LORD ABBETT
Tax-Fund
Income Fund
o National o New York o Texas o New Jersey o Connecticut
o Missouri o Hawaii o Washington o Minnesota o California
1997 ANNUAL REPORT
[GRAPHIC: kite with USA Flag print]
Portfolios with the
objective of providing
you with high
tax-free income
[LOGO]
<PAGE>
Report to Shareholders
For the Fiscal Year Ended September 30, 1997
[PHOTO: Robert S. Dow]
/s/ Robert S. Dow
ROBERT S. DOW
CHAIRMAN
OCTOBER 17, 1997
"...we will continue to focus
on high-quality bonds
with an emphasis on call
protection..."
Lord Abbett Tax-Free Income Fund completed its fiscal year on September 30, 1997
with aggregate net assets of $1.9 billion. (See inside front cover for net
assets and performance of each Series.)
Over the past year, your Fund increased holdings in more defensive securities
(such as prerefunded and shorter term bonds), which tend to be more stable
during periods of market volatility. Portfolios in the Fund held approximately
35% of these bonds at the close of the fiscal year. As yields came down over the
past twelve months, many issuers "prerefunded" their bonds, leading to an
increased overall supply of municipal issues in September. Issuers "prerefund"
their bonds when rates decline by issuing newer, lower yielding debt and using
the proceeds to pay off the first bond at its first call date. (The call date is
the date upon which an issuer may redeem a bond.)
Overall, credit quality (which evaluates an issuer's ability to repay debt) has
improved as many municipalities cut deficits and improved the performance of
their operations. Due to the relatively small difference in yield between lower
rated and higher rated bonds, we did not sacrifice much in the way of yield by
continuing to focus on high-quality bonds.
We are encouraged by the continued issuance of essential service revenue bonds,
which finance, among other things, airport, transportation and water and sewer
projects. We believe the relatively small difference in interest rates between,
for example, AAA-rated and A-rated bonds may increase as the economy slows.
Should this occur, it would offer us the opportunity to purchase more AA- and
A-rated bonds.
In the coming months, we will continue to focus on high-quality bonds with an
emphasis on call protection (assurance by the issuer that a bond will not be
redeemed before a specific date), especially during periods of decreased supply
in municipal bonds.
Our outlook through the end of 1997 into 1998 is for the economy to grow at a
rate averaging less than 2 1/2%, with inflation averaging about 3% or less.
Should the economy show signs of rapid growth or if inflation picks up, we
believe the Federal Reserve Board would move to raise short-term interest rates
again, in the hopes of maintaining a moderate economic environment.
Thank you for your continued confidence in Lord Abbett Tax-Free Income Fund. We
look forward to helping you attain your financial goals in the years ahead.
<PAGE>
Fund Facts
All series managed by Lord Abbett emphasize high quality, call protection and
total return potential. Portfolio quality shown as of 9/30/97.
Lord Abbett's Focus on Quality
[THE FOLLOWING TABLE WAS DEPICTED AS PIE CHARTS IN THE PRINTED MATERIAL.]
AAA AA A BBB N/R
-------- -------- -------- -------- --------
National Series 64.5% 19.3% 10.3% 5.8%(1) 0.1%(2)
New York Series 67.4% 11.1% 9.7% 11.8%(1)
Connecticut Series 57.5% 16.5% 19.9% 6.1%(1)
Missouri Series 72.5% 20.7% 3.4% 3.4%(1)
Hawaii Series 73.2% 9.3% 17.0% 0.5%
Texas Series 58.1% 25.3% 14.3% 2.3%
New Jersey Series 76.8% 9.2% 8.7% 5.3%(1)
Washington Series 71.8% 16.6% 11.0% 0.6%
Minnesota Series 53.1% 33.3% 13.6%
California Series 81.1% 11.5% 6.1% 1.3%
Lord Abbett's Tax-Free Record and SEC-Required Information as of 9/30/97
<TABLE>
<CAPTION>
National New York Texas New Jersey Connecticut
Series(3) Series(3) Series Series Series
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Date of Inception 4/2/84 4/2/84 1/20/87 1/2/91 4/1/91
Net Assets (in millions) $646.7 $300.5 $91.3 $184.5 $119.9
Distribution Rate at Net Asset Value 5.12% 5.22% 5.31% 4.96% 5.18%
- ----------------------------------------------------------------------------------------------------------------------------------
Average Annual Rate of Total Return(5)
at Net Asset Value:
1 Year 9.30% 8.01% 9.25% 8.25% 8.56%
10 Years or Life of Series 8.79% 8.23% 9.15% 8.21%(6) 7.80%(6)
30-Day SEC Yield 4.57% 4.55% 4.32% 4.40% 4.47%
- ----------------------------------------------------------------------------------------------------------------------------------
Average Annual Rate of Total Return at
the Class A Share Maximum Offering Price:
1 Year 4.10% 2.80% 4.10% 3.10% 3.30%
5 Years 5.63% 4.70% 5.87% 5.93% 5.76%
10 Years or Life of Series 8.27% 7.71% 8.61% 7.43%(6) 7.00%(6)
<CAPTION>
Missouri Hawaii Washington Minnesota California
Series Series Series Series Series(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Date of Inception 5/31/91 10/28/91 4/15/92 12/27/94 7/15/96(4)
Net Assets (in millions) $140.3 $79.1 $66.2 $10.5 $273.0
Distribution Rate at Net Asset Value 4.94% 4.97% 5.12% 5.47% 5.04%
- ------------------------------------------------------------------------------------------------------------------------------------
Average Annual Rate of Total Return(5)
at Net Asset Value:
1 Year 8.22% 8.42% 9.82% 8.97% 8.39%
10 Years or Life of Series 7.66%(6) 7.22%(6) 7.72%(6) 8.54%(6) 8.55%
30-Day SEC Yield 4.71% 4.51% 4.97% 4.49% 4.78%
- ------------------------------------------------------------------------------------------------------------------------------------
Average Annual Rate of Total Return at
the Class A Share Maximum Offering Price:
1 Year 3.10% 3.20% 4.50% 3.80% 3.20%
5 Years 5.27% 5.73% 6.04% -- 4.95%
10 Years or Life of Series 6.83%(6) 6.33%(6) 6.76%(6) 6.66%(6) 8.03%
</TABLE>
(1) Includes holdings which are not rated by independent ratings services but
are, in Lord Abbett's opinion, of comparable quality.
(2) N/R bonds are not rated by either an independent rating service or by
Lord, Abbett & Co. because, under the criteria used for rating securities,
they do not qualify for a rating.
(3) For specific Class share performance, please see each Series' Financial
Highlights (pages 29, 30 and 35).
(4) Predecessor established 9/3/85.
(5) Total return is the percent change in value with dividends and capital
gains reinvested. In the event a portfolio invests in private activity
bonds, the interest income derived therefrom may increase the Alternative
Minimum Tax liability only for shareholders subject to that tax. In the
event a portfolio does not invest entirely in municipal bonds, federal,
state and/or local taxes (as applicable) may be applicable to interest
income of such Series.
(6) Since inception.
The results quoted in this summary represent Class A share past
performance, which is no indication of future results. The investment
return and principal value of an investment in the Series will fluctuate
so that shares, on any given day or when redeemed, may be worth more or
less than their original cost.
The respective SEC-required uniformly computed average annual rates of
total return are at the Class A share maximum sales charge of 4.75%.
See Important Information on page 1.
<PAGE>
IMPORTANT INFORMATION
As of 9/30/97, no Series of the Fund had more than 9% of its net assets invested
in residual interest bonds ("RIBs"), although each portfolio may invest up to
20% of its net assets in such securities. ARIB, sometimes referred to as an
inverse floater, is a debt instrument with a floating or variable interest rate
that moves in the opposite direction of the interest rate on another security or
the value of an index. Changes in the interest rate on the other security or
index inversely affect the residual interest paid on the RIB, with the result
that when interest rates rise, RIBs make lower interest payments and their
values fall faster than fixed-rate bonds. But when interest rates fall, not only
do RIBs give higher interest payments, their values also rise faster than
fixed-rate bonds. If used as sales material after 12/31/97, this report must be
accompanied by Lord Abbett's Performance Quarterly for the most recently
completed calendar quarter.
<TABLE>
<CAPTION>
Statement of Net Assets
NATIONAL SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
===================================================================================================================================
Prerefunded 19.45%
<S> <C> <C> <C>
Azle TX Indpt Sch Dist Ser A 6% 2/15/2022 AAA $ 2,455M $ 2,559,338
Boulder Valley CO Sch Dist Ser A 6.30% 12/1/2013 AAA 1,000M 1,090,000
Chattanooga-Hamilton Co TN Hosp Auth Rev/Erlanger Ser B
RIBS FSA+ 9.875% 5/25/2021++ AAA 2,000M 2,410,000
Clermont Co OH Hosp Facs Ser A 7 1/2% 9/1/2019 AAA 285M 319,556
Clermont Co OH Hosp Facs Ser A AMBAC+ 7 1/2% 9/1/2019 AAA 965M 1,045,819
Colorado Springs CO Util Rev 6.10% 11/15/2024 AAA 1,500M 1,653,750
Colorado Springs Util Sys 9 7/8% 11/15/2012 AAA 2,000M 2,360,000
Connecticut St Health & Ed/Yale-New Haven Hosp Ser F
MBIA+ 7.10% 7/1/2025 AAA 1,000M 1,096,250
District of Columbia Rev MBIA+ 7.15% 4/1/2021 AAA 1,000M 1,057,500
Fulton Co GA Hosp Auth Rev Ser B MBIA+ 6.60% 10/1/2011 AAA 3,000M 3,360,000
Georgia Muni Elec Auth Pwr Rev FGIC+ 6% 1/1/2025 AAA 2,950M 3,023,750
Glendale AZ Ind Dev Auth Ed Facs Rev CNLA+ 7 1/8% 7/1/2020 AAA 1,000M 1,182,500
Greene Co PA Gen Facs Auth Ser A 7% 7/1/2011 AAA 5,825M 6,465,750
Harris Co TX Ser A 7.70% 5/1/2003 AAA 415M 437,825
Harris Co TX Ser A 6 1/8% 8/15/2020 AAA 9,375M 10,394,531
Indiana Univ Bldg Auth Ser N 10 1/8% 7/1/2010 AAA 710M 852,000
Intermountain UT Pwr Auth Ser A 7 3/4% 7/1/2020 AAA 225M 235,904
Kansas City MO Arpt Rev Ser B CGIC+ 6 7/8% 9/1/2014 AAA 2,400M 2,772,000
Louisville & Jefferson Co KY Metro Sewer Dist Sewer & Drain Sys
AMBAC+ 6 3/4% 5/15/2016 AAA 5,010M 5,774,025
Maryland St Health & Higher Ed Facs Auth Rev 8 1/4% 7/1/2018 AAA 2,600M 2,736,422
Massachusetts St Health & Ed Facs Auth Rev Brigham & Womens
MBIA+ 6 3/4% 7/1/2024 AAA 3,425M 3,788,906
Minneapolis & St Paul MN Hsg & Redev Auth Health Care Sys
8% 8/15/2019 AAA 2,000M 2,245,000
Mississippi Hosp Equip & Facs Auth Ser A 8 3/4% 1/1/2016 AAA 1,000M 1,151,250
Montgomery AL Med Clinic Bd 7% 3/1/2015 AAA 445M 483,381
New Jersey St Ed Facs Auth Rev MBIA+ 6.85% 7/1/2019 AAA 610M 650,413
New York City Muni Wtr Fin Auth Wtr & Sewer Sys Rev FGIC+
6 3/4% 6/15/2014 AAA 390M 413,400
New York St Dorm Auth Rev Cons Ser D 8 1/8% 7/1/2008 AAA 2,500M 2,625,275
New York St Dorm Auth Rev Ser B 8 1/8% 7/1/2008 AAA 1,500M 1,576,200
New York St Med Care Facs Fin Agy Rev Ser A 8% 2/15/2027 AAA 2,265M 2,315,963
Norman OK Regl Hosp Auth Hosp Rev MBIA+ 6 3/4% 9/1/2011 AAA 1,000M 1,108,750
Plano TX Indpt Sch Dist FGIC+ 8 5/8% 2/15/2002 AAA 1,000M 1,136,250
Puerto Rico Commonwealth 8% 7/1/2007 AAA 375M 392,115
Puerto Rico Commonwealth Hwy 6 5/8% 7/1/2018 AAA 372M 415,576
Puerto Rico Commonwealth Hwy Auth Rev Ser S 6 1/2% 7/1/2022 AAA 150M 166,688
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
NATIONAL SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
===================================================================================================================================
<S> <C> <C> <C>
Puerto Rico Ind Med & Environmental/Catholic Univ 9 3/8% 12/1/2007 AAA $ 2,000M $ 2,058,240
Raleigh NC Pkg Fac Lease Ctfs Part Rpda Prjt 6 3/4% 1/1/2012 AAA 6,095M 6,552,125
Savannah GA Economic Dev Auth Rev Zero Coupon 12/1/2021 AAA 12,500M 3,281,250
Spartanburg SC Wtr Wks Rev FGIC+ 6 1/8% 6/1/2026 AAA 5,000M 5,606,250
St Louis MO Land Clearance Rev 7 3/4% 7/1/2021 AAA 7,120M 8,001,100
Tacoma WA Elec Sys Rev RIBS AMBAC+ 8.84% 1/2/2015++ AAA 13,900M 16,384,625
Uintah Co UT Poll Ctrl Rev 84-F-2 10 1/2% 6/15/2014 AAA 1,000M 1,208,750
University ND Univ Rev 10 5/8% 4/1/2009 AAA 1,000M 1,203,750
Virginia St Trans Bd Trans Contract Rev 6 3/8% 5/15/2020 AAA 1,500M 1,625,625
Weber Co UT Muni Bldg Auth Lease Rev 7 1/2% 12/15/2019 AAA 3,000M 3,596,250
Western MI Univ Rev Gen FGIC+ 6 1/8% 11/15/2022 AAA 6,325M 6,957,500
Total 125,771,552
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation State 2.59%
California St 5.60% 9/1/2021 A 7,900M 8,097,500
Georgia St Ser C 6 1/4% 8/1/2013 Aaa 300M 342,750
Louisiana St Ser A AMBAC+ 6 1/2% 5/1/2011 AAA 1,000M 1,087,500
Nevada St Muni Bd Bk Prjt No 52 Ser A 6% 5/15/2021 AA 700M 742,875
New York St Ser B 6% 8/15/2018 A 200M 208,500
Ohio St 6.20% 8/1/2013 AA 750M 825,938
Oregon St Veterans Welfare Ser 76A AMT+++ 6.05% 10/1/2028 AA 1,370M 1,436,788
Puerto Rico Commonwealth AMBAC+ 5.40% 7/1/2025 AAA 1,500M 1,507,500
Texas St Ser A AMT+++ 6.30% 6/1/2014 AA 340M 350,200
Texas St Wtr Dev Bd 7.15% 8/1/2035 AA 1,915M 2,166,344
Total 16,765,895
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation Local 4.69%
Anne Arundel Co MD 6.30% 8/1/2014 AA 2,510M 2,767,275
Anne Arundel Co MD 6.30% 8/1/2015 AA 2,510M 2,767,275
Anne Arundel Co MD 6.30% 8/1/2023 AA 505M 550,450
Atlanta GA Ser A 6.10% 12/1/2019 AA 2,980M 3,181,150
College Station TX Indpt Sch 4 3/4% 8/15/2019 AAA 1,235M 1,140,831
El Paso Co CO Sch Dist No 11 Colorado Springs 7.10% 12/1/2018 Aa 1,200M 1,492,500
Fayette Co GA Sch Dist 6 1/8% 3/1/2015 Aa 1,000M 1,075,000
Finneytown OH Loc Sch Dist FGIC+ 6.20% 12/1/2017 AAA 375M 422,344
Kilmarnock VA 6 1/4% 3/1/2027 BBB** 1,430M 1,485,413
Lucas Co OH FGIC+ 6 1/2% 12/1/2016 AAA 750M 840,000
North Providence RI MBIA+ 6 1/8% 7/1/2016 AAA 1,410M 1,535,138
Plymouth-Canton MI Comm Sch Dist Ser C 6 1/2% 5/1/2016 AA 1,000M 1,080,000
Ringgold PA Sch Dist FSA+ 6 1/4% 2/1/2022 AAA 1,550M 1,664,313
Riverside VA Regl Jail Auth MBIA+ 6% 7/1/2025 AAA 6,750M 7,129,688
University City MO Sch Dist MBIA+ 10% 2/15/2008 AAA 2,250M 3,186,563
Total 30,317,940
- -----------------------------------------------------------------------------------------------------------------------============
Education 14.36%
Arkansas St Student Loan Auth Rev Ser B AMT+++ 7 1/4% 6/1/2009 A 3,500M 3,976,875
California Ed Facs Auth Ser N 5.35% 6/1/2027 AAA 10,390M 10,428,963
Connecticut St Higher Ed Supplemental Loan Auth Ser A
AMT+++ 7 3/8% 11/15/2005 A 80M 83,200
District of Columbia Rev RIBS 8.896% 4/25/2022++ A 4,000M 4,535,000
District of Columbia Rev Ref/Georgetown Univ MBIA+ 6% 4/1/2018 AAA 1,000M 1,025,000
District of Columbia Rev/Georgetown Univ Ser B 7.15% 4/1/2021 A 350M 369,688
District of Columbia Rev/Howard Univ Ser F 7 1/4% 10/1/2020 A 2,890M 3,110,363
Georgetown Univ DC Ser A Exchanged 8 1/4% 4/1/2018 A 1,500M 1,559,475
Indiana St Ed Facs Auth Rev 6.65% 3/1/2019 Aaa 11,600M 12,803,500
Marietta GA Dev Auth Rev Ser B FSA+ 6 1/4% 9/1/2025 AAA 1,090M 1,177,200
Massachusetts St Health & Ed Facs Auth Rev CNLA+ 6% 7/1/2023 AAA 1,175M 1,220,531
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
NATIONAL SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
===================================================================================================================================
<S> <C> <C> <C>
Massachusetts St Health & Ed Facs Auth Rev Ser P 5 5/8% 11/1/2026 AAA $ 2,000M $ 2,052,500
Missouri St Health & Ed Facs Auth Rev AMBAC+ 6 1/2% 8/1/2016 AAA 1,000M 1,082,500
New Jersey Economic Dev Sch Rev 7% 5/1/2020 BBB** 1,000M 1,028,750
New York St Dorm Auth Rev 5% 7/1/2017 Baa 750M 704,063
Northern IL Univ Rev FGIC+ 5 3/4% 4/1/2022 Aaa 5,000M 5,125,000
Ohio St Ed Loan Rev Ser A-1 AMBAC+ 5.85% 12/1/2019 AAA 6,250M 6,414,063
Pennsylvania St Higher Ed RIBS AMBAC+ AMT+++ 8.107% 3/1/2022++ AAA 3,000M 3,191,250
Private Colleges & Univ Facs Auth GA Rev 6.40% 10/1/2023 Aa 310M 333,250
Rhode Island St Health & Ed Bldg Corp 6% 9/1/2025 Aa 7,465M 7,894,238
Rockingham Co VA Ind Dev Auth Rev 6% 10/1/2023 Baa 360M 365,400
Texas St Higher Ed Coord AMT+++ 7.70% 10/1/2025 A 650M 689,813
University MN Ser A 5 1/2% 7/1/2021 AA 6,000M 6,232,500
University MO Univ Rev 5 1/2% 11/1/2021 AA 4,000M 4,060,000
University NM Tech Dev Corp Lease Rev/Univ Ctr Res Pk Prjt
MBIA+ 6.55% 8/15/2025 AAA 1,410M 1,582,725
Vermont Ed & Health Bldgs Fin Agy 6% 11/1/2013 AA 1,450M 1,556,938
Vermont Ed & Health Bldgs Fin Agy 7.05% 10/1/2016 A 2,000M 2,205,000
Virginia St Pub Sch Auth Ser A 6.20% 8/1/2014 AA 1,500M 1,618,125
Western MI Univ Rev FGIC+ 5 1/8% 11/15/2022 AAA 3,250M 3,128,125
Western MI Univ Rev Ser B AMBAC+ 6 3/4% 7/15/2011 AAA 3,000M 3,288,750
Total 92,842,785
- -----------------------------------------------------------------------------------------------------------------------============
Finance 2.60%
Cumberland Co NC Ctf Civic Ctr Ser A AMBAC+ 6.40% 12/1/2019 AAA 2,800M 3,076,500
Cumberland Co NC Ctf Ser A AMBAC+ 6.40% 12/1/2024 AAA 500M 549,375
Delaware Valley PA Regl Fin Auth Loc Govt Rev Ser C AMBAC+ 7 3/4% 7/1/2027 AAA 1,000M 1,362,500
Dinwiddie Co VA Ind Dev 6% 2/1/2018 BBB** 650M 669,500
Indiana Bd Bk Rev Guarantee/St Revolving Fd PG Ser A 6 3/4% 2/1/2017 AAA 500M 547,500
Indianapolis IN Loc Pub Imp Ser D 6 1/2% 2/1/2022 A 3,250M 3,269,253
Iowa St Fin Auth Rev 6 1/4% 5/1/2024 A 3,400M 3,672,000
