<PAGE>
LORD ABBETT RESEARCH FUND, INC.
THE GENERAL MOTORS BUILDING
767 FIFTH AVENUE
NEW YORK, NY 10153-0203
800-426-1130
LORD ABBETT RESEARCH FUND, INC., (THE "FUND"), IS A MUTUAL FUND CURRENTLY
CONSISTING OF THREE SERIES. ONLY SHARES OF ONE OF THOSE SERIES -- LARGE-CAP
SERIES ("WE" OR THE "SERIES") ARE OFFERED BY THIS PROSPECTUS. THE SERIES HAS TWO
CLASSES OF SHARES. THESE CLASSES, CALLED CLASS A AND B SHARES, PROVIDE INVESTORS
WITH DIFFERENT INVESTMENT OPTIONS IN PURCHASING SHARES OF THE SERIES. SEE
"PURCHASES" FOR A DESCRIPTION OF THESE CHOICES. BOTH CLASSES OF SHARES WILL BE
OFFERED TO THE PUBLIC FOR THE FIRST TIME ON OR ABOUT AUGUST 1, 1996. THE SERIES'
INVESTMENT OBJECTIVE IS GROWTH OF CAPITAL AND GROWTH OF INCOME CONSISTENT WITH
REASONABLE RISK. PRODUCTION OF CURRENT INCOME IS A SECONDARY CONSIDERATION. THE
SERIES SEEKS TO ATTAIN ITS OBJECTIVE BY INVESTING IN A BROAD RANGE OF COMPANIES
WHOSE COMMON STOCKS (INCLUDING SECURITIES CONVERTIBLE INTO COMMON STOCKS) ARE
SELLING AT ATTRACTIVE PRICES AND THEREFORE REPRESENT FUNDAMENTAL INVESTMENT
VALUE. THESE COMPANIES ARE PRIMARILY LARGE-SIZED, BASED ON THE VALUE OF THEIR
OUTSTANDING EQUITY SECURITIES. THIS OBJECTIVE MAY NOT BE CHANGED WITHOUT
SHAREHOLDER APPROVAL. 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 FUND AND 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 DIRECTLY TO THE FUND OR BY CALLING 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 15, 1996.
PROSPECTUS
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS. SHAREHOLDER INQUIRIES SHOULD
BE MADE IN WRITING DIRECTLY TO THE FUND OR BY CALLING 800-821-5129. YOU CAN ALSO
MAKE INQUIRIES THROUGH YOUR BROKER-DEALER.
SHARES OF THE SERIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
AN INVESTMENT IN THE SERIES INVOLVES RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
1 Investment Objective 2
2 Fee Table 2
3 Financial Highlights 3
4 How We Invest 3
5 Purchases 5
6 Shareholder Services 12
7 Our Management 14
8 Dividends, Capital Gains
Distributions and Taxes 14
9 Redemptions 15
10 Performance 16
<PAGE>
1 INVESTMENT OBJECTIVE
The investment objective of the Large-Cap Series is growth of capital and growth
of income consistent with reasonable risk. Production of current income is a
secondary consideration.
2 FEE TABLE
A summary of the Series' expenses is set forth in the table below. The example
should not be considered a representation of past or future expenses. Actual
expenses may be more or less than those shown.
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
<S> <C> <C>
Shareholder Transaction Expenses
(as a percentage of offering price)
Maximum Sales Load(1) on Purchases
(See Purchases) 5.75%(2)(3) None
Deferred Sales Load(1) (See Purchases) None(2) 5% if shares are redeemed
before 1st anniversary
of purchase, declining
to 1% before 6th
anniversary and
eliminated on and
after 6th anniversary(2)(3)
Annual Fund Operating Expenses(4)
(as a percentage of average net assets)
Management Fees (See "Our Management") 0.75%(3) 0.75%
12b-1 Fees (See "Purchases") 0.00% 1.00%
Other Expenses (See "Our Management") 0.27%(3) 0.27%
Total Operating Expenses 1.02% 2.02%
<FN>
Example:Assume an annual return of 5% and there is no change in the level of
expenses described above. For a $1,000 investment, with reinvestment of
all distributions, you would have paid the following total expenses if
you closed your account after the number of years indicated.
1 year 3 years 5 years 10 years
Class A shares(4) $67 $88 $111 $175
Class B shares(4) $60 $91 $118 $209
(1) Sales "load" is referred to as sales "charge", "deferred sales load" is
referred to as "contingent deferred sales charge" (or "CDSC") and "12b-1 fees"
which consist of a "service fee" and a "distribution fee" are referred to by
either or both of these terms where appropriate with respect to Class A and
Class B throughout this Prospectus. (2)See "Purchases" for descriptions of the
Class A front-end sales charges, the CDSC payable on certain redemptions of
Class A and Class B shares and separate Rule 12b-1 plans applicable to each
class of shares of the Fund. The CDSC reimburses: (a) the Fund, in the case of
Class A shares and (b) Lord Abbett Distributor LLC, in the case of Class B
shares. (3)Although the Fund does not, with respect to the Class B shares,
charge a front-end sales charge, investors should be aware that long-term
shareholders may pay, under the Rule 12b-1 plan applicable to the Class B shares
of the Fund (which pay annual 0.25% service and 0.75% distribution fees), more
than the economic equivalent of the maximum front-end sales charge as permitted
by certain rules of the National Association of Securities Dealers, Inc.
Likewise, with respect to Class A shares, investors should be aware that,
long-term, such maximum may be exceeded due to the Rule 12b-1 plan applicable to
Class A shares which permits the Fund to pay up to 0.50% in total annual fees,
half for service and the other half for distribution. The 12b-1 fee for the
Class A shares has been estimated. (4)The annual operating expenses shown in the
summary are the actual expenses for the fiscal year ended November 30, 1995 had
Lord, Abbett & Co. not waived its management fee and subsidized all other
expenses of the Series. The foregoing is provided to give investors a better
understanding of the expenses that are incurred by an investment in the Fund.
</FN>
</TABLE>
<PAGE>
3 FINANCIAL HIGHLIGHTS
The following table has been audited by Deloitte & Touche llp, independent
accountants, in connection with their annual audit of the Funds Financial
Statements, whose report thereon is incorporated by reference in the Statement
of Additional Information and may be obtained on request, and has been included
herein in reliance upon their authority as experts in accounting and auditing.
<TABLE>
<CAPTION>
For the Period
June 3, 1992
Per Class A Share+ Operating Year Ended November 30, (Commencement of Operations)
Performance: 1995 1994 1993 to November 30, 1992
<S> <C> <C> <C> <C>
Net asset value, beginning of period $12.79 $12.33 $10.61 $10.00
Income from Investment Operations
Net investment income* .42 .34 .29 .12**
Net realized and unrealized
gain on investments 3.44 .65 1.57 .49
Total from investment operations 3.86 .99 1.86 .61
Distributions
Dividends from net investment income (.29) (.20) (.14) .--
Net realized gain from security transactions (.82) (.33) -- --
Net asset value, end of period $15.54 $12.79 $12.33 $10.61
Total Return 32.82% 8.21% 17.72% 6.10%**
Ratios/Supplemental Data:
Net assets, end of period (000) $7,549 $5,558 $4,086 $2,372
Ratios to Average Net Assets:
Expenses, including waiver .00% .00% .00% .00%**
Expenses, excluding waiver 1.02% 1.15% 1.20% .79%**
Net investment income 3.27% 2.65% 2.44% 1.39%**
Portfolio turnover rate 37.17% 43.85% 74.16% 20.70%
</TABLE>
4 HOW WE INVEST
We invest primarily in common stocks (including securities convertible into
common stocks such as investment-grade convertible bonds or
convertible-preferred stocks) of large-cap companies defined for these purposes
as companies whose outstanding equity securities have an aggregate market value
of $1.5 billion and above. Under normal circumstances, at least 65% of the
Series' total assets will consist of investments made in large-cap companies,
determined at the time of purchase. These companies will have good prospects for
improvement in earnings trends or asset values. We will invest in companies on
the basis of the fundamental economic and business factors (such as government,
fiscal and monetary policies, employment levels, demographics, retail sales and
market share) which will affect future earnings and which we believe are the
primary factors determining the future market valuation of stocks. Although the
prices of common stocks fluctuate and their dividends vary, historically, common
stocks have appreciated in value and their dividends have increased when the
companies they represent have prospered and grown. There can be no assurance
that stocks selected for our portfolio will appreciate in value or that their
dividends will increase or be maintained.
In selecting securities for investment, we give more weight to the possibilities
of capital growth and growth of income than to current income. In seeking to
fulfill our objective, we will invest also in both small and middle-sized
companies, as measured by the value of their outstanding stock guided by the
policies mentioned herein. Stock prices of such small-sized companies may be
more volatile than those of large and middle-sized companies.
<PAGE>
By concentrating our research and stock selection on companies that are
undervalued or out of current investment favor, our investment portfolio
typically will encompass less market risk as measured by its
price-to-normal-earnings and price-to-book-value ratios. Our management process
results in the sale of stocks that we judge to be overpriced and reinvestment in
other securities which we believe offer better values and less market risk.
Our investment portfolio will be diversified among many issuers representing
many different industries. The portfolio reflects the collective judgment of the
Research Department of Lord, Abbett & Co. ("Lord Abbett") as to what securities
represent the greatest investment value, regardless of industry sector, market
capitalization, or Wall Street sponsorship. At the time of purchase, securities
selected for our portfolio may be largely neglected by the investment community
or, if widely followed, they may be out of favor or at least controversial.
Up to 10% of our net assets (at the time of investment) may be invested in
foreign securities (of the type described herein) primarily traded in foreign
countries.
For securities in our portfolio with a market value of up to 5% of our gross
assets at the time an option is written, we may write covered call options which
are traded on a national securities exchange in an attempt to increase our
income and to provide greater flexibility in the disposition of our portfolio
securities.
We may engage in (a) lending of our portfolio securities to broker-dealers on a
secured basis and (b) investing in rights and warrants to purchase securities.
We have no present intention to commit more than 5% of gross assets to any one
of these two identified practices. The term "warrants" includes warrants which
are not listed on the New York or American Stock Exchanges. Such unlisted
warrants may not exceed 2% of the Fund's assets.
We may invest in closed-end investment companies if bought in the secondary
market with a fee or commission no greater than the customary brokers commission
in compliance with the Investment Company Act of 1940. Shares of such investment
companies sometimes trade at a discount or premium in relation to their net
asset value and there may be duplication of fees, for example, to the extent
that we and the closed-end investment company both charge a management fee.
We will not borrow money, except as a temporary measure for extraordinary or
emergency purposes and then not in excess of 5% of our gross assets at the lower
of cost or market value.
Neither an issuer's ceasing to be rated investment grade nor a rating reduction
below that grade will require elimination of a bond from our portfolio. For
temporary defensive purposes, we 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.
We may invest up to 15% of our net assets in illiquid securities. Securities
determined by the Fund's Board of Directors to be liquid pursuant to Securities
and Exchange Commission Rule 144A ("Rule 144A") will not be subject to this
limit. Under Rule144A, a qualifying security may be resold to a qualified
institutional buyer without registration and without regard to whether the
seller originally purchased the security for investment. Investments by us in
Rule 144A securities initially determined to be liquid could have the effect of
diminishing the level of our liquidity during periods of decreased market
interest in such securities.
