Lord Abbett Affiliated Fund
Lord Abbett Growth Opportunities Fund
Lord Abbett High Yield Fund
Lord Abbett Securities Trust -
International Series
Lord Abbett Research Fund -
Large-Cap Series
Small-Cap Value Series
Class Y Shares
Prospectus
March 1, 2000
[LOGO]
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
Only Class Y shares of the International Series, the Large-Cap Series and the
Small-Cap Value Series are available in all states. Please call 800-821-5129 for
further information.
<PAGE>
Table of Contents
The Funds
Information about goal/ Affiliated Fund 2
principal strategy, main Growth Opportunities Fund 5
risks, performance and fees High Yield Fund 8
and expenses International Series 11
Large-Cap Series 14
Small-Cap Value Series 17
Your Investment
Information for managing Purchases 20
your Fund account Redemptions 21
Distributions and Taxes 21
Services For Fund Investors 22
Management 22
For More Information
How to learn more Other Investment Techniques 24
about the Funds Glossary of Shaded Terms 27
Recent Performance 27
Financial Information
Financial highlights, Affiliated Fund 30
line graph comparisons of each Growth Opportunities Fund 32
Fund and broker compensation High Yield Fund 34
International Series 36
Large-Cap Series 38
Small-Cap Value Series 40
How to learn more about the Back Cover
Funds and other Lord Abbett Funds
<PAGE>
Affiliated Fund
GOAL / PRINCIPAL STRATEGY
The Fund's investment objective is long-term growth of capital and income
without excessive fluctuations in market value.
To pursue this goal, the Fund purchases stocks of large, seasoned, U.S. and
multinational companies which we believe are undervalued. The Fund chooses
stocks using
o quantitative research to identify which stocks we believe represent
the best bargains
o fundamental research to learn about a company's operating environment,
resources and strategic plans and to assess its prospects for
exceeding earnings expectations
o business cycle analysis to determine how buying or selling securities
changes our overall portfolio's sensitivity to interest rates and
economic conditions
The Fund is intended for investors looking for long-term growth with low
fluctuations in market value. For this reason, we will forego some
opportunities for gains when, in our judgment, they are too risky. The Fund
tries to keep its assets invested in securities selling at reasonable
prices in relation to value.
While there is the risk that an investment may never reach what we think is
its full value, or may go down in value, our emphasis on large, seasoned
company bargain stocks may limit our downside risk because bargain stocks
in theory are already underpriced and large, seasoned company stocks tend
to be less volatile than small company stocks.
We generally sell a stock when we think it is no longer a bargain, seems
less likely to benefit from the current market and economic environment,
shows deteriorating fundamentals or falls short of our expectations.
While typically fully invested, at times we may take a temporary defensive
position by investing some of the Fund's 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 Fund is subject to the general risks and considerations associated with
equity investing, as well as the particular risks associated with bargain
stocks. The value of your investment will fluctuate in response to
movements in the stock market in general and to the changing prospects of
individual companies in which the Fund invests. Bargain stocks may perform
differently than the market as a whole and other types of stocks, such as
small company stocks and growth stocks. This is because different types of
stocks tend to shift in and out of favor depending on market and economic
conditions. The market may fail to recognize the intrinsic value of
particular bargain stocks for a long time. In addition, if the Fund's
assessment of a company's value or prospects for exceeding earnings
expectations or market conditions is wrong, the Fund could suffer losses or
produce poor performance relative to other funds, even in a rising market.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money in the Fund.
We or the Fund refers to Lord Abbett Affiliated Fund, Inc.
About the Fund. This Fund is a professionally managed portfolio primarily
holding securities purchased with the pooled money of investors. It strives to
reach its stated goal, although as with all funds, it cannot guarantee results.
Large companies are established companies that are considered "known
quantities." Large companies often have the resources to weather economic
shifts, although they can be slower to innovate than small companies.
Seasoned companies are usually established companies whose securities have
gained a reputation for quality with the investing public and enjoy liquidity in
the market.
Bargain stocks are stocks of com-panies which we believe the market undervalues
according to certain financial measurements of their intrinsic worth or business
prospects.
Small-company stocks are stocks of smaller companies which often are new and
less established, with a tendency to be faster-growing but more volatile than
large company stocks.
Growth stocks are stocks which exhibit faster-than-average gains in earnings and
are expected to continue profit growth at a high level, but also tend to be more
volatile than bargain stocks.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies used by the Fund and
their risks.
2 The Funds
<PAGE>
Affiliated Fund
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class Y shares
from calendar year to calendar year.
================================================================================
Bar Chart (per calendar year) - Class Y Shares
================================================================================
[GRAPHIC OMITTED]
Best Quarter 2nd Q `99 10.9% Worst Quarter 3rd Q `99 -6.6%
================================================================================
The table below shows how the average annual total returns of the Fund's
Class Y shares compare to those of a broad-based securities market index
and a more narrowly based index that more closely reflects the market
sectors in which the Fund invests.
================================================================================
Average Annual Total Returns Through December 31, 1999
================================================================================
Share Class 1 Year Since Inception(2)
Class Y shares 17.23% 11.66%
- --------------------------------------------------------------------------------
S&P 500(R)Index(1) 21.03% 19.51%(3)
- --------------------------------------------------------------------------------
S&P Barra Value Index(1) 12.72% 8.79%(3)
- --------------------------------------------------------------------------------
(1) Performance for the unmanaged indices does not reflect fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance.
(2) The date of inception for Class Y shares is 3/27/98.
(3) This represents total return for the period 3/31/98 - 12/31/99, to
correspond with Class Y inception date.
The Funds 3
<PAGE>
Affiliated Fund
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
================================================================================
Class Y
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- --------------------------------------------------------------------------------
(as a % of offering price) none
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge none
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets)
(as a % of average net assets)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.31%
- --------------------------------------------------------------------------------
Other Expenses 0.12%
- --------------------------------------------------------------------------------
Total Operating Expenses 0.43%
- --------------------------------------------------------------------------------
================================================================================
Example
================================================================================
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class Y shares $44 $138 $241 $542
- --------------------------------------------------------------------------------
Management fees are payable to Lord, Abbett & Co. ("Lord Abbett") for the Fund's
investment management.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
4 The Funds
<PAGE>
Growth Opportunities Fund
GOAL / PRINCIPAL STRATEGY
The Fund's investment objective is capital appreciation.
To pursue this goal, we normally invest primarily in common stocks of
mid-sized companies with market values between $1 billion and $10 billion.
The Fund uses a growth style of investing which means that we favor
companies that show the potential for stronger than expected revenue and
earnings growth. Under normal circumstances, at least 65% of our total
assets will consist of investments made in growth companies, as determined
at the time of purchase.
Typically, in choosing stocks, we look for companies using
o quantitative research to identify mid-sized companies with superior
growth possibilities.
o fundamental research to identify companies likely to produce superior
returns over a thirty-six month time frame, 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 the Fund selected companies without regard to current earnings,
following a process that sought to identify and invest in undervalued
securities.
While typically fully invested, at times 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 Fund is subject to the general risks and considerations associated with
equity investing, as well as the particular risks associated with growth
stocks. The value of your investment will fluctuate in response to
movements in the stock market in general and to the changing prospects of
individual companies in which the Fund invests. Growth stocks may grow
faster than other stocks and may be more volatile. In addition, if the
Fund's assessment of a company's potential for growth is wrong, the price
of the company's stock may decrease below the price at which the Fund
purchased the stock.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money in the Fund.
We or the Fund refers to Growth Opportunities Fund, a portfolio of Lord Abbett
Research Fund, Inc.
About the Fund. This Fund is a professionally managed portfolio primarily
holding securities purchased with the pooled money of investors. It strives to
reach its stated goal, although as with all funds, it cannot guarantee results.
Growth stocks exhibit faster-than-average gains in earnings and are expected to
continue profit growth at a high level, but also tend to be more volatile than
bargain stocks.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies used by the Fund and
their risks.
The Funds 5
<PAGE>
Growth Opportunities Fund
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class Y shares
from calendar year to calendar year.
================================================================================
Bar Chart (per calendar year) - Class Y Shares
================================================================================
[GRAPHIC OMITTED]
Best Quarter 4th Q `99 46.4% Worst Quarter 1st Q `99 -4.1%
================================================================================
The table below shows how the average annual total returns of the Fund's
Class Y shares compare to those of a broad-based securities market index.
================================================================================
Average Annual Total Returns Through December 31, 1999
================================================================================
Share Class 1 Year Since Inception(2)
Class Y shares 58.63% 88.81%
- --------------------------------------------------------------------------------
Russell Mid-Cap Growth Index(1) 51.29% 63.87%(3)
- --------------------------------------------------------------------------------
(1) Performance for the unmanaged Russell Mid-Cap Growth Index does not reflect
any fees or expenses.
(2) The date of inception for Class Y shares is 10/15/98.
(3) This represents total return for the period 10/31/98 - 12/31/99, to
correspond with Class Y inception date.
6 The Funds
<PAGE>
Growth Opportunities Fund
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
================================================================================
Class Y
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- --------------------------------------------------------------------------------
(as a % of offering price) none
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge none
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets)
(as a % of average net assets)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.90%
- --------------------------------------------------------------------------------
Other Expenses 0.40%
- --------------------------------------------------------------------------------
Total Operating Expenses 1.30%
- --------------------------------------------------------------------------------
================================================================================
Example
================================================================================
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class Y shares $132 $412 $713 $1,568
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
Lord Abbett is currently waiving the management fees
of the Fund. Lord Abbett may stop waiving the management fee
at any time. The total operating expense ratio
with the fee waiver for Class Y shares is 0.40% of average
net assets.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
The Funds 7
<PAGE>
High Yield Fund
GOAL / PRINCIPAL STRATEGY
The Fund's investment objective is to seek high current income and the
opportunity for capital appreciation to produce a high total return.
Normally, we invest in lower-rated debt securities, sometimes called "junk
bonds," which entail greater risks than investments in higher-rated debt
securities.
We believe that a high total return (current income and capital
appreciation) may be derived from an actively managed, diversified
portfolio of investments. Under normal circumstances, we invest at least
65% of our total assets in lower-rated debt securities, some of which are
convertible into common stock or have warrants to purchase common stock.
We seek unusual values, particularly in lower-rated debt securities. Higher
yield on debt securities can occur during periods of inflation when the
demand for borrowed money is high. Also, buying lower-rated bonds when the
credit risk is above average but, we think, likely to decrease, may
generate higher yields.
While typically fully invested, 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 lower-rated bonds in which the Fund invests involve risks that the
bond's issuers will not make payments of interest and principal payments
when due. Some issuers may default as to principal and/or interest payments
after we purchase their securities. Through portfolio diversification,
credit analysis and attention to current developments and trends in
interest rates and economic conditions, we attempt to reduce investment
risk, but losses may occur. In addition, the value of your investment will
change as interest rates fluctuate. When interest rates decline, share
value may rise. When interest rates rise, share value may decline. The Fund
also uses investment practices that could adversely affect performance,
such as investments in foreign securities and illiquid securities.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money in the Fund.
We or the Fund refers to Lord Abbett High Yield Fund.
About the Fund. This Fund is a professionally managed portfolio primarily
holding securities purchased with the pooled money of investors. It strives to
reach its stated goal, although as with all funds, it cannot guarantee results.
High yield debt securities, commonly known as "junk bonds," 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.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies used by the Fund and
their risks.
8 The Funds
<PAGE>
High Yield Fund
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less. Performance for Class Y shares is not shown because
the class has less than one year of performance. Returns for Class Y shares
are expected to be somewhat higher than those of Class A shares of the Fund
because Class Y shares have lower expenses.
================================================================================
Bar Chart (per calendar year) - Class A Shares
================================================================================
[GRAPHIC OMITTED]
Best Quarter 4th Q `99 4.0% Worst Quarter 3rd Q `99 -0.81%
================================================================================
The table below shows how the average annual total returns of the Fund's
Class A shares compare to those of two broad-based securities market
indices. The Fund's returns reflect payment of the maximum applicable
front-end sales charges.
================================================================================
Average Annual Total Returns Through December 31, 1999
================================================================================
Share Class 1 Year Since Inception(3)
Class A shares(1) 1.50% 1.50%
- --------------------------------------------------------------------------------
Merrill Lynch High Yield Master Index(2) 1.57% 1.57%(4)
- --------------------------------------------------------------------------------
First Boston High Yield Index(2) 3.29% 3.29%(4)
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 5.75%
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance.
(3) The date of inception for Class A shares is 12/31/98.
(4) This represents total return for the period 12/31/98 - 12/31/99, to
correspond with Class A inception date.
The Funds 9
<PAGE>
High Yield Fund
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
================================================================================
Class Y
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- --------------------------------------------------------------------------------
(as a % of offering price) none
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge none
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets)
(as a % of average net assets)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.60%
- --------------------------------------------------------------------------------
Other Expenses 0.26%
- --------------------------------------------------------------------------------
Total Operating Expenses 0.86%
- --------------------------------------------------------------------------------
================================================================================
Example
================================================================================
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class Y shares $88 $274 $477 $1,061
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
Lord Abbett is currently waiving the management fees and subsidizing the other
expenses of the Fund. Lord Abbett may stop waiving the management fees and
subsidizing the other expenses at any time. The total operating expense ratio
with the fee waiver and expense subsidy for Class Y shares is 0.0% of average
net assets.
10 The Funds
<PAGE>
International Series
GOAL / PRINCIPAL STRATEGY
The Fund's investment objective is long-term capital appreciation.
To pursue this goal, the Fund invests in stocks of companies principally
based outside the United States. Under normal conditions, at least 80% of
the Fund's assets will be invested in stocks of companies in at least three
different countries outside the United States.
The Fund intends to primarily invest in stocks of small companies, those
with market capitalizations of less than $2 billion, although the Fund may
also invest in stocks of larger companies.
We look for:
o developing global trends on an industry-by-industry basis
o companies which are the strongest or the best positioned in those
industries
o companies selling at attractive prices
o companies we see as having the best potential for growth or profits
We may limit the number of holdings in the Fund to a greater degree than
other similar funds in an effort to prevent the dilution of the performance
of securities held in the portfolio. However, the Fund is a diversified
fund.
The Fund may temporarily reduce its stock holdings for defensive purposes
in response to adverse market conditions and invest in domestic, Eurodollar
and foreign short-term money market instruments. This could potentially
reduce the Fund's ability to benefit from an upswing in the market and
prevent the Fund from achieving its investment objective.
MAIN RISKS
The Fund is subject to the general risks and considerations associated with
equity investing, such as market risk. The value of your investment in the
Fund will fluctuate in response to movements in the securities markets in
general and to the changing prospects of individual companies in which the
Fund invests. In addition, the Fund is subject to the risks of investing in
foreign securities and in the securities of small companies.
Investing in small companies generally involves greater risks than
investing in the stocks of large companies. Small companies may have less
experienced management, limited product lines, unproven track records, and
limited financial resources. Their securities may carry increased market,
liquidity, and other risks.
