1933 ACT FILE NO. 33-31072
1940 ACT FILE NO. 811-5876
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
-------
Post-Effective Amendment No. 11 [X]
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And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 11 [X]
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LORD ABBETT SERIES FUND, INC.
Exact Name of Registrant as Specified in Charter
767 FIFTH AVENUE, NEW YORK, NY 10153-0203
Address of Principal Executive Office
REGISTRANT'S TELEPHONE NUMBER (212) 848-1800
Kenneth B. Cutler, Vice President & Secretary
767 FIFTH AVENUE, NEW YORK, NY 10153-0203
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
X on May 1, 1997 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1) on (date)
pursuant to paragraph (a)(1) 75 days after filing pursuant to
paragraph (a)(2) on (date) pursuant to paragraph (a)(2) of
rule 485.
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
LORD ABBETT SERIES FUND, INC.
FORM N-1A
Cross Reference Sheet
Pursuant to Rule 481(a)
EXPLANATORY NOTE
This Post-Effective Amendment No. 11 (the "Amendment") to the Registration
Statement relates only to the Variable Contract Class of the Growth and Income
Portfolio of Lord Abbett Series Fund, Inc. This Amendment supersedes all
previously filed Registration Statements, including that filed under
Post-Effective Amendment No. 10 which related to the Pension Class of the Growth
and Income Portfolio which is no longer offered for sale.
Form N-1A Location In Prospectus or
ITEM NO. STATEMENT OF ADDITIONAL INFORMATION
1 Cover Page
2 N/A
3 Financial Highlights; Performance
4 (a) (i) Cover Page; The Fund
4 (a) (ii) Investment Objectives and Policies
4 (b) (c) Investment Objectives and Policies; Risk
Factors
5 (a) (b) The Fund; Management
5 (c) N/A
5 (d) Fund's Custodian, Transfer Agent, Auditors
and Counsel
5 (e) Management
5 (f) (i) N/A
5 (f) (ii) Purchase and Redemption of Shares; Portfolio
Transactions
6 (a) Cover Page; Shareholder Rights
6 (b) Management
6 (c) (d) N/A
6 (e) Cover Page
6 (f) (g) Dividends and Distributions; Tax Status
7 (a) The Fund
7 (b) (c) (d) Purchase and Redemption of Shares; Net Asset
Value
7 (e) (f) N/A
8 (a) (b) (c) (d) The Fund; Purchase and Redemption of Shares
9 N/A
10 Cover Page
11 Cover Page - Table of Contents
12 N/A
13 (a) (b) (c) Investment Objectives and Policies
13 (d) Portfolio Turnover Rates - Prospectus
14 Directors and Officers
15 (a) (b) (c) Directors and Officers; Investment Advisory
and Other Services
16 (a) (i) Investment Advisory and Other Services
<PAGE>
Form N-1A Location In Prospectus or
ITEM NO. STATEMENT OF ADDITIONAL INFORMATION
16 (a) (ii) Directors and Officers
16 (a) (iii) Investment Advisory and Other Services
16 (b) (e) Investment Advisory and Other Services
16 (c) (d) (f) (g) N/A
16 (h) Investment Advisory and Other Services
16 (i) N/A
17 (a) Portfolio Transactions
17 (b) N/A
17 (c) Portfolio Transactions
17 (d) (e) N/A
18 (a) The Fund - Prospectus
18 (b) N/A
19 (a) (b) The Fund - Prospectus; Purchase and
Redemption of Shares - Prospectus
19 (c) N/A
20 Taxes; Tax Status - Prospectus
21 (a) The Fund - Prospectus
21 (b) (c) N/A
22 N/A
23 Financial Statements
<PAGE>
LORD ABBETT SERIES FUND, INC.
THE GENERAL MOTORS BUILDING
767 FIFTH AVENUE
NEW YORK, NY 10153-0203
Lord Abbett Series Fund, Inc. (the "Fund"), is a diversified open-end management
investment company incorporated under Maryland law on August 28, 1989. The Fund
is a series fund currently comprised of one active Portfolio: the Growth and
Income Portfolio (the "Portfolio"). The Portfolio issues one separate class of
shares: the Variable Contract Class which is offered by this Prospectus. The
Directors may provide for additional Portfolios from time to time.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Additional information about
the Fund has been filed with the Securities and Exchange Commission. The
Statement of Additional Information is incorporated by reference into this
Prospectus and incorporates by reference the report of Deloitte & Touche, LLP
which is included in the Annual Report to shareholders. Both may be obtained,
without charge, by writing to the Fund or by calling 800-831-LIFE with respect
to Variable Contracts of Cova Financial Services Life Insurance Company and
800-342-6307 with respect to Variable Contracts of Great American Reserve
Insurance Company.
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE.
SHAREHOLDER INQUIRIES SHOULD BE MADE IN WRITING DIRECTLY TO THE FUND OR BY
CALLING ONE OF THE 800 NUMBERS MENTIONED ABOVE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. AN
INVESTMENT IN THE FUND INVOLVES RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus and of the Statement of Additional Information is
May 1, 1997.
<PAGE>
1. FINANCIAL HIGHLIGHTS
The following financial highlights have been audited by Deloitte & Touche LLP,
independent accountants, whose report thereon is incorporated by reference into
the Statement of Additional Information and may be obtained on request. The
total return information for the Portfolio shown in the table below does not
reflect expenses of a separate account or any variable contracts. If such
charges were included, the total return figures would be lower for all periods
shown. Further information about the Portfolio's performance is contained in the
Annual Report to shareholders which may be obtained, without charge, by calling
one of the 800 numbers mentioned on the previous page.
<TABLE>
<CAPTION>
GROWTH AND INCOME PORTFOLIO
For the Period
Dec. 11, 1989
(Commencement
Year Ended December 31, of Operations)
----------------------------------------------------------------------------------- to
Per Share Operating Performance: 1996 1995 1994 1993 1992 1991 1990 Dec. 31, 1989
----------- ------------ ----------- ----------- ------------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of $15.24 $12.71 $13.15 $12.27 $11.61 $ 9.93 $10.07 $10.00
period
- ---------------------------------- ----------- ------------ ----------- ----------- ------------ ---------- ---------- -------------
Income from investment operations
Net investment income .408 .459 .41 .34 .45* .50* .41* .00*
Net realized and unrealized gain
(loss) on investments 2.563 3.332 (.045) 1.48 1.3575 2.18 (.19) .07
TOTAL FROM INVESTMENT OPERATIONS 2.971 3.791 .365 1.82 1.8075 2.68 .22 .07
- ---------------------------------- ----------- ------------ ----------- ----------- ------------ ---------- ---------- -------------
Distributions
Dividends from net investment (.36) (.36) (.33) (.27) (.32) (.35) (.29) ---
income
Distributions from net realized (.83) (.90) (.475) (.67) (.8275) (.65) (.07) ---
gain
Net asset value, end of period $17.021 $15.24 $12.71 $13.15 $12.27 $11.61 $ 9.93 $10.07
- ---------------------------------- ----------- ------------ ----------- ----------- ------------ ---------- ---------- -------------
Total Return 19.49% 29.82% 2.76% 14.80% 15.62% 27.00% 2.18% 0.70%
- ---------------------------------- ----------- ------------ ----------- ----------- ------------ ---------- ---------- -------------
Ratios/Supplemental Data:
- ---------------------------------- ----------- ------------ ----------- ----------- ------------ ---------- ---------- -------------
Net assets, end of period (000) $303,982 $193,575 $114,608 $82,219 $37,307 $18,297 $10,754 $247
Ratios to Average Net Assets:
- ---------------------------------- ----------- ------------ ----------- ----------- ------------ ---------- ---------- -------------
Expenses, including waiver .52% .52% .59% .57% .51% .13% .46% .28%
Expenses, excluding waiver .52% .52% .59% .57% .65% .72% .91% 1.73%
Net investment income 2.32% 2.91% 2.97% 2.76% 3.38% 4.20% 4.38% .00%
Portfolio turnover rate 48.93% 70.30% 68.94% 78.26% 107.30% 70.82% 49.06% .00%
- ---------------------------------- ----------- ------------ ----------- ----------- ------------ ---------- ---------- -------------
Average commissions per share $.065 $.066 N/A N/A N/A N/A N/A N/A
paid on equity transactions
<FN>
* Net of management fee waiver
+ Not annualized.
See Notes to Financial Statements
</FN>
</TABLE>
<PAGE>
2. THE FUND
The Fund is a diversified open-end management investment company incorporated
under the laws of Maryland on August 28, 1989. The Fund is a series fund
currently comprised of one active Portfolio: the Growth and Income Portfolio
(the "Portfolio"). On April 21, 1997, pursuant to an order of the Securities and
Exchange Commission, the Global Equity Portfolio's assets were transferred to
another mutual fund as the underlying investment for certain variable annuity
contracts. The Portfolio issues one separate class of shares: the Variable
Contract Class which is offered by this Prospectus. Each share of common stock
of the Fund, regardless of Class, has a par value of $.001 per share and has one
vote and an equal right to dividends and distributions with respect to the
Portfolio, except as to those dividends and distributions which are affected by
expenses unique to a class. All shares have noncumulative voting rights for the
election of Directors. Each share is fully paid, nonassessable and freely
transferable. There are no liquidation, conversion or preemptive rights. The
fiscal year-end of the Fund is December 31.
DISTRIBUTION OF FUND SHARES
Lord, Abbett Distributor LLC ("Lord Abbett Distributor"), located at The General
Motors Building, 767 Fifth Avenue, New York, New York 10153-0203, is the
distributor of the shares of the Portfolio. The Variable Contract Class (the
"Class") of the Portfolio bears certain costs of distributing shares in
accordance with a plan adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act"). (See "Distribution Plan"
below.) Shares of the Class (the "shares") are currently issued and redeemed
only in connection with investment in and payments under certain variable
annuity contracts issued by life insurance companies and their affiliates ("Life
Companies"). The shares are purchased and redeemed at net asset value. Lord
Abbett Distributor and the Fund each reserves the right to suspend, change or
withdraw the offering of shares of any Portfolio or Portfolios or any of the
terms of such offering.
DISTRIBUTION PLAN
The Board of Directors of the Fund has adopted a Distribution Plan (the "Plan")
for the shares which has been approved by the shareholders of the Portfolio. The
Plan has not been activated to date. Pursuant to the Plan, the Fund, on behalf
of the Class, may make payments to Lord Abbett Distributor for remittance to a
Life Company for certain distribution expenses incurred or paid by such Life
Company, provided that such remittances in the aggregate do not exceed 0.15 of
1%, on an annual basis, of the average daily net asset value of shares of the
Portfolio sold to such Life Company to be used as the underlying investment for
variable life insurance and variable annuity contracts ("Variable Contracts").