St Louis MO Fin Corp Leasehold Rev Ser A AMBAC+ 6% 2/15/2019 AAA 3,500M 3,692,500
Total 16,839,128
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 11.59%
Albany OR Hosp Fac Auth Rev 5 5/8% 10/1/2017 BBB** 350M 340,375
Armstrong Co PA Hosp Auth Health Ctr Rev MBIA+ 6 1/2% 12/1/2021 AAA 2,795M 2,966,194
Augusta Co VA Ind Dev Auth Hosp Rev AMBAC+ 6 5/8% 9/1/2012 AAA 925M 1,012,875
Connecticut St Health & Ed/Waterbury Hosp Ser B FSA+ 7% 7/1/2020 AAA 1,000M 1,078,750
Connecticut St Health & Ed/William Backus Hosp Ser D
AMBAC+ 5 3/4% 7/1/2027 AAA 500M 517,500
Dalton GA Dev Auth Rev MBIA+ 5 1/2% 8/15/2026 AAA 10,000M 10,287,500
Glynn-Brunswick Mem Hosp Auth GA Rev Antic Ctfs Southeast GA
MBIA+ 6% 8/1/2016 AAA 500M 530,625
Illinois Health Facs Auth Rev CNLA+ 6% 2/15/2026 AAA 1,000M 1,041,250
Illinois Health Facs Auth Rev Alexian Brothers Med Ctr Prjt
FSA+ 7 1/8% 1/1/2021 Aaa 4,860M 5,297,400
Indiana Co PA Hosp Auth Rev 7 1/8% 7/1/2023 A 1,500M 1,651,875
Kershaw Co SC Hosp Facs Rev 8% 9/15/2017 Baa 1,435M 1,540,831
Lancaster Co Hosp Auth Ser A MBIA+ 5 3/8% 6/1/2019 AAA 2,750M 2,736,250
Louisiana Pub Fin Auth Hosp RIBS FSA+ 6.493% 7/22/2024++ AAA 4,900M 4,716,250
Minneapolis & St Paul MN Hsg & Redev Auth Health Care Sys
6 3/4% 12/1/2013 A 1,000M 1,096,250
Minneapolis & St Paul MN Hsg & Redev Auth Health Care Sys
MBIA+ 6 3/4% 8/15/2014 AAA 1,300M 1,399,125
Minneapolis & St Paul MN Hsg & Redev Auth Health Care Sys
6.90% 10/15/2022 A 700M 772,625
Mississippi Hosp Equip & Facs Auth Rev 6% 1/1/2016 BBB 600M 607,500
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
NATIONAL SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
===================================================================================================================================
<S> <C> <C> <C>
Montgomery AL Med Clinic Bd Unrefunded Balance 7% 3/1/2015 A $ 1,305M $ 1,381,669
Montgomery Co TX Health Facs Dev Corp Health Facs Rev FSA+
Zero Coupon 7/15/2023 AAA 17,165M 4,119,600
New Jersey Health Care Facs Fin Auth Rev/St Peters Med Ctr
MBIA+ 8.60% 7/1/2017 AAA 400M 413,044
New Jersey Health Care Facs Ser C MBIA+ 6 5/8% 7/1/2010 AAA 250M 264,688
New York St Med Care Facs Fin Agy Rev Ser A 8 7/8% 8/15/2007 BBB 1,105M 1,131,244
New York St Mtge Agy Rev Zero Coupon 10/1/2014 Aa 4,995M 1,027,871
Norfolk VA Ind Dev Auth Rev Hosp/Childrens Hosp Kings Grp
AMBAC+ 6 1/2% 6/1/2021 AAA 1,150M 1,231,938
Oregon Health Science Univ Rev Ser A MBIA+ Zero Coupon 7/1/2021 AAA 17,440M 4,883,200
Philadelphia PA Hosp & Higher Ed Facs Auth Hosp 6.20% 5/1/2011 BBB 3,000M 3,116,250
Philadelphia PA Hosp & Higher Ed Facs Auth Rev 6 1/2% 7/1/2027 BBB** 500M 501,875
Rhode Island St Health & Ed Bldg Corp Rev 5.70% 7/1/2015 BBB** 1,000M 985,000
Rhode Island St Health & Ed Bldg Corp Rev 5.80% 7/1/2020 BBB** 725M 712,313
Rhode Island St Health & Ed Bldg Corp Rev 6 1/4% 8/15/2022 BBB** 1,000M 1,030,000
Rochester MN Health Care Ser H RIBS 7.885% 11/15/2015++ AA 9,350M 10,483,688
Scottsdale AZ Ind Dev Auth Hosp Rev Ser A AMBAC+ 6 1/8% 9/1/2017 AAA 3,520M 3,823,600
St Paul MN Hsg & Redev Auth Hosp Rev Ser B 9 5/8% 11/1/2008 Baa 960M 982,906
Wisconsin Health & Ed Facs Auth Rev MBIA+ 6 1/2% 8/15/2011 AAA 1,140M 1,239,750
Total 74,921,811
- -----------------------------------------------------------------------------------------------------------------------============
Housing 10.14%
Arlington Co VA Ind Dev Auth Multi-Fam Rev Hsg Mtge 8% 7/1/2015 BBB** 890M 905,575
Arlington Co VA Ind Dev Auth Multi-Fam Rev Hsg Mtge 6.30% 7/1/2016 A 500M 531,875
Bexar Co TX Hsg Fin Corp GNMA+ AMT+++ 8.20% 4/1/2022 AAA 835M 880,925
Clayton Co GA Hsg Auth Multi-Fam Hsg Rev FSA+ 5.70% 7/1/2023 AAA 1,000M 1,012,500
Colorado Hsg & Fin Auth Ser A AMT+++ 6.65% 10/1/2028 AA 2,620M 2,803,400
Colorado Hsg & Fin Auth Ser A AMT+++ 6.80% 10/1/2037 AA 2,515M 2,687,906
Colorado Hsg & Fin Auth Ser C FHA+ 8 3/4% 9/1/2017 AA 115M 117,981
Connecticut St Hsg Fin Auth 6.20% 5/15/2017 AA 420M 445,200
Connecticut St Hsg Fin Auth AMBAC+ 5 5/8% 6/15/2027 AAA 1,000M 1,018,750
Connecticut St Hsg Fin Auth Ser A Sub Ser A-2
FHA+ AMT+++ 7.20% 11/15/2008 AA 500M 536,250
De Kalb Co Hsg Auth FSA+ AMT+++ 7.15% 1/1/2025 AAA 1,430M 1,578,363
Fulton Co GA Hsg Auth Multi-Fam Hsg Rev 6 3/8% 1/1/2027 A 2,900M 3,034,125
Georgia St Hsg & Fin Auth Rev AMT+++ 5.85% 12/1/2028 AA 500M 513,125
Georgia St Hsg & Fin Auth Rev Ser A Sing Fam Mtge A Sub Ser A-2
6.45% 12/1/2027 AA 250M 267,188
Georgia St Hsg & Fin Auth Rev Ser A Sub Ser A-2 AMT+++ 6.40% 12/1/2015 AA 2,000M 2,132,500
Georgia St Hsg & Fin Auth Rev Sing Fam Mtge Ser B Sub Ser B-2
FHA+ AMT+++ 6.55% 12/1/2027 AA 2,000M 2,142,500
Idaho Hsg Agy Ser F FHA+ AMT+++ 7.45% 7/1/2015 Aaa 1,210M 1,321,925
Illinois Hsg Dev Auth FHA+ AMT+++ 7.10% 12/1/2034 AAA 1,500M 1,631,250
Illinois Hsg Dev Auth Fam Hsg/Lawndale FHA+ AMT+++ 6.80% 12/1/2016 AAA 1,000M 1,085,000
Indiana St Hsg Fin Auth Ser D GNMA+ 7.80% 1/1/2022 Aaa 1,000M 1,045,000
Jefferson Co KY Multi-Fam Rev 8 1/4% 5/1/2010 N/R*** 400M 368,500
Kentucky Hsg Corp Hsg Rev Ser B AMT+++ 6.10% 7/1/2016 AAA 1,205M 1,260,731
Kentucky Hsg Corp Hsg Rev Ser D-1 FHA+ AMT+++ 6.80% 1/1/2024 AAA 660M 702,075
Maine St Hsg Auth Mtge Pur Ser A-2 AMT+++ 6 3/4% 11/15/2035 AA 980M 1,049,825
Marion Co OR Hsg Auth Rev Sr Hsg/Elliott Residence
GNMA+ AMT+++ 7 1/2% 10/20/2037 AAA 2,170M 2,419,550
Maryland Sing Fam Mtge FHA/VA+ AMT+++ 7.85% 4/1/2029 Aa 785M 829,156
Maryland St Comm Dev Admin Sing Fam 7th Ser AMT+++ 7.30% 4/1/2025 Aa 495M 537,075
Massachusetts Hsg Fin Auth AMT+++ 8.10% 6/1/2020 Aa 1,300M 1,346,319
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
NATIONAL SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
===================================================================================================================================
<S> <C> <C> <C>
Massachusetts St Hsg Fin Agy Hsg Rev Rental-Mtge Ser A
AMBAC/FHA+ AMT+++ 7.35% 1/1/2035 AAA $ 1,460M $ 1,627,900
Massachusetts St Hsg Fin Agy Hsg Ser 29 AMT+++ 6 3/4% 6/1/2026 Aa 1,425M 1,537,219
Michigan St Hsg Dev Auth AMT+++ 6.20% 6/1/2027 AA 2,500M 2,618,750
Minneapolis St Paul MN Hsg Fin Bd Rev FNMA+ AMT+++ 6 1/4% 11/1/2030 AAA 1,000M 1,070,000
Missouri St Hsg Dev Comm GNMA+ AMT+++ 7 3/8% 8/1/2023 AAA 645M 689,344
New Jersey St Hsg & Mtge Fin Agy Ser B MBIA+ AMT+++ 7.90% 10/1/2022 AAA 2,345M 2,488,631
North Carolina Hsg Fin Agy Sing Fam Rev Ser BB AMT+++ 6 1/4% 3/1/2012 Aa 1,290M 1,367,400
North Dakota St Hsg Fin Agy Rev Ser B AMT+++ 5.85% 7/1/2028 Aa 1,500M 1,533,750
Ohio Hsg Fin Auth Ser C GNMA+ AMT+++ 7.85% 9/1/2021 AAA 515M 552,338
Portland OR Hsg Auth Multi-Fam Rev Ser A 5.70% 1/1/2028 A 1,070M 1,079,363
Radcliff KY Hsg Auth 8 1/4% 5/1/2010 N/R*** 330M 304,013
Seattle WA Hsg Auth Low Income Hsg Assistance Rev
GNMA+ 7.40% 11/20/2036 AAA 3,892M 4,407,690
Tennessee Hsg Dev Agy Mtge Ser A AMT+++ 7 1/8% 7/1/2026 A 3,280M 3,583,400
Utah St Hsg Fin Agy Sing Fam Ser A-2 FHA+ AMT+++ 7 3/4% 1/1/2023 AA 275M 292,875
Vermont Hsg Fin Auth Ser B FHA/VA+ AMT+++ 8.10% 6/1/2022 A 1,645M 1,708,727
Virginia St Hsg Dev Auth 7.10% 1/1/2022 Aa 5,100M 5,450,625
Wyoming Co Dev Auth Hsg Rev AMT+++ 6.35% 6/1/2029 AA 1,000M 1,055,000
Total 65,571,594
- -----------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Bonds 3.37%
Brazos River Auth TX MBIA+ 8.10% 5/1/2019 AAA 3,000M 3,127,860
Butler AL Ind Bd Solid Waste Disp Rev/James River Corp
AMT+++ 8% 9/1/2028 BBB 1,500M 1,708,125
Connecticut St Dev Auth/Pfizer Inc Prjt AMT+++ 7% 7/1/2025 AAA 2,500M 2,856,250
Delaware Economic Dev Auth Ser A MBIA+ AMT+++ 7.60% 3/1/2020 AAA 2,000M 2,170,000
Henrico Co VA Ind Dev Auth Rev 7 1/8% 8/1/2021 AA 3,095M 3,559,250
Hillsborough Co FL Ind Dev Auth Rev Tampa Elec Prjt 8% 5/1/2022 Aa 2,955M 3,453,656
Missouri St Environmental Imp & Energy Rev/Union Elec Ser A 7.40% 5/1/2020 AA 1,000M 1,087,500
New York St Energy Res & Dev Auth Rev MBIA+ AMT+++ 5.95% 9/1/2033 AAA 3,000M 3,018,750
Texas City TX Ind Dev Corp Marine Term Rev/ARCO 7 3/8% 10/1/2020 A 650M 834,438
Total 21,815,829
- -----------------------------------------------------------------------------------------------------------------------============
Miscellaneous 4.02%
Buncombe Co NC Ctfs Part 6 5/8% 12/1/2010 A 3,750M 4,096,875
Cobb-Marietta GA Coliseum & Exhibit Hall Auth Rev MBIA+ 5 5/8% 10/1/2026 AAA 11,250M 11,896,875
CDP-King Co III WA Lease Rev MBIA+ 5 1/4% 6/1/2026 AAA 1,185M 1,149,450
Rhode Island Depositors Economic Protn Corp Spcl Oblig MBIA+ 6% 8/1/2017 AAA 2,650M 2,805,688
Richmond KY Dist Ct Facs Corp Rev 5 1/4% 2/1/2023 A 1,260M 1,233,225
St Louis Co MO Ind Dev Rev Arena Prjt AMT+++ 7 7/8% 12/1/2024 BBB** 3,500M 3,801,875
Teller Co CO Ctfs Part AMT+++ 5 7/8% 12/1/2024 A 1,000M 1,020,000
Total 26,003,988
- -----------------------------------------------------------------------------------------------------------------------============
Pollution Control Revenue 3.55%
Burke Co GA Dev Auth Poll Ctrl Rev MBIA+ 6.60% 7/1/2024 AAA 450M 473,063
Essex Co NY Ind Dev Agy Poll Ctrl Rev AMT+++ 5.70% 7/1/2016 A 1,350M 1,383,750
Essex Co NY Ind Dev Agy Poll Ctrl Rev Ser B 5.55% 1/1/2014 A 1,000M 1,018,750
La Crosse WI Res Recovery Rev MBIA+ AMT+++ 6% 11/1/2021 AAA 7,000M 7,560,000
Missouri St Environmental Imp & Energy Wtr Poll Ctrl Rev 7.20% 7/1/2016 Aa 3,250M 3,725,313
Monroe Co MI Poll Ctrl Rev FGIC+ AMT+++ 7.65% 9/1/2020 AAA 8,000M 8,800,000
Total 22,960,876
- -----------------------------------------------------------------------------------------------------------------------============
Power 10.59%
Camden Co NJ Muni Util Auth Sys FGIC+ 8 1/4% 12/1/2017 AAA 3,920M 4,026,310
Florida St Muni Pwr Agy Rev AMBAC+ 4 1/2% 10/1/2027 AAA 3,975M 3,443,344
Hamilton City OH Elec Ser B FGIC+ 6.30% 10/15/2025 AAA 7,555M 8,121,625
Hawaii St Dept Bdg & Fin RIBS AMT+++ 6.807% 12/15/2023++ AAA 2,000M 1,980,000
Intermountain Pwr Agy UT Pwr Supply Rev Reg Pars TCRS
LINK AMBAC+ 5.60% 7/1/2021 AAA 6,400M 6,440,000
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
NATIONAL SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
===================================================================================================================================
<S> <C> <C> <C>
Kansas City KS Util Sys Rev FGIC+ 6 3/8% 9/1/2023 AAA $ 5,000M $ 5,493,750
Lewis Co WA Pub Util Dist No 1 5 1/2% 10/1/2022 AA 375M 374,531
Michigan Pub Pwr Agy Rev Ref-Belle River Prjt Ser B 5% 1/1/2019 AA 5,000M 4,700,000
Milwaukee WI Loc Dist AMT+++ 6.85% 10/1/2021 AA 500M 542,500
Nebraska Pub Pwr Dist Rev 6 1/8% 1/1/2015 A 3,700M 3,945,125
New York St Energy Res & Dev/Con Edison AMT+++ 9 1/4% 9/15/2022 A 1,100M 1,145,111
North Carolina Eastern Muni Pwr Ser A FSA+ 5% 1/1/2021 AAA 5,600M 5,334,000
Puerto Rico Elec Pwr Auth RIBS FSA+ 8.208% 7/1/2023 AAA 2,500M 2,725,000
Puerto Rico Elec Pwr Auth Ser D 7 1/8% 7/1/2014 BBB 2,255M 2,393,119
Tacoma WA Elec Sys Rev LINK AMBAC+ 4.07% 1/2/2015++ AAA 3,000M 3,000,000
Washington St Pub Pwr Supply Sys Nuclear Ser B 5 1/8% 7/1/2017 Aa 8,000M 7,620,000
Western Generation Agy OR Cogeneration Prjt Rev Ser B
AMT+++ 7.40% 1/1/2016 BBB** 1,500M 1,606,875
Wisconsin St Pub Pwr Supply Sys Rev RIBS AMBAC+ 7% 7/1/2014++ AAA 5,500M 5,596,250
Total 68,487,540
- -----------------------------------------------------------------------------------------------------------------------============
Solid Waste .55%
Broward Co FL Resource Recovery Rev 7.95% 12/1/2008 A 1,705M 1,860,581
Broward Co FL Wtr & Sewer Solid Waste 7.95% 12/1/2008 A 2M 2,183
Cobb Co GA Solid Waste Mgmt Auth AMT+++ 6.40% 1/1/2015 Aaa 900M 990,000
Northeast MD Waste Disp Auth Solid Waste Rev MBIA+ 6.30% 7/1/2016 AAA 650M 696,313
Total 3,549,077
- -----------------------------------------------------------------------------------------------------------------------============
Transportation 8.34%
Albuquerque NM Arpt Rev Ref 7.60% 7/1/2008 A 1,000M 1,027,950
Albuquerque NM Arpt Rev Ser A AMBAC+ AMT+++ 6.60% 7/1/2016 AAA 2,400M 2,598,000
Arapahoe Co CO Cap Imp Tr Fd Hwy Rev 7% 8/31/2026 Baa 8,750M 10,368,750
Clark Co NV Passenger Fac Charge Rev AMBAC+ 6% 7/1/2022 AAA 3,000M 3,131,250
Denver CO Arpt Rev Ser A MBIA+ 5.60% 11/15/2020 AAA 500M 505,000
Hillsborough Co FL Aviation FGIC+ 6.90% 10/1/2011 AAA 500M 534,375
Massachusetts St Port Auth 6% 7/1/2023 Aa 950M 991,563
Massachusetts St Tnpk Auth Met Hwy Sys Rev Ser A
MBIA+ Zero Coupon 1/1/2029 AAA 50,000M 9,000,000
Ohio St Tnpk Comm Rev Ser A MBIA+ 5 1/2% 2/15/2026 AAA 14,910M 15,003,188
Pensacola FL Arpt Rev MBIA+ AMT+++ 6 1/8% 10/1/2018 AAA 1,000M 1,026,250
Port Auth NY & NJ 6 7/8% 1/1/2025 AA 5,740M 6,062,875
Port Auth NY & NJ 70th Ser AMT+++ 7 1/4% 8/1/2025 AA 500M 536,875
Port Kalama WA Rev Ser B AMT+++ 5 5/8% 12/1/2015 Baa 1,025M 1,028,844
Rhode Island St Tnpk & Brdg Auth Rev 5.35% 12/1/2017 A 1,000M 973,750
San Joaquin Hills CA Trans Corridor Agy Toll Rd Rev Zero Coupon 1/1/2025 AAA 5,000M 1,168,750
Total 53,957,420
- -----------------------------------------------------------------------------------------------------------------------============
Water and Sewer 6.72%
Cherokee Co GA Wtr & Sewer Auth Rev MBIA+ 5.20% 8/1/2025 AAA 880M 872,300
Dauphin Co PA Ind Dev Auth Wtr Dev Ser A AMT+++ 6.90% 6/1/2024 A 1,500M 1,785,000
Fairfax Co VA Wtr Auth 5% 4/1/2021 AA 7,950M 7,691,625
Foothill/Eastern Corridor Agy CA Toll Rd Ser A Zero Coupon 1/1/2030 Baa 4,325M 686,594
Garden City KS Sewer Disp Rev AMT+++ 5 3/4% 9/1/2017 BBB 1,000M 1,003,750
Hamilton OH Wtr Wks Rev Ser A MBIA+ 6.30% 10/15/2021 AAA 1,000M 1,063,750
Houston TX Wtr & Sewer Sys Rev Ser D FGIC+ 5% 12/1/2025 AAA 750M 705,008
Lexington SC Wtr & Sewer Rev 5.45% 4/1/2019 AA 2,320M 2,320,000
Metropolitan Govt Nashville & Davidson Co TN Wtr & Sewer
RIBS AMBAC+ 6.075% 1/1/2022++ AAA 5,500M 5,788,750
Metropolitan Govt Nashville Wtr & Sewer RIBS AMBAC+ 8.317% 1/1/2022++ AAA 12,000M 13,440,000
Milledgeville GA Wtr & Sewer Rev FSA+ 6% 12/1/2021 AAA 500M 550,000
New York City Muni Wtr Fin Auth Wtr & Sewer Sys Rev
AMBAC+ 6.20% 6/15/2021 AAA 1,000M 1,060,000
Springfield IL Wtr Rev 6 1/2% 3/1/2015 AA 1,500M 1,563,750
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
NATIONAL SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
===================================================================================================================================
<S> <C> <C> <C>
Texas Wtr Resource Fin Auth 7 5/8% 8/15/2008 A $ 1,860M $ 1,934,400
Virginia St Res Auth Wtr & Sewer Sys Rev 5 1/4% 11/1/2017 AA 1,330M 1,334,988
Virginia St Res Auth Wtr & Sewer Sys Rev 5.30% 11/1/2022 AA 1,720M 1,687,750
Total 43,487,665
-------------------------------------------------------------------------------------------------------------============
Total Municipal Bonds 102.56% (Cost $636,107,977) 663,293,100
===================================================================================================================================
Other Assets, Less Liabilities (2.56)%
===================================================================================================================================
Other Assets
Short-Term Securities
Texas TX Ser A 4 3/4% 8/31/1998 (Cost $3,831,496) MIG1 3,800M 3,832,528
- -----------------------------------------------------------------------------------------------------------------------============
Cash 768,900
- -----------------------------------------------------------------------------------------------------------------------============
Receivable for:
Interest 8,993,826
Capital stock sold 332,647
Securities sold 37,896,480
Other 4,673
Total Other Assets 51,829,054
-------------------------------------------------------------------------------------------------------------============
Payable for:
Capital stock reacquired 810,400
Securities purchased 64,561,864
Distributions 2,013,996
Other 999,680
-------------------------------------------------------------------------------------------------------------------------
Total Other Assets, Less Liabilities (16,556,886)
===================================================================================================================================
Net Assets 100.00% $646,736,214
===================================================================================================================================
Class A Shares -- Net asset value ($602,007,291 / 52,448,819 shares outstanding) $11.48
Class B Shares -- Net asset value ($2,935,358 / 255,307 shares outstanding) $11.50
Class C Shares -- Net asset value ($41,793,565 / 3,637,661 shares outstanding) $11.49
</TABLE>
* Ratings have not been audited by Deloitte & Touche LLP.
** This investment has not been rated by an independent ratings service
but is, in Lord Abbett's opinion, of comparable quality.
*** N/R bonds have not been rated by an independent rating service.
+ Insured or guaranteed by the indicated municipal bond insurance
corporation or Federal agency.
++ The interest rate is subject to change periodically and inversely to
the prevailing market rate. The interest rate shown is the rate in
effect at September 30, 1997. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative
Minimum Tax.
See Notes to Financial Statements.
