<PAGE>
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
SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED MARCH 31, 1998
[GRAPHIC OMITTED]
Portfolios that seek to provide attractive levels of tax-advantaged income
[LOGO]
<PAGE>
Report to Shareholders
For the Six Months Ended March 31, 1998
[PHOTO OMITTED]
/s/ Robert S. Dow
- ----------------------------
Robert S. Dow
Chairman
April 17, 1998
"It is our expectation that municipal supplies will remain strong and that the
municipal market will continue to offer good value..."
Lord Abbett Tax-Free Income Fund completed the first half of its fiscal year on
March 31, 1998 with aggregate net assets of $2.2 billion, relative to $1.9
billion in assets six months earlier. I am pleased to report that the investment
decisions of our management team helped the Fund post impressive returns and
consequently perform well relative to competitors for many of its portfolios
since the start of the fiscal year. (See inside front cover for net assets and
performance of each Series.)
How the Fund Added Value
Using Lord Abbett interest-rate projections to determine allocations between
market sectors, your Fund added value through its decision to maintain a high
percentage of its holdings (30-35%) in more defensive securities (such as
prerefunded and shorter-term, higher-coupon bonds), which performed well amid
the lower interest rates of the review period. Following the large drop in
Treasury yields during the last quarter of 1997, many issuers "prerefunded"
their bonds, leading to an increased overall supply of municipal issues going
into 1998. Issuers "prerefund" their bonds when rates decline by issuing newer,
lower-yielding debt and using the proceeds to pay off the first bond at its
first call date. (The call date is the date upon which an issuer may redeem a
bond.) This prerefunding activity led to nearly a 50% higher supply of municipal
bonds during the first quarter of 1998 than were available during the same
period in 1997.
Overall, credit quality (which evaluates an issuer's ability to repay principal
and interest) of U.S. municipal securities remained high, with municipalities
enjoying a period of economic strength. Due to the relatively small difference
in yield between lower- and higher-rated bonds, we stayed close to the Fund's
yield target while maintaining our emphasis on high-quality bonds.
We Plan To "Stay the Course" On Strategy
We are encouraged by the continued high level of credit quality available in the
market. In the coming months, we will continue to focus on high-quality bonds,
concentrating on call protection (assurance by the issuer that a bond will not
be redeemed before a specific date). We are constantly searching for value in
the bond market and will attempt to take advantage of any gaps in liquidity to
improve overall total returns.
Our outlook through 1998 is for the economy to grow at a rate averaging less
than 2 1/2%, with inflation remaining moderate. We remain watchful of the Asian
situation and any possible effects on the U.S. market, but believe the unrest
overseas will successfully offset domestic concerns regarding the strength of
the economy. It is our expectation that municipal supplies will remain strong
and that the municipal market will continue to offer good value relative to the
Treasury market.
Thank you for including Lord Abbett Tax-Free Income Fund as part of 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 3/31/98.
Lord Abbett's Focus on Quality
[These tables were initially represented as pie charts in the printed material]
National New York Connecticut Missouri Hawaii
Series Series Series Series Series
AAA 54.5% AAA 67.6% AAA 61.9% AAA 64.0% AAA 76.4%
AA 20.3% AA 10.6% AA 14.3% AA 19.9% AA 6.0%
A 17.6% A 12.4% A 13.9% A 7.9% A 13.4%
BBB(1) 7.6% BBB(1) 9.4% BBB(1) 9.9% BBB(1) 8.2% BBB(1) 4.2%
Texas New Jersey Washington Minnesota California
Series Series Series Series Series
AAA 48.3% AAA 72.3% AAA 67.0% AAA 55.1% AAA 75.9%
AA 30.5% AA 9.3% AA 21.6% AA 34.7% AA 13.6%
A 17.3% A 11.4% A 9.2% A 6.6% A 8.1%
BBB(1) 3.9% BBB(1) 7.0% BBB(1) 2.2% BBB(1) 3.6% BBB(1) 2.4%
Lord Abbett's Tax-Free Record and SEC-Required Information as of 3/31/98 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) $648.3 $293.1 $90.2 $182.9 $121.2
Distribution Rate at Net Asset Value(5) 4.83% 5.04% 5.08% 4.87% 5.02%
- --------------------------------------------------------------------------------------------------------------------------
Average Annual Rate of Total Return(6) at Net Asset Value:
1 Year 11.69% 10.32% 10.84% 10.91% 10.08%
10 Years or Life of Series 8.22% 7.78% 8.56% 8.27%(7) 7.75%(7)
30-Day SEC Yield(8) 4.39% 4.26% 3.88% 4.08% 4.21%
- --------------------------------------------------------------------------------------------------------------------------
Average Annual Rate of Total Return at the Class A Share
Maximum Offering Price:
1 Year 6.30% 5.10% 5.50% 5.60% 4.80%
5 Years 5.09% 4.18% 5.35% 5.26% 5.01%
10 Years or Life of Series 7.70% 7.26% 8.03% 7.54%(7) 7.00%(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) $142.3 $79.1 $63.5 $13.4 $266.9
Distribution Rate at Net Asset Value(5) 4.78% 4.67% 4.80% 5.19% 4.76%
- ------------------------------------------------------------------------------------------------------------------------------
Average Annual Rate of Total Return(6) at Net Asset Value:
1 Year 10.13% 11.00% 11.21% 10.37% 10.63%
10 Years or Life of Series 7.61%(7) 7.27%(7) 7.81%(7) 8.33%(7) 7.90%
30-Day SEC Yield(8) 4.00% 4.10% 4.47% 4.30% 4.11%
- ------------------------------------------------------------------------------------------------------------------------------
Average Annual Rate of Total Return at the Class A Share
Maximum Offering Price:
1 Year 4.90% 5.80% 5.90% 5.20% 5.40%
5 Years 4.71% 5.06% 5.63% -- 4.24%
10 Years or Life of Series 6.84%(7) 6.46%(7) 6.93%(7) 6.73%(7) 7.37%
</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 30, 31 and 36).
(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 Yield: The 30-day 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>
Important Information
As of 3/31/98, 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. ARIB, sometimes referred to as
an inverse floater, is a debt instrument with a floating or variable interest
rate that moves in the opposite direction of the interest rate on another
security or the value of an index. Changes in the interest rate on the other
security or index inversely affect the residual interest paid on the RIB, with
the result that when interest rates rise, RIBs make lower interest payments and
their values fall faster than fixed-rate bonds. But when interest rates fall,
not only do RIBs give higher interest payments, their values also rise faster
than fixed-rate bonds. If used as sales material after 6/30/98, this report must
be accompanied by Lord Abbett's Performance Quarterly for the most recently
completed calendar quarter.
Statement of Net Assets
NATIONAL SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 21.01% Azle TX Indpt Sch Dist Ser A 6% 2/15/2000 AAA $ 2,455M $ 2,540,925
Chattanooga-Hamilton Co TN Hosp Auth Rev Erlanger Ser B
RIBS FSA+ 9.976% 5/25/2021++ AAA 3,500M 4,182,500
Clermont Co OH Hosp Facs Ser A 7 1/2% 9/1/2019 AAA 285M 315,638
Clermont Co OH Hosp Facs Ser A AMBAC+ 7 1/2% 9/1/2019 AAA 965M 1,032,550
Colorado Springs Util Sys 9 7/8% 11/15/2012 AAA 2,000M 2,310,000
Connecticut St Health & Ed/Yale-New Haven Hosp Ser F
MBIA+ 7.10% 7/1/2025 AAA 1,000M 1,083,750
Delaware St Health Facs Auth 8 1/2% 6/1/2016 AAA 7,500M 8,325,000
Fulton Co GA Hosp Auth Rev Ser B MBIA+ 6.60% 10/1/2011 AAA 3,000M 3,348,750
Garfield Pitkin & Eagle Co Sch Dist No Re 1 Roarg Fk
MBIA+ 6.60% 12/15/2014 AAA 1,000M 1,137,500
Glendale AZ Ind Dev Auth Ed Facs Rev CNLA+ 7 1/8% 7/1/2020 AAA 1,000M 1,181,250
Harris Co TX 6 1/8% 8/15/2020 AAA 9,375M 10,464,844
Harris Co TX Ser A 7.70% 5/1/2003 AAA 415M 431,687
Hillsborough Co FL Aviation 6.90% 10/1/2011 AAA 170M 180,625
Indiana Univ Bldg Auth Ser N 10 1/8% 7/1/2010 AAA 710M 836,025
Indians St Ed 6.65% 3/1/2004 AAA 860M 978,250
Intermountain UT Pwr Auth Ser A 7 3/4% 7/1/2020 AAA 225M 231,683
Kansas City MO Arpt Rev Ser B CGIC+ 6 7/8% 9/1/2014 AAA 2,400M 2,775,000
Metropolitan Govt Nashville Wtr & Sewer RIBS AMBAC+
8.418% 1/7/2022++ AAA 14,750M 17,183,750
Mississippi Hosp Equip & Facs Auth Ser A 8 3/4% 1/1/2016 AAA 1,000M 1,136,250
Montgomery AL Med Clinic Bd 7% 3/1/2015 AAA 445M 478,931
New Jersey St Ed Facs Auth Rev BIG+ 6.85% 7/1/2019 AAA 610M 644,312
New York City Muni Wtr Fin Auth Wtr & Sewer Sys Rev
FGIC+ 6 3/4% 6/15/2014 AAA 390M 409,500
New York NY Ser A 8% 8/15/2021 AAA 3,000M 3,405,000
New York St Dorm Auth Rev 8 1/8% 7/1/2008 AAA 1,500M 1,545,900
New York St Dorm Auth Rev Cons Ser D 8 1/8% 7/1/2008 AAA 2,500M 2,573,525
New York St Med Care Facs Fin Agy Rev Ser A 8% 2/15/2027 AAA 1,990M 2,044,924
Ohio St 6.20% 8/1/2013 AAA 750M 847,500
Philadelphia PA Wtr & Sewer Rev 7% 8/1/2018 AAA 3,415M 3,713,812
Plano TX Indpt Sch Dist FGIC+ 8 5/8% 2/15/2002 AAA 1,000M 1,120,000
Puerto Rico Commonwealth 8% 7/1/2007 AAA 375M 385,953
Puerto Rico Commonwealth Hwy 6 5/8% 7/1/2018 AAA 372M 413,717
Puerto Rico Commonwealth Hwy Auth Rev Ser S 6 1/2%
7/1/2022 AAA 150M 166,125
Puerto Rico Elec Pwr Auth RIBS FSA+ 8.473% 7/1/2023++ AAA 2,500M 2,903,125
Puerto Rico Elec Pwr Auth Ser D 7 1/8% 7/1/2014 AAA 2,255M 2,373,387
Raleigh NC Pkg Fac Lease Ctfs Part Rpda Prjt 6 3/4%
1/1/2012 AAA 6,095M 6,491,175
</TABLE>
1
<PAGE>
Statement of Net Assets
NATIONAL SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Ringgold PA Sch Dist FSA+ 6 1/4% 2/1/2022 AAA $ 1,550M $ 1,722,439
Spartanburg SC Wtr Wks Rev FGIC+ 6 1/8% 6/1/2026 AAA 5,000M 5,637,500
Springfield IL Wtr Rev 6 1/2% 3/1/2015 AAA 500M 521,845
St Louis MO Land Clearance Rev 7 3/4% 7/1/2021 AAA 7,120M 7,912,100
Tacoma WA Elec Sys Rev RIBS AMBAC+ 9.043% 1/2/2015++ AAA 13,900M 16,158,750
Uintah Co UT Poll Ctrl Rev 84-F-2 10 1/2% 6/15/2014 AAA 1,000M 1,185,000
Virginia St Transn Brd Transn Contract Rev 6 3/8%
5/15/2020 AAA 1,500M 1,678,125
Washington St Pub Pwr Supply 6 7/8% 7/1/2017 AAA 3,500M 3,845,625
Weber Co UT Muni Bldg Auth Lease Rev 7 1/2% 12/15/2019 AAA 3,000M 3,600,000
Western MI Univ Revs Gen FGIC+ 6 1/8% 11/15/2022 AAA 4,325M 4,741,280
Total 136,195,527
- -------------------------------------------------------------------------------------------------------------------============
General Obligation Georgia St Ser C 6 1/4% 8/1/2013 Aaa 300M 346,500
State 0.76%
Nevada St Muni Bd Bk Prjt No 52-Ser A 6% 5/15/2021 AA 700M 750,750
New York St Ser B 6% 8/15/2018 A 200M 214,000
Oregon St Veterans Welfare-Ser 76A 6.05% 10/1/2028 AA 1,100M 1,186,625
Texas St Ser A AMT+++ 6.30% 6/1/2014 AA 270M 279,112
Texas St Wtr Dev Bd 7.15% 8/1/2035 AA 1,915M 2,173,525
Total 4,950,512
- -------------------------------------------------------------------------------------------------------------------============
General Obligation Alief TX Indpt Sch Dist 4% 2/15/2018 AAA 2,300M 1,949,250
Local 7.65%
Anne Arundel Co MD 6.30% 8/1/2014 AA 2,510M 2,779,825
Anne Arundel Co MD 6.30% 8/1/2015 AA 2,510M 2,779,825
Anne Arundel Co MD 6.30% 8/1/2023 AA 505M 556,130
Atlanta GA 6 1/8% 12/1/2023 AA 1,250M 1,365,625
Atlanta GA Ser A 6.10% 12/1/2019 AA 2,495M 2,716,431
Colorado Springs CO Sch Dist 1 MBIA+ 5% 12/1/2017 AAA 1,000M 973,750
Colorado Springs CO Sch Dist No 11 MBIA+ 5% 12/1/2013 AAA 500M 493,125
Cranston RI MBIA+ 6.10% 6/15/2015 AAA 500M 547,500
Fayette Co GA Sch Dist 6 1/8% 3/1/2015 Aa 1,000M 1,087,500
Highlands Ranch Met Dist 3 RF-B-CO 5 1/8% 12/1/2012 A 500M 496,250
Kilmarnock VA 6 1/4% 3/1/2027 BBB* 1,430M 1,505,075
Montgomery Co PA 5.40% 9/15/2018 Aaa 1,200M 1,237,500
Montgomery Co PA 5.45% 9/15/2022 Aaa 2,305M 2,368,387
North Providence RI MBIA+ 6 1/8% 7/1/2016 AAA 1,410M 1,563,338
Riverside VA Regl Jail Auth MBIA+ 6% 7/1/2025 AAA 7,000M 7,568,750
Taylor IN Co Sch Corp AMBAC+ 5 1/8% 1/15/2019 AAA 1,600M 1,572,000
University City MO Sch Dist MBIA+ 10% 2/15/2008 AAA 2,250M 3,195,000
Venus TX Indpt Sch Dist Zero Coupon 8/15/2027 AAA 1,030M 207,287
Wayne Twp IN Marion Co Sch Bldg Corp 5 1/2% 1/15/2022 A 14,435M 14,615,437
Total 49,577,985
- -------------------------------------------------------------------------------------------------------------------============
Education 11.66% Arkansas St Student Loan Auth Rev Ser B AMT+++ 7 1/4%
6/1/2009 A 3,500M 4,025,000
Boise Univ Ref-Std Fee-ID FSA+ 5% 4/1/2023 AAA 2,000M 1,950,000
Connecticut St Higher Ed Supplemental Loan Auth Ser A
AMT+++ 7 3/8% 11/15/2005 A 75M 77,438
District of Columbia Rev MBIA+ 7.15% 4/1/2021 AAA 1,000M 1,048,220
District of Columbia Rev LINK 9.065% 4/25/2022++ A 4,000M 4,615,000
District of Columbia Rev Ref Georgetown Univ A MBIA+ 6%
4/1/2018 AAA 1,000M 1,078,750
District of Columbia Rev CNLA+ 6.45% 10/1/2023 AAA 5,250M 5,755,313
District of Columbia Rev Howard Univ 7.15% 4/1/2021 A 3,350M 3,508,522
Indiana St Ed 6.65% 3/1/2019 AAA 10,740M 12,082,500
Johnson Co KS Comm College Student Commons & Pkg MBIA+
5.05% 11/15/2021 AAA 1,000M 991,250
</TABLE>
2
<PAGE>
Statement of Net Assets
NATIONAL SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Massachusetts St Health & Ed Facs Auth Rev CNLA+ 6%
7/1/2023 AAA $ 1,175M $ 1,246,969
Missouri St Health & Ed Facs Auth 4 3/4% 11/15/2037 AA 4,000M 3,700,000
Missouri St Health & Ed Facs Auth Rev AMBAC+ 6 1/2%
2/1/2016 AAA 1,000M 1,082,500
Montgomery Co MD Economic Dev Rev 5.60% 11/1/2018 BBB 500M 506,875
Montgomery Co MD Economic Dev Rev 5.60% 11/1/2022 BBB 300M 303,750
New Jersey Economic Dev Sch Rev 7% 5/1/2020 BBB* 1,000M 1,062,500
Pennsylvania St Higher Ed RIBS AMBAC+ AMT+++ 8.31%
3/1/2022++ AAA 3,000M 3,423,750
Pennsylvania St Higher Ed MBIA+ 5 5/8% 12/1/2027 AAA 1,000M 1,041,250
Private Colleges & Univ Facs Auth GA Rev 6.40% 10/1/2023 Aa 310M 335,575
Rhode Island St Health & Ed Bldg Corp 6% 9/1/2025 Aa 7,465M 8,090,194
Richland Co SC Ed Facs Rev 5 1/8% 1/1/2028 AA 3,235M 3,129,863
Roanoke Ind Holloms -VA 5 1/4% 3/15/2023 A 500M 490,625
Rockingham Co VA Ind Dev Auth Rev 6% 10/1/2023 Baa 360M 371,700
S M Ed Bldg Corp Rev MS AMBAC+ 5.30% 3/1/2027 Aaa 390M 390,975
Santa Fe NM Ed Facs Rev Ser A 5 1/2% 10/1/2028 BBB 475M 466,688
Texas St Higher Ed Coord AMT+++ 7.70% 10/1/2025 A 590M 627,613
University MO Health Facs Rev AMBAC+ 5.60% 11/1/2026 AAA 1,890M 1,979,775
University MO Univ Revs 5 1/2% 11/1/2021 AA 4,000M 4,150,000
University Northn CO Rev MBIA+ 5.60% 6/1/2024 AAA 1,000M 1,046,250
University NM Tech Dev Corp Lease Rev/Univ Ctr Res Pk
Prjt MBIA+ 6.55% 8/15/2025 AAA 1,410M 1,584,487
Vermont Ed & Health Bldgs Fin Agy 6% 11/1/2013 AA 1,450M 1,575,063
Vermont Ed & Health Bldgs Fin Agy Rev 7.05% 10/1/2016 A 2,000M 2,217,500
Virginia St Pub Sch Auth Ser A 6.20% 8/1/2014 AA 1,500M 1,648,125
Total 75,604,020
- -------------------------------------------------------------------------------------------------------------------============
Finance 2.63% Cumberland Co NC Ctf Civic Ctr Ser A AMBAC+ 6.40%
12/1/2019 AAA 2,800M 3,118,500
Cumberland Co NC Ctf Ser A AMBAC+ 6.40% 12/1/2024 AAA 500M 556,875
Delaware Valley PA Reg Fin Auth Loc Govt Rev Ser C
AMBAC+ 7 3/4% 7/1/2027 AAA 1,000M 1,403,750
Dinwiddie Co VA Ind Dev 6% 2/1/2018 BBB* 650M 681,687
Indiana Bd Bk Rev Guarantee/St Revolving Fd PG
Ser A 6 3/4% 2/1/2017 AAA 500M 563,125
Indianapolis IN Loc Pub Imp Ser D 6 1/2% 2/1/2022 AA 3,250M 3,254,778
Iowa St Fin Auth Rev 6 1/4% 5/1/2024 A 3,400M 3,714,500
St Louis MO Fin Corp Leasehold Rev Ser A AMBAC+ 6%
2/15/2021 AAA 3,500M 3,775,625
Total 17,068,840
- -------------------------------------------------------------------------------------------------------------------============
Health and Hospital Armstrong Co PA Hosp Auth Health Ctr Rev MBIA+ 6 1/2%
13.30% 12/1/2021 AAA 2,795M 2,980,169
Augusta Co VA Ind Dev Auth Hosp Rev AMBAC+ 6 5/8% 9/1/2012 AAA 925M 1,012,875
Connecticut St Health & Ed/Waterbury Hosp Ser B FSA+ 7%
7/1/2020 AAA 1,000M 1,076,250
Connecticut St Health Ed/William W Backus Hosp Ser D
