LORD ABBETT
Prospectus
October 1, 1998
Application Inside
LORD ABBETT
GROWTH OPPORTUNITIES
FUND
[LOGO](R) LORD, ABBETT & CO
Investment Management
A Tradition of Performance Through Disciplined Investing
<PAGE>
This Prospectus sets forth concisely the information about Lord Abbett Growth
Opportunities Fund ("we" or the "Fund") that you should know before investing.
Please read this Prospectus before investing and retain it for future reference.
The Fund's investment objective is capital appreciation. In its search for
growth, the Fund seeks companies which are primarily middle-sized, based on the
value of their outstanding stock. There can be no assurance the Fund will
achieve its objective.
The Statement of Additional Information dated October 1, 1998 has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this Prospectus. You may obtain it, without charge, by writing to the Fund
or by calling 800-874-3733. Ask for "Part B of the Prospectus -- the Statement
of Additional Information". In addition, the Commission maintains a website
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding registrants
that file electronically with the Commission. Shaded terms are defined in the
Glossary of Terms.
Mutual Fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank. Shares are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency. An investment in
the Fund involves risks, including the possible loss of principal.
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
LORD ABBETT
GROWTH OPPORTUNITIES
FUND
PROSPECTUS
October 1, 1998
TABLE OF CONTENTS PAGE
How We Invest 2
Risk Factors 2
Portfolio Management 2
Investor Expenses 2
Financial Highlights 3
Purchases 4
Opening Your Account 6
Shareholder Services 6
Redemptions 7
Dividends and Capital Gains 8
Our Management 8
Fund Performance 8
Investment Policies, Risks and Limits 9
Sales and Service Compensation
and Activities 12
Glossary of Terms 13
Lord, Abbett & Co.
Investment Management
A Tradition of Performance Through Disciplined Investing
THE GENERAL MOTORS BUILDING
767 FIFTH AVENUE o NEW YORK o NEW YORK o 10153
(800) 426-1130
<PAGE>
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HOW WE INVEST
Normally we invest primarily in equity securities of mid-sized companies,
defined for this purpose as companies whose outstanding equity securities have
an aggregate market value of between $1 billion and $6 billion. We favor
companies that show the potential for stronger than average earnings growth.
Under normal circumstances, at least 65% of our total assets will consist of
investments made in growth companies, as determined at the time of purchase.
See "Investment Policies, Risks and Limits".
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RISK FACTORS
The value of your investment will fluctuate in response to stock market
movements. The Fund employs other investment practices such as investments in
foreign securities, small-sized companies and other securities, that could
adversely affect performance. Before you invest, please read "Investment
Policies, Risks and Limits".
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PORTFOLIO MANAGEMENT
Stephen J. McGruder, Partner of Lord, Abbett & Co. ("Lord Abbett") and Executive
Vice President of the Fund, has served as Senior Portfolio Manager since July
15, 1998. He joined Lord Abbett in 1995. Prior to joining Lord Abbett, Mr.
McGruder served since October of 1988 as Vice President of Wafra Investment
Advisory Group, a private investment company. Mr. McGruder is assisted by, and
may delegate management duties to, other Lord Abbett employees who may be Fund
officers.
Mr. McGruder has over 29 years of investment experience.
When Mr. McGruder became the Senior Portfolio Manager of the Fund, he
introduced a growth style of investing to the Fund. Under this method, companies
are favored that show the potential for stronger-than-expected earnings growth.
As the opportunities present themselves, these kinds of companies will be
favored in the selection process. Under the former value style of investing used
to manage the Fund, companies were selected without regard to current income
under a process that sought to identify and invest in undervalued securities.
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INVESTOR EXPENSES
The expenses shown below are based on historical expenses adjusted to reflect
current fees. Future expenses may be different than those shown.
Class A Class B Class C
Shareholder Transaction Expenses
Maximum Sales Load on Purchases
(as a % of offering price) 5.75% None None
Deferred Sales Charge (See "Purchases") None 5.00% 1.00%
Annual Fund Operating Expenses(1) (as a % of average net assets)
Management Fee (See "Our Management") 0.90% 0.90% 0.90%
12b-1 Fees(1) 0.35% 1.00% 1.00%
Other Expenses (See "Our Management") 0.28% 0.28% 0.28%
Total Operating Expenses 1.53% 2.18% 2.18%
(1) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge. Lord
Abbett Distributor LLC has voluntarily agreed not to use a portion of the
12b-1 fee attributable to Class A shares of the Fund. Without such
limitation the 12b-1 fee for Class A shares would be payable at the rate of
0.50% of average daily net assets.
(2) Class B shares will automatically convert to Class A shares on the eighth
anniversary of your original purchase of Class B shares.
Example
Assume an average annual return of 5% and no change in the level of expenses.
For a $1,000 investment with all dividends and distributions reinvested, you
would have paid the following total expenses assuming you sold your shares at
the end of each time period indicated.
Share=Class 1 year 3=years 5 years 10 years
Class A shares $72 $103 $136 $229
Class B shares(2) $72 $ 98 $136 $235
Class C shares $32 $ 68 $117 $252
You would pay the following expenses on the same investment, assuming you kept
your shares:
Class A shares $72 $103 $136 $229
Class B shares(2) $22 $ 68 $117 $235
Class C shares $22 $ 68 $117 $252
This example is for comparison and is not a representation of the Fund's actual
expenses and returns, either past or present.
<PAGE>
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FINANCIAL HIGHLIGHTS Except for the six-month period ended May 31, 1998 which
has not been audited, the following table has been audited by Deloitte & Touche
LLP, independent auditors, in connection with their annual audit of the Fund's
Financial Statements, whose report may be obtained on request. Call 800-821-5129
and ask for the Lord Abbett Growth Opportunities Fund's 1997 annual report or
1998 semi-annual report.
<TABLE>
<CAPTION>
Per Class A Share Operating(a) Six Months Ended Year Ended November 30, For the Period August 1, 1995(d)
Performance: May 31, 1998 1997 1996 to November 30, 1995
<S> <C> <C> <C> <C>
Net asset value, beginning of period $16.18 $12.84 $10.18 $10.00
Income from Investment Operations
Net investment income(b) .08 .23 0.30 .10
Net realized and unrealized gain on investments 1.72 3.39 2.50 .08
Total from investment operations 1.80 3.62 2.80 .18
Distributions
Dividends from net investment income (.22) (.28) (.12) --
Net realized gain from security transactions (2.06) -- (.02) --
Net asset value, end of period $15.70 $16.18 $12.84 $10.18
Total Return(c) 13.01%(e) 28.90% 27.81% 1.80%(e)
Ratios/Supplemental Data:
Net assets, end of period(000) $2,095 $1,672 $1,462 $968
Ratios to Average Net Assets:
Expenses, including waiver .00(e) .00% .00% 0.00%(e)
Expenses, excluding waiver .69(e) 1.58% 2.39% 1.20%(e)
Net investment income .55(e) 1.69% 2.67% 1.04%(e)
Portfolio turnover rate 33.39% 52.86% 30.78% 1.55%
Average commissions per share paid on equity transactions $.049 $.062 $.048
<FN>
(a) See Notes to Financial Statements.
(b) Net of management fee waiver and expenses assumed.
(c) Total return does not consider the effects of front-end sales or contingent
deferred sales charges.
(d) Commencement of operations.
(e) Not annualized.
</FN>
</TABLE>
<PAGE>
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PURCHASES
This Prospectus offers three classes of shares, Class A, B and C. These classes
of shares represent investments in the same portfolio of securities but are
subject to different expenses. Our shares are continuously offered based on the
per share net asset value ("NAV") next computed after we accept your purchase
order submitted in proper form, plus a front-end sales charge as described
below, in the case of the Class A shares and without a front-end sales charge,
in the case of the Class B and C shares as described below. Investors should
read this section carefully to determine which class of shares represents the
best investment option for their particular situation.
Class A
o Normally offered with a front-end sales charge.
o Lower annual expenses than Class B and Class C shares.
Class B
o No front-end sales charge.
o Higher annual expenses than Class A shares.
o A contingent deferred sales charge is applied to shares sold prior to the
sixth anniversary of purchase.
o Automatically convert to Class A shares after eight years.
Class C
o No front-end sales charge.
o Higher annual expenses than Class A shares.
o A contingent deferred sales charge is usually applied to shares sold prior
to the first anniversary of purchase.
It may not be suitable for you to place a purchase order for Class B shares of
$500,000 or more or a purchase order for Class C shares of $1,000,000 or more.
You should discuss pricing options with your investment professional.
For more information, see "Alternative Sales Arrangements" in the Statement of
Additional Information.
Class A Shares. Front-end sales charges are as
follows:
To Compute
As a % of As a % of Offering Price
Offering Your Divide
Your Investment Price Investment NAV by
Less than $50,000 5.75% 6.10% .9425
$50,000 to $99,999 4.75% 4.99% .9525
$100,000 to $249,999 3.75% 3.90% .9625
$250,000 to $499,999 2.75% 2.83% .9725
$500,000 to $999,999 2.00% 2.04% .9800
$1,000,000 over No Sales Charge 1.0000
Reducing Your Class A Front-End Sales Charges. There are several ways you can
qualify for a lower sales charge when purchasing Class A shares if you inform
the Fund that you are eligible at the time of purchase.
o RIGHTS OF ACCUMULATION -- a Purchaser can add the share value of any
Eligible Fund already owned to the amount of the next purchase of Class A
shares for purposes of calculating the sales charge.
o STATEMENT OF INTENTION -- a Purchaser can purchase Class A shares of any
Eligible Fund over a 13-month period and receive the same sales charge as if
all shares had been purchased at once. Shares purchased through reinvestment
of distributions are not included.
For more information on eligibility for these privileges, read the applicable
sections in the attached application.
CLASS A SHARE PURCHASES WITHOUT A FRONT-END SALES CHARGE. Class A shares may be
purchased without a front-end sales charge under the following circumstances.
1. Purchases of $1 million or more. O
2. Purchases by Retirement Plans with at least 100 eligible employees. O
3. Purchases under a Special Retirement Wrap Program. O
4. Purchases made with dividends and distributions on Class A shares of another
Eligible Fund.