<TABLE>
<CAPTION>
Statement of Net Assets
NEW YORK SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
===================================================================================================================================
Prerefunded 18.45%
<S> <C> <C> <C>
New York City Muni Wtr Fin Auth Ser A FGIC+ 6% 6/15/2019 AAA $ 2,000M $ 2,065,000
New York NY Ser A 7 3/4% 8/15/2014 AAA 3,125M 3,558,594
New York NY Ser D 9 1/2% 8/1/2002 AAA 1,380M 1,656,000
New York NY Ser D 8% 8/1/2019 AAA 1,970M 2,260,575
New York St Dorm Auth Rev 7.70% 5/15/2012 AAA 6,000M 6,652,500
New York St Dorm Auth Rev Ser A 7 5/8% 7/1/2020 AAA 1,400M 1,552,250
New York St Dorm Auth Rev/City Univ Ser C FGIC+ 7% 7/1/2014 AAA 4,600M 4,973,750
New York St Med Care Facs Fin Agy Rev Ser A 7 1/2% 2/15/2021 AAA 11,215M 12,574,819
Puerto Rico Commonwealth Aqu & Sewer Auth Rev 10 1/4% 7/1/2009 AAA 1,000M 1,411,250
Puerto Rico Commonwealth Aqu & Sewer Auth Rev Ser A 7 7/8% 7/1/2017 AAA 1,000M 1,050,510
Puerto Rico Commonwealth G.O. 7.30% 7/1/2020 AAA 300M 331,125
Puerto Rico Commonwealth Hwy Ser P 8 1/8% 7/1/2013 AAA 850M 894,481
Puerto Rico Elec Pwr Auth Rev Ser M 8% 7/1/2008 AAA 6,200M 6,518,804
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
NEW YORK SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
===================================================================================================================================
<S> <C> <C> <C>
Puerto Rico G.O. Ser A 7 3/4% 7/1/2017 AAA $ 1,750M $ 1,887,813
United Nations Dev Corp Ser A 6% 7/1/2026 AAA 4,300M 4,719,250
United Nations Dev Corp Ser B 6 1/4% 7/1/2026 AAA 3,000M 3,330,000
Total 55,436,721
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation State 4.30%
Puerto Rico Commonwealth RIBS FSA+ 7.692% 7/1/2020++ AAA 12,000M 12,930,000
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation Local .42%
Bethlehem NY MBIA+ 7.20% 3/1/2022 AAA 1,080M 1,250,100
- -----------------------------------------------------------------------------------------------------------------------============
Education 9.45%
Hempstead Town NY Ind Dev Agy/Hofstra Univ MBIA+ 5.80% 7/1/2015 AAA 750M 782,812
New York City Ind Dev Agy/New Sch For Social Research MBIA+ 5 3/4% 9/1/2015 AAA 1,335M 1,375,050
New York St Dorm Auth Rev 5% 7/1/2017 Baa 1,000M 938,750
New York St Dorm Auth Rev/St Univ Ed Facs Ser A 5 1/2% 5/15/2026 BBB 75M 74,063
New York St Dorm Auth Rev/City Univ Ser U MBIA+ 6.45% 7/1/2005 AAA 300M 336,750
New York St Dorm Auth Rev/City Univ 2nd Ser MBIA+ 6 7/8% 7/1/2014 AAA 5,650M 6,441,000
New York St Dorm Auth Rev/Colgate Univ MBIA+ 6% 7/1/2016 AAA 1,000M 1,103,750
New York St Dorm Auth Rev/Cornell Univ Ser A 7 3/8% 7/1/2020 AA 5,075M 5,557,125
New York St Dorm Auth Rev/Spcl Act Sch Dists MBIA+ 6% 7/1/2016 AAA 1,400M 1,478,750
New York St Dorm Auth Rev/St Univ Ed Fac Ser A 5 1/4% 5/15/2021 BBB 1,025M 1,007,062
New York St Dorm Auth Rev/St Univ Ed Fac Ser B 7 1/2% 5/15/2011 BBB 5,000M 6,050,000
New York St Dorm Auth Rev/Univ Rochester Ser A 6.40% 7/1/2013 A 2,030M 2,202,550
New York St Dorm Auth Rev/Upstate Cmnty Colleges 6.20% 7/1/2015 Baa 1,000M 1,048,750
Total 28,396,412
- -----------------------------------------------------------------------------------------------------------------------============
Finance 3.42%
Municipal Assistance Corp NY Ser 66 7 3/4% 7/1/2008 Aa 265M 285,869
New York St Loc Govt Assistance Corp Ser A 6 1/2% 4/1/2020 A 9,360M 9,991,800
Total 10,277,669
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 10.79%
New York City Health & Hosp Corp LINK AMBAC+ 5.7% 2/15/2023 AAA 600M 604,500
New York City Health & Hosp Corp RIBS AMBAC+ 7.24% 2/15/2023 AAA 6,000M 6,120,000
New York St Dorm Auth Rev 5 3/8% 7/1/2012 BBB 750M 742,500
New York St Dorm Auth Rev 5.60% 7/1/2027 AAA 1,000M 1,006,250
New York St Dorm Auth Rev AMBAC+ 5 3/8% 8/1/2027 AAA 1,000M 977,500
New York St Dorm Auth Rev Dept of Health 5 5/8% 7/1/2012 Baa 2,000M 2,040,000
New York St Dorm Auth Rev Mental Health Svcs Facs B 5 3/4% 2/15/2010 BBB 1,500M 1,560,000
New York St Dorm Auth Rev Mental Health Svcs Facs B 5 3/4% 2/15/2011 BBB 1,385M 1,421,356
New York St Dorm Auth Rev Mental Health Svcs Facs Imp B 6% 8/15/2012 BBB 1,460M 1,564,025
New York St Dorm Auth Rev Mental Health Svcs Facs Imp D 6% 8/15/2021 BBB 1,000M 1,036,250
New York St Dorm Auth Rev Ser B 5 3/4% 2/15/2012 BBB 1,155M 1,195,425
New York St Med Care Facs Agy Rev Unrefunded Balance 7.80% 2/15/2019 BBB 355M 377,187
New York St Med Care Facs Fin/Beth Israel MBIA+ 7 1/2% 11/1/2010 AAA 1,250M 1,384,375
New York St Med Care Facs Fin/Mental Health Ser A 7 1/2% 2/15/2021 BBB 3,955M 4,380,162
New York St Med Care Facs Fin/North Shore Univ Hosp
MBIA+ 7.20% 11/1/2020 AAA 7,340M 8,028,125
Total 32,437,655
- -----------------------------------------------------------------------------------------------------------------------============
Housing 2.14%
New York St Mtge Agy Rev AMT+++ 5.80% 10/1/2028 Aaa 500M 504,375
New York St Mtge Agy Rev Ser 41 MBIA+ 6.45% 10/1/2014 AAA 2,990M 3,199,300
New York St Mtge Agy Rev Ser 44 FHA+ AMT+++ 7 1/2% 4/1/2026 Aa 2,495M 2,741,380
Total 6,445,055
- -----------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Bonds 2.02%
New York St Energy Res & Dev Auth Poll Ctrl Rev
MBIA+ AMT+++ 5.95% 9/1/2033 AAA 1,000M 1,006,250
Puerto Rico Pub Bldg Auth Rev Gtd Ser B 5 1/4% 7/1/2021 A 2,500M 2,431,250
Puerto Rico Pub Bldg Auth Rev Gtd Ser B AMBAC+ 5% 7/1/2027 AAA 2,000M 1,910,000
Puerto Rico Tel Auth Rev RIBS MBIA+ 6.925% 1/16/2015++ AAA 700M 720,125
Total 6,067,625
- -----------------------------------------------------------------------------------------------------------------------============
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
NEW YORK SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
===================================================================================================================================
<S> <C> <C> <C>
Miscellaneous 1.99%
New York St Urban Dev Corp Rev 5 1/4% 4/1/2012 Baa $1,765M $ 1,725,287
New York St Urban Dev Corp Rev 5.70% 4/1/2020 Baa 4,150M 4,253,750
Total 5,979,037
- -----------------------------------------------------------------------------------------------------------------------============
Pollution Control Revenue 4.45%
Essex Co NY Ind Dev Agy Poll Ctrl Rev Ser B 5.55% 1/1/2014 A 305M 310,719
New York St Environmental Facs Poll Ctrl Rev St Wtr Ser A 7 1/2% 6/15/2012 Aa 7,000M 7,682,500
New York St Environmental Facs Poll Ctrl Rev St Wtr Ser E 6 7/8% 6/15/2014 Aa 4,780M 5,371,525
Total 13,364,744
- -----------------------------------------------------------------------------------------------------------------------============
Power 16.90%
New York St Energy Res & Dev/Bklyn Union Gas Ser A
MBIA+ AMT+++ 6 3/4% 2/1/2024 AAA 13,000M 14,218,750
New York St Energy Res & Dev/Bklyn Union Gas Ser B
RIBS AMT+++ 9.676% 7/1/2026++ A 4,000M 5,020,000
New York St Energy Res & Dev/Central Hudson Gas & Elec
MBIA+ AMT+++ 8 3/8% 12/1/2028 AAA 2,215M 2,370,050
New York St Energy Res & Dev/Con Edison Ser A
MBIA+ AMT+++ 7 1/8% 12/1/2029 AAA 2,500M 2,843,750
New York St Energy Res & Dev/Con Edison Ser B AMT+++ 7 3/8% 7/1/2024 A 1,465M 1,514,444
New York St Energy Res & Dev Poll Ctrl Rev/Niagara Mohawk
FGIC+ 7.20% 7/1/2029 AAA 11,750M 13,512,500
New York St Pwr Auth 6 1/2% 1/1/2019 Aa 1,460M 1,589,575
Port Auth NY & NJ Spcl Oblig Rev 5th Install-SPL PJ-KIAC-4
AMT+++ 6 3/4% 10/1/2019 Baa** 2,970M 3,200,175
Puerto Rico Elec Pwr Auth Rev Ser U 6% 7/1/2014 A 2,250M 2,373,750
Puerto Rico Elec Pwr Auth Ser T RIBS FSA+ 8 5/8% 7/1/2018++ AAA 3,500M 4,130,000
Total 50,772,994
- -----------------------------------------------------------------------------------------------------------------------============
Solid Waste .79%
Dutchess Co Resource Recovery Ser A FGIC+ 7 1/2% 1/1/2009 AAA 2,200M 2,378,750
- -----------------------------------------------------------------------------------------------------------------------============
Transportation 15.71%
Metropolitan Trans Auth NY Commuter Facs Rev Ser A FGIC+ 6% 7/1/2016 AAA 2,000M 2,140,000
Metropolitan Trans Auth NY Commuter Facs Rev Ser A FGIC+ 6% 7/1/2021 AAA 4,000M 4,235,000
Metropolitan Trans Auth NY Commuter Facs Rev Ser A FGIC+ 6.10% 7/1/2026 AAA 2,000M 2,137,500
Metropolitan Trans Auth NY Svc Contract Trans Facs Ser O 5 3/4% 7/1/2008 Baa 1,000M 1,058,750
Nassau Co NY Auth Rev Ser B 5 1/4% 10/1/2026 AAA 600M 577,500
New York St Hwy Auth Svc Contract Rev Loc Hwy & Brdg 5% 4/1/2017 Baa 1,500M 1,411,875
Port Auth NY & NJ AMT+++ 6% 7/1/2015 AA 350M 363,563
Port Auth NY & NJ 6 7/8% 1/1/2025 AA 1,000M 1,056,250
Port Auth NY & NJ Cons Ninety-Second Ser 4 3/4% 1/15/2029 AA 520M 466,050
Port Auth NY & NJ Spcl Oblig Rev/JFK Intl Air Terminal-6
MBIA+ AMT+++ 5 3/4% 12/1/2025 AAA 25,150M 25,684,437
Triborough Brdg & Tunl Auth NY Revs 5.20% 1/1/2027 Aa 3,000M 2,895,000
Triborough Brdg & Tunl Auth Ser L 8 1/8% 1/1/2012 Aa 4,000M 4,118,160
Triborough Brdg & Tunl Auth Ser X 6 1/2% 1/1/2019 Aa 1,000M 1,066,250
Total 47,210,335
- -----------------------------------------------------------------------------------------------------------------------============
Water and Sewer 8.28%
Buffalo NY Muni Wtr Fin Auth FGIC+ 5% 7/1/2025 AAA 750M 715,313
Buffalo NY Muni Wtr Fin Auth Wtr & Sewer Sys Rev FGIC+ 5 3/4% 7/1/2021 AAA 500M 515,000
New York City Muni Wtr Fin Auth Ser A FGIC+ 6 1/4% 6/15/2021 AAA 3,500M 3,644,375
New York City Muni Wtr Fin Auth Ser A MBIA+ 6% 6/15/2025 AAA 5,000M 5,237,500
New York Environmental Facs Corp Poll Ctrl Rev MBIA+ 5% 6/15/2013 AAA 1,950M 1,913,438
New York NY City Muni Wtr & Sewer Sys Ser A 5 1/8% 6/15/2017 A 3,175M 3,067,844
New York NY City Muni Wtr & Sewer Sys Ser A 6% 6/15/2025 A 2,000M 2,082,500
New York NY City Muni Wtr & Sewer Sys Ser B MBIA+ 5 3/4% 6/15/2026 AAA 6,000M 6,157,500
New York NY City Muni Wtr & Sewer Sys Ser B MBIA+ 5 3/4% 6/15/2026 AAA 1,500M 1,541,250
Total 24,874,720
-------------------------------------------------------------------------------------------------------------============
Total Municipal Bonds 99.11% (Cost $284,149,693) 297,821,817
-------------------------------------------------------------------------------------------------------------============
</TABLE>
9
<PAGE>
Statement of Net Assets
NEW YORK SERIES September 30, 1997
<TABLE>
<CAPTION>
Market Value
===================================================================================================================================
<S> <C>
Other Assets, Less Liabilities .89%
===================================================================================================================================
Cash and Receivables, Net of Liabilities $ 2,668,081
===================================================================================================================================
Net Assets 100.00% $300,489,898
===================================================================================================================================
Class A Shares -- Net asset value ($294,286,071 / 26,670,004 shares outstanding) $11.03
Class C Shares -- Net asset value ($6,203,827 / 562,889 shares outstanding) $11.02
</TABLE>
* Ratings have not been audited by Deloitte & Touche LLP.
** This investment has not been rated by an independent ratings service
but is, in Lord Abbett's opinion, of comparable quality.
+ Insured or guaranteed by the indicated municipal bond insurance
corporation or Federal agency.
++ The interest rate is subject to change periodically and inversely to
the prevailing market rate. The interest rate shown is the rate in
effect at September 30, 1997. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative
Minimum Tax.
See Notes to Financial Statements.
<TABLE>
<CAPTION>
Statement of Net Assets
TEXAS SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
===================================================================================================================================
<S> <C> <C> <C>
Prerefunded 29.36%
Austin TX Util Sys Rev 11 1/8% 11/15/2009 AAA $ 3,845M $ 4,388,106
Austin TX Util Sys Rev 11.30% 11/15/2014 AAA 1,665M 1,906,425
Austin TX Util Sys Rev 8% 11/15/2016 AAA 1,000M 1,125,000
Austin TX Util Sys Rev Ser B 7.80% 11/15/2012 AAA 640M 678,400
Azle TX Indpt Sch Dist Ser A 6% 2/15/2022 AAA 4,000M 4,170,000
Board of Regents TX A&M Univ Rev 7.80% 8/15/2009 AAA 900M 930,339
Dallas Co TX Flood Ctrl Dist No 1 9 1/4% 4/1/2010 AAA 1,460M 1,848,725
Dallas Co TX Util & Reclamation Dist MBIA+ 8.30% 2/15/2016 AAA 700M 711,410
Harris Co TX Toll Rd Sub Lien Ser A 6.10% 8/15/2016 AAA 2,640M 2,923,800
Houston TX Arpt Sys Rev MBIA+ AMT+++ 8.20% 7/1/2017 AAA 1,500M 1,583,160
Houston TX Wtr & Sewer Sys Rev AMBAC+ 6 1/2% 12/1/2021 AAA 305M 336,263
Houston TX Wtr & Sewer Sys Rev Prior Lien MBIA+ 7.40% 12/1/2018 AAA 1,000M 1,113,750
Lower CO River Auth TX Rev MBIA+ 7 5/8% 1/1/2016 AAA 925M 951,844
Puerto Rico Commonwealth Hwy Ser T 6 5/8% 7/1/2018 AAA 1,250M 1,396,875
Texas St 8.30% 12/1/2016 AAA 2,275M 2,474,063
Texas St Tnpk Auth Dallas Northwy Rev AMBAC+ 7 1/8% 1/1/2015 AAA 250M 264,063
Total 26,802,223
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation State 22.77%
Texas St Ser A AMT+++ 6.30% 6/1/2014 AA 390M 401,700
Texas St Ser A-1 RIBS 6.87% 12/1/2023++ AA 6,000M 6,150,000
Texas St Ser B-1 & B-2 LINK 6.199% 9/30/2011 AA 11,000M 12,430,000
Texas St Wtr Dev Bd 7.15% 8/1/2035 AA 1,600M 1,810,000
Total 20,791,700
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation Local 3.38%
Bastrop TX Indpt Sch Dist Zero Coupon 2/15/2020 AAA 1,000M 293,750
Bastrop TX Indpt Sch Dist Zero Coupon 2/15/2022 AAA 1,000M 263,750
College Station TX Indpt Sch 4 3/4% 8/15/2018 AAA 1,200M 1,110,000
College Station TX Indpt Sch 4 1/2% 8/15/2019 AAA 1,590M 1,417,088
Total 3,084,588
- -----------------------------------------------------------------------------------------------------------------------============
Education .87%
Texas St Higher Ed 7.70% 10/1/2025 A 750M 795,932
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 18.52%
Amarillo TX Health Facs Corp LINK FSA+ 6.562% 1/1/2022 AAA 3,600M 3,883,500
Amarillo TX Health Facs Corp RIBS FSA+ 8.967% 1/1/2022++ AAA 2,250M 2,638,125
Bexar Co TX Health Facs MBIA+ 7 1/2% 8/15/2010 AAA 750M 831,563
Brazos Co TX Health Fac Dev Corp Franciscan MBIA+ 5 3/8% 1/1/2028 AAA 3,500M 3,430,000
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
TEXAS SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
===================================================================================================================================
<S> <C> <C> <C>
Montgomery Co TX Health Facs Dev Corp Health Facs Rev
FSA+ Zero Coupon 7/15/2023 AAA $ 5,000M $ 1,200,000
North Cent TX Health Fac Dev Corp Rev Ser B MBIA+ 5 3/4% 2/15/2011 AAA 2,000M 2,120,000
Texarkana TX Health Facs Ser B MBIA+ 6% 10/1/2018 AAA 1,260M 1,360,800
Texarkana TX Health Facs Ser B MBIA+ 6% 10/1/2019 AAA 1,335M 1,445,138
Total 16,909,126
- -----------------------------------------------------------------------------------------------------------------------============
Housing .73%
Dallas TX Hsg Corp Cap Prjt/Estell Village Apts Ser A 7 7/8% 12/1/2009 BBB 530M 551,200
Texas Hsg Agy Ser D AMT+++ 8.40% 1/1/2021 Aa 105M 109,594
Total 660,794
- -----------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Bonds 17.57%
Brazos River Auth TX 8 1/4% 5/1/2019 A 1,000M 1,042,110
Brazos River Auth TX Ser B MBIA+ 8.10% 5/1/2019 AAA 950M 990,489
Harris Co TX Ind Dev Corp Marine Term & Wtr Poll Ctrl Rev 6 5/8% 2/1/2024 BBB 1,500M 1,629,375
Matagorda Co TX Nav Dist No 1 Poll Ctrl Rev Ref/Cent Power
FGIC+ 7.70% 2/1/2019 AAA 240M 247,529
Orange Co TX Nav & Port Dist Ind Dev Corp Rev Ref-North 6 3/8% 2/1/2017 AA 2,400M 2,610,000
Puerto Rico Ind Med & Environmental Ctrl/Baxter Lab Ser A 8% 9/1/2012 A 2,315M 2,462,581
Texas City TX Ind Dev Corp Marine Term Rev/ARCO 7 3/8% 10/1/2020 A 5,500M 7,060,625
Total 16,042,709
- -----------------------------------------------------------------------------------------------------------------------============
Pollution Control Revenue .69%
Trinity River Auth TX Poll Ctrl Rev/Texas Instruments AMT+++ 6.20% 3/1/2020 A 605M 630,713
- -----------------------------------------------------------------------------------------------------------------------============
Power .56%
Lower CO River Auth Rev Ser B AMBAC+ 6% 1/1/2015 AAA 500M 512,500
- -----------------------------------------------------------------------------------------------------------------------============
Transportation 3.07%
Dallas-Fort Worth TX Regl Arpt MBIA+ AMT+++ 5 3/4% 11/1/2024 AAA 2,000M 2,022,500
Puerto Rico Commonwealth Hwy & Trans Auth Hwy Rev Ser Y 5 1/2% 7/1/2036 A 775M 781,781
Total 2,804,281
- -----------------------------------------------------------------------------------------------------------------------============
Water and Sewer 4.19%
Houston TX Wtr & Sewer Sys Rev AMBAC+ 6 1/2% 12/1/2021 AAA 2,695M 2,971,238
Texas Wtr Resource Fin Auth 7 5/8% 8/15/2008 A 475M 494,000
Texas Wtr Resource Fin Auth AMBAC+ 7 1/2% 8/15/2013 AAA 350M 364,438
Total 3,829,676
- -----------------------------------------------------------------------------------------------------------------------============
Total Municipal Bonds 101.71% (Cost $88,444,700) 92,864,242
===================================================================================================================================
Other Assets, Less Liabilities (1.71)%
===================================================================================================================================
Other Assets
Short-Term Securities
Texas TX Ser A 4 3/4% 8/31/1998 (Cost $1,411,840) MIG1 1,400M 1,411,984
- -----------------------------------------------------------------------------------------------------------------------============
Cash 63,864
- -----------------------------------------------------------------------------------------------------------------------============
Receivable for:
Interest 1,728,006
Capital stock sold 44,269
Securities sold 9,824,768
Other 302
Total Other Assets 13,073,193
- -----------------------------------------------------------------------------------------------------------------------============
Payable for:
Capital stock reacquired 28,433
Securities purchased 14,160,913
Distributions 295,945
Other 151,270
-------------------------------------------------------------------------------------------------------------------------
Total Other Assets, Less Liabilities (1,563,368)
===================================================================================================================================
Net Assets 100.00% $91,300,874
===================================================================================================================================
Net asset value ($91,300,874 / 8,779,126 shares outstanding) $10.40
</TABLE>
* Ratings have not been audited by Deloitte & Touche LLP.
+ Insured or guaranteed by the indicated municipal bond insurance
corporation or Federal agency.
++ The interest rate is subject to change periodically and inversely to
the prevailing market rate. The interest rate shown is the rate in
effect at September 30, 1997. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative
Minimum Tax.
See Notes to Financial Statements.
11
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
NEW JERSEY SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
Prerefunded 13.09%
<S> <C> <C> <C>
Essex Co NJ Imp Auth Lease/Jail & Youth Hse Prjts AMBAC+ 7% 12/1/2024 AAA $ 5,175M $ 6,080,625
Hudson Co NJ Util Auth Util Sys Rev 10% 7/1/2011 AAA 1,000M 1,241,250
Monmouth Co NJ MBIA+ 6 7/8% 8/1/2012 AAA 500M 546,250
New Jersey Economic Dev Auth 6 3/4% 6/15/2012 AAA 2,275M 2,513,875
New Jersey Health Care Facs Fin Auth Ser B 8 1/4% 7/1/2020 AAA 2,570M 2,891,250
New Jersey Wastewtr Treatment Trust 7% 5/15/2006 AAA 425M 452,094
New Jersey Wastewtr Treatment Trust 6 7/8% 6/15/2009 AAA 1,750M 1,905,312
North Brunswick Twp NJ Bd Ed 6.30% 2/1/2014 AAA 1,000M 1,110,000
Port Auth NY & NJ 7.35% 10/1/2027 AAA 2,500M 2,856,250
Puerto Rico Commonwealth Hwy Ser T 6 5/8% 7/1/2018 AAA 283M 316,387
Puerto Rico Pub Bldg Auth Ser L 6 7/8% 7/1/2021 AAA 200M 225,500
South Brunswick Twp NJ Bd Ed FGIC+ 6.40% 8/1/2024 AAA 1,600M 1,802,000
Tinton Falls NJ Sch Bd Ed FSA+ 6 1/2% 6/15/2017 AAA 1,000M 1,093,750
Union Co NJ Ser L 6 1/2% 2/1/2011 AAA 1,000M 1,088,750
University of Puerto Rico Ser L 6 1/2% 6/1/2013 AAA 25M 25,468
Total 24,148,761
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation State 4.99%
Puerto Rico Commonwealth RIBS MBIA+ 7.584% 7/1/2008++ AAA 5,000M 5,581,250
Puerto Rico Commonwealth 6 1/2% 7/1/2023 A 1,000M 1,102,500
Puerto Rico Commonwealth AMBAC+ 5.40% 7/1/2025 AAA 1,500M 1,507,500
Puerto Rico Commonwealth MBIA+ 5.40% 7/1/2025 AAA 1,000M 1,005,000
Total 9,196,250
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation Local 7.86%
Jersey City NJ Ser A 5 1/4% 10/1/2016 AA 950M 951,187
Keansburg NJ 6.80% 12/1/2010 A 1,000M 1,115,000
Millburn Twp NJ Sch Dist 5.35% 7/15/2018 Aaa 1,150M 1,181,625
Millburn Twp NJ Sch Dist 5.35% 7/15/2019 Aaa 1,100M 1,131,625
Morristown NJ FSA+ 6 1/2% 8/1/2019 AAA 3,440M 3,857,100
Paterson NJ FSA+ 9.30% 2/15/2004 AAA 4,200M 5,307,750
Pohatcong Twp NJ Sch Dist FSA+ 5.95% 7/15/2023 AAA 650M 687,375
Pohatcong Twp NJ Sch Dist FSA+ 5.95% 7/15/2026 AAA 250M 264,375
Total 14,496,037
- -----------------------------------------------------------------------------------------------------------------------============
Education 6.27%
Lodi NJ Bd Ed Ctfs Part MBIA+ 5.70% 9/15/2021 AAA 1,725M 1,776,750
New Jersey Economic Dev Auth Rev Ser B MBIA+ 6 1/4% 5/15/2025 AAA 6,000M 6,495,000
New Jersey Economic Dev Sch Rev 7% 5/1/2020 BBB** 1,800M 1,851,750
New Jersey St Ed Facs Rev MBIA+ 6.85% 7/1/2019 Aaa 540M 573,075
Rutgers St Univ NJ Ser P 6.85% 5/1/2021 AA 800M 866,000
Total 11,562,575
- -----------------------------------------------------------------------------------------------------------------------============
Finance .57%
Hamilton Twp NJ Bd Ed Ser B FSA+ 7% 12/15/2015 AAA 970M 1,058,512
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 9.82%
New Jersey Economic Dev Auth Rev Ser A MBIA+ 5 3/8% 7/1/2027 Aaa 1,500M 1,492,500
New Jersey Health Care Facs Fin Auth Rev AMBAC+ 5 1/4% 7/1/2020 AAA 2,410M 2,382,888
New Jersey Health Care Facs Fin Auth Rev/Bayonne Hosp FSA+ 6 1/4% 7/1/2012 AAA 1,600M 1,750,000
New Jersey Health Care Facs Fin Auth Rev Ser A AMBAC+ 7% 7/1/2020 AAA 5,000M 5,375,000
New Jersey Health Care Facs Ser A FHA+ 7 1/4% 2/15/2021 AA 1,485M 1,616,794
New Jersey Health Care Facs Ser B FHA+ 6 1/2% 2/1/2022 AAA 940M 1,006,975
New Jersey Health Care Facs Ser C FSA+ 6 3/4% 7/1/2020 AAA 2,665M 2,868,206
Puerto Rico Ind Tourist Ed Med & Environmental Ctrl Facs FHA+ 6 1/4% 8/1/2032 AAA 500M 536,250
Puerto Rico Ind Tourist Ed Med & Environmental Ctrl Facs Gr A
MBIA+ 6 1/4% 7/1/2024 AAA 1,000M 1,080,000
- -----------------------------------------------------------------------------------------------------------------------============
Total 18,108,613
- -----------------------------------------------------------------------------------------------------------------------============
Housing 4.98%
New Jersey St Hsg & Mtge Fin MBIA+ AMT+++ 7.70% 10/1/2029 AAA 875M 916,562
New Jersey St Hsg & Mtge Fin Agy Ser B MBIA+ AMT+++ 7.90% 10/1/2022 AAA 6,795M 7,211,194
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
NEW JERSEY SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
===================================================================================================================================
<S> <C> <C> <C>
Puerto Rico Hsg Fin Corp Mtge Rev Ser B GNMA+ 7.65% 10/15/2022 AAA $ 405M $ 428,794
Virgin Islands Hsg Fin Auth Sing Fam Rev Ser A GNMA+ AMT+++
6 1/2% 3/1/2025 AAA 600M 633,000
Total 9,189,550
- -----------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Bonds 3.35%
New Jersey Economic Dev Auth AMT+++ 7 1/4% 3/1/2021 A 1,500M 1,546,800
Puerto Rico Ind Med & Environmental/Upjohn 7 1/2% 12/1/2023 AA 1,500M 1,605,000
Puerto Rico Tel Auth Rev LINK MBIA+ 5.51% 1/16/2015 AAA 3,000M 3,033,750
Total 6,185,550
- -----------------------------------------------------------------------------------------------------------------------============
Miscellaneous 9.75%
Mercer Co NJ Imp Auth Rev 5 3/4% 11/1/2017 Aa 1,660M 1,738,850
Monmouth Co NJ Imp Auth Rev Govt Loan MBIA+ 6.40% 12/1/2009 AAA 1,075M 1,199,969
New Jersey Bldg Auth St Bldg Rev 4 3/4% 6/15/2017 AA 8,770M 8,188,988
New Jersey Economic Dev Auth Rev Ser A MBIA+ 6% 5/15/2025 AAA 4,250M 4,510,313
New Jersey Sports & Expo Auth Rev Ser A 8% 1/1/2025 BBB** 1,000M 1,127,500
Union Co Imp Auth Rev FGIC+ 6 1/4% 8/1/2013 AAA 1,100M 1,218,250
Total 17,983,870
- -----------------------------------------------------------------------------------------------------------------------============
Pollution Control Revenue .31%
Cape May Co NJ Ind Poll Ctrl Rev Fin Auth Ser B MBIA+ 7% 11/1/2029 AAA 500M 570,624
- -----------------------------------------------------------------------------------------------------------------------============
Power 13.27%
Camden Co NJ Muni Util Auth Sys FGIC+ 8 1/4% 12/1/2017 AAA 2,185M 2,244,257
Essex Co NJ Imp Auth Rev Orange Muni Util & Lease MBIA+ 6.80% 7/1/2014 AAA 1,710M 1,951,538
Puerto Rico Elec Pwr Auth LINK FSA+ 6.30% 7/1/2018 AAA 6,000M 6,487,500
Puerto Rico Elec Pwr Auth LINK FSA+ 5.929% 7/1/2023 AAA 1,000M 1,032,500
Puerto Rico Elec Pwr Auth RIBS FSA+ 8.208% 7/1/2023++ AAA 4,500M 4,905,000
Puerto Rico Elec Pwr Auth Pwr Rev MBIA+ 5 1/2% 7/1/2025 AAA 1,780M 1,786,675
Puerto Rico Elec Pwr Auth Ser N 7 1/8% 7/1/2014 BBB 715M 758,793
Puerto Rico Elec Pwr Auth Ser T RIBS FSA+ 8 5/8% 7/1/2018++ AAA 4,500M 5,310,000
Total 24,476,263
- -----------------------------------------------------------------------------------------------------------------------============
Transportation 22.41%
Delaware River & Bay Auth DE MBIA+ 4 3/4% 1/1/2024 AAA 1,715M 1,564,938
Delaware River Port Auth PA & NJ Rev FGIC+ 5 1/2% 1/1/2026 AAA 15,165M 15,316,650
New Jersey Economic Dev Auth AMT+++ 7% 7/1/2016 BBB** 5,545M 5,933,150
New Jersey St Trans Tr Fd Auth Ser A MBIA+ 4 3/4% 12/15/2016 AAA 5,000M 4,687,500
Port Auth NY & NJ Cons Ninety-Second Ser 4 3/4% 1/15/2029 AA 1,900M 1,702,875
Puerto Rico Commonwealth Hwy Rev Ser Q 6% 7/1/2020 A 2,000M 2,045,000
Puerto Rico Commonwealth Hwy & Trans Auth Hwy Rev Ser Y 5 1/2% 7/1/2036 A 10,000M 10,087,500
Total 41,337,613
- -----------------------------------------------------------------------------------------------------------------------============
Water and Sewer 2.42%
New Jersey Wastewtr Treatment Trust MBIA+ 7% 5/15/2006 AAA 75M 79,500
New Jersey Wastewtr Treatment Trust 6 7/8% 6/15/2009 AA 155M 167,400
New Jersey Wtr Supply Auth Rev MBIA+ AMT+++ 7 7/8% 11/1/2013 AAA 2,500M 2,642,675
Stafford NJ Muni Util Auth Ser A FGIC+ 6 1/8% 12/1/2022 AAA 1,500M 1,580,625
Total 4,470,200
- -----------------------------------------------------------------------------------------------------------------------============
Total Municipal Bonds 99.09% (Cost $174,451,191) 182,784,418
===================================================================================================================================
Other Assets, Less Liabilities .91%
===================================================================================================================================
Cash and Receivables, Net of Liabilities $ 1,680,427
===================================================================================================================================
Net Assets 100.00% $184,464,845
===================================================================================================================================
Net asset value ($184,464,845 / 34,677,816 shares outstanding) $5.32
</TABLE>
* Ratings have not been audited by Deloitte & Touche LLP.
