Lord Abbett
Global Fund, Inc.
Equity Series
Income Series
Prospectus
May 1, 2000
[logo]
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense. Class P
shares of the Income Series are currently offered by this prospectus.
Class P shares of the Equity Series are neither offered to the general public
nor available in all states. Please call 800-821-5129 for further information.
<PAGE>
Table of Contents
The Funds
Information about the goal, Equity Series 2
principal strategy, main risks, Income Series 5
performance, fees and expenses
Your Investment
Information for managing Purchases 9
your Fund account Sales Compensation 12
Opening Your Account 12
Redemptions 13
Distributions and Taxes 13
Services For Fund Investors 14
Management 15
For More Information
How to learn more Other Investment Techniques 16
about the Funds Glossary of Shaded Terms 17
Recent Performance 18
Financial Information
Financial highlights and line Equity Series 20
graph comparison of each Fund Income Series 22
Compensation For Your Dealer 24
How to learn more about the Back Cover
Funds and other Lord Abbett Funds
<PAGE>
Equity Fund
GOAL
The Fund's investment objective is long-term growth of capital and income
consistent with reasonable risk. The production of current income is a
secondary consideration.
PRINCIPAL STRATEGY
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. The Fund focuses primarily on stock selection to achieve
positive performance relative to similar funds. 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 at least 65% of its assets in equity securities primarily
traded in at least three countries (including the United States). The Fund
may take a temporary defensive position by investing some or all of its
assets in domestic securities, in securities primarily traded in fewer than
three foreign countries, or in debt securities. This could reduce the
benefit from any upswing in the market and prevent the Fund from realizing
its investment objective.
MAIN RISKS
The Fund is subject to the general risks and considerations associated with
equity investing, such as market risk. This means the value of your
investment in the Fund will fluctuate in response to movements in the
securities markets in general and to the changing prospects of individual
companies in which the Fund invests. In addition, if the Fund's assessment
of a company's value or prospects for exceeding earnings expectations or
market conditions is wrong, the Fund could suffer losses or produce poor
performance relative to other funds, even in a rising market.
The Fund is also subject to the risks of investing in foreign securities
which may present risks not typically associated with domestic securities.
Foreign markets and the securities traded in them are not subject to the
same degree of regulation as U.S. markets which may increase the degree of
market risk associated with them. Foreign securities may be subject to
greater price fluctuations and liquidity, currency and political risk.
Foreign investments may be affected by changes in currency rates or
currency controls. The Fund may, but is not required to, attempt to hedge
currency risk through the use of foreign currency forwards and options.
Such hedges, if used, may not work as planned, however. With respect to
certain foreign countries, there is a possibility of nationalization,
expropriation or confiscatory taxation, imposition of withholding or other
taxes, and political or social instability which could affect investments
in those countries. Investing in international companies generally involves
some degree of information risk. That means that key information about an
issuer, security or market may be inaccurate or unavailable.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money by investing in
the Fund.
We or the Fund refers to Equity Series ("Equity Fund"), a series of Lord Abbett
Global Fund, Inc. (the "Company"). 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 used by the Fund and
their risks.
2 The Funds
<PAGE>
Equity Fund
Symbols: Class A - LAGEX
Class B - LAGBX
Class C - LAGCX
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1989 17.7%
1990 -12.1%
1991 14.8%
1992 1.7%
1993 26.0%
1994 -0.1%
1995 9.2%
1996 8.4%
1997 8.0%
1998 9.1%
1999 12.4%
Best Quarter 4th Q `99 21.8% Worst Quarter 3rd Q `98 -18.4%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A, B, and C shares compared to those of a broad-based securities
market index. The Fund's returns reflect payment of the maximum applicable
front-end or deferred sales charges.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Share Class 1 Year 5 Years 10 Years Since Inception(1)
<S> <C> <C> <C> <C>
Class A shares 5.90% 8.10% 6.30% -
- -------------------------------------------------------------------------------------------
Class B shares 6.50% - - 8.56%
- -------------------------------------------------------------------------------------------
Class C shares 10.56% - - 9.36%
Morgan Stanley World Index(2) 25.34% 20.25% 11.96% -
22.71%(3)
- -------------------------------------------------------------------------------------------
</TABLE>
(1) The date of inception for each class is: A - 9/30/88; B - 8/1/96; and C -
7/15/96.
(2) Performance for the unmanaged index does not reflect fees or expenses. The
performance of the index is not necessarily representative of the Fund's
performance.
(3) Represents total returns for the period 8/31/96 to 12/31/99, to correspond
with Class B and C inception date.
The Funds 3
<PAGE>
Equity Fund
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Fee Table
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class B(2) Class C Class P
Shareholder Fees (Fees paid directly from your investment)
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
<S> <C> <C> <C> <C>
(as a % of offering price) 5.75% none none none
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge none(1) 5.00% 1.00%(1) none
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.75% 0.75% 0.75% 0.75%
Distribution (12b-1) and Service Fees(3) 0.35% 1.00% 1.00% 0.45%
Other Expenses 0.84% 0.84% 0.84% 0.84%
Total Operating Expenses 1.94% 2.59% 2.59% 2.04%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions (a) of Class A shares made within 24 months following any
purchases made without a sales charge, and (b) Class C shares if they are
redeemed before the first anniversary of their purchase.
(2) Class B shares will convert to Class A shares on the eighth anniversary of
your original purchase of Class B shares.
(3) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class A shares $761 $1,149 $1,562 $2,709
- --------------------------------------------------------------------------------
Class B shares $762 $1,105 $1,575 $2,767
- --------------------------------------------------------------------------------
Class C shares $362 $ 805 $1,375 $2,925
- --------------------------------------------------------------------------------
Class P shares $207 $ 640 $1,098 $2,369
- --------------------------------------------------------------------------------
You would have paid the following expenses if you did not redeem your shares:
- --------------------------------------------------------------------------------
Class A shares $761 $1,149 $1,562 $2,709
- --------------------------------------------------------------------------------
Class B shares $262 $ 805 $1,375 $2,767
- --------------------------------------------------------------------------------
Class C shares $262 $ 805 $1,375 $2,925
- --------------------------------------------------------------------------------
Class P shares $207 $ 640 $1,098 $2,369
- --------------------------------------------------------------------------------
Management fees are payable to Lord, Abbett & Co. ("Lord Abbett") for the Fund's
investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
4 The Funds
<PAGE>
Income Fund
GOAL
The Fund's investment objective is high current income consistent with
reasonable risk. Capital appreciation is a secondary consideration.
PRINCIPAL STRATEGY
To pursue its goal, the Fund primarily invests in high-quality and
investment grade debt securities of domestic and foreign companies. Under
normal circumstances, the Fund invests at least 65% of its assets in
high-quality debt securities. The Fund may invest up to 15% of its assets
in high yield debt securities, sometimes called "lower-rated bonds" or
"junk bonds." The weighted average life of the Fund's portfolio normally
will vary based on our perception of the relationship between the return
potential and the maturities of the Fund's holdings, among other factors.
The types of debt securities in which the Fund may invest include:
o Securities issued or guaranteed by governments (including the United
States), their political subdivisions, authorities, agencies or
instrumentalities, including mortgage-related securities
o Securities issued by foreign government related entities
o Securities of supranational organizations such as the World Bank
o Securities of foreign and domestic corporations
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. Our choices will be based on analysis of
fixed income market returns and expected currency exchange rate movements.
Under normal circumstances, the Fund will invest at least 65% of its assets
in at least three different countries, including the United States.
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 these 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 some or all of its assets in securities
primarily traded in fewer than three countries, or in equity or short-term
debt securities. This could reduce the benefit from any upswing in the
market and prevent the Fund from achieving its investment objective.
The Fund may engage in active and frequent trading of its portfolio
securities to achieve its principal investment strategy and can be expected
to have portfolio turnover rates substantially in excess of 100%. For the
fiscal year ended December 31, 1999, the portfolio turnover rate for the
Fund was 314%. 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").
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 can-not guarantee results.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies used by the Fund and
their risks.
The Funds 5
MAIN RISKS
The Fund is subject to the general risks and considerations associated with
investing in debt securities. The value of an investment in the Fund will
change as interest rates fluctuate in response to market movements. When
interest rates rise, the prices of debt securities are likely to decline,
and when interest rates fall, the prices of debt securities tend to rise.
There is also the risk that an issuer of a debt security will fail to make
timely payments of principal or interest to the Fund, a risk that is
greater with junk bonds. Some issuers, particularly of junk bonds, may
default as to principal and/or interest payments after the Fund purchases
their securities. This may result in losses to the Fund. In addition, the
market for high yield securities generally is less liquid than the market
for higher-rated securities.
The Fund is also subject to the risks of investing in foreign securities
which may present risks not typically associated with domestic securities.
Foreign markets and the securities traded in them are not subject to the
same degree of regulation as U.S. markets which may increase the degree of
market risk associated with them. Foreign securities may be subject to
greater price fluctuations and liquidity, currency and political risk.
Foreign investments may be affected by changes in currency rates or
currency controls. The Fund may, but is not required to, attempt to hedge
currency risk through the use of foreign currency forwards and options.
