STATEMENT OF ADDITIONAL INFORMATION
LORD ABBETT SERIES FUND, INC.
June 1, 1995
This Statement of Additional Information is not a Prospectus. A
Prospectus may be obtained from Lord, Abbett & Co. at The General Motors
Building, 767 Fifth Avenue, New York, N.Y. 10153-0203. This Statement relates
to, and should be read in conjunction with, the Prospectus dated June 1,
1995.
Shareholder inquiries should be made by writing directly to the Fund or
by calling (800) 831-LIFE.
<PAGE>
TABLE OF CONTENTS PAGE
1. Investment Objectives and Policies
2. Directors and Officers
3. Control Persons and Principal Holders of Securities
4. Investment Advisory and Other Services
5. Portfolio Transactions
6. Net Asset Value of Fund Shares
7. Dividends and Distributions
8. Distribution Arrangements
9. Taxes
10. Calculation of Performance Data
11. Financial Statements
<PAGE>
1.
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objectives and policies are described in the
Prospectus under "Investment Objectives and Policies". In addition to those
investment objectives, each Portfolio is subject to the following investment
restrictions which cannot be changed without approval of a majority of the
outstanding shares of the Portfolio. Each Portfolio may not: (1) sell short
securities or buy securities or evidences of interests therein on margin,
although it may obtain short-term credit necessary for the clearance of
purchases of securities; (2) buy or sell put or call options, although it may
buy, hold or sell rights or warrants, write covered call options and enter
into closing purchase transactions as discussed below; and, in the case of the
Global Equity Portfolio only, it may utilize various foreign currency hedging
techniques as discussed below; (3) borrow money which is in excess of
one-third of the value of its total assets taken at market value (including
the amount borrowed) and then only from banks as a temporary measure for
extraordinary or emergency purposes (borrowings beyond 5% of such total
assets, may not be used for investment leverage to purchase securities but
solely to meet redemption requests where the liquidation of the Portfolio's
investment is deemed to be inconvenient or disadvantageous); (4) invest in
securities or other assets not readily marketable at the time of purchase or
subject to legal or contractual restrictions on resale except as described
under "Restricted or Not Readily Marketable Securities for the Fund's
Portfolios" below; (5) act as underwriter of securities issued by others,
unless it is deemed to be one in selling a portfolio security requiring
registration under the Securities Act of 1933, such as those described under
"Restricted or Not Readily Marketable Securities for the Fund's Portfolios"
below; (6) lend money or securities to any person except that it may enter
into short-term repurchase agreements with sellers of securities it has
purchased, and it may lend its portfolio securities to registered
broker-dealers where the loan is 100% secured by cash or its equivalent as
long as it complies with regulatory requirements and the Fund deems such loans
not to expose the Portfolio to significant risk (investment in repurchase
agreements exceeding 7 days and in other illiquid investments is limited to a
maximum of 5% of a Portfolio's assets); (7) pledge, mortgage or hypothecate
its assets; however, this provision does not apply to permitted borrowing
mentioned above or to the grant of escrow receipts or the entry into other
similar escrow arrangements arising out of the writing of covered call
options; (8) buy or sell real estate including limited partnership interests
therein (except securities of companies, such as real estate investment
trusts, that deal in real estate or interests therein), or oil, gas or other
mineral leases, commodities or commodity contracts in the ordinary course of
its business, except such interests and other property acquired as a result of
owning other securities, though securities will not be purchased in order to
acquire any of these interests; (9) invest more than 5% of its gross assets,
taken at market value at the time of investment, in companies (including their
<PAGE>
predecessors) with less than three years' continuous operation; (10) buy
securities if the purchase would then cause a Portfolio to have more than (i)
5% of its gross assets, at market value at the time of purchase, invested in
securities of any one issuer, except securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, or (ii) 25% of its gross
assets, at market value at the time of purchase, invested in securities issued
or guaranteed by a foreign government, its agencies or instrumentalities; (11)
buy voting securities if the purchase would then cause a Portfolio to own
more than 10% of the outstanding voting stock of any one issuer; (12) own
securities in a company when any of its officers, directors or security holders
is an officer or director of the Fund or an officer, director or partner of
the Investment Manager or sub-adviser, if after the purchase any of such
persons owns beneficially more than 1/2 of 1% of such securities and such
persons together own more than 5% of such securities; (13) concentrate its
investments in any particular industry, but if deemed appropriate for
attainment of its investment objective, up to 25% of its gross assets
(at market value at the time of investment) may be invested in any one industry
classification used for investment purposes; or (14) buy securities from or
sell them to the Fund's officers, directors, or employees, or to the Investment
Manager or sub-adviser or to their partners, directors and employees.
CHANGES IN FUND OBJECTIVES, RESTRICTIONS, POLICIES AND STRATEGIES
The Fund's investment objectives described in the Prospectus and the
Fund's investment restrictions described above in this Statement of Additional
Information, both under the same heading "Investment Objectives and Policies",
can be changed only with the approval of a majority of the outstanding shares
of the affected Portfolio. All of the Fund's policies and techniques,
including those described below, can be changed without such approval.
Other Investments. Described below are other Fund policies and
techniques applicable to one or all of the Portfolios as indicated.
FOREIGN CURRENCY HEDGING TECHNIQUES OF THE GLOBAL EQUITY PORTFOLIO
The Fund's Global Equity Portfolio 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. A forward foreign currency contract
involves an obligation to purchase or sell a specific amount of a specific
currency at a set price at a future date. The Portfolio expects to enter into
forward foreign currency contracts in primarily two circumstances. First,
when the Portfolio enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may desire to "lock in" the
U.S. dollar price of the security. By entering into a forward contract for
the purchase or sale of the amount of foreign currency involved in the
underlying security transaction, the Portfolio will be able to protect against
<PAGE>
a possible loss resulting from an adverse change in the relationship between
the U.S. dollar and the subject foreign currency during the period between the
date the security is purchased or sold and the date on which payment is made
or received.
Second, when it is believed that the currency of a particular foreign
country may suffer a decline against the U.S. dollar, the Portfolio may enter
into a forward contract to sell the amount of foreign currency approximating
the value of some or all of the Portfolio securities denominated in such
foreign currency. Precise matching of the forward contract amount and the
value of the securities involved will not generally be possible since the
future value of such securities denominated in foreign currencies will change
as a consequence of market movements in the value of those securities between
the date the forward contract is entered into and the date it matures. The
Portfolio does not intend to enter into such forward contracts under this
second circumstance on a regular or continuous basis.
The Fund's custodian will segregate cash or liquid high-grade debt
securities in an amount not less than the value of the Portfolio's assets
committed to forward foreign currency contracts entered into under this type
of transaction. If the value of the securities segregated declines,
additional cash or debt securities 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 Global Equity Portfolio's commitments with respect to such contracts.
Foreign Currency Put and Call Options. The Fund may also purchase
foreign currency put options on U.S. exchanges or U.S. over-the-counter
markets for the Global Equity Portfolio. A put option gives the Portfolio,
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 seven major
currencies, and trading may be thin and illiquid. The seven major currencies
are Australian dollars, British pounds, Canadian dollars, German marks, French
francs, Japanese yen and Swiss francs. 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. These unlisted options
generally are available on a wider range of currencies, including those of
most of the developed countries mentioned in the Prospectus. 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 the Fund's policy on illiquid securities.
A call option written by the Fund on behalf of the Portfolio gives the
purchaser, upon payment of a premium, the right to purchase from the Portfolio
a currency at the exercise price until the expiration of the option. The Fund
<PAGE>
on behalf of the Portfolio 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 Portfolio to cover such call writing.
INVESTMENT TECHNIQUES FOR THE FUND'S PORTFOLIOS
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 Fund's current intention
that no more than 5% of each Portfolio's 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. The Fund may write call options on securities it
owns. 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. The writer of a fully
collateralized call option assumes the full downside risk of the securities
subject to such option. In addition, in exchange for the premium received,
the writer of the call gives up the gain possibility of the stock appreciating
beyond 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.
The Fund will not use call options on individual equity securities traded
on foreign securities markets.
The Fund's custodian will segregate cash or liquid high grade debt
securities in an amount not less than the value of the Fund's assets committed
to written covered call options. If the value of the securities segregated
declines, additional cash or debt securities 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 Fund's commitments with respect to such written options.
Rights and Warrants. The Fund may invest in rights and warrants to
purchase securities. Included within that amount, but not to exceed 2% of the
value of the Portfolio's net assets, may be warrants which are not listed on
the New York Stock Exchange or American Stock Exchange.
<PAGE>
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. The 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. The 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 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, the Fund may incur a loss upon disposition of them. 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 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. The Fund intends to limit repurchase agreements to
transactions with dealers and financial institutions believed by the Fund to
present minimal credit risks. The Fund will monitor creditworthiness of the
repurchase agreement sellers on an ongoing basis.
