1933 Act File No. 33-58846
1940 Act File No. 811-7538
SECURITIES & EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 13 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [X]
OF 1940
AMENDMENT NO. 13 [X]
LORD ABBETT SECURITIES TRUST
Exact Name of Registrant as Specified in Charter
767 FIFTH AVENUE, NEW YORK, N.Y. 10153
Address of Principal Executive Office
REGISTRANT'S TELEPHONE NUMBER (212) 848-1800
Kenneth B. Cutler, Vice President & Secretary
767 FIFTH AVENUE, NEW YORK, N.Y. 10153
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately on filing pursuant to paragraph (b) of Rule 485
X on December 5, 1996 pursuant to paragraph (b) of Rule 485
- ---
60 days after filing pursuant to paragraph (a) of Rule 485
on (date) pursuant to paragraph (a) (i) of Rule 485
75 days after filing pursuant to paragraph (a) (ii) of Rule 485
on (date) pursuant to paragraph (a) (ii) of Rule 485
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Registrant's Series will register an indefinite amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2(a) (1) and a Rule 24f-2 Notice for
such series for the most recent fiscal year to be filed with the Commission on
or about December 28, 1996.
<PAGE>
LORD ABBETT SECURITIES TRUST
N-1A
Cross Reference Sheet
Post-Effective Amendment No.13
Form N-1A Location In Prospectus or
ITEM NO. STATEMENT OF ADDITIONAL INFORMATION
1 Cover Page
2 Fee Table
3 Finacial Highlights
4 (a) (i) Cover Page
4 (a) (ii)I Investment Objectives
4 (b) (c) How We Invest
5 (a) (b) (c) Our Management; Last Page
5 (d) N/A
5 (e) Our Management
5 (f) Our Management
5 (g) Purchases
6 (a) Cover Page
6 (b) (c) (d) N/A
6 (e) Cover Page; Purchases
6 (f) (g) Dividends, Capital Gains
Distributions and Taxes
6 (h) Purchases
7 (a) Back Cover Page
7 (b) (c) (d) Purchases
8 (a) (b) (c) (d) Redemptions
Purchases, Redemptions and
Shareholder Services
9 N/A
10 Cover Page
11 Cover Page -- Table of Contents
12 N/A
13 (a) (b) (c) (d) Investment Objectives and Policies
14 Trustees and Officers
15 (a) (b) (c) Trustees and Officers
16 (a) (i) Investment Advisory and Other
Services
16 (a) (ii) Trustees and Officers
16 (a) (iii) Investment Advisory and Other
Services
16 (b) Investment Advisory and Other Services
16 (c) (d) (e) (g) N/A
16 (f) Purchases, Redemptions and
Shareholder Services
16 (h) Investment Advisory and Other Services
16 (i) N/A
17 (a) Portfolio Transactions
17 (b) N/A
17 (c) Portfolio Transactions
17 (d) (e) N/A
<PAGE>
Form N-1A Location in Prospectus or
ITEM NO. STATEMENT OF ADDITIONAL INFORMATION
18 (a) Cover Page
18 (b) N/A
19 (a) (b) Purchases; Redemptions and
Shareholder Services; Notes to
Financial Statements
19 (c) N/A
20 Taxes
21 (a) Purchases, Redemptions and
Shareholder Services
21 (b) (c) N/A
22 N/A
22 (b) Past Performance
23 Financial Statements; Supplementary
<PAGE>
Lord Abbett Securities Trust
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
800-426-1130
Lord Abbett Securities Trust ("we" or the "Fund") is a mutual fund currently
consisting of two series: the Growth & Income Series and a new series -- the
International Series. The Growth & Income Series offers two classes of shares:
Class A and Class C. The International Series offers one class of shares: Class
A shares. These classes provide investors different investment options in
purchasing shares of the Fund. See "Purchases" for a description of these
choices.
The Growth & Income Series seeks long-term growth of capital and income without
excessive fluctuations in market value. The International Series seeks long-term
capital appreciation. There can be no assurance that each Series will achieve
its objective. Within each Series, the freely transferable shares will have
equal rights with respect to dividends, assets, liquidations and voting.
This Prospectus sets forth concisely the information about the Fund and each
Series that a prospective investor should know before investing. Additional
information about the Fund and each Series has been filed with the Securities
and Exchange Commission. The Statement of Additional Information is incorporated
by reference into this Prospectus and may be obtained, without charge, by
writing to the Fund or by calling the Trust at 800-874-3733. Ask for "Part B of
the Prospectus -- The Statement of Additional Information".
The date of this Prospectus, and the date of the Statement of Additional
Information, is December 5, 1996.
PROSPECTUS
Investors should read and retain this Prospectus. Shareholder inquiries should
be made in writing to the Fund or by calling 800-821-5129. You can also make
inquiries through your broker-dealer.
Shares of the Series are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
An investment in the Series involves risks, including the possible loss of
principal.
CONTENTS PAGE
1 Investment Objectives 2
2 Fee Table 2
3 Financial Highlights 3
4 How We Invest 4
5 Purchases 8
6 Shareholder Services 13
7 Our Management 14
8 Dividends, Capital Gains
Distributions and Taxes 15
9 Redemptions 16
10 Performance 16
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>
The investment objective of the Growth & Income Series is long-term growth of
capital and income without excessive fluctuations in market value. The Growth &
Income Series normally invests in common stocks of large, seasoned companies in
sound financial condition which are expected to show above-average price
appreciation. The investment objective of the International Series is long-term
capital appreciation. The production of any current income is incidental to this
objective and the International Series also may invest in securities which do
not produce any income. The International Series normally invests primarily in
equity securities of non-U.S. issuers.
A summary of the expenses of each Series is set forth in the table below. Actual
expenses may be greater or less than shown.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
International Growth & Income
Series Series
Class A Class A Class C
Shares Shares Shares
Shareholder Transaction Expenses
(as a percentage of offering price)
Maximum Sales Load(1) on Purchases (See "Purchases") 5.75%(2)(3) 5.75%(2)(3) None(2)(3)
Redemption Fee (See "Purchases") None(2)(3) None(2)(3) 1% if shares are
redeemed before 1st
anniversary of purchase(2)(3)
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees (See "Our Management") 0.75% 0.75% 0.75%(4)
12b-1 Fees (See "Purchases") 0.23%(2)(3)(5) 0.23%(2)(3)(5) 0.88%(2)(3)
Other Expenses (See "Our Management") 0.37%(5) 0.37%(5) 0.37%(4)(6)
Total Operating Expenses 1.35%(5) 1.35%(5) 2.00%(4)
<FN>
Example: Assume each Series' annual return is 5% and there is no change in the
level of expenses described above. For a $1,000 investment in each Series, with
reinvestment of all distributions, you would have paid the following total
expenses if you closed your account after the number of years indicated.
1 year 3 years 5 years 10 years
Growth & Income Series
Class A shares $70 $98 $127 $211
Class C shares $20 $63 $108 $233
International Series
Class A shares $70 $97
(1)Sales "load" is referred to as sales "charge" and "deferred sales load" is
referred to as "contingent deferred sales charge" (or "CDSC") and "12b-1 fees"
which consist of a "service fee" and a "distribution fee" are referred to by
either or both of these terms where appropriate with respect to Class A and
Class C shares throughout this Prospectus.
(2)See "Purchases" for descriptions of the Class A front-end sales charges, the
CDSC payable on certain redemptions of Class A and Class C shares and separate
Rule 12b-1 Plans applicable to each class of shares of the Growth & Income
Series and the Class A shares of the International Series.
(3)Although the Growth & Income Series does 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 applicable to the
Class C shares of the Series (which pays annual .25% service and .75%
distribution fees), more than the economic equivalent of the maximum front-end
sales charge as permitted by certain rules of the National Association of
Securities Dealers, Inc. Likewise, with respect to Class A shares of both
Series, investors should be aware that, long-term, such maximum may be exceeded
due to the Rule 12b-1 plan applicable to the Class A shares which permits each
Series to pay up to 0.50% in total annual fees, half for service and the other
half for distribution.
(4)Although not obligated to, Lord Abbett may waive its management fee and/or
subsidize other expenses with respect to each Series. The management fee has
been restated to reflect current fees as a result of the discontinuation of the
fee waiver by Lord Abbett with respect to the Growth & Income Series as of July
12, 1996.
(5)Class A fees and expenses are estimated.
(6)The "other expenses" of the Growth & Income Series reflect an estimated
increase in various expenses expressed as a percentage of net assets reflecting
the sale by the Fund of the assets of nine of its Series in July 1996 .
The foregoing is provided to give investors a better understanding of the expenses
that are incurred by an investment in each Series.
</FN>
</TABLE>
<PAGE>
The following table has been audited by Deloitte & Touche llp, independent
accountants, in connection with their annual audit of the Class A and C share
Financial Statements of the Growth & Income Series, whose report thereon is
incorporated by reference into the Statement of Additional Information and may
be obtained on request, and have been included herein in reliance upon their
authority as experts in auditing and accounting.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GROWTH & INCOME SERIES For the Period
January 3, 1994
(Commencement
Per Class C Share+ Operating Year Ended Oct 31 Year Ended Oct. 31 of Operations) to
Performance: 1996 1995 October 31, 1994
Net asset value, beginning of period $6.04 $5.07 $5.00
Income from investment operation
Net investment income .0949 .12 .089++
Net realized and unrealized
gain (loss) on securities 1.0986 .97 .041
Total from investment operations 1.1935 1.09 .13
Distribution
Dividends from net investment income (.1035) (.12) (.06)
Distributions from net realized gain (0.04) -- --
Net asset value, end of period $7.09 $6.04 $5.07
Total Return* 20.02% 21.83% 2.62%++
Ratios/Supplemental Data:
Net assets, end of period (000) $66,685 $32,770 $9,160
Ratios to Average Net Assets:
Expenses, including waiver** 1.55% 1.16% .61%++
Expenses, excluding waiver 2.01% 1.91% 1.94%++
Net investment income 1.36% 2.06% 2.03%++
Portfolio turnover rate 23.84% 23.17% 31.95%
Average commissions per share
paid on equity transactions*** 0.064 0.059 --
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
GROWTH & INCOME SERIES For the Period
July 15, 1996
Per Class A Share+ Operating (Commencement of Operations) to
Performance: October 31, 1996
Net asset value, beginning of period $6.50
Income from investment operations
Net investment income 0.028++
Net realized and unrealized
gain (loss) on securities .589
Total from investment operations .617
Distributions
Dividends from net investment income (.027)
Net asset value, end of period $7.09
Total Return* 12.10%+
Ratios/Supplemental Data:
Net assets, end of period (000) $47,277
Ratios to Average Net Assets:
Expenses, including waiver** .39%++
Expenses, excluding waiver .39%++
et investment income .40%++
Portfolio turnover rate 23.84%
<FN>
*Total return does not consider the effects of sales charges.
**The Growth & Income Series is contingently obligated to repay its expenses
***The SEC instituted new guidelines requiring the disclosure of average
commission per share.
voluntarily assumed by Lord Abbett. At October 31, 1996, such expense subsidies
totalled $33,620. Such contingent obligations are not included in expenses. See
"Our Management" for the terms of such contingent obligations.
+Prior to July 12,1996, the Growth & Income Series had only one class of shares.
That class is now designated "Class C shares".
++Not annualized.
See Notes to Financial Statements.
</FN>
</TABLE>
<PAGE>
HOW WE INVEST
THE GROWTH & INCOME SERIES. The Series is intended for long-term investors who
purchase and redeem shares to meet their own financial requirements rather than
to take advantage of price fluctuations.The needs of such investors will be best
served by an investment whose growth is characterized by low fluctuations in
market value. For this reason, the Series tries to keep its assets invested in
securities which are selling at reasonable prices in relation to value and,
thus, is willing to forgo some opportunities for gains when, in the judgment of
Fund management, they carry excessive risk. Fund management tries to anticipate
major changes in the economy and select stocks which it believes will benefit
most from these changes. The Growth & Income Series normally invests in common
stocks (including securities convertible into common stocks) of large, seasoned
companies which are expected to show above-average growth in value and which are
in sound financial condition. Although the prices of common stocks fluctuate and
their dividends vary, historically, common stocks have appreciated in value and
their dividends have increased when the companies they represent have prospered
and grown.
The Growth & Income Series is constantly balancing the opportunity for profit
against the risk of loss. In the past, very few industries have continuously
provided the best investment opportunities. Fund management believes it is
important to take a flexible approach and adjust the portfolio to reflect
changes in the opportunities for sound investments relative to the risks
assumed; therefore, it sells securities that it judges to be overpriced and
reinvests the proceeds in other securities which it believes offer better
values.
The Series may invest up to 10% of its net assets (at the time of investment) in
each of the following: (a) covered call options traded on a national securities
exchange for portfolio securities and (b) foreign securities. These foreign
securities will be the kind described in this Prospectus for the Series'
domestic investment. It is the present intention of Fund management that these
securities be primarily traded in the United Kingdom, Western Europe, Australia,
Canada, the Far East, Latin America, and other developed countries as may be
determined from time to time. The Series also may invest in straight bonds and
other debt securities, including lower-rated, high-yield bonds, sometimes
referred to as "junk bonds" with a limit of 5% of its net assets (at the time of
investment) in such lower rated (BB/Ba or lower), high-yield bonds.
The Series does not purchase securities for trading purposes. To create reserve
purchasing power and also for temporary defensive purposes, it may invest in
short-term debt and other high-quality, fixed-income securities.
RISK FACTORS -- GROWTH & INCOME SERIES
High-Yield Bonds. The Series may invest up to 5% of its net assets (at the time
of investment), in lower-rated bonds for their higher yields. In general, the
market for lower-rated bonds is more limited than that for higher rated bonds
and, therefore, may be less liquid. The market prices of such lower-rated bonds
may fluctuate more than those of higher rated bonds, particularly in times of
economic change and stress. In addition, because the market for lower-rated
corporate debt securities has experienced wide fluctuations in the values of
certain of these securities, past experience may not provide an accurate
indication of the future performance of that market or of the frequency of
default, especially during periods of recession. Objective pricing data for
lower-rated bonds may be more limited and valuation of such securities may be
more difficult and require greater reliance upon judgment when compared to
higher rated bonds.
While the market for lower rated bonds may be less sensitive to interest rate
changes than that for higher rated bonds, the market prices of these lower rated
bonds structured as zero coupon or pay-in-kind securities may be affected to a
greater extent by such interest rate changes and thus may be more volatile than
prices of lower-rated securities periodically paying interest in cash. When
compared to higher rated bonds, lower-rated bonds that include redemption prior
to maturity or call provisions may be more susceptible to refunding during
periods of falling interest rates, requiring replacement by lower yielding
securities.
Since the risk of default generally is higher among lower-rated bonds, the
research and analysis of Lord Abbett are especially important in the selection
of such bonds which, if rated BB/Ba or lower, are often described as "high-yield
bonds" because of their generally higher yields and referred to as "junk bonds"
because of their greater risks. In selecting lower-rated bonds for our
investment, Lord Abbett does not rely upon ratings which, in any event, evaluate
only the safety of principal and interest, not market value risk and which,
furthermore, may not accurately reflect an issuer's current financial condition.
There are no minimum rating criteria for investments in these bonds and some may
default as to principal and/or interest payments subsequent to their purchase.
Through portfolio diversification, credit analysis and attention to current
developments and trends in interest rates and economic conditions, investment
risk can be reduced, although there is no assurance that losses will not occur.
<PAGE>
THE INTERNATIONAL SERIES. Portfolio Investments for the International Series
will be made in equity securities of companies domiciled in developed countries,
but investments also may be made in the securities of companies domiciled in
developing countries. Equity securities include common and preferred stocks,
convertible securities, and rights and warrants to purchase common stocks. Under
normal circumstances, at least 80% of the total assets of the Series will be
invested in such equity securities of companies which are domiciled in at least
three different countries outside the United States. The Series currently
intends to diversify investments among countries to reduce currency risk.
Although the Series will typically hold a number of diversified securities, it
does entail above-average investment risk in comparison to the U.S. stock
market.
Although the International Series intends to invest primarily in equity
securities of companies with market capitalization of less than $1 billion
listed on stock exchanges, it may also invest in equity securities of such
companies traded in over-the-counter markets, as well as large and middle
capitalization securities. Small capitalization securities involve greater risk
and the markets for such securities may be more volatile and less liquid.
Securities of companies in developing countries may pose liquidity risks. For a
description of special considerations and certain risks associated with
investments in foreign issuers, see "Risk Factors -- Both Series". The Series
may temporarily reduce its equity holdings for defensive purposes in response to
adverse market conditions and invest in domestic, Eurodollar and foreign
short-term money market instruments.
See "Investment Objectives and Policies" in the Statement of Additional
Information.
Although the International Series will not invest for short-term trading
purposes, investment securities may be sold from time to time without regard to
the length of time they have been held. It is anticipated that the annual
turnover rate of the Series will not exceed 100% under normal circumstances.
Any remaining assets of the Series not invested as described above may be
invested in certain securities or obligations as set forth in "Other Policies
Common to Both Series" below.
FORIEGN CURRENCY HEDGING TECHNIQUES. The International Series may utilize
various foreign currency hedging techniques described below.
