<PAGE>
Lord Abbett
Tax-Free
Income Trust
o Florida Series o Pennsylvania Series
o Michigan Series o Georgia Series
SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED APRIL 30, 1998
[PHOTO OMITTED]
A fund to help you keep more
of your investment income.
[LOGO](R)
<PAGE>
Report to Shareholders
For the Six Months Ended April 30, 1998
[PHOTO OMITTED]
/s/ Robert S. Dow
- ----------------------
ROBERT S. DOW
CHAIRMAN
MAY 15, 1998
"We expect municipal markets will continue to offer good value relative to the
Treasury market."
Lord Abbett Tax-Free Income Trust completed the first half of its fiscal year on
April 30, 1998 with aggregate net assets of $303.6 million. Our management
team's prudent investment decisions have helped the Trust to perform well
relative to competitors for many of its portfolios since the start of the fiscal
year. The net assets of each Series were as follows (see Page 1 for performance
of each Series):
Florida Series: $135.9 million Michigan Series: $53.1 million
Pennsylvania Series: $98.2 million Georgia Series: $16.4 million
Following the large drop in Treasury rates during the last quarter of 1997, many
issuers "pre-refunded" their bonds, leading to an increased overall supply of
municipal issues going into 1998. Issuers "pre-refund" 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 led to nearly a 50% higher supply of municipal
bonds entering 1998 than were available during the first quarter of 1997.
How the Trust Added Value
During the latter part of 1997, the Trust added value through its decision to
maintain a high percentage of its holdings (30-35%) in more defensive securities
(such as pre-refunded and shorter-term bonds), which performed well in the
interest-rate environment that prevailed during the quarter. We began to reverse
our defensive strategy this spring, as municipal bond rates in particular, and
bond rates in general, backed up, creating opportunities to buy high-quality
bonds at higher rates.
Overall, credit quality (which evaluates an issuer's ability to repay interest
and debt) of U.S. municipal securities remained high, with municipalities
enjoying a period of fiscal economic strength. Due to the relatively small
difference in rates between lower- and higher-rated bonds, we stayed close to
the Trust's yield target while maintaining our emphasis on high-quality bonds.
We carried more housing bonds during the period, as these issues tend to perform
very well in stable to rising interest-rate markets. The prevalence of bond
insurance, however, tends to minimize any potential gains in making sector-based
allocations. (As lower-rated issues become higher rated, spreads between ratings
narrow and lower- rated issues become less available.) We have also added issues
covered by American Capital Access ("ACA"), a new insurer whose top rating is A.
We expect that the launch of ACA will cause credit ratings in the municipal
markets to continue to tighten, and that these additions will add relative value
to the portfolio over time.
Our High-Quality Strategy Continues to Pay Off
We expect to maintain our focus on high-quality bonds that offer superior 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. In addition, our emphasis on high-quality issues should prove
beneficial, even in an environment in which interest rates remain low. Decreased
municipal bond issuance, which is typical during the autumn months, should also
add value to the bonds we currently own.
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
economic developments in Asia 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. We expect municipal markets will continue to offer
good value relative to the Treasury market.
Thank you for including Lord Abbett Tax-Free Income Trust in your investment
portfolio. We look forward to helping you attain your financial goals in the
years ahead.
<PAGE>
Fund Facts
On April 30, 1998, the portfolios in Lord Abbett Tax-Free Income Trust were
invested in a wide variety of high-quality issues.
Lord Abbett's Focus on Quality
All tax-free portfolios managed by Lord Abbett emphasize:
o High quality
o Total return
potential
o Call protection
[THE FOLLOWING WERE REPRESENTED BY PIE CHARTS IN THE PRINTED MATERIAL]
Florida Series
AAA 80.9%
AA 6.8%
A 10.9%
BBB 1.4%
Pennsylvania Series
AAA 70.4%
AA 10.7%
A 7.7%
BBB(1) 11.2%
Michigan Series
AAA 68.5%
AA 18.0%
A 5.9%
BBB(1) 7.6%
Georgia Series
AAA 53.5%
AA 28.7%
A 11.4%
BBB 6.4%
Lord Abbett's Tax-Free Record and SEC-Required Information
<TABLE>
<CAPTION>
Florida Pennsylvania Michigan Georgia
Series(2) Series Series Series
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Date of Inception 9/25/91 2/3/92 12/1/92 12/27/94
Distribution Rate at Net Asset Value (as of 4/30/98)(3) 4.80% 5.12% 4.97% 4.99%
- -----------------------------------------------------------------------------------------------------------------------------
Average Annual Rate of Total Return
at Net Asset Value (as of 4/30/98):(4)
1 Year 8.96% 9.94% 9.18% 11.24%
3 Years 6.70% 7.64% 7.66% 8.70%
Life of Series 6.61% 7.37% 7.19% 9.78%
30-Day SEC Yield (as of 4/30/98) 4.14% 4.53% 4.29% 4.37%
- -----------------------------------------------------------------------------------------------------------------------------
Average Annual Rate of Total Return at the
Maximum Offering Price (as of 3/31/98):
1 Year 5.20% 5.90% 5.30% 7.50%
5 Years 4.55% 5.50% 5.39% --
Life of Series 5.96% 6.71% 6.40% 8.50%
</TABLE>
The results quoted above represent past performance for Class A shares, which is
no indication of future results. The investment return and principal value of a
Series investment 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%.
(1) Includes holdings that are not rated by an independent ratings service but
are, in Lord Abbett's opinion, of comparable quality.
(2) Data shown represents Class A share performance. For Florida Series Class
C share performance, please see the Series' Financial Highlights table on
page 10. For a full discussion of the differences in pricing alternatives,
please call Lord Abbett Distributor LLC at 800-874-3733 and ask for the
Trust's current prospectus.
(3) The Series' distribution rates differ from SEC yields because the SEC
yields take into account the amortization of premiums at market, whereas
the Series' distribution rates amortize premiums at cost.
(4) 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 local taxes (if any) may be applicable to that portion of
interest income derived from taxable sources.