** This investment has not been rated by an independent ratings service
but is, in Lord Abbett's opinion, of comparable quality.
+ Insured or guaranteed by the indicated municipal bond insurance
corporation or Federal agency.
++ The interest rate is subject to change periodically and inversely to
the prevailing market rate. The interest rate shown is the rate in
effect at September 30, 1997. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative
Minimum Tax.
See Notes to Financial Statements.
13
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
CONNECTICUT SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
Prerefunded 21.30%
<S> <C> <C> <C>
Connecticut St Clean Wtr Fd 7% 1/1/2011 AAA $1,050M $ 1,157,625
Connecticut St Health & Ed/St Marys Hosp Ser C 7 3/8% 7/1/2020 AAA 3,250M 3,579,063
Connecticut St Health & Ed/St Raphael Hosp Ser C AMBAC+ 7 1/2% 7/1/2014 AAA 1,000M 1,047,020
Connecticut St Health & Ed/Yale-New Haven Hosp Ser F
MBIA+ 7% 7/1/2010 AAA 75M 82,031
Connecticut St Health & Ed/Yale-New Haven Hosp Ser F
MBIA+ 7.10% 7/1/2025 AAA 2,105M 2,307,606
Connecticut St Spcl Tax Oblig Rev Ser A 7 1/8% 6/1/2007 AAA 5,000M 5,537,500
Connecticut St Spcl Tax Oblig Rev Ser A 6 3/4% 6/1/2011 AAA 2,050M 2,298,563
Connecticut St Spcl Tax Oblig Rev Ser C 6.80% 12/1/2009 AAA 100M 107,625
Puerto Rico Commonwealth 7 3/4% 7/1/2006 AAA 3,000M 3,148,800
Puerto Rico Commonwealth 7.70% 7/1/2020 AAA 1,900M 2,116,125
Puerto Rico Commonwealth Aqu & Sewer Auth Rev Ser A 7 7/8% 7/1/2017 AAA 3,150M 3,309,107
Puerto Rico Commonwealth Hwy Ser T 6 5/8% 7/1/2018 AAA 453M 506,362
Puerto Rico Commonwealth Hwy Ser T 6 5/8% 7/1/2018 AAA 67M 74,738
Puerto Rico G.O. Ser A 7 3/4% 7/1/2017 AAA 250M 269,688
Total 25,541,853
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation State 4.55%
Puerto Rico Commonwealth 6.45% 7/1/2017 A 2,000M 2,200,000
Puerto Rico Commonwealth 6 1/2% 7/1/2023 A 2,000M 2,205,000
Puerto Rico Commonwealth 6% 7/1/2026 A 1,000M 1,047,500
Total 5,452,500
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation Local 2.99%
Darien CT 5 1/2% 10/15/2015 Aaa 500M 513,125
Hartford CT 6 1/2% 12/15/2005 AA 730M 820,338
Killingly CT 7 1/4% 12/15/2004 A 250M 261,563
Monroe CT 6.60% 4/15/2005 A 100M 111,500
Montville CT 6.70% 6/15/2009 Aa 550M 646,250
Montville CT 6.70% 6/15/2010 Aa 575M 678,500
Portland CT 7.10% 12/15/2000 A 100M 108,250
Redding CT 6.60% 4/15/2010 Aa 100M 116,875
Voluntown CT 6 3/4% 10/1/2002 A 100M 110,250
Watertown CT 6 1/2% 6/15/2003 A 100M 108,250
West Haven CT MBIA+ 6 1/2% 6/15/2006 AAA 100M 114,000
Total 3,588,901
- -----------------------------------------------------------------------------------------------------------------------============
Education 15.48%
Connecticut St Dev Auth Aquarium Prjt 7% 12/1/2027 BBB** 1,500M 1,569,375
Connecticut St Health & Ed Facs/CT Coll C-1 MBIA+ 5 1/2% 7/1/2027 AAA 1,000M 1,008,750
Connecticut St Health & Ed Facs/Fairfield Univ Ser F 6.90% 7/1/2014 BBB 1,500M 1,563,750
Connecticut St Health & Ed Facs/Kent Sch Ser B MBIA+ 5.40% 7/1/2023 AAA 750M 747,187
Connecticut St Health & Ed Facs/New Haven Ser D 6.70% 7/1/2026 BBB 1,000M 1,051,250
Connecticut St Health & Ed Facs/Sacred Heart Ser C 6 1/2% 7/1/2016 BBB 1,000M 1,075,000
Connecticut St Health & Ed Facs/Suffield Academy MBIA+ 5.30% 7/1/2017 AAA 1,000M 997,500
Connecticut St Health & Ed Facs/Trinity Coll Ser E MBIA+ 5 7/8% 7/1/2026 AAA 1,000M 1,036,250
Connecticut St Health & Ed Facs/Rosemary Hall Ser B MBIA+ 5% 7/1/2027 AAA 1,000M 961,250
Connecticut St Health & Ed Facs/Yale Univ RIBS 7.792% 6/10/2030++ AAA 6,800M 7,361,000
Connecticut St Higher Ed Supplemental Loan Auth Ser A
AMT+++ 7 3/8% 11/15/2005 A 740M 769,600
Connecticut St Higher Ed Supplemental Loan Auth Ser A
AMT+++ 7.20% 11/15/2010 A 400M 427,500
Total 18,568,412
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 8.83%
Connecticut St Health & Ed MBIA+ 5 1/8% 7/1/2027 AAA 2,000M 1,905,000
Connecticut St Health & Ed/Bridgeport Hosp Ser A MBIA+ 6 5/8% 7/1/2018 AAA 1,250M 1,356,250
Connecticut St Health & Ed/Greenwich Hosp 5 3/4% 7/1/2016 AAA 1,350M 1,400,625
Connecticut St Health & Ed/Greenwich Hosp Ser A MBIA+ 5.80% 7/1/2026 AAA 1,830M 1,880,325
Connecticut St Health & Ed/Waterbury Hosp Ser B FSA+ 7% 7/1/2020 AAA 100M 107,875
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
CONNECTICUT SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<S> <C> <C> <C>
Connecticut St Health & Ed/William Backus Hosp Ser C 6 3/8% 7/1/2022 A $ 850M $ 897,812
Connecticut St Health & Ed/William Backus Hosp Ser D
AMBAC+ 5 3/4% 7/1/2027 AAA 1,000M 1,035,000
Connecticut St Health & Ed/Windham Mem Hosp Ser A 5 3/4% 7/1/2011 BBB 2,000M 2,002,500
Total 10,585,387
- -----------------------------------------------------------------------------------------------------------------------============
Housing 8.46%
Connecticut St Hsg Fin Auth AMBAC+ 5 5/8% 6/15/2027 AAA 500M 509,375
Connecticut St Hsg Fin Auth Ser A Sub Ser A-2 FHA+ AMT+++ 7.20% 11/15/2008 AA 560M 600,600
Connecticut St Hsg Fin Auth Ser A-2 AMT+++ 6.45% 5/15/2022 AA 1,100M 1,174,250
Connecticut St Hsg Fin Auth Ser B 6 3/4% 11/15/2023 AA 2,605M 2,790,606
Connecticut St Hsg Fin Auth Ser D-2 AMT+++ 6.90% 5/15/2020 AA 620M 666,500
Connecticut St Hsg Fin Auth Sub Ser D-2 AMT+++ 6.20% 11/15/2027 AA 1,750M 1,835,312
Connecticut St Hsg Fin Auth Ser G AMT+++ 6% 11/15/2027 AA 1,500M 1,550,625
Connecticut St Hsg Fin Auth Sub Ser B-2 AMT+++ 5.85% 11/15/2028 AA 1,000M 1,012,500
Total 10,139,768
- -----------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Bonds 12.97%
Connecticut St Dev Auth/Pfizer Inc Prjt 6.55% 2/15/2013 AAA 3,570M 3,922,537
Connecticut St Dev Auth/Pfizer Inc Prjt AMT+++ 7% 7/1/2025 AAA 2,500M 2,856,250
Eastern CT Resource Recovery/Wheelabrator Lisbon Prjt Ser A
AMT+++ 5 1/2% 1/1/2020 A 4,000M 3,880,000
Puerto Rico Ind Med & Environmental/American Home Products
5.10% 12/1/2018 A 2,000M 1,935,000
Puerto Rico Ind Med & Environmental/Upjohn 7 1/2% 12/1/2023 AA 1,000M 1,070,000
Puerto Rico Ind Med & Environmental/Warner Lambert 7.60% 5/1/2014 Aa 1,750M 1,890,000
Total 15,553,787
- -----------------------------------------------------------------------------------------------------------------------============
Miscellaneous 9.54%
Connecticut Middletown Courthouse MBIA+ 6 1/4% 12/15/2010 AAA 575M 619,563
Connecticut St Dev Govt Lease Rev MBIA+ 6.60% 6/15/2014 AAA 500M 558,125
New Haven CT Air Rights Pkg MBIA+ 6 1/2% 12/1/2015 AAA 9,475M 10,256,687
Total 11,434,375
- -----------------------------------------------------------------------------------------------------------------------============
Power 2.82%
Connecticut St Dev Auth/New England Pwr Co 7 1/4% 10/15/2015 A 760M 816,050
Puerto Rico Elec Pwr Auth Ser T RIBS FSA+ 8 5/8% 7/1/2018++ AAA 1,500M 1,770,000
Puerto Rico Elec Pwr Auth Ser X 6 1/8% 7/1/2021 A 750M 795,000
Total 3,381,050
- -----------------------------------------------------------------------------------------------------------------------============
Solid Waste 4.41%
Connecticut St Resource Recovery/American Ref Fuel Ser A
AMT+++ 6.45% 11/15/2022 A 4,985M 5,290,331
- -----------------------------------------------------------------------------------------------------------------------============
Transportation 5.31%
Connecticut St Spcl Tax Oblig Rev Ser B 10% 10/1/2000 AA 4,000M 4,675,000
Connecticut St Spcl Tax Oblig Rev Ser B FGIC+ 6.10% 10/1/2011 AAA 1,000M 1,078,750
Puerto Rico Commonwealth Hwy & Trans Auth Hwy Rev 5 1/2% 7/1/2015 A 600M 619,500
Total 6,373,250
- -----------------------------------------------------------------------------------------------------------------------============
Water and Sewer 1.83%
Connecticut St Dev Auth Wtr Fac Rev AMBAC+ AMT+++ 5 3/4% 7/1/2028 AAA 250M 251,875
Connecticut St Dev Auth Wtr Fac Rev AMT+++ 6.15% 4/1/2035 A 500M 519,375
Puerto Rico Commonwealth Aqu & Sewer Rev 5% 7/1/2019 A 1,500M 1,423,125
Total 2,194,375
- -----------------------------------------------------------------------------------------------------------------------============
Total Municipal Bonds 98.49% (Cost $113,276,405) 118,103,989
===================================================================================================================================
Other Assets, Less Liabilities 1.51%
===================================================================================================================================
Cash and Receivables, Net of Liabilities 1,804,814
===================================================================================================================================
Net Assets 100.00% $119,908,803
===================================================================================================================================
Net asset value ($119,908,803 / 11,506,937 shares outstanding) $10.42
</TABLE>
* Ratings have not been audited by Deloitte & Touche LLP.
** This investment has not been rated by an independent ratings service
but is, in Lord Abbett's opinion, of comparable quality.
+ Insured or guaranteed by the indicated municipal bond insurance
corporation or Federal agency.
++ The interest rate is subject to change periodically and inversely to
the prevailing market rate. The interest rate shown is the rate in
effect at September 30, 1997. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative
Minimum Tax.
See Notes to Financial Statements.
15
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
MISSOURI SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
===================================================================================================================================
<S> <C> <C> <C>
Prerefunded 31.42%
Cape Girardeau MO Wtrwks Sys Rev FGIC+ 6.40% 3/1/2012 AAA $ 1,150M $ 1,252,063
Central MO St Univ MBIA+ 7% 7/1/2014 AAA 150M 167,438
Kansas City MO Arpt Rev Ser B CGIC+ 6 7/8% 9/1/2014 AAA 1,490M 1,720,950
Kansas City MO Muni Assistance Corp Rev AMBAC+ 6 5/8% 4/15/2015 AAA 6,225M 6,839,719
Kansas City MO Muni Assistance Corp Rev AMBAC+ 7 1/8% 4/15/2016 AAA 805M 880,469
Missouri St Health & Ed Facs Rev/Christian Health FGIC+ 6 7/8% 2/15/2013 AAA 2,100M 2,317,875
Missouri St Health & Ed Facs Rev/St Lukes MBIA+ 7% 11/15/2013 AAA 1,030M 1,158,750
Missouri St Regl Convention Ser A 6.90% 8/15/2021 AAA 10,750M 12,201,250
Platte Co MO Reorg Sch Dist Ctfs 7 1/8% 1/1/2011 AAA 500M 533,125
Puerto Rico Commonwealth 7.70% 7/1/2020 AAA 3,420M 3,809,025
Puerto Rico Commonwealth Aqu & Sewer Auth Rev Ser A 7 7/8% 7/1/2017 AAA 450M 472,730
Puerto Rico Commonwealth Hwy Ser P 8 1/8% 7/1/2013 AAA 150M 157,850
Puerto Rico Elec Pwr Auth Rev Ser M 8% 7/1/2008 AAA 300M 315,426
Puerto Rico Elec Pwr Auth Rev Ser P 7% 7/1/2021 AAA 300M 335,250
Sikeston MO Elec Rev MBIA+ 6 1/4% 6/1/2012 AAA 2,250M 2,477,813
Sikeston MO Elec Rev MBIA+ 6 1/4% 6/1/2022 AAA 1,000M 1,097,500
Springfield MO Sch Dist No 12 Ser A FGIC+ 6 3/4% 3/1/2011 AAA 1,225M 1,326,062
St Louis MO Land Clearance Rev 7 3/4% 7/1/2021 AAA 2,190M 2,461,012
St Louis MO Regl Convention & Sports Complex Auth Ser C 7.90% 8/15/2021 AAA 2,000M 2,372,500
University of MO Rev Ser A AMBAC+ 6 1/2% 11/1/2011 AAA 2,000M 2,177,500
Total 44,074,307
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation State 4.64%
Puerto Rico Commonwealth RIBS MBIA+ 7.584% 7/1/2008++ AAA 1,000M 1,116,250
Puerto Rico Commonwealth 6.45% 7/1/2017 A 990M 1,089,000
Puerto Rico Commonwealth RIBS FSA+ 7.692% 7/1/2020++ AAA 4,000M 4,310,000
Total 6,515,250
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation Local 4.68%
Columbia MO Spcl Oblig Cap Imp 5 1/2% 2/1/2016 A 500M 505,000
Fort Zumwalt MO Sch Dist Imp Corp Leasehold Rev AMBAC+ 5.60% 3/1/2017 Aaa 500M 507,500
Greene Co MO Reorg Sch Dist Direct Dep 5 3/4% 3/1/2016 AA 1,785M 1,858,630
Riverview Gardens MO Sch Dist 5% 4/1/2017 AA 2,425M 2,346,187
St Louis MO Sch Dist FGIC+ 6% 4/1/2012 AAA 1,275M 1,349,905
Total 6,567,222
- -----------------------------------------------------------------------------------------------------------------------============
Education 4.61%
Missouri St Health & Ed Facs Rev/Maryville Univ Ed 5 3/4% 6/15/2017 Baa 400M 405,000
Missouri St Health & Ed Facs Rev/St Louis Univ HS 6.35% 10/1/2014 A 2,000M 2,142,500
University of MO Rev 5 1/2% 11/1/2017 AA 3,500M 3,543,750
University of MO Rev 5 1/2% 11/1/2023 AA 375M 378,750
Total 6,470,000
- -----------------------------------------------------------------------------------------------------------------------============
Finance 6.36%
Blue Spring MO Pub Bldg Auth Leasehold Rev Ser A FGIC+ 5 1/8% 9/1/2016 AAA 1,130M 1,117,288
Kansas City MO Muni Assistance Corp Rev MBIA+ 5 1/8% 4/15/2015 AAA 8,000M 7,810,000
Total 8,927,288
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 17.97%
Hannibal MO Ind Dev Auth Health Facs Rev Ser A FSA+ 5 5/8% 3/1/2012 AAA 2,170M 2,254,088
Hannibal MO Ind Dev Auth Health Facs Rev Ser A FSA+ 5 3/4% 3/1/2022 AAA 1,250M 1,287,500
Jackson Co MO Ind Dev Rev/St Joseph Health Ctr 7% 7/1/2022 Baa 1,500M 1,640,625
Missouri St Health & Ed Facs Auth/Lutheran Senior Service 5 7/8% 2/1/2023 BBB** 500M 505,000
Missouri St Health & Ed Facs Rev/BJC Health Ser A 6 1/2% 5/15/2020 AA 4,900M 5,469,625
Missouri St Health & Ed Facs Rev/Health Midwest Ser B
MBIA+ 6 1/4% 2/15/2022 AAA 7,175M 7,695,187
Missouri St Health & Ed Facs Rev/Heartland Health Sys
AMBAC+ 6.35% 11/15/2017 AAA 3,600M 3,919,500
Missouri St Health & Ed Facs Rev/SSM Health Care Ser AA
MBIA+ 6 1/4% 6/1/2016 AAA 2,250M 2,430,000
Total 25,201,525
- -----------------------------------------------------------------------------------------------------------------------============
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
MISSOURI SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<S> <C> <C> <C>
Housing 5.70%
Missouri St Hsg Dev Comm Mtge Rev Ser A
GNMA+ AMT+++ 6 3/4% 6/1/2024 AAA $ 350M $ 372,750
Missouri St Hsg Dev Comm Mtge Rev Ser A
GNMA+ AMT+++ 6.22% 3/1/2026 AAA 5,000M 5,262,500
Missouri St Hsg Dev Comm Mtge Rev Ser B
GNMA+ AMT+++ 6.40% 12/1/2024 AAA 2,135M 2,236,413
Puerto Rico Hsg Fin Corp Mtge Rev Ser A GNMA+ 7.80% 10/15/2021 AAA 10M 10,363
Puerto Rico Hsg Fin Corp Mtge Rev Ser B GNMA+ 7.65% 10/15/2022 AAA 110M 116,463
Total 7,998,489
- -----------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Bonds 2.70%
Missouri St Environmental Imp & Energy Rev/Union Elec Ser A
7.40% 5/1/2020 AA $ 550M 598,125
Puerto Rico Tel Auth Rev RIBS MBIA+ 6.617% 1/25/2007++ AAA 2,000M 2,167,500
Puerto Rico Tel Auth Rev RIBS MBIA+ 6.925% 1/16/2015++ AAA 1,000M 1,028,750
Total 3,794,375
- -----------------------------------------------------------------------------------------------------------------------============
Miscellaneous 4.12%
Clay Co MO Pub Bldg Auth Leasehold Rev FGIC+ 7% 5/15/2014 AAA 1,000M 1,132,500
St Louis Co MO Ind Dev Rev Arena Prjt AMT+++ 7 7/8% 12/1/2024 BBB** 2,000M 2,172,500
St Louis Co MO Regl Convention & Sport Complex Auth 5 1/2% 8/15/2013 A 1,000M 993,750
St Louis MO Land Clearance Redev Auth Rev Ser A MBIA+ 5 1/8% 7/1/2021 AAA 1,000M 966,250
St Louis MO Land Clearance Redev Auth Rev Ser B MBIA+ 5.30% 7/1/2016 AAA 500M 498,125
St Louis MO Pkg Facs Rev MBIA+ 5 3/8% 12/15/2021 AAA 10M 10,025
Total 5,773,150
- -----------------------------------------------------------------------------------------------------------------------============
Pollution Control Revenue 8.11%
Missouri St Environmental Imp & Energy Wtr Poll Ctrl Rev 6.55% 7/1/2014 Aa 3,000M 3,243,750
Missouri St Environmental Imp & Energy Wtr Poll Ctrl Rev 5 3/4% 1/1/2016 Aa 2,400M 2,493,000
Missouri St Environmental Imp & Energy Wtr Poll Ctrl Rev 5 5/8% 7/1/2016 Aa 900M 927,000
Missouri St Environmental Imp & Energy Wtr Poll Ctrl Rev 7.20% 7/1/2016 Aa 2,250M 2,579,062
Missouri St Environmental Imp & Energy Wtr Poll Ctrl Rev 5.90% 1/1/2019 Aa 2,050M 2,139,688
Total 11,382,500
- -----------------------------------------------------------------------------------------------------------------------============
Power 2.66%
Puerto Rico Elec Pwr Auth RIBS FSA+ 8.208% 7/1/2023++ AAA 2,500M 2,725,000
Sikeston MO Elec Rev Ref MBIA+ 5% 6/1/2022 AAA 1,065M 1,010,418
Total 3,735,418
- -----------------------------------------------------------------------------------------------------------------------============
Transportation .78%
St Louis MO Arpt Rev Lambert St Louis Intl Ser B
FGIC+ AMT+++ 5 1/4% 7/1/2027 AAA 1,135M 1,092,438
- -----------------------------------------------------------------------------------------------------------------------============
Water and Sewer 5.04%
Kansas City MO Wtr Rev Ser D 7th Issue 6.65% 12/1/2013 AA 2,800M 3,094,000
Missouri St Environmental Imp Energy Res Auth Fac Rev
MBIA+ AMT+++ 5.95% 11/1/2019 AAA 1,500M 1,556,250
St Louis MO Wtr Rev FGIC+ 6% 7/1/2014 AAA 2,250M 2,399,062
Total 7,049,312
- -----------------------------------------------------------------------------------------------------------------------============
Total Municipal Bonds 98.79% (Cost $130,555,772) 138,581,274
===================================================================================================================================
Other Assets, Less Liabilities 1.21%
===================================================================================================================================
Cash and Receivables, Net of Liabilities 1,698,984
===================================================================================================================================
Net Assets 100.00% $140,280,258
===================================================================================================================================
Net asset value ($140,280,258 / 26,892,243 shares outstanding) $5.22
</TABLE>
* Ratings have not been audited by Deloitte & Touche LLP.
