1940 Act File No. 811-7538
1933 Act File No.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. __
[ ] Post-Effective Amendment No. __
Lord Abbett Securities Trust
(Exact Name of Registrant as Specified in Charter)
The General Motors Building, 767 Fifth Avenue
New York, New York 10153
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: 800-426-1130
Kenneth B. Cutler
Vice President and Secretary
Lord Abbett Securities Trust
The General Motors Building
767 Fifth Avenue
New York, New York 10153
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of the registration statement.
No filing fee is required because an indefinite number of shares are being
registered pursuant to Rule 24f-2 under the Investment Company Act of 1940.
It is proposed that this filing will become effective on
March , 1996 pursuant to Rule 488.
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<TABLE>
<CAPTION>
Lord Abbett Securities Trust
CROSS-REFERENCE SHEET
ITEMS REQUIRED BY FORM N-14
Part A
Item No. Item Caption Prospectus Caption
- - -------- ------------ ------------------
<S> <C> <C>
1. Beginning of Registration Statement and Outside Cover Page of Registration Statement;
Front Cover Page of Prospectus Cover Page of Proxy Statement and
Prospectus
2. Beginning and Outside Back Cover Page of Table of Contents
Prospectus
3. Fee Table, Synopsis and Risk Factors Fee Table; Summary of Proposal
4. Information about the Transaction Summary of Proposal; Information
About the Reorganization
5. Information about the Registrant Summary of Proposal; Comparative
Information about the Acquiring Fund
and the Acquired Fund; Additional
Information; Prospectus of Lord
Abbett Securities Trust dated March
, 1996
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6. Information about the Company Being Acquired Summary of Proposal; Comparative
Information about the Acquiring Fund
and the Acquired Fund
7. Voting Information Special Meeting of Shareholders of
the Acquired Fund; Notice of Special
Meeting of Shareholders; Summary of
Proposal
8. Interest of Certain Persons and Experts Additional Information
9. Additional Information Required for Reoffering Not Applicable
by Persons Deemed to be Underwriters
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Part B Statement of Additional
Item No. Item Caption Information Caption
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10. Cover Page Cover Page
11. Table of Contents Not Applicable
12. Additional Information about the Registrant Cover Page of Proxy Statement and
Prospectus; Acquiring Fund State-
ment of Additional Information
incorporated by reference.
13. Additional Information about the Company Being Cover Page of Proxy Statement and
Acquired Prospectus; Acquired Fund Statement
of Additional Information incor-
porated by reference.
14. Financial Statements Pro-forma Financial Statements
<CAPTION>
Part C
Item No. Part C Caption
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15. Indemnification Indemnification
16. Exhibits Exhibits
17. Undertakings Undertakings
Signatures
</TABLE>
<PAGE>
[Letterhead of Lord Abbett Growth & Income Fund, Inc.]
From the Chairman of the Board
- - ------------------------------
Dear Shareholder,
Lord, Abbett & Co. is the investment manager for two funds with
substantially similar investment objectives and policies: your Fund and the
Lord Abbett Growth & Income Trust Series, a series of Lord Abbett Securities
Trust (the "Acquiring Fund"). To eliminate the offering of substantially
identical funds and to take advantage of potential economies of scale, the Board
of Directors of your Fund has recommended that your Fund combine with the
Acquiring Fund.
If approved and consummated, this proposed combination of your Fund and
the Acquiring Fund will be a tax-free reorganization for Federal income tax
purposes.
You are also being asked to vote on the election of directors of your Fund
and to ratify the selection of Deloitte & Touche LLP as your Fund's independent
accountants. A shareholder vote is required on these two matters in the event
that the proposed reorganization will not be consummated.
The proposal is subject to the approval of shareholders of your Fund at a
meeting to be held in New York on June 19, 1996 at 10:00 a.m.
Your vote on these issues is critical. To ensure that your vote is
counted, it is important that you:
1. Review the enclosed Proxy Statement and Prospectus;
2. Complete and sign the enclosed proxy card; and
3. Return the proxy card in the enclosed envelope as soon as possible.
Your prompt response will help save your Fund the expense of additional
solicitations.
We encourage you to review the enclosed materials. Because we believe
this combination of funds is in the best interests of shareholders, we encourage
you to vote in favor of this proposal.
Sincerely,
Ronald P. Lynch
Chairman of the Board
April 17, 1996
<PAGE>
LORD ABBETT FUNDAMENTAL VALUE FUND, INC.
767 Fifth Avenue
New York, New York 10153
Telephone No. (800) 426-1130
Notice of an Annual Meeting of Shareholders
to be held on June 19, 1996 April 17, 1996
Notice is given hereby of an annual meeting of the shareholders of Lord Abbett
Fundamental Value Fund, Inc. The meeting will be held in the offices of Lord,
Abbett & Co., on the 11th floor of The General Motors Building, 767 Fifth
Avenue, New York, New York on June 19, 1996, at 10:00 a.m. for the following
purposes and to transact such other business as may properly come before the
meeting and any adjournments thereof.
ITEM 1. To consider and act upon an Agreement and Plan of Reorganization
between Lord Abbett Fundamental Value Fund, Inc. (the "Acquired Fund"),
and the Lord Abbett Growth & Income Trust, a series of Lord Abbett
Securities Trust (the "Acquiring Fund") providing for (a) the transfer
of all of the assets of the Acquired Fund to the Acquiring Fund in
exchange for shares of a new class of the Acquiring Fund (to be
designated "Class A Shares") and the assumption by the Acquiring Fund
of all of the liabilities of the Acquired Fund, (b) the distribution of
such Class A Shares to the shareholders of the Acquired Fund and (c)
the subsequent termination of the Acquired Fund. A vote in favor of
this Item 1 will be deemed to be a vote to authorize the Acquired Fund,
as the sole shareholder of Class A Shares prior to this reorganization,
to approve a proposed distribution plan pursuant to Section 12 of the
Investment Company Act of 1940, as amended, and Rule 12b-1 thereunder
applicable to that class.
ITEM 2. (A) To elect directors to serve as members of the Board of Directors of
the Acquired Fund; and
(B) To ratify the selection of Deloitte & Touche LLP as the independent
auditors of the Acquired Fund for the current fiscal year.
By order of the Board of Directors
Kenneth B. Cutler
Vice President and Secretary
The Board of Directors has fixed the close of business on March 22, 1996 as the
record date for determination of shareholders of the Acquired Fund entitled to
notice of and to vote at the meeting.
<PAGE>
Shareholders are entitled to one vote for each share held. As of March 22,
there were shares of the Acquired Fund issued and outstanding.
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PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD.
SIGN, DATE AND RETURN IT IN THE ENVELOPE PROVIDED.
TO SAVE THE COST OF ADDITIONAL SOLICITATIONS, PLEASE MAIL YOUR PROXY PROMPTLY.
<PAGE>
Proxy Statement and Prospectus Dated March , 1996
Acquisition of the Assets of
Lord Abbett Fundamental Value Fund, Inc.
The General Motors Building, 767 Fifth Avenue
New York, NY 10153
(800) 426-1130
by and in exchange for Class A Shares of
Lord Abbett Growth & Income Trust, a series of
Lord Abbett Securities Trust
The General Motors Building, 767 Fifth Avenue
New York, NY 10153
(800) 426-1130
This Proxy Statement and Prospectus relates to Class A shares (the "Class
A shares") of the Lord Abbett Growth & Income Trust (the "Acquiring Fund"), a
series of Lord Abbett Securities Trust (the "Trust") to be issued to, and in
exchange for all the assets of, Lord Abbett Fundamental Value Fund, Inc. (the
"Acquired Fund" and, together with the Acquiring Fund, the "Funds"). In
exchange for such assets, the Acquiring Fund will also assume all of the
liabilities of the Acquired Fund. Following receipt of the Acquiring Fund Class
A shares, the Acquired Fund will be terminated and the Class A shares will be
distributed to the shareholders of the Acquired Fund. The shareholders of the
Acquired Fund are being asked to vote to approve or disapprove these proposed
transactions (the "Reorganization"), which are more fully described in this
Proxy Statement and Prospectus.
The investment objectives of the Acquiring Fund and the Acquired Fund are
substantially similar. The Acquiring Fund seeks long term growth of capital and
income without excessive fluctuations in market value. It normally invests in
common stocks of large seasoned companies in sound financial condition which are
expected to show above average price appreciation. The Acquired Fund seeks
growth of capital and growth of income consistent with reasonable risk.
Production of current income is a secondary consideration for the Acquired Fund.
Lord, Abbett & Co. ("Lord Abbett") serves as investment manager to both Funds.
The Class A shares of the Acquiring Fund will be a newly-created class of
shares that will share pro-rata with the existing class of Acquiring Fund shares
(the "Class C shares") in the portfolio, income and expenses of the Acquiring
Fund, except that each class will bear the expense of its own distribution and
shareholder servicing arrangements and certain other expenses. See "Information
About the Reorganization -- Shares of the Acquiring Fund." The distribution and
shareholder servicing arrangements for the Class A shares will be substantially
the same as the arrangements currently applicable to the Acquired Fund shares,
except as discussed herein. The directors of the Acquired Fund believe that the
proposed transaction will enable the shareholders of the Acquired Fund to
benefit from economies of scale while continuing to invest in a portfolio of
securities managed by Lord Abbett under an investment objective substantially
similar to that of the Acquired Fund. See "Information About the Reorganization
- - -- Reasons for the Reorganization."
<PAGE>
This Proxy Statement and Prospectus sets forth concisely the information
about the Acquiring Fund that a shareholder of the Acquired Fund should know
before voting on the Reorganization. It should be read and retained for future
reference. Attached as Exhibit A to this Proxy Statement and Prospectus is a
copy of the Agreement and Plan of Reorganization (the "Plan") for the
Reorganization. This Proxy Statement and Prospectus is accompanied by the
Prospectus of the Acquiring Fund dated March 1, 1995 (the "Acquiring Fund
Prospectus"), which Prospectus is incorporated by reference herein. Also
incorporated herein by reference are (a) the Statement of Additional Information
dated the date hereof relating to this Proxy Statement and Prospectus, including
the Statement of Additional Information of the Acquired Fund dated November 1,
1995 and the Statement of Additional Information of the Acquiring Fund dated
March 1, 1995, and (b) the Prospectus of the Acquired Fund dated November 1,
1995 (the "Acquired Fund Prospectus") [a pre-effective amendment is to be filed
to incorporate by reference the Prospectus and Statement of Additional
Information of the Trust and the Acquired Fund to be dated March 1, 1996]. Such
Statements of Additional Information and the Acquired Fund Prospectus are
available, upon oral or written request, and at no charge, from the Acquiring
Fund, at its above-noted telephone number and address.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
SPECIAL MEETING OF SHAREHOLDERS OF THE ACQUIRED FUND.................... 2
FEE TABLE............................................................... 4
ITEM 1. - APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION.......... 6
SUMMARY OF PROPOSAL.................................................. 6
INFORMATION ABOUT THE REORGANIZATION................................. 8
COMPARATIVE INFORMATION ABOUT THE
ACQUIRING FUND AND THE ACQUIRED FUND.............................. 16
ITEM 2. - FOR ACQUIRED FUND SHAREHOLDERS ONLY........................... 18
ADDITIONAL INFORMATION............................................... 23
Exhibit A - Agreement and Plan of Reorganization
Exhibit B - Comparison of Current and Proposed Investment Policies and
Restrictions
</TABLE>
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS OF THE ACQUIRED FUND
This Prospectus and Proxy Statement is furnished in connection with the
solicitation of proxies by and on behalf of the Board of Directors of the
Acquired Fund to be used at an Annual Meeting of Shareholders of the Acquired
Fund to be held at 10:00 a.m. on June 19, 1996, at the offices of Lord Abbett on
the 11th floor of the General Motors Building, 767 Fifth Avenue, New York, New
York 10153, and at any adjournments thereof. This Prospectus and Proxy
Statement and the enclosed proxy card are first being mailed to shareholders of
the Acquired Fund on or about April 17, 1996.
At the close of business on March 22, 1996 (the "Record Date"), there were
issued and outstanding shares of the Acquired Fund. Only shareholders of
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record as of the close of business on the Record Date will be entitled to notice
of, and to vote at, the meeting or any adjournment thereof. Shareholders of the
Acquired Fund are entitled to one vote for each share. Under Maryland law,
shares owned by two or more persons (whether as joint tenants, co-fiduciaries or
otherwise) will be voted as follows, unless a written instrument or court order
providing to the contrary has been filed with the Secretary of the Acquired
Fund: (1) if only one votes, that vote binds all; (2) if more than one votes,
the vote of the majority binds all; and (3) if more than one votes and the vote
is evenly divided, the vote will be cast proportionately.
Approval of the Plan and the Reorganization will require the affirmative
vote of a majority of the shares of the Acquired Fund voted on the matter. One-
third of the aggregate number of shares of the Acquired Fund shall be necessary
to constitute a quorum for approval of the Plan and the Reorganization. Shares
with respect to which there is an abstention or broker non-vote shall be counted
for quorum purposes and shall not be treated as "voted" for purposes of
determining whether the proposal has passed. If the enclosed form of proxy is
properly executed and returned in time to be voted at the meeting, the proxies
named therein will vote the shares represented by the proxy in accordance with
the instructions marked thereon. A proxy may be revoked by the signer at any
time at or before the meeting by written notice to the Acquired Fund, by
execution of a later-dated proxy or by voting in person at the meeting. Unless
revoked, all valid proxies will be voted in accordance with the specifications
thereon or, in the absence of such specifications, FOR approval of the Plan and
the Reorganization, FOR ratification of the selection of Deloitte & Touche as
the Acquired Fund's independent auditors and on any other matters as deemed
appropriate.
Proxies will be solicited by mail. Additional solicitations may be made
by telephone, facsimile or personal contact by officers or employees of Lord
Abbett and its affiliates. The Acquired Fund may also request brokerage houses,
custodians, nominees, and fiduciaries who are shareholders of record to forward
proxy material to the beneficial owners. D.F. King & Co. has been retained to
assist in the solicitation of proxies at an estimated cost of $ . The
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cost of the solicitation will be borne by .
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In the event that sufficient votes to approve the Plan are not received by
the meeting date, the persons named as proxies may propose one or more
adjournments of the meeting to permit further solicitation of proxies. In
determining whether to adjourn the meeting, the following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast and the nature of any further solicitation and any
information to be provided to shareholders with respect to such
2
<PAGE>
a solicitation. Any such adjournment will require an affirmative vote of a
majority of the shares present in person or by proxy and entitled to vote at the
meeting. The persons named as proxies will vote upon such adjournment after
consideration of the best interests of all shareholders.
If the Plan is not approved by the shareholders of the Acquired Fund, or
if the Reorganization is not consummated for any other reason, the Acquired Fund
will continue to engage in business as Lord Abbett Fundamental Value Fund, Inc.
3
<PAGE>
FEE TABLE
Set forth below is a summary comparison of the expenses of (a) the shares
of the Acquiring Fund (currently, the only class of Acquiring Fund shares, to be
designated "Class C"), (b) the shares of the Acquired Fund and (c) on a pro-
forma basis after giving effect to the Reorganization, the Class A shares of the
Acquiring Fund (to be issued in the Reorganization in exchange for the shares of
the Acquired Fund). The annual operating expenses shown in the summary
comparison for the Acquiring Fund shares and the Acquired Fund shares are the
actual expenses for the fiscal years ending October 31, 1995 and June 30, 1995,
respectively, and those shown on a pro-forma basis for the Class A shares of the
Acquiring Fund are the estimated expenses of such shares for the subsequent year
had the Reorganization occurred on November 1, 1994. The example set forth
below is not a representation of past or future expenses. Actual expenses may
be greater or less than those shown.
4
<PAGE>
<TABLE>
<CAPTION>
Acquiring Fund shares Acquiring Fund
Shareholder Transaction Expenses (to be designated Class A shares
(as a percentage of offering price) Class C) Acquired Fund shares (pro-forma)
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<S> <C> <C> <C>
Maximum Sales Load on Purchases/(1)/........ None/(5)/ 5.75/(2)/ 5.75/(2)/
- - ------------------------------------------------------------------------------------------------------------------------------------
Deferred Sales Load /(1)/................... 1.00/(6)/ None/(2)/ None/(2)/
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Annual Operating Expenses
(as a percentage of average net assets)
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Management Fee............................... 0.0%/(7)/ 0.75% 0.75%/(3)/
- - ------------------------------------------------------------------------------------------------------------------------------------
Rule 12b-1 Fees.............................. 0.88% 0.21%/(3)/ 0.23%/(3)/
- - ------------------------------------------------------------------------------------------------------------------------------------
Other Expenses............................... 0.28% 0.42% 0.37%/(3)/
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Total Operating Expenses..................... 1.16% 1.38% 1.35%/(3)/
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</TABLE>
Example: Assume each Fund's annual return is 5% and there is no change in the
level of expenses described above. For every $1,000 invested, with
reinvestment of all distributions, you would pay the following total expenses
if you closed your account after the number of years indicated.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C>
Acquiring Fund Class C shares /(8)/ $12 $37 $64 $141
Acquired Fund shares /(8)/ $71 $99 $129 $214
Acquiring Fund Class A shares $70 $97 $127 $210
(pro-forma)/(4)/
</TABLE>
/(1)/ Sales "load" is referred to as sales "charge" and "deferred sales load"
is referred to as "contingent deferred reimbursement charge" throughout
this Proxy Statement and Prospectus.
/(2)/ With respect to shares on which the Acquired Fund's Rule 12b-1
distribution fee for purchases of $1 million or more has been paid, and
Class A shares on which the Acquiring Fund's Rule 12b-1 distribution fee
will be paid, certain redemptions are subject to a contingent deferred
reimbursement charge of up to 1% if the redemption occurs within 24
months after the month of purchase. Holding periods for shares purchased
prior to the Reorganization will carry over for the purpose of
determining the applicability of the CDRC to Class A shares. See
"12b-1 Plans" under "Information About the Reorganization" for a
description of the proposed 12b-1 Plan for the A shares.
/(3)/ The expenses of the Acquiring Fund Class A shares are estimated. The
proposed Rule 12b-1 Plan for the A shares provides for annual service fee
payments equal to 0.25%, and, if approved by the Board of Directors,
distribution fee payments not to exceed in any year 0.25%, of the
average value of the net assets of the Fund attributable to the Class A
shares. The board has not authorized the Acquiring Fund to make
distribution fee payments at this level. The estimated Rule 12b-1 fees
for the Acquiring Fund Class A shares are based on the distribution fee
payments authorized by the board. See "12b-1 Plans" under "Information
About the Reorganizations".
/(4)/ Based on total operating expenses or estimated operating expenses shown
in the table above.
/(5)/ Although the Acquiring Fund does not, and will not with respect to the
Class C shares, charge a front-end sales charge, investors should be
aware that long-term shareholders may pay, under the Rule 12b-1 Plan of
the Acquiring Fund and under the Rule 12b-1 Plan to be applicable to the
Class C shares of the Acquiring Fund (which pays and will pay annual
0.25% service and 0.75% distribution fees), more than the economic
equivalent of the maximum front-end sales charge as permitted by certain
rules of the National Association of Securities Dealers, Inc.
/(6)/ Redemptions of the Acquiring Fund shares are, and redemptions of the
Class C shares will be, subject to a 1% contingent deferred reimbursement
charge if the redemption occurs before the first anniversary of the share
purchase. Holding periods for shares purchased prior to the
Reorganization will carry over for the purpose of determining the
applicability of the CDRC to Class C shares. See "12b-1 Plans" under
"Information About Reorganizations."
/(7)/ Lord Abbett has waived part of its management fee with respect to the
Acquiring Fund during the past year (and continues to do so). The
management fee would have been 0.75% absent such waiver.
/(8)/ Based on total operating expenses or estimated operating expenses shown
in the table above.
The foregoing is provided to assist shareholders of the Acquired Fund in
understanding the various expenses the holders of the shares of the Acquiring
Fund and the holders of shares of the Acquired Fund have incurred and that
holders of the shares of the Acquired Fund might incur as holders of the Class
A shares following the Reorganization.
- - ------------------------------------------------------------------------------
5
<PAGE>
ITEM 1. - APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION
SUMMARY OF PROPOSAL
The following is a summary of certain information contained elsewhere or
incorporated by reference in this Proxy Statement and Prospectus and is
qualified in its entirety by reference to such information.
Overview of Proposed Reorganization. The Plan provides for the transfer to the
Acquiring Fund of all of the assets of the Acquired Fund in exchange for Class A
shares and the assumption by the Acquiring Fund of all of the liabilities of the
Acquired Fund. The Class A shares will then be distributed to the Acquired Fund
shareholders and the Acquired Fund will be terminated. As a result of the Reor-
ganization, each shareholder of the Acquired Fund will become the owner of
that number of full and fractional Class A shares having an aggregate net asset
value equal to the aggregate net asset value of their shares of the Acquired
Fund, as of the close of business on the date the Acquired Fund assets are
transferred to the Acquiring Fund. Consummation of the Reorganization is subject
to the approval of the Acquired Fund's shareholders and other conditions,
including Acquiring Fund shareholder approval of an amendment to the Trust's
Declaration and Agreement of Trust authorizing the creation of the Class A
shares.
To avoid a need to call an Acquiring Fund shareholders' meeting after the
Reorganization, shareholders of the Acquired Fund are being asked to authorize
the Acquired Fund, as the sole Class A shareholder of the Acquiring Fund before
the Reorganization, to approve the proposed distribution plan for the Class A
shares. A vote in favor of the Reorganization will be deemed also to be a vote
to authorize the Acquired Fund to take such action.
The directors of the Acquired Fund believe that the proposed
Reorganization will enable the shareholders of the Acquired Fund to benefit from
economies of scale while continuing to invest in a portfolio of securities
managed by Lord Abbett under the same investment objective as that of the
Acquiring Fund. See "Information About the Reorganization -- Reasons for
Reorganization" for additional information about the reasons for the
Reorganization.
Businesses of the Acquired and Acquiring Funds. The Acquired Fund is a
diversified, open-end management investment company incorporated under the laws
of Maryland on March 26, 1986. It has a single class of shares. The Acquired
Fund commenced investment operations on July 8, 1986. As of December 31, 1995,
the Acquired Fund's net assets were approximately $43 million.
The Acquiring Fund is a diversified series of the Trust, an open-end
management investment company organized under Delaware law on February 26, 1993.
To date, the Acquiring Fund offers ten series, one of which is the Acquiring
Fund, each consisting of one class of shares. As of December 31, 1995, the
Acquiring Fund's net assets were approximately $39 million.
Investment Objectives and Policies of the Acquired Fund and the Acquiring Fund.
The Acquired Fund and Acquiring Fund have substantially similar investment
objectives. The Acquiring Fund seeks long term growth of capital and income
without excessive fluctuations in market value. It normally
6
<PAGE>
invests in common stocks of large seasoned companies in sound financial
condition which are expected to show above average price appreciation. The
Acquired Fund seeks growth of capital and growth of income consistent with
reasonable risk. Production of current income is a secondary consideration for
the Acquired Fund. The two Funds also have generally similar investment
policies and restrictions. The Acquiring Fund is seeking to revise and
reclassify certain of its investment policies and restrictions in order to
provide greater flexibility in managing the investment portfolio of the
Acquiring Fund. Most importantly, a number of the investment policies and
restrictions that are classified as fundamental for the Acquired Fund are to be
reclassified as non-fundamental for the Acquiring Fund. See "Comparative
Information About the Acquiring Fund and the Acquired Fund -- Investment
Objectives, Policies and Restrictions."
The portfolio of the Acquired Fund is expected to be suitable for the
Acquiring Fund, and so no significant realignment of that portfolio is expected
in connection with the Reorganization.
Purchases and Exchanges. Shares of the Acquired Fund are, and Class A shares
will be, available through certain authorized dealers at the public offering
price, which is the net asset value per share plus a one-time sales charge. See
"Information About the Reorganization -- Shares of the Acquiring Fund."
Shareholders of the Acquired Fund may now exchange their shares for shares of up
to 24 other funds and series in the Lord Abbett family of funds. It is expected
that holders of Class A shares will be able to exchange their shares for Class A
shares of up to 25 other funds and series managed by Lord Abbett. Each exchange
represents a sale of shares for which a shareholder may have to recognize a gain
or loss under Federal income tax provisions.
Rule 12b-1 Plan. The Acquired Fund has adopted a plan pursuant to Section 12(b)
of the 1940 Act and Rule 12b-1 thereunder (a "Rule 12b-1 Plan"), under which it
pays Lord Abbett (1) an annual service fee (payable quarterly) of 0.25% of the
average daily net asset value of shares sold, or attributable to shares sold, by
dealers and (2) a one-time 1% distribution fee, at the time of sale, on all
shares sold at the $1 million level by dealers, including sales qualifying at
such level under the rights of accumulation and statement of intention
privileges described in the Acquired's Fund's prospectus in effect at such time,
subject to a contingent deferred reimbursement charge for up to 24 months. Lord
Abbett is required to pay these service and distribution fees to dealers to
provide additional incentives for the dealers (a) to provide continuing
information and investment services to their shareholder accounts and otherwise
to encourage their accounts to remain invested in the Acquired Fund and (b) to
sell its shares.
As part of the Reorganization, the Acquiring Fund is adopting a new Rule
12b-1 Plan applicable to the Class A shares that will be similar to the Acquired
Fund's Rule 12b-1 Plan. The principal change is that under the proposed new
Rule 12b-1 Plan for the Class A shares the Board of Directors will be able to
increase the amount of the total distribution fee up to 0.25% of the Fund's
average annual net assets. For a fuller description of the current Rule 12b-1
Plan of the Reorganized Fund and of the proposed new Rule 12b-1 Plan for the A
shares of the Acquiring Fund, see "Information About the Reorganization -- Rule
12b-1 Plan."
Dividend Policies and Options. The Acquired Fund distributes net investment
income as a dividend in July and December. It also may pay supplemental
dividends and capital gains distributions in December or January and, in the
case of the Acquired Fund, capital gains may be distributed in July. The
7
<PAGE>
Acquiring Fund has a similar dividend and distribution policy except that net
investment income dividends are paid in March, June, September and December.
The shareholders of each Fund may reinvest such dividends and distributions in
additional shares at net asset value or take such amounts in cash.
Redemption Procedures. The redemption procedures of the Acquired Fund and the
Acquiring Fund are substantially the same. See the Acquiring Fund Prospectus
under "Redemptions."
Tax Considerations. The consummation of the Reorganization is subject to
receipt of an opinion of counsel, substantially to the effect that, among other
things, the Reorganization will not cause a gain or loss to be recognized by the
Acquired Fund or its shareholders for federal income tax purposes. See
"Information about the Reorganization--Federal Income Tax Considerations."
Risk Factors. Because of the similarities in the investment objectives of the
Funds, Lord Abbett believes that the relative risks involved in investing in the
Funds can be considered similar. However, the investment policies and
restrictions of the Acquiring Fund have been made less restrictive compared to
those of the Acquired Fund in order to provide greater flexibility in the future
management of the investment portfolio of the Acquiring Fund. If the Acquiring
Fund were to take to any significant extent the actions permitted by these less
restrictive policies and restrictions, a result not now anticipated, the risks
of investing in the Acquiring Fund could be greater than those involved in
investing in the Acquired Fund. See "Comparative Information About the
Acquiring Fund and the Acquired Fund -- Investment Objectives, Policies and
Restrictions" below.
INFORMATION ABOUT THE REORGANIZATION
The Plan. On July 12, 1996, assuming the conditions referred to below are
satisfied, the Acquired Fund will transfer all its assets to the Acquiring Fund
(the date of such transfer is referred to herein as the "Closing Date") in
exchange for (i) Class A shares of the Acquiring Fund having an aggregate net
asset value equal to the aggregate value of the assets, less liabilities, of the
Acquired Fund and (ii) the assumption by the Acquiring Fund of all the
liabilities of the Acquired Fund. The Acquired Fund will distribute as of the
Closing Date such Class A shares pro-rata to its shareholders of record,
determined as of the close of business on the Closing Date, in exchange for
their shares of the Acquired Fund. The net asset value of Class A shares and
the value of the Acquired Fund's assets and the amount of its liabilities will
be determined as of the Closing Date in accordance with the valuation procedures
set forth in the Trust's Declaration and Agreement of Trust (see "Purchases" in
the Acquiring Fund Prospectus). The valuation procedures used by the Acquiring
Fund are the same as those used by the Acquired Fund.
The obligations of the Acquiring Fund and the Acquired Fund to consummate
the Reor ganization are subject to the satisfaction of certain conditions
precedent, including (a) approval and authorization of the Reorganization by the
vote of a majority of the shares of the Acquired Fund voted on the matter if a
quorum is present, (b) receipt of a favorable ruling from the Internal Revenue
Service to the effect that the issuance of various classes of shares by the
Acquiring Fund will not result in dividends or distributions of the Acquiring
Fund constituting "preferential dividends" under the Internal Revenue Code of
1986, as amended (the "Code"), (c) a favorable opinion of legal counsel as to
the
8
<PAGE>
federal income tax consequences of the proposed transaction as described below
under "Federal Income Tax Considerations", and (d) approval by the shareholders
of the Acquiring Fund of an amendment to its Declaration and Agreement of Trust
authorizing the creation of additional classes of shares.
The foregoing summary of the Plan does not purport to be complete, and is
subject in all respects to the provisions of, and is qualified in its entirety
by reference to, the Plan, a copy of which is attached as Exhibit A.
Reasons for the Reorganization. The Board of Directors of the Acquired Fund and
the Board of Trustees of the Trust, including in each case a majority who are
not "interested persons" (as defined in the 1940 Act) of either Fund or of Lord
Abbett, approved the Plan and the Reorganization on March 14, 1996, and in this
connection determined that participation in the proposed Reorganization is in
the best interests of the shareholders of each of the Funds and that the
interests of existing shareholders of the Funds will not be diluted as a result
of the Reorganization. In doing so, the boards of the two Funds considered
several factors, including that (a) the shareholders of the Acquired Fund are
expected to benefit from economies of scale as shareholders of the larger
Acquiring Fund, while continuing to invest in a portfolio of securities managed
by Lord Abbett under a substantially similar investment objective, and (b)
implementation of a multi-class fund structure for the Acquiring Fund is
expected to (i) enable investors in the Acquiring Fund to choose the
distribution option that best suits their individual situations, (ii) facilitate
distribution of the Acquiring Fund's shares, and (iii) maintain the competitive
position of the Acquiring Fund in relation to other funds that have implemented
or are seeking to implement similar distribution arrangements.