A forward foreign currency contract involves an obligation to purchase or sell a
specific amount of a currency at a set price on a future date. The Series may
enter into forward foreign currency contracts (but not in excess of the amount
the Series has invested in non-U.S. dollar-denominated securities at the time
any such contract is entered into) in primarily two circumstances. First, when
the Series enters into a contract for the purchase or sale of a security
denominated in a foreign currency, the Series may desire to "lock in" the U.S.
dollar price of the security. By entering into a forward contract for the
purchase or sale of the amount of foreign currency involved in the underlying
security transaction, the Series will be able to protect against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar and
the subject foreign currency during the period between the date of purchase or
sale and the date of settlement.
Second, when Fund management believes that the currency of a particular foreign
country may suffer a decline against the U.S. dollar, the International Series
may enter into a forward contract to sell the amount of foreign currency
approximating the value of some or all of the Series' portfolio securities
denominated in such foreign currency or, in the alternative, the Series may use
a cross-currency-hedging technique whereby it enters into such a forward
contract to sell another currency (obtained in exchange for the currency which
the portfolio securities are denominated in if such securities are sold) which
it expects to decline in a similar manner but which has a lower transaction
cost. Precise matching of the forward contract and the value of the securities
involved will generally not be possible since the future value of such
securities denominated in foreign currencies will change as a consequence of
market movements in the value of those securities between the date the forward
contract is entered into and the date the contract matures. The Series intends
to enter into such forward contracts under this second circumstance
periodically.
The Series also may purchase foreign currency put options and write foreign
currency call options on U.S. exchanges or U.S. over-the-counter markets. A put
option gives the Series, upon payment of a premium, the right to sell a currency
at the exercise price until the expiration of the option and serves to insure
against adverse currency price movements in the underlying portfolio assets
denominated in that currency. The premiums paid for such foreign currency put
options will not exceed 5% of the net assets of the Series.
<PAGE>
Exchange-listed options markets in the United States include several major
currencies, and trading may be thin and illiquid. A number of major investment
firms trade unlisted options which are more flexible than exchange-listed
options with respect to strike price and maturity date. These unlisted options
generally are available on a wider range of currencies, including those of most
of the developed countries mentioned above. Unlisted foreign-currency options
generally are less liquid than listed options and involve the credit risk
associated with the individual issuer.
Unlisted options together with other illiquid securities may comprise no more
than 15% of the Series' net assets.
A foreign currency call option written by the Series gives the purchaser, upon
payment of a premium, the right to purchase from the Series a currency at the
exercise price until the expiration of the option. The Series may write a call
option on a foreign currency only in conjunction with a purchase of a put option
on that currency. Such a strategy is designed to reduce the cost of downside
currency protection by limiting currency appreciation potential. The face value
of such writing or cross-hedging (described above) may not exceed 90% of the
value of the securities denominated in such currency (a) invested in by the
Series to cover such call writing or (b) to be crossed.
Limitations imposed by the Internal Revenue Code on regulated investment
companies may restrict the Series' ability to engage in transactions in options,
forward contracts and cross hedges.
The Series' custodian will segregate cash or permitted securities belonging to
the Series with respect to its assets committed to (a) writing options, (b)
forward foreign currency contracts and (c) cross hedges entered into by the
Series. If the value of the securities segregated declines, additional cash or
permitted securities will be added on a daily basis (i.e., marked to market), so
that the segregated amount will not be less than the amount of the Series'
commitments with respect to such written options, forward foreign currency
contracts and cross hedges.
FINANCIAL FUTURES AND OPTIONS THEREON. The International Series may deal in
financial futures transactions with respect to the type of securities described
in this Prospectus, including indices of such securities and options on such
financial futures and indices. The Series will not enter into any futures
contracts, or options thereon, if the aggregate market value of the securities
covered by futures contracts plus options on such financial futures exceeds 50%
of the Series' total assets.
INVESTMENT FUNDS. Some emerging countries have laws and regulations that
currently preclude direct foreign investment in the securities of their
companies. However, indirect foreign investment in the securities of such
countries is permitted through investment funds which have been specifically
authorized. The International Series may invest (normally not more than 5% of
the Series' total assets) in these investment funds subject to the provisions of
the Investment Company Act of 1940, as amended, and other applicable
restrictions as discussed herein or in the Statement of Additional Information.
If the Series invests in such investment funds, the Series' shareholders will
bear not only their proportionate share of the expense of the Series (including
operating expenses and the fees of Lord Abbett), but also will indirectly bear
similar expenses of the underlying investment funds.
DEPOSITARY RECEIPTS. The International Series may invest in American Depositary
Receipts ("ADRs"), Global Depositary Receipts ("GDRs"), European Depositary
Receipts ("EDRs") and other Depositary Receipts (which, together with ADRs, GDRs
and EDRs, are hereinafter collectively referred to as "Depositary Receipts"), to
the extent that such Depositary Receipts become available. ADRs are securities,
typically issued by a U.S. financial institution (a "depositary"), that evidence
ownership interests in a security or a pool of securities issued by a foreign
issuer (the "underlying issuer") and deposited with the depositary. ADRs may be
established by a depositary without participation by the underlying issuer.
GDRs, EDRs and other types of Depositary Receipts are typically issued by
foreign depositaries, although they may also be issued by U.S. depositaries, and
evidence ownership interests in a security or pool of securities issued by
either a foreign or a U.S. corporation. Generally, Depositary Receipts in
registered form are designed for use in the U.S. securities market and
Depositary Receipts in bearer form are designed for use in securities markets
outside the United States. The Series may invest in sponsored and unsponsored
Depositary Receipts. For purposes of the International Series' investment
policies, the Series' investments in Depositary Receipts will be deemed to be
investments in the underlying securities.
<PAGE>
RISK FACTORS -- BOTH SERIES
SIZE. If either Series remains small, there is risk that redemptions of a
Series' shares may (a) cause portfolio securities of that Series to be sold
prematurely (at a loss or gain, depending upon the circumstances) or (b) hamper
or prevent a contemplated portfolio security purchase by that Series.
FOREIGN INVESTMENTS. Investment in either Series requires consideration of
certain factors that are not normally involved in investments in U.S.
securities. Generally, at least 80% of the assets of the International Series
and up to 10% of the net assets of the Growth & Income Series will be
denominated or traded in foreign currencies. Accordingly, a change in the value
of any foreign currency relative to the U.S. dollar will result in a
corresponding change in the U.S. dollar value of a Series' assets denominated or
traded in that currency. The performance of each Series will be measured in U.S.
dollars, the base currency of the Series. Securities markets of foreign
countries in which a Series may invest generally are not subject to the same
degree of regulation as the U.S. markets and may be more volatile and less
liquid than the major U.S. markets. Lack of liquidity may affect a Series'
ability to purchase or sell large blocks of securities and thus obtain the best
price. There may be less publicly-available information on publicly-traded
companies, banks and governments in foreign countries than is generally the case
for such entities in the United States. The lack of uniform accounting standards
and practices among countries impairs the validity of direct comparisons of
valuation measures (such as price/earnings ratios) for securities in different
countries. In addition, a Series may incur costs associated with currency
hedging and the conversion of foreign currency into U.S. dollars and may be
adversely affected by restrictions on the conversion or transfer of foreign
currency. Other considerations include political and social instability,
expropriation, higher transaction costs and different securities settlement
practices. Settlement periods for foreign securities, which are sometimes longer
than those for securities of U.S. issuers, may affect portfolio liquidity. These
different settlement practices may cause missed purchasing opportunities and/or
the loss of interest on money market and debt investments pending further equity
or long-term debt investments. In addition, foreign securities held by a Series
may be traded on days that the Series do not value their portfolio securities,
such as Saturdays and customary U.S. business holidays, and, accordingly, a
Series' net asset value may be significantly affected on days when shareholders
do not have access to the Series. Many of the emerging or developing countries
may have higher and more rapidly fluctuating inflation rates, a higher demand
for capital investment, a higher dependence on export markets for their major
industries, and a greater need to develop basic economic infrastructures than
more developed countries. Also, it may be more difficult to obtain a judgment in
a court outside the United States.
OTHER POLICIES COMMON TO BOTH SERIES
ILLIQUID SECURITIES. Each Series may invest up to 15% of its net assets in
illiquid securities. Borrowing. Each Series may borrow from banks (as defined in
the Act) in amounts up to 33 1/3% of its total assets (including the amount
borrowed). Each Series may borrow up to an additional 5% of its total assets for
temporary purposes. Each Series may obtain such short-term credit as may be
necessary for the clearance of purchases and sales of portfolio securities.
DIVERSIFICATION. Each Series intends to meet the diversification rules under
Subchapter M of the Internal Revenue Code. The Growth & Income Series met the
diversification rules under Subchapter M for its fiscal year ended October 31,
1996. Generally, this requires, at the end of each quarter of the taxable year,
that (a) not more than 25% of each Series' total assets be invested in any one
issuer and (b) with respect to 50% of each Series' total assets, no more than 5%
of such Series' total assets be invested in any one issuer except U.S.
Government securities. Each Series, as a "diversified" investment company, is
prohibited, with respect to 75% of the value of its total assets, from investing
more than 5% of its total assets in securities of any one issuer other than U.S.
Government securities. For diversification purposes, the identification of an
"issuer" for the fixed-income portion of a Series' assets will be determined on
the basis of the source of assets and revenues committed to meeting interest and
principal payments of the securities. When the assets and revenues of a
sovereign state's political subdivision are separate from those of the sovereign
state government creating the subdivision, and the security is backed only by
the assets and revenues of the subdivision, then the subdivision would be
considered the sole issuer. Similarly, if a revenue bond is backed only by the
assets and revenues of a nongovernmental user, then such user would be
considered the sole issuer.
WHEN ISSUED OR DELAYED SECURITIES. Either Series may purchase securities on a
when-issued basis and, while awaiting delivery and before paying for them
("settlement"), normally may invest in short-term securities. Each Series does
not start earning interest on these when-issued securities until settlement and
often they are sold prior to settlement. During the period between purchase and
settlement, the value of the securities will fluctuate and assets consisting of
cash and/or marketable securities marked to market daily in an amount sufficient
to make payment at settlement will be segregated at our custodian in order to
pay for the commitment. There is a risk that market yields available at
settlement may be higher than yields obtained on the purchase date, which could
result in depreciation of value.
<PAGE>
The other debt securities in which each Series may invest include, but are not
limited to, domestic and foreign fixed- and floating-rate notes, bonds,
debentures, convertibles, certificates, warrants, commercial paper, and
principal and interest pass-through instruments issued by governments,
authorities, partnerships, corporations, trust companies, banks and bank holding
companies, and banker's acceptances, certificates of deposit, time deposits and
deposit notes issued by domestic and foreign banks.
It is currently intended that no more than 5% of each Series' net assets will be
at risk in the use of any one of the policies identified below.
COVERED CALL OPTIONS. Each Series may write call options on securities it owns,
provided that the securities we hold to cover such options do not represent more
than 5% of a Series' net assets. A call option on stock gives the purchaser of
the option, upon payment of a premium to the writer of the option, the right to
call upon the writer to deliver a specified number of shares of a stock on or
before a fixed date at a predetermined price.
RIGHTS AND WARRANTS. Each Series may invest in rights and warrants to purchase
securities provided that, at the time of the acquisition, its investment in
warrants, valued at the lower of cost or market, would not exceed 5% of the
Series' total assets. Warrants which are not listed on the New York or American
Stock Exchange or a major foreign exchange may not exceed 2% of the Series'
total assets.
REPURCHASE AGREEMENTS. Each Series may enter into repurchase agreements with
respect to a security. A repurchase agreement is a transaction by which a Series
acquires a security and simultaneously commits to resell that security to the
seller (a bank or securities dealer) at an agreed-upon price on an agreed-upon
date. Such repurchase agreement must, at all times, be collateralized by cash or
U.S. Government securities having a value equal to, or in excess of, the value
of the repurchase agreement.
CLOSED END INVESTMENT COMPANIES. Each Series may invest in shares of closed-end
investment companies if bought in the primary or secondary market with a fee or
commission no greater than the customary broker's commission. Shares of such
investment companies sometimes trade at a discount or premium in relation to
their net asset value and there may be duplication of fees, for example, to the
extent that a Series and the closed-end investment company both charge a
management fee.
LENDING OF PORTFOLIO SECURITIES. Each Series may seek to earn income by lending
its portfolio securities if the loan is collateralized and its terms are in
accordance with regulatory requirements.
PORTFOLIO TURNOVER. The portfolio turnover rate for the Growth & Income Series
for the fiscal year ended October 31, 1996 was 23.84%. It is anticipated that
the portfolio turnover rate for the International Series will not exceed 100%.
CHANGE OF INVESTMENT OBJECTIVES AND POLICIES. Neither Series will change its
investment objective without shareholder approval. If a Series determines that
its objective can best be achieved by a change in investment policy or strategy,
it may make such change without shareholder approval by disclosing it in its
prospectus.
PURCHASES
GENERAL
HOW MUCH DO YOU HAVE TO INVEST? You may buy our shares through any independent
securities dealer having a sales agreement with Lord Abbett Distributor, LLC
("Lord Abbett Distributor"), our exclusive selling agent. Place your order with
your investment dealer or send it to Lord Abbett Securities Trust (P.O. Box
419100, Kansas City, Missouri 64141). The minimum initial investment is $1,000
except for Invest-A-Matic, Div-Move and Retirement Plans ($250 initial and $50
monthly minimum). Subsequent investments may be made in any amount. See
"Shareholder Services". For information regarding proper form of a purchase or
redemption order, call the Fund at 800-821-5129. This offering may be suspended,
changed or withdrawn. Lord Abbett Distributor reserves the right to reject any
order.
The net asset value of the Series' shares is calculated every business day as of
the close of the New York Stock Exchange ("NYSE") by dividing the Series' net
assets by the number of shares of the Series outstanding. Securities are valued
at their market value, as more fully described in the Statement of Additional
Information.
<PAGE>
BUYING SHARES THROUGH YOUR DEALER. Orders for shares received by the Fund prior
to the close of the NYSE, or received by dealers prior to such close and
received by Lord Abbett Distributor in proper form prior to the close of its
business day, will be confirmed at the applicable public offering price
effective at such NYSE close. Orders received by dealers after the NYSE closes
and received by Lord Abbett Distributor prior to the close of its next business
day are executed at the applicable public offering price effective as of the
close of the NYSE on that next business day. The dealer is responsible for the
timely transmission of orders to Lord Abbett Distributor. A business day is a
day on which the NYSE is open for trading.
Lord Abbett Distributor may, for specified periods, allow dealers to retain the
full sales charge for sales of shares during such periods, or pay an additional
concession to a dealer who, during a specified period, sells a minimum dollar
amount of our shares and/or shares of other Lord Abbett-sponsored funds. In some
instances, such additional concessions will be offered only to certain dealers
expected to sell significant amounts of shares. Lord Abbett Distributor may,
from time to time, implement promotions under which Lord Abbett Distributor will
pay a fee to dealers with respect to certain purchases not involving imposition
of a sales charge. Additional payments may be paid from Lord Abbett
Distributor's own resources and will be made in the form of cash or, if
permitted, non-cash payments. The non-cash payments will include business
seminars at resorts or other locations, including meals and entertainment, or
the receipt of merchandise. The cash payments will include payment of various
business expenses of the dealer. In selecting dealers to execute portfolio
transactions for the Fund's portfolios, if two or more dealers are considered
capable of obtaining best execution, we may prefer the dealer who has sold our
shares and/or shares of other Lord Abbett-sponsored funds.
ALTERNATIVE SALES ARRANGEMENTS
CLASS OF SHARES. The Growth & Income Series offers investors two different
classes of shares: Class A and Class C shares. The International Series offers
only Class A shares. The different classes of shares represent investments in
the same portfolio of securities but are subject to different expenses and will
be likely to have different share prices. Investors should read this section
carefully to determine which class represents the best investment option for
their particular situation.
CLASS A SHARES. If you buy Class A shares, you pay an initial sales charge on
investments of less than $1 million (or on investments for employer-sponsored
retirement plans under the Internal Revenue Code (hereinafter referred to as
"Retirement Plans") with less than 100 eligible employees). If you purchase
Class A shares as part of an investment of at least $1 million (or for
Retirement Plans with at least 100 eligible employees) in shares of one or more
Lord Abbett-sponsored funds, you will not pay an initial sales charge, but if
you redeem any of those shares within 24 months after the month in which you buy
them, you may pay to the Series a contingent deferred sales charge ("CDSC") of
1%. Class A shares are subject to service and distribution fees that are
currently estimated to total annually approximately 0.23 of 1% (for each Series)
of the annual net asset value of the Class A shares. The initial sales charge
rates, the CDSC and the Rule 12b-1 Plan applicable to the Class A shares are
described in "Buying Class A Shares" below.
CLASS C SHARES. If you buy Class C shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the first anniversary of
buying them, you will normally pay the Growth & Income Series a CDSC of 1%.
Class C shares are subject to service and distribution fees at an annual rate of
1% of the annual net asset value of the Class C shares. The CDSC and the Rule
12b-1 Plan applicable to the C shares are described in "Buying Class C Shares"
below.
WHICH CLASS OF SHARES SHOULD YOU CHOOSE? If you decide that the Growth & Income
Series is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which you
should discuss with your financial adviser. The Series' class-specific expenses
and the effect of the different types of sales charges on your investment will
affect your investment results over time. The most important factors are how
much you plan to invest and how long you plan to hold your investment. If your
goals and objectives change over time and you plan to purchase additional
shares, you should re-evaluate those factors to see if you should consider
another class of shares.
