LORD ABBETT
SECURITIES TRUST
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
800-426-1130
The Alpha Series ("we" or the "Series") is a separate series of Lord Abbett
Securities Trust (the "Fund"). The Fund currently consists of five series. Only
shares of the Alpha Series are being offered by this Prospectus. The Series has
three classes called Class A, B, and C shares, which provide investors with
different options in purchasing shares of the Series. See "Purchases" for a
description of these choices.
We seek long-term capital appreciation. The Series 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 Series invests in three of these
underlying mutual funds (the" Underlying Funds"). There can be no assurance that
we will achieve our objective.
This Prospectus sets forth concisely the information about the Series and the
Fund that a prospective investor should know before investing. Additional
information about the Series and the Fund has been filed with the Securities and
Exchange Commission. The Statement of Additional Information is incorporated by
reference into this Prospectus and may be obtained, without charge, by writing
to the Fund or by calling 800-874-3733. Ask for "Part B of the Prospectus -- The
Statement of Additional Information." The date of this Prospectus and of the
Statement of Additional Information is March 1, 1998.
PROSPECTUS Investors should read and retain this Prospectus. Shareholder
inquiries should be made in writing to the Fund or by calling 800-821-5129. You
can also make inquiries through your broker-dealer.
Shares of the Series are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
An investment in the Series involves risks, including the possible loss of
principal.
CONTENTS PAGE
1 Fee Table 2
2 Investment Objective 3
3 How We Invest 3
4 Purchases 7
5 Shareholder Services 14
6 Our Management 15
7 Dividends, Capital Gains
Distributions and Taxes 16
8 Redemptions 16
9 Performance 17
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
1 FEE TABLE
A summary of expenses of the Alpha Series is set forth in the table below. The
example should not be considered a representation of past or future expenses.
Actual expenses may be greater or less than those shown.
<TABLE>
<CAPTION>
ALPHA SERIES Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Shareholder Transaction Expenses(1)
(as a percentage of offering price)
Maximum Sales Load(2) on Purchases
(See "Purchases") 5.75% None None
Deferred Sales Load(2) (See "Purchases")None 5% if shares are redeemed 1% if shares
before 1st anniversary are redeemed
of purchase, declining before 1st anniversary
to 1% before 6th of purchase
anniversary and
eliminated on and
after 6th anniversary(3)
Annual Fund Operating Expenses(4)
(as a percentage of average net assets)
Management Fees (after waiver)
(See "Our Management")(5) 0.00% 0.00% 0.00%
12b-1 Fees (See "Purchases")(1)(2) 0.25% 1.00% 1.00%
Other Expenses (after subsides)
(See "Our Management") 0.00% 0.00% 0.00%
Total Operating Expenses 0.25% 1.00% 1.00%
</TABLE>
While each class of shares of the Alpha Series is expected to operate with the
direct total operating expenses shown above ("each Alpha class expense ratio"),
shareholders in the Alpha Series bear indirectly the Class Y share expenses of
the Underlying Funds in which the Alpha Series invests exclusively. The
following chart provides the expense ratio for each of the Underlying Funds
invested in by the Alpha Series, as well as the percentage of the Alpha Series'
net assets proposed to be initially invested in each Underlying Fund:
Underlying Funds' Percentage of Alpha Series'
Expense Ratios Net Assets
Lord Abbett Developing Growth .88% 30%
Lord Abbett Research Fund
(Small-Cap Series) 1.15% 30%
Lord Abbett Securities Trust
(International Series) 1.10% 40%
100%
Based on these figures, the average weighted Class Y share expense ratio for the
Underlying Funds in which Alpha Series invests is 1.05% (the "underlying expense
ratio"). This figure is only an approximation of the Alpha Series' underlying
expense ratio, since the assets of the Alpha Series invested in each of the
Underlying Funds change daily.
Example: Using the underlying expense ratio combined with each Alpha class
expense ratio, the following example illustrates the expenses that you would
incur if you assume Alpha Series' annual return is 5% and there is no change in
the level of expenses described above. For a $1,000 investment, with
reinvestment of all dividends and distributions, you would pay the following
total expenses assuming redemption on the last day of each period indicated.
Alpha Series 1 year 3 years Example: You would pay 1 year 3 years
Class A shares $70 $97 the expenses in the $70 $97
Class B shares $71 $95 two right columns on $21 $65
Class C shares $31 $65 the same investment, $21 $65
assuming no redemption:
(1) Although the Alpha Series does not, with respect to the Class B and Class C
shares, charge a front-end sales charge, investors should be aware that
long-term shareholders may pay, under each Rule 12b-1 plan applicable to
the Class B and Class C shares of the Alpha Series (both of which pay
annual 0.25% service and 0.75% distribution fees), more than the economic
equivalent of the maximum front-end sales charge as permitted by certain
rules of the National Association of Securities Dealers, Inc. Likewise,
with respect to Class A shares, investors should be aware that, over the
long term, such maximum may be exceeded due to the Rule 12b-1 plan
applicable to certain net asset value Class A share purchases which permits
the Alpha Series to pay up to 0.50% in total annual fees, half for service
and the other half for distribution. The 12b-1 fees for the Class A shares
are based on estimated fees for the current fiscal year.
(2) Sales "load" is referred to as sales "charge," "deferred sales load" is
referred to as "contingent deferred sales charge" (or "CDSC") and "12b-1
fees" which consist of a "service fee" and a "distribution fee" are
referred to by either or both of these terms where appropriate with respect
to Class A, Class B and Class C shares throughout this Prospectus.
(3) Class B shares will automatically convert to Class A shares on the eighth
anniversary of the purchase of Class B shares.
(4) For Class A, B and C shares, the annual operating expenses shown in the
summary have been estimated and include reductions due to subsidization of
the Series' expenses by the Underlying Funds.
(5) The Alpha Series is obligated to pay Lord, Abbett & Co. ("Lord Abbett") a
management fee of .50 of 1% for the allocation of the Series' assets among
the Underlying Funds. However, Lord Abbett anticipates waiving this fee for
the current fiscal year of the Series.
The foregoing is provided to give investors a better understanding of the
expenses that are incurred by an investment in the Series.
<PAGE>
2 INVESTMENT OBJECTIVE
Our investment objective is to seek long-term capital appreciation. In pursuit
of this objective, the Series over time will have volatility approximating the
unmanaged Salomon Extended Market Index. For example, this index since inception
(January 1, 1990) has had a volatility with respect to its historical annualized
return through December 31, 1997 within a range of 3% to 21%. Also, in pursuit
of this objective, the Series over time will seek to approximate the foreign and
domestic investment balance of this index (if not its exact holdings) within the
confines of the Series' 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 Series. There can be no assurance that the
Series will achieve either this level of performance or volatility or balance or
its objective.
3 HOW WE INVEST
THE ALPHA SERIES INVESTS IN A DIVERSIFIED PORTFOLIO OF UNDERLYING FUNDS. The
Alpha Series will invest all of its assets in underlying mutual funds which are
members of the Lord Abbett Family of Funds. Currently, the Alpha Series invests
in three Lord Abbett Funds which invest primarily in small-capitalized equity
securities. The following table shows how the Alpha Series' assets are initially
divided among the three Underlying Funds:
INVESTMENT INITIAL UNDERLYING FUNDS
CATEGORY PERCENTAGE OF
ALPHA SERIES'
NET ASSETS
Small-Cap 30% Lord Abbett Developing
Equity Growth Growth Fund
Small-Cap 30% Lord Abbett Research
Equity Value Fund - Small-Cap Series
Small-Cap 40% Lord Abbett Securities
Equity International Trust - International
Series
As investments for the Alpha Series' portfolio, the Fund's Trustees have chosen
Lord Abbett Developing Growth Fund, Inc.; Lord Abbett Research Fund, Inc. -
Small-Cap Series; and Lord Abbett Securities Trust - International Series. The
selection of the Underlying Funds in which the Alpha Series portfolio will
invest, as well as the maximum and minimum amounts of the Alpha Series' assets
which can be invested in each Underlying Fund are determined from time to time
by the Fund's "management" (i.e., the officers of the Fund on a day-to-day basis
under the overall supervision of the Fund's Trustees based on the investment
advice of Lord, Abbett & Co. - "Lord Abbett").
From time to time the Alpha Series' investments in the Underlying Funds may be
limited by certain factors and, therefore, the Alpha Series' offering of its
shares to the public may be limited. The Board of Trustees or Directors/Trustees
of any of the Underlying Funds may impose limits on additional investments in a
particular Underlying Fund. For example, restrictions on additional investments
in Lord Abbett Research Fund -- Small-Cap Series imposed by its Board of
Directors could close the Alpha Series' investment in the Small-Cap Series and,
therefore, limit Alpha Series' offering of shares to the public. Currently, the
Small-Cap Series is open to the Alpha Series' investment.
IMPLEMENTATION OF POLICIES. The Underlying Funds in which the Series may invest,
as well as certain other investment practices of the Series are described below.
Investors desiring more information about an Underlying Fund described below
should call 1-800-874-3733 for the Lord Abbett fund's prospectus.
THE ALPHA SERIES INVESTS IN THREE SMALL-CAP STOCK FUNDS. Underlying Funds,
consisting of Lord Abbett Developing Growth Fund, International Series of Lord
Abbett Securities Trust, and Small-Cap Series of Lord Abbett Research Fund are
long-term capital appreciation mutual funds. All three funds seek to achieve
their objectives by investing primarily in companies which are small-sized based
on the value of such companies' outstanding stock.
DEVELOPING GROWTH FUND. The investment objective of the Lord Abbett 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 considered to be in the
developing growth phase.
The developing growth phase, as perceived by Lord Abbett, usually is 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,
the actual growth of a company cannot be foreseen, and it may be difficult to
determine in which phase a company is presently situated.
INTERNATIONAL SERIES. The investment objective of the International Series of
Lord Abbett Securities Trust is long-term capital appreciation. The production
of any current income is incidental to this objective, and the International
Series also may invest in securities which do not produce any income. The
International Series normally invests primarily in equity securities of non-U.S.
issuers.
Portfolio investments for the International Series will be made in equity
securities of companies domiciled in developed countries, but investments also
may be made in the securities of companies domiciled in developing countries.
Equity securities include common and preferred stocks, convertible securities,
and rights and warrants to purchase common stocks. Under normal circumstances,
at least 80% of the total assets of the International Series will be invested in
such equity securities of companies which are domiciled in at least three
different countries outside the United States.
Although the International Series intends to invest primarily in equity
securities of companies listed on stock exchanges with market capitalization of
less than $1 billion, it may also invest in equity securities of such companies
traded in over-the-counter markets, as well as large and middle capitalization
securities.
SMALL-CAP SERIES. The investment objective of the Small-Cap Series of the Lord
Abbett Research Fund is to seek long-term capital appreciation. The Small-Cap
Series will seek its objective through investments primarily in equity
securities which are believed to be undervalued in the marketplace. In its
search for value, the Small-Cap Series seeks companies which are primarily small
sized, based on the value of their outstanding stock. These companies are often
out of favor or not closely followed by investors and, as a result, may offer
substantial appreciation potential over time.