5. Purchases representing repayment under the
<PAGE>
loan feature of the Lord
Abbett-sponsored prototype 403(b) plan for Class A shares.
6. Employees of any consenting securities dealer having a sales agreement with
Lord Abbett Distributor.
7. Purchases under a Mutual Fund Wrap-Fee Program.
8. Lord Abbett Consultants/Advisers.
9. Employees of our shareholder servicing agent.
10. Employees of any national securities trade organization to which Lord Abbett
belongs.
11. Employees of Lord Abbett and our Directors/Trustees (active or retired),
their spouses, including surviving spouses and other family members.
12. Trustees or custodians of any pension or profit sharing plan, or payroll
deduction IRA for the persons mentioned in 6, 9, 10 and 11 above.
O May be subject to a CDSC.
CONTINGENT DEFERRED SALES CHARGES ("CDSC"). The CDSC, regardless of class, is
not charged on shares acquired through reinvestment of dividends or capital
gains distributions and is charged on the original purchase cost or the current
market value of the shares being sold, whichever is lower. In addition,
repayment of loans under Retirement Plans and 403(b) plans will constitute new
sales for purposes of assessing the CDSC.
CLASS A SHARE CDSC. If you buy Class A shares under one of the starred (O)
categories listed above subject to a dealer's concession of up to 1% and you
redeem any of the Class A shares within 24 months after the month in which you
initially purchased such shares, the Fund normally will collect a CDSC of 1%.
The Class A share CDSC generally will be waived under the following
circumstances.
o Benefit payments such as Retirement Plan loans, hardship withdrawals, death,
disability, retirement, separation from service or any excess distribution
under Retirement Plans (documentation may be required).
o Redemptions continuing as investments in another fund participating in a
Special Retirement Wrap Program.
CLASS B SHARE CDSC. The CDSC for Class B shares normally applies if you redeem
your shares before the sixth anniversary of their initial purchase. The CDSC
varies depending on how long you own your shares according to the following
schedule.
Contingent Deferred
Anniversary(1) Sales Charge on
of the Day on Redemptions
Which the Purchase (As % of Amount
Order Was Accepted Subject to Charge)
On Before
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
6th anniversary(2) None
(1) Anniversary is the 365th day subsequent to a purchase or a prior
anniversary.
(2) Class B shares will automatically convert to Class A shares on the eighth
anniversary of the purchase of Class B shares.
The Class B share CDSC generally will be waived under the following
circumstances.
o Benefit payments such as Retirement Plan loans, hardship withdrawals, death,
disability, retirement, separation from service or any excess distribution
under Retirement Plans.
o Eligible Mandatory Distributions under 403(b) plans and individual
retirement accounts.
o Death of the shareholder (natural person).
o On redemptions of shares in connection with Div-Move and Systematic
Withdrawal Plans (up to 12% per year).
See "Systematic Withdrawal Plan" for more information on CDSCs with respect to
Class B shares.
CLASS C SHARE CDSC. The 1% CDSC for Class C shares normally applies if you
redeem your shares before the first anniversary of your original purchase. An
exception is made for shares redeemed from a Mutual Fund Wrap-Fee Program.
APPLICATION OF CDSC TO A REDEMPTION. To determine if a CDSC applies to a
redemption, the Fund redeems shares in the following order.
1. Shares acquired by reinvestment of dividends and capital gains.
<PAGE>
2. Shares held for six years or more (Class B) or one year or more (Class C).
3. Shares held the longest before the sixth anniversary of their purchase
Class B) or before the first anniversary of their purchase (Class C).
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OPENING YOUR ACCOUNT
MINIMUM INITIAL INVESTMENT PER FUND
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o Regular account $1,000
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o Individual Retirement Accounts, 403(b)
and employer-sponsored retirement plans
under the Internal Revenue Code $250
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o Invest-A-Matic and Div-Move $250 initial
$50 subsequent minimum
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For Retirement Plans and Mutual Fund Wrap Programs, there is no minimum
investment required, regardless of share class.
You may purchase shares through any independent securities dealer who has a
sales agreement with Lord Abbett Distributor LLC or you can fill out the
attached application and send it to the Fund at the address stated below. You
may be charged a fee if you effect transactions through an independent dealer or
agent. You should read this Prospectus carefully before placing your order to
assure your order is in proper form.
LORD ABBETT GROWTH OPPORTUNITIES FUND
P.O. Box 419100
Kansas City, MO 64141
PROPER FORM. To be in proper form an order submitted directly to the Fund must
contain (1) a completed Application Form or information and documentation
required supplementally by the Fund, and (2) payment by check. For more
information regarding proper form of a purchase order, call the Fund at
1-800-821-5129.
Payment must be credited in U.S. dollars to our custodian bank's account.
IMPORTANT INFORMATION. If you fail to provide a correct taxpayer identification
number or to make certain required certifications, you may be subject to a $50
penalty under the Internal Revenue Code and we may be required to withhold a
portion (31%) of any redemption proceeds and of any dividend or distribution on
your account.
BY EXCHANGE. Telephone the Fund at 1-800-821-5129 to request an exchange from
any eligible Lord Abbett-sponsored fund.
We reserve the right to withdraw all or any part of the offering made by this
Prospectus or to reject any purchase order. We also reserve the right to waive,
increase or establish minimum investment requirements. All purchase orders are
subject to our acceptance and are not binding until confirmed or accepted in
writing.
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SHAREHOLDER SERVICES
TELEPHONE EXCHANGES. You or your investment professional, with proper
identification, can instruct the Fund by telephone to exchange shares of any
class for the same class of any Eligible Fund.
Instructions must be received by the Fund in Kansas City by calling
1-800-821-5129 prior to the close of the New York Stock Exchange ("NYSE") to
obtain an Eligible Fund's NAV per class share on that day. Exchanges will be
treated as a sale for federal tax purposes.
For your protection, telephone requests for exchanges are recorded. We will
take measures to verify the identity of the caller, such as asking for your
name, account number, social security or taxpayer identification number and
other relevant information. The Fund will not be liable for following
instructions communicated by telephone that it reasonably believes to be
genuine.
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 limit or terminate this privilege for any shareholder making frequent
exchanges and may revoke the privilege for all shareholders upon 60 days' prior
written notice. You have this privilege unless you refuse it in writing.
You should read the prospectus of the other Lord Abbett-sponsored fund(s)
selected before making an exchange.
INVEST-A-MATIC. You can make fixed, periodic investments ($250 initial and $50
subsequent minimum) into the Fund by means of automatic money transfers from
your bank checking account. See the attached Application Form for instructions.
DIV-MOVE. You can invest the dividends paid on your
<PAGE>
account ($50 minimum) into another account, within the same class, in any
Eligible Fund.
The account must be either your account, a joint spousal account, or a
custodial account for your minor child.
INVESTING BY PHONE. Upon completion and receipt of the attached application form
(in particular, section 7), you can instruct the Fund by phone to have money
transferred from your bank account to purchase shares of the Fund for an
existing account. The Fund will purchase the requested shares upon receipt of
the money from your bank.
SYSTEMATIC WITHDRAWAL PLAN ("SWP"). You can make periodic cash withdrawals from
your account which are automatically paid to you in fixed or variable amounts.
To participate, the value of your shares must be at least $10,000, except for
retirement plans for which there is no minimum.
With respect to Class B shares, the CDSC will be waived on redemptions of up to
12% of the current net asset value of your account at the time of your SWP
request. For Class B share redemptions over 12% per year, the CDSC will apply to
the entire redemption. Please contact the Fund for assistance in minimizing the
CDSC in this situation.
Redemption proceeds due to a SWP for Class B (up to 12% per year) and Class C
shares, will be redeemed in the order described under "Redemptions".
LORD ABBETT'S RETIREMENT PLANS. The Lord Abbett Family of Funds offers a range
of qualified retirement plans, including IRAs, SIMPLE IRAs, Simplified Employee
Pension Plans, 403(b) and pension and profit-sharing plans, including 401(k)
plans. To find out more about these plans, call the Fund at 1-800-842-0828.
ACCOUNT CHANGES. For any changes you need to make to your account, consult your
financial representative or call the Fund at 1-800-821-5129.
HOUSEHOLDING. Generally, shareholders with the same last name and address will
receive a single copy of an annual or semi-annual report, unless additional
reports are specifically requested in writing to the Fund.
REINVESTMENT PRIVILEGE. If you sell shares of the Fund, you have the one time
right to reinvest some or all of the proceeds in the same class of any Eligible
Fund within 60 days without a sales charge. If you paid a CDSC when you sold
your shares, you will be credited with the amount of the CDSC. All accounts
involved must have the same registration.
PRICING SHARES. The net asset value ("NAV") per share for each class of shares
is calculated each business day at the close of regular trading on the New York
Stock Exchange ("NYSE") by dividing a class's net assets by the number of shares
outstanding. The Fund is open on those business days when the NYSE is open.
Purchases and redemptions are executed at the next NAV to be calculated after
your request is accepted.
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REDEMPTIONS
BY BROKER. Call your broker or investment professional for directions on how to
redeem your shares.
BY TELEPHONE. To obtain the proceeds of an expedited redemption of $50,000 or
less, you or your representative can call the Fund at 1-800-821-5129. The Fund
will employ the procedures described in telephone exchanges to confirm that the
instructions received are genuine.
The Fund will not be liable for following instructions communicated by
telephone that it reasonably believes to be genuine.
BY MAIL. Submit a written redemption request indicating your Fund's name, your
share class, your account number, the name(s) in which the account is registered
and the dollar value or number of shares you wish to sell.
Include all necessary signatures. If the signer has any Legal Capacity, the
signature and capacity must be guaranteed by an Eligible Guarantor. Certain
other legal documentation may be required. For more information regarding proper
documentation call 1-800-821-5129.
We will verify that the shares being redeemed were purchased at least 15 days
earlier. Your account balance must be sufficient to cover the amount being
redeemed or your redemption order will not be processed.
Normally a check will be mailed to the name(s) and addresses in which the
account is registered, or otherwise according to your instruction within one
business day after receipt of your redemption request. The Fund reserves the
right to make payment within three business days.