For the year ended December 31, 1996, no payments were made pursuant to the
Plan.
Distribution expenses for which a Life Company may be reimbursed include, but
are not limited to, expenses of printing and distributing Fund prospectuses,
statements of additional information and shareholder reports to existing and
potential Variable Contract owners and developing and preparing Fund
advertisements and other promotional materials designed to promote the
distribution of shares. Lord Abbett will be required to submit to the Directors
for approval annual distribution expense budgets and quarterly reports of, and
requests for payment of, distribution expenses as to the Portfolio.
Variable annuity contract owners should refer to the fee table section of their
separate account prospectuses for further information with respect to the effect
of the Plan on their annuity contract expenses.
3. INVESTMENT OBJECTIVE AND POLICIES
The Portfolio of the Fund has an investment objective which it pursues through
investment policies as described below. The Portfolio is managed by Lord Abbett
& Co. ("Lord Abbett") and its risks and opportunities should be carefully
examined. There is no assurance that the investment objective of the Portfolio
will be met.
GROWTH AND INCOME PORTFOLIO
The investment objective of the Growth and Income Portfolio is long-term growth
of capital and income without excessive fluctuation in market value.
The Fund intends to keep the Portfolio's assets invested in those securities
which are selling at reasonable prices in relation to value and, in doing so, it
may have to forego some opportunities for gains when, in the Fund's judgment,
they carry excessive risk.
The Portfolio will try to anticipate major changes in the economy and select
stocks which it believes will benefit most from these changes.
The Portfolio will normally invest in common stocks (including securities
convertible into common stocks) of large, seasoned companies in sound financial
condition, which common stocks are expected to show above-average price
appreciation. Although the prices of common stocks fluctuate and their dividends
vary, historically, common stocks have appreciated in value and their dividends
have increased when the companies they represent have prospered and grown.
The Portfolio constantly seeks to balance the opportunity for profit against the
risk of loss. In the past, very few industries have continuously provided the
best investment opportunities. The Portfolio will take a flexible approach and
make adjustments to reflect changes in the opportunity for sound investments
relative to the risks assumed. Therefore, the Portfolio will sell stocks that
are judged to be overpriced and reinvest the proceeds in other securities which
are believed to offer better values.
The Portfolio will not purchase securities for trading purposes. To create
reserve purchasing power and also for temporary defensive purposes, the
Portfolio may invest in straight bonds and other fixed-income securities.
OTHER INVESTMENT POLICIES AND TECHNIQUES
When the Fund believes that the Portfolio should assume a temporary defensive
position because of unfavorable investment conditions, the Portfolio may
temporarily hold its assets in cash and short-term money market instruments.
See "Risk Factors" below for a discussion of special diversification standards
which the Portfolio will meet.
The Fund intends to utilize from time to time one or more of the investment
techniques identified below and described in the Statement of Additional
Information. It is the Fund's current intention that no more than 5% of the
Portfolio's net assets will be at risk in the use of any one of such investment
techniques identified below. While some of these techniques involve risk when
utilized independently, the Fund intends to use them to reduce risk and
volatility in the Portfolio, although this result cannot be assured by the use
of such investment techniques.
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.
RIGHTS AND WARRANTS. The Fund may invest in rights and warrants to purchase
securities. Included within these purchases, but not exceeding 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.
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 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.
OTHER POLICIES OF THE PORTFOLIO
It is the Fund's current intention that no more than 5% of the Portfolio's net
assets will be at risk in the use of any one of the policies identified below.
CLOSED-END INVESTMENT COMPANIES. The Fund may invest in shares of closed-end
investment companies if bought in primary or secondary offerings with a fee or
commission no greater than the customary broker's commission. Shares of such
investment companies sometimes trade at a discount or premium in relation to
their net asset value.
LENDING OF PORTFOLIO SECURITIES. The Fund may seek to earn income by lending its
Portfolio securities if the loan is collateralized and complies with regulatory
requirements.
EMERGENCY BORROWING. The Fund will be permitted to borrow money up to one-third
of the value of the Portfolio's total assets taken at current value but only
from banks as a temporary measure for extraordinary or emergency purposes.
Beyond 5% of the Portfolio's total assets (at current value), this borrowing may
not be used for investment leverage to purchase securities. As a matter of
operating policy, the Portfolio will not borrow more than 25% of its total
assets taken at current value.
CHANGE IN INVESTMENT OBJECTIVE
The Fund will not change the investment objective of the Portfolio without
shareholder approval as described below in "Investment Restrictions." However,
the Fund's policies and techniques are not fundamental. Therefore, if it is
determined that an objective of the Portfolio can best be achieved by a
substantive change in such a policy or technique, the change will be made
without shareholder approval by disclosing it in the Prospectus.
INVESTMENT RESTRICTIONS
In addition to the investment objectives set forth above, certain restrictions
relating to the investment of assets of the Portfolio are set forth in the
Statement of Additional Information. These investment restrictions are also
deemed fundamental and neither such restrictions nor the investment objectives
of the Portfolio may be changed without the approval of the holders of a
majority of the outstanding shares of the Portfolio (which for this purpose and
under the 1940 Act means the lesser of (i) 67% of the shares represented at a
meeting at which more than 50% of the outstanding shares are present or
represented by proxy or (ii) more than 50% of the outstanding shares).
4. RISK FACTORS
The Fund serves as the underlying investment for Variable Contracts issued by
the Life Companies.
Section 817(h) of the Internal Revenue Code of 1986, as amended (the "Code"),
imposes certain diversification standards on the underlying assets of Variable
Contracts held in any Portfolios of the Fund. The Code provides that a Variable
Contract shall not be treated as an annuity contract or life insurance for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the Treasury Department, adequately
diversified. Disqualification of a Variable Contract as an annuity contract or
life insurance would result in imposition of federal income tax on contract
owners with respect to earnings allocable to the Variable Contract prior to the
receipt of payments under the Variable Contract. Section 817(h)(2) of the Code
is a safe harbor provision which provides that contracts such as the Variable
Contracts meet the diversification requirements if, as of the close of each
quarter, the underlying assets meet the diversification standards for a
regulated investment company and no more than fifty-five percent (55%) of the
total assets consists of cash, cash items, U.S. Government securities and
securities of other regulated investment companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg.
1.817-5), which established diversification requirements for the investment
portfolios underlying Variable Contracts. The Regulations amplify the
diversification requirements for Variable Contracts set forth in Section 817(h)
of the Code and provide an alternative to the safe harbor provision described
above. Under the Regulations, an investment portfolio will be deemed adequately
diversified if (i) no more than 55 percent of the value of the total assets of
the portfolio is represented by any one investment; (ii) no more than 70 percent
of such value is represented by any two investments; (iii) no more than 80
percent of such value is represented by any three investments; and (iv) no more
than 90 percent of such value is represented by any four investments. For
purposes of these Regulations, all securities of the same issuer are treated as
a single investment.
The Code provides that for purposes of determining whether or not the
diversification standards imposed on the underlying assets of Variable Contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Portfolio will be managed in such a manner as to comply with these
diversification requirements. It is possible that in order to comply with the
diversification requirements, less desirable investment decisions may be made
which would affect the investment performance of the Portfolio.
The prices of long-term securities are more volatile than those of short-term
debt securities. When interest rates go up or down, the market value of such
long-term debt securities tends to go down or up, respectively, to a greater
extent than in the case of short-term debt securities.
5. PORTFOLIO TURNOVER RATES
For the years ended December 31, 1995 and 1996, the portfolio turnover
rates of the Portfolio were 70.30% and 48.93%, respectively. Higher portfolio
turnover rates may involve correspondingly higher brokerage costs which would
have to be borne directly by the Fund and ultimately by its shareholders.
6. MANAGEMENT
The Fund is managed by its officers on a day-to-day basis under the overall
direction of its Board of Directors. The Fund employs Lord Abbett as investment
manager for the Portfolio pursuant to a Management Agreement. Lord Abbett has
been an investment manager for over 67 years and currently manages approximately
$22 billion in a family of mutual funds and other advisory accounts. Lord Abbett
provides the Fund with investment management services and executive and other
personnel, pays the remuneration of its officers, provides the Fund with office
space and pays for ordinary and necessary office and clerical expenses relating
to research, statistical work and supervision of the Portfolio and certain other
costs. The Fund pays all other expenses not expressly assumed by Lord Abbett,
including, without limitation, outside Directors' fees and expenses, association
membership dues, legal and auditing 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 mailing
prospectuses to existing shareholders, insurance premiums and brokerage and
other expenses relating to the execution of Portfolio transactions. Lord Abbett
provides similar services to twelve other funds having their own investment
objectives and also advises other investment clients. Lord Abbett and Cova
Financial Services Life Insurance Company provided operating funds to the Fund
through their purchase of the initial shares of the Fund.
Mr. W. Thomas Hudson, Jr. is Executive Vice President of the Fund and is
primarily responsible for the day-to-day management of the Portfolio. Mr. Hudson
has been employed by Lord Abbett since 1982.
Under the Management Agreement, the Fund is obligated to pay Lord Abbett a
monthly fee, based on average daily net assets of the Portfolio for each month,
at an annual rate of 0.50 of 1%. In addition, the Fund will pay all expenses not
expressly assumed by Lord Abbett. For the year ended December 31, 1996, the
Portfolio of the Fund paid Lord Abbett $1,234,273 in advisory fees.
7. EXPENSES OF THE FUND
Lord Abbett may waive its management fee and/or advance other expenses of the
Fund. Although each Class must bear the expenses solely attributable to it, the
Classes are expected to experience cost savings over the aggregate amount that
would be payable if each Class were a separate fund, because they have the same
Directors, accountants, attorneys and share other general and administrative
expenses. Any expenses which are not solely attributable to a specific Class are
allocated on the basis of the net assets of the respective Classes. For the year
ended December 31, 1996, the expenses borne by the Portfolio amounted to
$1,277,811 or 0.52 of 1% of its average daily net assets.
8. SHAREHOLDER RIGHTS
The Portfolio issues one class of shares and may issue additional separate
classes of shares in the future. Each share represents an equal proportionate
interest in the assets of the Portfolio with each other share in the Portfolio.
On any matter submitted to a vote of shareholders, all shares of the Fund then
issued and outstanding and entitled to vote shall be voted in the aggregate and
not by class except for matters concerning only one class. The holder of each
share of stock of the Fund will be entitled to one vote for each full share and
a fractional vote for each fractional share of stock. Shares of one class may
not bear the same economic relationship to the Fund as shares of another class.
