Lord Abbett
Tax-Free Income Fund
o National o New York o Texas o New Jersey o Connecticut
o Missouri o Hawaii o Washington o Minnesota o California
1998 ANNUAL REPORT
[PHOTO OMITTED]
Portfolios that seek to provide attractive levels of tax-advantaged income
[LOGO](R)
<PAGE>
Report to Shareholders
For the Year Ended September 30, 1998
[PHOTO OMITTED]
/s/ Robert S. Dow
- ----------------------------
ROBERT S. DOW
CHAIRMAN
OCTOBER 23, 1998
"Our continued focus on high-quality municipal issues enabled our portfolios to
participate in the price appreciation that resulted from this `flight to
quality.'"
Lord Abbett Tax-Free Income Fund completed its fiscal year on September 30,
1998, with aggregate net assets of $1.9 billion. The Fund posted strong returns
and performed well relative to competitors for many of its portfolios. (See
inside front cover for net assets and performance of each Series.)
How the Fund Added Value
As economic and political uncertainties abroad created concern regarding the
domestic economy, investors moved from lower-rated fixed income investments into
higher-quality bonds. Our continued focus on high-quality municipal issues
enabled our portfolios to participate in the price appreciation that resulted
from this "flight to quality."
Throughout the fiscal year, the Fund held a high percentage of defensive
shorter-term investments, such as prerefunded bonds. In an environment of
falling rates, many issuers prerefund existing, higher-coupon bonds. When an
issuer prerefunds bonds, the proceeds from a newly issued lower-yielding bond
are used to buy Treasury securities. These Treasury securities are then held to
pay interest and principal on the older, higher-coupon bonds on the first call
date. (The call date is a date upon which an issuer may redeem a bond.) When a
bond becomes a strong prerefunding candidate, it trades off its lower
yield-to-call rather than its higher yield-to-maturity. As a result, it
appreciates in price due to the closer maturity date (the call date) and the
increase in the underlying credit quality (through the use of the Treasury
securities).
In the spring, Long Island Power Authority ("LIPA") brought to market the
largest municipal bond issue ($3 billion) in history. Prior to this offering,
many portfolio managers raised cash by selling bonds from their portfolios in
order to invest in the LIPA issue. We correctly anticipated that managers would
need to liquidate some of their high-quality bonds to make room for LIPA, and
purchased several issues at prices that we believe were significantly discounted
to the market.
What's Ahead
Long-dated municipal bond yields are nearly at parity with yields on government
bond issues. This unusual relationship has occurred because of the large supply
of municipal bonds available this year, and because of the "flight to quality"
that has significantly increased prices for government issues. Since interest
received from municipal bonds is exempt from federal income taxes, and often
from state income taxes, they are particularly appealing to investors in higher
tax brackets.
Our outlook for the balance of 1998 is for the economy to grow at an annualized
rate of less than 2.5%, with inflation remaining moderate and interest rates
stable to lower, depending on how aggressively the Federal Reserve eases. We
remain watchful of economic developments overseas and any possible effects they
might have on the U.S. market. We believe that lower expectations regarding
corporate profits will be responsible for a widening of credit spreads (that is,
the yield at which lower-rated credits trade versus higher-rated credits), and
this will similarly impact the municipal bond area. Thus, even with overall
interest rates declining, the yields (and, hence, the price) between
higher-quality and lower-quality bonds may widen.
Thank you for including Lord Abbett Tax-Free Income Fund in your investment
portfolio. 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 9/30/98.
Lord Abbett's Focus on Quality
[The following tables were represented as a pie chart in the printed material.]
National New York Connecticut Missouri Hawaii
Series Series Series Series Series
AAA 57.9% AAA 57.3% AAA 54.5% AAA 59.0% AAA 64.0%
AA 22.3% AA 9.2% AA 18.6% AA 22.3% AA 7.3%
A 13.1% A 15.2% A 10.9% A 8.2% A 20.7%
BBB(1) 6.7% BBB(1) 18.3% BBB(1) 16.0% BBB(1) 10.5% BBB(1) 8.0%
Texas New Jersey Washington Minnesota California
Series Series Series Series Series
AAA 58.3% AAA 64.8% AAA 68.6% AAA 44.0% AAA 79.7%
AA 23.8% AA 5.4% AA 25.8% AA 40.1% AA 14.1%
A 14.4% A 19.4% A 5.0% A 12.6% A 5.8%
BBB(1) 3.5% BBB(1) 10.4% BBB 0.6% BBB 3.3% BBB 0.4%
Lord Abbett's Tax-Free Record and SEC-Required Information as of 9/30/98 for
Class A Shares
<TABLE>
<CAPTION>
National New York Texas New Jersey Connecticut
Series(2) Series(2) 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) $606.4 $283.6 $92.6 $186.1 $121.0
Dividend Distribution Rate at Net Asset Value(5) 4.71% 4.93% 4.94% 4.77% 4.92%
- --------------------------------------------------------------------------------------------------------------------------
Average Annual Rate of Total Return(6) at Net Asset Value:
1 Year 9.60% 9.03% 9.24% 9.34% 8.32%
10 Years or Life of Series 8.17% 7.66% 8.48% 8.36%(7) 7.87%(7)
30-Day SEC Yield(8) 4.15% 4.28% 4.19% 4.05% 4.28%
- --------------------------------------------------------------------------------------------------------------------------
Average Annual Rate of Total Return(6) at the Class A Share
Maximum Offering Price:
1 Year 4.40% 3.80% 4.10% 4.00% 3.20%
5 Years 4.66% 3.78% 5.04% 4.81% 4.41%
10 Years or Life of Series 7.65% 7.13% 7.95% 7.68%(7) 7.17%(7)
<CAPTION>
Missouri Hawaii Washington Minnesota California
Series Series Series Series(3) Series(2)
- ------------------------------------------------------------------------------------------------------------------------------
<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) $144.2 $81.0 $62.8 $14.4 $250.4
Dividend Distribution Rate at Net Asset Value(5) 4.70% 4.57% 4.68% 5.10% 4.64%
- ------------------------------------------------------------------------------------------------------------------------------
Average Annual Rate of Total Return(6) at Net Asset Value:
1 Year 7.75% 8.59% 9.48% 8.11% 8.86%
10 Years or Life of Series 7.67%(7) 7.42%(7) 7.99%(7) 8.43%(7) 7.88%
30-Day SEC Yield(8) 3.92% 4.04% 4.46% 4.46% 4.02%
- ------------------------------------------------------------------------------------------------------------------------------
Average Annual Rate of Total Return(6) at the Class A Share
Maximum Offering Price:
1 Year 2.60% 3.50% 4.30% 3.00% 3.70%
5 Years 4.14% 4.35% 4.95% -- 3.75%
10 Years or Life of Series 6.96%(7) 6.66%(7) 7.17%(7) 7.02%(7) 7.36%
</TABLE>
(1) Includes holdings which are not rated by independent ratings services but
are, in Lord Abbett's opinion, of comparable quality.
(2) For specific Class share performance, please see each Series' Financial
Highlights (pages 29, 30 and 35).
(3) Returns and yield for the Minnesota Series reflect a voluntary waiver of
Lord, Abbett & Co.'s management fee. Absent of this waiver, the Series'
returns and yield would have been lower. Lord, Abbett & Co. may revise or
terminate this decision at any time.
(4) Predecessor established 9/3/85.
(5) Dividend Distribution Rate at Net Asset Value: The dividend distribution
rate is calculated by dividing the dividends of a class derived by net
investment income during a stated period by the net asset value on the
last day of the period.
(6) 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.
(7) Since inception.
(8) 30-Day SEC Yield: The 30-day SEC yield for each class of shares is
calculated by dividing annualized net investment income per share during a
recent 30-day period by the maximum offering price per share on the last
day of that period.
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%.
The National, California, and New York Series also offer other classes of
shares having varying fees and expenses.
See Important Information on page 1.
<PAGE>
A Note About Year 2000 Matters
As you probably know, the Fund depends on the proper functioning of computer
systems for most, if not all, aspects of its operations. Many computer systems
now in use cannot distinguish between the year 2000 (Y2K) and the year 1900, an
inability that could disrupt the services provided to the Fund.
Lord Abbett, Lord Abbett Distributor llc, the Fund's transfer agent, the Fund's
custodian and other providers of services critical to the Fund have advised the
Fund that they have been actively working on changes to their computer systems
to prepare for the Year 2000 and expect that their systems, and those of their
external service providers, will be adapted in time. Although the Y2K issue is
unprecedented and the process of Y2K preparedness evaluation and systems
remediation is an ongoing one, we presently believe that there will be no
material effect on the Fund and its financial statements.
Important Information
As of 9/30/98, no Series of the Fund had more than 16% 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. A RIB, 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 12/31/98, this report
must be accompanied by Lord Abbett's Performance Quarterly for the most recently
completed calendar quarter.
Statements of Net Assets
NATIONAL SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 16.22% Chattanooga-Hamilton Co TN Hosp Auth Rev Erlanger Ser B
RIBS FSA+ 9.956% 5/25/2021++ AAA $ 3,500M $ 4,169,375
Clermont Co OH Hosp Facs Ser A 7 1/2% 9/1/2019 AAA 285M 314,569
Clermont Co OH Hosp Facs Ser A AMBAC+ 7 1/2% 9/1/2019 AAA 965M 1,020,459
Colorado Springs Util Sys 9 7/8% 11/15/2012 AAA 2,000M 2,277,500
Connecticut St Health & Ed/Yale-New Haven Hosp Ser F
MBIA+ 7.10% 7/1/2025 AAA 1,000M 1,077,500
Cumberland Co NC Ctf Civic Ctr Ser A AMBAC+ 6.40% 12/1/2019 AAA 2,800M 3,230,500
Cumberland Co NC Ctf Ser A AMBAC+ 6.40% 12/1/2024 AAA 500M 576,875
Fulton Co GA Hosp Auth Rev Ser B MBIA+ 6.60% 10/1/2011 AAA 3,000M 3,367,500
Glendale AZ Ind Dev Auth Ed Facs Rev CNLA+ 7 1/8% 7/1/2020 AAA 1,000M 1,197,500
Harris Co TX Ser A 6 1/8% 8/15/2020 AAA 11,375M 12,896,406
Harris Co TX Ser A 7.70% 5/1/2003 AAA 415M 425,251
Hillsborough Co FL Aviation FGIC+ 6.90% 10/1/2011 AAA 170M 179,369
Indiana St Ed Facs Auth Rev 6.65% 3/1/2019 AAA 860M 987,925
Indiana Univ Bldg Auth Ser N 10 1/8% 7/1/2010 AAA 710M 825,375
Kansas City MO Arpt Rev Ser B CGIC+ 6 7/8% 9/1/2014 AAA 2,400M 2,805,000
Mckeesport PA Hosp Auth Rev FSA+ 6 1/2% 7/1/2008 AAA 6,415M 7,377,250
Metropolitan Govt Nashville Wtr & Sewer RIBS AMBAC+ 8.368%
1/1/2022++ AAA 14,750M 17,386,563
Michigan St Trunk Line Ser A MBIA+ 5 1/2% 10/1/2021 AAA 1,000M 1,062,500
Missouri St Health & Ed Facs Auth Rev AMBAC+ 6 1/2% 8/1/2016 AAA 1,000M 1,093,750
Montgomery AL Med Clinic Bd 7% 3/1/2015 AAA 445M 477,819
New Jersey Health Care Facs Fin Auth Series B 8 1/4%
7/1/2020 AAA 2,570M 2,817,363
Ohio St 6.20% 8/1/2013 AAA 750M 861,563
Puerto Rico Commonwealth Hwy Ser T 6 5/8% 7/1/2018 AAA 372M 415,111
Puerto Rico Commonwealth Hwy Auth Rev Ser S 6 1/2% 7/1/2022 AAA 150M 166,688
Puerto Rico Elec Pwr Auth RIBS FSA+ 7.898% 7/1/2023++ AAA 2,500M 2,950,000
</TABLE>
1
<PAGE>
Statements of Net Assets
NATIONAL SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Puerto Rico Elec Pwr Auth Ser D 7 1/8% 7/1/2014 AAA $ 2,255M $ 2,352,867
Spartanburg SC Wtr Wks Rev FGIC+ 6 1/8% 6/1/2026 AAA 5,000M 5,731,250
St Louis MO Land Clearance Rev 7 3/4% 7/1/2021 AAA 7,045M 7,793,531
Tacoma WA Elec Sys Rev Ser C RIBS AMBAC+ 8.942% 1/2/2015++ AAA 13,900M 16,141,375
Uintah Co UT Poll Ctrl Rev 84-F-2 10 1/2% 6/15/2014 AAA 1,000M 1,170,000
Weber Co UT Muni Bldg Auth Lease Rev 7 1/2% 12/15/2019 AAA 3,000M 3,637,500
Total 106,786,234
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation
State 1.06% Georgia St Ser C 6 1/4% 8/1/2013 Aaa 300M 360,375
Missouri St Ser A 4 1/2% 6/1/2020 AAA 2,865M 2,779,050
New York St Ser B 6% 8/15/2018 A 200M 217,500
Oregon St Veterans Welfare Ser 76A 6.05% 10/1/2028 AA 1,100M 1,215,500
Texas St Ser A AMT+++ 6.30% 6/1/2014 AA 190M 197,125
Texas St Wtr Dev Bd 7.15% 8/1/2035 AA 1,915M 2,202,250
Total 6,971,800
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation
Local 4.73% Anne Arundel Co MD 6.30% 8/1/2014 AA 2,510M 2,839,438
Anne Arundel Co MD 6.30% 8/1/2015 AA 2,510M 2,836,300
Anne Arundel Co Wtr & Sewer MD 6.30% 8/1/2023 AA 505M 567,494
Atlanta GA Ser A 6 1/8% 12/1/2023 AA 1,250M 1,393,750
Atlanta GA Ser A 6.10% 12/1/2019 AA 2,495M 2,778,806
Bibb Co GA 5 1/4% 8/1/2027 AA 500M 504,375
Fayette Co GA Sch Dist 6 1/8% 3/1/2015 Aa 1,000M 1,107,500
Glen Cove NY FGIC+ 5% 9/15/2014 AAA 705M 728,794
Houston Co GA Sch Dist MBIA+ 5 1/2% 3/1/2016 AAA 1,000M 1,038,750
Kilmarnock VA 6 1/4% 3/1/2027 BBB* 1,430M 1,551,550
North Providence RI Sch Ser A MBIA+ 6 1/8% 7/1/2016 AAA 1,410M 1,602,113
Riverside VA Regl Jail Auth MBIA+ 6% 7/1/2025 AAA 7,000M 7,735,000
United TX Indpt Sch Dist Zero Coupon 8/15/2021 AAA 3,150M 1,031,625
United TX Indpt Sch Dist Zero Coupon 8/15/2022 AAA 1,580M 491,775
United TX Indpt Sch Dist Zero Coupon 8/15/2023 AAA 3,130M 927,263
University City MO Sch Dist MBIA+ 10% 2/15/2008 AAA 2,250M 3,248,438
West Holmes OH Loc Sch Dist MBIA+ 5 3/8% 12/1/2023 AAA 750M 782,813
Total 31,165,784
- -----------------------------------------------------------------------------------------------------------------------============
Education 14.11% Allegheny Co PA Higher Ed Bldg 6% 5/1/2028 A 2,755M 3,202,688
Arkansas St Student Loan Auth Rev Ser B AMT+++ 7 1/4%
6/1/2009 A 3,500M 4,077,500
Connecticut St Higher Ed Supplemental Loan Auth Ser A
AMT+++ 7 3/8% 11/15/2005 A 65M 66,446
District of Columbia Rev MBIA+ 7.15% 4/1/2021 AAA 1,000M 1,035,750
District of Columbia Rev LINK 9.088% 4/25/2022++ A 4,000M 4,690,000
District of Columbia Rev Ref Georgetown Univ Ser A MBIA+ 6%
4/1/2018 AAA 1,000M 1,106,250
District of Columbia Rev CNLA+ 6.45% 10/1/2023 AAA 5,250M 5,807,813
Illinois Ed Fac Auth Revs AMBAC+ 5.70% 7/1/2024 AAA 5,100M 5,514,375
Indiana St Ed 6.65% 3/1/2019 AAA 10,740M 12,122,775
Maryland St Health & Higher 5.30% 7/1/2018 BBB 245M 248,063
Maryland St Health & Higher 5.30% 7/1/2028 BBB 700M 706,125
Maryland St Health & Higher FSA+ 5% 6/1/2029 Aaa 1,200M 1,213,500
Massachusetts St Health & Ed Facs Auth Rev CNLA+ 6%
7/1/2023 AAA 1,175M 1,273,406
Montgomery Co MD Economic Dev Rev 5.60% 11/1/2018 BBB 500M 523,125
Montgomery Co MD Economic Dev Rev 5.60% 11/1/2022 BBB 300M 312,375
New Jersey Economic Dev Auth 6% 2/1/2025 BBB* 4,230M 4,272,300
New Jersey Economic Dev Sch Rev 7% 5/1/2020 BBB* 1,000M 1,101,250
New Jersey St Ed Fac Auth Ser E AMBAC+ 5.20% 7/1/2028 AAA 880M 902,000
Northampton Co PA Higher Ed 5 1/2% 11/15/2011*** AA 1,500M 1,618,125
</TABLE>
2
<PAGE>
Statements of Net Assets
NATIONAL SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Ohio St Higher Ed Fac Ser A AMBAC+ 5.40% 12/1/2022 AAA $ 750M $ 786,563
Oklahoma Agric & Mech Colleges AMBAC+ 5% 8/1/2024 Aaa 3,500M 3,552,500
Oregon Health Science Univ Rev Ser A MBIA+ Zero
Coupon 7/1/2021 AAA 2,900M 941,311
Pennsylvania St Higher Ed Ser B RIBS AMBAC+ AMT+++
8.401% 3/1/2022++ AAA 3,000M 3,442,500
Pennsylvania St Higher Ed MBIA+ 5 5/8% 12/1/2027 AAA 1,000M 1,067,500
Private Colleges & Univ Facs Auth GA Ser B AMT+++ 5%
11/1/2033 Aa 3,100M 3,107,750
Private Colleges & Univ Facs Auth GA Rev Ser A 6.40%
10/1/2023 Aa 310M 337,125
Rhode Island St Health & Ed Bldg Corp 6% 9/1/2025 Aa 7,465M 8,192,838
Rhode Island St Health & Ed AMBAC+ 5% 11/15/2028 AAA 1,500M 1,490,625
Tennessee St Sch Bd Higher Ed 5% 5/1/2028 AA 2,000M 2,010,000
Texas St Higher Ed Coord AMT+++ 7.70% 10/1/2025 A 535M 567,769
University MO Health Facs Rev Ser A AMBAC+ 5.60%
11/1/2026 AAA 1,140M 1,215,525
University Northn CO Rev MBIA+ 5.60% 6/1/2024 AAA 1,000M 1,070,000
University VT Agric College MBIA+ 4 3/4% 10/1/2038 AAA 3,500M 3,390,625
Vermont Ed & Health Bldgs Fin Agy 6% 11/1/2013 AA 1,450M 1,585,938
Vermont Ed & Health Bldgs Fin Agy Rev 7.05% 10/1/2016 A 2,000M 2,212,500
Virginia St Pub Sch Auth Ser A 6.20% 8/1/2014 AA 1,500M 1,681,875
Washington St Higher Ed Facs Auth MBIA+ 4 3/4% 4/1/2022 AAA 1,195M 1,171,100
Wayne St Univ MI AMBAC+ 5.65% 11/15/2015 AAA 5,000M 5,281,250
Total 92,899,160
- -----------------------------------------------------------------------------------------------------------------------============
Finance 2.06% Delaware Valley PA Reg Fin Auth Loc Govt Rev Ser C
AMBAC+ 7 3/4% 7/1/2027 AAA 1,000M 1,445,000
Dinwiddie Co VA Ind Dev 6% 2/1/2018 BBB* 650M 687,375
Indiana Bd Bk Rev Guarantee/St Revolving Fd PG
Ser A 6 3/4% 2/1/2017 AAA 500M 573,125
Indianapolis IN Loc Pub Imp Ser D 6 1/2% 2/1/2022 AA 3,250M 3,257,118
Iowa St Fin Auth Rev 6 1/4% 5/1/2024 A 3,400M 3,752,750
St Louis MO Fin Corp Leasehold Rev Ser A AMBAC+
6% 2/15/2019 AAA 3,500M 3,845,625
Total 13,560,993
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 15.37% Burleigh Co ND Health/Med Ctr MBIA+ 5 1/4% 5/1/2013*** AAA 1,000M 1,025,000