<PAGE>
To determine if a CDSC applies to a redemption, see "Contingent Deferred
Sales Charges" above.
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DIVIDENDS AND CAPITAL GAINS
DIVIDENDS. The Fund distributes most or all of its net earnings in the form of
dividends which are expected to be paid to shareholders annually.
CAPITAL GAINS DISTRIBUTIONS. Any capital gains distribution is expected to be
made annually and may be taken in cash or reinvested. Distributions by the Fund
of any net long-term capital gains will be taxable to a shareholder as long-term
capital gains regardless of how long the shareholder has held the shares. Under
recently enacted legislation, the maximum tax rate on long-term capital gains
for a U.S. individual, estate or trust is reduced to 20% for distributions
derived from the sale of assets held by the Fund for more than 12 months. (If
the taxpayer is in the 15% tax bracket, the rate is 10%.)
DIVIDENDS/CAPITAL GAINS RECEIPT OR REINVESTMENT. If you elect to receive
dividends or capital gains in cash, a check will be mailed to you as soon as
possible after the reinvestment date. If you arrange for direct deposit, your
payment will be electronically transmitted to your bank account within one day
after the payable date. Most investors reinvest their dividends and capital
gains. If you choose this option, or if you do not indicate any choice, your
dividends and capital gains distributions will be automatically reinvested in
additional shares.
TAXES. The Fund pays no federal income tax on the earnings it distributes to
shareholders. Consequently, dividends you receive from the Fund, whether
reinvested or taken in cash, are generally considered taxable. Dividends
declared in December of any year will be treated for federal income tax purposes
as having been received by shareholders in that year if they are paid before
February 1 of the following year.
Each January the Fund will mail to you, if applicable, a Form 1099 tax
information statement detailing your dividends and capital gain distributions.
You should consult your tax adviser concerning applicable state and local taxes.
For more information about the tax consequences from dividends and
distributions, see the Statement of Additional Information.
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OUR MANAGEMENT
The Fund is supervised by a Board of Directors, an independent body which has
ultimate responsibility for the Fund's activities. The Board has retained Lord
Abbett as investment manager pursuant to a Management Agreement. Lord Abbett
has been an investment manager for over 69 years and currently manages about $26
billion in a family of mutual funds and other advisory accounts. Lord Abbett
provides similar services to thirty-six separate mutual fund portfolios having
various investment objectives and also advises other investment clients. For
more information about the services Lord Abbett provides to the Fund, see the
Statement of Additional Information.
The Fund pays Lord Abbett a monthly fee based on average daily net assets for
each month. For the fiscal year ended November 30, 1997, the Fund was obligated
to pay Lord Abbett at an annual rate of .75 of 1%. But Lord Abbett waived the
fee and subsidized all the Fund's expenses. For the current fiscal year such fee
and expenses are estimated to be .90 and .63 of 1%, respectively.
THE FUND. The Fund is a diversified separate series of Lord Abbett Research
Fund, Inc. (the "Company"), an open-end management investment company
incorporated in Maryland on April 6, 1992. The Fund's former name was Mid-Cap
Series. Its Class A, B and C shares have equal rights as to voting, dividends,
assets and liquidation except for differences resulting from certain
class-specific expenses. The Company currently consists of three series. Only
shares of the Fund are being offered in this prospectus.
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FUND PERFORMANCE
The Fund completed its fiscal year on November 30, 1997. The Fund's net asset
value was $16.18 per share versus $12.84 one year ago. Over the period, the Fund
produced a total return (the percent change in net asset value with all
distributions reinvested) of 28.9%.
Over the past 1997 fiscal year, the stock market experienced several
corrections before rebounding to new heights. This occurred against a background
of surprising strength in the economy, concerns of inflation and a volatile
interest-rate environment. The positive performance of your Fund over the past
year can be attributed to the use of the best ideas generated by
<PAGE>
the Fund's research team. Specifically, individual issues in the technology,
finance and consumer sectors proved to be rewarding.
Your Fund is not sector-weighted (diversified in proportion to an index) and,
as such, during the past year relied on, and continues to rely on, stock
selection of companies with solid fundamental prospects in the mid-cap universe.
See the performance chart on the second to last page of this Prospectus.
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INVESTMENT POLICIES, RISKS AND LIMITS
The Fund is permitted to utilize, within limits established by the Board of
Directors, the following investment policies in an effort to enhance the Fund's
performance. If no limit is disclosed for a particular investment policy, this
means that the Board of Directors did not establish a limit for such investment
policy. These policies have risks associated with them. However, the Fund
follows certain practices that may reduce these risks. To the extent the Fund
utilizes some of these policies, its overall performance may be positively or
negatively affected.
FINANCIAL FUTURES: A financial futures transaction is an exchange-traded
contract to buy or sell a standard quantity and quality of a financial
instrument or index at a specific future date and price. The Fund 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.
RISK: The price behavior of the futures contract may not correlate with that
of the item being hedged.
LIMIT: The Fund 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 the Fund's total
assets.
OPTIONS TRANSACTIONS: The Fund may purchase and write (i.e., sell) put and call
options on equity securities or stock indices that are traded on national
securities exchanges.
A put option on equity securities gives the purchaser, in return for a
premium, the right, for a specified period of time, to sell the securities
subject to the option to the writer of the put at the specified exercise price.
The writer of the put option, in return for the premium, has the obligation,
upon exercise of the option, to acquire the securities underlying the option at
the exercise price.
A call option on equity securities gives the purchaser, in return for a
premium paid, the right for a specified period of time to purchase the
securities subject to the option at a specified price (the "exercise price" or
"strike price"). The writer of a call option, in return for the premium, has the
obligation, upon exercise of the option, to deliver, depending upon the terms of
the option contract, the underlying securities to the purchaser upon receipt of
the exercise price.
Options on stock indices are similar to options on equity securities except
that, rather than the right to take or make delivery of stock at a specified
price, an option on a stock index gives the holder the right, in return for a
premium paid, to receive, upon exercise of the option, an amount of cash if the
closing level of the stock index upon which the option is based is greater than,
in the case of a call, or less than, in the case of a put, the exercise price of
the option. The writer of an index option, in return for a premium, is obligated
to pay the amount of cash due upon exercise of the option.
RISK: The Fund as the writer of a put option, might therefore be obligated
to purchase underlying securities for more than their current market value.
When the Fund writes a call option, it gives up the potential for gain on the
underlying securities in excess of the exercise price of the option during the
period that the option is open.
Participation in the options market involves investment risks and transaction
costs to which the Fund would not be subject absent the use of these strategies.
If Fund management's prediction of movement in the direction of the securities
markets is inaccurate, the adverse consequences to the Fund may leave it in a
worse position than if such strategies were not used. Risks inherent in the use
of options include (1) dependence on management's ability to predict correctly
movements in the direction of specific securities being hedged or the movement
in stock indices; (2) imperfect correlation between the price of options and
stock indices and options thereon and movements in the prices of the securities
being hedged; (3) the fact that skills needed to use these strategies are
different from those needed to select portfolio securities; (4) the possible
absence of a liquid secondary market for any
<PAGE>
particular instrument at any time; and (5) the possible need to defer closing
out certain hedged positions to avoid adverse tax consequences.
LIMIT: The Fund may only write covered put options to the extent that cover
for such options does not exceed 25% of the Fund's net assets. Provided they are
traded on a national securities exchange and used to increase the Fund's income
and to provide greater flexibility in the disposition of the Fund's portfolio
securities, the Fund may write covered call options on securities having an
aggregate market value not to exceed 5% of the Fund's gross assets. The Fund
will not purchase an option if, as a result of such purchase, more than 20% of
its total assets would be invested in premiums for such options.
The Fund will write only "covered" options. An option is covered if, so long
as the Fund is obligated under the option, it owns an offsetting position in the
underlying securities or maintains cash, U.S. Government securities or other
liquid high-grade debt obligations with a value sufficient at all times to cover
its obligations in a segregated account.
FOREIGN INVESTMENTS: The Fund may invest in securities (of the type described
herein) that are primarily traded in foreign countries.
RISK: Securities markets of foreign countries in which we may invest
generally are not subject to the same degree of regulation as the U.S. markets
and may be more volatile and less liquid than the major U.S. markets. There may
be less publicly-available information on publicly-traded companies, banks and
governments in foreign countries than generally is the case for such entities in
the United States. The lack of uniform accounting standards and practices among
countries impairs the validity of direct comparisons of valuation measures (such
as price/earnings ratios) for securities in different countries. Other
considerations include political and social instability, expropriation, higher
transaction costs, currency fluctuations, withholding taxes that cannot be
passed through as a tax credit 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, net asset values may
be significantly affected on days when shareholders do not have access to the
Fund.
LIMIT: Up to 35% of the Fund's net assets (at the time of investment) may be
invested in securities that are primarily traded in foreign countries. Forward
Foreign Currency Contracts: The Fund may utilize a forward foreign currency
contract which involves an obligation to purchase or sell a specific amount of a
currency at a set price on a future date. The Fund may enter into forward
foreign currency contracts in primarily two circumstances. First, when the Fund
desires to "lock in" the U.S. dollar price of the security, by entering into a
forward contract for the purchase or sale of the amount of foreign currency
involved in the underlying security transaction, the Fund will be able to
protect against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the subject foreign currency during the
period between the date of purchase or sale and the date of settlement.
Second, when Fund management believes that the currency of a particular
foreign country may suffer a decline against the U.S. dollar, the Fund may enter
into a forward contract to sell the amount of foreign currency approximating the
value of some or all of the portfolio securities denominated in such foreign
currency or, in the alternative, may use a cross-currency-hedging technique
whereby it enters into such a forward contract to sell another currency
(obtained in exchange for the currency in which the portfolio securities are
denominated if such securities are sold) which it expects to decline in a
similar manner but that has a lower transaction cost.
RISK: Precise matching of the forward contract and the value of the
securities involved will generally not be possible.
FOREIGN CURRENCY PUT AND CALL OPTIONS: The Fund may purchase foreign currency
put options and write foreign currency call options on U.S. exchanges or U.S.
over-the-counter markets ("OTC"). A put option gives the Fund, upon payment of a
premium, the right to sell a currency at the exercise price until the expiration
of the option and serves to insure against adverse currency price movements in
the underlying portfolio assets denominated in that currency.
