1933 Act File No. 33-33225
1940 Act File No. 811-6033
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [X]
OF 1940
Amendment No. 12 [X]
LORD ABBETT EQUITY FUND
Exact Name of Registrant as Specified in Charter
767 FIFTH AVENUE, NEW YORK, N. Y. 10153-0203
Address of Principal Executive Office
Registrant's Telephone Number (212) 848-1800
Lawrence H. Kaplan, Vice President
767 FIFTH AVENUE, NEW YORK, N. Y. 10153
Name and Address of Agent for Service
It is proposed that this filing will become effective (check appropriate box)
__X__ immediately upon filing pursuant to paragraph (b)
_____ on (date) 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.
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LORD ABBETT EQUITY FUND
PROSPECTUS
October 1, 1999
As with all mutual funds, the Securities and Exchange Commission does not
guarantee that the information in this prospectus is accurate or complete, and
it has not judged this fund for its investment merit. It is a criminal offense
to state otherwise.
TABLE OF CONTENTS
The Fund
Page
What you should know Goal/Strategy 3
about the fund Main Risks 3
Your Investment
Information for managing Redemptions 4
your fund account Distributions and Taxes 5
Services for Fund Investors 6
Service Fees 6
Management 7
For More Information
How to learn more Other Investment Techniques 7
about the fund Back Cover 9
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GOAL/STRATEGY
The fund seeks long-term growth of capital and income without excessive
fluctuations in market value.
Typically, in choosing stocks, we look for companies using a three-step process:
We perform QUANTITATIVE RESEARCH on a universe of large, seasoned, U.S. and
multinational companies to identify which stocks we believe represent the best
bargains.
We conduct FUNDAMENTAL RESEARCH to assess a company's operating environment,
resources and strategic plans and to determine its prospects for exceeding the
earnings expectations reflected in its stock price.
We use BUSINESS CYCLE ANALYSIS to assess the economic and interest-rate
sensitivity of our portfolio, helping us assess how adding or deleting stocks
changes our portfolio's overall sensitivity to economic activity and interest
rates.
The fund is intended for long-term investors who may redeem fund shares to meet
their own financial requirements rather than to take advantage of price
fluctuations. We believe the needs of such investors may be best served by an
investment which exhibits growth, characterized by as few excessive fluctuations
in market value as possible. For this reason, the fund tries to hold securities
which are selling at reasonable prices in relation to value and may forgo some
opportunities for gains when, in its judgment, they are too risky. The fund's
emphasis on large, seasoned-company bargain stocks could potentially limit its
downside risk because bargain stocks in theory are already underpriced and
large, seasoned-company stocks tend to be less volatile than small-company
stocks.
Although there can be no assurance that the fund will achieve its investment
objective, Financial Security Assurance Inc. ("Financial Security") has agreed
to guarantee that the net asset value of each fund share purchased in the
initial offering of the fund's shares in 1990 will not be less than $10 on May
31, 2000 (the "Guarantee Date"), provided that all dividends and distributions
attributable to such share since the date of the initial offering have been
reinvested and certain other conditions have been satisfied. All fund shares
outstanding after the Guarantee Date will be subject to the market risk inherent
in equity funds, and shareholders redeeming before that date will lose the
benefit of the guarantee for those shares redeemed.
Under normal circumstances, at least 65% of the fund's net assets will be
invested in equity securities. Under Financial Security's investment guidelines,
however, due to market conditions, the fund may be required to invest more than
35% of its net assets in U.S. Government Securities, although this is not
expected to be the norm. Under Financial Security's insurance investment
guidelines, and for temporary defensive purposes, the fund may invest some of
its assets in short-term debt securities. This could reduce the benefit from any
upswing in the market and prevent the fund from achieving its investment
objective.
MAIN RISKS
While stocks have historically been a leading choice of long-term investors,
they fluctuate in price. This will cause the value of your investment in the
fund to go up and down. The fund's performance may sometimes be lower or higher
than that of other types of funds (particularly those emphasizing small-company
stocks or growth stocks) because different types of stocks tend to shift in and
out of favor depending on market and economic conditions. As a result, there is
the risk that the fund's investments may never reach what we think are their
full value, or may go down in value. In the long run, the fund may produce more
modest gains than riskier stock funds.
An investment in the fund is not a bank deposit. It is not FDIC-insured or
government endorsed. It is not a complete investment program.
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We or the fund refers to the Lord Abbett Equity Fund. The fund operates under
the supervision of its Board with the advice of Lord, Abbett & Co., its
investment manager.
About the fund. The fund is a professionally managed portfolio of securities
purchased with the pooled money of investors. It strives to reach its stated
goal, although as with all mutual funds, it cannot guarantee results. Large
companies are established companies that are "known quantities." Large companies
often have the resources to weather economic shifts, although they can be slower
to innovate than small companies.
Seasoned companies are usually established companies whose securities have
gained a reputation for quality with the investing public and enjoy liquidity in
the market.
Bargain stocks are stocks of companies that appear underpriced according to
certain financial measurements of their intrinsic worth or business prospects.
Small companies are often new and less established, with a tendency to be
faster-growing but more volatile and less liquid than large-company stocks.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies, and their risks, used
by the fund.
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REDEMPTIONS
By Broker. Call your investment professional for directions on how to redeem
your shares.
By Telephone. To obtain the proceeds of a redemption of $50,000 or less from
your account, you or your representative can call the fund at 800-821-5129.
By Mail. Submit a written redemption request indicating, the name(s) in which
the account is registered, the fund's name, the class of shares, your account
number, and the dollar value or number of shares you wish to sell. Include all
necessary signatures. If the signer has any Legal Capacity, the signature and
capacity must be guaranteed by an Eligible Guarantor. Certain other legal
documentation may be required. For more information regarding proper
documentation call 800-821-5129.
An Eligible Guarantor is any broker or bank that is a member of the Medallion
Stamp Program. Most major securities firms and banks are members of this
program. A notary public is not an Eligible Guarantor.
Normally a check will be mailed to the name and address in which the account is
registered (or otherwise according to your instruction) within three business
days after receipt of your redemption request. Your account balance must be
sufficient to cover the amount being redeemed or your redemption order will not
be processed. Redemption requests for shares initially purchased by check will
not be honored for up to 15 days, unless we are assured that the check has
cleared earlier. A redemption (other than an immediate redemption of shares
issued in payment of a dividend or distribution) is a taxable transaction in
which gain or loss may be recognized.
Pricing of Fund Shares. The fund values its portfolio securities at market
value, on the basis of market quotations where readily available or, where such
quotations are not readily available, at fair market value as determined in good
faith in a manner prescribed by the Board of Trustees. Securities traded on the
New York Stock Exchange ("NYSE") or American Stock Exchange or on the NASDAQ
National Market System are valued at the last sales price, or where there has
been no sale on that day, at the mean between the last reported bid and asked
prices. Over-the-counter securities not traded on the NASDAQ National Market
System are valued at the mean between the last bid and asked prices.
The fund calculates its net asset value and is otherwise open for business on
each day that the NYSE is open for trading. In addition to Saturdays and
Sundays, the NYSE is closed on the following holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas.
Redemptions of fund shares are executed at the net asset value per share next
determined after the fund receives your order in proper form.
DISTRIBUTIONS AND TAXES
The fund pays its shareholders dividends from its net investment income and
distributes any net capital gains that it has realized. The Equity Fund expects
to pay its net investment income annually in December (on or after the 20th day
of December). Supplemental dividends from taxable net investment income may also
be paid thereafter in January. If a capital gain distribution is declared, it
will be paid in December with the regular distribution of net investment income,
and may be made thereafter as a supplemental distribution in January. The fund
intends to pay all dividends and distributions in the form of additional shares
and employ reverse stock splits which will maintain the original number of
shares purchased, assuming no shares are redeemed. If this is done, shareholders
will be advised in the fund's annual report or otherwise in advance of the
anticipated record and payment dates of such dividends and distributions, and
any shareholder desiring to receive the amount of that dividend or distribution
in cash should so notify DST, the fund's servicing agent, at least 30 days prior
to the record date and follow the procedures for redemptions described under
"Redemptions." In this event, the shares issued as the dividend or distribution
will be immediately redeemed and the shareholder will be treated for federal
income tax purposes as having received the dividend or distribution in cash. The
dividend or distribution will be taxable to the shareholder, however, whether or
not the shareholder elects to redeem in this manner. A shareholder redeeming
shares will own fewer Guaranteed Shares and so will lose the benefit of the
Financial Security guarantee to that extent.
The tax status of any distribution is the same for all shareholders regardless
of how long they have been in the fund or whether distributions are reinvested
or paid in cash. In general, distributions are taxable as follows:
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Federal Taxability Of Distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket and above
Income Ordinary Income Ordinary Income
dividends Rate Rate
Short-term Ordinary Income Ordinary Income
capital gains Rate Rate
Long-term
capital gains 10% 20%
Except in tax-advantaged accounts, any sale or exchange of fund shares may be a
taxable event.
Annual Information - Information concerning the tax treatment of dividends and
other distributions will be mailed to shareholders each year. The fund will also
provide annually to its shareholders information regarding the source of
dividends and distributions of capital gains by the fund. Because everyone's tax
situation is unique, you should consult your tax adviser regarding the treatment
of those distributions under the federal, state and local tax rules that apply
to you as well as the tax consequences of gains or losses from the redemption or
exchange of your shares.
Starting January 1, 2001, sales of securities held for more than five years will
be taxed at special lower rates.
SERVICES FOR FUND INVESTORS
The fund offers the following shareholder services as more fully described in
the Statement of Additional Information. Explanations and forms are available
from your dealer or from Lord Abbett.
Telephone Exchanges. You or your investment professional, with proper
identification, can instruct your fund by telephone to exchange shares of the
fund for shares of any other Lord Abbett managed fund by calling 800-821-5129.
