LORD ABBETT SECURITIES TRUST 485APOS
Filing Date: 11/04/98
485APOS REGISTRATION STATEMENT
1933 Act File No. 33-58846
1940 Act File No. 811-7538
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 23 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 23 [X]
LORD ABBETT SECURITIES TRUST
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Exact Name of Registrant as Specified in Charter
767 Fifth Avenue, New York, N.Y. 10153
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Address of Principal Executive Office
(212) 848-1800
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Registrant's Telephone Number
Thomas F. Konop, Vice President 767 Fifth Avenue, New York, N.Y. 10153
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(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
|_| on [date] 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
|X| on (December 30, 1998) 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
2
LORD ABBETT SECURITIES TRUST N-1A
Cross Reference Sheet
Post-Effective Amendment No.20
This Post-Effective Amendment No. 23 (the "Amendment") to the Registrant's
Registration Statement relates only to Class A, B and C shares of Lord Abbett
Securities Trust - Large-Cap International Series. The other Series and classes
of shares of the Registrant are listed below and are offered by the Prospectuses
and Statements of Additional Information in Parts A and B, respectively, of the
Post-Effective Amendments to the Registrant's Registration Statements as
identified. The following are separate series and classes of shares of the
Registrant. This Amendment does not relate to, amend or otherwise affect the
Prospectuses and Statements of Additional Information contained in the prior
Post-Effective Amendments listed below, and pursuant to Rule 485(d) under the
Securities Act of 1933, does not affect the effectiveness of such Post-Effective
Amendments.
POST-EFFECTIVE
AMENDMENT NO.
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International Series - Class Y 22
Growth & Income Series - Class A, B & C;
International Series - A, B & C; and
World Bond-Debenture Series - A, B & C 20 and 21
Alpha Series - A, B & C 17
Form N-1A Location In Prospectus or
Item No. Statement of Additional Information
1 Cover Page
2 Fee Table
3 N/A
4(a)(i) Cover Page
4(a)(ii) 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) Purchases, Redemptions and Shareholder Services
9 N/A
10 Cover Page
3
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
18(a) Cover Page
18(b) N/A
19(a)(b) Purchases; Redemptions and Shareholder Services
19(c) N/A
20 Taxes
21(a) Purchases, Redemptions and Shareholder Services
21(b)(c) N/A
22 N/A
22(b) Performance
23 N/A
4
This Prospectus sets forth concisely the information about Lord Abbett
Large-Cap International Fund ("we" or the "Fund") that you should know before
investing. Please read this prospectus before investing and retain for future
reference.
The Fund has three classes of shares, designated Classes A, B and C, which
provide you with different purchasing options. See "Purchases" for a description
of these options.
The investment objective of the Fund is to seek long-term capital
appreciation. There can be no assurance that this objective will be achieved.
The Statement of Additional Information dated December 31, 1998 has been
filed with the Securities and Exchange Commission and is incorporated by
reference into this Prospectus. You may obtain it, without charge, by writing to
the fund or by calling 800-874-3733 and asking for "Part B of the Prospectus -
the Statement of Additional Information." In addition, the Commission maintains
a website (http://www.sec.gov) that contains this Prospectus, the Statement of
Additional Information, other material incorporated by reference, and other
information regarding companies that file electronically with the Commission.
Like all mutual fund shares, 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.
PROSPECTUS
December 31, 1998
LORD ABBETT
Large-Cap International Fund
Investors should read and retain this Prospectus. Shareholder inquiries
should be made in writing to the fund or by calling 800-821-5129. In addition,
you can make inquiries through any broker-dealer.
Shares of the fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank. The shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
An investment in the Fund involves risks, including the possible loss of
principal.
TABLE OF CONTENTS PAGE
1 Investment Objectives 2
2 Fee Table 2
3 How We Invest 3
4 Purchases 7
5 Shareholder Services 13
6 Our Management 14
7 Dividends, Capital Gains
Distributions and Taxes 15
8 Redemption 15
8 Performance 16
5
1 INVESTMENT OBJECTIVES
The investment objective of the Fund is long-term capital appreciation.
The production of any current income is incidental to this objective and the
Fund also may invest in securities which do not produce any income. The Fund
normally invests primarily in equity securities of non-U.S. issuers.
2 FEE TABLE
A summary of the expenses of the Fund is set forth in the table below. The
example is not a representation of past or future expenses. Actual expenses may
be more or less than those shown.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Class A Shares Class B Shares Class C Shares
================================================================================================================
<S> <C> <C> <C>
Shareholder Transaction Expenses (1)
(as a percentage of offering price)
Maximum Sales Load (2) on Purchases (See
"Purchases")
5.75% None None
- ----------------------------------------------------------------------------------------------------------------
Deferred Sales Load (2) (See None 5% if shares redeemed 1% if shares are
"Purchases") before 1st anniversary of redeemed before 1st
purchase, declining to anniversary of
1% before 6th anniversary purchase
and eliminated on and
after 6th anniversary (3)
- ----------------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (4)
(as a percentage of average net assets)
Management Fees (See "Our
Management") 0.90% 0.90% 0.90%
12b-1 Fees (See "Purchases") (1) (2) 0.35% 1.00% 1.00%
Other Expenses (See "Our
Management") 0.48% 0.48% 0.48%
- ----------------------------------------------------------------------------------------------------------------
Total Operating Expenses 1.73% 2.38% 2.38%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Example: Assume the Fund's annual return is 5% and there is no change in the
level of expenses described above. For a $1,000 investment in the Fund, with
reinvestment of all our management distributions, you would pay the following
total expenses assuming redemption on the last day of each time period
indicated.
1 year 3 years
Class A shares $74 $109
Class B shares (3) $64 $104
Class C shares $24 $74
You would pay the following expenses on the same investment, assuming no
redemption.
Class A shares $74 $109
Class B shares (3) $24 $74
Class C shares $24 $74
6
(1) Although the Fund does not, with respect to Class B and 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 Class B and Class
C shares, more than the economic equivalent of the maximum front-end sales
charge as permitted by certain rules of NASD Regulation, Inc. Likewise, with
respect to Class A shares, investors should be aware that, over the long term,
such maximum may be exceeded due to the Rule l2b-l Plan applicable to Class A
shares, which permits the Fund to pay up to 0.50% in total annual fees, half for
service and the other half for distribution.
(2) Sales "load" is referred to as sales "charge," "deferred sales load" is
referred to as "contingent deferred sales charge" (or "CSDC") and "12b-l fees"
which consist of a "service fee" and a "distribution fee" are referred to by
either or both of these terms where appropriate throughout this Prospectus.
(3) Class B shares will automatically convert to Class A shares on the eighth
anniversary of the purchase of Class B shares.
(4) The annual operating expenses for the Fund are based on estimated expenses
for the current fiscal year.
The foregoing is provided to give investors a better understanding of the
expenses that are incurred by an investment in the Fund.
3 HOW WE INVEST
Portfolio investments for the Fund 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 Fund will be invested in such equity securities of
companies with a market capitalization of more than $4 billion which are
domiciled in at least three different countries outside the United States. The
Fund currently intends to diversify investments among countries to reduce
currency risk. Although the Fund 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 Fund intends to invest primarily in equity securities of
companies with market capitalization of more than $4 billion listed on stock
exchanges, it may also invest in equity securities of such companies traded in
over-the-counter markets, as well as small and middle capitalization securities.
Small capitalization securities involve greater risk and the markets for such
securities may be more volatile and less liquid than those of larger securities.
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 section headed "Risk Factors - The Fund."
The Fund 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 Fund 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.
Any remaining assets of the Fund not invested as described above may be
invested in certain securities or obligations as set forth under the heading
"Other Common Policies."
Financial Futures and Options Thereon. The Fund 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 Fund will not enter into any futures contracts, or
options thereon, if the aggregate market value of the securities covered by
futures contracts plus options on such financial futures exceeds 50% of the
Fund's total assets.
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.
7
The Fund may invest (normally not more than 5% of the Fund's total assets) in
these investment funds subject to the provisions of the Investment Company Act
of 1940, as amended (the "Act"), and other applicable restrictions as discussed
herein or in the Statement of Additional Information. If the Fund invests in
such investment funds, the Fund's shareholders will bear not only their
proportionate share of the expenses of the Fund (including operating expenses
and the fees of Lord Abbett), but also will indirectly bear similar expenses of
the underlying investment funds.
Depository Receipts. The Fund may invest in American Depository Receipts
("ADRs"), Global Depository Receipts ("GDRs"), European Depository Receipts
("EDRs") and other Depository Receipts (which, together with ADRs, GDRs and
EDRs, are hereinafter collectively referred to as "Depository Receipts"), to the
extent that such Depository Receipts become available. ADRs are securities,
typically issued by a U.S. Financial Institution (a "depository"), that evidence
ownership interests in a security or a pool of securities issued by a foreign
issuer (the "underlying issuer") and deposited with the depository. ADRs may be
established by a depository without participation by the underlying issuer.
GDRs, EDRs and other types of Depository Receipts are typically issued by
foreign depositories, although they may also be issued by U.S. depositories, and
evidence ownership interests in a security or pool of securities issued by
either a foreign or a U.S. corporation. Generally, Depository Receipts in
registered form are designed for use in the U.S. securities market and
Depository Receipts in bearer form are designed for use in securities markets
outside the United States. The Fund may invest in sponsored and unsponsored
Depository Receipts. For purposes of the Fund's investment policies, the Fund's
investments in Depository Receipts will be deemed to be investments in the
underlying securities.
Risk Factors
Size. If the Fund remains small, there is risk that redemptions of the Fund's
shares may (a) cause portfolio securities of the Fund to be sold prematurely (at
a loss or gain, depending upon the circumstances) or (b) hamper or prevent a
contemplated portfolio security purchase by the Fund.
