1940 Act File No. 811-3942
1933 Act File No. 333-01423
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. __
[x] Post-Effective Amendment No. 1
Lord Abbett Tax-Free Income Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
The General Motors Building, 767 Fifth Avenue
New York, New York 10153
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: 800-426-1130
Kenneth B. Cutler
Vice President and Secretary
Lord Abbett Tax-Free Income Fund, Inc.
The General Motors Building
767 Fifth Avenue
New York, New York 10153
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of the registration statement.
NO FILING FEE IS REQUIRED BECAUSE AN INDEFINITE NUMBER OF SHARES ARE BEING
REGISTERED PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940.
It is proposed that this filing become effective on
the date of filing pursuant to paragraph (b) of Rule 485.
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<TABLE>
<CAPTION>
Lord Abbett Tax-Free Income Fund, Inc.
CROSS-REFERENCE SHEET
ITEMS REQUIRED BY FORM N-14
Part A
Item No. Item Caption Prospectus Caption
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<S> <C> <C>
1. Beginning of Registration Statement and Outside Cover Page of Registration Statement;
Front Cover Page of Prospectus Cover Page of Proxy Statement and
Prospectus
2. Beginning and Outside Back Cover Page of Table of Contents
Prospectus
3. Fee Table, Synopsis and Risk Factors Fee Table; Summary of Proposal
4. Information about the Transaction Summary of Proposal; Information
About the Reorganization
5. Information about the Registrant Summary of Proposal; Comparative
Information about the Acquiring Fund
and the Acquired Fund; Additional
Information; Prospectus of Lord
Abbett Tax-Free Income Fund, Inc.
dated February 1, 1996
6. Information about the Company Being Acquired Summary of Proposal; Comparative
Information about the Acquiring Fund
and the Acquired Fund
7. Voting Information Special Meeting of Shareholders of
the Trust; Notice of Special Meeting
of Shareholders; Summary of
Proposal
8. Interest of Certain Persons and Experts Additional Information
9. Additional Information Required for Reoffering Not Applicable
by Persons Deemed to be Underwriters
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Part B Statement of Additional
Item No. Item Caption Information Caption
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<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Not Applicable
12. Additional Information about the Registrant Cover Page of Proxy Statement and
Prospectus; Acquired Fund Statement
of Additional Information incor-
porated by reference.
13. Additional Information about the Company Being Cover Page of Proxy Statement and
Acquired Prospectus; Acquired Fund Statement
of Additional Information incor-
porated by reference.
14. Financial Statements Pro-forma Financial Statements
Part C
Item No. Part C Caption
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15. Indemnification Indemnification
16. Exhibits Exhibits
17. Undertakings Undertakings
</TABLE>
Signatures
<PAGE>
Lord Abbett Securities Trust -
Lord Abbett National Tax-Free Income Trust
Dear Shareholder:
You are cordially invited to attend the Special Meeting of
Shareholders of Lord Abbett Securities Trust scheduled to be held on June 19,
1996, at 11:00 a.m., at the General Motors Building, 767 Fifth Avenue, New York,
New York. Your Board of Trustees looks forward to greeting those shareholders
who are able to attend.
At the meeting, in addition to the appointment of auditors, you
will be asked to approve or disapprove a proposal to combine your Fund with
another Lord Abbett fund which has an investment objective and policies
substantially similar to those of your Fund. The investment policies of the
other fund are proposed to be changed to provide greater uniformity among the
Lord Abbett-sponsored funds and greater flexibility in the management of your
Fund's portfolio.
Such proposal, if approved, will eliminate the offering of
substantially identical funds, as well as take advantage of potential economies
of scale. In addition, the proposed combination will be a tax-free
reorganization for federal income tax purposes. Such proposal is fully described
in the enclosed proxy statement and prospectus. I encourage you to review the
proxy statement and prospectus for all the details regarding the meeting agenda.
Your Board of Trustees believes the matters proposed in the agenda
are in the best interests of the Fund and its shareholders and unanimously
recommends a vote "for" each proposal. Regardless of the number of shares you
own, it is important that they be represented and voted. Accordingly, please
sign, date and mail the enclosed proxy card in the postage paid return envelope.
If you have any questions regarding the meeting agenda or need assistance in
voting, please contact our proxy solicitor, D.F. King & Co., Inc., at
1-800-207-3156.
Your prompt response will help save the Fund the expense of
additional solicitation.
Sincerely,
/s/ Ronald P. Lynch
Ronald P. Lynch
Chairman of the Board
April 24, 1996
<PAGE>
LORD ABBETT SECURITIES TRUST -
LORD ABBETT NATIONAL TAX-FREE INCOME TRUST
767 Fifth Avenue
New York, New York 10153
April 24, 1996
Notice to shareholders of Lord Abbett National Tax-Free Income April 24,
1996 Trust (the "Acquired Fund") of a Special Meeting of shareholders of Lord
Abbett Securities Trust to be held on June 19, 1996
Notice is given hereby to shareholders of the Acquired Fund of a special meeting
of the shareholders of Lord Abbett Securities Trust. The meeting will be held in
the offices of Lord, Abbett & Co., on the 11th floor of The General Motors
Building, 767 Fifth Avenue, New York, New York on June 19, 1996, at 11:00 a.m.
for the following purposes and to transact such other business as may properly
come before the meeting and any adjournments thereof.
ITEM 1. To consider and act upon an Agreement and Plan of Reorganization
between the Acquired Fund, a series of Lord Abbett Securities Trust,
and the National Series, a series of Lord Abbett Tax-Free Income Fund,
Inc. (the "Acquiring Fund"), providing for (a) the transfer of all of
the assets of the Acquired Fund to the Acquiring Fund in exchange for
shares of a new class of the Acquiring Fund (to be designated "Class C
Shares") and the assumption by the Acquiring Fund of all of the
liabilities of the Acquired Fund, (b) the distribution of such Class C
Shares to the shareholders of the Acquired Fund and (c) the subsequent
termination of the Acquired Fund. (The investment policies and
restrictions of the Acquiring Fund are expected to differ from those
of the Acquired Fund in ways that are intended to provide greater
flexibility in the management of the portfolio of the Acquiring Fund
and to provide greater uniformity in the investment policies and
restrictions among the various Lord Abbett-sponsored funds.) A vote in
favor of this Item 1 will be deemed to be a vote to authorize the
Acquired Fund, as the sole shareholder of Class C Shares prior to this
reorganization, to approve a proposed distribution plan pursuant to
Section 12 of the Investment Company Act of 1940, as amended, and Rule
12b-1 thereunder applicable to that class.
ITEM 2. To ratify the selection of Deloitte & Touche LLP as the independent
public accountants of the Lord Abbett Securities Trust for the current
fiscal year.
By order of the Board of Trustees
Kenneth B. Cutler
Vice President and Secretary
<PAGE>
The Board of Trustees has fixed the close of business on March 22, 1996 as the
record date for determination of shareholders of the Acquired Fund entitled to
notice of and to vote at the meeting.
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PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD.
SIGN, DATE AND RETURN IT IN THE ENVELOPE PROVIDED.
TO SAVE THE COST OF ADDITIONAL SOLICITATIONS, PLEASE MAIL YOUR PROXY
PROMPTLY.
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<PAGE>
Proxy Statement and Prospectus Dated April 24, 1996
Acquisition of the Assets of
Lord Abbett National Tax-Free Income Trust, a series of
Lord Abbett Securities Trust
The General Motors Building, 767 Fifth Avenue
New York, NY 10153
by and in exchange for Class C Shares of
National Series, a series of
Lord Abbett Tax-Free Income Fund, Inc.
The General Motors Building, 767 Fifth Avenue
New York, NY 10153
This Proxy Statement and Prospectus relates to Class C shares (the
"Class C shares") of the National Series (the "Acquiring Fund"), a series of
Lord Abbett Tax-Free Income Fund, Inc. (the "Income Fund"), to be issued to, and
in exchange for all the assets of, Lord Abbett National Tax-Free Income Trust
(the "Acquired Fund" and, together with the Acquiring Fund, the "Funds"), a
series of Lord Abbett Securities Trust (the "Trust"). The telephone number of
the principal executive office of each of the Funds is 1-800-426-1130. In
exchange for such assets, the Acquiring Fund will also assume all of the
liabilities of the Acquired Fund. Following receipt of the Acquiring Fund Class
C shares, the Acquired Fund will be terminated and the Class C shares will be
distributed to the shareholders of the Acquired Fund. The shareholders of the
Acquired Fund are being asked to vote to approve or disapprove these proposed
transactions (the "Reorganization"), which are more fully described in this
Proxy Statement and Prospectus.
The Income Fund and the Trust are open-end diversified investment
management companies. The Acquired Fund seeks as high a level of interest income
exempt from federal income tax as is consistent with preservation of capital.
The Acquiring Fund currently has the same investment objective but is seeking
shareholder approval of the following amended objective: to seek as high a level
of interest income exempt from federal income tax as is consistent with
reasonable risk. Lord, Abbett & Co. ("Lord Abbett") serves as investment manager
to both Funds.
Any shareholder having a question regarding the meeting agenda or needing
assistance in voting, should contact the Acquired Fund's proxy solicitor, D.F.
King & Co., Inc., at 1-800-207-3156.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
The Class C shares of the Acquiring Fund will be a newly-created class
of shares that will share pro-rata with the existing class of Acquiring Fund
shares (the "Class A shares") in the portfolio, income and expenses of the
Acquiring Fund, except that each class will bear the expense of its own
distribution and shareholder servicing arrangements and certain other expenses.
See "Information About the Reorganization -- Shares of the Acquiring Fund." The
distribution and shareholder servicing arrangements for the Class C shares will
be substantially the same as the arrangements currently applicable to the
Acquired Fund shares. The trustees of the Trust believe that the proposed
transaction will enable the shareholders of the Acquired Fund to benefit from
economies of scale while continuing to invest in a portfolio of securities
managed by Lord Abbett under an investment objective substantially similar to
that of the Acquired Fund. See "Information About the Reorganization -- Reasons
for the Reorganization."
This Proxy Statement and Prospectus sets forth concisely the
information about the Acquiring Fund that a shareholder of the Acquired Fund
should know before voting on the Reorganization. It should be read and retained
for future reference. Attached as Exhibit A to this Proxy Statement and
Prospectus is a copy of the Agreement and Plan of Reorganization (the "Plan")
for the Reorganization. This Proxy Statement and Prospectus is accompanied by
the Prospectus of the Acquiring Fund dated February 1, 1996 (the "Acquiring Fund
Prospectus"), which Prospectus is incorporated by reference herein. Also
incorporated herein by reference are (a) the Statement of Additional Information
dated the date hereof relating to this Proxy Statement and Prospectus, including
the Statement of Additional Information of the Trust dated March 1, 1996 and the
Statement of Additional Information of the Acquiring Fund dated February 1,
1996, and (b) the Prospectus of the Trust dated March 1, 1996 (the "Acquired
Fund Prospectus"). Such Statements of Additional Information and the Acquired
Fund Prospectus are available, upon oral or written request, and at no charge,
from the Acquiring Fund, at its above-noted address or by calling
1-800-874-3733.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SPECIAL MEETING OF SHAREHOLDERS OF THE TRUST..................................2
FEE TABLE.....................................................................3
ITEM 1. - APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION................5
SUMMARY OF PROPOSAL....................................................5
INFORMATION ABOUT THE REORGANIZATION...................................7
COMPARATIVE INFORMATION ABOUT THE
ACQUIRING FUND AND THE ACQUIRED FUND...........................11
REQUIRED VOTE.........................................................14
ITEM 2. - RATIFICATION OR REJECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS........................................14
ADDITIONAL INFORMATION.......................................................15
</TABLE>
Exhibit A - Agreement and Plan of Reorganization
Exhibit B - Comparison of Certain Investment Policies and Restrictions
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS OF THE TRUST
This Prospectus and Proxy Statement is furnished in connection with
the solicitation of proxies by and on behalf of the Board of Trustees of the
Trust to be used at a Special Meeting of Shareholders of the Trust to be held at
11:00 a.m. on June 19, 1996, at the offices of Lord Abbett on the 11th floor of
the General Motors Building, 767 Fifth Avenue, New York, New York 10153, and at
any adjournments thereof. This Prospectus and Proxy Statement and the enclosed
proxy card are first being mailed to shareholders of the Acquired Fund on or
about April 24, 1996.