<PAGE>
We may deal in financial futures transactions with respect to the type of
securities described herein, including indices of such securities and options on
such financial futures. We will not enter into any futures contracts, or options
thereon, if the aggregate market value of the securities covered by futures
contracts plus options on such financial futures exceeds 50% of our total
assets.
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. Securities markets of foreign countries in which we
may invest (up to 10% of our net assets) 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 or reduction to shareholders and different securities settlement
practices.
Foreign securities may be traded on days that we do not value our portfolio
securities, and, accordingly, our net asset value may be significantly affected
on days when shareholders do not have access to the Series.
Convertible bonds and convertible-preferred stocks tend to be more volatile than
straight bonds but less volatile and more income producing than their underlying
common stocks.
5 PURCHASES
ALTERNATIVE SALES ARRANGEMENTS
Classes of Shares. The Fund offers investors two different classes of shares.
The different classes of shares represent investments in the same portfolio of
securities but are subject to different expenses and will likely have different
share prices. Investors should read this section carefully to determine which
class represents the best investment option for their particular situation.
Class A Shares. If you buy Class A shares, you pay an initial sales charge on
investments of less than $1 million (or on investments for employer-sponsored
retirement plans under the Internal Revenue Code (hereinafter referred to as
"Retirement Plans") with less than 100 eligible employees).
If you purchase Class A shares as part of an investment of at least $1 million
(or for Retirement Plans with at least 100 eligible employees) in shares of one
or more Lord Abbett-sponsored funds, you will not pay an initial sales charge,
but if you redeem any of those shares within 24 months after the month in which
you buy them, you may pay to the Fund a contingent deferred sales charge
("CDSC") of 1%. Class A shares are subject to service and distribution fees that
are currently estimated to total annually approximately 0.____ of 1% of the
annual net asset value of the Class A shares. The initial sales charge rates,
the CDSC and the Rule 12b-1 Plan applicable to the Class A shares are described
in "Buying Class A Shares" below.
Class B Shares. If you buy Class B shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the sixth anniversary of
buying them, you will normally pay a CDSC to Lord Abbett Distributor LLC
(hereinafter referred to as "Lord Abbett Distributor"). That CDSC varies
depending on how long you own shares. Class B shares are subject to service and
distribution fees at an annual rate of 1% of the annual net asset value of the
Class B shares. The CDSC and the Rule 12b-1 Plan applicable to the Class B
shares are described in "Buying Class B Shares" below.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial adviser. The Fund's class-specific expenses and the
effect of the different types of sales charges on your investment will affect
your investment results over time. The most important factors are how much you
plan to invest and how long you plan to hold your investment. If your goals and
objectives change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider another class of
shares.
In the following discussion, to help provide you and your financial adviser with
a framework in which to choose a class, we have made some assumptions using a
hypothetical investment in the Fund. We used the sales charge rates that apply
to Class A and Class B, and considered the effect of the higher distribution fee
on Class B expenses (which will affect your investment return). Of course, the
actual performance of your investment cannot be predicted and will vary, based
on the Fund's actual investment returns, the operating expenses borne by each
class of shares, and the class of shares you purchase. The factors briefly
discussed below are not intended to be investment advice, guidelines or
recommendations, because each investor's financial considerations are different.
The discussion below of the factors to consider in purchasing a particular class
of shares assumes that you will purchase only one class of shares and not a
combination of shares of different classes.
<PAGE>
How Long Do You Expect to Hold Your Investment? While future financial needs
cannot be predicted with certainty, knowing how long you expect to hold your
investment will assist you in selecting the appropriate class of shares. For
example, over time, the reduced sales charges available for larger purchases of
Class A shares may offset the effect of paying an initial sales charge on your
investment, compared to the effect over time of higher class-specific expenses
on Class B shares, for which no initial sales charge is paid. Because of the
effect of class-based expenses, your choice should also depend on how much you
plan to invest.
Investing for the Short Term. If you have a short-term investment horizon (that
is, you plan to hold your shares for not more than six years), you should
probably consider purchasing Class A shares rather than Class B shares. This is
because of the effect of the Class B CDSC if you redeem before the sixth
anniversary of your purchase, as well as the effect of the Class B distribution
fee on the investment return for that class in the short term.
For most investors who invest $1 million or more or for Retirement Plans with at
least 100 eligible employees, in most cases Class A shares will be the most
advantageous choice, no matter how long you intend to hold your shares. For that
reason, Lord Abbett Distributor normally will not accept purchase orders for
Class B shares from a single investor (i) for $500,000 or more or (ii) for
Retirement Plans with at least 100 eligible employees.
Investing for the Longer Term. If you are investing long term (for example,
future college expenses for your child) and do not expect to need access to your
money for seven years or more, Class B shares may be an appropriate investment
option, if you plan to invest less than $100,000. If you plan to invest more
than $100,000 over the long term, Class A shares will likely be more
advantageous than Class B shares, as discussed above, because of the effect of
the expected lower expenses for Class A shares and the reduced initial sales
charges available for larger investments in
Class A shares under the Fund's Rights of Accumulation.
Of course, these examples are based on approximations of the effect of current
sales charges and expenses on a hypothetical investment over time, and should
not be relied on as rigid guidelines.
Are There Differences in Account Features That Matter to You? Some account
features are available in whole or in part to Class A and Class B shareholders.
Other features (such as Systematic Withdrawal Plans) might not be advisable in
non-Retirement Plan accounts for Class B shareholders (because of the effect of
the CDSC on withdrawals over 12% annually). See "Systematic Withdrawal Plan"
under "Shareholder Services" for more information about the 12% annual waivers
of the CDSC. You should carefully review how you plan to use your investment
account before deciding which class of shares you buy. For example, the
dividends payable to Class B shareholders will be reduced by the expenses borne
solely by this class, such as the higher distribution fee to which Class B
shares are subject, as described below.
How Does It Affect Payments to My Broker? A salesperson, such as a broker, or
any other person who is entitled to receive compensation for selling Fund shares
may receive different compensation for selling one class than for selling
another class. As discussed in more detail below, such compensation is primarily
paid at the time of sale in the case of Class A and B shares. It is important
that investors understand that the primary purpose of the CDSC and distribution
fee for Class B shares is the same as the purpose of the front-end sales charge
on sales of Class A shares:
to compensate brokers and other persons selling such shares. The CDSC, if
payable, supplements the Class B distribution fee.
GENERAL
How Much Must You Invest? You may buy our shares through any independent
securities dealer having a sales agreement with Lord Abbett Distributor, our
exclusive selling agent. Place your order with your investment dealer or send it
to Lord Abbett Research Fund, Inc. -- Large-Cap Series (P.O. Box 419100, Kansas
City, Missouri 64141). The minimum initial investment is $1,000 except for
Invest-A-Matic and Div-Move ($250 initial and $50 subsequent minimum) and
Retirement Plans ($250 minimum). See "Shareholder Services". For information
regarding the proper form of a purchase or redemption order, call the Fund at
800-821-5129. This offering may be suspended, changed or withdrawn. Lord Abbett
Distributor reserves the right to reject any order.
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 the
number of shares outstanding. Securities are valued at their market value as
more fully described in the Statement of Additional Information.
Buying Shares Through Your Dealer. Orders for shares received by the Fund prior
to the close of the NYSE, or received by dealers prior to such close and
received by Lord Abbett Distributor prior to the close of its business day, will
be confirmed at the applicable public offering price effective at such NYSE
close. Orders received by dealers after the NYSE closes and received by Lord
Abbett Distributor in proper form prior to the close of its next business day
are executed at the applicable public offering price effective as of the close
of the NYSE on that next business day. The dealer is responsible for the timely
transmission of orders to Lord Abbett Distributor. A business day is a day on
which the NYSE is open for trading.
<PAGE>
Lord Abbett Distributor may, for specified periods, allow dealers to retain the
full sales charge for sales of shares during such periods, or pay an additional
concession to a dealer who, during a specified period, sells a minimum dollar
amount of our shares and/or shares of other Lord Abbett-sponsored funds. In some
instances, such additional concessions will be offered only to certain dealers
expected to sell significant amounts of shares. Lord Abbett Distributor may,
from time to time, implement promotions under which Lord Abbett Distributor will
pay a fee to dealers with respect to certain purchases not involving imposition
of a sales charge. Additional payments may be paid from Lord Abbett
Distributor's own resources and will be made in the form of cash or, if
permitted, non-cash payments. The non-cash payments will include business
seminars at resorts or other locations, including meals and entertainment, or
the receipt of merchandise. The cash payments will include payment of various
business expenses of the dealer. In selecting dealers to execute portfolio
transactions for the Fund's portfolio, if two or more dealers are considered
capable of obtaining best execution, we may prefer the dealer who has sold our
shares and/or shares of other Lord Abbett-sponsored funds.
Buying Class A Shares. The offering price of Class A shares is based on the
per-share net asset value next computed after your order is accepted plus a
sales charge as follows.
<TABLE>
<CAPTION>
Sales Charge as a Dealer's
Percentage of: Concession
as a To Compute
Net Percentage Offering
Offering Amount of Offering Price, Divide
Size of Investment Price Invested Price NAV by
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00% .9425
$50,000 to $99,999 4.75% 4.99% 4.00% .9525
$100,000 to $249,999 3.75% 3.90% 3.25% .9625
$250,000 to $499,999 2.75% 2.83% 2.25% .9725
$500,000 to $999,999 2.00% 2.04% 1.75% .9800
$1,000,000 or more No Sales Charge 1.00%* 1.0000
<FN>
*Authorized institutions receive concessions on purchases made by a retirement
plan or other qualified purchaser within a 12-month period (beginning with the
first net asset value purchase) as follows: 1.00% on purchases of $5 million,
0.55% of the next $5 million, 0.50% of the next $40 million and 0.25% on
purchases over $50 million. See Class A Rule 12b-1 Plan below.
</FN>
</TABLE>
Class A Share Volume Discounts. This section describes several ways to qualify
for a lower sales charge when purchasing Class A shares if you inform Lord
Abbett Distributor or the Fund that you are eligible at the time of purchase.
(1) Any purchaser (as described below) may aggregate a Class A share purchase in
the Fund with any share purchases of any other eligible Lord Abbett-sponsored
fund, together with the current value at maximum offering price of any shares in
the Fund and in any eligible Lord Abbett-sponsored funds held by the purchaser.
(Holdings in the following funds are not eligible for the above rights of
accumulation: Lord Abbett Equity Fund ("LAEF"), Lord Abbett Series Fund
("LASF"), any series of the Fund not offered to the general public ("LARF") and
Lord Abbett U.S. Government Securities Money Market Fund ("GSMMF"), except for
holdings in GSMMF which are attributable to any shares exchanged from a Lord
Abbett-sponsored fund.) (2) A purchaser may sign a non-binding 13-month
statement of intention to invest $50,000 or more in any shares of the Fund or in
any of the above eligible funds. If the intended purchases are completed during
the period, the total amount of your intended purchases of any shares will
determine the reduced sales charge rate for the Class A shares purchased during
the period. If not completed, each Class A share purchase will be at the sales
charge for the aggregate of the actual share purchases.
Shares issued upon reinvestment of dividends or distributions are not included
in the statement of intention. The term "purchaser" includes (i) an individual,
(ii) an individual and his or her spouse and children under the age of 21 and
(iii) a trustee or other fiduciary purchasing shares for a single trust estate
or single fiduciary account (including a pension, profit-sharing, or other
employee benefit trust qualified under Section 401 of the Internal Revenue Code
- -- more than one qualified employee benefit trust of a single employer,
including its consolidated subsidiaries, may be considered a single trust, as
may qualified plans of multiple employers registered in the name of a single
bank trustee as one account), although more than one beneficiary is involved.