The trustees of the Trust and the directors of the Acquired Fund are the
same individuals.
Shares of the Acquiring Fund. On or before the Closing Date, the Acquiring Fund
will have two classes of shares, Class C shares (the existing class of the
Acquiring Fund) and Class A shares (to be received by the shareholders of the
Acquired Fund in the Reorganization). Each share of the Acquiring Fund,
regardless of class, will share pro-rata (based on net asset value) in the
portfolio and income of the Acquiring Fund and in the Acquiring Fund's expenses,
except for differences in expenses resulting from different Rule 12b-1 Plans for
the various classes and certain other class specific expenses. See "Rule 12b-1
Plans" below.
After the Reorganization, Class A shares will be offered to the public at
net asset value subject to an initial sales charge identical to the sales charge
currently imposed on sales of the Acquired Fund shares, as follows:
9
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------
Sales Charge as a
Percentage of: Dealer's Con-
--------------------------- cession as a To Compute
Percentage of Offering
Net Amount Offering Price, Divide
Size of Investment Offering Price Invested Price* NAV by
- - --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00% .9425
- - --------------------------------------------------------------------------------------
$50,000 to $99,999 4.75% 4.99% 4.00% .9525
- - --------------------------------------------------------------------------------------
$100,000 to $249,999 3.75% 3.90% 3.25% .9625
- - --------------------------------------------------------------------------------------
$250,000 to $499,999 2.75% 2.83% 2.50% .9725
- - --------------------------------------------------------------------------------------
$500,000 to $999,999 2.00% 2.04% 1.75% .9800
- - --------------------------------------------------------------------------------------
$1,000,000 or more No Sales Charge** 1.00% 1.0000
- - --------------------------------------------------------------------------------------
</TABLE>
*Lord Abbett may, for specified periods, allow dealers to retain the full
sales charge for sales of shares during such periods, or pay an additional
concession to a dealer who, during a specified period, sells a minimum
dollar amount of our shares and/or shares of other Lord Abbett-sponsored
funds. In some instances, such additional concessions will be offered only
to certain dealers expected to sell significant amounts of shares. Lord
Abbett may, from time to time, implement promotions under which Lord Abbett
will pay a fee to dealers with respect to certain purchases not involving
the imposition of a sales charge. Additional payments may be paid from Lord
Abbett's own resources and will be made in the form of cash or, if
permitted, non-cash payments. The non-cash payments will include business
seminars at resorts or other locations, including meals and entertainment,
or the receipt of merchandise. The cash payments will include payment of
various business expenses of the dealer.
**As disclosed in the Acquiring Fund Prospectus, other sales in certain
categories are made at net asset value without a sales charge.
Subject to some exceptions, Class A shares sold without any sales charge
will be subject to a contingent deferred reimbursement charge (a "CDRC") of up
to 1% of the lower of their cost or their net asset value if they are redeemed
from the Lord Abbett-sponsored family of funds within 24 months after the month
of purchase. See "12b-1 Plans" below. Holding periods for shares purchased
prior to the Reorganization will carry over for the purpose of determining the
applicability of the CDRC to Class A shares.
After the Reorganization, Class C shares will be offered at net asset
value without an initial sales charge, but if redeemed for cash before the first
anniversary of their purchase, will be subject to a CDRC equal to 1% of the
lower of their cost or then net asset value. Holding periods for shares
purchased prior to the Reorganization will carry over for the purpose of
determining the applicability of the CDRC to Class C shares.
After the Closing Date, the Acquiring Fund may create and issue one or
more classes of shares in addition to the Class A and C shares.
10
<PAGE>
Shares of all classes of the Acquiring Fund will vote together on all
matters affecting the Acquiring Fund, except for matters, such as approval of a
Rule 12b-1 plan, affecting only a particular class or classes. Shares of the
Acquiring Fund will vote together with shares of other series of the Trust on
all matters affecting the Trust, except for matters, such as approval of an
investment management agreement, affecting only one or more particular series.
All shares voting on a matter will have identical voting rights. All issued
shares of the Acquiring Fund will be fully paid and non-assessable, and
shareholders will have no preemptive or other right to subscribe to any
additional shares. Shares of all classes of the Acquiring Fund will have the
same rights and be subject to the same limitations with respect to dividends,
redemptions and liquidation except for differences resulting from class-specific
Rule 12b-1 plans and related service plans and certain other class-specific
expenses.
Rule 12b-1 Plans. Class A Rule 12b-1 Plan. As part of the Reorganization, the
Acquiring Fund is adopting a Rule 12b-1 plan applicable to the Class A shares
(the "Class A 12b-1 Plan") that will be similar to the plan currently in effect
for the Acquired Fund. Under the Acquired Fund's current plan (except as to
certain accounts for which tracking data is not available), the Fund pays
dealers through Lord Abbett (1) an annual service fee (payable quarterly) of
0.25% of the average daily net asset value of shares sold, or attributable to
shares sold, by dealers and (2) a one-time 1% distribution fee, at the time of
sale, on all shares sold at the $1 million level by dealers, including sales
qualifying at such level under the rights of accumulation and statement of
intention privileges described in the Acquired Fund's prospectus in effect at
such time. These service and distribution fees provide additional incentives
paid to dealers (a) to provide continuing information and investment services to
their shareholder accounts and otherwise to encourage their accounts to remain
invested in the Acquired Fund and (b) to sell shares of the Acquired Fund.
Under the current plan of the Acquired Fund, holders of shares on which
the 1% distribution fee has been paid are required to pay to the Acquired Fund a
CDRC, or contingent deferred reimbursement charge, of 1% of the original cost or
the then net asset value, whichever is less, of such shares if they are redeemed
out of the Lord Abbett-sponsored family of funds on or before the end of the
twenty-fourth month after the month in which the purchase occurred. (An
exception is made for certain redemptions by tax-qualified plans under Section
401 of the Internal Revenue Code due to plan loans, hardship withdrawals, death,
retirement or separation from service with respect to plan participants.) If
the shares are exchanged into another Lord Abbett fund and are thereafter
redeemed out of the Lord Abbett family on or before the end of such twenty-
fourth month, the charge is collected for the Acquired Fund by the other fund.
The Acquired Fund collects such a charge for other Lord Abbett-sponsored funds
in a similar situation.
Set forth below is a description of the principal changes to be effected
under the proposed Class A 12b-1 Plan:
(a) Distribution Fees. The Board of Trustees of the Trust will be
-----------------
authorized under the Class A 12b-1 Plan, without further shareholder vote, to
increase the amount of distribution fees up to 0.25% of the average annual net
assets attributable to the Class A shares. This increased spending limit is
intended primarily to permit the trustees to increase the amount to be spent for
distribution to meet changing sales competition. The trustees believe it is
desirable to be able to make these changes without further shareholder approval
because additional shareholder meetings would be costly to the Acquiring
11
<PAGE>
Fund and its shareholders and the time required for such meetings could delay
the implementation of advantageous changes. The Board of Trustees will approve
additional charges under this increased authority only if a majority of the
directors who are not "interested persons" of the Acquiring Fund within the
meaning of the 1940 Act and who will have no direct or indirect financial
interest in the operations of the Class A 12b-1 Plan or in any agreements
related thereto conclude in their business judgment that there is a reasonable
likelihood that the increase will benefit the Acquiring Fund and its
shareholders.
The one-time 1% distribution fee, payable at the time of certain sales as
described above, is to be charged against the 0.25% permitted annual
distribution fee. During the Acquired Fund's last fiscal year, payments of the
one-time 1% distribution fee under that Fund's Rule 12b-1 plan totaled 0.__% of
the Acquired Fund's average net assets. Subject to approval of the
Reorganization by the shareholders of the Acquired Fund, the Board of Trustees
of the Acquiring Fund has authorized the Acquiring Fund to pay this one-time
distribution fee with respect to sales of Class A shares, subject to three
changes: First, the payments will be made in connection with sales to retirement
-----
plans with 100 or more eligible employees, in addition to sales at the $1
million level as under the Acquired Fund's 12b-1 plan; Second, the payments will
------
be reduced as follows: 1.0% of the first $5 million, 0.55% of the next $5
million, 0.50% of the next $40 million and 0.25% over $50 million of shares sold
to a retirement plan or other qualifying purchaser within a 12-month period
(beginning when the first purchase is made at net asset value); and Third, the
-----
payments will be made to institutions and persons permitted by applicable law
and/or rules to receive such payments ("Authorized Institutions"), rather than
just to dealers as is the case under the Acquired Fund's Rule 12b-1 plan.
Subject to such approval of the Reorganization, the Acquiring Fund's Board
of Trustees has authorized the Acquiring Fund to pay, as an additional
distribution fee, a modest supplemental payment to dealers who have accounts
comprising a significant percentage of the Acquiring Fund's Class A share
assets, having a lower than average redemption rate and who have a satisfactory
program for the promotion of Class A shares. Any such payments will be 0.10%
per annum of the average assets of the Acquiring Fund represented by the Class A
share accounts of qualifying dealers. This supplemental payment is intended by
the Board of Trustees to enhance the Acquiring Fund's relationships with those
dealers most likely to have a significant impact on the growth of the Class A
shares.
(b) Service Fees. Service fee payments, which are to be continued under
------------
the proposed Class A 12b-1 Plan at an annual rate of 0.25% of the average daily
net asset value of the Class A shares could be made to all Authorized
Institutions (institutions and persons permitted by applicable law and/or rules
to receive such payments), rather than just to dealers as is the case under the
Acquired Fund's plan.
(c) Use of Payments by Lord Abbett. Lord Abbett will be permitted to use
------------------------------
payments received under the Class A 12b-1 Plan to provide continuing services to
shareholder accounts not serviced by Authorized Institutions and, with board
approval, to finance any activity which is primarily intended to result in the
sale of Class A shares. Any such payments to finance activities primarily
intended to result in the sale of Class A shares would be subject to the overall
ceiling of 0.25% for annual distribution fees.
12
<PAGE>
(d) CDRC. The Board of Trustees of the Trust has approved a CDRC
----
applicable to the Class A 12b-1 shares substantially similar to the CDRC payable
under the Rule 12b-1 Plan of the Acquired Fund, except that no CDRC would be
payable in connection with redemptions by retirement plans (not just those
qualified under Section 401 of the Internal Revenue Code) attributable to any
benefit payment or distribution of any excess contribution thereunder (not just
those described above in connection with such exception under the Acquired
Fund's plan). Because CDRC payments will be made directly to the Acquiring
Fund, they will have the effect of reducing the amount of the distribution fees
paid by the Acquiring Fund for the purpose of complying with the overall ceiling
of 0.25% for annual distribution fees. As in the case of the specific
distribution fees authorized by the Board of Trustees of the Trust, the CDRC
authorized from time to time by the board for the Class A shares will be
described in the then current prospectus of the Acquiring Fund.
If the supplemental payment to dealers, the revised one-time distribution
fee and the other changes described above had been in effect for the Acquired
Fund's last fiscal year, it is estimated that, in the aggregate, they would have
increased the expense ratio of the Acquired Fund from 0.__% to approximately
0.__%, a difference of 0.__%.
(e) Lord Abbett Distributor. The other party to the Class A 12b-1 Plan is
-----------------------
to be Lord Abbett Distributor LLC, a New York limited liability company, to be
formed as a subsidiary of Lord Abbett ("Lord Abbett Distributor"), rather than
Lord Abbett. Lord Abbett Distributor is to take on all the underwriting
functions currently performed directly by Lord Abbett.
The Class A 12b-1 Plan was approved on March 14, 1996 by the trustees of
the Trust, including a majority of the trustees who are not "interested persons"
of the Trust within the meaning of the 1940 Act and who will have no direct or
indirect financial interest in the operations of the Class A 12b-1 Plan or in
any agreements related thereto. In considering whether to approve the Class A
12b-1 Plan, the directors considered, among other things, the factors set forth
below:
(i) Flexibility in Adapting Distribution Fees to Meet Industry-Wide
---------------------------------------------------------------
Changes. During the last several years, there has been significantly
-------
increased competition and pricing experimentation in the mutual fund
industry. As the pace of change increases, the Board of Trustees believes
it will be useful to be able to respond more quickly to marketplace
pressures, and to change in appropriate cases the amount of the Class A
12b-1 distribution fees to be paid, without unnecessarily burdening the
shareholders with the costs of additional proxy solicitations. The trustees
believe that the increased distribution fees described above are good
examples of the desirability of this flexibility. Based on advice received
from Lord Abbett, the decision by the board to approve the payment of
distribution fees in connection with sales to retirement plans with 100 or
more eligible employees will enable the Class A shares to compete more
effectively in this growing and important market. The 0.10% per annum
supplemental payments to dealers who meet certain criteria will permit the
Acquiring Fund to enhance relationships with those dealers most likely to
have a significant impact on the growth of the Class A shares.
(ii) Expanding Categories of Persons Eligible to Receive Payments. The
------------------------------------------------------------
current Rule 12b-1 Plan of the Acquired Fund limits payments thereunder to
dealers selling fund shares. Since that plan was adopted, different methods
of distribution, using different entities, have developed in the
13
<PAGE>
industry. The Board of Trustees sees no reason to limit arbitrarily the
categories of persons eligible to receive payments under the proposed plan,
and believes that the availability of payments under the plan will induce
such other entities to invest in Class A shares.
(iii) Flexibility in Distributor's Use of Payments. Lord Abbett has
--------------------------------------------
advised the Board of Trustees that allowing Lord Abbett Distributor to
retain fees received from the Fund to (i) provide continuing information and
investment services to shareholder accounts and (ii) finance, with board
approval, any activity which is primarily intended to result in the sale of
Class A shares will provide useful flexibility and will be in line with
common practice in the industry.
Prior to the Reorganization, the Acquired Fund will purchase one Class A
share, and as sole shareholder of the Acquiring Fund, will approve the Class A
12b-1 Plan prior to the class being issued to the Acquired Fund in the
Reorganization. A vote in favor of the Reorganization will be deemed also to be
a vote to authorize the Acquired Fund to take such action.
Class C Rule 12b-1 Plan. The Acquiring Fund is adopting a Rule 12b-1 Plan
for the Class C shares (the "Class C 12b-1 Plan") substantially the same as the
plan currently in effect. The current plan provides for payments to dealers
through Lord Abbett of distribution and service fees (a) at the time shares are
sold, not to exceed 0.75% and 0.25%, respectively, of the net asset value of the
shares sold and (b) at the end of the quarter following the first anniversary of
the sale of shares, and quarterly thereafter, at an annual rate not to exceed
0.75% and 0.25%, respectively, of the net asset value of such shares, including
any shares issued for reinvested dividends and distributions after such first
anniversary, so long as such shares remain outstanding. Lord Abbett may retain
from the quarterly distribution fee, for the payment of distribution expenses
incurred directly by it, an amount not to exceed 0.10% of the average annual net
asset value of such shares outstanding. See the Acquiring Fund Prospectus under
"Purchases" for additional information concerning the Rule 12b-1 Plan of the
Acquired Fund.
There are two substantive changes in the Class C 12b-1 Plan: First,
-----
payment under the plan may be made to all Authorized Institutions (institutions
and persons permitted by applicable law and/or rules to receive such payments),
rather than just to dealers, as is the case under the Acquiring Fund's Rule 12b-
1 plan; and Second, the other party to the Class C 12b-1 Plan is to be Lord
------
Abbett Distributor (a New York limited liability company to be formed as a
subsidiary of Lord Abbett), rather than Lord Abbett itself. Lord Abbett
Distributor will take on all the underwriting functions currently performed
directly by Lord Abbett.
The Class C 12b-1 Plan was approved on March 14, 1996 by the trustee of
the Acquiring Fund, including a majority of the trustees who are not "interested
persons" of the Acquiring Fund within the meaning of the 1940 Act and who will
have no direct or indirect financial interest in the operations of such plan or
in any agreements related thereto.
Federal Income Tax Considerations. The consummation of each Reorganization is
conditioned upon the receipt of an opinion of Debevoise & Plimpton, legal
counsel to the Funds, regarding the Federal income tax consequences of that
Reorganization substantially to the effect that, for Federal income tax
purposes:
14
<PAGE>
(a) no gain or loss will be recognized by the Acquired Fund upon the
transfer of the Acquired Fund's assets to the Acquiring Fund in exchange for
Class A shares and the assumption by the Acquiring Fund of the liabilities of
the Acquired Fund or upon the distribution of the Class A shares to the
Acquired Fund's shareholders;
(b) no gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund in exchange for Class A shares
and the assumption by the Acquiring Fund of the liabilities of the Acquired
Fund;
(c) no gain or loss will be recognized by shareholders of the Acquired
Fund upon the exchange of their Acquired Fund shares for Class A shares;
(d) the aggregate tax basis of the Class A shares received by any Acquired
Fund shareholder pursuant to the Reorganization will be the same as the
aggregate tax basis of the Acquired Fund shares held by such shareholder
immediately prior to the Reorganization, and the holding period for the Class
A shares to be received by any Acquired Fund shareholder will include the
period during which the Acquired Fund shares exchanged therefor were held by
such shareholder (provided that the Acquired Fund shares were held as capital
assets on the date of the Reorganization); and
(e) the tax basis of the Acquired Fund's assets acquired by the Acquiring
Fund will be the same as the tax basis of such assets to the Acquired Fund
immediately prior to the Reorganization, and the holding period of the assets
of the Acquired Fund in the hands of the Acquiring Fund will include the
period during which those assets were held by the Acquired Fund.
The Funds have not sought a tax ruling from the Internal Revenue Service
with respect to the tax consequences of the Reorganization, but will act in
reliance upon the opinion of counsel. Such opinion is not binding on the
Internal Revenue Service. Since the foregoing discussion relates only to the
general Federal income tax consequences of the Reorganization, shareholders
should also consult their tax advisors as to any state or local tax consequences
of the Reorganization to them and any special circumstances that may apply in
their individual circumstances.
Expenses of the Reorganization. Expenses of the Reorganization, including legal
and accounting expense, the costs of proxy solicitation and the preparation of
this Prospectus and Proxy Statement, will be borne by __________. If the
Reorganization is consummated, the expenses of the Acquired Fund, to the extent
not paid prior to the Closing Date, will be assumed by the Acquiring Fund and
taken into account in determining the net assets of the Acquired Fund for the
purpose of calculating the number of Class C shares to be issued to the Acquired
Fund.
Capitalization. The following table sets forth the capitalization of the
Acquiring Fund and the Acquired Fund as of December 31, 1995, and the pro-forma
capitalization of the Acquiring Fund as if the Reorganization had occurred on
that date:
15
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Class A Class C
Acquiring Fund Acquired Fund Acquiring Acquiring
(unaudited) (unaudited) Fund Fund
--------------- -------------- (pro-forma - (pro-forma -
unaudited) unaudited)
------------- -------------
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In thousands, except per share values)
- - -----------------------------------------------------------------------------------------
Net Assets $39,198 $42,740 $39,198 $42,740
- - -----------------------------------------------------------------------------------------
Net Asset Value per Share $ 6.41 $ 14.11 $ 6.41 $ 6.41
- - -----------------------------------------------------------------------------------------
Shares Outstanding: 6,116 3,028 6,116 6,665
- - -----------------------------------------------------------------------------------------
</TABLE>
The foregoing table reflects a pro-forma exchange ratio of approximately
2.2 Class A shares for each Acquired Fund share. If the Reorganization is
consummated, the actual exchange ratio may vary from this ratio due to changes
in the market value of the portfolio securities of both the Acquiring Fund and
the Acquired Fund between December 31, 1995 and the Closing Date, and changes in
the amounts of undistributed net investment income and accrued liabilities of
the Acquiring Fund and the Acquired Fund during that period.
COMPARATIVE INFORMATION ABOUT THE
ACQUIRING FUND AND THE ACQUIRED FUND
Fees and Expenses. Both the Acquiring Fund and the Acquired Fund employ Lord
Abbett as their investment manager. Under the management agreement between the
Trust and Lord Abbett, the Trust, on behalf of the Acquiring Fund, is obligated
to pay a monthly fee, based on average daily net assets for each month, at the
annual rate of 0.75 of 1%. For the fiscal year ended October 31, 1995, the
Acquiring Fund paid Lord Abbett no effective management fee. This fee rate
reflects a waiver of management fee. The management agreement provides for the
Acquiring Fund to repay Lord Abbett without interest for any expenses of the
Acquiring Fund paid or reimbursed by Lord Abbett, as follows: if the Acquiring
Fund's annual expense ratio (determined before taking into account any fee
waiver or expense payment or reimbursement by Lord Abbett) is less than 1.95%
after the first day of the calendar quarter after the net assets of the
Acquiring Fund first reach $50 million (the "commencement date"), the Acquiring
Fund will repay Lord Abbett an amount sufficient to increase the expense ratio
to 1.95%. The Acquiring Fund is not obligated to repay any such expenses after
the earlier of the termination of the management agreement or the end of five
full fiscal years after the commencement date. The contingent obligation to
repay such expenses, which totaled $________ as of December 31, 1995, will
continue after the consummation of the Reorganization. This management
agreement will continue in effect following the Reorganization.
Under the management agreement between the Acquired Fund and Lord Abbett,
the Acquired Fund is obligated to pay a monthly fee at the annual rate of 0.75
of 1% of the Acquired Fund's first $200 million of average daily net assets,
0.65 of 1% of the next $300 million of such assets and 0.5% of such assets in
excess of $500 million. For the fiscal year ended October 31, 1995, the
Acquired Fund paid Lord Abbett a management fee at an annual rate of 0.75 of 1%
of average daily net assets.
16
<PAGE>
Once the Reorganization is completed, the ratio of expenses to average net
assets for former shareholders of the Acquired Fund is expected to decline as a
result of the combination of the two funds. As shown above under "Fee Table,"
the pro-forma expense ratio for the Class A shares for the year ended October
31, 1995, calculated as if the Reorganization had occurred at the beginning of
such year, was 1.35%, compared to an expense ratio of 1.38% for the Acquired
Fund for such year.
Investment Objectives, Policies and Restrictions. The Acquired Fund and
Acquiring Fund have substantially similar investment objectives. The Acquiring
Fund seeks long term growth of capital and income without excessive fluctuations
in market value. It normally invests in common stocks of large seasoned
companies in sound financial condition which are expected to show above average
price appreciation. The Acquired Fund seeks growth of capital and growth of
income consistent with reasonable risk. Production of current income is a
secondary consideration for the Acquired Fund.
The Acquired Fund and the Acquiring Fund have substantially the same
investment policies and restrictions. However, the Acquiring Fund is seeking
approval of its shareholders to simplify and make less restrictive its
investment policies and restrictions in order to provide greater flexibility in
managing its investment portfolio. A number of the investment policies and
restrictions that are classified as fundamental for the Acquired Fund are to be
re-classified as non-fundamental for the Acquiring Fund. In other instances,
certain fundamental restrictions of the Acquired Fund are to be modified or
eliminated in the case of the Acquiring Fund. Fundamental investment
restrictions may not be changed without approval of the shareholders of a fund
and the costs of shareholder meetings for these purposes generally are borne by
the fund and its shareholders. The board may amend a non-fundamental
restriction as it deems appropriate and in the best interest of the fund and its
shareholders, without incurring the costs of seeking a shareholder vote. The
fundamental restrictions of the Acquiring Fund would permit the following
actions, among others, that are not permitted by the fundamental restrictions of
the Acquired Fund: (i) short sales of securities and purchases of securities on
margin to the extent permitted by applicable law; (ii) borrowings from banks in
amounts up to one-third of total assets and such short-term credits as may be
necessary for the clearance of purchases and sales of portfolio securities;
(iii) purchases and sales of commodities and commodity contracts in accordance
with applicable law so long as registration would not be required as a commodity
pool operator under the Commodity Exchange Act; (iv) pledges to secure
borrowings or in connection with hedging transactions and other investment
strategies; (v) investments in the securities of other investment companies; and
purchase of put and call options. Currently, the Acquiring Fund does not intend
to take all such action, but the Board of Trustees of the Trust believes it
would be desirable for the Acquiring Fund to have the ability to do so in the
future without further shareholder approval if such action was deemed desirable
as an appropriate means of seeking the Acquiring Fund's investment objective.
A summary comparison of the current investment policies and restrictions
of the Acquired Fund and the Acquiring Fund and of the investment policies of
the Acquiring Fund as proposed to be amended is set forth in Exhibit B to this
Proxy Statement and Prospectus.
For a full discussion and statement of the Acquiring Fund's investment
objectives, policies and restrictions, see "Investment Objective" and "How We
Invest" in the Acquiring Fund Prospectus and "Investment Objective and
Policies" in the Acquiring Fund Statement of Additional Information. For a full
discussion and statement of the Acquired Fund investment objectives, policies
and restrictions, see
17
<PAGE>
"Investment Objective" and "How We Invest" in the Acquired Fund Prospectus and
"Investment Objective and Policies" in the Acquired Fund Statement of Additional
Information. The summary comparison set forth in Exhibit B does not purport to
be complete, and is subject in all respects to, and is qualified in its entirety
by reference to such statements of such policies and restrictions.
Shareholders' Rights. After the Reorganization, the rights of the former
shareholders of the Acquired Fund will be governed by the Trust's Declaration of
Trust, By-Laws and applicable Delaware law rather than by the Articles of
Incorporation and By-Laws of the Acquired Fund and applicable Maryland law. The
corporate law of Maryland, to which the Acquired Fund is subject, requires
shareholder approval of a greater number of corporate actions than is the case
under the law of Delaware applicable to business trusts and the Declaration of
Trust of the Investment Trust. Thus, the Board of Trustees of the Trust may
have somewhat greater authority, acting alone, to take corporate actions than
has been the case with the Board of Directors of the Acquired Fund. However,
the Acquiring Fund believes that the responsibilities and fiduciary duties of
the trustees of the Acquiring Fund are substantially the same as those of the
directors of the Acquired Fund and the operations of the Acquiring Fund will
continue to be subject to the provisions of the 1940 Act and the rules and
regulations of the Commission thereunder.
The Board of Directors of the Acquired Fund is comprised of the same
individuals as the current Board of Trustees of the Trust. The Acquired Fund's
By-Laws provide for indemnification of the directors for actual liabilities
arising out of the directors' service in their capacity as directors of the
Acquired Fund, subject only to the conditions and limitations of applicable law.
The Trust's Declaration of Trust provides for indemnification of the trustees
against certain liabilities and expenses, except with respect to (i) any matter
as to which any trustee has been adjudicated not to have acted in good faith in
the reasonable belief that his or her action was in the best interest of such
Trust, (ii) any liability by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of duties or (iii) any matter disposed of by
settlement, compromise or consent decree, unless it is in the best interests of
such trust or if said trustee acted in good faith in the reasonable belief that
such act was in the best interests of the trust. Acquired Fund shareholders may
remove, with or without cause, any director by the affirmative vote of a
majority of the votes cast. The Trust shareholders may remove a trustee by the
vote of shareholders of record of not less than two-thirds.
The Acquired Fund does not regularly hold shareholder meetings, and the
Acquiring Fund does not expect to hold such meetings. The By-laws of each of
the Funds provide that a meeting of shareholders will be held upon the written
request of holders of at least 25% of votes entitled to be cast.
The foregoing is only a summary of certain rights of the shareholders of
the Acquired Fund and of the rights these shareholders will have following the
Reorganization as holders of Class A shares of the Acquiring Fund. It is not a
complete description of the Declaration of
18
<PAGE>
Trust of the Acquiring Fund or the Articles of Incorporation of the Acquired
Fund, the By-Laws of any of the Funds or the applicable Delaware or Maryland
law. Shareholders desiring additional information about those documents and
provisions of law should refer to such Declarations of Trust, Articles of
Incorporation, By-Laws and provisions.
The Board of Directors of the Acquired Fund recommends that shareholders
vote FOR the approval of the proposed Agreement and Plan of Reorganization and
the Reorganization.
ITEM 2. - FOR ACQUIRED FUND SHAREHOLDERS ONLY
The Board of Directors of the Acquired Fund believes that it is important
to ensure continuity of operation of the Acquired Fund in the event that the
Reorganization is not consummated. Accordingly, the Board has determined that:
(i) the persons who currently constitute the Board of Directors of the Acquired
Fund should stand for re-election, for a term of office to extend until their
successors are elected and qualified, and (ii) the selection of Deloitte &
Touche LLP as the independent public accountants of the Acquired Fund should be
submitted to shareholders for ratification, as required by the 1940 Act if the
Acquired Fund continues to engage in business as an investment company.
A. Election of Directors of the Acquired Fund
The nominees for election as directors of the Acquired Fund are Ronald P.
Lynch, Robert S. Dow, E. Thayer Bigelow, Stewart S. Dixon, John C. Jansing, C.
Alan MacDonald, Hansel B. Millican, Jr. and Thomas J. Neff, who have been
nominated by the Board of Directors to succeed themselves. The individuals named
as proxies intend to vote the proxies, unless otherwise directed, in favor of
the election of such nominees, each of whom has agreed to continue to serve as a
director of the Acquired Fund. Management of the Acquired Fund has no reason to
believe that any nominee will be unable to serve as a director. If any nominee
should be unable to serve as a director, it is the intention of the individuals
named as proxies to vote for the election of such person or persons as the Board
of Directors may, in its discretion, recommend.
Information about each person nominated for election as a director is set
forth in the following table. Except where indicated, each of the persons
listed in the table has held the principal occupation listed opposite his name
for the past five years.
<TABLE>
<CAPTION>
Names and Ages of Director of the
Directors of the Fund Principal Occupation and Directorships Fund Since
- - -------------------------------------------------------------------------------------------
<C> <S> <C>
Ronald P. Lynch (1)(2) Chairman of the Board of the Reorganized 1986
60 Fund.
Partner of Lord Abbett.
Robert S. Dow (1)(2) President of the Reorganized Fund. 1995
50 Partner of Lord Abbett.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Names and Ages of Director of the
Directors of the Fund Principal Occupation and Directorships Fund Since
- - -------------------------------------------------------------------------------------------
<C> <S> <C>
E. Thayer Bigelow President and Chief Executive Officer of 1994
(2) 54 Time Warner Cable Programming, Inc.,
formerly President and Chief Operating
Officer of Home Box Office, Inc.
Stewart S. Dixon (2) Partner in the law firm of Wildman, 1986
65 Harrold, Allen & Dixon.
John C. Jansing (2) Retired. Former Chairman of Independent 1986
70 Election Corporation of America, a proxy
tabulating firm.