Such hedges, if used, may not work as planned, however. With respect to
certain foreign countries, there is a possibility of nationalization,
expropriation or confiscatory taxation, imposition of withholding or other
taxes, and political or social instability which could affect investments
in those countries. Investing in international companies generally involves
some degree of information risk. That means that key information about an
issuer, security or market may be inaccurate or unavailable.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money by investing in
the Fund.
6 The Funds
<PAGE>
Income Fund
Symbols: Class A - LAGIX
Class B - LAIBX
Class C - GBLAX
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
1989 - 10.6%
1990 - 11.9%
1991 - 14.3%
1992 - 5.8%
1993 - 10.8%
1994 - -3.4%
1995 - 17.9%
1996 - 6.1%
1997 - 4.2%
1998 - 10.8%
1999 - -9.5%
[GRAPHIC OMITTED]
Best Quarter 3rd Q `91 9.2% Worst Quarter 1st Q `99 -4.3%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A, B, and C shares compared to those of a broad-based securities
market index. The Fund's returns reflect payment of the maximum applicable
front-end or deferred sales charges.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- ------------------------------------------------------------------------------------------
Share Class 1 Year 5 Years 10 Years Since Inception(1)
<S> <C> <C> <C> <C>
Class A shares -13.80% 4.48% 6.08% -
- ------------------------------------------------------------------------------------------
Class B shares -14.35% - - 1.57%
- ------------------------------------------------------------------------------------------
Class C shares -10.83% - - 2.82%
Class P shares - - - -5.51%
- ------------------------------------------------------------------------------------------
J.P. Morgan Global Government -5.08% 6.69% 7.81% 3.90%(3)
Bond Index(2) 3.93%(4)
-0.98%(5)
- ------------------------------------------------------------------------------------------
</TABLE>
(1) The date of inception for each class is: A -9/30/88; B- 8/1/96; C -7/15/96
and P - 3/4/99.
(2) Performance for the unmanaged index does not reflect fees or expenses. The
performance of the index is not necessarily representative of the Fund's
performance.
(3) Represents total returns for the period 8/31/96 to 12/31/99, to correspond
with Class B inception date.
(4) Represents total returns for the period 7/31/96 to 12/31/99, to correspond
with Class C inception date.
(5) Represents total returns for the period 2/28/99 to 12/31/99, to correspond
with Class P inception date.
The Funds 7
<PAGE>
Income Fund
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Fee Table
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class B(2) Class C Class P
Shareholder Fees (Fees paid directly from your investment)
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(as a % of offering price) 4.75% none none none
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge none(1) 5.00% 1.00%(1) none
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.50% 0.50% 0.50% 0.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(3) 0.35% 1.00% 1.00% 0.45%
- ------------------------------------------------------------------------------------------------------------------------------------
Other Expenses 0.39% 0.39% 0.39% 0.39%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 1.24% 1.89% 1.89% 1.34%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions (a) of Class A shares made within 24 months following any
purchases made without a sales charge, and (b) Class C shares if they are
redeemed before the first anniversary of their purchase.
(2) Class B shares will convert to Class A shares on the eighth anniversary of
your original purchase of Class B shares.
(3) Because 12b-1 fees are paid out on an ongoing
basis, over time they will increase the cost of your investment and may
cost you more than paying other types of sales charges.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. This example, like
that in other funds' prospectuses, assumes that you invest $10,000 in the
Fund at maximum sales charge, if any, for the time periods indicated and
then redeem all of your shares at the end of those periods. The example
also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs (including any
applicable contingent deferred sales charges) would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class A shares $595 $850 $1,124 $1,904
- --------------------------------------------------------------------------------
Class B shares $692 $894 $1,221 $2,042
- --------------------------------------------------------------------------------
Class C shares $292 $594 $1,021 $2,212
- --------------------------------------------------------------------------------
Class P shares $136 $425 $ 734 $1,613
- --------------------------------------------------------------------------------
You would have paid the following expenses if you did not redeem your shares:
- --------------------------------------------------------------------------------
Class A shares $595 $850 $1,124 $1,904
- --------------------------------------------------------------------------------
Class B shares $192 $594 $1,021 $2,042
- --------------------------------------------------------------------------------
Class C shares $192 $594 $1,021 $2,212
- --------------------------------------------------------------------------------
Class P shares $136 $425 $ 734 $1,613
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
8 The Funds
<PAGE>
Your Investment
PURCHASES
The Funds offer in this prospectus four classes of shares: Class A, B, C,
and P, each with different expenses and dividends. You may purchase shares
at the net asset value ("NAV") per share determined after we receive your
purchase order submitted in proper form. A front-end sales charge is
normally added to the NAV in the case of the Class A shares. There is no
front-end sales charge in the case of Class B, C and P shares, although
there may be a contingent deferred sales charge ("CDSC") as described
below.
You should read this section carefully to determine which class of shares
represents the best investment option for your particular situation. It may
not be suitable for you to place a purchase order for Class B shares of
$500,000 or more or a purchase order for Class C shares of $1,000,000 or
more. You should discuss purchase options with your investment
professional.
For more information, see "Alternative Sales Arrangements" in the Statement
of Additional Information.
We reserve the right to withdraw all or any part of the offering made by
this prospectus or to reject any purchase order. We also reserve the right
to waive or change minimum investment requirements. All purchase orders are
subject to our acceptance and are not binding until confirmed or accepted
in writing.
- --------------------------------------------------------------------------------
Share Classes
- --------------------------------------------------------------------------------
Class A o normally offered with a front-end sales charge
Class B o no front-end sales charge, however, a CDSC is applied to shares
sold prior to the sixth anniversary of purchase
o higher annual expenses than Class A shares
o automatically convert to Class A shares after eight years
Class C o no front-end sales charge, however, a CDSC is applied to shares
sold prior to the first anniversary of purchase
o higher annual expenses than Class A shares
Class P o available to certain pension or retirement plans and pursuant to
a Mutual Fund Fee Based Program
- --------------------------------------------------------------------------------
Front-End Sales Charges - Class A Shares(Equity Fund Only)
- --------------------------------------------------------------------------------
To Compute
As a % of As a % of Offering Price
Your Investment Offering Price Your Investment Divide NAV by
- --------------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% .9425
- --------------------------------------------------------------------------------
$50,000 to $99,999 4.75% 4.99% .9525
- --------------------------------------------------------------------------------
$100,000 to $249,999 3.95% 4.11% .9605
- --------------------------------------------------------------------------------
$250,000 to $499,999 2.75% 2.83% .9725
$500,000 to $999,999 1.95% 1.99% .9805
$1,000,000 and over No Sales Charge 1.0000
- --------------------------------------------------------------------------------
NAV per share for each class of Fund shares is calculated each business day at
the close of regular trading on the New York Stock Exchange ("NYSE"), normally
4:00 p.m. Eastern time. Purchases and sales of Fund shares are executed at the
NAV next determined after the Fund receives your order in proper form. In
calculating NAV, securities for which market quotations are available are valued
at those quotations. Securities for which such quotations are not available are
valued at fair value under procedures approved by the Board of the Company.
Your Investment 9
- --------------------------------------------------------------------------------
Front-End Sales Charges - Class A Shares(Income Fund Only)
- --------------------------------------------------------------------------------
To Compute
As a % of As a % of Offering Price
Your Investment Offering Price Your Investment Divide NAV by
- --------------------------------------------------------------------------------
Less than $100,000 4.75% 4.99% .9525
- --------------------------------------------------------------------------------
$100,000 to $249,999 3.95% 4.11% .9605
- --------------------------------------------------------------------------------
$250,000 to $499,999 2.75% 2.83% .9725
$500,000 to $999,999 1.95% 1.99% .9805
$1,000,000 and over No Sales Charge 1.0000
- --------------------------------------------------------------------------------
Reducing Your Class A Front-End Sales Charges. Class A shares may be
purchased at a discount if you qualify under either of the following
conditions:
o Rights of Accumulation -- A Purchaser can apply the value of the
shares already owned to a new purchase of Class A shares of any
Eligible Fund in order to reduce the sales charge.
o Letters of Intention -- A Purchaser of Class A shares may purchase
additional shares of any Eligible Fund over a 13-month period and
receive the same sales charge as if you had purchased all shares at
once. Shares purchased through reinvestment of dividends or
distributions are not included. A Letter of Intention can be backdated
90 days. Current holdings under Rights of Accumulation can be included
in a Letter of Intention.
For more information on eligibility for these privileges, read the
applicable sections in the attached application.
Class A Share Purchases Without A Front-End Sales Charge. Class A shares
may be purchased without a front-end sales charge under any of the
following conditions:
o purchases of $1 million or more *
o purchases by Retirement Plans with at least 100 eligible employees *
o purchases under a Special Retirement Wrap Program *
o purchases made with dividends and distributions on Class A shares of
another Eligible Fund
o purchases representing repayment under the loan feature of the Lord
Abbett-sponsored prototype 403(b) Plan for Class A shares
o purchases by employees of any consenting securities dealer having a
sales agreement with Lord Abbett Distributor
o purchases under a Mutual Fund Fee Based Program
o purchases by trustees or custodians of any pension or profit sharing
plan, or payroll deduction IRA for employees of any consenting
securities dealer having a sales agreement with Lord Abbett
Distributor
o purchases by each Lord Abbett-sponsored fund's Directors or Trustees
(including retired Directors or Trustees), officers of each Lord
Abbett-sponsored fund, employees and partners of Lord Abbett. These
categories of purchasers also include other family members of such
purchasers.