Class A Share Net Asset Value Purchases. Our Class A shares may be purchased at
net asset value by our directors, employees of Lord Abbett, employees of our
shareholder servicing agent and employees of any securities dealer having a
sales agreement with Lord Abbett Distributor who consents to such purchases or
by the trustee or custodian under any pension or profit-sharing plan or Payroll
Deduction IRA established for the benefit of such persons or for the benefit of
any national securities trade organization to which Lord Abbett or Lord Abbett
Distributor belongs or any company with an account(s) in excess of $10 million
managed by Lord Abbett on a private-advisory-account basis. For purposes of this
paragraph, the terms "directors" and "employees" include a director's or
employee's spouse (including the surviving spouse of a deceased director or
employee).
The terms "directors" and "employees of Lord Abbett" also include other family
members and retired directors and employees. Our Class A shares also may be
purchased at net asset value (a) at $1 million or more, (b) with dividends and
distributions on Class A shares of other Lord Abbett-sponsored funds, except for
dividends and distributions on shares of LARF, LAEF and LASF, (c) under the loan
feature of the Lord Abbett-sponsored prototype 403(b) plan for Class A share
purchases representing the repayment of principal and interest, (d) by certain
authorized brokers, dealers, registered investment advisers or other financial
institutions who have entered into an agreement with Lord Abbett Distributor in
accordance with certain standards approved by Lord Abbett Distributor, providing
specifically for the use of our Class A shares in particular investment products
made available for a fee to clients of such brokers, dealers, registered
investment advisers and other financial institutions ("mutual fund wrap fee
programs"), (e) by employees, partners and owners of unaffiliated consultants
and advisers to Lord Abbett, Lord Abbett Distributor or Lord Abbett-sponsored
funds who consent to such purchase if such persons provide services to Lord
Abbett, Lord Abbett Distributor or such funds on a continuing basis and are
familiar with such funds, (f) through Retirement Plans with at least 100
eligible employees and (g) subject to appropriate documentation, through a
securities dealer where the amount invested represents redemption proceeds from
shares ("Redeemed Shares") of a registered open-end management investment
company not distributed or managed by Lord Abbett Distributor or Lord Abbett
(other than a money market fund), if such redemptions have occurred no more than
60 days prior to the purchase of our Class A shares, the Redeemed Shares were
held for at least six months prior to redemption and the proceeds of redemption
were maintained in cash or a money market fund prior to purchase.
Purchasers should consider the impact, if any, of contingent deferred sales
charges in determining whether to redeem shares for subsequent investment in our
Class A shares. Lord Abbett Distributor may suspend or terminate the purchase
option referred to in (g) above at any time Our Class A shares may be issued at
net asset value in exchange for the assets, subject to possible tax adjustment,
of a personal holding company or an investment company.
Class A Rule 12b-1 Plan. We have adopted a Class A share Rule 12b-1 Plan (the "A
Plan") which authorizes the payment of fees to authorized institutions (except
as to certain accounts for which tracking data is not available) in order to
provide additional incentives for them (a) to provide continuing information and
investment services to their Class A shareholder accounts and otherwise to
encourage those accounts to remain invested in the Fund and (b) to sell Class A
shares of the Fund. Under the A Plan, in order to save on the expense of
shareholders meetings and to provide flexibility to the Board of Directors, the
Board, including a majority of the outside directors who are not "interested
persons" of the Fund as defined in the Investment Company Act of 1940, is
authorized to approve annual fee payments from our Class A assets of up to 0.50
of 1% of the average net of such assets consisting of distribution and service
fees, each at a maximum annual rate not exceeding 0.25 of 1% (the "Fee
Ceiling").
Under the A Plan, the Board has approved payments by the Fund to Lord Abbett
Distributor which uses or passes on to authorized institutions (1) an annual
service fee (payable quarterly) of .25% of the average daily net asset value of
the Class A shares serviced by authorized institutions; (2) a one-time
distribution fee of up to 1% (reduced according to the following schedule: 1% of
the first $5 million, .55% of the next $5 million, .50% of the next $40 million
and .25% over $50 million), payable at the time of sale on all Class A shares
sold during any 12-month period starting from the day of the first net asset
value sale (i) at the $1 million level by authorized institutions, including
sales qualifying at such level under the rights of accumulation and statement of
intention privileges; or (ii) through Retirement Plans with at least 100
eligible employees. In addition, the Board has approved for those authorized
institutions which qualify, a supplemental annual distribution fee equal to
0.10% of the average daily net asset value of the Class A shares serviced by
authorized institutions which have a satisfactory program for the promotion of
such shares comprising a significant percentage of the Class A assets, with a
lower than average redemption rate. Institutions and persons permitted by law to
receive such fees are "authorized institutions".
Under the A Plan, Lord Abbett Distributor is permitted to use payments received
to provide continuing services to Class A shareholder accounts not serviced by
authorized institutions and, with Board approval, to finance any activity which
is primarily intended to result in the sale of Class A shares. Any such payments
are subject to the Fee Ceiling. Any payments under that Plan not used by Lord
Abbett Distributor in this manner are passed on to authorized institutions.
<PAGE>
Holders of Class A shares on which the 1% sales distribution fee has been paid
will be required to pay to the Fund on behalf of its Class A shares a CDSC of 1%
of the original cost or the then net asset value, whichever is less, of all
Class A shares so purchased which are redeemed out of the Lord Abbett-sponsored
family of funds on or before the end of the twenty-fourth month after the month
in which the purchase occurred. (An exception is made for redemptions by
Retirement Plans due to any benefit payment such as Plan loans, hardship
withdrawals, death, retirement or separation from service with respect to plan
participants or the distribution of any excess contributions.) If the Class A
shares have been exchanged into another Lord Abbett-sponsored fund and are
thereafter redeemed out of the Lord Abbett family of funds on or before the end
of such twenty-fourth month, the charge will be collected for the Fund's Class A
shares by the other fund. The Fund will collect such a charge for other Lord
Abbett-sponsored funds in a similar situation.
Buying Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed for
cash before the sixth anniversary of their purchase, a CDSC normally will be
deducted from the redemption proceeds. The charge will be assessed on the lesser
of the net asset value of the shares at the time of redemption or the original
purchase price. The CDSC is not imposed on the amount of your account value
represented by the increase in net asset value over the initial purchase price
(including increases due to the reinvestment of dividends and capital gains
distributions). The Class B CDSC is paid to Lord Abbett Distributor to
compensate it for its services rendered in conncection with the distribution of
Class B shares, including the payment and financing of sales commisisons. See
"Class B Rule 12b-1 Plan" below.
To determine whether the CDSC applies to a redemption, the Fund redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held until the sixth anniversary of
their purchase or later, and (3) shares held the longest before the sixth
anniversary of their purchase.
The amount of the CDSC will depend on the number of years since you invested and
the dollar amount being redeemed, according to the following schedule:
Anniversary
of the Day on Contingent Deferred
Which the Purchase Sales Charge on
Order Was Accepted Redemptions
(As % of Amount
On Before Subject to Charge)
1st 5.0%
1st 2nd 4.0%
2nd 3rd 3.0%
3rd 4th 3.0%
4th 5th 2.0%
5th 6th 1.0%
on or after the None
6th anniversary
In the table, an "anniversary" is the 365th day subsequent to a purchase or a
prior anniversary. All purchases are considered to have been made on the
business day the purchase was made. See "Buying Shares Through Your Dealer"
above.
If Class B shares are exchanged into the same class of another Lord
Abbett-sponsored fund and the new shares are subsequently redeemed for cash
before the sixth anniversary of the original purchase, the CDSC will be payable
on the new shares on the basis of the time elapsed from the original purchase.
The Fund will collect such a charge for other Lord Abbett-sponsored funds in a
similar situation.
Waiver of Class B Sales Charges. The Class B CDSC will not be applied to shares
purchased in certain types of transactions nor will it apply to shares redeemed
in certain circumstances as described below.
The Class B CDSC will be waived for redemptions of shares (i) in connection with
the Systematic Withdrawal Plan and Div-Move services, as described in more
detail under "Shareholder Services" below, (ii) by Retirement Plans due to any
benefit payment such as Plan loans, hardship withdrawals, death, retirement or
separation from service with respect to plan participants or the distribution of
any excess contributions, and (iii) in connection with mandatory distributions
under 403(b) plans and individual retirement accounts.
Class B Rule 12b-1 Plan. The Fund has adopted a Class B share Rule 12b-1 Plan
(the "B Plan") under which the Fund periodically pays Lord Abbett Distributor
(i) an annual service fee of 0.25 of 1% of the average daily net asset value of
the Class B shares and (ii) an annual distribution fee of 0.75 of 1% of the
average daily net asset value of the Class B shares that are outstanding for
less than 8 years. Lord Abbett Distributor uses the service fee to compensate
authorized institutions for providing personal services for accounts that hold
Class B shares. Those services are primarily similar to those provided under the
A Plan, described above. Lord Abbett Distributor pays an up-front payment to
authorized institutions totaling 4%, consisting of 0.25% for service and 3.75%
for a sales commission as described below.
Lord Abbett Distributor pays the 0.25% service fee to authorized institutions in
advance for the first year after Class B shares have been sold by the authorized
institutions. After the shares have been held for a year, Lord Abbett
Distributor pays the service fee on a quarterly basis. Lord Abbett Distributor
is entitled to retain such service fee payable under the B Plan with respect to
accounts for which there is no authorized institution of record or for which
such authorized institution did not qualify. Although not obligated to do so,
Lord Abbett Distributor may waive receipt from the Fund of part of all of the
service fee payments.
The 0.75% annual distribution fee is paid to Lord Abbett Distributor to
compensate it for its services rendered in connection with the distribution of
Class B shares, including the payment and financing of sales commissions.
Although Class B shares are sold without a front-end sales charge, Lord Abbett
Distributor pays authorized institutions responsible for sales of Class B shares
a sale commission of 3.75% of the purchase price. This payment is made at the
time of sale from Lord Abbett Distributor's own resources. Lord Abbett has made
arrangements to finance these commission payments, which arrangements include
non-recourse assignments by Lord Abbett Distributor to the financing party of
such distribution and CDSC payments which are made to Lord Abbett Distributor by
shareholders who redeem their Class B shares within six years of their purchase.
The distribution fee and CDSC payments described above allow investors to buy
Class B shares without a front-end sales charge while allowing Lord Abbett
Distributor to compensate authorized institutions that sell Class B shares. The
CDSC is intended to supplement Lord Abbett Distributor's reimbursement for the
commission payments it has made with respect to Class B shares and its related
distribution and financing costs. The distribution fee payments are at a fixed
rate and the CDSC payments are of a nature that, during any year, both forms of
payment may not be sufficient to reimburse Lord Abbett Distributor for its
actual expenses. The Fund is not liable for any expenses incurred by Lord Abbett
Distributor in excess of (i) the amount of such distribution fee payments to be
received by Lord Abbett Distributor and (ii) unreimbursed distribution expenses
of Lord Abbett Distributor incurred in a prior plan year, subject to the right
of the Board of Directors or shareholders to terminate the B Plan. Over the
long-term the expenses incurred by Lord Abbett Distributor are likely to be
greater than such distribution fee and CDSC payments. Nevertheless, there exists
a possibility that for a short-term period Lord Abbett Distributor may not have
sufficient expenses to warrant reimbursement by receipt of such distribution fee
payments. Although Lord Abbett Distributor undertakes not to make a profit under
the B Plan, the B Plan is considered a compensation plan (i.e., distribution
fees are paid regardless of expenses incurred) in order to avoid the possibility
of Lord Abbett Distributor not being able to receive distribution fees because
of a temporary timing difference between its incurring expenses and receipt of
such distribution fees.