Cobb Co GA/Kennestone Hosp MBIA+ Zero Coupon 8/1/2015 AAA 1,000M 390,000
Connecticut St Health & Ed 5 3/4% 7/1/2023 Baa 3,280M 3,347,699
Connecticut St Health & Ed Facs Auth Rev AMBAC+
6% 11/1/2022 AAA 2,800M 3,038,000
Connecticut St Health & Ed/Waterbury Hosp Ser B
FSA+ 7% 7/1/2020 AAA 1,000M 1,071,250
Connecticut St Health & Ed/William W Backus Hosp Ser D
AMBAC+ 5 3/4% 7/1/2027 AAA 250M 270,938
Cumberland Co PA Mun Auth 6.80% 11/15/2014 Baa 1,200M 1,327,500
Delaware Co PA Auth Hosp Rev 5 3/8% 12/1/2018 A 2,875M 2,961,250
Fairfax Co VA Ind Dev Auth Rev 5 7/8% 8/15/2016 AA 1,000M 1,085,000
Georgetown TX Health Facs Dev Corp Rev 5 3/8% 8/15/2028 A 500M 508,750
Glynn-Brunswick Mem Hosp Auth GA Rev Antic Ctfs
Southeast GA MBIA+ 6% 8/1/2016 AAA 500M 555,625
Grand Forks ND Health Care MBIA+ 5.60% 8/15/2017 AAA 1,675M 1,779,688
Illinois Health Facs Auth Rev Alexian Brothers
Med Ctr Prjt FSA+ 7 1/8% 1/1/2021 Aaa 4,860M 5,273,100
Indiana Co PA Hosp Auth Rev Ser A 7 1/8% 7/1/2023 A 1,500M 1,657,500
Iowa Fin Auth Rev Ser V 5 1/4% 8/15/2021 AA 4,510M 4,622,750
Kansas St Dev Fin Auth Rev MBIA+ 5 1/8% 12/1/2018 AAA 1,510M 1,547,750
Kentucky Economic Dev Fin Auth Rev MBIA+ 6% 1/1/2027 AAA 1,000M 1,130,000
Kershaw Co SC Hosp Facs Rec 8% 9/15/2017 Baa 1,435M 1,507,439
Maryland St Health & Higher 5.10% 7/1/2022 A 2,250M 2,247,188
Maryland St Health & Higher FSA+ 6.275% 1/1/2028++ Aaa 5,220M 5,637,600
Maryland St Health & Higher FSA+ 5 1/8% 7/1/2028 AAA 1,930M 1,963,775
Maryland St Health & Higher 5% 7/1/2033 AAA 3,600M 3,602,160
Maryland St Health & Higher FSA+ 5 1/8% 7/1/2033 AAA 1,050M 1,064,438
</TABLE>
3
<PAGE>
Statements of Net Assets
NATIONAL SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
McKean Co PA/Bradford Hosp 6% 10/1/2013 A $ 3,500M $ 3,728,165
Medford OR Hosp/Asante Health Ser B MBIA+ 5 1/8% 8/15/2028 AAA 2,680M 2,716,850
Minneapolis & St Paul MN Hsg & Redev Auth Health
Care Sys 6 3/4% 12/1/2013 A 1,000M 1,093,750
Minneapolis & St Paul MN Hsg & Redev Auth Health Care
Sys Ser A MBIA+ 6 3/4% 8/15/2014 AAA 1,300M 1,391,000
Minneapolis & St Paul MN Hsg & Redev Auth Health
Care Sys 6.90% 10/15/2022 A 700M 770,000
Mississippi Dev Bk/Panola Hosp 5 1/2% 7/1/2018 A 2,350M 2,423,438
Montgomery AL Med Clinic Bd Unrefunded Balance 7% 3/1/2015 A 1,305M 1,376,775
New Jersey Health Care Facs Fin Auth Rev/St Peters
Med Ctr MBIA+ 8.60% 7/1/2017 AAA 370M 378,525
New Jersey Health Care Facs Ser C MBIA+ 6 5/8% 7/1/2010 AAA 250M 260,148
New York St Med Care Facs Fin Agy Rev Ser A 8 7/8% 8/15/2007 A 1,105M 1,131,001
New York St Mtg Agy Rev Zero Coupon 10/1/2014 AAA 2,070M 452,937
Norfolk VA Ind Dev Auth Rev Hosp/Childrens Hosp
Kings Grp AMBAC+ 6 1/2% 6/1/2021 AAA 1,150M 1,236,250
North Carolina Med Care 5 2/15/2029 A 250M 244,688
Plymouth MN Health Facs Rev FSA+ 6 1/8% 6/1/2024 AAA 4,000M 4,385,000
Pottsville Hosp 5 5/8% 7/1/2024 A 250M 259,688
Rhode Island St Health & Ed Bldg Corp Rev 6 1/4% 8/15/2022 BBB** 1,000M 1,051,250
Rochester MN Health Care Ser H RIBS 8.118% 11/15/2015++ AA 9,000M 10,631,230
South Dakota Health & Ed MBIA+ 5 1/4% 9/1/2014*** AAA 2,250M 2,309,063
Springfield TN Health & Ed 5 3/8% 8/1/2024 Baa 1,000M 1,008,750
University MO Health Facs Rev RIBS AMBAC+ 5.775% 11/1/2028++ Aaa 1,500M 1,530,000
Washington Co OH Hosp FSA+ 5 3/8% 9/1/2018 Aaa 4,000M 4,175,000
Washington Co OH Hosp FSA+ 4 1/2% 9/1/2023 Aaa 3,250M 3,038,750
Washington Co PA Hosp Auth AMBAC+ 5 7/8% 12/15/2013 AAA 1,000M 1,070,000
Washington St Health Care Facs Auth 5% 8/15/2021 AA 1,000M 1,002,500
Wisconsin St Health & Ed Facs Auth Rev MBIA+ 6 1/2% 8/15/2011 AAA 1,140M 1,235,475
Wisconsin St Health & Ed Facs Auth Rev 7 7/8% 11/1/2022 BBB* 3,275M 3,786,719
Wisconsin St Health & Ed Facs Auth Rev MBIA+ 5 3/4% 3/1/2027 AAA 800M 861,000
Total 101,162,352
- -----------------------------------------------------------------------------------------------------------------------============
Housing 12.85% Arlington Co VA Ind Dev Auth Multi-Fam Rev Hsg Mtge
6.30% 7/1/2016 A 500M 544,375
Arlington Co VA Ind Dev Auth Multi-Fam Rev
Hsg-Mtge 8% 7/1/2015 BBB* 890M 922,263
Bellingham WA Hsg Auth Rev MBIA+ 5.20% 11/1/2027 Aaa 2,715M 2,752,331
Bexar Co TX Hsg Fin Corp Ser A GNMA+ AMT+++ 8.20% 4/1/2022 AAA 705M 732,897
Clayton Co GA Hsg Auth Multi-Fam Hsg Rev 5.70% 7/1/2023 AAA 1,000M 1,050,000
Colorado Hsg & Fin Auth Ser A AMT+++ 6.65% 10/1/2028 AA 2,385M 2,611,575
Colorado Hsg & Fin Auth Ser A AMT+++ 6.80% 10/1/2037 AA 2,360M 2,601,900
Connecticut St Hsg Fin Auth 6.20% 5/15/2017 AA 370M 396,825
Connecticut St Hsg Fin Auth AMBAC+ 5 5/8% 6/15/2027 AAA 1,000M 1,053,750
Connecticut St Hsg Fin Auth Ser A Sub Ser A-2
FHA+ AMT+++ 7.20% 11/15/2008 AA 385M 413,875
De Kalb Co Hsg Auth FSA+ AMT+++ 7.15% 1/1/2025 AAA 1,430M 1,599,812
Fulton Co GA Hsg Auth Multi-Fam Hsg Rev Ser A 6 3/8% 1/1/2027 A 2,900M 3,128,375
Georgia St Hsg & Fin Auth Rev Sub Ser B-2 AMT+++
5.85% 12/1/2028 AAA 495M 520,369
Georgia St Hsg & Fin Auth Rev Sing Fam Mtge A Sub Ser A-2
FHA+ AMT+++ 6.45% 12/1/2027 AAA 210M 228,900
Georgia St Hsg & Fin Auth Rev Sub Ser A-2 FHA+ AMT+++ 6.40%
12/1/2015 AAA 2,000M 2,167,500
Georgia St Hsg & Fin Auth Rev Sing Fam Mtge-B-Sub Ser B-2
FHA+ AMT+++ 6.55% 12/1/2027 AAA 2,000M 2,175,000
Hawaii St Hsg Fin & Dev Corp Sing Fam Mtg Pur Rev Ser A
FNMA+ AMT+++ 5 3/4% 7/1/2030 Aa 2,000M 2,090,000
Idaho Hsg Agy Ser F FHA+ AMT+++ 7.45% 7/1/2015 Aaa 1,115M 1,222,319
</TABLE>
4
<PAGE>
Statements of Net Assets
NATIONAL SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Illinois Hsg Dev Auth FHA+ AMT+++ 7.10% 12/1/2034 AAA $ 1,500M $ 1,663,125
Illinois Hsg Dev Auth Fam Hsg/Lawndale FHA+ AMT+++
6.80% 12/1/2016 AAA 1,000M 1,107,500
Indiana St Hsg Fin Auth Ser D GNMA+ AMT+++ 7.80% 1/1/2022 Aaa 810M 843,412
Kentucky Hsg Corp Hsg Rev Ser B AMT+++ 6.10% 7/1/2016 AAA 1,205M 1,296,881
Kentucky Hsg Corp Hsg Rev Ser D-1 FHA+ AMT+++ 6.80% 1/1/2024 AAA 225M 240,750
Maine St Hsg Auth Mtge Pur Ser A-2 AMT+++ 6 3/4% 11/15/2035 AA 130M 141,213
Maricopa AZ Ind Dev Auth Rev GNMA+ AMT+++ 5 1/2% 12/20/2037 AAA 575M 585,063
Maryland St Comm Dev Admin Dept Hsg & Comm Dev Rev
FHA/VA+ AMT+++ 7.85% 4/1/2029 Aa 785M 821,306
Maryland St Comm Dev Admin Sing Fam 7th Ser AMT+++
7.30% 4/1/2025 Aa 495M 538,931
Massachusetts St Hsg Fin Agy Hsg Rev Rental-Mtge Ser A
AMBAC/FHA+ AMT+++ 7.35% 1/1/2035 AAA 1,445M 1,614,788
Massachusetts St Hsg Fin Agy Hsg Ser 29 AMT+++ 6 3/4% 6/1/2026 Aa 1,525M 1,662,250
Minneapolis St Paul MN Hsg Fin Bd Rev FNMA+ AMT+++
6 1/4% 11/1/2030 AAA 1,000M 1,106,250
Missouri St Hsg Dev Comm GNMA+ AMT+++ 7 3/8% 8/1/2023 AAA 585M 620,831
Montana St Bd Hsg FHA+ AMT+++ 5.35% 6/1/2021 AA 5,000M 5,068,750
New Jersey St Hsg & Mtge Fin Agy Ser B MBIA+ AMT+++
7.90% 10/1/2022 AAA 4,905M 5,110,078
New Mexico Mtg Fin Auth GNMA+ AMT+++ 5.35% 7/1/2023 AAA 2,160M 2,200,500
New York St Med Care Facs Fin Agy Rev Ser A 8% 2/15/2027 AAA 1,960M 1,991,654
North Carolina Hsg Fin Agy Amt-Sing Fam Rev Ser BB FHA+
AMT+++ 6 1/4% 3/1/2012 Aa 1,275M 1,375,406
North Dakota St Hsg Fin Agy Rev Ser B MBIA+ AMT+++
5 1/2% 7/1/2029 Aaa 1,000M 1,026,250
North Dakota St Hsg Fin Agy Rev Ser B AMT+++ 5.85% 7/1/2028 Aa 2,500M 2,634,375
Ohio Hsg Fin Auth Ser C GNMA+ AMT+++ 7.85% 9/1/2021 AAA 395M 418,700
Oklahoma Hsg Fin Agy Sing Fam Rev AMT+++ 5 3/8% 3/1/2020 Aaa 1,000M 1,027,500
Oregon St Hsg & Comm Svcs Ser D AMT+++ 5.30% 7/1/2024 Aa 3,140M 3,198,875
Oregon St Hsg & Comm Svcs Ser A AMT+++ 5.70% 7/1/2029 Aa 500M 523,125
Pennsylvania Hsg Fin Agy Ser 63A AMT+++ Zero Coupon 4/1/2030 AA 2,395M 434,094
South Carolina St Hsg Fin Agy 5 1/8% 7/1/2035 Aaa 805M 806,006
South Dakota Hsg Dev Auth 5 1/4% 5/1/2028 AAA 4,415M 4,442,594
South Dakota Hsg Dev Auth Ser F AMT+++ 5.80% 5/1/2028 AAA 2,000M 2,097,500
Tennessee Hsg Dev Agy Mtge Ser A AMT+++ 7 1/8% 7/1/2026 A 2,575M 2,732,719
Utah St Hsg Fin Agy Sing Fam Ser A-2 FHA+ AMT+++
7 3/4% 1/1/2023 AAA 165M 174,075
Vermont Hsg Fin Auth Ser B AMT+++ 8.10% 6/1/2022 A 1,645M 1,698,150
Virginia St Hsg Dev Auth Ser A 7.10% 1/1/2022 Aa 7,600M 8,094,000
Wyoming Comm Dev Auth Hsg Rev AMT+++ 6.35% 6/1/2029 AA 990M 1,069,200
Total 84,577,917
- -----------------------------------------------------------------------------------------------------------------------============
Industrial Revenue
Bonds 4.37% Butler AL Ind Dev Bd Solid Waste Disp Rev/James River Corp
AMT+++ 8% 9/1/2028 BBB 1,500M 1,730,625
Connecticut St Dev Auth Solid Waste Disp Facs Rev/Pfizer
Inc Prjt AMT+++ 7% 7/1/2025 AAA 2,500M 2,912,500
Effingham Co GA Dev Auth Solid Waste AMT+++ 5 5/8% 7/1/2018 Baa 3,750M 3,787,500
Henrico Co VA Ind Dev Auth Pub Facs 7 1/8% 8/1/2021 AA 3,095M 3,655,969
Hillsborough Co FL Ind Dev Auth Rev Tampa Elec
Prjt 8% 5/1/2022 Aa 2,955M 3,435,188
Michigan St Strategic Fd Ltd MBIA+ AMT+++ 5.55% 9/1/2029*** AAA 11,000M 11,288,750
Missouri St Environmental Imp & Energy Rev/Union Elec Ser A
7.40% 5/1/2020 AA 1,000M 1,071,250
Texas City TX Ind Dev Corp Marine Term Rev/ARCO
7 3/8% 10/1/2020 A 650M 868,563
Total 28,750,345
- -----------------------------------------------------------------------------------------------------------------------============
Miscellaneous 7.36% Berkeley SC Sch Dist AMBAC+ 5% 2/1/2016 AAA 2,500M 2,525,000
Central Falls RI Detention 5% 1/15/2023 2,000M 1,931,680
Cobb-Marietta GA Coliseum & Exhibit Hall Auth Rev MBIA+
5 5/8% 10/1/2026 AAA 10,250M 11,864,375
Forsyth Co NC Cops 5% 10/1/2018 AA 2,000M 2,015,000
Harnett Co NC Ctfs Partn AMBAC+ 6.20% 12/1/2009 AAA 2,900M 3,226,250
</TABLE>
5
<PAGE>
Statements of Net Assets
NATIONAL SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Harrisburg PA Auth Rev MBIA+ 5 5/8% 9/15/2017 AAA $ 1,000M $ 1,063,750
Idaho St Bldg Auth Bldg Rev Ser A MBIA+ 4 3/4% 9/1/2025 AAA 2,245M 2,233,775
Norfolk VA Pkg Sys Rev MBIA+ 5.55% 2/1/2027 AAA 2,225M 2,375,188
Oregon St Health Hsg Ed & Cult Fac 5 1/2% 10/1/2011 BBB 1,805M 1,888,481
Seminole Co FL Sales Tax MBIA+ 4 5/8% 10/1/2022 AAA 2,500M 2,403,125
Spokane WA Downtown Fndtn Pkg Rev/River Park
Square 5.60% 8/1/2019 AA 950M 988,000
St Louis Co MO Ind Dev Rev Arena Prjt AMT+++ 7 7/8% 12/1/2024 BBB* 3,500M 3,863,125
Wisconsin Ctr Dist WI Tax Rev RIBS 6.979% 12/15/2027++ Aa 10,500M 12,101,250
Total 48,478,999
- -----------------------------------------------------------------------------------------------------------------------============
Pollution Control
Revenue 1.26% Burke Co GA Dev Auth Poll Ctrl Rev MBIA+ 6.60% 7/1/2024 AAA 450M 467,276
Coconino Co AZ Poll Ctrl Rev Ser B AMT+++ 5.80% 11/1/2032 BBB 1,000M 1,025,000
Missouri St Environmental Imp & Energy Wtr Poll Ctrl Rev
7.20% 7/1/2016 Aa 3,250M 3,790,313
New York St Energy Res & Dev MBIA+ AMT+++ 7.375% 9/1/2033 Aaa 2,500M 3,012,500
Total 8,295,089
- -----------------------------------------------------------------------------------------------------------------------============
Power 8.18% Chelan Co WA Pub Util MBIA+ Zero Coupon 6/1/2028 AAA 6,000M 1,395,000
Chelan Co WA Pub Util Ser A FSA+ AMT+++ 5 1/4% 7/1/2033 AAA 2,175M 2,204,906
Clark Co NV Ind Dev Rev Ser 6.663% 10/1/2030++ A 12,500M 13,109,375
Gastonia NC Comb Util Sys Rev MBIA+ 4 3/4% 5/1/2015 AAA 500M 505,000
Hamilton OH Elec Ser B FGIC+ 6.30% 10/15/2025 AAA 7,555M 8,234,950
Hawaii St Dept Bdg & Fin/Citizen Utilities RIBS AMT+++
7.066% 12/15/2023++ AAA 2,000M 2,135,000
Jacksonville FL Elec Auth Rev RIBS 6.871% 10/1/2037++ AA 2,500M 2,703,125
Long Island NY Pwr Auth Elec Sys Rev Ser A 5 1/2% 12/1/2029 A 3,000M 3,101,250
Milwaukee WI Loc Dist Heating Fac Rev AMT+++ 6.85% 10/1/2021 AA 500M 543,125
North Carolina Eastern Muni Pwr Ser C FSA+ 5% 1/1/2021 AAA 5,000M 5,012,500
Snohomish Co WA Pub Util RIBS MBIA+ 7.28% 1/1/2024++ AAA 5,000M 5,625,000
St Petersburg FL Pub Util Rev 5.60% 10/1/2015 Aa 250M 265,625
Washington St Pub Pwr Supply PA 369 RIBS 6.572% 7/1/2017++ AA 4,500M 4,629,375
Washington St Pub Pwr Supply PA 369 B RIBS 6.572% 7/1/2017++ AA 1,345M 1,383,669
Washington St Pub Pwr Supply Ser B 7 3/8% 7/1/2004 AAA 1,250M 1,346,875
Western OR Generation Agy Cogeneration Prjt Rev Ser B
AMT+++ 7.40% 1/1/2016 BBB* 1,500M 1,620,000
Total 53,814,775
- -----------------------------------------------------------------------------------------------------------------------============
Solid Waste .15% Broward Co FL Res Rec 7.95% 12/1/2008 A 2M 2,143
Cobb Co GA Solid Waste Mgmt Auth AMT+++ 6.40% 1/1/2015 Aaa 900M 1,012,500
Total 1,014,643
- -----------------------------------------------------------------------------------------------------------------------============
Transportation 8.95% Albuquerque NM Arpt Rev Ser A AMBAC+ AMT+++ 6.60% 7/1/2016 AAA 2,400M 2,613,000
Fulton Co GA Dev/Delta Air AMT+++ 5 1/2% 5/1/2033 BBB 2,840M 2,843,550
Hillsborough Co FL Aviation FGIC+ 6.90% 10/1/2011 AAA 330M 347,120
Laredo TX Intl Toll MBIA+ 5% 10/1/2018 AAA 1,500M 1,507,500
Metropolitan Atlanta Rapid 6 1/4% 7/1/2018 AA 2,600M 3,064,750
Metropolitan Washington DC Arpts Auth VA Gen Arpt Rev Ser B
AMT+++ 5 1/2% 10/1/2023 AA 3,910M 4,076,175
Michigan St Comprehensive Transn MBIA+ 5 1/4% 8/1/2014 AAA 3,500M 3,653,125
Pensacola FL Arpt Rev MBIA+ AMT+++ 6 1/8% 10/1/2018 AAA 1,000M 1,111,250
Phoenix AZ Arpt FSA+ 5% 7/1/2025 AAA 6,135M 6,158,006
Port Auth NY & NJ 7 1/8% 6/1/2025 AA 3,000M 3,183,750
Port Auth NY & NJ 70th Ser AMT+++ 7 1/4% 8/1/2025 AA 500M 531,250
Port Kalama WA Rev Ser B AMT+++ 5 5/8% 12/1/2015 Baa 1,025M 1,076,250
Puerto Rico Commonwealth Auth Hwy Rev Ser Y 5 1/2% 7/1/2036 A 3,800M 4,146,750
Puerto Rico Commonwealth Hwy 5% 7/1/2038 A 3,000M 2,985,000
San Joaquin Hills CA Trans Corridor Agy Ser A MBIA+
Zero Coupon 1/15/2036 AAA 3,800M 598,500
Santa Rosa Bay Brdg Auth FL 6 1/4% 7/1/2028 BBB 2,140M 2,383,425
</TABLE>
6
<PAGE>
Statements of Net Assets
NATIONAL SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Santa Rosa Bay Brdg Auth FL 6 1/4% 7/1/2028 A $11,500M $ 12,995,000
Southeastern PA Trans Auth FGIC+ 5 3/4% 3/1/2020 AAA 5,250M 5,617,500
Total 58,891,901
- -----------------------------------------------------------------------------------------------------------------------============
Water and Sewer 3.68% Cherokee Co GA Wtr & Sewer Auth Rev MBIA+ 5.20% 8/1/2025 AAA 1,030M 1,093,088
Chicago IL Waste Wtr Trans MBIA+ Zero Coupon 1/1/2027 AAA 1,500M 373,125
Foothill/Eastern Corridor Agy CA Toll Rd Ser A Zero
Coupon 1/1/2030 Baa 4,325M 854,188
Hamilton OH Wtr Wks Rev Ser A MBIA+ 6.30% 10/15/2021 AAA 1,000M 1,072,500
Mississippi Dev BK Spl Oblig AMBAC+ 5% 7/1/2023 AAA 250M 250,625
New York City Muni Wtr Fin Auth Wtr & Sewer Sys Rev Ser B
MBIA+ 5 3/4% 6/15/2029 AAA 1,000M 1,081,250
Salt River Proj AZ Agric 5 1/2% 1/1/2019 AA 5,000M 5,162,500
Seattle WA Drain & Wastewtr Util Rev 5% 11/1/2027 Aa 1,465M 1,470,494
Sedona AZ Wastewtr MBIA+ Zero Coupon 7/1/2020 AAA 2,000M 692,500
Sedona AZ Wastewtr MBIA+ Zero Coupon 7/1/2022 AAA 1,280M 401,600
Spartanburg SC San Sewer Dist Sewer Sys Rev MBIA+
5 1/2% 6/1/2027 AAA 5,000M 5,292,350
Texas Wtr Resource Fin Auth 7 5/8% 8/15/2008 A 1,785M 1,839,710
Virginia St Res Auth Wtr & Sewer Sys 5.20% 11/1/2017 AA 1,000M 1,033,750
Virginia St Res Auth Wtr & Sewer Sys Rev 5 1/4% 11/1/2017 AA 1,330M 1,379,875
West Mifflin PA San Sewer Mun Auth Sewer Rev FGIC+
5 3/4% 8/1/2020 AAA 2,000M 2,225,000
Total 24,222,555
----------------------------------------------------------------------------------------============
Total Municipal Bonds 100.35% (Cost $624,396,022) 660,592,547
===================================================================================================================================
Other Assets, Less Liabilities (.35)%
===================================================================================================================================
Cash 4,855,896
- -----------------------------------------------------------------------------------------------------------------------============
Receivable for: Securities sold 65,584,839
Interest 10,156,072
Capital stock sold 577,756
Other 4,673
Total Other Assets 81,179,236
----------------------------------------------------------------------------------------============
Payable for: Securities purchased 80,103,853
Distributions 1,943,660
Capital stock reacquired 467,505
Other 946,594
----------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities 83,461,612
- -----------------------------------------------------------------------------------------------------------------------============
Cash and Receivables, Net of Liabilities (2,282,376)
===================================================================================================================================
Net Assets 100.00% $658,310,171
===================================================================================================================================
Class A Shares-Net asset value ($606,428,450 / 50,637,480 shares outstanding) $11.98
Class A Shares-Maximum offering price $12.58
Class B Shares-Net asset value ($9,471,969 / 790,653 shares outstanding) $11.98
Class C Shares-Net asset value ($42,409,752 / 3,537,878 shares outstanding) $11.99
</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.
