1933 Act File No. 33-58846
1940 Act File No. 811-7538
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 33 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [X]
OF 1940
Amendment No. 33 [X]
LORD ABBETT SECURITIES TRUST
----------------------------
Exact Name of Registrant as Specified in Charter
90 HUDSON STREET, JERSEY CITY, NEW JERSEY 07302-3973
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Address of Principal Executive Office
Registrant's Telephone Number (201) 395-2000
--------------------------------------------
Lawrence H. Kaplan, Vice President
90 HUDSON STREET, JERSEY CITY, NEW JERSEY 07302-3973
----------------------------------------------------
Name and Address of Agent for Service
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
- -------
on date pursuant to paragraph (b)
- -------
X 60 days after filing pursuant to paragraph (a) (1)
- -------
on date pursuant to paragraph (a) (1)
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75 days after filing pursuant to paragraph (a) (2)
- -------
on (date) pursuant to paragraph (a) (2) of rule 485
- -------
If appropriate, check the following box:
_____ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
Lord Abbett
Micro-Cap Growth Fund
Micro-Cap Value Fund
Prospectus
[LOGO]
As with all mutual funds, the Securities and Exchange Commission has
not approved or disapproved these securities or passed upon the
adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
<PAGE>
Table of Contents
The Funds
Information about the goal/ Micro-Cap Growth Fund 2
principal strategy, main risks, Micro-Cap Value Fund 5
performance, and fees
and expenses
Your Investment
Information for managing Purchases 8
your Fund account Sales Compensation 9
Opening Your Account 10
Redemptions 10
Distributions and Taxes 11
Services For Fund Investors 11
Management 12
For More Information
How to learn more Other Investment Techniques 13
about the Funds Glossary of Shaded Terms 15
Financial Information
Line graph comparison Micro-Cap Growth Fund 17
and broker compensation Micro-Cap Value Fund 18
How to learn more about the Back Cover
Funds and other Lord Abbett Funds
<PAGE>
Micro-Cap Growth Fund
GOAL / PRINCIPAL STRATEGY
The Fund's investment objective is long-term capital appreciation.
To pursue this goal, the Fund normally invests at least 80% of its assets
in the stocks of companies with market capitalizations of less than $350
million at the time of purchase. We consider these companies to be
micro-cap companies. Micro-cap companies represent the smallest sector of
companies based on market capitalization. Normally, micro-cap companies are
in their earliest stages of development and may offer unique products,
services or technologies or may serve special or rapidly expanding niches.
The Fund may also invest up to 10% of its assets in foreign micro-cap
stocks.
We use fundamental analysis to look for micro-cap companies that appear to
have the potential for more rapid growth than the overall economy. The Fund
evaluates companies based on an analysis of their financial statements,
products and operations, market sectors and interviews with management.
This Fund is intended for investors who are willing to withstand the risk
of short-term price fluctuations in exchange for attractive potential
long-term returns.
We may take temporary defensive positions by investing some of our assets
in short-term debt securities. This could reduce the benefit from any
upswing in the market and prevent the Fund from achieving its investment
objective.
MAIN RISKS
The Fund is subject to the general risks and considerations associated with
equity investing, as well as the particular risks associated with micro-cap
and growth stocks. The value of your investment will fluctuate in response
to movements in the stock market in general and to the changing prospects
of individual companies in which the Fund invests.
Stocks of the smaller companies in which the Fund invests may fluctuate in
price more than the price of larger company stocks. When small-cap
investing is out of favor, the Fund's share prices may decline even though
the companies the Fund holds have sound fundamentals. Micro-cap companies
may still be developing. They may have limited product lines or markets for
their products, limited access to financial resources and less depth in
management skill than larger companies. They also may be subject to greater
business risks and more sensitive to changes in economic conditions than
larger, more established companies.
Many micro-cap stocks are not traded in the volume typical of stocks listed
on a national securities exchange. As a result, they may be less liquid.
That means the Fund could have difficulty selling a micro-cap stock at an
acceptable price, especially in periods of market volatility. This could
increase the potential for loss to the Fund.
Growth stocks may grow faster than other stocks and may be more volatile.
In addition, if the Fund's assessment of a company's potential for growth
is wrong, the price of the company's stock may decrease below the price at
which the Fund purchased the stock.
Foreign securities may present increased market, liquidity, currency,
political, information and other risks.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money in the Fund.
We or the Growth Fund refers to the Micro-Cap Growth Fund of Lord Abbett
Securities Trust (the "Company"). The Growth Fund operates under the supervision
of the Company's Board with the advice of Lord, Abbett & Co. ("Lord Abbett"),
its investment manager.
About the Fund. The Fund is a professionally managed portfolio of securities
purchased with the pooled money of investors. The Fund strives to reach its
stated goals, although as with all mutual funds, cannot guarantee results.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies used by the Fund and
their risks.
2 The Funds
<PAGE>
Micro-Cap Growth Fund
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class Y shares
from calendar year to calendar year. Performance for Class A shares is not
shown because the Class has less than one year of performance. This chart
does not reflect the sales charge applicable to Class A shares. Returns for
Class Y shares are expected to be somewhat higher than those of the Fund's
Class A shares because Class Y shares have lower expenses. If the sales
charges were reflected, returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class Y Shares(1)
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1999 - 51.2%
Best Quarter 4th Q `99 28.0% Worst Quarter 3rd Q `99 -4.3%
- --------------------------------------------------------------------------------
(1) Returns are for a class not offered in this Prospectus that would have
substantially similar annual returns as Class A because the shares are
invested in the same portfolio of securities. Annual returns for Class A
would differ only to the extent that the classes do not have the same
expenses.
The table below shows how the average annual total returns of the Fund's
Class Y shares compared to those of a broad-based securities market index.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year Since Inception(1)
Class Y shares 51.23% 60.86%
- --------------------------------------------------------------------------------
Center for Research Security
Prices Index "CRSP 9-10 Index"(2) 37.16% 37.16%
(1) The date of inception for Class A is 12/15/98. Because Class A shares are
new, the bar chart and table show returns for Class Y shares. Returns for
Class A shares will be somewhat lower because Class Y shares have lower
expenses.
(2) Performance for the unmanaged CRSP 9-10 Index does not reflect any fees or
expenses. The performance of the index is not necessarily representative of
the Fund's performance.
The Funds 3
<PAGE>
Micro-Cap Growth Fund
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
- --------------------------------------------------------------------------------
Fee Table
- --------------------------------------------------------------------------------
Class A
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- --------------------------------------------------------------------------------
(as a % of offering price) 5.75%
Maximum Deferred Sales Charge none(1)
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets)
(as a % of average net assets)(2)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 1.50%
- --------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(3) 0.35%
- --------------------------------------------------------------------------------
Other Expenses 0.46%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 2.31%
- --------------------------------------------------------------------------------
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares made within 24 months following any purchases
made without a sales charge.
(2) The annual operating expenses are based on estimated expenses for the
current fiscal year.
(3) Because 12b-1 fees are paid out on an on-going basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This Example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Share Class 1 Year 3 Years
Class A shares $796 $1,255
- --------------------------------------------------------------------------------
You would have paid the same expenses whether you redeemed your shares or not.
Management fees are payable to Lord Abbett for the Fund's investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
4 The Funds
<PAGE>
Micro-Cap Value Fund
GOAL / PRINCIPAL STRATEGY
The Fund's investment objective is long-term capital appreciation.
To pursue this goal, the Fund normally invests at least 80% of its assets
in the stocks of companies with market capitalizations of less than $350
million at the time of purchase. We consider these companies to be
micro-cap companies. Micro-cap companies represent the smallest sector of
companies based on market capitalization. Normally, micro-cap companies are
in their earliest stages of development and may offer unique products,
services or technologies or may serve special or rapidly expanding niches.
The Fund may also invest up to 10% of its assets in foreign micro-cap
stocks.
We use fundamental analysis to look for micro-cap companies that appear to
be undervalued. The Fund considers a stock undervalued if, in our view, its
price does not reflect its potential worth. Because of their smaller size
and low level of trading, micro-cap stocks are often overlooked or not
closely followed by investors. The Fund will invest in companies that
appear to have good prospects for improvement in earnings trends, asset
values, or other positive attributes, which we believe to be important
factors in determining the future market valuation for the company's stock.
The Fund evaluates companies based on an analysis of their financial
statements, products and operations, market sectors and interviews with
management.
This Fund is intended for investors who are willing to withstand the risk
of short-term price fluctuations in exchange for attractive potential
long-term returns.
We may take temporary defensive positions by investing some of our assets
in short-term debt securities. This could reduce the benefit from any
upswing in the market and prevent the Fund from achieving its investment
objective.
MAIN RISKS
The Fund is subject to the general risks and considerations associated with
equity investing, as well as the particular risks associated with micro-cap
and value stocks. The value of your investment will fluctuate in response
to movements in the stock market in general and to the changing prospects
of individual companies in which the Fund invests.
Stocks of the smaller companies in which the Fund invests may fluctuate in
price more than the price of larger company stocks. When small-cap
investing is out of favor, the Fund's share prices may decline even though
the companies the Fund holds have sound fundamentals. Micro-cap companies
may still be developing. They may have limited product lines or markets for
their products, limited access to financial resources and less depth in
management skill than larger companies. They also may be subject to greater
business risks and more sensitive to changes in economic conditions than
larger, more established companies.
Many micro-cap stocks are not traded in the volume typical of stocks listed
on a national securities exchange. As a result, they may be less liquid.
That means the Fund could have difficulty selling a micro-cap stock at an
acceptable price, especially in periods of market volatility. This could
increase the potential for loss to the Fund.
There is also the risk that an investment may never reach what we think is
its full value.
Foreign securities may present increased market, liquidity, currency,
political, information and other risks.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money in the Fund.
We or the Value Fund refers to the Micro-Cap Value Fund of Lord Abbett
Securities Trust (the "Company"). The Value Fund operates under the supervision
of the Company's Board with the advice of Lord, Abbett & Co. ("Lord Abbett"),
its investment manager.
About the Fund. The Fund is a professionally managed portfolio of securities
purchased with the pooled money of investors. The Fund strives to reach its
stated goals, although as with all mutual funds, cannot guarantee results.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies used by the Fund and
their risks.
The Funds 5
<PAGE>
Micro-Cap Value Fund
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class Y shares
from calendar year to calendar year. Performance for Class A shares is not
shown because the Class has less than one year of performance. This chart
does not reflect the sales charge applicable to Class A shares. Returns for
Class Y shares are expected to be somewhat higher than those of the Fund's
Class A shares because Class Y shares have lower expenses. If the sales
charges were reflected, returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class Y Shares(1)
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1999 - 20.1%
Best Quarter 2nd Q `99 21.2% Worst Quarter 1st Q `99 -7.3%
- --------------------------------------------------------------------------------
(1) Returns are for a class not offered in this Prospectus that would have
substantially similar annual returns as Class A because the shares are
invested in the same portfolio of securities. Annual returns for Class A
would differ only to the extent that the classes do not have the same
expenses.
The table below shows how the average annual total returns of the Fund's
Class Y shares compared to those of a broad-based securities market index.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year Since Inception(1)
Class Y shares 20.05% 22.18%
- --------------------------------------------------------------------------------
Center for Research Security
Prices Index "CRSP 9-10 Index"(2) 37.16% 37.16%
(1) The date of inception for Class A is 12/15/98. Because Class A shares are
new, the bar chart and table show returns for Class Y shares. Returns for
Class A shares will be somewhat lower because Class Y shares have lower
expenses.
(2) Performance for the unmanaged CRSP 9-10 Index does not reflect any fees or
expenses. The performance of the index is not necessarily representative of
the Fund's performance.
6 The Funds
<PAGE>
Micro-Cap Value Fund
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
- --------------------------------------------------------------------------------
Fee Table
- --------------------------------------------------------------------------------
Class A
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- --------------------------------------------------------------------------------
(as a % of offering price) 5.75%
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge none(1)
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets)
(as a % of average net assets)(2)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 1.50%
- --------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(3) 0.35%
- --------------------------------------------------------------------------------
Other Expenses 0.56%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 2.41%
- --------------------------------------------------------------------------------
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of Class A shares made within 24 months following any purchases
made without a sales charge.
(2) The annual operating expenses are based on estimated expenses for the
current fiscal year.
(3) Because 12b-1 fees are paid out on an on-going basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This Example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Share Class 1 Year 3 Years
Class A shares $805 $1,283
- --------------------------------------------------------------------------------
You would have paid the same expenses whether you redeemed your shares or not.
Management fees are payable to Lord Abbett for the Fund's investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
The Funds 7
<PAGE>
Your Investment
PURCHASES
This Prospectus offers Class A shares. You may purchase shares at the net
asset value ("NAV") per share determined after we receive your purchase
order submitted in proper form. A front-end sales charge is normally added
to the NAV in the case of the Class A shares.
We reserve the right to withdraw all or any part of the offering made by
this prospectus or to reject any purchase order. We also reserve the right
to waive or change minimum investment requirements. All purchase orders are
subject to our acceptance and are not binding until confirmed or accepted
in writing.
- --------------------------------------------------------------------------------
Front-End Sales Charges - Class A Shares
- --------------------------------------------------------------------------------
To Compute
As a % of As a % of OfferingPrice
Your Investment Offering Price Your Investment Divide NAV by
- --------------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% .9425
- --------------------------------------------------------------------------------
$50,000 to $99,999 4.75% 4.99% .9525
- --------------------------------------------------------------------------------
$100,000 to $249,999 3.95% 4.11% .9605
- --------------------------------------------------------------------------------
$250,000 to $499,999 2.75% 2.83% .9725
$500,000 to $999,999 1.95% 1.99% .9805
$1,000,000 and over No Sales Charge 1.0000
- --------------------------------------------------------------------------------
Reducing Your Class A Front-End Sales Charges. Class A shares may be
purchased at a discount if you qualify under either of the following
conditions:
o Rights of Accumulation -- A Purchaser may apply the value at public
offering price of the shares you already own to a new purchase of
Class A shares of any Eligible Fund in order to reduce the sales
charge.
o Statement of Intention -- A Purchaser of Class A shares may purchase
additional shares of any Eligible Fund over a 13-month period and
receive the same sales charge as if all shares were purchased at once.
Shares purchased through reinvestment of dividends or distributions
are not included. A Statement of Intention can be backdated 90 days.
Current holdings under Rights of Accumulation may be included in a
Statement of Intention.
For more information on eligibility for these privileges, read the
applicable sections in the attached application.
Class A Share Purchases Without A Front-End Sales Charge. Class A shares
may be purchased without a front-end sales charge under any of the
following conditions:
o purchases of $1 million or more O
o purchases by Retirement Plans with at least 100 eligible employees O
o purchases under a Special Retirement Wrap Program O
o purchases made with dividends and distributions on Class A shares of
another Eligible Fund
o purchases representing repayment under the loan feature of the Lord
Abbett- sponsored prototype 403(b) Plan for Class A shares
NAV per share for each class of Fund shares is calculated each business day at
the close of regular trading on the New York Stock Exchange ("NYSE"), normally
4:00 p.m. Eastern time. Purchases and sales of Fund shares are executed at the
NAV next determined after the Fund receives your order in proper form. In
calculating NAV, securities for which market quotations are available are valued
at those quotations. Securities for which such quotations are not available are
valued at fair value under procedures approved by the Board of the Funds.
Retirement Plans include employer-sponsored retirement plans under the Internal
Revenue Code, excluding Individual Retirement Accounts.
Lord Abbett offers a variety of Retirement Plans. Call 800-253-7299 for
information about:
o Traditional, Rollover, Roth and Education IRAs
o Simple IRAs, SEP-IRAs, 401(k) and 403(b) accounts
o Defined Contribution Plans
8 Your Investment
<PAGE>
o purchases by employees of any consenting securities dealer having a
sales agreement with Lord Abbett Distributor
o purchases under a Mutual Fund Fee Based Program
o purchases by trustees or custodians of any pension or profit sharing
plan, or payroll deduction IRA for employees of any consenting
securities dealer having a sales agreement with Lord Abbett
Distributor
o purchases by members of each Lord Abbett-sponsored fund's Board of
Directors or Trustees (including retired Directors or Trustees),
officers of each Lord Abbett-sponsored fund, employees and partners of
Lord Abbett. These categories of purchases also include other family
members of such purchasers.
See the Statement of Additional Information for a listing of other
categories of purchasers who qualify for class A share purchases without a
front-end sales charge.
* These categories may be subject to a contingent deferred sales charge
("CDSC").
Class A Share CDSC. If you buy Class A shares under one of the starred (O)
categories listed above and you redeem any within 24 months after the month
in which you initially purchased them, the Funds normally will collect a
CDSC of 1%. The Class A share CDSC generally will be waived for the
following conditions:
o benefit payments under Retirement Plans in connection with loans,
hardship withdrawals, death, disability, retirement, separation from
service or any excess distribution under Retirement Plans
(documentation may be required)
o redemptions continuing as investments in another fund participating in
a Special Retirement Wrap Program.
SALES COMPENSATION
As part of its plan for distributing shares, the Fund and Lord Abbett
Distributor pay sales and service compensation to Authorized Institutions
that sell the Fund's shares and service its shareholder accounts.
Sales compensation originates from two sources, as shown in the table "Fees
and Expenses": sales charges which are paid directly by shareholders; and
12b-1 distribution fees that are paid out of the Fund's assets. Service
compensation originates from 12b-1 service fees. The total 12b-1 fees
payable with respect to Class A shares are up to .35% of Class A shares
(plus distribution fees of up to 1.00% on certain qualifying purchases).
The amounts payable as compensation to Authorized Institutions, such as
your dealer, are shown in the chart at the end of this prospectus. The
portion of such compensation paid to Lord Abbett Distributor is discussed
under "Sales Activities" and "Service Activities." Sometimes we do not pay
compensation where tracking data is not available for certain accounts or
where the Authorized Institution waives part of the compensation. In such
cases, we may not require payment of any otherwise applicable CDSC.
We may pay Additional Concessions to Authorized Institutions from time to
time. Sales Activities.
We may use 12b-1 distribution fees to pay Authorized Institutions to
finance any activity which is primarily intended to result in the sale of
shares. Lord Abbett Distributor uses its portion of the distribution fees
attributable to a Fund's Class A shares for activities which are primarily
intended to result in the sale of such Class A shares. These activities
include, but are not limited to, printing of prospectuses and statements of
additional information and reports for other than existing shareholders,
preparation and distribution of advertising and sales material, expenses of
organiz-
CDSC, regardless of class, is not charged on shares acquired through
reinvestment of dividends or capital gains distributions and is charged on the
original purchase cost or the current market value of the shares at the time
they are being sold, which-ever is lower. In addition, repayment of loans under
Retirement Plans and 403(b) Plans will constitute new sales for purposes of
assessing the CDSC.
To minimize the amount of any CDSC, each Fund redeems shares in the following
order:
1. shares acquired by reinvestment of dividends and capital gains (always free
of a CDSC)
2. shares held for two years or more after the month of purchase (Class A)
3. shares held the longest before the second anniversary after the month of
purchase (Class A)
Lord Abbett Distributor LLC ("Lord Abbett Distributor") acts as agent for the
Funds to work with investment professionals that buy and/or sell shares of the
Funds on behalf of their clients. Generally, Lord Abbett Distributor does not
sell Fund shares directly to investors.
Benefit Payment Documentation. (Class A CDSC only)
o Under $50,000 - no documentation necessary
o Over $50,000 - reason for benefit payment must be received in writing. Use
the address indicated under "Opening your Account."
12b-1 fees are payable regardless of expenses. The amounts payable by the Fund
need not be directly related to expenses. If Lord Abbett Distributor's actual
expenses exceed the fee payable to it, the Fund will not have to pay more than
that fee. If Lord Abbett Distributor's expenses are less than the fee it
receives, Lord Abbett Distributor will keep the full amount of the fee.
Your Investment 9
<PAGE>
ing and conducting sales seminars, Additional Concessions to Authorized
Institutions, the cost necessary to provide distribution-related services
or personnel, travel, office expenses, equipment and other allocable
overhead.
Service Activities. We may pay 12b-1 service fees to Authorized
Institutions for any activity which is primarily intended to result in
personal service and/or the maintenance of shareholder accounts. Any
portion of the service fees paid to Lord Abbett Distributor will be used to
service and maintain shareholder accounts.
OPENING YOUR ACCOUNT
Minimum initial investment
o Regular Account $1,000
- --------------------------------------------------------------------------------
o Individual Retirement Accounts and
403(b) Plans under the Internal Revenue Code $250
o Uniform Gift to Minor Account $250
For Retirement Plans and Mutual Fund Fee Based Programs no minimum investment is
required, regardless of share class.
You may purchase shares through any independent securities dealer that has
a sales agreement with Lord Abbett Distributor or you can fill out the
attached application and send it to the Fund at the address stated below.
You should carefully read the paragraph below entitled "Proper Form" before
placing your order to ensure that your order will be accepted.
Name of Fund
P.O. Box 219100
Kansas City, MO 64121
By Exchange. Telephone the Fund at 800-821-5129 to request an exchange from
any eligible Lord Abbett-sponsored fund.
Proper Form. An order submitted directly to the Fund must contain: (1) a
completed application, and (2) payment by check. When purchases are made by
check, redemption proceeds will not be paid until the Fund or transfer
agent is advised that the check has cleared, which may take up to 15
calendar days. For more information call the Fund at 800-821-5129.