<PAGE>
Automatic Conversion of Class B Shares. On the eighth anniversary of your
purchase of Class B shares, those shares will automatically convert to Class A
shares. This conversion relieves Class B shareholders of the higher annual
distribution fee that applies to Class B shares under the Class B Rule 12b-1
Plan. The conversion is based on the relative net asset value of the two
classes, and no sales charge or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions will also convert to Class A shares on a pro rata
basis. The conversion feature is subject to the continued availability of an
opinion of counsel or of a tax ruling described in "Purchases, Redemptions and
Shareholder Services" in the Statement of Additional Information.
6 SHAREHOLDER SERVICES
We offer the following shareholder services:
Telephone Exchange Privilege: Shares may be exchanged, without a service charge:
(a) for shares of the same class of any other Lord Abbett-sponsored fund except
for (i) LAEF, LARF and LASF 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 and (b) for shares of any authorized institution's affiliated
money market fund satisfying Lord Abbett Distributor as to certain omnibus
accounts and other criteria (together, "Eligible Funds").
You or your representative with proper identification can instruct the Fund to
exchange uncertificated shares (held by the transfer agent) 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 (800-821-5129) prior to the close of the
NYSE to obtain each fund's 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.
Systematic Withdrawal Plan ("SWP"): Except for Retirement Plans for which there
is no such minimum, if the maximum offering price value of your uncertificated
shares is at least $10,000, you may have periodic cash withdrawals automatically
paid to you in either fixed or variable amounts. With respect to Class B shares,
the CDSC will be waived on redemptions of up to 12% per year of either the
current net asset value of your account or your original purchase price,
whichever is higher. For Class B shares (over 12% per year), redemption proceeds
due to a SWP will be derived from the following sources in the order listed: (1)
shares acquired by reinvestment of dividends and capital gains, (2) shares held
for six years or more (Class B); and (3) shares held the longest before the
sixth anniversary of their purchase (Class B). Shareholders should be careful in
establishg a SWP at the 12% level, especially to the extent that such a
withdrawal exceeds the annual total return for a class in which case, the
shareholder's original principal will be invaded and, over time, may be
depleted.
Div-Move: You can invest the dividends paid on your account ($50 minimum
investment) into an existing account in any other Eligible Fund. The account
must be either your account, a joint account for you and your spouse, a single
account for your spouse, or a custodial account for your minor child under the
age of 21. Such dividends are not subject to a CDSC. You should read the
prospectus of the other fund before investing.
Invest-A-Matic: You can make fixed, periodic investments ($50 minimum
investment) into the Series and/or any Eligible Fund by means of automatic
money transfers from your bank checking account. You should read the
prospectus of the other fund before investing.
Retirement Plans: Lord Abbett makes available the retirement plan forms and
custodial agreements for IRAs (Individual Retirement Accounts including
Simplified Employee Pensions), 403(b) plans and pension and profit-sharing
plans, including 401(k) plans.
Householding: A single copy of an annual or semi-annual report will be sent to
an address to which more than one registered shareholder of the Fund with the
same last name has indicated mail is to be delivered, unless additional reports
are specifically requested in writing or by telephone.
All correspondence should be directed to the Large-Cap Series of Lord Abbett
Research Fund, Inc. (P.O. Box 419100, Kansas City, Missouri 64141;
800-821-5129).
7 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. We employ
Lord Abbett as investment manager pursuant to a Management Agreement. Lord
Abbett has been an investment manager for over 65 years and currently manages
approximately $19 billion in a family of mutual funds and other advisory
accounts. Under the Management Agreement, Lord Abbett provides the Fund with
investment management services and executive and other personnel, pays the
remuneration of our officers and of our directors affiliated with Lord Abbett,
provides us with office space and pays for ordinary and necessary office and
clerical expenses relating to research, statistical work and supervision of our
portfolio and certain other costs. Lord Abbett provides similar services to
twelve other Lord Abbett-sponsored funds having various investment objectives
and also advises other investment clients. Robert G. Morris, Lord Abbett
partner, has been primarily responsible for the day-to-day management of the
Fund since 1996, although he has been involved with the Fund's management since
inception. Prior to joining Lord Abbett in 1991, Mr. Morris was Vice President
and Manager of Chase Manhattan Bank, N.A. Mr. Morris delegates management duties
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,
regardless of industry sector, market capitalization or Wall Street sponsorship.
We are obligated to pay Lord Abbett a monthly fee based on average daily net
assets for each month at the annual rate of .75%. This fee may be higher than
that paid by other mutual funds. For the fiscal year ended November 30, 1995,
Lord Abbett waived $50,255 of its management fee and assumed $18,000 of
expenses. Due to such waiver, the effective fee paid to Lord Abbett as a
percentage of average daily net assets was at the annual rate of zero percent
for such period. This effective fee would have been at the annual rate of .75%
had Lord Abbett not waived its management fee. In addition, we pay all expenses
not expressly assumed by Lord Abbett. Our Class A share ratio of expenses,
including management fee expenses, to average net assets for such fiscal year
was zero percent. This expense ratio would have been 1.02% had Lord Abbett not
waived its management fee and paid all other expenses of the Fund. Lord Abbett
will not continue to waive such fees and pay such expenses for the current
fiscal year.
8 DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
Dividends from taxable net investment income may be taken in cash or reinvested
in additional shares at net asset value (without a sales charge) and may be paid
to shareholders quarterly in March, June, September and December.
If you elect a cash payment (i) a check will be mailed to you as soon as
possible after the monthly reinvestment date or (ii) if you arrange for direct
deposit, your payment will be wired directly to your bank account within one day
after the payable date.
A long-term capital gains distribution is made when we have net profits during
the year from sales of securities which we have held more than one year. If we
realize net short-term capital gains, they also will be distributed. Any capital
gains distribution will be made in December and may be taken in cash or
reinvested in more shares at net asset value without a sales charge.
Supplemental dividends and distributions also may be paid in December. Dividends
and distributions declared in October, November or December of any year to
shareholders of record as of a date in such a month 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.
We intend to continue to meet the requirements of Subchapter M of the Internal
Revenue Code. We try to distribute to shareholders all our net investment income
and net realized capital gains, so as to avoid the necessity of the Fund 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 the Fund as "capital gains dividends" 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%. Legislation pending 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 proceeds (including the value of shares exchanged into another
Lord Abbett-sponsored fund), 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.
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 the
tax consequences of gains or losses from the redemption or exchange of our
shares.
9 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. 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, recording all telephone redemptions and mailing the proceeds
only to the named shareholder at the address appearing on the account
registration.
If you do not qualify for the expedited redemption procedures described above to
redeem shares directly, send your request to the Large-Cap Series of Lord Abbett
Research Fund, Inc. (P.O. Box 419100, Kansas City, Missouri 64141) with
signature(s) and any legal capacity of the signer(s) guaranteed by an eligible
guarantor, accompanied by any certificates for shares to be redeemed and other
required documentation. We will make payment of the net asset value of the
shares on the date the redemption order was received in proper form. Payment
will be made within three days. The Fund may suspend the right to redeem shares
for not more than seven days or longer under unusual circumstances as permitted
by Federal law. If you have purchased Fund shares by check and subsequently
submit a redemption request, redemption proceeds will be paid upon clearance of
your purchase check, which may take up to 15 days. To avoid delays you may
arrange for the bank upon which a check was drawn to communicate to the Fund
that the check has cleared. Shares also may be redeemed by the Fund at net asset
value through your securities dealer who, as an unaffiliated dealer, may charge
you a fee. If your dealer receives your order prior to the close of the NYSE and
communicates it to Lord Abbett Distributor, as our agent, prior to the close of
Lord Abbett Distributor's business day, you will receive the net asset value as
of the close of the NYSE on that day. If the dealer does not communicate such an
order to Lord Abbett until the next business day, you will receive the net asset
value as of the close of the NYSE on that next business day.
Shareholders who have redeemed their shares have a one-time right to reinvest,
into another account having the identical registration, in any of the Eligible
Funds at the then applicable net asset value (i) without the payment of a sales
charge or (ii) with reimbursement for the payment of any CDSC. Such reinvestment
must be made within 60 days of the redemption and is limited to no more than the
amount of the redemption proceeds.
Under certain circumstances and subject to 30 days' 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, resulting from redemption or exchange
not market action.
10 PERFORMANCE
The fiscal year ended on November 30, 1995 with a net asset value of $15.54,
which was 29.8% higher than the $11.97 price recorded at the close of fiscal
1994 (after adjustment for a capital gains distribution of $.82 per share paid
in December 1994). The Series produced a total return of 32.8% compared to a
36.9% return for the unmanaged S&P 500 Index. Since inception on June 3, 1992,
the Series produced a total return of 79.5% versus 60.5% for the S&P 500 over
the same period.
Moderate economic growth and declining interest rates resulted in a positive
environment for stocks throughout fiscal 1995. The Series maintained its focus
on undervalued issues with positive fundamentals and earnings that are not
primarily dependent on strong economic activity. Currently, significant
valuation disparities are not readily apparent among industries and sectors;
thus our ability to identify undervalued issues will drive the Fund's
performance in the first half of 1996.
Total Return. Total return for the one-, five- and ten-year periods represents
the average annual compounded rate of return on an investment of $1,000 in the
Fund at the maximum public offering price. When total return is quoted for Class
A shares, it includes the payment of the maximum initial sales charge. When
total return is shown for Class B shares, it reflects the effect of the
applicable CDSC. Total return also may be presented for other periods or based
on investments at reduced sales charge levels or net asset value. Any quotation
of total return not reflecting the maximum sales charge (front-end, level, or
back-end) would be reduced if such sales charge were used. Quotations of total
return for any period when an expense limitation is in effect will be greater
than if the limitation had not been in effect. See "Past Performance" in the
Statement of Additional Information for a more detailed discussion of the
computation of the Fund's total return.
This Prospectus does not constitute an offering in any jurisdiction in which
such offer is not authorized or in which the person making such offer is not
qualified to do so or to anyone to whom it is unlawful to make such offer.
No person is authorized to give any information or to make any representations
not contained in this Prospectus or in supplemental sales material authorized by
the Fund and no person is entitled to rely upon any information or
representation not contained herein or therein.
<PAGE>
Comparison of change in value of a $10,000 investment in Class A shares,
assuming reinvestment of all dividends and distributions, in the Fund and the
unmanaged Standard & Poor's 500 Index.
<TABLE>
<CAPTION>
The Fund The Fund S&P 500
at Net at Maximum Index
Date Asset Value Offering Price
- ----------------------------------------------------------------
<S> <C> <C> <C>
6/3/92 $10,000 $ 9,425 $10,000
11/30/92 10,610 10,000 10,534
11/30/93 12,490 11,772 11,597
11/30/94 13,516 12,739 11,719
11/30/95 17,952 16,921 16,048
Average Annual Total Return (3)
1 Year 3 Years Life of Fund
25.20% 16.81% 16.26%
<FN>
(1)Data reflects the deduction of the maximum initial sales charge of 5.75%
applicable to Class A shares.