At the close of business on March 22, 1996 (the "Record Date"), there
were issued and outstanding 9,354,446 shares of the Acquired Fund and
138,028,692 shares of the Trust. Only shareholders of record as of the close of
business on the Record Date will be entitled to notice of, and to vote at, the
meeting or any adjournment thereof. Shareholders of the Trust are entitled to
one vote for each share. Under Delaware law, shares owned by two or more persons
(whether as joint tenants, co-fiduciaries or otherwise) will be voted as
follows, unless a written instrument or court order providing to the contrary
has been filed with the Secretary of the Trust: (1) if only one votes, that vote
binds all; (2) if more than one votes, the vote of the majority binds all; and
(3) if more than one votes and the vote is evenly divided, the vote will be cast
proportionately.
If the enclosed form of proxy is properly executed and returned in
time to be voted at the meeting, the proxies named therein will vote the shares
represented by the proxy in accordance with the instructions marked thereon. A
proxy may be revoked by the signer at any time at or before the meeting by
written notice to the Trust, by execution of a later-dated proxy or by voting in
person at the meeting. Unless revoked, all valid proxies will be voted in
accordance with the specifications thereon or, in the absence of such
specifications, FOR approval of the Plan and the Reorganization, FOR
ratification of the selection of Deloitte & Touche as the Trust's independent
public accountants and on any other matters as deemed appropriate.
Proxies will be solicited by mail. Additional solicitations may be
made by telephone, facsimile or personal contact by officers or employees of
Lord Abbett and its affiliates. The Trust may also request brokerage houses,
custodians, nominees, and fiduciaries who are shareholders of record to forward
proxy material to the beneficial owners. D. F. King & Co. has been retained to
assist in the solicitation of proxies at an estimated cost of $2,000. The cost
of the solicitation will be borne by the Acquired Fund.
In the event that sufficient votes to approve the Plan are not
received by the meeting date, the persons named as proxies may propose one or
more adjournments of the meeting to permit further solicitation of proxies. In
determining whether to adjourn the meeting, the following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast and the nature of any further solicitation and any
information to be provided to shareholders with respect to such a solicitation.
Any such adjournment will require an affirmative vote of a majority of the
shares present in person or by proxy and entitled to vote at the meeting. The
persons named as proxies will vote upon such adjournment after consideration of
the best interests of all shareholders.
2
<PAGE>
FEE TABLE
Set forth on the following page is a summary of the expenses of the
shares of the Acquiring Fund (currently, the only class of Acquiring Fund
shares, to be designated "Class A"). Also set out on the following page is a
summary comparison of the expenses of (a) the shares of the Acquired Fund and
(b) on a pro-forma basis after giving effect to the Reorganization, the Class C
shares of the Acquiring Fund (to be issued in the Reorganization in exchange for
the shares of the Acquired Fund). The annual operating expenses shown in the
summary comparison for the Acquiring Fund shares and the Acquired Fund shares
are the actual expenses for the fiscal years ended September 30, 1995 and
October 31, 1995, respectively, and those shown on a pro-forma basis for the
Class C shares of the Acquiring Fund are the estimated expenses of such shares
for the year ended September 30, 1995 had the Reorganization occurred on October
1, 1994. The example set forth below is not a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
3
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<TABLE>
<CAPTION>
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Acquiring Fund shares Acquiring Fund
Shareholder Transaction Expenses (to be designated Class C shares
(as a percentage of offering price) Class A) Acquired Fund shares (pro-forma)
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Maximum Sales Load on Purchases(1) ....... 4.75%(2) None(3) None(3)
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Deferred Sales Load (1) .................. None(2) 1.00%(4) 1.00%(4)
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Annual Operating Expenses
(as a percentage of average net assets)
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Management Fee .................... 0.49% 0.00%(5) 0.50%
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Rule 12b-1 Fees ................... 0.24%(2) 0.93%(3) 0.93%(3)
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Other Expenses .................... 0.09% 0.40% 0.09%
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Total Operating Expenses ................. 0.82% 1.33%(5) 1.52%
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</TABLE>
Example: Assume each Fund's annual return is 5% and there is no change in the
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level of expenses described above. For every $1,000 invested, with reinvestment
of all distributions, you would pay the following total expenses if you closed
your account after the number of years indicated.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C>
Acquiring Fund Class A shares (6) $55 $72 $91 $144
Acquired Fund shares (6) $14 $42 $73 $160
Acquiring Fund Class C shares $15 $48 $83 $181
(pro-forma)(6)
</TABLE>
(1) Sales "load" is referred to as sales "charge" and "deferred sales load"
is referred to as "contingent deferred reimbursement charge" throughout
this Proxy Statement and Prospectus.
(2) See "Purchases" in the Acquiring Fund Prospectus accompanying this Proxy
Statement and Prospectus for descriptions of the front-end sales charges
and the 1% contingent deferred reimbursement charges payable on sales and
certain redemptions of these shares and the Rule 12b-1 plan applicable to
the shares of the Acquiring Fund.
(3) Although the Acquired Fund does not, and the Acquiring Fund will not with
respect to the Class C shares, charge a front-end sales charge, investors
should be aware that long-term shareholders may pay, under the Rule 12b-1
plan of the Acquired Fund and under the Rule 12b-1 plan to be applicable
to the Class C shares of the Acquiring Fund (which pays and will pay
annual 0.25% service and 0.75% distribution fees), more than the economic
equivalent of the maximum front-end sales charge as permitted by certain
rules of the National Association of Securities Dealers, Inc.
(4) Redemptions of the Acquired Fund shares are, and redemptions of the Class
C shares will be, subject to a 1% contingent deferred reimbursement
charge if the redemption occurs before the first anniversary of the share
purchase. Holding periods for shares purchased prior to the
Reorganization will carry over for the purpose of determining the
applicability of the CDRC to Class C shares.
(5) Lord Abbett waived its management fee with respect to the Acquired Fund
during the past year. The management fee and total operating expenses
would have been 0.50% and 1.83%, respectively, absent such waiver. Lord
Abbett has advised the Acquiring Fund that it does not intend to waive
its management fee following the consummation of the Reorganization.
(6) Based on total actual operating expenses and pro-forma operating
expenses shown in the table above.
The foregoing is provided to assist shareholders of the Acquired Fund in
understanding the various expenses the holders of the shares of the Acquiring
Fund and the holders of shares of the Acquired Fund have incurred and that
holders of the shares of the Acquired Fund might incur as holders of the Class C
shares following the Reorganization.
4
<PAGE>
ITEM 1. - APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION
SUMMARY OF PROPOSAL
The following is a summary of certain information contained elsewhere
or incorporated by reference in this Proxy Statement and Prospectus
and is qualified in its entirety by reference to such information.
Overview of Proposed Reorganization. The Plan provides for the transfer to the
Acquiring Fund of all of the assets of the Acquired Fund in exchange for Class C
shares and the assumption by the Acquiring Fund of all of the liabilities of the
Acquired Fund. The Class C shares will then be distributed to the Acquired Fund
shareholders and the Acquired Fund will be terminated. As a result of the Reor-
ganization, each shareholder of the Acquired Fund will become the owner of that
number of full and fractional Class C shares having an aggregate net asset value
equal to the aggregate net asset value of his or her shares of the Acquired
Fund, as of the close of business on the date the Acquired Fund assets are
transferred to the Acquiring Fund. Consummation of the Reorganization is subject
to the approval of the Acquired Fund's shareholders and other conditions,
including Income Fund shareholder approval of an amendment to the Income Fund's
Articles of Incorporation authorizing the creation of the Class C shares.
To avoid a need to call an Acquiring Fund shareholders' meeting after
the Reorganization, shareholders of the Acquired Fund are being asked to
authorize the Acquired Fund, as the sole Class C shareholder of the Acquiring
Fund before the Reorganization, to approve the proposed distribution plan for
the Class C shares. A vote in favor of the Reorganization will be deemed also to
be a vote to authorize the Acquired Fund to take such action.
The trustees of the Trust believe that the proposed Reorganization
will enable the shareholders of the Acquired Fund to benefit on a long-term
basis from economies of scale while continuing to invest in a portfolio of
securities managed by Lord Abbett under a similar investment objective to that
of the Acquired Fund. See "Information About the Reorganization -- Reasons for
Reorganization" for additional information about the reasons for the
Reorganization.
Businesses of the Acquired and Acquiring Funds. The Acquired Fund is a
diversified series of the Trust, an open-end management investment company
organized as a Delaware business trust under an Agreement and Declaration of
Trust dated February 26, 1993. The Trust offers ten series, one of which is the
Acquired Fund, each consisting of one class of shares. The Acquired Fund
commenced investment operations on October 31, 1993. As of December 31, 1995,
the Acquired Fund's net assets were approximately $44 million.
The Acquiring Fund is a diversified series of the Income Fund, an
open-end management investment company incorporated under Maryland law on
December 27, 1983. To date, the Income Fund offers ten series, one of which is
the Acquiring Fund, each consisting of one class of shares. As of December 31,
1995, the Acquiring Fund's net assets were approximately $668 million.
5
<PAGE>
6
<PAGE>
Investment Objectives and Policies of the Acquired Fund and the Acquiring Fund.
The Acquired Fund and Acquiring Fund have identical investment objectives: to
seek as high a level of interest income exempt from federal income tax as is
consistent with preservation of capital. The Acquiring Fund is seeking
shareholder approval of the following amended objective: to seek as high a level
of interest income exempt from federal income tax as is consistent with
reasonable risk. For this purpose, "reasonable risk" means that the Acquiring
Fund over time will have a volatility approximating the Lehman Brothers Current
Coupon Long Index. The two Funds also have generally similar investment policies
and restrictions. The Acquiring Fund is seeking to revise and reclassify certain
of its investment policies and restrictions in order to provide greater
flexibility in managing the investment portfolio of the Acquiring Fund and to
provide greater uniformity in the investment policies and restrictions among the
various Lord Abbett-sponsored funds. Most importantly, a number of the
investment policies and restrictions that are classified as fundamental for the
Acquired Fund are to be re-classified as nonfundamental for the Acquiring Fund.
See "Comparative Information About the Acquiring Fund and the Acquired Fund --
Investment Objectives, Policies and Restrictions."
The portfolio of the Acquired Fund is expected to be suitable for the
Acquiring Fund, and so no significant realignment of that portfolio is expected
in connection with the Reorganization.
Purchases and Exchanges. Shares of the Acquired Fund are, and Class C shares
will be, available through certain authorized dealers at the public offering
price, which is the net asset value per share. See "Information About the
Reorganization -- Shares of the Acquiring Fund." Shareholders of the Acquired
Fund may now exchange their shares for shares of the other nine series of the
Trust and for the shares of Lord Abbett U.S. Government Securities Money Market
Fund, Inc. It is expected that holders of Class C shares will be able to
exchange their shares for Class C shares of up to 13 other funds and series
managed by Lord Abbett. Each exchange represents a sale of shares for which a
shareholder may have to recognize a gain or loss under Federal income tax
provisions.
Rule 12b-1 Plan. The Acquired Fund has adopted a plan pursuant to Section 12(b)
of the Investment Company Act of 1940 (the "1940 Act") and Rule 12b-1 thereunder
(a "Rule 12b-1 Plan"), under which it pays service and distribution fees at the
time shares are sold not to exceed 1% of the net asset value of such shares and
at each quarter-end after the first anniversary of the sale of shares at an
annual rate not to exceed 1% of the net asset value of such shares then
outstanding. As part of the Reorganization, the Acquiring Fund will adopt a Rule
12b-1 Plan applicable to the Class C shares that will be substantially the same
as the Acquired Fund's Rule 12b-1 Plan, except as noted below under "Information
About the Reorganization -- Rule 12b-1 Plan."
Dividend Policies and Options. The Acquired Fund distributes net investment
income monthly as a dividend. It may also pay supplemental dividends and capital
gains distributions in December or January. The Acquiring Fund has a similar
dividend and distribution policy. The shareholders of each Fund may reinvest
such dividends and distributions in additional shares at net asset value or take
such amounts in cash.
