Lord Abbett
Tax-Free
Income Trust
o Florida Series o Pennsylvania Series
o Michigan Series o Georgia Series
1997 ANNUAL REPORT
[PHOTO: book and reading glasses]
A fund to help you keep more
of your investment income.
[Logo](R)
<PAGE>
Report to Shareholders
For the Fiscal Year Ended October 31, 1997
Photo: Robert S. Dow
/s/ Robert S. Dow
- -----------------------
Robert S. Dow
Chairman
November 17, 1997
"...we did not sacrifice
much in the way of yield by
continuing to focus on high-
quality bonds."
Lord Abbett Tax-Free Income Trust completed its fiscal year on October 31, 1997
with aggregate net assets of $305.4 million. The net assets of each Series were
as follows:
Florida Series: $144.7 million
Pennsylvania Series: $94.2 million
Michigan Series: $52.6 million
Georgia Series: $13.9 million
Over the past year, your Series increased holdings in more defensive securities
(such as prerefunded and shorter term bonds), which tend to be more stable
during periods of market volatility. Portfolios in the Trust held approximately
35% of these bonds at the close of the fiscal year. As yields came down over the
past twelve months, many issuers "prerefunded" their bonds, leading to an
increased overall supply of municipal issues in September. Issuers prerefund
their bonds when rates decline by issuing newer, lower yielding debt and using
the proceeds to pay off the first bond at its first call date. (The call date is
the date upon which an issuer may redeem a bond.)
Overall, credit quality (which evaluates an issuer's ability to repay debt) has
improved as many municipalities cut deficits and have improved the performance
of their operations. Due to the relatively small difference in yield between
lower rated and higher rated bonds, we did not sacrifice much in the way of
yield by continuing to focus on high-quality bonds. We believe the relatively
small difference in interest rates between, for example, AAA-rated and A-rated
bonds may increase as the economy slows. Should this occur, it would offer us
the opportunity to purchase more AA- and A-rated bonds at relatively attractive
prices.
We are encouraged by the continued issuance of essential service revenue bonds,
which finance, among other things, airport, transportation and water and sewer
projects. In the coming months, we will continue to focus on bonds with an
emphasis on call protection (assurance by the issuer that a bond will not be
redeemed before a specific date), especially during periods of decreased supply
in municipal bonds.
Our outlook through the end of 1997 and into 1998 is for the economy to grow at
a rate averaging less than 2 1/2%, with inflation averaging about 3% or less.
Should the economy show signs of rapid growth or if inflation picks up, we
believe the Federal Reserve Board would move to raise short-term interest rates
again, in the hopes of maintaining a moderate economic environment.
Thank you for your continued confidence in Lord Abbett Tax-Free Income Trust. We
look forward to helping you attain your financial goals in the years ahead.
<PAGE>
Fund Facts
On October 31, 1997, 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 table was depicted as a pie graph in the printed material.]
Florida Pennsylvania Michigan Georgia
Series Series Series Series
------- ------------ -------- -------
AAA 82.3% 67.1% 69.6% 76.5%
AA 10.0 12.6 17.0 13.5
A 7.7 14.0 9.1 9.7
BBB 0.4
BBB(1) 6.3 4.3
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(3) at Net Asset Value
(as of 10/31/97) 5.05% 5.37% 5.22% 5.20%
- ---------------------------------------------------------------------------------------------------------
Average Annual Rate of Total Return(4)
at Net Asset Value (as of 10/31/97):
1 Year 7.12% 8.37% 8.24% 9.27%
3 Years 8.40% 9.62% 9.64% --
Life of Series 6.70% 7.48% 7.35% 10.21%
30-Day SEC Yield (as of 10/31/97) 4.24% 4.65% 4.48% 4.63%
- ---------------------------------------------------------------------------------------------------------
Average Annual Rate of Total Return at the
Maximum Offering Price (as of 9/30/97):
1 Year 2.40% 3.60% 3.80% 4.60%
5 Years 5.11% 5.93% -- --
Life of Series 5.86% 6.54% 6.29% 8.35%
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%.
<FN>
(1) Includes holdings which 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.
</FN>
</TABLE>
1
<PAGE>
Important Information
As of 10/31/97, 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. 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 make higher interest payments, their values also rise faster
than fixed-rate bonds. If used as sales material after 12/31/97, this report
must be accompanied by Lord Abbett's Performance Quarterly for the most recently
completed calendar quarter.
Statement of Net Assets
FLORIDA SERIES October 31, 1997
<TABLE>
<CAPTION>
Rating*: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<C> <S> <C> <C> <C>
Prerefunded 26.51% Alachua Co FL Health Facs Auth Rev/Santa Fe Health Care
7.60% 11/15/2013 AAA $1,500M $ 1,674,375
Broward Co FL Wtr & Sewer Util Rev FGIC+ 6 1/2% 10/1/2017 AAA 3,250M 3,550,625
Charlotte Co FL Util Rev FGIC+ 6 3/4% 10/1/2013 AAA 1,100M 1,259,500
Dade Co FL Seaport Bd AMBAC+ 6 1/4% 10/1/2021 AAA 750M 812,813
Dade Co FL Seaport Bd AMBAC+ 6 1/2% 10/1/2026 AAA 6,350M 6,945,313
Dunedin FL Hosp Rev MBIA+ 6 3/4% 11/15/2021 AAA 1,000M 1,112,500
Florida St Bd of Ed Cap Outlay Ser A 7 1/4% 6/1/2023 AAA 1,160M 1,268,750
Florida St Jacksonville Trans-Sr Lien 6.40% 7/1/2022 AAA 2,425M 2,658,406
Manatee Co FL Util Rev MBIA+ 6 3/4% 10/1/2013 AAA 1,000M 1,110,000
Melbourne FL Wtr & Sewer Rev Ser B FGIC+ 6.40% 10/1/2022 AAA 1,700M 1,836,000
Miami FL Health Facs Rev Mercy Hosp Prjt AMBAC+ 6 3/4% 8/1/2020 AAA 870M 961,350
Miami FL Sports & Exhibit FGIC+ 7.20% 10/1/2020 AAA 1,690M 1,839,988
Orange Co FL Tourist Dev AMBAC+ 6% 10/1/2016 AAA 490M 515,113
Orlando & Orange Co FL Expwy Auth Rev FGIC+ 6 1/2% 7/1/2020 AAA 395M 426,600
Orlando FL Util Comm Wtr Sub-Ser A 6 1/2% 10/1/2020 AAA 1,000M 1,101,250
Puerto Rico Commonwealth 7 5/8% 7/1/2010 AAA 1,100M 1,219,625
Puerto Rico Commonwealth Hwy Auth Rev Ser Q 7 3/4% 7/1/2016 AAA 325M 361,156
Puerto Rico Commonwealth Hwy Auth Rev Ser S 6 1/2% 7/1/2022 AAA 2,350M 2,611,438
Puerto Rico Elec Pwr Auth Rev Ser P 7% 7/1/2021 AAA 4,850M 5,413,813
Stuart FL Util Rev FGIC+ 6.80% 10/1/2024 AAA 1,500M 1,689,375
Total 38,367,990
- ------------------------------------------------------------------------------------------------------------------------============
General Obligation State 11.81% Florida St 5% 7/1/2027 AA 3,000M 2,861,250
Florida St Bd Ed Cap Outlay Ser A 5 1/4% 6/1/2022 AA 2,750M 2,715,625
Florida St Bd Ed Cap Outlay Ser E 4 3/4% 6/1/2022 AA 1,000M 918,750
Florida St Dept of Trans 5% 7/1/2027 AA 4,000M 3,815,000
Florida St Dept of Trans Ser B 5% 7/1/2022 AA 2,000M 1,920,000