(2)Performance numbers for the unmanaged Standard & Poor's 500 Index do not
reflect transaction costs or management fees. An investor cannot invest directly
in the Standard & Poor's 500 Index.
(3)Total return is the percent change in value, after deduction of the maximum
initial sales charge of 5.75% applicable to Class A shares, with all dividends
and distributions reinvested for the periods shown ending November 30, 1995
using the SEC-required uniform method to compute such return. The Fund commenced
operations on June 3, 1992.
</FN>
</TABLE>
<PAGE>
LORD ABBETT
Statement of Additional Information July 15, 1996
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 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 July 15, 1996.
Large-Cap Series (the "Series" or "we") is a diversified separate series of Lord
Abbett Research Fund, Inc. (sometimes referred to as the "Fund") which was
incorporated under Maryland law on April 6, 1992. As of July 12, 1996, our
50,000,000 shares of authorized capital stock consist of two classes (A and B),
$0.001 par value. The Board of Directors will allocate these authorized shares
of capital stock among the classes from time to time. Prior to July 12, 1996, we
had only one class of shares, which class is now designated Class A. The Class A
and B shares will be offered to the public for the first time on or about August
1, 1996. All shares have equal noncumulative voting rights and equal rights with
respect to dividends, assets and liquidation, except for certain class-specific
expenses. They are fully paid and nonassessable when issued and have no
preemptive or conversion rights.
Rule 18f-2 under the Act provides that any matter required to be submitted, by
the provisions of the Act or applicable state law or otherwise, to the holders
of the outstanding voting securities of an investment company such as the Fund
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each class affected by such
matter. Rule 18f-2 further provides that a class shall be deemed to be affected
by a matter unless the interests of each class in the matter are substantially
identical or the matter does not affect any interest of such class. However, the
Rule exempts the selection of independent public accountants, the approval of
principal distributing contracts and the election of directors from its separate
voting requirements.
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
Distributor.
TABLE OF CONTENTS PAGE
1. Investment Policies 2
2. Directors and Officers 5
3. Investment Advisory and Other Services 7
4. Portfolio Transactions 7
5. Purchases, Redemptions
and Shareholder Services 9
6. Past Performance 14
7. Taxes 15
8. Information About The Fund 16
9. Financial Statements 16
<PAGE>
1.
Investment Policies
Fundamental Investment Restrictions
We are subject to the following investment restrictions which cannot be changed
without approval of a majority of our outstanding shares. The Fund may not: (1)
borrow money, except that (i) the Fund may borrow from banks (as defined in the
Investment Company Act of 1940, as amended (the "Act")) in amounts up to 33 1/3%
of its total assets (including the amount borrowed), (ii) the Fund may borrow up
to an additional 5% of its total assets for temporary purposes, (iii) the Fund
may obtain such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities and (iv) the Fund may purchase
securities on margin to the extent permitted by applicable law; (2) pledge its
assets (other than to secure borrowings, or to the extent permitted by the
Fund's investment policies as permitted by applicable law); (3) engage in the
underwriting of securities, except pursuant to a merger or acquisition or to the
extent that, in connection with the disposition of its portfolio securities, it
may be deemed to be an underwriter under federal securities laws; (4) make loans
to other persons, except that the acquisition of bonds, debentures or other
corporate debt securities and investment in government obligations, commercial
paper, pass-through instruments, certificates of deposit, bankers acceptances,
repurchase agreements or any similar instruments shall not be subject to this
limitation, and except further that the Fund may lend its portfolio securities,
provided that the lending of portfolio securities may be made only in accordance
with applicable law; (5) buy or sell real estate (except that the Fund may
invest in securities directly or indirectly secured by real estate or interests
therein or issued by companies which invest in real estate or interests therein)
or commodities or commodity contracts (except to the extent the Fund may do so
in accordance with applicable law and without registering as a commodity pool
operator under the Commodity Exchange Act as, for example, with futures
contracts); (6) with respect to 75% of the gross assets of the Fund, buy
securities of one issuer representing more than (i) 5% of the Fund's gross
assets, except securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities or (ii) 10% of the voting securities of such
issuer; (7) invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding securities of the
U.S. Government, its agencies and instrumentalities); or (8) issue senior
securities to the extent such issuance would violate applicable law.
With respect to the restrictions mentioned herein, compliance therewith will not
be affected by changes 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 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 Fund may
not: (1) borrow in excess of 5% of its gross assets taken at cost or market
value, whichever is lower at the time of borrowing, and then only as a temporary
measure for extraordinary or emergency purposes; (2) make short sales of
securities or maintain a short position except to the extent permitted by
applicable law; (3) invest knowingly more than 15% of its net assets (at the
time of investment) in illiquid securities, except for securities qualifying for
resale under Rule 144A of the Securities Act of 1933, deemed to be liquid by the
Board of Directors; (4) invest in the securities of other investment companies
except as permitted by applicable law; (5) invest in securities of issuers
which, with their predecessors, have a record of less than three years'
continuous operations, if more than 5% of the Fund's total assets would be
invested in such securities (this restriction shall not apply to
mortgaged-backed securities, asset-backed securities or obligations issued or
guaranteed by the U. S. Government, its agencies or instrumentalities); (6) hold
securities of any issuer if more than 1/2 of 1% of the securities of such issuer
are owned beneficially by one or more officers or directors of the Fund or by
one or more partners or members of the Fund's underwriter or investment adviser
if these owners in the aggregate own beneficially more than 5% of the securities
of such issuer; (7) invest in warrants if, at the time of the acquisition, its
investment in warrants, valued at the lower of cost or market, would exceed 5%
of the Fund's total assets (included within such limitation, but not to exceed
2% of the Fund's total assets, are warrants which are not listed on the New York
or American Stock Exchange or a major foreign exchange); (8) invest in real
estate limited partnership interests or interests in oil, gas or other mineral
leases, or exploration or other development programs, except that the Fund may
invest in securities issued by companies that engage in oil, gas or other
mineral exploration or other development activities; (9) write, purchase or sell
puts, calls, straddles, spreads or combinations thereof, except to the extent
permitted in the Fund's prospectus and statement of additional information, as
they may be amended from time to time; or (10) buy from or sell to any of its
officers, directors,
2
<PAGE>
employees, or its investment adviser or any of its officers, directors, partners
or employees, any securities other than shares of the Fund's common stock.
For the year ended November 30, 1995, the portfolio turnover rate was 37.17%
versus 43.85% for the prior year.
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.
Other Investment Restrictions (which can be changed without shareholder
approval)
Covered Call Options. As stated in the Prospectus, we may write covered call
options on securities in our portfolio in an attempt to increase our income and
to provide greater flexibility in the disposition of our 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 a stock at a specific price
prior to a specified date. A "covered call option" is a call option issued on
securities already owned by the writer of the call option for delivery to the
holder upon the exercise of the option. During the period of the option, we
forgo the opportunity to profit from any increase in the market price of the
underlying security above the exercise price of the option (to the extent that
the increase exceeds our net premium). We also may enter into "closing purchase
transactions" in order to terminate our obligation to deliver the underlying
security (this may result in a short-term gain or loss). 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. If we are unable to enter into a closing purchase transaction, we may
be required to hold a security that we otherwise might have sold to protect
against depreciation. We don't intend to write covered call options with respect
to securities with an aggregate market value of more than 5% of our gross assets
at the time an option is written. This percentage limitation will not be
increased without prior disclosure in our current prospectus.
Rights and Warrants. We may invest in rights and warrants to purchase
securities. Included within that amount, but not to exceed 2% of the value of
the Series' net assets, may be warrants which are not listed on the NYSE or
American Stock Exchange.
Rights represent a privilege offered to holders of record of issued securities
to subscribe (usually on a pro rata basis) for additional securities of the same
class, of a different class or of a different issuer, as the case may be.
Warrants represent the privilege to purchase securities at a stipulated price
and are usually valid for several years. Rights and warrants generally do not
entitle a holder to dividends or voting rights with respect to the underlying
securities nor do they represent any rights in the assets of the issuing
company.
Also, the value of a right or warrant may not necessarily change with the value
of the underlying securities and rights and warrants cease to have value if they
are not exercised prior to their expiration date.
Options and Financial Futures Transactions
General. We may engage in options and financial futures transactions in
accordance with our investment objective and policies. Although we are not
currently employing such options and financial futures transactions, we may
engage in such transactions in the future if it appears advantageous to us to do
so, in order to cushion the effects of fluctuating interest rates and adverse
market conditions. The use of options and financial futures, and possible
benefits and attendant risks, are discussed below, along with information
concerning certain other investment policies and techniques.
3
<PAGE>
Financial Futures Contracts. We may enter into contracts for the future delivery
of a financial instrument, such as a security or the cash value of a securities
index. This investment technique is designed primarily to hedge (i.e., protect)
against anticipated future changes in interest rates or market conditions which
otherwise might adversely affect the value of securities which we hold or intend
to purchase. A "sale" of a futures contract means the undertaking of a
contractual obligation to deliver the securities or the cash value of an index
called for by the contract at a specified price during a specified delivery
period. A "purchase" of a futures contract means the undertaking of a
contractual obligation to acquire the securities or cash value of an index at a
specified price during a specified delivery period. At the time of delivery
pursuant to the contract, adjustments are made to recognize differences in value
arising from the delivery of securities which differ from those specified in the
contract. In some cases, securities called for by a futures contract may not
have been issued at the time the contract was written. We will not enter into
any futures contracts or options on futures contracts if the aggregate of the
market value of the securities covered by our outstanding futures contracts and
securities covered by futures contracts subject to the outstanding options
written by us would exceed 50% of our total assets.
Although some financial futures contracts by their terms call for the actual
delivery or acquisition of securities, in most cases, a party will close out the
contractual commitment before delivery without having to make or take delivery
of the security by purchasing (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, if effected through a member of an exchange, cancels the
obligation to make or take delivery of the securities. All transactions in the
futures market are made, offset or fulfilled through a clearing house associated
with the exchange on which the contracts are traded. We will incur brokerage
fees when we purchase or sell contracts and will be required to maintain margin
deposits. At the time we enter into a futures contract, it is required to
deposit with our custodian, on behalf of the broker, a specified amount of cash
or eligible securities called "initial margin." The initial margin required for
a futures contract is set by the exchange on which the contract is traded.
Subsequent payments, called "variation margin," to and from the broker are made
on a daily basis as the market price of the futures contract fluctuates. The
costs incurred in connection with futures transactions could reduce our return.
Futures contracts entail risks. If the investment adviser's judgment about the
general direction of interest rates or markets is wrong, the overall performance
may be poorer than if no such contracts had been entered into.
There may be an imperfect correlation between movements in prices of futures
contracts and portfolio securities being hedged. The degree of difference in
price movements between futures contracts and the securities (or securities
indices) being hedged depends upon such things as variations in demand for
futures contracts and securities underlying the contracts and differences
between the liquidity of the markets for such contracts and the securities
underlying them. In addition, the market prices of futures contracts may be
affected by certain factors not directly related to the underlying securities.
At any given time, the availability of futures contracts, and hence their
prices, are influenced by credit conditions and margin requirements. Due to the
possibility of price distortions in the futures market and because of the
imperfect correlation between movements in the prices of securities and
movements in the prices of futures contracts, a correct forecast of market
trends by the investment adviser may not result in a successful hedging
transaction.
