1933 Act File No. 33-43017
1940 Act File No. 811-6418
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 18 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [X]
OF 1940
Amendment No. 18 [X]
LORD ABBETT TAX-FREE INCOME TRUST
------------------------------------------------
Exact Name of Registrant as Specified in Charter
90 Hudson Street, Jersey City, New Jersey 07302
------------------------------------------------
Address of Principal Executive Office
Registrant's Telephone Number (800) 201-6984
------------------------------------------------
Lawrence H. Kaplan, Vice President
90 Hudson Street, Jersey City, New Jersey 07302
------------------------------------------------
Name and Address of Agent for Service
It is proposed that this filing will become effective (check appropriate box)
_____ immediately upon filing pursuant to paragraph (b)
__X__ on February 1, 2000 pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a) (1)
____ on (date) pursuant to paragraph (a) (1)
_____ 75 days after filing pursuant to paragraph (a) (2)
_____ on (date) pursuant to paragraph (a) (2) of rule 485
If appropriate, check the following box:
____ this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE>
Lord Abbett
Prospectus
February 1, 2000
National Tax-Free Income Fund
California Tax-Free Income Fund
Connecticut Tax-Free Income Fund
Hawaii Tax-Free Income Fund
Minnesota Tax-Free Income Fund
Missouri Tax-Free Income Fund
New Jersey Tax-Free Income Fund
New York Tax-Free Income Fund
Texas Tax-Free Income Fund
Washington Tax-Free Income Fund
Florida Series
Georgia Series
Michigan Series
Pennsylvania Series
[LOGO]
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of
this prospectus. Any representation to the contrary is a criminal offense.
Class P shares of each Fund are neither offered to the general public nor
available in all states. Please call 800-821-5129 for further information.
<PAGE>
Table of Contents
The Funds Page
Information about
performance, fees
and expenses
Goal/Principal Strategy 3
Main Risks 3
National Tax-Free Income Fund 6
California Tax-Free Income Fund 8
Connecticut Tax-Free Income Fund 10
Hawaii Tax-Free Income Fund 12
Minnesota Tax-Free Income Fund 14
Missouri Tax-Free Income Fund 16
New Jersey Tax-Free Income Fund 18
New York Tax-Free Income Fund 20
Texas Tax-Free Income Fund 22
Washington Tax-Free Income Fund 24
Florida Series 26
Georgia Series 28
Michigan Series 30
Pennsylvania Series 32
Your Investment
Information for managing
your Fund account
Purchases 34
Sales Compensation 37
Opening Your Account 37
Redemptions 38
Distributions and Taxes 38
Services For Fund Investors 40
Management 41
For More Information
How to learn more
about the Funds
Other Investment Techniques 42
Glossary of Shaded Terms 44
Recent Performance 45
<PAGE>
Financial Information
Financial highlights, line
graph comparisons of each
Fund and broker compensation
National Tax-Free Income Fund 46
California Tax-Free Income Fund 48
Connecticut Tax-Free Income Fund 50
Hawaii Tax-Free Income Fund 52
Minnesota Tax-Free Income Fund 54
Missouri Tax-Free Income Fund 56
New Jersey Tax-Free Income Fund 58
New York Tax-Free Income Fund 60
Texas Tax-Free Income Fund 62
Washington Tax-Free Income Fund 64
Florida Series 66
Georgia Series 68
Michigan Series 70
Pennsylvania Series 72
Compensation For Your Dealer 74
How to learn more about the
Funds and other Lord Abbett Funds
Back Cover
<PAGE>
THE FUNDS
GOAL / PRINCIPAL STRATEGY
The investment objective of each Fund is to seek the maximum amount of
interest income exempt from federal income tax as is consistent with
reasonable risk. Each Fund (except for the National Fund) also seeks as
high a level of interest income exempt from the personal income tax of its
state as is consistent with reasonable risk. The New York Fund also seeks
as high a level of interest income exempt from New York City personal
income tax as is consistent with reasonable risk. At present, neither Texas
nor Washington imposes a personal income tax.
To pursue its goal, each Fund invests in municipal bonds which, at the time
of purchase, are investment grade or determined by Lord Abbett to be of
comparable quality. Under normal market conditions, each Fund attempts to
be 80% invested in municipal bonds, the interest on which is exempt from
federal, its state's and, in the case of the New York Fund, New York City
personal income tax. Under normal circumstances, we intend to maintain the
average weighted stated maturity of each Fund at between ten and
thirty-five years.
In selecting municipal bonds, we focus on:
o Credit Quality - an issuer's ability to pay principal and interest
o Call Protection - assurance by an issuer that it will not redeem a
bond earlier than anticipated
o Income Tax Exemption - the bond issuer's ability to pay interest free
from federal, state and/or local personal income taxes
o Total Return Potential - the return possibilities for an investment
over a period of time, including appreciation and interest
While typically fully invested, we may take a temporary defensive position
in: (i) short-term tax-exempt securities, and (ii) cash, investment grade
commercial paper, and short-term U.S. Government Securities (limited to 20%
of a Fund's assets). This could reduce tax-exempt income.
MAIN RISKS
For All Funds - Each Fund's performance and the value of its investments
will vary in response to changes in interest rates and other market
factors. As interest rates rise, a Fund's investments typically will lose
value. This risk is usually greater for long-term bonds than for short-term
bonds. As a result, the Funds, which tend to invest in longer term bonds
than many other municipal bond funds, normally will have more price
volatility than those funds.
Additional risks that could reduce each Fund's performance or increase
volatility include the following:
o Credit risk - the possibility that an issuer of bonds fails to make
timely payments of principal or interest. Credit risk varies among
states based upon the economic and fiscal conditions of each state and
the municipalities within the state
o Call risk - as interest rates decline, bond issuers may pay off their
loans early by buying back the bonds
o Governmental risk - government actions, including local, state and
regional factors, could have an adverse effect on municipal bond
prices
o Management risk - if certain sectors or investments do not perform as
expected, the Funds could underperform other similar funds or lose
money
Lord Abbett Tax-Free
Income Fund, Inc.
National Tax-Free Income Fund
California Tax-Free Income Fund
Connecticut Tax-Free Income Fund
Hawaii Tax-Free Income Fund
Minnesota Tax-Free Income Fund
Missouri Tax-Free Income Fund
New Jersey Tax-Free Income Fund
New York Tax-Free Income Fund
Texas Tax-Free Income Fund
Washington Tax-Free Income Fund
Lord Abbett Tax-Free
Income Trust
Florida Series
Georgia Series
Michigan Series
Pennsylvania Series
We or the Funds refers to any one or more of the portfolios of Lord Abbett
Tax-Free Income Fund, Inc. or Lord Abbett Tax-Free Income Trust.
Lord Abbett refers to Lord, Abbett & Co., each Fund's investment adviser.
About each Fund. Each Fund is a professionally managed portfolio primarily
holding municipal bonds purchased with the pooled money of investors. It strives
to reach its stated goal, although as with all mutual funds, it cannot guarantee
results.
Reasonable risk is the volatility each Fund has over time, which we believe will
approximate the Lehman Brothers Current Coupon Long Index.
Municipal Bonds ("bonds") are debt securities issued by or on behalf of states,
territories and possessions of the United States and their political
subdivisions, agencies and instrumentalities which provide income free from
federal, state and/or local personal income taxes. Municipal bonds generally are
divided into two types:
o General Obligation Bonds are secured by the full faith and credit of the
issuer and its taxing power.
o Revenue Bonds are payable only from revenue derived from a par-ticular
facility or source, such as bridges, tolls or sewer services. Industrial
development bonds are revenue bonds.
You should read this entire pros- pectus, including "Other Invest- ment
Techniques," which concisely describes the other investment strategies used by
the Funds and their risks.
3 The Funds
<PAGE>
Each Fund (except the National Fund) is nondiversified which means that it
may invest a greater portion of its assets in a single company than a
diversified fund. Thus, it may be exposed to greater risk.
An investment in the Funds is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Funds may not be appropriate for all investors and
none of the Funds is a complete investment program. You could lose money
investing in the Funds.
State and Puerto Rico Risks - Because each Fund other than the National
Fund invests primarily in issuers of its particular state, its performance
is more affected by local, state and regional factors than a fund investing
in municipal bonds issued in many states, such as the National Fund. These
factors may include economic, policy or state legislative changes, erosion
of the tax base and the possibility of credit problems.
o Puerto Rico Bonds - Each Fund may invest in bonds issued by the
Commonwealth of Puerto Rico and its instrumentalities. The economy of
Puerto Rico is dominated by the manufacturing and service sectors and
is heavily dependent on the stability of the price of oil, the state
of the U.S. economy and borrowing costs. Puerto Rico's unemployment
rate continues to substantially exceed the U.S. average.
o California Bonds - Various constitutional and statutory provisions may
affect the ability of issuers of California municipal bonds to meet
their financial obligations. Decreases in State and local revenues due
to such provisions may reduce the ability of California issuers to
satisfy their obligations.
o Connecticut Bonds - Connecticut's economy traditionally has been
concentrated in the manufacturing and defense-related sectors. The
State's high level of tax-supported debt also remains a concern as it
poses a relatively significant burden on the State's revenue base.
o Hawaii Bonds - In recent years, Hawaii has exhibited poor economic
performance and modest personal income growth. Hawaii's economy is
concentrated in retail trade and tourism and also includes
construction, agriculture and military operations. Tourism is a major
factor in the economy, and has been harmed by recent financial and
economic downturns in Southeast Asia. Construction activity has also
declined. Agriculture, dominated by pineapple and sugar production,
has experienced increased foreign competition.
o Minnesota Bonds - Minnesota's significant public debt includes the
State's general obligation debt, as well as university and other
agency debt that is not an obligation of the State. The State relies
heavily on individual, sales and corporate income taxes for revenues,
all of which are sensitive to economic conditions and could be
adversely affected by an economic downturn.
o Missouri Bonds - Economic reversals in the Kansas City or St. Louis
metropolitan areas, whose Missouri portions together contain a
significant portion of the State's population, would have a major
impact on the State's overall economic condition. Certain provisions
of the Constitution of Missouri could adversely affect payment on
Missouri municipal bonds.
o New Jersey Bonds - New Jersey is a major recipient of federal
assistance. Hence, a decrease in federal financial assistance may
adversely affect the State's financial condition. In an attempt to
ensure that local governmental entities remain on a sound financial
basis, State law restricts total appropriation increases to 5%
annually for such entities, with certain exceptions. Statutory or
legislative restrictions of this type may adversely affect a
municipality's or another bond-issuing authority's ability to repay
its obligations.
The Funds 4
<PAGE>
o New York Bonds - Although New York State has recorded balanced budgets
for its last seven fiscal years, gaps between actual revenues and
expenditures may arise in the current year and in future fiscal years.
The State, New York City, the State's other political subdivisions and
the State Authorities are perceived in the marketplace to be
financially interdependent. The State's credit is presently affected
by the indebtedness of the Authorities because of the State's
guarantee or other support. This indebtedness is substantial. The
Authorities are likely to require further financial assistance from
the State. Shortfalls and budget gaps have been predicted for future
years and will require further action by New York City's government.
o Texas Bonds - The economy of Texas in the recent past has been
dominated by the oil and gas industry, which depends heavily on the
level of oil prices. Any circumstances that affect the market value of
Texas bonds held by the Fund as a result of a dependency of local
governments and other authorities upon State aid and reimbursement
programs may have an adverse affect on the Texas Fund.
o Washington Bonds - The State of Washington's economy is concentrated
in manufacturing and service industries as well as agricultural and
timber production. The Boeing Company, one of the world's largest
aerospace firms, is the State's largest employer and as such has a
significant impact, in terms of production, employment and labor
earnings, on the State's economy. Continued declines in the forest
products industry and related employment opportunities are expected in
the future. In addition, in late 1999 Washington voters approved State
of Washington Initiative 695 which effected significant changes in
potential revenue sources available to finance various services and
projects throughout the State. The Initiative effectively reduces
the revenue to be derived from the State motor vehicle excise tax
and requires voter approval to raise various state and local taxes
and fees. The full impact of this Initiative on municipal bonds in
the State may not be clear for years.
o Michigan Bonds - Michigan's economy remains heavily concentrated in
the manufacturing sector. The State's automobile industry remains an
important component of this sector. Accordingly, the State's economy
is potentially more volatile than those of other states with more
diverse economies and may be more likely to be adversely affected by
recent global economic problems.
5 The Funds
<PAGE>
National Tax-Free Income Fund Symbols: Class A - LANSX
Class B - LANBX
Class C - LTNSX
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Best Quarter 1st Q `95 7.6% Worst Quarter 1st Q `94 -6.4%
The table below shows how the average annual total returns of the Fund's
Class A, B and C shares compare to those of a broad-based securities market
index and a more narrowly based index that more closely reflects the market
sectors in which the Fund invests. The Fund's returns reflect payment of
the maximum applicable front-end or deferred sales charges.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- -----------------------------------------------------------------------------------------------
Share Class 1 Year 5 Years 10 Years Since Inception(1)
<S> <C> <C> <C> <C>
Class A shares -8.60% 5.53% 5.94% -
- ------------------------------------------------------------------------------------------------
Class B shares -10.59% - - 2.79%
- ------------------------------------------------------------------------------------------------
Class C shares -7.03% - - 3.81%
Lehman Municipal Bond Index(2) -2.60% 6.91% 6.89% 5.06%(3)
- ------------------------------------------------------------------------------------------------
Lehman Municipal Long Current
Coupon Index(2) -5.28% 6.25% 6.31% 4.26%(3)
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) The dates of inception for each Class are: A -4/2/84; B -8/1/96; and C
-7/15/96.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance.
(3) Represents total returns for the period 7/31/96 - 12/31/99, to correspond
with Class B and C inception dates.
The Funds 6
<PAGE>
National Tax-Free Income Fund
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Fee Table
- ---------------------------------------------------------------------------------------------------------
Class A Class B(2) Class C Class P
<S> <C> <C> <C> <C>
Shareholder Fees (Fees paid directly from your investment)
- ---------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- ---------------------------------------------------------------------------------------------------------
(as a % of offering price) 3.25% none none none
- ---------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge 1.00%(1) 5.00% 1.00%(1) none
- ---------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)(3)
- ---------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.50% 0.50% 0.50% 0.50%
- ---------------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(4) 0.35% 1.00% 1.00% 0.45%
- ---------------------------------------------------------------------------------------------------------
Other Expenses 0.12% 0.12% 0.12% 0.12%
- ---------------------------------------------------------------------------------------------------------
Total Operating Expenses 0.97% 1.62% 1.62% 1.07%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of (a) Class A shares made within 24 months following any
purchases made without a sales charge, and (b) Class C shares if they are
redeemed before the first anniversary of their purchase.
(2) Class B shares will convert to Class A shares on the eighth anniversary of
your original purchase of Class B shares.
(3) The annual operating expenses have been restated from fiscal year amounts
to reflect current fees.
(4) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This Example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class A shares $421 $624 $ 844 $1,476
- --------------------------------------------------------------------------------
Class B shares $665 $811 $1,081 $1,748
- --------------------------------------------------------------------------------
Class C shares $265 $511 $ 881 $1,922
Class P shares $109 $340 $ 590 $1,306
You would pay the following expenses if you did not redeem your shares:
Class A shares $421 $624 $844 $1,476
- --------------------------------------------------------------------------------
Class B shares $165 $511 $881 $1,748
Class C shares $165 $511 $881 $1,922
- --------------------------------------------------------------------------------
Class P shares $109 $340 $590 $1,306
Management fees are payable to Lord Abbett for the Fund's investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
7 The Funds
<PAGE>
California Tax-Free Income Fund Symbols: Class A - LCFIX
Class C - CALAX
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Best Quarter 1st Q `95 7.7% Worst Quarter 1st Q `94 -7.3%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A and C shares compare to those of a broad-based securities market
index and a more narrowly based index that more closely reflects the market
sectors in which the Fund invests. The Fund's returns reflect payment of
the maximum applicable front-end or deferred sales charges.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- ----------------------------------------------------------------------------------------------
Share Class 1 Year 5 Years 10 Years Since Inception(1)
<S> <C> <C> <C> <C>
Class A shares -9.40% 4.90% 5.56% -
- ----------------------------------------------------------------------------------------------
Class C shares -7.90% - - 3.06%
- ----------------------------------------------------------------------------------------------
Lehman Municipal Bond Index(2) -2.06% 6.91% 6.89% 5.06%(3)
- ----------------------------------------------------------------------------------------------
Lehman Municipal Long Current
Coupon Index(2) -5.28% 6.25% 6.31% 4.26%(3)
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) The dates of inception for each Class are: A -9/3/85; and C -7/15/96.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance. Each index is composed of municipal bonds from many
states while the Fund is a single-state municipal bond portfolio.
(3) Represents total return for the period 7/31/96 - 12/31/99, to correspond
with Class C inception date.
The Funds 8
<PAGE>
California Tax-Free Income Fund
Fees and expenses
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Fee Table
- ----------------------------------------------------------------------------------------------------------
Class A Class C Class P
<S> <C> <C> <C>
Shareholder Fees (Fees paid directly from your investment)
- ----------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
(as a % of offering price) 3.25% none none
- ----------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge 1.00%(1) 1.00%(1) none
- ----------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)(2)
- ----------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.50% 0.50% 0.50%
- ----------------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(3) 0.35% 1.00% 0.45%
- ----------------------------------------------------------------------------------------------------------
Other Expenses 0.10% 0.10% 0.10%
- ----------------------------------------------------------------------------------------------------------
Total Operating Expenses 0.95% 1.60% 1.05%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of (a) Class A shares made within 24 months following any
purchases made without a sales charge, and (b) Class C shares if they are
redeemed before the first anniversary of their purchase.
(2) The annual operating expenses have been restated from fiscal year amounts
to reflect current fees.
(3) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This Example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
<TABLE>
<CAPTION>
Share Class 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class A shares $419 $618 $833 $1,453
- -------------------------------------------------------------------------------------------
Class C shares $263 $505 $871 $1,900
- -------------------------------------------------------------------------------------------
Class P shares $107 $334 $579 $1,283
You would pay the following expenses if you did not redeem your shares:
Class A shares $419 $618 $833 $1,453
- -------------------------------------------------------------------------------------------
Class C shares $163 $505 $871 $1,900
- -------------------------------------------------------------------------------------------
Class P shares $107 $334 $579 $1,283
- -------------------------------------------------------------------------------------------
</TABLE>
Management fees are payable to Lord Abbett for the Fund's investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
9 The Funds
<PAGE>
Connecticut Tax-Free Income Fund Symbol: Class A - LACTX
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Best Quarter 1st Q `95 7.9% Worst Quarter 1st Q `94 -5.7%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A shares compare to those of a broad-based securities market index
and a more narrowly based index that more closely reflects the market
sectors in which the Fund invests. The Fund's returns reflect payment of
the maximum applicable front-end or deferred sales charges.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year 5 Years Since Inception(1)
Class A shares -8.70% 5.26% 5.68%
- --------------------------------------------------------------------------------
Lehman Municipal Bond Index(2) -2.06% 6.91% 6.78%(3)
- --------------------------------------------------------------------------------
Lehman Municipal Long Current
Coupon Index(2) -5.28% 6.25% 5.89%(3)
- --------------------------------------------------------------------------------
(1) The date of inception for Class A shares is 4/1/91.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance. Each index is composed of municipal bonds from many
states while the Fund is a single-state municipal bond portfolio.
(3) Represents total return for the period 3/31/91 - 12/31/99, to correspond
with Class A inception date.
The Funds 10
<PAGE>
Connecticut Tax-Free Income Fund
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Fee Table
- ------------------------------------------------------------------------------------------------------------
Class A Class P
<S> <C> <C>
Shareholder Fees (Fees paid directly from your investment)
- ------------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
(as a % of offering price) 3.25% none
- ------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge 1.00%(1) none
- ------------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)(2)
- ------------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.50% 0.50%
- ------------------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(3) 0.35% 0.45%
- ------------------------------------------------------------------------------------------------------------
Other Expenses 0.12% 0.12%
- ------------------------------------------------------------------------------------------------------------
Total Operating Expenses 0.97% 1.07%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares made within 24 months following any purchases
made without a sales charge.
(2) The annual operating expenses have been restated from fiscal year amounts
to reflect current fees.
(3) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This Example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class A shares $421 $624 $844 $1,476
- --------------------------------------------------------------------------------
Class P shares $109 $340 $590 $1,306
You would pay the following expenses if you did not redeem your shares:
Class A shares $421 $624 $844 $1,476
- --------------------------------------------------------------------------------
Class P shares $109 $340 $590 $1,306
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
11 The Funds
<PAGE>
Hawaii Tax-Free Income Fund Symbol: Class A - LAHIX
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Best Quarter 1st Q `95 8.0% Worst Quarter 1st Q `94 -6.9%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A shares compare to those of a broad-based securities market index
and a more narrowly based index that more closely reflects the market
sectors in which the Fund invests. The Fund's returns reflect payment of
the maximum applicable front-end or deferred sales charges.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year 5 Years Since Inception(1)
Class A shares -8.10% 5.35% 5.17%
- --------------------------------------------------------------------------------
Lehman Municipal Bond Index(2) -2.06% 6.91% 6.38%(3)
- --------------------------------------------------------------------------------
Lehman Municipal Long Current
Coupon Index(2) -5.28% 6.25% 5.50%(3)
- --------------------------------------------------------------------------------
(1) The date of inception for Class A shares is 10/28/91.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance. Each index is composed of municipal bonds from many
states while the Fund is a single-state municipal bond portfolio.
(3) Represents total return for the period 10/31/91 - 12/31/99, to correspond
with Class A inception date.
The Funds 12
<PAGE>
Hawaii Tax-Free Income Fund
Fees and expenses
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Fee Table
- --------------------------------------------------------------------------------------------------------
Class A Class P
<S> <C> <C>
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
(as a % of offering price) 3.25% none
- --------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge 1.00%(1) none
- --------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)(2)
- --------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.50% 0.50%
- --------------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(3) 0.35% 0.45%
- --------------------------------------------------------------------------------------------------------
Other Expenses 0.14% 0.14%
- --------------------------------------------------------------------------------------------------------
Total Operating Expenses 0.99% 1.09%
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares made within 24 months following any purchases
made without a sales charge.
(2) The annual operating expenses have been restated from fiscal year amounts
to reflect current fees.
(3) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This Example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class A shares $423 $630 $854 $1,499
- --------------------------------------------------------------------------------
Class P shares $111 $347 $601 $1,329
You would pay the following expenses if you did not redeem your shares:
Class A shares $423 $630 $854 $1,499
- --------------------------------------------------------------------------------
Class P shares $111 $347 $601 $1,329
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
13 The Funds
<PAGE>
Minnesota Tax-Free Income Fund Symbol: Class A - LAMNX
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Best Quarter 1st Q `95 4.7% Worst Quarter 1st Q `96 -2.7%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A shares compare to those of a broad-based securities market index
and a more narrowly based index that more closely reflects the market
sectors in which the Fund invests. The Fund's returns reflect payment of
the maximum applicable front-end or deferred sales charges.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year 5 Years Since Inception(1)
Class A shares -8.30% 4.61% 4.62%
- --------------------------------------------------------------------------------
Lehman Municipal Bond Index(2) -2.06% 6.91% 6.91%(3)
- --------------------------------------------------------------------------------
Lehman Municipal Long Current
Coupon Index(2) -5.28% 6.25% 6.15%(3)
- --------------------------------------------------------------------------------
(1) The date of inception for Class A shares is 12/27/94.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance. Each index is composed of municipal bonds from many
states while the Fund is a single-state municipal bond portfolio.
(3) Represents total return for the period 12/31/94 - 12/31/99, to correspond
with Class A inception date.
The Funds 14
<PAGE>
Minnesota Tax-Free Income Fund
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Fee Table
- ---------------------------------------------------------------------------------------------------------
Class A Class P
<S> <C> <C>
Shareholder Fees (Fees paid directly from your investment)
- ---------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
(as a % of offering price) 3.25% none
- ---------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge 1.00%(1) none
- ---------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)
- ---------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.50% 0.50%
- ---------------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(2) 0.00% 0.45%
- ---------------------------------------------------------------------------------------------------------
Other Expenses 0.23% 0.23%
- ---------------------------------------------------------------------------------------------------------
Total Operating Expenses 0.73% 1.18%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares made within 24 months following any purchases
made without a sales charge.
(2) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This Example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class A shares $397 $551 $718 $1,202
- --------------------------------------------------------------------------------
Class P shares $120 $375 $649 $1,432
- --------------------------------------------------------------------------------
You would pay the following expenses if you did not redeem your shares:
Class A shares $397 $551 $718 $1,202
- --------------------------------------------------------------------------------
Class P shares $120 $375 $649 $1,432
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
Lord Abbett is currently waiving the management fees for the Fund. Lord Abbett
may stop waiving the management fees at any time. The total operating expense
ratio with the fee waiver is 0.23% for Class A and 0.68% for Class P.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance. The 12b-1 Plan for Class A shares of the Fund will not
become operative until the net assets of Class A reach $100 million.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
15 The Funds
<PAGE>
Missouri Tax-Free Income Fund Symbol: Class A - LAMOX
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Best Quarter 1st Q `95 7.7% Worst Quarter 1st Q `94 -6.8%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A shares compare to those of a broad-based securities market index
and a more narrowly based index that more closely reflects the market
sectors in which the Fund invests. The Fund's returns reflect payment of
the maximum applicable front-end or deferred sales charges.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year 5 Years Since Inception(1)
Class A shares -7.50% 5.21% 5.62%
- --------------------------------------------------------------------------------
Lehman Municipal Bond Index(2) -2.06% 6.91% 6.63%(3)
- --------------------------------------------------------------------------------
Lehman Municipal Long Current
Coupon Index(2) -5.28% 6.25% 5.81%(3)
- --------------------------------------------------------------------------------
(1) The date of inception for Class A shares is 5/31/91.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance. Each index is composed of municipal bonds from many
states while the Fund is a single-state municipal bond portfolio.
(3) Represents total return for the period 5/31/91 - 12/31/99, to correspond
with Class A inception date.
The Funds 16
<PAGE>
Missouri Tax-Free Income Fund
Fees and expenses
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Fee Table
- ----------------------------------------------------------------------------------------------------
Class A Class P
<S> <C> <C>
Shareholder Fees (Fees paid directly from your investment)
- ----------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- ----------------------------------------------------------------------------------------------------
(as a % of offering price) 3.25% none
- ----------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge 1.00%(1) none
- ----------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)
- ----------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.50% 0.50%
- ----------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(2) 0.36% 0.45%
- ----------------------------------------------------------------------------------------------------
Other Expenses 0.13% 0.13%
- ----------------------------------------------------------------------------------------------------
Total Operating Expenses 0.99% 1.08%
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares made within 24 months following any purchases
made without a sales charge.
