Lord Abbett
Investment
Trust
o U.S. Government Securities Series
o Limited Duration U.S. Government Securities Series
o Balanced Series
SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED MAY 31, 1997
[GRAPHIC: Weathervane]
Three portfolios
to help you
meet your goals
[LOGO(R)
<PAGE>
Report to Shareholders
For the Six Months Ended May 31, 1997
[PHOTO: Robert S. Dow]
/s/ Robert S. Dow
- -----------------
ROBERT S. DOW
CHAIRMAN
JUNE 17, 1997
Table of Contents
U.S. Government Securities Series
- ----------------------------------------------
About the Series 1
Statement of Net Assets 4
Limited Duration U.S. Government
Securities Series
- ----------------------------------------------
About the Series 3
Statement of Net Assets 6
Balanced Series
- ----------------------------------------------
About the Series 3
Statement of Net Assets 6
Data On All Series
- ----------------------------------------------
Statements of Operations 9
Statements of Changes in
Net Assets 10
Financial Highlights 11
Notes to Financial Statements 12
At the close of the fiscal half year, the three portfolios in your Trust had
combined assets of $2.4 billion. Below is an overview of each Series'
performance for the six months ended May 31, 1997:
U.S. Government Securities Series
Six Months Ended 5/31/97
------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Net asset value $2.52 $2.52 $2.52
Dividends $ .102 $ .0924 $ .0924
Total return*+ -0.3% -0.6% -0.6%
Limited Duration
U.S. Government
Securities Series Balanced Series
Six Months Ended 5/31/97 Six Months Ended 5/31/97
------------------------ --------------------------
Class A Class C Class A Class C
- ---------------------------------------------------- --------------------------
Net asset value $4.34 $4.34 $12.01 $11.99
Dividends $ .126 $ .1061 $ .228 $ .168
Capital gains -- -- $ 0.17 $ 0.17
Total return*+ +1.1% +0.6% +5.3% +4.7%
The economy grew at a rate of 4% during the first half of 1997 but with moderate
inflation. We expect growth to slow to less than 2 1/2% with inflation averaging
3% or less later in 1997 and into 1998. For now, the Federal Reserve Board (the
"Fed") is not acting to raise short-term interest rates. In the economic
environment we are forecasting over the next 6-12 months, yields on long-term
U.S. Government bonds could drop toward 6 1/4%.
Both the U.S. Government Securities Series and the Limited Duration U.S.
Government Securities Series were positively impacted by heavy weightings in
mortgage-backed securities and, going forward, we will continue to emphasize
these holdings. Given the expected lower interest-rate environment, we believe
they will continue to add value to your portfolio.
Since our last letter to you, the stock market averages continued to climb and
the prospects for the bond market improved. As a result, during the period, we
shifted the Balanced Series' asset allocation from 55% equity and 45% bonds to
50%-50% (equity to bonds). The equity portion of your Series benefited from its
exposure to financial companies and producers of non-durable goods. Currently,
we do not see any sectors as deeply undervalued in the equity market; therefore,
the Balanced Series' equity position is sector neutral. Performance will depend
on careful individual stock selection. While bonds have underperformed, we
expect our long-term bond holdings to perform well in the slower growth economy
we envision.
Thank you for making Lord Abbett Investment Trust a part of your investment
portfolio. We look forward to a long and prosperous relationship.
* Total return is the percent change in net asset value assuming the
reinvestment of all distributions.
+ Not annualized.
<PAGE>
ABOUT THE U.S. GOVERNMENT SECURITIES SERIES
Total Return is Important to Fixed-Income Investors
Over the last 10 1/2 years, an investment in the Series provided relatively
stable dividend income and, assuming the reinvestment of all distributions, grew
by almost 102%. The Series surpassed the increase in inflation (as measured by
the Consumer Price Index) over the last 10 1/2 years.