Dividend and investment income is of incidental importance, and the Small-Cap
Series may invest in securities which do not produce any income. The Small-Cap
Series typically will hold a large, diversified number of securities identified
through a quantitative, value-driven investment strategy. Up to 35% of the
Small-Cap Series' net assets (at the time of investment) may be invested in
securities (of the type described above) that are primarily traded in foreign
countries.
SOME POLICIES COMMON TO THE UNDERLYING FUNDS.
Diversification. Each Underlying Fund intends to meet the diversification rules
under Subchapter M of the Internal Revenue Code. Each Underlying Fund met the
diversification rules under Subchapter M for its last fiscal year. Generally,
this requires, at the end of each quarter of the taxable year, that (a) not more
than 25% of each Underlying Fund's total assets be invested in any one issuer
and (b) with respect to 50% of each Underlying Fund's total assets, no more than
5% of such Fund's total assets be invested in any one issuer except U.S.
Government securities.
Each Underlying Fund, as a "diversified" investment company, under the
Investment Company Act of 1940, is prohibited, with respect to 75% of the value
of its total assets, from investing more than 5% of its total assets in
securities of any one issuer other than U.S. Government securities. For
diversification purposes, the identification of an "issuer" for the fixed-income
portion of an Underlying Fund's assets will be determined on the basis of the
source of assets and revenues committed to meeting interest and principal
payments of the securities. When the assets and revenues of a sovereign state's
political subdivision are separate from those of the sovereign state government
creating the subdivision, and the security is backed only by the assets and
revenues of the subdivision, then the subdivision would be considered the sole
issuer. Similarly, if a revenue bond is backed only by the assets and revenues
of a nongovernmental user, then such user would be considered the sole issuer.
Illiquid Securities. Each Underlying Fund may invest up to 15% of its net assets
in illiquid securities.
POLICIES FOR SOME OF THE UNDERLYING FUNDS: INTERNATIONAL AND SMALL-CAP SERIES.
When-Issued or Delayed Delivery Securities. Each Series may purchase securities
on a when-issued basis and, while awaiting delivery and before paying for them
("settlement"), normally may invest in short-term securities. Each Series does
not start earning interest on these when-issued securities until settlement and
often they are sold prior to settlement. During the period between purchase and
settlement, the value of the securities will fluctuate and assets consisting of
cash and/or marketable securities marked to market daily in an amount sufficient
to make payment at settlement will be segregated at our custodian in order to
pay for the commitment. There is a risk that market yields available at
settlement may be higher than yields obtained on the purchase date, which could
result in depreciation of value.
Repurchase Agreements. Each Series may, on occasion, enter into repurchase
agreements whereby the seller of a security agrees to repurchase that security
at a mutually agreed-upon time and price. The period of maturity is usually
quite short, possibly overnight or a few days, although it may extend over a
number of months. The resale price is in excess of the purchase price,
reflecting an agreed-upon rate of return effective for the period of time each
Series' money is invested in the security. Each Series' repurchase agreements
will at all times be fully collateralized in an amount at least equal to the
purchase price, including accrued interest earned on the underlying securities.
The instruments held as collateral are valued daily, and if the value of the
instruments declines, each Series will require additional collateral. If the
seller defaults and the value of the collateral securing the repurchase
agreement declines, each Series may incur a loss.
Short-Term Fixed-Income Securities. The Alpha Series and each of its Underlying
Funds are authorized to invest temporarily in certain short-term fixed income
securities. Such securities may be used to invest uncommitted cash balances, to
maintain liquidity to meet shareholder redemptions, or to take a temporary
defensive position against market declines. These securities include:
obligations of the U.S. Government and its agencies and instrumentalities;
commercial paper, bank certificates of deposit, and bankers' acceptances; and
repurchase agreements collateralized by these securities.
Foreign Currency Hedging Techniques. On occasion, the International and
Small-Cap Series may utilize various foreign currency hedging techniques
described below.
A forward foreign currency contract involves an obligation to purchase or sell a
specific amount of a currency at a set price on a future date. Each Series may
enter into forward foreign currency contracts in primarily two circumstances.
First, when each Series desires to "lock in" the U.S. dollar price of a
security.
Second, each Series may enter into a forward contract (or use a cross-currency
hedge) to sell the amount of foreign currency approximating the value of some or
all of each Series' portfolio securities denominated in such foreign currency
which it expects to decline against the dollar.
Each Series also may transact in currency put options and write foreign currency
call options on U.S. exchanges or U.S. over-the-counter markets to protect a
foreign currency against a decline against the U.S. dollar. A put option gives
each Series, upon payment of a premium, the right to sell a currency at the
exercise price until the expiration of the option and serves to insure against
adverse currency price movements in the underlying portfolio assets denominated
in that currency.
A currency call option written by each Series gives the purchaser, upon payment
of a premium, the right to purchase from each Series a currency at the exercise
price until the expiration of the option. Each Series may write a call option on
a foreign currency only in conjunction with a purchase of a put option on that
currency.
Each Series' custodian will segregate cash or permitted securities belonging to
each Series with respect to its assets committed to (a) writing options, (b)
forward foreign currency contracts and (c) cross hedges entered into by each
Series. If the value of the securities segregated declines, additional cash or
permitted securities will be added on a daily basis (i.e., marked to market), so
that the segregated amount will not be less than the amount of each Series'
commitments with respect to such written options, forward foreign currency
contracts and cross hedges.
CHANGE OF INVESTMENT OBJECTIVES AND POLICIES. Neither the Alpha Series nor an
Underlying Fund will change its investment objective without shareholder
approval. If the Alpha Series or an Underlying Fund determines that its
objective can best be achieved by a change in investment policy or strategy, it
may make such change without shareholder approval by disclosing it in its
prospectus.
PORTFOLIO TURNOVER. The Alpha Series' turnover rate is not expected to exceed
20% annually. A portfolio turnover rate of 100% would occur if all of the Alpha
Series' investments were sold within a year. The Fund's Officers will purchase
or sell securities: (i) to accommodate purchases and sales of Alpha Series'
shares; (ii) on those occasions when they deem that market conditions warrant a
change in the percentage of the Alpha Series' assets invested in each Underlying
Fund; and (iii) to maintain or modify the allocation of the Alpha Series' assets
among the Underlying Funds in which the Series invests within the percentage
limits set by Fund management from time to time.
RISK REDUCTION. In an effort to reduce risk, among other things, each Underlying
Fund is diversified with respect to its investments under both the Internal
Revenue Code and the Investment Company Act of 1940. Further, each Underlying
Fund represents a different method of small-cap investing as the following
describes. Small-Cap Series uses a value method (generally seeks to focus on
seasoned, small companies whose stocks represent bargains. These companies also
may have characteristics which are overlooked or not fully recognized, such as
strong market position, financial strength, high employee ownership, and/or a
culture of flexibility and innovation). International Series uses a method which
seeks to focus its portfolio on leading companies that represent the best
investment potential on an international basis. Fuji Investment Management Co.
(Europe), Ltd., an affiliate of Fuji Bank, Ltd. (one of the world's largest and
most respected banks) provides international expertise in market analysis and
company research as part of International Series' investment process. Developing
Growth Fund uses a growth method which generally seeks to focus on small
companies with above-average, long-term growth rates with strong management and
a proven commitment to growth. Developing Growth Fund looks for other
characteristics that will help a company's growth, such as unique products or
services or new markets or patents, copyrights and/or special licensing which
are overlooked by others. Finally, Alpha Series' assets are allocated according
to maximum and minimum amounts which can be invested in each Underlying Fund as
determined from time to time by Fund management. Collectively, these three
Underlying Funds are invested in approximately 200 to 300 or more companies at
any particular time across the spectrum of investment methods and
diversification requirements and Alpha Series' own asset allocation process
among these three funds from time to time.
Regardless of these efforts to reduce risk, investors in Alpha Series should
consider the following market risks.
MARKET RISKS. Small-Capitalized Stocks. As a mutual fund investing its assets
primarily in common stocks of small-capitalized companies, the Alpha Series is
subject to stock market risk - i.e., the possibility that stock prices in
general will decline over short or even extended periods. The stock market tends
to be cyclical, with periods when stock prices generally rise and periods when
stock prices generally decline.
The small capitalized companies in which the Underlying Funds primarily invest
may offer significant appreciation potential. However, smaller companies may
carry more risk than larger companies. Generally, small companies rely on
limited product lines and markets, financial resources, or other factors, and
this may make them more susceptible to setbacks or economic downturns. Small
capitalized companies may be more volatile in price, normally have fewer shares
outstanding and 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
and may not be traded in the volume typical of a national securities exchange.
Foreign Securities. A portion of the small-capitalized stock in which the
Underlying Funds invest trades in foreign countries ranging from up to 10%
(Developing Growth) through up to 35% (Small-Cap Series) to at least 80%
(International Series).
Securities markets of foreign countries in which the Underlying Funds may invest
generally are not subject to the same degree of regulation as the U.S. markets
and may be more volatile and less liquid than the major U.S. markets. Lack of
liquidity may affect the Underlying Funds' ability to purchase or sell large
blocks of securities and thus obtain the best price. There may be less
publicly-available information on publicly-traded companies, banks and
governments in foreign countries than generally is the case for such entities in
the United States. The lack of uniform accounting standards and practices among
countries impairs the validity of direct comparisons of valuation measures (such
as price/earnings ratios) for securities in different countries. Other
considerations include political and social instability, expropriation, higher
transaction costs, withholding taxes that cannot be passed through as a tax
credit or deduction to shareholders, currency fluctuations and different
securities settlement practices. Settlement periods for foreign securities,
which are sometimes longer than those for securities of U.S. issuers, may affect
portfolio liquidity. In addition, foreign securities held by the Underlying
Funds may be traded on days that the Underlying Funds do not value their
portfolio securities, such as Saturdays and customary business holidays and,
accordingly, the Underlying Funds' (and thus the Alpha Series') net asset values
may be significantly affected on days when shareholders do not have access to
the Alpha Series.
4 PURCHASES
ALTERNATIVE SALES ARRANGEMENTS
CLASSES OF SHARES. The Alpha Series offers investors three different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and 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" defined under
"Class A Share Net Asset Value Purchases" below). 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 Series 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 .25 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 under
"General" 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 under "General" 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 Series a CDSC of 1%. Class C shares are
subject to service and distribution fees at an annual rate of 1% of the annual
net asset value of the Class C shares. The CDSC and the Rule 12b-1 plan
applicable to the C shares are described under "General" below.
WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Series is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your investment professional. The Series' class-specific expenses
and the effect of the different types of sales charges on your investment will
affect your investment results over time. The most important factors are how
much you plan to invest and how long you plan to hold your investment. If your
goals and objectives change over time and you plan to purchase additional
shares, you should re-evaluate those factors to see if you should consider
another class of shares.
In the following discussion, to help provide you and your investment
professional with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Series. We used the sales
charge rates that apply to Class A, Class B and Class C shares, 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 Series' actual
investment returns, the operating expenses borne by each class of shares, and
the class of shares you purchase. The factors briefly discussed below are not
intended to be investment advice, guidelines or recommendations, because each
investor's financial considerations are different. The discussion below of the
factors to consider in purchasing a particular class of shares assumes that you
will purchase only one class of shares and not a combination of shares of
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 shares you redeem after holding them for 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 shares might be
more appropriate than Class C shares 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 shares. If you are investing $500,000 or more, Class A
shares may become more desirable as your investment horizon approaches 3 years
or more.
