LORD ABBETT MID-CAP RESEARCH FUND
THE GENERAL MOTORS BUILDING
767 FIFTH AVENUE
NEW YORK, NY 10153-0203
800-426-1130
LORD ABBETT MID-CAP RESEARCH FUND (THESERIES) IS A DIVERSIFIED SEPARATE SERIES
OF LORD ABBETT RESEARCH FUND, INC. (WE OR THE FUND), AN OPEN-END MANAGEMENT
INVESTMENT COMPANY INCORPORATED IN MARYLAND ON APRIL 6, 1992. THE FUND CURRENTLY
CONSISTS OF TWO SERIES. ONLY SHARES OF THE SERIES ARE BEING OFFERED IN THIS
PROSPECTUS. THE SERIES INVESTMENT OBJECTIVE IS TO SEEK CAPITAL APPRECIATION
THROUGH INVESTMENTS PRIMARILY IN EQUITY SECURITIES WHICH ARE BELIEVED TO BE
UNDERVALUED IN THE MARKETPLACE. IN ITS SEARCH FOR VALUE, THE SERIES SEEKS
COMPANIES WHICH ARE PRIMARILY MIDDLE-SIZED, BASED ON THE VALUE OF THEIR
OUTSTANDING STOCK. THERE CAN BE NO ASSURANCE THAT THE SERIES WILL ACHIEVE ITS
OBJECTIVE. THE DIRECTORS MAY PROVIDE FOR ADDITIONAL SERIES FROM TIME TO TIME.
WITHIN EACH SERIES, THE FREELY TRANSFERABLE SHARES WILL HAVE EQUAL RIGHTS WITH
RESPECT TO DIVIDENDS, ASSETS, LIQUIDATION AND VOTING. THIS PROSPECTUS SETS FORTH
CONCISELY THE INFORMATION ABOUT THE SERIES THAT A PROSPECTIVE INVESTOR SHOULD
KNOW BEFORE INVESTING. ADDITIONAL INFORMATION ABOUT THE FUND AND THE SERIES HAS
BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS AVAILABLE UPON
REQUEST WITHOUT CHARGE. THE STATEMENT OF ADDITIONAL INFORMATION IS INCORPORATED
BY REFERENCE INTO THIS PROSPECTUS AND MAY BE OBTAINED, WITHOUT CHARGE, BY
WRITING TO THE FUND OR BY CALLING THE FUND AT 800-874-3733. ASK FOR PART B OF
THE PROSPECTUS THE STATEMENT OF ADDITIONAL INFORMATION. THE DATE OF THIS
PROSPECTUS, AND THE DATE OF THE STATEMENT OF ADDITIONAL INFORMATION, IS JULY 27,
1995.
PROSPECTUS
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS. SHAREHOLDER INQUIRIES SHOULD
BE MADE IN WRITING TO THE FUND OR BY CALLING 800-821-5129. YOU CAN ALSO MAKE
INQUIRIES THROUGH YOUR BROKER-DEALER.
CONTENTS PAGE
1 Investment Objectives 2
2 Fee Table 2
3 How We Invest 2
4 Purchases 4
5 Our Management 5
6 Dividends, Capital Gains
Distributions and Taxes 6
7 Redemptions 6
8 Performance 7
<PAGE>
1 INVESTMENT OBJECTIVE
The investment objective of the Series is to seek capital appreciation through
investments, primarily in equity securities, which are believed to be
undervalued in the marketplace.
2 FEE TABLE
A summary of expenses of the Series is set forth in the table below in order to
provide a better understanding of such expenses. The example is not a
representation of past or future expenses. Actual expenses may be more or less
than those shown.
[CAPTION]
<TABLE>
<S> <C>
Shareholder Transaction Expenses
(as a percentage of offering price)
Maximum Sales Load(1) on Purchases
(See Purchases) None
Redemption Fee None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees (See Our Management) .00%(2)
12b-1 Fees None
Other Expenses (See Our Management) .00%(2)
Total Operating Expenses .00%(2)
<FN>
Example: Assume annual return of the Series is 5% and there is no change in the
level of expenses described below. For every $1,000 invested, with reinvestment
of all distributions, you would pay the following total expenses if you closed
your account after the number of years indicated.
1 year(3) 3 years(3)
$0 $0
(1) Sales load is referred to as sales charge throughout this Prospectus.
(2) Although not obligated to, Lord, Abbett & Co. intends to waive its
management fee and subsidized the expenses of the Series. The management
fee for the Series would be .75% and other expenses are estimated to be
.40% (for total estimated operating expenses of 1.15%) for the Series for
the full year after its commencement of operations, absent such waiver and
subsidy.
(3) These figures reflect a management fee waiver and expense subsidy from
Lord, Abbett & Co. These expenses without such waiver and subsidy are
estimated to be $12 and $38, respectively, for the Series.
</FN>
</TABLE>
3 HOW WE INVEST
The Series invest primarily in common stocks (including securities convertible
onto common stocks) of mid-cap companies, defined for this purpose as companies
whose outstanding equity securities have an aggregate market value of between
$200 million and $5 billion.Under normal circumstances, at least 65% of the
Series total assets will consist of investments made in mid-cap companies,
determined at the time of purchase. Stocks are selected based on capital
appreciation potential, without regard to current income, utilizing a
value-based, disciplined investment process that seeks to identify and invest in
undervalued securities. This investment process consists of three steps.