REDEMPTIONS
By Broker. Call your investment professional for instructions on how to
redeem your shares.
By Telephone. To obtain the proceeds of a redemption of $50,000 or less
from your account, you or your representative should call the Fund at
800-821-5129.
By Mail. Submit a written redemption request indicating the name(s) in
which the account is registered, the Fund's name, the class of shares, your
account number, and the dollar value or number of shares you wish to sell.
Include all necessary signatures. If the signer has any Legal Capacity, the
signature and capacity must be guaranteed by an Eligible Guarantor. Certain
other legal documentation may be required. For more information regarding
proper documentation call 800-821-5129.
Normally a check will be mailed to the name(s) and address in which the
account is registered (or otherwise according to your instruction) within
three business days after receipt of your redemption request. Your account
balance must be sufficient to cover the amount being redeemed or your
redemption order will not be processed. Under unusual
Small Accounts. Our Board may authorize closing any account in which there are
fewer than 25 shares if it is in the Fund's best interest to do so.
Eligible Guarantor is any broker or bank that is a member of the medallion stamp
program. Most major securities firms and banks are members of this program. A
notary public is not an Eligible Guarantor.
10 Your Investment
<PAGE>
circumstances, the Fund may suspend redemptions, or postpone payment for
more than seven days, as permitted by federal securities laws. To determine
if a CDSC applies to a redemption, see "Class A share CDSC."
DISTRIBUTIONS AND TAXES
Each Fund normally pays dividends from its net investment income and
distributes its net capital gains (if any) as "capital gains distributions"
on an annual basis. Your distributions will be reinvested in your Fund
unless you instruct the Fund to pay them to you in cash. There are no sales
charges on reinvestments. The tax status of distributions is the same for
all shareholders regardless of how long they have owned Fund shares or
whether distributions are reinvested or paid in cash. The tax status of
distributions is the same for all shareholders regardless of how long they
have owned Fund shares or whether distributions are reinvested or paid in
cash.
Except in tax-advantaged accounts, any sale, redemption or exchange of Fund
shares may be taxable to the shareholder.
Information on the tax treatment of distributions, including the source of
dividends and distributions of capital gains each Fund, will be mailed to
shareholders each year. Because everyone's tax situation is unique, you
should consult your tax adviser regarding the treatment of distributions
under the federal, state and local tax rules that apply to you as well as
the tax consequences of gains or losses from the redemption or exchange of
your shares.
SERVICES FOR FUND INVESTORS
AUTOMATIC SERVICES
Buying or selling shares automatically is easy with the services described
below. With each service you select a schedule and amount, subject to
certain restrictions. You may set up most of these services when filling
out your application or by calling 800-821-5129.
- --------------------------------------------------------------------------------
For investing
Invest-A-Matic You may make fixed, periodic investments ($50 minimum) into
(Dollar-cost your Fund account by means of automatic money transfers
averaging) from your bank checking account. See the attached
application for instructions.
Div-Move You may automatically reinvest the dividends and
distributions from your account into another account in any
Eligible Fund ($50 minimum).
For selling shares
Systematic You may make regular withdrawals from most Lord Abbett
Withdrawal Funds. Automatic cash withdrawals will be paid to you from
Plan ("SWP") your account in fixed or variable amounts. To establish a
plan, the value of your shares must be at least $10,000,
except for Retirement Plans for which there is no minimum.
- --------------------------------------------------------------------------------
OTHER SERVICES
Telephone Investing. After we have received the attached application
(selecting "yes" under Section 8C and completing Section 7), you may
instruct us by phone to have money transferred from your bank account to
purchase shares of the Fund for an existing account. The Fund will purchase
the requested shares when it receives the money from your bank.
Telephone Transactions. You have this privilege unless you refuse it in writing.
For your security, telephone transaction requests are recorded. We will take
measures to verify the identity of the caller, such as asking for your name,
account number, social security or taxpayer identification number and other
relevant information. The Fund will not be liable for following instructions
communicated by telephone that it reasonably believes to be genuine.
Transactions by telephone may be difficult to implement in times of drastic
economic or market change.
Exchange Limitations. Exchanges should not be used to try to take advantage of
short-term swings in the market. Frequent exchanges create higher expenses for
the Fund. Accordingly, the Fund reserves the right to limit or terminate this
privilege for any shareholder making frequent exchanges or abusing the
privilege. The Fund also may revoke the privilege for all shareholders upon 60
days' written notice.
Your Investment 11
<PAGE>
Exchanges. You or your investment professional may instruct the Fund to
exchange shares of any class for shares of the same class of any Eligible
Fund. Instruction may be provided in writing or by telephone, with proper
identification, by calling 800-821-5129. The Fund must receive instructions
for the exchange before the close of the NYSE on the day of your call in
which case you will get the NAV per share of the Eligible Fund determined
on that day. Exchanges will be treated as a sale for federal tax purposes.
Be sure to read the current prospectus for any fund into which you are
exchanging.
Reinvestment Privilege. If you sell shares of the Fund, you have a one-time
right to reinvest some or all of the proceeds in the same class of any
Eligible Fund within 60 days without a sales charge. If you paid a CDSC
when you sold your shares, you will be credited with the amount of the
CDSC. All accounts involved must have the same registration.
Account Statements. Every Lord Abbett investor automatically receives
quarterly account statements.
Householding. Shareholders with the same last name and address will receive
a single copy of a prospectus and an annual and semi-annual report, unless
additional reports are specifically requested in writing to the Fund.
Account Changes. For any changes you need to make to your account, consult
your investment professional or call the Fund at 800-821-5129.
Systematic Exchange. You or your investment professional can establish a
schedule of exchanges between the same classes of any Eligible Fund.
MANAGEMENT
The Funds' investment adviser is Lord, Abbett & Co., located at 90 Hudson
St., Jersey City, NJ 07302-3973. Founded in 1929, Lord Abbett manages one
of the nation's oldest mutual fund complexes, with approximately $35
billion in more than 40 mutual fund portfolios and other advisory accounts.
For more information about the services Lord Abbett provides to the Funds,
see the Statement of Additional Information.
Lord Abbett is entitled to an annual management fee for each Fund, computed
and payable monthly, at a rate of 1.5% of each Fund's average daily net
assets. In addition each Fund pays all expenses not expressly assumed by
Lord Abbett. Lord Abbett uses a team of portfolio managers and analysts
acting together to manage each Fund's investments.
Micro-Cap Growth Fund. Stephen J. McGruder, Partner of Lord Abbett, heads
the Fund's team, the other senior members of which are Lesley-Jane Dixon
and Rayna Lesser. Mr. McGruder and Ms. Dixon have been with Lord Abbett
since 1995 and Ms. Lesser has been with Lord Abbett since 1996. Before
joining Lord Abbett, Mr. McGruder was a portfolio manager and Ms. Dixon was
an equity analyst with Wafra Investment Advisory Group. Ms. Lesser joined
Lord Abbett directly from Barnard College.
Micro-Cap Value Fund. Robert P. Fetch, Partner of Lord Abbett, heads the
Fund's team, the other senior members of which are Gregory M. Macosko and
Gerard S.E. Heffernan, Jr. Mr. Fetch joined Lord Abbett in 1995; before
that, he was was a Managing Director of Prudential Investment Advisors from
1983 to 1995. Mr. Macosko joined Lord Abbett in 1996; before that he was an
Equity Analyst with Quest Advisory Service from 1991 to 1996. Mr. Heffernan
joined Lord Abbett in 1998; before that he was with CL Capital Management
Company as a Portfolio Manager from 1996 to 1998 and as an Equity Research
Analyst from 1992 to 1996.
12 Your Investment
<PAGE>
For More Information
OTHER INVESTMENT TECHNIQUES
This section describes some of the investment techniques that might be used
by the Funds and their risks.
Adjusting Investment Exposure. Each Fund may, but is not required to, use
various strategies to change its investment exposure to adjust to changing
security prices, interest rates, currency exchange rates, commodity prices
and other factors. Each Fund may use these transactions to change the risk
and return characteristics of each Fund's portfolio. If we judge market
conditions incorrectly or use a strategy that does not correlate well with
a Fund's investments, it could result in a loss, even if we intended to
lessen risk or enhance returns. These transactions may involve a small
investment of cash compared to the magnitude of the risk assumed and could
produce disproportionate gains or losses. Also, these strategies could
result in losses if the counterparty to a transaction does not perform as
promised.
Foreign Securities. Each Fund may invest up to 10% of its total assets in
foreign securities. Foreign securities may present risks not typically
associated with domestic securities. Foreign markets and the securities
traded in them are not subject to the same degree of regulation as U.S.
markets. Securities clearance and settlement procedures may be different in
foreign countries. There may be less trading volume in foreign markets,
subjecting the securities traded in them to higher price fluctuations.
Transaction costs may be higher in foreign markets. Each Fund may hold
foreign securities which trade on days when such Fund does not sell shares.
As a result, the value of each Fund's portfolio securities may change on
days an investor may not purchase or sell such Fund's shares.
Foreign issuers are generally not subject to similar, uniform accounting,
auditing and financial reporting requirements as U.S. issuers. Foreign
investments may be affected by changes in currency rates or currency
controls. Certain foreign countries may limit a Fund's ability to remove
its assets from the country. With respect to certain foreign countries,
there is a possibility of nationalization, expropriation or confiscatory
taxation, imposition of withholding or other taxes, and political or social
instability which could affect investments in those countries.
Foreign Currency Hedging Techniques. Both Funds may use foreign currency
hedging techniques. Although the Funds do not normally engage in extensive
currency hedging, they may use forward foreign currency contracts and
options thereon to hedge the risk t o the portfolio if they expect that
foreign exchange price movements will be unfavorable for U.S. investors.
Generally, these instruments allow a Fund to lock in a specified ex-change
rate for a period of time. If our forecast proves to be wrong, such a hedge
may cause a loss. Also, it may be difficult or impractical to hedge
currency risk in many emerging countries. Although such contracts will be
used primarily to protect each Fund from adverse currency movements, their
use involves the risk that Lord Abbett will not accurately predict currency
movement, and each Fund's returns could be reduced.
In addition, forward foreign currency contracts and other privately
negotiated currency instruments offer less protection against defaults than
is available for currency instruments traded on an exchange. Since these
contracts are not guaranteed by an exchange or clearinghouse, a default on
a contract would deprive a Fund of unrealized profits, transaction costs,
or the benefits of a currency hedge, or could force a Fund to cover its
pur-
For More Information 13
<PAGE>
chase or sale commitments, if any, at the current market price. Currency
exchange rates may fluctuate significantly over short periods of time,
causing the NAV of each Fund to fluctuate. Currency exchange rates may be
affected unpredictably by the intervention of U.S. or foreign governments
or central banks, or the failure to intervene, or by currency controls or
political developments in the United States or abroad.
Each Fund may also purchase foreign currency put and call options, subject
to certain limitations.
There is the possibility that the foreign currency hedging techniques will
not work as anticipated.
Futures Contracts and Options on Future Contracts. Each Fund may enter into
financial futures transactions. A financial futures transaction is the
purchase or sale of an exchange-traded contract to buy or sell a specified
financial instrument or index at a specific future date and price. Neither
Fund will enter into any futures contracts, or options thereon, if the
aggregate market value of the securities covered by futures contracts plus
options on such financial futures exceeds 50% of such Fund's total assets.
Options Transactions. Each Fund may purchase and write put and call options
on equity securities or stock indices that are traded on national
securities exchanges.
A put option gives the buyer of the option the right to sell, and the
seller of the option the obligation to buy, the underlying instrument
during the option period.
A call option gives the buyer of the option the right to buy, and the
writer (seller) of the option the obligation to sell, the underlying
instrument. Each Fund may only sell (write) covered call options. This
means that each Fund may only sell call options on securities it owns.When
a Fund writes a call option it gives up the potential for gain on the
underlying securities in excess of the exercise price of the option during
the period that the option is open.
The Micro-Cap Growth Fund and Mirco-Cap Value Fund may write only covered
put options to the extent that cover for such options does not exceed 25%
of each Fund's net assets. Each Fund will not buy an option if, as a result
of such purchase, more than 20% of such Fund's total assets would be
invested in premiums for such options.
Repurchase Agreements. Each Fund may enter into repurchase agreements. In a
repurchase agreement, a Fund buys a security at one price from a
broker-dealer or financial institution and simultaneously agrees to sell
the same security back to the same party at a higher price in the future.
If the other party to the agreement defaults or becomes insolvent, a Fund
could lose money.
Risks of Futures Contracts and Options Transactions. The Fund's
transactions, if any, in futures, options on futures and other options
involve additional risk of loss. Loss may result from a lack of correlation
between changes in the value of these derivative instruments and the Funds'
assets being hedged, the potential illiquidity of the markets for
derivative instruments, or the risks arising from margin requirements and
related leverage factors associated with such transactions. The use of
these investment techniques also involves the risk of loss if the portfolio
managers are incorrect in their expectation of fluctuations in securities
prices. In addition, the loss that may be incurred by entering into futures
contracts and in writing call options on futures is potentially unlimited
and may exceed the amount of the premium received.
Stock Index Futures. The Micro-Cap Value Fund may invest in stock index
futures. A stock index futures contract is an agreement in which one party
agrees to deliver to another an amount of cash equal to a specific dollar
amount times the difference between a spe-
14 For More Information
<PAGE>
cific stock index at the close of the last trading day of the contract and
the price at which the agreement is made. No physical delivery of the
underlying stocks in the index is made. Participation in the stock index
futures markets involves investment risks and transaction costs to which
the Micro-Cap Value Fund would not be subject absent the use of these
strategies. If the Micro-Cap Value Fund management's prediction of movement
in the direction of the securities markets is inaccurate, the adverse
consequences to the Fund may leave it in a worse position than if such
strategies were not used. Risks inherent in the use of stock index futures
include: (1) dependence on management's ability to predict correctly
movements in the direction of specific securities being hedged or the
movement in stock indices; (2) imperfect correlation between the price of
stock index futures and options thereon and movements in the prices of the
securities being hedged; (3) the fact that skills needed to use these
strategies are different from those needed to select portfolio securities;
(4) the possible absence of a liquid secondary market for any particular
instrument at any time; (5) the possible need to defer closing out certain
hedged positions to avoid adverse tax consequences; and (6) daily limits on
price variance for a futures contract or related options imposed by certain
futures exchanges and boards of trade may restrict transactions in such
securities on a particular day.
The Micro-Cap Value Fund may not purchase or sell stock index futures if,
immediately after a purchase or sale, more than one-third of its net assets
would be hedged. In addition, except in the case of a call written and held
on the same index, the Micro-Cap Value Fund will write call options on
indices or sell stock index futures only if the amount resulting from the
multiplication of the then current level of the index (or indices) upon
which the options or futures contract(s) is based, the applicable
multiplier(s), and the number of futures or options contracts which would
be outstanding would not exceed one-third of the value of the Micro-Cap
Value Fund's net assets.
The Micro-Cap Value Fund's ability to enter into stock index futures and
listed options is limited by certain tax requirements in order to qualify
as a regulated investment company.
When-Issued or Delayed Delivery Securities. The Micro-Cap Value Fund may
purchase or sell securities with payment and delivery taking place as much
as a month or more later. The Fund would do this in an effort to buy or
sell the securities at an advantageous price and yield. The securities
involved are subject to market fluctuation and no interest accrues to the
purchaser during the period between purchase and settlement. At the time of
delivery of the securities, their market value may be less than the
purchase price. Also, if the Fund commits a significant amount of assets to
when-issued or delayed delivery transactions, it may increase the
volatility of its net asset value.
GLOSSARY OF SHADED TERMS
Additional Concessions. Lord Abbett Distributor may, for specified periods,
allow dealers to retain the full sales charge for sales of shares or may
pay an additional con- cession to a dealer who sells a minimum dollar
amount of our shares and/or shares of other Lord Abbett-sponsored funds. In
some instances, such additional concessions will be offered only to certain
dealers expected to sell significant amounts of shares. Additional payments
may be paid from Lord Abbett Distributor's own resources or from
distribution fees received from a fund and will be made in the form of cash
or, if permitted, non-cash payments. The non-cash payments will include
business seminars at Lord Abbett's headquarters or other locations,
including meals and entertainment, or the receipt of merchandise. The cash
payments may include payment of various business expenses of the dealer.
In selecting dealers to execute portfolio transactions for the Fund's
portfolio, if two or more dealers are considered capable of obtaining best
execution, we may prefer the
For More Information 15
<PAGE>
dealer who has sold our shares and/or shares of other Lord Abbett-sponsored
funds.
Authorized Institutions. Institutions and persons permitted by law to
receive service and/or distribution fees under a Rule 12b-1 Plan are
"Authorized Institutions." Lord Abbett Distributor is an Authorized
Institution.
Eligible Fund. An Eligible Fund is any Lord Abbett-sponsored fund except
for (1) certain tax-free, single-state funds where the exchanging
shareholder is a resident of a state in which such a fund is not offered
for sale; (2) Lord Abbett Equity Fund; (3) Lord Abbett Series Fund; (4)
Lord Abbett U.S. Government Securities Money Market Fund ("GSMMF") (except
for holdings in GSMMF which are attributable to any shares exchanged from
the Lord Abbett Family of Funds). An Eligible Fund also is any Authorized
Institution's affiliated money market Fund satisfying Lord Abbett
Distributor as to certain omnibus account and other criteria.
Legal Capacity. With respect to a redemption request, if (for example) the
request is on behalf of the estate of a deceased shareholder, John W. Doe,
by a person (Robert A. Doe) who has the legal capacity to act for the
estate of the deceased shareholder because he is the executor of the
estate, then the request must be executed as follows: Robert A.Doe,
Executor of the Estate of John W. Doe. That signature using that capacity
must be guaranteed by an Eligible Guarantor.
Similarly, if (for example) the redemption request is on behalf of the ABC
Corporation by a person (Mary B. Doe) that has the legal capacity to act on
behalf of this corporation, because she is the President of the
corporation, then the request must be executed as follows: ABC Corporation
by Mary B.Doe, President. That signature using that capacity must be
guaranteed by an Eligible Guarantor (see example in right column).
Mutual Fund Fee Based Program. Certain unaffiliated authorized brokers,
dealers, registered investment advisers or other financial institutions
("entities") who either (1) have an arrangement with Lord Abbett
Distributor, providing specifically for the use of our shares (and
sometimes providing for acceptance of orders for such shares on our behalf)
in particular investment products made available for a fee to clients of
such entities, or (2) charge an advisory, consulting or other fee for their
services and buy shares for their own accounts or the accounts of their
clients.
Purchaser. The term "purchaser" includes: (1) an individual, (2) an
individual and his or her spouse and children under the age of 21, and (3)
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.
Special Retirement Wrap Program. A program sponsored by an Authorized
Institution showing one or more characteristics distinguishing it, in the
opinion of Lord Abbett Distributor, from a Mutual Fund Fee Based Program.
Such characteristics include, among other things, the fact that an
Authorized Institution does not charge its clients any fee of a consulting
or advisory nature that is economically equivalent to the distribution fee
under the Class A 12b-1 Plan and the fact that the program relates to
participant-directed Retirement Plans.
GUARANTEED SIGNATURE. An acceptable form of guarantee would be as follows:
In the case of the estate --
Robert A. Doe
Executor of the Estate of
John W. Doe
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE ILLEGIBLE]
- --------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
In the case of the corporation --
ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE ILLEGIBLE]
- --------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
16 For More Information
<PAGE>
Micro-Cap Growth Fund
Financial Information
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class Y shares
to the same investment in Center for Research Security Prices Index "CRSP
9-10 Index", assuming reinvestment of all dividends and distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NAV CRSP 9-10
12/15/98 10000
12/31/98 10870 10000
01/31/99 12460 10594
02/28/99 11180 9899
03/31/99 10840 9689
04/30/99 11560 10509
05/31/99 12080 10831
06/30/99 13420 11251
07/31/99 13650 11437
08/31/99 12760 11159
09/30/99 12840 11058
10/31/99 12570 11000
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending October 31, 1999
Life(2)
- --------------------------------------------------------------------------------
Class Y(3) 25.70%
- --------------------------------------------------------------------------------
(1) Performance for the unmanaged CRSP 9-10 Index does not reflect any
expenses. The performance of the index is not necessarily representative of
the Fund's performance. Performance for the index begins on December
31,1998.
(2) The inception date for Class Y is 12/15/98.
(3) This shows total return which is the percent change in net asset value,
with all dividends and distributions reinvested for the periods shown
ending October 31, 1999, using the SEC-required uniform method to compute
total return. Because Class A has less than one year of performance, the
total returns shown are for Class Y shares. Returns for Class A shares are
expected to be somewhat lower than those of Class Y shares because Class A
shares have higher expenses.
Financial Information 17
<PAGE>
Micro-Cap Value Fund
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class Y shares
to the same investment in Center for Research Security Prices Index "CRSP
Index", assuming reinvestment of all dividends and distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NAV CRSP 9-10
12/15/98 10000
12/31/98 10270 10000
01/31/99 10390 10594
02/28/99 9750 9899
03/31/99 9520 9689
04/30/99 10530 10509
05/31/99 10950 10831
06/30/99 11540 11251
07/31/99 11550 11437
08/31/99 11290 11159
09/30/99 11050 11058
10/31/99 10760 11000
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending October 31, 1999
Life(2)
- --------------------------------------------------------------------------------
Class Y(3) 7.60%
- --------------------------------------------------------------------------------
(1) Performance for the unmanaged CRSP 9-10 Index does not reflect any
expenses. The performance of the index is not necessarily representative of
the Fund's performance. Performance for the index begins on December
31,1998.