1
<PAGE>
Important Information
As of 4/30/98, no Series of the Trust had more than 10% of its net assets
invested in residual interest bonds ("RIBs"), although each portfolio may invest
up to 20% of its net assets in such securities. A RIB, sometimes referred to as
an inverse floater, is a debt instrument with a floating or variable interest
rate that moves in the opposite direction of the interest rate on another
security or the value of an index. Changes in the interest rate on the other
security or index inversely affect the residual interest paid on the RIB, with
the result that when interest rates rise, RIBs make lower interest payments and
their values fall faster than fixed-rate bonds. But when interest rates fall,
not only do RIBs make 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
FLORIDA SERIES April 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 29.96% Alachua Co FL Health Facs Auth Rev/Santa Fe Health Care
7.60% 11/15/2013 AAA $1,500M $ 1,650,000
Broward Co FL Wtr & Sewer Util Rev FGIC+ 6 1/2% 10/1/2017 AAA 3,250M 3,505,938
Charlotte Co FL Util Rev FGIC+ 6 3/4% 10/1/2013 AAA 1,100M 1,243,000
Dade Co FL Seaport Bd AMBAC+ 6 1/2% 10/1/2026 AAA 6,350M 6,865,938
Dunedin FL Hosp Rev MBIA+ 6 3/4% 11/15/2021 AAA 1,000M 1,098,750
Florida St Bd of Ed Cap Outlay Ser A 7 1/4% 6/1/2023 AAA 1,160M 1,252,800
Manatee Co FL Util Rev MBIA+ 6 3/4% 10/1/2013 AAA 1,000M 1,096,250
Melbourne FL Wtr & Sewer Rev Ser B FGIC+ 6.40% 10/1/2022 AAA 1,700M 1,816,875
Miami FL Health Facs Rev Mercy Hosp Prjt AMBAC+ 6 3/4%
8/1/2020 AAA 870M 949,388
Orlando & Orange Co FL Expwy Auth Rev FGIC+ 6 1/2% 7/1/2020 AAA 395M 422,650
Palm Beach Co FL Health Facs Auth Rev Hosp/Good Samaritan
MBIA+ 6.30% 10/1/2022 AAA 7,935M 8,827,687
Puerto Rico Commonwealth Hwy Auth Rev Ser Q 7 3/4% 7/1/2016 AAA 325M 355,469
Puerto Rico Elec Pwr Auth Rev Ser P 7% 7/1/2021 AAA 3,850M 4,239,812
Stuart FL Util Rev FGIC+ 6.80% 10/1/2024 AAA 1,500M 1,666,875
Tampa FL Health Rev/Allegheny Health Sys/St Joseph
MBIA+ 6.70% 12/1/2018 AAA 5,000M 5,712,500
Total 40,703,932
- ------------------------------------------------------------------------------------------------------------------------============
General Obligation State
6.13% Florida St Dept of Trans 5% 7/1/2027 AA 2,000M 1,912,500
Florida St Jacksonville Trans 5% 7/1/2027 AA 3,000M 2,868,750
Puerto Rico Commonwealth RIBS MBIA+ 7.584% 7/1/2008++ AAA 1,100M 1,229,250
Puerto Rico Commonwealth 4 1/2% 7/1/2023 A 2,640M 2,323,200
Total 8,333,700
- ------------------------------------------------------------------------------------------------------------------------============
General Obligation Local
0.95% Dade Co FL AMBAC+ 7.70% 10/1/2013 Aaa 1,000M 1,287,500
- ------------------------------------------------------------------------------------------------------------------------============
Education 1.00% Florida St Bd Reg Univ Sys MBIA+ 5 5/8% 7/1/2019 AAA 1,300M 1,353,625
- ------------------------------------------------------------------------------------------------------------------------============
Finance 4.00% Puerto Rico Muni Fin Agy Ser A 6 1/2% 7/1/2019 A 4,915M 5,437,218
- ------------------------------------------------------------------------------------------------------------------------============
Health and Hospital 12.48% Charlotte Co FL Health Care Facs Rev RIBS FSA+ 8.015%
8/26/2027++ AAA 7,500M 8,353,125
Lee Co FL Hosp Bd Hosp Rev Ser A MBIA+ 5 3/4% 4/1/2022 AAA 3,300M 3,444,375
Miami FL Facs Auth Health Rev Facs AMBAC+ 5 1/4% 8/15/2015 AAA 4,400M 4,433,000
Plantation FL Health 5 1/8% 12/1/2022 A 750M 720,937
Total 16,951,437
- ------------------------------------------------------------------------------------------------------------------------============
Housing 1.86% Dade Co FL Hsg Fin Auth Sing Fam Mtge Rev
GNMA+ AMT+++ 6.70% 4/1/2028 AAA 1,000M 1,076,250
Dade Co FL Hsg Fin Auth Sing Fam Mtge Rev Ser E FNMA+
7% 3/1/2024 Aaa 40M 42,300
Orange Co FL Hsg Fin Auth Sing Fam Mtge Rev Ser A
GNMA+ AMT+++ 5.90% 9/1/2019 AAA 450M 471,375
</TABLE>
2
<PAGE>
Statement of Net Assets
FLORIDA SERIES April 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<S> <C> <C> <C> <C>
Palm Beach Co FL Hsg Fin Auth Sing Fam Mtge Rev Ser A
GNMA+ AMT+++ 6.55% 4/1/2027 Aaa $ 870M $ 935,250
Total 2,525,175
- ------------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Bonds
4.10% Hillsborough Co FL Ind Dev Auth Rev Tampa Elec Prjt 8%
5/1/2022 Aa 2,000M 2,320,000
Puerto Rico Tel Auth Rev RIBS MBIA+ 6.718% 1/25/2007++ AAA 3,000M 3,255,000
Total 5,575,000
- ------------------------------------------------------------------------------------------------------------------------============
Miscellaneous 9.35% Brevard Co FL Sales Tax Rev MBIA+ 7% 12/1/2018 AAA 1,000M 1,108,750
Broward Co FL Professional Sports Facs Tax Rev MBIA+ 5 3/4%
9/1/2021 AAA 2,000M 2,092,500
Hernando Co FL Cap Impt Rev 5% 2/1/2024 AAA 2,100M 2,016,000
Jacksonville FL Sales Tax Rev River City Renaissance Prjt
FGIC+ 5 3/8% 10/1/2018 AAA 2,685M 2,711,850
Lynn Haven FL Sales Tax Rev MBIA+ 5 1/8% 12/1/2027 Aaa 1,630M 1,587,213
Orange Co FL Sales Tax Rev FGIC+ 5.10% 1/1/2023 AAA 2,000M 1,947,500
Orange Co Tourist Rev AMBAC+ 6% 10/1/2016 AAA 710M 735,738
Tampa FL Sports Auth Rev Gtd Pkg/Tampa Bay Arena Prjt
MBIA+ 6% 10/1/2015 AAA 450M 496,688
Total 12,696,239
- ------------------------------------------------------------------------------------------------------------------------============
Pollution Control Revenue
5.43% Citrus Co FL Poll Ctrl Rev/FL Pwr Crystal Rivers MBIA+
6 5/8% 1/1/2027 AAA 6,780M 7,381,725
- ------------------------------------------------------------------------------------------------------------------------============
Power 6.55% Escambia Co FL Utils Auth Sys Rev Ser D FGIC+ 5% 1/1/2011 AAA 1,000M 1,015,000
Jacksonville FL Elec Auth Rev RIBS 6.595% 10/1/2037++ AA 2,000M 2,087,500
Okeechobee FL Util Auth Rev Acquisition & Imp
MBIA+ 5.60% 10/1/2025 AAA 825M 847,687
Puerto Rico Elec Pwr Auth 5% 7/1/2028 AAA 4,440M 4,210,541
Tampa FL Util Tax AMBAC+ Zero Coupon 10/1/2019 AAA 2,310M 742,087
Total 8,902,815
- ------------------------------------------------------------------------------------------------------------------------============
Transportation 12.02% Dade Co FL Aviation Rev Ser A MBIA+ AMT+++ 5 3/4% 10/1/2018 AAA 1,825M 1,907,125
Florida Ports Fin Comm Rev St Trans Tr Fd MBIA+ AMT+++
5 3/8% 6/1/2027 AAA 1,155M 1,142,006
Florida St Dept Trans Alligator Alley Rev FGIC+ 5 1/8%
7/1/2022 AAA 2,165M 2,116,287
Hillsborough Co FL Aviation Auth Rev Ser B AMBAC+ 5 1/8%
10/1/2017 AAA 1,675M 1,651,969
Palm Beach Co FL Arpt Sys Rev MBIA+ 7 3/4% 10/1/2010 AAA 1,290M 1,451,250
Puerto Rico Commonwealth Hwy & Trans Auth Hwy Rev Ser Y
5 1/2% 7/1/2026 A 1,000M 1,015,000
Santa Rosa Bay Brdg Auth FL Zero Coupon 7/1/2022 BBB 3,000M 772,500
Santa Rosa Bay Brdg Auth FL 6 1/4% 7/1/2028 BBB 1,000M 1,093,750
Santa Rosa Bay Brdg Auth FL 6 1/4% 7/1/2028 A 4,700M 5,187,625
Total 16,337,512
- ------------------------------------------------------------------------------------------------------------------------============
Water and Sewer 5.64% Atlantic Beach FL Util Sys Rev MBIA+ 5 1/2% 10/1/2016 AAA 125M 129,375
Bay Co FL Wtr Sys Rev MBIA+ 5 1/8% 9/1/2022 AAA 2,000M 1,955,000
Broward Co FL Wtr & Sewer Util Rev FGIC+ 6% 10/1/2020 AAA 2,500M 2,615,625
Cocoa FL Wtr & Sewer Rev Ser 1997 FGIC+ 5 7/8% 10/1/2022 AAA 1,340M 1,425,425
Indian River Co FL Wtr & Sewer Rev FGIC+ 5 1/2% 9/1/2016 AAA 475M 491,625
Panama City FL Wtr & Sewer Rev MBIA+ 5 5/8% 10/1/2016 AAA 1,000M 1,050,000
Total 7,667,050
-----------------------------------------------------------------------------------------============
Total Municipal Bonds 99.47% (Cost $128,170,519) 135,152,928
====================================================================================================================================
Other Assets, Less
Liabilities 0.53%
====================================================================================================================================
Receivable for: Securities sold 11,366,062
Interest 1,606,740
Capital stock sold 29,821
Total Other Assets 13,002,623
-----------------------------------------------------------------------------------------============
</TABLE>
3
<PAGE>
Statement of Net Assets
FLORIDA SERIES April 30, 1998
<TABLE>
<CAPTION>
Market Value
====================================================================================================================================
<S> <C> <C>
Payable for: Securities purchased $ 10,109,342
Capital stock reacquired 381,436
Distributions 397,095
Other 1,397,255
- ------------------------------------------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities 717,495
====================================================================================================================================
Net Assets 100.00% $135,870,423
====================================================================================================================================
Class A Shares-Net asset value ($128,909,740 / 26,449,541 shares outstanding) $4.87
Class C Shares-Net asset value ($6,960,683 / 1,427,698 shares outstanding) $4.88
</TABLE>
+ 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
April 30, 1998.
