<PAGE>
LORD
ABBETT Equity Series
GLOBAL FUND, INC. Income Series
May 1, 1999
[LOGO]
As with all mutual funds, the Securities and Exchange Commission does not
guarantee that the information in this prospectus is accurate or complete, and
it has not judged these funds for investment merit. It is a criminal offense
to state otherwise.
Class P shares of the Income Fund are currently offered by this prospectus.
Class P shares of the Equity Fund are neither offered to the general public
nor available in all states.
Please call 800-821-5129 for further information.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
THE FUNDS Page
<S> <C> <C>
Information about the goal/ Equity Fund 2
strategy, main risks, past Income Fund 5
performance, fees and expenses
YOUR INVESTMENT
Information for managing Purchases 9
your fund account Opening Your Account 11
Redemptions 12
Distributions and Taxes 12
Services For Fund Investors 13
Sales Charges and Service Fees 14
Management 15
FOR MORE INFORMATION
How to learn more Other Investment Techniques 16
about the funds Glossary of Shaded Terms 17
Recent Performance 19
FINANCIALINFORMATION
Financial highlights and line Equity Fund 20
graph comparison of each fund Income Fund 22
Compensation For Your Dealer 24
How to learn more about the Back Cover
funds and other Lord Abbett funds
</TABLE>
<PAGE>
GOAL/STRATEGY
The fund seeks long-term growth of capital and income consistent with
reasonable risk. The production of current income is a secondary
consideration. To pursue its goal, the fund primarily invests in the common
stocks of domestic and foreign companies in sound financial condition which
are expected to show above-average price appreciation. The fund attempts to
invest in companies well positioned within their industries that represent
the best value. We generally try to sell securities we believe to be
overvalued and reinvest the proceeds in other securities we deem to offer
better value. Under normal circumstances, the fund will invest its total
assets in domestic and foreign securities with at least 65% of such assets
invested in equity securities primarily traded in at least three countries
(including the United States).
The fund may take a temporary defensive position by investing in domestic
securities, in securities primarily traded in fewer than three foreign
countries, or in debt securities with more than 35% of the fund's total
assets. This could prevent the fund from realizing its investment objective.
MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they fluctuate in price. In addition, because the fund invests in foreign
securities, the fund faces certain risks that are not normally involved in
investments in U.S. securities. Foreign securities are not subject to the
same degree of regulation as securities traded in the U.S. markets, and
there may be less reliable information about the issuers of the securities.
Foreign securities may experience greater price fluctuations and be less
liquid than U.S. securities. In addition, there is the risk that unfavorable
changes in currency exchange rates could reduce the fund's share price. The
fund may, but is not required to, attempt to hedge these currency risks
through the use of foreign currency forwards and options. Such hedges, if
used, may not work as planned, however. Other concerns include political and
social instability, expropriations, higher transaction costs, currency
fluctuations, nondeductible withholding taxes and different settlement
practices.
An investment in the fund is not a bank deposit. It is not FDIC-insured
or government-endorsed. It is not a complete investment program. You could
lose money in this fund.
WE OR THE FUND refers to Equity Series ("Equity Fund"), a series of Lord Abbett
Global Fund, Inc. (the "company"), which operates under the supervision of the
company's Board, with the advice of Lord, Abbett & Co.("Lord Abbett"), its
investment manager.
ABOUT THE FUND. The fund is a professionally managed portfolio primarily holding
securities purchased with the pooled money of investors. It strives to reach its
stated goal, although as with all funds, it cannot guarantee results.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies, and their risks, used
by the fund.
2 The Funds
<PAGE>
Symbols: Class A - LAGEX
Class B - LAGBX
Class C - LAGCX
PAST PERFORMANCE
The information below provides some indication of the risks of investing in
the fund by showing changes in the fund's class A shares' performance from
calendar year to calendar year and by showing how the fund's average annual
returns compare with those of a broad measure of market performance. Past
performance is not a prediction of future results.
[PERFORMANCE GRAPH]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------------
17.7% -12.1% 14.8% -1.7% 26.0% -0.1% 9.2% 8.4% 8.0% 9.1%
</TABLE>
Best Quarter: 4th Q '98 19.08%
Worst Quarter: 3rd Q '98 (18.35)%
The table below shows a comparison of the fund's class A, B and C average annual
total return to that of the Morgan Stanley World Index ("MSWI"). Fund returns
assume reinvestment of all dividends and distributions and payment of the
maximum applicable front-end or deferred sales charge. All periods end on
December 31, 1998.
<TABLE>
<CAPTION>
CLASS 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION(i) MSWI(ii)
<S> <C> <C> <C> <C> <C>
A 2.80% 5.58% 6.80% 7.07% 12.10%(iii)
- ---------------------------------------------------------------------------------------
B 3.37% - - 7.27% 21.63%(iv)
- ---------------------------------------------------------------------------------------
C 7.36% - - 8.47% 21.63%(iv)
- ---------------------------------------------------------------------------------------
MSWI 24.80% 16.19% 11.21% - -
- ---------------------------------------------------------------------------------------
</TABLE>
(i) The dates of inception for each class are: A - 9/30/88; B - 8/1/96;
and C - 8/1/96.
(ii) Performance for the Morgan Stanley World Index does not reflect
transaction costs or management fees.
(iii) Represents total returns for the period 9/30/88 to 12/31/98, to correspond
with class A inception date.
(iv) Represents total returns for the period 8/31/96 to 12/31/98, to correspond
with class B and C inception date.
The Funds 3
<PAGE>
Symbols: Class A - LAGEX
Class B - LAGBX
Class C - LAGCX
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the fund.
<TABLE>
<CAPTION>
=================================================================================================
FEE TABLE
- -------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS P
<S> <C> <C> <C> <C>
SHAREHOLDER FEES (Fees paid directly from your investment)
- -------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- -------------------------------------------------------------------------------------------------
(as a % of offering price) 5.75% none none none
- -------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (See "Purchases") none 5.00%(1) 1.00% none
- -------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (Expenses deducted from fund assets) (as a % of
average net assets)(2)
- -------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.75% 0.75% 0.75% 0.75%
- -------------------------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees(3) 0.35% 1.00% 1.00% 0.45%
- -------------------------------------------------------------------------------------------------
Other Expenses 0.62% 0.62% 0.62% 0.62%
- -------------------------------------------------------------------------------------------------
Total Operating Expenses 1.72% 2.37% 2.37% 1.82%
- -------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
This example, like that in other funds' prospectuses, assumes a $10,000 initial
investment at maximum sales charge, if any, 5% total return each year and no
changes in expenses. You pay the following expenses over the course of each
period shown if you sell your shares at the end of the period, although your
actual cost may be higher or lower. The expenses include any applicable
contingent deferred sales charges.
<TABLE>
<CAPTION>
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A shares $740 $1,085 $1,454 $2,491
- -------------------------------------------------------------------------------------------------
Class B shares $740 $1,039 $1,465 $2,546
- -------------------------------------------------------------------------------------------------
Class C shares $340 $ 739 $1,265 $2,707
- -------------------------------------------------------------------------------------------------
Class P shares $185 $ 572 $ 985 $2,139
- -------------------------------------------------------------------------------------------------
You would pay the following expenses on the same investment, assuming you kept your
shares.
Class A shares $740 $1,085 $1,454 $2,491
- -------------------------------------------------------------------------------------------------
Class B shares $240 $ 739 $1,265 $2,546
- -------------------------------------------------------------------------------------------------
Class C shares $240 $ 739 $1,265 $2,707
- -------------------------------------------------------------------------------------------------
Class P shares $185 $ 572 $ 985 $2,139
- -------------------------------------------------------------------------------------------------
</TABLE>
This example is for comparison and is not a representation of the fund's actual
expenses or returns, either past or present.
MANAGEMENT FEES are payable to Lord Abbett for the fund's investment
management.
12B-1 FEES refer to fees incurred for activities that are primarily intended to
result in the sale of fund shares and service fees for shareholder account
services and maintenance.
OTHER EXPENSES include fees paid for miscellaneous items such as shareholder
services and professional fees.
- ------------------------------------------------------------------------------
(1) Class B shares will convert to class A shares on the eighth anniversary of
your original purchase of class B shares.
(2) The annual operating expenses have been restated from fiscal year amounts
to reflect current fees.
(3) Because 12b-1 distribution fees are paid out on an ongoing basis, over
time they will increase the cost of your investment and may cost you
more than paying other types of sales charges.
4 The Funds
<PAGE>
GOAL/STRATEGY
The fund seeks high current income consistent with reasonable risk. Capital
appreciation is a secondary consideration.
To pursue its goal, the fund primarily invests in high-quality debt
securities. These high-quality debt securities consist of those securities
rated within one of the two highest grades assigned by Standard & Poor's
Ratings Services ("S&P") or Moody's Investor Services, Inc. ("Moody's"). The
fund invests primarily in securities issued or guaranteed by governments
(including the United States), their political subdivisions, authorities,
agencies or instrumentalities, foreign government related issuers and
supranational organizations. Under normal circumstances, the fund will
invest at least 65% of such assets invested in long-term debt securities.
Normally, the weighted average life of the fund's portfolio will vary based
on our perception of the relationship between the return potential and the
maturities of the securities, among other factors.
Although the fund is subject to no prescribed limits on geographic asset
distribution, under normal circumstances, at least 65% of its assets will be
invested in at least three different countries, including the United States.
The fund will select which countries and currencies it will invest in based
on its perception of the best opportunities for an attractive return
consistent with its objective. The fund's choices will be based on analysis
of fixed-income market returns, price appreciation of fixed-income
obligations, equity securities and currency exchange-rate movements.
The fund may hold foreign currencies to meet settlement requirements
relating to the purchase of foreign securities. The fund also may effect
currency exchange transactions, including agreements to exchange one
currency for another at a future date, known as forward foreign currency
contracts. The fund may use currency exchange transactions to try to protect
against uncertainties in the levels of future exchange rates between
particular foreign currencies and the U.S. dollar or between foreign
currencies in which portfolio securities are or may be denominated. The fund
also may use these transactions as an efficient way to gain exposure to
short-term interest rates in a particular country instead of investing in
securities denominated in the country's currency.
The fund may take a temporary defensive position by investing in securities
primarily traded in fewer than three countries or in equity or short-term
debt securities with more than 35% of the fund's total assets. Consequently,
the market prices of long-term debt securities tend to be more volatile than
those of short-term debt securities when interest rates change. This could
prevent the fund from realizing its investment objective.
The fund may engage in active and frequent trading of its portfolio
securities to achieve its principal investment strategies and can be
expected to have portfolio turnover rates substantially in excess of 100%.
For the fiscal year ended December 31, 1998, the portfolio turnover rate for
the Income Fund was 359%. These rates vary year to year. High turnover
increases transaction costs and may increase taxable capital gains.
WE OR THE FUND refers to Income Series ("Income Fund"), a series of Lord Abbett
Global Fund, Inc. (the "company"), which operates under the supervision of the
company's Board, with the advice of Lord, Abbett & Co.("Lord Abbett"), its
investment manager.
ABOUT THE FUND. The fund is a professionally managed portfolio primarily holding
securities purchased with the pooled money of investors. It strives to reach its
stated goal, although as with all funds, it cannot guarantee results.
SUPRANATIONAL ORGANIZATIONS are entities designated or supported by one or more
governments or governmental entities to promote economic development. Examples
include the Asian Development Bank, the European Coal and Steel Community, the
European Economic Community and the World Bank.
The Funds 5
<PAGE>
MAIN RISKS
The fund faces interest rate risk, the risks involved with foreign
securities, and, to a lesser degree, credit risk.
INTEREST RATE RISK. Generally, the prices of fixed-income securities rise
when interest rates fall and fall when interest rates rise. Longer-term
bonds are usually more sensitive to interest rate changes. Put another way,
the longer the maturity of a bond or other debt security, the greater the
effect a change in interest rates is likely to have on the instrument's
price.
FOREIGN SECURITIES. Because it invests in foreign securities, the fund faces
the risk that unfavorable changes in currency exchange rates could reduce
its share price. The fund may, but is not required to, attempt to hedge
these currency risks through the use of forward foreign currency contracts
and options. Such hedges, if used, may not work as planned, however. In
addition, foreign securities are not subject to the same degree of
regulation as securities traded in the U.S. markets, and there may be less
reliable information about the issuers of the securities. In addition,
foreign securities may experience greater price fluctuations and be less
liquid than U.S. securities. Other concerns include political and social
instability, expropriations, higher transaction costs, currency
fluctuations, nondeductible withholding taxes and different settlement
practices.
The fund also faces certain risks related to forward foreign
currency contracts, including the possibility that we may judge market
conditions incorrectly or use a strategy that does not correlate well with
the fund's investments, thereby resulting in a loss.
CREDIT RISK. The debt securities in which the fund invests involve risks
that the interest and principal payments may not be made. Some issuers may
default as to principal and/or interest payments after the fund purchases
their securities. The fund attempts to reduce this risk by investing
primarily in high-quality debt securities.
An investment in the fund is not a bank deposit. It is not FDIC-insured or
government-endorsed. It is not a complete investment program. You could lose
money in this fund.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies, and their risks, used
by the fund.
6 The Funds
<PAGE>
------------------------
Symbols: Class A - LAGIX
Class B - LAIBX
Class C - GBLAX
PAST PERFORMANCE
The information below provides some indication of the risks of investing in
the fund by showing changes in the fund's class A shares' performance from
calendar year to calendar year and by showing how the fund's average annual
returns compare with those of a broad measure of market performance. Past
performance is not a prediction of future results.
[PERFORMANCE GRAPH]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------------
10.6% 11.9% 14.3% 5.8% 10.8% -3.4% 17.9% 6.1% 4.2% 10.8%
</TABLE>
Best Quarter: 3rd Q '91 9.21%
Worst Quarter: 1st Q '94 (4.11)%
================================================================================
The table below shows a comparison of the fund's class A, B, and C average
annual total return to that of the J.P. Morgan Global Government Bond Index
("JPMGGBI"). Fund returns assume reinvestment of all dividends and distributions
and payment of the maximum applicable front-end or deferred sales charge. All
periods end on December 31, 1998.
<TABLE>
<CAPTION>
CLASS 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION(i) JPMGGBI(ii)
<S> <C> <C> <C> <C> <C>
A 5.60% 5.84% 8.21% 8.15% 9.28%(iii)
- ---------------------------------------------------------------------------------------
B 5.03% - - 6.80% 8.42%(iv)
- ---------------------------------------------------------------------------------------
C 9.03% - - 8.53% 8.95%(v)
- ---------------------------------------------------------------------------------------
JPMGGBI 15.31% 8.09% 9.09% - -
- ---------------------------------------------------------------------------------------
</TABLE>
(i) The dates of inception for each class are as follows: A -9/30/88;
B- 8/1/96; and C -7/15/96.
(ii) Performance for the unmanaged J.P. Morgan Global Government
Bond Index does not reflect transaction costs or management fees.
(iii) Represents total returns for the period 9/30/88 to 12/31/98, to
correspond with class A inception date.
(iv) Represents total returns for the period 8/31/96 to 12/31/98, to correspond
with class B inception date.
(v) Represents total returns for the period 7/31/96 to 12/31/98, to correspond
with class C inception date.
The Funds 7
<PAGE>
------------------------
Symbols: Class A - LAGIX
Class B - LAIBX
Class C - GBLAX
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the fund.
<TABLE>
<CAPTION>
=======================================================================================
Fee table
- ---------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS P
<S> <C> <C> <C> <C>
SHAREHOLDER FEES (Fees paid directly from your investment)
- ------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- ------------------------------------------------------------------------------------------
(as a % of offering price) 4.75% none none none
- ------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (See "Purchases") none 5.00%(1) 1.00% none
- ------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (Expenses deducted from fund assets) (as a %
of average net assets)(2)
- ------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.50% 0.50% 0.50% 0.50%
- ------------------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees(3) 0.35% 1.00% 1.00% 0.45%
- ------------------------------------------------------------------------------------------
Other Expenses 0.38% 0.38% 0.38% 0.38%
- ------------------------------------------------------------------------------------------
Total Operating Expenses 1.23% 1.88% 1.88% 1.33%
- ------------------------------------------------------------------------------------------
</TABLE>
================================================================================
EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
This example, like that in other funds' prospectuses, assumes a $10,000 initial
investment at maximum sales charge, if any, 5% total return each year and no
changes in expenses. You pay the following expenses over the course of each
period shown if you sell your shares at the end of the period, although your
actual cost may be higher or lower. The expenses include any applicable
contingent deferred sales charges.
<TABLE>
<CAPTION>
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A shares $594 $847 $1,119 $1,895
- ------------------------------------------------------------------------------------------
Class B shares $691 $890 $1,216 $2,033
- ------------------------------------------------------------------------------------------
Class C shares $291 $590 $1,016 $2,203
- ------------------------------------------------------------------------------------------
Class P shares $135 $421 $ 729 $1,604
- ------------------------------------------------------------------------------------------
</TABLE>
You would pay the following expenses on the same investment, assuming you kept
your shares.
<TABLE>
<S> <C> <C> <C> <C>
Class A shares $594 $847 $1,119 $1,895
- ------------------------------------------------------------------------------------------
Class B shares $191 $590 $1,016 $2,033
- ------------------------------------------------------------------------------------------
Class C shares $191 $590 $1,016 $2,203
- ------------------------------------------------------------------------------------------
Class P shares $135 $421 $ 729 $1,604
- ------------------------------------------------------------------------------------------
</TABLE>
This example is for comparison and is not a representation of the fund's actual
expenses or returns, either past or present.
MANAGEMENT FEES are payable to Lord Abbett for the fund's investment
management.
12B-1 FEES refer to fees incurred for activities that are primarily intended to
result in the sale of fund shares and service fees for shareholder account
services and maintenance.
OTHER EXPENSES include fees paid for miscellaneous items such as shareholder
services and professional fees.
- --------------------------------------------------------------------------
(1) Class B shares will convert to class A shares on the eighth anniversary of
your original purchase of class B shares.
(2) The annual operating expenses have been restated from fiscal year amounts
to reflect current fees.
(3) Because 12b-1 distribution fees are paid out on an ongoing basis, over
time they will increase the cost of your investment and may cost you more
than paying other types of sales charges.
