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Lord Abbett
Securities Trust
Micro-Cap Growth Fund
Micro-Cap Value Fund
Prospectus
May 1, 2000
[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.
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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
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Micro-Cap Growth Fund
GOAL
The Fund's investment objective is long-term capital appreciation.
PRINCIPAL STRATEGY
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.
The Fund has particular risks associated with growth stocks. Different
types of stocks shift in and out of favor depending on market and economic
conditions. Growth companies may grow faster than other companies which may
result in more volatility in their stock prices. In addition, if the Fund's
assessment of a company's potential for growth or market conditions is
wrong, it could suffer losses or produce poor performance relative to other
funds, even in a rising market.
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 by investing in
the Fund.
We or the Fund refers to the Micro-Cap Growth Fund of Lord Abbett Securities
Trust.
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.
Growth stocks exhibit faster-than-average gains in earnings and are expected to
continue profit growth at a high level, but also tend to be more volatile than
value stocks.
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.
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
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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. 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. This chart does
not reflect the sales charges applicable to Class A shares. If the sales
charges were reflected, returns would be less.
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Bar Chart (per calendar year) - Class Y Shares
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[GRAPHIC OMITTED]
1999 - 51.2%
Best Quarter 4th Q `99 28.0% Worst Quarter 3rd Q `99 -4.3%
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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.
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Average Annual Total Returns Through December 31, 1999
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Share Class 1 Year Since Inception(1)
Class Y shares 51.23% 60.86%
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Center for Research Security
Prices Index "CRSP 9-10 Index"(2) 37.16% 37.16%(3)
(1) The date of inception for Class Y shares is 12/15/98.
(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.
(3) This represents total return for the period 12/31/98 - 12/31/99 to
correspond with Class Y inception date.
The Funds 3
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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.
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Fee Table
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Class A
Shareholder Fees (Fees paid directly from your investment)
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Maximum Sales Charge on Purchases
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(as a % of offering price) 5.75%
Maximum Deferred Sales Charge none(1)
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Annual Fund Operating Expenses (Expenses deducted from Fund assets)
(as a % of average net assets)(2)
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Management Fees (See "Management") 1.50%
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Distribution (12b-1) and Service Fees(3) 0.35%
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Other Expenses 0.46%
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Total Annual Fund Operating Expenses 2.31%
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(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 ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
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Example
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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 at
maximum sales charge, if any, 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 (including any applicable contingent deferred sales
charges) would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class A shares $796 $1,255 $1,739 $3,069
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Management fees are payable to Lord Abbett & Co.("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
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Micro-Cap Value Fund
GOAL
The Fund's investment objective is long-term capital appreciation.
PRINCIPAL STRATEGY
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.
Value stocks may perform differently than the market as a whole and other
types of stocks, such as small company stocks and growth stocks. This is
because different types of stocks tend to shift in and out of favor
depending on market and economic conditions. The market may fail to
recognize the intrinsic value of particular value stocks for a long time.
In addition, if the Fund's assessment of a company's value or prospects for
exceeding earning expectations or market conditions is wrong, the Fund
could suffer losses or produce poor performance relative to other funds,
even in a rising market.
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 by investing in
the Fund.
We or the Fund refers to the Micro-Cap Value Fund of Lord Abbett Securities
Trust.
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.
Value stocks are stocks of companies which we believe the market undervalues
according to certain financial measurements of their intrinsic worth or
business prospects.
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.
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
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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 xlass has less than one year of performance. 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. This chart does
not reflect the sales charges applicable to Class A shares. If the sales
charges were reflected, returns would be less.
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Bar Chart (per calendar year) - Class Y Shares
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[GRAPHIC OMITTED]
1999 - 20.1%
Best Quarter 2nd Q `99 21.2% Worst Quarter 1st Q `99 -7.3%
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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.
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Average Annual Total Returns Through December 31, 1999
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Share Class 1 Year Since Inception(1)
Class Y shares 20.05% 22.18%
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Center for Research Security
Prices Index "CRSP 9-10 Index"(2) 37.16% 37.16%(3)
(1) The date of inception for Class Y is 12/15/98.
(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.
(3) This represents total reeturns for the period 12/21/98 - 12/31/99 to
correspond with Class Y inception date.
6 The Funds
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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.
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Fee Table
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Class A
Shareholder Fees (Fees paid directly from your investment)
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Maximum Sales Charge on Purchases
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(as a % of offering price) 5.75%
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Maximum Deferred Sales Charge none(1)
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Annual Fund Operating Expenses (Expenses deducted from Fund assets)
(as a % of average net assets)(2)
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Management Fees (See "Management") 1.50%
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Distribution (12b-1) and Service Fees(3) 0.35%
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Other Expenses 0.56%
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Total Annual Fund Operating Expenses 2.41%
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(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 ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
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Example
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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 (including
any applicable contingent deferred sales charges) would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class A shares $805 $1,283 $1,787 $3,163
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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
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Your Investment
PURCHASES
This prospectus offers Class A shares only to current employees, partners
and officers, Directors or Trustees of each Lord Abbett-sponsored fund and
the spouses and children under the age of 21 of each such employee,
officer, Director or Trustee. These are the only individuals who are
eligible Purchasers with respect to Class A shares of the Funds. 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,
although no front-end sales charge shall be charged to the individuals
eligible to purchase Class A shares of the Funds.