Foreign Investments. Investment in the Fund 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 Fund 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 the Fund's assets denominated
or traded in that currency. The performance of the Fund will be measured in U.S.
dollars, the base currency of the Fund. Securities markets of foreign countries
in which the Fund 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 the Fund's 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, the Fund 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 the Fund may be traded on days
that the Fund does not value its portfolio securities, such as Saturdays and
customary U.S. business holidays, and, accordingly, the Fund's net asset value
may be significantly affected on days when shareholders do not have access to
the Fund.
8
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
Foreign Currency Hedging Techniques. The Fund may use various foreign currency
hedging techniques described below when Fund management believes that the
currency of a particular foreign country may suffer a decline against the U.S.
dollar.
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 Fund
may enter into forward foreign currency contracts (but not in excess of the
amount the Fund 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 Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, the Fund may desire to "lock in" the U.S.
dollar price of a security. By entering into a forward contract for the purchase
or sale of the amount of foreign currency involved in the underlying security
transaction. The Fund will be able to protect against a possible loss resulting
from an adverse change in the relationship between the U.S. dollar and the
subject foreign currency during the period between the date of purchase or sale
and the date of settlement.
Second, the Fund may enter into a forward contract to sell the amount of
foreign currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency or, in the alternative, the Fund
may use a cross currency-hedging technique whereby it enters into such a forward
contract to sell another currency (obtained in exchange for the currency in
which the portfolio securities are denominated if such securities are sold)
which it expects to decline in a similar manner. 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 Fund intends to enter into such forward contracts under this second
circumstance periodically.
The Fund also may transact in currency put and call options on U.S.
exchanges or U.S. over-the-counter markets ("OTC") to protect the dollar against
foreign currency exposure. A put option gives the Fund, upon payment of a
premium, the right to sell a currency at the exercise price until the expiration
of the option and serves to insure against adverse currency price movements in
the underlying portfolio assets denominated in that currency. The premiums paid
for such currency put and call options will not exceed 5% of the net assets of
the Fund.
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 and banks trade options which are more flexible than exchange-listed
options with respect to strike price and maturity date. These OTC options
generally are available on a wider range of currencies. OTC foreign-currency
options generally are more liquid than listed options and involve the credit
risk associated with the individual issuer. OTC options together with illiquid
securities may comprise no more than 15% of the Fund's net assets.
A currency call option, upon payment of a premium, gives the purchaser of
the option the right to buy and the seller (writer) of the obligation to sell,
the underlying currency at the exercise price until the expiration of the
option. The Fund's purchase of a call option on a currency might be intended to
protect the Fund against an increase in the price of the underlying currency
that it intends to purchase in the future by fixing the price at which it may
purchase such currency. The Fund may sell (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 (as
well as the cross-hedging described above) may not exceed 90% of the
9
value of the securities denominated in such currency (a) invested in by the Fund
to cover such call writing or (b) to be crossed.
The Fund will segregate cash or permitted liquid securities belonging to
the Fund in an amount not less than that required by SEC Release 10666 and SEC
staff interpretations thereof with respect to the Fund's assets committed to (a)
currency put and call options, (b) forward foreign currency contracts and (c)
cross hedges entered into by the Fund. If the value of the securities segregated
declines, additional cash or 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 Fund's commitments with respect to such options, forward
foreign currency contracts and cross hedges.
Illiquid Securities. The Fund may invest up to 15% of its net assets in
illiquid securities. Bonds which are subject to legal or contractual
restrictions on resale, but which have been determined by the Board of Trustees
to be liquid, will not be subject to this limit. Investment by the Fund in such
securities, initially determined to be liquid, could have the effect of
diminishing the level of the Fund's liquidity during periods of decreased market
interest in such securities.
Borrowing. The Fund may borrow from banks (as defined in the Act) in
amounts up to 33 1/3% of its total assets (including the amount borrowed). The
Fund may borrow up to an additional 5% of its total assets for temporary
purposes. The Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities.
Diversification. The Fund intends to meet the diversification rules under
Subchapter M of the Internal Revenue Code. Generally, this requires, at the end
of each quarter of the taxable year, that (a) not more than 25% of the Fund's
total assets be invested in any one issuer and (2) with respect to 50% of the
Fund's total assets, no more than 5% of such Fund's total assets be invested in
any one issuer except U.S. Government securities.
The Fund is prohibited as a "diversified" investment company, 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 the Fund's 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 Delivery Securities. The Fund 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. The Fund
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.
While this investment strategy may contribute significantly to a portfolio
turnover rate substantially in excess of 100%, it is anticipated to have little
or no transaction costs or adverse tax consequences for the Fund. Transaction
costs normally do not include brokerage because the Fund's fixed-income
portfolio transactions usually are on a principal basis and, at the time of
purchase, the Fund normally anticipates that any markups charged will be more
than offset by the anticipated economic benefits of the transactions. In the
remote situation where this anticipated result does not occur, the markups may
offset any benefits.
Covered Call Options. The Fund may write call options on securities it
owns, provided that the securities it holds to cover such options do not
represent more than 5% of net assets (in the case of the Fund). A call option on
stock gives the purchaser of the option, upon payment of a premium to the writer
10
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.
It is currently intended that no more than 5% of the Fund's net assets
will be at risk in the use of any on the policies identified below.
Rights and Warrants. The Fund may invest in rights and warrants to
purchase securities provided that the time of the acquisition, its investment in
warrants valued at the lower of cost or market, would not exceed 5% of the
Fund's total assets. Warrants which are listed on the New York or American Stock
Exchange or a major foreign exchange may not exceed 2% of the Fund's total
assets.
Repurchase Agreements. The Fund may enter into repurchase agreements with
respect to a security. A repurchase agreement is a transaction by which the Fund
acquires a security and simultaneously commits to resell that security to the
seller (a bank or securities dealer) at an agreed-upon price on an agreed-up
date. Such repurchase agreement must, at all times, 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. The Fund may invest in shares of
closed-end investment companies bought in the primary or secondary market with a
commission no greater than the customary brokerage 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 the Fund and the closed-end investment company both charge a
management fee.
Lending of Portfolio Securities. The Fund may seek to earn income by
lending its portfolio securities if the loan is collateralized and its terms are
in accordance with regulatory requirements. These loans may not exceed 30% of
the value of the Fund's total assets. In such an arrangement, the Fund loans
securities from its portfolio to registered broker-dealers. Such loans are
continuously collateralized by an amount at least equal to 100% of the market
value of the securities loaned. Cash collateral is invested in obligations
issued or guaranteed by the U.S. Government or its agencies or commercial paper
or bond obligations rated AAA or A-1/P-1 by Standard & Poor's Rating Services or
Moody's Investors Services, Inc., respectively, or repurchase agreements with
respect to the foregoing. As with other extensions of credit, there are risks of
delay in recovery and market loss should the borrowers of the portfolio
securities fail financially.
Portfolio Turnover. The portfolio turnover rate for the Fund is not expected to
exceed 100%.
Change of Investment Objectives and Policies. The Fund will not change its
investment objective without shareholder approval. If the Fund 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 the changed
policy in its prospectus.
4 PURCHASES
ALTERNATIVE SALES ARRANGEMENTS
The Fund offers investors three different classes of shares. The different
classes of shares represent investments in the same portfolio of securities but
are subject to different expenses and are 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) or on investments
that do not qualify to be under a "special retirement wrap program" defined
under Class A Share Net Asset Value. If you purchase Class A shares as part of
an investment of at least $1 million (or for Retirement Plans with at least 100
eligible employees or under a special retirement wrap program") in shares of one
or more Lord Abbett-
11
sponsored funds, you will not pay an initial sales charge, but if you redeem any
of those shares within 24 months after the month in which you buy them, you may
pay to the Fund a contingent deferred sales charge ("CDSC") of 1% except for
redemptions under a "special retirement wrap program." Class A shares are
subject to service and distribution fees that are currently estimated to total
approximately 0.35 of 1% annually 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 below under "General."
Class B Shares. If you buy Class B shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the sixth anniversary of
buying them, you will normally pay a CDSC to Lord Abbett Distributor LLC ("Lord
Abbett Distributor"). That CDSC varies depending on how long you own shares.
Class B shares are subject to service and distribution fees at an annual rate of
1% of the annual net asset value of the Class B shares. The CDSC and the Rule
12b-1 Plan applicable to the Class B shares are described below under "General."
Class C Shares. If you buy Class C shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the first anniversary of
buying them, you will normally pay the Fund a CDSC of 1%. Class C shares are
subject to service and distribution fees at an annual rate of 1% of the annual
net asset value of the Class C shares. The CDSC and the Rule 12b-1 Plan
applicable to the Class C shares are described below under "General."
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial adviser. 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 reevaluate those factors to see if you should consider another class of
shares.
In the following discussion, to help provide you and your financial
adviser with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund.
We used the sales charge rates that apply to Class A, Class B and Class C,
and considered the effect of the higher distribution fees on Class B and Class C
expenses (which will affect your investment return). Of course, the actual
performance of your investment cannot be predicted and will vary, based on the
Fund's actual investment returns, the operating expenses borne by each class of
shares, and the class of shares you purchase. The factors briefly discussed
below are not intended to be investment advice, guidelines or recommendations,
because each investor's financial considerations are different. The discussion
below of the factors to consider in purchasing a particular class of shares
assumes that you will purchase only one class of shares and not a combination of
shares of different classes.
How Long Do You Expect to Hold Your Investment? While future financial needs
cannot be predicted with certainty, knowing how long you expect to hold your
investment will assist you in selecting the appropriate class of shares. For
example, over time, the reduced sales charges available for larger purchases of
Class A shares may offset the effect of paying an initial sales charge on your
investment, compared to the effect over time of higher class-specific expenses
on Class B or Class C shares for which no initial sales charge is paid. Because
of the effect of class-based expenses, your choice should also depend on how
much you plan to invest.