Lord Abbett U.S. Government Securities Series Versus Inflation(1)(2)
Growth of $100,000: 12/1/86-5/31/97
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL]
Date U.S. Government Securities Series Inflation
12/1/86 96,254 100,000
11/20/87 96,596 104,529
11/30/88 105,908 108,967
11/30/89 118,246 114,040
11/30/90 127,488 121,196
11/30/91 145,787 124,819
11/30/92 159,263 128,623
11/30/93 176,296 132,065
11/30/94 168,817 135,598
11/30/95 193,955 139,221
11/30/96 202,494 143,841
5/31/97 201,952 145,018
The U.S. Government Securities Series'
Distribution Rate on 5/31/97 was
7.70%(3)
SEC Returns
Average annual compound returns for the periods ended June 30, 1997 at the
respective Class A share maximum sales charges(4), with all distributions
reinvested:
Limited Duration
U.S. Government U.S. Government
Securities Series(2) Securities Series Balanced Series
- --------------------------------------------------------------------------------
1 year: +1.90% +2.30% +12.40%
5 years: +4.81% n/a n/a
10 years or Life of Series: +7.45% +2.00%(5) +14.36%(5)
SEC yield for the 30 days
ended 6/30/97: 4.73% 5.35% 2.45%
The results quoted herein represent past performance which is no indication of
future results. The investment return and principal value of an investment in
any Series of the Trust will fluctuate so that shares, on any given day or when
redeemed, may be worth more or less than their original cost. Each Series issues
separate classes of shares, with distinct pricing options. For a full discussion
of the differences in pricing alternatives, see the Trust's current prospectus.
(1) Total return is the percent change in value, assuming the reinvestment of
both dividends and capital gains distributions. The Series investment
reflects the deduction of the reduced 3.75% sales charge applicable to
Class A share investments of $100,000.
(2) Lord Abbett Investment Trust-U.S. Government Securities Series was
established 7/15/96. Its predecessor, Lord Abbett U.S. Government
Securities Fund, was established 9/19/32. Any performance relating to the
Series for periods prior to 7/15/96 reflects performance of the Series'
predecessor.
(3) Based on the Class A share maximum offering price.
(4) The Class A share maximum sales charge is 4.75% for the U.S. Government
Securities Series and the Balanced Series and 3.00% for the Limited
Duration U.S. Government Securities Series.
(5) Limited Duration U.S. Government Securities Series commenced operations
11/4/93; Balanced Series commenced operations 12/27/94.
1
<PAGE>
ABOUT THE U.S. GOVERNMENT SECURITIES SERIES
Annual Total Returns Based on Calendar Year(1)
<TABLE>
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 Six Months
Ended
6/30/97
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Total Return(1) +1.7% +7.8% +12.7% +9.3% +16.9% +7.1% +9.2% -4.3% +15.7% +1.7% +2.5%
</TABLE>
(1) Total return reflects the percent change in value with both dividends and
capital gains distributions reinvested. Results shown are at net asset
value for Class A shares. For performance at the maximum Class A share
sales charge, see page 1. See Important Information on page 4.
A Portfolio of High-Quality Securities
Conservative shareholders gain the comfort of owning U.S. Government securities,
which have the top investment grade and carry the least credit risk among
fixed-income securities.
Lord Abbett's Focus on Quality
Representative Structure as of 5/31/97
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL]
Cash Equivalents 8.70%
Mortgage-Related Securities
FNMA 38.97%
GNMA 11.49%
FHLMC .58%
U.S. Treasury Bonds
Due 2002-2007 12.25%
U.S. Treasury Notes
Due 1997-2002 16.50%
Due 2002-2007 11.51%
Who Owns the Series?
Investor Profile of Lord Abbett U. S. Government Securities Series
- --------------------------------------------------------------------------------
Fiduciaries Trusts 4,584
Pension & profit-sharing plans 4,029
Custodians for minors 2,366
Estates 177
- --------------------------------------------------------------------------------
Institutions Broker-held accounts 47,320
Corporate organizations 385
Religious, charitable & welfare organizations 275
Banks, credit unions & insurance companies 152
Cemeteries & hospitals 53
Government agencies 31
Colleges & universities 18
- --------------------------------------------------------------------------------
Individuals Single & joint accounts & IRAs 46,000
Other 7,895
Total Accounts in the Series on 5/31/97 113,285
2
<PAGE>
ABOUT THE LIMITED DURATION U.S. GOVERNMENT SECURITIES SERIES
The Series invests in intermediate-term U.S. Government securities. A portfolio
of these securities has generated a competitive distribution rate, with less
volatility than longer term U.S. Government bonds.
Lord Abbett Limited Duration U.S. Government Securities Series(1)
Growth of $100,000 (as of 5/31/97)
The Limited Duration U.S. Government
Securities Series' Distribution Rate on
5/31/97 was 5.64%(2)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR GRAPH IN THE PRINTED MATERIAL]
1 Year $102,874
3 Years $111,120
ABOUT THE BALANCED SERIES
The Series allocates its assets between fixed-income securities and equity
holdings, based on our economic outlook. This strategy has provided investors
with strong total returns, while generating monthly income.
Lord Abbett Balanced Series(3)
Growth of $100,000 (as of 5/31/97)
The Balanced Series' Average Annual Rate
of Total Return Since Inception: 14.1%
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR GRAPH IN THE PRINTED MATERIAL]
1 Year $110,497
Life of Series $137,840
Total return shown reflects the percent change in value for Class A shares with
both dividends and capital gains reinvested.