First, quantitative research is used to identify a universe of stocks which are
relatively undervalued in comparison to other similar investments. From this
universe of stocks the most attractive companies are set aside as candidates for
further analysis.
In the second step of the process, fundamental research seeks to identify
candidates likely to produce attractive investment returns over a six to twelve
month time period. This is done, for example, by analyzing the key drivers of
each companys profitability, such as the companys competitive position, its
strategies for improving returns to shareholders, and the probability of
managements success based on past experience.
The third part of the investment process is an analysis of the companys
prospects in view of our economic outlook for a standard time period. This
outlook is developed periodically throughout the year, taking into
consideration, for example, such factors as (i) the level and direction of
inflation, interest rates, and general economic activity and (ii) government
monetary and fiscal policies.
The investment portfolio of the Series will be diversified among many issuers
representing many different industries. The portfolio of the Series reflects the
collective judgment of the Research Department of Lord, Abbett & Co. (Lord
Abbett) as to what securities represent the greatest long-term investment value
pursuant to the Series investment objective and policies. At the time of
purchase, securities selected for the Series portfolio may be largely neglected
by the investment community or, if widely followed, they may be out of favor.
FOREIGN INVESTMENTS. Up to 35% of the Series net assets (at the time of
investment) may be invested in foreign securities (of the type described above)
<PAGE>
which are primarily traded in foreign countries. See Risk Factors below.
FOREIGN CURRENCY HEDGING TECHNIQUES. The Series may utilize various foreign
currency hedging techniques described below. A forward foreign currency contract
involves an obligation to purchase or sell a specific amount of a currency at a
set price on a future date. The Series may enter into forward foreign currency
contracts in primarily two circumstances. First, when the Series desires to lock
in the U.S. dollar price of the security, by entering into a forward contract
for the purchase or sale of the amount of foreign currency involved in the
underlying security transaction, the Series will be able to protect against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the period between the date
of purchase or sale and the date of settlement.
Second, when Fund management believes that the currency of a particular foreign
country may suffer a decline against the U.S. dollar, the Series may enter into
a forward contract to sell the amount of foreign currency approximating the
value of some or all of a Series portfolio securities denominated in such
foreign currency or, in the alternative, a Series may use a
cross-currency-hedging technique whereby it enters into such a forward contract
to sell another currency (obtained in exchange for the currency which the
portfolio securities are denominated in if such securities are sold) which it
expects to decline in a similar manner but which has a lower transaction cost.
Precise matching of the forward contract and the value of the securities
involved will generally not be possible.
The Series also may purchase foreign currency put options and write foreign
currency call options on U.S. exchanges or U.S. over-the-counter markets (O-T-C
options are generally less liquid and involve issuer credit risk). A put option
gives the Series, upon payment of a premium, the right to sell a currency at the
exercise price until the expiration of the option and serves to insure against
adverse currency price movements in the underlying portfolio assets denominated
in that currency. The premiums paid for such foreign currency put options will
not exceed 5% of the net assets of the Series.
Unlisted options together with other illiquid securities may comprise no more
than 15% of the Series net assets.
A foreign currency call option written by the Series gives the purchaser, upon
payment of a premium, the right to purchase from the Series a currency at the
exercise price until the expiration of the option. The Series may write a call
option on a foreign currency only in conjunction with a purchase of a put option
on that currency. Such a strategy is designed to reduce the cost of downside
currency protection by limiting currency appreciation potential. The face value
of such writing or cross-hedging (described above) may not exceed 90% of the
value of the securities denominated in such currency (a) invested in by the
Series to cover such call writing or (b) to be crossed.
OTHER POLICIES. The Series may invest up to 15% of its net assets in illiquid
securities. Securities determined by the Directors to be liquid pursuant to
Securities and Exchange Commission Rule 144A will not be subject to this limit.
Investments by the Series in Rule 144A securities initially determined to be
liquid could have the effect of diminishing the level of the Series liquidity
during periods of decreased market interest in such securities. Under the Rule,
a qualifying unregistered security may be resold to a qualified institutional
buyer without registration and without regard to whether the seller originally
purchased the security for investment. The Series may deal in options on
securities, and securities indexes, and financial futures transactions,
including options on financial futures. The Series may write (sell) covered call
options and secured put and call options provided that no more than 5% of its
net assets (at the time of purchase) may be invested in premiums on such
options.
The Series is not currently employing any of the options and financial futures
transactions described above.
The Series may engage in (a) investing in closed-end investment companies, (b)
investing in straight bonds or other debt securities, including
<PAGE>
lower rated, high-yield bonds, (c) lending of its portfolio securities to
broker-dealers on a secured basis and (d) investing in rights and warrants to
purchase securities (included within these purchases but not exceeding 2% of the
value of its assets, may be warrants which are not listed on the New York or
American Stock Exchanges), but the Series has no present intention to commit
more than 5% of gross assets to any one of these four identified practices. The
Series will not invest more than 5% of its assets (at the time of investment) in
lower rated (BB/Ba or lower), high-yield bonds.
The Series will not borrow money, except as a temporary measure for
extraordinary or emergency purposes and then not in excess of 5% of its gross
assets at the lower of cost or market value.