A foreign currency call option written by the Fund gives the purchaser, upon
payment of a premium, the right to purchase from the Fund a currency at the
exercise price until the expiration of the option. The Fund may write a call
option on a foreign currency only in conjunction with a purchase of a put option
on that currency ("Cross Hedging"). Such a strategy is designed
<PAGE>
to reduce the cost of downside currency protection by limiting currency
appreciation potential.
RISK: OTC options are generally less liquid and involve issuer credit risk.
The staff of the SEC has taken the position that purchased OTC options and the
assets used as "cover" for written OTC options are illiquid securities unless
the Fund and the counterparty have provided for the Fund, at the Fund's
election, to unwind the OTC option. The exercise of such an option ordinarily
would involve the payment by the Fund of an amount designed to reflect the
counterparty's economic loss from an early termination, but does allow the Fund
to treat the assets used as "cover" as "liquid."
LIMIT: The premiums paid for such foreign currency put options will not
exceed 5% of the net assets of the Fund. Unlisted options, together with other
illiquid securities, may comprise no more than 15% of the Fund's net assets. The
face value of such currency call option writing or cross-hedging may not exceed
90% of the value of the securities denominated in such currency (a) invested in
by the Fund to cover such call writing or (b) to be crossed.
REPURCHASE AGREEMENTS: The Fund may, on occasion, enter into repurchase
agreements whereby the seller of a security agrees to repurchase that security
at a mutually agreed-upon time and price. The period of maturity is usually
quite short, possibly overnight or a few days, although it may extend over a
number of months. The resale price is in excess of the purchase price,
reflecting an agreed-upon rate of return effective for the period of time the
Fund's money is invested in the security. The Fund's repurchase agreements will
at all times be fully collateralized in an amount at least equal to the purchase
price, including accrued interest earned on the underlying securities. The
instruments held as collateral are valued daily, and if the value of the
instruments declines, the Fund will require additional collateral.
RISK: If the seller defaults and the value of the collateral securing the
repurchase agreement declines, the Fund may incur a loss.
WHEN-ISSUED OR DELAYED DELIVERY TRANSACTIONS: Such transactions arise when
securities are purchased or sold by the Fund with payment and delivery taking
place as much as a month or more in the future in order to secure what is
considered to be an advantageous price and yield to the Fund at the time of
entering other liquid high-grade debt obligations having a value equal to or
greater than the Fund's purchase commitments; the custodian will likewise
designate as segregated those securities sold on a delayed delivery basis.
RISK: The securities so purchased are subject to market fluctuation and no
interest accrues to the purchaser during the period between purchase and
settlement. At the time of delivery of the securities the value may be more or
less than the purchase price and an increase in the percentage of the Fund's
assets committed to the purchase of securities on a when-issued or delayed
delivery basis may increase the volatility of the Fund's net asset value.
ILLIQUID SECURITIES: Securities not traded on the open market. May include
illiquid Rule 144A securities.
RISK: Certain securities may be difficult or impossible to sell at the time
and price the seller would like.
LIMIT: The Fund may invest up to 15% of its assets in illiquid securities.
Securities determined by the Board of Directors to be liquid are not subject to
this limitation.
RULE 144A SECURITIES: Securities determined by the Directors to be liquid
pursuant to Securities and Exchange Commission Rule 144A (the "Rule"). Under the
Rule, a qualifying unregistered security may be resold to a qualified
institutional buyer without registration and without regard to whether the
seller originally purchased the security for investment.
RISK: Investments in Rule 144A securities initially determined to be liquid
could have the effect of diminishing the level of the Fund's liquidity during
periods of decreased market interest in such securities.
BORROWING: The Fund may borrow money.
RISK: Depending on the circumstances, the interest paid on borrowed money
may reduce the Fund's return.
LIMIT: The Fund may not borrow money in excess of 331/3% of its total assets
(including the amount borrowed), and then only as a temporary measure for
extraordinary or emergency purposes. Up to an additional 5% of total assets are
available for temporary purposes. The Fund may obtain such short-term credit as
may be necessary for the clearance of purchases and sales of portfolio
securities.
RIGHTS AND WARRANTS: The Fund may hold or sell any property or securities which
it may obtain through the exercise of conversion rights or warrants. The term
"warrants" includes warrants which are not listed on
<PAGE>
the New York or American Stock Exchanges.
LIMIT: The Fund has no present intention to commit more than 5% of its gross
assets to rights and warrants.
CLOSED-END INVESTMENT COMPANIES: The Fund may invest in closed-end investment
companies.
RISK: 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 the Fund and the closed-end investment
company both charge a management fee.
LIMIT: No more than 5% of the gross assets of the Fund may be invested in
closed-end investment companies.
SECURITIES LENDING: The lending of securities to financial institutions which
provide continuous collateral equal to the market
value of the securities loaned.
RISK: Delay in recovery of collateral and loss should the borrower of the
security fail financially.
LIMIT: Loans, in the aggregate, may not exceed 5% of the Fund's total
assets.
TEMPORARY INVESTMENTS: For temporary defensive purposes or to create reserve
purchasing power pending other investments, the Fund 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. 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.
OBJECTIVE, RESTRICTION AND POLICY CHANGES. The Fund will not change its
investment objective or its fundamental restrictions without shareholder
approval. If the Fund determines that its objective can best be achieved by a
substantive change in investment policy, which may be changed without
shareholder approval, the Fund may make such change by disclosing it in the
Prospectus.
For more information about investment policies, restrictions and risk factors,
see the Statement of Additional Information.
- --------------------------------------------------------------------------------
SALES AND SERVICE COMPENSATION
AND ACTIVITIES
SALES COMPENSATION. As part of its plan for distributing shares, the Fund and
Lord Abbett Distributor pay sales and service compensation to Authorized
Institutions that sell the Fund's shares and service its shareholder accounts.
These firms typically pass along a portion of this compensation to your
financial representative.
Sales compensation originates from two sources: sales charges and 12b-1 fees
that are paid out of the Fund's assets. Service compensation originates from
12b-1 fees. ("12b-1" refers to the federal securities regulation authorizing
fees of this type.) The 12b-1 fee rates vary by share class, according to the
Rule 12b-1 plan adopted by the Fund for each share class. The sales charges and
12b-1 fees paid by investors are detailed in the class-by-class information
under "Investor Expenses" and "Purchases". The portion of these expenses that
are paid as sales and service compensation to Authorized Institutions, such as
your dealer, are shown in the chart on the last page of this Prospectus. Lord
Abbett Distributor's portion of such sales and service compensation is discussed
under "Sales Activities" and "Service Activities" below. Sometimes sales and
service compensation is not paid where tracking data is not available for
certain accounts and where the Authorized Institution waives part of the
compensation, as with an account under a Mutual Fund Wrap-Fee Program.
ADDITIONAL CONCESSIONS may be paid to Authorized Institutions from time to time.
SALES ACTIVITIES. Rule 12b-1 distribution fees may be used to pay Authorized
Institutions to finance any activity which is primarily intended to result in
the sale of shares. Lord Abbett Distributor uses its portion of the distribution
fees attributable to the Fund's Class A and Class C shares for activities which
are primarily intended to result in the sale of such Class A and Class C shares,
respectively. These activities include, but are not limited to, printing of
prospectuses and statements of additional information and reports for other than
existing shareholders, preparation and distribution of advertising material and
sales literature, expenses of organizing and conducting sales seminars,
Additional Concessions to Authorized Institutions, the cost necessary to
provide distribution-related services or personnel, travel, office expenses,
equipment and other allocable overhead.
<PAGE>
SERVICE ACTIVITIES. Rule 12b-1 service fees may be used to pay Authorized
Institutions for any activity which is primarily intended to result in personal
service and/or the maintenance of shareholder accounts. If any portion of the
service fees is paid to Lord Abbett Distributor, such fees will be used to
service and maintain shareholder accounts.
The amounts payable by the Fund (whether distribution or service fees) need
not be directly related to expenses actually incurred by Lord Abbett Distributor
on behalf of the Fund. Thus, even if Lord Abbett Distributor's actual expenses
exceed the fee payable to Lord Abbett Distributor at any given time, the Fund
will not be obligated to pay more than that fee, and if Lord Abbett
Distributor's expenses are less than the fee it receives, Lord Abbett
Distributor will retain the full amount of the fee.
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
ADDITIONAL CONCESSIONS. Lord Abbett Distributor may, for specified periods,
allow dealers to retain the full sales charge for sales of shares or may pay an
additional concession to a dealer who 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. Additional payments may be paid from Lord
Abbett Distributor's own resources or from distribution fees received from the
Fund and will be made in the form of cash or, if permitted, non-cash payments.
The non-cash payments will include business seminars at Lord Abbett's
headquarters or other locations, including meals and entertainment, or the
receipt of merchandise. The cash payments may 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.
AUTHORIZED INSTITUTIONS. Institutions and persons permitted by law to receive
service and/or distribution fees under a Rule 12b-1 plan are "authorized
institutions". Lord Abbett Distributor is an Authorized Institution.
ELIGIBLE FUND. (a) Any Lord Abbett-sponsored fund except 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; Lord Abbett Equity Fund; Lord Abbett
Series Fund; Lord Abbett U.S. Government Securities Money Market Fund ("GSMMF")
(except for holdings in GSMMF which are attributable to any shares exchanged
from the Lord Abbett Family of Funds). (b) Any Authorized Institution's
affiliated money market fund satisfying Lord Abbett Distributor as to certain
omnibus account and other criteria.
ELIGIBLE GUARANTOR. Any broker or bank that is a member of the medallion stamp
program. Most major securities firms and banks are members of this program. A
NOTARY PUBLIC IS NOT AN ELIGIBLE GUARANTOR.
ELIGIBLE MANDATORY DISTRIBUTIONS. If Class B shares represent a part of an
individual's total IRA or 403(b) investment, the CDSC waiver is available only
for that portion of a mandatory distribution which bears the same relation to
the entire mandatory distribution as the B share investment bears to the total
investment.