(1) The Limited Duration U.S. Government Securities Series commenced operations
on 11/4/93. Results reflect the deduction of the reduced 2.50% sales charge
applicable to Class A share investments of $100,000.
(2) Based on the Class A share maximum offering price.
(3) The Balanced Series commenced operations on 12/27/94. Results reflect the
deduction of the reduced 3.75% sales charge applicable to Class A share
investments of $100,000. For Series' performance at the respective maximum
Class A share sales charges, see page 1.
3
<PAGE>
Important Information
Each Series' respective SEC yield is calculated on its maximum offering price on
6/30/97, using a standard method which does not take into account certain
portfolio strategies. Series' distribution rates differ from SEC yields
primarily because each Series purchases short- and intermediate-term,
high-coupon securities at a premium and distributes to shareholders all of the
interest income on those securities without amortizing the premiums. This
practice is consistent with applicable tax regulations and generally accepted
accounting principles, but may result in a decrease in the net asset values of
shares of the Series as the market values of the premium securities decrease
over time. Dividends paid from this interest income are taxable to shareholders
as ordinary income. Neither the U.S. Government Securities Series nor the
Limited Duration U.S. Government Securities Series is insured or guaranteed by
the U.S. Government.
Results quoted herein represent past performance based on the current sales
charge schedules and reflect appropriate Rule 12b-1 Plan expenses. Tax
consequences are not reflected. The U.S. Government Securities Series' sales
charge structure has changed from the past. If interest rates rise, the value of
bonds purchased by the Series would decrease, causing a decrease in the Series'
share values. If used as sales material after 9/30/97, this report must be
accompanied by Lord Abbett's Performance Quarterly for the most recently
completed calendar quarter.
Statement of Net Assets
U.S. GOVERNMENT SECURITIES SERIES May 31, 1997
<TABLE>
<CAPTION>
Principal
Investments Amount Market Value
===================================================================================================================================
Investments in Securities 91.30%
===================================================================================================================================
<S> <C> <C> <C>
U.S. Treasury 40.26% U.S. Treasury Bonds 6 5/8% due 2/15/2027+ $ 62,000M $ 59,742,812
U.S. Treasury Notes 6 1/4% due 5/31/1999 180,000M 180,140,625
U.S. Treasury Notes 6 3/8% due 5/15/2000+ 143,000M 143,089,375
U.S. Treasury Notes 6 1/2% due 5/31/2002 75,000M 74,976,563
U.S. Treasury Notes 6 5/8% due 5/15/2007+ 218,000M 217,386,875
U.S. Treasury Notes 7 1/4% due 5/15/2016 35,000M 36,017,187
U.S. Treasury Strips due 11/15/2004+ 100,000M 61,125,000
U.S. Treasury Strips due 2/15/2009 105,000M 47,578,125
U.S. Treasury Strips due 2/15/2013 200,000M 66,937,500
U.S. Treasury Strips due 2/15/2015 143,000M 41,447,655
U.S. Treasury Strips due 8/15/2020 237,000M 46,363,125
Total 974,804,842
- ---------------------------------------------------------------------------------------------------------------------==============
Federal Home Loan
Mortgage Corporation
Pass-Through Securities .58% 10 1/2% due 5/1/2020 12,861M 14,150,662
- ---------------------------------------------------------------------------------------------------------------------==============
Federal National 5 1/2% due 11/1/2025 4,662M 4,206,500
Mortgage Association 6 1/2% due on an announced basis 397,000M 380,790,937
Pass-Through Securities 38.97% 7% due on an announced basis 263,000M 256,577,657
7.04% due 12/1/2006 9,991M 9,980,026
7 1/2% due on an announced basis 144,000M 143,818,750
7 1/2% due 11/1/2023 6,256M 6,074,565
8% due on an announced basis 140,000M 141,990,625
Total 943,439,060
- ---------------------------------------------------------------------------------------------------------------------==============
Government National 6 1/4% due 2035 to 2036 7,014M 6,352,968
Mortgage Association 6 1/2% due 3/15/2031 5,891M 5,438,328
Pass-Through Securities 11.49% 6.55% due 3/15/2031 6,950M 6,432,737
</TABLE>
4
<PAGE>
Statement of Net Assets
U.S. GOVERNMENT SECURITIES SERIES May 31, 1997
<TABLE>
<CAPTION>
Principal
Investments Amount Market Value
===================================================================================================================================
<S> <C> <C> <C>
7 1/2% due on an announced basis $110,000M $ 109,346,875
8% due on an announced basis 102,000M 103,577,812
8% due 2024 24,632M 25,155,327
9% due 2018 to 2020 7,443M 7,952,969
9 1/2% due 2019 to 2020 2,314M 2,497,560
10% due 2018 to 2019 10,498M 11,481,781
Total 278,236,357
------------------------------------------------------------------------------=============
Total Investments (Cost $2,199,579,518) 2,210,630,921
===================================================================================================================================
Other Assets, Less Liabilities 8.70%
===================================================================================================================================