AMBAC+ 5 3/4% 7/1/2027 AAA 500M 526,250
Connecticut St Health & Ed Facs Auth Rev AMBAC+ 6%
11/1/2022 AAA 2,800M 3,010,000
Cumberland Co PA Mun Auth 6.80% 11/15/2014 Baa 1,200M 1,324,500
Fredrick Co MD Retirement Comm Rev 6% 1/1/2024 BBB* 750M 747,188
Glynn-Brunswick Mem Hosp Auth GA Rev Antic Ctfs
Southeast GA MBIA+ 6% 8/1/2016 AAA 500M 543,125
Greenville SC Hosp Sys Hosp Facs Rev Ser B 5 1/4% 5/1/2023 Aa 540M 541,350
Harris Co TX Health Facs Dev Corp Hosp Rev FSA+ 5 1/8%
6/1/2022 AAA 2,550M 2,492,625
Harrison Co WV Bldg Comn Rev AMBAC+ 5 1/4% 4/1/2028 Aaa 2,500M 2,465,625
Hawaii St Dept Bdg & Fin/St 5.35% 7/1/2018 BBB 700M 690,375
Illinois Health Facs Auth Rev Alexian Brothers Med
Ctr Prjt FSA+ 7 1/8% 1/1/2021 Aaa 4,860M 5,291,325
Indiana Co PA Hosp Auth Rev 7 1/8% 7/1/2023 A 1,500M 1,655,625
</TABLE>
3
<PAGE>
Statement of Net Assets
NATIONAL SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Indiana Health Fac Fing Auth Hosp Rev 5 1/4% 2/15/2022 BBB $ 1,700M $ 1,653,250
Iowa Fin Auth Rev Ser V 5 1/4% 8/15/2021 AA 4,510M 4,526,913
Kentucky Economic Dev Fin Auth Rev MBIA+ 6% 7/1/2027 AAA 1,000M 1,097,500
Kershaw Co SC Hosp Facs Rec 8% 9/15/2017 Baa 1,435M 1,528,275
Louisiana Pub Fin Auth Hosp RIBS FSA+ 6.767% 7/22/2024++ AAA 6,700M 6,792,125
Lucas Co OH Hosp Rev MBIA+ 5 1/4% 8/15/2022 AAA 500M 495,625
Mckeesport PA Hosp Auth Rev 6 1/2% 7/1/2008 Baa 1,875M 1,994,531
Minneapolis & St Paul MN Hsg & Redev Auth Health Care Sys
6 3/4% 12/1/2013 A 1,000M 1,101,250
Minneapolis & St Paul MN Hsg & Redev Auth Health Care Sys
MBIA+ 6 3/4% 8/15/2014 AAA 1,300M 1,392,625
Minneapolis & St Paul MN Hsg & Redev Auth Health Care Sys
6.90% 12/1/2022 A 700M 776,125
Missouri St Health & Ed Facs Rev/SSM Health Care Ser AA
MBIA+ 6 1/4% 6/1/2016 AAA 3,125M 3,371,094
Montgomery AL Med Clinic Bd Unrefunded Balance 7%
3/1/2015 A 1,305M 1,381,669
New Jersey Health Care Facs Fin Auth Rev/St Peters Med
Ctr MBIA+ 8.60% 7/1/2017 AAA 400M 409,040
New Jersey Health Care Facs Ser A MBIA+ 6 5/8% 7/1/2010 AAA 250M 262,812
New York St Med Care Facs Fin Agy Rev Ser A 8 7/8%
8/15/2007 A 1,105M 1,131,244
New York St Mtge Agy Rev Zero Coupon 10/1/2014 Aa 4,950M 1,043,361
Norfolk VA Ind Dev Auth Rev Hosp/Childrens Hosp Kings Grp
AMBAC+ 6 1/2% 6/1/2021 AAA 1,150M 1,236,250
Philadelphia PA Hosp & Higher Ed Facs Auth Hosp 6.20%
5/1/2011 BBB 3,000M 3,157,500
Plantation FL Health 5 1/8% 12/1/2022 A 300M 292,125
Plymouth MN Health Facs Rev FSA+ 6 1/8% 6/1/2024 AAA 4,000M 4,310,000
Rhode Island St Health & Ed Bldg Corp Rev 6 1/4% 8/15/2022 BBB* 1,000M 1,045,000
Rochester MN Health Care Ser H RIBS 8.23% 11/15/2015++ AA 9,350M 10,764,187
Skagit Co WA Pub Hosp Dist No 304 Hosp Rev FSA+ 5 3/4%
12/1/2011 Aaa 2,290M 2,456,025
Washington St Health Care Facs Auth 5% 8/15/2021 AA 1,000M 960,000
Winchester VA Indl Dev Auth Residential Care Fac 5 3/4%
1/1/2027 BBB* 1,400M 1,387,750
Wisconsin Health & Ed Facs Auth Rev MBIA+ 6 1/2% 8/15/2011 AAA 1,140M 1,231,200
Wisconsin St Health & Ed Facs Auth Rev 7 7/8% 11/1/2022 BBB* 3,275M 3,782,625
Wisconsin St Health & Ed Facs Auth Rev 5 5/8% 12/15/2022 BBB* 1,750M 1,756,562
Wisconsin St Health & Ed Facs Auth Rev MBIA+ 5 3/4%
3/1/2027 AAA 500M 524,375
Total 86,218,320
- -------------------------------------------------------------------------------------------------------------------============
Housing 13.94% Alaska St Hsg Fin Corp AMT+++ 5 3/4% 6/1/2024 AAA 6,090M 6,257,475
Arlington Co VA Ind Dev Auth Multi-Fam Rev Hsg Mtge 6.30%
7/1/2016 A 500M 537,500
Arlington Co VA Ind Dev Auth Multi-Fam Rev Hsg Mtge 8%
7/1/2015 BBB* 890M 916,700
Bellingham WA Hsg Auth MBIA+ 5.20% 11/1/2027 Aaa 3,215M 3,170,794
Bexar Co TX Hsg Fin Corp GNMA+ AMT+++ 8.20% 4/1/2022 AAA 770M 806,290
California St 5.45% 12/1/2028 A 1,000M 1,002,500
Clayton Co GA Hsg Auth Multi-Fam Hsg Rev FSA+ 5.70%
7/1/2023 AAA 1,000M 1,028,750
Colorado Hsg & Fin Auth Ser A AMT+++ 6.65% 10/1/2028 AA 2,385M 2,572,819
Colorado Hsg & Fin Auth Ser A AMT+++ 6.80% 10/1/2037 AA 2,360M 2,542,900
Colorado Hsg & Fin Auth Ser C FHA+ 8 3/4% 9/1/2017 AA 105M 106,050
Connecticut St Hsg Fin Auth 6.20% 5/15/2017 AA 410M 434,088
Connecticut St Hsg Fin Auth AMBAC+ 5 5/8% 6/15/2027 AAA 1,000M 1,033,750
Connecticut St Hsg Fin Auth Ser A Sub Ser A-2 FHA+ AMT+++
7.20% 11/15/2008 AA 480M 514,200
De Kalb Co Hsg Auth FSA+ AMT+++ 7.15% 1/1/2025 AAA 1,430M 1,585,513
East Baton Rouge LA Mtge Fin Auth Sing Fam Rev Zero
Coupon 10/1/2030 Aaa 10,000M 1,612,500
Fulton Co GA Hsg Auth Multi-Fam Hsg Rev AMT+++ 6 3/8%
1/1/2027 A 2,900M 3,074,000
</TABLE>
4
<PAGE>
Statement of Net Assets
NATIONAL SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Georgia St Hsg & Fin Auth Rev AMT+++ 5.85% 12/1/2028 AA $ 500M $ 516,250
Georgia St Hsg & Fin Auth Rev A Sing Fam Mtge A Sub Ser
A-2 AMT+++ 6.45% 12/1/2027 AA 210M 227,063
Georgia St Hsg & Fin Auth Rev Ser A Sub Ser A-2 AMT+++
6.40% 12/1/2015 AA 2,000M 2,152,500
Georgia St Hsg & Fin Auth Rev Sing Fam Mtge-B-Sub Ser B-2
FHA+ AMT+++ 6.55% 12/1/2027 AA 2,000M 2,160,000
Idaho Hsg Agy Ser F AMT+++ 7.45% 7/1/2015 Aaa 1,185M 1,293,131
Illinois Hsg Dev Auth FHA+ AMT+++ 7.10% 12/1/2034 AAA 1,500M 1,642,500
Illinois Hsg Dev Auth Fam Hsg/Lawndale FHA+ AMT+++ 6.80%
12/1/2016 AAA 1,000M 1,093,750
Indiana St Hsg Fin Auth Ser D GNMA+ 7.80% 1/1/2022 Aaa 940M 979,950
Jefferson Co KY Multi-Fam Rev 8 1/4% 5/1/2010 NR** 400M 240,000
Kentucky Hsg Corp Hsg Rev Ser B AMT+++ 6.10% 7/1/2016 AAA 1,205M 1,278,806
Kentucky Hsg Corp Hsg Rev Ser D-1 FHA+ AMT+++ 6.80%
1/1/2024 AAA 460M 491,050
Maine St Hsg Auth Mtge Pur Ser A-2 AMT+++ 6 3/4%
11/15/2035 AA 130M 140,400
Marion Co OR Hsg Auth Rev Sr Hsg/Elliott Residence
GNMA+ AMT+++ 7 1/2% 10/20/2037 AAA 2,170M 2,424,975
Maryland Sing Fam Mtge FHA/VA+ AMT+++ 7.85% 4/1/2029 Aa 785M 825,231
Maryland St Comm Dev Admin Dept Hsg & Comm Dev
AMT+++ 5 1/2% 7/1/2021 Aa 350M 352,625
Maryland St Comm Dev Admin Sing Fam 7th Ser AMT+++ 7.30%
4/1/2025 Aa 495M 537,075
Massachusetts Hsg Fin Auth AMT+++ 8.10% 6/1/2020 Aa 1,300M 1,330,914
Massachusetts St Hsg Fin Agy MBIA+ AMT+++ 5 1/2% 12/1/2030 AAA 2,000M 2,002,500
Massachusetts St Hsg Fin Agy Hsg Rev Rental-Mtge Ser A
AMBAC/FHA+ AMT+++ 7.35% 1/1/2035 AAA 1,455M 1,620,506
Massachusetts St Hsg Fin Agy Hsg Ser 29 AMT+++ 6 3/4%
6/1/2026 Aa 1,525M 1,654,625
Michigan St Hsg Dev Auth AMT+++ 6.20% 6/1/2027 AA 2,500M 2,603,125
Minneapolis St Paul MN Hsg Fin Bd Rev FNMA+ AMT+++ 6 1/4%
11/1/2030 AAA 1,000M 1,088,750
Missouri St Hsg Dev Comm GNMA+ AMT+++ 7 3/8% 8/1/2023 AAA 615M 654,206
New Hampshire St Hsg Fin Auth Sing Fam Ser D AMT+++
5.90% 7/1/2028 Aa 5,000M 5,181,250
New Jersey St Hsg & Mtge Fin Agy Ser B MBIA+ AMT+++ 7.90%
10/1/2022 AAA 5,350M 5,626,702
North Carolina Hsg Fin Agy Amt-Sing Fam Rev-Ser BB
AMT+++ 6 1/4% 3/1/2012 Aa 1,275M 1,364,250
North Dakota St Hsg Fin Agy Rev Ser B AMT+++ 5.85%
7/1/2028 Aa 2,500M 2,584,375
Ohio Hsg Fin Auth Ser C GNMA+ AMT+++ 7.85% 9/1/2021 AAA 480M 511,800
Radcliff KY Hsg Auth 8 1/4% 5/1/2010 NR** 330M 198,000
Seattle WA Hsg Auth Low Income Hsg Assistance Rev
GNMA+ 7.40% 11/20/2036 AAA 3,892M 4,412,555
Shelby Co TN Health Ed & Hsg Facs Brd Rev 6% 7/1/2028 A 400M 414,000
South Dakota Hsg Dev Auth Ser F AMT+++ 5.80% 5/1/2028 AAA 3,870M 3,981,263
Tennessee Hsg Dev Agy Mtge Ser A AMT+++ 7 1/8% 7/1/2026 A 2,930M 3,197,363
Utah St Hsg Fin Agy Sing Fam Ser A-2 FHA+ AMT+++ 7 3/4%
1/1/2023 AAA 215M 227,363
Vermont Hsg Fin Auth Ser B FHA/VA+ AMT+++ 8.10% 6/1/2022 A 1,645M 1,697,706
Virginia St Hsg Dev Auth 7.10% 1/1/2022 Aa 5,100M 5,431,500
Wyoming Co Dev Auth Hsg Rev 6.35% 6/1/2029 AA 995M 1,062,163
Total 90,396,051
- -------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Brunswick & Glynn Co GA Dev Auth Rev AMT+++ 5.55%
Bonds 3.34% 3/1/2026 Baa 1,000M 1,001,250
Butler AL Ind Bd Solid Waste Disp Rev/James River Corp
AMT+++ 8% 9/1/2028 BBB 1,500M 1,732,500
Connecticut St Dev Auth/Pfizer Inc Prjt AMT+++ 7%
7/1/2025 AAA 2,500M 2,881,250
Gulf Coast Waste Disp Auth TX Rev AMT+++ 5.60% 12/1/2031 BBB 1,000M 1,000,000
Henrico Co VA Ind Dev Auth Rev 7 1/8% 8/1/2021 AA 3,095M 3,597,938
Hillsborough Co FL Ind Dev Auth Rev Tampa Elec Prjt 8%
5/1/2022 Aa 2,955M 3,446,269
Michigan St Strategic Fd Ltd AMT+++ 5 3/4% 10/1/2022 A 2,750M 2,911,563
</TABLE>
5
<PAGE>
Statement of Net Assets
NATIONAL SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Missouri St Environmental Imp & Energy Rev/Union Elec
Ser A 7.40% 5/1/2020 AA $ 1,000M $ 1,080,000
New York St Energy Res & Dev Auth Rev MBIA+ AMT+++
5.95% 9/1/2033 AAA 3,000M 3,146,250
Texas City TX Ind Dev Corp Marine Term Rev/ARCO 7 3/8%
10/1/2020 A 650M 838,500
Total 21,635,520
- -------------------------------------------------------------------------------------------------------------------============
Miscellaneous 4.87% Buncombe Co NC Ctfs Partn 6 5/8% 12/1/2010 A 3,750M 4,110,937
Cobb-Marietta GA Coliseum & Exhibit Hall Auth Rev
MBIA+ 5 5/8% 10/1/2026 AAA 1,250M 1,376,562
George L Smith II GA World Congress Ctr Auth Rev
MBIA+ AMT+++ 5 1/2% 7/1/2020 AAA 3,000M 2,902,500
Harnett Co NC Ctfs Partn AMBAC+ 6.20% 12/1/2009 AAA 2,900M 3,208,125
Idaho St Bldg Auth Bldg Rev MBIA+ 4 3/4% 9/1/2025 AAA 1,245M 1,171,856
Puerto Rico Commonwealth Infrastructure Fing Auth Spl
AMBAC+ 5% 7/1/2028 AAA 1,500M 1,454,400
St Louis Co MO Ind Dev Rev Arena Prjt AMT+++ 7 7/8%
12/1/2024 BBB* 3,500M 3,871,875
Teller Co C0 Ctfs Partn 5 7/8% 12/1/2024 A 1,000M 1,038,750
Webb Co TX Ctfs Partn Ser A 5 1/4% 10/1/2022 AA 1,150M 1,132,750
Wisconsin Ctr Dist WI Tax Rev RIBS 7.476% 12/15/2027++ A 10,500M 11,313,750
Total 31,581,505
- -------------------------------------------------------------------------------------------------------------------============
Pollution Control Burke Co GA Dev Auth Poll Ctrl Rev MBIA+ 6.60% 7/1/2024 AAA 450M 470,812
Revenue 1.26%
Coconino Co AZ Poll Ctrl Rev Ser B AMT+++ 5.80% 11/1/2032 BBB 1,000M 1,018,750
Connecticut St Res Recover Auth Res Recovery Rev
MBIA+ AMT+++ 5 1/8% 11/15/2015 AAA 3,000M 2,913,750
Missouri St Environmental Imp & Energy Wtr Poll Ctrl Rev
7.20% 7/1/2016 Aa 3,250M 3,761,875
Total 8,165,187
- -------------------------------------------------------------------------------------------------------------------============
Power 11.64% Clark Co NV Ind Dev Rev Ser AMT+++ 5.60% 10/1/2030 A 26,110M 26,142,638
Gastonia NC Comb Utils Sys Rev MBIA+ 4 3/4% 5/1/2015 AAA 1,000M 967,500
Gastonia NC Comb Utils Sys Rev MBIA+ 4 3/4% 5/1/2019 AAA 2,825M 2,666,094
Hamilton City OH Elec Ser B FGIC+ 6.30% 10/15/2025 AAA 7,555M 8,178,288
Hawaii St Dept Bdg & Fin RIBS AMT+++ 7.04% 12/15/2023++ AAA 2,000M 2,032,500
Hawaii St Dept Bdg & Fin Spl Purp Rev MBIA+ 4.95%
4/1/2012 AAA 1,000M 998,750
Jacksonville FL Elec Auth Rev RIBS 7.305% 10/1/2037++ AA 5,500M 5,795,625
Lewis Co WA Pub Util Dist No 1 5 1/2% 10/1/2022 AA 375M 379,688
Milwaukee WI Loc Dist AMT+++ 6.85% 10/1/2021 AA 500M 543,125
Nebraska Pub Pwr Dist Rev 6.10% 1/1/2010 A 5,000M 5,418,750
Nebraska Pub Pwr Dist Rev 6 1/8% 1/1/2015 A 3,700M 3,991,375
North Carolina Eastern Muni Pwr Ser A FSA+ 5% 1/1/2021 AAA 5,000M 4,818,750
Puerto Rico Elec Pwr Rev Auth 5% 7/1/2028 BBB 6,500M 6,215,625
Western Generation Agy OR Cogeneration Prjt Rev Ser B
AMT+++ 7.40% 1/1/2016 BBB* 1,500M 1,618,125
Wisconsin St Pub Pwr Supply Sys Rev RIBS AMBAC+ 6.85%
7/1/2014++ AAA 5,500M 5,713,125
Total 75,479,958
- -------------------------------------------------------------------------------------------------------------------============
Solid Waste 0.16% Broward Co FL Wtr & Sewer Solid Waste 7.95% 12/1/2008 A 2M 2,165
Cobb Co GA Solid Waste Mgmt Auth AMT+++ 6.40% 1/1/2015 Aaa 900M 1,000,125
Total 1,002,290
- -------------------------------------------------------------------------------------------------------------------============
Transportation 6.23% Albuquerque NM Arpt Rev Ref 7.60% 7/1/2008 A 1,000M 1,018,500
Albuquerque NM Arpt Rev Ser A AMBAC+ AMT+++ 6.60%
7/1/2016 AAA 2,400M 2,616,000
Colombus OH Mun Arpt Auth Rev AMBAC+ 5% 1/1/2028 AAA 500M 481,875
Connector 2000 Assn Inc SC Ser B Zero Coupon 1/1/2037 BBB 20,000M 2,125,000
Hillsborough Co FL Aviation FGIC+ 6.90% 10/1/2011 AAA 330M 350,212
Massachusetts Bay Transn Auth Ser A MBIA+ 4 1/2% 3/1/2026 AAA 2,000M 1,792,500
</TABLE>
6
<PAGE>
Statement of Net Assets
NATIONAL SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Michigan St Trunk Line MBIA+ 5 1/2% 10/1/2021 AAA $ 1,000M $ 1,015,000
Ohio St Tnpk Comm Rev 5 3/4% 2/15/2024 AA 1,000M 1,050,000
Pensacola FL Arpt Rev MBIA+ AMT+++ 6 1/8% 10/1/2018 AAA 1,000M 1,077,500
Port Auth NY & NJ 7 1/8% 6/1/2025 AA 3,000M 3,202,500
Port Auth NY & NJ 70th Ser AMT+++ 7 1/4% 8/1/2025 AA 500M 535,625
Port Kalama WA Rev Ser B 5 5/8% 12/1/2015 Baa 1,025M 1,050,625
Puerto Rico Commonwealth Hwy & Trans Auth Hwy Rev Ser Y
5 1/2% 7/1/2026 A 3,550M 3,629,875
Santa Rosa Bay Brdg Auth FL 6 1/4% 7/1/2028 BBB 2,140M 2,319,225
Santa Rosa Bay Brdg Auth FL 6 1/4% 7/1/2028 A 11,500M 12,578,125
Southeastern PA Trans Auth FGIC+ 5 3/4% 3/1/2020 AAA 5,250M 5,558,438
Total 40,401,000
- -------------------------------------------------------------------------------------------------------------------============
Water and Sewer 3.32% Cherokee Co GA Wtr & Sewer Auth Rev MBIA+ 5.20% 8/1/2025 AAA 1,000M 1,030,000
Chicago IL Waste Wtr Trans MBIA+ Zero Coupon 1/1/2028 AAA 10,000M 2,087,500
Dade Co FL Wtr & Sewer Sys Rev FGIC+ 5 1/2% 10/1/2025 AAA 4,755M 4,915,480
Foothill/Eastern Corridor Agy CA Toll Rd Ser A Zero
Coupon 1/1/2030 Baa 4,325M 756,875
Garden City KS Sewer Disp Rev AMT+++ 5 3/4% 9/1/2017 BBB 1,000M 1,025,000
Hamilton OH Wtr Wks Rev Ser A MBIA+ 6.30% 10/15/2021 AAA 1,000M 1,068,750
Prince William Co VA Svc Auth Wtr & Sewer Sys Rev FGIC+
4 3/4% 7/1/2029 AAA 5,625M 5,252,343
Texas Wtr Resource Fin Auth 7 5/8% 8/15/2008 A 1,860M 1,918,012
Virginia St Res Auth Wtr & Sewer Sys Rev 5 1/4% 11/1/2017 AA 1,330M 1,366,575
West Mifflin PA San Sewer Muni Auth Sewer Rev FGIC+
5 3/4% 8/1/2020 AAA 2,000M 2,095,000
Total 21,515,535
- -------------------------------------------------------------------------------------------------------------------============
Total Municipal Bonds 101.77% (Cost $633,343,879) 659,792,250
<CAPTION>
===============================================================================================================================
Other Assets, Less Liabilities (1.77)%
===============================================================================================================================
<S> <C> <C> <C> <C>
Short-Term Securities California St 4 1/2% 6/30/1998 AAA 2,400M 2,404,272
Puerto Rico Commonwealth 4 1/2% 7/30/1998 AAA 100M 100,276
Texas TX Ser A 4 3/4% 8/31/1998 AAA 6,900M 6,929,187
Total (Cost $9,449,633) 9,433,735
- -------------------------------------------------------------------------------------------------------------------============
Cash 141,864
- -------------------------------------------------------------------------------------------------------------------============
Receivable for: Interest 9,808,481
Capital stock sold 318,737
Securities sold 53,538,005
Other 4,673
Total Other Assets 73,245,495
------------------------------------------------------------------------------------------============
Payable for: Capital stock reacquired 847,594
Securities purchased 81,036,688
Distributions 1,904,268
Other 936,387
------------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities (11,479,442)
===============================================================================================================================
Net Assets 100.00% $648,312,808
===============================================================================================================================
Class A Shares-Net asset value ($601,334,859 / 51,536,114 shares outstanding) $11.67
Class B Shares-Net asset value ($5,132,901 / 439,727 shares outstanding) $11.67
Class C Shares-Net asset value ($41,845,048 / 3,582,910 shares outstanding) $11.68
* This investment has not been rated by an independent ratings service but
is, in Lord Abbett's opinion, of comparable quality.