Puerto Rico Commonwealth RIBS MBIA+ 7.684% 7/1/2008++ AAA 1,100M 1,230,625
Puerto Rico Commonwealth MBIA+ 5 3/8% 7/1/2021 AAA 2,650M 2,656,625
Puerto Rico Commonwealth 5 3/8% 7/1/2025 A 1,000M 988,750
Total 17,106,625
- ------------------------------------------------------------------------------------------------------------------------============
General Obligation Local .89% Dade Co FL AMBAC+ 7.70% 10/1/2013 AAA 1,000M 1,296,250
- ------------------------------------------------------------------------------------------------------------------------============
Education .93% Florida St Bd Reg Univ Sys MBIA+ 5 5/8% 7/1/2019 AAA 1,300M 1,339,000
- ------------------------------------------------------------------------------------------------------------------------============
Finance 3.73% Puerto Rico Muni Fin Agy Ser A 6 1/2% 7/1/2019 A 4,915M 5,406,500
- ------------------------------------------------------------------------------------------------------------------------============
Health and Hospital 22.86% Altamonte Springs FL Health Fac Auth Hosp Rev/Adventist Health Ser A
AMBAC+ 7% 11/15/2014 AAA 2,485M 2,680,693
Charlotte Co FL Health Care Facs Rev RIBS FSA+ 7.974% 8/26/2027++ AAA 7,500M 8,296,875
Lee Co FL Hosp Bd Hosp Rev Ser A MBIA+ 5 3/4% 4/1/2022 AAA 3,300M 3,407,250
</TABLE>
2
<PAGE>
Statement of Net Assets
FLORIDA SERIES October 31, 1997
<TABLE>
<CAPTION>
Rating*: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<C> <S> <C> <C> <C>
Miami FL Facs Auth Health Facs Rev AMBAC+ 5 1/4% 8/15/2015 AAA $4,400M $ 4,416,500
Palm Beach Co FL Health Facs Auth Rev Hosp/Good Samaritan
MBIA+ 6.30% 10/1/2022 AAA 7,935M 8,629,312
Tampa FL Health Rev/Allegheny Health Sys/St Joseph
MBIA+ 6.70% 12/1/2018 AAA 5,000M 5,656,250
Total 33,086,880
- ------------------------------------------------------------------------------------------------------------------------============
Housing 1.74% Dade Co FL Hsg Fin Auth Sing Fam Mtge Rev GNMA+ AMT+++
6.70% 4/1/2028 AAA 1,000M 1,071,250
Dade Co FL Hsg Fin Auth Sing Fam Mtge Rev Ser E FNMA+ 7% 3/1/2024 AAA 40M 42,400
Orange Co FL Hsg Fin Auth Sing Fam Mtge Rev Ser A GNMA+ AMT+++
5.90% 9/1/2019 AAA 450M 466,875
Palm Beach Co FL Hsg Fin Auth Sing Fam Mtge Rev Ser A
GNMA+ AMT+++ 6.55% 4/1/2027 AAA 870M 930,900
Total 2,511,425
- ------------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Bonds 3.87% Hillsborough Co FL Ind Dev Auth Rev Tampa Elec Prjt 8% 5/1/2022 Aa 2,000M 2,337,500
Puerto Rico Tel Auth Rev RIBS MBIA+ 6.67% 1/25/2007++ AAA 3,000M 3,266,250
Total 5,603,750
- ------------------------------------------------------------------------------------------------------------------------============
Miscellaneous 7.48% Brevard Co FL Sales Tax Rev MBIA+ 7% 12/1/2018 AAA 1,000M 1,116,250
Broward Co FL Professional Sports Facs Tax Rev Ser A
MBIA+ 5 3/4% 9/1/2021 AAA 2,000M 2,070,000
Broward Co FL Professional Sports Facs Tax Rev Ser A
MBIA+ 5 5/8% 9/1/2028 AAA 200M 203,750
Cooper City FL Sales Tax Rev 7 1/4% 10/1/2011 A 1,000M 1,098,750
Jacksonville FL Sales Tax Rev River City Renaissance Prjt
FGIC+ 5 3/8% 10/1/2018 AAA 2,685M 2,701,781
Orange Co Tourist Rev AMBAC+ 6% 10/1/2016 AAA 710M 736,625
Puerto Rico Pub Bldg Auth Rev Gtd Ser B AMBAC+ 5% 7/1/2027 AAA 2,500M 2,403,125
Tampa FL Sports Auth Rev Gtd Pkg/Tampa Bay Arena Prjt
MBIA+ 6% 10/1/2015 AAA 450M 498,375
Total 10,828,656
- ------------------------------------------------------------------------------------------------------------------------============
Pollution Control Revenue 5.12% Citrus Co FL Poll Ctrl Rev/FL Pwr Crystal Rivers MBIA+ 6 5/8% 1/1/2027 AAA 6,780M 7,407,150
- ------------------------------------------------------------------------------------------------------------------------============
Power .58% Okeechobee FL Util Auth Sys Rev Acquisition & Imp
MBIA+ 5.60% 10/1/2025 AAA 825M 840,468
- ------------------------------------------------------------------------------------------------------------------------============
Solid Waste .75% Broward Co FL Resource Recovery Rev 7.95% 12/1/2008 A 1,000M 1,090,000
- ------------------------------------------------------------------------------------------------------------------------============
Transportation 8.16% Dade Co FL Aviation Rev Ser A FSA+ AMT+++ 5 3/8% 10/1/2010 AAA 1,000M 1,021,250
Dade Co FL Aviation Rev Ser A MBIA+ AMT+++ 5 3/4% 10/1/2018 AAA 1,825M 1,886,594
Florida St Dept Trans Alligator Alley Rev FGIC+ 5 1/8% 7/1/2022 AAA 4,915M 4,798,269
Greater Orlando Aviation Auth Arpt Fac Rev AMT+++ 8 3/8% 10/1/2016 A 2,500M 2,641,150
Palm Beach Co FL Arpt Sys Rev MBIA+ 7 3/4% 10/1/2010 AAA 1,290M 1,462,537
Total 11,809,800
- ------------------------------------------------------------------------------------------------------------------------============
Water and Sewer 4.59% Atlantic Beach FL Util Sys Rev MBIA+ 5 1/2% 10/1/2016 AAA 125M 128,125
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 1,410,350
Homestead FL Wtr Rev AMBAC+ 5% 10/1/2022 Aaa 1,000M 958,750
Indian River Co FL Wtr & Sewer Rev FGIC+ 5 1/2% 9/1/2016 AAA 475M 488,062
Panama City FL Wtr & Sewer Rev MBIA+ 5 5/8% 10/1/2016 AAA 1,000M 1,038,750
Total 6,639,662
---------------------------------------------------------------------------------------============
Total Municipal Bonds 99.02% (Cost $135,976,809) 143,334,156
====================================================================================================================================
Other Assets, Less Liabilities .98%
====================================================================================================================================
Short-Term Securities California St 4 1/2% 6/30/1998 (Cost $2,411,656) AAA 2,400M 2,411,976
----------------------------------------------------------------------------------------============
</TABLE>
3
<PAGE>
Statement of Net Assets
FLORIDA SERIES October 31, 1997
<TABLE>
<CAPTION>
Market Value
====================================================================================================================================
<C> <S> <C>
Cash and Receivables, Net of Liabilities $ (998,074)
- -----------------------------------------------------------------------------------------------------------------------=============
Total Other Assets, Less Liabilities 1,413,902
====================================================================================================================================
Net Assets 100.00% $144,748,058
====================================================================================================================================
Class A Shares-Net asset value ($137,252,499 / 28,176,682 shares outstanding) $4.87
Class C Shares-Net asset value ($7,495,559 / 1,538,411 shares outstanding) $4.87
<FN>
* Ratings have not been audited by Deloitte & Touche LLP.