See the Statement of Additional Information for a listing of other
categories of purchasers who qualify for Class A share purchases without a
front-end sales charge.
* These categories may be subject to a CDSC.
Retirement Plans include employer-sponsored retirement plans under the Internal
Revenue Code, excluding Individual Retirement Accounts.
Lord Abbett offers a variety of Retirement Plans. Call 800-253-7299 for
information about:
o Traditional, Rollover, Roth and Education IRAs
o Simple IRAs, SEP-IRAs, 401(k) and 403(b) accounts
o Defined Contribution Plans
Lord Abbett Distributor LLC ("Lord Abbett Distributor") acts as agent for the
Funds to work with investment professionals that buy and/or sell shares of the
Funds on behalf of their clients. Generally, Lord Abbett Distributor does not
sell Fund shares directly to investors.
Benefit Payment Documentation (Class A CDSC only)
o under $50,000 - no documentation necessary
o over $50,000 - reason for benefit payment must be received in writing. Use
the address indicated under "Opening Your Account."
10 Your Investment
<PAGE>
Class A Share CDSC. If you buy Class A shares under one of the starred (O)
categories listed above and you redeem any within 24 months after the month
in which you initially purchased them, the Fund will normally collect a
CDSC of 1%. The Class A share CDSC generally will be waived for the
following conditions:
o benefit payments under Retirement Plans in connection with loans,
hardship withdrawals, death, disability, retirement, separation from
service or any excess distribution under Retirement Plans
(documentation may be required)
o redemptions continuing as investments in another Fund participating in
a Special Retirement Wrap Program
Class B Share CDSC. The CDSC for Class B shares normally applies if you
redeem your shares before the sixth anniversary of their initial purchase.
The CDSC declines the longer you own your shares, according to the
following schedule:
- --------------------------------------------------------------------------------
Contingent Deferred Sales Charges - Class B Shares
- --------------------------------------------------------------------------------
Anniversary(1) of the day on Contingent Deferred Sales Charge
which the purchase order on redemption (as % of amount
was accepted subject to charge)
On Before
- --------------------------------------------------------------------------------
1st 5.0%
- --------------------------------------------------------------------------------
1st 2nd 4.0%
- --------------------------------------------------------------------------------
2nd 3rd 3.0%
3rd 4th 3.0%
4th 5th 2.0%
5th 6th 1.0%
- --------------------------------------------------------------------------------
on or after the 6th(2) None
- --------------------------------------------------------------------------------
(1) The anniversary is the same calendar day in each respective year after the
date of purchase. For example, the anniversary 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.
Different conversion schedules may apply to Class B shares purchased by or
on behalf of retirement plans in connection with certain special programs
or platforms created and maintained by certain broker-dealer firms.
The Class B share CDSC generally will be waived under the following
circumstances:
o benefit payments under Retirement Plans in connection with loans,
hardship withdrawals, death, disability, retirement, separation from
service or any excess contribution or distribution under Retirement
Plans
o Eligible Mandatory Distributions under 403(b) Plans and individual
retirement accounts
o death of the shareholder
o redemptions of shares in connection with 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 first anniversary of the purchase of such
shares.
Class P Shares. Class P shares have lower annual expenses than Class B and
Class C shares, no front-end sales charge, and no CDSC. Class P shares are
currently sold and redeemed at NAV (a) pursuant to a Mutual Fund Fee Based
Program, or (b) to the
CDSC, regardless of class, is not charged on shares acquired through
reinvestment of dividends or capital gains distributions and is charged on the
original purchase cost or the current market value of the shares at the time
they are being sold, which-ever is lower. In addition, repayment of loans under
Retirement Plans and 403(b) Plans will constitute new sales for purposes of
assessing the CDSC. To minimize the amount of any CDSC, each Fund redeems shares
in the following order:
1. shares acquired by reinvestment of dividends and capital gains (always free
of a CDSC)
2. shares held for six years or more (Class B) or two years or more after the
month of purchase (Class A) or one year or more (Class C)
3. shares held the longest before the sixth anniversary of their purchase
(Class B) or before the second anniversary after the month of purchase
(Class A) or before the first anniversary of their purchase (Class C)
Your Investment 11
<PAGE>
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.
SALES COMPENSATION
As part of its plan for distributing shares, each Fund and Lord Abbett
Distributor pay sales and service compensation to Authorized Institutions
that sell the Funds' shares and service its shareholder accounts. Sales
compensation originates from two sources as shown in the table "Fees and
Expenses": sales charges which are paid directly by shareholders; and 12b-1
distribution fees that are paid out of each Fund's assets. Service
compensation originates from 12b-1 service fees. The total 12b-1 fees
payable with respect to each share class of each Fund are up to .35% of
Class A shares (plus distribution fees of up to 1.00% on certain qualifying
purchases), 1.00% of Class B and C shares, and .45% of Class P shares. The
amounts payable as compensation to Authorized Institutions, such as your
dealer, are shown in the chart at the end of this prospectus. The portion
of such compensation paid to Lord Abbett Distributor is discussed under
"Sales Activities" and "Service Activities." Sometimes we do not pay
compensation where tracking data is not available for certain accounts or
where the Authorized Institution waives part of the compensation. In such
cases, we may not require payment of any otherwise applicable CDSC.
We may pay Additional Concessions to Authorized Institutions from time to
time.
Sales Activities. We may use 12b-1 distribution fees to pay Authorized
Institutions to finance any activity which is primarily intended to result
in the sale of shares. Lord Abbett Distributor uses its portion of the
distribution fees attributable to a Fund's Class A and Class C shares for
activities which are primarily intended to result in the sale of such Class
A and Class C shares, respectively. These activities include, but are not
limited to, printing of prospectuses and statements of additional
information and reports for other than existing shareholders, preparation
and distribution of advertising and sales material, expenses of organizing
and conducting sales seminars, Additional Concessions to Authorized
Institutions, the cost necessary to provide distribution-related services
or personnel, travel, office expenses, equipment and other allocable
overhead.
Service Activities. We may pay 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.
OPENING YOUR ACCOUNT
Minimum initial investment
o Regular Account $1,000
- --------------------------------------------------------------------------------
o Individual Retirement Accounts
and 403(b) Plans under the Internal Revenue Code $250
- --------------------------------------------------------------------------------
o Uniform Gift to Minor Account $250
- --------------------------------------------------------------------------------
o Invest-A-Matic $250
- --------------------------------------------------------------------------------
For Retirement Plans and Mutual Fund Fee Based Programs no minimum
investment is required, regardless of share class.
12b-1 fees are payable regardless of expenses. The amounts payable by a Fund
need not be directly related to expenses. If Lord Abbett Distributor's actual
expenses exceed the fee payable to it, 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.
12 Your Investment
<PAGE>
You may purchase shares through any independent securities dealer who has a
sales agreement with Lord Abbett Distributor or you can fill out the
attached application and send it to the Fund you select at the address
stated below. You should carefully read the paragraph below entitled
"Proper Form" before placing your order to ensure that your order will be
accepted.
Name of Fund
P.O. Box 219100
Kansas City, MO 64121
By Exchange. Telephone the Fund at 800-821-5129 to request an exchange from
any eligible Lord Abbett-sponsored fund. 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, redemption proceeds
will not be paid until the Fund or transfer agent is advised that the check
has cleared, which may take up to 15 calendar days. For more information
call the Fund at 800-821-5129.
REDEMPTIONS
By Broker. Call your investment professional for instructions on how to
redeem your shares.
By Telephone. To obtain the proceeds of a redemption of $50,000 or less
from your account, you or your representative should call the 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(s) and address in which the
account is registered (or otherwise according to your instruction) within
three business days after receipt of your redemption request. Your account
balance must be sufficient to cover the amount being redeemed or your
redemption order will not be processed. Under unusual circumstances, the
Fund may suspend redemptions, or postpone payment for more than seven days,
as permitted by federal securities laws.
To determine if a CDSC applies to a redemption, see "Class A share CDSC,"
"Class B share CDSC," or "Class C share CDSC."
DISTRIBUTIONS AND TAXES
Each Fund normally pays dividends from its net investment income. The
Equity Fund expects to pay such income dividends to shareholders
semi-annually. The Income Fund declares income dividends daily and expects
to pay them to shareholders monthly. Each Fund distributes net capital
gains (if any) as "capital gains distributions" on an annual basis. Your
distributions will be reinvested in your Fund unless you instruct the Fund
to pay them to you in cash. There are no sales charges on reinvestments.
The tax status of distributions is the same for all shareholders regardless
of how long they have owned Fund shares or whether distributions are
reinvested or paid in cash.