The fund must receive instructions for the exchange before the close of the NYSE
on the day of your call. If you meet this requirement, you will get the NAV per
share of the fund determined on that day. Exchanges will be treated as a sale
for federal tax purposes. Be sure to read the current prospectus for any fund
into which you are exchanging. Investors should be aware that until the
Guarantee Date (May 31, 2000), a shareholder who exchanges fund shares for
shares of other Lord Abbett managed funds will lose the guaranteed return of $10
per Guaranteed Share as described above. In addition, a shareholder who makes
such an exchange will not be permitted to reacquire fund shares prior to the
Guarantee Date.
Expedited exchanges by telephone may be difficult to implement in times of
drastic economic market changes. The exchange privilege should not be used to
take advantage of short-term swings in the market. No fees are charged for this
privilege. The fund reserves the right to terminate or limit the exchange
privilege of any shareholder. The fund can revoke the privilege for all
shareholders upon 60 days' prior notice.
Account Statements. Every Lord Abbett investor automatically receives quarterly
account statements.
Householding. Shareholders with the same last name and address will receive a
single copy of a prospectus and an annual or semi-annual report, unless
additional reports are specifically requested in writing to the fund.
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Taxes on Transactions. The chart at the left also can provide a "rule of thumb"
guide for your potential U.S. federal income tax liability when selling or
exchanging fund shares. The second row, "Short-term capital gains," applies to
fund shares sold within 12 months of purchase. The third row, "Long-term capital
gains," applies to shares held for more than 12 months.
Telephone Transactions.
You have this privilege unless you refuse it in writing. For your security,
telephone transaction requests are recorded. We will take measures to verify the
identity of the caller, such as asking for your name, account number, social
security or taxpayer identification number and other relevant information. The
fund will not be liable for following instructions communicated by telephone
that it reasonably believes to be genuine.
Transactions by telephone may be difficult to implement in times of drastic
economic or market change.
Exchange Limitations.
Exchanges should not be used to try to take advantage of short-term swings in
the market. Frequent exchanges create higher expenses for the fund. Accordingly,
the fund reserves the right to limit or terminate this privilege for any
shareholder making frequent exchanges or abusind the privilege. The fund also
may revoke the privilege for all shareholders upon 60 days' written notice.
Important Information. You may be subject to penalties under the Internal
Revenue Code if you have not provided a correct taxpayer identification number
(Social Security Number for individuals) or made certain required
certifications. In addition, we may be required to withhold from your account
and pay to the U.S. Treasury 31% of any redemption proceeds and of any dividend
or distribution from your account.
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Account Changes. For any changes you need to make to your account, consult your
investment professional or call the fund at 800-821-5129.
Systematic Exchange. You or your investment professional can establish a
schedule of exchanges between the fund and any Eligible Fund. The fund offered
in its initial offering 75,000 shares at the maximum offering price of $10 per
share, which included an investment at net asset value of $9.45 and a sales
charge of $.55 per share. There were sales charge reductions on larger orders.
The offering of these shares ended on May 23, 1990 and shares will not be
offered again publicly until after May 31, 2000. Lord Abbett reserves the right
to withdraw, cancel or modify this offering without notice and to refuse any
order in whole or in part.
Financial Security guarantees that the net asset value of each initially
purchased share will not be less than $10 on May 31, 2000, provided all
dividends and distributions attributable to that share are reinvested. The fund
intends to pay all dividends and distributions in shares and employ reverse
stock splits which will maintain the original number of shares purchased,
assuming no shares are redeemed. All dividends and capital gains distributions
will be taxable to shareholders.
The claims-paying ability of Financial Security, a New York stock insurance
company, is rated in the highest category by five major statistical rating
organizations, including Standard & Poor's Corporation (AAA) and Moody's
Investors Service, Inc. (Aaa). The fund is not appropriate for investors who
want cash dividends or cash distributions because they will not obtain the full
benefit of the guarantee. Prudential Mutual Fund Management, Inc. monitors for a
fee the fund's compliance with Financial Security's insurance investment
guidelines. The fund will not sell shares after the Subscription Period and
prior to the Guarantee Date. It is contemplated that all dividends and
distributions will be paid in additional shares unless shareholders elect
otherwise.
SERVICE FEES
The fund has adopted a Rule 12b-1 Plan providing for the payment to dealers of a
distribution service fee at the annual rate of .25% of average daily net assets
of shares of the fund issued during the initial offering and of any shares
attributable to the reinvestment of dividends and distributions on those shares.
Although these fees are paid by the fund to Lord Abbett, Lord Abbett will
disburse all the fees to dealers - no part of the fees will be retained by Lord
Abbett. The principal purpose of the Plan is to provide continuous service to
shareholders, such as answering shareholder inquiries, maintaining records and
advising shareholders with respect to redemptions, transfers, and exchanges, and
to assist the fund in soliciting proxies for any shareholder meetings. 12b-1
fees are payable regardless of expenses.
MANAGEMENT
The fund's investment adviser is Lord, Abbett & Co. ("Lord Abbett"), 767 Fifth
Avenue, New York, NY 10153-0203. Founded in 1929, Lord Abbett manages one of the
nation's oldest mutual fund complexes, with approximately $32 billion in more
than 40 mutual fund portfolios and other advisory accounts.
Under the Management Agreement, the fund pays Lord Abbett a monthly fee
based on average daily net assets for each month at the annual rate of .65 of
1%. For the fiscal year ended May 31, 1999, the fee paid to Lord Abbett was at
the annual rate of .65 of 1%. The fund pays all expenses not expressly assumed
by Lord Abbett.
Pursuant to a separate agreement entered into between Lord Abbett and
Financial Security, Lord Abbett has agreed, subject to certain terms and
conditions, to waive a portion of its fee under the Management Agreement during
those periods, if any, in which the fund is not in compliance with Financial
Security's insurance investment guidelines. The fund is not a party to this
separate agreement, which may be amended at any time without the fund's consent.
Lord Abbett uses a team of portfolio managers and analysts acting together
to manage the fund's investments. Robert G. Morris heads the team, the other
senior member of which is John J. Walsh. Both Mr. Morris and Mr. Walsh are
Partners of Lord Abbett and have been with the company for more than five years.
The services provided to the fund and its shareholders by Lord Abbett, Lord
Abbett Distributor LLC, the fund's transfer agent and the fund's custodian
depend on the proper functioning of their computer systems and those of their
outside service providers. Each fund could be adversely affected if the
computers used by each fund and their service providers do not properly process
and calculate date-related information from and after January 1, 2000. Lord
Abbett
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is working to avoid such problems and has received assurances from each
fund's service providers that they are taking similar steps. Of course, the Year
2000 problem is unprecedented and, therefore, Lord Abbett cannot eliminate
altogether the possibility that it or the funds will be affected.
OTHER INVESTMENT TECHNIQUES
This section describes some of the investment techniques that might be used by
the fund and their risks.
ADJUSTING INVESTMENT EXPOSURE. The fund may, but is not required to, use various
strategies to change its investment exposure to adjust to changing security
prices, interest rates, currency exchange rates, commodity prices and other
factors. The fund may use these transactions to change the risk and return
characteristics of the fund's portfolio. If we judge market conditions
incorrectly or use a strategy that does not correlate well with a fund's
investments, it could result in a loss, even if we intended to lessen risk or
enhance returns. These transactions may involve a small investment of cash
compared to the magnitude of the risk assumed and could produce disproportionate
gains or losses. Also, these strategies could result in losses if the
counterparty to a transaction does not perform as promised.
FOREIGN SECURITIES. These securities are not subject to the same degree of
regulation and may be more volatile and less liquid than securities traded in
major U.S. markets. Foreign portfolio securities may trade on days when an
underlying fund does not value them. Fund share prices could be affected on days
an investor cannot purchase or sell shares. Other risks include less information
on public companies, banks and governments; political and social instability;
expropriations; higher transaction costs; currency fluctuations; nondeductible
withholding taxes and different accounting and settlement practices. The fund
may invest up to 10% of its net assets at the time of investment in foreign
securities. However, this limitation does not apply to American Depository
Receipts.
OPTIONS TRANSACTIONS. The fund may only sell (write) covered call options. This
means that the fund may only sell the call options on securities which the fund
owns. A call option on securities gives the buyer, in return for a premium paid,
the right for a specified period of time to buy the securities subject to the
option at a specified price (the "exercise price" or "strike price"). The writer
of a call option, in return for the premium, has the obligation, upon exercise
of the option, to deliver, depending upon the terms of the option contract, the
underlying securities to the buyer upon receipt of the exercise price. When a
fund writes a call option, it gives up the potential for gain on the underlying
securities in excess of the exercise price of the option during the period that
the option is open.
Options on stock indices are similar to options on equity securities except
that, rather than the right to take or make delivery of stock at a specified
price, an option on a stock index gives the holder the right, in return for a
premium paid, to receive, upon exercise of the option, an amount of cash if the
closing level of the stock index upon which the option is based is greater than,
in the case of a call, or less than, in the case of a put, the exercise price of
the option. The writer of an index option, in return for a premium, is obligated
to pay the amount of cash due upon exercise of the option. The fund may write
only covered put options to the extent that cover for such options does not
exceed 10% of the fund's gross assets at the time an option is written.
PORTFOLIO SECURITIES LENDING. The fund may lend securities to broker-dealers and
financial institutions, as a means of earning income. This practice could result
in a loss or delay in recovering a fund's securities if the borrower defaults.
The fund will limit its loans to no more than 5% of its gross assets.
U.S. GOVERNMENT SECURITIES. To create reserve purchasing power, to meet possible
redemptions, or to satisfy Financial Security's insurance investment guidelines,
the fund may invest in investment grade (BBB/Baa or better) straight
(non-convertible) bonds and other long- or short-term debt obligations.
