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|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 26 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT |X|
OF 1940
Amendment No. 26 |X|
LORD ABBETT SECURITIES TRUST
----------------------------
Exact Name of Registrant as Specified in Charter
767 FIFTH AVENUE, NEW YORK, N. Y. 10153-0203
--------------------------------------------
Address of Principal Executive Office
Registrant's Telephone Number (212) 848-1800
--------------------------------------------
Thomas F. Konop, Vice President
767 FIFTH AVENUE, NEW YORK, N. Y. 10153
---------------------------------------
Name and Address of Agent for Service
It is proposed that this filing will become effective (check appropriate box)
|_| immediately upon filing pursuant to paragraph (b)
|_| on (date) pursuant to paragraph (b)
|X| 60 days after filing pursuant to paragraph (a) (1)
|_| on (date) pursuant to paragraph (a) (1)
|_| 75 days after filing pursuant to paragraph (a) (2)
|_| on (date) pursuant to paragraph (a) (2) 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.
<PAGE>
Prospectus / March 1, 1999
Lord Abbett
Securities Trust
Growth & Income Fund
International Fund
World Bond-Debenture Fund
[LOGO](R) LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
As with all mutual funds, the Securities and Exchange Commission
does not guarantee that the information in this Prospectus is
accurate or complete, and it has not judged these funds for
investment merit. It is a criminal offense to state otherwise.
<PAGE>
Table of Contents
The Funds Page
Information about the goal, approach, main risks, past performance, expenses,
financial highlights, portfolio management and recent performance of each fund
Growth & Income Fund 2
International Fund 6
World Bond-Debenture Fund 10
Your Investment
Information for managing your fund account
Purchases 14
Opening Your Account 16
Redemptions 17
Distributions and Taxes 17
Management 18
Services For Fund Investors 18
Sales Charges and Service Fees 19
For More Information
How to learn more about the funds and other Lord Abbett funds
Glossary of Shaded Terms 22
Back Cover
<PAGE>
Growth & Income Fund Symbols: Class A - LDFVX
Class B - LGIBX
Class C - GILAX
GOAL / APPROACH
The fund's investment objective is long-term growth of capital and income
without excessive fluctuations in market value. Typically, in choosing
stocks, we look for companies using a three-step process:
o Quantitative research is performed on a universe of large, seasoned,
U.S. and multinational companies to identify which stocks we believe
represent the best bargains.
o Fundamental research is conducted to assess a company's operating
environment, resources and strategic plans and to determine its
prospects for exceeding the earnings expectations reflected in its
stock price.
o Business cycle analysis is used to assess the economic and
interest-rate sensitivity of our portfolio, helping us assess how
adding or deleting stocks changes our portfolio's overall
sensitivity to economic activity and interest rates.
The fund is intended for long-term investors who purchase and redeem
shares to meet their own financial requirements rather than to take
advantage of price fluctuations. We believe the needs of such investors
will best be served by an investment which has growth characterized by
fewer fluctuations in market value than the Standard & Poor's Composite
Index of 500 stocks ("S&P 500(R)"). For this reason, the fund tries to
keep its assets invested in securities which are selling at reasonable
prices in relation to value and, thus, will forgo some opportunities for
gains when, in our judgment, they are too risky.
Information on recent market conditions and the fund's strategies can be
found under "Recent Performance" and in the current annual/semi-annual
report (see back cover). The report also has fund holdings information.
MAIN RISKS
While stocks have historically been a leading choice of long-term
investors, they fluctuate in price. The value of your investment in the
fund will go up and down, which means that you could lose money. Our
performance may sometimes be lower or higher than that of other types of
funds (particularly those emphasizing small-company stocks or growth
stocks) because different types of stocks tend to shift in and out of
favor depending on market and economic conditions. While there is the risk
that an investment may never reach what we think is its full value, or may
go down in value, our emphasis on large, seasoned company bargain stocks
could potentially limit our downside risk because bargain stocks in theory
are already underpriced and large, seasoned company stocks tend to be less
volatile than small company stocks. In the long run, we may produce more
modest gains than riskier stock funds as a trade-off for this potentially
lower risk. We may take a temporary position by investing some of our
assets in short-term debt securities. This could reduce the benefit from
any upswing in the market.
See the terms: Closed-End Investment Companies, Foreign Securities, High
Yield Debt Securities, Illiquid Securities, Portfolio Securities Lending,
Repurchase Agreements and When-Issued or Delayed Delivery Securities under
"For More Information" to learn about our other investment strategies and
their risks.
We or the fund refers to any one or more of three portfolios of Lord Abbett
Securities Trust (the "Company"), which operates through its officers under the
supervision of its Board Members, with the advice of Lord, Abbett & Co. ("Lord
Abbett"), its investment manager
Large companies are established companies that are considered "known
quantities." Large companies often have the resources to weather economic
shifts, though they can be slower to innovate than small companies.
Seasoned companies are usually established companies whose securities have
gained a reputation for quality with the investing public and enjoy liquidity in
the market.
Small company stocks are those of smaller companies which often are new and less
established, with a tendency to be faster-growing but more volatile and less
liquid than large company stocks.
Bargain stocks are stocks of companies that appear underpriced according to
certain financial measurements of their intrinsic worth or business prospects.
Growth Stocks. Stocks which exhibit faster-than-average gains in earnings and
are expected to continue profit growth at a high level, but also tend to be more
volatile than bargain stocks.
While stocks have historically been a leading choice of long-term investors,
they fluctuate in price. The value of your investment in the fund will go up and
down, which means that you could lose money.
2 / The Funds
<PAGE>
Growth & Income Fund
PAST PERFORMANCE - Growth & Income Fund
The chart and table below show how the fund's class A share calendar year
total returns fluctuate, without a sales charge. This assumes reinvestment
of dividends and distributions. With a sales charge, returns would be less
than those shown.
AWAITING DATA
================================================================================
Comparison of class A shares' average annual total return at maximum sales
charge to that of the S&P 500(R) which has no sales charge. Assumes
reinvestment of dividends and distributions. All periods end on December
31, 1998.
Class 1 Year 5 Years 10 Years Inception(i)
A % % % %
- --------------------------------------------------------------------------------
B % % % %
- --------------------------------------------------------------------------------
C % % % %
- --------------------------------------------------------------------------------
S&P 500(R) (ii)
- --------------------------------------------------------------------------------
About the fund. The fund is a professionally managed portfolio primarily holding
equity securities purchased with the pooled money of investors. It strives to
reach its stated goal, although as with all funds, it cannot guarantee results
and its past performance is not a prediction of future results.
An investment in the fund is not a bank deposit. It is not FDIC-insured or
government-endorsed. It is not a complete investment program. You could lose
money in this fund, but you also have the potential to make money.
- ------------
(i) The dates of inception for each class are as follows: A -7/15/96; B -
6/5/97; and C -1/3/94.
(ii) Performance for the unmanaged S&P 500(R) Index does not reflect
transaction costs or management fees.
EXPENSES - Growth & Income Fund
As an investor, you pay certain fees and expenses in connection with the
fund, which are described in the fee table below. Shareholder transaction
fees are paid from your account. Annual fund operating expenses are paid
out of fund assets, so they reduce the fund's share price.
================================================================================
Fee table
- --------------------------------------------------------------------------------
Class A Class B Class C
Shareholder Transaction Fees
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- --------------------------------------------------------------------------------
(as a % of offering price) 5.75% none none
- --------------------------------------------------------------------------------
Deferred Sales Charge (See "Purchases") none 5.00% 1.00%
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (as a % of average net assets)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.75% 0.75% 0.75%
- --------------------------------------------------------------------------------
12b-1 Fees(1) 0.35% 1.00% 1.00%
- --------------------------------------------------------------------------------
Other Expenses (See "Management") 0.23% 0.23% 0.23%
- --------------------------------------------------------------------------------
Total Operating Expenses 1.33% 1.98% 1.98%
- --------------------------------------------------------------------------------
================================================================================
Expense example
- --------------------------------------------------------------------------------
This example, like that in other funds' prospectuses, assumes a $10,000 initial
investment at maximum sales charge, if any, 5% total return each year and no
changes in expenses. You pay the following expenses over the course of each
period shown if you sell your shares at the end of the period. The expenses
include any applicable contingent deferred sales charges.
Share class 1 Year 3 Years 5 Years 10 Years
Class A shares $702 $972 $1,262 $2,087
- --------------------------------------------------------------------------------
Class B shares(2) $601 $921 $1,167 $2,137
- --------------------------------------------------------------------------------
Class C shares $201 $621 $1,067 $2,308
- --------------------------------------------------------------------------------
You would pay the following expenses on the same investment, assuming you kept
your shares.
Class A shares $702 $972 $1,262 $2,087
- --------------------------------------------------------------------------------
Class B shares(2) $201 $621 $1,067 $2,137
- --------------------------------------------------------------------------------
Class C shares $201 $621 $1,067 $2,308
- --------------------------------------------------------------------------------
This example is for comparison and is not a representation of the fund's actual
expenses or returns, either past or present.
Management fee: The fee payable to Lord Abbett for the fund's investment
management.
12b-1 fees: 12b-1 refers to the federal securities regulation that permits funds
to pay distribution fees for any activity which is primarily intended to result
in the sale of fund shares and service fees for shareholder account service and
maintenance.
Other expenses: Fees paid by the fund for miscellaneous items such as transfer
agency, custody, accounting, legal and share registration fees.
- ------------
(1) Because 12b-1 distribution fees (up to: 0.25%- class A; 0.75%- class B;
and 0.75%- class C) are paid out of the fund's assets on an on-going
basis, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges. Service fees
under each class's 12b-1 Plan equal up to 0.25%.
(2) Class B shares will automatically convert to class A shares on the eighth
anniversary of your original purchase of class B shares.
The Funds / 3
<PAGE>
Growth & Income Fund
FINANCIAL HIGHLIGHTS - Growth & Income Fund
This table describes the fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the fund would
have increased (or decreased) during each period, if you had reinvested
all dividends and distributions. These Financial Highlights have been
audited by Deloitte & Touche LLP, the fund's independent auditors, in
conjunction with their annual audits of the fund's financial statements.
Financial statements for the fiscal year ended October 31, 1998 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for that fiscal year and are incorporated by reference in the
Statement of Additional Information.
<TABLE>
<CAPTION>
=============================================================================================================================
Class A Shares
----------------------------------------------------------------------
Year Ended October 31,
Per Share Operating Performance: 1998 1997 1996(a)
<S> <C> <C> <C>
Net asset value, beginning of period $8.79 $7.09 $6.50
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.057 0.093 0.028
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- -----------------------------------------------------------------------------------------------------------------------------
gain on investments 0.928 1.781 0.589
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.985 1.874 0.617
- -----------------------------------------------------------------------------------------------------------------------------
Distributions
- -----------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.035) (0.099) (0.027)
- -----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (0.590) (0.075) --
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.15 $8.79 $7.09
- -----------------------------------------------------------------------------------------------------------------------------
Total Return(b) 11.97% 26.78% 12.10%(d)
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses 1.22% 1.29% 0.39%(d)
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.88% 1.15% 0.40%(d)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
=============================================================================================================================
Class B Shares Class C Shares
---------------------- --------------------------------------------------------
Year Ended October 31, Year Ended October 31,
Per Share Operating Performance: 1998 1997(a) 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.80 $8.20 $8.80 $7.09 $6.04 $5.07 $5.00
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income --(c) --(c) 0.011 0.032 0.0949 0.12 0.089
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- -----------------------------------------------------------------------------------------------------------------------------
gain on securities 0.92 0.60 0.889 1.790 1.0986 0.97 0.041
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.92 0.60 0.900 1.822 1.1935 1.09 0.130
- -----------------------------------------------------------------------------------------------------------------------------
Distributions
- -----------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income -- -- -- (0.037) (0.1035 (0.12) (0.06)
- -----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (0.590) -- (0.590) (0.075) (0.04) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.13 $8.80 $9.11 $8.80 $7.09 $6.04 $5.07
- -----------------------------------------------------------------------------------------------------------------------------
Total Return(b) 11.17% 7.19%(d) 10.94% 26.24% 20.02% 21.83% 2.62%(d)
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver 1.98% 0.86%(d) 1.98% 2.05% 1.55% 1.16% 0.61%(d)
- -----------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver 1.98% 0.86%(d) 1.98% 2.05% 2.01% 1.91% 1.94%(d)
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.09% 0.01%(d) 0.12% 0.39% 1.36% 2.06% 2.03%(d)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
=============================================================================================================================
Year Ended October 31,
--------------------------------------------------------------------------------
Supplemental Data For All Classes: 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net assets, end of period (000) $165,904 $142,992 $113,962 $32,770 $9,160
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 45.83% 36.37% 23.84% 23.17% 31.95%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) From commencement of operations for each class of shares: July 15, 1996
(class A); June 5, 1997 (class B); and January 3, 1994 (class C).
(b) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(c) Amount less that $0.01.
(d) Not annualized.
See Notes to Financial Statements.
4 / The Funds
<PAGE>
Growth & Income Fund
PORTFOLIO MANAGEMENT
Robert G. Morris, Lord Abbett Partner, Executive Vice President of the
company, and Portfolio Manager of the fund is primarily responsible for
the management of the fund. He has been with Lord Abbett for over five
years. He has over twenty-five years of investment experience.
RECENT PERFORMANCE
While anticipating a slowing of corporate earnings might move stock prices
lower during the second half of the fund's fiscal year, investor concern
over economic problems abroad resulted in significant declines across
nearly all equity sectors.The fund's primarily value-based approach to
stock selection did not spare it from declining during the stock market
downturn.
The economy continues to slow, and the financial markets have shown
increased volatility over concerns regarding earnings shortfalls and
evidence of a global credit crunch. How-ever, our expectation for the U.S.
economy at this time is not recession, but rather a point of slower
growth. Consumer activity continues to provide support for growth with
gains in job creation, income and spending. Business spending is an area
of greater concern. Recession abroad is likely to reduce exports and have
a flattening effect on corporate profit growth. Overall, gross domestic
product is likely to grow at an annual rate of approximately 1.5 - 2.0%
during the next 6 to 12 months. U.S. interest rates have fallen,
reflecting slowing growth and continuing low inflation. As of late October
1998, the market is still anticipating additional easing by the Federal
Reserve, a view with which we concur. In sum, it is our view that the
underpinnings of sound stock markets remain in place, and the price
declines of the third quarter created more opportunities for long-term
investors.
LINE GRAPH COMPARISON - Growth & Income Fund
Immediately below is a comparison of a $10,000 investment in class C
shares to the same investment in S&P 500(R), assuming reinvestment of all
dividends and distributions.
================================================================================
[The following table was depicted as a line graph in the printed material.]
0 10000 10000
0 10262 10360
0 12502 13096
0 15006 16250
0 18943 21466
0 21015 26190
================================================================================
Fund's Average Annual Total Return at Maximum Applicable
Sales Charge for the Periods Ending October 31, 1998
1 Year 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(3) 5.50% 19.32%
- --------------------------------------------------------------------------------
Class B(3) 6.72% 9.75%
- --------------------------------------------------------------------------------
Class C(1) 10.94% 16.63%
- --------------------------------------------------------------------------------
Year 2000 issues. Each fund could be adversely affected if the computers used by
each fund and their service providers do not properly process and calculate
date-related information from and after January 1, 2000.
While year 2000-related computer problems could have a negative effect on each
fund, Lord Abbett is working to avoid such problems and has assurances from each
fund's service providers that they are taking similar steps. However, because
the problem is unprecedented and efforts to identify and fix any problems are
aongoing, we don't know whether these efforts will be successful. Accordingly,
each fund may be adversely affected.
Euro. On January 1, 1999, the eleven member states of the European Union
converted to a common currency, known as the "Euro." Each fund could be
adversely affected if the computers used by it and its service providers do not
properly process and calculate Euro-related information from and after January
1, 1999. While euro-related computer problems could have a negative effect on
each fund, Lord Abbett is working to avoid such problems and has assurances from
each fund's service providers that they are taking similar steps. However,
because the problem is unprecedented, we don't know whether these efforts will
be successful and, accordingly, each fund may be adversely affected.
- --------------------------------------------------------------------------------
(1) This shows total return applicable to class C shares, with all dividends
and distributions reinvested for the periods shown ending October 31,
1998, using the SEC-required uniform method to compute such return.
(2) Performance for the unmanaged S&P 500(R) does not reflect transaction
costs, management fees or sales charges.
(3) The class A and B shares were first offered on 7/15/96 and 6/5/97,
respectively. For class B shares, performance reflects the deduction of a
CDSC of 4% (for 1 year) and 3% (life of class). For class A shares,
performance is at net asset value.
The Funds / 5
<PAGE>
International Fund Symbols: Class A - LAIEX
Class B - LINBX
Class C - LINCX
GOAL / APPROACH
The fund's investment objective is long-term capital appreciation. Current
income is incidental to this objective. The fund may invest in stocks
which do not produce any income.
International Fund
o Examines global trends, seeks to identify developments on an
industry-by-industry basis
o Fundamental research seeks to identify the strongest and/or best
positioned companies (Best of Breed) within their industries
o Does not use top-down geographic allocation
Investments are made in stocks of companies which are in developed or
developing countries. Under normal circumstances, at least 80% of the
total assets of the fund are invested in stocks of companies in at least
three different countries outside the United States.
Although the fund intends to invest primarily in stocks of small companies
with market capitalization of less than $1 billion listed on stock
exchanges, it may also invest in stocks of companies traded in
over-the-counter markets, as well as stocks of large and middle-sized
companies.
Information on recent market conditions and the fund's strategies can be
found under "Recent Performance" and in the current annual/semiannual
report (see back cover). The report also has fund holdings information.
MAIN RISKS
The fund sometimes has above-average investment risk compared to the U.S.
stock market since a substantial amount of the assets of the fund will be
denominated or traded in foreign currencies. A change in the value of any
foreign currency relative to the U.S. dollar results in changes in the
U.S. dollar value of the fund's assets denominated or traded in that
currency. The fund's performance is measured in U.S. dollars, the base
currency of the fund. Also, securities in which the fund invests are
usually not subject to the same degree of regulation as domestic
securities and may be more volatile and less liquid than those of major
U.S. markets.
Lack of liquidity affects the fund's ability to trade in large blocks of
securities and obtain the best price. There is often less information
available on publicly-traded companies, banks and governments than in the
U.S. , and a lack of uniform accounting standards and practices among
countries impairs a direct comparison for stocks and bonds. Other risks
include costs of currency hedging and conversion, political and social
instability, expropriation, higher transaction costs and longer settlement
practices. Foreign securities held by the fund sometimes are traded on
days that the fund does not value its assets, 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.
The fund may temporarily reduce its stock holdings for defensive purposes
in response to adverse market conditions and invest in domestic,
Eurodollar and foreign short-term money market instruments. Of course,
this would reduce any benefit from an upswing in the market.
See the terms: Borrowing, Closed-end Investment Companies, Depository
Receipts, Diversification, Foreign Currency Hedging Techniques, High-Yield
Debt Securities, Illiquid Securities, Investment Funds, Portfolio
Securities Lending, Repurchase Agreements, and When Issued or Delayed
Delivery under "For More Information" to learn about our other investment
strategies and their risks.
We or the fund refers to any one or more of three portfolios of the company,
which operates through its officers under the supervision of its Board Members
with the advice of Lord Abbett, its investment manager.
Over-the-counter stocks are usually those of smaller companies that do not meet
listing requirement of major exchanges. Transactions are conducted by telephone
and computer network rather than on the floor of an exchange.
Large companies are established companies that are considered "known
quantities." Large companies often have the resources to weather economic
shifts, though they can be slower to innovate than small companies.
Middle-sized companies usually have market capitalizations of roughly $500
million to $5 billion, but not less than $50 million.
Small company stocks are stocks of smaller companies which often are new and
less established. They have a tendency to be faster-growing but more volatile
and less liquid than large company stocks.
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 harder to obtain
a judgment in a court outside the United States.
While stocks have historically been a leading choice of long-term in-vestors,
they fluctuate in price. The value of your investment in the fund will go up and
down, which means that you could lose money.
6 / The Funds
<PAGE>
International Fund
PAST PERFORMANCE - International Fund
The chart and table below show how the fund's class A share calendar year
total returns fluctuate, without a sales charge. This assumes reinvestment
of dividends and distributions. With a sales charge, returns would be less
than those shown.
AWAITING DATA
================================================================================
Comparison of class A shares' average annual total return at maximum sales
charge to that of the Morgan Stanley Capital International ("EAFE")
European, Australasia and Far East Index which has no sales charge.
Assumes reinvestment of dividends and distributions. All periods end on
December 31, 1998.
Class 1 Year Inception(i)
- --------------------------------------------------------------------------------
A .% .%
- --------------------------------------------------------------------------------
B
- --------------------------------------------------------------------------------
C .% .%
- --------------------------------------------------------------------------------
EAFE Index(ii) .% .%
- --------------------------------------------------------------------------------
About the fund. The fund is a professionally managed portfolio primarily holding
stocks purchased with the pooled money of investors. It strives to reach its
stated goal, although as with all funds, it cannot guarantee results and its
past performance is not a prediction of future results.
An investment in the fund is not a bank deposit. It is not FDIC-insured or
government-endorsed. It is not a complete investment program. You could lose
money in this fund, but you also have the potential to make money.
- -----------
(i) The dates of inception for each class are as follows: A -12/13/96; B -
6/2/97; and C -6/2/97.
(ii) Performance for the unmanaged EAFE Index does not reflect transaction
costs or management fees.
EXPENSES - International Fund
As an investor, you pay certain fees and expenses in connection with the
fund, which are described in the fee table below. Shareholder transaction
fees are paid from your account. Annual fund operating expenses are paid
out of fund assets, so they reduce the fund's share price.
================================================================================
Fee table
- --------------------------------------------------------------------------------
Class A Class B Class C
Shareholder Transaction Fees
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- --------------------------------------------------------------------------------
(as a % of offering price) 5.75% none none
- --------------------------------------------------------------------------------
Deferred Sales Charge (See "Purchases") none 5.00% 1.00%
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (as a % of average net assets)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.75% 0.75% 0.75%
- --------------------------------------------------------------------------------
12b-1 Fees(1) 0.35% 1.00% 1.00%
- --------------------------------------------------------------------------------
Other Expenses (See "Management") 0.31% 0.31% 0.31%
- --------------------------------------------------------------------------------
Total Operating Expenses 1.41% 2.06% 2.06%
- --------------------------------------------------------------------------------
================================================================================
Expense example
- --------------------------------------------------------------------------------
This example, like that in other funds' prospectuses, assumes a $10,000 initial
investment at maximum sales charge, if any, 5% total return each year and no
changes in expenses. You pay the following expenses over the course of each
period shown if you sell your shares at the end of the period. The expenses
include any applicable contingent deferred sales charges.
Share class 1 Year 3 Years 5 Years 10 Years
Class A shares $710 $995 $1,302 $2,171
- --------------------------------------------------------------------------------
Class B shares(2) $609 $945 $1,208 $2,225
- --------------------------------------------------------------------------------
Class C shares $209 $645 $1,108 $2,391
- --------------------------------------------------------------------------------
You would pay the following expenses on the same investment, assuming you kept
your shares.
Class A shares $710 $995 $1,302 $2,171
- --------------------------------------------------------------------------------
Class B. shares(2) $209 $645 $1,108 $2,225
- --------------------------------------------------------------------------------
Class C shares $209 $645 $1,108 $2,391
- --------------------------------------------------------------------------------
This example is for comparison and is not a representation of the fund's actual
expenses or returns, either past or present.
Management fee: The fee payable to Lord Abbett for the fund's investment
management.
12b-1 fees: 12b-1 refers to the federal securities regulation that permits funds
to pay distribution fees for any activity which is primarily intended to result
in the sale of fund shares and service fees for shareholder account service and
maintenance.
Other expenses: Fees paid by the fund for miscellaneous items such as transfer
agency, custody, accounting, legal and share registration fees.
- ----------
(1) Because 12b-1 distribution fees (up to: 0.25%- class A; 0.75%- class B;
and 0.75%- class C) are paid out of the fund's assets on an on-going
basis, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges. Service fees
under each class's 12b-1 Plan equal up to 0.25%.
(2) Class B shares will automatically convert to class A shares on the eighth
anniversary of your original purchase of class B shares.
The Funds / 7
<PAGE>
International Fund
FINANCIAL HIGHLIGHTS - International Fund
This table describes the fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the fund would
have increased (or decreased) during each period, if you had reinvested
all dividends and distributions. These Financial Highlights have been
audited by Deloitte & Touche LLP, the fund's independent auditors, in
conjunction with their annual audits of the fund's financial statements.
Financial statements for the fiscal year ended October 31, 1998 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for that fiscal year and are incorporated by reference in the
Statement of Additional Information.
<TABLE>
<CAPTION>
========================================================================================================================
Class A Shares
----------------------------------------------------------------------
Year Ended October 31,
Per Share Operating Performance: 1998 1997(a)
<S> <C> <C>
Net asset value, beginning of period $10.86 $9.42
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------
Net investment income 0.11(d) 0.07
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------
gain on investments and foreign
- ------------------------------------------------------------------------------------------------------------------------
currency holdings 1.45 1.37
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.56 1.44
- ------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.03) --
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.39 $10.86
- ------------------------------------------------------------------------------------------------------------------------
Total Return(b) 14.36% 15.21%(c)
- ------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------
Expenses 1.31% 1.23%(c)
- ------------------------------------------------------------------------------------------------------------------------
Net investment income 0.80% 0.41%(c)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
========================================================================================================================
Class B Shares Class C Shares
---------------------------- ------------------------------
Year Ended October 31, Year Ended October 31,
Per Share Operating Performance: 1998 1997(a) 1998 1997(a)
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.83 $10.26 $10.83 $10.26
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.02(d) (0.03) 0.02(d) (0.03)
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------
gain on investments and foreign
- ------------------------------------------------------------------------------------------------------------------------
currency holdings 1.43 0.60 1.43 0.60
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.45 0.57 1.45 0.57
- ------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.28 $10.83 $12.28 $10.83
- ------------------------------------------------------------------------------------------------------------------------
Total Return(b) 13.39% 5.56%(c) 13.39% 5.56%(c)
- ------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
- ------------------------------------------------------------------------------------------------------------------------
Expenses 2.03% 0.87%(c) 2.05% 0.87%(c)
- ------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.18% (0.46)%(c) 0.12% (0.46)%(c)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
========================================================================================================================
Year Ended October 31,
----------------------------------------------------------------------
Supplemental Data For All Classes: 1998 1997
<S> <C> <C>
Net assets, end of period (000) $153,033 $37,334
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 20.52% 29.72%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) From commencement of operations for each class of shares: December 13,1996
(class A), June 2, 1997 (Class B), and June 2, 1997 (class C).
(b) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(c) Not annualized.
(d) Calculated using average shares outstanding during the period.
See Notes to Financial Statements.
8 / The Funds
<PAGE>
International Fund
PORTFOLIO MANAGEMENT
Christopher J. Taylor serves as Portfolio Manager of International Fund
and is primarily responsible for the management of the fund. He is
Managing Director of the new sub-adviser of the fund, Fuji-Lord Abbett
International, Limited,(formerly named Fuji Investment Management Co.
(Europe) Ltd.). Mr. Taylor has been employed by the sub-adviser and its
predecessor companies since 1987 and has over fifteen years of investment
experience.
RECENT PERFORMANCE
The fund's investment strategy consisted of holding a relatively
concentrated portfolio, comprised of a restricted number of markets and
stocks on industry-leading companies. The stocks were bought at low
valuation levels, and in line with our investment philosophy, which means
that we used the recent period of market weakness to steadily add to
existing positions.
In addition, the fund was not invested in the emerging and Far Eastern
markets, but was instead concentrated primarily in Europe and Canada.
This, in addition to the funds superior stock selection, contributed to
the last fiscal year's high performance. Throughout this period, portfolio
turnover remained low. We used new purchase monies to add to our existing
holdings during this period. As a result, there was very little actual
change to our list. Throughout this period, portfolio turnover remained
low.
LINE GRAPH COMPARISON - International Fund
Immediately below is a comparison of a $10,000 investment in class A
shares to the same investment in EAFE Index, assuming reinvestment of all
dividends and distributions.
================================================================================
[The following table was depicted as a line graph in the printed material.]
0 10000 9426
0 10047 9470 10000
0 10174 9540 9652
0 10609 10000 9812
0 10673 10060 9850
0 10662 10050 9905
0 10938 10310 10551
0 11224 10580 11136
0 11245 10600 11319
0 10874 10250 10475
0 11553 10890 11064
0 11521 10860 10217
0 11325 10675 10114
0 12027 11336 10205
0 12558 11837 10675
0 13601 12820 11362
0 14877 14023 11715
0 15514 14624 11809
0 16003 15085 11755
0 15610 14714 11847
0 15631 14734 11970
0 13398 12629 10489
0 12643 11918 10170
0 13175 12419 11233
================================================================================
Fund's Average Annual Total Return at Maximum Applicable
Sales Charge for the Periods Ending October 31, 1998
1 Year 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(1) 7.90% 12.19%
- --------------------------------------------------------------------------------
Class B(3) 8.85% 10.32%
- --------------------------------------------------------------------------------
Class C(4) 13.39% 13.55%
- --------------------------------------------------------------------------------
Year 2000 issues. Each fund could be adversely affected if the computers used by
each fund and their service providers do not properly process and calculate
date-related information from and after January 1, 2000.
While year 2000-related computer problems could have a negative effect on each
fund, Lord Abbett is working to avoid such problems and has assurances from each
fund's service providers that they are taking similar steps. However, because
the problem is unprecedented and efforts to identify and fix any problems are
ongoing, we don't know whether these efforts will be successful. Accordingly,
each fund may be adversely affected.
Euro. On January 1, 1999, the eleven member states of the European Union
converted to a common currency, known as the "Euro." Each fund could be
adversely affected if the computers used by it and its service providers do not
properly process and calculate Euro-related information from and after January
1, 1999. While euro-related computer problems could have a negative effect on
each fund, Lord Abbett is working to avoid such problems and has assurances from
each fund's service providers that they are taking similar steps. However,
because the problem is unprecedented, we don't know whether these efforts will
be successful and, accordingly, each fund may be adversely affected.
- -------------
(1) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 5.75% applicable to class
A shares, with all dividends and distributions reinvested for the periods
shown ending October 31, 1998, using the SEC-required uniform method to
compute such return.
(2) Performance for the unmanaged EAFE Index does not reflect transaction
costs, management fees or sales charges.
(3) The class B shares were first offered on 6/2/97. Performance reflects the
deduction of a CDSC of 4% (for 1 year) and 3% (life of the class).
(4) The class C shares were first offered on 6/2/97. Performance is at net
asset value.
The Funds / 9
<PAGE>
World Bond-Debenture Fund Symbols: Class A - WBDAX
Class B - WBDBX
Class C - WBDCX
GOAL / APPROACH
The fund's investment objective is high current income. The fund seeks
unusual values, particularly in lower-rated debt securities, some of which
are convertible into common stocks or have warrants to purchase common
stocks. In selecting investments, we also place great weight on capital
appreciation potential.