(2) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This Example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class A shares $423 $630 $854 $1,499
- --------------------------------------------------------------------------------
Class P shares $110 $343 $595 $1,317
- --------------------------------------------------------------------------------
You would pay the following expenses if you did not redeem your shares:
Class A shares $423 $630 $854 $1,499
- --------------------------------------------------------------------------------
Class P shares $110 $343 $595 $1,317
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
17 The Funds
<PAGE>
New Jersey Tax-Free Income Fund Symbol: Class A - LANJX
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Best Quarter 1st Q `95 7.4% Worst Quarter 1st Q `94 -5.7%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A shares compare to those of a broad-based securities market index
and a more narrowly based index that more closely reflects the market
sectors in which the Fund invests. The Fund's returns reflect payment of
the maximum applicable front-end or deferred sales charges.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year 5 Years Since Inception(1)
Class A shares -8.70% 5.26% 6.12%
- --------------------------------------------------------------------------------
Lehman Municipal Bond Index(2) -2.06% 6.91% 6.85%(3)
- --------------------------------------------------------------------------------
Lehman Municipal Long Current
Coupon Index(2) -5.28% 6.25% 6.11%(3)
- --------------------------------------------------------------------------------
(1) The date of inception for Class A shares is 1/2/91.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance. Each index is composed of municipal bonds from many
states while the Fund is a single-state municipal bond portfolio.
(3) Represents total return for the period 12/31/90 - 12/31/99, to correspond
with Class A inception date.
The Funds 18
<PAGE>
New Jersey Tax-Free Income Fund
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Fee Table
- ------------------------------------------------------------------------------------------------------------
Class A Class P
<S> <C> <C>
Shareholder Fees (Fees paid directly from your investment)
- ------------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
(as a % of offering price) 3.25% none
- ------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge 1.00%(1) none
- ------------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)(2)
- ------------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.50% 0.50%
- ------------------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(3) 0.35% 0.45%
- ------------------------------------------------------------------------------------------------------------
Other Expenses 0.12% 0.12%
- ------------------------------------------------------------------------------------------------------------
Total Operating Expenses 0.97% 1.07%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares made within 24 months following any purchases
made without a sales charge,.
(2) The annual operating expenses have been restated from fiscal year amounts
to reflect current fees.
(3) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This Example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class A shares $421 $624 $844 $1,476
- --------------------------------------------------------------------------------
Class P shares $109 $340 $590 $1,306
You would pay the following expenses if you did not redeem your shares:
Class A shares $421 $624 $844 $1,476
- --------------------------------------------------------------------------------
Class P shares $109 $340 $590 $1,306
Management fees are payable to Lord Abbett for the Fund's investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
19 The Funds
<PAGE>
New York Tax-Free Income Fund Symbols: Class A - LANYX
Class C - NYLAX
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Best Quarter 1st Q `95 7.1% Worst Quarter 1st Q `94 -5.9%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A and C shares compare to those of a broad-based securities market
index and a more narrowly based index that more closely reflects the market
sectors in which the Fund invests. The Fund's returns reflect payment of
the maximum applicable front-end or deferred sales charges.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average Annual Total Returns Through December 31, 1999
- ---------------------------------------------------------------------------------------------
Share Class 1 Year 5 Years 10 Years Since Inception(1)
<S> <C> <C> <C> <C>
Class A shares -7.70% 5.00% 5.55% -
- ---------------------------------------------------------------------------------------------
Class C shares -6.15% - - 3.44%
- ---------------------------------------------------------------------------------------------
Lehman Municipal Bond Index(2) -2.06% 6.91% 6.89% 5.06%(3)
- ---------------------------------------------------------------------------------------------
Lehman Municipal Long Current
Coupon Index(2) -5.28% 6.25% 6.31% 4.26%(3)
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) The dates of inception for each Class are: A -4/2/84; and C -7/15/96.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance. Each index is composed of municipal bonds from many
states while the Fund is a single-state municipal bond portfolio.
(3) Represents total returns for the period 7/31/96 - 12/31/99, to correspond
with Class C inception date.
The Funds 20
<PAGE>
New York Tax-Free Income Fund
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Fee Table
- -------------------------------------------------------------------------------------------------------------
Class A Class C Class P
<S> <C> <C> <C>
Shareholder Fees (Fees paid directly from your investment)
- -------------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
(as a % of offering price) 3.25% none none
- -------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge 1.00%(1) 1.00%(1) none
- -------------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)(2)
- -------------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.50% 0.50% 0.50%
- -------------------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(3) 0.35% 1.00% 0.45%
- -------------------------------------------------------------------------------------------------------------
Other Expenses 0.11% 0.11% 0.11%
- -------------------------------------------------------------------------------------------------------------
Total Operating Expenses 0.96% 1.61% 1.06%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of (a) Class A shares made within 24 months following any
purchases made without a sales charge, and (b) Class C shares if they are
redeemed before the first anniversary of their purchase.
(2) The annual operating expenses have been restated from fiscal year amounts
to reflect current fees.
(3) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This Example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class A shares $420 $621 $839 $1,465
- --------------------------------------------------------------------------------
Class C shares $264 $508 $876 $1,911
- --------------------------------------------------------------------------------
Class P shares $108 $337 $585 $1,294
You would pay the following expenses if you did not redeem your shares:
Class A shares $420 $621 $839 $1,465
- --------------------------------------------------------------------------------
Class C shares $164 $508 $876 $1,911
- --------------------------------------------------------------------------------
Class P shares $108 $337 $585 $1,294
Management fees are payable to Lord Abbett for the Fund's investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
21 The Funds
<PAGE>
Texas Tax-Free Income Fund Symbol: Class A - LATIX
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Best Quarter 1st Q `95 7.4% Worst Quarter 1st Q `94 -6.6%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A shares compare to those of a broad-based securities market index
and a more narrowly based index that more closely reflects the market
sectors in which the Fund invests. The Fund's returns reflect payment of
the maximum applicable front-end or deferred sales charges.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year 5 Years 10 Years
Class A shares(1) -9.80% 5.18% 6.00%
- --------------------------------------------------------------------------------
Lehman Municipal Bond Index(2) -2.06% 6.91% 6.89%
- --------------------------------------------------------------------------------
Lehman Municipal Long Current
Coupon Index(2) -5.28% 6.25% 6.31%
- --------------------------------------------------------------------------------
(1) The date of inception for Class A shares is 1/20/87.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance. Each index is composed of municipal bonds from many
states while the Fund is a single-state municipal bond portfolio.
The Funds 22
<PAGE>
Texas Tax-Free Income Fund
Fees and expenses
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Fee Table
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Class P
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- --------------------------------------------------------------------------------------------------------
(as a % of offering price) 3.25% none
- --------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge 1.00%(1) none
- --------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)(2)
- --------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.50% 0.50%
- --------------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(3) 0.35% 0.45%
- --------------------------------------------------------------------------------------------------------
Other Expenses 0.12% 0.12%
- --------------------------------------------------------------------------------------------------------
Total Operating Expenses 0.97% 1.07%
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares made within 24 months following any purchases
made without a sales charge.
(2) The annual operating expenses have been restated from fiscal year amounts
to reflect current fees.
(3) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This Example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class A shares $421 $624 $844 $1,476
- --------------------------------------------------------------------------------
Class P shares $109 $340 $590 $1,306
- --------------------------------------------------------------------------------
You would pay the following expenses if you did not redeem your shares:
Class A shares $421 $624 $844 $1,476
- --------------------------------------------------------------------------------
Class P shares $109 $340 $590 $1,306
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
23 The Funds
<PAGE>
Washington Tax-Free Income Fund Symbol: Class A - LAWAX
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Best Quarter 1st Q `95 7.3% Worst Quarter 1st Q `94 -7.2%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A shares compare to those of a broad-based securities market index
and a more narrowly based index that more closely reflects the market
sectors in which the Fund invests. The Fund's returns reflect payment of
the maximum applicable front-end or deferred sales charges.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year 5 Years Since Inception(1)
Class A shares -9.10% 5.71% 5.36%
- --------------------------------------------------------------------------------
Lehman Municipal Bond Index(2) -2.06% 6.91% 6.31%(3)
- --------------------------------------------------------------------------------
Lehman Municipal Long Current
Coupon Index(2) -5.28% 6.25% 5.32%(3)
- --------------------------------------------------------------------------------
(1) The date of inception for Class A shares is 4/15/92.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance. Each index is composed of municipal bonds from many
states while the Fund is a single-state municipal bond portfolio.
(3) Represents total return for the period 4/30/92 - 12/31/99, to correspond
with Class A inception date.
The Funds 24
<PAGE>
Washington Tax-Free Income Fund
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Fee Table
- ------------------------------------------------------------------------------------------------------
Class A Class P
<S> <C> <C>
Shareholder Fees (Fees paid directly from your investment)
- ------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- ------------------------------------------------------------------------------------------------------
(as a % of offering price) 3.25% none
- ------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge 1.00%(1) none
- ------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)
- ------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.50% 0.50%
- ------------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(2) 0.00% 0.45%
- ------------------------------------------------------------------------------------------------------
Other Expenses 0.16% 0.16%
- ------------------------------------------------------------------------------------------------------
Total Operating Expenses 0.66% 1.11%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares made within 24 months following any purchases
made without a sales charge.
(2) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This Example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class A shares $390 $529 $681 $1,121
- --------------------------------------------------------------------------------
Class P shares $113 $353 $612 $1,352
- --------------------------------------------------------------------------------
You would pay the following expenses if you did not redeem your shares:
Class A shares $390 $529 $681 1,121
- --------------------------------------------------------------------------------
Class P shares $113 $353 $612 $1,352
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance. The 12b-1 Plan for Class A shares of the Fund will not
become operative until the net assets of Class A reach $100 million.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
25 The Funds
<PAGE>
Florida Series Symbols: Class A - LAFLX
Class C - FLLAX
Performance
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Best Quarter 1st Q `95 7.5% Worst Quarter 1st Q `94 -7.0%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A and C shares compare to those of a broad-based securities market
index and a more narrowly based index that more closely reflects the market
sectors in which the Fund invests. The Fund's returns reflect payment of
the maximum applicable front-end or deferred sales charges.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year 5 Years Since Inception(1)
Class A shares -8.60% 4.70% 4.79%
- --------------------------------------------------------------------------------
Class C shares -6.88% - 3.06%
- --------------------------------------------------------------------------------
Lehman Municipal 6.43%(3)
Bond Index(2) -2.06% 6.91% 5.06%(4)
- --------------------------------------------------------------------------------
Lehman Municipal Long Current 5.54%(3)
Coupon Index(2) -5.28% 6.25% 4.26%(4)
- --------------------------------------------------------------------------------
(1) The dates of inception for each Class are: A -9/25/91; and C -7/15/96.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance. Each index is composed of municipal bonds from many
states while the Fund is a single-state municipal bond portfolio.
(3) Represents total returns for the period 9/30/91 - 12/31/99, to correspond
with Class A inception date.
(4) Represents total returns for the period 7/31/96 - 12/31/99, to correspond
with Class C inception date.
The Funds 26
<PAGE>
Florida Series
Fees and expenses
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Fee Table
- ---------------------------------------------------------------------------------------------------------
Class A Class C Class P
<S> <C> <C> <C>
Shareholder Fees (Fees paid directly from your investment)
- ---------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
(as a % of offering price) 3.25% none none
- ---------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge 1.00%(1) 1.00%(1) none
- ---------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)(2)
- ---------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.50% 0.50% 0.50%
- ---------------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(3) 0.35% 1.00% 0.45%
- ---------------------------------------------------------------------------------------------------------
Other Expenses 0.16% 0.16% 0.16%
- ---------------------------------------------------------------------------------------------------------
Total Operating Expenses 1.01% 1.66% 1.11%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of (a) Class A shares made within 24 months following any
purchases made without a sales charge, and (b) Class C shares if they are
redeemed before the first anniversary of their purchase.
(2) The annual operating expenses have been restated from fiscal year amounts
to reflect current fees.
(3) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This Example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class A shares $425 $636 $865 $1,521
- --------------------------------------------------------------------------------
Class C shares $269 $523 $902 $1,965
- --------------------------------------------------------------------------------
Class P shares $113 $353 $612 $1,352
- --------------------------------------------------------------------------------
You would pay the following expenses if you did not redeem your shares:
Class A shares $425 $636 $865 $1,521
- --------------------------------------------------------------------------------
Class C shares $169 $523 $902 $1,965
- --------------------------------------------------------------------------------
Class P shares $113 $353 $612 $1,352
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
27 The Funds
<PAGE>
Georgia Series Symbols: Class A - LAGAX
Performance
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Best Quarter 1st Q `95 6.2% Worst Quarter 2nd Q `99 -2.9%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A shares compare to those of a broad-based securities market index
and a more narrowly based index that more closely reflects the market
sectors in which the Fund invests. The Fund's returns reflect payment of
the maximum applicable front-end or deferred sales charges.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year 5 Years(1)
Class A shares -7.90% 5.96%
- --------------------------------------------------------------------------------
Lehman Municipal Bond Index(2) -2.06% 6.91%(3)
- --------------------------------------------------------------------------------
Lehman Municipal Long Current
Coupon Index(2) -5.28% 6.15%(3)
- --------------------------------------------------------------------------------
(1) The date of inception for Class A is 12/27/94.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance. Each index is composed of municipal bonds from many
states while the Fund is a single-state municipal bond portfolio.
(3) Represents total returns for the period 12/31/94 - 12/31/99, to correspond
with Class A inception date.
The Funds 28
<PAGE>
Georgia Series
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Fee Table
- -----------------------------------------------------------------------------------------------------------
Class A Class P
<S> <C> <C>
Shareholder Fees (Fees paid directly from your investment)
- -----------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- -----------------------------------------------------------------------------------------------------------
(as a % of offering price) 3.25% none
- -----------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge 1.00%(1) none
- -----------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)
- -----------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.50% 0.50%
- -----------------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(2) 0.00% 0.45%
- -----------------------------------------------------------------------------------------------------------
Other Expenses 0.18% 0.18%
- -----------------------------------------------------------------------------------------------------------
Total Operating Expenses 0.68% 1.13%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares made within 24 months following any purchases
made without a sales charge.
(2) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This Example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class A shares $392 $535 $691 $1,144
- --------------------------------------------------------------------------------
Class P shares $115 $359 $622 $1,375
- --------------------------------------------------------------------------------
You would pay the following expenses if you did not redeem your shares:
Class A shares $392 $535 $691 $1,144
- --------------------------------------------------------------------------------
Class P shares $115 $359 $622 $1,375
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
Lord Abbett is currently waiving the management fees for the Fund. Lord Abbett
may stop waiving the management fees at any time. The total operating expense
ratio with the fee waiver is 0.18% for Class A and 0.63% for Class P.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance. The 12b-1 Plan for Class A shares of the Fund will not
become operative until the net assets of Class A reach $100 million.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
29 The Funds
<PAGE>
Michigan Series Symbols: Class A - LAMIX
Performance
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Best Quarter 1st Q `95 8.0% Worst Quarter 1st Q `94 -6.5%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A shares compare to those of a broad-based securities market index
and a more narrowly based index that more closely reflects the market
sectors in which the Fund invests. The Fund's returns reflect payment of
the maximum applicable front-end or deferred sales charges.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year 5 Years Since Inception(1)
Class A shares -7.20% 5.69% 5.11%
- --------------------------------------------------------------------------------
Lehman Municipal Bond Index(2) -2.06% 6.91% 5.92%(3)
- --------------------------------------------------------------------------------
Lehman Municipal Long Current
Coupon Index(2) -5.28% 6.25% 4.58%(3)
- --------------------------------------------------------------------------------
(1) The date of inception for Class A shares is 12/1/92.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance. Each index is composed of municipal bonds from many
states while the Fund is a single-state municipal bond portfolio.
(3) Represents total return for the period 11/30/92 - 12/31/99, to correspond
with Class A inception date.
The Funds 30
<PAGE>
Michigan Series
Fees and expenses
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Fee Table
- -----------------------------------------------------------------------------------------------------
Class A Class P
<S> <C> <C>
Shareholder Fees (Fees paid directly from your investment)
- -----------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- -----------------------------------------------------------------------------------------------------
(as a % of offering price) 3.25% none
- -----------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge 1.00%(1) none
- -----------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)
- -----------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.50% 0.50%
- -----------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(2) 0.00% 0.45%
- -----------------------------------------------------------------------------------------------------
Other Expenses 0.19% 0.19%
- -----------------------------------------------------------------------------------------------------
Total Operating Expenses 0.69% 1.14%
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares made within 24 months following any purchases
made without a sales charge.
(2) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This Example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class A shares $393 $539 $697 $1,156
- --------------------------------------------------------------------------------
Class P shares $116 $362 $628 $1,386
- --------------------------------------------------------------------------------
You would pay the following expenses if you did not redeem your shares:
Class A shares $393 $539 $697 $1,156
- --------------------------------------------------------------------------------
Class P shares $116 $362 $628 $1,386
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance. The 12b-1 Plan for Class A shares of the Fund will not
become operative until the net assets of Class A reach $100 million.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
31 The Funds
<PAGE>
Pennsylvania Series Symbols: Class A - LAPAX
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Best Quarter 1st Q `95 8.1% Worst Quarter 1st Q `94 -7.1%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A shares compare to those of a broad-based securities market index
and a more narrowly based index that more closely reflects the market
sectors in which the Fund invests. The Fund's returns reflect payment of
the maximum applicable front-end or deferred sales charges.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year 5 Years Since Inception(1)
Class A shares -7.90% 5.68% 5.39%
- --------------------------------------------------------------------------------
Lehman Municipal Bond Index(2) -2.06% 6.91% 6.24%(3)
- --------------------------------------------------------------------------------
Lehman Municipal Long Current
Coupon Index(2) -5.28% 6.25% 5.35%(3)
- --------------------------------------------------------------------------------
(1) The date of inception for Class A shares is 2/3/92.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance. Each index is composed of municipal bonds from many
states while the Fund is a single-state municipal bond portfolio.
(3) Represents total return for the period 1/31/92 - 12/31/99, to correspond
with Class A inception date.
The Funds 32
<PAGE>
Pennsylvania Series
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Fee Table
- ----------------------------------------------------------------------------------------------------------
Class A Class P
<S> <C> <C>
Shareholder Fees (Fees paid directly from your investment)
- ----------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- ----------------------------------------------------------------------------------------------------------
(as a % of offering price) 3.25% none
- ----------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge 1.00%(1) none
- ----------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)(2)
- ----------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.50% 0.50%
- ----------------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(3) 0.35% 0.45%
- ----------------------------------------------------------------------------------------------------------
Other Expenses 0.15% 0.15%
- ----------------------------------------------------------------------------------------------------------
Total Operating Expenses 1.00% 1.10%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares made within 24 months following any purchases
made without a sales charge.
(2) The annual operating expenses have been restated from fiscal year amounts
to reflect current fees.
(3) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This Example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class A shares $424 $633 $860 $1,510
- --------------------------------------------------------------------------------
Class P shares $112 $350 $606 $1,340
- --------------------------------------------------------------------------------
You would pay the following expenses if you did not redeem your shares:
Class A shares $424 $633 $860 $1,510
- --------------------------------------------------------------------------------
Class P shares $112 $350 $606 $1,340
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
33 The Funds
<PAGE>
YOUR INVESTMENT
PURCHASES
The National Fund offers in this prospectus four classes of shares: Class
A, B, C and P. The California, New York, and Florida Funds offer three
share classes: Class A, C and P. The other Funds offer two share classes:
Class A and P. Each Class in a Fund has different expenses and dividends.
You may purchase shares at the net asset value ("NAV") per share determined
after we receive your purchase order submitted in proper form. A front-end
sales charge is added to the NAV in the case of the Class A shares. There
is no front-end sales charge in the case of Class B and C shares although
there is a contingent deferred sales charge ("CDSC") as described below.
You should read this section carefully to determine which class of shares
represents the best investment option for your particular situation. It may
not be suitable for you to place a purchase order for Class B shares of
$500,000 or more or a purchase order for Class C shares of $1,000,000 or
more. You should discuss purchase options with your investment
professional.
For more information, see "Alternative Sales Arrangements" in the Statement
of Additional Information.
We reserve the right to withdraw all or any part of the offering made by
this prospectus or to reject any purchase order. We also reserve the right
to waive or change minimum investment requirements. All purchase orders are
subject to our acceptance and are not binding until confirmed or accepted
in writing.
- --------------------------------------------------------------------------------
Share Classes
- --------------------------------------------------------------------------------
Class A (All Funds)
o normally offered with a front-end sales charge
Class B (National Fund only)
o no front-end sales charge, however, a CDSC is applied to shares
sold prior to the sixth anniversary of purchase
o higher annual expenses than Class A shares
o automatically converts to Class A shares after eight years
o asset-based sales charge of .75% - see "Sales and Compensation"
Class C (National, California, New York and Florida Funds only)
o no front-end sales charge, however, a CDSC is applied to shares
sold prior to the first anniversary of purchase
o higher annual expenses than Class A shares
o asset-based sales charge of .75% - see "Sales and Compensation"
Class P o available to certain pension or retirement plans and pursuant to
a Mutual Fund Fee Based Program
NAV per share for each class of Fund shares is calculated each business day at
the close of regular trading on the New York Stock Exchange ("NYSE"), normally
4:00 p.m. Eastern time. Purchases and sales of Fund shares are executed at the
NAV next determined after the Fund receives your order in proper form. In
calculating NAV, securities for which market quotations are available are valued
at those quotations. Securities for which such quotations are not available are
valued at fair value under procedures approved by the Board of the Funds.
Your Investment 34
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Front-End Sales Charges - Class A Shares (All Funds)
- ---------------------------------------------------------------------------------------------
To Compute
As a % of As a % of OfferingPrice
Your Investment Offering Price Your Investment Divide NAV by
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 3.25% 3.36% .9675
- ---------------------------------------------------------------------------------------------
$50,000 to $99,999 2.75% 2.83% .9725
- ---------------------------------------------------------------------------------------------
$100,000 to $249,999 2.50% 2.56% .9750
- ---------------------------------------------------------------------------------------------
$250,000 to $499,999 2.00% 2.04% .9800
- ---------------------------------------------------------------------------------------------
$500,000 to $999,999 1.50% 1.52% .9850
- ---------------------------------------------------------------------------------------------
$1,000,000 and over No Sales Charge 1.0000
- ---------------------------------------------------------------------------------------------
The following $1 million category applies only to the Georgia, Michigan,
Minnesota and Washington Tax-Free Income Funds until each Fund's Rule 12b-1
Plan becomes effective, at which time the sales charge table above will apply
to the Fund.
$1,000,000 and over 1.00% 1.01% .9900
- ---------------------------------------------------------------------------------------------
</TABLE>
Reducing Your Class A Front-End Sales Charges. Class A shares may be
purchased at a discount if you qualify under either of the following
conditions:
o Rights of Accumulation -- A Purchaser may apply the value of the
shares already owned to a new purchase of Class A shares of any
Eligible Fund in order to reduce the sales charge.
o Statement of Intention -- A Purchaser of Class A shares may purchase
additional shares of any Eligible Fund over a 13-month period and
receive the same sales charge as if all shares were purchased at once.
Shares purchased through reinvestment of dividends or distributions
are not included. A statement of intention may be backdated 90 days.
Current holdings under rights of accumulation may be included in a
statement of intention.
For more information on eligibility for these privileges, read the
applicable sections in the attached application.
Class A Share Purchases Without A Front-End Sales Charge. Class A shares
may be purchased without a front-end sales charge under any of the
following conditions:
o purchases of $1 million or more +
o purchases by Retirement Plans with at least 100 eligible employees +
o purchases under a Special Retirement Wrap Program +
o purchases made with dividends and distributions on Class A shares of
another Eligible Fund
o purchases representing repayment under the loan feature of the Lord
Abbett- sponsored prototype 403(b) Plan for Class A shares
o purchases by employees of any consenting securities dealer having a
sales agreement with Lord Abbett Distributor
o purchases under a Mutual Fund Fee Based Program
o purchases by trustees or custodians of any pension or profit sharing
plan, or payroll deduction IRA for employees of any consenting
securities dealer having a sales agreement with Lord Abbett
Distributor
See the Statement of Additional Information for a listing of other
categories of purchasers who qualify for Class A share purchases without a
front-end sales charge.
+ These categories may be subject to a CDSC.
Retirement Plans include employer-sponsored retirement plans under the Internal
Revenue Code, excluding Individual Retirement Accounts.
Lord Abbett offers a variety of Retirement Plans. Call 800-253-7299 for
information about:
o Traditional, Rollover, Roth and Education IRAs
o Simple IRAs, SEP-IRAs, 401(k) and 403(b) accounts
o Defined Contribution Plans
Lord Abbett Distributor LLC ("Lord Abbett Distributor") acts as agent for the
Funds to work with investment professionals that buy and/or sell shares of the
Funds on behalf of their clients. Generally, Lord Abbett Distributor does not
sell Fund shares directly to investors.
Benefit Payment Documentation.
(Class A CDSC only)
o under $50,000 - no documentation necessary
o over $50,000 - reason for benefit payment must be received in writing.Use
the address indicated under "Opening your Account."
35 Your Investment
<PAGE>
Class A Share CDSC. If you buy Class A shares under one of the starred (+)
categories listed above and you redeem any within 24 months after the month
in which you initially purchased them, the Fund will normally collect a
CDSC of 1%.
The Class A share CDSC generally will be waived for the following
conditions:
o benefit payments under Retirement Plans in connection with loans,
hardship withdrawals, death, disability, retirement, separation from
service or any excess distribution under Retirement Plans
(documentation may be required)
o redemptions continuing as investments in another Fund participating in
a Special Retirement Wrap Program
Class B Share CDSC. The CDSC for Class B shares normally applies if you
redeem your shares before the sixth anniversary of their initial purchase.
The CDSC declines the longer you own your shares, according to the
following schedule:
- --------------------------------------------------------------------------------
Contingent Deferred Sales Charges - Class B Shares
- --------------------------------------------------------------------------------
Anniversary(1) of the day on Contingent Deferred Sales Charge
which the purchase order on redemption (as % of amount
was accepted subject to charge)
On Before
- --------------------------------------------------------------------------------
1st 5.0%
- --------------------------------------------------------------------------------
1st 2nd 4.0%
- --------------------------------------------------------------------------------
2nd 3rd 3.0%
- --------------------------------------------------------------------------------
3rd 4th 3.0%
- --------------------------------------------------------------------------------
4th 5th 2.0%
- --------------------------------------------------------------------------------
5th 6th 1.0%
- --------------------------------------------------------------------------------
on or after the 6th(2) None
- --------------------------------------------------------------------------------
(1) The anniversary is the same calendar day in each respective year after the
date of purchase. For example, the anniversaries for shares purchased on
May 1 will be May 1 of each succeeding year.
(2) Class B shares will automatically convert to Class A shares on the eighth
anniversary of the purchase of Class B shares.
The Class B share CDSC generally will be waived under the following
conditions:
o benefit payments under Retirement Plans in connection with loans,
hardship withdrawals, death, disability, retirement, separation from
service or any excess contribution or distribution under Retirement
Plans
o Eligible Mandatory Distributions under 403(b) Plans and individual
retirement accounts
o death of the shareholder
o redemptions of shares in connection with Div-Move and Systematic
Withdrawal Plans (up to 12% per year)
See "Systematic Withdrawal Plan" under "Services For Fund Investors" below
for more information on CDSCs with respect to Class B shares.