+ Insured or guaranteed by the indicated municipal bond insurance
corporation or Federal agency.
++ The interest rate is subject to change periodically and inversely to the
prevailing market rate. The interest rate shown is the rate in effect at
October 31, 1997.
+++ Income from these investments may be subject to the Alternative Minimum
Tax.
See Notes to Financial Statements.
</FN>
</TABLE>
Statement of Net Assets
PENNSYLVANIA SERIES October 31, 1997
<TABLE>
<CAPTION>
Rating*: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<C> <S> <C> <C> <C>
Prerefunded 24.77% Bethlehem PA Area Sch Dist MBIA+ 6% 3/1/2016 AAA $1,000M $ 1,100,000
Erie PA Higher Ed Bldg Auth Coll Rev Ser A 8 1/2% 6/1/2015 AAA 3,000M 3,258,750
Langhorne Manor Boro PA Higher Ed & Health/Woods Sch
8 3/4% 11/15/2014 AAA 1,000M 1,108,750
Pennsylvania Conv Ctr Auth Ser A FGIC+ 6.70% 9/1/2016 AAA 540M 639,900
Pennsylvania Intergovernmental Coop Auth FGIC+ 6 3/4% 6/15/2021 AAA 2,000M 2,295,000
Pennsylvania St Tnpk Comm Tnpk Rev Ser E MBIA+ 7.55% 12/1/2017 AAA 1,000M 1,087,500
Pennsylvania St Tnpk Comm Tnpk Rev Ser J FGIC+ 7.15% 12/1/2011 AAA 1,000M 1,126,250
Philadelphia PA Gas Wks Rev 7.70% 6/15/2021 AAA 1,000M 1,133,750
Philadelphia PA Gas Wks Rev ETM Ser B MBIA+ 7% 5/15/2020 AAA 2,220M 2,627,925
Puerto Rico Commonwealth 7 5/8% 7/1/2010 AAA 1,415M 1,568,881
Puerto Rico Commonwealth 7.70% 7/1/2020 AAA 2,800M 3,108,000
Puerto Rico Commonwealth G.O. 7.30% 7/1/2020 AAA 700M 770,000
Puerto Rico Commonwealth Pub Imp Ser A 7.70% 7/1/2008 AAA 300M 322,125
Puerto Rico Elec Pwr Auth Rev Ser M 8% 7/1/2008 AAA 250M 261,928
Scranton-Lackawanna PA Health & Welfare Auth/Univ Scran Prjt
AMBAC+ 6.80% 11/1/2014 AAA 500M 563,750
Washington Co PA Auth Lease Rev Sub-Ser C AMBAC+ 7.45% 12/15/2018 AAA 1,150M 1,273,625
York PA Hosp Auth Rev AMBAC+ 7% 7/1/2021 AAA 1,000M 1,100,000
Total 23,346,134
- ------------------------------------------------------------------------------------------------------------------------============
General Obligation State 8.65% Lycoming Co PA MBIA+ 5.80% 11/15/2022 AAA 3,050M 3,149,125
Puerto Rico Commonwealth 6.45% 7/1/2017 A 1,900M 2,092,375
Puerto Rico Commonwealth MBIA+ 6.45% 7/1/2017 AAA 700M 769,125
Puerto Rico Commonwealth 6 1/2% 7/1/2023 A 1,000M 1,103,750
Puerto Rico Commonwealth 6% 7/1/2014 A 1,000M 1,038,750
Total 8,153,125
- ------------------------------------------------------------------------------------------------------------------------============
General Obligation Local 5.76% Bellefonte PA Area Sch Dist MBIA+ 5 1/2% 5/15/2026 AAA 205M 205,000
Bethlehem PA Area Sch Dist FGIC+ 5% 9/1/2016 Aaa 1,000M 975,000
Interboro Sch Dist Del Co MBIA+ 5 3/8% 8/15/2025 AAA 1,000M 981,250
Pennsylvania Hsg Fin Agy AMT+++ 5.80% 10/1/2029 AA 2,250M 2,275,313
Wilkes Barre PA Area Sch Dist FGIC+ 5 1/4% 4/1/2016 AAA 1,000M 991,250
Total 5,427,813
----------------------------------------------------------------------------------------============
</TABLE>
4
<PAGE>
Statement of Net Assets
PENNSYLVANIA SERIES October 31, 1997
<TABLE>
<CAPTION>
Rating*: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<C> <S> <C> <C> <C>
Education 8.50% Delaware Co PA Auth AMBAC+ 5.80% 8/1/2025 AAA $1,600M $ 1,650,000
Northeastern PA Hosp & Ed/Luzerne Co Comm Coll AMBAC+
6 5/8% 8/15/2015 AAA 2,000M 2,260,000
Pennsylvania St Higher Ed RIBS AMBAC+ AMT+++ 8.107% 3/1/2022++ AAA 3,000M 3,195,000
Pennsylvania St Higher Ed Ser A 6 5/8% 8/15/2009 Aa 825M 907,500
Total 8,012,500
- ------------------------------------------------------------------------------------------------------------------------============
Finance 1.45% Delaware Valley PA Reg Fin Auth Loc Govt Rev Ser C
AMBAC+ 7 3/4% 7/1/2027 AAA 1,000M 1,370,000
- ------------------------------------------------------------------------------------------------------------------------============
Health and Hospital 9.54% Chester Co PA Health & Ed Fac Auth Sys Rev/Mainline Health
RIBS AMBAC+ 7.17% 5/15/2020++ AAA 2,600M 2,684,500
Montgomery Co PA Higher Ed Auth Rev/Holy Redeemer Health
AMBAC+ 5 1/4% 10/1/2017 AAA 1,000M 982,500
Philadelphia PA Hosp & Higher Ed Auth Rev/Holy Redeemer Health
6 1/2% 7/1/2027 BBB 680M 686,800
Puerto Rico Ind Tourist Ed Med & Environmental Ctrl Fac Gr A
MBIA+ 6 1/4% 7/1/2024 AAA 850M 920,125
Sayre PA Health Care Fac/Tioga Nursing AMBAC+ 7 1/4% 10/1/2018 AAA 1,500M 1,593,750
Scranton-Lackawanna PA Health & Welfare Auth Rev 6.20% 7/1/2017 BBB 1,055M 1,103,793
West Shore PA Area Hosp Auth MBIA+ 5.70% 1/1/2022 AAA 1,000M 1,016,250
Total 8,987,718
- ------------------------------------------------------------------------------------------------------------------------============
Housing 6.86% Pennsylvania Hsg Fin Agy Ser 33 6.90% 4/1/2017 AA 1,180M 1,274,400
Pennsylvania Hsg Fin Agy Ser 43 AMT+++ 7.40% 10/1/2014 AA 1,000M 1,106,250
Pennsylvania Hsg Fin Agy Sing Fam Mtge Ser 41B
AMT+++ 6.65% 4/1/2025 AA 1,000M 1,068,750
Pennsylvania Hsg Fin Agy Sing Fam Mtge Ser 42 AMT+++ 6.85% 4/1/2025 AA 2,000M 2,167,500
Puerto Rico Pub Bldg Auth Ser J 6 1/2% 7/1/2003 A 770M 844,112
Total 6,461,012
- ------------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Bonds 9.24% Allegheny Co PA Ind Dev Auth Rev 6.10% 7/15/2020 Baa 1,000M 1,041,250