8 The Funds
<PAGE>
Your Investment
PURCHASES
This prospectus offers four classes of shares, classes A, B, C and P for
each fund (call 800-821-5129 to find out if P shares of the Equity Fund are
available in your state). Although each fund has more than one class of
shares, these different classes of shares represent investments in the same
port folio of securities but are subject to different expenses. Our shares
are continuously offered. The offering price is based on the Net Asset
Value ("NAV") per share next determined after we receive your purchase
order submitted in proper form. A front-end sales charge is added to the
NAV in the case of the class A shares. There is no front-end sales charge,
although there is a Contingent Deferred Sales Charge in the case of the
class B and C shares as described below.
You should read this section carefully to determine which class of shares
represents the best investment option for your particular situation. It may
not be suitable for you to place a purchase order for class B shares of
$500,000 or more, or a purchase order for class C shares of $1,000,000 or
more. You should discuss pricing options with your investment professional.
For more information, see "Alternative Sales Arrangements" in the Statement
of Additional Information.
We reserve the right to withdraw all or any part of the offering made by
this prospectus or to reject any purchase order. We also reserve the right
to waive or change minimum investment requirements. All purchase orders are
subject to our acceptance and are not binding until confirmed or accepted
in writing.
<TABLE>
<CAPTION>
=================================================================================
Front-End Sales Charges - Class A Shares
(Equity Fund Only)
- ---------------------------------------------------------------------------------
As a % of As a % of To Compute Offering
Your Investment Offering Price Your Investment Price Divide NAV by
=================================================================================
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% .9425
- ---------------------------------------------------------------------------------
$50,000 to $99,999 4.75% 4.99% .9525
- ---------------------------------------------------------------------------------
$100,000 to $249,999 3.75% 3.90% .9625
- ---------------------------------------------------------------------------------
$250,000 to $499,999 2.75% 2.83% .9725
- ---------------------------------------------------------------------------------
$500,000 to $999,999 2.00% 2.04% .9800
- ---------------------------------------------------------------------------------
$1,000,000 and over No Sales Charge 1.0000
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
=================================================================================
Front-End Sales Charges - Class A Shares
(Income Fund Only)
- ---------------------------------------------------------------------------------
As a % of As a % of To Compute Offering
Your Investment Offering Price Your Investment Price Divide NAV by
=================================================================================
<S> <C> <C> <C>
Less than $50,000 4.75% 4.99% .9525
- ---------------------------------------------------------------------------------
$50,000 to $99,999 4.75% 4.99% .9525
- ---------------------------------------------------------------------------------
$100,000 to $249,999 3.75% 3.90% .9625
- ---------------------------------------------------------------------------------
$250,000 to $499,999 2.75% 2.83% .9725
- ---------------------------------------------------------------------------------
$500,000 to $999,999 2.00% 2.04% .9800
- ---------------------------------------------------------------------------------
$1,000,000 and over No Sales Charge 1.0000
- ---------------------------------------------------------------------------------
</TABLE>
NAV per share for each class of fund shares is calculated each business day at
the close of regular trading on the New York Stock Exchange ("NYSE"). Each fund
is open on those business days when the NYSE is open. Purchases and sales of
fund shares are executed at the NAV next determined after the fund receives your
order. In calculating NAV, securities for which market quotations are available
are valued at those quotations. Securities for which such quotations are not
available are valued at fair value under procedures approved by the Board.
Share classes
Class A
normally offered with a front-end sales charge
Class B
no front-end sales charge, however, a contingent deferred sales charge is
applied to shares sold prior to the sixth anniversary of purchase
higher annual expenses than class A shares
automatically convert to class A shares after eight years
Class C
no front-end sales charge
higher annual expenses than class A shares
a contingent deferred sales charge is applied to shares sold prior to the
first anniversary of purchase
Class P
available to certain pension or retirement plans and pursuant to a Mutual Fund
Advisory Program
Your Investment 9
<PAGE>
Reducing Your Class A Front-End Sales Charges. Class A shares may be
purchased at a discount if you qualify under either of the following
conditions:
Rights of Accumulation -- A Purchaser can apply the value (at public
offering price) of the shares you already own to a new purchase of class
A shares of any Eligible Fund in order to reduce the sales charge.
Statement of Intention -- A Purchaser of class A shares can purchase
additional shares of any Eligible Fund over a 13-month period and receive
the same sales charge as if all shares were purchased at once. Shares
purchased through reinvestment of dividends and distributions are not
included. A statement of intention can be back-dated 90 days. Current
holdings under rights of accumulation can be included in a statement of
intention.
For more information on eligibility for these privileges, read the
applicable sections in the attached application.
Class A Share Purchases Without A Front-End Sales Charge. Class A shares
may be purchased without a front-end sales charge under any of the
following conditions:
purchases of $1 million or more *
purchases by Retirement Plans with at least 100 eligible employees *
purchases under a Special Retirement Wrap Program *
purchases made with dividends and distributions on class A shares of
another Eligible Fund
purchases representing repayment under the loan feature of the Lord
Abbett-sponsored prototype 403(b) Plan for class A shares
purchases by employees of any consenting securities dealer having a sales
agreement with Lord Abbett Distributor
purchases under a Mutual Fund Advisory Program
purchases by trustees or custodians of any pension or profit sharing
plan, or payroll deduction IRA for employees of any consenting securities
dealer having a sales agreement with Lord Abbett Distributor
See the Statement of Additional Information for a listing of other
categories of purchasers who qualify for class A share purchases without a
front-end sales charge.
*These categories may be subject to a Contingent Deferred Sales Charge
("CDSC").
Class A Share CDSC. If you buy class A shares under one of the starred (*)
categories listed above and you redeem any of them within 24 months after
the month in which you initially purchased them, the fund will normally
collect a CDSC of 1%.
The class A share CDSC will generally be waived for the following
conditions:
benefit payments such as Retirement Plan loans, hardship withdrawals,
death, disability, retirement, separation from service or any excess
distribution under Retirement Plans (documentation may be required)
redemptions continuing as investments in another fund participating in a
Special Retirement Wrap Program
CDSC, regardless of class, is not charged on shares acquired through
reinvestment of dividends or capital gains distributions and is charged on the
original purchase cost or the current market value of the shares at the time
they are being sold, whichever is lower. In addition, repayment of loans under
Retirement Plans and 403(b) Plans will constitute new sales for purposes of
assessing the CDSC.
To minimize the amount of any CDSC, the fund redeems shares in the following
order:
1. shares acquired by reinvestment of dividends and capital gains (always free
of a CDSC)
2. shares held for six years or more (class B) or two years or more after the
month of purchase (class A) or one year or more (class C)
3. shares held the longest before the sixth anniversary of their purchase (class
B) or before the second anniversary after the month of purchase (class A) or
before the first anniversary of their purchase (class C)
Retirement Plans include employer-sponsored retirement plans under the Internal
Revenue Code, excluding Individual Retirement Accounts.
Lord Abbett Distributor LLC ("Lord Abbett Distributor") acts as agent for the
funds to work with investment professionals that buy and/or sell shares of the
funds on behalf of their clients. Generally, Lord Abbett Distributor does not
sell fund shares directly to investors.
Benefit Payment Documentation.
(class A only)
under $50,000 - no documentation necessary
over $50,000 - reason for benefit payment must be received in writing. Use the
address indicated under "Opening Your Account."
10 Your Investment
<PAGE>
Class B Share CDSC. The CDSC for class B shares normally applies if you
redeem your shares before the sixth anniversary of their initial purchase.
The CDSC declines the longer you own your shares, according to the
following schedule:
<TABLE>
<CAPTION>
===============================================================================
Contingent Deferred Sales Charges - Class B Shares
- -------------------------------------------------------------------------------
Anniversary(1) of Contingent Deferred Sales Charge
the day on which the on redemptions (as a % of amount
purchase order was accepted subject to charge)
On Before
- -------------------------------------------------------------------------------
<S> <C> <C>
1st 5.0%
- -------------------------------------------------------------------------------
1st 2nd 4.0%
- -------------------------------------------------------------------------------
2nd 3rd 3.0%
- -------------------------------------------------------------------------------
3rd 4th 3.0%
- -------------------------------------------------------------------------------
4th 5th 2.0%
- -------------------------------------------------------------------------------
5th 6th 1.0%
- -------------------------------------------------------------------------------
on or after the 6th(2) None
- -------------------------------------------------------------------------------
</TABLE>
(1) The anniversary is the same calendar day in each respective year after the
date of purchase. For example, the anniversaries for shares purchased on May
1 will be May 1 of each succeeding year.
(2) Class B shares will automatically convert to class A shares on the eighth
anniversary of the purchase of class B shares.
The class B share CDSC will generally be waived under any one of the
following conditions:
benefit payments such as Retirement Plan loans, hardship withdrawals,
death, disability, retirement, separation from service or any excess
contribution or distribution under Retirement Plans
Eligible Mandatory Distributions under 403(b) Plans and individual
retirement accounts
death of the shareholder (natural person)
redemptions of shares in connection with Div-Move and Systematic
Withdrawal Plans (up to 12% per year)
See "Systematic Withdrawal Plan" under "Services For Fund Investors" below
for more information on CDSCs with respect to class B shares.
Class C Share CDSC. The 1% CDSC for class C shares normally applies if you
redeem your shares before the anniversary of the purchase of such shares.
Class P Shares. Class P shares have lower annual expenses than class B and
class C shares, no front-end sales charge, and no CDSC. Class P shares are
currently sold and redeemed at NAV (a) pursuant to a Mutual Fund Advisory
Program, or (b) to the trustees of, or employer-sponsors with respect to,
pension or retirement plans with at least 100 eligible employees (such as a
plan under Section 401(a), 401(k) or 457(b) of the Internal Revenue Code)
which engage an investment professional providing or participating in an
agreement to provide certain recordkeeping, administrative and/or
sub-transfer agency services to the fund on behalf of the class P
shareholders.
OPENING YOUR ACCOUNT
<TABLE>
<CAPTION>
Minimum initial investment
<S> <C>
Regular account $1,000
Individual Retirement Accounts and
403(b) Plans under the Internal Revenue Code $250
Uniform Gifts to Minors Account $250
</TABLE>
Important Information. You may be subject to a $50 penalty under the Internal
Revenue Code if you do not provide a correct taxpayer identification number
(Social Security Number for individuals) or make certain required
certifications. In addition, we may be required to withhold from your account
and pay to the U.S. Treasury 31% of any redemption proceeds and of any dividend
or distribution from your account.
Your Investment 11
<PAGE>
For Retirement Plans and Mutual Fund Advisory Programs, no minimum
investment is required, regardless of share class.
You may purchase shares through any independent securities dealer who has a
sales agreement with Lord Abbett Distributor or you can fill out the
attached applic ation and send it to the fund you select at the address
stated below. You should carefully read the paragraph below entitled
"Proper Form" before placing your order to assure your order will be
accepted.
Name of Fund
P.O. Box 419100
Kansas City, MO 64141
Proper Form. An order submitted directly to the fund must contain: (1) a
completed application, and (2) payment by check. When purchases are made by
check, redemptions will not be allowed until the fund or the transfer agent
is advised that the check has cleared, which may take up to 15 calendar
days. For more information regarding proper form of a purchase order, call
the fund at 800-821-5129.
By Exchange. Telephone the fund at 800-821-5129 to request an exchange from
any eligible Lord Abbett-sponsored fund.
REDEMPTIONS
By Broker. Call your investment professional for directions on how to
redeem your shares.
By Telephone. To obtain the proceeds of a redemption of $50,000 or less
from your account, you or your representative can call the fund at
800-821-5129.
By Mail. Submit a written redemption request indicating the name(s) in
which the account is registered, the fund's name, the class of shares, your
account number, and the dollar value or number of shares you wish to sell.
Include all necessary signatures. If the signer has any Legal Capacity, the
signature and capacity must be guaranteed by an Eligible Guarantor. Certain
other legal documentation may be required. For more information regarding
proper documentation call 800-821-5129.
Normally, a check will be mailed to the name and address in which the
account is regis-tered (or otherwise, according to your instruction) within
three business days after receipt of your redemption request. Your account
balance must be sufficient to cover the amount being redeemed or your
redemption order will not be processed. Under unusual circumstances, the
fund may suspend redemptions, or postpone payment for more that seven days,
as permitted by federal securities laws.
To determine if a CDSC applies to a redemption, see "Class A Share CDSC,"
"Class B Share CDSC" or "Class C Share CDSC."
DISTRIBUTIONS AND TAXES
Each fund pays its shareholders dividends from its net investment income,
and distributes net capital gains that it has realized. The Equity Fund
expects to pay such income dividends to shareholders semi-annually. The
Income Fund declares income dividends daily, however, it expects to pay
such dividends to shareholders monthly from its net investment income. If a
capital gain distribution is declared, it is expected to be paid annually.
Your distributions will be reinvested in your fund unless you instruct the
fund to pay them to you in cash. There are no sales charges on
reinvestments.
Small Accounts. Our Board may authorize closing any account in which there are
fewer than 25 shares if it is in a fund's best interest to do so.
Eligible Guarantor is any broker or bank that is a member of the Medallion Stamp
Program. Most major securities firms and banks are members of this program. A
notary public is not an eligible guarantor.
12 Your Investment
<PAGE>
The tax status of distributions is the same for all shareholders regardless
of how long they have been in the fund or whether distributions are
reinvested or paid in cash. In general, distributions are taxable as
follows:
<TABLE>
<CAPTION>
================================================================================
Federal Taxability Of Distributions
Type of Tax rate for taxpayer Tax rate for taxpayer subject
distribution subject to 15% bracket to 28% bracket or above
- --------------------------------------------------------------------------------
<S> <C> <C>
Income Ordinary income Ordinary income
dividends rate rate
- --------------------------------------------------------------------------------
Short-term Ordinary income Ordinary income
capital gains rate rate
- --------------------------------------------------------------------------------
Long-term
capital gains 10% 20%
- --------------------------------------------------------------------------------
</TABLE>
Except in tax-advantaged accounts, any sale or exchange of fund shares may be
a taxable event.
Annual Information - Information concerning the tax treatment of dividends
and other distributions will be mailed annually to shareholders. Each fund
will also provide annually to its shareholders information regarding the
source of dividends and distributions of capital gains by that fund. Because
everyone's tax situation is unique, you should consult your tax adviser
regarding the treatment of those distributions under the federal, state and
local tax rules that apply to you, as well as the tax consequences of gains
or losses from the redemption or exchange of your shares.
SERVICES FOR FUND INVESTORS
AUTOMATIC SERVICES
Buying or selling shares automatically is easy with the services described
below. With each service, you select a schedule and amount, subject to
certain restrictions. You can set up most of these services when filling out
your application or by calling 800-821-5129.
- -----------------------------------------------------------------
For investing
Invest-A-Matic You can make fixed, periodic investments ($50 minimum) into
(Dollar-cost your fund account by means of automatic money
transfers from averaging) your bank checking account. See the
attached application for instructions.
Div-Move You can automatically reinvest the dividends and distributions
from your account into another account in any Eligible Fund
($50 minimum).
For selling shares
Systematic You can make regular withdrawals from most Lord Abbett funds.
Withdrawal Automatic cash withdrawals can be paid to you from your
Plan ("SWP") account in fixed amounts. To establish a plan, the value
of your shares must be at least $10,000, except for Retirement
Plans for which there is no minimum. Your shares must be in
non-certificate form.
Class B shares The CDSC will be waived on SWP redemptions of up to
12% of the current net asset value of your account at the time
of your SWP request. For class B share SWP redemptions over
12% per year, the CDSC will apply to the entire redemption.
Please contact the fund for assistance in minimizing the CDSC
in this situation.
Class B and Redemption proceeds due to a SWP for class B and class C
C shares shares redeemed in the order described under "Purchases."
- --------------------------------------------------------------------------------
Taxes on transactions. The chart at left also can provide a "rule of thumb"
guide for your potential U.S. federal income tax liability when selling or
exchanging fund shares. The second row, "Short-term capital gains," applies to
fund shares sold within 12 months of purchase. The third row, "Long-term capital
gains," applies to shares held for more than 12 months.
Starting January 1, 2001, sales of securities held for more than five years will
be taxed at special lower rates.
Any gains realized on a fund's transactions in options and financial futures
will be treated as taxable long- or short-term capital gains.
Lord Abbett offers a variety of Retirement Plans. Call 800-253-7299 for
information about:
Traditional, Rollover, Roth and Education IRAs
Simple IRAs, SEP-IRAs, 401(k) and 403(b) accounts
Defined Contribution Plans
Your investment 13
<PAGE>
OTHER SERVICES
Telephone Investing. After we have received the attached application
(selecting "yes" under Section 7C and completing Section 7), you can
instruct us by phone to have money transferred from your bank account to
purchase shares of the fund for an existing account. The fund will purchase
the requested shares when it receives the money from your bank.
Telephone Exchanges. You or your investment professional, with proper
identification, can instruct your fund by telephone to exchange shares of
any class for shares of the same class of any Eligible Fund by calling
800-821-5129. The fund must receive instructions for the exchange before
the close of the NYSE on the day of your call. If you meet this
requirement, you will get the NAV per share of the Eligible Fund determined
on that day. Exchanges will be treated as a sale for federal tax purposes.
Be sure to read the current prospectus for any fund into which you are
exchanging.
Reinvestment Privilege. If you sell shares of the fund, you have a one time
right to reinvest some or all of the proceeds in the same class of any
Eligible Fund within 60 days without a sales charge. If you paid a CDSC
when you sold your shares, you will be credited with the amount of the
CDSC. All accounts involved must have the same registration.
Account Statements. Every Lord Abbett investor automatically receives
quarterly account statements.
Householding. Shareholders with the same last name and address will receive
a single copy of a prospectus and an annual or semi-annual report, unless
additional reports are specifically requested in writing to the fund.
Account Changes. For any changes you need to make to your account, consult
your investment professional or call the fund at 800-821-5129.
Systematic Exchange. You or your investment professional can establish a
schedule of exchanges between the same classes of any Eligible Fund.
SALES CHARGES AND SERVICE FEES
Sales and Service Compensation. As part of its plan for distributing
shares, each fund and Lord Abbett Distributor pays sales and service
compensation to Authorized Institutions that sell the fund's shares and
service its shareholder accounts.