C. Alan MacDonald (2) General Partner, The Marketing Partner- 1988
62 ship, Inc., a full service marketing con-
sulting firm. Formerly Chairman and
Chief Executive Officer of Lincoln Snacks,
Inc., manufacturer of branded snack foods
(1992-1994). Formerly President & CEO
of Nestle Foods Corp., and prior to that,
President & CEO of Stouffer Foods Corp.,
both subsidiaries of Nestle SA,
Switzerland. Currently serves as Director
of Den West Restaurant Co., J. B.
Williams, and Fountainhead Water Com-
pany.
Hansel B. Millican, Jr. (2) President and Chief Executive Officer of 1986
66 Rochester Button Company.
Thomas J. Neff (2) President, Spencer Stuart & Associates, an 1986
58 executive search consulting firm.
- - -------------------------------------------------------------------------------------------
</TABLE>
(1) "Interested person" of the Acquired Fund and Lord Abbett, within the
meaning of the Investment Company Act of 1940, as amended, because of his
association with Lord Abbett.
(2) Also a director or trustee of the other Lord Abbett-sponsored funds except
for Lord Abbett Research Fund, Inc., of which only Messrs. Lynch, Dow,
Millican and Neff are directors.
Listed below is the number of shares of the Acquired Fund's outstanding
capital stock owned beneficially by each director as of December 31, 1995,
together with the number of "phantom" shares credited to the account of each
director under a plan (the "Deferred Plan") permitting independent directors to
defer their directors' fees and to have the deferred amounts deemed invested in
shares of the capital stock of the Acquired Fund for later payment. Also shown
is the number of shares owned beneficially by the directors and officers as a
group, together with such "phantom" shares credited to the accounts of directors
and officers as a group. In each case, the amounts shown are less than 1% of
the Acquired Fund's outstanding capital stock.
20
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Beneficially
Name Owned and Phantom Shares/(1)/
- - -------------------------------------------------------------
<S> <C>
Ronald P. Lynch 137,719
Robert S. Dow 7,142
E. Thayer Bigelow 10
Stewart S. Dixon 1,263
John C. Jansing 2,937
C. Alan MacDonald 478
Hansel B. Millican, Jr. 1,050
Thomas J. Neff 1,275
Thomas S. Henderson 8,483
Directors and Officers as a 178,487
group
</TABLE>
___________________
(1) Of the shares listed in the foregoing table, the following constitute
"phantom" shares credited to directors under the Deferred Plan: Mr.
Bigelow, 10 shares; Mr. Dixon, 1,083 shares; Mr. Jansing, 1,087 shares; Mr.
MacDonald, 478 shares; Mr. Millican, 1,050 shares; Mr. Neff, 1,099 shares;
Mr. Henderson, 0; and directors and officers as a group: 9,423.
The board of the Acquired Fund has only one standing committee, an Audit
Committee, consisting of Messrs. Bigelow, MacDonald and Millican. The functions
performed by the Audit Committee include recommendation of the selection of
independent public accountants for the Acquired Fund to the board for approval,
review of the scope and results of audit and non-audit services, the adequacy of
internal controls and material changes in accounting principles and practices
and other matters when requested from time to time by the directors who are not
"interested persons" of the Acquired Fund within the meaning of the 1940 Act.
The Audit Committee held four meetings during the fiscal year of the Acquired
Fund ended June 30, 1995.
The Board of Directors of the Acquired Fund met [eleven] times during the
fiscal year ended June 30, 1995, and each director attended at least 75% of the
total number of meetings of the Board and, if he was a member of the Audit
Committee, of such committee.
The second column of the following table sets forth the compensation
accrued by the Acquired Fund for the directors not associated with Lord Abbett.
The third and fourth columns set forth information with respect to the
retirement plan for the directors not associated with Lord Abbett
21
<PAGE>
maintained by the Acquired Fund and the other Lord Abbett-sponsored funds. The
fifth column sets forth the total compensation accrued by the Acquired Fund and
such other funds for such directors. The second, third and fourth columns give
information for the Acquired Fund's most recent fiscal year; the fifth column
gives information for the calendar year ended December 31, 1995. No director
associated with Lord Abbett and no officer of the Acquired Fund received any
compensation from the Acquired Fund for acting as a director or officer.
<TABLE>
<CAPTION>
For Year Ended
For the Fiscal Year Ended June 30, 1995 December 31, 1995
- - -----------------------------------------------------------------------------------------------------------
(I) (II) (III) (IV) (V)
- - -----------------------------------------------------------------------------------------------------------
Pension or Estimated Annual
Retirement Bene- Benefits Upon Re-
fits Accrued by tirement Proposed Total Compensation
the Acquired to be Paid by the Accrued by the
Aggregate Com- Fund and Fifteen Acquired Fund Acquired Fund and
pensation Ac- Other Lord and Fifteen Other Fifteen Other Lord
crued by the Abbett-sponsored Lord Abbett-spon- Abbett-sponsored
Name of Director Acquired Fund/1/ Funds/2/ sored Funds/2/ Funds/3/
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
E. Thayer Bigelow/4/ $ 74 $ 7,656 $33,600 $41,700
- - -----------------------------------------------------------------------------------------------------------
Stewart S. Dixon $109 $22,595 $33,600 $42,000
- - -----------------------------------------------------------------------------------------------------------
John C. Jansing $111 $28,636 $33,600 $42,960
- - -----------------------------------------------------------------------------------------------------------
C. Alan MacDonald $112 $27,508 $33,600 $42,750
- - -----------------------------------------------------------------------------------------------------------
Hansel B. Millican, Jr. $111 $24,892 $33,600 $43,000
- - -----------------------------------------------------------------------------------------------------------
Thomas J. Neff $108 $16,214 $33,600 $42,000
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Fees for directors not associated with Lord Abbett, including attendance
fees for board and committee meetings, are allocated among all Lord Abbett-
sponsored funds based on net assets of each fund. Fees payable by the
Acquired Fund to such directors are being deferred under a plan that deems
the deferred amounts to be invested in shares of the Acquired Fund for
later payment to the directors. The total amount accrued under the plan
for each such director since the beginning of his tenure with the Acquired
Fund, including dividends reinvested and changes in net asset value
applicable to such deemed investments, were as follows as of June 30, 1995:
Mr. Bigelow, $82; Mr. Dixon, $13,754; Mr. Jansing, $13,746; Mr. MacDonald,
$6,071; Mr. Millican, $13,279; and Mr. Neff, $13,897.
(2) Each Lord Abbett-sponsored fund has a retirement plan providing that
Directors not associated with Lord Abbett will receive annual retirement
benefits for life equal to 80% of their final annual retainers following
retirement at or after age 72 with at least 10 years of service. Each plan
also provides for a reduced benefit upon early retirement under certain
circumstances, a pre-retirement death benefit and actuarially reduced
joint-and-survivor
22
<PAGE>
spousal benefits. The amounts stated in column (IV) would be payable
annually under such retirement plans if the director were to retire at age
72 and the annual retainers payable by such funds were the same as they are
today. The amounts set forth in column (III) were accrued by the Lord
Abbett-sponsored funds during the fiscal year ended June 30, 1995 with
respect to the retirement benefits set forth in column (IV).
(3) This column shows aggregate fees of directors who are not "interested
persons" of the Acquired Fund within the meaning of the 1940 Act, including
attendance fees for board and committee meetings, of a nature referred to
in the first sentence of footnote (1), accrued by the Lord Abbett-sponsored
funds during the year ended December 31, 1995.
(4) Mr. Bigelow was elected a director of the Fund on October 12, 1994.
(5) Mr. Creamer retired as a director of the Fund effective September 21, 1994.
The stated amount of his retirement income (column iv) is the annual amount
payable to him by the Lord Abbett-sponsored funds before reduction for a
joint-and-survivor spousal benefit.
Listed below are the executive officers of the Acquired Fund, other than
Messrs. Lynch and Dow who are listed above in the table of nominees. Each
executive officer has been associated with Lord Abbett for over five years,
except as indicated. Messrs. Allen, Carper, Cutler, Henderson, Morris, Nordberg
and Walsh are partners of Lord Abbett; the others listed below are em ployees.
Stephen I. Allen, age 42, Vice President since 1994.
Daniel E. Carper, age 44, Vice President since 1986.
Kenneth B. Cutler, age 63, Vice President and Secretary since 1986.
John J. Gargana, Jr., age 64, Vice President since 1986.
Thomas S. Henderson, age 64, Vice President since 1986.
Paul A. Hilstad, age 53, Vice President since 1995 (with Lord Abbett since 1995
- - - formerly Senior Vice President and General Counsel of American Capital
Management & Research, Inc.).
William T. Hudson, age 53, Vice President since 1992.
Thomas F. Konop, age 53, Vice President since 1987.
Robert G. Morris, age 51, Vice President since 1994.
E. Wayne Nordberg, age 59, Vice President since 1988.
Keith F. O'Connor, age 40, Treasurer since 1987.
23
<PAGE>
Victor W. Pizzolato, age 63, Vice President since 1986.
John J. Walsh, age 59, Vice President since 1986.
The Board of Directors of the Acquired Fund recommends that the
shareholders vote FOR the election of each of the nominees as directors of the
Acquired Fund.
B. Ratification or Rejection of
Independent Public Accountants
The Board of Directors of the Acquired Fund has selected Deloitte & Touche
LLP as the independent public accountants of the Acquired Fund for the fiscal
year ending June 30, 1996. The 1940 Act requires that such selection be
submitted for ratification or rejection at the next annual meeting of
shareholders if such meeting be held. Deloitte & Touche LLP (or a predecessor
firm) acted as the Acquired Fund's independent public accountants for the year
ended August 31, 1995, and for a number of years prior thereto. Based on
information in the possession of the Acquired Fund, and information furnished by
Deloitte & Touche LLP, such firm has no direct financial interest and no
material indirect financial interest in the Acquired Fund. A representative of
Deloitte & Touche LLP is expected to attend the meeting and will be provided
with an opportunity to make a statement and answer appropriate questions. The
Board of Directors' recommendation of Deloitte & Touche LLP has been made so
that such firm may continue to serve as the independent public accountants of
the Acquired Fund in the event that the Reorganization does not occur for any
reason.
The Board of Directors of the Acquired Fund recommends that shareholders
vote to ratify the selection of Deloitte & Touche LLP as the Acquired Fund's
independent public accountants for the fiscal year ending June 30, 1996.
ADDITIONAL INFORMATION
To the knowledge of the Acquiring Fund and the Acquired Fund, as of March
22, 1996, no person owned of record or beneficially 5% or more of the
outstanding shares of the Trust, the Acquiring Fund or the Acquired Fund. As of
December 31, 1995, the trustees and officers of the Trust, as a group, and the
directors and officers of the Acquired Fund, as a group, owned less than 1% of
the outstanding shares of each of the Acquiring Fund, the Acquired Fund and the
Securities Trust.
The Trust and the Acquired Fund are subject to the informational
requirements of the Securities Exchange Act of 1934 and in accordance therewith
file reports, proxy statements and other information with the Securities and
Exchange Commission. Such reports, proxy statements and other information filed
by such entities can be inspected and copied at the public reference facilities
of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C., and at
the Northeast Regional Office in New York, 7 World Trade Center, 13th Floor, New
York, New York. Copies
24
<PAGE>
of such material can also be obtained by mail from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549 at prescribed rates.
25
<PAGE>
Draft-February 25, 1996
Exhibit A
---------
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this day of , 1996, by and between the Lord Abbett Investment Trust
(the "Trust"), a Delaware business trust, on behalf of its series the Lord
Abbett Growth & Income Trust (the "Acquiring Fund") and Lord Abbett Fundamental
Value Fund, Inc. (the "Acquired Fund"), a Maryland corporation.
WHEREAS, this Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of the
United States Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, the reorganization (the "Reorganization") will consist of the
transfer of all of the assets of the Acquired Fund in exchange for Class A
shares of capital stock of the Acquiring Fund (the "Acquiring Fund Class A
Shares" and each an "Acquiring Fund Class A Share") and the assumption by the
Acquiring Fund of all of the liabilities of the Acquired Fund and the
distribution, after the Closing Date herein referred to, of Acquiring Fund Class
A Shares to the shareholders of the Acquired Fund in termination of the Acquired
Fund, all upon the terms and conditions hereinafter set forth in this Agreement;
WHEREAS, the Acquired Fund and the Trust are open-end, registered
investment companies of the management type;
WHEREAS, the Acquiring Fund is a series of the Trust;
WHEREAS, the Acquired Fund owns securities that generally are of the
character in which the Acquiring Fund is permitted to invest;
WHEREAS, the Acquiring Fund is authorized to issue and currently has
outstanding a single class of shares (the "Acquiring Fund Class C Shares"), and
prior to the consummation of the Reorganization, will seek to amend its
Declaration and Agreement of Trust to provide for the authorization and issuance
of shares of additional classes of capital stock, including Acquiring Fund Class
A Shares, which will share pro rata with each other class in the portfolio,
income and expenses of the Acquiring Fund, except that each class will bear the
expense of its own distribution and shareholder servicing arrangements and
certain other expenses;
WHEREAS, after the multiple class share structure is authorized by the
Acquiring Fund but before the Acquiring Fund Class A Shares are issued to the
<PAGE>
Acquired Fund pursuant to the Reorganization, the Acquired Fund is to purchase
one Acquiring Fund Class A share and as sole shareholder approve a plan pursuant
to Section 12(b) of the Investment Company Act of 1940 (the "1940 Act") and Rule
12b-1 thereunder (a "Rule 12b-1 Plan") applicable to the Acquiring Fund Class A
Shares;
WHEREAS, the Board of Directors, including a majority of the directors who
are not "interested persons" (as defined under the 1940 Act ), of the Acquired
Fund has determined that the Reorganization is in the best interests of the
Acquired Fund's shareholders and that the interests of the existing shareholders
of the Acquired Fund will not be diluted as a result of this transaction; and
WHEREAS, the Board of Trustees, including a majority of the trustees who
are not "interested persons" (as defined under the 1940 Act) of the Trust, has
determined that the Reorganization is in the best interests of the Acquiring
Fund's shareholders and that the interests of the existing shareholders of the
Acquiring Fund will not be diluted as a result of this transaction;
NOW THEREFORE, in consideration of the premises and of the agreements
hereinafter set forth, the parties hereto agree as follows:
1. REORGANIZATION.
1.1. Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Acquired Fund will
transfer its assets as set forth in paragraph 1.2 to the Acquiring Fund, and the
Acquiring Fund will in exchange therefor, (i) deliver to the Acquired Fund the
-
number of Acquiring Fund Class A Shares, including fractional Acquiring Fund
Class A Shares, determined by dividing the net value of the Acquired Fund's
assets so transferred computed in the manner and as of the time and date set
forth in para graph 2.1, by the net asset value of one Acquiring Fund Class C
Share, computed in the manner and as of the time and date set forth in paragraph
2.2; and (ii) to assume all of the liabilities of the Acquired Fund. Such
--
transactions shall take place at the closing provided for in paragraph 3.1 (the
"Closing").
1.2. (a) The assets of the Acquired Fund to be acquired by the Acquiring
Fund shall consist of all of its property, including, without limitation, all
cash, securities and dividends or interest receivables and any deferred or
prepaid expenses shown as an asset on the books of the Acquired Fund on the
closing date provided in paragraph 3.1 (the "Closing Date").
2
<PAGE>
(b) The Acquiring Fund has a list of all of the Acquired Fund's assets as
of the date of execution of this Agreement. The Acquired Fund has a statement
of the Acquiring Fund's investment objectives, policies and restrictions. The
Acquired Fund reserves the right to sell any of its securities but will not,
without the prior approval of the Acquiring Fund, acquire any additional
securities other than securities of the type in which the Acquiring Fund is
permitted to invest. The Acquiring Fund will, within a reasonable time prior to
the Closing Date, furnish the Acquired Fund with a list of the securities, if
any, on the Acquired Fund's list referred to in the first sentence of this
paragraph which do not conform to the Acquiring Fund's investment objectives,
policies and restrictions. In the event that the Acquired Fund holds any
investments which the Acquiring Fund may not hold, the Acquired Fund will
dispose of such securities prior to the Closing Date. In addition, if it is
determined that the portfolios of the Acquired Fund and the Acquiring Fund, when
aggregated, would contain investments exceeding certain percentage limitations
imposed upon the Acquiring Fund with respect to such investments, the Acquired
Fund, if requested by the Acquiring Fund, will dispose of and/or reinvest a
sufficient amount of such in vestments as may be necessary to avoid violating
such limitations as of the Closing Date.
1.3. As provided in paragraph 3.4, as soon after the Closing Date as is
conveniently practicable, the Acquired Fund will distribute pro rata to the
Acquired Fund's shareholders of record determined as of the close of business on
the Closing Date, the Acquiring Fund Class A Shares it receives pursuant to
paragraph 1.1. Such distribution will be accomplished by establishing Acquiring
Fund shareholder accounts in the names of each Acquired Fund shareholder,
representing the respective pro rata number of full and fractional Acquiring
Fund Class A Shares due each shareholder. All issued and outstanding shares of
the Acquired Fund will simultaneously be canceled on the books of the Acquired
Fund. The Acquiring Fund shall not issue certificates representing the
Acquiring Fund Shares in connection with such exchange.
1.4. Any transfer taxes payable upon issuance of Acquiring Fund Class A
Shares in a name other than the registered holder of the shares of the Acquired
Fund on the books of the Acquired Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Class A Shares are to be issued and transferred.
1.5. The Acquired Fund shall, following the Closing Date and the making of
all distributions pursuant to paragraph 1.3, be terminated by a majority of the
Acquired Fund's directors' executing an instrument pursuant to the Articles of
Incorporation of the Acquired Fund abolishing the Acquired Fund. Any reporting
responsibility of the Acquired Fund is and shall remain the responsibility of
the
3
<PAGE>
Acquired Fund up to and including the Closing Date and following the termination
of the Acquired Fund.
2. VALUATION
2.1. The net value of the Acquired Fund's assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets, less the Acquired
Fund's liabilities assumed by the Acquiring Fund, computed as of the close of
regular trading on New York Stock Exchange, Inc. (the "NYSE") on the Closing
Date (such time and date being hereinafter called the "Valuation Date"), using
the valuation procedures set forth in the Trust's Declaration and Agreement of
Trust.
2.2. The net asset value of one Acquiring Fund Class C Share shall be the
net asset value per share computed as of the close of regular trading on the
NYSE on the Valuation Date, using the valuation procedures set forth in the
Trust's Declaration and Agreement of Trust.
2.3. All computations of value shall be made by the Acquiring Fund and the
Acquired Fund in accordance with the regular practice of the Acquiring Fund.
3. CLOSING AND CLOSING DATE
3.1. The Closing Date shall be July 12, 1996, or such other date as the
parties may agree to in writing. All acts taking place at the Closing shall be
deemed to take place simultaneously as of the close of business on the Closing
Date unless otherwise provided. The Closing shall be held as of 5:00 p.m. at
the offices of [specify location in New Jersey], or at such other time and/or
place as the parties may agree.
3.2. In the event that on the Valuation Date (a) the NYSE or another
-
primary trading market for portfolio securities of the Acquiring Fund or the
Acquired Fund shall be closed to trading or trading thereon shall be restricted
or (b) trading or the reporting of trading on the NYSE or elsewhere shall be
-
disrupted so that accurate appraisal of the value of the net assets of the
Acquiring Fund or the Acquired Fund is impracticable, the Closing Date shall be
postponed until the first business day after the day when trading shall have
been fully resumed and reporting shall have been restored.
3.3. At the Closing, the Acquired Fund shall direct its custodian to
deliver to the custodian of the Acquiring Fund, for the Acquiring Fund's
account, all of its portfolio securities and other assets held by such custodian
for the Acquired
4
<PAGE>
Fund's account, duly endorsed in proper form for transfer as appropriate, in
such condition as to constitute good delivery thereof in accordance with the
custom of the Acquiring Fund's custodian, and shall be accompanied by all
necessary federal and state stock transfer stamps or a check for the appropriate
purchase price thereof.
3.4. The Acquired Fund shall direct its transfer agent to deliver to the
transfer agent of the Acquiring Fund on the Closing Date a list of the names and
addresses of the Acquired Fund's shareholders and the number of outstanding
shares owned by each such shareholder immediately prior to the Closing. The
Acquiring Fund shall direct its transfer agent to issue and deliver a
confirmation evidencing the Acquiring Fund Class A Shares to be credited to the
Acquired Fund's account on the Closing Date to the transfer agent of the
Acquired Fund, or provide evidence satisfactory to the Acquired Fund that such
Acquiring Fund Class A Shares have been credited to the Acquired Fund's account
on the books of the Acquiring Fund. At the Closing, each party shall deliver to
the other such bills of sale, checks, assignments, share certificates, if any,
receipts, assumption agreements or other documents as such other party or its
counsel may reasonably request.
4. REPRESENTATION AND WARRANTIES
4.1. The Acquired Fund represents and warrants to the Trust as follows:
(a) The Acquired Fund is a registered investment company classified as a
management company of the open-end type, and its registration with the
Securities and Exchange Commission (the "Commission") as an investment company
under the 1940 Act is in full force and effect.
(b) The Acquired Fund is duly organized, validly existing and in good
standing under the laws of the State of Maryland and has the power to own all
of its properties and assets and to carry out this Agreement.
(c) The current prospectus and statement of additional information of the
Acquired Fund conform (and any prospectus or statement of additional
information of the Acquired Fund issued prior to the Closing Date will
conform) in all material respects to the applicable requirements of the
Securities Act of 1933 Act, as amended (the "1933 Act"), and the 1940 Act and
the rules and regulations of the Commission thereunder and do not (and will
not) include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements
5
<PAGE>
therein, in light of the circumstances under which they were (and will be)
made, not materially misleading.
(d) The Acquired Fund is not, and the execution, delivery and performance
of this Agreement will not result in, a material violation of its Articles of
Incorporation or By-laws or of any agreement, instrument, contract or other
undertaking to which the Acquired Fund is a party or by which it is bound.
(e) The Acquired Fund has no material contracts or other commitments which
will be terminated with liability to the Acquired Fund on, prior to or after
the Closing Date.
(f) Except as otherwise disclosed in writing to and accepted by the
Acquiring Fund, no litigation or administrative proceeding or investigation
before any court or governmental body is presently pending or to its knowledge
threatened against the Acquired Fund or any of the Acquired Fund's properties
or assets, which if adversely determined would materially and adversely affect
the financial condition of the Acquired Fund or the conduct of the Acquired
Fund's business. The Acquired Fund knows of no facts which might form the
basis of the institution of such a proceeding and is not party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects the business of the
Acquired Fund or the ability of the Acquired Fund to consummate the
transactions contemplated herein.
(g) True and correct copies of the Acquired Fund's (i) Statement of Net
-
Assets as at June 30, 1995 and (ii) Statements of Operations and Changes in
--
Net Assets for the 12-month period then ended, including the accompanying
notes, have been furnished to the Acquiring Fund. Such Statement of Net Assets
and such Statements of Operations and Changes in Net Assets (and the
accompanying notes) have been audited by Deloitte & Touche LLP, independent
certified public accountants. Such statements have been prepared in accordance
with generally accepted accounting principles consistently applied, and such
statements fairly reflect the financial condition and the operations and
changes in net assets of the Acquired Fund as of such date and for such
period, respectively. There are no known contingent liabilities of the
Acquired Fund as of such date required to be reflected or disclosed in such
Statement of Net Assets or notes in accordance with generally accepted
accounting principles that are not so reflected or disclosed.
6
<PAGE>
(h) Since June 30, 1995, there has not been any material adverse change in
the Acquired Fund's financial condition, assets, liabilities or business other
than changes occurring in the ordinary course of business, or any incurrence
by the Acquired Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed to and accepted
by the Acquiring Fund.
(i) The Acquired Fund will file the final federal and other tax returns of
the Acquired Fund for the period ending on the Closing Date in accordance with
the Code. At the Closing Date, all federal and other tax returns and reports
of the Acquired Fund required by law to have been filed prior to the Closing
Date shall have been filed, and all federal and other taxes shown as due on
such returns shall have been paid, or provision shall have been made for the
payment thereof, and to the best of the Acquired Fund's knowledge, no such
return is currently under audit and no assessment has been asserted with
respect to such returns.
(j) For the most recent fiscal year of its operation, the Acquired Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable. All of the issued and outstanding shares of the Acquired Fund
will, at the time of Closing, be held of record by the persons and in the
amounts set forth in the records of the transfer agent as provided in
paragraph 3.4. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any shares of the
Acquired Fund, nor is there outstanding any security convertible into any
shares of the Acquired Fund.
(l) At the Closing Date, the Acquired Fund will have good and marketable
title to its assets to be transferred to the Acquiring Fund pursuant to
paragraph 1.1 and full right, power and authority to sell, assign, transfer
and deliver such assets hereunder and, upon delivery and payment for such
assets, the Acquiring Fund will acquire good and marketable title thereto,
subject to no restrictions on the full transfer thereof, including such
restrictions as might arise under the 1933 Act, other than as disclosed to the
Acquiring Fund prior to the date hereof.
7
<PAGE>
(m) The execution, delivery and performance of this Agreement has been
duly authorized by all necessary action on the part of Acquired Fund's
directors, and subject to the due approval of the Acquired Fund's
shareholders, this Agreement, assuming due authorization, execution and
delivery by the Acquiring Fund, constitutes a valid and binding obligation of
the Acquired Fund, enforceable in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights and to general equity
principles. The Acquired Fund's Board of Directors has called a meeting of the
Acquired Fund's shareholders at which the shareholders of the Acquired Fund
are to consider and act upon this Agreement.
(n) The information furnished and to be furnished by the Acquired Fund for
use in registration statements, proxy materials and other documents which may
be necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all
material respects with federal securities and other laws and regulations
thereunder applicable thereto.
(o) The combined prospectus and proxy statement (the "N-14 prospectus and
proxy statement") and the related statement of additional information included
in the Registration Statement on Form N-14 of the Acquiring Fund (the "N-14
Registration Statement") did not on the effective date of the N-14
Registration Statement contain any untrue statement of a material fact
relating to the Acquired Fund or the meeting of the Acquired Fund shareholders
referred to therein or omit to state a material fact required to be stated
therein or necessary to make the statements therein relating to the Acquired
Fund or such special meeting, in light of the circumstances under which such
statements were made, not materially misleading.
(p) The Acquiring Fund Class A Shares to be issued to the Acquired Fund
hereunder are not being acquired for the purpose of making any distribution
thereof other than in accordance with the terms of this Agreement.
4.2. With respect to the Acquiring Fund, the Trust represents and warrants
to the Acquired Fund as follows:
(a) The Investment Trust is a registered investment company classified as
a management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act is in full force and
effect.
8
<PAGE>
(b) The Acquiring Fund is a series of the Trust. The Trust is a business
trust duly organized, validly existing and in good standing under the laws of
the State of Delaware and has the power to own all of its properties and
assets and to carry out this Agreement.
(c) The current prospectus and statement of additional information of the
Trust conform (and any prospectus or statement of additional information of
the Trust issued prior to the Closing Date will conform) in all material
respects to the applicable requirements of the 1933 Act and the 1940 Act and
the rules and regulations of the Commission thereunder and do not (and will
not) include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were (or
will be) made, not materially misleading.
(d) The Trust is not, and the execution, delivery and performance of this
Agreement will not result in, a material violation of its Declaration and
Agreement of Trust or By-laws or of any agreement, instrument, contract or
other undertaking to which the Trust is a party or by which it is bound.
(e) The Trust has no material contracts or other commitments which will be
terminated with liability to the Trust on, prior to or after the Closing Date.
(f) Except as otherwise disclosed in writing to and accepted by the
Acquired Fund, no litigation or administrative proceeding or investigation
before any court or governmental body is presently pending or to its knowledge
threatened against the Trust or any of the Acquiring Fund's properties or
assets, which, if adversely determined, would materially and adversely affect
its financial condition or the conduct of its business. The Trust knows of no
facts which might form the basis of the institution of such a proceeding and
is not party to or subject to the provisions of any order, decree or judgment
of any court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions contemplated herein.
(g) True and correct copies of the Acquiring Fund's (i) Statement of Net
-
Assets as at October 31, 1995, and (ii) Statements of Operation and Changes in
--
Net Assets for the 12-month period then ended, including the accompanying
notes, have been furnished to the Acquired Fund. Such Statement of Net Assets
and such Statements of Operations and Changes in
9
<PAGE>
Net Assets (and the accompanying notes) have been audited by Deloitte & Touche
LLP, independent certified public accountants. Such statements have been
prepared in accordance with generally accepted accounting principles
consistently applied, and such statements fairly reflect the financial
condition and the operations and changes in net assets of the Acquiring Fund
as of such date and for such period, respectively. There are no known
contingent liabilities of the Acquiring Fund as of such date required to be
reflected or disclosed in such Statements of Net Assets or notes in accordance
with generally accepted accounting principles that are not so reflected or
disclosed.
(h) Since October 31, 1995, there has not been any material adverse change
in the Acquiring Fund's financial condition, assets, liabilities or business
other than changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Acquired Fund.
(i) At the Closing Date, all federal and other tax returns and reports of
the Trust required by law to have been filed prior to the Closing Date shall
have been filed, and all federal and other taxes shown as due on such returns
and reports shall have been paid, or provision shall have been made for the
payment thereof, and to the best of the Acquiring Fund's knowledge, no such
return is currently under audit and no assessment has been asserted with
respect to such returns.
(j) For the most recent fiscal year of its operation, the Acquiring Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and the Acquiring Fund intends to
do so in the future.
(k) All issued and outstanding shares of the Acquiring Fund are, and at
the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable, with no personal liability attaching to the ownership
thereof. The Acquiring Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any shares of the Acquiring Fund,
nor is there outstanding any security convertible into shares of the Acquiring
Fund.
(l) At the Closing Date, the Acquiring Fund will have good and marketable
title to the Acquiring Fund's assets.
10
<PAGE>
(m) The execution, delivery and performance of this Agreement has been
duly authorized by all necessary action on the part of the Trust's Board of
Trustees, and assuming due authorization, execution and delivery by the
Acquired Fund, this Agreement constitutes a valid and binding obligation of
the Trust on behalf of the Acquiring Fund, enforceable in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles.
(n) The N-14 Registration Statement (except insofar as it relates to the
Acquired Fund or the special meeting of its shareholders referred to therein)
did not on the effective date of the N-14 Registration Statement contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not materially
misleading.
