<PAGE>
LORD Large-Cap Series
ABBETT Small-Cap Value Series
RESEARCH FUND
PROSPECTUS
April 1, 1999
[LOGO OF LORD, ABBETT & CO.]
As with all mutual funds, the Securities and Exchange Commission does not
guarantee that the information in this prospectus is accurate or complete, and
it has not judged these funds for investment merit. It is a criminal offense to
state otherwise.
Class P shares of the funds are neither offered to the general public nor
available in all states. Please call 800-821-5129 for further information.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C> <C>
The Funds
Information about the goal/ Large-Cap Series 2
approach, main risks, past Small-Cap Value Series 4
performance, fees and expenses
Your Investment
Information for managing Purchases 6
your fund account Opening Your Account 8
Redemptions 9
Distributions and Taxes 9
Services For Fund Investors 10
Sales Charges and Service Fees 11
Management 12
For More Information
How to learn more Other Investment Techniques 13
about the funds Glossary of Shaded Terms 16
Recent Performance 18
Financial Information
Financial highlights of each Large-Cap Series 19
fund, and dealer compensation Sma1l-Cap Value Series 21
Compensation For Your Dealer 23
How to learn more about the Back Cover
funds and other Lord Abbett funds
</TABLE>
<PAGE>
Large-Cap Series
The Funds
GOAL / APPROACH
The Large-Cap Fund's investment objective is growth of capital and growth of
income consistent with reasonable risk. Normally, we invest in the
undervalued common stocks of large-capitalization companies with outstanding
equity securities having an aggregate market value of at least $1.5 billion.
Current income is not emphasized.
Typically, in choosing stocks, we look for companies using the following
process:
QUANTITATIVE RESEARCH is performed on a universe of large, seasoned U.S.
companies to identify those which have stocks that we believe represent
the best bargains.
FUNDAMENTAL RESEARCH is conducted to identify current bargain-priced
securities among the largest publicly-traded companies.
Under normal circumstances, at least 65% of the Large-Cap Fund's total
assets will consist of investments made in large-cap companies, determined
at the time of purchase.
We may take a temporary defensive position by investing some of our assets
in short-term debt securities. This could reduce the benefit from any
upswing in the market and prevent the fund from achieving its investment
objective.
Main risks
The Large-Cap Fund will invest in companies that appear to have good
prospects for improvement in earnings trends or asset values. The fund will
invest in companies on the basis of the fundamental economic and business
factors which will affect future earnings and which the fund believes are
the primary factors determining the future market valuation of stocks. There
can be no assurance that stocks selected for the fund will appreciate in
value.
At the time of purchase, securities selected for our portfolio may be
largely neglected by the investment community or, if widely followed, they
may be out of favor. Our investment portfolio typically will be less
volatile and prices will move less dramatically than the overall stock
market. Individual-security risk is managed through broad company and
industry diversification.
An investment in the fund is not a bank deposit. It is not FDIC-insured or
government endorsed. It is not a complete investment program. You could lose
money in the fund, but you also have the potential to make money.
WE OR THE FUND refers to either of the Large-Cap Series (the "Large-Cap
Fund") or the Small-Cap Value Series (the "Small-Cap Value Fund") of Lord
Abbett Research Fund, Inc. (the "company"). Each fund operates under the
supervision of the company's Board with the advice of Lord, Abbett &
Co.("Lord Abbett"), its investment manager.
ABOUT EACH FUND. Each fund is a professionally managed portfolio of
securities purchased with the pooled money of investors. Each fund strives
to reach its stated goals, although as with all mutual funds, cannot
guarantee results.
BARGAIN STOCKS are stocks of companies that appear underpriced according to
certain financial measurements of their intrinsic worth or business
prospects.
LARGE COMPANIES are established companies that are considered "known
quantities." Large companies often have the resources to weather economic
shifts, though they can be slower to innovate than small companies.
SEASONED COMPANIES are usually established companies whose securities have
gained a reputation for quality with the investing public and enjoy high
liquidity in the market.
You should read this entire prospectus, including "Other Investment
Techniques," which concisely describes the other investment strategies and
their risks used by the fund.
2 The Funds
<PAGE>
Large-Cap Series Symbols: Class A - LRLCX
Class B - LARBX
Class C - LLRCX
PAST PERFORMANCE
The information below provides some indication of the risks of investing in
the fund, by showing changes in the fund's class A shares' performance from
calendar year to calendar year and by showing how the fund's average annual
returns compare with those of a broad measure of market performance.
[PERFORMANCE BAR CHART]
================================================================================
The table below shows a comparison of the fund's class A, B and C average annual
total return to that of the S&P 500'r' Index. Fund returns assume reinvestment
of dividends and distributions and payment of the maximum applicable front-end
or deferred sales charge. All periods end on December 31, 1998.
<TABLE>
<CAPTION>
CLASS 1 YEAR 5 YEARS INCEPTION S&P 500'r' INDEX(ii)
<S> <C> <C> <C> <C>
A 9.60% 18.40% 18.27% 20.73%(iii)
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B 9.59% - 21.29% 33.33%(iv)
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C 13.94% - 20.17% 31.31%(v)
- -------------------------------------------------------------------------------
S&P 500'r' Index(ii) 28.74% 24.08% - -
- -------------------------------------------------------------------------------
</TABLE>
Past performance is not a prediction of future results.
- ------------------------------------------------------------------------------
(i) The date of inception for each class is: A -6/3/92; B -8/1/96; and
C -4/1/97.
(ii) Performance for the unmanaged S&P 500'r' Index does not reflect
transaction costs or management fees.
(iii) Represents total return for the period 6/30/92 - 12/31/98, to correspond
with class A inception date.
(iv) Represents total return for the period 8/31/96 - 12/31/98, to correspond
with class B inception date.
(v) Represents total return for the period 4/30/97 - 12/31/98, to correspond
with class C inception date.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the fund.
<TABLE>
<CAPTION>
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Fee table
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CLASS A CLASS B CLASS C CLASS P
<S> <C> <C> <C> <C>
SHAREHOLDER FEES (Fees paid directly from your investment)
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Maximum Sales Charge on Purchases
- -----------------------------------------------------------------------------------------------------
(as a % of offering price) 5.75% none none none
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Maximum Deferred Sales Charge (See "Purchases") none 5.00%(3) 1.00% none
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ANNUAL FUND OPERATING EXPENSES (Expenses deducted from fund assets)
(as a % of average net assets)(1)
- -----------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.75% 0.75% 0.75% 0.75%
- -----------------------------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees(2) 0.35% 1.00% 1.00% 0.45%
- -----------------------------------------------------------------------------------------------------
Other Expenses 0.24% 0.24% 0.24% 0.24%
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Total Operating Expenses 1.34% 1.99% 1.99% 1.44%
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</TABLE>
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Expense example
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This example, like that in other funds' prospectuses, assumes a $10,000 initial
investment at maximum sales charge, if any, 5% total return each year and no
changes in expenses. You pay the following expenses over the course of each
period shown if you sell your shares at the end of the period, although your
actual cost may be higher or lower. The expenses include any applicable
contingent deferred sales charges.
<TABLE>
<CAPTION>
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A shares $703 $975 $1,267 $2,097
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Class B shares $702 $924 $1,272 $2,151
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Class C shares $302 $624 $1,072 $2,319
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Class P shares $146 $455 $ 787 $1,727
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</TABLE>
You would pay the following expenses on the same investment, assuming you kept
your shares.
<TABLE>
<S> <C> <C> <C> <C>
Class A shares $703 $975 $1,267 $2,097
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Class B shares $202 $624 $1,072 $2,151
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Class C shares $202 $624 $1,072 $2,319
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Class P shares $146 $455 $ 787 $1,727
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</TABLE>
This example is for comparison and is not a representation of the fund's actual
expenses or returns, either past or present.
MANAGEMENT FEES are payable to Lord Abbett for the fund's investment
management.
12b-1 FEES refer to fees incurred for activities that are primarily intended to
result in the sale of fund shares and service fees for shareholder account
service and maintenance.
OTHER EXPENSES include fees paid for miscellaneous items such as transfer
agency, legal and share registration fees.
- -------------------------------------------------------------------------------
(1) The annual fund operating expenses have been restated from fiscal year
amounts to reflect current fees.
(2) Because 12b-1 distribution fees are paid out on an ongoing basis, over time
they will increase the cost of your investment and may cost you more than
paying other types of sales charges.
(3) Class B shares will convert to class A shares on the eighth anniversary of
your original purchase of class B shares.
The Funds 3
<PAGE>
SMALL-CAP VALUE SERIES
GOAL/APPROACH
The Small-Cap Value Fund's investment objective is long-term capital
appreciation. Usually we invest primarily in equity securities of smaller
companies with market capitalizations of less than $1 billion.
Typically, in choosing stocks, we usually look for companies using the
following process:
QUANTITATIVE RESEARCH is performed to evaluate various criteria, including
the price of shares in relation to book value, sales, asset value, earnings,
dividends and cash flow.
FUNDAMENTAL RESEARCH is conducted to assess the dynamics of each company
within its industry and within the economy. We evaluate the company's
business strategies by assessing management's ability to execute the
strategies, and evaluating the adequacy of its financial resources.
Usually, at least 65% of the Small-Cap Value Fund's total assets will be
invested in common stocks issued by smaller, less well-known companies (with
market capitalizations of less than $1 billion) selected using fundamental
investment analysis. The fund may invest up to 35% of its total assets in the
securities of larger companies. Companies in which the fund is likely to
invest may have more limited product lines, markets or financial resources
and may lack management depth or experience as compared with companies with
larger market capitalizations. The fund may invest up to 35% of its assets in
foreign securities.
We may take a temporary defensive position by investing some of our assets in
short-term debt securities. This could reduce the benefit from any upswing in
the market and prevent the fund from achieving its investment objective.
MAIN RISKS
Small-company stocks offer significant appreciation potential. Generally,
small companies carry more risk than larger companies. Generally, small
companies rely on limited product lines and markets, financial resources, or
other factors, and this may make them more susceptible to setbacks or
economic downturns. Small-company stocks tend to be more volatile in price,
have fewer shares outstanding and trade less frequently than large company
stocks. Therefore, small company stocks may be subject to wider price
fluctuations. Many small company stocks are traded over-the-counter and are
not traded in the volume typical of stocks listed on a national securities
exchange.
The foreign securities in which the Small-Cap Value Fund may invest are
subject to currency fluctuations. Foreign securities markets may not be
subject to the same degree of regulation as the U.S. markets and may be more
volatile and less liquid than the U.S. markets. Investors should also be
aware that the fund has the ability to invest in derivatives, the value of
which may fluctuate greatly.
An investment in the fund is not a bank deposit. It is not FDIC-insured or
government endorsed. It is not a complete investment program. You could lose
money in the fund, but you also have the potential to make money.
THE SMALL-CAP VALUE FUND IS CLOSED TO NEW CLASS A, B, C AND P SHARE INVESTORS;
ONLY CURRENT SHAREHOLDERS MAY ADD TO EXISTING ACCOUNTS.
SMALL COMPANIES often are younger and less well-established, with a potential to
be faster-growing but often more volatile than large companies.
LARGE COMPANIES are established companies that are considered "known
quantities." Large companies often have the resources to weather economic
shifts, though they can be slower to innovate than small companies.
OVER-THE-COUNTER STOCKS are usually those of smaller companies that do not meet
listing requirements of major exchanges. Transactions are conducted by telephone
and computer network rather than on the floor of an exchange.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies and their risks used
by the fund.
4 The Funds
<PAGE>
Small-Cap Value Series Symbols Class A - LRSCX
Class B - LRSBX
Class C - LSRCX
PAST PERFORMANCE
The information below provides some indication of the risks of investing in
the fund, by showing changes in the fund's class A shares' performance from
calendar year to calendar year and by showing how the fund's average annual
returns compare with those of a broad measure of market performance.
[PERFORMANCE BAR CHART]
================================================================================
The table below shows a comparison of the fund's class A average annual total
return to that of the Russell 2000'r' Index. Fund returns assume reinvestment of
dividends and distributions and payment of the maximum applicable front-end or
deferred sales charge. All periods end on December 31, 1998.
<TABLE>
<CAPTION>
CLASS 1 YEAR INCEPTION(i) RUSSELL 2000'r' Index(ii)
<S> <C> <C> <C>
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A (12.70)% 15.74% 11.58%(iii)
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B (12.66)% 11.95% 12.30%(iv)
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C (8.92)% 10.71% 12.53%(v)
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Russell 2000'r' Index(ii) (2.55)% - -
- --------------------------------------------------------------------------------
</TABLE>
Past performance is not a prediction of future results.
- --------------------------------------------------------------------------------
(i) The date of inception for each class is:
A -12/13/95; B -11/15/96; and C -4/1/97.
(ii) Performance for the unmanaged Russell 2000'r' Index does not reflect
transaction costs or management fees.
(iii) Represents total return for the period 12/31/95 - 12/31/98, to correspond
with class A inception date.
(iv) Represents total return for the period 11/30/96 - 12/31/98, to correspond
with class B inception date.
(v) Represents total return for the period 4/30/97 - 12/31/98, to correspond
with class C inception date.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the fund.
================================================================================
Fee table
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS P
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(Fees paid directly from your investment)
================================================================================
Maximum Sales Charge on Purchases
- --------------------------------------------------------------------------------
(as a % of offering price) 5.75% none none none
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge
(See "Purchases") none 5.00%(3) 1.00% none
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (Expenses deducted from fund assets) (as a % of
average net assets)(1)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.75% 0.75% 0.75% 0.75%
- --------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees(2) 0.36% 1.00% 1.00% 0.45%
- --------------------------------------------------------------------------------
Other Expenses 0.24% 0.24% 0.24% 0.24%
- --------------------------------------------------------------------------------
Total Operating Expenses 1.35% 1.99% 1.99% 1.44%
- --------------------------------------------------------------------------------
</TABLE>
================================================================================
Expense example
- --------------------------------------------------------------------------------
This example, like that in other funds' prospectuses, assumes a $10,000 initial
investment at maximum sales charge, if any, 5% total return each year and no
changes in expenses. You pay the following expenses over the course of each
period shown if you sell your shares at the end of the period, although your
actual cost may be higher or lower. The expenses include any applicable
contingent deferred sales charges.
<TABLE>
<CAPTION>
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A shares $704 $978 $1,272 $2,108
- --------------------------------------------------------------------------------
Class B shares $702 $924 $1,272 $2,153
- --------------------------------------------------------------------------------
Class C shares $302 $624 $1,072 $2,319
- --------------------------------------------------------------------------------
Class P shares $146 $455 $ 787 $1,727
- --------------------------------------------------------------------------------
You would pay the following expenses on the same investment, assuming you kept
your shares.
- --------------------------------------------------------------------------------
Class A shares $704 $978 $1,272 $2,108
- --------------------------------------------------------------------------------
Class B shares $202 $624 $1,072 $2,153
- --------------------------------------------------------------------------------
Class C shares $202 $624 $1,072 $2,319
- --------------------------------------------------------------------------------
Class P shares $146 $455 $ 787 $1,727
- --------------------------------------------------------------------------------
</TABLE>
This example is for comparison and is not a representation of the fund's actual
expenses or returns, either past or present.
MANAGEMENT FEES are payable to Lord Abbett for the fund's investment management.
12b-1 FEES refer to fees incurred for activities that are primarily intended to
result in the sale of fund shares and service fees for shareholder account
service and maintenance.
OTHER EXPENSES include fees paid for miscellaneous items such as transfer
agency, legal and share registration fees.
- --------------------------------------------------------------------------------
(1) The annual fund operating expenses have been restated from fiscal year
amounts to reflect current fees.
(2) Because 12b-1 distribution fees are paid out on an ongoing basis, over
time they will increase the cost of your investment and may cost you more
than paying other types of sales charges.
(3) Class B shares will convert to class A shares on the eighth anniversary of
your original purchase of class B shares.
The Funds 5
<PAGE>
Your Investment
Purchases
This prospectus offers four classes of shares for each fund: classes A, B,
C, and P (call 800-821-5129 to find out if class P shares are available in
your state). These different classes of shares represent investments in the
same portfolio of securities but are subject to different expenses. Our
shares are continuously offered. The offering price is based on the Net
Asset Value ("NAV") per share next determined after we receive your purchase
order submitted in proper form. A front-end sales charge is added to the
NAV, in the case of the class A shares. There is no front-end sales charge,
although there is a CDSC in the case of the class B and C shares, as
described below.
You should read this section carefully to determine which class of shares
represents the best investment option for your particular situation. 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.
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 or change minimum investment requirements. All purchase orders are
subject to our acceptance and are not binding until confirmed or accepted in
writing.
===============================================================================
Front-End Sales Charges - Class A Shares
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<TABLE>
<CAPTION>
TO COMPUTE
AS A % OF AS A % OF OFFERING PRICE
YOUR INVESTMENT OFFERING PRICE YOUR INVESTMENT DIVIDE NAV BY
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% .9425
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$50,000 to $99,999 4.75% 4.99% .9525
- -------------------------------------------------------------------------------
$100,000 to $249,999 3.75% 3.90% .9625
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$250,000 to $499,999 2.75% 2.83% .9725
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$500,000 to $999,999 2.00% 2.04% .9800
- -------------------------------------------------------------------------------
$1,000,000 and over No Sales Charge 1.0000
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</TABLE>
REDUCING YOUR CLASS A FRONT-END SALES CHARGES. Class A shares may be
purchased at a discount if you qualify under either of the following
conditions:
RIGHTS OF ACCUMULATION -- A Purchaser can apply the value (at public
offering price) of the shares already owned to a new purchase of class A
shares of any Eligible Fund in order to reduce the sales charge.
STATEMENT OF INTENTION -- A Purchaser of class A shares can purchase
additional shares of any Eligible Fund over a 13-month period and receive
the same sales charge as if all shares were purchased at once. Shares
purchased through reinvestment of dividends or distributions are not
included. A statement of intention can be backdated 90 days. Current
holdings under rights of accumulation can be included in a statement of
intention.
For more information on eligibility for these privileges, read the
applicable sections in the attached application.
NAV per share for each class of fund shares is calculated each business day
at the close of regular trading on the New York Stock Exchange ("NYSE").
Each fund is open on those business days when the NYSE is open. Purchases
and sales of fund shares are executed at the NAV next determined after the
fund receives your order. In calculating NAV, securities for which market
quotations are available are valued at those quotations. Securities for
which such quotations are not available are valued at fair value under
procedures approved by the Board.
Share classes
CLASS A
normally offered with a front-end sales charge
CLASS B
no front-end sales charge, however, a contingent deferred sales charge is
applied to shares sold prior to the sixth anniversary of purchase
higher annual expenses than class A shares
automatically convert to class A shares after eight years
CLASS C
front-end sales charge
higher annual expenses than class A shares
a contingent deferred sales charge is applied to shares sold prior to the
first anniversary of purchase
CLASS P
available to certain pension or retirement plans and pursuant to a Mutual
Fund Advisory Program
6 Your Investment
<PAGE>
CLASS A SHARE PURCHASES WITHOUT A FRONT-END SALES CHARGE. Class A shares may
be purchased without a front-end sales charge under any of the following
conditions:
purchases of $1 million or more *
purchases by Retirement Plans with at least 100 eligible employees *
purchases under a Special Retirement Wrap Program *
purchases made with dividends and distributions on class A shares of
another Eligible Fund
purchases representing repayment under the loan feature of the Lord
Abbett-sponsored prototype 403(b) Plan for class A shares
purchases by employees of any consenting securities dealer having a sales
agreement with Lord Abbett Distributor
purchases under a Mutual Fund Advisory Program
purchases by trustees or custodians of any pension or profit sharing plan,
or payroll deduction IRA for the employees of any consenting securities
dealer having a sales agreement with Lord Abbett Distributor.
See the Statement of Additional Information for a listing of other
categories of purchasers who qualify for class A share purchases without a
front-end sales charge.
* These categories may be subject to a Contingent Deferred Sales Charge
("CDSC").
CLASS A SHARE CDSC. If you buy class A shares under one of the starred (*)
categories listed above and you redeem any of them within 24 months after
the month in which you initially purchased them, the fund normally will
collect a CDSC of 1%.
The class A share CDSC generally will be waived for:
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)
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 declines the longer you own your shares, according to the
following schedule:
<TABLE>
<CAPTION>
===============================================================================
Contingent Deferred Sales Charges - Class B Shares
- -------------------------------------------------------------------------------
ANNIVERSARY(1) OF CONTINGENT DEFERRED SALES CHARGE
THE DAY ON WHICH THE ON REDEMPTION (AS % OF AMOUNT
PURCHASE ORDER WAS ACCEPTED SUBJECT TO CHARGE)
<S> <C> <C>
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(2) None
- -------------------------------------------------------------------------------
</TABLE>
(1) The anniversary is the same calendar day in each respective year after the
date of purchase. For example, the anniversaries for shares purchased on May
1 will be May 1 of each succeeding year.