<PAGE>
RESTRICTED OR NOT READILY MARKETABLE SECURITIES FOR THE FUND'S PORTFOLIOS
Although the Fund has no current intention of investing in such
securities in the foreseeable future, no more than 5% of the value of each
Portfolio may be invested in securities with legal or contractual restrictions
on resale ("restricted securities") (including securities qualifying for
resale under SEC Rule 144A that are determined by the Board, or by Lord Abbett
& Co. pursuant to the Board's delegation, to be liquid securities, restricted
securities, repurchase agreements with maturities of more than seven days and
over-the-counter options), other than repurchase agreements and those
restricted securities which have a liquid market among certain institutions,
including the Fund, and in securities which are not readily marketable.
LENDING OF SECURITIES BY THE FUND'S PORTFOLIOS
Although the Fund has no current intention of doing so in the foreseeable
future, the Fund may seek to earn income by lending portfolio securities.
Under present regulatory policies, such loans may be made to member firms of
the New York Stock Exchange and are required to be secured continuously by
collateral consisting of cash, cash equivalents, or United States Treasury
bills maintained in an amount at least equal to the market value of the
securities loaned. The Fund will have the right to call a loan and obtain the
securities loaned at any time on five days' notice. During the existence of a
loan the Fund will receive the income earned on investment of collateral. The
aggregate value of the securities loaned will not exceed 15% of the value of
each Portfolio's total assets.
PORTFOLIO TURNOVER RATES
During the fiscal year ended December 31, 1994, the portfolio turnover
rate of the Growth and Income Portfolio was 68.94%. During the fiscal year
ended December 31, 1993, the portfolio turnover rate of the Growth and Income
Portfolio was 78.26%.
During the fiscal year ended December 31, 1994, the portfolio turnover
rate of the Global Equity Portfolio was 50.63%. During the fiscal year ended
December 31, 1993, the portfolio turnover rate of the Global Equity Portfolio
was 131.51%. These changes, dictated by market conditions, resulted in a higher
turnover of portfolio assets in 1993 than in 1994, i.e. 131% versus 50%.
2.
DIRECTORS AND OFFICERS
The following director and officer is a partner of Lord, Abbett & Co., The
General Motors Building, 767 Fifth Avenue, New York, N.Y. 10153-0203 ("Lord
Abbett"). He has been associated with Lord Abbett for over five years and is
also an officer and/or director or trustee of the fifteen other Lord
<PAGE>
Abbett-sponsored funds described under "Investment Advisory and Other
Services." He is an "interested person" as defined in the Investment Company
Act of 1940, as amended, and as such, may be considered to have an indirect
financial interest in any Rule 12b-1 Plan adopted by a Portfolio..
Ronald P. Lynch, Age 60, Chairman, President and Director
The following outside directors are also directors of the fifteen other Lord
Abbett sponsored funds referred to above (except for Lord Abbett Research
Fund, Inc., of which only Messrs. Millican and Neff are directors).
E. Thayer Bigelow
Time Warner Cable
300 First Stamford Place
Stamford, Connecticut
President and Chief Executive Officer of Time Warner Cable Programming, Inc.
Formerly President and Chief Operating Officer of Home Box Office, Inc. Age
54.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 64.
John C. Jansing
162 South Beach Road
Hobe Sound, Florida
Retired. Formerly Chairman of Independent Election Corporation of America, a
proxy tabulating firm. Age 69.
C. Alan MacDonald
The Marketing Partnership, Inc.
27 Signal Road
Stamford, Connecticut
General Partner, The Marketing Partnership, Inc., a full service marketing
consulting firm that specializes in strategic planning and customer-specific
marketing. Formerly Acquisition Consultant, The Noel Group, a private
consulting firm (1994). Formerly Chairman and Chief Executive Officer of
Lincoln Snacks, Inc., manufacturer of branded snack foods (1992-1994).
Formerly President and Chief Executive Officer of Nestle Foods Corporation, a
subsidiary of Nestle S.A. (Switzerland). Age 62.
<PAGE>
Hansel B. Millican, Jr.
Rochester Button Co.
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Formerly
Senior Vice President of Springs Industries, Inc., a textile company,
(December 1986-1989). Age 65.
Thomas J. Neff
Spencer Stuart & Associates
277 Park Avenue
New York, New York
President of Spencer Stuart & Associates, an executive search consulting firm.
Age 57.
The second column of the following table sets forth the compensation
accrued for the Funds outside directors. The third and fourth columns set
forth information with respect to the retirement plan for outside directors
maintained by the Lord Abbett-sponsored funds. The fifth column sets forth
the total compensation payable by such funds to the outside directors. The
information provided is for the fiscal year ended December 31, 1994. No
director of the Fund associated with Lord Abbett and no officer of the Fund
received any compensation from the Fund for acting as a director or officer.
<TABLE>
<CAPTION>
Compensation Table for the Fiscal Year Ended December 31, 1994
______________________________________________________________
Estimated Annual
Benefits Upon
Retirement
Pension or Proposed to be
Retirement Benefits Paid by the Fund
Accrued Expenses and Fifteen Total Compensation
by the Fund and Other Lord Accrued by the Fund and
Aggregate Fifteen other Abbett- Fifteen Other Lord
Compensation Lord Abbett- sponsored Abbett-sponsored
Name of Director from the Fund (1) sponsored Funds (2) Funds (2) Funds (3)
------------------------ ------------------ --------------------- ------------------ -------------------------
<S> <C> <C> <C> <C>
E. Thayer Bigelow (3) $ 73 None $ 33,600 $ 8,400
------------------ --------------------- ------------------ -------------------------
Thomas F. Creamer (4) $ 197 $ 27,578 $ 33,600 $ 29,650
------------------ --------------------- ------------------ -------------------------
<PAGE>
Stewart S. Dixon $ 314 $ 22,595 $ 33,600 $ 43,600
------------------ --------------------- ------------------ -------------------------
John C. Jansing $ 307 $ 28,636 $ 33,600 $ 42,500
------------------ --------------------- ------------------ -------------------------
C. Alan MacDonald $ 310 $ 27,508 $ 33,600 $ 41,500
------------------ --------------------- ------------------ -------------------------
Hansel B. Millican, Jr. $ 302 $ 24,842 $ 33,600 $ 41,750
------------------ --------------------- ------------------ -------------------------
Thomas J. Neff $ 297 $ 16,214 $ 33,600 $ 41,200
------------------ --------------------- ------------------ -------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
1. Outside directors fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on net assets
of each fund. Fees payable by the Fund to its outside directors are being deferred
under a plan that deems the deferred amounts to be invested in shares of the Fund
for later distribution to the directors. The amounts accrued by the Fund for the year
ended December 31, 1994, are as set forth after each outside Directors name
above. The total amount accrued for each outside Director since the beginning of
his tenure with the Fund, together with dividends reinvested and changes in net
asset value applicable to such deemed investments, were as follows as of
December 31, 1994: Mr. Bigelow, $73; Mr. Creamer, $436; Mr. Dixon, $557; Mr.
Jansing, $550; Mr. MacDonald, $538; Mr. Millican, $546; and Mr. Neff, $547.
2. Each Lord Abbett-sponsored fund has a retirement plan providing that outside directors will
receive annual retirement benefits for life equal to 80% of their final annual retainers
following retirement at or after age 72 with at least 10 years of service. Each plan also
provides for a reduced benefit upon early retirement under certain circumstances, a pre-
retirement death benefit and actuarially reduced joint-and-survivor spousal benefits. The
amounts stated, except in the case of Mr. Creamer, would be payable annually under such
retirement plans if the director were to retire at age 72 and the annual retainers payable by
such funds were the same as they were today. The amounts accrued in column 3 were
accrued by Lord Abbett-sponsored funds during the fiscal year ended December 31, 1994
with respect to the retirement benefits in column 4.
3. This columns shows aggregate compensation, including directors fees and attendance fees for
board and committee meetings, of a nature referred to in footnote one, accrued by the Lord
Abbett-sponsored funds during the year ended December 31, 1994.
4. Mr. Bigelow was elected a director of the Fund on October 19, 1994.
<PAGE>
5. Mr. Creamer retired as a director of the Fund effective September 21, 1994. The stated amount
of his retirement income (column 4) is the annual amount payable to him by the Lord Abbett-
sponsored funds before reduction for a joint-and -survivor spousal benefit.
</TABLE>
Except where indicated, the following executive officers of the Fund have
been associated with Lord Abbett for over five years. Messrs. Allen, Carper,
Cutler, Dow, Nordberg and Walsh are partners of Lord Abbett; the others are
employees: W. Thomas Hudson, Jr., age 53, Executive Vice President; Kenneth B.
Cutler, age 62, Vice President and Secretary; Stephen I. Allen, age 42, Daniel
E. Carper, age 43, Robert S. Dow, age 50, E. Wayne Nordberg, age 59, John J.
Walsh, age 58, John J. Gargana, Jr., age 64, Thomas F. Konop, age 53, Victor
W. Pizzolato, age 62, Vice Presidents; and Keith F. O'Connor, age 40,
Treasurer.