(2) The inception date for Class Y is 12/15/98.
(3) This shows total return which is the percent change in net asset value,
with all dividends and distributions reinvested for the periods shown
ending October 31, 1999, using the SEC-required uniform method to compute
total return. Because Class A has less than one year of performance, the
total returns shown are for Class Y shares. Returns for Class A shares are
expected to be somewhat lower than those of Class Y shares because Class A
shares have higher expenses.
18 Financial Information
<PAGE>
COMPENSATION FOR YOUR DEALER
<TABLE>
<CAPTION>
====================================================================================================================================
First Year Compensation
Front-end
sales charge Dealer's
paid by investors concession Service fee(1) Total compensation(2)
Class A investments (% of offering price) (% of offering price) (% of net investment) (% of offering price)
====================================================================================================================================
<S> <C> <C> <C> <C
Less than $50,000 5.75% 5.00% 0.25% 5.24%
====================================================================================================================================
$50,000 - $99,999 4.75% 4.00% 0.25% 4.24%
====================================================================================================================================
$100,000 - $249,999 3.95% 3.25% 0.25% 3.49%
====================================================================================================================================
$250,000 - $499,999 2.75% 2.25% 0.25% 2.49%
====================================================================================================================================
$500,000 - $999,999 1.95% 1.75% 0.25% 2.00%
====================================================================================================================================
$1 million or more(3) or Retirement Plan -
100 or more eligible employees(3) or
Special Retirement Wrap Program(3)
====================================================================================================================================
First $5 million no front-end sales charge 1.00% 0.25% 1.25%
====================================================================================================================================
Next $5 million above that no front-end sales charge 0.55% 0.25% 0.80%
====================================================================================================================================
Next $40 million above that no front-end sales charge 0.50% 0.25% 0.75%
====================================================================================================================================
Over $50 million no front-end sales charge 0.25% 0.25% 0.50%
====================================================================================================================================
====================================================================================================================================
Annual Compensation After first Year
Class A investments
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25% 0.25%
====================================================================================================================================
</TABLE>
(1) The service fee for Class A shares is paid quarterly.
(2) Reallowance/concession percentages and service fee percentages are
calculated from different amounts, and therefore may not equal total
compensation percentages if combined using simple addition. Additional
Concessions may be paid to Authorized Institutions, such as your dealer,
from time to time.
(3) Concessions are paid at the time of sale on all Class A shares sold during
any 12-month period starting from the day of the first net asset value
sale. With respect to (a) Class A share purchases at $1 million or more,
sales qualifying at such level under rights of accumulation and statement
of intention privileges are included and (b) for Special Retirement Wrap
Programs, only new sales are eligible and exchanges into the Fund are
excluded. Certain purchases of Class A shares are subject to a CDSC.
Financial Information 19
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
More information on this Fund is available free upon request, including the
following:
ANNUAL/SEMI-ANNUAL REPORT
Describes the Funds, lists portfolio holdings and contains a letter from
each Fund's manager discussing recent market conditions and the Fund's
investment strategies.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Provides more details about the Fund and its policies. A current SAI is on
file with the Securities and Exchange Commission ("SEC") and is
incorporated by reference (is legally considered part of this prospectus).
Lord Abbett Micro-Cap Growth Fund
Lord Abbett Micro-Cap Value Fund
90 Hudson Street
Jersey City, NJ 07302-3973
- --------------------------------------------------------------------------------
SEC file number: 811-7358
To obtain information:
By telephone. Call the Fund at:
800-426-1130
By mail. Write to the Fund at:
The Lord Abbett Family of Funds
90 Hudson Street
Jersey City, NJ 07302-3973
Via the Internet.
Lord, Abbett & Co.
www.lordabbett.com
Text only versions of Fund
documents can be viewed
online or downloaded from:
SEC
www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 202-942-8090) or by sending your request and a duplicating
fee to the SEC's Public Reference Section, Washington, DC 20549-6009 or by
sending your request electronically to [email protected].
LAMC-1-300
(3/00)
<PAGE>
LORD ABBETT
Statement of Additional Information April 1, 2000
LORD ABBETT SECURITIES TRUST
Lord Abbett Micro-Cap Growth Fund
Lord Abbett Micro-Cap Value Fund
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord Abbett Distributor LLC
("Lord Abbett Distributor"), 90 Hudson Street, Jersey City, New Jersey
07302-3973. This Statement of Additional Information relates to, and should be
read in conjunction with, the Prospectus dated April 1, 2000.
Shareholder inquiries should be made by directly contacting the Fund or by
calling 800-821-5129. The Annual Report to Shareholders is available, without
charge, upon request by calling that number. In addition, you can make inquiries
through your dealer.
TABLE OF CONTENTS Page
1. Investment Policies 2
2. Directors and Officers 11
3. Investment Advisory and Other Services 15
4. Portfolio Transactions 16
5. Purchases, Redemptions and Shareholder Services 17
6. Performance 22
7. Taxes 22
8. Information About The Company 24
9. Financial Statements 24
1
<PAGE>
Lord Abbett Securities Trust (the "Company" or the "Fund") was organized as a
Delaware business trust on February 26, 1993, as a diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "Act"). The Company has six funds, but only Class A of
Lord Abbett Micro-Cap Growth Fund and Lord Abbett Micro-Cap Value Fund, are
described in this Statement of Additional Information. Both Funds also offer
Class Y shares. All shares have equal noncumulative voting rights and equal
rights with respect to dividends, assets and liquidation, except for certain
class-specific expenses. They are fully paid and nonassessable when issued and
have no preemptive or conversion rights.
1.
Investment Policies
Fundamental Investment Restrictions. Each Fund is subject to the following
investment restrictions which cannot be changed without the approval of a
majority of its outstanding shares.
Each Fund may not:
(1) borrow money (except that (i) each Fund may borrow from banks (as defined
in the Act) in amounts up to 33 1/3% of its total assets (including the
amount borrowed), (ii) each Fund may borrow up to an additional 5% of its
total assets for temporary purposes, (iii) each Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and
sales of portfolio securities and (iv) each Fund may purchase securities on
margin to the extent permitted by applicable law);
(2) pledge its assets (other than to secure such borrowings or to the extent
permitted by each Fund's investment policies as permitted by applicable
law);
(3) engage in the underwriting of securities except pursuant to a merger or
acquisition or to the extent that, in connection with the disposition of
its portfolio securities, it may be deemed to be an underwriter under
federal securities laws;
(4) make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in government
obligations, commercial paper, pass-through instruments, certificates of
deposit, bankers acceptances, repurchase agreements or any similar
instruments shall not be subject to this limitation, and except further
that each Fund may lend its portfolio securities, provided that the lending
of portfolio securities may be made only in accordance with applicable law;
(5) buy or sell real estate (except that each Fund may invest in securities
directly or indirectly secured by real estate or interests therein or
issued by companies which invest in real estate or interests therein),
commodities or commodity contracts (except to the extent each Fund may do
so in accordance with applicable law and without registering as a commodity
pool operator under the Commodity Exchange Act as, for example, with
futures contracts);
(6) with respect to 75% of the gross assets of the National Fund, buy
securities of one issuer representing more than (i) 5% of the Fund's gross
assets, except securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities or (ii) 10% of the voting securities of such
issuer;
(7) invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding of the U.S.
Government, its agencies and instrumentalities); or
(8) issue senior securities to the extent such issuance would violate
applicable law.
Compliance with the investment restriction in this section 1 will be determined
at the time of purchase or sale of the portfolio investments.
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Non-Fundamental Investment Restrictions. In addition to the policies in the
Prospectus and the investment restrictions above which cannot be changed without
shareholder approval, each Fund is also subject to the following non-fundamental
investment policies which may be changed by the Board of Directors without
shareholder approval.
Each Fund may not:
(1) borrow in excess of 33 1/3% of its total assets (including the amount
borrowed), and then only as a temporary measure for extraordinary or
emergency purposes;
(2) make short sales of securities or maintain a short position except to the
extent permitted by applicable law;
(3) invest knowingly more than 15% of its net assets (at the time of
investment) in illiquid securities, except for securities qualifying for
resale under Rule 144A of the Securities Act of 1933 ("Rule 144A") deemed
to be liquid by the Board of Directors;
(4) invest in securities of other investment companies, except as permitted by
applicable law;
(5) invest in securities of issuers which, with their predecessors, have a
record of less than three years of continuous operation, if more than 5% of
it's total assets would be invested in such securities. (This restriction
shall not apply to mortgaged-backed securities, asset-backed securities or
obligations issued or guaranteed by the U. S. government, its agencies or
instrumentalities.);
(6) hold securities of any issuer if more than 1/2 of 1% of the issuer's
securities are owned beneficially by one or more of it's officers or
directors/trustees of the Funds, or by one or more of its partners or
members or underwriter or investment adviser if these owners in the
aggregate own beneficially more than 5% of the securities of such issuer;
(7) invest in warrants if, at the time of acquisition, its investment in
warrants, valued at the lower of cost or market, would exceed 5% of its
total assets (included within such limitation, but not to exceed 2% of the
Fund's total assets, are warrants which are not listed on the New York or
American Stock Exchange or a major foreign exchange);
(8) invest in real estate limited partnership interests or interests in oil,
gas or other mineral leases, or exploration or development programs, except
that each Fund may invest in securities issued by companies that engage in
oil, gas or other mineral exploration or development activities;
(9) write, purchase or sell puts, calls, straddles, spreads or combinations
thereof, except to the extent permitted in it's Prospectus and Statement of
Additional Information, as they may be amended from time to time or;
(10) buy from or sell to any of it's officers, directors, trustees, employees,
or it's investment adviser or any of it's officers, directors, trustees,
partners or employees, any securities other than shares of the it's shares.
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INVESTMENT TECHNIQUES
Each Fund intends to utilize, from time to time, one or more of the investment
techniques described below, including lending portfolio securities, repurchase
agreements, warrants, and covered call options. While some of these techniques
involve risk when utilized independently, each Fund intends to use them to
reduce risk and volatility in its portfolios.
Borrowing. Each Fund may borrow from banks. If a Fund borrows money, its share
price may be subject to greater fluctuation until the borrowing is paid off.
Each Fund may borrow only for temporary or emergency purposes, and not in an
amount exceeding 33 1/3% of its total assets.
Call Options On Stock. Each Fund may, from time to time, write call options on
its portfolio securities. Each Fund may write only call options which are
"covered," meaning that the Fund either owns the underlying security or has an
absolute and immediate right to acquire that security, without additional cash
consideration, upon conversion or exchange of other securities currently held in
its portfolio. In addition, the Fund will not permit the call to become
uncovered prior to the expiration of the option or termination through a closing
purchase transaction as described below. If the Fund writes a call option, the
purchaser of the option has the right to buy (and the Fund has the obligation to
sell) the underlying security at the exercise price throughout the term of the
option. The amount paid to the Fund by the purchaser of the option is the
"premium." The Funds' obligation to deliver the underlying security against
payment of the exercise price would terminate either upon expiration of the
option or earlier if the Fund' were to effect a "closing purchase transaction"
through the purchase of an equivalent option on an exchange. There can be no
assurance that a closing purchase transaction can be effected. The Fund does not
intend to write covered call options with respect to securities with an
aggregate market value of more than 5% of it's gross assets at the time an
option is written. This percentage limitation will not be increased without
prior disclosure in our current prospectus.
The Fund would not be able to effect a closing purchase transaction after it had
received notice of exercise. In order to write a call option, the Fund is
required to comply with the rules of The Options Clearing Corporation and the
various exchanges with respect to collateral requirements. The Fund may not
purchase call options except in connection with a closing purchase transaction.
It is possible that the cost of effecting a closing purchase transaction may be
greater than the premium received by the Fund for writing the option.
Generally, the Fund intends to write listed covered call options during periods
when it anticipates declines in the market values of portfolio securities
because the premiums received may offset to some extent the decline in the
Fund's net asset value occasioned by such declines in market value. Except as
part of the "sell discipline" described below, the Fund will generally not write
listed covered call options when it anticipates that the market values of it's
portfolio securities will increase.
One reason for the Fund to write call options is as part of a "sell discipline."
If the Fund decides that a portfolio security would be overvalued and should be
sold at a certain price higher than the current price, it could write an option
on the stock at the higher price. Should the stock subsequently reach that price
and the option be exercised, the Fund would, in effect, have increased the
selling price of that stock, which it would have sold at that price in any
event, by the amount of the premium. In the event the market price of the stock
declined and the option were not exercised, the premium would offset all or some
portion of the decline. It is possible that the price of the stock could
increase beyond the exercise price; in that event, the Fund would forego the
opportunity to sell the stock at that higher price.
In addition, call options may be used as part of a different strategy in
connection with sales of portfolio securities. If, in the judgment of Fund
management, the market price of a stock is overvalued and it should be sold, the
Fund may elect to write a call option with an exercise price substantially below
the current market price. As long as the value of the underlying security
remains above the exercise price during the term of the option, the option will,
in all probability, be exercised, in which case the Fund will be required to
sell the stock at the exercise price. If the sum of the premium and the exercise
price exceeds the market price of the stock at the time the call option is
written, the Fund would, in effect, have increased the selling price of the
stock. The Fund would not write a call option in these circumstances if the sum
of the premium and the exercise price were less than the current market price of
the stock.
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Closed-End Investment Companies. The Micro-Cap Value Fund may invest in shares
of closed-end investment companies if it pays a free or commission no greater
than the customary broker's commission. Shares of investment companies sometimes
trade at a discount or premium to their net asset value. Also, there may be
duplication of fees if the Fund and the closed-end investment company both
charge a management fee. No more than 5% of the Fund's gross assets may be
invested in Closed-End Investment Companies.
Covered Call Options. Each Fund may write covered call options, which are traded
on a national securities exchange with respect to securities in its portfolio in
an attempt to increase its income and to provide greater flexibility in the
disposition of its portfolio securities. A "call option" is a contract sold for
a price (the "premium") giving its holder the right to buy a specific number of
shares of a stock at a specific price prior to a specified date. A "covered call
option" is a call option issued on securities already owned by the writer of the
call option for delivery to the holder upon the exercise of the option. During
the period of the option, each Fund forgoes the opportunity to profit from any
increase in the market price of the underlying security above the exercise price
of the option (to the extent that the increase exceeds its net premium). Each
Fund may enter into "closing purchase transactions" in order to terminate its
obligation to deliver the underlying security (this may result in a short-term
gain or loss). A closing purchase transaction is the purchase of a call option
(at a cost which may be more or less than the premium received for writing the
original call option) on the same security with the same exercise price and call
period as the option previously written. If a Fund is unable to enter into a
closing purchase transaction, it may be required to hold a security that it
might otherwise have sold to protect against depreciation. Each Fund does not
intend to write covered call options with respect to securities with an
aggregate market value of more than 5% of it's gross assets at the time an
option is written. This percentage limitation will not be increased without
prior disclosure in the current Prospectus.
Each Fund's custodian will segregate cash or liquid high-grade debt securities
in an amount not less than that required by the Securities and Exchange
Commission ("SEC") Release 10666 with respect to Fund assets committed to
written covered call options. If the value of the segregated securities
declines, additional cash or debt securities will be added on a daily basis
(i.e., marked-to-marketed) so that the segregated amount will not be less than
the amount of each Fund's commitment with respect to such written options.
Diversification. Each Fund is a diversified fund, which means that with respect
to 75% of its total assets, it will not purchase a security if, as a result,
more than 5% of the Fund's total assets would be invested in securities of a
single issuer or the Fund would hold more than 10% of the outstanding voting
securities of the issuer. U. S. government securities are not subject to these
requirements.
Financial Futures Contracts. Each Fund may enter into contracts for the future
delivery of a financial instrument, such as a security or the cash value of a
securities index. This investment technique is designed primarily to hedge
(i.e., protect) against anticipated future changes in interest rates or market
conditions which otherwise might adversely affect the value of securities which
we hold or intend to purchase. A "sale" of a futures contract means the
undertaking of a contractual obligation to deliver the securities or the cash
value of an index called for by the contract at a specified price during a
specified delivery period. A "purchase" of a futures contract means the
undertaking of a contractual obligation to acquire the securities or cash value
of an index at a specified price during a specified delivery period. At the time
of delivery pursuant to the contract, adjustments are made to recognize
differences in value arising from the delivery of securities that differ from
those specified in the contract. In some cases, securities called for by a
futures contract may not have been issued at the time the contract was written.
Each Fund will not enter into any futures contracts or options on futures
contracts if the aggregate of the market value of the securities covered by it's
outstanding futures contracts and securities covered by futures contracts
subject to the outstanding options written by us would exceed 50% of its total
assets.
Although some financial futures contracts by their terms call for the actual
delivery or acquisition of securities, in most cases, a party will close out the
contractual commitment before delivery without having to make or take delivery
of the security by purchasing (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, if effected through a member of an exchange, cancels the
obligation to make or take delivery of the securities. All transactions in the
futures market are made, offset or fulfilled through a clearing house associated
with the exchange on which the contracts are traded. Each Fund will incur
brokerage fees when they purchase or sell contracts and will be required to
maintain margin deposits. At the time they enter into a futures contract, it is
required to deposit with the custodian, on behalf of the broker, a specified
amount of cash or eligible securities called "initial margin." The initial
margin required for a futures contract is set by the exchange on which the
contract is traded. Subsequent payments, called "variation margin," to and from
the broker are made on a daily basis as the market price of the futures contract
fluctuates. The costs incurred in connection with futures transactions could
reduce the Fund's return. Futures contracts entail risks. If the investment
adviser's judgment about the general direction of interest rates or markets is
wrong, the overall performance may be poorer than if no such contracts had been
entered into.
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There may be an imperfect correlation between movements in prices of futures
contracts and portfolio securities being hedged. The degree of difference in
price movements between futures contracts and the securities (or securities
indices) being hedged depends upon such things as variations in demand and
liquidity for futures contracts and the securities underlying the contracts. In
addition, the market prices of futures contracts may be affected by certain
factors not directly related to the underlying securities. At any given time,
the availability of futures contracts, and hence their prices, are influenced by
credit conditions and margin requirements. Due to the possibility of price
distortions in the futures market and because of the imperfect correlation
between movements in the prices of securities and movements in the prices of
futures contracts, a correct forecast of market trends by the investment adviser
may not result in a successful hedging transaction.
Foreign Currency Hedging Techniques. Each Fund may utilize various foreign
currency hedging techniques described below, including forward foreign currency
contracts and foreign currency put and call options.
Foreign Currency Put And Call Options. Each Fund also may purchase foreign
currency put options and write foreign currency call options on U.S. exchanges
or U.S. over-the-counter markets. A put option gives a Fund, upon payment of a
premium, the right to sell a currency at the exercise price until the expiration
of the option and serves to insure against adverse currency price movements in
the underlying portfolio assets denominated in that currency.
Exchange-listed options markets in the United States include several major
currencies, and trading may be thin and illiquid. A number of major investment
firms trade unlisted options which are more flexible than exchange-listed
options with respect to strike price and maturity date. Unlisted options
generally are available in a wider range of currencies. Unlisted foreign
currency options are generally less liquid than listed options and involve the
credit risk associated with the individual issuer. The premiums paid for such
currency put options will not exceed 5% of the net assets of a Fund. Unlisted
options, together with other illiquid securities, are subject to a limit of 15%
of a Fund's net assets. The face value of such currency call option writing or
cross-hedging may not exceed 90% of the value of the securities denominated in
such currency (a) invested in to cover such call writing or to be crossed.
A call option written by each Fund gives the purchaser, upon payment of a
premium, the right to purchase from the Fund a currency at the exercise price
until the expiration of the option. Each Fund may write a call option on a
foreign currency only in conjunction with a purchase of a put option on that
currency. Such a strategy is designed to reduce the cost of downside currency
protection by limiting currency appreciation potential. The face value of such
writing may not exceed 90% of the value of the securities denominated in such
currency invested in by the Fund or in such cross currency (referred to above)
to cover such call writing.
Each Fund's custodian will segregate cash or permitted securities belonging to
the Fund in an amount not less than that required by SEC Release 10666 and
related policies with respect to the Fund's assets committed to (a) writing
options, (b) forward foreign currency contracts and (c) cross hedges entered
into by the Fund. If the value of the securities segregated declines, additional
cash or debt securities will be added on a daily basis (i.e., marked to market),
so that the segregated amount will not be less than the amount of the Fund's
commitments with respect to such written options, forward foreign currency
contracts and cross hedges.
Forward Foreign Currency Contracts. A forward foreign currency contract involves
an obligation to purchase or sell a specific amount of a specific currency at a
set price at a future date. A Fund expects to enter into forward foreign
currency contracts in primarily two circumstances. First, when a Fund enters
into a contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security. By
entering into a forward contract for the purchase or sale of the amount of
foreign currency involved in the underlying security transaction, a Fund will be
able to protect against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the subject foreign currency during the
period between the date the security is purchased or sold and the date on which
payment is made or received.
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Second, when management believes that the currency of a particular foreign
country may suffer a decline against the U.S. dollar, each Fund may enter into a
forward contract to sell the amount of foreign currency approximating the value
of some or all of the Fund's portfolio securities denominated in such foreign
currency or, in the alternative, the Fund may use a cross-hedging technique
whereby it sells another currency which the Fund expects to decline in a similar
way but which has a lower transaction cost. Precise matching of the forward
contract amount and the value of the securities involved will not generally be
possible since the future value of such securities denominated in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. Each Fund does not intend to enter into such forward contracts
under this second circumstance on a continuous basis.