Class C Share CDSC (National, California, New York and Florida Funds only).
The 1% CDSC for Class C shares normally applies if you redeem your shares
before the anniversary of the purchase of such shares.
Class P Shares. Class P shares have lower annual expenses than Class B and
Class C shares, no front-end sales charge, and no CDSC. Class P shares are
currently sold and redeemed at NAV (a) pursuant to a Mutual Fund Fee Based
Program, or (b) to the trustees of, or employer-sponsors with respect to,
pension or retirement plans with at
CDSC, regardless of class, is not charged on shares acquired through
reinvestment of dividends or capital gains distributions and is charged on the
original purchase cost or the current market value of the shares at the time
they are being sold, which-ever is lower. In addition, repayment of loans under
Retirement Plans and 403(b) Plans will constitute new sales for purposes of
assessing the CDSC.
To minimize the amount of any CDSC, each Fund redeems shares in the following
order:
1. shares acquired by reinvestment of dividends and capital gains (always free
of a CDSC)
2. shares held for six years or more (Class B) or two years or more after the
month of purchase (Class A) or one year or more (Class C)
3. shares held the longest before the sixth anniversary of their purchase
(Class B) or before the second anniversary after the month of purchase
(Class A) or before the first anniversary of their purchase (Class C)
Your Investment 36
<PAGE>
least 100 eligible employees (such as a plan under Section 401(a), 401(k)
or 457(b) of the Internal Revenue Code) which engage an investment
professional providing or participating in an agreement to provide certain
recordkeeping, administrative and/or sub-transfer agency services to the
Funds on behalf of the Class P shareholders.
Sales Compensation
As part of its plan for distributing shares, the Funds and Lord Abbett
Distributor pay sales and service compensation to Authorized Institutions
that sell the Funds' shares and service their shareholder accounts.
Sales compensation originates from two sources, as shown in the table "Fees
and Expenses": sales charges which are paid directly by shareholders; and
12b-1 distribution fees that are paid out of a Fund's assets. Service
compensation originates from 12b-1 service fees. The total 12b-1 fees
payable annually with respect to each share class are up to .35% of Class A
shares (plus distribution fees of up to 1.00% on certain qualifying
purchases), 1.00% of Class B and C shares, and .45% of Class P shares. The
amounts payable as compensation to Authorized Institutions, such as your
dealer, are shown in the chart at the end of this prospectus. The portion
of such compensation paid to Lord Abbett Distributor is discussed under
"Sales Activities" and "Service Activities." Sometimes we do not pay
compensation where tracking data is not available for certain accounts or
where the Authorized Institution waives part of the compensation. In such
cases, we may not require payment of any otherwise applicable CDSC.
We may pay Additional Concessions to Authorized Institutions from time to
time.
Sales Activities. We may use 12b-1 distribution fees to pay Authorized
Institutions to finance any activity which is primarily intended to result
in the sale of shares. Lord Abbett Distributor uses its portion of the
distribution fees attributable to a Fund's Class A and Class C shares for
activities which are primarily intended to result in the sale of such Class
A and Class C shares, respectively. These activities include, but are not
limited to, printing of prospectuses and statements of additional
information and reports for other than existing shareholders, preparation
and distribution of advertising and sales material, expenses of organizing
and conducting sales seminars, Additional Concessions to Authorized
Institutions, the cost necessary to provide distribution-related services
or personnel, travel, office expenses, equipment and other allocable
overhead.
Service Activities. We may pay 12b-1 service fees to Authorized
Institutions for any activity which is primarily intended to result in
personal service and/or the maintenance of shareholder accounts. Any
portion of the service fees paid to Lord Abbett Distributor will be used to
service and maintain shareholder accounts.
OPENING YOUR ACCOUNT
Minimum initial investment
o Regular account $1,000
- --------------------------------------------------------------------------------
o Individual Retirement Accounts and
403(b) Plans under the Internal Revenue Code $250
- --------------------------------------------------------------------------------
o Uniform Gift to Minor Account $250
- --------------------------------------------------------------------------------
For Retirement Plans and Mutual Fund Fee Based Programs no minimum
investment is required, regardless of share class.
You may purchase shares through any independent securities dealer who has a
sales agreement with Lord Abbett Distributor or you can fill out the
attached application and
12b-1 fees are payable regardless of expenses. The amounts payable by a Fund
need not be directly related to expenses. If Lord Abbett Distributor's actual
expenses exceed the fee payable to it, the Fund will not have to pay more than
that fee. If Lord Abbett Distributor's expenses are less than the fee it
receives, Lord Abbett Distributor will keep the full amount of the fee.
37 Your Investment
<PAGE>
send it to the Fund you select at the address stated below. You should
carefully read the paragraph below entitled "Proper Form" before placing
your order to ensure that your order will be accepted.
Name of Fund
P.O. Box 419100
Kansas City, MO 64141
By Exchange. Telephone the Funds at 800-821-5129 to request an exchange
from any eligible Lord Abbett-sponsored fund.
Proper Form. An order submitted directly to the Funds must contain: (1) a
completed application, and (2) payment by check. When purchases are made by
check, redemption proceeds will not be paid until the Fund or transfer
agent is advised that the check has cleared, which may take up to 15
calendar days. For more information call the Funds at 800-821-5129.
REDEMPTIONS
By Broker. Call your investment professional for instructions on how to
redeem your shares.
By Telephone. To obtain the proceeds of a redemption of $50,000 or less
from your account, you or your representative should call the Funds at
800-821-5129.
By Mail. Submit a written redemption request indicating the name(s) in
which the account is registered, the Fund's name, the class of shares, your
account number, and the dollar value or number of shares you wish to sell.
Include all necessary signatures. If the signer has any Legal Capacity, the
signature and capacity must be guaranteed by an Eligible Guarantor. Certain
other legal documentation may be required. For more information regarding
proper documentation call 800-821-5129.
Normally a check will be mailed to the name(s) and address in which the
account is registered (or otherwise according to your instruction) within
three business days after receipt of your redemption request. Your account
balance must be sufficient to cover the amount being redeemed or your
redemption order will not be processed. Under unusual circumstances, the
Funds may suspend redemptions, or postpone payment for more than seven
days, as permitted by federal securities laws.
To determine if a CDSC applies to a redemption, see "Class A share CDSC,"
"Class B share CDSC" or "Class C share CDSC."
DISTRIBUTIONS AND TAXES
Each Fund normally declares "exempt-interest dividends" from its net
investment income on a daily basis and pays them on a monthly basis. The
Funds expect these amounts to be tax exempt income to their shareholders.
Each Fund distributes its net capital gains (if any) as "capital gains
distributions" on an annual basis. Your distributions will be reinvested in
your Fund unless you instruct the Fund to pay them to you in cash. There
are no sales charges on reinvestments. The tax status of distributions is
the same for all shareholders regardless of how long they have owned Fund
shares and whether distributions are reinvested or paid in cash.
Except in tax-advantaged accounts, any sale, redemption or exchange of Fund
shares may be taxable to the shareholder.
Information concerning the tax treatment of dividends and other
distributions will be mailed to shareholders each year. Because everyone's
tax situation is unique, you should
Exchange Limitations. Exchanges should not be used to try to take advantage of
short-term swings in the market. Frequent exchanges create higher expenses for
the Funds. Accordingly, the Funds reserve the right to limit or terminate this
privilege for any shareholder making frequent exchanges or abusing the
privilege. The Fund also may revoke the privilege for all shareholders upon 60
days' written notice.
Small Accounts. Our Board may authorize closing any account in which there are
fewer than 25 shares if it is in a Fund's best interest to do so.
Eligible Guarantor is any broker or bank that is a member of the medallion stamp
program. Most major securities firms and banks are members of this program. A
notary public is not an eligible guarantor.
Your Investment 38
<PAGE>
consult your tax adviser regarding the treatment of those distributions
under the federal, state and local tax rules that apply to you.
SINGLE-STATE TAXABILITY OF DISTRIBUTIONS
For All Funds - With respect to any particular state Fund, exempt-interest
dividends derived from interest income on obligations of that state or its
political subdivisions, agencies or instrumentalities and on obligations of
the federal government or certain other government authorities (for
example, U.S. territories) paid to individual shareholders in most cases
will be exempt from tax in that state. However, special rules, described
below, may apply. Exempt-interest dividends may be subject to that state's
franchise or other corporate taxes if received by a corporation subject to
such taxes and to state and local taxes in states other than that state.
Generally, dividends and distributions, whether received in cash or
additional shares, derived from a state Fund's other investment income and
capital gains will be subject to state income tax.
The following are special rules that apply to the states named below:
Florida Taxes - Florida imposes no state personal income tax.
Michigan Taxes - Capital gains from the sale by the Michigan Fund of
obligations of the federal government or certain other government
authorities will be exempt from Michigan income tax. In addition, dividends
paid by the Fund that are derived from interest on state exempt investments
will not be subject to the Michigan Single Business Tax. The portion of the
Fund's dividends and distributions received by a shareholder that is exempt
from the Michigan income tax or Michigan Single Business Tax may be reduced
by interest or other expenses paid or incurred to purchase or carry shares
of the Fund.
Minnesota Taxes - Exempt-interest dividends paid by the Minnesota Fund will
only be exempt from Minnesota personal income tax if 95% or more of the
exempt-interest dividends paid by the Minnesota Fund come from
Minnesota-sourced obligations. The Minnesota Fund intends to invest so that
the 95% test is met each year. Generally, at least 80% of the value of the
net assets of the Minnesota Fund will be maintained in debt obligations
that are exempt from federal income tax and Minnesota personal income tax.
For Minnesota corporations, S corporations and partnerships holding shares
of the Fund, Minnesota Fund distributions may be taken into account in
determining the minimum fee that is imposed by the state.
Missouri Taxes - The portion of the Missouri Fund's exempt-interest
dividends received by a shareholder that is exempt from Missouri personal
or corporate income tax each year may be reduced by interest or other
expenses in excess of $500 paid or incurred to purchase or carry shares of
the Fund or other investments producing income that is exempt from Missouri
income tax. Exempt-interest dividends paid by the Missouri Fund generally
will be exempt from Missouri corporate income tax to the extent that they
are derived from interest on obligations of the State of Missouri or any of
its political subdivisions or authorities or obligations issued by certain
other government authorities.
New Jersey Taxes - Exempt-interest dividends paid by the New Jersey Fund
will only be exempt from New Jersey Gross Income Tax if at least 80% of the
interest-bearing and discount obligations held by the Fund are obligations
of the State of New Jersey or other New Jersey government agencies and the
Fund meets certain other investment and filing requirements. The New Jersey
Fund intends to meet these requirements. As long as the New Jersey Fund
meets those requirements, exempt-interest dividends derived from those
obligations, capital gains distributions derived from the Fund's sale or
exchange of those obligations, and each shareholder's net gains or income
derived from the disposi-
Your Investment 39
<PAGE>
tion of shares of the New Jersey Fund will not be subject to New Jersey
Gross Income Tax.
New York Taxes - Exempt-interest dividends derived from interest on
obligations of the State of New York or its political subdivisions that are
exempt from federal income tax or on obligations issued by certain other
governmental entities paid by the New York Fund will be exempt from New
York City, as well as New York State, personal income taxes.
Pennsylvania Taxes - Exempt-interest dividends paid by the Pennsylvania
Fund that are derived from interest on state exempt investments will not be
subject to the Pennsylvania corporate net income tax. Exempt-interest
dividends paid to residents of Philadelphia by the Fund that are not
derived from interest on state exempt investments will be subject to
Philadelphia School District investment income tax in addition to the
Pennsylvania personal income and corporate net income taxes.
Personal Property Taxes - Florida intangible personal property tax will be
imposed on shares of the Florida Fund owned by Florida residents and
Pennsylvania county personal property tax will be imposed on shares of the
Pennsylvania Fund unless the relevant Fund's portfolio includes only state
exempt investments on the annual statutory assessment date. If the Fund
holds other assets, including assets attributable to options and financial
futures transactions in which the Fund may engage, then a portion (which
might be a significant portion) of the value of the Fund's shares would be
subject to personal property tax.
SERVICES FOR FUND INVESTORS
AUTOMATIC SERVICES
Buying or selling shares automatically is easy with the services described
below. With each service, you select a schedule and amount, subject to
certain restrictions. You may set up most of these services when filling
out your application or by calling 800-821-5129.
- --------------------------------------------------------------------------------
For investing
Invest-A-Matic
You can make fixed, periodic investments ($50 minimum) into
your Fund (Dollar-cost account by means of automatic money
transfers from your bank checking averaging) account. See
the attached application for instructions.
Div-Move
You can automatically reinvest the dividends and
distributions from your account into another account in any
Eligible Fund ($50 minimum).
For selling shares
Systematic Withdrawal Plan ("SWP")
You can make regular withdrawals from most Lord Abbett
Funds. Automatic cash withdrawals will be paid to you from
your account in fixed or variable amounts. To establish a
plan, the value of your shares must be at least $10,000,
except for Retirement Plans for which there is no minimum.
Class B shares
The CDSC will be waived on redemptions of up to 12% of the
current net asset value of your account at the time of your
SWPrequest. For Class B share redemptions over 12% per year,
the CDSC will apply to the entire redemption. Please contact
the Funds for assistance in minimizing the CDSC in this
situation.
Class B and C shares
Redemption proceeds due to a SWP for Class B and Class C
shares will be redeemed in the order described under "CDSC"
under "Purchases."
- --------------------------------------------------------------------------------
Your Investment 40
<PAGE>
OTHER SERVICES
Telephone Investing. After we have received the attached application
(selecting "yes" under Section 8C and completing Section 7), you may
instruct us by phone to have money transferred from your bank account to
purchase shares of the Funds for an existing account. Each Fund will
purchase the requested shares when it receives of the money from your bank.
Exchanges. You or your investment professional, may instruct the Funds to
exchange shares of any class for shares of the same class of any Eligible
Fund. Instruction may be provided in writing or by telephone, with proper
identification, by calling 800-821-5129. The Funds must receive
instructions for the exchange before the close of the NYSE on the day of
your call in which case you will get the NAV per share of the Eligible Fund
determined on that day. Exchanges will be treated as a sale for federal tax
purposes. Be sure to read the current prospectus for any Fund into which
you are exchanging.
Reinvestment Privilege. If you sell shares of a Fund, you have a one time
right to reinvest some or all of the proceeds in the same class of any
Eligible Fund within 60 days without a sales charge. If you paid a CDSC
when you sold your shares, you will be credited with the amount of the
CDSC. All accounts involved must have the same registration.
Account Statements. Every Lord Abbett investor automatically receives
quarterly account statements.
Householding. Shareholders with the same last name and address will receive
a single copy of a prospectus and an annual or semi-annual report, unless
additional reports are specifically requested in writing to the Funds.
Account Changes. For any changes you need to make to your account, consult
your investment professional or call the Funds at 800-821-5129.
Systematic Exchange. You or your investment professional can establish a
schedule of exchanges between the same share classes of any Eligible Fund.
MANAGEMENT
The Funds' investment adviser is Lord, Abbett & Co., which is located at 90
Hudson Street, Jersey City, NJ 07302 -3973. Founded in 1929, Lord Abbett
manages one of the nation's oldest mutual fund complexes, with
approximately $33 billion in more than 40 mutual fund portfolios and other
advisory accounts. For more information about the services Lord Abbett
provides to the Funds, see the Statement of Additional Information.
Each Fund pays Lord Abbett a monthly fee based on average daily net assets
for each month. For the Funds' most recent fiscal years, the fees paid to
Lord Abbett were at an annual rate of .50 of 1% for all Funds, except the
Minnesota and Georgia Funds. Lord Abbett waived its entire fee of .50 of 1%
for these Funds. In addition, each Fund pays all expenses not expressly
assumed by Lord Abbett.
Portfolio Managers. Lord Abbett uses a team of portfolio managers and
analysts acting together to manage each Fund's investments. Zane E. Brown,
Partner and Director of Fixed Income for Lord Abbett, heads the team, the
senior members of which are John R. Mousseau, Director of Municipal Bond
Management, and Philip P. Fang, Municipal Portfolio Manager. Mr. Brown has
been with Lord Abbett since 1992, Mr. Mousseau since 1993 and Mr. Fang
since 1991.
Telephone Transactions. You have this privilege unless you refuse it in writing.
For your security, telephone transaction requests are recorded. We will take
measures to verify the identity of the caller, such as asking for your name,
account number, social security or taxpayer identification number and other
relevant information. The Funds will not be liable for following instructions
communicated by telephone that they reasonably believe to be genuine.
Transactions by telephone may be difficult to implement in times of drastic
economic or market change.
41 Your Investment
<PAGE>
FOR MORE INFORMATION
OTHER INVESTMENT TECHNIQUES
This section describes some of the investment techniques that might be used
by the Funds and their risks.
Adjusting Investment Exposure. Each Fund may, but is not required to, use
various strategies to change its investment exposure to adjust to changing
security prices, interest rates, commodity prices and other factors. These
strategies may involve buying or selling derivative instruments, such as
options and futures contracts, stripped securities, indexed securities and
rights and warrants. A Fund may use these transactions to change the risk
and return characteristics of its portfolio. If we judge market conditions
incorrectly or use a strategy that does not correlate well with a Fund's
investments, it could result in a loss, even if we intended to lessen risk
or enhance returns. These transactions may involve a small investment of
cash compared to the magnitude of the risk assumed and could produce
disproportionate gains or losses. Also, these strategies could result in
losses if the counterparty to a transaction does not perform as promised.
Concentration. No Fund generally intends to invest more than 25% of its
total assets in any industry, other than tax-exempt securities issued by
governments or political subdivisions of governments which are not
considered part of any "industry." Where nongovernmental users of
facilities financed by tax-exempt revenue bonds are in the same industry
(such as frequently occurs in the electric utility and health care
industries), there may be additional risk to a Fund in the event of an
economic downturn in that industry. This may result generally in a lowered
ability of such users to make payments on their obligations. The electric
utility industry is relatively stable but subject to rate regulation
vagaries. The health care industry suffers from two main problems -
affordability and access.
Diversification. The National Fund is a diversified fund, which means that
with respect to 75% of its total assets, it will not purchase a security
if, as a result, more than 5% of the Fund's total assets would be invested
in securities of a single issuer or the Fund would hold more than 10% of
the outstanding voting securities of the issuer. Each of the other Funds is
a nondiversified mutual fund. A nondiversified fund may invest a greater
portion of its assets in, and own a greater amount of the voting securities
of, a single company than a diversified fund. As a result, the value of
such a fund's investments may be more affected by any single adverse
economic, political or regulatory occurrence than the investments of a
diversified fund would be.
Investment Grade Debt Securities. These are debt securities which are rated
within the four highest grades assigned by Moody's Investors Service, Inc.,
Standard & Poor's Ratings Services or Fitch Investors Service, or are
unrated but determined by Lord Abbett to be of comparable in quality. At
least 70% of the municipal bonds in each Fund must be rated, at the time of
purchase, within the three highest grades.
Options and Financial Futures Transactions. Each Fund may deal in options
on securities, and securities indices, and financial futures transactions,
including options on futures to increase or decrease its exposure to
changing securities prices or interest rates or for bona fide hedging
purposes. Each Fund may write (sell) covered call options and secured put
options on up to 25% of its net assets and may purchase put and call
options and purchase and sell futures contracts provided that no more than
5% of its net assets (at the time of
Your Investment 42
<PAGE>
purchase) may be invested in premiums on such options and initial margin
deposits on such futures contracts.
A Fund's transactions, if any, in futures contracts, related options and
other options involve additional risk of loss. Loss may result from a lack
of correlation between changes in the value of these derivative instruments
and the Fund's assets being hedged, the potential illiquidity of the
markets for derivative instruments, or the risks arising from margin
requirements and related leverage factors associated with such
transactions. The use of these investment techniques also involves the risk
of loss if Lord Abbett is incorrect in its expectation of fluctuations in
securities prices. In addition, the loss that may be incurred by a Fund in
entering into futures contracts and in writing call options on futures
contracts is potentially unlimited and may exceed the amount of the premium
received.
Private Activity or Industrial Development Bonds. Each Fund may invest up
to 20% of its net assets (less any amount invested in the temporary taxable
investments described under "Main Risks") in private activity bonds. A
Fund's dividends derived from interest on such bonds would be considered a
preference item for purposes of the computation of the federal alternative
minimum tax. A Fund's dividends derived from such interest may increase the
federal alternative minimum tax liability of corporate shareholders that
are subject to the tax based on the excess of their adjusted current
earnings over their taxable income. In addition, the credit quality of such
bonds usually is directly related to the credit standing of the private
user of the facilities.
Residual Bonds. Each Fund may invest up to 20% of its net assets in
residual interest bonds ("RIBs") to enhance and increase portfolio
duration. 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 specific fixed-rate
security ("specific fixed-rate security"). Changes in the interest rate on
the specific fixed-rate security inversely affect the residual interest
rate paid on the RIB, with the result that when interest rates rise, RIBs'
interest payments are lowered and their value falls faster than securities
similar to the specific fixed-rate security. In an effort to mitigate this
risk, each Fund purchases fixed-rate bonds which are less volatile. When
interest rates fall, not only do RIBs provide interest payments that are
higher than securities similar to the specific fixed-rate security, but
their values also rise faster than securities similar to the specific
fixed-rate security.
U.S. Government Securities. These are obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
When-Issued Municipal Bonds. Each Fund may purchase new issues of municipal
bonds, which are generally offered on a when-issued basis, with delivery
and payment ("settlement") normally taking place approximately one month
after the purchase date. However, the payment obligation and the interest
rate to be received by a Fund are each fixed on the purchase date. During
the period between purchase and settlement, each Fund's assets consisting
of cash and/or high-grade marketable debt securities, marked to market
daily, of an amount sufficient to make payment at settlement will be
segregated at our custodian. There is a risk that market yields available
at settlement may be higher than yields obtained on the purchase date,
which could result in depreciation of value. While we may sell when-issued
securities prior to settlement, we intend to actually acquire such
securities unless a sale appears desirable for investment reasons.
43 Your Investment
<PAGE>
glossary of Shaded terms
Additional Concessions. Lord Abbett Distributor may, for specified periods,
allow dealers to retain the full sales charge for sales of shares or may
pay an additional concession to a dealer who sells a minimum dollar amount
of our shares and/or shares of other Lord Abbett-sponsored funds. In some
instances, such additional concessions will be offered only to certain
dealers expected to sell significant amounts of shares. Additional payments
may be paid from Lord Abbett Distributor's own resources or from
distribution fees received from a Fund and will be made in the form of cash
or, if permitted, non-cash payments. The non-cash payments will include
business seminars at Lord Abbett's headquarters or other locations,
including meals and entertainment, or the receipt of merchandise. The cash
payments may include payment of various business expenses of the dealer.
In selecting dealers to execute portfolio transactions for a Fund's
portfolio, if two or more dealers are considered capable of obtaining best
execution, we may prefer the dealer who has sold our shares and/or shares
of other Lord Abbett-sponsored funds.
Authorized Institutions. Institutions and persons permitted by law to
receive service and/or distribution fees under a Rule 12b-1 Plan are
"Authorized Institutions." Lord Abbett Distributor is an Authorized
Institution.
Eligible Fund. An Eligible Fund is any Lord Abbett-sponsored fund except
for (1) certain tax-free, single-state Funds where the exchanging
shareholder is a resident of a state in which such a Fund is not offered
for sale; (2) Lord Abbett Equity Fund; (3) Lord Abbett Series Fund; (4)
Lord Abbett U.S. Government Securities Money Market Fund ("GSMMF") (except
for holdings in GSMMF which are attributable to any shares exchanged from
the Lord Abbett Family of Funds). An Eligible Fund also is any Authorized
Institution's affiliated money market fund satisfying Lord Abbett
Distributor as to certain omnibus account and other criteria.
Eligible Mandatory Distributions. If Class B shares represent a part of an
individual's total IRA or 403(b) investment, the CDSC will be waived only
for that part of a mandatory distribution which bears the same relation to
the entire mandatory distribution as the B share investment bears to the
total investment.
Legal Capacity. With respect to a redemption request, if (for example) the
request is on behalf of the estate of a deceased shareholder, John W. Doe,
by a person (Robert A. Doe) who has the legal capacity to act for the
estate of the deceased shareholder because he is the executor of the
estate, then the request must be executed as follows: Robert A.Doe,
Executor of the Estate of John W. Doe. That signature using that capacity
must be guaranteed by an Eligible Guarantor.
Similarly, if (for example) the redemption request is on behalf of the ABC
Corporation by a person (Mary B. Doe) that has the legal capacity to act on
behalf of this corporation, because she is the President of the
corporation, then the request must be executed as follows: ABC Corporation
by Mary B.Doe, President. That signature using that capacity must be
guaranteed by an Eligible Guarantor (see example in right column).
Mutual Fund Fee Based Program. Certain unaffiliated authorized brokers,
dealers, registered investment advisers or other financial institutions
("entities") who either (1) have an arrangement with Lord Abbett
Distributor in accordance with certain standards approved by Lord Abbett
Distributor, providing specifically for the use of our shares (and
sometimes providing for acceptance of orders for such shares on our behalf)
in particular investment products made available for a fee to clients of
such entities, or (2) charge an advisory, consulting or other fee for their
services and buy shares for their own accounts or the accounts of their
clients.
GUARANTEED SIGNATURE. An acceptable form of guarantee would be as follows:
In the case of the estate --
Robert A. Doe
Executor of the Estate of
John W. Doe
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE ILLEGIBLE]
- --------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
In the case of the corporation --
ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE ILLEGIBLE]
- --------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
Your Investment 44
<PAGE>
Purchaser. The term "purchaser" includes: (1) an individual, (2) an
individual and his or her spouse and children under the age of 21, and (3)
a trustee or other fiduciary purchasing shares for a single trust estate or
single fiduciary account (including a pension, profit-sharing, or other
employee benefit trust qualified under Section 401 of the Internal Revenue
Code - more than one qualified employee benefit trust of a single employer,
including its consolidated subsidiaries, may be considered a single trust,
as may qualified plans of multiple employers registered in the name of a
single bank trustee as one account), although more than one beneficiary is
involved.
Special Retirement Wrap Program. A program sponsored by an Authorized
Institution showing one or more characteristics distinguishing it, in the
opinion of Lord Abbett Distributor from a Mutual Fund Fee Based Program.
Such characteristics include, among other things, the fact that an
Authorized Institution does not charge its clients any fee of a consulting
or advisory nature that is economically equivalent to the distribution fee
under the Class A 12b-1 Plan and the fact that the program relates to
participant- directed Retirement Plans.
RECENT PERFORMANCE
What started out as a good year for municipal bonds turned sour in the
later part of 1999 as municipal bond yields backed up from lower levels
earlier in the year. The municipal market enjoyed an early rally spurred by
strong demand as investors took advantage of the cheapness of tax-free
bonds in relation to Treasuries. However, as interest rates began to climb
in the spring amid worries of renewed inflation and subsequent Federal
Reserve Board increases in the Federal Funds Rate, yields on tax-free bonds
rose and prices declined.