The Fund's by-laws provide that the Fund shall not hold an annual meeting
of its stockholders in any year unless one or more matters are required to be
acted on by stockholders under the Investment Company Act of 1940, as amended
(the "Act"), or unless called at the request of 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 to hold the offices of
any directors who have held office for more than one year or who have been
elected by the Board of Directors to fill vacancies. Under the By-laws and in
accordance with the Act, stockholder approval of the independent auditors of
the Fund will not be required except when such meetings are held.
3.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
SUBSTANTIAL SHAREHOLDERS
As of March 31, 1995, COVA Variable Annuity Account One, a
separate account of COVA Financial Services Life Insurance Company,
One Tower Lane, Oakbrook Terrace, Illinois 60181 (" COVA Life"),
was known to the Board of Directors and the management of the Fund
to own of record 9,225,749 shares representing 99.8% of the total shares
issued and outstanding of the Growth and Income Portfolio and Lord Abbett was
known to own of record 14,025 shares representing 0.2% of the total shares
issued and outstanding. As of that same date, COVA Variable Annuity
Account One was known to own of record 273,301 shares representing 95.6%
of the total shares issued and outstanding of the Global Equity Portfolio and
Lord Abbett was known to own of record 12,686 shares representing 4.4%
of the total shares issued and outstanding. As of that date, the officers
and directors of the Fund together owned no variable contracts.
<PAGE>
4.
INVESTMENT ADVISORY AND OTHER SERVICES
As described under "Management" in the Prospectus, Lord Abbett is the
Fund's investment manager. The eight general partners of Lord Abbett, all of
whom are officers and/or directors of the Fund, are: Stephen I. Allen, Daniel
E. Carper, Kenneth B. Cutler, Robert S. Dow, Thomas S. Henderson, Ronald P.
Lynch, E. Wayne Nordberg and John J. Walsh. The address of each partner is
The General Motors Building, 767 Fifth Avenue, New York, New York 10153-0203.
Lord Abbett and COVA Life provided operating funds to the Fund
through their purchase of the initial shares of the Fund.
Lord Abbett acts as investment manager for fifteen other investment
companies comprising the Lord Abbett family of funds. The names of these
investment companies are: Affiliated Fund, Inc., Lord Abbett Bond-Debenture
Fund, Inc., Lord Abbett Developing Growth Fund, Inc., Lord Abbett Global Fund,
Inc., Lord Abbett U.S. Government Securities Fund, Inc., Lord Abbett Value
Appreciation Fund, Inc., Lord Abbett Tax-Free Income Fund, Inc., Lord Abbett
California Tax-Free Income Fund, Inc., Lord Abbett Tax-Free Income Trust,
Lord Abbett Fundamental Value Fund, Inc., Lord Abbett Equity Fund, Lord
Abbett U.S. Government Securities Money Market Fund, Inc., Lord Abbett
Securities Trust, Lord Abbett Investment Trust and Lord Abbett Research
Fund, Inc.
The services to be provided by Lord Abbett are described under Management
in the Prospectus. Under the Management Agreement, the Fund on behalf of each
Portfolio is obligated to pay Lord Abbett a monthly fee, based on the average
daily net assets of a Portfolio for each month, at the annual rate of .50 of
1% with respect to the Growth and Income Portfolio and .75 of 1% with respect
to the Global Equity Portfolio. For the year ended December 31, 1992, Lord
Abbett waived $38,059 of its advisory fee with respect to the Growth and
Income Portfolio and waived all $18,097 of its advisory fee with respect to
the Global Equity Portfolio. For the year ended December 31, 1993, Lord
Abbett was paid an advisory fee of $269,800 with respect to the Growth and
Income Portfolio and waived all $17,699 of its advisory fee with respect to
the Global Equity Portfolio. For the year ended December 31, 1994, Lord
Abbett was paid an advisory fee of $ 518,190 with respect to the Growth and
Income Portfolio and waived all $17,699 of its advisory fee with respect to
the Global Equity Portfolio.
The Fund pays all expenses not expressly assumed by Lord Abbett,
including, without limitation, 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 the Fund's
shares under federal and state securities laws, expenses of printing and
<PAGE>
mailing prospectuses to existing shareholders, insurance premiums, brokerage
and other expenses connected with executing portfolio transactions.
Lord Abbett has entered into a Sub-Investment Management Agreement with
Dunedin Fund Managers Limited (the "Sub-Adviser"), under which the Sub-Adviser
provides Lord Abbett with advice with respect to that portion of the Global
Equity Portfolio's assets invested in countries other than the United States
as more particularly described in the Prospectus. Lord Abbett pays the
Sub-Adviser a monthly fee based on the average daily net assets of the Global
Equity Portfolio for each month equal, on an annual basis, to .375 of 1%.
The Sub-Adviser and its parent holding company, DFM Holdings Limited, are
located at Dunedin House, 25 Ravelston Terrace, Edinburgh EH4 3EX Scotland.
The Sub-Adviser and its predecessors date back 122 years to 1873. The
Sub-Adviser provides international investment research and advisory services
to private and institutional clients, investment trusts, pension clients and
unit trusts both in the United Kingdom and overseas. The Sub-Adviser
currently manages about $7 billion, and its investment and administrative
staffs have substantial global investment management experience.
Due to different investment objectives or other factors, a particular
security may be bought for one or more funds, portfolios or clients (for
which Lord Abbett or the Sub-Adviser or their affiliates offer investment
advice) when one or more are selling the same security. If opportunities for
purchase or sale of securities by Lord Abbett or the Sub-Adviser for the Fund
or for other funds, portfolios 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,
portfolios 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 or their affiliates may increase the demand for securities being
purchased or the supply of securities being sold, there may be an adverse
effect on price.
Deloitte & Touche LLP, Two World Financial Plaza, New York, New York
10281 are the independent auditors of the Fund and must be approved at least
annually by the Fund's Board of Directors to continue in such capacity. They
perform audit services for the Fund including the examination of financial
statements included in the Fund's annual report to shareholders.
Morgan Guaranty Trust Company of New York ("Morgan"), 60 Wall Street, New
York, New York 10005, is the Fund's custodian. Rules adopted by the
Securities and Exchange Commission under the Investment Company Act of 1940,
as amended, permit the Fund to maintain the Global Equity Portfolio's foreign
securities and cash in the custody of certain eligible foreign banks and
securities depositories. Pursuant to these rules, the Global Equity
Portfolio's securities and cash, when invested in foreign securities and not
held by Morgan or foreign branches of a United States bank, are held by
<PAGE>
Sub-Custodians of Morgan who will be approved by the Board of Directors of the
Fund in accordance with such rules.
The Sub-Custodians of Morgan 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 &
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 Corporaton; Sweden: Skandinaviska Enskilda Banken; Switzerland: Bank
Leu: Turkey: Citibank, N.A.; Venezuela: Citibank, N.A..
5.
PORTFOLIO TRANSACTIONS
The Fund's policy is to have purchases and sales of portfolio securities
executed at the most favorable prices, considering all costs of the
transaction including brokerage commissions and dealer markups and markdowns,
consistent with obtaining the best execution, except to the extent that the
Fund may pay a higher commission as described below. This policy governs the
selection of brokers or dealers and the market in which the transaction is
executed. Where a commission is payable, the Fund attempts to negotiate with
brokers qualified to provide best execution. To the extent permitted by law,
the Fund may, if considered advantageous, make a purchase from or sale to
another Lord Abbett-managed fund without the intervention of any
broker-dealer.
The Fund selects broker-dealers on the basis of their professional
capability and the value and quality of their brokerage and research services.
Normally, for domestic assets, the selection is made by the Fund's traders
who are officers of the Fund and also are employees of Lord Abbett. For
foreign assets, as in the case of the Global Equity Portfolio, the selection
is made by the Sub-Adviser. The Fund's traders do the trading as well for
other accounts - investment companies (of which they are also officers) and
other investment clients - managed by Lord Abbett. They are responsible for
the negotiation of prices and commissions.
<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 markets, as in the case of the
Global Equity Portfolio, 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 Fund's 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. The Fund may
select a broker-dealer who may receive a commission for portfolio transactions
exceeding the amount another broker-dealer would have charged for the same
transaction if the Fund's traders determine that such amount of commission is
reasonable in relation to the value of the brokerage and research services
performed by the executing broker-dealer viewed in terms of either the
particular transaction or its overall responsibilities with respect to the
Fund and other accounts managed by Lord Abbett. Brokerage services may
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. Research may
include the furnishing of analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the
performance of accounts. Such research may be used by Lord Abbett in
servicing all their accounts, and not all of such research will necessarily be
used by Lord Abbett in connection with their services to the Fund; conversely,
research furnished in connection with brokerage of other accounts managed by
Lord Abbett may be used in connection with their services to the Fund, and not
all of such research will necessarily be used by Lord Abbett in connection
with their services to such other accounts. The Fund has been advised by Lord
Abbett that, although such research is often useful, no dollar value can be
ascribed to it nor can it be accurately ascribed or allocated to any account
and it is not a substitute for services provided by them to the Fund; nor does
it materially reduce or otherwise affect the expenses incurred by Lord Abbett
in the performance of such services. The Fund makes no commitments regarding
the allocation of brokerage business to or among broker-dealers.