In accordance with its view of present applicable law, the Fund views the
separate account(s) of Life Companies as shareholders of the Fund having the
right to vote Fund shares at any meeting of shareholders and will provide
pass-through voting privileges to all contract owners. Life Companies will vote
shares of the Fund held in the separate account(s) for which no timely voting
instructions from contract owners are received, as well as shares they own, in
the same proportion as those shares for which voting instructions are received.
Additional information concerning voting rights is described in the separate
account prospectuses.
The Fund's By-Laws provide that the Fund shall not hold an annual meeting of its
shareholders in any year unless one or more matters are required to be acted on
by shareholders under the 1940 Act, or unless called at the request in writing
of a majority of the Board of Directors or by shareholders holding at least
one-quarter of the shares of the Fund outstanding and entitled to vote at the
meeting. The Fund will hold a shareholder meeting to fill existing vacancies on
the Board in the event that less than a majority of Directors were elected by
the shareholders. The Directors shall also call a meeting of shareholders for
the purpose of voting upon the question of removal of any Director when
requested in writing to do so by the record holders of not less than 10 percent
of the outstanding shares. Under the By-Laws of the Fund and in accordance with
the 1940 Act, shareholder approval of the independent auditors of the Fund will
not be required except when shareholder meetings are held. The Fund has an
obligation to assist shareholder communications.
9. PURCHASE AND REDEMPTION OF SHARES
Shares are currently only sold to the separate accounts of the Life
Companies at net asset value (see below). Redemptions will be effected by the
separate accounts to meet obligations under the Variable Contracts. Contract
owners do not deal directly with the Fund with respect to acquisition or
redemption of shares.
In selecting broker-dealers to execute portfolio transactions for the Fund's
Portfolio, if two or more broker-dealers are considered capable of best
execution, the Fund may prefer the broker-dealer who has sold Fund shares
through the sale of such Variable Contracts.
10. DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions are distributed to the shareholders and will be
payable in shares or cash at the election of shareholders. The Life Companies,
with respect to shares held by their separate accounts, have elected, and intend
to continue to elect, to receive dividends and distributions in shares.
Dividends and distributions are made at such frequency and in such amount as to
assure compliance with the Internal Revenue Code.
11. TAX STATUS
It is the intention of the Fund to have the Portfolio qualify, and for the
fiscal year ended December 31, 1996, it did qualify, as a "regulated investment
company" under Subchapter M of the Internal Revenue Code. The Fund distributes
all of its net income and gains to its shareholders (the separate accounts). The
Portfolio is treated as a separate entity for federal income tax purposes and,
therefore, the investments and results of the Portfolio are determined
separately for purposes of determining whether the Portfolio qualifies as a
"regulated investment company" and for purposes of determining net ordinary
income (or loss) and net realized capital gains (or losses).
12. NET ASSET VALUE
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 trading
by dividing the net assets of each class by the number of shares outstanding for
that class at the time of calculation. The daily net asset value per share is
also determined once daily on each day (other than a day during which no such
shares were tendered for redemption and no order to purchase or sell such shares
was received by the Fund) in which there is a sufficient degree of trading in
the Portfolio's securities that the current net asset value of the Portfolio's
shares might be materially affected by changes in the value of the securities.
Total assets are determined by adding the total current value of the Portfolio's
securities, cash, receivables and other assets and subtracting liabilities.
Portfolio shares are sold and redeemed at the net asset value next determined
after receipt of the sales order or request for redemption.
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 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.
13. PERFORMANCE
From time to time, advertisements and other sales materials for the Fund may
include information concerning the historical performance of the Fund. Total
return information will include the Portfolio's average annual compounded rate
of return for a given period, based upon the value of the shares acquired
through a hypothetical $1000 investment at the beginning of the specified period
and the net asset or redemption value of such shares at the end of the period,
assuming reinvestment of all dividends and distributions at net asset value. In
lieu of or in addition to total return calculations, such information may
include performance rankings and similar information from independent
organizations such as Lipper Analytical Services, Inc., Business Week, Forbes or
other industry publications.
Total return figures utilized by the Fund are based on historical performance
and are not intended to indicate future performance. Total return and net asset
value per share can be expected to fluctuate over time. Further information
about the Fund's performance is contained in the Annual Report to shareholders
which may be obtained, without charge, by calling 800-831-LIFE with respect to
Variable Contracts of Cova and 800 342-6307 with respect to Variable Contracts
of Great American.
14. GENERAL INFORMATION
The Fund's custodian is The Bank of New York, 48 Wall Street, New York, New York
10286. The Fund's transfer agent and dividend disbursing agent is DST Systems,
Inc., Kansas City, Missouri 64141. The Fund's accountants are Deloitte & Touche
LLP, Two World Financial Center, New York, New York 10281. The Fund's counsel is
Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
LORD ABBETT SERIES FUND, INC. MAY 1, 1997
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from Lord, Abbett & Co ("Lord Abbett"), 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 May 1, 1997.
Shareholder inquiries should be made by writing directly to the Fund or by
calling 800-831-LIFE with respect to Variable Contracts of Cova Financial
Services Life Insurance Company and 800 342-6307 with respect to Variable
Contracts of Great American Reserve Insurance Company.
TABLE OF CONTENTS PAGE
1. Investment Objectives and Policies 1
2. Directors and Officers 5
3. Control Persons and Principal Holders of Securities 8
4. Investment Advisory and Other Services 8
5. Portfolio Transactions 10
6. Net Asset Value of Fund Shares 12
7. Dividends and Distributions 12
8. Distribution Arrangements 12
9. Taxes 13
10. Calculation of Performance Data 13
11. Financial Statements 14
<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, the Growth and Income Portfolio (the "Portfolio") is subject to the
following investment restrictions which cannot be changed without approval of a
majority of the outstanding shares of the Portfolio. The 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; (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 Portfolio"
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 Portfolio" 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 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.
INVESTMENT TECHNIQUES FOR THE FUND'S PORTFOLIO
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 the 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
Portfolio.
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's custodian will segregate cash, liquid high grade debt securities or
other permitted 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 permitted 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.
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.
RESTRICTED OR NOT READILY MARKETABLE SECURITIES FOR THE FUND'S PORTFOLIO
Although the Fund has no current intention of investing in such securities in
the foreseeable future, no more than 5% of the value of the 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 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 PORTFOLIO
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 the Portfolio's total
assets.
PORTFOLIO TURNOVER RATES
During the fiscal year ended December 31, 1996, the portfolio turnover rate of
the Portfolio was 48.93% compared to 70.30% for the prior fiscal year.
2.
DIRECTORS AND OFFICERS
The following directors and officers are partners of Lord Abbett, The General
Motors Building, 767 Fifth Avenue, New York, N.Y. 10153-0203. They have been
associated with Lord Abbett for over five years and are also officers and
directors/trustees of the twelve other Lord Abbett-sponsored funds. They are
"interested persons" as defined in the Investment Company Act of 1940, as
amended (the "Act"), and as such, may be considered to have an indirect
financial interest in any Rule 12b-1 Plan described in the Prospectus.
Robert S. Dow, Age 52, Chairman and President
E. Wayne Nordberg, Age 58, Vice President
The following outside directors are also directors of the twelve other Lord
Abbett sponsored funds referred to above.
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 55.
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 66.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 71.
C. Alan MacDonald
The Marketing Partnership, Inc.
27 Signal Road
Stamford, Connecticut
General Partner, The Marketing Partnership, Inc., a full service marketing
consulting firm. 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 Corp, and prior to that,
President and Chief Executive Officer of Stouffer Foods Corp., both subsidiaries
of Nestle SA, Switzerland. Currently serves as Director of Den West Restaurant
Co., J. B. Williams, and Fountainhead Water Company.
Age 63.
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 68.
Thomas J. Neff
Spencer Stuart & Associates
277 Park Avenue
New York, New York
Chairman of Spencer Stuart U.S., an executive search consulting firm. Age 59.
<PAGE>
The second column of the following table sets forth the compensation accrued for
the Fund's outside directors. The third column sets forth information with
respect to the equity-based benefits accrued for outside directors by the Lord
Abbett-sponsored funds. The fourth column sets forth information with respect to
the retirement plan for outside directors maintained by each of the Lord
Abbett-sponsored funds. The fifth column sets forth the total compensation
payable by such funds to the outside directors. No director of the Fund
associated with Lord Abbett and no officer of the Fund received any compensation
from the Fund for acting as a director or officer.
COMPENSATION TABLE FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
<PAGE>
<TABLE>
(1) (2) (3) (4) (5)
NAME OF DIRECTOR AGGREGATE EQUITY-BASED BENEFITS ESTIMATED ANNUAL TOTAL COMPENSATION
- ---------------- COMPENSATION ACCRUED EXPENSES BENEFITS UPON ACCRUED BY THE FUND AND
FROM THE FUND 1 BY THE FUND AND RETIREMENT TWELVE OTHER LORD
TWELVE OTHER PROPOSED TO BE ABBETT-SPONSORED
LORD ABBETT- PAID BY THE FUND FUNDS 3
SPONSORED FUNDS 2 AND TWELVE OTHER
LORD ABBETT-
SPONSORED FUNDS 2
<S> <C> <C> <C> <C> <C>
E. Thayer Bigelow3 $764 $11,563 None $48,200
Stewart S. Dixon $742 $22,283 None $46,700
John C. Jansing $742 $28,242 $50,000 $46,700
C. Alan MacDonald $764 $29,942 None $48,200
Hansel B. Millican, Jr. $788 $24,499 None $49,600
Thomas J. Neff $743 $15,990 None $46,900
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. A portion of the 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 of the aggregate compensation payable by the Fund as
of December 31, 1996, deemed invested in Fund shares, including dividends
reinvested and changes in net asset value applicable to such deemed
investments, were: Mr. Bigelow, $1,490; Mr. Dixon, $864; Mr. Jansing,
$2,236; Mr. MacDonald, $834; Mr. Millican, $2,264 and Mr. Neff, $2,216.
2. Each Lord Abbett-sponsored fund has a retirement plan providing that
outside directors may receive annual retirement benefits for life equal to
100% 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.
Such retirement plans, and the deferred compensation plans referred to in
footnote one, have been amended recently to, among other things, enable
outside directors to elect to convert their prospective benefits under the
retirement plans to equity-based benefits under the deferred compensation
plans (renamed the equity-based plans and hereinafter referred to as such).
Five of the six current outside directors made such an election. The
amounts accrued in column 3 were accrued by the Lord Abbett-sponsored funds
during the fiscal year ended October 31, 1996 with respect to the
equity-based plans. These accruals were based on the retirement plans as in
effect before the recent amendments and on the fees payable to outside
directors of the Fund during the year ended October 31, 1996. Under the
recent amendments, the annual retainer was increased to $50,000 and the
annual retirement benefits were increased from 80% to 100% of a director's
final annual retainer. The amount stated in column 4 would be payable
annually under the retirement plans as recently amended if that director
was to retire at age 72 and the annual retainer payable by the funds was
the same as it is today.