Investing for the Short Term. If you have a short-term investment horizon (that
is, you plan to hold your shares for not more than six years), you should
probably consider purchasing Class A or Class C shares rather than Class B
shares. This is because of the effect of the Class B CDSC if you redeem before
the sixth anniversary of your purchase, as well as the effect of the Class B
distribution fee on the investment return for that class in the short term.
Class C shares might be the appropriate choice (especially for investments of
less
12
than $100,000), because there is no initial sales charge on Class C shares, and
the CDSC does not apply to amounts you redeem alter holding them one year.
However, if you plan to invest more than $100,000 for the short term, then
the more you invest and the more your investment horizon increases toward six
years, the more attractive the Class A share option may become. This is because
the annual distribution fee 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 and 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 hold your shares.
Investing for the Longer Term. If you are investing for the longer term (for
example, to provide for future college expenses for your child) and do not
expect to nee access to your money for seven years or more, Class shares may be
an appropriate investment option, if you plan to invest less than $100,000. If
you plan to invest more than $100,000 over the long term, Class A shares will
likely be more advantageous than Class B shares or Class C shares, as discussed
above, because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charges available for large investments in Class A
shares under the Fund's Right 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.
You should discuss your purchase order for a specific class of shares with
your investment professional.
Are There Differences in Account Features That Matter to You? Some account
features are available in whole or in part to Class A, Class B and Class C
shareholders. Other features (such as Systematic Withdrawal Plans) might not be
advisable in non-Retirement Plan accounts for Class B shareholders (because of
the effect of the CDSC on the entire amount of a withdrawal if it exceeds 12%
annually) and in any account for Class C shareholders during the first year of
share ownership (due to the CDSC on withdrawals during that year). See
"Systematic Withdrawal Plan" under "Shareholder Services" for more information
about the 12% annual waiver of the CDSC. You should carefully review how you
plan to use your investment account before deciding which class of shares you
buy. For example, the dividends payable to Class B and Class C shareholders will
be reduced by the expenses borne solely by each of these classes, such as the
higher distribution fee to which Class B and Class C shares are subject, as
described below.
How Does It Affect Payments to My Broker? A sales person, such as a broker, or
any other person who is entitled to receive compensation for selling Fund shares
may receive different compensation for selling one class than for selling
another class. As discussed in more detail below, such compensation is primarily
paid at the time of sale in the case of Class A and B shares and is paid over
time, so long as shares remain outstanding, in the case of Class C shares. It is
important that investors understand that the primary purpose of the CDSC for the
Class B shares and the distribution fee for Class B and Class C shares is the
same as the purpose of the front-end sales charge on sales of Class A shares: to
compensate brokers and other persons selling such shares. The CDSC, if payable,
supplements the Class B distribution fee and reduces the Class C distribution
fee expenses for the Fund and Class C shareholders.
GENERAL
How Much Must You Invest? You may buy our shares through any independent
securities dealer having a sales agreement with Lord Abbett Distributor, our
exclusive selling agent. Place your order with your
13
investment dealer or send it to Lord Abbett Securities Trust, P.O. Box 419100,
Kansas City, Missouri 64141. The minimum initial investment for the Fund is
$1,000, except for lnvest-A-Matic and Div-Move ($250 initial and $50 subsequent
minimum) and Individual Retirement Accounts ($250 minimum). For Retirement Plans
there is no minimum initial investment required. See "Shareholder Services." For
information regarding the 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 our shares is calculated every business day as of
the close of the New York Stock Exchange ("NYSE") by dividing net assets by the
number of shares outstanding. Securities are valued at their market value as
more fully described in the Statement of Additional Information.
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 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 in proper form 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, noncash payments. The noncash
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 portfolio, if two or more
dealers are considered capable of obtaining best execution, we may prefer the
dealer who has sold our shares and/or shares of other Lord Abbett-sponsored
funds.
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>
- ---------------------------------------------------------------------------------------------------
Sales Charge as a Percentage of:
Dealer's
Concession as a
Net Amount Percentage of To Compute Offering
Size of Investment Offering Price Invested Offering Price Price, Divide NAV by
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00% .9425
- ---------------------------------------------------------------------------------------------------
$50,000 to $99,999 4.75% 4.99% 4.00% .9525
- ---------------------------------------------------------------------------------------------------
$100,000 to $249, 999 3.75% 3.90% 3.25% .9625
- ---------------------------------------------------------------------------------------------------
$250,000 to $499,999 2.75% 2.83% 2.25% .9725
- ---------------------------------------------------------------------------------------------------
$500,000 to $999,999 2.00% 2.04% 1.75% .9800
- ---------------------------------------------------------------------------------------------------
$1 million or more No Sales Charge 1.00% 1.0000
- ---------------------- --------------------------------------
</TABLE>
Authorized institutions receive concessions on purchases made by a retirement
plan pursuant to a special retirement wrap program or by another qualified
purchaser within a 12-month period (beginning with the first net asset value
purchase) as follows: 1.00% of purchases at $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 l2b-l Plan" below.
14
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")
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 intent to invest $50,000 or more in any shares of the Fund or 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, every 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 officers, directors, 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 trustee or custodian under any pension or profit-sharing plan or Payroll
Deduction IRA established for 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 "directors" and "employees" include a director's or
employee's spouse (including the surviving spouse of a deceased director or
employee). The terms "directors" and "employees of Lord Abbett" also include
other family members, retired directors and employees. Our Class A shares also
may be purchased at net asset value (a) at $1 million or more, (b) with
dividends and distributions on Class A shares of other Lord Abbett-sponsored
fund except for dividends and distributions on shares of LARF, LAEF and LASF,
(c) under the loan feature of Lord Abbett-sponsored prototype 403(b) plan for
Class A share purchases representing the repayment of principal and interest,
(d) by certain unaffiliated authorized brokers, dealers, registered investment
advisers or other financial institutions who have entered into an agreement with
Lord Abbett Distributor in accordance with certain standards approved by Lord
Abbett Distributor, providing specifically for the use of our 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 fund and (f) through Retirement
Plans with at least 100 eligible employees.
There are no minimum initial or subsequent investment requirements for the
above-mentioned mutual fund wrap programs.
Class A Rule 12b-1 Plan. The Fund has adopted a Class A Share Rule 12b-1 Plan
(the "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
15
invested in the Fund and (b) to sell Class A shares of the Fund. Under the A
Plan, 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
Act, is authorized to approve annual fee payments from the Fund's Class A assets
of up to 0.50 of 1% of the average net of such assets consisting of distribution
and service fees, each at a maximum annual rate not exceeding 0.25 of 1% (the
"Fee Ceiling"). Institutions and persons permitted by law to receive such fees
are "authorized institutions."
Under the A Plan, the Board has approved payments by the Fund to Lord
Abbett Distributor which uses or passes on to authorized institutions (1) annual
service and distribution fees (payable quarterly) of .35% 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, 0.55% of the next $5 million, 0.50% of the
next $40 million and 0.25% 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 or (ii) through Retirement
Plans with at least 100 eligible employees.
Under the A Plan, 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 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 Fund 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. (Exceptions are 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 Fund's
Class A shares by the other fund. The Fund will collect such a charge for other
Lord Abbett-sponsored funds in a similar situation.
Buying Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed for
cash before the sixth anniversary of their purchase, a CDSC may be deducted from
the redemption proceeds. That sales 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 Class B CDSC is paid to Lord
Abbett Distributor to compensate it for its services rendered in connection with
the distribution of Class B shares, including the payment and financing of sales
commissions. See "Class B Rule 12b-1 Plan" below. To determine whether the CDSC
applies to a redemption, the Fund redeems shares in the following order: (1)
shares acquired by reinvestment of dividends and capital gains distributions,
(2) shares held until the sixth anniversary of their purchase or later, and (3)
shares held the longest before the sixth anniversary of their purchase.
The amount of the CDSC will depend on the number of years since you invested and
the dollar amount being redeemed, according to the following schedule:
16
Anniversary Contingent Deferred
of the Day on Sales Charge on Redemptions
Which the Purchase (As % of Amount
Order Was Accepted On Before Subject to Change)
- -------------------------------------------------------------------------------
1st 5.0%
1st 2nd 4.0%
- -------------------------------------------------------------------------------
2nd 3rd 3.0%
3rd 4th 3.0%
- -------------------------------------------------------------------------------
4th 5th 2.0%
5th 6th 1.0%
- -------------------------------------------------------------------------------
On or after the 6th None
anniversary
In the table, an "anniversary" is the 365th day subsequent to a purchase
or a prior anniversary. All purchases are considered to have been made on the
business day the purchase was made. See "Buying Shares Through Your Dealer"
above.
If Class B shares are exchanged into the same class of another Lord
Abbett-sponsored fund and the new shares are subsequently redeemed for cash
before the sixth anniversary of the original purchase, the CDSC will be payable
on the new shares on the basis of the time elapsed from the original purchase.
The Fund will collect such a charge for other Lord Abbett-sponsored funds in a
similar situation.
Waiver of Class B Sales Charges. The Class B CDSC will not be applied to shares
purchased in certain types of transactions nor will it apply to shares redeemed
in certain circumstances as described below.
The Class B CDSC will be waived for redemptions of shares (i) in
connection with the Systematic Withdrawal Plan and Div-Move services, as
described in more detail under "Shareholder Services" below; (ii) 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, (iii) in connection with the
death of an individual shareholder (a natural person), and (iv) in connection
with mandatory distributions under 403(b) plans and individual retirement
accounts. If Class B shares represent a part of an individual's total IRA or
403(b) investment, the CDSC waiver is available only for that portion of a
mandatory distribution which bears the same relation to the entire mandatory
distribution as the B share investment bears to the total investment.