For most investors who invest $1 million or more, 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.
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 Series' 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.
You should discuss your purchase order for a specific class of shares with your
investment professional.
ARE THERE DIFFERENCES IN ACCOUNT FEATURES THAT MATTER TO YOU? Some account
features are available in whole or in part to Class A, Class B and Class C
shareholders. Other features (such as Systematic Withdrawal Plans) might not be
advisable in non-Retirement Plan accounts for Class B shareholders (because of
the effect of the CDSC on the entire amount of a withdrawal if it exceeds 12%
annually) and in any account for Class C shareholders during the first year of
share ownership (due to the CDSC on withdrawals during that year). See
"Systematic Withdrawal Plan" under "Shareholder Services" for more information
about the 12% annual waiver of the CDSC with respect to Class B shares. 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 Series
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 Series and Class C shareholders.
GENERAL
HOW MUCH MUST YOU INVEST? You may buy our shares through any independent
securities dealer having a sales agreement with Lord Abbett Distributor, our
exclusive selling agent. Place your order with your investment dealer or send it
to the Alpha Series of the Lord Abbett Securities Trust (P.O. Box 419100, Kansas
City, Missouri 64141). The minimum initial investment is $1,000 except for
Invest-A-Matic ($250 initial and $50 subsequent minimum), Div-Move ($50 minimum)
and Individual Retirement Accounts ($250 minimum). For Retirement Plans there is
no minimum investment required. See "Shareholder Services." For information
regarding the proper form of a purchase or redemption order, call the Series at
800-821-5129. This offering may be suspended, changed or withdrawn. Lord Abbett
Distributor reserves the right to reject any order.
The net asset value of our shares is calculated every business day as of the
close of the New York Stock Exchange ("NYSE") by dividing net assets by the
number of shares outstanding. Securities are valued at their market value as
more fully described in the Statement of Additional Information.
BUYING SHARES THROUGH YOUR DEALER. Orders for shares received by the Series
prior to the close of the NYSE, or received by dealers prior to such close and
received by Lord Abbett Distributor prior to the close of its business day, will
be confirmed at the applicable public offering price effective at such NYSE
close. Orders received by dealers after the NYSE closes and received by Lord
Abbett Distributor in proper form prior to the close of its next business day
are executed at the applicable public offering price effective as of the close
of the NYSE on that next business day. The dealer is responsible for the timely
transmission of orders to Lord Abbett Distributor. A business day is a day on
which the NYSE is open for trading.
Lord Abbett Distributor may, for specified periods, allow dealers to retain the
full sales charge for sales of shares during such periods, or pay an additional
concession to a dealer who, during a specified period, sells a minimum dollar
amount of our shares and/or shares of other Lord Abbett-sponsored funds. In some
instances, such additional concessions will be offered only to certain dealers
expected to sell significant amounts of shares. Lord Abbett Distributor may,
from time to time, implement promotions under which Lord Abbett Distributor will
pay a fee to dealers with respect to certain purchases not involving imposition
of a sales charge. Additional payments may be paid from Lord Abbett
Distributor's own resources and will be made in the form of cash or, if
permitted, non-cash payments. The non-cash payments will include business
seminars at resorts or other locations, including meals and entertainment, or
the receipt of merchandise. The cash payments will include payment of various
business expenses of the dealer. In selecting dealers to execute portfolio
transactions for the Series' portfolio, if two or more dealers are considered
capable of obtaining best execution, we may prefer the dealer who has sold our
shares and/or shares of other Lord Abbett-sponsored funds.
BUYING CLASS A SHARES. The offering price of Class A shares is based on the
per-share net asset value next computed after your order is accepted plus a
sales charge as follows.
Sales Charge as a Dealer's
Percentage of: Concession
as a To Compute
Net Percentage Offering
Offering Amount of Offering Price, Divide
Size of Investment Price Invested Price NAV by
Less than $50,000 5.75% 6.10% 5.00% .9425
$50,000 to $99,999 4.75% 4.99% 4.00% .9525
$100,000 to $249,999 3.75% 3.90% 3.25% .9625
$250,000 to $499,999 2.75% 2.83% 2.25% .9725
$500,000 to $999,999 2.00% 2.04% 1.75% .9800
$1,000,000 or more No Sales Charge 1.00%+ 1.0000
+Authorized institutions receive concessions on purchases made by a Retirement
Plan, pursuant to a special retirement wrap program or by another qualified
purchaser within a 12-month period (beginning with the first net asset value
purchase) as follows: 1.00% on purchases of $5 million, 0.55% of the next $5
million, 0.50% of the next $40 million and 0.25% on purchases over $50 million.
See "Class A Rule 12b-1 Plan" below.
CLASS A SHARE VOLUME DISCOUNTS. This section describes several ways to qualify
for a lower sales charge when purchasing Class A shares if you inform Lord
Abbett Distributor or the Series that you are eligible at the time of purchase.
(1) Any purchaser (as described below) may aggregate a Class A share purchase in
the Series with any share purchases of any other eligible Lord Abbett-sponsored
fund, together with the current value at maximum offering price of any shares in
the Series and in any eligible Lord Abbett-sponsored funds held by the
purchaser. (Holdings in the following funds are not eligible for the above
rights of accumulation: Lord Abbett Equity Fund ("LAEF"), Lord Abbett Series
Fund ("LASF"), any series of Lord Abbett Research Fund not offered to the
general public ("LARF") and Lord Abbett U.S. Government Securities Money Market
Fund ("GSMMF"), except for holdings in GSMMF which are attributable to any
shares exchanged from a Lord Abbett-sponsored fund.) (2) A purchaser may sign a
non-binding 13-month statement of intention to invest $50,000 or more in any
shares of the Series or in any of the above eligible funds. If the intended
purchases are completed during the period, the total amount of your intended
purchases of any shares will determine the reduced sales charge rate for the
Class A shares purchased during the period. If not completed, each Class A share
purchase will be at the sales charge for the aggregate of the actual share
purchases. Shares issued upon reinvestment of dividends or distributions are not
included in the statement of intention. The term "purchaser" includes (i) an
individual, (ii) an individual and his or her spouse and children under the age
of 21 and (iii) a trustee or other fiduciary purchasing shares for a single
trust estate or single fiduciary account (including a pension, profit-sharing,
or other employee benefit trust qualified under Section 401 of the Internal
Revenue Code -- more than one qualified employee benefit trust of a single
employer, including its consolidated subsidiaries, may be considered a single
trust, as may qualified plans of multiple employers registered in the name of a
single bank trustee as one account), although more than one beneficiary is
involved.
CLASS A SHARE NET ASSET VALUE PURCHASES. Our Class A shares may be purchased at
net asset value by our trustees, employees of Lord Abbett, employees of our
shareholder servicing agent and employees of any securities dealer having a
sales agreement with Lord Abbett Distributor who consents to such purchases or
by the trustee or custodian under any pension or profit-sharing plan or Payroll
Deduction IRA established for the benefit of such persons or for the benefit of
any national securities trade organization to which Lord Abbett or Lord Abbett
Distributor belongs or any company with an account(s) in excess of $10 million
managed by Lord Abbett on a private-advisory account basis. For purposes of this
paragraph, the terms "trustees" and "employees" include a trustee's or
employee's spouse (including the surviving spouse of a deceased trustee or
employee). The terms "trustees" and "employees of Lord Abbett" also include
other family members and retired trustees and employees. Our Class A shares also
may be purchased at net asset value (a) at $1 million or more, (b) with
dividends and distributions on Class A shares of other Lord Abbett-sponsored
funds, except for dividends and distributions on shares of LARF, LAEF and LASF,
(c) under the loan feature of the Lord Abbett-sponsored prototype 403(b) plan
for Class A share purchases representing the repayment of principal and
interest, (d) by certain authorized brokers, dealers, registered investment
advisers or other financial institutions who have entered into an agreement with
Lord Abbett Distributor in accordance with certain standards approved by Lord
Abbett Distributor, providing specifically for the use of our Class A shares in
particular investment products made available for a fee to clients of such
brokers, dealers, registered investment advisers and other financial
institutions ("mutual fund wrap-fee programs"), (e) by employees, partners and
owners of unaffiliated consultants and advisers to Lord Abbett, Lord Abbett
Distributor or Lord Abbett-sponsored funds who consent to such purchase if such
persons provide services to Lord Abbett, Lord Abbett Distributor or such funds
on a continuing basis and are familiar with such fund, (f) through Retirement
Plans with at least 100 eligible employees, and (g) 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-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 a Class A 12b-1 plan and the fact that
the program relates to participant-directed Retirement Plans.
There are no minimum initial or subsequent investment requirements for the
above-mentioned mutual fund wrap-fee programs.
CLASS A RULE 12B-1 PLAN. We have adopted a Class A share Rule 12b-1 plan (the "A
Plan") which authorizes the payment of fees to authorized institutions (except
as to certain accounts for which tracking data is not available) in order to
provide additional incentives for them (a) to provide continuing information and
investment services to their Class A shareholder accounts and otherwise to
encourage those accounts to remain invested in the Series and (b) to sell Class
A shares of the Series. Under the A Plan, in order to save on the expense of
shareholders' meetings and to provide flexibility to the Board of Trustees, the
Board, including a majority of the outside trustees who are not "interested
persons" of the Fund as defined in the Investment Company Act of 1940, is
authorized to approve annual fee payments from our Class A assets of up to 0.50
of 1% of the average net of such assets consisting of distribution and service
fees, each at a maximum annual rate not exceeding 0.25 of 1% (the "Fee
Ceiling").
Under the A Plan, the Board has approved payments by the Series to Lord Abbett
Distributor which uses or passes on to authorized institutions (1) an annual
service fee (payable quarterly) of .25% of the average daily net asset value of
the Class A shares serviced by authorized institutions and (2) a one-time
distribution fee of up to 1% (reduced according to the following schedule: 1% of
the first $5 million, .55% of the next $5 million, .50% of the next $40 million
and .25% over $50 million), payable at the time of sale on all Class A shares
sold during any 12-month period starting from the day of the first net asset
value sale (i) at the $1 million level by authorized institutions, including
sales qualifying at such level under the rights of accumulation and statement of
intention privileges; (ii) through Retirement Plans with at least 100 eligible
employees or (iii) constituting new sales pursuant to a "special retirement wrap
program" and excluding exchanges into the Series under such a program. In
addition, the Board has approved for those authorized institutions which qualify
a supplemental annual distribution fee equal to 0.10% of the average daily net
asset value of the Class A shares serviced by authorized institutions which have
a program for the promotion and retention of such shares satisfying Lord Abbett
Distributor. Class A shares held pursuant to a satisfactory program would, for
example, (i) constitute a significant percentage of the Fund's net assets, (ii)
be held for a substantial length of time and/or (iii) have a lower than average
redemption rate. Institutions and persons permitted by law to receive such fees
are "authorized institutions."