<PAGE>
In the following discussion, to help provide you and your financial adviser with
a framework in which to choose a class, we have made some assumptions using a
hypothetical investment in the Growth & Income Series. We used the sales charge
rates that apply to Class A and Class C shares, and considered the effect of the
higher distribution fee on Class C expenses (which will affect your investment
return). Of course, the actual performance of your investment cannot be
predicted and will vary, based on the Growth & Income Series' actual investment
returns, the operating expenses borne by each class of shares, and the class of
shares you purchase. The factors briefly discussed below are not intended to be
investment advice, guidelines or recommendations, because each investor's
financial considerations are different. The discussion below of the factors to
consider in purchasing a particular class of shares assumes that you will
purchase only one class of shares and not a combination of shares of both
classes.
HOW LONG DO YOU EXPECT TO HOLD YOUR INVESTMENT ? While future financial needs
cannot be predicted with certainty, knowing how long you expect to hold your
investment will assist you in selecting the appropriate class of shares. For
example, over time, the reduced sales charges available for larger purchases of
Class A shares may offset the effect of paying an initial sales charge on your
investment, compared to the effect over time of higher class-specific expenses
on Class C shares for which no initial sales charge is paid. Because of the
effect of class-based expenses, your choice should also depend on how much you
plan to invest.
INVESTING FOR THE SHORT TERM. If you have a short-term investment horizon (that
is, you plan to hold your shares for not more than six years), Class C shares
might be the appropriate choice (especially for investments of less than
$100,000), because there is no initial sales charge on Class C shares, and the
CDSC does not apply to amounts you redeem after holding them one year.
However, if you plan to invest more than $100,000 for the short term, then the
more you invest and the more your investment horizon increases toward six years,
the more attractive the Class A share option may become. That is because the
annual distribution fee on Class C shares will have a greater impact on your
account over the longer term than the reduced front-end sales charge available
for larger purchases of Class A shares. For example, Class A might be more
appropriate than Class C for investments of more than $100,000 expected to be
held for 5 or 6 years (or more). For investments over $250,000 expected to be
held 4 to 6 years (or more), Class A shares may become more appropriate than
Class C. If you are investing $500,000 or more, Class A may become more
desirable as your investment horizon approaches 3 years or more.
For most investors who invest $1 million or more or for Retirement Plans with at
least 100 eligible employees, in most cases Class A shares will be the most
advantageous choice, no matter how long you intend to hold your shares. For that
reason, Lord Abbett Distributor normally will not accept purchase orders (i) for
Class C shares of $1 million or more from a single investor or (ii) for
Retirement Plans with at least 100 eligible employees.
INVESTING FOR THE LONGER TERM. If you plan to invest more than $100,000 in the
Series over the long term, Class A shares will likely be more advantageous than
Class C shares, as discussed above, because of the effect of the expected lower
expenses for Class A shares and the reduced initial sales charges available for
larger investments in Class A shares under the Fund's Rights of Accumulation.
Of course, these examples are based on approximations of the effect of current
sales charges and expenses on a hypothetical investment over time, and should
not be relied on as rigid guidelines.
Are There Differences in Account Features That Matter to You? Some account
features are available in whole or in part to Class A and Class C shareholders.
Other features (such as Systematic Withdrawal Plans) might not be advisable in
any account for Class C shareholders during the first year of share ownership
(due to the CDSC on withdrawals during that year). You should carefully review
how you plan to use your investment account before deciding which class of
shares you buy. For example, the dividends payable to Class C shareholders will
be reduced by the expenses borne solely by that class, such as the higher
distribution fee to which Class C shares are subject, as described below.
How Does It Affect Payments to My Broker? A salesperson, such as a broker, or
any other person who is entitled to receive compensation for selling Fund shares
may receive different compensation for selling one class than for selling
another class. As discussed in more detail below, such compensation is primarily
paid at the time of sale in the case of Class A shares and is paid over time, so
long as shares remain outstanding, in the case of Class C shares. It is
important that investors understand that the primary purpose of the CDSC and
distribution fee for Class C shares is the same as the purpose of the front-end
sales charge on sales of Class A shares: to compensate brokers and other persons
selling such shares. The CDSC, if payable, reduces the Class C distribution fee
expenses for the Growth and Income Series and Class C shareholders.
<PAGE>
BUYING CLASS A SHARES. The offering price of Class A shares is based on the
per-share net asset value next computed after your order is accepted plus a
sales charge as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Sales Charge as a Dealer's
Percentage of: Concession
as a To Compute
Net Percentage Offering
Offering Amount of Offering Price, Divide
Size of Investment Price Invested Price NAV by
Less than $50,000 5.75% 6.10% 5.00% .9425
$50,000 to $99,999 4.75% 4.99% 4.00% .9525
$100,000 to $249,999 3.75% 3.90% 3.25% .9625
$250,000 to $499,999 2.75% 2.83% 2.25% .9725
$1,000,000 or more No Sales Charge 1.00%+ 1.0000
+Authorized institutions receive concessions on purchases made by a retirement
plan or other qualified purchaser within a 12-month period (beginning with the
first net asset value purchase) as follows: 1.00% on purchases of $5 million,
0.55% of the next $5 million, 0.50% of the next $40 million and 0.25% on
purchases over $50 million. See "Class A Rule 12b-1 Plan" below.
CLASS A SHARE VOLUME DISCOUNTS. This section describes several ways to qualify
for a lower sales charge when purchasing Class A shares if you inform Lord
Abbett Distributor or the Fund that you are eligible at the time of purchase.
(1) Any purchaser (as described below) may aggregate a Class A share purchase in
the Fund with any share purchases of any other eligible Lord Abbett-sponsored
fund, together with the current value at maximum offering price of any shares in
the Fund and in any eligible Lord Abbett-sponsored funds held by the purchaser.
(Holdings in the following funds are not eligible for the above rights of
accumulation: Lord Abbett Equity Fund ("LAEF"), Lord Abbett Series Fund
("LASF"), any series of the Lord Abbett Research Fund not offered to the general
public ("LARF") and Lord Abbett U.S. Government Securities Money Market Fund
("GSMMF"), except for holdings in GSMMF which are attributable to any shares
exchanged from a Lord Abbett-sponsored fund.) (2) A purchaser may sign a
non-binding 13-month statement of intention to invest $100,000 or more in any
shares of the Fund or in any of the above eligible funds. If the intended
purchases are completed during the period, the total amount of your intended
purchases of any shares will determine the reduced sales charge rate for the
Class A shares purchased during the period. If not completed, each Class A share
purchase will be at the sales charge for the aggregate of the actual share
purchases. Shares issued upon reinvestment of dividends or distributions are not
included in the statement of intention. The term "purchaser" includes (i) an
individual, (ii) an individual and his or her spouse and children under the age
of 21 and (iii) a trustee or other fiduciary purchasing shares for a single
trust estate or single fiduciary account (including a pension, profit-sharing,
or other employee benefit trust qualified under Section 401 of the Internal
Revenue Code -- more than one qualified employee benefit trust of a single
employer, including its consolidated subsidiaries, may be considered a single
trust, as may qualified plans of multiple employers registered in the name of a
single bank trustee as one account), although more than one beneficiary is
involved.
CLASS A SHARE NET ASSET VALUE PURCHASES. Our Class A shares may be purchased at
net asset value by our trustees, employees of Lord Abbett, employees of our
shareholder servicing agent and employees of any securities dealer having a
sales agreement with Lord Abbett Distributor who consents to such purchases or
by the trustee or custodian under any pension or profit-sharing plan or Payroll
Deduction IRA established for the benefit of such persons or for the benefit of
any national securities trade organization to which Lord Abbett or Lord Abbett
Distributor belongs or any company with an account(s) in excess of $10 million
managed by Lord Abbett on a private-advisory-account basis. For purposes of this
paragraph, the terms "trustees" and "employees" include a trustee's or
employee's spouse (including the surviving spouse of a deceased trustee or
employee). The terms
<PAGE>
"trustees" and "employees of Lord Abbett" also include other family members and
retired trustees and employees. Our Class A shares also may be purchased at net
asset value (a) at $1 million or more, (b) with dividends and distributions on
Class A shares of other Lord Abbett-sponsored funds, except for dividends and
distributions on shares of LARF, LAEF and LASF, (c) under the loan feature of
the Lord Abbett-sponsored prototype 403(b) plan for Class A share purchases
representing the repayment of principal and interest, (d) by certain authorized
brokers, dealers, registered investment advisers or other financial institutions
who have entered into an agreement with Lord Abbett Distributor in accordance
with certain standards approved by Lord Abbett Distributor, providing
specifically for the use of our Class A shares in particular investment products
made available for a fee to clients of such brokers, dealers, registered
investment advisers and other financial institutions ("mutual fund wrap fee
programs"), (e) by employees, partners and owners of unaffiliated consultants
and advisers to Lord Abbett, Lord Abbett Distributor or Lord Abbett-sponsored
funds who consent to such purchase if such persons provide services to Lord
Abbett, Lord Abbett Distributor or such funds on a continuing basis and are
familiar with such funds, (f) through Retirement Plans with at least 100
eligible employees and (g) subject to appropriate documentation, through a
securities dealer where the amount invested represents redemption proceeds from
shares ("Redeemed Shares") of a registered open-end management investment
company not distributed or managed by Lord Abbett Distributor or Lord Abbett
(other than a money market fund), if such redemptions have occurred no more than
60 days prior to the purchase of our Class A shares, the Redeemed Shares were
held for at least six months prior to redemption and the proceeds of redemption
were maintained in cash or a money market fund prior to purchase. Purchasers
should consider the impact, if any, of contingent deferred sales charges in
determining whether to redeem shares for subsequent investment in our Class A
shares. Lord Abbett Distributor may suspend or terminate the purchase option
referred to in (g) above at any time.
Our Class A shares may be issued at net asset value in exchange for the assets,
subject to possible tax adjustment, of a personal holding company or an
investment company.
CLASS A RULE 12B-1 PLAN. The Fund has adopted a Class A share Rule 12b-1 Plan
for each Series (the "A Plans", each an "A Plan") which authorizes the payment
of fees to authorized institutions (except as to certain accounts for which
tracking data is not available) in order to provide additional incentives for
them (a) to provide continuing information and investment services to their
Class A shareholder accounts and otherwise to encourage those accounts to remain
invested in the Series and (b) to sell Class A shares of the Series. Under the A
Plans, in order to save on the expense of shareholders meetings and to provide
flexibility to the Board of Trustees, the Board, including a majority of the
outside trustees who are not "interested persons" of the Fund as defined in the
Investment Company Act of 1940, is authorized to approve annual fee payments
from our Class A assets of up to 0.50 of 1% of the average net asset value of
such assets consisting of distribution and service fees, each at a maximum
annual rate not exceeding 0.25 of 1% (the "Fee Ceiling").
Under the A Plans, the Board has approved payments by the Series to Lord Abbett
Distributor which uses or passes on to authorized institutions (1) an annual
service fee (payable quarterly) of .25% of the average daily net asset value of
the Class A shares serviced by authorized institutions; and (2) a one-time
distribution fee of up to 1% (reduced according to the following schedule: 1% of
the first $5 million, .55% of the next $5 million, .50% of the next $40 million
and .25% over $50 million), payable at the time of sale on all Class A shares
sold during any 12-month period starting from the day of the first net asset
value sale (i) at the $1 million level by authorized institutions, including
sales qualifying at such level under the rights of accumulation and statement of
intention privileges; (ii) through Retirement Plans with at least 100 eligible
employees. In addition, the Board has approved for those authorized institutions
which qualify, a supplemental annual distribution fee equal to 0.10% of the
average daily net asset value of the Class A shares serviced by authorized
institutions which have a satisfactory program for the promotion of such shares
comprising a significant percentage of the Class A assets, with a lower than
average redemption rate. Institutions and persons permitted by law to receive
such fees are "authorized institutions".
Under the A Plans, Lord Abbett Distributor is permitted to use payments received
to provide continuing services to Class A shareholder accounts not serviced by
authorized institutions and, with Board approval, to finance any activity which
is primarily intended to result in the sale of Class A shares. Any such payments
are subject to the Fee Ceiling. Any payments under the A Plan not used by Lord
Abbett Distributor in this manner are passed on to authorized institutions.
Holders of Class A shares on which the 1% sales distribution fee has been paid
may be required to pay to the Series on behalf of its Class A shares a CDSC of
1% of the original cost or the then net asset value, whichever is less, of all
Class A shares so purchased which are redeemed out of the Lord Abbett-sponsored
family of funds on or before the end of the twenty-fourth month after the month
in which the purchase occurred. (An exception is made for redemptions by
Retirement Plans due to any benefit payment such as Plan loans, hardship
withdrawals, death, retirement or separation from service with respect to plan
participants or the distribution of any excess contributions.) If the Class A
shares have been exchanged into another Lord Abbett-sponsored fund and are
thereafter redeemed out of the Lord Abbett family of funds on or before the end
of such twenty-fourth month, the charge will be collected for the Series' Class
A shares by the other fund. The Series will collect such a charge for other Lord
Abbett-sponsored funds in a similar situation.
<PAGE>
BUYING CLASS C SHARES. Class C shares of the Growth & Income Series are sold at
net asset value per share without an initial sales charge. However, if Class C
shares are redeemed for cash before the first anniversary of their purchase, a
CDSC of 1% may be deducted from the redemption proceeds. That reimbursement
charge will not apply to shares purchased by the reinvestment of dividends or
capital gains distributions. The charge will be assessed on the lesser of the
net asset value of the shares at the time of redemption or the original purchase
price. The CDSC is not imposed on the amount of your account value represented
by the increase in net asset value over the initial purchase price (including
increases due to the reinvestment of dividends and capital gains distributions).
The Class C CDSC is paid to the Series to reimburse it, in whole or in part, for
the service and distribution fee payment made by the Series at the time such
shares were sold, as described below.
To determine whether the CDSC applies to a redemption, the Series redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held for one year or more, and (3)
shares held the longest before the first anniversary of their purchase. If Class
C shares are exchanged into the same class of another Lord Abbett-sponsored fund
and subsequently redeemed before the first anniversary of their original
purchase, the charge will be collected by the other fund on behalf of this
Series' Class C shares. The Series will collect such a charge for other Lord
Abbett-sponsored funds in a similar situation.
CLASS C RULE 12B-1 PLAN. The Fund has adopted a Class C share Rule 12b-1 Plan
(the "C Plan") under which (except as to certain accounts for which tracking
data is not available) the Growth & Income Series pays authorized institutions
through Lord Abbett Distributor (1) a service fee and a distribution fee, at the
time shares are sold, not to exceed 0.25 and 0.75 of 1%, 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 0.25 and 0.75 of 1% respectively, of the average annual net
asset value of such shares outstanding (payments with respect to shares not
outstanding during the full quarter to be prorated). These service and
distribution fees are for purposes similar to those mentioned above with respect
to the A Plan. 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.
SHAREHOLDER SERVICES
We offer the following shareholder services:
TELEPHONE EXCHANGE PRIVILEGE: Shares of any class may be exchanged without a
service charge: (a) for shares of the same class of any other Lord
Abbett-sponsored fund except for (i) LAEF, LASF and LARF and (ii) certain
tax-free, single-state series where the exchanging shareholder is a resident of
a state in which such series is not offered for sale and (b) for shares of any
authorized institution's affiliated money market fund satisfying Lord Abbett
Distributor as to certain omnibus account and other criteria (together,
"Eligible Funds").
You or your representative with proper identification can instruct the Fund to
exchange uncertificated shares of a class (held by the transfer agent) by
telephone. Shareholders have this privilege unless they refuse it in writing.
The Fund will not be liable for following instructions communicated by telephone
that it reasonably believes to be genuine and will employ reasonable procedures
to confirm that instructions received are genuine, including requesting proper
identification and recording all telephone exchanges. Instructions must be
received by the Fund in Kansas City (800-821-5129) prior to the close of the
NYSE to obtain each fund's net asset value per class share on that day.
Expedited exchanges by telephone may be difficult to implement in times of
drastic economic or market change. The exchange privilege should not be used to
take advantage of short-term swings in the market. The Fund reserves the right
to terminate or limit the privilege of any shareholder who makes frequent
exchanges. The Fund can revoke the privilege for all shareholders upon 60 days'
prior written notice. A prospectus for the other Lord Abbett-sponsored fund
selected by you should be obtained and read before an exchange. Exercise of the
Exchange Privilege will be treated as a sale for federal income tax purposes
and, depending on the circumstances, a capital gain or loss may be recognized.
<PAGE>
SYSTEMATIC WITHDRAWAL PLAN ("SWP"): Except for Retirement Plans for which there
is no such minimum, if the maximum offering price value of your uncertificated
shares is at least $10,000, you may have periodic cash withdrawals automatically
paid to you in either fixed or variable amounts. For C shares, redemption
proceeds due to an SWP will be derived from the following sources in the order
listed: (1) shares acquired by reinvestment of dividends and capital gains, (2)
shares held for one year or more, and (3) shares held the longest before the
first anniversary of their purchase.
DIV-MOVE : You can invest the dividends paid on your account ($50 minimum
investment) into an existing account within the same class in any Eligible Fund.
The account must be either your account, a joint account for you and your
spouse, a single account for your spouse or a custodial account for your minor
child under the age of 21. Such dividends will not be subject to a CDSC. You
should read the prospectus of the other fund before investing.
INVEST-A-MATIC: You can make fixed, periodic investments ($50 minimum
investment) into the Fund and/or any Eligible Fund by means of automatic money
transfers from your bank checking account. You should read the prospectus of the
other fund before investing.