Foreign securities may present risks not typically associated with domestic
securities. Foreign markets and the securities traded in them are not
subject to the same degree of regulation as U.S. markets which may increase
the degree of market risk associated with them. Foreign securities may also
be subject to liquidity, currency and political risk. Foreign investments
may be affected by changes in currency rates or currency controls. With
respect to certain foreign countries, there is a possibility of
nationalization, expropriation or confiscatory taxation, imposition of
withholding or other taxes, and political or social instability which could
affect investments in those countries.
Investing in both small and international companies generally involves some
degree of information risk. That means that key information about an
issuer, security or market may be inaccurate or unavailable.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money by investing in
the Fund.
We or the Fund refers to the International Series of Lord Abbett Securities
Trust.
About the Fund. This Fund is a professionally managed portfolio primarily
holding securities purchased with the pooled money of investors. It strives to
reach its stated goal, although as with all funds, it cannot guarantee results.
Large companies are established companies that are considered "known
quantities." Large companies often have the resources to weather economic
shifts, although they can be slower to innovate than small companies.
Small companies are often new and less established, with a tendency to be
faster-growing but more volatile and less liquid than large company stocks.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies used by the Fund and
their risks.
The Funds 11
<PAGE>
International Series
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class Y shares
from calendar year to calendar year.
================================================================================
Bar Chart (per calendar year) - Class Y Shares
================================================================================
[GRAPHIC OMITTED]
Best Quarter 1st Q `98 23.8% Worst Quarter 3rd Q `98 -19.0%
================================================================================
The table below shows how the average annual total returns of the Fund's
Class Y shares compare to those of a broad-based securities market index.
================================================================================
Average Annual Total Returns Through December 31, 1999
================================================================================
Share Class 1 Year Since Inception(2)
Class Y shares 27.81% 21.76%
- --------------------------------------------------------------------------------
Morgan Stanley Capital International European,
Australasia and Far East Index ("MSCI EAFE")(1) 27.30% 23.77%(3)
- --------------------------------------------------------------------------------
(1) Performance for the unmanaged MSCI EAFE Index does not reflect fees or
expenses.
(2) The date of inception for Class Y shares is 12/30/97.
(3) This represents total return for the period 12/31/97 - 12/31/99, to
correspond with Class Y inception date.
12 The Funds
<PAGE>
International Series
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
================================================================================
Class Y
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- --------------------------------------------------------------------------------
(as a % of offering price) none
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge none
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets)
(as a % of average net assets)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.44%
- --------------------------------------------------------------------------------
Total Operating Expenses 1.19%
- --------------------------------------------------------------------------------
================================================================================
Example
================================================================================
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class Y shares $121 $378 $654 $1,443
================================================================================
Management fees are payable to Lord Abbett for the Fund's investment management.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
The Funds 13
<PAGE>
Large-Cap Series
GOAL / PRINCIPAL STRATEGY
The Fund's investment objective is long-term growth of capital and income
without excessive fluctuations in market value.
To pursue this goal, the Fund purchases stocks of large, seasoned, U.S. and
multinational companies which we believe are undervalued. The Fund chooses
stocks using
o quantitative research to identify which stocks we believe represent
the best bargains
o fundamental research to learn about a company's operating environment,
resources and strategic plans and to assess its prospects for
exceeding earnings expectations
o business cycle analysis to determine how buying or selling securities
changes our overall portfolio's sensitivity to interest rates and
economic conditions
The Fund is intended for investors looking for long-term growth with low
fluctuations in market value. For this reason, we will forego some
opportunities for gains when, in our judgment, they are too risky. The Fund
tries to keep its assets invested in securities selling at reasonable
prices in relation to value.
While there is the risk that an investment may never reach what we think is
its full value, or may go down in value, our emphasis on large, seasoned
company bargain stocks may limit our downside risk because bargain stocks
in theory are already underpriced and large, seasoned company stocks tend
to be less volatile than small company stocks.
We generally sell a stock when we think it is no longer a bargain, seems
less likely to benefit from the current market and economic environment,
shows deteriorating fundamentals or falls short of our expectations.
While typically fully invested, at times we may take a temporary defensive
position by investing some of the Fund's 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 Fund is subject to the general risks and considerations associated with
equity investing, as well as the particular risks associated with bargain
stocks. The value of your investment will fluctuate in response to
movements in the stock market in general and to the changing prospects of
individual companies in which the Fund invests. Bargain stocks may perform
differently than the market as a whole and other types of stocks, such as
small company stocks and growth stocks. This is because different types of
stocks tend to shift in and out of favor depending on market and economic
conditions. The market may fail to recognize the intrinsic value of
particular bargain stocks for a long time. In addition, if the Fund's
assessment of a company's value or prospects for exceeding earnings
expectations or market conditions is wrong, the Fund could suffer losses or
produce poor performance relative to other funds, even in a rising market.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money in the Fund.
We or the Fund refers to the Large-Cap Series of Lord Abbett Research Fund, Inc.
About the Fund. This Fund is a professionally managed portfolio primarily
holding securities purchased with the pooled money of investors. It strives to
reach its stated goal, although as with all funds, it cannot guarantee results.
Large companies are established companies that are considered "known
quantities." Large companies often have the resources to weather economic
shifts, although they can be slower to innovate than small companies.
Seasoned companies are usually established companies whose securities have
gained a reputation for quality with the investing public and enjoy liquidity in
the market.
Bargain stocks are stocks of com-panies which we believe the market undervalues
according to certain financial measurements of their intrinsic worth or business
prospects.
Small-company stocks are stocks of smaller companies which often are new and
less established, with a tendency to be faster-growing but more volatile than
large company stocks.
Growth stocks are stocks which exhibit faster-than-average gains in earnings and
are expected to continue profit growth at a high level, but also tend to be more
volatile than bargain stocks.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies used by the Fund and
their risks.
14 The Funds
<PAGE>
Large-Cap Series
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less. Performance for Class Y shares is not shown because
the class has less than one year of performance. Returns for Class Y shares
are expected to be somewhat higher than those of Class A shares of the Fund
because Class Y shares have lower expenses.
================================================================================
Bar Chart (per calendar year) - Class A Shares
================================================================================
[GRAPHIC OMITTED]
Best Quarter 4th Q `98 18.9% Worst Quarter 3rd Q `98 -12.5%
================================================================================
The table below shows how the average annual total returns of the Fund's
Class A shares compare to those of a broad-based securities market index
and a more narrowly based index that more closely reflects the market
sectors in which the Fund invests. The Fund's returns reflect payment of
the maximum applicable front-end sales charges.
================================================================================
Average Annual Total Returns Through December 31, 1999
================================================================================
Share Class 1 Year 5 Years Since Inception(3)
Class A shares(1) 10.70% 20.80% 18.15%
- --------------------------------------------------------------------------------
S&P 500(R)Index(2) 21.03% 28.54% 21.24%(4)
- --------------------------------------------------------------------------------
S&P Barra Value Index(2) 12.72% 22.94% 18.14%(4)
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 5.75%
(2) Performance for the unmanaged indices does not reflect fees or expenses.
(3) The date of inception for Class A shares is 6/3/92.
(4) This represents total return for the period 6/30/92 - 12/31/99, to
correspond with Class A inception date.
The Funds 15
<PAGE>
Large-Cap Series
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
================================================================================
Class Y
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- --------------------------------------------------------------------------------
(as a % of offering price) none
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge none
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets)
(as a % of average net assets)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.36%
- --------------------------------------------------------------------------------
Total Operating Expenses 1.11%
- --------------------------------------------------------------------------------
================================================================================
Example
================================================================================
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class Y shares $113 $353 $612 $1,352
================================================================================
Management fees are payable to Lord Abbett for the Fund's investment management.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
16 The Funds
<PAGE>
Small-Cap Value Series
GOAL / PRINCIPAL STRATEGY
The Fund's investment objective is long-term capital appreciation.
To pursue this goal, the Fund invests primarily in equity securities of
small companies with market capitalizations of less than $1 billion.
Typically, in choosing stocks, we look for companies using
o quantitative research to evaluate various criteria, including the
price of shares in relation to book value, sales, asset value,
earnings, dividends and cash flow.
o fundamental research 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 those
strategies, and by evaluating the adequacy of its financial resources.
Under normal circumstances, at least 65% of the 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 by 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.
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 Fund is subject to the general risks and considerations associated with
equity investing, such as market risk.The value of your investment in the
Fund will fluctuate in response to movements in the securities markets in
general and to the changing prospects of individual companies in which the
Fund invests.
In addition, the Fund is subject to the risks of investing in the
securities of small companies. Investing in small companies generally
involves greater risks than investing in the stocks of large companies.
Small companies may have less experienced management, limited product
lines, unproven track records, and limited financial resources. Their
securities may carry increased market, liquidity, and other risks.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money in the Fund.
We or the Fund refers to Small- Cap Value Series of Lord Abbett Research Fund,
Inc.
About the Fund. The Fund is a professionally managed portfolio primarily holding
securities purchased with the pooled money of investors. It strives to reach its
stated goal, although as with all funds, it cannot guarantee results.
Large companies are established companies that are considered "known
quantities." Large companies often have the resources to weather economic
shifts,although they can be slower to innovate than small companies.
Small companies often are new and less established, with a tendency to be
faster-growing but more volatile and less liquid than large companies.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies used by the Fund and
their risks.
The Funds 17
<PAGE>
Small-Cap Value Series
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class Y shares
from calendar year to calendar year.
================================================================================
Bar Chart (per calendar year) - Class Y Shares
================================================================================
[GRAPHIC OMITTED]
Best Quarter 2nd Q `99 23.1% Worst Quarter 3rd Q `98 -24.1%
================================================================================
The table below shows how the average annual total returns of the Fund's
Class Y shares compare to those of a broad-based securities market index.
================================================================================
Average Annual Total Returns Through December 31, 1999
================================================================================
Share Class 1 Year Since Inception(2)
Class Y shares 8.57% 0.76%
- --------------------------------------------------------------------------------
Russell 2000 Index(1) 21.26% 8.70%(3)
- --------------------------------------------------------------------------------
(1) Performance for the unmanaged Russell 2000 Index does not reflect fees or
expenses. The performance of the index is not necessarily representative of
the Fund's performance.
(2) The date of inception for Class Y shares is 12/30/97.
(3) This represents total return for the period 12/31/97 - 12/31/99, to
correspond with Class Y inception date.
18 The Funds
<PAGE>
Small-Cap Value Series
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
================================================================================
Class Y
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- --------------------------------------------------------------------------------
(as a % of offering price) none
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge none
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets)
(as a % of average net assets)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.44%
- --------------------------------------------------------------------------------
Total Operating Expenses 1.19%
- --------------------------------------------------------------------------------
================================================================================
Example
================================================================================
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class Y shares $121 $378 $654 $1,443
================================================================================
Management fees are payable to Lord Abbett for the Fund's investment management.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
The Funds 19
<PAGE>
Your Investment
PURCHASES
Class Y shares. You may purchase Class Y shares at the net asset value
("NAV") per share next determined after we receive and accept your purchase
order submitted in a proper form. No sales charges apply.
We reserve the right to withdraw all or 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.
Who May Invest? Eligible purchasers of Class Y shares include: (1) certain
authorized brokers, dealers, registered investment advisers or other
financial institutions ("entities") 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 our Class Y
shares in particular investment products made available for a fee to
clients of such entities 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 ("Mutual Fund Fee Based Programs"); (2) the trustee or
custodian under any deferred compensation or pension or profit-sharing plan
or payroll deduction IRA established for the benefit of the employees of
any company with an account(s) in excess of $10 million managed by Lord
Abbett or its sub-advisers on a private-advisory-account basis; (3)
institutional investors, such as retirement plans, companies, foundations,
trusts, endowments and other entities where the total amount of potential
investable assets exceeds $50 million that were not introduced to Lord
Abbett by persons associated with a broker or dealer primarily involved in
the retail securities business. Additional payments may be made by Lord
Abbett out of its own resources with respect to certain of these sales.
How Much Must You Invest? You may buy our shares through any independent
securities dealer having a sales agreement with Lord Abbett Distributor,
our exclusive selling agent. Place your order with your investment dealer
or send the money to the Fund you selected (P.O. Box 219100, Kansas City,
Missouri 64121). The minimum initial investment is $1 million except for
Mutual Fund Fee Based Program, which has no minimum. This offering may be
suspended, changed or withdrawn by Lord Abbett Distributor which reserves
the right to reject any order.
Buying Shares Through Your Dealer. Orders for shares received by a Fund
prior to the close of the NYSE, or received by dealers prior to such close
and received by Lord Abbett Distributor prior to the close of its business
day, will be confirmed at NAV effective at such NYSE close. Orders received
by dealers after the NYSE closes and received by Lord Abbett Distributor in
proper form prior to the close of its next business day are executed at the
NAV effective as of the close of the NYSE on that next business day. The
dealer is responsible for the timely transmission of orders to Lord Abbett
Distributor. A business day is a day on which the NYSE is open for trading.
Buying Shares By Wire. To open an account, call 800-821-5129 Ext. 34028,
Institutional Trade Dept., to set up your account and to arrange a wire
transaction. Wire to: United Missouri Bank of Kansas City, N.A., Routing
number - 101000695, bank account number: 9878002611, FBO: (account name)
and (your Lord Abbett account number). Specify the complete name of the
Fund, note Class Y shares and include your new account number
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"), normally
4:00 p.m. Eastern Time. Purchases and sales of Fund shares are executed at the
NAV next determined after the Fund receives your order in proper form. 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.
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.
Exchange Limitations. Exchanges should not be used to try to take advantage of
short-term swings in the market. Frequent exchanges create higher expenses for
the Funds. Accordingly, each Fund reserves the right to limit or terminate this
privilege for any shareholder making frequent exchanges or abusing the
privilege. The Funds also may revoke the privilege for all shareholders upon 60
days' written notice.
20 Your Investment
<PAGE>
and your name. To add to an existing account, wire to: United Missouri Bank
of Kansas City, N.A., routing number - 101000695, bank account number:
9878002611, FBO: (account name) and (your Lord Abbett account number).
Specify the complete name of the Fund, note Class Y shares and include your
account number and your name.
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 Funds at
800-821-5129.
By Mail. Submit a written redemption request indicating, the name(s) in
which the account is registered, the Fund's name, the class of shares, your
account number, and the dollar value or number of shares you wish to sell.
Include all necessary signatures. If the signer has any Legal Capacity, the
signature and capacity must be guaranteed by an Eligible Guarantor. Certain
other legal documentation may be required. For more information regarding
proper documentation call 800-821-5129.
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. Under unusual circumstances, each
Fund may suspend redemptions, or postpone payment for more than seven days,
as permitted by federal securities laws.
By Wire. In order to receive funds by wire, our servicing agent must have
the wiring instructions on file. To verify that this feature is in place,
call 800-821-5129 Ext. 34028, Institutional Trading Dept. (minimum wire:
$1,000). Your wire redemption request must be received by the Fund before
the close of the NYSE for money to be wired on the next business day.