If two or more broker-dealers are considered capable of offering the
equivalent likelihood of best execution, the broker-dealer who has sold the
Fund's shares through the sale of variable contracts may be preferred.
If other clients of Lord Abbett buy or sell the same security at the same
time as the Fund does, transactions will, to the extent practicable, be
allocated among all participating accounts in proportion to the amount of each
order and will be executed daily until filled so that each account shares the
average price and commission cost of each day.
The Fund will not seek "reciprocal" broker-dealer business (for the
purpose of applying commissions in whole or in part for the Fund's benefit or
<PAGE>
otherwise) from broker-dealers as consideration for the direction to them of
portfolio business. However, the Fund may receive quotations and pricing
services without charge from broker-dealers selected on the basis of the
Fund's policy described above.
During the fiscal years ended December 31, 1994, 1993 and 1992, the total
dollar amounts of brokerage commissions paid by the Fund were $285,241,
$253,502 and $152,962 respectively.
6.
NET ASSET VALUE OF FUND SHARES
Portfolio shares are sold and redeemed at a price equal to the share's
net asset value. Net asset value per share is determined as of the close of
the New York Stock Exchange on each day that the New York Stock Exchange is
open for business, which is Monday through Friday, except for New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day by dividing each Portfolio's total net
assets by the number of shares outstanding at the time of calculation. The
Portfolios will also calculate such price on each other day in which there is
a sufficient degree of trading in the Portfolio's securities such that the
current net asset value of the Portfolio's shares might be materially affected
by changes in the value of such Portfolio securities, but only if on any such
day the Portfolio is required to purchase or redeem shares. Total net assets
are determined by adding the total current value of Portfolio securities,
cash, receivables, and other assets and subtracting liabilities. Portfolio
shares will be sold and redeemed at the net asset value next determined after
receipt of the sales order or request for redemption.
VALUATION OF SECURITIES HELD IN EACH PORTFOLIO
Securities in the Fund's Portfolios are valued at their market value as
of the close of the New York Stock Exchange. Securities that are listed on a
securities exchange are valued at their closing sales price on the day of the
valuation. Price valuations for listed securities are based on market
quotations where the security is primarily traded or, if not available, are
valued at the mean of the bid and asked prices on any valuation date.
Unlisted securities in a Portfolio are primarily valued based on their latest
quoted bid price or, if such a price is not available, are valued by a method
determined by the Directors to accurately reflect fair value. Money market
instruments maturing in 60 days or less are valued on the basis of amortized
cost, which means that they are valued at their acquisition cost to reflect a
constant amortization rate to maturity of any premium or discount, rather than
at current market value.
All assets and liabilities expressed in foreign currencies will be
converted into United States dollars at the mean between the buying and
<PAGE>
selling rates of such currencies against United States dollars last quoted by
any major bank. If such quotations are not available, the rate of exchange
will be determined in accordance with policies established by the Board of
Directors of the Fund. The Board of Directors will monitor, on an ongoing
basis, the Fund's 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 (i.e., a day on which the New York
Stock Exchange is open). 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 Fund's net asset value is 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 New York Stock Exchange will not be reflected
in the Fund's calculation of net asset value unless the Fund's Directors
determine that the particular event would materially affect net asset value,
in which case an adjustment will be made.
7.
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's intention to distribute substantially all the net
investment income, if any, of each Portfolio. For dividend purposes, net
investment income of each Portfolio will consist of dividends and/or interest
earned by such Portfolio less the expenses of such Portfolio.
All net realized capital gains of the Fund, if any, are declared and
distributed annually to the shareholders of the Portfolio or Portfolios to
which such gains are attributable.
8.
DISTRIBUTION ARRANGEMENTS
GENERAL
Lord Abbett serves as the distributor in connection with the offering of
the Fund's shares. Currently, only shares of the Growth and Income Portfolio
are offered for sale. In connection with the sale of its shares, the Fund has
authorized Lord Abbett to provide only such information and to make only such
statements and representations which are not materially misleading or which
are contained in Fund's then-current Prospectus or Statement of Additional
Information or shareholder reports in such financial and other statements
<PAGE>
which are furnished to Lord Abbett by the Fund.
The Fund and Lord Abbett are parties to a Distribution Agreement that
continues in force until February 4, 1996. The Distribution Agreement may be
terminated by either party and will automatically terminate in the event of
its assignment. The Distribution Agreement may be renewed annually if
specifically approved by the Board of Directors or by vote of a majority of
the outstanding voting securities of the Fund provided that any such renewal
shall be approved by the vote of a majority of the Directors who are not
parties to the Distribution Agreement and are not "interested persons" of the
Fund and have no direct or indirect financial interest in the operation of the
Distribution Agreement.
9.
TAXES
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended. Under such
provisions, the Fund will not be subject to Federal income tax on that part of
its net ordinary income and net realized capital gains which it distributes to
shareholders. Each Portfolio will be treated as a separate entity for Federal
income tax purposes and, therefore, the investments and results of the
Portfolios are determined separately for purposes of determining whether the
Fund qualifies as a regulated investment company and for purposes of
determining the Fund's net ordinary income (or loss) and net realized capital
gains (or losses). To qualify for treatment as a regulated investment company,
the Fund must, among other things, derive in each taxable year at least 90% of
its gross income from dividends, interest and gains from the sale or other
disposition of securities and certain other related income and derive less
than 30% of its gross income in each taxable year from the gains (without
deduction for losses) from the sale or other disposition of securities
(including, in certain circumstances, gains from options, futures, forward
contracts and foreign currencies) held for less than three months.
If the Global Equity Portfolio purchases shares in certain foreign
investment entities, called "passive foreign investment companies", that
Portfolio may be subject to United States federal income tax on a portion of
any "excess distribution" or gain from the disposition of such shares, even if
such income is distributed as a taxable dividend by the Portfolio to its
shareholders. Additional charges in the nature of interest may be imposed on
either the Portfolio or its shareholders in respect of deferred taxes arising
from such distributions or gains. If the Portfolio were to invest in a
passive foreign investment company with respect to which the Portfolio elected
to make a "qualified electing fund" election, in lieu of the foregoing
requirements, the Portfolio might be required to include in income each year a
portion of the ordinary earnings and net capital gains of the qualified
<PAGE>
electing fund, even if such amount were not distributed to the Portfolio.
10.
CALCULATION OF PERFORMANCE DATA
Each Portfolio's average annual compounded rate of return is determined
by reference to a hypothetical $1,000 investment that includes capital
appreciation and depreciation for the stated period, according to the
following formula:
n
P ( 1 + T) = ERV
where
P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1000 purchase
at the end of the period.
Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes that all dividends and
distributions are reinvested at net asset value on the reinvestment dates
during the period.
Using this method to compute average annual compounded rates of total
return for the Growth and Income Portfolio, the Portfolio's last one, five and
the life of the fund periods ending on December 31, 1994 are: 2.80%, 12.10%
and 12.12%, respectively. Using this method to compute average annual
compounded rates of total return for the Global Equity Portfolio, the
Portfolio's last one and life of the fund periods ending on December 31, 1994
are 1.70% and 7.76%, respectively.
11.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended December 31, 1994 and
the opinion thereon of Deloitte & Touche LLP, independent auditors, included
in the 1994 Annual Report to Shareholders of the Lord Abbett Series Fund,
Inc., are incorporated herein by reference in reliance upon the authority of
Deloitte & Touche LLP as experts in auditing and accounting.
<PAGE>
EXHIBIT (11)
CONSENT OF INDEPENDENT AUDITORS
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
Lord Abbett Series Fund, Inc.:
We consent to the use in Post-Effective Amendment No. 7 to Registration
Statement No. 33-31072 of our report dated January 27, 1995 appearing in the
annual report to shareholders and to the reference to us under the captions
"Financial Highlights" and "Fund's Custodian, Transfer Agent, Auditors and
Counsel" in the Prospectus and "Investment Advisory and Other Services" and
"Financial Statements" in the Statement of Additional Information,
both of which are part of such Registration Statement.
/s/ DELOITTE & TOUCH LLP
New York, New York
<PAGE>
EXHIBIT (18)
ANNUAL STATEMENTS
(i) Growth and Income Portfolio
(ii) Global Equity Portfolio
<PAGE>
LORD ABBETT SERIES FUND, INC.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Lord Abbett Series Fund, Inc.