RETIREMENT PLANS: Lord Abbett makes available the retirement plan forms and
custodial agreements for IRAs (Individual Retirement Accounts including
Simplified Employee Pensions), 403(b) plans and pension and profit-sharing
plans, including 401(k) plans.
HOUSEHOLDING: A single copy of an annual or semi-annual report will be sent to
an address to which more than one registered shareholder of the Fund with the
same last name has indicated mail is to be delivered, unless additional reports
are specifically requested in writing or by telephone.
All correspondence should be directed to Lord Abbett Securities Trust (P.O. Box
419100, Kansas City, Missouri 64141; 800-821-5129).
OUR MANAGEMENT
Our business is managed by our officers on a day-to-day basis under the overall
direction of our Board of Trustees with the advice of Lord Abbett ("Fund
Management"). We employ Lord Abbett as investment manager pursuant to a
Management Agreement. Lord Abbett has been an investment manager for over 65
years and currently manages approximately $19 billion in a family of mutual
funds and other advisory accounts. Under the Management Agreement, Lord Abbett
provides us with investment management services and personnel, pays the
remuneration of our officers and of our Trustees affiliated with Lord Abbett,
provides us with office space and pays for ordinary and necessary office and
clerical expenses relating to research, statistical work and supervision of our
portfolios and certain other costs. Lord Abbett provides similar services to
twelve other Lord Abbett-sponsored funds having various investment objectives
and also advises other investment clients. Robert G. Morris, Executive Vice
President of Lord Abbett, serves as portfolio manager for the Growth & Income
Series. Mr. Morris has been with Lord Abbett five years and has over twenty-five
years of investment experience. Christopher Taylor, will serve as portfolio
manager of the International Series. Mr. Taylor has been with Fuji Investment
Management Co. (Europe) Ltd. since ____ and has over ___ years of investment
experience.
Lord Abbett has entered into an agreement with Fuji Investment Management Co.
(Europe) Ltd. (the "Sub-Adviser"), under which the Sub-Adviser provides Lord
Abbett with advice with respect to that portion of the International Series'
assets invested in countries other than the United States (the "foreign
assets"). The Sub-Adviser is controlled by Fuji Investment Management Co.
(Tokyo). Fuji Bank Limited of Tokyo Japan directly owns 40% of the outstanding
voting stock of the Sub-Adviser. Fuji Investment Management Co. (Tokyo) is an
affiliate of Fuji Bank. Lord Abbett indirectly owns a minor percentage of such
outstanding voting stock. As of November 1, 1996 the Sub-Adviser manages
approximately $336 million, which is invested globally. The Sub-Adviser
furnishes Lord Abbett with advice and recommendations with respect to the
foreign assets, including advice about the allocation of investments among
foreign securities markets and foreign equity and debt securities markets and
foreign equity and debt securities and, subject to consultation with Lord
Abbett, advice as to cash holdings and what securities in the portfolios of
foreign assets should be purchased, held or disposed of. The Sub-Adviser also
gives advice with respect to foreign currency matters.
Although under normal circumstances the International Series will be invested at
least 80% in equity securities of non-U.S. issuer, subject to the direction of
the Board of Trustees, Lord Abbett, in consultation with the Sub-Adviser, will
determine at least quarterly, and more frequently as Lord Abbett determines, the
percentage of the assets of the International Series that shall be allocated
(the "Asset Allocation") for investment in the United States and in foreign
markets, respectively.
<PAGE>
Under the Management Agreement, we are obligated to pay Lord Abbett a monthly
fee at the annual rate of .75 of 1% for each Series. With respect to the
International Series, Lord Abbett, when not waiving its management fee, is
obligated to pay the Sub-Adviser a monthly fee equal to one-half of Lord
Abbett's fee as described above. Regardless of such waiver, Lord Abbett is free
to pay the Sub-Adviser. For the year ended October 31, 1996, Lord Abbett had
waived $242,341 in management fees for the Growth & Income Series. For the same
period the Class C share ratio of expenses, including management fees, to
average net assets was 1.55%. For the same period, had Lord Abbett not waived
its management fee and assumed certain expenses, the Class C share expense ratio
would have been 2.01%. As of July 12, 1996, Lord Abbett discontinued its waiver
of the Growth & Income Series' management fee.
The Management Agreement provides for each Series to repay Lord Abbett without
interest any expenses assumed by Lord Abbett on and after the first day of the
calendar quarter after the net assets of each Series first reach $50 million
("commencement date"), to the extent that the expense ratio (determined before
taking into account any fee waiver or expense assumption) is less than 1.95% for
the Growth & Income Series and 1.75% for the International Series. Each Series
shall not be 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. Each Series will not record as obligations in its
financial statements any expenses which may possibly be repaid to Lord Abbett
under this repayment formula unless such repayment is probable at the time. If
such repayment is not probable, each Series will disclose in notes to its
financials that such repayments are possible. As of October 31, 1996, such
contingent obligations of the Growth & Income Series totaled $33,620.
We will not hold annual meetings and expect to hold meetings of shareholders
only when necessary under applicable law or the terms of the Fund's Declaration
of Trust. Under the Declaration of Trust, a shareholder's meeting may be called
at the request of the holders of one-quarter of the outstanding shares entitled
to vote. See the Statement of Additional Information for more details.
THE FUND. The Fund was organized as a Delaware business trust on February 26,
1993. Its Class A and Class C shares have equal rights as to voting, dividends
and distributions except for differences resulting from certain class-specific
expense.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
Dividends from net investment income are paid to shareholders of the Growth &
Income Series in March, June, September and December. Such dividends are paid to
shareholders of the International Series in December. Supplemental dividends may
be paid by each Series in December or January. Dividends from net investment
income may be taken in cash or reinvested in additional shares at net asset
value without a sales charge. If you elect a cash payment (i) a check will be
mailed to you as soon as possible after the monthly reinvestment date or (ii) if
you arrange for direct deposit, your payment will be wired directly to your bank
account within one day after the date on which the dividend is paid.
A long-term capital gains distribution is made by a Series when it has net
profits during the year from sales of securities which it has held more than one
year. If a Series realizes net short-term capital gains, they also will be
distributed. It is anticipated that capital gains will be distributed in
December or January. You may take them in cash or additional shares without a
sales charge.
Dividends declared in October, November or December of any year to shareholders
of record as of a date in such a month will be treated for federal income tax
purposes as having been received by shareholders in that year if they are paid
before February 1 of the following year.
Shareholders must report dividends and capital gains distributions as taxable
income. Distributions derived from net long-term capital gains which are
designated by a Series as "capital gains distributions" will be taxable to
shareholders as long-term capital gains, whether received in cash or shares,
regardless of how long a taxpayer has held the shares. Under current law, net
long-term capital gains are taxed at the rates applicable to ordinary income,
except that the maximum rate for long-term capital gains for individuals is 28%.
Recently, legislation has been proposed that would have the effect of reducing
the federal income tax rate on capital gains.
Each Series may be subject to foreign withholding taxes which would reduce the
yield on their investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. See the Statement of
Additional Information for additional details.
<PAGE>
Shareholders may be subject to a $50 penalty under the Internal Revenue Code and
we may be required to withhold and remit to the U.S. Treasury a portion (31%) of
any redemption or repurchase proceeds (including the value of shares exchanged
into another Lord Abbett-sponsored fund) and of any taxable dividend or
distribution on any account where the payee failed to provide a correct taxpayer
identification number or to make certain required certifications.
We will inform shareholders of the federal tax status of each dividend and
distribution after the end of each calendar year. Shareholders should consult
their tax advisers concerning applicable state and local taxes as well as the
tax consequences of gains or losses from the redemption or exchange of our
shares.
REDEMPTIONS
To obtain the proceeds of an expedited redemption of $50,000 or less, you or
your representative with proper identification can telephone the Fund. The Fund
will not be liable for following instructions communicated by telephone that it
reasonably believes to be genuine and will employ reasonable procedures to
confirm that instructions received are genuine, including requesting proper
identification, recording all telephone redemptions and mailing the proceeds
only to the named shareholder at the address appearing on the account
registration.
If you do not qualify for the procedure above, send your written redemption
request to Lord Abbett Securities Trust (P.O. Box 419100, Kansas City, Missouri
64141) with signature(s) and any legal capacity of the signer(s) guaranteed by
an eligible guarantor accompanied by any certificates for shares to be redeemed
and other required documentation. Payment will be made within three business
days. The Fund may suspend the right to redeem shares for not more than three
days (or longer under unusual circumstances as permitted by Federal law). If you
have purchased Series shares by check and subsequently submit a redemption
request, redemption proceeds will be paid upon clearance of your purchase check,
which may take up to 15 days. To avoid delays you may arrange for the bank upon
which a check was drawn to communicate to the Fund that the check has cleared.
Shares also may be redeemed by the Fund at net asset value through your
securities dealer who, as an unaffiliated dealer, may charge you a fee. If your
dealer receives your order prior to the close of the NYSE and communicates it to
Lord Abbett, as our agent, prior to the close of Lord Abbett's business day, you
will receive the net asset value of the shares being redeemed as of the close of
the NYSE on that day. If the dealer does not communicate such an order to Lord
Abbett until the next business day, you will receive the net asset value as of
the close of the NYSE on that next business day. Shareholders who have redeemed
their shares have a one-time right to reinvest, in another account having the
identical class and registration, in any of the Eligible Funds at the then
applicable net asset value without the payment of a front-end sales charge. Such
reinvestment must be made within 60 days of the redemption and is limited to no
more than the amount of the redemption proceeds.
Under certain circumstances and subject to prior written notice, our Board of
Trustees may authorize redemption of all of the shares in any account in which
there are fewer than 50 shares.
TAX-QUALIFIED PLANS: For redemptions of $50,000 or less, follow normal
redemption procedures. Redemptions over $50,000 must be in writing from the
employer, broker or plan administrator stating the reason for the redemption.
The reason for the redemption must be received by the Fund prior to, or
concurrent with, the redemption request.
PERFORMANCE
Lord Abbett Securities Trust - Growth & Income Series closed fiscal 1996 on
October 31 with combined assets of $113,961,747. During the year, the Growth &
Income Series portfolio and the financial markets in general performed well.
Following are some of the factors that were relevant to the Series' performance
over the past year, including market conditions and investment strategies
pursued by the Fund's management.
Over the past year, the stock market remained near all time highs against a
background of modest economic growth, low inflation and a volatile interest-rate
enviornment. We mainly identified investment opportunities based on the
characteristics of individual securities, as few areas (sectors) of the market
represented extrodinary value. One exception was the financial sector, where we
were heavily weighted. These holdings performed strongly and helped to offset
disappointments from our technology holdings.
YIELD AND TOTAL RETURN. Yield and total return data may, from time to time, be
included in advertisements about each Series. Each class of shares calculates
its "yield" by dividing the annualized net investment income per share on the
portfolio during a 30-day period by the maximum offering price on the last day
of the period. The yield of each class will differ because of the different
expenses (including actual 12b-1 fees) of each class of shares. The yield data
represents a hypothetical investment return on the portfolio, and does not
measure an investment return based on dividends actually paid to shareholders.
To show that return, a dividend distribution rate may be calculated. Dividend
distribution rate is calculated by dividing the dividends of a class derived
from net investment income during a stated period by the maximum offering price
on the last day of the period. Yields and dividend distribution rate for Class A
shares reflect the deduction of the maximum initial sales charge, but may also
be shown based on the Series' net asset value per share. Yields for Class C
shares do not reflect the deduction of the CDSC.
<PAGE>
"Total return" for the one-, five- and ten-year periods represents the average
annual compounded rate of return on an investment of $1,000 in each Series at
the maximum public offering price. When total return is quoted for Class A
shares, it includes the payment of the maximum initial sales charge. When total
return is shown for Class C shares, it reflects the effect of the applicable
CDSC. Total return also may be presented for other periods or based on
investments at reduced sales charge levels or net asset value. Any quotation of
total return not reflecting the maximum sales charge (front-end, level, or
back-end) would be reduced if such sales charge were used. Quotations of yield
or total return for any period when an expense limitation is in effect will be
greater than if the limitation had not been in effect. See "Past Performance" in
the Statement of Additional Information for a more detailed description.
See "Performance" in the Statement of Additional Information for a more detailed
discussion concerning the computation of each Series' total return and yield.
This Prospectus does not constitute an offering in any jurisdiction in which
such offer is not authorized or in which the person making such offer is not
qualified to do so or to anyone to whom it is unlawful to make such offer.
No person is authorized to give information or to make any representations not
contained in this Prospectus or in supplemental literature authorized by the
Series, and no person is entitled to rely upon any information or representation
not contained herein or therein.
<PAGE>
Comparison of change in value of a $10,000 investment in Class C shares of Lord
Abbett Securities Trust -- Growth & Income Series, assuming reinvestment of all
dividends and distributions, and the Standard & Poor's 500
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
DATE THE SERIES (CLASS C) S&P
AT NET ASSET VALUE 500
1-3-94 10,000 10,000
10-31-94 10,262 10,382
10-31-95 12,502 13,125
10-31-96 15,0006 16,275
</TABLE>
Average Annual Total Return
for Class C shares(2)
1 Year Life of Fund
20.02.% 15.43%
<PAGE>
Investment Manager and Distributor
Lord, Abbett & Co. and Lord Abbett Distributor LLC
The General Motors Building
767 Fifth Avenue
New York, New York 10153-0203
212-848-1800
Custodian
The Bank of New York
48 Wall Street
New York, New York 10286
Transfer Agent and Dividend
Disbursing Agent
United Missouri Bank of Kansas City, N.A.
Tenth and Grand
Kansas City, Missouri 64141
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419100
Kansas City, Missouri 64141
800-821-5129
Auditors
Deloitte & Touche LLP
Counsel Debevoise & Plimpton
<PAGE>
LORD ABBETT
STATEMENT OF ADDITIONAL INFORMATION DECEMBER 5, 1996
LORD ABBETT SECURITIES TRUST
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord Abbett Distributor LLC
("Lord Abbett Distributor") at The General Motors Building, 767 Fifth Avenue,
New York, New York 10153-0203. This Statement relates to, and should be read in
conjunction with, the Prospectus dated December 5, 1996.
Lord Abbett Securities Trust (referred to as "we" or the "Fund") was organized
as a Delaware business trust on February 26, 1993. The Fund has two series:
Growth & Income Series and a new series - the International Series (the
"Series"). The Growth and Income Series consists of two classes (A and C) and
the International Series consists of one class (A). All shares have equal
noncumulative voting rights and equal rights with respect to dividends, assets
and liquidation, except for certain class-specific expenses. The International
Series commenced operations subsequent to October 31, 1996. All shares have
equal noncumulative voting rights and equal rights with respect to dividends,
assets and liquidation, except for certain class-specific expenses. They are
fully paid and nonassessable when issued and have no preemptive or conversion
rights.
Rule 18f-2 under the Investment Company Act of 1940, as amended (the "Act")
provides that any matter required to be submitted, by the provisions of the Act
or applicable state law or otherwise, to the holders of the outstanding voting
securities of an investment company such as the Fund shall not be deemed to have
been effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each class or series affected by such matter. Rule 18f-2
further provides that a class or series shall be deemed to be affected by a
matter unless the interests of each class or series in the matter are
substantially identical or the matter does not affect any interest of such class
or series. However, the Rule exempts the selection of independent public
accountants, the approval of principal distributing contracts and the election
of trustees from its separate voting requirements.
Shareholder inquiries should be made by writing directly to the Fund or by
calling 800-821-5129. In addition, you can make inquiries through your dealer.
TABLE OF CONTENTS Page
1. Investment Objective and Policies 2
2. Trustees and Officers 5
3. Investment Advisory and Other Services 8
4. Portfolio Transactions 9
5. Purchases, Redemptions and Shareholder Services 10
6. Past Performance 15
7. Taxes 16
8. Information About the Fund 16
9. Financial Statements 17
<PAGE>
1.
Investment Objective and Policies
FUNDAMENTAL INVESTMENT RESTRICTIONS
Both Series are subject to the following investment restrictions which cannot be
changed without approval of a majority of each Series' outstanding shares. Each
Series may not: (1) borrow money, except that (i) each Series may borrow from
banks (as defined in the Act ) in amounts up to 33 1/3% of its total assets
(including the amount borrowed), (ii) each Series may borrow up to an additional
5% of its total assets for temporary purposes, (iii) each Series may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities and (iv) each Series may purchase securities on margin
to the extent permitted by applicable law; (2) pledge its assets (other than to
secure borrowings, or to the extent permitted by each Series' investment
policies as permitted by applicable law); (3) engage in the underwriting of
securities, except pursuant to a merger or acquisition or to the extent that, in
connection with the disposition of its portfolio securities, it may be deemed to
be an underwriter under federal securities laws; (4) make loans to other
persons, except that the acquisition of bonds, debentures or other corporate
debt securities and investment in government obligations, commercial paper,
pass-through instruments, certificates of deposit, bankers acceptances,
repurchase agreements or any similar instruments shall not be subject to this
limitation, and except further that each Series may lend its portfolio
securities, provided that the lending of portfolio securities may be made only
in accordance with applicable law; (5) buy or sell real estate (except that each
Series may invest in securities directly or indirectly secured by real estate or
interests therein or issued by companies which invest in real estate or
interests therein), or commodities or commodity contracts (except to the extent
each Series may do so in accordance with applicable law and without registering
as a commodity pool operator under the Commodity Exchange Act as, for example,
with futures contracts); (6) with respect to 75% of its gross assets, buy
securities of one issuer representing more than (i) 5% of its gross assets,
except securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or (ii) 10% of the voting securities of such issuer; (7)
invest more than 25% of its assets, taken at market value, in the securities of
issuers in any particular industry (excluding securities of the U.S. Government,
its agencies and instrumentalities); or (8) issue senior securities to the
extent such issuance would violate applicable law.