Exchange Limitations. Exchanges should not be used to try to take advantage of
short-term swings in the market. Frequent exchanges create higher expenses for
the Fund. Accordingly, the Fund reserves the right to limit or terminate this
privilege for any shareholder making frequent exchanges or abusing the
privilege. The Fund also may revoke the privilege for all shareholders upon 60
days' written notice.
Small Accounts. Our Board may authorize closing any account in which there are
fewer than 25 shares if it is in a Fund's best interest to do so.
Eligible Guarantor is any broker or bank that is a member of the medallion stamp
program. Most major securities firms and banks are members of this program. A
notary public is not an eligible guarantor.
Your Investment 13
<PAGE>
Except in tax-advantaged accounts, any sale, redemption or exchange of Fund
shares may be taxable to the shareholder. Information on the tax treatment
of distributions, including the source of dividends and distributions of
capital gains by each Fund, will be mailed to shareholders each year.
Because everyone's tax situation is unique, you should consult your tax
adviser regarding 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 may set up most of these services when filling
out your application or by calling 800-821-5129.
- --------------------------------------------------------------------------------
For investing
Invest-A-Matic You can make fixed, periodic investments ($50 minimum) into
(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
Withdrawal Funds. Automatic cash withdrawals will be paid to you from
Plan ("SWP") your account in fixed or variable amounts. To establish a
plan, the value of your shares must be at least $10,000,
except for Retirement Plans for which there is no minimum.
Your shares must be in non-certificate form.
Class B shares The CDSC will be waived on redemptions of up to 12% of the
current net asset value of your account at the time of your
SWPrequest. For Class B share redemptions over 12% per year,
the CDSC will apply to the entire redemption. Please contact
the 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 will be redeemed in the order described under "CDSC"
under "Purchases."
- --------------------------------------------------------------------------------
OTHER SERVICES
Telephone Investing. After we have received the attached application
(selecting "yes" under Section 8C and completing Section 7), you may
instruct us by phone to have money transferred from your bank account to
purchase shares of the Funds for an existing account. Each Fund will
purchase the requested shares when it receives the money from your bank.
Exchanges. You or your investment professional, may instruct the Fund to
exchange shares of any class for shares of the same class of any Eligible
Fund. Instruction may be provided in writing or by telephone, with proper
identification, by calling 800-821-5129. The Funds must receive
instructions for the exchange before the close of the NYSE on the day of
your call in which case you will get the NAV per share of the Eligible Fund
determined on that day. Exchanges will be treated as a sale for federal tax
purposes. Be sure to read the current prospectus for any fund into which
you are exchanging.
Telephone Transactions. You have this privilege unless you refuse it in writing.
For your security, telephone transaction requests are recorded. We will take
measures to verify the identity of the caller, such as asking for your name,
account number, social security or taxpayer identification number and other
relevant information. The Funds will not be liable for following instructions
communicated by telephone that it reasonably believes to be genuine.
Transactions by telephone may be difficult to implement in times of drastic
economic or market change.
14 Your Investment
<PAGE>
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 and 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.
MANAGEMENT
Each Fund's investment adviser is Lord, Abbett & Co., located at 90 Hudson
Street, Jersey City, NJ 07302-3973. Founded in 1929, Lord Abbett manages
one of the nation's oldest mutual fund complexes, with approximately $35
billion in more than 40 mutual fund portfolios and other advisory accounts.
For more information about the services Lord Abbett provides to the Funds,
see the Statement of Additional Information.
Lord Abbett is entitled to a monthly fee based on the following Funds'
average daily net assets for each month at the annual rate set forth below:
.75 of 1% for the Equity Fund and
.50 of 1% for the Income Fund.
For the fiscal year ended December 31, 1999, the fees paid to Lord Abbett
were at an effective rate of .75 of 1% for the Equity Fund and .50 of 1%
for the Income Fund. Each Fund pays all expenses not expressly assumed by
Lord Abbett.
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 Equity Fund's assets. Lord
Abbett pays the Sub-Adviser a monthly fee equal to one half of Lord
Abbett's management fee.
Investment Managers. Lord Abbett uses a team of investment managers and
analysts acting together to manage each Fund's investments.
Equity Fund. The Equity Fund's U.S. and non-U.S. investments are managed by
separate teams of investment managers and analysts. Both teams are headed
by Robert G. Morris, Partner of Lord Abbett, who is primarily responsible
for the day-to-day management of the Fund's portfolio.
Income Fund. Zane E. Brown, Partner and Director of Fixed Income 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 to 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, forward contracts, and rights and warrants. Each
Fund may use these transactions to change the risk and return
characteristics of its portfolio. If we judge market conditions incorrectly
or use a strategy that does not correlate well with a Fund's investments,
it could result in a loss, even if we intended to lessen risk or enhance
returns. These transactions may involve a small investment of cash compared
to the magnitude of the risk assumed and could produce disproportionate
gains or losses. Also, these strategies could result in losses if the
counterparty to a transaction does not perform as promised.
Diversification. The Equity Fund is a diversified fund, which means that
with respect to 75% of its total assets, it normally 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. As a result, the value of the
Income Fund's investments may be more affected by a single adverse
economic, political or regulatory occurrence than the investments of a
diversified fund would be.
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 a 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.
High Yield Debt Securities. High yield debt securities or "junk bonds" are
rated BB/Ba or lower or unrated and typically pay a higher yield than
investment grade debt securities. These bonds have a higher risk of default
than investment grade bonds and their prices can be much more volatile.
Mortgage-Backed Securities. Investment grade debt securities directly or
indirectly represent a participation in, or are secured by and payable
from, mortgage loans secured by real property. The price of a
mortgage-backed security may be significantly affected by changes in
interest rates. Some mortgage-backed securities have structures that make
their reaction to interest rates and other factors difficult to predict,
making their prices very volatile.
16 For More Information
<PAGE>
Short-Term Fixed Income Securities. The Fund is authorized to invest
temporarily in certain short-term fixed income securities. Such securities
may be used to invest uncommitted cash balances, to maintain liquidity to
meet shareholder redemptions, or to take a temporary defensive position
against market declines. These securities include: obligations of the U.S.
Government and its agencies and instrumentalities; commercial paper, bank
certificates of deposit, and bankers' acceptances; and repurchase
agreements icollateralized by these securities.
Supranational Organizations. These 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.
GLOSSARY OF SHADED TERMS
Additional Concessions. Lord Abbett Distributor may, for specified periods,
allow dealers to retain the full sales charge for sales of shares or may
pay an additional concession to a dealer who sells a minimum dollar amount
of our shares and/or shares of other Lord Abbett-sponsored Funds. In some
instances, such additional concessions will be offered only to certain
dealers expected to sell significant amounts of shares. Additional payments
may be paid from Lord Abbett Distributor's own resources or from
distribution fees received from a Fund and will be made in the form of cash
or, if permitted, non-cash payments. The non-cash payments will include
business seminars at Lord Abbett's headquarters or other locations,
including meals and entertainment, or the receipt of merchandise. The cash
payments may include payment of various business expenses of the dealer.
In selecting dealers to execute portfolio transactions for a Fund's
portfolio, if two or more dealers are considered capable of obtaining best
execution, we may prefer the dealer who has sold our shares and/or shares
of other Lord Abbett-sponsored funds.
Authorized Institutions. Institutions and persons permitted by law to
receive service and/or distribution fees under a Rule 12b-1 Plan are
"Authorized Institutions." Lord Abbett Distributor is an Authorized
Institution.
Eligible Fund. An Eligible Fund is any Lord Abbett-sponsored fund except
for (1) 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.
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
For More Information 17
<PAGE>
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 Fee Based Program. Certain unaffiliated authorized brokers,
dealers, registered investment advisers or other financial institutions
("entities") who either (1) have an arrangement with Lord Abbett
Distributor in accordance with certain standards approved by Lord Abbett
Distributor, providing specifically for the use of our shares (and
sometimes providing for acceptance of orders for such shares on our behalf)
in particular investment products made available for a fee to clients of
such entities, or (2) charge an advisory, consulting or other fee for their
services and buy shares for their own accounts or the accounts of their
clients.
Purchaser. The term "purchaser" includes: (1) an individual, (2) an
individual and his or her spouse and children under the age of 21, and (3)
a trustee or other fiduciary purchasing shares for a single trust estate or
single fiduciary account (including a pension, profit-sharing, or other
employee benefit trust qualified under Section 401 of the Internal Revenue
Code - more than one qualified employee benefit trust of a single employer,
including its consolidated subsidiaries, may be considered a single trust,
as may qualified plans of multiple employers registered in the name of a
single bank trustee as one account), although more than one beneficiary is
involved.
Special Retirement Wrap Program. A program sponsored by an Authorized
Institution showing one or more characteristics distinguishing it, in the
opinion of Lord Abbett Distributor from a Mutual Fund Fee Based Program.
Such characteristics include, among other things, the fact that an
Authorized Institution does not charge its clients any fee of a consulting
or advisory nature that is economically equivalent to the distribution fee
under the Class A 12b-1 Plan and the fact that the program relates to
participant-directed Retirement Plans.
RECENT PERFORMANCE
The following is a discussion of recent performance for the twelve month
period ending December 31, 1999.