** This investment has been rated by Fitch Investors
Service only.
*** When-issued security.
+ 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, 1998. See page 1 for
additional information.
+++ Income from these investments may be subject to
the Alternative Minimum Tax.
See Notes to Financial Statements.
7
<PAGE>
Statements of Net Assets
NEW YORK SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 18.19% Dutchess Co Resource Recovery Ser A FGIC+ 7 1/2% 1/1/2009 AAA $ 2,200M $ 2,337,500
Metropolitan Trans Auth NY Commuter Facs Ser A FGIC+
6.10% 7/1/2026 AAA 2,000M 2,307,500
Metropolitan Trans Auth NY Commuter Facs Rev Ser A
FGIC+ 6% 7/1/2021 AAA 4,000M 4,585,000
Metropolitan Trans Auth NY Tran Facs Ser A FSA+ 6.10% 7/1/2026 AAA 1,500M 1,734,375
New York St Dorm Auth Rev/City Univ Ser C FGIC+ 7% 7/1/2014 AAA 1,360M 1,462,000
New York St Dorm Auth Rev/City Univ 2nd Ser MBIA+
6 7/8% 7/1/2014 AAA 5,650M 6,610,500
New York St Environmental Facs Poll Ctrl Rev St Wtr Ser E
6 7/8% 6/15/2014 AAA 2,795M 3,249,188
New York St Loc Govt Assistance Corp Ser A 6 1/2% 4/1/2020 AAA 5,000M 5,425,000
New York St Med Care Facs Fin/Mental Health Ser A
7 1/2% 2/15/2021 AAA 10,000M 11,050,000
Puerto Rico Commonwealth Aqu & Sewer Auth Rev 10 1/4% 7/1/2009 AAA 1,000M 1,385,000
Puerto Rico Elec Pwr Auth RIBS FSA+ 9.168% 7/1/2018++ AAA 3,500M 4,515,000
United Nations Dev Corp Ser A 6% 7/1/2026 AAA 4,300M 4,778,375
United Nations Dev Corp Ser B 6 1/4% 7/1/2026 AAA 3,000M 3,367,500
Total 52,806,938
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation
State 4.69% Puerto Rico Commonwealth RIBS FSA+ 7.832% 7/1/2020++ AAA 12,000M 13,620,000
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation Local .78% Bethlehem New York Wtr Sys MBIA+ AMT+++ 7.20% 3/1/2022 AAA 1,080M 1,267,650
New York NY Ser C 5% 8/15/2028 A 1,000M 991,250
Total 2,258,900
- -----------------------------------------------------------------------------------------------------------------------============
Education 12.27% Hempstead Town NY Ind Dev Agy/Hofstra Univ MBIA+ 5.80% 7/1/2015 AAA 750M 821,250
New York City Ind Dev Agy/New Sch For Social Resh Ser A
MBIA+ 5 3/4% 9/1/2015 AAA 1,335M 1,441,800
New York St Dorm Auth Ser C FGIC+ 7% 7/1/2014 AAA 3,240M 3,470,850
New York St Dorm Auth Rev/St Univ Edl Facs Ser A MBIA+
4 3/4% 5/15/2025 AAA 5,250M 5,125,312
New York St Dorm Auth Rev/St Univ Edl Facs Ser B MBIA+
4 3/4% 5/15/2028 A 1,500M 1,443,750
New York St Dorm Auth Rev/St Univ Ser A 5 1/2% 5/15/2026 A 75M 77,906
New York St Dorm Auth Rev/City Univ Ser U MBIA-IBC+
6.45% 7/1/2005 AAA 300M 343,875
New York St Dorm Auth Rev/Colgate Univ MBIA+ 6% 7/1/2016 AAA 1,000M 1,170,000
New York St Dorm Auth Rev/Cornell Univ Ser A 7 3/8% 7/1/2020 AA 5,075M 5,487,344
New York St Dorm Auth Rev/Spl Act Sch Dists MBIA+ 6% 7/1/2016 AAA 1,400M 1,541,750
New York St Dorm Auth Rev/St Univ Ed Fac Ser A 5 1/4% 5/15/2021 A 1,025M 1,086,500
New York St Dorm Auth Rev/St Univ Ed Fac Ser B 7 1/2% 5/15/2011 A 5,000M 6,225,000
New York St Dorm Auth Rev/Univ Rochester Ser A 6.40% 7/1/2013 A 2,030M 2,268,525
New York St Dorm Auth Rev/Upstate Cmnty Colleges Ser A
6.20% 7/1/2015 Baa 1,000M 1,103,750
New York St Dorm Auth Rev/St Johns-NY MBIA+ 4 3/4% 7/1/2028 AAA 3,080M 2,987,600
Niagara Falls City SD-NY 5 3/8% 6/15/2028 BBB 1,000M 1,022,500
Total 35,617,712
- -----------------------------------------------------------------------------------------------------------------------============
Finance 1.63% New York NY City Transitional Fin Auth Ser B 4 3/4% 11/15/2023 AA 2,885M 2,805,662
Virgin Islands Pub Fin Auth Ser E 5 7/8% 10/1/2018 BBB* 1,850M 1,933,250
Total 4,738,912
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 8.05% New York City Health & Hosp Corp LINK AMBAC+ 5.635% 2/15/2023++ AAA 600M 624,750
New York City Health & Hosp Corp RIBS AMBAC+ 7.30% 2/15/2023++ AAA 6,000M 6,562,500
New York St Dorm Auth Rev Manhattan Eye Ear and Throat
5 3/8% 7/1/2012 BBB 1,500M 1,550,625
New York St Dorm Auth Rev Mental Health Svcs Facs Ser B
5 3/4% 2/15/2010 A 1,500M 1,665,000
New York St Dorm Auth Rev Mental Health Svcs Facs Ser B
5 3/4% 2/15/2011 A 1,385M 1,526,962
New York St Dorm Auth Rev Mental Health Svcs Facs Ser B
6% 8/15/2012 A 1,460M 1,677,175
New York St Dorm Auth Rev Mental Health Svcs Facs Ser D
6% 8/15/2021 A 1,000M 1,097,500
New York St Dorm Auth Rev Rosalind and Joseph AMBAC+
5.60% 2/1/2027 AAA 1,000M 1,067,500
New York St Dorm Auth Rev Sarah Neuman AMBAC+ 5.45% 8/1/2027 AAA 550M 574,750
New York St Dorm Auth Rev Mental Health Svcs Facs Ser B
5 3/4% 2/15/2012 A 1,155M 1,257,506
</TABLE>
8
<PAGE>
Statements of Net Assets
NEW YORK SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
New York St Med Care Facs Fin/Mental Health Ser A
Unrefunded Balance 7.80% 2/15/2019 A $ 355M $ 367,049
New York St Med Care Facs Fin Montefiore MD Ser A
AMBAC+ 5 3/4% 2/15/2025 AAA 1,000M 1,071,250
New York St Med Care Facs Fin/Mental Health Ser A
7 1/2% 2/15/2021 A 3,955M 4,320,838
Total 23,363,405
- -----------------------------------------------------------------------------------------------------------------------============
Housing 2.07% New York St Mtg Agy Rev Ser 70 5.40% 4/1/2022 Aa 520M 535,600
New York St Mtg Agy Rev Ser 61 AMT+++ 5.80% 10/1/2028 Aaa 500M 521,875
New York St Mtg Agy Rev Ser 41 MBIA+ 6.45% 10/1/2014 AAA 2,000M 2,197,500
New York St Mtg Agy Rev Ser 44 AMT+++ 7 1/2% 4/1/2026 Aa 2,495M 2,747,619
Total 6,002,594
- -----------------------------------------------------------------------------------------------------------------------============
Industrial Revenue
Bonds 1.37% New York NY City Ind Dev Agy Brooklyn Navy Yard AMT+++
6.20% 10/1/2022 BBB 1,000M 1,137,500
New York NY City Ind Dev Agy Brooklyn Navy Yard AMT+++
5.65% 10/1/2028 BBB 2,000M 2,055,000
Puerto Rico Tel Auth Rev RIBS MBIA+ 7.168% 1/16/2015++ AAA 700M 771,750
Total 3,964,250
- -----------------------------------------------------------------------------------------------------------------------============
Miscellaneous 4.99% New York St Urban Dev Corp Ser A 5% 4/1/2018 BBB 1,000M 996,250
New York St Urban Dev Corp 5 1/4% 4/1/2012 Baa 1,765M 1,828,981
New York St Urban Dev Corp 5.70% 4/1/2020 Baa 4,150M 4,616,875
New York St Urban Dev Corp Ser A 5% 1/1/2028 BBB 5,000M 4,937,500
Virgin Islands Pub Fin Auth Ser E 6% 10/1/2022 BBB 2,000M 2,105,000
Total 14,484,606
- -----------------------------------------------------------------------------------------------------------------------============
Pollution Control
Revenue 4.92% Essex Cnty NY Indl Dev Agy Poll Rev - Ser B Intl Paper
5.55% 1/1/2014 A 305M 328,255
New York St Energy Res & Dev MBIA+ AMT+++ 8.135% 9/1/2033 Aaa 2,500M 3,012,500
New York St Env Facs Poll Ctrl Rev St Wtr Ser E 6 7/8% 6/15/2014 Aa 1,985M 2,282,750
New York St Environmental Facs Poll Ctrl Rev St Wtr Ser A
7 1/2% 6/15/2012 Aa 8,000M 8,660,000
Total 14,283,505
- -----------------------------------------------------------------------------------------------------------------------============
Power 27.66% Long Island Pwr Auth NY Elec Sys Ser A 5 3/4% 12/1/2024 A 995M 1,075,844
Long Island Pwr Auth NY Elec Sys Ser A 5 1/2% 12/1/2029 A 10,000M 10,337,500
New York St Energy Res & Dev/Rochester Gas & Elec Ser A
MBIA+ AMT+++ 5.95% 9/1/2033 AAA 1,000M 1,102,500
New York St Energy Res & Dev/Niagara Mohawk Ser A FGIC+
7.20% 7/1/2029 AAA 11,750M 13,688,750
New York St Energy Res & Dev/Bklyn Union Gas Ser A
MBIA+ AMT+++ 6 3/4% 2/1/2024 AAA 13,000M 14,267,500
New York St Energy Res & Dev/Bklyn Union Gas Ser B
RIBS AMT+++ 10.051% 7/1/2026++ A 4,000M 5,335,000
New York St Energy Res & Dev/Central Hudson Gas & Elec Ser C
MBIA+ AMT+++ 8 3/8% 12/1/2028 AAA 2,215M 2,276,245
New York St Energy Res & Dev/Con Edison Ser A
MBIA+ AMT+++ 7 1/8% 12/1/2029 AAA 2,500M 2,893,750
Port Auth NY & NJ Spl Oblig Rev 2nd Install-SPL PJ-KIAC-4
AMT+++ 6 3/4% 10/1/2019 Baa* 2,970M 3,344,963
Puerto Rico Elec Pwr Auth Ser DD 5% 7/1/2028 BBB 7,500M 7,462,500
Puerto Rico Elec Pwr Auth Ser EE 4 3/4% 7/1/2024 BBB 16,500M 16,066,875
Puerto Rico Elec Pwr Auth Ser U 6% 7/1/2014 A 2,250M 2,444,063
Total 80,295,490
- -----------------------------------------------------------------------------------------------------------------------============
Transportation 9.15% Metropolitan Trans Auth NY FGIC+ 4 3/4% 4/1/2028 AAA 3,000M 2,928,750
Metropolitan Trans Auth NY Commuter Facs Rev Ser B FGIC+
4 3/4% 7/1/2026 AAA 1,960M 1,915,900
Metropolitan Trans Auth NY Commuter Facs Rev Ser A FGIC+
6% 7/1/2016 AAA 2,000M 2,230,000
Metropolitan Trans Auth NY Svc Contract Trans Facs Ser O
5 3/4% 7/1/2008 Baa 1,000M 1,111,250
Metropolitan Trans Auth NY Trans Auth Facs Rev 5 1/2% 7/1/2017 BBB 1,000M 1,057,500
Port Auth NY & NJ Cons 106th Ser AMT+++ 6% 7/1/2015 AA 350M 378,875
Port Auth NY & NJ Cons 67th Ser 6 7/8% 1/1/2025 AA 1,000M 1,045,000
</TABLE>
9
<PAGE>
Statements of Net Assets
NEW YORK SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Port Auth NY & NJ Cons 92nd Ser 4 3/4% 1/15/2029 AA $ 520M $ 508,300
Port Auth NY & NJ Spl Oblig Rev/JFK Intl Air Terminal-6
MBIA+ AMT+++ 5 3/4% 12/1/2025 AAA 14,345M 15,385,012
Total 26,560,587
- -----------------------------------------------------------------------------------------------------------------------============
Water and Sewer 2.83% Buffalo NY Muni Wtr Fin Auth Wtr & Sewer Sys Rev FGIC+
5 3/4% 7/1/2021 AAA 500M 542,500
New York City Muni Wtr Fin Auth Ser A FGIC+ 6 1/4% 6/15/2021 AAA 3,500M 3,661,875
New York St Environmental Facs Poll Ctrl Rev Clean Wtr Ser E
4 7/8% 6/15/2020 Aa 2,000M 2,005,000
New York St Environmental Facs Poll Ctrl Rev St Wtr Ser E
MBIA+ 5% 6/15/2013 AAA 1,950M 1,998,750
Total 8,208,125
----------------------------------------------------------------------------------------============
Total Municipal Bonds 98.60% (Cost $264,972,089) 286,205,024
===================================================================================================================================
Other Assets, Less Liabilities
===================================================================================================================================
Cash and Receivables, Net of Liabilities 1.40% 4,051,718
===================================================================================================================================
Net Assets 100.00% $290,256,742
===================================================================================================================================
Class A Shares-Net asset value ($283,550,528 / 24,813,742 shares outstanding) $11.43
Class A Shares-Maximum offering price $12.00
Class C Shares-Net asset value ($6,706,214 / 587,027 shares outstanding) $11.42
</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, 1998. See page 1 for
additional information.
+++ Income from these investments may be subject to
the Alternative Minimum Tax.
See Notes to Financial Statements.
Statements of Net Assets
TEXAS SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 26.33% Amarillo TX Health Facs Corp RIBS FSA+ 9.088% 1/1/2022++ AA $4,050M $ 4,880,250
Austin TX Util Sys 8% 11/15/2016 AA 1,000M 1,106,250
Austin TX Util Sys Ser B 7.80% 11/15/2012 AA 640M 655,910
Azle TX Indpt Sch Dist Ser A 6% 2/15/2000 AA 6,205M 6,398,906
Bexar Co TX Health Facs MBIA+ 7 1/2% 8/15/2010 AA 750M 815,625
Dallas Co TX Flood Ctrl Dist No 1 9 1/4% 4/1/2010 AA 1,460M 1,837,775
Harris Co TX Toll Rd Sub Lien Ser A 6.10% 8/15/2016 AA 2,640M 2,976,600
Houston TX Wtr & Sewer Sys Rev AMBAC+ 6 1/2% 12/1/2021 AA 335M 368,081
Houston TX Wtr & Sewer Sys Rev AMBAC+ 6 1/2% 12/1/2021 AA 2,665M 2,928,169
Houston TX Wtr & Sewer Sys Rev Prior Lien MBIA+ 7.40% 12/1/2018 AA 1,000M 1,095,000
Texas Turnpike 12 5/8% 1/1/2020 AA 1,000M 1,317,500
Total 24,380,066
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation
State 23.43% Texas St Ser B-1 & B-2 4.05% 9/30/2011 AA 3,000M 3,573,750
Texas St Ser B-1 & B-2 RIBS 8.293% 9/30/2011++ AA 3,000M 3,573,750
Texas St Ser A AMT+++ 6.30% 6/1/2014 AA 130M 134,875
Texas St Ser A-1 AMT+++ RIBS 7.17% 12/1/2023++ AA 6,000M 6,622,500
Texas St LINK 6.199% 9/30/2011++ AA 5,000M 5,956,250
Texas St 7.15% 8/1/2035 AA 1,600M 1,840,000
Total 21,701,125
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation
Local 6.57% Azle TX Indpt Sch Dist Ser A 6% 2/15/2022 AAA 250M 255,625
</TABLE>
10
<PAGE>
Statements of Net Assets
TEXAS SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Keller TX Indpt Sch Dist 4 3/4% 8/15/2020 AAA $ 1,000M $ 981,250
Keller TX Indpt Sch Dist 4 3/4% 8/15/2022 AAA 2,100M 2,050,125
Sherman TX Indpt Sch Dist Re Zero Coupon 2/15/2023 AAA 3,530M 1,072,238
Sherman TX Indpt Sch Dist Re Zero Coupon 2/15/2024 AAA 3,525M 1,013,438
Willis TX Indpt Sch Dist Zero Coupon 2/15/2021 AAA 2,115M 711,169
Total 6,083,845
- -----------------------------------------------------------------------------------------------------------------------============
Education .72% Texas St Higher Ed Coord AMT+++ 7.70% 10/1/2025 A 625M 663,281
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 5.80% Amarillo TX Health Facs Corp FSA+ 5 1/2% 1/1/2017 Aaa 2,000M 2,180,000
Denton Co TX Health Facs 7 1/2% 8/15/2015 BBB** 1,000M 1,130,000
Georgetown TX Health Facs 5 3/8% 8/15/2028 A 500M 508,750
Texarkana TX Health Facs Ser B MBIA+ 6% 10/1/2019 AAA 1,335M 1,553,606
Total 5,372,356
- -----------------------------------------------------------------------------------------------------------------------============
Housing .71% Dallas TX Hsg Corp Cap Prjt/Estell Village Apts Ser A
7 7/8% 12/1/2009 BBB* 530M 551,863
Texas Hsg Agy Ser D AMT+++ 8.40% 1/1/2021 Aa 100M 104,255
Total 656,118
- -----------------------------------------------------------------------------------------------------------------------============
Industrial Revenue
Bonds 17.43% Harris Co TX Ind Dev Corp Marine Term & Wtr Poll Ctrl Rev
6 5/8% 2/1/2024 BBB 1,500M 1,663,125
Michigan St Strategic Fd Ltd MBIA+ AMT+++ 5.55% 9/1/2029*** AAA 2,000M 2,052,500
Orange Co TX Nav & Port Dist Ind Dev/North Star Steel
6 3/8% 2/1/2017 AA 2,400M 2,685,000
Puerto Rico Ind Med & Environmental/Baxter Travenol Labs Ser A
8% 9/1/2012 A 2,315M 2,391,372
Texas City TX Ind Dev Corp Marine Term Rev/ARCO 7 3/8% 10/1/2020 A 5,500M 7,349,375
Total 16,141,372
- -----------------------------------------------------------------------------------------------------------------------============
Pollution Control
Revenue 1.31% Trinity River Auth TX Poll Ctrl Rev/Texas Instruments AMT+++
6.20% 3/1/2020 A 1,105M 1,214,119
- -----------------------------------------------------------------------------------------------------------------------============
Power 2.65% Brazos River Auth TX Poll Ctl Rev AMBAC+ AMT+++ 5.55% 5/1/2033 AAA 1,000M 1,050,000
Lubbock TX Elec Lt & Pwr Sys Rev AMBAC+ 4 1/4% 4/15/2018 AAA 460M 427,225
Victoria TX Util MBIA+ 4 3/4% 12/1/2022 AAA 1,000M 976,250
Total 2,453,475
- -----------------------------------------------------------------------------------------------------------------------============
Transportation 5.67% Dallas-Fort Worth TX Regl Arpt MBIA+ AMT+++ 5 3/4% 11/1/2024 AAA 2,500M 2,618,750
North TX Thruway FGIC+ 4 3/4% 1/1/2022 AAA 1,000M 965,850
Port Beaumont TX Nav Dist Ser A FGIC+ 4 3/4% 3/1/2018 Aaa 500M 491,875
Puerto Rico Commonwealth Hwy Rev Ser Y 5 1/2% 7/1/2036 A 1,075M 1,173,093
Total 5,249,568
- -----------------------------------------------------------------------------------------------------------------------============
Water and Sewer 12.38% Bexar Co TX Metro Wtr Dist MBIA+ 5% 5/1/2038 AAA 2,750M 2,725,938
Nueces River Auth TX Wtr Supply FSA+ 5 1/2% 3/1/2027 AAA 7,500M 7,968,750
Texas Wtr Resource Fin Auth 7 5/8% 8/15/2008 A 425M 438,026
Texas Wtr Resource Fin Auth AMBAC+ 7 1/2% 8/15/2013 AAA 325M 336,024
Total 11,468,738
-----------------------------------------------------------------------------------------===========
Total Municipal Bonds 103.00% (Cost $88,380,757) 95,384,063
===================================================================================================================================
Other Assets, Less Liabilities (3.00)%
===================================================================================================================================
Cash and Receivables, Net of Liabilities (2,776,793)
===================================================================================================================================
Net Assets 100.00% $92,607,270
===================================================================================================================================
Net asset value ($92,607,270 / 8,662,892 shares outstanding) $10.69
Maximum offering price $11.22
</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.