(2) Class B shares will automatically convert to class A shares on the eighth
anniversary of the purchase of class B shares.
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 at the time
they are 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.
To minimize the amount of any CDSC, the fund redeems shares in the following
order:
1. shares acquired by reinvestment of dividends and capital gains (always free
of a CDSC)
2. shares held for six years or more (class B) or two years or more after the
month of purchase (class A) or one year or more (class C)
3. shares held the longest before the sixth anniversary of their purchase
(class B) or before the second anniversary after the month of purchase
(class A) or before the first anniversary of their purchase (class C)
RETIREMENT PLANS include employer-sponsored retirement plans under the Internal
Revenue Code, excluding Individual Retirement Accounts.
LORD ABBETT DISTRIBUTOR LLC ("Lord Abbett Distributor") acts as agent for the
funds to work with investment professionals that buy and/or sell shares of the
funds on behalf of their clients. Generally, Lord Abbett Distributor does not
sell fund shares directly to investors.
BENEFIT PAYMENT DOCUMENTATION. (class A only)
under $50,000 - no documentation necessary
over $50,000 - reason for benefit payment must be received in writing. Use the
address indicated under "Opening Your Account."
Your Investment 7
<PAGE>
The class B share CDSC generally will be waived under any one of the
following conditions:
benefit payments such as Retirement Plan loans, hardship withdrawals,
death, disability, retirement, separation from service or any excess
contribution or distribution under Retirement Plans
Eligible Mandatory Distributions under 403(b) Plans and individual
retirement accounts
death of the shareholder (natural person)
redemptions of shares in connection with Div-Move and Systematic
Withdrawal Plans (up to 12% per year)
See "Systematic Withdrawal Plan" under "Services For Fund Investors --
Automatic Services" below 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 anniversary of the purchase of such shares.
CLASS P SHARES. Class P shares have lower annual expenses than class B and
class C shares, no front-end sales charge, and no CDSC. Class P shares are
currently sold and redeemed at NAV (a) pursuant to a Mutual Fund Advisory
Program or (b) to the trustees of, or employer-sponsors with respect to,
pension or retirement plans with at least 100 eligible employees (such as a
plan under Section 401(a), 401(k) or 457(b) of the Internal Revenue Code)
which engage an investment professional providing, or participating in an
agreement to provide, certain recordkeeping, administrative and/or
sub-transfer agency services to the fund on behalf of the class P
shareholders.
OPENING YOUR ACCOUNT
<TABLE>
<S> <C>
MINIMUM INITIAL INVESTMENT
Regular account $1,000
Individual Retirement Accounts and
403(b) Plans under the Internal Revenue Code $ 250
Uniform Gifts to Minors Account $ 250
</TABLE>
For Retirement Plans and Mutual Fund Advisory Programs, no minimum
investment is required, regardless of share class.
You may purchase shares through any independent securities dealer who has a
sales agreement with Lord Abbett Distributor or you can fill out the
attached application and send it to the fund you select at the address
stated below. You should carefully read the paragraph below entitled "Proper
Form" before placing your order to assure your order will be accepted.
NAME OF FUND
P.O. Box 419100
Kansas City, MO 64141
PROPER FORM. An order submitted directly to the fund must contain: (1) a
completed application, and (2) payment by check. For more information
regarding proper form of a purchase order, call the fund at 800-821-5129.
Payment must be credited in U.S. dollars to our custodian bank's account.
BY EXCHANGE. Telephone the fund at 800-821-5129 to request an exchange from
any eligible Lord Abbett-sponsored fund.
IMPORTANT INFORMATION. You may be subject to a $50 penalty under the
Internal Revenue Code if you do not provide a correct taxpayer
identification number (Social Security Number for individuals) or make
certain required certifications. In addition, we may be required to
withhold from your account and pay to the U.S. Treasury 31% of any
redemption proceeds and any dividend or distribution from your account.
SMALL ACCOUNTS. Our Board may authorize closing any account in which there
are fewer than 25 shares if it is in a fund's best interest to do so.
8 Your Investment
<PAGE>
REDEMPTIONS
BY BROKER. Call your investment professional for directions on how to redeem
your shares.
BY TELEPHONE. To obtain the proceeds of a redemption of $50,000
or less from your account, you or your representative can call the fund at
800-821-5129.
BY MAIL. Submit a written redemption request indicating the
name(s) in which the account is registered, the fund's name, the class of
shares, your account number, and the dollar value or number of shares you
wish to sell.
Include all necessary signatures. If the signer has any Legal Capacity, the
signature and the capacity must be guaranteed by an Eligible Guarantor.
Certain other legal documentation may be required. For more information
regarding proper documentation call 800-821-5129.
Normally a check will be mailed to the name and address in which the account
is registered (or otherwise according to your instruction) within three
business days after receipt of your redemption request. Your account balance
must be sufficient to cover the amount being redeemed or your redemption
order will not be processed. Redemption requests for shares initially
purchased by check will not be honored for up to 15 days, unless we are
assured that the check has cleared earlier.
To determine if a CDSC applies to a redemption, see "Class A Share CDSC,"
"Class B Share CDSC" or "Class C Share CDSC."
ELIGIBLE GUARANTOR is any broker or bank that is a member of the Medallion
Stamp Program. Most major securities firms and banks are members of this
program. A NOTARY PUBLIC IS NOT AN ELIGIBLE GUARANTOR.
DISTRIBUTIONS AND TAXES
Each fund pays its shareholders dividends from its net investment income,
and distributes net capital gains that it has realized. Dividends from net
investment income are expected to be paid to shareholders of Large-Cap Fund
semi-annually and Small-Cap Value Fund annually. If a capital gains
distribution is declared, it is expected to be paid annually. Your
distributions will be reinvested in your fund unless you instruct the fund
to pay them to you in cash. There are no sales charges on reinvestments.
The tax status of any distribution is the same for all shareholders
regardless of how long they have been in the fund or whether distributions
are reinvested or paid in cash. In general, distributions are taxable as
follows:
<TABLE>
<CAPTION>
===============================================================================
Federal Taxability Of Distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket and above
- -------------------------------------------------------------------------------
<S> <C> <C>
INCOME Ordinary Income Ordinary Income
DIVIDENDS Rate Rate
- -------------------------------------------------------------------------------
SHORT-TERM Ordinary Income Ordinary Income
CAPITAL GAINS Rate Rate
- -------------------------------------------------------------------------------
LONG-TERM
CAPITAL GAINS 10% 20%
- -------------------------------------------------------------------------------
</TABLE>
Except in tax-advantaged accounts, any sale or exchange of fund shares may
be a taxable event.
ANNUAL INFORMATION - Information concerning the tax treatment of dividends
and other distributions will be mailed to shareholders each year. Each fund
will also provide annually to its shareholders information regarding the
source of dividends and distribu-
<TABLE>
<S> <C>
TAXES ON TRANSACTIONS. The chart at left also can provide a "rule of thumb"
guide for your potential U.S. federal income tax liability when selling or
exchanging fund shares. The second row, "Short-term capital gains," applies
to fund shares sold within 12 months of purchase. The third row, "Long-term
capital gains," applies to shares held for more than 12 months.
Starting January 1, 2001, sales of securities held for more than five years
will be taxed at special lower rates.
</TABLE>
Your Investment 9
<PAGE>
tions of capital gains by that fund. Because everyone's tax situation is
unique, you should consult your tax adviser regarding the treatment of those
distributions under the federal, state and local tax rules that apply to you
as well as the tax consequences of gains or losses from the redemption or
exchange of your shares.
SERVICES FOR FUND INVESTORS
AUTOMATIC SERVICES
Buying or selling shares automatically is easy with the services described
below. With each service, you select a schedule and amount, subject to
certain restrictions. You can set up most of these services when filling out
your application or by calling 800-821-5129.
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
For investing
INVEST-A-MATIC You can make fixed, periodic investments ($50 minimum)
(Dollar-cost into your fund account by means of automatic
averaging) money transfers from your bank checking account.
See the attached application for instructions.
DIV-MOVE You can automatically reinvest the dividends and
distributions from your account into another account in
any Eligible Fund ($50 minimum).
For selling shares
SYSTEMATIC You can make regular withdrawals from most Lord Abbett
WITHDRAWAL funds. Automatic cash withdrawals can be paid to you
PLAN ("SWP") from your account in fixed or variable amounts. To
establish a plan, the value of your shares must be at
least $10,000, except for Retirement Plans for which there
is no minimum. Your shares must be in non-certificate
form.
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.
CLASS B AND Redemption proceeds due to a SWP for class B and class C
C SHARES shares will be redeemed in the order described under
"CDSC" under "Purchases."
- -------------------------------------------------------------------------------
</TABLE>
OTHER SERVICES
TELEPHONE INVESTING. After we have received the attached application
(selecting "yes" under Section 7C and completing Section 7), you can
instruct us 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 when it receives the money from your bank.
TELEPHONE EXCHANGES. You or your investment professional, with proper
identification, can instruct your fund by telephone to exchange shares of
any class for shares of the same class of any Eligible Fund by calling
800-821-5129. The fund must receive instructions for the exchange before the
close of the NYSE on the day of your call. If you meet this requirement, you
will get the NAV per share of the Eligible Fund determined on that day.
Exchanges will be treated as a sale for federal tax purposes. Be sure to
read the current prospectus for any fund into which you are exchanging.
REINVESTMENT PRIVILEGE. If you sell shares of the fund, you have a 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.
Lord Abbett offers a variety of Retirement Plans. Call 800-253-7299 for
information about:
Traditional, Rollover, Roth and Education IRAs
Simple IRAs, SEP-IRAs, 401(k) and 403(b) accounts
Defined Contribution Plans
TELEPHONE TRANSACTIONS. You have this privilege unless you refuse it in
writing. For your security, telephone transaction requests are recorded. We
will take measures to verify the identity of the caller, such as asking for
your name, account number, social security or taxpayer identification number
and other relevant information. The funds will not be liable for following
instructions communicated by telephone that they reasonably believe to be
genuine.
Transactions by telephone may be difficult to implement in times of drastic
economic or market change.
Exchanges by telephone should not be used to take advantage of short-term
swings in the market. The funds reserve the right to limit or terminate this
privilege for any shareholder making frequent exchanges or abusing the
privilege and may revoke the privilege for all shareholders upon 60 days'
written notice.
10 Your Investment
<PAGE>
ACCOUNT STATEMENTS. Every Lord Abbett investor automatically receives
quarterly account statements.
HOUSEHOLDING. Shareholders with the same last name and address will receive
a single copy of a prospectus and an annual or semi-annual report, unless
additional reports are specifically requested in writing to the fund.
ACCOUNT CHANGES. For any changes you need to make to your account, consult
your investment professional or call the fund at 800-821-5129.
SYSTEMATIC EXCHANGE. You or your investment professional can establish a
schedule of exchanges between the same classes of any Eligible Fund.
SALES CHARGES AND SERVICE FEES
SALES AND SERVICE COMPENSATION. As part of its plan for distributing shares,
each fund and Lord Abbett Distributor pay sales and service compensation to
Authorized Institutions that sell the fund's shares and service its
shareholder accounts.
Sales compensation originates from two sources: sales charges and 12b-1
distribution fees that are paid out of each fund's assets. Service
compensation originates from 12b-1 service fees. The 12b-1 fee rates vary by
share class, according to the Rule 12b-1 plan adopted by each fund. The
sales charges and 12b-1 fees paid by investors are shown in the
class-by-class information under "Expenses" and "Purchases." The portion of
these expenses that is paid as sales and service compensation to Authorized
Institutions, such as your dealer, is shown in the chart at the end of this
prospectus. The portion of such sales and service compensation paid to Lord
Abbett Distributor is discussed under "Sales Activities" and "Service
Activities." Sometimes we do not pay sales and service compensation where
tracking data is not available for certain accounts or where the Authorized
Institution waives part of the compensation.
We may pay Additional Concessions to Authorized Institutions from time to
time.
SALES ACTIVITIES. We may use 12b-1 distribution fees 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 a 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 those other than exist ing shareholders,
preparation and distribution of advertising and sales material, 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.
SERVICE ACTIVITIES. We may pay Rule 12b-1 service fees to Authorized
Institutions for any activity which is primarily intended to result in
personal service and/or the maintenance of shareholder accounts. Any portion
of the service fees paid to Lord Abbett Distributor will be used to service
and maintain shareholder accounts.
12b-1 FEES ARE PAYABLE REGARDLESS OF EXPENSES. The amounts payable by a fund
need not be directly related to expenses. If Lord Abbett Distributor's
actual expenses exceed the fee payable to it, a fund will not have to pay
more than that fee. If Lord Abbett Distributor's expenses are less than the
fee it receives, Lord Abbett Distributor will keep the full amount of the
fee.
Your Investment 11
<PAGE>
MANAGEMENT
The funds' investment adviser is Lord, Abbett & Co., 767 Fifth Avenue, New
York, NY 10153-0203. Founded in 1929, Lord Abbett manages one of the
nation's oldest mutual fund complexes, with approximately $28 billion in
more than 35 mutual fund portfolios and other advisory accounts. For more
information about the services Lord Abbett provides to the funds, see the
Statement of Additional Information.
Each fund pays Lord Abbett a monthly fee based on average daily net assets
for each month. For the fiscal year ended November 30, 1998, the fee paid to
Lord Abbett was at an annual rate of 0.75 of 1% for both Large-Cap Fund and
Small-Cap Value Fund.
Lord Abbett uses a team of portfolio managers and analysts acting together
to manage each fund's investments.
LARGE-CAP FUND. Eli M. Salzman heads the fund's team, the other senior
members of which are W. Thomas Hudson, Jr., Partner of Lord Abbett, and
Robert B. Morris, Partner of Lord Abbett. Mr. Salzman joined Lord Abbett in
1997; before that he was a Vice President with Mutual of America Capital
Corp. from 1996 to 1997, and a Vice President at Mitchell Hutchins Asset
Management, Inc. from 1986 to 1996. Mr. Hudson and Mr. Morris have both been
with Lord Abbett for more than five years.
SMALL-CAP VALUE FUND. Robert P. Fetch, Partner of Lord Abbett, heads the
fund's team, the other senior member of which is Gregory M. Macosko. Mr.
Fetch joined Lord Abbett in 1995; before that, he was was a Managing
Director of Prudential Investment Advisors from 1983 to 1995. Mr. Macosko
joined Lord Abbett in 1996; before that he was an Equity Analyst with Quest
Advisory Service from 1991 to 1996.
12 Your Investment
<PAGE>
FOR MORE INFORMATION
OTHER INVESTMENT TECHNIQUES
This section describes some of the investment techniques that might be used
by the funds, and their risks.
ADJUSTING INVESTMENT EXPOSURE. Each fund may, but is not required to, use
various strategies to change its investment exposure to adjust to changing
security prices, interest rates, currency exchange rates, commodity prices
and other factors. Each fund may use these transactions to change the risk
and return characteristics of each fund's portfolio. If we judge market
conditions incorrectly or use a strategy that does not correlate well with a
fund's investments, it could result in a loss, even if we intended to lessen
risk or enhance returns. These transactions may involve a small investment of
cash compared to the magnitude of the risk assumed and could produce
disproportionate gains or losses. Also, these strategies could result in
losses if the counterparty to a transaction does not perform as promised.
BORROWING. Each fund may borrow from banks. If a fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is paid
off. Each fund may borrow only for temporary or emergency purposes, and not
in an amount exceeding 33 1/3% of its total assets.
CLOSED-END INVESTMENT COMPANIES. Each fund may invest in shares of closed-end
investment companies if it pays a fee or commission no greater than the
customary broker's commission. Shares of investment companies sometimes trade
at a discount or premium to their net asset value. Also, there may be
duplication of fees if a fund and the closed-end investment company both
charge a management fee. No more than 5% of each fund's gross assets may be
invested in Closed-End Investment Companies.
DEBT SECURITIES. The Small-Cap Value Fund may invest in bonds or other debt
securities. However, not more than 5% of its assets will be invested in high
yield debt securities. High-yield debt securities or "junk bonds" are rated
BB/Ba or lower and typically pay a higher yield than investment grade debt
securities. These bonds have a higher risk of default than investment grade
bonds, and their prices can be much more volatile.
DIVERSIFICATION. Each fund is a diversified fund, which means that with
respect to 75% of its total assets, it will not purchase a security if, as a
result, more than 5% of the fund's total assets would be invested in
securities of a single issuer or the fund would hold more than 10% of the
outstanding voting securities of the issuer. U.S. government securities are
not subject to these requirements.
FINANCIAL FUTURES TRANSACTIONS. The Large-Cap Fund may enter into financial
futures transactions. A financial futures transaction is the purchase or sale
of an exchange-traded contract to buy or sell a standard quality and quantity
of a financial instrument or index at a specific future date and price. The
price behavior of the futures contract may not correlate with that of the
item being hedged. 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 its
total assets.
FOREIGN CURRENCY HEDGING TECHNIQUES. The Small-Cap Value Fund may use Foreign
Currency Hedging Techniques. Although it does not normally engage in
extensive currency hedging, it may use forward foreign currency contracts and
options thereon to hedge the risk to the portfolio if it expects that foreign
exchange price movements will
For More Information 13
<PAGE>
be unfavorable for U.S. investors. Generally, these instruments allow a fund
to lock in a specified exchange rate for a period of time. If the fund's
forecast proves to be wrong, such a hedge may cause a loss. Also, it may be
difficult or impractical to hedge currency risk in many emerging countries.
Under some circumstances, a fund may commit a substantial portion of its
portfolio to the completion of forward contracts. Although such contracts
will be used primarily to protect the fund from adverse currency movements,
their use involves the risk that Lord Abbett will not accurately predict
currency movement, and the fund's return could be reduced.
Certain of the fund's investments may be denominated in foreign
currency. The fund uses currency transactions in an attempt to eliminate
currency risk associated with foreign investments.
The Small-Cap Value Fund may also purchase foreign currency put and call
options, subject to certain limitations.
There is the possibility that the foreign currency hedging techniques will
not work as anticipated.
FOREIGN SECURITIES. The Large-Cap Fund may invest up to 10% and the Small-Cap
Value Fund may invest up to 35% of total assets in foreign securities. These
securities are not subject to the same degree of regulation and may be more
volatile and less liquid than securities traded in major U.S. markets.
Foreign portfolio securities may trade on days when a fund does not value
them. Fund share prices could be affected on days an investor cannot purchase
or sell shares. Other risks include less information on public companies,
banks, and governments; political and social instability; expropriations;
higher transaction costs; currency fluctuations; non-deductible withholding
taxes and different accounting and settlement practices.
ILLIQUID SECURITIES. Each fund may invest in illiquid securities. These
securities include those that are not traded on the open market or that trade
irregularly or in very low volume. They may be difficult or impossible to
sell at the time and price the fund would like. Each fund may invest up to
15% of its assets in illiquid securities.
OPTIONS TRANSACTIONS. The Small-Cap Value Fund and Large-Cap Fund may only
sell (write) covered call options. This means that the funds may only sell
the call options on securities which the funds own. The Small-Cap Value Fund
may purchase and write put and call options on equity securities or stock
indices that are traded on national securities exchanges. A put option on
securities gives the buyer, in return for a premium, the right, for a
specified period of time, to sell the securities subject to the option to the
writer (seller) 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. The writer of a put option might be obligated to purchase underlying
securities for more than their current market value.
A call option on securities gives the buyer, in return for a premium paid,
the right for a specified period of time to buy the securities subject to the
option at a specified price (the "exercise price" or "strike price"). The
writer of a call option, in return for the premium, has the obligation, upon
exercise of the option, to deliver, depending upon the terms of the option
contract, the underlying securities to the buyer upon receipt of the exercise
price.
When a fund writes a call option, it gives up the potential for gain on the
underlying securities in excess of the exercise price of the option during
the period that the option is open.
Options on stock indices are similar to options on equity securities except
that, rather than the right to take or make delivery of stock at a specified
price, an option on a stock
14 For More Information
<PAGE>
index gives the holder the right, in return for a premium paid, to receive,
upon exercise of the option, an amount of cash if the closing level of the
stock index upon which the option is based is greater than, in the case of a
call, or less than, in the case of a put, the exercise price of the option.
The writer of an index option, in return for a premium, is obligated to pay
the amount of cash due upon exercise of the option.
The Small-Cap Value Fund may write only covered put options to the extent
that cover for such options does not exceed 25% of the fund's net 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.
PORTFOLIO SECURITIES LENDING. Each fund may lend securities to broker-dealers
and financial institutions, as a means of earning income. This practice could
result in a loss or delay in recovering a fund's securities, if the borrower
defaults. Each fund will limit its securities loans to 5% of its total assets
and all loans will be fully collateralized.