Normally, the fund invests at least 65% of its assets in bonds and/or
debentures. Also, normally its total assets will be invested in securities
primarily traded in at least three different countries, including the
United States. Except for this guideline, there are no limits on how much
of the fund's assets may be invested in securities primarily invested in
any one country. The fund will keep at least 20% of its assets in
investment grade debt securities, U.S. government securities, or cash or
cash equivalents. The fund may invest up to 35% of its assets in equity
securities, and may exceed this limit to avoid a loss on a conversion of a
convertible debt securities.
However, this guideline may not be followed for temporary defensive
periods when the fund believes it should invest entirely in domestic
securities or in securities primarily traded in fewer than three such
countries or in equity or short-term debt securities.
Information on recent market conditions and the fund's strategies can be
found under "Recent Performance" and in the current annual/semiannual
report (see back cover). The report also has fund holdings information.
MAIN RISKS
The market for lower-rated bonds is more limited than that for
higher-rated bonds and may be less liquid. Market prices of lower-rated
bonds may fluctuate more than those of higher-rated bonds, particularly in
times of economic change and stress. Objective pricing data for
lower-rated bonds may be more limited than for higher-rated bonds and
valuation of such securities may be more difficult and require greater
reliance upon judgment.
The risk of default generally is higher among lower-rated bonds, and
because of this risk, the value of your investment in the fund may be
adversely affected which means you could lose money. For this reason,
diversification and the research and analysis performed by Lord Abbett are
especially important in the selection of these bonds. There is no
assurance that losses will not occur.
The fund may, for temporary defensive periods, invest entirely in equity
securities, domestic securities, in securities traded primarily in one
country or in short-term debt securities. This could reduce the benefit
from any upswing in the market and prevent the fund from realizing its
investment objective.
See "Main Risks - International Fund" for the main risks of Foreign
Investments. Also see the terms: Borrowing, Closed-End Investment
Companies, Diversification, Foreign Currency Hedging Techniques, Illiquid
Securities, Portfolio Securities Lending, Repurchase Agreements, and
When-Issued or Delayed Delivery Transactions in "For More Information" to
learn about our other investment strategies and their risks.
We or the fund refers to any one or more of three portfolios of the Company,
which operates through its officers under the supervision of its 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.
While stocks have historically been a leading choice of long-term in-vestors,
they fluctuate in price. The value of your investment in the fund will go up and
down, which means that you could lose money.
Lower-rated debt securities. If bonds are rated BB/Ba or lower, they are
described as "high-yield bonds" because of their generally higher yields and are
referred to colloquially as "lower-rated debt securities" or "junk bonds"
because of their greater risks.
Warrants are a type of security usually issued with a bond that entitles the
holder to buy a proportionate amount of common stock at a certain price for a
period of years.
Bonds are secured debt obligations of the issuer.
Debentures generally are unsecured debt obligations of the issuer.
10 / The Funds
<PAGE>
World Bond-Debenture Fund
PAST PERFORMANCE - World Bond-Debenture Fund
The chart and table below show how the fund's class A share calendar year
total returns fluctuate, without a sales charge. This assumes reinvestment
of dividends and distributions. With a sales charge, returns would be less
than those shown.
AWAITING DATA
================================================================================
Comparison of class A shares' average annual total return at maximum sales
charge to that of the The JP Morgan Emerging Markets Bond Plus Index, The
Merrill Lynch High Yield Master II Index, and the JP Morgan Global
Government Bond Index, which has no sales charge. Assumes reinvestment of
dividends and distributions. All periods end on December 31, 1998.
Class 1 Year Inception(i)
- --------------------------------------------------------------------------------
A .% .%
- --------------------------------------------------------------------------------
B
- --------------------------------------------------------------------------------
C .% .%
- --------------------------------------------------------------------------------
(ii) .% .%
- --------------------------------------------------------------------------------
About the fund. The fund is a professionally managed portfolio primarily holding
stocks purchased with the pooled money of investors. It strives to reach its
stated goal, although as with all funds, it cannot guarantee results and its
past performance is not a prediction of future results.
An investment in the fund is not a bank deposit. It is not FDIC-insured or
government-endorsed. It is not a complete investment program. You could lose
money in this fund, but you also have the potential to make money.
- -------------
(i) The dates of inception for each class are as follows: A -12/18/97; B -
12/19/97; and C -12/19/97.
(ii) Performance for the unmanaged Morgan Stanley European, Australasia and Far
East Index does not reflect transaction costs or management fees. An
investor cannot invest directly in the Morgan Stanley European,
Australasia and Far East Index.
EXPENSES - World Bond-Debenture Fund
As an investor, you pay certain fees and expenses in connection with the
fund, which are described in the fee table below. Shareholder transaction
fees are paid from your account. Annual fund operating expenses are paid
out of fund assets, so they reduce the fund's share price.
================================================================================
Fee table
- --------------------------------------------------------------------------------
Class A Class B Class C
Shareholder Transaction Fees
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- --------------------------------------------------------------------------------
(as a % of offering price) 4.75% none none
- --------------------------------------------------------------------------------
Deferred Sales Charge (See "Purchases") none 5.00% 1.00%
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (as a % of average net assets)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.75% 0.75% 0.75%
- --------------------------------------------------------------------------------
12b-1 Fees(1) 0.35% 1.00% 1.00%
- --------------------------------------------------------------------------------
Other Expenses (See "Management") 0.45% 0.45% 0.45%
- --------------------------------------------------------------------------------
Total Operating Expenses 1.55% 2.20% 2.20%
- --------------------------------------------------------------------------------
================================================================================
Expense example
- --------------------------------------------------------------------------------
This example, like that in other funds' prospectuses, assumes a $10,000 initial
investment at maximum sales charge, if any, 5% total return each year and no
changes in expenses. You pay the following expenses over the course of each
period shown if you sell your shares at the end of the period. The expenses
include any applicable contingent deferred sales charges.
Share class 1 Year 3 Years
Class A shares $625 $941
- --------------------------------------------------------------------------------
Class B shares(2) $623 $988
- --------------------------------------------------------------------------------
Class C shares $223 $688
- --------------------------------------------------------------------------------
You would pay the following expenses on the same investment, assuming you kept
your shares.
Class A shares $625 $941
- --------------------------------------------------------------------------------
Class B shares(2) $223 $688
- --------------------------------------------------------------------------------
Class C shares $223 $688
- --------------------------------------------------------------------------------
This example is for comparison and is not a representation of the fund's actual
expenses or returns, either past or present.
Management fee: The fee payable to Lord Abbett for the fund's investment
management.
12b-1 fees: 12b-1 refers to the federal securities regulation that permits funds
to pay distribution fees for any activity which is primarily intended to result
in the sale of fund shares and service fees for shareholder account service and
maintenance.
Other expenses: Fees paid by the fund for miscellaneous items such as transfer
agency, custody, accounting, legal and share registration fees.
- -------------
(1) Because 12b-1 distribution fees (up to: 0.25%- class A; 0.75%- class B;
and 0.75%- class C) are paid out of the fund's assets on an on-going
basis, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges. Service fees
under each class's 12b-1 Plan equal up to 0.25%.
(2) Class B shares will automatically convert to class A shares on the eighth
anniversary of your original purchase of class B shares.
The Funds / 11
<PAGE>
World Bond-Debenture Fund
FINANCIAL HIGHLIGHTS - World Bond-Debenture Fund
This table describes the fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the fund would
have increased (or decreased) during each period, if you had reinvested
all dividends and distributions. These Financial Highlights have been
audited by Deloitte & Touche LLP, the fund's independent auditors, in
conjunction with their annual audits of the fund's financial statements.
Financial statements for the fiscal year ended October 31, 1998 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for that fiscal year and are incorporated by reference in the
Statement of Additional Information.
<TABLE>
<CAPTION>
=============================================================================================================================
Class A Shares Class B Shares Class C Shares
--------------------------------------------------------------------------------------
Year Ended October 31,
Per Share Operating Performance: 1998(a) 1998(a) 1998(a)
<S> <C> <C> <C>
Net asset value, beginning of period 10.00 $10.00 $10.00
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.511 0.406 0.395
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- -----------------------------------------------------------------------------------------------------------------------------
gain on investments and foreign
- -----------------------------------------------------------------------------------------------------------------------------
currency holdings (0.425) (0.372) (0.361)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.086 0.034 0.034
- -----------------------------------------------------------------------------------------------------------------------------
Distributions
- -----------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.426) (0.384) (0.384)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.66 $9.65 $9.65
- -----------------------------------------------------------------------------------------------------------------------------
Total Return(b)(c) 0.75% 0.24% 0.24%
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:(c)
- -----------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver 0.55% 1.28% 1.28%
- -----------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver 1.20% 1.93% 1.93%
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 7.08% 6.67% 6.62%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
=============================================================================================================================
Supplemental Data For All Classes: Year Ended October 31, 1998(a)
<S> <C>
Net assets, end of period (000) $10,134
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 159.14%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) From commencement of operations for each class of shares: December 18,
1997 (class A), December 19, 1997 (class B), and December 19, 1997 (class
C).
(b) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(c) Not annualized. See Notes to Financial Statements.
12 / The Funds
<PAGE>
World Bond-Debenture Fund
PORTFOLIO MANAGEMENT
Zane E. Brown is a Lord Abbett partner and Director of Fixed Income. He is
primarily responsible for day-to-day management of World Bond-Debenture
Fund. He delegates duties to other Lord Abbett employees.
RECENT PERFORMANCE
High-quality assets tended to outperform during much of the year as
markets discounted the prospect of lower rates in a flight to quality. The
fund - with its limited exposure to emerging markets - was able to hold
its own in a falling market by maintaining exposure to the U.S. and
European high-yield markets as well as to high-grade markets. However, as
difficulties in various emerging markets become resolved, a prudent
reassessment of investment opportunities in such markets will be required.
LINE GRAPH COMPARISON - World Bond-Debenture Fund
Immediately below is a comparison of a $10,000 investment in class A
shares to the same investment in The JP Morgan Emerging Markets Bond Plus
Index, The Merrill Lynch High Yield Master II Index, and the JP Morgan
Global Government Bond Index, assuming reinvestment of all dividends and
distributions.
================================================================================
[The following table was depicted as a line graph in the printed material.]
0 10000 10000
0 10110 9629 10000 10000 10000
0 10280 9790 9980 10159 10100
0 10510 10010 10265 10201 10175
0 10610 10105 10521 10297 10099
0 10690 10181 10546 10342 10254
0 10540 10037 10186 10404 10298
0 10510 10010 9892 10458 10327
0 10704 10194 9960 10524 10355
0 9721 9259 7098 9993 10641
0 10022 9544 7792 10019 11197
0 10075 9596 8296 9805 11448
================================================================================
Fund's Average Annual Total Return at Maximum Applicable
Sales Charge for the Periods Ending October 31, 1998
10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(1) -4.00
- --------------------------------------------------------------------------------
Class B(3) -4.77
- --------------------------------------------------------------------------------
Class C(4) -0.76
- --------------------------------------------------------------------------------
Year 2000 issues. Each fund could be adversely affected if the computers used by
each fund and their service providers do not properly process and calculate
date-related information from and after January 1, 2000.
While year 2000-related computer problems could have a negative effect on each
fund, Lord Abbett is working to avoid such problems and has assurances from each
fund's service providers that they are taking similar steps. However, because
the problem is unprecedented and efforts to identify and fix any problems are
ongoing, we don't know whether these efforts will be successful. Accordingly,
each fund may be adversely affected.
Euro. On January 1, 1999, the eleven member states of the European Union
converted to a common currency, known as the "Euro." Each fund could be
adversely affected if the computers used by it and its service providers do not
properly process and calculate euro-related information from and after January
1, 1999. While euro-related computer problems could have a negative effect on
each fund, Lord Abbett is working to avoid such problems and has assurances from
each fund's service providers that they are taking similar steps. However,
because the problem is unprecedented, we don't know whether these efforts will
be successful and, accordingly, each fund may be adversely affected.
- -------------
(1) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 4.75% applicable to class
A shares, with all dividends and distributions reinvested for the periods
shown ending October 31, 1998, using the SEC-required uniform method to
compute such return.
(2) Performance for the unmanaged The JP Morgan Emerging Markets Bond Plus
Index, The Merrill Lynch High Yield Master II Index, and the JP Morgan
Global Government Bond Index, do not reflect transaction costs, management
fees or sales charges. An investor cannot invest directly in these
indices. These three indices chosen to compare to the Fund's performance
have elements of these three categories but since there is no one index
combining all three in the same annual blend as the fund's portfolio,
these three separate indices may not be a valid comparison for the fund.
(3) The class B shares were first offered on 12/19/97. For class B shares,
performance reflects the deduction of a CDSC of 4% (for 1 year) and 3%
(life of class).
(4) The class C shares were first offered on 12/19/97. Performance is at net
asset value.
The Funds / 13
<PAGE>
Your Investment
PURCHASES
This Prospectus offers three classes of shares, classes A, B and C, for
each of the Growth & Income Fund, International Fund and World
Bond-Debenture Fund. These different classes represent investments in the
same portfolio of securities but are subject to different expenses. Our
shares are continuously offered. The offering price is based on the Net
Asset Value ("NAV") per share next determined after we accept your
purchase order submitted in proper form. A front-end sales charge is added
to the NAV, in the case of the class A shares. There is no front-end sales
charge, in the case of the class B and C shares, as described below.
You should read this section carefully to determine which class of shares
represents the best investment option for your particular situation. For
larger purchases or at certain dollar amounts it may not be suitable for
you to place a purchase order for class B shares of $500,000 or more or a
purchase order for class C shares of $1,000,000 or more. You should
discuss pricing options with your investment professional.
For more information, see "Alternative Sales Arrangements" in the
Statement of Additional Information.
We reserve the right to withdraw all or any part of the offering made by
this Prospectus or to reject any purchase order. We also reserve the right
to waive or change minimum investment requirements. All purchase orders
are subject to our acceptance and are not binding until confirmed or
accepted in writing.
Net Asset Value. NAV per share for each class of fund shares is calculated each
business day at the close of regular trading on the New York Stock Exchange
("NYSE"). The fund is open on those business days when the NYSE is open.
Purchases and sales of fund shares are executed at the NAV next determined after
your order is accepted. In connection with the calculation of NAV, portfolio
securities for which quotations are not available are valued at fair value under
procedures approved by the Board Members.
================================================================================
Class A Shares (Growth & Income Fund and International Fund)
- --------------------------------------------------------------------------------
Front-end sales charges are as follows:
To Compute
As a % of As a % of Offering Price of
Your Investment Offering Price Your Investment Divide NAV by
================================================================================
Less than $50,000 5.75% 6.10% .9425
- --------------------------------------------------------------------------------
$50,000 to $99,999 4.75% 4.99% .9525
- --------------------------------------------------------------------------------
$100,000 to $249,999 3.75% 3.90% .9625
- --------------------------------------------------------------------------------
$250,000 to $499,999 2.75% 2.83% .9725
- --------------------------------------------------------------------------------
$500,000 to $999,999 2.00% 2.04% .9800
- --------------------------------------------------------------------------------
$1,000,000 and over No Sales Charge 1.0000
- --------------------------------------------------------------------------------
================================================================================
Class A Shares (World Bond-Debenture Fund Only)
- --------------------------------------------------------------------------------
Front-end sales charges are as follows:
To Compute
As a % of As a % of Offering Price
Your Investment Offering Price Your Investment Divide NAV by
================================================================================
Less than $50,000 4.75% 4.99% .9525
- --------------------------------------------------------------------------------
$50,000 to $99,999 4.75% 4.99% .9525
- --------------------------------------------------------------------------------
$100,000 to $249,999 3.75% 3.90% .9625
- --------------------------------------------------------------------------------
$250,000 to $499,999 2.75% 2.83% .9725
- --------------------------------------------------------------------------------
$500,000 to $999,999 2.00% 2.04% .9800
- --------------------------------------------------------------------------------
$1,000,000 and over No Sales Charge 1.0000
- --------------------------------------------------------------------------------
Share classes
Class A
o Normally offered with a front-end sales charge.
Class B
o No front-end sales charge.
o Higher annual expenses than class A shares.
o A contingent deferred sales charge is applied to shares sold prior to the
sixth anniversary of purchase.
o Automatically convert to class A shares after eight years.
Class C
o No front-end sales charge.
o Higher annual expenses than class A shares.
o A contingent deferred sales charge is applied to shares sold prior to the
first anniversary of purchase.
14 / Your Investment
<PAGE>
Reducing Your Class A Front-End Sales Charges. There are several ways you can
qualify for a discount when purchasing class A shares if you inform the fund
that you are eligible at the time of purchase.
o Rights of Accumulation -- a Purchaser can add the share value (at public
offering price) of any Eligible Fund already owned to the amount of the
next purchase of class A shares for purposes of calculating the sales
charge.
o Statement of Intention -- a Purchaser can purchase class A shares of any
Eligible Fund over a 13-month period and receive the same sales charge as
if all shares had been purchased at once. Shares purchased through
reinvestment of distributions are not included. A statement of intention
can be backdated 90 days. Current holding under rights of accumulation can
be included in a statement of intention.
For more information on eligibility for these privileges, read the applicable
sections in the attached application.
Class A Share Purchases Without a Front-End Sales Charge. Class A shares may be
purchased without a front-end sales charge under the following circumstances.
1. Purchases of $1 million or more. *
2. Purchases by Retirement Plans with at least 100 eligible employees. *
3. Purchases under a Special Retirement Wrap Program. *
4. Purchases made with dividends and distributions on class A shares of
another Eligible Fund.
5. Purchases representing repayment under the loan feature of the Lord
Abbett-sponsored prototype 403(b) plan for class A shares.
6. Employees of any consenting securities dealer having a sales agreement
with Lord Abbett Distributor LLC.
7. Purchases under a Mutual Fund Wrap-Fee Program.
8. Trustees or custodians of any pension or profit sharing plan, or payroll
deduction IRA for the persons mentioned in 6 above.
See the Statement of Additional Information for a listing of other categories of
purchasers who qualify for class A share purchases without a front-end sales
charge.
Class A Share CDSC. If you buy class A shares under one of the starred (*)
categories listed above and you redeem any of the class A shares within 24
months after the month in which you initially purchased such shares, the fund
normally will collect a CDSC of 1%.
The class A share CDSC generally will be waived for the following.
o Benefit payments such as Retirement Plan loans, hardship withdrawals,
death, disability, retirement, separation from service or any excess
distribution under Retirement Plans (documentation may be required).
o Redemptions continuing as investments in another fund participating in a
Special Retirement Wrap Program.
Class B Share CDSC. The CDSC for class B shares normally applies if you redeem
your shares before the sixth anniversary of their initial purchase. The CDSC
declines the longer you own your shares, according to the following schedule.
* May be subject to a Contingent Deferred Sales Charge ("CDSC").
Retirement Plans. Employer-sponsored retirement plans under the Internal Revenue
Code, excluding Individual Retirement Accounts.
Lord Abbett Distributor LLC. Lord Abbett Distributor acts as agent for the funds
to work with investment professionals that buy and/or sell shares of the funds
on behalf of their clients. Generally, Lord Abbett Distributor does not sell
fund shares directly to investors.
Benefit Payment Documentation.
(Class A only)
o under $50,000 - no documentation necessary
o over $50,000 - reason for benefit payment must be received in writing. Use
the address indicated under opening your account.
Your Investment / 15
<PAGE>
================================================================================
Class B Shares
- --------------------------------------------------------------------------------
Anniversary(1) of Contingent Deferred Sales Charge
the day on which the on redemption (as % of amount
purchase order was accepted subject to charge)
On Before
- --------------------------------------------------------------------------------
1st 5.0%
- --------------------------------------------------------------------------------
1st 2nd 4.0%
- --------------------------------------------------------------------------------
2nd 3rd 3.0%
- --------------------------------------------------------------------------------
3rd 4th 3.0%
- --------------------------------------------------------------------------------
4th 5th 2.0%
- --------------------------------------------------------------------------------
5th 6th 1.0%
- --------------------------------------------------------------------------------
on or after the 6th(2) None
- --------------------------------------------------------------------------------
(1) Anniversary is the 365th day after to a purchase or a prior anniversary.
(2) Class B shares will automatically convert to class A shares on the eighth
anniversary of the purchase of class B shares.
The class B share CDSC generally will be waived under the following
circumstances.
o Benefit payments such as Retirement Plan loans, hardship
withdrawals, death, disability, retirement, separation from service
or any excess contribution or distribution under Retirement Plans.
o Eligible Mandatory Distributions under 403(b) plans and individual
retirement accounts.
o Death of the shareholder (natural person).
o Redemptions of shares in connection with Div-Move and Systematic
Withdrawal Plans (up to 12% per year).
See "Systematic Withdrawal Plan" under "Services For Fund Investors" below
for more information on CDSCs with respect to class B shares.
Class C Share CDSC. The 1% CDSC for class C shares normally applies if you
redeem your shares before the first anniversary of your original purchase.
There are no CDSC waiver provisions for this class.
OPENING YOUR ACCOUNT
MINIMUM INITIAL INVESTMENT
o Regular account $1,000
o Individual Retirement Accounts and
403(b) plans under the Internal Revenue Code $250
o Uniform Gift to Minor Account $250
For Retirement Plans and Mutual Fund Wrap Programs, no minimum investment
is required, regardless of share class.
You may purchase shares through any independent securities dealer who has
a sales agreement with Lord Abbett Distributor or you can fill out the
attached application and send it to the fund you select at the address
stated below. You should carefully read the paragraph below entitled
"Proper Form" before placing your order.
Name of Fund you select.
P.O. Box 419100
Kansas City, MO 64141
Proper Form. An order submitted directly to the fund must contain (1) a
completed
Contingent Deferred Sales Charges. The CDSC, regardless of class, is not charged
on shares acquired through reinvestment of dividends or capital gains
distributions and is charged on the original purchase cost or the current market
value of the shares at the time they are being sold, whichever is lower. In
addition, repayment of loans under Retirement Plans and 403(b) plans will
constitute new sales for purposes of assessing the CDSC.
To determine if a CDSC applies to a redemption, the fund redeems shares in the
following order.
1. Shares acquired by reinvestment of dividends and capital gains.
2. Shares held for six years or more (class B) or two years or more after the
month of purchase (class A) or one year or more (class C).
3. Shares held the longest before the sixth anniversary of their purchase (class
B) or before the second anniversary after the month of purchase (class A) or
before the first anniversary of their purchase (class C).
Important information. If you do not provide a correct taxpayer identification
number (Social Security number for individuals) or make certain required
certifications, you may be subject to a $50 penalty under the Internal Revenue
Code. Also, we may be required to withhold from your account and pay to the U.S.
Treasury 31% of any redemption proceeds and of any dividend or distribution from
your account.
16 / Your Investment
<PAGE>
application, and (2) payment by check. For more information regarding
proper form of a purchase order, call the fund at 800-821-5129. Payment
must be credited in U.S. dollars to our custodian's bank account.
By Exchange. Telephone the fund at 800-821-5129 to request an exchange
from any eligible Lord Abbett-sponsored fund.
REDEMPTIONS
By Broker. Call your investment professional for directions on how to
redeem your shares.
By Telephone. To obtain the proceeds ($50,000 or less) of a redemption to
the name and address in which your account is registered, you or your
representative can call the fund at 800-821-5129.
By Mail. Submit a written redemption request indicating, the name(s) in
which the account is registered, the fund's name, the class of shares,
your account number, and the dollar value or number of shares you wish to
sell.
Include all necessary signatures. If the signer has any Legal Capacity,
the signature and capacity must be guaranteed by an Eligible Guarantor.
Certain other legal documentation may be required. For more information
regarding proper documentation, call 800-821-5129.
We will verify that the shares being redeemed (if purchased by check) were
purchased at least 15 days earlier. Your account balance must be
sufficient to cover the amount being redeemed or your redemption order
will not be processed.
Normally a check will be mailed to the name and address in which the
account is registered (or otherwise according to your instruction) within
three business days after we receive of your redemption request.
To determine if a CDSC applies to a redemption, see "Class A share CDSC,"
"Class B share CDSC" or "Class C share CDSC" above.
DISTRIBUTIONS AND TAXES
Each fund pays its shareholders dividends from its net investment income,
and distributes net capital gains that it has realized. Dividends from net
investment income are expected to be paid to shareholders of Growth &
Income Fund semi-annually, the International Fund annually, and the World
Bond-Debenture Fund monthly. Each fund expects to pay capital gain
distribution once a year in December. Your distributions will be
reinvested in your fund unless you instruct the fund to pay them to you in
cash. There are no sales charges on reinvestments.
The tax status of distributions are the same for all shareholders
regardless of how long they have been in the fund or whether distributions
are reinvested or paid in cash. In general, distributions are taxable as
follows:
================================================================================
Federal Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
================================================================================
Income Ordinary Income
dividends 15% Rate
- --------------------------------------------------------------------------------
Short-term Ordinary Income
capital gains 15% Rate
- --------------------------------------------------------------------------------
Long-term
capital gains 10% 20%
- --------------------------------------------------------------------------------
Small Accounts. Our Board Members may authorize closing any account in which
there are fewer than 25 shares if it is in a fund's best economic interest to do
so.
Taxes on transactions. Except in tax-advantaged accounts, any sale or exchange
of fund shares may be a taxable event.
The table at left also can provide a "rule of thumb" guide for your potential
U.S. federal tax liability when selling or exchanging fund shares. The second
row, "Short-term capital gains," applies to fund shares sold within 12 months of
purchase. The third row, "Long-term capital gains," applies to shares held for
more than 12 months.
Starting January 1, 2001, sales of securities held for more than five years will
be taxed at special lower rates.
Your Investment / 17
<PAGE>
MANAGEMENT
The funds' investment adviser is Lord, Abbett & Co., 767 Fifth Avenue, New
York, NY 10153-0203. Founded in 1929, Lord Abbett manages one of the
nation's oldest mutual fund complexes, with approximately $28 billion in
more than 35 mutual fund portfolios and other advisory accounts. For more
information about the services Lord Abbett provides to the funds, see the
Statement of Additional Information.
Each fund pays Lord Abbett a monthly fee based on average daily net assets
for each month. For the fiscal year ended October 31, 1998, the fee paid
to Lord Abbett was at an annual rate of 0.75 of 1% for each the Growth &
Income Fund, International Fund, and World Bond-Debenture Fund. In
addition, the funds pay all expenses not expressly assumed by Lord Abbett.
Lord Abbett offers a variety of Retirement Plans. Call 800-253-7299 for
information about:
o Traditional, Rollover, Roth and Education IRAs.
o Simple IRAs, SEP-IRAs, 401(k) and 403(b) accounts.
o Defined Contribution Plans.
SERVICES FOR FUND INVESTORS
AUTOMATIC SERVICES
Buying or selling shares automatically is easy with the services described
below. With each service, you select a schedule and amount, subject to
certain restrictions. You can set up most of these services with your
application or by calling 800-821-5129.
================================================================================
For investing
Invest-A-Matic You can make fixed, periodic investments ($50 minimum) into
(Dollar-cost your fund account by means of automatic money transfers from
averaging) you bank checking account. See the attached application for
instructions.
Div-Move For automatically reinvesting the dividends and distributions
from your account into another account in any Eligible Fund.
($50 minimum)
For selling shares
Systematic For making regular withdrawals from most Lord Abbett funds.
Withdrawal You can have automatic cash withdrawals paid to you from your
Plan ("SWP") account in fixed or variable amounts. To establish a plan, the
value of your shares must be at least $10,000, except for
Retirement Plans for which there is no minimum. Your shares
must be in non-certificate form.
Class B shares The CDSC will be waived on redemptions of up to 12% of the
current net asset value of your account at the time of your
SWP request. For class B share redemptions over 12% per year,
the CDSC will apply to the entire redemption. Please contact
the fund for assistance in minimizing the CDSC in this
situation.
Class B and Redemption proceeds due to a SWP for class B and class C
C shares shares will be redeemed in the order described under
"Contingent Deferred Sales Charges" under "Purchases" above.
================================================================================
OTHER SERVICES
Telephone Investing. After we have received the telephone investing
portion of the attached application (section 7), you can instruct us by
phone to have money transferred from your bank account to purchase shares
of the fund for an existing account. The fund will purchase the requested
shares when it receives the money from your bank.
Telephone Exchanges. You or your investment professional, with proper
identification, can instruct your fund by telephone to exchange shares of
any class for the same class of any Eligible Fund by calling 800-821-5129.
The fund must receive instructions for the exchange before the close of
the New York Stock Exchange on the day of your call. If you do this, you
will get the NAV per share of the Eligible Fund determined on that day.
Exchanges
Telephone Transactions. You have this privilege unless you refuse it in writing.
For your security, telephone transaction requests are recorded. We will take
measures to verify the identity of the caller, such as asking for your name,
account number, social security or taxpayer identification number and other
relevant information. Each fund will not be liable for following instructions
communicated by telephone that it reasonably believes to be genuine.
Transactions by telephone may be difficult to implement in times of drastic
economic or market change.
Exchanges by telephone should not be used to take advantage of short-term swings
in the market. Each fund reserves the right to limit or terminate this privilege
for any shareholder making frequent exchanges or abusing the privilege and may
revoke the privilege for all shareholders upon 60 days' written notice.
12b-1 fees payable regardless of expenses. The amounts payable by a fund need
not be directly related to expenses. If Lord Abbett Distributor's actual
expenses exceed the fee payable to it. A fund will not have to pay more than
that fee. If Lord Abbett Distributor's expenses are less than the fee it
receives, Lord Abbett Distributor will keep the full amount of the fee.
18 / Your Investment
<PAGE>
will be treated as a sale for federal tax purposes. Be sure to read the
current prospectus for any fund into which you are exchanging.
Reinvestment Privilege. If you sell shares of a fund, you have a one time
right to reinvest some or all of the proceeds in the same class of any
Eligible Fund within 60 days without a sales charge. If you paid a CDSC
when you sold your shares, you will be credited with the amount of the
CDSC. All accounts involved must have the same registration.
Account Statements. Generally, every Lord Abbett investor automatically
receives quarterly account statements.
Householding. Generally, shareholders with the same last name and address
will receive a single copy of a prospectus and an annual or semi-annual
report, unless additional reports are specifically requested in writing to
a fund.
Account Changes. For any changes you need to make to your account, consult
your investment professional or call a fund at 800-821-5129.
Systematic Exchange. You or your investment professional can establish a
schedule of exchanges between the same classes of any eligible fund.
SALES CHARGES AND SERVICE FEES
Sales and Service Compensation. As part of its plan for distributing
shares, each fund and Lord Abbett Distributor pay sales and service
compensation to Authorized Institutions that sell fund shares and service
shareholders.
Sales compensation originates from two sources: sales charges and 12b-1
distribution fees that are paid out of each fund's assets. Service
compensation originates from 12b-1 service fees. The 12b-1 fee rates vary
by share class, according to the Rule 12b-1 plan adopted by each fund. The
sales charges and 12b-1 fees paid by investors are shown in the
class-by-class information under "Expenses" and "Purchases". The portion
of these expenses that is paid as sales and service compensation to
Authorized Institutions, such as your dealer, is shown in the chart on the
next page. The portion of such sales and service compensation paid to Lord
Abbett Distributor is discussed under "Sales Activities" and "Service
Activities" below. Sometimes we do not pay sales and service compensation
where tracking data is not available for certain accounts or where the
Authorized Institution waives part of the compensation.
We may pay Additional Concessions to Authorized Institutions from time to
time.