+++ Income from these investments may be subject to the Alternative Minimum
Tax.
See Notes to Financial Statements.
Statement of Net Assets
PENNSYLVANIA SERIES April 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 32.29% Bethlehem PA Area Sch Dist MBIA+ 6% 3/1/2016 AAA $1,000M $ 1,091,250
New York PA Hosp Auth Rev AMBAC+ 7% 7/1/2021 AAA 1,000M 1,085,000
Northeastern PA Hosp & Ed/Luzerne Co Comm Coll
AMBAC+ 6 5/8% 8/15/2015 AAA 2,000M 2,240,000
Pennsylvania Conv Ctr Auth Ser A FGIC+ 6.70% 9/1/2016 AAA 855M 1,008,900
Pennsylvania Intergovernmental Coop Auth FGIC+ 6 3/4%
6/15/2021 AAA 2,000M 2,270,000
Pennsylvania St Tnpk Comm Tnpk Rev FGIC+ 7.15% 12/1/2011 AAA 1,000M 1,110,000
Philadelphia PA Gas Wks Rev 7.70% 6/15/2021 AAA 1,000M 1,115,000
Philadelphia PA Gas Wks Rev ETM Ser B MBIA+ 7% 5/15/2020 AAA 2,220M 2,644,575
Puerto Rico Commonwealth 7 5/8% 7/1/2010 AAA 1,415M 1,544,119
Puerto Rico Commonwealth MBIA+ 6.45% 7/1/2017 AAA 700M 786,625
Puerto Rico Commonwealth 6.45% 7/1/2017 AAA 1,900M 2,135,125
Puerto Rico Commonwealth 7.30% 7/1/2020 AAA 700M 758,625
Puerto Rico Commonwealth 7.70% 7/1/2020 AAA 2,450M 2,679,688
Puerto Rico Commonwealth 6 1/2% 7/1/2023 AAA 1,000M 1,126,250
Puerto Rico Elec Pwr Auth RIBS FSA+ 8.687% 7/1/2018++ AAA 1,500M 1,852,500
Puerto Rico Elec Pwr Auth LINK FSA+ 5.929% 7/1/2023++ AAA 6,000M 6,457,500
Scranton-Lackawanna PA Health & Welfare Auth/Univ
Scranton Prjt AMBAC+ 6.80% 11/1/2014 AAA 500M 555,625
Washington Co PA Auth Lease Rev AMBAC+ 7.45% 12/15/2018 AAA 1,150M 1,256,375
Total 31,717,157
- ------------------------------------------------------------------------------------------------------------------------============
General Obligation State
1.07% Puerto Rico Commonwealth 6% 7/1/2014 A 1,000M 1,058,750
- ------------------------------------------------------------------------------------------------------------------------============
General Obligation Local
13.18% Bethlehem PA Area Sch Dist FSA+ 5% 10/15/2018 Aaa 1,000M 966,250
Bradford PA Area Sch Dist FGIC+ 4 7/8% 10/1/2019 AAA 1,765M 1,665,719
Burrell PA Sch Dist FGIC+ 5.65% 11/15/2016 AAA 1,500M 1,561,875
Cambria Co PA FGIC+ 5 1/2% 8/15/2016 AAA 500M 512,500
Interboro Sch Dist Del Co MBIA+ 5 3/8% 8/15/2025 AAA 1,000M 993,750
Lycoming Co PA MBIA+ 5.80% 11/15/2022 AAA 3,050M 3,191,062
Penn Trafford PA Sch Dist 4.80% 5/1/2015 AAA 1,000M 952,500
Punxsutawney PA Area Sch Dist FGIC+ 4 3/4% 4/15/2020 AAA 1,270M 1,169,988
</TABLE>
4
<PAGE>
Statement of Net Assets
PENNSYLVANIA SERIES April 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<S> <C> <C> <C> <C>
West Mifflin PA Area Sch Dist FGIC+ 4 7/8% 2/15/2023 AAA $1,000M $ 933,750
Wilkes Barre PA Area Sch Dist FGIC+ 5 1/4% 4/1/2016 AAA 1,000M 1,000,000
Total 12,947,394
- ------------------------------------------------------------------------------------------------------------------------============
Education 9.00% Delaware Co PA Auth Villanova Univ AMBAC+ 5.80%
8/1/2025 AAA 1,600M 1,674,000
Delaware Co PA Auth Villanova Univ Ser A MBIA+ 5%
12/1/2028 Aaa 1,000M 943,750
New Wilmington PA Muni Auth College Rev 5.35% 3/1/2028 Baa 1,000M 962,500
Pennsylvania St Higher Ed 6 5/8% 8/15/2009 Aa 825M 904,406
Pennsylvania St Higher Ed RIBS AMBAC+ AMT+++ 8.31%
3/1/2022++ AAA 3,000M 3,405,000
Pennsylvania St Higher Ed 5 3/8% 4/1/2023 BBB 1,000M 948,750
Total 8,838,406
- ------------------------------------------------------------------------------------------------------------------------============
Finance 1.41% Delaware Valley PA Reg Fin Auth Loc Govt Rev Ser C
AMBAC+ 7 3/4% 7/1/2027 AAA 1,000M 1,386,250
- ------------------------------------------------------------------------------------------------------------------------============
Health and Hospital 14.86% Allegheny Co PA Hosp Dev Auth Rev 4 7/8% 11/15/2026 AAA 1,250M 1,160,938
Chester Co PA Health & Ed Fac Auth Sys Rev/Mainline Health
RIBS AMBAC+ 7.12% 5/15/2020++ AAA 2,600M 2,691,000
Delaware Co PA Auth Hosp Rev 5.30% 12/1/2027 A 1,000M 961,250
Franklin Co PA Indl Dev Auth Hosp Rev AMBAC+ 5% 7/1/2022 Aaa 675M 642,938
Lehigh Co PA Gen Purp Auth R 5% 7/1/2028 Aaa 470M 437,772
Lehigh Co PA Gen Purp Auth R 5% 7/1/2028 Aaa 2,500M 2,365,625
Montgomery Co PA Higher Ed/Holy Redeemer Health
AMBAC+ 5 1/4% 10/1/2017 AAA 1,000M 996,250
Philadelphia PA Hosp & Higher Ed 6 1/2% 7/1/2027 BBB* 680M 693,600
Puerto Rico Ind Tourist Ed Med & Environmental Ctrl
Fac Gr A MBIA+ 6 1/4% 7/1/2024 AAA 850M 926,500
Sayre PA Health Care Fac/Tioga Nursing AMBAC+ 7 1/4%
10/1/2018 AAA 1,500M 1,586,250
Scranton-Lackawanna PA Health & Welfare Auth Rev 6.20%
7/1/2017 BBB 1,055M 1,114,343
West Shore PA Area Hosp Auth MBIA+ 5.70% 1/1/2022 AAA 1,000M 1,026,250
Total 14,602,716
- ------------------------------------------------------------------------------------------------------------------------============
Housing 7.62% Pennsylvania Hsg Fin Agy AMT+++ 5.80% 10/1/2029 AA 2,250M 2,297,813
Pennsylvania Hsg Fin Agy Sing Fam Mtge Ser 41B AMT+++ 6.65%
4/1/2025 AA 1,000M 1,071,250
Pennsylvania Hsg Fin Agy Sing Fam Mtge Ser 42 AMT+++ 6.85%
4/1/2025 AA 2,000M 2,172,500
Pennsylvania Hsg Fin Agy Sing Fam Mtge Ser 43 AMT+++ 7.40%
10/1/2014 AA 1,000M 1,101,250
Puerto Rico Pub Bldg Auth Ser J 6 1/2% 7/1/2003 A 770M 843,150
Total 7,485,963
- ------------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Bonds
9.78% Allegheny Co PA Ind Dev Auth/USX Corp. 6.10% 7/15/2020 Baa 1,000M 1,051,250
Beaver Co PA Ind Dev Auth/Ohio Edison FGIC+ 7 3/4%
9/1/2024 AAA 1,950M 2,069,437
Bradford Co PA Ind Dev Auth/Int'l Paper AMT+++ 6.60%
3/1/2019 A 1,250M 1,384,375
Bucks Co PA Indl Dev Auth Environmental 5.60% 3/1/2033 BBB 1,000M 998,750
Pennsylvania Economic Dev Fin Auth Exempt Fac Rev/Macmillan
AMT+++ 7.60% 12/1/2020 Baa 1,000M 1,088,750
Puerto Rico Ind Med & Environmental Ctrl/Motorola 6 3/4%
1/1/2014 AA 1,500M 1,648,125
Puerto Rico Ind Med & Environmental Ctrl/Upjohn 7 1/2%
12/1/2023 AA 1,300M 1,366,235
Total 9,606,922
- ------------------------------------------------------------------------------------------------------------------------============
Power 7.61% Pennsylvania Economic Dev Res Recov Northhampton 6.60%
1/1/2019 Baa* 1,500M 1,593,750
Puerto Rico Elec Pwr Auth Ser EE 4 3/4% 7/1/2024 BBB 2,500M 2,265,625
Puerto Rico Elec Pwr Auth Ser N 7 1/8% 7/1/2014 BBB 365M 382,794
Puerto Rico Elec Pwr Auth Ser X 6% 7/1/2015 AAA 1,000M 1,073,750
Puerto Rico Elec Pwr Auth Ser X 6 1/8% 7/1/2021 A 500M 538,125
York Co PA Ind Dev Auth Poll Ctrl Rev MBIA+ 6.45% 10/1/2019 AAA 1,475M 1,618,812
Total 7,472,856
-----------------------------------------------------------------------------------------============
</TABLE>
5
<PAGE>
Statement of Net Assets
PENNSYLVANIA SERIES April 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Transportation 4.03% Puerto Rico Commonwealth Hwy Ser V 6 5/8% 7/1/2012 A $2,615M $ 2,869,962
Puerto Rico Port Auth Rev Ser D FGIC+ AMT+++ 7%