Redemption Procedures. The redemption procedures of the Acquired Fund and the
Acquiring Fund are substantially the same. See the Acquiring Fund Prospectus
under "Redemptions."
7
<PAGE>
Tax Considerations. The consummation of the Reorganization is subject to receipt
of an opinion of counsel, substantially to the effect that, among other things,
the Reorganization will not cause a gain or loss to be recognized by the
Acquired Fund or its shareholders for federal income tax purposes. See
"Information about the Reorganization--Federal Income Tax Considerations."
Risk Factors. Because the investment objective of the Acquired Fund is similar
to the investment objective of the Acquiring Fund as proposed to be amended,
Lord Abbett believes that the relative risks involved in investing in the Funds
can be considered similar. However, the investment policies and restrictions of
the Acquiring Fund are proposed to be made less restrictive compared to those of
the Acquired Fund in order to provide greater flexibility in the future
management of the investment portfolio of the Acquiring Fund and to provide
greater uniformity in the investment policies and restrictions among the various
Lord Abbett-sponsored funds. If the Acquiring Fund were to take to any
significant extent the actions permitted by these less restrictive policies and
restrictions, a result not now anticipated, the risks of investing in the
Acquiring Fund could be greater than those involved in investing in the Acquired
Fund. See "Comparative Information About the Acquiring Fund and the Acquired
Fund -- Investment Objectives, Policies and Restrictions."
INFORMATION ABOUT THE REORGANIZATION
The Plan. On July 12, 1996, assuming the conditions referred to below are
satisfied, the Acquired Fund will transfer all its assets to the Acquiring Fund
(the date of such transfer is referred to herein as the "Closing Date") in
exchange for (i) Class C shares of the Acquiring Fund having an aggregate net
asset value equal to the aggregate value of the assets, less liabilities, of the
Acquired Fund and (ii) the assumption by the Acquiring Fund of all the
liabilities of the Acquired Fund. The Acquired Fund will distribute as of the
Closing Date such Class C shares pro-rata to its shareholders of record,
determined as of the close of business on the Closing Date, in redemption and
cancellation of their shares of the Acquired Fund. The net asset value of Class
C shares and the value of the Acquired Fund's assets and the amount of its
liabilities will be determined as of the Closing Date in accordance with the
valuation procedures set forth in the Income Fund's Articles of Incorporation
(see "Purchases" in the Acquiring Fund Prospectus). The valuation procedures
used by the Acquiring Fund are the same as those used by the Acquired Fund.
The obligations of the Acquiring Fund and the Acquired Fund to
consummate the Reorganization are subject to the satisfaction of certain
conditions precedent, including (a) approval and authorization of the
Reorganization by the vote of a majority of the shares of the Acquired Fund
voted on the matter if a quorum is present, (b) receipt of a favorable ruling
from the Internal Revenue Service to the effect that the issuance of various
classes of shares by the Acquiring Fund will not result in dividends or
distributions of the Acquiring Fund constituting "preferential dividends" under
the Internal Revenue Code of 1986, as amended (the "Code"), (c) receipt of a
favorable opinion of legal counsel as to the federal income tax consequences of
the proposed transaction as described below under "Federal Income Tax
Considerations", and (d) approval by the shareholders of the Income Fund of an
amendment to its Articles of Incorporation authorizing the creation of
additional classes of shares.
8
<PAGE>
The foregoing summary of the Plan does not purport to be complete, and
is subject in all respects to the provisions of, and is qualified in its
entirety by reference to, the Plan, a copy of which is attached as Exhibit A.
Reasons for the Reorganization. The Board of Trustees of the Trust and the Board
of Directors of the Income Fund, including in each case a majority who are not
"interested persons" (as defined in the 1940 Act) of either the Income Fund, the
Trust or Lord Abbett, approved the Plan and the Reorganization on March 14,
1996, and in this connection determined that participation in the proposed
Reorganization is in the best interests of the shareholders of each of the Funds
and that the interests of existing shareholders of the Funds will not be diluted
as a result of the Reorganization. In doing so, both boards considered the
estimated expenses to be incurred by the Funds in connection with the
Reorganization and several other factors, including (a) that the shareholders of
the Acquired Fund are expected to benefit from economies of scale as
shareholders of the larger Acquiring Fund, while continuing to invest in a
portfolio of securities managed by Lord Abbett under a substantially similar
investment objective, and (b) that the implementation of a multi-class fund
structure for the Acquiring Fund is expected to (i) enable investors in the
Acquiring Fund to choose the distribution option that best suits their
individual situations, (ii) facilitate distribution of the Acquiring Fund's
shares, and (iii) maintain the competitive position of the Acquiring Fund in
relation to other funds that have implemented or are seeking to implement
similar distribution arrangements.
The trustees of the Trust and the directors of the Income Fund are the
same individuals, except that E. Wayne Nordberg is a director of the Income Fund
but not a trustee of the Trust.
Shares of the Acquiring Fund. On or before the Closing Date, the Acquiring Fund
will have two classes of shares, Class A shares (the existing class of the
Acquiring Fund) and Class C shares (to be received by the shareholders of the
Acquired Fund in the Reorganization). Each share of the Acquiring Fund,
regardless of class, will share pro-rata (based on net asset value) in the
portfolio and income of the Acquiring Fund and in the Acquiring Fund's expenses,
except for differences in expenses resulting from different Rule 12b-1 Plans for
the classes and certain other class specific expenses. See "Rule 12b-1 Plans"
below. After the Reorganization, Class C shares will be offered at net asset
value without an initial sales charge but if redeemed for cash before the first
anniversary of purchase, will be subject to a contingent deferred reimbursement
charge (a "CDRC") equal to 1% of the lower of their cost or then net asset
value. Holding periods for shares purchased prior to the Reorganization will
carry over for the purpose of determining the applicability of the CDRC.
After the Closing Date, the Acquiring Fund may create and issue one or
more classes of shares in addition to the Class A and C shares. Lord Abbett has
advised the Board of Directors of the Income Fund that it intends to propose to
the board in the near future that the board authorize the Acquiring Fund to
issue a third class of shares, to be designated the "Class B shares." If
authorized, the Class B shares are expected to be sold without an initial sales
charge and otherwise to be similar to the Class C shares except that (i) they
will be subject to a contingent deferred sales charge ("CDSC") that is payable
to the distributor of such shares, rather than subject to a contingent deferred
reimbursement charge payable to the Acquiring Fund, as is the case with the
Class C shares, (ii) the B-share CDSC will be substantially larger than the 1%
CDRC charged on early redemptions of Class C shares, (iii) the B-share CDSC will
apply over a period of time substantially longer than the 12 months applicable
to the C-share
9
<PAGE>
CDRC, and will scale down to zero over that longer period, and (iv) the Class B
shares will convert automatically into A shares at net asset value after a
period of time.
Shares of all classes of the Acquiring Fund will vote together on all
matters affecting the Acquiring Fund, except for matters, such as approval of a
Rule 12b-1 Plan, affecting only a particular class or classes. All shares voting
on a matter will have identical voting rights. All issued shares of the
Acquiring Fund are fully paid and non-assessable, and shareholders have no
preemptive or other right to subscribe to any additional shares. All shares
within a series will have the same rights and be subject to the same limitations
with respect to dividends, redemptions and liquidation except for differences
resulting from class-specific Rule 12b-1 plans and related service plans and
certain other class-specific expenses.
Rule 12b-1 Plans. The Acquiring Fund is adopting a Rule 12b-1 Plan for the Class
C shares (the "Class C 12b-1 Plan") substantially the same as the plan currently
in effect for the Acquired Fund, except for the changes noted below. The
Acquired Fund's plan provides for payments to dealers through Lord Abbett of
distribution and service fees (a) at the time shares are sold, not to exceed
0.75% and 0.25%, respectively, of the net asset value of the shares sold and (b)
at the end of the quarter following the first anniversary of the sale of shares,
and quarterly thereafter, at an annual rate not to exceed 0.75% and 0.25%,
respectively, of the net asset value of such shares, including any shares issued
for reinvested dividends and distributions after such first anniversary, so long
as such shares remain outstanding. Lord Abbett may retain from the quarterly
distribution fee, for the payment of distribution expenses incurred directly by
it, an amount not to exceed 0.10% of the average annual net asset value of such
shares outstanding. See the Acquired Fund Prospectus under "Purchases" for
additional information concerning the Rule 12b-1 Plan of the Acquired Fund.
There are two substantive changes in the Class C 12b-1 Plan: First,
payments under the plan may be made to all institutions and persons permitted by
applicable law and/or rules to receive such payments ("Authorized
Institutions"), rather than just to dealers, as is the case under the Acquired
Fund's plan; and Second, the other party to the Class C 12b-1 Plan is to be Lord
Abbett Distributor, LLC, a New York limited liability company, to be formed as a
subsidiary of Lord Abbett ("Lord Abbett Distributor"), rather than Lord Abbett
itself. Lord Abbett Distributor will take on all the underwriting functions
currently performed directly by Lord Abbett.
The Acquiring Fund will pay smaller Rule 12b-1 distribution and
service fees in connection with the Class A shares. However, the Acquiring Fund
will sell those shares subject to an initial sales charge (see the Acquiring
Fund Prospectus under "Purchases"). The Acquired Fund does not impose, and the
Acquiring Fund will not impose with respect to the Class C shares, an initial
sales charge.
The Class C 12b-1 Plan was approved on March 14, 1996, by the
directors of the Income Fund, including a majority of the directors who are not
"interested persons" of the Income Fund or the Acquiring Fund within the meaning
of the 1940 Act and who will have no direct or indirect financial interest in
the operations of such plan or in any agreements related thereto. Prior to the
Reorganization, the Acquired Fund will purchase one Class C share, and as sole
shareholder, will approve the Class C 12b-1 Plan prior to that class being
issued to the Acquired Fund in the Reorganization. A vote in favor
10
<PAGE>
of the Reorganization will be deemed also to be a vote to authorize the Acquired
Fund to take such action.
Federal Income Tax Considerations. The consummation of the Reorganization is
conditioned upon the receipt of an opinion of Debevoise & Plimpton, legal
counsel to the Acquiring Fund and the Acquired Fund, substantially to the effect
that, for Federal income tax purposes:
(a) no gain or loss will be recognized by the Acquired Fund upon the
transfer of the Acquired Fund's assets to the Acquiring Fund in exchange
for Class C shares and the assumption by the Acquiring Fund of the
liabilities of the Acquired Fund or upon the distribution of the Class C
shares to the Acquired Fund's shareholders;
(b) no gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund in exchange for Class C shares
and the assumption by the Acquiring Fund of the liabilities of the Acquired
Fund;
(c) no gain or loss will be recognized by shareholders of the Acquired
Fund upon the exchange of their Acquired Fund shares for Class C shares;
(d) the aggregate tax basis of the Class C shares received by any
Acquired Fund shareholder pursuant to the Reorganization will be the same
as the aggregate tax basis of the Acquired Fund shares held by such
shareholder immediately prior to the Reorganization, and the holding period
for the Class C shares to be received by any Acquired Fund shareholder will
include the period during which the Acquired Fund shares exchanged therefor
were held by such shareholder (provided that the Acquired Fund shares were
held as capital assets on the date of the Reorganization); and
(e) the tax basis of the Acquired Fund's assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization, and the holding
period of the assets of the Acquired Fund in the hands of the Acquiring
Fund will include the period during which those assets were held by the
Acquired Fund.
The Funds have not sought a tax ruling from the Internal Revenue
Service with respect to the tax consequences of the Reorganization, but will act
in reliance upon the opinion of counsel. Such opinion is not binding on the
Internal Revenue Service. Since the foregoing discussion relates only to the
general Federal income tax consequences of the Reorganization, shareholders
should also consult their tax advisors as to any state or local tax consequences
of the Reorganization to them and any special circumstances that may apply in
their individual circumstances.