Sales Activities. We may use 12b-1 distribution fees to pay Authorized
Institutions to finance any activity that is primarily intended to result
in the sale of shares. Lord Abbett Distributor uses its portion of the
distribution fees attributable to a fund's class A and class C shares for
activities that are primarily intended to result in the sale of such
shares. These activities include, but are not limited to, printing of
prospectuses and statements of additional information and reports for
other than existing shareholders, preparation and distribution of
advertising and sales material, expenses of organizing and conducting
sales seminars, Additional Concessions to Authorized Institutions, the
cost necessary to provide distribution-related services or personnel,
travel, office expenses, equipment and other allocable overhead.
Service Activities. We may pay 12b-1 service fees to Authorized
Institutions for any activity that is primarily intended to result in
personal service and/or the maintenance of shareholder accounts. Any
portion of the service fees paid to Lord Abbett Distributor will be used
to service and maintain shareholder accounts.
Your Investment / 19
<PAGE>
COMPENSATION FOR YOUR DEALER - Growth & Income Funds and International Fund
<TABLE>
<CAPTION>
==============================================================================================================================
FIRST YEAR COMPENSATION
Class A investments Front-end
sales charge Dealer's
paid by investors concession Service fee(1) Total compensation(2)
(% of offering price) (% of offering price) (% of net investment) (% of offering price)
==============================================================================================================================
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 5.00% 0.25% 5.24%
- ------------------------------------------------------------------------------------------------------------------------------
$50,000 - $99,999 4.75% 4.00% 0.25% 4.24%
- ------------------------------------------------------------------------------------------------------------------------------
$100,000 - $249,999 3.75% 3.25% 0.25% 3.49%
- ------------------------------------------------------------------------------------------------------------------------------
$250,000 - $499,999 2.75% 2.25% 0.25% 2.49%
- ------------------------------------------------------------------------------------------------------------------------------
$500,000 - $999,999 2.00% 1.75% 0.25% 2.00%
- ------------------------------------------------------------------------------------------------------------------------------
$1 million or more(3) or Retirement
Plan - 100 or more eligible employees(3)
or Special Retirement Wrap Program(3)
- ------------------------------------------------------------------------------------------------------------------------------
First $5 million no front-end sales charge 1.00% 0.25% 1.25%
- ------------------------------------------------------------------------------------------------------------------------------
Next $5 million above that no front-end sales charge 0.55% 0.25% 0.80%
- ------------------------------------------------------------------------------------------------------------------------------
Next $40 million above that no front-end sales charge 0.50% 0.25% 0.75%
- ------------------------------------------------------------------------------------------------------------------------------
Over $50 million no front-end sales charge 0.25% 0.25% 0.50%
==============================================================================================================================
Class B investments Paid at time of sale (% of net asset value)
- ------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 3.75% 0.25% 4.00%
==============================================================================================================================
Class C investments
- ------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.75% 0.25% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
==============================================================================================================================
ANNUAL COMPENSATION AFTER FIRST YEAR
Class A investments
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
All amounts no front-end sales charge none 0.25% 0.25%
==============================================================================================================================
Class B investments Percentage of average net assets(4)
- ------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25% 0.25%
==============================================================================================================================
Class C investments
- ------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.75% 0.25% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The service fee for Class A shares is paid quarterly. The first year's
service fee on Class B and C shares is paid at the time of sale.
(2) Reallowance/concession percentages and service fee percentages are
calculated from different amounts, and therefore may not equal total
compensation percentages if combined using simple addition. Additional
Concessions may be paid to Authorized Institutions from time to time.
(3) Concessions are paid at the time of sale on all Class A shares sold during
any 12-month period starting from the day of the first net asset value
sale. With respect to (a) Class A share purchases at $1 million or more,
sales qualifying at such level under rights of accumulation and statement
of intention privileges are included and(b) for Special Retirement Wrap
Programs, only new sales are eligible and exchanges into the Fund are
excluded.
(4) With respect to Class B and C shares, 0.25% and 0.90%, respectively, of
the average annual net asset value of such shares outstanding during the
quarter (including distribution reinvestment shares after the first
anniversary of their issuance) is paid to Authorized Institutions. These
fees are paid quarterly in arrears. In the case of Class C shares for
fixed-income series, 0.10% of the average net asset value of such shares
is retained by Lord Abbett Distributor, thus reducing from 0.75% to 0.65%
after the first year. Lord, Abbett & Co. uses 0.10% for expenses primarily
intended to result in the sale of such series' shares. CDSC revenues
collected may be used to fund commission payments when there is no initial
sales charge.
20 / Your Investment
<PAGE>
COMPENSATION FOR YOUR DEALER - World Bond-Debenture Fund
<TABLE>
<CAPTION>
==============================================================================================================================
FIRST YEAR COMPENSATION
Class A investments Front-end
sales charge Dealer's
paid by investors concession Service fee(1) Total compensation(2)
(% of offering price) (% of offering price) (% of net investment) (% of offering price)
==============================================================================================================================
<S> <C> <C> <C> <C>
Less than $50,000 4.75% 4.00% 0.25% 4.24%
- ------------------------------------------------------------------------------------------------------------------------------
$50,000 - $99,999 4.75% 4.25% 0.25% 4.49%
- ------------------------------------------------------------------------------------------------------------------------------
$100,000 - $249,999 3.75% 3.25% 0.25% 3.49%
- ------------------------------------------------------------------------------------------------------------------------------
$250,000 - $499,999 2.75% 2.50% 0.25% 2.74%
- ------------------------------------------------------------------------------------------------------------------------------
$500,000 - $999,999 2.00% 1.75% 0.25% 2.00%
- ------------------------------------------------------------------------------------------------------------------------------
$1 million or more(3) or Retirement
Plan - 100 or more eligible employees(3)
or Special Retirement Wrap Program(3)
- ------------------------------------------------------------------------------------------------------------------------------
First $5 million no front-end sales charge 1.00% 0.25% 1.25%
- ------------------------------------------------------------------------------------------------------------------------------
Next $5 million above that no front-end sales charge 0.55% 0.25% 0.80%
- ------------------------------------------------------------------------------------------------------------------------------
Next $40 million above that no front-end sales charge 0.50% 0.25% 0.75%
- ------------------------------------------------------------------------------------------------------------------------------
Over $50 million no front-end sales charge 0.25% 0.25% 0.50%
==============================================================================================================================
Class B investments Paid at time of sale (% of net asset value)
- ------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 3.75% 0.25% 4.00%
==============================================================================================================================
Class C investments
- ------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.75% 0.25% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
==============================================================================================================================
ANNUAL COMPENSATION AFTER FIRST YEAR
Class A investments
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
All amounts no front-end sales charge none 0.25% 0.25%
==============================================================================================================================
Class B investments Percentage of average net assets(4)
- ------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25% 0.25%
==============================================================================================================================
Class C investments
- ------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.65% 0.25% 0.90%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The service fee for Class A shares is paid quarterly. The first year's
service fee on Class B and C shares is paid at the time of sale.
(2) Reallowance/concession percentages and service fee percentages are
calculated from different amounts, and therefore may not equal total
compensation percentages if combined using simple addition. Additional
Concessions may be paid to Authorized Institutions from time to time.
(3) Concessions are paid at the time of sale on all Class A shares sold during
any 12-month period starting from the day of the first net asset value
sale. With respect to (a) Class A share purchases at $1 million or more,
sales qualifying at such level under rights of accumulation and statement
of intention privileges are included and(b) for Special Retirement Wrap
Programs, only new sales are eligible and exchanges into the Fund are
excluded.
(4) With respect to Class B and C shares, 0.25% and 0.90%, respectively, of
the average annual net asset value of such shares outstanding during the
quarter (including distribution reinvestment shares after the first
anniversary of their issuance) is paid to Authorized Institutions. These
fees are paid quarterly in arrears. In the case of Class C shares for
fixed-income series, 0.10% of the average net asset value of such shares
is retained by Lord Abbett Distributor, thus reducing from 0.75% to 0.65%
after the first year. Lord, Abbett & Co. uses 0.10% for expenses primarily
intended to result in the sale of such series' shares. CDSC revenues
collected may be used to fund commission payments when there is no initial
sales charge.
Your Investment / 21
<PAGE>
For More Information
GLOSSARY OF SHADED TERMS
Additional Concessions. Lord Abbett Distributor may, for specified
periods, allow dealers to retain the full sales charge for sales of shares
or may pay an additional concession to a dealer who sells a minimum dollar
amount of our shares and/or shares of other Lord Abbett-sponsored funds.
In some instances, such additional concessions will be offered only to
certain dealers expected to sell significant amounts of shares. Additional
payments may be paid from Lord Abbett Distributor's own resources or from
distribution fees received from a fund and will be made in the form of
cash or, if permitted, non-cash payments. The non-cash payments will
include business seminars at Lord Abbett's headquarters or other
locations, including meals and entertainment, or the receipt of
merchandise. The cash payments may include payment of various business
expenses of the dealer.
In selecting dealers to execute portfolio transactions for a fund's
portfolio, if two or more dealers are considered capable of obtaining best
execution, we may prefer the dealer who has sold our shares and/or shares
of other Lord Abbett-sponsored funds.
Authorized Institutions. Institutions and persons permitted by law to
receive service and/or distribution fees under a Rule 12b-1 plan are
"authorized institutions." Lord Abbett Distributor is an Authorized
Institution.
Borrowing. Each underlying fund may borrow from banks. If a fund borrows
money, its share price may be subject to greater fluctuation until the
borrowing is paid off. Each underlying fund may borrow only for temporary
or emergency purposes, and not in an amount exceeding 33 1/3% of its total
assets.
Changing Investment Profile. Each fund may, but it not required to, use
various strategies to change its investment profile so as to adjust its
exposure to changing security prices, interest rates, currency exchange
rates, commodity prices and other factors. These strategies may involve
derivative transactions such as buying and selling options and futures
contracts, entering into currency exchange contracts or swap agreements
and purchasing indexed securities and rights and warrants. We can use
these transactions to change the risk and return characteristics of each
fund's portfolio. If we judge market conditions incorrectly or use a
strategy that does not correlate well with the fund's investments, it
could result in a loss, even if we intended to lessen risk or enhance
returns. These transactions may involve a small investment of cash
compared to the magnitude of the risk assumed and could produce
disproportionate gains or losses. Also, these strategies could result in a
loss if the counterparty to a transaction does not perform as promised.
Closed-End Investment Companies. Each fund may invest in shares of
closed-end investment companies if it pays a fee or commission no greater
than the customary broker's commission. Shares of investment companies
sometimes trade at a discount or premium to their net asset value. Also,
there may be duplication of fees if a fund and the closed-end investment
company both charge a management fee.
Depository Receipts. The International Fund may invest in Depository
Receipts which are securities, typically issued by a financial institution
(a "depository"), that evidence ownership interests in a security or a
pool of securities issued by a foreign issuer (the "underlying issuer")
and deposited with the depository. Generally, Depository Receipts in
registered form are designed for use in U.S. securities market and
Depository Receipts
22 / Your Investment
<PAGE>
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 purpose of the International Fund's investment policies,
investments in Depository Receipts will be deemed to be investments in the
underlying securities.
Diversification. The International Fund and the Growth & Income Fund are
diversified funds, which means that they each will not purchase a security
if, as a result, as to 75% of their total assets, more than 5% of their
total assets would be invested in securities of a single issuer or more
than 10% of the outstanding voting securities of the issuer would be held
by them. World Bond-Debenture Fund is a nondiversified mutual fund. This
means that the fund may invest a greater portion of its assets in, and own
a greater amount of the voting securities of, a single company than a
diversified fund. This may subject the fund to greater risk.
Eligible Fund. An Eligible Fund is any Lord Abbett-sponsored fund except
for certain tax-free, single-state funds where the exchanging shareholder
is a resident of a state in which such a fund is not offered for sale;
Lord Abbett Equity Fund; Lord Abbett Series Fund; Lord Abbett U.S.
Government Securities Money Market Fund ("GSMMF") (except for holdings in
GSMMF which are attributable to any shares exchanged from the Lord Abbett
family of funds). An Eligible Fund also is any Authorized Institution's
affiliated money market fund satisfying Lord Abbett Distributor as to
certain omnibus account and other criteria.
Eligible Guarantor. Any broker or bank that is a member of the medallion
stamp program. Most major securities firms and banks are members of this
program. A notary public is not an eligible guarantor.
Eligible Mandatory Distributions. If class B shares represent a part of an
individual's total IRA or 403(b) investment, the CDSC will be waived only
for that part of a mandatory distribution which bears the same relation to
the entire mandatory distribution as the B share investment bears to the
total investment.
Equity Securities. These include common stocks, preferred stocks,
convertible securities, warrants, and similar instruments. Common stocks,
the most familiar type, represent an ownership interest in a corporation.
Although equity securities have a history of long-term growth in their
value, their prices fluctuate based on changes in a company's financial
condition and on market and economic conditions.
Foreign Currency Hedging Techniques. Although the International Fund and
World Bond-Debenture Fund do not normally engage in extensive currency
hedging, they may use currency forwards and options to hedge the risk to
the portfolio if they expect that foreign exchange price movements will be
unfavorable for U.S. investors. Generally, these instruments allow a fund
to lock in a specified exchange rate for a period of time. If the fund's
forecast proves to be wrong, such a hedge may cause a loss. Also, it may
be difficult or impractical to hedge currency risk in many emerging
countries. The fund generally will not enter into a forward contract with
a term greater than one year. Under some circumstances, a fund may commit
a substantial portion or the entire value of its portfolio to the
completion of forward contracts. Although such contracts will be used
primarily to protect the fund from adverse currency movements, their use
involves the risk that anticipated currency movements will not be
accurately predicted, and the fund's return could be adversely affected.
Foreign Securities. These securities are not subject to the same degree of
regulation and may be more volatile and less liquid than securities traded
in major U.S. markets. This affects block trading. Foreign portfolio
securities trade on days when an underlying
Your Investment / 23
<PAGE>
fund does not value them. Fund share prices could be affected on days an
investor cannot purchase or sell shares. Other risks include less
information on public companies, banks and governments; political and
social instability; expropriations; higher transaction costs; currency
fluctuations; nondeductible withholding taxes and different accounting and
settlement practices.
Also, governmental issuers of foreign debt securities may be unwilling to
pay interest and repay principal when due and may require that the
conditions for payment be renegotiated.
High-Yield Debt Securities. Except for the International Fund, the World
Bond-Debenture Fund may invest substantially and the Growth & Income Fund
may invest up to 5% of its net assets (at the time of investment) in
lower-rated bonds. High yield debt securities or "junk bonds" are rated
BB/Ba or lower and typically pay a higher yield debt than investment grade
debt securities. These bonds have a higher risk of default than investment
grade bonds and their prices can be much more volatile.
Illiquid Securities. These are securities not traded on the open market.
They may be difficult or impossible to sell at the time and price the fund
would like. Each underlying fund may invest up to 15% of its assets in
illiquid securities.
Investment Funds. Some emerging countries have laws and regulations that
currently preclude direct foreign investment in the securities of their
companies. However, indirect foreign investment in the securities of such
countries is permitted through investment funds which have been
specifically authorized. The International 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, 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.
Investment Grade Debt Securities. These are debt securities which are
rated in one of the four highest grades assigned by Moody's Investors
Service, Inc., Standard & Poor's Ratings Services or Fitch Investors
Service, or are unrated but determined by Lord Abbett to be equivalent in
quality.
Legal Capacity. This term refers to the authority of an individual to act
on behalf of an entity. For example, if a redemption request were to be
made on behalf of the estate of a deceased shareholder, John W. Doe, by a
person (Robert A. Doe) who has the legal capacity to act for the estate of
the deceased shareholder because he is the executor of the estate, then
the request must be executed as follows: Robert A. Doe, Executor of the
Estate of John W. Doe. That signature using that capacity must be
guaranteed by an Eligible Guarantor.
To give another example, if a redemption request were to be made on behalf
of the ABC Corporation by a person (Mary B. Doe) who has the legal
capacity to act on the behalf of the corporation, because she is the
president of the corporation, the the request must be executed as follows:
ABC Corporation by Mary B. Doe, President. That signature using that
capacity must be guaranteed by an Eligible Guarantor.
Mutual Fund Wrap-Fee Program. 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 shares (and some-
Guaranteed signature. An acceptable form of guarantee would be as follows:
o In the case of the estate -
Robert A. Doe
Executor of the Estate of
John W. Doe
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
/s/ [ILLEGIBLE]
------------------------------------------------
AUTHORIZED SIGNATURE
(960) X9003470
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM(TM)
SR
o In the case of the corporation - ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
/s/ [ILLEGIBLE]
------------------------------------------------
AUTHORIZED SIGNATURE
(960) X9003470
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM(TM)
SR
24 / Your Investment
<PAGE>
times providing for acceptance of orders for such shares on our behalf) in
particular investment products made available for a fee to clients of such
brokers, dealers, registered investment advisers and other financial
institutions.
Portfolio Securities Lending. Each fund may lend securities to
broker-dealers and financial institutions, as a means of earning income.
This practice could result in a loss or delay in recovering a fund's
securities, if the borrower defaults. Each fund will limit its securities
loans to 33 1/3 of its total assets.
Purchaser. The term "purchaser" includes: (i) an individual, (ii) an
individual and his or her spouse and children under the age of 21 and
(iii) a trustee or other fiduciary purchasing shares for a single trust
estate or single fiduciary account (including a pension, profit-sharing,
or other employee benefit trust qualified under Section 401 of the
Internal Revenue Code - more than one qualified employee benefit trust of
a single employer, including its consolidated subsidiaries, may be
considered a single trust, as may qualified plans of multiple employers
registered in the name of a single bank trustee as one account), although
more than one beneficiary is involved.
Repurchase Agreements. In a Repurchase Agreement, a fund buys a security
at one price and simultaneously agrees to sell it back at a higher price.
Delays or losses could result if the other party to the agreement defaults
or becomes insolvent.
Special Retirement Wrap Program. A program sponsored by an Authorized
Institution showing one or more characteristics distinguishing it, in the
opinion of Lord Abbett Distributor from a mutual fund wrap-fee program.
Such characteristics include, among other things, the fact that an
authorized institution does not charge its clients any fee of a consulting
or advisory nature that is economically equivalent to the distribution fee
under the class A 12b-1 Plan and the fact that the program relates to
participant-directed Retirement Plans.
U.S. Government Securities. These are obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
When-Issued or Delayed Delivery Transactions. Each underlying fund may
purchase or sell securities with payment and delivery taking place as much
as a month or more later. A fund would do this to secure an advantageous
price and yield. The securities so purchased are subject to market
fluctuation and no interest accrues to the purchaser during the period
between purchase and settlement. At the time of delivery of the
securities, their market value may be less than the purchase price. Also,
if a fund commits a significant amount of assets to when-issued or delayed
delivery transactions, it may increase the volatility of the fund's net
asset value.
Your Investment / 25
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
For more Information
More information on these funds is available free upon request, including:
ANNUAL/SEMI-ANNUAL REPORT
Describes the funds, lists portfolio holdings and contains a letter from
the funds' manager.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Provides more details about the funds and their policies. A current SAI is
on file with the Securities and Exchange Commission ("SEC") and is
incorporated by reference (is legally considered part of this Prospectus).
Growth & Income Fund
International Fund
World Bond-Debenture Fund
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
-----------------------
SEC file number: 811-?
To obtain information:
By telephone. Call the funds at
800-426-1130
By mail. Write to:
The Lord Abbett Family of Funds
767 Fifth Avenue
New York, NY 10153-0203
Via the Internet. Text only versions of fund documents can be viewed online or
downloaded from:
Lord, Abbett & Co.
http://www.lordabbett.com
SEC
http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 800-SEC-0330) or by sending your request and a duplicating
fee to the SEC's Public Reference Section, Washington, DC 20549-6009.
================================================================================
---------------
BULK RATE
U.S. POSTAGE
PAID
PERMIT NO. 2405
NEW YORK, N.Y.
---------------
<PAGE>
Prospectus / March 1, 1999
Lord Abbett
Alpha Fund
[LOGO](R) LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
As with all mutual funds, the Securities and Exchange Commission
does not guarantee that the information in this Prospectus is
accurate or complete, and it has not judged this fund for investment
merit. It is a criminal offense to state otherwise.
<PAGE>
Table of Contents
The Fund Page
Goal / Approach 2
Main Risks 2
Past Performance 3
Expenses 3
Financial Highlights 4
Portfolio Management 5
Recent Performance 5
Your Investment
Information for managing your fund account
Purchases 6
Opening Your Account 8
Redemptions 8
Distributions and Taxes 9
Management 9
Services For Fund Investors 10
Sales Charges and Service Fees 11
For More Information
How to learn more about the funds and other Lord Abbett funds
Glossary of Shaded Terms 13
Back Cover
<PAGE>
Alpha Fund Symbols: Class A - ALFAX
Class B - ALFBX
Class C - ALFCX
GOAL / APPROACH
The Alpha Fund seeks long-term capital appreciation. To pursue its
objective, the fund invests in a portfolio of three underlying funds
managed by Lord Abbett.
Developing Growth Fund
o Looks for small companies with exciting prospects, strong management and
above-average, long-term growth potential
o Bottom-up stock selection focuses on fundamentals, not events
International Fund
o Examines global trends, seeking to identify developments on an
industry-by-industry basis
o Fundamental research seeks to identify the strongest and/or best
positioned companies (Best of Breed) within their industries
o Does not use top-down georgaphic allocation
Small-Cap Fund
o Looks for companies that are not closely followed or highly regarded by
the broader investment community
o Bottom-up stock selection focuses on fundamentals, not events
All three underlying funds seek their objectives by investing primarily in
companies which are small-sized, based on the value of such companies'
outstanding stock. The fund will decide in which of the underlying funds
it will invest at any particular time, as well as the relative amounts
invested in the underlying funds. The fund can change the amounts invested
in any or all underlying funds as any time. As of this Prospectus, 40% of
the fund's assets were in Developing Growth Fund, 30% in International
Fund, and 30% in Small-Cap Fund.
Information on the fund's recent strategies can be found under "Recent
Performance" and further information on such strategies and the fund's
holdings can be found in the current annual/semiannual report (see back
cover).
MAIN RISKS
Small-Capitalization Stocks. Each of the underlying funds investes
primarily in the stocks of companies with small market capitalizations
(that is, the market value of the companies' outstanding stock). As a
result, the fund will experience periods when stock prices generally rise
or decline. This means that your fund investment will fluctuate in value
and you could lose money. While small companies offer significant
appreciation potential, they generally carry more risk than larger
companies. Small companies may be more limited as to product lines,
markets and financial resources. This may make them more susceptible to
business setbacks or economic downturns. Small companies tend to be more
volatile in price and normally have fewer shares outstanding which trade
less frequently than large companies. Therefore, the securities of smaller
companies may be subject to wider price fluctuations. In many instances,
the securities of smaller companies are traded over the counter.
Foreign Securities. Each of the underlying funds may invest in securities
that trade in foreign countries, and the International Fund expects that a
substantial portion of its assets will be so invested. These stocks are
not subject to the same degree of regulation and may be more volatile and
less liquid than securities traded in major U.S. markets. This may affect
the ability of the underlying funds to trade with maximum efficiencies.
Foreign portfolio securities may trade on days when an underlying fund
does not value them, and share values could be affected on days an
investor has no fund access. Other risks include less information on
public companies, banks and governments; political and social instability;
expropriations; higher transaction costs; currency fluctuations;
nondeductable withholding taxes and different accounting and settlement
practices.
See the terms: Developing Growth Fund, Diversification, Foreign Currency
Hedging Techniques, Illiquid Securities, International Fund, Repurchase
Agreements, Short-term Fixed-Income Securities, Small-Cap Fund, and
When-Issued or Delayed Delivery Transactions. Under "For More Information"
to learn about our other investment strategies and their risks.
We or the fund refers to the Alpha Fund acting as a fund of funds by investing
in the underlying funds. The fund is a portfolio of Lord Abbett Securities Trust
(the "Company") which operates through its officers under the supervision of its
Board Members with the advice of Lord, Abbett & Co. ("Lord Abbett").
Underlying funds: currently,
o Lord Abbett Developing Growth Fund ("Developing Growth Fund")
o Lord Abbett International Fund ("International Fund") and
o Lord Abbett Small-Cap Fund ("Small-Cap Fund")
Call 800-874-3733 for any underlying fund's prospectus, or a prospectus for any
Lord Abbett fund.
Best of Breed refers to certain companies, primarily foreign, that the portfolio
manager thinks are candidates for the best in their industries.
Fund's Volatility and Balance. The fund's volatility is expected to approximate
that of the unmanaged Salomon Extended Market Index for the long-term. The
historical annualized return of this index from inception (January 1, 1990)
through December 31, 1998 fluctuated within a range of 0% to 0%. Over time, the
fund intends to approximate the index's balance between foreign and domestic
securities by varying its investments int eh underlying funds, subject to the
fund's cash flow and desire to avoid excessive capital gains distributions. Past
performance and volatility of the index are no indication of future results for
the index or the fund. The fund can not guarantee that it will succeed in its
pursuit of this level of volatility, or balance, or its objective.
2 / The Fund
<PAGE>
PAST PERFORMANCE
The chart and table below show how the fund's class A share calendar year
total returns fluctuate, without a sales charge. This assumes reinvestment
of dividends and distributions. With a sales charge, returns would be less
than those shown.
AWAITING DATA
================================================================================
Comparison of the fund class's average annual total return at maximum
sales charge to that of the Salomon Brothers EMI Index which has no sales
charge. Assumes reinvestment of dividends and distributions. All periods
end on December 31, 1998.
Class 1 Year 5 Years 10 Years Inception(i)
A .% .% .% .%
- --------------------------------------------------------------------------------
B .% -- -- .%
- --------------------------------------------------------------------------------
C .% -- -- .%
- --------------------------------------------------------------------------------
Salomon Brothers EMI Index(ii) .% .% .% .%
- --------------------------------------------------------------------------------
About the fund. This fund is a mutual fund: a pooled investment that is
professionally managed and gives you the opportunity to participate in
securities markets. It strives to reach its stated goal, although as with all
mutual funds, it cannot guarantee results and its past is not a prediction of
the future.
An investment in the fund is not a bank deposit. It is not FDIC-insured or
government-endorsed. It is not a complete investment program. You could lose
money in this fund, but you also have the potential to make money.
- -----------
(i) The dates of inception for each class is 12/29/97.
(ii) Performance for the unmanaged Salomon Brothers EMI Index does not reflect
transaction costs or management fees. An investor cannot invest directly
in the Salomon Brothers EMI Index.
EXPENSES
As an investor, you pay certain fees and expenses in connection with the
fund, which are described in the fee table below. Shareholder transaction
fees are paid from your account. Annual fund operating expenses are paid
out of fund assets, so they reduce the fund's share price.
================================================================================
Fee table
- --------------------------------------------------------------------------------
Class A Class B Class C
Shareholder Transaction Fees
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- --------------------------------------------------------------------------------
(as a % of offering price) 5.75% none none
- --------------------------------------------------------------------------------
Deferred Sales Charge (See "Purchases") none 5.00% 1.00%
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (as a % of average net assets)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.50% 0.50% 0.50%
- --------------------------------------------------------------------------------
12b-1 Fees(1) 0.35% 1.00% 1.00%
- --------------------------------------------------------------------------------
Other Expenses (See "Management") 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
Total Operating Expenses 0.85% 1.50% 1.50%
- --------------------------------------------------------------------------------
While each class of shares of the Alpha Fund is expected to operate with
the direct total operating expenses shown under "management fees" above
("each Alpha class expense ratio"), shareholders in the Alpha Fund bear
indirectly the Class Y share expenses of the underlying funds in which the
Alpha Fund invests exclusively. The following chart provides the expense
ratio for each of the underlying funds, as well as the percentage of the
Alpha Fund's net assets invested in each underlying fund on October 31,
1998:
Underlying funds' % of Alpha Fund
expense ratios net assets
Lord Abbett Developing Growth Fund 0.00% 30%
- --------------------------------------------------------------------------------
Lord Abbett Small-Cap Fund 0.00% 30%
- --------------------------------------------------------------------------------
Lord Abbett International Fund 0.00% 40%
- --------------------------------------------------------------------------------
100%
--------------------
Based on these figures, the average weighted Class Y share expense ratio
for the underlying funds in which Alpha Fund invests is 0.00% (the
"underlying expense ratio"). This figure is only an approximation of the
Alpha Fund's underlying expense ratio, since its assets invested in each
of the underlying funds changes daily.
Management fee: The fee payable to Lord Abbett for the fund's investment
management. Lord Abbett expects to waive its fee for the current fiscal year.
Total operating expenses in this situation are 0.35% (class A shares) and 1.00%
(class B and C shares).
12b-1 fees: 12b-1 refers to the federal securities regulation authorizing
payment of distribution fees for any activity which is primarily intended to
result in the sale of fund shares and service fees for shareholder account
service and maintenance.
Other expenses: Fees paid by the fund for miscellaneous items such as transfer
agency, custody, accounting, legal and share registration fees. All of these
Alpha Fund expenses are expected to be subsidized by the underlying funds.
- -----------
(1) Because 12b-1 distribution fees (up to: 0.25%- class A; 0.75%- class B;
and 0.75%- class C) are paid out of the fund's assets on an on-going
basis, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges. Service fees
under each class's 12b-1 Plan equal up to 0.25%.
The Fund / 3
<PAGE>
================================================================================
EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
This example, like that in other funds' prospectuses, assumes a $10,000 initial
investment at maximum sales charge, if any; 5% total return each year and no
changes in expenses. You pay the following expenses over the course of each
period shown if you sell your shares at the end of the periods. The expenses
include any applicable contingent deferred sales charges.
Share class 1 Year 3 Years 5 Years 10 Years
Class A shares $657 $830 $1,019 $1,566
- --------------------------------------------------------------------------------
Class B shares(1) $552 $774 $918 $1,617
- --------------------------------------------------------------------------------
Class C shares $152 $474 $818 $1,793
- --------------------------------------------------------------------------------
You would pay the following expenses on the same investment, assuming you kept
your shares.
Class A shares $657 $830 $1,019 $1,566
- --------------------------------------------------------------------------------
Class B shares(1) $152 $474 $818 $1,617
- --------------------------------------------------------------------------------
Class C shares $152 $474 $818 $1,793
- --------------------------------------------------------------------------------
This example is for comparison and is not a representation of the fund's actual
expenses or returns, either past or present.
- -----------
(1) Class B shares will automatically convert to class A shares on the eighth
anniversary of your original purchase of class B shares.
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the fund would
have increased (or decreased) during each period, if you had reinvested
all dividends and distributions. These Financial Highlights have been
audited by Deloitte & Touche LLP, the fund's independent auditors, in
conjunction with their annual audit of the fund's financial statements.
Financial statements for the fiscal year ended October 31, 1998 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for that fiscal year and are incorporated by reference in the
Statement of Additional Information.