Illiquid Securities. Each Fund may invest in illiquid securities. These
securities include those that are not traded on the open market or that trade
irregularly or in very low volume. They may be difficult or impossible to sell
at the time and price the Fund would like. Each Fund may invest up to 15% of its
assets in illiquid securities. Some securities of micro-cap companies may be
restricted as to resale or may be highly illiquid.
Lending Portfolio Securities. Each Fund may lend portfolio securities to
registered broker-dealers. These loans, if and when made, may not exceed 30% of
each Fund's total assets. Each Fund loan of securities will be collateralized by
cash or marketable securities issued or guaranteed by the U.S. Government or its
agencies ("U.S. Government securities") or other permissible means at least
equal to the market value of the loaned securities. From time to time, each Fund
may pay a part of the interest received with respect to the investment of
collateral to a borrower and/or a third party that is not affiliated with the
Fund and is acting as a "placing broker." No fee will be paid to affiliated
persons.
By lending portfolio securities, each Fund can increase its income by continuing
to receive interest on the loaned securities as well as by either investing the
cash collateral in permissible investments, such as U.S. Government securities
or obtaining yield in the form of interest paid by the borrower when U.S.
Government securities or other forms of non-cash collateral are received. Each
Fund will comply with the following conditions whenever it loans securities: (i)
it must receive at least 100% collateral from the borrower; (ii) the borrower
must increase the collateral whenever the market value of the securities loaned
rises above the level of the collateral; (iii) it must be able to terminate the
loan at any time; (iv) it must receive reasonable compensation for the loan, as
well as any dividends, interest or other distributions on the loaned securities;
(v) it may pay only reasonable fees in connection with the loan and (vi) voting
rights on the loaned securities may pass to the borrower except that, if a
material event adversely affecting the investment in the loaned securities
occurs, the Trustees must terminate the loan and regain the right to vote the
securities.
Limitations On The Purchases And Sales Of Stock Options, Options On Stock
Indices And Stock Index Futures. Each Fund may write put and call options on
stocks only if they are covered, and such options must remain covered so long as
the Fund is obligated as a writer. Each Fund will not (a) write puts having an
aggregate exercise price greater than 25% of its total net assets; or (b)
purchase (i) put options on stocks not held in the Fund's portfolio, (ii) put
options on stock indices or (iii) call options on stocks or stock indices if,
after any such purchase, the aggregate premiums paid for such options would
exceed 20% of the Fund's total net assets.
Options And Financial Futures Transactions. Each Fund may engage in options and
financial futures transactions in accordance with their investment objective and
policies. Although each Fund is not currently employing such options and
financial futures transactions, they may engage in such transactions in the
future if it appears advantageous to us to do so, in order to cushion the
effects of fluctuating interest rates and adverse market conditions. The use of
options and financial futures, and possible benefits and attendant risks, are
discussed below, along with information concerning certain other investment
policies and techniques.
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Options On Financial Futures Contracts. Each Fund may purchase and write call
and put options on financial futures contracts. An option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract at a specified exercise price at any time during
the period of the option. Upon exercise, the writer of the option delivers the
futures contract to the holder at the exercise price. Each Fund would be
required to deposit with our custodian initial margin and maintenance margin
with respect to put and call options on futures contracts written by us. Options
on futures contracts involve risks similar to the risks relating to transactions
in financial futures contracts described above. Generally speaking, a given
dollar amount used to purchase an option on a financial futures contract can
hedge a much greater value of underlying securities than if that amount were
used to directly purchase the same financial futures. Should the event that the
Fund intends to hedge (or protect) against not materialize, however, the option
may expire worthless, in which case the Fund would lose the premium paid
therefor.
Put Options On Stock. Each Fund may also write listed put options. If the Fund
writes a put option, it is obligated to purchase a given security at a specified
price at any time during the term of the option.
Writing listed put options is a useful portfolio investment strategy when the
Fund has cash or other reserves available for investment as a result of sales of
Fund shares or, more importantly, because Fund management believes a more
defensive and less fully invested position is desirable in light of market
conditions. If Fund management wishes to invest its cash or reserves in a
particular security at a price lower than current market value, it may write a
put option on that security at an exercise price which reflects the lower price
it is willing to pay. The buyer of the put option generally will not exercise
the option unless the market price of the underlying security declines to a
price near or below the exercise price. If the Fund writes a listed put, the
price of the underlying stock declines and the option is exercised, the premium,
net of transaction charges, will reduce the purchase price paid by the Fund for
the stock. The price of the stock may decline by an amount in excess of the
premium, in which event the Fund would have foregone an opportunity to purchase
the stock at a lower price.
If, prior to the exercise of a put option, the Fund determines that it no longer
wishes to invest in the stock on which the put option had been written, the Fund
may be able to effect a closing purchase transaction on an exchange by
purchasing a put option of the same series as the one which it has previously
written. The cost of effecting a closing purchase transaction may be greater
than the premium received on writing the put option and there is no guarantee
that a closing purchase transaction can be effected.
Each Fund may only write covered put options to the extent that cover for such
options does not exceed 25% of its net assets. Each Fund will not purchase an
option if, as a result of such purchase, more than 20% of its total assets would
be invested in premiums for such options.
Repurchase Agreements. Each Fund may enter into repurchase agreements with
respect to a security. A repurchase agreement is a transaction by which each
Fund acquires a security and simultaneously commits to resell that security to
the seller (a bank or securities dealer) at an agreed upon price on an agreed
upon date. The resale price reflects the purchase price plus an agreed upon
market rate of interest which is unrelated to the coupon rate or date of
maturity of the purchased security. In this type of transaction, the securities
purchased by each Fund have a total value in excess of the value of the
repurchase agreement. Each Fund requires at all times that the repurchase
agreement be collateralized by cash or U.S. Government securities having a value
equal to, or in excess of, the value of the repurchase agreement. Such
agreements permit each Fund to keep all of its assets at work while retaining
flexibility in pursuit of investments of a longer term nature.
The use of repurchase agreements involves certain risks. For example, if the
seller of the agreement defaults on its obligation to repurchase the underlying
securities at a time when the value of these securities has declined, the Fund
may incur a loss upon disposition of them. If the seller of the agreement
becomes insolvent and subject to liquidation or reorganization under the
Bankruptcy Code or other laws, a bankruptcy court may determine that the
underlying securities are collateral not within the control of the Fund and are
therefore subject to sale by the trustee in bankruptcy. Even though the
repurchase agreements may have maturities of seven days or less, they may lack
liquidity, especially if the issuer encounters financial difficulties. While
Fund management acknowledges these risks, it is expected that they can be
controlled through stringent selection criteria and careful monitoring
procedures. Fund management intends to limit repurchase agreements to
transactions with dealers and financial institutions believed by Fund management
to present minimal credit risks. Fund management will monitor creditworthiness
of the repurchase agreement sellers on an ongoing basis.
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Rights And Warrants. Each Fund may invest in rights and warrants to purchase
securities. Included within that amount, but not to exceed 5% of the value of
the Fund's gross assets, may be warrants which are not listed on the NYSE or
American Stock Exchange.
Rights represent a privilege offered to holders of record of issued securities
to subscribe (usually on a pro rata basis) for additional securities of the same
class, of a different class or of a different issuer, as the case may be.
Warrants represent the privilege to purchase securities at a stipulated price
and are usually valid for several years. Rights and warrants generally do not
entitle a holder to dividends or voting rights with respect to the underlying
securities nor do they represent any rights in the assets of the issuing
company.
Also, the value of a right or warrant may not necessarily change with the value
of the underlying securities and rights and warrants cease to have value if they
are not exercised prior to their expiration date.
Risks Of Options On Indices. The Micro-Cap Value Fund's purchase and sale of
options on indices will be subject to risks described above under "Risk of
Transactions in Stock Options." In addition, the distinctive characteristics of
options on indices create certain risks that are not present with stock options.
Because the value of an index option depends upon movements in the level of the
index rather than the price of a particular stock, whether the Funds' will
realize a gain or loss on the purchase or sale of an option on an index depends
upon movements in the level of stock prices in the stock market generally or in
an industry or market segment rather than movements in the price of a particular
stock. Accordingly, successful use by the Fund of options on indices would be
subject to the investment adviser's ability to predict correctly movements in
the direction of the stock market generally or of a particular industry. This
requires different skills and techniques than predicting changes in the price of
individual stocks.
Index prices may be distorted if trading of certain stocks included in the index
is interrupted. Trading in the index option also may be interrupted in certain
circumstances, such as if trading were halted in a substantial number of stocks
included in the index. If this occurred, the Fund would not be able to close out
options which it had purchased or written and, if restrictions on exercise were
imposed, may be unable to exercise an option it holds, which could result in
substantial losses to the Fund. It is the Funds' policy to purchase or write
options only on indices which include a number of stocks sufficient to minimize
the likelihood of a trading halt in the index.
Trading in index options commenced in April 1983 with the S&P 100 option
(formerly called the CBOE 100). Since that time a number of additional index
option contracts have been introduced including options on industry indices.
Although the markets for certain index option contracts have developed rapidly,
the markets for other index options are still relatively illiquid. The ability
to establish and close out positions on such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
this market will develop in all index option contracts. The Fund will not
purchase or sell any index option contract unless and until, in Fund
management's opinion, the market for such options has developed sufficiently
that such risk in connection with such transactions in no greater than such risk
in connection with options on stocks.
Risks Of Transactions In Stock Options. Writing options involves the risk that
there will be no market in which to effect a closing transaction. An option
position may be closed out only on an exchange which provides a secondary market
for an option of the same series. Although the Fund will generally write only
those options for which there appears to be an active secondary market, there is
no assurance that a liquid secondary market on an exchange will exist for any
particular option, or at any particular time, and for some options no secondary
market on an exchange may exist. If the Fund, as a covered call option writer,
is unable to effect a closing purchase transaction in a secondary market, it
will not be able to sell the underlying security until the option expires or it
delivers the underlying security upon exercise.
Rule 144A Securities. Both Funds may invest in Rule 144A securities, which are
securities determined by the Board to be liquid pursuant to the Securities and
Exchange Commission Rule 144A ("Rule 144A"). Under Rule 144A, a qualifying
unregistered security may be resold to a qualified institutional buyer without
registration and without regard to whether the seller originally purchased the
security for investment. Investments in Rule 144A securities initially
determined to be liquid could have the effect of diminishing the level of a
Fund's liquidity during periods of decreased market interest in such securities.
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Short Sales. The Micro-Cap Value Fund may make short sales of securities or
maintain a short position, if at all times when a short position is opened the
fund owns an equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for an equal amount
of the securities of the same issuer as the securities sold short. The Micro-Cap
Value Fund does not intend to have more than 5% of its net assets (determined at
the time of the short sale) subject to short sales against the box.
Stock Index Options. Except as describe below, the Micro-Cap Value Fund will
write call options on indices only if on such date it holds a portfolio of
stocks at least equal to the value of the index times the multiplier times the
number of contracts. When the Fund writes a call option on a broadly-based stock
market index, the Fund will segregate or put into escrow with its custodian, or
pledge to a broker as collateral for the option, one or more "qualified
securities" with a market value at the time the option is written of not less
than 100% of the current index value times the multiplier times the number of
contracts.
Stock Index Futures. The Micro-Cap Value Fund will engage in transactions in
stock index futures contracts as a hedge against changes resulting from market
conditions in the values of securities which are held in the Funds' portfolio or
which it intends to purchase. The Fund will engage in such transactions when
they are economically appropriate for the reduction of risks inherent in the
ongoing management of the Fund. The Fund may not purchase or sell stock index
futures if, immediately thereafter, more than one-third of its net assets would
be hedged and, in addition, except as described above in the case of a call
written and held on the same index, will write call options on indices or sell
stock index futures only if the amount resulting from the multiplication of the
then current level of the index (or indices) upon which the option or future
contract(s) is based, the applicable multiplier(s), and the number of futures or
options contracts which would be outstanding, would not exceed one-third of the
value of the Funds' net assets.
Special Risks Of Writing Calls On Indices. Because exercises of index options
are settled in cash, a call writer cannot determine the amount of its settlement
obligations in advance and, unlike call writing on specific stocks, cannot
provide in advance for, or cover, its potential settlement obligations by
acquiring and holding the underlying securities. However, the Fund will write
call options on indices only under the circumstances described above under
"Limitations on the Purchases and Sales of Stock Options, Options on Stock
Indices and Stock Index Futures."
Price movements in the Fund's portfolio probably will not correlate precisely
with movements in the level of the index and, therefore, the Fund bears the risk
that the price of the securities held may not increase as much as the index. In
such event the Fund would bear a loss on the call which is not completely offset
by movements in the price of the Fund's portfolio. It is also possible that the
index may rise when the Funds' portfolio of stocks does not rise. If this
occurred, the Fund would experience a loss on the call which is not offset by an
increase in the value of its portfolio and might also experience a loss in its
portfolio. However, because the value of a diversified portfolio will, over
time, tend to move in the same direction as the market, movements in the value
of the Fund in the opposite direction to the market would be likely to occur for
only a short period or to a small degree.
Unless the Fund has other liquid assets that are sufficient to satisfy the
exercise of a call, the Fund would be required to liquidate portfolio securities
in order to satisfy the exercise. Because an exercise must be settled within
hours after receiving the notice of exercise, if the Fund fails to anticipate an
exercise, it may have to borrow (in amounts not exceeding 20% of the Fund's
total assets) pending settlement of the sale of securities in its portfolio and
would incur interest charges thereon.
When the Fund has written a call, there is also a risk that the market may
decline between the time the call is written and the time the Fund is able to
sell stocks in its portfolio. As with stock options, the Fund will not learn
that an index option has been exercised until the day following the exercise
date but, unlike a call on stock where the Fund would be able to deliver the
underlying securities in settlement, the Fund may have to sell part of its stock
portfolio in order to make settlement in cash, and the price of such stocks
might decline before they can be sold. This timing risk makes certain strategies
involving more than one option substantially more risky with index options than
with stock options. For example, even if an index call which the Fund has
written is "covered" by an index call held by the Fund with the same strike
price, the Fund will bear the risk that the level of the index may decline
between the close of trading on the date the exercise notice is filed with the
clearing corporation and the close of trading on the date the Fund exercises the
call it holds or the time the Fund sells the call which in either case would
occur no earlier than the day following the day the exercise notice was filed.
10
<PAGE>
Special Risks Of Purchasing Puts And Calls On Indices. If the Micro-Cap Value
Fund holds an index option and exercises it before final determination of the
closing index value for that day, it runs the risk that the level of the
underlying index may change before closing. If such a change causes the
exercised option to fall out-of-the-money, the Fund will be required to pay the
difference between the closing index value and the exercise price of the option
(times the applicable multiple) to the assigned writer. Although the Fund may be
able to minimize this risk by withholding exercise instructions until just
before the daily cut off time or by selling rather than exercising an option
when the index level is close to the exercise price it may not be possible to
eliminate this risk entirely because the cut off times for index options may be
earlier than those fixed for other types of options and may occur before
definitive closing index values are announced.
2.
Directors and Officers
The Company's Board of Trustees is responsible for the management of the
business and affairs of each Fund.
The following trustee is a partner of Lord, Abbett & Co. ("Lord Abbett"), 90
Hudson Street, Jersey City, New Jersey 07302-3973. He has been associated with
Lord Abbett for over five years and is also an officer, director, or trustee of
the other Lord Abbett-sponsored funds. He is an "interested person" as defined
in the Act, and as such, may be considered to have an indirect financial
interest in the Rule 12b-1 Plan described in the Prospectus.
Robert S. Dow, age 55, Chairman and President
The following outside trustees are also directors or trustees of the other Lord
Abbett-sponsored funds referred to above.
E. Thayer Bigelow, Trustee
245 Park Avenue, Suite 2414
New York, New York
Senior Adviser, Time Warner Inc. Formerly, Acting Chief Executive Officer of
Courtroom Television Network (1997 - 1998). Formerly, President and Chief
Executive Officer of Time Warner Cable Programming, Inc. (1991 - 1997). Prior to
that, President and Chief Operating Officer of Home Box Office, Inc. Age 58.
William H.T. Bush, Trustee
Bush-O'Donnell & Co., Inc.
101 South Hanley Road, Suite 1025
St. Louis, Missouri
Co-founder and Chairman of the Board of financial advisory firm of
Bush-O'Donnell & Company (since 1986). Age 61.
11
<PAGE>
Robert B. Calhoun, Jr., Trustee
Monitor Clipper Partners
650 Madison Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners (since 1997) and President of The
Clipper Group, both private equity investment funds (since 1990). Age 57.
Stewart S. Dixon, Trustee
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon since 1990). Age 69.
John C. Jansing, Trustee
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 74.
C. Alan MacDonald, Trustee
415 Round Hill Road
Greenwich, Connecticut
Currently involved in golf development management on a consultancy basis (since
1999). Formerly, Managing Director of The Directorship Group, Inc., a
consultancy in board management and corporate governance (1997-1999). Prior to
that, General Partner of The Marketing Partnership, Inc., a full service
marketing consulting firm (1994-1997). Prior to that, Chairman and Chief
Executive Officer of Lincoln Snacks, Inc., manufacturer of branded snack foods
(1992-1994). His career spans 36 years at Stouffers and Nestle with 18 of those
years as Chief Executive Officer. Currently serves as Director of DenAmerican
Corp., J. B. Williams Company, Inc., Fountainhead Water Company, Exigent
Diagnostics. Age 66.
Hansel B. Millican, Jr., Trustee
Rochester Button Company
1328 Broadway (Suite 816)
New York, New York
President and Chief Executive Officer of Rochester Button Company (since 1991).
Currently serves as Director of Polyvision Corporation. Age 71.
Thomas J. Neff, Trustee
Spencer Stuart
277 Park Avenue
New York, New York
Chairman of Spencer Stuart, an executive search consulting firm (since 1976).
Currently serves as a Director of Ace, Ltd. (NYSE). Age 62.
12
<PAGE>
The second column of the following table sets forth the compensation accrued by
the Company for outside directors/trustees. The third column sets forth
information with respect to the pension or retirement benefits accrued by all
Lord Abbett-sponsored funds for outside directors/trustees. The fourth column
sets forth information the total compensation paid by all Lord Abbett-sponsored
funds to the outside directors/trustees, and amounts payable but deferred at the
option of the director/trustee. No director/trustee of the funds associated with
Lord Abbett and no officer of the funds received any compensation from the funds
for acting as a director/trustee or officer.
For the Fiscal Year Ended October 31, 1999
------------------------------------------
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Pension or For Year Ended
Retirement Benefits December 31, 1999
Accrued by the Total Compensation
Aggregate Fund and Paid by the Fund and
Compensation Thirteen Other Lord Thirteen Other Lord
Accrued by Abbett-sponsored Abbett-sponsored
Name of Trustee the Fund/1 Funds/2 Funds/3
- --------------- ---------- ------- -------
<S> <C> <C> <C>
E. Thayer Bigelow $1,709 $17,622 $ 57,720
William H.T. Bush* $1,703 $15,846 $ 58,000
Robert B. Calhoun, Jr.** $1,680 $12,276 $ 57,000
Stewart S. Dixon $1,725 $32,420 $ 58,500
John C. Jansing $1,680 $41,108/4 $ 57,250
C. Alan MacDonald $1,695 $26,763 $ 57,500
Hansel B. Millican, Jr. $1,695 $37,822 $ 57,500
Thomas J. Neff $1,753 $20,313 $ 59,660
</TABLE>
*Elected as of August 13, 1998
**Elected as of June 17, 1998
1. Outside directors'/trustees' fees, including attendance fees for board and
committee meetings, are allocated among all Lord Abbett-sponsored funds
based on the net assets of each fund. A portion of the fees payable by the
Company to its outside directors/trustees may be deferred under a plan
('equity-based plan") that deems the deferred amounts to be invested in
shares of the Fund for later distribution to the directors/trustees.
2. The amounts in Column 3 were accrued by the Lord Abbett-sponsored funds for
the 12 months ended October 31, 1999.
3. The fourth column shows aggregate compensation, including
directors/trustees fees and attendance fees for board and committee
meetings, of a nature referred to in footnote one, accrued by the Lord
Abbett-sponsored funds during the year ended December 31, 1999, including
fees directors/trustees have chosen to defer, but does not include amounts
accrued under the equity-based plans and shown in Column 3.
4. The equity-based plans superseded a previously approved retirement plan for
all directors/trustees. Directors/trustees had the option to convert their
accrued benefits under the retirement plan. All of the then current outside
directors/trustees except one made such election. The equity-based plans
also provide for a pre-retirement death benefit and actuarially reduced
joint-and-survivor spousal benefits. Mr. Jansing chose to continue to
receive benefits under the retirement plan which provides that outside
directors (trustees) may receive annual retirement benefits for life equal
to their final annual retainer following retirement at or after age 72 with
at least ten years of service. Thus, if Mr. Jansing were to retire and the
annual retainer payable by the funds were the same as it is today, he would
receive annual retirement benefits of $50,000.
13
<PAGE>
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Brown, Carper, Fetch, Hilstad, Hudson, McGruder, Morris, Towle, and Walsh are
partners of Lord Abbett; the others are employees:
Executive Vice Presidents:
Zane E. Brown, age 48;
Robert P. Fetch, age 47;
W. Thomas Hudson, Jr., age 58;
Stephen I. McGruder, age 56;
Robert G. Morris, age 55.