Obligations which are not so rated will be purchased only if equivalent to
investment grade in the fund's judgment. Under Financial Security's insurance
investment guidelines, the fund may be required to invest a portion of its
assets in "U.S. Government Securities," or in related securities consisting of
obligations fully collateralized by U.S. Government Securities and of custodial
receipts (issued in a program other than the Treasury Department's STRIPS
Program) with respect to U.S. Government Securities. U.S. Government Securities
consist of zero-coupon bonds or other debt securities that are issued,
guaranteed or backed by the full faith and credit of the United States
Government or its agencies or instrumentalities. Custodial receipts evidencing
ownership of parts of U.S. Government Securities issued in the Treasury
Department's STRIPS Program are included within this definition of U.S.
Government Securities. Examples of U.S. Government Securities are: 1)
Obligations issued by the U.S. Treasury, differing only in their interest rates,
maturities and time of issuance, and including Treasury bills maturing in one
year or less. Treasury Notes maturing in one to ten years, and Treasury bonds
with maturities of over ten years, and 2) obligations issued or guaranteed by
U.S. Government agencies and instrumentalities which are supported by any of the
following: (a) the full faith and credit of the United States (such as GNMA
certificates, (b) the right of the issuer to borrow from the U.S. Treasury, (c)
credit of the instrumentality.
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More information on this fund is available free upon request, including the
following:
ANNUAL/SEMI-ANNUAL REPORT
Describes the fund, lists portfolio holdings and contains a letter from
the fund's manager discussing recent market conditions and the fund's
investment strategies.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Provides more details about the fund and its policies. A current SAI is
on file with the Securities and Exchange Commission ("SEC") and is
incorporated by reference (is legally considered part of this
prospectus).
To obtain information:
BY TELEPHONE. Call the fund at:
800-426-1130
BY MAIL. Write to the fund at:
The Lord Abbett Family of Funds
767 Fifth Avenue
New York, NY 10153-0203
VIA THE INTERNET.
LORD, ABBETT & CO.
http://www.lordabbett.com
Text only versions of the fund documents can be viewed online or downloaded
from:
SEC
http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 800-SEC-0330) or by sending your request and a duplicating
fee to the SEC's Public Reference Section, Washington, DC 20549-6009.
Lord Abbett Equity Fund
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
SEC file number: 811-6033
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LORD ABBETT
STATEMENT OF ADDITIONAL INFORMATION OCTOBER 1, 1999
LORD ABBETT EQUITY FUND
(INITIAL INVESTMENT INSURED ON MAY 31, 2000)
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This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord Abbett Distributor LLC
("Lord Abbett Distributor") at The General Motors Building, 767 Fifth Avenue,
New York, New York 10153-0203. This Statement relates to, and should be read in
conjunction with, the Prospectus dated October 1, 1999.
Lord Abbett Equity Fund (referred to as "we" or the "Fund") was organized as a
Massachusetts business trust on January 19, 1990. The Fund has no prior
investment history. The Fund's Trustees have authority to create separate series
of shares of beneficial interest, without further action by shareholders. To
date, the Fund has only one series of shares, the 1990 Series. Although no
present plan exists, further series may be added in the future. Unless otherwise
stated, use of the word "Fund" hereafter in this Statement of Additional
Information will mean the 1990 Series.
Shareholder inquiries should be made by writing directly to the Fund or by
calling 800-821-5129. The 1999 Annual Report to Shareholders is available,
without charge, upon request by calling that number. In addition, you can make
inquiries through your dealer.
TABLE OF CONTENTS Page
1. Investment Policies 2
2. Trustees and Officers 4
3. Financial Assurance Security Inc. 7
4. Investment Advisory and Other Services 10
5. Portfolio Transactions 10
6. Redemptions and Shareholder Services 11
7. Taxes 13
8. Further Information About the Fund 14
9. Financial Statements 14
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1.
INVESTMENT POLICIES
The Fund is a diversified open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act").
FUNDAMENTAL INVESTMENT RESTRICTIONS. We will not change our fundamental
investment objective stated in the Prospectus or the following fundamental
investment restrictions without shareholder approval.
The Fund may not: (1) sell short or buy on margin; (2) borrow money unless
immediately thereafter it has an asset coverage of at least 400% of all
borrowings, except that the assets may be less than 400% of borrowings if
reduced because of changes in the value of its investments (the Fund has no
present plans to borrow money); (3) engage in the underwriting of securities;
(4) lend money or securities to any person except through entering into
short-term repurchase agreements with sellers of securities the fund has
purchased, and through lending its portfolio securities to registered
broker-dealers where the loan is 100% secured by cash or its equivalent as long
as the Fund complies with regulatory requirements and management deems such
loans not to expose the Fund to significant risk or adversely affect its
qualification for pass-through tax treatment under the Internal Revenue Code
(investment in repurchase agreements exceeding 7 days and in other illiquid
investments is limited to a maximum of 10% of the Fund's assets); (5) pledge,
mortgage, or hypothecate its assets - however, this provision does not apply to
(a) the grant of escrow receipts or (b) the entry into other similar escrow
arrangements arising out of the writing of covered call options; (6) deal in
real estate, commodities, or commodity contracts; (7) invest in securities
issued by other investment companies as defined in the 1940 Act; (8) purchase
securities of any issuer unless it or its predecessor has a record of three
years' continuous operation, except that the Fund may purchase securities of
such issuers through subscription offers or other rights the Fund receives as a
security holder of companies offering such subscription or rights, and such
purchases will then be limited in the aggregate to 5% of the Fund's net assets
at the time of investment; (9) buy securities if the purchase would then cause
the Fund to have more than 5% of its gross assets, at market value at the time
of investment, invested in the securities of any one issuer (except securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
obligations fully collateralized thereby or custodial receipts with respect
thereto issued in a program other than the Treasury Department's STRIPS
Program), or to own more than 10% of the voting securities of any issuer; (10)
hold securities of any issuer when more than 1/2 of 1% of the issuer's
securities are owned beneficially by one or more of the Fund's officers or
trustees or by one or more partners of the Fund's underwriter or investment
manager if these owners in the aggregate own beneficially more than 5% of such
securities; (11) engage in security transactions with the Fund's underwriter or
investment manager, with its officers or directors, or with firms (acting as
principals) with which any of the foregoing are associated - however, this
provision does not apply to the Fund's shares, to securities the Fund may become
entitled to by reason of its ownership of securities already held, to
transactions on a securities exchange when only the regular exchange commissions
and charges are imposed or to transactions in accordance with Rule 17a-7 under
the 1940 Act; or (12) concentrate the Fund's investments in any one industry.
(Neither U.S. Government Securities as defined in the Prospectus, obligations
fully collateralized thereby nor custodial receipts with respect there issued in
a program other than the Treasury Department's STRIPS Program shall be
considered to represent an industry for this purpose. In addition, the Fund's
investment policy of investing in securities which are believed to be selling at
reasonable prices in relation to value normally results in diversification among
many industries - consistent with this and the insurance investment guidelines
referred to below, the Fund does not intend to invest more than 25% of its
assets in any one industry classification it uses for investment purposes,
although such concentration could, under unusual economic and market conditions,
amount to more than 25%.
Compliance with the investment restrictions will be determined at the time of
the purchase or sale of the portfolio investments.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. If we determine that our investment
objective can best be achieved by a change in a non-fundamental investment
policy, strategy or restriction, we may make such change without shareholder
approval by disclosing it in the Prospectus or Statement of Additional
Information.
As a condition of the Fund's registration in certain states, it has agreed not
to invest more than 10% of its assets in restricted securities or more than 5%
of its assets in illiquid securities and not to invest in oil, gas or mineral
development programs or in puts or calls (other than in connection with the
writing of covered call options as described in the Prospectus) or like options.
2
<PAGE>
As stated in the Prospectus, the Fund may write covered call options which are
traded on a national securities exchange with respect to securities in its
portfolio. The writing of such options would represent an attempt to increase
the Fund's income and to provide greater flexibility in the disposition of its
portfolio securities. A "call option" is a contract sold for a price (the
"premium") giving its holder the right to buy a specific number of shares of
stock at a specific price prior to a specified date. A call option is "covered"
if the Fund owns the optioned securities or has an immediate right to acquire
such securities, without additional consideration, upon conversion or exchange
or securities currently held in the Fund's portfolio. During the period of the
option, the Fund foregoes the opportunity to profit from any increase in the
market price of the underlying security above the exercise price of the options
(to the extent that the increase exceeds the Fund's net premium). The Fund may
also enter into "closing transactions" in order to terminate its obligation to
deliver the underlying security. A closing purchase transaction is the purchase
of a call option (at a cost which may be more or less than the premium received
for writing the original call option) on the same security with the same
exercise price and call period as the option previously written. Such a
transaction may result in a short-term gain or loss. If the Fund is unable to
enter into a closing purchase transaction, it may be required to hold a security
that it might otherwise have sold to protect against depreciation. The Fund does
not intend to write covered call options with respect to securities with an
aggregate market value of more than 10% of its gross assets at the time an
option is written.
INSURANCE INVESTMENT GUIDELINES. The guarantee provided by Financial Security
requires the Fund, with respect to a portion (which may under certain
circumstances constitute all) of its assets not invested in U.S. Government
Securities (as defined in the Prospectus), obligations fully collateralized
thereby or custodial receipts with respect thereto issued in a program other
than the Treasury Department's STRIPS Program, cash or cash equivalents, to
adhere to certain investment limitations that are in some respects more
restrictive than those to which the Fund is otherwise committed. These
limitations will tend to lower still further the overall level of risk to which
the affected portion of the Fund's portfolio is subject by further restricting
the extent to which such portion may be invested in (1) the securities of a
single issuer (3% of such portion but not in excess of 5% of the issuer's
securities); (2) the securities of issuers in a single industry (generally, 7%
of such portion but more with respect to 3 specified industries); (3) foreign
securities that are not U.S. dollar denominated (none of such portion) and those
that are not U.S. dollar denominated (10% of such portion); (4) securities of
issuers which do not satisfy specified rating criteria (Baa3 or BBB - for senior
debt); (5) equity securities of issuers not satisfying certain requirements as
to dividend history (cash dividends in each of the last 3 years), stock market
capitalization with respect to such issue ($500 million), shareholder base (at
least 2,000 record stockholders) and exchange listing (New York or American
Stock Exchanges, NASDAQ National Market System or other agreed-upon exchanges);
and (6) a single security (25% of prior 20 business days' trading volume).