EMPLOYEES OF LORD ABBETT/FUND DIRECTORS (TRUSTEES). The terms "directors,"
"trustees" (of a Fund) and "employees" (of Lord Abbett) include a director's
(trustee's) or employee's spouse (including the surviving spouse of a deceased
director (trustee) or employee). The terms "directors," "trustees" and
"employees of Lord Abbett" also include other family members and retired
directors (trustees) and employees.
LEGAL CAPACITY. With respect to a redemption request, if (for example) the
request is on behalf of the estate of a deceased shareholder, John W. Doe, by a
person (Robert A. Doe) who has the legal capacity to act for the estate of the
deceased shareholder because he is the executor of the estate, then the request
must be executed as follows: Robert A. Doe, Executor of the Estate of John W.
Doe.
Similarly, if (for example) the redemption request is on behalf of the ABC
Corporation by a person (Mary B. Doe) that has the legal capacity to act on
behalf of this corporation, because she is the President of the corporation,
then the request must be executed as follows: ABC Corporation by Mary B. Doe,
President.
An acceptable form of guarantee would be as follows:
<PAGE>
o In the case of the estate -
Robert A. Doe,
Executor of the Estate of John W. Doe
[Date]
[SIGNATURE GUARANTEED]
o In the case of the corporation -
ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
[SIGNATURE GUARANTEED]
LORD ABBETT CONSULTANTS/ADVISERS. 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 fund.
LORD ABBETT DISTRIBUTOR LLC. Lord Abbett Distributor is the Fund's exclusive
selling agent. 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.
MUTUAL FUND WRAP-FEE PROGRAM. Certain unaffiliated 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 (and sometimes providing for acceptance of orders for such
shares on our behalf), in particular investment products made available for a
fee to clients of such brokers, dealers, registered investment advisers and
other financial institutions.
PURCHASER. 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.
RETIREMENT PLANS. Employer-sponsored retirement plans under the Internal Revenue
Code.
SPECIAL RETIREMENT WRAP PROGRAM. A program sponsored by an authorized
institution showing one or more characteristics distinguishing it, in the
opinion of Lord Abbett Distributor from a mutual fund wrap-fee program. Such
characteristics include, among other things, the fact that an authorized
institution does not charge its clients any fee of a consulting or advisory
nature that is economically equivalent to the distribution fee under Class A
12b-1 Plan and the fact that the program relates to participant-directed
Retirement Plans.
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 and Class C 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 yield or 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
description.
YIELD. Each class of shares calculates its "yield" by dividing the annualized
net investment income per share on the portfolio during a 30-day period by the
maximum offering price on the last day of the period. The yield of each class
will differ because of the different expenses (including actual 12b-1 fees) of
each
<PAGE>
class of shares. The yield data represents a hypothetical investment return on
the portfolio, and does not measure investment return based on dividends
actually paid to shareholders. To show that return, a dividend distribution rate
may be calculated. Dividend distribution rate is calculated by dividing the
dividends of a class derived from net investment income during a stated period
by the maximum offering price on the last day of the period. Yields and dividend
distribution rate for Class A shares reflect the deduction of the maximum
initial sales charge, but may also be shown based on the Fund's net asset value
per share. Yields for Class B and Class C shares do not reflect the deduction of
the CDSC.
- --------------------------------------------------------------------------------
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>
The performance of the Class A shares of the multi-class Fund which is shown in
the comparisons below will be more or less than that shown below for Class B and
Class C shares based on the differences in sales charges and fees paid by
shareholders investing in the different classes.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAV MOP S&P RMC
<S> <C> <C> <C> <C>
8/1/95 $10,000 $ 9,425 $10,000 $10,000
1995 $10,180 $ 9,595 $10,609 $10,524
1996 $13,011 $12,263 $12,600 $12,581
11/30/97 $16,772 $15,808 $16,059 $14,962
Fiscal Year-end 11/30
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
FOR CLASS A SHARES(3)
Life of Series
1 Year 8/1/95 -- 11/30/97
21.50% 21.69%
- --------------------------------------------------------------------------------
<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 Standard &Poor's Mid-Cap 400 and the Russell
Mid-Cap Growth Indices which are unmanaged, do not reflect transaction costs
or management fees. The second index is being used because it is a growth
index which, in Fund management's opinion, is a more appropriate standard
against which to measure the Fund's performance in view of the growth style
of investing used to manage the portfolio. See "Portfolio Management". An
investor cannot invest directly in these indices.
(3) Total return is the percent change in value with all dividends and
distributions reinvested for the periods shown using the SEC-required
uniform method to compute such return.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST YEAR COMPENSATION
Front-end
sales charge Dealer's
paid by investors concession Service fee(1) Total compensation(2)
Class A investments (% of offering price) (% of offering price) (% of net investment) (%of offering price)
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 5.00% 0.25% 5.24%
$50,000 - $99,999 4.75% 4.00% 0.25% 4.24%
$100,000 - $249,999 3.75% 3.25% 0.25% 3.49%
$250,000 - $499,999 2.75% 2.25% 0.25% 2.49%
$500,000 - $999,999 2.00% 1.75% 0.25% 2.00%
$1 million or more(3) or
Retirement Plan - 100 or more eligible employees(3) or Special Retirement Wrap Program
First $5 million no front-end sales charge 1.00% 0.25% 1.25%
Next $5 million above that no front-end sales charge 0.55% 0.25% 0.80%
Next $40 million above that no front-end sales charge 0.50% 0.25% 0.75%
Over $50 million no front-end sales charge 0.25% 0.25% 0.50%
Class B investments Paid at time of sale (% of net asset value)
All amounts no front-end sales charge 3.75% 0.25% 4.00%
Class C investments
All amounts no front-end sales charge 0.75% 0.25% 1.00%
ANNUAL COMPENSATION AFTER FIRST YEAR
Class A investments
All amounts no front-end sales charge none 0.25% 0.25%
Class B investments Percentage of average net assets(4)
All amounts no front-end sales charge none 0.25% 0.25%
Class C investments
All amounts no front-end sales charge 0.75% 0.25% 1.00%
<FN>
(1) The service fee for Class A shares is paid quarterly. The first year's
service fee on Class B and C shares is paid at the time of sale.
(2) Reallowance/concession percentages and service fee percentages are
calculated from different amounts, and therefore may not equal total
compensation percentages if combined using simple addition. Additional
Concessions may be paid to Authorized Institutions from time to time.
(3) Concessions are paid 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.
With respect to (a) Class A share purchases at $1 million or more, sales
qualifying at such level under rights of accumulation and statement of
intention privileges are included and (b) for Special Retirement Wrap
Programs, only new sales are eligible and exchanges into the Fund are
excluded.
(4) With respect to Class B and C shares, 0.25% and 1.00%, respectively, of the
average annual net asset value of such shares outstanding during the quarter
(including distribution reinvestment shares after the first anniversary of
their issuance) is paid to Authorized Institutions. These fees are paid
quarterly in arrears.
</FN>
</TABLE>
<PAGE>
INVESTMENT MANAGER AND UNDERWRITER
Lord, Abbett & Co. and Lord Abbett Distributor LLC
The General Motors Building
767 Fifth Avenue
New York, New York 10153-0203
212-848-1800
CUSTODIAN
The Bank of New York
48 Wall Street
New York, New York 10286
TRANSFER AGENT AND DIVIDEND
Disbursing Agent
United Missouri Bank of Kansas City, N.A.
Tenth and Grand
Kansas City, Missouri 64141
SHAREHOLDER SERVICING AGENT
DST Systems, Inc.
P.O. Box 419100
Kansas City, Missouri 64141
800-821-5129
AUDITORS
Deloitte & Touche LLP
COUNSEL
Debevoise & Plimpton
Printed in the U.S.A.
LAgof-1-1098
(10/98)
LORD ABBETT
GROWTH OPPORTUNITIES FUND
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
<PAGE>
- --------------------------------------------------------------------------------
LORD ABBETT
Statement of Additional Information October 1, 1998
Lord Abbett Growth Opportunities Fund
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") at The General Motors Building, 767 Fifth Avenue, New York, New
York 10153-0203. This Statement relates to, and should be read in conjunction
with, the Prospectus dated October 1, 1998.
The Lord Abbett Growth Opportunities Fund (sometimes referred to as "we" or the
"Fund") is a diversified separate Series of Lord Abbett Research Fund, Inc. (the
"Company"), an open-end management investment company incorporated in Maryland
on April 6, 1992. The Fund's former name was Mid-Cap Series. Its Class A, B and
C shares have equal rights as to voting, dividends, assets and liquidation
except for differences resulting from certain class-specific expenses. Only
shares of the Fund are described in this Statement of Additional Information. To
date 130,000,000 shares of the Fund have been designated by the Board of
Directors.
Rule 18f-2 under the Investment Company Act of 1940, 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 the Fund affected by such matter. Rule 18f-2 further
provides that a Fund shall be deemed to be affected by a matter unless the
interests of the Fund in the matter are identical or the matter does not affect
any interest of such Fund. However, the Rule exempts from these separate voting
requirements the selection of independent public accountants, the approval of
principal distributing contracts and the election of directors.
Shareholder inquiries should be made by writing directly to the Fund or by
calling 800-821-5129. In addition, you can make inquiries through Lord Abbett.
TABLE OF CONTENTS PAGE
1. Investment Objective and Policies 2
2. Directors and Officers 4
3. Investment Advisory and Other Services 7
4. Portfolio Transactions 8
5. Purchases, Redemptions
and Shareholder Services 9
6. Past Performance 17
7. Taxes 18
8. Information About The Fund 19
9. Financial Statements 19
<PAGE>
1.
INVESTMENT OBJECTIVE AND POLICIES
FUNDAMENTAL INVESTMENT RESTRICTIONS. The Fund's investment objective and
policies are described in the Prospectus under "How We Invest." In addition to
those policies described in the Prospectus, the Fund is subject to the following
fundamental investment restrictions which cannot be changed for the Fund without
the approval of the holders of a majority of the Fund's respective shares. The
Fund may not: (1) borrow money ,except that (i) the Fund may borrow from banks
(as defined in the Act) in amounts up to 33 1/3% of its total assets (including
the amount borrowed), (ii) the 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 such
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 its gross assets,
except securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or (ii) own more than 10% of the voting securities of any
issuer; (7) invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding securities of the
U.S. Government, its agencies and instrumentalities); or (8) issue senior
securities to the extent such issuance would violate applicable law.