Under the A Plan, Lord Abbett Distributor is permitted to use payments received
to provide continuing services to Class A shareholder accounts not serviced by
authorized institutions and, with Board approval, to finance any activity which
is primarily intended to result in the sale of Class A shares. Any such payments
are subject to the Fee Ceiling. Any payments under that Plan not used by Lord
Abbett Distributor in this manner are passed on to authorized institutions.
Holders of Class A shares on which the 1% sales distribution fee has been paid
may be required to pay to the Series on behalf of its Class A shares a CDSC of
1% of the original cost or the then net asset value, whichever is less, of all
Class A shares so purchased which are redeemed out of the Lord Abbett-sponsored
family of funds on or before the end of the twenty-fourth month after the month
in which the purchase occurred. (Exceptions are made for: (i) redemptions by
Retirement Plans due to any benefit payment such as Plan loans, hardship
withdrawals, death, retirement or separation from service with respect to plan
participants or the distribution of any excess contributions and (ii)
participant-directed redemptions which continue as program investments in
another fund participating in a "special retirement wrap program.") If the Class
A shares have been exchanged into another Lord Abbett-sponsored fund and are
thereafter redeemed out of the Lord Abbett family of funds on or before the end
of such twenty-fourth month, the charge will be collected for the Series' Class
A shares by the other fund. The Series will collect such a charge for other Lord
Abbett-sponsored funds in a similar situation.
BUYING CLASS B SHARES. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed for
cash before the sixth anniversary of their purchase, a CDSC may be deducted from
the redemption proceeds. That sales charge will not apply to shares purchased by
the reinvestment of dividends or capital gains distributions. The charge will be
assessed on the lesser of the net asset value of the shares at the time of
redemption or the original purchase price. The Class B CDSC is paid to Lord
Abbett Distributor to compensate it for its services rendered in connection with
the distribution of Class B shares, including the payment and financing of sales
commissions. See "Class B Rule 12b-1 Plan" below.
To determine whether the CDSC applies to a redemption, the Series redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held until the sixth anniversary of
their purchase or later, and (3) shares held the longest before the sixth
anniversary of their purchase.
The amount of the CDSC will depend on the number of years since you invested and
the dollar amount being redeemed, according to the following schedule.
Anniversary
of the Day on Contingent Deferred
Which the Purchase Sales Charge on
Order Was Accepted Redemptions
(As % of Amount
On Before Subject to Charge)
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 None
6th anniversary
In the table, an "anniversary" is the 365th day subsequent to a purchase or a
prior anniversary. All purchases are considered to have been made on the
business day the purchase was made. See "Buying Shares Through Your Dealer"
above.
If Class B shares are exchanged into the same class of another Lord
Abbett-sponsored fund and the new shares are subsequently redeemed for cash
before the sixth anniversary of the original purchase, the CDSC will be payable
on the new shares on the basis of the time elapsed from the original purchase.
The Series will collect such a charge for other Lord Abbett-sponsored funds in a
similar situation.
WAIVER OF CLASS B SALES CHARGES. The Class B CDSC will not be applied to shares
purchased in certain types of transactions nor will it apply to shares redeemed
in certain circumstances as described below.
The Class B CDSC will be waived for redemptions of shares (i) in connection with
the Systematic Withdrawal Plan and Div-Move services, as described in more
detail under "Shareholder Services" below, (ii) by Retirement Plans due to any
benefit payment such as Plan loans, hardship withdrawals, death, retirement or
separation from service with respect to plan participants or the distribution of
any excess contributions, (iii) in connection with the death of an individual
shareholder (natural person), and (iv) in connection with mandatory
distributions under 403(b) plans and individual retirement accounts. If Class B
shares represent a part of an individual's total IRA or 403(b) investment, the
CDSC waiver is available only for that portion of a mandatory distribution which
bears the same relation to the entire mandatory distribution as the B share
investment bears to the total investment.
CLASS B RULE 12B-1 PLAN. The Series has adopted a Class B share Rule 12b-1 Plan
(the "B Plan") under which the Series periodically pays Lord Abbett Distributor
(i) an annual service fee of 0.25 of 1% of the average daily net asset value of
the Class B shares and (ii) an annual distribution fee of 0.75 of 1% of the
average daily net asset value of the Class B shares that are outstanding for
less than eight years.
Lord Abbett Distributor uses the service fee to compensate authorized
institutions (except as to certain accounts for which tracking data is not
available) for providing personal services for accounts that hold Class B
shares. Those services are similar to those provided under the A Plan, described
above.
<PAGE>
Lord Abbett Distributor pays an up-front payment to authorized institutions
totaling 4%, consisting of 0.25% for service and 3.75% for a sales commission as
described below.
Lord Abbett Distributor pays the 0.25% service fee to authorized institutions in
advance for the first year after Class B shares have been sold by the authorized
institutions. After the shares have been held for a year, Lord Abbett
Distributor pays the service fee on a quarterly basis. Lord Abbett Distributor
is entitled to retain such service fee payable under the B Plan with respect to
accounts for which there is no authorized institution of record or for which
such authorized institution did not qualify. Although not obligated to do so,
Lord Abbett Distributor may waive receipt from the Series of part or all of the
service fee payments.
The 0.75% annual distribution fee is paid to Lord Abbett Distributor to
compensate it for its services rendered in connection with the distribution of
Class B shares, including the payment and financing of sales commissions.
Although Class B shares are sold without a front-end sales charge, Lord Abbett
Distributor pays authorized institutions responsible for sales of Class B shares
a sales commission of 3.75% of the purchase price. This payment is made at the
time of sale from Lord Abbett
Distributor's own resources. Lord Abbett has made arrangements to finance these
commission payments, which arrangements include non-recourse assignments by Lord
Abbett Distributor to the financing party of such distribution and CDSC payments
concerning Class B shares.
The distribution fee and CDSC payments described above allow investors to buy
Class B shares without a front-end sales charge while allowing Lord Abbett
Distributor to compensate authorized institutions that sell Class B shares. The
CDSC is intended to supplement Lord Abbett Distributor's reimbursement for the
commission payments it has made with respect to Class B shares and its related
distribution and financing costs. The distribution fee payments are at a fixed
rate and the CDSC payments are of a nature that, during any year, both forms of
payment may not be sufficient to reimburse Lord Abbett Distributor for its
actual expenses. The Series is not liable for any expenses incurred by Lord
Abbett Distributor in excess of (i) the amount of such distribution fee payments
to be received by Lord Abbett Distributor and (ii) unreimbursed distribution
expenses of Lord Abbett Distributor incurred in a prior plan year, subject to
the right of the Board of Trustees or shareholders to terminate the B Plan. Over
the long term, the expenses incurred by Lord Abbett Distributor are likely to be
greater than such distribution fee and CDSC payments. Nevertheless, there exists
a possibility that for a short-term period Lord Abbett Distributor may not have
sufficient expenses to warrant reimbursement by receipt of such distribution fee
payments. Although Lord Abbett Distributor does not intend to make a profit
under the B Plan, the B Plan is considered a compensation plan (i.e.,
distribution fees are paid regardless of expenses incurred) in order to avoid
the possibility of Lord Abbett Distributor not being able to receive
distribution fees because of a temporary timing difference between its incurring
expenses and receipt of such distribution fees.
AUTOMATIC CONVERSION OF CLASS B SHARES. On the eighth anniversary of your
purchase of Class B shares, those shares will automatically convert to Class A
shares. This conversion relieves Class B shareholders of the higher annual
distribution fee that applies to Class B shares under the B Plan. The conversion
is based on the relative net asset values of the two classes, and no sales
charge or other charge is imposed. When Class B shares convert, any other Class
B shares that were acquired by the reinvestment of dividends and distributions
will also convert to Class A shares on a pro rata basis. The conversion feature
is subject to the continued availability of an opinion of counsel or a tax
ruling described in "Purchases, Redemptions and Shareholder Services" in the
Statement of Additional Information.
BUYING CLASS C SHARES. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed for
cash before the first anniversary of their purchase, a CDSC of 1% will be
deducted from the redemption proceeds. That reimbursement charge will not apply
to shares purchased by the reinvestment of dividends or capital gains
distributions. The charge will be assessed on the lesser of the net asset value
of the shares at the time of redemption or the original purchase price. The
Class C CDSC is paid to the Series to reimburse it, in whole or in part, for the
service and distribution fee payments made by the Series at the time such shares
were sold, as described below.
To determine whether the CDSC applies to a redemption, the Series redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
<PAGE>
capital gains distributions, (2) shares held for one year or more and (3) shares
held the longest before the first anniversary of their purchase. If Class C
shares are exchanged into the same class of another Lord Abbett-sponsored fund
and subsequently redeemed before the first anniversary of their original
purchase, the charge will be collected by the other fund on behalf of this
Series' Class C shares. The Series will collect such a charge for other Lord
Abbett-sponsored funds in a similar situation.
CLASS C RULE 12B-1 PLAN. The Series has adopted a Class C share Rule 12b-1 Plan
(the "C Plan") under which (except as to certain accounts for which tracking
data is not available) the Series pays authorized institutions through Lord
Abbett Distributor (1) a service fee and a distribution fee, at the time shares
are sold, not to exceed 0.25 and 0.75 of 1%, respectively, of the net asset
value of such shares and (2) at each quarter-end after the first anniversary of
the sale of shares, fees for services and distribution at annual rates not to
exceed 0.25 and 0.75 of 1%, respectively, of the average annual net asset value
of such shares outstanding (payments with respect to shares not outstanding
during the full quarter to be prorated). These service and distribution fees are
for purposes similar to those mentioned above with respect to the A Plan. Sales
in clause (1) exclude shares issued for reinvested dividends and distributions
and shares outstanding in clause (2) include shares issued for reinvested
dividends and distributions after the first anniversary of their issuance.
5 SHAREHOLDER SERVICES
We offer the following shareholder services:
Telephone Exchange Privilege: Shares of any class may be exchanged without a
service charge: (a) for shares of the same class of any other Lord
Abbett-sponsored fund except for (i) LAEF, LASF and LARF and (ii) certain
tax-free, single-state series where the exchanging shareholder is a resident of
a state in which such series is not offered for sale and (b) for shares of any
authorized institution's affiliated money market fund satisfying Lord Abbett
Distributor as to certain omnibus account and other criteria (together,
"Eligible Funds").
You or your representative with proper identification can instruct the Series to
exchange uncertificated shares of a class (held by the transfer agent) by
telephone. Shareholders have this privilege unless they refuse it in writing.
The Series will not be liable for following instructions communicated by
telephone that it reasonably believes to be genuine and will employ reasonable
procedures to confirm that instructions received are genuine, including
requesting proper identification and recording all telephone exchanges.
Instructions must be received by the Series in Kansas City (800-821-5129) prior
to the close of the NYSE to obtain each fund's net asset value per class share
on that day. Expedited exchanges by telephone may be difficult to implement in
times of drastic economic or market change. The exchange privilege should not be
used to take advantage of short-term swings in the market. The Series reserves
the right to terminate or limit the privilege of any shareholder who makes
frequent exchanges. The Series can revoke the privilege for all shareholders
upon 60 days' prior written notice. A prospectus for the other Lord
Abbett-sponsored fund selected by you should be obtained and read before an
exchange. Exercise of the exchange privilege will be treated as a sale for
federal income tax purposes and, depending on the circumstances, a capital gain
or loss may be recognized.