Class B Rule 12b-1 Plan. The Fund has adopted a Class B share Rule 12b-l Plan on
behalf of the Fund (the "B Plan") under which the Fund periodically pays (except
as to certain accounts for which tracking data is not available) Lord Abbett
Distributor (i) an annual service fee of 0.25 of 1% of the average daily net
asset value of the Class B shares and (ii) an annual distribution fee of 0.75 of
1% of the average daily net asset value of the Class B shares that are
outstanding for less than 8 years.
Lord Abbett Distributor uses the service fee to compensate authorized
institutions for providing personal services for accounts that hold Class B
shares. Those services are primarily similar to those provided under the A Plan
described above.
Lord Abbett Distributor pays an up-front payment to authorized
institutions totaling 4%, consisting of 0.25% for service and 3.75% for a sales
commission as described below.
Lord Abbett Distributor pays the 0.25% service fee to authorized institutions in
advance for the first year after Class B shares have been sold by the authorized
institutions. After the shares have been held for a year, Lord Abbett
Distributor pays the service fee on a quarterly basis. Lord Abbett Distributor
is entitled to retain such service fee payable under the B Plan with respect to
accounts for which there is no authorized institution of record or for which
such authorized institution did not qualify. Although not obligated to do so,
Lord Abbett Distributor may waive receipt from the Fund or part or all of the
service fee payments.
The 0.75% annual distribution fee is paid to Lord Abbett Distributor to
compensate it for its services rendered in connection with the distribution of
Class B shares, including the payment and financing of sales commissions.
Although Class B shares are sold without a front-end sales charge, Lord Abbett
Distributor pays authorized institutions responsible for sales of Class B shares
a sales commission of 3.75% of the purchase
17
price. This payment is made at the time of sale from Lord Abbett Distributor's
own resources. Lord Abbett has made arrangements to finance these commission
payments, which arrangements include non-recourse assignments by Lord Abbett
Distributor to the financing party of such distribution and CDSC payments which
are made to Lord Abbett Distributor by shareholders who redeem their Class B
shares within six years of their purchase.
The distribution fee and CDSC payments described above allow investors to
buy Class B shares without a front-end sales charge while allowing Lord Abbett
Distributor to compensate authorized institutions that sell Class B shares. The
CDSC is intended to supplement Lord Abbett Distributor's reimbursement for the
commission payments it has made with respect to Class B shares and its related
distribution and financing costs. The distribution fee payments are at a fixed
rate and the CDSC payments are of a nature that, during any year, both forms of
payment may not be sufficient to reimburse Lord Abbett Distributor for its
actual expenses. The Fund is not liable for any expenses incurred by Lord Abbett
Distributor in excess of (i) the amount of such distribution fee payments to be
received by Lord Abbett Distributor and (ii) unreimbursed distribution expenses
of Lord Abbett Distributor incurred in a prior plan year, subject to the right
of the Board of Trustees or shareholders to terminate the B Plan. Over the long
term, the expenses incurred by Lord Abbett Distributor are likely to be greater
than such distribution fee and CDSC payments. Nevertheless, there exists a
possibility that for a short-term period Lord Abbett Distributor may not have
sufficient expenses to warrant reimbursement by receipt of such distribution fee
payments. Although Lord Abbett Distributor undertakes not to make a profit under
the B Plan, the B Plan is considered a compensation plan (i.e., distribution
fees are paid regardless of expenses incurred) in order to avoid the possibility
of Lord Abbett Distributor not being able to receive distribution fees because
of a temporary timing difference between its incurring expenses and receipt of
such distribution fees.
Automatic Conversion of Class B Shares. On the eighth anniversary of your
purchase of Class B shares, those shares will automatically convert to Class A
shares. This conversion relieves Class B shareholders of the higher annual
distribution fee that applies to Class B shares under the Class B Rule 12b-1
Plan. The conversion is based on the relative net asset values of the two
classes, and no sales charge or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions will also convert to Class A shares on a pro rata
basis. The conversion feature is subject to the continued availability of an
opinion of counsel or of a tax ruling described in "Purchases, Redemptions and
Shareholder Services" in the Statement of Additional Information.
Buying Class C Shares. Class C shares 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% will 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
Class C CDSC is paid to the Fund to reimburse it, in whole or in part, for the
service and distribution fee payments made by the Fund at the time such shares
were sold, as described below. To determine whether the CDSC applies to a
redemption, the Fund redeems shares in the following order (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
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 the Fund's Class C shares. The Fund 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 on
behalf of the Fund (the "C Plan") under which (except as to certain accounts for
which tracking data is not available) the Fund 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
18
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. Lord Abbett Distributor may retain from the quarterly
distribution fee, for the payment of distribution expenses incurred directly by
it, an amount not to exceed .10% of the average annual net asset value of such
shares outstanding.
5 SHAREHOLDER SERVICES
We offer the following shareholder services:
Telephone Exchange Privilege: Shares of any Fund may be exchanged, without a
service charge: (a) for those of the same class of any other Fund or any other
Lord Abbett-sponsored fund except for (i) LAEF, LASF and LARF and (ii) certain
tax-free, single-state Funds where the exchanging shareholder is a resident of a
state in which such Fund is not offered for sale 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 the 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.
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. With
respect to Class B shares, the CDSC will be waived on redemptions of up to 12%
per year of the current net asset value of your account at the time your SWP is
established. For Class B shares (under 12% per year) and Class C shares,
redemption proceeds due to a 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 six years or more (Class B) or one year or more
(Class C); and (3) shares held the longest before the sixth anniversary of their
purchase (Class B) or before the first anniversary of their purchase (Class C).
For Class B share redemptions over 12% per year, the CDSC will apply to the
entire redemption. Therefore, please contact the Fund for assistance in
minimizing the CDSC in this situation. Shareholders should be careful in
establishing a SWP, especially to the extent that such a withdrawal exceeds the
annual total return for a class, in which case, the shareholder's original
principal will be invaded and, over time, may be depleted.
Div-Move: You can invest the dividends paid on your account ($250 minimum
initial and $50 subsequent 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.
19
Invest-A-Matic: You can make fixed, periodic investments ($250 minimum
initial and $50 subsequent 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
Simple IRAs, Simplified Employee Pensions), 403(b) plans and pension and
profit-sharing plans, including 401(k) plans.
Householding: A single copy of an annual or semiannual 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).
6 OUR MANAGEMENT
Our business is managed by our officers on a daily 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 67
years and currently manages approximately $27 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. Christopher Taylor serves as
portfolio manager of the Fund. Mr. Taylor is Managing Director of
Fuji-Lord Abbett International, Ltd. (the "Sub-Adviser"). He has been with the
Sub-Adviser and its predecessor since 1987 and has 15 years of investment
experience.
Lord Abbett has entered into an agreement with the Sub-Adviser, under
which the Sub-Adviser provides Lord Abbett with advice with respect to the
Fund's assets. The Sub-Adviser is controlled by Fuji Investment Management Co.
(Tokyo). Fuji Bank Limited of Tokyo, Japan ("Fuji Bank") 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 directly and indirectly owns
approximately 27% of such outstanding voting stock. As of September 30, 1998,
the Sub-Adviser manages approximately $915 million, which is invested globally.
The Sub-Adviser furnishes Lord Abbett with advice and recommendations with
respect to the Fund's assets, including advice about the allocation of
investments among foreign securities markets and foreign equity and debt
securities markets and foreign equity and debt securities and, subject to
consultation with Lord Abbett, advice as to cash holdings and what securities in
the portfolio should be purchased, held or disposed of. The Sub-Adviser also
gives advice with respect to foreign currency matters.
Although, under normal circumstances, the Fund will be invested at least
80% in equity securities of non-U.S. issuers, 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 assets of the Fund that shall be allocated for investment in the
United States and in foreign markets, respectively.
Under the Management Agreement, we are obligated to pay Lord Abbett a
monthly fee at the annual rate of 0.90 of 1% for the Fund. 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.
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 shareholders' 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.
20
The Fund. The Fund is a Series of the Lord Abbett Securities Trust, which was
organized as a Delaware business trust on February 26, 1993. The Fund's Class A,
B and C shares have equal rights as to voting, liquidation, assets, dividends
and distributions except for differences resulting from certain class-specific
expenses.
7 DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
Dividends from net investment income are expected to be paid to
shareholders of the Fund annually. 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 the Fund when it has net
profits during the year from sales of securities which it has held more than one
year. If the Fund realizes net short-term capital gains, they also will be
distributed. It is anticipated that capital gains will be distributed in
November. 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.
We intend to continue to meet the requirements of Subchapter M of the
Internal Revenue Code. We will try to distribute to shareholders all our net
investment income and net realized capital gains, so as to avoid the necessity
of the Fund paying federal income tax. Distributions by the Fund of any net
long-term capital gains will be taxable to a shareholder as long-term capital
gains regardless of how long the shareholder has held the shares. Under recently
enacted legislation, the maximum tax rate for a U.S. individual, estate or trust
is reduced to 20% for distributions derived from the sale of assets held by the
Fund for more than 12 months. If the taxpayer is in the 15% tax bracket, the
rate is 10%.
The Fund may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. See the Statement of
Additional Information for additional details.
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.
8 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
21
by Federal law). If you have purchased Fund's 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.
9 PERFORMANCE
Yield and Total Return. Yield and total return data may, from time to time, be
included in advertisements about the Fund. 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. The
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
rates for Class A shares reflect the deduction of the maximum initial sales
charge, but may also be shown based on the Fund's net asset value per share.
Yields for Class C shares do not reflect the deduction of the CDSC.