As discussed in the Prospectus, the Fund may be required to invest a portion of
its assets in U.S. Government Securities, obligations fully collateralized
thereby or custodial receipts with respect thereto issued in a program other
than the Treasury Department's SCRIPS Program. In addition, the Fund will agree
not to buy or sell any futures contract or buy any security the issuer of which
is or has been within the past 5 years in default on any debt security.
In general, the investment guidelines require the Fund at all times to have
sufficient eligible assets, after applying various agreed upon discount factors,
to cover the cost of a potential purchase of eligible zero-coupon bonds maturing
on or before the Guarantee Date (as defined on page 7) that would at maturity,
together with any such bonds already held by the Fund, equal or exceed the
Guaranteed Amount (as defined on page 7) times the number of Guaranteed Shares
(as defined on page 7) outstanding at the time. Assets qualifying as "eligible"
for the purpose of this test must satisfy various investment limitations that
are in some respects more restrictive than those to which the Fund is otherwise
committed. The Fund expects that at this time these guidelines would permit it
to invest almost entirely in eligible equity assets, although the Fund may
nevertheless choose to invest a portion of its assets in U.S. Government or
related securities. Moreover, various things could happen, such as a decline in
the value of eligible assets or a decline in long-term interest rates, that
could result in the Fund's investing a part of, in extremely unlikely
circumstances, possibly all of its assets in U.S. Government or related
securities. For example, if the eligible assets declined by 20% from their
initial level, and assuming no change in long-term interest rates from their
present level of 8.6% per annum, the Fund might satisfy these guidelines by
investing up to 17% of its total portfolio in zero-coupon bonds. Also, for
example, if long-term interest rates decline to 7.1% per annum, and assuming no
change in the market value of the eligible assets, the Fund could satisfy the
guidelines by investing up to 15% of its total portfolio in zero-coupon bonds.
In the future, the Fund also might increase its investments in U.S. Government
and related securities, even though interest rates do not decline, should the
market value of the Fund's eligible assets not increase an offsetting amount.
The insurance investment guidelines are intended to provide comfort to Financial
Security in connection with its
3
<PAGE>
guarantee to the Fund. Although the Fund will respect these guidelines to the
extent required under the terms of the guarantee, the limitations are not
fundamental policies and their modification is not subject to shareholder
approval.
For the year ended May 31, 1999, the portfolio turnover rate was 59.17% versus
43.10% for the prior year.
2.
TRUSTEES AND OFFICERS
The Board of Trustees of the Fund is responsible for the management of the
business and affairs of the Fund. The following trustee is a partner of Lord
Abbett, The General Motors Building, 767 Fifth Avenue, New York, New York
10153-0203. He has been associated with Lord Abbett for over five years and is
also an officer and/or director or trustee of the twelve other Lord
Abbett-sponsored funds. Mr. Dow is an "interested person" as defined in the 1940
Act.
*Robert S. Dow, age 54, Chairman and President
The following outside trustees are also directors or trustees of the other Lord
Abbett-sponsored funds referred to above.
E. Thayer Bigelow
Time Warner Inc.
1271 Avenue of the Americas
New York, New York
Senior Adviser, Time Warner Inc. Formerly, Acting Chief Executive Officer of
Courtroom Television Network (1997-1998). Formerly, President and Chief
Executive Officer of Time Warner Cable Programming, Inc. (1991-1997). Prior to
that, President and Chief Operating Officer of Home Box Office, Inc. Age 58.
William H. T. Bush
Bush-O'Donnell & Co., Inc.
101 South Hanley Road, Suite 1025
St. Louis, Missouri
Co-founder and Chairman of the Board of financial advisory firm of
Bush-O'Donnell & Company. Age 61.
Robert B. Calhoun, Jr.
Monitor Clipper Partners
650 Madison Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners and President of The Clipper
Group, both private equity investment funds. Age 56.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 68.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 73.
C. Alan MacDonald
415 Round Hill Road
Greenwich, Connecticut
Currently involved in golf development management on a consultancy basis.
Formerly, Managing Director of The Directorship Group, Inc., a consultancy in
executive search, board management and corporate governance (1997 - 1999). Prior
to that, General Partner of The Marketing Partnership, Inc., a full service
marketing consulting firm (1994
4
<PAGE>
- - 1997). Chairman and Chief Executive Officer of Lincoln Snacks, Inc.,
manufacturer of branded snack foods (1992 - 1994). His career includes 36 years
at Stouffers and Nestle with 18 of those years as Chief Executive Officer.
Currently serves as Director of J.B. Williams Company, Inc., Fountainhead Water
Company, CARESIDE, Inc. and Lincoln Snacks Company. Age 66.
Hansel B. Millican, Jr.
Rochester Button Company
1328 Broadway (Suite 816)
New York, New York
President and Chief Executive Officer of Rochester Button Company. Currently
serves as Director of Polyvision Corporation. Age 71.
Thomas J. Neff
Spencer Stuart
277 Park Avenue
New York, New York
Chairman of Spencer Stuart, an executive search consulting firm. Currently,
serves as Director of Ace, Ltd. (NYSE). Age 61.
The second column of the following table sets forth the compensation accrued for
the Fund's outside trustees. The third column sets forth information with
respect to the equity-based benefits accrued for outside trustees by the Lord
Abbett-sponsored funds. The fourth column sets forth the total compensation
payable by such funds to the outside trustees. No trustee of the Fund associated
with Lord Abbett and no officer of the Fund received any compensation from the
Fund for acting as a trustee or officer.
<TABLE>
<CAPTION>
For the Fiscal Year Ended May 31, 1999
(1) (2) (3) (4)
For Year Ended
Equity-Based December 31, 1998
Benefits Accrued Total Compensation
by the Fund and Accrued by the
Aggregate Twelve Other Lord Fund and Twelve
Compensation Abbett-sponsored Other Lord Abbett-
Accrued by the Fund(1) Funds(2) sponsored Funds(3)
---------- ----------- -------- ------------------
Name of Trustee
- ---------------
<S> <C> <C> <C>
E. Thayer Bigelow $177 $17,068 $57,400
William H. T. Bush* $85 None $27,500
Robert B. Calhoun** $103 None $33,500
Stewart S. Dixon $174 $32,190 $56,500
John C. Jansing $171 $45,085(4) $55,500
C. Alan MacDonald $170 $30,703 $55,000
Hansel B. Millican, Jr. $171 $37,747 $55,500
Thomas J. Neff $174 $19,853 $56,500
</TABLE>
* ELECTED AUGUST 13, 1998.
** ELECTED JUNE 17, 1998.
5
<PAGE>
1. Outside trustees' fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on the
net assets of each fund. A portion of the fees payable by the Fund to its
outside trustees is being deferred under a plan that deems the deferred
amounts to be invested in shares of the Fund for later distribution to the
trustees.
2. The amounts in Column 3 were accrued by the Lord Abbett-sponsored Funds for
the twelve months ended May 31, 1999 with respect to the equity based plans
established for independent directors/trustees in 1996. This plan supercedes
a previously approved retirement plan for all future trustees. Current
trustees had the option to convert their accrued benefits under the
retirement plan. All of the outside directors except one made such an
election.
3. This column shows aggregate compensation, including directors/trustees' fees
and attendance fees for board and committee meetings, of a nature referred to
in footnote one, accrued by the Lord Abbett-sponsored funds during the year
ended December 31, 1998. The amounts of the aggregate compensation payable by
the Fund as of May 31, 1999 deemed invested in Fund shares, including
dividends reinvested and changes in net asset value applicable to such deemed
investments, were: Mr. Bigelow, $1,245; Mr. Calhoun, $200; Mr. Dixon, $2,507;
Mr. Jansing, $6,529; Mr. MacDonald, $5,420; Mr. Millican, $6,602 and Mr.
Neff, $6,564.
4. Mr. Jansing chose to continue to receive benefits under the retirement plan,
which provides that outside trustees may receive annual retirement benefits
for life equal to their final annual retainer following retirement at or
after age 72 with at least ten years of service. Thus, if Mr. Jansing were to
retire and the annual retainer payable by the funds were the same as it is
today, he would receive annual retirement benefits of $50,000.
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. None have received compensation
from the fund. Messrs. Carper, Hilstad, Morris and Walsh are partners of Lord
Abbett; the others are employees.
Executive Vice President:
Robert G. Morris, age 54.
Vice Presidents:
Paul A. Hilstad, age 56, Vice President and Secretary (with Lord Abbett since
1995 - formerly Senior Vice President and General Counsel of American Capital
Management & Research, Inc.)
Daniel E. Carper, age 46
Lawrence A. Kaplan, age 42 (with Lord Abbett since 1997 - formerly Vice
President and Chief Counsel of Salomon Brothers Asset Management Inc from 1995
to 1997, prior thereto Senior Vice President, Director and General Counsel of
Kidder Peabody Asset Management, Inc.)
A. Edward Oberhaus III, age 38
Keith O'Connor, age 43
John J. Walsh, age 62
Treasurer:
Donna McManus, age 37 (with Lord Abbett since 1996, formerly a Senior Manager at
Deloitte & Touche LLP).