Equity Fund. Throughout the year, we underweighted the portfolio in the
stocks of Japanese companies, due to our concern that these companies were
not showing enough corporate earnings growth to support long-term economic
expansion. However, by the fourth quarter, some Japanese companies began to
show signs of extended earnings improvement and therefore some were added
to the portfolio. To make these purchases, we sold some of the stocks of
U.K. technology companies that had reached the target prices we set for
them. Both of these decisions added to performance of the Fund. In
addition, the portfolio remained overweighted in the stocks of European
companies. Our decision to slightly underweight the portfolio in U.S.
equities detracted from performance of the Fund, as relatively, the
European equity markets did not perform as strongly as the U.S. equity
market. Going forward, we will continue to watch economic developments in
Japan in order to take advantage of any potentially rewarding investment
opportunities.
18 For More Information
<PAGE>
Income Fund. We remained overweighted in bonds of the U.K., Greece and core
European countries (Germany, France, Switzerland, Belgium, Austria and the
Netherlands). Exposure to the euro (the common European currency), which
came under pressure during the year, negatively affected Fund performance.
We continued to limit our exposure to Japanese bonds, especially during the
second half of 1999, as we did not perceive an opportunity for competitive
returns. With 86% of the portfolio invested in AAA-rated global securities,
the overall credit of the portfolio remained at the high end of the quality
spectrum, and contributed to the relatively lower volatility of the Fund
versus some of its peers.
In 1999, the Federal Reserve Board, the Bank of England and many European
central banks raised interest rates in an attempt to curb inflationary
expectations. We are encouraged by these actions and expect that
inflationary pressures will be contained, thereby making the current real
rates of return in the U.S. and in Europe more attractive. With moderate
growth and appropriate interest rate policies, core European countries and
the U.K. should continue to offer some attractive opportunities in 2000.
Likewise, we are optimistic that the worst of Europe's currency problems
are over.
For More Information 19
<PAGE>
Equity Fund
Financial Information
Financial Highlights
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended December 31, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended December 31, 1999, and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single fund share.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
Per Share Operating Performance: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $12.29 $12.08 $12.55
$11.96 $11.55
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.09)(b) .01(b) .07(b)
.07 .16
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on
- ------------------------------------------------------------------------------------------------------------------------------------
investments and foreign currency transactions 1.62 1.08 .90
.93 .90
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.53 1.09 .97
1.00 1.06
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income -- (.03) (.06)
(.07) (.17)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (.85) (1.11)
(.21) (.48)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from foreign currency transactions -- -- (.27)
(.13) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $13.82 $12.29 $12.08
$12.55 $11.96
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 12.37% 9.07% 7.99%
8.37% 9.19%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses(e) 1.94% 1.66% 1.51%
1.52% 1.63%
- ------------------------------------------------------------------------------------------------------------------------------------
Net investments income (loss) (.77)% .06% .57%
.54% 1.31%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
Period Ended December 31, Period Ended
December 31,
Per Share Operating Performance: 1999 1998 1997 1996(c) 1999 1998
1997 1996(c)
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
Net asset value, beginning of period $12.18 $12.03 $12.53 $12.30 $12.20 $12.05
$12.54 $12.31
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.17)(b) (.09)(b) (.02)(b) (.01) (.17)(b) (.09)(b)
(.01)(b) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on
- ------------------------------------------------------------------------------------------------------------------------------------
investments and foreign currency
transactions 1.59 1.09 .89 .58 1.60 1.09
.90 .57
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.42 1.00 .87 .57 1.43 1.00
.89 .57
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and 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 $13.60 $12.18 $12.03 $12.53 $13.63 $12.20
$12.05 $12.54
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 11.49% 8.37% 7.19% 4.56%(d) 11.56% 8.35%
7.34% 4.64%(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses(e) 2.57% 2.37% 2.23% .83%(d) 2.57% 2.37%
2.14% .83%(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.42)% (.70)% (.16)% (.16)%(d) (1.44)% (.69)%
(.06)% (.11)%(d)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental Data For All Classes: 1999 1998 1997
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
<C> <C>
Net assets, end of year (000) $72,966 $80,093 $80,820
$92,164 $84,731
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 78.74% 89.48% 99.05%
81.97% 83.32%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(b) Calculated using average shares outstanding during the year.
(c) Commencement of offering respective class: Class B - August 1, 1996, and
Class C - July 15, 1996.
(d) Not annualized.
(e) The ratios for 1997, 1998 and 1999 include expenses paid through an expense
offset arrangement.
20 Financial Information
<PAGE>
Equity Fund
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.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Morgan Stanley
NAV MAX World Index
12/31/88 10,437 9,837 11,142
12/31/89 12,288 11,582 13,057
12/31/90 10,798 10,178 10,900
12/31/91 12,392 11,681 12,968
12/31/92 12,178 11,478 12,364
12/31/93 15,351 14,469 15,223
12/31/94 15,337 14,456 16,073
12/31/95 16,747 15,785 19,500
12/31/96 18,149 17,108 22,230
12/31/97 19,600 18,474 25,837
12/31/98 21,377 20,150 32,245
12/31/99 24,020 22,641 40,416
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending December 31, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(3) 5.90% 8.10% -
- --------------------------------------------------------------------------------
Class B(4) 6.50% - 8.56%
- --------------------------------------------------------------------------------
Class C(5) 10.56% - 9.36%
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 5.75%.
(2) Performance for the index does not reflect fees or expenses. The
performance of the index is notnecessarily representative of the Fund's
performance.
(3) This shows total return which 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 end ing December 31, 1999 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 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 fiscal year ended December 31, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended December 31, 1999, and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single fund share.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Shares Class B
Shares
Year Ended December 31, Year Ended
December 31,
Per Share Operating Performance: 1999 1998 1997 1996 1995 1999 1998
1997 1996(c)
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $8.44 $8.09 $8.34 $8.58 $7.98 $8.44 $8.09
$8.34 $8.24
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .47(b) .55(b) .51(b) .53 .77 .43(b) .49(b)
.45(b) .23
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
- ------------------------------------------------------------------------------------------------------------------------------------
investments and foreign currency
transactions (1.26) .30 (.18) (.04) .6138 (1.26) .30
(.18) .22
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.79) .85 .33 .49 1.3838 (.83) .79
.27 .45
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.39) (.50) (.51) (.61) (.6613) (.35) (.44)
(.46) (.23)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from paid-in-capital (.10) -- (.07) -- -- (.09) --
(.06) --
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from foreign currency
transactions -- -- -- (.12) (.1225) -- --
- -- (.12)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $7.16 $8.44 $8.09 $8.34 $8.58 $7.17 $8.44
$8.09 $8.34
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (9.47)% 10.79% 4.23% 6.12% 17.86% (10.11)% 10.03%
3.49% 5.58%(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses(e) 1.24% 1.18% 1.10% 1.04% 1.04% 1.89% 1.87%
1.78% .73%(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 6.08% 6.75% 6.29% 6.52% 7.60% 5.57% 6.01%
5.57% 2.11%(d)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Shares Class
P Shares
Year Ended December 31, Period
Ended December 31,
Per Share Operating Performance: 1999 1998 1997 1996(c)
1999(c)
<S> <C> <C> <C> <C>
<C>
Net asset value, beginning of year $8.44 $8.09 $8.34 $8.14
$7.91
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .43(b) .50(b) .45(b) .21
.42(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (1.26) .29 (.18) .37
(.85)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.83) .79 .27 .58
(.43)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.35) (.44) (.46) (.26)
(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from paid-in-capital (.09) -- (.06) --
(.07)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from foreign currency transactions -- -- -- (.12)
- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $7.17 $8.44 $8.09 $8.34
$7.16
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (9.98)% 10.03% 3.48% 7.43%(d)
(5.51)%(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses(e) 1.88% 1.85% 1.77% .87%(d)
1.25%(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 5.42% 6.08% 5.62% 2.69%(d)
5.66%(d)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental Data For All Classes: 1999 1998 1997
1996 1995
<S> <C> <C> <C> <C>
<C> <C>
Net assets, end of year (000) $90,429 $125,162 $148,785
$202,494 $238,291
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 314.07% 359.13% 616.63%
621.79% 1,073.69%
- ------------------------------------------------------------------------------------------------------------------------------------
</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 respective class: Class B - August 1, 1996, Class C - July
15, 1996, and Class P - March 4, 1999.
(d) Not annualized.
(e) The ratios for 1997, 1998 and 1999 include expenses paid through an expense
offset arrangement.
22 Financial Information
<PAGE>
Income Fund
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.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
J.P. Morgan Global
NAV MAX Gov't Bond Index
12/31/88 10,141 9,659 10,299
12/31/89 11,214 10,682 10,998
12/31/90 12,546 11,950 12,292
12/31/91 14,344 13,662 14,192
12/31/92 15,169 14,449 14,837
12/31/93 16,806 16,007 16,657
12/31/94 16,235 15,463 16,870
12/31/95 19,134 18,224 20,129
12/31/96 20,304 19,339 21,015
12/31/97 21,162 20,158 21,309
12/31/98 23,444 22,331 24,573
12/31/99 21,224 20,216 23,325
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending December 31, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(3) -13.80% 4.48% -
- --------------------------------------------------------------------------------
Class B(4) -14.35% - 1.57%
- --------------------------------------------------------------------------------
Class C(5) -10.83% - 2.83%
Class P(6) - - -5.51%
- --------------------------------------------------------------------------------
(1) This reflects the deduction of the maximum initial sales charge of 4.75%.