We have audited the accompanying statements of net assets of the Growth and
Income Portfolio and the Global Equity Portfolio of Lord Abbett Series Fund,
Inc. as of December 31, 1994, the related statements of operations for the
year then ended, and of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
presented. These financial statements and the financial highlights are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and the financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1994 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Growth and
Income Portfolio and the Global Equity Portfolio of Lord Abbett Series Fund,
Inc. at December 31, 1994, the results of their operations, the changes in
their net assets and the financial highlights for the above-stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
January 27, 1995
<PAGE>
LORD ABBETT SERIES FUND - GROWTH AND INCOME PORTFOLIO
December 31, 1994
STATEMENT OF NET ASSETS
Market Value
Security Number of Shares (Note 1a)
------------------------------------------------------------------------------
INVESTMENTS IN COMMON AND CONVERTIBLE-PREFERRED STOCKS 91.22%
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Aerospace-3.52%
Boeing Co............................................. 40,000 $1,870,000
Lockheed Corp......................................... 15,000 1,089,375
Rockwell International Corp........................... 30,000 1,072,500
Total................................................. 4,031,875
Airlines-2.47%
British Airways plc ADR............................... 50,000 2,831,250
Auto Parts-1.89%
Snap-On, Inc.......................................... 65,000 2,161,250
Automobiles-.80%
Ford Motor Co. $4.20 Conv. Pfd........................ 10,000 920,000
Banks: Regional-2.10%
AmSouth Bancorporation................................ 40,000 1,030,000
George Mason Bankshares Inc........................... 35,000 625,625
KeyCorp............................................... 30,000 750,000
Total................................................. 2,405,625
Beverages-1.33%
Anheuser-Busch Companies, Inc......................... 30,000 1,526,250
Building Materials-1.17%
Crane Co.............................................. 50,000 1,343,750
Chemicals-3.84%
Dow Chemical Co....................................... 25,000 1,681,250
Hanna, M.A. Co........................................ 60,000 1,425,000
Lyondell Petrochernical Co............................ 50,000 1,293,750
Total................................................. 4,400,000
<PAGE>
Containers-1.68%
Sonoco Products Co. $2.25 Conv. Pfd................... 40,000 1,920,000
Data Processing Equipment-3.46%
Hewlett-Packard Co.................................... 8,000 799,000
International Business Machines Corp.................. 20,000 1,470,000
Moore Corp. Ltd....................................... 90,000 1,698,750
Total................................................. 3,967,750
Data Processing Services-1.75%
General Motors Corp. $3.25 Conv. Pfd. (GME)........... 35,000 2,008,125
Drugs/Health Care Products-4.88%
Bristol-Myers Squibb Company.......................... 15,000 868,125
Merck & Co. Inc....................................... 70,000 2,668,750
SmithKline Beecham plc ADR............................ 60,000 2,055,000
Total................................................. 5,591,875
</TABLE>
<PAGE>
LORD ABBETT SERIES FUND - GROWTH AND INCOME PORTFOLIO
December 31, 1994
STATEMENT OF NET ASSETS
Market Value
Security Number of Shares (Note 1a)
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Electric Power-5.51%
CINergy Corp........................................ 100,000 $2,337,500
Ohio Edison Co...................................... 50,000 925,000
Potomac Electric Power Co........................... 70,000 1,286,250
Public Service Co. of Colorado...................... 60,000 1,762,500
Total............................................... 6,311,250
Electronics: Communications-1.48%
Harris Corp......................................... 40,000 1,700,000
Electronics: Components-1.59%
AMP Incorporated.................................... 25,000 1,818,750
Electronics: Equipment-2.74%
Perkin-Elmer Corp................................... 60,000 1,537,500
Raytheon Company.................................... 25,000 1,596,875
Total............................................... 3,134,375
Financial: Miscellaneous-2.81%
American Express Company............................ 50,000 1,475,000
Transamerica Corp................................... 35,000 1,741,250
Total............................................... 3,216,250
Food-8.66%
Archer-Daniels-Midland Co........................... 60,000 1,237,500
ConAgra Inc. $1.6875 Conv. Pfd...................... 50,000 1,637,500
Dean Foods Co....................................... 50,000 1,450,000
General Mills Inc................................... 35,000 1,995,000
Sara Lee Corp....................................... 70,000 1,767,500
Supervalu Inc....................................... 75,000 1,837,500
Total............................................... 9,925,000
Health Care Products-.99%
Baxter International Inc............................ 40,000 1,130,000
<PAGE>
Insurance-4.90%
American General Corporation........................ 40,000 1,130,000
Cigna Corp.......................................... 40,000 2,545,000
Lincoln National Corp............................... 30,000 1,050,000
St. Paul Companies Inc.............................. 20,000 895,000
Total............................................... 5,620,000
Machinery: Diversified-4.04%
Deere & Co.......................................... 30,000 1,987,500
Goulds Pumps, Inc................................... 80,000 1,730,000
Parker Hannifin Corp................................ 20,000 910,000
Total............................................... 4,627,500
Manufactured Housing-.65%
Fleetwood Enterprises, Inc.......................... 40,000 750,000
Metals: Miscellaneous-2.53%
Cyprus Amax Minerals $4.00 Conv. Pfd................ 30,000 1,758,750
Inco Ltd............................................ 40,000 1,145,000
Total............................................... 2,903,750
</TABLE>
<PAGE>
LORD ABBETT SERIES FUND - GROWTH AND INCOME PORTFOLIO
December 31, 1994
STATEMENT OF NET ASSETS
Market Value
Security Number of Shares (Note 1a)
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Miscellaneous-3.20%
Minnesota Mining & Mfg. Co.......................... 40,000 $2,135,000
National Service Industries, Inc.................... 60,000 1,537,500
Total............................................... 3,672,500
Natural Gas Diversified-1.66%
Equitable Resources, Inc............................ 70,000 1,898,750
Oil: Domestic-1.51%
Unocal Corp. $3.50 Conv. Pfd t...................... 35,000 1,732,500
Oil: International-3.29%
Chevron Corp........................................ 30,000 1,338,750
Exxon Corp.......................................... 40,000 2,430,000
Total............................................... 3,768,750
Paper and Forest Products-1.97%
Boise Cascade Corp.................................. 30,000 802,500
Champion International Corp......................... 40,000 1,460,000
Total............................................... 2,262,500
Photographic-1.25%
Eastman Kodak Co.................................... 30,000 1,432,500
Printing and Publishing-4.07%
Donnelley, R.R. & Sons Co........................... 90,000 2,655,000
Dow Jones & Co., Inc................................ 65,000 2,015,000
Total............................................... 4,670,000
Retail-3.99%
Dayton Hudson Corp.................................. 10,000 707,500
Kmart Corporation................................... 50,000 650,000
Sears, Roebuck & Co................................. 70,000 3,220,000
Total............................................... 4,577,500
<PAGE>
Savings and Loan-1.96%
Ahmanson, H.F. & Co................................. 70,000 1,128,750
Great Western Financial Corp........................ 70,000 1,120,000
Total............................................... 2,248,750
Tire and Rubber Goods-1.05%
Standard Products Co................................ 50,000 1,200,000
Waste Disposal-2.48%
Browning Ferris Industries Inc...................... 100,000 2,837,500
</TABLE>
<PAGE>
LORD ABBETT SERIES FUND - GROWTH AND INCOME PORTFOLIO
December 31, 1994
STATEMENT OF NET ASSETS
Market Value
Security Number of Shares (Note 1a)
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS IN
COMMON AND CONVERTIBLE-PREFERRED STOCKS (COST $103,680,363) $104,545,875
OTHER ASSETS, LESS LIABILITIES-8.78%
OTHER ASSETS
CORPORATE OBLIGATIONS, AT COST
Federal National Mortgage Association
5.77% due 1/3/95........................................... 2,500M 2,495,192
5.91% due 1/12/95.......................................... 2,050M 2,041,923
General Electric Capital Corp.
4.25% due 1/5/95........................................... 2,500M 2,500,000
Prudential Funding Corp.
5.25% due 1/4/95........................................... 1,900M 1,900,000
Total...................................................... 8,937,115
Cash on deposit............................................ 589,553
Receivable for
Dividends............................................. 461,095
Capital stock sold.................................... 158,187
Interest.............................................. 9,803
TOTAL OTHER ASSETS......................................... 10,155,753
LIABILITIES
Accrued Expenses........................................... 93,989
TOTAL OTHER ASSETS, LESS LIABILITIES 10,061,764
NET ASSETS 100.00%
(equivalent to $12.71 a share on 9,017,934 shares of $.001
par value capital stock outstanding; authorized,
50,000,000 shares) $114,607,639
</TABLE>
<PAGE>
* Restricted security under Rule 144A
See Notes to Financial Statements.