At September 1, 1999, the officers and trustees of the Fund, as a group, owned
less than 1% of the 1990 Series outstanding shares. As of September 1, 1999, the
record holders of 5% or more of the Fund's outstanding shares are as follows:
EDWARD JONES & CO. - 13.71%
201 Progress Pkwy
Marayland Hts, MO 63043-3009
6
<PAGE>
3.
FINANCIAL SECURITY ASSURANCE INC.
Financial Security Assurance Inc. ("Financial Security"), a New York stock
insurance company, has agreed to guarantee unconditionally and irrevocably to
the Fund pursuant to an Insurance Policy (the "Policy") that the net asset value
of each initially purchased Guaranteed Share (as defined below) will not be less
than $10 (the "Guaranteed Amount") on May 31, 2000 (the "Guarantee Date"),
provided all dividends and distributions attributable to that share are
reinvested. The Fund intends to pay all dividends and distributions in shares
and employ reverse stock splits which will maintain the original number of
shares purchased, assuming no shares are redeemed.
The Fund intends to pay all dividends and distributions in the form of
additional shares. Such dividends and distributions will be taxable to
shareholders, and taxes paid with respect thereto will not be taken into account
in determining the Guaranteed Amount. The Trustees presently intend, through
reverse stock splits, to combine the additional shares with the originally
purchased shares as to which such dividends and distributions are paid. If the
Trustees take this action with respect to each dividend and distribution prior
to the Guarantee Date, a "Guaranteed Share" shall mean a single outstanding
share. If the Trustees do not authorize such reverse stock splits, a "Guaranteed
Share" shall mean, on a given date, that number of shares that a shareholder
would hold on that date if he had bought a single share in this offering and
then held it and all shares issued as dividends and distributions attributable
thereto through the given date. This single share and all shares issued as
dividends and distributions attributable thereto will be treated as a single
unit to which the $10 Guaranteed Amount will apply as described above. Reverse
stock splits will have no economic significance. If effected by the Trustees,
they simply will enable shareholders to determine more easily whether the value
of their investment is above or below the Guaranteed Amount.
Financial Security will agree to pay the Custodian, for the account of the Fund,
on the fifth business day following the Guarantee Date, the amount, if any,
needed to enable each shareholder who elects to redeem shares on the Guarantee
Date to receive $10 for each Guaranteed Share by the date of such redemption
payment. The Custodian will be instructed to hold any such insurance payment
with the Fund's other assets. Financial Security's guarantee is intended to
assure each owner of shares purchased in this offering that he or she will be
able to recover by the Guarantee Date, at a minimum, $10 for each Guaranteed
Share. The guarantee will benefit the owner of Fund shares on the Guarantee
Date, who need not be the original purchaser and who, for example, may own such
shares by gift or inheritance. All shares of the Fund outstanding after the
Guarantee Date will be subject to the market risks inherent in equity funds, and
shareholders redeeming before that date will lose the benefit of the guarantee
for those shares redeemed.
The Fund has entered into agreements (the "Insurance Agreements") with Financial
Security, pursuant to which, among other things, Financial Security agreed to
issue the Policy containing the guarantee and the Fund agreed to pay an
insurance premium in respect thereof. The annual insurance premium equals .50 of
1% of the total amount guaranteed ($.05 a year for each outstanding Guaranteed
Share). The total amount guaranteed will be determined by multiplying the
outstanding Guaranteed Shares at the time of the premium calculation by $10.
Financial Security required that the Fund retain the services of a compliance
agent to monitor the Fund's compliance with the insurance investment guidelines.
The Fund pays the compliance agent a fee equal to the annual rate of .05 of 1%
of the Fund's average daily net assets. Payment of this premium and fee
increases the Fund's expense ratio. The Financial Security Guarantee is
unconditional and irrevocable: likewise, the Fund is obligated to pay the
premium and fee through the Guarantee Date notwithstanding the performance of
the Fund or the financial condition of Financial Security. Where there will be
no return of this expense to a shareholder who redeems shares, the amount of the
expense charged to the Fund will be reduced by such a redemption because the
total amount guaranteed will be reduced. Pursuant to insurance investment
guidelines to be set forth in the Insurance Agreements, the Fund will be
required (1) to invest a portion (which may under certain circumstances
constitute all) of its assets according to certain investment limitations (which
provide for more conservative investment in the types of securities described in
this Prospectus and the Statement of Additional Information), and (2) under
certain circumstances, to invest a portion of its assets in U.S. Government
Securities or related obligations, as defined under "How the Fund Invests." All
assets of the Fund will be held by the Fund's custodian (the "Custodian"), which
will be Morgan Guaranty Trust Company of New York.
Payment obligations under the Policy will be solely obligations of Financial
Security. Neither the Fund, Lord Abbett, any of their affiliates nor any other
party is undertaking any obligation to the Fund or its shareholders with respect
to the guarantee contained in the Policy other than an obligation by the Fund to
obtain such guarantee. The Policy will not be covered by the property/casualty
insurance security fund specified in Article 76 of the New York insurance law.
7
<PAGE>
RATINGS. Financial Security's insurance financial strength is rated "Aaa" by
Moody's Investors Service, Inc. Financial Security's insurer financial strength
is rated "AAA" by Standard & Poor's Ratings Services and Standard & Poor's
(Australia) Pty. Ltd. Financial Security's claims-paying ability is rated "AAA"
by Fitch IBCA, Ins. and Japan Rating and Investment Information, Inc. Such
ratings reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies.
CAPITALIZATION. The following table sets forth the capitalization of Financial
Security and its wholly owned subsidiaries on the basis of generally accepted
accounting principles as of June 30, 1999 (in thousands):
June 30, 1999
-------------
(Unaudited)
Deferred Premium Revenue (net of prepaid reinsurance premiums) $ 520,986
-------
Surplus Notes 120,000
-------
Minority Interest 21,429
------
Shareholder's Equity:
Common Stock 15,000
Additional Paid-In Capital 706,117
Accumulated Other Comprehensive Loss (net of deferred income (1,937)
taxes)
Accumulated Earnings 418,772
-------
Total Shareholder's Equity 1,137,952
---------
Total Deferred Premium Revenue, Surplus Notes, Minority
Interest and Shareholder's Equity $1,800,367
----------
For further information concerning Financial Security, see the Consolidated
Financial Statements of Financial Security and Subsidiaries, and the notes
thereto. Financial Security's financial statements are included as exhibits to
the Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q filed with
the Securities and Exchange Commission by Holdings and may be reviewed at the
EDGAR web site maintained by the Securities and Exchange Commission and at the
web site http://www.FSA.com. Copies of the statutory quarterly and annual
statements filed with the State of New York Insurance Department by Financial
Security are available upon request to the State of New York Insurance
Department.
INSURANCE REGULATION. Financial Security is licensed and subject to regulation
as a financial guaranty insurance corporation under the laws of the State of New
York, its state of domicile. In addition, Financial Security and its insurance
subsidiaries are subject to regulation by insurance laws of the various other
jurisdictions in which they are licensed to do business. As a financial guaranty
insurance corporation licensed to do business in the State of New York,
Financial Security is subject to Article 69 of the New York Insurance law which,
among other things, limits the business of each such insurer to financial
guaranty insurance and related lines, requires that each such insurer maintain a
minimum surplus to policyholders, establishes contingency, loss and unearned
premium reserve requirements for each such issuer, and limits the size of
individual transactions ("single risks") and the volume of transactions
("aggregate risks") that may be underwritten by each such issuer. Other
provisions of the New York Insurance Law, applicable to non-life insurance
companies such as Financial Security, regulate, among other things, permitted
investments, payment of dividends, transactions with affiliates, mergers,
consolidations, acquisitions or sales of assets and incurrence of liability for
borrowings.
REINSURANCE. Pursuant to an intercompany agreement, liabilities on financial
guaranty insurance written or reinsured from third parties by Financial Security
or its domestic or Bermuda operating insurance company subsidiaries are
generally reinsured among such companies on an agreed-upon percentage
substantially proportional to their respective capital, surplus and reserves,
subject to applicable statutory risk limitations. In addition, Financial
Security reinsures a portion of its liabilities under certain of its financial
guaranty insurance policies with other reinsurers under various treaties and on
a transaction -by-transaction basis. Such reinsurance is utilized by Financial
Security as a risk management device and to comply with statutory and rating
agency requirements; it does not alter or limit Financial Security's obligations
under an financial guaranty insurance policy.
THE GUARANTEE. Pursuant to agreements between the Fund and Financial Security,
(i) Financial Security will issue
8
<PAGE>
an insurance policy (the "Policy") containing the guarantee described in the
Prospectus, which Policy shall be held by the Custodian and (ii) the Fund will
agree to pay to Financial Security a premium (as described in the Prospectus) in
respect of the Policy. The Guarantee Date is May 31, 2000. In the event that the
net asset value per Guaranteed Share outstanding on the Guarantee Date is at
least equal to $10, less any amounts previously paid by the Fund as cash
dividends or distributions per Guaranteed Share to all shareholders (the
"Guaranteed Amount"), the Policy will expire in accordance with its terms. (The
Fund believes any such cash dividends or distributions are highly unlikely.) In
the event that the net asset value per Guaranteed Share outstanding on the
Guarantee Date is less than the Guaranteed Amount, the Fund will demand payment
under the Policy and the terms of the Policy will obligate Financial Security
unconditionally and irrevocably to pay to the Custodian for the account of the
Fund an amount equal to the difference between the net asset value and the
Guaranteed Amount for all Guaranteed Shares outstanding on the Guarantee Date.
(The net asset value on the Guarantee Date for this purpose will be certified by
the Fund's independent certified public accountants no later than 90 days
following the Guarantee Date.) The Custodian will deposit any payment received
from Financial Security in the Fund's account pursuant to the Custody Agreement.