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.
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Front-End Sales Charges - Class A Shares
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To Compute
As a % of As a % of OfferingPrice
Your Investment Offering Price Your Investment Divide NAV by
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Less than $50,000 5.75% 6.10% .9425
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$50,000 to $99,999 4.75% 4.99% .9525
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$100,000 to $249,999 3.95% 4.11% .9605
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$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
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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 Letter 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 Letter of Intention can be backdated 90 days.
Current holdings under Rights of Accumulation may be included in a
Letter 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 Class A share of each 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 Company.
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 each Lord Abbett-sponsored fund's Directors or Trustees
(including reited directors or Trustees), officers of each Lord Abbett
-sponsored fund, employees and partners of Lord Abbett. These
categories of purchasers 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 a 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-
The CDSC 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
3. shares held the longest before the second anniversary after the month of
purchase
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.
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 Funds
need not be directly related to expenses. If Lord Abbett Distributor's actual
expenses 2exceed the fee payable to it, the Funds 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
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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.
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 Funds at 800-821-5129 to request an exchange
from any eligible Lord Abbett-sponsored fund.
Proper Form. An order submitted directly to the Funds 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 Funds 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 a 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 expects to pay income dividends and cpital gains distributions,
if any, annually. 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.
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 by 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.
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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.
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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 Funds for an existing account. The Funds will
purchase the requested shares when they 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 Funds will not be liable for following instructions
communicated by telephone that they reasonably believe 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, each 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 eiither 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. Each 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 Funds.
Account Changes. For any changes you need to make to your account, consult
your investment professional or call the Funds 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 investment 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 it'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.
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 to the portfolio if they expect that
foreign exchange price movements will be unfavorable for U.S. investors.
Generally, these instruments allow a Fund to lock in a specified 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. A financial futures
transaction is an exchange-traded contract to buy or sell a standard
quantity and quality of a financial instrument or index at a specific
future date and price. Each Fund may purchae and sell futures contracts and
options thereon. Each Fund will not enter into any futures contracts or
options thereon, if the aggregate market value of the securities covered by
such contracts exceeds 50% of the Fund's total assets. A Fund's ability
to enter into financial transactions is limited by certain tax requirements
in order to qualify as a regulated investment company.
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.
Each Fund may write only covered put options to the extent that cover for
such options does not exceed 25% of its net assets. A Fund will not buy an
option if, as a result of such purchase, more than 20% of it'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. Each 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 Fund's
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
investment 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.
14 For More Information
<PAGE>
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 a 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); (5) certain Lord Abbett-sponsored funds
for which a shareholder is not an eligible Purchaser; and (6) Lord Abbett-
sponsored funds which are not currently available to new investors of the
type requesting an exchange. 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 the 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
- --------------------------------------------------------------------------------
Class Y(2) 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) 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. The inception date for Class Y is 12/15/98.
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 the 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 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
- --------------------------------------------------------------------------------
Class Y(2) 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) 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. The inception date for Class Y is 12/15/98.
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 Percentage of average net assets
- ------------------------------------------------------------------------------------------------------------------------------------
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 these 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 each Fund's
investment strategies.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Provides more details about the Funds and their policies. A current SAI is
on file with the Securities and Exchange Commission ("SEC") and is
incorporated by reference (is legally considered part of this prospectus).
Lord Abbett Securities Trust
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 either Fund at:
800-426-1130
By mail. Write to either 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 May 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 May 1, 2000.
Shareholder inquiries should be made by writing directly to a 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 10
3. Investment Advisory and Other Services 14
4. Portfolio Transactions 15
5. Purchases, Redemptions and Shareholder Services 16
6. Performance 21
7. Taxes 21
8. Information About The Company 23
9. Financial Statements 23
1
<PAGE>
Lord Abbett Securities Trust (the "Company") 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. Class A shares of Lord Abbett
Micro-Cap Growth Fund and Lord Abbett Micro-Cap Value Fund are only offered to
current employees, partners, and officers, directors or trustees of each Lord
Abbett-sponsored fund and the spouses and children under the age of 21 of each
such employee, officer, director or trustee. 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 each 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 restrictions in this section will be determined
at the time of purchase or sale of the portfolio investments.
2
<PAGE>
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 Trustees without
shareholder approval.