Systematic Withdrawal Plan ("SWP"): Except for Retirement Plans for which there
is no such minimum, if the maximum offering price value of your uncertificated
shares is at least $10,000, you may have periodic cash withdrawals automatically
paid to you in either fixed or variable amounts. With respect to Class B shares,
the CDSC will be waived on redemptions of up to 12% per year of the current net
asset value of your account at the time your SWP is established. For Class B
shares (over 12% per year) and C shares, redemption proceeds due to a SWP will
be derived from the following sources in the order listed: (1) shares acquired
by reinvestment of dividends and capital gains, (2) shares held for six years or
more (Class B) or one year or more (Class C); and (3) shares held the longest
before the sixth anniversary of their purchase (Class B) or before the first
anniversary of their purchase (Class C). For Class B share redemptions over 12%
per year, the CDSC will apply to the entire redemption.
Therefore, please contact the Series for assistance in minimizing the CDSC in
this situation. Shareholders should be careful in establishing a SWP, especially
to the extent that such a withdrawal exceeds the annual total return for a
class, in which case, the shareholder's original principal will be invaded and,
over time, may be depleted.
<PAGE>
Div-Move: You can invest the dividends paid on your account ($50 minimum
investment) into an existing account within the same class in any Eligible Fund.
The account must be either your account, a joint account for you and your
spouse, a single account for your spouse or a custodial account for your minor
child under the age of 21. Such dividends are not subject to a CDSC. You should
read the prospectus of any other fund before investing.
Invest-A-Matic: You can make fixed, periodic investments ($250 minimum initial
and $50 subsequent minimum investment) into the Series and/or any Eligible Fund
by means of automatic money transfers from your bank checking account. You
should read the prospectus of the other fund before investing.
Retirement Plans: Lord Abbett makes available the retirement plan documents,
including 401(k) plans and custodial agreements for IRAs (Individual Retirement
Accounts including Simple IRAs and Simplified Employee Pensions), 403(b) plans
and pension and profit-sharing plans.
Householding: Generally, shareholders with the same last name and address will
receive a single copy of an annual or semi-annual report, unless additional
reports are specifically requested in writing to the Fund.
All correspondence should be directed to the Alpha Series of Lord Abbett
Securities Trust (P.O. Box 419100, Kansas City, Missouri 64141; 800-821-5129).
6 OUR MANAGEMENT
We employ Lord Abbett as investment manager for the Alpha Series pursuant to a
Management Agreement. Lord Abbett has been an investment manager for over 67
years and currently manages approximately $25 billion in a family of mutual
funds and other advisory accounts. Under the Management Agreement, Lord Abbett
is obligated to provide the Series with investment management services (such as
the selection of the Underlying Funds in which the Alpha Series will invest, as
well as maximum and minimum amount of the Alpha Series' assets which can be
invested in each Underlying Fund) and executive and other personnel, pay the
remuneration of our officers and of our trustees affiliated with Lord Abbett,
provide us with office space and pay for ordinary and necessary office and
clerical expenses relating to research, statistical work and supervision of the
Series' portfolio and certain other costs. Lord Abbett provides investment
management services to twelve other Lord Abbett-sponsored funds having various
investment objectives and also advises other investment clients.
The Series' investment decisions are made by Robert G. Morris, Lord Abbett
Partner and Executive Vice President of the Fund and Portfolio Manager of the
Series. Mr. Morris has served as Portfolio Manager since the start of the
Series.
Under the Management Agreement, the Series is obligated to pay Lord Abbett a
monthly fee, based on average daily net assets, at the annual rate of .50 of 1%
for allocating the Alpha Series' assets among the Underlying Funds. However,
because Lord Abbett expects to waive this fee for the current fiscal year of the
Series, the effective fee payable to Lord Abbett by the Series as a percentage
of average daily net assets is expected to be at the annual rate of zero
percent. In addition, we pay all expenses not expressly assumed by Lord Abbett
or the Underlying Funds. The Series' ratio of expenses, including management fee
expenses, to average net assets for the one-year period after commencement of
operations of the Series is expected to be .25% for Class A shares and 1.00% for
Class B and Class C shares.
The Officers and Trustees of the Fund also serve in similar positions in the
Underlying Funds. If the interests of the Alpha Series and the Underlying Funds
were ever to become divergent, a concern might arise that this could create a
potential conflict of interest which could affect how the Officers or Trustees
fulfill their fiduciary duties to the Alpha Series and the Underlying Funds. The
Trustees believe that the Fund policy described as follows will avoid the
concerns which could arise. Conceivably, a situation could occur where proper
portfolio or other action for the Alpha Series could be adverse to the interests
of an Underlying Fund, or the reverse could occur. If such a possibility appears
likely, the Trustees and Officers will carefully analyze the situation and take
all steps they believe reasonable to minimize and, where possible, eliminate the
potential conflict. Moreover, limitations on aggregate investments in the
Underlying Funds and other restrictions will be adopted by the Fund's management
to minimize this possibility from time to time, and continuous monitoring will
be exercised to avoid, insofar as possible, these concerns.
<PAGE>
7 DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
With respect to the Series, dividends from taxable net investment income may be
taken in cash or invested in additional shares at net asset value (without a
sales charge) and will be paid to shareholders annually in December.
A capital gains distribution is made when the Series has net profits during the
year from sales of securities. Any capital gains distributions will be made
annually in December. They may be taken in cash or invested in more shares at
net asset value without a sales charge.
For tax-deferred retirement accounts (such as Individual Retirement Accounts or
other retirement plans sponsored by Lord Abbett), dividends and capital gains
distribution from the Series most likely will be reinvested in additional
shares.
Dividends and distributions declared in October, November or December of any
year will be treated for federal income tax purposes as having been received by
shareholders of the Series in that year if they are paid before February 1 of
the following year. A supplemental capital gains distribution also may be paid
in December.
The Series intends to meet the requirements of Subchapter M of the Internal
Revenue Code. The Series will try to distribute to shareholders all of its net
investment income and net realized capital gains, so as to avoid the necessity
of paying federal income tax.
If you open an IRA or other tax-deferred retirement account, dividend and
capital gains distributions from the Alpha Series will generally be exempt from
current taxation. You are advised to consult with a tax professional on the
specific rules governing your own tax deferred arrangement. There are varying
restrictions imposed by the Internal Revenue Service on eligibility,
contributions and withdrawals, depending on the type of tax-deferred account you
selected. The rules governing tax-deferred retirement plans are complex, and
failure to comply with the IRS's rules and regulations governing your specific
type of plan may result in substantial costs to you, including the loss of tax
advantages and the imposition of additional taxes and penalties by the IRS.
If you open an account in the Alpha Series outside a tax-deferred retirement
account, the following tax rules will generally apply. For the regular
investment accounts, dividends paid by the Alpha Series from the net investment
income and net short capital gains, whether received in cash or reinvested in
additional shares, will be taxable to shareholders at ordinary income rates.
Any capital gains distribution may be taken in cash or reinvested. Distributions
of any net long-term capital gains will be taxable to a shareholder as long-term
capital gains, regardless of how long the shareholder has held the shares. Under
recently enacted legislation, the maximum tax rate on long-term capital gains
for a U.S. individual, estate or trust is reduced to 20% for distributions
derived from the sale of assets held by the Fund for more than 18 months. (If
the taxpayer is in the 15% tax bracket, the rate is 10%.) For distributions
derived from the sale of assets held by the Fund for between 12 and 18 months,
the tax rate remains at 28% (15% if the taxpayer is in the 15% tax bracket).
If you elect to receive dividends or capital gains in cash, a check will be
mailed to you as soon as possible after the reinvestment date. If you arrange
for direct deposit, your payment will be electronically transmitted to your bank
account within one day after the payable date.
Shareholders may be subject to a $50 penalty under the Internal Revenue Code and
we may be required to withhold and remit to the U.S. Treasury a portion (31%) of
any redemption or repurchase proceeds and of any dividend or distribution on any
account, where the payee (shareholder) failed to provide a correct taxpayer
identification number or to make certain required certifications.
Limitations imposed by the Internal Revenue Code on regulated investment
companies may restrict the Series' ability to engage in transactions in options,
forward contracts and cross hedges.
We will inform shareholders of the federal tax status of each dividend and
distribution after the end of each calendar year. Shareholders should consult
their tax advisers concerning applicable state and local taxes as well as on the
tax consequences of gains or losses from the redemption or exchange of our
shares.
8 REDEMPTIONS
To obtain the proceeds of an expedited redemption of $50,000 or less, you or
your representative with proper identification can telephone the Series. The
Series will not be liable for following instructions communicated by telephone
<PAGE>
that it reasonably believes to be genuine and will employ reasonable procedures
to confirm that instructions received are genuine, including requesting proper
identification, recording all telephone redemptions and mailing the proceeds
only to the named shareholder at the address appearing on the account
registration.
If you do not qualify for the expedited procedures described above, to redeem
shares directly, send your request to the Alpha Series of the Lord Abbett
Securities Trust (P.O. Box 419100, Kansas City, Missouri 64141) with
signature(s) and any legal capacity of the signer(s) guaranteed by an eligible
guarantor, accompanied by any certificates for shares to be redeemed and other
required documentation. We will make payment of the net asset value of the
shares on the date the redemption order was received in proper form. Payment
will be made within three days. The Series may suspend the right to redeem
shares for not more than seven days or longer under unusual circumstances as
permitted by Federal law. If you have purchased Series shares by check and
subsequently submit a redemption request, redemption proceeds will be paid upon
clearance of your purchase check, which may take up to 15 days. To avoid delays
you may arrange for the bank upon which a check was drawn to communicate to the
Series that the check has cleared. Shares also may be redeemed by the Series at
net asset value through your securities dealer who, as an unaffiliated dealer,
may charge you a fee. If your dealer receives your order prior to the close of
the NYSE and communicates it to Lord Abbett, as our agent, prior to the close of
Lord Abbett's business day, you will receive the net asset value of the shares
being redeemed as of the close of the NYSE on that day. If the dealer does not
communicate such an order to Lord Abbett until the next business day, you will
receive the net asset value as of the close of the NYSE on that next business
day.
Shareholders who have redeemed their shares have a one-time right to reinvest
into another account having the identical registration in any of the Eligible
Funds at the then applicable net asset value of the shares being purchased, (i)
without the payment of a sales charge or (ii) with reimbursement for the payment
of any CDSC. Such reinvestment must be made within 60 days of the redemption and
is limited to no more than the dollar amount of the redemption proceeds.
Under certain circumstances and subject to prior written notice, our Board of
Trustees may authorize redemption of all of the shares in any account in which
there are fewer than 25 shares.
Tax-qualified Plans: For redemptions of $50,000 or less, follow normal
redemption procedures. Redemptions over $50,000 must be in writing from the
employer, broker or plan administrator stating the reason for the redemption.