Sales compensation originates from two sources: sales charges and 12b-1
distribution fees that are paid out of each fund's assets. Service
compensation originates from 12b-1 service fees. The 12b-1 fee rates vary
by share class, according to the Rule 12b-1 Plans adopted by each fund. The
sales charges and 12b-1 fees paid by investors are shown in the
class-by-class information under "Fees and Expenses" and "Purchases." The
portion of these expenses that is paid as sales and service compensation to
Authorized Institutions, such as your dealer, is shown in the chart at the
end of this prospectus. The portion of such sales and service compensation
paid to Lord Abbett Distributor is discussed under "Sales Activities" and
"Service Activities." Sometimes we do not pay sales and service
compensation where tracking data is not available for certain accounts or
where the Authorized Institution waives part of the compensation.
We may pay Additional Concessions to Authorized Institutions from time to
time.
Sales Activities. We may use 12b-1 distribution fees to pay Authorized
Institutions to finance any activity which is primarily intended to result
in the sale of shares. Lord Abbett Distributor uses its portion of the
distribution fees attributable to a fund's class A
Telephone Transactions. You have this privilege unless you refuse it in
writing. For your security, telephone transaction requests are recorded. We
will take measures to verify the identity of the caller, such as asking for
your name, account number, social security or taxpayer identification
number and other relevant information. Each fund will not be liable for
following instructions communicated by telephone that it reasonably
believes to be genuine.
Transactions by telephone may be difficult to implement in times of drastic
economic or market change.
Exchanges by telephone should not be used to take advantage of short-term
swings in the market. Each fund reserves the right to limit or terminate
this privilege for any shareholder making frequent exchanges or abusing the
privilege and may revoke the privilege for all shareholders upon 60 days'
written notice.
12b-1 fees payable regardless of expenses. The amounts payable by a fund
need not be directly related to expenses. If Lord Abbett Distributor's
actual expenses exceed the fee payable to it, a fund will not have to pay
more than that fee. If Lord Abbett Distributor's expenses are less than the
fee it receives, Lord Abbett Distributor will keep the full amount of the
fee.
14 Your investment
<PAGE>
and class C shares for activities that are primarily intended to result in
the sale of such class A and class C shares, respectively. These activities
include, but are not limited to, printing of prospectuses and statements of
additional information and reports for other than existing shareholders,
preparation and distribution of advertising and sales material, expenses of
organizing and conducting sales seminars, Additional Concessions to
Authorized Institutions, the cost necessary to provide distribution-related
services or personnel, travel, office expenses, equipment and other
allocable overhead.
Service Activities. We may pay Rule 12b-1 service fees to Authorized
Institutions for any activity which is primarily intended to result in
personal service and/or the maintenance of shareholder accounts. Any
portion of the service fees paid to Lord Abbett Distributor will be used to
service and maintain shareholder accounts.
MANAGEMENT
The fund's investment adviser is Lord, Abbett & Co., 767 Fifth Avenue, New
York, NY 10153-0203. Founded in 1929, Lord Abbett manages one of the
nation's oldest mutual fund complexes, with over $30 billion in more than
35 mutual fund portfolios and other advisory accounts. For more information
about the services Lord Abbett provides to the funds, see the Statement of
Additional Information.
The fund pays Lord Abbett a monthly fee based on the average daily net
assets for each month. For the fiscal year ended December 31, 1998, the fee
paid to Lord Abbett was at an annual rate of .75 of 1% for the Equity Fund
and .50 of 1% for the Income Fund. In addition, the fund pays all expenses
not expressly assumed by Lord Abbett.
Equity Fund. Lord Abbett has entered into an agreement with Fuji-Lord
Abbett International, Limited. (the "Sub-Adviser"), under which the
Sub-Adviser provides Lord Abbett with advice regarding the Income Fund's
assets. Lord Abbett pays the Sub-Adviser a monthly fee equal to one half of
Lord Abbett's fee.
The fund's investments are all managed by a team of portfolio managers and
analysts acting together to manage the fund's investments. Christopher J.
Taylor is Managing Director of the Sub-Adviser and heads the team, the
senior member is Simon Steele, U.K. Equity Fund Manager. Mr. Steele joined
the Sub-Adviser in 1996 and previously was responsible for the WH Smith
Pension Trust's U.K. Equities, as well as the whole fund's International
Asset allocation. Mr. Taylor has been employed by the Sub-Adviser since
1987.
Income Fund. Lord Abbett uses a team of portfolio managers and analysts
acting together to manage the fund's investments. Zane E. Brown, Partner of
Lord Abbett, heads the team, the other senior members include, Timothy W.
Horan and Jerald M. Lanzotti. Mr. Brown has been with Lord Abbett for over
five years. Mr. Horan joined Lord Abbett in 1996; before that he was a
member of Senior Management at Credit Suisse from 1994 - 1996. Mr. Lanzotti
joined Lord Abbett in 1996; before that he was an Associate in Global Fixed
Income at Deutsche Morgan Grenfell from 1993 - 1996.
Your investment 15
<PAGE>
For More Information
OTHER INVESTMENT TECHNIQUES
This section describes some of the investment techniques that might be used
by each fund and their risks.
Adjusting Investment Exposure. Each fund may, but is not required to, use
various strategies to change its investment exposure to adjust to changing
security prices, interest rates, currency exchange rates, commodity prices
and other factors. These strategies may involve buying or selling options
and futures contracts and rights and warrants. Each fund may use these
transactions to change the risk and return characteristics of each fund's
portfolio. If we judge market conditions incorrectly or use a strategy that
does not correlate well with the fund's investments, it could result in a
loss, even if we intended to lessen risk or enhance returns. These
transactions may involve a small investment of cash compared to the
magnitude of the risk assumed and could produce disproportionate gains or
losses. Also, these strategies could result in losses if the counterparty
to a transaction does not perform as promised.
Borrowing. Each fund may borrow from banks. If a fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is
paid off. Each fund may borrow only for temporary or emergency purposes,
and not in an amount exceeding 33 1/3% of its total assets.
Covered Call Options. Each fund may write (sell) call options on securities
it owns. A call option on a stock gives the purchaser of the option, upon
payment of a premium to the writer of the option, the right to call upon
the writer to deliver a specified number of shares of a stock on or before
a fixed date at a predetermined price.
Diversification. The Equity Fund is a diversified fund, which means that
with respect to 75% of its total assets, it will not purchase a security
if, as a result, more than 5% of the fund's total assets would be invested
in securities of a single issuer or the fund would hold more than 10% of
the outstanding voting securities of the issuer. The Income Fund is a
nondiversified mutual fund. This means that the fund may invest a greater
portion of its assets in, and own a greater amount of the voting securities
of, a single company than a diversified fund. This may expose the fund to
greater risk.
Foreign Currency Hedging Techniques. Each fund may use currency forwards
and options to hedge the risk to the portfolio if it expects that foreign
exchange price movements will be unfavorable for U.S. investors. Generally,
these instruments allow each fund to lock in a specified exchange rate for
a period of time. If the fund's forecast proves to be wrong, such a hedge
may cause a loss. Also, it may be difficult or impractical to hedge
currency risk in many emerging countries. The funds generally will not
enter into a forward contract with a term greater than one year. Under some
circumstances, a fund may commit a substantial portion of its portfolio to
the completion of forward contracts. Although such contracts will be used
primarily to attempt to protect the fund from adverse currency movements,
their use involves the risk Lord Abbett will not accurately predict
currency movements, and the fund's return could be reduced.
Illiquid Securities. Each fund may invest up to 15% of its assets in
illiquid securities. These securities include those that are not traded on
the open market or that trade irregularly or in very low volume. They may
be difficult or impossible to sell at the time and price the fund would
like.
16 For More Information
<PAGE>
Portfolio Securities Lending. Each fund may lend securities to
broker-dealers and financial institutions, as a means of earning income.
This practice could result in a loss or delay in recovering a fund's
securities, if the borrower defaults. The Equity Fund will limit its
security loans to 5% of its total assets and the Income Fund will limit its
loans to 30% of its total assets, subject to approval of the company's
Board, or 15% pending such an approval.
Repurchase Agreements. In a repurchase agreement, a fund buys a security at
one price from a broker-dealer or financial institution and simultaneously
agrees to sell the same security back to the same party at a higher price
in the future. If the other party to the agreement defaults or becomes
insolvent, the fund could lose money.
Rights and Warrants. Each fund may invest up to 5% of its assets in rights
and warrants to purchase securities. Rights represent a privilege offered
to holders of record of issued securities (usually on a pro-rata basis) for
additional securities of the same class, or of a different class, or of a
different issuer, as the case may be. Warrants represent the privilege to
purchase securities at a stipulated price and are usually valid for several
years. Rights and warrants generally do not entitle a holder to dividends
or voting rights with respect to the underlying securities, nor do they
represent any rights in the assets of the issuing company.
The value of a right or warrant may not necessarily change with the value
of the underlying securities and rights and warrants cease to have value
after their expiration date.
When-Issued or Delayed Delivery Transactions. The Income Fund may buy or
sell securities with payment and delivery taking place as much as a month
or more later. The fund would do this in an effort to buy or sell the
securities at an advantageous price and yield. The securities involved are
subject to market fluctuation and no interest accrues to the purchaser
during the period between purchase and settlement. At the time of delivery
of the securities, their market value may be less than the purchase price.
Also, if the fund commits a significant amount of assets to when-issued or
delayed delivery transactions, it may increase the volatility of the fund's
net asset value.
GLOSSARY OF SHADED TERMS
Additional Concessions. Lord Abbett Distributor may, for specified periods,
allow dealers to retain the full sales charge for sales of shares or may
pay an additional concession to a dealer who sells a minimum dollar amount
of our shares and/or shares of other Lord Abbett-sponsored funds. In some
instances, such additional concessions will be offered only to certain
dealers expected to sell significant amounts of shares. Additional payments
may be paid from Lord Abbett Distributor's own resources or from
distribution fees received from a fund and will be made in the form of cash
or, if permitted, non-cash payments. The non-cash payments will include
business seminars at Lord Abbett's headquarters or other locations,
including meals and entertainment, or the receipt of merchandise. The cash
payments may include payment of various business expenses of the dealer.
In selecting dealers to execute portfolio transactions for a fund's
portfolio, if two or more dealers are considered capable of obtaining best
execution, we may prefer the dealer who has sold our shares and/or shares
of other Lord Abbett-sponsored funds.
Authorized Institutions. Institutions and persons permitted by law to
receive service and/or distribution fees under a Rule 12b-1 Plan are
"Authorized Institutions." Lord Abbett Distributor is an Authorized
Institution.
For More Information 17
<PAGE>
Eligible Fund. An Eligible Fund is any Lord Abbett-sponsored fund except
for (1) ce rtain tax-free, single-state funds where the exchanging
shareholder is a resident of a state in which such a fund is not offered
for sale; (2) Lord Abbett Equity Fund; (3) Lord Abbett Series Fund; and (4)
Lord Abbett U.S. Government Securities Money Market Fund ("GSMMF") (except
for holdings in GSMMF which are attributable to any shares exchanged from
the Lord Abbett family of funds). An Eligible Fund also is any Authorized
Institution's affiliated money market fund satisfying Lord Abbett
Distributor as to certain omnibus account and other criteria.
Eligible Mandatory Distributions. If class B shares represent a part of an
individual's total IRA or 403(b) investment, the CDSC will be waived only
for that part of a manda-tory distribution which bears the same relation to
the entire mandatory distribution as the B share investment bears to the
total investment.
Legal Capacity. With respect to a redemption request, if (for example) the
request is on behalf of the estate of a deceased shareholder, John W. Doe,
by a person (Robert A. Doe) who has the legal capacity to act for the
estate of the deceased shareholder because he is the executor of the
estate, then the request must be executed as follows: Robert A.Doe,
Executor of the Estate of John W. Doe. That signature using that capacity
must be guaranteed by an Eligible Guarantor.
Similarly, if (for example) the redemption request is on behalf of the ABC
Corporation by a person (Mary B. Doe) who has the legal capacity to act on
behalf of this corporation, because she is the President of the
corporation, then the request must be executed as follows: ABC Corporation
by Mary B.Doe, President. That signature using that capacity must be
guaranteed by an Eligible Guarantor (see example in right column).
Mutual Fund Advisory Program. Certain unaffiliated authorized brokers,
dealers, registered investment advisers or other financial institutions who
either (1) have an arrangement with Lord Abbett Distributor in accordance
with certain standards approved by Lord Abbett Distributor, providing
specifically for the use of our shares (and sometimes providing for
acceptance of orders for such shares on our behalf) in particular
investment products made available for a fee to clients of such brokers,
dealers, registered investment advisers and other financial institutions,
or (2) charge an advisory, consulting or other fee for their services and
buy shares for their own accounts or the accounts of their clients.
Purchaser. The term "purchaser" includes: (1) an individual, (2) an
individual and his or her spouse and children under the age of 21 and (3) a
trustee or other fiduciary purchasing shares for a single trust estate or
single fiduciary account (including a pension, profit-sharing, or other
employee benefit trust qualified under Section 401 of the Internal Revenue
Code more than one qualified employee benefit trust of a single employer,
including its consolidated subsidiaries, may be considered a single trust,
as may qualified plans of multiple employers registered in the name of a
single bank trustee as one account), although more than one beneficiary is
involved.
Special Retirement Wrap Program. A program sponsored by an Authorized
Institution showing one or more characteristics distinguishing it, in the
opinion of Lord Abbett Distributor from a Mutual Fund Advisory Program.
Such characteristics include, among other things, the fact that an
Authorized Institution does not charge its clients any fee of a consulting
or advisory nature that is economically equivalent to the distribution fee
under the class A 12b-1 Plan and the fact that the program relates to
participant-directed Retirement Plans.
GUARANTEED SIGNATURE. An acceptable form of guarantee would be as follows:
In the case of the estate -
Robert A. Doe
Executor of the Estate of
John W. Doe
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE ILLEGIBLE]
- ------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM 'sm'
SR
In the case of the corporation -
ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE ILLEGIBLE]
- ------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM 'sm'
SR
18 For More Information
<PAGE>
RECENT PERFORMANCE
Income Fund. During the fall months, the Federal Reserve Board (Fed)
imposed a series of three interest rate cuts, which were viewed in most
markets as a necessary action to increase liquidity and restore order to
markets in disarray. The Fed's easing prompted similar cuts at other
central banks throughout the world. Emerging markets, particularly in Latin
America, continued to languish as Brazil grappled with its fiscal reform
and speculation about a devaluation. The International Monetary Fund (IMF),
which focuses on lowering trade barriers and stabilizing currencies,
indicated that it would provide weaker countries with the short-term
liquidity needed to work our their fiscal problems in an effort to achieve
economic stability.
Throughout the fiscal year, we were rewarded for our emphasis on
high-quality issues, particularly U.S. Treasuries, which experienced
significant price appreciation due to global demand for "safer, more
liquid" investments. We maintained a large exposure in Greece, in order to
capitalize on the country's efforts to improve its economy and gain entry
to the European Economic Community. We continued to maintain an
underweighting of yen assets, which are currently among the lowest yielding
of all global bonds. Our fund's focus on high-quality issues helped us
achieve strong performance relative to our peer group average. For the
fiscal year ended 12/31/98, the fund's class A shares returned 10.79% at
net asset value versus 6.2% for the Lipper Global Income Funds Average.
The year ahead should provide ample opportunities for global fixed-income
investors if, as we believe, central banks continue to implement rate cuts
in an attempt to stave off economic deceleration. Europe, for example, will
likely need additional rate cuts in order to maintain growth, fuel domestic
demand and ensure that the new Euro currency does not become over-valued as
central banks and asset managers realign their portfolios with the advent
of the new currency.
Equity Fund. Throughout the year, the fund's management worked to
restructure the portfolio by reducing the number of stocks held in order to
focus on what we consider "Best of Breed" companies. Given our long-term
strategy, we have maintained a strong exposure to European-based companies.
Many of these companies, because of their significant export sales to North
America, were impacted by the decline in the value of the U.S. dollar
during the period. We believe, however, that they are generally undervalued
and have potential for significant long-term outperformance relative to
other world equity markets.
We are encouraged by the fact that the Euro has had a successful start. Our
current pro-jections call for European economic growth to average over 2%
during the next year, and for continued subdued inflation. In the U.S., we
anticipate slowing economic growth and benign interest rates, which should
translate to further appreciation of the fund's holdings. We believe
corporate restructuring, rather than economic expansion, will continue to
drive European earnings growth. However, we remain watchful of problems in
the emerging markets, which could hurt economic prospects throughout many
global economies.
Year 2000 Issues. Each fund could be adversely affected if the computers used by
each fund and their service providers do not properly process and calculate
date-related information from and after January 1, 2000.
Lord Abbett is working to avoid such problems and has received assurances from
each fund's service providers that they are taking similar steps. Of course, the
Year 2000 problem is unprecedented and, therefore, Lord Abbett cannot eliminate
altogether the possibility that it or the funds will be affected.
For More Information 19
<PAGE>
Financial Information
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the fund's independent auditors, in
conjunction with their annual audit of the fund's financial statements.
Financial statements for the year ended December 31, 1998 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the year ended December 31, 1998 and are incorporated by
reference into the Statement of Additional Information, which is available
upon request. Certain information reflects financial results for a single
fund share.