** This investment has been rated by Fitch Investors
Service only.
*** When-issued security.
+ 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, 1998. 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>
Statements of Net Assets
NEW JERSEY SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 19.29% Essex Co NJ Imp Auth Rev Orange Muni Util & Lease MBIA+
6.80% 7/1/2014 AAA $ 1,710M $ 2,028,487
Hudson Co NJ Util Auth Util Sys Rev 10% 7/1/2011 AAA 1,000M 1,213,750
Monmouth Co NJ Imp Auth Rev MBIA+ 6 7/8% 8/1/2012 AAA 500M 538,125
New Jersey Economic Dev Auth Rev 6 3/4% 6/15/2012 AAA 2,275M 2,496,812
New Jersey Health Care Facs Fin Auth Rev/Cathooral Hlth Ser A
FHA+ 7 1/4% 2/15/2021 AAA 1,485M 1,629,788
New Jersey Health Care Facs Fin Auth Rev/Bayonne Hosp
FSA+ 6 1/4% 7/1/2012 AAA 230M 257,600
New Jersey St Ed Facs Rev MBIA+ 6.85% 7/1/2019 AAA 540M 564,791
New Jersey Waste Treatment Trust 6 7/8% 6/15/2009 AAA 1,750M 1,874,688
North Brunswick Twp NJ Bd Ed 6.30% 2/1/2014 AAA 1,000M 1,130,000
Pohatcong Twp NJ Sch Dist FSA+ 5.95% 7/15/2023 AAA 650M 743,437
Pohatcong Twp NJ Sch Dist FSA+ 5.95% 7/15/2026 AAA 250M 285,937
Puerto Rico Commonwealth 6 1/2% 7/1/2023 AAA 1,000M 1,152,500
Puerto Rico Commonwealth Hwy Ser T 6 5/8% 7/1/2018 AAA 283M 316,033
Puerto Rico Elec Pwr Auth RIBS FSA+ 9.168% 7/1/2018++ AAA 7,000M 9,030,000
Puerto Rico Elec Pwr Auth RIBS FSA+ 7.898% 7/1/2023++ AAA 5,000M 5,900,000
Puerto Rico Pub Bldg Auth Ser L 6 7/8% 7/1/2021 AAA 200M 225,000
Rutgers St Univ NJ Ser P 6.85% 5/1/2021 AAA 800M 877,000
South Brunswick Twp NJ Bd Ed FGIC+ 6.40% 8/1/2024 AAA 1,600M 1,838,000
Stafford NJ Mun Util Auth Ser A FGIC+ 6 1/8% 12/1/2022 AAA 1,500M 1,635,000
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 1,080,000
Total 35,910,698
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation State 3.99% Puerto Rico Commonwealth RIBS MBIA+ 7.846% 7/1/2008++ AAA 5,000M 5,775,000
Puerto Rico Commonwealth 5 3/8% 7/1/2025 A 1,585M 1,644,438
Total 7,419,438
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation Local 7.06% Elizabeth NJ AMBAC+ 5% 7/15/2015 Aaa 150M 153,750
Elizabeth NJ AMBAC+ 5% 7/15/2017 Aaa 150M 152,812
Keansburg NJ 6.80% 12/1/2010 AA 1,000M 1,125,000
Millburn Twp NJ Bd Ed 5.35% 7/15/2018 Aaa 1,150M 1,250,625
Millburn Twp NJ Bd Ed 5.35% 7/15/2019 Aaa 1,100M 1,199,000
Morristown NJ FSA+ 6 1/2% 8/1/2019 AAA 3,440M 3,943,100
Paterson NJ FSA+ 9.30% 2/15/2004 AAA 4,200M 5,307,750
Total 13,132,037
- -----------------------------------------------------------------------------------------------------------------------============
Education 7.74% New Jersey Economic Dev Auth 4.60% 5/1/2010 BBB 550M 543,125
New Jersey Economic Dev Sch Rev 6% 2/1/2025 BBB* 4,000M 4,040,000
New Jersey Economic Dev Auth Rev Ser B MBIA+ 6 1/4% 5/15/2025 AAA 6,000M 6,772,500
New Jersey Economic Dev Sch Rev 7% 5/1/2020 BBB* 1,800M 1,982,250
New Jersey St Ed Fac Auth AM AMBAC+ 6% 7/1/2019 AAA 1,000M 1,073,750
Total 14,411,625
- -----------------------------------------------------------------------------------------------------------------------============
Finance .57% Hamilton Township NJ Bd Ed Ser B FSA+ 7% 12/15/2015 AAA 970M 1,060,938
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 13.37% Camden Co NJ Impt Auth Rev 6% 2/15/2027 A 8,750M 9,603,125
New Jersey Health Care Facs Fin Auth Rev/Bayonne Hosp FSA+
4 3/4% 7/1/2027 Aaa 2,800M 2,768,500
New Jersey Health Care Facs Fin Auth Rev/Hunterdon Med Ctr Ser A
AMBAC+ 7% 7/1/2020 AAA 5,000M 5,337,500
New Jersey Health Care Facs Fin Auth Rev/Bayonne Hosp FSA+
6 1/4% 7/1/2012 AAA 1,370M 1,534,400
New Jersey Health Care Facs Fin Auth Rev/Spectrum Ser B
FHA+ 6 1/2% 2/1/2022 AAA 915M 989,344
New Jersey Health Care Facs Fin Auth Rev/Med Ctr of Ocean Co
Ser C FSA+ 6 3/4% 7/1/2020 AAA 2,755M 2,989,175
</TABLE>
12
<PAGE>
Statements of Net Assets
NEW JERSEY SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Puerto Rico Ind Tourist Ed Med & Environmental Ctrl Fac Gr A
MBIA+ 6 1/4% 7/1/2024 AAA $ 1,000M $ 1,113,750
Puerto Rico Ind Tourist Ed Med & Environmental Ctrl Facs
FHA+ 6 1/4% 8/1/2032 AAA 500M 549,375
Total 24,885,169
- -----------------------------------------------------------------------------------------------------------------------============
Housing 2.81% New Jersey St Hsg & Mtge Fin Agy Ser V MBIA+ 5 1/4% 4/1/2026 AAA 1,000M 1,017,500
New Jersey St Hsg & Mtge Fin Agy Ser D MBIA+ AMT+++
7.70% 10/1/2029 AAA 625M 647,875
New Jersey St Hsg & Mtge Fin Agy MBIA+ AMT+++ 7.90% 10/1/2022 AAA 2,860M 2,979,577
Puerto Rico Hsg Fin Corp Mtg Rev Ser B GNMA+ 7.65% 10/15/2022 AAA 290M 306,312
Virgin Islands Hsg Fin Auth Sing Fam Rev Ser A
GNMA+ AMT+++ 6 1/2% 3/1/2025 AAA 255M 273,806
Total 5,225,070
- -----------------------------------------------------------------------------------------------------------------------============
Industrial Revenue
Bonds 1.31% Puerto Rico Ind Med & Environmental Ctrl/Upjohn 7 1/2% 12/1/2023 AA 750M 777,225
Puerto Rico Tel Auth Rev RIBS MBIA+ 7.168% 1/16/2015++ AAA 1,500M 1,653,750
Total 2,430,975
- -----------------------------------------------------------------------------------------------------------------------============
Miscellaneous 8.32% East Orange NJ Brd Ctfs FSA+ Zero Coupon 2/1/2026 AAA 850M 222,062
East Orange NJ Brd Ed Ctfs FSA+ 5 3/8% 8/1/2013 AAA 2,705M 2,863,919
Mercer Co NJ Impt Auth Rev 5 3/4% 11/1/2017 Aa 1,660M 1,819,775
Monmouth Co NJ Imp Auth Rev Govt Loan MBIA+ 6.40% 12/1/2009 AAA 1,075M 1,234,906
Montgomery Twp NJ MBIA+ 4 7/8% 9/1/2023 Aaa 1,000M 993,750
New Jersey Economic Dev Auth Rev Ser A MBIA+ 6% 5/15/2025 AAA 4,250M 4,722,813
New Jersey Sports & Expo Auth Rev Ser A 8% 1/1/2025 BBB* 1,000M 1,135,000
Puerto Rico Muni Fin Agy FSA+ 5 1/2% 7/1/2021 AAA 1,150M 1,226,187
Union Co Impt Auth Rev FGIC+ 6 1/4% 8/1/2013 AAA 1,100M 1,271,875
Total 15,490,287
- -----------------------------------------------------------------------------------------------------------------------============
Pollution Control Revenue .31% Cape May Co NJ Ind Poll Ctrl Fin Auth Rev Ser B MBIA+ 7% 11/1/2029 AAA 500M 583,125
- -----------------------------------------------------------------------------------------------------------------------============
Power 4.52% Puerto Rico Elec Pwr Auth Ser EE 4 3/4% 7/1/2024 BBB 6,500M 6,329,375
Puerto Rico Elec Pwr Auth Ser N 7 1/8% 7/1/2014 BBB 715M 746,031
Union Co NJ Util AMBAC+ AMT+++ 5% 6/1/2023 AAA 1,340M 1,343,350
Total 8,418,756
- -----------------------------------------------------------------------------------------------------------------------============
Transportation 28.65% Delaware River Port Auth PA AMBAC+ 5 1/4% 1/1/2009 AAA 1,000M 1,086,250
Delaware River Port Auth PA & NJ Rev Ser B MBIA+ 5% 1/1/2026 AAA 250M 251,562
Delaware River Port Auth PA & NJ Rev Ser 1995 FGIC+
5 1/2% 1/1/2026 AAA 15,450M 16,396,312
New Jersey Economic Dev Auth AMT+++ 7% 7/1/2016 BBB* 4,245M 4,573,988
Port Auth NY & NJ 7 1/8% 6/1/2025 AA 4,000M 4,245,000
Port Auth NY & NJ Cons 92nd Ser 4 3/4% 1/15/2029 AA 2,000M 1,955,000
Puerto Rico Commonwealth Auth Hwy Rev Ser Y 5 1/2% 7/1/2036 A 10,800M 11,785,500
Puerto Rico Commonwealth Hwy 5% 7/1/2028 A 2,500M 2,487,500
Puerto Rico Commonwealth Hwy Ser A 5% 7/1/2038 A 6,000M 5,970,000
Puerto Rico Commonwealth Hwy Ser Y 5 1/2% 7/1/2026 A 4,350M 4,572,938
Total 53,324,050
- -----------------------------------------------------------------------------------------------------------------------============
Water and Sewer 1.97% New Jersey Wastewtr Treatment Trust MBIA+ 7% 5/15/2006 AAA 75M 77,808
New Jersey Wastewtr Treatment Trust 6 7/8% 6/15/2009 AA 155M 165,850
New Jersey Wtr Supply Auth Rev MBIA+ AMT+++ 7 7/8% 11/1/2013 AAA 2,500M 2,557,825
Washington Twp NJ MUA Zero Coupon 12/15/2023 Aaa 1,055M 316,500
Washington Twp NJ MUA Zero Coupon 12/15/2024 Aaa 1,055M 303,313
Washington Twp NJ MUA Zero Coupon 12/15/2027 Aaa 1,000M 245,000
Total 3,666,296
----------------------------------------------------------------------------------------============
Total Municipal Bonds 99.91% (Cost $173,296,876) 185,958,464
----------------------------------------------------------------------------------------============
</TABLE>
13
<PAGE>
Statements of Net Assets
NEW JERSEY SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Other Assets, Less Liabilities .09%
===================================================================================================================================
Cash and Receivables, Net of Liabilities $ 168,206
===================================================================================================================================
Net Assets 100.00% $186,126,670
===================================================================================================================================
Net asset value ($186,126,670 / 33,575,819 shares outstanding) $5.54
Maximum offering price $5.82
</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, 1998. See page 1 for
additional information.
+++ Income from these investments may be subject to
the Alternative Minimum Tax.
See Notes to Financial Statements.
Statements of Net Assets
CONNECTICUT SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 11.84% Connecticut Middletown Courthouse MBIA+ 6 1/4% 12/15/2010 AAA $ 575M $ 628,906
Connecticut St Clean Wtr Fd 7% 1/1/2011 AAA 2,050M 2,226,813
Connecticut St Health & Ed/Yale - New Haven Hosp Ser F
MBIA+ 7% 7/1/2010 AAA 75M 80,625
Connecticut St Spcl Tax Oblig Rev Ser A 6 3/4% 6/1/2011 AAA 1,350M 1,518,750
Connecticut St Spcl Tax Oblig Ser B FGIC+ 6.10% 10/1/2011 AAA 1,000M 1,127,500
Connecticut St Spcl Tax Oblig Rev Ser C 6.80% 12/1/2009 AAA 100M 105,875
Puerto Rico Commonwealth 6.45% 7/1/2017 AAA 2,000M 2,300,000
Puerto Rico Commonwealth 6 1/2% 7/1/2023 AAA 2,000M 2,305,000
Puerto Rico Commonwealth 6% 7/1/2026 AAA 1,000M 1,161,250
Puerto Rico Commonwealth Hwy Ser T 6 5/8% 7/1/2018 AAA 3M 3,482
Puerto Rico Commonwealth Hwy Ser T 6 5/8% 7/1/2018 AAA 67M 74,655
Puerto Rico Elec Pwr Auth RIBS FSA+ 9.168% 7/1/2018++ AAA 1,500M 1,935,000
Puerto Rico Elec Pwr Auth Ser X 6 1/8% 7/1/2021 A 750M 861,563
Total 14,329,419
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation
State .63% Puerto Rico Commonwealth Zero Coupon 7/1/2018 A 2,000M 762,500
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation
Local 3.06% Darien CT 5 1/2% 10/15/2015 Aaa 500M 534,375
Hartford CT 6 1/2% 12/15/2005 AA 730M 845,888
Killingly CT 7 1/4% 12/15/2004 A 250M 256,415
Monroe CT 6.60% 4/15/2005 A 100M 114,500
Montville CT 6.70% 6/15/2009 Aa 550M 672,375
Montville CT 6.70% 6/15/2010 Aa 575M 707,250
Portland CT 7.10% 12/15/2000 A 100M 107,125
Redding CT 6.60% 4/15/2010 Aa 100M 122,125
Voluntown CT 6 3/4% 10/1/2002 A 100M 111,375
Watertown CT 6 1/2% 6/15/2003 A 100M 110,250
West Haven CT MBIA+ 6 1/2% 6/15/2006 AAA 100M 117,125
Total 3,698,803
- -----------------------------------------------------------------------------------------------------------------------============
Education 18.94% Connecticut St Dev/Auth Aquarium Proj 7% 12/1/2027 BBB* 1,500M 1,612,500
Connecticut St Health & Ed Facs/Fairfield Univ Ser H MBIA+
5% 7/1/2028 AAA 1,905M 1,928,813
Connecticut St Health & Ed Facs/Canterbury Sch Ser A 5% 7/1/2028 AA 1,835M 1,848,762
Connecticut St Health & Ed Facs/Conn College Ser C-1
MBIA+ 5 1/2% 7/1/2027 AAA 1,000M 1,056,250
</TABLE>
14
<PAGE>
Statements of Net Assets
CONNECTICUT SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Connecticut St Health & Ed Facs/Kent Sch Ser B MBIA+
5.40% 7/1/2023 AAA $ 750M $ 778,125
Connecticut St Health & Ed Facs/New Haven Ser D 6.70% 7/1/2026 BBB 1,000M 1,088,750
Connecticut St Health & Ed Facs/Sacred Heart Ser C
6 1/2% 7/1/2016 BBB 1,000M 1,100,000
Connecticut St Health & Ed/Suffield Academy Ser A
MBIA+ 5.30% 7/1/2017 AAA 1,000M 1,043,750
Connecticut St Health & Ed/Trinity College Ser E MBIA+
5 7/8% 7/1/2026 AAA 1,000M 1,095,000
Connecticut St Health & Ed/Yale Univ RIBS 8.076% 6/10/2030++ AAA 6,800M 7,718,000
Connecticut St Higher Ed Supplemental Loan Auth Ser A
AMT+++ 7 3/8% 11/15/2005 A 710M 725,790
Connecticut St Higher Ed Supplemental Loan Auth Ser A
AMT+++ 7.20% 11/15/2010 A 370M 394,050
University Ct Rev Ser A MBIA+ 4 3/4% 11/15/2018 AAA 540M 542,700
University Ct Rev MBIA+ 4 3/4% 11/15/2027 AAA 2,000M 1,977,500
Total 22,909,990
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 13.50% Connecticut St Health & Ed/William Backus Hosp Ser E AMBAC+
5% 7/1/2022 AAA 850M 856,375
Connecticut St Health & Ed/Fairfield Univ Ser H MBIA+
5% 7/1/2023 AAA 1,710M 1,731,375
Connecticut St Health & Ed/Trinity College Ser F MBIA+
5% 7/1/2028 AA 1,000M 1,012,500
Connecticut St Health & Ed/Bridgeport Hosp Ser A MBIA+
6 5/8% 7/1/2018 AAA 1,250M 1,382,813
Connecticut St Health & Ed/Greenwich Hosp MBIA+ 5.80% 7/1/2026 AAA 2,125M 2,308,281
Connecticut St Health & Ed/Greenwich Hosp Ser A MBIA+
5 3/4% 7/1/2016 AAA 1,350M 1,478,250
Connecticut St Health & Ed/Hosp for Spl Care 5 1/2% 7/1/2027 BBB 2,345M 2,403,625
Connecticut St Health & Ed/Vet Mem Med Ctr Ser A MBIA+
5 1/2% 7/1/2026 AAA 1,000M 1,048,750
Connecticut St Health & Ed/Waterbury Hosp Ser B FSA+
7% 7/1/2020 AAA 100M 107,125
Connecticut St Health & Ed/William Backus Hosp Ser C
6 3/8% 7/1/2022 A 850M 940,312
Connecticut St Health & Ed/William Backus Hosp Ser D
AMBAC+ 5 3/4% 7/1/2027 AAA 1,000M 1,083,750
Connecticut St Health & Ed/Windham Mem Hosp Ser A
5 3/4% 7/1/2011 BBB 1,900M 1,976,000
Total 16,329,156
- -----------------------------------------------------------------------------------------------------------------------============
Housing 12.15% Connecticut St Hsg Fin Auth Sub Ser D-2 AMT+++ 5.60% 11/15/2021 AA 535M 551,719
Connecticut St Hsg Fin Auth AMBAC+ 5 5/8% 6/15/2027 AAA 500M 526,875
Connecticut St Hsg Fin Auth Sub Ser F-2 AMT+++ 6% 11/15/2027 AA 1,500M 1,599,375
Connecticut St Hsg Fin Auth Sub Ser D-1 5.55% 11/15/2028 AA 1,690M 1,751,263
Connecticut St Hsg Fin Auth Sub Ser C-2 5.85% 11/15/2028 AA 1,000M 1,052,500
Connecticut St Hsg Fin Auth Ser C AMT+++ 5 1/2% 11/15/2035 AA 2,775M 2,865,188
Connecticut St Hsg Fin Auth Sub Ser A-2 FHA+ AMT+++
7.20% 11/15/2008 AA 450M 483,750
Connecticut St Hsg Fin Auth Sub Ser A-2 AMT+++ 6.45% 5/15/2022 AA 1,100M 1,185,250
Connecticut St Hsg Fin Auth Ser B 6 3/4% 11/15/2023 AA 2,605M 2,826,425
Connecticut St Hsg Fin Auth Sub Ser D-2 AMT+++ 6.20% 11/15/2027 AA 1,740M 1,857,450
Total 14,699,795
- -----------------------------------------------------------------------------------------------------------------------============
Industrial Revenue
Bonds 8.87% Connecticut St Dev Auth/Watson Foods Inc AMT+++ 5.90% 6/1/2028 BBB* 1,000M 997,500
Connecticut St Dev Auth/Pfizer Inc Prjt 6.55% 2/15/2013 AAA 3,570M 3,940,388
Connecticut St Dev Auth/Pfizer Inc Prjt AMT+++ 7% 7/1/2025 AAA 2,500M 2,912,500
Puerto Rico Ind Med & Environmental/Upjohn 7 1/2% 12/1/2023 AA 1,000M 1,036,300
Puerto Rico Ind Med & Environmental/Warner Lambert
7.60% 5/1/2014 Aa 1,750M 1,840,877
Total 10,727,565
- -----------------------------------------------------------------------------------------------------------------------============
Miscellaneous 9.02% Connecticut St Dev Auth/Govt Lease Rev MBIA+ 6.60% 6/15/2014 AAA 500M 569,375
New Haven CT Air Rights Pkg MBIA+ 6 1/2% 12/1/2015 AAA 9,475M 10,351,438
Total 10,920,813
- -----------------------------------------------------------------------------------------------------------------------============
Power 6.83% Connecticut St Dev Auth/New England Pwr Co 7 1/4% 10/15/2015 A 760M 800,712
Puerto Rico Elec Pwr Auth Ser GG 4 3/4% 7/1/2021 AAA 1,600M 1,576,000
Puerto Rico Elec Pwr Auth Ser DD 5% 7/1/2028 BBB 2,000M 1,990,000
</TABLE>
15
<PAGE>
Statements of Net Assets
CONNECTICUT SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Puerto Rico Elec Pwr Auth Ser EE 4 3/4% 7/1/2024 BBB $ 4,000M $ 3,895,000
Total 8,261,712
- -----------------------------------------------------------------------------------------------------------------------============
Solid Waste 7.77% Connecticut St Resource Recovery/American Ref Fuel Ser A
AMT+++ 6.45% 11/15/2022 A 4,985M 5,365,106
Eastern CT Resource Recovery/Wheelabrator Lisbon Prjt Ser A
AMT+++ 5 1/2% 1/1/2020 BBB 4,000M 4,040,000
Total 9,405,106
- -----------------------------------------------------------------------------------------------------------------------============
Transportation 5.72% Connecticut St Spcl Tax Oblig Rev Ser B FSA+ 4 3/4% 11/1/2018 AAA 5,000M 4,975,000
Puerto Rico Commonwealth Hwy Ser A 5% 7/1/2038 A 500M 497,500
Puerto Rico Commonwealth Hwy Ser W 5 1/2% 7/1/2015 A 600M 653,250
Puerto Rico Commonwealth Hwy Ser Y 5 1/2% 7/1/2026 A 750M 788,438
Total 6,914,188
- -----------------------------------------------------------------------------------------------------------------------============
Water and Sewer .67% Connecticut St Dev Auth Wtr Fac Rev Ser A AMBAC+ AMT+++
5 3/4% 7/1/2028 AAA 250M 259,687
Connecticut St Dev Auth Wtr Fac Rev AMT+++ 6.15% 4/1/2035 A 500M 550,000
Total 809,687
----------------------------------------------------------------------------------------============
Total Municipal Bonds 99.00% (Cost $111,787,256) 119,768,734
===================================================================================================================================
Other Assets, Less Liabilities 1.00%
===================================================================================================================================
Cash and Receivables, Net of Liabilities 1,213,911
===================================================================================================================================
Net Assets 100.00% $120,982,645
===================================================================================================================================
Net asset value ($120,982,645 / 11,273,740 shares outstanding) $10.73
Maximum offering price $11.27
</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, 1998. See page 1 for
additional information.