With respect to the restrictions mentioned herein, compliance therewith will not
be affected by change in the market value of portfolio securities but will be
determined at the time of purchase or sale of such securities.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. In addition to those policies described
in the Prospectus and the investment restrictions above which cannot be changed
without shareholder approval, the Fund also is 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 33 1/3% of its total assets (including the amount borrowed), 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 ("Rule 144A"), deemed to be
liquid by the Board of Directors; (4) invest in securities of other investment
companies as defined in the Act, except as permitted by applicable law; (5)
invest in securities of which, with their predecessors, have a record of less
than three years of continuous operation, 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 when more than 1/2 of 1% of the securities of such
issuer are owned beneficially by one or more of the Fund's officers or directors
or by one or more partners of the Fund's underwriter or investment adviser if
these owners in the aggregate own beneficially more than 5% of such securities
of such issuer; (7) invest in warrants if, at the time of acquisition, its
investment in warrants, valued at the lower of cost or market, to exceed 5% of
the Fund's total assets (included within such limitation, but not to exceed 2%
of the Funds total assets, are warrants which are not listed on the New York or
American Stock Exchange or a foreign exchange); and (8) invest in real estate
limited partnership interests or interest in oil, gas or other mineral leases,
or exploration or development programs, except that the Fund may invest in
securities issued by companies that engage in oil, gas or other mineral
exploration or development activities.
<PAGE>
INVESTMENT TECHNIQUES WHICH MAY BE USED BY THE FUND
LENDING OF PORTFOLIO SECURITIES. The Fund may seek to earn income by lending
portfolio securities. Under present regulatory policies, such loans may be made
to member firms of the New York Stock Exchange ("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. The Fund 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 the Fund 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 Fund's gross assets.
If the Fund enters into repurchase agreements as provided in clause (4) above,
it will do so only with those primary reporting dealers that report to the
Federal Reserve Bank of New York and with the 100 largest United States
commercial banks and the underlying securities purchased under the agreements
will consist only of those securities in which the Fund otherwise may invest.
FOREIGN CURRENCY HEDGING TECHNIQUES. The Fund may utilize various foreign
currency hedging techniques described below, including forward foreign currency
contracts and foreign currency put and call options.
FORWARD FOREIGN CURRENCY CONTRACTS. A forward foreign currency contract involves
an obligation to purchase or sell a specific amount of a specific currency at a
set price at a future date. The Fund expects to enter into forward foreign
currency contracts in primarily two circumstances. First, when the Fund enters
into a contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security. By
entering into a forward contract for the purchase or sale of the amount of
foreign currency involved in the underlying security transaction, the Fund will
be able to protect against a possible loss resulting from an adverse change in
the relationship between the U.S. dollar and the subject foreign currency during
the period between the date the security is purchased or sold and the date on
which payment is made or received.
Second, when management believes that the currency of a particular foreign
country may suffer a decline against the U.S. dollar, the Fund may enter into a
forward contract to sell the amount of foreign currency approximating the value
of some or all of the Fund's portfolio securities denominated in such foreign
currency or, in the alternative, the Fund may use a cross-hedging technique
whereby it sells another currency which the Fund expects to decline in a similar
way but which has a lower transaction cost. Precise matching of the forward
contract amount and the value of the securities involved will not generally be
possible since the future value of such securities denominated in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The Fund does not intend to enter into such forward contracts
under this second circumstance on a continuous basis.
FOREIGN CURRENCY PUT AND CALL OPTIONS. The Fund also may purchase foreign
currency put options and write foreign currency call options on U.S. exchanges
or U.S. over-the-counter markets. A put option gives the Fund, upon payment of a
premium, the right to sell a currency at the exercise price until the expiration
of the option and serves to insure against adverse currency price movements in
the underlying portfolio assets denominated in that currency.
Exchange-listed options markets in the United States include several major
currencies, and trading may be thin and illiquid. A number of major investment
firms trade unlisted options which are more flexible than exchange-listed
options with respect to strike price and maturity date. Unlisted options
generally are available in a wider range of currencies. Unlisted foreign
currency options are generally less liquid than listed options and involve the
credit risk associated with the individual issuer. Unlisted options, together
with other illiquid securities, are subject to a limit of 15% of the Fund's net
assets.
<PAGE>
A call option written by the Fund gives the purchaser, upon payment of a
premium, the right to purchase from the Fund a currency at the exercise price
until the expiration of the option. The Fund may write a call option on a
foreign currency only in conjunction with a purchase of a put option on that
currency. Such a strategy is designed to reduce the cost of downside currency
protection by limiting currency appreciation potential. The face value of such
writing may not exceed 90% of the value of the securities denominated in such
currency invested in by a Fund or in such cross currency (referred to above) to
cover such call writing.
The Fund's custodian will segregate cash or permitted securities belonging to
the Fund in an amount not less than that required by SEC Release 10666 and
related policies with respect to the Fund's assets committed to (a) writing
options, (b) forward foreign currency contracts and (c) cross hedges entered
into by the Fund. If the value of the securities segregated declines, additional
cash or debt securities will be added on a daily basis (i.e., marked to market),
so that the segregated amount will not be less than the amount of the Fund's
commitments with respect to such written options, forward foreign currency
contracts and cross hedges.
2.
DIRECTORS AND OFFICERS
The following director is a partner of Lord, Abbett & Co. ("Lord Abbett"), The
General Motors Building, 767 Fifth Avenue, New York, New York 10153-0203. He has
been associated with Lord Abbett for over five years and is also an officer,
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 53, 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
Courtroom Television Network
600 Third Avenue
New York, New York
Formerly President and Chief Executive Officer of Time Warner Cable Programming,
Inc. Prior to that, formerly President and Chief Operating Officer of Home Box
Office, Inc. Age 57.
William H.T. Bush
Bush-O'Donnell & Co., Inc
101 South Hanley Road, Suite 1025
St. Louis, Missouri
Co-founder and Chairman of the Board of financial advisory firm of
Bush-O'Donnell & Company. Age 60.
Robert B. Calhoun
Monitor Clipper Partners
650 Madison Avenue, 9th Floor
New York, NY
Managing Director of Monitor Clipper Partners and President of the Clipper Group
L.P., both private equity investment funds. Age 56.
<PAGE>
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 67.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 72.
C. Alan MacDonald
Directorship Inc.
8 Sound Shore Drive
Greenwich, Connecticut
Managing Director of Directorship Inc., a consultancy in board management and
corporate governance. Formerly General Partner of The Marketing Partnership,
Inc., a full service marketing consulting firm (1994-1997). Prior to that,
Chairman and Chief Executive Officer of Lincoln Snacks, Inc., manufacturer of
branded snack foods (1992-1994). His career spans 36 years at Stouffers and
Nestle with 18 of the years as Chief Executive Officer. Currently serves as
Director of DenAmerica Corp., J. B. Williams Company, Inc., Fountainhead Water
Company and Exigent Diagnostics. Age 65.
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 70.
Thomas J. Neff
Spencer Stuart
277 Park Avenue
New York, New York
Chairman of Spencer Stuart, an executive search consulting firm. Currently
serves as Director of Ace, Ltd (NYSE). Age 60.
The second column of the following table sets forth the compensation accrued for
the Fund's outside directors. The third and fourth columns set forth information
with respect to the equity-based benefits accrued for outside directors
maintained by the Lord Abbett-sponsored funds. The fourth column sets forth the
total compensation payable by such funds to the outside directors/trustees. No
director of the Fund associated with Lord Abbett and no officer of the Fund
received any compensation from the Fund for acting as a director or officer.
<PAGE>
<TABLE>
<CAPTION>
For the Fiscal Year Ended November 30, 1997
(1) (2) (3) (4)
Pension or For Year Ended
Retirement Benefits December 31, 1997
Accrued by the Fund Total Compensation
Aggregate and All Other Accrued by the Fund
Compensation Lord Abbett-Sponsored And All other Lord
NAME OF DIRECTOR ACCRUED BY THE FUND FUNDS2 ABBETT--SPONSORED FUNDS3
<S> <C> <C> <C>
E. Thayer Bigelow None $17,068 $56,000
William T. Bush* None None None
Robert B. Calhoun** None None None
Stewart S. Dixon None $32,190 $55,000
John C. Jansing None $45,0854 $55,000
C. Alan MacDonald None $30,703 $57,400
Hansel B. Millican, Jr. None $37,747 $55,000
Thomas J. Neff None $19,853 $56,000
<FN>
- --------------------------------------------------------------------------------
* Elected as a director, June 17, 1998 effective as of August 13, 1998
**Elected as a director, May 5, 1998 effective as of June 17, 1998
1. Outside directors' fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on the
net assets of each fund. The Fund has not commenced paying such fees. When
the Fund starts to pay such fees, a portion of the fees payable by the Fund
to its outside directors/trustees will be deferred under a plan that deems
the deferred amounts to be invested in shares of the Fund for later
distribution to the directors/trustees. The amounts of the aggregate
compensation payable by the other series of the Fund as of November 30,1997,
deemed invested in Company Shares, including dividends reinvested and
changes in net asset value applicable to such deemed investments, were: Mr.
Bigelow, $39,081; Mr. Dixon, $107,152, Mr. Jansing, $142,903, Mr.
MacDonald,$84,555; Mr. Millican,$143,927; and Mr. Neff,$143,008.
2. The amounts in Column 3 were accrued by the Lord Abbett-Sponsored Fund's for
the 12 months ended November 30, 1997 with respect to the equity based plans
established for independent directors in 1996. This plan supersedes a
previously approved retirement plan for all future directors. Current
directors had the option to convert their accrued benefits under the
retirement plan. All of the outside directors except one made such an
election. Each plan also provided for a pre-retirement death benefit and
actuarially reduced joint-and-survivor spousal benefits.