** This investment has not been rated by an independent ratings service
but is, in Lord Abbett's opinion, of comparable quality.
+ Insured or guaranteed by the indicated municipal bond insurance
corporation or Federal agency.
++ The interest rate is subject to change periodically and inversely to
the prevailing market rate. The interest rate shown is the rate in
effect at September 30, 1997. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative
Minimum Tax.
See Notes to Financial Statements.
17
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
HAWAII SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<S> <C> <C> <C>
Prerefunded 22.39%
Hawaii St Dept Bdg & Fin/Pali Moni Med Ctr 7.60% 7/1/2010 AAA $ 200M $ 227,250
Hawaii St Dept Bdg & Fin/Pali Moni Med Ctr 7.65% 7/1/2019 AAA 1,000M 1,138,750
Hawaii St Dept Bdg & Fin/Queens Med Hosp FGIC+ 6 1/2% 7/1/2012 AAA 250M 255,168
Hawaii St G.O. Ser B-R 7% 6/1/2009 AAA 1,000M 1,076,250
Hawaii St G.O. Ser B-R 7% 6/1/2010 AAA 2,430M 2,615,288
Hawaii St G.O. Ser B-S 7% 9/1/2003 AAA 500M 545,000
Hawaii St G.O. Ser B-S 7 1/8% 9/1/2009 AAA 700M 765,625
Honolulu HI City & Co G.O. 7.10% 6/1/2006 AAA 1,000M 1,086,250
Honolulu HI City & Co G.O. Ser C 7.15% 6/1/2008 AAA 500M 544,375
Honolulu HI City & Co G.O. Ser C 7.15% 6/1/2010 AAA 1,000M 1,088,750
Honolulu HI City & Co G.O. Ser D 6.90% 12/1/2010 AAA 400M 437,500
Honolulu HI City & Co Ser B 6.90% 10/1/2002 AAA 100M 104,592
Maui Co HI Ser A AMBAC+ 6.80% 12/1/2001 AAA 1,000M 1,090,000
Maui Co HI Ser A AMBAC+ 6.80% 12/1/2009 AAA 1,000M 1,090,000
Puerto Rico Commonwealth 7 5/8% 7/1/2010 AAA 200M 222,500
Puerto Rico Commonwealth 7.70% 7/1/2020 AAA 1,500M 1,670,625
Puerto Rico Commonwealth Aqu & Sewer Auth Rev Ser A
7 7/8% 7/1/2017 AAA 100M 105,051
Puerto Rico Commonwealth Hwy Ser Q 7 3/4% 7/1/2010 AAA 525M 585,375
Puerto Rico Commonwealth Pub Imp Ser A 7.70% 7/1/2008 AAA 1,700M 1,831,750
Puerto Rico Elec Pwr Auth Rev Ser M 8% 7/1/2008 AAA 150M 157,713
Puerto Rico Elec Pwr Auth Rev Ser P 7% 7/1/2021 AAA 500M 558,750
Puerto Rico Pub Bldg Auth Ser K 6 7/8% 7/1/2012 AAA 450M 507,375
Total 17,703,937
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation State 18.72%
Hawaii St 8% 1/1/2013 AAA 2,000M 2,625,000
Hawaii St Hwy Rev 5 1/4% 7/1/2016 AA 1,500M 1,486,875
Hawaii St Ser B-Z 6% 10/1/2010 AA 500M 550,000
Hawaii St Ser B-Z 6% 10/1/2012 AA 500M 549,375
Puerto Rico Commonwealth 6.35% 7/1/2010 A 1,285M 1,405,469
Puerto Rico Commonwealth 6.45% 7/1/2017 A 2,300M 2,530,000
Puerto Rico Commonwealth RIBS FSA+ 7.692% 7/1/2020++ AAA 3,000M 3,232,500
Puerto Rico Commonwealth 6 1/2% 7/1/2023 A 1,250M 1,378,125
Puerto Rico Commonwealth 6% 7/1/2026 A 1,000M 1,047,500
Total 14,804,844
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation Local 8.51%
Hawaii Co HI Ser A FGIC+ 5.60% 5/1/2013 AAA 1,780M 1,886,800
Honolulu HI City & Co FGIC+ 6% 12/1/2015 AAA 1,000M 1,101,250
Honolulu HI City & Co Ser A MBIA+ 5% 11/1/2015 AAA 1,500M 1,458,750
Honolulu HI City & Co Ser A FGIC+ 5 1/2% 9/1/2016 AAA 1,000M 1,017,500
Kauai Co HI Ser B MBIA+ 5 1/4% 8/1/2017 AAA 195M 192,806
Maui Co HI Ser A MBIA+ 5 3/4% 6/1/2016 AAA 1,035M 1,073,813
Total 6,730,919
- -----------------------------------------------------------------------------------------------------------------------============
Education .37%
University of HI Ser G AMBAC+ 5.45% 10/1/2006 AAA 275M 288,750
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 7.66%
Hawaii St Dept Bdg & Fin Spcl Purp Rev Kapi'olani 6.20% 7/1/2016 A 1,000M 1,048,750
Hawaii St Dept Bdg & Fin Spcl Purp Rev Kapi'olani 6 1/4% 7/1/2021 A 2,000M 2,097,500
Hawaii St Dept Bdg & Fin/St Francis Hosp CGIC+ 6 1/2% 7/1/2022 AAA 1,200M 1,296,000
Puerto Rico Ind Med & Environmental/St Luke Hosp 6 1/4% 6/1/2010 A 1,390M 1,454,288
Puerto Rico Ind Tourist Ed Med & Environmental Ctrl Fac Gr A
MBIA+ 6 1/4% 7/1/2024 AAA 150M 162,000
Total 6,058,538
- -----------------------------------------------------------------------------------------------------------------------============
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
HAWAII SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<S> <C> <C> <C>
Housing 4.59%
Hawaii St Hsg Fin & Dev Corp Ser A FNMA+ AMT+++ 7.10% 7/1/2024 Aa $ 960M $ 1,018,800
Hawaii St Hsg Fin & Dev Corp Sing Fam Mtge Pur Rev Ser B
FNMA+ 5.45% 7/1/2017 Aa 1,000M 1,001,250
Hawaii St Hsg Fin & Dev Corp/Univ of HI Faculty Hsg Prjt
AMBAC+ 5.65% 10/1/2016 AAA 1,000M 1,036,250
Hawaii St Hsg Fin & Dev Corp/Univ of HI Faculty Hsg Prjt
AMBAC+ 5.70% 10/1/2025 AAA 500M 518,125
Puerto Rico Hsg Fin Corp Mtge Rev Ser B GNMA+ 7.65% 10/15/2022 AAA 55M 58,231
Total 3,632,656
- -----------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Bonds 4.43%
Puerto Rico Ind Med & Environmental Ctrl/Baxter Lab Ser A
8% 9/1/2012 A 1,000M 1,063,750
Puerto Rico Ind Med & Environmental/Warner Lambert
7.60% 5/1/2014 Aa 1,500M 1,620,000
Puerto Rico Tel Auth Rev RIBS MBIA+ 6.925% 1/16/2015++ AAA 800M 823,000
Total 3,506,750
- -----------------------------------------------------------------------------------------------------------------------============
Power 21.16%
Hawaii St Dept Bdg & Fin RIBS AMT+++ 6.807% 12/15/2023++ AAA 1,500M 1,485,000
Hawaii St Dept Bdg & Fin Sav LINK 5.538% 12/15/2023 AAA 7,000M 6,886,250
Hawaii St Dept Bdg & Fin/HI Elec Ser A
MBIA+ AMT+++ 6.60% 1/1/2025 AAA 2,795M 3,067,512
Hawaii St Dept Bdg & Fin/HI Elec Ser C
MBIA+ AMT+++ 7 3/8% 12/1/2020 AAA 2,500M 2,746,875
Puerto Rico Elec Pwr Auth RIBS FSA+ 8.208% 7/1/2023++ AAA 1,500M 1,635,000
Puerto Rico Elec Pwr Auth Ser N 7 1/8% 7/1/2014 BBB 365M 387,355
Puerto Rico Elec Pwr Auth Ser U 6% 7/1/2014 A 500M 527,500
Total 16,735,492
- -----------------------------------------------------------------------------------------------------------------------============
Transportation 9.37%
Hawaii St Arpt Sys Rev Ser M MBIA+ AMT+++ 7% 7/1/2018 AAA 2,125M 2,326,875
Hawaii St Arpt Sys Rev 2nd Ser FGIC+ AMT+++ 7 1/2% 7/1/2020 AAA 445M 487,831
Hawaii St Arpt Sys Rev 2nd Ser MBIA+ AMT+++ 6 3/4% 7/1/2021 AAA 2,745M 2,974,894
Hawaii St Hbr Cap Imp Rev FGIC+ AMT+++ 6 1/4% 7/1/2015 AAA 500M 536,250
Hawaii St Hbr Cap Imp Rev FGIC+ AMT+++ 6 3/8% 7/1/2024 AAA 500M 535,000
Puerto Rico Commonwealth Hwy Ser V 6 5/8% 7/1/2012 A 500M 548,125
Total 7,408,975
- -----------------------------------------------------------------------------------------------------------------------============
Water and Sewer 1.56%
Honolulu HI City & Co Bd Wtr Supply Wtr Sys Rev 5.80% 7/1/2021 AA 1,000M 1,040,000
Puerto Rico Commonwealth Aqu & Sewer Rev 5% 7/1/2019 A 200M 189,750
Total 1,229,750
- -----------------------------------------------------------------------------------------------------------------------============
Total Municipal Bonds 98.76% (Cost $74,778,323) 78,100,611
===================================================================================================================================
Other Assets, Less Liabilities 1.24%
===================================================================================================================================
Cash and Receivables, Net of Liabilities 978,877
===================================================================================================================================
Net Assets 100.00% $79,079,488
====================================================================================================================================
Net asset value ($79,079,488 / 15,597,349 shares outstanding) $5.07
</TABLE>
++* Ratings have not been audited by Deloitte & Touche LLP.
+++ Insured or guaranteed by the indicated municipal bond insurance
corporation or Federal agency.
+++ The interest rate is subject to change periodically and inversely to
the prevailing market rate. The interest rate shown is the rate in
effect at September 30, 1997. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative
Minimum Tax.
See Notes to Financial Statements.
19
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
WASHINGTON SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<S> <C> <C> <C>
Prerefunded 20.35%
Douglas Co WA Pub Util Dist No 1 Wells Hydroelec Ser A 8 3/4% 9/1/2018 AAA $ 150M $ 201,563
Lewis Co WA Pub Util Dist No Cowlitz Falls Hydroelec 7% 10/1/2022 AAA 500M 559,375
Mount Vernon WA AMBAC+ 6.85% 12/1/2014 AAA 1,285M 1,458,475
Pike Place Mkt Preservation Ser A 6.60% 12/1/2021 AAA 2,000M 2,175,000
Seattle WA Muni Metro Ser T 6 7/8% 1/1/2014 AAA 500M 538,750
Tacoma WA Elec Sys Rev FGIC+ 7 3/8% 1/1/2009 AAA 500M 535,000
Tacoma WA Elec Sys Rev RIBS AMBAC+ 8.84% 1/2/2015++ AAA 4,500M 5,304,375
Washington St 6 3/8% 2/1/2014 AAA 2,000M 2,172,500
Washington St Pub Pwr Supply Ser C 8% 7/1/2017 AAA 475M 530,813
Total 13,475,851
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation State 7.05%
Puerto Rico Commonwealth AMBAC+ 5.40% 7/1/2025 AAA 1,000M 1,005,000
Washington St Ser B 5 3/4% 5/1/2016 AA 3,550M 3,665,375
Total 4,670,375
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation Local .60%
King Co WA 4 1/2% 1/1/2024 AA 320M 282,800
Whatcom Co WA 5 3/4% 12/1/2012 A 115M 118,019
Total 400,819
- -----------------------------------------------------------------------------------------------------------------------============
Education .42%
Washington St Higher Ed Facs Auth Rev CNLA+ 7% 10/1/2015 AAA 250M 279,063
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 1.29%
Washington St Health Care Facs Rev CNLA+ 6% 12/1/2008 AAA 770M 853,738
- -----------------------------------------------------------------------------------------------------------------------============
Housing 7.27%
Skagit Co WA Hsg Auth Low Income Hsg Assistance Coll
GNMA+ 7% 6/20/2035 AAA 750M 828,750
Snohomish Co WA Hsg Auth Rev AMT+++ 6.40% 5/1/2027 A 500M 526,875
Washington St Hsg Fin Comm Sing Fam Mtge Rev
GNMA+ AMT+++ 6.65% 7/1/2016 AAA 735M 756,130
Washington St Hsg Fin Comm Sing Fam Mtge Rev
GNMA+ AMT+++ 7.05% 7/1/2022 AAA 1,520M 1,645,400
Washington St Hsg Fin Comm GNMA+ AMT+++ 6.30% 12/1/2027 Aaa 1,000M 1,055,000
Total 4,812,155
- -----------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Bonds .78%
Puerto Rico Tel Auth Rev RIBS MBIA+ 6.925% 1/16/2015++ AAA 500M 514,375
- -----------------------------------------------------------------------------------------------------------------------============
Miscellaneous 2.71%
Bellevue WA Convention Ctr Auth Spcl Oblig Rev MBIA+ Zero Coupon 2/1/2024 AAA 2,400M 558,000
CDP-King Co III WA Lease Rev MBIA+ 5 1/4% 6/1/2026 AAA 1,000M 970,000
Spokane WA Pub Facs Dist AMBAC+ 6 1/2% 1/1/2018 AAA 250M 267,188
Total 1,795,188
- -----------------------------------------------------------------------------------------------------------------------============
Power 43.17%
Chelan Co WA Pub Util Dist Ser A MBIA+ AMT+++ 6.40% 7/1/2017 AAA 1,000M 1,090,000
Chelan Co WA Pub Util Dist Ser D MBIA+ AMT+++ 6.35% 7/1/2028 AAA 2,425M 2,622,030
Douglas Co WA Pub Util Dist No 1 Wells Hydroelec AMBAC+ 8 3/4% 9/1/2006 AAA 5,460M 6,558,825
Douglas Co WA Pub Util Dist No 1 Wells Hydroelec 8 3/4% 9/1/2018 A 350M 445,812
Mason Co WA Pub Util Dist 6.35% 1/1/2013 A 1,040M 1,106,300
Puerto Rico Elec Pwr Auth LINK FSA+ 5.929% 7/1/2023 AAA 1,000M 1,032,500
Puerto Rico Elec Pwr Auth RIBS FSA+ 8.208% 7/1/2023++ AAA 3,000M 3,270,000
Tacoma WA Elec Sys Rev LINK AMBAC+ 4.07% 1/2/2015 AAA 1,000M 1,000,000
Washington St Pub Pwr Supply Ser B 7 3/8% 7/1/2004 Aa 1,250M 1,371,875
Washington St Pub Pwr Supply Sys Nuclear Prjt No 2 Rev Reg
FSA+ 5.40% 7/1/2012 AAA 8,000M 8,180,000
Washington St Pub Pwr Supply Sys Nuclear Ser B 5 1/8% 7/1/2017 Aa 2,000M 1,905,000
Total 28,582,342
- -----------------------------------------------------------------------------------------------------------------------============
Transportation 8.22%
Port Kalama WA Rev Ser B AMT+++ 5 5/8% 12/1/2015 Baa 400M 401,500
Port Seattle WA Rev Ser B AMT+++ 7.60% 12/1/2009 AA 750M 834,375
Port Seattle WA Rev Ser B AMT+++ 6.70% 11/1/2010 AA 250M 272,500
Puerto Rico Commonwealth Hwy & Trans Auth Hwy Rev Ser Y 5 1/2% 7/1/2036 A 3,900M 3,934,125
Total 5,442,500
- -----------------------------------------------------------------------------------------------------------------------============
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
WASHINGTON SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<S> <C> <C> <C>
Water and Sewer 7.32%
Pasco WA Wtr & Sewer Rev MBIA+ 6.40% 6/1/2014 AAA $ 865M $ 941,769
Renton WA Wtr & Sewer Rev 6.55% 11/1/2013 A 1,000M 1,091,250
Richland WA Wtr & Sewer Rev MBIA+ 6 1/4% 4/1/2012 AAA 250M 264,375
Seattle WA Drain & Wtr 5 3/4% 12/1/2022 AA 1,500M 1,526,250
Seattle WA Wtr Sys Rev 5 1/4% 12/1/2023 AA 1,040M 1,023,100
Total 4,846,744
-------------------------------------------------------------------------------------------------------------============
Total Municipal Bonds 99.18% (Cost $61,324,800) 65,673,150
===================================================================================================================================
Other Assets, Less Liabilities .82%
===================================================================================================================================
Short-Term Securities
California St 4 1/2% 6/30/1998 MIG1 1,300M 1,307,020
Los Angeles CA Ser A 4 1/2% 6/30/1998 MIG1 1,500M 1,507,650
Total (Cost $2,813,604) 2,814,670
- -----------------------------------------------------------------------------------------------------------------------============
Cash and Receivables, Net of Liabilities (2,272,610)
-------------------------------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities 542,060
===================================================================================================================================
Net Assets 100.00% $66,215,210
===================================================================================================================================
Net asset value ($66,215,210 / 12,832,659 shares outstanding) $5.16
</TABLE>
* Ratings have not been audited by Deloitte & Touche LLP.
+ Insured or guaranteed by the indicated municipal bond insurance
corporation or Federal agency.
++ The interest rate is subject to change periodically and inversely to
the prevailing market rate. The interest rate shown is the rate in
effect at September 30, 1997. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative
Minimum Tax.
See Notes to Financial Statements.
<TABLE>
<CAPTION>
Statement of Net Assets
MINNESOTA SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
===================================================================================================================================
<S> <C> <C> <C>
Prerefunded 31.29%
Brainerd MN Health Care Facs/Benedictine Health/St Joseph Prjt
8 3/8% 2/15/2020 AAA $ 775M $ 864,125
Minneapolis & St Paul MN Hsg & Redev Auth Health Care Ser B
8% 8/15/2014 AAA 250M 280,625
Minneapolis MN Hosp Rev MN Childrens Med Ctr Prjt C 7.30% 12/1/2006 AAA 200M 224,500
Minneapolis MN Hosp Rev MN Childrens Med Ctr Prjt C 7% 12/1/2020 AAA 200M 222,500
Minnesota St Hsg Fin Agy Sing Fam Mtge 6.80% 8/1/2002 AAA 1,000M 1,072,500
Puerto Rico Commonwealth 7.70% 7/1/2020 AAA 250M 278,438
St Louis Park MN Health Care Facs Rev 9 1/4% 1/1/2020 AAA 100M 112,875
Western MN Muni Pwr Agy MN 1977 Ser A 6 3/8% 1/1/2016 AAA 210M 233,363
Total 3,288,926
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation State 5.43%
Minnesota St Hsg Fin Agy Sing Fam Mtge 5 1/4% 8/1/2014 AA 265M 267,981
Puerto Rico Commonwealth 6.45% 7/1/2017 A 275M 302,500
Total 570,481
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation Local 15.60%
Champlin MN MBIA+ 5.60% 2/1/2021 Aaa 250M 254,375
Frazee MN Indpt Sch Dist Ser A 5% 2/1/2016 Aaa 250M 244,688
Minneapolis MN 5 1/8% 10/1/2020 Aaa 500M 495,000
Minneapolis MN Spcl Sch Dist FGIC+ 5 3/8% 2/1/2014 AAA 250M 254,063
North St Paul Maplewood MN Indpt Sch Dist 5 1/8% 2/1/2020 AA 400M 391,500
Total 1,639,626
-------------------------------------------------------------------------------------------------------------============
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
MINNESOTA SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<S> <C> <C> <C>
Education 9.88%
Minnesota St Higher Ed Facs Auth 5.55% 3/1/2017 Aa $ 260M $ 265,850
Minnesota St Higher Ed Facs Auth 5.35% 4/1/2017 A 250M 250,000
Minnesota St Higher Ed Facs Auth Rev/Univ St Thomas Ser 4-A1
5 5/8% 10/1/2016 A 250M 254,688
University of MN 5 3/4% 7/1/2018 AA 250M 267,812
Total 1,038,350
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 16.20%
Minneapolis & St Paul MN Hsg & Redev Auth Health Care Sys
MBIA+ 6 3/4% 8/15/2014 AAA 245M 263,680
Minneapolis & St Paul MN Hsg & Redev Auth Health Care Sys
CGIC+ 5.70% 8/15/2016 AAA 150M 156,000
Minneapolis & St Paul MN Hsg & Redev Auth Health Care Sys
6.90% 10/15/2022 A 300M 331,125
Minnesota Agric & Economic Dev Bd Rev MBIA+ 5 1/2% 11/15/2017 Aaa 220M 223,575
Rochester MN Health Care Ser H RIBS 7.885% 11/15/2015++ AA 650M 728,812
Total 1,703,192
- -----------------------------------------------------------------------------------------------------------------------============
Housing 14.27%
Minnesota St Hsg Fin Agy Sing Fam Mtge AMT+++ 5.85% 7/1/2019 AA 250M 254,688
Minnesota St Hsg Fin Agy Sing Fam Mtge Ser B AMT+++ 5.65% 7/1/2022 AA 250M 254,062
Minnesota St Hsg Fin Agy Sing Fam Mtge Ser B-1 RMK AMT+++
6 3/4% 1/1/2026 AA 95M 100,938
Minnesota St Hsg Fin Agy Sing Fam Mtge Ser D AMT+++ 6.40% 7/1/2015 AA 250M 264,062
Minnesota St Hsg Fin Agy Sing Fam Mtge Ser E RMK 5.90% 7/1/2025 AA 250M 259,063
Minnesota St Hsg Fin Agy Sing Fam Mtge Ser G AMT+++ 6 1/4% 7/1/2026 AA 250M 260,937
St Louis Park MN Multi-Fam Hsg FHA+ 6.15% 12/1/2016 Aa 100M 105,750
Total 1,499,500
- -----------------------------------------------------------------------------------------------------------------------============
Power 2.51%
Puerto Rico Elec Pwr Auth Rev Ser U 6% 7/1/2014 A 250M 263,750
- -----------------------------------------------------------------------------------------------------------------------============
Water and Sewer 2.57%
Marshall MN Elec & Wtr Util FSA+ 6.45% 7/1/2011 AAA 150M 163,500
Minnesota Pub Facs Auth Wtr Poll Ctrl Rev Ser A 6 1/4% 3/1/2016 AAA 100M 107,125
Total 270,625
-------------------------------------------------------------------------------------------------------------============
Total Municipal Bonds 97.75% (Cost $10,010,591) 10,274,450
===================================================================================================================================
Other Assets, Less Liabilities 2.25%
===================================================================================================================================
Other Assets
Cash 385,859
- -----------------------------------------------------------------------------------------------------------------------============
Receivable for:
Interest 135,023
Capital stock sold 70,252
Total Other Assets 591,134
-------------------------------------------------------------------------------------------------------------============
Payable for:
Capital stock reacquired 5,220
Securities purchased 307,544
Distributions 34,840
Other 7,553
-------------------------------------------------------------------------------------------------------------------------
Total Other Assets, Less Liabilities 235,977
===================================================================================================================================
Net Assets 100.00% $10,510,427
===================================================================================================================================
Net asset value ($10,510,427 / 2,079,841 shares outstanding) $5.05
</TABLE>
++* Ratings have not been audited by Deloitte & Touche LLP.