+++ Income from these investments may be subject to
the Alternative Minimum Tax.
See Notes to Financial Statements.
Statements of Net Assets
MISSOURI SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 27.79% Cape Girardeau MO Wtrwks Sys Rev FGIC+ 6.40% 3/1/2012 AAA $ 1,150M $ 1,250,625
Central MO St Univ Revs MBIA+ 7% 7/1/2014 AAA 150M 165,750
Clay Co MO Pub Bldg Auth Leasehold Rev FGIC+ 7% 5/15/2014 AAA 1,000M 1,160,000
Kansas City MO Arpt Rev Ser B CGIC+ 6 7/8% 9/1/2014 AAA 1,490M 1,741,438
Kansas City MO Wtr Rev Ser D 7th Issue 6.65% 12/1/2013 AAA 2,800M 3,227,000
Missouri St Health & Ed Facs Rev/SSM Hlth Care MBIA+
6 1/4% 6/1/2016 AAA 345M 380,794
Missouri St Health & Ed Facs Rev/BJC Health Ser A
6 1/2% 5/15/2020 AAA 4,900M 5,628,875
Missouri St Health & Ed Facs Rev/Christian Health Ser B FGIC+
6 7/8% 2/15/2013 AAA 2,100M 2,291,625
Missouri St Health & Ed Facs Rev/St Lukes MBIA+ 7% 11/15/2013 AAA 1,030M 1,148,450
Missouri St Regional Convention Ser A 6.90% 8/15/2021 AAA 10,000M 11,362,500
Platte Co MO Reorg Sch Dist Ctfs 7 1/8% 1/1/2011 AAA 500M 521,250
Puerto Rico Elec Pwr Auth RIBS FSA+ 7.898% 7/1/2023++ AAA 2,500M 2,950,000
Springfield MO Sch Dist No 12 Ser A FGIC+ 6 3/4% 3/1/2011 AAA 1,225M 1,313,812
St Louis MO Land Clearance Rev 7 3/4% 7/1/2021 AAA 2,165M 2,395,031
St Louis MO Regl Convention & Sports Complex Auth Ser C
7.90% 8/15/2021 AAA 2,000M 2,365,000
</TABLE>
16
<PAGE>
Statements of Net Assets
MISSOURI SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
University of MO Rev Ser A AMBAC+ 6 1/2% 11/1/2011 AAA $ 2,000M $ 2,155,000
Total 40,057,150
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation
State 3.95% Puerto Rico Commonwealth RIBS MBIA+ 7.846% 7/1/2008++ AAA 1,000M 1,155,000
Puerto Rico Commonwealth RIBS FSA+ 7.832% 7/1/2020++ AAA 4,000M 4,540,000
Total 5,695,000
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation
Local 5.08% Columbia MO Spcl Oblig Cap Imp 5 1/2% 2/1/2016 A 500M 526,250
Fort Zumwalt MO Sch Dist Impt Corp Leasehold Rev AMBAC+
5.60% 3/1/2017 Aaa 500M 529,375
Greene Co MO Reorg Sch Dist 5 3/4% 3/1/2016 AA 1,785M 1,959,037
Missouri St Wtr Poll Ctrl Ser A 4 1/2% 6/1/2020 AAA 2,005M 1,944,850
KS CITY SD 4.85% 3/1/2018 AA 1,000M 987,570
St Louis MO Sch Dist FGIC+ 6% 4/1/2012 AAA 1,275M 1,378,594
Total 7,325,676
- -----------------------------------------------------------------------------------------------------------------------============
Education 4.70% Missouri St Health & Ed Facs Rev/Lutheran Senior Service
5 7/8% 2/1/2023 BBB 500M 526,250
Missouri St Health & Ed Facs Rev/Maryville Univ Ed
5 3/4% 6/15/2017 Baa 400M 420,000
Missouri St Health & Ed Facs Rev/St Louis Univ HS
6.35% 10/1/2014 A 2,000M 2,202,500
University of MO Rev 5 1/2% 11/1/2017 AA 3,500M 3,622,500
Total 6,771,250
- -----------------------------------------------------------------------------------------------------------------------============
Finance 3.56% Kansas City MO Muni Assistance Corp Rev MBIA+ 5 1/8% 4/15/2015 AAA 5,000M 5,137,500
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 14.91% Hannibal MO Ind Dev Auth Health Facs Rev Ser A FSA+
5 5/8% 3/1/2012 AAA 2,170M 2,343,600
Hannibal MO Ind Dev Auth Health Facs Rev Ser A FSA+
5 3/4% 3/1/2022 AAA 1,250M 1,348,437
Jackson Co MO Ind Dev Rev/St Joseph Health Ctr 7% 7/1/2022 Baa 1,500M 1,651,875
Missouri St Health & Ed Facs Rev/Lake Ozarks Gen Hosp
5 1/8% 2/15/2024 AA 1,000M 1,007,500
Missouri St Health & Ed Facs Rev/BJC Hlth Sys 5% 5/15/2038 AA 5,000M 4,912,500
Missouri St Health & Ed Facs Rev/Health Midwest Ser B
MBIA+ 6 1/4% 2/15/2022 AAA 2,175M 2,340,844
Missouri St Health & Ed Facs Rev/Heartland Health Sys
AMBAC+ 6.35% 11/15/2017 AAA 3,600M 3,933,000
Puerto Rico Indl Tourist Edl Ser A 5 5/8% 7/1/2017 BBB 375M 389,531
University Mo Health RIBS AMBAC+ 5.775% 11/1/2028++ Aaa 3,500M 3,570,000
Total 21,497,287
- -----------------------------------------------------------------------------------------------------------------------============
Housing 6.49% Missouri St Hsg Dev Comm Mtg Rev Ser B-2 GNMA+ AMT+++
5 1/2% 3/1/2025 AAA 1,250M 1,279,688
Missouri St Hsg Dev Comm Mtg Rev Ser A GNMA+ AMT+++
6 3/4% 6/1/2024 AAA 350M 374,063
Missouri St Hsg Dev Comm Mtg Rev Ser A GNMA+ AMT+++
6.22% 3/1/2026 AAA 5,000M 5,368,750
Missouri St Hsg Dev Comm Mtg Rev Ser B GNMA+ AMT+++
6.40% 12/1/2024 AAA 2,125M 2,255,156
Puerto Rico Hsg Fin Corp Mtg Rev Ser A GNMA+ 7.80% 10/15/2021 AAA 10M 10,205
Puerto Rico Hsg Fin Corp Mtg Rev Ser B GNMA+ 7.65% 10/15/2022 AAA 70M 73,938
Total 9,361,800
- -----------------------------------------------------------------------------------------------------------------------============
Industrial Revenue
Bonds 5.86% Joplin Ida-A-Catholic-MO 5% 12/1/2028 AA 2,500M 2,484,375
Kansas City MO Indl Dev Auth 4.90% 12/31/2008 Baa 2,000M 2,032,500
Missouri St Environmental Imp & Energy Rev/Union Elec Ser A
7.40% 5/1/2020 AA 550M 589,187
Puerto Rico Tel Auth Rev RIBS MBIA+ 6.708% 1/25/2007++ AAA 2,000M 2,240,000
Puerto Rico Tel Auth Rev RIBS MBIA+ 7.168% 1/16/2015++ AAA 1,000M 1,102,500
Total 8,448,562
- -----------------------------------------------------------------------------------------------------------------------============
Miscellaneous 3.34% St Louis Co MO Ind Dev Rev Arena Prjt 7 7/8% 12/1/2024 BBB* 2,000M 2,207,500
St Louis MO Ld Clearance Redev Auth Rev Ser A MBIA+
5 1/8% 7/1/2021 AAA 1,000M 1,021,250
St Louis MO Ld Clearance Redev Auth Rev Ser B MBIA+
5.30% 7/1/2016 AAA 500M 524,375
St Louis MO Pkg Facs Rev MBIA+ 5 3/8% 12/15/2021 AAA 10M 10,412
Virgin Islands Pub Fin Auth Ser E 6% 10/1/2022 BBB* 1,000M 1,052,500
Total 4,816,037
- -----------------------------------------------------------------------------------------------------------------------============
</TABLE>
17
<PAGE>
Statements of Net Assets
MISSOURI SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Pollution Control
Revenue 8.13% Missouri St Environmental Imp & Energy Wtr Poll
Ctrl Rev Ser A 6.55% 7/1/2014 Aa 3,000M 3,311,250
Missouri St Environmental Imp & Energy Wtr Poll
Ctrl Rev Ser A 5 3/4% 1/1/2016 Aa 2,400M 2,592,000
Missouri St Environmental Imp & Energy Wtr Poll Ctrl
Rev Ser E 5 5/8% 7/1/2016 Aa 900M 965,250
Missouri St Environmental Imp & Energy Wtr Poll
Ctrl Rev Ser B 7.20% 7/1/2016 Aa 2,250M 2,624,062
Missouri St Environmental Imp & Energy Wtr Poll Ctrl Rev Ser D
5.90% 1/1/2019 Aa 2,050M 2,221,688
Total 11,714,250
- -----------------------------------------------------------------------------------------------------------------------============
Power 4.90% Puerto Rico Commonwealth Infrastructure Fing Auth Spl AMBAC+
5% 7/1/2028 AAA 2,000M 2,017,500
Puerto Rico Elec Pwr Auth MBIA+ 5% 7/1/2028 AAA 2,100M 2,121,000
Puerto Rico Elec Pwr Auth Ser EE 4 3/4% 7/1/2024 BBB 3,000M 2,921,250
Total 7,059,750
- -----------------------------------------------------------------------------------------------------------------------============
Transportation 11.03% Lake Of The Ozarks Co Brdg Corp MO Brdg Sys Rev 5 1/4% 12/1/2020 BBB* 1,500M 1,449,375
Lake Of The Ozarks Co Corp MO Brdg Sys 5 1/4% 12/1/2026 BBB* 3,000M 2,865,000
Puerto Rico Commonwealth Hwy Ser Y 5 1/2% 7/1/2036 A 1,250M 1,364,062
Puerto Rico Commonwealth Hwy 5% 7/1/2028 A 5,000M 4,975,000
Puerto Rico Commonwealth Hwy 5% 7/1/2038 A 3,000M 2,985,000
St Louis MO Arpt Rev FGIC+ AMT+++ 5 1/4% 7/1/2022 AAA 2,210M 2,259,725
Total 15,898,162
- -----------------------------------------------------------------------------------------------------------------------============
Water and Sewer 2.83% Missouri St Environmental Imp Energy Res Auth Fac Rev
MBIA+ AMT+++ 5.95% 11/1/2019 AAA 1,500M 1,608,750
St Louis MO Wtr Rev FGIC+ 6% 7/1/2014 AAA 2,250M 2,472,188
Total 4,080,938
----------------------------------------------------------------------------------------============
Total Municipal Bonds 102.57% (Cost $137,317,994) 147,863,362
===================================================================================================================================
Other Assets, Less Liabilities (2.57)%
===================================================================================================================================
Cash and Receivables, Net of Liabilities (3,707,994)
===================================================================================================================================
Net Assets 100.00% $144,155,368
===================================================================================================================================
Net asset value ($144,155,368 / 26,887,954 shares outstanding) $5.36
Maximum offering price $5.63
</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, 1998. See page 1 for
additional information.
+++ Income from these investments may be subject to
the Alternative Minimum Tax.
See Notes to Financial Statements.
Statements of Net Assets
HAWAII SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 13.12% Hawaii St Dept Bdg & Fin/Pali Momi Med Ctr 7.60% 7/1/2010 AAA $ 200M $ 223,500
Hawaii St Dept Bdg & Fin/Pali Momi Med Ctr 7.65% 7/1/2019 AAA 1,000M 1,118,750
Puerto Rico Commonwealth 6.35% 7/1/2010 AAA 1,285M 1,471,325
Puerto Rico Commonwealth 7 5/8% 7/1/2010 AAA 200M 217,500
Puerto Rico Commonwealth 6.45% 7/1/2017 AAA 2,300M 2,645,000
Puerto Rico Commonwealth 6 1/2% 7/1/2023 AAA 1,250M 1,440,625
</TABLE>
18
<PAGE>
Statements of Net Assets
HAWAII SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Puerto Rico Commonwealth 6% 7/1/2026 AAA $1,000M $ 1,161,250
Puerto Rico Commonwealth Hwy Ser Q 7 3/4% 7/1/2010 AAA 525M 572,250
Puerto Rico Elec Pwr Auth RIBS FSA+ 7.898% 7/1/2023++ AAA 1,500M 1,770,000
Total 10,620,200
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation
State 18.36% Hawaii St Ser C-A 8% 1/1/2013 AAA 2,000M 2,722,500
Hawaii St FGIC+ 5% 10/1/2016 AAA 900M 915,750
Hawaii St Ser B-Z 6% 10/1/2010 AA 500M 575,625
Hawaii St Ser B-Z 6% 10/1/2012 AA 500M 577,500
Hawaii St Ser C-R MBIA+ 4 3/4% 4/1/2018 AAA 2,000M 1,982,500
Puerto Rico Commonwealth RIBS FSA+ 7.832% 7/1/2020++ AAA 3,000M 3,405,000
Puerto Rico Commonwealth 4 1/2% 7/1/2023 A 2,500M 2,346,875
Puerto Rico Commonwealth 5% 7/1/2026 A 1,845M 1,840,388
Puerto Rico Commonwealth Ser A MBIA+ 5% 7/1/2027 A 500M 500,625
Total 14,866,763
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation
Local 9.33% Hawaii Co HI Ser A FGIC+ 5.60% 5/1/2013 AAA 1,780M 1,982,475
Honolulu HI City & Co FGIC+ 6% 12/1/2015 AAA 1,000M 1,160,000
Honolulu HI City & Co Ser 95 MBIA+ 5% 11/1/2015 AAA 1,500M 1,524,375
Honolulu HI City & Co Ser A FGIC+ 5 1/2% 9/1/2016 AAA 1,000M 1,063,750
Honolulu HI City & Co Ser B FGIC+ 5% 11/1/2016 AAA 500M 508,750
Kauai Co HI Ser B MBIA+ 5 1/4% 8/1/2017 AAA 195M 202,069
Maui Co HI Ser A MBIA+ 5 3/4% 6/1/2016 AAA 1,035M 1,112,625
Total 7,554,044
- -----------------------------------------------------------------------------------------------------------------------============
Education 2.05% Puerto Rico Indl Tourist Edl Med & Environmental Inter AM
Univ Ser A MBIA+ 5% 10/1/2022 AAA 1,350M 1,370,250
University of HI Ser G AMBAC+ 5.45% 10/1/2006 AAA 275M 292,875
Total 1,663,125
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 13.75% Hawaii St Dept Bdg & Fin/Spcl Purp Rev Kapi'olani Hlth Care
6.20% 7/1/2016 A 1,000M 1,097,500
Hawaii St Dept Bdg & Fin/Spcl Purp Rev Kapi'olani Hlth Care
6 1/4% 7/1/2021 A 2,000M 2,200,000
Hawaii St Dept Bdg & Fin/Wilcox Mem Hosp 5 1/4% 7/1/2013 BBB 1,200M 1,219,500
Hawaii St Dept Bdg & Fin/Queens Hlth Sys Ser B MBIA+ 5% 7/1/2028 AAA 2,250M 2,272,500
Hawaii St Dept Bdg & Fin/Wilcox Mem Hosp 5 1/2% 7/1/2028 BBB 1,350M 1,382,063
Hawaii St Dept Bdg & Fin/St Francis Med Ctrs FSA+ 6 1/2% 7/1/2022 AAA 1,200M 1,318,500
Puerto Rico Ind Med & Environmental/St Luke Hosp 6 1/4% 6/1/2010 A 1,390M 1,473,400
Puerto Rico Ind Tourist Ed Med & Environmental Ctrl Fac Gr A
MBIA+ 6 1/4% 7/1/2024 AAA 150M 167,062
Total 11,130,525
- -----------------------------------------------------------------------------------------------------------------------============
Housing 4.55% Hawaii St Hsg Fin & Dev Corp/Univ of HI Facs Hsg Proj
AMBAC+ 5.70% 10/1/2025 AAA 500M 530,625
Hawaii St Hsg Fin & Dev Corp 5.30% 7/1/2028 Aa 1,000M 1,013,750
Hawaii St Hsg Fin & Dev Corp Ser A FNMA+ AMT+++ 7.10% 7/1/2024 Aa 960M 1,029,600
Hawaii St Hsg Fin & Dev Corp/Univ of HI Faculty Hsg Prjt
AMBAC+ 5.65% 10/1/2016 AAA 1,000M 1,062,500
Puerto Rico Hsg Fin Corp Mtg Rev Ser B GNMA+ 7.65% 10/15/2022 AAA 45M 47,531
Total 3,684,006
- -----------------------------------------------------------------------------------------------------------------------============
Industrial Revenue
Bonds 4.31% Puerto Rico Ind Med & Environmental/Baxter Travenol Labs Ser A
8% 9/1/2012 A 1,000M 1,032,990
Puerto Rico Ind Med & Environmental/Warner Lambert 7.60% 5/1/2014 Aa 1,500M 1,577,895
Puerto Rico Tel Auth Rev RIBS MBIA+ 7.168% 1/16/2015++ AAA 800M 882,000
Total 3,492,885
- -----------------------------------------------------------------------------------------------------------------------============
Power 20.81% Hawaii St Dept Bdg & Fin/Citizens Utilities RIBS AMT+++
7.066% 12/15/2023++ AAA 5,000M 5,337,500
Hawaii St Dept Bdg & Fin/HI Elec Ser A MBIA+ AMT+++
6.60% 1/1/2025 AAA 2,795M 3,137,388
</TABLE>
<PAGE>
19
Statements of Net Assets
HAWAII SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
====================================================================================================================================
<S> <C> <C> <C> <C>
Hawaii St Dept Bdg & Fin/HI Elec Ser C MBIA+ AMT+++ 7 3/8%
12/1/2020 AAA $2,500M $ 2,718,750
Hawaii St Dept Bdg & Fin/HI Elec Ser A MBIA+ 4.95%
4/1/2012 AAA 1,000M 1,035,000
Puerto Rico Elec Pwr Auth Ser DD 5% 7/1/2028 BBB 1,000M 995,000
Puerto Rico Elec Pwr Auth Ser EE 4 3/4% 7/1/2024 BBB 2,500M 2,434,375
Puerto Rico Elec Pwr Auth Ser N 7 1/8% 7/1/2014 BBB 365M 380,840
Puerto Rico Elec Pwr Auth Ser U 6% 7/1/2014 A 750M 814,687
Total 16,853,540
- ------------------------------------------------------------------------------------------------------------------------============
Transportation 11.19% Hawaii St Arpt Sys Rev Ser M MBIA+ AMT+++ 7% 7/1/2018 AAA 2,000M 2,192,500
Hawaii St Arpt Sys Rev 2nd Ser FGIC+ AMT+++ 7 1/2%
7/1/2020 AAA 445M 480,044
Hawaii St Hbr Cap Imp Rev FGIC+ AMT+++ 6 1/4% 7/1/2015 AAA 500M 552,500
Hawaii St Hbr Cap Imp Rev FGIC+ AMT+++ 6 3/8% 7/1/2024 AAA 500M 555,625
Puerto Rico Commonwealth Hwy Ser V 6 5/8% 7/1/2012 A 500M 550,000
Puerto Rico Commonwealth Hwy Ser A 5% 7/1/2038 A 4,750M 4,726,250
Total 9,056,919
- ------------------------------------------------------------------------------------------------------------------------============
Water and Sewer 1.34% Honolulu HI City & Co Bd Wtr Supply Wtr Sys Rev 5.80%
7/1/2021 AA 1,000M 1,081,250
-----------------------------------------------------------------------------------------============
Total Municipal Bonds 98.81% (Cost $74,394,785) 80,003,257
====================================================================================================================================
Other Assets, Less Liabilities 1.19%
====================================================================================================================================
Cash and Receivables, Net of Liabilities 967,172
====================================================================================================================================
Net Assets 100.00% $80,970,429
====================================================================================================================================
Net asset value ($80,970,429 / 15,417,224 shares
outstanding) $5.25
Maximum offering price $5.51
</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, 1998. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative
Minimum Tax.