REPURCHASE AGREEMENTS. The Small-Cap Value Fund may enter into repurchase
agreements. In a repurchase agreement, a fund buys a security at one price
from a broker-dealer or financial institution and simultaneously agrees to
sell the same security back to the same party at a higher price in the
future. If the other party to the agreement defaults or becomes insolvent, a
fund could lose money.
RIGHTS AND WARRANTS. Each fund may invest up to 5% of its assets in rights
and warrants to purchase securities. Rights represent a privilege offered to
holders of record of issued securities (usually on a pro-rata basis) for
additional securities of the same class, or of a different class, or of a
different issuer, as the case may be. Warrants represent the privilege to
purchase securities at a stipulated price and are usually valid for several
years. Rights and warrants generally do not entitle a holder to dividends or
voting rights with respect to the underlying securities, nor do they
represent any rights in the assets of the issuing company.
The value of a right or warrant may not necessarily change with the value of
the underlying securities and rights and warrants cease to have value after
their expiration date.
RULE 144A SECURITIES. Both funds may invest in Rule 144A securities, which
are securities determined by the Board 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. A substantial part of the lower-rated
debt market consists of Rule 144A securities, many of which are registered
within a few months of their purchases. Investments in Rule 144A securities
initially determined to be liquid could have the effect of diminishing the
level of a fund's liquidity during periods of decreased market interest in
such securities.
STOCK INDEX FUTURES. The Small-Cap Value Fund may invest in stock index
futures. A stock index futures contract is an agreement in which one party
agrees to deliver to another an amount of cash equal to a specific dollar
amount times the difference between a specific stock index at the close of
the last trading day of the contract and the price at which the agreement is
made. No physical delivery of the underlying stocks in the index is made.
Participation in the options or futures markets involves investment risks and
transaction costs to which the Small-Cap Value Fund would not be subject
absent the use of these strategies. If the Small-Cap Value 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 and stock index futures include: (1) dependence on management's
ability to
For More Information 15
<PAGE>
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 index futures 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 particular instrument at any time; (5) the possible need to
defer closing out certain hedged positions to avoid adverse tax consequences;
and (6) daily limits on price variance for a futures contract or related
options imposed by certain futures exchanges and boards of trade may restrict
transactions in such securities on a particular day.
The Small-Cap Value Fund may not purchase or sell stock index futures if,
immediately after a purchase or sale, more than one-third of its net assets
would be hedged. In addition, except in the case of a call written and held
on the same index, the Small-Cap Value Fund will write call options on
indices or sell stock index futures only if the amount resulting from the
multiplication of the then current level of the index (or indices) upon which
the options or futures contract(s) is based, the applicable multiplier(s),
and the number of futures or options contracts which would be outstanding
would not exceed one-third of the value of the Small-Cap Value Fund's net
assets.
The Small-Cap Value Fund's ability to enter into stock index futures and
listed options is limited by certain tax requirements in order to qualify as
a regulated investment company.
SHORT SALES. The Small-Cap Value Fund may make short sales of securities or
maintain a short position, provided that at all times when a short position
is open the fund owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further
consideration, for an equal amount of the securities of the same issuer as
the securities sold short. The Small-Cap Value Fund does not intend to have
more than 5% of its net assets (determined at the time of the short sale)
subject to short sales against the box.
WHEN-ISSUED OR DELAYED DELIVERY SECURITIES. The Small-Cap Value Fund may
purchase or sell securities with payment and delivery taking place as much as
a month or more later. The fund would do this in an effort to buy or sell the
securities at an advantageous price and yield. The securities involved 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, their market value may be less than the purchase price. Also, if
the fund commits a significant amount of assets to when-issued or delayed
delivery transactions, it may increase the volatility of its net asset value.
GLOSSARY OF SHADED 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 a 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.
16 For More Information
<PAGE>
In selecting dealers to execute portfolio transactions for a 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. An Eligible Fund is any Lord Abbett-sponsored fund except for:
(1) certain tax-free, single-state funds where the exchanging shareholder is
a resident of a state in which such fund is not offered for sale; (2) Lord
Abbett Equity Fund; (3) Lord Abbett Series Fund; and (4) 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). An Eligible Fund also is any Authorized Institution's
affiliated money market fund satisfying Lord Abbett Distributor as to certain
omnibus account and other criteria.
ELIGIBLE MANDATORY DISTRIBUTIONS. If class B shares represent a part of an
individual's total IRA or 403(b) investment, the CDSC will be waived only for
that part of a mandatory distribution which bears the same relation to the
entire mandatory distribution as the class B share investment bears to the
total investment.
LEGAL CAPACITY. This term refers to the authority of an individual to act on
behalf of an entity or other person(s). For example, if a redemption request
were to be made 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. That signature using that capacity must be guaranteed
by an Eligible Guarantor.
To give another example, if a redemption request were to be made on behalf of
the ABC Corporation by a person (Mary B. Doe) who has the legal capacity to
act on the behalf of the Corporation, because she is the president of the
Corporation, the request must be executed as follows: ABC Corporation by Mary
B. Doe, President. That signature using that capacity must be guaranteed by
an Eligible Guarantor (see example in right column).
MUTUAL FUND ADVISORY PROGRAM. This includes certain unaffiliated authorized
brokers, dealers, registered investment advisers or other financial
institutions who either (a) have an arrangement with Lord Abbett Distributor
in accordance with certain standards approved by Lord Abbett Distributor,
providing specifically for the use of fund 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, or
(b) charge an advisory consulting or other fee for their services and buy
shares for their own accounts or the accounts of their clients.
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.
<TABLE>
<S> <C>
GUARANTEED SIGNATURE. An acceptable form of guarantee would be as follows:
In the case of the estate -
Robert A. Doe
Executor of the Estate of
John W. Doe
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE]
----------------------------------
(960) X9003470
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
In the case of the corporation -
ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE]
----------------------------------
AUTHORIZED SIGNATURE
(960) X9003470
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
</TABLE>
For More Information 17
<PAGE>
SPECIAL RETIREMENT WRAP PROGRAM. This is 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 Advisory 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
participant-directed Retirement Plans.
RECENT PERFORMANCE
LARGE-CAP FUND. The fund's strong absolute returns for the fiscal year ended
November 30, 1998 were due, in part, to our decision to maintain an
overweighting of financial company holdings. After a weak start, these
holdings benefited from attractive valuations relative to their expected
earnings and from ongoing industry consolidations.
Favorable earnings developments and merger activity among pharmaceutical and
health care holdings also enhanced the portfolio's performance, as did our
particular stock selections in the energy sector. Interim price weakness
among technology companies created the opportunity to add technology stocks
to the portfolio, as we anticipated that this industry would continue to
perform well into 1998. The announcement of the Exxon-Mobil merger had a
positive impact on the fund's performance, although, overall, companies in
the electric utilities and energy sectors did not perform well during the
period.
We believe that the anticipated environment of continued low inflation,
modest economic growth and benign interest rates, combined with S&P 500'r'
Index's flat projected earnings growth in 1999, will favor the fund's
research-driven value investment strategy in the years ahead.
SMALL-CAP VALUE FUND. In a year of challenge for small-cap stocks, our
management team focused on various industry sectors. For example, our
overweighting of companies in the technology and consumer non-cyclical
industries, such as apparel and general retailers, which moved ahead of the
broad market early in the year and then again during the fourth quarter,
added significant value to the portfolio. On the other hand, we reduced our
exposure to industrial companies late in the year when they continued to
struggle despite improved market conditions.
We believe the stage is set for a small-cap rebound now that these companies
are selling at historically low prices relative to larger companies and that
our value approach will enable us to continue to provide attractive long-term
returns relative to our peers.
YEAR 2000 ISSUES. Each fund could be adversely affected if the computers used by
each fund and their service providers do not properly process and calculate
date-related information from and after January 1, 2000.
Lord Abbett is working to avoid such problems and has received assurances from
each fund's service providers that they are taking similar steps. Of course, the
Year 2000 problem is unprecedented and, therefore, Lord Abbett cannot eliminate
altogether the possibility that it or the fund will be affected.
18 For More Information
<PAGE>
Large-Cap Series
FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods indicated.
"Total return" shows how much your investment in the fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These Financial Highlights have been audited by
Deloitte & Touche LLP, the fund's independent auditors, in conjunction with
their annual audit of the fund's financial statements. Financial statements
for the fiscal year ended November 30, 1998 and the Independent Auditors'
Report thereon appear in the Annual Report to Shareholders for the fiscal
year ended November 30, 1998 and are incorporated by reference into the
Statement of Additional Information, which is available upon request. Certain
information reflects financial results for a single fund share.
<TABLE>
<CAPTION>
====================================================================================================
CLASS A SHARES
-----------------------------------------------------------
Year Ended November 30,
Per Share Operating Performance: 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $20.08 $17.86 $15.54 $12.79 $12.33
- ----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------
Net investment income 0.15(a) .08(a) .270 .42 .34
- ----------------------------------------------------------------------------------------------------
Net realized and unrealized
- ----------------------------------------------------------------------------------------------------
gain on investments 2.45 3.21 3.505 3.44 .65
- ----------------------------------------------------------------------------------------------------
Total from investment operations 2.60 3.29 3.775 3.86 .99
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------------
Dividends from net investment income (.06) (.12) (.57) (.29) (.20)
- ----------------------------------------------------------------------------------------------------
Distributions from net realized gain (.71) (.95) (.885) (.82) (.33)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $21.91 $20.08 $17.86 $15.54 $12.79
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN(b) 13.45% 19.87% 26.25% 32.82% 8.21%
- ----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ----------------------------------------------------------------------------------------------------
Expenses, including waiver and reimbursements 1.24% 1.52% 0.36% 0.00% 0.00%
- ----------------------------------------------------------------------------------------------------
Expenses, excluding waiver and reimbursements 1.24% 1.52% 0.96% 1.02% 1.15%
- ----------------------------------------------------------------------------------------------------
Net investment income 0.74% 0.42% 2.24% 3.27% 2.65%
- ----------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B SHARES CLASS C SHARES
------------------------- -------------------------
Period Ended November 30, Period Ended November 30,
Per Share Operating Performance: 1998 1997 1996(c) 1998 1997(c)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $20.00 $17.83 $15.24 $20.01 $16.90
- ------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------
Net investment income (loss) --(a)(e) (.06)(a) .12 (.01)(a) (0.07)(a)
- -------------------------------------------------------------------------------------------------------
Net realized and unrealized
- -------------------------------------------------------------------------------------------------------
gain on investments 2.42 3.20 2.66 2.44 3.18
- -------------------------------------------------------------------------------------------------------
Total from investment operations 2.42 3.14 2.78 2.43 3.11
- -------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
- -------------------------------------------------------------------------------------------------------
Dividends from net investment income -- (.02) (.19) -- --
- -------------------------------------------------------------------------------------------------------
Distributions from net realized gain (.71) (.95) -- (0.71) --
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $21.71 $20.00 $17.83 $21.73 $20.01
- -------------------------------------------------------------------------------------------------------
TOTAL RETURN(b) 12.56% 18.92% 18.39%(d) 12.61% 18.40%(d)
- -------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- -------------------------------------------------------------------------------------------------------
Expenses 2.00% 2.28% 0.59%(d) 2.00% 1.54%(d)
- -------------------------------------------------------------------------------------------------------
Net investment income (loss) (.01)% (0.34)% 0.22%(d) (.04)% (0.37)%(d)
- -------------------------------------------------------------------------------------------------------
Year Ended November 30,
--------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES: 1998 1997 1996 1995 1994
NET ASSETS, END OF YEAR (000) $143,153 $69,796 $23,592 $7,549 $5,558
- -------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 99.14% 30.81% 62.25% 37.17% 43.85%
- -------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads and assumes
reinvestment of all distributions.
(c) Commencement of operations: August 1, 1996 (class B); and April 1, 1997
(class C).
(d) Not annualized.
(e) Amount less than $.01.
See Notes to Financial Statements.
Financial Information 19
<PAGE>
Large-Cap Series
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in class A shares
to the same investment in the S&P 500'r' Index, assuming reinvestment of all
dividends and distributions.
[GRAPH]
<TABLE>
<CAPTION>
=================================================================
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending November 30, 1998
1 YEAR 5 YEARS LIFE
- -----------------------------------------------------------------
<S> <C> <C> <C>
Class A(1) 6.90% 18.39% 17.85%
- -----------------------------------------------------------------
Class B(4) 6.94% - 20.24%
- -----------------------------------------------------------------
Class C(5) 11.48% - 18.84%
- -----------------------------------------------------------------
</TABLE>
- -----------------------------------------------------------------
(1) This reflects the deduction of the maximum initial sales charge of 5.75%
(2) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 5.75% applicable to class A
shares, with all dividends and distributions reinvested for the periods
shown ending November 30, 1998, using the SEC-required uniform method to
compute such return.
(3) Performance for the unmanaged S&P 500'r' Index does not reflect transaction
costs, management fees or sales charges. Performance for this index begins
on 6/30/92.
(4) The class B shares were first offered on 8/1/96. Performance reflects the
deduction of a CDSC of 5% (for 1 year) and 3% (life of class).
(5) The class C shares were first offered on 4/1/97. Performance reflects the
deduction of a CDSC of 1% (for 1 year) and 0% (life of class).
20 Financial Information
<PAGE>
Small-Cap Value Series
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the fund's independent auditors, in
conjunction with their annual audit of the fund's financial statements.
Financial statements for the fiscal year ended November 30, 1998 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended November 30, 1998 and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single fund share.
<TABLE>
<CAPTION>
=======================================================================================================================
Class A Shares Class B Shares
------------------------------------------------------------------------------
Period Ended November 30, Period Ended November 30,
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance: 1998 1997 1996(a) 1998 1997 1996(b)
Net asset value, beginning of period $16.56 $12.01 $10.00 $16.44 $12.00 $11.67
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.06)(c) .02(c) .127 (.17)(c) (.09)(c) .001
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- --------------------------------------------------------------------------------------------------------------------------
gain (loss) on investments (1.85) 4.53 2.658 (1.82) 4.53 .329
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations (1.91) 4.55 2.785 (1.99) 4.44 .33
- --------------------------------------------------------------------------------------------------------------------------
Distributions
- --------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income -- -- (.075) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (.29) -- (.700) (.25) -- --
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.36 $16.56 $12.01 $14.20 $16.44 $12.00
- --------------------------------------------------------------------------------------------------------------------------
Total Return(d) (11.71)% 37.89% 28.24%(e) (12.27)% 37.00% 2.84%(e)
- --------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- --------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver and reimbursements 1.28% 1.17% 0.01%(e) 2.00% 1.86% 0.04%(e)
- --------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver and reimbursements 1.28% 1.17% 1.00%(e) 2.00% 1.86% 0.07%(e)
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.37)% 0.10% 1.02%(e) (1.09)% (0.56)% 0.01%(e)
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
===========================================================================================================================
Class C Shares
-----------------------------------------------
Period Ended November 30,
<S> <C> <C>
Per Share Operating Performance: 1998 1997(b)
Net asset value, beginning of period $16.44 $12.81
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment loss (.17)(c) (0.05)(c)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ---------------------------------------------------------------------------------------------------------------------------
gain (loss) on investments (1.82) 3.68
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations (1.99) 3.63
- ---------------------------------------------------------------------------------------------------------------------------
Distributions
- ---------------------------------------------------------------------------------------------------------------------------
Dividends from net realized gain (.25) --
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.20 $16.44
- ---------------------------------------------------------------------------------------------------------------------------
Total Return(d) (12.27)% 28.34%(e)
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ---------------------------------------------------------------------------------------------------------------------------
Expenses 2.00% 1.25%(e)
- ---------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.09)% (0.30)%(e)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
===========================================================================================================================
Period Ended November 30,
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental Data For All Classes: 1998 1997 1996(a)
Net Assets, end of period (000) $515,379 $435,776 $8,772
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 67.86% 45.24% 110.09%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) From commencement of operations: December 13, 1995 (class A).
(b) Commencement of offering respective class shares: November 15, 1996 (class
B), April 1, 1997 (class C).
(c) Calculated using average shares outstanding during the period.
(d) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(e) Not annualized.
Financial Information 21
<PAGE>
Small-Cap Value Series
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in class A shares
to the same investment in Russell 2000'r' Index, assuming reinvestment of
all dividends and distributions.
[GRAPH]
<TABLE>
<CAPTION>
===============================================================================
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending November 30, 1998
1 Year Life
- -------------------------------------------------------------------------------
<S> <C> <C>
Class A(1) (16.80)% 13.89%
- -------------------------------------------------------------------------------
Class B(4) (16.66)% 9.28%
- -------------------------------------------------------------------------------
Class C(5) (13.15)% 7.37%
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) This reflects the deduction of the maximum initial sales charge of 5.75%
(2) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 5.75% applicable to class A
shares, with all dividends and distributions reinvested for the periods
shown ending November 30, 1998, using the SEC-required uniform method to
compute such return.
(3) Performance for the unmanaged Russell 2000'r' Index does not reflect
transaction costs, management fees or sales charges. Performance of this
index begins on 12/31/95.
(4) The class B shares were first offered on 11/15/96. Performance reflects the
deduction of a CDSC of 5% (for 1 year) and 3% (life of the class).
(5) The class C shares were first offered on 4/1/97. Performance reflects the
deduction of a CDSC of 1% (for 1 year) and 0% (life of class).
22 Financial Information
<PAGE>
COMPENSATION FOR YOUR DEALER
<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(3)
- -------------------------------------------------------------------------------------------------------------------------------
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%
- -------------------------------------------------------------------------------------------------------------------------------
Class P investments Percentage of average net assets
- -------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.25% 0.20% 0.45%
===============================================================================================================================
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%
- -------------------------------------------------------------------------------------------------------------------------------
Class P investments
- -------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.25% 0.20% 0.45%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The service fee for class A and P shares is paid quarterly. The first year's
service fee on class B and C shares is paid at the time of sale.
(2) Dealer's 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, such as your dealer, 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, C and P shares, 0.25%, 1.00% and 0.45%,
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, such as your dealer. These fees are paid quarterly in arrears.
Financial Information 23
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
More information on these funds is available free upon request, including:
ANNUAL/SEMI-ANNUAL REPORT
Describes the funds, lists portfolio holdings and contains a letter from the
funds' manager discussing recent market conditions and the funds' investment
strategies.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Provides more details about the funds and their policies. A current SAI is
on file with the Securities and Exchange Commission ("SEC") and is
incorporated by reference (is legally considered part of this prospectus).
Lord Abbett Research Fund
Large-Cap Series
Small-Cap Value Series
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
----------------------------
SEC file number: 811-6650
To obtain information:
By telephone. Call the funds at: 800-426-1130
By mail. Write to the funds at:
The Lord Abbett Family of Funds
767 Fifth Avenue
New York, NY 10153-0203
Via the Internet.
Lord, Abbett & Co.
http://www.lordabbett.com
Text only versions of fund documents can be viewed online or downloaded
from:
SEC
http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
LARF-1-499
(4/99)
STATEMENT OF DIFFERENCES
The registered trademark symbol shall be expressed as.......................'r'
The service mark symbol shall be expressed as..............................'sm'
<PAGE>
Lord Abbett
Growth Opportunities Fund
PROSPECTUS
April 1, 1999
[LOGO OF LORD, ABBETT & CO.]
As with all mutual funds, the Securities and Exchange Commission does not
guarantee that the information in this prospectus is accurate or complete, and
it has not judged these funds for investment merit. It is a criminal offense to
state otherwise.
Class P shares of the fund are neither offered to the general public nor
available in all states. Please call 800-821-5129 for further information.
PAGE>
Table of Contents
<TABLE>
<S> <C>
The Fund Page
What you should know Goal/Approach 2
about the fund Main Risks 2
Past Performance 3
Fees and Expenses 3
Your Investment
Information for managing Purchases
your fund account Opening Your Account 4
Redemptions 7
Distributions and Taxes 7
Services For Fund Investors 8
Sales Charges and Service Fees 9
Management 10
For More Information
How to learn more Other Investment Techniques 11
about the fund Glossary of Shaded Terms 14
Recent Performance 15
Financial Information
Financial Highlights 16
Compensation For Your Dealer 18
How to learn more about Back Cover
the fund and other Lord
Abbett funds
</TABLE>
<PAGE>
The Fund
GOAL/APPROACH
The fund's investment objective is capital appreciation. Normally, we
invest primarily in common stocks of mid-sized companies with outstanding
equity securities having an aggregate market value between $1 billion and
$6 billion. The fund uses a growth style of investing which means that we
favor companies that show the potential for stronger than expected earnings
or 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. The fund may invest up to 35% of its assets in foreign
securities.