DISTRIBUTIONS AND TAXES
The Funds normally pay dividends from their net investment income as
follows: quarterly, for the Affiliated Fund; monthly, for the High Yield
Fund; semi-annually, for the Large-Cap Series; and annually, for Growth
Opportunities Fund, International Series and Small-Cap Value Series. Each
Fund distributes net capital gains (if any) as "capital gains
distributions" on an annual basis. Your distributions will be reinvested in
your Fund unless you instruct the Fund to pay them to you in cash. The tax
status of distributions is the same for all shareholders regardless of how
long they have owned Fund shares or whether distributions are reinvested or
paid in cash.
Except in tax-advantaged accounts, any sale, redemption or exchange of Fund
shares may be taxable to the shareholder.
Information on the tax treatment of distributions, including the source of
dividends and distributions of capital gains by the Funds, will be mailed
to shareholders each year. Because everyone's tax situation is unique, you
should consult your tax adviser regarding the treatment of distributions
under the federal, state and local tax rules that apply to you.
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.
Your Investment 21
<PAGE>
SERVICES FOR FUND INVESTORS
AUTOMATIC SERVICES
We offer the following shareholder services:
Telephone Exchange Privilege. Class Y shares may be exchanged without a
service charge for Class Y shares of any Eligible Fund among the Lord
Abbett-sponsored funds.
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 Funds.
Account Changes. For any changes you need to make to your account, consult
your investment professional or call the Funds 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.
MANAGEMENT
The Funds' investment adviser is Lord, Abbett & Co., located at 90 Hudson
St., Jersey City, NJ 07302-3973. Founded in 1929, Lord Abbett manages one
of the nation's oldest mutual fund complexes, with approximately $35
billion in more than 40 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. Lord Abbett is entitled to a monthly fee based on the
Affiliated Fund's average daily net assets for each month as follows:
.50 of 1% on the first $200 million in assets
.40 of 1% on the next $300 million
.375 of 1% on the next $200 million
.35 of 1% on the next $200 million
.30 of 1% on the Fund's assets over $900 million
Lord Abbett is entitled to a monthly fee based on the following Funds'
average daily net assets for each month as follows: .90 of 1% for Growth
Opportunities Fund; .60 of 1% for High Yield Fund; and .75 of 1% for each
of the International Series, Large-Cap Series and Small-Cap Series. For the
Funds' most recent fiscal years, the fees paid to Lord Abbett were at an
effective annual rate of .31 of 1% for Affiliated Fund and .75 of 1% for
each of International Series, Large-Cap Series and Small-Cap Value Series.
Lord Abbett waived its entire management fees and subsidized a portion of
the other expenses for the Growth Opportunities Fund and High Yield Fund.
Each Fund pays all expenses not expressly assumed by Lord Abbett.
Portfolio Managers. Lord Abbett uses teams of portfolio managers and
analysts acting together to manage the Funds' investments.
Affiliated Fund and Large-Cap Series. The senior members of the team are:
Thomas Hudson Jr., Partner of Lord Abbett; Robert G. Morris, Partner of
Lord Abbett; and Eli M. Salzman, Portfolio Manager. Messrs. Hudson and
Morris have been with Lord Abbett since 1982 and 1991, respectively. Mr.
Salzman joined Lord Abbett in 1997; and previously he was a Vice President
with Mutual of America Capital Corp. since 1997 and a
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. Each Fund will not be liable for following instructions
communicated by telephone that it reasonably believes to be genuine.
Transactions by telephone may be difficult to implement in times of drastic
economic or market change.
22 Your Investment
<PAGE>
Vice President with Mitchell Hutchins Asset Management, Inc. from 1986 to
1997.
Growth Opportunities Fund. 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. Prior to joining Lord
Abbett, Mr. McGruder served as Vice President of Wafra Investment Advisory
Group, a private investment 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. The Fund
is a portfolio of Lord Abbett Research Fund, Inc.
High Yield Fund. Christopher J. Towle, Partner of Lord Abbett, heads the
Fund's team, the other senior members of which are Michael Goldstein,
Richard Szaro and Thomas Baade. Messrs. Towle and Szaro joined Lord Abbett
in 1988 and 1983, respectively. Mr. Goldstein has been with Lord Abbett
since April 1997. Before joining Lord Abbett, Mr. Goldstein was a bond
trader for Credit Suisse BEA Associates from August 1992 through April
1997. Mr. Baade joined Lord Abbett in 1998; prior to that he was a credit
analyst with Greenwich Street Advisors. The Fund is a portfolio of Lord
Abbett Investment Trust.
International Series. Christopher J. Taylor is Managing Director of the
sub-adviser of the Fund, Fuji-Lord Abbett International Ltd., of which Lord
Abbett is a minority owner (formerly named Fuji Investment Management Co.
(Europe) Ltd.). Mr. Taylor has been employed by the sub-adviser and its
predecessor companies since 1987.
Small-Cap Value Series. 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; prior to that, he was was a Managing
Director of Prudential Investment Advisors from 1983 to 1995. Mr. Macosko
joined Lord Abbett in 1996; prior to that he was an Equity Analyst with
Quest Advisory Service from 1991 to 1996.
Your Investment 23
<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. These strategies may involve buying or selling
derivative instruments, such as options and futures contracts, swap
agreements including interest rate swaps, caps, floors, collars and rights
and warrants. Each 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.
Closed-End Investment Companies.Each Fund other than the High Yield Fund
may invest in shares of closed-end investment companies if bought in the
primary or secondary market with a fee or commission no greater than the
customary broker's commission. Each may invest no more than 5% of its
assets in closed-end investment companies.
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. This does not apply to U.S.
government securities.
Depository Receipts.The Each Fund other than the High Yield Fund may invest
in Depository Receipts which are securities,typically issued by a financial
institution (a "depository"), that evidence ownership interests in a
security or a pool of securities issued by a foreign issuer (the
"underlying issuer") and deposited with the depository. Generally,
Depository Receipts in registered form are designed for use in U.S.
securities markets and Depository Receipts in bearer form are designed for
use in securities markets outside the United States. The Funds may invest
in sponsored and unsponsored Depository Receipts.
Equity Securities. Each Fund other than the High Yield Fund invests
primarily in equity securities. The High Yield Fund may invest up to 20% of
its total assets in equity securities. These include common stocks,
preferred stocks, convertible securities, warrants, and similar
instruments. Common stocks, the most familiar type, represent an ownership
interest in a corporation. Although equity securities have a history of
long-term growth in their value, their prices fluctuate based on changes in
a company's financial condition and on market and economic conditions.
Emerging Countries Risk. The International Series may invest in emerging
country securities. The securities markets of emerging countries are less
liquid, are especially subject to greater price volatility, have smaller
market capitalizations, have less government regulation and are not subject
to as extensive and frequent accounting, financial and other reporting
requirements as the securities markets of more developed countries.
Further, investing in the securities of issuers located in certain emerging
countries may involve a
24 For More Information
<PAGE>
risk of loss resulting from problems in security registration and custody
or substantial economic or political disruptions. These risks are not
normally associated with investments in more developed countries.
Futures Contracts and Options on Futures Contracts. A financial futures
transaction is an exchange-traded contract to buy or sell a standard
quantity and quality of a financial instrument or index at a specific
future date and price. Each Fund may purchase and sell futures contracts
and options thereon. Each Fund other than the High Yield Fund will not
enter into any futures contracts or options thereon, if the aggregate
market value of the securities covered by such contracts exceeds 50% of the
Fund's total assets. The High Yield Fund may not invest more than 5%
of its assets in such transactions.
A Fund's ability to enter into financial transactions is limited by certain
tax requirements in order to qualify as a regulated investment company.
Foreign Currency Transactions The International Series may purchase or sell
foreign currencies on a cash basis or through forward contracts. A forward
contract involves an obligation to purchase or sell a specific currency at
a future date at a price set at the time of the contract. Although the
International Series does not normally engage in extensive currency
hedging, it may use foreign currency transactions to seek to protect
against anticipated changes in future foreign currency exchange rates. It
may be difficult or impractical to hedge currency risk in many emerging
countries.
In addition, the International Series may enter into such transactions to
seek to increase total return, which is considered a speculative practice.
The Fund generally will not enter into a forward contract with a term
greater than one year. Under some circumstances, the Fund may commit a
substantial portion or the entire value of its portfolio to the completion
of forward contracts.
The use of foreign currency transactions is subject to the general risk
that the portfolio managers will not accurately predict currency movements,
and the Fund's returns could be reduced. In addition, forward foreign
currency exchange contracts and other privately negotiated currency
instruments offer less protection against defaults than is available for
currency instruments traded on an exchange. Since these contracts are not
guaranteed by an exchange or clearinghouse, a default on a contract would
deprive the Fund of unrealized profits, transaction costs, or the benefits
of a currency hedge, or could force the Fund to cover its purchase or sale
commitments, if any, at the current market price. Currency exchange rates
may fluctuate significantly over short periods of time, causing the NAV of
the International Series to fluctuate. Currency exchange rates may be
affected unpredictably by the intervention of U.S. or foreign governments
or central banks, or the failure to intervene, or by currency controls or
political developments in the United States or abroad.
Foreign Securities. The Affiliated Fund, Large-Cap Series, Growth
Opportunities Fund, and Small-Cap Value Series will limit their investments
in foreign securities to 10% of their respective total assets. The
International Series may invest all of its assets in foreign securities.
The High Yield Fund will limit such investments to 20% of its total assets.
Foreign markets and the securities traded in them are not subject to the
same degree of regulation as U.S. markets. Securities clearance and
settlement procedures may be different in foreign countries. There may be
less trading volume in foreign markets, subjecting the securities traded in
them to higher price fluctuations. Transaction costs may be higher in
foreign markets. A Fund may hold foreign securities which trade on days
when the Fund does not sell shares. As a result, the value of the Fund's
portfolio securities may change on days an investor may not purchase or
sell Fund shares.
Foreign issuers are generally not subject to similar, uniform accounting,
auditing and
For More Information 25
<PAGE>
financial reporting requirements as U.S. issuers. Foreign investments may
be affected by changes in currency rates or currency controls. Certain
foreign countries may limit a Fund's ability to remove its assets from the
country. With respect to certain foreign countries, there is a possibility
of nationalization, expropriation or confiscatory taxation, imposition of
withholding or other taxes and political or social instability which could
affect investments in those countries.
Investment Funds. The International Series may invest (normally not more
than 5% of the Fund's total assets) in investment funds. Some emerging
countries have laws and regulations that currently preclude direct foreign
investment in the securities of their companies. However, indirect foreign
investment in the securities of such countries is permitted through
investment funds which have been specifically authorized. If the Fund
invests in such investment funds, the Fund's shareholders will bear not
only their proportionate share of the expenses of the Fund (including
operating expenses and the fees of Lord Abbett), but also will indirectly
bear similar expenses of the underlying investment funds.
Investment Grade Debt Securities. These are debt securities which are rated
in one of the four highest grades assigned by Moody's Investors Service,
Inc., Standard & Poor's Ratings Services or Fitch Investors Service, or are
unrated but determined by Lord Abbett to be equivalent in quality.
Options Transactions. The Growth Opportunities Fund, High Yield Fund and
Small-Cap Value Series may purchase and write put and call options on
securities or stock indices that are traded on national securities
exchanges.
A put option gives the buyer of the option the right to sell, and the
seller of the option the obligation to buy, the underlying instrument
during the option period. Each of the three Funds listed above may write
only covered put options to the extent that cover for such options does not
exceed 25% of the Fund's net assets. Each will not purchase an option if,
as a result of such purchase, more than 20% (in the case of the Growth
Opportunities Fund and Small-Cap Value Series) and 5% (in the case of the
International Series) of its net assets would be invested in premiums for
such options.
A call option gives the buyer of the option the right to buy, and the
writer (seller) of the option the obligation to sell, the underlying
instrument. All Funds may write (sell) only "covered" options. This means
that the Funds may only sell call options on securities which the Funds
own. 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. The Affiliated Fund,
International Series and Large-Cap Series will only write "covered" call
options on securities having an aggregate market value not to exceed 10% of
the Affiliated Fund's assets or 5% of the International Series' and
Large-Cap Series' gross assets. In addition, the Growth Opportunities Fund
may write covered call options on securities having an aggregate market not
to exceed 5% of that fund's assets.
The High Yield Fund will only write covered call options and secured put
options on securities having an aggregate market value not to exceed 25% of
the High Yield Fund's assets.
Risks of Futures Contracts and Options Transactions. Transactions in
futures, options on futures and other options involve additional risk of
loss. Loss may result from a lack of correlation between changes in the
value of these derivative instruments and the Fund's assets being hedged,
the potential illiquidity of the markets for derivative instruments, or the
risks arising from margin requirements and related leverage factors
associated with such transactions. The use of these investment techniques
also involves the risk of loss if the portfolio managers are incorrect in
their expectation of fluctuations in securities
26 For More Information
<PAGE>
prices. In addition, the loss that may be incurred by the a Fund in
entering into futures contracts and in writing call options on futures is
potentially unlimited and may exceed the amount of the premium received.
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. The Affiliated Fund, High Yield Fund
and International Series will limit their securities loans to 30% of their
total assets, while the Growth Opportunities Fund, Large-Cap Series and
Small-Cap Value Series will limit their securities loans to 5% of their
total assets.
GLOSSARY OF SHADED TERMS
Eligible Fund. An Eligible Fund is any Lord Abbett-sponsored fund offering
Class Y shares.
Eurodollar. Eurodollars are U.S. currency held in banks outside the United
States, mainly in Europe, and commonly used for settling international
transactions. Some securities are issued in Eurodollars--that is, with a
promise to pay interest in dollars deposited in foreign bank accounts.
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 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 Fee Based Program. Certain unaffiliated authorized brokers,
dealers, registered investment advisers or other financial institutions
("entities") who either (1) have an arrangement with Lord Abbett
Distributor in accordance with certain standards approved by Lord Abbett
Distributor, providing specifically for the use of our shares (and
sometimes providing for acceptance of orders for such shares on our behalf)
in particular investment products made available for a fee to clients of
such entities, or (2) charge an advisory, consulting or other fee for their
services and buy shares for their own accounts or the accounts of their
clients.
RECENT PERFORMANCE
The following is a discussion of recent performance for the twelve month
period ending each Fund's respective fiscal year.
Affiliated Fund. The past fiscal year was characterized by continued
overall strength in both the broad equity market and the U.S. economy. Low
interest rates and a deceleration in earnings have driven the U.S. equity
market for the last two and one-half years. This environment favored a very
select group of large stocks that have had stable earnings growth. Rather
than venturing into "unknown" waters, investors stayed the course and
continued to purchase names familiar to them, remaining with companies that
exhibited strong earnings stories. The result, however, is that many of the
larger, more well-known growth names have become, in our opinion, quite
expensive.