With respect to the restrictions mentioned herein, compliance therewith will not
be affected by changes in the market value of portfolio securities but will be
determined at the time of purchase or sale of such securities.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. In addition to the investment
restrictions above which cannot be changed without shareholder approval, each
Series also is subject to the following non-fundamental investment policies
which may be changed by the Board of Trustees without shareholder approval. Each
Series may not: (1) borrow in excess of 5% of its gross assets taken at cost or
market value, whichever is lower at the time of borrowing, and then only as a
temporary measure for extraordinary or emergency purposes; (2) make short sales
of securities or maintain a short position except to the extent permitted by
applicable law; (3) invest knowingly more than 15% of its net assets (at the
time of investment) in illiquid securities, except for securities qualifying for
resale under Rule 144A of the Securities Act of 1933, deemed to be liquid by the
Board of Trustees; (4) invest in the securities of other investment companies
except as permitted by applicable law; (5) invest in securities of issuers
which, with their predecessors, have a record of less than three years'
continuous operations, if more than 5% of a Series' total assets would be
invested in such securities (this restriction shall not apply to
mortgaged-backed securities, asset-backed securities or obligations issued or
guaranteed by the U. S. government, its agencies or instrumentalities); (6) hold
securities of any issuer if more than 1/2 of 1% of the securities of such issuer
are owned beneficially by one or more officers or trustees of the Fund or by one
or more partners or members of the Fund's underwriter or investment adviser if
these owners in the aggregate own beneficially more than 5% of the securities of
such issuer; (7) invest in warrants if, at the time of the acquisition, its
investment in warrants, valued at the lower of cost or market, would exceed 5%
of a Series' total assets (included within such limitation, but not to exceed 2%
of a Series' total assets, are warrants which are not listed on the New York or
American Stock Exchange or a major foreign exchange); (8) invest in real estate
limited partnership interests or interests in oil, gas or other mineral leases,
or exploration or other development programs, except that each Series may invest
in securities issued by companies that engage in oil, gas or other mineral
exploration or other development activities; (9) write, purchase or sell puts,
calls, straddles, spreads or combinations thereof, except to the extent
permitted in each Series' prospectus and statement of additional information, as
they may be amended from time to time; or (10) buy from
<PAGE>
or sell to any of its officers, trustees, employees, or its investment adviser
or any of its officers, trustees, partners or employees, any securities other
than shares of beneficial interest in each Series.
LENDING PORTFOLIO SECURITIES
Each Series may lend portfolio securities to registered broker-dealers. These
loans, if and when made, may not exceed 30% of each Series' total assets. Each
Series loan of securities will be collateralized by cash or marketable
securities issued or guaranteed by the U.S. Government or its agencies ("U.S.
Government securities") or other permissible means at least equal to the market
value of the loaned securities. From time to time, each Series may pay a part of
the interest received with respect to the investment of collateral to a borrower
and/or a third party that is not affiliated with the Fund and is acting as a
"placing broker". No fee will be paid to affiliated persons of the Fund.
By lending portfolio securities, each Series can increase its income by
continuing to receive interest on the loaned securities as well as by either
investing the cash collateral in permissible investments, such as U.S.
Government securities or obtaining yield in the form of interest paid by the
borrower when U.S. Government securities or other forms of non-cash collateral
are received. Each Series will comply with the following conditions whenever it
loans securities: (i) each Series must receive at least 100% collateral from the
borrower; (ii) the borrower must increase the collateral whenever the market
value of the securities loaned rises above the level of the collateral; (iii)
each Series must be able to terminate the loan at any time; (iv) each Series
must receive reasonable compensation for the loan, as well as any dividends,
interest or other distributions on the loaned securities; (v) each Series may
pay only reasonable fees in connection with the loan and (vi) voting rights on
the loaned securities may pass to the borrower except that, if a material event
adversely affecting the investment in the loaned securities occurs, the Trustees
must terminate the loan and regain the right to vote the securities.
REPURCHASE AGREEMENTS
Each Series may enter into repurchase agreements with respect to a security. A
repurchase agreement is a transaction by which each Series acquires a security
and simultaneously commits to resell that security to the seller (a bank or
securities dealer) at an agreed upon price on an agreed upon date. The resale
price reflects the purchase price plus an agreed upon market rate of interest
which is unrelated to the coupon rate or date of maturity of the purchased
security. In this type of transaction, the securities purchased by each Series
have a total value in excess of the value of the repurchase agreement. Each
Series requires at all times that the repurchase agreement be collateralized by
cash or U.S. Government securities having a value equal to, or in excess of, the
value of the repurchase agreement. Such agreements permit each Series to keep
all of its assets at work while retaining flexibility in pursuit of investments
of a longer term nature.
The use of repurchase agreements involves certain risks. For example, if the
seller of the agreement defaults on its obligation to repurchase the underlying
securities at a time when the value of these securities has declined, each
Series may incur a loss upon disposition of them. If the seller of the agreement
becomes insolvent and subject to liquidation or reorganization under the
Bankruptcy Code or other laws, a bankruptcy court may determine that the
underlying securities are collateral not within the control of each Series and
are therefore subject to sale by the trustee in bankruptcy. Even though the
repurchase agreements may have maturities of seven days or less, they may lack
liquidity, especially if the issuer encounters financial difficulties. While
Fund management acknowledges these risks, it is expected that they can be
controlled through stringent selection criteria and careful monitoring
procedures. Fund management intends to limit repurchase agreements to
transactions with dealers and financial institutions believed by Fund management
to present minimal credit risks. Fund management will monitor creditworthiness
of the repurchase agreement sellers on an ongoing basis.
The Series will enter into repurchase agreements only with those primary
reporting dealers that report to the Federal Reserve Bank of New York and with
the 100 largest United States commercial banks and the underlying securities
purchased under the agreements will consist only of those securities in which
the Series otherwise may invest.
<PAGE>
WARRANTS
Pursuant to Texas regulations, each Series will not invest more than 5% of its
assets in warrants and not more than 2% of such value in warrants not listed on
the New York or American Stock Exchanges, except when they form a unit with
other securities. As a matter of operating policy, we will not invest more than
5% of our net assets in rights.
COVERED CALL OPTIONS
As stated in the Prospectus, each Series may write covered call options which
are traded on a national securities exchange with respect to securities in its
portfolio in an attempt to increase its income and to provide greater
flexibility in the disposition of its portfolio securities. A "call option" is a
contract sold for a price (the "premium") giving its holder the right to buy a
specific number of shares of stock at a specific price prior to a specified
date. A "covered call option" is a call option issued on securities already
owned by the writer of the call option for delivery to the holder upon the
exercise of the option. During the period of the option, each Series forgoes the
opportunity to profit from any increase in the market price of the underlying
security above the exercise price of the option (to the extent that the increase
exceeds its net premium). Each Series may enter into "closing purchase
transactions" in order to terminate its obligation to deliver the underlying
security (this may result in a short-term gain or loss). A closing purchase
transaction is the purchase of a call option (at a cost which may be more or
less than the premium received for writing the original call option) on the same
security, with the same exercise price and call period as the option previously
written. If a Series is unable to enter into a closing purchase transaction, it
may be required to hold a security that it might otherwise have sold to protect
against depreciation. Neither Series intends to write covered call options with
respect to securities with an aggregate market value of more than 5% of its
gross assets at the time an option is written. This percentage limitation will
not be increased without prior disclosure in the current Prospectus.
The Fund's custodian will segregate cash or liquid high-grade debt securities in
an amount not less than that required by Securities Exchange Commission ("SEC")
Release 10666 with respect to Series assets committed to written covered call
options. If the value of the segregated securities declines, additional cash or
debt securities will be added on a daily basis (i.e., marked-to-market) so that
the segregated amount will not be less than the amount of each Series'
commitments with respect to such written options.
OTHER INTERNATIONAL SERIES INVESTMENT POLICIES (WHICH CAN BE CHANGED WITHOUT
SHAREHOLDER APPROVAL)
FINANCIAL FUTURES CONTRACTS. The International Series may enter into contracts
for the future delivery of a financial instrument, such as a security or the
cash value of a securities index. This investment technique is designed
primarily to hedge (i.e., protect) against anticipated future changes in
interest rates or market conditions which otherwise might adversely affect the
value of securities which we hold or intend to purchase. A "sale" of a futures
contract means the undertaking of a contractual obligation to deliver the
securities or the cash value of an index called for by the contract at a
specified price during a specified delivery period. A "purchase" of a futures
contract means the undertaking of a contractual obligation to acquire the
securities or cash value of an index at a specified price during a specified
delivery period. At the time of delivery pursuant to the contract, adjustments
are made to recognize differences in value arising from the delivery of
securities which differ from those specified in the contract. In some cases,
securities called for by a futures contract may not have been issued at the time
the contract was written. The International Series will not enter into any
futures contracts or options on futures contracts if the aggregate of the market
value of the securities covered by its outstanding futures contracts and
securities covered by futures contracts subject to the outstanding options
written by it would exceed 50% of its total assets.
Although some financial futures contracts by their terms call for the actual
delivery or acquisition of securities, in most cases, a party will close out the
contractual commitment before delivery without having to make or take delivery
of the security by purchasing (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, if effected through a member of an exchange, cancels the
obligation to make or take delivery of the securities. All transactions in the
futures market are made, offset or fulfilled through a clearing house associated
with the exchange on which the contracts are traded. The International Series
will incur
<PAGE>
brokerage fees when it purchases or sells contracts and will be required to
maintain margin deposits. At the time it enters into a futures contract, it is
required to deposit with its custodian, on behalf of the broker, a specified
amount of cash or eligible securities called "initial margin." The initial
margin required for a futures contract is set by the exchange on which the
contract is traded. Subsequent payments, called "variation margin," to and from
the broker are made on a daily basis as the market price of the futures contract
fluctuates. The costs incurred in connection with futures transactions could
reduce the Series' return. Futures contracts entail risks. If the investment
adviser's judgment about the general direction of interest rates or markets is
wrong, the overall performance may be poorer than if no such contracts had been
entered into.
There may be an imperfect correlation between movements in prices of futures
contracts and portfolio securities being hedged. The degree of difference in
price movements between futures contracts and the securities (or securities
indices) being hedged depends upon such things as variations in demand for
futures contracts and securities underlying the contracts and differences
between the liquidity of the markets for such contracts and the securities
underlying them. In addition, the market prices of futures contracts may be
affected by certain factors not directly related to the underlying securities.
At any given time, the availability of futures contracts, and hence their
prices, are influenced by credit conditions and margin requirements. Due to the
possibility of price distortions in the futures market and because of the
imperfect correlation between movements in the prices of securities and
movements in the prices of futures contracts, a correct forecast of market
trends by the investment adviser may not result in a successful hedging
transaction.
OPTIONS ON FINANCIAL FUTURES CONTRACTS. The International Series may purchase
and write call and put options on financial futures contracts. An option on a
futures contract gives the purchaser the right, in return for the premium paid,
to assume a position in a futures contract at a specified exercise price at any
time during the period of the option. Upon exercise, the writer of the option
delivers the futures contract to the holder at the exercise price. The
International Series would be required to deposit with our custodian initial
margin and maintenance margin with respect to put and call options on futures
contracts written by us. Options on futures contracts involve risks similar to
the risks relating to transactions in financial futures contracts described
above. Generally speaking, a given dollar amount used to purchase an option on a
financial futures contract can hedge a much greater value of underlying
securities than if that amount were used to directly purchase the same financial
futures. Should the event that the International Series intends to hedge (or
protect) against not materialize, however, the option may expire worthless, in
which case we would lose the premium paid therefor.
SEGREGATED ACCOUNTS. To the extent required to comply with Securities and
Exchange Commission Release 10666 and any related SEC policies, when purchasing
a futures contract, or writing a put option, the International Series will
maintain in a segregated account at its custodian bank cash, U.S. Government and
other permitted securities to cover its position.
PORTFOLIO TURNOVER
For the fiscal year ended October 31, 1996 the portfolio turnover was 23.84% for
the Growth & Income Series.
2.
Trustees and Officers
The following trustee is a partner of Lord Abbett, The General Motors Building,
767 Fifth Avenue, New York, New York 10153-0203. He has been associated with
Lord Abbett for over five years and is also an officer and director or trustee
of the twelve other Lord Abbett-sponsored funds. He is an "interested person" as
defined in the Act, and as such, may be considered to have an indirect financial
interest in the Rule 12b-1 Plan described in the Prospectus.
Robert S. Dow, age 51, Chairman and President
<PAGE>
The following outside trustees are also directors or trustees of the twelve
other Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow
Time Warner Cable
300 First Stamford Place
Stamford, Connecticut
President and Chief Executive Officer of Time Warner Cable Programming, Inc.
Formerly President and Chief Operating Officer of Home Box Office, Inc. Age 54.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 65.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 70.
C. Alan MacDonald
The Marketing Partnership, Inc.
27 Signal Road
Stamford, Connecticut
General Partner, The Marketing Partnership, Inc., a full service marketing
consulting firm. Formerly Chairman and Chief Executive Officer of Lincoln
Snacks, Inc., manufacturer of branded snack foods (1992-1994). Formerly
President & 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 Company. Age 63.
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 68.
Thomas J. Neff
Spencer Stuart & Associates
277 Park Avenue
New York, New York
Chairman of Spencer Stuart U.S., an executive search consulting firm. Age 59.
The second column of the following table sets forth the compensation accrued for
the Fund's outside trustees. The third and fourth columns set forth information
with respect to the retirement plan for outside trustees maintained by the Lord
Abbett-sponsored funds. The fifth column sets forth the total compensation
payable by such funds to the outside trustees. No trustee of the Fund associated
with Lord Abbett and no officer of the Fund received any compensation from the
Fund for acting as a trustee or officer.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996
(1) (2) (3) (4) (5)
Pension or Estimated Annual For Year Ended
Retirement Benefits Benefits Upon December 31, 1995
Accrued by the Retirement Proposed Total Compensation
Aggregate Fund and to be Paid by the Accrued by the Fund and
Compensation Twelve Other Lord Fund and Twelve Twelve Other Lord
Accrued by Abbett-sponsored Other Lord Abbett- Abbett-sponsored
NAME OF TRUSTEE the Fund1 sponsored Funds2 Funds2 Funds3
E. Thayer Bigelow $173 $ $50,000 $41,700
Stewart S. Dixon $166 $ $50,000 $42,000
John C. Jansing $167 $ $50,000 $42,960
C. Alan MacDonald $174 $ $50,000 $42,750
Hansel B. Millican, Jr. $178 $ $50,000 $43,000
Thomas J. Neff $169 $ $50,000 $42,000
<FN>
1. Outside trustees' fees, 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 Fund to its outside directors are being
deferred under a plan that deems the deferred amounts to be invested in shares
of the Fund for later distribution to the directors. The amounts of the
aggregate compensation payable by the Fund for the fiscal year ended October 31,
1996 deemed invested in Fund shares, including dividends reinvested and changes
in net asset value applicable to such deemed investments, were as follows as of
October 31, 1996: Mr. Bigelow,___ ; Mr. Dixon, ____; Mr. Jansing,_____; Mr.
MacDonald, _____; Mr. Millican,_______ and Mr. Neff,_______.
2. Each Lord Abbett-sponsored fund has a retirement plan providing that outside
directors may receive annual retirement benefits for life equal to 100% of their
final annual retainers following retirement at or after age 72 with at least 10
years of service. Each plan also provides for a reduced benefit upon early
retirement under certain circumstances, a pre-retirement death benefit and
actuarially reduced joint-and-survivor spousal benefits. Such retirement plans,
and the deferred compensation plans referred to in footnote one, have been
amended recently to, among other things, enable outside directors to elect to
convert their prospective benefits under the retirement plans to equity-based
benefits under the deferred compensation plans (to be renamed the equity-based
plans). The amounts accrued in column 3 were accrued by the Lord
Abbett-sponsored funds during the fiscal year ended October 31, 1996 with
respect to the retirement plans. These accruals were based on the retirement
plans as in effect before the recent amendments and on the fees payable to
outside directors during the fiscal year of the Fund ended October 31, 1996.
Under the recent amendments, the annual retirement benefits were increased from
80% to 100% of the final annual retainers. The amounts stated in column 4 would
be payable annually under the retirement plans as recently amended if the
directors were to retire at age 72 and the annual retainers payable by the funds
were the same as they are today.
3. This column shows aggregate compensation, including director's fees and
attendance fees for board and committee meetings, of a nature referred to in
footnote one, accrued by the Lord Abbett-sponsored funds during the year ended
December 31, 1996.