For temporary defensive purposes or to create reserve purchasing power pending
other investments, the Series may invest in high-quality, short-term debt
obligations of banks, corporations or the U.S. Government of the type normally
owned by a money market fund.
The Series will not change its investment objective without shareholder
approval. If the Series determines that its objective can best be achieved by a
substantive change in investment policy or strategy, the Series may make such a
change without shareholder approval by disclosing it in the prospectus.
RISK FACTORS. If the Series remains small, there is risk that redemptions may
(a) cause portfolio securities to be sold prematurely (at a loss or gain,
depending upon the circumstances) or (b) hamper or prevent a contemplated
portfolio security purchase.
FOREIGN SECURITIES. Securities markets of foreign countries in which the Series
may invest generally are not subject to the same degree of regulation as the
U.S. markets and may be more volatile and less liquid than the major U.S.
markets. There may be less publicly-available information on publicly-traded
companies, banks and governments in foreign countries than generally is the case
for such entities in the United States. The lack of uniform accounting standards
and practices among countries impairs the validity of direct comparisons of
valuation measures (such as price/earnings ratios) for securities in different
countries. Other considerations include political and social instability,
expropriation, higher transaction costs, currency fluctuations, withholding
taxes that cannot be passed through as a tax credit to shareholders and
different securities settlement practices. Foreign securities may be traded on
days that the Series does not value its portfolio securities, and, accordingly,
the Series net asset value may be significantly affected.
Although the Series invests primarily in middle-sized companies, the Series also
may invest, from time to time, in stocks of large-sized and small-sized
companies guided by the policies mentioned above. Small capitalized companies
generally consist of companies in either the formative or developing growth
phase of business growth. The formative phase has high risk. The perils of
infancy take a high toll during these years. Skill of management and growth of
revenues and earnings permit some of these formative companies to survive and
advance into the growth stage. The developing growth phase is a period of swift
development, when growth occurs at a rate rarely equalled by established
companies in their mature years. Of course, the actual growth of a company can
not be foreseen, and it can be difficult to determine in which phase a company
is presently situated. Small capitalized companies are usually young and their
shares are generally traded over the counter.
4 PURCHASES
Our shares may only be purchased by employees and partners of Lord Abbett,
directors (trustees) of Lord Abbett-managed funds and spouses and other family
members of such employees, partners and directors (trustees). All shares may be
purchased at the net asset value per share next computed after the order is
received by Lord Abbett. The minimum initial investment is $1,000. Subsequent
investments may be made in any amount. Place your order with Lord Abbett or send
it to Lord Abbett Mid-Cap Research Fund (P.O. Box 419100, Kansas City, Missouri
64141).
<PAGE>
The net asset value of our shares is calculated every business day as of the
close of the New York Stock Exchange (NYSE), by dividing net assets by shares
outstanding. Securities in the Series portfolio are valued at their market value
as more fully described in the Statement of Additional Information. A business
day is a day on which the NYSE is open for trading. We are not obligated to
maintain the offering or its terms and the offering may be suspended, changed or
withdrawn. Lord Abbett reserves the right to reject any order. Certificates
representing shares of the Fund will not be issued. This will relieve
shareholders of the responsibility and inconvenience of safekeeping share
certificates and save the Fund unnecessary expense. If you have any questions,
call the Fund at 800-821-5129.
TELEPHONE EXCHANGE PRIVILEGE: Shares may be exchanged, without a service charge,
for those of any other Lord Abbett-sponsored fund except for (i) Lord Abbett
Equity Fund, Lord Abbett Series Fund and Lord Abbett Counsel Group and (ii)
certain tax-free single-state series where the exchanging shareholder is a
resident of a state in which such series is not offered for sale (together,
Eligible Funds).
You or YOUR REPRESENTATIVE WITH PROPER IDENTIFICATION can instruct the Fund to
exchange shares by telephone. Shareholders have this privilege unless they
refuse it in writing. The Fund will not be liable for following instructions
communicated by telephone that it reasonably believes to be genuine and will
employ reasonable procedures to confirm that instructions received are genuine,
including requesting proper identification, and recording all telephone
exchanges. Instructions must be received by the Fund in Kansas City
(800-521-5315) prior to the close of the NYSE to obtain each funds net asset
value per share on that day. Expedited exchanges by telephone may be difficult
to implement in times of drastic economic or market change. The exchange
privilege should not be used to take advantage of short-term swings in the
market. The Fund reserves the right to terminate or limit the privilege of any
shareholder who makes frequent exchanges. The Fund can revoke the privilege for
all shareholders upon 60 days prior written notice. A prospectus for the other
Lord Abbett-sponsored fund selected by you should be obtained and read before an
exchange.
Exercise of the Exchange Privilege will be treated as a sale for federal income
tax purposes and, depending on the circumstances, a capital gain or loss may be
recognized.