+++ Insured or guaranteed by the indicated municipal bond insurance
corporation or Federal agency.
+++ The interest rate is subject to change periodically and inversely to
the prevailing market rate. The interest rate shown is the rate in
effect at September 30, 1997. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative
Minimum Tax.
See Notes to Financial Statements.
22
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
CALIFORNIA SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<S> <C> <C> <C>
Prerefunded 27.85%
California St Dept Wtr Res Cent Valley Prjt Rev Wtr Sys Ser P 6.10% 12/1/2029 AAA $ 5,000M $ 5,631,250
Capistrano CA Unified Sch Dist Co Fac Dist Spcl Tax 8 3/8% 10/1/2020 AAA 2,500M 2,853,125
East Bay CA Muni Util Dist Wtr Sys Rev AMBAC+ 6 1/2% 6/1/2017 AAA 9,935M 11,350,738
East Bay Muni Water Sys MBIA+ 7 1/2% 6/1/2018 AAA 1,750M 1,938,125
Local Govt Fin/Anaheim Redev 8.20% 9/1/1998 AAA 1,500M 1,589,550
Los Angeles CA Civic Ctr Ctfs 8% 6/1/2010 AAA 3,000M 3,142,800
Los Angeles CA Convention Ctfs Ser A 7 3/8% 8/15/2018 AAA 7,900M 8,502,375
North City West CA Sch Facs Fin Auth Spcl Tax Ser A 7.85% 9/1/2019 AAA 10,025M 10,939,781
Northern CA Transmission Rev Ser A MBIA+ 7% 5/1/2024 AAA 1,750M 1,905,313
Puerto Rico Commonwealth 7.70% 7/1/2020 AAA 2,000M 2,227,500
Puerto Rico Commonwealth Hwy Auth Rev Ser Q 7 3/4% 7/1/2016 AAA 2,250M 2,508,750
Puerto Rico Commonwealth Hwy Auth Rev Ser Q 8% 7/1/2018 AAA 3,500M 3,924,375
Sacramento CA Muni Util Dist Elec Rev Ser B MBIA+ 6 3/8% 8/15/2022 AAA 2,000M 2,225,000
San Francisco CA City & Co Pub Util Wtr Rev Ser A 6 1/2% 11/1/2017 AAA 7,000M 7,752,500
Santa Clara CA Redev Ser 88 Ser A FGIC+ 7 3/4% 6/1/2014 AAA 2,000M 2,092,660
Vallejo CA Rev Wtr Imp Ser B FGIC+ 6 1/2% 11/1/2014 AAA 6,565M 7,451,275
Total 76,035,117
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation State 1.18%
California St FGIC+ 5 5/8% 10/1/2023 AAA 1,275M 1,303,688
Puerto Rico Commonwealth MBIA+ 5 3/8% 7/1/2021 AAA 875M 881,563
Puerto Rico Commonwealth 6% 7/1/2026 A 1,000M 1,047,500
Total 3,232,751
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation Local .73%
Fresno CA Unified Fed Sch Dist Ser C FSA+ 5 3/8% 8/1/2021 AAA 2,000M 2,002,500
- -----------------------------------------------------------------------------------------------------------------------============
Education 12.61%
California Ed Fac Auth Rev/Loyola Marymount Univ Ser B 6.60% 10/1/2022 A 1,900M 2,052,000
California Ed Fac Auth Rev/Pooled College Prjt 6.30% 4/1/2021 Baa 1,000M 1,055,000
California Ed Fac Auth Rev/Stanford Univ Ser M 5 1/4% 12/1/2026 AAA 3,200M 3,192,000
California Ed Fac Auth Rev/Univ of San Francisco MBIA+ 6% 10/1/2016 AAA 1,500M 1,601,250
California Ed Fac Auth Rev/Univ of San Francisco MBIA+ 6% 10/1/2026 AAA 10,500M 11,208,750
California St Univ Rev FGIC+ 5.90% 11/1/2021 AAA 7,700M 8,085,000
University CA Rev AMBAC+ 6% 7/1/2026 AAA 6,825M 7,243,030
Total 34,437,030
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 1.52%
California Health Fac Auth Rev/Cedarknoll Ser B CA MTGE+ 7 1/2% 8/1/2020 A 1,000M 1,085,000
California Health Fac Auth Rev/San Diego Hosp Assn Ser A
MBIA+ 6.95% 10/1/2021 AAA 2,750M 3,055,938
Total 4,140,938
- -----------------------------------------------------------------------------------------------------------------------============
Housing 5.35%
California Hsg Fin Agy Rev Home Mtge Ser A 7 3/8% 8/1/2017 Aa 7,085M 7,563,238
California St Hsg Fin Agy Home Mtge Rev Ser L MBIA+ AMT+++
6.40% 8/1/2027 AAA 6,625M 7,039,063
San Diego CA Sing Fam Mtge Rev Issue A 9.20% 7/15/2016 Aa 5M 5,369
Total 14,607,670
- -----------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Bonds .61%
Puerto Rico Ind Med & Environmental Rev/Upjohn 7 1/2% 12/1/2023 AA 1,550M 1,658,500
- -----------------------------------------------------------------------------------------------------------------------============
Miscellaneous 6.05%
California St Pub Wks Bd Lease Rev Ref Various Comm PJ-B
AMBAC+ 5 5/8% 3/1/2019 AAA 3,000M 3,075,000
Concord CA Redev Agy 3rd Ser MBIA+ 8% 7/1/2018 AAA 35M 36,702
Los Angeles CA Trans Comm Sales Tax Rev MBIA+ 7% 7/1/2019 AAA 4,960M 5,288,600
Orange Co CA Recovery Ctfs Part Ser A MBIA+ 6% 7/1/2008 AAA 3,000M 3,326,250
Orange Co CA Recovery Ctfs Part Ser A MBIA+ 6% 7/1/2026 AAA 3,205M 3,397,300
Santa Clara CA Ctfs 7.80% 11/1/2013 A 1,295M 1,406,693
Total 16,530,545
- -----------------------------------------------------------------------------------------------------------------------============
Pollution Control Revenue 4.17%
California Poll Ctrl Rev/Pacific Gas & Elec MBIA+ AMT+++ 8 3/4% 1/1/2007 AAA 650M 668,116
California Poll Ctrl Rev/So CA Edison Ser B AMBAC+ AMT+++ 6.40% 12/1/2024 AAA 10,000M 10,712,500
Total 11,380,616
-------------------------------------------------------------------------------------------------------------============
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
CALIFORNIA SERIES September 30, 1997
Rating*: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<S> <C> <C> <C>
Power 10.58%
Los Angeles CA Dept Wtr & Pwr Elec Plt Rev FGIC+ 5.40% 11/15/2031 AAA $ 1,000M $ 991,250
Northern CA Transmission Rev MBIA+ 6 1/2% 5/1/2016 AAA 4,250M 4,648,438
Northern CA Transmission Rev RIBS MBIA+ 6.607% 4/29/2024++ AAA 8,500M 8,563,750
Palo Alto CA Util Rev Ser A 6 1/4% 6/1/2020 AA 2,860M 3,078,075
Puerto Rico Elec Pwr Auth Ser O 7 1/8% 7/1/2014 BBB 500M 530,625
Sacramento CA Muni Util Dist Elec Rev RIBS FGIC+ 8.868% 8/15/2018++ AAA 6,000M 6,945,000
Santa Clara CA Elec Rev Ser A MBIA+ 6 1/4% 7/1/2019 AAA 3,890M 4,133,125
Total 28,890,263
- -----------------------------------------------------------------------------------------------------------------------============
Solid Waste 1.07%
California Poll Ctrl Fin Auth Solid Waste Rev/Browning Ferris
AMT+++ 6 3/4% 9/1/2019 A 2,600M 2,908,750
- -----------------------------------------------------------------------------------------------------------------------============
Transportation 16.77%
Long Beach Hbr Rev MBIA+ AMT+++ 5 1/4% 5/15/2025 AAA 3,000M 2,891,250
Los Angeles CA Dept Arpts Rev Ontario Intl Arpt Ser A
FGIC+ AMT+++ 6% 5/15/2026 AAA 2,750M 2,880,625
Los Angeles CA Hbr Dept Rev Ser B MBIA+ AMT+++ 5 3/8% 11/1/2019 AAA 5,000M 4,912,500
Los Angeles CA Hbr Dept Rev Ser B AMT+++ 5 3/8% 11/1/2023 AA 6,525M 6,386,343
Los Angeles CA Hbr Dept Rev Ser B AMT+++ 6 5/8% 8/1/2025 AA 1,000M 1,083,750
Port Oakland CA Port Rev Ser I MBIA+ 5.60% 11/1/2019 AAA 1,500M 1,531,875
Puerto Rico Commonwealth Hwy Rev Ser Y 5 1/2% 7/1/2018 A 2,000M 2,017,500
San Francisco CA Bay Area Rapid Trans Dist Sales Tax Rev
FGIC+ 6.60% 7/1/2012 AAA 1,540M 1,680,525
San Francisco CA City & Co Arpt Comm Intl Arpt Rev Ser I
AMBAC+ AMT+++ 6 1/2% 5/1/2018 AAA 4,500M 4,921,875
San Francisco CA City & Co Arpt Comm Intl Arpt Rev 2nd Ser
MBIA+ 6 3/4% 5/1/2020 AAA 5,000M 5,587,500
San Francisco CA City & Co Arpt Comm Intl Arpt Rev 2nd Ser
FGIC+ 5 5/8% 5/1/2021 AAA 2,000M 2,040,000
San Francisco CA City & Co Arpt Intl Arpt Rev 2nd Ser 8B
FGIC+ 6.10% 5/1/2025 AAA 2,000M 2,117,500
San Joaquin Hills CA Trans Corridor Agy Toll Rd Rev Zero Coupon 1/1/2025 AAA 10,000M 2,337,500
San Joaquin Hills CA Trans Corridor Agy Toll Rd Rev Ser A 5 1/2% 1/15/2028 BBB 2,000M 1,950,000
San Joaquin Hills CA Trans Corridor Agy Toll Rd Rev Ser A
MBIA+ 5 3/8% 1/15/2029 AAA 3,500M 3,443,125
Total 45,781,868
- -----------------------------------------------------------------------------------------------------------------------============
Water and Sewer 12.16%
California St Dept Wtr Res Ser O 5% 12/1/2022 AA 2,240M 2,136,400
Chino Ontario Upland CA Wtr Facs Auth Ctfs FGIC+ 5.20% 10/1/2015 AAA 5,000M 4,937,500
East Bay CA Muni Util Dist Wastewtr Treatment Sys Rev
RIBS AMBAC+ 6.92% 6/1/2020++ AAA 1,750M 1,787,187
Los Angeles CA Wastewtr Sys Rev Ser A MBIA+ 4.90% 12/1/2010 AAA 2,895M 2,895,000
Los Angeles CA Wastewtr Rev Ser C 7.10% 6/1/2018 A 5,980M 6,361,225
Metropolitan Wtr Dist So CA Wtrwks Rev RIBS 7.682% 8/5/2022++ AA 7,300M 7,957,000
Metropolitan Wtr Dist So CA Wtrwks Rev Ser C 5% 7/1/2037 AA 2,000M 1,870,000
Vallejo CA Rev Ref Wtr Imp Prjt Ser A FSA+ 5 7/8% 5/1/2026 AAA 5,000M 5,243,750
Total 33,188,062
-------------------------------------------------------------------------------------------------------------============
Total Municipal Bonds 100.65% (Cost $260,199,101) 274,794,610
===================================================================================================================================
Other Assets, Less Liabilities (.65)%
===================================================================================================================================
Cash and Receivables, Net of Liabilities (1,785,576)
===================================================================================================================================
Net Assets 100.00% $273,009,034
===================================================================================================================================
Class A Shares -- Net asset value ($258,504,916 / 24,115,576 shares outstanding) $10.72
Class C Shares -- Net asset value ($14,504,118 / 1,353,349 shares outstanding) $10.72
</TABLE>
* Ratings have not been audited by Deloitte & Touche LLP.
+ Insured or guaranteed by the indicated municipal bond insurance
corporation or Federal agency.
++ The interest rate is subject to change periodically and inversely to
the prevailing market rate. The interest rate shown is the rate in
effect at September 30, 1997. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative
Minimum Tax.
See Notes to Financial Statements.
24
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
Year Ended 9/30/97
---------------------------------------------------------------------
National New York Texas New Jersey Connecticut
Investment Income Series Series Series Series Series
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Income
Interest $ 40,498,037 $ 19,104,611 $ 5,785,490 $ 11,124,424 $ 7,252,668
- ---------------------------------------------------------------------------------------------------------------------------
Expenses
Management fee 3,310,474 1,546,703 463,328 920,184 600,344
Management fee waived -- -- -- (76,825) (220,975)
12b-1 distribution plan 2,007,370 811,694 249,678 441,129 247,201
Shareholder servicing 397,952 159,046 57,812 111,223 47,481
Registration 55,000 1,900 2,400 3,000 1,000
Reports to shareholders 87,327 38,868 6,468 21,819 7,684
Audit and tax 69,064 40,600 17,600 30,146 22,368
Legal 24,565 19,298 5,000 15,058 2,795
Directors 16,500 9,000 2,975 5,445 2,988
Other 77,814 46,969 4,033 38,559 1,337
Total expenses 6,046,066 2,674,078 809,294 1,509,738 712,223
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income 34,451,971 16,430,533 4,976,196 9,614,686 6,540,445
- ---------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain on Investments
===========================================================================================================================
Realized gain from investment transactions
Proceeds from sales 1,760,752,035 362,174,980 148,384,370 290,097,419 49,741,123
Cost of investments sold 1,752,258,374 359,412,897 147,623,322 287,838,146 49,333,788
Net realized gain 8,493,661 2,762,083 761,048 2,259,273 407,335
- ---------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investments 15,356,407 4,503,556 2,542,204 2,850,706 2,846,990
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 23,850,068 7,265,639 3,303,252 5,109,979 3,254,325
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 58,302,039 $ 23,696,172 $ 8,279,448 $ 14,724,665 $ 9,794,770
===========================================================================================================================
<CAPTION>
Year Ended 9/30/97
---------------------------------------------------------------------
Missouri Hawaii Washington Minnesota California
Investment Income Series Series Series Series Series
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Income
Interest $ 8,158,242 $ 4,780,866 $ 4,095,429 $ 532,266 $ 17,172,488
- ---------------------------------------------------------------------------------------------------------------------------
Expenses
Management fee 689,175 400,345 344,362 45,321 1,406,241
Management fee waived (329,040) (227,090) (34,553) (45,321) (344,451)
12b-1 distribution plan 437,956 209,303 -- -- 831,987
Shareholder servicing 102,142 52,832 50,865 10,706 124,708
Registration 3,605 650 1,000 1,860 3,400
Reports to shareholders 10,900 6,424 7,812 884 24,336
Audit and tax 21,894 13,200 12,731 10,680 34,572
Legal 3,900 4,794 1,276 600 16,450
Directors 3,798 3,471 2,819 180 6,061
Organization -- 75 572 1,380 --
Other 18,560 4,059 4,570 6,282 49,430
Total expenses 962,890 468,063 391,454 32,572 2,152,734
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income 7,195,352 4,312,803 3,703,975 499,694 15,019,754
- ---------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
===========================================================================================================================
Realized gain (loss) from investment transactions
Proceeds from sales 42,189,276 31,705,457 123,647,597 3,676,004 417,110,674
Cost of investments sold 41,942,758 31,413,085 122,300,549 3,707,798 414,905,734
Net realized gain (loss) 246,518 292,372 1,347,048 (31,794) 2,204,940
- ---------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investments 3,361,757 1,942,576 1,371,578 333,373 5,289,887
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 3,608,275 2,234,948 2,718,626 301,579 7,494,827
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 10,803,627 $ 6,547,751 $ 6,422,601 $ 801,273 $ 22,514,581
===========================================================================================================================
</TABLE>
See Notes to Financial Statements.
25
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended 9/30/97
---------------------------------------------
National New York Texas
Increase (Decrease) in Net Assets Series Series Series
========================================================================================================
<S> <C> <C> <C>
Operations
Net investment income $ 34,451,971 $ 16,430,533 $ 4,976,196
Net realized gain from investment transactions 8,493,661 2,762,083 761,048
Net unrealized appreciation (depreciation) of investments 15,356,407 4,503,556 2,542,204
Net increase in net assets resulting from operations 58,302,039 23,696,172 8,279,448
- --------------------------------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income (35,155,788) (16,684,783) (5,044,386)
Net realized loss from investment transactions -- -- (646,428)
Total distributions (35,155,788) (16,684,783) (5,690,814)
- --------------------------------------------------------------------------------------------------------
Capital share transactions
Net proceeds from sales of shares 35,601,437 12,173,340 2,994,354
Net asset value of shares issued to shareholders in
reinvestment of net investment income and realized gain
from investment transactions 18,500,641 9,556,295 3,021,664
Net asset value of shares issued in exchange for
assets acquired in tax-free acquisition -- -- --
Total 54,102,078 21,729,635 6,016,018
- --------------------------------------------------------------------------------------------------------
Cost of shares reacquired (102,855,970) (47,803,872) (11,718,272)
- --------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets derived from capital
share transactions (48,753,892) (26,074,237) (5,702,254)
- --------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (25,607,641) (19,062,848) (3,113,620)
- --------------------------------------------------------------------------------------------------------
Net Assets
Beginning of year 672,343,855 319,552,746 94,414,494
- --------------------------------------------------------------------------------------------------------
End of year+ $ 646,736,214 $ 300,489,898 $ 91,300,874
========================================================================================================
<CAPTION>
Year Ended 9/30/96
---------------------------------------------
National New York Texas
Increase (Decrease) in Net Assets Series Series Series
========================================================================================================
<S> <C> <C> <C>
Operations
Net investment income $ 35,611,434 $ 18,011,455 $ 5,477,906
Net realized gain from investment transactions 6,073,693 3,622,706 732,214
Net unrealized appreciation (depreciation) of investments (906,258) (5,732,944) (334,915)
Net increase in net assets resulting from operations 40,778,869 15,901,217 5,875,205
- --------------------------------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income (35,301,437) (17,627,218) (5,330,896)
Net realized loss from investment transactions -- -- --
Total distributions (35,301,437) (17,627,218) (5,330,896)
- --------------------------------------------------------------------------------------------------------
Capital share transactions
Net proceeds from sales of shares 39,972,459 20,811,142 4,835,000
Net asset value of shares issued to shareholders in
reinvestment of net investment income and realized gain
from investment transactions 19,064,733 10,329,658 2,685,685
Net asset value of shares issued in exchange for
assets acquired in tax-free acquisition 44,391,757 7,525,059 --
Total 103,428,949 38,665,859 7,520,685
- --------------------------------------------------------------------------------------------------------
Cost of shares reacquired (87,262,001) (49,004,761) (13,954,966)
- --------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets derived from capital
share transactions 16,166,948 (10,338,902) (6,434,281)
- --------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 21,644,380 (12,064,903) (5,889,972)
- --------------------------------------------------------------------------------------------------------
Net Assets
Beginning of year 650,699,475 331,617,649 100,304,466
- --------------------------------------------------------------------------------------------------------
End of year+ $ 672,343,855 $ 319,552,746 $ 94,414,494
========================================================================================================
</TABLE>
+ Includes (overdistributed) undistributed net investment income of
$(2,298,835), $(949,569) and $(18,102), respectively, at September 30, 1997
and (overdistributed) undistributed net investment income of $(1,595,018),
$(695,319) and $50,088, respectively, at September 30, 1996.
See Notes to Financial Statements.
26
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended 9/30/97
-----------------------------------------------------------------------------
New Jersey Connecticut Missouri Hawaii Washington
Increase (Decrease) in Net Assets Series Series Series Series Series
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Operations
Net investment income $ 9,614,686 $ 6,540,445 $ 7,195,352 $ 4,312,803 $ 3,703,975
Net realized gain (loss) from investment transactions 2,259,273 407,335 246,518 292,372 1,347,048
Net unrealized appreciation of investments 2,850,706 2,846,990 3,361,757 1,942,576 1,371,578
Net increase in net assets resulting
from operations 14,724,665 9,794,770 10,803,627 6,547,751 6,422,601
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income (9,740,556) (6,503,760) (7,156,539) (4,250,983) (3,760,874)
Total distributions (9,740,556) (6,503,760) (7,156,539) (4,250,983) (3,760,874)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital share transactions
Net proceeds from sales of shares 17,203,304 8,963,629 15,958,674 5,715,066 2,537,235
Net asset value of shares issued to shareholders
in reinvestment of net investment income and
realized gain from investment transactions 5,413,150 3,324,275 3,885,605 1,939,959 2,231,777
Total 22,616,454 12,287,904 19,844,279 7,655,025 4,769,012
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of shares reacquired (29,538,020) (18,555,099) (17,355,063) (16,216,580) (12,510,858)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets derived
from capital share transactions (6,921,566) (6,267,195) 2,489,216 (8,561,555) (7,741,846)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (1,937,457) (2,976,185) 6,136,304 (6,264,787) (5,080,119)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets
Beginning of year 186,402,302 122,884,988 134,143,954 85,344,275 71,295,329
- -----------------------------------------------------------------------------------------------------------------------------------
End of year+ $ 184,464,845 $ 119,908,803 $140,280,258 $ 79,079,488 $ 66,215,210
===================================================================================================================================
<CAPTION>
Year Ended 9/30/97
-----------------------------
Minnesota California
Increase (Decrease) in Net Assets Series Series
====================================================================================
<S> <C> <C>
Operations
Net investment income $ 499,694 $ 15,019,754
Net realized gain (loss) from investment transactions (31,794) 2,204,940
Net unrealized appreciation of investments 333,373 5,289,887
Net increase in net assets resulting
from operations 801,273 22,514,581
- ------------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income (505,256) (14,909,128)
Total distributions (505,256) (14,909,128)
- ------------------------------------------------------------------------------------
Capital share transactions
Net proceeds from sales of shares 2,953,707 16,665,881
Net asset value of shares issued to shareholders
in reinvestment of net investment income and
realized gain from investment transactions 309,868 6,516,836
Total 3,263,575 23,182,717
- ------------------------------------------------------------------------------------
Cost of shares reacquired (1,096,054) (52,616,616)
- ------------------------------------------------------------------------------------
Increase (decrease) in net assets derived
from capital share transactions 2,167,521 (29,433,899)
- ------------------------------------------------------------------------------------
Increase (decrease) in net assets 2,463,538 (21,828,446)
- ------------------------------------------------------------------------------------
Net Assets
Beginning of year 8,046,889 294,837,480
- ------------------------------------------------------------------------------------
End of year+ $ 10,510,427 $ 273,009,034
====================================================================================
</TABLE>
+ Includes (overdistributed) undistributed net investment income of
$(378,247), $28,140, $(514,569), $(160,037), $(241,313), $9,090 and
$(871,381), respectively, at September 30, 1997.
See Notes to Financial Statements.