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 ILLEGIBLE]
- --------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
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 ILLEGIBLE]
- --------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
For More Information 27
<PAGE>
In anticipation of an improvement in the global economy, we made an early
entry into the energy sector, a strategy that paid off well for the Fund.
In our view, the rise in oil prices initiated by OPEC, coupled with solid
fundamentals for many energy companies, helped to boost this sector. In
addition, the technology sector continued to outperform the general market.
However, despite strong performance by a number of holdings in this sector,
we recently began to reduce our exposure to technology, as prices began to
reach the upper end of our valuation discipline. We reinvested a good
portion of the proceeds from those sales into more traditional cyclical
sectors such as paper, chemicals and aluminum, and anticipate these areas
will benefit from a rise in commodity prices as the global economy
strengthens.
In addition, we have started to focus some attention toward the property
and casualty insurance sector during this period, and will continue to seek
out companies in this market segment that display improving fundamentals.
At the same time, we are generally underweighted in financial companies,
which has worked to our advantage since many of these stocks continued to
struggle during this period as interest rates increased. We believe there
is only a small chance that U.S. interest rates will continue to climb.
This view, coupled with the fact that many financial service companies have
solid fundamentals, will likely result in an increase in our exposure to
the financial services area.
Growth Opportunities Fund. The stock market rebounded sharply in the fourth
quarter, with stocks of small- and mid-sized growth companies asserting
their leadership versus large company growth stocks. Despite their strong
fourth quarter rally, small- and mid-cap stocks remained relatively cheap
on a price-to-earnings basis, often trading at a discount to large-cap
stocks. In addition, the average small- and mid-cap growth company offered
higher rates of expected earnings growth than the average large-cap
company, confirming the opportunities that exist in this segment of the
market.
During the period, we focused on increasing portfolio diversification both
across and within sectors. The Fund's investments in technology companies
continued to be significant positive contributors. The Fund's technology
holdings included companies from many diverse areas, such as
telecommunication services, software developers, and select equipment
manufacturers. We increased our emphasis on technology-related companies,
all of which turned out strong performances during the fourth quarter. The
ever-increasing demand for wireless communication services and products and
increased broadband access has benefited several of the portfolio's major
holdings.
Stock performance for many companies in the financial and healthcare
services sectors continued to be disappointing, but the Fund was not hurt
significantly, as our weightings in these sectors has been relatively
moderate. While healthcare services companies continued to suffer from
government and managed care-mandated price reductions, select
pharmaceutical companies entered into a new era of profitability as new
products were introduced to the market.
High Yield Fund. Lord Abbett High Yield Fund's strategy is to build a
portfolio of high-yield bonds from companies with strong earnings that are
well managed and are undervalued relative to their fundamentals. We
continued to find value among companies in the cable, media, technology and
telecommunications industries. With ongoing consolidation in these sectors,
many companies exhibit strong earnings potential due to the growth in data,
video and voice services. We increased our exposure to certain basic
industries such as paper companies, and increased our multinational
technology manufacturing and semiconductor holdings, which exhibited
visible price improvements and have the potential to benefit from global
economic growth. We remained underweighted in financial companies (e.g.,
banking, insurance), retail companies and other consumer-
28 For More Information
<PAGE>
oriented companies that were hurt by fierce competition in their respective
industries.
International Series. During the last months of 1998, many of the world's
financial markets began to signal a possible recovery from a two-year
period of financial crisis and global deflation. By mid 1999, it became
apparent that this recovery was real, as economic indicators pointed to a
new phase of global economic expansion.
In the international equity markets, Europe, which remained subdued
throughout much of the period, rallied when recession fears proved false.
In addition, many European companies posted better-than-expected earnings
growth in late 1999 due to a solid local economy and a weak euro, relative
to the dollar and the yen, which boosted exports. Japan, which benefited
from a series of economic initiatives during the period, continued to show
signs of improvement, as it attracted overseas money on the strength of its
apparent recovery and its relative importance to international investors.
The Fund continued to implement its investment strategy of focusing on
attractively priced, industry-dominant companies with global leadership
potential. During the period, the Fund remained overweighted in European
and Canadian companies that demonstrated superior corporate earnings growth
rates and attractive valuation levels relative to many companies in the Far
East and emerging markets. In general, we limited our exposure to Japanese
companies in traditional, old-style industries such as steel, chemicals and
paper, because we believe they require further corporate restructuring. In
addition, the sluggishness of Japan's overall economy does not bode well
for those industries. However, the Fund has invested in select Japanese
companies within new-style industries, such as telecommunications and
software. Indeed, a handful of these high-tech issues have accounted for
the majority of recent gains in the Japanese markets.
Large-Cap Series. We attribute the solid performance of the portfolio to
several factors. First, the new era of technology-related
telecommunications spawned several winning stocks for the portfolio.
Second, we sharply reduced our exposure to the consumer non-cyclical
sector, a group whose performance was poor for the year. Third, we
increased our allocation in the basic materials sector (aluminum, paper,
chemicals, etc.), as we believe this sector contains significant value.
Amidst merger and acquisition activity, the performance of the financial
sector weakened in 1999. Valuations suffered as acquiring banks eventually
found it hard to both cut costs and grow revenue. Intense competition
forced downward earnings revisions in the group and some of our holdings
suffered as a result.
Small-Cap Value Series. Our exposure to technology and telecommunications
stocks helped the overall performance of the portfolio. Additionally, the
portfolio benefited from the purchase of several hardware technology stocks
that were depressed earlier in the year, but performed quite well as the
year progressed. When these stocks hit the target prices we had set, they
were sold and the proceeds were used to invest in other parts of the
technology sector such as software and information technology services.
Despite prospects of continuing consolidation, we remained significantly
underweighted in the financial sector. This paid off later as disappointing
earnings drove small-cap financial stocks down.
For More Information 29
<PAGE>
Affiliated Fund
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 October 31, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended October 31, 1999 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 Y Shares
- -----------------------------------------------------------------------------------------------------------
Year Ended October 31,
Per Share Operating Performance: 1999 1998(c)
<S> <C> <C>
Net asset value, beginning of year $14.57 $15.44
===========================================================================================================
Income from investment operations
===========================================================================================================
Net investment income .26(e) .15
===========================================================================================================
Net realized and unrealized gain
===========================================================================================================
(loss) on investments 2.65 (.89)
===========================================================================================================
Total from investment operations 2.91 (.74)
===========================================================================================================
Distributions
===========================================================================================================
Dividends from net investment income (.28) (.13)
===========================================================================================================
Distributions from net realized gain (.95) --
===========================================================================================================
Net asset value, end of year $16.25 $14.57
===========================================================================================================
Total Return(a) 21.15% (4.77)%(d)
===========================================================================================================
Ratios to Average Net Assets: Expenses(b)
.43% .24%(d)
===========================================================================================================
Net investment loss 1.67% 1.03%(d)
===========================================================================================================
===========================================================================================================
Year Ended October 31,
- -----------------------------------------------------------------------------------------------------------
Supplemental Data For All Classes: 1999 1998
Net Assets, end of year (000) $10,080,754 $8,520,603
===========================================================================================================
Portfolio turnover rate 62.30% 56.49%
===========================================================================================================
</TABLE>
(a) Total return assumes the reinvestment of all distributions.
(b) The ratios for 1999 and 1998 include expenses paid through an expense
offset arrangement.
(c) From March 27, 1998 (commencement of offering) to October 31, 1998.
(d) Not annualized.
(e) Calculated using average shares outstanding during the period.
30 Financial Information
<PAGE>
Affiliated Fund
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 and S&P Barra Value Index,
assuming reinvestment of all dividends and distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
================================================================================
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending October 31, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(3) 13.70% 18.55% 14.40%
- --------------------------------------------------------------------------------
Class B(4) 14.87% - 19.26%
- --------------------------------------------------------------------------------
Class C(5) 18.80% - 19.86%
- --------------------------------------------------------------------------------
Class P(6) 20.51% - 13.71%
- --------------------------------------------------------------------------------
Class Y(7) 21.15% - 9.36%
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 5.75%.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices, particularly that of the S & P 500(R)
Index, is not necessarily representative of the Fund's performance.
(3) 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 October 31, 1999 using the SEC-required uniform method to
compute total return.
(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% (for life of the class).
(5) The Class C shares were first offered on 8/1/96. Performance reflects the
deduction of a CDSCof 1% (for 1 year) and 0% (for the life of the class).
(6) The Class P shares were first offered on 12/8/97. Performance is at net
asset value.
(7) The Class Y shares were first offered on 3/27/98. Performance is at net
asset value.
Financial Information 31
<PAGE>
Growth Opportunities
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, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended November 30, 1999 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.
================================================================================
Class Y Shares
- --------------------------------------------------------------------------------
Year Ended November 30,
Per Share Operating Performance: 1999(a)
Net asset value, beginning of period $12.76
================================================================================
Income from investment operations
================================================================================
Net investment income .09(d)
================================================================================
Net realized and unrealized
================================================================================
gain on investments 6.09
================================================================================
Total from investment operations 6.18
================================================================================
Distributions
================================================================================
Net investment income --
================================================================================
Net asset value, end of period $18.94
================================================================================
Total Return(b) 48.43%(c)
================================================================================
Ratios to Average Net Assets:
================================================================================
Expenses, including waiver and reimbursements .06%(c)
================================================================================
Expenses, excluding waiver and reimbursements 1.27%(c)
================================================================================
Net investment income .62%(c)
================================================================================
================================================================================
Year Ended November 30,
- --------------------------------------------------------------------------------
Supplemental Data For All Classes: 1999
Net Assets, end of year (000) $59,647
================================================================================
Portfolio turnover rate 104.87%
================================================================================
(a) From December 9, 1998 (commencement of operations).
(b) Total return assumes the reinvestment of all distributions.
(c) Not annualized.
(d) Calculated using average shares outstanding during the period.
32 Financial Information
<PAGE>
Growth Opportunities
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in the Russell Mid-Cap Growth Index, assuming
reinvestment of all dividends and distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
================================================================================
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending November 30, 1999
1 Year Life
- --------------------------------------------------------------------------------
Class A(2) 41.40% 26.62%
- --------------------------------------------------------------------------------
Class Y(3) 50.44% 73.61%
- --------------------------------------------------------------------------------
(1) Performance for the unmanaged Russell Mid-Cap Growth Index does not reflect
any fees or expenses.
(2) This shows total return which is the percent change in value, after the
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, 1999 using the SEC-required uniform method to
compute total return. The Class A share inception date is 8/1/95.
(3) The Class Y shares were first offered on 10/15/98. Performance is at net
asset value.
Financial Information 33
<PAGE>
High Yield Fund
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, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended November 30, 1999 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.
================================================================================
Class Y Shares
- --------------------------------------------------------------------------------
Year Ended November 30,
Per Share Operating Performance: 1999(a)
Net asset value, beginning of year $10.36
================================================================================
Income from investment operations
================================================================================
Net investment income(d) .55
================================================================================
Net realized and unrealized loss on investments (.62)
================================================================================
Total from investment operations (.07)
================================================================================
Distributions
================================================================================
Dividends from net investment income (.56)
================================================================================
Net asset value, end of year $9.73
================================================================================
Total Return(b)(c) (.59)%
================================================================================
Ratios to Average Net Assets:(c)
================================================================================
Expenses, including waiver and reimbursements .51%
================================================================================
Expenses, excluding waiver and reimbursements --
================================================================================
Net investment income 5.59%
================================================================================
================================================================================
Year Ended November 30,
- --------------------------------------------------------------------------------
Supplemental Data For All Classes: 1999
Net Assets, end of year (000) $28,689
================================================================================
Portfolio turnover rate 109.57%
================================================================================
(a) From May 4, 1999 (commencement of operations).
(b) Total return assumes the reinvestment of all distributions.
(c) Not annualized.
(d) Calculated using average shares outstanding during the year.
34 Financial Information
<PAGE>
High Yield Fund
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in both the Merrill Lynch High Yield Master Index
and the First Boston High Yield Index, assuming reinvestment of all
dividends and distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
================================================================================
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending November 30, 1999
Life
- --------------------------------------------------------------------------------
Class A(2) 0.10%
- --------------------------------------------------------------------------------
(1) Performance for each unmanaged index does not reflect any fees or expenses.
(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, 1999 using the SEC-required uniform method to
compute total return. Because Class Y has less than one year of
performance, the total returns shown are for Class A shares. Returns for
Class Y shares are expected to be somewhat higher than those of Class A
shares because Class Y shares have lower expenses. The Class A share
inception date is 12/31/98.
Financial Information 35
<PAGE>
International 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 October 31, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended October 31, 1999 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 Y Shares
- --------------------------------------------------------------------------------------------------------
Year Ended October 31,
Per Share Operating Performance: 1999 1998(a)
<S> <C> <C>
Net asset value, beginning of year $12.41 $11.28
========================================================================================================
Income (loss) from investment operations
========================================================================================================
Net investment income(d) .12 .15
========================================================================================================
Net realized and unrealized gain on
========================================================================================================
investments and foreign currency holdings 1.56 .98
========================================================================================================
Total from investment operations 1.68 1.13
========================================================================================================
Distributions
========================================================================================================
Dividends from net investment income (.07) --
========================================================================================================
Distributions from net realized gain (.02) --
========================================================================================================
Net asset value, end of year $14.00 $12.41
========================================================================================================
Total Return(b) 13.65% 10.02%(c)
========================================================================================================
Ratios to Average Net Assets:
========================================================================================================
Expenses 1.20%(e) .84%(c)
========================================================================================================
Net investment income .86% 1.11%(c)
========================================================================================================
========================================================================================================
Year Ended October 31,
- --------------------------------------------------------------------------------------------------------
Supplemental Data For All Classes: 1999 1998
Net Assets, end of year (000) $213,087 $153,033
========================================================================================================
Portfolio turnover rate 75.15% 20.52%
========================================================================================================
</TABLE>
(a) From December 30, 1997 (commencement of offering).
(b) Total return assumes the reinvestment of all distributions.
(c) Not annualized.
(d) Calculated using average shares outstanding during the year.
(e) The ratio includes expenses paid through an expense offset arrangement.
36 Financial Information
<PAGE>
International Series
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in the Morgan Stanley Capital International
European, Australasia and Far East Index ("MSCI EAFE Index"), assuming
reinvestment of all dividends and distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
================================================================================
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending October 31, 1999
1 Year Life
- --------------------------------------------------------------------------------
Class A(2) 6.60% 12.54%
- --------------------------------------------------------------------------------
Class Y(3) 13.65% 12.92%
- --------------------------------------------------------------------------------
(1) Performance for the unmanaged index does not reflect any fees or expenses.
Performance for this index begins on 12/31/96.
(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 October 31, 1999 using the SEC-required uniform method to
compute total return.The Class A share inception date is 12/13/96.
(3) The Class Y shares were first offered on 12/30/97. Performance is at net
asset value.