(o) The Acquiring Fund Class A Shares to be issued and delivered to the
Acquired Fund pursuant to the terms of this Agreement have been duly
authorized by the Board of Trustees of the Trust, and, when issued and
delivered at the Closing in accordance with this Agreement, will be duly and
validly issued Acquiring Fund Class A Shares and will be fully paid and non-
assessable with no personal liability attaching to the ownership thereof.
(p) The Board of Trustees of the Trust has duly adopted a resolution (a
copy of which has been furnished to the Acquired Fund) authorizing the
creation and issuance of Acquiring Fund Class A Shares.
5. COVENANTS
5.1. The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date.
It is understood that such ordinary course of business will include the
declaration and payment of customary dividends and distributions and any other
dividends and distributions deemed advisable.
5.2. After the amendment to the Trust's Declaration and Agreement of Trust
referred to in paragraph 4.2(p) has been duly approved by the shareholders of
the Trust, the Trust will duly file the same with the Secretary of State of the
State of Delaware.
11
<PAGE>
5.3. At or after the Closing, the Acquired Fund will deliver or otherwise
make available to the Trust a statement of the Acquired Fund's assets and
liabilities, together with a list of the Acquired Fund's portfolio securities
showing the tax costs of such securities to it and the holding periods of such
securities, as of the Closing Date.
5.4. The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Acquired Fund's shares.
5.5. Subject to the provisions of this Agreement, the Acquired Fund and
the Acquiring Fund each will take, or cause to be taken, all action, and do or
cause to be done all things, reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.6. Prior to the Closing Date, the Board of Directors of the Acquired
Fund will declare such dividends and distributions, payable no later than [90]
days after the Closing Date, to shareholders of record of the Acquired Fund as
of the Closing Date, which, together with all such previous dividends and
distributions, shall have the effect of distributing to the shareholders of the
Acquired Fund all of the investment company taxable income and exempt-interest
income of the Acquired Fund for all taxable years ending on or prior to the
Closing Date. The dividends and distributions declared by the Acquired Fund
shall also include all of the Acquired Fund's net capital gain realized in all
taxable years ending on or prior to the Closing Date (after reduction for any
capital loss carry forward). Such dividends and distributions declared prior to
the Closing Date shall be paid by the Acquiring Fund no later than [90] days
after the Closing Date.
5.7. As promptly as practicable, but in any case within sixty days after
the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in such
form as is reasonably satisfactory to the Acquiring Fund, a statement of the
earnings and profits of the Acquired Fund for federal income tax purposes which
will be carried over to the Acquiring Fund as a result of Section 381 of the
Code.
5.8. The Acquired Fund will provide the Acquiring Fund with any additional
information reasonably necessary for any revision of the N-14 Prospectus and
Proxy Statement referred to in paragraph 4.1(o), all to be included in any
amendment to the N-14 Registration Statement, in compliance with the 1933 Act,
the Securities Exchange Act of 1934 (the "1934 Act") and the 1940 Act in
connection with the meeting of the Acquired Fund's shareholders to consider
approval of this Agreement and the Reorganization.
12
<PAGE>
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Trust in all material respects of all of the obligations to be performed by it
hereunder on or before the Closing Date and, in addition thereto, the following
further conditions:
6.1. All representations and warranties of the Trust contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
6.2. The Acquiring Fund shall have delivered to the Acquired Fund a
certificate executed in its name by its Chairman, President or a Vice President
and its Treasurer or an Assistant Treasurer, in form reasonably satisfactory to
the Acquired Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the Trust made in this Agreement are true and
correct at and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST
The obligations of the Trust, on behalf of the Acquiring Fund, to
consummate the transactions provided for herein shall be subject, at its
election, to the performance by the Acquired Fund in all material respects of
all the obligations to be performed by it hereunder on or before the Closing
Date and, in addition thereto, the following further conditions:
7.1. All representations and warranties of the Acquired Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
7.2. The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its Chairman, President or a
Vice President and its Treasurer or an Assistant Treasurer, in form and
substance satisfactory to the Acquiring Fund and dated as of the Closing Date,
to the effect that the representations and warranties of the Acquired Fund made
in this Agreement are
13
<PAGE>
true and correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST AND THE ACQUIRED
FUND
If any of the conditions set forth below do not exist on the Closing Date
with respect to the Acquiring Fund or the Acquired Fund, either party to this
Agreement shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:
8.1. This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of the Acquired Fund's
Articles of Incorporation of Trust and By-laws. Notwithstanding anything herein
to the contrary, neither the Acquiring Fund nor the Acquired Fund may waive the
conditions set forth in this paragraph 8.1.
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
8.3. All consents of other parties and all other consents, orders, rulings
and permits of federal, state and local regulatory authorities (including those
of the Commission, the Internal Revenue Service and state Blue Sky and
securities authorities) deemed necessary by the Acquiring Fund or the Acquired
Fund to permit consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to obtain any
such consent, order, ruling or permit would not involve a risk of a material
adverse effect on the assets or properties of the Acquiring Fund or the Acquired
Fund.
8.4. The N-14 Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act.
8.5. The parties shall have received a favorable opinion of Debevoise &
Plimpton, addressed to the Trust and the Acquired Fund and satisfactory to the
14
<PAGE>
Secretary of each such party, substantially to the effect that for federal
income tax purposes:
(a) the acquisition by the Acquiring Fund of all of the assets of the
Acquired Fund solely in exchange for the issuance of Acquiring Fund Class A
Shares to the Acquired Fund and the assumption of all of the Acquired Fund
liabilities by the Acquiring Fund, followed by the distribution by the
Acquired Fund, in complete liquidation, of the Acquiring Fund Class A Shares
to the Acquired Fund shareholders in exchange for their Acquired Fund shares,
will be treated as a "reorganization" within the meaning of Section 368(a) of
the Code, and the Acquiring Fund and the Acquired Fund will each be a "party
to a reorganization" within the meaning of Section 368(b) of the Code;
(b) no gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund in exchange for the Acquiring Fund
Shares and the assumption by the Acquiring Fund of liabilities of the Acquired
Fund;
(c) no gain or loss will be recognized by the Acquired Fund upon the
transfer of the Acquired Fund's assets to the Acquiring Fund in exchange for
the Acquiring Fund Shares and the assumption by the Acquiring Fund of
liabilities of the Acquired Fund or upon the distribution of the Acquiring
Fund Shares to the Acquired Fund's shareholders;
(d) no gain or loss will be recognized by shareholders of the Acquired
Fund upon the exchange of their Acquired Fund shares for the Acquiring Fund
Shares;
(e) the aggregate tax basis for the Acquiring Fund Shares received by each
of the Acquired Fund's shareholders pursuant to the Reorganization will be the
same as the aggregate tax basis of the Acquired Fund shares held by such
shareholder immediately prior to the Reorganization, and the holding period of
the Acquiring Fund Shares to be received by each Acquired Fund shareholder
will include the period during which the Acquired Fund shares exchanged
therefor were held by such shareholder (provided that the Acquired Fund shares
were held as capital assets on the date of the Reorganization); and
(f) the tax basis of the Acquired Fund's assets acquired by the Acquiring
Fund will be the same as the tax basis of such assets to the Acquired Fund
immediately prior to the Reorganization, and the holding period of the assets
of the Acquired Fund in the hands of the Acquiring Fund
15
<PAGE>
will include the period during which those assets were held by the Acquired
Fund.
Notwithstanding anything herein to the contrary, neither the Trust nor the
Acquired Fund may waive the conditions set forth in this paragraph 8.5.
8.6. The Acquiring Fund shall have duly adopted a Rule 12b-1 Plan for the
Acquiring Fund Class A Shares acceptable to the Acquired Fund.
9. BROKERAGE FEES AND EXPENSES
9.1. The Investment Trust represents and warrants to the Acquired Fund,
and the Acquired Fund represents and warrants to the Acquiring Fund, that there
are no brokers or finders entitled to receive any payments in connection with
the transactions provided for herein.
9.2. Except as may be otherwise provided herein, the Acquiring Fund and
the Acquired Fund each shall pay, or provide for the payment of, the expenses
incurred by it in connection with entering into and carrying out the provisions
of this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. The parties hereto agree that no party has made any representation,
warranty or covenant not set forth herein and that this Agreement constitutes
the entire agreement between the parties.
10.2. None of the representations and warranties included or provided for
herein shall survive the consummation of the transactions contemplated hereby.
11. TERMINATION
11.1. This Agreement may be terminated at any time prior to the Closing
Date: (1) by the mutual agreement of the Acquired Fund and the Trust; (2) by
- -
the Acquired Fund in the event that the Trust shall, or by the Trust in the
event that the Acquired Fund shall, materially breach any representation or
warranty contained herein or any agreement contained herein and to be performed
at or prior to the Closing Date; or (3) by either party if a condition herein
-
expressed to be precedent to the obligations of the terminating party has not
been met and it reasonably appears that it will not or cannot be met.
16
<PAGE>
11.2. In the event of any such termination, there shall be no liability
for damages on the part of either the Acquired Fund, the Trust or the Acquiring
Fund or their respective directors, trustees or officers to the other party, but
the Acquiring Fund and the Acquired Fund shall each bear, or provide for the
payment of, the expenses incurred by it incidental to the preparation and
carrying out of this Agreement as provided in paragraph 9.2.
12. AMENDMENTS; WAIVERS
12.1. This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
the Acquired Fund and the Trust; provided, however, that following the approval
of the Acquired Fund shareholders referred to in paragraph 8.1, no such
amendment may have the effect of changing the provisions for determining the
number of the Acquiring Fund Class A Shares to be issued to the Acquired Fund's
shareholders under this Agreement to the detriment of such shareholders without
their further approval.
12.2. At or at any time prior to the Closing either party hereto may by
written instrument signed by it (i) waive any inaccuracies in the
-
representations and warranties made to it contained herein and (ii) waive
--
compliance with any of the covenants or conditions made for its benefit
contained herein.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by personal
delivery addressed to the Acquired Fund, 767 Fifth Avenue, New York, New York,
10153, Attention: Office of the Secretary; or to the Acquiring Fund, 767 Fifth
Avenue, New York, New York, 10153, Attention: Office of the Secretary.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
14.1. The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
17
<PAGE>
14.3. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
14.4. (a) This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm, corporation or other entity, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason of
this Agreement.
(b) The Acquired Fund is hereby expressly put on notice of the limitation
of liability as set forth in Article IV of the Declaration and Agreement of
Trust of the Trust and agrees that the obligations assumed by the Trust pursuant
to this Agreement shall be limited in any case to the Acquiring Fund and its
assets and
18
<PAGE>
the Acquired Fund shall not seek satisfaction of any such obligation from the
shareholders of the Trust, the trustees, officers, employees or agents of the
Trust or any of them or from any other assets of the Trust.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its Chairman of the Board, President or Vice President and
attested by its Secretary or Assistant Secretary.
Attest: LORD ABBETT FUNDAMENTAL VALUE FUND, INC.
By: _______________________________
Name: __________________ Name:
Title: Secretary Title:
Attest: LORD ABBETT SECURITIES TRUST
on behalf of the Lord Abbett Growth &
Income Trust
By: _______________________________
Name: _________________ Name:
Title: Secretary Title:
19
<PAGE>
Exhibit B
---------
Comparison of Current and Proposed Investment Policies and Restrictions
Comparison of certain investment policies and restrictions of Lord Abbett
Fundamental Value Fund, Inc. (the "Acquired Fund") and Lord Abbett Growth &
Income Trust, a series of Lord Abbett Securities Trust (the "Acquiring Fund")
and proposed revised investment policies and restrictions of the Acquiring Fund.
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
Policy/Restriction of the Policy/Restriction of the Proposed Policy/Restriction of
Acquired Fund Acquiring Fund the Acquiring Fund
- - ------------------------------------------- ---------------------------------------- ------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT SALES/MARGIN.
Non-Fundamental Fundamental Non-fundamental
Subject to certain exceptions, the Subject to certain exceptions, the The Fund may not make short
Fund may not sell short or buy on Fund may not sell short or buy on sales of securities or maintain a
margin margin. short position except to the
extent permitted by applicable
law.
Fundamental
The Fund may purchase
securities on margin to the extent
permitted by applicable law.
- - ---------------------------------------------------------------------------------------------------------------------------
BORROWING.
Fundamental Fundamental Fundamental
Subject to certain exceptions, the Subject to certain exceptions, the The Fund may not borrow
Fund may not borrow money. Fund may not borrow money money, except that (i) the Fund
may borrow from banks (as de-
fined in the 1940 Act) in
amounts up to 33 1/3% of its
total assets (including the amount
borrowed), (ii) the Fund may
borrow up to an additional 5% of
its total assets for temporary
purposes, and (iii) the Fund may
obtain such short-term credit as
may be necessary for the
clearance of purchases and sales
of portfolio securities.
- - ---------------------------------------------------------------------------------------------------------------------------
UNDERWRITING. Fundamental
Fundamental Fundamental The Fund may not engage in the
The Fund may not engage in the The Fund may not engage in the underwriting of securities,
underwriting of securities, unless underwriting of securities, except except, pursuant to a merger or
deemed to be an underwriter in pursuant to a merger or acquisition, acquisition or to the extent that,
selling a portfolio security requiring or unless deemed to be an underwriter in connection with the disposition
registration under the 1933 Act. in selling a portfolio security of its portfolio securities, it may
requiring registration under the 1933 be deemed to be an underwriter
Act. under federal securities laws.
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
Policy/Restriction of the Policy/Restriction of the Proposed Policy/Restriction of
Acquired Fund Acquiring Fund the Acquiring Fund
- - ------------------------------------------- ---------------------------------------- ------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LENDING.
Fundamental Fundamental Fundamental
The Fund may not lend money or The Fund may not lend money or The Fund may not make loans to
securities to any person, except securities to any person, except other persons, except that the ac-
through lending its portfolio securities through certain repurchase agreements quisition of bonds, debentures or
to registered dealers where the loan is and by lending its portfolio securities other corporate debt securities
100% secured by cash or its to registered broker-dealers where the and investment in government
equivalent as long as we comply with loan is 100% secured by cash or its obligations, commercial paper,
regulatory requirements. equivalent and except for time or pass-through instruments,
demand deposits with banks and certificates of deposit, bankers
.. purchases of commercial paper or acceptances, repurchase agree-
publicly-offered debt securities at ments or any similar instruments
original issue or otherwise. shall not be subject to this
limitation, and except further that
the Fund may lend its portfolio
securities, provided that the
lending of portfolio securities
may be made only in accordance
with applicable law and the
guidelines set forth in the Fund's
Prospectus and Statement of
Additional Information, as they
may be amended from time to
time.
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
Policy/Restriction of the Policy/Restriction of the Proposed Policy/Restriction of
Acquired Fund Acquiring Fund the Acquiring Fund
- - ------------------------------------------- ---------------------------------------- ------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE/COMMODITIES.
Fundamental Fundamental Fundamental
The Fund may not buy or sell real The Fund may not buy or sell real The Fund may not buy or sell
estate (except securities of companies estate (excluding securities of real estate (except that the Fund
that deal in real estate or interests companies which deal in real estate or may invest in securities directly
therein), or oil, gas or other mineral interests therein), oil, gas or other or indirectly secured by real
leases, commodities or commodity mineral leases or in commodities or estate or interests therein or
contracts in the ordinary course of its commodity contracts in the ordinary issued by companies which invest
business, except such interests and course of its business, except such in real estate or interests
other property acquired as a result of interests and other property acquired therein), commodity or
owning other securities, though as a result of owning other securities, commodity contracts (except to
securities will not be purchased in though securities will not be the extent the Fund may do so in
order to acquire any of these purchased in order to acquire any of accordance with applicable law
interests. these interests. and without registering as a
commodity pool operator under
the Commodity Exchange Act as,
for example, with futures
contracts).
Non-fundamental
The Fund may not invest in real
estate limited partnership
interests or interests in oil, gas
or other mineral leases, or
exploration or other development
programs, except that the Fund
may invest in securities issued by
companies that engage in oil, gas
or other mineral exploration or
development activities.
- - ---------------------------------------------------------------------------------------------------------------------------
DIVERSIFICATION.
Fundamental Fundamental Fundamental
The Fund may not buy securities if The Fund may not, with respect to With respect to 75% of its gross
the purchase would then cause it to 75% of its gross assets, buy securities assets, the Fund may not buy
have more than 5% of its gross if the purchase would then cause it to securities of one issuer
assets, at market value at the time of have more than 5% of its gross representing more than (i) 5% of
investment, invested in the securities assets, at market value at the time of -
of any one issuer, except securities investment, invested in the securities the Fund's gross assets, except
issued or guaranteed by the U.S. of any one issuer, except securities securities issued or guaranteed by
Government, its agencies or issued or guaranteed by the U.S. the U.S. Government, its
instrumentalities, or to own more than Government, its agencies or agencies or instrumentalities, or
10% of the voting securities of any instrumentalities, or to own more than (ii) 10% of the voting securities
issuer. 10% of the voting securities of any --
issuer. of such issuer.
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
Policy/Restriction of the Policy/Restriction of the Proposed Policy/Restriction of
Acquired Fund Acquiring Fund the Acquiring Fund
- - ------------------------------------------- ---------------------------------------- ------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT IN A SINGLE
INDUSTRY.
Fundamental
The Fund may not concentrate its Fundamental Fundamental
investments in any particular industry, The Fund may not concentrate its The Fund may not invest more
but if deemed appropriate for investments in any particular industry than 25% of its assets, taken at
attainment of its investment objective, excluding U.S. Government market value, in the securities of
up to 25% of its gross assets may be securities. issuers in any particular industry
invested in any one industry (excluding securities of the U.S.
classification used for investment Government, its agencies and
purposes. instrumentalities).
- - ---------------------------------------------------------------------------------------------------------------------------
RESTRICTED/ILLIQUID
SECURITIES.
Fundamental Non-fundamental Non-fundamental
The Fund may not invest knowingly The Fund may not invest knowingly The Fund may not invest,
in securities or other assets not more than 15% of its net assets in knowingly, more than 15% of its
readily marketable at the time of illiquid securities (subject to net assets (at the time of
purchase or subject to legal or applicable state law, securities investment) in illiquid securities,
contractual restrictions on resale. qualifying for resale under Rule 144A except for securities qualifying
of the Securities Act of 1933 that are for resale under Rule 144A of
determined by the trustees, or by the Securities Act of 1933,
Lord Abbett, to be liquid are deemed to be liquid by the Board
considered liquid securities). of Trustees.
- - ---------------------------------------------------------------------------------------------------------------------------
MORTGAGING AND PLEDGING
OF ASSETS.
Fundamental Non-fundamental Fundamental
The Fund may not pledge, mortgage The Fund may not pledge, mortgage, The Fund may not pledge its
or hypothecate its assets, except for or hypothecate its assets, except for assets (other than to secure
the grant of escrow receipts or the permitted borrowing or the grant of borrowings, or to the extent
entry into other similar escrow escrow receipts or the entry into permitted by the Fund's
arrangements arising out of the similar escrow arrangements arising investment policies, in
writing of covered call options. out of the writing of covered call connection with hedging
options. transactions, short sales, when-
issued and forward commitment
transactions and similar
investment strategies).
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
Policy/Restriction of the Policy/Restriction of the Proposed Policy/Restriction of
Acquired Fund Acquiring Fund the Acquiring Fund
- - ------------------------------------------- ---------------------------------------- ------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS IN SECURITIES
OF OTHER INVESTMENT
COMPANIES.
Fundamental
The Fund may not buy securities
issued by any other open-end Non-fundamental Non-fundamental
investment company except pursuant The Fund may not invest in the The Fund may not invest in the
to a merger, acquisition or securities of other investment securities of other investment
consolidation, except up to 5% of its companies except as permitted by the companies, except as permitted
gross assets is such securities are 1940 Act. by applicable law.
bought in the open market with a fee
or commission no greater than the
customary broker's commission.
- - ---------------------------------------------------------------------------------------------------------------------------
OPTIONS.
Fundamental Non-fundamental Fundamental
The Fund may not buy or sell put or The Fund may not buy or sell put or The Fund may not write,
call options, although it may buy, call options although it may write purchase or sell puts, calls,
hold or sell rights or warrants and covered call options and enter into straddles, spreads or
write covered call options and enter closing purchase transactions. combinations thereof, except to
into closing purchase transactions. the extent permitted in the
Fund's prospectus and statement
of additional information, as they
may be amended from time to
time.
- - ---------------------------------------------------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
OF ISSUERS IN OPERATION
FOR LESS THAN THREE YEARS.
Non-fundamental Fundamental Non-fundamental
The Fund may not invest more than The Fund may not purchase securities The Fund may not invest in
5% of its gross assets, taken at of any issuer unless it or its securities of issuers which, with
market value at the time of predecessor has a record of three their predecessors, have a record
investment, in companies (including years' continuous operation, except of less than three years
their predecessors) with less than through subscription offers or other continuous operations, except if
three years' continuous operation. rights limited in the aggregate to 5% more than 5% of the Fund's total
of its net assets at the time of assets would be invested in such
investment. securities (this restriction shall
not apply to mortgage-backed
securities, asset-backed securities
or obligations issued or
guaranteed by the U.S.
Government, its agencies or
instrumentalities).
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------
Policy/Restriction of the Policy/Restriction of the Proposed Policy/Restriction of
Acquired Fund Acquiring Fund the Acquiring Fund
- - ------------------------------------------- ---------------------------------------- ------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OWNERSHIP OF PORTFOLIO
SECURITIES BY OFFICERS AND
DIRECTORS.
Non-fundamental
The Fund may not own securities in a
company when any of its officers, Fundamental Non-fundamental
directors or security holders is an The Fund may not hold securities of The Fund may not hold securities
officer or director of the Fund or an any issuer when more than 1/2 of 1% of any issuer if more than 1/2 of
officer, director or partner of our of the issuer's securities are owned 1% of the securities of such
investment manager, if after the beneficially by one or more of the issuer are owned beneficially by
purchase any of such persons owns Trust's officers or trustees or by one one or more officers or Trustees
beneficially more than 1/2 of 1% of or more partners of the Trust's or by one or more members or
such securities and such persons underwriter or investment adviser if partners of the underwriter or
together own more than 5% of such these owners in the aggregate own investment advisor if together
securities. beneficially more than 5% of such they own more than 5% of the
securities. securities of such issuer.
- - ---------------------------------------------------------------------------------------------------------------------------
TRANSACTIONS WITH
CERTAIN PERSONS.
Fundamental None
The Fund may not buy securities from None stated (but certain
or sell them to its officers, directors, restrictions may exist under
or employees, or to our investment applicable law).
manager or to its partners and
employees, other than capital stock of
the Fund.
- - ---------------------------------------------------------------------------------------------------------------------------
SENIOR SECURITIES.
Fundamental Fundamental
None The Fund may not issue senior The Fund may not issue senior
securities. securities to the extent such
issuance would violate applicable
law.
- - ---------------------------------------------------------------------------------------------------------------------------
PURCHASE OF WARRANTS.
Non-fundamental None Non-fundamental
Pursuant to state regulations, the Fund The Fund may not invest in
will not invest more than 5% of its warrants if, at the time of the
net assets in warrants and not more acquisition, its investment in
than 2% in warrants not listed on the warrants, valued at the lower of
New York or American Stock cost or market, would exceed 5%
Exchanges, except when they form a of the Fund's total assets
unit with other securities. (included within such limitation,
but not to exceed 2% of the
Fund's total assets, are warrants
which are not listed on the New
York or American Stock
Exchange or a major foreign
exchange.)
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION DATED MARCH __, 1996
Acquisition of the Assets of
Lord Abbett Fundamental Value Fund, Inc.
The General Motors Building, 767 Fifth Avenue
New York, NY 10153
(800) 426-1130
by and in exchange for Class A Shares of
Lord Abbett Growth & Income Trust, a series of
Lord Abbett Securities Trust
The General Motors Building, 767 Fifth Avenue
New York, NY 10153
(800) 426-1130
This Statement of Additional Information, relating specifically to the
proposed transfer of the assets of Lord Abbett Fundamental Value Fund, Inc. (the
"Acquired Fund"), to the Lord Abbett Growth & Income Trust (the "Acquiring
Fund"), a series of Lord Abbett Securities Trust (the "Trust") in exchange for
Class A shares of the Acquiring Fund and the assumption by the Acquiring Fund of
the liabilities of the Acquired Fund, consists of (i) this cover page, (ii) the
pro-forma financial statements of the Acquiring Fund as at October 31, 1995 and
for the 12-month period then ended prepared as though the reorganization
referred to above had occurred on November 1, 1994, attached hereto as Exhibit
A, and (iii) the following described documents, each of which accompanies this
Statement of Additional Information and is incorporated herein by reference:
1. Statement of Additional Information of the Trust dated March 1,
1996./*/
2. Statement of Additional Information of the Acquired Fund dated November
1, 1995, insofar as it relates to the Acquired Fund./*/
3. The financial statements of the Acquiring Fund for the fiscal year
ended October 31, 1995, and the report thereon of Deloitte & Touche LLP,
independent auditors, contained in the 1995 Annual Report of the Acquiring Fund.
4. The financial statements of the Acquired Fund for the fiscal year ended
June 30, 1995, and the report thereon of Deloitte & Touche LLP, independent
public accountants, contained in the 1995 Annual Report of the Acquired Fund.
The financial statements referred to above are incorporated herein in
reliance upon the authority of Deloitte & Touche LLP as experts in auditing and
accounting. This Statement of Additional Information is not a prospectus. A
Proxy Statement and Prospectus dated the date hereof
- - --------------------------
/*/ A pre-effective amendment is to be filed to incorporate by reference these
documents.
B-1
<PAGE>
relating to the above-referenced matter may be obtained without charge by
calling or writing the Acquiring Fund at the telephone number or address set
forth above. This Statement of Additional Information should be read in
conjunction with such Proxy Statement and Prospectus.
B-2
<PAGE>
EXHIBIT A
PRO-FORMA PORTFOLIO OF INVESTMENTS FUND
October 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
LORD ABBETT
SECURITIES TRUST
GROWTH & INCOME TRUST FUNDAMENTAL VALUE PRO-FORMA COMBINED
Number of Market Number of Market Number of Market
Security Shares Value Shares Value Shares Value
-------- --------- ------ --------- ------ --------- ------
INVESTMENT IN COMMON AND CONVERTIBLE-PREFERRED STOCKS 93.20%
<S> <C> <C> <C> <C> <C> <C> <C>
Aerospace Boeing Co. 8,400 $ 551,250 12,000 $ 787,500 20,400 $1,338,750
3.19% Lockheed Martin Corp. 2,878 196,064 5,000 340,625 7,878 536,689
Rockwell International Corp. 10,000 445,000 10,000 445,000
Total 747,314 1,573,125 2,320,439
Agricultural
Equipment
..55% Pioneer Hi-Bred
International, Inc. 8,000 397,000 8,000 397,000
Airline
1.33% British Airways plc ADR 3,500 250,250 10,000 715,000 13,500 965,250
Apparel
1.38% VF Corp. 8,900 426,087 12,000 574,500 20,900 1,000,587
Auto Parts Genuine Parts 19,900 788,538 10,000 396,250 29,900 1,184,788
4.52% Company 9,200 389,850 25,000 1,059,375 34,200 1,449,225
Snap-On, Inc. 3,900 256,425 6,000 394,500 9,900 650,925
TRW Inc. 1,434,813 1,850,125 3,284,938
Total
Automobiles Ford Motor Co. 15,000 431,250 15,000 431,250
1.46% Ford Motor Co. $4.20 Cum. 500 47,000 500 47,000
Conv. Pfd. A 13,300 581,875 13,300 581,875
General Motors Corp. 628,875 431,250 1,060,125
Total
Banks: Money Chemical Banking Corp. 6,700 381,063 6,700 381,063
Center First Chicago Corp. 4,500 305,438 4,500 305,438
..94% Total 686,501 686,501
Banks: Regional Bank of Boston Corp. 6,100 271,450 6,100 271,450
4.01% BankAmerica Corp 6,900 396,750 6,900 396,750
Comerica Inc. 8,100 272,363 20,000 672,500 28,100 944,863
Fleet Financial Group, Inc. 5,500 213,125 15,000 581,250 20,500 794,375
KeyCorp 15,000 506,250 15,000 506,250
Total 1,153,688 1,760,000 2,913,688
Building Materials
..19% Masco Corp. 5,000 140,625 5,000 140,625
Chemicals
2.22% Dow Chemical Co. 6,200 425,475 6,200 425,475
Hanna, M.A. Co. 25,000 640,625 25,000 640,625
Union Carbide Corp. 14,400 545,400 14,400 545,400
Total 970,875 640,625 1,611,500
Containers
1.07% Sonoco Products Co. 31,500 779,625 31,500 779,625
Data Processing Hewlett-Packard Co. 4,300 398,288 4,300 398,288
Equipment Seagate Technology Inc. 4,800 214,800 4,800 214,800
..84% Total 613,088 613,088
Data Processing General Motors Corp. $3.25
Services Conv. Pfd.