Eli M. Salzman, age 36 (with Lord Abbett since 1997, formerly a Portfolio
Manager, Analyst at Mutual of America from 1996 to 1997, prior thereto Vice
President at Mitchell Hutchins Asset Management);
Vice Presidents:
Joan Binstock, age 46 (with Lord Abbett since 1999, formerly Chief Operating
Officer of Morgan Grenfell from 1996 to 1999, prior thereto Principal of Ernst &
Young LLP);
Daniel E. Carper, age 48;
Lesley Jane Dixon, age 36;
Gerard S. E. Heffernan, age 36 (with Lord Abbett since 1998, formerly a
Portfolio Manager at CL Capital Management Company; from 1996 to 1998, prior
thereto Equity Research Analyst at CL Capital Management Company);
Paul A. Hilstad, age 57, Vice President and Secretary (with Lord Abbett since
1995; formerly Senior Vice President and General Counsel of American Capital
Management & Research, Inc.);
Timothy W. Horan, age 45;
Cinda C. Hughes, age 37 (with Lord Abbett since 1998, formerly Analyst/Director,
Equity Research at Phoenix Investment Counsel from 1996 to 1998, prior thereto
Associate Strategist - Small Cap Stocks at Paine Webber, Inc./Kidder, Peabody &
Co., Inc.);
Lawrence H. Kaplan, age 43 (with Lord Abbett since 1997 - formerly Vice
President and Chief Counsel of Salomon Brothers Asset Management Inc. from 1995
to 1997, prior thereto Senior Vice President, Director and General Counsel of
Kidder Peabody Asset Management, Inc.);
Jerald Lanzotti, age 32;
Gregory M. Macosko, age 53 (with Lord Abbett since 1996, formerly an Equity
Analyst and Portfolio Manager at Quest Advisory Inc.);
A. Edward Oberhaus, age 40;
Tracie Richter, age 32 (with Lord Abbett since 1999, formerly Vice President -
Head of Fund Administration of Morgan Grenfell from 1998 to 1999, Vice President
of Bankers Trust from 1996 to 1998, prior thereto Tax Associate of Goldman
Sachs);
Fernando Saldanha, age 47;
14
<PAGE>
Christopher J. Towle, age 42;
John J. Walsh, age 64;
Treasurer:
Donna M. McManus, age 39, Treasurer (with Lord Abbett since 1996, formerly a
Senior Manager at Deloitte & Touche LLP).
The Company does not hold an annual meeting of shareholders in any year unless
one or more matters are required to be acted on by shareholders under the Act.
Under the Company's Declaration of Trust, shareholder meeting may be called at
any time by certain officers of the Company or by a majority of the Board of
Trustees (i) for the purpose of taking action upon any matter requiring the vote
or authority of the Company's shareholders or upon other matters deemed to be
necessary or desirable or (ii) upon the written request of the holders of at
least one-quarter of the shares of the Fund's outstanding shares entitled to
vote at the meeting.
As of February 1, 2000, our officers and directors/trustees, as a group, owned
approximately 1oo% of each Funds' outstanding shares of Class Y. As of February
1, 2000, there were no other record holders of 5% or more of each Funds'
outstanding shares. The ownership of each Fund's outstanding shares of Class Y
represents the initial investment. It is anticipated that over time this
percentage of ownership will decrease.
3.
Investment Advisory and Other Services
The services performed by Lord Abbett are described under "Management" in the
Prospectus. Under the Management Agreement, each Fund is obligated to pay Lord
Abbett a monthly fee, based on average daily net assets for each month, at the
annual rate of .75 of 1% for each of the Micro-Cap Growth Fund and the Micro-Cap
Value Fund. These fees are allocated among the separate classes based on such
class' proportionate share of the Funds' average daily net assets. For the
fiscal years ended October 31, 1999, such fees amounted to $13,059 for Micro-Cap
Growth Fund; and $10,786 for Micro-Cap Value Fund. For the fiscal year ended
October 31, 1999, such fees were waived.
Each Fund pays all of its expenses not expressly assumed by Lord Abbett,
including, without limitation, 12b-1 expenses, outside directors'/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
stock certificates and shareholder reports, expenses of registering 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.
Lord Abbett Distributor LLC, a New York limited liability company ("Lord Abbett
Distributor") and subsidiary of Lord Abbett, 90 Hudson Street, Jersey City, NJ
07302, serves as the principal underwriter for the Funds.
Deloitte & Touche LLP, Two World Financial Center, New York, New York, are the
independent auditors of the Fund and must be approved at least annually by our
Board of Directors to continue in such capacity. Deloitte & Touche LLP perform
audit services for each Fund, including the examination of financial statements
included in our Annual Report to Shareholders.
The Bank of New York ("BNY"), 48 Wall Street, New York, New York 10268, serves
as each Fund's custodian. In accordance with the requirements of Rule 17f-5, the
Fund's directors/trustees have approved arrangements permitting the Funds'
foreign assets not held by BNY or its foreign branches to be held by certain
qualified foreign banks and depositories.
The Sub-Custodians of BNY are:
15
<PAGE>
Euro-Clear (a transnational securities depository); Australia: ANZ Banking
Group; Austria: Creditanstalt-Bankverein; Canada: Canadian Imperial Bank of
Commerce; Chile: Citibank, N.A.; Czech Republic: Ceskoslovenska Obchodni Banka;
Denmark: Den Danske Bank; Finland: Union Bank of Finland; Germany: J.P. Morgan
GmbH; Greece: National Bank of Greece S.A.; Hong Kong, Indonesia, Philippines,
Taiwan and Thailand: Hong Kong & Shanghai Banking Corp.; Hungary: Citibank
Budapest Rt; India: Hong Kong and Shanghai Banking Corporation; Ireland: Allied
Irish Banks, PLC; Israel: Bank Leumi LE-Israel B.M.; Japan: The Fuji Bank, Ltd.;
Jordan: Citibank, N.A.; Korea: Bank of Seoul; Luxembourg: Banque Internationale
A Luxembourg, S.A.; Mexico: Citibank, N.A.; Morocco: Banque Commerciale du
Maroc; Netherlands: Bank van Haften Labouchere; New Zealand: Anz Banking Group
Ltd.; Norway: Den Norske Bank; Pakistan: Citibank, N.A.; Peru: Citibank, N.A.;
Poland: Bank Handlowy w Warszawie S.A.; Portugal: Banco Espirito Santo E
Comercial de Lisboa; Malaysia, Singapore: Development Bank of Singapore; South
Africa: The First National Bank of Southern Africa; Sri Lanka: Hong Kong and
Shanghai Banking Corporation; Sweden: Skandinaviska Enskilda Banken;
Switzerland: Bank Leu; Turkey: Citibank, N.A.; Venezuela: Citibank, N.A.
United Missouri Bank of Kansas City, N.A., Tenth and Grand, Kansas City,
Missouri 64141, acts as the transfer agent and dividend disbursing agent for
each Fund.
4.
Portfolio Transactions
The Company's policy is to obtain best execution on all our portfolio
transactions, which means that it seeks to have purchases and sales of portfolio
securities executed at the most favorable prices, considering all costs of the
transaction including brokerage commissions and dealer markups and markdowns and
taking into account the full range and quality of the brokers' services.
Consistent with obtaining best execution, we generally pay, as described below,
a higher commission than some brokers might charge on the same transaction. This
policy with respect to best execution governs the selection of brokers or
dealers and the market in which the transaction is executed. To the extent
permitted by law, we may, if we consider it advantageous, make a purchase from
or sale to another Lord Abbett-sponsored fund without the intervention of any
broker-dealer.
Broker-dealers are selected on the basis of their professional capability and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of each Lord Abbett-sponsored fund
and also are employees of Lord Abbett. These traders do the trading as well for
other accounts -- investment companies (of which they are also officers) and
other investment clients -- managed by Lord Abbett. They are responsible for
obtaining best execution.
We pay a commission rate that we believe is appropriate to give maximum
assurance that our brokers will provide us, on a continuing basis, the highest
level of brokerage services available. While we do not always seek the lowest
possible commissions on particular trades, we believe that our commission rates
are in line with the rates that many other institutions pay. Our traders are
authorized to pay brokerage commissions in excess of those that other brokers
might accept on the same transactions in recognition of the value of the
services performed by the executing brokers, viewed in terms of either the
particular transaction or the overall responsibilities of Lord Abbett with
respect to us and the other accounts they manage. Such services include showing
us trading opportunities including blocks, a willingness and ability to take
positions in securities, knowledge of a particular security or market proven
ability to handle a particular type of trade, confidential treatment, promptness
and reliability.
Some of these brokers also provide research services at least some of which are
useful to Lord Abbett in their overall responsibilities with respect to us and
the other accounts they manage. Research includes the furnishing of analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts and trading equipment and
computer software packages, acquired from third-party suppliers, that enable
Lord Abbett to access various information bases. Such services may be used by
Lord Abbett in servicing all their accounts, and not all of such services will
necessarily be used by Lord Abbett in connection with their management of the
Fund; conversely, such services furnished in connection with brokerage on other
accounts managed by Lord Abbett may be used in connection with their management
of the Fund, and not all of such services will necessarily be used by Lord
Abbett in connection with their advisory services to such other accounts. We
have been advised by Lord Abbett that research services received from brokers
cannot be allocated to any particular account, are not a substitute for Lord
Abbett's services but are supplemental to their own research effort and, when
utilized, are subject to internal analysis before being incorporated by Lord
Abbett into their investment process. As a practical matter, it would not be
possible for Lord Abbett to generate all of the information presently provided
by brokers. While receipt of research services from brokerage firms has not
reduced Lord Abbett's normal research activities, the expenses of Lord Abbett
could be materially increased if it attempted to generate such additional
information through its own staff and purchased such equipment and software
packages directly from the suppliers.
16
<PAGE>
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-sponsored funds to purchase or sell portfolio
securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold the Lord
Abbett-sponsored funds' shares and/or shares of other Lord Abbett-sponsored
funds may be preferred.
If other clients of Lord Abbett buy or sell the same security at the same time a
Lord Abbett-sponsored fund does, transactions will, to the extent practicable,
be allocated among all participating accounts in proportion to the amount of
each order and will be executed daily until filled so that each account shares
the average price and commission cost of each day. Other clients who direct that
their brokerage business be placed with specific brokers or who invest through
wrap accounts introduced to Lord Abbett by certain brokers may not participate
with a Lord Abbett-sponsored fund in the buying and selling of the same
securities as described above. If these clients wish to buy or sell the same
security as a Lord Abbett-sponsored fund does, they may have their transactions
executed at times different from our transactions and thus may not receive the
same price or incur the same commission cost as a Lord Abbett-sponsored fund
does.
The Lord Abbett-sponsored funds will not seek "reciprocal" dealer business (for
the purpose of applying commissions in whole or in part for their benefit or
otherwise) from dealers as consideration for the direction to them of portfolio
business.
For the fiscal year ended October 31, 1999, we paid total commissions to
independent broker-dealers of $6,057.
5.
Purchases, Redemptions
and Shareholder Services
Information concerning how we value our shares for the purchase and redemption
of our shares is described in the Prospectus under "Purchases" and
"Redemptions", respectively.
As disclosed in the Prospectus, we calculate our net asset value as of the close
of the New York Stock Exchange ("NYSE") on each day that the NYSE is open for
trading by dividing our total net assets by the number of shares outstanding at
the time of calculation. The NYSE is closed on Saturdays and Sundays and the
following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
The Fund values its portfolio securities at market value as of the close of the
NYSE. Market value will be determined as follows: securities listed or admitted
to trading privileges on the New York or American Stock Exchange or on the
NASDAQ National Market System are valued at the last sales price, or, if there
is no sale on that day, at the mean between the last bid and asked prices, or,
in the case of bonds, in the over-the-counter market if, in the judgment of the
Fund's officers, that market more accurately reflects the market value of the
bonds. Over-the-counter securities not traded on the NASDAQ National Market
System are valued at the mean between the last bid and asked prices. Securities
for which market quotations are not available are valued at fair market value
under procedures approved by the Board of Directors/Trustees.
17
<PAGE>
All assets and liabilities express in foreign currencies will be converted into
U.S. dollars at the mean between the buying and selling rates of such currencies
against U.S. 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 Directors/Trustees. The Board of
Directors/Trustees will monitor, on an ongoing basis, the Fund's method of
valuation.
For each class of share, the net asset value per share will be determined by
taking the net assets and dividing by the number of shares outstanding.
The Fund has entered into a distribution agreement with Lord Abbett Distributor
LLC, a New York limited liability company ("Lord Abbett Distributor"), and
subsidiary of Lord Abbett under which Lord Abbett Distributor is obligated to
use its best efforts to find purchasers for the shares of the Funds, and to make
reasonable efforts to sell Fund shares so long as, in Lord Abbett Distributor's
judgment, a substantial distribution can be obtained by reasonable efforts.
Sales Arrangements
Classes of Shares. Each Fund offers Class A shares as described in the
Prospectus.
Class A Shares. If you buy Class A shares, you pay an initial sales charge,
unless your purchase meets one of the following conditions: (i) your purchase is
for $1 million or more in one or ore Lord Abbett-sponsored funds; (ii) you
purchase through an employer-sponsored retirement plan (a "Retirement Plan")
with a least 100 eligible employees under the Internal Revenue Code (which
excludes Individual Retirement Accounts); or (iii) you purchase through a
"special retirement wrap program" which is a certain type program sponsored by
an institution or other entity permitted to receive service and/or distribution
fees under a Rule 12b-1 Plan (an "Authorized Institution"). The program must
also have one or more characteristics distinguishing it, in the opinion of Lord
Abbett Distributor, from a Mutual Fund Fee Based Program. Such characteristics
include, among other things, the fact that an Authorized Institution does not
charge its clients any fee of a consulting or advisory nature that is
economically equivalent to the distribution fee under the Class A 12b-1 Plan and
the fact that the program related to participant-directed Retirement Plans.
However, if you meet a condition which allows you to purchase Class A shares
without an initial sales charge, but you redeem any of those shares within 24
months after the month in which you buy them, you may pay to the Fund a
contingent deferred sales charge ("CDSC") of 1%. There is an exception to the
CDSC for redemptions under a special retirement wrap program. Class A shares are
subject to service and distribution fees at an annual rate of 33 of 1% of the
annual net asset value of the Class A shares. The initial sales charge rates,
the CDSC, and the Rule 12b-1 Plan applicable to the Class A shares are described
in the sections below.
Account Features That Matter to You? Some account features are available in
whole or in part to Class A shareholders.
Systematic Withdrawal Plans are available to Class A shareholders. See
"Systematic Withdrawal Plan" under "Shareholder Services" in the Prospectus for
more information about the 12% annual waiver of the CDSC.
How Does It Affect Payments to My Broker? A salesperson, such as a broker, or
any other person who is entitled to receive compensation for selling Fund shares
may receive different compensation for selling one class than for selling
another class. As discussed in more detail below, such compensation is primarily
paid at the time of sale in the case of Class A shares.
Rule 12b-1 Plans
Class A. As described in the Prospectus, the Fund has adopted a Distribution
Plan and Agreement on behalf of each Fund pursuant to Rule 12b-1 of the Act for
the Fund. In adopting the Plan and in approving its continuance, the Board of
Directors/Trustees has concluded that there is a reasonable likelihood that the
Plan will benefit the shareholders. The expected benefits include greater sales
and lower redemptions of shares, which should allow the Fund to maintain a
consistent cash flow, and a higher quality of service to shareholders by
authorized institutions than would otherwise be the case. Lord Abbett used all
amounts received under the Class A Plan for payments to dealers for (i)
providing continuous services to the shareholders, such as answering shareholder
inquiries, maintaining records, and assisting shareholders in making
redemptions, transfers, additional purchases and exchanges and (ii) their
assistance in distributing shares of each Fund.
18
<PAGE>
The fees payable under the Class A Plan are described in the Prospectus. For the
fiscal year ended October 31, 1999 fees paid to dealers under the Plans were as
follows:
The Plan requires the Directors/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. The Plan shall continue in effect only if
its continuance is specifically approved at least annually by vote of the
Directors/Trustees, including a majority of the Directors/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 directors"), 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 without
approval by a majority of the outstanding voting securities of the applicable
class and the approval of a majority of the directors/trustees, including a
majority of the outside directors/trustees. The Plan may be terminated at any
time by vote of a majority of the outside directors or by vote of a majority of
its class's outstanding voting securities.
Contingent Deferred Sales Charges. A Contingent Deferred Sales Charge ("CDSC"),
applies regardless of class, and (i) will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original purchase
price and (ii) is not imposed on the amount of your account value represented by
the increase in net asset value over the initial purchase price (including
increases due to the reinvestment of dividends and capital gains distributions).
Class A Shares. As stated in the Prospectus, subject to certain exceptions, a
CDSC of 1% is imposed with respect to those Class A shares (or Class A shares of
another Lord Abbett-sponsored fund or fund acquired through exchange of such
shares) on which a fund has paid the one-time distribution fee of 1% if such
shares are redeemed out of the Lord Abbett-sponsored funds within a period of 24
months from the end of the month in which the original sale occurred.
To determine whether the CDSC applies to a redemption, the Funds redeem shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held on or after the second anniversary
of their purchase, and (3) shares held the longest before such second
anniversary.
General. Each percentage (1% in the case of Class A) used to calculate CDSCs
described above for the Class A shares is sometimes hereinafter referred to as
the "Applicable Percentage".
With respect to Class A, 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 shares, the
CDSC is received by the applicable fund and is intended to reimburse all or a
portion of the amount paid by the fund if the shares are redeemed before the
fund has had an opportunity to realize the anticipated benefits of having a
long-term shareholder account in the fund.
The other funds which participate in the Telephone Exchange Privilege (except
(a) Lord Abbett U.S. Government Securities Money Market Fund, Inc. ("GSMMF"),
(b) certain funds 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-sponsored 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
shares. Thus, if shares of a Lord Abbett Fund are exchanged for shares of the
same class of another such Fund and the shares of the same class tendered
("Exchanged Shares") are subject to a CDSC, the CDSC will carry over to the
shares of the same class being acquired, including GSMMF and AMMF ("Acquired
Shares"). Any CDSC that is carried over to Acquired Shares is calculated as if
the holder of the Acquired Shares had held those shares from the date on which
he or she became the holder of the Exchanged Shares. Although the Non-12b-1
Funds will not pay a distribution fee on their own shares, and will, therefore,
not impose their own CDSC, the Non-12b-1 Funds will collect the CDSC on behalf
of other Lord Abbett Funds, in the case of the Class A 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.
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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 Funds paid a 12b-1 fee, 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). 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 for those of 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
Funds before exchanging. In establishing a new account by exchange, shares of
the Fund being exchanged must have a value equal to at least the minimum initial
investment required for the 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 Fund's shares. Exchanges are based on relative
net asset values on the day instructions are received by the Fund in Kansas City
if the instructions are received prior to the close of the NYSE in proper form.
No sales charges are imposed except in the case of exchanges out of GSMMF or
AMMF (unless a sales charge (front-end, back-end or level) was paid on the
initial investment). Exercise of the exchange privilege will be treated as a
sale for federal income tax purposes, and, depending on the circumstances, a
gain or loss may be recognized. In the case of an exchange of shares that have
been held for 90 days or less where no sales charge is payable on the exchange,
the original sales charge incurred with respect to the exchanged shares will be
taken into account in determining gain or loss on the exchange only to the
extent such charge exceeds the sales charge that would have been payable on the
acquired shares had they been acquired for cash rather than by exchange. The
portion of the original sales charge not so taken into account will increase the
basis of the acquired shares.
Shareholders have the exchange privilege unless they refuse it in writing. You
should not view the exchange privilege as a means for taking advantage of
short-term swings in the market, and we reserve the right to terminate or limit
the privilege of any shareholder who makes frequent exchanges. We can revoke or
modify the privilege for all shareholders upon 60 days' prior notice. "Eligible
Funds" are AMMF and other Lord Abbett-sponsored funds which are eligible for the
exchange privilege, except Lord Abbett Series Fund ("LASF") which offers its
shares only in connection with certain variable annuity contracts, Lord Abbett
Equity Fund ("LAEF") which is not issuing shares. The exchange privilege will
not be available with respect to any otherwise "Eligible Funds" the shares of
which at the time are not available to new investors of the type requesting the
exchange.
Statement of Intention. Under the terms of the Statement of Intention as
described in the Prospectus to invest $50,000 or more over a 13-month period as
described in the Prospectus, shares of Lord Abbett-sponsored funds (other than
shares of LAEF, LASF, LARF and GSMMF, unless holdings in GSMMF are attributable
to shares exchanged from a Lord Abbett-sponsored fund offered with a front-end,
back-end or level sales charge) currently owned by you are credited as purchases
(at their current offering prices on the date the Statement is signed) toward
achieving the stated investment and reduced initial charges for Class A shares.
Class A shares valued at 5% of the amount of intended purchases are escrowed and
may be redeemed to cover the additional sales charge payable if the Statement is
not completed. The Statement of Intention is neither a binding obligation on you
to buy, nor on the Fund to sell, the full amount indicated.
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<PAGE>
Rights of Accumulation. As stated in the Prospectus, purchasers (as defined in
the Prospectus) may accumulate their investment in Lord Abbett-sponsored funds
(other than LAEF, LARF, LASF, and GSMMF, unless holdings in GSMMF are
attributable to shares exchanged from a Lord Abbett-sponsored fund offered with
a front-end, back-end or level sales charge) so that a current investment, plus
the purchaser's holdings valued at the current maximum offering price, reach a
level eligible for a discounted sales charge for Class A shares.