Over the summer, a number of factors contributed to excess supply of
municipal paper relative to demand, which in turn kept interest rates on
tax-free bonds high in relation to Treasuries. Property and casualty
insurance companies, traditionally large buyers of municipal bonds, became
net sellers as lower insurance profits reduced their need for tax-free
income. At the same time, less traditional institutional buyers, such as
life insurance companies, became heavy sellers. In addition, as interest
rates rose on all fixed-income securities, individual investors were more
reluctant to purchase bonds. The flood of extra supply, resulting from a
high level of selling, and in some instances, from issuers trying to have
bonds underwritten before year end, temporarily overwhelmed demand for
municipals and forced yields to move significantly higher.
While these periods of market weakness do have an impact on the value of a
Fund's portfolio, they also present opportunities for the Fund to purchase
high-quality, long-term bonds at very attractive yields. Currently,
inflation remains low and the Federal Reserve seems resolved to prevent any
sustained increase. While difficult to justify, given the low inflation the
economy continues to enjoy, Lord Abbett would consider any additional
increase in the Federal Funds Rate by the Federal Reserve as an "insurance
move" given that today's high rates are only beginning to impact the
economy. We anticipate that the factors that resulted in the yields on
tax-free bonds increasing more than the yields on Treasuries will prove to
be temporary. Once supply and demand fall more in line, tax-free bonds
should rally relative to Treasuries.
Lord Abbett believes municipal bonds remain extremely attractive from a
relative value perspective, offering tax-free yields equivalent to nearly
98% of the yield of Treasuries and continue to emphasize highly liquid,
high-quality bon
<PAGE>
NATIONAL TAX-FREE INCOME FUND
FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended September 30, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended September 30, 1999 and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single Fund share.
<TABLE>
<CAPTION>
Class A Shares
- ---------------------------------------------------------------------------------------
Year Ended September 30,
Per Share Operating Performance: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $11.98 $11.48 $11.08
$11.00 $10.62
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .59 .604 .587
.603 .626
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain (loss) on investments (1.03) .470 .415
.075 .382
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.44) 1.074 1.002
.678 1.008
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.56) (.574) (.602)
(.598) (.628)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (.19) -- --
- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $10.79 $11.98 $11.48
$11.08 $11.00
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (3.85%) 9.60% 9.30%
6.31% 9.84%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses .95% 0.88% 0.87%
0.90% 0.82%
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.10% 5.18% 5.27%
5.63% 5.92%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
-----------------------------------------
- --------------------------------------------------
Year Ended September 30, Year Ended
September 30,
Per Share Operating Performance: 1999 1998 1997 1996(c) 1999 1998
1997 1996(c)
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
Net asset value, beginning of year$11.98 $11.50 $11.08 $11.05 $11.99 $11.49
$11.08 $10.90
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .51 .518 .553 .089 .50 .520
.507 .106
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain on securities (.99) .466 .413 .033 (1.01) .471
.423 .190
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.48) .984 .966 .122 (.51) .991
.930 .296
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net
investment income (.49) (.504) (.546) (.092) (.48) (.491)
(.520) (.116)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net
realized gain (.19) -- -- -- (.19) --
- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $10.82 $11.98 $11.50 $11.08 $10.81 $11.99
$11.49 $11.08
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (4.30)% 8.85% 8.95% 1.16%(b) (4.45)% 8.80%
8.61% 2.71%(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses 1.54% 1.47% 1.37% 0.20%(b) 1.63% 1.61%
1.59% 0.34%(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.41% 4.49% 4.65% 0.68%(b) 4.38% 4.44%
4.54% 0.96%(b)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
- -------------------------------------------------------------------------------------------------
Supplemental Data For All Classes: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net assets, end of year (000) $597,063 $658,310 $646,736
$672,344 $650,699
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 254.13% 304.15% 232.64%
205.35% 225.39%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(b) Not annualized.
(c) From commencement of operations for each class of shares: August 1, 1996
(Class B) and July 15, 1996 (Class C).
Financial Information 46
<PAGE>
National Tax-Free Income Fund
Line Graph Comparison
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in Lipper's average of General Municipal Debt Funds,
the Lehman Municipal Bond Index and the Lehman Municipal Long Current
Coupon Index, assuming reinvestment of all dividends and distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending September 30, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(4) -6.90% 5.40% 6.45%
- --------------------------------------------------------------------------------
Class B(5) -8.81% - 3.61%
- --------------------------------------------------------------------------------
Class C(6) -5.35% - 4.72%
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 3.25%.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance.
(3) Source: Lipper, Inc.
(4) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 3.25% applicable to Class
A shares, with all dividends and distributions reinvested for the periods
shown ending September 30, 1999 using the SEC-required uniform method to
compute total return. The Class A share inception date is 4/2/84.
(5) The Class B shares were first offered on 8/1/96. Performance reflects the
deduction of a CDSC of 4% (for 1 year) and 3% (for life of the Class).
(6) The Class C shares were first offered on 7/15/96. Performance is at net
asset value.
47 Financial Information
<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended September 30, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended September 30, 1999 and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single Fund share.
<TABLE>
<CAPTION>
Class A Shares
- -------------------------------------------------------------------------------------
Year Ended September 30,
Per Share Operating Performance: 1999 1998 1997 1996(c)
1996 1995
<S> <C> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $11.12 $10.72 $10.43 $10.32
$10.41 $10.45
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .54 .538 .560 .046
.566 .588
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain (loss) on investments (.98) .388 .290 .112
(.089) (.038)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.44) .926 .850 .158
.477 .550
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.52) (.526) (.560) (.048)
(.567) (.590)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain -- -- -- --
- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $10.16 $11.12 $10.72 $10.43
$10.32 $10.41
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (4.09)% 8.86% 8.39% 1.53%(b)
4.65% 5.58%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver .93% 0.87% 0.72% 0.07%(b)
0.75% 0.76%
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver .93% 0.87% 0.85% 0.07%(b)
0.86% 0.86%
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.96% 4.98% 5.38% 0.44%(b)
5.41% 5.84%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
- ---------------------------------------------------------------------------------------------
Year Ended September 30,
Per Share Operating Performance: 1999 1998 1997
1996(c) 1996(d)
<S> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $11.12 $10.72 $10.43
$10.32 $10.28
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .46 .465 .485
.039 .068
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain (loss) on investments (.98) .383 .287
.113 .041
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.52) .848 .772
.152 .109
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.44) (.448) (.482)
(.042) (.069)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $10.16 $11.12 $10.72
$10.43 $10.32
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (4.77)% 8.09% 7.59%
1.47%(b) 1.16%(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver and reimbursements 1.60% 1.59% 1.46%
0.13%(b) 0.17%(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver and reimbursements 1.60% 1.59% 1.59%
0.13%(b) 0.21%(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.28% 4.26% 4.64%
0.38%(b) 0.65%(b)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
- -------------------------------------------------------------------------------------------
Supplemental Data For All Classes: 1999 1998 1997 1996(d)
1996 1995
<S> <C> <C> <C> <C>
<C> <C>
Net assets, end of year (000) $219,880 $264,405 $273,009 $294,837
$291,611 $296,274
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 185.43% 187.26% 121.97% 2.74%
132.37% 100.20%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(b) Not annualized.
(c) One month ended September 30, 1996.
(d) From July 15, 1996, commencement of operations for Class C shares.
Financial Information 48
<PAGE>
CALIFORNIA TAX-FREE INCOME FUND
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in Lipper's average of California Municipal Debt
Funds, the Lehman Municipal Bond Index and the Lehman Municipal Long
Current Coupon Index, assuming reinvestment of all dividends and
distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending September 30, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(4) -7.20% 4.65% 6.11%
- --------------------------------------------------------------------------------
Class C(5) -5.69% - 4.07%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 3.25%.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance. Each index is composed of municipal bonds from many
states while the Fund is a single-state municipal bond portfolio.
(3) Source: Lipper, Inc.
(4) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 3.25% applicable to Class
A shares, with all dividends and distributions reinvested for the periods
shown ending September 30, 1999 using the SEC-required uniform method to
compute total return. The Class A shares inception date is 9/3/85.
(5) The Class C shares were first offered on 7/15/96. Performance is at net
asset value.
49 Financial Information
<PAGE>
CONNECTICUT TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended September 30, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended September 30, 1999 and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single Fund share.
<TABLE>
<CAPTION>
Class A Shares
- ----------------------------------------------------------------------------------------------
Year Ended September 30,
Per Share Operating Performance: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $10.73 $10.42 $10.13
$10.12 $9.71
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .54 .521 .556
.576 .579
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain (loss) on investments (.86) .322 .287
(.013) .407
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.32) .843 .843
.563 .986
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.52) (.533) (.553)
(.553) (.576)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $9.89 $10.73 $10.42
$10.13 $10.12
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (3.04)% 8.32% 8.56%
5.70% 10.52%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver 0.95% 0.81% 0.59%
0.38% 0.41%
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver 0.95% 0.81% 0.78%
0.80% 0.86%
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.12% 4.95% 5.45%
5.66% 5.89%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
- --------------------------------------------------------------------------------------------------
Supplemental Data: 1999 1998 1997
1996 1995
<S> <C> <C> <C> <C>
<C> <C>
Net assets, end of year (000) $111,758 $120,983 $119,909
$122,885 $113,436
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 53.76% 61.06% 37.09%
63.61% 54.19%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
Financial Information 50
<PAGE>
CONNECTICUT TAX-FREE INCOME FUND
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in Lipper's average of Connecticut Municipal Debt
Funds, the Lehman Municipal Bond Index and the Lehman Municipal Long
Current Coupon Index, assuming reinvestment of all dividends and
distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending September 30, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(4) -6.20% 5.19% 6.12%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 3.25%.
(2) Performance for each unmanaged index does not reflect any fees or expenses
and is calculated from March 31, 1991.
The performance of the indices is not necessarily representative of the
Fund's performance. Each index is composed of municipal bonds from many
states while the Fund is a single-state municipal bond portfolio.
(3) Source: Lipper, Inc. Calculated from March 31, 1991.
(4) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 3.25% applicable to Class
A shares, with all dividends and distributions reinvested for the periods
shown ending September 30, 1999 using the SEC-required uniform method to
compute total return. The Class A share inception date is 4/1/91.
51 Financial Information
<PAGE>
HAWAII TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended September 30, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended September 30, 1999 and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single Fund share.
<TABLE>
<CAPTION>
Class A Shares
- --------------------------------------------------------------------------------------------
Year Ended September 30,
Per Share Operating Performance: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $5.25 $5.07 $4.93
$4.91 $4.72
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .26 .245 .266
.273 .271
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain (loss) on investments (.43) .180 .138
.015 .198
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.17) .425 .404
.288 .469
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.24) (.245) (.264)
(.268) (.279)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $4.84 $5.25 $5.07
$4.93 $4.91
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (3.31)% 8.59% 8.42%
5.94% 10.30%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver 0.97% 0.92% 0.58%
0.57% 0.58%
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver 0.97% 0.93% 0.87%
0.87% 0.87%
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.03% 4.78% 5.39%
5.46% 5.74%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
- -----------------------------------------------------------------------------------------------------
Supplemental Data: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net assets, end of year (000) $71,619 $80,970 $79,079
$85,344 $86,105
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 27.63% 52.65% 29.09%
59.46% 70.64%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
Financial Information 52
<PAGE>
Hawaii Tax-Free Income Fund
Line Graph Comparison
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in Lipper's average of Hawaii Municipal Debt Funds,
the Lehman Municipal Bond Index and the Lehman Municipal Long Current
Coupon Index, assuming reinvestment of all dividends and distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending September 30, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(4) -6.60% 5.18% 5.56%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 3.25%.
(2) Performance for each unmanaged index does not reflect any fees or expenses
and is calculated from October 31, 1991. The performance of the indices is
not necessarily representative of the Fund's performance. Each index is
composed of municipal bonds from many states while the Fund is a
single-state municipal bond portfolio.
(3) Source: Lipper, Inc. Calculated from October 31, 1991.
(4) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 3.25% applicable to Class
A shares, with all dividends and distributions reinvested for the periods
shown ending September 30, 1999 using the SEC-required uniform method to
compute total return. The Class A share inception date is 10/28/91.
53 Financial Information
<PAGE>
MINNESOTA TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended September 30, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended September 30, 1999 and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single Fund share.
<TABLE>
<CAPTION>
Class A Shares
- -------------------------------------------------------------------------------------------
Year Ended September 30,
Per Share Operating Performance: 1999 1998 1997
1996 1995(c)
<S> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $5.18 $5.05 $4.90
$5.01 $4.76
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .27 .265 .273
.294 .230
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain (loss) on investments (.41) .134 .155
(.078) .249
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.14) .399 .428
.216 .479
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.26) (.269) (.278)
(.286) (.229)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain -- -- --
(.04) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $4.78 $5.18 $5.05
$4.90 $5.01
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (2.72)% 8.11% 8.97%
4.44% 10.22%(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver 0.23% 0.27% 0.36%
0.00% 0.00%(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver 0.73% 0.77% 0.86%
0.91% 0.64%(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.43% 5.19% 5.51%
5.91% 4.58%(b)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
- --------------------------------------------------------------------------------------------------------
Supplemental Data: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net assets, end of year (000) $19,843 $14,399 $10,510
$8,047 $4,315
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 22.87% 40.65% 41.45%
43.08% 121.41%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(b) Not annualized.
(c) From December 27, 1994, commencement of operations for Class A shares.
Financial Information 54
<PAGE>
MINNESOTA TAX-FREE INCOME FUND
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in Lipper's average of Minnesota Municipal Debt
Funds, the Lehman Municipal Bond Index and the Lehman Municipal Long
Current Coupon Index, assuming reinvestment of all dividends and
distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending September 30, 1999
1 Year 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(4) -5.90% 5.27%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 3.25%.
(2) Performance for each unmanaged index does not reflect any fees or expenses
and is calculated from December 31, 1994. The performance of the indices is
not necessarily representative of the Fund's performance. Each index is
composed of municipal bonds from many states while the Fund is a
single-state municipal bond portfolio.
(3) Source: Lipper, Inc. Calculated from December 31, 1994.
(4) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 3.25% applicable to Class
A shares, with all dividends and distributions reinvested for the periods
shown ending September 30, 1999 using the SEC-required uniform method to
compute total return. The Class A share inception date is 12/27/94.
55 Financial Information
<PAGE>
MISSOURI TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended September 30, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended September 30, 1999 and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single Fund share.
<TABLE>
<CAPTION>
Class A Shares
- --------------------------------------------------------------------------------------------
Year Ended September 30,
Per Share Operating Performance: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $5.36 $5.22 $5.08
$5.08 $4.88
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .25 .253 .268
.267 .277
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain (loss) on investments (.37) .142 .138
.008 .204
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.12) .395 .406
.275 .481
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.25) (.255) (.266)
(.275) (.281)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $4.99 $5.36 $5.22
$5.08 $5.08
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (2.25)% 7.75% 8.22%
5.54% 10.21%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver 0.99% 0.92% 0.70%
0.77% 0.74%
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver 0.99% 0.93% 0.94%
0.92% 0.89%
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.84% 4.80% 5.22%
5.21% 5.61%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
Year Ended September 30,
- -------------------------------------------------------------------------------------------------------------------
Supplemental Data: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net assets, end of year (000) $125,775 $144,155 $140,280
$134,144 $131,823
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 78.85% 72.89% 27.34%
93.17% 58.17%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
Financial Information 56
<PAGE>
Missouri Tax-Free Income Fund
Line Graph Comparison
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in Lipper's average of Missouri Municipal Debt
Funds, the Lehman Municipal Bond Index and the Lehman Municipal Long
Current Coupon Index, assuming reinvestment of all dividends and
distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending September 30, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(4) -5.40% 5.13% 6.01%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 3.25%.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance. Each index is composed of municipal bonds from many
states while the Fund is a single-state municipal bond portfolio.
(3) Source: Lipper, Inc.
(4) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 3.25% applicable to Class
A shares, with all dividends and distributions reinvested for the periods
shown ending September 30, 1999 using the SEC-required uniform method to
compute total return. The Class A share inception date is 5/31/91.
<PAGE>
NEW JERSEY TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended September 30, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended September 30, 1999 and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single Fund share.
<TABLE>
<CAPTION>
Class A Shares
- ----------------------------------------------------------------------------------------
Year Ended September 30,
Per Share Operating Performance: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $5.54 $5.32 $5.18
$5.14 $4.95
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .27 .262 .272
.277 .287
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain (loss) on investments (.47) .223 .144
.041 .192
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.20) .485 .416
.318 .479
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.26) (.265) (.276)
(.278) (.289)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (.11) -- --
- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $4.97 $5.54 $5.32
$5.18 $5.14
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (3.73)% 9.34% 8.25%
6.29% 9.98%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver 0.93% 0.86% 0.82%
0.79% 0.72%
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver 0.93% 0.86% 0.86%
0.86% 0.87%
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.11% 4.85% 5.21%
5.31% 5.73%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
- ---------------------------------------------------------------------------------------------------------
Supplemental Data: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net assets, end of year (000) $163,237 $186,127 $184,465
$186,402 $191,562
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 185.16% 118.38% 154.80%
171.63% 133.11%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
Financial Information 58
<PAGE>
NEW JERSEY TAX-FREE INCOME FUND
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in Lipper's average of New Jersey Municipal Debt
Funds, the Lehman Municipal Bond Index and the Lehman Municipal Long
Current Coupon Index, assuming reinvestment of all dividends and
distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending September 30, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(4) -6.90% 5.19% 6.50%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 3.25%.
(2) Performance for each unmanaged index does not reflect any fees or expenses
and is calculated from December 31, 1990. The performance of the indices is
not necessarily representative of the Fund's performance. Each index is
composed of municipal bonds from many states while the Fund is a
single-state municipal bond portfolio.
(3) Source: Lipper, Inc. Calculated from December 31, 1990.
(4) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 3.25% applicable to Class
A shares, with all dividends and distributions reinvested for the periods
shown ending September 30, 1999 using the SEC-required uniform method to
compute total return. The Class A share inception date is 1/2/91.
59 Financial Information
<PAGE>
NEW YORK TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended September 30, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended September 30, 1999 and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single Fund share.
<TABLE>
<CAPTION>
Class A Shares
- -----------------------------------------------------------------------------------------------
Year Ended September 30,
Per Share Operating Performance: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $11.43 $11.03 $10.78
$10.85 $10.54
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .58 .562 .578
.597 .610
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain (loss) on investments (.94) .408 .262
(.081) .316
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.36) .970 .840
.516 .926
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.56) (.570) (.590)
(.586) (.616)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $10.51 $11.43 $11.03
$10.78 $10.85
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (3.23)% 9.03% 8.01%
4.87% 9.12%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses 0.93% 0.85% 0.85%
0.81% 0.82%
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.21% 5.06% 5.35%
5.54% 5.83%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
- ----------------------------------------------------------------------------------------
Year Ended September 30,
Per Share Operating Performance: 1999 1998
1997 1996(c)
<S> <C> <C>
<C> <C>
Net asset value, beginning of year $11.42 $11.02
$10.78 $10.63
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .50 .485
.483 .111
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain (loss) on securities (.93) .402
.267 .152
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.43) .887
.750 .263
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.48) (.487)
(.510) (.113)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $10.51 $11.42
$11.02 $10.78
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (3.93)% 8.34%
7.13% 2.48%(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses 1.62% 1.57%
1.57% 0.34%(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.49% 4.32%
4.60% 1.04%(b)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
- --------------------------------------------------------------------------------------------------------
Supplemental Data: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net assets, end of year (000) $255,033 $290,257 $300,490
$319,553 $331,618
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 52.67% 64.63% 110.28%
64.25% 105.62%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(b) Not annualized.
(c) From July 15, 1996, commencement of operations for Class C shares.
Financial Information 60
<PAGE>
New York Tax-Free Income Fund
Line Graph Comparison
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in Lipper's average of New York Municipal Debt
Funds, the Lehman Municipal Bond Index and the Lehman Municipal Long
Current Coupon Index, assuming reinvestment of all dividends and
distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending September 30, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(4) -6.30% 4.76% 6.01%
- --------------------------------------------------------------------------------
Class C(5) -4.86% - 4.23%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 3.25%.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance. Each index is composed of municipal bonds from many
states while the Fund is a single-state municipal bond portfolio.
(3) Source: Lipper, Inc.
(4) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 3.25% applicable to Class
A shares, with all dividends and distributions reinvested for the periods
shown ending September 30, 1999 using the SEC-required uniform method to
compute total return. The Class A share inception date is 4/2/84.
(5) The Class C shares were first offered on 7/15/96. Performance is at net
asset value.
61 Financial Information
<PAGE>
TEXAS TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended September 30, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended September 30, 1999 and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single Fund share.
<TABLE>
<CAPTION>
Class A Shares
- --------------------------------------------------------------------------------------------
Year Ended September 30,
Per Share Operating Performance: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $10.69 $10.40 $10.11
$10.05 $9.59
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .52 .507 .548
.567 .571
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain (loss) on investments (1.03) .407 .367
.045 .452
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.51) .914 .915
.612 1.023
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.52) (.534) (.555)
(.552) (.563)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (.11) (.09) (.07)
- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $9.55 $10.69 $10.40
$10.11 $10.05
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (4.96)% 9.24% 9.25%
6.11% 11.14%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver 0.94% 0.91% 0.88%
0.69% 0.62%
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver 0.94% 0.91% 0.88%
0.87% 0.87%
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.12% 4.85% 5.38%
5.58% 5.90%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
- --------------------------------------------------------------------------------------------------------
Supplemental Data: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net Assets, end of year (000) $84,491 $92,607 $91,301
$94,414 $100,304
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 168.04% 143.78% 127.88%
112.34% 108.00%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
Financial Information 62
<PAGE>
TEXAS TAX-FREE INCOME FUND
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in Lipper's average of Texas Municipal Debt Funds,
the Lehman Municipal Bond Index and the Lehman Municipal Long Current
Coupon Index, assuming reinvestment of all dividends and distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending September 30, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(4) -8.10% 5.29% 6.60%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 3.25%.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance. Each index is composed of municipal bonds from many
states while the Fund is a single-state municipal bond portfolio.
(3) Source: Lipper, Inc.
(4) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 3.25% applicable to Class
A shares, with all dividends and distributions reinvested for the periods
shown ending September 30, 1999 using the SEC-required uniform method to
compute total return. The Class A share inception date is 1/20/87.
63 Financial Highlights
<PAGE>
WASHINGTON TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended September 30, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended September 30, 1999 and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single Fund share.
<TABLE>
<CAPTION>
Class A Shares
- -----------------------------------------------------------------------------------------
Year Ended September 30,
Per Share Operating Performance: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $5.38 $5.16 $4.96
$4.91 $4.72
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .28 .273 .268
.271 .277
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain (loss) on investments (.50) .206 .206
.056 .200
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.22) .479 .474
.327 .477
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.25) (.259) (.274)
(.277) (.287)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $4.91 $5.38 $5.16
$4.96 $4.91
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (4.17)% 9.48% 9.82%
6.80% 10.48%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver 0.66% 0.65% 0.57%
0.60% 0.53%
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver 0.66% 0.65% 0.62%
0.68% 0.68%
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.42% 5.20% 5.36%
5.47% 5.84%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
- ------------------------------------------------------------------------------------------------------------
Supplemental Data: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net assets, end of year (000) $51,849 $62,754 $66,215
$71,295 $74,359
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 180.42% 141.56% 132.37%
78.02% 92.85%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
Financial Information 64
<PAGE>
WASHINGTON TAX-FREE INCOME FUND
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in Lipper's average of Washington Municipal Debt
Funds, the Lehman Municipal Bond Index and the Lehman Municipal Long
Current Coupon Index, assuming reinvestment of all dividends and
distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending September 30, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(4) -7.30% 5.63% 5.80%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 3.25%.
(2) Performance for each unmanaged index does not reflect any fees or expenses
and is calculated from April 30, 1992. The performance of the indices is
not necessarily representative of the Fund's performance. Each index is
composed of municipal bonds from many states while the Fund is a
single-state municipal bond portfolio.
(3) Source: Lipper, Inc. Calculated from April 30, 1992.
(4) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 3.25% applicable to Class
A shares, with all dividends and distributions reinvested for the periods
shown ending September 30, 1999 using the SEC-required uniform method to
compute total return. The Class A share inception date is 4/15/92.
<PAGE>
FLORIDA SERIES
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended October 31, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended October 31, 1999 and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single Fund share.
<TABLE>
<CAPTION>
Class A Shares
- -------------------------------------------------------------------------------------------------
Year Ended October 31,
Per Share Operating Performance: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $4.98 $4.87 $4.79
$4.85 $4.49
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .23(d) .235 .240
.248 .271
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain (loss) on investments (.46) .113 .092
(.056) .352
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.23) .348 .332
.192 .623
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.23) (.238) (.252)
(.252) (.263)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $4.52 $4.98 $4.87
$4.79 $4.85
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (4.74)% 7.30% 7.12%
4.09% 14.22%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver 0.97% 0.89% 0.86%
0.80% 0.74%
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver 0.97% 0.89% 0.86%
0.82% 0.88%
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.73% 4.79% 5.03%
5.19% 5.81%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
- ----------------------------------------------------------------------------------------
Year Ended October 31,
Per Share Operating Performance: 1999 1998
1997 1996(b)
<S> <C> <C>
<C> <C>
Net asset value, beginning of period $4.98 $4.87
$4.79 $4.70
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .20(d) .200
.202 .064
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain on securities (.46) .112
.093 .093
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.26) .312
.295 .157
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.20) (.202)
(.215) (.067)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.52 $4.98
$4.87 $4.79
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (5.43)% 6.52%
6.33% 3.35%(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver 1.62% 1.58%
1.57% 0.44%(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver 1.62% 1.58%
1.57% 0.44%(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 4.07% 4.09%
4.29% 1.37%(c)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31,
- -----------------------------------------------------------------------------------------------------
Supplemental Data: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net assets, end of year (000) $106,970 $134,567 $144,748
$162,070 $173,242
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 191.12% 140.61% 106.32%
167.95% 142.04%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(b) From July 15, 1996 commencement of offering class shares.
(c) Not annualized.
(d) Calculate using average shares outstanding during the year.
Financial Information 66
<PAGE>
FLORIDA SERIES
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in Lipper's average of Florida Municipal Debt Funds,
the Lehman Municipal Bond Index and the Lehman Municipal Long Current
Coupon Index, assuming reinvestment of all dividends and distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending October 31, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(4) -7.90% 4.73% 4.86%
- --------------------------------------------------------------------------------
Class C(5) -6.34% - 3.13%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 3.25%.
(2) Performance for each unmanaged index does not reflect any fees or expenses
and is calculated from September 30, 1991. The performance of the indices
is not necessarily representative of the Fund's performance. Each index is
composed of municipal bonds from many states while the Fund is a
single-state municipal bond portfolio.
(3) Source: Lipper, Inc. Calculated from September 30, 1991.