Beaver Co PA Ind Dev Auth/Ohio Edison Ser A FGIC+ 7 3/4% 9/1/2024 AAA 1,950M 2,096,250
Bradford Co PA Ind Dev Auth Solid Waste Disp Rev
AMT+++ 6.60% 3/1/2019 A 1,250M 1,379,687
Pennsylvania Economic Dev Fin Auth Exempt Fac Rev/Macmillan
AMT+++ 7.60% 12/1/2020 Baa 1,000M 1,152,500
Puerto Rico Ind Med & Environmental Ctrl/Motorola Ser A 6 3/4% 1/1/2014 AA 1,500M 1,651,875
Puerto Rico Ind Med & Environmental Ctrl/Upjohn 7 1/2% 12/1/2023 AA 1,300M 1,387,607
Total 8,709,169
- ------------------------------------------------------------------------------------------------------------------------============
Power 13.94% Pennsylvania Economic Dev Res Recov Northhampton 6.60% 1/1/2019 Baa** 1,500M 1,556,250
Puerto Rico Elec Pwr Auth LINK FSA+ 5.929% 7/1/2023++ AAA 6,000M 6,210,000
Puerto Rico Elec Pwr Auth Ser N 7 1/8% 7/1/2014 BBB 365M 386,444
Puerto Rico Elec Pwr Auth Ser T RIBS FSA+ 8.508% 7/1/2018++ AAA 1,500M 1,781,250
Puerto Rico Elec Pwr Auth Ser X 6% 7/1/2015 AAA 1,000M 1,060,000
Puerto Rico Elec Pwr Auth Ser X 6 1/8% 7/1/2021 A 500M 531,250
York Co PA Ind Dev Auth Poll Ctrl Rev Ser A MBIA+ 6.45% 10/1/2019 AAA 1,475M 1,611,438
Total 13,136,632
- ------------------------------------------------------------------------------------------------------------------------============
Transportation 9.70% Allegheny Co PA Arpt Rev Ser B MBIA+ 5% 1/1/2019 AAA 2,250M 2,160,000
Puerto Rico Commonwealth Hwy Ser V 6 5/8% 7/1/2012 A 2,615M 2,866,694
Puerto Rico Commonwealth Hwy Ser Y 5 1/2% 7/1/2018 A 3,000M 3,015,000
Puerto Rico Port Auth Rev Ser D FGIC+ AMT+++ 7% 7/1/2014 AAA 1,000M 1,093,750
Total 9,135,444
- ------------------------------------------------------------------------------------------------------------------------============
Water and Sewer 1.27% Philadelphia PA Wtr & Wastewtr Rev AMBAC+ 5% 8/1/2022 AAA 1,000M 956,250
Puerto Rico Commonwealth Aqu & Sewer Rev 5% 7/1/2019 A 250M 238,125
Total 1,194,375
----------------------------------------------------------------------------------------============
</TABLE>
5
<PAGE>
Statement of Net Assets
PENNSYLVANIA SERIES October 31, 1997
<TABLE>
<CAPTION>
Market Value
====================================================================================================================================
<S> <C>
Total Municipal Bonds 99.68% (Cost $90,245,811) $93,933,922
====================================================================================================================================
Other Assets, Less Liabilities 0.32%
====================================================================================================================================
Cash and Receivables, Net of Liabilities 303,225
====================================================================================================================================
Net Assets 100.00% $94,237,147
====================================================================================================================================
Net asset value ($94,237,147 / 18,350,253 shares outstanding) $5.14
<FN>
* Ratings have not been audited by Deloitte & Touche LLP.
** 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
October 31, 1997.
+++ Income from these investments may be subject to the Alternative Minimum
Tax.
See Notes to Financial Statements.
</FN>
</TABLE>
Statement of Net Assets
MICHIGAN SERIES October 31, 1997
<TABLE>
<CAPTION>
Rating*: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<C> <S> <C> <C> <C>
Prerefunded 28.37% Detroit MI Ser A 8.70% 4/1/2010 AAA $1,405M $ 1,577,112
Detroit MI Sewer Disp Rev FGIC+ 6 5/8% 7/1/2021 AAA 2,500M 2,750,000
Grand Rapids MI Water Supply FGIC+ 7% 1/1/2012 AAA 1,500M 1,616,250
Lake Orion MI Comm Sch Dist AMBAC+ 7% 5/1/2020 AAA 1,050M 1,229,812
Michigan St Bldg Auth Rev Ser I 6 3/4% 10/1/2003 AAA 1,000M 1,085,000
Michigan St Hosp Fin Auth Rev 7 1/2% 2/15/2018 AAA 3,150M 3,524,062
Puerto Rico Commonwealth Aqu & Sewer Auth Rev Ser A 7 7/8% 7/1/2017 AAA 400M 418,764
Riverview MI Comm Sch Dist FGIC+ 6.55% 5/1/2014 AAA 500M 552,500
Romulus MI Co Schs Ser II FGIC+ 6.40% 5/1/2017 AAA 500M 551,875
Royal Oak MI Hosp Fin Auth Hosp Rev/William Beaumont Ser C
7 3/8% 1/1/2020 AAA 500M 528,750
Royal Oak MI Hosp Fin Auth Hosp Rev/William Beaumont Ser D
6 3/4% 1/1/2020 AAA 500M 546,250
Tri Co MI Area Sch Dist MBIA+ 6 7/8% 5/1/2016 AAA 500M 550,625
Total 14,931,000
- ------------------------------------------------------------------------------------------------------------------------============
General Obligation State 4.71% Puerto Rico Commonwealth 6.45% 7/1/2017 A 1,500M 1,651,875
Puerto Rico Commonwealth 6 1/2% 7/1/2023 A 750M 827,813
Total 2,479,688
- ------------------------------------------------------------------------------------------------------------------------============
General Obligation Local 12.18% Alpena MI Pub Sch MBIA+ 5 5/8% 5/1/2022 AAA 500M 511,875
Huron Valley MI Sch FGIC+ 5 3/4% 5/1/2022 AAA 250M 255,625
Lakeview MI Comm Sch FGIC+ 5.60% 5/1/2022 AAA 500M 508,125
Lincoln Pk MI Sch Dist FGIC+ 5.90% 5/1/2026 AAA 500M 520,625
Lincoln PK MI Sch Dist FGIC+ 5% 5/1/2017 AAA 500M 483,125