Net Asset Value Purchases of Class A Shares. As stated in the Prospectus, our
Class A shares may be purchased at net asset value by our directors, employees
of Lord Abbett, employees of our shareholder servicing agent and employees of
any securities dealer having a sales agreement with Lord Abbett who consents to
such purchases or by the trustee or custodian under any pension or
profit-sharing plan or Payroll Deduction IRA established for the benefit of such
persons or for the benefit of employees of any national securities trade
organization to which Lord Abbett belongs or any company with an account(s) in
excess of $10 million managed by Lord Abbett on a private-advisory-account
basis. For purposes of this paragraph, the terms "directors", "trustees", and
"employees" include a director's/trustee's or employee's spouse (including the
surviving spouse of a deceased director or employee). The terms "directors",
"trustees", and "employees of Lord Abbett" also include other family members and
retired directors/trustees and employees.
Our Class A shares also may be purchased at net asset value (a) at $1 million or
more, (b) with dividends and distributions from Class A shares of other Lord
Abbett-sponsored funds, except for LARF, LAEF and LASF, (c) under the loan
feature of the Lord Abbett-sponsored funds prototype 403(b) plan for share
purchases representing the repayment of principal and interest, (d) by certain
authorized brokers, dealers, registered investment advisers or other financial
institutions who have entered into an agreement with Lord Abbett Distributor, in
accordance with certain standards approved by Lord Abbett Distributor, providing
specifically for the use of our shares in particular investment products made
available for a fee to clients of such brokers, dealers, registered investment
advisers and other financial institutions, ("mutual fund wrap fee program"), (e)
by employees, partners, directors,, trustees, and owners of unaffiliated
consultants and advisors to Lord Abbett, Lord Abbett Distributor or Lord
Abbett-sponsored funds who consent to such purchase if such persons provide
service to Lord Abbett, Lord Abbett Distributor or such funds on a continuing
basis and are familiar with such funds (f) through Retirement Plans with at
least 100 eligible employees, (g) in connection with a merger, acquisition or
other reorganization, and (h) through a "special retirement wrap program"
sponsored by an authorized institution having one or more characteristics
distinguishing it, in the opinion of Lord Abbett Distributor, from a mutual fund
wrap program. Such characteristics include, among other things, the fact that an
authorized institution does not charge its clients any fee of a consulting or
advisory nature that is economically equivalent to the distribution fee under
the Class A 12b-1 Plan and the fact that the program relates to
participant-directed Retirement Plan. Shares are offered at net asset value to
these investors for the purpose of promoting goodwill with employees and others
with whom Lord Abbett Distributor and/or the Fund has business relationships.
Our shares may be issued at net asset value in exchange for the assets, subject
to possible tax adjustment, of a personal holding company or an investment
company. There are economies of selling efforts and sales-related expenses with
respect to offers to these investors and those referred to above.
Redemptions. A redemption order is in proper form when it contains all of the
information and documentation required by the order form or supplementally by
Lord Abbett Distributor or the Fund to carry out the order. The signature(s) and
any legal capacity of the signer(s) must be guaranteed by an eligible guarantor.
See the Prospectus for expedited redemption procedures.
The right to redeem and receive payment, as described in the Prospectus, may be
suspended if the NYSE is closed (except for weekends or customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
deems an emergency to exist.
Our Board of Directors/Trustees may authorize redemption of all of the shares in
any account in which there are fewer than 25 shares. Before authorizing such
redemption, the Board must determine that it is in our economic best interest or
necessary to reduce disproportionately burdensome expenses in servicing
shareholder accounts. At least six 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.
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<PAGE>
Div-Move. Under the Div-Move service described in the Prospectus, you can invest
the dividends paid on your account into an existing account 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 Funds and/or any
other Eligible Fund is described in the Prospectus. To avail yourself of this
method you must complete the application form, selecting the time and amount of
your bank checking account withdrawals and the funds for investment, include a
voided, unsigned check and complete the bank authorization.
Systematic Withdrawal Plans. The Systematic Withdrawal Plan (the "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. The SWP involves
the planned redemption of shares on a periodic basis by receiving either fixed
or variable amounts at periodic intervals. Since the value of shares redeemed
may be more or less than their cost, gain or loss may be recognized for income
tax purposes on each periodic payment. Normally, you may not make regular
investments at the same time you are receiving systematic withdrawal payments
because it is not in your interest to pay a sales charge on new investments when
in effect a portion of that new investment is soon withdrawn. The minimum
investment accepted while a withdrawal plan is in effect is $1,000. The SWP may
be terminated by you or by us at any time by written notice.
Retirement Plans. The Prospectus indicates the types of retirement plans for
which Lord Abbett provides forms and explanations. Lord Abbett makes available
the retirement plan forms and custodial agreements for IRAs (Individual
Retirement Accounts including Simplified Employee Pensions), 403(b) plans and
qualified pension and profit-sharing plans, including 401(k) plans. The forms
name Investors Fiduciary Trust Company as custodian and contain specific
information about the plans. Explanations of the eligibility requirements,
annual custodial fees and allowable tax advantages and penalties are set forth
in the relevant plan documents. Adoption of any of these plans should be on the
advice of your legal counsel or qualified tax adviser.
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6.
Performance
Each Fund computes the average annual 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 from the initial amount invested and reinvestment of all
income dividends and capital gains distributions on the reinvestment dates at
prices calculated as stated in the Prospectus. The ending redeemable value is
determined by assuming a complete redemption at the end of the period(s) covered
by the average annual total return computation.
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment (unless the return is shown at net asset value). Total
returns also assume that all dividends and capital gains distributions during
the period are reinvested at net asset value per share, and that the investment
is redeemed at the end of the period.
Each Fund's yield quotation is based on a 30-day period ended on a specified
date, computed by dividing the Funds' net investment income per share earned
during the period by the funds' maximum offering price per share on the last day
of the period. This is determined by finding the following quotient: Take the
funds' dividends and interest earned during the period minus its expenses
accrued for the period (net of reimbursements) and divide by the product of (i)
the average daily number of fund shares outstanding during the period that were
entitled to receive dividends and (ii) the funds' maximum offering price per
share on the last day of the period. To this quotient add one. This sum is
multiplied by itself five times. Then, one is subtracted from the product of
this multiplication and the remainder is multiplied by two. Yield for the Class
A shares reflects the deduction of the maximum initial sales charge, but may
also be shown based on the fund's net asset value per share.
7.
Taxes
Each Fund intends to elect and to qualify for special tax treatment afforded
regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"). If it so qualifies, the Fund (but not its shareholders) will be
relieved of federal income taxes on the amount it distributes to shareholders.
If in any taxable year the Funds do not qualify as a regulated investment
company, all of its taxable income will be taxed to the Fund at regular
corporate rates.
Each Fund contemplates declaring as dividends substantially all of its net
investment income. Dividends paid by the Fund from its investment income and
distributions of its net realized short-term capital gains are taxable to
shareholders as ordinary income or capital gains, whether received in cash or
reinvested in additional shares of the Fund. The Fund will send each shareholder
annual information concerning the tax treatment of dividends and other
distributions.
Upon sale, exchange or redemption of shares of the Funds, a shareholder will
recognize short- or long-term capital gain or loss, depending upon the
shareholders' holding period in the Funds' shares. However, if a shareholder's
holding period in his shares is six month or less, any capital loss realized
from a sale or exchange of such shares must be treated as long-term capital loss
to the extent of dividends classified as "capital gains dividends" received with
respect to such shares. The maximum tax rates applicable to net capital gains
recognized by individuals and other non-corporate taxpayers are (i) the same as
ordinary income rates for capital assets held for one year or less and (ii) 20%
for capital assets held for more than one year. Capital gains or losses
recognized by corporate shareholders are subject to tax at the ordinary income
tax rates applicable to corporations.
Losses on the sale of shares are not deductible if, within a period beginning 30
days before the date of the sale and ending 30 days after the date of the sale,
the taxpayer acquires shares that are substantially identical.
Some shareholders may be subject to a 31% withholding tax on reportable
dividends, capital gains distributions and redemption payments (backup
withholding"). Generally, shareholders subject to backup withholding will be
those for whom a certified taxpayer identification number is not on file with
the Fund or who, to the Fund's knowledge, have furnished an incorrect number.
When establishing an account, an investor must certify under penalties of
perjury that such number is correct and that he or she is not otherwise subject
to backup withholding.
The Funds may be subject to foreign withholding taxes which would reduce the
yield on their investments. It is generally expected that Fund shareholders who
are subject to U.S. federal income tax will be entitled to claim a federal
income tax credit or deduction for foreign income taxes paid by the Fund.
The Funds will be subject to a 4% non-deductible excise tax on certain amounts
not distributed or treated as having been distributed on a timely basis each
calendar year. The Funds intend to distribute to shareholders each year an
amount adequate to avoid the imposition of such excise tax.
Dividends paid by the Funds will qualify for the dividends-received deduction
for corporations to the extent they are derived from dividends paid by domestic
corporations. Corporate shareholders must have held their shares in the Funds
for more than 45 days to qualify for the deduction on dividends paid by the
Funds.
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Gain and loss realized by the Funds on certain transactions, including sales of
foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gain or loss is attributable to changes in
exchange rates for foreign currencies. Accordingly, distributions taxable as
ordinary income will include the net amount, if any, of such foreign exchange
gains and will be reduced by the net amount, if any, of such foreign exchange
losses.
If the Funds purchase shares in certain foreign investment entities called
"passive foreign investment companies," they may be subject to U.S. federal
income tax on a portion of any "excess distribution" or gain from the
disposition of such shares, even if such income is distributed as a taxable
dividend by the Funds to their shareholders. Additional charges in the nature of
interest may be imposed on either the Funds' or their shareholders in respect of
deferred taxes arising from such distributions or gains. If the Funds were to
make a "qualified electing fund" election with respect to investment in a
passive foreign investment company, in lieu of the foregoing requirements, the
Funds might be required to include in income each year a portion of the ordinary
earnings and net capital gains of the qualified electing fund, even if such
amount were not distributed to the Funds.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to U.S. persons (U.S. citizens or residents and United States
domestic corporations, partnerships, trusts and estates.) Each shareholder who
is not a U.S. person should consult his tax adviser regarding the U.S. and
foreign tax consequences of the ownership of shares of the Funds, including the
applicable rate of U.S. withholding tax on dividends representing ordinary
income and net short-term capital gains, and the applicability of U.S. gift and
estate taxes.
8.
Information About the Fund
The directors, trustees and officers of Lord Abbett-sponsored funds, together
with the partners and employees of Lord Abbett, are permitted to purchase and
sell securities for their personal investment accounts. In engaging in personal
securities transactions, however, such persons are subject to requirements and
restrictions contained in the Company's Code of Ethics which complies, in
substance, with each of the recommendations of the Investment Company's
Institute's Advisory Group on Personal Investing. Among other things, the Code
requires that Lord Abbett partners and employees obtain advance approval before
buying or selling securities, submit confirmations and quarterly transaction
reports, and obtain approval before becoming a director of any company; and it
prohibits such persons from investing in a security 7 days before or after any
Lord Abbett-sponsored fund trades in such security, prohibiting profiting on
trades of the same security within 60 days and trading on material and
non-public information. The code imposes certain similar requirements and
restrictions on the independent directors and trustees of each Lord
Abbett-sponsored funds to the extent contemplated by the recommendations of such
Advisory Group.
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9.
Financial Statements
Not applicable.
25
<PAGE>
PART C
OTHER INFORMATION
This Post-Effective Amendment No. 33 (the "Amendment") to the Registrant's
Registration Statement relates only to Micro-Cap Value Fund - Class A and
Micro-Cap Growth Fund - Class A.
The other series and classes of shares of the Registrant are listed below and
are offered by the Prospectus and Statement of Additional Information in Parts A
and B, respectively, of the Post-Effective Amendment to the Registrant's
Registration Statement as identified. The following are separate series and/or
classes of shares of the Registrant. This Amendment does not relate to, amend or
otherwise affect the Prospectuses and Statements of Additional Information
contained in the prior Post-Effective Amendments listed below, and pursuant to
Rule 485(d) under the Securities Act of 1933, does not affect the effectiveness
of such Post-Effective Amendments.
POST-EFFECTIVE
AMENDMENT NO.
Alpha Series - Classes A, B, C, and P shares 32
Growth & Income Series - Classes A, B, C, and P shares 32
World Bond-Debenture Series - Classes A, B, C, and P shares 32
International Series - Classes A, B, C, P, and Y shares 32
Micro-Cap Value Fund - Class Y shares 32
Micro-Cap Growth Fund - Class Y shares 32
Item 23 Exhibits
(a) Declaration of Trust is incorporated by reference to Post-Effective
Amendment No.19 to the Registration Statement on Form N-1A filed on
3/1/98.
(b) By-Laws incorporated by reference to Post-Effective Amendment No. 25 to
the Registration Statement on Form N-1A filed on 12/30/98.
(c) Instruments Defining Rights of Security Holders incorporated by
reference.
(d) Investment Advisory Contracts incorporated by reference.
(e) Underwriting Contracts incorporated by reference.
(f) Bonus or Profit Sharing Contracts is incorporated by reference to Post
Effective Amendment No. 6 to the Registration Statement on Form N-1A
filed on October 7, 1994.
(g) Custodian Agreements incorporated by reference.
(h) Other Material Contracts incorporated by reference.
(i) Legal Opinion filed herewith.
(j) Other Opinion. Not applicable.
(k) Omitted Financial Statements. Not applicable.
(l) Initial Capital Agreements incorporated by reference.
(m) Rule 12b-1 Plan filed herewith.
(n) Financial Data Schedule. Not applicable.
(o) Rule 18f-3 Plan filed herewith.
(p) Code of Ethics filed herewith.
Item 24 Persons Controlled by or Under Common Control with the Fund
None.
Item 25 Indemnification
All Trustees, officers, employees and agents of Registrant are to be
indemnified as set forth in Section 4.3 of Registrant's Declaration of
Trust.
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Insofar as indemnification for liability arising under the Securities
Act of 1933 (the "Act") may be permitted to Trustees, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expense
incurred or paid by a Trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding)
is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
In addition, Registrant maintains a Trustees' and officers' errors and
omissions liability insurance policy protecting Trustees and officers
against liability for breach of duty, negligent act, error or omission
committed in their capacity as Trustees or officers. The policy
contains certain exclusions, among which is exclusion from coverage for
active or deliberate dishonest or fraudulent acts and exclusion for
fines or penalties imposed by law or other matters deemed uninsurable.
Item 26 Business and Other Connections of Investment Adviser
Lord, Abbett & Co. acts as investment adviser for twelve other
investment companies (of which it is principal underwriter for
thirteen) and as investment adviser to approximately 8,300 private
accounts as of October 31, 1999. Other than acting as trustees,
directors and/or officers of open-end investment companies managed by
Lord, Abbett & Co., none of Lord, Abbett & Co.'s partners has, in the
past two fiscal years, engaged in any other business, profession,
vocation or employment of a substantial nature for his own account or
in the capacity of director, officer, employee, partner or Trustee of
any entity.
Investment Adviser
American Skandia Trust (Lord Abbett Growth & Income Portfolio)
Item 27 Principal Underwriters
(a) Lord Abbett Distributor LLC serves as the principal underwriter for the
Funds. Lord Abbett Distributor LLC also serves as principal underwriter
for thirteen of the Lord Abbett-sponsored funds as listed below:
Lord Abbett Mid-Cap Value Fund, Inc.
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett Global Fund, Inc.
Lord Abbett Series Fund, Inc.
Lord Abbett U.S. Government Money Market Fund, Inc.
Lord Abbett Equity Fund
Lord Abbett Tax-Free Income Trust
Lord Abbett Affiliated Fund, Inc.
Lord Abbett Investment Trust
Lord Abbett Research Fund, Inc.
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(b) The partners of Lord, Abbett & Co. are:
Name and Principal Positions and Offices
Business Address (1) with Registrant
-------------------- ---------------
Robert S. Dow Chairman and President
Paul A. Hilstad Vice President & Secretary
Zane E. Brown Executive Vice President
Robert P. Fetch Executive Vice President
Stephen I. McGruder Executive Vice President
Robert G. Morris Executive Vice President
Daniel E. Carper Vice President
Christopher J. Towle Vice President
John J. Walsh Vice President
The other general partners of Lord Abbett & Co. who are neither
officers nor directors of the Registrant are Stephen I. Allen, John E.
Erard, Daria L. Foster, Robert I. Gerber, Thomas W. Hudson, Jr.,
Michael B. McLaughlin, Robert J. Noelke, and R. Mark Pennington.
Each of the above has their principal business address located at 90
Hudson Street, Jersey City, NJ 07302-3973
(c) Not applicable
Item 28 Location of Accounts and Records
Registrant maintains the records, required by Rules 31a - 1(a) and (b),
and 31a - 2(a) at its main office.
Lord, Abbett & Co. maintains the records required by Rules 31a - 1(f)
and 31a - 2(e) at its main office.
Certain records such as cancelled stock certificates and correspondence
may be physically maintained at the main office of the Registrant's
Transfer Agent, Custodian, or Shareholder Servicing Agent within the
requirements of Rule 31a-3.
Item 29 Management Services
None
Item 30 Undertakings
The Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
The Registrant undertakes, if requested to do so by the holders of at
least 10% of the registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the question of removal of
a director or directors and to assist in communications with other
shareholders as required by Section 16(c) of the Investment Company Act
of 1940, as amended.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant had duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Jersey City, and State of New Jersey on the 15th day
of March, 2000.
BY: /s/ Lawrence H. Kaplan
----------------------
Lawrence H. Kaplan
Vice President
BY: /s/ Donna M. McManus
--------------------
Donna M. McManus
Treasurer
LORD ABBETT SECURITIES TRUST
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
Signatures Title Date
- ---------- ----- ----
Chairman, President
/s/ Robert S. Dow and Director/Trustee March 15, 2000
- --------------------------------------------------------------------------------
Robert S. Dow
/s/ E. Thayer Bigelow Director/Trustee March 15, 2000
- --------------------------------------------------------------------------------
E. Thayer Bigelow
/s/ William H. T. Bush Director/Trustee March 15, 2000
- --------------------------------------------------------------------------------
William H. T. Bush
/s/ Robert B. Calhoun, Jr. Director/Trustee March 15, 2000
- --------------------------------------------------------------------------------
Robert B. Calhoun, Jr.
/s/ Stewart S. Dixon Director/Trustee March 15, 2000
- --------------------------------------------------------------------------------
Stewart S. Dixon
/s/ John C. Jansing Director/Trustee March 15, 2000
- --------------------------------------------------------------------------------
John C. Jansing
/s/ C. Alan MacDonald Director/Trustee March 15, 2000
- --------------------------------------------------------------------------------
C. Alan MacDonald
/s/ Hansel B. Millican, Jr. Director/Trustee March 15, 2000
- --------------------------------------------------------------------------------
Hansel B. Millican, Jr.
/s/ Thomas J. Neff Director/Trustee March 15, 2000
- --------------------------------------------------------------------------------
Thomas J. Neff
4
<PAGE>
EXHIBIT A
Lord Abbett Affiliated Fund, Inc.
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Equity Fund, Inc.
Lord Abbett Global Fund, Inc.
Lord Abbett Investment Trust
Lord Abbett Large-Cap Growth Fund
Lord Abbett Mid-Cap Value Fund, Inc.
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett Tax-Free Income Trust
Lord Abbett Research Fund, Inc.
Lord Abbett Securities Trust
Lord Abbett Series Fund, Inc.
Lord Abbett U.S. Government Securities Money Market Fund, Inc.
5
March 15, 2000
Lord Abbett Securities Trust
90 Hudson Street
Jersey City, NJ 07302-3972
Dear Sirs:
You have requested our opinion in connection with your filing of Amendment
No. 33 to the Registration Statement on Form N-1A (the "Amendment") under the
Investment Company Act of 1940, as amended, of Lord Abbett Securities Trust, a
Delaware business trust (the "Company"), and in connection therewith your
registration of the following shares of beneficial interest, without par value,
of the Company (collectively, the "Shares"): Micro-Cap Value Fund (Class A) and
Micro-Cap Growth Fund (Class A).
We have examined and relied upon originals, or copies certified to our
satisfaction, of such company records, documents, certificates and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion set forth below.
We are of the opinion that the Shares issued in the continuous offering
have been duly authorized and, assuming the issuance of the Shares for cash at
net asset value and receipt by the Company of the consideration therefore as set
forth in the Amendment, the Shares will be validly issued, fully paid and
nonassessable.
We express no opinion as to matters governed by any laws other than Title
12 of the Delaware Code. We consent to the filing of this opinion solely in
connection with the Amendment. In giving such consent, we do not hereby admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
WILMER, CUTLER & PICKERING
By:JAMES E. ANDERSON
James E. Anderson, a partner
Rule12b1 Distribution Plan and Agreement
Lord Abbett Securities Trust Micro-Cap Growth Fund
Class A Shares
RULE 12b1 DISTRIBUTION PLAN AND AGREEMENT dated as of March 10, 2000 by and
between LORD ABBETT SECURITIES TRUST, a Delaware business trust (the "Fund"), on
behalf of its Micro-Cap Growth Fund (the "Series") and LORD ABBETT DISTRIBUTOR
LLC, a New York limited liability company (the"Distributor").