** N/R bonds have not been rated by an independent rating service.
+ Insured or guaranteed by the indicated municipal bond insurance
corporation or Federal agency.
++ The interest rate is subject to change periodically and inversely to the
prevailing market rate. The interest rate shown is the rate in effect at
March 31, 1998. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative Minimum
Tax.
See Notes to Financial Statements.
</TABLE>
7
<PAGE>
Statement of Net Assets
NEW YORK SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 25.81% Municipal Assistance Corp NY Ser 66 7 3/4% 7/1/2008 AAA $ 265M $ 282,556
New York City Muni Wtr Fin Auth Ser A FGIC+ 6% 6/15/2019 AAA 2,000M 2,052,500
New York City Muni Wtr Fin Auth Ser A MBIA+ 6% 6/15/2025 AAA 5,000M 5,556,250
New York NY City Muni Wtr & Sewer Sys Rev Ser A 6%
6/15/2025 AAA 2,000M 2,217,500
New York NY Prerefunded Ser D 9 1/2% 8/1/2002 AAA 1,380M 1,624,950
New York NY Ser A 7 3/4% 8/15/2014 AAA 3,125M 3,519,531
New York NY Ser D 8% 8/1/2019 AAA 1,970M 2,233,488
New York St Dorm Auth Rev 7.70% 5/15/2012 AAA 6,250M 6,835,938
New York St Dorm Auth Rev/City Univ Ser A 7 5/8% 7/1/2020 AAA 1,400M 1,533,000
New York St Dorm Auth Rev/City Univ 2nd Ser MBIA+
6 7/8% 7/1/2014 AAA 5,650M 6,539,875
New York St Environmental 6 7/8% 6/15/2014 AAA 2,795M 3,214,250
New York St Loc Govt Assistance Corp Ser A 6 1/2% 4/1/2020 AAA 9,360M 10,155,600
New York St Med Care Facs Fin Agy Rev 7 1/2% 2/15/2021 AAA 11,215M 12,434,631
New York St Med Care Facs Fin Agy Rev MBIA+ 7 1/2%
11/1/2010 AAA 1,250M 1,376,563
New York St Pwr 6 1/2% 1/1/2019 AAA 1,460M 1,600,524
Puerto Rico Commonwealth Aqu & Sewer Auth Rev 10 1/4%
7/1/2009 AAA 1,000M 1,383,750
Puerto Rico Commonwealth G.O. 7.30% 7/1/2020 AAA 300M 327,000
Puerto Rico Elec Pwr Auth Rev Ser P 7% 7/1/2021 AAA 300M 332,250
Puerto Rico Elec Pwr Auth Rev Ser T RIBS FSA+
8.772% 7/1/2018++ AAA 3,500M 4,379,375
United Nations Dev Corp Ser A 6% 7/1/2026 AAA 4,300M 4,730,000
United Nations Dev Corp Ser B 6 1/4% 7/1/2026 AAA 3,000M 3,333,750
Total 75,663,281
- -------------------------------------------------------------------------------------------------------------------============
General Obligation Puerto Rico Commonwealth RIBS FSA+ 8.132% 7/1/2020++ AAA 12,000M 13,380,000
State 6.41%
Puerto Rico Commonwealth 4 1/2% 7/1/2023 A 6,000M 5,407,500
Total 18,787,500
- -------------------------------------------------------------------------------------------------------------------============
General Obligation Bethlehem New York MBIA+ 7.20% 3/1/2022 AAA 1,080M 1,255,500
- -------------------------------------------------------------------------------------------------------------------============
Education 8.99% Hempstead Town NY Ind Dev Agy/Hofstra Univ MBIA+ 5.80%
7/1/2015 AAA 750M 798,750
New York City Ind Dev Agy/New Sch For Social Res MBIA+
5 3/4% 9/1/2015 AAA 1,335M 1,403,419
New York St Dorm Auth Rev/St Univ Ed Facs Ser A 5 1/2%
5/15/2026 BBB 75M 76,688
New York St Dorm Auth Rev/City Univ Ser C FGIC+ 7%
7/1/2014 AAA 4,600M 4,939,250
New York St Dorm Auth Rev/City Univ Ser U-MBIA-Ibc 6.45%
7/1/2005 AAA 300M 338,625
New York St Dorm Auth Rev/Colgate Univ MBIA+ 6% 7/1/2016 AAA 1,000M 1,127,500
New York St Dorm Auth Rev/Cornell Univ Ser A 7 3/8%
7/1/2020 AA 5,075M 5,525,406
New York St Dorm Auth Rev/Spcl Act Sch Dists MBIA+ 6%
7/1/2016 AAA 1,400M 1,505,000
New York St Dorm Auth Rev/St Univ Ed Fac Ser A 5 1/4%
5/15/2021 A 1,025M 1,040,375
New York St Dorm Auth Rev/St Univ Ed Fac Ser B 7 1/2%
5/15/2011 A 5,000M 6,262,500
New York St Dorm Auth Rev/Univ Rochester Ser A 6.40%
7/1/2013 A 2,030M 2,245,688
New York St Dorm Auth Rev/Upstate Cmnty Colleges 6.20%
7/1/2015 Baa 1,000M 1,087,500
Total 26,350,701
- -------------------------------------------------------------------------------------------------------------------============
Finance 3.46% New York NY City Transitional Fin Auth Ser B 4 1/2%
11/15/2027 AA 9,315M 8,220,488
New York St Loc Govt Assistance Corp Ser B MBIA+ 4 7/8%
4/1/2020 AAA 2,000M 1,917,500
Total 10,137,988
- -------------------------------------------------------------------------------------------------------------------============
Health and Hospital New York City Health & Hosp Corp LINK AMBAC+ 5.4034%
11.45% 2/15/2023++ AAA 600M 614,250
New York City Health & Hosp Corp RIBS AMBAC+ 7.36%
2/15/2023++ AAA 6,000M 6,285,000
New York St Dorm Auth Rev Manhattan Eye Ear and Throat
5 3/8% 7/1/2012 BBB 1,500M 1,516,875
New York St Dorm Auth Rev Mental Health Svcs Facs B 5 3/4%
2/15/2010 A 1,500M 1,584,375
New York St Dorm Auth Rev Mental Health Svcs Facs B 5 3/4
2/15/2011 A 1,385M 1,454,250
New York St Dorm Auth Rev Mental Health Svcs Facs Imp
B 6% 8/15/2012 A 1,460M 1,596,875
New York St Dorm Auth Rev Mental Health Svcs Facs Imp
D 6% 8/15/2021 A 1,000M 1,063,750
</TABLE>
8
<PAGE>
Statement of Net Assets
NEW YORK SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
New York St Dorm Auth Rev Rosalind and Joseph Home 5.60%
7/1/2027 AAA $ 1,000M $ 1,037,500
New York St Dorm Auth Rev Ser B Mental Health Svcs 5 3/4%
2/15/2012 A 1,155M 1,215,638
New York St Dorm Auth Rev/Niagara Lutheran MBIA+ 5.55%
8/1/2027 AAA 2,815M 2,881,856
New York St Dorm Auth Rev/Sarah Neuman AMBAC+ 5.45%
8/1/2027 AAA 550M 554,813
New York St Med Care Facs Fin Agy Rev Montefiore Md
AMBAC+ 5 3/4% 2/15/2025 AAA 1,000M 1,037,500
New York St Med Care Facs Fin Agy Rev Unrefunded Balance
7.80% 2/15/2019 A 355M 372,743
New York St Med Care Facs Fin/Mental Health Ser A 7 1/2%
2/15/2021 A 3,955M 4,365,331
New York St Med Care Facs Fin/North Shore Univ Hosp
MBIA+ 7.20% 11/1/2020 AAA 7,340M 7,982,250
Total 33,563,006
- -------------------------------------------------------------------------------------------------------------------============
Housing 2.38% New York St Mtge Agy Rev Ser 70 5.40% 4/1/2022 Aa 520M 520,650
New York St Mtge Agy Rev Ser 67 AMT+++ 5.80% 10/1/2028 Aaa 500M 511,875
New York St Mtge Agy Rev Ser 41 MBIA+ 6.45% 10/1/2014 AAA 2,990M 3,217,988
New York St Mtge Agy Rev Ser 44 FHA+ AMT+++ 7 1/2%
4/1/2026 Aa 2,495M 2,738,263
Total 6,988,776
- -------------------------------------------------------------------------------------------------------------------============
Industrial Revenue New York NY City Indl Dev Agy Bklyn Navy Yard
Bonds 1.68% AMT+++ 6.20% 10/1/2022 BBB 1,000M 1,103,750
New York NY City Indl Dev Agy Bklyn Navy Yard
AMT+++ 5.65% 10/1/2028 BBB 2,000M 2,025,000
New York St Energy Res & Dev Auth Rev MBIA+ AMT+++ 5.95%
9/1/2033 AAA 1,000M 1,048,750
Puerto Rico Tel Auth Rev RIBS MBIA+ 7.168% 1/16/2015++ AAA 700M 745,500
Total 4,923,000
- -------------------------------------------------------------------------------------------------------------------============
Miscellaneous 5.51% New York St Urban Dev Corp Rev 5% 1/1/2028 BBB 8,450M 8,027,500
New York St Urban Dev Corp Rev 5 1/4% 4/1/2012 Baa 1,765M 1,769,413
New York St Urban Dev Corp Rev 5% 1/1/2018 BBB 2,000M 1,930,000
New York St Urban Dev Corp Rev 5.70% 4/1/2020 Baa 4,150M 4,409,375
Total 16,136,288
- -------------------------------------------------------------------------------------------------------------------============
Pollution Control Essex Co NY Indl Dev Agy Poll Ctrl Rev-Ser B Intl Paper
Revenue 3.48% 5.55% 1/1/2014 A 305M 319,105
New York St Environmental Fac 1st Wtr Rev 6 7/8% 6/15/2014 Aa 1,985M 2,255,455
New York St Environmental Facs Poll Ctrl Rev Ser A 7 1/2%
6/15/2012 Aa 7,000M 7,638,750
Total 10,213,310
- -------------------------------------------------------------------------------------------------------------------============
Power 15.48% New York St Energy Res & Dev Poll Ctrl Rev/Niagara Mohawk
FGIC+ 7.20% 7/1/2029 AAA 11,750M 13,571,250
New York St Energy Res & Dev/Bklyn Union Gas Ser A
MBIA+ AMT+++ 6 3/4% 2/1/2024 AAA 13,000M 14,235,000
New York St Energy Res & Dev/Bklyn Union Gas Ser B
RIBS AMT+++ 9.944% 7/1/2026++ A 4,000M 5,125,000
New York St Energy Res & Dev/Central Hudson Gas & Elec
MBIA+ AMT+++ 8 3/8% 12/1/2028 AAA 2,215M 2,326,259
New York St Energy Res & Dev/Con Edison Ser A
MBIA+ AMT+++ 7 1/8% 12/1/2029 AAA 2,500M 2,862,500
New York St Energy Res & Dev/Con Edison Ser B AMT+++
7 3/8% 7/1/2024 A 1,465M 1,491,501
Port Auth NY & NJ Spcl Oblig Rev 5th Install-SPCL
PJ-KIAC-4 6 3/4% 10/1/2019 Baa* 2,970M 3,311,550
Puerto Rico Elec Pwr Auth Ser U 6% 7/1/2014 A 2,250M 2,441,250
Total 45,364,310
- -------------------------------------------------------------------------------------------------------------------============
Solid Waste 0.80% Dutchess Co Resource Recovery Ser A FGIC+ 7 1/2% 1/1/2009 AAA 2,200M 2,359,500
------------------------------------------------------------------------------------------============
</TABLE>
9
<PAGE>
Statement of Net Assets
NEW YORK SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Transportation 10.74% Metropolitan Transn Auth NY Commuter Facs Rev Ser A
FGIC+ 6% 7/1/2016 AAA $ 2,000M $ 2,190,000
Metropolitan Transn Auth NY Commuter Facs Rev Ser A
FGIC+ 6% 7/1/2021 AAA 4,000M 4,365,000
Metropolitan Transn Auth NY Commuter Facs Rev Ser A
FSA+ 6.10% 7/1/2026 AAA 1,500M 1,642,500
Metropolitan Transn Auth NY Commuter Facs Rev Ser A
FGIC+ 6.10% 7/1/2026 AAA 2,000M 2,197,500
Metropolitan Transn Auth NY Svc Contract Trans Facs Ser O
5 3/4% 7/1/2008 Baa 1,000M 1,075,000
Metropolitan Transn Auth NY Trans Facs Rev 5 1/2% 7/1/2017 BBB 1,000M 1,017,500
Port Auth NY & NJ AMT+++ 6% 7/1/2015 AA 350M 374,063
Port Auth NY & NJ 6 7/8% 1/1/2025 AA 1,000M 1,052,500
Port Auth NY & NJ Cons Ninety-Second Ser 4 3/4% 1/15/2029 AA 520M 483,600
Port Auth NY & NJ Spcl Oblig Rev/JFK Intl Air Terminal-6
MBIA+ AMT+++ 5 3/4% 12/1/2025 AAA 15,345M 16,016,343
Triborough Brdg & Tunl Auth Ser X 6 1/2% 1/1/2019 Aa 1,000M 1,068,750
Total 31,482,756
- -------------------------------------------------------------------------------------------------------------------============
Water and Sewer 2.43% Buffalo NY Muni Wtr Fin Auth Wtr & Sewer Sys Rev FGIC+
5 3/4% 7/1/2021 AAA 500M 525,625
New York City Muni Wtr Fin Auth Ser A FGIC+ 6 1/4%
6/15/2021 AAA 3,500M 3,657,500
New York St Environmental Facs Corp Poll Rev MBIA+ 5%
6/15/2013 AAA 1,950M 1,947,563
Suffolk Co NY Wtr Auth Wtrwks Rev AMBAC+ 5% 6/1/2017 AAA 1,000M 982,500
Total 7,113,188
------------------------------------------------------------------------------------------============
Total Municipal Bonds 99.05% (Cost $273,833,569) 290,339,104
===============================================================================================================================
Other Assets, Less Liabilities 0.95%
===============================================================================================================================
Short-Term Securities Puerto Rico Commonwealth 4 1/2% 7/30/1998 (Cost
$1,406,518) AAA 1,400M 1,403,864
- -------------------------------------------------------------------------------------------------------------------============
Cash and Receivables,
Net of Liabilities 1,390,293
------------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities 2,794,157
===============================================================================================================================
Net Assets 100.00% $293,133,261
===============================================================================================================================
Class A Shares-Net asset value ($286,820,498 / 25,659,492 shares outstanding) $11.18
Class C Shares-Net asset value ($6,312,763 / 565,386 shares outstanding) $11.17
* 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
March 31, 1998. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative Minimum
Tax.
See Notes to Financial Statements.
</TABLE>
Statement of Net Assets
TEXAS SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 19.44% Austin TX Util Sys 8% 11/15/2016 AAA $ 1,000M $ 1,111,250
Austin TX Util Sys Ser B 7.80% 11/15/2012 AAA 640M 668,326
Azle TX Indpt Sch Dist Ser A 6% 2/15/2000 AAA 3,750M 3,881,250
Bexar Co TX Health Facs MBIA+ 7 1/2% 8/15/2010 AAA 750M 821,250
Board of Regents TX A&M Univ Rev 7.80% 8/15/2009 AAA 900M 913,221
Dallas Co TX Flood Ctrl Dist No 1 9 1/4% 4/1/2010 AAA 1,460M 1,834,125
Harris Co TX Toll Rd Sub Lien Ser A 6.10% 8/15/2016 AAA 2,640M 2,933,700
Houston TX Arpt Sys Rev MBIA+ AMT+++ 8.20% 7/1/2017 AAA 1,500M 1,553,040
</TABLE>
10
<PAGE>
Statement of Net Assets
TEXAS SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Houston TX Wtr & Sewer Sys Rev AMBAC+ 6 1/2% 12/1/2021 AAA $ 335M $ 367,244
Houston TX Wtr & Sewer Sys Rev Prior Lien MBIA+ 7.40%
12/1/2018 AAA 1,000M 1,100,000
Puerto Rico Commonwealth Hwy Rev Ser Q 6% 7/1/2020 AAA 2,000M 2,087,500
Texas St Tnpk Auth Dallas Northwy Rev AMBAC+ 7 1/8%
1/1/2015 AAA 250M 261,075
Total 17,531,981
- -------------------------------------------------------------------------------------------------------------------============
General Obligation Puerto Rico Commonwealth Zero Coupon 7/1/2017 A 1,000M 377,500
State 23.72%
Texas St Ser A AMT+++ 6.30% 6/1/2014 AA 250M 258,438
Texas St Ser A-1 AMT+++ RIBS 7.02% 12/1/2023++ AA 6,000M 6,292,500
Texas St Ser B-1 & B-2 LINK 6.199% 9/30/2011++ AA 11,000M 12,650,000
Texas St Wtr Dev Bd 7.15% 8/1/2035 AA 1,600M 1,816,000
Total 21,394,438
- -------------------------------------------------------------------------------------------------------------------============
General Obligation Azle TX Indpt Sch Dist Ser A 6% 2/15/2022 AAA 250M 255,625
Local 7.69%
Hays TX Cons Indpt Sch Dist 5 7/8% 8/15/2022 AAA 1,500M 1,591,875
Keller TX Indpt Sch Dist 4 3/4% 8/15/2022 AAA 2,100M 1,953,000
Quinlan TX Indpt Sch Dist 5 1/4% 2/15/2022 Aaa 2,000M 2,002,500
Stephenville TX Indpt Sch Dist Zero Coupon 2/15/2012 AAA 1,000M 501,250
Willis TX Indpt Sch Dist Zero Coupon 2/15/2021 AAA 2,115M 634,500
Total 6,938,750
- -------------------------------------------------------------------------------------------------------------------============
Education 0.78% Texas St Higher Ed Coord AMT+++ 7.70% 10/1/2025 A 665M 707,394
- -------------------------------------------------------------------------------------------------------------------============
Health and Hospital Amarillo TX Health Facs Corp LINK FSA+ 6.562% 1/1/2022++ AAA 3,600M 3,901,500
11.33%
Amarillo TX Health Facs Corp RIBS FSA+ 9.114% 1/1/2022++ AAA 2,250M 2,624,063
Denton Co TX Health Facs 7 1/2% 8/15/2015 BBB** 1,000M 1,128,750
North Cent TX Health Facs Dev Corp Rev Ser B MBIA+ 5 3/4%
2/15/2011 AAA 1,000M 1,068,750
Texarkana TX Health Facs Ser B MBIA+ 6% 10/1/2019 AAA 1,335M 1,495,200
Total 10,218,263
- -------------------------------------------------------------------------------------------------------------------============
Housing 0.74% Dallas TX Hsg Corp Cap Prjt/Estell Village Apts Ser A
7 7/8% 12/1/2009 BBB* 530M 553,188
Texas Hsg Agy Ser D AMT+++ 8.40% 1/1/2021 Aa 105M 110,775
Total 663,963
- -------------------------------------------------------------------------------------------------------------------============
Industrial Revenue
Bonds 15.31% Harris Co TX Ind Dev Corp Marine Term & Wtr Poll Ctrl
Rev 6 5/8% 2/1/2024 BBB 1,500M 1,646,250
Orange Co TX Nav & Port Dist Ind Dev Corp Rev Ref-North
6 3/8% 2/1/2017 AA 2,400M 2,646,000
Puerto Rico Ind Med & Environmental Ctrl/Baxter Lab
Ser A 8% 9/1/2012 A 2,315M 2,422,485
Texas City TX Ind Dev Corp Marine Term Rev/ARCO
7 3/8% 10/1/2020 A 5,500M 7,095,000
Total 13,809,735
- -------------------------------------------------------------------------------------------------------------------============
Miscellaneous 2.23% Webb Co TX Ctfs Partn 5 3/8% 10/1/2013 AA 1,500M 1,533,750
Webb Co TX Ctfs Partn Ser A 5 1/4% 10/1/2022 AA 480M 472,800
Total 2,006,550
- -------------------------------------------------------------------------------------------------------------------============
Pollution Control
Revenue 0.72% Trinity River Auth TX Poll Ctrl Rev/Texas Instruments
AMT+++ 6.20% 3/1/2020 A 605M 648,106
- -------------------------------------------------------------------------------------------------------------------============
Power 0.45% Lubbock TX Elec Lt & Pwr Sys Rev AMBAC+ 4 1/4% 4/15/2018 AAA 460M 401,925
- -------------------------------------------------------------------------------------------------------------------============
Transportation 4.81% Dallas-Fort Worth TX Regl Arpt MBIA+ AMT+++ 5 3/4%
11/1/2024 AAA 2,500M 2,581,250
Port Beaumont TX Nav Dist Ser A FGIC+ 4 3/4% 3/1/2018 Aaa 1,000M 940,000
Puerto Rico Commonwealth Hwy & Trans Auth Hwy Rev Ser Y
5 1/2% 7/1/2036 AAA 775M 808,906
Total 4,330,156
- -------------------------------------------------------------------------------------------------------------------============
Water and Sewer 6.45% Houston TX Wtr & Sewer Sys Rev AMBAC+ 6 1/2% 12/1/2021 AAA 2,665M 2,921,506
Nueces River Auth TX Wtr Supply FSA+ 5 1/2% 3/1/2027 AAA 2,000M 2,055,000
Texas Wtr Resource Fin Auth 7 5/8% 8/15/2008 A 470M 484,659
</TABLE>
11
<PAGE>
Statement of Net Assets
TEXAS SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Texas Wtr Resource Fin Auth AMBAC+ 7 1/2% 8/15/2013 AAA $350M $ 360,126
Total 5,821,291
- -------------------------------------------------------------------------------------------------------------------============
Total Municipal Bonds 93.67% (Cost $79,810,849) 84,472,552
===============================================================================================================================
Other Assets, Less Liabilities 6.33%
===============================================================================================================================
Short-Term Securities Texas TX Ser A 4 3/4% 8/31/1998 (Cost $503,344) AAA 500M 502,115
- -------------------------------------------------------------------------------------------------------------------============
Cash 2,365,767
- -------------------------------------------------------------------------------------------------------------------============
Receivable for: Interest 1,555,591
Capital stock sold 123,314
Securities sold 8,656,352
Other 302
Total Other Assets 13,203,441
------------------------------------------------------------------------------------------============
Payable for: Capital stock reacquired 336,070
Securities purchased 6,722,953
Distributions 280,421
Other 152,436
------------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities 5,711,561
===============================================================================================================================
Net Assets 100.00% $90,184,113
===============================================================================================================================
Net asset value ($90,184,113 / 8,668,902 shares outstanding) $10.40
* 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
March 31, 1998. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative Minimum
Tax.