3. This column shows aggregate compensation, including directors fees and
attendance fees for board and committee meetings, of a nature referred to
in footnote one, accrued by the Lord Abbett-sponsored funds during the year
ended December 31, 1996.
<PAGE>
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Allen, Brown, Carper, Cutler, Ms. Foster, Messrs. Morris, Noelke, Nordberg and
Walsh are partners of Lord Abbett; the others are employees: W. Thomas Hudson,
age 55, Executive Vice President; Kenneth B. Cutler, age 64, Vice President and
Secretary; Stephen I. Allen, age 44; Zane E. Brown, age 45; Daniel E. Carper,
age 45; Daria L. Foster, age 42; Robert G. Morris, age 52; Robert J. Noelke, age
40; E. Wayne Nordberg, age 58; Paul A. Hilstad, age 54 (with Lord Abbett since
1995; formerly Senior Vice President and General Counsel of American Capital
Management & Research, Inc.); Thomas F. Konop, age 55; A. Edward Oberhaus, age
37; Victor W. Pizzolato, age 64; John J. Walsh, age 61, Vice Presidents; and
Keith F. O'Connor, age 41, Vice President and 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 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, 1997, 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 18,805,902 shares representing
99.91% of the total shares issued and outstanding of the Portfolio and Lord
Abbett was known to own of record 16,231 shares representing 0.09% of the total
shares issued and outstanding. As of that date, the officers and directors of
the Fund together owned no Variable Contracts.
4.
INVESTMENT ADVISORY AND OTHER SERVICES
As described under "Management" in the Prospectus, Lord Abbett is the Fund's
investment manager. The ten general partners of Lord Abbett, all of whom are
officers and/or directors of the Fund, are: Stephen I. Allen, Zane E. Brown,
Daniel E. Carper, Kenneth B. Cutler, Robert S. Dow, Daria L. Foster, Robert G.
Morris, Robert J. Noelke, 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 acts as investment manager for twelve other investment companies
comprising the Lord Abbett family of funds. The names of these investment
companies are: Lord Abbett Affiliated Fund, Inc., Lord Abbett Bond-Debenture
Fund, Inc., Lord Abbett Developing Growth Fund, Inc., Lord Abbett Global Fund,
Inc., Lord Abbett Mid-Cap Value Fund, Inc., Lord Abbett Tax-Free Income Fund,
Inc., Lord Abbett Tax-Free Income Trust, 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 the
Portfolio is obligated to pay Lord Abbett a monthly fee, based on the average
daily net assets of the Portfolio for each month, at the annual rate of 0.50 of
1%. For the fiscal years ended December 31, 1994, 1995 and 1996 Lord Abbett
received $518,190, $704,093 and $1,234,273 in advisory fees, respectively.
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 mailing prospectuses to existing
shareholders, insurance premiums, brokerage and other expenses connected with
executing portfolio transactions.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281 are
the independent accountants 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.
The Bank of New York ("BNY"), 48 Wall Street, New York, New York, is the Fund's
custodian. In accordance with the requirements of Rule 17f-5, the Fund's
directors have approved arrangements permitting the Fund's foreign assets not
held by BNY or its foreign branches to be held by certain qualified foreign
banks and depositories.
5.
PORTFOLIO TRANSACTIONS
Our policy is to obtain best execution on all our portfolio transactions, which
means that we seek to have purchases and sales of portfolio securities executed
at the most favorable prices, considering all costs of the transaction including
brokerage commissions and dealer markups and markdowns and taking into account
the full range and quality of the brokers' services. Consistent with obtaining
best execution, we generally pay, as described below, a higher commission than
some brokers might charge on the same transactions. Our policy with respect to
best execution governs the selection of brokers or dealers and the market in
which the transaction is executed. To the extent permitted by law, we may, if
considered advantageous, make a purchase from or sale to another Lord
Abbett-sponsored fund without the intervention of any broker-dealer.
Broker-dealers are selected on the basis of their professional capability and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of the Fund and also are employees
of Lord Abbett. These traders do the trading as well for other accounts --
investment companies (of which they are also officers) and other investment
clients -- managed by Lord Abbett. They are responsible for obtaining best
execution.
We pay a commission rate that we believe is appropriate to give maximum
assurance that our brokers will provide us, on a continuing basis, the highest
level of brokerage services available. While we do not always seek the lowest
possible commissions on particular trades, we believe that our commission rates
are in line with the rates that many other institutions pay. Our traders are
authorized to pay brokerage commissions in excess of those that other brokers
might accept on the same transactions in recognition of the value of the
services performed by the executing brokers, viewed in terms of either the
particular transaction or the overall responsibilities of Lord Abbett with
respect to us and the other accounts they manage. Such services include showing
us trading opportunities including blocks, a willingness and ability to take
positions in securities, knowledge of a particular security or market proven
ability to handle a particular type of trade, confidential treatment, promptness
and reliability.
Some of these brokers also provide research services at least some of which are
useful to Lord Abbett in their overall responsibilities with respect to us and
the other accounts they manage. Research includes the furnishing of analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts and trading equipment and
computer software packages, acquired from third-party suppliers, that enable
Lord Abbett to access various information bases. Such services may be used by
Lord Abbett in servicing all their accounts, and not all of such services will
necessarily be used by Lord Abbett in connection with their management of the
Fund; conversely, such services furnished in connection with brokerage on other
accounts managed by Lord Abbett may be used in connection with their management
of the Fund, and not all of such services will necessarily be used by Lord
Abbett in connection with their advisory services to such other accounts. We
have been advised by Lord Abbett that research services received form brokers
cannot be allocated to any particular account, are not a substitute for Lord
Abbett's services but are supplemental to their own research effort and when
utilized, are subject to internal analysis before being incorporated by Lord
Abbett into their investment process. As a practical matter, it would not be
possible for Lord Abbett to generate all of the information presently provided
by brokers. While receipt of research services from brokerage firms has not
reduced Lord Abbett's normal research activities, the expenses of Lord Abbett
could be materially increased if it attempted to generate such additional
information through its own staff and purchased such equipment and software
packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or
among brokers, and trades are executed only when they are dictated by investment
decisions of the Fund to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold our shares and/or
shares of other Lord Abbett-sponsored funds may be preferred.
If other clients of Lord Abbett buy or sell the same security at the same time
as we do, transactions will, to the extent practicable, be allocated among all
participating accounts in proportion to the amount of each order and will be
executed daily until filled so that each account shares the average price and
commission cost of each day. Other clients who direct that their brokerage
business be placed with specific brokers or who invest through wrap accounts
introduced to Lord Abbett by certain brokers may not participate with us in the
buying and selling of the same securities as described above. If these clients
wish to buy or sell the same security as we do, they may have their transactions
executed at times different from our transactions and thus may not receive the
same price or incur the same commission cost as we do.
We will not seek "reciprocal" dealer business (for the purpose of applying
commissions in whole or in part for our benefit or otherwise) from dealers as
consideration for the direction to them of portfolio business.
During the fiscal years ended December 31, 1996, 1995 and 1994, the total dollar
amounts of brokerage commissions paid by the Fund were $389,776, $418,128, and
$285,241, respectively.
6.
NET ASSET VALUE OF FUND SHARES
Information concerning how we value our shares for the purchase and redemption
of our shares is contained in the Prospectus under "Purchase and Redemption of
Shares", respectively.
As disclosed in the Prospectus, we calculate our net asset value as of the close
of the New York Stock Exchange ("NYSE") on each day that the NYSE is open for
trading by dividing our total net assets by the number of shares outstanding at
the time of calculation. The NYSE is closed on Saturdays and Sundays and the
following holidays -- New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas.
VALUATION OF SECURITIES HELD IN THE PORTFOLIO
The Fund values its portfolio securities at market value as of the close of the
NYSE. Market value will be determined as follows: securities listed or admitted
to trading privileges on the New York or American Stock Exchange or on the
NASDAQ National Market System are valued at the last sales price, or, if there
is no sale on that day, at the mean between the last bid and asked prices, or,
in the case of bonds, in the over-the-counter market if, in the judgment of the
Fund's officers, that market more accurately reflects the market value of the
bonds. Over-the-counter securities not traded on the NASDAQ National Market
System are valued at the mean between the last bid and asked prices. Securities
for which market quotations are not available are valued at fair market value
under procedures approved by the Board of Directors.
7.
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's intention to distribute substantially all the net investment
income, if any, of the Portfolio. For dividend purposes, net investment income
of the Portfolio will consist of dividends and/or interest earned by the
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 to which such gains are
attributable.
8.
DISTRIBUTION ARRANGEMENTS
GENERAL
Lord Abbett Distributor serves as the distributor in connection with the
offering of the Fund's shares. In connection with the sale of its shares, the
Fund has authorized Lord Abbett Distributor to provide only such information and
to make only such statements and representations which are not materially
misleading or which are contained in the Fund's then current Prospectus or
Statement of Additional Information or shareholder reports in such financial and
other statements which are furnished to Lord Abbett by the Fund.
The Fund and Lord Abbett Distributor are parties to a Distribution Agreement
that continues in force until December 11, 1997. 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. The
Portfolio will be treated as a separate entity for Federal income tax purposes
and, therefore, the investments and results of the Portfolio 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.
10.
CALCULATION OF PERFORMANCE DATA
The 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:
<PAGE>
{P~(~1~+~T~)}SUP n~=~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 Portfolio's last one, five and the life of the fund periods ending on
December 31, 1996 were: 19.50%, 16.15% and 15.50%, respectively.
11.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended December 31, 1996 and the
report of Deloitte & Touche LLP, independent public accountants, on such
financial statements contained in the 1996, Annual Report to Shareholders of
Lord Abbett Series Fund, Inc. are incorporated herein by reference to such
financial statements and report in reliance upon the authority of Deloitte &
Touche LLP as experts in auditing and accounting.
<PAGE>
PART C OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The financial statements of the Fund for the fiscal year ended December 31, 1996
are included in the 1996 Annual Report to Shareholders and are incorporated by
reference in Part B hereof.
(b) Exhibits -
(1) Articles of Incorporation of Registrant**
(2) By-Laws of Registrant***
(3) Not Applicable
(4) Not Applicable
(5) Management Agreement between Registrant and
Lord, Abbett & Co.****
(i) Sub-Investment Management Agreement#
(6) Form of Distribution Plan between Registrant and
Lord, Abbett & Co.##
(7) Not Applicable
(8)(i) Custody Agreement between Registrant and
Morgan Guaranty Trust Company of New York#
(ii) Form of Transfer Agency Agreement***
(9) Fund Participation Agreement between Lord Abbett &
Co. and Great American Reserve Insurance Company*
(10) Opinion and Consent of Counsel***
(11) Consent of Independent Auditors*
(12) Not Applicable
(13) Form of Agreements Governing Contribution of Capital***
(14) Not Applicable
(15) Form of Distribution Agreement between Registrant
and Lord, Abbett & Co.##
(16) Not Applicable
* Filed herewith
** Incorporated by reference to Registrant's initial registration
on Form N-1A, filed on September 15, 1989.