Financial Information 37
<PAGE>
Large-Cap 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, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended November 30, 1999 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.
================================================================================
Class Y Shares
- --------------------------------------------------------------------------------
Year Ended November 30,
Per Share Operating Performance: 1999(c)
Net asset value, beginning of period $25.21
================================================================================
Income from investment operations
================================================================================
Net investment income(a) .04
================================================================================
Net realized and unrealized gain on investments .09
================================================================================
Total from investment operations .13
================================================================================
Distributions
================================================================================
Dividends from net investment income (.04)
================================================================================
Net asset value, end of year $25.30
================================================================================
Total Return(b)(d) .52%
================================================================================
Ratios to Average Net Assets:(d)
================================================================================
Expenses .63%(e)
================================================================================
Net investment income .15%
================================================================================
================================================================================
Year Ended November 30,
- --------------------------------------------------------------------------------
Supplemental Data For All Classes: 1999
Net Assets, end of year (000) $256,003
================================================================================
Portfolio turnover rate 60.59%
================================================================================
(a) Calculated using average shares outstanding during the period.
(b) Total return assumes the reinvestment of all distributions.
(c) From May 4, 1999 (commencement of offering).
(d) Not annualized.
(e) The ratio includes expenses paid through an expense offset arrangement.
38 Financial Information
<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&P500(R) Index and S&P Barra Value Index,
assuming reinvestment of all dividends and distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
================================================================================
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending November 30, 1999
1 Year 5 Years Life
- --------------------------------------------------------------------------------
Class A(2) 10.30% 20.26% 17.73%
- --------------------------------------------------------------------------------
(1) Performance for each unmanaged index does not reflect fees or expenses.
Performance for these indices begins on 6/30/92.
(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, 1999 using the SEC-required uniform method to
compute total return. Because Class Y has less than one year of
performance, the total returns shown are for Class A shares. Returns for
Class Y shares are expected to be somewhat higher than those of Class A
shares because Class Y shares have lower expenses. The Class A share
inception date is 6/3/92.
Financial Information 39
<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, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended November 30, 1999 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 Y Shares
- --------------------------------------------------------------------------------------------------------
Year Ended November 30,
Per Share Operating Performance: 1999 1998(a)
<S> <C> <C>
Net asset value, beginning of period $14.40 $16.34
========================================================================================================
Income (loss) from investment operations
========================================================================================================
Net investment loss(b) (.07) (.01)
========================================================================================================
Net realized and unrealized gain
========================================================================================================
(loss) on investments 1.38 (1.93)
========================================================================================================
Total from investment operations 1.31 (1.94)
========================================================================================================
Distributions
========================================================================================================
Distributions from net realized gain -- --
========================================================================================================
Net asset value, end of year $15.71 $14.40
========================================================================================================
Total Return(c) 9.10% (11.87)%(d)
========================================================================================================
Ratios to Average Net Assets
Expenses 1.19%(e) .96%(d)
========================================================================================================
Net investment loss (.47)%(e) (.05)%(d)
========================================================================================================
========================================================================================================
Year Ended November 30,
- --------------------------------------------------------------------------------------------------------
Supplemental Data For All Classes: 1999 1998
Net Assets, end of year (000) $460,549 $515,379
========================================================================================================
Portfolio turnover rate 83.93% 67.86%
========================================================================================================
</TABLE>
(a) From December 30, 1997 (commencement of offering).
(b) Calculated using average shares outstanding during the period.
(c) Total return assumes the reinvestment of all distributions.
(d) Not annualized.
(e) The ratio includes expenses paid through an expense offset arrangement.
40 Financial Information
<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 the Russell 2000 Index, assuming reinvestment of
all dividends and distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
================================================================================
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending November 30, 1999
1 Year Life
- --------------------------------------------------------------------------------
Class A(2) 2.60% 12.61%
- --------------------------------------------------------------------------------
Class Y(3) 9.10% -2.03%
- --------------------------------------------------------------------------------
(1) Performance for the unmanaged Russell 2000 Index does not reflect any fees
or expenses. Performance of this index begins on 12/31/95.
(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, 1999 using the SEC-required uniform method to
compute total return. The Class A share inception date is 12/13/95.
(3) The Class Y shares were first offered on 12/30/97. Performance is at net
asset value.
Financial Information 41
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
More information on these Funds is available free upon request, including
the following:
ANNUAL/SEMI-ANNUAL REPORT
Describes each Fund, lists portfolio holdings and contains a letter from
each Fund's manager discussing recent market conditions and each Fund's
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 Affiliated Fund, Inc.
Lord Abbett Growth Opportunities Fund
Lord Abbett High Yield Fund
Lord Abbett Securities Trust-
International Series
Lord Abbett Research Fund, Inc -
Large-Cap Series
Small-Cap Value Series
90 Hudson Street
Jersey City, NJ 07302-3973
- --------------------------------------------------------------------------------
SEC file numbers: 811-5, 811-6650, 811-7988, 811-7538, 811-6650, 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
90 Hudson Street
Jersey City, NJ 07302-3973
Via the Internet.
Lord, Abbett & Co.
www.lordabbett.com
Text only versions of Fund
documents can be viewed
online or downloaded from:
SEC
www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 202-942-8090) or by sending your request and a duplicating
fee to the SEC's Public Reference Section, Washington, DC 20549-6009 or by
sending your request electronically to [email protected].
LAPROSP-Y6-1-599
(5/99)
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 Affiliated Fund, Inc.
Lord Abbett Growth Opportunities Fund
Lord Abbett High Yield Fund
Lord Abbett Securities Trust-
International Series
Lord Abbett Research Fund, Inc -
Large-Cap Series
Small-Cap Value Series
90 Hudson Street
Jersey City, NJ 07302-3973
- --------------------------------------------------------------------------------
SEC file numbers: 811-5, 811-6650, 811-7988, 811-7538, 811-6650, 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
90 Hudson Street
Jersey City, NJ 07302-3973
Via the Internet.
Lord, Abbett & Co.
www.lordabbett.com
Text only versions of Fund
documents can be viewed
online or downloaded from:
SEC
www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 202-942-8090) or by sending your request and a duplicating
fee to the SEC's Public Reference Section, Washington, DC 20549-6009 or by
sending your request electronically to [email protected].
LAPROSP-Y6-1-599
(5/99)
<PAGE>
Lord, Abbett & Co.
Statement of Additional Information March 1, 2000
Lord Abbett Affiliated Fund, Inc.
Lord Abbett Growth Opportunities Fund
Lord Abbett High Yield Fund
Lord Abbett Securities Trust - International Series
Lord Abbett Research Fund, Inc. - Large-Cap Series
Lord Abbett Research Fund, Inc. - Small-CapValue Series
This Statement of Additional Information is not a Prospectus. A Prospectus for
Class Y shares of the Funds mentioned below may be obtained from your securities
dealer or from Lord Abbett Distributor LLC ("Lord Abbett Distributor") at the 90
Hudson Street, Jersey City, New Jersey 07302-3973. This Statement of Additional
Information relates to, and should be read in conjunction with, the Prospectus
dated March 1, 2000. This Statement of Additional Information, relates to Class
Y shares of Lord Abbett Affiliated Fund, Inc. ("Affiliated Fund"); Lord Abbett
Research Fund, Inc. - Large-Cap Series, ("Large-Cap Series"); Lord Abbett
Research Fund, Inc. - Small-Cap Value Series ("Small-Cap Value Series"); Lord
Abbett Growth Opportunities Fund ("Growth Opportunities Fund"); Lord Abbett
Securities Trust - International Series ("International Series"); and Lord
Abbett High Yield Fund ("High Yield Fund") (each individually "we" or the
"Fund," and collectively the "Funds") and may be obtained from your securities
dealer or from Lord Abbett Distributor at 90 Hudson Street, Jersey City, New
Jersey 07302-3973.
TABLE OF CONTENTS PAGE
1. Investment Policies 2
2. Directors (Trustees) and Officers 11
3. Investment Advisory and Other Services 17
4. Portfolio Transactions 19
5. Purchases, Redemptions
and Shareholder Services 20
6. Taxes 21
7. Performance 22
8. Information About The Funds 23
9. Financial Statements 23
1
<PAGE>
1.
Investment Policies
Fundamental Investment Restrictions. The Funds are subject to the following
investment restrictions which cannot be changed without approval of a majority
of each Fund's outstanding shares.
Each Fund may not:
(1) borrow money, except that (i) each Fund may borrow from banks (as defined
in the Investment Company Act of 1940, as amended (the "Act")) in amounts
up to 33 1/3% of its total assets (including the amount borrowed), (ii)
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 Fund's investment policies as permitted by applicable
law);
(3) engage in the underwriting of securities, except pursuant to a merger or
acquisition or to the extent that, in connection with the disposition of
its portfolio securities, it may be deemed to be an underwriter under
federal securities laws;
(4) make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in government
obligations, commercial paper, pass-through instruments, certificates of
deposit, bankers acceptances, repurchase agreements or any similar
instruments shall not be subject to this limitation, and except further
that 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) 10% of the voting securities of such issuer;
(7) invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding securities of
the U.S. Government, its agencies and instrumentalities); or
(8) issue senior securities to the extent such issuance would violate
applicable law.
With respect to the restrictions mentioned herein, compliance therewith will not
be affected by changes in the market value of portfolio securities but will be
determined at the time of purchase or sale of such securities.
Non-Fundamental Investment Restrictions. In addition to the investment
restrictions above which cannot be changed without shareholder approval, each
Fund also is subject to the following non-fundamental investment policies which
may be changed by the Boards of Directors (Trustees) 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, deemed to be liquid
by the Boards of Directors (Trustees);
<PAGE>
(4) invest in the securities of other investment companies as defined under 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 of 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 each Fund's officers
or directors (trustees) or by one or more partners or members of the Fund's
underwriter or investment adviser if these owners in the aggregate own
beneficially more than 5% of the securities of such issuer;
(7) invest in warrants if, at the time of the acquisition, its investment in
warrants, valued at the lower of cost or market, would exceed 5% of 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 major foreign exchange);
(8) invest in real estate limited partnership interests or interests in oil,
gas or other mineral leases, or exploration or other development programs,
except that each Fund may invest in securities issued by companies that
engage in oil, gas or other mineral exploration or other development
activities;
(9) write, purchase or sell puts, calls, straddles, spreads or combinations
thereof, except to the extent permitted in a Fund's prospectus and
statement of additional information, as they may be amended from time to
time;
(10) buy from or sell to any of a Fund's officers, directors (trustees),
employees, or its investment adviser any securities other than shares of a
Fund;
(11) with respect to Affiliated Fund, pledge, mortgage or hypothecate its
assets; however, this provision does not apply to the grant of escrow
receipts or the entry into other similar escrow arrangements arising out of
the writing of covered call options; and
(12) with respect to High Yield Fund, invest more than 10% of the market value
of its gross assets at the time of investment in debt securities which are
in default as to interest or principal.
For the year ended October 31, 1999, Affiliated Fund's portfolio turnover rate
was 62.30% versus 56.49% for the prior year. For the year ended November 30,
1999, the Small-Cap Value Series' portfolio turnover rate was 83.93% versus
67.86% for the prior year; and the Large-Cap Series' portfolio turnover rate was
60.59% versus 99.14% for the prior year. For the year ended October 31, 1999,
the International Series' portfolio turnover rate was 75.15% versus 20.52% for
the year ended October 31, 1999. For the year ended November 30, 1999, the
Growth Opportunities Fund's turnover rate was 104.87% versus 136.81% for the
prior year.
With respect to the Affiliated Fund, it has no current intention to do so, but
may invest in financial futures & options on financial futures.
INVESTMENT TECHNIQUES
Lending Portfolio Securities (Affiliated Fund, Growth Opportunities Fund,
International Series, Large-Cap Series, Small-Cap Value Series) The Funds may
lend portfolio securities to registered broker-dealers. These loans may not
exceed 30% of total assets. The Funds' loans of securities will be
collateralized by cash or marketable securities issued or guaranteed by the U.S.
Government or its agencies ("U.S. Government Securities") or other permissible
means. The cash or instruments collateralizing the loans of securities will be
maintained at all times in an amount at least equal to the current market value
of the loaned securities. From time to time, the Funds may allow to the borrower
and/or a third party that is not affiliated with the Funds and is acting as a
"placing broker" a part of the interest received with respect to the investment
of collateral received for securities loaned. No fee will be paid to affiliated
persons of the Funds.
By lending portfolio securities, the Funds can increase their income by
continuing to receive interest on the loaned securities as well as by either
investing the cash collateral in permissible investments, such as U.S.
Government Securities, or obtaining yield in the form of interest paid by the
borrower when such U.S. Government Securities are used as collateral. The Funds
will comply with the following conditions whenever they loans securities: (i)
the Funds must receive at least 100% collateral from the borrower; (ii) the
borrower must increase the collateral whenever the market value of the
securities loaned rises above the level of the collateral; (iii) the Funds must
be able to terminate the loan at any time; (iv) the Funds must receive
reasonable compensation with respect to the loan, as well as any dividends,
interest or other distributions on the loaned securities; (v) the Funds may pay
only reasonable fees in connection with the loan and (vi) voting rights on the
loaned securities may pass to the borrower except that, if a material event
adversely affecting the investment in the loaned securities occurs, the Funds'
Board must terminate the loan and regain the right to vote the securities.
3
<PAGE>
Rule 144A Securities (Affiliated Fund) The Fund may invest in securities
qualifying for resale to "qualified institutional buyers" under SEC Rule 144A
that are determined by the Board, or by Lord Abbett pursuant to the Board's
delegation, to be liquid securities. The Board will review quarterly the
liquidity of the investments the Fund makes in such securities. Investments by
the Fund in Rule 144A securities initially determined to be liquid could have
the effect of diminishing the level of the Fund's liquidity during periods of
decreased market interest in such securities among qualified institutional
buyers.
Other Investment Policies (Affiliated Fund and Large-Cap Series) Both Funds may
write covered call options which are traded on a national securities exchange
with respect to securities in our portfolio in an attempt to increase income and
to 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 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
will forgo the opportunity to profit from any increase in the market price of
the underlying security above the exercise price of the option (to the extent
that the increase exceeds our net premium). We also may enter into "closing
purchase transactions" in order to terminate the 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 might otherwise 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 10% of its gross assets at the time an option is written. This percentage
limitation will not be increased without prior disclosure in a Fund's current
Prospectus.
Repurchase Agreements (International Series) The Fund may enter into repurchase
agreements with respect to a security. A repurchase agreement is a transaction
by which the Fund acquires a security and simultaneously commits to resell that
security to the seller (a bank or securities dealer) at an agreed upon price on
an agreed upon date. The resale price reflects the purchase price plus an agreed
upon market rate of interest which is unrelated to the coupon rate or date of
maturity of the purchased security. In this type of transaction, the securities
purchased by the Fund have a total value in excess of the value of the
repurchase agreement. The Fund requires at all times that the repurchase
agreement be collateralized by cash or U.S. Government securities having a value
equal to, or in excess of, the value of the repurchase agreement. Such
agreements permit the Fund to keep all of its assets at work while retaining
flexibility in pursuit of investments of a longer term nature.