See Notes to Financial Statements.
</TABLE>
Statement of Net Assets
NEW JERSEY SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 26.45% Essex Co NJ Imp Auth Lease/Jail & Youth Hse Prjts AMBAC+
7% 12/1/2024 AAA $ 6,675M $ 7,826,438
Gloucester Co NJ Muni Util Auth 6 1/2% 1/1/2021 AAA 2,000M 2,137,500
Hudson Co NJ Util Auth Util Sys Rev 10% 7/1/2011 AAA 1,000M 1,223,750
Monmouth Co NJ Imp Auth Rev MBIA+ 6 7/8% 8/1/2012 AAA 500M 540,625
New Jersey Economic Dev Auth 6 3/4% 6/15/2012 AAA 2,275M 2,493,969
New Jersey Health Care Facs Ser A FHA+ 7 1/4% 2/15/2021 AAA 1,485M 1,635,356
New Jersey Health Care Facs Fin Auth Series B 8 1/4%
7/1/2020 AAA 2,570M 2,849,488
New Jersey Waste Treatment Trust 6 7/8% 6/15/2009 AAA 1,750M 1,885,625
New Jersey Wastewtr Treatment Trust 7% 5/15/2006 AAA 425M 447,313
North Brunswick Twp NJ Bd Ed 6.30% 2/1/2014 AAA 1,000M 1,113,750
Puerto Rico Commonwealth 6 1/2% 7/1/2023 AAA 1,000M 1,140,000
Puerto Rico Commonwealth Hwy Ser T 6 5/8% 7/1/2018 AAA 283M 314,971
Puerto Rico Elec Pwr Auth LINK FSA+ 6.30% 7/1/2018++ AAA 6,000M 6,750,000
Puerto Rico Elec Pwr Auth LINK FSA+ 5.929% 7/1/2023++ AAA 1,000M 1,081,250
Puerto Rico Elec Pwr Auth RIBS FSA+ 8.473% 7/1/2023++ AAA 4,500M 5,225,625
Puerto Rico Elec Pwr Auth Ser T RIBS FSA+ 8.772%
7/1/2018++ AAA 4,000M 5,005,000
Puerto Rico Pub Bldg Auth Ser L 6 7/8% 7/1/2021 AAA 200M 224,250
Rutgers St Univ NJ Ser P 6.85% 5/1/2021 AA 800M 877,000
</TABLE>
12
<PAGE>
Statement of Net Assets
NEW JERSEY SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
South Brunswick Twp NJ Bd Ed FGIC+ 6.40% 8/1/2024 AAA $ 1,600M $ 1,810,000
Stafford NJ Muni Util Auth Ser A FGIC+ 6 1/8% 12/1/2022 AAA 1,500M 1,623,750
Tinton Falls NJ Sch Bd Ed FSA+ 6 1/2% 6/15/2017 AAA 1,000M 1,090,000
Union Co NJ Ser L 6 1/2% 2/1/2011 AAA 1,000M 1,081,250
Total 48,376,910
- -------------------------------------------------------------------------------------------------------------------============
General Obligation Puerto Rico Commonwealth RIBS MBIA+ 7.884% 7/1/2008++ AAA 5,000M 5,631,250
State 3.29%
Puerto Rico Commonwealth Zero Coupon 7/1/2017 A 1,000M 377,500
Total 6,008,750
- -------------------------------------------------------------------------------------------------------------------============
General Obligation Keansburg NJ 6.80% 12/1/2010 AA 1,000M 1,117,500
Local 7.47%
Millburn Twp NJ Sch Dist 5.35% 7/15/2018 Aaa 1,150M 1,211,812
Millburn Twp NJ Sch Dist 5.35% 7/15/2019 Aaa 1,100M 1,160,500
Morristown NJ FSA+ 6 1/2% 8/1/2019 AAA 3,440M 3,895,800
Paterson NJ FSA+ 9.30% 2/15/2004 AAA 4,200M 5,297,250
Pohatcong Twp NJ Sch Dist FSA+ 5.95% 7/15/2023 AAA 650M 699,563
Pohatcong Twp NJ Sch Dist FSA+ 5.95% 7/15/2026 AAA 250M 269,062
Total 13,651,487
- -------------------------------------------------------------------------------------------------------------------============
Education 6.25% Lodi NJ Bd Ed Ctfs Partn MBIA+ 5.70% 9/15/2021 AAA 1,725M 1,809,094
New Jersey Economic Dev Auth Rev Ser B MBIA+ 6 1/4%
5/15/2025 AAA 6,000M 6,637,500
New Jersey Economic Dev Sch Rev 7% 5/1/2020 BBB* 1,800M 1,912,500
New Jersey St Ed Facs Auth AMBAC+ 5 1/8% 7/1/2028 AAA 500M 493,750
New Jersey St Ed Facs Rev MBIA+ 6.85% 7/1/2019 Aaa 540M 568,350
Total 11,421,194
- -------------------------------------------------------------------------------------------------------------------============
Finance 0.58% Hamilton Twp NJ Bd Ed Ser B FSA+ 7% 12/15/2015 AAA 970M 1,056,088
- -------------------------------------------------------------------------------------------------------------------============
Health and Hospital Camden Co NJ Imp Auth Rev 6% 2/15/2027 A 9,000M 9,630,000
15.25%
New Jersey Economic Dev Auth Rev Ser A MBIA+ Zero Coupon
7/1/2024 Aaa 7,445M 1,935,700
New Jersey Health Care Facs Fin Auth Rev Ser A AMBAC+
7% 7/1/2020 AAA 5,000M 5,356,250
New Jersey Health Care Facs Fin Auth Rev/Bayonne Hosp
FSA+ 6 1/4% 7/1/2012 AAA 1,600M 1,764,000
New Jersey Health Care Facs Fin Auth Rev FSA+ 4 3/4%
7/1/2027 Aaa 3,850M 3,590,125
New Jersey Health Care Facs Ser B FHA+ 6 1/2% 2/1/2022 AAA 925M 996,687
New Jersey Health Care Facs Ser C FSA+ 6 3/4% 7/1/2020 AAA 2,755M 2,975,400
Puerto Rico Ind Tourist Ed Med & Environmental Ctrl Facs
Gr A MBIA+ 6 1/4% 7/1/2024 AAA 1,000M 1,097,500
Puerto Rico Ind Tourist Ed Med & Environmental Ctrl Facs
FHA+ 6 1/4% 8/1/2032 AAA 500M 542,500
Total 27,888,162
- -------------------------------------------------------------------------------------------------------------------============
Housing 2.76% New Jersey St Hsg & Mtge Fin MBIA+ AMT+++ 7.70% 10/1/2029 AAA 840M 874,650
New Jersey St Hsg & Mtge Fin Agy Ser B MBIA+ AMT+++
7.90% 10/1/2022 AAA 3,025M 3,181,452
Puerto Rico Hsg Fin Corp Mtge Rev Ser B GNMA+ 7.65%
10/15/2022 AAA 335M 355,518
Virgin Islands Hsg Fin Auth Sing Fam Rev Ser A
GNMA+ AMT+++ 6 1/2% 3/1/2025 AAA 600M 639,000
Total 5,050,620
- -------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Puerto Rico Ind Med & Environmental Ctrl/Upjohn 7 1/2%
Bonds 2.13% 12/1/2023 AA 750M 791,010
Puerto Rico Tel Auth Rev LINK MBIA+ 5.51% 1/16/2015++ AAA 3,000M 3,097,500
Total 3,888,510
- -------------------------------------------------------------------------------------------------------------------============
Miscellaneous 7.04% Mercer Co NJ Imp Auth Rev 5 3/4% 11/1/2017 Aa 1,660M 1,776,200
Monmouth Co NJ Imp Auth AMBAC+ 5.15% 12/1/2017 AAA 500M 500,625
Monmouth Co NJ Imp Auth Rev Govt Loan MBIA+ 6.40%
12/1/2009 AAA 1,075M 1,217,438
New Jersey Economic Dev 5.70% 1/1/2018 BBB* 1,200M 1,201,500
New Jersey Economic Dev Auth Rev Ser A MBIA+ 6% 5/15/2025 AAA 4,250M 4,616,563
</TABLE>
13
<PAGE>
Statement of Net Assets
NEW JERSEY SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
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 1,190,250
Union Co Imp Auth Rev FGIC+ 6 1/4% 8/1/2013 AAA 1,100M 1,233,375
Total 12,870,951
- -------------------------------------------------------------------------------------------------------------------============
Pollution Control Cape May Co NJ Ind Poll Ctrl Rev Fin Auth Ser B MBIA+
Revenue 0.31% 7% 11/1/2029 AAA 500M 574,375
- -------------------------------------------------------------------------------------------------------------------============
Power 5.68% Bergen Co NJ Util Auth Wtr Poll Ctrl Rev FGIC+ 4 3/4%
12/15/2015 AAA 4,500M 4,331,250
Essex Co NJ Imp Auth Rev Orange Muni Util & Lease
MBIA+ 6.80% 7/1/2014 AAA 1,710M 1,962,225
Puerto Rico Elec Pwr Auth 5% 7/1/2028 BBB 3,500M 3,346,875
Puerto Rico Elec Pwr Auth Ser N 7 1/8% 7/1/2014 BBB 715M 752,537
Total 10,392,887
- -------------------------------------------------------------------------------------------------------------------============
Transportation 21.61% Delaware River Port Auth PA & NJ Rev FGIC+ 5 1/2% 1/1/2026 AAA 15,085M 15,631,831
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 4,270,000
Port Auth NY & NJ 5 3/8% 1/15/2032 AA 500M 508,125
Port Auth NY & NJ 5% 10/1/2032 AA 5,000M 4,818,750
Puerto Rico Commonwealth Hwy & Trans Auth Hwy Rev Ser Y
5 1/2% 7/1/2036 A 9,300M 9,706,875
Total 39,509,569
- -------------------------------------------------------------------------------------------------------------------============
Water and Sewer 1.56% New Jersey Wastewtr Treatment Trust MBIA+ 7% 5/15/2006 AAA 75M 78,656
New Jersey Wastewtr Treatment Trust 6 7/8% 6/15/2009 AA 155M 166,625
New Jersey Wtr Supply Auth Rev MBIA+ AMT+++ 7 7/8%
11/1/2013 AAA 2,500M 2,602,925
Total 2,848,206
------------------------------------------------------------------------------------------============
Total Municipal Bonds 100.38% (Cost $173,837,088) 183,537,709
===============================================================================================================================
Other Assets, Less Liabilities (0.38)%
===============================================================================================================================
Short-Term Securities Puerto Rico Commonwealth 4 1/2% 7/30/1998 (Cost
$1,002,740) AAA 1,000M 1,002,760
- -------------------------------------------------------------------------------------------------------------------============
Cash and Receivables,
Net of Liabilities (1,688,982)
------------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities (686,222)
===============================================================================================================================
Net Assets 100.00% $182,851,487
===============================================================================================================================
Net asset value ($182,851,487 / 33,719,816 shares outstanding) $5.42
* 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
March 31, 1998. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative Minimum
Tax.
See Notes to Financial Statements.
</TABLE>
Statement of Net Assets
CONNECTICUT SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 23.93% Connecticut St Clean Wtr Fd 7% 1/1/2011 AAA $ 2,050M $ 2,239,625
Connecticut St Health & Ed/St Marys Hosp Ser C
7 3/8% 7/1/2020 AAA 3,250M 3,538,438
Connecticut St Health & Ed/Yale-New Haven Hosp Ser F
MBIA+ 7% 7/1/2010 AAA 75M 81,188
Connecticut St Health & Ed/Yale-New Haven Hosp Ser F
MBIA+ 7.10% 7/1/2025 AAA 2,105M 2,281,294
Connecticut St Spcl Tax Oblig Rev 6 3/4% 6/1/2011 AAA 2,050M 2,290,875
</TABLE>
14
<PAGE>
Statement of Net Assets
CONNECTICUT SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Connecticut St Spcl Tax Oblig Rev Ser A 7 1/8% 6/1/2007 AAA $ 5,000M $ 5,487,500
Connecticut St Spcl Tax Oblig Rev Ser B 10% 10/1/2000 AAA 4,000M 4,555,000
Connecticut St Spcl Tax Oblig Rev Ser C 6.80% 12/1/2009 AAA 100M 106,625
Puerto Rico Commonwealth G.O. 6 1/2% 7/1/2023 AAA 2,000M 2,280,000
Puerto Rico Commonwealth G.O. 6% 7/1/2026 AAA 1,000M 1,138,750
Puerto Rico Commonwealth Hwy Ser T 6 5/8% 7/1/2018 AAA 67M 74,404
Puerto Rico Commonwealth Hwy Toll Rd Ser T 6 5/8%
7/1/2018 AAA 453M 504,096
Puerto Rico Elec Pwr Auth Ser T RIBS FSA+ 8.899%
7/1/2018++ AAA 1,500M 1,876,875
Puerto Rico G.O. 6.45% 7/1/2017 AAA 2,000M 2,275,000
Puerto Rico G.O. Ser A 7 3/4% 7/1/2017 AAA 250M 265,938
Total 28,995,608
- -------------------------------------------------------------------------------------------------------------------============
General Obligation Puerto Rico Commonwealth Zero Coupon 7/1/2018 A 2,500M 893,750
State 1.85%
Puerto Rico Commonwealth 4 1/2% 7/1/2023 A 1,500M 1,351,875
Total 2,245,625
- -------------------------------------------------------------------------------------------------------------------============
General Obligation Darien CT 5 1/2% 10/15/2015 Aaa 500M 519,375
Local 2.99%
Hartford CT 6 1/2% 12/15/2005 AA 730M 826,725
Killingly CT 7 1/4% 12/15/2004 A 250M 259,313
Monroe CT 6.60% 4/15/2005 A 100M 112,250
Montville CT 6.70% 6/15/2009 Aa 550M 655,875
Montville CT 6.70% 6/15/2010 Aa 575M 687,125
Portland CT 7.10% 12/15/2000 A 100M 107,500
Redding CT 6.60% 4/15/2010 Aa 100M 118,750
Voluntown CT 6 3/4% 10/1/2002 A 100M 110,375
Watertown CT 6 1/2% 6/15/2003 A 100M 108,750
West Haven CT MBIA+ 6 1/2% 6/15/2006 AAA 100M 114,250
Total 3,620,288
- -------------------------------------------------------------------------------------------------------------------============
Education 18.35% Connecticut St Dev Auth Aquarium Proj 7% 12/1/2027 BBB* 1,500M 1,597,500
Connecticut St Health & Ed Facs/Conn College C-1 MBIA+
5 1/2% 7/1/2027 AAA 1,000M 1,031,250
Connecticut St Health & Ed Facs/Fairfield Univ Ser F
6.90% 7/1/2014 BBB 1,500M 1,560,000
Connecticut St Health & Ed Facs/Kent Sch Ser B MBIA+
5.40% 7/1/2023 AAA 750M 759,375
Connecticut St Health & Ed Facs/New Haven Ser D 6.70%
7/1/2026 BBB 1,000M 1,076,250
Connecticut St Health & Ed Facs/Sacred Heart Ser C 6 1/2%
7/1/2016 BBB 1,000M 1,093,750
Connecticut St Health & Ed Facs/Suffield Academy Ser A
MBIA+ 5.30% 7/1/2017 AAA 1,000M 1,013,750
Connecticut St Health & Ed Facs/Trinity College Ser E
MBIA+ 5 7/8% 7/1/2026 AAA 1,000M 1,062,500
Connecticut St Health & Ed Facs/Yale Univ RIBS 7.995%
6/10/2030++ AAA 6,800M 7,548,000
Connecticut St Higher Ed Supplemental Loan Auth Ser A
AMT+++ 7 3/8% 11/15/2005 A 725M 748,570
Connecticut St Higher Ed Supplemental Loan Auth Ser A
AMT+++ 7.20% 11/15/2010 A 385M 411,950
Puerto Rico Ind Tourist Ed Med & Environmental/American
Univ 5% 10/1/2022 AAA 2,000M 1,947,500
Univ CT Rev MBIA+ 4 3/4% 11/15/2027 AAA 2,000M 1,875,000
Univ CT Rev Ser A MBIA+ 4 3/4% 11/15/2018 AAA 540M 513,000
Total 22,238,395
- -------------------------------------------------------------------------------------------------------------------============
Health and Hospital Connecticut St Health & Ed/Bridgeport Hosp MBIA+
11.48% 6 5/8% 7/1/2018 AAA 1,250M 1,373,437
Connecticut St Health & Ed/Greenwich Hosp MBIA+ 5.80%
7/1/2026 AAA 1,830M 1,932,938
Connecticut St Health & Ed/Greenwich Hosp Ser A MBIA+
5 3/4% 7/1/2016 AAA 1,350M 1,432,687
Connecticut St Health & Ed/Vet Mem Med Ctr Ser A MBIA+
5 1/2% 7/1/2026 AAA 1,000M 1,023,750
Connecticut St Health & Ed/Waterbury Hosp Ser B FSA+ 7%
7/1/2020 AAA 100M 107,625
</TABLE>
15
<PAGE>
Statement of Net Assets
CONNECTICUT SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Connecticut St Health & Ed/William Backus Hosp 6 3/8%
7/1/2022 A $ 850M $ 904,187
Connecticut St Health & Ed/William Backus Hosp Ser D
AMBAC+ 5 3/4% 7/1/2027 AAA 1,000M 1,052,500
Connecticut St Health & Ed/Windham Mem Hosp Ser C
5 3/4% 7/1/2011 BBB 2,000M 2,042,500
Connecticut St Health & Ed/Masonicare Ser A AMBAC+ 5%
7/1/2013 AAA 700M 697,375
Connecticut St Health & Ed/Masonicare Hosp for Spcl Care
5 3/8% 7/1/2017 BBB 1,000M 992,500
Connecticut St Health & Ed/Masonicare Hosp for Spcl Care
5 1/2% 7/1/2027 BBB 2,345M 2,347,931
Total 13,907,430
- -------------------------------------------------------------------------------------------------------------------============
Housing 10.67% Connecticut St Hsg Fin Auth AMT+++ 5.60% 11/15/2021 AA 535M 540,350
Connecticut St Hsg Fin Auth AMBAC+ 5 5/8% 6/15/2027 AAA 500M 516,875
Connecticut St Hsg Fin Auth AMT+++ 6% 11/15/2027 AA 1,500M 1,569,375
Connecticut St Hsg Fin Auth 5.55% 11/15/2028 AA 1,690M 1,715,350
Connecticut St Hsg Fin Auth 5.85% 11/15/2028 AA 1,000M 1,026,250
Connecticut St Hsg Fin Auth AMT+++ 5 1/2% 11/15/2029 AA 1,000M 1,001,250
Connecticut St Hsg Fin Auth Ser A Sub Ser A-2
FHA+ AMT+++ 7.20% 11/15/2008 AA 515M 551,693
Connecticut St Hsg Fin Auth Ser A-2 AMT+++ 6.45%
5/15/2022 AA 1,100M 1,175,625
Connecticut St Hsg Fin Auth Ser B 6 3/4% 11/15/2023 AA 2,605M 2,813,400
Connecticut St Hsg Fin Auth Ser D-2 AMT+++ 6.90%
5/15/2020 AA 145M 156,419
Connecticut St Hsg Fin Auth Sub Ser D-2 AMT+++ 6.20%
11/15/2027 AA 1,750M 1,859,375
Total 12,925,962
- -------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Connecticut St Dev Auth/Pfizer Inc Prjt 6.55% 2/15/2013 AAA 3,570M 3,931,462
Bonds 11.28%
Connecticut St Dev Auth/Pfizer Inc Prjt AMT+++ 7% 7/1/2025 AAA 2,500M 2,881,250
Eastern CT Resource Recovery/Wheelabrator Lisbon Prjt
Ser A AMT+++ 5 1/2% 1/1/2020 A 4,000M 3,930,000
Puerto Rico Ind Med & Environmental/Upjohn 7 1/2%
12/1/2023 AA 1,000M 1,054,680
Puerto Rico Ind Med & Environmental/Warner Lambert
7.60% 5/1/2014 Aa 1,750M 1,867,775
Total 13,665,167
- -------------------------------------------------------------------------------------------------------------------============
Miscellaneous 9.44% Connecticut Middletown Courthouse MBIA+ 6 1/4% 12/15/2010 AAA 575M 621,000
Connecticut St Dev Govt Lease Rev MBIA+ 6.60% 6/15/2014 AAA 500M 560,000
New Haven CT Air Rights Pkg MBIA+ 6 1/2% 12/1/2015 AAA 9,475M 10,256,687
Total 11,437,687
- -------------------------------------------------------------------------------------------------------------------============
Power 2.49% Connecticut St Dev Auth/New England Pwr Co 7 1/4%
10/15/2015 A 760M 809,400
Puerto Rico Elec Pwr Auth 4 3/4% 7/1/2024 BBB 1,500M 1,393,125
Puerto Rico Elec Pwr Auth Ser X 6 1/8% 7/1/2021 A 750M 810,937
Total 3,013,462
- -------------------------------------------------------------------------------------------------------------------============
Solid Waste 6.00% Connecticut St Res Recovery/American Ref Fuel Ser A
AMT+++ 6.45% 11/15/2022 A 4,985M 5,327,719
Connecticut St Res Recovery/American Ref Fuel Ser A
MBIA+ AMT+++ 5 1/8% 11/15/2015 AAA 2,000M 1,942,500
Total 7,270,219
- -------------------------------------------------------------------------------------------------------------------============
Transportation 1.42% Connecticut St Spcl Tax Oblig Rev Ser B FGIC+ 6.10%
10/1/2011 AAA 1,000M 1,088,750
Puerto Rico Commonwealth Hwy & Trans Auth Hwy Rev 5 1/2%
7/1/2015 A 600M 636,750
Total 1,725,500
- -------------------------------------------------------------------------------------------------------------------============
Water and Sewer 1.47% Connecticut St Clean Wtr Fd 5.05% 3/1/2028 AAA 1,010M 988,538
Connecticut St Dev Auth Wtr Fac Rev AMBAC+ AMT+++ 5 3/4%
7/1/2028 AAA 250M 255,313
Connecticut St Dev Auth Wtr Fac Rev AMT+++ 6.15% 4/1/2035 A 500M 533,125
Total 1,776,976
------------------------------------------------------------------------------------------============
Total Municipal Bonds 101.37% (Cost $116,914,626) 122,822,319
------------------------------------------------------------------------------------------============
</TABLE>
16
<PAGE>
Statement of Net Assets
CONNECTICUT SERIES March 31, 1998
<TABLE>
<S> <C> <C>
===============================================================================================================================
Other Assets, Less Liabilities (1.37)%
===============================================================================================================================
Cash and Receivables, Net of Liabilities $ (1,663,249)
===============================================================================================================================
Net Assets 100.00% $121,159,070
===============================================================================================================================
Net asset value ($121,159,070 / 11,527,308 shares outstanding) $10.51
* 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
March 31, 1998. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative Minimum
Tax. See Notes to Financial Statements.