*** Incorporated by reference to Registrant's Pre-Effective
Amendment No. 1, filed on November 17, 1989.
**** Incorporated by reference to Registrant's Post-Effective
Amendment No. 1, filed on April 2, 1990.
# Incorporated by reference to Registrant's Post-Effective
Amendment No. 2, filed on April 22, 1991.
## Incorporated by reference to Registrant's Post-Effective
Amendment No. 6, filed on April 28, 1994.
<PAGE>
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The shares of the Fund are currently sold to Cova Financial Services Life
Insurance Company and Great American Reserve Insurance Company, individually
("Cova") and ("Great American"), collectively (the "Life Companies").
Cova and Lord, Abbett & Co., (the Fund's Investment Manager) each made initial
capital contributions to the Fund and together own the majority of the
outstanding shares of the Fund.
COVA Variable Annuity Account One, a separate account of COVA Financial Services
Life Insurance Company is a Delaware corporation located at One Tower Lane,
Oakbrook Terrace, Illinois 60181.
Great American Reserve Insurance Company is a life insurance company organized
under the laws of the State of Indiana located at 11815 N. Pennsylvania Street,
Carmel, Indiana 46032-4572.
Lord, Abbett & Co. is a partnership located at The General Motors Building, 767
Fifth Avenue, New York, New York 10153-0203. The ten general partners of Lord,
Abbett & Co., all of whom are officers and/or directors of the Fund, are:
Stephen I. Allen, Daniel E. Carper, Kenneth B. Cutler, Robert S. Dow, Daria L.
Foster, Robert G. Morris, Robert J. Noelke, E. Wayne Nordberg and John J. Walsh.
<PAGE>
Item 26. NUMBER OF RECORD HOLDERS OF SECURITIES
The Life Companies and Lord, Abbett & Co. are the shareholders of the Fund.
Item 27. INDEMNIFICATION
Registrant is incorporated under the laws of the State of
Maryland and is subject to Section 2-418 of the Corporations
and Associations Article of the Annotated Code of the State of
Maryland controlling the indemnification of the directors and
officers. Since Registrant has its executive offices in the
State of New York, and is qualified as a foreign corporation
doing business in such State, the persons covered by the
foregoing statute may also be entitled to and subject to the
limitations of the indemnification provisions of Section
721-726 of the New York Business Corporation Law.
The general effect of these statutes is to protect officers,
directors and employees of Registrant against legal liability
and expenses incurred by reason of their positions with the
Registrant. The statutes provide for indemnification for
liability for proceedings not brought on behalf of the
corporation and for those brought on behalf of the
corporation, and in each case place conditions under which
indemnification will be permitted, including requirements that
the officer, director or employee acted in good faith. Under
certain conditions, payment of expenses in advance of final
disposition may be permitted. The By-Laws of Registrant,
without limiting the authority of Registrant to indemnify any
of its officers, employees or agents to the extent consistent
with applicable law, makes the indemnification of its
directors mandatory subject only to the conditions and
limitations imposed by the above-mentioned Section 2-418 of
Maryland Law and by the provisions of Section 17(h) of the
Investment Company Act of 1940 as interpreted and required to
be implemented by SEC Release No. IC-11330 of September 4,
1980.
In referring in its By-Laws to, and making indemnification of
directors subject to the conditions and limitations of, both
Section 2-418 of the Maryland Law and Section 17(h) of the
Investment Company Act of 1940, Registrant intends that
conditions and limitations on the extent of the
indemnification of directors imposed by the provisions of
either Section 2-418 or Section 17(h) shall apply and that any
inconsistency between the two will be resolved by applying the
provisions of said Section 17(h) if the condition or
limitation imposed by Section 17(h) is the more stringent. In
referring in its By-Laws to SEC Release No. IC-11330 as the
source for interpretation and implementation of said Section
17(h), Registrant understands that it would be required under
its By-Laws to use reasonable and fair means in determining
whether indemnification of a director should be made and
undertakes to use either (1) a final decision on the merits by
a court or other body before whom the proceeding was brought
that the person to be indemnified ("indemnitee") was not
liable to Registrant or to its security holders by reason of
willful malfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office
("disabling conduct") or (2) in the absence of such a
decision, a reasonable determination, based upon a review of
the facts, that the indemnitee was not liable by reason of
such disabling conduct, by (a) the vote of a majority of a
quorum of directors who are neither "interested persons" (as
defined in the 1940 Act) of Registrant nor parties to the
proceeding, or (b) an independent legal counsel in a written
opinion. Also, Registrant will make advances of attorneys'
fees or other expenses incurred by a director in his defense
only if (in addition to his undertaking to repay the advance
if he is not ultimately entitled to indemnification) (1) the
indemnitee provides a security for his undertaking, (2)
Registrant shall be insured against losses arising by reason
of any lawful advances, or (3) a majority of a quorum of the
non-interested, non-party directors of Registrant, or an
independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts, that
there is reason to believe that the indemnitee ultimately will
be found entitled to indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expense incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the
securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
In addition, Registrant maintains a directors' and officers
errors and omissions liability insurance policy protecting
directors and officers against liability for breach of duty,
negligent act, error or omission committed in their capacity
as directors or officers. The policy contains certain
exclusions, among which is exclusion from coverage for active
or deliberate dishonest or fraudulent acts and exclusion for
fines or penalties imposed by law or other matters deemed
uninsurable.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Lord, Abbett & Co. acts as investment adviser for twelve other
open-end investment companies and as investment adviser to
approximately 5,700 private accounts. Other than acting as
directors and/or officers of open-end investment companies
sponsored by Lord, Abbett & Co., none of Lord, Abbett & Co.'s
partners has, in the past two fiscal years, engaged in any
other business, profession, vocation or employment of a
substantial nature for his own account or in the capacity of
director, officer, employee, partner or trustee of any entity
except as follows:
John J. Walsh
Trustee
Brooklyn Hospital
Parkside Avenue
Brooklyn, N.Y.
Item 29. PRINCIPAL UNDERWRITER
(a) Lord Abbett Affiliated Fund, Inc.
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Mid-Cap Value Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett Tax-Free Income Trust
Lord Abbett Global Fund, Inc.
Lord Abbett Equity Fund
Lord Abbett U.S. Government Securities Money Market Fund, Inc.
Lord Abbett Securities Trust
Lord Abbett Investment Trust
Lord Abbett Research Fund, Inc.
INVESTMENT ADVISOR
American Skandia Trust
(Lord Abbett Growth and Income Portfolio)
(b) The partners of Lord, Abbett & Co. are:
Name and Principal Positions and Offices
Business Address (1) with Registrant
Robert S. Dow Chairman, President and Director
Kenneth B. Cutler Vice President & Secretary
Zane E. Brown Vice President
Daniel E. Carper Vice President
Daria L. Foster Vice President
Robert J. Noelke Vice President
Robert G. Morris Vice President
E. Wayne Nordberg Vice President & Director
John J. Walsh Vice President
Stephen I. Allen Vice President
(1) Each of the above has a principal business address of 767 Fifth
Avenue, New York, NY 10153-0203
(c) Not applicable
<PAGE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Registrant maintains the records, required by Rules 31a-1(a) and (b), and
31a-2(a) at its main office.
Lord, Abbett & Co. maintains the records required by Rules 31a-1(f) and 31a-2(e)
at its main office.
Certain records and correspondence may be physically maintained at the main
office of the Registrant's Transfer Agent, Custodian, or Shareholder Servicing
Agent within the requirements of Rule 31a-3.
Item 31. MANAGEMENT SERVICES
None
Item 32. UNDERTAKINGS
(c) The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without
charge.
The registrant undertakes, if requested to do so by the
holders of at least 10% of the registrant's outstanding
shares, to call a meeting of shareholders for the purpose of
voting upon the question of removal of a director or directors
and to assist in communications with other shareholders as
required by Section 16(c).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant certifies that it meets the requirements of
Rule 485(b) of the Securities Act of 1933 for effectiveness of this Registration
Statement and has duly caused this Registration Statement and/or any amendment
thereto to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York and State of New York on the 29th day of
April, 1997.
LORD ABBETT SERIES FUND, INC.
By: /s/ ROBERT S. DOW
------------------------------------
Robert S. Dow, Chairman of the Board
and Director
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
Chairman of
/s/Ronald P. Lynch the Board and Director April 29, 1997
- ----------------------- ---------------------------- -------------
Ronald P. Lynch (Title) (Date)
Vice President and
/s/ Keith F. O'Connor Treasurer April 29, 1997
- ----------------------- ---------------------------- ------------
Keith F. O'Connor (Title) (Date)
/s/E. Wayne Nordberg Director April 29, 1997
- ----------------------- ---------------------------- -----------
E. Wayne Nordberg (Title) (Date)
/s/E. Thayer Bigelow Director April 29, 1997
- ----------------------- ---------------------------- -----------
E. Thayer Bigelow (Title) (Date)
/s/Steward S. Dixon Director April 29, 1997
- ----------------------- ---------------------------- -----------
Steward S. Dixon (Title) (Date)
/s/John C. Jansing Director April 29, 1997
- ----------------------- ---------------------------- -----------
John C. Jansing (Title) (Date)
/s/C. Alan MacDonald Director April 29, 1997
- ----------------------- ---------------------------- ------------
C. Alan MacDonald (Title) (Date)
/s/ Hansel B. Millican, Jr. Director April 29, 1997
- ----------------------- ----------------------------- -----------
Hansel B. Millican, Jr. (Title) (Date)
/s/ Thomas J. Neff Director April 29, 1997
- ----------------------- ----------------------------- ------------
Thomas J. Neff (Title) (Date)
<PAGE>
EXHIBITS
INDEX TO EXHIBITS
Exhibits Page
- -------- ----
(9) Fund Participation Agreement
(11) Consent of Independent Auditors
<PAGE>
EXHIBITS
</TABLE>
Q:\LEGAL\LASF\GREATAM.AGR
3/18/97
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT made as of the 10th day of April, 1997, by and between
Lord Abbett Series Fund, Inc. ("FUND"), a Maryland Corporation, Lord, Abbett &
Co. ("ADVISER"), a New York Partnership, and GREAT AMERICAN RESERVE INSURANCE
COMPANY (the "COMPANY"), a life insurance company organized under the laws of
the State of Indiana.