(2) Performance for the index does not reflect any fees or expenses. The
performance of the index is not necessarily representative of the Fund's
performance.
(3) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 4.75% applicable to Class
A shares, with all dividends and distributions reinvested for the periods
shown ending December 31, 1999, using the SEC-required uniform method to
compute such return.
(4) The Class B shares were first offered on 11/15/96. Performance reflects the
deduction of a CDSC of 5% (for 1 year) and 3% (life of the Class).
(5) The Class C shares were first offered on 4/1/97. Performance reflects the
deduction of a CDSC of 1% (for 1 year) and 0% (life of Class).
(6) The Class P shares were first offered on 3/4/99. Performance is at net
asset value.
Financial Information 23
<TABLE>
<CAPTION>
COMPENSATION FOR YOUR DEALER - EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
First Year Compensation
Front-end
sales charge
Dealer's
paid by investors concession Service fee(1) Total
compensation(2)(% of
Class A investments (% of offering price) (% of net investment) (% of offering price) 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 3.95% 3.25% 0.25% 3.49%
- ------------------------------------------------------------------------------------------------------------------------------------
$250,000 - $499,999 2.75% 2.25% 0.25% 2.49%
$500,000 - $999,999 1.95% 1.75% 0.25% 1.99%
$1 million or more(3) or Retirement Plan - 100 or more
eligible employees(3) or Special Retirement Wrap Program(3)
- ------------------------------------------------------------------------------------------------------------------------------------
First $5 million no front-end sales charge 1.00% 0.25% 1.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Next $5 million above that no front-end sales charge 0.55% 0.25% 0.80%
Next $40 million above that no front-end sales charge 0.50% 0.25% 0.75%
Over $50 million no front-end sales charge 0.25% 0.25% 0.50%
Class B investments(4) Paid at time of sale (% of net asset value)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 3.75% 0.25% 4.00%
Class C investments(4)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.75% 0.25% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Class P investments Percentage of average net assets
All amounts no front-end sales charge 0.25% 0.20% 0.45%
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Compensation After first Year
Class A investments Percentage of average net assets(5)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Class B investments(4)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Class C investments(4)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.75% 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) Reallowance/concession percentages and service fee percentages are
calculated from different amounts, and therefore may not equal total
compensation percentages if combined using simple addition. Additional
Concessions may be paid to Authorized Institutions, such as your dealer,
from time to time.
(3) Concessions are paid at the time of sale on all Class A shares sold during
any 12-month period starting from the day of the first net asset value
sale. With respect to (a) Class A share purchases at $1 million or more,
sales qualifying at such level under rights of accumulation and statement
of intention privileges are included and (b) for Special Retirement Wrap
Programs, only new sales are eligible and exchanges into the Fund are
excluded. Certain purchases of Class A shares are subject to a CDSC.
(4) Class B and C shares are subject to CDSCs.
(5) With respect to Class 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, such as your dealer. 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)(% of
Class A investments (% of offering price) (% of net investment) (% of offering price) offering
price)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $100,000 4.75% 4.00% 0.25% 4.24%
- ------------------------------------------------------------------------------------------------------------------------------------
$100,000 - $249,999 3.95% 3.25% 0.25% 3.49%
- ------------------------------------------------------------------------------------------------------------------------------------
$250,000 - $499,999 2.75% 2.25% 0.25% 2.49%
- ------------------------------------------------------------------------------------------------------------------------------------
$500,000 - $999,999 1.95% 1.75% 0.25% 1.99%
$1 million or more(3) or Retirement Plan - 100 or more
eligible employees(3) or Special Retirement Wrap Program(3)
- ------------------------------------------------------------------------------------------------------------------------------------
First $5 million no front-end sales charge 1.00% 0.25% 1.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Next $5 million above that no front-end sales charge 0.55% 0.25% 0.80%
- ------------------------------------------------------------------------------------------------------------------------------------
Next $40 million above that no front-end sales charge 0.50% 0.25% 0.75%
- ------------------------------------------------------------------------------------------------------------------------------------
Over $50 million no front-end sales charge 0.25% 0.25% 0.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Class B investments(4) Paid at time of sale (% of net asset value)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 3.75% 0.25% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Class C investments(4)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.75% 0.25% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Class P investments Percentage of average net assets
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.25% 0.20% 0.45%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Compensation After first Year
Class A investments Percentage of average net assets(5)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Class B investments(4)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Class C investments(4)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.65% 0.25% 0.90%
- ------------------------------------------------------------------------------------------------------------------------------------
Class P investments
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.25% 0.20% 0.45%
</TABLE>
(1) The service 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) Reallowance/concession percentages and service fee percentages are
calculated from different amounts, and therefore may not equal total
compensation percentages if combined using simple addition. Additional
Concessions may be paid to Authorized Institutions, such as your dealer,
from time to time.
(3) Concessions are paid at the time of sale on all Class A shares sold during
any 12-month period starting from the day of the first net asset value
sale. With respect to (a) Class A share 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. Certain purchases of Class A shares are subject to a CDSC.
(4) Class B and C shares are subject to CDSCs.
(5) With respect to Class 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, such as your dealer. 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>
More information on these Funds is available free upon request, including:
ANNUAL/SEMI-ANNUAL REPORT
Describes the Funds, lists portfolio holdings and contains a letter from
the Funds' manager discussing recent market conditions and each Fund's
investment strategies.
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).
Lord Abbett Global Fund, Inc.
Equity Series
Income Series
90 Hudson Street
Jersey City, NJ 07302-3973
--------------------------
SEC file number: 811-5476
To obtain information:
By telephone. Call either Fund at: 888-522-2388
By mail. Write to either Fund at:
The Lord Abbett Family of Funds
90 Hudson Street
Jersey City, NJ 07302-3973
Via the Internet.
Lord, Abbett & Co.
www.lordabbett.com
Text only versions of Fund documents can be viewed online or downloaded from:
SEC www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 202-942-8090) or by sending your request and a duplicating
fee to the SEC's Public Reference Section, Washington, DC 20549-6009 or by
sending your request electronically to [email protected].
LAGF-1-500
(5/00)
<PAGE>
LORD ABBETT
Statement of Additional Information May 1, 2000
GLOBAL FUND, INC.
EQUITY SERIES
INCOME SERIES
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord Abbett Distributor LLC
("Lord Abbett Distributor") at 90 Hudson Street, Jersey City, New Jersey
07302-3973. This Statement relates to, and should be read in conjunction with,
the Prospectus dated May 1, 2000.
Shareholder inquiries should be made by directly contacting the Funds or by
calling 800-821-5129. The Annual Report to Shareholders is available, without
charge, upon request by calling that number. In addition, you can make inquiries
through your dealer.
TABLE OF CONTENTS Page
1. Investment Policies 2
2. Directors and Officers 7
3. Investment Advisory and Other Services 11
4. Portfolio Transactions 12
5. Purchases, Redemptions and Shareholder Services 14
6. Performance 20
7. Taxes 21
8. Information About the Fund 22
9. Financial Statements 23
10. Appendix 23
1
<PAGE>
1.
INVESTMENT POLICIES
Lord Abbett Global Fund, Inc. (the "Company") was incorporated in Maryland on
February 23, 1988. The Company has two series, the Equity Series (the "Equity
Fund") and the Income Series (the "Income Fund") (each a "Fund" or collectively
the "Funds") which are offered in this Statement of Additional Information. The
Equity Fund and the Income Fund each have four classes of shares: Class, A, B, C
and P.
FUNDAMENTAL INVESTMENT RESTRICTIONS. Each Fund is subject to the following
fundamental investment restrictions, which cannot be changed without approval of
a majority of our outstanding shares.
The Funds may not:
(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.
Compliance with the investment restrictions in this Section will be determined
at the time of purchase or sale of the portfolio investment.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. In addition to the policies in the
Prospectus and the investment restictions above which cannot be changed without
shareholder approval, each Fund is subject to the following non-fundamental
investment policies which may be changed by the Board of Directors without
shareholder approval.
2
<PAGE>
Each Fund may not:
(1) borrow in excess of 33 1/3% of its total assets (including the amount
borrowed), and then only as a temporary measure for extraordinary or
emergency purposes;
(2) make short sales of securities or maintain a short position except to the
extent permitted by applicable law;
(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 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, 1999, the
portfolio turnover rates were 78.74% versus 89.48% for the prior year for the
Equity Fund, and 314.07% versus 359.13% for the prior year for the Income Fund.
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.
3
<PAGE>
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 purchase
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 forward
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.
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.
4
<PAGE>
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 in 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.
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.
5
<PAGE>
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 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 Fund 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.
6
<PAGE>
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 Board of Directors of each Fund is responsible for the management of the
business and affairs of the Funds.