7/1/2014 AAA 1,000M 1,086,250
Total 3,956,212
-----------------------------------------------------------------------------------------===========
Total Municipal Bonds 100.85% (Cost $94,952,685) 99,072,626
===================================================================================================================================
Other Assets, Less Liabilities (0.85)%
===================================================================================================================================
Cash and Receivables, Net of Liabilities (838,119)
===================================================================================================================================
Net Assets 100.00% $98,234,507
===================================================================================================================================
Net asset value ($98,234,507 / 19,035,533 shares outstanding) $5.16
</TABLE>
* This security 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
April 30, 1998.
+++ Income from these investments may be subject to the Alternative Minimum
Tax.
See Notes to Financial Statements.
Statement of Net Assets
MICHIGAN SERIES April 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 24.40% Detroit MI Ser A 8.70% 4/1/2010 AAA $1,405M $ 1,549,013
Detroit MI Sewer Disp Rev FGIC+ 6 5/8% 7/1/2021 AAA 1,300M 1,413,750
Grand Rapids MI Water Supply FGIC+ 7% 1/1/2012 AAA 500M 532,500
Lake Orion MI Comm Sch Dist AMBAC+ 7% 5/1/2020 AAA 1,050M 1,216,688
Michigan St Hosp Fin Auth Rev 7 1/2% 2/15/2018 AAA 2,650M 2,921,625
Puerto Rico Commonwealth 6.45% 7/1/2017 AAA 1,500M 1,685,625
Puerto Rico Commonwealth 6 1/2% 7/1/2023 AAA 750M 844,688
Puerto Rico Elec Pwr Auth Ser T RIBS FSA+ 8.687%
7/1/2018++ AAA 500M 617,500
Riverview MI Comm Sch Dist FGIC+ 6.55% 5/1/2014 AAA 500M 546,250
Romulus MI Co Schs Ser II FGIC+ 6.40% 5/1/2017 AAA 500M 545,625
Royal Oak MI Hosp Fin Auth Hosp Rev William Beaumont
Ser D 6 3/4% 1/1/2020 AAA 500M 539,375
Tri Co MI Area Sch Dist MBIA+ 6 7/8% 5/1/2016 AAA 500M 543,125
Total 12,955,764
- ------------------------------------------------------------------------------------------------------------------------============
General Obligation Local
13.41% Alpena MI Pub Sch MBIA+ 5 5/8% 5/1/2022 AAA 500M 512,500
Belding MI Area Sch AMBAC+ 5% 5/1/2026 AAA 500M 469,239
Chippewa Valley MI Schs AMBAC+ 4 3/4% 5/1/2023 AAA 500M 463,750
Hastings MI Sch FGIC+ 5 5/8% 5/1/2018 AAA 1,000M 1,027,500
Huron Valley MI Sch FGIC+ 5 3/4% 5/1/2022 AAA 250M 259,375
Lakeview MI Comm Sch FGIC+ 5.60% 5/1/2022 AAA 500M 511,875
Lincoln Pk MI Sch FGIC+ 5.90% 5/1/2026 AAA 500M 526,250
Lincoln Pk MI Sch FGIC+ 5% 5/1/2017 AAA 500M 486,875
Plymouth-Canton MI Comm Sch Dist Ser C 6 1/2% 5/1/2016 AA 1,000M 1,083,750
Saline MI Area Sch FGIC+ 5 1/2% 5/1/2015 AAA 750M 768,750
South Redford MI Sch FGIC+ 5 1/2% 5/1/2022 AAA 500M 508,125
Wayne County MI MBIA+ 5 1/4% 6/1/2016 AAA 500M 503,125
Total 7,121,114
- ------------------------------------------------------------------------------------------------------------------------============
Education 2.32% Michigan Higher Ed Student Loan Auth Rev AMBAC+ 5 3/4%
6/1/2013 AAA 250M 259,375
Oakland Co MI Economic Dev Corp 5% 11/1/2017 Aa 500M 481,875
</TABLE>
6
<PAGE>
Statement of Net Assets
MICHIGAN SERIES April 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
===================================================================================================================================
<S> <C> <C> <C> <C>
Saginaw Valley St Univ MI Rev AMBAC+ 5.30% 7/1/2028 AAA $ 500M $ 491,875
Total 1,233,125
- -----------------------------------------------------------------------------------------------------------------------============
Health and Hospital 20.43% Farmington Hills MI Hosp/Botsford Gen Hosp MBIA+ 6 1/2%
2/15/2011 AAA 1,000M 1,091,250
Flint MI Hosp Bldg Auth Rev 5 3/8% 7/1/2020 Baa 500M 486,875
Kalamazoo MI Hosp Fin Auth/Borgess Hosp RIBS 6.538%
6/1/2011++ AAA 3,000M 3,060,000
Kalamazoo MI Hosp Fin Auth/Borgess Hosp Reg Lkd
Arcs & Levrs LINK FGIC+ 5.244% 6/1/2011++ AAA 2,000M 2,027,500
Kent Hosp Fin Auth/Butterworth Health Ser A MBIA+ 5 5/8%
1/15/2026 AAA 800M 818,000
Michigan St Hosp Fin Auth/Butterworth Health MBIA+ 5%
2/15/2022 Aaa 500M 472,500
Michigan St Hosp Fin Auth/Holland Community AMBAC+ 5 5/8%
1/1/2028 AAA 250M 255,625
Michigan St Hosp Fin Auth/St. John Health AMBAC+ 5%
5/15/2028 AAA 500M 467,500
Petoskey MI Hosp Fin Auth Rev 5% 11/15/2027 AAA 500M 470,000
Puerto Rico Ind Tourist Ed Med & Environmental Ctrl Facs
6.70% 5/1/2024 BBB 1,575M 1,699,031
Total 10,848,281
- -----------------------------------------------------------------------------------------------------------------------============
Housing 10.35% Guam Hsg Corp Sing Fam Ser A AMT+++ 5 3/4% 9/1/2031 AAA 1,000M 1,048,750
Michigan St Hsg Dev Auth Ser A AMBAC+ AMT+++ 6.05%
12/1/2027 AAA 1,000M 1,053,750
Michigan St Hsg Dev Auth Ser B 6.95% 12/1/2020 AA 990M 1,048,163
Michigan St Hsg Dev Auth Ser B AMT+++ 7.05% 6/1/2026 AA 740M 770,525
Michigan St Hsg Dev Auth Ser D 5.95% 12/1/2016 AA 500M 526,250
Michigan St Hsg Dev Auth Ser E 6.20% 12/1/2027 AA 1,000M 1,050,000
Total 5,497,438
- -----------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Bonds
9.90% Michigan St Strategic Fd Ltd 5 3/8% 7/1/2028 A 600M 579,750
Michigan St Strategic Fd Ltd/Waste Mgmt Inc AMT+++ 6 5/8%
12/1/2012 AA 1,000M 1,091,250
Puerto Rico Ind Med & Environmental Ctrl/Upjohn 7 1/2%
12/1/2023 AA 1,500M 1,576,425
Puerto Rico Ind Med & Environmental/Warner Lambert 7.60%
5/1/2014 Aa 1,000M 1,063,600
Puerto Rico Tel Auth Rev RIBS MBIA+ 7.168% 1/16/2015++ AAA 900M 942,750
Total 5,253,775
- -----------------------------------------------------------------------------------------------------------------------============
Miscellaneous 5.12% Michigan Muni Bd Auth AMBAC+ 6 3/4% 11/1/2014 AAA 1,500M 1,674,375
Michigan Muni Bd Auth Ser B 5 5/8% 10/1/2019 AA 1,000M 1,041,250
Total 2,715,625
- -----------------------------------------------------------------------------------------------------------------------============
Power 8.86% Michigan St Strategic Fd Ltd Detroit Edison MBIA+ 7%
7/15/2008 AAA 500M 590,625
Michigan St Strategic Fd Ltd Detroit Edison AMBAC+ 7%
5/1/2021 AAA 500M 626,875
Michigan St Strategic Fd Rev/Genesee Pwr Prjt AMT+++
7 1/2% 1/1/2021 BBB* 500M 541,875
Puerto Rico Elec Pwr Auth MBIA+ 5 1/2% 7/1/2016 AAA 1,500M 1,545,000
Puerto Rico Elec Pwr Auth 4 3/4% 7/1/2024 BBB 500M 453,125
Puerto Rico Elec Pwr Auth 5% 7/1/2028 BBB 1,000M 945,000
Total 4,702,500
- -----------------------------------------------------------------------------------------------------------------------============
Transportation 6.91% Puerto Rico Commonwealth Hwy 6 5/8% 7/1/2012 A 1,500M 1,646,250
Puerto Rico Commonwealth Hwy 5% 7/1/2038 A 1,000M 937,500
Wayne Charter Co MI Arpt Rev MBIA+ AMT+++ 6 3/4%
12/1/2021 AAA 1,000M 1,082,500