Each Fund may not:
(1) borrow in excess of 33 1/3% of its total assets (including the amount
borrowed), and then only as a temporary measure for extraordinary or
emergency purposes;
(2) make short sales of securities or maintain a short position except to the
extent permitted by applicable law;
(3) invest knowingly more than 15% of its net assets (at the time of
investment) in illiquid securities, except for securities qualifying for
resale under Rule 144A of the Securities Act of 1933 ("Rule 144A") deemed
to be liquid by the Board of Trustees;
(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 the officers or
directors/trustees of the Company, 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 that 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 its Prospectus and Statement of
Additional Information, as they may be amended from time to time or;
(10) buy from or sell to any of its officers, directors, trustees, employees,
or it's investment adviser or any of it's officers, directors, trustees,
partners or employees, any securities other than its shares.
3
<PAGE>
INVESTMENT TECHNIQUES
Each Fund intends to use, 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 used 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. Each Fund may, from time to time, write 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 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 sppecified date.
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 on stock or
stock indices with respect to securities with an aggregate market value of
more than 5% of its gross assets at the time an option is written. This
percentage limitation will not be increased without prior disclosure in 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 fee or commission no greater
than the customary broker's commission. Shares of investment companies sometimes
trade at a discount or premium to their net asset value. Also, there may be
duplication of fees if 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.
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 use 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.
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.
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 may 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 Fund must terminate the loan and regain the right to vote the
securities.
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 on stocks held in its portfolio 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 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.
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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Segregation. 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.
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.
Stock Index Options. Except as described 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 Fund's 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
"Call Options."
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.
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Special Risks Of Purchasing 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.
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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 but does not include amounts accrude under the
third column. 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>
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 at the option
of a director/trustee under a plan ('equity-based plan") that deems the
deferred amounts to be invested in shares of the Company for later
distribution to the directors/trustees.
2. The amounts in Column 3 were accrued by the Lord Abbett-sponsored funds for
the 12 months ended October 31, 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. 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 100% of each Fund's 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.
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. Class A shares of Lord Abbett Micro-Cap Growth Fund
and Lord Abbett Micro-Cap Value Fund are only offered to current employees,
partners, and officers, directors or trustees of each Lord Abbett-sponsored fund
and the spouses and children under the age of 21 of each such employee, officer,
director or trustee.
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.
Each 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 Trustees. The Board of 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.
Each 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 to eligible Purchasers
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, each 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 Plan requires the Board of 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
Trustees, including a majority of the Trustees who are not interested persons of
the Fund and who have no direct or indirect financial interest in the operation
of the Plan or in any agreements related to the Plan ("outside 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 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' 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, each Fund redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held on or after the 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 that 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.
19
<PAGE>
In no event will the amount of the CDSC exceed the Applicable Percentage of the
lesser of: (i) the net asset value of the shares redeemed or (ii) the original
cost of such shares (or of the Exchanged Shares for which such shares were
acquired). No CDSC will be imposed when the investor redeems (i) amounts derived
from increases in the value of the account above the total cost of shares being
redeemed due to increases in net asset value, (ii) shares with respect to which
no Lord Abbett Fund paid a 12b-1 fee, 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, and 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.
Letter of Intention. Under the terms of the Letter 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, 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 Letter 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 Letter is
not completed. The Letter 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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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, 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. Class A shares of Lord Abbett
Micro-Cap Growth Fund and Lord Abbett Micro-Cap Value fund are only offered to
current employees, partners, and officers, directors or trustees of each Lord
Abbett-sponsered fund and the spouses and children under the age of 21 of each
such employee, officer, director or trustee.
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 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 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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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 timely distributes to
shareholders. If in any taxable year a Fund does 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 each Fund from its investment income and
distributions of its net realized long-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. Each Fund will send its shareholder
annual information concerning the tax treatment of dividends and other
distributions.
Upon sale, exchange or redemption of shares of a Fund, a shareholder will
recognize short- or long-term capital gain or loss, depending upon the
shareholders' holding period in the Fund's 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 applicable 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 not be entitled to claim a federal
income tax credit or deduction for foreign income taxes paid by the Fund.
The writing of call options and other investment techniques and practices which
a fund may utilize may affect the character and timing of the recognition of
gains and losses. Such transactions may increase the amount of short-term
capital gain realized by such Fund, which is taxed as ordinary income when
distributed to shareholders.
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," the Funds 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 the Funds 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 their 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. Alternatively, if the Funds were to make a "mark-to-market"
election with respect to an investment in a passive foreign investment company,
gain with respect to the investment would be considered realized at the end of
each taxable year of the Funds even if the Funds continued to hold the
investment.
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.
Rule 18f-2 under the Act provides that any matter required to be submitted, by
the provisions of the Act or applicable state law or otherwise, to the holders
of the outstanding voting securities of an investment company such as each Fund
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each class affected by such
matter. Rule 18f-2 further provides that a class shall be deemed to be affected
by a matter unless the interests of each class in the matter are substantially
identical or the matter does not affect any interst of such class. However, the
Rule exempts the selection of independent public accountants, the approval of a
contract with a principal underwriter and the election of directors from its
separate voting requirements.
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9.
Financial Statements
Not applicable.
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