27
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended 9/30/96
---------------------------------------------------------------------------------------------
Increase (Decrease) New Jersey Connecticut Missouri Hawaii Washington Minnesota
in Net Assets Series Series Series Series Series Series
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income $ 10,094,793 $ 6,679,207 $ 6,998,862 $ 4,691,747 $ 4,036,501 $ 402,293
Net realized gain (loss) from
investment transactions 2,284,474 233,088 984,793 620,421 400,112 (29,599)
Net unrealized
appreciation (depreciation)
of investments (934,233) (458,922) (627,703) (498,915) 356,916 (110,355)
Net increase in net assets
resulting from operations 11,445,034 6,453,373 7,355,952 4,813,253 4,793,529 262,339
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income (10,130,335) (6,419,221) (7,226,857) (4,609,365) (4,111,145) (388,612)
Net realized gain from
investment transactions -- -- -- -- -- (44,188)
Total distributions (10,130,335) (6,419,221) (7,226,857) (4,609,365) (4,111,145) (432,800)
- --------------------------------------------------------------------------------------------------------------------------------
Capital share transactions
Net proceeds from sales of shares 20,596,239 19,396,365 11,241,199 10,477,052 4,280,899 4,297,692
Net asset value of shares
issued to shareholders
in reinvestment of net
investment income and
realized gain from
investment transactions 5,684,017 3,443,037 4,116,755 2,125,689 2,420,812 284,450
Net asset value of shares
issued in exchange for
assets acquired in tax-free
acquisition -- -- -- -- -- --
Total 26,280,256 22,839,402 15,357,954 12,602,741 6,701,711 4,582,142
- --------------------------------------------------------------------------------------------------------------------------------
Cost of shares reacquired (32,754,740) (13,424,762) (13,166,042) (13,567,467) (10,448,073) (679,941)
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in
net assets derived from
capital share transactions (6,474,484) 9,414,640 2,191,912 (964,726) (3,746,362) 3,902,201
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease)
in net assets (5,159,785) 9,448,792 2,321,007 (760,838) (3,063,978) 3,731,740
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets
Beginning of period 191,562,087 113,436,196 131,822,947 86,105,113 74,359,307 4,315,149
- --------------------------------------------------------------------------------------------------------------------------------
End of period+ $ 186,402,302 $ 122,884,988 $ 134,143,954 $ 85,344,275 $ 71,295,329 $ 8,046,889
==================================================================================================================================
</TABLE>
One
Month Ended Year Ended
9/30/96 8/31/96
------------- -------------
Increase (Decrease) California California
in Net Assets Series Series
=================================== ============= =============
Operations
Net investment income $ 1,270,077 $ 15,909,947
Net realized gain (loss) from
investment transactions 152,431 1,550,576
Net unrealized
appreciation (depreciation)
of investments 3,003,787 (3,799,733)
Net increase in net assets
resulting from operations 4,426,295 13,660,790
- ----------------------------------- ------------- -------------
Distributions to
shareholders from
Net investment income (1,331,764) (15,888,739)
Net realized gain from
investment transactions -- --
Total distributions (1,331,764) (15,888,739)
- ----------------------------------- ------------- -------------
Capital share transactions
Net proceeds from sales of shares 2,814,821 20,619,999
Net asset value of shares
issued to shareholders
in reinvestment of net
investment income and
realized gain from
investment transactions 575,513 6,879,438
Net asset value of shares
issued in exchange for
assets acquired in tax-free
acquisition -- 16,355,395
Total 3,390,334 43,854,832
- ----------------------------------- ------------- -------------
Cost of shares reacquired (3,258,486) (46,289,724)
- ----------------------------------- ------------- -------------
Increase (decrease) in
net assets derived from
capital share transactions 131,848 (2,434,892)
- ----------------------------------- ------------- -------------
Increase (decrease)
in net assets 3,226,379 (4,662,841)
- ----------------------------------- ------------- -------------
Net Assets
Beginning of period 291,611,101 296,273,942
- ----------------------------------- ------------- -------------
End of period+ $ 294,837,480 $ 291,611,101
==================================================================
+ Includes (overdistributed) undistributed net investment income of
$(252,377), $(8,545), $(553,382), $(221,857), $(184,414), $14,652 and
$(982,007), respectively, at September 30, 1996 and ($920,320) at August 31,
1996.
See Notes to Financial Statements.
28
<PAGE>
Financial Highlights
NATIONAL SERIES
<TABLE>
<CAPTION>
Class A Shares
--------------------------------------------------------------
Year Ended 9/30,
Per Share Operating Performance: 1997 1996 1995 1994 1993
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 11.08 $ 11.00 $ 10.62 $ 12.37 $ 11.72
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .587 .603 .626 .657 .695
Net realized and unrealized gain (loss) on investments .415 .075 .382 (1.3124) .9255
Total from investment operations 1.002 .678 1.008 (.6554) 1.6205
---------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.602) (.598) (.628) (.6596) (.693)
Distributions from net realized gain -- -- -- (.435) (.2775)
---------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 11.48 $ 11.08 $ 11.00 $ 10.62 $ 12.37
- ---------------------------------------------------------------------------------------------------------------------------
Total Return(a) 9.30% 6.31% 9.84% (5.64)% 14.57%
===========================================================================================================================
Ratios to Average Net Assets:
Expenses 0.87% 0.90%+ 0.82% 0.86% 0.87%
Net investment income 5.27% 5.63%+ 5.92% 5.76% 5.79%
=====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
--------------------------------- --------------------------------
Year Ended 9/30, 8/1/96(c) Year Ended 9/30, 7/15/96(c)
Per Share Operating Performance: 1997 to 9/30/96 1997 to 9/30/96
======================================================================================= ================================
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.08 $ 11.05 $ 11.08 $ 10.90
- --------------------------------------------------------------------------------------- --------------------------------
Income from investment operations
Net investment income .553 .089 .507 .106
Net realized and unrealized gain on investments .413 .033 .423 .190
Total from investment operations .966 .122 .93 .296
--------------------------------------------------------------------------------- --------------------------------
Distributions
Dividends from net investment income (.546) (.092) (.520) (.116)
--------------------------------------------------------------------------------- --------------------------------
Net asset value, end of period $ 11.50 $ 11.08 $ 11.49 $ 11.08
- --------------------------------------------------------------------------------------- --------------------------------
Total Return(a) 8.95% 1.16%(b) 8.61% 2.71%(b)
==========================================================================================================================
Ratios to Average Net Assets:
Expenses 1.37% 0.20%(b) 1.59% 0.34%(b)
Net investment income 4.65% 0.68%(b) 4.54% 0.96%(b)
====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended 9/30,
Supplemental Data for All Classes: 1997 1996 1995 1994 1993
======================================================================================================================
<S> <C> <C> <C> <C> <C>
Net assets, end of year (000) $646,736 $672,344 $650,699 $662,380 $709,413
Portfolio turnover rate 232.64% 205.35% 225.39% 184.07% 138.06%
================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Not annualized.
(c) Commencement of offering respective Class shares.
See Notes to Financial Statements.
29
<PAGE>
Financial Highlights
NEW YORK SERIES
<TABLE>
<CAPTION>
Class A Shares
----------------------------------------------------------
Year Ended 9/30,
Per Share Operating Performance: 1997 1996 1995 1994 1993
=======================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.78 $ 10.85 $ 10.54 $ 12.27 $ 11.60
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .578 .597 .610 .649 .682
Net realized and unrealized gain (loss) on investments .262 (.081) .316 (1.3665) .874
Total from investment operations .84 .516 .926 (.7175) 1.556
-----------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.590) (.586) (.616) (.6475) (.681)
Distributions from net realized gain -- -- -- (.365) (.205)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 11.03 $ 10.78 $ 10.85 $ 10.54 $ 12.27
- -----------------------------------------------------------------------------------------------------------------------
Total Return(a) 8.01% 4.87% 9.12% (6.21)% 13.95%
=======================================================================================================================
Ratios to Average Net Assets:
Expenses 0.85% 0.81%+ 0.82% 0.83% 0.85%
Net investment income 5.35% 5.54% 5.83% 5.72% 5.72%
=================================================================================================================
</TABLE>
Class C Shares
----------------------------------
Year Ended 9/30, 7/15/96(c)
Per Share Operating Performance: 1997 to 9/30/96
================================================================================
Net asset value, beginning of period $ 10.78 $ 10.63
- --------------------------------------------------------------------------------
Income from investment operations
Net investment income .483 .111
Net realized and unrealized gain on investments .267 .152
Total from investment operations .75 .263
--------------------------------------------------------------------------
Distributions
Dividends from net investment income (.510) (.113)
--------------------------------------------------------------------------
Net asset value, end of period $ 11.02 $ 10.78
- --------------------------------------------------------------------------------
Total Return(a) 7.13% 2.48%(b)
================================================================================
Ratios to Average Net Assets:
Expenses 1.57% 0.34%(b)
Net investment income 4.60% 1.04%(b)
==========================================================================
<TABLE>
<CAPTION>
Year Ended 9/30,
Supplemental Data for All Classes: 1997 1996 1995 1994 1993
======================================================================================================================
<S> <C> <C> <C> <C> <C>
Net assets, end of year (000) $300,490 $319,553 $331,618 $338,539 $376,456
Portfolio turnover rate 110.28% 64.25% 105.62% 149.13% 101.59%
================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Not annualized.
(c) Commencement of offering Class shares.
See Notes to Financial Statements.
30
<PAGE>
Financial Highlights
TEXAS SERIES
<TABLE>
<CAPTION>
Year Ended 9/30,
Per Share Operating Performance: 1997 1996 1995 1994 1993
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.11 $ 10.05 $ 9.59 $ 10.82 $ 10.28
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .548 .567 .571 .604 .624
Net realized and unrealized gain (loss)
on investments .367 .045 .452 (1.0802) .7135
Total from investment operations .915 .612 1.023 (.4762) 1.3375
------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.555) (.552) (.563) (.6038) (.615)
Distributions from net realized gain (.07) -- -- (.15) (.1825)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 10.40 $ 10.11 $ 10.05 $ 9.59 $ 10.82
- ------------------------------------------------------------------------------------------------------------------------
Total Return(a) 9.25% 6.11%+ 11.14% (4.60)% 13.64%
========================================================================================================================
Ratios/Supplemental Data:
Net assets, end of year (000) $ 91,301 $ 94,414 $100,304 $103,836 $109,232
------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.88% 0.69% 0.62% 0.50% 0.57%
Expenses, excluding waiver 0.88% 0.87% 0.87% 0.87% 0.97%
Net investment income 5.38% 5.58% 5.90% 5.97% 5.96%
Portfolio turnover rate 127.88% 112.34% 108.00% 96.79% 58.10%
==================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
See Notes to Financial Statements.
Financial Highlights
NEW JERSEY SERIES
<TABLE>
<CAPTION>
Year Ended 9/30,
Per Share Operating Performance: 1997 1996 1995 1994 1993
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 5.18 $ 5.14 $ 4.95 $ 5.55 $ 5.14
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .272 .277 .287 .300 .318
Net realized and unrealized gain (loss)
on investments .144 .041 .192 (.507) .439
Total from investment operations .416 .318 .479 (.207) .757
------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.276) (.278) (.289) (.303) (.307)
Distribution from net realized gain -- -- -- (.09) (.04)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 5.32 $ 5.18 $ 5.14 $ 4.95 $ 5.55
- ------------------------------------------------------------------------------------------------------------------------
Total Return(a) 8.25% 6.29% 9.98% (3.91)% 15.26%
========================================================================================================================
Ratios/Supplemental Data:
Net assets, end of year (000) $184,465 $186,402 $191,562 $184,230 $178,767
------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.82% 0.79% 0.72% 0.51% 0.35%
Expenses, excluding waiver 0.86% 0.86% 0.87% 0.83% 0.83%
Net investment income 5.21% 5.31% 5.73% 5.76% 5.88%
Portfolio turnover rate 154.80% 171.63% 133.11% 75.62% 88.29%
==================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
See Notes to Financial Statements.
31
<PAGE>
Financial Highlights
CONNECTICUT SERIES
<TABLE>
<CAPTION>
Year Ended 9/30,
Per Share Operating Performance: 1997 1996 1995 1994 1993
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.13 $ 10.12 $ 9.71 $ 11.01 $ 10.16
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .556 .576 .579 .585 .612
Net realized and unrealized gain (loss)
on investments .287 (.013) .407 (1.1287) .906
Total from investment operations .843 .563 .986 (.5437) 1.518
------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.553) (.553) (.576) (.6038) (.608)
Distributions from net realized gain -- -- -- (.1525) (.06)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 10.42 $ 10.13 $ 10.12 $ 9.71 $ 11.01
- ------------------------------------------------------------------------------------------------------------------------
Total Return(a) 8.56% 5.70% 10.52% (5.13)% 15.48%
========================================================================================================================
Ratios/Supplemental Data:
Net assets, end of year (000) $119,909 $122,885 $113,436 $101,619 $ 93,020
------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.59% 0.38% 0.41% 0.49% 0.44%
Expenses, excluding waiver 0.78% 0.80% 0.86% 0.86% 0.91%
Net investment income 5.45% 5.66% 5.89% 5.67% 5.60%
Portfolio turnover rate 37.09% 63.61% 54.19% 97.42% 45.81%
==================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
See Notes to Financial Statements.
Financial Highlights
MISSOURI SERIES
<TABLE>
<CAPTION>
Year Ended 9/30,
Per Share Operating Performance: 1997 1996 1995 1994 1993
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 5.08 $ 5.08 $ 4.88 $ 5.51 $ 5.14
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .268 .267 .277 .2926 .305
Net realized and unrealized gain (loss)
on investments .138 .008 .204 (.5681) .381
Total from investment operations .406 .275 .481 (.2755) .686
------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.266) (.275) (.281) (.297) (.301)
Distributions from net realized gain -- -- -- (.0575) (.015)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 5.22 $ 5.08 $ 5.08 $ 4.88 $ 5.51
- ------------------------------------------------------------------------------------------------------------------------
Total Return(a) 8.22% 5.54% 10.21% (5.22)% 13.80%
========================================================================================================================
Ratios/Supplemental Data:
Net assets, end of year (000) $140,280 $134,144 $131,823 $119,690 $107,478
------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.70% 0.77% 0.74% 0.60% 0.48%
Expenses, excluding waiver 0.94% 0.92% 0.89% 0.91% 0.92%
Net investment income 5.22% 5.21% 5.61% 5.60% 5.66%
Portfolio turnover rate 27.34% 93.17% 58.17% 50.59% 56.20%
==================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
See Notes to Financial Statements.
32
<PAGE>
Financial Highlights
HAWAII SERIES
<TABLE>
<CAPTION>
Year Ended 9/30,
Per Share Operating Performance: 1997 1996 1995 1994 1993
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 4.93 $ 4.91 $ 4.72 $ 5.34 $ 4.89
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .266 .273 .271 .2918 .297
Net realized and unrealized gain (loss)
on investments .138 .015 .198 (.578) .454
Total from investment operations .404 .288 .469 (.2862) .751
------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.264) (.268) (.279) (.2888) (.301)
Distribution from net realized gain -- -- -- (.045) --
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 5.07 $ 4.93 $ 4.91 $ 4.72 $ 5.34
- ------------------------------------------------------------------------------------------------------------------------
Total Return(a) 8.42% 5.94% 10.30% (5.54)% 15.85%
========================================================================================================================
Ratios/Supplemental Data:
Net assets, end of year (000) $ 79,079 $ 85,344 $ 86,105 $ 92,972 $ 92,883
------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.58% 0.57% 0.58% 0.41% 0.40%
Expenses, excluding waiver 0.87% 0.87% 0.87% 0.87% 0.90%
Net investment income 5.39% 5.46% 5.74% 5.80% 5.62%
Portfolio turnover rate 29.09% 59.46% 70.64% 66.04% 34.49%
==================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
See Notes to Financial Statements.
Financial Highlights
WASHINGTON SERIES
<TABLE>
<CAPTION>
Year Ended 9/30,
Per Share Operating Performance: 1997 1996 1995 1994 1993
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 4.96 $ 4.91 $ 4.72 $ 5.35 $ 4.92
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .268 .271 .277 .2976 .304
Net realized and unrealized gain (loss)
on investments .206 .056 .200 (.5895) .427
Total from investment operations .474 .327 .477 (.2919) .731
------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.274) (.277) (.287) (.2931) (.301)
Distribution from net realized gain -- -- -- (.045) --
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 5.16 $ 4.96 $ 4.91 $ 4.72 $ 5.35
- ------------------------------------------------------------------------------------------------------------------------
Total Return(a) 9.82% 6.80% 10.48% (5.65)% 15.32%
========================================================================================================================
Ratios/Supplemental Data:
Net assets, end of year (000) $ 66,215 $ 71,295 $ 74,359 $ 78,854 $ 77,324
------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.57% 0.60% 0.53% 0.29% 0.30%
Expenses, excluding waiver 0.62% 0.68% 0.68% 0.67% 0.80%
Net investment income 5.36% 5.47% 5.84% 5.93% 5.86%
Portfolio turnover rate 132.37% 78.02% 92.85% 137.74% 85.45%
==================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
See Notes to Financial Statements.
33
<PAGE>
Financial Highlights
MINNESOTA SERIES
<TABLE>
<CAPTION>
Year Ended 9/30, 12/27/94(c)
Per Share Operating Performance: 1997 1996 to 9/30/95
========================================================================================================
<S> <C> <C> <C>
Net asset value, beginning of period $ 4.90 $ 5.01 $ 4.76
- --------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .273 .294 .230
Net realized and unrealized gain (loss) on investments .155 (.078) .249
Total from investment operations .428 .216 .479
--------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.278) (.286) (.229)
Distribution from net realized gain -- (.04) --
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.05 $ 4.90 $ 5.01
- --------------------------------------------------------------------------------------------------------
Total Return(a) 8.97% 4.44% 10.22%(b)
========================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000) $10,510 $8,047 $ 4,315
--------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.36% 0.00% 0.00%(b)
Expenses, excluding waiver 0.86% 0.91% 0.64%(b)
Net investment income 5.51% 5.91% 4.58%(b)
Portfolio turnover rate 41.45% 43.08% 121.41%
==================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Not annualized.
(c) Commencement of operations.
See Notes to Financial Statements.
34
<PAGE>
Financial Highlights
CALIFORNIA SERIES
<TABLE>
<CAPTION>
Class A Shares
---------------------------------------------------------------------------------------
Year One Month
Ended 9/30, Ended 9/30, Year Ended 8/31,
Per Share Operating Performance: 1997 1996 1996 1995 1994 1993 1992
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.43 $ 10.32 $ 10.41 $ 10.45 $ 11.79 $ 11.21 $ 10.78
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations
Net investment income .560 .046 .566 .588 .623 .656 .663
Net realized and unrealized gain (loss)
on investments .290 .112 (.089) (.038) (.989) .872 .5615
Total from investment operations .850 .158 .477 .550 (.366) 1.528 1.2245
-----------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.560) (.048) (.567) (.590) (.624) (.658) (.672)
Distributions from net realized gain -- -- -- -- (.350) (.290) (.1225)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.72 $ 10.43 $ 10.32 $ 10.41 $ 10.45 $ 11.79 $ 11.21
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 8.39% 1.53%(b) 4.65% 5.58% (3.33)% 14.43% 11.79%
===================================================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver 0.72% 0.07%(b) 0.75% 0.76% 0.67% 0.68% 0.67%
Expenses, excluding waiver 0.85% 0.07%(b) 0.86% 0.86% 0.87% 0.88% 0.87%
Net investment income 5.38% 0.44%(b) 5.41% 5.84% 5.63% 5.68% 5.87%
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
------------------------------------------
Year One Month
Ended 9/30, Ended 9/30, 7/15/96(c)
Per Share Operating Performance: 1997 1996 to 8/31/96
=============================================================================================
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.43 $ 10.32 $ 10.28
- ---------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .485 .039 .068
Net realized and unrealized gain on investments .287 .113 .041
Total from investment operations .772 .152 .109
---------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.482) (.042) (.069)
---------------------------------------------------------------------------------------
Net asset value, end of period $ 10.72 $ 10.43 $ 10.32
- ---------------------------------------------------------------------------------------------
Total Return(a) 7.59% 1.47%(b) 1.16%(b)
=============================================================================================
Ratios to Average Net Assets:
Expenses, including waiver 1.46% 0.13%(b) 0.17%(b)
Expenses, excluding waiver 1.59% 0.13%(b) 0.21%(b)
Net investment income 4.64% 0.38%(b) 0.65%(b)
=======================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year One Month
Ended 9/30, Ended 9/30, Year Ended 8/31,
Supplemental Data for All Classes: 1997 1996 1996 1995 1994 1993 1992
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Net assets, end of period (000) $273,009 $294,837 $ 291,611 $296,274 $329,474 $336,291 $224,505
Portfolio turnover rate 121.97% 2.74% 132.37% 100.20% 86.05% 81.34% 152.79%
=============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Not annualized.
(c) Commencement of offering Class shares.
See Notes to Financial Statements.
35
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Lord Abbett Tax-Free Income Fund, Inc. (the "Company") is an open-end management
investment company. The Company consists of ten separate portfolios ("Series").
Each Series is non-diversified as defined under the Investment Company Act of
1940 except for the National Series. The financial statements have been prepared
in conformity with generally accepted accounting principles, which require
management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Company.
(a) Market value is determined as follows: Securities are valued at latest
prices on the basis of valuations furnished by an independent pricing service
or, in their absence, at fair value as determined under procedures approved by
the Board of Directors.
(b) It is the policy of the Company to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all net investment income and net realized gains. Therefore, there
is no provision for federal income tax.
(c) Security transactions are accounted for on the date that the securities are
purchased or sold (trade date). Interest income is recorded on the accrual
basis. Net investment income (other than distribution and service fees) and
realized and unrealized gains or losses are allocated to each class of shares
based upon the relative proportion of net assets at the beginning of the day.
(d) The organization expenses of the Hawaii, Washington and Minnesota Series are
being amortized evenly over a period of five years from their respective
commencement dates of operations.
2. Management Fee and Other Transactions With Affiliates
The Company has a management agreement with Lord, Abbett & Co. ("Lord Abbett")
pursuant to which Lord Abbett supplies the Company with investment management
services and executive and other personnel, pays the remuneration of officers,
provides office space and pays for ordinary and necessary office and clerical
expenses relating to research, statistical work and the supervision of the
Company's investment portfolios. The management fee is based on average daily
net assets for each month at an annual rate of 0.50%. Lord Abbett may
voluntarily waive management fee or reimburse any Series for certain of its
other expenses. Any such other expenses reimbursed are subject to repayment
pursuant to a formula based on the expense ratio and size of the Series until
five years from the commencement of its operations or the termination of the
management agreement, whichever is earlier. As of September 30, 1997, other
expenses reimbursed by Lord Abbett and not repaid by the Minnesota Series
amounted to $43,480.
Each Series of the Company has Rule 12b-1 plans and agreements with respect to
one or more classes of shares as described below (the "Class A, Class B and
Class C Plans") with Lord Abbett Distributor LLC ("Distributor"), an affiliate
of Lord Abbett. Each Series makes payments to Distributor which uses or passes
on such payments to authorized institutions. Pursuant to the Class A Plan, the
Series pays Distributor (1) an annual service fee of (a) 0.25% of the average
daily net assets of Class A shares of the Connecticut, Missouri and California
Series and (b) 0.15% of the average daily net asset value of shares sold prior
to the effective date of the Class A Plan and 0.25% of the average daily net
asset value of shares sold on or after that date for the National, New York,
Texas, New Jersey, Hawaii, Washington and Minnesota Series; (2) a one-time
distribution fee of up to 1% on certain qualifying purchases and (3) a
supplemental annual distribution fee of 0.10% of the average daily net assets of
Class A shares serviced by certain qualifying institutions. The Class A Plan of
the Washington and Minnesota Series will not go into effect until the quarter
subsequent to the net assets of each Series reaching $100 million. Pursuant to
the Class B Plan of the National Series, the Series pays Distributor an annual
service and distribution fee of 0.25% and 0.75%, respectively, of the average
daily net asset value of the Class B shares. Pursuant to the Class C Plan of the
National, New York and California Series, the Series pays Distributor (1) a
service fee and a distribution fee, at the time such shares are sold, not to
exceed 0.25% and 0.75%, respectively, of the net asset value of such shares sold
and (2) at each quarter-end after the first anniversary of the sale of such
shares, a service fee and a distribution fee at an annual rate not to exceed
0.25% and 0.75%, respectively, of the average annual net asset value of such
shares outstanding.