See Notes to Financial Statements.
Statements of Net Assets
WASHINGTON SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
====================================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 28.48% Douglas Co WA Pub Util Dist No 1 Wells Hydroelec Ser A
8 3/4% 9/1/2018 AAA $ 150M $ 203,813
Lewis Co WA Pub Util Dist No 1 Cowlitz Falls Hydroelec 7%
10/1/2022 AAA 500M 554,375
Mason Co WA Pub Util Dist No 3 6.35% 1/1/2013 AAA 1,040M 1,138,800
Mount Vernon WA AMBAC+ 6.85% 12/1/2014 AAA 1,285M 1,493,813
Pike Place Mkt Preservation Ser A 6.60% 12/1/2021 AAA 2,000M 2,165,000
Port Seattle WA Rev Ser B AMT+++ 7.60% 12/1/2009 AA 225M 247,219
Puerto Rico Elec Pwr Auth RIBS FSA+ 7.898% 7/1/2023++ AAA 3,500M 4,130,000
Renton WA Wtr & Sewer Rev 6.55% 11/1/2013 AAA 1,000M 1,142,500
Seattle WA Muni Metro Ser T 6 7/8% 1/1/2014 AAA 500M 529,375
Tacoma WA Elec Sys Rev FGIC+ 7 3/8% 1/1/2009 AAA 500M 522,500
Tacoma WA Elec Sys Rev Ser C RIBS AMBAC+ 8.942% 1/2/2015++ AAA 4,500M 5,225,625
Washington St Pub Pwr Supply Ser C 8% 7/1/2017 AAA 475M 517,750
Total 17,870,770
- ------------------------------------------------------------------------------------------------------------------------============
General Obligation State 8.00% Washington St Ser A 5 3/4% 9/1/2019 AA 1,150M 1,229,062
Washington St Ser B 5 3/4% 5/1/2016 AA 3,550M 3,794,063
Total 5,023,125
-----------------------------------------------------------------------------------------============
</TABLE>
20
<PAGE>
Statements of Net Assets
WASHINGTON SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
====================================================================================================================================
<S> <C> <C> <C> <C>
General Obligation Local .67% King Co WA Ser B 4 1/2% 1/1/2024 AA $ 320M $ 298,800
Whatcom Co WA 5 3/4% 12/1/2012 A 115M 122,475
Total 421,275
- ------------------------------------------------------------------------------------------------------------------------============
Education 3.25% Washington St Higher Ed Facs Auth Rev CNLA+ 7% 10/1/2015 AAA 250M 285,000
Washington St University Rec Ctr AMBAC+ 5% 4/1/2028 AAA 1,750M 1,752,188
Total 2,037,188
- ------------------------------------------------------------------------------------------------------------------------============
Health and Hospital 2.52% Washington St Health Care Facs Auth 5% 8/15/2021 AA 1,575M 1,578,937
- ------------------------------------------------------------------------------------------------------------------------============
Housing 8.54% Bellingham WA Hsg Auth MBIA+ 5.20% 11/1/2027 Aaa 850M 861,687
Skagit Co WA Hsg Auth Low Income Hsg Assistance Coll
GNMA+ 7% 6/20/2035 AAA 750M 838,125
Snohomish Co WA Hsg Auth Rev AMT+++ 6.40% 5/1/2027 A 500M 541,250
Washington St Hsg Fin Comm Sing Fam Ser 2A
GNMA+ AMT+++ 6.30% 12/1/2027 Aaa 940M 1,012,850
Washington St Hsg Fin Comm Sing Fam Mtge Rev Ser A
GNMA+ AMT+++ 6.65% 7/1/2016 AAA 535M 555,062
Washington St Hsg Fin Comm Sing Fam Mtge Rev Ser A
GNMA+ AMT+++ 7.05% 7/1/2022 AAA 1,420M 1,549,575
Total 5,358,549
- ------------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Bonds 5.78% Michigan St Strategic Fd Ltd MBIA+ AMT+++ 5.55% 9/1/2029* AAA 3,000M 3,078,750
Puerto Rico Tel Auth Rev RIBS MBIA+ 7.168% 1/16/2015++ AAA 500M 551,250
Total 3,630,000
- ------------------------------------------------------------------------------------------------------------------------============
Miscellaneous 5.20% Bellevue WA Convention Ctr Auth Spl Oblig Rev MBIA+ Zero
Coupon 2/1/2024 AAA 1,400M 400,750
CDP-King Co III WA Lease Rev MBIA+ 5 1/4% 6/1/2026 AAA 500M 515,000
Spokane WA Downtown Fndtn Pkg 5.60% 8/1/2019 AA 2,000M 2,080,000
Spokane WA Pub Facs Dist AMBAC+ 6 1/2% 1/1/2018 AAA 250M 269,687
Total 3,265,437
- ------------------------------------------------------------------------------------------------------------------------============
Power 26.59% Chelan Co WA Pub Util Dist No 1 Columbia Riv Rock MBIA+
Zero Coupon 6/1/2024 AAA 1,860M 525,450
Chelan Co WA Pub Util Dist No 1 Columbia Riv Rock MBIA+
Zero Coupon 6/1/2028 AAA 14,985M 3,484,013
Chelan Co WA Pub Util Dist Ser A MBIA+ AMT+++ 6.40%
7/1/2017 AAA 1,000M 1,141,250
Chelan Co WA Pub Util Dist Ser D MBIA+ AMT+++ 6.35%
7/1/2028 AAA 2,425M 2,749,344
Douglas Co WA Pub Util Dist No 1 Wells Hydroelec Ser B
AMBAC+ 8 3/4% 9/1/2006 AAA 5,020M 6,005,175
Douglas Co WA Pub Util Dist No 1 Wells Hydroelec Ser A
8 3/4% 9/1/2018 A 350M 455,437
Lewis Co WA Pub Util Dist No 1 Cowlitz Falls Hydroelec
5 1/2% 10/1/2022 AA 755M 782,369
Washington St Pub Pwr Supply RIBS 6.572% 7/1/2017++ AA 1,500M 1,543,125
Total 16,686,163
- ------------------------------------------------------------------------------------------------------------------------============
Transportation 6.05% Port Kalama WA Rev Ser B AMT+++ 5 5/8% 12/1/2015 Baa 400M 420,000
Port Seattle WA Rev Ser B AMT+++ 6.70% 11/1/2010 AA 20M 22,350
Port Seattle WA Rev Ser B AMT+++ 6.70% 11/1/2010 AA 230M 254,725
Port Seattle WA Rev Ser B AMT+++ 7.60% 12/1/2009 AA 525M 576,844
Port Tacoma WA Rev AMBAC+ AMT+++ 5.30% 12/1/2017 AAA 750M 778,125
Puerto Rico Commonwealth Auth Hwy Rev Ser Y 5 1/2%
7/1/2036 A 1,600M 1,746,000
Total 3,798,044
- ------------------------------------------------------------------------------------------------------------------------============
Water and Sewer 9.38% Pasco WA Wtr & Sewer Rev MBIA+ 6.40% 6/1/2014 AAA 865M 970,962
Richland WA Wtr & Sewer Rev MBIA+ 6 1/4% 4/1/2012 AAA 250M 267,500
Seattle WA Drain & Wtr 5 3/4% 12/1/2022 AA 1,500M 1,575,000
Seattle WA Drain & Wtr 5% 11/1/2027 Aa 2,000M 2,007,500
</TABLE>
21
<PAGE>
Statements of Net Assets
WASHINGTON SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Seattle WA Wtr Sys Rev 5 1/4% 12/1/2023 AA $1,040M $ 1,063,400
Total 5,884,362
----------------------------------------------------------------------------------------============
Total Municipal Bonds 104.46% (Cost $60,706,919) 65,553,850
===================================================================================================================================
Other Assets, Less Liabilities (4.46)%
===================================================================================================================================
Cash and Receivables, Net of Liabilities (2,800,111)
===================================================================================================================================
Net Assets 100.00% $ 62,753,739
===================================================================================================================================
Net asset value ($62,753,739 / 11,658,046 shares
outstanding) $5.38
Maximum offering price $5.65
</TABLE>
Ratings have not been audited by Deloitte & Touche LLP.
* When-issued security.
+ 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, 1998. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative
Minimum Tax.
See Notes to Financial Statements.
Statements of Net Assets
MINNESOTA SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 26.54% Brainerd MN Health Care Facs Rev/Benedictine Hlth/St
Joseph Prjt 8 3/8% 2/15/2020 AAA $ 775M $ 838,938
Minneapolis & St Paul MN Hsg & Redev Auth Health Care Sys
Rev Ser B 8% 8/15/2014 AAA 650M 713,375
Minneapolis MN Hosp Rev MN Childrens Med Ctr Prjt C 7.30%
12/1/2006 AAA 200M 222,000
Minneapolis MN Hosp Rev MN Childrens Med Ctr Prjt C 7%
12/1/2020 AAA 200M 220,500
Minnesota Pub Facs Auth Wtr Poll Ctrl Rev Ser A 6 1/4%
3/1/2016 AAA 100M 113,250
Minnesota St Hsg Fin Agy Sing Fam Mtge 6.80% 8/1/2002 AAA 1,000M 1,056,250
Puerto Rico Commonwealth 6.45% 7/1/2017 AAA 275M 316,250
St Louis Park MN Health Care Facs Rev 9 1/4% 1/1/2020 AAA 100M 108,750
Western MN Mun Pwr Agy 1977 Ser A 6 3/8% 1/1/2016 AAA 205M 232,931
Total 3,822,244
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation State 1.32% Puerto Rico Commonwealth Zero Coupon 7/1/2018 A 500M 190,625
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation Local Champlin MN MBIA+ 5.60% 2/1/2021 Aaa 250M 262,812
11.75%
Minneapolis MN 5 1/8% 10/1/2020 Aaa 500M 511,250
Minneapolis MN Spcl Sch Dist FGIC+ 5 3/8% 2/1/2014 AAA 250M 259,688
North St Paul Maplewood MN Indpt Sch Dist 5 1/8% 2/1/2020 AA 400M 406,500
St Michael MN Isd 885-MN 5% 2/1/2025 Aa 250M 251,250
Total 1,691,500
- -----------------------------------------------------------------------------------------------------------------------============
Education 7.47% Minnesota St Higher Ed Facs Auth Rev/Macalister College
5.55% 3/1/2017 Aa 260M 272,675
Minnesota St Higher Ed Facs Auth Rev/Univ of St. Thomas
5.35% 4/1/2017 A 250M 257,188
Minnesota St Higher Ed Facs Auth Rev/Univ St. Thomas Ser
4-A1 5 5/8% 10/1/2016 A 250M 262,188
University of MN Ser A 5 3/4% 7/1/2018 AA 250M 283,125
Total 1,075,176
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 25.96% Hastings MN Health Care Facs Rev 5.30% 9/15/2028 A 250M 252,500
Minneapolis & St Paul MN Hsg & Redev Auth Health Care Sys
Rev MBIA+ 6 3/4% 8/15/2014 AAA 245M 262,150
Minneapolis & St Paul MN Hsg & Redev Auth Health Care Sys
Rev Childrens Hlth Ser A FSA+ 5.70% 8/15/2016 AAA 150M 162,187
</TABLE>
22
<PAGE>
Statements of Net Assets
MINNESOTA SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Minneapolis & St Paul MN Hsg & Redev Auth Health Care Sys
6.90% 10/15/2022 A $ 300M $ 330,000
Minnesota Agric & Economic Dev Brd Rev Ser A MBIA+ 5 1/2%
11/15/2017 Aaa 220M 237,325
Rochester MN Health Care Facs Rev Ser A 5 1/2% 11/15/2027 AA 500M 528,125
Rochester MN Health Care Facs Rev Ser B 5 1/2% 11/15/2027 AA 500M 528,125
Rochester MN Health Care Ser H RIBS 8.118% 11/15/2015++ AA 1,000M 1,181,250
St Paul MN Hsg & Redev Auth Hosp Rev Ser A 5.70%
11/1/2015 BBB 250M 256,250
Total 3,737,912
- -----------------------------------------------------------------------------------------------------------------------============
Housing 15.69% Fairbault Hsg & Redev Auth Ser A 5 1/4% 2/1/2028 A 500M 502,500
Minnesota St 5 1/4% 8/1/2014 AA 265M 275,600
Minnesota St Hsg Fin Agy Sing Fam Mtge Ser D AMT+++ 5.85%
7/1/2019 AA 210M 220,500
Minnesota St Hsg Fin Agy Sing Fam Mtge Ser B-1 RMK AMT+++
6 3/4% 1/1/2026 AA 95M 101,650
Minnesota St Hsg Fin Agy Sing Fam Mtge Ser D AMT+++ 6.40%
7/1/2015 AA 250M 268,750
Minnesota St Hsg Fin Agy Sing Fam Mtge Ser E RMK 5.90%
7/1/2025 AA 250M 265,312
Minnesota St Hsg Fin Agy Sing Fam Mtge Ser G AMT+++
6 1/4% 7/1/2026 AA 240M 256,500
Minnesota St Hsg Fin Agy Sing Fam Mtge Ser B AMT+++ 5.65%
7/1/2022 AA 250M 259,375
St Louis Park MN Multi-Fam Hsg FHA+ 6.15% 12/1/2016 AA 100M 108,500
Total 2,258,687
- -----------------------------------------------------------------------------------------------------------------------============
Miscellaneous 4.85% St Cloud MN Ctfs Partn 5.90% 12/1/2017 BBB 200M 208,250
St Paul MN 4 3/4% 2/1/2019 AA 250M 246,562
St Paul MN 4 3/4% 2/1/2025 AA 250M 244,063
Total 698,875
- -----------------------------------------------------------------------------------------------------------------------============
Pollution Control Revenue Minnesota Pub Facs Auth Wtr Poll Ctrl Rev Ser A 4 3/4% 3/1/2017 AAA 300M 300,750
2.09%
- -----------------------------------------------------------------------------------------------------------------------============
Transportation 1.76% Minneapolis St Paul MN Airports Ser A AMBAC+ 5% 1/1/2022 AAA 250M 253,125
- -----------------------------------------------------------------------------------------------------------------------============
Water and Sewer 1.15% Marshall MN Elec & Wtr Util FSA+ 6.45% 7/1/2011 AAA 150M 165,375
----------------------------------------------------------------------------------------============
Total Municipal Bonds 98.58% (Cost $13,644,316) 14,194,269
===================================================================================================================================
Other Assets, Less Liabilities 1.42%
===================================================================================================================================
Cash and Receivables, Net of Liabilities 204,945
===================================================================================================================================
Net Assets 100.00% $14,399,214
===================================================================================================================================
Net asset value ($14,399,214 / 2,778,323 shares outstanding) $5.18
Maximum offering price $5.44
</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, 1998. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative
Minimum Tax.
See Notes to Financial Statements.
23
<PAGE>
Statements of Net Assets
CALIFORNIA SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 25.12% California Ed Fac Auth Rev/Loyola Marymount Univ Ser B
6.60% 10/1/2022 AAA $1,900M $ 2,139,875
California Health Fac Fing Auth Rev/Cedarknoll CA MTG+
7 1/2% 8/1/2020 AAA 1,000M 1,088,750
California Health Fac Fing Auth Rev/San Diego Hosp Assn
Ser A MBIA+ 6.95% 10/1/2021 AAA 2,750M 3,059,375
California St Dept Wtr Res Cen Valley/Prjt Rev Wtr Sys
Ser P 6.10% 12/1/2029 AAA 5,000M 5,768,750
Capistrano CA Unified Sch Dist Comm Fac Dist Spl Tax
8 3/8% 10/1/2020 AAA 2,500M 2,781,250
East Bay CA Muni Util Dist Wtr Sys Rev AMBAC+ 6 1/2%
6/1/2017 AAA 9,935M 11,512,181
East Bay CA Muni Util Dist Wtr Sys Rev MBIA+ 7 1/2%
6/1/2018 AAA 1,750M 1,894,375
Metropolitan Wtr Dist So CA RIBS 7.864% 8/5/2022++ AAA 7,300M 8,741,750
Northern CA Transmission Rev Prjt Ser A MBIA+ 7% 5/1/2024 AAA 1,750M 1,870,313
Puerto Rico Commonwealth 6% 7/1/2026 AAA 1,000M 1,161,250
Puerto Rico Commonwealth Hwy Auth Rev Ser Q 8% 7/1/2018 AAA 3,500M 3,828,125
San Francisco CA Bay Area Rapid Trans Dist Sales Tax Rev
FGIC+ 6.60% 7/1/2012 AAA 1,540M 1,688,225
San Francisco CA City & Co Pub Util Wtr Rev Ser A 6 1/2%
11/1/2017 AAA 7,000M 7,717,500
Santa Clara CA Ctfs 7.80% 11/1/2013 AAA 1,295M 1,382,568
Santa Clara CA Elec Rev Ser A MBIA+ 6 1/4% 7/1/2019 AAA 3,890M 4,230,375
Vallejo CA Rev Wtr Prjt Imp Ser B FGIC+ 6 1/2% 11/1/2014 AAA 6,565M 7,566,163
Total 66,430,825
- -----------------------------------------------------------------------------------------------------------------------============
General Obligation Local 2.92% Chaffey CA Uni Sch Dist Ser A FGIC+ 5 1/2% 8/1/2023 AAA 2,900M 3,117,500
Fresno CA Uni Sch Dist Ser C FSA+ 5 3/8% 8/1/2021 AAA 2,000M 2,080,000
Pasadena CA Usd Ser A FGIC+ 5% 5/1/2023 AAA 2,500M 2,509,375
Total 7,706,875
- -----------------------------------------------------------------------------------------------------------------------============
Education 11.99% California Ed Fac Auth Rev 5 1/8% 1/1/2031 AAA 1,000M 1,017,500
California Ed Fac Auth Rev/Pooled College Proj 6.30%
4/1/2021 Baa 1,000M 1,125,000
California Ed Fac Auth Rev/Univ of San Francisco MBIA+ 6%
10/1/2016 AAA 1,500M 1,696,875
California Ed Fac Auth Rev/Univ of San Francisco MBIA+ 6%
10/1/2026 AAA 10,500M 11,799,375
California St Univ Rev FGIC+ 5.90% 11/1/2021 AAA 7,700M 8,498,875
University CA Rev AMBAC+ 6% 7/1/2026 AAA 6,825M 7,575,750
Total 31,713,375
- -----------------------------------------------------------------------------------------------------------------------============
Finance 2.85% Culver City Redv Ref -CA AMBAC+ 4.60% 11/1/2020 AAA 3,500M 3,368,750
Riverside Co CA Asset Leasing Corp Lease Hold Rev MBIA+
Zero Coupon 6/1/2023 AAA 14,410M 4,172,992
Total 7,541,742
- -----------------------------------------------------------------------------------------------------------------------============
Housing 5.63% California Hsg Fin Agy AMT+++ 5 1/2% 8/1/2039 AAA 250M 256,250
California Hsg Fin Agy Ser A 7 3/8% 8/1/2017 Aa 7,085M 7,430,394
California Hsg Fin Agy Ser L MBIA+ AMT+++ 6.40% 8/1/2027 AAA 6,625M 7,196,406
San Diego CA Sing Fam Mtge Rev 9.20% 7/15/2016 Aa 5M 5,462
Total 14,888,512
- -----------------------------------------------------------------------------------------------------------------------============
Miscellaneous 4.94% Beverly Hills Fing Auth Lease Rev Ser A 5 1/4% 6/1/2028 AA 5,000M 5,168,750
California St Pub Wks Bd Lease Rev 5 1/4% 10/1/2017 A 1,000M 1,033,750
California St Pub Wks Bd Lease Rev PJ-B AMBAC+ 55/8%
3/1/2019 AAA 3,000M 3,228,750
Concord CA Redev Agy 3rd Ser MBIA+ 8% 7/1/2018 AAA 35M 36,066
Orange Co CA Recovery Ctsf Partner Ser A MBIA+ 6%
7/1/2026 AAA 3,205M 3,581,587
Total 13,048,903
- -----------------------------------------------------------------------------------------------------------------------============
Pollution Control Revenue California Poll Ctrl Rev/So CA Edison AMBAC+ AMT+++ 6.40%
6.03% 12/1/2024 AAA 10,000M 11,050,000
East Bay CA Muni Util Dist Wtr Sys Rev MBIA+ 4 3/4%
6/1/2034 AAA 5,000M 4,887,500
Total 15,937,500
----------------------------------------------------------------------------------------============
</TABLE>
24
<PAGE>
Statements of Net Assets
CALIFORNIA SERIES September 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Power 14.43% Los Angeles CA Dept Wtr & Pwr Elec Plt Rev FGIC+ 5.40%
11/15/2031 AAA $1,000M $ 1,032,500
Los Angeles CA Wastewater Sys 4 3/4% 10/15/2020 Aa 1,000M 976,250
Northern CA Transmission Rev MBIA+ 6 1/2% 5/1/2016 AAA 4,250M 4,680,313
Northern CA Transmission Rev RIBS MBIA+ 6.782%
4/29/2024++ AAA 8,500M 9,275,625
Palo Alto CA Util Rev Ser A 6 1/4% 6/1/2020 AA 2,860M 3,196,050
Pasadena CA Elec Ref 4 3/4% 8/1/2024 AAA 10,000M 9,812,500
Sacramento CA Cogen Ref MBIA+ 5% 7/1/2018 AAA 2,000M 2,017,500
Sacramento CA Muni Util Dist Elec Rev RIBS FGIC+ 9.071%
8/15/2018++ AAA 6,000M 7,170,000
Total 38,160,738
- -----------------------------------------------------------------------------------------------------------------------============
Solid Waste 1.11% California Poll Ctl Fin Auth Solid Waste Rev/Browning
Ferris AMT+++ 6 3/4% 9/1/2019 A 2,600M 2,925,000
- -----------------------------------------------------------------------------------------------------------------------============
Transportation 12.10% Los Angeles CA Dept Arpt Rev Ontario Intl Arpt Ser A
FGIC+ AMT+++ 6% 5/15/2026 AAA 2,750M 3,038,750
Los Angeles CA Hbr Rev Ser B MBIA+ AMT+++ 5 3/8%
11/1/2019 AAA 5,000M 5,181,250
Los Angeles CA Hbr Rev Ser B AMT+++ 6 5/8% 8/1/2025 AA 1,000M 1,100,000
Puerto Rico Commonwealth Hwy & Trans Auth 5% 7/1/2028 A 1,750M 1,741,250
Puerto Rico Commonwealth Hwy & Trans Auth 5% 7/1/2038 A 3,500M 3,482,500
San Francisco CA City & Co Arpt Comm Intl Arpt Rev 2nd
Ser Issue BB FGIC+ 6.10% 5/1/2025 AAA 2,000M 2,197,500
San Francisco CA City & Co Arpt Comm Intl Arpt Rev Ser I
Issue 6 AMBAC+ AMT+++ 6 1/2% 5/1/2018 AAA 4,500M 5,090,625
San Francisco CA City & Co Arpt Comm Intl Arpt Rev 2nd
Ser Issue 2 MBIA+ 6 3/4% 5/1/2020 AAA 5,000M 5,662,500
San Joaquin Hills CA Trans Comdor Ser A MBIA+ Zero Coupon
1/15/2026 AAA 5,000M 1,293,750
San Joaquin Hills CA Trans Comdor Ser A MBIA+ Zero Coupon
1/15/2036 AAA 3,750M 590,625
San Joaquin Hills CA Trans Comdor Ser A MBIA+ Zero Coupon
1/15/2032 AAA 13,690M 2,618,212
Total 31,996,962
- -----------------------------------------------------------------------------------------------------------------------============
Water and Sewer 13.12% Big Bear Lake CA Wtr Rev Ref MBIA+ 6% 4/1/2022 AAA 1,500M 1,764,375
California St Dept Wtr Res Ser O 5% 12/1/2022 AA 2,240M 2,245,600
East Bay CA Muni Util Dist Wastewtr Treatment Sys Rev
RIBS AMBAC+ 6.82% 6/1/2020++ AAA 1,750M 1,944,688
Los Angeles CA Wastewtr Rev Ser C 7.10% 6/1/2018 A 5,980M 6,232,834
Metropolitan CA Wtr Dist So Ser A 4 3/4% 7/1/2022 AA 5,250M 5,151,562
Napa San Wstwtr PJ-A CA FGIC+ 5% 8/1/2023 AAA 1,660M 1,666,225
Napa San Wstwtr PJ-A CA FGIC+ 5% 8/1/2024 AAA 1,745M 1,751,544
Napa San Wstwtr PJ-A CA FGIC+ 5% 8/1/2028 AAA 1,620M 1,626,075
Salinas CA San Swr Sys Rev FGIC+ 5% 8/1/2028 AAA 3,490M 3,503,087
San Francisco CA City & Co Pub Utils Ser A 5% 11/1/2026 Aa 3,250M 3,258,125
Vallejo CA Rev Ref Wtr Imp Prjt Ser A FSA+ 5 7/8% 5/1/2026 AAA 5,000M 5,537,500
Total 34,681,615
----------------------------------------------------------------------------------------============
Total Municipal Bonds 100.24% (Cost $243,524,811) 265,032,047
===================================================================================================================================
Other Assets, Less Liabilities (.24)%
===================================================================================================================================
Cash and Receivables, Net of Liabilities (627,530)
===================================================================================================================================
Net Assets 100.00% $264,404,517
===================================================================================================================================
Class A Shares-Net asset value ($250,426,512 / 22,521,675 shares outstanding) $11.12
Class A Shares-Maximum offering price $11.67
Class C Shares-Net asset value ($13,978,005 / 1,257,043 shares outstanding) $11.12
</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, 1998. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative
Minimum Tax.