The amount of any payment by Financial Security, plus the net asset value
already held by the Fund, are to provide a net asset value of at least $10.00
per Guaranteed Share by the Guarantee Date, less any amounts previously paid by
the Fund as cash dividends or distributions per Guaranteed Share to all
shareholders. On the Guarantee Date, the shareholder will have two options: (i)
keep his or her shares or (ii) surrender his or her shares to the Fund for at
least the Guaranteed Amount. Investors should keep in mind that dividends and
distributions will be taxable to shareholders and that taxed paid with respect
thereto will not be taken into account in determining the amount, if any, of
Financial Security's guarantee payment.
The obligations, if any, of Financial Security under the Policy shall be
discharged when all required payments are made in full to the Custodian for the
account of the Fund. Payment obligations under the Policy will be solely
obligations of Financial Security. Neither the Fund, Lord Abbett or any of their
affiliates nor any other party is undertaking any obligation to the Fund or its
shareholders with respect to the guarantee contained in the Policy other than an
obligation by the Fund to obtain such guarantee.
Pursuant to the Policy, Financial Security will waive, to the fullest extent
permitted by law, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defenses of fraud), whether
acquired by assignment or otherwise, to the extent that such rights and defenses
may be available to Financial Security to avoid payment of its obligations under
the Policy in accordance with the express provisions of the Policy.
Claims under the Policy and claims under each other insurance policy issued by
Financial Security will constitute pari passu claims against the general assets
of Financial Security. Any modification or alteration of the terms of the Policy
by any other agreement or instrument will require the Fund's consent. The Policy
will be governed by the laws of the State of New York.
The Policy will not be covered by the property/casualty insurance security fund
specified in Article 76 of the New York insurance law.
The foregoing is only a summary, and not a complete statement, of the principal
terms of the Policy, including Financial Security's guarantee contained herein.
Reference is made to the Policy, a specimen copy of which is filled as an
exhibit to the Registration Statement to which the Prospectus and Statement of
Additional Information relate. This summary is subject thereto and qualified in
its entirety by such reference.
COMPLIANCE AGREEMENT AND DAILY MONITORING. Pursuant to a Compliance Agreement
(the "Compliance Agreement") among the Fund, Financial Security and Prudential
Mutual Fund Management Inc. (the "Compliance Agent"), the Compliance Agent
reviews the Fund's assets daily for compliance with the above-mentioned
insurance investment guidelines. The Compliance Agent notifies the Fund daily of
the results of this review and provides a weekly report to Financial Security,
with daily notice to Financial Security if the Fund is found not to be in
compliance. Financial Security reserves the right to require more frequent
submission of compliance reports if necessary in its opinion. The Compliance
Agent's compliance review function is subject to quarterly audit with a report
to the Fund, the Compliance Agent and Financial Security. The Compliance Agent
receives from the Fund a fee equal to the annual rate of .05 of 1% of the Fund's
average daily net assets for its daily compliance review services under the
Compliance Agreement. The Compliance Agent is affiliated with Prudential-Bache
Securities Inc. which will participate as a dealer in the offering of the Fund's
shares.
FINANCIAL SECURITY ASSURANCE INC. Financial Security is a monoline insurance
company incorporated in 1984 under the laws of the State of New York. Financial
Security is licensed to engage in financial guaranty insurance business in all
50 states, the District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged in the business of writing
financial guaranty insurance,
9
<PAGE>
principally in respect of securities offered in domestic and foreign markets. In
general, financial guaranty insurance consists of the issuance of a guaranty of
scheduled payments of an issuer's securities--thereby enhancing the credit
rating of those securities--in consideration for the payment of a premium to the
insurer. Financial Security and its subsidiaries principally insure
asset-backed, collateralized and municipal securities. Asset-backed securities
are generally supported by residential mortgage loans, consumer or trade
receivables, securities or other assets having an ascertainable cash flow or
market value. Collateralized securities include public utility first mortgage
bonds and sale/leaseback obligation bonds. Municipal securities consist largely
of general obligation bonds, special revenue bonds and other special obligations
of state and local governments. Financial Security insures both newly issued
securities sold in the primary market and outstanding securities sold in the
secondary market that satisfy Financial Security's underwriting criteria.
Financial Security is a wholly owned subsidiary of Financial Security Assurance
Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company. Major
shareholders of Holdings include White Mountains Insurance Group, Inc., MediaOne
Capital Corporation, The Tokio Marine and Fire Insurance Co., Ltd. and XL
Capital Ltd. No shareholder of Holdings is obligated to pay any debt of
Financial Security or any claim under any insurance policy issued by Financial
Security or to make any additional contribution to the capital of Financial
Security.
The principal executive offices of Financial Security are located at 350 Park
Avenue, New York, New York 10022, and its telephone number at that location is
(212) 826-0100.
4.
INVESTMENT ADVISORY AND OTHER SERVICES
As described under "Management" in the Prospectus, Lord Abbett is the Fund's
investment manager.
Under the Management Agreement, the Fund pays Lord Abbett a monthly fee, based
on average daily net assets for each month, at the annual rate of .65 of 1%.
Pursuant to a separate agreement entered into between Lord Abbett and Financial
Security, Lord Abbett has agreed, subject to certain terms and conditions, to
waive a portion of its fee under the Management Agreement during those periods,
if any, in which the Fund is not in compliance with Financial Security's
insurance investment guidelines. The Fund is not a party to this separate
agreement, which may be amended at any time without the Fund's consent. For the
fiscal years ended May 31, 1999, 1998 and 1997 the management fees paid by the
Fund to Lord Abbett under the Management Agreement were $ 405,523, $426,436, and
$ 374,988, respectively.
The Fund pays all expenses not expressly assumed by Lord Abbett, including
without limitation 12b-1 Plan expenses, outside trustees' fees and expenses,
association membership dues, legal and auditing fees, taxes, transfer and
dividend disbursing agent fees, shareholder servicing costs, custody fees, fees
for reviewing compliance with Financial Security's insurance investment
guidelines expenses relating to shareholder meetings, expenses of preparing,
printing and mailing stock shareholder reports, expenses of registering the Fund
under federal and state securities laws, insurance premiums, including the
annual fee paid to Financial Security for its guarantee, and brokerage and other
expenses relating to the execution of portfolio transactions.
Deloitte & Touche LLP, Two World Trade Center, New York, New York 10281 are the
independent auditors of the Fund and must be approved at least annually by its
Trustees to continue in such capacity. They will perform audit services for the
Fund including the examination of financial statements included in the Fund's
annual report to shareholders.
Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, New York
10286 is the Fund's custodian.
United Missouri Bank of Kansas City, N.A., Tenth and Grand Kansas, City,
Missouri 64141, acts as the Transfer Agent and Dividend Disbursing Agent for the
fund.
5.
PORTFOLIO TRANSACTIONS
The Fund's policy is to have sales of portfolio securities executed at the most
favorable prices (considering all costs of the transaction, including brokerage
commissions and dealer markups and markdowns), consistent with obtaining the
10
<PAGE>
best execution, except to the extent that it may pay a higher commission as
described below. This policy governs the selection of brokers or dealers and the
market in which the transaction is executed. To the extent permitted by law, the
Fund may, if such a transaction is considered advantageous to the Fund, make a
sale to another Lord Abbett- managed fund without the intervention of any
broker-dealer.
The Fund selects broker-dealers on the basis of their professional capability
and the value and quality of their brokerage and research services. Normally,
such selection is made by a Fund trader who is both an officer of the Fund and
employee of Lord Abbett. He does the trading as well for other accounts --
investment companies (of which he is also an officer) and other investment
clients -- managed by Lord Abbett and is responsible for the negotiation of
prices and commissions.
A broker-dealer may receive a commission for portfolio transactions exceeding
the amount another broker-dealer would have charged for the same transaction if
the Fund's trader determines that such commission is reasonable in relation to
the value of the brokerage and research services performed by the executing
broker-dealer viewed in terms of either the particular transaction or the
broker-dealer's overall responsibilities with respect to the Fund and other
accounts managed by Lord Abbett. Brokerage services may include such factors as
showing the Fund trading opportunities, including blocks, willingness and
ability to take positions in securities, knowledge of a particular security or
market, proven ability to handle a particular type of trade, confidential
treatment, promptness, reliability, and quotation and pricing services. Research
may include the furnishing of analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy and the
performance of accounts. Such research may not be used by Lord Abbett in
servicing all their accounts, and not all of such research will necessarily be
used by Lord Abbett in connection with their services to the Fund; conversely,
research furnished in connection with brokerage or other accounts managed by
Lord Abbett may be used in connection with their services to the Fund, and not
all such research will necessarily be used by Lord Abbett in connections with
their services to other accounts. The Fund has been advised by Lord Abbett that,
although such research is often useful, no dollar value can be ascribed to it
nor can it be accurately ascribed or allocated to any account, and it is not a
substitute for services provided by them to the Fund; nor does it materially
reduce or otherwise affect the expenses incurred by Lord Abbett in the
performance of such services. The Fund makes no commitments regarding the
allocation of brokerage business to or among broker-dealers.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold our shares and/or
shares of other Lord Abbett-sponsored funds may be preferred.
If other clients of Lord Abbett sell the same security at the same time as the
Fund, 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.
If the Fund tenders portfolio securities pursuant to a cash tender offer, it
will seek to recapture any fees or commissions involved in designating Lord
Abbett as the Fund's agent so that the fees may be passed back to the Fund. As
other legally permissable opportunities come to our attention for the direct or
indirect recapture by the Fund of brokerage commissions or similar fees paid on
portfolio transactions, the Fund's trustees will determine whether the Fund
should or should not seek such recapture.
The Fund will not seek "reciprocal" dealer business (for the purpose of applying
commissions in whole or in part for the Fund's benefit or otherwise) from
dealers as consideration for the direction to them of portfolio business.
For the fiscal years ended May 31, 1999, 1998 and 1997, the Fund paid $ ,
$ 62,907, and $ 79,576 respectively, in brokerage commissions.