<TABLE>
<CAPTION>
============================================================================================
Class A Shares
- --------------------------------------------------------------------------------------------
Year Ended December 31,
Per Share Operating Performance: 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.08 $12.55 $11.96 $11.55 $12.44
- --------------------------------------------------------------------------------------------
Income from investment operations
- --------------------------------------------------------------------------------------------
Net investment income .01(b) .07(b) .07 .16 .10
- --------------------------------------------------------------------------------------------
Net realized and unrealized
- --------------------------------------------------------------------------------------------
gain (loss) on investments 1.08 .90 .93 .90 (.1125)
- --------------------------------------------------------------------------------------------
Total from investment operations 1.09 .97 1.00 1.06 (.0125)
- --------------------------------------------------------------------------------------------
Distributions
- --------------------------------------------------------------------------------------------
Dividends from net investment income (.03) (.06) (.07) (.17) (.10)
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net
realized gains (.85) (1.11) (.21) (.48) (.7775)
- --------------------------------------------------------------------------------------------
Distributions from foreign currency
transactions -- (.27) (.13) -- --
- --------------------------------------------------------------------------------------------
Net asset value, end of year $12.29 $12.08 $12.55 $11.96 $11.55
- --------------------------------------------------------------------------------------------
Total Return(a) 9.07% 7.99% 8.37% 9.19% (0.09)%
- --------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- --------------------------------------------------------------------------------------------
Expenses(e) 1.66% 1.51% 1.52% 1.63% 1.56%
- --------------------------------------------------------------------------------------------
Net investments income 0.06% 0.57% 0.54% 1.31% 0.79%
============================================================================================
<CAPTION>
Class B Shares Class C Shares
--------------------------- ---------------------------
Period Ended December 31, Period Ended December 31,
Per Share Operating Performance: 1998 1997 1996(c) 1998 1997 1996(c)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.03 $12.53 $12.30 $12.05 $12.54 $12.31
- ------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) (.09)(b) (.02)(b) (.01) (.09)(b) (.01)(a)(b) --
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------
gain (loss) on investments 1.09 .89 .58 1.09 .90 .57
- ------------------------------------------------------------------------------------------------------
Total from investment operations 1.00 .87 .57 1.00 .89 .57
- ------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------
Dividends from net investment income -- -- -- -- (.01) --
- ------------------------------------------------------------------------------------------------------
Dividends from net realized gain (.85) (1.11) (.21) (.85) (1.11) (.21)
- ------------------------------------------------------------------------------------------------------
Distributions from foreign
- ------------------------------------------------------------------------------------------------------
currency transactions -- (.26) (.13) -- (.26) (.13)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.18 $12.03 $12.53 $12.20 $12.05 $12.54
- ------------------------------------------------------------------------------------------------------
Total Return(a) 8.37% 7.19% 4.56%(d) 8.35% 7.34% 4.64%(d)
- ------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------
Expenses(e) 2.37% 2.23% 0.83%(d) 2.37% 2.14% 0.83%(d)
- ------------------------------------------------------------------------------------------------------
Net investment loss (0.70)% (0.16)% (0.16)%(d)(0.69)% (0.06)% (0.11)%(d)
======================================================================================================
<CAPTION>
Year Ended December 31,
---------------------------------------------------
Supplemental Data For All Classes: 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net assets, end of year (000) $80,093 $80,820 $92,164 $84,731 $83,739
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 89.48% 99.05% 81.97% 83.32% 75.39%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(b) Calculated using average shares during the period.
(c) Commencement of operations: class B - August 1, 1996, and class C - August
1, 1996.
(d) Not annualized.
(e) The ratios for 1997 and 1998 include expenses paid through an expense
offset arrangement.
20 Financial Information
<PAGE>
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in class A shares
to the same investment in the Morgan Stanley World Index, assuming
reinvestment of all dividends and distributions.
- -----------------------------------------------------------------
[PERFORMANCE GRAPH]
=================================================================
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending December 31, 1998
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years (or Life)
- -----------------------------------------------------------------
<S> <C> <C> <C>
Class A(3) 2.78% 5.58% 6.80%
- -----------------------------------------------------------------
Class B(4) 3.37% - 7.27%
- -----------------------------------------------------------------
Class C(5) 7.36% - 8.47%
- -----------------------------------------------------------------
</TABLE>
- -----------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 5.75%.
(2) Performance for the unmanaged Morgan Stanley World Index does not reflect
transaction costs, management fees or sales charges.
(3) Total return is the percent change in value, after deduction of the maximum
initial sales charge of 5.75% applicable to class A shares, with all
dividends and distributions reinvested for the periods shown ending
December 31, 1998 using the SEC-required uniform method to compute such
return.
(4) The class B shares were first offered on 8/1/96. Performance reflects the
deduction of a CDSC of 4% (for 1 year) and 3% (life of the class).
(5) The class C shares were first offered on 8/1/96. Performance reflects the
deduction of a CDSC of 1% (for 1 year) and 3% (life of the class).
Financial Information 21
<PAGE>
Income Fund
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the fund's independent auditors, in
conjunction with their annual audit of the fund's financial statements.
Financial statements for the year ended December 31, 1998 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the year ended December 31, 1998 and are incorporated by
reference into the Statement of Additional Information, which is available
upon request. Certain information reflects financial results for a single
fund share.
<TABLE>
<CAPTION>
======================================================================================================
Class A Shares
----------------------------------------------------
Year Ended December 31,
Per Share Operating Performance: 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $8.09 $8.34 $8.58 $7.98 $9.02
- ------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------
Net investment income .55(b) .51(b) .53 .77 .65
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------
gain (loss) on investments .30 (.18) (.04) .6138 (.9603)
- ------------------------------------------------------------------------------------------------------
Total from investment operations .85 .33 .49 1.3838 (.3103)
- ------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------
Dividends from net investment income (.50) (.51) (.61) (.6613) (.6035)
- ------------------------------------------------------------------------------------------------------
Distributions to shareholders from
paid-in-capital -- (.07) -- -- (.1262)
- ------------------------------------------------------------------------------------------------------
Distributions from foreign currency
transactions -- -- (.12) (.1225) --
- ------------------------------------------------------------------------------------------------------
Net asset value, end of year $8.44 $8.09 $8.34 $8.58 $7.98
- ------------------------------------------------------------------------------------------------------
Total Return(a) 10.79% 4.23% 6.12% 17.86% (3.40)%
- ------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------
Expenses(e) 1.18% 1.10% 1.04% 1.04% 1.02%
- ------------------------------------------------------------------------------------------------------
Net investments income 6.75% 6.29% 6.52% 7.60% 7.72%
======================================================================================================
<CAPTION>
Class B Shares Class C Shares
---------------------------- ----------------------------
Year Ended December 31, Year Ended December 31,
Per Share Operating Performance: 1998 1997 1996(c) 1998 1997 1996(c)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.09 $8.34 $8.24 $8.09 $8.34 $8.14
- ------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------
Net investment income .49(b) .45(b) .23 .50(b) .45(a)(b) .21
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------
gain (loss) on investments .30 (.18) .22 .29 (.18) .37
- ------------------------------------------------------------------------------------------------------
Total from investment operations .79 .27 .45 .79 .27 .58
- ------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------
Dividends from net investment income (.44) (.46) (.23) (.44) (.46) (.26)
- ------------------------------------------------------------------------------------------------------
Dividends to shareholders from
paid-in-capital -- (.06) -- -- (.06) --
- ------------------------------------------------------------------------------------------------------
Distributions from foreign
currency transactions -- -- (.12) -- -- (.12)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.44 $8.09 $8.34 $8.44 $8.09 $8.34
- ------------------------------------------------------------------------------------------------------
Total Return(a) 10.03% 3.49% 5.58%(d) 10.03% 3.48% 7.43%(d)
- ------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------
Expenses(e) 1.87% 1.78% 0.73%(d) 1.85% 1.77% 0.87%(d)
- ------------------------------------------------------------------------------------------------------
Net investment income 6.01% 5.57% 2.11%(d) 6.08% 5.62% 2.69%(d)
======================================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------------
Supplemental Data For All Classes: 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net assets, end of year (000) $125,162 $148,785 $202,494 $238,291 $249,490
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 359.13% 616.63% 621.79% 1,073.69% 1,230.20%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(b) Calculated using average shares during the period.
(c) Commencement of operations of: class B - August 1, 1996, and class C - July
15, 1996.
(d) Not annualized.
(e) The ratios for 1997 and 1998 include expenses paid through an expense
offset arrangement.
22 Financial Information
<PAGE>
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in class A shares
to the same investment in the J.P. Morgan Global Government Bond Index,
assuming reinvestment of all dividends and distributions.
- -----------------------------------------------------------------
[PERFORMANCE GRAPH]
=================================================================
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending December 31, 1998
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years (or Life)
- -----------------------------------------------------------------
<S> <C> <C> <C>
Class A(3) 5.56% 5.85% 8.21%
- -----------------------------------------------------------------
Class B(4) 5.03% - 6.80%
- -----------------------------------------------------------------
Class C(5) 9.03% - 8.53%
- -----------------------------------------------------------------
</TABLE>
(1) Reflects the deduction of the maximum initial sales charge of 4.75%.
(2) Performance numbers for the unmanaged J.P. Morgan Global Government Bond
Index does not reflect trans action costs, management fees or sales
charges.
(3) Total return is the percent change in value, after deduction of the maximum
initial sales charge of 4.75%, with all dividends and distributions
reinvested for the periods shown end ing December 31, 1998 using the
SEC-required uniform method to compute such return.
(4) The class B shares were first offered on 8/1/96. Performance reflects the
deduction of a CDSC of 4% (for 1 year) and 3% (life of the class).
(5) The class C shares were first offered on 7/15/96. Performance reflects the
deduction of a CDSC of 1% (for 1 year) and 3% (life of the class).
Financial Information 23
<PAGE>
COMPENSATION FOR YOUR DEALER - Equity Fund
<TABLE>
<CAPTION>
=============================================================================================================================
FIRST YEAR COMPENSATION
Front-end
sales charge Dealer's
paid by investors concession Service fee(1) Total compensation(2)
Class A investments (% of offering) (% of offering) (% of net investment) (% of offering price)
=============================================================================================================================
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 5.00% 0.25% 5.24%
- -----------------------------------------------------------------------------------------------------------------------------
$50,000 - $99,999 4.75% 4.00% 0.25% 4.24%
- -----------------------------------------------------------------------------------------------------------------------------
$100,000 - $249,999 3.75% 3.25% 0.25% 3.49%
- -----------------------------------------------------------------------------------------------------------------------------
$250,000 - $499,999 2.75% 2.25% 0.25% 2.49%
- -----------------------------------------------------------------------------------------------------------------------------
$500,000 - $999,999 2.00% 1.75% 0.25% 2.00%
- -----------------------------------------------------------------------------------------------------------------------------
$1 million or more(3) or Retirement Plan - 100 or more eligible employees(3) or
Special Retirement Wrap Program(3)
- -----------------------------------------------------------------------------------------------------------------------------
First $5 million no front-end sales charge 1.00% 0.25% 1.25%
- -----------------------------------------------------------------------------------------------------------------------------
Next $5 million above that no front-end sales charge 0.55% 0.25% 0.80%
- -----------------------------------------------------------------------------------------------------------------------------
Next $40 million above that no front-end sales charge 0.50% 0.25% 0.75%
- -----------------------------------------------------------------------------------------------------------------------------
Over $50 million no front-end sales charge 0.25% 0.25% 0.50%
=============================================================================================================================
Class B investments Paid at time of sale (% of net asset value)
- -----------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 3.75% 0.25% 4.00%
=============================================================================================================================
Class C investments
- -----------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.75% 0.25% 1.00%
=============================================================================================================================
Class P investments Percentage of average net assets
- -----------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.25% 0.20% 0.45%
=============================================================================================================================
<CAPTION>
ANNUAL COMPENSATION AFTER FIRST YEAR
Class A investments
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
All amounts no front-end sales charge none 0.25% 0.25%
=============================================================================================================================
Class B investments Percentage of average net assets(4)
- -----------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25% 0.25%
=============================================================================================================================
Class C investments
- -----------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.75% 0.25% 1.00%
- -----------------------------------------------------------------------------------------------------------------------------
Class P investments
- -----------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.25% 0.20% 0.45%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The service fee for class A and P shares is paid quarterly. The first
year's service fee on class B and C shares is paid at the time of sale.
(2) Dealer's concession percentages and service fee percentages are calculated
from different amounts, and therefore may not equal total compensation
percentages if combined using simple addition. Additional Concessions may
be paid to Authorized Institutions from time to time.
(3) Concessions are paid at the time of sale on all class A shares sold during
any 12-month period starting from the day of the first net asset value
sale. With respect to (a) class A share purchases at $1 million or more,
sales qualifying at such level under rights of accumulation and statement
of intention privileges are included and (b) for Special Retirement Wrap
Programs, only new sales are eligible and exchanges into the fund are
excluded.
(4) With respect to class B, C and P shares, 0.25%, 1.00% and 0.45%,
respectively, of the average annual net asset value of such shares
outstanding during the quarter (including distribution reinvestment shares
after the first anniversary of their issuance) is paid to Authorized
Institutions. These fees are paid quarterly in arrears.
24 Financial Information
<PAGE>
COMPENSATION FOR YOUR DEALER - Income Fund
<TABLE>
<CAPTION>
=============================================================================================================================
FIRST YEAR COMPENSATION
Front-end
sales charge Dealer's
paid by investors concession Service fee(1) Total compensation(2)
Class A investments (% of offering) (% of offering) (% of net investment) (% of offering price)
=============================================================================================================================
<S> <C> <C> <C> <C>
Less than $50,000 4.75% 4.00% 0.25% 4.24%
- -----------------------------------------------------------------------------------------------------------------------------
$50,000 to $99,999 4.75% 4.25% 0.25% 4.49%
- -----------------------------------------------------------------------------------------------------------------------------
$100,000 - $249,999 3.75% 3.25% 0.25% 3.49%
- -----------------------------------------------------------------------------------------------------------------------------
$250,00 - $499,999 2.75% 2.50% 0.25% 2.74%
- -----------------------------------------------------------------------------------------------------------------------------
$500,000 - $999,999 2.00% 1.75% 0.25% 2.00%
- -----------------------------------------------------------------------------------------------------------------------------
$1 million or more(3) or Retirement Plan - 100 or more
eligible employees(3) or Special Retirement Wrap Program(3)
- -----------------------------------------------------------------------------------------------------------------------------
First $5 million no front-end sales charge 1.00% 0.25% 1.25%
- -----------------------------------------------------------------------------------------------------------------------------
Next $5 million above that no front-end sales charge 0.55% 0.25% 0.80%
- -----------------------------------------------------------------------------------------------------------------------------
Next $40 million above that no front-end sales charge 0.50% 0.25% 0.75%
- -----------------------------------------------------------------------------------------------------------------------------
Over $50 million no front-end sales charge 0.25% 0.25% 0.50%
- -----------------------------------------------------------------------------------------------------------------------------
Class B investments Paid at time of sale (% of net asset value)
- -----------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 3.75% 0.25% 4.00%
- -----------------------------------------------------------------------------------------------------------------------------
Class C investments
- -----------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.75% 0.25% 1.00%
- -----------------------------------------------------------------------------------------------------------------------------
Class P investments Percentage of average net assets
- ----------------------------------------------------------------------------------------------------------------All amounts
No front-end sales charge 0.25% 0.20% 0.45%
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
ANNUAL COMPENSATION AFTER FIRST YEAR
Class A investments
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
All amounts no front-end sales charge none 0.25% 0.25%
- -----------------------------------------------------------------------------------------------------------------------------
Class B investments Percentage of average net assets(4)
- -----------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25% 0.25%
- -----------------------------------------------------------------------------------------------------------------------------
Class C investments
- -----------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.65% 0.25% 0.90%
- -----------------------------------------------------------------------------------------------------------------------------
Class P investments
- -----------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.25% 0.20% 0.45%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The service fee for class A and P shares is paid quarterly. The first
year's service fee on class B and C shares is paid at the time of sale.
(2) Dealer's concession percentages and service fee percentages are calculated
from different amounts, and therefore may not equal total compensation
percentages if combined using simple addition. Additional Concessions may
be paid to Authorized Institutions from time to time.
(3) Concessions are paid at the time of sale on all class A shares sold during
any 12-month period starting from the day of the first net asset value
sale. With respect to (a) class A share purchase at $1 million or more,
sales qualifying at such level under rights of accumulation and statement
of intention privileges are included and (b) for Special Retirement Wrap
Programs, only new sales are eligible and exchanges into the Fund are
excluded.
(4) With respect to class B, C and P shares, 0.25%, 0.90% and 0.45%,
respectively, of the average annual net asset value of such shares
outstanding during the quarter (including distribution reinvestment shares
after the first anniversary of their issuance) is paid to Authorized
Institutions. These fees are paid quarterly in arrears. In the case of
class C shares for fixed-income series, 0.10% of the average net asset
value of such shares is retained by Lord Abbett Distributor, thus reducing
from 0.75% to 0.65% after the first year. Lord Abbett & Co. uses 0.10% for
expenses primarily intended to result in the sale of such series' shares.
Financial Information 25
<PAGE>
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<PAGE>
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<PAGE>
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<PAGE>
More information on these funds is available free upon request, including
the following:
ANNUAL/SEMI-ANNUAL REPORT
Describes the funds, lists portfolio holdings and contains a letter from
each fund's manager discussing recent market conditions and investment
strategies.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Provides more details about the funds and their policies. A current SAI is
on file with the Securities and Exchange Commission ("SEC") and is
incorporated by reference (is legally considered part of this prospectus).
To obtain information:
By telephone. Call the funds at: 800-426-1130
By mail. Write to the funds at:
The Lord Abbett Family of Funds
767 Fifth Avenue
New York, NY 10153-0203
Via the Internet.
Lord, Abbett & Co.
http://www.lordabbett.com
Text only versions of fund documents can be viewed online or downloaded from:
SEC
http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 800-SEC-0330) or by sending your request and a duplicating
fee to the SEC's Public Reference Section, Washington, DC 20549-6009.
LAGF-1-599
(5/99)
Lord Abbett Global Fund, Inc.
Equity Series
Income Series
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
---------------------------
SEC file number: 811-5476
<PAGE>
LORD ABBETT
Statement of Additional Information May 1, 1999
Global Fund, Inc.
Equity Series
Income Series
This Statement of Additional Information is not a prospectus. A prospectus for
Lord Abbett Global Fund, Inc. (the "fund" or "we") may be obtained from your
securities dealer or from Lord Abbett Distributor LLC ("Lord Abbett
Distributor") at The General Motors Building, 767 Fifth Avenue, New York, New
York 10153-0203. This Statement relates to, and should be read in conjunction
with, the prospectus dated May 1, 1999.
Our Board of Directors has authority to create and classify shares of common
stock in separate series, without further action by shareholders. To date,
500,000,000 shares of the Equity Series ("Equity Fund") and 500,000,000 shares
of the Income Series ("Income Fund") have been authorized at $0.001 par value.
Both funds consist of four classes (A, B, C and P ). The Board of Directors will
allocate these authorized shares among the classes of each fund from time to
time. All shares have equal noncumulative voting rights and equal rights with
respect to dividends, assets and liquidation, except for certain class-specific
expenses. They are fully paid and nonassessable when issued and have no
preemptive or conversion rights. Although no present plans exist to do so,
further series may be added in the future. The Investment Company Act of 1940,
as amended (the "Act"), requires that where more than one fund exists, each fund
must be preferred over all other funds in respect of assets specifically
allocated to such funds.