The reason for the redemption must be received by the Series prior to, or
concurrent with, the redemption request.
9 PERFORMANCE
Total Return. Total return data may, from time to time, be included in
advertisements about the Series.
"Total return" for the one-, five- and ten-year periods represents the average
annual compounded rate of return on an investment of $1,000 in the Series at the
maximum public offering price. When total return is quoted for Class A shares,
it includes the payment of the maximum initial sales charge. When total return
is shown for Class B and Class C shares, it reflects the effect of the
applicable CDSC. Total return also may be presented for other periods or based
on investments at reduced sales charge levels or net asset value. Any quotation
of total return not reflecting the maximum sales charge (front-end, level, or
back-end) would be reduced if such sales charge were used. Quotations of total
return for any period when an expense limitation is in effect will be greater
than if the limitation had not been in effect. See "Past Performance" in the
Statement of Additional Information for a more detailed description.
This Prospectus does not constitute in offering in any jurisdiction in which
such offer is not authorized or in which the person making such offer is not
qualified to do so or to anyone to whom it is unlawful to make such offer.
No person is authorized to give any information or to make any representations
not contained in this Prospectus, or in supplemental sales material authorized
by the Fund and no person is entitled to rely upon any information or
representation not contained herein or therein.
<PAGE>
Investment Manager and Underwriter
Lord, Abbett & Co. and Lord Abbett Distributor LLC
The General Motors Building
767 Fifth Avenue
New York, New York 10153-0203
212-848-1800
Custodian
The Bank of New York
48 Wall Street
New York, New York 10286
Transfer Agent and Dividend
Disbursing Agent
United Missouri Bank of Kansas City, N.A.
Tenth and Grand
Kansas City, Missouri 64141
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419100
Kansas City, Missouri 64141
800-821-5129
Auditors
Deloitte & Touche LLP
Counsel
Debevoise & Plimpton
Printed in the U.S.A.
LAALPH-1-398
(3/98)
LORD ABBETT SECURITIES TRUST
The General Motors Building
767 Fifth Avenue
New York, New York 10153-0203
LORD ABBETT
PROSPECTUS '98
MARCH 1, 1998 APPLICATION INSIDE
LORD ABBETT SECURITIES TRUST
ALPHA SERIES
LORD, ABBETT & CO.
INVESTMENT MANAGEMENT
A TRADITION OF PERFORMANCE THROUGH DISCIPLINED INVESTING
<PAGE>
LORD ABBETT
Statement of Additional Information March 1 , 1998
Lord Abbett Securities Trust
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord Abbett Distributor LLC
("Lord Abbett Distributor") at The General Motors Building, 767 Fifth Avenue,
New York, New York 10153-0203. This Statement relates to, and should be read in
conjunction with, the Prospectus dated March 8, 1998.
Lord Abbett Securities Trust (referred to as the "Fund") was organized as a
Delaware business trust on August 16, 1993. The Fund has five series, but only
Alpha Series (the "Series") is described in this Statement of Additional
Information. The Series has three classes of shares (A, B and C). The Series 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 Series
invests in three of these underlying mutual funds: Lord Abbett Developing Growth
Fund, Inc.; Lord Abbett Research Fund, Inc.(Small-Cap Series), and Lord Abbett
Securities Trust (International Series) (referred to as the "Lord Abbett
Funds"). 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 Act provides that any matter required to be submitted, by
the provisions of the Act or applicable state law or otherwise, to the holders
of the outstanding voting securities of an investment company such as the Fund
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each class or series affected
by such matter. Rule 18f-2 further provides that a class or series shall be
deemed to be affected by a matter unless the interests of each class or series
in the matter are substantially identical or the matter does not affect any
interest of such class or series. However, the Rule exempts the selection of
independent public accountants, the approval of principal distributing contracts
and the election of trustees from its separate voting requirements.
Shareholder inquiries should be made by writing directly to the Fund or by
calling 800-821-5129. In addition, you can make inquiries through your dealer.
TABLE OF CONTENTS Page
1. Investment Policies.......................................2
2. Trustees and Officers.....................................5
3. Investment Advisory and Other Services....................8
4. Portfolio Transactions....................................8
5. Purchases, Redemptions
and Shareholder Services.................................10
6. Performance..............................................11
7. Taxes....................................................12
8. Information About the Fund...............................12
<PAGE>
1.
Investment Policies
FUNDAMENTAL INVESTMENT RESTRICTIONS
The Series is subject to the following Investment restrictions which cannot be
changed without approval of a majority of the Series' outstanding shares. The
Series may not: (1) borrow money, except that (i) the Series may borrow from
banks (as defined in the Act) in amounts up to 33 1/3% of its total assets
(including the amount borrowed), (ii) the Series may borrow up to an additional
5% of its total assets for temporary purposes, (iii) the Series may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities and (iv) the Series may purchase securities on margin to
the extent permitted by applicable law; (2) pledge its assets (other than to
secure borrowings, or to the extent permitted by the Series' 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 Series may lend its portfolio
securities, provided that the lending of portfolio securities may be made only
in accordance with applicable law; (5) buy or sell real estate (except that the
Series may invest in securities directly or indirectly secured by real estate or
interests therein or issued by companies which invest in real estate or
interests therein) or commodities or commodity contracts (except to the extent
the Series may do so in accordance with applicable law and without registering
as a commodity pool operator under the Commodity Exchange Act as, for example,
with futures contracts); (6) with respect to 75% of its gross assets, buy
securities of one issuer representing more than (i) 5% of 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 investment 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 investment restrictions above which cannot be changed without
shareholder approval, we also are subject to the policies described in the
Prospectus and the following investment policies which may be changed by the
Board of Trustees without shareholder approval. The Series may not: (1) borrow
in excess of 5% of its gross assets taken at cost or market value, whichever is
lower at the time of borrowing, and then only as a temporary measure for
extraordinary or emergency purposes; (2) make short sales of securities or
maintain a short position except to the extent permitted by applicable law; (3)
invest knowingly more than 15% of its net assets (at the time of investment) in
illiquid securities, except for securities qualifying for resale under Rule 144A
of the Securities Act of 1933, deemed to be liquid by the Board of Trustees; (4)
invest in securities of issuers which, with their predecessors, have a record of
less than three years' continuous operations, if more than 5% of a Series' total
assets would be invested in such securities (this restriction shall not apply to
investment 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 investment
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 series or by one or more
partners or members of the Fund's underwriter orinvestment 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
investment in warrants, valued at the lower of cost or market, would exceed 5%
of the Series' total assets (included within such limitation, but not to exceed
2% of the Series' 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
2
<PAGE>
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 investment adviser or any of its officers, trustees, partners
or employees, any securities other than shares of beneficial interest in such
series.
Although there is no current intention to do so, the Series may invest in
financial futures and options on financial futures.
2.
Trustees and Officers
The following trustees are partners of Lord Abbett, The General Motors Building,
767 Fifth Avenue, New York, New York 10153-0203. They have been associated with
Lord Abbett for over five years and are also officers and/or directors or
trustees of the twelve other Lord Abbett-sponsored funds. They are "interested
persons" as defined in the Act, and as such, may be considered to have an
indirect financial interest in the Rule 12b-1 Plans described in the Prospectus.
Robert S. Dow, age 52, Chairman and President
E. Wayne Nordberg, age 59, Vice President
The following outside trustees are also directors or trustees of the
twelve other Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow
Courtroom Television Network
600 Third Avenue
New York, New York
Chief Executive Officer of Courtroom Television Network. Formerly President
and Chief Executive Officer of Time Warner Cable Programming, Inc. Prior to
that, President and Chief Operating Officer of Home Box Office, Inc. 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 67.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America,
a proxy tabulating firm. Age 72.
C. Alan MacDonald
The Marketing Partnership, Inc.
27 Signal Road
3
<PAGE>
Stamford, Connecticut
General Partner, Managing Director of Directorship Inc. Formerly Chairman and
Chief Executive Officer of Lincoln Foods, Inc., manufacturer of branded snack
foods (1992-1994). Formerly President and Chief Executive Officer of Nestle
Foods Corporation, and prior to that, President and Chief Executive Officer of
Stouffer Foods Corp., both subsidiaries of Nestle S.A. (Switzerland). Currently
serves as Director of Den West Restaurant Co., J.B. Williams, and Fountainhead
Water Company. Age 64.
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 69.
Thomas J. Neff
Spencer Stuart U.S.
277 Park Avenue
New York, New York
Chairman of Spencer Stuart U.S., an executive search consulting firm. Age 60.
The second column of the following table sets forth the compensation accrued by
the Alpha Series for the Fund's outside trustees. The third and fourth columns
set forth information with respect to the retirement plan for outside trustees
maintained by the Lord Abbett-sponsored funds (excluding the Alpha Series which
has not commenced accuring outside trustees fees). The fifth column set forth
the total compensation payable by such funds to the outside trusteed. No
trustees for the Fund associated with Lord Abbett and no officer of the Fund
receive any compensation from the Fund for acting as a trustee or officer.
<TABLE>
<CAPTION>
For the Fiscal Year Ended November 30, 1996
(1) (2) (3) (4) (5)
Pension or Estimated Annual For Year Ended
Retirement Benefits Benefits Upon December 31, 1995
Accrued by the Retirement Proposed Total Compensation
other series of the to be Paid by the Accrued by the other
Fund and other series of series of the Fund
Twelve Other the Fund and Twelve
Compensation Lord-Abbett and Twelve Other Lord
Accrued by Abbett-sponsored Other Lord Abbett- Abbett-sponsored
Name of Director the AlphaSeries1 Funds sponsored Funds2 Funds3
<S> <C> <C> <C> <C>
E. Thayer Bigelow None $11,563 $50,000 $41,700
Stewart S. Dixon None $22,283 $50,000 $42,000
John C. Jansing None $28,242 $50,000 $42,960
C. Alan MacDonald None $29,942 $50,000 $42,750
Hansel B. Millican, Jr. None $24,499 $50,000 $43,000
Thomas J. Neff None $15,990 $50,000 $42,000
<FN>
1. Outside trustees fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on net
assets of each fund. The Alpha Series has not commenced paying such fees. When
the Series starts to pay such fees, a portion of the fees payable by the Alpha
Series to its outside trustees will be deferred under a plan that deems the
deferred amounts to be invested in shares of the Fund for later distribution to
the trustees. The amounts of the aggregate compensation payable by the other
series of the Fund as of November 30, 1996, deemed invested in Fund shares,
including dividends
4
<PAGE>
reinvested and changes in net asset value applicable to such deemed investments,
were: Mr. Bigelow, $27,143; Mr. Dixon, $101,138; Mr. Jansing, $125,269; Mr.
MacDonald, $80,318; Mr. Millican, $126,245 and Mr. Neff, $125,238.
2. Each Lord Abbett-sponsored fund (excluding the Alpha Series) has a retirement
plan providing that outside trustees may receive annual retirement benefits for
life equal to 100% of their final annual retainers following retirement at or
after age 72 with at least 10 years of service. Each plan also provides for a
reduced benefit upon early retirement under certain circumstances, a
pre-retirement death benefit and actuarially reduced joint-and-survivor spousal
benefits. Such retirement plans, and the deferred compensation plans referred to
in footnote one, have been amended recently to, among other things, enable
outside trustees to elect to convert their prospective benefits under the
retirement plans to equity-based benefits under the deferred compensation plans
(to be renamed the equity-based plans). The amounts accrued in column 3 were
accrued by the Lord Abbett-sponsored funds (excluding the Alpha Series) during
the fiscal year ended November 30, 1996 with respect to the retirement plans.