3.01% (Electronic Data Systems) 6,400 428,800 6,400 428,800
General Motors Corp. Class E
(Electronic Data Systems) 4,800 226,200 15,000 706,875 19,800 933,075
H & R Block Inc. 20,000 825,000 20,000 825,000
Total 655,000 1,531,875 2,186,875
Drugs/Health Baxter International Inc. 7,500 289,688 18,000 695,250 25,500 984,938
Care Products Lilly, Eli & Co. 3,500 338,188 3,500 338,188
7.16% Mallinckrodt Group Inc. 20,000 695,000 20,000 695,000
Merck & Co., Inc. 8,000 460,000 15,000 862,500 23,000 1,322,500
SmithKline Beecham plc ADR 13,500 700,313 22,400 1,162,000 35,900 1,862,313
Total 1,788,189 3,414,750 5,202,939
1
</TABLE>
<PAGE>
PRO-FORMA PORTFOLIO OF INVESTMENTS FUND
October 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
LORD ABBETT
SECURITIES TRUST
GROWTH & INCOME TRUST FUNDAMENTAL VALUE PRO-FORMA COMBINED
Number of Market Number of Market Number of Market
Security Shares Value Shares Value Shares Value
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Electric Power Baltimore Gas & Electric Co. 17,000 $454,750 17,000 $ 454,750
5.87% Carolina Power & Light Co. 25,000 $ 818,750 25,000 818,750
CINergy Corp. 22,900 649,788 30,000 851,250 52,900 1,501,038
DTE Energy 9,700 327,375 9,700 327,375
Ipalco Enterprise 20,000 737,500 20,000 737,500
Public Service Enterprises Group Inc. 14,600 428,875 14,600 428 875
Total 1,860,788 2,407,500 4,268,288
- - -------------------------------------------------------------------------------------------------------------------------------
Electrical
Equipment
2.17% Emerson Electric Co. 10,100 719,625 12,000 855,000 22,100 1,574,625
- - -------------------------------------------------------------------------------------------------------------------------------
Electronoic
Communications
1.46% Harris Corp. 3,300 191,812 15,000 871,875 18,300 1,063,687
- - -------------------------------------------------------------------------------------------------------------------------------
Electronoic
Components
2.44% AMP Inc. 20,100 788,925 25,000 981,250 45,100 1,770,175
- - -------------------------------------------------------------------------------------------------------------------------------
Electronics: Perkin-Elmer Corp. 3,900 136,987 20,000 702,500 23,900 839,487
Equipment Raytheon Company 10,000 436,250 10,000 436,250
1.76% Total 136,987 1,138,750 1,275,737
- - -------------------------------------------------------------------------------------------------------------------------------
Financial: American Express Co. 8,000 325,000 8,400 341,250 16,400 666,250
Miscellaneous Transamerica Corp 6,100 413,275 6,100 413,275
1.49% Total 738,275 341,250 1,079,525
- - -------------------------------------------------------------------------------------------------------------------------------
Food Conagra Inc. 7,670 296,254 20,000 772,500 27,670 1,068,754
8.45% Dean Foods Co. 16,700 465,513 15,000 418,125 31,700 883,638
Hershey Foods Corp. 9,300 555,675 12,000 717,000 21,300 1,272,675
RJR Nabisco 25,200 774,900 25,200 774,900
Sara Lee Corp. 4,000 117,500 20,000 587,500 24,000 705,000
Supervalu Inc. 14,600 448,950 32,000 984,000 46,600 1,432,950
Total 2,658,792 3,479,125 6,137,917
- - -------------------------------------------------------------------------------------------------------------------------------
Hotel/Motel Patriot American Hospitality Inc. 12,600 307,125 12,600 307,125
..80% Starwood Lodging Trust 10,000 272,500 10,000 272,500
Total 579,625 579,625
- - -------------------------------------------------------------------------------------------------------------------------------
Insurance Aetna Life & Casualty Co. 8,750 615,780 8,750 615,780
5.13% Chubb Corp. 15,000 1,348,125 15,000 1,348,125
CIGNA Corp. 5,900 584,837 5,900 584,837
Lincoln National Corp. 200 8,925 10,600 473,025 10,800 481,950
St. Paul Companies Inc. 12,000 609,000 12,000 609,000
SAFECO Corp. 1,400 89,862 1,400 89,862
Total 1,299,404 2,430,150 3,729,554
- - -------------------------------------------------------------------------------------------------------------------------------
Machinery: Deere & Co. 6,500 580,937 6,500 580,937
Diversified Goulds Pumps, Inc. 13,600 323,000 20,000 475,000 33,600 798,000
1.90% Total 903,937 475,000 1,378,937
- - -------------------------------------------------------------------------------------------------------------------------------
Miscellaneous Minnesota Mining & Mfg. Co. 8,100 460,688 10,000 568,750 18,100 1,029,438
2.95% Moore Corp. Ltd. 6,000 114,750 6,000 114,750
National Service Industries, Inc. 8,700 258,825 25,000 743,750 33,700 1,002,575
Total 834,263 1,312,500 2,146,763
- - -------------------------------------------------------------------------------------------------------------------------------
Natural Gas Coastal Corp. 11,000 356,125 11,000 356,125
Transmission Eastern Enterprises 4,000 119,500 4,000 119,500
1.05% Equitable Resources, Inc. 9,700 283,725 9,700 283,725
Total 759,350 759,350
----------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
PRO-FORMA PORTFOLIO OF INVESTMENTS FUND
October 31, 1995 (unaudited)
<TABLE>
<CAPTION>
LORD ABBETT
SECURITIES TRUST
GROWTH & INCOME TRUST FUNDAMENTAL VALUE PRO-FORMA COMBINED
Number of Number of Number of
Shares or Shares or Shares or
Principal Market Principal Market Principal Market
Securities Amount Value Amount Value Amount Value
---------- --------- ------- --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Office Equipment/
Supplies .51% Apple Computer Inc. 10,300 $ 374,018 10,300 $ 374,018
- - -----------------------------------------------------------------------------------------------------------------------------------
Oil: Domestic Amoco Corporation 7,000 $ 447,125 7,000 447,125
..79% Ultramar Corp. 5,300 129,187 5,300 125,187
Total 129,187 447,125 576,312
- - -----------------------------------------------------------------------------------------------------------------------------------
Oil: International Chevron Corp. 13,600 635,800 10,000 467,500 23,600 1,103,300
3.56% Exxon Corp. 5,900 450,612 4,000 305,500 9,900 756,112
Mobil Corp. 4,800 483,600 4,800 483,600
Royal Dutch Petroleum Co. 2,000 245,750 2,000 245,750
Total 1,570,012 1,018,750 2,588,762
-----------------------------------------------------------------------------------------------------------------------------------
Paper and Forest Crown Vantage Inc. 690 13,714 690 13,714
Products Federal Paper Board Inc 13,300 558,600 13,300 558,600
5.76% James River Corp. 13,900 446,537 20,000 642,500 33,900 1,089,037
Kimberly Clark Corp. 4,900 355,862 4,900 355,862
Scott Paper Co. 5,500 292,875 18,000 958,500 23,500 1,251,375
Westvaco Corporation 10,600 294,150 22,500 624,375 33,100 918,525
Total 1,961,738 2,225,375 4,187,113
- - -----------------------------------------------------------------------------------------------------------------------------------
Printing and Deluxe Corp. 6,700 180,063 6,700 180,063
Publshing Donnelley, R.R. & Sons Co. 16,800 613,200 22,400 817,600 39,200 1,430,800
2.37% Gannett Co., Inc. 2,000 108,750 2,000 108,750
Total 902,013 817,600 1,719,613
- - -----------------------------------------------------------------------------------------------------------------------------------
Retail Dayton Hudson Corp. 5,050 347,188 5,050 347,188
2.98% Nordstrom Inc. 15,000 555,938 15,000 555,938
Sears, Roebuck & Co. 12,100 411,400 25,000 850,000 37,100 1,261,400
Total 758,588 1,405,938 2,164,526
- - -----------------------------------------------------------------------------------------------------------------------------------
Savings and Loan Ahmanson, H.F. & Co. 23,900 597,500 23,900 597,500
2.69% Great Western Financial Corp. 28,500 644,813 28,500 644,813
Standard Federal Bancorporation
Inc. 20,000 710,000 20,000 710,000
Total 1,242,313 710,000 1,952,313
- - -----------------------------------------------------------------------------------------------------------------------------------
Telecommunications AT&T Corp. 7,900 505,600 7,900 505,600
2.06% MCI Communications Corp. 39,700 990,018 39,700 990,018
Total 1,495,618 1,495,618
- - -----------------------------------------------------------------------------------------------------------------------------------
Tire and Rubber
Goods
1.30% Cooper Tire & Rubber Company 20,700 478,687 20,000 462,500 40,700 941,187
- - -----------------------------------------------------------------------------------------------------------------------------------
Tobacco
..59% American Brands Inc. 10,000 428,750 10,000 428,750
- - -----------------------------------------------------------------------------------------------------------------------------------
Waste Management Browning Ferris Industries Inc. 21,600 629,100 30,000 873,750 51,600 1,502,850
3.25% WMX Technologies Inc. 5,600 157,500 25,000 703,125 30,600 860,625
Total 786,600 1,576,875 2,363,475
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments
(Cost $27,661,121 and
$30,786,863, respectively) 30,953,987 36,765,063 67,719,050
- - -----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES 5.33%
- - -----------------------------------------------------------------------------------------------------------------------------------
Short-Term Ford Motor Credit Co. 5.72% 200M 200,000 650M 650,000 850M 850,000
Securities, due 11/2/1995
At Cost Prudential Funding Corp. 5.72% 700M 700,000 1,150M 1,150,000 1,850M 1,850,000
due 11/3/1995
Beneficial Corp 5.726%
due 11/6/1995 600M 600,000 600M 600,000
3
</TABLE>
Lord Abbett & Company Pro Forma Portfolio of Investments
<PAGE>
Pro-Forma Portfolio of Investments Fund
October 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
LORD ABBETT
SECURITIES TRUST
GROWTH & INCOME TRUST FUNDAMENTAL VALUE PRO-FORMA COMBINED
Principal Market Principal Market Principal Market
Security Amount Value Amount Value Amount Value
- - ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Chevron Oil Finance Co.
5.584% due 11/1/95 $575M $ 575,000 $575M $ 575,000
- - --------------------------------------------------------------------------------------------
Total Short-Term Investments
(Cost $900,000 and $2,975,000,
respectively) 900,000 2,975,000 3,875,000
-------------------------------------------------------------------------------------------
Total Investments in
Securities
(Cost $28,561,121 and
$33,761,863, respectively) 31,853,987 39,740,063 71,594,050
- - --------------------------------------------------------------------------------------------
4
</TABLE>
See Notes to Pro-Forma Financial Statements.
<PAGE>
PRO-FORMA STATEMENT OF NET ASSETS
OCTOBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Lord Abbett
Securities Trust Lord Abbett
Growth & Income Fundamental Pro-Forma Pro-Forma
Trust Value Fund, Inc. Adjustments Combined
--------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value (cost $28,561,121 31,853,987 39,740,063 71,594,050
and $33,761,863 respectively)
Cash 198,771 109,860 308,631
Receivable for investments sold 206,801 329,300 536,101
Receivable for capital stock sold 442,090 124,693 566,783
Other assets & other receivables 178,796 43,293 - 222,089
--------------------------------------------------------------
Total Assets 32,880,445 40,347,209 - 73,227,654
--------------------------------------------------------------
LIABILITIES
Payable for capital stock reacquired 21,960 8,932 30,892
Payable for securities purchased 55,058 292,365 347,423
Accounts payable, accrued expenses & taxes 33,503 162,996 196,499
Total Liabilities 110,521 464,293 - 574,814
--------------------------------------------------------------
NET ASSETS AS OF OCTOBER 31, 1995 32,769,924 39,882,916 - 72,652,840
==============================================================
Net Assets were comprised of :
Capital stock, at par - 295,844 (295,844) (#) -
Paid-in capital 29,090,823 32,526,047 295,844 (#) 61,912,714
Accumulated net realized gain 200,736 216,707 417,443
Net unrealized appreciation 3,292,866 5,978,200 9,271,066
Undistributed net investment income 185,499 866,118 1,051,617
--------------------------------------------------------------
NET ASSETS AS OF OCTOBER 31, 1995 32,769,924 39,882,916 - 72,652,840
==============================================================
Class A shares outstanding as of October 31, 1995 2,958,443 6,603,132
Class C shares outstanding as of October 31, 1995 5,428,222 5,428,222
Class A:
Net Asset Value and redemption price
per share $ 13.48 $ 6.04
Class C:
Net Asset Value and redemption price
per share $ 6.04 $ 6.04
</TABLE>
------------------------
(#) Adjustment to reflect the exchange of capital stock of Lord Abbett
Fundamental Value Fund Inc. for shares of beneficial interest
in Lord Abbett Securities Trust Growth & Income Securities Trust.
<PAGE>
PRO-FORMA STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Lord Abbett
Securities Trust Lord Abbett
Growth & Income Fundamental Pro-Forma Pro-Forma
Trust Value Fund, Inc. Adjustments Combined
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income
Interest $ 56,649 $ 190,084 246,733
Dividends 559,819 989,565 1,549,384
- - -----------------------------------------------------------------------------------------------------------------------------------
Total Income $ 616,468 $ 1,179,649 1,796,117
- - -----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Management fee 143,551 269,080 - 412,631
------------------------------------------------------------------------------------------------------------------------------
Management Fees Waived & Assumed (143,551) - (143,551)
------------------------------------------------------------------------------------------------------------------------------
Distribution Fee - Class A 76,683 7,190 (a) 83,873
------------------------------------------------------------------------------------------------------------------------------
Distribution Fee - Class C 169,003 169,003
------------------------------------------------------------------------------------------------------------------------------
Shareholder servicing costs 16,729 60,000 76,729
------------------------------------------------------------------------------------------------------------------------------
Reports to shareholders 2,800 28,000 30,800
------------------------------------------------------------------------------------------------------------------------------
Audit & Tax Fee 9,585 26,942 (4,000)(b) 32,527
------------------------------------------------------------------------------------------------------------------------------
Legal fee 510 3,600 4,110
------------------------------------------------------------------------------------------------------------------------------
Registration fee 10,827 17,650 28,477
------------------------------------------------------------------------------------------------------------------------------
Organization expense 6,866 - - 6,866
------------------------------------------------------------------------------------------------------------------------------
Other 5,727 20,866 26,593
- - ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 222,047 502,821 3,190 728,058
- - -----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 394,421 676,828 (3,190) 1,068,059
Net Realized and Unrealized gain (loss) on Investments:
Net Realized gain (loss) from security transactions
Proceeds from sales 4,021,708 16,364,318 20,386,026
Cost of securities sold 3,805,407 14,141,998 17,947,405
- - -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 216,301 2,222,320 2,438,621
- - -----------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments:
Beginning of year 144,498 2,551,695 2,696,193
End of year 3,292,866 5,978,200 9,271,066
- - -----------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation 3,148,368 3,426,505 6,574,873
- - -----------------------------------------------------------------------------------------------------------------------------------
Net realized/unrealized gain on investment 3,364,669 5,648,825 - 9,013,494
- - -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $3,759,090 $ 6,325,653 ($3,190) 10,081,553
===================================================================================================================================
</TABLE>
- - ----------------------------
(a) Adjustment to reflect increase in 12B-1 plan
(b) Adjustment to reflect elimination of duplicative expenses.
<PAGE>
NOTES TO PRO-FORMA FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Lord Abbett Securities Trust was organized as a Delaware business trust on
February 26, 1993, and is registered under the Investment Company Act of 1940 as
a diversified, open-end management investment company. On January 3, 1994,
Growth & Income Trust commenced operations.
The following is a summary of significant accounting policies consistently
followed by the Company. The policies are in comformity with generally accepted
accounting principles.
(a) Market value is determined as follows: Securities listed or admitted to
trading privileges on any securities exchange are valued at the last sales
price on the exchange on which such securities are traded, as of the close of
business on the day the securities are being valued or, lacking any slaes, at
the mean between the last bid and asked price on such exchange or at the latest
price on the basis of current quotations from dealers (as in the case of bonds),
from valuations furnished by an independent pricing service or, in their
absence, fair value as determined under procedures approved by the Board of
Trustees. Securities traded in the over-the-counter market are valued at the
mean between the last bid and asked price in such market, except that securities
admitted to trading on the NASDAQ National Market System are valued at the last
sales price if it is determined that such price more accurately reflects the
value of such securities. (b) It is the policy of the Company to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income in taxable distributions.
Therefore no federal income tax provision is requried. (c) Security transacti-
ons are accounted for on the date that the securities are purchased or sold
(trade date). Dividend income and distributions to shareholders are recorded on
the ex-dividend date and interest is recorded on the accrual basis. (d) The
organization expenses of the Trust of the Company are amortized evenly over a
period of five years from its commencement of operations. (e) A portion of the
proceeds from sales and costs of repurhases of shares, equivalent to the amount
of distributable net investment income on the date of the transaction is
credited or charged to undistribute income. Undistributed net investment income
per share thus is unaffected by sales or repurchases of shares.
2. REPURCHASE AGREEMENTS
The Company may enter into repurchase agreements with certain banks and
broker/dealers whereby the Company, through its custodian, receives delivery of
the underlying securities, the amount of which at the time of purchase and each
subsequent business day is required to be maintained at such a level that the
market value, depending on the maturity of the repurchase agreement and the
underlying collateral, is equal to at least 100% of the resale price.
3. DISTRIBUTIONS
Dividends from net investment income are declared and paid quarterly. Taxable
net realzied gains from security transcractions, if any, will be distributed to
shareholders in December 1995.
4. AGREEMENTS
The Company has a mangement agreement with Lord, Abbett & co. for which it
provided the Company with investment management services and executive and other
personnel, paid the remuneration of officers, provided office space and paid for
ordinary and necessary office and clerical expenses relating to research,
statistical work and the supervison of the investment portfolios.
The management fee is based on average daily net assets for each month at the
annual rate of .75 of 1%.
Pursuant to Rule 12b-1, for Class C shares, the Company will pay (1) a service
fee and a distribution fee, at the time shares are sold, not to exceed .25% and
..75%, respectively, of the net asset value of such shares and (2) at each
quarter-end after the first anniversay of the sale of such shares, fees for
services and distribution at annual rates not to exceed .25% and .75%,
respectively, of the average annual net asset value of shares outstanding
(payments with respect to shares not outstanding during the full quarter to be
prorated).
For Class A shares the Company has a Rule 12b-1 Plan providing for (a) the
payment of a service fee at the annual rate of .25% of the average daily net
asset value of shares sold by dealers and (b) a one-time 1% distribution fee at
the time of sale on shares sold at net asset value of $1 million or more.
The fees will be paid to Lord Abbett Distributor LLC, which may retain from the
distribution fees, for payment of distribution expenses incurred directly by it,
an amount not to exceed .10% of the average annual net asset value of such
shares outstanding.
5
<PAGE>
PART C
Item 15. Indemnification
The Registrant is a Delaware Business Trust established under Chapter 38 of
Title 12 of the Delaware Code. The Registrant's Declaration and Agreement of
Trust at Section 4.3 relating to indemnification of trustees, officers and
employees states the following.
The Trust shall indemnify each of its Trustees, officers, employees and agents
(including any individual who serves at its request as director, officer,
partner, trustee or the like of another organization in which it has any
interest as a shareholder, creditor or otherwise) against all liabilities and
expenses, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and counsel fees reasonably
incurred by him or her in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any court or
administrative or legislative body in which he or she may be or may have been
involved as a party or otherwise or with which he or she may be or may have been
threatened, while acting as Trustee or as an officer, employee or agent of the
Trust or the Trustees, as the case may be, or thereafter, by reason of his or
her being or having been such a Trustee, officer, employee or agent, except with
------
respect to any matter as to which he or she shall have been adjudicated not to
have acted in good faith in the reasonable belief that his or her action was in
the best interests of the Trust or any Series thereof. Notwithstanding anything
herein to the contrary, if any matter which is the subject of indemnification
hereunder relates only to one Series (or to more than one but not all of the
Series of the Trust), then the indemnity shall be paid only out of the assets of
the affected Series. No individual shall be indemnified hereunder against any
liability to the Trust or any Series thereof or the Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office. In addition, no such
indemnity shall be provided with respect to any matter disposed of by settlement
or a compromise payment by such Trustee, officer, employee or agent, pursuant to
a consent decree or otherwise, either for said payment or for any other expenses
unless there has been a determination that such compromise is in the best
interests of the Trust or, if appropriate, of any affected Series thereof and
that such Person appears to have acted in good faith in the reasonable belief
that his or her action was in the best interests of the Trust or, if
appropriate, of any affected Series thereof, and did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office. All determinations that the
applicable standards of conduct have been met for indemnification hereunder
shall be made by (a) a majority vote of a quorum consisting of disinterested
Trustees who are not parties to the proceeding relating to indemnification, or
(b) if such quorum is not obtainable or, even if obtainable, if a majority vote
of such quorum so directs, by independent legal counsel in a written opinion, or
(c) a vote of Shareholders (excluding Shares owned of a record or beneficially
by such individual). In addition, unless a matter is disposed of with a court
determination (i) on the merits that such Trustee, officer, employee or agent
was not liable or (ii) that such Person was not guilty of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office, no indemnification shall be provided hereunder
unless there has been a determination by independent legal counsel in a written
opinion that such Person did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.
C-3
<PAGE>
The Trustees may make advance payments out of the assets of the Trust, or, if
appropriate, of the affected Series in connection with the expense of defending
any action with respect to which indemnification might be sought under this
Section 4.3. The indemnified Trustee, officer, employee or agent shall give a
written undertaking to reimburse the Trust or the Series in the event it
subsequently determined that he or she is not entitled to such indemnification
and (a) the indemnified Trustee, officer, employee or agent shall provide
security for his or her undertaking, (b) the Trust shall be insured against
losses arising by reason of lawful advances, or (c) a majority of a quorum of
disinterested Trustees or an independent legal counsel in a written opinion
shall determine, based on a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe that the indemnitee
ultimately will be found entitled to indemnification. The rights accruing to
any Trustee, officer, employee or agent under these provisions shall not exclude
any other right to which he or she may be lawfully entitled and shall inure to
the benefit of his or her heirs, executors, administrators or other legal
representatives.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expense incurred
or paid by a Trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 16. Exhibits
1. (a) Declaration and Agreement of Trust of the Registrant. (1)
(b) Form of Amendment designating Class A and Class C shares; filed
herewith.
2. By-Laws of the Registrant. (1)
3. Not Applicable.
4. Form of Agreement and Plan of Reorganization between Registrant and
Lord Abbett Fundamental Value Fund, Inc.; filed herewith as Exhibit A
contained in Part A of this Registration Statement.
5. Not Applicable.
6. (a) Investment Management Agreement between the Registrant and Lord,
Abbett & Co. dated May 19, 1993.(1)
C-4
<PAGE>
(b) Amendment to Investment Management Agreement.(2)
7. (a) Form of Rule 12b-1 Plan for Registrant Class C Shares; filed herewith.
(b) Distribution Agreement, dated May 19, 1993, between Registrant and
Lord, Abbett & Co.(1)
8. (a) Deferred Compensation Plan. (3)
(b) Retirement Plan. (3)
9. (a) Custody Agreement. (2)
(b) Form of Assignment and Assumption Agreement between Morgan Guaranty
Trust Company of New York and Bank of New York; filed herewith.
10. (a) See Item 7(a) above.
(b) Form of Rule 18f-3 Plan; filed herewith.
11. Form of opinion and Consent of Debevoise & Plimpton as to the legality
of securities being issued; filed herewith.
12. Form of opinion and Consent of Debevoise & Plimpton as to Tax Matters;
filed herewith.
13. Not Applicable.
14. (a) Consent of Deloitte & Touche LLP regarding financial statements of
Registrant, Lord Abbett U.S. Government Securities Fund, Inc. and Lord
Abbett Securities Trust; filed herewith.
(b) Ruling application submitted to the Internal Revenue Service, dated
October 19, 1995, supplemental application dated January 26, 1996 and
Ruling, dated February 5, 1996; filed herewith.
15. Not Applicable.
16. Not Applicable.
17. (a) Form of Proxy Card; filed herewith.
(b) Prospectus and Statement of Additional Information of the Registrant,
dated March ___, 1996. (4)
(c) Financial statements of the Acquiring Fund for the fiscal year ended
October 31, 1995 and report thereon of Deloitte & Touche LLP. (5)
(d) Prospectus and Statement of Additional Information of Lord Abbett
Fundamental Value Fund, Inc., dated November 1, 1995. (6)
(e) Financial statements of the Acquired Fund for the fiscal year ended
October 31, 1995, and the report thereon of Deloitte and Touche LLP.
(7)
(f) Notice to Brokers
(g) Letter to Shareholders re: Proxy
C-5
<PAGE>
(1) Incorporated herein by reference to Registrant's Registration Statement on
Form N-1A (File Nos. 33-58846 and 811-7538) filed on or about March 1,
1993.
(2) Incorporated herein by reference to Post-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A (File Nos. 33-58846 and
811-7538) filed on or about August 6, 1993.
(3) Incorporated herein by reference to Post-Effective Amendment No. 7 to
Registrant's Registration Statement on Form N-1A (File Nos. 33-58846 and
811-7538) filed on or about October 7, 1994.
(4) Incorporated herein by reference to Post-Effective Amendment No. 7 to
Registrant's Registration Statement on Form N-1A (File Nos. 33-58846 and
811-7538) filed on or about ________, 1996.
(5) 1995 Annual Report of the Registrant filed on or about January 10, 1996.
(6) Incorporated herein by reference to Post-Effective Amendment No. 10 to Lord
Abbett Fundamental Value Fund, Inc.'s Registration Statement on Form N-1A
(File Nos. 33-518 and 811-4648) filed on or about October 31, 1995.
(7) 1995 Annual Report of the Acquired Fund filed on or about September 11,
1995.
Item 17. Undertakings
(1) The undersigned registrant agrees that, prior to any public reoffering of
the securities registered through the use of a prospectus which is a part
of this registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act [17
CFR (S) 230.145c] the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by persons
who may be deemed underwriters, in addition to the information called for
by the other items of the applicable form.
(2) The undersigned registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act, each
post-effective amendment shall be deemed to be a new registration statement
for the securities offered therein, and the offering of the securities at
that time shall be deemed to be the initial bona fide offering of them.
C-6
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has
been signed on behalf of the Registrant in the City of New York and State of New
York on the 29th day of February 1996.
LORD ABBETT SECURITIES TRUST
By: /s/ Ronald P. Lynch
---------------------------------------
Ronald P. Lynch, Chairman of the Board
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities indicated and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- - ------------------------- ----------------------- ----
<S> <C> <C>
/s/Ronald P. Lynch Chairman of the Board 2/29/96
- - ------------------------- and Trustee -----------
Ronald P. Lynch
/s/ Robert S. Dow President and Trustee 2/29/96
- - ------------------------- -----------
Robert S. Dow
/s/ John J. Gargana, Jr. Vice President and 2/29/96
- - ------------------------- Chief Financial Officer -----------
John J. Gargana, Jr.
/s/ E. Thayer Bogelow Trustee 2/29/96
- - ------------------------- -----------
E. Thayer Bigelow
Trustee
- - ------------------------- -----------
Stewart S. Dixon
Trustee
- - ------------------------- -----------
John C. Jansing
C. Alan MacDonald Trustee 2/29/96
- - ------------------------- -----------
C. Alan MacDonald
Trustee
- - ------------------------- -----------
Hansel B. Millican, Jr.
/s/ Thomas J. Neff Trustee 2/29/96
- - ------------------------- -----------
Thomas J. Neff
</TABLE>
C-7
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as a part of this Registration Statement
pursuant to General Instruction G of Form N-14.
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- - --------- ---------------------------------------------------------------------- ------
<S> <C> <C>
(1)(b) Form of Amendment designating Class A and Class C shares thereof
(4) Form of Agreement and Plan of Reorganization between the Registrant
and Lord Abbett Fundamental Value Fund, Inc.
(7) Form of Rule 12b-1 Plan for Registrant Class C Shares.
(9)(b) Form of Assignment and Assumption Agreement between Morgan
Guaranty Trust Company of New York and Bank of New York
(10)(b) Rule 18f-3 Plan
(11) Form of opinion and Consent of Debevoise & Plimpton as to legality of
securities being issued
(12) Form of opinion and Consent of Debevoise & Plimpton as to Tax Matters
(14)(a) Consent of Deloitte & Touche LLP regarding financial statements
(b) Ruling application submitted to the Internal Revenue Service, dated
October 19, 1995, supplemental application dated January 26, 1996 and
Ruling, dated February 5, 1996.
(17)(a) Form of Proxy Card
(f) Notice to Brokers
(g) Letter to Shareholders re: Proxy
</TABLE>
C-8
Draft--February 20, 1996
LORD ABBETT SECURITIES TRUST
----------------------------
AMENDMENT TO
DECLARATION OF TRUST
--------------------
The undersigned, being at least a majority of the Trustees of Lord Abbett
Securities Trust, a Delaware business trust (the "Trust"), organized pursuant to
a Declaration of Trust dated February 26, 1993 (the "Declaration"), do hereby
establish, pursuant to Section 5.3 of the Declaration, a new class of shares for
the Series of the Trust previously designated the Lord Abbett Growth & Income
Trust, to be designated the Class A shares of such Series. The initial class of
shares of such Series shall be designated the Class C shares of such Series.
Any variations between such classes as to purchase price, determination of net
asset value, the price, terms and manner of redemption, special and relative
rights as to dividends and on liquidation, and conditions under which such
classes shall have separate voting rights, shall be as set forth in the
Declaration or as elsewhere determined by the Board of Trustees of the Trust.
This instrument shall constitute an amendment to the Declaration.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument this
day of , 1996.
- - ---- ----------
----------------------------
----------------------------
----------------------------
----------------------------
----------------------------
----------------------------
----------------------------
----------------------------
----------------------------
2
<PAGE>
State of New York )
) ss.
Count of New York )
On , 1996, there personally appeared before me the above-
--------------
named [insert names of Trustees executing amendment] who severally acknowledged
the foregoing instrument to be their free act and deed.
Before me
----------------------------
Notary Public
My commission expires
- - ----------------------------
3
Exhibit 7(a)
------------
Draft--February 25, 1996
Rule 12b-1 Distribution Plan and Agreement
Lord Abbett Securities Trust -- Growth & Income Series -- Class A Shares
------------------------------------------------------------------------
RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT dated as of July 12, 1996
by and between LORD ABBETT SECURITIES TRUST, a Delaware business trust (the
"Fund"), on behalf of the LORD ABBETT GROWTH & INCOME TRUST (the "Series"), and
LORD ABBETT DISTRIBUTOR LLC, a New York limited liability company (the
"Distributor").
WHEREAS, the Fund is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "Act"); and
the Distributor is the exclusive selling agent of the Fund's shares of
beneficial interest, including the Series' Class A shares (the "Shares")
pursuant to the Distribution Agreement between the Fund and the Distributor,
dated as of the date hereof (the "Distribution Agreement").
WHEREAS, the Fund desires to adopt a Distribution Plan and Agreement
(the "Plan") for the Series with the Distributor, as permitted by Rule 12b-1
under the Act, pursuant to which the Series may make certain payments to the
Distributor to be used by the Distributor or paid to institutions and persons
permitted by applicable law and/or rules to receive such payments ("Authorized
Institutions") in connection with sales of Shares and/or servicing of accounts
of shareholders holding Shares.
WHEREAS, the Fund's Board of Trustees has determined that there is a
reasonable likelihood that the Plan will benefit the Series and the holders of
the Shares.
NOW, THEREFORE, in consideration of the mutual covenants and of other
good and valuable consideration, receipt of which is hereby acknowledged, it is
agreed as follows.