<PAGE>
GROWTH AND INCOME PORTFOLIO
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends $ 3,213,660
Interest 355,313
----------------------------------------------------- -------------- ------------
Total income $ 3,568,973
Expenses:
Management fee (Note 5) 518,190
Audit and tax 35,500
Legal 21,388
Registration 6,500
Organization (Note 1e) 3,300
Pricing 1,225
Shareholder servicing 1,225
Other 3,322
Total expenses 590,650
----------------------------------------------------- -------------- ------------
Net investment income 2,978,323
Realized and Unrealized Gain (Loss) on Investments
(Note 4)
Realized gain from security transactions
(excluding short-term securities):
Proceeds from sales 63,563,234
Cost of securities sold 59,640,124
----------------------------------------------------- -------------- ------------
Net realized gain 3,923,110
----------------------------------------------------- -------------- ------------
Unrealized appreciation(depreciation)of investments:
Beginning of year 4,905,953
End of year 865,512
<PAGE>
----------------------------------------------------- -------------- ------------
Net unrealized depreciation (4,040,441)
----------------------------------------------------- -------------- ------------
Net realized and unrealized loss on investments (117,331)
----------------------------------------------------- -------------- ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 2,860,992
----------------------------------------------------- -------------- ------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
GROWTH AND INCOME PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 2,978,323 $ 1,593,418
Net realized gain from security transactions 3,923,110 3,820,342
Net unrealized appreciation (depreciation) of
investments (4,040,441) 2,292,234
-------------------------------------------------------- ---------------- ---------------
Net increase in net assets resulting from
operations 2,860,992 7,705,994
-------------------------------------------------------- ---------------- ---------------
Undistributed net investment income included in price
of shares sold and reacquired (Note 1d) 1,371,924 1,692,037
-------------------------------------------------------- ---------------- ---------------
Distributions to shareholders from (Note 2)
Net investment income (2,794,800) (1,571,797)
Net realized gain from security transactions (4,022,817) (3,900,387)
-------------------------------------------------------- ---------------- ---------------
Total distributions (6,817,617) (5,472,184)
-------------------------------------------------------- ---------------- ---------------
Capital share transactions
Net proceeds from sales of 2,524,309 and 2,913,177
shares, respectively 31,847,505 37,024,250
Net asset value of 536,398 and 415,189 shares
issued to shareholders in reinvestment of net
investment income and realized gain from
security transactions 6,817,617 5,472,184
<PAGE>
-------------------------------------------------------- ---------------- ---------------
Total 38,665,122 42,496,434
Cost of 294,061 and 118,242 shares reacquired,
respectively (3,691,518) (1,510,193)
-------------------------------------------------------- ---------------- ---------------
Increase in net assets derived from capital share
transactions
(net increase of 2,766,646 and 3,210,124 shares,
respectively) 34,973,604 40,986,241
-------------------------------------------------------- ---------------- ---------------
Increase in net assets 32,388,903 44,912,088
NET ASSETS
Beginning of year 82,218,736 37,306,648
-------------------------------------------------------- ---------------- ---------------
End of year (including undistributed net investment
income of $4,409,150 and $1,713,658,respectively) $ 114,607,639 $ 82,218,736
-------------------------------------------------------- ---------------- ---------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
GROWTH AND INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE: 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 13.15 $ 12.27 $ 11.61 $ 9.93 $ 10.07
INCOME FROM INVESTMENT OPERATIONS
Net investment income .41 .34 .45* .50* .41*
Net realized and unrealized gain
(loss) on investments (.045) 1.48 1.3575 2.18 (.19)
TOTAL FROM INVESTMENT OPERATIONS .365 1.82 1.8075 2.68 .22
------------------------------------------ ----------- --------- --------- --------- ---------
DISTRIBUTIONS
Dividends from net investment income (.33) (.27) (.32) (.35) (.29)
Distributions from net realized gain (.475) (.67) (.8275) (.65) (.07)
NET ASSET VALUE, END OF YEAR $ 12.71 $ 13.15 $ 12.27 $ 11.61 $ 9.93
TOTAL RETURN 2.76% 14.80% 15.62% 27.00% 2.18%
RATIOS/SUPPLEMENTAL DATA:
------------------------------------------ ----------- --------- --------- --------- ---------
Net assets, end of year (000) $ 114,608 $ 82,219 $ 37,307 $ 18,297 $ 10,754
------------------------------------------ ----------- --------- --------- --------- ---------
RATIOS TO AVERAGE NET ASSETS:
Expenses, including waiver .59% .57% .51% .13% .46%
Expenses, excluding waiver .59% .57% .65% .72% .91%
Net investment income 2.97% 2.76% 3.38% 4.20% 4.38%
------------------------------------------ ----------- --------- --------- --------- ---------
PORTFOLIO TURNOVER RATE 68.94% 78.26% 107.30% 70.82% 49.06%
------------------------------------------ ----------- --------- --------- --------- ---------
</TABLE>
* Net of management fee waiver.
See Notes to Financial Statements.
<PAGE>
GROWTH AND INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated under Maryland law on August 28, 1989 and is
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The Company currently consists of two active
Series. The Growth and Income Portfolio (the "Company") commenced operations
on December 11, 1989. Shares of the Company are currently issued and redeemed
only in connection with investment in, and payments under, certain variable
annuity contracts issued by COVA Financial Services Life Insurance
Company (" COVA ") and its affiliated insurance companies. The following
is a summary of significant accounting policies consistently followed by the
Company. The policies are in conformity with generally accepted accounting
principles.
(A) Market value is determined as follows: Securities listed or admitted to
trading privileges on any national 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, at the mean between the last bid and asked
prices on such exchange. Securities traded in the over-the-counter market are
valued at the mean between the last bid and asked prices in such market,
except that securities admitted to trading on the NASDAQ National Market
System are valued at the last sales price if it is determined that such price
more accurately reflects the value of such securities. Securities for which
market quotations are not available are valued at fair value under procedures
approved by the Board of Directors. Short-term securities are carried at cost
which approximates market.
(B) It is the policy of the Company to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income in taxable distributions. Therefore, no federal
income tax provision is required.
(C) Security transactions are accounted for on the date that the securities
are purchased or sold (trade date). Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Interest income is recorded
on the accrual basis.
(D) A portion of proceeds from sales and costs of repurchases of capital
shares, equivalent to the amount of distributable net investment income on the
date of the transaction, is credited or charged to undistributed income.
Undistributed net investment income per share thus is unaffected by sales or
repurchases of shares.
(E) The organization expenses of the Company were amortized evenly over a
period of five years.
<PAGE>
2. DISTRIBUTIONS
Net realized gain from security transactions, if any, is declared in December
and distributed to shareholders in the succeeding year. Accumulated
distributions in excess of net realized capital gain at December 31, 1994 for
financial reporting purposes, which is substantially the same as for federal
income tax purposes, aggregated $187,331. The excess distribution will be
utilized in determining the realized capital gain distribution in 1995.
Income and capital gains distributions are determined in accordance with
income tax regulations which may differ from methods used to determine the
corresponding income and capital gains amounts in accordance with generally
accepted accounting principles.
3. CAPITAL PAID IN
At December 31, 1994, capital paid in aggregated $109,520,308.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities (other than short-term
investments) aggregated $92,467,192 and $63,563,234, respectively. Security
gains and losses are computed on the identified cost basis.
As of December 31, 1994, unrealized appreciation for federal income tax
purposes for the Company aggregated $865,512 of which $5,297,515 related to
appreciated securities and $4,432,003 related to depreciated securities. For
federal income tax purposes, the identified cost of investments owned at
December 31, 1994 was substantially the same as the cost for financial
reporting purposes.
5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Lord, Abbett & Co. received a management fee of $518,190 for which it provided
the Company with investment management services and executive and other
personnel, paid the remuneration of officers, provided of fine space and paid
for ordinary and necessary office and clerical expenses relating to research
and statistical work. The management fee paid to Lord, Abbett & Co. is based
on average daily net assets at the rate of 1/2 of 1% per annum. Certain of the
Company's officers and Directors have an interest in Lord, Abbett & Co.
The Company adopted a Rule 12b-1 Plan on April 20, 1994 which permits the
Company to make payments to Lord, Abbett & Co. for remittance to a Life
Insurance Company at the annual rate of .15% of the average daily net asset
value of shares of the Company attributable to such Life Insurance Company's
variable contract owners. No payments were made under the Plan during the
period ended December 31, 1994 to reimburse such Company for distribution
expenses.
<PAGE>
6. DIRECTORS' REMUNERATION
The Directors of the Company associated with Lord, Abbett & Co. and all
officers of the Company receive no compensation from the Company for acting as
such. Outside Directors' fees, including attendance fees for board and
committee meetings, and outside Directors' retirement costs, are allocated
among all funds in the Lord Abbett group based on net assets of each fund. The
direct remuneration accrued during the period for outside Directors of the
Company as a group was $1,250 (exclusive of expenses), which has been deemed
invested in shares of the Company under a deferred compensation plan
contemplating future payment of the value of those shares. As of December 31,
1994, the aggregate amount in Directors' accounts maintained under the plan
was $2,150. Retirement costs accrued during the year ended December 31, 1994
amounted to $920.
<PAGE>
LORD ABBETT SERIES FUND, INC.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Lord Abbett Series Fund, Inc.