Expenses of the Reorganization. Expenses of the Reorganization, including legal
and accounting expense, the costs of proxy solicitation and the preparation of
this Prospectus and Proxy Statement, will be borne in part by the Acquiring Fund
and in part by the Acquired Fund. If the Reorganization is consummated, the
expenses of the Acquired Fund, to the extent not paid prior to the Closing Date,
will be assumed by the Acquiring Fund and taken into account in determining the
net assets of the Acquired Fund for the purpose of calculating the number of
Class C shares to be issued to the Acquired Fund.
11
<PAGE>
Capitalization. The following table sets forth the capitalization of the
Acquiring Fund and the Acquired Fund as of December 31, 1995, and the pro-forma
capitalization of the Acquiring Fund as if the Reorganization had occurred on
that date:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Class A Class C
Acquiring Acquiring
Fund Fund
Acquiring Acquired (pro- (pro-
Fund Fund forma- forma -
(unaudited) (unaudited) unaudited) unaudited)
- --------------------------------------------------------------------------------
(In thousands, except per share values)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets .............. $668,078 $44,110 $668,078 $44,110
- --------------------------------------------------------------------------------
Net Asset Value
per Share ............... $ 11.36 $ 4.48 $ 11.36 $ 11.36
- --------------------------------------------------------------------------------
Shares Outstanding: ..... 58,810 9,043 58,810 3,885
- --------------------------------------------------------------------------------
</TABLE>
The foregoing table reflects a pro-forma exchange ratio of
approximately 0.4 Class C shares for each Acquired Fund share. If the
Reorganization is consummated, the actual exchange ratio may vary from this
ratio due to changes in the market value of the portfolio securities of both the
Acquiring Fund and the Acquired Fund between December 31, 1995 and the Closing
Date, and changes in the amounts of undistributed net investment income and
accrued liabilities of the Acquiring Fund and the Acquired Fund during that
period.
COMPARATIVE INFORMATION ABOUT THE
ACQUIRING FUND AND THE ACQUIRED FUND
Fees and Expenses. Both the Acquiring Fund and the Acquired Fund employ Lord
Abbett as their investment manager. Under the management agreement between the
Income Fund and Lord Abbett, the Income Fund, on behalf of the Acquiring Fund,
pays a monthly fee, based on average daily net assets for each month, at the
annual rate of 0.50 of 1%. For the fiscal year ended September 30, 1995, the
Acquiring Fund paid Lord Abbett a management fee at an annual rate of 0.49 of 1%
of average daily net assets. This management agreement will continue in effect
following the Reorganization.
Under the management agreement between the Trust and Lord Abbett, the
Trust, on behalf of the Acquired Fund, is obligated to pay a monthly fee at the
annual rate of 0.50 of 1% of average daily net assets. For the fiscal year ended
October 31, 1995, Lord Abbett waived all of the management fee payable by the
Acquired Fund. Lord Abbett has advised the Acquiring Fund that it does not
12
<PAGE>
intend to waive any portion of the management fee payable by the Acquiring Fund
following the consummation of the Reorganization.
The management agreement between the Trust and Lord Abbett provides
for the Trust, on behalf of the Acquired Fund, to repay Lord Abbett without
interest for any expenses of the Acquired Fund paid or reimbursed by Lord
Abbett, as follows: if the Acquired Fund's annual expense ratio (determined
before taking into account any fee waiver or expense payment or reimbursement by
Lord Abbett) is less than 1.95% after the first day of the calendar quarter
after the net assets of the Acquired Fund first reach $50 million (the
"commencement date"), the Acquired Fund will repay Lord Abbett an amount
sufficient to increase the expense ratio to 1.95%. The Acquired Fund is not
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. The contingent obligation to repay such expenses, which totaled $109,915
as of December 31, 1995, will be extinguished upon the consummation of the
Reorganization. The Acquiring Fund has no such contingent obligation.
As shown above under "Fee Table," the pro-forma expense ratio for the
Class C shares was 1.52%, compared to the actual expense ratio of 1.33% for the
Acquired Fund. If Lord Abbett had not waived its management fee for the Acquired
Fund, the Acquired Fund's expense ratio for such year would have been 1.83%.
Investment Objectives, Policies and Restrictions. The Acquired Fund and
Acquiring Fund have identical investment objectives: to seek as high a level of
interest income exempt from federal income tax as is consistent with
preservation of capital. The Acquiring Fund is seeking shareholder approval of
the following amended objective: to seek as high a level of interest income
exempt from federal income tax as is consistent with reasonable risk. For this
purpose, "reasonable risk" means that the Acquiring Fund over time will have a
volatility approximating the Lehman Brothers Current Coupon Long Index.
The Acquired Fund and the Acquiring Fund have substantially the same
investment policies and restrictions. However, the Acquiring Fund is seeking
approval of its shareholders to simplify and make less restrictive its
investment policies and restrictions in order to provide greater flexibility in
managing its investment portfolio and to provide greater uniformity in the
investment policies and restrictions among the various Lord Abbett-sponsored
funds. A number of the investment policies and restrictions that are classified
as fundamental for the Acquired Fund are to be re-classified as nonfundamental
for the Acquiring Fund. In other instances, certain fundamental restrictions of
the Acquired Fund are to be modified or eliminated in the case of the Acquiring
Fund. Fundamental investment restrictions may not be changed without approval of
the shareholders of a fund and the costs of shareholder meetings for these
purposes generally are borne by the fund and its shareholders. The board may
amend a non-fundamental restriction as it deems appropriate and in the best
interest of the fund and its shareholders, without incurring the costs of
seeking a shareholder vote.
The principal effect for the shareholders of the Acquired Fund of the
proposed changes in the fundamental policies of the Acquiring Fund will be to
permit the Acquiring Fund to take certain actions not now permitted to the
Acquired Fund without obtaining approval of the shareholders. The Acquiring Fund
either will not be permitted to, or does not intend to, take any such
13
<PAGE>
action unless such action is approved by its Board of Directors. The board does
not now intend to approve any such action or to do so in the future unless it
deems such action to be an appropriate means of seeking the Acquiring Fund's
investment objective in the best interests of the Acquiring Fund and its
shareholders, in which case disclosure of the change would be made in the Income
Fund's then current prospectus or statement of additional information or both.
Such actions, none of which the board has a present intention of approving,
involve the following matters, among others: (i) short sales of securities and
purchases of securities on margin to the extent permitted by applicable law;
(ii) borrowings from banks in amounts up to one-third of total assets (and up to
an additional 5% of total assets for temporary purposes) and such short-term
credits as may be necessary for the clearance of purchases and sales of
portfolio securities; (iii) loans of portfolio securities to the extent
permitted by law; (iv) purchases and sales of securities directly and indirectly
secured by real estate and interests therein and of commodities and commodity
contracts in accordance with applicable law so long as registration would not be
required as a commodity pool operator under the Commodity Exchange Act; (v)
pledges to secure borrowings or in connection with the Acquiring Fund's
investment policies and as permitted by applicable law; (vi) investments in the
securities of other investment companies to the extent permitted by applicable
law; and (vii) purchases and sales of puts, calls, straddles or spread options.
A summary comparison of the fundamental and certain non-fundamental
investment policies and restrictions of the Acquired Fund and of the Acquiring
Fund, as currently in effect and as proposed to be amended, is set forth in
Exhibit B to this Proxy Statement and Prospectus.
For a full discussion and statement of the Acquiring Fund's investment
objectives, policies and restrictions, see "Investment Objective" and "How We
Invest" in the Acquiring Fund Prospectus and "Investment Objective and Policies"
in the Acquiring Fund Statement of Additional Information. For a full discussion
and statement of the Acquired Fund investment objectives, policies and
restrictions, see "Investment Objective" and "How We Invest" in the Acquired
Fund Prospectus and "Investment Objective and Policies" in the Acquired Fund
Statement of Additional Information. The summary comparison set forth in Exhibit
B does not purport to be complete, and is subject in all respects to, and is
qualified in its entirety by reference to, such statements of such policies and
restrictions.
Shareholders' Rights. The Acquiring Fund believes that the rights of the
Acquired Fund shareholders will not change in an adverse way as a result of the
Reorganization. After the Reorganization, the rights of the former shareholders
of the Acquired Fund (Class C shareholders of the Acquiring Fund) will be
governed by the Income Fund's Articles of Incorporation, By-Laws and applicable
Maryland law rather than by the Trust's Declaration of Trust and By-Laws and
applicable Delaware law. The operations of the Acquiring Fund will continue to
be subject to the provisions of the 1940 Act and the rules and regulations of
the Commission thereunder.
The current Board of Directors of the Income Fund comprises the same
individuals as the current Board of Trustees of the Trust, except that E. Wayne
Nordberg is a director of the Income Fund but not a trustee of the Trust. The
responsibilities, powers and fiduciary duties of the directors of the Income
Fund are substantially the same as those of the trustees of the Trust. The
Income Fund's ByLaws provide for indemnification of the directors for actual or
threatened liabilities arising out of the directors' service in their capacity
as directors of the Income Fund, subject only to the conditions and limitations
of applicable law. The Trust's Declaration of Trust provides for indemnification
of the
14
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
made as of this day of , 1996, by and between Lord Abbett
Tax-Free Income Fund, Inc. (the "Income Fund"), a Maryland corporation, on
behalf of its series the National Series (the "Acquiring Fund") and Lord Abbett
Securities Trust (the "Trust"), a Delaware business trust, on behalf of its
series Lord Abbett National Tax-Free Income Trust (the "Acquired Fund").
WHEREAS, this Agreement is intended to be and is adopted as a plan
of reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, the reorganization (the "Reorganization") will consist of
the transfer of all of the assets of the Acquired Fund in exchange for Class C
shares of capital stock of the Acquiring Fund (the "Acquiring Fund Class C
Shares" and each an "Acquiring Fund Class C Share") and the assumption by the
Acquiring Fund of all of the liabilities of the Acquired Fund and the
distribution, after the Closing Date herein referred to, of Acquiring Fund Class
C Shares to the shareholders of the Acquired Fund in termination of the Acquired
Fund, all upon the terms and conditions hereinafter set forth in this Agreement;
WHEREAS, the Trust and the Income Fund are open-end, registered
investment companies of the management type;
WHEREAS, the Acquiring Fund is a series of the Income Fund;
WHEREAS, the Acquired Fund is a series of the Trust and the
Acquired Fund owns securities that generally are of the character in which the
Acquiring Fund is permitted to invest;
WHEREAS, the Acquiring Fund is authorized to issue and currently
has outstanding a single class of shares (the "Acquiring Fund Class A Shares"),
and prior to the consummation of the Reorganization, will seek to amend its
Articles of Incorporation to provide for the authorization and issuance of
shares of additional classes of capital stock, including Acquiring Fund Class C
Shares, which will share pro rata with each other class in the portfolio, income
and expenses of the Acquiring Fund, except that each class will bear the expense
of its own distribution and shareholder servicing arrangements and certain other
expenses;
<PAGE>
WHEREAS, after the multiple class share structure is authorized by
the Acquiring Fund but before the Acquiring Fund Class C Shares are issued to
the Acquired Fund pursuant to the Reorganization, the Acquired Fund is to
purchase one Acquiring Fund Class C share and as sole shareholder approve a plan
pursuant to Section 12(b) of the Investment Company Act of 1940 (the "1940 Act")
and Rule 12b- 1 thereunder (a "Rule 12b-1 Plan") applicable to the Acquiring
Fund Class C Shares;
WHEREAS, the Board of Trustees, including a majority of the
Trustees who are not "interested persons" (as defined under the 1940 Act ), of
the Trust has determined that the Reorganization is in the best interests of the
Acquired Fund's shareholders and that the interests of the existing shareholders
of the Acquired Fund will not be diluted as a result of this transaction; and
WHEREAS, the Board of Directors, including a majority of the
Directors who are not "interested persons" (as defined under the 1940 Act) of
the Income Fund, has determined that the Reorganization is in the best interests
of the Acquiring Fund's shareholders and that the interests of the existing
shareholders of the Acquiring Fund will not be diluted as a result of this
transaction;
NOW THEREFORE, in consideration of the premises and of the
agreements hereinafter set forth, the parties hereto agree as follows:
1. REORGANIZATION.
1.1. Subject to the terms and conditions herein set forth and on
the basis of the representations and warranties contained herein, the Trust will
transfer assets of the Acquired Fund as set forth in paragraph 1.2 to the
Acquiring Fund, and the Acquiring Fund will in exchange therefor, (i) deliver to
the Acquired Fund the number of Acquiring Fund Class C Shares, including
fractional Acquiring Fund Class C Shares, determined by dividing the net value
of the Acquired Fund's assets so transferred computed in the manner and as of
the time and date set forth in paragraph 2.1, by the net asset value of one
Acquiring Fund Class A Share, computed in the manner and as of the time and date
set forth in paragraph 2.2; and (ii) assume all of the liabilities of the
Acquired Fund. Such transactions shall take place at the closing provided for in
paragraph 3.1 (the "Closing").