(4) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 3.25% applicable to Class
A shares, with all dividends and distributions reinvested for the periods
shown ending October 31, 1999 using the SEC-required uniform method to
compute total return. The Class A shares inception date is 9/25/91.
(5) The Class C shares were first offered on 7/15/96. Performance is at net
asset value.
67 Financial Information
<PAGE>
GEORGIA SERIES
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended October 31, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended October 31, 1999 and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single Fund share.
<TABLE>
<CAPTION>
Class A Shares
- -------------------------------------------------------------------------------------------
Year Ended October 31,
Per Share Operating Performance: 1999 1998 1997
1996 1995(b)
<S> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $5.43 $5.31 $5.14
$5.12 $4.76
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .28(d) .276 .275
.290 .245
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain (loss) on investments (.50) .187 .187
.0397 .370
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.22) .463 .462
.3297 .615
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.26) (.268) (.282)
(.2872) (.255)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (.04) (.075) (.01)
(.0225) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.30) (.343) (.292)
(.3097) (.255)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $4.91 $5.43 $5.31
$5.14 $5.12
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (4.36)% 9.00% 9.27%
6.69% 13.15%(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver 0.18% 0.24% 0.38%
0.03% 0.00%(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver 0.68% 0.74% 0.88%
0.83% 1.08%(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.32% 5.07% 5.23%
5.55% 5.44%(c)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31,
- -------------------------------------------------------------------------------------------------------
Supplemental Data: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net Assets, end of year (000) $27,432 $19,764 $13,897
$10,688 $5,203
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 115.87% 126.52% 90.40%
72.53% 142.69%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(b) From December 27, 1994 commencement of offering class shares.
(c) Not annualized.
(d) Calculate using average shares outstanding during the year.
Financial Information 68
<PAGE>
GEORGIA SERIES
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in Lipper's average of Georgia Municipal Debt Funds,
the Lehman Municipal Bond Index and the Lehman Municipal Long Current
Coupon Index, assuming reinvestment of all dividends and distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending October 31, 1999
1 Year 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(4) -7.50% 6.08%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 3.25%.
(2) Performance for each unmanaged index does not reflect any fees or expenses
and is calculated from December 31, 1994. The performance of the indices is
not necessarily representative of the Fund's performance. Each index is
composed of municipal bonds from many states while the Fund is a
single-state municipal bond portfolio.
(3) Source: Lipper, Inc. Calculated from December 31, 1994.
(4) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 3.25% applicable to Class
A shares, with all dividends and distributions reinvested for the periods
shown ending October 31, 1999 using the SEC-required uniform method to
compute total return. The Class A share inception date is 12/27/94.
69 Financial Information
<PAGE>
MICHIGAN SERIES
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended October 31, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended October 31, 1999 and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single Fund share.
<TABLE>
<CAPTION>
Class A Shares
- --------------------------------------------------------------------------------------------------
Year Ended October 31,
Per Share Operating Performance: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $5.18 $5.06 $4.93
$4.93 $4.53
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .26(b) .255 .267
.274 .248
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain (loss) on investments (.44) .121 .128
(.010) .395
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.18) .376 .395
.264 .679
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.25) (.256) (.265)
(.264) (.279)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $4.75 $5.18 $5.06
$4.93 $4.93
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (3.55)% 7.59% 8.24%
5.53% 15.39%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver 0.69% 0.69% 0.60%
0.44% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver 0.69% 0.69% 0.68%
0.73% 0.75%
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.21% 4.98% 5.37%
5.59% 5.95%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31,
- ---------------------------------------------------------------------------------------------------------
Supplemental Data: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net Assets, end of year (000) $49,356 $53,139 $52,630
$52,975 $54,186
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 186.97% 82.33% 68.50%
85.26% 98.89%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(b) Calculate using average shares outstanding during the year.
Financial Information 70
<PAGE>
MICHIGAN SERIES
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in Lipper's average of Michigan Municipal Debt
Funds, the Lehman Municipal Bond Index and the Lehman Municipal Long
Current Coupon Index, assuming reinvestment of all dividends and
distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending October 31, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(4) -6.60% 5.77% 5.22%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 3.25%.
(2) Performance for each unmanaged index does not reflect any fees or expenses
and is calculated from November 30, 1992. The performance of the indices is
not necessarily representative of the Fund's performance. Each index is
composed of municipal bonds from many states while the Fund is a
single-state municipal bond portfolio.
(3) Source: Lipper, Inc. Calculated from November 30, 1992.
(4) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 3.25% applicable to Class
A shares, with all dividends and distributions reinvested for the periods
shown ending October 31, 1999 using the SEC-required uniform method to
compute total return. The Class A share inception date is 12/1/92.
71 Financial Information
<PAGE>
PENNSYLVANIA SERIES
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended October 31, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended October 31, 1999 and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single Fund share.
<TABLE>
<CAPTION>
Class A Shares
- ----------------------------------------------------------------------------------------------
Year Ended October 31,
Per Share Operating Performance: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $5.28 $5.14 $5.01
$5.01 $4.62
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .26(b) .264 .276
.2772 .282
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain (loss) on investments (.47) .144 .131
(.0011) .395
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.21) .408 .407
.2761 .677
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.26) (.268) (.277)
(.2761) (.287)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $4.81 $5.28 $5.14
$5.01 $5.01
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (4.13)% 8.12% 8.37%
5.68% 15.02%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver 0.96% 0.72% 0.61%
0.62% 0.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver 0.96% 0.72% 0.65%
0.69% 0.65%
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.02% 5.05% 5.47%
5.55% 5.83%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31,
- ---------------------------------------------------------------------------------------------------
Supplemental Data: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net Assets, end of year (000) $93,835 $102,907 $94,237
$92,605 $93,494
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 40.76% 65.20% 70.99%
78.30% 126.11%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(b) Calculate using average shares outstanding during the year.
Financial Information 72
<PAGE>
Pennsylvania Series
Line Graph Comparison
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in Lipper's average of Pennsylvania Municipal Debt
Funds, the Lehman Municipal Bond Index and the Lehman Municipal Long
Current Coupon Index, assuming reinvestment of all dividends and
distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending October 31, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(4) -7.30% 5.71% 5.54%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 3.25%.
(2) Performance for each unmanaged index does not reflect any fees or expenses
and is calculated from January 31, 1992. The performance of the indices is
not necessarily representative of the Fund's performance. Each index is
composed of municipal bonds from many states while the Fund is a
single-state municipal bond portfolio.
(3) Source: Lipper, Inc. Calculated from January 31, 1992.
(4) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 3.25% applicable to Class
A shares, with all dividends and distributions reinvested for the periods
shown ending October 31, 1999 using the SEC-required uniform method to
compute total return. The Class A share inception date is 2/3/92.
73 Financial
<PAGE>
COMPENSATION FOR YOUR DEALER
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FIRST YEAR COMPENSATION
Front-end
sales charge Dealer's
paid by investors concession Service fee(1) Total
compensation(2)
Class A shares (% of offering price) (% of offering price) (% of net investment) (% of
offering price)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 3.25% 2.75% 0.25%
4.24%
- ------------------------------------------------------------------------------------------------------------------------------------
$50,000 - $99,999 2.75% 2.25% 0.25%
4.49%
- ------------------------------------------------------------------------------------------------------------------------------------
$100,000 - $249,999 2.50% 2.00% 0.25%
3.49%
- ------------------------------------------------------------------------------------------------------------------------------------
$250,000 - $499,999 2.00% 1.70% 0.25%
2.74%
- ------------------------------------------------------------------------------------------------------------------------------------
$500,000 - $999,999 1.50% 1.25% 0.25%
2.00%
- ------------------------------------------------------------------------------------------------------------------------------------
$1 million or more(3) or Retirement Plan - 100 or more eligible employees(3) or
Special Retirement Wrap Program(3)
- ------------------------------------------------------------------------------------------------------------------------------------
First $5 million no front-end sales charge 1.00% 0.25%
1.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Next $5 million above that no front-end sales charge 0.55% 0.25%
0.80%
- ------------------------------------------------------------------------------------------------------------------------------------
Next $40 million above that no front-end sales charge 0.50% 0.25%
0.75%
- ------------------------------------------------------------------------------------------------------------------------------------
Over $50 million no front-end sales charge 0.25% 0.25%
0.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Class B investments(4) Paid at time of sale (% of net asset value)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 3.75% 0.25%
4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Class C investments(4)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.75% 0.25%
1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Class P investments Percentage of average net assets
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.25% 0.20%
0.45%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
ANNUAL COMPENSATION AFTER FIRST YEAR
Class A investments Percentage of average net assets(5)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
<C>
All amounts no front-end sales charge none 0.25%
0.25%
- -------------------------------------------------------------------------------------------------------------------
Class B investments(4)
- -------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25%
0.25%
- -------------------------------------------------------------------------------------------------------------------
Class C investments(4)
- -------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.65% 0.25%
0.90%
- -------------------------------------------------------------------------------------------------------------------
Class P investments
- -------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.25% 0.20%
0.45%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The service fees for Class A and P shares are paid quarterly and for Class
A shares may not exceed 0.15% for shares sold prior to: June 1, 1990 for
the National, New York and Texas Funds; January 1, 1993 for the Hawaii
Fund; the first day of the calendar quarter subsequent to each of the
Georgia, Michigan, Minnesota and Washington Fund's net assets reaching $100
million; July 1, 1992 for the New Jersey Fund; and October 1, 1992 for the
Florida Fund. The first year's service fees on Class B and C shares are
paid at the time of sale.
(2) Reallowance/concession percentages and service fee percentages are
calculated from different amounts, and therefore may not equal total
compensation percentages if combined using simple addition. Additional
Concessions may be paid to Authorized Institutions, such as your dealer,
from time to time.
(3) Concessions are paid at the time of sale on all Class A shares sold during
any 12-month period starting from the day of the first net asset value
sale. With respect to (a) Class A share purchases at $1 million or more,
sales qualifying at such level under rights of accumulation and statement
of intention privileges are included and (b) for Special Retirement Wrap
Programs, only new sales are eligible and exchanges into the Funds are
excluded. Certain purchases of Class A shares are subject to a CDSC.
(4) Class B and C shares are subject to CDSCs.
(5) With respect to Class A, B, C and P shares, 0.25%, 0.25%, 0.90% and 0.45%,
respectively, of the average annual net asset value of such shares
outstanding during the quarter (including distribution reinvestment shares
after the first anniversary of their issuance) is paid to Authorized
Institutions, such as your dealer. These fees are paid quarterly in
arrears.
Financial Information 74
<PAGE>
More information on the Funds is available free upon request, including the
following:
Annual/Semi-annual Report
Describes the Funds, lists portfolio holdings and contains a letter
from the Funds' manager discussing recent market conditions and each Fund's
investment strategies.
Statements of Additional Information ("SAI")
Provide more details about the Funds and their policies. Current
SAIs are on file with the Securities and Exchange Commission ("SEC") and
are incorporated by reference (legally considered part of this prospectus).
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett National Tax-Free Income Fund
Lord Abbett California Tax-Free Income Fund
Lord Abbett Connecticut Tax-Free Income Fund
Lord Abbett Hawaii Tax-Free Income Fund
Lord Abbett Minnesota Tax-Free Income Fund
Lord Abbett Missouri Tax-Free Income Fund
Lord Abbett New Jersey Tax-Free Income Fund
Lord Abbett New York Tax-Free Income Fund
Lord Abbett Texas Tax-Free Income Fund
Lord Abbett Washington Tax-Free Income Fund
Lord Abbett Tax-Free Trust
Florida Series
Georgia Series
Michigan Series
Pennsylvania Series
90 Hudson Street
Jersey City, NJ 07302-3973
- --------------------------------------------------------------------------------
SEC file numbers: 811-3942, 811-6418
To obtain information:
By telephone. Call the Funds at:
800-426-1130
By mail. Write to the Funds at:
The Lord Abbett Family of Funds
90 Hudson Street
Jersey City, NJ 07302-3973
Via the Internet.
Lord, Abbett & Co.
www.lordabbett.com
Text only versions of Fund
documents can be viewed
online or downloaded from:
SEC
www.sec.gov
You can also obtain copies by
visiting the SEC's Public Reference Room in Washington, DC (phone
202-942-8090) or by sending your request and a duplicating fee to
the SEC's Public Reference Section, Washington, DC 20549-6009 or by sending your
request electronically to [email protected].
LATFI-1-200
(2/00)
<PAGE>
LORD ABBETT
Statement of Additional Information February 1, 2000
Lord Abbett Tax-Free Income Trust
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord Abbett Distributor LLC
("Lord Abbett Distributor"), 80 Hudson Street, Jersey City, New Jersey
07302-3973. This Statement of Additional Information relates to, and should be
read in conjunction with, the Prospectus dated February 1, 2000.
Shareholder inquiries should be made by directly contacting the Fund or by
calling 800-821-5129. The Annual Report to Shareholders is available, without
charge, upon request by calling that number. In addition, you can make inquiries
through your dealer.
TABLE OF CONTENTS Page
1. Investment Policies 2
2. Trustees and Officers 9
3. Investment Advisory and Other Services 13
4. Portfolio Transactions 14
5. Purchases, Redemptions and Shareholder Services 15
6. Taxes 22
7. Risk Factors 23
8. Past Performance 27
9. Information About the Company 28
10. Financial Statements 29
<PAGE>
1.
Investment Policies
Fundamental Investment Restrictions. Each Fund's investment objective and
policies are described in the Prospectus under "Goal/Approach." In addition to
those policies described in the Prospectus, each Fund is subject to the
following fundamental investment restrictions which cannot be changed for each
Fund without the approval of the holders of a majority of the Fund's shares.
Each Fund may not:
(1) borrow money (except that (i) each Fund may borrow from banks (as
defined in the Act) in amounts up to 33 1/3% of its total assets
(including the amount borrowed), (ii) each Fund may borrow up to an
additional 5% of its total assets for temporary purposes, (iii) each
Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities and (iv) each
Fund may purchase securities on margin to the extent permitted by
applicable law);
(2) pledge its assets (other than to secure borrowings or to the extent
permitted by the Funds' investment policies as permitted by applicable
law;
(3) engage in the underwriting of securities except pursuant to a merger
or acquisition or to the extent that, in connection with the
disposition of its portfolio securities, it may be deemed to be an
underwriter under federal securities laws;
(4) make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in
government obligations, commercial paper, pass-through instruments,
certificates of deposit, bankers acceptances, repurchase agreements or
any similar instruments shall not be subject to this limitation, and
except further that each Fund may lend its portfolio securities,
provided that the lending of portfolio securities may be made only in
accordance with applicable law;
(5) buy or sell real estate (except that each Fund may invest in
securities directly or indirectly secured by real estate or interests
therein or issued by companies which invest in real estate or
interests therein), commodities or commodity contracts (except to the
extent each Company may do so in accordance with applicable law and
without registering as a commodity pool operator under the Commodity
Exchange Act as, for example, with futures contracts);
(6) invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding tax-exempt
securities financing facilities in the same industry or issued by
nongovernmental users and securities of the U.S. Government, its
agencies and instrumentalities); or
(7) issue senior securities to the extent such issuance would violate
applicable law.
With respect to the restrictions mentioned herein, compliance therewith will not
be affected by change in the market value of portfolio securities but will be
determined at the time of purchase or sale of such securities.
Non-Fundamental Investment Restrictions. In addition to the investment
restrictions above, which cannot be changed without shareholder approval, we
also are subject to the following non-fundamental investment policies, which may
be changed by the Board of Trustees without shareholder approval.
Each Fund may not:
(1) borrow in excess of 33 1/3% of its total assets (including the amount
borrowed), and then only as a temporary measure for extraordinary or
emergency purposes;
(2) make short sales of securities or maintain a short position except to
the extent permitted by applicable law;
2
<PAGE>
(3) invest knowingly more than 15% of its net assets (at the time of
investment) in illiquid securities, except for securities qualifying
for resale under Rule 144A of the Securities Act of 1933 deemed to be
liquid by the Board of Trustees;
(4) invest in securities of other investment companies, except as
permitted by applicable law;
(5) invest in securities of issuers which, with their predecessors, have a
record of less than three years of continuous operation, if more than
5% of such Fund's total assets would be invested in such securities
(this restriction shall not apply to mortgaged-backed securities,
asset-backed securities or obligations issued or guaranteed by the U.
S. government, its agencies or instrumentalities);
(6) hold securities of any issuer when more than 1/2 of 1% of the issuer's
securities are owned beneficially by one or more of the Fund's
officers or trustees or by one or more partners of the Fund's
underwriter or investment adviser if these owners in the aggregate own
beneficially more than 5% of the securities of such issuer;
(7) invest in warrants if, at the time of acquisition, its investment in
warrants, valued at the lower of cost or market, would exceed 5% of
such Fund's total assets (included within such limitation, but not to
exceed 2% of such Fund's total assets, are warrants which are not
listed on the New York or American Stock Exchange or a major foreign
exchange;
(8) invest in real estate limited partnership interests or interests in
oil, gas or other mineral leases, or exploration or development
programs, except that such Fund may invest in securities issued by
companies that engage in oil, gas or other mineral exploration or
development activities;
(9) write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except to the extent permitted in the Fund's
Prospectus and Statement of Additional Information, as they may be
amended from time to time; or
(10) buy from or sell to any of its officers, trustees, employees, or its
investment adviser or any of its officers, trustees, partners or
employees, any securities other than shares of beneficial interest in
a Fund of the Company.
With respect to each Fund, there is no fundamental policy or restriction with
respect to diversification, but each Fund will be required to meet the
diversification rules under Subchapter M of the Internal Revenue Code.
While each of the Funds may take short-term gains if deemed appropriate,
normally, the Funds will hold securities in order to realize interest income
exempt from federal income tax and, where applicable, its state's personal
income tax, consistent with reasonable risks. For the fiscal year ended October
31, 1999 the portfolio turnover rates for the Florida, Georgia, Michigan and
Pennsylvania Funds were 191.12%, 115.87%, 186.97% and 40.76%, respectively. The
liquidity of a Rule 144A security will be a determination of fact for which the
trustees are ultimately responsible. However, the Trustees may delegate the
day-to-day function of such determinations to Lord Abbett, subject to the
Trustees' oversight. Examples of factors which the Trustees may take into
account with respect to a Rule 144A security include the frequency of trades and
quotes for the security, the number of dealers willing to purchase or sell the
security and the number of other potential purchasers, dealer undertakings to
make a market in the security and the nature of the security and the nature of
the marketplace (e.g., the time period needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer).
Investment Techniques
Municipal Bonds
3
<PAGE>
In general, municipal bonds are debt obligations issued by or on behalf of
states, territories and possessions of the United States and the District of
Columbia and Puerto Rico and by their political subdivisions, agencies and
instrumentalities. Municipal bonds are issued to obtain funds for various public
purposes, including the construction of bridges, highways, housing, hospitals,
mass transportation, schools, streets and water and sewer works. They may be
used to refund outstanding obligations, to obtain funds for general operating
expenses, or to obtain funds to lend to other public institutions and facilities
and in anticipation of the receipt of revenue or the issuance of other
obligations. In addition, the term "municipal bonds" includes certain types of
"private activity" bonds including industrial development bonds issued by public
authorities to obtain funds to provide privately-operated housing facilities,
sports facilities, convention or trade show facilities, airport, mass transit,
port or parking facilities, air or water pollution control facilities and
certain facilities for water supply, gas, electricity, or sewerage or solid
waste disposal. Under the Tax Reform Act of 1986, as amended, substantial
limitations have been imposed on new issues of municipal bonds to finance
privately-operated facilities. The interest on municipal bonds generally is
excludable from gross income for federal income tax purposes of most investors.
The two principal classifications of municipal bonds are "general obligation"
and limited obligation or "revenue bonds." General obligation bonds are secured
by the pledge of the faith, credit and taxing power of the municipality for the
payment of principal and interest. The taxes or special assessments that can be
levied for the payment of debt service may be limited or unlimited as to rate or
amount. Revenue bonds are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise or other specific revenue source. "Private activity" bonds,
including industrial development bonds are, in most cases, revenue bonds and
generally do not constitute the pledge of the faith, credit or taxing power of
the municipality. The credit quality of such municipal bonds usually is directly
related to the credit standing of the user of the facilities. There are
variations in the security of municipal bonds, both within a particular
classification and between classifications, depending on numerous factors.
The yields on municipal bonds are dependent on a variety of factors, including
general market conditions, supply and demand, general conditions of the
municipal bond market, size of a particular offering, the maturity of the
obligation and the rating of the issue. The ratings of Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Ratings Services ("Standard &
Poor's") and Fitch Investors Service ("Fitch") represent their opinions as to
the quality of the municipal bonds which they undertake to rate. It should be
emphasized, however, that such ratings are general and are not absolute
standards of quality. Consequently, municipal bonds with the same maturity,
coupon and rating may have different yields when purchased in the open market,
while municipal bonds of the same maturity and coupon with different ratings may
have the same yield.
Description of Four Highest Municipal Bond Ratings
Moody's describes its four highest ratings for municipal bonds as follows:
Aaa Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present that make the long-term risks appear somewhat larger than
in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in
the future.
Baa Bonds that are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain
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protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well."
Standard & Poor's describes its four highest ratings for municipal bonds as
follows:
AAA An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet ts financial commitment on the
obligation is extremely strong.
AA An obligation rated AA differs from the highest rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on
the obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions are changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation."
Fitch describes its four highest ratings for municipal bonds as follows:
AAA Highest credit quality. 'AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is
highly unlikely to be adversely affected by foreseeable events.
AA Very high credit quality. 'AA' ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A High credit quality. 'A' ratings denote a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher
ratings.
BBB Good credit quality. 'BBB' ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances
and in economic conditions are more likely to impair this capacity. This is
the lowest investment-grade category."
Options And Financial Futures Transactions
General. Each Fund may engage in futures and options transactions in accordance
with its investment objective and policies. Each Fund intends to engage in such
transactions if it appears advantageous to do so, in order to pursue its
investment objective, to hedge against the effects of fluctuating interest rates
and to stabilize the value of its assets. The use of futures and options and
possible benefits and attendant risks are discussed below, along with
information concerning certain other investment policies and techniques.
Financial Futures Contracts. Each Fund may enter into financial futures
contracts for the future delivery of a financial instrument, such as a security
or the cash value of a securities index. This investment technique is designed
primarily to hedge (i.e., protect) against anticipated future changes in
interest rates or market conditions which otherwise might adversely affect the
value of securities which the Fund holds or intends to purchase. A "sale" of a
futures contract means the undertaking of a contractual obligation to deliver
the securities or the cash value of an index called for by the contract at a
specified price during a specified delivery period. A "purchase" of a futures
contract means the undertaking of a contractual obligation to acquire the
securities or cash value of an index at a specified price during a specified
delivery period. At the time of delivery in the case of fixed-income securities
pursuant to the contract, adjustments are
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<PAGE>
made which reflect differences in value arising from the delivery of securities
with a different interest rate than that specified in the contract. In some
cases, securities called for by a futures contract may not have been issued at
the time the contract was written. Each Fund will not enter into any futures
contracts or options on futures contracts if the aggregate of the market value
of the outstanding futures contracts of each Fund and futures contracts subject
to outstanding options written by each Fund would exceed 50% of the total assets
of each Fund. Although some financial futures contracts by their terms call for
the actual delivery or acquisition of securities, in most cases a party will
close out the contractual commitment before delivery without having to make or
take delivery of the security by purchasing (or selling, as the case may be) on
a commodities exchange an identical futures contract calling for delivery in the
same month. Such a transaction, if effected through a member of an exchange,
cancels the obligation to make or take delivery of the securities. All
transactions in the futures market are made, offset or fulfilled through a
clearing house associated with the exchange on which the contracts are traded.
Each Fund will incur brokerage fees when it purchases or sells contracts and
will be required to maintain margin deposits. At the time each Fund enters into
a futures contract, it is required to deposit with its custodian, on behalf of
the broker, a specified amount of cash or eligible securities, called "initial
margin." The initial margin required for a futures contract is set by the
exchange on which the contract is traded. Subsequent payments, called "variation
margin," to and from the broker are made on a daily basis as the market price of
the futures contract fluctuates. The costs incurred in connection with futures
transactions could reduce a Fund's return. Futures contracts entail risks. If
Lord Abbett's judgment about the general direction of interest rates or markets
is wrong, the Funds' overall performance may be poorer than if no such contracts
had been entered into.
There may be an imperfect correlation between movements in prices of futures
contracts and portfolio securities being hedged. The degree of difference in
price movements between futures contracts and the securities being hedged
depends upon such things as variations in speculative market demand for futures
contracts and debt securities and differences between the securities being
hedged and the securities underlying the futures contracts, e.g., interest
rates, tax status, maturities and creditworthiness of issuers. While interest
rates on taxable securities generally move in the same direction as interest
rates on municipal bonds, frequently there are differences in the rate of such
movements and temporary dislocations. Accordingly, the use of a financial
futures contract on a taxable security or a taxable securities index may involve
a greater risk of an imperfect correlation between the price movements of the
futures contract and of the municipal bond being hedged than when using a
financial futures contract on a municipal bond or a municipal bond index. In
addition, the market prices of futures contracts may be affected by certain
factors. For example, if participants in the futures market elect to close out
their contracts through offsetting transactions rather than meet margin
requirements, distortions in the normal relationship between the debt securities
and futures markets could result. Price distortions also could result if
investors in futures contracts decide to make or take delivery of underlying
securities rather than engage in closing transactions because of the resultant
reduction in the liquidity of the futures market. In addition, because, from the
point of view of speculators, margin requirements in the futures market are less
onerous than margin requirements in the cash market, increased participation by
speculators in the futures market could cause temporary price distortions. Due
to the possibility of price distortions in the futures market and because of the
imperfect correlation between movements in the prices of securities and
movements in the prices of futures contracts, a correct forecast of market
trends by the investment adviser still may not result in a successful hedging
transaction. If any of these events should occur, a Fund could lose money on the
financial futures contracts and also on the value of its portfolio securities.
Options On Financial Futures Contracts. Each Fund may purchase and write call
and put options on financial futures contracts. An option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract at a specified exercise price at any time during
the period of the option. Upon exercise, the writer of the option delivers the
futures contract to the holder at the exercise price. Each Fund would be
required to deposit with its custodian initial margin and maintenance margin
with respect to put and call options on futures contracts written by it. Options
on futures contracts involve risks similar to those risks relating to
transactions in financial futures contracts described above. Also, an option
purchased by a Fund may expire worthless, in which case that Fund would lose the
premium paid therefor.
Options On Securities. Each Fund may write (sell) covered call options on
securities so long as it owns securities which are acceptable for escrow
purposes and may write secured put options on securities, which means that, so
long as a Fund is obligated as a writer of a put option, it will invest an
amount not less than the exercise price of the put option in eligible
securities. A call option gives the purchaser the right to buy, and the writer
the obligation to sell, the
6
<PAGE>
underlying security at the exercise price during the option period. A put option
gives the purchaser the right to sell, and the writer has the obligation to buy,
the underlying security at the exercise price during the option period. The
premium received for writing an option will reflect, among other things, the
current market price of the underlying security, the relationship of the
exercise price to such market price, the price volatility of the underlying
security, the option period, supply and demand and interest rates. Each Fund may
write or purchase spread options, which are options for which the exercise price
may be a fixed-dollar spread or yield spread between the security underlying the
option and another security it does not own, but that is used as a benchmark.