</FN>
</TABLE>
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Allen, Brown, Carper, Cutler, Ms. Foster, Messrs. Morris, Noelke, Nordberg and
Walsh are partners of Lord Abbett; the others are employees: Robert G. Morris,
age 51, Executive Vice President; Kenneth B. Cutler, age 64, Vice President and
Secretary; Stephen I. Allen, age 43; Zane E. Brown, age 44; Daniel E. Carper,
age 44; Daria L. Foster, age 42; Robert J. Noelke, age 39; E. Wayne Nordberg,
age 59; Paul A. Hilstad, age 53 (with Lord Abbett since 1995 - formerly Senior
Vice President and General Counsel of American Capital Management & Research,
Inc.); Thomas F. Konop, age 54; Victor W. Pizzolato, age 63; John J. Walsh, age
60, Vice Presidents; and Keith F. O'Connor, age 40, Vice President and
Treasurer.
The Fund does not hold annual meetings of shareholders unless one or more
matters are required to be acted on by shareholders under the Act. Under the
Fund's Declaration of Trust, shareholder meetings may be called at any time by
certain officers of the Fund or by a majority of the trustees (i) for the
purpose of taking action upon any matter requiring the vote or authority of the
Fund's shareholders or upon other matters deemed to be necessary or desirable or
(ii) upon the written request of the holders of at least one-quarter of the
shares of the Fund outstanding and entitled to vote at the meeting.
As of October 31, 1996, our trustees and officers, as a group, owned less than
1% of our outstanding shares.
<PAGE>
3.
Investment Advisory and Other Services
As described under "Our Management" in the Prospectus, Lord Abbett is the
investment manager for the Series. The ten general partners of Lord Abbett, all
of whom are officers and/or trustees of the Fund, are: Stephen I. Allen, Zane E.
Brown, Daniel E. Carper, Kenneth B. Cutler, Robert S. Dow, Daria L. Foster,
Robert G. Morris, Robert J. Noelke, E. Wayne Nordberg and John J. Walsh. The
address of each partner is The General Motors Building, 767 Fifth Avenue, New
York, New York 10153-0203.
The services performed by Lord Abbett are described under "Our Management" in
the Prospectus. Under the Management Agreement, each Series is obligated to pay
Lord Abbett a monthly fee, based on average daily net assets for each month, at
the annual rate of .75 of 1%. This fee is allocated among Class A and C based on
the classes' proportionate shares of such daily net assets, in the case of the
Growth & Income Series. For the year ended October 31, 1996 such fees amounted
to $161,248 attributable to Class A and $339,410 attributable to Class C shares
of the Growth & Income Series.
Although not obligated to do so, Lord Abbett has waived or may waive all or part
of its management fees and has assumed or may assume other expenses of each
Series. For the fiscal year ended October 31, 1996 Lord Abbett waived $242,341 ,
in management fees which were attributable to Class C shares, in the case of the
Growth & Income Series.
As discussed in the Prospectus under "Our Management," each Series is
contingently obligated to repay to Lord Abbett the amounts of such assumed other
expenses.
Each Series pays all expenses not expressly assumed by Lord Abbett, including,
without limitation, 12b-1 expenses, outside trustees' fees and expenses,
association membership dues, legal and auditing fees, taxes, transfer and
dividend disbursing agent fees, shareholder servicing costs, expenses relating
to shareholder meetings, expenses of preparing, printing and mailing stock
certificates and shareholder reports, expenses of registering our shares under
federal and state securities laws, expenses of preparing, printing and mailing
prospectuses to existing shareholders, insurance premiums, brokerage and other
expenses connected with executing portfolio transactions.
The Fund has agreed with the State of California to limit operating expenses
(including management fees but excluding taxes, interest, extraordinary expenses
and brokerage commissions) to 2 1/2% of average annual net assets up to
$30,000,000, 2% of the next $70,000,000 of such assets and 1 1/2% of such assets
in excess of $100,000,000. However, as described in the Prospectuses, the Fund
has adopted a Plan pursuant to Rule 12b-1 of the Act for each class of shares of
the Series. Annual Plan distribution expenses up to 1% of the Series' average
net assets during its fiscal year may be excluded from this expense limitation.
The expense limitation is a condition the registration of investment company
shares for sale in the State and applies so long as our shares are registered
for sale in that State.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10128, are
the independent public accountants of the Fund and must be approved at least
annually by our trustees to continue in such capacity. Deloitte & Touche LLP
perform audit services for the Fund including the examination of financial
statements included in our annual report to shareholders.
The Bank of New York ("BNY"), 48 Wall Street, New York, New York 10286, is the
Fund's custodian. Rules adopted by the Securities & Exchange Commission under
the Act permit the International Series to maintain its foreign assets in the
custody of certain eligible foreign banks and securities depositories. The
International Series' portfolio securities and cash, when invested in foreign
securities and not held by BNY or its foreign branches, are held by
sub-custodians of BNY approved by the Board of Directors of the Fund in
accordance with such rules.
The Sub-Custodians of BNY are:
Euro-Clear (a transnational securities depository); Australia: ANZ Banking
Group; Austria: Creditanstalt-Bankverein; Canada: Canadian Imperial Bank of
Commerce; Chile: Citibank, N.A.; Czech Republic: Ceskoslovenska Obchodni
<PAGE>
Banka; Denmark: Den Danske Bank; Finland: Union Bank of Finland; Germany: J.P.
Morgan GmbH; Greece: National Bank of Greece S.A.; Hong Kong, Indonesia,
Philippines, Taiwan and Thailand: Hong Kong & Shanghai Banking Corp.; Hungary:
Citibank Budapest Rt; India: Hong Kong and Shanghai Banking Corporation;
Ireland: Allied Irish Banks, PLC; Israel: Bank Leumi LE-Israel B.M.; Japan: The
Fuji Bank, Ltd.; Jordan: Citibank, N.A.; Korea: Bank of Seoul; Luxembourg:
Banque Internationale A Luxembourg, S.A.; Mexico: Citibank, N.A.; Morocco:
Banque Commerciale du Maroc; Netherlands: Bank van Haften Labouchere; New
Zealand: Anz Banking Group Ltd.; Norway: Den Norske Bank; Pakistan: Citibank,
N.A.; Peru: Citibank, N.A.; Poland: Bank Handlowy w Warszawie S.A.; Portugal:
Banco Espirito Santo E Comercial de Lisboa; Malaysia, Singapore: Development
Bank of Singapore; South Africa: The First National Bank of Southern Africa; Sri
Lanka: Hong Kong and Shanghai Banking Corporation; Sweden: Skandinaviska
Enskilda Banken; Switzerland: Bank Leu; Turkey: Citibank, N.A.; Venezuela:
Citibank, N.A.
4.
Portfolio Transactions
Our policy is to obtain best execution on all our portfolio transactions, which
means that we seek to have purchases and sales of portfolio securities executed
at the most favorable prices, considering all costs of the transaction including
brokerage commissions and dealer markups and markdowns and taking into account
the full range and quality of the brokers' services. Consistent with obtaining
best execution, the Fund may pay, as described below, a higher commission than
some brokers might charge on the same transaction. This policy governs the
selection of brokers or dealers and the market in which the transaction is
executed. To the extent permitted by law, we may, if considered advantageous,
make a purchase from or sale to another Lord Abbett-sponsored fund without the
intervention of any broker-dealer.
Broker-dealers are selected on the basis of their professional capability and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of the Fund and also are employees
of Lord Abbett. These traders do the trading as well for other accounts --
investment companies (of which they are also officers) and other investment
clients -- managed by Lord Abbett. For foreign securities purchased or sold by
the International Series, the selection is made by the Sub-Adviser. The
Sub-Advisor are responsible for obtaining best execution.
In transactions on stock exchanges in the United States, commissions are
negotiated, whereas on many foreign stock exchanges commissions are fixed. In
the case of securities traded in the foreign and domestic over-the-counter
markets, there is generally no stated commission, but the price usually includes
an undisclosed commission or markup. Purchases from underwriters of newly-issued
securities for inclusion in the Fund's portfolios usually will include a
concession paid to the underwriter by the issuer and purchases from dealers
serving as market makers will include the spread between the bid and asked
prices. When commissions are negotiated, we pay a commission rate that we
believe is appropriate to give maximum assurance that our brokers will provide
us, on a continuing basis, the highest level of brokerage services available.
While we do not always seek the lowest possible commission on particular trades,
we pay a commission rate that we believe is appropriate to give maximum
assurance that our brokers will provide us, on a continuing basis, the highest
level of brokerage services available. While we do not always seek the lowest
possible commissions on particular trades, we believe that our commission rates
are in line with the rates that many other institutions pay. Our traders are
authorized to pay brokerage commissions in excess of those that other brokers
might accept on the same transactions in recognition of the value of the
services performed by the executing brokers, viewed in terms of either the
particular transaction or the overall responsibilities of Lord Abbett with
respect to us and the other accounts they manage. Such services include showing
us trading opportunities including blocks, a willingness and ability to take
positions in securities, knowledge of a particular security or market, proven
ability to handle a particular type of trade, confidential treatment, promptness
and reliability.
Some of our brokers also provide research services at least some of which are
useful to Lord Abbett in their overall responsibilities with respect to us and
the other accounts they manage. Research includes the furnishing of analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts and trading equipment and
computer software packages, acquired from third-party suppliers, that enable
Lord Abbett to access various information bases. Such services may be used by
Lord Abbett in servicing all their accounts, and not all of such services will
necessarily be used by Lord Abbett in connection with their management of
<PAGE>
the Fund; conversely, such services furnished in connection with brokerage on
other accounts managed by Lord Abbett may be used in connection with their
management of the Fund; and not all of such services will necessarily be used by
Lord Abbett in connection with their advisory services to such other accounts.
We have been advised by Lord Abbett that research services received from brokers
cannot be allocated to any particular account, are not a substitute for Lord
Abbett's services but are supplemental to their own research effort and, when
utilized, are subject to internal analysis before being incorporated by Lord
Abbett into their investment process. As a practical matter, it would not be
possible for Lord Abbett to generate all of the information presently provided
by brokers. While receipt of research services from brokerage firms has not
reduced Lord Abbett's normal research activities, the expenses of Lord Abbett
could be materially increased if it attempted to generate such additional
information through its own staff and purchased such equipment and software
packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or
among brokers, and trades are executed only when they are dictated by investment
decisions of the Fund to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold our shares and/or
shares of other Lord Abbett-sponsored funds may be preferred.
If other clients of Lord Abbett buy or sell the same security at the same time
as we do, transactions will, to the extent practicable, be allocated among all
participating accounts in proportion to the amount of each order and will be
executed daily until filled so that each account shares the average price and
commission cost of each day. Other clients who direct that their brokerage
business be placed with specific brokers or who invest through wrap accounts
introduced to Lord Abbett by certain brokers may not participate with us in the
buying and selling of the same securities as described above. If these clients
wish to buy or sell the same security as we do, they may have their transactions
executed at times different from our transactions and thus may not receive the
same price or incur the same commission cost as we do.
We will not seek "reciprocal" dealer business (for the purpose of applying
commissions in whole or in part for our benefit or otherwise) from dealers as
consideration for the direction to them of portfolio business.
For the period January 3, 1994 to October 31, 1994 and for the fiscal years
ended October 31, 1995 and 1996 we paid total commissions to independent
broker-dealers of $15,489, $58,435 and $85,334.
5.
Purchases, Redemptions
and Shareholder Services
Securities in the Fund's portfolios are valued at their market values as of the
close of the NYSE. Market value will be determined as follows: securities listed
or admitted to trading privileges on any national or foreign securities exchange
are valued at the last sales price on the principal securities exchange on which
such securities are traded, or, if there is no sale, at the mean between the
last bid and asked prices on such exchange, or, in the case of bonds, in the
over-the-counter market if, in the judgment of the Fund's officers, that market
more accurately reflects the market value of the bonds. Securities traded only
in the over-the-counter market are valued at the mean between the bid and asked
prices, except that securities admitted to trading on the NASDAQ National Market
System are valued at the last sales price. Securities for which market
quotations are not available are valued at fair value under procedures approved
by the Board of Trustees.
All assets and liabilities expressed in foreign currencies will be converted
into United States dollars at the mean between the buying and selling rates of
such currencies against United States dollars last quoted by any major bank. If
such quotations are not available, the rate of exchange will be determined in
accordance with policies established by the Fund's Board of Trustees. The Board
of Trustees will monitor, on an ongoing basis, the Fund's method of valuation.
Information concerning how we value our Shares for the purchase and redemption
of our Shares is described in the Prospectus under "Purchases" and
"Redemptions", respectively.
<PAGE>
As disclosed in the Prospectus, we calculate our net asset values and are
otherwise open for business on each day that the NYSE is open for trading. The
NYSE is closed on Saturdays and Sundays and the following holidays -- New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
The net asset value per share for the Class A shares will be determined in the
same manner as for the Class C shares (net assets divided by shares
outstanding). Our Class A shares will be sold with a front-end sales charge of
5.75%.
The maximum offering prices of each Series' Class A shares on October 31, 1996
were computed as follows:
Growth & Income International
Series Series
Net asset value per share (net assets
divided by shares outstanding $7.09 $10.00
Maximum offering price per
share (net asset value divided by
.9425 in both cases) $7.52 $10.61
The offering price of Class C shares of
the Growth & Income Series on October 31, 1996 was computed as follows:
Net asset value per share
(net assets divided by
shares outstanding) $7.09 $10.00
The Fund has entered into a distribution agreement with Lord Abbett Distributor
LLC, a New York limited liability company ("Lord Abbett Distributor") under
which Lord Abbett Distributor is obligated to use its best efforts to find
purchasers for the shares of the Fund, and to make reasonable efforts to sell
Fund shares so long as, in Lord Abbett Distributor's judgment, a substantial
distribution can be obtained by reasonable efforts.
CLASS A AND C RULE 12B-1 PLANS. As described in the Prospectus, the Fund has
adopted a Distribution Plan and Agreement pursuant to Rule 12b-1 of the Act for
the Class A shares of each of the two Series ( each an "A Plan") and for the
Class C shares of the Growth & Income Series ( the "C Plan"). In adopting each
Plan and in approving its continuance, the Board of Trustees has concluded that
there is a reasonable likelihood that each Plan will benefit its respective
class and such class' shareholders. The expected benefits include greater sales
and lower redemptions of shares, which should allow each class to maintain a
consistent cash flow, and a higher quality of service to shareholders by
authorized institutions than would otherwise be the case. During the last fiscal
year, the Growth & Income Series accrued or paid through Lord Abbett to
authorized institutions $28,799 under the A Plan and $490,573 under the C Plan.
The A Plan for the International Series became effective subsequent to the
Fund's last fiscal year. Lord Abbett used all amounts received under the A and C
Plans for the Growth & Income Series for payments to dealers for (i) providing
continuous services to its Class A and C shareholders, such as answering
shareholder inquiries, maintaining records, and assisting shareholders in making
redemptions, transfers, additional purchases and exchanges and (ii) their
assistance in distributing Class A and C shares of that Series.
Each Plan requires the trustees to review, on a quarterly basis, written reports
of all amounts expended pursuant to the Plan and the purposes for which such
expenditures were made. Each Plan shall continue in effect only if its
continuance is specifically approved at least annually by vote of the trustees,
including 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 the
Plan or in any agreements related to the Plan ("outside trustees"), cast in
person at a meeting called for the purpose of voting on the Plan. No Plan may be
amended to increase materially the above limits set forth therein the amount
spent for distribution expenses thereunder without approval by a majority of the
outstanding voting securities of the applicable class and the approval of a
majority of the trustees, including a majority of the outside trustees. Each
Plan may be terminated at any time by vote of a majority of the outside trustees
or by vote of a majority of the outstanding voting securities of the applicable
class.
<PAGE>
CONTINGENT DEFERRED SALES CHARGES. A Contingent Deferred Sales Charge ("CDSC"),
applies upon early redemption of shares regardless of class and (i) will be
assessed on the lesser of the net asset value of the shares at the time of
redemption or the original purchase price and (ii) is not imposed on the amount
of your account value represented by the increase in net asset value over the
initial purchase price (including increases due to the reinvestment of dividends
and capital gains distributions).
CLASS A SHARES. As stated in the Prospectus, a CDSC of 1% is imposed with
respect to those Class A shares (or Class A shares of another Lord
Abbett-sponsored fund or series acquired through exchange of such shares) on
which either Series has paid the one-time distribution fee of 1% if such shares
are redeemed out of the Lord Abbett-sponsored family of funds within a period of
24 months from the end of the month in which the original sale occurred.
CLASS C SHARES. As stated in the Prospectus, if Class C shares are redeemed for
cash before the first anniversary of their purchase, the redeeming shareholder
will be required to pay to the Growth & Income Series on behalf of Class C
shares a CDSC of 1% of the lower of cost or the then net asset value of Class C
shares redeemed. If such shares are exchanged into the same class of another
Lord Abbett-sponsored fund and subsequently redeemed before the first
anniversary of their original purchase, the charge will be collected by the
other fund on behalf of the Growth & Income Series' Class C shares.
GENERAL.
With respect to Class A shares, no CDSC is payable on redemptions by
participants or beneficiaries from employer-sponsored retirement plans under the
Internal Revenue Code for benefit payments due to plan loans, hardship
withdrawals, death, retirement or separation from service and for returns of
excess contributions to retirement plan sponsors. In the case of both classes of
shares, the CDSC is received by the Series and is intended to reimburse all or a
portion of the amount paid by the Series if the shares are redeemed before the
Series has had an opportunity to realize the anticipated benefits of having a
long-term shareholder account in the Series.
The other funds and series which participate in the Telephone Exchange Privilege
(except (a) Lord Abbett U.S. Government Securities Money Market Fund, Inc.