Other Assets
Short-term Investments, at Market
Federal Home Loan Banks 10% due 9/25/1997 100,000M 101,406,250
Federal Home Loan Banks 11% due 9/18/1997 100,000M 101,609,375
Federal Home Loan Banks 13% due 1997 300,000M 304,382,814
Federal Home Loan Mortgage Corp. 10% due 8/21/1997 100,000M 101,015,625
Federal Home Loan Mortgage Corp. 11% due 8/4/1997 100,000M 100,968,750
Federal Home Loan Mortgage Corp. 12 1/2% due 1997 200,000M 201,000,000
Federal National Mortgage Association 12 1/2% due 10/16/1997 100,000M 102,500,000
Federal National Mortgage Association 13% due 11/19/1997 150,000M 154,921,875
U.S. Treasury Notes 5 7/8% due 7/31/1997+ 145,900M 146,127,969
U.S. Treasury Notes 6 1/8% due 5/31/1997+ 73,500M 73,511,484
Total (Cost $1,417,518,829) 1,387,444,142
------------------------------------------------------------------------------=============
Short-term Investments, at Cost
Federal Farm Credit Banks 5.33% due 6/2/1997 100,000M 99,837,138
Federal Home Loan Banks 5.33% due 6/2/1997 50,000M 49,925,972
Federal Home Loan Banks 5.55% due 6/2/1997 2,700M 2,698,752
Federal Home Loan Mortgage Corp. 5.35% due 6/2/1997 47,000M 46,923,168
Total 199,385,030
------------------------------------------------------------------------------=============
Total Short-Term Investments 1,586,829,172
- ----------------------------------------------------------------------------------------------------------------------=============
Cash 596,168
- ----------------------------------------------------------------------------------------------------------------------=============
Receivable for: Investments sold 1,225,598,292
Interest 29,216,525
Other 690,394
Total Other Assets 2,842,930,551
===================================================================================================================================
Liabilities
Payable for: Investments purchased 2,611,548,140
Other 20,707,302
Total Liabilities 2,632,255,442
------------------------------------------------------------------------------=============
Total Other Assets, Less Liabilities 210,675,109
===================================================================================================================================
Net Assets 100.00% $2,421,306,030
===================================================================================================================================
Class A Shares-Net asset value ($2,209,285,128 / 876,325,120 shares outstanding) $2.52
Class B Shares-Net asset value ($8,916,578 / 3,540,372 shares outstanding) $2.52
Class C Shares-Net asset value ($203,104,324 / 80,596,662 shares outstanding) $2.52
</TABLE>
+ Securities (or a portion of securities) on loan. See Note 5.
See Notes to Financial Statements.
5
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
LIMITED DURATION U.S. GOVERNMENT SECURITIES SERIES May 31, 1997
Principal
Investments Amount Market Value
===================================================================================================================================
Investments in Securities 64.10%
===================================================================================================================================
<S> <C> <C> <C>
U.S. Treasury 35.51% U.S. Treasury Notes 6 1/4% due 10/31/2001 $2,500M $ 2,477,344
U.S. Treasury Notes 6 3/8% due 9/30/2001 1,500M 1,493,671
Total 3,971,015
- ------------------------------------------------------------------------------------------------------------------------===========
U.S. Government Agencies 2.94% Financing Corp. Strip due 6/27/1998 350M 328,780
- ------------------------------------------------------------------------------------------------------------------------===========
Federal National 6 1/2% due on an announced basis 1,550M 1,511,250
Mortgage Association 6 1/2% due 2007 to 2011 553M 541,480
Pass-Through Securities 18.35% Total 2,052,730
- ------------------------------------------------------------------------------------------------------------------------===========
Government National 10% due 6/15/2019 102M 111,143
Mortgage Association 10 1/2% due 2013 to 2020 639M 705,012
Pass-Through Securities 7.30% Total 816,155
--------------------------------------------------------------------------------===========
Total Investments (Cost $7,229,377) 7,168,680
===================================================================================================================================
Other Assets, Less Liabilities 35.90%
===================================================================================================================================
Other Assets
Short-Term Investments, at Market U.S. Treasury Notes 8 1/2% due 7/15/1997 (Cost $102,340) 100M 100,438
- ------------------------------------------------------------------------------------------------------------------------===========
Short-Term Investments, at Cost Federal National Mortgage Association 5.52% due 6/2/1997 5,300M 5,297,562
--------------------------------------------------------------------------------===========
Total 5,398,000
- ------------------------------------------------------------------------------------------------------------------------===========