Typically, in choosing stocks, we look for companies using the following
process:
QUANTITATIVE RESEARCH is performed on a universe of middle-sized
companies to identify those with superior growth possibilities.
FUNDAMENTAL RESEARCH is performed to identify companies likely to produce
superior returns over a thirty-six month time frame, identified by
analyzing the dynamics in each company within its industry and within the
economy.
Before July 15, 1998, the fund used a value style of investing. This meant
that companies were selected without regard to current earnings, under a
process that sought to identify and invest in undervalued securities.
We may take a temporary defensive position by investing some of our assets
in short-term debt securities. This could reduce the benefit from any
upswing in the market and present the fund from achieving its investment
objective.
Main risks
The value of your investment will fluctuate in response to stock market
movements. In addition, growth stocks tend to be more volatile than
slower-growing value stocks. This means that the fund could be more
volatile than the stock market as a whole.
The foreign securities in which the fund may invest are subject to currency
fluctuations. Foreign securities markets may not be subject to the same
degree of regulation as the U.S. markets and may be more volatile and less
liquid than the U.S. markets. Investors should also be aware that the fund
has the ability to invest in derivatives, the value of which may fluctuate
greatly.
An investment in the fund is not a bank deposit. It is not FDIC-insured or
government endorsed. It is not a complete investment program. You could
lose money in the fund, but you also have the potential to make money.
WE OR THE FUND refers to Growth Opportunities Fund, a portfolio of Lord
Abbett Research Fund, Inc. (the"company"). The fund operates under the
supervision of the company's Board with the advice of Lord, Abbett & Co.
("Lord Abbett"), its investment manager.
ABOUT THE FUND. The fund is a professionally managed portfolio of
securities purchased with the pooled money of investors. It strives to
reach its stated goal although, as with all mutual funds, cannot guarantee
results.
GROWTH STOCKS exhibit faster-than-average gains in earnings and are
expected to continue profit growth at a high-level. They tend to be more
volatile than slower-growing value stocks.
You should read this entire prospectus, including "Other Investment
Techniques," which concisely describes the other investment strategies and
their risks used by the fund.
2 The Fund
PAGE>
Growth Opportunities Fund
PAST PERFORMANCE
The information below provides some indication of the risks of investing in
the fund, by showing changes in the fund's class A shares' performance from
calendar year to calendar year and by showing how the fund's average annual
returns compare with those of a broad measure of market performance.
[PERFORMANCE BAR CHART]
The table below shows a comparison of the fund's class A average annual total
return to that of the Russell Mid-Cap Growth Index ("RMCG Index"). Fund returns
assume reinvestment of dividends and distributions and payment of the maximum
applicable front-end or deferred sales charge. All periods end on December 31,
1998.
<TABLE>
<CAPTION>
CLASS 1 YEAR INCEPTION(i) RMCG INDEX(ii)
<S> <C> <C> <C>
A 6.90% 19.50% 18.65%(iii)
- --------------------------------------------------------------------------------
RMCG Index(ii) 17.86% -- --
- --------------------------------------------------------------------------------
</TABLE>
Past performance is not a prediction of future results.
- -------------------------------------------------------
(i) The date of inception for class A is: 8/1/95.
(ii) Performance for the unmanaged RMCG Index does not reflect transaction
costs or management fees.
(iii) Represents total return for the period 8/31/95 - 12/31/98, to correspond
with class A inception date.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the fund.
<TABLE>
<CAPTION>
=======================================================================================================
Fee table
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A CLASS B CLASS C CLASS P
SHAREHOLDER FEES (Fees paid directly from your investment)
- -------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- -------------------------------------------------------------------------------------------------------
(as a % of offering price) 5.75% none none none
- -------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (See "Purchases") none 5.00%(3) 1.00% none
- -------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (Expenses deducted from fund assets) (as a % of average net assets)(1)
- -------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.90% 0.90% 0.90% 0.90%
- -------------------------------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees(2) 0.35% 1.00% 1.00% 0.45%
- -------------------------------------------------------------------------------------------------------
Other Expenses 0.81% 0.81% 0.81% 0.81%
- -------------------------------------------------------------------------------------------------------
Total Operating Expenses 2.06% 2.71% 2.71% 2.16%
- -------------------------------------------------------------------------------------------------------
=======================================================================================================
Expense example
=======================================================================================================
</TABLE>
This example, like that in other funds' prospectuses, assumes a $10,000 initial
investment at maximum sales charge, if any, 5% total return each year and no
changes in expenses. You pay the following expenses over the course of each
period shown if you sell your shares at the end of the period, although your
actual cost may be higher or lower. The expenses include any applicable
contingent deferred sales charges.
<TABLE>
<CAPTION>
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A shares $772 $1,183 $1,619 $2,829
- -------------------------------------------------------------------------------------------
Class B shares $774 $1,141 $1,634 $2,886
- -------------------------------------------------------------------------------------------
Class C shares $374 $841 $1,434 $3,042
- -------------------------------------------------------------------------------------------
Class P shares $219 $676 $1,159 $2,495
- -------------------------------------------------------------------------------------------
</TABLE>
You would pay the following expenses on the same investment, assuming you kept
your shares.
<TABLE>
<S> <C> <C> <C> <C>
Class A shares $772 $1,183 $1,619 $2,829
- -------------------------------------------------------------------------------------------
Class B shares $274 $841 $1,434 $2,886
- -------------------------------------------------------------------------------------------
Class C shares $274 $841 $1,434 $3,042
- -------------------------------------------------------------------------------------------
Class P shares $219 $676 $1,159 $2,495
- -------------------------------------------------------------------------------------------
</TABLE>
This example is for comparison and is not a representation of the fund's actual
expenses or returns, either past or present.
MANAGEMENT FEES are payable to Lord Abbett for the fund's investment
management.
12b-1 FEES refer to fees incurred for activities that are primarily
intended to result in the sale of fund shares and service fees for shareholder
account service and maintenance.
OTHER EXPENSES include fees paid for miscellaneous items such as transfer
agency, legal and share registration fees.
Lord Abbett is currently waiving the management fee and subsidizing the other
expenses of the fund. Lord Abbett may stop waiving the management fee and
subsidizing the other expenses at any time. Total operating expenses with the
fee waiver and expense subsidy are 0.35%, 1.00%, 1.00% and 0.45% for classes A,
B, C and P, respectively.
- --------------------------
(1) The annual fund operating expenses have been restated from fiscal year
amounts to reflect current fees.
(2) Because 12b-1 distribution fees are paid out on an ongoing basis, over time
they will increase the cost of your investment and may cost you more than
paying other types of sales charges.
(3) Class B shares will convert to class A shares on the eighth anniversary of
your original purchase of class B shares.
The Fund 3
<PAGE>
Your Investment
PURCHASES
This prospectus offers four classes of shares: classes A, B ,C, and P (call
800-821-5129 to find out if class P shares are available in your state).
These different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses. Our shares
are continuously offered. The offering price is based on the Net Asset
Value ("NAV") per share next determined after we receive your purchase
order submitted in proper form. A front-end sales charge is added to the
NAV, in the case of the class A shares. There is no front-end sales charge,
although there is a CDSC in the case of the class B and C shares, as
described below.
You should read this section carefully to determine which class of shares
represents the best investment option for your particular situation. 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.
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 or change minimum investment requirements. All purchase orders are
subject to our acceptance and are not binding until confirmed or accepted
in writing.
<TABLE>
<CAPTION>
================================================================================
Front-End Sales Charges - Class A Shares
================================================================================
TO COMPUTE
AS A % OF AS A % OF OFFERINGPRICE
YOUR INVESTMENT OFFERING PRICE YOUR INVESTMENT DIVIDE NAV BY
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
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 and over No Sales Charge 1.0000
- --------------------------------------------------------------------------------
</TABLE>
REDUCING YOUR CLASS A FRONT-END SALES CHARGES. Class A shares may be
purchased at a discount if you qualify under either of the following
conditions:
RIGHTS OF ACCUMULATION -- A Purchaser can apply the value (at public
offering price) of the shares already owned to a new purchase of class A
shares of any Eligible Fund in order to reduce the sales charge.
STATEMENT OF INTENTION -- A Purchaser of class A shares can purchase
additional shares of any Eligible Fund over a 13-month period and receive
the same sales charge as if all shares were purchased at once. Shares
purchased through reinvestment of dividends or distributions are not
included. A statement of intention can be backdated 90 days. Current
holdings under rights of accumulation can be included in a statement of
intention.
For more information on eligibility for these privileges, read the
applicable sections in the attached application.
NAV per share for each class of fund shares is calculated each business day
at the close of regular trading on the New York Stock Exchange ("NYSE").
The fund is open on those business days when the NYSE is open. Purchases
and sales of fund shares are executed at the NAV next determined after the
fund receives your order. In calculating NAV, securities for which market
quotations are available are valued at those quotations. Securities for
which such quotations are not available are valued at fair value under
procedures approved by the Board.
Share classes
CLASS A
normally offered with a front-end sales charge
CLASS B
no front-end sales charge, however, a contingent deferred sales charge
is applied to shares sold prior to the sixth anniversary of purchase
higher annual expenses than class A shares
automatically convert to class A shares after eight years
CLASS C
no front-end sales charge
higher annual expenses than class A shares
a contingent deferred sales charge is applied to shares sold prior to the
first anniversary of purchase
CLASS P
available to certain pension or retirement plans and pursuant to a Mutual
Fund Advisory Program
4 Your Investment
PAGE>
CLASS A SHARE PURCHASES WITHOUT A FRONT-END SALES CHARGE. Class A shares
may be purchased without a front-end sales charge under any of the
following conditions:
purchases of $1 million or more*
purchases by Retirement Plans with at least 100 eligible employees*
purchases under a Special Retirement Wrap Program*
purchases made with dividends and distributions on class A shares of
another Eligible Fund
purchases representing repayment under the loan feature of the Lord
Abbett-sponsored prototype 403(b) Plan for class A shares
purchases by employees of any consenting securities dealer having a sales
agreement with Lord Abbett Distributor
purchases under a Mutual Fund Advisory Program
purchases by trustees or custodians of any pension or profit sharing
plan, or payroll deduction IRA for the employees of any consenting
securities dealer having a sales agreement with Lord Abbett Distributor
See the Statement of Additional Information for a listing of other
categories of purchasers who qualify for class A share purchases without a
front-end sales charge.
* These categories may be subject to a Contingent Deferred Sales Charge
("CDSC").
CLASS A SHARE CDSC. If you buy class A shares under one of the starred (*)
categories listed above and you redeem any of them within 24 months after
the month in which you initially purchased them, the fund normally will
collect a CDSC of 1%.
The class A share CDSC generally will be waived for:
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)
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 declines the longer you own your shares, according to the
following schedule:
<TABLE>
<CAPTION>
===============================================================================
Contingent Deferred Sales Charges - Class B Shares
- -------------------------------------------------------------------------------
ANNIVERSARY(1) OF CONTINGENT DEFERRED SALES CHARGE
THE DAY ON WHICH THE ON REDEMPTION (AS % OF AMOUNT
PURCHASE ORDER WAS ACCEPTED SUBJECT TO CHARGE)
<S> <C> <C>
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(2) None
- -------------------------------------------------------------------------------
</TABLE>
(1) The anniversary is the same calendar day in each respective year after the
date of purchase. For example, the anniversaries for shares purchased on
May 1 will be May 1 of each succeeding year.
(2) Class B shares will automatically convert to class A shares on the eighth
anniversary of the purchase of class B shares.
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 at the
time they are 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.
To minimize the amount of any CDSC, the fund redeems shares in the
following order:
1. shares acquired by reinvestment of dividends and capital gains (always
free of a CDSC)
2. shares held for six years or more (class B) or two years or more after
the month of purchase (class A) or one year or more (class C)
3. shares held the longest before the sixth anniversary of their purchase
(class B) or before the second anniversary after the month of purchase
(class A) or before the first anniversary of their purchase (class C)
RETIREMENT PLANS include employer-sponsored retirement plans under the
Internal Revenue Code, excluding Individual Retirement Accounts.
LORD ABBETT DISTRIBUTOR LLC ("Lord Abbett Distributor") acts as agent for
the funds to work with investment professionals that buy and/or sell shares
of the funds on behalf of their clients. Generally, Lord Abbett Distributor
does not sell fund shares directly to investors.
BENEFIT PAYMENT DOCUMENTATION.
(class A only)
under $50,000 - no documentation necessary
over $50,000 - reason for benefit payment must be received in writing.
Use the address indicated under "Opening Your Account."
Your Investment 5
<PAGE>
The class B share CDSC generally will be waived under any one of the
following conditions:
benefit payments such as Retirement Plan loans, hardship withdrawals,
death, disability, retirement, separation from service or any excess
contribution or distribution under Retirement Plans
Eligible Mandatory Distributions under 403(b) Plans and individual
retirement accounts
death of the shareholder (natural person)
redemptions of shares in connection with Div-Move and Systematic
Withdrawal Plans (up to 12% per year)
See "Systematic Withdrawal Plan" under "Services For Fund Investors" below
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 anniversary of the purchase of such shares.
CLASS P SHARES. Class P shares have lower annual expenses than class B and
class C shares, no front-end sales charge, and no CDSC. Class P shares are
currently sold and redeemed at NAV (a) pursuant to a Mutual Fund Advisory
Program or (b) to the trustees of, or employer-sponsors with respect to,
pension or retirement plans with at least 100 eligible employees (such as a
plan under Section 401(a), 401(k) or 457(b) of the Internal Revenue Code)
which engage an investment professional providing, or participating in an
agreement to provide, certain recordkeeping, administrative and/or
sub-transfer agency services to the fund on behalf of the class P
shareholders.
OPENING YOUR ACCOUNT
Minimum initial investment
Regular account $1,000
Individual Retirement Accounts and
403(b) Plans under the Internal Revenue Code $250
Uniform Gifts to Minors Account $250
For Retirement Plans and Mutual Fund Advisory Programs, no minimum
investment is required, regardless of share class.
You may purchase shares through any independent securities dealer who has a
sales agreement with Lord Abbett Distributor or you can fill out the
attached application and send it to the fund you select at the address
stated below. You should carefully read the paragraph below entitled
"Proper Form" before placing your order to assure your order will be
accepted.
GROWTH OPPORTUNITIES FUND
P.O. Box 419100
Kansas City, MO 64141
PROPER FORM. An order submitted directly to the fund must contain: (1) a
completed application, and (2) payment by check. For more information
regarding proper form of a purchase order, call the fund at 800-821-5129.
Payment must be credited in U.S. dollars to our custodian bank's account.
BY EXCHANGE. Telephone the fund at 800-821-5129 to request an exchange from
any eligible Lord Abbett-sponsored fund.
IMPORTANT INFORMATION. You may be subject to a $50 penalty under the
Internal Revenue Code if you do not provide a correct taxpayer
identification number (Social Security Number for individuals) or make
certain required certifications. In addition, we may be required to
withhold from your account and pay to the U.S. Treasury 31% of any
redemption proceeds and any dividend or distribution from your account.
SMALL ACCOUNTS. Our Board may authorize closing any account in which there
are fewer than 25 shares if it is in a fund's best interest to do so.
6 Your Investment
PAGE>
REDEMPTIONS
BY BROKER. Call your investment professional for directions on how to
redeem your shares.
BY TELEPHONE. To obtain the proceeds of a redemption of $50,000 or less
from your account, you or your representative can call the fund at
800-821-5129.
BY MAIL. Submit a written redemption request indicating the name(s) in
which the account is registered, the fund's name, the class of shares, your
account number, and the dollar value or number of shares you wish to sell.
Include all necessary signatures. If the signer has any Legal Capacity, the
signature and the capacity must be guaranteed by an Eligible Guarantor.
Certain other legal documentation may be required. For more information
regarding proper documentation call 800-821-5129.
Normally a check will be mailed to the name and address in which the
account is registered (or otherwise according to your instruction) within
three business days after receipt of your redemption request. Your account
balance must be sufficient to cover the amount being redeemed or your
redemption order will not be processed. Redemption requests for shares
initially purchased by check will not be honored for up to 15 days, unless
we are assured that the check has cleared earlier.
To determine if a CDSC applies to a redemption, see "Class A share CDSC,"
"Class B share CDSC" or "Class C share CDSC."
ELIGIBLE GUARANTOR is any broker or bank that is a member of the Medallion
Stamp Program. Most major securities firms and banks are members of this
program. A NOTARY PUBLIC IS NOT AN ELIGIBLE GUARANTOR.
DISTRIBUTIONS AND TAXES
Each fund pays its shareholders dividends from its net investment income,
and distributes net capital gains that it has realized. Dividends from net
investment income are expected to be paid to shareholders annually. If a
capital gains distribution is declared, it is expected to be paid annually.
Your distributions will be reinvested in your fund unless you instruct the
fund to pay them to you in cash. There are no sales charges on
reinvestments.
The tax status of any distribution is the same for all shareholders
regardless of how long they have been in the fund or whether distributions
are reinvested or paid in cash. In general, distributions are taxable as
follows:
<TABLE>
<CAPTION>
================================================================================
Federal Taxability Of Distributions
<S> <C> <C>
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket and above
- --------------------------------------------------------------------------------
INCOME Ordinary Income Ordinary Income
DIVIDENDS Rate Rate
- --------------------------------------------------------------------------------
SHORT-TERM Ordinary Income Ordinary Income
CAPITAL GAINS Rate Rate
- --------------------------------------------------------------------------------
LONG-TERM
CAPITAL GAINS 10% 20%
- --------------------------------------------------------------------------------
</TABLE>
Except in tax-advantaged accounts, any sale or exchange of fund shares may
be a taxable event.
ANNUAL INFORMATION - Information concerning the tax treatment of dividends
and other distributions will be mailed to shareholders each year. Each fund
will also provide annually to its shareholders information regarding the
source of dividends and distributions of capital gains by that fund.
Because everyone's tax situation is unique, you should
<TABLE>
<S> <C>
TAXES ON TRANSACTIONS. The chart at left also can provide a "rule of thumb"
guide for your potential U.S. federal income tax liability when selling or
exchanging fund shares. The second row, "Short-term capital gains," applies
to fund shares sold within 12 months of purchase. The third row, "Long-term
capital gains," applies to shares held for more than 12 months.
Starting January 1, 2001, sales of securities held for more than five years
will be taxed at special lower rates.
</TABLE>
Your Investment 7
<PAGE>
consult your tax adviser regarding the treatment of those distributions
under the federal, state and local tax rules that apply to you as well as
the tax consequences of gains or losses from the redemption or exchange of
your shares.
SERVICES FOR FUND INVESTORS
AUTOMATIC SERVICES
Buying or selling shares automatically is easy with the services described
below. With each service, you select a schedule and amount, subject to
certain restrictions. You can set up most of these services when filling
out your application or by calling 800-821-5129.
<TABLE>
- ---------------------------------------------------------------------------------------------
<S> <C>
For investing
INVEST-A-MATIC You can make fixed, periodic investments ($50 minimum) into your fund
(Dollar-cost account by means of automatic money transfers from your bank checking
averaging) account. See the attached application for instructions.
DIV-MOVE You can automatically reinvest the dividends and distributions from
your account into another account in any Eligible Fund ($50 minimum).
For selling shares
SYSTEMATIC You can make regular withdrawals from most Lord Abbett funds. Automatic
WITHDRAWAL cash withdrawals can be paid to you from your account in fixed or variable
Plan ("SWP") amounts. To establish a plan, the value of your shares must be at least
$10,000, except for Retirement Plans for which there is no minimum. Your
shares must be in non-certificate form.
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 SWPrequest. 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.
CLASS B AND Redemption proceeds due to a SWP for class B and class C shares will be
C SHARES redeemed in the order described under "CDSC" under "Purchases."
- ---------------------------------------------------------------------------------------------
</TABLE>
OTHER SERVICES
TELEPHONE INVESTING. After we have received the attached application
(selecting "yes" under Section 7C and completing Section 7), you can
instruct us 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 when it receives the money from your bank.
TELEPHONE EXCHANGES. You or your investment professional, with proper
identification, can instruct your fund by telephone to exchange shares of
any class for shares of the same class of any Eligible Fund by calling
800-821-5129. The fund must receive instructions for the exchange before
the close of the NYSE on the day of your call. If you meet this
requirement, you will get the NAV per share of the Eligible Fund determined
on that day. Exchanges will be treated as a sale for federal tax purposes.
Be sure to read the current prospectus for any fund into which you are
exchanging.
REINVESTMENT PRIVILEGE. If you sell shares of the fund, you have a 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.