<TABLE>
<CAPTION>
===========================================================================================================================
Class A Shares Class B Shares Class C Shares
----------------------------------------------------------------------------------
Period Ended October 31,
Per Share Operating Performance: 1998(b) 1998(b) 1998(b)
<S> <C> <C> <C>
Net asset value, beginning of period $13.52 $13.52 $13.52
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.03)(d) (0.11)(d) (0.11)(d)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ---------------------------------------------------------------------------------------------------------------------------
loss on investments and foreign
- ---------------------------------------------------------------------------------------------------------------------------
currency holdings (0.58) (0.56) (0.55)
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.61) (0.67) (0.66)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.91 $12.85 $12.86
- ---------------------------------------------------------------------------------------------------------------------------
Total Return(c) (4.51)% (4.96)% (4.88)%
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:(c)
- ---------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver 0.21% 0.83% 0.82%
- ---------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver 0.63% 1.26% (0.82)%
- ---------------------------------------------------------------------------------------------------------------------------
Net investment (income)loss (0.18)% (0.81)% 1.24%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
===========================================================================================================================
Period Ended October 31,
----------------------------------------------------------------------------------
Supplemental Data For All Classes: 1998
<S> <C>
Net assets, end of period (000) $106,279
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 0.01%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not reflect the deduction of front-end or contingent
deferred sales charges.
(b) From commencement of operations for each class of shares: December 29,
1997.
(c) Not annualized.
(d) Calculated using average shares oustanding during the period.
See Notes to Financial Statements.
4 / The Fund
<PAGE>
PORTFOLIO MANAGEMENT
Robert G. Morris, Lord Abbett Partner, Executive Vice President of the
company, and Portfolio Manager of the fund has primary responsibility for
the management of the fund's portfolio. He has been with Lord Abbett for
over five years. He has over twenty-five years of investment experience.
RECENT PERFORMANCE
A short-term liquidity crisis in the U.S. capital markets, caused by
investors' reluctance to take risk, pushed stock prices down. Small-cap
stocks, which are generally less liquid than mid-cap and large-cap stocks,
under-performed most other asset classes. Since that time, the Federal
Reserve Board moved to lower interest rates to restore investor
confidence, and small-company stocks have rallied. However, relative to
most large-company stocks, small-caps remain meaningfully undervalued. We
view this as a unique opportunity to add select small companies to the
portfolio. Furthermore, we anticipate that continued intervention by the
Federal Reserve will create an environment in which small-cap stocks can
perform well.
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in class A
shares to the same investment in the Salomon Brothers EMI Index, assuming
reinvestment of all dividends and distributions
================================================================================
[The following table was depicted as a line graph in the printed material.]
0 10000 9428
0 10081 9505 10000
0 10185 9603 10068
0 10991 10363 10821
0 11627 10962 11304
0 11886 11206 11383
0 11709 11039 11175
0 11494 10837 11040
0 10851 10230 10592
0 8876 8368 8907
0 9053 8536 9138
0 9549 9003 9697
================================================================================
Average Annual Total Return at Maximum Sales Charge
for the Periods Ending October 31, 1998
Life
- --------------------------------------------------------------------------------
Class A(1) 0.00%
- --------------------------------------------------------------------------------
Class B(3) 0.00%
- --------------------------------------------------------------------------------
Class C(4) 0.00%
- --------------------------------------------------------------------------------
Year 2000 issues. Each fund could be adversely affected if the computers used by
each fund and their service providers do not properly process and calculate
date-related information from and after January 1, 2000.
While year 2000-related computer problems could have a negative effect on each
fund, Lord Abbett is working to avoid such problems and has assurances from each
fund's service providers that they are taking similar steps. However, because
the problem is unprecedented, we don't know whether these efforts will be
successfu.l Accordingly, each fund may be adversely affected.
- -----------
(1) This shows total return which is the per- cent change in value, after
deduction of the maximum initial sales charge of 5.75% applicable to class
A shares, with all dividends and distributions reinvested for the periods
shown ending October 31, 1998 using the SEC-required uniform method to
compute such return.
(2) Performance for the unmanaged Salomon Brothers EMI Index does not reflect
transaction costs, management fees or sales charges. An investor cannot
invest directly in the Salomon Brothers EMI Index.
(3) The class B shares were first offered on 12/29/97. Performance reflects
the deduction of a CDSC of 4% (for 1 year) and 3% (for life of the class).
(4) The class C shares were first offered on 12/29/97. Performance is at net
asset value.
The Fund / 5
<PAGE>
Your Investment
PURCHASES
This Prospectus offers three classes of shares, Class A, B and C. These
classes of shares represent investments in the same portfolio of
securities but are subject to different expenses. Our shares are
continuously offered. The offering price is based on the Net Asset Value
(NAV) per share next after we accept your purchase order submitted in
proper form. A front-end sales charge is added to the NAV, in the case of
the Class A shares. There is no front-end sales charge, in the case of the
Class B, and C, shares as described below. You should read this section
carefully to determine which class of shares represents the best
investment option for their particular situation.
You should read this section carefully to determine which class of shares
represents the best investment option for your particular situation. For
larger purchases or at certain dollar amounts it may not be suitable for
you to place a purchase order for class B shares of $500,000 or more or a
purchase order for class C shares. You should discuss pricing options with
your investment professional.
For more information, see "Alternative Sales Arrangements" in the
Statement of Additional Information.
Net Asset Value. NAV per share for each class of fund shares is calculated each
business day at the close of regular trading on the New York Stock Exchange
("NYSE"). The fund is open on those business days when the NYSE is open.
Purchases and sales of fund shares are executed at the NAV next determined after
your order is accepted. In connection with the calculation of NAV, portfolio
securities for which quotations are not available are valued at fair value under
procedures approved by the Board Members.
================================================================================
Class A Shares
- --------------------------------------------------------------------------------
Front-end sales charges are as follows:
To Compute
As a % of As a % of Offering Price
Your Investment Offering Price Your Investment Divide NAV by
- --------------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% .9425
- --------------------------------------------------------------------------------
$50,000 to $99,999 4.75% 4.99% .9525
- --------------------------------------------------------------------------------
$100,000 to $249,999 3.75% 3.90% .9625
- --------------------------------------------------------------------------------
$250,000 to $499,999 2.75% 2.83% .9725
- --------------------------------------------------------------------------------
$500,000 to $999,999 2.00% 2.04% .9800
- --------------------------------------------------------------------------------
$1,000,000 and over No Sales Charge 1.0000
- --------------------------------------------------------------------------------
Reducing Your Class A Front-End Sales Charges. There are several ways you
can qualify for a discount (at public offering price) when purchasing
class A shares if you inform the fund that you are eligible at the time of
purchase.
o Rights of Accumulation -- a Purchaser can add the share value (at
public offering price) of any Eligible Fund already owned to the
amount of the next purchase of class A shares for purposes of
calculating the sales charge.
o Statement of Intention -- a Purchaser can purchase class A shares of
any Eligible Fund over a 13-month period and receive the same sales
charge as if all shares had been purchased at once. Shares purchased
through reinvestment of distributions are not included. A statement
of intention can be backdated 90 days. Current holding under rights
of accumulation can be included in a statement of intention.
For more information on eligibility for these privileges, read the
applicable sections in the attached application.
Share classes
Class A
o Normally offered with a front-end sales charge.
Class B
o No front-end sales charge.
o Higher annual expenses than class A shares.
o A contingent deferred sales charge is applied to shares sold prior to the
sixth anniversary of purchase.
o Automatically convert to class A shares after eight years.
Class C
o No front-end sales charge.
o Higher annual expenses than class A shares.
o A contingent deferred sales charge is applied to shares sold prior to the
first anniversary of purchase.
6 / Your Investment
<PAGE>
Class A Share Purchases Without a Front-End Sales Charge. Class A shares
may be purchased without a front-end sales charge under the following
circumstances.
1. Purchases of $1 million or more.*
2. Purchases by Retirement Plans with at least 100 eligible employees.*
3. Purchases under a Special Retirement Wrap Program.*
4. Purchases made with dividends and distributions on class A shares of
another Eligible Fund.
5. Purchases representing repayment under the loan feature of the Lord
Abbett-sponsored prototype 403(b) plan for class A shares.
6. Employees of any consenting securities dealer having a sales
agreement with Lord Abbett Distributor LLC.
7. Purchases under a Mutual Fund Wrap-Fee Program.
8. Trustees or custodians of any pension or profit sharing plan, or
payroll deduction IRA for the persons mentioned in 6 above.
See the Statement of Additional Information for a listing of other
categories of purchasers who qualify for class A share purchases without a
front-end sales charge.
Class A Share CDSC. If you buy class A shares under one of the starred (*)
categories listed above and you redeem any of the class A shares within 24
months after the month in which you initially purchased such shares, the
fund normally will collect a CDSC of 1%.
The class A share CDSC generally will be waived for the following.
o Benefit payments such as Retirement Plan loans, hardship
withdrawals, death, disability, retirement, separation from service
or any excess distribution under Retirement Plans (documentation may
be required).
o Redemptions continuing as investments in another fund participating
in a Special Retirement Wrap Program.
Class B Share CDSC. The CDSC for class B shares normally applies if you
redeem your shares before the sixth anniversary of their initial purchase.
The CDSC declines the longer you own your shares, according to the
following schedule.
================================================================================
Class B Shares
- --------------------------------------------------------------------------------
Anniversary(1) of Contingent Deferred Sales Charge
the day on which the on redemption (as % of amount
purchase order was accepted subject to charge)
On Before
- --------------------------------------------------------------------------------
1st 5.0%
- --------------------------------------------------------------------------------
1st 2nd 4.0%
- --------------------------------------------------------------------------------
2nd 3rd 3.0%
- --------------------------------------------------------------------------------
3rd 4th 3.0%
- --------------------------------------------------------------------------------
4th 5th 2.0%
- --------------------------------------------------------------------------------
5th 6th 1.0%
- --------------------------------------------------------------------------------
on or after the 6th anniversary(2) None
- --------------------------------------------------------------------------------
(1) Anniversary is the 365th day subsequent to a purchase or a prior
anniversary.
(2) Class B shares will automatically convert to class A shares on the eighth
anniversary of the purchase of class B shares.
* May be subject to a Contingent Deferred Sales Charge ("CDSC").
Retirement Plans. Employer-sponsored retirement plans under the Internal Revenue
Code, excluding Individual Retirement Accounts.
Lord Abbett Distributor LLC. Lord Abbett Distributor acts as agent for the funds
to work with investment professionals that buy and/or sell shares of the funds
on behalf of their clients. Generally, Lord Abbett Distributor does not sell
fund shares directly to investors.
Benefit Payment Documentation.
(Class A shares only)
o under $50,000 - no documentation necessary
o over $50,000 - reason for benefit payment must be received in writing. Use
the address indicated under opening your account.
Contingent Deferred Sales Charges. The CDSC, regardless of class, is not charged
on shares acquired through reinvestment of dividends or capital gains
distributions and is charged on the original purchase cost or the current market
value of the shares at the time they are being sold, which-ever is lower. In
addition, repayment of loans under Retirement Plans and 403(b) plans will
constitute new sales for purposes of assessing the CDSC.
To determine if a CDSC applies to a redemption, the fund redeems shares in the
following order.
1. Shares acquired by reinvestment of dividends and capital gains.
2. Shares held for six years or more (class B) or two years or more after the
month of purchase (class A) or one year or more (class C).
3. Shares held the longest before the sixth anniversary of their purchase (class
B) or before the second anni-versary after the month of purchase (class A) or
before the first anniversary of their purchase (class C).
Your Investment / 7
<PAGE>
The class B share CDSC generally will be waived under the following
circumstances.
o Benefit payments such as Retirement Plan loans, hardship
withdrawals, death, disability, retirement, separation from service
or any excess contribution or distribution under Retirement Plans.
o Eligible Mandatory Distributions under 403(b) plans and individual
retirement accounts.
o Death of the shareholder (natural person).
o Redemptions of shares in connection with Div-Move and Systematic
Withdrawal Plans (up to 12% per year).
See "Systematic Withdrawal Plan" under "Services For Fund Investors" below
for more information on CDSCs with respect to class B shares.
Class C Share CDSC. The 1% CDSC for class C shares normally applies if you
redeem your shares before the first anniversary of your original purchase.
There are no CDSC waiver provisions for this class.
Important information. If you do not provide a correct taxpayer identification
number (Social Security number for individuals) or make certain required
certifications, you may be subject to a $50 penalty under the Internal Revenue
Code. Also, we may be required to withhold from your account and pay to the U.S.
Treasury 31% of any redemption proceeds and of any dividend or distribution from
your account.
OPENING YOUR ACCOUNT
MINIMUM INITIAL INVESTMENT
o Regular account $1,000
o Individual Retirement Accounts and 403(b) plans under
the Internal Revenue Code $250
o Uniform Gift to Minor Account $250
For Retirement Plans and Mutual Fund Wrap Programs, no minimum investment
is required, regardless of share class.
You may purchase shares through any independent securities dealer who has
a sales agreement with Lord Abbett Distributor or you can fill out the
attached application and send it to the fund at the address stated below.
You should carefully read the paragraph below entitled "Proper Form"
before placing your order.
Name of fund you select.
P.O. Box 419100
Kansas City, MO 64141
Proper Form. An order submitted directly to the fund must contain (1) a
completed application, and (2) payment by check. For more information
regarding proper form of a purchase order, call the fund at 800-821-5129.
Payment must be credited in U.S. dollars to our custodian bank's account.
By Exchange. Telephone the fund at 800-821-5129 to request an exchange
from any eligible Lord Abbett-sponsored fund.
REDEMPTIONS
By Broker. Call your investment professional for directions on how to
redeem your shares.
By Telephone. To obtain the proceeds ($50,000 or less) of a redemption to
the name and address in which your account is registered, you or your
representative can call the fund at 800-821-5129.
8 / Your Investment
<PAGE>
By Mail. Submit a written redemption request indicating, the name(s) in
which the account is registered, the fund's name, the class of shares,
your account number, and the dollar value or number of shares you wish to
sell.
Include all necessary signatures. If the signer has any Legal Capacity,
the signature and capacity must be guaranteed by an Eligible Guarantor.
Certain other legal documentation may be required. For more information
regarding proper documentation call 800-821-5129.
We will verify that the shares being redeemed (if purchased by check) were
purchased at least 15 days earlier. Your account balance must be
sufficient to cover the amount being redeemed or your redemption order
will not be processed.
Normally a check will be mailed to the name and address in which the
account is registered (or otherwise according to your instruction) within
three business days after receipt of your redemption request.
To determine if a CDSC applies to a redemption, see "Class A share CDSC",
"Class B share CDSC" or "Class C share CDSC" above.
DISTRIBUTIONS AND TAXES
The fund pays its shareholders dividends from its net investment income,
and distributes net capital gains that it has realized. The fund expects
to pay income dividends to shareholders annually in December. Any capital
gain distribution is generally paid once a year. Your distributions will
be reinvested in the fund unless you instruct the fund to pay them to you
in cash. There are no sales charges on reinvestments.
The tax status of distributions are the same for all shareholders
regardless of how long they have been in the fund and whether
distributions are reinvested or paid in cash. In general, distributions
are taxable as follows:
================================================================================
U.S. federal income tax on distributions
Type of Tax rate for taxpayer Tax rate for taxpayer subject
distribution subject to 15% bracket to 28% bracket or above
- --------------------------------------------------------------------------------
Income Ordinary
dividends 15% income rate
- --------------------------------------------------------------------------------
Short-term Ordinary
capital gains 15% income rate
- --------------------------------------------------------------------------------
Long-term
capital gains 10% 20%
- --------------------------------------------------------------------------------
MANAGEMENT
The fund's investment adviser is Lord, Abbett & Co., 767 Fifth Avenue, New
York, NY 10153-0203. Founded in 1929, Lord Abbett manages one of the
nation's oldest mutual fund complexes, with approximately $28 billion in
more than 35 mutual fund portfolios and other advisory accounts. For more
information about the services Lord Abbett provides to the fund, see the
Statement of Additional Information.
The fund pays Lord Abbett a monthly fee based on average daily net assets
for each month. For the fiscal year ended October 31, 1998, the fee paid
to Lord Abbett was at an annual rate of .00 of 1%. In addition, the fund
pays all expenses not expressly assumed by Lord Abbett.
Small Accounts. Our Board Members may authorize closing any account in which
there are fewer than 25 shares if it is in a fund's best economic interest to do
so.
Taxes on transactions. Except in tax-advantaged accounts, any sale or exchange
of fund shares may be a taxable event.
The table at left can provide a "rule of thumb" guide for your potential U.S.
federal income tax liability when selling or exchanging fund shares. The second
row, "Short -term capital gains," applies to fund shares sold within 12 months
of purchase. The third row, "Long-term capital gains," applies to shares held
for more than 12 months.
Starting January 1, 2001, sales of securities held for more than five years will
be taxed at special lower rates.
Lord Abbett offers a variety of Retirement Plans. Call 800-253-7299 for
information about:
o Traditional, Rollover Roth and Education IRAs.
o Simple IRA's, SEP-IRAs, 401(k) and 403(b) accounts.
o Defined Contribution Plans.
Your Investment / 9
<PAGE>
SERVICES FOR FUND INVESTORS
AUTOMATIC SERVICES
Buying or selling shares automatically is easy with the services described
below. With each service, you select a schedule and amount, subject to
certain restrictions. You can set up most of these services with your
application or by calling 800-821-5129.
================================================================================
For investing
Invest-A-Matic You can make fixed, periodic investments ($50 minimum) into
your fund account by means of automatic money transfers from
your bank checking account. See the attached application for
instructions.
Div-Move For automatically reinvesting the dividends and distributions
from your account into another account in any Eligible Fund.
($50 minimum).
For selling shares
Systematic For making regular withdrawals from most Lord Abbett funds.
Withdrawal You can have automatic cash withdrawals paid to you from your
Plan ("SWP") account in fixed or variable amounts. To establish a plan, the
value of your shares must be at least $10,000, except for
Retirement Plans for which there is no minimum. Your shares
must be in non-certificate form.
Class B shares The CDSC will be waived on redemptions of up to 12% of the
current net asset value of your account at the time of your
SWP request. For class B share redemptions over 12% per year,
the CDSC will apply to the entire redemption. Please contact
the fund for assistance in minimizing the CDSC in this
situation.
Class B and Redemption proceeds due to a SWP for class B and class C
C shares shares will be redeemed in the order described under
"Contingent Deferred Sales Charges" under "Purchases" above.
================================================================================
OTHER SERVICES
Telephone Investing. After we have received the telephone investing
portion of the attached application (section 7), you can instruct us by
phone to have money transferred from your bank account to purchase shares
of the fund for an existing account. The fund will purchase the requested
shares when it receives of the money from your bank.
Telephone Exchanges. You or your investment professional, with proper
identification, can instruct your fund by telephone to exchange shares of
any class for the same class of any Eligible Fund by calling 800-821-5129.
The fund must receive instructions for the exchange before the close of
the New York Exchange on the day of your call. If you do this, you will
get the NAV per share of the Eligible Fund determined on that day.
Exchanges will be treated as a sale for federal tax purposes. Be sure to
read the current prospectus for any fund into which you are exchanging.
Reinvestment Privilege. If you sell shares of the fund, you have a one
time right to reinvest some or all of the proceeds in the same class of
any Eligible Fund within 60 days without a sales charge. If you paid a
CDSC when you sold your shares, you will be credited with the amount of
the CDSC. All accounts involved must have the same registration.
Account Statements. Generally, every Lord Abbett investor automatically
receives quarterly account statements.
Householding. Generally, shareholders with the same last name and address
will receive a single copy of a prospectus and an annual or semi-annual
report, unless additional reports are specifically requested in writing to
the fund.
Telephone Transactions. You have this privilege unless you refuse it in writing.
For your security, telephone transaction requests are recorded. We will take
measures to verify the identity of the caller, such as asking for your name,
account number, social security or taxpayer identification number and other
relevant information. The fund will not be liable for following instructions
communicated by telephone that it reasonably believes to be genuine.
Transactions by telephone may be difficult to implement in times of drastic
economic or market change.
Exchanges by telephone should not be used to take advantage of short-term swings
in the market. The fund reserves the right to limit or terminate this privilege
for any shareholder making frequent exchanges or abusing the privilege and may
revoke the privilege for all shareholders upon 60 days' written notice.
10 / Your Investment
<PAGE>
Account Changes. For any changes you need to make to your account, consult
your financial representative or call the fund at 800-821-5129.
Systematic Exchange. You or your investment professional can establish a
schedule of exchanges between the same classes of any eligible fund. We
offer UGMA and UTMA accounts.
SALES CHARGES AND SERVICE FEES
Sales and Service Compensation. As part of its plan for distributing
shares, each fund and Lord Abbett Distributor pay sales and service
compensation to Authorized Institutions that sell fund shares and service
shareholders.
Sales compensation originates from two sources: sales charges and 12b-1
distribution fees that are paid out of each fund's assets. Service
compensation originates from 12b-1 service fees. The 12b-1 fee rates vary
by share class, according to the Rule 12b-1 plan adopted by each fund. The
sales charges and 12b-1 fees paid by investors are shown in the
class-by-class information under "Expenses" and "Purchases". The portion
of these expenses that is paid as sales and service compensation to
Authorized Institutions, such as your dealer, is shown in the chart on the
next page. The portion of such sales and service compensation paid to Lord
Abbett Distributor is discussed under "Sales Activities" and "Service
Activities" below. Sometimes we do not pay sales and service compensation
where tracking data is not available for certain accounts or where the
Authorized Institution waives part of the compensation. We may pay
Additional Concessions to Authorized Institutions from time to time.
Sales Activities. We may use 12b-1 distribution fees to pay Authorized
Institutions to finance any activity that is primarily intended to result
in the sale of shares. Lord Abbett Distributor uses its portion of the
distribution fees attributable to a fund's class A and class C shares for
activities that are primarily intended to result in the sale of such class
A and class C shares, respectively. These activities include, but are not
limited to, printing of prospectuses and statements of additional
information and reports for other than existing shareholders, preparation
and distribution of advertising and sales material, expenses of organizing
and conducting sales seminars, Additional Concessions to Authorized
Institutions, the cost necessary to provide distribution-related services
or personnel, travel, office expenses, equipment and other allocable
overhead.
Service Activities. We may pay Rule 12b-1 service fees to Authorized
Institutions for any activity which is primarily intended to result in
personal service and/or the maintenance of shareholder accounts. Any
portion of the service fees paid to Lord Abbett Distributor will be used
to service and maintain shareholder accounts.
12b-1 fees payable regardless of expenses. The amounts payable by a fund need
not be directly related to expenses. If Lord Abbett Distributor's actual
expenses exceed the fee payable to it, the fund will not have to pay more than
that fee. If Lord Abbett Distributor's expenses are less than the fee it
receives, Lord Abbett Distributor will keep the full amount of the fee.
Your Investment / 11
<PAGE>
COMPENSATION FOR YOUR DEALER
<TABLE>
<CAPTION>
==============================================================================================================================
FIRST YEAR COMPENSATION
Class A investments Front-end
sales charge Dealer's
paid by investors concession Service fee(1) Total compensation(2)
(% of offering price) (% of offering price) (% of net investment) (% of offering price)
==============================================================================================================================
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 5.00% 0.25% 5.24%
- ------------------------------------------------------------------------------------------------------------------------------
$50,000 - $99,999 4.75% 4.00% 0.25% 4.24%
- ------------------------------------------------------------------------------------------------------------------------------
$100,000 - $249,999 3.75% 3.25% 0.25% 3.49%
- ------------------------------------------------------------------------------------------------------------------------------
$250,000 - $499,999 2.75% 2.25% 0.25% 2.49%
- ------------------------------------------------------------------------------------------------------------------------------
$500,000 - $999,999 2.00% 1.75% 0.25% 2.00%
- ------------------------------------------------------------------------------------------------------------------------------
$1 million or more(3) or Retirement
Plan - 100 or more eligible employees(3)
or Special Retirement Wrap Program(3)
- ------------------------------------------------------------------------------------------------------------------------------
First $5 million no front-end sales charge 1.00% 0.25% 1.25%
- ------------------------------------------------------------------------------------------------------------------------------
Next $5 million above that no front-end sales charge 0.55% 0.25% 0.80%
- ------------------------------------------------------------------------------------------------------------------------------
Next $40 million above that no front-end sales charge 0.250% 0.25% 0.50%
- ------------------------------------------------------------------------------------------------------------------------------
Over $50 million no front-end sales charge 0.025% 0.25% 0.275%
==============================================================================================================================
Class B investments Paid at time of sale (% of net asset value)
- ------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 3.75% 0.25% 4.00%
==============================================================================================================================
Class C investments
- ------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.75% 0.25% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
==============================================================================================================================
ANNUAL COMPENSATION AFTER FIRST YEAR
Class A investments
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
All amounts no front-end sales charge none 0.25% 0.25%
==============================================================================================================================
Class B investments Percentage of average net assets(4)
- ------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25% 0.25%
==============================================================================================================================
Class C investments
- ------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.65% 0.25% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The service fee for Class A shares is paid quarterly. The first year's
service fee on Class B and C shares is paid at the time of sale.
(2) Reallowance/concession percentages and service fee percentages are
calculated from different amounts, and therefore may not equal total
compensation percentages if combined using simple addition. Additional
Concessions may be paid to Authorized Institutions from time to time.
(3) Concessions are paid at the time of sale on all Class A shares sold during
any 12-month period starting from the day of the first net asset value
sale. With respect to (a) Class A share purchases at $1 million or more,
sales qualifying at such level under rights of accumulation and statement
of intention privileges are included and(b) for Special Retirement Wrap
Programs, only new sales are eligible and exchanges into the Fund are
excluded.
(4) With respect to Class B and C shares, 0.25% and 1.00%, respectively, of
the average annual net asset value of such shares outstanding during the
quarter (including distribution reinvestment shares after the first
anniversary of their issuance) is paid to Authorized Institutions. These
fees are paid quarterly in arrears. In the case of Class C shares for
fixed-income series, 0.10% of the average net asset value of such shares
is retained by Lord Abbett Distributor, thus reducing from 0.75% to 0.65%
after the first year. Lord, Abbett & Co. uses 0.10% for expenses primarily
intended to result in the sale of such series' shares. CDSC revenues
collected may be used to fund commission payments when there is no initial
sales charge.
12 / Your Investment
<PAGE>
For More Information
GLOSSARY OF SHADED TERMS
Additional Concessions. Lord Abbett Distributor may, for specified
periods, allow dealers to retain the full sales charge for sales of shares
or may pay an additional concession to a dealer who sells a minimum dollar
amount of our shares and/or shares of other Lord Abbett-sponsored funds.
In some instances, such additional concessions will be offered only to
certain dealers expected to sell significant amounts of shares. Additional
payments may be paid from Lord Abbett Distributor's own resources or from
distribution fees received from the fund and will be made in the form of
cash or, if permitted, non-cash payments. The non-cash payments will
include business seminars at Lord Abbett's headquarters or other
locations, including meals and entertainment, or the receipt of
merchandise. The cash payments may include payment of various business
expenses of the dealer.
In selecting dealers to execute portfolio transactions for 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.
Authorized Institutions. Institutions and persons permitted by law to
receive service and/or distribution fees under a Rule 12b-1 plan are
"authorized institutions". Lord Abbett Distributor is an Authorized
Institution.
Borrowing. Each underlying fund may borrow from banks. If a fund borrows
money, its share price may be subject to greater fluctuation until the
borrowing is paid off. Each underlying fund may borrow only for temporary
or emergency purposes, and not in an amount exceeding 33 1/3% of its total
assets.
Developing Growth Fund. The investment objective of the Developing Growth
Fund is long-term growth of capital through a diversified and
actively-managed portfolio consisting of developing growth companies, many
of which are traded over the counter. In pursuing Developing Growth Fund's
objective, it invests primarily in the common stocks of companies with
long-range growth potential, particularly smaller companies that
LordAbbett believes to be in the developing growth phase.
Lord Abbett views the developing growth phase as a period of swift
development, when growth occurs at a rate rarely equaled by established
companies in their mature years. Lord Abbett Developing Growth Fund
focuses on companies which it believes are strongly positioned in this
phase. Of course, because the actual growth of a company cannot be
foreseen, Lord Abbett may not always be correct in its judgments about
which phase a company is in at a particular time.
Diversification. Each underlying fund is a diversified fund, which means
that with respect to 3/4 of its total assets, it will not purchase a
security if, as a result, more than 5% of the fund's total assets would be
invested in securities of a single issuer or the fund would hold more than
10% of the outstanding voting securities of the issuer.
Eligible Fund. An Eligible Fund is any Lord Abbett-sponsored fund except
for (1) certain tax-free, single-state funds where the exchanging
shareholder is a resident of a state in which such fund is not offered for
sale; (2) Lord Abbett Equity Fund; (3) Lord Abbett Series Fund; and (4)
Lord Abbett U.S. Government Securities Money Market Fund ("GSMMF") (except
for holdings in GSMMF which are attributable to any shares exchanged from
the Lord Abbett family of funds). An Eligible Fund also is any Authorized
Your Investment / 13
<PAGE>
Institution's affiliated money market fund satisfying Lord Abbett
Distributor as to certain omnibus account and other criteria.
Eligible Guarantor. Any broker or bank that is a member of the medallion
stamp program. Most major securities firms and banks are members of this
program. A notary public is not an eligible guarantor.
Eligible Mandatory Distributions. If class B shares represent a part of an
individual's total IRA or 403(b) investment, the CDSC will be waived only
for that part of a mandatory distribution which bears the same relation to
the entire mandatory distribution as the B share investment bears to the
total investment.
Foreign Currency Hedging Techniques. Although the International Fund and
the Small-Cap Fund do not normally engage in extensive currency hedging,
they may use currency forwards and options to hedge the risk to the
portfolio if they expect that foreign exchange price movements will be
unfavorable for U.S. investors. Generally, these instruments allow a fund
to lock in a specified exchange rate for a period of time. If the fund's
forecast proves to be wrong, such a hedge may cause a loss. Also, it may
be difficult or impractical to hedge currency risk in many emerging
countries. The funds generally will not enter into a forward contract with
a term greater than one year. Under some circumstances, a fund may commit
a substantial portion or the entire value of its portfolio to the
completion of forward contracts. Although such contracts will be used
primarily to attempt to protect the fund from adverse currency movements,
their use involves the risk Lord Abbett will not accurately predict
currency movements, and the fund's return could be reduced.
Foreign Securities. These securities are not subject to the same degree of
regulation and may be more volatile and less liquid than securities traded
in major U.S. markets. This affect block trading. Foreign portfolio
securities may trade on days when an underlying fund does ont value them.
Fund share prices could be affected on days an investor cannot purchase or
sell shares. Other risks include less information on public ompanies,
banks and governments; political and social instability; expropriations;
higher transaction costs; currency fluctuations; nondeductable withholding
taxes and different accounting and settlement practices.
High Yield Debt Securities. High yield debt securities or "junk bonds" are
rated BB/Ba or lower and typically pay a higher yield than
investment-grade debt securities. These bonds have a higher risk of
default than investment grade bonds and their prices can be much more
volatile. The Small-Cap Fund will not invest more than 5% of its assets
measured at the time of investment in high yield debt securities.
Illiquid Securities. These are securities not traded on the open market or
that trade irregularly or in very low volume. They may be difficult or
impossible to sell at the time and price the fund would like. Each
underlying fund may invest up to 15% of its assets in illiquid securities.
International Fund. The investment objective of the International Fund is
long-term capital appreciation. Current income is incidental to this
objective and the fund may invest in securities that do not produce any
income. The fund may invest in securities of companies domiciled in
developed countries and in developing countries, including common and
preferred stocks, convertible securities, rights and awards to purchase
common stocks. Normally, at least 80% of the total assets of the fund will
be invested in equity securities of companies that are domiciled in at
least three different countries outside the United States. Although the
fund invests primarily in equity securities of companies with market
capitalization of less than $1 billion, it may also invest in large and
middle capi-
14 / Your Investment
<PAGE>
talization securities.