("GSMMF"), (b) certain series of Lord Abbett Tax-Free Income Fund and Lord
Abbett Tax-Free Income Fund for which a Rule 12b-1 Plan is not yet in effect,
and (c) any authorized institution's affiliated money market fund satisfying
Lord Abbett Distributor as to certain omnibus account and other criteria-
hereinafter referred to as an "authorized money market fund" or "AMMF"
(collectively, the "Non-12b-1 funds")) have instituted a CDSC for each class on
the same terms and conditions. No CDSC will be charged on an exchange of shares
of the same class between Lord Abbett funds or between such funds and AMMF. Upon
redemption of shares out of the Lord Abbett family of funds or out of AMMF, the
CDSC will be charged on behalf of and paid to the Fund in which the original
purchase (subject to a CDSC) occurred, in the case of the Class A and Class C
shares. Thus, if shares of a Lord Abbett fund are exchanged for shares of the
same class of another such fund and the shares of the same class tendered
("Exchanged Shares") are subject to a CDSC, the CDSC will carry over to the
shares of the same class being acquired, including GSMMF and AMMF ("Acquired
Shares"). Any CDSC that is carried over to Acquired Shares is calculated as if
the holder of the Acquired Shares had held those shares from the date on which
he or she became the holder of the Exchanged Shares. Although the Non-12b-1
funds will not pay a distribution fee on their own shares, and will, therefore,
not impose their own CDSC, the Non-12b-1 funds will collect the CDSC on behalf
of other Lord Abbett funds, in the case of the Class A and Class C shares.
Acquired Shares held in GSMMF and AMMF which are subject to a CDSC will be
credited with the time such shares are held in GSMMF but will not be credited
with the time such shares are held in AMMF. Therefore, if your Acquired Shares
held in AMMF qualified for no CDSC at the time of exchange into AMMF, that is
the CDSC treatment you will receive upon redeeming for cash from AMMF,
regardless of the time you have held Acquired Shares in AMMF.
In no event will the amount of the CDSC exceed 1% of the lesser of (i) the net
asset value of the shares redeemed or (ii) the original cost of such shares (or
of the Exchanged Shares for which such shares were acquired). No CDSC will be
imposed when the investor redeems (i) amounts derived from increases in the
value of the account above the total cost of shares being redeemed due to
increases in net asset value, (ii) shares with respect to which no Lord Abbett
fund or series paid a 12b-1 fee or (iii) shares which, together with Exchanged
Shares, have been held continuously for 24
<PAGE>
months from the end of the month in which the original sale occurred (in the
case of Class A shares); or for one year or more (in the case of Class C
shares). In determining whether a CDSC is payable, (a) shares not subject to the
CDSC will be redeemed before shares subject to the CDSC and (b) of the shares
subject to a CDSC, those held the longest will be the first to be redeemed.
EXCHANGES. The Prospectus briefly describes the Telephone Exchange Privilege.
You may exchange some or all of your shares of any class for those in the same
class of: (i) Lord Abbett-sponsored funds currently offered to the public with a
sales charge (front-end, back-end or level ), (ii) GSMMF or (iii) AMMF, to the
extent offers and sales may be made in your state. You should read the
prospectus of the other fund before exchanging. In establishing a new account by
exchange, shares of the Series being exchanged must have a value equal to at
least the minimum initial investment required for the other fund into which the
exchange is made.
Shareholders in other Lord Abbett-sponsored funds and AMMF have the same right
to exchange their shares for the corresponding class of the Fund's shares.
Exchanges are based on relative net asset values on the day instructions are
received by the Fund in Kansas City if the instructions are received prior to
the close of the NYSE in proper form. No sales charges are imposed except in the
case of exchanges out of GSMMF or AMMF (unless a sales charge (front-end,
back-end or level) was paid on the initial investment in a Lord Abbett-sponsored
fund). Exercise of the exchange privilege will be treated as a sale for federal
income tax purposes, and, depending on the circumstances, a gain or loss may be
recognized. In the case of an exchange of shares that have been held for 90 days
or less where no sales charge is payable on the exchange, the original sales
charge incurred with respect to the exchanged shares will be taken into account
in determining gain or loss on the exchange only to the extent such charge
exceeds the sales charge that would have been payable on the acquired shares had
they been acquired for cash rather than by exchange. The portion of the original
sales charge not so taken into account will increase the basis of the acquired
shares.
Shareholders have the exchange privilege unless they refuse it in writing. You
should not view the exchange privilege as a means for taking advantage of
short-term swings in the market, and we reserve the right to terminate or limit
the privilege of any shareholder who makes frequent exchanges. We can revoke or
modify the privilege for all shareholders upon 60 days' prior notice. "Eligible
Funds" are AMMF and other Lord Abbett-sponsored funds which are eligible for the
exchange privilege, except Lord Abbett Series Fund ("LASF") which offers its
shares only in connection with certain variable annuity contracts, Lord Abbett
Equity Fund ("LAEF"), which is not issuing shares, and certain series of Lord
Abbett Research Fund if not offered to the general public ("LARF").
STATEMENT OF INTENTION. Under the terms of the Statement of Intention to invest
$100,000 or more over a 13-month period as described in the Prospectus, in
shares of a Lord Abbett-sponsored fund (other than shares of LAEF, LASF, LARF
and GSMMF, unless holdings in GSMMF are attributable to shares exchanged from a
Lord Abbett-sponsored fund offered with a front-end, back-end or level sales
charge) currently owned by you are credited as purchases (at their current
offering prices on the date the Statement is signed) toward achieving the stated
investment and reduced initial sales charge for Class A shares. Class A shares
valued at 5% of the amount of intended purchases are escrowed and may be
redeemed to cover the additional sales charge payable if the Statement is not
completed. The Statement of Intention is neither a binding obligation on you to
buy, nor on the Fund to sell, the full amount indicated.
RIGHTS OF ACCUMULATION. As stated in the Prospectus, purchasers (as defined in
the Prospectus) may accumulate their investment in Lord Abbett-sponsored funds
(other than LAEF, LARF, LASF, GSMMF, and AMMF unless holdings in GSMMF or AMMF
are attributable to shares exchanged from a Lord Abbett-sponsored fund offered
with a front-end, back-end or level sales charge) so that a current investment,
plus the purchaser's holdings valued at the current maximum offering price,
reach a level eligible for a discounted sales charge for Class A shares.
NET ASSET VALUE PURCHASES OF CLASS A SHARES. As stated in the Prospectus, our
Class A shares may be purchased at net asset value by our trustees, employees of
Lord Abbett, employees of our shareholder servicing agent and employees of any
securities dealer having a sales agreement with Lord Abbett who consents to such
purchases or by the trustee or custodian under any pension or profit-sharing
plan or Payroll Deduction IRA established for the benefit of such persons or for
the benefit of employees of any national securities trade organization to which
Lord Abbett belongs or any company with an account(s) in excess of $10 million
managed by Lord Abbett on a private-advisory-account basis. For
<PAGE>
purposes of this paragraph, the terms "trustees" and "employees" include a
trustee's or employee's spouse (including the surviving spouse of a deceased
trustee or employee). The terms "our trustees" and "employees of Lord Abbett"
also include other family members and retired trustees and employees.
Our Class A shares also may be purchased at net asset value (a) at $1 million or
more, (b) with dividends and distributions from Class A shares of other Lord
Abbett-sponsored funds, except for LARF, LAEF and LASF, (c) under the loan
feature of the Lord Abbett-sponsored prototype 403(b) plan for share purchases
representing the repayment of principal and interest, (d) by certain authorized
brokers, dealers, registered investment advisers or other financial institutions
who have entered into an agreement with Lord Abbett Distributor in accordance
with certain standards approved by Lord Abbett Distributor, providing
specifically for the use of our shares in particular investment products made
available for a fee to clients of such brokers, dealers, registered investment
advisers and other financial institutions, and (e) by employees, partners and
owners of unaffiliated consultants and advisors to Lord Abbett, Lord Abbett
Distributor or Lord Abbett-sponsored funds who consent to such purchase if such
persons provide service to Lord Abbett, Lord Abbett Distributor or such funds on
a continuing basis and are familiar with such funds. Shares are offered at net
asset value to these investors for the purpose of promoting goodwill with
employees and others with whom Lord Abbett Distributor and/or the Fund has
business relationships.
Our Class A shares also may be purchased at net asset value, subject to
appropriate documentation, through a securities dealer where the amount invested
represents redemption proceeds from shares ("Redeemed Shares") of a registered
open-end management investment company not distributed or managed by Lord Abbett
(other than a money market fund), if such redemption has occurred no more than
60 days prior to the purchase of our shares, the Redeemed Shares were held for
at least six months prior to redemption and the proceeds of redemption were
maintained in cash or a money market fund prior to purchase. Purchasers should
consider the impact, if any, of contingent deferred sales charges in determining
whether to redeem shares for subsequent investment in our Class A shares. Lord
Abbett may suspend, change or terminate this purchase option at any time.
Our Class A shares may be issued at net asset value in exchange for the assets,
subject to possible tax adjustment, of a personal holding company or an
investment company. There are economies of selling efforts and sales-related
expenses with respect to offers to these investors and those referred to above.
REDEMPTIONS. A redemption order is in proper form when it contains all of the
information and documentation required by the order form or supplementally by
Lord Abbett Distributor or the Fund to carry out the order. The signature(s) and
any legal capacity of the signer(s) must be guaranteed by an eligible guarantor.
See the Prospectus for expedited redemption procedures.
The right to redeem and receive payment, as described in the Prospectus, may be
suspended if the NYSE is closed (except for weekends or customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
deems an emergency to exist.
Our Board of Trustees may authorize redemption of all of the shares in any
account in which there are fewer than 60 shares. Before authorizing such
redemption, the Board must determine that it is in our economic best interest or
necessary to reduce disproportionately burdensome expenses in servicing
shareholder accounts. At least 6 month's prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
DIV-MOVE. Under the Div-Move service described in the Prospectus, you can invest
the dividends paid on your account of any class into an existing account of the
same class in any other Eligible Fund. The account must be either your account,
a joint account for you and your spouse, a single account for your spouse, or a
custodial account for your minor child under the age of 21. You should read the
prospectus of the other fund before investing.
INVEST-A-MATIC. The Invest-A-Matic method of investing in the Fund and/or any
other Eligible Fund is described in the Prospectus. To avail yourself of this
method you must complete the application form, selecting the time and amount
<PAGE>
of your bank checking account withdrawals and the Funds for investment, include
a voided, unsigned check and complete the bank authorization.
SYSTEMATIC WITHDRAWAL PLANS. The Systematic Withdrawal Plan ("SWP") also is
described in the Prospectus. You may establish a SWP if you own or purchase
uncertificated shares having a current offering price value of at least $10,000.
Lord Abbett prototype retirement plans have no such minimum. With respect to
Class C shares, the CDSC will be waived on and after the first anniversary of
their purchase. The SWP involves the planned redemption of shares on a periodic
basis by receiving either fixed or variable amounts at periodic intervals. Since
the value of shares redeemed may be more or less than their cost, gain or loss
may be recognized for income tax purposes on each periodic payment. Normally,
you may not make regular investments at the same time you are receiving
systematic withdrawal payments because it is not in your interest to pay a sales
charge on new investments when in effect a portion of that new investment is
soon withdrawn. The minimum investment accepted while a withdrawal plan is in
effect is $1,000. The SWP may be terminated by you or by us at any time by
written notice.
RETIREMENT PLANS. The Prospectus indicates the types of retirement plans for
which Lord Abbett provides forms and explanations. Lord Abbett makes available
the retirement plan forms and custodial agreements for IRAs (Individual
Retirement Accounts, including Simplified Employee Pensions), 403(b) plans and
qualified pension and profit-sharing plans, including 401(k) plans. The forms
name Investors Fiduciary Trust Company as custodian and contain specific
information about the plans. Explanations of the eligibility requirements,
annual custodial fees and allowable tax advantages and penalties are set forth
in the relevant plan documents. Adoption of any of these plans should be on the
advice of your legal counsel or qualified tax adviser.
6.
Past Performance
Each Series computes the average annual compounded rate of total return for each
class during specified periods that would equate the initial amount invested to
the ending redeemable value of such investment by adding one to the computed
average annual total return, raising the sum to a power equal to the number of
years covered by the computation and multiplying the result by one thousand
dollars which represents a hypothetical initial investment. The calculation
assumes deduction of the maximum sales charge (as described in the next
paragraph) from the amount invested and reinvestment of all income dividends and
capital gains distributions on the reinvestment dates at prices calculated as
stated in the Prospectus. The ending redeemable value is determined by assuming
a complete redemption at the end of the period covered by the average annual
total return computation.
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment (unless the return is shown at net asset value). For Class C
shares, the 1.0% CDSC is applied to the Series' investment result for the time
period shown prior to the first anniversary of purchase (unless the total return
is shown at net asset value). Total returns also assume that all dividends and
capital gains distributions during the period are reinvested at net asset value
per share, and that the investment is redeemed at the end of the period.
Using the method described above to compute annual rates of total return for the
fiscal-year ending on October 31, 1996 was 5.60% and 20.10% for the Class A and
C shares of the Growth & Income Series, respectively.
Each Series' yield quotation for each class is based on a 30-day period ended on
a specified date, computed by dividing such Series' net investment income per
share earned during the period by such Series' maximum offering price per share
on the last day of the period. This is determined by finding the following
quotient: take the Class' dividends and interest earned during the period minus
its expenses accrued for the period and divide by the product of (i) the average
daily number of Class shares outstanding during the period that were entitled to
receive dividends and (ii) the Series' maximum offering price per share on the
last day of the period. To this quotient add one. This sum is multiplied by
itself five times. Then one is subtracted from the product of this
multiplication and the remainder is multiplied by two. Yield for the Class A
shares reflects the deduction of the maximum initial sales charge, but may also
be shown based on the Series' net asset value per share. Yields for C shares do
not reflect the deduction of the CDSC.
<PAGE>
These figures represent past performance, and an investor should be aware that
the investment return and principal value of a Fund investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Therefore, there is no assurance that this performance will be
repeated in the future.
7.
Taxes
The value of any shares redeemed by the Fund or repurchased or otherwise sold
may be more or less than your tax basis in the shares at the time the
redemption, repurchase or sale is made. Any gain or loss will generally be
taxable for federal income tax purposes. Any loss realized on the sale,
redemption or repurchase of Fund shares which you have held for six months or
less will be treated for tax purposes as a long-term capital loss to the extent
of any capital gains distributions which you received with respect to such
shares. Losses on the sale of stock or securities are not deductible if, within
a period beginning 30 days before the date of the sale and ending 30 days after
the date of the sale, the taxpayer acquires stock or securities that are
substantially identical.
The writing of call options and other investment techniques and practices which
the Fund may utilize, as described above under "Investment Objectives and
Policies," may create "straddles" for United States federal income tax purposes
and may affect the character and timing of the recognition of gains and losses
by the Fund. Such transactions may increase the amount of short-term capital
gain realized by the Fund, which is taxed as ordinary income when distributed to
shareholders. Limitations imposed by the Internal Revenue Code on regulated
investment companies may restrict the Fund's ability to engage in transactions
in options.
The Fund will be subject to a 4% non-deductible excise tax on certain amounts
not distributed (and not treated as having been distributed) on a timely basis
in accordance with a calendar-year distribution requirement. The Fund intends to
distribute to shareholders each year an amount adequate to avoid the imposition
of such excise tax. Dividends paid by the Fund will qualify for the
dividends-received deduction for corporations to the extent they are derived
from dividends paid by domestic corporations.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to United States persons (United States citizens or residents and
United States domestic corporations, partnerships, trusts and estates.) Each
shareholder who is not a United States person should consult his tax adviser
regarding the U.S. and foreign tax consequences of the ownership of shares of
the Fund, including a 30% (or lower treaty rate) United States withholding tax
on dividends representing ordinary income and net short-term capital gains, and
the applicability of United States gift and estate taxes to non-United States
persons who own Fund shares.
8.
Information About the Fund
Shareholder Liability. Delaware law provides that Fund shareholders shall be
entitled to the same limitations of personal liability extended to stockholders
of private corporations for profit. The courts of some states, however, may
decline to apply Delaware law on this point. The Fund's Declaration of Trust
contains an express disclaimer of shareholder liability for the acts,
obligations, or affairs of the Fund and requires that a disclaimer be given in
each contract entered into or executed by the Fund. The Declaration provides for
indemnification out of the Fund's property of any shareholder or former
shareholder held personally liable for the obligations of the Fund. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which Delaware law does not apply, no
contractual limitation of liability was in effect and the portfolio is unable to
meet its obligations. Lord Abbett believes that, in view of the above, the risk
of personal liability to shareholders is extremely remote.
Under The Fund's Declaration of Trust, the trustees may, without shareholder
vote, cause the Fund to merge or consolidate into, or sell and convey all or
substantially all of, the assets of the Fund to one or more trusts, partnerships
or corporations, so long as the surviving entity is an open-end management
investment company that will succeed to or assume the Fund's registration
statement. In addition, the trustees may, without shareholder vote, cause the
Fund to be incorporated under Delaware law.
<PAGE>
Derivative actions on behalf of the Fund may be brought only by shareholders
owning not less than 50% of the then outstanding shares of the Fund.