WHEREAS, FUND is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940, as amended (the "`40 Act"), as
an open-end, diversified management investment company; and
WHEREAS, FUND is organized as a series fund comprised of several
Portfolios ("Portfolios"), those currently available are listed on Appendix A
hereto; and
WHEREAS, FUND was organized to act as the funding vehicle for certain
variable life insurance and/or variable annuity contracts ("Variable Contracts")
offered by life insurance companies through separate accounts ("Separate
Accounts") of such life insurance companies ("Participating Insurance
Companies") and also offers its shares to certain qualified pension and
retirement plans ("Qualified Plans"); and
WHEREAS, FUND intends to apply for an order from the SEC, granting
Participating Insurance Companies and their separate accounts exemptions from
the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the `40 Act, and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Portfolios of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated Participating Insurance Companies and Qualified Plans ("Exemptive
Order"); and
WHEREAS, the COMPANY has established or will establish one or more
separate accounts ("Separate Accounts") to offer Variable Contracts and is
desirous of having FUND as one of the underlying funding vehicles for such
Variable Contracts; and
WHEREAS, ADVISER is registered with the SEC as an investment adviser
under the Investment Advisers Act of 1940 and as a broker-dealer under the
Securities Exchange Act of 1934, as amended and acts as the FUND's investment
adviser and its subsidiary Lord Abbett Distributors LLC, a New York limited
liability Company (the "Distributor") acts as principal underwriter; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the COMPANY intends to purchase shares of FUND to fund the
aforementioned Variable Contracts and FUND is authorized to sell such shares to
the COMPANY at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the COMPANY,
FUND, and ADVISER agree as follows:
Article I. SALE OF FUND SHARES
1.1 FUND agrees to make available to the Separate Accounts of the
COMPANY shares of the selected Portfolios as listed on Appendix B for investment
of purchase payments of Variable Contracts allocated to the designated Separate
Accounts as provided in FUND's Registration Statement.
1.2 FUND agrees to sell to the COMPANY those shares of the selected
Portfolios of Fund which the COMPANY orders, executing such orders on a daily
basis at the net asset value next computed after receipt by FUND or its designee
of the order for the shares of FUND. For purposes of this Section 1.2, the
COMPANY shall be the designee of FUND for receipt of such orders from the
designated Separate Account and receipt by such designee shall constitute
receipt by FUND; provided that the COMPANY receives the order by 4:00 p.m. New
York time and FUND receives notice from the COMPANY by telephone or facsimile
(or by such other means as FUND and the COMPANY may agree in writing) of such
order by 9:00 a.m. New York time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange is open for trading
and on which FUND calculates its net asset value pursuant to the rules of the
SEC.
1.3 FUND agrees to redeem on the COMPANY's request, any full or
fractional shares of FUND held by the COMPANY, executing such requests on a
daily basis at the net asset value next computed after receipt by FUND or its
designee of the request for redemption, in accordance with the provisions of
this agreement and FUND's Registration Statement. For purposes of this Section
1.3, the COMPANY shall be the designee of FUND for receipt of requests for
redemption from the designated Separate Account and receipt by such designee
shall constitute receipt by FUND; provided that the COMPANY receives the request
for redemption by 4:00 p.m. New York time and FUND receives notice from the
COMPANY by telephone or facsimile (or by such other means as FUND and the
COMPANY may agree in writing) of such request for redemption by 9:00 a.m. New
York time on the next following Business Day.
1.4 FUND shall furnish, on or before the ex-dividend date, notice to
the COMPANY of any income dividends or capital gain distributions payable on the
shares of any Portfolios of FUND. The COMPANY hereby elects to receive all such
income dividends and capital gain distributions as are payable on a Portfolio's
shares in additional shares of the Portfolio. FUND shall notify the COMPANY or
its designee of the number of shares so issued as payment of such dividends and
distributions.
1.5 FUND shall make the net asset value per share for the selected
Portfolio(s) available to the COMPANY on a daily basis as soon as reasonably
practicable after the net asset value per share is calculated but shall use its
best efforts to make such net asset value available by 6:30 p.m. New York time.
In the event that FUND is unable to meet the 6:30 p.m. time stated herein, it
shall provide additional time for the COMPANY to place orders for the purchase
and redemption of shares. Such additional time shall be equal to the additional
time which FUND takes to make the net asset value available to the COMPANY. If
FUND provides the COMPANY with materially incorrect share net asset value
information through no fault of the COMPANY, the COMPANY on behalf of the
Separate Accounts, shall be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct share net asset value. Any material
error in the calculation of net asset value per share, dividend or capital gain
information shall be reported promptly upon discovery to the COMPANY. If a
Separate Account due to such error has received amounts in excess of the amounts
to which it is entitled, the COMPANY, when requested by FUND, shall make
adjustments to the Separate Account to reflect the change in the values of the
shares as reflected in the unit values of the affected Variable Contract owners
who still have values in the Portfolio. When making adjustments for an error,
the FUND shall not net same day transactions in a Separate Account. No
adjustment for an error shall be taken in any Separate Account until such time
as the parties hereto have agreed to a resolution of the error, but the parties
shall use all reasonable efforts to reach such agreement within two business
days after the discovery of the error.
1.6 At the end of each Business Day, the COMPANY shall use the
information described in Section 1.5 to calculate Separate Account unit values
for the day. Using these unit values, the COMPANY shall process each such
Business Day's Separate Account transactions based on requests and premiums
received by it by the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m. New York time) to determine the net dollar amount
of FUND shares which shall be purchased or redeemed at that day's closing net
asset value per share. The net purchase or redemption orders so determined shall
be transmitted to FUND by the COMPANY by 9:00 a.m. New York Time on the Business
Day next following the COMPANY's receipt of such requests and premiums in
accordance with the terms of Sections 1.2 and 1.3 hereof.
1.7 If the COMPANY's order requests the purchase of FUND shares, the
COMPANY shall pay for such purchase by wiring federal funds to FUND or its
designated custodial account on the day the order is transmitted by the COMPANY.
If the COMPANY's order requests a net redemption resulting in a payment of
redemption proceeds to the COMPANY, FUND shall use its best efforts to wire the
redemption proceeds to the COMPANY by the next Business Day, unless doing so
would require FUND to dispose of Portfolio securities or otherwise incur
additional costs. In any event, proceeds shall be wired to the COMPANY within
three Business Days or such longer period permitted by the '40 Act or the rules,
orders or regulations thereunder and FUND shall notify the person designated in
writing by the COMPANY as the recipient for such notice of such delay by 3:00
p.m. New York Time the same Business Day that the COMPANY transmits the
redemption order to FUND. If the COMPANY's order requests the application of
redemption proceeds from the redemption of shares to the purchase of shares of
another Portfolio advised by ADVISER, FUND shall so apply such proceeds the same
Business Day that the COMPANY transmits such order to FUND.
1.8 FUND agrees that all shares of the Portfolios of FUND will be sold
only to Participating Insurance Companies which have agreed to participate in
FUND to fund their Separate Accounts and/or to Qualified Plans, all in
accordance with the requirements of Section 817(h) of the Internal Revenue Code
of 1986, as amended ("Code") and Treasury Regulation 1.817-5. Shares of the
Portfolios of FUND will not be sold directly to the general public.
1.9 FUND may refuse to sell shares of any Portfolios to any person, or
suspend or terminate the offering of the shares of any Portfolios if such action
is required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Board of Directors of the FUND (the "Board"), acting
in good faith and in light of its duties under federal and any applicable state
laws, deemed necessary, desirable or appropriate and in the best interests of
the shareholders of such Portfolios.
1.10 Issuance and transfer of Portfolio shares will be by book entry
only. Stock certificates will not be issued to the COMPANY or the Separate
Accounts. Shares ordered from Portfolios will be recorded in appropriate book
entry titles for the Separate Accounts.
Article II. REPRESENTATIONS AND WARRANTIES
2.1 The COMPANY represents and warrants that it is an insurance company
duly organized and in good standing under the laws of Indiana and that it has
legally and validly established each Separate Account as a segregated asset
account under such laws.
2.2 The COMPANY represents and warrants that it has registered or,
prior to any issuance or sale of the Variable Contracts, will register each
Separate Account as a unit investment trust ("UIT") in accordance with the
provisions of the `40 Act and cause each Separate Account to remain so
registered to serve as a segregated asset account for the Variable Contracts,
unless an exemption from registration is available.
2.3 The COMPANY represents and warrants that the Variable Contracts
will be registered under the Securities Act of 1933 (the "`33 Act") unless an
exemption from registration is available prior to any issuance or sale of the
Variable Contracts and that the Variable Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and further that the sale of the Variable Contracts shall comply in all material
respects with state insurance law suitability requirements.
2.4 The COMPANY represents and warrants that the Variable Contracts are
currently and at the time of issuance will be treated as life insurance,
endowment or annuity contracts under applicable provisions of the Code, that it
will maintain such treatment and that it will notify FUND immediately upon
having a reasonable basis for believing that the Variable Contracts have ceased
to be so treated or that they might not be so treated in the future.
2.5 FUND represents and warrants that the Portfolio shares offered and
sold pursuant to this Agreement will be registered under the '33 Act and sold in
accordance with all applicable federal and state laws, and FUND shall be
registered under the `40 Act prior to and at the time of any issuance or sale of
such shares. FUND, subject to Section 1.9 above, shall amend its registration
statement under the `33 Act and the `40 Act from time to time as required in
order to effect the continuous offering of its shares. FUND shall register and
qualify its shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by FUND.
2.6 FUND represents and warrants that each Portfolio will comply with
the diversification requirements set forth in Section 817(h) of the Code, and
the rules and regulations thereunder, including without limitation Treasury
Regulation 1.817-5, and will notify the COMPANY immediately upon having a
reasonable basis for believing any Portfolio has ceased to comply or might not
so comply and will immediately take all reasonable steps to adequately diversify
the Portfolio to achieve compliance.
2.7 FUND represents and warrants that each Portfolio invested in by the
Separate Account intends to elect to be treated as a "regulated investment
company" under Subchapter M of the Code, and to qualify for such treatment for
each taxable year and will notify the COMPANY immediately upon having a
reasonable basis for believing it has ceased to so qualify or might not so
qualify in the future.
2.8 ADVISER represents and warrants that Distributor is and will be a
member in good standing of the National Association of Securities Dealers, Inc.
("NASD") and is and will be registered as a broker-dealer with the SEC. ADVISER
further represents that Distributor will sell and distribute Portfolio shares in
accordance with all applicable state and federal laws and regulations, including
without limitation the '33 Act, the '34 Act and the '40 Act.
2.9 ADVISER represents and warrants that it and Distributor are still
and will remain duly registered and licensed in all material respects under all
applicable federal and state securities laws and shall perform its obligations
hereunder in compliance in all material respects with any applicable state and
federal laws.