The exercise price of an option may be below, equal to or above, the current
market value of the underlying security at the time the option is written. The
buyer of a put who also owns the related security is protected by ownership of a
put option against any decline in that security's price below the exercise price
less the amount paid for the option. The ability to purchase put options allows
each Fund to protect capital gains in an appreciated security it owns, without
being required to actually sell that security. At times a Fund might like to
establish a position in securities upon which call options are available. By
purchasing a call option, a Fund is able to fix the cost of acquiring the
security, this being the cost of the call plus the exercise price of the option.
This procedure also provides some protection from an unexpected downturn in the
market because the Fund is only at risk for the amount of the premium paid for
the call option which it can, if it chooses, permit to expire.
During the option period, the covered call writer gives up the potential for
capital appreciation above the exercise price should the underlying security
rise in value, and the secured put writer retains the risk of loss should the
underlying security decline in value. For the covered call writer, substantial
appreciation in the value of the underlying security would result in the
security being "called away." For the secured put writer, substantial
depreciation in the value of the underlying security would result in the
security being "put to" the writer. If a covered call option expires
unexercised, the writer realizes a gain and the buyer a loss in the amount of
the premium. If the covered call option writer has to sell the underlying
security because of the exercise of the call option, it realizes a gain or loss
from the sale of the underlying security, with the proceeds being increased by
the amount of the premium.
If a secured put option expires unexercised, the writer realizes a gain and the
buyer a loss in the amount of the premium. If the secured put writer has to buy
the underlying security because of the exercise of the put option, the secured
put writer incurs an unrealized loss to the extent that the current market value
of the underlying security is less than the exercise price of the put option,
minus the premium received.
Over-The-Counter Options. As indicated in the Prospectus, each Fund may deal in
over-the-counter traded options ("OTC options"). OTC options differ from
exchange-traded options in several respects. They are transacted directly with
dealers and not with a clearing corporation and there is a risk of
nonperformance by the dealer, as a result of the insolvency of such dealer or
otherwise, in which event each Fund may experience material losses. However, in
writing options the premium is paid in advance by the dealer. OTC options are
available for a greater variety of securities and a wider range of expiration
dates and exercise prices, than are exchange- traded options. Since there is no
exchange, normally pricing is done by reference to information from market
makers, which information is carefully monitored by the Company's investment
adviser and verified in appropriate cases.
A writer or purchaser of a put or call option can terminate it voluntarily only
by entering into a closing transaction. In the case of OTC options, there can be
no assurance that a continuous liquid secondary market will exist for any
particular option at any specific time. Consequently, each Fund may be able to
realize the value of an OTC option it has purchased only by exercising it or
entering into a closing sale transaction with the dealer that issued it.
Similarly, when a Fund writes an OTC option, generally it can close out that
option prior to its expiration only by entering into a closing purchase
transaction with the dealer to which the Fund originally wrote it. If a covered
call option writer cannot effect a closing transaction, it cannot sell the
underlying security until the option expires or the option is exercised.
Therefore, a covered call option writer of an OTC option may not be able to sell
an underlying security even though it might otherwise be advantageous to do so.
Likewise, a secured put writer of an OTC option may be unable to sell the
securities pledged to secure the put for other investment purposes, while it is
obligated as a put writer. Similarly, a purchaser of such put or call option
also might find it difficult to terminate its position on a timely basis in the
absence of a secondary market.
The Company understands the position of the staff of the Securities and Exchange
Commission ("SEC") to be that purchased OTC options and the assets used as
"cover" for written OTC options are illiquid securities. The Fund and
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<PAGE>
its investment adviser disagree with this position and believe that dealers with
which they intend to engage in OTC options transactions are, generally,
agreeable to and capable of entering into closing transactions. The Company has
adopted procedures for engaging in OTC options for the purpose of reducing any
potential adverse effect of such transactions upon the liquidity of each Funds'
portfolio. A description of such procedures is set forth below.
Each Fund will only engage in OTC options transactions with dealers that have
been specifically approved by the trustees of the Company. The Fund and their
investment adviser believe that such dealers present minimal credit risks to the
Fund and, therefore, should be able to enter into closing transactions, if
necessary. The Fund will not engage in OTC options transactions if the amount
invested by a Fund in OTC options, plus a "liquidity charge" related to OTC
options written by such Fund, plus the amount invested by such Fund in illiquid
securities, would exceed 10% of the Fund' net assets. The "liquidity charge"
referred to above is computed as described below.
The Company anticipates entering into agreements with dealers to which the Funds
sell OTC options. Under these agreements, a Fund would have the absolute right
to repurchase the OTC options from the dealer at any time at a price no greater
than a price established under the agreements (the "Repurchase Price"). The
"liquidity charge" referred to above for a specific OTC option transaction will
be the Repurchase Price related to the OTC option less the intrinsic value of
the OTC option. The intrinsic value of an OTC call option, for such purposes,
will be the amount by which the current market value of the underlying security
exceeds the exercise price. In the case of an OTC put option, intrinsic value
will be the amount by which the exercise price exceeds the current market value
of the underlying security. If there is no such agreement requiring a dealer to
allow a Fund to repurchase a specific OTC option written by the Fund, the
"liquidity charge" will be the current market value of the assets serving as
"cover" for such OTC option.
Options On Securities Indices. Each Fund also may purchase and write call and
put options on securities indices in an attempt to hedge against market
conditions affecting the value of securities that the Fund owns or intends to
purchase, and not for speculation. Through the writing or purchase of index
options, a Fund can achieve many of the same objectives as through the use of
options on individual securities. Options on securities indices are similar to
options on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the securities index upon which the option is based
is greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option. The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. Unlike security options, all settlements are in cash
and gain or loss depends upon price movements in the market generally (or in a
particular industry or segment of the market), rather than upon price movements
in individual securities. Price movements in securities which a Fund owns or
intends to purchase will probably not correlate perfectly with movements in the
level of an index and, therefore, the Fund bears the risk that a loss on an
index option would not be completely offset by movements in the price of such
securities.
When a Fund writes an option on a securities index, it will be required to
deposit with its custodian, and mark-to-market eligible securities equal in
value to at least 100% of the exercise price in the case of a put, or the
contract value in the case of a call. In addition, where a Fund writes a call
option on a securities index at a time when the contract value exceeds the
exercise price, the Fund will segregate and mark-to-market until the option
expires or is closed out, cash or equivalents equal in value to such excess.
Options on futures contracts and index options involve risks similar to those
risks relating to transactions in financial futures contracts described above.
Also, an option purchased by a Fund may expire worthless, in which case the Fund
would lose the premium paid therefor.
Delayed Delivery Transactions. Each Fund may purchase or sell portfolio
securities on a when-issued or delayed delivery basis. When-issued or delayed
delivery transactions involve a commitment by a Fund to purchase or sell
securities, with payment and delivery to take place in the future, in order to
secure what is considered to be an advantageous price or yield to the Fund at
the time of entering into the transaction. When a Fund enters into a delayed
delivery purchase, it becomes obligated to purchase securities and it has all
the rights and risks attendant to ownership of a security, although delivery and
payment occur at a later date. The value of fixed-income securities to be
delivered in the future will fluctuate as interest rates vary. At the time a
Fund makes the commitment to purchase a security on
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<PAGE>
a when-issued or delayed delivery basis, it will record the transaction and
reflect the liability for the purchase and the value of the security in
determining its net asset value. Likewise, at the time a Fund makes the
commitment to sell a security on a delayed delivery basis, it will record the
transaction and include the proceeds to be received in determining its net asset
value; accordingly, any fluctuations in the value of the security sold pursuant
to a delayed delivery commitment are ignored in calculating net asset value so
long as the commitment remains in effect. Each Fund, generally, has the ability
to close out a purchase obligation on or before the settlement date, rather than
take delivery of the security.
To the extent a Fund engages in when-issued or delayed delivery purchases, it
will do so for the purpose of acquiring portfolio securities consistent with its
investment objective and policies and not for investment leverage or to
speculate in interest rate changes. A Fund will only make commitments to
purchase securities on a when-issued or delayed delivery basis with the
intention of actually acquiring the securities, but each Fund reserves the right
to sell these securities before the settlement date if deemed advisable.
Regulatory Restrictions. To the extent required to comply with applicable
Securities and Exchange Commission requirements, when purchasing a futures
contract, writing a put option or entering into a delayed delivery purchase,
each Fund will maintain in a segregated account cash or liquid securities equal
to the value of such contracts.
To the extent required to comply with Commodities Futures Trading Commission
Regulation 4.5 and thereby avoid "commodity pool operator" status, no Fund will
enter into a futures contract or purchase an option thereon if immediately
thereafter the initial margin deposits for futures contracts held by the Fund
plus premiums paid by it for open options on futures would exceed 5% of that
Funds' total assets. No Fund will engage in transactions in financial futures
contracts or options thereon for speculation, but only to attempt to hedge
against changes in market conditions affecting the values of securities which
the Fund holds or intends to purchase. When futures contracts or options thereon
are purchased to protect against a price increase on securities intended to be
purchased later, it is anticipated that at least 75% of such intended purchases
will be completed. When other futures contracts or options thereon are
purchased, the underlying value of such contracts will at all times not exceed
the sum of: (1) accrued profit on such contracts held by the broker; (2) cash or
high-quality money market instruments set aside in an identifiable manner and
(3) cash proceeds from investments due in 30 days.
2.
Trustees and Officers
The Board of Trustees of the Fund is responsible for the management of the
business and affairs of each Fund.
The following trustee is a partner of Lord, Abbett & Co. ("Lord Abbett"), 90
Hudson Street, Jersey City, New Jersey 07302-3973. He has been associated with
Lord Abbett for over five years and is also an officer, director or trustee of
the thirteen other Lord Abbett-sponsored funds.
*Robert S. Dow, age 54, Chairman and President
*Mr. Dow is an "interested person" as defined in the Act.
The following outside trustees are also directors or trustees of thirteen other
Lord Abbett-sponsored Funds referred to above.
E. Thayer Bigelow, Trustee
245 Park Avenue, Suite 2414
New York, New York
Senior Adviser, Time Warner, Inc. (since 1998). Formerly, Acting Chief Executive
Officer of Courtroom Television Network (1997-1998). Formerly, President and
Chief Executive Officer of Time Warner Cable Programming, Inc. (1991-1997).
Prior to that, President and Chief Operating Officer of Home Box Office, Inc.
Age 58.
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William H.T. Bush, Trustee
Bush-O'Donnell & Co., Inc.
101 South Hanley Road, Suite 1025
St. Louis, Missouri
Co-founder and Chairman of the Board of the financial advisory firm of
Bush-O'Donnell & Company (since 1986). Age 61.
Robert B. Calhoun, Jr., Trustee
Monitor Clipper Partners
650 Madison Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners (since 1997) and President of The
Clipper Group L.P., both private equity investment funds (since 1990). Age 57.
Stewart S. Dixon, Trustee
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon (Since 1990). Age 68.
John C. Jansing, Trustee
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 73.
C. Alan MacDonald, Trustee
Directorship, Inc.
8 Sound Shore Drive
Greenwich, Connecticut
Currently involved in golf development management on a consultancy basis (since
1999). Formerly, Managing Director of The Directorship Inc., a consultancy in
board management and corporate governance (1997-1999). Prior to that, General
Partner of The Marketing Partnership, Inc., a full service marketing consulting
firm (1994 - 1997). Prior to that, Chairman and Chief Executive Officer of
Lincoln Snacks, Inc., manufacturer of branded snack foods (1992 - 1994). His
career spans 36 years at Stouffers and Nestle with eighteen of the years as
Chief Executive Officer. Currently serves as Director of DenAmerica Corp., J.B.
Williams Company, Inc., Fountainhead Water Company and Exigent Diagnostics. Age
66.
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Hansel B. Millican, Jr., Trustee
Rochester Button Company
1328 Broadway (Suite 816)
New York, New York
President and Chief Executive Officer of Rochester Button Company (since 1991).
Age 71.
Thomas J. Neff, Trustee
Spencer Stuart
277 Park Avenue
New York, New York
Chairman of Spencer Stuart, an executive search consulting firm (since 1976).
Currently serves as Director of Ace, Ltd. (NYSE). Age 62.
The second column of the following table sets forth the compensation accrued for
outside trustees. The third column sets forth information with respect to the
pension or retirement benefits accrued for outside directors/trustees maintained
by the Lord Abbett-sponsored Funds. No trustee of the Funds associated with Lord
Abbett and no officer of the funds received any compensation from the funds for
acting as a trustee or officer.
For the Fiscal Year Ended October 31, 1999
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Pension or For Year Ended
Retirement Benefits December 31, 1999
Accrued by the Total Compensation
Aggregate Company and Paid by the Company and
Compensation Thirteen Other Lord Thirteen Other Lord
Accrued by Abbett-sponsored Abbett-sponsored
Name of Trustee the Company/1 Funds/2 Funds/3
- --------------- -------------- -------------------- ---------------------
<S> <C> <C> <C>
E. Thayer Bigelow $1,000 $17,068 $57,400
William H. T. Bush* $ 289 $none $27,500
Robert B. Calhoun, Jr.** $ 394 $none $33,500
Stewart S. Dixon $ 984 $32,190 $56,500
John C. Jansing $ 971 $45,0854 $55,500
C. Alan MacDonald $ 971 $30,703 $55,000
Hansel B. Millican, Jr. $ 971 $37,747 $55,500
Thomas J. Neff $ 989 $19,853 $56,500
</TABLE>
*Elected as of August 13, 1998. **Elected as of June 17, 1998.
1. Outside trustees/directors' fees, including attendance fees for board and
committee meetings, are allocated among all Lord Abbett-sponsored funds
based on the net assets of each Fund. A portion of the fees payable by the
Company to its outside directors is being deferred under a plan (`equity
based plan') that deems the deferred amounts to be invested in shares of
the Company for later distribution to the directors.
2. The amounts in Column 3 were accrued by the Lord Abbett-Sponsored funds for
the 12 months ended October 31, 1999 with respect to the equity based plan
established for independent directors/trustees in 1996. This plan
supersedes a previously approved retirement plan for all future
directors/trustees. Current directors had the option to covert their
accrued benefits under the retirement plan. All of the outside directors
except one made such an election. Each plan also provides for a
pre-retirement death benefit and actuarially reduced joint-and-survivor
spousal benefits.
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3. This column shows aggregate compensation, including directors/trustees fees
and attendance fees for board and committee meetings, of a nature referred
to in footnote one, paid for by the Lord Abbett-sponsored Funds during the
year ended December 31, 1999 (including fees directors have chosen to
defer) but does not include amounts accrued under the equity based plan and
shown in Column 3 The amounts of the aggregate compensation payable by the
Company as of October 31, 1999 deemed invested in Company shares, including
dividends reinvested and changes in net asset value applicable to such
deemed investments, were: Mr. Bigelow, $5,002; Mr. Dixon, $1,274; Mr.
Jansing, $7,449; Mr. MacDonald, $2,697; Mr. Millican, $7,464, and Mr. Neff,
$7,430. If the amounts deemed invested in Company shares were added to each
trustees actual holdings of Company shares as of October 31, 1999, each
would own the following: Mr. Bigelow, $5,002; Mr. Dixon, $1,274, Mr.
Jansing, $7,449, Mr. MacDonald, $2,697, Mr. Millican, $7,464, and Mr. Neff,
$7,430.
4. Mr. Jansing chose to continue to receive benefits under the retirement
plan, which provides that outside directors/trustees may receive annual
retirement benefits for life equal to their final annual retainer following
retirement at or after age 72 with at least ten years of service. This, if
Mr. Jansing were to retire and the annual retainer payable by the Funds were
the same as it is today, he would receive annual retirement benefits of
$50,000.
Except where indicated, the following executive officers of the Company have
been associated with Lord Abbett for over five years. Messrs. Brown, Carper,
Messrs. Hilstad, and Morris are partners of Lord Abbett; the others are
employees. None have received compensation from the Funds.
Executive Vice President:
Zane Brown, age 47
Vice Presidents:
Paul A. Hilstad, age 56, Vice President and Secretary (with Lord Abbett since
1995; formerly Senior Vice President and General Counsel of American Capital
Management & Research, Inc.)
Joan A. Binstock, age 45 (with Lord Abbett since 1999, formerly Chief Operating
Officer of Morgan Grenfell from 1996 to 1999, prior thereto Principal of Ernst &
Young LLP)
Daniel E. Carper, age 48
Philip Fang, age 33\
Lawrence H. Kaplan, age 42 (with Lord Abbett since 1997 - formerly Vice
President and Chief Counsel of Salomon Brothers Asset Management Inc. from 1995
to 1997, prior thereto Senior Vice President, Director and General Counsel of
Kidder Peabody Asset Management, Inc.)
Robert G. Morris, age 54
John R. Mouseeau, age 42
A.Edward Oberhaus, III, age 39
Tracie E. Richter, age 31 (with Lord Abbett since 1999, formerly Vice
President-Head of Fund Administration of Morgan Grenfell from 1998 to 1999, Vice
President of Bankers Trust from 1996 to 1998, prior thereto Tax Associate of
Goldman Sachs)
Treasurer
Donna M. McManus, age 38 (with Lord Abbett since 1996, formerly a Senior Manager
at Deloitte & Touche LLP).
The Company does not hold annual meetings of shareholders unless one or more
matters are required to be acted on by shareholders under the Act. Under the
Company's Declaration of Trust, shareholder meetings may be called at any
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<PAGE>
time by certain officers of the Company or by a majority of the trustees (i) for
the purpose of taking action upon any matter requiring the vote or authority of
the Company's shareholders or upon other matters deemed to be necessary or
desirable or (ii) upon the written request of the holders of at least
one-quarter of the shares of the Company outstanding and entitled to vote at the
meeting.
As of February 1,2000, our officers and directors/trustees as a group owned less
than 1% of the Fund's outstanding shares and there were no known record holders
of 5% or more of the Fund's outstanding shares other than Lord Abbett
Distributor.
3.
Investment Advisory and Other Services
The services performed by Lord Abbett are described under "Management" in the
Prospectus. Under the Management Agreement, each fund is obligated to pay Lord
Abbett a monthly fee, based on average daily net assets of each Fund for each
month, at the annual rate of .5 of 1%. This fee is allocated among each Fund's
classes based on the class's proportionate share of the average daily net assets
of the Fund. In addition, we pay all expenses not expressly assumed by Lord
Abbett, including without limitation 12b-1 expenses; outside trustees' fees and
expenses; association membership dues; legal and auditing fees; taxes; transfer
and dividend disbursing agent fees; shareholder servicing costs; expenses
relating to shareholder meetings; expenses of preparing, printing and mailing
share certificates and shareholder reports; expenses of registering our shares
under federal and state securities laws; expenses of preparing, printing and
mailing prospectuses to existing shareholders; insurance premiums and brokerage
and other expenses connected with executing portfolio transactions.
Although not obligated to do so, Lord Abbett may waive all or part of its
management fees and may assume other expenses of the Company. Subsequently, Lord
Abbett may charge these fees and/or omit these subsidies on a partial or
complete basis.
The Company's Management Agreement provides for each Fund to repay Lord Abbett
without interest for subsidized expenses on and after the first day of the
calendar quarter after the net assets of a Fund first reaches $50 million (the
"commencement date") and until the net assets reach $100 million, provided the
ratio of operating expenses of the Fund (determined before taking into account
any fee waiver or expense assumption) to average net assets is less than .85%
and the amount repaid is equal in dollars to the difference between the expenses
included in the determination of such expense ratio and those at an expense
ratio of .85%. Beginning on the first day of the calendar quarter after the net
assets of a Fund first reach $100 million, the repayment of expenses shall be
measured by the difference between the expenses included in the determination of
each Fund expense ratio and those at an expense ratio of 1.05%. A Fund shall not
be obligated to repay any such expenses after the earlier of the termination of
the Management Agreement or the end of five full fiscal years after the
commencement date.
As of October 31, 1999, other expenses reimbursed by Lord Abbett and not repaid
by the Georgia Fund amounted to $.
Gross management fees, management fees waived and net management fees for each
Fund for the years ended October 31, 1999, 1998 and 1997 respectively, were as
follows:
FUND 1999
- ---- ----
Gross Management Net
Management Fees Management
Fees Waived Fees
---- ------ ----
Florida $ - $
Pennsylvania $ - $
Michigan $ - $
Georgia $ $ -
13
<PAGE>
FUND 1998
- ---- ----
Gross Management Net
Management Fees Management
Fees Waived Fees
---- ------ ----
Florida $702,730 - $702,730
Pennsylvania $492,670 - $492,670
Michigan $266,479 - $266,479
Georgia $84,279 $84,279 -
FUND 1997
- ---- ----
Gross Management Net
Management Fees Management
Fees Waived Fees
---- ------ ----
Florida $760,504 -- $760,504
Pennsylvania $464,836 $34,734 $430,102
Michigan $261,943 $45,360 $216,583
Georgia $59,788 $59,788 --
Expenses of the Georgia Fund assumed by Lord Abbett for the year ended October
31, 1996 was $24,665.
The Bank of New York ("BNY"), 48 Wall Street, New York, New York 10286, serves
as each Fund custodian.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281, are
the independent auditors of each Fund and must be approved at least annually by
the Board of Trustees to continue in such capacity. Deloitte & Touche LLP
perform audit services for the Company including the audit of financial
statements included in our Annual Report to Shareholders.
United Missouri Bank of Kansas City, N.A., Tenth and Grand, Kansas City,
Missouri 64141, acts as the transfer agent and dividend disbursing agent for
each Fund.
4.
Portfolio Transactions
Each Fund's policy is to obtain best execution on all our portfolio
transactions, which means that each Fund seeks to have purchases and sales of
portfolio securities executed at the most favorable prices, considering all
costs of the transaction including brokerage commissions and dealer markups and
markdowns and any brokerage commissions and taking into account the full range
and quality of the brokers' services. Consistent with obtaining best execution,
we generally pay, as described below, a higher commission that some brokers
might charge on the same transaction. This policy governs the selection of
brokers or dealers and the market in which the transaction is executed. To the
extent permitted by law, we may, if considered advantageous, make a purchase
from or sale to another Lord Abbett-sponsored Fund without the intervention of
any broker-dealer.
Broker-dealers are selected on the basis of their professional capability and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of each Lord Abbett-sponsored fund
and also are employees of Lord Abbett. These traders do the trading as well for
other accounts -- investment companies (of which they are also officers) and
other investment clients -- managed by Lord Abbett. They are responsible for
obtaining best execution.
We may pay a brokerage commission on the purchase or sale of a security that
could be purchased from or sold to a market maker if our net cost of the
purchase or the net proceeds to us of the sale are at least as favorable as we
could obtain on a direct purchase or sale. Brokers who receive such commissions
may also provide research services at least
14
<PAGE>
some of which are useful to Lord Abbett in their overall responsibilities with
respect to us and the other accounts they manage. Research includes trading
equipment and computer software packages, acquired from third-party suppliers,
that enable Lord Abbett to access various information bases and may include the
furnishing of analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
Such services may be used by Lord Abbett in servicing all their accounts, and
not all of such services will necessarily be used by Lord Abbett in connection
with their management of the Company; conversely, such services furnished in
connection with brokerage on other accounts managed by Lord Abbett may be used
in connection with their management of the Company, and not all of such services
will necessarily be used by Lord Abbett in connection with their advisory
services to such other accounts. We have been advised by Lord Abbett that
research services received from brokers cannot be allocated to any particular
account, are not a substitute for Lord Abbett's services but are supplemental to
their own research effort and, when utilized, are subject to internal analysis
before being incorporated by Lord Abbett into their investment process. As a
practical matter, it would not be possible for Lord Abbett to generate all of
the information presently provided by brokers. While receipt of research
services from brokerage firms has not reduced Lord Abbett's normal research
activities, the expenses of Lord Abbett could be materially increased if it
attempted to generate such additional information through its own staff and
purchased such equipment and software packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or
among brokers, and trades are executed only when they are dictated by investment
decisions of Lord Abbett-sponsored funds to purchase or sell portfolio
securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold the Lord
Abbett-sponsored funds' shares and/or shares of other Lord Abbett-sponsored
Funds may be preferred.
If other clients of Lord Abbett buy or sell the same security at the same time
as a Lord Abbett-sponsored fund does, transactions will, to the extent
practicable, be allocated among all participating accounts in proportion to the
amount of each order and will be executed daily until filled so that each
account shares the average price and commission cost of each day. Other clients
who direct that their brokerage business be placed with specific brokers or who
invest through wrap accounts introduced to Lord Abbett by certain brokers may
not participate with us in the buying and selling of the same securities as
described above. If these clients wish to buy or sell the same security as a
Lord Abbett-sponsored fund does, they may have their transactions executed at
times different from our transactions and thus may not receive the same price or
incur the same commission cost as a Lord Abbett-sponsored fund does.
The Lord Abbett-sponsored fund does will not seek "reciprocal" dealer business
(for the purpose of applying commissions in whole or in part for their benefit
or otherwise) from dealers as consideration for the direction to them of
portfolio business.
During the fiscal years ended October 31, 1999, 1998 and 1997 , we paid no
commissions to independent brokers.
5.
Purchases, Redemptions
and Shareholder Services
Information concerning how we value our shares for the purchase and redemption
or repurchase of our shares is contained in the Prospectus under "Purchases" and
"Redemptions," respectively.
As disclosed in the Prospectus, we calculate net asset value and are otherwise
open for business on each day that the New York Stock Exchange ("NYSE") is open
for trading. The NYSE is closed on Saturdays and Sundays and the following
holidays -- New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas
Day.
15
<PAGE>
Securities in our portfolio are valued at their market value as of the close of
the NYSE. Market value will be determined as follows: securities listed or
admitted to trading privileges on the New York or American Stock Exchange or on
the NASDAQ National Market System are valued at the last sales price, or, if
there is no sale on that day, at the mean between the last bid and asked prices,
or, in the case of bonds, in the over-the-counter market if, in the judgment of
the Company's officers, that market more accurately reflects the market value of
the bonds. Over-the-counter securities not traded on the NASDAQ National Market
System market are valued at the mean between the last bid and asked prices.
Securities for which market quotations are not available are valued at fair
market value under procedures approved by the trustees.
Although our shares are continuously offered, we are under no obligation to
maintain the offering or its terms, and the offering may be suspended, changed
or withdrawn. The sales agreements between Lord Abbett and independent
securities dealers provide that all orders are subject to acceptance in New York
and that the right is reserved to reject any order.
The net asset value per share for the Class C shares of the Florida Fund will be
determined in the same manner as for the Class A shares (net assets divided by
outstanding shares). The Class C shares of the Florida Fund will be sold at net
asset value.