<TABLE>
<S> <C>
Lord Abbett offers a variety of Retirement Plans. Call 800-253-7299 for
information about:
Traditional, Rollover, Roth and Education IRAs
Simple IRAs, SEP-IRAs, 401(k) and 403(b) accounts
Defined Contribution Plans
TELEPHONE TRANSACTIONS. You have this privilege unless you refuse it in
writing. For your security, telephone transaction requests are recorded. We
will take measures to verify the identity of the caller, such as asking for
your name, account number, social security or taxpayer identification
number and other relevant information. The funds will not be liable for
following instructions communicated by telephone that they reasonably
believe to be genuine.
Transactions by telephone may be difficult to implement in times of drastic
economic or market change.
Exchanges by telephone should not be used to take advantage of short-term
swings in the market. The funds reserve the right to limit or terminate
this privilege for any shareholder making frequent exchanges or abusing the
privilege and may revoke the privilege for all shareholders upon 60 days'
written notice.
</TABLE>
8 Your Investment
PAGE>
ACCOUNT STATEMENTS. Every Lord Abbett investor automatically receives
quarterly account statements.
HOUSEHOLDING. Shareholders with the same last name and address will receive
a single copy of a prospectus and an annual or semi-annual report, unless
additional reports are specifically requested in writing to the fund.
ACCOUNT CHANGES. For any changes you need to make to your account, consult
your investment professional or call the fund at 800-821-5129.
SYSTEMATIC EXCHANGE. You or your investment professional can establish a
schedule of exchanges between the same classes of any Eligible Fund.
SALES CHARGES AND SERVICE FEES
SALES AND SERVICE COMPENSATION. As part of its plan for distributing
shares, each fund and Lord Abbett Distributor pay sales and service
compensation to Authorized Institutions that sell the fund's shares and
service its shareholder accounts.
Sales compensation originates from two sources: sales charges and 12b-1
distribution fees that are paid out of each fund's assets. Service
compensation originates from 12b-1 service fees. The 12b-1 fee rates vary
by share class, according to the Rule 12b-1 plan adopted by each fund. The
sales charges and 12b-1 fees paid by investors are shown in the
class-by-class information under "Expenses" and "Purchases." The portion of
these expenses that is paid as sales and service compensation to Authorized
Institutions, such as your dealer, is shown in the chart at the end of this
prospectus. The portion of such sales and service compensation paid to Lord
Abbett Distributor is discussed under "Sales Activities" and "Service
Activities." Sometimes we do not pay sales and service compensation where
tracking data is not available for certain accounts or where the Authorized
Institution waives part of the compensation.
We may pay Additional Concessions to Authorized Institutions from time to
time.
SALES ACTIVITIES. We may use 12b-1 distribution fees 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 a 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 those other than existing shareholders,
preparation and distribution of advertising and sales material, 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.
SERVICE ACTIVITIES. We may pay Rule 12b-1 service fees to Authorized
Institutions for any activity which is primarily intended to result in
personal service and/or the maintenance of shareholder accounts. Any
portion of the service fees paid to Lord Abbett Distributor will be used to
service and maintain shareholder accounts.
12b-1 FEES ARE PAYABLE REGARDLESS OF EXPENSES. The amounts payable by a
fund need not be directly related to expenses. If Lord Abbett
Distributor's actual expenses exceed the fee payable to it, a fund will
not have to pay more than that fee. If Lord Abbett Distributor's expenses
are less than the fee it receives, Lord Abbett Distributor will keep the
full amount of the fee.
Your Investment 9
<PAGE>
MANAGEMENT
The fund's investment adviser is Lord, Abbett & Co., 767 Fifth Avenue, New
York, NY 10153-0203. Founded in 1929, Lord Abbett manages one of the
nation's oldest mutual fund complexes, with approximately $28 billion in
more than 35 mutual fund portfolios and other advisory accounts. 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. Effective September 15, 1998, the management fee increased
from an annual rate of 0.75 of 1% to 0.90 of 1% for the fund. In addition,
the fund pays all expenses not expressly assumed by Lord Abbett. For the
fiscal year ended November 30, 1998, Lord Abbett waived its management fee
and subsidized most other expenses.
Lord Abbett uses teams of portfolio managers and analysts acting together
to manage the fund's investments. Stephen J. McGruder, Partner of Lord
Abbett, heads the fund's team, the other senior member of which is Frederic
D. Ohr. Mr. McGruder has been with Lord Abbett since 1995. Before joining
Lord Abbett, Mr. McGruder served as Vice President of Wafra Investment
Advisory Group, a private investment advisory company, from 1988 to 1995.
Mr. Ohr joined Lord Abbett in 1998. Before joining Lord Abbett, Mr. Ohr was
a Vice President and Senior Analyst with Chase Asset Management from 1991
to 1998.
10 Your Investment
PAGE>
For More Information
OTHER INVESTMENT TECHNIQUES
This section describes some of the investment techniques that might be used
by the funds, and their risks.
ADJUSTING INVESTMENT EXPOSURE. The fund may, but is not required to, use
various strategies to change its investment exposure to adjust to changing
security prices, interest rates, currency exchange rates, commodity prices
and other factors. These strategies may involve buying or selling
derivative instruments, such as options and futures contracts, currency
exchange contracts, indexed securities, and rights and warrants. The fund
may use these transactions to change the risk and return characteristics of
its portfolio. If we judge market conditions incorrectly or use a strategy
that does not correlate well with the fund's investments, it could result
in a loss, even if we intended to lessen risk or enhance returns. These
transactions may involve a small investment of cash compared to the
magnitude of the risk assumed and could produce disproportionate gains or
losses. Also, these strategies could result in losses if the counterparty
to a transaction does not perform as promised.
BORROWING. The fund may borrow from banks. If it borrows money, its share
price may be subject to greater fluctuation until the borrowing is paid
off. The fund may borrow only for temporary or emergency purposes, and not
in an amount exceeding 33 1/3% of its total assets.
CLOSED-END INVESTMENT COMPANIES. The fund may invest in shares of
closed-end investment companies if it pays a fee or commission no greater
than the customary broker's commission. Shares of investment companies
sometimes trade at a discount or premium to their net asset value. Also,
there may be duplication of fees if a fund and the closed-end investment
company both charge a management fee. No more than 5% of the fund's gross
assets may be invested in Closed-End Investment Companies.
DIVERSIFICATION. The fund is a diversified fund, which means that with
respect to 75% of its total assets, it will not purchase a security if, as
a result, more than 5% of the fund's total assets would be invested in
securities of a single issuer or the fund would hold more than 10% of the
outstanding voting securities of the issuer. U.S. government securities are
not subject to these requirements.
FINANCIAL FUTURES TRANSACTIONS. The fund may enter into financial futures
transactions. A financial futures transaction is the purchase or sale of an
exchange-traded contract to buy or sell a standard quality and quantity of
a financial instrument or index at a specific future date and price. The
price behavior of the futures contract may not correlate with that of the
item being hedged. 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 its
total assets.
FOREIGN CURRENCY HEDGING TECHNIQUES. The fund may use Foreign Currency
Hedging Techniques. Although it does not normally engage in extensive
currency hedging, it may use forwards and options to hedge the risk to the
portfolio (related to foreign holdings) if it expects that foreign exchange
price movements will be unfavorable for U.S. investors. Generally, these
instruments allow a fund to lock in a specified exchange rate for a period
of time. If the fund's forecast proves to be wrong, such a hedge may cause
a loss. Also, it may be difficult or impractical to hedge currency risk in
many emerging countries. Under some circumstances, a fund may commit a
substantial portion of its portfolio to the com-
For More Information 11
<PAGE>
pletion of forward contracts. Although such contracts will be used
primarily to protect the fund from adverse currency movements, their use
involves the risk that Lord Abbett will not accurately predict currency
movement, and the fund's return could be reduced.
Certain of the fund's investments may be denominated in foreign currency.
The fund uses currency transactions in an attempt to eliminate currency
risk associated with foreign investments.
The fund may also purchase foreign currency put and call options, subject
to certain limitations.
There is the possibility that the foreign currency hedging techniques will
not work as anticipated.
FOREIGN SECURITIES. The fund may invest in securities of foreign countries.
These securities are not subject to the same degree of regulation and may
be more volatile and less liquid than securities traded in major U.S.
markets. Foreign portfolio securities may trade on days when a fund does
not value them. Fund share prices could be affected on days an investor
cannot purchase or sell shares. Other risks include less information on
public companies, banks and governments; political and social instability;
expropriations; higher transaction costs; currency fluctuations;
non-deductible withholding taxes and different accounting and settlement
practices. The fund may invest 35% of net assets at the time of investment
in securities traded primarily in foreign countries.
ILLIQUID SECURITIES. The fund may invest in illiquid securities. These
securities include those that are not traded on the open market or that
trade irregularly or in very low volume. They may be difficult or
impossible to sell at the time and price the fund would like. The fund may
invest up to 15% of its assets in illiquid securities.
OPTIONS TRANSACTIONS. The fund may purchase and write put and call options
on equity securities or stock indices that are traded on national
securities exchanges. A put option on 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 (seller) 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. The writer of a
put option might be obligated to purchase underlying securities for more
than their current market value.
A call option on 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.
The fund may only sell (write) covered call options. This means that the
fund may only sell the call options on securities which the fund owns.
When a fund writes a call option, it gives up the potential for gain on the
underlying index gives the holder the right, in return for a premium paid,
to receive, upon exercise of the option, an amount of cash if the closing
level of the stock index upon which the option is based is greater than, in
the case of a call, or less than, in the case of a put, the exercise price
of the option. The writer of an index option, in return for a premium, is
obligated to pay the amount of cash due upon exercise of the option.
The fund may write only covered put options to the extent that cover for
such options does not exceed 25% of the fund's net assets. The fund will
not purchase an option if,
12 For More Information
PAGE>
as a result of such purchase, more than 20% of its total assets would be
invested in premiums for such options.
PORTFOLIO SECURITIES LENDING. The fund may lend securities to
broker-dealers and financial institutions, as a means of earning income.
This practice could result in a loss or delay in recovering a fund's
securities, if the borrower defaults. The fund will limit its securities
loans to 5% of its total assets and all loans will be fully collateralized.
REPURCHASE AGREEMENTS. The fund may enter into repurchase agreements. In a
repurchase agreement, a fund buys a security at one price from a
broker-dealer or financial institution and simultaneously agrees to sell
the same security back to the same party at a higher price in the future.
If the other party to the agreement defaults or becomes insolvent, a fund
could lose money.
RIGHTS AND WARRANTS. The fund may invest up to 5% of its assets in rights
and warrants to purchase securities. Rights represent a privilege offered
to holders of record of issued securities (usually on a pro-rata basis) for
additional securities of the same class, of a different class, or of a
different issuer, as as the case may be. Warrants represent the privilege
to purchase securities at a stipulated price and are usually valid for
several years. Rights and warrants generally do not entitle a holder to
dividends or voting rights with respect to the underlying securities, nor
do they represent any rights in the assets of the issuing company.
The value of a right or warrant may not necessarily change with the value
of the underlying securities and rights and warrants cease to have value
after their expiration date.
RULE 144A SECURITIES. The fund may invest in Rule 144A securities, which
are securities determined by the Board 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. A substantial part of the
lower-rated debt market consists of Rule 144A securities, many of which are
registered within a few months of their purchases. Investments in Rule 144A
securities initially determined to be liquid could have the effect of
diminishing the level of a fund's liquidity during periods of decreased
market interest in such securities.
WHEN-ISSUED OR DELAYED DELIVERY SECURITIES. The fund may purchase or sell
securities with payment and delivery taking place as much as a month or
more later. The fund would do this in an effort to buy or sell the
securities at an advantageous price and yield. The securities involved 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, their market value may be less than the purchase price.
Also, if a fund commits a significant amount of assets to when-issued or
delayed delivery transactions, it may increase the volatility of the fund's
net asset value.
For More Information 13
<PAGE>
GLOSSARY OF SHADED 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 a 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 a 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. An Eligible Fund is any Lord Abbett-sponsored fund except
for: (1) certain tax-free, single-state funds where the exchanging
shareholder is a resident of a state in which such fund is not offered for
sale; (2) Lord Abbett Equity Fund; (3) Lord Abbett Series Fund; and (4)
Lord Abbett U.S. Government Securities Money Market Fund ("GSMMF") (except
for holdings in GSMMF which are attributable to any shares ex-changed from
the Lord Abbett family of funds). An Eligible Fund also is any Authorized
Institution's affiliated money market fund satisfying Lord Abbett
Distributor as to certain omnibus account and other criteria.
ELIGIBLE MANDATORY DISTRIBUTIONS. If class B shares represent a part of an
individual's total IRA or 403(b) investment, the CDSC will be waived only
for that part of a mandatory distribution which bears the same relation to
the entire mandatory distribution as the class B share investment bears to
the total investment.
LEGAL CAPACITY. This term refers to the authority of an individual to act
on behalf of an entity or other person(s). For example, if a redemption
request were to be made 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. That signature using that capacity
must be by an Eligible Guarantor.
To give another example, if a redemption request were to be made on behalf
of the ABC Corporation by a person (Mary B. Doe) who has the legal capacity
to act on the behalf of the Corporation, because she is the president of
the Corporation, the request must be executed as follows: ABC Corporation
by Mary B. Doe, President. That signature using that capacity must be
guaranteed by an Eligible Guarantor (see example in right column).
MUTUAL FUND ADVISORY PROGRAM. This includes certain unaffiliated authorized
brokers, dealers, registered investment advisers or other financial
institutions who either (a) have an arrangement with Lord Abbett
Distributor in accordance with certain standards approved by Lord Abbett
Distributor, providing specifically for the use of fund shares (and
sometimes providing for acceptance of orders for such shares on our behalf)
<TABLE>
<S> <C>
GUARANTEED SIGNATURE. An acceptable form of guarantee would be as follows:
In the case of the estate -
Robert A. Doe
Executor of the Estate of
John W. Doe
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE]
--------------------------------------
AUTHORIZED SIGNATURE
(960) X9003470
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
In the case of the corporation--
ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE]
--------------------------------------
AUTHORIZED SIGNATURE
(960) X9003470
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
</TABLE>
14 For More Information
PAGE>
in particular investment products made available for a fee to clients of
such brokers, dealers, registered investment advisers and other financial
institutions, or (b) charge an advisory consulting or other fee for their
services and buy shares for their own accounts or the accounts of their
clients.
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.
SPECIAL RETIREMENT WRAP PROGRAM. This is 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 Advisory
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
participant-directed Retirement Plans.
RECENT PERFORMANCE
U.S. stock markets were subject to significant volatility throughout the
fund's fiscal year. During the first half of the fiscal year, stocks
performed strongly, followed by sizable downdrafts during the summer
months, and a subsequent recovery from late September through November. We
believe much of the volatility was due to investors' growing reluctance to
bear risk in response to economic and political uncertainties in Japan, the
Pacific Rim, Russia and other emerging markets, and the impact that those
uncertainties might have on future U.S. corporate earnings. A series of
rate cuts initiated by the U.S. Federal Reserve Board helped to ease
investor concern later in the period. As a more optimistic view of global
economies emerged, stocks rallied with most sectors participating in the
upswing.
The fund experienced a period of transition in September/October as we
reorganized the portfolio to account for the new growth investment
strategy. Since the transition, the fund has performed well relative to its
benchmark, the Russell Mid-Cap Growth Index.
YEAR 2000 ISSUES. Each fund could be adversely affected if the computers
used by each fund and their service providers do not properly process and
calculate date-related information from and after January 1, 2000.
Lord Abbett is working to avoid such problems and has received assurances
from each fund's service providers that they are taking similar steps. Of
course, the Year 2000 problem is unprecedented and, therefore, Lord Abbett
cannot eliminate altogether the possibility that it or the fund will be
affected.
For More Information 15
<PAGE>
Financial Information
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the fund's independent auditors, in
conjunction with their annual audit of the fund's financial statements.
Financial statements for the fiscal year ended November 30, 1998 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended November 30, 1998 and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single fund share.
<TABLE>
<CAPTION>
==================================================================================================================
CLASS A SHARES
------------------------------------------------------------------
Period Ended November 30,
Per Share Operating Performance: 1998 1997 1996 1995(c)
<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 .15 .23 .30 .10
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------
gain on investments .09 3.39 2.50 .08
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations .24 3.62 2.80 .18
- ------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
- ------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.37) (.28) (.12) --
- ------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (3.47) -- (.02) --
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.58 $16.18 $12.84 $10.18
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(b) 5.71% 28.90% 27.81% 1.80%(d)
- ------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ------------------------------------------------------------------------------------------------------------------
Expenses, including waiver and reimbursements 0.02% .00% .00% 0.00%(d)
- ------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver and reimbursements 1.60% 1.58% 2.39% 1.20%(d)
- ------------------------------------------------------------------------------------------------------------------
Net investment income 1.14% 1.69% 2.67% 1.04%(d)
==================================================================================================================
<CAPTION>
CLASS B SHARES CLASS C SHARES
------------------------ -------------------------
Period Ended November 30, Period Ended November 30,
Per Share Operating Performance: 1998(c) 1998(c)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.41 $10.70
- ------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------
Net investment income --(a) --(a)
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- -----------------------------------------------------------------------------------------------------------------
gain on investments 2.16 1.89
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.16 1.89
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.57 $12.59
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(b)(d) 20.87% 17.66%
- ------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ------------------------------------------------------------------------------------------------------------------
Expenses, including waiver and reimbursements 0.13% 0.13%
- ------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver and reimbursements 0.34% 0.34%
- ------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.08)% (0.10)%
==================================================================================================================
<CAPTION>
Period Ended November 30,
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
SUPPLEMENTAL DATA FOR ALL CLASSES: 1998 1997 1996 1995(c)
NET ASSETS, END OF YEAR (000) $4,723 $1,672 $1,462 $968
- ------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 136.81% 52.86% 30.78% 1.55%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Amount less than $.01.
(b) Total return does not consider the effects of sales loads and assumes
reinvestment of all distributions.
(c) Commencement of operations: August 1, 1995 (class A); October 16, 1998
(class B); and October 19, 1998 (class C).
(d) Not annualized.
See Notes to Financial Statements. Financial Information
16 Financial Information
PAGE>
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in class A shares
to the same investment in the RMCG Index, assuming reinvestment of all
dividends and distributions.
[GRAPH]
<TABLE>
<CAPTION>
===============================================================================
Average Annual Total Return At Maximum Applicable
Sales Charge For The Period Ending November 30, 1998
1 YEAR LIFE
- -------------------------------------------------------------------------------
<S> <C> <C>
Class A(1) (.40)% 16.67%
- -------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) This reflects the deduction of the maximum initial sales charge of 5.75%
(2) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 5.75% applicable to class A
shares, with all dividends and distributions reinvested for the periods
shown ending November 30, 1998, using the SEC-required uniform method to
compute such return. Performance for the RMCG Index begins on 7/31/95.
Financial Information 17
<PAGE>
COMPENSATION FOR YOUR DEALER
<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(3)
- --------------------------------------------------------------------------------------------------------------------------
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%
==========================================================================================================================
Class P investments Percentage of average net assets
- --------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.25% 0.20% 0.45%
==========================================================================================================================
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%
==========================================================================================================================
Class P investments
- --------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.25% 0.20% 0.45%
==========================================================================================================================
</TABLE>
(1) The service fee for class A and P shares is paid quarterly. The first
year's service fee on class B and C shares is paid at the time of sale.
(2) Dealer's 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, such as your dealer, 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, C and P shares, 0.25%, 1.00% and 0.45%,
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, such as your dealer. These fees are paid quarterly in
arrears.
18 Financial Information
PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
PAGE>
More information on the fund is available free upon request, including:
ANNUAL/SEMI-ANNUAL REPORT
Describes the fund, lists portfolio holdings and contains a letter from the
fund's manager discussing recent market conditions and the fund's
investment strategies.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Provides more details about the fund and its policies. A current SAI is on
file with the Securities and Exchange Commission ("SEC") and is
incorporated by reference (is legally considered part of this prospectus).
Lord Abbett Growth Opportunities Fund
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
--------------------------
SEC file number: 811-6650
To obtain information:
BY TELEPHONE. Call the fund at:
800-426-1130
BY MAIL. Write to the fund at:
The Lord Abbett Family of Funds
767 Fifth Avenue
New York, NY 10153-0203
VIA THE INTERNET.
LORD, ABBETT & CO.
http://www.lordabbett.com
Text only versions of fund documents can be viewed online or downloaded
from:
SEC
http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
LAGOF-1-499
(4/99)
===============================================================================
STATEMENT OF DIFFERENCES
The service mark symbol shall be expressed as...............................'sm'
<PAGE>
LORD ABBETT
Statement of Additional Information April 1, 1999
- --------------------------------------------------------------------------------
Lord Abbett Research Fund, Inc.