Article III. PROSPECTUS AND PROXY STATEMENTS
3.1 FUND shall prepare and be responsible for filing with the SEC and
any state regulators requiring such filing all shareholder reports, notices,
proxy materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of FUND.
Except for the costs and fees the Distributor is obligated to pay pursuant to
its distribution agreement with the FUND, the FUND shall bear the costs of
registration and qualification of shares of the Portfolios, preparation and
filing of the documents listed in this Section 3.1 and all taxes and filing fees
to which an issuer is subject on the issuance and transfer of its shares.
3.2 At least annually, FUND or its designee shall provide the COMPANY,
free of charge, with as many copies of the current prospectus for the shares of
the Portfolios as the COMPANY may reasonably request for distribution to
existing Variable Contract owners whose Variable Contracts are funded by such
shares. FUND or its designee shall provide the COMPANY, at the COMPANY's
expense, with as many more copies of the current prospectus for the shares as
the COMPANY may reasonably request for distribution to prospective purchasers of
Variable Contracts. If requested by the COMPANY in lieu thereof, FUND or its
designee shall provide such documentation (including a "camera ready" copy of
the new prospectus as set in type or, at the request of the COMPANY, as a
diskette in the form sent to the financial printer) and other assistance as is
reasonably necessary in order for the parties hereto once a year (or more
frequently if the prospectus for the shares is supplemented or amended) to have
the prospectus for the Variable Contracts and the prospectus for the FUND shares
and any other fund shares offered as investments for the Variable Contracts
printed together in one document.
3.3 FUND will provide the COMPANY with at least one complete copy of
all prospectuses, statements of additional information, annual and semi-annual
reports, proxy statements, exemptive applications and all amendments or
supplements to any of the above that relate to the Portfolios promptly after the
filing of each such document with the SEC or other regulatory authority. The
COMPANY will provide FUND with at least one complete copy of all prospectuses,
statements of additional information, annual and semi-annual reports, proxy
statements, exemptive applications and all amendments or supplements to any of
the above that relate to a Separate Account promptly after the filing of each
such document with the SEC or other regulatory authority.
Article IV. SALES MATERIALS
4.1 The COMPANY will furnish, or will cause to be furnished, to FUND
and ADVISER, each piece of sales literature or other promotional material in
which FUND or ADVISER or DISTRIBUTOR is named, at least fifteen (15) Business
Days prior to its intended use. No such material will be used if FUND, ADVISER
or DISTRIBUTOR objects to its use in writing within ten (10) Business Days after
receipt of such material.
4.2 FUND and DISTRIBUTOR will furnish, or will cause to be furnished,
to the COMPANY, each piece of sales literature or other promotional material in
which the COMPANY or its Separate Accounts are named, at least fifteen (15)
Business Days prior to its intended use. No such material will be used if the
COMPANY objects to its use in writing within ten (10) Business Days after
receipt of such material.
4.3 FUND and its affiliates and agents shall not give any information
or make any representations on behalf of the COMPANY or concerning the COMPANY,
the Separate Accounts, or the Variable Contracts issued by the COMPANY, other
than the information or representations contained in a registration statement or
prospectus for such Variable Contracts, as such registration statement and
prospectus may be amended or supplemented from time to time, or in reports of
the Separate Accounts or reports prepared for distribution to owners of such
Variable Contracts, or in sales literature or other promotional material
approved by the COMPANY or its designee, except with the written permission of
the COMPANY.
4.4 The COMPANY and its affiliates and agents shall not give any
information or make any representations on behalf of FUND , ADVISER or
DISTRIBUTOR or concerning FUND, ADVISER or DISTRIBUTOR other than the
information or representations contained in a registration statement or
prospectus for FUND, as such registration statement and prospectus may be
amended or supplemented from time to time, or in sales literature or other
promotional material approved by FUND, ADVISER or DISTRIBUTOR or its designee,
except with the written permission of FUND, ADVISER or DISTRIBUTOR, as the case
may be.
4.5 For purposes of this Agreement, the phrase "sales literature or
other promotional material" or words of similar import include, without
limitation, advertisements (such as material published, or designed for use, in
a newspaper, magazine or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures or other
public media), sales literature (such as any written communication distributed
or made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts, or
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, registration
statements, prospectuses, statements of additional information, shareholder
reports and proxy materials, and any other material constituting sales
literature or advertising under National Association of Securities Dealers, Inc.
rules, the `40 Act or the '33 Act.
Article V. POTENTIAL CONFLICTS
5.1 The parties acknowledge that FUND intends to file an application
with the SEC to request an order granting relief from various provisions of the
'40 Act and the rules thereunder to the extent necessary to permit FUND shares
to be sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated Participating Insurance Companies
and Qualified Plans. It is anticipated that the Exemptive Order, when and if
issued, shall require FUND and each Participating Insurance Company to comply
with conditions and undertakings substantially as provided in this Section 5. If
the Exemptive Order imposes conditions materially different from those provided
for in this Section 5, the conditions and undertakings imposed by the Exemptive
Order shall govern this Agreement and the parties hereto agree to amend this
Agreement consistent with the Exemptive Order. The Fund will not enter into a
participation agreement with any other Participating Insurance Company unless it
imposes the same conditions and undertakings as are imposed on the COMPANY
hereby.
5.2 The Board will monitor FUND for the existence of any material
irreconcilable conflict between the interests of Variable Contract owners of all
separate accounts investing in FUND. An irreconcilable material conflict may
arise for a variety of reasons, which may include: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling or any similar action by insurance, tax or securities regulatory
authorities; (c) an administrative or judicial decision in any relevant
proceeding; (d) the manner in which the investments of FUND are being managed;
(e) a difference in voting instructions given by variable annuity and variable
life insurance Contract owners; (f) a decision by a Participating Insurance
Company to disregard the voting instructions of Variable Contract owners and (g)
if applicable, a decision by a Qualified Plan to disregard the voting
instructions of plan participants.
5.3 The COMPANY will report any potential or existing conflicts to the
Board. The COMPANY will be responsible for assisting the Board in carrying out
its duties in this regard by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. The responsibility
includes, but is not limited to, an obligation by the COMPANY to inform the
Board whenever it has determined to disregard Variable Contract owner voting
instructions. These responsibilities of the COMPANY will be carried out with a
view only to the interests of the Variable Contract owners.
5.4 If a majority of the Board or majority of its disinterested
members, determines that a material irreconcilable conflict exists, affecting
the COMPANY, the COMPANY, at its expense and to the extent reasonably
practicable (as determined by a majority of the Board's disinterested members),
will take any steps necessary to remedy or eliminate the irreconcilable material
conflict, including; (a) withdrawing the assets allocable to some or all of the
Separate Accounts from FUND or any Portfolio thereof and reinvesting those
assets in a different investment medium, which may include another Portfolio of
FUND, or another investment company; (b) submitting the question as to whether
such segregation should be implemented to a vote of all affected Variable
Contract owners and as appropriate, segregating the assets of any appropriate
group (i.e variable annuity or variable life insurance Contract owners of one or
more Participating Insurance Companies) that votes in favor of such segregation,
or offering to the affected Variable Contract owners the option of making such a
change; and (c) establishing a new registered management investment company (or
series thereof) or managed separate account. If a material irreconcilable
conflict arises because of the COMPANY's decision to disregard Variable Contract
owner voting instructions, and that decision represents a minority position or
would preclude a majority vote, the COMPANY may be required, at the election of
FUND to withdraw the Separate Account's investment in FUND, and no charge or
penalty will be imposed as a result of such withdrawal. The responsibility to
take such remedial action shall be carried out with a view only to the interests
of the Variable Contract owners.
For the purposes of this Section 5.4, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict but in no event will
FUND or ADVISER (or any other investment adviser of FUND) be required to
establish a new funding medium for any Variable Contract. Further, the COMPANY
shall not be required by this Section 5.4 to establish a new funding medium for
any Variable Contracts if any offer to do so has been declined by a vote of a
majority of Variable Contract owners materially and adversely affected by the
irreconcilable material conflict.
5.5 The Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly and in
writing to the COMPANY.
5.6 No less than annually, the COMPANY shall submit to the Board such
reports, materials or data as the Board may reasonably request so that the Board
may fully carry out its obligations. Such reports, materials, and data shall be
submitted more frequently if deemed appropriate by the Board.
Article VI. VOTING
6.1 The COMPANY will provide pass-through voting privileges to all
Variable Contract owners so long as the SEC continues to interpret the `40 Act
as requiring pass-through voting privileges for Variable Contract owners.
Accordingly, the COMPANY, where applicable, will vote shares of the Portfolio
held in its Separate Accounts in a manner consistent with voting instructions
timely received from its Variable Contract owners. The COMPANY will be
responsible for assuring that each of its Separate Accounts that participates in
FUND calculates voting privileges in a manner consistent with other
Participating Insurance Companies. The COMPANY will vote shares for which it has
not received timely voting instructions, as well as shares it owns, in the same
proportion as its votes those shares for which it has received voting
instructions.
6.2 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or if
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the `40
Act or the rules thereunder with respect to mixed and shared funding on terms
and conditions materially different from any exemptions granted in the Exemptive
Order, then FUND, and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rule 6e-2 and Rule
6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such Rules are
applicable.
Article VII. INDEMNIFICATION
7.1 INDEMNIFICATION BY THE COMPANY. The COMPANY agrees to indemnify and
hold harmless FUND, ADVISER and DISTRIBUTOR and each of their trustees,
directors, principals, officers, partners, employees and agents and each person,
if any, who controls FUND, ADVISER or DISTRIBUTOR within the meaning of Section
15 of the `33 Act (collectively, the "Indemnified Parties" for purposes of this
Article VII) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the COMPANY, which
consent shall not be unreasonably withheld) or litigation (including legal and
other expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of FUND's shares or the Variable
Contracts and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the Registration Statement or prospectus for the Variable
Contracts or contained in the Variable Contracts (or any
amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to the COMPANY by or on
behalf of an Indemnified Party for use in the registration
statement or prospectus for the Variable Contracts or in the
Variable Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Variable Contracts or FUND shares; or
(b) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature of FUND not supplied by the COMPANY, or persons
under its control) or wrongful conduct of the COMPANY or
persons under its control, with respect to the sale or
distribution of the Variable Contracts or FUND shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of FUND or any
amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with information furnished to FUND by or on behalf
of the COMPANY; or
(d) arise as a result of any failure by the COMPANY to provide
the services and furnish the materials under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the COMPANY in this
Agreement or arise out of or result from any other material
breach of this Agreement by the COMPANY.