The use of repurchase agreements involves certain risks. For example, if the
seller of the agreement defaults on its obligation to repurchase the underlying
securities at a time when the value of these securities has declined, the Fund
may incur a loss upon disposition of them. If the seller of the agreement
becomes insolvent and subject to liquidation or reorganization under the
Bankruptcy Code or other laws, a bankruptcy court may determine that the
underlying securities are collateral not within the control of the Fund and are
therefore subject to sale by the trustee in bankruptcy. Even though the
repurchase agreements may have maturities of seven days or less, they may lack
liquidity, especially if the issuer encounters financial difficulties. While
Fund management acknowledges these risks, it is expected that they can be
controlled through stringent selection criteria and careful monitoring
procedures. Fund management intends to limit repurchase agreements to
transactions with dealers and financial institutions believed by Fund management
to present minimal credit risks. Fund management will monitor creditworthiness
of the repurchase agreement sellers on an ongoing basis.
4
<PAGE>
The Fund will enter into repurchase agreements only with those primary reporting
dealers that report to the Federal Reserve Bank of New York and with the 100
largest United States commercial banks and the underlying securities purchased
under the agreements will consist only of those securities in which the Fund
otherwise may invest.
Warrants (International Series and Large-Cap Series) Pursuant to Texas
regulations, both Funds will not invest more than 5% of its assets in warrants
and not more than 2% of such value in warrants not listed on the New York or
American Stock Exchanges, except when they form a unit with other securities. As
a matter of operating policy, we will not invest more than 5% of our net assets
in rights.
Covered Call Options (International Series and Large-Cap Series) Both Funds may
write covered call options which are traded on a national securities exchange
with respect to securities in its portfolio in an attempt to increase its income
and to provide greater flexibility in the disposition of its portfolio
securities. A "call option" is a contract sold for a price (the "premium")
giving its holder the right to buy a specific number of shares of stock at a
specific price prior to a specified date. A "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 its net premium). Each Fund may enter into
"closing purchase transactions" in order to terminate its 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 might
otherwise have sold to protect against depreciation. Both Funds intend to write
covered call options with respect to securities with an aggregate market value
of more than 5% of its gross assets at the time an option is written. This
percentage limitation will not be increased without prior disclosure in the
current Prospectus.
The Funds' custodian will segregate cash or liquid high-grade debt securities in
an amount not less than that required by Securities and Exchange Commission
("SEC") Release 10666 with respect to the Funds' assets committed to written
covered call options. If the value of the segregated securities 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 Funds' commitments with respect to such written options.
Financial Futures Contracts (International Series and Large-Cap Series) Both
Funds may enter into contracts for the future delivery of a financial
instrument, such as a security or the cash value of a securities index. This
investment technique is designed primarily to hedge (i.e., protect) against
anticipated future changes in interest rates or market conditions which
otherwise might adversely affect the value of securities which we hold or intend
to purchase. A "sale" of a futures contract means the undertaking of a
contractual obligation to deliver the securities or the cash value of an index
called for by the contract at a specified price during a specified delivery
period. A "purchase" of a futures contract means the undertaking of a
contractual obligation to acquire the securities or cash value of an index at a
specified price during a specified delivery period. At the time of delivery
pursuant to the contract, adjustments are made to recognize differences in value
arising from the delivery of securities which differ from those specified in the
contract. In some cases, securities called for by a futures contract may not
have been issued at the time the contract was written. Both Funds will not enter
into any futures contracts or options on futures contracts if the aggregate of
the market value of the securities covered by its outstanding futures contracts
and securities covered by futures contracts subject to the outstanding options
written by it 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. The International Series
will incur brokerage fees when it purchases or sells contracts and will be
required to maintain margin deposits. At the time it enters into a futures
contract, it is required to deposit with its 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 the Funds' 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.
5
<PAGE>
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 (International Series and Large-Cap
Series) Both Funds 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. Both Funds would be required to deposit with
our custodian initial margin and maintenance margin with respect to put and call
options on futures contracts written by us. Options on futures contracts involve
risks similar to the risks relating to transactions in financial futures
contracts described above. Generally speaking, a given dollar amount used to
purchase an option on a financial futures contract can hedge a much greater
value of underlying securities than if that amount were used to directly
purchase the same financial futures. Should the event that a Fund intends to
hedge (or protect) against not materialize, however, the option may expire
worthless, in which case the Fund would lose the premium paid therefor.
Segregated Accounts (International Series and Large-Cap Series) To the extent
required to comply with Securities and Exchange Commission Release 10666 and any
related SEC policies, when purchasing a futures contract, or writing a put
option, each Fund will maintain in a segregated account at its custodian bank
cash, U.S. Government and other permitted securities to cover its position.
Forward Foreign Currency Contracts (Growth Opportunities Fund, Small-Cap Value
Series,) 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. Each 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, each 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, each Fund may enter into a
forward contract to sell the amount of foreign currency approximating the value
of some or all of each Fund's portfolio securities denominated in such foreign
currency or, in the alternative, each Fund may use a cross-hedging technique
whereby it sells another currency which each 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. Each Fund does not intend to enter into such forward
contracts under this second circumstance on a continuous basis.
6
<PAGE>
Repurchase Agreements (Growth Opportunities Fund, Small-Cap Value Series) If a
Fund enters 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
each Fund otherwise may invest.
Foreign Currency Hedging Techniques (Growth Opportunities Fund, Small-Cap Value
Series) The Funds may utilize various foreign currency hedging techniques,
including forward foreign currency contracts and foreign currency put and call
options.
Foreign Currency Put and Call Options (Growth Opportunities Fund, Small-Cap
Value Series) The Funds also may purchase foreign currency put options and write
foreign currency call options on U.S. exchanges or U.S. over-the-counter
markets. A put option gives the Funds, upon payment of a premium, the right to
sell a currency at the exercise price until the expiration of the option and
serves to insure against adverse currency price movements in the underlying
portfolio assets denominated in that currency.
Exchange-listed options markets in the United States include several major
currencies, and trading may be thin and illiquid. A number of major investment
firms trade unlisted options which are more flexible than exchange-listed
options with respect to strike price and maturity date. Unlisted options
generally are available in a wider range of currencies. Unlisted foreign
currency options are generally less liquid than listed options and involve the
credit risk associated with the individual issuer. Unlisted options, together
with other illiquid securities, are subject to a limit of 15% of each Funds' net
assets.
A call option written by a Fund gives the purchaser, upon payment of a premium,
the right to purchase a currency at the exercise price until the
expiration of the option. The Funds may write call options on a foreign currency
only in conjunction with a purchase of a put option on that currency. Such a
strategy is designed to reduce the cost of downside currency protection by
limiting currency appreciation potential. The face value of such writing may not
exceed 90% of the value of the securities denominated in such currency invested
in by the Funds or in such cross currency (referred to above) to cover such call
writing.
The Funds' custodian will segregate cash or permitted securities belonging to
the Funds in an amount not less than that required by SEC Release 10666 and
related policies with respect to the Funds' assets committed to (a) writing
options, (b) forward foreign currency contracts and (c) cross hedges entered
into by the Funds. 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 Funds' commitments with respect to such written options, forward foreign
currency contracts and cross hedges.
Stock Options, Options on Stock Indices and Stock Index Futures (Small-Cap Value
Series) The Fund may write put and call options on stocks only if they are
covered, and such options must remain covered so long as the Fund is obligated
as a writer. The Fund will not (a) write puts having an aggregate exercise price
greater than 25% of the Fund's 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 (Small-Cap Value Series) The Fund may, from time to time,
write call options on its portfolio securities. The Fund 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 Fund's obligation to deliver the
underlying security against payment of the exercise price would terminate either
upon expiration of the option or earlier if the Fund 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 Fund 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.
7
<PAGE>
The Fund 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 Fund 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 Fund for writing the option.
Generally, the Fund 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 Fund 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 Fund 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's
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 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 Fund 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 (Small-Cap Value Series) The Fund 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
Fund 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 Fund 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 Fund for
the stock. The price of the stock may decline by an amount in excess of the
premium, in which event the Fund 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 stock 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.
8
<PAGE>
Stock Index Options (Small-Cap Value Series) Except as described below, the Fund
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 Fund writes a call option on a broadly-based stock
market index, it 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 (Small-Cap Value Series) If the Fund 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 Fund has not written a
stock call option and which has not been hedged by the Fund by the sale of stock
index futures. Such securities will include stocks which represent at least 50%
of the weighting of the industry or market segment index and will represent at
least 50% of the Fund's 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
Fund 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 Fund writes a call on an index which is in-the-money at the
time the call is written, the Fund 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 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 Fund 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 Fund
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 Fund, 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 Fund's commodity futures or commodity options transactions
constitute bona fide hedging transactions within the meaning of the CFTC's
regulations. The Fund will use stock index futures and options on futures as
described herein in a manner consistent with this requirement.
Stock Index Futures (Small-CapValue Series) The Fund 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 Fund's
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 Fund's net assets.
9
<PAGE>
RISK FACTORS
Risk Factors (Affiliated Fund) As stated in the Prospectus, the Fund may invest
no more than 5% of its net assets (at the time of investment) in lower-rated,
high-yield bonds. In general, the market for lower-rated, high-yield bonds is
more limited than the market for higher-rated bonds, and because trading in such
bonds may be thinner and less active, the market prices of such bonds may
fluctuate more than the prices of higher-rated bonds, particularly in times of
market stress. In addition, while the market for high-yield, corporate debt
securities has been in existence for many years, the market in recent years
experienced a dramatic increase in the large-scale use of such securities to
fund highly-leveraged corporate acquisitions and restructurings. Accordingly,
past experience may not provide an accurate indication of future performance of
the high-yield bond market, especially during periods of economic recession.
Other risks which may be associated with lower-rated, high-yield bonds include
their relative insensitivity to interest-rate changes; the exercise of any of
their redemption or call provisions in a declining market which may result in
their replacement by lower-yielding bonds; and legislation, from time to time,
which may adversely affect their market. Since the risk of default is higher
among lower-rated, high-yield bonds, Lord Abbett's research and analyses are an
important ingredient in the selection of such bonds. Through portfolio
diversification, good credit analysis and attention to current developments and
trends in interest rates and economic conditions, investment risk can be
reduced, although there is no assurance that losses will not occur. The Fund
does not have any minimum rating criteria applicable to the fixed-income
securities in which it invests.
Risks of Transactions in Stock Options (Small-Cap Value Series) 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 Fund. Although the Fund
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 Fund, 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 (Small-CapValue Series) The Fund's 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 Fund 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 Fund 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 Fund 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 could result in
substantial losses to the Fund. It is the Fund's 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 Fund 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.
10
<PAGE>
Special Risks of Writing Calls on Indices (Small-Cap Value Series) 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 Fund 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 Fund's 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 Fund in the opposite direction to the market would be likely to occur for
only a short period or to a small degree.
Unless the Fund has other liquid assets that are sufficient to satisfy the
exercise of a call, the Fund 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 Fund 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 Fund 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 Fund is able to
sell stocks in its portfolio. As with stock options, the Fund 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 Fund 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 Fund has
written is "covered" by an index call held by the Fund with the same strike
price, the Fund 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 Fund exercises the
call it holds or the time the Fund 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 (Small-Cap Value Series)
If the Fund 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 Fund 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 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 (Trustees) and Officers
The Board of Directors/Trustees of each Fund is responsible for the management
of the business and affairs of each Fund.
11
<PAGE>
The following director/trustee is a partner of Lord, Abbett & Co. ("Lord
Abbett"), 90 Hudson Street, Jersey City, New Jersey 07302-3973. He has been
associated with Lord Abbett for over five years and is also an officer,
director, or trustee of thirteen other Lord Abbett-sponsored funds.
*Robert S. Dow, age 54, Chairman and President
*Mr. Dow is an "interested person" as defined in the Act.
The following outside directors/trustees are also directors or trustees of
thirteen other Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow, Director/Trustee
245 Park Avenue, Suite 2414
New York, New York
Senior Adviser, Time Warner Inc. (since 1998). Formerly, Acting Chief Executive
Officer of Courtroom Television Network (1997 - 1998). Formerly, President and
Chief Executive Officer of Time Warner Cable Programming, Inc. (1991 - 1997).
Prior to that, President and Chief Operating Officer of Home Box Office, Inc.
Age 58.
William H. T. Bush, Director/Trustee
Bush-O'Donnell & Co., Inc.
101 South Hanley Road, Suite 1025
St. Louis, Missouri
Co-founder and Chairman of the Board of the financial advisory firm of
Bush-O'Donnell & Company (since 1986). Age 61.
Robert B. Calhoun, Jr., Director/Trustee
Monitor Clipper Partners
650 Madison Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners (since 1997) and President of The
Clipper Group L.P., both private equity investment funds (since 1990). Age 57.
Stewart S. Dixon, Director/Trustee
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. (since 1990). Age
69.
John C. Jansing, Director/Trustee
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 74.
C. Alan MacDonald, Director/Trustee
Directorship Inc.
8 Sound Shore Drive
Greenwich, Connecticut
12
<PAGE>
Currently involved in golf development management on a consultancy basis (since
1999). Formerly, Managing Director of The Directorship Inc., a consultancy in
board management and corporate governance (1997-1999). Prior to that, 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 eighteen 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
66.
Hansel B. Millican, Jr., Director/Trustee
Rochester Button Company
1328 Broadway (Suite 816)
New York, New York
President and Chief Executive Officer of Rochester Button Company (since 1991).
Age 71.
Thomas J. Neff, Director/Trustee
Spencer Stuart
277 Park Avenue
New York, New York
Chairman of Spencer Stuart, an executive search consulting firm (since 1976).
Currently serves as Director of Ace, Ltd. (NYSE). Age 62.
For the Fiscal Year Ended October 31, 1999 - Affiliated Fund;
International Series For the Fiscal Year Ended November 30, 1999 - Growth
Opportunities Fund; Large-Cap Series; Small-Cap Value
Series; High Yield Fund
The following table sets forth the compensation accrued for each Fund's
outside directors/trustees for their respective fiscal years.
Aggregate
Name of Director Compensation Accrued by each Fund/1
Affiliated Research Investment Securities
Fund Fund Trust Trust
E. Thayer Bigelow $ 27,341 $ 1,720 $5,906 $ 1,709
William H. T. Bush* $ 27,240 $ 1,718 $5,897 $ 1,703
Robert B. Calhoun, Jr.** $ 26,880 $ 1,695 $5,820 $ 1,680
Stewart S. Dixon $ 27,600 $ 1,740 $5,974 $ 1,725
John C. Jansing/4 $ 26,880 $ 1,695 $5,820 $ 1,680
C. Alan MacDonald $ 27,120 $ 1,710 $5,871 $ 1,695
Hansel B. Millican, Jr. $ 27,120 $ 1,710 $5,871 $ 1,695
Thomas J. Neff $ 28,046 $ 1,775 $6,095 $ 1,753
*Elected as of August 13, 1998
**Elected as of June 17, 1998
13
<PAGE>
The following table sets forth information with respect to the equity-based
benefits accrued for outside directors/trustees by the Lord Abbett-sponsored
funds for the twelve months ended October 31, 1999.