</TABLE>
Statement of Net Assets
MISSOURI SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 25.84% Cape Girardeau MO Wtrwks Sys Rev FGIC+ 6.40% 3/1/2012 AAA $ 1,150M $ 1,246,313
Central MO St Univ MBIA+ 7% 7/1/2014 AAA 150M 165,938
Kansas City MO Arpt Rev Ser B CGIC+ 6 7/8% 9/1/2014 AAA 1,490M 1,722,813
Kansas City MO Muni Assistance Corp Rev AMBAC+ 6 5/8%
4/15/2015 AAA 5,000M 5,450,000
Kansas City MO Muni Assistance Corp Rev AMBAC+ 7 1/8%
4/15/2016 AAA 805M 870,406
Missouri St Health & Ed Facs Rev/Christian Health FGIC+
6 7/8% 2/15/2013 AAA 2,100M 2,296,875
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 10,750M 12,160,938
Platte Co MO Reorg Sch Dist Ctfs 7 1/8% 1/1/2011 AAA 500M 526,250
Puerto Rico Elec Pwr Auth RIBS FSA+ 8.473% 7/1/2023++ AAA 2,500M 2,903,125
Springfield MO Sch Dist No 12 Ser A FGIC+ 6 3/4% 3/1/2011 AAA 1,225M 1,315,344
St Louis MO Land Clearance Rev 7 3/4% 7/1/2021 AAA 2,190M 2,433,638
St Louis MO Regl Convention &Sports Complex Auth Ser C
7.90% 8/15/2021 AAA 2,000M 2,357,500
University of MO Rev Ser A AMBAC+ 6 1/2% 11/1/2011 AAA 2,000M 2,157,500
Total 36,755,090
- -------------------------------------------------------------------------------------------------------------------============
General Obligation Missouri St Ser A 5 1/2% 8/1/2021 AAA 1,000M 1,037,500
State 8.36%
Puerto Rico Commonwealth RIBS MBIA+ 7.884% 7/1/2008++ AAA 1,000M 1,126,250
Puerto Rico Commonwealth RIBSFSA+ 8.132% 7/1/2020++ AAA 4,000M 4,460,000
Puerto Rico Commonwealth Zero Coupon 7/1/2018 A 2,500M 893,750
Puerto Rico Commonwealth 4 1/2% 7/1/2023 A 2,500M 2,253,125
Puerto Rico Commonwealth 5% 7/1/2026 A 2,200M 2,125,750
Total 11,896,375
- -------------------------------------------------------------------------------------------------------------------============
General Obligation Columbia MO Spcl Oblig Cap Imp 5 1/2% 2/1/2016 A 500M 509,375
Local 2.99%
Fort Zumwalt MO Sch Dist Impt Corp Leasehold Rev
AMBAC+ 5.60% 3/1/2017 Aaa 500M 514,375
Greene Co MO Reorg Sch Dist Direct Dep 5 3/4% 3/1/2016 AA 1,785M 1,876,481
St Louis MO Sch Dist FGIC+ 6% 4/1/2012 AAA 1,275M 1,357,875
Total 4,258,106
- -------------------------------------------------------------------------------------------------------------------============
Education 6.07% Missouri St Health & Ed Facs Rev/Lutheran Senior Service
5 7/8% 2/1/2023 BBB* 500M 515,625
Missouri St Health & Ed Facs Rev/Maryville Univ Ed
5 3/4% 6/15/2017 Baa 400M 415,000
Missouri St Health & Ed Facs Rev/St Louis Univ HS 6.35%
10/1/2014 A 2,000M 2,170,000
Missouri St Health & Ed Facs Rev/Wash Univ 5% 11/15/2037 AA 2,000M 1,932,500
</TABLE>
17
<PAGE>
Statement of Net Assets
MISSOURI SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
University of MO Rev 5 1/2% 11/1/2017 AA $ 3,500M $ 3,600,625
Total 8,633,750
- -------------------------------------------------------------------------------------------------------------------============
Finance 4.34% Blue Spring MO Pub Bldg Auth LeaseholdRev Ser A FGIC+
5 1/8% 9/1/2016 AAA 1,130M 1,137,063
Kansas City MO Muni Assistance Corp Rev MBIA+ 5 1/8%
4/15/2015 AAA 5,000M 5,043,750
Total 6,180,813
- -------------------------------------------------------------------------------------------------------------------============
Health and Hospital Hannibal MO Ind Dev Auth Health Facs Rev Ser A FSA+
17.73% 5 5/8% 3/1/2012 AAA 2,170M 2,308,338
Hannibal MO Ind Dev Auth Health Facs Rev Ser A FSA+
5 3/4% 3/1/2022 AAA 1,250M 1,318,750
Jackson Co MO Ind Dev Rev/St Joseph Health Ctr
7% 7/1/2022 Baa 1,500M 1,650,000
Missouri St Health & Ed Facs Rev/BJC Health Ser A
6 1/2% 5/15/2020 AA 4,900M 5,512,500
Missouri St Health & Ed Facs Rev/Health Midwest Ser B
MBIA+ 6 1/4% 2/15/2022 AAA 7,175M 7,713,125
Missouri St Health & Ed Facs Rev/Heartland Health Sys
AMBAC+ 6.35% 11/15/2017 AAA 3,600M 3,919,500
Missouri St Health & Ed Facs Rev/SSM Health Care Ser AA
MBIA+ 6 1/4% 6/1/2016 AAA 2,250M 2,427,187
Puerto Rico Ind Tourist Ed 5 5/8% 7/1/2017 BBB 375M 380,625
Total 25,230,025
- -------------------------------------------------------------------------------------------------------------------============
Housing 5.64% Missouri St Hsg Dev Comm Mtge Rev Ser A
GNMA+ AMT+++ 6 3/4% 6/1/2024 AAA 350M 373,187
Missouri St Hsg Dev Comm Mtge Rev Ser A
GNMA+ AMT+++ 6.22% 3/1/2026 AAA 5,000M 5,312,500
Missouri St Hsg Dev Comm Mtge Rev Ser B
GNMA+ AMT+++ 6.40% 12/1/2024 AAA 2,125M 2,239,219
Puerto Rico Hsg Fin Corp Mtge Rev Ser A GNMA+ 7.80%
10/15/2021 AAA 10M 10,287
Puerto Rico Hsg Fin Corp Mtge Rev Ser B GNMA+ 7.65%
10/15/2022 AAA 80M 84,900
Total 8,020,093
- -------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Missouri St Environmental Imp & Energy Rev/Union Elec
Bonds 2.71% Ser A 7.40% 5/1/2020 AA 550M 594,000
Puerto Rico Tel Auth Rev RIBS MBIA+ 6.718% 1/25/2007++ AAA 2,000M 2,192,500
Puerto Rico Tel Auth Rev RIBS MBIA+ 7.168% 1/16/2015++ AAA 1,000M 1,065,000
Total 3,851,500
- -------------------------------------------------------------------------------------------------------------------============
Miscellaneous 3.42% Clay Co MO Pub Bldg Auth Leasehold Rev FGIC+ 7% 5/15/2014 AAA 1,000M 1,140,000
St Louis MO Ind Dev Rev Arena Prjt AMT+++ 7 7/8% 12/1/2024 BBB* 2,000M 2,212,500
St Louis MO Land Clearance Redev Auth Rev Ser A MBIA+
5 1/8% 7/1/2021 AAA 1,000M 998,750
St Louis MO Land Clearance Redev Auth Rev Ser B MBIA+
5.30% 7/1/2016 AAA 500M 510,625
St Louis MO Pkg Facs Rev MBIA+ 5 3/8% 12/15/2021 AAA 10M 10,212
Total 4,872,087
- -------------------------------------------------------------------------------------------------------------------============
Pollution Control Missouri St Environmental Imp & Energy Wtr Poll Ctrl Rev
Revenue 8.12% 6.55% 7/1/2014 Aa 3,000M 3,270,000
Missouri St Environmental Imp & Energy Wtr Poll Ctrl Rev
5 3/4% 1/1/2016 Aa 2,400M 2,544,000
Missouri St Environmental Imp & Energy Wtr Poll Ctrl Rev
5 5/8% 7/1/2016 Aa 900M 948,375
Missouri St Environmental Imp & Energy Wtr Poll Ctrl Rev
7.20% 7/1/2016 Aa 2,250M 2,604,375
Missouri St Environmental Imp & Energy Wtr Poll Ctrl Rev
5.90% 1/1/2019 Aa 2,050M 2,180,687
Total 11,547,437
- -------------------------------------------------------------------------------------------------------------------============
Transportation 7.70% Puerto Rico Elec Pwr Rev Auth 5% 7/1/2028 BBB 2,100M 2,008,125
Power 1.41%
Lake Of The Ozarks Co Brdg Corp MO Brdg Sys Rev 5 1/4%
12/1/2020 BBB* 1,500M 1,477,500
Lake Of The Ozarks Co Brdg Corp MO Brdg SysRev 5 1/4%
12/1/2026 BBB* 3,000M 2,928,750
Puerto Rico Commonwealth Hwy & Trans Auth Trans Rev 5%
7/1/2038 A 2,000M 1,897,500
Puerto Rico Commonwealth Hwy & Trans Auth Hwy Rev Ser Y
5 1/2% 7/1/2036 A 1,250M 1,304,687
St Louis MO Arpt Rev FGIC+ AMT+++ 5 1/4% 7/1/2022 AAA 2,210M 2,210,000
</TABLE>
18
<PAGE>
Statement of Net Assets
MISSOURI SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
St Louis MO Arpt Rev FGIC+ AMT+++ 5 1/4% 7/1/2027 AAA $ 1,135M $ 1,135,000
Total 10,953,437
- -------------------------------------------------------------------------------------------------------------------============
Water and Sewer 5.03% Kansas City MO Wtr Rev Ser D 7th Issue 6.65% 12/1/2013 AA 2,800M 3,136,000
Missouri St Environmental Imp Energy Res Auth Fac Rev
MBIA+ AMT+++ 5.95% 11/1/2019 AAA 1,500M 1,586,250
St Louis MO Wtr Rev FGIC+ 6% 7/1/2014 AAA 2,250M 2,435,625
Total 7,157,875
------------------------------------------------------------------------------------------============
Total Municipal Bonds 99.36% (Cost $132,476,569) 141,364,713
===============================================================================================================================
Other Assets, Less Liabilities 0.64%
===============================================================================================================================
Cash and Receivables, Net of Liabilities 911,435
===============================================================================================================================
Net Assets 100.00% $142,276,148
===============================================================================================================================
Net asset value ($142,276,148 / 26,981,995 shares outstanding) $5.27
* 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
March 31, 1998. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative Minimum
Tax.
See Notes to Financial Statements.
</TABLE>
Statement of Net Assets
HAWAII SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 25.27% Hawaii St Dept Bdg & Fin/Pali Moni Med Ctr 7.60% 7/1/2010 AAA $ 200M $ 225,000
Hawaii St Dept Bdg & Fin/Pali Moni Med Ctr 7.65% 7/1/2019 AAA 1,000M 1,126,250
Hawaii St Dept Bdg & Fin/Queens Med Hosp FGIC+ 6 1/2%
7/1/2012 AAA 250M 251,783
Hawaii St G.O. Ser B-R 7% 6/1/2009 AAA 1,000M 1,062,500
Hawaii St G.O. Ser B-R 7% 6/1/2010 AAA 2,430M 2,581,875
Hawaii St G.O. Ser B-S 7 1/8% 9/1/2009 AAA 700M 756,875
Honolulu HI City & Co G.O. 7.10% 6/1/2006 AAA 1,000M 1,072,500
Honolulu HI City & Co G.O. Ser C 7.15% 6/1/2008 AAA 500M 537,500
Honolulu HI City & Co G.O. Ser C 7.15% 6/1/2010 AAA 1,000M 1,075,000
Honolulu HI City & Co G.O. Ser D 6.90% 12/1/2010 AAA 400M 432,500
Honolulu HI City & Co Ser B 6.90% 10/1/2002 AAA 100M 103,101
Maui Co Hawaii Ser A AMBAC+ 6.80% 12/1/2009 AAA 1,000M 1,078,750
Puerto Rico Commonwealth 6.35% 7/1/2010 AAA 1,285M 1,453,656
Puerto Rico Commonwealth 7 5/8% 7/1/2010 AAA 200M 219,500
Puerto Rico Commonwealth 6.45% 7/1/2017 AAA 2,300M 2,616,250
Puerto Rico Commonwealth 6 1/2% 7/1/2023 AAA 1,250M 1,425,000
Puerto Rico Commonwealth 6% 7/1/2026 AAA 1,000M 1,138,750
Puerto Rico Commonwealth Hwy Ser Q 7 3/4% 7/1/2010 AAA 525M 577,500
Puerto Rico Elec Pwr Auth RIBS FSA+ 8.473% 7/1/2023++ AAA 1,500M 1,741,875
Puerto Rico Pub Bldg Auth Ser K 6 7/8% 7/1/2012 AAA 450M 504,562
Total 19,980,727
- -------------------------------------------------------------------------------------------------------------------============
General Obligation Hawaii St 8% 1/1/2013 AAA 2,000M 2,647,500
State 14.93%
Hawaii St FGIC+ 5% 10/1/2016 AAA 1,000M 991,250
Hawaii St 5% 10/1/2017 AAA 95M 93,694
Hawaii St Ser B-Z 6% 10/1/2010 AA 500M 560,625
Hawaii St Ser B-Z 6% 10/1/2012 AA 500M 561,875
</TABLE>
19
<PAGE>
Statement of Net Assets
HAWAII SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Puerto Rico Commonwealth RIBS FSA+ 8.132% 7/1/2020++ AAA $3,000M $ 3,345,000
Puerto Rico Commonwealth 4 1/2% 7/1/2023 A 4,000M 3,605,000
Total 11,804,944
- -------------------------------------------------------------------------------------------------------------------============
General Obligation Hawaii Co HI Ser A FGIC+ 5.60% 5/1/2013 AAA 1,780M 1,913,500
Local 9.30%
Honolulu HI City & Co FGIC+ 6% 12/1/2015 AAA 1,000M 1,120,000
Honolulu HI City & Co Ser A MBIA+ 5% 11/1/2015 AAA 1,500M 1,492,500
Honolulu HI City & Co Ser A FGIC+ 5 1/2% 9/1/2016 AAA 1,000M 1,040,000
Honolulu HI City & Co 5% 11/1/2016 AAA 500M 495,625
Kauai Co HI Ser B MBIA+ 5 1/4% 8/1/2017 AAA 195M 197,194
Maui Co HI Ser A MBIA+ 5 3/4% 6/1/2016 AAA 1,035M 1,093,219
Total 7,352,038
- -------------------------------------------------------------------------------------------------------------------============
Education 0.37% University of HI Ser G AMBAC+ 5.45% 10/1/2006 AAA 275M 291,155
- -------------------------------------------------------------------------------------------------------------------============
Health and Hospital Hawaii St Dept Bdg & Fin Spcl Purp Rev Kapi'olani
11.54% 6.20% 7/1/2016 A 1,000M 1,080,000
Hawaii St Dept Bdg & Fin Spcl Purp Rev Kapi'olani 6 1/4%
7/1/2021 A 2,000M 2,167,500
Hawaii St Dept Bdg & Fin Wilcox Mem Hosp 5 1/4% 7/1/2013 BBB 1,200M 1,186,500
Hawaii St Dept Bdg & Fin Wilcox Mem Hosp 5 1/2% 7/1/2028 BBB 1,750M 1,747,813
Hawaii St Dept Bdg & Fin/St Francis Hosp CGIC+ 6 1/2%
7/1/2022 AAA 1,200M 1,305,000
Puerto Rico Ind Med & Environmental/St Luke Hosp 6 1/4%
6/1/2010 A 1,390M 1,468,188
Puerto Rico Ind Tourist Ed Med & Environmental Ctrl
Fac Gr A MBIA+ 6 1/4% 7/1/2024 AAA 150M 164,625
Total 9,119,626
- -------------------------------------------------------------------------------------------------------------------============
Housing 3.37% Hawaii St Hsg Fin & Dev Corp Rev Univ of HI Faculty Hsg
Prjt AMBAC+ 5.70% 10/1/2025 AAA 500M 521,875
Hawaii St Hsg Fin & Dev Corp Ser A FNMA+ AMT+++ 7.10%
7/1/2024 Aa 960M 1,032,000
Hawaii St Hsg Fin & Dev Corp/Univ of HI Faculty Hsg Prjt
AMBAC+ 5.65% 10/1/2016 AAA 1,000M 1,055,000
Puerto Rico Hsg Fin Corp Mtge Rev Ser B GNMA+ 7.65%
10/15/2022 AAA 50M 53,062
Total 2,661,937
- -------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Puerto Rico Ind Med & Environmental Ctrl/Baxter
Bonds 4.43% Lab Ser A 8% 9/1/2012 A 1,000M 1,046,430
Puerto Rico Ind Med & Environmental/Warner Lambert
7.60% 5/1/2014 Aa 1,500M 1,600,950
Puerto Rico Tel Auth Rev RIBS MBIA+ 7.168% 1/16/2015++ AAA 800M 852,000
Total 3,499,380
- -------------------------------------------------------------------------------------------------------------------============
Power 21.01% Hawaii St Dept Bdg & Fin Citizen Utilities Linked Sav
LINK 5.538% 12/15/2023++ AAA 7,000M 7,052,500
Hawaii St Dept Bdg & Fin Citizen Utilities RIBS AMT+++
7.04% 12/15/2023++ AAA 1,500M 1,524,375
Hawaii St Dept Bdg & Fin Spcl Purp Rev HI Elec MBIA+
4.95% 4/1/2012 AAA 1,000M 998,750
Hawaii St Dept Bdg & Fin/HI Elec Ser A MBIA+ AMT+++
6.60% 1/1/2025 AAA 2,795M 3,102,450
Hawaii St Dept Bdg & Fin/HI Elec Ser C MBIA+ AMT+++
7 3/8% 12/1/2020 AAA 2,500M 2,734,375
Puerto Rico Elec Pwr Auth Ser N 7 1/8% 7/1/2014 BBB 365M 384,163
Puerto Rico Elec Pwr Auth Ser U 6% 7/1/2014 A 750M 813,750
Total 16,610,363
- -------------------------------------------------------------------------------------------------------------------============
Transportation 9.38% Hawaii St Arpt Sys Rev Ser M MBIA+ AMT+++ 7% 7/1/2018 AAA 2,125M 2,326,875
Hawaii St Arpt Sys Rev 2nd Ser FGIC+ AMT+++ 7 1/2%
7/1/2020 AAA 445M 482,269
Hawaii St Arpt Sys Rev 2nd Ser MBIA+ AMT+++ 6 3/4%
7/1/2021 AAA 2,745M 2,974,893
Hawaii St Hbr Cap Imp Rev FGIC+ AMT+++ 6 1/4% 7/1/2015 AAA 500M 543,125
Hawaii St Hbr Cap Imp Rev FGIC+ AMT+++ 6 3/8% 7/1/2024 AAA 500M 541,875
Puerto Rico Commonwealth Hwy Ser V 6 5/8% 7/1/2012 A 500M 551,250
Total 7,420,287
- -------------------------------------------------------------------------------------------------------------------============
Water and Sewer 1.34% Honolulu HI City & Co Bd Wtr Supply Wtr Sys Rev 5.80%
7/1/2021 AA 1,000M 1,056,250
------------------------------------------------------------------------------------------============
Total Municipal Bonds 100.94% (Cost $75,499,582) 79,796,707
------------------------------------------------------------------------------------------============
</TABLE>
20
<PAGE>
Statement of Net Assets
HAWAII SERIES March 31, 1998
<TABLE>
<S> <C> <C>
===============================================================================================================================
Other Assets, Less Liabilities (0.94)%
===============================================================================================================================
Cash and Receivables, Net of Liabilities $ (740,837)
===============================================================================================================================
Net Assets 100.00% $ 79,055,870
===============================================================================================================================
Net asset value ($79,055,870 / 15,380,009 shares outstanding) $5.14
* 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
March 31, 1998. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative Minimum
Tax.
See Notes to Financial Statements.