We have audited the accompanying statements of net assets of the Growth and
Income Portfolio and the Global Equity Portfolio of Lord Abbett Series Fund,
Inc. as of December 31, 1994, the related statements of operations for the
year then ended, and of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
presented. These financial statements and the financial highlights are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and the financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1994 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as wed as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in an material respects, the financial position of the Growth and
Income Portfolio and the Global Equity Portfolio of Lord Abbett Series Fund,
Inc. at December 31, 1994, the results of their operations, the changes in
their net assets and the financial highlights for the above-stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
January 27, 1995
<PAGE>
LORD ABBETT SERIES FUND - GLOBAL EQUITY PORTFOLIO
December 31, 1994
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
Market Value
Security Number of (Notes 1a
Shares & 1b)
INVESTMENTS IN COMMON STOCKS AND WARRANTS 93.98%
FOREIGN 77.41%
Australia - 4.11%
Amcor............................................. 4,000 $ 28,904
Australian Gas Light Co........................... 8,000 26,984
Australian National Industries.................... 28,000 31,248
National Australia Bank........................... 3,000 24,051
News Corp......................................... 4,000 15,660
News Corp. Preference............................. 2,000 6.900
Total............................................. 133,747
France - 6.52%
AXA............................................... 575 26,655
Christian Dior.................................... 355 27,738
Christian Dior Warrants........................... 355 2,927
Elf-Aquitaine..................................... 340 23,947
Lafarge Coppee.................................... 407 28,979
Naf Naf........................................... 787 30,967
Naf Naf Warrants.................................. 87 192
Saint Gobain...................................... 338 38,885
Societe Generale.................................. 300 31,534
Total............................................. 211,824
Germany - 4.75%
BASF.............................................. 120 24,744
Bayer............................................. 110 25,770
Mannesmann........................................ 140 38,128
Preussag.......................................... 130 37,754
Veba.............................................. 80 27,880
Total............................................. 154,276
<PAGE>
Italy - 2.52%
Italcementi....................................... 5,330 37,438
Italcementi Warrants.............................. 1,230 349
Montedisont....................................... 58,500 44,109
Total............................................. 81,896
Japan - 31.13%
Canon Inc......................................... 3,000 50,913
Honda............................................. 3,000 53,325
Jusco............................................. 3,000 66,882
Kamigumi Co....................................... 5,000 53,225
Kurimoto Iron..................................... 4,000 43,384
Kyocera........................................... 1,000 74,212
Mitsubishi Heavy Industry......................... 7,000 53,424
Nippon Meat Packers............................... 2,300 30,256
Nippondenso....................................... 2,000 42,178
Nomura Securities................................. 2,000 41,574
Sansei Yusoki Co., Ltd............................ 4,000 66,280
Shikoku Electric Power............................ 1,600 38,080
Shin-Etsu Chemical................................ 3,000 59,652
Sho Bond Construction............................. 1,300 33,943
Sony Corp......................................... 1,000 56,738
Sumitomo Electric Industries...................... 3,000 42,780
Toray Industries.................................. 9,000 65,529
Toshiba Corp...................................... 8,000 58,088
Toshiba Engineering & Construction................ 3,000 28,923
77th Bank Ltd..................................... 5,000 52,720
Total............................................. 1,012,106
Malaysia - 1.74%
Alcom............................................. 15,000 19,860
Southern Bank..................................... 18,750 34,219
Southern Bank Nil Paid Rights..................... 4,500 2,610
Total............................................. 56,689
Mexico - 1.47%
Grupo Industrial Durango SA De CV ADS*............ 1,000 14,125
Grupo lusacell Series D ADS*...................... 500 8,000
Grupo lusacell Series L ADR*...................... 500 9,312
Telefonos de Mexico............................... 400 16,400
Total............................................. 47,837
Netherlands - 3.19%
Hunter Douglas.................................... 730 32,914
Philips Electronics............................... 830 24,598
Ver Ned Uitger Ver Bezit.......................... 445 46,235
Total............................................. 103,747
<PAGE>
Singapore - 1.80%
United Overseas Bank.............................. 5,548 58,598
Spain - 2.24%
Banco Santander................................... 440 16,853
Compania Telefonica Nacional...................... 1,700 20,091
Europistas........................................ 1,995 16,451
Repsol............................................ 710 19,264
Total............................................. 72,659
Sweden - 1.08%
Atlas Copco....................................... 2,750 35,189
Switzerland - 1.65%
Ciba Geigy........................................ 25 14,921
Ciba Geigy Warrants............................... 5 16
Roche Holdings.................................... 8 38,728
Total............................................. 53,665
United Kingdom - 14.43%
Barclays.......................................... 3,500 33,432
BPB Industries.................................... 6,000 27,696
British Petroleum................................. 7,500 49,935
British Telecom................................... 7,000 41,349
BTR............................................... 6,123 28,117
BTR Warrants 1998................................. 184 93
Bunzl............................................. 10,000 26,990
Cookson........................................... 7,500 26,872
Grand Metropolitan................................ 4,600 29,293
Greenalls Group................................... 4,000 26,912
Guardian Royal Exchange........................... 8,000 20,840
Mirror Group Newspapers........................... 10,000 20,180
North West Water.................................. 2,000 16,962
Peninsular and Oriental Steam Navigation Company.. 3,191 30,458
Siebe............................................. 2,600 22,680
SmithKline Beecham................................ 4,000 28,384
Tesco............................................. 10,000 38.960
Total............................................ 469,153
Venezuela - .78%
Banque Indosuez Warrants**........................................ 4,000 187
Venprecar C.A. ADR**.............................. 4,000 25,000
Total............................................. 25,187
TOTAL INVESTMENTS IN
FOREIGN SECURITIES (COST $2,174,581) 2,516,573
<PAGE>
UNITED STATES 16.57%
Anheuser-Busch Companies, Inc..................... 1,000 50,875
Dayton Hudson Corp................................ 300 21,225
Equitable Resources, Inc.......................... 2,000 54,250
Freeport-McMoRan Copper & Gold Inc................ 5,000 98,125
Fruit Of The Loom*................................ 1,000 27,000
International Paper Co............................ 1,000 75,375
National City Corp................................ 2,000 51,750
Standard Products Co.............................. 2,500 60,000
Thomas & Betts Corp............................... 1,000 67,125
TRW Inc........................................... 500 33,000
TOTAL INVESTMENTS IN UNITED STATES
SECURITIES (COST $532,167) 538,725
TOTAL INVESTMENTS IN COMMON STOCKS AND
WARRANTS (COST $2,706,748) 3,055,298
</TABLE>
<PAGE>
LORD ABBETT SERIES FUND - GLOBAL EQUITY PORTFOLIO
December 31, 1994
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Market Value
Amount (Note 1a)
OTHER ASSETS, LESS LIABILITIES - 6.02%
OTHER ASSETS
CORPORATE OBLIGATION, AT COST
General Electric Capital Corp.
Yielding 5.51% due 1/16/95............................ $ 125M $ 125,000
Cash on deposit....................................... 79,333
Receivable for
Foreign Currency Contracts....................... 500,000
Dividends........................................ 10,030
Interest......................................... 38
Deferred organization expenses........................ 312
TOTAL OTHER ASSETS.................................... 714,713
LIABILITIES
Payable for
Foreign Currency Contracts....................... 502,757
Accrued Expenses................................. 13,846
Capital Stock Reacquire.......................... 2,486
Total liabilities..................................... 519,089
TOTAL OTHER ASSETS, LESS LIABILITIES.................. 195,624
NET ASSETS 100.00%
(equivalent to $11.22 a share on 289,826 shares of
.001 par value capital stock outstanding; authorized,
50,000,000 shares) $ 3,250,922
</TABLE>
* Non-income producing.
** Restricted security under Rule 144A.
See Notes to Financial Statements.
<PAGE>
GLOBAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends $ 69,111
Interest 15,520
Foreign taxes withheld (8,653)
----------------------------------------------------------- ------------ ---------
Total income $ 75,978
Expenses:
Management fee (Note 5) 17,889
Pricing 10,100
Custodian 9,850
Audit and tax 7,750
Organization 1,140
Legal 685
Management fee waived and expenses assumed by
Lord, Abbett & Co. (Note 5) (44,129)
----------------------------------------------------------- ------------ ---------
Net expenses 3,285
----------------------------------------------------------- ------------ ---------
Net investment income 72,693
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS (NOTE 4)
Realized gain from security transactions
(excluding short-term securities): 1,714,275
Proceeds from sales
Cost of securities sold 1,355,144
----------------------------------------------------------- ------------ ---------
Net realized gain on securities sold 359,131
Realized loss from foreign currency transactions (32,616)
----------------------------------------------------------- ------------ ---------
Net realized gain from securities
and foreign currency transactions 326,515
<PAGE>
----------------------------------------------------------- ------------ ---------
Unrealized appreciation (depreciation) of investments
and foreign currency holdings
Beginning of year 667,679
End of year 345,793
Net unrealized depreciation of investments
and foreign currency holdings (321,886)
----------------------------------------------------------- ------------ ---------
Net realized and unrealized gain on investments
and foreign currency transactions 4,629
----------------------------------------------------------- ------------ ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 77,322
----------------------------------------------------------- ------------ ---------
</TABLE>
See Notes to Financial Statements.