1.2. (a) The assets of the Acquired Fund to be acquired by the
Acquiring Fund shall consist of all of its property, including, without
limitation, all cash, securities and dividends or interest receivables and any
deferred or prepaid expenses shown as an asset on the books of the Acquired Fund
on the closing date provided in paragraph 3.1 (the "Closing Date").
2
<PAGE>
(b) The Acquiring Fund has a list of all of the Acquired Fund's
assets as of the date of execution of this Agreement. The Acquired Fund has a
statement of the Acquiring Fund's investment objectives, policies and
restrictions. The Acquired Fund reserves the right to sell any of its securities
but will not, without the prior approval of the Acquiring Fund, acquire any
additional securities other than securities of the type in which the Acquiring
Fund is permitted to invest. The Acquiring Fund will, within a reasonable time
prior to the Closing Date, furnish the Acquired Fund with a list of the
securities, if any, on the Acquired Fund's list referred to in the first
sentence of this paragraph which do not conform to the Acquiring Fund's
investment objectives, policies and restrictions. In the event that the Acquired
Fund holds any investments which the Acquiring Fund may not hold, the Acquired
Fund will dispose of such securities prior to the Closing Date. In addition, if
it is determined that the portfolios of the Acquired Fund and the Acquiring
Fund, when aggregated, would contain investments exceeding certain percentage
limitations imposed upon the Acquiring Fund with respect to such investments,
the Acquired Fund, if requested by the Acquiring Fund, will dispose of and/or
reinvest a sufficient amount of such in vestments as may be necessary to avoid
violating such limitations as of the Closing Date.
1.3. As provided in paragraph 3.4, as soon after the Closing Date
as is conveniently practicable, the Acquired Fund will distribute pro rata to
the Acquired Fund's shareholders of record determined as of the close of
business on the Closing Date, the Acquiring Fund Class C Shares it receives
pursuant to paragraph 1.1. Such distribution will be accomplished by
establishing Acquiring Fund shareholder accounts in the names of each Acquired
Fund shareholder, representing the respective pro rata number of full and
fractional Acquiring Fund Class C Shares due each shareholder. All issued and
outstanding shares of the Acquired Fund will simultaneously be canceled on the
books of the Acquired Fund. The Acquiring Fund shall not issue certificates
representing the Acquiring Fund Shares in connection with such exchange.
1.4. Any transfer taxes payable upon issuance of Acquiring Fund
Class C Shares in a name other than the registered holder of the shares of the
Acquired Fund on the books of the Acquired Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Class C Shares are to be issued and transferred.
1.5. The Acquired Fund shall, following the Closing Date and the
making of all distributions pursuant to paragraph 1.3, be terminated by a
majority of the Trust's Trustees' executing an instrument pursuant to Section
5.4 of the Declaration and Agreement of Trust of the Trust abolishing the
Acquired Fund. Any reporting responsibility of the Trust with respect to the
Acquired Fund is and shall
3
<PAGE>
remain the responsibility of the Trust up to and including the Closing Date and
following the termination of the Acquired Fund.
2. VALUATION
2.1. The net value of the Acquired Fund's assets to be acquired by
the Acquiring Fund hereunder shall be the value of such assets, less the
Acquired Fund's liabilities assumed by the Acquiring Fund, computed as of the
close of regular trading on New York Stock Exchange, Inc. (the "NYSE") on the
Closing Date (such time and date being hereinafter called the "Valuation Date"),
using the valuation procedures set forth in the Income Fund's Articles of
Incorporation.
2.2. The net asset value of one Acquiring Fund Class A Share shall
be the net asset value per share computed as of the close of regular trading on
the NYSE on the Valuation Date, using the valuation procedures set forth in the
Income Fund's Articles of Incorporation.
2.3. All computations of value shall be made by the Acquiring Fund
and the Acquired Fund in accordance with the regular practice of the Acquiring
Fund.
3. CLOSING AND CLOSING DATE
3.1. The Closing Date shall be July 12, 1996, or such other date
as the parties may agree to in writing. All acts taking place at the Closing
shall be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held as of 5:00
p.m. at the offices of [specify location in New Jersey], or at such other time
and/or place as the parties may agree.
3.2. In the event that on the Valuation Date (a) the NYSE or
another primary trading market for portfolio securities of the Acquiring Fund or
the Acquired Fund shall be closed to trading or trading thereon shall be
restricted or (b) trading or the reporting of trading on the NYSE or elsewhere
shall be disrupted so that accurate appraisal of the value of the net assets of
the Acquiring Fund or the Acquired Fund is impracticable, the Closing Date shall
be postponed until the first business day after the day when trading shall have
been fully resumed and reporting shall have been restored.
3.3. At the Closing, the Acquired Fund shall direct its custodian
to deliver to the custodian of the Acquiring Fund, for the Acquiring Fund's
account, all of its portfolio securities and other assets held by such custodian
for the Acquired
4
<PAGE>
Fund's account, duly endorsed in proper form for transfer as appropriate, in
such condition as to constitute good delivery thereof in accordance with the
custom of the Acquiring Fund's custodian, and shall be accompanied by all
necessary federal and state stock transfer stamps or a check for the appropriate
purchase price thereof.
3.4. The Acquired Fund shall direct its transfer agent to deliver
to the transfer agent of the Acquiring Fund on the Closing Date a list of the
names and addresses of the Acquired Fund's shareholders and the number of
outstanding shares owned by each such shareholder immediately prior to the
Closing. The Acquiring Fund shall direct its transfer agent to issue and deliver
a confirmation evidencing the Acquiring Fund Class C Shares to be credited to
the Acquired Fund's account on the Closing Date to the transfer agent of the
Acquired Fund, or provide evidence satisfactory to the Acquired Fund that such
Acquiring Fund Class C Shares have been credited to the Acquired Fund's account
on the books of the Acquiring Fund. At the Closing, each party shall deliver to
the other such bills of sale, checks, assignments, share certificates, if any,
receipts, assumption agreements or other documents as such other party or its
counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1. With respect to the Acquired Fund, the Trust represents and
warrants to the Acquiring Fund as follows:
(a) The Trust is a registered investment company classified as a
management company of the open-end type, and its registration with the
Securities and Exchange Commission (the "Commission") as an investment
company under the 1940 Act is in full force and effect.
(b) The Acquired Fund is a series of the Trust. The Trust
is duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the power to own all of its
properties and assets and to carry out this Agreement.
(c) The current prospectus and statement of additional information
of the Trust conform (and any prospectus or statement of additional
information of the Trust issued prior to the Closing Date will conform)
in all material respects to the applicable requirements of the
Securities Act of 1933 Act, as amended (the "1933 Act"), and the 1940
Act and the rules and regulations of the Commission thereunder and do
not (and will not) include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
5
<PAGE>
circumstances under which they were (and will be) made, not materially
misleading.
(d) The Trust is not, and the execution, delivery and performance
of this Agreement will not result in, a material violation of its
Declaration and Agreement of Trust or By-laws or of any agreement,
instrument, contract or other undertaking to which the Trust is a party
or by which it is bound.
(e) The Trust has no material contracts or other commitments which
will be terminated with liability to the Trust on, prior to or after the
Closing Date.
(f) Except as otherwise disclosed in writing to and accepted by
the Acquiring Fund, no litigation or administrative proceeding or
investigation before any court or governmental body is presently pending
or to its knowledge threatened against the Trust or any of the Acquired
Fund's properties or assets, which if adversely determined would
materially and adversely affect the financial condition of the Acquired
Fund or the conduct of the Acquired Fund's business. The Trust knows of
no facts which might form the basis of the institution of such a
proceeding and is not party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which
materially and adversely affects the business of the Acquired Fund or
the ability of the Trust to consummate the transactions contemplated
herein.
(g) True and correct copies of the Acquired Fund's (i) Statement
of Net Assets as at October 31, 1995 and (ii) Statements of Operations
and Changes in Net Assets for the 12-month period then ended, including
the accompanying notes, have been furnished to the Acquiring Fund. Such
Statement of Net Assets and such Statements of Operations and Changes in
Net Assets (and the accompanying notes) have been audited by Deloitte &
Touche LLP, independent certified public accountants. Such statements
have been prepared in accordance with generally accepted accounting
principles consistently applied, and such statements fairly reflect the
financial condition and the operations and changes in net assets of the
Acquired Fund as of such date and for such period, respectively. There
are no known contingent liabilities of the Acquired Fund as of such date
required to be reflected or disclosed in such Statement of Net Assets or
notes in accordance with generally accepted accounting principles that
are not so reflected or disclosed.
6
<PAGE>
(h) Since October 31, 1995, there has not been any material
adverse change in the Acquired Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary
course of business, or any incurrence by the Acquired Fund of
indebtedness maturing more than one year from the date such indebtedness
was incurred, except as otherwise disclosed to and accepted by the
Acquiring Fund.
(i) The Trust will file the final federal and other tax returns of
the Acquired Fund for the period ending on the Closing Date in
accordance with the Code. At the Closing Date, all federal and other tax
returns and reports of the Acquired Fund required by law to have been
filed prior to the Closing Date shall have been filed, and all federal
and other taxes shown as due on such returns shall have been paid, or
provision shall have been made for the payment thereof, and to the best
of the Trust's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns.
(j) For the most recent fiscal year of its operation, the Acquired
Fund has met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund are,
and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. All of the issued and
outstanding shares of the Acquired Fund will, at the time of Closing, be
held of record by the persons and in the amounts set forth in the
records of the transfer agent as provided in paragraph 3.4. The Acquired
Fund does not have outstanding any options, warrants or other rights to
subscribe for or purchase any shares of the Acquired Fund, nor is there
outstanding any security convertible into any shares of the Acquired
Fund.
(l) At the Closing Date, the Acquired Fund will have good and
marketable title to its assets to be transferred to the Acquiring Fund
pursuant to paragraph 1.1 and full right, power and authority to sell,
assign, transfer and deliver such assets hereunder and, upon delivery
and payment for such assets, the Acquiring Fund will acquire good and
marketable title thereto, subject to no restrictions on the full
transfer thereof, including such restrictions as might arise under the
1933 Act, other than as disclosed to the Acquiring Fund prior to the
date hereof.
7
<PAGE>
(m) The execution, delivery and performance of this Agreement has
been duly authorized by all necessary action on the part of Trust's
Trustees, and subject to the due approval of the Acquired Fund's
shareholders, this Agreement, assuming due authorization, execution and
delivery by the Acquiring Fund, constitutes a valid and binding
obligation of the Trust on behalf of the Acquired Fund, enforceable in
accordance with its terms, subject as to enforcement to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles. The
Trust's Board of Trustees has called a meeting of the Trust's
shareholders at which the shareholders of the Acquired Fund are to
consider and act upon this Agreement.
(n) The information furnished and to be furnished by the Trust on
behalf of the Acquired Fund for use in registration statements, proxy
materials and other documents which may be necessary in connection with
the transactions contemplated hereby shall be accurate and complete in
all material respects and shall comply in all material respects with
federal securities and other laws and regulations thereunder applicable
thereto.
(o) The combined prospectus and proxy statement (the "N-14
prospectus and proxy statement") and the related statement of additional
information included in the Registration Statement on Form N-14 of the
Acquiring Fund (the "N-14 Registration Statement") did not on the
effective date of the N-14 Registration Statement contain any untrue
statement of a material fact relating to the Acquired Fund or the
meeting of the Trust shareholders referred to therein or omit to state a
material fact required to be stated therein or necessary to make the
statements therein relating to the Acquired Fund or such special
meeting, in light of the circumstances under which such statements were
made, not materially misleading.