</TABLE>
Statement of Net Assets
WASHINGTON SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 33.60% Douglas Co WA Pub Util Dist No 1 Wells Hydroelec Ser A
8 3/4% 9/1/2018 AAA $ 150M $ 201,750
Lewis Co WA Pub Util Dist No Cowlitz Falls Hydroelec 7%
10/1/2022 AAA 500M 554,375
Mason Co WA Pub Util Dist 6.35% 1/1/2013 AAA 1,040M 1,131,000
Mount Vernon WA AMBAC+ 6.85% 12/1/2014 AAA 1,285M 1,472,931
Pike Place Mkt Preservation Ser A 6.60% 12/1/2021 AAA 2,000M 2,160,000
Puerto Rico Elec Pwr Auth RIBS FSA+ 8.473% 7/1/2023++ AAA 3,500M 4,064,375
Renton WA Wtr & Sewer Rev 6.55% 11/1/2013 AAA 1,000M 1,125,000
Seattle WA Muni Metro Ser T 6 7/8% 1/1/2014 AAA 500M 533,125
Tacoma WA Elec Sys Rev FGIC+ 7 3/8% 1/1/2009 AAA 500M 528,125
Tacoma WA Elec Sys Rev RIBS AMBAC+ 9.043% 1/2/2015++ AAA 4,500M 5,231,250
Washington St 6 3/8% 2/1/2014 AAA 2,000M 2,165,000
Washington St Pub Pwr Supply 6 7/8% 7/1/2017 AA 1,500M 1,648,125
Washington St Pub Pwr Supply Ser C 8% 7/1/2017 AAA 475M 523,094
Total 21,338,150
- -------------------------------------------------------------------------------------------------------------------============
General Obligation Puerto Rico Commonwealth Zero Coupon 7/1/2017 A 1,000M 377,500
State 11.92%
Puerto Rico Commonwealth 4 1/2% 7/1/2023 A 2,500M 2,253,125
Washington St Ser A 5 3/4% 9/1/2019 AA 1,150M 1,210,375
Washington St Ser B 5 3/4% 5/1/2016 AA 3,550M 3,727,500
Total 7,568,500
- -------------------------------------------------------------------------------------------------------------------============
General Obligation King Co WA 4 1/2% 1/1/2024 AA 320M 287,600
Local 0.64%
Whatcom Co WA 5 3/4% 12/1/2012 A 115M 119,025
Total 406,625
- -------------------------------------------------------------------------------------------------------------------============
Education 2.20% Washington St Higher Ed Facs Auth MBIA+ 4 3/4% 4/1/2022 AAA 1,195M 1,112,844
Washington St Higher Ed Facs Auth Rev CNLA 7% 10/1/2015 AAA 250M 281,562
Total 1,394,406
- -------------------------------------------------------------------------------------------------------------------============
Health and Hospital Washington St Health Care Facs Auth 5% 8/15/2021 AA 1,575M 1,512,000
3.73%
Washington St Health Care Facs Rev CNLA+ 6% 12/1/2008 AAA 770M 856,625
Total 2,368,625
- -------------------------------------------------------------------------------------------------------------------============
Housing 12.16% Bellingham WA Hsg Auth MBIA+ 5.20% 11/1/2027 Aaa 2,000M 1,972,500
Skagit Co WA Hsg Auth Low Income Hsg Assistance Coll
GNMA+ 7% 6/20/2035 AAA 750M 833,437
Snohomish Co WA Hsg Auth Rev AMT+++ 6.40% 5/1/2027 A 500M 533,125
Vancouver WA Hsg Auth Rev 5 1/2% 3/1/2028 BBB* 1,000M 968,750
</TABLE>
21
<PAGE>
Statement of Net Assets
WASHINGTON SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Washington St Hsg Fin Comm GNMA+ AMT+++ 6.30% 12/1/2027 Aaa $ 1,000M $ 1,070,000
Washington St Hsg Fin Comm Sing Fam Mtge Rev
GNMA+ AMT+++ 6.65% 7/1/2016 AAA 670M 690,938
Washington St Hsg Fin Comm Sing Fam Mtge Rev
GNMA+ AMT+++ 7.05% 7/1/2022 AAA 1,520M 1,653,000
Total 7,721,750
- -------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Puerto Rico Tel Auth Rev RIBS MBIA+ 7.168% 1/16/2015++ AAA 500M 532,500
- -------------------------------------------------------------------------------------------------------------------============
Miscellaneous 1.01% Bellevue WA Convention Ctr Auth Spcl Oblig Rev MBIA
Zero Coupon 2/1/2024 AAA 1,400M 371,000
Spokane WA Pub Facs Dist AMBAC+ 6 1/2% 1/1/2018 AAA 250M 268,750
Total 639,750
- -------------------------------------------------------------------------------------------------------------------============
Power 19.14% Chelan Co WA Pub Util Dist Ser A MBIA+ AMT+++ 6.40%
7/1/2017 AAA 1,000M 1,115,000
Chelan Co WA Pub Util Dist Ser D MBIA+ AMT+++ 6.35%
7/1/2028 AAA 2,425M 2,694,781
Douglas Co WA Pub Util Dist No 1 Wells Hydroelec
AMBAC+ 8 3/4% 9/1/2006 AAA 5,460M 6,538,350
Douglas Co WA Pub Util Dist No 1 Wells Hydroelec 8 3/4%
9/1/2018 A 350M 448,437
Washington St Pub Supply Ser B 7 3/8% 7/1/2004 Aa 1,250M 1,356,250
Total 12,152,818
- -------------------------------------------------------------------------------------------------------------------============
Transportation 6.69% Port Kalama WA Rev Ser B 5 5/8% 12/1/2015 Baa 400M 410,000
Port Seattle WA Rev Ser B AMT+++ 7.60% 12/1/2009 AA 750M 828,750
Port Seattle WA Rev Ser B AMT+++ 6.70% 11/1/2010 AA 250M 273,125
Port Tacoma WA AMBAC+ AMT+++ 5.30% 12/1/2017 AAA 750M 754,688
Puerto Rico Commonwealth Hwy & Trans Auth Hwy Rev Ser Y
5 1/2% 7/1/2036 A 1,900M 1,983,125
Total 4,249,688
- -------------------------------------------------------------------------------------------------------------------============
Water and Sewer 6.02% Pasco WA Wtr & Sewer Rev MBIA+ 6.40% 6/1/2014 AAA 865M 952,581
Richland WA Wtr & Sewer Rev MBIA+ 6 1/4% 4/1/2012 AAA 250M 265,938
Seattle WA Drain & Wtr 5 3/4% 12/1/2022 AA 1,500M 1,561,875
Seattle WA Wtr Sys Rev 5 1/4% 12/1/2023 AA 1,040M 1,045,200
Total 3,825,594
------------------------------------------------------------------------------------------============
Total Municipal Bonds 97.95% (Cost $58,496,117) 62,198,406
===============================================================================================================================
Other Assets, Less Liabilities 2.05%
===============================================================================================================================
Short-Term Securities California St 4 1/2% 6/30/1998 (Cost $400,688) AAA 400M 400,712
- -------------------------------------------------------------------------------------------------------------------============
Cash and Receivables,
Net of Liabilities 903,975
------------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities 1,304,687
===============================================================================================================================
Net Assets 100.00% $63,503,093
===============================================================================================================================
Net asset value ($63,503,093 / 12,106,635 shares outstanding) $5.25
* 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
March 31, 1998. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative Minimum
Tax.
See Notes to Financial Statements.
</TABLE>
22
<PAGE>
Statement of Net Assets
MINNESOTA SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 27.81% Brainerd MN Health Care Facs/Benedictine Health/St
Joseph Prjt 8 3/8% 2/15/2020 AAA $ 775M $ 850,563
Minneapolis & St Paul MN Hsg & Redev Auth Health Care
Ser B 8% 8/15/2014 AAA 650M 719,875
Minneapolis MN Hosp Rev MN Childrens Med Ctr Prjt C
7.30% 12/1/2006 AAA 200M 222,250
Minneapolis MN Hosp Rev MN Childrens Med Ctr Prjt C 7%
12/1/2020 AAA 200M 220,500
Minnesota St Hsg Fin Agy Sing Fam Mtge 6.80% 8/1/2002 AAA 1,000M 1,061,250
Puerto Rico Commonwealth 6.45% 7/1/2017 AAA 275M 312,813
St Louis Park MN Health Care Facs Rev 9 1/4% 1/1/2020 AAA 100M 110,500
Western MN Muni Pwr Agy MN 1977 Ser A 6 3/8% 1/1/2016 AAA 205M 228,062
Total 3,725,813
- -------------------------------------------------------------------------------------------------------------------============
General Obligation Minnesota St G.O. 5 1/4% 8/1/2014 AA 265M 270,630
State 2.02%
- -------------------------------------------------------------------------------------------------------------------============
General Obligation Champlin MN MBIA+ 5.60% 2/1/2021 Aaa 250M 257,812
Local 19.42%
Chicago Lakes MN Indpt Sch Dist No 2144 MBIA+ 5% 2/1/2023 Aaa 250M 243,750
Lakeville MN Indpt Sch Dist No 194 FSA+ Zero Coupon
2/1/2016 Aaa 1,140M 454,575
Minneapolis MN 5 1/8% 10/1/2020 Aaa 500M 504,375
Minneapolis MN Spcl Sch Dist FGIC+ 5 3/8% 2/1/2014 AAA 250M 256,563
North St Paul Maplewood MN Indpt Sch Dist 5 1/8% 2/1/2020 AA 400M 400,000
Princeton MN Indpt Sch Dist No 477 5% 2/1/2021 Aa 500M 484,375
Total 2,601,450
- -------------------------------------------------------------------------------------------------------------------============
Education 10.74% Minnesota St Higher Ed Facs Auth/Macalester Coll 5.55%
3/1/2017 Aa 260M 271,050
Minnesota St Higher Ed Facs Auth/Univ St Thomas 5.35%
4/1/2017 A 250M 254,375
Minnesota St Higher Ed Facs Auth/Univ St Thomas Ser 4-A1
5 5/8% 10/1/2016 A 250M 259,375
Puerto Rico Indl Tourist Edl Med & Environmental American
Univ 5% 10/1/2022 AAA 390M 379,763
University of MN 5 3/4% 7/1/2018 AA 250M 274,375
Total 1,438,938
- -------------------------------------------------------------------------------------------------------------------============
Health and Hospital Minneapolis & St Paul MN Hsg & Redev Auth Health Care Sys
14.82% Health One MBIA+ 6 3/4% 8/15/2014 AAA 245M 262,455
Minneapolis & St Paul MN Hsg & Redev Auth Health Care Sys
Children Hlth CGIC+ 5.70% 8/15/2016 AAA 150M 158,438
Minneapolis & St Paul MN Hsg & Redev Auth Health Care Sys
Group Hlth Plan 6.90% 12/1/2022 A 300M 332,625
Minnesota Agric & Economic Dev Brd Rev Fairview Hosp
MBIA+ 5 1/2% 11/15/2017 Aaa 220M 229,900
Rochester MN Health Care Ser H RIBS 8.23% 11/15/2015++ AA 650M 748,312
St Paul MN Hsg & Redev Auth Hosp Rev 5.70% 11/1/2015 BBB 250M 253,750
Total 1,985,480
- -------------------------------------------------------------------------------------------------------------------============
Housing 11.31% Minnesota St Hsg Fin Agy Sing Fam Mtge AMT+++ 5.85% 7/1/2019 AA 250M 257,813
Minnesota St Hsg Fin Agy Sing Fam Mtge Ser B-1 RMK
AMT+++ 6 3/4% 1/1/2026 AA 95M 101,294
Minnesota St Hsg Fin Agy Sing Fam Mtge Ser D AMT+++ AA 250M 266,563
6.40% 7/1/2015
Minnesota St Hsg Fin Agy Sing Fam Mtge Ser E RMK AA 250M 261,875
5.90% 7/1/2025
Minnesota St Hsg Fin Agy Sing Fam Mtge Ser G AMT+++ AA 250M 264,063
6 1/4% 7/1/2026
Minnesota St Hsg Fin Agy Sing Fam Mtge Ser B AMT+++ AA 250M 256,563
5.65% 7/1/2022
St Louis Park MN Multi-Fam Hsg FHA+ 6.15% 12/1/2016 Aa 100M 106,875
Total 1,515,046
- -------------------------------------------------------------------------------------------------------------------============
Miscellaneous 5.04% St Cloud MN Ctfs Partn 5.90% 12/1/2017 BBB 200M 204,000
St Paul MN 4 3/4% 2/1/2019 AA 250M 237,187
</TABLE>
23
<PAGE>
Statement of Net Assets
MINNESOTA SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
St Paul MN Ctfs Partn 4 3/4% 2/1/2025 AA $ 250M $ 234,375
Total 675,562
- -------------------------------------------------------------------------------------------------------------------============
Pollution Control Minnesota Pub Facs Auth Wtr 4 3/4% 3/1/2017 AAA 300M 285,750
Revenue 2.14%
- -------------------------------------------------------------------------------------------------------------------============
Water and Sewer 2.06% Marshall MN Elec & Wtr Util FSA+ 6.45% 7/1/2011 AAA 150M 164,062
Minnesota Pub Facs Auth Wtr Poll Ctrl Rev Ser A 6 1/4%
3/1/2016 AAA 100M 111,500
Total 275,562
------------------------------------------------------------------------------------------============
Total Municipal Bonds 95.36% (Cost $12,446,683) 12,774,231
===============================================================================================================================
Other Assets, Less Liabilities 4.64%
===============================================================================================================================
Cash 512,978
- -------------------------------------------------------------------------------------------------------------------============
Receivable for: Interest 157,595
Capital stock sold 4,766
Total Other Assets 675,339
------------------------------------------------------------------------------------------============
Payable for: Capital stock reacquired 3,000
Distributions 41,834
Other 9,008
------------------------------------------------------------------------------------------------------
Total Other Assets, Less Liabilities 621,497
===============================================================================================================================
Net Assets 100.00% $13,395,728
===============================================================================================================================
Net asset value ($13,395,728 / 2,631,346 shares outstanding) $5.09
* 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
March 31, 1998. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative Minimum
Tax.
See Notes to Financial Statements.
</TABLE>
Statement of Net Assets
CALIFORNIA SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 26.24% California Ed Fac Auth Rev/Loyola Marymount Univ Ser B
6.60% 10/1/2022 AAA $ 1,900M $ 2,120,875
California St Dept Wtr Res Cent Valley Prjt Rev Wtr Sys
Ser P 6.10% 12/1/2029 AAA 5,000M 5,650,000
Capistrano CA Unified Sch Dist Co Fac Dist Spcl Tax
8 3/8% 10/1/2020 AAA 2,500M 2,803,125
East Bay CA Muni Util Dist Wtr Sys Rev AMBAC+ 6 1/2%
6/1/2017 AAA 9,935M 11,350,738
East Bay Muni Wtr Sys MBIA+ 7 1/2% 6/1/2018 AAA 1,750M 1,909,688
Local Govt Fin/Anaheim Redev 8.20% 9/1/2015 AAA 1,500M 1,557,345
Los Angeles CA Convention Ctfs Ser A 7 3/8% 8/15/2018 AAA 6,900M 7,331,250
Los Angeles CA Trans Comm Sales Tax Rev MBIA+ 7% 7/1/2019 AAA 4,960M 5,251,400
North City West CA Sch Facs Fin Auth Spcl Tax Ser A 7.85%
9/1/2019 AAA 1,525M 1,639,375
Northern CA Transmission Rev Ser A MBIA+ 7% 5/1/2024 AAA 1,750M 1,881,250
Puerto Rico Commonwealth 6% 7/1/2026 AAA 1,000M 1,138,750
Puerto Rico Commonwealth Hwy Auth Rev Ser Q 8% 7/1/2018 AAA 3,500M 3,867,500
Sacramento CA Muni Util Dist Elec Rev MBIA+ 6 3/8%
8/15/2022 AAA 1,000M 1,106,250
San Francisco CA Bay Area Rapid Trans Dist Sales Tax Rev
FGIC+ 6.60% 7/1/2012 AAA 1,540M 1,684,375
San Francisco CA City & Co Pub Util Wtr Rev 6 1/2%
11/1/2017 AAA 7,000M 7,682,500
Santa Clara CA Ctfs 7.80% 11/1/2013 AAA 1,295M 1,396,981
</TABLE>
24
<PAGE>
Statement of Net Assets
CALIFORNIA SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Santa Clara CA Elec Rev Ser A MBIA+ 6 1/4% 7/1/2019 AAA $ 3,890M $ 4,215,787
Vallejo CA Rev Wtr Imp FGIC+ 6 1/2% 11/1/2014 AAA 6,565M 7,443,069
Total 70,030,258
- -------------------------------------------------------------------------------------------------------------------============
General Obligation Puerto Rico Commonwealth 4 1/2% 7/1/2023 A 4,000M 3,605,000
State 1.35%
General Obligation Fresno CA Uni Sch Dist Ser C FSA+ 5 3/8% 8/1/2021 AAA 2,000M 2,032,500
Local 0.76%
Education 12.36% California Ed Facs Auth Rev/Pooled College Proj 6.30%
4/1/2021 Baa 1,000M 1,078,750
California Ed Facs Auth Rev/Sanford Univ Ser M 5 1/4%
12/1/2026 AAA 3,200M 3,204,000
California Ed Facs Auth Rev/Univ of San Francisco MBIA+
6% 10/1/2016 AAA 1,500M 1,638,750
California Ed Facs Auth Rev/Univ of San Francisco MBIA+
6% 10/1/2026 AAA 10,500M 11,431,875
California St Univ Rev FGIC+ 5.90% 11/1/2021 AAA 7,700M 8,248,625
University CA Rev AMBAC+ 6% 7/1/2026 AAA 6,825M 7,371,000
Total 32,973,000
- -------------------------------------------------------------------------------------------------------------------============
Health and Hospital California Health Fac Auth Rev/Cedarknoll CA MTG+ 7 1/2%
1.54% 8/1/2020 A 1,000M 1,082,500
California Health Fac Auth Rev/San Diego Hosp Assn
MBIA+ 6.95% 10/1/2021 AAA 2,750M 3,035,312
Total 4,117,812
- -------------------------------------------------------------------------------------------------------------------============
Housing 6.58% California Hsg Fin Agy Rev Home Mtge Ser A 7 3/8% 8/1/2017 Aa 7,085M 7,430,394
California St Hsg Fin Agy Home Mtge Rev Ser L
MBIA+ AMT+++ 6.40% 8/1/2027 AAA 6,625M 7,130,156
California St Vet Bonds 5.45% 12/1/2028 A 3,000M 3,007,500
San Diego CA Sing Fam Mtge Rev 9.20% 7/15/2016 Aa 5M 5,394
Total 17,573,444
- -------------------------------------------------------------------------------------------------------------------============
Miscellaneous 7.42% Anaheim CA Pub Fing Auth Lease Rev FSA+ Zero Coupon
9/1/2036 AAA 33,150M 4,392,375
California St Pub Wks Bd Lease Rev 5 1/4% 10/1/2017 A 1,000M 1,001,250
California St Pub Wks Bd Lease Rev Ref Various Comm PJ-B
AMBAC+ 5 5/8% 3/1/2019 AAA 3,000M 3,146,250
Concord CA Redev Agy 3rd Ser MBIA+ 8% 7/1/2018 AAA 35M 36,038
Los Angeles Co CA Pub Wks Fing Auth Rev 5% 10/1/2016 AA 5,375M 5,274,219
Orange Co CA Recovery Cts Partner Ser A MBIA+ 6% 7/1/2026 AAA 3,205M 3,473,419
San Jose CA Redev Agy Tax Allocation 5 1/4% 8/1/2029 A 2,500M 2,465,625
Total 19,789,176
- -------------------------------------------------------------------------------------------------------------------============
Pollution Control California Poll Ctrl Rev/So CA Edison AMBAC+ AMT+++ 6.40%
Revenue 4.10% 12/1/2024 AAA 10,000M 10,950,000
- -------------------------------------------------------------------------------------------------------------------============
Power 12.12% Los Angeles CA Dept Wtr & Pwr Elec Plt Rev FGIC+ 5.40%
11/15/2031 AAA 1,000M 1,012,500
Northern CA Transmission Rev MBIA+ 6 1/2% 5/1/2016 AAA 4,250M 4,643,125
Northern CA Transmission Rev RIBS MBIA+ 6.812%
4/29/2024++ AAA 8,500M 8,776,250
Palo Alto CA Util Rev Ser A 6 1/4% 6/1/2020 AA 2,860M 3,167,450
Puerto Rico Elec Pwr Auth Rev 4 3/4% 7/1/2024 A 2,000M 1,857,500
Puerto Rico Elec Pwr Auth Rev 5% 7/1/2028 A 3,500M 3,346,875
Puerto Rico Elec Pwr Auth Rev Ser D 7 1/8% 7/1/2014 AAA 500M 526,250
Sacramento CA Muni Util Dist Elec Rev RIBS FGIC+ 8.97%
8/15/2018++ AAA 6,000M 7,057,500
Turlock Irr Dist Rev RF-A-CA MBIA+ 5% 1/1/2026 AAA 2,000M 1,942,500
Total 32,329,950
- -------------------------------------------------------------------------------------------------------------------============
Solid Waste 1.10% California Poll Ctrl Fin Auth Solid Waste Rev/Browning
Ferris AMT+++ 6 3/4% 9/1/2019 A 2,600M 2,931,500
- -------------------------------------------------------------------------------------------------------------------============
Transportation 13.01% Los Angeles CA Dept Arpts Rev Ontario Intl Arpt Ser A
FGIC+ AMT+++ 6% 5/15/2026 AAA 2,750M 2,939,063
Los Angeles CA Hbr Rev Ser B MBIA+ AMT+++ 5 3/8%
11/1/2019 AAA 5,000M 5,043,750
Los Angeles CA Hbr Rev Ser B AMT+++ 5 3/8% 11/1/2023 AA 6,525M 6,541,312
Los Angeles CA Hbr Rev Ser B AMT+++ 6 5/8% 8/1/2025 AA 1,000M 1,091,250
Port Oakland CA Port Rev MBIA+ 5.60% 11/1/2019 AAA 1,750M 1,833,125
</TABLE>
25
<PAGE>
Statement of Net Assets
CALIFORNIA SERIES March 31, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===============================================================================================================================
<S> <C> <C> <C> <C>
Puerto Rico Commonwealth Hwy & Trans Auth Rev 5% 7/1/2038 A $ 1,000M $ 948,750
San Francisco CA City & Co Arpt Comm Intl Arpt Rev
AMBAC+ AMT+++ 5 1/4% 1/1/2020 AAA 1,500M 1,490,625
San Francisco CA City & Co Arpt Comm Intl Arpt Rev FGIC+
5 5/8% 5/1/2021 AAA 2,000M 2,082,500
San Francisco CA City & Co Arpt Comm Intl Arpt Rev FGIC+
6.10% 5/1/2025 AAA 2,000M 2,155,000
San Francisco CA City & Co Arpt Comm Intl Arpt Rev Ser I
AMBAC+ AMT+++ 6 1/2% 5/1/2018 AAA 4,500M 5,006,250
San Francisco CA City & Co Arpt Comm Intl Arpt Rev 2nd Ser
MBIA+ 6 3/4% 5/1/2020 AAA 5,000M 5,600,000
Total 34,731,625
- -------------------------------------------------------------------------------------------------------------------============
Water and Sewer 12.09% California St Dept Wtr Rev Cent Vy Ser O 4 3/4% 12/1/2018 AA 2,000M 1,892,500
California St Dept Wtr Rev Ser O 5% 12/1/2022 AA 2,240M 2,167,200
East Bay CA Muni Util Dist Wastewtr Treatment Sys Rev
RIBS AMBAC+ 6.87% 6/1/2020++ AAA 1,750M 1,837,500
Los Angeles CA Wastewtr Rev Ser C 7.10% 6/1/2018 A 5,980M 6,293,950
Metropolitan Wtr Dist So CA Wtrwks Rev RIBS 7.907%
8/5/2022++ AA 7,300M 8,121,250
Metropolitan Wtr Dist So CA Wtrwks Rev Ser B MBIA+ 4 3/4%
7/1/2021 AAA 7,015M 6,594,100
Vallejo CA Rev Ref Wtr Imp Prjt Ser A FSA+ 5 7/8%
5/1/2026 AAA 5,000M 5,362,500
Total 32,269,000
------------------------------------------------------------------------------------------============
Total Municipal Bonds 98.67% (Cost $246,700,960) 263,333,265
===============================================================================================================================
Other Assets, Less Liabilities 1.33%
===============================================================================================================================
Short-Term Securities California St 4 1/2% 6/30/1998 (Cost $3,906,758) AAA 3,900M 3,906,942
- -------------------------------------------------------------------------------------------------------------------============
Cash and Receivables,
Net of Liabilities (361,592)
------------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities 3,545,350
===============================================================================================================================
Net Assets 100.00% $266,878,615
===============================================================================================================================
Class A Shares-Net asset value ($252,335,979 / 23,273,861 shares outstanding) $10.84
Class C Shares-Net asset value ($14,542,636 / 1,341,626 shares outstanding) $10.84
* 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
March 31, 1998. See page 1 for additional information.