5 OUR MANAGEMENT
Our business is managed by our officers on a day-to-day basis under the overall
direction of our Board of Directors with the advice of Lord Abbett (herein
referred to as management). We employ Lord Abbett as investment manager pursuant
to a Management Agreement. Lord Abbett has been an investment manager for over
60 years and currently manages approximately $16 billion in a family of mutual
funds and other advisory accounts. Under the Management Agreement, Lord Abbett
is obligated to provide the Series with investment management services and
executive and other personnel, pay the remuneration of our officers and of our
directors affiliated with Lord Abbett, provide us with office space and pay for
ordinary and necessary office and clerical expenses relating to research,
statistical work and supervision of the Series portfolio and certain other
costs. Lord Abbett provides similar services to fifteen other Lord
Abbett-sponsored funds having various investment objectives and also advises
other investment clients. John J. Walsh, Jr., Lord Abbett partner for over five
years, is primarily responsible for the day-to-day management of the Series and
has been since inception. Mr. Walsh delegates management duties with respect to
the Series to a committee consisting, at any time, of three Lord Abbett
employees from the Research Department. The members of the committee, who also
may be officers of the Fund, have staggered terms to assure continuity and a
forum for different judgments as to what securities represent the greatest
investment value for the Series.
Under the Management Agreement, the Series is obligated to pay Lord Abbett a
monthly fee based on average daily net assets for each month at the annual rate
of .75%, which is higher than that charged by most mutual funds. Due to the
management fee waiver by Lord Abbett, the effective
<PAGE>
fee payable to Lord Abbett by the Series as a percentage of average daily net
assets is expected to be at the annual rate of zero percent for the period from
July 27, 1995 (commencement of operations) through November 30, 1995. In
addition, we pay all expenses not expressly assumed by Lord Abbett. The Series
ratio of expenses, including management fee expenses, to average net assets for
such period is expected to be zero percent.
6 DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
With respect to the Series, dividends from taxable net investment income may be
taken in cash or invested in additional shares at net asset value (without a
sales charge) and will be paid to shareholders annually in December.
A long-term capital gains distribution is made when the Series has net profits
during the year from sales of securities which it has held more than one year.
If the Series has realized net short-term capital gains, they also will be
distributed. Any capital gains distributions will be made annually in December.
They may be taken in cash or invested in more shares at net asset value without
a sales charge.
Dividends and distributions declared in October, November or December of any
year will be treated for federal income tax purposes as having been received by
shareholders in that year if they are paid before February 1 of the following
year. A supplemental capital gains distribution also may be paid in December.
The Series intends to meet the requirements of Subchapter M of the Internal
Revenue Code. The Series will try to distribute to shareholders all of its net
investment income and net realized capital gains, so as to avoid the necessity
of paying federal income tax. Shareholders, however, must report dividends and
capital gains distributions as taxable income. Distributions derived from net
long-term capital gains which are designated by us as capital gains
distributions will be taxable to shareholders as long-term capital gains,
whether received in cash or shares, regardless of how long a taxpayer has held
the shares. Under current law, net long-term capital gains of individuals and
corporations are taxed at the rates applicable to ordinary income, except that
the maximum rate for long-term capital gains for individuals is 28%. Provisions
of the Contract with America Tax Relief Act of 1995, that were pending in
Congress as of the date of this Prospectus, would have the effect of reducing
the federal income tax rate on capital gains.
Shareholders may be subject to a $50 penalty under the Internal Revenue Code and
we may be required to withhold and remit to the U.S. Treasury a portion (31%) of
any redemption or repurchase proceeds and of any dividend or distribution on any
account, where the payee (shareholder) failed to provide a correct taxpayer
identification number or to make certain required certifications.
Limitations imposed by the Internal Revenue Code on regulated investment
companies may restrict the Series ability to engage in transactions in options,
forward contracts and cross hedges.
We will inform shareholders of the federal tax status of each dividend and
distribution after the end of each calendar year.
Shareholders should consult their tax advisers concerning applicable state and
local taxes as well as on the tax consequences of gains or losses from the
redemption or exchange of our shares.
7 REDEMPTIONS
To obtain the proceeds of an expedited redemption of $50,000 or less, you or
your representative with proper identification can telephone the Fund. This
privilege is automatically extended to all shareholders. The Fund will not be
liable for following instructions communicated by telephone that it reasonably
believes to be genuine with respect to the Fund and, therefore, will employ
reasonable procedures to confirm that instructions received are genuine,
including requesting proper identification, recording all telephone redemptions
and mailing the proceeds only to the named shareholder at the address appearing
on the account registration.
If you cannot use the expedited redemption procedures described above to redeem
shares directly, send your request to Lord Abbett Mid-Cap
<PAGE>
Research Fund (P.O. Box 419100, Kansas City, Missouri 64141) with signature(s)
and any legal capacity of the signer(s) guaranteed by an eligible guarantor.
Under certain circumstances and subject to prior written notice, our Board of
Directors may authorize redemption of all of the shares in any account in which
there are fewer than 25 shares.
8 PERFORMANCE
We calculate our average annual total return for the Series for a given period
by determining an annual compounded rate that would cause the hypothetical
initial investment made on the first day of the period to equal the ending
redeemable value. The calculation assumes for the period a $1,000 hypothetical
initial investment in the Series, the reinvestment of all income and capital
gains distributions on the reinvestment dates at the prices calculated as stated
in the Prospectus, and a complete redemption at the end of the period to
determine the ending redeemable value.
Further information about the Series performance will be in its annual report to
shareholders which may be obtained without charge.
UNDERWRITER AND INVESTMENT MANAGER
Lord, Abbett & Co.
The General Motors Building
767 Fifth Avenue
New York, New York 10153-0203
212-848-1800
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10005
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
United Missouri Bank of Kansas City, N.A.