7.2 The COMPANY shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
7.3 The COMPANY shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the COMPANY in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the COMPANY of any
such claim shall not relieve the COMPANY from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the COMPANY shall be entitled to participate at
its own expense in the defense of such action. The COMPANY also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the COMPANY to such party of the
COMPANY's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
COMPANY will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
7.4 INDEMNIFICATION BY FUND. FUND agrees to indemnify and hold harmless
the COMPANY and each of its directors, officers, employees, and agents and each
person, if any, who controls the COMPANY within the meaning of Section 15 of the
`33 Act (collectively, the "Indemnified Parties" for the purposes of this
Article VII) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of ADVISER which consent
shall not be unreasonably withheld) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
or regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of FUND's shares or the Variable
Contracts and:
(a) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement
or prospectus of FUND (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not apply
as to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to FUND by or on behalf of the
COMPANY for use in the registration statement or prospectus for FUND
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Variable Contracts or FUND shares; or
(b) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration
statement, prospectus or sales literature for the Variable Contracts
not supplied by FUND or persons under its control) or wrongful conduct
of FUND or persons under their control, with respect to the sale or
distribution of the Variable Contracts or FUND shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement or prospectus
covering the Variable Contracts, or any amendment thereof or
supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the COMPANY for
inclusion therein by or on behalf of FUND; or
(d) arise as a result of (i) a failure by FUND to provide the services and
furnish the materials under the terms of this Agreement; or (ii) a
failure by a Portfolio(s) invested in by the Separate Account to
comply with the diversification requirements of Section 817(h) of the
Code; or (iii) a failure by a Portfolio(s) invested in by the Separate
Account to qualify as a "regulated investment company" under
Subchapter M of the Code; or
(e) arise out of or result from any material breach of any representation
and/or warranty made by FUND in this Agreement or arise out of or
result from any other material breach of this Agreement by FUND.
7.5 INDEMNIFICATION BY ADVISER. To the extent not covered by any
applicable insurance coverage of the Fund and the ADVISER, ADVISER agrees to
indemnify and hold harmless the Company and each of its directors, officers,
employees, and agents and each person, if any, who controls the COMPANY within
the meaning of Section 15 of the '33 Act (collectively, the "Indemnified
Parties" for the purposes of this Article VII) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of ADVISER which consent shall not be unreasonably withheld) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisitions of
FUND's shares or the Variable Contracts and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration statement or
prospectus or in sales literature of FUND (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to ADVISER or FUND by or on
behalf of the COMPANY for use in the registration statement or prospectus for
FUND or in sales literature (or any amendment or supplement) or otherwise for
use in connection with the sale of the Variable Contracts or FUND shares; or
(b) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration statement,
prospectus or sales literature for the Variable Contracts not supplied by
ADVISER or persons under its control) or wrongful conduct of FUND of ADVISER or
persons under their control, with respect to the sale or distribution of the
Variable Contracts or FUND shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or sales
literature covering the Variable Contracts, or any amendment thereof or
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with information
furnished to the COMPANY for inclusion therein by or on behalf of FUND; or
(d) arise as a result of (i) a failure by FUND to provide the services
and furnish the materials under the terms of this Agreement; or (ii) a failure
by a Portfolio(s) invested in by the Separate Account to comply with the
diversification requirements of Section 817(h) of the Code; or (iii) a failure
by a Portfolio(s) invested in by the Separate Account to qualify as a "regulated
investment company" under Subchapter M of the Code; or
(e) arise out of or result from any material breach of any
representation an/or warranty made by FUND or ADVISER in this Agreement or arise
out of or result from any other material breach of this Agreement by FUND or
ADVISER.
7.6 FUND or ADVISER shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
7.7 FUND or ADVISER, as the case may be, shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified FUND or ADVISER, as the
case may be, in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify FUND or ADVISER of any such claim shall not relieve FUND or ADVISER from
any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, FUND or
ADVISER shall be entitled to participate at its own expense in the defense
thereof. FUND or ADVISER also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After notice from
FUND or ADVISER to such party of FUND's or ADVISER's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and FUND or ADVISER will not be liable to
such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
Article VIII. TERM; TERMINATION
8.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions herein.
8.2 This Agreement shall terminate in accordance with the following
provisions:
(a) At the option of the COMPANY or FUND at any time from the
date hereof upon 180 days' notice, unless a shorter time is
agreed to by the parties;
(b) At the option of the COMPANY, if FUND shares are not
reasonably available to meet the requirements of the
Variable Contracts as determined by the COMPANY. Prompt
notice of election to terminate shall be furnished by the
COMPANY, said termination to be effective ten days after
receipt of notice unless FUND makes available a sufficient
number of shares to reasonably meet the requirements of the
Variable Contracts within said ten-day period;
(c) At the option of the COMPANY, upon the institution of formal
proceedings against FUND by the SEC, the National
Association of Securities Dealers, Inc., or any other
regulatory body, the expected or anticipated ruling,
judgment or outcome of which would, in the COMPANY's
reasonable judgment, materially impair FUND's ability to
meet and perform FUND's obligations and duties hereunder.
Prompt notice of election to terminate shall be furnished by
the COMPANY with said termination to be effective upon
receipt of notice;
(d) At the option of FUND, upon the institution of formal
proceedings against the COMPANY by the SEC, the National
Association of Securities Dealers, Inc., or any other
regulatory body, the expected or anticipated ruling,
judgment or outcome of which would, in FUND's reasonable
judgment, materially impair the COMPANY's ability to meet
and perform its obligations and duties hereunder. Prompt
notice of election to terminate shall be furnished by FUND
with said termination to be effective upon receipt of
notice;
(e) In the event FUND's shares are not registered, issued or
sold in accordance with applicable state or federal law, or
such law precludes the use of such shares as the underlying
investment medium of Variable Contracts issued or to be
issued by the COMPANY. Termination shall be effective upon
such occurrence without notice;
(f) At the option of FUND if the Variable Contracts cease to
qualify as annuity contracts or life insurance contracts, as
applicable, under the Code, or if FUND reasonably believes
that the Variable Contracts may fail to so qualify.
Termination shall be effective upon receipt of notice by the
COMPANY;
(g) At the option of the COMPANY, upon FUND's breach of any
material provision of this Agreement, which breach has not
been cured to the satisfaction of the COMPANY within ten
days after written notice of such breach is delivered to
FUND;
(h) At the option of FUND, upon the COMPANY's breach of any
material provision of this Agreement, which breach has not
been cured to the satisfaction of FUND within ten days after
written notice of such breach is delivered to the COMPANY;
(i) At the option of FUND, if the Variable Contracts are not
registered, issued or sold in accordance with applicable
federal and/or state law. Termination shall be effective
immediately upon such occurrence without notice;
(j) In the event this Agreement is assigned without the prior
written consent of the COMPANY, FUND, and ADVISER,
termination shall be effective immediately upon such
occurrence without notice.
8.3 Notwithstanding any termination of this Agreement pursuant to
Section 8.2 hereof, FUND at the option of the COMPANY will continue to make
available additional FUND shares, as provided below, pursuant to the terms and
conditions of this Agreement, for all Variable Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, without limitation, the owners of the
Existing Contracts or the COMPANY, whichever shall have legal authority to do
so, shall be permitted to reallocate investments in FUND, redeem investments in
FUND and/or invest in FUND upon the payment of additional premiums under the
Existing Contracts.
Article IX. NOTICES
Any notice hereunder shall be given by registered or certified mail
return receipt requested to the other party at the address of such party set
forth below or at such other address as such party may from time to time specify
in writing to the other party.
If to FUND, or ADVISER.
Lord, Abbett & Co.
The GM Building - 767 Fifth Avenue
New York, New York 10153-0203
Attn: Thomas F. Konop
If to the COMPANY:
Great American Reserve Insurance Company
11815 N. Pennsylvania Street
Carmel, Indiana 46032-4572
Attention: Gregory Gloeckner
Notice shall be deemed given on the date of receipt by the addressee as
evidenced by the return receipt.
Article X. MISCELLANEOUS
10.1 The COMPANY shall be reimbursed for distribution expenses as
provided for in the Distribution Plan attached hereto as Appendix C under the
terms and conditions set forth in such Distribution Plan.
10.2 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
10.3 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
10.4 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
10.5 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Indiana. It
shall also be subject to the provisions of the federal securities laws and the
rules and regulations thereunder and to any orders of the SEC granting exemptive
relief therefrom and the conditions of such orders.
10.6 It is understood and expressly stipulated that neither the
shareholders of shares of any Portfolio nor the Board or officers of FUND or any
Portfolio shall be personally liable hereunder. No Portfolio shall be liable for
the liabilities of any other Portfolio. All persons dealing with FUND or a
Portfolio must look solely to the property of FUND or that Portfolio,
respectively, for enforcement of any claims against FUND or that Portfolio. It
is also understood that each of the Portfolios shall be deemed to be entering
into a separate Agreement with the COMPANY so that it is as if each of the
Portfolios had signed a separate Agreement with the COMPANY and that a single
document is being signed simply to facilitate the execution and administration
of the Agreement.
10.7 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
National Association of Securities Dealers, Inc. and state insurance regulators)
and shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
10.8 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
10.9 No provision of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by FUND,
ADVISER and the COMPANY.
10.10 If this Agreement terminates, the parties agree that Article 7
and Sections 10.1, 10.6, 10.7 and 10.8 shall remain in effect after
termination.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Fund Participation Agreement as of the date and year
first above written.
Lord Abbett Series Fund, Inc.
By: /s/ Thomas F. Konop
Name: Thomas F. Konop
Title: Vice President
Lord, Abbett & Co.
By: /s/ Kenneth B. Cutler
Name: Kenneth B. Cutler
Title: Partner
GREAT AMERICAN RESERVE INSURANCE COMPANY
By: /s/ L. Gregory Gloekner
Name: L. Gregory Gloekner
Title: Senior Vice President
<PAGE>
Q:\LEGAL\LASF\GREATAM.AGR
3/18/97
APPENDIX A
FUND AND ITS PORTFOLIOS
Lord Abbett Series Fund, Inc. Growth and Income Portfolio
<PAGE>
APPENDIX B
SEPARATE ACCOUNTS SELECTED PORTFOLIOS
Variable Annuity Account G Growth and Income Portfolio
CONSENT OF INDEPENDENT AUDITORS
Lord Abbett Series Fund, Inc.:
We consent to the incorporation by reference in Post-Effective Amendment No.11
to Registration Statement No. 33-31072 of our report dated February 5, 1997
appearing in the annual report to shareholders and to the reference to us under
the caption "Financial Highlights" in the Prospectus and to the references to us
under the captions "Investment Advisory and Other Services" and "Financial
Statements" in the Statement of Additional Information, both of which are part
of such Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
April 30, 1997
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