1. The Fund hereby authorizes the Distributor to enter into
agreements with Authorized Institutions (the "Agreements") which may provide for
the payment to such Authorized Institutions of distribution and service fees
which the Distributor receives from the Series in order to provide additional
incentives to such Authorized Institutions (i) to sell Shares and (ii) to
- --
provide continuing information and investment
<PAGE>
services to their accounts holding Shares and otherwise to encourage their
accounts to remain invested in the Shares.
2. The Fund also hereby authorizes the Distributor to use payments
received hereunder from the Series in order to (a) finance any activity which is
-
primarily intended to result in the sale of Shares and (b) provide continuing
-
information and investment services to shareholder accounts not serviced by
Authorized Institutions receiving a service fee from the Distributor hereunder
and otherwise to encourage such accounts to remain invested in the Shares;
provided that (i) any payments referred to in the foregoing clause (a) shall not
- - -------- -
exceed the distribution fee permitted to be paid at the time under paragraph 3
of this Plan and shall be authorized by the Board of Trustees of the Fund by a
vote of the kind referred to in paragraph 10 of this Plan and (ii) any payments
--
referred to in clause (b) shall not exceed the service fee permitted to be paid
at the time under paragraph 3 of this Plan.
3. The Series is authorized to pay the Distributor hereunder for
remittance to Authorized Institutions and/or use by the Distributor pursuant to
this Plan (a) service fees and (b) distribution fees, each at an annual rate not
- -
to exceed .25 of 1% of the average annual net asset value of Shares outstanding.
The Board of Trustees of the Fund shall from time to time determine the amounts,
within the foregoing maximum amounts, that the Series may pay the Distributor
hereunder. Any such fees (which may be waived by the Authorized Institutions in
whole or in part) may be calculated and paid quarterly or more frequently if
approved by the Board of Trustees of the Fund. Such determinations and
approvals by the Board of Trustees shall be made and given by votes of the kind
referred to in paragraph 10 of this Plan. Payments by holders of Shares to the
Series of contingent deferred reimbursement charges relating to distribution
fees paid by the Series hereunder shall reduce the amount of distribution fees
for purposes of the annual 0.25% distribution fee limit. The Distributor will
monitor the payments hereunder and shall reduce such payments or take such other
steps as may be necessary to assure that (i) the payments pursuant to this Plan
-
shall be consistent with Article III, Section 26, subparagraphs (d)(2) and (5)
of the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. with respect to investment companies with asset-based sales charges and
service fees, as the same may be in effect from time to time and (ii) the Series
--
shall not pay with respect to any Authorized Institution service fees equal to
more than .25 of 1% of the average annual net asset value of Shares sold by (or
attributable to Shares or shares sold by) such Authorized Institution and held
in an account covered by an Agreement.
4. The net asset value of the Shares shall be determined as provided
in the Declaration of Trust of the Fund. If the Distributor waives all or a
portion of the fees which are to be paid by the Series hereunder, the
Distributor shall not be deemed to have waived its rights under this Agreement
to have the Series pay such fees in the future.
2
<PAGE>
5. The Secretary of the Fund, or in his absence the Chief Financial
Officer, is hereby authorized to direct the disposition of monies paid or
payable by the Series hereunder and shall provide to the Fund's Board of
Trustees, and the Trustees shall review at least quarterly, a written report of
the amounts so expended pursuant to this Plan and the purposes for which such
expenditures were made.
6. Neither this Plan nor any other transaction between the parties
hereto pursuant to this Plan shall be invalidated or in any way affected by the
fact that any or all of the trustees, officers, shareholders, or other
representatives of the Fund are or may be "interested persons" of the
Distributor, or any successor or assignee thereof, or that any or all of the
directors, officers, partners, or other representatives of the Distributor are
or may be "interested persons" of the Fund, except as may otherwise be provided
in the Act.
7. The Distributor shall give the Fund the benefit of the
Distributor's best judgment and good faith efforts in rendering services under
this Plan. Other than to abide by the provisions hereof and render the services
called for hereunder in good faith, the Distributor assumes no responsibility
under this Plan and, having so acted, the Distributor shall not be held liable
or held accountable for any mistake of law or fact, or for any loss or damage
arising or resulting therefrom suffered by the Fund, the Series or any of the
shareholders, creditors, trustees, or officers of the Fund; provided however,
that nothing herein shall be deemed to protect the Distributor against any
liability to the Fund or the Series' shareholders by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties
hereunder, or by reason of the reckless disregard of its obligations and duties
hereunder.
8. This Plan shall become effective upon the date hereof, and shall
continue in effect for a period of more than one year from that date only so
long as such continuance is specifically approved at least annually by a vote of
the Board of Trustees of the Fund, including the vote of a majority of the
trustees who are not "interested persons" of the Fund and who have no direct or
indirect financial interest in the operation of this Plan or in any agreement
related to this Plan, cast in person at a meeting called for the purpose of
voting on such renewal.
9. This Plan may not be amended to increase materially the amount to
be spent by the Series hereunder above the maximum amounts referred to in
paragraph 3 of this Plan without a shareholder vote in compliance with Rule 12b-
1 and Rule 18f-3 under the Act as in effect at such time, and each material
amendment must be approved by a vote of the Board of Trustees of the Fund,
including the vote of a majority of the trustees who are not "interested
persons" of the Fund and who have no direct or indirect financial interest in
the operation of this Plan or in any agreement related to this Plan, cast in
person at a meeting called for the purpose of voting on such amendment.
Amendments to this Plan which do not increase materially the amount to be spent
by the Series hereunder above the maximum
3
<PAGE>
amounts referred to in paragraph 3 of this Plan may be made pursuant to
paragraph 10 of this Plan.
10. Amendments to this Plan other than material amendments of the
kind referred to in the forgoing paragraph 9 may be adopted by a vote of the
Board of Trustees of the Fund, including the vote of a majority of the trustees
who are not "interested persons" of the Fund and who have no direct or indirect
financial interest in the operation of this Plan or in any agreement related to
this Plan. The Board of Trustees of the Fund may, by such a vote, interpret
this Plan and make all determinations necessary or advisable for its
administration.
11. This Plan may be terminated at any time without the payment of
any penalty (a) by the vote of a majority of the trustees of the Fund who are
-
not "interested persons" of the Fund and have no direct or indirect financial
interest in the operation of this Plan or in any agreement related to the Plan,
or (b) by a shareholder vote in compliance with Rule 12b-1 and Rule 18f-3 under
-
the Act as in effect at such time. This Plan shall automatically terminate in
the event of its assignment.
12. So long as this Plan shall remain in effect, the selection and
nomination of those trustees of the Fund who are not "interested persons" of the
Fund are committed to the discretion of such disinterested trustees. The terms
"interested persons," "assignment" and "vote of a majority of the outstanding
voting securities" shall have the same meanings as those terms are defined in
the Act.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and on its behalf by its duly authorized representative
as of the date first above written.
LORD ABBETT SECURITIES TRUST
By:_____________________________
President
ATTEST:
_____________________
Assistant Secretary
LORD ABBETT DISTRIBUTOR LLC
By:__________________________
4
Exhibit 9(a)
------------
MORGAN GUARANTY
Letterhead
February 9, 1996
Lord Abbett Securities Trust
767 Fifth Avenue
New York, N.Y. 10153
Attention: Mr. Kenneth B. Cutler
Vice President
Dear Sirs:
Pursuant to Section 15 of the Global Custody Agreement, dated October 20,
1993, between Lord Abbett Securities Trust (hereinafter called the
"Corporation") and Morgan GuarantyTrust Company of New York (hereinafter called
"Morgan"), Morgan hereby assigns to The Bank of New York (hereinafter called
"successor custodian"), as of January 1, 1996, all its rights and obligations
under such Agreement, and successor custodian hereby agrees with you to be bound
by such Agreement in accordance with its terms.
Sincerely,
____________________ Consented to:
Vice President LORD ABBETT SECURITIES TRUST
Mutual Funds Division
Agreed and Confirmed By:___________________________
THE BANK OF NEW YORK Vice President
By:________________________
Vice President
Exhibit 10(b)
-------------
Draft--February 27, 1996
Plans Pursuant to Rule 18f-3(d) under the
Investment Company Act of 1940
Rule 18f-3 (the "Rule") under the Investment Company Act of 1940, as
amended (the "1940 Act"), requires that the Board of Directors or Trustees of an
investment company desiring to offer multiple classes pursuant to the Rule adopt
a plan setting forth the separate arrangement and expense allocation of each
class, and any related conversion features or exchange privileges. This
document constitutes such a plan (individually, a "Plan" and collectively, the
"Plans") of each of the investment companies, or series thereof, listed on
Schedule A attached hereto (each, a "Fund"). The Plan of any Fund is subject to
amendment by action of the Board of Directors or Trustees (the "Board") of such
Fund and without the approval of shareholders of any class, to the extent
permitted by law and by the governing documents of such Fund.
The Board, including a majority of the non-interested Board members, has
determined that the following separate arrangement and expense allocation, and
the related exchange privileges, of each class of each Fund are in the best
interest of each class of each Fund individually and each Fund as a whole:
1
<PAGE>
1. Class Designation. Fund shares shall initially be divided into Class A
-----------------
shares and Class C shares.
2. Sales Charges and Distribution and Service Fees.
-----------------------------------------------
(a) Initial Sales Charge. Class A shares will be traditional front-end
--------------------
sales charge shares, offered at their net asset value ("NAV") plus a sales
charge in the case of each Fund as described in such Fund's Prospectus as from
time to time in effect.
Class C shares will be offered at their NAV with out an initial sales
charge.
(b) Service and Distribution Fees. In respect of the Class A shares and
-----------------------------
Class C shares, each Fund will pay service and distribution fees under plans
adopted for such classes pursuant to Rule 12b-1 under the 1940 Act (each a "12b-
1 Plan").
Pursuant to a 12b-1 Plan with respect to the Class A shares, if effective,
each Fund will pay (i) at the time such shares are sold, a one-time distribution
-
fee of up to 1% of the NAV of the shares sold in the amount of $1 million or
more, including sales qualifying at such level under the rights of accumulation
and statement of intention privileges, or to retirement plans with 100 or more
eligible employees, as described in the Fund's Prospectus as from time to time
in effect, (ii) a continuing distribution fee
--
2
<PAGE>
at an annual rate of 0.10% of the average daily NAV of the Class A share
accounts of dealers who meet certain sales and redemption criteria, and (iii) a
---
continuing service fee at an annual rate not to exceed 0.25% of the average
daily NAV of the Class A shares. The Board will have the authority to increase
the distribution fees payable under such 12b-1 Plan by a vote of the Board,
including a majority of the independent directors thereof, up to an annual rate
of 0.50% of the average daily NAV of the Class A shares. The effective dates of
various of the 12b-1 Plans for the Class A shares are based on achievement by
the Funds of specified total NAV's for the Class A shares of each Fund.
Pursuant to a 12b-1 Plan with respect to the Class C shares, each Fund will
pay a one-time service and distribution fee at the time such shares are sold of
up to 1% of their NAV and a continuing annual fee, commencing 12 months after
the first anniversary of such sale, of up to 1% of the average annual NAV of
such shares then outstanding (each fee comprised of .25% in service fees and
..75% in distribution fees).
(c) Contingent Deferred Reimbursement Charges ("CDRC"). Subject to some
--------------------------------------------------
exceptions, Class A shares subject to the one-time sales distribution fee of up
to 1% under the Rule 12b-1 Plan for the Class A shares will be subject to a CDRC
equal to 1% of the lower of the cost or then NAV of such shares if the shares
are redeemed for cash
3
<PAGE>
on or before the end of the twenty-fourth month after the month in which the
shares were purchased.
Class C shares will be subject to a CDRC equal to 1% of the lower of the
cost or then NAV of the shares if the shares are redeemed for cash before the
first anniversary of their purchase.
3. Liability and Expense Allocation. The following expenses and
--------------------------------
liabilities therefor shall be allocated, to the extent such expenses can
reasonably be identified as relating to a particular class, on a class-specific
basis: (a) fees under a 12b-1 Plan applicable to a specific class (net of any
CDRC paid with respect to shares of such class and retained by the Fund) and any
other costs relating to implementing or amending such Plan, including obtaining
shareholder approval of such Plan or any amendment thereto; (b) transfer and
shareholder servicing agent fees and shareholder servicing costs identifiable as
being attributable to the particular provisions of a specific class; (c)
stationery, printing, postage and delivery expenses related to preparing and
distributing materials such as shareholder reports, prospectuses and proxy
statements to current shareholders of a specific class; (d) Blue Sky
registration fees incurred by a specific class; (e) Securities and Exchange
Commission registration fees incurred by a specific class; (f) Board fees or
expenses identifiable as
4
<PAGE>
being attributable to a specific class; (g) auditor's fees and expense relating
solely to a specific class; (h) litigation expenses and legal fees and expense
relating solely to a specific class; (i) expenses incurred in connection with
shareholders meetings as a result of issues relating solely to a specific class
and (j) other expenses relating solely to a specific class. All such
liabilities and expenses incurred by a class of shares will be charged directly
to the net assets of the particular class and thus will be borne on a pro rata
basis by the outstanding shares of such class.
4. Dividends. Dividends paid by a Fund as to each class of its shares, to
---------
the extent any dividends are paid, will be calculated in the same manner, will
be paid at the same time, and will be in the same amount, except that any
liabilities and expenses allocated to a class as provided above will be borne
exclusively by that class.
5. Net Asset Values. The NAV of each share of a class of a Fund shall be
----------------
determined in accordance with the Articles of Incorporation or Declaration of
Trust of such Fund with appropriate adjustments to reflect the differing
allocations of liabilities and expenses of such Fund between its classes as
provided above. [Attached hereto as Exhibit
5
<PAGE>
A is a sample calculation of the NAV's of a Class A share and a Class C share.]
6. Conversion Features. Subject to amendment by the Board, no class of
-------------------
shares shall be subject to any automatic conversion feature at this time.
7. Exchange Privileges. Except as set forth in the Fund's prospectus,
-------------------
shares of any class of a Fund may be exchanged, at the holder's option, for
shares of the same class of another Fund, or other Lord Abbett-sponsored fund or
series thereof, without the imposition of any sales charge, fee or other charge.
Each Plan is qualified by and subject to the terms of the then current
prospectus for the applicable Fund; provided, however, that none of the terms
set forth in any such prospectus shall be inconsistent with the terms contained
herein. The prospectus for each Fund contains additional information about
that Fund's classes and its multiple-class structure.
Each Plan is being adopted for a Fund with the approval of, and all
material amendments thereto must be approved by, a majority of the Board of such
Fund, including a majority of the Board who are not interested persons of the
Fund.
6
<PAGE>
Schedule A
----------
The Lord Abbett - Sponsored Funds
Establishing Multi-Class Structures
-----------------------------------
Lord Abbett Affiliated Fund, Inc.
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Global Fund, Inc.
Equity Series
Income Series
Lord Abbett Investment Trust
Lord Abbett Balanced Series
Lord Abbett Limited Duration U.S. Government Securities Series
Lord Abbett U.S. Government Securities Series
Lord Abbett Securities Trust
Lord Abbett Growth & Income Trust
Lord Abbett Tax-Free Income Fund, Inc.
California Series
National Series
New York Series
Lord Abbett Tax-Free Income Trust
Florida Series
Lord Abbett U.S. Government Securities Money Market Fund, Inc.
7
Exhibit 11
----------
Draft_February 27, 1996
[Debevoise & Plimpton Letterhead]
Lord Abbett Securities Trust
The General Motors Building
767 Fifth Avenue
New York, New York 10153
Lord Abbett Securities Trust
Registration Statement on Form N-14
-------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Lord Abbett Securities Trust (the
"Registrant"), a Delaware business trust, in connection with the preparation
and filing with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, of a Registration Statement on Form N-14 (File No. 811-
7538) (the "Registration Statement"), relating to the issuance of shares of
beneficial interest of the Lord Abbett Growth & Income Trust (the "Acquiring
Fund"), a series of the Registrant.
Such shares have been established and designated as the Class A shares (the
"Class A shares"). The Class A shares are to be issued to Lord Abbett
Fundamental Value Fund, Inc., a Maryland corporation (the "Acquired Fund"),
pursuant to an Agreement and Plan of Reorganization (the
<PAGE>
Lord Abbett Securities Trust
Page 2
"Acquired Fund Plan") between the Registrant, on behalf of the Acquiring Fund,
and the Acquired Fund substantially in the form of Exhibit A included in Part A
of the Registration Statement. Such issuance of the Class A shares is to be
made in connection with the acquisition by the Acquiring Fund of the assets of,
and the assumption by the Acquiring Fund of the liabilities of, the Acquired
Fund.
In so acting, we have examined and relied upon the originals, or copies
certified or otherwise identified to our satisfaction, of such documents,
records, certificates and other instruments and have made such other investiga-
tions as in our judgment are necessary or appropriate to enable us to render
the opinion expressed below. We have not, however, undertaken any independent
investigation of any factual matter set forth in any of the foregoing.
Based on the foregoing, we are of the following opinion:
Assuming that the Acquired Fund and the Acquiring Fund duly execute and
deliver the Acquired Fund Plan, that the Acquired Fund Plan and the
reorganization provided for thereby are duly approved by the shareholders
of the Acquired Fund and that the transactions contemplated by the
Acquired Fund Plan are duly consummated, the Class A shares issued
pursuant to the Acquired Fund Plan will be legally issued, fully paid and
non-assessable.
This opinion is limited solely to the federal law of the United States and
the Delaware Business Trust Act as in effect on the date hereof and the relevant
facts that exist as of the date hereof. Without limiting the generality of the
foregoing, we express no opinion concerning other laws of the State of Delaware,
including the securities laws of such state, or the laws of any other
jurisdiction other than the United States. No assurance can be given that the
law or facts will not change, and we have not undertaken to advise you or any
other person with respect to any event subsequent to the date hereof.
We are delivering this opinion to you and, without our prior written
consent, no other persons are entitled to rely on this opinion. We consent to
the filing of this opinion as an Exhibit to the Registration Statement. In
giving such consent, we do not thereby concede that we are within the category
of persons whose consent is required
<PAGE>
Lord Abbett Securities Trust
Page 2
under Section 7 of the Securities Act of 1933 or the Rules and Regulations of
the Securities and Exchange Commission thereunder.
Very truly yours,
Exhibit 12
----------
[Debevoise & Plimpton Letterhead]
[Dated as of the Closing Date]
Lord Abbett Securities Trust
The General Motors Building
767 Fifth Avenue
New York, New York 10153
Lord Abbett Fundamental Value
Fund, Inc.
The General Motors Building
767 Fifth Avenue
New York, New York 10153
Agreement and Plan of Reorganization
dated as of _______ __, 1996
by and between
Lord Abbett Securities Trust,
on behalf of its series,
Lord Abbett Growth and Income Trust,
and Lord Abbett Fundamental Value Fund, Inc.
--------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Lord Abbett Securities Trust, a Delaware
business trust ("Securities Trust"),
acting on behalf of its series, Lord Abbett Growth and Income Trust ("Acquiring
Fund"), and Lord Abbett Fundamental Value Fund Inc., a Maryland corporation
("Acquired Fund") in
<PAGE>
Lord Abbett Securities Trust
Lord Abbett Fundamental
Value Fund, Inc.
2 [Date of the Closing]
connection with the proposed acquisition (the "Reorganization") of all of the
assets of Acquired Fund by Acquiring Fund pursuant to the Agreement and Plan of
Reorganization dated as of _______ __, 1996, by and between Securities Trust, on
behalf of Acquiring Fund, and Acquired Fund (the "Reorganization Agreement").
In so acting, we have participated in the preparation of the Reorganization
Agreement and the preparation and filing by Acquiring Fund with the Securities
and Exchange Commission on ________ __, 1996 of a Registration Statement on Form
N-14, containing a Proxy Statement and Prospectus relating to the proposed
Reorganization and to the shares of common stock of Acquiring Fund to be issued
to Acquired Fund shareholders in the Reorganization pursuant to the
Reorganization Agreement.
As required by Section 8.5 of the Reorganization Agreement, you have
requested that we render the opinion set forth below. In rendering such
opinion, we have examined and relied upon the accuracy as of the date hereof of
the representations and warranties as to factual matters set forth in the
documents referred to above and the Letters of Representation, dated as of the
date hereof, that you have provided to us, copies of which are attached hereto.
We have also examined the originals, or copies certified or otherwise identified
to our satisfaction, of such records, documents, certificates or other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinions set forth below. We have not, however, undertaken any
independent investigation of any factual matter set forth in any of the
foregoing.
Subject to the foregoing and to the qualifications and limitations set
forth herein, and assuming that the Reorganization is consummated in accordance
with the Reorganization Agreement and as described in the Registration
Statement, we are of the opinion that for United States federal income tax
purposes:
1. The acquisition by Acquiring Fund of all of the assets of Acquired
Fund solely in exchange for the issuance of Acquiring Fund shares to
<PAGE>
Lord Abbett Securities Trust
Lord Abbett Fundamental
Value Fund, Inc.
3 [Date of the Closing]
Acquired Fund and the assumption of all of the Acquired Fund liabilities by
Acquiring Fund, followed by the distribution by Acquired Fund, in complete
liquidation, of the Acquiring Fund shares to Acquired Fund shareholders in
exchange for their Acquired Fund shares, will be treated as a
"reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
2. Acquiring Fund and Acquired Fund will each be "a party to the
reorganization" within the meaning of Section 368(b) of the Code.
3. No gain or loss will be recognized by Acquired Fund upon the
transfer of Acquired Fund's assets to Acquiring Fund in exchange for
Acquiring Fund shares and the assumption by Acquiring Fund of the
liabilities of Acquired Fund or upon the distribution of Acquiring Fund
shares to Acquired Fund's shareholders.
4. No gain or loss will be recognized by Acquiring Fund upon the
receipt of the assets of Acquired Fund in exchange for Acquiring Fund
shares and the assumption by Acquiring Fund of the liabilities of Acquired
Fund.
5. No gain or loss will be recognized by shareholders of Acquired Fund
upon the exchange of their Acquired Fund shares for Acquiring Fund shares.
6. The aggregate tax basis of the Acquiring Fund shares received by
any Acquired Fund shareholder pursuant to the Reorganization will be the
same as the aggregate tax basis of the Acquired Fund shares held by such
shareholder immediately prior to the Reorganization, and the holding period
for the Acquiring Fund shares to be received by any Acquired Fund
shareholder will include the period during which the Acquired Fund shares
exchanged therefor were held by such shareholder (provided that the
Acquired Fund shares are held as capital assets on the date of the
Reorganization).
<PAGE>
Lord Abbett Securities Trust
Lord Abbett Fundamental
Value Fund, Inc.
4 [Date of the Closing]
7. The tax basis of Acquired Fund's assets acquired by Acquiring Fund
will be the same as the tax basis of such assets to Acquired Fund immediately
prior to the Reorganization, and the holding period of the assets of Acquired
Fund in the hands of Acquiring Fund will include the period during which
those assets were held by Acquired Fund.
This opinion is limited solely to the federal law of the United States
as in effect on the date hereof and the relevant facts that exist as of the date
hereof. No assurance can be given that the law or facts will not change, and we
have not undertaken to advise you or any other person with respect to any event
subsequent to the date hereof.
We are delivering this opinion to you and, without our prior written
consent, no other persons are entitled to rely on this opinion.
Very truly yours,
<PAGE>
[Debevoise & Plimpton Letterhead]
March 1, 1996
Lord Abbett Securities Trust
The General Motors Building
767 Fifth Avenue
New York, New York 10153
Lord Abbett Fundamental Value Fund, Inc.
The General Motors Building
767 Fifth Avenue
New York, New York 10153
Ladies and Gentlemen:
We hereby consent to the filing of the draft opinion attached hereto as an
exhibit to the Registration Statement on Form N-14, to be filed by Lord Abbett
Securities Trust, a Delaware business trust ("Securities Trust"), with the
Securities and Exchange Commission, containing a Proxy Statement and Prospectus
relating to (i) the proposed acquisition (the "Reorganization") of all of the
-
assets of Lord Abbett Fundamental Value Fund, Inc. ("Acquired Fund"), a Maryland
corporation, by Lord Abbett Growth and Income Trust ("Acquiring Fund"), a series
of Securities Trust, pursuant to an Agreement and Plan of Reorganization to be
entered into by and between Securities Trust, on behalf of Acquiring Fund, and
Acquired Fund and (ii) the shares of common stock of Acquiring Fund to be issued
--
to Acquired Fund shareholders in the Reorganization. We also hereby consent to
the use of our name under the caption "Information About the Reorganization --
Federal Income Tax Consequences" in the Registration Statement. In giving such
consent, we do not thereby concede that we are within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933 or the
Rules and Regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/S/ DEBEVOISE & PLIMPTON
Exhibit 14(a)
-------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Registration Statement on Form N-14 of Lord Abbett
Securities Trust of our reports on the financial statements of the Lord Abbett
Securities Trust - Growth & Income Trust dated December 8, 1995 and Lord Abbett
Fundamental Value, Inc. dated August 3, 1995, which are contained in the
respective 1995 Annual Reports and are incorporated by reference in such
Registration Statement. We also consent to the references to us under the
headings "Financial Highlights" in the Prospectus and to the references to us
under the headings of "Investment Advisory and Other Services" and "Financial
Statements" in the Statement of Additional Information of Lord Abbett Securities
Trust - Growth & Income Trust dated December 27, 1994 and Lord Abbett
Fundamental Value Fund, Inc. dated November 1, 1995, which are incorporated by
reference in such Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
February 29, 1996
Exhibit 14(b)
-------------
January 26, 1996
BY HAND DELIVERY
- - ----------------
Internal Revenue Service
Associate Chief Counsel (Domestic)
1111 Constitution Avenue, N.W.
Washington, D.C. 20224
Attention: CC:DOM:FIP2
- - --------- Susan Baker
Room 4316
Re: TR-31-2400-95
Request for Rulings Under
Sections 562 and 852(b)(2)(D)
-----------------------------
Dear Associate Chief Counsel (Domestic):
By letter dated October 19, 1995 (the "Original Request"), the Lord Abbett
funds listed on Schedule A thereto requested that the Internal Revenue Service
issue rulings (1) that the dividends paid on each class of shares issued by them
-
will be eligible for the dividends-paid deduction under sections 561 and
852(b)(2)(D) of the Internal Revenue Code and (2) that the creation of multiple
-
classes of shares will not affect the classification of any such fund as a
regulated investment company under section 851(a) and (h) of the Code.
<PAGE>
Internal Revenue Service 2 January 26, 1996
We now wish to request that you issue similar rulings with respect to two
additional funds, Growth and Income Trust of Lord Abbett Securities Trust and
the Small-Cap Series of Lord Abbett Research Fund, Inc. All defined terms in
this request have the meanings set forth in the Original Request.
Growth and Income Trust
-----------------------
Growth and Income Trust (TIN 13-3731505) is a series of Lord Abbett
Securities Trust ("Securities Trust"), an open-end management investment company
organized as a Delaware business trust on February 26, 1993. Securities Trust
is registered as an open-end management investment company under the 1940 Act.
A copy of Securities Trust's most recent Post-Effective Amendment to its
Registration Statement on Form N-1A, dated June 15, 1995, is attached as Exhibit
N.
Growth and Income Trust is diversified and has met and intends to continue
to meet the diversification rules under Subchapter M of the Internal Revenue
Code. Its taxable year ends on October 31. The investment objective of Growth
and Income Trust is long-term growth of capital and income without excessive
fluctuations in market value. It normally invests in common stocks of large,
seasoned companies in sound financial condition which are expected to show
above-average price appreciation.
Growth and Income Trust currently has outstanding only a single class of
shares. All shares have equal voting rights and equal rights with respect to
dividends, assets, and liquidation. They are fully paid and non-assessable when
issued and have no preemptive or conversion rights. There are no restrictions
on transfer.
Growth and Income Trust has adopted a Rule 12b-1 Plan. Under the 12b-1
Plan, Growth and Income Trust pays Lord Abbett (1) a service fee and a
-
distribution fee, at the time shares are sold, not to exceed .25% and .75%,
respectively, of the net asset value of such shares and (2) at each quarter-end
-
after the first anniversary of the sale of shares, fees for services and
distribution at annual rates not to exceed .25% and .75%, respectively, of the
average annual net asset value of such shares outstanding (payments with respect
to shares
<PAGE>
Internal Revenue Service 3 January 26, 1996
not outstanding during the full quarter are prorated). Sales in clause (1)
exclude shares issued for reinvested dividends and distributions and shares
outstanding in clause (2) include shares issued for reinvested dividends and
distributions after the first anniversary of their issuance. Lord Abbett may
retain from the quarterly distribution fee, for the payment of distribution
expenses incurred directly by it, an amount not to exceed .10% of the average
annual net asset value of such shares outstanding. No dealer shall receive for
service more than .25% of the average annual net asset value of shares sold by
the dealer. Lord Abbett is required to pay the sales distribution fee to
dealers as compensation for selling Growth and Income Trust's shares.
If shares of Growth and Income Trust are redeemed for cash before the first
anniversary of their purchase, the redeeming shareholder will be required to pay
a contingent deferred reimbursement charge of 1% of the lower of cost or the
then net asset value of the shares redeemed. If the shares are exchanged into
another series of Securities Trust or Lord Abbett U.S. Government Securities
Money Market Fund ("GSMMF") and subsequently redeemed before the first
anniversary of their original purchase, the charge will be collected by the
other series or GSMMF for Growth and Income Trust.
The Small-Cap Series
--------------------
The Small-Cap Series (TIN 13-3862601) is a newly-organized series of
Research Fund, which is described at page 9 of the Original Request. It plans
to begin offering its shares on or after February 20, 1996. The Small-Cap
Series intends to qualify as a regulated investment company under Subchapter M
of the Internal Revenue Code. The Small Cap Series' taxable year ends on
November 30. The investment objective of the Small-Cap Series is to seek long-
term capital appreciation through investments primarily in equity securities
which are believed to be undervalued in the marketplace. A copy of Research
Fund's most recent amendment to its Form N-1A describing the Small-Cap Series,
which was filed with the Securities and Exchange Commission on December 7, 1995,
is attached as Exhibit O.
The Small-Cap Series currently has outstanding only a single class of
shares, $.001 par value. All shares have
<PAGE>
Internal Revenue Service 4 January 26, 1996
equal voting rights and equal rights with respect to dividends, assets, and
liquidation. They are fully paid and nonassessable when issued and have no
preemptive or conversion rights. There are no restrictions on transfer.