Rule 18f-2 under the Act provides that any matter required to be submitted, by
the provisions of the Act or applicable state law, or otherwise, to the holders
of the outstanding voting securities of an investment company such as the fund
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each class or fund affected
by such matter. Rule 18f-2 further provides that a class or fund shall be deemed
to be affected by a matter unless the interests of each class or fund in the
matter are substantially identical or the matter does not affect any interest of
such class or series. However, the Rule exempts the selection of independent
public accountants, the approval of a contract with a principal underwriter and
the election of directors from the separate voting requirements of the Rule.
Shareholder inquiries should be made by writing directly to the fund or by
calling 800-821-5129. In addition, you can make inquiries through your dealer.
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
1. Investment Policies 2
2. Directors and Officers 6
3. Investment Advisory and Other Services 10
4. Portfolio Transactions 12
5. Purchases Redemptions and Shareholder Services 13
6. Past Performance 20
7. Taxes 21
8. Information About the Fund 22
9. Financial Statements 22
10. Appendix 22
</TABLE>
1
<PAGE>
1.
Investment Policies
Fundamental Investment Restrictions
The Fund is subject to the following investment restrictions which cannot be
changed without approval of a majority of our outstanding shares. Neither fund
may: (1) borrow money, except that (i) it may borrow from banks (as defined in
the Act) in amounts up to 33 1/3% of its total assets (including the amount
borrowed), (ii) it may borrow up to an additional 5% of its total assets for
temporary purposes, (iii) it may obtain such short-term credit as may be
necessary for the clearance of purchases and sales of portfolio securities and
(iv) it may purchase securities on margin to the extent permitted by applicable
law; (2) pledge its assets (other than to secure borrowings, or to the extent
permitted by the funds' investment policies as permitted by applicable law); (3)
engage in the underwriting of securities, except pursuant to a merger or
acquisition or to the extent that, in connection with the disposition of its
portfolio securities, it may be deemed to be an underwriter under federal
securities laws; (4) make loans to other persons, except that the acquisition of
bonds, debentures or other corporate debt securities and investment in
government obligations, commercial paper, pass-through instruments, certificates
of deposit, bankers acceptances, repurchase agreements or any similar
instruments shall not be subject to this limitation, and except further that
each fund may lend its portfolio securities, provided that the lending of
portfolio securities may be made only in accordance with applicable law; (5) buy
or sell real estate (except that a fund may invest in securities directly or
indirectly secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein) or commodities or commodity
contracts (except to the extent a 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); (6) with respect to 75%
of the gross assets of the Equity fund, buy securities of one issuer
representing more than (i) 5% of the Equity funds' gross assets, except
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or (ii) 10% of the voting securities of such issuer; (7)
invest more than 25% of its assets, taken at market value, in the securities of
issuers in any particular industry (excluding securities of the U.S. Government,
its agencies and instrumentalities); or (8) issue senior securities to the
extent such issuance would violate applicable law.
With respect to the restrictions mentioned herein, compliance therewith will not
be affected by changes in the market value of portfolio securities but will be
determined at the time of purchase or sale of such securities.
Non-Fundamental Investment Restrictions. In addition to the investment
restrictions above which cannot be changed without shareholder approval, each
fund is also subject to the following non-fundamental investment policies which
may be changed by the Board of Directors without shareholder approval. Neither
fund may: (1) borrow in excess of 33 1/3% of its total assets (including the
amount borrowed), and then only as a temporary measure for extraordinary or
emergency purposes; (2) make short sales of securities or maintain a short
position except to the extent permitted by applicable law; (3) invest knowingly
more than 15% of its net assets (at the time of investment) in illiquid
securities, except for securities qualifying for resale under Rule 144A of the
Securities Act of 1933, deemed to be liquid by the Board of Directors; (4)
invest in the securities of other investment companies except as permitted by
applicable law; (5) invest in securities of issuers which, with their
predecessors, have a record of less than three years' continuous operations, if
more than 5% of a funds' 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); (6) hold securities of any issuer if more than
1/2 of 1% of the securities of such issuer are owned beneficially by one or more
officers or directors of the fund or by one or more partners or members of a
funds' underwriter or investment adviser if these owners in the aggregate own
beneficially more than 5% of the securities of such issuer; (7) invest in
warrants if, at the time of the acquisition, its investment in warrants, valued
at the lower of cost or market, would exceed 5% of such funds' total assets
(included within such limitation, but not to exceed 2% of such funds' total
assets, are warrants which are not listed on the New York or American Stock
Exchange or a major foreign exchange); (8) invest in real estate limited
partnership interests or interests in oil, gas or other mineral leases, or
exploration or other development programs, except that each fund may invest in
securities issued by companies that engage in oil, gas or other mineral
exploration or other development activities; (9) write, purchase or sell puts,
calls, straddles, spreads or combinations thereof, except to the extent
permitted in the funds' prospectus and statement of additional information, as
they may be amended from time to time; or (10) buy from or sell to any of its
2
<PAGE>
officers, directors, employees, or its investment adviser or any of its
officers, directors, partners or employees, any securities other than shares of
the funds' common stock.
The Income fund will be required to meet the diversification rules under
Subchapter M of the Internal Revenue Code.
Although it has no current intention to do so, the fund may invest in financial
futures and options on financial futures.
Portfolio Turnover Rate
For the fiscal years ended December 31, 1998, 1997 and 1996 the portfolio
turnover rates were 89.48%, 99.05% and 81.97% for the Equity Fund, and 359.13%,
616.63% and 621.79% for the Income Fund, respectively.
Foreign Currency Hedging Techniques
The fund may utilize various foreign currency hedging techniques described
below, including forward foreign currency contracts and foreign currency put and
call options.
Forward Foreign Currency Contracts. The Income Fund may hold foreign currencies
to meet settlement requirements relating to the purchase of foreign securities.
The fund also may enter into currency exchange transactions, including forward
foreign currency contracts. Forward currency contracts are agreements to
exchange one currency for another at a future date. The fund may use currency
exchange transactions to try to protect against uncertainties in the levels of
future exchange rates between particular foreign currencies and the U.S. dollar,
among foreign currencies or between foreign currencies in which portfolio
securities are or may be denominated. The fund also may use these transactions
as an efficient way to gain exposure to short-term interest rates in a
particular country instead of investing in securities denominated in the
country's currency.
Forward currency contracts (1) are traded in a market primarily conducted
directly between commercial banks or other financial institutions and their
customers, (2) generally have no deposit requirements and (3) are typically
consummated without payment of any commissions. The fund may enter into forward
foreign currency contracts requiring deposits or the payment of commissions,
however. At maturity of a forward foreign currency contract, the fund may (a)
pay for and receive the underlying currency, (b) negotiate with the dealer to
roll over the contract into a new forward currency contract with a new future
settlement date or (c) negotiate with the dealer or another dealer to terminate
the forward contract by entering into an offset with the currency trader
providing for the fund's paying or receiving the difference between the exchange
rate fixed in the contract and the then current exchange rate. At any time, the
fund also may elect to negotiate such an offset prior to the maturity of the
original forward contract , although it is possible that neither new forward
contracts nor offsets will be available to the fund at any given time. In
addition, if a devaluation in a particular currency is generally anticipated,
the fund may not be able to contract to sell currency at a price above the
devaluation level it anticipates.
The fund may use forward foreign exchange for hedging with respect to specific
transactions or portfolio positions. Transaction hedging is the purchase or sale
of one forward currency for another currency with respect to specific
receivables or payables of the fund accruing in connections with the pruchase
and sale of its portfolio securities, the sale and redemption of shares of the
fund or the payment of dividends and distributions by the fund. Position hedging
is the purchase or sale of one forward currency for another currency with
respect to portfolio security positions denominated or quoted in the foreign
currency to offset the effect of an anticipated substantial appreciation or
depreciation, respectively, in the value of the currency relative to the U.S.
dollar. In this situation, the fund, may, for example, enter into a foreign
contract to sell or purchase a different foreign currency for a fixed U.S.
dollar amount where it is anticipated that the U.S. dollar will fall or rise, as
the case may be, whenever there is a decline or increase, respectively, in the
U.S. dollar value of the currency in which portfolio securities of the fund are
denominated (this practice being referred to as a "cross-hedge"). In hedging a
specific transaction, the fund may enter into a forward contract with respect to
either the currency in which the transaction is denominated or another currency
that Lord Abbett deems appropriate.
3
<PAGE>
The cost to the fund of engaging in currency transactions varies with factors
such as the currency involved, the length of the contract period and the market
conditions then prevailing. The use of forward currency contracts does not
eliminate fluctuations in the underlying prices of securities, but it does
establish a rate of exchange that can be achieved in the future. In addition,
although forward currency contracts limit the risk of loss due to a decline in
the value of the hedged currency, at the same time, they limit any potential
gain that might result should the value of the currency increase.
In entering into forward currency contracts, the fund may be subject to a number
of risks and special considerations. The market for forward currency contracts,
for example, may be limited with respect to certain currencies. The existence of
a limited market may in turn restrict the fund's ability to hedge against the
risk of devaluation of currencies in which the fund holds a substantial quantity
of securities. The successful use of forward currency contracts as a hedging
technique draws on Lord Abbett's skill and experience with respect to those
instruments and usually depends on Lord Abbett's ability to forecast interest
rate and currency exchange rate movements correctly. If interest or exchange
rates move in an unexpected manner, the fund may not achieve the anticipated
benefits of forward currency contracts or may realize losses and thus be in a
less advantageous position than if those strategies had not been used. Forward
currency contracts normally are not subject to any daily price fluctuation
limits to that adverse market movements could continue with respect to those
contracts to a substantial extent over a period of time. In addition, the
correlation between movements in the prices of those contracts and movements in
the prices of the currencies hedged or used for cover may not be perfect.
The fund's ability to dispose of its positions in forward currency contracts
will depend on the availability of active markets in those instruments and Lord
Abbett cannot predict the amount of trading interest that may exist in the
future in forward currency contracts. Only the parties entering into an
offsetting contract may close out forward currency contracts. As a result, no
assurance can be given that the fund will be able to use these contracts
effectively for the purposes described above.
Foreign Currency Put and Call Options. The fund may also purchase foreign
currency put options and write foreign currency call options on U.S. exchanges
or U.S. over-the-counter markets. A put option gives the fund, upon payment of a
premium, the right to sell a currency at the exercise price until the expiration
of the option and serves to insure against adverse currency price movements in
the underlying portfolio assets denominated in that currency.
Exchange-listed options markets in the United States include several major
currencies, and trading may be thin and illiquid. A number of major investment
firms trade unlisted options which are more flexible than exchange-listed
options with respect to strike price and maturity date. Unlisted options
generally are available in a wider range of currencies, including those of most
of the developed countries. Unlisted foreign currency options are generally less
liquid than listed options and involve the credit risk associated with the
individual issuer. Unlisted options are subject to a limit of 5% of each funds'
net assets illiquid securities.
A call option written by the fund gives the purchaser, upon payment of a
premium, the right to purchase from the fund a currency at the exercise price
until the expiration of the option. The fund may write a call option on a
foreign currency only in conjunction with a purchase of a put option on that
currency. Such a strategy is designed to reduce the cost of downside currency
protection by limiting currency appreciation potential. The face value of such
writing may not exceed 90% of the value of the securities denominated in such
currency invested in by the fund or in such cross currency (referred to above)
to cover such call writing.
Investment Techniques
The fund intends to utilize, from time to time, one or more of the investment
techniques described below, including covered call options, rights and warrants
and repurchase agreements. It is the funds' current intention that no more than
5% of each funds' net assets will be at risk in the use of any one of such
investment techniques. While some of these techniques involve risk when utilized
independently, the fund intends to use them to reduce risk and volatility in its
portfolios.
4
<PAGE>
Covered Call Options. Each fund may write covered call options on securities it
owns ("call options"), provided that the securities held to cover such call
options do not represent more than 5% of a funds' net assets. A call option on
stock gives the purchaser of the option, upon payment of a premium to the writer
of the option, the right to call upon the writer to deliver a specified number
of shares of a stock on or before a fixed date at a predetermined price.
The writing of call options will, therefore, involve a potential loss of
opportunity to sell securities at higher prices. In exchange for the premium
received. The writer of a fully collateralized call option gives up the gain
possibility of the underlying stock beyond the call price and continues to have
the downside risk of such securities. In addition, in exchange for the premium
received, the writer of the call gives up the gain possibility of the stock
appreciating above the call price. While an option that has been written is in
force, the maximum profit that may be derived from the optioned stock is the sum
of the premium less brokerage commissions and fees plus the difference between
the strike price of the call and the market price of the underlying security.
Each fund will not use call options on individual equity securities traded on
foreign securities markets.
The funds' custodian will segregate cash or liquid high-grade debt securities in
an amount not less than that required by SEC Release 10666 and any SEC staff
interpretations thereof with respect to each funds' assets committed to (a)
forward foreign currency contracts and (b) cross hedges. If the value of the
segregated securities declines, additional cash, equity and debt securities
consistent with the funds' policies and such SEC requirements will be added on a
daily basis (i.e., marked to market) so that the segregated amount will not be
less than the amount of the funds' commitments with respect to such forward
contracts and cross hedges.
Rights and Warrants. Each fund may invest in rights and warrants to purchase
securities. Included within that amount, but not to exceed 2% of the value of
the fund's net assets, may be warrants which are not listed on the New York
Stock Exchange ("NYSE") or American Stock Exchange.
Rights represent a privilege offered to holders of record of issued securities
to subscribe (usually on a pro-rata basis) for additional securities of the same
class, of a different class, or of a different issuer, as the case may be.
Warrants represent the privilege to purchase securities at a stipulated price
and are usually valid for several years. Rights and warrants generally do not
entitle a holder to dividends or voting rights with respect to the underlying
securities, nor do they represent any rights in the assets of the issuing
company.
Also, the value of a right or warrant may not necessarily change with the value
of the underlying securities and rights and warrants cease to have value if they
are not exercised prior to their expiration date.
Repurchase Agreements. Each fund may enter into repurchase agreements with
respect to a security. A repurchase agreement is a transaction by which the fund
acquires a security and simultaneously commits to resell that security to the
seller (a bank or securities dealer) at an agreed-upon price on an agreed-upon
date. The resale price reflects the purchase price plus an agreed-upon market
rate of interest which is unrelated to the coupon rate or date of maturity of
the purchased security. In this type of transaction, the securities purchased by
the fund have a total value in excess of the value of the repurchase agreement.
Each fund requires at all times that the repurchase agreement be collateralized
by cash or U.S. Government securities having a value equal to, or in excess of,
the value of the repurchase agreement. Such agreements permit the each fund to
keep all of its assets at work while retaining flexibility in pursuit of
investments of a longer-term nature.
The use of repurchase agreements involves certain risks. For example, if the
seller of the agreement defaults on its obligation to repurchase the underlying
securities at a time when the value of these securities has declined, a fund may
incur a loss upon their disposition. If the seller of the agreement becomes
insolvent and subject to liquidation or reorganization under the Bankruptcy Code
or other laws, a bankruptcy court may determine that the underlying securities
are collateral not within the control of the fund and are therefore subject to
sale by the trustee in bankruptcy. Even though the repurchase agreements may
have maturities of seven days or less, they may lack liquidity, especially if
the issuer encounters financial difficulties. While the fund acknowledges these
risks, it is expected that they can be controlled through stringent selection
criteria and careful monitoring procedures. Each fund intends to limit
repurchase
5
<PAGE>
agreements to transactions with dealers and financial institutions believed by
the fund to present minimal credit risks. Each fund will monitor
creditworthiness of the repurchase agreement sellers on an ongoing basis.
Lending Portfolio Securities
Each fund may lend its portfolio securities to registered broker-dealers. These
loans, if and when made, currently may not exceed 15% of each funds' total
assets. However, the Equity Fund is limiting its security loans to 5% of its
total assets and the Income Fund anticipates increasing its securities lending
activities to 30% of its total assets, upon approval of the increase by the
Board of Directors. Each funds' lending of securities will be collateralized by
cash or marketable securities issued or guaranteed by the U.S. Government or its
agencies ("U.S. Government securities") or other permissible means. The cash or
instruments collateralizing each funds' lending of securities will be maintained
at all times in an amount at least equal to the current market value of the
loaned securities. From time to time, a Series may allow a part of the interest
received with respect to the investment of collateral to be paid to the borrower
and/or a third party that is not affiliated with the fund and is acting as a
"placing broker." No fee will be paid to affiliated persons of a fund.
By lending portfolio securities, a fund can increase its income by continuing to
receive interest on the loaned securities as well as by either investing the
cash collateral in permissible investments, such as U.S. Government securities,
or obtaining yield in the form of interest paid by a borrower when such U.S.
Government securities are used as collateral. Each fund will comply with the
following conditions whenever it lends securities: (i) the funds must receive at
least 100% collateral from the borrower; (ii) the borrower must increase the
collateral whenever the market value of the securities loaned rises above the
level of the collateral; (iii) the funds must be able to terminate the loan at
any time; (iv) the funds must receive reasonable compensation with respect to
the loan, as well as any dividends, interest or other distributions on the
loaned securities; (v) the funds may pay only reasonable fees in connection with
the loan; and (vi) voting rights on the loaned securities may pass to the
borrower, except that if a material event adversely affecting the investment in
the loaned securities occurs, the funds' Board of Directors must terminate the
loan and regain the right to vote the securities.
INCOME FUND ONLY
When-Issued Transactions
As stated in the prospectus, the Income Fund may purchase portfolio securities
on a when-issued basis. When-issued transactions involve a commitment by the
Income Fund to purchase securities, with payment and delivery ("settlement") to
take place in the future, in order to secure what is considered to be an
advantageous price or yield at the time of entering into the transaction. When
the Income Fund enters into a when-issued purchase, it becomes obligated to
purchase securities and it assumes all the rights and risks attendant to
ownership of a security, although settlement occurs at a later date. The value
of fixed-income securities to be delivered in the future will fluctuate as
interest rates vary. At the time the Income Fund makes the commitment to
purchase a security on a when-issued basis, it will record the transaction and
reflect the liability for the purchase and the value of the security in
determining its net asset value. The Income Fund generally has the ability to
close out a purchase obligation on or before the settlement date, rather than
take delivery of the security. Under no circumstances will settlement for such
securities take place more than 120 days after the purchase date.
2.