Legal Capacity. This term refers to the authority of an individual to act
on behalf of an entity or other person(s). For example, if a redemption
request were to be made on behalf of the estate of a deceased shareholder,
John W. Doe, by a person (Robert A. Doe) who has the legal capacity to act
for the estate of the deceased shareholder because he is the executor of
the estate, then the request must be executed as follows: Robert A. Doe,
Executor of the Estate of John W. Doe. That signature using that capacity
must be guaranteed by an Eligible Guarantor.
To give another example, if a redemption request were to be made on behalf
of the ABC Corporation by a person (Mary B. Doe) who has the legal
capacity to act on behalf of this corporation, because she is the
president of the corporation, the request must be executed as follows: ABC
Corporation by Mary B. Doe, President. That signature using that capacity
must be guaranteed by an Eligible Guarantor.
Mutual Fund Advisory Program. 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 fund shares (and sometimes providing
for acceptance of orders for such shares on Lord Abbett Distributor's
behalf) in particular investment products made available for a fee to
clients of such brokers, dealers, registered investment advisers and other
financial institutions.
Purchaser. The term "purchaser" includes: (i) an individual, (ii) an
individual and his or her spouse and children under the age of 21 and
(iii) a trustee or other fiduciary purchasing shares for a single trust
estate or single fiduciary account (including a pension, profit-sharing,
or other employee benefit trust qualified under Section 401 of the
Internal Revenue Code - more than one qualified employee benefit trust of
a single employer, including its consolidated subsidiaries, may be
considered a single trust, as may qualified plans of multiple employers
registered in the name of a single bank trustee as one account), although
more than one beneficiary is involved.
Repurchase Agreements. In a Repurchase Agreement, a fund buys a security
at one price from a broker-dealer or financial institution and
simultaneously agrees to sell the same security back to the same party at
a higher price in the future. If the other party to the agreement defaults
or becomes insolvent, the fund could lose money.
Short-Term Fixed-Income Securities. The Alpha Fund and each of its
underlying funds are authorized to invest temporarily in certain
short-term fixed-income securities. These securities are used to invest
uncommitted cash balances, to maintain liquidity to meet shareholder
redemptions, or to take out of temporary defensive position against market
declines. This could have the effect of reducing the benefit from any
upswing in the market.
Small-Cap Fund. This fund's investment objective is long-term capital
appreciation. The fund invests primarily in equity securities which it
believes to be undervalued. In doing so, the fund usually invests in
smaller companies, which may be out of favor with or not closely followed
by investors, and sometimes offer substantial appreciation potential.
The production of income is of incidental importance, and the fund may buy
securities that do not produce any income. Up to 35% of the fund's net
assets may be invested in securities that are traded in foreign countries.
Special Retirement Wrap Program. A program sponsored by an authorized
institution
Guaranteed signature. An acceptable form of guarantee would be as follows:
o In the case of the estate -
Robert A. Doe
Executor of the Estate of
John W. Doe
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
/s/ [ILLEGIBLE]
------------------------------------------------
AUTHORIZED SIGNATURE
(960) X9003470
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM(TM)
SR
o In the case of the corporation - ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
/s/ [ILLEGIBLE]
------------------------------------------------
AUTHORIZED SIGNATURE
(960) X9003470
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM(TM)
SR
Your Investment / 15
<PAGE>
showing one or more characteristics distinguishing it, in the opinion of
Lord Abbett Distributor from a mutual fund wrap-fee program. Such
characteristics include, among other things, the fact that an authorized
institution does not charge its clients any fee of a consulting or
advisory nature that is economically equivalent to the distribution fee
under the class A 12b-1 Plan and the fact that the program relates to
participant-directed Retirement Plans.
When-Issued or Delayed Delivery Securities. Each underlying fund may
purchase or sell securities with payment and delivery taking place as much
as a month or more later. A fund would do this in an effort to buy or sell
the securities at an advantageous price and yield. The securities involved
are subject to market fluctuation and no interest accrues to the purchaser
during the period between purchase and settlement. At the time of delivery
of the securities, their market value may be less than the purchase price.
Also, if a fund commits a significant amount of assets to when-issued or
delayed delivery transactions, it may increase the volatility of the
fund's net asset value.
16 / Your Investment
<PAGE>
For more Information
More information on these funds is available free upon request, including
the following:
ANNUAL/SEMI-ANNUAL REPORT
Describes the fund, lists portfolio holdings and contains a letter from
the fund's manager.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Provides more details about the fund and its policies. A current SAI is on
file with the Securities and Exchange Commission ("SEC") and is
incorporated by reference (is legally considered part of this Prospectus).
Alpha Fund
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
-----------------------
SEC file number: 811-?
To obtain information:
By telephone. Call the fund at
800-426-1130
By mail. Write to:
The Lord Abbett Family of Funds
767 Fifth Avenue
New York, NY 10153-0203
Via the Internet. Text only versions of fund documents can be viewed online or
downloaded from:
Lord, Abbett & Co.
http://www.lordabbett.com
SEC
http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 800-SEC-0330) or by sending your request and a duplicating
fee to the SEC's Public Reference Section, Washington, DC 20549-6009.
================================================================================
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BULK RATE
U.S. POSTAGE
PAID
PERMIT NO. 2405
NEW YORK, N.Y.
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<PAGE>
- --------------------------------------------------------------------------------
LORD ABBETT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Additional Information March 1, 1999
- --------------------------------------------------------------------------------
Growth & Income Fund
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 of Additional information relates
to, and should be read in conjunction with, the Prospectus dated March 1, 1999.
Lord Abbett Securities Trust (the "Company") was organized as a Delaware
business trust on February 26, 1993. The Company has four funds, but only Growth
& Income Fund and International Fund, individually ("we" or the "fund"),
collectively (the "funds") are described in this Statement of Additional
Information. The Growth & Income Fund has three classes of shares (A, B and C)
and International Fund has four classes of shares (A, B, C and Y). Only classes
A, B and C are offered by this Statement of Additional Information. 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 Funds shall not be deemed to
have been effectively acted upon unless approved by the holders of a majority of
the outstanding shares are affected by such matter. Rule 18f-2 further provides
that a class shall be deemed to be affected by a matter unless the interests of
each class in the matter are substantially identical or the matter does not
affect any interest of such class. However, the Rule exempts the selection of
independent public accountants, the approval of principal distributing contracts
and the election of trustees from its separate voting requirements.
Shareholder inquiries should be made directly to the Funds 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 9
4. Portfolio Transactions 10
5. Purchases, Redemptions and Shareholder Services 12
6. Past Performance 19
7. Taxes 20
8. Information About the Company 21
9. Financial Statements 22
1
<PAGE>
1.
Investment Objective and Policies
Fundamental Investment Restrictions
Both Funds are subject to the following investment restrictions which cannot be
changed without approval of a majority of each Fund's outstanding shares. Each
Fund may not: (1) borrow money, except that (i) each Fund may borrow from banks
(as defined in the Act ) in amounts up to 33 1/3% of its total assets (including
the amount borrowed), (ii) each Fund may borrow up to an additional 5% of its
total assets for temporary purposes, (iii) each Fund may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of portfolio
securities and (iv) each Fund may purchase securities on margin to the extent
permitted by applicable law; (2) pledge its assets (other than to secure
borrowings, or to the extent permitted by each Fund's investment policies as
permitted by applicable law); (3) engage in the underwriting of securities,
except pursuant to a merger or acquisition or to the extent that, in connection
with the disposition of its portfolio securities, it may be deemed to be an
underwriter under federal securities laws; (4) make loans to other persons,
except that the acquisition of bonds, debentures or other corporate debt
securities and investment in government obligations, commercial paper,
pass-through instruments, certificates of deposit, bankers acceptances,
repurchase agreements or any similar instruments shall not be subject to this
limitation, and except further that each Fund may lend its portfolio securities,
provided that the lending of portfolio securities may be made only in accordance
with applicable law; (5) buy or sell real estate (except that each Fund may
invest in securities directly or indirectly secured by real estate or interests
therein or issued by companies which invest in real estate or interests
therein), or commodities or commodity contracts (except to the extent each Fund
may do so in accordance with applicable law and without registering as a
commodity pool operator under the Commodity Exchange Act as, for example, with
futures contracts); (6) with respect to 75% of its gross assets, buy securities
of one issuer representing more than (i) 5% of its gross assets, except
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or (ii) 10% of the voting securities of such issuer; (7)
invest more than 25% of its assets, taken at market value, in the securities of
issuers in any particular industry (excluding securities of the U.S. Government,
its agencies and instrumentalities); or (8) issue senior securities to the
extent such issuance would violate applicable law.
With respect to the restrictions mentioned herein, compliance therewith will not
be affected by changes in the market value of portfolio securities but will be
determined at the time of purchase or sale of such securities.
Non-Fundamental Investment Restrictions. In addition to the investment
restrictions above which cannot be changed without shareholder approval, each
Fund also is subject to the following non-fundamental investment policies which
may be changed by the Board of Trustees without shareholder approval. Each Fund
may not: (1) borrow in excess of 33 1/3% of its total assets (including the
amount borrowed), and then only as a temporary measure for extraordinary or
emergency purposes; (2) make short sales of securities or maintain a short
position except to the extent permitted by applicable law; (3) invest knowingly
more than 15% of its net assets (at the time of investment) in illiquid
securities, except for securities qualifying for resale under Rule 144A of the
Securities Act of 1933, deemed to be liquid by the Board of Trustees; (4) invest
in the securities of other investment companies (in the case of the
International Fund, as long as the Fund is an underlying fund in a fund-of-funds
structure) (in the case of the Growth & Income Fund, except as permitted by
applicable law); (5) invest in securities of issuers which, with their
predecessors, have a record of less than three years' continuous operations, if
more than 5% of a 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 a Fund's total assets
(included within such limitation, but not to exceed 2% of a Fund's total assets,
are warrants which are not listed on the New York or American Stock Exchange or
a major foreign exchange); (8) invest in real estate limited partnership
interests or interests in oil, gas or other mineral leases, or exploration or
other development programs, except that each Fund may invest in securities
issued by companies that engage in oil, gas or other mineral exploration or
other development activities; (9) write, purchase or sell puts, calls,
straddles, spreads or combinations thereof, except to the extent permitted in
each Fund's prospectus and statement of additional information, as they may be
amended from time to time; or (10) buy from
2
<PAGE>
or sell to any of its officers, trustees, employees, or its investment adviser
or any of its officers, trustees, partners or employees, any securities other
than shares of each Fund.
Investment Techniques
Each Fund intends to utilize, from time to time, one or more of the investment
techniques described below, including lending portfolio securities, repurchase
agreements, warrants, and covered call options. While some of these techniques
involve risk when utilized independently, the Funds intend to use them to reduce
risk and volatility in its portfolios.
Lending Portfolio Securities
Each Fund may lend portfolio securities to registered broker-dealers. These
loans, if and when made, may not exceed 30% of each Fund's total assets. Each
Fund loan of securities will be collateralized by cash or marketable securities
issued or guaranteed by the U.S. Government or its agencies ("U.S. Government
securities") or other permissible means at least equal to the market value of
the loaned securities. From time to time, each 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, each 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. Each
Fund will comply with the following conditions whenever it loans securities: (i)
each 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) each Fund must
be able to terminate the loan at any time; (iv) each Fund must receive
reasonable compensation for the loan, as well as any dividends, interest or
other distributions on the loaned securities; (v) each 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
Each Fund may enter into repurchase agreements with respect to a security. A
repurchase agreement is a transaction by which each 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 each Fund
have a total value in excess of the value of the repurchase agreement. Each Fund
requires at all times that the repurchase agreement be collateralized by cash or
U.S. Government securities having a value equal to, or in excess of, the value
of the repurchase agreement. Such agreements permit each 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, each 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 each 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.
3
<PAGE>
The Fund will enter into repurchase agreements only with those primary reporting
dealers that report to the Federal Reserve Bank of New York and with the 100
largest United States commercial banks and the underlying securities purchased
under the agreements will consist only of those securities in which the Fund
otherwise may invest.
Warrants
Each Fund will not invest more than 5% of its assets in warrants and not more
than 2% of such value in warrants not listed on the New York or American Stock
Exchanges, except when they form a unit with other securities. As a matter of
operating policy, we will not invest more than 5% of our net assets in rights.
Covered Call Options
Each 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, each Fund forgoes the opportunity to profit from any
increase in the market price of the underlying security above the exercise price
of the option (to the extent that the increase exceeds its net premium). Each
Fund may enter into "closing purchase transactions" in order to terminate its
obligation to deliver the underlying security (this may result in a short-term
gain or loss). A closing purchase transaction is the purchase of a call option
(at a cost which may be more or less than the premium received for writing the
original call option) on the same security, with the same exercise price and
call period as the option previously written. If a Fund is unable to enter into
a closing purchase transaction, it may be required to hold a security that it
might otherwise have sold to protect against depreciation. Neither Fund intends
to write covered call options with respect to securities with an aggregate
market value of more than 5% of its gross assets at the time an option is
written. This percentage limitation will not be increased without prior
disclosure in the current Prospectus.
Each Fund's custodian will segregate cash or liquid high-grade debt securities
in an amount not less than that required by Securities Exchange Commission
("SEC") Release 10666 with respect to 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 each Fund's
commitments with respect to such written options.
Other International Fund Investment Policies (which can be changed without
shareholder approval)
Financial Futures Contracts. The International Fund may enter into contracts for
the future delivery of a financial instrument, such as a security or the cash
value of a securities index. This investment technique is designed primarily to
hedge (i.e., protect) against anticipated future changes in interest rates or
market conditions which otherwise might adversely affect the value of securities
which we hold or intend to purchase. A "sale" of a futures contract means the
undertaking of a contractual obligation to deliver the securities or the cash
value of an index called for by the contract at a specified price during a
specified delivery period. A "purchase" of a futures contract means the
undertaking of a contractual obligation to acquire the securities or cash value
of an index at a specified price during a specified delivery period. At the time
of delivery pursuant to the contract, adjustments are made to recognize
differences in value arising from the delivery of securities which differ from
those specified in the contract. In some cases, securities called for by a
futures contract may not have been issued at the time the contract was written.
The International 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
4
<PAGE>
to make or take delivery of the securities. All transactions in the futures
market are made, offset or fulfilled through a clearing house associated with
the exchange on which the contracts are traded. The International 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.
Options on Financial Futures Contracts. The International 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
International 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 International 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.
Portfolio Turnover
For the fiscal year ended October 31, 1998, the portfolio turnover rate was
45.83% for the Growth & Income Fund; for the fiscal year ended October 31, 1997,
it was 36.37%. For the fiscal year ended October 31, 1998, the portfolio
turnover rate was 20.52% for the International Fund; and for the period December
13, 1996 to October 31, 1997 it was 29.72%.
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 an officer
and/or director or trustee of the twelve other Lord Abbett-sponsored funds. He
is an "interested person" as defined in the Act, and as such, may be considered
to have an indirect financial interest in the Rule 12b-1 Plan described in the
Prospectus.
Robert S. Dow, age 53, Chairman and President
5
<PAGE>
The following outside trustees are also directors or trustees of the twelve
other Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow
Time Warner Inc.
1271 Avenue of the Americas
New York, New York
Senior Adviser, Time Warner Inc. Formerly, Acting Chief Executive Officer of
Courtroom Television Network (1997 - 1998). Formerly, President and Chief
Executive Officer of Time Warner Cable Programming, Inc. (1991 - 1997). Prior to
that, President and Chief Operating Officer of Home Box Office, Inc. Age 57.
William H.T. Bush
Bush-O'Donnell & Co., Inc.
101 South Hanley Road, Suite 1025
St. Louis, Missouri
Co-founder and Chairman of the Board of financial advisory firm of
Bush-O'Donnell & Company. Age 60.
Robert B. Calhoun, Jr.
Monitor Clipper partners
650 Madison Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners and President of The Clipper Group
L.P., both private equity investment funds. Age 56.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 68.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 73.
C. Alan MacDonald
Directorship Inc.
8 Sound Shore Drive
Greenwich, Connecticut
Managing Director of Directorship Inc., a consultancy in board management and
corporate governance. Formerly General Partner of The Marketing Partnership,
Inc., a full service marketing consulting firm (1994-1997). Prior to that,
Chairman and Chief Executive Officer of Lincoln Snacks, Inc., manufacturer of
branded snack foods (1992-1994). His career spans 36 years at Stouffers and
Nestle with 18 of the years as Chief Executive Officer. Currently serves as
Director of DenAmerica Corp., J. B. Williams Company, Inc., Fountainhead Water
Company and Exigent Diagnostics. Age 65.
6
<PAGE>
Hansel B. Millican, Jr.
Rochester Button Company
1328 Broadway (Suite 816)
New York, New York
President and Chief Executive Officer of Rochester Button Company. Age 70.
Thomas J. Neff
Spencer Stuart
277 Park Avenue
New York, New York
Chairman of Spencer Stuart, an executive search consulting firm. Currently
serves as a Director of Ace, Ltd. (NYSE). Age 61.
The second column of the following table sets forth the compensation accrued for
outside 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 funds associated with Lord Abbett and no officer of the funds
received any compensation from the funds 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 Company and Accrued by the Company and
Compensation Twelve Other Lord Twelve Other Lord
Accrued by Abbett-sponsored Abbett-sponsored
Name of Director the Company(1) Companies(2) Companies(3)
- ---------------- -------------- ------------ ------------
<S> <C> <C> <C>
E. Thayer Bigelow $ $17,068 $56,000
William H.T. Bush* $ none none
Robert B. Calhoun, Jr.** $ none none
Stewart S. Dixon $ $32,190 $55,000
John C. Jansing $ $45,085(4) $55,000
C. Alan MacDonald $ $30,703 $57,400
Hansel B. Millican, Jr. $ $37,747 $55,000
Thomas J. Neff $ $19,853 $56,000
</TABLE>
* Elected as of August 13, 1998
** Elected as of June 17, 1998
1. Outside trustees' fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored companies based on
the net assets of each fund. A portion of the fees payable by the Company
to its outside directors/trustees is being deferred under a plan that
deems the deferred amounts to be invested in shares of the Company for
later distribution to the directors/trustees.
2. The amounts in Column 3 were accrued by the Lord Abbett-sponsored
companies 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.
7
<PAGE>
3. This column shows aggregate compensation, including directors'/trustees'
fees and attendance fees for board and committee meetings, of a nature
referred to in footnote one, accrued by the Lord Abbett-sponsored
companies during the year ended December 31, 1998. The amounts of the
aggregate compensation payable by the Company as of October 31, 1998
deemed invested in Company shares, including dividends reinvested and
changes in net asset value applicable to such deemed investments, were:
Mr. Bigelow, $ ; Mr. Dixon, $ ; Mr. Jansing, $ ; Mr. MacDonald,
$ ; Mr. Millican, $ ; and Mr. Neff, $ . If the amounts deemed
invested in Company shares were added to each director's actual holdings
of Company shares as of October 31, 1998, each would own, the following:
Mr. Bigelow, shares; Mr. Dixon, shares; Mr. Jansing, shares;
Mr. MacDonald, shares; Mr. Millican, shares; and Mr. Neff,
shares.
4. Mr. Jansing chose to continue to receive benefits under the retirement
plan which provides that outside directors (Trustees) may receive annual
retirement benefits for life equal to their final annual retainer
following retirement at or after age 72 with at least ten years of
service. Thus, if Mr. Jansing were to retire and the annual retainer
payable by the funds were the same as it is today, he would receive annual
retirement benefits of $50,000.
Except where indicated, the following executive officers of the Company have
been associated with Lord Abbett for over five years. Of the following, Messrs.
Brown, Carper, Fetch, Hilstad, Morris, McGruder, Towle and Walsh are partners of
Lord Abbett; the others are employees:
Executive Vice Presidents
Zane Brown, age 47;
Robert G. Morris, age 54;
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 47;
Robert P. Fetch, age 46;
Timothy W. Horan, age 44;
Lawrence H. Kaplan, age 42 (with Lord Abbett since 1997 - formerly Vice
President and Chief Counsel of Salomon Brothers Asset Management Inc from 1995
to 1997, prior thereto Senior Vice President, Director and General Counsel of
Kidder Peabody Asset Management, Inc.);
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. Towle, age 41;
John J. Walsh, age 61;
8
<PAGE>
and Donna M. McManus, age 38, Treasurer (with Lord Abbett since 1996, formerly a
Senior Manager at Deloitte & Touche LLP).
The Company 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
Company's Declaration of Trust, shareholder meetings may be called at any time
by certain officers of the Company or by a majority of the trustees (i) for the
purpose of taking action upon any matter requiring the vote or authority of the
Company'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 Company's outstanding and entitled to vote at the meeting.
As of , 1999 our officers and trustees, as a group, owned less than 1% of the
Funds' outstanding shares. As of , 1999 there were no record holders of 5% or
more of the Funds' outstanding shares.
3.
Investment Advisory and Other Services
As described under "Management" in the Prospectus, Lord Abbett is the investment
manager of the Company. Nine of the general partners of Lord Abbett are officers
and/or trustees of the Company, as follows: Zane E. Brown; Daniel E. Carper;
Robert S. Dow; Robert P. Fetch; Paul A. Hilstad; Stephen J. McGruder; Robert G.
Morris; Christopher J. Towle; and John J. Walsh.
The other general partners who are neither officers nor directors of the Company
are Stephen Allen, John E. Erard, Daria L. Foster, W. Thomas Hudson, Robert I.
Gerber, Michael B. McLaughlin, R. Mark Pennington, and Robert J. Noelke. The
address of each partner is The General Motors Building, 767 Fifth Avenue, New
York, New York 10153-0203.
The services performed by Lord Abbett are described under "Management" in the
Prospectus. Under the Management Agreement, each Fund is obligated to pay Lord
Abbett a monthly fee, based on average daily net assets for each month, at the
annual rate of .75 of 1%. For the fiscal years ended October 31, 1998 and 1997,
such fees amounted to $1,202,319, and $999,092 of Growth & Income Fund; and
$700,368 and, $127,715 of International Fund for the same periods.
Although not obligated to do so, Lord Abbett has waived or may waive all or part
of its management fees and has assumed or may assume other expenses of each
Fund. For the fiscal year ended October 31, 1998 Lord Abbett did not waive
management fees.
As discussed in the Prospectus under "Management," each Fund is contingently
obligated to repay to Lord Abbett the amounts of such assumed other expenses.
Both Funds pay 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.
Both Funds have agreed with the State of California to limit operating expenses
(including management fees but excluding taxes, interest, extraordinary expenses
and brokerage commissions) to 2 1/2% of average annual net assets up to
$30,000,000, 2% of the next $70,000,000 of such assets and 1 1/2% of such assets
in excess of $100,000,000. However, as described in the Prospectuses, the Funds
have adopted a Plan pursuant to Rule 12b-1 of the Act for each class of shares
of the Funds. Annual Plan distribution expenses up to 1% of the Funds' average
net assets during its fiscal year may be excluded from this expense limitation.
The expense limitation is a condition the registration of investment company
shares for sale in the State and applies so long as our shares are registered
for sale in that State.
9
<PAGE>
Lord Abbett Distributor LLC serves as the principal underwriter for the Fund.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10128, are
the independent auditors of the Company and must be approved at least annually
by our trustees to continue in such capacity. Deloitte & Touche LLP perform
audit services for the Company, 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
Company's custodian. Rules adopted by the Securities & Exchange Commission under
the Act permit the International Fund to maintain its foreign assets in the
custody of certain eligible foreign banks and securities depositories. The
International 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 Fund in
accordance with such rules.
The Sub-Custodians of BNY are:
Euro-Clear (a transnational securities depository); Australia: ANZ Banking
Group; Austria: Creditanstalt-Bankverein; Canada: Canadian Imperial Bank of
Commerce; Chile: Citibank, N.A.; Czech Republic: Ceskoslovenska Obchodni 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.
United Missouri Bank of Kansas City, N.A. Tenth and Grand, Kansas City,
Missouri, 64141, acts as the transfer agent and dividend dispursing agent for
each Fund.
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 Funds 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 Companies and also are
employees of Lord Abbett. These traders do the trading as well for other
accounts -- investment companies (of which they are also officers) and other
investment clients -- managed by Lord Abbett. For foreign securities purchased
or sold by the International Fund, the selection is made by the Sub-Adviser. The
Sub-Advisor are responsible for obtaining best execution.
In transactions on stock exchanges in the United States, commissions are
negotiated, whereas on many foreign stock exchanges commissions are fixed. In
the case of securities traded in the foreign and domestic over-the-counter
markets,
10
<PAGE>
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 each 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 Lord Abbett to generate all of the information presently provided
by brokers. While receipt of research services from brokerage firms has not
reduced Lord Abbett's normal research activities, the expenses of Lord Abbett
could be materially increased if it attempted to generate such additional
information through its own staff and purchased such equipment and software
packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or
among brokers, and trades are executed only when they are dictated by investment
decisions of the Fund to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold our shares and/or
shares of other Lord Abbett-sponsored funds may be preferred.
If other clients of Lord Abbett buy or sell the same security at the same time
as we do, transactions will, to the extent practicable, be allocated among all
participating accounts in proportion to the amount of each order and will be
executed daily until filled so that each account shares the average price and
commission cost of each day. Other clients who direct that their brokerage
business be placed with specific brokers or who invest through wrap accounts
introduced to Lord Abbett by certain brokers may not participate with us in the
buying and selling of the same securities as described above. If these clients
wish to buy or sell the same security as we do, they may have their transactions
executed at times different from our transactions and thus may not receive the
same price or incur the same commission cost as we do.
We will not seek "reciprocal" dealer business (for the purpose of applying
commissions in whole or in part for our benefit or otherwise) from dealers as
consideration for the direction to them of portfolio business.
For the fiscal years ended October 31, 1995, 1996, 1997, and 1998, we paid total
commissions to independent broker-dealers of $58,435, $85,334, $273,174, and
$466,874.
11
<PAGE>
5.
Purchases, Redemptions
and Shareholder Services
Securities in the Company'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 Company'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 Company's Board of Trustees. The
Board of Trustees will monitor, on an ongoing basis, the Company'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.
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., Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
The net asset value per share for the Class A shares will be determined in the
same manner as for the Class 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 maximum offering prices of each Fund's Class A shares on October 31, 1998
were computed as follows:
<TABLE>
<CAPTION>
Growth & Income International
Fund Fund
--------------- -------------
<S> <C> <C>
Net asset value per share (net assets
divided by shares outstanding $9.15 $12.39
Maximum offering price per
share (net asset value divided by .9425 in both cases) $9.71 $13.15
</TABLE>
The funds have entered into a distribution agreement with Lord Abbett
Distributor LLC, a New York limited liability company ("Lord Abbett
Distributor"), under which Lord Abbett Distributor is obligated to use its best
efforts to find purchasers for the shares of the funds, and to make reasonable
efforts to sell fund shares so long as, in Lord Abbett Distributor's judgment, a
substantial distribution can be obtained by reasonable efforts.
12
<PAGE>
Conversion of Class B Shares. The conversion of Class B shares on the eighth
anniversary of their purchase is subject to the continuing availability of a
private letter ruling from the Internal Revenue Service, or an opinion of
counsel or tax adviser, to the effect that the conversion of Class B shares does
not constitute a taxable event for the holder under Federal income tax law. If
such a revenue ruling or opinion is no longer available, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect. Although
Class B shares could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a sales
charge or fee, such exchange could constitute a taxable event for the holder.
ALTERNATIVE SALES ARRANGEMENTS
Classes of Shares. The Funds offer investors four different classes of shares.
This Statement of Additional Information offers three of those classes
designated Class A, B, and C. The different classes of shares represent
investments in the same portfolio of securities but are subject to different
expenses and will likely have different share prices. Investors should read this
section carefully to determine which class represents the best investment option
for their particular situation.
Class A Shares. If you buy Class A shares, you pay an initial sales charge on
investments of less than $1 million (or on investments for employer-sponsored
retirement plans under the Internal Revenue Code (hereinafter referred to as
"Retirement Plans") with less than 100 eligible employees or on investments that
do not qualify to be under a "special retirement wrap program" as a program
sponsored by an authorized institution showing one or more characteristics
distinguishing it, in the opinion of Lord Abbett Distributor from a mutual fund
wrap fee program). If you purchase Class A shares as part of an investment of at
least $1 million (or for Retirement Plans with at least 100 eligible employees
or under a special retirement wrap program) in shares of one or more Lord
Abbett-sponsored funds, you will not pay an initial sales charge, but if you
redeem any of those shares within 24 months after the month in which you buy
them, you may pay to 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 annually approximately 33 of 1% of the annual net asset value of the Class
A shares. The initial sales charge rates, the CDSC and the Rule 12b-1 plan
applicable to the Class A shares are described in "Buying Class A Shares" below.
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 in "Buying Class B
Shares" below.
Class C Shares. If you buy Class C shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the first anniversary of
buying them, you will normally pay the 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 C shares are described in "Buying Class C Shares" below.
Which Class of Shares Should You Choose? Once you decide that the a Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial adviser. The Fund's class-specific expenses and the
effect of the different types of sales charges on your investment will affect
your investment results over time. The most important factors are how much you
plan to invest and how long you plan to hold your investment. If your goals and
objectives change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider another class of
shares.
In the following discussion, to help provide you and your financial adviser with
a framework in which to choose a class, we have made some assumptions using a
hypothetical investment in the 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
13
<PAGE>
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 than $100,000), because there is no initial sales charge on Class C shares,
and the CDSC does not apply to amounts you redeem after holding them one year.
However, if you plan to invest more than $100,000 for the short term, then the
more you invest and the more your investment horizon increases toward six years,
the more attractive the Class A share option may become. This is because the
annual distribution fee on Class C shares will have a greater impact on your
account over the longer term than the reduced front-end sales charge available
for larger purchases of Class A shares. For example, Class A might be more
appropriate than Class C for investments of more than $100,000 expected to be
held for 5 or 6 years (or more). For investments over $250,000 expected to be
held 4 to 6 years (or more), Class A shares may become more appropriate than
Class C. If you are investing $500,000 or more, Class A may become more
desirable as your investment horizon approaches 3 years or more.
For most investors who invest $1 million or more or for Retirement Plans with at
least 100 eligible employees or for investments pursuant to a special retirement
wrap program, in most cases Class A shares will be the most advantageous choice,
no matter how long you intend to hold your shares. For that reason, it may not
be suitable for you to place a purchase order for Class B shares of $500,000 or
more or a purchase order for Class C shares of $1,000,000 or more. In addition,
it may not be suitable for you to place an order for Class B or C shares for a
Retirement Plan with at least 100 eligible employees or for a special retirement
wrap program. You should discuss this with your financial advisor.
Investing for the Longer Term. If you are investing for the longer term (for
example, to provide for future college expenses for your child) and do not
expect to need access to your money for seven years or more, Class B shares may
be an appropriate investment option, if you plan to invest less than $100,000.
If you plan to invest more than $100,000 over the long term, Class A shares will
likely be more advantageous than Class B shares or Class C shares, as discussed
above, because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charges available for larger investments in Class
A shares under the Fund's Rights of Accumulation. Of course, these examples are
based on approximations of the effect of current sales charges and expenses on a
hypothetical investment over time, and should not be relied on as rigid
guidelines.