Pension or Retirement Benefits
Accrued by each Fund and All Other
Name of Director Lord Abbett-sponsored Funds/2
- ---------------- -----------------------------
E. Thayer Bigelow $ 17,622
William H.T. Bush* $ 15,846
Robert B. Calhoun, Jr.** $ 12,276
Stewart S. Dixon $ 32,420
John C. Jansing/4 $ 41,108
C. Alan MacDonald $ 26,763
Hansel B. Millican, Jr. $ 37,822
Thomas J. Neff $ 20,313
The following table sets forth the total compensation accrued by all Lord
Abbett sponsored funds for
the outside director/trustees. 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 or officer.
For Year Ended December 31, 1999
Total Compensation Accrued by each Fund and
Name of Director Thirteen Other Lord Abbett-sponsored Funds/3
- ---------------- --------------------------------------------
E. Thayer Bigelow $ 57,720
William H.T. Bush* $ 58,000
Robert B. Calhoun, Jr.** $ 57,000
Stewart S. Dixon $ 58,500
John C. Jansing/4 $ 57,250
C. Alan MacDonald $ 57,500
Hansel B. Millican, Jr. $ 57,500
Thomas J. Neff $ 59,660
1. Outside directors'/trustees' fees, including attendance fees for board
and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on the
net assets of each Fund. A portion of the fees payable by each Fund to its
outside directors/trustees may be deferred under a plan ("equity based
plan") that
deems the deferred amounts to be invested in shares of the Fund for later
distribution to the directors/trustees. The amounts of the aggregate
compensation payable by the Company in accordance with the equity-based plan
as of each Fund's respective fiscal years deemed invested in Fund shares,
including dividends
reinvested and changes in the net asset value applicable to such deemed
investments were:
For Affiliated Fund, the aggregate compensation payable by the Fund as of
October 31, 1999 deemed invested in Fund shares, including dividends reinvested
and changes in net asset value applicable to such deemed investments, were: Mr.
Bigelow, $177,464; Mr. Bush, $1,512; Mr. Calhoun, Jr., $39,595; Mr. Dixon,
$337,337;
Mr. Jansing, $575,176; Mr. MacDonald, $422,105; Mr. Millican, $743,736; and Mr.
Neff, $657,888. If the amounts deemed invested in Fund shares were added to each
director's actual holdings of Fund shares as of October 31, 1999 each would own,
the following: Mr. Bigelow, $177,464; Mr. Bush, $1,512; Mr. Calhoun, $39,595;
Mr. Dixon, $351,857; Mr. Jansing, $923,464; Mr. MacDonald, $780,769;
Mr. Millican, 743,736; and Mr. Neff, $721,255.
The amounts of the aggregate compensation payable by the Large-Cap Series as of
November 30, 1999 deemed invested in Company shares, including dividends
reinvested and changes in net asset value applicable to such deemed investments,
were: Mr. Bigelow, $1,062; Mr. Bush, $23 Mr. Calhoun, $625; Mr. Dixon, $509;
Mr. Jansing,
$852; Mr. MacDonald, $462; Mr. Millican, $1,474; and Mr. Neff, $1,187. If the
amounts deemed invested in Company shares were added to each director's actual
holdings of Company shares as of November 30, 1999, each would own, the
following: Mr. Bigelow,$1,062; Mr. Bush, $23; Mr. Calhoun, $625; Mr. Dixon,
$509; Mr. Jansing, $852; Mr. MacDonald, $462; Mr. Millican, $1,474;
and Mr. Neff, $1,187 .
The amounts of the aggregate compensation payable by the Growth Opportunities
Fund as of November 30, 1999 deemed invested in Company shares, including
dividends reinvested and changes in net asset value applicable to such deemed
investments, were: Mr. Bigelow, $0; Mr. Calhoun, $31; Mr. Jansing, $30;
Mr. Millican, $31; and Mr. Neff, $31. If the amounts deemed
invested in Company shares were added to each director's actual holdings of
Company shares as of November 30, 1999, each would own, the following: Mr.
Bigelow, $0 ; Mr. Dixon, $0 ; Mr. Jansing, $30 ; Mr.
MacDonald,$0 ; Mr. Millican, $31; and Mr. Neff, $31.
The amounts of the aggregate compensation payable by the International Series
as of November 30, 1999 deemed invested in Company shares, including dividends
reinvested and changes in net asset value applicable to such deemed investments,
were: Mr. Bigelow, $793; Mr. Calhoun, $601; Mr. Dixon, $0; Mr. Jansing,
$657; Mr. MacDonald, $49; Mr. Millican, $667; and Mr. Neff, $686.
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, $793; Mr. Calhoun, $601; Mr. Dixon, $0;
Mr. Jansing, $657; Mr. MacDonald, $49; Mr. Millican, $667; and Mr. Neff,
$686.
For the Small-Cap Value Series,the amounts of the aggregate compensation payable
by the Fund as of October 31, 1999 deemed invested in Company shares, including
dividends reinvested and changes in net asset value applicable to such deemed
investments, were: Mr. Bigelow, $3094; Mr. Bush, $82; Mr. Calhoun, $2084;
Mr. Dixon, $157; Mr. Jansing, $2503; Mr. MacDonald, $481; Mr. Millican,
$2712; and Mr. Neff, $2712. If the amounts deemed invested in Company
shares were added to each
director's actual holdings of Company shares as of October 31, 1999, each would
own, the following: Mr. Bigelow, $3094; Mr. Bush, $82; Mr. Calhoun, $2084;
Mr. Dixon, $157; Mr. Jansing, $2503; Mr. MacDonald, $481; Mr. Millican, $2715;
and Mr. Neff, $2712.
2. The amounts in the Column were accrued by the Lord Abbett-Sponsored Funds for
the twelve months ended for each Fund's respective fiscal year ends.
3. This column shows aggregate compensation, including directors/trustees' fees
and attendance fees for board and committee meetings, of a nature referred to
in footnote one, accrued by the Lord Abbett-sponsored funds during the year
ended December 31, 1999, including fees directors/trusttes' have chosen to
defer but does not include amounts accrued under the equity based plan and
shown in this Column.
14
<PAGE>
4. The equity-based plans superseded a previously approved retirement plan for
all directors/trustees. Directors/trustees had the option to convert their
accrued benefits under the retirement plan. All of the current outside
directors/trustees except one made such election. 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 each Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Brown, Fetch, Carper, Gerber, Hilstad, Hudson, McGruder, Morris, and Walsh are
partners of Lord Abbett; the others are employees:
Executive Vice Presidents:
Zane E. Brown, age 48 (International Series)
15
<PAGE>
Robert P. Fetch, age 47 (Large-Cap Series; Small-Cap Value Series) (with Lord
Abbett since 1995 - formerly Managing Director at Prudential Investment Advisors
from 1983 to 1995)
Robert I. Gerber, age 45 (High Yield Fund) (with Lord Abbett since 1997 -
formerly Senior Portfolio Manager at Sanford Bernstein & Co. from 1992 - 1997)
W. Thomas Hudson, Jr. age 58 (Affiliated Fund)
Robert G. Morris, age 55 (Growth Opportunities Fund; High Yield Fund;
International Series; Large-Cap Series; Small-Cap Value Series)
Stephen J. McGruder, age 56 (Growth Opportunities Fund; Large-Cap Series) (with
Lord Abbett since 1995 - formerly Vice President of Wafra Securities from 1988
to 1995)
Vice Presidents:
Paul A. Hilstad, age 57, Vice President and Secretary (all Funds) (with Lord
Abbett since 1995 - formerly Senior Vice President and General Counsel of
American Capital Management & Research, Inc.)
Joan A. Binstock, age 45 (with Lord Abbett since 1999, formerly Chief Operating
Officer of Morgan Grenfell from 1996 to 1999, prior thereto Principal of Ernst &
Young LLP)
Zane E. Brown, age 48 (Large-Cap Series; Small-Cap Value Series)
Daniel E. Carper, age 48 (all Funds)
Timothy Horan, age 45 (International Series) (with Lord Abbett since 1996 -
formerly Senior Manager at Credit Suisse from 1994 to 1995; prior thereto Vice
President at Aubrey G. Lanston & Co. from 1992 to 1994)
Lawrence H. Kaplan, age 43, Vice President and Assistant Secretary (all Funds)
(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.)
Jerald Lanzotti, age 32 (International Series)
Gregory M. Macosko, age 52 (Large-Cap Series; Small-Cap Value Series) (with Lord
Abbett since 1997 - formerly Analyst with Royce Associates from 1991 to 1997)
Robert G. Morris, age 55 (Affiliated Fund)
A. Edward Oberhaus III, age 40 (all Funds)
Tracie E. Richter, age 32 (with Lord Abbett since 1999, formerly Vice President
- -Head of Fund Administration of Morgan Grenfell from 1998 to 1999, Vice
President of Bankers Trust from 1996 to 1998, prior thereto Tax Associate of
Goldman Sachs)
Fernando Saldanha, age 47 (International Series) (with Lord Abbett since 1998 -
formerly Economist and Senior Financial Officer of World Bank (IBRO) from 1988
to 1998)
Eli M. Salzman, age 34 (Affiliated Fund) (with Lord Abbett since 1997 - formerly
Vice President of Mutual of America Capital Corp.; prior thereto Vice President
of Mitchell Hutchins Asset Mgt. from 1986 to 1996)
Christopher J. Towle, age 42 (International Series)
16
<PAGE>
John J. Walsh, age 63 (all Funds); and
Treasurer:
Donna M. McManus, age 39, Treasurer (all Funds) (with Lord Abbett since 1996 -
formerly a Senior Manager at Deloitte & Touche LLP).
As of February 12, 2000, our officers and directors owned as a group less than
1% of each Fund's Y shares and there were no record
holders of 5% or more of each Fund's outstanding Y shares.
The Funds' By-Laws provide that each Fund shall not hold a meeting of its
stockholders in any year unless one or more matters are required to be acted on
by stockholders under the Investment Company Act of 1940, as amended (the
"Act"), or unless called by a majority of the Board of Directors (Trustees) or
by shareholders holding at least one quarter of the stock of each Fund's
outstanding and entitled to vote at the meeting.
3.
Investment Advisory and Other Services
As described under "Management" in the Prospectus, Lord Abbett is the investment
manager of the Funds. Ten of the general partners of Lord Abbett are officers
and/or board members of the Funds, as follows: Zane E. Brown; Daniel E. Carper;
Robert S. Dow; Robert P. Fetch; Robert I. Gerber; Paul A. Hilstad; W. Thomas
Hudson; Stephen J. McGruder; Robert G. Morris; Christopher J. Towle; and John J.
Walsh.
The other general partners who are neither officers nor directors of the Funds
are Stephen Allen, John E. Erard, Daria L. Foster, Michael B. McLaughlin, R.
Mark Pennington, and Robert J. Noelke. The address of each partner is 90 Hudson
Street, Jersey City, New Jersey 07302-3973.
The services performed by Lord Abbett are described in the Prospectus under
"Management." Under its Management Agreement, Affiliated Fund pays Lord Abbett a
monthly fee, based on average daily net assets for each month, at the annual
rate of .5 of 1% of the portion of its net assets not in excess of $200,000,000;
.4 of 1% of the portion in excess of $200,000,000, but not in excess of
$500,000,000; .375 of 1% of the portion in excess of $500,000,000, but not in
excess of $700,000,000; .35 of 1% of the portion in excess of $700,000,000, but
not in excess of $900,000,000; and .3 of 1% of the portion in excess of
$900,000,000.
Under its Management Agreement:
Growth Opportunities Fund is obligated to pay Lord Abbett a monthly fee, based
on average daily net assets for each month, at the annual rate of .90 of 1% of
the Fund's average daily net assets. On September 15, 1999, the Fund's
shareholders voted to raise the management fee to .90 of 1%.
High Yield Fund is obligated to pay Lord Abbett a monthly fee, based on average
daily net assets for each month, at the annual rate of .60 of 1% of its average
daily net assets.
Large-Cap Series and Small-Cap Value Series are each 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 each's average daily net assets.
International Series is obligated to pay Lord Abbett a monthly fee, based on
average daily net assets for each month, at the annual rate of .75 of 1%.
The following is a summary of the Management Fee for the 1999, 1998 and 1997
fiscal years of the funds:
17
<PAGE>
<TABLE>
<CAPTION>
Gross Management Management
Fund Fiscal Year Management Fees Fees Waived Fees Paid
---- ----------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
Affiliated Fund 1999 $29,829,606 $ 0 $29,829,606
1998 $26,317,934 $ 0 $26,317,934
1997 $22,192,209 $ 0 $22,192,209
Growth 1999 $ 159,804 $ 159,804 $ 0
Opportunities 1998 $ 16,316 $ 16,316 $ 0
Fund 1997 $ 10,844 $ 10,844 $ 0
International 1999 $ 1,450,892 $ 0 $ 1,450,892
Series 1998 $ 700,368 $ 0 $ 700,368
1997 $ 127,715 $ 0 $ 127,715
Small-Cap Value 1999 $ 3,562,324 $ 0 $ 3,562,324
Series 1998 $ 4,270,210 $ 0 $ 4,270,210
1997 $ 1,075,019 $ 0 $ 1,075,019
Large-Cap 1999 $ 1,498,289 $ 0 $ 1,498,289
Series 1998 $ 768,947 $ 0 $ 768,547
1997 $ 334,394 $ 0 $ 334,394
</TABLE>
Lord Abbett has entered into an agreement with Fuji-Lord Abbett International
Ltd. ("the Sub-Adviser"), under which the Sub-Adviser provides Lord Abbett with
advice with respect to the International Series' assets. The Sub-Adviser is
controlled by Fuji Investment Management Co. (Tokyo). Fuji Bank Limited of
Tokyo, Japan ("Fuji Bank") directly owned 40% of the outstanding voting stock of
the Sub-Adviser. Fuji Investment Management Co. (Tokyo) is an affiliate of Fuji
Bank. Lord Abbett owns approximately 27% of such outstanding voting stock. As of
November 30, 1999, the Sub-Adviser manages approximately $915 million, which is
invested globally. The Sub-Adviser furnishes Lord Abbett with advice and
recommendations with respect to the International Series' assets, including
advice about the allocation of investments among foreign securities markets and
foreign equity and debt securities markets and foreign equity and debt
securities and, subject to consultation with Lord Abbett, advice as to cash
holdings and what securities in the portfolio should be purchased, held or
disposed of. The Sub-Adviser also gives advice with respect to foreign currency
matters. Lord Abbett is obligated to pay the Sub-Adviser a monthly fee, based on
average daily net assets for each month, at the annual rate of .375 of 1%. For
the fiscal year ended October 31, 1999, October 31, 1998 and for the period
December 13, 1996 (commencement of operations) to October 31, 1997, the fees
paid to the Sub-Adviser by Lord Abbett were $725,446, $350,184 and
$63,857, respectively.