"Total return" for the one, five and ten-year periods represents the
average annual compounded rate of return on an investment of $1,000 in the Fund
at the maximum public offering price. When total return is quoted for Class A
shares, it includes the payment of the maximum initial sales charge. 'When total
return is shown for Class 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 the Fund's 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.
22
No person is authorized to give information or to make any representations
not contained in this Prospectus or in supplemental literature authorized by the
Fund, and no person is entitled to rely upon any information or representation
not contained herein or therein.
23
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 84141
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419100
Kansas City, Missouri 64141
800-821-5129
Auditors
Deloitte & Touche LLP
Counsel
Debevoise & Plimpton
Printed in the U.S.A.
<PAGE>
24
- --------------------------------------------------------------------------------
LORD ABBETT
- --------------------------------------------------------------------------------
Statement of Additional Information December 31, 1998
Lord Abbett Securities Trust
Lord Abbett Large-Cap International Fund
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord Abbett Distributor LLC
("Lord Abbett 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 xx, 1998.
Lord Abbett Securities Trust (the "Trust") was organized as a Delaware business
trust on February 26, 1993. The Fund has five series, but only the Lord Abbett
Large-Cap International Fund (the "Fund") is described in this Statement of
Additional Information. The Fund has three classes of shares (A, B and C). 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 10
5. Purchases, Redemptions and Shareholder Services 11
6. Performance 16
7. Taxes 17
8. Information About the Fund 18
25
1.
Investment Objective and Policies
Fundamental Investment Restrictions
The Fund is subject to the following investment restrictions which cannot be
changed without approval of a majority of the Fund's outstanding shares. The
Fund may not: (1) borrow money, except that (i) the Fund may borrow from banks
(as defined in the Act) in amounts up to 33 1/3% of its total assets (including
the amount borrowed), (ii) the Fund may borrow up to an additional 5% of its
total assets for temporary purposes, (iii) the Fund may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of portfolio
securities and (iv) the Fund may purchase securities on margin to the extent
permitted by applicable law; (2) pledge its assets (other than to secure
borrowings, or to the extent permitted by the Fund's investment policies as
permitted by applicable law); (3) engage in the underwriting of securities,
except pursuant to a merger or acquisition or to the extent that, in connection
with the disposition of its portfolio securities, it may be deemed to be an
underwriter under federal securities laws; (4) make loans to other persons,
except that the acquisition of bonds, debentures or other corporate debt
securities and investment in government obligations, commercial paper,
pass-through instruments, certificates of deposit, bankers acceptances,
repurchase agreements or any similar instruments shall not be subject to this
limitation, and except further that may lend its portfolio securities, provided
that the lending of portfolio securities may be made only in accordance with
applicable law; (5) buy or sell real estate (except that the Fund may invest in
securities directly or indirectly secured by real estate or interests therein or
issued by companies which invest in real estate or interests therein), or
commodities or commodity contracts (except to the extent the Fund may do so in
accordance with applicable law and without registering as a commodity pool
operator under the Commodity Exchange Act as, for example, with futures
contracts); (6) with respect to 75% of 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, the
Fund also is subject to the following non-fundamental investment policies which
may be changed by the Board of Trustees without shareholder approval. The Fund
may not: (1) borrow in excess of 33 1/3% of its total assets (including the
amount borrowed), and then only as a temporary measure for extraordinary or
emergency purposes; (2) make short sales of securities or maintain a short
position except to the extent permitted by applicable law; (3) invest knowingly
more than 15% of its net assets (at the time of investment) in illiquid
securities, except for securities qualifying for resale under Rule 144A of the
Securities Act of 1933, 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 the
26
Fund's total assets would be invested in such securities (this restriction shall
not apply to mortgaged-backed securities, asset-backed securities or
obligations issued or guaranteed by the U. S. government, its agencies or
instrumentalities); (6) hold securities of any issuer if more than 1/2 of 1% of
the securities of such issuer are owned beneficially by one or more 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 the Fund's total assets
(included within such limitation, but not to exceed 2% of the Fund's total
assets, are warrants which are not listed on the New York or American Stock
Exchange or a major foreign exchange); (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 the Fund may invest in
securities issued by companies that engage in oil, gas or other mineral
exploration or other development activities; (9) write, purchase or sell puts,
calls, straddles, spreads or combinations thereof, except to the extent
permitted in the Fund's prospectus and statement of additional information, as
they may be amended from time to time; or (10) buy from 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 the Fund.
Lending Portfolio Securities
The Fund may lend portfolio securities to registered broker-dealers. These
loans, if and when made, may not exceed 30% of the Fund's total assets. The
Fund's loans of securities will be collateralized by cash or marketable
securities issued or guaranteed by the U.S. Government or its agencies ("U.S.
Government securities") or other permissible means at least equal to the market
value of the loaned securities. From time to time, the Fund 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, the Fund 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. The
Fund will comply with the following conditions whenever it loans securities: (i)
the Fund must receive at least 100% collateral from the borrower; (ii) the
borrower must increase the collateral whenever the market value of the
securities loaned rises above the level of the collateral; (iii) the Fund must
be able to terminate the loan at any time; (iv) the Fund must receive reasonable
compensation for the loan, as well as any dividends, interest or other
distributions on the loaned securities; (v) the Fund 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
The Fund may enter into repurchase agreements with respect to a security. A
repurchase agreement is a transaction by which the Fund acquires a security and
simultaneously commits to resell that security to the seller (a bank or
securities dealer) at an agreed upon price on an agreed upon date. The resale
price reflects the purchase price plus an agreed upon market rate of interest
which is unrelated to the coupon rate or date of maturity of the purchased
security. In this type of transaction, the securities purchased by the Fund have
a total value in excess of the value of the repurchase agreement. The Fund
requires at all times that the repurchase agreement be collateralized by cash or
U.S. Government securities having a value equal to, or in excess of, the
27
value of the repurchase agreement. Such agreements permit the Fund to keep all
of its assets at work while retaining flexibility in pursuit of investments of a
longer term nature.
The use of repurchase agreements involves certain risks. For example, if the
seller of the agreement defaults on its obligation to repurchase the underlying
securities at a time when the value of these securities has declined, the Fund
may incur a loss upon disposition of them. If the seller of the agreement
becomes insolvent and subject to liquidation or reorganization under the
Bankruptcy Code or other laws, a bankruptcy court may determine that the
underlying securities are collateral not within the control of the Fund and are
therefore subject to sale by the trustee in bankruptcy. Even though the
repurchase agreements may have maturities of seven days or less, they may lack
liquidity, especially if the issuer encounters financial difficulties. While
Fund management acknowledges these risks, it is expected that they can be
controlled through stringent selection criteria and careful monitoring
procedures. Fund management intends to limit repurchase agreements to
transactions with dealers and financial institutions believed by Fund management
to present minimal credit risks. Fund management will monitor creditworthiness
of the repurchase agreement sellers on an ongoing basis.
The Fund will enter into repurchase agreements only with those primary reporting
dealers that report to the Federal Reserve Bank of New York and with the 100
largest United States commercial banks and the underlying securities purchased
under the agreements will consist only of those securities in which the Fund
otherwise may invest.
Covered Call Options
As stated in the Prospectus, the Fund 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, the Fund forgoes the
opportunity to profit from any increase in the market price of the underlying
security above the exercise price of the option (to the extent that the increase
exceeds its net premium). The Fund may enter into "closing purchase
transactions" in order to terminate its obligation to deliver the underlying
security (this may result in a short-term gain or loss). A closing purchase
transaction is the purchase of a call option (at a cost which may be more or
less than the premium received for writing the original call option) on the same
security, with the same exercise price and call period as the option previously
written. If the Fund is unable to enter into a closing purchase transaction, it
may be required to hold a security that it might otherwise have sold to protect
against depreciation. The Fund does not intend to write covered call options
with respect to securities with an aggregate market value of more than 5% of its
gross assets at the time an option is written. This percentage limitation will
not be increased without prior disclosure in the current Prospectus.
The Fund's custodian will segregate cash or liquid high-grade debt securities in
an amount not less than that required by Securities and Exchange
Commission("SEC") Release 10666 with respect to Fund assets committed to written
covered call options. If the value of the segregated securities declines,
additional cash or debt securities will be added on a daily basis (i.e.,
marked-to-market) so that the segregated amount will not be less than the amount
of the Fund's commitments with respect to such written options.
Other Investment Policies (which can be changed without shareholder approval)
Financial Futures Contracts. The Fund may enter into contracts for the future
delivery of a financial instrument, such as a security or the cash value of a
securities index. This investment technique is designed
28
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 Fund will not enter into any futures contracts or
options on futures contracts if the aggregate of the market value of the
securities covered by 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 Fund will incur
brokerage fees when it purchases or sells contracts and will be required to
maintain margin deposits. At the time it enters into a futures contract, it is
required to deposit with its custodian, on behalf of the broker, a specified
amount of cash or eligible securities called "initial margin." The initial
margin required for a futures contract is set by the exchange on which the
contract is traded. Subsequent payments, called "variation margin," to and from
the broker are made on a daily basis as the market price of the futures contract
fluctuates. The costs incurred in connection with futures transactions could
reduce the Fund's 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.
29
Options on Financial Futures Contracts. The Fund may purchase and write call and
put options on financial futures contracts. An option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract at a specified exercise price at any time during
the period of the option. Upon exercise, the writer of the option delivers the
futures contract to the holder at the exercise price. The Fund 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 Fund
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 Fund will maintain in a
segregated account at its custodian bank cash, U.S. Government and other
permitted securities to cover its position.
2.
Trustees and Officers
The following trustee is a partner of Lord, Abbett & Co. ("Lord Abbett"), The
General Motors Building, 767 Fifth Avenue, New York, New York 10153-0203. He has
been associated with Lord Abbett for over five years and is also officers and/or
directors or trustee of the twelve other Lord Abbett-sponsored funds. He is an
Ainterested person" as defined in the Act, and as such, may be considered to
have an indirect financial interest in the Rule 12b-1 Plan described in the
Prospectus.