Options on Financial Futures Contracts. We may purchase and write call and put
options on financial futures contracts. An option on a futures contract gives
the purchaser the right, in return for the premium paid, to assume a position in
a futures contract at a specified exercise price at any time during the period
of the option. Upon exercise, the writer of the option delivers the futures
contract to the holder at the exercise price. We would be required to deposit
with our custodian initial margin and maintenance margin with respect to put and
call options on futures contracts written by us. Options on futures contracts
involve risks similar to the risks relating to transactions in financial futures
contracts described above. Generally speaking, a given dollar amount used to
purchase an option on a financial futures contract can hedge a much greater
value of underlying securities than if that amount were used to directly
purchase the same financial futures. Should the event we intend to hedge (or
protect) against not materialize, however, the option may expire worthless, in
which case we would lose the premium paid therefor.
Segregated Accounts. To the extent required to comply with Securities and
Exchange Commission Release 10666, when purchasing a futures contract, or
writing a put option, we will maintain in a segregated account at our custodian
bank liquid high grade debt obligations, such as cash and U.S. Government
Securities to cover our position.
4
<PAGE>
2.
Directors and Officers
The following director is a partner of Lord, Abbett & Co. ("Lord Abbett"),
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. He
is an "interested person" as defined in the Act, and as such, may be considered
to have an indirect financial interest in the Rule 12b-1 Plan described in the
Prospectus.
Robert S. Dow, age 51, Chairman and President
The following outside directors are also directors or trustees of the twelve
other Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow
Time Warner Cable
300 First Stamford Place
Stamford, Connecticut
President and Chief Executive Officer of Time Warner Cable Programming, Inc.
Formerly President and Chief Operating Officer of Home Box Office, Inc. Age 54.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 65.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 70.
C. Alan MacDonald
The Marketing Partnership, Inc.
27 Signal Road
Stamford, Connecticut
General Partner, The Marketing Partnership, Inc., a full service marketing
consulting firm. Formerly Chairman and Chief Executive Officer of Lincoln
Snacks, Inc., manufacturer of branded snack foods (1992-1994). Formerly
President and Chief Executive Officer of Nestle Foods Corp, and prior to that,
President and Chief Executive Officer of Stouffer Foods Corp., both subsidiaries
of Nestle SA, Switzerland. Currently serves as Director of Den West Restaurant
Co., J. B.
Williams, and Fountainhead Water Company. Age 63.
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 68.
5
<PAGE>
Thomas J. Neff
Spencer Stuart & Associates
277 Park Avenue
New York, New York
President of Spencer Stuart & Associates, an executive search consulting firm.
Age 58.
No compensation was paid or accrued for the Fund's directors or officers since
the Fund's inception. The third and fourth columns set forth information with
respect to the retirement plan for outside directors maintained by the other
Lord Abbett-sponsored funds(not the Fund). The fifth column sets forth the total
compensation payable by such other funds (not the Fund) to the outside
directors.
<TABLE>
<CAPTION>
For the Fiscal Year Ended November 30, 1995
(1) (2) (3) (4) (5)
Pension or Estimated Annual For Year Ended
Retirement Benefits Benefits Upon December 31, 1994
Accrued by Retirement Proposed Total Compensation
Aggregate the Twelve to be Paid by the Accrued by the
Compensation Other Lord Twelve Other Lord Twelve Other Lord
Accrued by Abbett-sponsored Other Lord Abbett- Abbett-sponsored
Name of Director the Fund Funds sponsored Funds1 Funds2
- ---------------- ---------- ---------------- ----------------- ------
<S> <C> <C> <C> <C>
E. Thayer Bigelow.3 None $9772 $33600 $41,700
Stewart S. Dixon3 None $22472 $33600 $42000
John C. Jansing3 None $28480 $33600 $42960
C. Alan MacDonald3 None $27435 $33600 $42750
Hansel B. Millican, Jr None $24,707 $33,600 $43,000
Thomas J. Neff None $16,126 $33,600 $42,000
<FN>
1. Each other Lord Abbett-sponsored fund (not the Fund) has a retirement plan
providing that outside directors will receive annual retirement benefits for
life equal to 80% of their final annual retainers following retirement at or
after age 72 with at least 10 years of service. Each plan also provides for
a reduced benefit upon early retirement under certain circumstances, a
pre-retirement death benefit and actuarially reduced joint-and-survivor
spousal benefits. The amounts stated would be payable annually under such
retirement plans if the director were to retire at age 72 and the annual
retainers payable by such funds were the same as they are today. The amounts
accrued in column 3 were accrued by the other Lord Abbett-sponsored funds
(not the Fund) during the fiscal year ended November 30, 1995 with respect
to the retirement benefits in column 4.
2. This column shows aggregate compensation, including director's fees and
attendance fees for board and committee meetings, of a nature referred to in
footnote one, accrued by the other Lord Abbett-sponsored funds (not the
Fund) during the year ended December 31, 1995.
3. Messrs. Bigelow, Dixon, Jansing and MacDonald were elected directors of the
Fund subsequent to the end of the last fiscal year.
</FN>
</TABLE>
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, Henderson, Morris, Nordberg and Walsh are partners
of Lord Abbett; the others are employees: Kenneth B. Cutler, age 64, Vice
President and Secretary; Stephen I. Allen, age 43; Daniel E. Carper, age 44;
Robert S. Dow, age 51; Thomas S. Henderson, age 64; Robert G. Morris, age 51, E.
Wayne Nordberg, age 58; John J. Gargana, Jr., age 65; Paul A. Hilstad, age 53
(with Lord Abbett since 1995 - formerly Senior Vice President and General
Counsel of American Capital Management & Research, Inc.); Thomas F. Konop, age
54; Victor W. Pizzolato, age 63; John J. Walsh, age 60, Vice Presidents; and
Keith F. O'Connor, age 41, Treasurer.
The Fund's By-Laws provide that the Fund shall not hold an annual meeting of its
stockholders in any year unless one or more matters are required to be acted on
by stockholders under the Investment Company Act of 1940, as amended (the
6
<PAGE>
"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.
As of June 30, 1996 our officers and directors as a group owned less than 20% of
our outstanding shares.
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, Robert G. Morris, 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.
The services performed by Lord Abbett are described under "Our Management" in
the Prospectus. Under the Management Agreement, we are obligated to pay Lord
Abbett a monthly fee, based on average daily net assets for each month, at the
annual rate of .75 of 1% of the Series' average daily net assets. For the fiscal
years ended November 30, 1995, 1994, and 1993, respectively, this management fee
was waived by Lord Abbett and, except for this waiver, would have amounted to
$50,255, $33,861 and $22,408, respectively.
We are obligated to pay all expenses not expressly assumed by Lord Abbett,
including, without limitation, outside directors' fees and expenses, association
membership dues, legal and auditing fees, taxes, transfer and dividend
disbursing agent fees, shareholder servicing costs, expenses relating to
shareholder meetings, expenses of preparing, printing and mailing stock
certificates and shareholder reports, expenses of registering our shares under
federal and state securities laws, expenses of preparing, printing and mailing
prospectuses to existing shareholders, insurance premiums, brokerage and other
expenses connected with executing portfolio transactions. For the fiscal years
ended November 30, 1995, 1994 and 1993, respectively, Lord Abbett, although not
obligated to, voluntarily assumed the above-mentioned expenses which, if not so
assumed, would have amounted to $18,000, $18,000 and $13,500, respectively.
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.
The Bank of New York ("BNY"), 48 Wall Street, New York, New York 10268, is the
Fund's custodian. In accordance with the requirements of Rule 17f-5, the Fund's
directors have approved arrangements permitting the Fund's foreign assets not
held by BNY or its foreign branches to be held by certain qualified foreign
banks and depositories.
4.
Portfolio Transactions
Our policy is to obtain best execution on all our portfolio transactions, which
means that we seek to have purchases and sales of portfolio securities executed
at the most favorable prices, considering all costs of the transaction including
brokerage commissions and dealer markups and markdowns and taking into account
the full range and quality of the brokers' services. Consistent with obtaining
best execution, we generally pay, as described below, a higher commission than
some brokers might charge on the same transactions. Our policy with respect to
best execution governs the selection of brokers or dealers and the market in
which the transaction is executed. To the extent permitted by law, we may, if
considered advantageous, make a purchase from or sale to another Lord
Abbett-sponsored fund without the intervention of any broker-dealer.
Broker-dealers are selected on the basis of their professional capability and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of the Fund and also are employees
of Lord
7
<PAGE>
Abbett. These traders do the trading as well for other accounts -- investment
companies (of which they are also officers) and other investment clients --
managed by Lord Abbett. They are responsible for obtaining best execution.
We pay a commission rate that we believe is appropriate to give maximum
assurance that our brokers will provide us, on a continuing basis, the highest
level of brokerage services available. While we do not always seek the lowest
possible commissions on particular trades, we believe that our commission rates
are in line with the rates that many other institutions pay. Our traders are
authorized to pay brokerage commissions in excess of those that other brokers
might accept on the same transactions in recognition of the value of the
services performed by the executing brokers, viewed in terms of either the
particular transaction or the overall responsibilities of Lord Abbett with
respect to us and the other accounts they manage. Such services include showing
us trading opportunities including blocks, a willingness and ability to take
positions in securities, knowledge of a particular security or market proven
ability to handle a particular type of trade, confidential treatment, promptness
and reliability.
Some of these brokers also provide research services at least some of which are
useful to Lord Abbett in their overall responsibilities with respect to us and
the other accounts they manage. Research includes the furnishing of analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts and trading equipment and
computer software packages, acquired from third-party suppliers, that enable
Lord Abbett to access various information bases. Such services may be used by
Lord Abbett in servicing all their accounts, and not all of such services will
necessarily be used by Lord Abbett in connection with their management of the
Fund;
conversely, such services furnished in connection with brokerage on other
accounts managed by Lord Abbett may be used in connection with their management
of the Fund, and not all of such services will necessarily be used by Lord
Abbett in connection with their advisory services to such other accounts. We
have been advised by Lord Abbett that research services received form brokers
cannot be allocated to any particular account, are not a substitute for Lord
Abbett's services but are supplemental to their own research effort and when
utilized, are subject to internal analysis before being incorporated by Lord
Abbett into their investment process. As a practical matter, it would not be
possible for Lord Abbett to generate all of the information presently provided
by brokers. While receipt of research services from brokerage firms has not
reduced Lord Abbett's normal research activities, the expenses of Lord Abbett
could be materially increased if it attempted to generate such additional
information through its own staff and purchased such equipment and software
packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or
among brokers, and trades are executed only when they are dictated by investment
decisions of the Fund to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold our shares and/or
shares of other Lord Abbett-sponsored funds may be preferred.
If other clients of Lord Abbett buy or sell the same security at the same time
as we do, transactions will, to the extent practicable, be allocated among all
participating accounts in proportion to the amount of each order and will be
executed daily until filled so that each account shares the average price and
commission cost of each day. Other clients who direct that their brokerage
business be placed with specific brokers or who invest through wrap accounts
introduced to Lord Abbett by certain brokers may not participate with us in the
buying and selling of the same securities as described above. If these clients
wish to buy or sell the same security as we do, they may have their transactions
executed at times different from our transactions and thus may not receive the
same price or incur the same commission cost as we do.
We will not seek "reciprocal" dealer business (for the purpose of applying
commissions in whole or in part for our benefit or otherwise) from dealers as
consideration for the direction to them of portfolio business.