These accruals were based on the retirement plans as in effect before the recent
amendments and on the fees payable to outside trustees of the Fund during the
year ended November 30, 1996. Under the recent amendments, the annual retainer
was increased to $50,000 and retirement benefits were increased from 80% to 100%
of a director's final annual retainer. The amounts stated in column 4 would be
payable annually under the retirement plans as recently amended if the directors
were to retire at age 72 and the annual retainers payable by the funds were the
same as they are today.
3. This column shows aggregate compensation, including trustees fees and
attendance fees for board and committee meetings, of a nature referred to in
footnote one, accrued by the Lord Abbett-sponsored funds, excluding the Alpha
Series, during the year ended December 31, 1995.
</FN>
</TABLE>
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Allen, Brown, Carper, Ms. Foster, Messrs. Hilstad, Morris, Noelke, Nordberg and
Walsh are partners of Lord Abbett; the others are employees; Robert G. Morris,
age 53, Executive Vice President; Paul A. Hilstad, age 55 (with Lord Abbett
since 1995 - formerly Senior Vice President and General Counsel of American
Capital Management & Research, Inc.), Vice President and Secretary; Stephen I.
Allen, age 44; Zane E. Brown, age 46; Daniel E. Carper, age 45; Daria Foster,
age 43; Lawrence H. Kaplan, age 40 (with Lord Abbett since 1997 - formerly Vice
President and Chief Counsel of Salomon Brothers Asset Management Inc. - 1995 -
1997; prior thereto Senior Vice President and Associate General Counsel of
Kidder, Peabody & Co. Incorporated); Thomas F. Konop, age 55; Robert Noelke, age
40; E. Wayne Nordberg, age 59; A. Edward Oberhaus, age 37, Keith F. O'Connor,
age 42, John J. Walsh, age 61, Vice Presidents; and Donna M. McManus, age 36,
Treasurer.
The Fund does not hold annual meetings of shareholders unless one or more
matters are required to be acted on by shareholders under the Act. Under the
Fund's Declaration of Trust, shareholder meetings may be called at any time by
certain officers of the Fund or by a majority of the trustees (i) for the
purpose of taking action upon any matter requiring the vote or authority of the
Fund's shareholders or upon other matters deemed to be necessary or desirable or
(ii) upon the written request of the holders of at least one-quarter of the
shares of the Series outstanding and entitled to vote at the meeting.
As of November 30, 1997, our trustees and officers, as a group, owned less than
1% of our outstanding shares
3.
Investment Advisory and Other Services
As described under "Our Management" in the Prospectus, Lord Abbett is the Fund's
investment manager. Ten of the twelve general partners of Lord Abbett, all of
whom are officers and/or directors of the Fund, are: Stephen I. Allen, Zane E.
Brown, Daniel E. Carper, Robert S. Dow, Daria L. Foster, Paul A. Hilstad, Robert
G. Morris, Robert J. Noelke, E. Wayne Nordberg and John J. Walsh. The other
general partners of Lord Abbett who are neither officers nor directors of the
Fund are W. Thomas Hudson and Michael McLaughlin. The address of each partner is
The General Motors Building, 767 Fifth Avenue, New York, New York 10153-0203.
The services performed by Lord Abbett are described under "Our Management" in
the Prospectus. Under the Management Agreement, the Series is obligated to pay
Lord Abbett a fee of .50% of 1% which Lord Abbett has waived for the current.
fiscal year.
Although not obligated to do so, Lord Abbett may assume expenses of the Series.
5
<PAGE>
The Series 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 mailing prospectuses to existing shareholders, insurance premiums and
brokerage and other expenses connected with executing portfolio transactions.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281, are
the independent public accountants of the Series and must be approved at least
annually by our trustees to continue in such capacity. Deloitte & Touche LLP
perform audit services for the Series including the examination of financial
statements included in our annual report to shareholders.
The Bank of New York ("BNY") 40 Wall Street, New York, New York, is the Series
custodian.
4.
Portfolio Transactions
The policy of the underlying Lord Abbett Funds (in which the Series invests) is
to obtain best execution on 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 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 Fund and also
are employees of Lord Abbett. These traders do the trading as well for other
accounts -- investment companies (of which they are also officers) and other
investment clients -- managed by Lord Abbett. For foreign securities purchased
or sold by the International Series, the selection is made by the Sub-Adviser
(i.e. Fuji Investment Management Co. (Europe), Ltd.). 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 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 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 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 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 Funds and the other accounts they manage. Such
services include showing the Lord Abbett Funds 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.
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Some of the Lord Abbett 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 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 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
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 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 Lord Abbett 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
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 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 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 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.
5.
Purchases, Redemptions
and Shareholder Services
Securities in the Series' portfolios are valued at their market values as of the
close of the NYSE. Market value will be determined as follows: securities listed
or admitted to trading privileges on any national or foreign securities exchange
are valued at the last sales price on the principal securities exchange on which
such securities are traded, or, if there is no sale, at the mean between the
last bid and asked prices on such exchange, or, in the case of bonds, in the
over-the-counter market if, in the judgment of the Fund's officers, that market
more accurately reflects the market value of the bonds. Securities traded only
in the over-the-counter market are valued at the mean between the bid and asked
prices, except that securities admitted to trading on the NASDAQ National Market
System are valued at the last sales price. Securities for which market
quotations are not available are valued at fair value under procedures approved
by the Board of Trustees.
All assets and liabilities expressed in foreign currencies will be converted
into United States dollars at the mean between the buying and selling rates of
such currencies against United States dollars last quoted by any major bank. If
such quotations are not available, the rate of exchange will be determined in
accordance with policies established by the Fund's Board of Trustees. The Board
of Trustees will monitor, on an ongoing basis, the Fund's method of valuation.
Information concerning how the Series values its Shares for the purchase and
redemption of its Shares is described in the Prospectus under "Purchases" and
"Redemptions," respectively.
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As disclosed in the Prospectus, the Series calculates its net asset value and is
otherwise open for business on each day that the New York Stock Exchange
("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). The Series' Class A shares will be sold with a front-end sales
charge of 5.75%.
The maximum offering prices of the Series' Class A shares on February 25, 1998
was computed as follows:
Alpha
Net asset value per share (net assets Series
divided by shares outstanding) ........................................$
Maximum offering price per
share (net asset value divided by .9425 in both cases) ................$
The offering price of Class C shares of the Alpha Series on December 15, 1997
was computed as follows:
Net asset value per share (net assets divided by
shares outstanding) ......................... .......... $
The Fund on behalf of the Series 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 Series, and to make reasonable
efforts to sell the Series shares so long as, in Lord Abbett Distributor's
judgment, a substantial distribution can be obtained by reasonable efforts.
CONVERSION OF CLASS B SHARES. The conversion of Class B shares on the eighth
anniversary of their purchase is subject to the continuing availability of a
private letter ruling from the Internal Revenue Service, or an opinion of
counsel or tax adviser, to the effect that the conversion of Class B shares does
not constitute a taxable event for the holder under Federal income tax law. If
such a revenue ruling or opinion is no longer available, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect. Although
Class B shares could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a sales
charge or fee, such exchange could constitute a taxable event for the holder.
CLASS A, B AND C RULE 12B-1 PLANS. As described in the Prospectus, the Fund has
adopted a Distribution Plan and Agreement on behalf of the Series pursuant to
Rule 12b-1 of the Act for each class of shares available in the Series: the "A
Plan", the "B Plan" and the "C Plan", respectively. In adopting each Plan and in
approving its continuance, the Board of Trustees has concluded that there is a
reasonable likelihood that each Plan will benefit its respective Class and such
Class' shareholders. The expected benefits include greater sales and lower
redemptions of Class shares, which should allow each Class to maintain a
consistent cash flow, and a higher quality of service to shareholders by
authorized institutions than would otherwise be the case. Lord Abbett uses all
amounts received under the A and C Plans for the Series 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 Series.
Each Plan requires the trustees to review, on a quarterly basis, written reports
of all amounts expended pursuant to the Plan and the purposes for which such
expenditures were made. Each Plan shall continue in effect only if its
continuance is specifically approved at least annually by vote of the trustees,
including a majority of the trustees who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related to the Plan ("outside trustees"), cast in
person at a meeting called for the purpose of voting on the Plan. No Plan may be
amended to increase materially above the limits set forth therein the amount
spent for distribution expenses thereunder without approval by a majority of the
outstanding voting securities
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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 series acquired through exchange of such shares) on
which a Series has paid the one-time distribution fee of 1% if such shares are
redeemed out of the Lord Abbett-sponsored family of funds within a period of 24
months from the end of the month in which the original sale occurred.
CLASS B SHARES. As stated in the Prospectus, if Class B shares (or Class B
shares of another Lord Abbett-sponsored fund or series acquired through exchange
of such shares) are redeemed out of the Lord Abbett-sponsored family of funds
for cash before the sixth anniversary of their purchase, a CDSC will be deducted
from the redemption proceeds. The Class B CDSC is paid to Lord Abbett
Distributor to reimburse its expenses, in whole or in part, for providing
distribution-related service in connection with the sale of Class B shares.
To determine whether the CDSC applies to a redemption, the Series redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held on or after the sixth anniversary
of their purchase, and (3) shares held the longest before such sixth
anniversary.
The amount of the contingent deferred sales charge will depend on the number of
years since you invested and the dollar amount being redeemed, according to the
following schedule:
Anniversary of the Day on Contingent Deferred Sales Charge
Which the Purchase Order Was Accepted on Redemptions (As % of Amount
Subject to Charge)
Before the 1st........................................................5.0%
On the 1st, before the 2nd............................................4.0%
On the 2nd, before the 3rd............................................3.0%
On the 3rd, before the 4th............................................3.0%
On the 4th, before the 5th............................................2.0%
On the 5th, before the 6th ...........................................1.0%
On or after the 6th anniversary........................................None
In the table, an "anniversary" is the 365th day subsequent to the acceptance of
a purchase order or a prior anniversary. All purchases are considered to have
been made on the business day on which the purchase order was accepted.
CLASS C SHARES. As stated in the Prospectus, if Class C shares are redeemed for
cash before the first anniversary of their purchase, the redeeming shareholder
will be required to pay to the Series on behalf of Class C shares a CDSC of 1%
of the lower of cost or the then net asset value of Class C shares redeemed. If
such shares are exchanged into the same class of another Lord Abbett-sponsored
fund and subsequently redeemed before the first anniversary of their original
purchase, the charge will be collected by the other fund on behalf of this
Series' 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".
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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 Series and is intended to
reimburse all or a portion of the amount paid by the Series if the shares are
redeemed before the Series has had an opportunity to realize the anticipated
benefits of having a long-term shareholder account in the Series. 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
Series (including recoupment of the commission payments made) in connection with
the sale of Class B shares before Lord Abbett Distributor has had an opportunity
to realize its anticipated reimbursement by having such a long-term shareholder
account subject to the B Plan distribution fee.