The following director is a partner of Lord, Abbett & Co. ("Lord Abbett"), 90
Hudson Street, Jersey City, New Jersey, 07302-3973. He has been associated with
Lord Abbett for over five years and is also an officer, director or trustee of
the thirteen other Lord Abbett-sponsored funds.
*ROBERT S. DOW, age 55, Chairman and President
*Mr. Dow is an "interested person" as defined in the Act.
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, DIRECTOR
245 Park Avenue, Suite 2414
New York, New York
Senior Adviser, Time Warner, Inc. (since 1998). 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, President and Chief Operating Officer of Home Box Office, Inc.
Age 58.
7
<PAGE>
WILLIAM H.T. BUSH, DIRECTOR
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 (since 1986). Age 61.
ROBERT B. CALHOUN, JR., DIRECTOR
Monitor Clipper Partners
650 Madison Avenue, 9TH Floor
New York, New York
Managing Director of Monitor Clipper Partners (since 1997) and President of The
Clipper Group L.P., both private equity investment funds (since 1990). Age 57.
STEWART S. DIXON, DIRECTOR
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon (since 1990). Age 69.
JOHN C. JANSING, DIRECTOR
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 74.
C. ALAN MACDONALD, DIRECTOR
415 Round Hill Road
Greenwich, Connecticut
Currently in golf development management on a consultancy basis (since 1999).
Formerly, Managing Director of The Directorship Inc., a consultancy in board
management and corporate governance (1997-1999). Prior to that General Partner
of the The Marketing Partnership, Inc., a full service marketing consulting firm
(1994 - 1997). Prior to that, Chairman and Chief Executive Officer of Lincoln
Snacks, Inc., manufacturer of branded snack foods (1992 - 1994). His career
spans 36 years at Stouffers and Nestle with eighteen of the years as Chief
Executive Officer. Currently serves as Director of DenAmerica Corp., J.B.
Williams Company, Inc., Fountainhead Water Company and Exigent Diagnostics. Age
66.
HANSEL B. MILLICAN, JR., DIRECTOR
Rochester Button Company
1328 Broadway (Suite 816)
New York, New York
President and Chief Executive Officer of Rochester Button Company (since 1991).
Currently serves as Director of Polyvision. Age 71.
THOMAS J. NEFF, DIRECTOR
Spencer Stuart
277 Park Avenue
New York, New York
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Chairman of Spencer Stuart, an executive search consulting firm (since 1976).
Currently serves as Director of Ace, Ltd. (NYSE). Age 62.
The second column of the following table sets forth the compensation accrued by
the Company for outside directors/trustees. The third column sets forth
information with respect to the pension or retirement benefits accrued by all
Lord Abbett-sponsored funds for outside directors/trustees. The fourth column
sets forth the total compensation paid by all Lord Abbett-sponsored funds to the
outside directors/trustees, and amounts payable but deferred at the option of
the director/trustee. No director/trustee of the Funds associated with Lord
Abbett and no officer of the Funds received any compensation from the Funds for
acting as a director/trustee or officer.
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
(1) (2) (3) (4)
Pension or For Year Ended
Retirement Benefits December 31, 1999
Accrued by the Total Compensation
Aggregate Fund and Paid by the Fund and
Compensation Thirteen Other Lord Thirteen 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 $519 $17,622 $57,720
William H.T. Bush* $522 $15,846 $58,000
Robert B. Calhoun, Jr.** $513 $12,276 $57,000
Stewart S. Dixon $527 $32,420 $58,500
JOHN C. JANSING $515 $41,1084 $57,250
C. Alan MacDonald $518 $26,763 $57,500
Hansel B. Millican, Jr. $518 $37,822 $57,500
Thomas J. Neff $537 $20,313 $59,660
</TABLE>
1. Outside directors'/trustees' 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/trustees may be deferred under a plan
("equity-based plan") that deems the deferred amounts to be invested in
shares of the Fund for later distribution to the directors/trustees. The
amounts of the aggregate compensation payable by the Equity Fund as of
December 31, 1999 deemed invested in Fund shares, including dividends
reinvested and changes in net asset value applicable to such deemed
investments were: Mr. Bigelow, $2,306; Mr. Bush $62; Mr. Calhoun, $468; Mr.
Dixon, $3,568; Mr. Jansing, $4,016; Mr. MacDonald, $4,162; Mr. Millican,
$7,080 and Mr. Neff, $5,519. If the amounts deemed invested in Fund shares
were added to each director's actual holdings of Fund shares as of December
31, 1999, each would own, the following: Mr. Bigelow, $2,306; Mr. Bush,
$62; Mr. Calhoun, $468; Mr. Dixon, $7,524; Mr. Jansing, $30,847; Mr.
MacDonald, $4,162; Mr. Millican, $7,080; and Mr. Neff, $83,114. The amounts
of the aggregate compensation payable by the Income Fund as of December 31,
1999 deemed invested in Fund shares, including dividends reinvested and
changes in net asset value applicable to such deemed investments, were: Mr.
Bigelow, $4,167; Mr. Calhoun, $664; Mr. Dixon, $5,127; Mr. Jansing,
$8,149; Mr. MacDonald, $6,974; Mr. Millican, $8,041 and Mr. Neff,$9,857.
If the amounts deemed invested in Fund shares were added to each director's
actual holdings of Fund shares as of December 31, 1999, each would own, the
following: Mr. Bigelow, $4,167; Mr. Calhoun, $664; Mr. Dixon, $5,127;
Mr. Jansing, $8,149; Mr. MacDonald, $6,974; Mr. Millican, $8,041; and Mr.
Neff, $9,857.
2. The amounts in Column 3 were accrued by the Lord Abbett-sponsored funds for
the twelve months ended October 31, 1999.
9
<PAGE>
3. This column shows aggregate compensation, including directors/trustees'
fees and attendance fees for board and committee meetings, of a nature
referred to in footnote one, accrued by the Lord Abbett-sponsored funds
during the year ended December 31, 1999, including fees directors/trustees'
have chosen to defer but does not include amounts accrued under the equity
based plan and shown in Column 3.
4. The equity-based plans superseded a previously approved retirement plan for
all directors/trustee. Directors/trustees had the option to convert their
accrued benefits under the retirement plan. All of the current outside
directors/trustees except one made such election. Mr. Jansing chose to
continue to receive benefits under the retirement plan which provides that
outside directors/trustees may receive annual retirement benefits for life
equal to their final annual retainer following retirement at or after age
72 with at least ten years of service. 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. Messrs. Brown, Carper, Hilstad,
Morris and Walsh are partners of Lord Abbett; the others are employees. None
have received compensation from the Funds.
EXECUTIVE VICE PRESIDENTS:
Zane E. Brown, age 48
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 57, 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 48
Lawrence H. Kaplan, age 43 (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 55
A. Edward Oberhaus III, age 40
Fernando Saldanha, age 46 (with Lord Abbett since 1998 - formerly Senior
Financial Officer at World Bank from 1988)
John J. Walsh, age 64
TREASURER
Donna M. McManus, age 39, (with Lord Abbett since 1996, formerly a Senior
Manager at Deloitte & Touche LLP).
As of April 15, 2000, our officers and directors, as a group, owned less than 1%
of each Fund's outstanding shares and there were no record holders of 5% or more
of the Fund's outstanding shares, other than Lord Abbett Distributor.
10
<PAGE>
3.
INVESTMENT ADVISORY AND OTHER SERVICES
The services performed by Lord Abbett are described in the Prospectus under
"Management". Under the Management Agreement, each Fund pays Lord Abbett a
monthly fee, based on average daily net assets for each month. The management
fee for the Equity Fund is at the annual rate of .75 of 1% 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.
For the fiscal years ended December 31, 1999, 1998 and 1997 the management fees
for the Equity Fund and the Income Fund were as follows:
1999 1998 1997
---- ---- ----
Equity Fund $529,582 $636,532 $636,532
Income Fund $535,412 $657,888 $864,869
The Funds 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 owns 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
December 31, 1999, the Sub-Adviser managed 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. 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.
Lord Abbett Distributor LLC, a New York limited liability company ("Lord Abbett
Distributor"), and a subsidiary of Lord Abbett, 90 Hudson Street, Jersey City,
New Jersey 07302, serves as the principal underwriter for the Funds.
11
<PAGE>
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281 are
the independent auditors of each Fund and must be approved at least annually by
our Board of Directors to continue in such capacity. Deloitte & Touche LLP
perform audit services for the Funds, including the examination of financial
statements included in the Fund's Annual Report to Shareholders.
The Bank of New York ("BNY"), 48 Wall Street, New York, New York 10286, is each
Fund's custodian. Rules adopted by the Securities & Exchange Commission under
the Act permit the fund to maintain its foreign assets in the custody 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.
United Missouri Bank of Kansas City, N.A., Tenth and Grand, Kansas City,
Missouri, acts as the transfer agent and dividend disbursing agent for the
Funds.
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. This 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.
12
<PAGE>
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 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. When, in the
opinion of the investment adviser, two or more brokers (ether directly or
through their correspondent clearing agents) are in a position to obtain the
best price and execution, preference may be given to brokers who have sold
shares of a Fund or who have provided investment research, statistical, or other
related services to the investment adviser.