Directors and Officers
The following director is a partner of Lord, Abbett & Co. ("Lord Abbett"), The
General Motors Building, 767 Fifth Avenue, New York, New York 10153-0203. He has
been associated with Lord Abbett for over five years and is also an officer
and/or director or trustee of the other Lord Abbett-sponsored funds. He is an
"interested person" as defined in the Act, and as such, may be considered to
have an indirect financial interest in the Rule 12b-1 Plan described in the
prospectus.
Robert S. Dow, age 54, Chairman and President
6
<PAGE>
The following outside directors are also directors or trustees of some or all of
the other Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow
Time Warner Inc.
1271 Avenue of the Americas
New York, New York
Senior Adviser, Time Warner, Inc. Formerly, Acting Chief Exective Officer of
Courtroom Television Network (1997-1998). Formerly President and Chief Executive
Officer of Time Warner Cable Programming, Inc. (1991-1997). Prior to that,
(1997-1998) President and Chief Operating Officer of Home Box Office, Inc. Age
57.
William H.T. Bush
Bush-O'Donnell & Co., Inc.
101 South Hanley Road, Suite 1025
St. Louis, Missouri
Co-founder and Chairman of the Board of the financial firm of Bush-O'Donnell &
Company. Age 60.
Robert B. Calhoun, Jr.
Monitor Clipper Partners
650 Madison Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners and President of the Clipper Group
L.P., both private equity investment funds. Age 56.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 68.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 73.
C. Alan MacDonald
Directorship Inc.
8 Sound Shore Drive
Greenwich, Connecticut
Managing Director of Directorship Inc., a consultancy in board management and
corporate governance. Formerly General Partner of the The Marketing Partnership,
Inc., a full service marketing consulting firm (1994 - 1997). Prior to that,
Chairman and Chief Executive Officer of Lincoln Snacks, Inc., manufacturer of
branded snack foods (1992 - 1994). His career spans 36 years at Stouffers and
Nestle with 18 of the years as Chief Executive Officer. Currently serves as
Director of DenAmerica Corp., J.B. Williams Company, Inc., Fountainhead Water
Company and Exigent Diagnostics. Age 65.
7
<PAGE>
Hansel B. Millican, Jr.
Rochester Button Company
1328 Broadway (Suite 816)
New York, New York
President and Chief Executive Officer of Rochester Button Company. Age 70.
Thomas J. Neff
Spencer Stuart
277 Park Avenue
New York, New York
Chairman of Spencer Stuart, an executive search consulting firm. Currently
serves as Director of ACE, Ltd. (NYSE). Age 61.
The second column of the following table sets forth the compensation accrued for
the funds' outside directors. The third column sets forth information with
respect to the equity-based benefits accrued for outside directors by the Lord
Abbett-sponsored funds. The fourth column sets forth the total compensation
payable by such funds to the outside directors. No director of the fund
associated with Lord Abbett and no officer of the fund received any compensation
from the fund for acting as a director or officer.
For the Fiscal Year Ended December 31, 1998
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Pension or For Year Ended
Retirement Benefits December 31, 1998
Accrued by the Total Compensation
Aggregate fund and Accrued by the fund and
Compensation Twelve Other Lord Twelve Other Lord
Accrued by Abbett-sponsored Abbett-sponsored
Name of Director the fund 1. funds 2. funds 3.
- ---------------- --------- ------ -------
<S> <C> <C> <C>
E. Thayer Bigelow $563 $17,068 $57,400
William H.T. Bush * $270 $0 $27,500
Robert B. Calhoun, Jr.** $328 $0 $33,500
Stewart S. Dixon $554 $32,190 $56,500
John C. Jansing $544 $45,085 4. $55,500
C. Alan MacDonald $539 $30,703 $55,000
Hansel B. Millican $544 $37,747 $55,500
Thomas J. Neff $554 $19,853 $56,500
</TABLE>
* Elected August 13, 1998
** Elected June 17, 1998
1. Outside directors' fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on the
net assets of each fund. A portion of the fees payable by the fund to its
outside directors is being deferred under a plan that deems the deferred
amounts to be invested in shares of the fund for later distribution to the
directors.
2. The amounts in Column 3 were accrued by the Lord Abbett-sponsored funds for
the 12 months ended October 31, 1998 with respect to the equity based plans
established for independent directors in 1996. This plan supercedes a
previously approved retirement plan for all future directors. Current
directors had the option to convert their accrued benefits under the
retirement plan. All of the outside directors except one made such an
election. Each plan also provides for a pre-retirement death benefit and
actuarially reduced joint-and-survivor spousal benefits.
8
<PAGE>
3. This column shows aggregate compensation, including directors fees and
attendance fees for board and committee meetings, of a nature referred to
in footnote one, accrued by the Lord Abbett-sponsored funds during the year
ended December 31, 1998. The amounts of the aggregate compensation payable
by the Equity Fund as of December 31, 1998 deemed invested in fund shares,
including dividends reinvested and changes in net asset value applicable to
such deemed investments, were: Mr. Bigelow, $1,498; Mr. Calhoun, $158; Mr.
Dixon, $913; Mr. Jansing, $3,361; Mr. MacDonald, $1,960; Mr. Millican,
$3,397 and Mr. Neff, $3,364. If the amounts deemed invested in fund shares
were added to each director's actual holdings of fund shares as of December
31, 1998, each would own, the following: Mr. Bigelow, 122 shares; Mr.
Calhoun, 13 shares; Mr. Dixon, 74 shares; Mr. Jansing, 274 shares; Mr.
MacDonald, 160 shares; Mr. Millican, 276 shares; and Mr. Neff, 274 shares.
The amounts of the aggregate compensation payable by the Income Fund as of
December 31, 1998 deemed invested in fund shares, including dividends
reinvested and changes in net asset value applicable to such deemed
investments, were: Mr. Bigelow, $3,710; Mr. Calhoun, $288; Mr. Dixon,
$2,444; Mr. Jansing, $8,633; Mr. MacDonald, $5,177; Mr. Millican, $4,685
and Mr. Neff, $8,613. If the amounts deemed invested in fund shares were
added to each director's actual holdings of fund shares as of December 31,
1998, each would own, the following: Mr. Bigelow, 440 shares; Mr. Calhoun,
34 shares; Mr. Dixon, 459 shares; Mr. Jansing, 1,023 shares; Mr. MacDonald,
613 shares; Mr. Millican, 555 shares; and Mr. Neff, 6,227 shares.
4. Mr. Jansing chose to continue to receive benefits under the retirement plan
which provides that outside directors may receive annual retirement
benefits for life equal to their final annual retainer following retirement
at or after age 72 with at least ten years of service. Thus, if Mr. Jansing
were to retire and the annual retainer payable by the funds were the same
as it is today, he would receive annual retirement benefits of $50,000.
Except where indicated, the following executive officers of the fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Brown, Carper, Hilstad, Morris and Walsh are partners of Lord Abbett; the others
are employees:
Executive Vice Presidents
Zane E. Brown, age 47
Timothy W. Horan, age 44 (with Lord Abbett since 1996 - formerly Senior Manager
of Credit Suisse; prior thereto Vice President of Aubrey G. Lanston & Co.)
Vice Presidents
Paul A. Hilstad, age 56, Vice President and Secretary (with Lord Abbett since
1995 - formerly Senior Vice President and General Counsel of American Capital
Management & Research, Inc.)
Daniel E. Carper, age 47
Lawrence H. Kaplan, age 42 (with Lord Abbett since 1997 formerly Vice President
and Chief Counsel of Salomon Brothers Asset Management Inc. from 1995 to 1997;
prior thereto, Senior Vice President, Director and General Counsel of Kidder
Peabody Asset Management, Inc.)
Jerald M. Lanzotti, age 31 (with Lord Abbett since 1996 - formerly an Associate
of Deutsche Morgan Grenfell/C.J. Lawrence Inc.)
Robert G. Morris, age 54
A. Edward Oberhaus, age 39
Keith F. O'Connor, age 43
Fernando Saldanha, age 46 (with Lord Abbett since 1998 formerly Senior Financial
Officer at World Bank from 1988)
9
<PAGE>
John J. Walsh, age 63
Treasurer
Donna M. McManus, age 38, (with Lord Abbett since 1996, formerly a Senior
Manager at Deloitte & Touche LLP).
The funds' By-Laws provide that the fund shall not hold an annual meeting of its
stockholders in any year unless one or more matters are required to be acted on
by stockholders under the Investment Company Act of 1940, as amended (the
"Act"), or unless called by a majority of the Board of Directors or by
stockholders holding at least one quarter of the stock of the fund outstanding
and entitled to vote at the meeting. When any such annual meeting is held, the
stockholders will elect directors and vote on the approval of the independent
auditors of the fund.
As of April 15, 1998, our officers and directors, as a group, owned less than 1%
of each class's outstanding shares. As of that date, each person who owns of
record or is known to own of record, beneficially 5% or more of any class of
shares of the Fund are as follows:
<TABLE>
<CAPTION>
Equity Fund: Income Fund:
Class A: Class A:
<S> <C>
Edward Jones & Co. - 28% Edward Jones & Co. - 35%
201 Progress Pkwy 201 Progress Pkwy
Maryland Hts, MO 63043 Maryland Hts, MO 63043
Class B: Class B:
Edward Jones & Co. - 11.5% Edward Jones & Co. - 15%
201 Progress Pkwy 201 Progress Pkwy
Maryland Hts, MO 63043 Maryland Hts, MO 63043
MLPF&S/Benefit of Its Customer - 11% MLPF&S/Benefit of its Customers - 12%
4800 Deer Lake Drive E FL 3 4800 Deer Lake Drive E FL 3
Jacksonville, FL 32246 Jacksonville, FL 32246
Painewebber/R.& N Maxey Trustees - 5.7% Sumerkau & Sons Inc./Employee Trust - 6%
24745 La Vida 290 Broadway
Laguna Niguel, CA 92677 Huntington Station, NY 11746
Class C: Class C:
Edward Jones & Co. - 13.5% Edward Jones & Co. - 5%
201 Progress Pkwy 201 Progress Pkwy
Maryland Hts, MO 63043 Maryland Hts, MO 63043
Painewebber/Benefit of
Lowerre Charitable Trust - 12.7% MLPF&S/Benefit of its Customers - 28%
123 East 80th Street 4800 Deer Lake Drive
New York, New York 10021 Jacksonville, FL 32245
Painewebber/Benefit of Rothman - 6%
P.O. Box 3321
Weehawken, NJ 07087
Class P:
MLPF&S/Benefit of its Customers - 99%
4800 Deer Lake Drive E FL 3
Jacksonville, FL 32246
</TABLE>
3.
Investment Advisory and Other Services
As described under "Management" in the Prospectus, Lord Abbett is the funds'
investment manager. The general partners of Lord Abbett who also are officers
and/or directors of the fund are: Zane E. Brown, Daniel E. Carper, Robert S.
Dow, Paul A. Hilstad, Robert G. Morris and John J. Walsh. The other general
partners who are neither offficers nor directors of the fund are : Stephen
Allen, John E. Erard, Robert P. Fetch, Daria L. Foster, Robert I. Gerber, W.
Thomas Hudson, Stephen J. McGruder, Michael B. McLaughlin, Mark Pennington,
Robert J. Noelke and Christopher J. Towle. The address of each partner is The
General Motors Building, 767 Fifth Avenue, New York, New York 10153-0203.
10
<PAGE>
The services performed by Lord Abbett are described under "Management" in the
prospectus. Under the Management Agreement, we pay Lord Abbett a monthly fee,
based on average daily net assets for each month, at the annual rate of .75 of
1% for the Equity Fund and .50 of 1% for the Income Fund. Notwithstanding the
above, Lord Abbett may, but is not required to, waive its fee or directly pay
all or any portion of the expenses of either fund not expressly assumed by Lord
Abbett under the Management Agreement.
The expense ratios for 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1998** 1997** 1996
A B C A B C A B* C*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income 1.18% 1.87% 1.85% 1.10% 1.78% 1.77% 1.04% .73% .87%
Equity 1.66% 2.37% 2.37% 1.51% 2.23% 2.14% 1.52% .83% .83%
</TABLE>
* Not annualized
**The ratios for 1998 and 1997 include expenses paid through an expense offset
arrangement.
We pay all expenses not expressly assumed by Lord Abbett, including without
limitation 12b-1 expenses, outside directors' fees and expenses, association
membership dues, legal and auditing fees, taxes, transfer and dividend
disbursing agent fees, shareholder servicing costs, expenses relating to
shareholder meetings, expenses of preparing, printing and mailing stock
certificates and shareholder reports, expenses of registering our shares under
federal and state securities laws, expenses of preparing, printing and mailing
prospectuses to existing shareholders, insurance premiums, brokerage and other
expenses connected with executing portfolio transactions.
Lord Abbett has entered into an agreement with Fuji-Lord Abbett International
Ltd. ("the Sub-Adviser"), under which the Sub-Adviser provides Lord Abbett with
advice with respect to the Equity Fund's assets. The Sub-Adviser is controlled
by Fuji Investment Management Co. (Tokyo). Fuji Bank Limited of Tokyo, Japan
("Fuji Bank") directly owned 40% of the outstanding voting stock of the
Sub-Adviser. Fuji Investment Management Co. (Tokyo) is an affiliate of Fuji
Bank. Lord Abbett owns approximately 27% of such outstanding voting stock. As of
November 30, 1998, the Sub-Adviser manages approximately $915 million, which is
invested globally. The Sub-Adviser furnishes Lord Abbett with advice and
recommendations with respect to Equity Fund's assets, including advice about the
allocation of investments among foreign securities markets and foreign equity
and debt securities markets and foreign equity and debt securities and, subject
to consultation with Lord Abbett, advice as to cash holdings and what securities
in the portfolio should be purchased, held or disposed of. The Sub-Adviser also
gives advice with respect to foreign currency matters. Lord Abbett is obligated
to pay the Sub-Adviser a monthly fee, based on average daily net assets for each
month, at the annual rate of .375 of 1%.
Securities held by either of the funds may also be held by other funds or
investment advisory clients for which Lord Abbett or the Sub-Adviser (in the
case of the Equity Fund) or their affiliates provide investment advice. Because
of different investment objectives or other factors, a particular security may
be bought for one or more funds or clients when one or more other funds or
clients are selling the same security. If opportunities for purchase or sale of
securities by Lord Abbett or the Sub-Adviser (in the case of the Equity Fund)
for the fund or for other funds or clients for which they render investment
advice arise for consideration at or about the same time, transactions in such
securities will be made insofar as feasible for the respective funds or clients
in a manner deemed equitable to all of them. To the extent that transactions on
behalf of more than one client of Lord Abbett, the Sub-Adviser (in the case of
the Equity Fund) or their affiliates may increase the demand for securities
being purchased or the supply of securities being sold, there may be an adverse
effect on price.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281 are
the independent auditors of the fund and must be approved at least annually by
our Board of Directors to continue in such capacity. They perform audit services
for the fund including the audit of financial statements included in our annual
report to shareholders.
The Bank of New York ("BNY"), 48 Wall Street, New York, New York 10286, is the
funds' custodian. Rules adopted by the Securities & Exchange Commission under
the Act permit the fund to maintain its foreign assets in the custody
11
<PAGE>
of certain eligible foreign banks and securities depositories. The funds'
portfolio securities and cash, when invested in foreign securities and not held
by BNY or its foreign branches, are held by sub-custodians of BNY approved by
the Board of Directors of the fund in accordance with such rules.
The Sub-Custodians of BNY are:
Euro-Clear (a transnational securities depository); Australia: ANZ Banking
Group; Austria: Creditanstalt-Bankverein; Canada: Canadian Imperial Bank of
Commerce; Chile: Citibank, N.A.; Czech Republic: Ceskoslovenska Obchodni Banka;
Denmark: Den Danske Bank; Finland: Union Bank of Finland; Germany: J.P. Morgan
GmbH; Greece: National Bank of Greece S.A.; Hong Kong, Indonesia, Philippines,
Taiwan and Thailand: Hong Kong & Shanghai Banking Corp.; Hungary: Citibank
Budapest Rt; India: Hong Kong and Shanghai Banking Corporation; Ireland: Allied
Irish Banks, PLC; Israel: Bank Leumi LE-Israel B.M.; Japan: The Fuji Bank, Ltd.;
Jordan: Citibank, N.A.; Korea: Bank of Seoul; Luxembourg: Banque Internationale
A Luxembourg, S.A.; Mexico: Citibank, N.A.; Morocco: Banque Commerciale du
Maroc; Netherlands: Bank van Haften Labouchere; New Zealand: Anz Banking Group
Ltd.; Norway: Den Norske Bank; Pakistan: Citibank, N.A.; Peru: Citibank, N.A.;
Poland: Bank Handlowy w Warszawie S.A.; Portugal: Banco Espirito Santo E
Comercial de Lisboa; Malaysia, Singapore: Development Bank of Singapore; South
Africa: The First National Bank of Southern Africa; Sri Lanka: Hong Kong and
Shanghai Banking Corporation; Sweden: Skandinaviska Enskilda Banken;
Switzerland: Bank Leu; Turkey: Citibank, N.A.; Venezuela: Citibank, N.A.
4.
Portfolio Transactions
With respect to the Income Fund, purchases and sales of portfolio securities
usually will be principal transactions and normally such securities will be
purchased directly from the issuer or from an underwriter or market maker for
the securities. Therefore, the Income Fund usually will pay no brokerage
commissions for such purchases. Purchases from underwriters of portfolio
securities will include a commission or concession paid by the issuer to the
underwriter and purchases from dealers serving as market makers will include a
dealer's markup. Principal transactions, including riskless principal
transactions, are not afforded the protection of the safe harbor in Section 28
(e) of the Securities Exchange Act of 1934.
Our policy is to obtain best execution on all our portfolio transactions, which
means that we seek to have purchases and sales of portfolio securities executed
at the most favorable prices, considering all costs of the transaction including
dealer markups and markdowns and any brokerage commissions and taking into
account the full range and quality of the brokers' services. With respect to the
Equity Fund, consistent with obtaining best execution, we may pay, as described
below, a higher commission than some brokers might charge on the same
transactions. Our policy with respect to best execution governs the selection of
brokers or dealers and the market in which the transaction is executed. To the
extent permitted by law, we may, if considered advantageous, make a purchase
from or sale to another Lord Abbett-sponsored fund without the intervention of
any broker-dealer.
Broker-dealers are selected on the basis of their professional capability and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of the fund and also are employees
of Lord Abbett. These traders do the trading as well for other accounts --
investment companies (of which they are also officers) and other investment
clients -- managed by Lord Abbett. For foreign securities purchased or sold by
the Equity Fund, the selection is made by the Sub-Adviser. They are responsible
for obtaining best execution.