The other funds and series which participate in the Telephone Exchange Privilege
(except (a) Lord Abbett U.S. Government Securities Money Market Fund, Inc.
("GSMMF"), (b) certain series of Lord Abbett Tax-Free Income Fund and Lord
Abbett Tax-Free Income Trust for which a Rule 12b-1 Plan is not yet in effect,
and (c) any authorized institution's affiliated money market fund satisfying
Lord Abbett Distributor as to certain omnibus account and other criteria,
hereinafter referred to as an "authorized money market fund" or "AMMF"
(collectively, the "Non-12b-1 Funds") have instituted a CDSC for each class on
the same terms and conditions. No CDSC will be charged on an exchange of shares
of the same class between Lord Abbett funds or between such funds and AMMF. Upon
redemption of shares out of the Lord Abbett family of funds or out of AMMF, the
CDSC will be charged on behalf of and paid: (i) to the fund in which the
original purchase (subject to a CDSC) occurred, in the case of the Class A and
Class C shares and (ii) to Lord Abbett Distributor if the original purchase was
subject to a CDSC, in the case of the Class B shares. Thus, if shares of a Lord
Abbett fund are exchanged for shares of the same class of another such fund and
the shares of the same class tendered ("Exchanged Shares") are subject to a
CDSC, the CDSC will carry over to the shares of the same class being acquired,
including GSMMF and AMMF ("Acquired Shares"). Any CDSC that is carried over to
Acquired Shares is calculated as if the holder of the Acquired Shares had held
those shares from the date on which he or she became the holder of the Exchanged
Shares. Although the Non-12b-1 Funds will not pay a distribution fee on their
own shares, and will, therefore, not impose their own CDSC, the Non-12b-1 Funds
will collect the CDSC (a) on behalf of other Lord Abbett funds, in the case of
the Class A and Class C shares and (b) on behalf of Lord Abbett Distributor, in
the case of the Class B shares. Acquired Shares held in GSMMF and AMMF which are
subject to a CDSC will be credited with the time such shares are held in GSMMF
but will not be credited with the time such shares are held in AMMF. Therefore,
if your Acquired Shares held in AMMF qualified for no CDSC or a lower Applicable
Percentage at the time of exchange into AMMF, that Applicable Percentage will
apply to redemptions for cash from AMMF, regardless of the time you have held
Acquired Shares in AMMF.
In no event will the amount of the CDSC exceed the Applicable Percentage of the
lesser of (i) the net asset value of the shares redeemed or (ii) the original
cost of such shares (or of the Exchanged Shares for which such shares were
acquired). No CDSC will be imposed when the investor redeems (i) 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.
EXCHANGES. The Prospectus briefly describes the Telephone Exchange Privilege.
You may exchange some or all of your shares of any class for those in the same
class of: (i) Lord Abbett-sponsored funds currently offered to the public with a
sales charge (front-end, back-end or level ), (ii) GSMMF or (iii) AMMF, to the
extent offers and sales may be made in your state. You should read the
prospectus of the other fund before exchanging. In establishing a new account by
exchange, shares of the Series' being exchanged must have a value equal to at
least the minimum initial investment required for the other fund into which the
exchange is made.
Shareholders in other Lord Abbett-sponsored funds and AMMF have the same right
to exchange their shares for the corresponding class of the Series' shares.
Exchanges are based on relative net asset values on the day instructions are
received by the Series' 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,
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depending on the circumstances, a gain or loss may be recognized. In the case of
an exchange of shares that have been held for 90 days or less where no sales
charge is payable on the exchange, the original sales charge incurred with
respect to the exchanged shares will be taken into account in determining gain
or loss on the exchange only to the extent such charge exceeds the sales charge
that would have been payable on the acquired shares had they been acquired for
cash rather than by exchange. The portion of the original sales charge not so
taken into account will increase the basis of the acquired shares.
Shareholders have the exchange privilege unless they refuse it in writing. You
should not view the exchange privilege as a means for taking advantage of
short-term swings in the market, and we reserve the right to terminate or limit
the privilege of any shareholder who makes frequent exchanges. We can revoke or
modify the privilege for all shareholders upon 60 days' prior notice. "Eligible
Funds" are AMMF and other Lord Abbett-sponsored funds which are eligible for the
exchange privilege, except Lord Abbett Series Fund ("LASF") which offers its
shares only in connection with certain variable annuity contracts, Lord Abbett
Equity Fund ("LAEF") which is not issuing shares, and series of Lord Abbett
Research Fund not offered to the general public ("LARF").
STATEMENT OF INTENTION. Under the terms of the Statement of Intention to invest
$50,000 or more over a 13-month period as described in the Prospectus, shares of
a Lord Abbett-sponsored fund (other than shares of LAEF, LASF, LARF, GSMMF and
AMMF, unless holdings in GSMMF and AMMF are attributable to shares exchanged
from a Lord Abbett-sponsored fund offered with a front-end, back-end or level
sales charge) currently owned by you are credited as purchases (at their current
offering prices on the date the Statement is signed) toward achieving the stated
investment and reduced initial sales charge for Class A shares. Class A shares
valued at 5% of the amount of intended purchases are escrowed and may be
redeemed to cover the additional sales charge payable if the Statement is not
completed. The Statement of Intention is neither a binding obligation on you to
buy, nor on the Series to sell, the full amount indicated.
RIGHTS OF ACCUMULATION. As stated in the Prospectus, purchasers (as defined in
the Prospectus) may accumulate their investments 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. 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.
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 investment products made
available for a fee to clients of such brokers, dealers, registered investment
advisers and other financial institutions, ("mutual fund wrap fee program"), (e)
by employees, partners and owners of unaffiliated consultants and advisors to
Lord Abbett, Lord Abbett Distributor or Lord Abbett-sponsored funds who consent
to such purchase if such persons provide service to Lord Abbett, Lord Abbett
Distributor or such funds on a continuing basis and are familiar with such funds
and (f) through Retirement Plans with at least 100 eligible employees.
REDEMPTIONS. A redemption order is in proper form when it contains all of the
information and documentation required by the order form or supplementally by
Lord Abbett Distributor or the Fund to carry out the order. The signature(s) and
any legal capacity of the signer(s) must be guaranteed by an eligible guarantor.
See each Prospectus for expedited redemption procedures.
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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 Series 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 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. 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 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 Series computes the average annual compounded rate of total return for each
Class during specified periods that would equate the initial amount invested to
the ending redeemable value of such investment by adding one to the computed
average annual total return, raising the sum to a power equal to the number of
years covered by the computation and multiplying the result by $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
initialinvestment (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
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to the third and fourth anniversaries of purchase, 2.0% prior to the fifth
anniversary of purchase, 1.0% prior to the sixth anniversary of purchase and no
CDSC on and after the sixth anniversary of purchase) is applied to the Series'
investment result for that class for the time period shown (unless the total
return is shown at net asset value). For Class C shares, the 1.0% CDSC is
applied to the Series' investment result for that class for the time period
shown prior to the first anniversary of purchase (unless the total return is
shown at net asset value). For Class Y shares no sales charge is deducted from
the initial investment and the return is shown at net asset value. Total returns
also assume that all dividends and capital gains distributions during the period
are reinvested at net asset value per share, and that theinvestment is redeemed
at the end of the period.
These figures represent past performance, and an investor should be aware that
the investment return and principal value of a Series 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 Series or repurchased or otherwise sold
may be more or less than your tax basis in the shares at the time the
redemption, repurchase or sale is made. Any gain or loss will generally be
taxable for federal income tax purposes. Any loss realized on the sale,
redemption or repurchase of Series shares which you have held for six months or
less will be treated for tax purposes as a long-term capital loss to the extent
of any capital gains distributions which you received with respect to such
shares. Losses on the sale of stock or securities are not deductible if, within
a period beginning 30 days before the date of the sale and ending 30 days after
the date of the sale, the taxpayer acquires stock or securities that are
substantially identical.
The Series 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 Series intends
to distribute to shareholders each year an amount adequate to avoid the
imposition of such excise tax. Dividends paid by the Series will qualify for the
dividends-received deduction for corporations to the extent they are derived
from dividends paid by domestic corporations.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to United States persons (United States citizens or residents and
United States domestic corporations, partnerships, trusts and estates.) Each
shareholder who is not a United States person should consult his tax adviser
regarding the U.S. and foreign tax consequences of the ownership of shares of
the Series, including a 30% (or lower treaty rate) United States withholding tax
on dividends representing ordinary income and net short-term capital gains, and
the applicability of United States gift and estate taxes to non-United States
persons who own Fund shares.
8.
Information About the Fund
Shareholder Liability. Delaware law provides that Fund shareholders shall be
entitled to the same limitations of personal liability extended to stockholders
of private corporations for profit. The courts of some states, however, may
decline to apply Delaware law on this point. The Fund's Declaration of Trust
contains an express disclaimer of shareholder liability for the acts,
obligations, or affairs of the Fund and requires that a disclaimer be given in
each contract entered into or executed by the Fund. The Declaration provides for
indemnification out of the Fund's property of any shareholder or former
shareholder held personally liable for the obligations of the Fund. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which Delaware law does not apply, no
contractual limitation of liability was in effect and the portfolio is unable to
meet its obligations. Lord Abbett believes that, in view of the above, the risk
of personal liability to shareholders is extremely remote.
Under The Fund's Declaration of Trust, the trustees may, without shareholder
vote, cause the Fund to merge or consolidate into, or sell and convey all or
substantially all of, the assets of the Fund to one or more trusts, partnerships
or corporations, so long as the surviving entity is an open-end management
investment company that will succeed to or assume the Fund's registration
statement. In addition, the trustees may, without shareholder vote, cause the
Fund to be incorporated under Delaware law.
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Derivative actions on behalf of the Fund may be brought only by shareholders
owning not less than 50% of the then outstanding shares of the Fund.
The directors, trustees and officers of Lord Abbett-sponsored mutual funds,
together with the partners and employees of Lord Abbett, are permitted to
purchase and sell securities for their personal investment account. In engaging
in personal securities transactions, however, such persons are subject to
requirements and restrictions contained in the Trust's Code of Ethics which
complies, in substance, with each of the recommendations of the Investment
Company Institute's Advisory Group on Personal Investing. Among other things,
the Code requires that Lord Abbett partners and employees obtain advance
approval before buying or selling securities, submit confirmations and quarterly
transaction reports, and obtain approval before becoming a director of any
company; and it prohibits such persons from investing in a security seven days
before or after any Lord Abbett- sponsored fund trades in such security,
profiting from trades of the same security within 60 days and trading on
material non-public information. The Code imposes similar requirements and
restrictions on the independent trustees of the Trust to the extent contemplated
by the recommendations of such Advisory Group.
9.
Financial Statements
The financial statements for fiscal year ended November 30, 1996 and the fiscal
half year ended May 31, 1997 and the report of Deloitte & Touche LLP,
independent public accountants, on such annual financial statements contained in
the 1996 Annual Report to Shareholders of the 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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