Total 3,666,250
----------------------------------------------------------------------------------------============
Total Municipal Bonds 101.70% (Cost $52,450,779) 53,993,872
===================================================================================================================================
Other Assets, Less Liabilities (1.70)%
===================================================================================================================================
Cash and Receivables, Net of Liabilities (902,625)
- -----------------------------------------------------------------------------------------------------------------------============
</TABLE>
7
<PAGE>
Statement of Net Assets
MICHIGAN SERIES April 30, 1998
<TABLE>
====================================================================================================================================
<S> <C>
Net Assets 100.00% $53,091,247
====================================================================================================================================
Net asset value ($53,091,247 / 10,477,617 shares outstanding) $5.07
</TABLE>
* This security 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
April 30, 1998.
+++ Income from these investments may be subject to the Alternative Minimum
Tax.
See Notes to Financial Statements.
Statement of Net Assets
GEORGIA SERIES April 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<S> <C> <C> <C> <C>
Prerefunded 21.84% Albany GA Sewer Sys Rev MBIA+ 6 5/8% 7/1/2017 AAA $ 100M $ 110,250
Chatham Co GA Sch Dist MBIA+ 6 3/4% 8/1/2020 AAA 1,035M 1,166,963
Metropolitan Atlanta Rapid Tran Auth GA Sales Tax
Ser O 6.55% 7/1/2020 AAA 1,000M 1,083,750
Puerto Rico Elec Pwr Auth RIBS FSA+ 8.687% 7/1/2018++ AAA 1,000M 1,235,000
Total 3,595,963
- ------------------------------------------------------------------------------------------------------------------------============
General Obligation State
8.54% Georgia St Ser C 6 1/4% 8/1/2013 Aaa 350M 395,938
Puerto Rico Commomwealth Zero Coupon 7/1/2017 A 800M 295,000
Puerto Rico Commonwealth RIBS FSA+ 7.892% 7/1/2020++ AAA 250M 275,625
Puerto Rico Commonwealth 4 1/2% 7/1/2023 A 500M 440,000
Total 1,406,563
- ------------------------------------------------------------------------------------------------------------------------============
General Obligation Local
13.13% Atlanta GA 6 1/8% 12/1/2023 AA 750M 815,625
Atlanta GA Ser A 6.10% 12/1/2019 AA 500M 541,875
De Kalb Co GA 6% 1/1/2020 AA 250M 265,000
Fayette Co GA Sch Dist 6 1/8% 3/1/2015 Aa 500M 540,000
Total 2,162,500
- ------------------------------------------------------------------------------------------------------------------------============
Health and Hospital 3.26% Glynn-Brunswick Mem Hosp Auth GA Rev Antic Ctfs
Southeast GA MBIA+ 6% 8/1/2016 AAA 500M 537,500
- ------------------------------------------------------------------------------------------------------------------------============
Housing 9.22% De Kalb Co Hsg Auth FSA+ AMT+++ 7.15% 1/1/2025 AAA 500M 553,125
Georgia St Hsg & Fin Auth Rev A Sing Fam Mtge A Sub
Ser A-2 AMT+++ 6.45% 12/1/2027 AA 210M 226,537
Georgia St Hsg & Fin Auth Rev Ser A Sub Ser A-2 AMT+++
6.40% 12/1/2015 AA 200M 214,500
Guam Hsg Corp Sing Fam Ser A AMT+++ 5 3/4% 9/1/2031 AAA 500M 524,375
Total 1,518,537
- ------------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Bonds
10.86% Brunswick & Glynn Co GA Dev Auth Rev AMT+++ 5.55%
3/1/2026 Baa 1,000M 1,000,000
Puerto Rico Ind Med & Environmental Ctrl/Upjohn
7 1/2% 12/1/2023 AA 750M 788,212
Total 1,788,212
- ------------------------------------------------------------------------------------------------------------------------============
Miscellaneous 12.18% Cartersville GA Dev Auth Rev AMT+++ 6 1/8% 5/1/2027 A 1,000M 1,073,750
Cobb-Marietta GA Coliseum & Exhibit Hall Auth Rev MBIA+
5 5/8% 10/1/2026 AAA 600M 651,750
Savannah GA Economic Dev Auth Rev Zero Coupon 12/1/2021 AAA 1,000M 281,250
Total 2,006,750
- ------------------------------------------------------------------------------------------------------------------------============
Pollution Control Revenue
0.32% Burke Co GA Dev Auth Poll Ctrl Rev MBIA+ 6.60% 7/1/2024 AAA 50M 52,125
- ------------------------------------------------------------------------------------------------------------------------============
Power 0.32% Puerto Rico Elec Pwr Auth Ser D 7 1/8% 7/1/2014 Baa 50M 52,438
- ------------------------------------------------------------------------------------------------------------------------============
Solid Waste 0.67% Cobb Co GA Solid Waste Mgmt Auth AMT+++ 6.40% 1/1/2015 Aaa 100M 110,625
-----------------------------------------------------------------------------------------============
</TABLE>
8
<PAGE>
Statement of Net Assets
GEORGIA SERIES April 30, 1998
<TABLE>
<CAPTION>
Rating: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<S> <C> <C> <C> <C>
Transportation 14.11% Metropolitan Atlanta Rapid Trans Auth GA Sales Tax
Rev Ser P AMBAC+ 6 1/4% 7/1/2020 AAA $1,125M $ 1,289,531
Puerto Rico Commonwealth Hwy & Trans Auth Hwy Rev Ser Y
5 1/2% 7/1/2036 A 1,000M 1,033,750
Total 2,323,281
-----------------------------------------------------------------------------------------============
Total Municipal Bonds 94.45% (Cost $15,000,705) 15,554,494
====================================================================================================================================
Other Assets, Less Liabilities 5.55%
====================================================================================================================================
Other Assets
Short-Term Securities Puerto Rico Commonwealth 4 1/2% 7/30/1998 (Cost $507,600) AAA 500M 500,795
- ------------------------------------------------------------------------------------------------------------------------============
Cash 7,889
- ------------------------------------------------------------------------------------------------------------------------============
Receivable for: Securities sold 1,346,400
Capital stock sold 407,678
Interest 316,955
Total Other Assets 2,579,717
- ------------------------------------------------------------------------------------------------------------------------============
Payable for: Securities purchased 1,568,357
Capital stock reacquired 36,467
Distributions 48,892
Other 12,227
-----------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities 913,774
====================================================================================================================================
Net Assets 100.00% $16,468,268
====================================================================================================================================
Net asset value ($16,468,268 / 3,109,767 shares outstanding) $5.30
</TABLE>
+ 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
April 30, 1998.