Each Fund's fee is allocated among all of its classes based on each Fund's
proportionate share of such daily net assets.
In addition, each Fund is 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.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281 are
the independent auditors for each Fund and must be approved at least annually by
each Fund's Board of Directors (Trustees) to continue in such capacity. They
perform audit services for each Fund including the audits of financial
statements included in each Fund's annual report to shareholders.
18
<PAGE>
The Bank of New York ("BNY"), 48 Wall Street, New York, New York 10268, is each
Fund's custodian. In accordance with the requirements of Rule 17f-5, each Fund's
directors (trustees) have approved arrangements permitting each Fund's foreign
assets not held by BNY or its foreign branches to be held by certain qualified
foreign banks and depositories.
The Sub-Custodians of BNY are:
Euro-Clear (a transnational securities depository); Australia: ANZ Banking
Group; Austria: Creditanstalt-Bankverein; Canada: Canadian Imperial Bank of
Commerce; Chile: Citibank, N.A.; Czech Republic: Ceskoslovenska Obchodni Banka;
Denmark: Den Danske Bank; Finland: Union Bank of Finland; Germany: J.P. Morgan
GmbH; Greece: National Bank of Greece S.A.; Hong Kong, Indonesia, Philippines,
Taiwan and Thailand: Hong Kong & Shanghai Banking Corp.; Hungary: Citibank
Budapest Rt; India: Hong Kong and Shanghai Banking Corporation; Ireland: Allied
Irish Banks, PLC; Israel: Bank Leumi LE-Israel B.M.; Japan: The Fuji Bank, Ltd.;
Jordan: Citibank, N.A.; Korea: Bank of Seoul; Luxembourg: Banque Internationale
A Luxembourg, S.A.; Mexico: Citibank, N.A.; Morocco: Banque Commerciale du
Maroc; Netherlands: Bank van Haften Labouchere; New Zealand: Anz Banking Group
Ltd.; Norway: Den Norske Bank; Pakistan: Citibank, N.A.; Peru: Citibank, N.A.;
Poland: Bank Handlowy w Warszawie S.A.; Portugal: Banco Espirito Santo E
Comercial de Lisboa; Malaysia, Singapore: Development Bank of Singapore; South
Africa: The First National Bank of Southern Africa; Sri Lanka: Hong Kong and
Shanghai Banking Corporation; Sweden: Skandinaviska Enskilda Banken;
Switzerland: Bank Leu; Turkey: Citibank, N.A.; Venezuela: Citibank, N.A.
4.
Portfolio Transactions
Our policy is to obtain best execution on all our portfolio transactions, which
means that we seek to have purchases and sales of portfolio securities executed
at the most favorable prices, considering all costs of the transaction including
brokerage commissions and dealer markups and markdowns and taking into account
the full range and quality of the brokers' services. Consistent with obtaining
best execution, we generally pay, as described below, a higher commission than
some brokers might charge on the same transactions. Our policy with respect to
best execution governs the selection of brokers or dealers and the market in
which the transaction is executed. To the extent permitted by law, we may, if
considered advantageous, make a purchase from or sale to another Lord
Abbett-sponsored fund without the intervention of any broker-dealer.
Broker-dealers are selected on the basis of their professional capability and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of the Fund and also are employees
of Lord 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 databases. Such services may be used
by Lord Abbett in servicing all their accounts, and not all of such services
will necessarily be used by Lord Abbett in connection with their management of
the Fund; conversely, such services furnished in connection with brokerage on
other accounts managed by Lord Abbett may be used in connection with their
management of the Fund, and not all of such services will necessarily be used by
Lord Abbett in connection with their advisory services to such other accounts.
We have been advised by Lord Abbett that research services received form brokers
cannot be allocated to any particular account, are not a substitute for Lord
Abbett's services but are supplemental to their own research effort and, when
utilized, and 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.
19
<PAGE>
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 Lord Abbett to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold our shares and/or
shares of other Lord Abbett-sponsored funds may be preferred.
If other clients of Lord Abbett buy or sell the same security at the same time
as we do, transactions will, to the extent practicable, be allocated among all
participating accounts in proportion to the amount of each order and will be
executed daily until filled so that each account shares the average price and
commission cost of each day. Other clients who direct that their brokerage
business be placed with specific brokers or who invest through wrap accounts
introduced to Lord Abbett by certain brokers may not participate with us in the
buying and selling of the same securities as described above. If these clients
wish to buy or sell the same security as we do, they may have their transactions
executed at times different from our transactions and thus may not receive the
same price or incur the same commission cost as we do.
For the fiscal years ended October 31, 1999, 1998 and 1997, Affiliated Fund paid
total commissions to independent dealers of $11,088,462 , $12,832,030, and
$7,681,037, respectively.
For the fiscal year ended November 30, 1999, 1998 and 1997, Growth Opportunities
Fund paid total commissions to independent broker-dealers of $ 91,960 ,
$12,741, and $3,678, respectively.
For the fiscal year ended October 31, 1999, 1998 and the period December 13,
1996 (commencement of operations) through October 31, 1997, International Series
paid total commissions to independent broker-dealers of $ 380,452, $321,480
and $108,281, respectively.
For the fiscal years ended November 30, 1999, 1998, and 1997, the Large-Cap
Series paid total commissions to independent broker-dealers of $395,908,
$321,279 and $88,234, respectively.
For the fiscal years ended November 30, 1999, 1998, and 1997, the Small-Cap
Value Series paid total commissions to independent broker-dealers of $1,492,501
$1,564,340, and $1,812,425, respectively.
5.
Purchases, Redemptions
and Shareholder Services
Information concerning how we value our shares for the purchase and redemption
of our shares is contained in the Prospectus under "Purchases" and
"Redemptions," respectively.
As disclosed in the Prospectus, we calculate our net asset value as of the close
of the New York Stock Exchange ("NYSE") on each day that the NYSE is open for
trading by dividing our total net assets by the number of shares outstanding at
the time of calculation. The NYSE is closed on Saturdays and Sundays and the
following holidays -- New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
20
<PAGE>
Each Fund values its portfolio securities at market value as of the close of the
NYSE. Market value will be determined as follows: securities listed or admitted
to trading privileges on the New York or American Stock Exchange or on the
NASDAQ National Market System are valued at the last sales price, or, if there
is no sale on that day, at the mean between the last bid and asked prices, or,
in the case of bonds, in the over-the-counter market if, in the judgment of the
Fund's officers, that market more accurately reflects the market value of the
bonds. Over-the-counter securities not traded on the NASDAQ National Market
System are valued at the mean between the last bid and asked prices. Securities
for which market quotations are not available are valued at fair market value
under procedures approved by the Board of Directors /Trustees.
The net asset value per share for the Class Y shares will be determined by
taking Class Y shares net assets and dividing by shares outstanding. Our Class Y
shares will be offered at net asset value.
Each Fund has entered into a distribution agreement with Lord Abbett Distributor
LLC, a New York limited liability company ("Lord Abbett Distributor") and
subsidiary of Lord Abbett under which Lord Abbett Distributor is obligated to
use its best efforts to find purchasers for the shares of each Fund, and to make
reasonable efforts to sell Fund shares so long as, in Lord Abbett Distributor's
judgment, a substantial distribution can be obtained by reasonable efforts.
Class Y Share Exchanges. The Prospectus describes the Telephone Exchange
Privilege. You may exchange some or all of your Y shares for Y shares of any
Lord Abbett-sponsored funds currently offering Class Y shares to the public.
Currently those other funds consist of Lord Abbett Investment Trust - Core Fixed
Income Series, Strategic Core Fixed Income Series, Bond-Debenture Fund,
Developing Growth Fund, and Mid-Cap Value Fund.
Redemptions. A redemption order is in proper form when it contains all of the
information and documentation required by the order form or supplementally by
Lord Abbett Distributor or the Fund to carry out the order. The signature(s) and
any legal capacity of the signer(s) must be guaranteed by an eligible guarantor.
See each Prospectus for expedited redemption procedures.
The right to redeem and receive payment, as described in each 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 /Trustees may authorize redemption of all of the shares
in any account in which there are fewer than 25 shares (Affiliated Fund, Growth
Opportunities Fund, High Yield Fund, Large-Cap Series, and Small-Cap Value
Series), and 60 shares (International Series). Before authorizing such
redemption, the Board must determine that it is in our economic best interest or
necessary to reduce disproportionately burdensome expenses in servicing
shareholder accounts. At least 6 months prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
6.
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 federal income tax purposes.
Any loss realized on the disposition of a Fund's 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.
21
<PAGE>
Each Fund will be subject to a four-percent nondeductible 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.
The writing of call options and other investment techniques and practices which
a Fund may utilize may create "straddles" for United States federal income tax
purposes and may affect the character and timing of the recognition of gains and
losses by each Fund. 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.
Each Fund may be subject to foreign withholding taxes which would reduce the
yield on its investments. It is generally expected that shareholders of a Fund
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. However, if at the close of any fiscal year, more than 50% of the
assets of a fund consist of stock or securities of foreign corporations, the
Fund may elect to treat foreign income taxes paid by the Fund as having been
paid directly by its shareholder. If a Fund makes such an election, the
shareholders of the Fund will be required to (I) include in ordinary gross
income (in addition to taxable dividends actually received) their pro rata share
of foreign income taxes paid by the Fund and (ii) treat such pro rata share as
foreign income taxes paid by them. Such shareholders may then use such pro rata
portion of foreign income taxes as foreign tax credits, subject to applicable
limitations, or, alternatively, deduct them in computing their taxable income.
Shareholders who do not itemize deductions for federal income tax purposes will
not be entitled to deduct their pro rata portion of foreign taxes paid by the
Fund, although such shareholders will still be required to include their share
of such taxes in gross income. Shareholders who claim a foreign tax credit for
foreign taxes paid by a Fund may be required to treat a portion of the dividends
received from the Fund as separate category income for purposes of computing the
limitations on the foreign tax credit. Tax-exempt shareholders will ordinarily
not benefit from this election. Each year that a Fund qualifies for and makes
the election described above, its shareholders will be notified of the amount of
(i) each shareholder's pro rata share of foreign income taxes paid by the Fund
and (ii) the portion of dividends which represents income from each foreign
country.
Gains and losses realized by each Fund on certain transactions, including sales
of foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gains or losses are attributable to changes in
exchange rates for foreign currencies. Accordingly, distributions taxable as
ordinary income will include the net amount, if any, of such foreign exchange
gains and will be reduced by the net amount, if any, of such foreign exchange
losses.
If either Fund purchases shares in certain foreign investment entities, called
"passive foreign investment companies," it may be subject to United States
federal income tax on a portion of any "excess distribution" or gain from the
disposition of such shares, even if such income is distributed as a taxable
dividend by the Fund to its shareholders. Additional charges in the nature of
interest may be imposed on either the Fund or its shareholders in respect to
deferred taxes arising from such distributions or gains.
If a Fund were to invest in a passive foreign investment company with respect to
which a Fund elected to make a "qualified electing fund" election, in lieu of
the foregoing requirements, the Fund might be required to include in income each
year a portion of the ordinary earnings and net capital gains of the qualified
electing fund, even if such amount were not distributed to a Fund.
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.
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 advisor
regarding 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 to non-United States gift
and estate taxes to non-United States persons who own Fund shares.
22
<PAGE>
7.
Performance
Each Fund computes the annual compounded rate of total return for Class Y shares
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 no 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 each Prospectus. The ending redeemable
value is determined by assuming a complete redemption at the end of the
period(s) covered by the annual total return computation.
In calculating total returns for Class Y shares no sales charge is deducted from
the initial investment and the 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.
Class Y share performance. Using the computation method described above,
Affiliated Fund's total return for Class Y shares for the fiscal year ended
October 31, 1999 was %. Small-Cap Value Series' total return for Class Y shares
for the fiscal year ended November 30, 1999 %. International Series' total
return for Class Y shares for the fiscal year ended October 31, 1999 was %. All
of these returns are not annualized.
Our yield quotation for Class Y shares 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 net asset value 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 the 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 net asset value 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.Yields for Class Y shares do not reflect the
deduction of any sales charge.
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.
22
<PAGE>
8.
Information About the Funds
Affiliated Fund is a Maryland Corporation formed in 1934. Small-Cap Value
Series, Large-Cap Series and Growth Opportunities Fund are Funds of Lord Abbett
Research Fund, Inc., a Maryland corporation organized in 1992. The International
Series is a Fund of Lord Abbett Securities Trust, a Delaware business trust
organized in 1993. The High Yield Fund is a Fund of Lord Abbett Investment
Trust, a Delaware business trust organized in 1993.
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.
Our Boards of Directors/Trustees have authority to create and classify shares in
separate series, without further action by shareholders. To date, the Boards of
Directors/Trustees have authorized five classes of shares for each Fund (Class
A, B, C, P and Y). The Board of a Fund will allocate a Fund's shares among its
classes from time to time. All shares of a Fund 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. Although
no present plans exist to do so, further classes or series may be added to one
or more of the Funds in the future. The Act requires that where more than one
series exists for a Fund, each series must be preferred over all other series in
respect of assets specifically allocated to such series.
Rule 18f-2 under the Act provides that any matter required to be submitted, by
the provisions of the Act or applicable state law or otherwise, to the holders
of the outstanding voting securities of an investment company such as a 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 or series affected
by such matter. Rule 18f-2 further provides that a class or series shall be
deemed to be affected by a matter unless the interests of each class or series
in the matter are substantially identical or the matter does not affect any
interest of such class or series. However, the Rule exempts the selection of
independent public accountants, the approval of principal distribution contracts
and the election of directors from the separate voting requirements of the Rule.
Shareholder inquiries should be made by writing directly to your Fund or by
calling 800-821-5129. In addition, you can make inquiries through Lord Abbett
Distributor.
9.
Financial Statements
The financial statements for the fiscal year ended October 31, 1999 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1999 Annual Report to Shareholders of Lord Abbett
Affiliated Fund, Inc. 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.
The financial statements for the fiscal year ended November 30, 1999 and the
reports of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1999 Annual Reports to Shareholders of the Lord
Abbett Research Fund, Inc. (which includes Growth Opportunities Fund, formerly,
Mid-Cap Fund, Large-Cap Series, and Small-Cap Value Series), are incorporated
herein by reference to such financial statements and report in reliance upon the
authority of Deloitte & Touche LLP as experts in auditing and accounting.
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The financial statements for the fiscal year ended October 31, 1999 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1999 Annual Report to Shareholders of Lord Abbett
Securities Trust (which includes International Series) are incorporated herein
by reference to such financial statements and report in reliance upon the
authority of Deloitte & Touche LLP as experts in auditing and accounting.
24
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