3. This column shows aggregate compensation, including directors fees and
attendance fees for board and committee meetings, of a nature referred to in
footnote one, accrued by the Lord Abbett-sponsored funds during the year
ended December 31, 1997. Since no amounts of aggregate compensation were
payable by the Fund for the year ended November 30, 1997, no shares were
deemed invested in Fund shares.
4 Mr. Jansing chose to continue to receive benefits under the retirement plan
which provides that outside directors (trustees) may receive annual
retirement benefits for life equal to their final annual retainer following
retirement at or after age 72 with at least ten years of service. Thus, if
Mr. Jansing were to retire and the annual retainer payable by the funds were
the same as it is today, he would receive annual retirement benefits of
$50,000.
</FN>
</TABLE>
Except where indicated, the following executive officers of the Company have
been associated with Lord Abbett for over five years. Of the following, Messrs.
Brown, Carper, Hilstad, Morris, and Walsh are partners of Lord Abbett; the
others are employees: Robert G. Morris, age 52, Robert P. Fetch, age 45, Stephen
J. McGruder, age 54, Executive Vice Presidents,
<PAGE>
Paul A. Hilstad, age 55, Vice President and Secretary (with Lord Abbett since
1995; formerly Senior Vice President and General Counsel of American Capital
Management & Research, Inc.); Zane E. Brown, age 46; Daniel E. Carper, age 46;
Lawrence H. Kaplan, age 41 (with Lord Abbett since 1997 formerly Vice President
and Chief Counsel of Salomon Brothers Asset Management Inc. 1995 - 1997; prior
thereto Senior Vice President and Associate General Counsel of Kidder, Peabody &
Co. Incorporated); Thomas F. Konop, age 56; Gregory M. Macosko, age 51, A.
Edward Oberhaus, age 38; Keith F. O'Connor, age 43; John J. Walsh, age 62, Vice
Presidents; and Donna M. McManus, age 37, Treasurer (with Lord Abbett since
1996, formerly a Senior Manager at Deloitte & Touche LLP).
The Company's By-Laws provide that the Company shall not hold an annual meeting
of its stockholders in any year unless one or more matters are required to be
acted on by stockholders under the Act, or unless called by a majority of the
Board of Directors or by stockholders holding at least one quarter of the stock
of the Company 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 Company.
As of November 30, 1997 our officers and directors, as a group, owned less than
12% of the Fund's outstanding shares.
3.
INVESTMENT ADVISORY AND OTHER SERVICES
As described under "Our Management" in the Prospectus, Lord Abbett is the
company's investment manager. Seven of the seventeen general partners of Lord
Abbett are officers and/or directors of the Company and are identified as
follows: Zane E. Brown, Daniel E. Carper, Robert S. Dow, Robert P. Fetch, Paul
A. Hilstad, Stephen J. McGruder, Robert G. Morris, and John J. Walsh. The other
general partners of Lord Abbett who are neither officers nor directors of the
Fund are Stephen I. Allen, John E. Erad, Daria L. Foster, Robert I. Gerber,
Robert J. Noelke, Michael McLaughlin, W. Thomas Hudson, Christopher Towle and R.
Mark Pennington. 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 .90 of 1% of the Fund's average daily net assets. For the period
from August 1, 1995 (commencement of operations) through November 30, 1995, and
each of the two fiscal years ended November 30, 1997 and the fiscal half year
ended May 31, 1998 this management fee was .75 of 1% and was waived by Lord
Abbett with respect to the Fund and, except for this waiver, would have amounted
to $2,125, $8,249; $10,844, and $7,077 respectively. On September 15, 1998, the
Fund's shareholders voted to raise the management fee to .90 of 1%.
We are obligated to pay all expenses not expressly assumed by Lord Abbett,
including, without limitation, 12b-1 expenses, outside directors' fees and
expenses, association membership dues, legal and auditing fees, taxes, transfer
and dividend disbursing agent fees, shareholder servicing costs, expenses
relating to shareholder meetings, expenses of preparing, printing and mailing
stock certificates and shareholder reports, expenses of registering the Fund's
shares under federal and state securities laws, expenses of preparing, printing
and mailing prospectuses to existing shareholders, insurance premiums, brokerage
and other expenses connected with executing portfolio transactions. For the
period from August 1, 1995 (commencement of operations) through November 30,
1995 and each of the two fiscal years ended November 30, 1997, and the fiscal
half year ended May 31, 1998, Lord Abbett, although not obligated to,
voluntarily assumed the above-mentioned expenses which, if not so assumed, would
have amounted to $7,544, $18,000; $12,000, and $6,000 respectively, with respect
to the Fund.
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 ("BONY"), 48 Wall Street, New York, New York, is the Fund's
custodian. In accordance with the requirements of Rule 17f-5, the Fund's
directors have approved arrangements permitting the Fund's foreign assets not
held by BONY or its foreign branches to be held by certain qualified foreign
banks and depositories.
<PAGE>
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 pay a commission rate determined to attract the services we
require, as described below. That rate may be higher or lower than other 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 Company and also are
employees of Lord Abbett. These traders do the trading as well for other
accounts -- investment companies (of which they are also officers) and other
investment clients -- managed by Lord Abbett. They are responsible for obtaining
best execution.
We pay a commission rate that we believe is appropriate to give maximum
assurance that our brokers will provide us, on a continuing basis, the highest
level of brokerage services available. While we do not always seek the lowest
possible commissions on particular trades, we believe that our commission rates
are in line with the rates that many other institutions pay. Our traders are
authorized to pay brokerage commissions in excess of those that other brokers
might accept on the same transactions in recognition of the value of the
services performed by the executing brokers, viewed in terms of either the
particular transaction or the overall responsibilities of Lord Abbett with
respect to us and the other accounts they manage. Such services include showing
us trading opportunities in a timely manner, 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 from 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 Fund's 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
<PAGE>
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.
If we tender portfolio securities pursuant to a cash tender offer, we will seek
to recapture any fees or commissions involved by designating Lord Abbett our
agent so that the fees may be passed back to us. As other legally permissible
opportunities come to our attention for the direct or indirect recapture by us
of brokerage commissions or similar fees paid on portfolio transactions, our
directors will determine whether we should or should not seek such recapture.
For the period from August 1, 1995 (commencement of operations) through year
ended November 30, 1995, fiscal years ended November 30, 1996, 1997, and the
fiscal half year ended May 31, 1998 we paid total commissions to independent
broker-dealers of $3,245, $2,155, $3,687 and $4,027, respectively.
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 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, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
The Fund values its portfolio securities at market value as of the close of the
NYSE. Market value will be determined as follows: securities listed or admitted
to trading privileges on the New York or American Stock Exchange or on the
NASDAQ National Market System are valued at the last sales price, or, if there
is no sale on that day, at the mean between the last bid and asked prices, or,
in the case of bonds, in the over-the-counter market if, in the judgment of the
Fund's officers, that market more accurately reflects the market value of the
bonds. Over-the-counter securities not traded on the NASDAQ National Market
System are valued at the mean between the last bid and asked prices. Securities
for which market quotations are not available are valued at fair market value
under procedures approved by the Board of Directors.
The maximum offering price of our shares on October 1, 1998 was computed as
follows:
THE FUND
Net asset value per share (net assets value divided by shares outstanding)
.......$11.91
Maximum offering price per share (net asset value divided by .9425) .... $12.64
The Fund has entered into a distribution agreement with Lord Abbett under which
Lord Abbett is obligated to use its best efforts to find purchasers for the
shares of the Fund and to make reasonable efforts to sell the Fund's shares so
long as, in Lord Abbett's judgment, a substantial distribution can be obtained
by reasonable efforts.
As stated in the Prospectus, our shares may be purchased at net asset value only
by directors (trustees) of the Lord Abbett-sponsored Fund's, partners and
employees of Lord Abbett, and spouses and other family members of such directors
(trustees), partners and employees.
The right to redeem and receive payment, as described in the Prospectus, may be
suspended if the NYSE is closed (except for weekends or customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
deems an emergency to exist.
Our Board of Directors may authorize redemption of all of the shares in any
account in which there are fewer than 25 shares. Before authorizing such
redemption, the Board must determine that it is in our economic best interest or
necessary to reduce disproportionately burdensome expenses in servicing
shareholder accounts. At least 60 days' prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
<PAGE>
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.
ALTERNATIVE SALES ARRANGEMENTS
CLASSES OF SHARES. The Fund offers investors four different classes of shares.
This Statement of Additional Information offers three of those classes
designated Class A, B, and C. The fourth class is offered in another prospectus
and statement of additional information. 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 or on investments that
do not qualify to be under a "special retirement wrap program" as a program
sponsored by an authorized institution showing one or more characteristics
distinguishing it, in the opinion of Lord Abbett Distributor from a mutual fund
wrap fee program). 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
or under a special retirement wrap program) 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%
except for redemptions under a special retirement wrap program. Class A shares
are subject to service and distribution fees that are currently estimated to
total annually approximately 0.28 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 ("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 below.
CLASS C SHARES. If you buy Class C shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the first anniversary of
buying them, you will normally pay the Fund a CDSC of 1%. Class C shares are
subject to service and distribution fees at an annual rate of 1% of the annual
net asset value of the Class C shares. The CDSC and the Rule 12b-1 plan
applicable to the C shares are described 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
<PAGE>
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, Class B and Class C, and considered the effect of the higher
distribution fees on Class B and Class C 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.
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 or Class C 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 or Class C 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.
Class C shares might be the appropriate choice (especially for investments of
less than $100,000), because there is no initial sales charge on Class C shares,
and the CDSC does not apply to amounts you redeem after holding them one year.
However, if you plan to invest more than $100,000 for the short term, then the
more you invest and the more your investment horizon increases toward six years,
the more attractive the Class A share option may become. This is because the
annual distribution fee on Class C shares will have a greater impact on your
account over the longer term than the reduced front-end sales charge available
for larger purchases of Class A shares. For example, Class A might be more
appropriate than Class C for investments of more than $100,000 expected to be
held for 5 or 6 years (or more). For investments over $250,000 expected to be
held 4 to 6 years (or more), Class A shares may become more appropriate than
Class C. If you are investing $500,000 or more, Class A may become more
desirable as your investment horizon approaches 3 years or more.