<PAGE>
GLOBAL EQUITY PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended December 31,
1994 1993
------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income $ 72,693 $ 79,674
Net realized gain from security transactions and
foreign currency holdings 326,515 84,460
Net unrealized appreciation (depreciation) of
investments and foreign currency holdings (321,886) 668,597
------------------------------------------------------- ------------- ---------------
Net increase in net assets resulting
from operations 77,322 832,731
------------------------------------------------------- ------------- ---------------
Undistributed net investment income included in
price of shares sold and reacquired (Note 1e) (11,166) (10,620)
------------------------------------------------------- ------------- ---------------
Distributions to shareholders from (Note 2)
Net investment income (73,774) (93,065)
Net realized gain from security transactions (326,261) (23,993)
Total distributions (400,035) (117,058)
------------------------------------------------------- ------------- ---------------
Capital share transactions
Net proceeds from sales of 10,522 and 21,889
shares, respectively 134,118 256,016
Net asset value of 35,654 and 9,305 shares issued
to shareholders in reinvestment of net investment
income and realized gain from security transactions 400,035 117,058
------------------------------------------------------- ------------- ---------------
<PAGE>
Total 534,153 373,074
Cost of 56,482 and 59,111 shares reacquired,
respectively (724,448) (665,033)
------------------------------------------------------- ------------- ---------------
Decrease in net assets derived from capital share
transactions (net decrease of 10,306 and 27,917
shares, respectively) (190,295) (291,959)
------------------------------------------------------- ------------- ---------------
Increase (decrease) in net assets (524,174) 413,094
NET ASSETS
Beginning of year 3,775,096 3,362,002
------------------------------------------------------- ------------- ---------------
End of year (including over distributed net
investment income of $1,551 and $26,204,
respectively) $ 3,250,922 $ 3,775,096
------------------------------------------------------- ------------- ---------------
</TABLE>
* See Notes to Financial Statements.
<PAGE>
GLOBAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
April 9, 1990
Commencement)
Year Ended Dec. 31, of Operations)
PER SHARE OPERATING PERFORMANCE: 1994 1993 1992 1991 to Dec. 31. 1990
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 12.58 $ 10.25 $ 10.75 $ 9.73 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income* .27 .26 .29 .28 .24
Net realized and unrealized gain
(loss) on investments (.0575) 2.4725 (.4575) 1.03 (.35)
TOTAL FROM INVESTMENT OPERATIONS .2125 2.7325 (.1675) 1.31 (.11)
----------------------------------- ----------- ---------- ---------- ----------- ------------------
DISTRIBUTIONS
Dividends from net investment
income (.29) (.32) (.24) (.22) (.16)
Distributions from net realized
gain (1.2825) (.0825) (.0925) (.07) ------
----------------------------------- ----------- ---------- ---------- ----------- ------------------
NET ASSET VALUE, END OF PERIOD $ 11.22 $ 12.58 $ 10.25 $ 10.75 $ 9.73
----------------------------------- ----------- ---------- ---------- ----------- ------------------
TOTAL RETURN 1.69% 26.67% (1.54)% 13.48% (1.10)%*
----------------------------------- ----------- ---------- ---------- ----------- ------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 3,251 $ 3,775 $ 3,362 $ 4,407 $ 2,683
----------------------------------- ----------- ---------- ---------- ----------- ------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses, including waiver .09% .09% .10% .10% .21%*
Expenses, excluding waiver 1.33% 1.62% 1.39% 2.15% 2.49%*
Net investment income 2.04% 2.24% 2.72% 2.69% 2.40%*
----------------------------------- ----------- ---------- ---------- ----------- ------------------
PORTFOLIO TURNOVER RATE 50.63% 131.51% 128.59% 60.84% 25.59%
</TABLE>
* Net of management fee waiver.
** Not annualized.
See Notes to Financial Statements.
<PAGE>
GLOBAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated under Maryland law on August 28, 1989 and is
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The Company currently consists of two active
Series. The Global Equity Portfolio (the "Company") commenced operations on
April 9, 1990. Shares of the Company are currently issued and redeemed only in
connection with investment in, and payments under, certain variable annuity
contracts issued by COVA Financial Services Life Insurance Company
(" COVA ") and its affiliated insurance companies. Shares of the
Company are no longer offered for sale. The following is a summary of
significant accounting policies consistently followed by the Company.
The policies are in conformity with generally accepted accounting
principles.
(A) Market value is determined as follows: Securities listed or admitted to
trading privileges on any national 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, at the mean between the last bid and asked
prices on such exchange. Securities traded in the over-the-counter market are
valued at the mean between the last bid and asked prices in such market,
except that securities admitted to trading on the NASDAQ National Market
System are valued at the last sales price if it is determined that such price
more accurately reflects the value of such securities. Securities for which
market quotations are not available are valued at fair value under procedures
approved by the Board of Directors. Short-term securities are carried at cost
which approximates market.
(B) It is the policy of the Company to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income in taxable distributions. Therefore, no federal
income tax provision is required.
(C) Security transactions are accounted for on the date that the securities
are purchased or sold (trade date). Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Interest income is recorded
on the accrual basis.
(D) A portion of proceeds from sales and costs of repurchases of capital
shares, equivalent to the amount of distributable net investment income on the
date of the transaction, is credited or charged to undistributed income.
Undistributed net investment income per share thus is unaffected by sales or
repurchases of shares.
<PAGE>
(E) The organization expenses of the Company are amortized evenly over a
period of five years. If any of the 20,000 initial shares of the Company
issued to Lord, Abbett & Co. and COVA are redeemed during the
amortization period, the proceeds of any such redemption will be reduced by
the proportionate amount of the unamortized organization expenses which the
number of shares redeemed bears to the number of shares then outstanding.
(F) The Company enters into forward currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings. A forward contract is a commitment to purchase or sell a
foreign currency at a future date (usually the security transaction settlement
date) at a negotiated forward rate. The contracts are valued daily at current
exchange rates and any unrealized gain or loss is included in net unrealized
appreciation or depreciation of investments and foreign currency holdings. The
gain or loss, if any, arising from the difference between the settlement value
of the forward contract and the closing of such contract, is included in net
realized gain or loss from security and foreign currency transactions. Risks
may arise due to changes in the value of the foreign currency and as a result
of the potential inability of the counter parties to meet the terms of their
contracts.
(G) Foreign Currency Translation Effective January 1, 1994, the Fund adopted
Statement of Position (SOP) 93-4: Foreign Currency Accounting and Financial
Statement Presentation for Investment Companies. In accordance with this SOP,
reported net realized gains and losses from foreign currency transactions
represent net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and the
U.S. dollar amount actually received. Further, as permitted under the SOP, the
effects of changes in foreign currency exchange rates on investments in
securities are not segregated in the Statement of Operations from the effects
of changes in market prices of those securities.
2. DISTRIBUTIONS
Net realized gain from security transactions, if any, is declared in December
and distributed to shareholders in the succeeding year. Undistributed net
realized capital gain at December 31, 1994 for financial reporting purposes,
which is substantially the same as for federal income tax purposes, aggregated
$28,265.
Income and capital gains distributions are determined in accordance with
income tax regulations which may differ from methods used to determine the
corresponding income and capital gains amounts in accordance with generally
accepted accounting principles.
3. CAPITAL PAID IN
At December 31, 1994, capital paid in aggregated $2,878,415.
<PAGE>
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities (other than short-term
investments and foreign currency transactions) aggregated $1,590,924 and
$1,714,275, respectively. Security gains and losses, if any, are computed on
the identified cost basis.
As of December 31, 1994, unrealized appreciation on investment securities for
federal income tax purposes aggregated $348,550 of which $469,910 related to
appreciated securities and $121,360 related to depreciated securities. For
federal income tax purposes, the identified cost of investments owned at
December 31, 1994 was substantially the same as the cost for financial
reporting purposes.December 31, 1994, the Global Equity Portfolio had
outstanding forward currency contracts to sell foreign currencies as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current
Sell Receivable Value (Depreciation)
<S> <C> <C> <C>
DEUTSCHE MARKS,
expiring 3/7/95 $ 100,000 $101,657 $ (1,657)
JAPANESE YEN,
expiring 11/16/95 400,000 401,100 (1,100)
$ 500,000 $502,757 $ (2.757)
</TABLE>
5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Lord, Abbett & Co. provided the Company with investment management services
and executive and other personnel, paid the remuneration of officers, provided
office space and paid for ordinary and necessary office and clerical expenses
relating to research and statistical work. Lord Abbett has entered into a
subadvisory agreement with Dunedin Fund Managers Ltd. ("Dunedin"); Dunedin
furnishes investment advisory services in connection with the management of
the Company. Lord Abbett pays for the cost of Dunedin's services. For the year
ended December 31, 1994, Lord, Abbett & Co. waived the Company's management
fee of $17,889. The management fee paid to Lord, Abbett & Co. is based on
average daily net assets at the rate of 3/4 of 1 % per annum. Lord, Abbett &
Co. has subsidized the Company for $26,240 for the year ended December 31,
1994. Certain of the Company's officers and Directors have an interest in
Lord, Abbett & Co.
<PAGE>