Tenth and Grand
Kansas City, Missouri 64141
SHAREHOLDER SERVICING AGENT
DST Systems, Inc.
P.O. Box 419100
Kansas City, Missouri 64141
800-821-5129
AUDITORS
Deloitte & Touche LLP
<PAGE>
LORD ABBETT
STATEMENT OF ADDITIONAL INFORMATION JULY 27, 1995
LORD ABBETT
RESEARCH FUND, INC.
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord, Abbett & Co. ("Lord
Abbett") 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 July 27, 1995.
Lord Abbett Research Fund, Inc. (sometimes referred to as the "Fund") was
incorporated under Maryland law on April 6, 1992. The Fund's Board of Directors
has authority to classify its shares of common stock into separate Series
without further action by shareholders. To date, 50,000,000 shares of Series 1
and 50,000,000 shares of a new Series - Lord Abbett Mid-Cap Research Fund - have
been designated by the Board of Directors. Although no present plans exist,
further series may be added in the future. The Investment Company Act of 1940
(the "Act") requires that where more than one series exists, each series must be
preferred over all other series with respect to assets specifically allocated to
such series. Only Lord Abbett Mid-Cap Research Fund (sometimes referred to as
the "Series" or "we") is described in this Statement of Additional Information.
Rule 18f-2 under the Act provides that any matter required to be submitted by
the provisions of the Act or applicable state law, or otherwise, to the holders
of the outstanding voting securities of an investment company, such as the Fund,
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each Series affected by such
matter. Rule 18f-2 further provides that a Series shall be deemed to be affected
by a matter unless the interests of each Series in the matter are identical or
the matter does not affect any interest of such Series. However, the Rule
exempts from these separate voting requirements the selection of independent
public accountants, the approval of principal distributing contracts and the
election of directors.
Shareholder inquiries should be made by writing directly to the Fund or by
calling 800-821-5129. In addition, you can make inquiries through Lord Abbett.
TABLE OF CONTENTS PAGE
1. Investment Objective and Policies 2
2. Directors and Officers 4
3. Investment Advisory and Other Services 5
4. Portfolio Transactions 5
5. Purchases, Redemptions
and Shareholder Services 6
6. Past Performance 7
7. Taxes 7
8. Information About The Fund 8
<PAGE>
1.
Investment Objectives and Policies
FUNDAMENTAL INVESTMENT RESTRICTIONS. The Series' investment objective and
policies are described in the Prospectus under "How We Invest". In addition to
those policies described in the Prospectus, we are subject to the following
fundamental investment restrictions which cannot be changed for the Series
without the approval of the holders of a majority of the Series' respective
shares. The Series may not: (1) borrow money (except that (i) the Series may
borrow from banks (as defined in the Act) in amounts up to 33 1/3% of its total
assets (including the amount borrowed), (ii) the Series may borrow up to an
additional 5% of its total assets for temporary purposes, (iii) the Series may
obtain such short-term credit as may be necessary for the clearance of purchases
and sales of portfolio securities and (iv) the Series may purchase securities on
margin to the extent permitted by applicable law); (2) pledge its assets (other
than to secure such borrowings or, to the extent permitted by the Series'
investment policies as set forth in its prospectus and statement of additional
information, as they may be amended from time to time, in connection with
hedging transactions, short sales, when-issued and forward commitment
transactions and similar investment strategies); (3) engage in the underwriting
of securities except pursuant to a merger or acquisition or to the extent that
in connection with the disposition of its portfolio securities it may be deemed
to be an underwriter under federal securities laws; (4) make loans to other
persons, except that the acquisition of bonds, debentures or other corporate
debt securities and investment in government obligations, commercial paper,
pass-through instruments, certificates of deposit, bankers acceptances,
repurchase agreements or any similar instruments shall not be deemed to be the
making of a loan, and except further that the Series may lend its portfolio
securities, provided that the lending of portfolio securities may be made only
in accordance with applicable law and the guidelines set forth in the Series'
prospectus and statement of additional information, as they may be amended from
time to time; (5) buy or sell real estate (except that theSeries may invest in
securities directly or indirectly secured by real estate or interests therein or
issued by companies which invest in real estate or interests therein),
commodities or commodity contracts (except to the extent the Series may do so in
accordance with applicable law and without registering as a commodity pool
operator under the Commodity Exchange Act as, for example, with futures
contracts); (6) with respect to 75% of the gross assets of the Series, buy
securities if the purchase would then cause it to (i) 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 or (ii) own more than 10% of the
voting securities of any issuer; (7) invest more than 25% of its assets, taken
at market value, in the securities of issuers in any particular industry
(excluding securities of the U.S. Government, its agencies and
instrumentalities);or (8) issue senior securities to the extent such issuance
would violate applicable law.