For the fiscal years ended November 30, 1993, 1994 and 1995, we paid total
commissions to independent broker-dealers of $14,055, $8,033 and $7,832,
respectively.
8
<PAGE>
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 net asset value per share for the Class B shares will be determined in the
same manner as for the Class A shares (net assets divided by shares
outstanding). Our Class B shares will be sold at net asset value.
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 November 30, 1995 was computed as
follows:
Net asset value per share (net assets divided
by shares outstanding)..................................................$15.54
Maximum offering price per share (net asset
value divided by .9425).................................................$16.49
The Fund has entered into a distribution agreement with Lord Abbett Distributor
LLC, a New York limited liability company ("Lord Abbett Distributor") and
subsidiary of Lord Abbett under which Lord Abbett Distributor is obligated to
use its best efforts to find purchasers for the shares of the Fund, and to make
reasonable efforts to sell Fund shares so long as, in Lord Abbett Distributor's
judgment, a substantial distribution can be obtained by reasonable efforts.
Conversion of Class B Shares. The conversion of Class B shares on the eighth
anniversary of their purchase is subject to the continuing availability of a
private letter ruling from the Internal Revenue Service, or an opinion of
counsel or tax adviser, to the effect that the conversion of Class B shares does
not constitute a taxable event for the holder under Federal income tax law. If
such a revenue ruling or opinion is no longer available, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect. Although
Class B shares could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a sales
charge or fee, such exchange could constitute a taxable event for the holder.
Class A and B 12b-1 Plans. As described in the Prospectus, the Fund has adopted
a Distribution Plan and Agreement pursuant to Rule 12b-1 of the Act for each of
the two Fund Classes: the "A Plan" and the "B Plan", respectively. In adopting
each Plan and in approving its continuance, the Board of Directors has concluded
that there is a reasonable likelihood that each Plan will benefit its respective
Class and such Class' shareholders. The expected benefits include greater sales
and lower redemptions of Class shares, which should allow each Class to maintain
a consistent cash flow, and a higher quality of service to shareholders by
authorized institutions than would otherwise be the case. The Plans were adopted
by the Fund subsequent to its last fiscal year.
9
<PAGE>
Each Plan requires the directors to review, on a quarterly basis, written
reports of all amounts expended pursuant to the Plan and the purposes for which
such expenditures were made. Each Plan shall continue in effect only if its
continuance is specifically approved at least annually by vote of the directors,
including a majority of the directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related to the Plan ("outside directors"), cast in
person at a meeting called for the purpose of voting on the Plan. No Plan may be
amended to increase materially above the limits set forth therein the amount
spent for distribution expenses thereunder without approval by a majority of the
outstanding voting securities of the applicable class and the approval of a
majority of the directors, including a majority of the outside directors. Each
Plan may be terminated at any time by vote of a majority of the outside
directors or by vote of a majority of its Class's outstanding voting securities.
Contingent Deferred Sales Charges. A Contingent Deferred Sales Charge ("CDSC")
applies regardless of class, (i) will not apply to shares purchased by the
reinvestment of dividends or capital gains distributions; (ii) will be assessed
on the lesser of the net asset value of the shares at the time of redemption or
the original purchase price and (iii) will not be imposed on the amount of your
account value represented by the increase in net asset value over the initial
purchase price (including increases due to the reinvestment of dividends and
capital gains distributions) and upon early redemption of shares.
Class A Shares. As stated in the Prospectus, a CDSC of 1% is imposed with
respect to those Class A shares (or Class A shares of another Lord
Abbett-sponsored fund or series acquired through exchange of such shares) on
which the Fund has paid the one-time distribution fee of 1% if such shares are
redeemed out of the Lord Abbett-sponsored family of funds within a period of 24
months from the end of the month in which the original sale occurred.
Class B Shares. As stated in the Prospectus, if Class B shares (or Class B
shares of another Lord Abbett-sponsored fund or series acquired through exchange
of such shares) are redeemed out of the Lord Abbett-sponsored family of funds
for cash before the sixth anniversary of their purchase, a CDSC will be deducted
from the redemption proceeds. The Class B CDSC is paid to Lord Abbett
Distributor to reimburse its expenses, in whole or in part, for providing
distribution-related service to the Fund in connection with the sale of Class B
shares.
To determine whether the CDSC applies to a redemption, the Fund redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held on or after the sixth anniversary
of their purchase, and (3) shares held the longest before such sixth
anniversary.
The amount of the contingent deferred sales charge will depend on the number of
years since you invested and the dollar amount being redeemed, according to the
following schedule:
Anniversary of the Day on Contingent Deferred Sales Charge
Which the Purchase Order Was Accepted on Redemptions (As % of Amount
Subject to Charge)
Before the 1st........................................................5.0%
On the 1st, before the 2nd............................................4.0%
On the 2nd, before the 3rd............................................3.0%
On the 3rd, before the 4th............................................3.0%
On the 4th, before the 5th............................................2.0%
On the 5th, before the 6th ...........................................1.0%
On or after the 6th anniversary........................................None
In the table, an "anniversary" is the 365th day subsequent to the acceptance of
a purchase order or a prior anniversary. All purchases are considered to have
been made on the business day on which the purchase order was accepted.
General. Each percentage (1% in the case of Class A shares and 5% through 1% in
the case of Class B shares) used to calculate CDSCs described above for the
Class A and Class B shares is sometimes hereinafter referred to as the
"Applicable Percentage".
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With respect to Class A and Class B shares, no CDSC is payable on redemptions by
participants or beneficiaries from employer-sponsored retirement plans under the
Internal Revenue Code for benefit payments due to plan loans, hardship
withdrawals, death, retirement or separation from service and for returns of
excess contributions to retirement plan sponsors. In the case of Class A shares,
the CDSC is received by the Fund and is intended to reimburse all or a portion
of the amount paid by the Fund if the shares are redeemed before the Fund has
had an opportunity to realize the anticipated benefits of having a long-term
shareholder account in the Fund. In the case of Class B shares, the CDSC is
received by Lord Abbett Distributor and is intended to reimburse its expenses of
providing distribution-related service to the Fund (including recoupment of the
commission payments made) in connection with the sale of Class B shares before
Lord Abbett Distributor has had an opportunity to realize its anticipated
reimbursement by having such a long-term shareholder account subject to the B
Plan distribution fee.
The other funds and series which participate in the Telephone Exchange Privilege
(except (a) Lord Abbett U.S. Government Securities Money Market Fund, Inc.
("GSMMF"), (b) certain series of Lord Abbett Tax-Free Income Fund and Lord
Abbett Tax-Free Income Trust for which a Rule 12b-1 Plan is not yet in effect,
and (c) any authorized institution's affiliated money market fund satisfying
Lord Abbett Distributor as to certain omnibus account and other criteria,
hereinafter referred to as an "authorized money market fund" or "AMMF"
(collectively, the "Non-12b-1 Funds")) have instituted a CDSC for each class on
the same terms and conditions. No CDSC will be charged on an exchange of shares
of the same class between Lord Abbett funds or between such funds and AMMF. Upon
redemption of shares out of the Lord Abbett family of funds or out of AMMF, the
CDSC will be charged on behalf of and paid: (i) to the fund in which the
original purchase (subject to a CDSC) occurred, in the case of the Class A
shares and (ii) to Lord Abbett Distributor if the original purchase was subject
to a CDSC, in the case of the Class B shares. Thus, if shares of a Lord Abbett
fund are exchanged for shares of the same class of another such fund and the
shares of the same class tendered ("Exchanged Shares") are subject to a CDSC,
the CDSC will carry over to the shares of the same class being acquired,
including GSMMF and AMMF ("Acquired Shares"). Any CDSC that is carried over to
Acquired Shares is calculated as if the holder of the Acquired Shares had held
those shares from the date on which he or she became the holder of the Exchanged
Shares. Although the Non-12b-1 Funds will not pay a distribution fee on their
own shares, and will, therefore, not impose their own CDSC, the Non-12b-1 Funds
will collect the CDSC (a) on behalf of other Lord Abbett funds, in the case of
the Class A shares and (b) on behalf of Lord Abbett Distributor, in the case of
the Class B shares. Acquired Shares held in GSMMF and AMMF which are subject to
a CDSC will be credited with the time such shares are held in GSMMF but will not
be credited with the time such shares are held in AMMF. Therefore, if your
Acquired Shares held in AMMF qualified for no CDSC or a lower Applicable
Percentage at the time of exchange into AMMF, that Applicable Percentage will
apply to redemptions for cash from AMMF, regardless of the time you have held
Acquired Shares in AMMF.
In no event will the amount of the CDSC exceed the Applicable Percentage of the
lesser of (i) the net asset value of the shares redeemed or (ii) the original
cost of such shares (or of the Exchanged Shares for which such shares were
acquired). No CDSC will be imposed when the investor redeems (i) amounts derived
from increases in the value of the account above the total cost of shares being
redeemed due to increases in net asset value, (ii) shares with respect to which
no Lord Abbett fund paid a 12b-1 fee and, in the case of Class B shares, Lord
Abbett Distributor paid no sales charge or service fee (including shares
acquired through reinvestment of dividend income and capital gains
distributions) or (iii) shares which, together with Exchanged Shares, have been
held continuously for 24 months from the end of the month in which the original
sale occurred (in the case of Class A shares); for six years or more (in the
case of Class B shares). In determining whether a CDSC is payable, (a) shares
not subject to the CDSC will be redeemed before shares subject to the CDSC and
(b) of the shares subject to a CDSC, those held the longest will be the first to
be redeemed.
Exchanges. The Prospectus briefly describes the Telephone Exchange Privilege.
You may exchange some or all of your shares of any class for those in the same
class of: (i) Lord Abbett-sponsored funds currently offered to the public with a
sales charge (front-end, back-end or level ), (ii) GSMMF or (iii) AMMF, to the
extent offers and sales may be made in your state. You should read the
prospectus of the other fund before exchanging. In establishing a new account by
exchange, shares of the Fund being exchanged must have a value equal to at least
the minimum initial investment required for the other fund into which the
exchange is made.
Shareholders in other Lord Abbett-sponsored funds and AMMF have the same right
to exchange their shares for the corresponding class of the Fund's shares.
Exchanges are based on relative net asset values on the day instructions are
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received by the Fund in Kansas City if the instructions are received prior to
the close of the NYSE in proper form. No sales charges are imposed except in the
case of exchanges out of GSMMF or AMMF (unless a sales charge (front-end,
back-end or level) was paid on the initial investment in a Lord Abbett-sponsored
fund). Exercise of the exchange privilege will be treated as a sale for federal
income tax purposes, and, depending on the circumstances, a gain or loss may be
recognized. In the case of an exchange of shares that have been held for 90 days
or less where no sales charge is payable on the exchange, the original sales
charge incurred with respect to the exchanged shares will be taken into account
in determining gain or loss on the exchange only to the extent such charge
exceeds the sales charge that would have been payable on the acquired shares had
they been acquired for cash rather than by exchange. The portion of the original
sales charge not so taken into account will increase the basis of the acquired
shares.
Shareholders have the exchange privilege unless they refuse it in writing. You
should not view the exchange privilege as a means for taking advantage of
short-term swings in the market, and we reserve the right to terminate or limit
the privilege of any shareholder who makes frequent exchanges. We can revoke or
modify the privilege for all shareholders upon 60 days' prior notice. "Eligible
Funds" are AMMF and other Lord Abbett-sponsored funds which are eligible for the
exchange privilege, except Lord Abbett Series Fund ("LASF") which offers its
shares only in connection with certain variable annuity contracts, Lord Abbett
Equity Fund ("LAEF") which is not issuing shares, and series of Lord Abbett
Research Fund not offered to the general public ("LARF").