Large-Cap Series
Growth Opportunities Fund
Small-Cap Value Series
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord Abbett Distributor LLC
("Lord Abbett Distributor") at The General Motors Building, 767 Fifth Avenue,
New York, New York 10153-0203. The Growth Opportunities Fund is a separate
Prospectus. This Statement of Additional information relates to, and should be
read in conjunction with, the Prospectuses dated April 1, 1999.
Lord Abbett Research Fund, Inc. (the "Company") was incorporated in Maryland on
April 6, 1992. The Company has three series, Large-Cap Series, Growth
Opportunities Fund, and Small-Cap Value Series (individually, "we" or the
"Fund") (collectively, the "Funds") which are offered in this Statement of
Additional Information. The Large-Cap Series has four classes of shares (A, B,
C, and P); Growth Opportunities Fund and Small-Cap Value Series each have five
(A, B, C, P and Y). Only classes A, B, C, and P are offered by this Statement of
Additional Information. All classes of shares have equal noncumulative voting
rights and equal rights with respect to dividends, assets and liquidation,
except for certain class-specific expenses. They are fully paid and
nonassessable when issued and have no preemptive or conversion rights.
Rule 18f-2 under the Investment Company Act, as amended (the "Act"), provides
that any matter required to be submitted, by the provisions of the Act or
applicable state law, or otherwise, to the holders of the outstanding voting
securities of an investment company such as the Fund shall not be deemed to have
been effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each class affected by such matter. Rule 18f-2 further
provides that a class shall be deemed to be affected by a matter unless the
interests of each class in the matter are substantially identical or the matter
does not affect any interest of such class. However, the Rule exempts the
selection of independent public accountants, the approval of a contract with a
principal underwriter and the election of directors from its separate voting
requirements.
Shareholder inquiries should be made by directly contacting the Funds or by
calling 800-821-5129. In addition, you can make inquiries through your dealer.
TABLE OF CONTENTS PAGE
1. Investment Policies 2
2. Directors and Officers 10
3. Investment Advisory and Other Services 14
4. Portfolio Transactions 15
5. Purchases, Redemptions
and Shareholder Services 16
6. Past Performance 25
7. Taxes 26
8. Information About The Company 27
9. Financial Statements 27
1
<PAGE>
1.
Investment Policies
Fundamental Investment Restrictions. Each Fund is subject to the following
fundamental investment restrictions which cannot be changed without the approval
of the holders of a majority of a Fund's respective shares. If a Fund determines
that its objectives can best be achieved by a change in any non-fundamental
investment policy, strategy or restriction, it may make such change without
shareholder approval by disclosing it in the Prospectus or Statement of
Additional Information.
Each Fund may not: (1) borrow money, except that (i) each 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) each Fund may borrow up to an additional
5% of its total assets for temporary purposes, (iii) each Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities and (iv) each Fund may purchase securities on margin to
the extent permitted by applicable law; (2) pledge its assets (other than to
secure borrowings, or to the extent permitted by the Funds' 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 each 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 each 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 each 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 each Fund, buy
securities of one issuer representing more than (i) 5% of each Fund's 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 such issuer; (7) invest more than 25% of its assets, taken at market value,
in the securities of issuers in any particular industry (excluding securities of
the U.S. Government, its agencies and instrumentalities); or (8) issue senior
securities to the extent such issuance would violate applicable law.
With respect to the restrictions mentioned herein, compliance therewith will not
be affected by 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 policies in the
Prospectus and the investment restrictions above which cannot be changed without
shareholder approval, each fund is also subject to the following non-fundamental
investment policies which may be changed by the Board of Directors without
shareholder approval. Each 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 the securities of other
investment companies as defined in the Act, except as permitted by applicable
law; (5) invest in securities of issuers which, with their predecessors, have a
record of less than three years' continuous operation, if more than 5% of each
Fund's total assets would be invested in such securities (this restriction shall
not apply to mortgaged-backed securities, asset-backed securities or obligations
issued or guaranteed by the U. S. Government, its agencies or
instrumentalities); (6) hold securities of any issuer if more than 1/2 of 1% of
the securities of such issuer are owned beneficially by one or more of the
officers or directors of the Funds or by one or more partners or members of the
Funds' underwriter or investment adviser if these owners in the aggregate own
beneficially more than 5% of the securities of such issuer; (7) invest in
warrants if, at the time of the acquisition, its investment in warrants, valued
at the lower of cost or market, would exceed 5% of each Fund's total assets
(included within such limitation, but not to exceed 2% of each Fund's total
assets, are warrants which are not listed on the New York or American Stock
Exchange or a foreign exchange); (8) invest in real estate limited partnership
interests or interests in oil, gas or other mineral leases, or exploration or
development programs, except that each Fund may invest in securities issued by
companies that engage in oil, gas or
2
<PAGE>
other mineral exploration or development activities; (9) write, purchase or sell
puts, calls, straddles, spreads or combinations thereof, except to the extent
permitted in the Funds' prospectuses and statements of additional information,
as they may be amended from time to time; or (10) buy from or sell to any of the
Funds' officers, directors, employees, or its investment adviser or any of the
Funds' officers, directors, partners or employees, any securities other than
shares of the Funds' common stock.
For the fiscal year ended November 30, 1998, the portfolio turnover rate was
99.14% for the Large-Cap Series compared to 30.81% for the previous year;
136.81% for Growth Opportunities Fund compared to 52.86% for the previous year;
and 67.86% for Small-Cap Value Series compared to 45.24% for the previous year.
INVESTMENT TECHNIQUES
ALL FUNDS
Lending Of Portfolio Securities. Although each Fund has no current
intention of doing so, each 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. Each 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 we will receive the income earned on investment of
collateral. The aggregate value of the securities loaned will not exceed 5% of
the value of a Fund's gross assets.
LARGE-CAP SERIES And GROWTH OPPORTUNITIES FUND
Covered Call Options. A Fund may write covered call options on securities in our
portfolio in an attempt to increase income and provide greater flexibility in
the disposition of portfolio securities. A "call option" is a contract sold for
a price (the "premium") giving its holder the right to buy a specific number of
shares of a stock at a specific price prior to a specified date. A "covered call
option" is a call option issued on securities already owned by the writer of the
call option for delivery to the holder upon the exercise of the option. During
the period of the option, a Fund forgoes the opportunity to profit from any
increase in the market price of the underlying security above the exercise price
of the option (to the extent that the increase exceeds our net premium). A Fund
also may enter into "closing purchase transactions" in order to terminate an
obligation to deliver the underlying security (this may result in a short-term
gain or loss). A closing purchase transaction is the purchase of a call option
(at a cost which may be more or less than the premium received for writing the
original call option) on the same security with the same exercise price and call
period as the option previously written. If a Fund is unable to enter into a
closing purchase transaction, it may be required to hold a security that it
otherwise might have sold to protect against depreciation. A Fund does not
intend to write covered call options with respect to securities with an
aggregate market value of more than 5% of a Fund's gross assets at the time an
option is written. This percentage limitation will not be increased without
prior disclosure in a Funds' current prospectus.
Rights And Warrants. A Fund may invest in rights and warrants to purchase
securities. Included within that amount, but not to exceed 2% of the value of
Large-Cap Series' net assets and 5% of the value of Growth Opportunities Fund's
gross assets, may be warrants which are not listed on the NYSE or American Stock
Exchange.
Rights represent a privilege offered to holders of record of issued securities
to subscribe (usually on a pro rata basis) for additional securities of the same
class, of a different class or of a different issuer, as the case may be.
Warrants represent the privilege to purchase securities at a stipulated price
and are usually valid for several years. Rights and warrants generally do not
entitle a holder to dividends or voting rights with respect to the underlying
securities nor do they represent any rights in the assets of the issuing
company.
Also, the value of a right or warrant may not necessarily change with the value
of the underlying securities and rights and warrants cease to have value if they
are not exercised prior to their expiration date.
Options And Financial Futures Transactions. A Fund may engage in options and
financial futures transactions in accordance with their investment objective and
policies. Although each Fund is not currently employing such options and
financial futures transactions, they may engage in such transactions in the
future if it appears advantageous to us
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to do so, in order to cushion the effects of fluctuating interest rates and
adverse market conditions. The use of options and financial futures, and
possible benefits and attendant risks, are discussed below, along with
information concerning certain other investment policies and techniques.
Financial Futures Contracts. A Fund may enter into contracts for the future
delivery of a financial instrument, such as a security or the cash value of a
securities index. This investment technique is designed primarily to hedge
(i.e., protect) against anticipated future changes in interest rates or market
conditions which otherwise might adversely affect the value of securities which
a Fund holds or intends to purchase. A "sale" of a futures contract means the
undertaking of a contractual obligation to deliver the securities or the cash
value of an index called for by the contract at a specified price during a
specified delivery period. A "purchase" of a futures contract means the
undertaking of a contractual obligation to acquire the securities or cash value
of an index at a specified price during a specified delivery period. At the time
of delivery pursuant to the contract, adjustments are made to recognize
differences in value arising from the delivery of securities which differ from
those specified in the contract. In some cases, securities called for by a
futures contract may not have been issued at the time the contract was written.
A Fund will not enter into any futures contracts or options on futures contracts
if the aggregate of the market value of the securities covered by either's
outstanding futures contracts and securities covered by futures contracts
subject to the outstanding options written by us would exceed 50% of its total
assets.
Although some financial futures contracts by their terms call for the actual
delivery or acquisition of securities, in most cases, a party will close out the
contractual commitment before delivery without having to make or take delivery
of the security by purchasing (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, if effected through a member of an exchange, cancels the
obligation to make or take delivery of the securities. All transactions in the
futures market are made, offset or fulfilled through a clearing house associated
with the exchange on which the contracts are traded. A Fund will incur brokerage
fees when they purchase or sell contracts and will be required to maintain
margin deposits. At the time they enter into a futures contract, it is required
to deposit with the custodian, on behalf of the broker, a specified amount of
cash or eligible securities called "initial margin." The initial margin required
for a futures contract is set by the exchange on which the contract is traded.
Subsequent payments, called "variation margin," to and from the broker are made
on a daily basis as the market price of the futures contract fluctuates. The
costs incurred in connection with futures transactions could reduce our return.
Futures contracts entail risks. If the investment adviser's judgment about the
general direction of interest rates or markets is wrong, the overall performance
may be poorer than if no such contracts had been entered into.
There may be an imperfect correlation between movements in prices of futures
contracts and portfolio securities being hedged. The degree of difference in
price movements between futures contracts and the securities (or securities
indices) being hedged depends upon such things as variations in demand for
futures contracts and securities underlying the contracts and differences
between the liquidity of the markets for such contracts and the securities
underlying them. In addition, the market prices of futures contracts may be
affected by certain factors not directly related to the underlying securities.
At any given time, the availability of futures contracts, and hence their
prices, are influenced by credit conditions and margin requirements. Due to the
possibility of price distortions in the futures market and because of the
imperfect correlation between movements in the prices of securities and
movements in the prices of futures contracts, a correct forecast of market
trends by the investment adviser may not result in a successful hedging
transaction.
Options On Financial Futures Contracts. A Fund may purchase and write call and
put options on financial futures contracts. An option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract at a specified exercise price at any time during
the period of the option. Upon exercise, the writer of the option delivers the
futures contract to the holder at the exercise price. A Fund would be required
to deposit with the custodian initial margin and maintenance margin with respect
to put and call options on futures contracts written by a Fund. Options on
futures contracts involve risks similar to the risks relating to transactions in
financial futures contracts described above. Generally speaking, a given dollar
amount used to purchase an option on a financial futures contract can hedge a
much greater value of underlying securities than if that amount were used to
directly purchase the same financial futures. Should the event it intends to
hedge (or protect) against not materialize, however, the option may expire
worthless, in which case a Fund would lose the premium paid therefor.
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Segregated Accounts. To the extent required to comply with Securities and
Exchange Commission Release 10666 and subsequent interpretation thereof by the
Commission or its staff, when purchasing a futures contract, or writing a put
option, each Fund will maintain in a segregated account at the custodian bank in
liquid high grade debt obligations, such as cash and U.S. Government Securities
to cover its position.
SMALL-CAP VALUE SERIES And GROWTH OPPORTUNITIES FUND
Repurchase Agreements. If a Fund enter into repurchase agreements as provided in
clause (4) of the fundamental investment restrictions 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 a Fund otherwise may invest.
Foreign Currency Hedging Techniques. A 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. A Fund expects to enter into forward foreign
currency contracts in primarily two circumstances. First, when a 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, a 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, a Fund may enter into a
forward contract to sell the amount of foreign currency approximating the value
of some or all of a Fund's portfolio securities denominated in such foreign
currency or, in the alternative, a Fund may use a cross-hedging technique
whereby it sells another currency which a 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. A Fund does not intend to enter into such forward contracts
under this second circumstance on a continuous basis.
Foreign Currency Put And Call Options. A 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 a 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. The premiums paid for such
currency put options will not exceed 5% of the net assets of a Fund. Unlisted
options, together with other illiquid securities, are subject to a limit of 15%
of a 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
sucy currency (a) invested in to cover such call writing or to be crossed.
A call option written by a Fund gives the purchaser, upon payment of a premium,
the right to purchase from a Fund a currency at the exercise price until the
expiration of the option. A 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.
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Each 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.
SMALL-CAP VALUE SERIES
Limitations On The Purchases And Sales Of Stock Options, Options On Stock
Indices And Stock Index Futures. The Small-Cap Value Series may write put and
call options on stocks only if they are covered, and such options must remain
covered so long as the Small-Cap Value Series is obligated as a writer. The Fund
will not (a) write puts having an aggregate exercise price greater than 25% of
its total net assets; or (b) purchase (i) put options on stocks not held in the
Fund's portfolio, (ii) put options on stock indices or (iii) call options on
stocks or stock indices if, after any such purchase, the aggregate premiums paid
for such options would exceed 20% of the Fund's total net assets.
Call Options On Stock. The Small-Cap Value Series may, from time to time, write
call options on its portfolio securities. The Small-Cap Value Series may write
only call options which are "covered," meaning that the Fund either owns the
underlying security or has an absolute and immediate right to acquire that
security, without additional cash consideration, upon conversion or exchange of
other securities currently held in its portfolio. In addition, the Fund will not
permit the call to become uncovered prior to the expiration of the option or
termination through a closing purchase transaction as described below. If the
Fund writes a call option, the purchaser of the option has the right to buy (and
the Fund has the obligation to sell) the underlying security at the exercise
price throughout the term of the option. The amount paid to the Fund by the
purchaser of the option is the "premium." The Small-Cap Value Series' obligation
to deliver the underlying security against payment of the exercise price would
terminate either upon expiration of the option or earlier if the Small-Cap Value
Series' were to effect a "closing purchase transaction" through the purchase of
an equivalent option on an exchange. There can be no assurance that a closing
purchase transaction can be effected. The Small-Cap Value Series does not intend
to write covered call options with respect to securities with an aggregate
market value of more than 5% of it's gross assets at the time an option is
written. This percentage limitation will not be increased without prior
disclosure in our current prospectus.
The Small-Cap Value Series would not be able to effect a closing purchase
transaction after it had received notice of exercise. In order to write a call
option, the Small-Cap Value Series is required to comply with the rules of The
Options Clearing Corporation and the various exchanges with respect to
collateral requirements. The Fund may not purchase call options except in
connection with a closing purchase transaction. It is possible that the cost of
effecting a closing purchase transaction may be greater than the premium
received by the Small-Cap Value Series for writing the option.
Generally, the Small-Cap Value Series intends to write listed covered call
options during periods when it anticipates declines in the market values of
portfolio securities because the premiums received may offset to some extent the
decline in the Fund's net asset value occasioned by such declines in market
value. Except as part of the "sell discipline" described below, the Fund will
generally not write listed covered call options when it anticipates that the
market values of it's portfolio securities will increase.
One reason for the Fund to write call options is as part of a "sell discipline."
If the Small-Cap Value Series decides that a portfolio security would be
overvalued and should be sold at a certain price higher than the current price,
it could write an option on the stock at the higher price. Should the stock
subsequently reach that price and the option be exercised, the Fund would, in
effect, have increased the selling price of that stock, which it would have sold
at that price in any event, by the amount of the premium. In the event the
market price of the stock declined and the option were not exercised, the
premium would offset all or some portion of the decline. It is possible that the
price of the stock could increase beyond the exercise price; in that event, the
Small-Cap Value Series would forego the opportunity to sell the stock at that
higher price.
In addition, call options may be used as part of a different strategy in
connection with sales of portfolio securities. If, in the judgment of the Fund
Management, the market price of a stock is overvalued and it should be sold, the
Fund may elect to write a call option with an exercise price substantially below
the current market price. As long as the value of
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the underlying security remains above the exercise price during the term of the
option, the option will, in all probability, be exercised, in which case the
Small-Cap Value Series will be required to sell the stock at the exercise price.
If the sum of the premium and the exercise price exceeds the market price of the
stock at the time the call option is written, the Fund would, in effect, have
increased the selling price of the stock. The Fund would not write a call option
in these circumstances if the sum of the premium and the exercise price were
less than the current market price of the stock.
Put Options On Stock. The Small-Cap Value Series may also write listed put
options. If the Fund writes a put option, it is obligated to purchase a given
security at a specified price at any time during the term of the option.
Writing listed put options is a useful portfolio investment strategy when the
Small-Cap Value Series has cash or other reserves available for investment as a
result of sales of Fund shares or, more importantly, because Fund Management
believes a more defensive and less fully invested position is desirable in light
of market conditions. If the Fund Management wishes to invest its cash or
reserves in a particular security at a price lower than current market value, it
may write a put option on that security at an exercise price which reflects the
lower price it is willing to pay. The buyer of the put option generally will not
exercise the option unless the market price of the underlying security declines
to a price near or below the exercise price. If the Small-Cap Value Series
writes a listed put, the price of the underlying stock declines and the option
is exercised, the premium, net of transaction charges, will reduce the purchase
price paid by the Small-Cap Value Series for the stock. The price of the stock
may decline by an amount in excess of the premium, in which event the Small-Cap
Value Series would have foregone an opportunity to purchase the stock at a lower
price.
If, prior to the exercise of a put option, the Fund determines that it no longer
wishes to invest in the stock on which the put option had been written, the Fund
may be able to effect a closing purchase transaction on an exchange by
purchasing a put option of the same series as the one which it has previously
written. The cost of effecting a closing purchase transaction may be greater
than the premium received on writing the put option and there is no guarantee
that a closing purchase transaction can be effected.
The Small-Cap Value Series may only write covered put options to the extent that
cover for such options does not exceed 25% of its net assets. The Small-Cap
Value Series 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.
Stock Index Options. Except as describe below, the Small-Cap Value Series will
write call options on indices only if on such date it holds a portfolio of
stocks at least equal to the value of the index times the multiplier times the
number of contracts. When the Small-Cap Value Series writes a call option on a
broadly-based stock market index, the Fund will segregate or put into escrow
with its custodian, or pledge to a broker as collateral for the option, one or
more "qualified securities" with a market value at the time the option is
written of not less than 100% of the current index value times the multiplier
times the number of contracts.
Segregated Accounts. If the Small-Cap Value Series has written an option on an
industry or market segment index, it will segregate or put into escrow with its
custodian, or pledge to a broker as collateral for the option, at least ten
"qualified securities," which are securities of an issuer in such industry or
market segment, with a market value at the time the option is written of not
less than 100% of the current index value times the multiplier times the number
of contracts. A "qualified security" is an equity security which is listed on a
national securities exchange or listed on the National Association of Securities
Dealers Automated Quotation System against which the Small-Cap Value Series has
not written a stock call option and which has not been hedged by the Small-Cap
Value Series by the sale of stock index futures. Such securities will include
stocks which represent at least 50% of the weighing of the industry or market
segment index and will represent at least 50% of the Small-Cap Value Series'
holdings in that industry or market segment. No individual security will
represent more than 25% of the amount so segregated, pledged or escrowed. If at
the close of business on any day the market value of such qualified securities
so segregated, escrowed or pledged falls below 100% of the current index value
times the multiplier times the number of contracts, the Small-Cap Value Series
will so segregate, escrow or pledge an amount in cash, Treasury bills or other
high-grade short-term obligations equal in value to the difference. In addition,
when the Small-Cap Value Series writes a call on an index which is in-the-money
at the time the call is written, it will segregate with its custodian or pledge
to the broker as collateral cash, equity securities, non-investment grade debt,
short term U.S. Government securities or other high-grade short-term debt
obligations equal in value to the amount by which the call is in-the-money times
the multiplier times the number of
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contracts. Any amount segregated pursuant to the foregoing sentence may be
applied to the Small-Cap Value Series' obligation to segregate additional
amounts in the event that the market value of the qualified securities falls
below 100% of the current index value times the multiplier times the number of
contracts. However, if the Small-Cap Value Series holds a call on the same index
as the call written where the exercise price of the call held is equal to or
less than the exercise price of the call written or greater than the exercise
price of the call written if the difference is maintained by the Small-Cap Value
Series in cash, equity securities, non-investment grade debt, treasury bills or
other high-grade short-term obligations in a segregated account with its
custodian, it will not be subject to the requirements describe in this
paragraph. In instances involving the purchase of stock index futures contracts
by the Small-Cap Value Series, an amount of cash or permitted securities equal
to the market value of the futures contracts will be deposited in a segregated
account with its custodian and/or in a margin account with a broker to
collateralize the position and thereby insure that the use of such futures are
unleveraged.