See Notes to Financial Statements.
25
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
Year Ended 9/30/98
-------------------------------------------------------------------------
National New York Texas New Jersey Connecticut
Investment Income Series Series Series Series Series
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
Income
Interest $ 39,268,436 $ 17,363,862 $ 5,219,455 $ 10,505,807 $ 6,909,805
- -------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fee 3,240,212 1,472,880 453,092 919,485 599,546
12b-1 distribution plan 2,065,125 789,464 260,855 464,497 249,641
Shareholder servicing 399,510 157,955 58,875 111,000 52,055
Registration 53,000 4,308 2,400 2,999 1,500
Reports to shareholders 91,721 42,620 12,936 26,330 16,924
Professional 74,935 40,430 20,733 39,762 21,876
Directors' fees 18,194 10,880 2,815 5,492 4,064
Other 86,837 21,244 9,440 10,751 21,500
Total expenses 6,029,534 2,539,781 821,146 1,580,316 967,106
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 33,238,902 14,824,081 4,398,309 8,925,491 5,942,699
- -------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain on Investments
===============================================================================================================================
Realized gain from investment transactions
Proceeds from sales 2,092,247,241 214,274,915 156,335,344 225,621,534 78,802,207
Cost of investments sold 2,075,404,698 211,443,294 155,362,724 222,272,458 78,299,142
Net realized gain 16,842,543 2,831,621 972,620 3,349,076 503,065
- -------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investments 9,010,370 7,560,811 2,583,620 4,328,361 3,153,894
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 25,852,913 10,392,432 3,556,240 7,677,437 3,656,959
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 59,091,815 $ 25,216,513 $ 7,954,549 $ 16,602,928 $ 9,599,658
===============================================================================================================================
<CAPTION>
Year Ended 9/30/98
- -------------------------------------------------------------------------------------------------------------------------------
Missouri Hawaii Washington Minnesota California
Investment Income Series Series Series Series Series
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income
Interest $ 8,085,715 $ 4,552,559 $ 3,743,741 $ 701,966 $ 15,589,964
- -------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fee 705,908 399,689 321,260 64,326 1,336,847
Management fee waived (17,497) (13,205) (2,740) (64,326) --
12b-1 distribution plan 436,037 246,740 -- -- 847,568
Shareholder servicing 110,522 47,616 54,845 12,862 120,199
Registration 3,600 902 1,500 1,835 3,600
Reports to shareholders 19,841 11,556 9,442 1,491 38,858
Professional 23,624 17,450 17,728 10,405 37,329
Directors' fees 4,558 3,341 2,323 351 8,977
Organization -- -- -- 1,363 --
Other 15,511 19,156 11,190 5,908 20,468
Total expenses 1,302,104 733,245 415,548 34,215 2,413,846
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 6,783,611 3,819,314 3,328,193 667,751 13,176,118
- -------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain on Investments
===============================================================================================================================
Realized gain from investment transactions
Proceeds from sales 104,848,850 42,918,873 109,585,311 5,067,325 537,788,013
Cost of investments sold 103,454,035 42,387,453 107,553,325 5,017,105 535,361,882
Net realized gain 1,394,815 531,420 2,031,986 50,220 2,426,131
- -------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investments 2,519,866 2,286,184 497,515 286,094 6,911,727
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 3,914,681 2,817,604 2,529,501 336,314 9,337,858
- -------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 10,698,292 $ 6,636,918 $ 5,857,694 $ 1,004,065 $ 22,513,976
===============================================================================================================================
</TABLE>
See Notes to Financial Statements.
26
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended 9/30/98
--------------------------------------------
National New York Texas
Increase (Decrease) in Net Assets Series Series Series
==============================================================================================================
<S> <C> <C> <C>
Operations
Net investment income $ 33,238,902 $ 14,824,081 $ 4,398,309
Net realized gain from investment transactions 16,842,543 2,831,621 972,620
Net unrealized appreciation of investments 9,010,370 7,560,811 2,583,620
Net increase in net assets resulting from operations 59,091,815 25,216,513 7,954,549
- --------------------------------------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income (31,523,634) (14,940,983) (4,665,612)
Net realized gain from investment transactions -- -- (776,439)
Total distributions (31,523,634) (14,940,983) (5,442,051)
- --------------------------------------------------------------------------------------------------------------
Capital share transactions
Net proceeds from sales of shares 44,173,162 10,675,106 4,536,385
Net asset value of shares issued to shareholders
in reinvestment of net investment income and realized gain
from investment transactions 17,571,273 8,689,637 3,071,896
Total 61,744,435 19,364,743 7,608,281
- --------------------------------------------------------------------------------------------------------------
Cost of shares reacquired (77,738,659) (39,873,429) (8,814,383)
- --------------------------------------------------------------------------------------------------------------
Decrease in net assets derived from capital share transactions (15,994,224) (20,508,686) (1,206,102)
- --------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 11,573,957 (10,233,156) 1,306,396
- --------------------------------------------------------------------------------------------------------------
Net Assets
Beginning of year 646,736,214 300,489,898 91,300,874
- --------------------------------------------------------------------------------------------------------------
End of year+ $ 658,310,171 $ 290,256,742 $ 92,607,270
==============================================================================================================
<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 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 gain 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
Total 54,102,078 21,729,635 6,016,018
- --------------------------------------------------------------------------------------------------------------
Cost of shares reacquired (102,855,970) (47,803,872) (11,718,272)
- --------------------------------------------------------------------------------------------------------------
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
==============================================================================================================
</TABLE>
+ Includes (overdistributed) net investment income of $(583,567),
$(1,066,471) and $(285,405), respectively, at September 30, 1998 and
(overdistributed) net investment income of $(2,298,835), $(949,569) and
$(18,102), respectively, at September 30, 1997.
See Notes to Financial Statements.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended 9/30/98
------------------------------------------------------------
New Jersey Connecticut Missouri Hawaii
Increase (Decrease) in Net Assets Series Series Series Series
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 8,925,491 $ 5,942,699 $ 6,783,611 $ 3,819,314
Net realized gain from investment transactions 3,349,076 503,065 1,394,815 531,420
Net unrealized appreciation of investments 4,328,361 3,153,894 2,519,866 2,286,184
Net increase in net assets resulting
from operations 16,602,928 9,599,658 10,698,292 6,636,918
- --------------------------------------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income (8,988,994) (6,083,771) (6,829,012) (3,809,143)
- --------------------------------------------------------------------------------------------------------------
Capital share transactions
Net proceeds from sales of shares 16,357,474 9,080,419 13,109,806 6,212,354
Net asset value of shares issued to shareholders
in reinvestment of net investment income and
realized gain from investment transactions 4,921,185 2,905,858 3,869,083 1,666,332
Total 21,278,659 11,986,277 16,978,889 7,878,686
- --------------------------------------------------------------------------------------------------------------
Cost of shares reacquired (27,230,768) (14,428,322) (16,973,059) (8,815,520)
- --------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets derived
from capital share transactions (5,952,109) (2,442,045) 5,830 (936,834)
- --------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 1,661,825 1,073,842 3,875,110 1,890,941
- --------------------------------------------------------------------------------------------------------------
Net Assets
Beginning of year 184,464,845 119,908,803 140,280,258 79,079,488
- --------------------------------------------------------------------------------------------------------------
End of year+ $ 186,126,670 $ 120,982,645 $ 144,155,368 $ 80,970,429
==============================================================================================================
<CAPTION>
Year Ended 9/30/98
-------------------------------------------
Washington Minnesota California
Increase (Decrease) in Net Assets Series Series Series
=============================================================================================
<S> <C> <C> <C>
Operations
Net investment income $ 3,328,193 $ 667,751 $ 13,176,118
Net realized gain from investment transactions 2,031,986 50,220 2,426,131
Net unrealized appreciation of investments 497,515 286,094 6,911,727
Net increase in net assets resulting
from operations 5,857,694 1,004,065 22,513,976
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income (3,139,347) (675,087) (12,811,949)
- ---------------------------------------------------------------------------------------------
Capital share transactions
Net proceeds from sales of shares 2,936,679 4,660,360 17,098,182
Net asset value of shares issued to shareholders
in reinvestment of net investment income and
realized gain from investment transactions 1,897,157 433,426 5,714,052
Total 4,833,836 5,093,786 22,812,234
- ---------------------------------------------------------------------------------------------
Cost of shares reacquired (11,013,654) (1,533,977) (41,118,778)
- ---------------------------------------------------------------------------------------------
Increase (decrease) in net assets derived
from capital share transactions (6,179,818) 3,559,809 (18,306,544)
- ---------------------------------------------------------------------------------------------
Increase (decrease) in net assets (3,461,471) 3,888,787 (8,604,517)
- ---------------------------------------------------------------------------------------------
Net Assets
Beginning of year 66,215,210 10,510,427 273,009,034
- ---------------------------------------------------------------------------------------------
End of year+ $ 62,753,739 $ 14,399,214 $ 264,404,517
=============================================================================================
</TABLE>
+ Includes (overdistributed) undistributed net investment income of
$(441,750), $(112,932), $(559,970), $(149,866), $(52,467), $1,754 and
$(507,212), respectively, at September 30, 1998.
27
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended 9/30/97
------------------------------------------------------------
New Jersey Connecticut Missouri Hawaii
Increase (Decrease) in Net Assets Series Series Series Series
===================================================================================================================
<S> <C> <C> <C> <C>
Operations
Net investment income $ 9,614,686 $ 6,540,445 $ 7,195,352 $ 4,312,803
Net realized gain (loss) from investment transactions 2,259,273 407,335 246,518 292,372
Net unrealized appreciation of investments 2,850,706 2,846,990 3,361,757 1,942,576
Net increase in net assets resulting
from operations 14,724,665 9,794,770 10,803,627 6,547,751
- -------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income (9,740,556) (6,503,760) (7,156,539) (4,250,983)
- -------------------------------------------------------------------------------------------------------------------
Capital share transactions
Net proceeds from sales of shares 17,203,304 8,963,629 15,958,674 5,715,066
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
Total 22,616,454 12,287,904 19,844,279 7,655,025
- -------------------------------------------------------------------------------------------------------------------
Cost of shares reacquired (29,538,020) (18,555,099) (17,355,063) (16,216,580)
- -------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets derived
from capital share transactions (6,921,566) (6,267,195) 2,489,216 (8,561,555)
- -------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (1,937,457) (2,976,185) 6,136,304 (6,264,787)
- -------------------------------------------------------------------------------------------------------------------
Net Assets
Beginning of year 186,402,302 122,884,988 134,143,954 85,344,275
- -------------------------------------------------------------------------------------------------------------------
End of year+ $ 184,464,845 $ 119,908,803 $ 140,280,258 $ 79,079,488
===================================================================================================================
<CAPTION>
Year Ended 9/30/97
-------------------------------------------
Washington Minnesota California
Increase (Decrease) in Net Assets Series Series Series
==================================================================================================
<S> <C> <C> <C>
Operations
Net investment income $ 3,703,975 $ 499,694 $ 15,019,754
Net realized gain (loss) from investment transactions 1,347,048 (31,794) 2,204,940
Net unrealized appreciation of investments 1,371,578 333,373 5,289,887
Net increase in net assets resulting
from operations 6,422,601 801,273 22,514,581
- --------------------------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income (3,760,874) (505,256) (14,909,128)
- --------------------------------------------------------------------------------------------------
Capital share transactions
Net proceeds from sales of shares 2,537,235 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 2,231,777 309,868 6,516,836
Total 4,769,012 3,263,575 23,182,717
- --------------------------------------------------------------------------------------------------
Cost of shares reacquired (12,510,858) (1,096,054) (52,616,616)
- --------------------------------------------------------------------------------------------------
Increase (decrease) in net assets derived
from capital share transactions (7,741,846) 2,167,521 (29,433,899)
- --------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (5,080,119) 2,463,538 (21,828,446)
- --------------------------------------------------------------------------------------------------
Net Assets
Beginning of year 71,295,329 8,046,889 294,837,480
- --------------------------------------------------------------------------------------------------
End of year+ $ 66,215,210 $ 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.
28
<PAGE>
Financial Highlights
NATIONAL SERIES
<TABLE>
<CAPTION>
Class A Shares
--------------------------------------------------------------
Year
Ended 9/30,
Per Share Operating Performance: 1998 1997 1996 1995 1994
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $11.48 $11.08 $11.00 $10.62 $12.37
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .604 .587 .603 .626 .657
Net realized and unrealized gain (loss) on investments .470 .415 .075 .382 (1.3124)
Total from investment operations 1.074 1.002 .678 1.008 (.6554)
----------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.574) (.602) (.598) (.628) (.6596)
Distributions from net realized gain -- -- -- -- (.435)
----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $11.98 $11.48 $11.08 $11.00 $10.62
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 9.60% 9.30% 6.31% 9.84% (5.64)%
==================================================================================================================================
Ratios to Average Net Assets:
Expenses 0.88% 0.87% 0.90% 0.82% 0.86%
Net investment income 5.18% 5.27% 5.63% 5.92% 5.76%
============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
-------------------------------------- -----------------------------------------
Year Year
Ended 9/30, 8/1/96(c) Ended 9/30, 7/15/96(c)
Per Share Operating Performance: 1998 1997 to 9/30/96 1998 1997 to 9/30/96
=================================================================================== =========================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.50 $11.08 $11.05 $11.49 $11.08 $10.90
- ----------------------------------------------------------------------------------- -----------------------------------------
Income from investment operations
Net investment income .518 .553 .089 .520 .507 .106
Net realized and unrealized
gain on investments .466 .413 .033 .471 .423 .190
Total from investment operations .984 .966 .122 .991 .930 .296
----------------------------------------------------------------------------- -----------------------------------------
Distributions
Dividends from net investment income (.504) (.546) (.092) (.491) (.520) (.116)
----------------------------------------------------------------------------- -----------------------------------------
Net asset value, end of period $11.98 $11.50 $11.08 $11.99 $11.49 $11.08
- ----------------------------------------------------------------------------------- -----------------------------------------
Total Return(a) 8.85% 8.95% 1.16%(b) 8.80% 8.61% 2.71%(b)
=================================================================================================================================
Ratios to Average Net Assets:
Expenses 1.47% 1.37% 0.20%(b) 1.61% 1.59% 0.34%(b)
Net investment income 4.49% 4.65% 0.68%(b) 4.44% 4.54% 0.96%(b)
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year
Ended 9/30,
Supplemental Data for All Classes: 1998 1997 1996 1995 1994
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net assets, end of year (000) $658,310 $646,736 $672,344 $650,699 $662,380
Portfolio turnover rate 304.15% 232.64% 205.35% 225.39% 184.07%
===========================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(b) Not annualized.
(c) Commencement of offering 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: 1998 1997 1996 1995 1994
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $11.03 $10.78 $10.85 $10.54 $12.27
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .562 .578 .597 .610 .649
Net realized and unrealized gain (loss) on investments .408 .262 (.081) .316 (1.3665)
Total from investment operations .970 .840 .516 .926 (.7175)
------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.570) (.590) (.586) (.616) (.6475)
Distributions from net realized gain -- -- -- -- (.365)
------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $11.43 $11.03 $10.78 $10.85 $10.54
- ------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 9.03% 8.01% 4.87% 9.12% (6.21)%
==============================================================================================================================
Ratios to Average Net Assets:
Expenses .85% 0.85% 0.81% 0.82% 0.83%
Net investment income 5.06% 5.35% 5.54% 5.83% 5.72%
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
-------------------------------------------------
Year
Ended 9/30, 7/15/96(c)
Per Share Operating Performance: 1998 1997 to 9/30/96
==============================================================================================================================
<S> <C> <C> <C>
Net asset value, beginning of period $11.02 $10.78 $10.63
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .485 .483 .111
Net realized and unrealized gain on investments .402 .267 .152
Total from investment operations .887 .750 .263
------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.487) (.510) (.113)
------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.42 $11.02 $10.78
- ------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 8.34%(b) 7.13% 2.48%(b)
==============================================================================================================================
Ratios to Average Net Assets:
Expenses 1.57% 1.57% 0.34%(b)
Net investment income 4.32% 4.60% 1.04%(b)
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year
Ended 9/30,
Supplemental Data for All Classes: 1998 1997 1996 1995 1994
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net assets, end of year (000) $290,257 $300,490 $319,553 $331,618 $338,539
Portfolio turnover rate 64.63% 110.28% 64.25% 105.62% 149.13%
========================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(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: 1998 1997 1996 1995 1994
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.40 $10.11 $10.05 $9.59 $10.82
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .507 .548 .567 .571 .604
Net realized and unrealized gain (loss)
on investments .407 .367 .045 .452 (1.0802)
Total from investment operations .914 .915 .612 1.023 (.4762)
-------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.534) (.555) (.552) (.563) (.6038)
Distributions from net realized gain (.09) (.07) -- -- (.15)
-------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $10.69 $10.40 $10.11 $10.05 $9.59
- -------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 9.24% 9.25% 6.11% 11.14% (4.60)%
===============================================================================================================================
Ratios/Supplemental Data:
Net assets, end of year (000) $92,607 $91,301 $94,414 $100,304 $103,836
-------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.91% 0.88% 0.69% 0.62% 0.50%
Expenses, excluding waiver 0.91% 0.88% 0.87% 0.87% 0.87%
Net investment income 4.85% 5.38% 5.58% 5.90% 5.97%
Portfolio turnover rate 143.78% 127.88% 112.34% 108.00% 96.79%
=========================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
See Notes to Financial Statements.
Financial Highlights
NEW JERSEY SERIES
<TABLE>
<CAPTION>
Year
Ended 9/30,
Per Share Operating Performance: 1998 1997 1996 1995 1994
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $5.32 $5.18 $5.14 $4.95 $5.55
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .262 .272 .277 .287 .300
Net realized and unrealized gain (loss)
on investments .223 .144 .041 .192 (.507)
Total from investment operations .485 .416 .318 .479 (.207)
-------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.265) (.276) (.278) (.289) (.303)
Distributions from net realized gain -- -- -- -- (.09)
-------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $5.54 $5.32 $5.18 $5.14 $4.95
- -------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 9.34% 8.25% 6.29% 9.98% (3.91)%
===============================================================================================================================
Ratios/Supplemental Data:
Net assets, end of year (000) $186,127 $184,465 $186,402 $191,562 $184,230
-------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.86% 0.82%(b) 0.79% 0.72% 0.51%
Expenses, excluding waiver 0.86% 0.86%(b) 0.86% 0.87% 0.83%
Net investment income 4.85% 5.21%(b) 5.31% 5.73% 5.76%
Portfolio turnover rate 118.38% 154.80% 171.63% 133.11% 75.62%
=========================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
See Notes to Financial Statements.