+++ Income from these investments may be subject to the Alternative Minimum
Tax.
See Notes to Financial Statements.
9
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
Six Months Ended April 30, 1998
----------------------------------------------------
Florida Pennsylvania Michigan Georgia
Investment Income Series Series Series Series
===================================================================================================================================
<S> <C> <C> <C> <C>
Income Interest $ 4,080,146 $ 2,848,709 $ 1,515,406 $ 413,096
-----------------------------------------------------------------------------------------------------------------------
Expenses Management fee 358,597 242,453 132,447 38,712
Management fee waived -- -- -- (38,712)
12b-1 distribution plan-Class A 173,451 -- -- --
12b-1 distribution plan-Class C 35,088 5,300 -- --
Shareholder servicing 43,342 33,158 26,060 6,584
Registration 1,500 1,200 750 600
Reports to shareholders 11,916 7,644 4,224 1,080
Audit and tax 18,348 13,272 11,178 5,478
Legal 3,000 1,560 900 300
Directors' fees 2,738 2,154 982 194
Organization -- -- 330 396
Other 7,950 1,126 6,648 5,130
Total expenses 655,930 307,867 183,519 19,762
-----------------------------------------------------------------------------------------------------------------------
Net investment income 3,424,216 2,540,842 1,331,887 393,334
-----------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
===================================================================================================================================
Realized gain (loss) from investment transactions
Proceeds from sales 100,343,615 34,251,878 20,749,108 11,501,125
Cost of securities sold 99,795,473 34,261,938 20,620,543 11,401,611
Net realized gain (loss) 548,142 (10,060) 128,565 99,514
-----------------------------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investments (375,258) 431,830 (86,052) 31,308
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 172,884 421,770 42,513 130,822
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 3,597,100 $ 2,962,612 $ 1,374,400 $ 524,156
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended April 30, 1998
--------------------------------------------------------------
Increase (Decrease) Florida Pennsylvania Michigan Georgia
in Net Assets Series Series Series Series
====================================================================================================
<S> <C> <C> <C> <C>
Operations
Net investment income $ 3,424,216 $ 2,540,842 $ 1,331,887 $ 393,334
Net realized gain (loss)
from investment transactions 548,142 (10,060) 128,565 99,514
Net unrealized appreciation
(depreciation) of investments (375,258) 431,830 (86,052) 31,308
Net increase in net assets
resulting from operations 3,597,100 2,962,612 1,374,400 524,156
- ----------------------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income (3,434,818) (2,529,919) (1,336,736) (388,197)
Net realized gain from
investment transactions -- -- -- (204,624)
Total distributions (3,434,818) (2,529,919) (1,336,736) (592,821)
- ----------------------------------------------------------------------------------------------------
Share transactions
Net proceeds from sales of shares 4,244,324 10,110,172 3,218,386 3,403,377
Net asset value of shares issued to
shareholders in reinvestment of net
investment income and realized
gain from investment transactions 1,381,474 1,153,939 701,887 357,394
Total 5,625,798 11,264,111 3,920,273 3,760,771
- ----------------------------------------------------------------------------------------------------
Cost of shares reacquired (14,665,715) (7,699,444) (3,496,500) (1,121,105)
- ----------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
derived from share transactions (9,039,917) 3,564,667 423,773 2,639,666
- ----------------------------------------------------------------------------------------------------
Total increase (decrease)
in net assets (8,877,635) 3,997,360 461,437 2,571,001
- ----------------------------------------------------------------------------------------------------
Net Assets
Beginning of period 144,748,058 94,237,147 52,629,810 13,897,267
End of period+ $135,870,423 $98,234,507 $53,091,247 $16,468,268
====================================================================================================
<CAPTION>
Year Ended October 31, 1997
--------------------------------------------------------------
Increase (Decrease) Florida Pennsylvania Michigan Georgia
in Net Assets Series Series Series Series
===================================================================================================
<S> <C> <C> <C> <C>
Operations
Net investment income $ 7,592,428 $ 5,086,917 $ 2,779,370 $ 625,667
Net realized gain (loss)
from investment transactions 1,146,444 981,723 245,609 188,948
Net unrealized appreciation
(depreciation) of investments 1,603,515 1,379,031 1,092,550 285,372
Net increase in net assets
resulting from operations 10,342,387 7,447,671 4,117,529 1,099,987
- ---------------------------------------------------------------------------------------------------
Distributions to
shareholders from
Net investment income (7,925,102) (5,109,328) (2,760,672) (647,441)
Net realized gain from
investment transactions -- -- -- (20,485)
Total distributions (7,925,102) (5,109,328) (2,760,672) (667,926)
- ---------------------------------------------------------------------------------------------------
Share transactions
Net proceeds from sales of shares 9,015,704 9,506,178 4,143,719 4,086,242
Net asset value of shares issued to
shareholders in reinvestment of net
investment income and realized
gain from investment transactions 3,171,449 2,363,497 1,432,311 345,337
Total 12,187,153 11,869,675 5,576,030 4,431,579
- ---------------------------------------------------------------------------------------------------
Cost of shares reacquired (31,926,100) (12,575,562) (7,278,245) (1,654,042)
- ---------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
derived from share transactions (19,738,947) (705,887) (1,702,215) 2,777,537
- ----------------------------------------------------------------------------------------------------
Total increase (decrease)
in net assets (17,321,662) 1,632,456 (345,358) 3,209,598
- ---------------------------------------------------------------------------------------------------
Net Assets
Beginning of period 162,069,720 92,604,691 52,975,168 10,687,669
End of period+ $$144,748,058 $ 94,237,147 $52,629,810 $13,897,267
===================================================================================================
</TABLE>
+ Including (overdistributed) net investment income of $(458,958),
$(48,619), $(408) and, $(31,442), respectively, as of April 30, 1998 and
undistributed (overdistributed) net investment income of $(448,358),
$(59,544), $4,442 and, $(36,578), respectively, as of October 31, 1997.