As stated in the Original Request, Research Fund has not adopted a Rule
12b-1 Plan.
The Statement of Facts, Rulings Requested, Discussion and Procedural
Statements with respect to Growth and Income Trust and the Small-Cap Series are
otherwise as set forth in the Original Request, except that "Revenue Procedure
96-1" is substituted for "Revenue Procedure 95-1" and the check for the user fee
specified in section 14.02 and Appendix A of Revenue Procedure 96-1 is endorsed
in the amount of $300.
Respectfully submitted,
Seth L. Rosen
<PAGE>
October 19, 1995
BY HAND DELIVERY
- - ----------------
Internal Revenue Service
Associate Chief Counsel (Domestic)
1111 Constitution Avenue, N.W.
Washington, D.C. 20224
Attention: CC:DOM:FI&P
- - ---------
Request for Rulings Under
Sections 562 and 852(b)(2)(D)
-----------------------------
The Lord Abbett funds listed on Schedule A (collectively, the "Lord Abbett
Funds" or the "Funds") hereby request that the Internal Revenue Service (the
"Service") issue rulings (1) that the dividends paid on each class of shares
-
issued by them will be eligible for the dividends-paid deduction under sections
561 and 852(b)(2)(D) of the Internal Revenue Code (the "Code") and (2) that the
-
creation of multiple classes of shares will not affect the classification of any
Fund as a regulated investment company under section 851(a) and (h) of the Code.
<PAGE>
Internal Revenue Service 2 October 19, 1995
STATEMENT OF FACTS
------------------
The Funds
- - ---------
The principal office of each of the Lord Abbett Funds is located at
The General Motors Building, 767 Fifth Avenue, New York, New York 10153-0203
(telephone number (212) 848-1800). Each of the Lord Abbett Funds files its tax
returns with the Internal Revenue Service Center in Holtsville, New York and is
subject to the audit jurisdiction of the District Director, Manhattan District,
New York, New York.
The Investment Manager for each of the Lord Abbett Funds is Lord,
Abbett & Co. ("Lord Abbett"), a partnership organized under the laws of New
York, located at The General Motors Building, 767 Fifth Avenue, New York, New
York 10153-0203 (Taxpayer ID No. 13-5620131). Pursuant to a Distribution
Agreement for each Fund, Lord Abbett also acts as the distributor of the shares
for each of the Funds (other than Lord Abbett Research Fund Inc.).
Affiliated Fund, Inc. (TIN 13-6020600) ("Affiliated Fund") is a
diversified, open-end management investment company re-organized in 1934 and
incorporated under the laws of Maryland on November 26, 1975. The fund is
registered as a diversified, open-end management investment company under the
Investment Company Act of 1940, 15 U.S.C. (S) 80a-1 et seq. (the "1940 Act"). A
copy of Affiliated Fund's most recent Post-Effective Amendment to its
Registration Statement on Form N-1A, dated March 1, 1995 containing the fund's
Prospectus and Statement of Additional Information, is attached as Exhibit A.
Affiliated Fund currently has a single class of shares, $1.25 par
value, with equal rights as to voting, dividends, assets and liquidation. There
are no conversion or preemptive rights, and no restrictions on transfer.
Affiliated Fund qualifies as a regulated investment company under Subchapter M
of the Internal Revenue Code. Its taxable year ends on October 31. The
investment objective of Affiliated Fund is long-term growth of capital and
income without excessive fluctuations in market value.
<PAGE>
Internal Revenue Service 3 October 19, 1995
Affiliated Fund has adopted a distribution plan pursuant to Rule 12b-
1, 17 C.F.R. 270.12b-1, promulgated pursuant to Section 12(b) of the 1940 Act (a
"12b-1 Plan"). Under its 12b-1 Plan, Affiliated Fund pays Lord Abbett (1) an
-
annual service fee (payable quarterly) of .15% of the average daily net asset
value of Affiliated Fund's shares sold by dealers prior to June 1, 1990 and .25%
of the average daily net asset value of shares sold by dealers on or after that
date and (2) a one-time 1% sales distribution fee, at the time of sale, on all
-
sales of over $1 million by dealers, including sales qualifying at such level
under the rights of accumulation and statement of intention privileges./1/
Lord Abbett is required to pay the sales distribution fee to dealers as
compensation for selling Affiliated Fund's shares.
Lord Abbett Bond-Debenture Fund, Inc. (TIN 13-2669319) ("Bond Fund")
is a diversified, open-end management investment company incorporated under the
laws of Maryland on January 23, 1976. Bond Fund is registered as a diversified,
open-end management investment company under the 1940 Act. A copy of the fund's
most recent Post
- - ---------------------
/1/. For each of the Funds, each holder of Fund shares on which the 1% sales
distribution fee has been paid is required to pay to the Fund a contingent
deferred reimbursement charge of 1% of the original cost or the then net asset
value, whichever is less, of all shares so purchased which are redeemed out of
the Lord Abbett Funds on or before the end of the twenty-fourth month after the
month in which the purchase occurred (subject to certain exceptions, including
certain redemptions by tax-qualified plans under Section 401 of the Internal
Revenue Code). If the shares have been exchanged into another Lord Abbett Fund
and are thereafter redeemed out of the Lord Abbett family on or before the end
of such twenty-fourth month, the charge will be collected for the initial Fund
by the other Fund. Each Fund also collects such a charge for other Lord Abbett
Funds in similar situations. Shares of a Fund or series on which the 1% sales
distribution fee has been paid may not be exchanged into a Fund or series with a
Rule 12b-1 Plan for which the payment provisions have not been in effect for at
least one year.
<PAGE>
Internal Revenue Service 4 October 19, 1995
Effective Amendment to its Registration Statement on Form N-1A, dated May 1,
1995, is attached as Exhibit B.
Bond Fund currently has outstanding a single class of shares, $1.00
par value, with equal rights as to voting, dividends, assets and liquidation.
The shares are fully paid and nonassessable when issued and have no preemptive
or conversion rights. There are no restrictions on transfer. Bond Fund
qualifies as a regulated investment company under Subchapter M of the Internal
Revenue Code. Its taxable year ends on December 31. The investment objective
of Bond Fund is high current income and the opportunity for capital appreciation
to produce a high total return through a professionally-managed portfolio
consisting primarily of convertible and discount debt securities, many of which
are lower-rated.
Bond Fund has adopted a Rule 12b-1 Plan. Under its Rule 12b-1 Plan,
Bond Fund pays Lord Abbett (1) an annual service fee (payable quarterly) of .25%
-
of the average daily net asset value of Bond Fund's shares sold by dealers on or
after June 1, 1990 and .15% of the average daily net asset value of shares sold
by dealers prior to that date and (2) a one-time 1% sales distribution fee, at
-
the time of sale, on all sales over $1 million by dealers, including sales
qualifying at such level under the rights of accumulation and statement of
intention privileges. Lord Abbett is required to pay the sales distribution fee
to dealers as compensation for selling Bond Fund shares.
Lord Abbett California Tax-Free Income Fund, Inc. (TIN 13-3271131)
("California Fund") is a diversified, open-end management investment company
incorporated under the laws of Maryland on May 21, 1985. California Fund is
registered as a diversified, open-end management investment company under the
1940 Act. A copy of the fund's most recent Post-Effective Amendment to its
Registration Statement on Form N-1A, dated January 1, 1995, is attached as
Exhibit C.
California Fund has a single class of shares, $.001 par value, with
equal rights as to voting, dividends, assets and liquidation. They are fully
paid and nonassessable when paid for and issued and have no preemptive or
conversion rights. There are no restrictions
<PAGE>
Internal Revenue Service 5 October 19, 1995
on transfer. California Fund qualifies as a regulated investment company under
Subchapter M of the Internal Revenue Code. Its taxable year ends on August 31.
The investment objective of California Fund is to seek as high a level of
interest income exempt from both federal income tax and California personal
income tax as is consistent with preservation of capital by investing primarily
in a diversified portfolio of California municipal bonds.
California Fund has adopted a Rule 12b-1 Plan whereby California Fund
pays Lord Abbett (1) an annual fee for services (payable quarterly) of .25% of
-
the average daily net asset value of shares sold by dealers and (2) a one-time
-
1% sales distribution fee, at the time of sale, on all sales over $1 million by
dealers, including sales qualifying at such level under the rights of
accumulation and statement of intention privileges. Lord Abbett is required to
pay the sales distribution fee to dealers as compensation for selling California
Fund's shares.
Lord Abbett Developing Growth Fund, Inc. (TIN 13-2755091) ("Growth
Fund") is a diversified, open-end management investment company incorporated
under the laws of Maryland on August 21, 1978 and its predecessor corporation
was organized on July 11, 1973. Growth Fund is registered as a diversified,
open-end management investment company under the 1940 Act. A copy of Growth
Fund's most recent Post-Effective Amendment to its Registration Statement on
Form N-1A, dated June 1, 1995, is attached as Exhibit D.
Growth Fund has a single class of shares, $1.00 par value, with equal
rights to voting, dividends, assets, and liquidation. There are no conversion
or preemptive rights and no restrictions on transfer. Growth Fund qualifies as
a regulated investment company under Subchapter M of the Internal Revenue Code.
Its taxable year ends on January 31. The investment objective of Growth Fund is
long-term growth of capital through a diversified and actively-managed portfolio
consisting of developing growth companies, many of which are traded over the
counter.
Growth Fund has adopted a Rule 12b-1 Plan. Under the 12b-1 Plan,
Growth Fund pays Lord Abbett (1) an annual service fee (payable quarterly) of
-
..25% of the average daily net asset value of Growth Fund's shares sold by
dealers on
<PAGE>
Internal Revenue Service 6 October 19, 1995
or after June 1, 1990 and .15% of the average daily net asset value of shares
sold by dealers prior to that date and (2) a one-time 1% sales distribution fee,
-
at the time of sale, on all sales over $1 million by dealers, including sales
qualifying at such level under the rights of accumulation and statement of
intention privileges. Lord Abbett is required to pay the sales distribution fee
to dealers as compensation for selling Growth Fund's shares.
Lord Abbett Fundamental Value Fund, Inc. (TIN 13-3342841)
("Fundamental Value Fund") is a diversified, open-end management investment
company incorporated under the laws of Maryland on March 26, 1986. Fundamental
Value Fund is registered as a diversified, open-end management investment
company under the 1940 Act. A copy of the fund's most recent Post-Effective
Amendment to its Registration Statement on Form N-1A, dated November 1, 1994, is
attached as Exhibit E.
All of Fundamental Value Fund's shares are of a single class and each
has a par value of $.10. All shares have equal noncumulative voting rights and
equal rights with respect to dividends, assets and liquidation. There are no
conversion or preemptive rights, and no restrictions on transfer. Fundamental
Value Fund qualifies as a regulated investment company under Subchapter M of the
Internal Revenue Code. Its taxable year ends on June 30. The investment
objectives of Fundamental Value Fund are growth of capital and growth of income
consistent with reasonable risk. Production of current income is a secondary
consideration.
Fundamental Value Fund has adopted a Rule 12b-1 Plan. The 12b-1 Plan
provides for the payment to Lord Abbett of (1) an annual service fee (payable
-
quarterly) of .25% of the average daily net asset value of Fundamental Value
Fund shares sold by dealers, and (2) a one-time 1% sales distribution fee, at
-
the time of sale, on all sales over $1 million by dealers, including sales
qualifying at such level under the rights of accumulation and statement of
intention privileges. Lord Abbett is required to pay the full amount of the
sales distribution fees to dealers as compensation for selling Fundamental Value
Fund's shares.
<PAGE>
Internal Revenue Service 7 October 19, 1995
Lord Abbett Global Fund, Inc. ("Global Fund") is a diversified, open-
end management investment company incorporated under the laws of Maryland on
February 23, 1988. The fund is registered as a diversified, open-end management
investment company under the 1940 Act. A copy of the fund's most recent Post-
Effective Amendment to its Registration Statement on Form N-1A, dated May 1,
1995, is attached as Exhibit F.
Global Fund is organized as a series fund, currently comprised of two
separate portfolios, Equity Series (TIN 13-3460109) and Income Series (TIN 13-
3460111). Each series qualifies as a regulated investment company under
Subchapter M of the Internal Revenue Code. Each series' taxable year ends on
December 31. The investment objective of Equity Series is long-term growth of
capital and income consistent with reasonable risk. The production of current
income is a secondary consideration for Equity Series. The investment objective
of Income Series is high current income consistent with reasonable risk.
Capital appreciation is a secondary consideration for Income Series.
Lord Abbett has entered into an agreement with Dunedin Fund Managers
Limited, under which it provides Lord Abbett with advice with respect to that
portion of Global Fund's assets invested in foreign countries.
Each series currently has outstanding only a single class of shares
and each share has a par value of $.001. Within each series, all shares have
equal rights as to voting, dividends, assets and liquidation. There are no
conversion or preemptive rights, and no restrictions on transfer.
Global Fund has adopted a Rule 12b-1 Plan. Under the 12b-1 Plan,
Global Fund pays to Lord Abbett (1) an annual service fee (payable quarterly) of
-
..25% of the average daily net asset value of Global Fund's shares sold by
dealers and (2) a one-time 1% sales distribution fee, at the time of sale, on
-
all sales over $1 million by dealers on or after June 1, 1990, including sales
qualifying at that level under the rights of accumulation and statement of
intention privileges. Lord Abbett is required to pay the full amount of the
sales distribution fees to dealers as compensation for selling Global Fund's
shares.
<PAGE>
Internal Revenue Service 8 October 19, 1995
Lord Abbett Investment Trust ("Investment Trust"), is a diversified,
open-end management investment company organized as a Delaware business trust on
August 16, 1993. Investment Trust is registered as a diversified, open-end
management investment company under the 1940 Act. A copy of the fund's most
recent Post-Effective Amendment to its Registration Statement on Form N-1A,
dated June 15, 1995, is attached as Exhibit G.
Investment Trust is organized as a series fund, currently comprised of
two separate portfolios, Limited Duration U.S. Government Securities Series (TIN
13-3731507) and Balanced Series (TIN 13-3799450). Each series qualifies as a
regulated investment company under Subchapter M of the Internal Revenue Code.
Each series' taxable year ends on October 31. The investment objective of
Limited Duration U.S. Government Securities Series is to seek a high income from
a portfolio consisting primarily of limited duration U.S. government securities.
The investment objective of Balanced Series is to seek current income and
capital growth.
Each series currently has outstanding only a single class of shares.
Each share has no par value. Within each series, all shares have equal rights as
to voting, dividends, assets and liquidation. There are no conversion or
preemptive rights, and no restrictions on transfer.
Investment Trust has adopted a Rule 12b-1 Plan. Under the 12b-1 Plan,
Investment Trust pays Lord Abbett (1) an annual service fee (payable quarterly)
-
of .25% of the average daily net asset value of the series' shares sold by
dealers from the commencement of the series' public offering and (2) with
-
respect to sales at the breakpoint of $1 million or more, a one-time 1%, .50% or
..25% distribution fee, with respect to sales at the time of sale, on shares sold
at net asset value of $1 million but less than $3 million, $3 million but less
than $10 million or $10 million or more, respectively. Sales qualifying at such
levels in clause (2) under rights of accumulation and statement of intention
privileges are included. Lord Abbett is required to pay the sales distribution
fee to dealers as compensation for selling Investment Trust's shares.
<PAGE>
Internal Revenue Service 9 October 19, 1995
Lord Abbett Research Fund, Inc. ("Research Fund") is a diversified,
open-end management investment company incorporated under the laws of Maryland
on April 6, 1992. Research Fund is registered as a diversified, open-end
management investment company under the 1940 Act. A copy of Research Fund's
most recent Post-Effective Amendment to Registration Statement on Form N-1A,
dated April 1, 1995, is attached as Exhibit H.
Research Fund is organized as a series fund, currently comprised of
two separate portfolios, Series 1 (TIN 13-6995863), and Lord Abbett Mid Cap
Research Fund (TIN 13-3842507). Each series qualifies as a regulated investment
company under Subchapter M of the Internal Revenue Code. Each series' taxable
year ends on November 30. The investment objective of Series 1 is growth of
capital and growth of income consistent with reasonable risk. Production of
current income is a secondary consideration. The investment objective of Lord
Abbett Mid Cap Research Fund is to seek capital appreciation through investments
primarily in equity securities which are believed to be undervalued in the
marketplace.
Each series currently has outstanding only a single class of shares,
$.001 par value. Within each series, all shares have equal voting rights and
equal rights with respect to dividends, assets, and liquidation. They are fully
paid and nonassessable when issued and have no preemptive or conversion rights.
There are no restrictions on transfer.
Research Fund has not adopted a Rule 12b-1 Plan.
Lord Abbett Tax-Free Income Fund, Inc. (the "Tax-Free Fund") is an
open-end management investment company incorporated under the laws of Maryland
on December 27, 1983. Tax-Free Fund is registered as an open-end management
investment company under the 1940 Act. A copy of the fund's most recent Post-
Effective Amendment to its Registration Statement on Form N-1A, dated June 15,
1995, is attached as Exhibit I.
Tax-Free Fund is organized as a series fund, currently comprised of
nine separate portfolios, National Series (TIN 13-3397836), Connecticut Series
(TIN 13-
<PAGE>
Internal Revenue Service 10 October 19, 1995
3608057), Hawaii Series (TIN 13-3635800), Minnesota Series (TIN 13-
3799448), Missouri Series (TIN 13-3616715), New Jersey Series (TIN 13-3603812),
New York Series (TIN 13-3386492), Texas Series (TIN 13-3386494) and Washington
Series (TIN 13-3664187). National Series is diversified under the 1940 Act;
each of the other series is nondiversified. All of the series have met and
intend to continue to meet the diversification rules under Subchapter M of the
Internal Revenue Code. Each series' taxable year ends on September 30. The
investment objective for each series is to seek as high a level of interest
income exempt from federal income tax as is consistent with preservation of
capital by investing in municipal bonds. Except for National, Texas and
Washington Series, each series also seeks as high a level of interest income
exempt from its state's personal income tax and, in the case of New York Series,
from New York City personal income tax, as is consistent with preservation of
capital.
Each series currently has outstanding only a single class of shares.
Each share has a par value of $.001 and has one vote. There are no liquidation,
conversion or preemptive rights, and no restrictions on transfer.
Each series has adopted a Rule 12b-1 Plan. National, New York and
Texas Series have each adopted a 12b-1 Plan under which each series pays Lord
Abbett (1) an annual fee for services (payable quarterly) of .15% of the average
-
daily net asset value of each series' shares sold by dealers prior to June 1,
1990 and .25% of the average daily net asset value of shares sold by dealers on
or after that date, and (2) a one-time 1% sales distribution fee, at the time of
-
sale, on all sales over $1 million by dealers, including sales qualifying at
such level under the rights of accumulation and statement of intention
privileges. Lord Abbett is required to pay the sales distribution fee to
dealers as compensation for selling Tax-Free Fund's shares.
Separate 12b-1 Plans have been adopted by each of Connecticut, Hawaii,
Minnesota, Missouri, New Jersey and Washington Series. Each 12b-1 Plan has
become effective except for Washington and Minnesota Series which will go into
effect on the first day of the quarter subsequent to its net assets reaching
$100 million. Each 12b-1 Plan provides for the payment of the series to Lord
Abbett of
<PAGE>
Internal Revenue Service 11 October 19, 1995
(1) an annual service fee (payable quarterly) of .25% of the average daily net
-
asset value of shares sold by dealers from commencement of the series' public
offering (in the case of Hawaii, Minnesota, New Jersey and Washington Series,
..15% of the average daily net asset value of such shares sold prior to its
effective date and .25% of the average daily net asset value of such shares sold
on or after that date), and (2) a one-time 1% sales distribution fee, at the
-
time of sale, on all sales over $1 million by dealers on or after the series'
effective date, including sales qualifying at such level under the rights of
accumulation and statement of intention privileges.
Lord Abbett Tax-Free Income Trust ("Tax-Free Trust") is an open-end
non-diversified management investment company organized as a Massachusetts
business trust on September 11, 1991. Tax-Free Trust is registered as an open-
end management investment company under the 1940 Act. A copy of Tax-Free Trust's
most recent Post-Effective Amendment to its Registration Statement on Form N-1A,
dated June 15, 1995, is attached as Exhibit J.
Tax-Free Trust is organized as a series fund, currently comprised of
four separate portfolios, Florida Series (TIN 13-3633027), Georgia Series (TIN
13-3799446), Pennsylvania Series (TIN 13-3646755) and Michigan Series (TIN 13-
3692073). Each of the four series, although non-diversified under the 1940 Act,
meets the diversification rules of and qualifies as a regulated investment
company under Subchapter M of the Internal Revenue Code. Each series' taxable
year ends on October 31. The investment objective of each series is to seek as
high a level of interest income exempt from federal income tax and its
respective state's personal income tax, if any, as is consistent with
preservation of capital by investing primarily in a diversified portfolio of
municipal bonds.
Each series currently has outstanding only a single class of shares.
Each share has no par value. Within each series, all shares have equal voting
rights and equal rights with respect to dividends, assets, and liquidation.
There are no conversion or preemptive rights, and no restrictions on transfer.
<PAGE>
Internal Revenue Service 12 October 19, 1995
Each series has adopted a Rule 12b-1 Plan. The 12b-1 Plan fees
indicated below will go into effect on the first day of the calendar quarter
subsequent to the series' net assets reaching $100 million. Under the 12b-1
Plan the series will pay Lord Abbett (1) an annual service fee (payable
-
quarterly) of .25% of the average daily net asset value of the series' shares
sold by dealers on or after the 12b-1 Plans' effective date and .15% of the
average daily net asset value of shares sold by dealers prior to that date and
(2) a one-time 1% sales distribution fee, at the time of sale, on all sales over
- - --
$1 million by dealers, on or after the series' effective date, including sales
qualifying at such level under the rights of accumulation and statement of
intention privileges. Lord Abbett is required to pay the sales distribution fee
to dealers as compensation for selling Tax-Free Trust's shares.
Lord Abbett U.S. Government Securities Fund, Inc. (TIN 13-6020601)
("Government Fund") is a diversified, open-end management investment company
organized in 1932 and re-incorporated under the laws of Maryland on July 9,
1975. The fund is registered as a diversified, open-end management investment
company under the 1940 Act. A copy of the fund's most recent Post-Effective
Amendment to its Registration Statement on Form N-1A, dated April 1, 1995, is
attached as Exhibit K.
Government Fund has a single class of shares, $1.00 par value, with
equal rights as to voting, dividends, assets and liquidation. There are no
conversion or preemptive rights, and no restrictions on transfer. Its taxable
year ends on November 30. The investment objective of Government Fund is high
current income with relatively low risk of price decline. This objective is
sought by investing primarily in U.S. government securities.
Government Fund has adopted a Rule 12b-1 Plan. Under the 12b-1 Plan,
Government Fund pays Lord Abbett (1) an annual service fee (payable quarterly)
-
of .25% of the average daily net asset value of Government Fund's shares
attributable to sales by dealers on or after September 1, 1985 and .15% of the
average daily net asset value of shares sold by dealers prior to that date and
(2) a one-time 1% sales distribution fee, at the time of sale, on all sales over
- - --
$1 million by dealers, including sales qualifying at
<PAGE>
Internal Revenue Service 13 October 19, 1995
such level under the rights of accumulation and statement of intention
privileges. Lord Abbett is required to pay the sales distribution fee to
dealers as compensation for selling Government Fund's shares.
Lord Abbett U.S. Government Securities Money Market Fund, Inc. (TIN
13-2986729) ("Money Market Fund") is a diversified, open-end management
investment company incorporated under the laws of Maryland on May 9, 1979. Money
Market Fund is registered as a diversified, open-end management investment
company under the 1940 Act. A copy of Money Market Fund's most recent
Registration Statement on Form N-1A, dated November 1, 1994, is attached as
Exhibit L.
Money Market Fund has a single class of shares, $.001 par value, with
equal rights as to voting, dividends, assets and liquidation. There are no
conversion or preemptive rights, and no restrictions on transfer. Money Market
Fund qualifies as a regulated investment company under Subchapter M of the
Internal Revenue Code. Its taxable year ends on June 30. The investment
objective of Money Market Fund is to provide high current income and
preservation of capital through investments in high-quality, short-term liquid
securities. The Money Market Fund seeks to obtain its objective by investing at
least 65% of its total assets in obligations issued or backed by the U.S.
Government or its agencies or instrumentalities.
Money Market Fund has adopted a Rule 12b-1 Plan. However, payment of
the 12b-1 Plan fees has been waived since July 1, 1992. Under the 12b-1 Plan,
Money Market Fund would pay Lord Abbett, which would pass on to dealers, an
annual service fee (payable quarterly) of .15% of the average daily net asset
value of Money Market Fund's shares sold by dealers.
Lord Abbett Value Appreciation Fund, Inc. (TIN 13-3166900) ("Value
Fund"), is a diversified, open-end management investment company incorporated
under the laws of Maryland on March 14, 1983. Value Fund is registered as a
diversified, open-end management investment company under the 1940 Act. A copy
of Value Fund's most recent Post-Effective Amendment to its Registration
Statement on Form N-1A, dated May 1, 1995, is attached as Exhibit M.
<PAGE>
Internal Revenue Service 14 October 19, 1995
Value Fund has a single class of shares, $.10 par value, with equal
rights as to voting, dividends, assets and liquidation. They are fully paid and
nonassessable when issued and have no preemptive or conversion rights. There
are no restrictions on transfer. Value Fund qualifies as a regulated investment
company under Subchapter M of the Internal Revenue Code. Its taxable year ends
on December 31. The investment objective of Value Fund is to seek capital
appreciation through investments, primarily in equity securities, which are
believed to be undervalued in the marketplace.
Value Fund has adopted a Rule 12b-1 Plan. Under the 12b-1 Plan, Value
Fund pays to Lord Abbett, which passes on to dealers, (1) an annual service fee
(payable quarterly) of .25% of the average daily net asset value of Value Fund's
shares attributable to sales by dealers on or after June 1, 1990 and .15% of the
average daily net asset value of shares sold by dealers prior to that date and
(2) a one-time 1% sales distribution fee, at the time of sale, on all sales over
$1 million by dealers, including sales qualifying at such level under the rights
of accumulation and statement of intention privileges. Lord Abbett is required
to pay the full amount of the sales distribution fees to dealers as compensation
for selling Value Fund's shares.
<PAGE>
Internal Revenue Service 15 October 19, 1995
Proposed Transactions
- - ---------------------
Management of the Lord Abbett Funds/2/ has proposed that the Articles
of Incorporation or Declaration of Trust of each Fund be amended to permit each
to issue additional, separate classes of shares with characteristics designed
for particular markets. A draft of the proxy materials soliciting the approval
of each Fund's shareholders for the amendment to the Articles of Incorporation
or Declaration of Trust permitting the issuance of separate classes (including
the text of the proposed amendment), will be submitted when it is filed with the
Securities and Exchange Commission./3/
Subject to the shareholders' approval of the amendments, the Board of
Directors of each Fund will redesignate its currently outstanding shares as a
separate class and will authorize the issuance of additional separate classes of
shares of each series ("Additional Classes").
The precise terms of each Additional Class will be determined by the
Board of Directors of each Fund at the time of issuance. However, each Fund
represents that, although the Additional Classes may be sold under different
sales arrangements, the shares of the Additional Classes offered by each Fund
will otherwise be identical to the currently outstanding shares of that Fund,
with the following exceptions:
(i) A 12b-1 Fee equal to a percentage of average daily net asset
-
value may or may not be charged under a 12b-1 Plan to each of the Additional
Classes, and the level of 12b-1 Fees may vary from class to class. The
- - --------------------
/2/. As used herein, the term "Fund" refers to each taxpayer designated on
Schedule A, regardless of whether the entity is structured as a separate
corporation or trust or as a series of a corporation or trust.
/3/. No shareholder vote is required for Tax-Free Trust. A copy of its
proposed amendment will be submitted with the other amendments. No amendment is
required for Investment Trust.
<PAGE>
Internal Revenue Service 16 October 19, 1995
Additional Classes may bear different service and distribution fees under
12b-1 Plans, may bear different costs relating to shareholder or director
(trustee) approval of or amendments to 12b-1 Plans or may have front end
loads or other sales charges or non-12b-1 shareholder service plan fees
(collectively, "Plan Payments"). Services provided pursuant to 12b-1 Plans
or non-12b-1 shareholder service plans may include (1) preparing,
producing, and delivering printed materials to shareholders, including
reports, prospectuses and proxies, (2) advertising, and (3) promoting and
selling shares. Such services may also include certain administrative
services associated with (1) maintaining and processing customer accounts
and records, such as data maintenance and communication, and systems
servicing; (2) handling shareholder inquiries and communications, including
postage and shipping charges; (3) recordkeeping and shareholder accounting,
including related storage and shipping; (4) shareholder servicing; and (5)
processing dividend payments on behalf of customers.
(ii) Each class will bear different "Specially Allocated Expenses,"
--
which are Fund expenses and fees (other than Plan Payments) allocated to
that class and not allocated on a pro rata basis across different classes.
These may include registration fees under state Blue Sky laws; SEC
registration fees; accounting expenses; auditors fees, litigation expenses
and legal fees and expenses relating to a class; and expenses incurred in
connection with shareholder or director (trustee) meetings as a result of
issues relating to a class .
Specially Allocated Expenses may also include other expenses related
solely to a particular class of shareholders and administrative expenses
required to support shareholders of that class, to the extent that such
expenses are incidental to the class expenses specifically enumerated in
the paragraph above .
The taxpayer represents that the only expenses allocated to the
classes disproportionately will be Specially Allocated Expenses and Plan
Payments. The Specially Allocated Expenses allocated to each share of
<PAGE>
Internal Revenue Service 17 October 19, 1995
a class during a year will differ from the Specially Allocated Expenses
allocated to each share of any other class of the same Fund by less than 50
basis points of the average daily net asset value of the class of shares of
such Fund with the smallest average net asset value.
Any distribution on shares of a class will differ from the
distribution on shares of other classes of the same Fund only as a result
of the allocation of Specially Allocated Expenses and Plan Payments and the
effects of such allocation.
(iii) The designation of each class of shares of
---
a Fund will be different.
(iv) The effect of the sales charges for each
--
class will differ.
(v) Voting rights on matters affecting only one class will vary in
-
accordance with the procedures set forth in Rule 12b-1 and Rule 18f-3.
(vi) Different classes of shares may have
--
different conversion features.