Under regulations of the Commodity Exchange Act, investment companies registered
under the Act are exempt from the definition of "commodity pool operator,"
provided all of the Small-Cap Value Series' commodity futures or commodity
options transactions constitute bona fide hedging transactions within the
meaning of the CFTC's regulations. The Small-Cap Value Series will use stock
index futures and options on futures as described herein in a manner consistent
with this requirement.
Stock Index Futures. The Small-Cap Value Series will engage in transactions in
stock index futures contracts as a hedge against changes resulting from market
conditions in the values of securities which are held in the Small-Cap Value
Series' portfolio or which it intends to purchase. The Fund will engage in such
transactions when they are economically appropriate for the reduction of risks
inherent in the ongoing management of the Fund. The Fund may not purchase or
sell stock index futures if, immediately thereafter, more than one-third of its
net assets would be hedged and, in addition, except as described above in the
case of a call written and held on the same index, will write call options on
indices or sell stock index futures only if the amount resulting from the
multiplication of the then current level of the index (or indices) upon which
the option or future contract(s) is based, the applicable multiplier(s), and the
number of futures or options contracts which would be outstanding, would not
exceed one-third of the value of the Small-Cap Value Series' net assets.
Risks Of Transactions In Stock Options. Writing options involves the risk that
there will be no market in which to effect a closing transaction. An option
position may be closed out only on an exchange which provides a secondary market
for an option of the same series. Although the Small-Cap Value Series will
generally write only those options for which there appears to be an active
secondary market, there is no assurance that a liquid secondary market on an
exchange will exist for any particular option, or at any particular time, and
for some options no secondary market on an exchange may exist. If the Small-Cap
Value Series, as a covered call option writer, is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise.
Risks Of Options On Indices. The Small-Cap Value Series' purchase and sale of
options on indices will be subject to risks described above under "Risk of
Transactions in Stock Options." In addition, the distinctive characteristics of
options on indices create certain risks that are not present with stock options.
Because the value of an index option depends upon movements in the level of the
index rather than the price of a particular stock, whether the Small-Cap Value
Series' will realize a gain or loss on the purchase or sale of an option on an
index depends upon movements in the level of stock prices in the stock market
generally or in an industry or market segment rather than movements in the price
of a particular stock. Accordingly, successful use by the Small-Cap Value Series
of options on indices would be subject to the investment adviser's ability to
predict correctly movements in the direction of the stock market generally or of
a particular industry. This requires different skills and techniques than
predicting changes in the price of individual stocks.
Index prices may be distorted if trading of certain stocks included in the index
is interrupted. Trading in the index option also may be interrupted in certain
circumstances, such as if trading were halted in a substantial number of stocks
included in the index. If this occurred, the Small-Cap Value Series would not be
able to close out options which it had purchased or written and, if restrictions
on exercise were imposed, may be unable to exercise an option it holds, which
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could result in substantial losses to the Small-Cap Value Series. It is the
Small-Cap Value Series' policy to purchase or write options only on indices
which include a number of stocks sufficient to minimize the likelihood of a
trading halt in the index.
Trading in index options commenced in April 1983 with the S&P 100 option
(formerly called the CBOE 100). Since that time a number of additional index
option contracts have been introduced including options on industry indices.
Although the markets for certain index option contracts have developed rapidly,
the markets for other index options are still relatively illiquid. The ability
to establish and close out positions on such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
this market will develop in all index option contracts. The Small-Cap Value
Series will not purchase or sell any index option contract unless and until, in
Fund management's opinion, the market for such options has developed
sufficiently that such risk in connection with such transactions in no greater
than such risk in connection with options on stocks.
Special Risks Of Writing Calls On Indices. Because exercises of index options
are settled in cash, a call writer cannot determine the amount of its settlement
obligations in advance and, unlike call writing on specific stocks, cannot
provide in advance for, or cover, its potential settlement obligations by
acquiring and holding the underlying securities. However, the Small-Cap Value
Series will write call options on indices only under the circumstances described
above under "Limitations on the Purchases and Sales of Stock Options, Options on
Stock Indices and Stock Index Futures."
Price movements in the Fund's portfolio probably will not correlate precisely
with movements in the level of the index and, therefore, the Fund bears the risk
that the price of the securities held may not increase as much as the index. In
such event the Fund would bear a loss on the call which is not completely offset
by movements in the price of the Fund's portfolio. It is also possible that the
index may rise when the Small-Cap Value Series' portfolio of stocks does not
rise. If this occurred, the Fund would experience a loss on the call which is
not offset by an increase in the value of its portfolio and might also
experience a loss in its portfolio. However, because the value of a diversified
portfolio will, over time, tend to move in the same direction as the market,
movements in the value of the Small-Cap Value Series in the opposite direction
to the market would be likely to occur for only a short period or to a small
degree.
Unless the Small-Cap Value Series has other liquid assets that are sufficient to
satisfy the exercise of a call, the Small-Cap Value Series would be required to
liquidate portfolio securities in order to satisfy the exercise. Because an
exercise must be settled within hours after receiving the notice of exercise, if
the Small-Cap Value Series fails to anticipate an exercise, it may have to
borrow (in amounts not exceeding 20% of the Fund's total assets) pending
settlement of the sale of securities in its portfolio and would incur interest
charges thereon.
When the Small-Cap Value Series has written a call, there is also a risk that
the market may decline between the time the call is written and the time the
Small-Cap Value Series is able to sell stocks in its portfolio. As with stock
options, the Small-Cap Value Series will not learn that an index option has been
exercised until the day following the exercise date but, unlike a call on stock
where the Small-Cap Value Series would be able to deliver the underlying
securities in settlement, the Fund may have to sell part of its stock portfolio
in order to make settlement in cash, and the price of such stocks might decline
before they can be sold. This timing risk makes certain strategies involving
more than one option substantially more risky with index options than with stock
options. For example, even if an index call which the Small-Cap Value Series has
written is "covered" by an index call held by the Small-Cap Value Series with
the same strike price, the Small-Cap Value Series will bear the risk that the
level of the index may decline between the close of trading on the date the
exercise notice is filed with the clearing corporation and the close of trading
on the date the Small-Cap Value Series exercises the call it holds or the time
the Small-Cap Value Series sells the call which in either case would occur no
earlier than the day following the day the exercise notice was filed.
Special Risks Of Purchasing Puts And Calls On Indices. If the Small-Cap Value
Series holds an index option and exercises it before final determination of the
closing index value for that day, it runs the risk that the level of the
underlying index may change before closing. If such a change causes the
exercised option to fall out-of-the-money, the Fund will be required to pay the
difference between the closing index value and the exercise price of the option
(times the applicable multiple) to the assigned writer. Although the Small-Cap
Value Series may be able to minimize this risk by withholding exercise
instructions until just before the daily cut off time or by selling rather than
exercising an option when the index level is close to the exercise price it may
not be possible to eliminate this risk entirely because
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the cut off times for index options may be earlier than those fixed for other
types of options and may occur before definitive closing index values are
announced.
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 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 54, Chairman and President
The following outside directors are also directors or trustees of twelve other
Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow
Time Warner Inc.
1271 Avenue of the Americas
New York, New York
Senior Adviser, Time Warner Inc. Formerly, Acting Chief Executive Officer of
Courtroom Television Network (1997 - 1998). Formerly, President and Chief
Executive Officer of Time Warner Cable Programming, Inc. (1991 - 1997). Prior to
that, President and Chief Operating Officer of Home Box Office, Inc. Age 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, Jr.
Monitor Clipper Partners
650 Madison Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners and President of The Clipper Group
L.P., both private equity investment funds. Age 56.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 68.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 73.
10
<PAGE>
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
1328 Broadway (Suite 816)
New York, New York
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 a Director of Ace, Ltd. (NYSE). Age 61.
The second column of the following table sets forth the compensation accrued for
outside directors. The third column sets forth information with respect to the
equity-based benefits accrued for outside directors/trustees maintained by the
Lord Abbett-sponsored funds. The fourth column sets forth information with
respect to the retirement plan for outside directors/trustees maintained by each
of the Lord Abbett-sponsored funds. No director/trustee of the funds associated
with Lord Abbett and no officer of the funds received any compensation from the
funds for acting as a director/trustee or officer.
<TABLE>
<CAPTION>
For the Fiscal Year Ended November 30, 1998
-------------------------------------------
(1) (2) (3) (4)
Pension or For Year Ended
Retirement Benefits December 31, 1998
Accrued by the Total Compensation
Aggregate Company and Accrued by the Company and
Compensation Twelve Other Lord Twelve Other Lord
Accrued by Abbett-sponsored Abbett-sponsored
Name of Director the Company(1) Companies(2) Companies
- ---------------- ------------------------ ------------------- --------------------------
<S> <C> <C> <C>
E. Thayer Bigelow $1,772 $17,068 $ 56,000
William H.T. Bush* $512 none none
Robert B. Calhoun, Jr.** $698 none none
Stewart S. Dixon $1,744 $32,190 $ 55,000
John C. Jansing $1,721 $45,0854 $ 55,000
C. Alan MacDonald $1,720 $30,703 $ 57,400
Hansel B. Millican, Jr. $1,721 $37,747 $ 55,000
Thomas J. Neff $1,752 $19,853 $ 56,000
</TABLE>
11
<PAGE>
* Elected as of August 13, 1998
** Elected as of June 17, 1998
1. Outside directors' fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored companies based on
the net assets of each fund. A portion of the fees payable by the Company
to its outside directors is being deferred under a plan that deems the
deferred amounts to be invested in shares of the Company for later
distribution to the directors/trustees.
The amounts of the aggregate compensation payable by the Large-Cap Series
as of November 30, 1998 deemed invested in Company shares, including
dividends reinvested and changes in net asset value applicable to such
deemed investments, were: Mr. Bigelow, $369.71; Mr. Calhoun, $130.87; Mr.
Dixon, $0; Mr. Jansing, $356.17; Mr. MacDonald, $0; Mr. Millican, $360.68;
and Mr. Neff, $364.43. If the amounts deemed invested in Company shares
were added to each director's actual holdings of Company shares as of
November 30, 1998, each would own, the following: Mr. Bigelow, 16.874
shares; Mr. Calhoun, 5.973; Mr. Dixon, 132 shares; Mr. Jansing, 1,421.25
shares; Mr. MacDonald, $0 shares; Mr. Millican, 16.462 shares; and Mr.
Neff, 16.633 shares.
The amounts of the aggregate compensation payable by the Growth
Opportunities Fund as of November 30, 1998 deemed invested in Company
shares, including dividends reinvested and changes in net asset value
applicable to such deemed investments, were: Mr. Bigelow, $0; Mr. Dixon,
$0; Mr. Jansing, $0; Mr. MacDonald, $0; Mr. Millican, $0; and Mr. Neff,
$0. If the amounts deemed invested in Company shares were added to each
director's actual holdings of Company shares as of November 30, 1998, each
would own, the following: Mr. Bigelow, 0 shares; Mr. Dixon, 0 shares; Mr.
Jansing, 607.72 shares; Mr. MacDonald, 0 shares; Mr. Millican, 0 shares;
and Mr. Neff, 650.57 shares.
The amounts of the aggregate compensation payable by the Small-Cap Value
Series as of November 30, 1998 deemed invested in Company shares,
including dividends reinvested and changes in net asset value applicable
to such deemed investments, were: Mr. Bigelow, $1,035.94; Mr. Calhoun,
$513.24; Mr. Dixon, $0; Mr. Jansing, $1,004.75; Mr. MacDonald, $0; Mr.
Millican, $1,004.75; and Mr. Neff, $1,002.98. If the amounts deemed
invested in Company shares were added to each director's actual holdings
of Company shares as of November 30, 1998, each would own, the following:
Mr. Bigelow, 72.141 shares; Mr. Calhoun, 35.741; Mr. Dixon, 0 shares; Mr.
Jansing, 69.969 shares; Mr. MacDonald, 0 shares; Mr. Millican, 69.969
shares; and Mr. Neff, 71.238 shares.
2. The amounts in Column 3 were accrued by the Lord Abbett-sponsored
companies for the 12 months ended November 30, 1998 with respect to the
equity based plans established for independent directors in 1996. This
plan supercedes 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.
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 companies during the
year ended December 31, 1998.
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.
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, Fetch, Hilstad, McGruder, Morris, and Walsh are partners of Lord
Abbett; the others are employees:
Executive Vice Presidents:
Robert G. Morris, age 54
12
<PAGE>
Robert P. Fetch, age 46 (with Lord Abbett since 1995; formerly Managing Director
at Prudential Investment Advisors); Stephen J. McGruder, age 55 (with Lord
Abbett since 1995; formerly Vice President of Wafra Investment Advisory Group);
Vice Presidents:
Paul A. Hilstad, age 56 (with Lord Abbett since 1995; formerly Senior Vice
President and General Counsel of American Capital Management & Research, Inc.)
Zane Brown, age 47
Daniel E. Carper, age 47
Lawrence H. Kaplan, age 42 (with Lord Abbett since 1997 - formerly Vice
President and Chief Counsel of Salomon Brothers Asset Management Inc from 1995
to 1997, prior thereto Senior Vice President, Director and General Counsel of
Kidder Peabody Asset Management, Inc.)
Gregory M. Macosko, age 52 (with Lord Abbett since 1996; formerly Portfolio
Manager and Analyst at Royce Associates)
A. Edward Oberhaus, age 39
Keith F. O'Connor, age 43
John J. Walsh, age 63
Treasurer:
Donna M. McManus, age 38, (with Lord Abbett since 1996, formerly a Senior
Manager at Deloitte & Touche LLP).
The Funds' By-Laws provide that they shall not hold an annual meeting of
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 a
Fund's outstanding shares 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 Funds.
As of October 31, 1998, our officers and directors, as a group, owned more than
1% of the Large-Cap Series' outstanding shares. As of the same date, there was
one record holder of 5% or more of the Large-Cap Series' outstanding shares:
Edward Jones & Co. 42.1%.
ATTN: Mutual Fund
Shareholder Accounting
201 Progress Way
Maryland Hts. MO 63043
As of October 31, 1998, our officers and directors, as a group, owned more than
1% of the Growth Opportunities Fund's outstanding shares. As of the same date,
there was one record holder of 5% or more of the Growth Opportunities Fund's
outstanding shares:
Edward Jones & Co. 8.27%.
Susan Lynch
Greenwich, CT
As of October 31, 1998, our officers and directors, as a group, did not own more
than 1% of the Small-Cap Value Series' outstanding shares. As of the same date,
there was one record holder of 5% or more of the Small-Cap Value Series'
outstanding shares:
Edward Jones & Co. 9.3%.
MLPF&S for the Sole Benefit of its Customers
4800 Deer Lake Dr. E Fl 3
Jacksonville, FL
13
<PAGE>
3.
Investment Advisory And Other Services
As described under "Management" in the Prospectus, Lord Abbett is the Company's
investment manager. Eight of the 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 Company are: Stephen I. Allen, John E. Erard, Daria L. Foster, Robert I.
Gerber, W. Thomas Hudson, Michael McLaughlin, Robert J. Noelke, Mark R.
Pennington, and Christopher J. Towle. 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 "Management" in the
Prospectus. Under the Management Agreement, we are obligated to pay Lord Abbett
a monthly fee, based on average daily net assets for each month, at the annual
rate of .75 of 1% of Large-Cap Series' and Small-Cap Value Series' and .90 of 1%
of Growth Opportunities Fund's average daily net assets. In addition we are
obligated to pay all expenses not expressly assumed by Lord Abbett, including,
without limitation, outside directors' fees and expenses, association membership
dues, legal and auditing fees, taxes, transfer and dividend disbursing agent
fees, shareholder servicing costs, expenses relating to shareholder meetings,
expenses of preparing, printing and mailing stock certificates and shareholder
reports, expenses of registering our shares under federal and state securities
laws, expenses of preparing, printing and mailing prospectuses to existing
shareholders, insurance premiums, brokerage and other expenses connected with
executing portfolio transactions.
For the fiscal years ended November 1998, 1997 and 1996, Lord Abbett received
$768,547, $334,394 and $38,364, respectively, in management fees with respect to
the Large-Cap Series.
For the fiscal years ended November 30, 1997, 1996 the management fee was .75 of
1% and was waived by Lord Abbett with respect to the Growth Opportunities Fund
and, except for this waiver, would have amounted to $10,844 and $8,249,
respectively. On September 15, 1998, the Fund's shareholders voted to raise the
management fee to .90 of 1%. This fee was also waived. The management fee for
the fiscal year ended November 30, 1998, except for this waiver, would have
amounted to $16,316.
For the fiscal years ended November 30, 1998, and 1997, Lord Abbett received
$4,270,210, and $1,075,019, respectively in management fees with respect to
Small-Cap Value Series. For fiscal year ended November 30, 1996, total fees in
the amount of $24,461 were waived.
We 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 our shares under
federal and state securities laws, expenses of preparing, printing and mailing
prospectuses to existing shareholders, insurance premiums, brokerage and other
expenses connected with executing portfolio transactions.
Lord Abbett Distributor LLC serves as the principal underwriter for the Funds.
The Bank of New York ("BNY"), 48 Wall Street, New York, New York, is the
Company's custodian. In accordance with the requirements of Rule 17f-5, the
Company's directors have approved arrangements permitting the Funds' foreign
assets not held by BNY or its foreign branches to be held by certain qualified
foreign banks and depositories.
Deloitte & Touche LLP, Two World Financial Center, New York, New York, are the
independent auditors of the Company and must be approved at least annually by
our Board of Directors to continue in such capacity. Independent public
accountants perform audit services for the Fund including the examination of
financial statements included in our Annual Report to Shareholders. United
Missouri Bank of Kansas City, N.A., Tenth and Grand, Kansas City, Missouri, acts
as the transfer agent and dividend disbursing agent for the Funds.
14
<PAGE>
4.
Portfolio Transactions
The Company's policy is to obtain best execution on all our portfolio
transactions, which means that it seeks to have purchases and sales of portfolio
securities executed at the most favorable prices, considering all costs of the
transaction including brokerage commissions and dealer markups and markdowns and
taking into account the full range and quality of the brokers' services.
Consistent with obtaining best execution, we generally pay, as described below,
a higher commission than some brokers might charge on the same transaction. 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 each Lord Abbett-sponsored fund
and also are employees of Lord Abbett. These traders do the trading as well for
other accounts -- investment companies (of which they are also officers) and
other investment clients -- managed by Lord Abbett. They are responsible for
obtaining best execution.
We pay a commission rate that we believe is appropriate to give maximum
assurance that our brokers will provide us, on a continuing basis, the highest
level of brokerage services available. While we do not always seek the lowest
possible commissions on particular trades, we believe that our commission rates
are in line with the rates that many other institutions pay. Our traders are
authorized to pay brokerage commissions in excess of those that other brokers
might accept on the same transactions in recognition of the value of the
services performed by the executing brokers, viewed in terms of either the
particular transaction or the overall responsibilities of Lord Abbett with
respect to us and the other accounts they manage. Such services include showing
us trading opportunities including blocks, a willingness and ability to take
positions in securities, knowledge of a particular security or market proven
ability to handle a particular type of trade, confidential treatment, promptness
and reliability.
Some of these brokers also provide research services at least some of which are
useful to Lord Abbett in their overall responsibilities with respect to us and
the other accounts they manage. Research includes the furnishing of analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts and trading equipment and
computer software packages, acquired from third-party suppliers, that enable
Lord Abbett to access various information bases. Such services may be used by
Lord Abbett in servicing all their accounts, and not all of such services will
necessarily be used by Lord Abbett in connection with their management of the
Fund; conversely, such services furnished in connection with brokerage on other
accounts managed by Lord Abbett may be used in connection with their management
of the Fund, and not all of such services will necessarily be used by Lord
Abbett in connection with their advisory services to such other accounts. We
have been advised by Lord Abbett that research services received 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 Lord Abbett-sponsored funds 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 the Lord
Abbett-sponsored funds' shares and/or shares of other Lord Abbett-sponsored
funds may be preferred.
15
<PAGE>
If other clients of Lord Abbett buy or sell the same security at the same time
as a Lord Abbett-sponsored fund does, 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 a Lord Abbett-sponsored fund in the buying and selling of
the same securities as described above. If these clients wish to buy or sell the
same security as a Lord Abbett-sponsored fund does, they may have their
transactions executed at times different from our transactions and thus may not
receive the same price or incur the same commission cost as a Lord
Abbett-sponsored fund does.