With respect to the restrictions mentioned herein, compliance therewith will not
be affected by change in the market value of portfolio securities but will be
determined at the time of purchase or sale of such securities.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. In addition to those policies described
in the Prospectus and the investment restrictions above which cannot be changed
without shareholder approval, we also are subject to the following
non-fundamental investment policies which may be changed by the Board of
Directors without shareholder approval. The Series may not: (1) make short sales
of securities or maintain a short position except to the extent permitted by
applicable law; (2) invest knowingly more than 15% of its net assets (at the
time of investment) in illiquid securities (securities qualifying for resale
under Rule 144A of the Securities Act of 1933 ("Rule 144A") that are determined
by the Directors, or by Lord Abbett pursuant to delegated authority, to be
liquid are considered liquid securities); (3) invest in securities issued by
other investment companies as defined in the Act, except as permitted by the
Act; (4) purchase securities of any issuer unless it or its predecessor has a
record of three years' continuous operation, except that the Series may purchase
securities of such issuers through subscription offers or other rights it
receives as a security holder of companies offering such subscriptions or
rights, and such purchases will then be limited in the aggregate to 5% of the
Series' net assets at the time of investment; (5) 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 directors or by one or more partners of
the Fund's underwriter or investment adviser if these owners in the aggregate
own beneficially more than 5% of such securities; (6) invest in warrants, valued
at the lower of cost or market, to exceed 5% of the Series' net assets,
including warrants not listed on the New York or American Stock Exchange which
may not exceed 2% of such net assets; or (7) invest in real estate limited
partnership interests or interest in oil, gas or other mineral leases, or
exploration or development programs, except that the Series may invest in
securities issued by companies that engage in oil, gas or other mineral
exploration or development activities.
INVESTMENT TECHNIQUES WHICH MAY BE USED BY THE SERIES
LENDING OF PORTFOLIO SECURITIES. Although we have no current intention of doing
so in the foreseeable future, we may seek to earn income by lending portfolio
securities. Under present regulatory policies, such loans may be made to member
firms of the New York Stock Exchange ("NYSE") and are required to be secured
continuously by collateral consisting of cash, cash equivalents, or United
States Treasury bills maintained in an amount at least equal to the market value
of the securities loaned. We will have the right to call a loan and obtain the
securities loaned at any time upon five days' notice. During the existence of a
loan we will receive the income earned on investment of collateral. The
aggregate value of the securities loaned will not exceed 5% of the value of the
Series' gross assets.
If the Series enters into repurchase agreements as provided in clause (4) above,
it will do so only with those primary reporting dealers that report to the
Federal Reserve Bank of New York and with the 100 largest United States
commercial banks and the underlying securities purchased under the agreements
will consist only of those securities in which the Series otherwise may invest.
FOREIGN CURRENCY HEDGING TECHNIQUES. The Series may utilize various foreign
currency hedging techniques described below, including forward foreign currency
contracts and foreign currency put and call options.
FORWARD FOREIGN CURRENCY CONTRACTS. A forward foreign currency contract involves
an obligation to purchase or sell a specific amount of a specific currency at a
set price at a future date. The Series expects to enter into forward foreign
currency contracts in primarily two circumstances. First, when the Fund enters
into a contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security. By
entering into a forward contract for the purchase or sale of the amount of
foreign currency involved in the underlying security transaction, the Series
will be able to protect against a possible loss resulting from an adverse change
in the relationship between the U.S. dollar and the subject foreign currency
during the period between the date the security is purchased or sold and the
date on which payment is made or received.
Second, when management believes that the currency of a particular foreign
country may suffer a decline against the U.S. dollar, the Series may enter into
a forward contract to sell the amount of foreign currency approximating the
value of some or all of the Series' portfolio securities denominated in such
foreign currency or, in the alternative, the Series may use a cross-hedging
technique whereby it sells another currency which the Series expects to decline
in a similar way but which has a lower transaction cost. Precise matching of the
forward contract amount and the value of the securities involved will not
generally be possible since the future value of such securities denominated in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date the forward contract is entered into and
the date it matures. The Series does not intend to enter into such forward
contracts under this second circumstance on a continuous basis.
FOREIGN CURRENCY PUT AND CALL OPTIONS. The Series may also purchase foreign
currency put options and write foreign currency call options on U.S. exchanges
or U.S. over-the-counter markets. A put option gives the Series, upon payment of
a premium, the right to sell a currency at the exercise price until the
expiration of the option and serves to insure against adverse currency price
movements in the underlying portfolio assets denominated in that currency.
Exchange-listed options markets in the United States include several major
currencies, and trading may be thin and illiquid. A number of major investment
firms trade unlisted options which are more flexible than exchange-listed
options with respect to strike price and maturity date. Unlisted options
generally are available in a wider range of currencies. Unlisted foreign
currency options are generally less liquid than listed options and involve the
credit risk associated with the individual issuer. Unlisted options, together
with other illiquid securities, are subject to a limit of 15% of the Series' net
assets.
A call option written by the Series gives the purchaser, upon payment of a
premium, the right to purchase from the Fund a currency at the exercise price
until the expiration of the option. The Series may write a call option on a
foreign currency only in conjunction with a purchase of a put option on that
currency. Such a strategy is designed to reduce the cost of downside currency
protection by limiting currency appreciation potential. The face value of such
writing may not exceed 90% of the value of the securities denominated in such
currency invested in by the Series or in such cross currency (referred to above)
to cover such call writing.
The Fund's custodian will segregate cash or liquid high-grade debt securities
belonging to the Series in an amount not less than that required by SEC Release
10666 with respect to the Series' assets committed to (a) writing options, (b)
forward foreign currency contracts and (c) cross hedges entered into by the
Series. If the value of the securities segregated declines, additional cash or
debt securities will be added on a daily basis (i.e., marked to market), so that
the segregated amount will not be less than the amount of the Series'
commitments with respect to such written options, forward foreign currency
contracts and cross hedges.