Plymouth-Canton MI Comm Sch Dist Ser C 6 1/2% 5/1/2016 AA 1,000M 1,085,000
Rockford MI Pub Schs FGIC+ 5 1/4% 5/1/2022 AAA 250M 245,625
Saline MI Area Sch FGIC+ 5 1/2% 5/1/2015 AAA 750M 767,813
South Lake MI Sch FGIC+ 5 1/8% 5/1/2015 AAA 500M 487,325
South Redford MI Sch FGIC+ 5 1/2% 5/1/2022 AAA 500M 504,375
Traverse MI Area Library MBIA+ 5% 5/1/2017 AAA 555M 539,738
Wayne County MI Ser A MBIA+ 5 1/4% 6/1/2016 AAA 500M 498,750
Total 6,408,001
----------------------------------------------------------------------------------------============
</TABLE>
6
<PAGE>
Statement of Net Assets
MICHIGAN SERIES October 31, 1997
<TABLE>
<CAPTION>
Rating*: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<C> <S> <C> <C> <C>
Education 1.39% Michigan Higher Ed Student Loan Auth Rev AMBAC+ 5 3/4% 6/1/2013 AAA $ 250M $ 257,813
Oakland Co MI Economic Dev Corp 5% 11/1/2017 Aa 500M 475,625
Total 733,438
- ------------------------------------------------------------------------------------------------------------------------============
Health and Hospital 16.95% Farmington Hills MI Hosp/Botsford Gen Hosp Ser A
MBIA+ 6 1/2% 2/15/2011 AAA 1,000M 1,090,000
Kalamazoo MI Hosp Fin Auth Reg Arcs & Levrs
LINK FGIC+ 5.244% 6/1/2011++ AAA 2,000M 2,002,500
Kalamazoo MI Hosp Fin Auth/Borgess Hosp RIBS 6.528% 6/1/2011++ AAA 3,000M 3,071,250
Kent Hosp Fin Auth/Butterworth Health Ser A MBIA+ 5 5/8% 1/15/2026 AAA 800M 809,000
Michigan St Hosp Fin Auth Rev AMBAC+ 5 5/8% 1/1/2028 AAA 250M 252,500
Puerto Rico Ind Tourist Ed Med & Environmental Ctrl Facs Ser A
6.70% 5/1/2024 BBB 1,575M 1,693,125
Total 8,918,375
- ------------------------------------------------------------------------------------------------------------------------============
Housing 8.47% Michigan St Hsg Dev Auth Ser A AMBAC+ AMT+++ 6.05% 12/1/2027 AAA 1,000M 1,043,750
Michigan St Hsg Dev Auth Ser B 6.95% 12/1/2020 AA 990M 1,071,675
Michigan St Hsg Dev Auth Ser B AMT+++ 7.05% 6/1/2026 AA 740M 782,550
Michigan St Hsg Dev Auth Ser D 5.95% 12/1/2016 AA 500M 521,875
Michigan St Hsg Dev Auth Ser E AMT+++ 6.20% 12/1/2027 AA 1,000M 1,040,000
Total 4,459,850
- ------------------------------------------------------------------------------------------------------------------------============
Industrial Revenue Bonds 8.95% Michigan St Strategic Fd Ltd/Waste Mgmt Inc AMT+++ 6 5/8% 12/1/2012 AA 1,000M 1,098,750
Puerto Rico Ind Med & Environmental Ctrl/Upjohn 7 1/2% 12/1/2023 AA 1,500M 1,601,085
Puerto Rico Ind Med & Environmental Ctrl/Warner Lambert 7.60% 5/1/2014 Aa 1,000M 1,077,500
Puerto Rico Tel Auth Rev RIBS MBIA+ 6.875% 1/16/2015++ AAA 900M 930,375
Total 4,707,710
- ------------------------------------------------------------------------------------------------------------------------============
Miscellaneous 4.12% Detroit MI Loc Dev Fin Auth Ser A 5 3/8% 5/1/2018 A 500M 494,375
Michigan Muni Bd Auth AMBAC+ 6 3/4% 11/1/2014 AAA 1,500M 1,674,375
Total 2,168,750
- ------------------------------------------------------------------------------------------------------------------------============
Power 7.36% Michigan St Strategic Fd Ltd Detroit Edison MBIA+ 7% 7/15/2008 AAA 500M 600,000
Michigan St Strategic Fd Ltd Detroit Edison AMBAC+ 7% 5/1/2021 AAA 500M 616,250
Michigan St Strategic Fd Rev/Genesee Pwr Prjt AMT+++ 7 1/2% 1/1/2021 BBB** 500M 531,250
Puerto Rico Elec Pwr Auth Pwr MBIA+ 5 1/2% 7/1/2016 AAA 1,500M 1,533,750
Puerto Rico Elec Pwr Auth Ser T RIBS FSA+ 8.508% 7/1/2018++ AAA 500M 593,750
Total 3,875,000
- ------------------------------------------------------------------------------------------------------------------------============
Transportation 5.19% Puerto Rico Commonwealth Hwy Ser V 6 5/8% 7/1/2012 A 1,500M 1,644,375
Wayne Charter Co MI Arpt Rev MBIA+ AMT+++ 6 3/4% 12/1/2021 AAA 1,000M 1,086,250
Total 2,730,625
- ------------------------------------------------------------------------------------------------------------------------============
Water and Sewer .09% Puerto Rico Commonwealth Aqu & Sewer Rev 5% 7/1/2019 A 50M 47,625
- ------------------------------------------------------------------------------------------------------------------------============
Total Municipal Bonds 97.78% (Cost $49,830,917) 51,460,062
====================================================================================================================================
Other Assets, Less Liabilities 2.22%
====================================================================================================================================
Cash and Receivables, Net of Liabilities 1,169,748
====================================================================================================================================
Net Assets 100.00% $52,629,810
====================================================================================================================================
Net asset value ($52,629,810 / 10,395,127 shares outstanding) $5.06
<FN>
* Ratings have not been audited by Deloitte & Touche LLP.
** 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
October 31, 1997.
+++ Income from these investments may be subject to the Alternative Minimum
Tax.
See Notes to Financial Statements.