Robert S. Dow, age 53, Chairman and President
The following outside trustees are also directors or trustees of the twelve
other Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow
Courtroom Television Network
600 Third Avenue
New York, New York
Chief Executive Officer of Courtroom Television. Formerly President and Chief
Executive Officer of Time Warner Cable Programming, Inc. Prior to that, formerly
President and Chief Operating Officer of Home Box Office, Inc. Age 57.
William H. T. Bush
Bush-O-Donnell & Co., Inc.
1001 South Hanley Road, Suite 1025
St. Louis, Missouri
Co-founder and Chairman of the Board of the financial advisory firm of
Bush-O'Donnell & Co. Age 60
Robert B. Calhoun
30
Monitor Clipper Partners
650 Madison Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners and President of the Clipper Group
L.P., both private equity investment funds. Age 56.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 68
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 73
C. Alan MacDonald
Directorship Inc.
8 Sound Shore Drive
Greenwich, Connecticut
Managing Director of Directorship Inc., a consultancy in board management and
corporate governance. Formerly General Partner of The Marketing Partnership,
Inc., a full service marketing consulting firm (1994-1997). Prior to that, he
was Chairman and Chief Executive Officer of Lincoln Snacks, Inc., manufacturer
of branded snack foods (1992-1994). His career spans 36 years at Stouffers and
Nestle with 18 of the years as Chief Executive Officer. Currently serves as
Director of DenAmerica Corp., J. B. Williams Company, Inc., Fountainhead Water
Company and Exigent Diagnostics. Age 65.
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 70.
Thomas J. Neff
Spencer Stuart U.S.
277 Park Avenue
New York, New York
Chairman of Spencer Stuart U.S., an executive search consulting firm. Age 61.
31
The second column of the following table sets forth the compensation accrued for
the Trust's outside trustees. The third and fourth columns set forth information
with respect to the equity-based benefits accrued for outside directors/trustees
maintained by the Lord Abbett-sponsored funds. The fourth column sets forth the
total compensation payable by such funds to the outside directors/trustees. No
trustee of the Trust associated with Lord Abbett and no officer of the Trust
received any compensation from the Trust for acting as a trustee or officer.
For the Fiscal Year Ended October 31, 1998
------------------------------------------
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Pension or For Year Ended
Retirement Benefits December 31, 1998
Accrued by the Total Compensation
Aggregate Trust and Accrued by the Trust and
Compensation Twelve Other Lord Twelve Other Lord
Accrued by Abbett-sponsored Abbett-sponsored
Name of Director the Trust(1) Funds(2) Funds(3)
- ---------------- ------------- ------------------- ------------------------
<S> <C> <C> <C>
E. Thayer Bigelow $ $ $
William H. T. Bush* $ $ $
Robert B. Calhoun** $ $ $
Stewart S. Dixon $ $ $
John C. Jansing $ $(4) $
C. Alan MacDonald $ $ $
Hansel B. Millican, Jr. $ $ $
Thomas J. Neff $ $ $
</TABLE>
* Elected director, June 17, 1998, effective as of August 13, 1998.
**Elected Director, May 5, 1998, effective as of June 17, 1998.
(1) Outside trustees' fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on the
net assets of each fund. Since the Fund is new, no compensation currently
is payable to its trustees. However, in the future a portion of the fees
payable by the Trust to its outside directors/trustees will be deferred
under a plan that deems the deferred amounts to be invested in shares of
the Trust for later distribution to the directors/trustees.
(2) The amounts in Column 3 were accrued by the Lord Abbett-Sponsored Funds
for the 12 months ended October 31, 1998 with respect to the equity based
plans established for independent directors in 1996. This plan supercedes
a previously approved retirement plan for all future directors. Current
directors had the option to convert their accrued benefits under the
retirement plan. All of the outside directors except one made such an
election.
(3) This column shows aggregate compensation, including directors fees and
attendance fees for board and committee meetings, of a nature referred to
in footnote one, accrued by the Lord Abbett-sponsored funds during the
year ended December 31, 1998. Since no amounts of compensation were
payable by the Fund for the year ended October 31, 1998, no shares were
deemed invested in Fund shares.
32
(4) Mr. Jansing chose to continue to receive benefits under the retirement
plan which provides that outside directors (Trustees) may receive annual
retirement benefits for life equal to their final annual retainer
following retirement at or after age 72 with at least ten years of
service. Thus, if Mr. Jansing were to retire and the annual retainer
payable by the funds were the same as it is today, he would receive annual
retirement benefits of $50,000.
Except where indicated, the following executive officers of the Trust have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Brown, Carper, Fetch , Ms. Foster, Messrs. Hilstad, McGruder, Morris, Noelke,
Towle and Walsh are partners of Lord Abbett; the others are employees: Zane
Brown, age 47; Robert G. Morris, age 54, Executive Vice Presidents; Paul A.
Hilstad, age 56, Vice President and Secretary (with Lord Abbett since 1995;
formerly Senior Vice President and General Counsel of American Capital
Management & Research, Inc.); Daniel E. Carper, age 46; Robert P. Fetch, age 45;
Daria L. Foster, age 44; Timothy W. Horan, age 44; Lawrence H. Kaplan, age 41
(with Lord Abbett since 1997 B formerly Vice President and Chief Counsel of
Salomon Brothers Asset Management Inc from 1995 to 1997, prior thereto Senior
Vice President, Director and General Counsel of Kidder Peabody Asset Management,
Inc.); Thomas F. Konop, age 56; Jerald Lanzotti, age 31; Stephen I. McGruder,
age 55; A. Edward Oberhaus, age 39; Keith F. O'Connor, age 43; Fernando
Saldanha, age 45; Christopher J. Taylor, age 40 (Deputy Manager), Director of
Fuji-Lord Abbett International, Ltd.; Christopher J. Towle, age 41; John J.
Walsh, age 62, Vice Presidents; and Donna M. McManus, age 37, Treasurer (with
Lord Abbett since 1996, formerly a Senior Manager at Deloitte & Touche LLP).
The Trust 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
Trust's Declaration of Trust, shareholder meetings may be called at any time by
certain officers of the Trust or by a majority of the trustees (i) for the
purpose of taking action upon any matter requiring the vote or authority of the
Trust'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 Trust outstanding and entitled to vote at the meeting.
As of October 31, 1998, our trustees and officers, as a group, owned less than
1% of our outstanding shares.
3.
Investment Advisory and Other Services
As described under "Our Management" in the Prospectus, Lord Abbett is the
investment manager for the Fund. Ten of the seventeen general partners of Lord
Abbett, all of whom are officers and/or trustees of the Fund, are: Zane E.
Brown, Daniel E. Carper, Robert S. Dow, Robert P. Fetch, Daria L. Foster, Paul
A. Hilstad, Steven I. McGruder, Robert G. Morris, Christopher J. Towle and John
J. Walsh. The address of each partner is The General Motors Building, 767 Fifth
Avenue, New York, New York 10153-0203. The other general partners of Lord Abbett
who are neither officers nor trustees of the Fund are Stephen I. Allen, John E.
Erard, Robert Gerber, W. Thomas Hudson, Michael B. McLaughlin, Robert J. Noelke
and R. Mark Pennington.
The services performed by Lord Abbett are described under "Our Management" in
the Prospectus. Under the Management Agreement, the Fund is obligated to pay
Lord Abbett a monthly fee, based on average daily net assets for each month, at
the annual rate of .90 of 1%. Although not obligated to do so, Lord Abbett may
waive all or part of its management fees or may assume other expenses of the
Fund. As discussed in the Prospectus under "Our Management," the Fund is
contingently obligated to repay to Lord Abbett the amounts of such assumed other
expenses.
Lord Abbett has entered into an agreement with the Sub-Adviser, under which the
Sub-Adviser provides Lord Abbett with advice with respect to the Fund's assets.
The Sub-Adviser is controlled by Fuji Investment
33
Management Co. (Tokyo). Fuji Bank Limited of Tokyo, Japan ("Fuji Bank") 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 directly and
indirectly owns approximately 27% of such outstanding voting stock. As of
September 30, 1998, the Sub-Adviser manages approximately $915 million, which is
invested globally. The Sub-Adviser furnishes Lord Abbett with advice and
recommendations with respect to the Fund's assets, including advice about the
allocation of investments among foreign securities markets and foreign equity
and debt securities markets and foreign equity and debt securities and, subject
to consultation with Lord Abbett, advice as to cash holdings and what securities
in the portfolio should be purchased, held or disposed of. The Sub-Adviser also
gives advice with respect to foreign currency matters.
Lord Abbett, 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.
The Fund 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.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10128, are
the independent auditors 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 Fund to maintain its foreign assets in the custody of certain
eligible foreign banks and securities depositories. The Fund's 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
Trustees of the Trust 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 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.
34
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 Trust 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 Fund, the selection is made by the Sub-Adviser. The Sub-Adviser
is 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 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
35
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.
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 Trust'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.
36
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, Martin Luther King, Jr., 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 B and 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 Trust on behalf of 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.
Conversion of Class B Shares. The conversion of Class B shares on the eighth
anniversary of their purchase is subject to the continuing availability of a
private letter ruling from the Internal Revenue Service, or an opinion of
counsel or tax adviser, to the effect that the conversion of Class B shares does
not constitute a taxable event for the holder under Federal income tax law. If
such a revenue ruling or opinion is no longer available, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect. Although
Class B shares could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a sales
charge or fee, such exchange could constitute a taxable event for the holder.