2.
Directors and Officers
The following director is a partner of Lord, Abbett & Co., 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 fifteen other Lord Abbett-sponsored funds. He is an
"interested person" as defined in the Act.
Ronald P. Lynch, age 59, President and Chairman
The following outside directors are also directors or trustees of the fifteen
other Lord Abbett-sponsored funds referred to above.
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 67.
Thomas J. Neff
Spencer Stuart & Associates
277 Park Avenue
New York, New York
President of Spencer Stuart & Associates, an executive search consulting firm.
Age 57.
No director and no officer of the Fund received compensation from the Fund for
acting in such capacity.
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Allen, Carper, Cutler, Dow, Nordberg and Walsh are partners of Lord Abbett; the
others are employees: Kenneth B. Cutler, age 63, Vice President and Secretary;
Stephen I. Allen, age 42, Daniel E. Carper age, 43, Robert S. Dow, age 50, E.
Wayne Nordberg, age 59, John J. Walsh, age 59, Jeffery H. Boyd, age 38 (with
Lord Abbett since 1994 - formerly partner in the law firm of Robinson & Cole),
John J. Gargana, Jr., age 64, Thomas F. Konop, age 53, Victor W. Pizzolato, age
63, Vice Presidents; and Keith F.
O'Connor, age 40, Treasurer.
The Fund's By-Laws provide that the Fund shall not hold an annual meeting of its
stockholders in any year unless one or more matters are required to be acted on
by stockholders under the Act, or unless called by a majority of the Board of
Directors or by stockholders holding at least one quarter of the stock of the
Fund outstanding and entitled to vote at the meeting. When any such annual
meeting is held, the stockholders will elect directors and vote on the approval
of the independent auditors of the Fund.
3.
Investment Advisory and Other Services
As described under "Our Management" in the Prospectus, Lord Abbett is the Fund's
investment manager. The eight general partners of Lord Abbett, all of whom are
officers and/or directors of the Fund, are: Stephen I. Allen, Daniel E. Carper,
Kenneth B. Cutler, Robert S. Dow, Thomas S. Henderson, Ronald P. Lynch, E. Wayne
Nordberg and John J. Walsh. The address of each partner is The General Motors
Building, 767 Fifth Avenue, New York, New York 10153-0203.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281 are
the independent auditors of the Fund and must be approved at least annually by
our Board of Directors to continue in such capacity. They perform audit services
for the Fund including the examination of financial statements included in our
annual report to shareholders.
Morgan Guaranty Trust Company of New York ("Morgan"), 60 Wall Street, New York,
New York, is the Fund's custodian. In accordance with the requirements of Rule
17f-5, the Fund's directors have approved arrangements permitting the Fund's
foreign assets not held by Morgan or its foreign branches to be held by certain
qualified foreign banks and depositories.
4.
Portfolio Transactions
Our policy is to have purchases and sales of portfolio securities executed at
the most favorable prices, considering all costs of the transaction including
brokerage commissions and dealer markups and markdowns, consistent with
obtaining best execution, except to the extent that we 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, we may, if considered advantageous, make a purchase from or
sale to another Lord Abbett-sponsored fund without the intervention of any
broker-dealer.
We select broker-dealers on the basis of their professional capability and the
value and quality of their brokerage and research services. Normally, the
selection is made by our traders who are officers of the Fund and also are
employees of Lord Abbett. Our traders do the trading as well for other accounts
- -- investment companies (of which they are also officers) and other investment
clients -- managed by Lord Abbett. They are responsible for the negotiation of
prices and commissions.
A broker may receive a commission for portfolio transactions exceeding the
amount another broker would have charged for the same transaction if our traders
determine that such amount of commission is reasonable in relation to the value
of the brokerage and research services performed by the executing broker viewed
in terms of either the particular transaction or its overall responsibilities
with respect to us and other accounts managed by Lord Abbett. Brokerage services
may include such factors as showing us 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 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 us; conversely,
research furnished in connection with brokerage on other accounts managed by
Lord Abbett may be used in connection with their services to us, and not all of
such research will necessarily be used by Lord Abbett in connection with their
services to such other accounts. We have 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 us; nor does it materially reduce or
otherwise affect the expenses incurred by Lord Abbett in the performance of such
services. We make no commitments regarding the allocation of brokerage business
to or among 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 buy or sell the same security at the same time
as we do, transactions will, to the extent practicable, be allocated among all
participating accounts in proportion to the amount of each order and will be
executed daily until filled so that each account shares the average price and
commission cost of each day.
If we tender portfolio securities pursuant to a cash tender offer, we will seek
to recapture any fees or commissions involved by designating Lord Abbett as our
agent so that the fees may be passed back to us. As other legally permissible
opportunities come to our attention for the direct or indirect recapture by us
of brokerage commissions or similar fees paid on portfolio transactions, our
directors will determine whether we should or should not seek such recapture.
5.
Purchases, Redemptions
and Shareholder Services
Information concerning how we value our shares for the purchase and redemption
of our shares is contained in the Prospectus under "Purchases" and
"Redemptions", respectively.