6.
REDEMPTIONS AND
SHAREHOLDER SERVICES
The Fund values its portfolio securities at market value, on the basis of market
quotations where readily available or, where such quotations are not readily
available, at fair market value as determined in good faith in a manner
prescribed by the Board of Trustees. Securities traded on the NYSE or American
Stock Exchange or on the NASDAQ National Market System are valued at the last
sales price, or, where there has been no sale on that day, at the mean between
the
11
<PAGE>
last reported bid and asked prices. Over-the-counter securities not traded
on the NASDAQ National Market System are valued at the mean between the last bid
and asked prices.
The Fund calculates its net asset value and is otherwise open for business on
each day that the NYSE is open for trading. In addition to Saturdays and
Sundays, NYSE is closed on the following holidays: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas.
The offering price of the Fund's shares on May 31, 1990 was computed as follows:
Net asset value per share (net assets divided by shares
outstanding)......................................................$9.45
Maximum offering price per share (net asset value
divided by .9450)...............................................$10.00
A redemption (other than an immediate redemption of shares issued in payment of
a dividend or distribution) is a taxable transaction on which gain or loss may
be recognized.
As described in the Prospectus, the Fund has adopted a Distribution Plan and
Agreement pursuant to Rule 12b-1 of the 1940 Act. In adopting the Plan and in
approving its continuance, the Board of Trustees has concluded that there is a
reasonable likelihood that the Plan will benefit its shareholders. During the
fiscal years ended May 31, 1999, 1998 and 1997, the Fund accrued or paid through
Lord Abbett to authorized institutions $156,317, $162,658 and $144,226,
respectively. Lord Abbett used all amounts received under the Plan to pay
dealers for providing continuous services to shareholders, such as answering
shareholder inquiries, maintaining records, and assisting shareholders in making
redemptions, transfers, and exchanges.
The Prospectus briefly describes the exchange privilege. Prior to May 31, 2000,
(i) exchanges of shares of the Lord Abbett managed funds (including shares
acquired in exchange for shares of the Fund) into the Fund are not permitted;
and (ii) shares exchanged out of the Fund will lose the benefit of the
guaranteed return of the shareholder's original $10, as described in the
Prospectus.
Exercise of the exchange privilege will be treated as a redemption for federal
income tax purposes, and, depending on the circumstances, a capital gain or loss
may be recognized.
The right to redeem and receive payment, as described in the Prospectus, may be
suspended if the NYSE is closed (except for weekends and customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
deems an emergency to exist.
Lord Abbett offers retirement plan forms and custodial agreements for IRAs
(Simple IRAs, SEP-IRAs, Traditional, Rollover, Roth and Education IRAs), 403(b)
plans, and Defined Contribution Plans. The forms name Investors Fiduciary Trust
as custodian and contain specific information about the plans.
The Internal Revenue Service gives you the right to revoke an IRA within seven
days by notifying the custodian by phone and confirming in writing, in which
case your money is returned.
Explanations of the eligibility requirements, annual custodial fees and
allowable tax advantages and penalties for these plans are available from Lord
Abbett. Adoption of any of these plans should be on the advice of your legal
counsel or qualified tax adviser.
7.
TAXES
The value of any shares redeemed by the Fund or repurchased or otherwise sold
may be more or less than your tax basis in the shares at the time of
disposition. Any gain will generally be taxable for federal income tax purposes.
(An immediate redemption of shares issued in payment of a dividend or
distribution will not give rise to a gain or loss,
12
<PAGE>
although the dividend or distribution will itself be taxable.) Any loss realized
on the disposition of Fund shares which you have held for six months or less
will be treated for tax purposes as a long-term capital loss to the extent of
any "capital gains distributions" which you received with respect to such
shares. Losses on the sale of shares are not deductible if, within a period
beginning 30 days before the date of the sale and ending 30 days after the date
of the sale, the taxpayer acquires shares that are substantially identical.
A shareholder's holding period for each share held after a reverse stock split
will be a split holding period, reflecting reinvestment of the dividend or
distribution paid immediately preceding the reverse stock split. Accordingly, if
a dividend or distribution of $1.00 is paid in shares in connection with a
reverse stock split and the net asset value per share after the dividend or
distribution and the reverse stock split is $15.00 per share, 1/15 of the share
will have a holding period dating from the dividend or distribution payment date
and the rest of the share will have a holding period (or periods) dating from
the date of purchase (and any prior dividend or distribution payment dates).
The Fund will be subject to a 4% non-deductible excise tax on certain amounts
not distributed or treated as having been distributed on a timely basis each
calendar year. The Fund intends to distribute to shareholders each year an
amount adequate to avoid the imposition of such excise tax.
The writing of call options and other investment techniques and practices which
the Fund may utilize may affect the character and timing of the recognition of
gains and losses by the Fund. Such transactions may increase the amount of
short-term capital gain realized by the Fund, which is taxed as ordinary income
when distributed to shareholders. Limitations imposed by the Internal Revenue
Code on regulated investment companies may restrict the Fund's ability to engage
in transactions in options.
The Fund may be subject to foreign withholding taxes which would reduce the
yield on its investments. It is generally expected that Fund shareholders who
are subject to United States Federal income tax will not be entitled to claim a
federal income tax credit or deduction for foreign income taxes paid by the
Fund.
Gain and loss derived by the Fund on certain transactions, including sales of
foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gains or losses are attributable to changes in
exchange rates for foreign currencies. Accordingly, distributions taxable as
ordinary income will include the net amount, if any, of such foreign exchange
gains and will be reduced by the net amount, if any, of such foreign exchange
losses.
If the Fund purchases shares in certain foreign investment entities called
"passive foreign investment companies," it may be subject to United States
federal income tax on a portion of any "excess distribution" or gain from the
disposition of such shares, even if such income is distributed as a taxable
dividend by the Fund to its shareholders. Additional charges in the nature of
interest may be imposed on either the Fund or its shareholders in respect of
deferred taxes arising from such distributions or gains. If the Fund were to
make a "qualified electing fund" election with respect to its investment in a
passive foreign investment company, in lieu of the foregoing requirements, the
Fund might be required to include in income each year a portion of the ordinary
earnings and net capital gains of the qualified electing fund, even if such
amount were not distributed to the Fund.
Although the issue is not free from doubt, dividends paid by the Fund should
qualify for the dividends-received deduction for corporations to the extent that
they are derived from dividends paid by domestic corporations. Corporate
shareholders should consult their tax advisers regarding the availability of the
deduction in light of the guarantee.
Any amount paid to the Fund by Financial Security to honor its guarantee would
presumably be income to the Fund to be distributed as a taxable dividend to
shareholders who did not tender their shares for redemption to the extent that
the amount paid by Financial Security increased the taxable income (including
capital gain) of the Fund.
It is possible that the Fund might fail at some time to meet the requirements
for "regulated investment company" treatment under subchapter M of the Code as a
result of it s investment activities or otherwise, although management of the
Fund believes that this is highly unlikely to occur. If , nonetheless, the Fund
were found to have failed to meet such requirements for a taxable year, it would
in most circumstances become taxable at regular corporate rates on its income
for such year, regardless of whether that income was distributed to shareholders
(whereas a regulated investment company is not taxable on income distributed to
shareholders within applicable time periods). If the Fund had either
13
<PAGE>
paid or appropriately accrued on or prior to the Guarantee Date a liability in
respect of the tax payable for such failure, the Financial Security guarantee
would apply to cover the liability to the extent the liability caused net asset
value per Guarantee Share to be below the Guaranteed Amount at the Guarantee
Date. Otherwise, the liability would be borne by the Fund at the time the
liability was accrued in computing net asset value.
The foregoing discussion relates solely to United States federal income tax law
as applicable to United States persons (United States citizens or residents and
United States domestic corporations, partnerships, trusts and estates). Each
shareholder who is not a United States person should consult his or her tax
adviser regarding the United States and foreign tax consequences of the
ownership of shares of the Fund, including a 30% (or lower treaty rate) United
States withholding tax on dividends representing ordinary income and net
short-term capital gains, and the applicability of United States gift and estate
taxes.
8.
FURTHER INFORMATION ABOUT THE FUND
Lord Abbett Equity Fund was established on January 19, 1990 as a Massachusetts
business trust pursuant to a Declaration of Trust, under the name "Lord Abbett
Guaranteed Equity Fund." That name was changed to the present name on April 6,
1990. A copy of the Declaration of Fund is on file with the Secretary of the
Commonwealth of Massachusetts. As a trust, the Fund does not hold regular annual
meetings of shareholders, although special meetings may be called for a specific
series or for the Trust as a whole, for purposes such as electing or removing
Trustees, changing fundamental policies or approving an advisory contract. The
Fund will promptly call a meeting of shareholders to vote on whether to remove a
Trustee(s) when requested to do so in writing by record holders of not less than
10% of the Fund's outstanding stock, and the Trustees, within 5 business days of
a written request by 10 or more shareholders who have been of record for at
least 6 months and who hold in the aggregate the lesser of either shares having
a net asset value of at least $25,000 or 1% of such outstanding Fund stock,
shall give such shareholders access to a list of the names and addresses of all
other shareholders or inform them of the number of shareholders and the cost of
the Fund's mailing their request.
Under the Declaration of Trust, the Trustees may provide for additional series
from time to time. Such an additional series would constitute a separate class
of shares which has rights separate from the other classes of shares. Within
each class, all shares have equal voting rights and equal rights with respect to
dividends, assets and liquidation.
9.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended May 31, 1999 and the report
of Deloitte & Touche LLP, independent auditors, on such financial statements
contained in the 1999 Annual Report to Shareholders of Lord Abbett Equity Fund
are incorporated by reference to such financial statements and report in
reliance upon the authority of Deloitte & Touche LLP as experts in auditing and
accounting.