+++ Income from these investments may be subject to the Alternative Minimum
Tax.
See Notes to Financial Statements.
</TABLE>
26
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Six Months Ended 3/31/98
----------------------------------------------------------------------------
National New York Texas New Jersey Connecticut
Investment Income Series Series Series Series Series
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Income
Interest $ 19,858,531 $ 8,811,025 $ 2,659,598 $ 5,323,736 $ 3,487,057
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fee 1,624,785 748,748 227,351 463,730 301,091
12b-1 distribution plan 1,015,073 402,158 131,879 231,863 126,458
Shareholder servicing 179,325 74,524 25,150 51,544 22,495
Registration 26,000 2,160 1,200 1,000 500
Reports to shareholders 47,429 20,712 6,267 12,652 8,187
Audit and tax 29,925 16,430 8,480 13,335 9,525
Legal 9,000 4,380 2,400 6,000 2,500
Directors 12,018 6,140 1,379 3,715 1,872
Other 58,356 12,140 6,989 7,532 6,754
Total expenses 3,001,911 1,287,392 411,095 791,371 479,382
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income 16,856,620 7,523,633 2,248,503 4,532,365 3,007,675
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
====================================================================================================================================
Realized gain from investment transactions
Proceeds from sales 1,033,654,678 97,585,308 90,172,749 124,183,937 37,990,538
Cost of investments sold 1,022,982,656 96,390,103 89,484,089 121,964,475 37,980,099
Net realized gain 10,672,022 1,195,205 688,660 2,219,462 10,439
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investments (753,681) 2,830,757 240,788 1,367,414 1,080,110
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 9,918,341 4,025,962 929,448 3,586,876 1,090,549
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 26,774,961 $11,549,595 $ 3,177,951 $ 8,119,241 $ 4,098,224
===================================================================================================================================
<CAPTION>
Six Months Ended 3/31/98
----------------------------------------------------------------------------
Missouri Hawaii Washington Minnesota California
Investment Income Series Series Series Series Series
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Income
Interest $ 4,054,860 $ 2,291,451 $ 1,886,088 $ 320,559 $ 7,947,997
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fee 353,612 199,663 163,681 29,762 678,333
Management fee waived (17,497) (13,205) (2,740) (29,762) --
12b-1 distribution plan 217,018 123,572 -- -- 428,067
Shareholder servicing 47,868 21,808 24,157 5,235 54,853
Registration 1,800 452 1,700 910 1,800
Reports to shareholders 9,585 5,763 4,603 690 18,900
Audit and tax 10,020 7,650 7,515 4,863 15,195
Legal 1,950 1,206 1,000 295 3,900
Directors 2,356 2,093 1,279 164 4,669
Organization -- -- -- 677 --
Other 14,826 13,354 9,051 3,754 16,675
Total expenses 641,538 362,356 210,246 16,588 1,222,392
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income 3,413,322 1,929,095 1,675,842 303,971 6,725,605
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain on Investments
===================================================================================================================================
Realized gain from investment transactions
Proceeds from sales 50,563,720 14,737,603 60,436,130 3,026,667 192,472,418
Cost of investments sold 49,886,942 14,602,821 58,742,783 3,003,199 191,520,648
Net realized gain 676,778 134,782 1,693,347 23,468 951,770
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investments 862,642 974,837 (647,102) 63,689 2,036,972
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1,539,420 1,109,619 1,046,245 87,157 2,988,742
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 4,952,742 $ 3,038,714 $ 2,722,087 $ 391,128 $ 9,714,347
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
27
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended 3/31/98
-----------------------------------------------
National New York Texas
Increase (Decrease) in Net Assets Series Series Series
===========================================================================================================
<S> <C> <C> <C>
Operations
Net investment income $ 16,856,620 $ 7,523,633 $ 2,248,503
Net realized gain from investment transactions 10,672,022 1,195,205 688,660
Net unrealized appreciation (depreciation) of investments (753,681) 2,830,757 240,788
- -----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 26,774,961 11,549,595 3,177,951
Distributions to shareholders from
Net investment income (16,094,338) (7,646,163) (2,371,329)
Net realized gain from investment transactions -- -- (776,439)
Total distributions (16,094,338) (7,646,163) (3,147,768)
- -----------------------------------------------------------------------------------------------------------
Capital share transactions
Net proceeds from sales of shares 20,123,973 5,820,077 1,817,503
Net asset value of shares issued to shareholders in
reinvestment of net investment income and realized gain
from investment transactions 8,683,245 4,430,898 1,771,991
Total 28,807,218 10,250,975 3,589,494
- -----------------------------------------------------------------------------------------------------------
Cost of shares reacquired (37,911,247) (21,511,044) (4,736,438)
- -----------------------------------------------------------------------------------------------------------
Decrease in net assets derived from share transactions (9,104,029) (11,260,069) (1,146,944)
- -----------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 1,576,594 (7,356,637) (1,116,761)
- -----------------------------------------------------------------------------------------------------------
Net Assets
Beginning of period 646,736,214 300,489,898 91,300,874
- -----------------------------------------------------------------------------------------------------------
End of period+ $ 648,312,808 $ 293,133,261 $ 90,184,113
===========================================================================================================
<CAPTION>
Year Ended 9/30/97
-----------------------------------------------
National New York Texas
Increase (Decrease) in Net Assets Series Series Series
===========================================================================================================
<S> <C> <C> <C>
Operations
Net investment income $ 34,451,971 $ 16,430,533 $ 4,976,196
Net realized gain from investment transactions 8,493,661 2,762,083 761,048
Net unrealized appreciation (depreciation) of investments 15,356,407 4,503,556 2,542,204
- -----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 58,302,039 23,696,172 8,279,448
Distributions to shareholders from
Net investment income (35,155,788) (16,684,783) (5,044,386)
Net realized 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 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 period 672,343,855 319,552,746 94,414,494
- -----------------------------------------------------------------------------------------------------------
End of period+ $ 646,736,214 $ 300,489,898 $ 91,300,874
===========================================================================================================
</TABLE>
+ Includes (overdistributed) net investment income of $(1,536,554), $(1,072,098)
and $(140,926) , respectively, at March 31, 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>
Six Months Ended 3/31/98
----------------------------------------------------------------
New Jersey Connecticut Missouri Hawaii
Increase (Decrease) in Net Assets Series Series Series Series
===========================================================================================================
<S> <C> <C> <C> <C>
Operations
Net investment income $ 4,532,365 $ 3,007,675 $ 3,413,322 $ 1,929,095
Net realized gain from investment
transactions 2,219,462 10,439 676,778 134,782
Net unrealized appreciation (depreciation)
of investments 1,367,414 1,080,110 862,642 974,837
Net increase in net assets resulting
from operations 8,119,241 4,098,224 4,952,742 3,038,714
- -----------------------------------------------------------------------------------------------------------
Distributions to shareholders from
net investment income (4,549,581) (3,076,642) (3,443,411) (1,935,842
- -----------------------------------------------------------------------------------------------------------
Capital share transactions
Net proceeds from sales of shares 7,627,206 5,561,412 6,743,102 2,305,019
Net asset value of shares issued to
shareholders in reinvestment of net
investment income 2,503,619 1,506,017 1,836,608 863,191
Total 10,130,825 7,067,429 8,579,710 3,168,210
- -----------------------------------------------------------------------------------------------------------
Cost of shares reacquired (15,313,843) (6,838,744) (8,093,151) (4,294,701
- -----------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets derived
from capital share transactions (5,183,018) 228,685 486,559 (1,126,491
- -----------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (1,613,358) 1,250,267 1,995,890 (23,619
- -----------------------------------------------------------------------------------------------------------
Net Assets
Beginning of period 184,464,845 119,908,803 140,280,258 79,079,489
- -----------------------------------------------------------------------------------------------------------
End of period+ $ 182,851,487 $ 121,159,070 $ 142,276,148 $ 79,055,870
===========================================================================================================
<CAPTION>
Six Months Ended 3/31/98
-----------------------------------------------
Washington Minnesota California
Increase (Decrease) in Net Assets Series Series Series
==========================================================================================
<S> <C> <C> <C>
Operations
Net investment income $ 1,675,842 $ 303,971 $ 6,725,605
Net realized gain from investment
transactions 1,693,347 23,468 951,770
Net unrealized appreciation (depreciation)
of investments (647,102) 63,689 2,036,972
Net increase in net assets resulting
from operations 2,722,087 391,128 9,714,347
- ------------------------------------------------------------------------------------------
Distributions to shareholders from
net investment income (1,629,565) (316,217) (6,607,910)
- ------------------------------------------------------------------------------------------
Capital share transactions
Net proceeds from sales of shares 1,097,809 3,020,961 9,348,346
Net asset value of shares issued to
shareholders in reinvestment of net
investment income 962,112 189,025 2,910,709
Total 2,059,921 3,209,986 12,259,055
- ------------------------------------------------------------------------------------------
Cost of shares reacquired (5,864,560) (399,596) (21,495,911)
- ------------------------------------------------------------------------------------------
Increase (decrease) in net assets derived
from capital share transactions (3,804,639) 2,810,390 (9,236,856)
- ------------------------------------------------------------------------------------------
Increase (decrease) in net assets (2,712,117) 2,885,301 (6,130,419)
- ------------------------------------------------------------------------------------------
Net Assets
Beginning of period 66,215,210 10,510,427 273,009,034
- ------------------------------------------------------------------------------------------
End of period+ $ 63,503,093 $ 13,395,728 $ 266,878,615
==========================================================================================
</TABLE>
+ Includes (overdistributed) net investment income of $(395,466), $(40,826),
$(544,657), $(166,783), $(195,004), $(3,156) and $(753,687), respectively, at
March 31, 1998.
See Notes to Financial Statements.
28
<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 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 period 186,402,302 122,884,988 134,143,954 85,344,275
- -----------------------------------------------------------------------------------------------------------------------------
End of period+ $ 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 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 period 71,295,329 8,046,889 294,837,480
- -----------------------------------------------------------------------------------------------------------
End of period+ $ 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.
29
<PAGE>
Financial Highlights
NATIONAL SERIES
<TABLE>
<CAPTION>
Class A Shares
---------------------------------------------------------------------------
Six Months Year
Ended 3/31, Ended 9/30,
Per Share Operating Performance: 1998 1997 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.48 $11.08 $11.00 $10.62 $12.37 $11.72
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income .304 .587 .603 .626 .657) .695
Net realized and unrealized gain (loss)on investments .177 .415 .075 .382 (1.3124 .9255
Total from investment operations .481 1.002 .678 1.008 (.6554) 1.6205
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.291) (.602) (.598) (.628) (.6596) (.693)
Distributions from net realized gain -- -- -- -- (.435) (.2775)
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.67 $11.48 $11.08 $11.00 $10.62 $12.37
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 4.23%(b) 9.30%(b) 6.31% 9.84% (5.64)% 14.57%
====================================================================================================================================
Ratios to Average Net Assets:
Expenses 0.44%(b) 0.87%(b) 0.90%+ 0.82% 0.86% 0.87%
Net investment income 2.62%(b) 5.27%(b) 5.63%+ 5.92% 5.76% 5.79%
==============================================================================================================================
<CAPTION>
Class B Shares Class C Shares
------------------------------------------------------------------------------------------
Six Months Year Six Months Year
Ended 3/31, Ended 9/30, 8/1/96(c) Ended 3/31, 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 .260 .553 .089 .263 .507 .106
Net realized and unrealized
gain on investments .167 .413 .033 .177 .423 .190
Total from investment operations .427 .966 .122 .440 .930 .296
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.257) (.546) (.092) (.250) (.520) (.116)
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.67 $11.50 $11.08 $11.68 $11.49 $11.08
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 3.75%(b) 8.95% 1.16%(b) 3.84%(b) 8.61% 2.71%(b)
====================================================================================================================================
Ratios to Average Net Assets:
Expenses 0.72%(b) 1.37% 0.20%(b) 0.81%(b) 1.59% 0.34%(b)
Net investment income 2.31%(b) 4.65% 0.68%(b) 2.28%(b) 4.54% 0.96%(b)
==============================================================================================================================
<CAPTION>
Six Months Year
Ended 3/31, Ended 9/30,
Supplemental Data for AllClasses: 1998 1997 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net assets, end of period (000) $648,313 $646,736 $672,344 $650,699 $662,380 $709,413
Portfolio turnover rate 144.10% 232.64% 205.35% 225.39% 184.07% 138.06%
==============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Not annualized.
(c) Commencement of offering respective Class shares.
See Notes to Financial Statements.
30
<PAGE>
Financial Highlights
NEW YORK SERIES
<TABLE>
<CAPTION>
Class A Shares
---------------------------------------------------------------------------------
Six Months Year
Ended 3/31, Ended 9/30,
Per Share Operating Performance: 1998 1997 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.03 $10.78 $10.85 $10.54 $12.27 $11.60
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .280 .578 .597 .610 .649 .682
Net realized and unrealized gain (loss) on
investments .156 .262 (.081) .316 (1.3665) .874
Total from investment operations .436 .840 .516 .926 (.7175) 1.556
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.286) (.590) (.586) (.616) (.6475) (.681)
Distributions from net realized gain -- -- -- -- (.365) (.205)
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.18 $11.03 $10.78 $10.85 $10.54 $12.27
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 3.99%(b) 8.01% 4.87% 9.12% (6.21)% 13.95%
====================================================================================================================================
Ratios to Average Net Assets:
Expenses 0.42%(b) 0.85% 0.81%+ 0.82% 0.83% 0.85%
Net investment income 2.53%(b) 5.35%(b) 5.54% 5.83% 5.72% 5.72%
==============================================================================================================================
<CAPTION>
Class C Shares
-------------------------------------------------
Six Months Year
Ended 3/31, 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 .246 .483 .111
Net realized and unrealized gain on investments .150 .267 .152
Total from investment operations .396 .750 .263
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.246) (.510) (.113)
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.17 $11.02 $10.78
Total Return(a) 3.63%(b) 7.13% 2.48%(b)
====================================================================================================================================
Ratios to Average Net Assets:
Expenses 0.77%(b) 1.57% 0.34%(b)
Net investment income 2.17%(b) 4.60% 1.04%(b)
===============================================================================================================================
<CAPTION>
Six Months Year
Ended 3/31, Ended 9/30,
Supplemental Data for AllClasses: 1998 1997 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net assets, end of period (000) $293,133 $300,490 $319,553 $331,618 $338,539 $376,456
Portfolio turnover rate 26.90% 110.28% 64.25% 105.62% 149.13% 101.59%
==============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Not annualized.
(c) Commencement of offering Class shares.
See Notes to Financial Statements.
31
<PAGE>
Financial Highlights
TEXAS SERIES
<TABLE>
<CAPTION>
Six Months Year
Ended 3/31, Ended 9/30,
Per Share Operating Performance: 1998 1997 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.40 $10.11 $10.05 $ 9.59 $ 10.82 $ 10.28
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .258 .548 .567 .571 .604 .624
Net realized and unrealized gain (loss)
on investments .104 .367 .045 .452 (1.0802) .7135
Total from investment operations .362 .915 .612 1.023 (.4762) 1.3375
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.272) (.555) (.552) (.563) (.6038) (.615)
Distributions from net realized gain (.09) (.07) -- -- (.15) (.1825)
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.40 $10.40 $10.11 $ 10.05 $ 9.59 $ 10.82
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 3.62%(b) 9.25%(b) 6.11%+ 11.14% (4.60)% 13.64%
====================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000) $90,184 $91,301 $94,414 $100,304 $103,836 $109,232
------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.45%(b) 0.88%(b) 0.69% 0.62% 0.50% 0.57%
Expenses, excluding waiver 0.45%(b) 0.88%(b) 0.87% 0.87% 0.87% 0.97%
Net investment income 2.47%(b) 5.38%(b) 5.58% 5.90% 5.97% 5.96%
Portfolio turnover rate 74.00% 127.88% 112.34% 108.00% 96.79% 58.10%
==============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Not annualized.
See Notes to Financial Statements.
Financial Highlights
NEW JERSEY SERIES
<TABLE>
<CAPTION>
Six Months Year
Ended 3/31, Ended 9/30,
Per Share Operating Performance: 1998 1997 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 5.32 $ 5.18 $ 5.14 $ 4.95 $ 5.55 $ 5.14
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .131 .272 .277 .287 .300 .318
Net realized and unrealized gain (loss)
on investments .101 .144 .041 .192 (.507) .439
Total from investment operations .232 .416 .318 .479 (.207) .757
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.132) (.276) (.278) (.289) (.303) (.307)
Distributions from net realized gain -- -- -- -- (.09) (.04)
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.42 $ 5.32 $ 5.18 $ 5.14 $ 4.95 $ 5.55
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 4.40%(b) 8.25% 6.29% 9.98% (3.91)% 15.26%
====================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000) $182,851 $184,465 $186,402 $191,562 $184,230 $178,767
------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.43%(b) 0.82%(b) 0.79% 0.72% 0.51% 0.35%
Expenses, excluding waiver 0.43%(b) 0.86%(b) 0.86% 0.87% 0.83% 0.83%
Net investment income 2.44%(b) 5.21%(b) 5.31% 5.73% 5.76% 5.88%
Portfolio turnover rate 65.61% 154.80% 171.63% 133.11% 75.62% 88.29%
==============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Not annualized.
See Notes to Financial Statements.
32
<PAGE>
Financial Highlights
CONNECTICUT SERIES
<TABLE>
<CAPTION>
Six Months Year
Ended 3/31, Ended 9/30,
Per Share Operating Performance: 1998 1997 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.42 $ 10.13 $ 10.12 $ 9.71 $ 11.01 $10.16
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .262 .556 .576 .579 .585 .612
Net realized and unrealized gain (loss)
on investments .096 .287 (.013) .407 (1.1287) .906
Total from investment operations .358 .843 .563 .986 (.5437) 1.518
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.268) (.553) (.553) (.576) (.6038) (.608)
Distributions from net realized gain -- -- -- -- (.1525) (.06)
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.51 $ 10.42 $ 10.13 $ 10.12 $ 9.71 $11.01
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 3.47%(b) 8.56%(b) 5.70% 10.52% (5.13)% 15.48%
====================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000) $121,159 $119,909 $122,885 $113,436 $101,619 $93,020
------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.40%(b) 0.59% 0.38% 0.41% 0.49% 0.44%
Expenses, excluding waiver 0.40%(b) 0.78% 0.80% 0.86% 0.86% 0.91%
Net investment income 2.50%(b) 5.45% 5.66% 5.89% 5.67% 5.60%
Portfolio turnover rate 27.85% 37.09% 63.61% 54.19% 97.42% 45.81%
==============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Not annualized.
See Notes to Financial Statements.