As disclosed in the Prospectus, we calculate our net asset value as of the close
of the New York Stock Exchange ("NYSE") on each day is a day that the NYSE is
open for trading by dividing our total net assets by the number of shares
outstanding at the time of calculation. The NYSE is closed on Saturdays and
Sundays and the following holidays -- New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The Fund values its portfolio securities at market value as of the close of the
NYSE. Market value will be determined as follows: securities listed or admitted
to trading privileges on the New York or American Stock Exchange or on the
NASDAQ National Market System are valued at the last sales price, or, if there
is no sale on that day, at the mean between the last bid and asked prices, or,
in the case of bonds, in the over-the-counter market if, in the judgment of the
Fund's officers, that market more accurately reflects the market value of the
bonds. Over-the-counter securities not traded on the NASDAQ National Market
System are valued at the mean between the last bid and asked prices. Securities
for which market quotations are not available are valued at fair market value
under procedures approved by the Board of Directors.
The maximum offering price of our shares on July 27, 1995 was computed as
follows (assuming no sales charge currently in effect):
Maximum offering price per share is equal to
the net asset value per share
(net assets divided by shares outstanding)................................$10.00
The Fund has entered into a distribution agreement with Lord Abbett under which
Lord Abbett is obligated to use its best efforts to find purchasers for the
shares of the Fund and to make reasonable efforts to sell the Series' shares so
long as, in Lord Abbett's judgment, a substantial distribution can be obtained
by reasonable efforts.
As stated in the Prospectus, our shares may be purchased at net asset value only
by directors (trustees) of the Lord Abbett-sponsored funds, partners and
employees of Lord Abbett, and spouses and other family members of such directors
(trustees), partners and employees.
The right to redeem and receive payment, as described in the Prospectus, may be
suspended if the NYSE is closed (except for weekends or customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
deems an emergency to exist.
Our Board of Directors may authorize redemption of all of the shares in any
account in which there are fewer than 25 shares. Before authorizing such
redemption, the Board must determine that it is in our economic best interest or
necessary to reduce disproportionately burdensome expenses in servicing
shareholder accounts. At least 60 days' prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
6.
Past Performance
The Fund computes the average annual compounded rate of total return during
specified periods that would equate the initial amount invested to the ending
redeemable value of such investment by adding one to the computed average annual
total return, raising the sum to a power equal to the number of years covered by
the computation and multiplying the result by one thousand dollars, which
represents a hypothetical initial investment. The calculation assumes deduction
of the maximum sales charge from the initial amount invested (in this case there
is no sales charge) and reinvestment of all income dividends and capital gains
distributions on the reinvestment dates at prices calculated as stated in the
Prospectus. The ending redeemable value is determined by assuming a complete
redemption at the end of the period(s) covered by the average annual total
return computation.
These figures represent past performance, and an investor should be aware that
the investment return and principal value of a Fund investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Therefore, there is no assurance that this performance will be
repeated in the future.
7.
Taxes
The value of any shares redeemed by the Fund or otherwise sold may be more or
less than your tax basis in the shares at the time the redemption or sale is
made. Any gain or loss generally will be taxable for federal income tax
purposes. Any loss realized on the sale or redemption 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 stock or securities are not
deductible if, within a period beginning 30 days before the date of the sale and
ending 30 days after the date of sale, the taxpayer acquires stock or securities
that are substantially identical.
The writing of call options and other investment techniques and practices which
the Fund may utilize, as described above under "Investment Objectives and
Policies," may create "straddles" for United States federal income tax purposes
and 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.
As described in the Prospectus under "How We Invest - Risk Factors," the Fund
may be subject to foreign withholding taxes which would reduce the yield on its
investments. Tax treaties between certain countries and the United States may
reduce or eliminate such taxes. It is 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.
The Fund will be subject to a 4% non-deductible excise tax on certain amounts
not distributed (and not treated as having been distributed) on a timely basis
in accordance with a calendar-year distribution requirement. The Fund intends to
distribute to shareholders each year an amount adequate to avoid the imposition
of such excise tax. Dividends paid by the Fund will qualify for the
dividends-received deduction for corporations to the extent they are derived
from dividends paid by domestic corporations.
Gains and losses realized 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 invest in a passive foreign investment company with respect
to which the Fund elected to make a "qualified electing fund" election, 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.
8.
Information About the Fund
The directors, trustees and officers of Lord Abbett-sponsored mutual funds,
together with the partners and employees of Lord Abbett, are permitted to
purchase and sell securities for their personal investment accounts. In engaging
in personal securities transactions, however, such persons are subject to
requirements and restrictions contained in the Fund's Code of Ethics which
complies, in substance, with each of the recommendations of the Investment
Company Institute's Advisory Group on Personal Investing. Among other things,
the Code requires that Lord Abbett partners and employees obtain advance
approval before buying or selling securities, submit confirmations and quarterly
transaction reports, and obtain approval before becoming a director of any
company; and it prohibits such persons from investing in a security 7 days
before or after any Lord Abbett-sponsored fund or Lord Abbett-managed account
considers a trade or trades in such security, prohibiting profiting on trades of
the same security within 60 days and trading on material and non-public
information. The Code imposes certain similar requirements and restrictions on
the independent directors and trustees of each Lord Abbett-sponsored mutual fund
to the extent contemplated by the recommendations of such Advisory Group.