The maximum offering prices of our Class A shares on October 31, 1999 were
computed as follows:
<TABLE>
<CAPTION>
Florida Pennsylvania Georgia Michigan
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Net asset value per share (net assets
divided by shares outstanding) .................$4.52 $4.81 $4.91 $4.75
Maximum offering price per share (net
asset value divided by .9525) ..................$4.67 $4.97 $5.07 $4.91
</TABLE>
The offering prices of our Class C shares on October 31, 1999 were computed as
follows:
Florida Fund
Net asset value per share (net assets
divided by shares outstanding) .................$4.52
The Fund has entered into a distribution agreement with Lord Abbett Distributor
LLC, a New York limited liability company ("Lord Abbett Distributor"), and
subsidiary of Lord Abbett under which Lord Abbett Distributor is obligated to
use its best efforts to find purchasers for the shares of the Fund, and to make
reasonable efforts to sell Fund shares so long as, in Lord Abbett Distributor's
judgment, a substantial distribution can be obtained by reasonable efforts.
For our last three fiscal years, Lord Abbett as our principal underwriter
received net commissions after allowance of and carried over to future years a
portion of the sales charge to independent dealers with respect to Class A
shares as follows:
Year Ended Year Ended Year Ended
Oct. 31, 1997 Oct. 31, 1998 Oct. 31, 1999
------------- ------------- -------------
Gross sales charge $870,073 $904,104 $
Amount allowed
to dealers $769,150 $797,281 $
-------- -------- -
Net commissions received
by Lord Abbett Distributor $ 100,923 $ 106,823 $
========= ========= =
16
<PAGE>
ALTERNATIVE SALES ARRANGEMENTS
Classes of Shares. The Funds offer different classes of shares as described in
the Prospectus. The different classes of shares represent investments in the
same portfolio of securities but are subject to different expenses and will
likely have different share prices. Investors should read this section carefully
to determine which class represents the best investment option for their
particular situation.
Class A Shares. If you buy Class A shares, you pay an initial sales charge on
investments of less than $1 million (or on investments for employer-sponsored
retirement plans under the Internal Revenue Code (hereinafter referred to as
"Retirement Plans") with less than 100 eligible employees or on investments that
do not qualify to be under a "special retirement wrap program" as a program
sponsored by an authorized institution showing one or more characteristics
distinguishing it, in the opinion of Lord Abbett Distributor from a mutual fund
wrap fee program). If you purchase Class A shares as part of an investment of at
least $1 million (or for Retirement Plans with at least 100 eligible employees
or under a special retirement wrap program) in shares of one or more Lord
Abbett-sponsored Funds, you will not pay an initial sales charge, but if you
redeem any of those shares within 24 months after the month in which you buy
them, you may pay to the Fund a contingent deferred sales charge ("CDSC") of 1%
except for redemptions under a special retirement wrap program. Class A shares
are subject to service and distribution fees that are currently estimated to
total annually approximately 0.23 of 1% of the annual net asset value of the
Class A shares. The initial sales charge rates, the CDSC and the Rule 12b-1 plan
applicable to the Class A shares are described in "Buying Class A Shares" below.
Class C Shares. If you buy Class C shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the first anniversary of
buying them, you will normally pay the Fund a CDSC of 1%. Class C shares are
subject to service and distribution fees at an annual rate of 1% of the annual
net asset value of the Class C shares. The CDSC and the Rule 12b-1 plan
applicable to the C shares are described in "Buying Class C Shares" below.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial adviser. The Fund's class-specific expenses and the
effect of the different types of sales charges on your investment will affect
your investment results over time. The most important factors are how much you
plan to invest and how long you plan to hold your investment. If your goals and
objectives change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider another class of
shares.
In the following discussion, to help provide you and your financial adviser with
a framework in which to choose a class, we have made some assumptions using a
hypothetical investment in the Fund. We used the sales charge rates that apply
to Class A and Class C, and considered the effect of the higher distribution
fees on Class C expenses (which will affect your investment return). Of course,
the actual performance of your investment cannot be predicted and will vary,
based on the Fund's actual investment returns, the operating expenses borne by
each class of shares, and the class of shares you purchase. The factors briefly
discussed below are not intended to be 0investment advice, guidelines or
recommendations, because each investor's financial considerations are different.
The discussion below of the factors to consider in purchasing a particular class
of shares assumes that you will purchase only one class of shares and not a
combination of shares of different classes.
How Long Do You Expect to Hold Your Investment? While future financial needs
cannot be predicted with certainty, knowing how long you expect to hold your
investment will assist you in selecting the appropriate class of shares. For
example, over time, the reduced sales charges available for larger purchases of
Class A shares may offset the effect of paying an initial sales charge on your
investment, compared to the effect over time of higher class-specific expenses
on Class C shares for which no initial sales charge is paid. Because of the
effect of class-based expenses, your choice should also depend on how much you
plan to invest.
17
<PAGE>
However, if you plan to invest more than $100,000 for the short term, then the
more you invest and the more your investment horizon increases toward six years,
the more attractive the Class A share option may become. This is because the
annual distribution fee on Class C shares will have a greater impact on your
account over the longer term than the reduced front-end sales charge available
for larger purchases of Class A shares. For example, Class A might be more
appropriate than Class C for investments of more than $100,000 expected to be
held for 5 or 6 years (or more). For investments over $250,000 expected to be
held 4 to 6 years (or more), Class A shares may become more appropriate than
Class C. If you are investing $500,000 or more, Class A may become more
desirable as your investment horizon approaches 3 years or more.
For most investors who invest $1 million or more or for Retirement Plans with at
least 100 eligible employees or for investments pursuant to a special retirement
wrap program, in most cases Class A shares will be the most advantageous choice,
no matter how long you intend to hold your shares. For that reason, it may not
be suitable for you to place a purchase order for Class C shares of $1,000,000
or more. In addition, it may not be suitable for you to place an order for C
shares for a Retirement Plan with at least 100 eligible employees or for a
special retirement wrap program. You should discuss this with your financial
advisor.
Investing for the Longer Term. If you are investing for the longer term (for
example, to provide for future college expenses for your child) and do not
expect to need access to your money for seven years or more and you plan to
invest more than $100,000, Class A shares will likely be more advantageous than
Class C shares, as discussed above, because of the effect of the expected lower
expenses for Class A shares and the reduced initial sales charges available for
larger investments in Class A shares under the Fund's Rights of Accumulation. Of
course, these examples are based on approximations of the effect of current
sales charges and expenses on a hypothetical investment over time, and should
not be relied on as rigid guidelines.
Are There Differences in Account Features That Matter to You? Some account
features are available in whole or in part to Class A and Class C shareholders.
Other features (such as Systematic Withdrawal Plans) might not be advisable in
non-Retirement Plan accounts for Class C shareholders during the first year of
share ownership (due to the CDSC on withdrawals during that year). See
"Systematic Withdrawal Plan" under "Shareholder Services" in the Prospectus for
more information about the 12% annual waiver of the CDSC. You should carefully
review how you plan to use your investment account before deciding which class
of shares you buy. For example, the dividends payable to Class C shareholders
will be reduced by the expenses borne solely by this class, such as the higher
distribution fee to which Class C shares are subject, as described below.
How Does It Affect Payments to My Broker? A salesperson, such as a broker, or
any other person who is entitled to receive compensation for selling Fund shares
may receive different compensation for selling one class than for selling
another class. As discussed in more detail below, such compensation is primarily
paid at the time of sale in the case of Class A shares and is paid over time, so
long as shares remain outstanding, in the case of Class C shares. It is
important that investors understand that the primary purpose of the CDSC and the
distribution fee for Class C shares is the same as the purpose of the front-end
sales charge on sales of Class A shares: to compensate brokers and other persons
selling such shares. The CDSC, if payable, reduces the Class C distribution fee
expenses for the Fund and Class C shareholders.
Class A and Class C Rule 12b-1 Plans. As described in the Prospectus, each Fund
has adopted a Distribution Plan and Agreement pursuant to Rule 12b-1 under the
Act for the Class A shares (all Fund) and the Class C shares (Florida Fund
only): the "A Plans" and the "C" Plan," respectively. The A Plans each become
effective when the required level of net assets for each Fund is reached. The
Florida Funds' A Plan became effective October 1, 1992. The Pennsylvania Fund A
Plan became effective on April 1, 1998. In adopting a Plan for each class of
each Fund and in approving its continuance, the trustees have concluded that,
based on information provided to Lord Abbett, there is a reasonable likelihood
that each Plan will benefit its respective class and each class' shareholders.
The expected benefits include greater sales, lower redemptions of Class shares,
which should allow each class to maintain a consistent cash flow and a higher
quality of service to shareholders by dealers than would otherwise would be the
case. During the last fiscal year, the Company paid $ and $ through Lord Abbett
to dealers pursuant to the Florida Funds' A Plan and C Plan, respectively. The A
Plans for the Georgia and Michigan Fund are not yet effective. Lord Abbett uses
amounts received under the Florida Funds' A and C Plans as described in the
Prospectus and for payments to dealers for (i) providing
18
<PAGE>
continuous services to the Florida Fund' shareholders, such as answering
shareholder inquiries, maintaining records, and assisting shareholders in making
redemptions, transfers, additional purchases and exchanges and (ii) their
assistance in distributing shares of the Fund, respectively.
Each Plan requires the trustees to review, on a quarterly basis written reports
of all amounts expended pursuant to the Plan and the purposes for which such
expenditures were made. Each Plan shall continue in effect only if its
continuance is specifically approved at least annually by vote of the trustees
and of the trustees who are not interested persons of the Company and who have
no direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan ("outside trustees"), cast in person at a meeting
called for the purpose of voting on the Plan. No Plan may be amended to increase
materially the amount spent for distribution expenses without approval by a
majority of the outstanding voting securities of relevant class of the Fund in
question and the approval of a majority of the trustees, including a majority of
the outside trustees. Each Plan may be terminated at any time by vote of a
majority of the outside trustees or by vote of a majority of its class's
outstanding voting securities.
Contingent Deferred Sales Charges. A Contingent Deferred Sales Charge ("CDSC")
applies, regardless of class and (i) will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original purchase
price and (ii) is not imposed on the amount of your share value represented by
the increase in net asset value over the initial purchase price (including
increases due to the reinvestment of dividends and capital gains distributions).
Class A Shares. As stated in the Prospectus, subject to certain exceptions, a
CDSC of 1% is imposed with respect to those Class A shares (or ClassA shares of
another Lord Abbett-sponsored fund or Fund acquired through exchange of such
shares) on which a Fund has paid the one-time distribution fee of 1% if such
shares are redeemed out of the Lord Abbett-sponsored family of funds within a
period of 24 months from the end of the month in which the original sale
occurred.
Class C Shares. (Florida Fund only.) As stated in the Prospectus, subject to
certain exceptions, if Class C shares of the Florida Fund are redeemed for cash
before the first anniversary of their purchase, the redeeming shareholder will
be required to pay to the Florida Fund on behalf of Class C shares a CDSC of 1%
of the lower of cost or the then net asset value of Class C shares redeemed. If
such shares are exchanged into the same class of another Lord Abbett-sponsored
Fund and subsequently redeemed before the first anniversary of their original
purchase, the charge will be collected by the other fund on behalf of the
Florida Fund' Class C shares.
General. With respect to Class A shares, no CDSC is payable on redemptions by
participants or beneficiaries from employer-sponsored retirement plans under the
Internal Revenue Code for benefit payments due to plan loans, hardship
withdrawals, death, retirement or separation from service and for returns of
excess contributions to retirement plan sponsors. In the case of both Class A
and Class C shares, the CDSC is received by the applicable Fund and is intended
to reimburse all or a portion of the amount paid by the Fund if the shares are
redeemed before the Fund has had an opportunity to realize the anticipated
benefits of having a long-term shareholder account in the Fund.
The other funds and Fund which participate in the Telephone Exchange Privilege
(except (a) Lord Abbett U.S. Government Securities Money Market Fund, Inc.
("GSMMF"), (b) certain Fund of Lord Abbett Tax-Free Income Fund and the Company
for which a Rule12b-1 Plan is not yet in effect, and (c) any authorized
institution's affiliated money market fund satisfying Lord Abbett Distributor as
to certain omnibus account and other criteria, hereinafter referred to as an
"authorized money market fund" or "AMMF" (collectively, the "Non-12b-1 Funds"))
have instituted a CDSC for each class on the same terms and conditions. No CDSC
will be charged on an exchange of shares of the same class between Lord Abbett
funds or between such funds and AMMF. Upon redemption of shares out of the Lord
Abbett family of funds or out of AMMF, the CDSC will be charged on behalf of and
paid to the fund in which the original purchase (subject to a CDSC) occurred.
Thus, if shares of a Lord Abbett fund are exchanged for shares of the same class
of another such fund and the shares of the same class tendered ("Exchanged
Shares") are subject to a CDSC, the CDSC will carry over to the shares of the
same class being acquired, including GSMMF and AMMF ("Acquired Shares"). Any
CDSC that is carried over to Acquired Shares is calculated as if the holder of
the Acquired Shares had held those shares from the date on which he or she
became the holder of the Exchanged Shares. Although the Non-12b-1 Funds will not
pay a distribution fee on their own shares, and will, therefore, not impose
their own CDSC, the Non-12b-1 Funds will
19
<PAGE>
collect the CDSC on behalf of other Lord Abbett funds. Acquired Shares held in
GSMMF and AMMF which are subject to a CDSC will be credited with the time such
shares are held in GSMMF but will not be credited with the time such shares are
held in AMMF. Therefore, if your Acquired Shares held in AMMF qualified for no
CDSC or a lower CDSC at the time of exchange into AMMF, that Applicable
Percentage will apply to redemptions for cash from AMMF, regardless of the time
you have held Acquired Shares in AMMF.
In no event will the amount of the CDSC exceed 1% of the lesser of (i) the net
asset value of the shares redeemed or (ii) the original cost of such shares (or
of the Exchanged Shares for which such shares were acquired). No CDSC will be
imposed when the investor redeems (i) amounts derived from increases in the
value of the account above the total cost of shares being redeemed due to
increases in net asset value, (ii) shares with respect to which no Lord Abbett
fund or Fund paid a 12b-1 fee (including shares acquired through reinvestment of
dividend income and capital gains distributions) or (iii) shares which, together
with Exchanged Shares, have been held continuously for 24 months from the end of
the month in which the original sale occurred (in the case of Class A shares) or
for one year or more (in the case of Class C shares). In determining whether a
CDSC is payable, (a) shares not subject to the CDSC will be redeemed before
shares subject to the CDSC and (b) of the shares subject to a CDSC, those held
the longest will be the first to be redeemed.
Exchanges. The Prospectus briefly describes the Telephone Exchange Privilege.
You may exchange some or all of your shares of any class for those in the same
class of: (i) Lord Abbett-sponsored funds currently offered to the public with a
sales charge (front-end, back-end or level ), (ii) GSMMF or (iii) AMMF, to the
extent offers and sales may be made in your state. You should read the
prospectus of the other fund before exchanging. In establishing a new account by
exchange, shares of the Fund being exchanged must have a value equal to at least
the minimum initial investment required for the other fund into which the
exchange is made.
Shareholders in other Lord Abbett-sponsored funds and AMMF have the same right
to exchange their shares for the corresponding class of the Fund's shares.
Exchanges are based on relative net asset values on the day instructions are
received by the Company in Kansas City if the instructions are received prior to
the close of the NYSE in proper form. No sales charges are imposed except in the
case of exchanges out of GSMMF or AMMF (unless a sales charge (front-end,
back-end or level) was paid on the initial investment in a Lord Abbett-sponsored
Company). Exercise of the exchange privilege will be treated as a sale for
federal income tax purposes, and, depending on the circumstances, a gain or loss
may be recognized. In the case of an exchange of shares that have been held for
90 days or less where no sales charge is payable on the exchange, the original
sales charge incurred with respect to the exchanged shares will be taken into
account in determining gain or loss on the exchange only to the extent such
charge exceeds the sales charge that would have been payable on the acquired
shares had they been acquired for cash rather than by exchange. The portion of
the original sales charge not so taken into account will increase the basis of
the acquired shares.
Shareholders have the exchange privilege unless they refuse it in writing. You
should not view the exchange privilege as a means for taking advantage of
short-term swings in the market, and we reserve the right to terminate or limit
the privilege of any shareholder who makes frequent exchanges. We can revoke or
modify the privilege for all shareholders upon 60 days' prior notice. "Eligible
Companies" are AMMF and other Lord Abbett-sponsored funds which are eligible for
the exchange privilege, except Lord Abbett Fund Fund ("LASF") which offers its
shares only in connection with certain variable annuity contracts, Lord Abbett
Equity Fund ("LAEF") which is not issuing shares.
Statement Of Intention. Under the terms of the Statement of Intention as
described in the Prospectus to invest $100,000 or more over a 13-month period as
described in the Prospectus, shares of a Lord Abbett-sponsored fund (other than
shares of LAEF, LASF, LARF and GSMMF, unless holdings in GSMMF are attributable
to shares exchanged from a Lord Abbett-sponsored fund offered with a front-end,
back-end or level sales charge) currently owned by you are credited as purchases
(at their current offering prices on the date the Statement is signed) toward
achieving the stated investment and reduced initial sales charge for Class A
shares. Class A shares valued at 5% of the amount of intended purchases are
escrowed and may be redeemed to cover the additional sales charge payable if the
Statement is not completed. The Statement of Intention is neither a binding
obligation on you to buy, nor on the Company to sell, the full amount indicated.
20
<PAGE>
Rights Of Accumulation. As stated in the Prospectus, purchasers (as defined in
the Prospectus) may accumulate their investment in Lord Abbett-sponsored funds
(other than LAEF, LARF, LASF, GSMMF, and AMMF unless holdings in GSMMF or AMMF
are attributable to shares exchanged from a Lord Abbett-sponsored fund offered
with a front-end, back-end or level sales charge) so that a current investment,
plus the purchaser's holdings valued at the current maximum offering price,
reach a level eligible for a discounted sales charge for Class A shares.
Net Asset Value Purchases Of Class A Shares. As stated in the Prospectus, our
Class A shares may be purchased at net asset value by our trustees, employees of
Lord Abbett, employees of our shareholder servicing agent and employees of any
securities dealer having a sales agreement with Lord Abbett who consents to such
purchases or by the trustee or custodian under any pension or profit-sharing
plan or Payroll Deduction IRA established for the benefit of such persons or for
the benefit of employees of any national securities trade organization to which
Lord Abbett belongs or any company with an account(s) in excess of $10 million
managed by Lord Abbett on a private-advisory-account basis. For purposes of this
paragraph, the terms "trustees" and "employees" include a trustee's or
employee's spouse (including the surviving spouse of a deceased trustee or
employee). The terms "our trustees" and "employees of Lord Abbett" also include
other family members and retired trustees and employees.
Our Class A shares also may be purchased at net asset value (a) at $1 million or
more, (b) with dividends and distributions from Class A shares of other Lord
Abbett-sponsored funds, except for LARF, LAEF and LASF, (c) under the loan
feature of the Lord Abbett-sponsored prototype 403(b) plan for share purchases
representing the repayment of principal and interest, (d) by certain authorized
brokers, dealers, registered investment advisers or other financial institutions
who have entered into an agreement with Lord Abbett Distributor in accordance
with certain standards approved by Lord Abbett Distributor, providing
specifically for the use of our shares in particular investment products made
available for a fee to clients of such brokers, dealers, registered investment
advisers and other financial institutions, ("mutual fund wrap fee program"), (e)
by employees, partners and owners of unaffiliated consultants and advisors to
Lord Abbett, Lord Abbett Distributor or Lord Abbett-sponsored funds who consent
to such purchase if such persons provide service to Lord Abbett, Lord Abbett
Distributor or such funds on a continuing basis and are familiar with such
funds, and (f) through Retirement Plans with at least 100 eligible employees.
Shares are offered at net asset value to these investors for the purpose of
promoting goodwill with employees and others with whom Lord Abbett Distributor
and/or the Fund has business relationships.
Our shares may be issued at net asset value in exchange for the assets, subject
to possible tax adjustment, of a personal holding company or an investment
company. There are economies of selling efforts and sales-related expenses with
respect to offers to these investors and those referred to above.
Redemptions. A redemption order is in proper form when it contains all of the
information and documentation required by the order form or supplementally by
Lord Abbett Distributor or the Company to carry out the order. The signature(s)
and any legal capacity of the signer(s) must be guaranteed by an eligible
guarantor. See the Prospectus for expedited redemption procedures.
The right to redeem and receive payment, as described in the Prospectus, may be
suspended if the NYSE is closed (except for weekends or customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
deems an emergency to exist.
Our Board of Trustees may authorize redemption of all of the shares in any
account in which there are fewer than 25 shares. Before authorizing such
redemption, the Board must determine that it is in our economic best interest or
necessary to reduce disproportionately burdensome expenses in servicing
shareholder accounts. At least 30 days' prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
Div-Move. Under the Div-Move service described in the Prospectus, you can invest
the dividends paid on your account into an existing account in any other
Eligible Fund. The account must be either your account, a joint account for you
and your spouse, a single account for your spouse, or a custodial account for
your minor child under the age of 21. You should read the prospectus of the
other funds before investing.
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Invest-A-Matic. The Invest-A-Matic method of investing in the Company and/or any
other Eligible Fund is described in the Prospectus. To avail yourself of this
method you must complete the application form, selecting the time and amount of
your bank checking account withdrawals and the funds for investment, include a
voided, unsigned check and complete the bank authorization.
Systematic Withdrawal Plans. The Systematic Withdrawal Plan (the "SWP") also is
described in the Prospectus. You may establish a SWP if you own or purchase
uncertificated shares having a current offering price value of at least $10,000.
Lord Abbett prototype retirement plans have no such minimum. With respect to
Class C shares, the CDSC will be waived on and after the first anniversary of
their purchase. The SWP involves the planned redemption of shares on a periodic
basis by receiving either fixed or variable amounts at periodic intervals. Since
the value of shares redeemed may be more or less than their cost, gain or loss
may be recognized for income tax purposes on each periodic payment. Normally,
you may not make regular investments at the same time you are receiving
systematic withdrawal payments because it is not in your interest to pay a sales
charge on new investments when in effect a portion of that new investment is
soon withdrawn. The minimum investment accepted while a withdrawal plan is in
effect is $1,000. The SWP may be terminated by you or by us at any time by
written notice.
Retirement Plans. The Prospectus indicates the types of retirement plans for
which Lord Abbett provides forms and explanations. Lord Abbett makes available
the retirement plan forms and custodial agreements for IRAs (Individual
Retirement Accounts including Roth and Simple IRAs and Simplified Employee
Pensions), 403(b) plans and qualified pension and profit-sharing plans,
including 401(k) plans. The forms name Investors Fiduciary Trust Company as
custodian and contain specific information about the plans. Explanations of the
eligibility requirements, annual custodial fees and allowable tax advantages and
penalties are set forth in the relevant plan documents. Adoption of any of these
plans should be on the advice of your legal counsel or qualified tax adviser.
6.
Taxes
Each Fund will be treated as a separate entity for federal income tax purposes.
As a result, the status of each Fund as a regulated investment company is
determined separately by the Internal Revenue Service.
Interest on indebtedness incurred by a shareholder to purchase or carry shares
of the Company may not be deductible, in whole or in part, for federal, state or
local income tax purposes. Pursuant to published guidelines, the Internal
Revenue Service may deem indebtedness to have been incurred for the purpose of
acquiring or carrying shares of the Company even though the borrowed funds may
not be directly traceable to the purchase of shares.
Our shares may not be an appropriate investment for "substantial users" of
facilities financed by industrial development bonds, or persons related to such
"substantial users." Such persons should consult their tax advisers before
investing in shares of the Company.
Certain financial institutions may be denied a federal income tax deduction for
the amount of interest expense allocable to an investment in the Company. The
deduction for loss reserves available to property and casualty insurance
companies may be reduced by a specified percentage as a result of their
investment in the Company.
The value of any shares redeemed by the Company or repurchased or otherwise sold
may be more or less than your tax basis at the time of disposition. Any gain
generally will be taxable for federal income tax purposes. Any loss realized on
the disposition of Company shares held for six months or less will be treated
for tax purposes as a long-term capital loss to the extent of any distribution
designated by the Company as a "capital gains distribution" received with
respect to such shares. Moreover, shareholders will not be allowed to recognize
for tax purposes any capital loss realized on the redemption or repurchase of
Company shares which they have held for six months or less to the extent of any
tax-exempt distributions received on the shares. Losses on the sale of shares
are not deductible if, within a period beginning 30 days before the date of the
sale and ending 30 days after the date of the sale, the taxpayer acquires shares
that are substantially identical.
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Each Fund will be subject to a 4% nondeductible excise tax on certain amounts
not distributed or treated as having been distributed on a timely basis each
calendar year. Each Fund intends to distribute to shareholders each year an
amount adequate to avoid the imposition of such excise tax.
Limitations imposed by the Internal Revenue Code on regulated investment
companies may restrict a Fund's ability to engage in the writing of call
options, in financial futures transactions or in other investment techniques and
practices. In addition, in order to qualify for exemption from state and local
personal property taxes in Florida and Pennsylvania, a Fund may be required to
refrain from engaging in transactions, techniques or practices it is otherwise
permitted to engage in or to dispose of investments attributable to such
transactions each year before the relevant "statutory assessment dates."
The foregoing discussion relates solely to U. S. federal income tax law as
applicable to United States persons (United States citizens or residents and
United States domestic corporations, partnerships, trusts and estates). Each
shareholder who is not a United States person should consult his tax adviser
regarding the U. S. and foreign tax consequences of the ownership of shares of a
Fund, including a 30% (or lower treaty rate) United States withholding tax on
dividends representing ordinary income and net short-term capital gains, and the
applicability of United States gift and estate taxes.
Except as otherwise discussed in the Prospectus, the receipt of dividends and
distributions from the Funds may be subject to state and local taxes. You should
consult your tax adviser on state and local tax matters.
7.
Risk Factors Regarding Investments
in Florida, Georgia, Michigan, Pennsylvania
and Puerto Rico Municipal Bonds
The following information is a summary of special risks affecting the states and
territory indicated, each of which could affect the bonds purchased by the
Funds. It does not purport to be complete or current and is based upon
information and judgments derived from public documents relating to such states
and territory. The Funds have not verified any of this information.
Florida Bonds
Florida's economic expansion has been strong, as employment rates continued to
grow steadily. The Florida economy is expecting a mild slowdown of growth.
Because Florida has a proportionately greater retirement age population than the
rest of the nation, property income (dividends, interest and rent and transfer
payments (social and pension benefits, for example) are relatively more
important sources of income.
Florida's economy has performed well in recent years, largely due to rapid
population growth. The State's total personal income has grown at a strong rate
and outperformed the U.S. and other southeastern states. The increase in
personal income directly reflects the population increase. Per capita income has
closely tracked the national average for many years. Florida's unemployment rate
has been below or about the same as the national average since 1995. The
increase in population has placed increased pressure on the State's
transportation infrastructure and other facilities.
Florida's economy is gradually becoming less dependent on employment related to
construction, agriculture and manufacturing and more dependent on services and
trade-related employment. The decline in importance of construction and
construction-related industries is expected to continue, as Florida's economy
diversifies.
Tourism continues to be one of Florida's most important industries. The State
has worked to diversify its tourist attractions, and this diversification has
helped to reduce, to a degree, the seasonal character of the industry and to
stabilize tourist-related employment.