In transactions on stock exchanges in the United States, commissions are
negotiated, whereas on many foreign stock exchanges commissions are fixed. In
the case of securities traded in the foreign and domestic over-the-counter
markets, there is generally no stated commission, but the price usually includes
an undisclosed commission or markup. Purchases from underwriters of newly-issued
securities for inclusion in the funds' portfolios usually will include a
concession paid to the underwriter by the issuer and purchases from dealers
serving as market makers will include the spread between the bid and asked
prices. When commissions are negotiated, we pay a commission rate that we
believe is appropriate to give maximum assurance that our brokers will provide
us, on a continuing basis, the highest level of brokerage services available.
While we do not always seek the lowest possible commission on particular trades,
we believe that our commission rates are in line with the rates that many other
institutions pay. Our traders are authorized to pay
12
<PAGE>
brokerage commissions in excess of those that other brokers might accept on the
same transactions in recognition of the value of the services performed by the
executing brokers, viewed in terms of either the particular transaction or the
overall responsibilities of Lord Abbett with respect to us and the other
accounts they manage. Such services include such factors as showing the fund
trading opportunities including blocks, willingness and ability to take
positions in securities, knowledge of a particular security or market, proven
ability to handle a particular type of trade, confidential treatment, promptness
and reliability. Some of our brokers also provide research services at least
some of which are useful to Lord Abbett in their overall responsibilities with
respect to us and the other accounts they manage. Research includes, the
furnishing of analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts
and trading equipment and computer software packages, acquired from third-part
suppliers, that enable Lord Abbett to access various information databases. Such
services may be used by Lord Abbett in servicing all their accounts, and not all
of such services will necessarily be used by Lord Abbett in connection with
their management of the fund; conversely, such services furnished in connection
with brokerage of other accounts managed by Lord Abbett may be used in
connection with their management of the fund, and not all of such services will
necessarily be used by Lord Abbett in connection with their advisory services to
such other accounts. The fund has been advised by Lord Abbett that research
services received from brokers cannot be allocated to any particular account,
are not a substitute for Lord Abbett's services but are supplemental to their
own research effort and, when utilized, are subject to internal analysis before
being incorporated by Lord Abbett into their investment process. As a practical
matter, it would not be possible for Lord Abbett to generate all of the
information presently provided by brokers. While receipt of research services
from brokerage firms has not reduced Lord Abbett's normal research activities,
the expenses of Lord Abbett could be materially increased if it attempted to
generate such additional information through its own staff and purchased such
equipment and software packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or
among brokers, and trades are executed only when they are dictated by investment
decisions of Lord Abbett to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold our shares and/or
shares of other Lord Abbett-sponsored funds may be preferred.
If other clients of Lord Abbett buy or sell the same security at the same time
as we do, transactions will, to the extent practicable, be allocated among all
participating accounts in proportion to the amount of each order and will be
executed daily until filled so that each account shares the average price and
commission cost of each day. Other clients who direct that their brokerage
business be placed with specific brokers or who invest through wrap accounts
introduced to Lord Abbett by certain brokers may not participate with us in the
buying and selling of the same securities as described above. If these clients
wish to buy or sell the same security as we do, they may have their transactions
executed at times different from our transactions and thus may not receive the
same price or incur the same commission cost as we do.
We will not seek "reciprocal" dealer business (for the purpose of applying
commissions in whole or in part for our benefit or otherwise) from dealers as
consideration for the direction to them of portfolio business.
During the fiscal years ended December 31, 1998, 1997, and 1996, the Equity Fund
paid total commissions to independent broker-dealers of $330,496, $414,606, and
$372,219, respectively.
5.
Purchases, Redemptions
and Shareholder Services
The fund values its portfolio securities at their market values as of the close
of the NYSE. Market value will be determined as follows: securities listed or
admitted to trading privileges on any national or foreign securities exchange
are valued at the last sales price on the principal securities exchange on which
such securities are traded, or, if there is no sale on that day, at the mean
between the last bid and asked prices, or, in the case of bonds, in the
over-the-counter market if, in the judgment of the funds' officers, that market
more accurately reflects the market value of the bonds. Over-the-counter
securities that are not traded on the NASDAQ National Market System are valued
at the mean between the last bid and asked price. Securities for which market
quotations are not available are valued at fair market value under procedures
approved by the Board of Directors.
13
<PAGE>
Information concerning how each fund values its shares for the purchase and
redemption or repurchase of its shares is briefly described in the Prospectus
under "Purchases" and "Redemptions," respectively.
As disclosed in the Prospectus, each Series calculates its net asset value and
is otherwise open for business on each day that the NYSE is open for trading.
The NYSE is closed on Saturdays and Sundays and the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas.
All assets and liabilities expressed in foreign currencies will be converted
into United States dollars at the mean between the buying and selling rates of
such currencies against United States dollars last quoted by any major bank. If
such quotations are not available, the rate of exchange will be determined in
accordance with policies established by the Board of Directors of the fund. The
Board of Directors will monitor, on an ongoing basis, the funds' method of
valuation.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York. In addition, European or Far Eastern
securities trading generally or in a particular country or countries may not
take place on all business days in New York. Furthermore, trading takes place in
various foreign markets on days which are not business days in New York and on
which the funds' net asset values are not calculated. Such calculation does not
take place contemporaneously with the determination of the prices of the
majority of the portfolio securities used in such calculation. Events affecting
the values of portfolio securities that occur between the time their prices are
determined and the close of the NYSE will not be reflected in the funds'
calculation of net asset values unless the funds' Directors determine that the
particular event would materially affect net asset value, in which case an
adjustment will be made.
The net asset value per share for the Class B and Class C shares is determined
in the same manner as for the Class A shares (net assets divided by shares
outstanding). Our Class B and Class C shares are sold at net asset value.
The maximum offering prices of each funds' Class A shares on December 31, 1998
were computed as follows:
Equity Income
Series Series
------ ------
Net asset value per share (net assets
divided by shares outstanding)......................... $12.29 $8.44
Maximum offering price per
share (net asset value divided by .9425 and .9525,
respectively).......................................... $13.04 $8.86
The fund has entered into a distribution agreement with Lord Abbett Distributor
under which Lord Abbett is obligated to use its best efforts to find purchasers
for the shares of the fund and to make reasonable efforts to sell fund shares,
so long as, in Lord Abbett Distributor's judgment, a substantial distribution
can be obtained by reasonable efforts.
For the last three fiscal years Lord Abbett, as the funds' principal
underwriter, received net commissions after allowance of a portion of the sales
charge to independent dealers with respect to Class A shares as follows:
<TABLE>
<CAPTION>
Equity Fund
Year Ended December 31,
---------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Gross sales charge $145,982 $200,054 $310,158
Amount allowed
to dealers $125,381 $170,647 $267,318
-------- -------- --------
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C> <C>
Net commissions
received by
Lord Abbett $ 20,601 $ 29,407 $ 42,840
======== ======== =========
<CAPTION>
Income Fund
Year Ended December 31,
--------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Gross sales charge $ 52,209 $ 75,727 $172,464
Amount allowed
to dealers $ 45,019 $ 65,169 $148,333
-------- -------- --------
Net commissions
received by
Lord Abbett $ 7,190 $ 10,558 $ 24,131
======== ========= =========
</TABLE>
Conversion of Class B Shares. The conversion of Class B shares on the eighth
anniversary of their purchase is subject to the continuing availability of a
private letter ruling from the Internal Revenue Service, or an opinion of
counsel or tax adviser, to the effect that the conversion of Class B shares does
not constitute a taxable event for the holder under Federal income tax law. If
such a revenue ruling or opinion is no longer available, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect. Although
Class B shares could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a sales
charge or fee, such exchange could constitute a taxable event for the holder.
Class A, B, C and P Rule 12b-1 Plans. As described in the prospectus, the fund
has adopted on behalf of each class of each fund, a Distribution Plan and
Agreement pursuant to Rule 12b-1 of the Act: the "A Plans," the "B Plans" , "C
Plans," and "P Plans", respectively. In adopting each Plan and in approving its
continuance, the Board of Directors has concluded that there is a reasonable
likelihood that each Plan will benefit its respective Class and such Class'
shareholders. The expected benefits include greater sales and lower redemptions
of Class shares, which should allow each Class to maintain a consistent cash
flow, and a higher quality of service to shareholders by authorized institutions
than would otherwise be the case. Lord Abbett used all amounts received under
each Plan for payments to dealers for (i) providing continuous services to the
shareholders, such as answering shareholder inquiries, maintaining records, and
assisting shareholders in making redemptions, transfers, additional purchases
and exchanges and (ii) their assistance in distributing shares of each fund.
The fees payable under the A Plan, B Plan and C Plan are described in the
prospectus. For the fiscal year ended December 31, 1998 fees paid to dealers
under each Plan was:
<TABLE>
<CAPTION>
12b-1 Distribution Plan Equity Fund Income Fund
- ----------------------- ----------- -----------
<S> <C> <C>
Class A $223,669 $379,046
Class B $ 21,225 $ 13,787
Class C $ 13,309 $ 41,301
</TABLE>
Each Plan requires the directors to review, on a quarterly basis, written
reports of all amounts expended pursuant to the Plan and the purposes for which
such expenditures were made. Each Plan shall continue in effect only if its
continuance is specifically approved at least annually by vote of the directors,
including a majority of the directors who are not interested persons of the fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related to the Plan ("outside directors"), cast in
person at a meeting called for the purpose of voting on the Plan. No Plan may be
amended to increase materially above the limits set forth therein the amount
spent for distribution
15
<PAGE>
expenses thereunder without approval by a majority of the outstanding voting
securities of the applicable Class and the approval of a majority of the
directors, including a majority of the outside directors. Each Plan may be
terminated at any time by vote of a majority of the outside directors or by vote
of a majority of its Class's outstanding voting securities.
Contingent Deferred Sales Charges. A Contingent Deferred Sales Charge ("CDSC")
(i) applies regardless of class, (ii) will not apply to shares purchased by the
reinvestment of dividends or capital gains distributions; (iii) will be assessed
on the lesser of the net asset value of the shares at the time of redemption or
the original purchase price and (iv) will not be imposed on the amount of your
account value represented by the increase in net asset value over the initial
purchase price (including increases due to the reinvestment of dividends and
capital gains distributions) and upon early redemption of shares.
Class A Shares. As stated in the prospectus, subject to certain exceptions, a
CDSC of 1% is imposed with respect to those Class A shares (or Class A shares of
another Lord Abbett-sponsored fund or series acquired through exchange of such
shares) on which the fund has paid the one-time distribution fee of 1% if such
shares are redeemed out of the Lord Abbett-sponsored family of funds within a
period of 24 months from the end of the month in which the original sale
occurred.
Class B Shares. As stated in the prospectus, subject to certain exceptions, if
Class B shares (or Class B shares of another Lord Abbett-sponsored fund or
series acquired through exchange of such shares) are redeemed out of the Lord
Abbett-sponsored family of funds for cash before the sixth anniversary of their
purchase, a CDSC will be deducted from the redemption proceeds. The Class B CDSC
is paid to Lord Abbett Distributor to reimburse its expenses, in whole or in
part, for providing distribution-related service to the fund in connection with
the sale of Class B shares.
To determine whether the CDSC applies to a redemption, the fund redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held on or after the sixth anniversary
of their purchase, and (3) shares held the longest before such sixth
anniversary.
The amount of the contingent deferred sales charge will depend on the number of
years since you invested and the dollar amount being redeemed, according to the
following schedule:
<TABLE>
<CAPTION>
Anniversary of the Day on Contingent Deferred Sales Charge
Which the Purchase Order Was Accepted on Redemptions (As % of Amount Subject to Charge)
<S> <C>
Before the 1st 5.0%
On the 1st, before the 2nd 4.0%
On the 2nd, before the 3rd 3.0%
On the 3rd, before the 4th 3.0%
On the 4th, before the 5th 2.0%
On the 5th, before the 6th 1.0%
On or after the 6th anniversary None
</TABLE>
In the table, an "anniversary" is the same calendar day in each respective year
after the date of purchase. For example, the anniversaries for shares purchased
on May 1 will be May 1 of each succeeding year. All purchases are considered to
have been made on the business day on which the purchase order was accepted.
Class C Shares. As stated in the prospectus, subject to certain exceptions, if
Class C shares are redeemed for cash before the first anniversary of their
purchase, the redeeming shareholder will be required to pay to the fund on
behalf of Class C shares a CDSC of 1% of the lower of cost or the then net asset
value of Class C shares redeemed. If such shares are exchanged into the same
class of another Lord Abbett-sponsored fund and subsequently redeemed before the
first anniversary of their original purchase, the charge will be collected by
the other fund on behalf of the funds' Class C shares.
16
<PAGE>
Class P Shares. If you buy Class P shares, you pay no sales charge at the time
of purchase, and if you redeem your shares you pay no CDSC. Class P shares are
subject to service and distribution fees at an annual rate of .45 of 1% of the
average daily net asset value of the Class P shares. The Rule 12b-1 plan
applicable to the Class P shares is described in "Class P Rule 12b-1 Plan".
Class P shares are available to a limited number of investors
General. The percentage (1% in the case of Class A and C shares and 5% through
1% in the case of Class B shares) used to calculate CDSCs described above for
the Class A, Class B and Class C shares is sometimes hereinafter referred to as
the "Applicable Percentage."
With respect to Class A and Class B shares, no CDSC is payable on redemptions by
participants or beneficiaries from employer-sponsored retirement plans under the
Internal Revenue Code for benefit payments due to plan loans, hardship
withdrawals, death, retirement or separation from service and for returns of
excess contributions to retirement plan sponsors. With respect to Class B
shares, no CDSC is payable for redemptions (i) in connection with Systematic
Withdrawal Plan and Div-Move services as described below under those headings,
(ii) in connection with mandatory distribution under 403(b) plans and IRAs and
(iii) in connection with death of the shareholder. In the case of Class A and
Class C shares, the CDSC is received by the fund and is intended to reimburse
all or a portion of the amount paid by the fund if the shares are redeemed
before the fund has had an opportunity to realize the anticipated benefits of
having a long-term shareholder account in the fund. In the case of Class B
shares, the CDSC is received by Lord Abbett Distributor and is intended to
reimburse its expenses of providing distribution-related service to the fund
(including recoupment of the commission payments made) in connection with the
sale of Class B shares before Lord Abbett Distributor has had an opportunity to
realize its anticipated reimbursement by having such a long-term shareholder
account subject to the B Plan distribution fee.
The other funds and series which participate in the Telephone Exchange Privilege
(except (a) Lord Abbett U.S. Government Securities Money Market fund, Inc.
("GSMMF"), (b) certain series of Lord Abbett Tax-Free Income fund and Lord
Abbett Tax-Free Income Trust for which a Rule 12b-1 Plan is not yet in effect,
and (c) any authorized institution's affiliated money market fund satisfying
Lord Abbett Distributor as to certain omnibus account and other criteria,
hereinafter referred to as an "authorized money market fund" or "AMMF"
(collectively, the "Non-12b-1 funds") have instituted a CDSC for each class on
the same terms and conditions. No CDSC will be charged on an exchange of shares
of the same class between Lord Abbett funds or between such funds and AMMF. Upon
redemption of shares out of the Lord Abbett family of funds or out of AMMF, the
CDSC will be charged on behalf of and paid: (i) to the fund in which the
original purchase (subject to a CDSC) occurred, in the case of the Class A and
Class C shares and (ii) to Lord Abbett Distributor if the original purchase was
subject to a CDSC, in the case of the Class B shares. Thus, if shares of a Lord
Abbett fund are exchanged for shares of the same class of another such fund and
the shares of the same class tendered ("Exchanged Shares") are subject to a
CDSC, the CDSC will carry over to the shares of the same class being acquired,
including GSMMF and AMMF ("Acquired Shares"). Any CDSC that is carried over to
Acquired Shares is calculated as if the holder of the Acquired Shares had held
those shares from the date on which he or she became the holder of the Exchanged
Shares. Although the Non-12b-1 funds will not pay a distribution fee on their
own shares, and will, therefore, not impose their own CDSC, the Non-12b-1 funds
will collect the CDSC (a) on behalf of other Lord Abbett funds, in the case of
the Class A and Class C shares and (b) on behalf of Lord Abbett Distributor, in
the case of the Class B shares. Acquired Shares held in GSMMF and AMMF which are
subject to a CDSC will be credited with the time such shares are held in GSMMF
but will not be credited with the time such shares are held in AMMF. Therefore,
if your Acquired Shares held in AMMF qualified for no CDSC or a lower Applicable
Percentage at the time of exchange into AMMF, that Applicable Percentage will
apply to redemptions for cash from AMMF, regardless of the time you have held
Acquired Shares in AMMF.
In no event will the amount of the CDSC exceed the Applicable Percentage of the
lesser of (i) the net asset value of the shares redeemed or (ii) the original
cost of such shares (or of the Exchanged Shares for which such shares were
acquired). No CDSC will be imposed when the investor redeems (i) amounts derived
from increases in the value of the account above the total cost of shares being
redeemed due to increases in net asset value, (ii) shares with respect to which
no Lord Abbett fund paid a 12b-1 fee and, in the case of Class B shares, Lord
Abbett Distributor paid no sales charge or service fee (including shares
acquired through reinvestment of dividend income and capital gains
distributions) or (iii) shares which, together with Exchanged Shares, have been
held continuously for 24 months from the end of the month in which the original
sale occurred (in the case of Class A shares); for six years or more (in the
case of Class B
17
<PAGE>
shares) and for one year or more (in the case of Class C shares). In determining
whether a CDSC is payable, (a) shares not subject to the CDSC will be redeemed
before shares subject to the CDSC and (b) of the shares subject to a CDSC, those
held the longest will be the first to be redeemed.
Exchanges. The prospectus briefly describes the Telephone Exchange Privilege.
You may exchange some or all of your shares of any class for those in the same
class of: (i) Lord Abbett-sponsored funds currently offered to the public with a
sales charge (front-end, back-end or level), (ii) GSMMF or (iii) AMMF, to the
extent offers and sales may be made in your state. You should read the
prospectus of the other fund before exchanging. In establishing a new account by
exchange, shares of the fund being exchanged must have a value equal to at least
the minimum initial investment required for the other fund into which the
exchange is made.