12b-1 distribution plan expenses for the multiple share class Series were as
follows:
12b-1 Expenses
----------------------------------------------
Series Class A Class B Class C
- --------------------------------------------------------------------------------
National $1,580,638 $ 12,902 $ 413,830
- --------------------------------------------------------------------------------
New York 747,714 -- 63,980
- --------------------------------------------------------------------------------
California 681,060 -- 150,927
- --------------------------------------------------------------------------------
Lord Abbett received the following commissions on sales of capital stock of the
Company after concessions were paid to authorized distributors:
Lord Abbett Distributors'
Series Commissions Concessions
- --------------------------------------------------------------------------------
National-Class A $ 81,538 $555,195
- --------------------------------------------------------------------------------
New York-Class A 38,543 259,477
- --------------------------------------------------------------------------------
Texas 13,271 84,500
- --------------------------------------------------------------------------------
New Jersey 56,028 372,235
- --------------------------------------------------------------------------------
Connecticut 34,048 223,604
- --------------------------------------------------------------------------------
Missouri 47,059 304,962
- --------------------------------------------------------------------------------
Hawaii 17,550 120,464
- --------------------------------------------------------------------------------
Washington 12,107 86,464
- --------------------------------------------------------------------------------
Minnesota 14,813 98,043
- --------------------------------------------------------------------------------
California-Class A 33,565 233,315
- --------------------------------------------------------------------------------
Certain of the Company's officers and directors have an interest in Lord Abbett.
36
<PAGE>
Notes to Financial Statements
3. Capital Share Transactions Transactions in shares of capital stock for the
single class Series were as follows:
<TABLE>
<CAPTION>
Year Ended 9/30/97
---------------------------------------------------------------------------
Texas New Jersey Connecticut Missouri Hawaii
Series Series Series Series Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales of shares 293,907 3,287,703 870,633 3,120,760 1,146,282
- ------------------------------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in reinvestment
of net investment income 296,935 1,036,296 325,385 759,387 390,299
- ------------------------------------------------------------------------------------------------------------------------------------
Total 590,842 4,323,999 1,196,018 3,880,147 1,536,581
- ------------------------------------------------------------------------------------------------------------------------------------
Shares reacquired (1,151,185) (5,645,924) (1,818,788) (3,389,471) (3,267,973)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in shares (560,343) (1,321,925) (622,770) 490,676 (1,731,392)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Year Ended 9/30/97
--------------------------
Washington Minnesota
Series Series
- -----------------------------------------------------------------------------
Sales of shares 499,734 594,768
- -----------------------------------------------------------------------------
Shares issued to shareholders in reinvestment
of net investment income 443,179 62,448
- -----------------------------------------------------------------------------
Total 942,913 657,216
- -----------------------------------------------------------------------------
Shares reacquired (2,481,343) (220,422)
- -----------------------------------------------------------------------------
Increase (decrease) in shares (1,538,430) 436,794
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended 9/30/96
---------------------------------------------------------------------------
Texas New Jersey Connecticut Missouri Hawaii
Series Series Series Series Series
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales of shares 475,866 3,974,605 1,905,589 2,206,553 2,128,597
- ------------------------------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in reinvestment of
net investment income and realized gain from
investment transactions 265,530 1,098,145 339,929 808,814 431,565
- ------------------------------------------------------------------------------------------------------------------------------------
Total 741,396 5,072,750 2,245,518 3,015,367 2,560,162
- ------------------------------------------------------------------------------------------------------------------------------------
Shares reacquired (1,377,623) (6,324,324) (1,321,872) (2,584,262) (2,750,815)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in shares (636,227) (1,251,574) 923,646 431,105 (190,653)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Year Ended 9/30/96
--------------------------
Washington Minnesota
Series Series
- -------------------------------------------------------------------------------
Sales of shares 860,560 861,206
- -------------------------------------------------------------------------------
Shares issued to shareholders in reinvestment of
net investment income and realized gain from
investment transactions 488,901 57,627
- -------------------------------------------------------------------------------
Total 1,349,461 918,833
- -------------------------------------------------------------------------------
Shares reacquired (2,109,723) (137,934)
- -------------------------------------------------------------------------------
Increase (decrease) in shares (760,262) 780,899
- -------------------------------------------------------------------------------
Transactions in multiple class share Series (both shares and dollars) were as
follows:
<TABLE>
<CAPTION>
Year Ended 9/30/97
---------------------------------------------------------------------------------
National Series New York Series California Series
Class A Shares Amount Shares Amount Shares Amount
- --------------------------------------------------------------------------- -------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales of shares 2,578,744 $ 28,861,551 1,056,307 $ 11,488,124 1,463,320 $ 15,311,560
- --------------------------------------------------------------------------- -------------------------- -------------------------
Shares issued to shareholders in reinvestment
of net investment income 1,544,616 17,301,986 863,665 9,383,144 585,929 6,151,528
- --------------------------------------------------------------------------- -------------------------- -------------------------
Total 4,123,360 46,163,537 1,919,972 20,871,268 2,049,249 21,463,088
- --------------------------------------------------------------------------- -------------------------- -------------------------
Shares reacquired (8,359,387) (93,829,162) (4,196,395) (45,604,509) (4,602,746) (48,391,373)
- --------------------------------------------------------------------------- -------------------------- -------------------------
Decrease in shares (4,236,027) $(47,665,625) (2,276,423) $(24,733,241) (2,553,497) $(26,928,285)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended 9/30/96
--------------------------------------------------------
National Series New York Series
Class A Shares Amount Shares Amount
- ------------------------------------------------------------------- --------------------------
<S> <C> <C> <C> <C>
Sales of shares 3,460,521 $ 38,540,261 1,905,900 $ 20,626,851
- ------------------------------------------------------------------- --------------------------
Shares issued to shareholders in
reinvestment of net investment income 1,705,482 18,872,688 953,105 10,302,679
- ------------------------------------------------------------------- --------------------------
Total 5,166,003 57,412,949 2,859,005 30,929,530
- ------------------------------------------------------------------- --------------------------
Shares reacquired (7,648,786) (84,781,412) (4,489,130) (48,590,185)
- ------------------------------------------------------------------- --------------------------
Increase (decrease) in shares (2,482,783) $(27,368,463) (1,630,125) $(17,660,655)
- ------------------------------------------------------------------- --------------------------
<CAPTION>
One Month Ended 9/30/96 Year Ended 8/31/96
-----------------------------------------------------
California Series California Series
Class A Shares Amount Shares Amount
- ----------------------------------------------------------------- -------------------------
<S> <C> <C> <C> <C>
Sales of shares 267,904 $ 2,778,820 1,920,287 $ 20,210,489
- ----------------------------------------------------------------- -------------------------
Shares issued to shareholders in
reinvestment of net investment income 52,730 543,646 654,374 6,851,665
- ----------------------------------------------------------------- -------------------------
Total 320,634 3,322,466 2,574,661 27,062,154
- ----------------------------------------------------------------- -------------------------
Shares reacquired (301,434) (3,124,462) (4,377,777) (45,915,889)
- ----------------------------------------------------------------- -------------------------
Increase (decrease) in shares 19,200 $ 198,004 (1,803,116) $(18,853,735)
- ----------------------------------------------------------------- -------------------------
</TABLE>
<TABLE>
<CAPTION>
8/1/96
(Commencement of Offering
Class B Shares)
Year Ended 9/30/97 to 9/30/96
--------------------- -------------------------
National Series National Series
Class B Shares Amount Shares Amount
- ------------------------------------------------------------------------ -------------------------
<S> <C> <C> <C> <C>
Sales of shares 207,299 $ 2,326,883 59,802 $ 661,582
- ------------------------------------------------------------------------ -------------------------
Shares issued to shareholders in reinvestment
of net investment income 3,026 33,961 72 786
- ------------------------------------------------------------------------ -------------------------
Total 210,325 2,360,844 59,874 662,368
- ------------------------------------------------------------------------ -------------------------
Shares reacquired (9,245) (104,667) (5,647) (61,732)
- ------------------------------------------------------------------------ -------------------------
Increase in shares 201,080 $ 2,256,177 54,227 $ 600,636
- ------------------------------------------------------------------------ -------------------------
</TABLE>
37
<PAGE>
Notes to Financial Statements
<TABLE>
<CAPTION>
Year Ended 9/30/97
-------------------------------------------------------------------------------
National Series New York Series California Series
Class C Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------ -------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales of shares 392,311 $ 4,413,003 63,012 $ 685,216 129,424 $ 1,354,321
- ------------------------------------------------------------ -------------------------- -------------------------
Shares issued to shareholders in
reinvestment of net investment
income 103,959 1,164,694 15,946 173,151 34,799 365,308
- ------------------------------------------------------------ -------------------------- -------------------------
Total 496,270 5,577,697 78,958 858,367 164,223 1,719,629
- ------------------------------------------------------------ -------------------------- -------------------------
Shares reacquired (798,706) (8,922,141) (203,552) (2,199,363) (402,350) (4,225,243)
- ------------------------------------------------------------ -------------------------- -------------------------
Decrease in shares (302,436) $(3,344,444) (124,594) $(1,340,996) (238,127) $(2,505,614)
- ------------------------------------------------------------ -------------------------- -------------------------
</TABLE>
<TABLE>
<CAPTION>
7/15/96
(Commencement of Offering
Class C Shares) One Month Ended
to 9/30/96 9/30/96
------------------------------------------------------- -------------------------
National Series New York Series California Series
Class C Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------- --------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales of shares 69,802 $ 770,616 15,695 $ 184,291 3,458 $ 36,001
- -------------------------------------------------------------- --------------------------- -------------------------
Shares issued to shareholders in
reinvestment of net investment
income 17,293 191,259 2,504 26,979 3,091 31,867
- -------------------------------------------------------------- --------------------------- -------------------------
Shares issued to shareholders in
exchange for assets acquired in
tax-free acquisition 4,072,638 44,391,757 707,908 7,525,059 -- --
- -------------------------------------------------------------- --------------------------- -------------------------
Total 4,159,733 45,353,632 726,107 7,736,329 6,549 67,868
- -------------------------------------------------------------- --------------------------- -------------------------
Shares reacquired (219,636) (2,418,857) (38,624) (414,576) (12,944) (134,024)
- -------------------------------------------------------------- --------------------------- -------------------------
Increase (decrease) in shares 3,940,097 $ 42,934,775 687,483 $ 7,321,753 (6,395) $ (66,156)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
7/15/96
(Commencement of Offering
Class C Shares) to 8/31/96
--------------------------
California Series
Class C Shares Amount
- ---------------------------------------------------------------
Sales of shares 39,504 $ 409,510
- ---------------------------------------------------------------
Shares issued to shareholders in
reinvestment of net investment
income 2,635 27,773
- ---------------------------------------------------------------
Shares issued to shareholders in
exchange for assets acquired in
tax-free acquisition 1,591,611 16,355,395
- ---------------------------------------------------------------
Total 1,633,750 16,792,678
- ---------------------------------------------------------------
Shares reacquired (35,879) (373,835)
- ---------------------------------------------------------------
Increase (decrease) in shares 1,597,871 $ 16,418,843
- ---------------------------------------------------------------
The Company has 640,000,000 authorized shares outstanding (par value $.001)
allocated as follows: 120,000,000 to the National Series, 100,000,000 to each of
the New York and California Series, 80,000,000 to the New Jersey Series and
40,000,000 to each of the Texas, Connecticut, Missouri, Hawaii, Washington, and
Minnesota Series.
4. Distributions
Dividends from net investment income are declared daily and paid monthly.
Taxable net realized gains from securities transactions, if any, reduced by
capital loss carryforwards will be distributed to shareholders annually. Income
and capital gains distributions are determined in accordance with income tax
regulations which may differ from methods used to determine the corresponding
income and capital gains amounts in accordance with generally accepted
accounting principles. The accumulated net realized gain (loss) for financial
reporting purposes, which is substantially the same as for federal income tax
purposes, aggregated $(7,617,307) for the National Series, $(13,196,339) for the
New York Series, $739,620 for the Texas Series, $(187,055) for the New Jersey
Series, $(1,910,584) for the Connecticut Series, $(4,371,703) for the Missouri
Series, $(2,189,296) for the Hawaii Series, $(2,637,851) for the Washington
Series, $(64,191) for the Minnesota Series, and $(21,583,046) for the California
Series. The capital loss carryforwards expire in 2003, 2004, 2005 and 2006.
Dividends declared by class for the multiple class share Series were as follows:
Dividends
-----------------------------------------------
Series Class A Class B Class C
- --------------------------------------------------------------------------------
National $33,132,364 $ 78,893 $ 1,944,531
- --------------------------------------------------------------------------------
New York 16,381,850 -- 302,933
- --------------------------------------------------------------------------------
California 14,195,001 -- 714,127
- --------------------------------------------------------------------------------
5. Paid In Capital
At September 30, 1997, paid in capital for each Series was as follows:
- --------------------------------------------------------------------------------
National $629,466,201 Missouri $137,141,028
- --------------------------------------------------------------------------------
New York 300,963,682 Hawaii 78,106,533
- --------------------------------------------------------------------------------
Texas 86,159,670 Washington 64,744,958
- --------------------------------------------------------------------------------
New Jersey 176,696,920 Minnesota 10,301,669
- --------------------------------------------------------------------------------
Connecticut 116,963,663 California 280,867,952
- --------------------------------------------------------------------------------
38
<PAGE>
Notes to Financial Statements
6. Purchases and Sales of Securities
Purchases and sales of investment securities (other than short-term investments)
were as follows:
Series Purchases Sales
- --------------------------------------------------------------------------------
National $1,541,509,590 $1,579,501,934
- --------------------------------------------------------------------------------
New York 338,731,995 362,174,980
- --------------------------------------------------------------------------------
Texas 117,817,662 125,094,590
- --------------------------------------------------------------------------------
New Jersey 281,664,925 290,097,419
- --------------------------------------------------------------------------------
Connecticut 43,978,109 49,741,723
- --------------------------------------------------------------------------------
Missouri 41,871,567 37,318,990
- --------------------------------------------------------------------------------
Hawaii 23,024,442 29,396,697
- --------------------------------------------------------------------------------
Washington 92,595,098 101,198,157
- --------------------------------------------------------------------------------
Minnesota 5,713,225 3,676,004
- --------------------------------------------------------------------------------
California 341,036,065 362,976,080
- --------------------------------------------------------------------------------
Security gains and losses are computed on the identified cost basis. As of
September 30, 1997, net unrealized appreciation, unrealized appreciation, and
unrealized depreciation of investments based on cost for federal income tax
purposes were as follows:
Net Unrealized Unrealized Unrealized
Series Appreciation Appreciation Depreciation
- --------------------------------------------------------------------------------
National $27,186,155 $29,205,149 $ 2,018,994
- --------------------------------------------------------------------------------
New York 13,672,124 14,900,664 1,228,540
- --------------------------------------------------------------------------------
Texas 4,419,686 4,900,181 480,495
- --------------------------------------------------------------------------------
New Jersey 8,333,227 8,754,588 421,361
- --------------------------------------------------------------------------------
Connecticut 4,827,584 6,034,207 1,206,623
- --------------------------------------------------------------------------------
Missouri 8,025,502 8,112,144 86,642
- --------------------------------------------------------------------------------
Hawaii 3,322,288 3,764,198 441,910
- --------------------------------------------------------------------------------
Washington 4,349,416 4,391,568 42,152
- --------------------------------------------------------------------------------
Minnesota 263,859 318,602 54,743
- --------------------------------------------------------------------------------
California 14,595,509 15,467,572 872,063
- --------------------------------------------------------------------------------
The cost of investments for federal income tax purposes is the same as that used
for financial reporting purposes.
7. Directors' Remuneration
The Directors of the Company associated with Lord Abbett and all officers of the
Company receive no compensation from the Company for acting as such. Outside
Directors' fees and retirement costs are allocated among all funds in the Lord
Abbett group based on the net assets of each fund. Directors' fees payable at
September 30, 1997 under a deferred compensation plan were $518,898.
8. California Series
On July 12, 1996, Lord Abbett California Tax-Free Income Fund became a Series of
the Company. The California Series changed its fiscal year end from August 31 to
September 30 to conform to the fiscal year end of the other Series in the
Company. Accordingly, the financial statements of the California Series covered
a one-month period from September 1, 1996 to September 30, 1996.
9. Acquisition
On July 12, 1996, the National, New York and California Series of the Company
acquired the net assets of the respective Series of Lord Abbett Securities Trust
(the "Trust") pursuant to a plan of reorganization approved by the Trust's
shareholders on June 19, 1996. The acquisition was accomplished by a tax-free
exchange of newly issued Class C shares of each Series for shares of the
respective Series of the Trust. The number of Class C shares of each Series of
the Company issued, the number of shares of each Series of the Trust exchanged,
and the aggregate net assets of each Series of the Company and Trust (including
net unrealized appreciation (depreciation) and accumulated net realized losses
for the Trust) immediately before the acquisition were as follows:
Class C Shares Trust Shares Net Assets
Issued Exchanged Of Company
- -------------------------------------------------------------------------------
National 4,072,638 9,484,046 $625,342,602
- -------------------------------------------------------------------------------
New York 707,908 1,662,757 $312,547,408
- -------------------------------------------------------------------------------
California 1,591,611 3,703,634 $276,270,190
- -------------------------------------------------------------------------------
Unrealized
Net Assets Appreciation Accumulated Net
Of Trust (Depreciation) Realized Losses
- -------------------------------------------------------------------------------
National $ 44,391,757 $ 61,000 $ (2,390,370)
- -------------------------------------------------------------------------------
New York $ 7,525,059 $ (4,439) $ (825,448)
- -------------------------------------------------------------------------------
California $ 16,355,395 $ 162,427 $ (2,264,239)
- -------------------------------------------------------------------------------
39
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders,
Lord Abbett Tax-Free Income Fund, Inc.:
We have audited the accompanying statements of net assets of the National
Series, New York Series, Texas Series, New Jersey Series, Connecticut Series,
Missouri Series, Hawaii Series, Washington Series, Minnesota Series, and
California Series of Lord Abbett Tax-Free Income Fund, Inc. as of September 30,
1997, the related statements of operations, and of changes in net assets and the
financial highlights for the respective periods presented. These financial
statements and the financial highlights are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at
September 30, 1997 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the National Series,
New York Series, Texas Series, New Jersey Series, Connecticut Series, Missouri
Series, Hawaii Series, Washington Series, Minnesota Series, and California
Series of Lord Abbett Tax-Free Income Fund, Inc. at September 30, 1997, the
results of their operations, the changes in their net assets and the financial
highlights for the respective periods presented, in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
October 31, 1997
Our Management
Board of Directors
Robert S. Dow
E. Wayne Nordberg
E. Thayer Bigelow*+
Stewart S. Dixon*
John C. Jansing*
C. Alan MacDonald*+
Hansel B. Millican, Jr.*
Thomas J. Neff*+
* Outside Director
+ Audit Committee
Officers
Robert S. Dow, Chairman and President
Zane E. Brown, Executive Vice
President and Portfolio Manager
Paul A. Hilstad, Vice President
and Secretary
Stephen I. Allen, Vice President
Daniel E. Carper, Vice President
Daria L. Foster, Vice President
Robert G. Morris, Vice President
Robert J. Noelke, Vice President
E. Wayne Nordberg, Vice President
John J. Walsh, Vice President
Laurence H. Kaplan, Vice President
and Assistant Secretary
Thomas F. Konop, Vice President
and Assistant Secretary
Keith F. O'Connor, Vice President
and Treasurer
A. Edward Oberhaus III, Vice President
Donna McManus, Assistant Treasurer
Joseph Van Dyke, Assistant Treasurer
Lydia Guzman, Assistant Secretary
Robert M. Hickey, Assistant Secretary
Investment Manager and
Underwriter
Lord, Abbett & Co. and
Lord Abbett Distributor LLC
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
212-848-1800
Custodian
The Bank of New York
New York, NY
Transfer Agent
United Missouri Bank of
Kansas City, N.A.
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419100
Kansas City, MO 64141
800-821-5129
Auditors
Deloitte & Touche LLP
New York, NY
Counsel
Debevoise & Plimpton
New York, NY
40
<PAGE>
LORD, ABBETT & CO.
A Tradition of Performance Through
Disciplined
Investing
[PHOTO: Lisa D'Emic, Zane E. Brown, Richard Smola, Philip Fang and John R.
Mousseau]
(standing, left to right)
Lisa D'Emic, portfolio manager
Richard Smola, portfolio manager
Philip Fang, portfolio manager
(seated, left to right)
Zane E. Brown, partner in charge of
fixed income and portfolio manager
John R. Mousseau, director of municipal
bond management and portfolio manager
A successful long-term track record is evidence of a successful investment
strategy. For decades we, at Lord, Abbett & Co., have believed that investing
with a disciplined, value approach is the best way to achieve competitive
returns and reduce portfolio risk. This commitment and the dedication of our
team of 50 investment professionals have helped us earn the trust of financial
professionals and investors for over 65 years.
About Your Fund's
Board of
Directors
The Securities and Exchange Commission (SEC) views the role of the independent
Board of Directors as one of the most important components in overseeing a
mutual fund. The Board of Directors watches over your Fund's general operations
and represents your interests. Board members review and approve every contract
between your Fund and Lord, Abbett & Co. (the Fund's investment manager) and
Lord Abbett Distributor LLC (the Fund's underwriter). They meet regularly to
review a wide variety of information and issues regarding your Fund. Every
member of the Board possesses extensive business experience. Lord Abbett
Tax-Free Income Fund's shareholders are indeed fortunate to have a group of
independent directors with diverse backgrounds to provide a variety of
viewpoints in the oversight of their Fund. Below, we feature one of our
independent directors, C. Alan MacDonald.
C. Alan MacDonald
Director -- Lord Abbett
Tax-Free Income Fund
[PHOTO OMITTED]
Mr. MacDonald is a graduate of Cornell University's School of Hotel
Administration and has over 40 years of corporate management experience. He is
currently the Managing Director of Directorship, a firm that focuses on the
responsibilities of corporate boards.
Mr. MacDonald serves as director for Fountainhead Water Company, DenAmerica
Corp., J.B. Williams and Exigent Diagnostics, Inc. He has been an independent
director for all of Lord Abbett's funds since 1988.
<PAGE>
Investing in the
Lord Abbett
Family of Funds
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
GROWTH
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
INCOME
- ------------------------------------------------------------------------------------------------------------------------
Growth Funds Growth & Balanced Fund Income Funds Tax-Free Money
Income Funds Income Fund Market Fund
<S> <C> <C> <C> <C> <C> <C>
Developing Global Fund- Affiliated Fund Balanced Series Bond-Debenture o National U.S. Government
Growth Fund Equity Series Fund o California Securities
Growth & o Connecticut Money Market
International Mid-Cap Income Series Global Fund- o Florida Fund*+
Series Value Fund Income Series o Georgia
Research Fund- o Hawaii
Research Fund- Large-Cap Limited Duration o Michigan
Small-Cap Series U.S. Government o Minnesota
Series Securities Series* o Missouri
o New Jersey
U.S. Government o New York
Securities Series* o Pennsylvania
o Texas
o Washington
</TABLE>
Finding the right mutual fund can be confusing. At Lord, Abbett & Co., we
believe your financial adviser provides value in helping you identify and
understand your investment objectives and, ultimately, offering fund
recommendations suitable for your individual needs.
This publication, when used as sales literature, is to be distributed only if
preceded or accompanied by a current prospectus for Lord Abbett Tax-Free Income
Fund.
For more complete information about any other Lord Abbett fund, including
charges and expenses, call your financial adviser or Lord Abbett Distributor LLC
at 800-874-3733 for a prospectus. Read it carefully before investing.
When you invest in a family of funds, you benefit from:
Diversification. You and your financial adviser can diversify your investments
between equity and income funds.
Flexibility. As your investment goals change, your financial adviser can help
you reallocate your portfolio.
As an investor in the Lord Abbett Family of Funds, you have access to 28
portfolios designed to meet a variety of investment needs. While you may
reallocate your assets among our funds at any time, we recommend speaking with
your financial adviser to help you customize your investment plan.
Numbers to Keep Handy
For Shareholder Account or
Statement Inquiries:
800-821-5129
For Literature:
800-874-3733
For More Information:
800-426-1130
Visit Our Web Site:
http://www.lordabbett.com
* An investment in this Fund is neither insured nor guaranteed by the U.S.
Government.
+ There can be no assurance that this Fund will be able to maintain a stable
net asset value of $1.00 per share. This Fund is managed to maintain, and
has maintained, its stable $1.00 per share price.
- --------------------------------------------------------------------------------
[LOGO] LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
LORD ABBETT DISTRIBUTOR LLC LATFI-2-997
- ------------------------------------------------------------
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203 (11/97)