(p) The Acquiring Fund Class C Shares to be issued to the Acquired
Fund hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this
Agreement.
4.2. With respect to the Acquiring Fund, the Income Fund
represents and warrants to the Acquired Fund as follows:
(a) The Income Fund is a registered investment company classified
as a management company of the open-end type, and its registration with
the Commission as an investment company under the 1940 Act is in full
force and effect.
8
<PAGE>
(b) The Acquiring Fund is a series of the Income Fund. The Income
Fund is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland and has the power to
own all of its properties and assets and to carry out this Agreement.
(c) The current prospectus and statement of additional information
of the Income Fund conform (and any prospectus or statement of
additional information of the Income Fund issued prior to the Closing
Date will conform) in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not (and will not)
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
(or will be) made, not materially misleading.
(d) The Income Fund is not, and the execution, delivery and
performance of this Agreement will not result in, a material violation
of its Articles of Incorporation or By-laws or of any agreement,
instrument, contract or other undertaking to which the Income Fund is a
party or by which it is bound.
(e) The Income Fund has no material contracts or other commitments
which will be terminated with liability to the Income Fund on, prior to
or after the Closing Date.
(f) Except as otherwise disclosed in writing to and accepted by
the Acquired Fund, no litigation or administrative proceeding or
investigation before any court or governmental body is presently pending
or to its knowledge threatened against the Income Fund or any of the
Acquiring Fund's properties or assets, which, if adversely determined,
would materially and adversely affect its financial condition or the
conduct of its business. The Income Fund knows of no facts which might
form the basis of the institution of such a proceeding and is not party
to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions contemplated
herein.
(g) True and correct copies of the Acquiring Fund's (i) Statement
of Net Assets as at September 30, 1995, and (ii) Statements of Operation
and Changes in Net Assets for the 12-month period then ended, including
the accompanying notes, have been furnished to the Trust. Such Statement
of Net
9
<PAGE>
Assets and such Statements of Operations and Changes in Net Assets (and
the accompanying notes) have been audited by Deloitte & Touche LLP,
independent certified public accountants. Such statements have been
prepared in accordance with generally accepted accounting principles
consistently applied, and such statements fairly reflect the financial
condition and the operations and changes in net assets of the Acquiring
Fund as of such date and for such period, respectively. There are no
known contingent liabilities of the Acquiring Fund as of such date
required to be reflected or disclosed in such Statements of Net Assets
or notes in accordance with generally accepted accounting principles
that are not so reflected or disclosed.
(h) Since September 30, 1995, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary
course of business, or any incurrence by the Acquiring Fund of
indebtedness maturing more than one year from the date such indebtedness
was incurred, except as otherwise disclosed to and accepted by the
Acquired Fund.
(i) At the Closing Date, all federal and other tax returns and
reports of the Income Fund required by law to have been filed prior to
the Closing Date shall have been filed, and all federal and other taxes
shown as due on such returns and reports shall have been paid, or
provision shall have been made for the payment thereof, and to the best
of the Acquiring Fund's knowledge, no such return is currently under
audit and no assessment has been asserted with respect to such returns.
(j) For the most recent fiscal year of its operation, the
Acquiring Fund has met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company and the
Acquiring Fund intends to do so in the future.
(k) All issued and outstanding shares of the Acquiring Fund are,
and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable, with no personal liability
attaching to the ownership thereof. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any shares of the Acquiring Fund, nor is there outstanding any
security convertible into shares of the Acquiring Fund.
(l) At the Closing Date, the Acquiring Fund will have good and
marketable title to the Acquiring Fund's assets.
10
<PAGE>
(m) The execution, delivery and performance of this Agreement has
been duly authorized by all necessary action on the part of the Income
Fund's Board of Directors, and assuming due authorization, execution and
delivery by the Acquired Fund, this Agreement constitutes a valid and
binding obligation of the Income Fund on behalf of the Acquiring Fund,
enforceable in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights and to general equity
principles.
(n) The N-14 Registration Statement (except insofar as it relates
to the Acquired Fund or the special meeting of its shareholders referred
to therein) did not on the effective date of the N-14 Registration
Statement contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not materially misleading.
(o) The Acquiring Fund Class C Shares to be issued and delivered
to the Acquired Fund pursuant to the terms of this Agreement have been
duly authorized by the Board of Directors of the Income Fund, and, when
issued and delivered at the Closing in accordance with this Agreement,
will be duly and validly issued Acquiring Fund Class C Shares and will
be fully paid and non-assessable with no personal liability attaching to
the ownership thereof.
(p) The Board of Directors of the Income Fund has duly adopted (a)
articles of amendment to the Articles of Incorporation of the Income
Fund (i) authorizing the Board of Directors to create multiple classes
within series (which amendment has been duly approved by the
shareholders of the Income Fund) and (ii) designating the initial class
of shares, both outstanding and unissued shares, as Class A Shares and
(b) articles supplementary creating the Acquiring Fund Class C Shares.
Such articles have been duly filed with the State Department of
Assessments and Taxation of Maryland and copies of same have been
furnished to the Trust.
5. COVENANTS
5.1. The Acquiring Fund and the Acquired Fund each will operate
its business in the ordinary course between the date hereof and the Closing
Date. It is understood that such ordinary course of business will include the
declaration and payment of customary dividends and distributions and any other
dividends and distributions deemed advisable.
11
<PAGE>
5.2. At or after the Closing, the Trust will deliver or otherwise
make available to the Income Fund a statement of the Acquired Fund's assets and
liabilities, together with a list of the Acquired Fund's portfolio securities
showing the tax costs of such securities to it and the holding periods of such
securities, as of the Closing Date.
5.3. The Acquired Fund will assist the Acquiring Fund in obtaining
such information as the Acquiring Fund reasonably requests concerning the
beneficial ownership of the Acquired Fund's shares.
5.4. Subject to the provisions of this Agreement, the Acquired
Fund and the Acquiring Fund each will take, or cause to be taken, all action,
and do or cause to be done all things, reasonably necessary, proper or advisable
to consummate and make effective the transactions contemplated by this
Agreement.
5.5. Prior to the Closing Date, the Board of Trustees of the Trust
will declare such dividends and distributions, payable no later than [90] days
after the Closing Date, to shareholders of record of the Acquired Fund as of the
Closing Date, which, together with all such previous dividends and
distributions, shall have the effect of distributing to the shareholders of the
Acquired Fund all of the investment company taxable income and exempt-interest
income of the Acquired Fund for all taxable years ending on or prior to the
Closing Date. The dividends and distributions declared by the Acquired Fund
shall also include all of the Acquired Fund's net capital gain realized in all
taxable years ending on or prior to the Closing Date (after reduction for any
capital loss carry forward). Such dividends and distributions declared prior to
the Closing Date shall be paid by the Acquiring Fund no later than [90] days
after the Closing Date.
5.6. As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in
such form as is reasonably satisfactory to the Acquiring Fund, a statement of
the earnings and profits of the Acquired Fund for federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section 381 of
the Code.
5.7. The Acquired Fund will provide the Acquiring Fund with any
additional information reasonably necessary for any revision of the N-14
Prospectus and Proxy Statement referred to in paragraph 4.1(o), all to be
included in any amendment to the N-14 Registration Statement, in compliance with
the 1933 Act, the
12
<PAGE>
Securities Exchange Act of 1934 (the "1934 Act") and the 1940 Act in connection
with the meeting of the Acquired Fund's shareholders to consider approval of
this Agreement and the Reorganization.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST
The obligations of the Trust, on behalf of the Acquired Fund, to
consummate the transactions provided for herein shall be subject, at its
election, to the performance by the Income Fund in all material respects of all
of the obligations to be performed by it hereunder on or before the Closing Date
and, in addition thereto, the following further conditions:
6.1. All representations and warranties of the Income Fund
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
6.2. The Acquiring Fund shall have delivered to the Acquired Fund
a certificate executed in its name by its Chairman, President or a Vice
President and its Treasurer or an Assistant Treasurer, in form reasonably
satisfactory to the Acquired Fund and dated as of the Closing Date, to the
effect that the representations and warranties of the Income Fund made in this
Agreement are true and correct at and as of the Closing Date, except as they may
be affected by the transactions contemplated by this Agreement.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING
FUND
The obligations of the Income Fund, on behalf of the Acquiring
Fund, to consummate the transactions provided for herein shall be subject, at
its election, to the performance by the Trust in all material respects of all
the obligations to be performed by it hereunder on or before the Closing Date
and, in addition thereto, the following further conditions:
7.1. All representations and warranties of the Trust contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
13
<PAGE>
7.2. The Trust shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its Chairman, President or a
Vice President and its Treasurer or an Assistant Treasurer, in form and
substance satisfactory to the Acquiring Fund and dated as of the Closing Date,
to the effect that the representations and warranties of the Trust made in this
Agreement are true and correct at and as of the Closing Date, except as they may
be affected by the transactions contemplated by this Agreement.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
TRUST AND THE INCOME FUND
If any of the conditions set forth below do not exist on the
Closing Date with respect to the Acquiring Fund or the Acquired Fund, either
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1. This Agreement and the transactions contemplated herein shall
have been approved by the requisite vote of the holders of the outstanding
shares of the Acquired Fund in accordance with the provisions of the Trust's
Declaration and Agreement of Trust and By-laws. Notwithstanding anything herein
to the contrary, neither the Acquiring Fund nor the Acquired Fund may waive the
conditions set forth in this paragraph 8.1.
8.2. On the Closing Date, no action, suit or other proceeding
shall be pending before any court or governmental agency in which it is sought
to restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3. All consents of other parties and all other consents, orders,
rulings and permits of federal, state and local regulatory authorities
(including those of the Commission, the Internal Revenue Service and state Blue
Sky and securities authorities) deemed necessary by the Acquiring Fund or the
Acquired Fund to permit consummation, in all material respects, of the
transactions contemplated hereby shall have been obtained, except where failure
to obtain any such consent, order, ruling or permit would not involve a risk of
a material adverse effect on the assets or properties of the Acquiring Fund or
the Acquired Fund.
8.4. The N-14 Registration Statement shall have become effective
under the 1933 Act and no stop orders suspending the effectiveness thereof shall
have been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 1933 Act.
14
<PAGE>
8.5. The parties shall have received a favorable opinion of
Debevoise & Plimpton, addressed to the Income Fund and the Trust and
satisfactory to the Secretary of each such party, substantially to the effect
that for federal income tax purposes:
(a) the acquisition by the Acquiring Fund of all of the assets of
the Acquired Fund solely in exchange for the issuance of Acquiring Fund
Class C Shares to the Acquired Fund and the assumption of all of the
Acquired Fund liabilities by the Acquiring Fund, followed by the
distribution by the Acquired Fund, in complete liquidation, of the
Acquiring Fund Class C Shares to the Acquired Fund shareholders in
exchange for their Acquired Fund shares, will be treated as a
"reorganization" within the meaning of Section 368(a) of the Code, and
the Acquiring Fund and the Acquired Fund will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code;
(b) no gain or loss will be recognized by the Acquiring Fund upon
the receipt of the assets of the Acquired Fund in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of
liabilities of the Acquired Fund;
(c) no gain or loss will be recognized by the Acquired Fund upon
the transfer of the Acquired Fund's assets to the Acquiring Fund in
exchange for the Acquiring Fund Shares and the assumption by the
Acquiring Fund of liabilities of the Acquired Fund or upon the
distribution of the Acquiring Fund Shares to the Acquired Fund's
shareholders;
(d) no gain or loss will be recognized by shareholders of the
Acquired Fund upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares;
(e) the aggregate tax basis for the Acquiring Fund Shares received
by each of the Acquired Fund's shareholders pursuant to the
Reorganization will be the same as the aggregate tax basis of the
Acquired Fund shares held by such shareholder immediately prior to the
Reorganization, and the holding period of the Acquiring Fund Shares to
be received by each Acquired Fund shareholder will include the period
during which the Acquired Fund shares exchanged therefor were held by
such shareholder (provided that the Acquired Fund shares were held as
capital assets on the date of the Reorganization); and
(f) the tax basis of the Acquired Fund's assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization, and the holding
15
<PAGE>
period of the assets of the Acquired Fund in the hands of the Acquiring
Fund will include the period during which those assets were held by the
Acquired Fund.