Are There Differences in Account Features That Matter to You? Some account
features are available in whole or in part to Class A, Class B and Class C
shareholders. Other features (such as Systematic Withdrawal Plans) might not be
advisable in non-Retirement Plan accounts for Class B shareholders (because of
the effect of the CDSC on the entire amount of a withdrawal if it exceeds 12%
annually) and in any account for Class C shareholders during the first year of
share ownership (due to the CDSC on withdrawals during that year). See
"Systematic Withdrawal Plan" under "Shareholder Services" in the Prospectus for
more information about the 12% annual waiver of the
14
<PAGE>
CDSC. You should carefully review how you plan to use your investment account
before deciding which class of shares you buy. For example, the dividends
payable to Class B and Class C shareholders will be reduced by the expenses
borne solely by each of these classes, such as the higher distribution fee to
which Class B and Class C shares are subject, as described below.
How Does It Affect Payments to My Broker? A salesperson, such as a broker, or
any other person who is entitled to receive compensation for selling Fund shares
may receive different compensation for selling one class than for selling
another class. As discussed in more detail below, such compensation is primarily
paid at the time of sale in the case of Class A and B shares and is paid over
time, so long as shares remain outstanding, in the case of Class C shares. It is
important that investors understand that the primary purpose of the CDSC for the
Class B shares and the distribution fee for Class B and Class C shares is the
same as the purpose of the front-end sales charge on sales of Class A shares: to
compensate brokers and other persons selling such shares. The CDSC, if payable,
supplements the Class B distribution fee and reduces the Class C distribution
fee expenses for the Funds and Class C shareholders.
Class A, B and C Rule 12b-1 Plans. As described in the Prospectus, the Company
has adopted a Distribution Plan and Agreement on behalf of each fund pursuant to
Rule 12b-1 of the Act for each class of shares available in the applicable Fund:
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. During the last fiscal
year, the Growth & Income Fund accrued or paid through Lord Abbett to authorized
institutions $161,340 under the A Plan, $18,807 under the B Plan and $908,552
under the C Plan. During the last fiscal year, the International Fund accrued or
paid through Lord Abbett to authorized institutions $143,035 under the A Plan,
$82,767 under the B Plan and $83,164 under the C Plan . Lord Abbett used all
amounts received under the A, B and C Plans for the Growth & Income Fund for
payments to dealers for (i) providing continuous services to the Class A
shareholders, such as answering shareholder inquiries, maintaining records, and
assisting shareholders in making redemptions, transfers, additional purchases
and exchanges and (ii) their assistance in distributing Class A shares of the
Funds.
Each Plan requires the trustees to review, on a quarterly basis, written reports
of all amounts expended pursuant to the Plan and the purposes for which such
expenditures were made. Each Plan shall continue in effect only if its
continuance is specifically approved at least annually by vote of the trustees,
including a majority of the trustees who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related to the Plan ("outside trustees"), cast in
person at a meeting called for the purpose of voting on the Plan. No Plan may be
amended to increase materially 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).
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 acquired through exchange of such shares) on which a Fund
has paid the one-time distribution fee of 1% if such shares are redeemed out of
the Lord Abbett-sponsored family of funds within a period of 24 months from the
end of the month in which the original sale occurred.
Class B Shares. As stated in the Prospectus, if Class B shares (or Class B
shares of another Lord Abbett-sponsored fund acquired through exchange of such
shares) are redeemed out of the Lord Abbett-sponsored family of funds for cash
15
<PAGE>
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 funds redeem 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:
Contingent Deferred Sales Charge
Anniversary of the Day on Which on Redemptions (As %
the Purchase Order Was Accepted 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 funds 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 this
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 the applicable Fund and is intended to
reimburse all or a portion of the amount paid by the Fund if the shares are
redeemed before the Fund has had an opportunity to realize the anticipated
benefits of having a long-term shareholder account in the Fund. In the case of
Class B shares, the CDSC is received by Lord Abbett Distributor and is intended
to reimburse its expenses of providing distribution-related service to the
applicable Fund (including recoupment of the commission payments made) in
connection with the sale of Class B shares before Lord Abbett Distributor has
had an opportunity to realize its anticipated reimbursement by having such a
long-term shareholder account subject to the B Plan distribution fee.
The other funds which participate in the Telephone Exchange Privilege (except
(a) Lord Abbett U.S. Government Securities Money Market Fund, Inc. ("GSMMF"),
(b) certain funds of Lord Abbett Tax-Free Income Fund and Lord Abbett Tax-Free
Income Trust for which a Rule 12b-1 Plan is not yet in effect, and (c) any
authorized institution's affiliated money market fund satisfying Lord Abbett
Distributor as to certain omnibus account and other criteria, hereinafter
referred to as an "authorized money market fund" or "AMMF" (collectively, the
"Non-12b-1 Funds")) have instituted a CDSC for each class on the same terms and
conditions. No CDSC will be charged on an exchange of shares of the same class
between Lord Abbett funds or between such funds and AMMF. Upon redemption of
shares out of the Lord Abbett family of funds or out of AMMF, the CDSC will be
charged on behalf of and paid: (i) to the fund in which the original purchase
(subject to a CDSC) occurred, in the case of the Class A and Class C shares and
(ii) to Lord
16
<PAGE>
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 fund paid a 12b-1 fee and, in the case of Class
B shares, Lord Abbett Distributor paid no sales charge or service fee (including
shares acquired through reinvestment of dividend income and capital gains
distributions) or (iii) shares which, together with Exchanged Shares, have been
held continuously for 24 months from the end of the month in which the original
sale occurred (in the case of Class A shares); for six years or more (in the
case of Class B shares) and for one year or more (in the case of Class C
shares). In determining whether a CDSC is payable, (a) shares not subject to the
CDSC will be redeemed before shares subject to the CDSC and (b) of the shares
subject to a CDSC, those held the longest will be the first to be redeemed.
Exchanges. The Prospectus briefly describes the Telephone Exchange Privilege.
You may exchange some or all of your shares of any class for those in the same
class of: (i) Lord Abbett-sponsored funds currently offered to the public with a
sales charge (front-end, back-end or level ), (ii) GSMMF or (iii) AMMF, to the
extent offers and sales may be made 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 Fund of Lord Abbett
Research Fund not offered to the general public ("LARF").
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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 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 Funds 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 25 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
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account, a joint account for you and your spouse, a single account for your
spouse, or a custodial account for your minor child under the age of 21. You
should read the prospectus of the other fund before investing.
Invest-A-Matic. The Invest-A-Matic method of investing in the Funds and/or any
other Eligible Fund is described in the Prospectus. To avail yourself of this
method you must complete the application form, 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.
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.
Past Performance
Each 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 Fund' 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 Fund' 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.
Using the computation method described above, the Growth & Income Fund's average
annual compounded rates of total return for the fiscal year ended on October 31,
1998 were 5.50%, and 10.94%, and for the fiscal year ended October
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31, 1997, 19.60% and 26.24% for the Fund' Class A and C shares, respectively.
The total return for Class B shares for the fiscal period ended October 31, 1998
was 6.72%, and for the period June 5, 1997 through October 31, 1997 was 1.46%
(not annualized).
The total return for the International Fund for the fiscal year ended October
31, 1998 was 7.90%, and for the period December 13, 1996 to October 31, 1997,
8.60% (not annualized). The total return for the Class B and Class C shares for
the fiscal year ended October 31, 1998 was 8.85%, and 13.39%, and for the period
June 5, 1997 through October 31, 1997, -.40% (not annualized) and 3.69% (not
annualized), respectively..
Each Fund's yield quotation for each class is based on a 30-day period ended on
a specified date, computed by dividing such Fund's net investment income per
share earned during the period by such Fund's maximum offering price per share
on the last day of the period. This is determined by finding the following
quotient: take the Class' dividends and interest earned during the period minus
its expenses accrued for the period and divide by the product of (i) the average
daily number of Class shares outstanding during the period that were entitled to
receive dividends and (ii) the 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 Fund' net asset value per share. Yields for Class B and
Class C shares do not reflect the deduction of the CDSC. For the 30-day period
ended October 31, 1998, the yield for the Growth & Income Fund's Class A, B and
C shares were .72%, 0% and 0%, respectively. For the 30-day period ended October
31, 1998, the yield for the International Fund's Class A, B and C shares was
.19%, 0%, and 0%, respectively.
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 Funds or repurchased or otherwise sold
may be more or less than your tax basis in the shares at the time of
disposition. Any gain will generally be taxable for United States federal income
tax purposes. Any loss realized on the disposition of fund shares which you have
held for six months or less will be treated for tax purposes as a long-term
capital loss to the extent of any "capital gains distributions" which you
received with respect to such shares. Losses on the sale of shares are not
deductible if, within a period beginning 30 days before the date of the sale and
ending 30 days after the date of the sale, the taxpayer acquires shares that are
substantially identical.
The writing of call options and other investment techniques and practices which
the Funds may utilize, as described above under "Investment Objective and
Policies," may affect the character and timing of the recognition of gains and
losses by the funds. Such transactions may increase the amount of short-term
capital gain realized by the Funds, which is taxed as ordinary income when
distributed to shareholders. Limitations imposed by the Internal Revenue Code on
regulated investment companies may restrict the funds' ability to engage in
transactions in options.
The Funds may be subject to foreign withholding taxes which would reduce the
yield on their investments. 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.
The Funds will be subject to a 4% non-deductible excise tax on certain amounts
not distributed or treated as having been distributed on a timely basis each
calendar year. The Funds intend to distribute to shareholders each year an
amount adequate to avoid the imposition of such excise tax.
Dividends paid by the Funds will qualify for the dividends-received deduction
for corporations to the extent they are derived from dividends paid by domestic
corporations.
Gain and loss realized by the Funds on certain transactions, including sales of
foreign debt securities and certain
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transactions involving foreign currency, will be treated as ordinary income or
loss for federal income tax purposes to the extent, if any, that such gain or
loss is attributable to changes in exchange rates for foreign currencies.
Accordingly, distributions taxable as ordinary income will include the net
amount, if any, of such foreign exchange gains and will be reduced by the net
amount, if any, of such foreign exchange losses.
If the Funds purchases shares in certain foreign investment entities called
"passive foreign investment companies," they may be subject to United States
federal income tax on a portion of any "excess distribution" or gain from the
disposition of such shares, even if such income is distributed as a taxable
dividend by the Funds to shareholders. Additional charges in the nature of
interest may be imposed on either the Funds' or their shareholders in respect of
deferred taxes arising from such distributions or gains. If the Funds were to
make a "qualified electing fund" election with respect to investment in a
passive foreign investment company, in lieu of the foregoing requirements, the
Funds might be required to include in income each year a portion of the ordinary
earnings and net capital gains of the qualified electing fund, even if such
amount were not distributed to the Funds.
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 Funds, 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.
8.
Information About the Company
Shareholder Liability. Delaware law provides that Company 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 Company's Declaration of Trust
contains an express disclaimer of shareholder liability for the acts,
obligations, or affairs of the Company and requires that a disclaimer be given
in each contract entered into or executed by the Company. The Declaration
provides for indemnification out of the Company's property of any shareholder or
former shareholder held personally liable for the obligations of the Company.
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 Company's Declaration of Trust, the trustees may, without shareholder
vote, cause the Company to merge or consolidate into, or sell and convey all or
substantially all of, the assets of the Company 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 Company's
registration statement. In addition, the trustees may, without shareholder vote,
cause the Company to be incorporated under Delaware law.
Derivative actions on behalf of the Company may be brought only by shareholders
owning not less than 50% of the then outstanding shares of the Company.
The directors, trustees and officers of Lord Abbett-sponsored mutual funds,
together with the partners and employees of Lord Abbett, are permitted to
purchase and sell securities for their personal investment 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.
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9.
Financial Statements
The financial statements for the fiscal year ended October 31, 1998 with respect
to the Growth & Income Fund and the International Fund, and the report of
Deloitte & Touche LLP, independent auditors, on such financial statements
contained in the 1998 Annual Report to Shareholders of Lord Abbett Securities
Trust, are incorporated herein by reference to such financial statements and
report in reliance upon the authority of Deloitte & Touche LLP as experts in
auditing and accounting.
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LORD ABBETT
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Statement of Additional Information March 1, 1999
- --------------------------------------------------------------------------------
World Bond-Debenture Fund
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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 of Additional Information, relates
to, and should be read in conjunction with, the Prospectus dated March 1, 1999.
Lord Abbett Securities Trust (the "Company") was organized as a Delaware
business trust on February 26, 1993. The Company has four funds, but only World
Bond-Debenture Fund ("we" or the "Fund") is described in this Statement of
Additional Information. The Fund has three classes of shares (A, B and C)
offered by this Statement of Additional Information. All Fund 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 affected by such matter. Rule 18f-2 further
provides that a class shall be deemed to be affected by a matter unless the
interests of each class in the matter are substantially identical or the matter
does not affect any interest of such class. However, the Rule exempts the
selection of independent public accountants, the approval of a contract with a
principal underwriter and the election of directors from its separate voting
requirements.
Shareholder inquiries should be made by directly contacting the Fund or by
calling 800-821-5129. In addition, you can make inquiries through your dealer.
TABLE OF CONTENTS Page
1. Investment Policies 2
2. Trustees and Officers 4
3. Investment Advisory and Other Services 8
4. Portfolio Transactions 8
5. Purchases, Redemptions and Shareholder Services 10
6. Past Performance 18
7. Taxes 19
8. Information About the Company 20
9. Financial Statements 20
10. Appendix 21
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1.
Investment Policies
Fundamental Investment Restrictions
We are subject to the following investment restrictions which cannot be changed
without approval of a majority of our 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 the Fund may lend its portfolio securities, provided that the
lending of portfolio securities may be made only in accordance with applicable
law; (5) buy or sell real estate (except that 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 the Fund's gross assets, except securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities or (ii) 10%
of the voting securities of such issuer; (7) invest more than 25% of its assets,
taken at market value, in the securities of issuers in any particular industry
(excluding securities of the U.S. Government, its agencies and
instrumentalities); or (8) issue senior securities to the extent such issuance
would violate applicable law.
With respect to the restrictions mentioned herein, compliance therewith will not
be affected by changes in the market value of portfolio securities but will be
determined at the time of purchase or sale of such securities.
Non-Fundamental Investment Restrictions.
In addition to the investment restrictions above which cannot be changed without
shareholder approval, we also are 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 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 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; (8) 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; (9) buy from or sell to any of its officers, trustees, employees,
or its investment adviser or any of its officers, directors, partners or
employees, any securities other than shares of the Fund; or (10) invest more
than 10% of the market value of its gross assets at the time of investment in
debt securities which are in default as to interest or principal.
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Portfolio Turnover Rate. For the year ended October 31, 1998, the portfolio
turnover rate was 159.14%.
Investment Techniques
The Fund intends to utilize, from time to time, one or more of the investment
techniques described below, including covered call options, rights and warrants
and repurchase agreements. While some of these techniques involve risk when
utilized independently, the Fund intends to use them to reduce risk and
volatility in its portfolios.
Covered Call Options. The Fund may write covered call options on securities it
owns ("call options"). A call option on securities gives the purchaser of the
option, upon payment of a premium to the writer of the option, the right to call
upon the writer to deliver a specified security on or before a fixed date at a
predetermined price.
The writing of call options will, therefore, involve a potential loss of
opportunity to sell securities at higher prices. In exchange for the premium
received. The writer of a fully collateralized call option gives up the gain
possibility of the underlying security beyond the call price and continues to
have the downside risk of such securities. In addition, in exchange for the
premium received, the writer of the call gives up the gain possibility of the
stock appreciating above the call price. While an option that has been written
is in force, the maximum profit that may be derived from the optioned security
is the sum of the premium less brokerage commissions and fees plus the
difference between the strike price of the call and the market price of the
underlying security.
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 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 their disposition. 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 the Fund acknowledges these
risks, it is expected that they can be controlled through stringent selection
criteria and careful monitoring procedures. The Fund intends to limit repurchase
agreements to transactions with dealers and financial institutions believed by
the Fund to present minimal credit risks. The Fund will monitor creditworthiness
of the repurchase agreement sellers on an ongoing basis.
Lending Portfolio Securities
The Fund may lend its 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 lending of securities will be collateralized by cash or marketable
securities issued or guaranteed by the U.S. Government or its agencies ("U.S.
Government securities") or other permissible means. The cash or instruments
collateralizing the Fund's lending of securities will be maintained at all times
in an amount at least equal to the current market value of the loaned
securities. From time to time, the Fund may allow a part of the interest
received with respect to the investment of collateral to be paid to the 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 a borrower when such U.S.
Government securities are used
3
<PAGE>
as collateral. The Fund will comply with the following conditions whenever it
lends securities: (i) the 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 with respect to 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 Fund's Board of Trustees must terminate the loan and regain the
right to vote the securities.
When-Issued Transactions
The Fund may purchase portfolio securities on a when-issued basis. When-issued
transactions involve a commitment by the Fund to purchase securities, with
payment and delivery ("settlement") to take place in the future, in order to
secure what is considered to be an advantageous price or yield at the time of
entering into the transaction. When the Fund enters into a when-issued purchase,
it becomes obligated to purchase securities and it assumes all the rights and
risks attendant to ownership of a security, although settlement occurs at a
later date. The value of fixed-income securities to be delivered in the future
will fluctuate as interest rates vary. At the time the Fund makes the commitment
to purchase a security on a when-issued basis, it will record the transaction
and reflect the liability for the purchase and the value of the security in
determining its net asset value. The Fund generally has the ability to close out
a purchase obligation on or before the settlement date, rather than take
delivery of the security. Under no circumstances will settlement for such
securities take place more than 120 days after the purchase date.
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 an officer
and/or director or trustee of the twelve other Lord Abbett-sponsored funds. He
is an "interested person" as defined in the Act, and as such, may be considered
to have an indirect financial interest in the Rule 12b-1 Plan described in the
Prospectus.
Robert S. Dow, age 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
Time Warner Inc.
1271 Avenue of the Americas
New York, New York
Senior Adviser, Time Warner Inc. Formerly, Acting Chief Executive Officer of
Courtroom Television Network (1997 - 1998). Formerly, President and Chief
Executive Officer of Time Warner Cable Programming, Inc. (1991 - 1997). Prior to
that, President and Chief Operating Officer of Home Box Office, Inc. Age 57.
4
<PAGE>
William H.T. Bush
Bush-O'Donnell & Co., Inc.
101 South Hanley Road, Suite 1025
St. Louis, Missouri
Co-founder and Chairman of the Board of financial advisory firm of
Bush-O'Donnell & Company. Age 60.
Robert B. Calhoun, Jr.
Monitor Clipper Partners
650 Madison Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners and President of The Clipper Group
L.P., both private equity investment funds. Age 56.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 68.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 73.
C. Alan MacDonald
Directorship Inc.
8 Sound Shore Drive
Greenwich, Connecticut
Managing Director of Directorship Inc., a consultancy in board management and
corporate governance. Formerly General Partner of the Marketing Partnership,
Inc., a full service marketing consulting firm (1994-1997). Prior to that,
Chairman and Chief Executive Officer of Lincoln Snacks, Inc., manufacturer of
branded snack foods (1992-1994). His career spans 36 years at Stouffers and
Nestle with 18 of the years as Chief Executive Officer. Currently serves as
Director of DenAmerica Corp., J.B. Williams Company, Inc. , Fountainhead Water
Company and Exigent Diagnostics. Age 65.
Hansel B. Millican, Jr.
Rochester Button Company
1328 Broadway (Suite 816)
New York, New York
President and Chief Executive Officer of Rochester Button Company. Age 70.
Thomas J. Neff
Spencer Stuart
277 Park Avenue
New York, New York
Chairman of Spencer Stuart, an executive search consulting firm. Currently
serves as a Director of Ace, Ltd. (NYSE). Age 61.
5
<PAGE>
The second column of the following table sets forth the compensation accrued for
the Company's outside trustees. The third column sets forth information with
respect to the equity-based benefits accrued for outside directors/trustees by
the Lord Abbett-sponsored funds. The fourth column sets forth information with
respect to the retirement plan for outside directors/trustees maintained by each
of the Lord Abbett-sponsored funds. No director/trustee of the funds associated
with Lord Abbett and no officer of the funds received any compensation from the
funds for acting as a director or officer.
<TABLE>
<CAPTION>
For The Fiscal Year Ended October 31, 1998
------------------------------------------
(1) (2) (3) (4)
For Year Ended
Equity-Based December 31, 1998
Benefits Accrued Total Compensation
Aggregate By The Company And Accrued By The Company And
Compensation Twelve Other Lord Twelve Other Lord
Accrued By Abbett-Sponsored Abbett-Sponsored
Name Of Director The Company(1) Companies(2) Companies(3)
- ---------------- -------------- ------------------ --------------------------
<S> <C> <C> <C>
E. Thayer Bigelow $ $16,641 $56,000
William H.T. Bush* $ none none
Robert B. Calhoun, Jr.** $ none none
Stewart S. Dixon $ $32,015 $55,000
John C. Jansing $ $46,430 $55,000
C. Alan MacDonald $ $29,994 $57,400
Hansel B. Millican, Jr. $ $38,069 $55,000
Thomas J. Neff $ $18,804 $56,000
</TABLE>
* Elected as of August 13, 1998
** Elected 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 the funds A portion of the fees payable by the Company to
its outside directors/trustees is being deferred under a plan that deems
the deferred amounts to be invested in shares of the Company for later
distribution to the directors/trustees.
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'/trustees'
fees and attendance fees for board and committee meetings, of a nature
referred to in footnote one, accrued by the Lord Abbett-sponsored
companies during the year ended December 31, 1998. The amounts of the
aggregate compensation payable by the Company as of October 31, 1998
deemed invested in Company shares, including dividends reinvested and
changes in net asset value applicable to such deemed investments, were:
Mr. Bigelow, $ ; Mr. Dixon, $ ; Mr. Jansing, $ ; Mr. MacDonald,
$ ; Mr. Millican, $ and Mr. Neff, $ . If the amounts deemed
invested in Company shares were added to each director/trustee's actual
holdings of Company shares as of October 31, 1998, each would own the
following: Mr. Bigelow, shares; Mr. Dixon, shares; Mr. Jansing,
shares; Mr. MacDonald, shares; Mr. Millican, shares; and Mr.
Neff, shares.
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
6
<PAGE>
or after age 72 with at least ten years of service. Thus, if Mr. Jansing
were to retire and the annual retainer payable by the funds were the same
as it is today, he would receive annual retirement benefits of $50,000.
Except where indicated, the following executive officers of the Company have
been associated with Lord Abbett for over five years. Of the following, Messrs.
Brown, Carper, Fetch, Hilstad, Morris, McGruder, Towle and Walsh are partners of
Lord Abbett; the others are employees:
Executive Vice Presidents
Zane Brown, age 47;
Robert G. Morris, age 54;
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 47;
Robert P. Fetch, age 46;
Timothy W. Horan, age 44;
Lawrence H. Kaplan, age 42 (with Lord Abbett since 1997 - formerly Vice
President and Chief Counsel of Salomon Brothers Asset Management Inc from 1995
to 1997, prior thereto Senior Vice President, Director and General Counsel of
Kidder Peabody Asset Management, Inc.);
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. Towle, age 41;
John J. Walsh, age 61;
and Donna M. McManus, age 38, Treasurer (with Lord Abbett since 1996, formerly a
Senior Manager at Deloitte & Touche LLP).
The Company 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
Company's Declaration of Trust, shareholder meetings may be called at any time
by certain officers of the Company or by a majority of the trustees (i) for the
purpose of taking action upon any matter requiring the vote or authority of the
Company'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 Funds outstanding and entitled to vote at the meeting.
As of , 1999 our officers and trustees, as a group, owned less than 1% of the
Funds' outstanding shares. As of
7
<PAGE>
, 1999 there were no record holders of 5% or more of the Funds' outstanding
shares.
3.
Investment Advisory and Other Services
As described under "Management" in the Prospectus, Lord Abbett is the investment
manager of the Company. Nine of the general partners of Lord Abbett are officers
and/or trustees of the Company, as follows: Zane E. Brown; Daniel E. Carper;
Robert S. Dow; Robert P. Fetch; Paul A. Hilstad; Stephen J. McGruder; Robert G.
Morris; Christopher J. Towle; and John J. Walsh.
The other general partners who are neither officers nor trustees of the Company
are Stephen Allen, John E. Erard, Daria L. Foster, W. Thomas Hudson, Robert I.
Gerber, Michael B. McLaughlin, R. Mark Pennington, and Robert J. Noelke. The
address of each partner is The General Motors Building, 767 Fifth Avenue, New
York, New York 10153-0203.
The services performed by Lord Abbett are described in the Prospectus under
"Management." Under the Management Agreement, we are obligated to pay Lord
Abbett a monthly fee, based on average daily net assets for each month, at the
annual rate of .75 of 1% of the Fund's average daily net assets. This fee is
allocated among Classes A, B and C based on the classes' proportionate shares of
such average daily net assets. For the period December 18, 1998 (commencement of
operations) to October 31, 1998, the management fee for World Bond-Debenture
Fund was waived. If paid by the Fund, it would have amounted to $39,168.
We pay 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.
Lord Abbett Distributor LLC serves as the principal underwriter for the Fund.
The Bank of New York ("BNY"), 48 Wall Street, New York, New York, is the
Company's custodian. In accordance with the requirements of Rule 17f-5, the
Company's trustees have approved arrangements permitting the Fund's foreign
assets not held by BNY or its foreign branches to be held by certain qualified
foreign banks and depositories.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281 are
the independent auditors of the Company and must be approved at least annually
by our Board of Trustees to continue in such capacity. Independent public
accountants perform audit services for the Fund including the examination of
financial statements included in our annual report to shareholders.
United Missouri Bank of Kansas City, N.A. Tenth and Grand Kansas City, Missouri,
64141, acts as the transfer agent and dividend dispursing agent for each Fund.
4.
Portfolio Transactions
With respect to the Fund, purchases and sales of portfolio securities usually
will be principal transactions and normally such securities will be purchased
directly from the issuer or from an underwriter or market maker for the
securities. Therefore, the Fund usually will pay no brokerage commissions for
such purchases. Purchases from underwriters of portfolio securities will include
a commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers will include a dealer's markup. Principal
transactions, including riskless principal transactions, are not afforded the
protection of the safe harbor in Section 28 (e) of the Securities Exchange Act
of 1934.
8
<PAGE>
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 Company and also are
employees of Lord Abbett. These traders do the trading as well for other
accounts -- investment companies (of which they are also officers) and other
investment clients -- managed by Lord Abbett. They are responsible for obtaining
best execution.
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 portfolio 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 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 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 Company to purchase or sell the Fund's 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
9
<PAGE>
daily until filled so that each account shares the average price and commission
cost of each day. Other clients who direct that their brokerage business be
placed with specific brokers or who invest through wrap accounts introduced to
Lord Abbett by certain brokers may not participate with us in the buying and
selling of the same securities as described above. If these clients wish to buy
or sell the same security as we do, they may have their transactions executed at
times different from our transactions and thus may not receive the same price or
incur the same commission cost as we do.
We will not seek "reciprocal" dealer business (for the purpose of applying
commissions in whole or in part for our benefit or otherwise) from dealers as
consideration for the direction to them of portfolio business.
For the period December 29, 1997 to October 31, 1998, we paid total commissions
to independent broker-dealers of $27,140.
5.
Purchases, Redemptions
and Shareholder Services
Information concerning how we value our shares for the purchase and redemption
of our shares is contained in the Prospectus under "Purchases" and
"Redemptions," respectively.
As disclosed in the Prospectus, we calculate our net asset value as of the close
of the New York Stock Exchange ("NYSE") on each day that the NYSE is open for
trading by dividing our total net assets by the number of shares outstanding at
the time of calculation. The NYSE is closed on Saturdays and Sundays and the
following holidays -- New Year's Day, Martin Luther King , Jr., Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
The Fund values its portfolio securities at market value as of the close of the
NYSE. Market value will be determined as follows: securities listed or admitted
to trading privileges on the New York or American Stock Exchange or on the
NASDAQ National Market System are valued at the last sales price, or, if there
is no sale on that day, at the mean between the last bid and asked prices, or,
in the case of bonds, in the over-the-counter market if, in the judgment of the
Fund's officers, that market more accurately reflects the market value of the
bonds. Over-the-counter securities not traded on the NASDAQ National Market
System are valued at the mean between the last bid and asked prices. Securities
for which market quotations are not available are valued at fair market value
under procedures approved by the Board of Trustees.
The maximum offering price of Class A shares on 10/31/98 was computed as
follows:
Class A
-------
Net asset value per share (net assets divided
by shares outstanding).....................................................$9.66
Maximum offering price per share (net asset
value divided by .9525)...................................................$10.14
10
<PAGE>
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 Board of Trustees of the Company.
The Board of Trustees will monitor, on an ongoing basis, the Company's method of
valuation.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York. In addition, European or Far Eastern
securities trading generally or in a particular country or countries may not
take place on all business days in New York. Furthermore, trading takes place in
various foreign markets on days which are not business days in New York and on
which the Fund's net asset values are not calculated. Such calculation does not
take place contemporaneously with the determination of the prices of the
majority of the portfolio securities used in such calculation. Events affecting
the values of portfolio securities that occur between the time their prices are
determined and the close of the NYSE will not be reflected in the Fund's
calculation of net asset values unless the Company's trustees determine that the
particular event would materially affect net asset value, in which case an
adjustment will be made.
The net asset value per share for the Class B and C shares is determined in the
same manner as for the Class A shares (net assets divided by shares
outstanding). Our Class B and C shares are offered at net asset value.
The Company has entered into a distribution agreement with Lord Abbett
Distributor LLC, a New York limited liability company ("Lord Abbett
Distributor") and subsidiary of Lord Abbett under which Lord Abbett Distributor
is obligated to use its best efforts to find purchasers for the shares of 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.
ALTERNATIVE SALES ARRANGEMENTS
Classes of Shares. The Fund offers investors three different classes of shares.
This Statement of Additional Information offers those classes, designated Class
A, B, and C. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will likely
have different share prices. Investors should read this section carefully to
determine which class represents the best investment option for their particular
situation.
Class A Shares. If you buy Class A shares, you pay an initial sales charge on
investments of less than $1 million (or on investments for employer-sponsored
retirement plans under the Internal Revenue Code (hereinafter referred to as
"Retirement Plans") with less than 100 eligible employees or on investments that
do not qualify to be under a "special retirement wrap program" as a program
sponsored by an authorized institution showing one or more characteristics
distinguishing it, in the opinion of Lord Abbett Distributor from a mutual fund
wrap fee program). If you purchase Class A shares as part of an investment of at
least $1 million (or for Retirement Plans with at least 100 eligible employees
or under a special retirement wrap program) in shares of one or more Lord
Abbett-sponsored funds, you will not pay an initial sales charge, but if you
redeem any of those shares within 24 months after the month in which you buy
them, you may pay to 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 annually approximately 33 of 1% of the annual net asset value of the Class
A shares. The initial sales charge rates, the CDSC and the Rule 12b-1 plan
applicable to the Class A shares are described in "Buying Class A Shares" below.
11
<PAGE>
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 in "Buying Class B
Shares" below.
Class C Shares. If you buy Class C shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the first anniversary of
buying them, you will normally pay the 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 C shares are described in "Buying Class C Shares" below.