For most investors who invest $1 million or more or for Retirement Plans with at
least 100 eligible employees or for investments pursuant to a special retirement
wrap program, 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, it may not
be suitable for you to place a purchase order for Class B shares of $500,000 or
more or a purchase order for Class C shares of $1,000,000 or more. In addition,
it may not be suitable for you to place an order for Class B or C shares for a
Retirement Plan with at least 100 eligible employees or for a special retirement
wrap program. You should discuss this with your financial advisor.
INVESTING FOR THE LONGER TERM. If you are investing for the longer term (for
example, to provide for future college expenses for your child) and do not
expect to need access to your money for seven years or more,
<PAGE>
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 or Class C
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, Class B and Class C
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 the entire amount of a withdrawal if it exceeds 12%
annually) and in any account for Class C shareholders during the first year of
share ownership (due to the CDSC on withdrawals during that year). See
"Systematic Withdrawal Plan" under "Shareholder Services" in the Prospectus for
more information about the 12% annual waiver 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 and Class C
shareholders will be reduced by the expenses borne solely by each of these
classes, such as the higher distribution fee to which Class B and Class C 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 and is paid over
time, so long as shares remain outstanding, in the case of Class C shares. It is
important that investors understand that the primary purpose of the CDSC for the
Class B shares and the distribution fee for Class B and Class C 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 and reduces the Class C distribution
fee expenses for the Fund and Class C shareholders.
CLASS A, B, AND C RULE 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 three Fund Classes: the "A Plan," the "B Plan," and the "C 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 shares of each Class,
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. Lord Abbett used all amounts received under each Plan for
payments to dealers for (i) providing continuous services to shareholders, such
as answering shareholder inquiries, maintaining records, and assisting
shareholders in making redemptions, transfers, additional purchases and
exchanges and (ii) their assistance in distributing shares of the Fund.
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.
<PAGE>
CONTINGENT DEFERRED SALES CHARGES. A Contingent Deferred Sales Charge ("CDSC")
(i) applies regardless of class, (ii) will not apply to shares purchased by the
reinvestment of dividends or capital gains distributions; (iii) 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 (iv) will not be imposed on (a) the aggregate
dollar amount of your account, in the case of Class A shares, and (b) the
percentage of each share redeemed, in the case of class B and C shares,
representing an 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. In the case of Class A
shares, this increase is represented by shares having an aggregate dollar value
in your account. In the case of Class B and C shares, this increase is
represented by that percentage of each share redeemed where the net asset value
exceeded the initial purchase price.
CLASS A SHARES. As stated in the Prospectus, subject to certain exceptions, 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, subject to certain exceptions, 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 services 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 CDSC will depend on the number of years since you invested and
the dollar amount being redeemed, according to the following schedule:
Contingent Deferred Sales Charge
Anniversary of the Day on on Redemptions (As % of Amount
Which the Purchase Order Was Accepted 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.
CLASS C SHARES. As stated in the Prospectus, subject to certain exceptions, if
Class C shares are redeemed for cash before the first anniversary of their
purchase, the redeeming shareholder will be required to pay to the Fund on
behalf of Class C shares a CDSC of 1% of the lower of cost or the then net asset
value of Class C shares redeemed. If such shares are exchanged into the same
class of another Lord Abbett-sponsored fund and subsequently redeemed before the
first anniversary of their original purchase, the charge will be collected by
the other fund on behalf of this Fund's Class C shares.
<PAGE>
GENERAL. The percentage (1% in the case of Class A and C shares and 5% through
1% in the case of Class B shares) used to calculate CDSCs described above for
the Class A, Class B and Class C shares is sometimes hereinafter referred to as
the "Applicable Percentage."
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. With respect to Class A shares
purchased pursuant to a special retirement wrap program, no CDSC is payable on
redemptions which continue as investments in another fund participating in the
program. With respect to Class B shares, no CDSC is payable for redemptions (i)
in connection with Systematic Withdrawal Plan and Div-Move services as described
below under those headings, (ii) in connection with mandatory distribution under
403(b) plans and IRAs and (iii) in connection with death of an individual
shareholder (a natural person). In the case of Class A and Class C 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 services 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 and
Class C 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 and Class C 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) shares
representing an aggregate dollar amount of your account, in the case of Class A
shares, (ii) that percentage of each share redeemed, in the case of Class B and
C shares, derived from increases in the value of the shares above the total cost
of shares being redeemed due to increases in net asset value, (iii) shares with
respect to which no Lord Abbett fund paid
<PAGE>
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 (iv) 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) and for one year or more
(in the case of Class C 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
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 and Lord
Abbett Equity Fund ("LAEF") which is not issuing shares.
STATEMENT OF INTENTION. Under the terms of the Statement of Intention as
described in the Prospectus, you may invest $100,000 or more over a 13-month
period in shares of a Lord Abbett-sponsored fund (other than shares of LAEF,
LASF, 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 of Intention 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, 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.
<PAGE>
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 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 ("mutual fund wrap fee program"), (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 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)
in connection with a merger, acquisition or other reorganization (h) through a
"special retirement wrap program sponsored by an authorized institution having
one or more characteristics distinguishing it, in the opinion of Lord Abbett
Distributor, from a mutual fund wrap program. Such characteristics include,
among other things, the fact that an authorized institution does not charge its
clients any fee of a consulting or advisory nature that is economically
equivalent to the distribution fee under the Class A 12b-1 Plan and the fact
that the program relates to a participant-directed Retirement Plan. 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.
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 30 days' prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
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.
<PAGE>
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
Class B shares the CDSC will be waived on redemptions of up to 12% per year of
the current net asset value of your account at the time the SWP is established.
For Class B share redemptions of over 12% per year, the CDSC will apply to the
entire redemption. Therefore, please contact the Fund for assistance in
minimizing the CDSC in this situation. With respect to Class C shares, the CDSC
will be waived on and after the first anniversary of their purchase. 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.
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 including 401(k) plans and custodial agreements for
IRAs (Individual Retirement Accounts, including Traditional, Education, Roth and
SIMPLE IRAs and Simplified Employee Pensions), 403(b) plans and qualified
pension and profit-sharing plans. The forms name Investors Fiduciary Trust
Company as custodian and contain specific information about the plans excluding
401(k) 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 Fund computes the average annual compounded rate of total return during
specified periods that would equate the initial amount invested to the ending
redeemable value of such investment by adding one to the computed average annual
total return, raising the sum to a power equal to the number of years covered by
the computation and multiplying the result by one thousand dollars, which
represents a hypothetical initial investment. The calculation assumes deduction
of the maximum sales charge from the initial amount invested (in this case there
is no sales charge) and reinvestment of all income dividends and capital gains
distributions on the reinvestment dates at prices calculated as stated in the
Prospectus. The ending redeemable value is determined by assuming a complete
redemption at the end of the period(s) covered by the average annual total
return computation.
These figures represent past performance, and an investor should be aware that
the investment return and principal value of a Fund investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Therefore, there is no assurance that this performance will be
repeated in the future.
<PAGE>
7.
TAXES
The value of any shares redeemed by the Fund or otherwise sold may be more or
less than your tax basis in the shares at the time the redemption or sale is
made. Any gain or loss generally will be taxable for federal income tax
purposes. Any loss realized on the sale or redemption of Fund shares which you
have held for six months or less will be treated for tax purposes as a long-term
capital loss to the extent of any capital gains distributions which you received
with respect to such shares. Losses on the sale of stock or securities are not
deductible if, within a period beginning 30 days before the date of the sale and
ending 30 days after the date of sale, the taxpayer acquires stock or securities
that are substantially identical.
The writing of call options and other investment techniques and practices which
the Fund may utilize, as described above under "Investment Objectives and
Policies," may create "straddles" for United States federal income tax purposes
and may affect the character and timing of the recognition of gains and losses
by the Fund. Such transactions may increase the amount of short-term capital
gain realized by the Fund, which is taxed as ordinary income when distributed to
shareholders. Limitations imposed by the Internal Revenue Code on regulated
investment companies may restrict the Fund's ability to engage in transactions
in options. As described in the Prospectus under "How We Invest - Risk Factors,"
the Fund may be subject to foreign withholding taxes which would reduce the
yield on its investments. Tax treaties between certain countries and the United
States may reduce or eliminate such taxes. It is expected that Fund shareholders
who are subject to United States federal income tax will not be entitled to
claim a federal income tax credit or deduction for foreign income taxes paid by
the Fund.
The Fund will be subject to a 4% non-deductible excise tax on certain amounts
not distributed (and not treated as having been distributed) on a timely basis
in accordance with a calendar-year distribution requirement. The Fund intends to
distribute to shareholders each year an amount adequate to avoid the imposition
of such excise tax. Dividends paid by the Fund will qualify for the
dividends-received deduction for corporations to the extent they are derived
from dividends paid by domestic corporations.
Gains and losses realized by the Fund on certain transactions, including sales
of foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gains or losses are attributable to changes in
exchange rates for foreign currencies. Accordingly, distributions taxable as
ordinary income will include the net amount, if any, of such foreign exchange
gains and will be reduced by the net amount, if any, of such foreign exchange
losses.
If the Fund purchases shares in certain foreign investment entities, called
"passive foreign investment companies," it may be subject to United States
federal income tax on a portion of any "excess distribution" or gain from the
disposition of such shares, even if such income is distributed as a taxable
dividend by the Fund to its shareholders. Additional charges in the nature of
interest may be imposed on either the Fund or its shareholders in respect of
deferred taxes arising from such distributions or gains.
<PAGE>
If the Fund were to invest in a passive foreign investment company with respect
to which the Fund elected to make a "qualified electing fund" election, in lieu
of the foregoing requirements, the Fund might be required to include in income
each year a portion of the ordinary earnings and net capital gains of the
qualified electing fund, even if such amount were not distributed to the Fund.
8.
INFORMATION ABOUT THE FUND
The directors, trustees and officers of Lord Abbett-sponsored mutual Fund's,
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 G1 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 with respect to the Fund for the fiscal half year ended
May 31, 1998 (unaudited) and the fiscal year ended November 30, 1997 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1997 Annual Report to Shareholders of Fund 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.