Notwithstanding anything herein to the contrary, neither the Income Fund
nor the Trust may waive the conditions set forth in this paragraph 8.5.
8.6. The Acquiring Fund shall have duly adopted a Rule 12b-1 Plan for
the Acquiring Fund Class C Shares acceptable to the Trust.
9. BROKERAGE FEES AND EXPENSES
9.1. The Income Fund represents and warrants to the Acquired Fund,
and the Trust represents and warrants to the Acquiring Fund, that there are no
brokers or finders entitled to receive any payments in connection with the
transactions provided for herein.
9.2. Except as may be otherwise provided herein, the Acquiring Fund and
the Acquired Fund each shall pay, or provide for the payment of, the expenses
incurred by it in connection with entering into and carrying out the provisions
of this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. The parties hereto agree that no party has made any
representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement between the parties.
10.2. None of the representations and warranties included or provided
for herein shall survive the consummation of the transactions contemplated
hereby.
11. TERMINATION
11.1. This Agreement may be terminated at any time prior to the Closing
Date: (1) by the mutual agreement of the Trust and the Income Fund; (2) by the
Trust in the event that the Income Fund shall, or by the Income Fund in the
event that the Trust shall, materially breach any representation or warranty
contained herein or any agreement contained herein and to be performed at or
prior to the Closing Date; or (3) by either party if a condition herein
expressed to be precedent to the obligations of the terminating party has not
been met and it reasonably appears that it will not or cannot be met.
16
<PAGE>
11.2. In the event of any such termination, there shall be no liability
for damages on the part of either the Trust, the Income Fund, the Acquired Fund
or the Acquiring Fund or their respective Trustees, Directors or officers to the
other party, but the Acquiring Fund and the Acquired Fund shall each bear, or
provide for the payment of, the expenses incurred by it incidental to the
preparation and carrying out of this Agreement as provided in paragraph 9.2.
12. AMENDMENTS; WAIVERS
12.1. This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
the Trust and the Income Fund; provided, however, that following the approval of
the Acquired Fund shareholders referred to in paragraph 8.1, no such amendment
may have the effect of changing the provisions for determining the number of the
Acquiring Fund Class C Shares to be issued to the Acquired Fund's shareholders
under this Agreement to the detriment of such shareholders without their further
approval.
12.2. At or at any time prior to the Closing either party hereto may by
written instrument signed by it (i) waive any inaccuracies in the
representations and warranties made to it contained herein and (ii) waive
compliance with any of the covenants or conditions made for its benefit
contained herein.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by personal
delivery addressed to Lord Abbett Securities Trust on behalf of its series Lord
Abbett National Tax-Free Income Trust, 767 Fifth Avenue, New York, New York,
10153, Attention: Office of the Secretary; or to Lord Abbett Tax-Free Income
Fund, Inc. on behalf of its National Series, 767 Fifth Avenue, New York, New
York, 10153, Attention: Office of the Secretary.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
14.1. The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
17
<PAGE>
14.3. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
14.4. (a) This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm, corporation or other entity, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason of
this Agreement.
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<PAGE>
(b) The Acquiring Fund is hereby expressly put on notice of the
limitation of liability as set forth in Article IV of the Declaration and
Agreement of Trust of the Trust and agrees that the obligations assumed by the
Trust pursuant to this Agreement shall be limited in any case to the Acquired
Fund and its assets and the Income Fund shall not seek satisfaction of any such
obligation from the shareholders of the Trust, the trustees, officers, employees
or agents of the Trust or any of them or from any other assets of the Trust.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its Chairman of the Board, President or Vice President and
attested by its Secretary or Assistant Secretary.
Attest: LORD ABBETT SECURITIES TRUST
on behalf of Lord Abbett National Tax-Free
Income Trust
By: _______________________________
Name: _____________ Name:
Title: Secretary Title:
Attest: LORD ABBETT TAX-FREE INCOME FUND,
INC. on behalf of the National Series
By: _______________________________
Name: _____________ Name:
Title: Secretary Title:
19
<PAGE>
EXHIBIT B
---------
Comparison of Certain Investment Policies and Restrictions
Comparison of fundamental and certain non-fundamental investment
policies and restrictions of Lord Abbett National Tax-Free Income Trust (the
"Acquired Fund"), a series of Lord Abbett Securities Trust, and Lord Abbett
Tax-Free Income Fund, Inc. (the "Acquiring Fund") and of the Acquiring Fund as
proposed to be revised.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Policy/Restriction of the Policy/Restriction of the Proposed Policy/Restriction of
Acquired Fund Acquiring Fund the Acquiring Fund
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT SALES/MARGIN.
Fundamental Fundamental Non-fundamental
Subject to certain exceptions, the The Fund may not sell short or buy The Fund may not make short sales of
Fund may not sell short or buy on on margin, although it may obtain securities or maintain a short position
margin. short-term credit necessary for the except to the extent permitted by
clearance of the purchase of applicable law.
securities.
Fundamental
The Fund may purchase securities on
on the margin to the extent permitted
by applicable law.
- ------------------------------------------------------------------------------------------------------------------------------------
BORROWING.
Fundamental Fundamental Fundamental
The Fund may not borrow money, Subject to certain exceptions, the The Fund may not borrow money,
unless such borrowing does not Fund may not borrow money except except that (i) the Fund may borrow
exceed the asset coverage as a temporary measure for from banks (as defined in the 1940
requirements of Section 18(f) of the extraordinary or emergency purposes Act) in amounts up to 33 1/3% of its
Act and unless such borrowing on and then not in excess of 5% of gross total assets (including the amount bor-
behalf of the Fund shall be a liability assets (at cost or market value, rowed), (ii) the Fund may borrow up
of the Fund, as the case may be. whichever is lower) at the time of to an additional 5% of its total assets
borrowing. for temporary purposes, and (iii) the
Fund may obtain such short-term
credit as may be necessary for the
clearance of purchases and sales of
portfolio securities.
Non-fundamental
The Fund may not borrow in excess of
5% of its gross assets taken at cost
or market value, whichever is lower at
the time of borrowing, and then only
as a temporary measure for
extraordinary or emergency purposes.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Policy/Restriction of the Policy/Restriction of the Proposed Policy/Restriction of
Acquired Fund Acquiring Fund the Acquiring Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
UNDERWRITING.
Fundamental Fundamental Fundamental
The Fund may not engage in the The Fund may not engage in the The Fund may not engage in the
underwriting of securities, except underwriting of securities unless it is underwriting of securities, except,
pursuant to a merger or acquisition or deemed to be an underwriter in pursuant to a merger or acquisition or
to the extent that, in connection with selling a portfolio security requiring to the extent that, in connection with
the disposition of its portfolio secu- registration under federal securities the disposition of its portfolio secur-
rities, it may be deemed to be an laws. ities, it may be deemed to be an
underwriter under federal securities underwriter under federal securities
laws. laws.
- ------------------------------------------------------------------------------------------------------------------------------------
LENDING.
Fundamental Fundamental Fundamental
The Fund may not lend money or The Fund may not make loans, except The Fund may not make loans to
securities to any person, except that it for the purchase of debt securities in other persons, except that the acqui-
may lend money for the purchase debt which it may invest consistent with its sition of bonds, debentures or other
securities in which it may invest investment objective and policies. corporate debt securities and invest-
consistent with its investment ment in government obligations, com-
objectives and policies. mercial paper, pass-through instru-
ments, certificates of deposit,
bankers acceptances, repurchase
agreements or any similar instruments
shall not be subject to this
limitation, and except further that
the Fund may lend its portfolio
securities, provided that the lending
of portfolio securities may be made
only in accordance with applicable
law.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Policy/Restriction of the Policy/Restriction of the Proposed Policy/Restriction of
Acquired Fund Acquiring Fund the Acquiring Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
REAL ESTATE/COMMODITIES.
Fundamental Fundamental Fundamental
The Fund may not deal in real estate, The Fund may not deal in oil, gas or The Fund may not buy or sell real
commodities or commodity contracts, mineral leases, real estate, com- estate (except that the Fund may in
excluding the securities of companies modities or commodity contracts vest in securities directly or indirectly
which deal in or hold real estate or (except that the Fund may invest in secured by real estate or interests
commodities. securities issued by companies which therein or issued by companies which
invest in real estate or interests invest in real estate or interests
therein). therein) or commodities or commodity
contracts (except to the extent the
Fund 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).
Non-fundamental
The Fund may not invest in real estate
limited partnership interests or
interests in oil, gas or other mineral
leases, or exploration or other
development programs, except that the
Fund may invest in securities issued
by companies that engage in oil, gas
or other mineral exploration or
development activities.
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFICATION.
Fundamental Fundamental Fundamental
The Fund may not buy securities of With respect to 75% of its gross
None one issuer representing more than (i) assets, the Fund may not buy securi-
5% of its gross assets of market value ties of one issuer representing more
on time of purchase except securities than (i) 5% of its gross assets, except
issued or guaranteed by the U.S. securities issued or guaranteed by the
Government, its agencies or U.S. Government, its agencies or in-
instrumentalities or (ii) 10% of the strumentalities, or (ii) 10% of the
voting securities of such issuer. voting securities of such issuer.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Policy/Restriction of the Policy/Restriction of the Proposed Policy/Restriction of
Acquired Fund Acquiring Fund the Acquiring Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT IN A SINGLE
INDUSTRY.
Fundamental Fundamental Fundamental
The Fund may not concentrate its The Fund may not invest more than The Fund may not invest more than
investments in any single industry, 25% of its assets in any one industry, 25% of its assets, taken at market
excluding U.S. Government except with regard to investments in value, in the securities of issuers in
securities, except that the Fund may tax-exempt securities. any particular industry (excluding (i)
invest more than 25% of its gross tax-exempt securities, such as those
assets taken at market value in tax- financing facilities in the same
exempt securities. industry or issued by non-
governmental users and (ii) the
securities of the U.S. Government, its
agencies or instrumentalities).
- ------------------------------------------------------------------------------------------------------------------------------------
RESTRICTED/ILLIQUID SECURITIES.
Non-fundamental Fundamental Non-fundamental
The Fund may not invest more than The Fund may not invest more than The Fund may not invest, knowingly,
15% of its total assets in restricted or 10% of its net assets in illiquid more than 15% of its net assets (at
illiquid securities, except, subject to securities, except, subject to state the time of investment) in illiquid
state law, for securities qualifying for law, for securities qualifying for securities, except for securities
resale under Rule 144A of the resale under Rule 144A of the qualifying for resale under Rule 144A
Securities Act of 1933, deemed to be Securities Act of 1933, deemed to be of the Securities Act of 1933, deemed
liquid by the Board of Trustees. liquid by the Board of Directors. to be liquid by the Board of
Directors.
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGING AND PLEDGING
OF ASSETS.
Fundamental Fundamental Fundamental
The Fund may not, with certain The Fund may not, with certain The Fund may not pledge its assets
exceptions, pledge, mortgage or exceptions, pledge, mortgage or (other than to secure borrowings, or
hypothecate its assets. hypothecate its assets. to the extent permitted by the Fund's
investment policies, as permitted by
applicable law).
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
OF OTHER INVESTMENT COMPANIES.
Fundamental Fundamental Non-fundamental
The Fund may, with certain The Fund may not invest in the The Fund may not invest in the
exceptions, not invest in the securities securities of other investment securities of other investment
of other investment companies. companies, except pursuant to a companies, except as permitted by
merger, acquisition or consolidation. applicable law.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Policy/Restriction of the Policy/Restriction of the Proposed Policy/Restriction of
Acquired Fund Acquiring Fund the Acquiring Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
OPTIONS.
Fundamental Fundamental Non-fundamental
The Fund may not buy or sell puts or The Fund may not buy or sell put, The Fund may not write, purchase or
calls, straddle or spread options call, straddle or spread options, sell puts, calls, straddles, spreads or
although the Fund may buy, hold or except that the Fund may buy, hold or combinations thereof, except to the
sell options and financial futures, and sell options and financial futures. extent permitted in the Fund's
buy or sell oil, gas and mineral prospectus and statement of additional
leases. information, as they may be amended
from time to time.