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. The Fund's class-specific expenses and the
effect of the different types of sales charges on your investment will affect
your investment results over time. The most important factors are how much you
plan to invest and how long you plan to hold your investment. If your goals and
objectives change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider another class of
shares.
In the following discussion, to help provide you and your financial adviser with
a framework in which to choose a class, we have made some assumptions using a
hypothetical investment in the 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 than $100,000), because there is no initial sales charge on Class C shares,
and the CDSC does not apply to amounts you redeem after holding them one year.
However, if you plan to invest more than $100,000 for the short term, then the
more you invest and the more your investment horizon increases toward six years,
the more attractive the Class A share option may become. This is because the
annual distribution fee on Class C shares will have a greater impact on your
account over the longer term than the reduced front-end sales charge available
for larger purchases of Class A shares. For example, Class A might be more
appropriate than Class C for investments of more than $100,000 expected to be
held for 5 or 6 years (or more). For investments over $250,000 expected to be
held 4 to 6 years (or more), Class A shares may become more appropriate than
Class C. If you are investing $500,000 or more, Class A may become more
desirable as your investment horizon approaches 3 years or more.
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For most investors who invest $1 million or more or for Retirement Plans with at
least 100 eligible employees or for investments pursuant to a special retirement
wrap program, in most cases Class A shares will be the most advantageous choice,
no matter how long you intend to hold your shares. For that reason, it may not
be suitable for you to place a purchase order for Class B shares of $500,000 or
more or a purchase order for Class C shares of $1,000,000 or more. In addition,
it may not be suitable for you to place an order for Class B or C shares for a
Retirement Plan with at least 100 eligible employees or for a special retirement
wrap program. You should discuss this with your financial advisor.
Investing for the Longer Term. If you are investing for the longer term (for
example, to provide for future college expenses for your child) and do not
expect to need access to your money for seven years or more, Class B shares may
be an appropriate investment option, if you plan to invest less than $100,000.
If you plan to invest more than $100,000 over the long term, Class A shares will
likely be more advantageous than Class B shares or Class C shares, as discussed
above, because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charges available for larger investments in Class
A shares under the Fund's Rights of Accumulation. Of course, these examples are
based on approximations of the effect of current sales charges and expenses on a
hypothetical investment over time, and should not be relied on as rigid
guidelines.
Are There Differences in Account Features That Matter to You? Some account
features are available in whole or in part to Class A, Class B and Class C
shareholders. Other features (such as Systematic Withdrawal Plans) might not be
advisable in non-Retirement Plan accounts for Class B shareholders (because of
the effect of the CDSC on the entire amount of a withdrawal if it exceeds 12%
annually) and in any account for Class C shareholders during the first year of
share ownership (due to the CDSC on withdrawals during that year). See
"Systematic Withdrawal Plan" under "Shareholder Services" in the Prospectus for
more information about the 12% annual waiver of the CDSC. You should carefully
review how you plan to use your investment account before deciding which class
of shares you buy. For example, the dividends payable to Class B and Class C
shareholders will be reduced by the expenses borne solely by each of these
classes, such as the higher distribution fee to which Class B and Class C shares
are subject, as described below.
How Does It Affect Payments to My Broker? A salesperson, such as a broker, or
any other person who is entitled to receive compensation for selling Fund shares
may receive different compensation for selling one class than for selling
another class. As discussed in more detail below, such compensation is primarily
paid at the time of sale in the case of Class A and B shares and is paid over
time, so long as shares remain outstanding, in the case of Class C shares. It is
important that investors understand that the primary purpose of the CDSC for the
Class B shares and the distribution fee for Class B and Class C shares is the
same as the purpose of the front-end sales charge on sales of Class A shares: to
compensate brokers and other persons selling such shares. The CDSC, if payable,
supplements the Class B distribution fee and reduces the Class C distribution
fee expenses for the Fund and Class C shareholders.
Class A, B and C Rule 12b-1 Plans. As described in the Prospectus, the Fund has
adopted a Distribution Plan and Agreement pursuant to Rule 12b-1 of the Act for
each of the three Fund Classes: 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. Lord Abbett used all amounts received under each Plan for payments to
dealers for (i) providing continuous services to shareholders, such as answering
shareholder inquiries, maintaining records, and assisting shareholders in making
redemptions, transfers, additional purchases and exchanges and (ii) their
assistance in distributing shares of the Fund.
The fees payable under the A, B and C Plans are described in the Prospectus. For
the period December 18, 1997 to October 31, 1998, fees paid to dealers under the
A, B and C Plans were $7,538, $4,411, and $6,034, respectively.
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
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interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan
("outside trustees"), cast in person at a meeting called for the purpose of
voting on the Plan. No Plan may be amended to increase materially 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")
(i) applies regardless of class, (ii) will not apply to shares purchased by the
reinvestment of dividends or capital gains distributions; (iii) 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 (iv) will not be imposed on the amount of your
account value represented by the increase in net asset value over the initial
purchase price (including increases due to the reinvestment of dividends and
capital gains distributions) and upon early redemption of shares.
Class A Shares. As stated in the Prospectus, subject to certain exceptions, a
CDSC of 1% is imposed with respect to those Class A shares (or Class A shares of
another Lord Abbett-sponsored fund 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, subject to certain exceptions, if
Class B shares (or Class B shares of another Lord Abbett-sponsored fund acquired
through exchange of such shares) are redeemed out of the Lord Abbett-sponsored
family of funds for cash before the sixth anniversary of their purchase, a CDSC
will be deducted from the redemption proceeds. The Class B CDSC is paid to Lord
Abbett Distributor to reimburse its expenses, in whole or in part, for providing
distribution-related service to the Fund 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:
Contingent Deferred Sales
Anniversary of the Day on Charge on Redemptions (As %
Which the Purchase Order Was Accepted 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, subject to certain exceptions 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 this Fund's Class C shares.
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General. The 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. With respect to Class A shares
purchased pursuant to a special retirement wrap program, no CDSC is payable on
redemptions which continue as investments in another fund participating in the
program. With respect to Class B shares, no CDSC is payable for redemptions (i)
in connection with Systematic Withdrawal Plan and Div-Move services as described
below under those headings, (ii) in connection with mandatory distribution under
403(b) plans and IRAs and (iii) in connection with death of the shareholder. In
the case of Class A and Class C shares, the CDSC is received by 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 which participate in the Telephone Exchange Privilege (except
(a) Lord Abbett U.S. Government Securities Money Market Fund, Inc. ("GSMMF"),
(b) certain funds of Lord Abbett Tax-Free Income Fund and Lord Abbett Tax-Free
Income Trust for which a Rule 12b-1 Plan is not yet in effect, and (c) any
authorized institution's affiliated money market fund satisfying Lord Abbett
Distributor as to certain omnibus account and other criteria, hereinafter
referred to as an "authorized money market fund" or "AMMF" (collectively, the
"Non-12b-1 Funds")) have instituted a CDSC for each class on the same terms and
conditions. No CDSC will be charged on an exchange of shares of the same class
between Lord Abbett funds or between such funds and AMMF. Upon redemption of
shares out of the Lord Abbett family of funds or out of AMMF, the CDSC will be
charged on behalf of and paid: (i) to the fund in which the original purchase
(subject to a CDSC) occurred, in the case of the Class A and Class C shares and
(ii) to Lord Abbett Distributor if the original purchase was subject to a CDSC,
in the case of the Class B shares. Thus, if shares of a Lord Abbett fund are
exchanged for shares of the same class of another such fund and the shares of
the same class tendered ("Exchanged Shares") are subject to a CDSC, the CDSC
will carry over to the shares of the same class being acquired, including GSMMF
and AMMF ("Acquired Shares"). Any CDSC that is carried over to Acquired Shares
is calculated as if the holder of the Acquired Shares had held those shares from
the date on which he or she became the holder of the Exchanged Shares. Although
the Non-12b-1 Funds will not pay a distribution fee on their own shares, and
will, therefore, not impose their own CDSC, the Non-12b-1 Funds will collect the
CDSC (a) on behalf of other Lord Abbett funds, in the case of the Class A and
Class C shares and (b) on behalf of Lord Abbett Distributor, in the case of the
Class B shares. Acquired Shares held in GSMMF and AMMF which are subject to a
CDSC will be credited with the time such shares are held in GSMMF but will not
be credited with the time such shares are held in AMMF. Therefore, if your
Acquired Shares held in AMMF qualified for no CDSC or a lower Applicable
Percentage at the time of exchange into AMMF, that Applicable Percentage will
apply to redemptions for cash from AMMF, regardless of the time you have held
Acquired Shares in AMMF.
In no event will the amount of the CDSC exceed the Applicable Percentage of the
lesser of (i) the net asset value of the shares redeemed or (ii) the original
cost of such shares (or of the Exchanged Shares for which such shares were
acquired). No CDSC will be imposed when the investor redeems (i) amounts derived
from increases in the value of the account above the total cost of shares being
redeemed due to increases in net asset value, (ii) shares with respect to which
no Lord Abbett fund paid a 12b-1 fee and, in the case of Class B shares, Lord
Abbett Distributor paid no sales charge or service fee (including shares
acquired through reinvestment of dividend income and capital gains
distributions) or (iii) shares which, together with Exchanged Shares, have been
held continuously for 24 months from the end of the month in which the original
sale occurred (in the case of Class A shares); for six years or more (in the
case of Class B shares) and for one year or more (in the case of Class C
shares). In determining whether a CDSC is payable, (a) shares not subject to the
CDSC will be redeemed before shares subject to the CDSC and (b) of the shares
subject to a CDSC, those held the longest will be the first to be redeemed.
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Exchanges. The Prospectus briefly describes the Telephone Exchange Privilege.
You may exchange some or all of your shares of any class for those in the same
class of: (i) Lord Abbett-sponsored funds currently offered to the public with a
sales charge (front-end, back-end or level ), (ii) GSMMF or (iii) AMMF, to the
extent offers and sales may be made in your state. You should read the
prospectus of the other fund before exchanging. In establishing a new account by
exchange, shares of the 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 funds of Lord Abbett
Research Fund not offered to the general public ("LARF").
Statement of Intention. Under the terms of the Statement of Intention as
described in the Prospectus you may invest $100,000 or more over a 13-month
period in 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). Shares 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 of Intention 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 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.
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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, (f) through Retirement Plans with at least 100 eligible employees,
through a special retirement wrap program sponsored by an authorized institution
having one or more characteristics distinguishing it, in the opinion of Lord
Abbett Distributor, from a mutual fund wrap program. Such characteristics
include, among other things, the fact that an authorized institution does not
charge its clients any fee of a consulting or advisory nature that is
economically equivalent to the distribution fee under Class A 12b-1 Plan and the
fact that the program relates to participant-directed Retirement Plan.
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 25 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.
Systematic Withdrawal Plans. The Systematic Withdrawal Plan ("SWP") also is
described in the Prospectus. You may establish a SWP if you own or purchase
uncertificated shares having a current offering price value of at least $10,000.
Lord Abbett prototype retirement plans have no such minimum. With respect to
Class 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 the SWP is established.
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. 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
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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 including 401(k) plans and custodial agreements for
IRAs (Individual Retirement Accounts, including SIMPLE IRAs and Simplified
Employee Pensions), 403(b) plans and qualified pension and profit-sharing plans.
The forms name Investors Fiduciary Trust Company as custodian and contain
specific information about the plans excluding 401(k) plans. Explanations of the
eligibility requirements, annual custodial fees and allowable tax advantages and
penalties are set forth in the relevant plan documents. Adoption of any of these
plans should be on the advice of your legal counsel or qualified tax adviser.
6.
Past Performance
The 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 one thousand
dollars which represents a hypothetical initial investment. The calculation
assumes deduction of the maximum sales charge (as described in the next
paragraph) from the amount invested and reinvestment of all income dividends and
capital gains distributions on the reinvestment dates at prices calculated as
stated in the Prospectus. The ending redeemable value is determined by assuming
a complete redemption at the end of the period covered by the average annual
total return computation.
In calculating total returns for Class A shares, the current maximum sales
charge of 4.75% (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 Fund's investment
result for that class for the time period shown (unless the total return is
shown at net asset value). For Class C shares, the 1.0% CDSC is applied to the
Fund's investment result for that class for the time period shown prior to the
first anniversary of purchase (unless the total return is shown at net asset
value). Total returns also assume that all dividends and capital gains
distributions during the period are reinvested at net asset value per share, and
that the investment is redeemed at the end of the period.
Using the computation method described above, the Fund's average annual
compounded rates of total return for the fiscal year ended October 31, 1998 was
- -4.00%, -4.77%, and -.76% for the A, B, and C shares, respectively.
Yield quotation for each Class is based on a 30-day period ended on a specified
date, computed by dividing our net investment income per share earned during the
period by the maximum offering price per share of such Class on the last day of
the period. This is determined by finding the following quotient: take the
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 shares of such Class outstanding during the period that were entitled to
receive dividends and (ii) the maximum offering price per share of such Class on
the last day of the period. To this quotient add one. This sum is multiplied by
itself five times. Then one is subtracted from the product of this
multiplication and the remainder is multiplied by two. Yield for the Class A
shares reflects the deduction of the maximum initial sales charge, but may also
be shown based on the Fund's net asset value per share. Yields for Class B and C
shares do not reflect the deduction of the CDSC. For the 30-day period ended
October 31, 1998, the yield for the Class A, B and C shares of the Fund were
8.40%, 8.08% and 0%, respectively.
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.
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7.
Taxes
The value of any shares redeemed by the Company or repurchased or otherwise sold
may be more or less than your tax basis in the shares at the time of
disposition. Any gain will generally be taxable for United States federal income
tax purposes. Any loss realized on the disposition of Company shares which you
have held for six months or less will be treated for tax purposes as a long-term
capital loss to the extent of any "capital gains distributions" which you
received with respect to such shares. Losses on the sale of shares are not
deductible if, within a period beginning 30 days before the date of the sale and
ending 30 days after the date of the sale, the taxpayer acquires shares that are
substantially identical.
The Company 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 Company intends
to distribute to shareholders each year an amount adequate to avoid the
imposition of such excise tax. Dividends paid by the Company will qualify for
the dividends-received deduction for corporations to the extent they are derived
from dividends paid by domestic corporations.
Forward foreign currency contracts, foreign currency put and call options and
other investment techniques and practices which the Company may utilize, may
affect the character and timing of the recognition of gains and losses by a
Company. Such transactions may increase the amount of short-term capital gain
realized by such Company, which is taxed as ordinary income when distributed to
shareholders. Limitations imposed by the Internal Revenue Code on regulated
investment companies may restrict the Company's ability to engage in
transactions in options and forward contracts.
Gain and loss realized by the Company on certain transactions, including sales
of foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gain or loss is attributable to changes in
exchange rates for foreign currencies. Accordingly, distributions taxable as
ordinary income will include the net amount, if any, of such foreign exchange
gains and will be reduced by the net amount, if any, of such foreign exchange
losses.
If the Company purchases shares in certain foreign investment entities, called
"passive foreign investment companies," the Company may be subject to United
States federal income tax on a portion of any "excess distribution" or gain from
the disposition of such shares, even if such income is distributed as a taxable
dividend by the to its shareholders. Additional charges in the nature of
interest may be imposed on either the Company or its shareholders with respect
to deferred taxes arising from such distributions or gains. If the Company were
to invest in a passive foreign investment company with respect to which the
Company elected to make a "qualified electing fund" election, in lieu of the
foregoing requirements, the Company might be required to include in income each
year a portion of the ordinary earnings and net capital gains of the qualified
electing fund, even if such amount were not distributed to the Company.
As described in the Prospectus, the Company may be subject to withholding taxes
and other taxes imposed by foreign countries. If, at the close of any fiscal
year, more than 50% of the assets of the Company consist of stock or securities
of foreign corporations, the Company may elect to treat foreign income taxes
paid by the Company as having been paid directly by its shareholders. If a
Company makes such an election, the shareholders of the Company will be required
to (i) include in ordinary gross income (in addition to taxable dividends
actually received) their pro rata share of foreign income taxes paid by the
Company and (ii) treat such pro rata share as foreign income taxes paid by them.
Such shareholders may then use such pro rata portion of foreign income taxes as
foreign tax credits, subject to applicable limitations, or, alternatively,
deduct them in computing their taxable income. Shareholders who do not itemize
deductions for federal income tax purposes will not be entitled to deduct their
pro rata portion of foreign taxes paid by the Company, although such
shareholders will still be required to include their share of such taxes in
gross income. Shareholders who claim a foreign tax credit for foreign taxes paid
by the Company may be required to treat a portion of dividends received from the
Company as separate category income for purposes of computing the limitations on
the foreign tax credit. Tax-exempt shareholders will ordinarily not benefit from
this election. Each year that the Company qualifies for and makes the election
described above, its shareholders will be notified of the amount of (i) each
19
<PAGE>
shareholder's pro rata share of foreign income taxes paid by the Fund and (ii)
the portion of dividends which represents income from each foreign country.
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.
8.
Information About the Company
The directors, trustees and officers of Lord Abbett-sponsored mutual funds,
together with the partners and employees of Lord Abbett, are permitted to
purchase and sell securities for their personal investment accounts. In engaging
in personal securities transactions, however, such persons are subject to
requirements and restrictions contained in the Fund's Code of Ethics which
complies, in substance, with each of the recommendations of the Investment
Company Institute's Advisory Group on Personal Investing. Among other things,
the Code requires that Lord Abbett partners and employees obtain advance
approval before buying or selling securities, submit confirmations and quarterly
transaction reports, and obtain approval before becoming a director of any
company; and it prohibits such persons from investing in a security 7 days
before or after any Lord Abbett-sponsored fund or Lord Abbett-managed account
considers a trade or trades in such security, from profiting on trades of the
same security within 60 days and from trading on material and non-public
information. The Code imposes certain similar requirements and restrictions on
the independent directors and trustees of each Lord Abbett-sponsored mutual fund
to the extent contemplated by the recommendations of the Advisory Group.
9.
Financial Statements
The financial statements for the fiscal year ended October 31, 1998 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1998 Annual Report to Shareholders of Lord Abbett
Securities Trust are incorporated herein by reference to such financial
statements and report, in reliance upon the authority of Deloitte & Touche LLP
as experts in auditing and accounting.
20
<PAGE>
10.
Appendix
Corporate Bond Ratings
Moody's Investors Service, Inc.'s Corporate Bond Ratings
Aaa - Bonds which are rated Aaa are judged to be of the best quality and carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin, and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds which are rated Aa are judged to be of high-quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance and
other terms of the contract over any long period of time may be small.
Caa - Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds that are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds that are rated C are the lowest-rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Standard & Poor's Corporation's Corporate Bond Ratings
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong and in the majority of instances they
differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
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<PAGE>
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB-B-CCC-CC-C - Debt rated BB, B, CCC, CC and C is regarded as having
predominately speculative characteristics with respect to capacity to pay
interest and repay principal. 'BB' indicates the least degree of speculation and
'CCC' the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
D - Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes such payments will
be made during such grace period. The 'D' rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
22
<PAGE>
- --------------------------------------------------------------------------------
LORD ABBETT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Additional Information March 1, 1999
- --------------------------------------------------------------------------------
Alpha 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 of Additional Information, relates
to, and should be read in conjunction with, the Prospectus dated March 1, 1998.
Lord Abbett Securities Trust ("Company") was organized as a Delaware business
trust on February 26, 1993. The Company has four funds, but only Alpha Fund (the
"Fund") is described in this Statement of Additional Information. The Fund has
three classes of shares (A, B and C) offered by this Statement of Additional
Information. The Fund is designed to invest in a diversified portfolio of
underlying mutual funds, all of which are members of the Lord Abbett Family of
Funds. Currently, the Fund invests in three of these underlying mutual funds:
Lord Abbett Developing Growth Fund, Inc.; Lord Abbett Research Fund,
Inc.(Small-Cap Fund), and Lord Abbett Securities Trust (International Fund)
(referred to as the "Lord Abbett Funds"). All classes of shares have equal
noncumulative voting rights and equal rights with respect to dividends, assets
and liquidation, except for certain class-specific expenses. They are fully paid
and nonassessable when issued and have no preemptive or conversion rights.
Rule 18f-2 under the Investment Company Act, as amended (the "Act'), provides
that any matter required to be submitted, by the provisions of the Act or
applicable state law or otherwise, to the holders of the outstanding voting
securities of an investment company such as the Fund shall not be deemed to have
been effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each class affected by such matter. Rule 18f-2 further
provides that a class shall be deemed to be affected by a matter unless the
interests of each class in the matter are substantially identical or the matter
does not affect any interest of such class. However, the Rule exempts the
selection of independent public accountants, the approval of a contract with a
principal underwriter and the election of trustees from its separate voting
requirements.
Shareholder inquiries should be made by directly contacting the Fund or by
calling 800-821-5129. In addition, you can make inquiries through your dealer.
TABLE OF CONTENTS Page
1. Investment Policies 2
2. Trustees and Officers 3
3. Investment Advisory and Other Services 6
4. Portfolio Transactions 7
5. Purchases, Redemptions and Shareholder Services 8
6. Past Performance 16
7. Taxes 16
8. Information About the Company 17
9. Financial Statements 18
1
<PAGE>
1.
Investment 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' Securities 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 Securities 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 the Fund may lend its portfolio securities,
provided that the lending of portfolio securities may be made only in accordance
with applicable law; (5) buy or sell real estate (except that 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 the its gross assets, or (ii) 10% of the
voting securities of such issuer; except, in either case, securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
securities of other Securities companies; (7) invest more than 25% of its
assets, taken at market value, in the securities of issuers in any particular
industry (excluding (i) securities of the U.S. Government, its agencies and
instrumentalities and (ii) mortgage-backed securities); and (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 fundamental investment restrictions above which cannot be
changed without shareholder approval, we also are subject to the policies
described in the Prospectus and the following Securities 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 Securities) 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 securities of
issuers which, with their predecessors, have a record of less than three years'
continuous operations, if more than 5% of a Fund' total assets would be invested
in such securities (this restriction shall not apply to Securities companies,
mortgaged-backed securities , asset-backed securities or obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities); (5) hold
securities of any issuer (excluding Securities companies) 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 Securities adviser if these owners in the aggregate own
beneficially more than 5% of the securities of such issuer; (6) invest in
warrants if, at the time of the acquisition, its Securities in warrants, valued
at the lower of cost or market, would exceed 5% of the Fund' total assets
(included within such limitation, but not to exceed 2% of the Fund' total
assets, are warrants which are not listed on the New York or American Stock
Exchange or a major foreign exchange); (7) 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; (8) 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 (9) buy from or sell to any of its
officers, trustees, employees, or its Securities adviser or any of its officers,
trustees, partners or employees, any securities other than shares of beneficial
interest in such Fund.
2
<PAGE>
Portfolio Turnover
For the period December 29, 1997 to October 31, 1998, the portfolio turnover
rate was .01% for the Alpha Fund.
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 an officer,
director, or trustee of twelve other Lord Abbett-sponsored Funds. He is an
"interested person" as defined in the Act, and as such, may be considered to
have an indirect financial interest in the Rule 12b-1 Plan described in the
Prospectus.
Robert S. Dow, age 53, Chairman and President
The following outside trustees are also directors or trustees of some or all of
the twelve other Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow
Time Warner Inc.
1271 Avenue of the Americas
New York, New York
Senior Adviser, Time Warner Inc. Formerly, Acting Chief Executive Officer of
Courtroom Television Network (1997 - 1998). Formerly, President and Chief
Executive Officer of Time Warner Cable Programming, Inc. (1991 - 1997). Prior to
that, President and Chief Operating Officer of Home Box Office, Inc. Age 57.
William H. T. Bush
Bush-O'Donnell & Co., Inc.
101 South Hanley Road, Suite 1025
St. Louis, Missouri
Co-founder and Chairman of the Board of financial advisory firm of
Bush-0'Donnell & Company. Age 60.
Robert B. Calhoun, Jr.
Monitor Clipper Partners
650 Madison Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners and President of The Clipper Group
L.P., both private equity investment funds. Age 56.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 68.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 73.
3
<PAGE>
C. Alan MacDonald
Directorship Inc.
8 Sound Shore Drive
Greenwich, Connecticut
Managing Director of Directorship Inc., a consultancy in board management and
corporate governance. Formerly General Partner of the Marketing Partnership,
Inc., a full service marketing consulting firm (1994 - 1997). Prior to that,
Chairman and Chief Executive Officer of Lincoln Snacks, Inc., manufacturer of
branded snack foods (1992 - 1994). His career spans 36 years at Stouffers and
Nestle with 18 of the years as Chief Executive Officer. Currently serves as
Director of DenAmerica Corp., J.B. Williams Company, Inc., Fountainhead Water
Company and Exigent Diagnostics. Age 65.
Hansel B. Millican, Jr.
Rochester Button Company
1328 Broadway (Suite 816)
New York, New York
President and Chief Executive Officer of Rochester Button Company. Age 70.
Thomas J. Neff
Spencer Stuart
277 Park Avenue
New York, New York
Chairman of Spencer Stuart, an executive search consulting firm. Currently
serves as a Director of Ace, Ltd. (NYSE). Age 61.
The second column of the following table sets forth the compensation accrued for
the Fund's outside trustees. The third 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
information with respect to the retirement plan for outside directors/trustees
maintained by each of the Lord Abbett-sponsored funds. No director/trustee of
the funds associated with Lord Abbett and no officer of the funds received any
compensation from the funds for acting as a director/trustee or officer.
<TABLE>
<CAPTION>
For the Fiscal Year Ended October 31, 1998
------------------------------------------
(1) (2) (3) (4)
Pension or For Year Ended
Retirement Benefits December 31, 1997
Accrued by the Total Compensation
Aggregate Company and Accrued by the Company and
Compensation Twelve Other Lord Twelve Other Lord
Accrued by Abbett-sponsored Abbett-sponsored
Name of Director the Company(1) Companies(2) Companie(3)
<S> <C> <C> <C>
E. Thayer Bigelow $0 $17,068 $56,000
William H.T. Bush* $0 $0 $0
Robert B. Calhoun, Jr.** $0 $0 $0
Stewart S. Dixon $0 $32,190 $55,000
John C. Jansing $0 $45,085(4) $55,000
C. Alan MacDonald $0 $30,703 $57,400
Hansel B. Millican, Jr. $0 $37,747 $55,000
Thomas J. Neff $0 $19,853 $56,000
</TABLE>
4
<PAGE>
* Elected as of August 13, 1998
** Elected 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. A portion of the fees payable by the Company to
its outside trustees is being deferred under a plan that deems
the deferred amounts to be invested in shares of the Company for later
distribution to the 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 trustees in 1996. This plan supercedes
a previously approved retirement plan for all future directors. Current
trustees had the option to convert their accrued benefits under the
retirement plan. All of the outside trustees except one made such an
election.
3. This column shows aggregate compensation, including directors'/trustees'
fees and attendance fees for board and committee meetings, of a nature
referred to in footnote one, accrued by the Lord Abbett-sponsored
companies during the year ended December 31, 1998. The amounts of the
aggregate compensation payable by the Company as of October 31, 1998
deemed invested in Company shares, including dividends reinvested and
changes in net asset value applicable to such deemed investments, were:
Mr. Bigelow, $ ; Mr. Dixon, $ ; Mr. Jansing, $ ; Mr. MacDonald,
$ ; Mr. Millican, $ and Mr. Neff, $ . If the amounts deemed
invested in Fund shares were added to each director/trustee's actual
holdings of Fund shares as of October 31, 1998, each would own the
following: Mr. Bigelow, shares; Mr. Dixon, shares; Mr. Jansing,
shares; Mr. MacDonald, shares; Mr. Millican, shares; and Mr.
Neff, shares.
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 Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Brown, Carper, Fetch, Hilstad, Morris, McGruder, Towle and Walsh are partners of
Lord Abbett; the others are employees:
Executive Vice Presidents
Zane Brown, age 47;
Robert G. Morris, age 54;
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 47;
Robert P. Fetch, age 46;
Timothy W. Horan, age 44;
Lawrence H. Kaplan, age 42 (with Lord Abbett since 1997 - formerly Vice
President and Chief Counsel of Salomon Brothers Asset Management Inc from 1995
to 1997, prior thereto Senior Vice President, Director and General Counsel of
Kidder Peabody Asset Management, Inc.);
Thomas F. Konop, age 56;
Jerald Lanzotti, age 31;
5
<PAGE>
Stephen I. McGruder, age 55;
A. Edward Oberhaus, age 39;
Keith F. O'Connor, age 43;
Fernando Saldanha, age 45;
Christopher J. Towle, age 41;
John J. Walsh, age 61;
and Donna M. McManus, age 38, Treasurer (with Lord Abbett since 1996, formerly a
Senior Manager at Deloitte & Touche LLP).
The Company 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
Company's Declaration of Trust, shareholder meetings may be called at any time
by certain officers of the Company or by a majority of the trustees (i) for the
purpose of taking action upon any matter requiring the vote or authority of the
Company's shareholders or upon other matters deemed to be necessary or desirable
or (ii) upon the written request of the holders of at least one-quarter of the
shares of the Fund's outstanding and entitled to vote at the meeting.
As of , 1999 our officers and trustees, as a group, owned less than 1% of the
Funds' outstanding shares. As of , 1999 there were no record holders of 5%
or more of the Funds' outstanding shares.
3.
Investment Advisory and Other Services
As described under "Management" in the Prospectus, Lord Abbett is the investment
manager of the Company. Nine of the general partners of Lord Abbett are officers
and/or trustees of the Company, as follows: Zane E. Brown; Daniel E. Carper;
Robert S. Dow; Robert P. Fetch; Paul A. Hilstad; Stephen J. McGruder; Robert G.
Morris; Christopher J. Towle; and John J. Walsh.
The other general partners who are neither officers nor trustees of the Company
are Stephen Allen, John E. Erard, Daria L. Foster, W. Thomas Hudson, Robert I.
Gerber, Michael B. McLaughlin, R. Mark Pennington, and Robert J. Noelke. The
address of each partner is The General Motors Building, 767 Fifth Avenue, New
York, New York 10153-0203.
The services performed by Lord Abbett are described under "Management" in the
Prospectus. Under the Management Agreement, the Alpha Fund is obligated to pay
Lord Abbett a monthly fee, based on the average daily net assets for each month,
at the annual rate of .50 of 1%. For the period December 29, 1997 (commencement
of operations) to October 31, 1998, this fee was waived for the Alpha Fund. If
the Fund had paid this fee, it would have amounted to $204,935. .
Although not obligated to do so, Lord Abbett may assume expenses of the Fund.
As discussed in the Prospectus under "Management," the Fund is contingently
obligated to repay to Lord Abbett the amounts of such assumed expenses.
The Fund pays all of its expenses not expressly assumed by Lord Abbett, or the
Lord Abbett Funds including, without limitation, 12b-1 expenses, outside
trustees' fees and expenses, association membership dues, legal and audit fees,
taxes, transfer and dividend disbursing agent fees, shareholder servicing costs,
expenses relating to shareholder meetings, expenses of preparing, printing and
mailing share certificates and shareholder reports, expenses of registering our
shares under federal and state securities laws, expenses of preparing, printing
and
6
<PAGE>
mailing prospectuses to existing shareholders, insurance premiums and brokerage
and other expenses connected with executing portfolio transactions.
Lord Abbett Distributor LLC serves as the principal underwriter for the Fund.