Class A, B and C Rule 12b-1 Plans. As described in the Prospectus, the Trust has
adopted a Distribution Plan and Agreement on behalf of the Fund pursuant to Rule
12b-1 of the Act for each class of shares available in the applicable series:
the "A Plan", the "B Plan" and the "C Plan", respectively. 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 Class shares, which should allow each Class to maintain a
consistent cash flow, and a higher quality of service to shareholders by
authorized institutions than would otherwise be the case.
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 Trust
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 above the limits set forth therein the amount
spent for distribution expenses thereunder without approval by a majority of the
outstanding voting securities of the applicable class and the approval of a
majority of the 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 its Class's outstanding voting securities.
Contingent Deferred Sales Charges. A Contingent Deferred Sales Charge ("CDSC"),
applies upon early redemption of shares regardless of class, and (i) will be
assessed on the lesser of the net asset value of the shares at the time of
redemption or the original purchase price and (ii) will not be imposed on (a)
the aggregate dollar amount of your account, in the case of Class A shares, and
(b) the percentage of each share redeemed, in the case of class B and C shares,
representing an increase in net asset value over the initial purchase price
(including increases due to the reinvestment of dividends and capital gains
distributions).
37
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 the Fund has paid the one-time distribution fee of 1% if such shares are
redeemed out of the Lord Abbett-sponsored family of funds within a period of 24
months from the end of the month in which the original sale occurred.
Class B Shares. As stated in the Prospectus, if Class B shares (or Class B
shares of another Lord Abbett-sponsored fund or series acquired through exchange
of such shares) are redeemed out of the Lord Abbett-sponsored family of funds
for cash before the sixth anniversary of their purchase, a CDSC will be deducted
from the redemption proceeds. The Class B CDSC is paid to Lord Abbett
Distributor to reimburse its expenses, in whole or in part, for providing
distribution-related service in connection with the sale of Class B shares.
To determine whether the CDSC applies to a redemption, the Fund redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held on or after the sixth anniversary
of their purchase, and (3) shares held the longest before such sixth
anniversary.
The amount of the contingent deferred sales charge will depend on the number of
years since you invested and the dollar amount being redeemed, according to the
following schedule:
Anniversary of the Day on Contingent Deferred
Which the Purchase Order Sales Charge on Redemptions
Was Accepted (As % of Amount Subject to Charge)
Before the 1st..............................................................5.0%
On the 1st, before the 2nd..................................................4.0%
On the 2nd, before the 3rd..................................................3.0%
On the 3rd, before the 4th..................................................3.0%
On the 4th, before the 5th..................................................2.0%
On the 5th, before the 6th .................................................1.0%
On or after the 6th anniversary.............................................None
In the table, an "anniversary" is the 365th day subsequent to the acceptance of
a purchase order or a prior anniversary. All purchases are considered to have
been made on the business day on which the purchase order was accepted.
Class C Shares. As stated in the Prospectus, if Class C shares are redeemed for
cash before the first anniversary of their purchase, the redeeming shareholder
will be required to pay to the Fund on behalf of Class C shares a CDSC of 1% of
the lower of cost or the then net asset value of Class C shares redeemed. If
such shares are exchanged into the same class of another Lord Abbett-sponsored
fund and subsequently redeemed before the first anniversary of their original
purchase, the charge will be collected by the other fund on behalf of the Fund's
Class C shares.
General. Each percentage (1% in the case of Class A and C shares and 5% through
1% in the case of Class B shares) used to calculate CDSCs described above for
the Class A, Class B and Class C shares is sometimes hereinafter referred to as
the "Applicable Percentage."
With respect to Class A and Class B shares, no CDSC is payable on redemptions by
participants or beneficiaries from employer-sponsored retirement plans under the
Internal Revenue Code for benefit payments due to plan loans, hardship
withdrawals, death, retirement or separation from service and for returns of
excess contributions to retirement plan sponsors. In the case of Class A and
Class C shares, the CDSC is received by
38
the Fund and is intended to reimburse all or a portion of the amount paid by the
Fund if the shares are redeemed before the Fund has had an opportunity to
realize the anticipated benefits of having a long-term shareholder account in
the Fund. In the case of Class B shares, the CDSC is received by Lord Abbett
Distributor and is intended to reimburse its expenses of providing
distribution-related service to the Fund (including recoupment of the commission
payments made) in connection with the sale of Class B shares before Lord Abbett
Distributor has had an opportunity to realize its anticipated reimbursement by
having such a long-term shareholder account subject to the B Plan distribution
fee.
The other funds and series which participate in the Telephone Exchange Privilege
(except (a) Lord Abbett U.S. Government Securities Money Market Fund, Inc.
("GSMMF"), (b) certain series of Lord Abbett Tax-Free Income Fund and Lord
Abbett Tax-Free Income Trust for which a Rule 12b-1 Plan is not yet in effect,
and (c) any authorized institution's affiliated money market fund satisfying
Lord Abbett Distributor as to certain omnibus account and other criteria,
hereinafter referred to as an "authorized money market fund" or "AMMF"
(collectively, the "Non-12b-1 Funds")) have instituted a CDSC for each class on
the same terms and conditions. No CDSC will be charged on an exchange of shares
of the same class between Lord Abbett funds or between such funds and AMMF. Upon
redemption of shares out of the Lord Abbett family of funds or out of AMMF, the
CDSC will be charged on behalf of and paid: (i) to the fund in which the
original purchase (subject to a CDSC) occurred, in the case of the Class A and
Class C shares and (ii) to Lord Abbett Distributor if the original purchase was
subject to a CDSC, in the case of the Class B shares. Thus, if shares of a Lord
Abbett fund are exchanged for shares of the same class of another such fund and
the shares of the same class tendered ("Exchanged Shares") are subject to a
CDSC, the CDSC will carry over to the shares of the same class being acquired,
including GSMMF and AMMF ("Acquired Shares"). Any CDSC that is carried over to
Acquired Shares is calculated as if the holder of the Acquired Shares had held
those shares from the date on which he or she became the holder of the Exchanged
Shares. Although the Non-12b-1 Funds will not pay a distribution fee on their
own shares, and will, therefore, not impose their own CDSC, the Non-12b-1 Funds
will collect the CDSC (a) on behalf of other Lord Abbett funds, in the case of
the Class A and Class C shares and (b) on behalf of Lord Abbett Distributor, in
the case of the Class B shares. Acquired Shares held in GSMMF and AMMF which are
subject to a CDSC will be credited with the time such shares are held in GSMMF
but will not be credited with the time such shares are held in AMMF. Therefore,
if your Acquired Shares held in AMMF qualified for no CDSC or a lower Applicable
Percentage at the time of exchange into AMMF, that Applicable Percentage will
apply to redemptions for cash from AMMF, regardless of the time you have held
Acquired Shares in AMMF.
In no event will the amount of the CDSC exceed the Applicable Percentage of the
lesser of (i) the net asset value of the shares redeemed or (ii) the original
cost of such shares (or of the Exchanged Shares for which such shares were
acquired). No CDSC will be imposed when the investor redeems (i) shares
representing an aggregate dollar amount of your account, in the case of Class A
shares, (ii) that percentage of each share redeemed, in the case of Class B and
C shares, derived from increases in the value of the shares above the total cost
of shares being redeemed due to increases in net asset value, (ii) shares with
respect to which no Lord Abbett-sponsored fund paid a 12b-1 fee and, in the case
of Class B shares, Lord Abbett Distributor paid no sales charge or service fee
(including shares acquired through reinvestment of dividend income and capital
gains distributions) or (iii) shares which, together with Exchanged Shares, have
been held continuously for 24 months from the end of the month in which the
original sale occurred (in the case of Class A shares); for six years or more
(in the case of Class B shares) and for one year or more (in the case of Class C
shares). In determining whether a CDSC is payable, (a) shares not subject to the
CDSC will be redeemed before shares subject to the CDSC and (b) of the shares
subject to a CDSC, those held the longest will be the first to be redeemed.
Exchanges. The Prospectus briefly describes the Telephone Exchange Privilege.
You may exchange some or all of your shares of any class for those in the same
class of: (i) Lord Abbett-sponsored funds currently offered to the public with a
sales charge (front-end, back-end or level), (ii) GSMMF or (iii) AMMF, to the
39
extent offers and sales may be made in your state. You should read the
prospectus of the other fund before exchanging. In establishing a new account by
exchange, shares of the Fund being exchanged must have a value equal to at least
the minimum initial investment required for the other fund into which the
exchange is made.
Shareholders in other Lord Abbett-sponsored funds and AMMF have the same right
to exchange their shares for the corresponding class of the Fund's shares.
Exchanges are based on relative net asset values on the day instructions are
received by the Fund in Kansas City if the instructions are received prior to
the close of the NYSE in proper form. No sales charges are imposed except in the
case of exchanges out of GSMMF or AMMF (unless a sales charge (front-end,
back-end or level) was paid on the initial investment in a Lord Abbett-sponsored
fund). Exercise of the exchange privilege will be treated as a sale for federal
income tax purposes, and, depending on the circumstances, a gain or loss may be
recognized. In the case of an exchange of shares that have been held for 90 days
or less where no sales charge is payable on the exchange, the original sales
charge incurred with respect to the exchanged shares will be taken into account
in determining gain or loss on the exchange only to the extent such charge
exceeds the sales charge that would have been payable on the acquired shares had
they been acquired for cash rather than by exchange. The portion of the original
sales charge not so taken into account will increase the basis of the acquired
shares.
Shareholders have the exchange privilege unless they refuse it in writing. You
should not view the exchange privilege as a means for taking advantage of
short-term swings in the market, and we reserve the right to terminate or limit
the privilege of any shareholder who makes frequent exchanges. We can revoke or
modify the privilege for all shareholders upon 60 days' prior notice. "Eligible
Funds" are AMMF and other Lord Abbett-sponsored funds which are eligible for the
exchange privilege, except Lord Abbett Series Fund ("LASF") which offers its
shares only in connection with certain variable annuity contracts, Lord Abbett
Equity Fund ("LAEF") which is not issuing shares, and series of Lord Abbett
Research Fund not offered to the general public ("LARF").