</FN>
</TABLE>
7
<PAGE>
Statement of Net Assets
GEORGIA SERIES October 31, 1997
<TABLE>
<CAPTION>
Rating*: S&P Principal
Investments or Moody's Amount Market Value
====================================================================================================================================
<C> <S> <C> <C> <C>
Prerefunded 27.80% Albany GA Sewer Sys Rev MBIA+ 6 5/8% 7/1/2017 AAA $ 100M $ 111,625
Chatham Co GA Sch Dist MBIA+ 6 3/4% 8/1/2020 AAA 1,035M 1,181,194
Georgia Muni Elec Auth Pwr Rev FGIC+ 6% 1/1/2025 AAA 900M 920,250
Puerto Rico Commonwealth 8% 7/1/2007 AAA 1,320M 1,382,977
Savannah GA Economic Dev Auth Rev Zero Coupon 12/1/2021 AAA 1,000M 267,500
Total 3,863,546
- ------------------------------------------------------------------------------------------------------------------------============
General Obligation State 4.80% Georgia St Ser C 6 1/4% 8/1/2013 Aaa 350M 396,375
Puerto Rico Commonwealth RIBS FSA+ 7.882% 7/1/2020++ AAA 250M 271,250
Total 667,625
- ------------------------------------------------------------------------------------------------------------------------============
General Obligation Local 9.62% Atlanta GA Ser A 6.10% 12/1/2019 AA 500M 534,375
De Kalb Co GA 6% 1/1/2020 AA 250M 263,750
Fayette Co GA Sch Dist 6 1/8% 3/1/2015 Aa 500M 538,125
Total 1,336,250
- ------------------------------------------------------------------------------------------------------------------------============
Education 3.89% Marietta GA Dev Auth Rev Ser B CGIC+ 6 1/4% 9/1/2025 AAA 500M 541,250
- ------------------------------------------------------------------------------------------------------------------------============
Health and Hospital 3.83% Glynn-Brunswick Mem Hosp Auth GA Rev Antic Ctfs Southeast GA
MBIA+ 6% 8/1/2016 AAA 500M 531,875
- ------------------------------------------------------------------------------------------------------------------------============
Housing 7.44% De Kalb Co Hsg Auth FSA+ AMT+++ 7.15% 1/1/2025 AAA 500M 552,500
Georgia St Hsg & Fin Auth Rev A Sing Fam Mtge A Sub Ser A-2
AMT+++ 6.45% 12/1/2027 AA 250M 267,500
Georgia St Hsg & Fin Auth Rev Ser A Sub Ser A-2
AMT+++ 6.40% 12/1/2015 AA 200M 213,500
Total 1,033,500
- ------------------------------------------------------------------------------------------------------------------------============
Miscellaneous 12.26% Cartersville GA Dev Auth Rev AMT+++ 6 1/8% 5/1/2027 A 1,000M 1,065,000
Cobb-Marietta GA Coliseum & Exhibit Hall Auth Rev
MBIA+ 5 5/8% 10/1/2026 AAA 600M 638,250
Total 1,703,250
- ------------------------------------------------------------------------------------------------------------------------============
Pollution Control Revenue 2.22% Burke Co GA Dev Auth Poll Ctrl Rev AMT+++ 9 3/8% 12/1/2017 A 250M 255,952
Burke Co GA Dev Auth Poll Ctrl Rev MBIA+ 6.60% 7/1/2024 AAA 50M 52,563
Total 308,515
- ------------------------------------------------------------------------------------------------------------------------============
Power 4.65% Puerto Rico Elec Pwr Auth Ser O 7 1/8% 7/1/2014 BBB 50M 52,938
Puerto Rico Elec Pwr Auth Ser T RIBS FSA+ 8.508% 7/1/2018++ AAA 500M 593,750
Total 646,688
- ------------------------------------------------------------------------------------------------------------------------============
Solid Waste .79% Cobb Co GA Solid Waste Mgmt Auth AMT+++ 6.40% 1/1/2015 Aaa 100M 110,125
- ------------------------------------------------------------------------------------------------------------------------============
Transportation 9.20% Metropolitan Atlanta Rapid Trans Auth GA Sales Tax Rev Ser P
AMBAC+ 6 1/4% 7/1/2020 AAA 1,125M 1,278,281
- ------------------------------------------------------------------------------------------------------------------------============
Water and Sewer 11.16% Cherokee Co GA Wtr & Sewer Auth Rev MBIA+ 5.20% 8/1/2025 AAA 1,000M 997,500
Milledgeville GA Wtr & Sewer Rev FSA+ 6% 12/1/2021 AAA 500M 553,125
Total 1,550,625
----------------------------------------------------------------------------------------============
Total Municipal Bonds 97.66% (Cost $13,055,854) 13,571,530
====================================================================================================================================
Other Assets, Less Liabilities 2.34%
====================================================================================================================================
Cash and Receivables, Net of Liabilities 325,737
====================================================================================================================================
Net Assets 100.00% $13,897,267
====================================================================================================================================
Net asset value ($13,897,267 / 2,615,464 shares outstanding) $5.31
<FN>
* Ratings have not been audited by Deloitte & Touche LLP.
+ Insured or guaranteed by the indicated municipal bond insurance
corporation or Federal agency.
++ The interest rate is subject to change periodically and inversely to the
prevailing market rate. The interest rate shown is the rate in effect at
October 31, 1997.
+++ Income from these investments may be subject to the Alternative Minimum
Tax.
See Notes to Financial Statements.
</FN>
</TABLE>
8
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
Year Ended October 31, 1997
---------------------------------------------------------------
Florida Pennsylvania Michigan Georgia
Investment Income Series Series Series Series
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Income Interest $ 8,963,895 $ 5,656,232 $ 3,087,896 $ 670,931
------------------------------------------------------------------------------------------------------------
Expenses Management fee 760,504 464,836 261,943 59,788
Management fee waived -- (34,734) (45,360) (59,788)
12b-1 distribution plan-Class A 355,311 -- -- --
12b-1 distribution plan-Class C 77,158 -- -- --
Shareholder servicing 81,871 66,730 50,192 19,550
Registration 2,998 4,500 1,771 600
Reports to shareholders 20,973 16,830 9,247 4,160
Audit and tax 44,360 26,400 17,616 13,250
Legal 5,996 3,036 2,044 1,300
Trustees 4,191 3,480 1,475 120
Organization -- 603 3,959 792
Other 18,105 17,634 5,639 5,492
Net expenses 1,371,467 569,315 308,526 45,264
------------------------------------------------------------------------------------------------------------
Net investment income 7,592,428 5,086,917 2,779,370 625,667
------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain on Investments
========================================================================================================================
Net realized gain (loss) from investment transactions
Proceeds from sales 217,154,871 70,030,904 37,511,828 10,382,566
Cost of investments sold 216,008,427 69,049,181 37,266,219 10,193,618
Net realized gain 1,146,444 981,723 245,609 188,948
------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investments 1,603,515 1,379,031 1,092,550 285,372
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 2,749,959 2,360,754 1,338,159 474,320
- ------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 10,342,387 $ 7,447,671 $ 4,117,529 $ 1,099,987
========================================================================================================================
</TABLE>
See Notes to Financial Statements.