Florida's tax base is relatively narrow, with most of its revenues derived from
the state's sales and use tax. This reliance on a cyclical revenue source
creates some vulnerability. In addition, Florida passed a constitutional
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amendment in 1994 that limits the rate of growth in state revenues. This
limitation, however, exempts revenues pledged to bonds.
Georgia Bonds
Georgia has been one of the fastest-growing states in terms of population, and
has benefited from steady economic growth due to the State's low cost of living,
extensive transportation infrastructure and low unemployment rates.
Nevertheless, Georgia's per capita income remains below the national average.
Georgia's unemployment rate has declined steadily since 1992, and remains below
the national average. The State's per capita income, while it has grown
strongly, is still less than the national average. Personal income levels also
have shown steady increases, as have State revenues.
The State had an undesignated, unreserved General Fund balance of $776 million
in fiscal year 1996-97. In addition, Georgia's Revenue Shortfall Reserve Fund,
which was drawn down to zero in the early 1990s, had a balance of $334 million
at the end of the 1996-97 fiscal year.
The Georgia Constitution provides that the State may incur general obligation
debt and guaranteed revenue debt for public purposes. However, the Georgia
Constitution imposes certain debt limits and controls. General obligation debt
cannot exceed 10 percent of total revenue receipts less refunds of the State
treasury.
Michigan Bonds
Michigan's economic forecast for 1999 projects healthy growth. Michigan's
economy remains heavily concentrated in the manufacturing sector. The State's
automobile industry remains an important component of this sector. Accordingly,
the State's economy is potentially more volatile than those of other states with
more diverse economies and may be more likely to be adversely affected by recent
global economic problems. In recent years, however, the State's economy has
diversified somewhat. Renewed state economic growth has caused the Michigan
unemployment rate to remain slightly below the U.S. unemployment rate for seven
consecutive years, running counter to a historical trend of Michigan having a
higher unemployment rate than the national average.
As a result of legislative action in 1993, and a statewide referendum in 1994,
the State has made major changes in the financing of local public schools. Most
local property taxes, which had been the primary source of school financing,
have been repealed. They have been replaced by other revenues, with the
principal replacement revenue being an increased sales tax. These additional
revenues will be included within the State's constitutional revenue limitations
and may have an impact on the State's ability to raise additional revenues in
the future.
The Constitution provides that the total amount of general ad valorem taxes
imposed on taxable property in any year cannot exceed certain millage
limitations set by the Constitution, statute or charter. The Constitution
prohibits local units of government from levying any tax not authorized by law
or charter, or from increasing the rate of an existing tax above the rate
authorized by law or charter, without the approval of the electors of the local
unit voting on the question. Local units of government and local authorities are
authorized to issue bonds and other evidences of indebtedness in a variety of
situations without the approval of electors, but the ability of the obligor to
levy taxes for the payment of such obligations is subject to the foregoing
limitations unless the obligations were authorized before December 23, 1978 or
approved by the electors. The Constitution also contains millage reduction
provisions. Under such provisions, should the value of taxable property
(exclusive of construction and improvements) increase at a percentage greater
than the percentage increase in the Consumer Price Index, the maximum authorized
tax rate would be reduced by a factor which would result in the same maximum
potential tax revenues to the local taxing unit as if the valuation of taxable
property (less new construction and improvements) had grown only at the Consumer
Price Index rate instead of at the higher actual growth rate. Thus, if taxable
property values rise faster than consumer prices, the maximum authorized tax
rate would be reduced accordingly.
As of September 30, 1998, Michigan's outstanding general obligation debt totaled
approximately $874 million.
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In 1978, the Michigan Constitution was amended to limit the amount of total
state revenues raised from taxes and other sources. State revenues (excluding
federal aid and revenues for payment of principal and interest on general
obligation bonds) in any fiscal year are limited to a fixed percentage of State
personal income in the prior calendar-year or the average of the prior three
calendar years, whichever is greater. The percentage is fixed by the amendment
to equal the ratio of the 1978-79 fiscal year revenues to total 1977 State
personal income. The State may, however, raise taxes in excess of the limit for
emergencies, when deemed necessary by the Governor and two-thirds of the members
of each house of the Legislature. The revenue limit does not apply to taxes
imposed for the payment of principal of and interest on bonds of the State, if
the bonds are approved by voters and authorized by a vote of two-thirds of the
members of each House of the Legislature. The Constitution also provides that
the proportion of State spending paid to all local units of government to total
State spending may not be reduced below the proportion in effect in the 1978-79
fiscal year.
The State is a party to various legal proceedings seeking damages or injunctive
or other relief. In addition to routine litigation, certain of these proceedings
could, if unfavorably resolved from the point of view of the State,
substantially affect State programs or finances.
Pennsylvania Bonds
Pennsylvania is an established, yet growing state with a diversified economy.
Many major corporations have their headquarters in Pennsylvania. Pennsylvania
has been historically identified as a heavy-industry state, although that
reputation has changed over the last 30 years as the industrial composition of
Pennsylvania diversified with the decline of the coal, steel, and railroad
industries. The major new sources of growth are in the service sector, including
trade, medical and health services, education and financial institutions.
Agriculture also remains an important part of the State's economy.
Pennsylvania's unemployment rate has declined steadily since its peak in 1992,
and in 1998 was equal to the national average. However, employment growth
continues to lag behind the national average.
The fiscal years 1993 through 1998 were characterized by steady, modest economic
growth and low inflation rates. These economic conditions, combined with several
years of tax reductions following the various tax rate increases and tax base
expansions enacted in fiscal 1991 for the General Fund, produced tax revenue and
total revenue gains during the period. In fiscal year 1998, the Commonwealth had
a significant operating surplus.
Per capita income in Pennsylvania has continued to grow and remains above the
national average. Concurrently, unemployment has continued to decrease and is
now equal to the U.S. average.
The Pennsylvania Constitution mandates that the total operating budget
appropriations made by Commonwealth's General Assembly may not exceed the sum of
(a) the actual and estimated revenues in any given year, and (b) the surplus of
the preceding year. The Pennsylvania Constitution permits the issuance of the
following types of debt: (i) debt to suppress insurrection or rehabilitate areas
affected by disaster, (ii) electorate-approved debt, (iii) debt for capital
projects, subject to an aggregate debt limit of 1.75 times the annual average
tax revenues of the preceding five fiscal years and (iv) tax anticipation notes
payable in the fiscal year of issuance. All debt except tax anticipation notes
must be amortized in substantial and regular amounts.
Pennsylvania engages in short-term borrowing to fund expenses within a fiscal
year through the sale of tax anticipation notes, for the account of the General
Fund or the Motor License Fund or both such funds. Tax anticipation notes must
mature within the fiscal year of issuance. The principal amount issued, when
added to that outstanding, may not exceed, in the aggregate, 20% of the revenues
estimated to accrue to the appropriate fund or both funds in the fiscal year.
The Commonwealth is not permitted to fund deficits between fiscal years with any
form of debt. All year-end deficit balances must be funded within the succeeding
fiscal year's budget.
Pending the issuance of bonds, Pennsylvania may issue bond anticipation notes,
subject to the applicable statutory and Constitutional limitations generally
imposed on bonds. The term of such borrowings may not exceed three years.
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Certain Commonwealth-created agencies have statutory authorization to incur debt
for which Commonwealth appropriations to pay debt service thereon are not
required. The debt of these agencies is supported by assets of or revenues
derived from the various projects financed; it is not a moral or statutory
obligation of the Commonwealth. Some of these agencies, however, indirectly
depend on Commonwealth appropriations.
The Commonwealth, through several of its departments and agencies, has entered
into various agreements to lease as lessee certain real property and equipment,
and to make lease payments for the use of such property and equipment. Some of
those leases and their respective lease payments are pledged as security for
debt obligations issued by certain public authorities for other entities within
the State. All lease payments due from Commonwealth departments and agencies are
subject to and depend on an annual spending authorization approved through the
Commonwealth's annual budget process. The Commonwealth is not required by law to
appropriate or otherwise provide monies from which the lease payments are to be
paid. The obligations to be paid from such lease payments are not bonded debt of
the Commonwealth.
The Commonwealth established the Pennsylvania Intergovernmental Cooperation
Authority ("PICA") in 1991 to assist Philadelphia in remedying fiscal
emergencies. Philadelphia is currently operating under a five-year fiscal plan
approved by PICA on May 20, 1997.
Puerto Rico Bonds
Each fund may invest in bonds issued by the Commonwealth of Puerto Rico and its
instrumentalities. The economy of Puerto Rico is dominated by the manufacturing
and service sectors. Puerto Rico's economic health is closely tied to the price
of oil and the state of the U.S. economy. Although its unemployment rate has
generally declined in recent years, Puerto Rico's unemployment rate continues to
substantially exceed the U.S. average. Puerto Rico's economy has experienced
significant growth. Continued growth depends on factors, such as the state of
the U.S. economy, stability of the price of oil and borrowing costs.
Puerto Rico's manufacturing sector has become more diversified as industrial
development has become more capital intensive and more dependent on skilled
labor. The service sector, including wholesale and retail trade, finance,
insurance and real estate, also plays a major role in the economy. The service
sector ranks second only to manufacturing in contribution to the gross domestic
product and leads all sectors in providing employment. In recent years, the
service sector has experienced significant growth in response to and paralleling
the expansion of the manufacturing sector.
Much of the development of the manufacturing sector in Puerto Rico to date can
be attributed to various federal and Commonwealth tax incentives, most notably
Section 936 of the Internal Revenue Code (the "Code"), which allows companies
with operations in Puerto Rico and other U.S. territories to receive a credit to
be used against U.S. tax on certain income from operations and the
Commonwealth's Industrial Incentives Program. However, in 1996 amendments were
passed that phase out Section 936 tax credits over ten years for existing
claimants and eliminate it for corporations without established operations after
October 1995. The long-term effects on the Puerto Rico economy of the repeal of
section 936 cannot yet be determined, although the repeal is not expected to
have material adverse effects on the Commonwealth's economy in the short- or
medium-term. The Commonwealth also needs to address its substantial unfunded
pension liabilities to its two main public pension systems.
Puerto Rico's economy has continued to expand for over a decade, with almost
every sector participating and resulting in record levels of employment
(although Puerto Rico's unemployment rate has continued to substantially exceed
the average for the United States). Factors behind this expansion included
Commonwealth-sponsored economic development programs, periodic declines in the
exchange value of the United States dollar, increases in the level of federal
transfers and the relatively low cost of borrowing.
The Commonwealth's general fund has had a positive cash balance in recent years,
but was forecast to decrease by $266.6 million by the end of fiscal 1999.
The Constitution of Puerto Rico provides that public debt of the Commonwealth
will constitute a first claim on
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available Commonwealth revenues. Public debt includes general obligation bonds
and notes of the Commonwealth and any payments required to be made by the
Commonwealth under its guarantees of bonds and notes issued by its public
instrumentalities.
The Constitution of Puerto Rico also provides that direct obligations of the
Commonwealth evidenced by full faith and credit bonds or notes shall not be
issued if the amount of the principal of and interest on such bonds and notes
and on all such bonds and notes theretofore issued which is payable in any
fiscal year, together with any amount paid by the Commonwealth in the preceding
fiscal year on account of bonds or notes guaranteed by the Commonwealth, exceeds
15% of the average annual revenues raised under the provisions of Commonwealth
legislation and covered into the Treasury of Puerto Rico (principally income
taxes, property taxes and excise taxes) in the two fiscal years preceding the
then current fiscal year.
In recent years the Commonwealth has had higher levels of public sector debt
compared to the growth in nominal gross product. These higher levels are due to
the increase during fiscal 1996, 1997, and 1998 in the amount of debt incurred
to finance infrastructure projects. This trend is expected to continue during
the next few fiscal years as the level of public sector capital investment
remains high.
8.
Past Performance
Each Fund computes the average annual compounded rate of total return for each
class during specified periods that would equate the initial amount invested to
the ending redeemable value of such investment by adding one to its computed
average annual total return, raising the sum to a power equal to the number of
years covered by the computation and multiplying the result by $1,000 which
represents a hypothetical initial investment. The calculation assumes deduction
of the maximum sales charge (as described in the next paragraph) from the
initial amount invested and reinvestment of all income dividends and capital
gains distributions on the reinvestment dates at prices calculated as stated in
the Prospectus. The ending redeemable value is determined by assuming a complete
redemption at the end of the period(s) covered by the average annual total
return computation.
In calculating total returns for Class A shares, the current maximum sales
charge of 4.75% (as a percentage of the offering price) is deducted from the
initial investment (unless the return is shown at net asset value). For Class C
shares, the 1.0% CDSC is applied to the Florida Fund' investment result for that
class for the time period shown prior to the first anniversary of purchase
(unless the total return is shown at net asset value). Total returns also assume
that all dividends and capital gains distributions during the period are
reinvested at net asset value per share, and that the investment is redeemed at
the end of the period.
The total returns for the one-year ended October 31, 1999 for Class A shares of
the Florida, Georgia, Michigan and Pennsylvania Fund were: -4.74%, -4.36%,
- -3.55% and -4.13%, respectively. The average annual compounded rates of total
return for the five year period ended October 31, 1999 for the Florida Fund and
the life of the Florida Fund (commencing on September 25, 1991 to October 31,
1999), the life of the Georgia Fund (commencing on December 27, 1994 to October
31, 1999), the life of the Pennsylvania Fund (commencing on February 3, 1992 to
October 31, 1999) and the life of the Michigan Fund (commencing on December 1,
1992 to October 31, 1999), were as follows: 5.42 %, 5.29%, 6.79%, 5.99% and
5.74%, respectively.
The total return for the Class C shares of the Florida Fund for the year ended
October 31, 1999, 1998 and the life of the class (commencing July 15, 1996 to
October 31, 1999) was -5.43% and 3.13%, respectively.
Our yield quotation for each class is based on a 30-day period ended on a
specified date, computed by dividing the net investment income per share earned
during the period by the maximum offering price per share of such class on the
last day of the period. This is determined by finding the following quotient:
take the dividends and interest earned during the period for a class minus its
expenses accrued for the period and divide by the product of (i) the average
daily number of Class shares outstanding during the period that were entitled to
receive dividends and (ii) the maximum offering price per share of such class on
the last day of the period. To this quotient add one. This sum is multiplied by
itself five times. Then one is subtracted from the product of this
multiplication and the remainder is multiplied by two. Yield for
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the Class A shares reflects the deduction of the maximum initial sales charge,
but may also be shown based on the Class A net asset value per share. Yield for
C shares does not reflect the deduction of the CDSC. For the 30-day period ended
October 31, 1999 the yields for Class A shares of the Florida, Georgia,
Pennsylvania and Michigan Fund were 4.47%, 4.63 %, 4.77 % and 4.63 %,
respectively. The yield for Class C shares of the Florida Fund for such 30 day
period was 3.98 %.
Each Funds' tax-equivalent yield for each Class is computed by dividing that
portion of the appropriate Class' yield (as determined above) which is tax
exempt by one minus a stated income tax rate (Florida - .3600%; Pennsylvania
- -.3779%, Michigan - .3882% and Georgia - .3984%) and adding the product to that
portion, if any, of the appropriate Class' yield that is not tax exempt. For the
30-day period ended on October 31, 1999, the tax-equivalent yields for Class A
shares of the Florida, Georgia, Pennsylvania and Michigan Fund were 6.98%, 7.70
%, 7.80%, and 7.44%, respectively. The tax-equivalent yield for Class C shares
of the Florida Fund for such 30 day period was 6.22 %.
It is important to remember that these figures represent past performance and an
investor should be aware that the investment return and principal value of a
Fund investment will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost. Therefore, there is no assurance
that this performance will be repeated in the future.
9.
Information About the Company
The Company was established on September 11, 1991 as a Massachusetts business
trust by a Declaration of Trust. As a Trust, the Company does not hold regular
meetings of shareholders, although special meetings may be called for a specific
Fund or for the Company as a whole, for purposes such as electing or removing
trustees, changing fundamental policies or approving an advisory contract. The
Company will promptly call a meeting of shareholders to vote on whether to
remove a trustee(s) when requested to do so in writing by record holders of not
less than 10% of the Company's outstanding shares, and the trustees, within 5
business days of a written request by 10 or more shareholders who have been of
record for at least 6 months and who hold in the aggregate the lesser of either
shares having a net asset value of at least $25,000 or 1% of such outstanding
Company shares, shall give such shareholders access to a list of the names and
addresses of all other shareholders or inform them of the number of shareholders
and the cost of the Company's mailing their request.
Lord Abbett Tax-Free Income Trust (the "Company") was organized as a
Massachusetts Business Trust on September 11, 1991. The Company's Board of
Trustees has authority to create separate series of shares of beneficial
interest, without further action by shareholders. To date, the Company has four
series: the Florida Fund, the Georgia Fund, the Michigan Fund and the
Pennsylvania Fund (each a "Fund"). The Florida Fund consists of three classes of
shares: Class A, C and P. The other Funds consist of a two classes of shares:
Class A and P. Although no present plans exist, further funds and/or classes may
be added in the future.
Rule 18f-2 under The Investment Company Act of 1940, as amended (the "Act")
provides that any matter required to be submitted, by the provisions of the Act
or applicable state law, or otherwise, to the holders of the outstanding voting
securities of an investment company such as the Company shall not be deemed to
have been effectively acted upon unless approved by the holders of a majority of
the outstanding shares of each class or funds affected by such matter. Rule
18f-2 further provides that a class or fund shall be deemed to be affected by a
matter unless the interests of each class or funds in the matter are
substantially identical or the matter does not affect any interest of such class
or fund. However, the Rule exempts the selection of independent public
accountants, the approval of principal distribution contracts and the election
of trustees from the separate voting requirements of the Rule.
Under the Declaration of Trust, the trustees may provide for additional funds
and classes from time to time. Any additional fund and class would have rights
separate from the other funds and classes. Within each fund and class, all
shares have equal voting rights and equal rights with respect to dividends,
assets and liquidation.
Under Massachusetts law, shareholders could, under certain circumstances, be
held liable for the obligations of the Company. However, the Declaration of
Trust disclaims shareholder liability for acts, obligations or affairs of
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the Company and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Company or
the Trustees. The Declaration of Trust also provides for indemnification out of
a Funds' property for all losses and expenses of any shareholder of the Fund
held liable on account of being or having been a shareholder. Thus, the risk of
a shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. The Company believes that, in view of the above, the risk of
personal shareholder liability is remote.
The directors, trustees and officers of Lord Abbett-sponsored mutual funds,
together with the partners and employees of Lord Abbett, are permitted to
purchase and sell securities for their personal investment accounts. In engaging
in personal securities transactions, however, such persons are subject to
requirements and restrictions contained in the Company's Code of Ethics which
complies, in substance, with each of the recommendations of the Investment
Company Institute's Advisory Group on Personal Investing. Among other things,
the Code requires that Lord Abbett partners and employees obtain advance
approval before buying or selling securities, submit confirmations and quarterly
transaction reports, and obtain approval before becoming a director of any
company; and it prohibits such persons from investing in a security 7 days
before or after any Lord Abbett-sponsored fund trades in such security,
profiting from trades of the same security within 60 days and trading on
material non-public information. The Code imposes certain similar requirements
and restrictions on the independent directors and trustees of each of the Lord
Abbett-sponsored mutual funds to the extent contemplated by the recommendations
of such Advisory Group.
10.
Financial Statements
The financial statements for the fiscal year ended October 31, 1999 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements in the 1999 Annual Report to Shareholders of Lord Abbett Tax-Free
Income Trust, are incorporated herein by reference to such financial statements
and report in reliance upon the authority of Deloitte & Touche LLP as experts in
auditing and accounting.
29
<PAGE>
PART C OTHER INFORMATION
Item 23 Exhibits
(a) Declaration of Trust. Incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement on Form N-1A filed
on March 1, 1998.
(b) By-Laws. Incorporated by reference to Post-Effective Amendment
No. 16 to the Registration Statement on Form N-1A filed on
December 28, 1998.
(c) Instruments Defining Rights of Security Holders. Incorporated by
reference
(d) Investment Advisory Contracts. Incorporated by reference.
(e) Underwriting Contracts. Incorporated by reference.
(f) Bonus or Profit Sharing Contracts. Incorporated by reference to
Post Effective Amendment No. 15 to the Registration Statement on
Form N-1A filed on March 1, 1998.
(g) Custodian Agreement. Incorporated by reference.
(h) Other Material Contracts. Incorporated by reference.
(i) Legal Opinion. Filed herewith.
(j) Other Opinion. Consent of Independent Auditors. Incorporated by
reference to Post-Effective Amendment No. 16 to the Registration
Statement on Form N-1A filed on December 28, 1998.
(k) Omitted Financial Statements. Incorporated by reference.
(l) Initial Capital Agreements. Incorporated by reference.
(m) Rule 12b-1 Plan. Incorporated by reference.
(n) Financial Data Schedule.
(o) Rule 18f-3 Plan. Incorporated by reference.
Item 24 Persons Controlled by or Under Common Control with the Fund
-----------------------------------------------------------
None.
Item 25 Indemnification
---------------
All Trustees, officers, employees and agents of Registrant are to be
indemnified as set forth in Section 4.3 of Registrant's Declaration of
Trust.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expense
incurred or paid by a Trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person
in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
In addition, Registrant maintains a Trustees' and officers' errors and
omissions liability insurance policy protecting Trustees and officers
against liability for breach of duty, negligent act, error or omission
committed in their capacity as Trustees or officers. The policy
contains certain exclusions, among which is exclusion from coverage
for active or deliberate dishonest or fraudulent acts and exclusion
for fines or penalties imposed by law or other matters deemed
uninsurable.
<PAGE>
Item 26 Business and Other Connections of Investment Adviser
----------------------------------------------------
Lord, Abbett & Co. acts as investment adviser for the Lord Abbett
registered investment companies and provides investment management
services to various pension plans, institutions and individuals. Lord
Abbett Distributor, a limited liability corporation, serves as their
distributor and principal underwriter. Other than acting as trustees,
directors and/or officers of open-end investment companies managed by
Lord, Abbett & Co., none of Lord, Abbett & Co.'s partners has, in the
past two fiscal years, engaged in any other business, profession,
vocation or employment of a substantial nature for his or her own
account or in the capacity of director, officer, employee, partner or
Trustee of any entity.
Item 27 Principal Underwriters
----------------------
(a) Lord Abbett Affiliated Fund, Inc.
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Equity Fund
Lord Abbett Global Fund, Inc.
Lord Abbett Investment Trust
Lord Abbett Mid-Cap Value Fund, Inc.
Lord Abbett Large-Cap Growth Fund
Lord Abbett Series Fund, Inc.
Lord Abbett Research Fund, Inc.
Lord Abbett Securities Trust
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett Tax-Free Income Trust
Lord Abbett U.S. Government Money Market Fund, Inc
(b) The partners of Lord, Abbett & Co. are:
Name and Principal Positions and Offices
Business Address (1) with Registrant
-------------------- ---------------
Robert S. Dow Chairman and President
Paul A. Hilstad Vice President & Secretary
Zane E. Brown Vice President
Daniel E. Carper Vice President
Robert G. Morris Vice President
Each of the above has a principal business address:
90 Hudson Street, Jersey City, New Jersey 07302-3973
(c) Not applicable
<PAGE>
Item 28 Location of Accounts and Records
--------------------------------
Registrant maintains the records, required by Rules 31a - 1(a) and
(b), and 31a - 2(a) at its main office.
Lord, Abbett & Co. maintains the records required by Rules 31a - 1(f)
and 31a - 2(e) at its main office.
Certain records such as cancelled stock certificates and
correspondence may be physically maintained at the main office of the
Registrant's Transfer Agent, Custodian, or Shareholder Servicing Agent
within the requirements of Rule 31a-3.
Item 29 Management Services
-------------------
None
Item 30 Undertakings
------------
The Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
The Registrant undertakes, if requested to do so by the holders of at
least 10% of the registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the question of removal of
a director or directors and to assist in communications with other
shareholders as required by Section 16(c) of the Investment Company
Act of 1940, as amended.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant had duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, and State of New York on the 27th day of
January, 2000.
BY: /s/ Lawrence H. Kaplan
----------------------
Lawrence H. Kaplan
Vice President
LORD ABBETT TAX-FREE INCOME TRUST
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
Chairman, President
/s/Robert S. Dow* and Director/Trustee January 27, 2000
- --------------------------- -------------------------- ----------------
Robert S. Dow
/s/ E. Thayer Bigelow* Director/Trustee January 27, 2000
- ---------------------------- ----------------------- ----------------
E. Thayer Bigelow
/s/William H. T. Bush* Director/Trustee January 27, 2000
- ---------------------------- ------------------------ ----------------
William H. T. Bush
/s/Robert B. Calhoun, Jr*. Director/Trustee January 27, 2000
- -------------------------- ------------------------ ----------------
Robert B. Calhoun, Jr.
/s/Stewart S. Dixon* Director/Trustee January 27, 2000
- ---------------------------- ---------------------- ----------------
Stewart S. Dixon
/s/John C. Jansing* Director/Trustee January 27, 2000
- ---------------------------- ---------------------- ---------------
John C. Jansing
/s/C. Alan MacDonald* Director/Trustee January 27, 2000
- ---------------------------- ------------------------ ----------------
C. Alan MacDonald
/s/Hansel B. Millican, Jr*. Director/Trustee January 27, 2000
- --------------------------- ------------------------ ----------------
Hansel B. Millican, Jr.
/s/Thomas J. Neff* Director/Trustee January 27, 2000
- ---------------------------- ------------------------ ----------------
Thomas J. Neff
/s/Donna M. McManus* Director/Trustee January 27, 2000
- ---------------------------- ------------------------ ----------------
Donna M. McManus
</TABLE>
<PAGE>
January 27, 2000
Lord Abbett Tax-Free Income Trust
90 Hudson Street
Jersey City, NJ 07302-3972
Dear Sirs:
You have requested our opinion in connection with your filing of Amendment
No. 18 to the Registration Statement on Form N-1A (the "Amendment") under the
Investment Company Act of 1940, as amended (the "Act"), of Lord Abbett Tax-Free
Income Trust, a Massachusetts trust (the "Company"), and in connection therewith
your registration of the following shares of beneficial interest, without par
value, of the Company (collectively, the "Shares"): the Florida Series (Class A,
C, and P); Georgia Series (Class A and P); Michigan Series (Class A and P); and
Pennsylvania Series (Class A and P).
We have examined and relied upon originals, or copies certified to our
satisfaction, of such company records, documents, certificates and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion set forth below.
We are of the opinion that the Shares issued in the continuous offering
have been duly authorized and, assuming the issuance of the Shares for cash at
net asset value and receipt by the Company of the consideration therefor as set
forth in the Amendment, the Shares will be validly issued, fully paid and
nonassessable.
We express no opinion as to matters governed by any laws other than the
Title XXII of the Massachusetts Code. We consent to the filing of this opinion
solely in connection with the Amendment. In giving such consent, we do not
hereby admit that we come within the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
WILMER, CUTLER & PICKERING
By:
------------------------------
Marianne K. Smythe, a partner