(vii) Each class may have different privileges of reinvestment with a
---
reduced sales load after redemption, as will be specified from time to time
in the relevant prospectus disclosure.
(viii) Different classes of shares may have
different exchange privileges.
Dividends paid by each Fund with respect to various classes of shares
will be calculated in the same manner and at the same time on the same day.
Amounts payable as dividends, however, will vary because of the differing
amounts of Specially Allocated Expenses and Plan Payments borne exclusively by a
particular class.
The net asset value per share and net income per share of a particular
class will also vary owing to the differing amounts of Specially Allocated
Expenses and Plan Payments. Because gross income and other expenses would be
<PAGE>
Internal Revenue Service 18 October 19, 1995
allocated daily to a class based on its net asset value, more income would be
allocated per share to classes with lower per share class expenses than to
classes with higher per share expenses. Further, this net income differential
would tend to increase during the course of the dividend period until the
accumulated income is declared as a dividend at the close of the period.
On each day that it determines net asset value per share each Fund
will first allocate its gross investment income less expenses other than
Specially Allocated Expenses or Plan Payments among all shares of that Fund
regardless of class in accordance with net asset values determined as of the
preceding day. Specially Allocated Expenses and Plan Payments allocated to a
particular class will then be subtracted from the amounts otherwise allocable to
that class, to determine the net asset value of the shares of each class.
RULINGS REQUESTED
-----------------
We respectfully request that you rule that:
1. The adoption of the proposed multiple class system will not cause
dividends declared and paid by any of the Funds to be preferential
dividends within the meaning of section 562(c) of the Code and each
Fund will therefore be eligible for the dividends paid deduction under
sections 561 and 852 of the Code, provided that each Fund otherwise
continues to meet the criteria of those two sections.
2. The creation of multiple classes of shares within each Fund will not
affect the classification of each Fund as a regulated investment
company under section 851(a) or (h).
3. There will be no federal income tax consequences to the holders of
currently outstanding shares of any Fund as a result of the
reclassification of the shares held by such holders as a separate
class of each Fund.
<PAGE>
Internal Revenue Service 19 October 19, 1995
DISCUSSION
----------
Each share of each Additional Class that will be offered by each Fund
will represent an equal interest in the same portfolio of investments and
(except as specified in paragraphs (i) through (viii) above) will have voting,
dividend, and liquidation rights that are identical to those of the currently
outstanding shares of that Fund. Each class of new shares may be subject to its
own 12b-1 Fees, non-12b-1 shareholder service plan fees or other Plan Payments
and some of the classes may be subject to different levels of Plan Payments.
Although Specially Allocated Expenses will be allocated differently between the
classes, each Fund has represented that the Specially Allocated Expenses
allocated to each share of a class during a year will differ from Specially
Allocated Expenses allocated to each share of any other class of the same Fund
by less than 0.50% of the average net asset value per share of the class with
the smallest net asset value per share.
The facts and representations presented above are similar to those
described in Private Letter Ruling 9522045 (March 7, 1995), Private Letter
Ruling 9422026 (March 1, 1994) and numerous other rulings.
In those rulings, the Service has stated that for purposes of section
562(c) of the Code, sales loads, 12b-1 Fees and other Plan Payments are
essentially treated as direct and indirect shareholder expenses that should not
be taken into account in determining whether distributions are preferential.
Cf., Treas. Reg. (S) 1.67-2T(k), Examples 3 and 4. As a result, amounts
- - --
distributed with respect to different classes of shares of each Fund will
effectively differ only as a result of the Specially Allocated Expenses, which
will be limited as described in paragraph (ii) above. As noted in the prior
rulings, section 562(c) treats as pro rata those distributions that differ by a
de minimis amount because of the allocation of fund expenses. H.R. Rep. No.
1860, 75th Cong., 3d Sess. 23 (1938). Accordingly, dividends paid by each Fund
after the adoption of the multiple class system will not be preferential within
the meaning of section 562(c) of the Code.
Moreover, the Service has found in the prior rulings that differences
in class-designations, voting
<PAGE>
Internal Revenue Service 20 October 19, 1995
rights, sales charges and class-specific expenses, like those described above,
are insufficient to cause the shares to be classified as different classes for
purposes of the Code. As a result, the designation of outstanding shares as
belonging to a particular class should have no tax effect.
As a result, the adoption of the multiple class system as described
above should have no effect on the qualification of each Fund as a regulated
investment company under sections 851 and 852 of the Code.
PROCEDURAL STATEMENTS
---------------------
To the best of the knowledge of each Fund and its representative,
issues identical to those involved in this ruling request are not raised in an
earlier return of any Fund (or in a return for any year of a related taxpayer
within the meaning of section 267 of the Code, or of a member of an affiliated
group of which any Fund is also a member within the meaning of section 1504).
To the best of the knowledge of each Fund and its representative, the
Service has not previously ruled on issues identical or similar to those raised
in this ruling request for any Fund (or a related taxpayer within the meaning of
section 267 of the Code, or a member of an affiliated group within the meaning
of section 1504) or a predecessor, nor has any Fund, a related taxpayer, a
predecessor, or their representatives previously submitted the same or similar
issues to the Service but withdrawn them before a letter ruling or determination
letter was issued.
To the best of the knowledge of each Fund and its representative, the
taxpayer, a related taxpayer, or a predecessor has not previously submitted a
request involving the same or a similar issue that is currently pending with the
Service, nor is the taxpayer or a related taxpayer presently submitting another
request involving the same or similar issues to the Service at the same time as
this request.
Each Fund believes that the law in connection with this ruling request
is unclear and that the issues raised herein are not adequately addressed by the
relevant authorities.
<PAGE>
Internal Revenue Service 21 October 19, 1995
No Fund is aware of any pending legislation which may affect the
proposed transactions nor is any Fund aware of any authorities contrary to the
positions advanced herein.
The declarations required by section 601.201(e)(1) of the Regulations,
signed by an officer of each Fund on behalf of that Fund, who has personal
knowledge of the material facts, is enclosed.
If any additional information is desired, please call Seth L. Rosen of
Debevoise & Plimpton ((212) 909-6373). Enclosed herewith are powers of attorney
authorizing Mr. Rosen and Jonathan A. Small of this firm to represent each Fund
in this matter. If for any reason the rulings requested cannot be issued on
the basis of the information contained herein, together with any additional
information, we hereby request a conference.
Your ruling letter should be addressed to each Fund, with a copy to
the undersigned.
We request that an advance copy of the letter ruling be issued by
facsimile pursuant to section 8.02(5) of Revenue Procedure 95-1, 1995-1 I.R.B.
9. The facsimile copy should be sent to Seth L. Rosen, c/o Debevoise &
Plimpton, at (212) 909-6836. The Funds hereby waive any disclosure violations
which may result from the facsimile transmission, but ask that you take certain
precautions to protect confidential information in accordance with section
8.02(5) of Revenue Procedure 95-1.
A check in the amount of $7475 is enclosed as the user fee specified
in section 14.02 and Appendix A of Revenue Procedure 95-1.
Respectfully submitted,
Seth L. Rosen
Enclosures
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Fund T.I.N.
- - ---- ----------
<S> <C>
Affiliated Fund, Inc. 13-6020600
Lord Abbett Bond-Debenture Fund, Inc. 13-2669319
Lord Abbett California Tax-Free
Income Fund, Inc. 13-3271131
Lord Abbett Developing Growth Fund, Inc. 13-2755091
Lord Abbett Fundamental Value Fund, Inc. 13-3342841
Lord Abbett Global Fund, Inc.
-- Equity Series 13-3460109
-- Income Series 13-3460111
Lord Abbett Investment Trust
-- Limited Duration U.S. Government
Securities Series 13-3731507
-- Balanced Series 13-3799450
Lord Abbett Research Fund, Inc.
-- Series 1 13-6995863
-- Lord Abbett Mid Cap Research Fund 13-3842507
Lord Abbett Tax-Free Income Fund, Inc.
-- National Series 13-3397836
-- Connecticut Series 13-3608057
-- Hawaii Series 13-3635800
-- Minnesota Series 13-3799448
-- Missouri Series 13-3616715
-- New Jersey Series 13-3603812
-- New York Series 13-3386492
-- Texas Series 13-3386494
-- Washington Series 13-3664187
Lord Abbett Tax-Free Income Trust
-- Florida Series 13-3633027
-- Georgia Series 13-3799446
-- Pennsylvania Series 13-3646755
-- Michigan Series 13-3692073
Lord Abbett U.S. Government Securities
Fund, Inc. 13-6020601
Lord Abbett U.S. Government Securities
Money Market Fund, Inc. 13-2986729
Lord Abbett Value Appreciation Fund, Inc. 13-3166900
</TABLE>
<PAGE>
Internal Revenue Service Department of the Treasury
Washington, DC 20024
U.I.L. Nos.: 0561.05-00, 0562.03-02
0851.00-00, 0852.00-01
Person to Contact:
Susan T. Baker
Seth Rosen Telephone Number:
Debevoise & Plimpton (202) 622-3940
875 Third Avenue Refer Reply to:
New York, NY 10022 CC:DOM:FI&P:2 TR-31-2399-95
Date:
Legend:
State A = Maryland
State B = Delaware
State C = Massachusetts
Investment Manager and Distributor = Lord, Abbett & Company
Fund 1 = Affiliated Fund, Inc.
EIN: 13-6020600
Fund 2 = Lord Abbett Bond-Debenture Fund, Inc.
EIN: 13-2669319
TR-31-2400-95
Fund 3 = Lord Abbett California Tax-Free Income Fund, Inc.
EIN: 13-3271131
TR-31-2401-95
Fund 4 = Lord Abbett Developing Growth Fund, Inc.
EIN: 13-2755091
TR-31-2402-95
Fund 5 = Lord Abbett Fundamental Value Fund, Inc.
EIN: 13-3342841
TR-31-2403-95
<PAGE>
Fund 6 = Lord Abbett Global Fund, Inc.--Equity Series
EIN: 13-3460109
TR-31-2404-95
Fund 7 = Lord Abbett Global Fund, Inc.--Income Series
EIN: 13-3460111
TR-31-2405-95
Fund 8 = Lord Abbett Investment Trust--Limited Duration U.S. Government
Securities Series
EIN: 13-3731507
TR-31-2406-95
Fund 9 = Lord Abbett Investment Trust--Balanced Series
EIN: 13-3799450
TR-31-2410-95
Fund 10 = Lord Abbett Research Fund, Inc.--Series I
EIN: 13-6995863
TR-31-2411-95
Fund 11 = Lord Abbett Research Fund, Inc.--Lord Abbett Mid Cap Research Fund
EIN: 13-3842507
TR-31-2412-95
Fund 12 = Lord Abbett Tax-Free Income Fund, Inc.--National Series
EIN: 13-3397836
TR-31-2415-95
Fund 13 = Lord Abbett Tax-Free Income Fund, Inc.--Connecticut Series
EIN: 13-3608057
TR-31-2417-95
Fund 14 = Lord Abbett Tax-Free Income Fund, Inc.--Hawaii Series
EIN: 13-3635800
TR-31-2419-95
Fund 15 = Lord Abbett Tax-Free Income Fund, Inc.--Minnesota Series
EIN: 13-3799448
TR-31-2420-95
2
<PAGE>
Fund 16 = Lord Abbett Tax-Free Income Fund, Inc.--Missouri Series
EIN: 13-3616715
TR-31-2425-95
Fund 17 = Lord Abbett Tax-Free Income Fund,.Inc.--New Jersey Series
EIN: 13-3603812
TR-31-2426-95
Fund 18 = Lord Abbett Tax-Free Income Fund, Inc.--New York Series
EIN: 13-3386492
TR-31-2427-95
Fund 19 = Lord Abbett Tax-Free Income Fund, Inc.--Texas Series
EIN: 13-3386494
TR-31-2428-95
Fund 20 = Lord Abbett Tax-Free Income Fund, Inc.--Washington Series
EIN: 13-3664187
TR-31-2429-95
Fund 21 = Lord Abbett Tax-Free Income Trust--Florida Series
EIN: 13-3633027
TR-31-2430-95
Fund 22 = Lord Abbett Tax-Free Income Trust--Georgia Series
EIN: 13-3799446
TR-31-2431-95
Fund 23 = Lord Abbett Tax-Free Income Trust--Pennsylvania Series
EIN: 13-3646755
TR-31-2432-95
Fund 24 = Lord Abbett Tax-Free Income Trust--Michigan Series
EIN: 13-3692073
TR-31-2433-95
Fund 25 = Lord Abbett U.S. Government Securities Money Market Fund, Inc.
EIN: 13-2986729
TR-31-2435-95
3
<PAGE>
Fund 26 = Lord Abbett U.S. Government Securities Fund, Inc.
EIN: 13-6020601
TR-31-2435-95
Fund 27 = Lord Abbett Value Appreciation Fund, Inc.
EIN: 13-3166900
TR-31-2436-95
Fund 28 = Lord Abbett Securities Trust--Growth and Income Trust
EIN: 13-3731505
TR-31-268-96
Fund 29 = Lord Abbett Research Fund, Inc.--Small-Cap Series
EIN: 13-3862601
TR-31-269-96
a = .50
- - -
Dear Mr. Rosen:
This ruling replies to your letters dated October 19, 1995, and January
26, 1996, submitted an behalf of Funds I through 29, in which you request that
the Internal Revenue Service rule as follows:
(1) that the adoption of the proposed multiple class system will not cause
dividends paid on each class of shares issued by the funds to be preferential
dividends under section 562(c) of the Code, and therefore that each fund will
be eligible for the dividends-paid deduction under sections 561 and 852(b)(2)(D)
of the Code;
(2) that the creation of multiple classes of shares will not affect the
classification of the Funds as regulated investment companies (RICs) under
section 851 of the Code; and
(3) that the redesignation of currently outstanding shares of each fund as a
separate class of shares pursuant to the proposed multiple class system will not
result in gain or loss or in other Federal income tax consequences to the
holders of currently outstanding shares.
4
<PAGE>
FACTS
Funds are open-end management investment companies registered under the
Investment Company Act of 1940, 15 U.S.C. 80a-1 et seq., as amended (the 1940
-- ---
Act) , and are structured as corporations, as trusts, or as series of
corporations or trusts. Each qualified as a regulated investment company (RIC)
under Subchapter M, part 1, of the Code. Funds 1 through 7, 10 through 20, and
25 through 27 are incorporated under the laws of State A. Funds 6 and 7, Funds
10, 11, and 29, and Funds 12 through 20 are organized as series funds under the
laws of State A. Funds 8 and 9 are organized as business trusts under the laws
of State B. Funds 21 through 24 are organized as a series fund under the laws
of State C. Fund 28 is organized as a series fund under the laws of State B.
Investment Advisor and Distributor provides investment advice for each
of the funds. The shares of the funds, with the exception of shares of Funds 10
and 11, are marketed pursuant to distribution agreement with Investment Advisor
and Distributor.
Shares of the funds are sold subject to differing sales arrangements.
Under Rule 12b-1 plans adopted by certain of the funds, an annual service fee
equal to a percentage of the average daily net asset value of shares of the fund
is payable to Investment Advisor and Distributor. The level of the annual
service fee varies from fund to fund. Also payable to Investment Advisor and
Distributor under the Rule 12b-1 plans are one-time sales distribution fees,
payable at the time of sale, on sales of greater than certain specified amounts.
Investment Advisor and Distributor is required to pay the sales distribution
fees to dealers as compensation for selling shares of the funds.
Funds each have outstanding only a single class of shares. Funds have
proposed that the articles of incorporation or declaration of trust of each
fund be amended to permit each to issue additional, separate classes of shares
with characteristics designed for particular markets.
The precise terms of each additional class will be determined by the
Board of Directors of each fund at the time of issuance. Each fund represents,
however, that although the additional classes may be sold under differing sales
arrangements the shares of the additional classes offered by each fund will
otherwise be identical to outstanding shares of that fund, with the following
exceptions:
5
<PAGE>
(1) The designation of each class of shares will be different.
(2) Different classes of shares may have different conversion features.
(3) Different classes may have different exchange privileges.
(4) Each class may have different privileges of reinvestment with a reduced
sales load after redemption.
(5) The additional classes may adopt Rule 12b-1 plans which bear different
service and distribution fees or different costs relating to approval of or
amendments to the Rule 12b-1 plans. The level of Rule 12b-1 plan fees may vary
from class to class. Voting rights on matters affecting only one class will
vary in accordance with the procedures set forth in Rule 12b-1 and Rule 18f-3.
(6) The additional classes may be sold subject to asset-based sales charges
and the effect of the sales charges for each class will differ.
(7) The additional classes may be sold subject to non-Rule 12b-1 plan
shareholder services plan fees.
(8) Each class will bear different specially allocated expenses. To the
extent the following classes of expenses can reasonably be identified as
relating to a particular class, they will be allocated to that class and, if so
allocated, will be referred to as Class Expenses:
(a) registration fees under state Blue Sky laws;
(b) SEC registration fees;
(c) accounting expenses, including auditors' fees;
(d) legal fees, including expenses of litigation;
(e) expenses incurred in connection with shareholder,
director, or trustee meetings; and
(f) administrative expenses required to support shareholders of a
particular class, to the
6
<PAGE>
extent incidental to the expenses enumerated in (a) through (e).
The funds represent that the only expenses allocated to the classes
disproportionately are Class Expenses, Rule 12b-1 plan fees and shareholder
services plan fees. The Class Expenses allocated to each share of a class during
a year will differ from the Class Expenses allocated to each share of any other
class of the same fund by less than a% of the average daily net asset value of
-
the class of shares with the smallest average net asset value.
Any distribution on shares of a class will differ from the distribution
on shares of other classes of the same fund only as a result of the allocation
of Class Expenses, Rule 12b-1 plan fees and shareholder services plan fees and
the effects of such allocation.
Investment Advisor and Distributor may waive a Rule 12b-1 plan fee in
whole or in part.
Dividends paid by each fund with respect to various classes of shares
will be calculated in the same manner and at the same time on the same day.
Amounts payable as dividends, however, will vary because of the differing
amounts of Class Expenses, Rule 12b-1 plan fees, and shareholder services plan
fees borne exclusively by a particular class.
LAW
Section 851(a) defines a RIC, in part, as a domestic corporation
registered under the 1940 Act as a management company.
Section 851 (b) limits the definition of a RIC to a corporation meeting
certain election, gross income, and diversification requirements.
Section 851(h) of the Code provides a special rule for a RIC having more
than one fund. This provision treats each fund as a separate corporation for
all purposes of the Code, other than the definitional requirement of section
851(a).
A corporation that is a RIC within the meaning of section 851 and that is
taxable under Subchapter M, part I, pays tax on its investment company taxable
income under section 852(b)(2) and on the excess, if any, of its net
7
<PAGE>
capital gain over its deduction for dividends paid, determined with reference
to capital gains dividends only under section 852(b)(3).
Section 852 provides that a RIC is not taxable under Subchapter M, part
I, unless its deduction for dividends paid (as that term is defined in section
561(a) with certain modifications) for the taxable year equals or exceeds a
specified portion of its taxable income (with certain adjustments) and its net
tax-exempt interest income.
Section 561(a) defines the deduction for dividends paid, for purposes of
section 852, to include dividends paid during the taxable year.
Section 562(a) states that the term "dividend", except as otherwise
provided, includes only dividends described in section 316, which provides a
definition of dividends for purposes of corporate distributions.
Section 316(a) defines the term "dividend" as any distribution of
property made by a corporation to its shareholders (1) out of its earnings and
-
profits (E & P) accumulated after February 28, 1913, or (2) out of its E & P of
-
the taxable year (computed as of the close of the taxable year without
diminution by reason of any distributions made during the taxable year), without
regard to the amount of the E & P at the time the distribution was made.
Section 562(c) provides that the amount of any distribution shall not be
considered as a dividend for purposes of the dividends paid deduction under
section 561 unless the distribution is pro rata, does not prefer any shares of
stock of a class over other shares of stock of that same class, and does not
prefer one class of stock over another class except to the extent the former
class is entitled (without reference to waivers of their rights by shareholders)
to be preferred.
The legislative history and regulations show that each shareholder within
a class, as that term is used in section 562(c), has certain inherent rights.
The Revenue Act of 1936: Hearings on H.R. 12395 Before the Senate Comm. on
- - --------------------------------------------------------------------------
Finance, 74th Cong., 2d Sess. 62 (1936); H.R. Rep. No. 1860, 75th Cong., 3d
- - -------
Sess. 23 (1938); section 1.562-2 of the Income Tax Regulations. Each
shareholder within a class has the right to receive the same distribution an
each of his shares belonging to the class as every other shareholder within the
class. In addition, the class has the right not
8
<PAGE>
to receive less than that to which it is entitled when compared to other
classes.
A class for purposes of section 562(c), therefore, is a group of
shareholders whose rights are so closely aligned and so different from other
shareholders' rights as to warrant a conclusion that members of the group should
all be treated the same and should be protected against the infringement of
shareholders outside the group with respect to distributions. For example,
section 1.562-2(b), Example (3) of the income Tax Regulations indicates that
cumulative preferred and common stock may form two classes for these purposes.
Among the characteristics that cause cumulative preferred shareholders to be
viewed as a unit separate from common shareholders is their right to certain
preferences on distributions, on redemption, and on liquidation, and their right
to vote to protect those preferences.
ANALYSIS
In this case, shares proposed under the multiple class distribution
system represent an equal interest in the same fund of investments and will be
identical in all ways, except as follows:
1. Each class of shares will have a different designation.
2. The amount and type of asset-based sales load, if any, may differ on each
class of shares.
3. The amounts assessed to a class as a result of a shareholder servicing
plan may differ.
4. The Class Expanses enumerated above will be allocated separately to the
class of shares to which they are attributable.
5. Certain classes may adopt Rule 12b-1 plans which bear different service
and distribution fees or different costs relating to approval of or amendments
to the Rule 12b-1 plans. The level of Rule 12b-1 plan fees may vary from class
to class. Voting rights on matters affecting only one class will vary in
accordance with the procedures act forth in Rule 12b-1 and Rule l8f-3.
6. Different classes of shares may have different conversion features.
9
<PAGE>
7. Different classes may have different privileges of reinvestment with a
reduced sales load after redemption.
8. Different classes of shares may have different exchange privileges.
These differences alone are insufficient to cause the shares proposed
under the multiple class distribution system to be treated as different classes
of shares under section 562(c).
The Rule 12b-1 fee is a fund expense for purposes of computing investment
company taxable income because it is paid by a fund from fund assets, unlike a
front-end sales load, which is viewed as a shareholder cost. See United States
--- -------------
v. Cartwright, 411 U.S. 546 (1973), aff'q 457 F.2d 567 (1972), in which the
- - ------------- -----
Supreme Court describes a front-end sales load as a type of brokerage commission
that is a shareholder cost. Nonetheless, fees paid pursuant to Rule 12b-1 plans
are akin to front-end sales loads because both amounts are primarily for
distribution expenses. The Securities and Exchange Commission has described
Rule 12b-1 plan fees as substitutes for front-end sales loads. See Exemptions
--- ----------
for Certain Registered Open-End Management Investment Companies to Impose
- - ------------------------------------------ ------------------------------
Deferred Sales Loads, Investment Company Act Release No. 16,619, 53 FR 45,275 at
- - --------------------
45,277-78 (Nov. 9, 1988) and Payment of Asset-Based Sales Loads by Registered
--- ------------------------------------------------
Open-End Management Investment Companies, Investment Company Act Release No.
- - ----------------------------------------
16,431, 53 FR 23,258 at 23,270 (June 21, 1988). Thus, it appears that fees paid
pursuant to a Rule 12b-1 plan indirectly are shareholder expenses. A fund is
never out-of-pocket for amounts paid under the Rule 12b-1 plan; it is reimbursed
for these outlays by shareholders participating in the plan.
Under this analysis, a Rule 12b-1 fee can be considered an indirect
shareholder expense in determining whether distributions are preferential under
section 562(c) of the Code. Payments made pursuant to shareholder servicing
agreements also must be considered in determining whether a fund's distributions
are preferential.
When the Rule 12b-1 plan fees and fees payable under shareholder
servicing agreements are taken into account, the amounts distributed on the
shares of a fund differ by less than a%, which is de mininis. Section 562(c) of
-
the Code treats as pro rata those distributions that
10
<PAGE>
differ by a de minimis amount. H.R. Rep. No. 1860, 75th Cong., 3d Sess. 23
(1938).
We conclude from this analysis that each fund has only a single class of
stock. The differences specified above are insufficient to cause the shares to
be classified as different classes under section 562(c) of the Code. The rights
of all shareholders are so closely aligned and similar as to mandate that all
shareholders, who will have the benefit of the same economic distributions,
should be treated as a single class and that the conversion of shares within
that single class will have no tax affect.
HOLDINGS
Based on the facts as represented by the funds, and provided that each
fund otherwise meets the criteria of sections 561(a) and 852, we rule as
follows:
(1) that the adoption of the proposed multiple class system will not cause
dividends paid on each class of shares issued by the funds to be preferential
dividends under section 562(c) of the Code, and therefore that each fund will
be eligible for the dividends-paid deduction under sections 561 and 852(b)(2)(D)
of the Code,
(2) that the creation of multiple classes of shares will not affect the
classification of the Funds as regulated investment companies (RICs) under
section 851 of the Code,
and
(3) that the redesignation of currently outstanding shares of each fund as a
separate class of shares pursuant to the proposed multiple class system will not
result in gain or loss or in other Federal income tax consequences to the
holders of currently outstanding shares.
Except as specifically ruled upon above, no opinion is expressed or
implied regarding the Federal tax aspects of this transaction. We express no
opinion as to whether each fund will qualify as a RIC that is taxable under
Subchapter M, part 1, if expenses other than the Rule 12b-1 fees, fees paid
pursuant to shareholder servicing plans, and the Class Expenses described in
this letter are allocated to the shareholders disproportionately.
11
<PAGE>
This ruling is directed only to the funds. Section 6110(j)(3) of the
Code provides that it may not be used or cited as precedent.
A copy Of this letter Should be attached to the Federal income tax return
of each fund for each taxable year in which the fund has outstanding classes of
shares described above.
Sincerely yours,
Assistant Chief Counsel
(Financial Institutions & Products)
By_________________________
William E. Coppersmith
Chief, Branch 2
Enclosure:
6110 copy
12
Exhibit 17(a)
-------------
Draft-February 20, 1996
LORD ABBETT FUNDAMENTAL VALUE FUND, INC.
The undersigned hereby appoints KENNETH B. CUTLER, ROBERT S. DOW and RONALD
P. LYNCH and each of them proxies, with full power of substitution, to vote
(according to the number of votes which the undersigned would be entitled to
cast if then personally present) at the annual meeting of shareholders of LORD
ABBETT FUNDAMENTAL VALUE FUND, INC. on June 19, 1996, including all
adjournments, as specified below, and in their discretion upon such other
business as may properly be brought before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS WHO RECOMMEND THAT
YOU AUTHORIZE THE PROXIES TO VOTE FOR THE ELECTION OF DIRECTORS AND FOR THE
OTHER MATTERS SPECIFIED BELOW.
UNMARKED PROXIES WILL BE VOTED IN FAVOR OF THE ELECTION OF DIRECTORS AND FOR
EACH OF THE OTHER MATTERS SPECIFIED BELOW.
1. For [_] or against [_] or abstain from [_] the approval of the
Agreement and Plan of Reorganization and the reorganization provided for
therein, as described in the proxy statement and prospectus.
2. With [_] or without [_] authority to vote for the election of
directors. (Note: to withhold authority to vote for an individual nominee,
strike out the nominee's name below.)
Ronald P. Lynch, Robert S. Dow, E. Thayer Bigelow, Stewart S. Dixon, John C.
Jansing, C. Alan MacDonald, Hansel B. Millican, Jr. and Thomas J. Neff.
3. For [_] or against [_] or abstain from [_] the ratification of the
selection of Deloitte & Touche LLP as independent public accountants of Lord
Abbett Fundamental Value Fund, Inc. for the fiscal year ending June 30, 1996.
ACCOUNT NUMBER SHARES PROXY NUMBER
LORD ABBETT FUNDAMENTAL VALUE FUND, INC.
<PAGE>
PLEASE FILL IN, DATE AND SIGN PROXY AND RETURN IN THE ENCLOSED ENVELOPE.
For information as to the voting of stock registered in more than one name, see
page 2 of the proxy statement and prospectus. When signing the proxy as
attorney, executor, administrator, trustee or guardian, please indicate the
capacity in which you are acting. Only authorized officers should sign for
corporations.
Date:......................................................
Signature(s) of Shareholder(s) as shown at left
..............................................................
..............................................................
(Please read other side)
IMPORTANT NEWS FROM LORD, ABBETT & CO.
We want to give you advance notice of some changes we will be proposing to
shareholders. As you know, Lord Abbett currently offers front-end load and level
load funds through two separate groups: the Lord Abbett Family of Funds and Lord
Abbett Counsel Group, respectively. In general, we are proposing a consolidation
of the second group into the first group, which would be achieved by the
issuance of Class A shares to represent the Family of Funds and the issuance of
Class C shares to represent the former Counsel Group. Additionally, we intend to
offer B shares in the near future. Many of you have asked for more pricing
alternatives and this proxy should enable us to respond to your needs. In
addition to offering more pricing options, we are recommending other changes
that will allow for more flexibility in our funds' management and in the
distribution of our funds' shares.
Shareholders will receive proxy materials describing these proposed changes in
April. We ask that you encourage your clients to vote their proxies promptly, as
additional solicitations are costly to their funds. The shareholder meeting is
scheduled for June 19, 1996. Soon thereafter, we will notify you of all approved
changes.
We believe these changes will enhance our funds' competitive positioning. We
appreciate any efforts you can make in helping us secure a quorum and thank you
for your continued support.
LETTER TO SHAREHOLDERS RE: PROXY
(To go on Fund letterhead)
March __, 1996
Dear Shareholder:
In April, you will receive a proxy statement and ballot, requesting your vote on
several important proposals. These proposed changes are designed to maintain
your Fund's competitive position and to provide more management and distribution
flexibility. The proxy materials will describe all of the proposed changes.
We ask that you please vote your proxy/proxies promptly, as additional
solicitations are costly to your Fund. The shareholder meeting is scheduled for
June 19, 1996. Soon thereafter, we will notify you of all approved changes.
We appreciate your cooperation in promptly returning your proxy card and we look
forward to continuing helping you meet your financial goals.
Sincerely,
Ronald P. Lynch
Chairman