Statements of Changes in Net Assets
<TABLE>
<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
Net asset value of shares issued in
exchange for assets acquired in
tax-free acquisition -- -- -- 9,480,186
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 year 162,069,720 92,604,691 52,975,168 10,687,669
End of year+ $ 144,748,058 $ 94,237,147 $ 52,629,810 $ 13,897,267
===============================================================================================
<CAPTION>
Year Ended October 31, 1996
- -------------------------------------- ----------------------------------------------------------
Increase (Decrease) Florida Pennsylvania Michigan Georgia
in Net Assets Series Series Series Series
====================================== ==========================================================
<S> <C> <C> <C> <C>
Operations
Net investment income $ 8,629,401 $ 5,162,782 $ 2,997,735 $ 451,062
Net realized gain (loss)
from investment transactions (1,035,870) 365,030 170,393 9,656
Net unrealized appreciation
(depreciation) of investments (910,194) (489,207) (237,304) 69,195
Net increase in net assets
resulting from operations 6,683,337 5,038,605 2,930,824 529,913
------------
Distributions to
shareholders from
Net investment income (8,752,598) (5,141,277) (2,885,696) (455,345)
Net realized gain from
investment transactions -- -- -- (26,021)
Total distributions (8,752,598) (5,141,277) (2,885,696) (481,366)
------------
Share transactions
Net proceeds from sales of shares 12,098,560 8,524,777 5,262,977 5,902,867
Net asset value of shares issued to
shareholders in reinvestment of net
investment income and realized
gain from investment transactions 3,449,991 2,408,760 1,532,165 254,773
Net asset value of shares issued in
exchange for assets acquired in
tax-free acquisition -- -- --
Total 25,028,737 10,933,537 6,795,142 6,157,640
- -------------------------------------- ----------------------------------------------------------
Cost of shares reacquired (34,131,285) (11,720,098) (8,050,957) (721,983)
- -------------------------------------- ----------------------------------------------------------
Increase (decrease) in net assets
derived from share transactions (9,102,548) (786,561) (1,255,815) 5,435,657
- -------------------------------------- ----------------------------------------------------------
Total increase (decrease)
in net assets (11,171,809) (889,233) (1,210,687) 5,484,204
- -------------------------------------- ----------------------------------------------------------
Net Assets
Beginning of year 173,241,529 93,493,924 54,185,855 5,203,465
End of year+ $ 162,069,720 $ 92,604,691 $ 52,975,168 $ 10,687,669
====================================== ==========================================================
<FN>
+ Including undistributed (overdistributed) net investment income of
$(448,358), $(59,544) , $4,442 and, $(36,578), respectively, as of October
31, 1997 and undistributed (overdistributed) net investment income of
$(115,684), $(37,133), $(14,256) and $(14,804), respectively, at October
31, 1996. See Notes to Financial Statements.
</FN>
</TABLE>
9
<PAGE>
Financial Highlights
FLORIDA SERIES
<TABLE>
<CAPTION>
Class A Shares Class C Shares
----------------------------------------------------------- ----------------------------
Year Ended
Year Ended October 31, October 31, 7/15/96(b)
Per Share Operating Performance: 1997 1996 1995 1994 1993 1997 to 10/31/96
==================================================================================================== ============================
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 4.79 $ 4.85 $ 4.49 $ 5.28 $ 4.75 $ 4.79 $ 4.70
------- -------
Income from investment operations
Net investment income .240 .248 .271 .291 .297 .202 .064
Net realized and unrealized gain (loss)
on investments .092 (.056) .352 (.695) .549 .093 .093
Total from investment operations .332 .192 .623 (.404) .846 .295 .157
- ---------------------------------------------------------------------------------------------------- ----------------------------
Distributions
Dividends from net investment income (.252) (.252) (.263) (.2835) (.301) (.215) (.067)
Distributions from net realized gain -- -- -- (.1025) (.015) -- --
- ---------------------------------------------------------------------------------------------------- ----------------------------
Net asset value, end of period $ 4.87 $ 4.79 $ 4.85 $ 4.49 $ 5.28 $ 4.87 $ 4.79
Total Return(a) 7.12% 4.09% 14.22% (8.03)% 18.24% 6.33% 3.35%(c)
==================================================================================================== ============================
Ratios to Average Net Assets:
Expenses, including waiver .86%(c) .80% .74% .32% .38% 1.57% .44%(c)
Expenses, excluding waiver .86%(c) .82% .88% .82% .88% 1.57% .44%(c)
Net investment income 5.03%(c) 5.19% 5.81% 5.98% 5.71% 4.29% 1.37%(c)
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31,
Supplemental Data for All Classes: 1997 1996 1995 1994 1993
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net assets, end of period (000) $144,748 $162,070 $173,242 $174,844 $191,463
Portfolio turnover rate 106.32% 167.95% 142.04% 122.36% 89.32%
==============================================================================================================================
<FN>
(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.
</FN>
</TABLE>
Financial Highlights
PENNSYLVANIA SERIES
<TABLE>
<CAPTION>
Year Ended October 31,
Per Share Operating Performance: 1997 1996 1995 1994 1993
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 5.01 $ 5.01 $ 4.62 $ 5.33 $ 4.75
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .276 .2772 .282 .300 .299
Net realized and unrealized gain (loss) on investments .131 (.0011) .395 (.6975) .582
Total from investment operations .407 .2761 .677 (.3975) .881
---------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.277) (.2761) (.2870) (.2925) (.301)
Distribution from net realized gain -- -- -- (.02) --
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.14 $ 5.01 $ 5.01 $ 4.62 $ 5.33
- -------------------------------------------------------------------------------------------------------------------
Total Return(a) 8.37% 5.68% 15.02% (7.73%) 18.95%
===================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000) $94,237 $92,605 $93,494 $81,258 $82,113
---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver .61%(c) .62% .50% .33% .31%
Expenses, excluding waiver .65%(c) .69% .65% .68% .81%
Net investment income 5.47%(c) 5.55% 5.83% 5.98% 5.70%
Portfolio turnover rate 70.99% 78.30% 126.11% 137.22% 7.71%
===============================================================================================================
<FN>
(a) Total return does not consider the effects of sales loads.
See Notes to Financial Statements.
</FN>
</TABLE>
10
<PAGE>
Financial Highlights
MICHIGAN SERIES
<TABLE>
<CAPTION>
Year Ended October 31, 12/1/92(b)
Per Share Operating Performance: 1997 1996 1995 1994 to 10/31/93
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 4.93 $ 4.93 $ 4.53 $ 5.23 $ 4.76
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .267 .274 .284 .286 .266
Net realized and unrealized gain (loss) on investments .128 (.010) .395 (.651) .480
Total from investment operations .395 .264 .679 (.365) .746
--------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.265) (.264) (.279) (.293) (.276)
Distribution from net realized gain -- -- -- (.042) --
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.06 $ 4.93 $ 4.93 $ 4.53 $ 5.23
- ------------------------------------------------------------------------------------------------------------------------
Total Return(a) 8.24% 5.53% 15.39% (7.29)% 16.01%(c)
- ------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (000) $52,630 $52,975 $54,186 $45,603 $34,957
--------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver .60%(c) .44% .25% .34% .00%(c)
Expenses, excluding waiver .68%(c) .73% .75% .84% .75%(c)
Net investment income 5.37%(c) 5.59% 5.95% 5.69% 4.75%(c)
Portfolio turnover rate 68.50% 85.26% 98.89% 137.31% 68.10%
====================================================================================================================
<FN>
(a) Total return does not consider the effects of sales loads.
(b) Commencement of operations.
(c) Not annualized.
See Notes to Financial Statements.