The Lord Abbett-sponsored funds will not seek "reciprocal" dealer business (for
the purpose of applying commissions in whole or in part for their benefit or
otherwise) from dealers as consideration for the direction to them of portfolio
business.
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 Company 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 Funds' 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 net asset value per share for the Class B and C shares will be determined in
the same manner as for the Class A shares (net assets divided by shares
outstanding).
The maximum offering price of Class A shares of the Large-Cap Series on November
30, 1998 was computed as follows:
Net asset value per share (net assets divided
by shares outstanding) ................................................. $21.91
Maximum offering price per share (net asset
value divided by .9425) ................................................ $23.25
The maximum offering price of Class A shares of the Small-Cap Value Series on
November 30, 1998 was computed as follows:
Net asset value per share (net assets divided
by shares outstanding) ................................................. $14.36
Maximum offering price per share (net asset
value divided by .9425) ) .............................................. $15.24
16
<PAGE>
The Company on behalf of the funds has entered into a distribution agreement
with Lord Abbett Distributor LLC, a New York limited liability company ("Lord
Abbett Distributor"), under which Lord Abbett Distributor is obligated to use
its best efforts to find purchasers for the shares of the Funds, and to make
reasonable efforts to sell the shares so long as, in Lord Abbett Distributor's
judgment, a substantial distribution can be obtained by reasonable efforts.
For the last three fiscal years Lord Abbett, as the Funds' principal
underwriter, received net commissions after allowance of a portion of the sales
charge to independent dealers with respect to Class A shares as follows:
Large-Cap Series
Year Ended November 30,
-----------------------
1998 1997 1996
---- ---- ----
Gross sales charge $1,508,922 $1,005,548 $270,755
Amount allowed to dealers $1,294,173 $ 864,739 $234,486
---------- ---------- --------
Net commissions
received by
Lord Abbett $214,749 $ 140,809 $ 36,269
---------- ---------- --------
17
<PAGE>
Small-Cap Value Series
<TABLE>
<CAPTION>
Period December 13, 1995
Year Ended Year Ended (commencement of operations)
November 30, 1998 November 30, 1997 to November 30, 1996
----------------- ----------------- --------------------
<S> <C> <C> <C>
Gross sales charge $3,448,187 $7,021,169 $46,090
Amount allowed to dealers $2,980,530 $6,026,914 $39,745
---------- ---------- -------
Net commissions
received by
Lord Abbett $ 467,657 $ 994,255 $6,345
---------- ---------- -------
</TABLE>
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 Funds offer investors four different classes of shares,
designated Classes A, B, C and P. 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
advisory 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 a Fund a contingent deferred sales charge ("CDSC") of 1%
except for redemptions under a special retirement wrap program. Class A shares
of the Large-Cap Research Fund are subject to service and distribution fees that
are currently estimated to total annually approximately .23 of 1% of the annual
net asset value of the Class A shares. Class A shares of the Growth
Opportunities Fund 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. Class A shares of the Small-Cap Value Fund
are subject to service and distribution fees that are currently estimated to
total annually approximately .31 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."
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. That CDSC
varies depending on how long you own your shares. Class B shares are subject to
service and distribution fees at an annual rate of 1% of the annual net asset
value of the Class B shares. The CDSC and the Rule 12b-1 plan applicable to the
Class B shares are described in "Buying Class B Shares."
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 a Fund a CDSC of 1%. Class C shares are
18
<PAGE>
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 in "Buying Class C Shares."
Class P Shares. If you buy Class P shares, you pay no sales charge at the time
of purchase, and if you redeem your shares you pay no CDSC. Class P shares are
subject to service and distribution fees at an annual rate of .45 of 1% of the
average daily net asset value of the Class P shares. The Rule 12b-1 plan
applicable to the Class P shares is described in "Class P Rule 12b-1 Plan."
Class P shares are available to a limited number of investors.
Which Class Of Shares Should You Choose? Once you decide which 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 Funds' class-specific expenses and the
effect of the different types of sales charges on your investment will affect
your investment results over time. The most important factors are how much you
plan to invest and how long you plan to hold your investment. If your goals and
objectives change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider another class of
shares.
In the following discussion, to help provide you and your financial adviser with
a framework in which to choose a class, we have made some assumptions using a
hypothetical investment in the Funds. 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 a 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
19
<PAGE>
$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, 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 a 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, C And P Rule 12b-1 Plans. As described in the Prospectus, the
Company has adopted a Distribution Plan and Agreement pursuant to Rule 12b-1 of
the Act for each of the four Classes: the "A Plan," the "B Plan" the "C Plan,"
and the "P 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's
shareholders. The expected benefits include greater sales and lower redemptions
of Class shares, which should allow each Class to maintain a consistent cash
flow, and a higher quality of service to shareholders by authorized institutions
than would otherwise be the case. Lord Abbett uses all amounts received under
each Plan as described in the Prospectus and for payments to dealers for (i)
providing continuous services to the 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 Company.
The fees payable under the A Plan, B Plan, C Plan, and P Plan are described in
the Prospectus. For the fiscal year ended November 30, 1998, the fees paid to
dealers under the A Plan for the Large-Cap Series was $183,383; for the Growth
Opportunities Fund $473; and for the Small-Cap Value Series $692,900.
For the fiscal year ended November 30, 1998, the fee paid to dealers under the B
Plan for the Large-Cap Series was $265,809; for the Growth Opportunities Fund
$152; and for the Small-Cap Value Series $2,199,355.
For the fiscal year ended November 30, 1998, the fee paid to dealers under the C
Plan for the Large-Cap Series was $44,918; for the Growth Opportunities Fund
$116; and for the Small-Cap Value Series $730,710.
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<PAGE>
Each Plan requires the directors to review, on a quarterly basis, written
reports of all amounts expended pursuant to the Plan and the purposes for which
such expenditures were made. Each Plan shall continue in effect only if its
continuance is specifically approved at least annually by vote of the directors,
including a majority of the directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related to the Plan ("outside directors"), cast in
person at a meeting called for the purpose of voting on the Plan. No Plan may be
amended to increase materially above the limits set forth therein the amount
spent for distribution expenses thereunder without approval by a majority of the
outstanding voting securities of the applicable Class and the approval of a
majority of the directors, including a majority of the outside directors. Each
Plan may be terminated at any time by vote of a majority of the outside
directors or by vote of a majority of its Class's outstanding voting securities.
Contingent Deferred Sales Charges. A Contingent Deferred Sales Charge ("CDSC")
applies upon early redemption of shares, regardless of class, and: (i) 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 (ii) will not be imposed on the
amount of your account value represented by the increase in net asset value over
the initial purchase price (including increases due to the reinvestment of
dividends and capital gains distributions) and upon early redemption of shares.
Class A Shares. As stated in the Prospectus, a CDSC of 1% is imposed with
respect to those Class A shares (or Class A shares of another Lord
Abbett-sponsored fund or Fund acquired through exchange of such shares) on which
a Fund has paid the one-time distribution fee of 1% if such shares are redeemed
out of the Lord Abbett-sponsored family of funds within a period of 24 months
from the end of the month in which the original sale occurred.
Class B Shares. As stated in the Prospectus, if Class B shares (or Class B
shares of another Lord Abbett-sponsored fund or Fund acquired through exchange
of such shares) are redeemed out of the Lord Abbett-sponsored family of funds
for cash before the sixth anniversary of their purchase, a CDSC will be deducted
from the redemption proceeds. The Class B CDSC is paid to Lord Abbett
Distributor to reimburse its expenses, in whole or in part, for providing
distribution-related service in connection with the sale of Class B shares.
To determine whether the CDSC applies to a redemption, a 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 charge will depend on the number of years since you
invested and the dollar amount being redeemed, according to the following
schedule:
<TABLE>
<CAPTION>
Anniversary of the Day on Contingent Deferred Sales Charge
Which the Purchase Order Was Accepted on Redemptions (As % of Amount Subject to Charge)
<S> <C>
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
</TABLE>
In the table, an "anniversary" is the 364th day subsequent to the date of
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, if Class C shares are redeemed for
cash before the first anniversary of their purchase, the redeeming shareholder
will be required to pay to a 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 a Fund's
Class C shares.
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<PAGE>
General. Each 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 CDSC's 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. In the case of Class A and
Class C shares, the CDSC is received by the applicable Fund and is intended to
reimburse all or a portion of the amount paid by the Fund if the shares are
redeemed before the Fund has had an opportunity to realize the anticipated
benefits of having a long-term shareholder account in the Fund. In the case of
Class B shares, the CDSC is received by Lord Abbett Distributor and is intended
to reimburse its expenses of providing distribution-related service to the Fund
(including recoupment of the commission payments made) in connection with the
sale of Class B shares before Lord Abbett Distributor has had an opportunity to
realize its anticipated reimbursement by having such a long-term shareholder
account subject to the B Plan distribution fee.
The other Funds which participate in the Telephone Exchange Privilege (except
(a) Lord Abbett U.S. Government Securities Money Market Fund, Inc. ("GSMMF"),
(b) certain funds 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) amounts
derived from increases in the value of the account above the total cost of
shares being redeemed due to increases in net asset value; (ii) shares with
respect to which no Lord Abbett fund paid a 12b-1 fee and, in the case of Class
B shares, Lord Abbett Distributor paid no sales charge or service fee (including
shares acquired through reinvestment of dividend income and capital gains
distributions); or (iii) shares which, together with Exchanged Shares, have been
held continuously for 24 months from the end of the month in which the original
sale occurred (in the case of Class A shares), for six years or more (in the
case of Class B shares) 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
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<PAGE>
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 each Series' 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, Lord Abbett
Equity Fund ("LAEF") which is not issuing shares, and Small-Cap Value Fund of
Lord Abbett Research Fund ("LARF"), not currently being offered to the general
public.
Statement of Intention. Under the terms of the Statement of Intention to invest
$50,000 or more over a 13-month period as described in the Prospectus, shares of
a Lord Abbett-sponsored fund (other than shares of LAEF, LASF, LARF, GSMMF and
AMMF, unless holdings in GSMMF and AMMF are attributable to shares exchanged
from a Lord Abbett-sponsored fund offered with a front-end, back-end or level
sales charge) currently owned by you are credited as purchases (at their current
offering prices on the date the Statement is signed) toward achieving the stated
investment and reduced initial sales charge for Class A shares. Class A shares
valued at 5% of the amount of intended purchases are escrowed and may be
redeemed to cover the additional sales charge payable if the Statement is not
completed. The Statement of Intention is neither a binding obligation on you to
buy, nor on a Fund to sell, the full amount indicated.
Rights Of Accumulation. As stated in the Prospectus, purchasers (as defined in
the Prospectus) may accumulate their investment in Lord Abbett-sponsored funds
(other than LAEF, LARF, LASF, GSMMF, and AMMF unless holdings in GSMMF or AMMF
are attributable to shares exchanged from a Lord Abbett-sponsored fund offered
with a front-end, back-end or level sales charge) so that a current investment,
plus the purchaser's holdings valued at the current maximum offering price,
reach a level eligible for a discounted sales charge for Class A shares.
Net Asset Value Purchases Of Class A Shares. As stated in the Prospectus, our
Class A shares may be purchased at net asset value by our directors, employees
of Lord Abbett, employees of our shareholder servicing agent and employees of
any securities dealer having a sales agreement with Lord Abbett who consents to
such purchases or by the director or custodian under any pension or
profit-sharing plan or Payroll Deduction IRA established for the benefit of such
persons or for the benefit of employees of any national securities trade
organization to which Lord Abbett belongs or any company with an account(s) in
excess of $10 million managed by Lord Abbett on a private-advisory-account
basis. For purposes of this paragraph, the terms "directors" and "employees"
include a trustee'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 other family members and retired directors and employees.
Our Class A shares also may be purchased at net asset value: (a) at $1 million
or more; (b) with dividends and distributions from Class A shares of other Lord
Abbett-sponsored funds, except for LARF, LAEF and LASF; (c) under the loan
feature of the Lord Abbett-sponsored prototype 403(b) plan for share purchases
representing the repayment of principal and interest; (d) by certain authorized
brokers, dealers, registered investment advisers or other financial institutions
who have entered into an agreement with Lord Abbett Distributor in accordance
with certain standards
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<PAGE>
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 advisory 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; (g) in connection with a merger,
acquisition or other reorganization; and (h) through a "special retirement wrap
program" sponsored by an authorized institution showing one or more
characteristics distinguishing it, in the opinion of Lord Abbett Distributor
from a mutual fund advisory 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 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 Funds have 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 a 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
is necessary to reduce disproportionately burdensome expenses in servicing
shareholder accounts. At least 6 month's prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
Div-Move. Under the Div-Move service described in the Prospectus, you can invest
the dividends paid on your account of any class into an existing account of the
same class in any other Eligible Fund. The account must be either your account,
a joint account for you and your spouse, a single account for your spouse, or a
custodial account for your minor child under the age of 21. You should read the
prospectus of the other fund before investing.
Invest-A-Matic. The Invest-A-Matic method of investing in the Funds and/or any
other Eligible Fund is described in the Prospectus. To avail yourself of this
method you must complete the application form, select the time and amount of
your bank checking account withdrawals and the funds for investment, include a
voided, unsigned check and complete the bank authorization.
Systematic Withdrawal Plans. The Systematic Withdrawal Plan ("SWP") also is
described in the Prospectus. You may establish a SWP if you own or purchase
uncertificated shares having a current offering price value of at least $10,000.
Lord Abbett prototype retirement plans have no such minimum. With respect to a
SWP for Class B shares, the CDSC will be waived for redemptions of 12% or less
per year and for redemptions over 12% per year, the CDSC will apply to the
entire redemption. Therefore, please contact the Funds 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.
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<PAGE>
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 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. 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 Funds compute the average annual compounded rate of total return for each
class during specified periods that would equate the initial amount invested to
the ending redeemable value of such investment by adding one to the computed
average annual total return, raising the sum to a power equal to the number of
years covered by the computation and multiplying the result by one thousand
dollars, which represents a hypothetical initial investment. The calculation
assumes deduction of the maximum sales charge from the initial amount invested
and reinvestment of all income dividends and capital gains distributions on the
reinvestment dates at prices calculated as stated in the Prospectus. The ending
redeemable value is determined by assuming a complete redemption at the end of
the period(s) covered by the average annual total return computation.
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment (unless the return is shown at net asset value). For Class B
shares, the payment of the applicable CDSC (5.0% prior to the first anniversary
of purchase, 4.0% prior to the second anniversary of purchase, 3.0% prior to the
third and fourth anniversaries of purchase, 2.0% prior to the fifth anniversary
of purchase, 1.0% prior to the sixth anniversary of purchase and no CDSC on and
after the sixth anniversary of purchase) is applied to a Fund's investment
result for that class for the time period shown (unless the total return is
shown at net asset value). For Class C shares, the 1.0% CDSC is applied to a
Fund's investment result for that class for the time period shown prior to the
first anniversary of purchase (unless the total return is shown at net asset
value). Total returns also assume that all dividends and capital gains
distributions during the period are reinvested at net asset value per share, and
that the investment is redeemed at the end of the period. Total returns also
assume that all dividends and capital gains distributions during the period are
reinvested at net asset value per share, and that the investment is redeemed at
the end of the period.
Using the method to compute average annual compounded total return described
above for the Class A shares of the Large-Cap Series for each of the fiscal
years ended November 30, 1996, 1997, and 1998, the average annual rates of total
return for Class A were 26.25%, 19.87%, and 13.45%, respectively. For the same
periods for the Growth Opportunities Fund, the average annual rates of return
for Class A were 27.81%, 28.90%, and 5.71%, respectively. And for the Small-Cap
Value Series for the period December 13, 1995 to November 30, 1996, the fiscal
years ended November 30, 1997 and 1998, the average annual rates of total return
were 28.24%, 37.89%, and (11.71)%, respectively.
Our yield quotation for each class is based on a 30-day period ended on a
specified date, computed by dividing the net investment income per share earned
during the period by the maximum offering price per share of such class on the
last day of the period. This is determined by finding the following quotient:
take the dividends and interest earned during the period for a class minus its
expenses accrued for the period and divide by the product of: (i) the average
daily number of Class shares outstanding during the period that were entitled to
receive dividends; and (ii) the maximum offering price per share of such class
on the last day of the period. To this quotient add one. This sum is multiplied
by itself five times. Then one is subtracted from the product of this
multiplication and the remainder is multiplied by two. Yield for the Class A
shares reflects the deduction of the maximum initial sales charge, but may also
be shown based on the Class A net asset value per share. Yields for Class B and
C shares do not reflect the deduction of the CDSC.
These figures represent past performance, and an investor should be aware that
the investment return and principal value of a Fund's investment will fluctuate
so that an investor's shares, when redeemed, may be worth more or less than
their original cost. Therefore, there is no assurance that this performance will
be repeated in the future.
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<PAGE>
7.
Taxes
The value of any shares redeemed by each Fund or repurchased or otherwise sold
may be more or less than your tax basis in the shares at the time of
disposition. Any gain will generally be taxable for United States federal income
tax purposes. Any loss realized on the disposition of fund shares which you have
held for six months or less will be treated for tax purposes as a long-term
capital loss to the extent of any "capital gains distributions" which you
received with respect to such shares. Losses on the sale of shares are not
deductible if, within a period beginning 30 days before the date of the sale and
ending 30 days after the date of the sale, the taxpayer acquires shares that are
substantially identical.
The writing of call options and other investment techniques and practices which
a Fund may utilize may affect the character and timing of the recognition of
gains and losses. Such transactions may increase the amount of short-term
capital gain realized by such Fund, which is taxed as ordinary income when
distributed to shareholders. Limitations imposed by the Internal Revenue Code on
regulated investment companies may restrict a Fund's ability to engage in
transactions in options.
A Fund may be subject to foreign withholding taxes, which would reduce the yield
on its investments. It is generally expected that fund shareholders who are
subject to United States federal income tax will not be entitled to claim a
federal income tax credit or deduction for foreign income taxes paid by such
Fund.
Each Fund will be subject to a 4% non-deductible excise tax on certain amounts
not distributed or treated as having been distributed on a timely basis each
calendar year. Each Fund intends to distribute to shareholders each year an
amount adequate to avoid the imposition of such excise tax.
Dividends paid by a Fund will qualify for the dividends-received deduction for
corporations to the extent they are derived from dividends paid by domestic
corporations.
Gain and loss realized by a 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 gain or loss is 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
gain and will be reduced by the net amount, if any, of such foreign exchange
loss.
If a Fund purchases shares in certain foreign investment entities called
"passive foreign investment companies," they may be subject to United States
federal income tax on a portion of any "excess distribution" or gain from the
disposition of such shares, even if such income is distributed as a taxable
dividend by the Fund to its shareholders. Additional charges in the nature of
interest may be imposed on either the Fund or its shareholders in respect of
deferred taxes arising from such distributions or gains. If the Funds were to
make a "qualified electing fund" election with respect to its investment in a
passive foreign investment company, in lieu of the foregoing requirements, such
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 such Fund.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to United States persons (United States citizens or residents and
United States domestic corporations, partnerships, trusts and estates.) Each
shareholder who is not a United States person should consult his tax adviser
regarding the U.S. and foreign tax consequences of the ownership of shares of a
Fund, including a 30% (or lower treaty rate) United States withholding tax on
dividends representing ordinary income and net short-term capital gains, and the
applicability of United States gift and estate taxes.
26
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8.
Information About the Company
The directors, trustees and officers of Lord Abbett-sponsored mutual funds,
together with the partners and employees of Lord Abbett, are permitted to
purchase and sell securities for their personal investment accounts. In engaging
in personal securities transactions, however, such persons are subject to
requirements and restrictions contained in the Fund's Code of Ethics which
complies, in substance, with each of the recommendations of the Investment
Company Institute's Advisory Group on Personal Investing. Among other things,
the Code requires that Lord Abbett partners and employees obtain advance
approval before buying or selling securities, submit confirmations and quarterly
transaction reports, and obtain approval before becoming a director of any
company; and it prohibits such persons from investing in a security 7 days
before or after any Lord Abbett-sponsored fund or Lord Abbett-managed account
considers a trade or trades in such security, prohibiting profiting on trades of
the same security within 60 days and trading on material and non-public
information. The Code imposes certain similar requirements and restrictions on
the independent directors and trustees of each Lord Abbett-sponsored mutual fund
to the extent contemplated by the recommendations of such Advisory Group.
9.
Financial Statements
The financial statements for the fiscal year ended November 30, 1998 and the
reports of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1998 Annual Reports to Shareholders of the Lord
Abbett Research Fund, Inc. and the Growth Opportunities 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.
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