Shareholders in other Lord Abbett-sponsored funds and AMMF have the same right
to exchange their shares for the corresponding class of each funds' shares.
Exchanges are based on relative net asset values on the day instructions are
received by the fund in Kansas City if the instructions are received prior to
the close of the NYSE in proper form. No sales charges are imposed except in the
case of exchanges out of GSMMF or AMMF (unless a sales charge (front-end,
back-end or level) was paid on the initial investment in a Lord Abbett-sponsored
fund). Exercise of the exchange privilege will be treated as a sale for federal
income tax purposes, and, depending on the circumstances, a gain or loss may be
recognized. In the case of an exchange of shares that have been held for 90 days
or less where no sales charge is payable on the exchange, the original sales
charge incurred with respect to the exchanged shares will be taken into account
in determining gain or loss on the exchange only to the extent such charge
exceeds the sales charge that would have been payable on the acquired shares had
they been acquired for cash rather than by exchange. The portion of the original
sales charge not so taken into account will increase the basis of the acquired
shares.
Shareholders have the exchange privilege unless they refuse it in writing. You
should not view the exchange privilege as a means for taking advantage of
short-term swings in the market, and we reserve the right to terminate or limit
the privilege of any shareholder who makes frequent exchanges. We can revoke or
modify the privilege for all shareholders upon 60 days' prior notice. "Eligible
funds" are AMMF and other Lord Abbett-sponsored funds which are eligible for the
exchange privilege, except Lord Abbett Series Fund ("LASF") which offers its
shares only in connection with certain variable annuity contracts, Lord Abbett
Equity Fund ("LAEF") which is not issuing shares, and series of Lord Abbett
Research Fund not offered to the general public ("LARF").
Statement of Intention. Under the terms of the Statement of Intention to invest
$50,000 or more over a 13-month period as described in the prospectus, shares of
a Lord Abbett-sponsored fund (other than shares of LAEF, LASF, LARF, GSMMF and
AMMF, unless holdings in GSMMF and AMMF are attributable to shares exchanged
from a Lord Abbett-sponsored fund offered with a front-end, back-end or level
sales charge) currently owned by you are credited as purchases (at their current
offering prices on the date the Statement is signed) toward achieving the stated
investment and reduced initial sales charge for Class A shares. Class A shares
valued at 5% of the amount of intended purchases are escrowed and may be
redeemed to cover the additional sales charge payable if the Statement is not
completed. The Statement of Intention is neither a binding obligation on you to
buy, nor on the fund to sell, the full amount indicated.
Rights of Accumulation. As stated in the prospectus, purchasers (as defined in
the Prospectus) may accumulate their investment in Lord Abbett-sponsored funds
(other than LAEF, LARF, LASF, GSMMF, and AMMF unless holdings in GSMMF or AMMF
are attributable to shares exchanged from a Lord Abbett-sponsored fund offered
with a front-end, back-end or level sales charge) so that a current investment,
plus the purchaser's holdings valued at the current maximum offering price,
reach a level eligible for a discounted sales charge for Class A shares.
Net Asset Value Purchases of Class A Shares. Our Class A shares may be purchased
at net asset value by our directors, employees of Lord Abbett, employees of our
shareholder servicing agent and employees of any securities dealer having a
sales agreement with Lord Abbett who consents to such purchases or by the
director or custodian under any pension or profit-sharing plan or Payroll
Deduction IRA established for the benefit of such persons or for the benefit of
employees of any national securities trade organization to which Lord Abbett
belongs or any company with an account(s) in excess of $10 million managed by
Lord Abbett on a private-advisory-account basis. For purposes of this paragraph,
the terms "directors" and "employees" include a director's or employee's spouse
(including the surviving
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spouse of a deceased director or employee). The terms "our directors" and
"employees of Lord Abbett" also include other family members and retired
directors and employees.
Our Class A shares also may be purchased at net asset value (a) at $1 million or
more, (b) with dividends and distributions from Class A shares of other Lord
Abbett-sponsored funds, except for LARF, LAEF and LASF, (c) under the loan
feature of the Lord Abbett-sponsored prototype 403(b) plan for share purchases
representing the repayment of principal and interest, (d) by certain authorized
brokers, dealers, registered investment advisers or other financial institutions
who have entered into an agreement with Lord Abbett Distributor in accordance
with certain standards approved by Lord Abbett Distributor, providing
specifically for the use of our shares in particular investment products made
available for a fee to clients of such brokers, dealers, registered investment
advisers and other financial institutions, ("mutual fund wrap fee program"), (e)
by employees, partners and owners of unaffiliated consultants and advisors to
Lord Abbett, Lord Abbett Distributor or Lord Abbett-sponsored funds who consent
to such purchase if such persons provide service to Lord Abbett, Lord Abbett
Distributor or such funds on a continuing basis and are familiar with such
funds, (f) through Retirement Plans with at least 100 eligible employees. Shares
are offered at net asset value to these investors for the purpose of promoting
goodwill with employees and others with whom Lord Abbett Distributor and/or the
fund has business relationships.
Redemptions. A redemption order is in proper form when it contains all of the
information and documentation required by the order form or supplementally by
Lord Abbett Distributor or the fund to carry out the order. The signature(s) and
any legal capacity of the signer(s) must be guaranteed by an eligible guarantor.
See the prospectus for expedited redemption procedures.
The right to redeem and receive payment, as described in the prospectus, may be
suspended if the NYSE is closed (except for weekends or customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
deems an emergency to exist.
Our Board of Directors may authorize redemption of all of the shares in any
account in which there are fewer than 25 shares. Before authorizing such
redemption, the Board must determine that it is in our economic best interest or
necessary to reduce disproportionately burdensome expenses in servicing
shareholder accounts. At least 6 months prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
Div-Move. Under the Div-Move service described in the prospectus, you can invest
the dividends paid on your account of any class into an existing account of the
same class in any other Eligible Fund. The account must be either your account,
a joint account for you and your spouse, a single account for your spouse, or a
custodial account for your minor child under the age of 21. You should read the
prospectus of the other fund before investing.
Invest-A-Matic. The Invest-A-Matic method of investing in the fund and/or any
other Eligible Fund is described in the Prospectus. To avail yourself of this
method you must complete the application form, selecting the time and amount of
your bank checking account withdrawals and the funds for investment, include a
voided, unsigned check and complete the bank authorization.
Systematic Withdrawal Plans. The Systematic Withdrawal Plan ("SWP") is also
described in the prospectus. You may establish a SWP if you own or purchase
uncertificated shares having a current offering price value of at least $10,000.
Lord Abbett prototype retirement plans have no such minimum. With respect to a
SWP for Class B shares, the CDSC will be waived for redemptions of 12% or less
per year. For redemptions over 12% per year, the CDSC will apply to the entire
redemption. Therefore, please contact the fund for assistance in minimizing the
CDSC in this situation. With respect to Class C shares, the CDSC will be waived
on and after the first anniversary of their purchase. The SWP involves the
planned redemption of shares on a periodic basis by receiving either fixed or
variable amounts at periodic intervals. Since the value of shares redeemed may
be more or less than their cost, gain or loss may be recognized for income tax
purposes on each periodic payment. Normally, you may not make regular
investments at the same time you are receiving systematic withdrawal payments
because it is not in your interest to pay a sales charge on new investments when
in effect a portion of that new investment is soon withdrawn. The minimum
investment accepted
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while a withdrawal plan is in effect is $1,000. The SWP may be terminated by you
or by us at any time by written notice.
Retirement Plans. The prospectus indicates the types of retirement plans for
which Lord Abbett provides forms and explanations. Lord Abbett makes available
the retirement plan forms, including 401(k) plans and custodial agreements for
IRAs (Individual Retirement Accounts, including SIMPLE IRAs and Simplified
Employee Pensions), 403(b) plans and qualified pension and profit-sharing plans.
The forms name Investors Fiduciary Trust Company as custodian except in the case
of 401 (k) plans and contain specific information about the plans. Explanations
of the eligibility requirements, annual custodial fees and allowable tax
advantages and penalties are set forth in the relevant plan documents. Adoption
of any of these plans should be on the advice of your legal counsel or qualified
tax adviser.
6.
Past Performance
Each fund computes the average annual compounded rate of total return for each
Class of shares during specified periods that would equate the initial amount
invested to the ending redeemable value of such investment by adding one to the
computed average annual total return, raising the sum to a power equal to the
number of years covered by the computation and multiplying the result by one
thousand dollars, which represents a hypothetical initial investment. The
calculation assumes deduction of the maximum sales charge from the amount
invested and reinvestment of all income dividends and capital gains
distributions on the reinvestment dates at prices calculated as stated in the
prospectus. The ending redeemable value is determined by assuming a complete
redemption at the end of the period(s) covered by the average annual total
return computation.
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% in the case of the Equity Fund and 4.75% in the case of the
Income Fund (as a percentage of the offering price) is deducted from the initial
investment (unless the return is shown at net asset value). For Class B shares
of each fund, the payment of the applicable CDSC (5.0% prior to the first
anniversary of purchase, 4.0% prior to the second anniversary of purchase, 3.0%
prior to the third and fourth anniversaries of purchase, 2.0% prior to the fifth
anniversary of purchase, 1.0% prior to the sixth anniversary of purchase and no
CDSC on and after the sixth anniversary of purchase) is applied to each Series'
investment result for that class for the time period shown (unless the total
return is shown at net asset value). For Class C shares of each fund, the 1.0%
CDSC is applied to each fund's investment results for that class for the time
period shown prior to the first anniversary of purchase (unless the total return
is shown at net asset value). Total returns also assume that all dividends and
capital gains distributions during the period are reinvested at net asset value
per share, and that the investment is redeemed at the end of the period.
Using the computation method described above, the funds' average annual
compounded rates of total return for the last one-year, five-year and
life-of-the-funds' periods ending on December 31, 1998 for the Equity Fund were
as follows: 2.78%, 5.58% and 6.80% for the funds' Class A shares, respectively.
For the funds' Class B shares, the average annual compounded rates of total
return for the last one-year period and life-of-the-fund period ending on
December 31, 1998 were: 3.37% and 7.27%, respectively. For the funds' Class C
shares, the average annual compounded rates of total return for the last
one-year period and life-of-the-fund period ending on December 31, 1998 were:
7.36% and 8.47%, respectively.
Using the computation method described above, the funds' average annual
compounded rates of total return for the last one-year, five-year, ten-year
period and life-of-the-fund period ending on December 31, 1998 for the Income
Fund were as follows: 5.56%, 5.85%, 8.21% and 8.15% for the funds' Class A
shares, respectively. For the funds' Class B shares, the average annual
compounded rates of total return for the last one-year period and
life-of-the-fund period ending on December 31, 1998 were: 5.03% and 6.80%,
respectively. For the funds' Class C shares, the average annual compounded rates
of total return for the last one-year period and life-of-the-funds period ending
on December 31, 1998 were: 9.03% and 8.53%, respectively.
Our yield quotation is based on a 30-day period ended on a specified date,
computed by dividing our net investment income per share earned during the
period by our maximum offering price per share on the last day of the period.
This is determined by finding the following quotient: take each funds' dividends
and interest earned during the period minus
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its expenses accrued for the period and divide by the product of (i) the average
daily number of such funds' shares outstanding during the period that were
entitled to receive dividends and (ii) such funds' maximum offering price per
share on the last day of the period. To this quotient add one. This sum is
multiplied by itself five times. Then one is subtracted from the product of this
multiplication and the remainder is multiplied by two. Yield for the Class A
shares reflects the deduction of the maximum initial sales charge, but may also
be shown based on such funds' net asset value per share. Yields for Class B and
C shares do not reflect the deduction of the CDSC. For the 30-day period ended
December 31, 1998, the yield for the Class A, B and C shares of the Income Fund
were 3.63%, 3.08% and 3.15%, respectively.
These figures represent past performance, and an investor should be aware that
the investment return and principal value of an investment in the fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Therefore, there is no assurance that this performance
will be repeated in the future.
7.
Taxes
The value of any shares redeemed by each fund or repurchased or otherwise sold
may be more or less than a shareholder's tax basis in the shares at the time of
disposition. Any gain will generally be taxable for federal income tax purposes.
Any loss realized on the disposition of a funds' shares which a shareholder has
held for six months or less will be treated for tax purposes as a long-term
capital loss to the extent of any "capital gains distributions" which were
received with respect to such shares. Losses on the sale of shares are not
deductible if, within a period beginning 30 days before the date of the sale and
ending 30 days after the date of the sale, the taxpayer acquires shares that are
substantially identical.
Each Fund will be subject to a 4% non-deductible excise tax on certain amounts
not distributed or treated as having been distributed on a timely basis each
calendar year. Each fund intends to distribute to shareholders each year an
amount adequate to avoid the imposition of such excise tax.
Dividends paid by a Fund will qualify for the dividends-received deduction for
corporations to the extent that they are derived from dividends paid by domestic
corporations.
A Fund may be subject to withholding taxes and other taxes imposed by foreign
countries. If, at the close of any fiscal year, more than 50% of the assets of a
Fund consist of stock or securities of foreign corporations, the Fund may elect
to treat foreign income taxes paid by the Fund as having been paid directly by
its shareholders. If a Fund qualifies for and makes such an election, the
shareholders of the Fund will be required to (i) include in ordinary gross
income (in addition to taxable dividends actually received) their pro rata share
of foreign income taxes paid by the Fund and (ii) treat such pro rata share as
foreign income taxes paid by them. Such shareholders may then use such pro rata
portion of foreign income taxes as foreign tax credits, subject to applicable
limitations, or, alternatively, deduct them in computing their taxable income.
Shareholders who do not itemize deductions for federal income tax purposes will
not be entitled to deduct their pro rata portion of foreign taxes paid by the
Fund, although such shareholders will be required to include their share of such
taxes in gross income. Shareholders who claim a foreign tax credit for foreign
taxes paid by a Fund may be required to treat a portion of the dividends
received from the Fund as separate category income for purposes of computing the
limitations on the foreign tax credit. Tax-exempt shareholders will ordinarily
not benefit from this election. Each year that a Fund qualifies for and makes
the election described above, its shareholders will be notified of the amount of
(i) each shareholder's pro rata share of foreign income taxes paid by the Fund
and (ii) the portion of dividends which represents income from each foreign
country.
Forward foreign currency contracts, foreign currency put and call options and
other investment techniques and practices which a Fund may utilize may affect
the character and timing of the recognition of gains and losses by such Fund.
Such hedging transactions may increase the amount of short-term capital gain
realized by such Fund, which is taxed as ordinary income when distributed to
shareholders. Limitations imposed by the Internal Revenue Code on regulated
investment companies may restrict a fund's ability to engage in transactions in
options and forward contracts.
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Gain and loss realized by a Fund on certain transactions, including sales of
foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gains or losses are attributable to changes in
exchange rates for foreign currencies. Accordingly, distributions taxable as
ordinary income will include the net amount, if any, of such foreign exchange
gains and will be reduced by the net amount, if any, of such foreign exchange
losses.
If a Fund purchases shares in certain foreign investment entities called
"passive foreign investment companies," it may be subject to United States
federal income tax on a portion of any "excess distribution" or gain from the
disposition of such shares, even if such income is distributed as a taxable
dividend by the Fund to its shareholders. Additional charges in the nature of
interest may be imposed on either the Fund or its shareholders in respect of
deferred taxes arising from such distributions or gains. If a Fund were to make
a "qualified electing fund" election with respect to its investment in a passive
foreign investment company, in lieu of the foregoing requirements, such Fund
might be required to include in income each year a portion of the ordinary
earnings and net capital gains of the qualified electing fund, even if such
amount were not distributed to such fund.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to United States persons (United States citizens or residents and
United States domestic corporations, partnerships, trusts and estates). Each
shareholder who is not a United States person should consult his tax adviser
regarding the U.S. and foreign tax consequences of the ownership of shares of a
Fund, including a 30% (or lower treaty rate) United States withholding tax on
dividends representing ordinary income and net short-term capital gains, and the
applicability of United States gift and estate taxes.
8.
Information About the Fund
The directors, trustees and officers of Lord Abbett-sponsored mutual funds,
together with the partners and employees of Lord Abbett, are permitted to
purchase and sell securities for their personal investment accounts. In engaging
in personal securities transactions, however, such persons are subject to
requirements and restrictions contained in the funds' Code of Ethics which
complies, in substance, with each of the recommendations of the Investment
Company Institute's Advisory Group on Personal Investing. Among other things,
the Code requires that Lord Abbett partners and employees obtain advance
approval before buying or selling securities, submit confirmations and quarterly
transaction reports, and obtain approval before becoming a director of any
company; and it prohibits such persons from investing in a security 7 days
before or after any Lord Abbett-sponsored fund or Lord Abbett-managed account
considers a trade or trades in such security, from profiting on trades of the
same security within 60 days and from trading on material and non-public
information. The Code imposes certain similar requirements and restrictions on
the independent directors and trustees of each Lord Abbett-sponsored mutual fund
to the extent contemplated by the recommendations of the Advisory Group.
9.
Financial Statements
The financial statements for the year ended December 31, 1998 and the report of
Deloitte & Touche LLP, independent auditors, on such financial statements
contained in the 1998 Annual Report to Shareholders of Lord Abbett Global Fund,
Inc. are incorporated herein by reference to such financial statements and
report in reliance upon the authority of Deloitte & Touche LLP as experts in
auditing and accounting.
10.
Appendix
Moody's Investors Service, Inc.'s Corporate Bond Ratings
Aaa - Bonds which are rated Aaa are judged to be of the best quality and carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin, and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are unlikely to impair the fundamentally strong position of such
issues.
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Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance and
other terms of the contract over any long period of time may be small.
Caa - Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds that are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds that are rated C are the lowest-rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Standard & Poor's Corporation's Corporate Bond Ratings
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong and in the majority of instances they
differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB-B-CCC-CC-C - Debt rated BB, B, CCC, CC and C is regarded as having
predominately speculative characteristics with respect to capacity to pay
interest and repay principal. 'BB' indicates the least degree of
speculation and 'CCC' the highest. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
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D - Debt rated 'D' is in payment default. The 'D' rating
category is used when interest payments or principal payments are not made on
the date due even if the applicable grace period has not expired, unless S&P
believes such payments will be made during such grace period. The 'D'
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
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STATEMENT OF DIFFERENCES
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The service mark symbol shall be expressed as.......................... 'sm'