</FN>
</TABLE>
Financial Highlights
GEORGIA SERIES
<TABLE>
<CAPTION>
Year Ended October 31, 12/27/94(b)
Per Share Operating Performance: 1997 1996 to 10/31/95
================================================================================================
<S> <C> <C> <C>
Net asset value, beginning of period $ 5.14 $ 5.12 $ 4.76
- ------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .275 .290 .245
Net realized and unrealized gain (loss) on investments .187 .0397 .370
Total from investment operations .462 .3297 .615
--------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.282) (.2872) (.255)
Distributions from net realized gain (.01) (.0225) .-
- ------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.31 $ 5.14 $ 5.12
- ------------------------------------------------------------------------------------------------
Total Return(a) 9.27% 6.69% 13.15%(c)
================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000) $13,897 $10,688 $ 5,203
--------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver .38% .03% .00%(c)
Expenses, excluding waiver .88% .83% 1.08%(c)
Net investment income 5.23% 5.55% 5.44%(c)
Portfolio turnover rate 90.40% 72.53% 142.69%
============================================================================================
<FN>
(a) Total return does not consider the effects of sales loads.
(b) Commencement of operations.
(c) Not annualized.
See Notes to Financial Statements.
</FN>
</TABLE>
11
<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 October 31, 1997, 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
Pennsylvania, 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 $32,437 $219,329
- --------------------------------------------------------------------------------
Pennsylvania 26,437 273,776
- --------------------------------------------------------------------------------
Michigan 20,775 140,483
- --------------------------------------------------------------------------------
Georgia 21,274 135,562
- --------------------------------------------------------------------------------
Certain of the Trust's officers and trustees have an interest in Lord Abbett.
3. Distributions
As of October 31, 1997, accumulated net realized gain (loss) for financial
report- ing purposes, which is substantially the same as for federal income tax
purposes, aggregated $(10,212,479) for the Florida Series, $(857,454) for the
Pennsylvania Series, $(1,253,317) for the Michigan Series and $174,915 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 $7,559,484
- --------------------------------------------------------------------------------
Class C $ 365,618
- --------------------------------------------------------------------------------
4. Capital
Transactions in shares of beneficial interest for the Florida Series (both
shares and dollar amount) were as follows:
Year Ended 10/31/97 Year Ended 10/31/96
- ---------------------------------------------------- --------------------------
Class A Shares Amount Shares Amount
- ---------------------------------------------------- --------------------------
Sales of shares 1,626,001 $ 7,812,607 2,490,080 $ 12,036,691
Shares issued to
shareholders in
reinvestment of net
investment income 632,367 3,034,401 715,706 3,427,406
Total 2,258,368 10,847,008 3,205,786 15,464,097
- ---------------------------------------------------- --------------------------
Shares reacquired (6,029,983) (28,889,005) (6,969,002) (33,452,324)
Decrease in shares (3,771,615) $(18,041,997) (3,763,216) $(17,988,227)
- --------------------------------------------------------------------------------
12
<PAGE>
Notes to Financial Statements
<TABLE>
<CAPTION>
7/15/96
(Commencement of
Offering Class C Shares)
Year Ended 10/31/97 to 10/31/96
----------------------- -------------------------
Class C Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------- -------------------------
<S> <C> <C> <C> <C>
Sales of shares 250,976 $ 1,203,097 13,038 $ 61,869
Shares issued to shareholders in reinvestment of net investment income 28,569 137,048 4,698 22,585
Shares issued to shareholders in exchange for assets acquired in
tax-free acquisition -- -- 2,016,203 9,480,186
Total 279,545 1,340,145 2,033,939 9,564,640
- ------------------------------------------------------------------------------------------------- -------------------------
Shares reacquired (632,179) (3,037,095) (142,894) (678,961)
- ------------------------------------------------------------------------------------------------- -------------------------
Increase (decrease) in shares (352,634) $(1,696,950) 1,891,045 $ 8,885,679
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Transactions in shares of beneficial interest for the single class Series were
as follows:
<TABLE>
<CAPTION>
Year Ended 10/31/97 Year Ended 10/31/96
------------------------------------ --------------------------------------
Pennsylvania Michigan Georgia Pennsylvania Michigan Georgia
Series Series Series Series Series Series
- -------------------------------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales of shares 1,886,645 830,953 788,606 1,704,142 1,068,118 1,154,409
Shares issued to shareholders in
reinvestment of net investment
income and realized gain from
investment transactions 469,179 288,012 66,640 483,298 312,664 50,038
Total 2,355,824 1,118,965 855,246 2,187,440 1,380,782 1,204,447
- -------------------------------------------------------------------- --------------------------------------
Shares reacquired (2,498,345) (1,465,934) (318,591) (2,347,568) (1,637,715) (142,263)
- -------------------------------------------------------------------- --------------------------------------
Increase (decrease) in shares (142,521) (346,969) 536,655 (160,128) (256,933) 1,062,184
- -------------------------------------------------------------------------------------------------------------
</TABLE>
As of October 31, 1997, paid in capital for each Series was as follows:
$148,051,228 for the Florida Series, $91,466,034 for the Pennsylvania Series,
$52,249,540 for the Michigan Series and $13,243,254 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 $160,603,829 $181,304,432
- --------------------------------------------------------------------------------
Pennsylvania 66,341,604 66,312,696
- --------------------------------------------------------------------------------
Michigan 35,308,740 37,511,828
- --------------------------------------------------------------------------------
Georgia 13,544,418 10,382,566
- --------------------------------------------------------------------------------
As of October 31,1997, net unrealized appreciation, unrealized appreciation and
unrealized depreciation of investments based on cost for federal income tax
purposes were as follows:
Net Unrealized Unrealized Unrealized
Series Appreciation Appreciation Depreciation
- --------------------------------------------------------------------------------
Florida $7,357,667 $7,706,541 $(348,874)
- --------------------------------------------------------------------------------
Pennsylvania 3,688,111 4,470,533 (782,422)
- --------------------------------------------------------------------------------
Michigan 1,629,145 1,962,562 (333,417)
- --------------------------------------------------------------------------------
Georgia 515,676 562,836 (47,160)
- --------------------------------------------------------------------------------
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 withLord 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
October 31, 1997 were $27,955.
7. Acquisition
On July 12, 1996, the Florida Series acquired the net assets of LordAbbett
Securities Trust-Florida Tax-Free Income Trust ("Florida Trust") pursuant to a
plan of reorganization approved by the Florida Trust's shareholders on June 19,
1996. The acquisition was accomplished by a tax-free exchange of 2,016,203
shares of newly issued Class C shares for 2,136,065 shares of the Florida Trust
valued at $9,480,186 in the aggregate on July 12, 1996. The aggregate net assets
of the Florida Series and the Florida Trust immediately before the acquisition
were $156,381,441 and $9,480,186 (including $54,005 of net unrealized
appreciation and $(1,371,030) of accumulated net realized losses), respectively.
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders,
Lord Abbett Tax-Free Income Trust:
We have audited the accompanying statements of net assets of Lord Abbett
Tax-Free Income Trust-Florida Series, Pennsylvania Series, Michigan Series and
Georgia Series as of October 31, 1997, the related statements of operations and
of changes in net assets and the financial highlights for each of the periods
presented. These financial statements and the financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at October
31, 1997 by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Lord Abbett Tax-Free
Income Trust-Florida Series, Pennsylvania Series, Michigan Series and Georgia
Series at October 31, 1997, the results of their operations, the changes in
their net assets and the financial highlights for each of the periods presented,
in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
December 2, 1997
Copyright (C) 1997 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
- ------------------------------------------------------------------------
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203
o 800-426-1130
LATFIT-2-1097
(12/97)