Statement of Intention. Under the terms of the Statement of Intention to invest
$100,000 or more over a 13-month period as described in the Prospectus, in
shares of a Lord Abbett-sponsored fund (other than shares of LAEF, LASF, LARF,
GSMMF and AMMF, unless holdings in GSMMF and AMMF are attributable to shares
exchanged from a Lord Abbett-sponsored fund offered with a front-end, back-end
or level sales charge) shares currently owned by you are credited as purchases
(at their current offering prices on the date the Statement is signed) toward
achieving the stated investment and reduced initial sales charge for Class A
shares. Class A shares valued at 5% of the amount of intended purchases are
escrowed and may be redeemed to cover the additional sales charge payable if the
Statement is not completed. The Statement of Intention is neither a binding
obligation on you to buy, nor on the Fund to sell, the full amount indicated.
Rights of Accumulation. As stated in the Prospectus, purchasers (as defined in
the Prospectus) may accumulate their investment in Lord Abbett-sponsored funds
(other than LAEF, LARF, LASF, GSMMF, and AMMF unless holdings in GSMMF or AMMF
are attributable to shares exchanged from a Lord Abbett-sponsored fund offered
with a front-end, back-end or level sales charge) so that a current investment,
plus the purchaser's holdings valued at the current maximum offering price,
reach a level eligible for a discounted sales charge for Class A shares.
Net Asset Value Purchases of Class A Shares. As stated in the Prospectus, our
Class A shares may be purchased at net asset value by our directors, employees
of Lord Abbett, employees of our shareholder servicing agent and employees of
any securities dealer having a sales agreement with Lord Abbett who consents to
such purchases or by the director or custodian under any pension or
profit-sharing plan or Payroll Deduction IRA established for the benefit of such
persons or for the benefit of employees of any national securities trade
organization to which Lord Abbett belongs or any company with an account(s) in
excess of $10 million managed by Lord Abbett on a private-advisory-account
basis. For purposes of this paragraph, the terms "directors" and "employees"
include a director's or employee's spouse (including the surviving spouse of a
deceased director or employee). The terms "our directors" and "employees of Lord
Abbett" also include retired directors and employees and other family members
thereof.
Our Class A shares also may be purchased at net asset value (a) at $1 million or
more, (b) with dividends and distributions from Class A shares of other Lord
Abbett-sponsored funds, except for LARF, LAEF and LASF, (c) under the loan
feature of the Lord Abbett-sponsored prototype 403(b) plan for share purchases
representing the repayment of principal and interest, (d) by certain authorized
brokers, dealers, registered investment advisers or other financial institutions
who have entered into an agreement with Lord Abbett Distributor in accordance
with certain standards approved by Lord Abbett Distributor, providing
specifically for the use of our shares in particular investment products made
available for a fee to clients of such brokers, dealers, registered investment
advisers and other financial institutions, and (e) by employees, partners and
owners of unaffiliated consultants and advisors to Lord Abbett, Lord Abbett
Distributor or Lord Abbett- sponsored funds who consent to such purchase if such
persons provide service to Lord Abbett, Lord Abbett Distributor
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or such funds on a continuing basis and are familiar with such funds. Shares are
offered at net asset value to these investors for the purpose of promoting
goodwill with employees and others with whom Lord Abbett Distributor and/or the
Fund has business relationships.
Our Class A shares also may be purchased at net asset value, subject to
appropriate documentation, through a securities dealer where the amount invested
represents redemption proceeds from shares ("Redeemed Shares") of a registered
open-end management investment company not distributed or managed by Lord Abbett
(other than a money market fund), if such redemption has occurred no more than
60 days prior to the purchase of our shares, the Redeemed Shares were held for
at least six months prior to redemption and the proceeds of redemption were
maintained in cash or a money market fund prior to purchase. Purchasers should
consider the impact, if any, of contingent deferred sales charges in determining
whether to redeem shares for subsequent investment in our Class A shares. Lord
Abbett may suspend, change or terminate this purchase option at any time.
Our Class A shares may be issued at net asset value in exchange for the assets,
subject to possible tax adjustment, of a personal holding company or an
investment company. There are economies of selling efforts and sales-related
expenses with respect to offers to these investors and those referred to above.
Redemptions. A redemption order is in proper form when it contains all of the
information and documentation required by the order form or supplementally by
Lord Abbett Distributor or the Fund to carry out the order. The signature(s) and
any legal capacity of the signer(s) must be guaranteed by an eligible guarantor.
See the Prospectus for expedited redemption procedures.
The right to redeem and receive payment, as described in the Prospectus, may be
suspended if the NYSE is closed (except for weekends or customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
deems an emergency to exist.
Our Board of Directors may authorize redemption of all of the shares in any
account in which there are fewer than 25 shares. Before authorizing such
redemption, the Board must determine that it is in our economic best interest or
necessary to reduce disproportionately burdensome expenses in servicing
shareholder accounts. At least 6 month's 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.
Div-Move. Under the Div-Move service described in the Prospectus, you can invest
the dividends paid on your account of any class into an existing account of the
same class in any other Eligible Fund. The account must be either your account,
a joint account for you and your spouse, a single account for your spouse, or a
custodial account for your minor child under the age of 21. You should read the
prospectus of the other fund before investing.
Invest-A-Matic. The Invest-A-Matic method of investing in the Fund and/or any
other Eligible Fund is described in the Prospectus. To avail yourself of this
method you must complete the application form, selecting the time and amount of
your bank checking account withdrawals and the funds for investment, include a
voided, unsigned check and complete the bank authorization.
Systematic Withdrawal Plans. The Systematic Withdrawal Plan ("SWP") also is
described in the Prospectus. You may establish a SWP if you own or purchase
uncertificated shares having a current offering price value of at least $10,000.
Lord Abbett prototype retirement plans have no such minimum. With respect to a
SWP for Class B shares, the CDSC will be waived on redemptions of up to 12% per
year of either the current net asset value of your account or your original
purchase price, whichever is higher. The SWP involves the planned redemption of
shares on a periodic basis by receiving either fixed or variable amounts at
periodic intervals. Since the value of shares redeemed may be more or less than
their cost, gain or loss may be recognized for income tax purposes on each
periodic payment. Normally, you may not make regular investments at the same
time you are receiving systematic withdrawal payments because it is not in your
interest to pay a sales charge on new investments when in effect a portion of
that new investment is soon withdrawn. The minimum investment accepted while a
withdrawal plan is in effect is $1,000. The SWP may be terminated by you or by
us at any time by written notice.
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Retirement Plans. The Prospectus indicates the types of retirement plans for
which Lord Abbett provides forms and explanations. Lord Abbett makes available
the retirement plan forms and custodial agreements for IRAs (Individual
Retirement Accounts, including Simplified Employee Pensions), 403(b) plans and
qualified pension and profit-sharing plans, including 401(k) plans. The forms
name Investors Fiduciary Trust Company as custodian and contain specific
information about the plans. Explanations of the eligibility requirements,
annual custodial fees and allowable tax advantages and penalties are set forth
in the relevant plan documents. Adoption of any of these plans should be on the
advice of your legal counsel or qualified tax adviser.
6.
Past Performance
The Series 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 and reinvestment of
all income dividends and capital gains distributions on the reinvestment dates
at prices calculated as stated in the Prospectus. The ending redeemable value is
determined by assuming a complete redemption at the end of the period(s) covered
by the average annual total return computation.
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment (unless the return is shown at net asset value). For Class B
shares, the payment of the applicable CDSC (5.0% prior to the first anniversary
of purchase, 4.0% prior to the second anniversary of purchase, 3.0% prior to the
third and fourth anniversaries of purchase, 2.0% prior to the fifth anniversary
of purchase, 1.0% prior to the sixth anniversary of purchase and no CDSC on and
after the sixth anniversary of purchase) is applied to the Series' investment
result for that class for the time period shown (unless the total return is
shown at net asset value). For Class C shares, the 1.0% CDSC is applied to the
Series' investment result for that class for the time period shown prior to the
first anniversary of purchase (unless the total return is shown at net asset
value). Total returns also assume that all dividends and capital gains
distributions during the period are reinvested at net asset value per share, and
that the investment is redeemed at the end of the period. Prior to July 12,
1996, the Fund had only one class of shares, which class is now designated Class
A.
Using the method to compute average annual compounded total return described
above, for the one year, and the life-of- series periods (from commencement of
operations on June 3, 1992 through) ended November 30, 1995 assuming a $1,000
investment at the beginning of the period, the average annual rate of total
return of the Class A shares of the Series amounted to 25.20% and 16.26% and the
redeemable values were $1,252 and $1,693, respectively.
Our yield quotation for each class is based on a 30-day period ended on a
specified date, computed by dividing the net investment income per share earned
during the period by the maximum offering price per share of such class on the
last day of the period. This is determined by finding the following quotient:
take the dividends and interest earned during the period for a class minus its
expenses accrued for the period and divide by the product of (i) the average
daily number of Class shares outstanding during the period that were entitled to
receive dividends and (ii) the maximum offering price per share of such class on
the last day of the period. To this quotient add one. This sum is multiplied by
itself five times. Then one is subtracted from the product of this
multiplication and the remainder is multiplied by two. Yield for the Class A
shares reflects the deduction of the maximum initial sales charge, but may also
be shown based on the Class A net asset value per share. Yields for Class B and
C shares do not reflect the deduction of the CDSC.
These figures represent past performance, and an investor should be aware that
the investment return and principal value of a Series 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.
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7.
Taxes
The value of any shares redeemed by the Series or repurchased or otherwise sold
may be more or less than your tax basis in the shares at the time the
redemption, repurchase or sale is made. Any gain or loss will generally be
taxable for federal income tax purposes. Any loss realized on the sale,
redemption or repurchase of Series 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 the sale, the taxpayer acquires stock or securities that are
substantially identical.
The Series will be subject to a four-percent nondeductible 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 Series
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 Series 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 Series. Such transactions may increase the amount of short-term capital
gain realized by the Series, which is taxed as ordinary income when distributed
to shareholders. Limitations imposed by the Internal Revenue Code on regulated
investment companies may restrict the Series' ability to engage in transactions
in options. As described in the Prospectus under "How We Invest - Risk Factors,"
the Series 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 Series
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 Series.
Gains and losses realized by the Series 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 Series 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 Series to its shareholders. Additional charges in the nature of
interest may be imposed on either the Series or its shareholders in respect to
deferred taxes arising from such distributions or gains.
If the Series were to invest in a passive foreign investment company with
respect to which the Series elected to make a "qualified electing fund"
election, in lieu of the foregoing requirements, the Series might be required to
include in income each year a portion of the ordinary earnings and net capital
gains of the qualified electing series, even if such amount were not distributed
to the Series.
Dividends paid by the Series will qualify for the dividends-received deduction
for corporations to the extent they are derived from dividends paid by domestic
corporations.
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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.
9.
Financial Statements
The financial statements for the fiscal year ended November 30, 1995 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1995 Annual Report to Shareholders of Lord Abbett
Research Fund, Inc. - Large-Cap Series are incorporated herein by reference to
such financial statements and report in reliance upon the authority of Deloitte
& Touche LLP as experts in auditing and accounting. Prior to July 12, 1996, the
Fund had only one class of share which is now designated Class A.
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