The directors, trustees and officers of Lord Abbett-sponsored mutual funds,
together with the partners and employees of Lord Abbett, are permitted to
purchase and sell securities for their personal investment account. In engaging
in personal securities transactions, however, such persons are subject to
requirements and restrictions contained in the Trust's Code of Ethics which
complies, in substance, with each of the recommendations of the Investment
Company Institute's Advisory Group on Personal Investing. Among other things,
the Code requires that Lord Abbett partners and employees obtain advance
approval before buying or selling securities, submit confirmations and quarterly
transaction reports, and obtain approval before becoming a director of any
company; and it prohibits such persons from investing in a security seven days
before or after any Lord Abbett-sponsored fund trades in such security,
profiting from trades of the same security within 60 days and trading on
material non-public information. The Code imposes similar requirements and
restrictions on the independent trustees of the Trust to the extent contemplated
by the recommendations of such Advisory Group.
9.
Financial Statements
The financial statements for the fiscal year ended October 31, 1996 and the
report of Deloitte & Touche LLP, independent public accountants, on such annual
financial statements contained in the 1996 Annual Report to Shareholders of Lord
Abbett Securities Trust are incorporated herein by reference to such financial
statements and report in reliance upon the authority of Deloitte & Touche LLP as
experts in auditing and accounting. The International Series commenced
operations subsequent to October 31, 1996.
<PAGE>
PART C OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Part A - Financial Highlights for the period December
31, 1994 (commencement of operations - Growth & Income
Series) to October 31, 1995 and the fiscal year ended
October 31, 1996.
Part B - Statement of Net Assets (Growth & Income Series)
at October 31, 1996. Statement of Operations
(Growth & Income Series)for the year ended
October 31, 1996.
(b) Exhibits -
99.B1 Amendment to Declaration & Agreement of Trust
establishing International Series*
99.B2 By-laws**
99.B5
(a) Investment Advisory Contract**
(b) Sub-Investment Advisory Contract**
99.B7 Profit Sharing or Similar Arrangement for
Directors****
99.B8 Custodian Agreement**
99.B11 Consent of Deloitte & Touche*
99.B14 Prototype Retirement Plan****
99.B15 Form of Rule 12b-1 Plan and Agreement***
99.B16 Computation of Performance & Yield*
99.B18 Amended and Restated Plan entered into
by Registrant pursuant to Rule 18f-3*
* Filed herewith
** Previously filed
*** No. 40 to the Registration Statement on Form N-1A of
Lord Abbett Bond-Debenture Fund, Inc. (File No. 811-
2145) ("LABD"), except for the substitution of (a) the
Registant's name in lieu of LABD and (b) Registrant's
status as a Delaware business Trust in lieu of LABD's
status as a Maryland corporation, in the case of a
form of Rule 12b-1 Plan and Agreement for Registrant.
**** Incorporated by reference to Post-Effective Amendment
No. 7 to the Registration Statement on Form N-1A of
Lord Abbett Equity Fund, Inc. (File No. 811-7538)
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
Item 26. NUMBER OF RECORD HOLDERS OF SECURITIES
(as of November 1, 1996)
Growth & Income Series Class A - 4,129
Class C - 2,762
International Series - None
Item 27. INDEMNIFICATION
1
<PAGE>
The Registrant is a Delaware Business Trust established under
Chapter 38 of Title 12 of the Delaware Code. The Registrant's
Declaration and Instrument of Trust at Section 4.3 relating to
indemnification of Trustees, officers, etc. 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 a 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 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.
2
<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 is 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 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Lord, Abbett & Co. acts as investment manager and/or principal
underwriter for thirteen other Lord Abbett open-end investment
companies (of which it is principal underwriter for thirteen),
and as investment adviser to approximately 5,100 private
accounts. Other than acting as Trustees (directors) and/or
officers of open-end investment companies managed by Lord,
Abbett & Co., none of Lord, Abbett & Co.'s partners has, in
the past two fiscal years, engaged in any other business,
profession, vocation or employment of a substantial nature for
his own account or in the capacity of director, officer,
employee, partner or trustee of any entity except as follows:
John J. Walsh
Trustee
Brooklyn Hospital
Parkside Avenue
Brooklyn, N.Y.
3
<PAGE>
Item 29. PRINCIPAL UNDERWRITER
(a) Lord Abbett Affiliated Fund, Inc.
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Mid-Cap Value Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett Government Securities Money Market Fund, Inc.
Lord Abbett Tax-Free Income Trust
Lord Abbett Global Fund, Inc.
Lord Abbett Equity Fund
Lord Abbett Series Fund, Inc.
Lord Abbett Research Fund, Inc.
Lord Abbett Investment Trust
INVESTMENT ADVISER
American Skandia Trust (Lord Abbett Growth and Income Portfolio)
(b) The partners of Lord, Abbett & Co. are:
Name and Principal Positions and Offices
BUSINESS ADDRESS (1) WITH REGISTRANT
Robert S. Dow Chairman and President
Kenneth B. Cutler Vice President & Secretary
Stephen I. Allen Vice President
Zane E. Brown Vice President
Daniel E. Carper Vice President
Daria L. Foster Vice President
Robert G. Morris Vice President
Robert J.Noelke Vice President
E. Wayne Nordberg Vice President
John J. Walsh Vice President
(1) Each of the above has a principal business address
at
767 Fifth Avenue, New York, NY 10153
(c) Not applicable
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Registrant maintains the records, required by Rules 31a - 1(a)
and (b), and 31a - 2(a) at its main office.
Lord, Abbett & Co. maintains the records required by Rules 31a
- 1(f) and 31a - 2(e) at its main office.
Certain records such as correspondence may be physically
maintained at the main office of the Registrant's Transfer
Agent, Custodian, or Shareholder Servicing Agent within the
requirements of Rule 31a-3.
Item 31. MANAGEMENT SERVICES
None.
Item 32. UNDERTAKINGS
The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to
4
<PAGE>
shareholders, upon request and without charge.
The Registrant undertakes, if requested to do so by the
holders of at least 10% of the Registrant's outstanding
shares, to call a meeting of shareholders for the purpose of
voting upon the question of removal of a director or directors
and to assist in communications with other shareholders as
required by Section 16(c).
The Registrant hereby undertakes to file a post-effective
amendment, using financial statements which need not be
certified, within four to six months from the effective date
of Registrant's Pension Class 1933 Act Registration Statement.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant has duly caused this Registration Statement
and/or any amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York on the
29th day of November, 1996.
LORD ABBETT SECURITIES TRUST
By: /s/ ROBERT S. DOW
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Robert S. Dow, Chairman of the Board
and Trustee
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
Chairman of the Board
/s/Robert S. Dow President and Trustee November 29, 1996
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Robert S. Dow (Title) (Date)
Vice President and
/s/Keith F. O'Connor Treasurer November 29, 1996
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Keith F. O'Connor (Title) (Date)
/s/E. Thayer Bigelow Trustee November 29, 1996
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E. Thayer Bigelow (Title) (Date)
/s/Steward S. Dixon Trustee November 29, 1996
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Steward S. Dixon (Title) (Date)
/s/John C. Jansing Trustee November 29, 1996
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John C. Jansing (Title) (Date)
/s/C. Alan MacDonald Trustee November 29, 1996
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C. Alan MacDonald (Title) (Date)
/s/ Hansel B. Millican, Jr. Trustee November 29, 1996
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Hansel B. Millican, Jr. (Title) (Date)
/s/ Thomas J. Neff Trustee November 29, 1996
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Thomas J. Neff (Title) (Date)
LORD ABBETT SECURITIES TRUST
Amendment to Declaration
and Agreement of Trust
DATED FEBRUARY 26, 1996
The undersigned Board of Trustees of Lord Abbett Securities Trust (the
"Trust") do hereby establish a new series of the Trust to be designated the
INTERNATIONAL SERIES.
/S/ ROBERT S. DOW /S/ JOHN C. JANSING
/S/ E. THAYER BIGELOW /S/ C. ALAN MACDONALD
/S/ STEWART S. DIXON /S/ HANSEL B. MILLICAN, JR.
/S/ THOMAS J. NEFF
Dated: September 12, 1996
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CONSENT OF INDEPENDENT AUDITORS
Lord Abbett Securities Trust - Growth & Income Series:
We consent to the incorporation by reference in Post-Effective Amendment No.13
to Registration Statement No. 33-58846 of our report dated November 22, 1996
appearing in the annual report to shareholders and to the reference to us under
the caption "Financial Highlights" in the Prospectus and to the references to us
under the captions "Investment Advisory and Other Services" and "Financial
Statements" in the Statement of Additional Information, both of which are part
of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
New York, New York
November 27, 1996
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Lord Abbett Securities Trust Growth & Income Series
Post Effective Amendment No. 13 on form N-1A
Results of a $1,000 investment reflecting the maximum sales charge and the
reinvestment of all distributions.
PERIOD ENDING OCTOBER 31, 1996
P * (1 + T)N = ERV
LIFE OF FUND* ONE YEAR
P = 1,000 P = 1,000
N = 2.8301 N = 1
ERV = 1,500 ERV = 1,201
T = Average annual total return
1,000 * (1 + T)2.8301 = 1,500 1,000 * (1 + T)1 = 1,201
(1 + T)2.8301 = 1,500 (1 + T)1 = 1,201
--------- -----
1,000 1,000
T = (1,500)0.3533 -1 = 15.40% T = 1,201 -1
------- -----
1,000 (1,000)
T = 15.40% T = 20.10%
* The Trust's Growth & Income Series(Class C share)commenced
operations on 1/3/94.
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Lord Abbett Securities Trust Growth & Income Series
Post Effective Amendment No. 13 on form N-1A
Results of a $1,000 investment reflecting the maximum sales charge and the
reinvestment of all distributions.
PERIOD ENDING OCTOBER 31, 1996
P * (1 + T) = ERV
LIFE OF FUND*
P = 1,000
ERV = 1,056
T = total return
1,000 * (1 + T) = 1,056
(1 + T) = 1,056
1,000
T = (1,056) -1 = 5.60% (7/15/96-10/31/96)
(1,000)
* The Trust's Growth & Income Series(Class A share)commenced
operations on 7/15/96.
Amended and Restated Plans as of November 20,1996
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 an amended and restated 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-in terested Board members, has
determined that the following separate arrangement and expense allocation,and
the related conversion features, if any, and exchange privileges, of each
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class of each Fund are in the best interest of each class of each Fund
individually and each Fund as a whole.
1. CLASS DESIGNATION. Shares of all Funds except Lord Abbett Series Fund, Inc.
shall be divided into Class A shares, Class B shares and Class C shares as
indicated for each Fund on Schedule A attached hereto. In the case of the Lord
Abbett Series Fund - Growth & Income Portfolio, shares shall be divided into
Variable Contract Class shares and Pension Class shares as indicated on Schedule
A.
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 B shares, Class C shares, Variable Contract Class shares
and Pension Class shares will be offered at their NAV without an initial sales
charge.
(b) SERVICE AND DISTRIBUTION FEES. In respect of the Class A shares, Class B
shares, Class C shares, Variable Contract Class shares and Pension Class shares,
each Fund will pay service and/or distribution fees under plans from time to
time in effect adopted for such classes pursuant to Rule 12b-1
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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 generally 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 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 0.25% 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 net assets for the Class A shares of such Funds.
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Pursuant to a 12b-1 Plan with respect to the Class B shares, if effective, each
Fund will generally pay a continuing annual fee of up to 1% of the average
annual NAV of such shares then outstanding (each fee comprising .25% in service
fee and .75% in distribution fee).
Pursuant to a 12b-1 Plan with respect to the Class C shares, if effective, each
Fund will generally 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 comprising .25% in service
fees and .75% in distribution fees). Pursuant to a 12b-1 plan with respect to
the Variable Contract Class, if operational, the Growth & Income Portfolio will
generally pay a continuing annual fee of up to .15% of the average annual NAV of
such shares then outstanding to reimburse an insurance company for its
expenditure related to the distribution of such shares which expenditures are
not also reimbursable pursuant to fees paid under the variable contract issued
by such insurance company. Pursuant to a 12b-1 Plan with respect to the Pension
Class, if operational, the Growth & Income Portfolio will
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generally pay a continuing annual fee of .45% of the average annual NAV of such
shares then outstanding. 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 0.75% of the average daily NAV of such shares (consisting of distribution and
service fees, at maximum annual rates not exceeding 0.50 and 0.25 of 1%,
respectively).
(c) CONTINGENT DEFERRED SALES CHARGES ("CDSC"). 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 CDSC equal to 1%
of the lower of the cost or the NAV of such shares if the shares are redeemed
for cash on or before the end of the twenty-fourth month after the month in
which the shares were purchased. Class B shares will be subject to a CDSC
ranging from 5% to 1% of the lower of the cost or the NAV of the shares, if the
shares are redeemed for cash before the sixth anniversary of their purchase. The
CDSC for the Class B shares may be waived for certain transactions. Class C
shares will be subject to a CDSC equal to 1% of the lower of the cost or the NAV
of the shares if the shares are redeemed for cash before the first anniversary
of their purchase.
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Neither the Variable Contract Class nor the Pension Class shares will be subject
to a CDSC.
3. CLASS-SPECIFIC EXPENSES. The following expenses shall be allocated, to the
extent such expenses can reasonably be identified as relating to a particular
class and consistent with Revenue Procedure 96-47, on a class-specific basis:
(a) fees under a 12b-1 Plan applicable to a specific class (net of any CDSC 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) sta
tionery, printing, postage and delivery expenses related to preparing and
distributing materials such as shareholder reports, prospectuses and proxy
statements to current share holders of a specific class; (d) Securities and
Exchange Commission registration fees incurred by a specific class; (e) Board
fees or expenses identifiable as being attributable to a specific class; (f)
fees for outside accountants and related expenses relating solely to a specific
class;
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(g) litigation expenses and legal fees and expense relating solely to a specific
class; (h) expenses incurred in connection with shareholders meetings as a
result of issues relating solely to a specific class and (i) other expenses
relating solely to a specific class, provided, that advisory fees and other
expenses related to the management of a Fund's assets (including custodial fees
and tax-return preparation fees) shall be allocated to all shares of such Fund
on the basis of NAV, regardless of whether they can be specifically attributed
to a particular class. All common expenses shall be allocated to shares of each
class at the same time they are allocated to the shares of all other classes.
All such 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. For all Funds, with the exception of
Series Fund - Growth & Income Portfolio, Blue Sky expenses will be treated as
common expenses. In the case of Series Fund - Growth & Income Portfolio, Blue
Sky expenses will be allocated entirely to the Pension Class, as the Variable
Contract Class of Series Fund Growth & Income Portfolio has no Blue Sky
expenses.
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4. INCOME AND EXPENSE ALLOCATIONS. Income, realized and unrealized capital gains
and losses and expenses not allocated to a class as provided above shall be
allocated to each class on the basis of the net assets of that class in relation
to the net assets of the Fund, except that, in the case of each daily dividend
Fund, income and expenses shall be allocated on the basis of relative net assets
(settled shares).
5. DIVIDENDS AND DISTRIBUTIONS. Dividends and Distributions paid by a Fund on
each class of its shares, to the extent paid, will be calculated in the same
manner, will be paid at the same time, and will be in the same amount, except
that the amount of the dividends declared and paid by a particular class may be
different from that paid by another class because of expenses borne exclusively
by that class.
6. 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 allocations of
expenses, income and realized and unrealized capital gains and losses of such
Fund between or among its classes as provided above.
7. CONVERSION FEATURES. The Class B shares will automatically convert to Class A
shares 8 years after the date
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of purchase. Such conversion will occur at the relative NAV per share of each
Class without the imposition of any sales charge, fee or other charge. When
Class B shares convert, any other Class B shares that were acquired by the
shareholder by the reinvestment of dividends and distributions will also convert
to Class A shares on a pro rata basis. The conversion of Class B shares to Class
A shares after 8 years is subject to the continuing availability of a private
letter ruling from the Internal Revenue Service or an opinion of counsel to the
effect that the conversion does not constitute a taxable event for the Class B
shareholder under Federal income tax law. If such a revenue ruling or opinion is
no longer available, the automatic conversion feature may be suspended, in which
event no further conversions of Class B shares would occur while such suspension
remained in effect. Subject to amendment by the Board, Class A shares and Class
C shares shall not be subject to any automatic conversion feature.
8. EXCHANGE PRIVILEGES. Except as set forth in a Fund's prospectus as from time
to time in effect, shares of any class of such 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.
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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.
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The Lord Abbett - Sponsored Funds
ESTABLISHING MULTI-CLASS STRUCTURES
CLASSES
Lord Abbett Affiliated Fund, Inc. A, B, C
Lord Abbett Bond-Debenture Fund, Inc. A, B, C
Lord Abbett Developing Growth Fund, Inc. A, B, C
Lord Abbett Global Fund, Inc.
Equity Series A, B, C
Income Series A, B, C
Lord Abbett Investment Trust
Lord Abbett Balanced Series A, C
Lord Abbett Limited Duration U.S.
Government Securities Series A, C
Lord Abbett U.S. Government
Securities Series A, B, C
Lord Abbett Securities Trust
Lord Abbett Growth & Income Trust A, C
Lord Abbett Tax-Free Income Fund, Inc.
California Series A, C
National Series A, B, C
New York Series A, C
Lord Abbett Tax-Free Income Trust
Florida Series A, C
Lord Abbett U.S. Government Securities
Money Market Fund, Inc. A, B, C
Lord Abbett Research Fund, Inc.
Large-Cap Series A, B
Small-Cap Series A, B
Lord Abbett Series Fund Growth & Income Portfolio
Variable Contract Class
Growth & Income Portfolio
Pension Class