The Bank of New York ("BNY"), 48 Wall Street, New York, New York, is the
Company's custodian. In accordance with the requirements of Rule 17f-5, the
Company's trustees have approved arrangements permitting the Fund's foreign
assets not held by BNY or its foreign branches to be held by certain qualified
foreign banks and depositories.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281, are
the independent auditors of the Company and must be approved at least annually
by our Board of 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.
United Missouri Bank of Kansas City, N.A. Tenth and Grand Kansas City, Missouri,
64141, acts as the transfer agent and dividend dispursing agent for each Fund.
4.
Portfolio Transactions
The policy of the underlying Lord Abbett-sponsored funds (in which the Fund
invests) is to obtain best execution fon all our portfolio transactions, which
means that they seek to have purchases and sales of portfolio securities
executed at 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, each Lord Abbett-sponsored 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,
they may, if considered advantageous, make a purchase from or sale to another
Lord Abbett-sponsored fund without the intervention of any broker- dealer.
Broker-dealers are selected on the basis of their professional capability and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of each Lord Abbett-sponsored fund
and also are employees of Lord Abbett. These traders do the trading as well for
other accounts -- Securities companies (of which they are also officers) and
other Securities clients -- managed by Lord Abbett. For foreign securities
purchased or sold by the International Fund, the selection is made by Fuji-Lord
Abbett International, Limited (the "Sub-Adviser"). The Sub-Advisor 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
cases 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 a Lord Abbett-sponsored fund's portfolio 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, the Lord Abbett-sponsored
funds pay a commission rate that they believe is appropriate to give maximum
assurance that their brokers will provide them, on a continuing basis, the
highest level of brokerage services available. While they do not always seek the
lowest possible commission on particular trades, they pay a commission rate that
they believe is appropriate to give maximum assurance that their brokers will
provide them, on a continuing basis, the highest level of brokerage services
available. While the Lord Abbett-sponsored funds do not always seek in the
lowest possible commissions on particular trades, they believe that their
commission rates are in line with the rates that many other institutions pay.
The Lord Abbett-sponsored funds' 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 the Lord
Abbett-sponsored funds and the other accounts they manage. Such services include
showing the Lord Abbett-sponsored funds trading opportunities including blocks,
a
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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 the Lord Abbett-sponsored funds' brokers also provide research services
at least some of which are useful to Lord Abbett in their overall
responsibilities with respect to the Lord Abbett-sponsored funds 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
Lord Abbett-sponsored funds; 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 Lord Abbett Funds; and not all of such
services will necessarily be used by Lord Abbett in connection with their
advisory services to such other accounts. The Lord Abbett-sponsored funds 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 Securities process. As a practical matter, it would not be possible for
Lord Abbett to generate all of the information presently provided by brokers.
While receipt of research services from brokerage firms has not reduced Lord
Abbett's normal research activities, the expenses of Lord Abbett could be
materially increased if it attempted to generate such additional information
through its own staff and purchased such equipment and software packages
directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or
among brokers, and trades are executed only when they are dictated by Securities
decisions of the Lord Abbett-sponsored funds to purchase or sell portfolio
securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold the Lord
Abbett-sponsored funds' shares and/or shares of other Lord Abbett-sponsored
funds may be preferred.
If other clients of Lord Abbett buy or sell the same security at the same time
as a Lord Abbett Fund does, transactions will, to the extent practicable, be
allocated among all participating accounts in proportion to the amount of each
order and will be executed daily until filled so that each account shares the
average price and commission cost of each day. Other clients who direct that
their brokerage business be placed with specific brokers or who invest through
wrap accounts introduced to Lord Abbett by certain brokers may not participate
with a Lord Abbett-sponsored fund in the buying and selling of the same
securities as described above. If these clients wish to buy or sell the same
security as a Lord Abbett-sponsored fund does, they may have their transactions
executed at times different from our transactions and thus may not receive the
same price or incur the same commission cost as a Lord Abbett-sponsored fund
does.
The Lord Abbett Funds will not seek "reciprocal" dealer business (for the
purpose of applying commissions in whole or in part for their benefit or
otherwise) from dealers as consideration for the direction to them of portfolio
business.
For the period December 29, 1997 to October 31, 1998, we paid total commissions
to independent broker-dealers of $299,976.
5.
Purchases, Redemptions
and Shareholder Services
Information concerning how we value our shares for the purchase and redemption
of our shares is contained in the Prospectus under "Purchases" and
"Redemptions," respectively.
As disclosed in the Prospectus, we calculate our net asset value as of the close
of the New York Stock Exchange ("NYSE") on each day that the NYSE is open for
trading by dividing our total net assets by the number of shares
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outstanding at the time of calculation. The NYSE is closed on Saturdays and
Sundays and the following holidays -- New Year's Day, Martin Luther King , Jr.,
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
The Fund values its portfolio securities at market value as of the close of the
NYSE. Market value will be determined as follows: securities listed or admitted
to trading privileges on the New York or American Stock Exchange or on the
NASDAQ National Market System are valued at the last sales price, or, if there
is no sale on that day, at the mean between the last bid and asked prices, or,
in the case of bonds, in the over-the-counter market if, in the judgment of the
Fund's officers, that market more accurately reflects the market value of the
bonds. Over-the-counter securities not traded on the NASDAQ National Market
System are valued at the mean between the last bid and asked prices. Securities
for which market quotations are not available are valued at fair market value
under procedures approved by the Board of Trustees.
The maximum offering prices of the Fund' Class A shares on 10/31/98 was computed
as follows:
Alpha
Fund
----
Net asset value per share (net assets
divided by shares outstanding) $12.91
Maximum offering price per
share (net asset value divided by .9425 in both cases) $13.70
The Company 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 the 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.
ALTERNATIVE SALES ARRANGEMENTS
Classes of Shares. The Fund offers investors three different classes of shares.
This Statement of Additional Information offers those classes, designated Class
A, B, and C. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will likely
have different share prices. Investors should read this section carefully to
determine which class represents the best investment option for their particular
situation.
Class A Shares. If you buy Class A shares, you pay an initial sales charge on
investments of less than $1 million (or on investments for employer-sponsored
retirement plans under the Internal Revenue Code (hereinafter referred to as
"Retirement Plans") with less than 100 eligible employees or on investments that
do not qualify to be under a "special retirement wrap program" as a program
sponsored by an authorized institution showing one or more characteristics
distinguishing it, in the opinion of Lord Abbett Distributor from a mutual fund
wrap fee program). If you purchase Class A shares as part of an investment of at
least $1 million (or for Retirement Plans with at least 100 eligible employees
or under a special retirement wrap program) in shares of one or more Lord
Abbett-sponsored funds, you will not pay an initial sales charge, but if you
redeem any of those shares within 24 months after the month in which you buy
them, you may pay to the Fund a contingent deferred sales charge
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<PAGE>
("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 annually approximately 33 of 1% of the annual net asset value
of the Class A shares.
Class B Shares. If you buy Class B shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the sixth anniversary of
buying them, you will normally pay a CDSC to Lord Abbett Distributor 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.
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.
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. The Fund's class-specific expenses and the
effect of the different types of sales charges on your investment will affect
your investment results over time. The most important factors are how much you
plan to invest and how long you plan to hold your investment. If your goals and
objectives change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider another class of
shares.
In the following discussion, to help provide you and your financial adviser with
a framework in which to choose a class, we have made some assumptions using a
hypothetical investment in the 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 than $100,000), because there is no initial sales charge on Class C shares,
and the CDSC does not apply to amounts you redeem after holding them one year.
However, if you plan to invest more than $100,000 for the short term, then the
more you invest and the more your investment horizon increases toward six years,
the more attractive the Class A share option may become. This is because the
annual distribution fee on Class C shares will have a greater impact on your
account over the longer term than the reduced front-end sales charge available
for larger purchases of Class A shares. For example, Class A might be more
appropriate than Class C for investments of more than $100,000 expected to be
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<PAGE>
held for 5 or 6 years (or more). For investments over $250,000 expected to be
held 4 to 6 years (or more), Class A shares may become more appropriate than
Class C. If you are investing $500,000 or more, Class A may become more
desirable as your investment horizon approaches 3 years or more.
For most investors who invest $1 million or more or for Retirement Plans with at
least 100 eligible employees or for investments pursuant to a special retirement
wrap program, in most cases Class A shares will be the most advantageous choice,
no matter how long you intend to hold your shares. For that reason, it may not
be suitable for you to place a purchase order for Class B shares of $500,000 or
more or a purchase order for Class C shares of $1,000,000 or more. In addition,
it may not be suitable for you to place an order for Class B or C shares for a
Retirement Plan with at least 100 eligible employees or for a special retirement
wrap program. You should discuss this with your financial advisor.
Investing for the Longer Term. If you are investing for the longer term (for
example, to provide for future college expenses for your child) and do not
expect to need access to your money for seven years or more, Class B shares may
be an appropriate investment option, if you plan to invest less than $100,000.
If you plan to invest more than $100,000 over the long term, Class A shares will
likely be more advantageous than Class B shares or Class C shares, as discussed
above, because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charges available for larger investments in Class
A shares under the Fund's Rights of Accumulation. Of course, these examples are
based on approximations of the effect of current sales charges and expenses on a
hypothetical investment over time, and should not be relied on as rigid
guidelines.
Are There Differences in Account Features That Matter to You? Some account
features are available in whole or in part to Class A, 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 "Services For Fund Investors" in the
Prospectus for more information about the 12% annual waiver of the CDSC. You
should carefully review how you plan to use your investment account before
deciding which class of shares you buy. For example, the dividends payable to
Class B and Class C shareholders will be reduced by the expenses borne solely by
each of these classes, such as the higher distribution fee to which Class B and
Class C shares are subject, as described below.
How Does It Affect Payments to My Broker? A salesperson, such as a broker, or
any other person who is entitled to receive compensation for selling Fund shares
may receive different compensation for selling one class than for selling
another class. As discussed in more detail below, such compensation is primarily
paid at the time of sale in the case of Class A and B shares and is paid over
time, so long as shares remain outstanding, in the case of Class C shares. It is
important that investors understand that the primary purpose of the CDSC for the
Class B shares and the distribution fee for Class B and Class C shares is the
same as the purpose of the front-end sales charge on sales of Class A shares: to
compensate brokers and other persons selling such shares. The CDSC, if payable,
supplements the Class B distribution fee and reduces the Class C distribution
fee expenses for the Fund and Class C shareholders.
Class A, B and C Rule 12b-1 Plans. As described in the Prospectus, the Fund 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 Fund: 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. Lord Abbett uses all
amounts received under the A and C Plans for the Fund for payments to dealers
for (i) providing continuous services to the Class A shareholders, such as
answering shareholder inquiries, maintaining records, and assisting shareholders
in making redemptions, transfers, additional purchases and exchanges and (ii)
their assistance in distributing Class A shares of the Fund.
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<PAGE>
The fees payable under the A, B and C Plans are described in the Prospectus. For
the period December 29, 1997 to October 31, 1998, fees paid to dealers under the
A, B and C Plans were $46,152, $146,102, and $74,834, respectively.
Each Plan requires the trustees to review, on a quarterly basis, written reports
of all amounts expended pursuant to the Plan and the purposes for which such
expenditures were made. Each Plan shall continue in effect only if its
continuance is specifically approved at least annually by vote of the trustees,
including a majority of the trustees who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related to the Plan ("outside trustees"), cast in
person at a meeting called for the purpose of voting on the Plan. No Plan may be
amended to increase materially 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 the
amount of your account value represented by the increase in net asset value over
the initial purchase price (including increases due to the reinvestment of
dividends and capital gains distributions) and upon early redemption of shares.
Class A Shares. As stated in the Prospectus, a CDSC of 1% is imposed with
respect to those Class A shares (or Class A shares of another Lord
Abbett-sponsored fund or Fund acquired through exchange of such shares) on which
a Fund has paid the one-time distribution fee of 1% if such shares are redeemed
out of the Lord Abbett-sponsored family of funds within a period of 24 months
from the end of the month in which the original sale occurred.
Class B Shares. As stated in the Prospectus, if Class B shares (or Class B
shares of another Lord Abbett-sponsored fund or Fund acquired through exchange
of such shares) are redeemed out of the Lord Abbett-sponsored family of funds
for cash before the sixth anniversary of their purchase, a CDSC will be deducted
from the redemption proceeds. The Class B CDSC is paid to Lord Abbett
Distributor to reimburse its expenses, in whole or in part, for providing
distribution-related service in connection with the sale of Class B shares.
To determine whether the CDSC applies to a redemption, 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:
Contingent Deferred Sales
Anniversary of the Day on Charge on Redemptions (As %
Which the Purchase Order Was Accepted 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
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<PAGE>
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 this 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 the applicable Fund and is intended to
reimburse all or a portion of the amount paid by the Fund if the shares are
redeemed before the Fund has had an opportunity to realize the anticipated
benefits of having a long-term shareholder account in the Fund. In the case of
Class B shares, the CDSC is received by Lord Abbett Distributor and is intended
to reimburse its expenses of providing distribution-related service to the Fund
(including recoupment of the commission payments made) in connection with the
sale of Class B shares before Lord Abbett Distributor has had an opportunity to
realize its anticipated reimbursement by having such a long-term shareholder
account subject to the B Plan distribution fee.
The other funds and Fund which participate in the Telephone Exchange Privilege
(except (a) Lord Abbett U.S. Government Securities Money Market Fund, Inc.
("GSMMF"), (b) certain Fund of Lord Abbett Tax-Free Income Fund and Lord Abbett
Tax-Free Income Trust for which a Rule 12b-1 Plan is not yet in effect, and (c)
any authorized institution's affiliated money market fund satisfying Lord Abbett
Distributor as to certain omnibus account and other criteria, hereinafter
referred to as an "authorized money market fund" or "AMMF" (collectively, the
"Non-12b-1 Funds") have instituted a CDSC for each class on the same terms and
conditions. No CDSC will be charged on an exchange of shares of the same class
between Lord Abbett funds or between such funds and AMMF. Upon redemption of
shares out of the Lord Abbett family of funds or out of AMMF, the CDSC will be
charged on behalf of and paid: (i) to the fund in which the original purchase
(subject to a CDSC) occurred, in the case of the Class A and Class C shares and
(ii) to Lord Abbett Distributor if the original purchase was subject to a CDSC,
in the case of the Class B shares. Thus, if shares of a Lord Abbett fund are
exchanged for shares of the same class of another such fund and the shares of
the same class tendered ("Exchanged Shares") are subject to a CDSC, the CDSC
will carry over to the shares of the same class being acquired, including GSMMF
and AMMF ("Acquired Shares"). Any CDSC that is carried over to Acquired Shares
is calculated as if the holder of the Acquired Shares had held those shares from
the date on which he or she became the holder of the Exchanged Shares. Although
the Non-12b-1 Funds will not pay a distribution fee on their own shares, and
will, therefore, not impose their own CDSC, the Non-12b-1 Funds will collect the
CDSC (a) on behalf of other Lord Abbett funds, in the case of the Class A and
Class C shares and (b) on behalf of Lord Abbett Distributor, in the case of the
Class B shares. Acquired Shares held in GSMMF and AMMF which are subject to a
CDSC will be credited with the time such shares are held in GSMMF but will not
be credited with the time such shares are held in AMMF. Therefore, if your
Acquired Shares held in AMMF qualified for no CDSC or a lower Applicable
Percentage at the time of exchange into AMMF, that Applicable Percentage will
apply to redemptions for cash from AMMF, regardless of the time you have held
Acquired Shares in AMMF.
In no event will the amount of the CDSC exceed the Applicable Percentage of the
lesser of (i) the net asset value of the shares redeemed or (ii) the original
cost of such shares (or of the Exchanged Shares for which such shares were
acquired). No CDSC will be imposed when the investor redeems (i) amounts derived
from increases in the value of the account above the total cost of shares being
redeemed due to increases in net asset value, (ii) shares with respect to which
no Lord Abbett fund paid a 12b-1 fee and, in the case of Class B shares, Lord
Abbett Distributor paid no sales charge or service fee (including shares
acquired through reinvestment of dividend income and capital gains
distributions) or (iii) shares which, together with Exchanged Shares, have been
held continuously for 24 months from the end of the month in which the original
sale occurred (in the case of Class A shares); for six years or more (in the
case of Class B shares) and for one year or more (in the case of Class C
shares). In determining whether a CDSC is payable, (a) shares not subject to the
CDSC will be redeemed before shares subject to the CDSC and (b) of the shares
subject to a CDSC, those held the longest will be the first to be redeemed.
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Exchanges. The Prospectus briefly describes the Telephone Exchange Privilege.
You may exchange some or all of your shares of any class for those in the same
class of: (i) Lord Abbett-sponsored funds currently offered to the public with a
sales charge (front-end, back-end or level ), (ii) GSMMF or (iii) AMMF, to the
extent offers and sales may be made in your state. You should read the
prospectus of the other fund before exchanging. In establishing a new account by
exchange, shares of the Fund' being exchanged must have a value equal to at
least the minimum initial Securities 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 Securities 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 Fund 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
Securities 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 Securities 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 Securities,
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. Rights
of Accumulation are not applicable to Class Y shares.
Net Asset Value Purchases of Class A Shares. As stated in the Prospectus, our
Class A shares may be purchased at net asset value by our directors, employees
of Lord Abbett, employees of our shareholder servicing agent and employees of
any securities dealer having a sales agreement with Lord Abbett who consents to
such purchases or by the director or custodian under any pension or
profit-sharing plan or Payroll Deduction IRA established for the benefit of such
persons or for the benefit of employees of any national securities trade
organization to which Lord Abbett belongs or any company with an account(s) in
excess of $10 million managed by Lord Abbett on a private-advisory-account
basis. For purposes of this paragraph, the terms "directors" and "employees"
include a 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.
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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 Securities 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 Securities products made
available for a fee to clients of such brokers, dealers, registered Securities
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 each Prospectus for expedited redemption procedures.
The right to redeem and receive payment, as described in each Prospectus, may be
suspended if the NYSE is closed (except for weekends or customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
deems an emergency to exist.
Our Board of 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 each 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 with respect to Class A, B
and C shares. 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 Securities, include a voided, unsigned check and complete the
bank authorization.
Systematic Withdrawal Plans. The Systematic Withdrawal Plan ("SWP") also is
described in the Prospectus. You may establish a SWP if you own or purchase
uncertificated shares having a current offering price value of at least $10,000.
Lord Abbett prototype retirement plans have no such minimum. With respect to a
SWP for Class B shares, 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 Securities is soon
withdrawn. The minimum Securities 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. Each 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
15
<PAGE>
Company as custodian and contain specific information about the plans.
Explanations of the eligibility requirements, annual custodial fees and
allowable tax advantages and penalties are set forth in the relevant plan
documents. Adoption of any of these plans should be on the advice of your legal
counsel or qualified tax adviser.
6.
Past Performance
The 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 prices calculated as stated in the
prospectus. The ending redeemable value is determined by assuming a complete
redemption at the end of the period covered by the average annual total return
computation.
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment (unless the return is shown at net asset value). For Class 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 Fund's investment
result for that class for the time period shown (unless the total return is
shown at net asset value). For Class C shares, the 1.0% CDSC is applied to the
Fund's investment result for that class for the time period shown prior to the
first anniversary of purchase (unless the total return is shown at net asset
value). Total returns also assume that all dividends and capital gains
distributions during the period are reinvested at net asset value per share, and
that the investment is redeemed at the end of the period.
Using the computation method described above, the Fund's average annual
compounded rates of total return for the period December 29, 1997 (commencement
of operations) to October 31, 1998 was -10.00%, -9.71%, and -5.83% for the A, B,
and C shares, respectively, not annualized.
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 of
disposition. Any gain will generally be taxable for United States federal income
tax purposes. Any loss realized on the disposition of Fund shares which you have
held for six months or less will be treated for tax purposes as a long-term
capital loss to the extent of any capital gains distributions, which you
received with respect to such shares. Losses on the sale of shares are not
deductible if, within a period beginning 30 days before the date of the sale and
ending 30 days after the date of the sale, the taxpayer acquires shares that are
substantially identical.
The writing of call options and other investment techniques and practices which
the Fund (or any of the underlying Lord Abbett-sponsored funds in which the Fund
invests) may utilize 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.
The Fund (or any of the underlying Lord Abbett-sponsored funds in which the Fund
invests) may be subject to foreign withholding taxes which would reduce the
yield on the Funds' investments. Generally, Fund shareholders who are subject to
United States federal income tax will not be entitled to claim a federal income
tax credit or deduction for foreign income taxes paid by the Fund (or an
underlying Lord Abbett-sponsored fund).
16
<PAGE>
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.
Gain and loss realized by the Fund (or any of the underlying Lord
Abbett-sponsored funds in which the Fund invests) on certain transactions,
including sales of foreign debt securities and certain transactions involving
foreign currency, will be treated as ordinary income or loss for federal income
tax purposes to the extent, if any, that such gain or loss is attributable to
changes in exchange rates for foreign currencies. Accordingly, distributions
taxable as ordinary income will include the net amount, if any, of such foreign
exchange gains and will be reduced by the net amount, if any, of such foreign
exchange losses.
If any of the underlying Lord Abbett-sponsored funds in which the Fund invests
purchases shares in certain foreign investment entities called "passive foreign
investment companies," such fund may be subject to United States federal income
tax on a portion of any "excess distribution" or gain from the disposition of
such shares, even if such income is distributed to the Fund and distributed as a
taxable dividend by the Fund to its shareholders. Additional charges in the
nature of interest may be imposed on such Fund, the Fund, or its shareholders in
respect of deferred taxes arising from such distributions or gains. If an
underlying Lord Abbett Fund were to make a "qualified electing fund" election
with respect to its investment in a passive foreign investment company, in lieu
of the foregoing requirements, such underlying fund might be required to include
in income each year a portion of the ordinary earnings and net capital gains of
the qualified electing fund, which would increase the amount that the underlying
fund is required to distribute in order to avoid income and excise taxes.
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 Company
The value of any shares redeemed by the Company or repurchased or otherwise sold
may be more or less than your tax basis in the shares at the time of
disposition. Any gain will generally be taxable for United States federal income
tax purposes. Any loss realized on the disposition of Company shares which you
have held for six months or less will be treated for tax purposes as a long-term
capital loss to the extent of any "capital gains distributions" which you
received with respect to such shares. Losses on the sale of shares are not
deductible if, within a period beginning 30 days before the date of the sale and
ending 30 days after the date of the sale, the taxpayer acquires shares that are
substantially identical.
The Company 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 Company intends
to distribute to shareholders each year an amount adequate to avoid the
imposition of such excise tax. Dividends paid by the Company will qualify for
the dividends-received deduction for corporations to the extent they are derived
from dividends paid by domestic corporations.
Gain and loss realized by the Company on certain transactions, including sales
of foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gain or loss is attributable to changes in
exchange rates for foreign currencies. Accordingly, distributions taxable as
ordinary income will include the net amount, if any, of such foreign exchange
gains and will be reduced by the net amount, if any, of such foreign exchange
losses.
If the Company purchases shares in certain foreign investment entities, called
"passive foreign investment companies," the Company may be subject to United
States federal income tax on a portion of any "excess
17
<PAGE>
distribution" or gain from the disposition of such shares, even if such income
is distributed as a taxable dividend by the to its shareholders. Additional
charges in the nature of interest may be imposed on either the Company or its
shareholders with respect to deferred taxes arising from such distributions or
gains. If the Company were to invest in a passive foreign investment company
with respect to which the Company elected to make a "qualified electing fund"
election, in lieu of the foregoing requirements, the Company might be required
to include in income each year a portion of the ordinary earnings and net
capital gains of the qualified electing fund, even if such amount were not
distributed to the Company.
The Company may be subject to withholding taxes and other taxes imposed by
foreign countries. If, at the close of any fiscal year, more than 50% of the
assets of the Company consist of stock or securities of foreign corporations,
the Company may elect to treat foreign income taxes paid by the Company as
having been paid directly by its shareholders. If a Company makes such an
election, the shareholders of the Company will be required to (i) include in
ordinary gross income (in addition to taxable dividends actually received) their
pro rata share of foreign income taxes paid by the Company and (ii) treat such
pro rata share as foreign income taxes paid by them. Such shareholders may then
use such pro rata portion of foreign income taxes as foreign tax credits,
subject to applicable limitations, or, alternatively, deduct them in computing
their taxable income. Shareholders who do not itemize deductions for federal
income tax purposes will not be entitled to deduct their pro rata portion of
foreign taxes paid by the Company, although such shareholders will still be
required to include their share of such taxes in gross income. Shareholders who
claim a foreign tax credit for foreign taxes paid by the Company may be required
to treat a portion of dividends received from the Company as separate category
income for purposes of computing the limitations on the foreign tax credit.
Tax-exempt shareholders will ordinarily not benefit from this election. Each
year that the Company qualifies for and makes the election described above, its
shareholders will be notified of the amount of (i) each shareholder's pro rata
share of foreign income taxes paid by the Fund and (ii) the portion of dividends
which represents income from each foreign country.
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.
9.
Financial Statements
The financial statements for the fiscal year ended October 31, 1998 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1998 Annual Report to Shareholders of Lord Abbett
Securities Trust are incorporated herein by reference to such financial
statements and report, in reliance upon the authority of Deloitte & Touche LLP
as experts in auditing and accounting.
18
<PAGE>
PART C OTHER INFORMATION
This Post-Effective Amendment No. 26 (the "Amendment") to the Registrant's
Registration Statement relates only to the Growth & Income Fund, International
Fund, World Bond-Debenture Fund, and Alpha Fund - classes A, B and C.
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/or 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.
-------------
International Fund - Y shares 25
International Fund - Y shares 24
Large-Cap International Series - A,B, and C 23
Item 23 Exhibits
(a) Declaration of Trust is incorporated by reference to
Post-Effective Amendment No.19 to the Registration
Statement on Form N-1A filed on 3/1/98.
(b) By-Laws incorporated by reference.
(c) Instruments Defining Rights of Security Holders
incorporated by reference.
(d) Investment Advisory Contracts incorporated by reference.
(e) Underwriting Contracts incorporated by reference.
(f) Bonus or Profit Sharing Contracts is incorporated by
reference to Post Effective Amendment No. 6 to the
Registration Statement on Form N-1A filed on October 7,
1994.
(g) Custodian Agreements incorporated by reference.
(h) Other Material Contracts incorporated by reference.
(i) Legal Opinion incorporated by reference.
(j) Other Opinion. Consent of Independent Auditors.
(k) Omitted Financial Statements incorporated by reference.
(l) Initial Capital Agreements incorporated by reference.
(m) Rule 12b-1 Plan incorporated by reference to Post
Effective Amendment No. 12 filed on August 29, 1996.
(n) Financial Data Schedule.
(o) Rule 18f-3 Plan. Incorporated by reference to Post
Effective Amendment No. 12 filed on August 29, 1996.
Item 24 Persons Controlled by or Under Common Control with the Fund
None.
Item 25 Indemnification
All Trustees, officers, employees and agents of Registrant are to be
indemnified as set forth in Section 4.3 of Registrant's Declaration
of Trust.
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
2
<PAGE>
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 of 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.
In addition, Registrant maintains a Trustees' and officers' errors
and omissions liability insurance policy protecting Trustees and
officers against liability for breach of duty, negligent act, error
or omission committed in their capacity as Trustees or officers. The
policy contains certain exclusions, among which is exclusion from
coverage for active or deliberate dishonest or fraudulent acts and
exclusion for fines or penalties imposed by law or other matters
deemed uninsurable.
Item 26 Business and Other Connections of Investment Adviser
Lord, Abbett & Co. acts as investment adviser for twelve other
investment companies (of which it is principal underwriter for
thirteen) and as investment adviser to approximately 8,300 private
accounts as of September 30, 1998. 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 27 Principal Underwriters
(a) Lord Abbett Mid-Cap Value Fund, Inc.
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett Global Fund, Inc.
Lord Abbett Series Fund, Inc.
Lord Abbett U.S. Government Money Market Fund, Inc.
Lord Abbett Equity Fund
Lord Abbett Tax-Free Income Trust
Lord Abbett Affiliated Fund, Inc.
Lord Abbett Investment Trust
Lord Abbett Research Fund, Inc.
Investment Advisor
American Skandia Trust (Lord Abbett Growth & 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
Paul A. Hilstad Vice President & Secretary
Zane E. Brown Executive Vice President
Robert G. Morris Executive Vice President
Daniel E. Carper Vice President
Robert P. Fetch Vice President
Stephem I. McGruder Vice President
Christopher J. Towle Vice President
3
<PAGE>
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 I. Gerber, Thomas W. Hudson, Jr.,
Michael McLaughlin, Robert J. Noelke, and R. Mark Pennington.
Each of the above has a principal business address:
767 Fifth Avenue, New York, NY 10153
(c) Not applicable
Item 28 Location of Accounts and Records
Registrant maintains the records, required by Rules 31a - 1(a) and
(b), and 31a - 2(a) at its main office.
Lord, Abbett & Co. maintains the records required by Rules 31a -
1(f) and 31a - 2(e) at its main office.
Certain records such as cancelled 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 29 Management Services
None
Item 30 Undertakings
The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
The registrant undertakes, if requested to do so by the holders of
at least 10% of the registrant's outstanding shares, to call a
meeting of shareholders for the purpose of voting upon the question
of removal of a director or directors and to assist in
communications with other shareholders as required by Section 16(c)
of the Investment Company Act of 1940, as amended.
4
<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
30th day of December, 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 Trustee 12/30/98
- ------------------------------ ---------------------- ----------------------
Robert S. Dow (Title) (Date)
/s/E. Thayer Bigelow Trustee 12/30/98
- ------------------------------ ---------------------- ----------------------
E. Thayer Bigelow (Title) (Date)
/s/William H.T. Bush Trustee 12/30/98
- ------------------------------ ---------------------- ----------------------
William H. T. Bush (Title) (Date)
/s/Robert B. Calhoun,Jr. Trustee 12/30/98
- ------------------------------ ---------------------- ----------------------
Robert B. Calhoun, Jr. (Title) (Date)
/s/Stewart S. Dixon Trustee 12/20/98
- ------------------------------ ---------------------- ----------------------
Stewart S. Dixon (Title) (Date)
/s/John C. Jansing Trustee 12/30/98
- ------------------------------ ---------------------- ----------------------
John C. Jansing (Title) (Date)
/s/C. Alan MacDonald Trustee 12/30/98
- ------------------------------ ---------------------- ----------------------
C. Alan MacDonald (Title) (Date)
/s/Hansel B. Millican, Jr. Trustee 12/30/98
- ------------------------------ ---------------------- ----------------------
Hansel B. Millican, Jr. (Title) (Date)
/s/Thomas J. Neff Trustee 12/30/98
- ------------------------------ ---------------------- ----------------------
Thomas J. Neff (Title) (Date)
Vice President and
/s/Keith F. O'Connor Chief Financial Officer 12/30/98
- ------------------------------ ---------------------- ----------------------
Keith F. O'Connor (Title) (Date)
CONSENT OF INDEPENDENT AUDITORS
Lord Abbett Securities Trust:
We consent to the incorporation by reference in Post-Effective Amendment No. 26
to Registration Statement No. 33-58846 of our report dated December 11, 1998
appearing in the Annual Report to Shareholders for the year ended October 31,
1998, and to the references to us under the captions "Financial Highlights" in
the Prospectus and under the captions "Investment Advisory and Other Services"
and "Financial Statements" appearing in the Statement of Additional Information,
both of which are part of such Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
December 28, 1998
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