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "Act"); and the
Distributor is the exclusive selling agent of the Fund's shares of beneficial
interest, including the Series' Class A shares (the "Shares") pursuant to the
Distribution Agreement between the Fund and the Distributor, dated as of July
12, 1996 (the "Distribution Agreement").
WHEREAS, the Fund desires to adopt a Distribution Plan and Agreement (the
"Plan") with the Distributor, as permitted by Rule12b1 under the Act, pursuant
to which the Fund may make certain payments to the Distributor to be used by the
Distributor or paid to institutions and persons permitted by applicable law
and/or rules to receive such payments ("Authorized Institutions") in connection
with sales of Shares and/or servicing of accounts of shareholders holding
Shares.
WHEREAS, the Fund's Board of Trustees has determined that there is a
reasonable likelihood that the Plan will benefit the Fund and the holders of the
Shares.
NOW, THEREFORE, in consideration of the mutual covenants and of other good
and valuable consideration, receipt of which is hereby acknowledged, it is
agreed as follows:
1. The Fund hereby authorizes the Distributor to enter into agreements with
Authorized Institutions (the "Agreements") which may provide for the payment to
such Authorized Institutions of distribution and service fees which the
Distributor receives from the Fund in order to provide additional incentives to
such Authorized Institutions (i) to sell Shares and (ii) to provide continuing
information and investment services to their accounts holding Shares and
otherwise to encourage their accounts to remain invested in the Shares.
2. The Fund also hereby authorizes the Distributor to use payments received
hereunder from the Fund in order to (a) finance any activity which is primarily
intended to result in the sale of Shares and (b) provide continuing information
and investment services to shareholder accounts not serviced by Authorized
Institutions receiving a service fee from the Distributor hereunder and
otherwise to encourage such accounts to remain invested in the Shares; provided
that (i) any payments referred to in the foregoing clause (a) shall not exceed
the distribution fee permitted to be paid at the time under paragraph 3 of this
Plan and shall be authorized by the Board of Trustees of the Fund by a vote of
the kind referred to in paragraph 10 of this Plan and (ii) any payments referred
to in clause (b) shall not exceed the service fee permitted to be paid at the
time under paragraph 3 of this Plan.
3. The Fund is authorized to pay the Distributor hereunder for remittance
to Authorized Institutions and/or use by the Distributor pursuant to this Plan
(a) service fees and (b) distribution fees, each at an annual rate not to exceed
.25 of 1% of the average annual net asset value of Shares outstanding. The Board
of Trustees of the Fund shall from time to time determine the amounts, within
the foregoing maximum amounts, that the Series may pay the Distributor
hereunder. Any such fees (which may be waived by the Authorized Institutions in
whole or in part) may be calculated and paid quarterly or more frequently if
approved by the Board of Trustees of the Fund. Such determinations and approvals
by the Board of Trustees shall be made and given by votes of the kind referred
to in paragraph 10 of this Plan. Payments by holders of Shares to the Fund of
contingent deferred reimbursement charges relating to distribution fees paid by
the Series hereunder shall reduce the amount of distribution fees for purposes
of the annual 0.25% distribution fee limit. The Distributor will monitor the
payments hereunder and shall reduce such payments or take such other steps as
may be necessary to assure that (i) the payments pursuant to this Plan shall be
consistent with Rule 2830, subparagraphs (d)(2) and (5) of the Conduct Rules of
the National Association of Securities Dealers, Inc. with respect to investment
companies with asset-based sales charges and service fees, as the same may be in
effect from time to time and (ii) the Fund shall not pay with respect to any
Authorized Institution service fees equal to more than .25 of 1% of the average
annual net asset value of Shares sold by (or attributable to Shares or shares
sold by) such Authorized Institution and held in an account covered by an
Agreement.
4. The net asset value of the Shares shall be determined as provided in the
Declaration and Agreement of Trust of the Fund. If the Distributor waives all or
a portion of the fees which are to be paid by the Fund hereunder, the
Distributor shall not be deemed to have waived its rights under this Agreement
to have the Fund pay such fees in the future.
5. The Secretary of the Fund, or in his absence the Chief Financial
Officer, is hereby authorized to direct the disposition of monies paid or
payable by the Fund hereunder and shall provide to the Fund's Board of Trustees,
and the Trustees shall review at least quarterly, a written report of the
amounts so expended pursuant to this Plan and the purposes for which such
expenditures were made.
6. Neither this Plan nor any other transaction between the parties hereto
pursuant to this Plan shall be invalidated or in any way affected by the fact
that any or all of the Trustees, officers, shareholders, or other
representatives of the Fund are or may be "interested persons" of the
Distributor, or any successor or assignee thereof, or that any or all of the
Trustees, officers, partners, members or other representatives of the
Distributor are or may be "interested persons" of the Fund, except as may
otherwise be provided in the Act.
7. The Distributor shall give the Fund the benefit of the Distributor's
best judgment and good faith efforts in rendering services under this Plan.
Other than to abide by the provisions hereof and render the services called for
hereunder in good faith, the Distributor assumes no responsibility under this
Plan and, having so acted, the Distributor shall not be held liable or held
accountable for any mistake of law or fact, or for any loss or damage arising or
resulting therefrom suffered by the Fund, or any of the shareholders, creditors,
trustees, or officers of the Fund; provided however, that nothing herein shall
be deemed to protect the Distributor against any liability to the Fund or the
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties hereunder, or by reason of the reckless disregard
of its obligations and duties hereunder.
8. This Plan shall become effective upon the date hereof, and shall
continue in effect for a period of more than one year from that date only so
long as such continuance is specifically approved at least annually by a vote of
the Board of Trustees of the Fund, including the vote of a majority of the
trustees who are not "interested persons" of the Fund and who have no direct or
indirect financial interest in the operation of this Plan or in any agreement
related to this Plan, cast in person at a meeting called for the purpose of
voting on such renewal.
9. This Plan may not be amended to increase materially the amount to be
spent by the Fund hereunder above the maximum amounts referred to in paragraph 3
of this Plan without a shareholder vote in compliance with Rule 12b-1 and Rule
18f-3 under the Act as in effect at such time, and each material amendment must
be approved by a vote of the Board of Trustees of the Fund, including the vote
of a majority of the Trustees who are not "interested persons" of the Fund and
who have no direct or indirect financial interest in the operation of this Plan
or in any agreement related to this Plan, cast in person at a meeting called for
the purpose of voting on such amendment. Amendments to this Plan which do not
increase materially the amount to be spent by the Fund hereunder above the
maximum amounts referred to in paragraph3 of this Plan may be made pursuant to
paragraph10 of this Plan.
10. Amendments to this Plan other than material amendments of the kind
referred to in the foregoing paragraph9 may be adopted by a vote of the Board of
Trustees of the Fund, including the vote of a majority of the Trustees who are
not "interested persons" of the Fund and who have no direct or indirect
financial interest in the operation of this Plan or in any agreement related to
this Plan. The Board of Trustees of the Fund may, by such a vote, interpret this
Plan and make all determinations necessary or advisable for its administration.
11. This Plan may be terminated at any time without the payment of any
penalty (a) by the vote of a majority of the trustees of the Fund who are not
"interested persons" of the Fund and have no direct or indirect financial
interest in the operation of this Plan or in any agreement related to the Plan,
or (b) by a shareholder vote in compliance with Rule 12b-1 and Rule 18f-3 under
the Act as in effect at such time.
12. So long as this Plan shall remain in effect, the selection and
nomination of those Trustees of the Fund who are not "interested persons" of the
Fund are committed to the discretion of such disinterested Trustees. The terms
"interested persons," "assignment" and "vote of a majority of the outstanding
voting securities" shall have the same meanings as those terms are defined in
the Act.
13. The obligations of the Fund, including those imposed hereby, are not
personally binding upon, nor shall resort be had to the private property of, any
of the trustees, shareholders, officers, employees or agents of the Fund
individually, but are binding only upon the assets and property of the Fund. Any
and all personal liability, either at common law or in equity, or by statute or
constitution, of every such trustee, shareholder, officer, employee or agent for
any breach of the Fund of any agreement, representation or warranty hereunder is
hereby expressly waived as a condition of and in consideration for the execution
of this Agreement by the Fund.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and on its behalf by its duly authorized representative as
of the date first above written.
LORD ABBETT SECURITIES TRUST
By: /s/ Lawrence H. Kaplan
Vice President
ATTEST:
/s/ Lydia Guzman
Assistant Secretary
LORD ABBETT DISTRIBUTOR LLC
By: LORD, ABBETT & CO.
Managing Member
By: Paul A. Hilstad
A Partner
<PAGE>
Rule12b1 Distribution Plan and Agreement
Lord Abbett Securities Trust Micro-Cap Value Fund
Class A Shares
RULE12b1 DISTRIBUTION PLAN AND AGREEMENT dated as of March 10, 2000 by and
between LORD ABBETT SECURITIES TRUST, a Delaware business trust (the "Fund"), on
behalf of its Micro-Cap Value Fund (the "Series") and LORD ABBETT DISTRIBUTOR
LLC, a New York limited liability company (the"Distributor").
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "Act"); and the
Distributor is the exclusive selling agent of the Fund's shares of beneficial
interest, including the Series' Class A shares (the "Shares") pursuant to the
Distribution Agreement between the Fund and the Distributor, dated as of July
12, 1996 (the "Distribution Agreement").
WHEREAS, the Fund desires to adopt a Distribution Plan and Agreement (the
"Plan") with the Distributor, as permitted by Rule12b1 under the Act, pursuant
to which the Fund may make certain payments to the Distributor to be used by the
Distributor or paid to institutions and persons permitted by applicable law
and/or rules to receive such payments ("Authorized Institutions") in connection
with sales of Shares and/or servicing of accounts of shareholders holding
Shares.
WHEREAS, the Fund's Board of Trustees has determined that there is a
reasonable likelihood that the Plan will benefit the Fund and the holders of the
Shares.
NOW, THEREFORE, in consideration of the mutual covenants and of other good
and valuable consideration, receipt of which is hereby acknowledged, it is
agreed as follows:
1. The Fund hereby authorizes the Distributor to enter into agreements with
Authorized Institutions (the "Agreements") which may provide for the payment to
such Authorized Institutions of distribution and service fees which the
Distributor receives from the Fund in order to provide additional incentives to
such Authorized Institutions (i) to sell Shares and (ii) to provide continuing
information and investment services to their accounts holding Shares and
otherwise to encourage their accounts to remain invested in the Shares.
2. The Fund also hereby authorizes the Distributor to use payments received
hereunder from the Fund in order to (a) finance any activity which is primarily
intended to result in the sale of Shares and (b) provide continuing information
and investment services to shareholder accounts not serviced by Authorized
Institutions receiving a service fee from the Distributor hereunder and
otherwise to encourage such accounts to remain invested in the Shares; provided
that (i) any payments referred to in the foregoing clause (a) shall not exceed
the distribution fee permitted to be paid at the time under paragraph 3 of this
Plan and shall be authorized by the Board of Trustees of the Fund by a vote of
the kind referred to in paragraph 10 of this Plan and (ii) any payments referred
to in clause (b) shall not exceed the service fee permitted to be paid at the
time under paragraph 3 of this Plan.
3. The Fund is authorized to pay the Distributor hereunder for remittance
to Authorized Institutions and/or use by the Distributor pursuant to this Plan
(a) service fees and (b) distribution fees, each at an annual rate not to exceed
.25 of 1% of the average annual net asset value of Shares outstanding. The Board
of Trustees of the Fund shall from time to time determine the amounts, within
the foregoing maximum amounts, that the Series may pay the Distributor
hereunder. Any such fees (which may be waived by the Authorized Institutions in
whole or in part) may be calculated and paid quarterly or more frequently if
approved by the Board of Trustees of the Fund. Such determinations and approvals
by the Board of Trustees shall be made and given by votes of the kind referred
to in paragraph 10 of this Plan. Payments by holders of Shares to the Fund of
contingent deferred reimbursement charges relating to distribution fees paid by
the Series hereunder shall reduce the amount of distribution fees for purposes
of the annual 0.25% distribution fee limit. The Distributor will monitor the
payments hereunder and shall reduce such payments or take such other steps as
may be necessary to assure that (i) the payments pursuant to this Plan shall be
consistent with Rule 2830, subparagraphs (d)(2) and (5) of the Conduct Rules of
the National Association of Securities Dealers, Inc. with respect to investment
companies with asset-based sales charges and service fees, as the same may be in
effect from time to time and (ii) the Fund shall not pay with respect to any
Authorized Institution service fees equal to more than .25 of 1% of the average
annual net asset value of Shares sold by (or attributable to Shares or shares
sold by) such Authorized Institution and held in an account covered by an
Agreement.
4. The net asset value of the Shares shall be determined as provided in the
Declaration and Agreement of Trust of the Fund. If the Distributor waives all or
a portion of the fees which are to be paid by the Fund hereunder, the
Distributor shall not be deemed to have waived its rights under this Agreement
to have the Fund pay such fees in the future.
5. The Secretary of the Fund, or in his absence the Chief Financial
Officer, is hereby authorized to direct the disposition of monies paid or
payable by the Fund hereunder and shall provide to the Fund's Board of Trustees,
and the Trustees shall review at least quarterly, a written report of the
amounts so expended pursuant to this Plan and the purposes for which such
expenditures were made.
6. Neither this Plan nor any other transaction between the parties hereto
pursuant to this Plan shall be invalidated or in any way affected by the fact
that any or all of the Trustees, officers, shareholders, or other
representatives of the Fund are or may be "interested persons" of the
Distributor, or any successor or assignee thereof, or that any or all of the
Trustees, officers, partners, members or other representatives of the
Distributor are or may be "interested persons" of the Fund, except as may
otherwise be provided in the Act.
7. The Distributor shall give the Fund the benefit of the Distributor's
best judgment and good faith efforts in rendering services under this Plan.
Other than to abide by the provisions hereof and render the services called for
hereunder in good faith, the Distributor assumes no responsibility under this
Plan and, having so acted, the Distributor shall not be held liable or held
accountable for any mistake of law or fact, or for any loss or damage arising or
resulting therefrom suffered by the Fund, or any of the shareholders, creditors,
trustees, or officers of the Fund; provided however, that nothing herein shall
be deemed to protect the Distributor against any liability to the Fund or the
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties hereunder, or by reason of the reckless disregard
of its obligations and duties hereunder.
8. This Plan shall become effective upon the date hereof, and shall
continue in effect for a period of more than one year from that date only so
long as such continuance is specifically approved at least annually by a vote of
the Board of Trustees of the Fund, including the vote of a majority of the
trustees who are not "interested persons" of the Fund and who have no direct or
indirect financial interest in the operation of this Plan or in any agreement
related to this Plan, cast in person at a meeting called for the purpose of
voting on such renewal.
9. This Plan may not be amended to increase materially the amount to be
spent by the Fund hereunder above the maximum amounts referred to in paragraph 3
of this Plan without a shareholder vote in compliance with Rule 12b-1 and Rule
18f-3 under the Act as in effect at such time, and each material amendment must
be approved by a vote of the Board of Trustees of the Fund, including the vote
of a majority of the Trustees who are not "interested persons" of the Fund and
who have no direct or indirect financial interest in the operation of this Plan
or in any agreement related to this Plan, cast in person at a meeting called for
the purpose of voting on such amendment. Amendments to this Plan which do not
increase materially the amount to be spent by the Fund hereunder above the
maximum amounts referred to in paragraph3 of this Plan may be made pursuant to
paragraph10 of this Plan.
10. Amendments to this Plan other than material amendments of the kind
referred to in the foregoing paragraph9 may be adopted by a vote of the Board of
Trustees of the Fund, including the vote of a majority of the Trustees who are
not "interested persons" of the Fund and who have no direct or indirect
financial interest in the operation of this Plan or in any agreement related to
this Plan. The Board of Trustees of the Fund may, by such a vote, interpret this
Plan and make all determinations necessary or advisable for its administration.
11. This Plan may be terminated at any time without the payment of any
penalty (a) by the vote of a majority of the trustees of the Fund who are not
"interested persons" of the Fund and have no direct or indirect financial
interest in the operation of this Plan or in any agreement related to the Plan,
or (b) by a shareholder vote in compliance with Rule 12b-1 and Rule 18f-3 under
the Act as in effect at such time.
12. So long as this Plan shall remain in effect, the selection and
nomination of those Trustees of the Fund who are not "interested persons" of the
Fund are committed to the discretion of such disinterested Trustees. The terms
"interested persons," "assignment" and "vote of a majority of the outstanding
voting securities" shall have the same meanings as those terms are defined in
the Act.
13. The obligations of the Fund, including those imposed hereby, are not
personally binding upon, nor shall resort be had to the private property of, any
of the trustees, shareholders, officers, employees or agents of the Fund
individually, but are binding only upon the assets and property of the Fund. Any
and all personal liability, either at common law or in equity, or by statute or
constitution, of every such trustee, shareholder, officer, employee or agent for
any breach of the Fund of any agreement, representation or warranty hereunder is
hereby expressly waived as a condition of and in consideration for the execution
of this Agreement by the Fund.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and on its behalf by its duly authorized representative as
of the date first above written.
LORD ABBETT SECURITIES TRUST
By: /s/ Lawarence H. Kaplan
Vice President
ATTEST:
/s/ Lydia Guzman
Assistant Secretary
LORD ABBETT DISTRIBUTOR LLC
By: LORD, ABBETT & CO.
Managing Member
By: /s/ Paul A. Hilstad
A Partner
Amended and Restated Plans as of March 9, 2000
Pursuant to Rule 18f3(d)
under the Investment Company Act of 1940
(As adopted August 15, 1996)
Rule 18f3 (the "Rule") under the Investment Company Act of 1940, as amended
(the "1940 Act"), requires that the Board of Directors or Trustees of an
investment company desiring to offer multiple classes pursuant to the Rule adopt
a plan setting forth the separate arrangement and expense allocation of each
class, and any related conversion features or exchange privileges. This document
constitutes an amended and restated plan (individually, a "Plan" and
collectively, the "Plans") of each of the investment companies, or series
thereof, listed on Schedule A attached hereto (each, a "Fund"). The Plan of any
Fund is subject to amendment by action of the Board of Directors or Trustees
(the "Board") of such Fund and without the approval of shareholders of any
class, to the extent permitted by law and by the governing documents of such
Fund.
The Board, including a majority of the noninterested Board members, has
determined that the following separate arrangement and expense allocation, and
the related conversion features, if any, and exchange privileges, of each class
of each Fund are in the best interest of each class of each Fund individually
and each Fund as a whole.
1. CLASS DESIGNATION. Shares of all Funds, except Lord Abbett Series Fund,
Inc. shall be divided into Class A, Class B, Class C, Class Y, and Class P
(Pension Class) shares as indicated for each Fund on Schedule A attached hereto.
Shares of Lord Abbett Series Fund, Inc. shall be divided into Class P and Class
VC (Variable Contract Class).
2. SALES CHARGES AND DISTRIBUTION AND SERVICE FEES.
(a) Initial Sales Charge. Class A shares will be traditional frontend sales
charge shares, offered at their net asset value ("NAV") plus a sales charge in
the case of each Fund, except for such categories of purchasers who qualify for
Class A share purchases without a front-end sales charge, as described in such
Fund's prospectus and/or statement of additional information as from time to
time in effect.
Class B shares, Class C shares, Class Y shares, Variable Contract Class
shares and P Class shares will be offered at their NAV without an initial sales
charge.
(b) Service and Distribution Fees. In respect of the Class A shares, Class
B shares, Class C shares, and Class P shares, each Fund will pay service and/or
distribution fees under plans from time to time in effect adopted for such
classes pursuant to Rule 12b1 under the 1940 Act (each, a "12b1 Plan").
Pursuant to a 12b1 Plan with respect to the Class A shares, if effective,
each Fund will generally pay (i) at the time such shares are sold, a onetime
distribution fee of up to 1% of the NAV of the shares sold in the amount of $1
million or more, including sales qualifying at such level under the rights of
accumulation and statement of intention privileges, to retirement plans with 100
or more eligible employees, as described in the Fund's prospectus as from time
to time in effect, or with respect to purchases made by certain 401(k) plan
multi-fund platforms which have been authorized by the Board to receive the 1%
distribution fee on net new sales, (ii) a continuing distribution fee at an
annual rate of 0.10% of the average daily NAV of the Class A share accounts of
dealers who meet certain sales and redemption criteria, and (iii) a continuing
service fee at an annual rate not to exceed 0.25% of the average daily NAV of
the Class A shares. The Board will have the authority to increase the
distribution fees payable under such 12b1 Plan by a vote of the Board, including
a majority of the independent directors or trustees thereof, up to an annual
rate of 0.25% of the average daily NAV of the Class A shares. The effective
dates of certain of the 12b1 Plans for the Class A shares are based on
achievement by the Funds of specified total net assets for the Class A shares of
such Funds.
Pursuant to a 12b1 Plan with respect to the Class B shares that are
outstanding for less than 8 years, if effective, each Fund will generally pay a
continuing annual fee of up to 1% of the average annual NAV of such shares then
outstanding (each fee comprising .25% in service fees and .75% in distribution
fees).
Pursuant to a 12b1 Plan with respect to the Class C shares, if effective,
each Fund will generally pay a onetime service and distribution fee at the time
such shares are sold of up to 1% of their NAV (excluding shares issued for
reinvested dividends and distributions) and a continuing annual fee (paid
quarterly), commencing 12 months after the first anniversary of such sale, of up
to 1% of the average annual NAV of such shares then outstanding (each fee
comprising .25% in service fees and .75% in distribution fees). The Distributor
may retain up to .10% of the payments referred to in this paragraph related to
fixed-income funds to compensate it for its services rendered in connection with
the distribution of Class C shares, including the payment of commissions.