Financial Highlights
MISSOURI SERIES
<TABLE>
<CAPTION>
Six Months Year
Ended 3/31, Ended 9/30,
Per Share Operating Performance: 1998 1997 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 5.22 $ 5.08 $ 5.08 $ 4.88 $ 5.51 $ 5.14
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .127 .268 .267 .277 .2926 .305
Net realized and unrealized gain (loss)
on investments .051 .138 .008 .204 (.5681) .381
Total from investment operations .178 .406 .275 .481 (.2755) .686
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.128) (.266) (.275) (.281) (.297) (.301)
Distributions from net realized gain -- -- -- -- (.0575) (.015)
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.27 $ 5.22 $ 5.08 $ 5.08 $ 4.88 $ 5.51
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 3.45%(b) 8.22% 5.54% 10.21% (5.22)% 13.80%
====================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000) $142,276 $140,280 $134,144 $131,823 $119,690 $107,478
------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.45%(b) 0.70%(b) 0.77% 0.74% 0.60% 0.48%
Expenses, excluding waiver 0.47%(b) 0.94% 0.92% 0.89% 0.91% 0.92%
Net investment income 2.41%(b) 5.22% 5.21% 5.61% 5.60% 5.66%
Portfolio turnover rate 34.63% 27.34% 93.17% 58.17% 50.59% 56.20%
==============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Not annualized.
See Notes to Financial Statements.
33
<PAGE>
Financial Highlights
HAWAII SERIES
<TABLE>
<CAPTION>
Six Months Year
Ended 3/31, Ended 9/30,
Per Share Operating Performance: 1998 1997 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 5.07 $ 4.93 $ 4.91 $ 4.72 $ 5.34 $ 4.89
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .124 .266 .273 .271 .2918 .297
Net realized and unrealized gain (loss)
on investments .070 .138 .015 .198 (.578) .454
Total from investment operations .194 .404 .288 .469 (.2862) .751
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.124) (.264) (.268) (.279) (.2888) (.301)
Distribution from net realized gain -- -- -- -- (.045) --
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.14 $ 5.07 $ 4.93 $ 4.91 $ 4.72 $ 5.34
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 3.87%(b) 8.42% 5.94% 10.30% (5.54)% 15.85%
====================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000) $79,056 $79,079 $85,344 $86,105 $92,972 $92,883
------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.45%(b) 0.58% 0.57% 0.58% 0.41% 0.40%
Expenses, excluding waiver 0.47%(b) 0.87%(b) 0.87% 0.87% 0.87% 0.90%
Net investment income 2.42%(b) 5.39% 5.46% 5.74% 5.80% 5.62%
Portfolio turnover rate 17.98% 29.09% 59.46% 70.64% 66.04% 34.49%
==============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Not annualized.
See Notes to Financial Statements.
Financial Highlights
WASHINGTON SERIES
<TABLE>
<CAPTION>
Six Months Year
Ended 3/31, Ended 9/30,
Per Share Operating Performance: 1998 1997 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 5.16 $ 4.96 $ 4.91 $ 4.72 $ 5.35 $ 4.92
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .135 .268 .271 .277 .2976 .304
Net realized and unrealized gain (loss)
on investments .087 .206 .056 .200 (.5895) .427
Total from investment operations .222 .474 .327 .477 (.2919) .731
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.132) (.274) (.277) (.287) (.2931) (.301)
Distribution from net realized gain -- -- -- -- (.045) --
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.25 $ 5.16 $ 4.96 $ 4.91 $ 4.72 $ 5.35
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 4.31%(b) 9.82%(b) 6.80% 10.48% (5.65)% 15.32%
====================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000) $63,503 $66,215 $71,295 $74,359 $78,854 $77,324
------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.32%(b) 0.57% 0.60% 0.53% 0.29% 0.30%
Expenses, excluding waiver 0.33%(b) 0.62% 0.68% 0.68% 0.67% 0.80%
Net investment income 2.57%(b) 5.36% 5.47% 5.84% 5.93% 5.86%
Portfolio turnover rate 64.15% 132.37% 78.02% 92.85% 137.74% 85.45%
==============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Not annualized.
See Notes to Financial Statements.
34
<PAGE>
Financial Highlights
MINNESOTA SERIES
<TABLE>
<CAPTION>
Six Months Year
Ended 3/31 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 .131 .273 .294 .230
Net realized and unrealized gain (loss) on investments .045 .155 (.078) .249
Total from investment operations .176 .428 .216 .479
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.136) (.278) (.286) (.229)
Distribution from net realized gain -- -- (.04) --
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.09 $ 5.05 $4.90 $5.01
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 3.52%(b) 8.97% 4.44% 10.22%(b)
====================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000) $13,396 $10,510 $8,047 $4,315
------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.14%(b) 0.36%(b) 0.00% 0.00%(b)
Expenses, excluding waiver 0.39%(b) 0.86% 0.91% 0.64%(b)
Net investment income 2.55%(b) 5.51% 5.91% 4.58%(b)
Portfolio turnover rate 26.59% 41.45% 43.08% 121.41%
==============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Not annualized.
(c) Commencement of operations.
See Notes to Financial Statements.
35
<PAGE>
Financial Highlights
CALIFORNIA SERIES
<TABLE>
<CAPTION>
Class A Shares
-----------------------------------------------------------------------------------
Six Months Year One Month
Ended 3/31, Ended 9/30, Ended 9/30,
Per Share Operating Performance: 1998 1997 1996 1996 1995 1994
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.72 $10.43 $10.32 $10.41 $10.45 $11.79
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations
Net investment income .270 .560 .046 .566 .588 .623
Net realized and unrealized gain (loss)
on investments .117 .290 .112 (.089) (.038) (.989)
Total from investment operations .387 .850 .158 .477 .550 (.366)
----------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.267) (.560) (.048) (.567) (.590) (.624)
Distributions from net realized gain -- -- -- -- -- (.350)
----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.84 $10.72 $10.43 $10.32 $10.41 $10.45
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 3.64%(b) 8.39%(b) 1.53%(b) 4.65% 5.58% (3.33)%
==================================================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver 0.43%(b) 0.72% 0.07%(b) 0.75% 0.76% 0.67%
Expenses, excluding waiver 0.43%(b) 0.85% 0.07%(b) 0.86% 0.86% 0.87%
Net investment income 2.51%(b) 5.38% 0.44%(b) 5.41% 5.84% 5.63%
============================================================================================================================
</TABLE>
Class A Shares
---------------------
Year
Ended 8/31,
Per Share Operating Performance: 1993 1992
====================================================================
Net asset value, beginning of period $11.21 $10.78
- --------------------------------------------------------------------
Income (loss) from investment
operations
Net investment income .656 .663
Net realized and unrealized gain (loss)
on investments .872 .5615
Total from investment operations 1.528 1.2245
--------------------------------------------------------------
Distributions
Dividends from net investment income (.658) (.672)
Distributions from net realized gain (.290) (.1225)
--------------------------------------------------------------
Net asset value, end of period $11.79 $11.21
- --------------------------------------------------------------------
Total Return(a) 14.43% 11.79%
====================================================================
Ratios to Average Net Assets:
Expenses, including waiver 0.68% 0.67%
Expenses, excluding waiver 0.88% 0.87%
Net investment income 5.68% 5.87%
==============================================================
<TABLE>
<CAPTION>
Class C Shares
------------------------------------------------------------
Six Months Year One Month
Ended 3/31, 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 .225 .485 .039 .068
Net realized and unrealized gain on investments .123 .287 .113 .041
Total from investment operations .348 .772 .152 .109
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.228) (.482 ) (.042) (.069)
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.84 $10.72 $10.43 $10.32
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 3.27%(b) 7.59% 1.47%(b) 1.16%(b)
====================================================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver 0.79%(b) 1.46% 0.13%(b) 0.17%(b)
Expenses, excluding waiver 0.79%(b) 1.59% 0.13%(b) 0.21%(b)
Net investment income 2.15%(b) 4.64% 0.38%(b) 0.65%(b)
==============================================================================================================================
<CAPTION>
Six Months Year One Month Year
Supplemental Data Ended 3/31, Ended 9/30, Ended 9/30, Ended 8/31,
for AllClasses: 1998 1997 1996 1996 1995 1994 1993 1992
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net assets, end of
period (000) $266,879 $273,009 $294,837 $291,611 $296,274 $329,474 $336,291 $224,505
Portfolio turnover rate 62.84% 121.97% 2.74% 132.37% 100.20% 86.05% 81.34% 152.79%
==============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Not annualized.
(c) Commencement of offering Class shares.
See Notes to Financial Statements.
36
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Lord Abbett Tax-Free Income Fund, Inc. (the "Company") is an open-end management
investment company. The Company consists of ten separate portfolios ("Series").
Each Series is non-diversified as defined under the Investment Company Act of
1940 except for the National Series. The financial statements have been prepared
in conformity with generally accepted accounting principles, which require
management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Company.
(a) Market value is determined as follows: Securities are valued at latest
prices on the basis of valuations furnished by an independent pricing service
or, in their absence, at fair value as determined under procedures approved by
the Board of Directors.
(b) It is the policy of the Company to meet the requirements of the Internal
Revenue Code applicable to regulated investment com panies 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 securi ties 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 Min ne sota 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 remuner ation 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 March 31, 1998, other expenses
reimbursed by Lord Abbett and not repaid by the Minnesota Series amounted to
$43,480.
Each Series of the Company has Rule 12b-1 plans and agreements with respect to
one or more classes of shares as described below (the "Class A, Class B and
Class C Plans") with Lord Abbett Distributor llc ("Distributor"), an affiliate
of Lord Abbett. Each Series makes payments to Distributor which uses or passes
on such payments to authorized institutions. Pursuant to the Class A Plan, the
Series pays Distributor(1) an annual service fee of (a) 0.25% of the average
daily net assets of Class A shares of the Connecticut, Missouri and California
Series and (b) 0.15% of the average daily net asset value of shares sold prior
to the effective date of the Class A Plan and 0.25% of the average daily net
asset value of shares sold on or after that date for the National, New York,
Texas, New Jersey, Hawaii, Washington and Minnesota Series; (2) a one-time
distribution fee of up to 1% on certain qualifying purchases and (3) a
supplemental annual distribution fee of 0.10% of the average daily net assets of
Class A shares serviced by certain qualifying institutions. The Class A Plan of
the Washington and Minnesota Series will not go into effect until the quarter
subsequent to the net assets of each Series reaching $100 million. Pursuant to
the Class B Plan of the National Series, the Series pays Distributor an annual
service and distribution fee of 0.25% and 0.75%, respectively, of the average
daily net asset value of the Class B shares. Pursuant to the Class C Plan of the
National, New York and California Series, the Series pays Distributor (1) a
service fee and a distribution fee, at the time such shares are sold, not to
exceed 0.25% and 0.75%, respectively, of the net asset value of such shares sold
and (2) at each quarter-end after the first anniversary of the sale of such
shares, a service fee and a distribution fee at an annual rate not to exceed
0.25% and 0.75%, respectively, of the average annual net asset value of such
shares outstanding.
12b-1 distribution plan expenses for the multiple share class Series were as
follows:
12b-1 Expenses
------------------------------------------
Series Class A Class B Class C
- --------------------------------------------------------------------------------
National $788,784 $17,189 $209,100
- --------------------------------------------------------------------------------
New York 371,189 -- 30,969
- --------------------------------------------------------------------------------
California 357,912 -- 70,155
- --------------------------------------------------------------------------------
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 $42,624 $302,996
- --------------------------------------------------------------------------------
New York-Class A 26,117 115,939
- --------------------------------------------------------------------------------
Texas 10,121 65,798
- --------------------------------------------------------------------------------
New Jersey 22,296 156,165
- --------------------------------------------------------------------------------
Connecticut 20,265 135,460
- --------------------------------------------------------------------------------
Missouri 31,888 203,205
- --------------------------------------------------------------------------------
Hawaii 5,702 40,491
- --------------------------------------------------------------------------------
Washington 6,492 41,210
- --------------------------------------------------------------------------------
Minnesota 14,814 101,243
- --------------------------------------------------------------------------------
California-Class A 19,372 136,311
- --------------------------------------------------------------------------------
Certain of the Company's officers and directors have an interest in Lord Abbett.
37
<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>
Six Months Ended 3/31/98
-------------------------------------------------------------------------------------------
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 173,571 1,415,442 529,018 1,278,477 451,829 210,979 592,681
- ----------------------------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of net
investment income and realized
gain from investment transactions 169,768 465,906 143,735 349,805 169,034 184,970 37,198
- ----------------------------------------------------------------------------------------------------------------------------------
Total 343,339 1,881,348 672,753 1,628,282 620,863 395,949 629,879
- ----------------------------------------------------------------------------------------------------------------------------------
Shares reacquired (453,563) (2,839,348) (652,382) (1,538,530) (838,203) (1,121,973) (78,374)
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in shares (110,224) (958,000) 20,371 89,752 (217,340) (726,024) 551,505
- ----------------------------------------------------------------------------------------------------------------------------------
<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>
Six Months Ended 3/31/98
-----------------------------------------------------------------------------------------
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 1,347,100 $ 15,651,300 431,464 $ 4,812,348 753,648 $ 8,192,970
- -----------------------------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of net
investment income 699,666 8,115,466 390,867 4,347,600 256,165 2,768,200
- -----------------------------------------------------------------------------------------------------------------------------------
Total 2,046,766 23,766,766 822,331 9,159,948 1,009,813 10,961,170
- -----------------------------------------------------------------------------------------------------------------------------------
Shares reacquired (2,959,471) (34,382,409) (1,832,843) (20,446,646) (1,851,528) (20,081,967)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in shares (912,705) $(10,615,643) (1,010,510) $(11,286,698) (841,715) $(9,120,797)
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Six Months Ended 3/31/97
-----------------------------------------------------------------------------------------
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)
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Six Months Ended 3/31/98 Year Ended 9/30/97
------------------------------------------------------
National Series National Series
Class B Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales of shares 207,947 $2,420,429 207,299 $2,326,883
- -----------------------------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of net
investment income 3,410 39,599 3,026 33,961
- -----------------------------------------------------------------------------------------------------------------------------------
Total 211,357 2,460,028 210,325 2,360,844
- -----------------------------------------------------------------------------------------------------------------------------------
Shares reacquired (26,934) (314,120) (9,245) (104,667)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in shares 184,423 $2,145,908 201,080 $2,256,177
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
Notes to Financial Statements
<TABLE>
<CAPTION>
Six Months Ended 3/31/98
-----------------------------------------------------------------------------------
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 176,073 $2,052,245 90,357 $1,007,730 106,270 $1,155,379
- -----------------------------------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of net
investment income 45,497 528,181 7,494 83,298 13,192 142,508
- -----------------------------------------------------------------------------------------------------------------------------------
Total 221,570 2,580,426 97,851 1,091,028 119,462 1,297,887
- -----------------------------------------------------------------------------------------------------------------------------------
Shares reacquired (276,321) (3,214,720) (95,354) (1,064,399) (131,185) (1,413,946)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in shares (54,751) $ (634,294) 2,497 $ 26,629 (11,723) $ (116,059)
- -----------------------------------------------------------------------------------------------------------------------------------
<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 640,000,000 authorized shares outstanding (par value $.001)
allocated as follows: 120,000,000 to the National Series, 100,000,000 to each of
the New York and California Series, 80,000,000 to the New Jersey Series and
40,000,000 to each of the Texas, Connecticut, Missouri, Hawaii, Washington and
Minnesota Series.
4. Distributions
Dividends from net investment income are declared daily and paid monthly.
Taxable net realized gains from securities transactions, if any, reduced by
capital loss carryforwards will be distributed to shareholders annually. Income
and capital gains distributions are determined in accordance with income tax
regulations which may differ from methods used to determine the corresponding
income and capital gains amounts in accordance with generally accepted
accounting principles. The accumulated net realized gain (loss) for financial
reporting purposes, which is substantially the same as for federal income tax
purposes, aggregated $3,054,715 for the National Series, $(12,001,134) for the
New York Series, $651,841 for the Texas Series, $2,032,407 for the New Jersey
Series, $(1,900,145) for the Connecticut Series, $(3,694,925) for the Missouri
Series, $(2,054,514) for the Hawaii Series, $(944,504) for the Washington
Series, $(40,723) for the Minnesota Series and $(20,631,276) for the California
Series. The capital loss carryforwards expire in 2003, 2004, 2005 and 2006.
Dividends declared by class for the multiple class share Series were as follows:
Dividends
-------------------------------------------------
Series Class A Class B Class C
- --------------------------------------------------------------------------------
National $15,107,099 $89,712 $897,527
- --------------------------------------------------------------------------------
New York 7,503,134 -- 143,029
- --------------------------------------------------------------------------------
California 6,312,232 -- 295,678
- --------------------------------------------------------------------------------
5. Paid In Capital
At March 31, 1998, paid in capital for each Series was as follows:
- --------------------------------------------------------------------------------
National $620,362,174
- --------------------------------------------------------------------------------
New York 289,703,612
- --------------------------------------------------------------------------------
Texas 85,012,724
- --------------------------------------------------------------------------------
New Jersey 171,513,905
- --------------------------------------------------------------------------------
Connecticut 117,192,348
- --------------------------------------------------------------------------------
Missouri $137,627,586
- --------------------------------------------------------------------------------
Hawaii 76,980,042
- --------------------------------------------------------------------------------
Washington 60,940,288
- --------------------------------------------------------------------------------
Minnesota 13,112,059
- --------------------------------------------------------------------------------
California 271,631,097
- --------------------------------------------------------------------------------
6. Purchases and Sales of Securities
Purchases and sales of investment securities (other than short-term investments)
were as follows:
Series Purchases Sales
- --------------------------------------------------------------------------------
National $961,191,707 $959,010,630
- --------------------------------------------------------------------------------
New York 79,428,000 90,721,695
- --------------------------------------------------------------------------------
Texas 67,023,684 72,257,015
- --------------------------------------------------------------------------------
New Jersey 119,880,725 122,576,753
- --------------------------------------------------------------------------------
Connecticut 37,038,887 33,242,200
- --------------------------------------------------------------------------------
Missouri 49,851,806 48,553,594
- --------------------------------------------------------------------------------
Hawaii 14,915,003 14,235,102
- --------------------------------------------------------------------------------
Washington 41,403,971 45,851,384
- --------------------------------------------------------------------------------
Minnesota 5,455,572 3,026,668
- --------------------------------------------------------------------------------
California 170,591,452 184,941,529
- --------------------------------------------------------------------------------
39
<PAGE>
Notes to Financial Statements
Security gains and losses are computed on the identified cost basis. As of March
31, 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 $26,432,473 $28,737,520 $(2,305,047)
- --------------------------------------------------------------------------------
New York 16,502,881 17,601,833 (1,098,952)
- --------------------------------------------------------------------------------
Texas 4,660,474 5,121,368 (460,894)
- --------------------------------------------------------------------------------
New Jersey 9,700,641 10,272,723 (572,082)
- --------------------------------------------------------------------------------
Connecticut 5,907,693 7,171,018 (1,263,325)
- --------------------------------------------------------------------------------
Missouri 8,888,144 8,986,445 (98,301)
- --------------------------------------------------------------------------------
Hawaii 4,297,125 4,875,311 (578,186)
- --------------------------------------------------------------------------------
Washington 3,702,313 3,762,388 (60,075)
- --------------------------------------------------------------------------------
Minnesota 327,548 441,964 (114,416)
- --------------------------------------------------------------------------------
California 16,632,481 17,340,971 (708,490)
- --------------------------------------------------------------------------------
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
March 31, 1998, under a deferred compensation plan, were $503,158.
8. California Series
On July 12, 1996, Lord Abbett California Tax-Free Income Fund be came a Series
of the Company. The California Series changed its fiscal year end from August 31
to September 30 to conform to the fiscal year end of the other Series in the
Company. Accordingly, the financial statements of the California Series covered
a one-month period from September 1, 1996 to September 30, 1996.
Our Management
Board of Directors
Robert S. Dow
E. Wayne Nordberg
E. Thayer Bigelow*+
Stewart S. Dixon*
John C. Jansing*
C. Alan MacDonald*+
Hansel B. Millican, Jr.*
Thomas J. Neff*+
* Outside Director
+ Audit Committee
Officers
Robert S. Dow, Chairman and President
Zane E. Brown, Executive Vice
President and Portfolio Manager
Paul A. Hilstad, Vice President
and Secretary
Stephen I. Allen, Vice President
Daniel E. Carper, Vice President
Daria L. Foster, Vice President
Robert G. Morris, Vice President
Robert J. Noelke, Vice President
E. Wayne Nordberg, Vice President
John J. Walsh, Vice President
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
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.
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 59 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, Hansel B. Millican, Jr.
Hansel B. Millican, Jr.
Director--Lord Abbett
Tax-Free Income Fund
[PHOTO OMITTED]
An alumnus of North Carolina State University (Raleigh), Mr. Millican has over
45 years of corporate management experience. He is currently the President and
CEO of Rochester Button Company. Mr. Millican has been an independent director
for all of Lord Abbett's funds since 1982.
<PAGE>
Investing in the
Lord Abbett
Family of Funds
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
GROWTH
- -----------------------------------------------------------------------------------------------------------------------
INCOME
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<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Funds Growth & Balanced Fund Income Funds Tax-Free Money Market
Growth Fund Income Funds Income Funds Fund
Developing Alpha Series Affiliated Fund Balanced Series Bond-Debenture o National U.S. Government
Growth Fund Fund o California Securities
o Connecticut Money Market
Global Fund- Growth & Global Fund- o Florida Fund** +
Equity Series Income Series Income Series o Georgia
o Hawaii
International Research Fund- Limited Duration o Michigan
Series Large-Cap U.S. Government o Minnesota
Series Securities Series** o Missouri
o New Jersey
Mid-Cap U.S. Government o New York
Value Fund Securities Series** o Pennsylvania
o Texas
Research Fund- World Bond- o Washington
Small-Cap Debenture Series
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 investment professional to help you customize your investment plan.
Numbers to Keep Handy
For Shareholder Account or Statement Inquiries: 800-821-5129
For Literature: 800-874-3733
For More Information: 800-426-1130
Visit Our Web Site:
http://www.lordabbett.com
* 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.
+ Although the Fund is managed to maintain, and has maintained, its stable net
asset value of $1.00 per share price, there can be no assurance that a
stable net asset value of $1.00 per share will be maintained.
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[LOGO] LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
LORD ABBETT DISTRIBUTOR LLC LATFI-3-398
- ------------------------------------------------------------ (5/98)
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203