See Notes to Financial Statements.
10
<PAGE>
Financial Highlights
FLORIDA SERIES
<TABLE>
<CAPTION>
Class A Shares Class C Shares
--------------------------------------------- ----------------------------------
Six Months Six Months Year
Ended Ended Ended
April 30, Year Ended October 31, April 30, 10/31, 7/15/96(b)
Per Share Operating Performance: 1998 1997 1996 1995 1994 1993 1998 1997 to 10/31/96
================================================================================================ ==================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $4.87 $4.79 $4.85 $4.49 $5.28 $4.75 $4.87 $4.79 $4.70
- ------------------------------------------------------------------------------------------------ ----------------------------------
Income from investment operations
Net investment income .119 .240 .248 .271 .291 .297 .101 .202 .064
Net realized and unrealized
gain (loss) on investments .001 .092 (.056) .352 (.695) .549 .011 .093 .093
Total from investment operations .120 .332 .192 .623 (.404) .846 .112 .295 .157
------------------------------------------------------------------------------------------ ----------------------------------
Distributions
Dividends from net investment
income (.120) (.252) (.252) (.263) (.2835) (.301) (.102) (.215) (.067)
Distributions from net realized
gain -- -- -- -- (.1025) (.015) -- -- --
------------------------------------------------------------------------------------------ ----------------------------------
Net asset value, end of period $4.87 $4.87 $4.79 $4.85 $4.49 $5.28 $4.88 $4.87 $4.79
- ------------------------------------------------------------------------------------------------ ----------------------------------
Total Return(a) 2.67%(c) 7.12% 4.09% 14.22% (8.03)% 18.24% 2.30%(c) 6.33% 3.35%(c)
====================================================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver .44%(c) .86%(c) .80% .74% .32% .38% .79%(c) 1.57% .44%(c)
Expenses, excluding waiver .44%(c) .86%(c) .82% .88% .82% .88% .79%(c) 1.57% .44%(c)
Net investment income 2.42%(c) 5.03%(c) 5.19% 5.81% 5.98% 5.71% 2.08%(c) 4.29% 1.37%(c)
==============================================================================================================================
<CAPTION>
Six Months
Ended
April 30, Year Ended October 31,
Supplemental Data for All Classes: 1998 1997 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net assets, end of period (000) $135,870 $144,748 $162,070 $173,242 $174,844 $191,463
Portfolio turnover rate 60.55% 106.32% 167.95% 142.04% 122.36% 89.32%
==============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Commencement of offering Class shares.
(c) Not annualized.
See Notes to Financial Statements.
Financial Highlights
PENNSYLVANIA SERIES
<TABLE>
<CAPTION>
Six Months
Ended
April 30, Year Ended October 31,
Per Share Operating Performance: 1998 1997 1996 1995 1994 1993
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $5.14 $5.01 $5.01 $4.62 $5.33 $4.75
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .135 .276 .2772 .282 .300 .299
Net realized and unrealized gain (loss)
on investments .020 .131 (.0011) .395 (.6975) .582
Total from investment operations .155 .407 .2761 .677 (.3975) .881
-----------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.135) (.277) (.2761) (.2870) (.2925) (.301)
Distribution from net realized gain -- -- -- -- (.02) --
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.16 $5.14 $5.01 $5.01 $4.62 $5.33
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 3.02%(b) 8.37% 5.68% 15.02% (7.73%) 18.95%
===================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000) $98,235 $94,237 $92,605 $93,494 $81,258 $82,113
-----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver .31%(b) .61%(c) .62% .50% .33% .31%
Expenses, excluding waiver .31%(b) .65%(c) .69% .65% .68% .81%
Net investment income 2.60%(b) 5.47%(c) 5.55% 5.83% 5.98% 5.70%
Portfolio turnover rate 32.78% 70.99% 78.30% 126.11% 137.22% 7.71%
=============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Not annualized.
See Notes to Financial Statements.
11
<PAGE>
Financial Highlights
MICHIGAN SERIES
<TABLE>
<CAPTION>
Six Months
Ended
April 30, Year Ended October 31, 12/1/92(b)
Per Share Operating Performance: 1998 1997 1996 1995 1994 to 10/31/93
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $5.06 $4.93 $4.93 $4.53 $5.23 $4.76
- ---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .129 .267 .274 .284 .286 .266
Net realized and unrealized gain (loss)
on investments .010 .128 (.010) .395 (.651) .480
Total from investment operations .139 .395 .264 .679 (.365) .746
--------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.129) (.265) (.264) (.279) (.293) (.276)
Distribution from net realized gain -- -- -- -- (.042) --
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.07 $5.06 $4.93 $4.93 $4.53 $5.23
- --------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 2.75%(c) 8.24% 5.53% 15.39% (7.29)% 16.01%(c)
================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000) $53,091 $52,630 $52,975 $54,186 $45,603 $34,957
--------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver .35%(c) .60%(c) .44% .25% .34% .00%(c)
Expenses, excluding waiver .35%(c) .68%(c) .73% .75% .84% .75%(c)
Net investment income 2.51%(c) 5.37%(c) 5.59% 5.95% 5.69% 4.75%(c)
Portfolio turnover rate 38.41% 68.50% 85.26% 98.89% 137.31% 68.10%
==========================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Commencement of operations.
(c) Not annualized.
See Notes to Financial Statements.
Financial Highlights
GEORGIA SERIES
<TABLE>
<CAPTION>
Six Months
Ended
April 30, Year Ended October 31, 12/27/94(b)
Per Share Operating Performance: 1998 1997 1996 to 10/31/95
=======================================================================================================================
<S> <C> <C> <C> <C>
Net asset value, beginning of period $5.31 $5.14 $5.12 $4.76
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .138 .275 .290 .245
Net realized and unrealized gain on investments .061 .187 .0397 .370
Total from investment operations .199 .462 .3297 .615
-----------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.134) (.282) (.2872) (.255)
Distributions from net realized gain (.075) (.01) (.0225) --
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.30 $5.31 $5.14 $5.12
- -----------------------------------------------------------------------------------------------------------------------
Total Return(a) 3.59%(c) 9.27% 6.69% 13.15%(c)
=======================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000) $16,468 $13,897 $10,688 $5,203
-----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver .13%(c) .38% .03% .00%(c)
Expenses, excluding waiver .38%(c) .88% .83% 1.08%(c)
Net investment income 2.54%(c) 5.23% 5.55% 5.44%(c)
Portfolio turnover rate 74.84% 90.40% 72.53% 142.69%
=================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Commencement of operations.
(c) Not annualized.
See Notes to Financial Statements.