31
<PAGE>
Financial Highlights
CONNECTICUT SERIES
<TABLE>
<CAPTION>
Year
Ended 9/30,
Per Share Operating Performance: 1998 1997 1996 1995 1994
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.42 $10.13 $10.12 $9.71 $11.01
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .521 .556 .576 .579 .585
Net realized and unrealized gain (loss)
on investments .322 .287 (.013) .407 (1.1287)
Total from investment operations .843 .843 .563 .986 (.5437)
---------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.533) (.553) (.553) (.576) (.6038)
Distributions from net realized gain -- -- -- -- (.1525)
---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $10.73 $10.42 $10.13 $10.12 $9.71
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 8.32% 8.56% 5.70% 10.52% (5.13)%
=================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of year (000) $120,983 $119,909 $122,885 $113,436 $101,619
---------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.81% 0.59% 0.38% 0.41% 0.49%
Expenses, excluding waiver 0.81% 0.78% 0.80% 0.86% 0.86%
Net investment income 4.95% 5.45% 5.66% 5.89% 5.67%
Portfolio turnover rate 61.06% 37.09% 63.61% 54.19% 97.42%
===========================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
See Notes to Financial Statements.
Financial Highlights
MISSOURI SERIES
<TABLE>
<CAPTION>
Year
Ended 9/30,
Per Share Operating Performance: 1998 1997 1996 1995 1994
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $5.22 $5.08 $5.08 $4.88 $5.51
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .253 .268 .267 .277 .2926
Net realized and unrealized gain (loss)
on investments .142 .138 .008 .204 (.5681)
Total from investment operations .395 .406 .275 .481 (.2755)
---------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.255) (.266) (.275) (.281) (.297)
Distributions from net realized gain -- -- -- -- (.0575)
---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $5.36 $5.22 $5.08 $5.08 $4.88
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 7.75% 8.22% 5.54% 10.21% (5.22)%
=================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of year (000) $144,155 $140,280 $134,144 $131,823 $119,690
---------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.92% 0.70% 0.77% 0.74% 0.60%
Expenses, excluding waiver 0.93% 0.94% 0.92% 0.89% 0.91%
Net investment income 4.80% 5.22% 5.21% 5.61% 5.60%
Portfolio turnover rate 72.89% 27.34% 93.17% 58.17% 50.59%
=================================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
See Notes to Financial Statements.
32
<PAGE>
Financial Highlights
HAWAII SERIES
<TABLE>
<CAPTION>
Year
Ended 9/30,
Per Share Operating Performance: 1998 1997 1996 1995 1994
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $5.07 $4.93 $4.91 $4.72 $5.34
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .245 .266 .273 .271 .2918
Net realized and unrealized gain (loss)
on investments .180 .138 .015 .198 (.578)
Total from investment operations .425 .404 .288 .469 (.2862)
---------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.245) (.264) (.268) (.279) (.2888)
Distribution from net realized gain -- -- -- -- (.045)
---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $5.25 $5.07 $4.93 $4.91 $4.72
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 8.59% 8.42% 5.94% 10.30% (5.54)%
=================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of year (000) $80,970 $79,079 $85,344 $86,105 $92,972
---------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.92% 0.58% 0.57% 0.58% 0.41%
Expenses, excluding waiver 0.93% 0.87% 0.87% 0.87% 0.87%
Net investment income 4.78% 5.39% 5.46% 5.74% 5.80%
Portfolio turnover rate 52.65% 29.09% 59.46% 70.64% 66.04%
=================================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
See Notes to Financial Statements.
Financial Highlights
WASHINGTON SERIES
<TABLE>
<CAPTION>
Year
Ended 9/30,
Per Share Operating Performance: 1998 1997 1996 1995 1994
=================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $5.16 $4.96 $4.91 $4.72 $5.35
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .273 .268 .271 .277 .2976
Net realized and unrealized gain (loss)
on investments .206 .206 .056 .200 (.5895)
Total from investment operations .479 .474 .327 .477 (.2919)
---------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.259) (.274) (.277) (.287) (.2931)
Distribution from net realized gain -- -- -- -- (.045)
---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $5.38 $5.16 $4.96 $4.91 $4.72
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 9.48% 9.82% 6.80% 10.48% (5.65)%
=================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of year (000) $62,754 $66,215 $71,295 $74,359 $78,854
---------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.65% 0.57% 0.60% 0.53% 0.29%
Expenses, excluding waiver 0.65% 0.62% 0.68% 0.68% 0.67%
Net investment income 5.20% 5.36% 5.47% 5.84% 5.93%
Portfolio turnover rate 141.56% 132.37% 78.02% 92.85% 137.74%
===========================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
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: 1998 1997 1996 to 9/30/95
=================================================================================================================================
<S> <C> <C> <C> <C>
Net asset value, beginning of period $5.05 $4.90 $5.01 $4.76
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .265 .273 .294 .230
Net realized and unrealized gain (loss) on investments .134 .155 (.078) .249
Total from investment operations .399 .428 .216 .479
---------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.269) (.278) (.286) (.229)
Distribution from net realized gain -- -- (.04) --
---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.18 $5.05 $4.90 $5.01
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 8.11% 8.97% 4.44% 10.22%(b)
=================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000) $14,399 $10,510 $8,047 $4,315
---------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.27% 0.36% 0.00% 0.00%(b)
Expenses, excluding waiver 0.77% 0.86% 0.91% 0.64%(b)
Net investment income 5.19% 5.51% 5.91% 4.58%(b)
Portfolio turnover rate 40.65% 41.45% 43.08% 121.41%
===========================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(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 Year
Ended Ended Ended
9/30, 9/30, 8/31,
Per Share Operating Performance: 1998 1997 1996 1996 1995 1994 1993
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.72 $10.43 $10.32 $10.41 $10.45 $11.79 $11.21
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations
Net investment income .538 .560 .046 .566 .588 .623 .656
Net realized and unrealized gain (loss)
on investments .388 .290 .112 (.089) (.038) (.989) .872
Total from investment operations .926 .850 .158 .477 .550 (.366) 1.528
----------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.526) (.560) (.048) (.567) (.590) (.624) (.658)
Distributions from net realized gain -- -- -- -- -- (.350) (.290)
----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.12 $10.72 $10.43 $10.32 $10.41 $10.45 $11.79
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 8.86% 8.39% 1.53%(b) 4.65% 5.58% (3.33)% 14.43%
==================================================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver 0.87% 0.72% 0.07%(b) 0.75% 0.76% 0.67% 0.68%
Expenses, excluding waiver 0.87% 0.85% 0.07%(b) 0.86% 0.86% 0.87% 0.88%
Net investment income 4.98% 5.38% 0.44%(b) 5.41% 5.84% 5.63% 5.68%
============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
-------------------------------------------------------------------
Year One Month
Ended 9/30, Ended 9/30, 7/15/96(c)
Per Share Operating Performance: 1998 1997 1996 to 8/31/96
==================================================================================================================================
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.72 $10.43 $10.32 $10.28
- ----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .465 .485 .039 .068
Net realized and unrealized gain on investments .383 .287 .113 .041
Total from investment operations .848 .772 .152 .109
----------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.448) (.482) (.042) (.069)
----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.12 $10.72 $10.43 $10.32
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 8.09%(b) 7.59% 1.47%(b) 1.16%(b)
==================================================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver 1.59% 1.46% 0.13%(b) 0.17%(b)
Expenses, excluding waiver 1.59% 1.59% 0.13%(b) 0.21%(b)
Net investment income 4.26% 4.64% 0.38%(b) 0.65%(b)
============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year One Month Year
Ended 9/30, Ended 9/30, Ended 8/31,
Supplemental Data for All Classes: 1998 1997 1996 1996 1995 1994 1993
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Net assets, end of period (000) $264,405 $273,009 $294,837 $291,611 $296,274 $329,474 $336,291
Portfolio turnover rate 187.26% 121.97% 2.74%+ 132.37% 100.20% 86.05% 81.34%
==================================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(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) Security valuation is determined as follows: Portfolio 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 Minnesota Series are being amortized evenly
over a period of five years from its commencement date 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 fees 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, 1998, other
expenses reimbursed by Lord Abbett and not repaid by the Minnesota Series
amounted to $43,830.
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 shares are sold, not to exceed
0.25% and 0.75%, respectively, of the net asset value of such shares and (2) at
each quarter-end after the first anniversary of the sale of 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
after the first anniversary of their issuance.
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 $1,597,953 $51,071 $416,101
- --------------------------------------------------------------------------------
New York 726,923 -- 62,541
- --------------------------------------------------------------------------------
California 706,386 -- 141,182
- --------------------------------------------------------------------------------
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 $95,310 $628,289
- --------------------------------------------------------------------------------
New York-Class A 33,114 227,037
- --------------------------------------------------------------------------------
Texas 24,181 154,848
- --------------------------------------------------------------------------------
New Jersey 51,760 372,633
- --------------------------------------------------------------------------------
Connecticut 36,095 238,625
- --------------------------------------------------------------------------------
Missouri 64,586 405,069
- --------------------------------------------------------------------------------
Hawaii 12,412 85,145
- --------------------------------------------------------------------------------
Washington 14,477 92,976
- --------------------------------------------------------------------------------
Minnesota 22,889 154,200
- --------------------------------------------------------------------------------
California-Class A 37,977 272,311
- --------------------------------------------------------------------------------
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 9/30/98
--------------------------------------------------------------------------------------------
Texas New Jersey Connecticut Missouri Hawaii Washington Minnesota
Series Series Series Series Series Series Series
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales of shares 433,676 3,019,528 862,094 2,485,406 1,211,315 560,837 913,418
- ----------------------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of net
investment income and
realized gain from
investment transactions 294,101 910,326 276,538 735,101 324,937 362,420 85,054
- ----------------------------------------------------------------------------------------------------------------------------
Total 727,777 3,929,854 1,138,632 3,220,507 1,536,252 923,257 998,472
- ----------------------------------------------------------------------------------------------------------------------------
Shares reacquired (844,011) (5,031,851) (1,371,829) (3,224,796) (1,716,377) (2,097,870) (299,990)
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in shares (116,234) (1,101,997) (233,197) (4,289) (180,125) (1,174,613) 698,482
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year Ended 9/30/97
--------------------------------------------------------------------------------------------
Texas New Jersey Connecticut Missouri Hawaii Washington Minnesota
Series Series Series Series Series Series Series
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales of shares 293,907 3,287,703 870,633 3,120,760 1,146,282 499,734 594,768
- ----------------------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of net
investment income 296,935 1,036,296 325,385 759,387 390,299 443,179 62,448
- ----------------------------------------------------------------------------------------------------------------------------
Total 590,842 4,323,999 1,196,018 3,880,147 1,536,581 942,913 657,216
- ----------------------------------------------------------------------------------------------------------------------------
Shares reacquired (1,151,185) (5,645,924) (1,818,788) (3,389,471) (3,267,973) (2,481,343) (220,422)
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in shares (560,343) (1,321,925) (622,770) 490,676 (1,731,392) (1,538,430) 436,794
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Transactions in multiple class share Series (both shares and dollars) were as
follows:
<TABLE>
<CAPTION>
Year Ended 9/30/98
---------------------------------------------------------------------------------
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 2,744,018 $ 32,066,617 829,121 $ 9,270,220 1,378,536 $ 15,009,494
- ------------------------------------------------------------------------- -------------------------- -------------------------
Shares issued to shareholders in reinvestment
of net investment income 1,406,485 16,408,699 763,823 8,523,670 501,108 5,431,587
- ------------------------------------------------------------------------- -------------------------- -------------------------
Total 4,150,503 48,475,316 1,592,944 17,793,890 1,879,644 20,441,081
- ------------------------------------------------------------------------- -------------------------- -------------------------
Shares reacquired (5,961,842) (69,583,131) (3,449,206) (38,570,889) (3,473,545) (37,715,369)
- ------------------------------------------------------------------------- -------------------------- -------------------------
Decrease in shares (1,811,339) $(21,107,815) (1,856,262) $(20,776,999) (1,593,901) $(17,274,288)
- --------------------------------------------------------------------------------------------------------------------------------
<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 9/30/98 Year Ended 9/30/97
-------------------------- ------------------------------
National Series National Series
Class B Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Sales of shares 570,285 $ 6,662,760 207,299 $ 2,326,883
- ------------------------------------------------------------------------------------------------ ------------------------------
Shares issued to shareholders in reinvestment
of net investment income 10,179 119,121 3,026 33,961
- ------------------------------------------------------------------------------------------------ ------------------------------
Total 580,464 6,781,881 210,325 2,360,844
- ------------------------------------------------------------------------------------------------ ------------------------------
Shares reacquired (45,118) (527,894) (9,245) (104,667)
- ------------------------------------------------------------------------------------------------ ------------------------------
Increase in shares 535,346 $ 6,253,987 201,080 $ 2,256,177
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
Notes to Financial Statements
<TABLE>
<CAPTION>
Year Ended 9/30/98
------------------------------------------------------------------------------
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 463,595 $ 5,443,785 125,857 $ 1,404,886 192,070 $ 2,088,688
- ----------------------------------------------------------- ------------------------ ------------------------
Shares issued to shareholders in
reinvestment of net investment
income 89,380 1,043,453 14,878 165,967 26,069 282,465
- ----------------------------------------------------------- ------------------------ ------------------------
Total 552,975 6,487,238 140,735 1,570,853 218,139 2,371,153
- ----------------------------------------------------------- ------------------------ ------------------------
Shares reacquired (652,758) (7,627,634) (116,597) (1,302,540) (314,445) (3,403,409)
- ----------------------------------------------------------- ------------------------ ------------------------
Increase (decrease) in shares (99,783) $(1,140,396) 24,138 $ 268,313 (96,306) $(1,032,256)
- -----------------------------------------------------------------------------------------------------------------
<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>
The Company has 600,000,000 authorized shares (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, 60,000,000 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 $9,225,236 for the National Series, $(10,364,718) for the
New York Series, $935,801 for the Texas Series, $3,162,021 for the New Jersey
Series, $(1,407,519) for the Connecticut Series, $(2,976,888) for the Missouri
Series, $(1,657,876) for the Hawaii Series, $(605,865) for the Washington
Series, $(13,971) for the Minnesota Series and $(19,156,915) for the California
Series. The capital loss carryforwards expire in 2003, 2004 and 2005.
Dividends declared by class for the multiple class share Series were as follows:
Dividends
---------------------------------------------
Series Class A Class B Class C
- --------------------------------------------------------------------------------
National $29,528,872 $256,967 $1,737,795
- --------------------------------------------------------------------------------
New York 14,658,617 -- 282,366
- --------------------------------------------------------------------------------
California 12,279,923 -- 532,026
- --------------------------------------------------------------------------------
5. Paid In Capital
At September 30, 1998, paid in capital for each Series was as follows:
- --------------------------------------------------------------------------------
National $613,471,977 Missouri $137,146,858
- --------------------------------------------------------------------------------
New York 280,454,996 Hawaii 77,169,699
- --------------------------------------------------------------------------------
Texas 84,953,568 Washington 58,565,140
- --------------------------------------------------------------------------------
New Jersey 170,744,811 Minnesota 13,861,478
- --------------------------------------------------------------------------------
Connecticut 114,521,618 California 262,561,408
- --------------------------------------------------------------------------------
6. Purchases and Sales of Securities
Purchases and sales of investment securities (other than short-term investments)
were as follows:
Series Purchases Sales
- --------------------------------------------------------------------------------
National $1,959,863,303 $1,991,813,970
- --------------------------------------------------------------------------------
New York 189,240,817 210,862,113
- --------------------------------------------------------------------------------
Texas 130,468,032 131,407,565
- --------------------------------------------------------------------------------
New Jersey 217,693,028 222,010,470
- --------------------------------------------------------------------------------
Connecticut 73,357,200 75,083,869
- --------------------------------------------------------------------------------
Missouri 108,281,681 102,838,724
- --------------------------------------------------------------------------------
Hawaii 41,650,766 42,416,373
- --------------------------------------------------------------------------------
Washington 90,910,239 93,497,824
- --------------------------------------------------------------------------------
Minnesota 8,675,182 5,067,325
- --------------------------------------------------------------------------------
California 502,155,982 521,446,570
- --------------------------------------------------------------------------------
38
<PAGE>
Notes to Financial Statements
Security gains and losses are computed on the identified cost basis. As of
September 30, 1998, 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 $36,196,525 $37,191,791 $(995,266)
- --------------------------------------------------------------------------------
New York 21,232,935 21,518,483 (285,548)
- --------------------------------------------------------------------------------
Texas 7,003,306 7,370,026 (366,720)
- --------------------------------------------------------------------------------
New Jersey 12,661,588 13,096,427 (434,839)
- --------------------------------------------------------------------------------
Connecticut 7,981,478 8,224,450 (242,972)
- --------------------------------------------------------------------------------
Missouri 10,545,368 10,615,112 (69,744)
- --------------------------------------------------------------------------------
Hawaii 5,608,472 5,959,983 (351,511)
- --------------------------------------------------------------------------------
Washington 4,846,931 4,863,729 (16,798)
- --------------------------------------------------------------------------------
Minnesota 549,953 667,868 (117,915)
- --------------------------------------------------------------------------------
California 21,507,236 21,704,379 (197,143)
- --------------------------------------------------------------------------------
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, 1998, under a deferred compensation plan, were $544,830.
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 and financial highlights of the
California Series covered a one-month period from September 1, 1996 to September
30, 1996.
Copyright (C) 1998 by Lord Abbett Tax-Free Income Fund, Inc., 767 Fifth Avenue,
New York, NY 10153-0203
This publication, when not used for the general information of shareholders of
Lord Abbett Tax-Free Income Fund, Inc., is to be distributed only if preceded or
accompanied by a current prospectus which includes information concerning the
Fund's investment objective and policies, sales charges and other matters.
Please read the prospectus carefully before you invest. There is no guarantee
that the forecasts contained within this publication will come to pass.
All rights reserved. Printed in the U.S.A.
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,
1998, the related statements of operations for the year ended and of changes in
net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the 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, 1998 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, 1998, the
results of their operations, the changes in their net assets and their 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 30,1998
Our Management
Board of Directors
Robert S. Dow
E. Thayer Bigelow*+
William H.T. Bush*
Robert B. Calhoun, Jr.*
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
Daniel E. Carper, Vice President
Philip Fang, Vice President
Robert G. Morris, Vice President
John R. Mousseau, Vice President
Lawrence H. Kaplan, Vice President and Assistant Secretary
Thomas F. Konop, Vice President and Assistant Secretary
A. Edward Oberhaus III, Vice President
Keith F. O'Connor, Vice President
Donna McManus, 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 OMITTED]
(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 57 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, E. Thayer Bigelow, Jr.
E. Thayer Bigelow, Jr.
Director--Lord Abbett
Tax-Free Income Fund
[PHOTO OMITTED]
Mr. Bigelow is a graduate of Trinity College and earned his MBA at the
University of Virginia's Darden Business School. He is currently the CEO of
Court Room Television Network, and previously served for five years as President
and CEO of Time Warner Cable Programming, Inc.
Mr. Bigelow serves as a member of the Board of Trustees for the Cate School. He
is also a member of the Board of Directors for the Visiting Nurse Service of New
York, Crane Co., Medusa Inc., and The Boys Club of New York. He has been an
independent director for all of Lord Abbett's funds since 1994.
<PAGE>
Investing in the
Lord Abbett
Family of Funds
<TABLE>
<CAPTION>
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Growth
- ---------------------------------------------------------------------------------------------------------------------------------
Income
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Funds Growth & Balanced Fund Income Funds Tax-Free Money
Growth Fund Income Funds Income Funds Market Fund
Developing Alpha Series Affiliated Fund Balanced Series Bond-Debenture o National U.S. Government
Growth Fund Fund o California Securities
Global Fund- Growth & o Connecticut Money Market
Equity Series Income Series Global Fund- o Florida Fund**+
Income Series o Georgia
Growth Research Fund- o Hawaii
Opportunities Large-Cap Limited Duration o Michigan
Fund Series U.S. Government o Minnesota
Securities Series** o Missouri
International o New Jersey
Series U.S. Government o New York
Securities Series** o Pennsylvania
Mid-Cap o Texas
Value Fund World Bond- o Washington
Debenture Series
Research Fund-
Small-Cap
Series*
</TABLE>
Finding the right mutual fund can be confusing. At Lord, Abbett & Co., we
believe your investment professional 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 investment professional 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 investment professional can diversify your
investments between equity and income funds.
Flexibility. As your investment goals change, your investment professional can
help you reallocate your portfolio.
As an investor in the Lord Abbett Family of Funds, you have access to 30
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 invest-ment professional to help you customize your investment plan.
Numbers to Keep Handy
For Shareholder Account or Statement Inquiries: 800-821-5129
For Literature Only: 800-874-3733
For More Information: 800-426-1130
Visit Our Web Site:
http://www.lordabbett.com
* The Lord Abbett Research Fund-Small-Cap Series is closed to new investors.
For more information, call Lord Abbett Distributor LLC at 800-426-1130.
** An investment in this Fund is neither insured nor guaranteed by the U.S.
Government.
+ An investment in the Fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund. This Fund is managed
to maintain, and has maintained, its stable $1.00 per share price.
[LOGO](R) LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
Lord Abbett mutual fund shares are distributed by:
LORD ABBETT DISTRIBUTOR LLC
- ------------------------------------------------------------ LATFI-2-998
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203 (11/98)