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
OF ISSUERS IN OPERATION
FOR LESS THAN THREE YEARS.
Non-fundamental
None. None. The Fund may not invest in securities
of issuers which, with their
predecessors, have a record of less
than three years continuous
operations, except if more than 5% of
the Fund's total assets would be
invested in such securities (this
restriction shall not apply to
mortgage-backed securities, asset-
backed securities or obligations issued
or guaranteed by the U.S.
Government, its agencies or
instrumentalities).
- ------------------------------------------------------------------------------------------------------------------------------------
OWNERSHIP OF PORTFOLIO
SECURITIES BY OFFICERS AND
DIRECTORS.
Fundamental Fundamental Non-fundamental
The Fund may not hold securities of The Fund may not hold securities of The Fund may not hold securities of
any issuer if more than1/2of 1% of any issuer if more than1/2of 1% of any issuer if more than1/2of 1% of
the securities of such issuer are the securities of such issuer are the securities of such issuer are
owned beneficially by one or more owned beneficially by one or more owned beneficially by one or more
officer or Trustee or by one or more officer or director or by one or more officers or Directors or by one or
partners of the underwriter of partners of the investment adviser if more members or partners of the
investment advisor if together they together they own more than 5% of underwriter or investment advisor if
own more than 5% of the securities of the securities of such issuer. together they own more than 5% of
such issuer. the securities of such issuer.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Policy/Restriction of the Policy/Restriction of the Proposed Policy/Restriction of
Acquired Fund Acquiring Fund the Acquiring Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
TRANSACTIONS WITH CERTAIN PERSONS.
Fundamental Fundamental Non-fundamental
The Fund, subject to certain The Fund, subject to certain excep- The Fund may not buy from or sell to
exceptions, may not engage in tions, may not engage in securities any of its officers, directors,
securities transactions with its officers transactions with its officers, directors employees, or its investment adviser
or directors, investment adviser or and employees, investment adviser or or any or its officers, directors,
with its partners and employees other with its partners and employees other partners or employees, any securities
than capital stock of the Fund. than capital stock of the Fund. other than shares of the Fund's
common stock.
- ------------------------------------------------------------------------------------------------------------------------------------
SENIOR SECURITIES.
Fundamental Fundamental Fundamental
The Fund may not issue senior
The Fund may not issue senior The Fund may not issue senior securities to the extent such issuance
securities. securities. would violate applicable law.
- ------------------------------------------------------------------------------------------------------------------------------------
PURCHASE OF WARRANTS.
Non-fundamental Non-fundamental
None. Pursuant to state regulations, the Fund The Fund may not invest in warrants
will not invest more than 5% of its if, at the time of the acquisition, its
net assets in warrants or more than investment in warrants, valued at the
2% in warrants not listed on the New lower of cost or market, would
York or American Stock Exchanges, exceed 5% of the Fund's total assets
except when they form a unit with (included within such limitation, but
other securities. As a matter of not to exceed 2% of the Fund's total
operating policy, the Fund will not assets, are warrants which are not
invest more than 5% of its net assets listed on the New York or American
in rights. Stock Exchange or a major foreign
exchange).
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION DATED APRIL 24, 1996
Acquisition of the Assets of
Lord Abbett National Tax-Free Income Trust, a series of
Lord Abbett Securities Trust
The General Motors Building, 767 Fifth Avenue
New York, NY 10153
by and in exchange for Class C Shares of
National Series, a series of
Lord Abbett Tax-Free Income Fund, Inc.
The General Motors Building, 767 Fifth Avenue
New York, NY 10153
This Statement of Additional Information, relating specifically to the
proposed transfer of the assets of Lord Abbett National Tax-Free Income Trust
(the "Acquired Fund"), a series of Lord Abbett Securities Trust (the "Trust"),
to the National Series (the "Acquiring Fund"), a series of Lord Abbett Tax-Free
Income Fund, Inc. (the "Income Fund") in exchange for Class C shares of the
Acquiring Fund and the assumption by the Acquiring Fund of the liabilities of
the Acquired Fund, consists of this page and the following described documents,
each of which accompanies this Statement of Additional Information and is
incorporated herein by reference:
1. Statement of Additional Information of the Acquiring Fund dated
February 1, 1996.
2. Statement of Additional Information of the Trust dated March 1,
1996, insofar as it relates to the Acquired Fund.
3. The financial statements of the Acquiring Fund for the fiscal year
ended September 30, 1995, and the report thereon of Deloitte & Touche LLP,
independent public accountants, contained in the 1995 Annual Report of the
Acquiring Fund.
4. The financial statements of the Acquired Fund for the fiscal year
ended October 31, 1995, and the report thereon of Deloitte & Touche LLP,
independent public accountants, contained in the 1995 Annual Report of the
Acquired Fund.
The financial statements referred to above are incorporated herein in
reliance upon the authority of Deloitte & Touche LLP as experts in auditing and
accounting. This Statement of Additional Information is not a prospectus. A
Proxy Statement and Prospectus dated the date hereof relating to the
above-referenced matter may be obtained without charge by writing the Acquiring
Fund at the address set forth above or by calling 1-800-874-3733. This Statement
of Additional Information should be read in conjunction with such Proxy
Statement and Prospectus.
B-1
<PAGE>
PART C
Item 16. Exhibits
11. Opinion of Debevoise & Plimpton as to the legality of
securities being issued and Consent; filed herewith.
17. Prospectus and Statement of Additional Information of Lord
Abbett Securities Trust, dated March 1, 1996, incorporated
herein by reference to Post Effective Amendment No. 10 to
Registration Statement on Form N-1A of Lord Abbett
Securities Trust (File Nos. 33-58846 and 811-7538) filed on
or about February 29, 1996.
C-1
<PAGE>
SIGNATURES
*Post-effective amendment No. 1 to this Registration Statement has been
signed on behalf of the Registrant in the City of New York and State of New York
on the 24 day of April 1996, who certifies that this Post-Effective Amendment
No. 1 meets all the requirements for effectiveness under paragraph (b) of Rule
485 under the Securities Act of 1933, as amended.
LORD ABBETT TAX-FREE INCOME FUND, INC.
By:/s/ Ronald P. Lynch
---------------
Ronald P. Lynch
Chairman of the Board
*Post-Effective Amendment No. 1 to this Registration Statement has
been signed by the following persons in the capacities indicated and on the
dates indicated.
Signature Title Date
--------- ----- ----
/s/ Ronald P. Lynch Chairman of the Board
- ----------------------------- and Director 4/24/96
Ronald P. Lynch
/s/ Robert S. Dow President and Director
- ----------------------------- 4/24/96
Robert S. Dow
/s/ John J. Gargana, Jr. Vice President and
- ----------------------------- Chief Financial Officer 4/24/96
John J. Gargana, Jr.
/s/ E. Thayer Bigelow Director
- ----------------------------- 4/24/96
E. Thayer Bigelow
/s/ Director
- ----------------------------- -----------
Stewart S. Dixon
/s/ Director
- ----------------------------- -----------
John C. Jansing
/s/ C. Alan MacDonald Director
- ----------------------------- 4/24/96
C. Alan MacDonald
/s/ Director
- ----------------------------- -----------
Hansel B. Millican, Jr.
s/ Thomas J. Neff Director
- ----------------------------- 4/24/96
Thomas J. Neff
/s/ E. Wayne Nordberg Director
- ----------------------------- 4/24/96
E. Wayne Nordberg
EXHIBIT INDEX
The following exhibits are filed as a part of this Registration
Statement pursuant to General Instruction G of Form N-14.
Exhibit Page
Number Description Number
- ------ ----------- ------
(11) Opinion of Debevoise & Plimpton as to
legality of securities being issued and
Consent.
<PAGE>
SCHEDULE A
----------
The Lord Abbett - Sponsored Funds
Establishing Multi-Class Structures
-----------------------------------
Lord Abbett Affiliated Fund, Inc.
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Global Fund, Inc.
Equity Series
Income Series
Lord Abbett Investment Trust
Lord Abbett Balanced Series
Lord Abbett Limited Duration U.S. Government Securities Series
Lord Abbett U.S. Government Securities Series
Lord Abbett Securities Trust
Lord Abbett Growth & Income Trust
Lord Abbett Tax-Free Income Fund, Inc.
California Series
National Series
New York Series
Lord Abbett Tax-Free Income Trust
Florida Series
Lord Abbett U.S. Government Securities Money Market Fund, Inc.
Exhibit 11
Debevoise & Plimpton
April 24, 1996
Lord Abbett Tax-Free Income Fund, Inc.
The General Motors Building
767 Fifth Avenue
New York, New York 10153
Lord Abbett Tax-Free Income Fund, Inc.
Registration Statement on Form N-14
--------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Lord Abbett Tax-Free Income Fund, Inc.
(the "Registrant"), a Maryland corporation trust, in connection with the
preparation and filing with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, of a Registration Statement on Form N-14
(File No. 811-3942) and Post-Effective Amendment No. 1 thereto (as so amended,
the "Registration Statement"), relating to the issuance of shares of the capital
stock of the National Series, currently referred to in the Registrant's Articles
of Incorporation as the Tax-Exempt Class (the "Acquiring Fund"), a series of the
Registrant.
Such shares are to be established and designated as the Class C shares
(the "Class C shares"). The Class C shares are to be issued to Lord Abbett
National Tax-Free
<PAGE>
Lord Abbett Tax-Free Income Fund, Inc.
Page 2
Income Trust (the "Acquired Trust"), a series of Lord Abbett Securities Trust
(the "Securities Trust"), a Delaware business trust, pursuant to an Agreement
and Plan of Reorganization (the "Acquired Trust Plan") between the Registrant,
on behalf of the Acquiring Fund, and the Securities Trust, on behalf of the
Acquired Trust, substantially in the form of Exhibit A included in Part A of the
Registration Statement. Such issuance of the Class C shares is to be made in
connection with the acquisition by the Acquiring Fund of the assets of, and the
assumption by the Acquiring Fund of the liabilities of, the Acquired Trust.
In so acting, we have examined and relied upon the originals, or
copies certified or otherwise identified to our satisfaction, of such documents,
records, certificates and other instruments and have made such other investi
gations as in our judgment are necessary or appropriate to enable us to render
the opinion expressed below. We have not, however, undertaken any independent
investigation of any factual matter set forth in any of the foregoing.
Based on the foregoing, we are of the following opinion:
Assuming that the Acquired Trust and the Acquiring Fund duly execute and
deliver the Acquired Trust Plan, that the Acquired Trust Plan and the
reorganization provided for thereby are duly approved by the shareholders of the
Acquired Trust, that the transactions contemplated by the Acquired Trust Plan
are duly consummated and that the charter documents substantially in the forms
of Exhibits 1(f), 1(g) and 1(h) to the Registration Statement are duly approved
and filed with the State Department of Assessments and Taxation of Maryland, the
Class C shares issued pursuant to the Acquired Trust Plan will be legally
issued, fully paid and non-assessable.
We understand that the authorized shares of capital stock of each
series and of each class of each series of the Registrant are sufficient for the
issuance of the Class C shares that would be issued pursuant to the Acquired
Trust Plan if the closing under such Plan took place today. The foregoing
opinion assumes that if, pending such closing, additional authorized shares are
required, the Registrant will amend its Articles of Incorporation to provide for
such authorized shares.
<PAGE>
Lord Abbett Tax-Free Income Fund, Inc.
Page 3
This opinion is limited solely to the federal law of the United States
and the Maryland General Corporation Law as in effect on the date hereof and the
relevant facts that exist as of the date hereof. Without limiting the
generality of the foregoing, we express no opinion concerning other laws of the
State of Maryland, including the securities laws of such state, or the laws of
any other jurisdiction other than the United States. No assurance can be given
that the law or facts will not change, and we have not undertaken to advise you
or any other person with respect to any event subsequent to the date hereof.
We are delivering this opinion to you and, without our prior written
consent, no other persons are entitled to rely on this opinion. We consent to
the filing of this opinion as an Exhibit to the Registration Statement. In
giving such consent, we do not thereby concede that we are within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933 or the Rules and Regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
/s/ Debevoise & Plimpton