14
<PAGE>
PART C: OTHER INFORMATION
Item 23. Exhibits
(a) Amended and Restated Declaration of Trust incorporated
by reference to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A filed on September
26, 1991.
(b) By-Laws incorporated by reference to Post-Effective
Amendment No. 4 to the Registration Statement on Form
N-1A filed on September 26, 1991.
(c) Instruments Defining Rights of Security Holders
incorporated by reference.
(d) Management Agreement incorporated by reference to
Post-EffectiveAmendment No. 4 to the Registration
Statement on Form N-1A filed on September 26, 1991.
(e) Distribution Agreement incorporated by reference to
Post-Effective Amendment No. 4 to the Registration
Statement on Form N-1A filed on September 26, 1991.
(f) Bonus or Profit Sharing Contracts incorporated by
reference to Post-Effective Amendment No. 7 to the
Registration Statement on Form N-1A filed on September
22, 1994.
(g) Custodian Agreement incorporated by reference to
Post-Effective Amendment No. 4 to the Registration
Statement on Form N-1A filed on September 26, 1991.
(h) Other Material Contracts.
a. Copy of Insurance Policy, with endorsement,
issued by Financial Security incorporated by
reference to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A filed on
September 26, 1991
b. Copy of Premium Side Letter issued by Financial
Security incorporated by reference to
Post-Effective No. 4 to the Registration Statement
on Form N-1A filed on September 26, 1991.
c. Copy of Insurance and Indemnity Agrreement
between Registrant and Financial Security
incorporated by reference to Post-Effective
Amendment No. 4 to the Registration Statement on
Form N-1A filed on September 26, 1991.
d. Copy of Second Supplemental Compliance
Agreement among Registrant, Financial Security and
Prudential Mutual Fund Management, Inc.
incorporated by reference to Post-Effective
Amendment No. 6 to the Registration Statement on
Form N-1A filed on September 20, 1993.
e. Copy of Indemnification Agreement among
Registrant, Financial Security and Lord, Abbett &
Co. incorporated by reference to Post-Effective
Amendment No. 4 to the Regustration Statement on
Form N-1A filed on September 26, 1991.
(i) Consent of Deloitte & Touche, LLP filed herewith.
(j) Copy of Form of Subscription Agreement incorporated by
reference to Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-1A filed on April 9, 1990.
(k) Rule 12b-1 Plan incorporated by reference to
Post-Effective Amendment No. 4 to the Registration Statement
on Form N-1A filed on September 26, 1991.
Item 24. Persons Controlled by or Under Common Control with Registrant
None.
9
<PAGE>
Item 25. Indemnification
All trustees, officers, employees and agents of Registrant are to be
indemnified as set forth in Section 4.3 of Registrant's Amended and
Restated Declaration of Trust, which has been previously filed.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to trustees, 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 expenses incurred or paid by a trustee,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such trustee, 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 of 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 trustees' and officers' errors and
omissions liability insurance policy protecting trustees and officers
against liability for breach of duty, negligent act, error or omission
committed in their capacity as trustees 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 26. Business and Other Connections of Investment Adviser
Lord, Abbett & Co. acts as investment adviser for the Lord Abbett
registered investment companies and provides investment management
services to various pension plans, institutions and individuals. Lord
Abbett Distributor, a limited liability corporation, serves as their
distributor and principal underwriter. Other than acting as trustees,
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.
Item 27. Principal Underwriter
(a) Lord Abbett Affiliated Fund, Inc.
Lord Abbett Global Fund, Inc.
Lord Abbett Series Fund, Inc.
Lord Abbett U.S. Government Securities Money Market Fund, Inc.
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Mid-Cap Value Fund, Inc.
Lord Abbett Developing Growth, Inc.
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett Securities Trust
Lord Abbett Research Fund, Inc.
Lord Abbett Investment Trust
Lord Abbett Tax-Free Income Trust
Investment Sub-Adviser
American Skandia Trust (Lord Abbett Growth and Income Portfolio)
10
<PAGE>
(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 Trustee
Paul A. Hilstad Vice President and Secretary
Daniel E. Carper Vice President
Robert G. Morris Vice President
John J. Walsh Vice President
The other partners who are neither officers nor directors of the Fund are
Stephen Allen, Zane E. Brown, John E. Erard, Robert P. Fetch, Daria L. Foster,
Robert I. Gerber, W. Thomas Hudson, Stephen J. McGruder, Michael B. McLaughlin,
Robert J. Noelke, R. Mark Pennington, and Christopher Towle.
Each of the above has a principal business address at 767 Fifth
Avenue, New York, New York 10153.
(c) Not applicable.
Item 28. 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-(f) and
31a-2(e) at its main office.
Certain records such as stock certificates 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 29. Management Services
None.
Item 30. Undertakings
(a) N/A
(b) N/A
(c) The Registrant hereby 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.
(d) Registrant hereby 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 trustee or trustees and to assist
in communications with other shareholders as required by Section
16(c) of the Investment Company Act of 1940, as amended.
11
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below on this Amendment to
the Registration Statement hereby constitutes and appoints Paul A. Hilstad and
Lawrence H. Kaplan, each of them, with full power to act without the other, his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (until revoked in writing) to sign any and all amendments to this
Registration Statement of each Fund enumerated on Exhibit A hereto (including
post-effective amendments and amendments thereto), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
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.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
Chairman, President
/s/ Robert S. Dow and Director/Trustee September 30, 1999
- ----------------------- ----------------------- ------------------
Robert S. Dow
/s/ E. Thayer Bigelow Director/Trustee September 30, 1999
- ----------------------- ----------------------- ------------------
E. Thayer Bigelow
/s/ William H. T. Bush Director/Trustee September 30, 1999
- ----------------------- ----------------------- ------------------
William H. T. Bush
/s/ Robert B. Calhoun, Jr. Director/Trustee September 30, 1999
- ----------------------- ----------------------- ------------------
Robert B. Calhoun, Jr.
/s/ Stewart S. Dixon Director/Trustee September 30, 1999
- ----------------------- ----------------------- ------------------
Stewart S. Dixon
/s/ John C. Jansing Director/Trustee September 30, 1999
- ----------------------- ----------------------- ------------------
John C. Jansing
/s/ C. Alan MacDonald Director/Trustee September 30, 1999
- ----------------------- ----------------------- ------------------
C. Alan MacDonald
/s/ Hansel B. Millican, Jr.. Director/Trustee September 30, 1999
- ----------------------- ----------------------- ------------------
Hansel B. Millican, Jr.
/s/ Thomas J. Neff Director/Trustee September 30, 1999
- ----------------------- ----------------------- ------------------
Thomas J. Neff
/s/ Donna M. McManus Chief Financial Officer September 30, 1999
- -------------------- ----------------------- ------------------
Donna M. McManus
</TABLE>
<PAGE>
EXHIBIT A
Lord Abbett Affiliated Fund, Inc.
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Equity Fund, Inc.
Lord Abbett Global Fund, Inc.
Lord Abbett Investment Trust
Lord Abbett Large-Cap Growth Fund
Lord Abbett Mid-Cap Value Fund, Inc.
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett Tax-Free Income Trust
Lord Abbett Research Fund, Inc.
Lord Abbett Securities Trust
Lord Abbett Series Fund, Inc.
Lord Abbett U.S. Government Securities Money Market Fund, Inc.
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
Lord Abbett Equity Fund:
We consent to the incorporation by reference in Post-Effective Amendment No. 12
to Registration Statement No. 811-6033 of our report dated July 9, 1999
appearing in the Annual Report to Shareholders for the year ended May 31, 1999
and to the reference to us under the captions "Investment Advisory and Other
Services" and "Financial Statements" appearing in the Statement of Additional
Information, which is part of such Registration Statement.
[GRAPHIC OMITTED]
DELOITTE & TOUCHE LLP
New York, New York
September 29, 1999
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act, the Fund certifies that it meets all of the requirements
for effectiveness of this registration statement under rule 485(b) under the
Securities Act and had duly caused this registration statement to be signed on
its behalf by the undersigned, duly authorized, in the City of New York, and the
State of New York on the day of September 30, 1999.
BY:
Lawrence H. Kaplan
Vice President
LORD ABBETT EQUITY FUND
<PAGE>
Pursuant to the requirements of the Securities Act, this registration statement
has been signed below by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
Chairman, President
/s/ Robert S. Dow and Director/Trustee September 30, 1999
- ----------------------- ----------------------- ------------------
Robert S. Dow
/s/ E. Thayer Bigelow Director/Trustee September 30, 1999
- ----------------------- ----------------------- ------------------
E. Thayer Bigelow
/s/ William H. T. Bush Director/Trustee September 30, 1999
- ----------------------- ----------------------- ------------------
William H. T. Bush
/s/ Robert B. Calhoun, Jr. Director/Trustee September 30, 1999
- ----------------------- ----------------------- ------------------
Robert B. Calhoun, Jr.
/s/ Stewart S. Dixon Director/Trustee September 30, 1999
- ----------------------- ----------------------- ------------------
Stewart S. Dixon
/s/ John C. Jansing Director/Trustee September 30, 1999
- ----------------------- ----------------------- ------------------
John C. Jansing
/s/ C. Alan MacDonald Director/Trustee September 30, 1999
- ----------------------- ----------------------- ------------------
C. Alan MacDonald
/s/ Hansel B. Millican, Jr.. Director/Trustee September 30, 1999
- ----------------------- ----------------------- ------------------
Hansel B. Millican, Jr.
/s/ Thomas J. Neff Director/Trustee September 30, 1999
- ----------------------- ----------------------- ------------------
Thomas J. Neff
/s/ Donna M. McManus Chief Financial Officer September 30, 1999
- ----------------------- ----------------------------- ------------------
Donna M. McManus
</TABLE>
*/s/ Lawrence H. Kaplan
Attorney-in-Fact