12
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Lord Abbett Tax-Free Income Trust (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on September 11,
1991. The Trust consists of four separate portfolios ("Series"). Each Series is
non-diversified as defined under the Investment Company Act of 1940. 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 Trust:
(a) Market value is determined as follows: Securities are valued at prices
furnished by an independent pricing service or, in their absence, at fair value
as determined under procedures approved by the Board of Trustees. (b) It is the
policy of the Trust to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute substantially all
net investment income and net realized gains. Therefore, there is no provision
for federal income taxes. (c) Security transactions are accounted for on the
date that the securities are purchased or sold (trade date). Realized gains and
losses from investment transactions are calculated on the identified cost basis.
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) Dividends from net investment income are
declared daily and paid monthly. Taxable net realized gains from investment
transactions, if any, reduced by capital loss carryforwards are distributed
annually. (e) Organization expenses are amortized evenly over a period of five
years.
2. Management Fee and Other Transactions with Affiliates
The Trust has a management agreement with Lord, Abbett & Co. ("Lord Abbett")
pursuant to which Lord Abbett provides the Trust with investment management
services and executive and other personnel, pays the remuneration of officers,
provides office space and pays for ordinary and necessary office and clerical
expenses relating to research, statistical work and the supervision of the
Trust's investment portfolios. The management fee is based on average daily net
assets for each month at the annual rate of 0.50%. Lord Abbett may waive its
management fees and reimburse the Trust for certain of its other expenses. Any
such other expenses reimbursed are subject to repayment by each Series, pursuant
to a formula based on the asset size and expense ratio of each Series. Each
Series shall not be obligated to repay Lord Abbett after five full fiscal years
after the commencement of operations or the termination of the management
agreement, whichever is earlier. As of April 30, 1998, other expenses reimbursed
by Lord Abbett and not repaid by the Georgia Series amounted to $40,765.
Each Series of the Trust has Rule 12b-1 plans and agreements with respect to one
or more classes of shares as described below (the "Class A 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 pay
Distributor (1) an annual service fee of 0.15% of the average daily net asset
value of shares sold prior to June 1, 1990 and 0.25% of the average daily net
asset value of shares sold on or after that date, (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 Michigan
and Georgia Series will not become operative until the first day of the calendar
quarter subsequent to the Series' net assets reaching $100 million. Pursuant to
the Class C Plan of the Florida 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.
Lord Abbett received the following commissions on sales of shares of the Trust
after concessions were paid to authorized distributors:
Lord Abbett Dealers'
Series Commissions Concessions
- -------------------------------------------------------
Florida-Class A $11,487 $79,109
- -------------------------------------------------------
Pennsylvania 14,897 176,168
- -------------------------------------------------------
Michigan 10,637 87,851
- -------------------------------------------------------
Georgia 16,087 99,174
- -------------------------------------------------------
Certain of the Trust's officers and trustees have an interest in Lord Abbett.
3. Distributions
As of April 30, 1998, accumulated net realized gain (loss) for financial report-
ing purposes, which is substantially the same as for federal income tax
purposes, aggregated $(9,664,337) for the Florida Series, $(867,514) for the
Pennsylvania Series, $(1,124,752) for the Michigan Series and $69,805 for the
Georgia Series. The capital loss carryforwards expire in 2003 and 2004. 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.
Dividends declared by class for the Florida Series were as follows:
Class A $3,280,895
- ------------------------------------------------------------------
Class C $ 153,923
- ------------------------------------------------------------------
4. Capital
Transactions in shares of beneficial interest for the Florida Series (both
shares and dollar amount) were as follows:
Six Months Ended 4/30/98 Year Ended 10/31/97
------------------------ ---------------------------
Class A Shares Amount Shares Amount
- ------------------------------------------------ ---------------------------
Sales of shares 746,460 $ 3,685,043 1,626,001 $7,812,607
Shares issued to
shareholders in
reinvestment of net
investment income 270,808 1,325,243 632,367 3,034,401
Total 1,017,268 5,010,286 2,258,368 10,847,008
- ------------------------------------------------ ---------------------------
Shares reacquired (2,744,409) (13,507,724) (6,029,983) (28,889,005)
Decrease in shares (1,727,141) $(8,497,438) (3,771,615) $(18,041,997)
- --------------------------------------------------------------------------------
<PAGE>
Notes to Financial Statements
<TABLE>
<CAPTION>
Six Months Ended
April 30, 1998 Year Ended 10/31/97
---------------------- ----------------------
Class C Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C>
Sales of shares 113,153 $559,281 250,976 $1,203,097
Shares issued to shareholders in reinvestment of net investment income 11,444 56,232 28,569 137,048
Total 124,597 615,513 279,545 1,340,145
- -------------------------------------------------------------------------------------------------------- ----------------------
Shares reacquired (235,310) (1,157,992) (632,179) (3,037,095)
- -------------------------------------------------------------------------------------------------------- ----------------------
Decrease in shares (110,713) $(542,479) (352,634) $(1,696,950)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Transactions in shares of beneficial interest for the single class Series were
as follows:
<TABLE>
<CAPTION>
Six Months Ended 4/30/98 Year Ended 10/31/97
--------------------------------------- ---------------------------------------
Pennsylvania Michigan Georgia Pennsylvania Michigan Georgia
Series Series Series Series Series Series
- ------------------------------------------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales of shares 1,941,937 630,648 637,362 1,886,645 830,953 788,606
Shares issued to shareholders in reinvestment
of net investment income and realized gain
from investment transactions 222,895 137,696 67,085 469,179 288,012 66,640
Total 2,164,832 768,344 704,447 2,355,824 1,118,965 855,246
- ------------------------------------------------------------------------------------------- ---------------------------------------
Shares reacquired (1,479,553) (685,855) (210,144) (2,498,345) (1,465,934) (318,591)
- ------------------------------------------------------------------------------------------- ---------------------------------------
Increase (decrease) in shares 685,279 82,489 494,303 (142,521) (346,969) 536,655
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
As of April 30, 1998, paid in capital for each Series was as follows:
$139,011,309 for the Florida Series, $95,030,699 for the Pennsylvania Series,
$52,673,314 for the Michigan Series and $15,882,921 for the Georgia Series.
5. Purchases and Sales of Securities
Purchases and sales of investment securities (other than short-term investments)
were as follows:
Series Purchases Sales
- -----------------------------------------------------------------
Florida $86,729,072 $95,007,405
- -----------------------------------------------------------------
Pennsylvania 36,844,500 32,040,673
- -----------------------------------------------------------------
Michigan 22,787,354 20,246,078
- -----------------------------------------------------------------
Georgia 12,872,418 10,999,700
- -----------------------------------------------------------------
As of April 30, 1998, net unrealized appreciation, unrealized appreciation and
unrealized depreciation of investments based on cost for federal income tax
purposes were as follows:
Net Unrealized Unrealized Unrealized
Series Appreciation Appreciation Depreciation
- ------------------------------------------------------------------
Florida $6,982,409 $7,317,214 $334,805
- ------------------------------------------------------------------
Pennsylvania 4,119,941 4,932,246 812,305
- ------------------------------------------------------------------
Michigan 1,543,093 2,098,336 555,243
- ------------------------------------------------------------------
Georgia 546,984 603,333 56,349
- ------------------------------------------------------------------
The cost of investments for federal income tax purposes is substantially the
same as that used for financial reporting purposes.
6. Trustees' Remuneration
The Trustees of the Trust associated with Lord Abbett and all officers of the
Trust receive no compensation from the Trust for acting as such. Outside
Trustees' fees and retirement costs are allocated among all funds in the Lord
Abbett group based on the net assets of each fund. Trustee fees payable at April
30, 1998 were $29,466.
Copyright (C) 1998 by Lord Abbett Tax Free Income Trust, 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 Trust, is to be distributed only if preceded or
accompanied by a current prospectus which includes information concerning each
Series' investment objective and policies, sales charges and other matters.
There is no guarantee that the forecasts contained within this publication will
come to pass. All rights reserved. Printed in the U.S.A.
[LOGO] LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
LORD ABBETT DISTRIBUTOR LLC
- ------------------------------------------------------------
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203
LATFIT-3-498
(6/98)