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 a Lord
Abbett-sponsored fund 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 a Lord Abbett-sponsored fund does.
During the fiscal years ended December 31, 1999, 1998 and 1997, the Equity Fund
paid total commissions to independent broker-dealers of $164,795, $330,496 and
$414,606, respectively.
13
<PAGE>
5.
PURCHASES, REDEMPTIONS
AND SHAREHOLDER SERVICES
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 Fund 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.
Each 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.
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 Funds. 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 Fund's Class A shares on December 31, 1999
were computed as follows:
<TABLE>
<CAPTION>
Equity Income
Series Series
------ ------
<S> <C> <C>
Net asset value per share (net assets
divided by shares outstanding)........................................ $13.82 $ 7.16
Maximum offering price per
share (net asset value divided by .9425 and .9525, respectively)...... $14.67 $ 7.52
</TABLE>
14
<PAGE>
Each 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:
Equity Fund
Year Ended December 31,
-----------------------
1999 1998 1997
---- ---- ----
Gross sales charge $115,969 $145,982 $200,054
Amount allowed
TO DEALERS $ 99,286 $125,381 $170,647
-------- -------- --------
Net commissions
received by
LORD ABBETT $ 16,683 $ 20,601 $ 29,407
======== ======== ========
Income Fund
Year Ended December 31,
-----------------------
1999 1998 1997
---- ---- ----
Gross sales charge $ 52,537 $ 52,209 $ 75,727
Amount allowed
TO DEALERS $ 45,181 $ 45,019 $ 65,169
-------- -------- --------
Net commissions
received by
LORD ABBETT $ 7,356 $ 7,190 $ 10,558
======== ======== ========
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.
RULE 12B-1 PLANS
CLASS A, B, C AND P. As described in the Prospectus, the Company 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.
15
<PAGE>
The fees payable under the A Plan, B Plan, C Plan and P Plan are described in
the Prospectus. For the fiscal year ended December 31, 1999, fees paid to
dealers under each Plan were:
12b-1 Distribution Plan Equity Fund Income Fund
- ----------------------- ----------- -----------
Class A $232,809 $351,636
Class B $ 29,783 $ 16,513
Class C $ 18,644 $ 33,292
Class P - $ 592
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 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:
Anniversary of the Day on Contingent Deferred Sales Charge
Which the Purchase Order Was Accepted on Redemptions (As % of Amount
Subject to Charge)
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
16
<PAGE>
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.
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.
17
<PAGE>
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 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 and Lord
Abbett Equity Fund ("LAEF") which is not issuing shares. The exchange privilege
will not be available with respect to any otherwise "Eligible Funds" the shares
of which are not available to new investors of the type requesting the exchange.
LETTER OF INTENTION. Under the terms of the Letter of Intention, as described in
the Prospectus you may invest $100,000 or more over a 13-month period in shares
of a Lord Abbett-sponsored fund (other than shares of LAEF, LASF, 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). Shares 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 Letter is not
completed. The Letter of Intention is neither a binding obligation on you to
buy, nor on the Fund to sell, the full amount indicated.
18
<PAGE>
RIGHTS OF ACCUMULATION. As stated in the Prospectus, purchasers (as defined in
the Prospectus) may accumulate their investment in Lord Abbett-sponsored funds
(other than LAEF, 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 spouse of a deceased director or employee). The terms
"our directors" and "employees of Lord Abbett" also include retired directors
and employees and other family members thereof.
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 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, (g) in
connection with a merger, acquisition or other reorganization (h) through a
"special retirement wrap program" sponsored by an authorized institution having
one or more characteristics distinguishing it, in the opinion of Lord Abbett
Distributor, from a mutual fund wrap 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 Class A 12b-1 Plan and the fact that
the program related to participant-directed Retirement Plan. 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,
which is any broker or bank that is a member of the medallion stamp program. 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.
19
<PAGE>
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 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.
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, each Funds' average annual
compounded rates of total return for the one-year, five-years and ten years or
the life-of-the-Fund ending on December 31, 1999 were as follows:
EQUITY FUND
-----------
1 YEAR 5 YEARS 10 YEARS (OR LIFE)
------ ------- ------------------
Class A shares 5.90% 8.10% 6.30%
Class B shares 6.50% - 8.56%
Class C shares 10.56% - 9.36%
INCOME FUND
-----------
1 YEAR 5 YEARS 10 YEARS (OR LIFE)
------ ------- ------------------
Class A shares -13.80% 4.48% 6.08%
Class B shares -14.35% - 1.57%
Class C shares -10.83% - 2.83%
Class P shares - - -5.51%
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 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, 1999, the yield
for the Class A, B and C shares of the Income Fund were 4.11%, 3.71% and 3.71%,
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
Each Fund intends to elect and to qualify for special tax treatment afforded
regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"). If it so qualifies, each Fund (but not its shareholders) will be
relieved of federal income taxes on the amount it distributes to shareholders.
If in any taxable year a Fund does not qualify as a regulated investment
company, all of its taxable income will be taxed to the Fund at regular
corporate rates.
The Funds contemplate declaring as dividends substantially all of their net
investment income. Dividends paid by the Funds from their investment income and
distributions out of short-term capital gains are taxable to shareholders as
ordinary income from dividends whether received in cash or reinvested in
additional shares of the Fund. Distributions paid by the funds out of their net
realized long-term capital gains are taxable to shareholders as capital gain,
also whether received in cash or reinvested in shares. The Fund will send each
shareholder annual information concerning the tax treatment of dividends and
other distributions.
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Upon sale, exchange or redemption of shares of a Fund, a shareholder will
recognize short- or long-term capital gain or loss, depending upon the
shareholder's holding period in the Fund's shares. However, if a shareholder's
holding period in his shares is six months or less, any capital loss realized
from a sale or exchange of such shares must be treated as long-term capital loss
to the extent of dividends classified as "capital gains dividends" received with
respect to such shares. The maximum tax rates applicable to net capital gains
recognized by individuals and other non-corporate taxpayers are (i) the same as
ordinary income rates for capital assets held for one year or less and (ii) 20%
for capital assets held for more than one year. Capital gains or losses
recognized by corporate shareholders are subject to tax at the ordinary income
tax rates applicable to corporations.
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.
Some shareholders may be subject to a 31% withholding tax on reportable
dividends, capital gains distributions and redemption payments ("backup
withholding"). Generally, shareholders subject to backup withholding will be
those for whom a certified taxpayer identification number is not on file with
the Funds or who, to the Funds' knowledge, have furnished an incorrect number.
When establishing an account, an investor must certify under penalties of
perjury that such number is correct and that he is not otherwise subject to
backup withholding.
The writing of call options and other investment techniques and practices which
the Funds may utilize may affect the character and timing of the recognition of
gains and losses. Such transactions may increase the amount of short-term
capital gain realized by the Funds, which is taxed as ordinary income when
distributed to shareholders.
The Funds may be subject to foreign withholding taxes, which would reduce the
yield on their investments. It is generally expected that Fund shareholders who
are subject to U.S. federal income tax will not be entitled to claim a federal
income tax credit or deduction for foreign income taxes paid by the Funds.
The Funds will also 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. The Funds intend to distribute to shareholders each year an
amount adequate to avoid the imposition of such excise tax.
Dividends paid by the Funds will qualify for the dividends-received deduction
for corporations to the extent they are derived from dividends paid by domestic
corporations. Corporate shareholders must have held their shares in a Fund for
more than 45 days to qualify for the deduction for dividends paid by a Fund.
Gain and loss realized by the Funds 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 gain or loss is 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
gain and will be reduced by the net amount, if any, of such foreign exchange
loss.
If a Fund purchases shares in certain foreign investment entities called
"passive foreign investment companies," the Fund may be subject to U.S. 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 the Fund 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, the Fund might be required to include in
income each year a portion of the ordinary earnings and net capital gains of the
passive foreign investment company even if such amount were not distributed to
the Fund. Alternatively, if a fund were to make a "mark-to-market" election with
respect to its investment in a passive foreign investment company, gain or loss
with respect to the investment would be considered realized at the end of each
taxable year of the Fund even if the Fund continued to hold the investment and
would be treated as ordinary income or loss to the Fund.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to U.S. persons (U.S. citizens or residents and United States
domestic corporations, partnerships, trusts and estates). Each shareholder who
is not a U.S. person should consult his tax adviser regarding the U.S. and
foreign tax consequences of the ownership of shares of a Fund, including the
applicable rate of U.S. withholding tax on dividends representing ordinary
income and net short-term capital gains, and the applicability of U.S. gift and
estate taxes.
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8.
INFORMATION ABOUT THE FUND
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 Fund and 500,000,000 shares of the Income Fund
have been authorized at $0.001 par value. Both Funds currently offer four
classes of shares: Class 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
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.
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.
The Companys' 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 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 each Fund.
9.
FINANCIAL STATEMENTS
The financial statements for the year ended December 31, 1999 and the report of
Deloitte & Touche LLP, independent auditors, on such financial statements
contained in the 1999 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
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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.
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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