Pursuant to a Type II Class C share 12b-1 Plan, if effective, the
Distributor will make payments at the time of sale of up to 1% of the value of
the shares purchased at the time of sale. Each Fund shall pay the Distributor,
on a quarterly basis, up to .25% and .75% for service and distribution fees,
respectively, of the average annual net asset value of outstanding shares,
including reinvested dividend or distribution shares.
Pursuant to a 12b-1 Plan with respect to Class P shares, the Board is
authorized to approve annual fee payments from Class P assets of up to .75% of
the average annual NAV of such assets consisting of service and distribution
fees, at maximum annual rates not exceeding .25% for service and .50% for
distribution. The Board has approved an annual service fee payable quarterly, of
.20% and .25% for service and distribution fees, respectively, of the average
annual net asset value of outstanding shares.
The Class Y shares do not have a Rule 12b-1 Plan.
The Variable Contract Class shares' Rule 12b-1 Plan was terminated by the
Board on March 17, 1999.
(c) Contingent Deferred Sales Charges ("CDSC"). Subject to some exceptions,
Class A shares subject to the onetime sales distribution fee of up to 1% under
the Rule 12b1 Plan for the Class A shares will be subject to a CDSC equal to 1%
of the lower of the cost or the NAV of such shares if the shares are redeemed
for cash on or before the end of the twentyfourth month after the month in which
the shares were purchased.
Class B shares will be subject to a CDSC ranging from 5% to 1% of the lower
of the cost or the NAV of the shares, if the shares are redeemed for cash before
the sixth anniversary of their purchase. The CDSC for the Class B shares may be
waived for certain transactions. Class C shares will be subject to a CDSC equal
to 1% of the lower of the cost or the NAV of the shares if the shares are
redeemed for cash before the first anniversary of their purchase.
The Class Y, the Variable Contract Class and the Class P shares will not be
subject to a CDSC.
3. ClassSpecific Expenses. The following expenses shall be allocated, to
the extent such expenses can reasonably be identified as relating to a
particular class and consistent with Revenue Procedure 9647, on a classspecific
basis: (a) fees under a 12b1 Plan applicable to a specific class (net of any
CDSC paid with respect to shares of such class and retained by the Fund) and any
other costs relating to implementing or amending such Plan, including obtaining
shareholder approval of such Plan or any amendment thereto; (b) transfer and
shareholder servicing agent fees and shareholder servicing costs identifiable as
being attributable to the particular provisions of a specific class; (c)
stationery, printing, postage and delivery expenses related to preparing and
distributing materials such as shareholder reports, prospectuses and proxy
statements to current shareholders of a specific class; (d) Securities and
Exchange Commission registration fees incurred by a specific class; (e) Board
fees or expenses identifiable as being attributable to a specific class; (f)
fees for outside accountants and related expenses relating solely to a specific
class; (g) litigation expenses and legal fees and expense relating solely to a
specific class; (h) expenses incurred in connection with shareholders meetings
as a result of issues relating solely to a specific class and (i) other expenses
relating solely to a specific class, provided, that advisory fees and other
expenses related to the management of a Fund's assets (including custodial fees
and taxreturn preparation fees) shall be allocated to all shares of such Fund on
the basis of NAV, regardless of whether they can be specifically attributed to a
particular class. All common expenses shall be allocated to shares of each class
at the same time they are allocated to the shares of all other classes. All such
expenses incurred by a class of shares will be charged directly to the net
assets of the particular class and thus will be borne on a pro rata basis by the
outstanding shares of such class. For all Funds, Blue Sky expenses will be
treated as common expenses.
4. Income and Expense Allocations. Income, realized and unrealized capital
gains and losses and expenses not allocated to a class as provided above shall
be allocated to each class on the basis of the net assets of that class in
relation to the net assets of the Fund, except that, in the case of each daily
dividend Fund, income and expenses shall be allocated on the basis of relative
net assets (settled shares).
5. Dividends and Distributions. Dividends and Distributions paid by a Fund
on each class of its shares, to the extent paid, will be calculated in the same
manner, will be paid at the same time, and will be in the same amount, except
that the amount of the dividends declared and paid by a particular class may be
different from that paid by another class because of expenses borne exclusively
by that class.
6. Net Asset Values. The NAV of each share of a class of a Fund shall be
determined in accordance with the Articles of Incorporation or Declaration of
Trust of such Fund with appropriate adjustments to reflect the allocations of
expenses, income and realized and unrealized capital gains and losses of such
Fund between or among its classes as provided above.
7. Conversion Features. The Class B shares will automatically convert to
Class A shares 8 years after the date of purchase. Such conversion will occur at
the relative NAV per share of each Class without the imposition of any sales
charge, fee or other charge. When Class B shares convert, any other Class B
shares that were acquired by the shareholder by the reinvestment of dividends
and distributions will also convert to Class A shares on a pro rata basis. The
conversion of Class B shares to Class A shares after 8 years is subject to the
continuing availability of a private letter ruling from the Internal Revenue
Service or an opinion of counsel to the effect that the conversion does not
constitute a taxable event for the Class B shareholder under Federal income tax
law. If such a revenue ruling or opinion is no longer available, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect.
Subject to amendment by the Board, Class A shares and Class C shares shall
not be subject to any automatic conversion feature.
8. Exchange Privileges. Except as set forth in a Fund's prospectus and
statement of additional information as from time to time in effect, shares of
any class of such Fund may be exchanged, at the holder's option, for shares of
the same class of another Fund, or other Lord Abbettsponsored fund or series
thereof, without the imposition of any sales charge, fee or other charge.
Each Plan is qualified by and subject to the terms of the then current
prospectus for the applicable Fund; provided, however, that none of the terms
set forth in any such prospectus shall be inconsistent with the terms contained
herein. The prospectus for each Fund contains additional information about that
Fund's classes and its multipleclass structure.
Each Plan is being adopted for a Fund with the approval of, and all
material amendments thereto must be approved by, a majority of the Board of such
Fund, including a majority of the Board who are not interested persons of the
Fund.
<PAGE>
SCHEDULE A
As of March 9, 2000
The Lord Abbett Sponsored Funds
ESTABLISHING MULTICLASS STRUCTURES
CLASSES
Lord Abbett Affiliated Fund, Inc. A, B, C, P, Y
Lord Abbett BondDebenture Fund, Inc. A, B, C, P, Y
Lord Abbett Developing Growth Fund, Inc. A, B, C, P, Y
Lord Abbett Mid-Cap Value Fund, Inc. A, B, C, P, Y
Lord Abbett Global Fund, Inc.
Equity Series A, B, C, P
Income Series A, B, C, P
Lord Abbett Investment Trust
Balanced Series A, B, C, P
High Yield Fund A, B, C, P, Y
Limited Duration U.S. Government
Securities Series A, C, P
U.S. Government Securities Series A, B, C, P
Core Fixed Income Series A, B, C, P, Y
Strategic Core Fixed Income Series A, B, C, P, Y
Lord Abbett Large-Cap Growth Fund A, B, C, P, Y
Lord Abbett Securities Trust
Growth & Income Trust A, B, C, P
International Series A, B, C, P, Y
World Bond-Debenture Series A, B, C, P
Alpha Series A, B, C, P
Lord Abbett Micro-Cap Growth Fund A, Y
Lord Abbett Micro-Cap Value Fund A, Y
Lord Abbett TaxFree Income Fund, Inc.
California Series A, C, P
National Series A, B, C, P
New York Series A, C, P
Texas Series A, P
New Jersey Series A, P
Connecticut Series A, P
Missouri Series A, P
Hawaii Series A, P
Washington Series A, P
Minnesota Series A, P
Lord Abbett TaxFree Income Trust
Florida Series A, C, P
Pennsylvania Series A, P
Michigan Series A, P
Georgia Series A, P
Lord Abbett U.S. Government Securities
Money Market Fund, Inc. A, B, C
Lord Abbett Research Fund, Inc.
LargeCap Series A, B, C, P, Y
Growth Opportunities Fund A, B, C, P, Y
SmallCap Series A, B, C, P, Y
Lord Abbett Series Fund
Growth & Income Portfolio VC, P
Lord Abbett Equity Fund
1990 Series
Lord, Abbett & Co.
/s/ PAUL A. HILSTAD
Paul A. Hilstad
Partner
LORD ABBETT SECURITIES TRUST
By: /s/ LAWRENCE H. KAPLAN
Lawrence H. Kaplan
Vice President
DATED: March 9, 2000
PAGE 6
LORD, ABBETT & CO.
LORD ABBETT-SPONSORED FUNDS
AND
LORD ABBETT DISTRIBUTOR LLC
CODE OF ETHICS
I. Statement of General Principles
The personal investment activities of any officer, director, trustee or
employee of the Lord Abbett-sponsored Funds (the Funds) or any partner or
employee of Lord, Abbett & Co. (Lord Abbett) will be governed by the following
general principles: (1) Covered Persons have a duty at all times to place first
the interests of Fund shareholders and, in the case of employees and partners of
Lord Abbett, beneficiaries of managed accounts; (2) all securities transactions
by Covered Persons shall be conducted consistent with this Code and in such a
manner as to avoid any actual or potential conflict of interest or any abuse of
an individual's position of trust and responsibility; and (3) Covered Persons
should not take inappropriate advantage of their positions with Lord Abbett or
the Funds.
II. Specific Prohibitions
No person covered by this Code, shall purchase or sell a security, except
an Excepted Security, if there has been a determination to purchase or sell such
security for a Fund (or, in the case of any employee or partner of Lord, Abbett,
for another client of Lord Abbett), or if such a purchase or sale is under
consideration for a Fund (or, in the case of an employee or partner of Lord
Abbett, for another client of Lord Abbett), nor may such person have any
dealings in a security that he may not purchase or sell for any other account in
which he has Beneficial Ownership, or disclose the information to anyone, until
such purchase, sale or contemplated action has either been completed or
abandoned.
III. Obtaining Advance Approval
Except as provided in Sections V and VI of this Code, all proposed
transactions in securities (privately or publicly owned) by Covered Persons,
except transactions in Excepted Securities, should be approved consistent with
the provisions of this Code in advance by one of the partners of Lord Abbett. In
order to obtain approval, the Covered Person must send their request via e-mail
to Isabel Herrera, or in her absence, Chrissy DeCicco, who will obtain a
partner's approval. After approval has been obtained, the Covered Person may act
on it within the next seven business days, unless he sooner learns of a
contemplated action by Lord Abbett. After the seven business days, or upon
hearing of such contemplated action, a new approval must be obtained.
Furthermore, in addition to the above requirements, partners and employees
directly involved must disclose information they may have concerning securities
they may want to purchase or sell to any portfolio manager who might be
interested in the securities for the portfolios they manage.
IV. Reporting and Certification Requirements; Brokerage Confirmations
(1) Except as provided in Sections V and VI of this Code, within 10 days
following the end of each calendar quarter each Covered Person must file
with Ms. Herrera a signed Security Transaction Reporting Form. The form
must be signed and filed whether or not any security transaction has been
effected. If any transaction has been effected during the quarter for the
Covered Person's account or for any account in which he has a direct or
indirect Beneficial Ownership, it must be reported. Excepted from this
reporting requirement are transactions effected in any accounts over which
the Covered Person has no direct or indirect influence or control and
transactions in Excepted Securities. Ms. Herrera is responsible for
reviewing these transactions promptly and must bring any apparent violation
to the attention of the General Counsel of Lord Abbett.
(2) Each employee and partner of Lord Abbett will upon commencement of
employment and annually thereafter disclose all personal securities
holdings and annually certify that: (i) they have read and understand this
Code and recognize they are subject hereto; and (ii) they have complied
with the requirements of this Code and disclosed or reported all securities
transactions required to be disclosed or reported pursuant to the
requirements of this Code.
(3) Each employee and partner of Lord Abbett will direct his brokerage firm to
send copies of all confirmations and all monthly statements directly to Ms.
Herrera.
(4) Each employee and partner of Lord Abbett who has a Fully-Discretionary
Account (as defined in Section VI) shall disclose all pertinent facts
regarding such Account to Lord Abbett's General Counsel upon commencement
of employment. Each such employee or partner shall thereafter annually
certify on the prescribed form that he or she has not and will not exercise
any direct or indirect influence or control over such Account, and has not
discussed any potential investment decisions with such independent
fiduciary in advance of any such transactions.
V. Special Provisions Applicable to Outside Directors and Trustees of theFunds
The primary function of the Outside Directors and Trustees of the Funds is
to set policy and monitor the management performance of the Funds' officers and
employees and the partners and employees of Lord Abbett involved in the
management of the Funds. Although they receive complete information as to actual
portfolio transactions, Outside Directors and Trustees are not given advance
information as to the Funds' contemplated investment transactions.
An Outside Director or Trustee wishing to purchase or sell any security
will therefore generally not be required to obtain advance approval of his
security transactions. If, however, during discussions at Board meetings or
otherwise an Outside Director or Trustee should learn in advance of the Funds'
current or contemplated investment transactions, then advance approval of
transactions in the securities of such company(ies) shall be required for a
period of 30 days from the date of such Board meeting. In addition, an Outside
Director or Trustee can voluntarily obtain advance approval of any security
transaction or transactions at any time.
No report described in Section IV (1) will be required of an Outside
Director or Trustee unless he knew, or in the ordinary course of fulfilling his
official duties as a director or trustee should have known, at the time of his
transaction, that during the 15-day period immediately before or after the date
of the transaction (i.e., a total of 30 days) by the Outside Director or Trustee
such security was or was to be purchased or sold by any of the Funds or such a
purchase or sale was or was to be considered by a Fund. If he makes any
transaction requiring such a report, he must report all securities transactions
effected during the quarter for his account or for any account in which he has a
direct or indirect Beneficial Ownership interest and over which he has any
direct or indirect influence or control. Each Outside Director and Trustee will
direct his brokerage firm to send copies of all confirmations of securities
transactions to Ms. Herrera, and annually make the certification required under
Section IV(2)(i) and (ii). Outside Directors' and Trustees' transactions in
Excepted Securities are excepted from the provisions of this Code.
It shall be prohibited for an Outside Director or Trustee to (i) trade on
material non-public information, or (ii) trade in options with respect to
securities covered by this Code without advance approval from Lord Abbett. Prior
to accepting an appointment as a director of any company, an Outside Director or
Trustee will advise Lord Abbett and discuss with Lord Abbett's Managing Partner
whether accepting such appointment creates any conflict of interest or other
issues.
If an Outside Director or Trustee, who is a director or an employee of, or
consultant to, a company, receives a grant of options to purchase securities in
that company (or an affiliate), neither the receipt of such options, nor the
exercise of those options and the receipt of the underlying security, requires
advance approval from Lord Abbett. Further, neither the receipt nor the exercise
of such options and receipt of the underlying security is reportable by such
Outside Director or Trustee. Finally, neither the receipt nor the exercise of
such options shall be considered "trading in options" within the meaning of the
preceding paragraph of this Section V.
VI. Additional Requirements relating to Partners and Employees of Lord Abbett
It shall be prohibited for any partner or employee of Lord Abbett:
(1) To obtain or accept favors or preferential treatment of any kind or gift or
other thing having a value of more than $100 from any person or entity that
does business with or on behalf of the investment company---no partner or
employee shall have any ownership interest in a brokerage firm;
(2) to trade on material non-public information or otherwise fail to comply
with the Firm's Statement of Policy and Procedures on Receipt and Use of
Inside Information adopted pursuant to Section 15(f) of the Securities
Exchange Act of 1934 and Section 204A of the Investment Advisers Act of
1940;
(3) to trade in options with respect to securities covered under this Code;
(4) to profit in the purchase and sale, or sale and purchase, of the same (or
equivalent) securities within 60 calendar days (any profits realized on
such short-term trades shall be disgorged to the appropriate Fund or as
otherwise determined);
(5) to trade in futures or options on commodities, currencies or other
financial instruments, although the Firm reserves the right to make rare
exceptions in unusual circumstances which have been approved by the Firm in
advance;
(6) to engage in short sales or purchase securities on margin;
(7) to buy or sell any security within seven business days before or after any
Fund (or other Lord Abbett client) trades in that security (any profits
realized on trades within the proscribed periods shall be disgorged to the
Fund (or the other client) or as otherwise determined);
(8) to subscribe to new or secondary public offerings, even though the offering
is not one in which the Funds or Lord Abbett's advisory accounts are
interested;
(9) to become a director of any company without the Firm's prior consent and
implementation of appropriate safeguards against conflicts of interest.
In connection with any request for approval, pursuant to Section III of
this Code, of an acquisition by partners or employees of Lord Abbett of any
securities in a private placement, prior approval will take into account, among
other factors, whether the investment opportunity should be reserved for any of
the Funds and their shareholders (or other clients of Lord Abbett) and whether
the opportunity is being offered to the individual by virtue of the individual's
position with Lord Abbett or the Funds. An individual's investment in
privately-placed securities will be disclosed to the Managing Partner of Lord
Abbett if such individual is involved in consideration of an investment by a
Fund (or other client) in the issuer of such securities. In such circumstances,
the Fund's (or other client's) decision to purchase securities of the issuer
will be subject to independent review by personnel with no personal interest in
the issuer.
If a spouse of a partner or employee of Lord Abbett who is a director or an
employee of, or a consultant to, a company, receives a grant of options to
purchase securities in that company (or an affiliate), neither the receipt nor
the exercise of those options requires advance approval from Lord Abbett or
reporting. Any subsequent sale of the security acquired by the option exercise
by that spouse would require advance approval and is a reportable transaction.
Advance approval is not required for transactions in any account of a
Covered person if the Covered Person has no direct or indirect influence or
control ( a "Fully-Discretionary Account"). A Covered person will be deemed to
have "no direct or indirect influence or control" over an account only if : (i)
investment discretion for the account has been delegated to an independent
fiduciary and such investment discretion is not shared with the employee, (ii)
the Covered Person certifies in writing that he or she has not and will not
discuss any potential investment decisions with such independent fiduciary
before any transaction and (iii) the General Counsel of Lord Abbett has
determined that the account satisfies these requirements. Transaction in
Fully-Discretionary Accounts by an employee or partner of Lord Abbett are
subject to the post-trade reporting requirements of this Code.
VII. Enforcement
The Secretary of the Funds and General Counsel for Lord Abbett (who may be
the same person) each is charged with the responsibility of enforcing this Code,
and may appoint one or more employees to aid him in carrying out his enforcement
responsibilities. The Secretary shall implement a procedure to monitor
compliance with this Code through a periodic review of personal trading records
provided under this Code against transactions in the Funds and managed
portfolios. The Secretary shall bring to the attention of the Funds' Audit
Committees any apparent violations of this Code, and the Audit Committees shall
determine what action shall be taken as a result of such violation. The record
of any violation of this Code and any action taken as a result thereof, which
may include suspension or removal of the violator from his position, shall be
made a part of the permanent records of the Audit Committees of the Funds. The
Secretary shall also prepare an annual report to the directors or trustees of
the Funds that (a) summarizes Lord Abbett's procedures concerning personal
investing, including the procedures followed by partners in determining whether
to give approvals under Section III and the procedures followed by Ms. Herrera
in determining pursuant to Section IV whether any Funds have determined to
purchase or sell a security or are considering such a purchase or sale, and any
changes in those procedures during the past year, and (b) identifies any
recommended changes in the restrictions imposed by this Code or in such
procedures with respect to the Code and any changes to the Code based upon
experience with the Code, evolving industry practices or developments in the
regulatory environment.
The Audit Committee of each of the Funds and the General Counsel of Lord
Abbett may determine in particular cases that a proposed transaction or proposed
series of transactions does not conflict with the policy of this Code and exempt
such transaction or series of transactions from one or more provisions of this
Code.
VIII. Definitions
"Covered Person" means any officer, director, trustee, director or trustee
emeritus or employee of any of the Funds and any partner or employee of Lord
Abbett. (See also definition of "Beneficial Ownership.")
"Excepted Securities" are shares of the Funds, bankers' acceptances, bank
certificates of deposit, commercial paper, shares of registered open-end
investment companies and U.S. Government securities.
"Outside Directors and Trustees" are directors and trustees who are not
"interested persons" as defined in the Investment Company Act of 1940.
"Security" means any stock, bond, debenture or in general any instrument
commonly known as a security and includes a warrant or right to subscribe to or
purchase any of the foregoing and also includes the writing of an option on any
of the foregoing.
"Beneficial Ownership" is interpreted in the same manner as it would be
under Section 16 of the Securities Exchange Act of 1934 and Rule 16a-1
thereunder. Accordingly, "beneficial owner" includes any Covered Person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has or shares a direct or indirect pecuniary interest
(i.e. the ability to share in profits derived from such security) in any equity
security, including:
(i) securities held by a person's immediate family sharing the same house
(with certain exceptions);
(ii) a general partner's interest in portfolio securities held by a general
or limited partnership;
(iii) a person's interest in securities held in trust as trustee, beneficiary
or settlor, as provided in Rule 16a-8(b); and
(iv) a person's right to acquire securities through options, rights or other
derivative securities.
"Gender/Number" whenever the masculine gender is used herein, it includes
the feminine gender as well, and the singular includes the plural and the plural
includes the singular, unless in each case the context clearly indicates
otherwise.