Statement of Intention. Under the terms of the Statement of Intention to invest
$50,000 or more over a 13-month period as described in the Prospectus, shares of
a Lord Abbett-sponsored fund (other than shares of LAEF, LASF, LARF, GSMMF and
AMMF, unless holdings in GSMMF and AMMF are attributable to shares exchanged
from a Lord Abbett-sponsored fund offered with a front-end, back-end or level
sales charge) currently owned by you are credited as purchases (at their current
offering prices on the date the Statement is signed) toward achieving the stated
investment and reduced initial sales charge for Class A shares. Class A shares
valued at 5% of the amount of intended purchases are escrowed and may be
redeemed to cover the additional sales charge payable if the Statement is not
completed. The Statement of Intention is neither a binding obligation on you to
buy, nor on 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 directors, employees
of Lord Abbett, employees of our shareholder servicing agent and employees of
any securities dealer having a sales agreement with Lord Abbett who consents to
such purchases or by the director or custodian under any pension or
profit-sharing plan or Payroll Deduction IRA established for the benefit of such
persons or for the benefit of employees of any national securities trade
organization to which Lord Abbett belongs or any company with an account(s) in
excess of $10
40
million managed by Lord Abbett on a private-advisory-account basis. For purposes
of this paragraph, the terms "directors" and "employees" include a director's or
employee's spouse (including the surviving spouse of a deceased director or
employee). The terms "our directors" and "employees of Lord Abbett" also include
retired directors and employees and other family members thereof.
Our Class A shares also may be purchased at net asset value (a) at $1 million or
more, (b) with dividends and distributions from Class A shares of other Lord
Abbett-sponsored funds, except for 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, ("mutual fund wrap fee program"), (e)
by employees, partners and owners of unaffiliated consultants and advisors to
Lord Abbett, Lord Abbett Distributor or Lord Abbett-sponsored funds who consent
to such purchase if such persons provide service to Lord Abbett, Lord Abbett
Distributor or such funds on a continuing basis and are familiar with such funds
and (f) through Retirement Plans with at least 100 eligible employees.
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 months prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
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 of
your bank checking account withdrawals and the funds for investment, include a
voided, unsigned check and complete the bank authorization.
41
Systematic Withdrawal Plans. The Systematic Withdrawal Plan ("SWP") also is
described in the Prospectus. You may establish a SWP if you own or purchase
uncertificated shares having a current offering price value of at least $10,000.
Lord Abbett prototype retirement plans have no such minimum. With respect to a
SWP for Class B shares, on redemptions over 12% per year, the CDSC will apply to
the entire redemption. Therefore, please contact the Fund for assistance in
minimizing the CDSC in this situation. With respect to Class C shares, the CDSC
will be waived on and after the first anniversary of their purchase. The SWP
involves the planned redemption of shares on a periodic basis by receiving
either fixed or variable amounts at periodic intervals. Since the value of
shares redeemed may be more or less than their cost, gain or loss may be
recognized for income tax purposes on each periodic payment. Normally, you may
not make regular investments at the same time you are receiving systematic
withdrawal payments because it is not in your interest to pay a sales charge on
new investments when in effect a portion of that new investment is soon
withdrawn. The minimum investment accepted while a withdrawal plan is in effect
is $1,000. The SWP may be terminated by you or by us at any time by written
notice.
Retirement Plans. The Prospectus indicates the types of retirement plans for
which Lord Abbett provides forms and explanations. Lord Abbett makes available
the retirement plan forms and custodial agreements for IRAs (Individual
Retirement Accounts, including Simple IRAs and Simplified Employee Pensions),
403(b) plans and qualified pension and profit-sharing plans, 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.
Performance
The Fund 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 $1,000, 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 net asset value. The ending
redeemable value is determined by assuming a complete redemption at the end of
the period(s) covered by the average annual total return computation.
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment (unless the return is shown at net asset value). For Class B
shares, the payment of the applicable CDSC (5.0% prior to the first anniversary
of purchase, 4.0% prior to the second anniversary of purchase, 3.0% prior to the
third and fourth anniversaries of purchase, 2.0% prior to the fifth anniversary
of purchase, 1.0% prior to the sixth anniversary of purchase and no CDSC on and
after the sixth anniversary of purchase) is applied to the Series' investment
result for that class for the time period shown (unless the total return is
shown at net asset value). For Class C shares, the 1.0% CDSC is applied to the
applicable Series' investment result for that class for the time period shown
prior to the first anniversary of purchase (unless the total return is shown at
net asset value). Total returns also assume that all dividends and capital gains
distributions during the period are reinvested at net asset value per share, and
that the investment is redeemed at the end of the period.
The Fund's yield quotation for each class is based on a 30-day period ended on a
specified date, computed by dividing the Fund's net investment income per share
earned during the period by such Fund's maximum
42
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 Fund's 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 Class B and Class C shares do not reflect the deduction of the CDSC.
These figures represent past performance, and an investor should be aware that
the investment return and principal value of a Fund 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 distribution designated by the Fund as a "capital gains distribution"
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.
As described in the Prospectus under "Risk Factors," the Fund may be subject to
foreign withholding taxes which would reduce the yield on its investments. Tax
treaties between certain countries and the United States may reduce or eliminate
such taxes. It is expected that Fund shareholders who are subject to United
States federal income tax will be entitled to claim a federal income tax credit
or deduction for foreign income taxes paid by the Fund.
Gains and losses realized by the Fund on certain transactions, including sales
of foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gains or losses are attributable to changes in
exchange rates for
43
foreign currencies. Accordingly, distributions taxable as ordinary income will
include the net amount, if any, of such foreign exchange gains and will be
reduced by the net amount, if any, of such foreign exchange losses.
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 Trust 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 Trusts Declaration of Trust
contains an express disclaimer of shareholder liability for the acts,
obligations, or affairs of the Trust and requires that a disclaimer be given in
each contract entered into or executed by the Trust. The Declaration provides
for indemnification out of the Trust's property of any shareholder or former
shareholder held personally liable for the obligations of the Trust. 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 Trust's Declaration of Trust, the trustees may, without shareholder
vote, cause the Trust to merge or consolidate into, or sell and convey all or
substantially all of, the assets of the Trust 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 Trust's
registration statement. In addition, the trustees may, without shareholder vote,
cause the Trust to be incorporated under Delaware law.
Derivative actions on behalf of the Trust may be brought only by shareholders
owning not less than 50% of the then outstanding shares of the Trust.
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.
44
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
N/A
(b) Exhibits - to be filed later
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Record Holders of Securities
Item 27. Indemnification
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 C-1 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
45
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. 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 C-2
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 twelve
other Lord Abbett open-end investment companies (of which it is principal
underwriter for thirteen), and as investment adviser to approximately 6,220
private accounts as of December 31, 1997. 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.
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.
46
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
Zane E. Brown Executive Vice President
Robert G. Morris Executive Vice President
Paul A. Hilstad Vice President & Secretary
Daniel E. Carper Vice President
Robert P. Fetch Vice President
W. Thomas Hudson, Jr. Vice President
Stephen I. McGruder Vice President
Christopher J. Towle Vice President
John J. Walsh Vice President
The other general partners of Lord Abbett & Co. who are neither officers nor
directors of the Registrant are Stephen I. Allen, John E. Erard, Daria L.
Foster, Robert Gerber, Michael McLaughlin, Robert J. Noelke and R. Mark
Pennington.
(1) Each of the above has a principal business address:
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.
47
Lord, Abbett & Co. maintains the records required by Rules 31a-1(f) and 31a-2(e)
at its main office.
Certain records such as canceled stock certificates and 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
(a) None
Item 32. UNDERTAKINGS
(c) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to shareholders, upon
request and without charge. Registrant undertakes, if requested to do so by the
holders of at least 10% of 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).
48
<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
4th day of November, 1998.
LORD ABBETT SECURITIES TRUST
By /s/ Robert S. Dow
-------------------------
Robert S. Dow,
Chairman of the Board
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, President
/s/ Robert S. Dow and Director November 4, 1998
- ------------------------ --------------------------- ---------------
Keith F. O'Connor (Title) (Date)
Vice President and
/s/ Keith F. O'Connor Chief Financial Officer November 4, 1998
- ------------------------ --------------------------- ---------------
Keith F. O'Connor (Title) (Date)
/s/ Stewart S. Dixon Director November 4, 1998
- ------------------------ --------------------------- ---------------
Stewart S. Dixon (Title) (Date)
/s/ John C. Jansing Director November 4, 1998
- ------------------------ --------------------------- ---------------
John C. Jansing (Title) (Date)
/s/ C. Alan MacDonald Director November 4, 1998
- ------------------------ --------------------------- ---------------
C. Alan MacDonald (Title) (Date)
/s/ Hansel B. Millican Director November 4, 1998
- ------------------------ --------------------------- ---------------
Hansel B. Millican, Jr. (Title) (Date)
/s/ Thomas J. Neff Director November 4, 1998
- ------------------------ --------------------------- ---------------
Thomas J. Neff (Title) (Date)
/s/ E. Thayer Bigelow Director November 4, 1998
- ------------------------ --------------------------- ---------------
E. Thayer Bigelow (Title) (Date)
/s/ Robert B. Calhoun Jr. Director November 4, 1998
- ------------------------ --------------------------- ---------------
Robert B. Calhoun Jr. (Title) (Date)
/s/ William H.T. Bush Director November 4, 1998
- ------------------------ --------------------------- ---------------
William H.T. Bush (Title) (Date)