Cash 16,434
- ------------------------------------------------------------------------------------------------------------------------===========
Receivable for: Interest 42,099
Other 100,634
Total Other Assets 5,557,167
===================================================================================================================================
Liabilities
Payable for: Investments purchased 1,510,283
Other 31,322
Total Liabilities 1,541,605
--------------------------------------------------------------------------------===========
Total Other Assets, Less Liabilities 4,015,562
===================================================================================================================================
Net Assets 100.00% $11,184,242
===================================================================================================================================
Class A Shares-Net asset value ($4,413,623 / 1,016,917 shares outstanding) $4.34
Class C Shares-Net asset value ($6,770,619 / 1,560,897 shares outstanding) $4.34
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Net Assets
BALANCED SERIES May 31, 1997
Investments Shares Market Value
===================================================================================================================================
Investments in Securities 87.09%
===================================================================================================================================
Common Stocks and Convertible Securities 48.08%
===================================================================================================================================
<S> <C> <C> <C>
Aerospace .50% Boeing Co.-World's leading commercial aircraft manufacturer 700 $ 73,675
- --------------------------------------------------------------------------------------------------------------------------=========
Apparel .80% VF Corp.-Leading producer of blue jeans and other apparel 1,500 117,187
- --------------------------------------------------------------------------------------------------------------------------=========
Auto Parts .79% Genuine Parts Company-National distributor of automotive
replacement parts 3,450 115,575
- --------------------------------------------------------------------------------------------------------------------------=========
Automobiles .62% General Motors Corp.-Worldwide auto producer 1,600 91,600
- --------------------------------------------------------------------------------------------------------------------------=========
Banks: Money Center 1.29% Chase Manhattan Corp.-Major money-center bank holding company 1,200 113,400
First Chicago NBD-Major midwest bank 1,300 77,025
Total 190,425
----------------------------------------------------------------------------------=========
</TABLE>
6
<PAGE>
Statement of Net Assets
BALANCED SERIES May 31, 1997
<TABLE>
<CAPTION>
Investments Shares Market Value
===================================================================================================================================
<S> <C> <C> <C>
Banks: Regional 3.00% BankBoston, N.A.-Leading New England regional bank 2,100 $ 153,300
BankAmerica Corp.-Major west coast bank 850 99,344
First Union Corp.-Major east coast bank 1,150 98,756
KeyCorp-Multi-regional bank holding company serving
the Northwest U.S. 1,650 89,719
Total 441,119
- --------------------------------------------------------------------------------------------------------------------------=========
Brokers .76% Morgan Stanley, Dean Witter, Discover & Co.-Major brokerage
and credit card company 2,700 111,375
- --------------------------------------------------------------------------------------------------------------------------=========
Chemicals 2.92% Air Products & Chemicals Inc.-Industrial gas producer 2,300 178,825
Dow Chemical Co.-Leading global chemical producer 1,300 108,388
Morton International Inc.-Producer of specialty chemicals,
salt and air bags 2,500 80,625
Union Carbide Corp.-Major U.S.-based producer of plastics
and chemicals 1,350 63,112
Total 430,950
- --------------------------------------------------------------------------------------------------------------------------=========
Communications Equipment 1.03% Corning Inc.-Major producer of fiber optics and provider
of medical testing services 3,000 151,123
Data Processing Equipment 2.47% *Digital Equipment Corp.-Manufacturer of data processing equipment 2,000 71,750
Hewlett-Packard Co.-Leading manufacturer of computer products
including printers, servers, workstations and PCs 3,150 162,225
International Business Machines Corp.-Largest
computer manufacturer 1,500 129,750
Total 363,725
- --------------------------------------------------------------------------------------------------------------------------=========
Drugs/Health Care Products 3.25% American Home Products Corp.-Producer of drugs, food housewares
and packaged medicine and medical products 1,500 114,375
Bristol-Myers Squibb Company-Major worldwide pharmaceutical
concern with other interests in infant nutrition, non-prescription
medications, medical devices and toiletries 1,200 88,050
*Humana Inc.-Provider of managed health plans 4,250 96,155
SmithKline Beecham plc ADS-United Kingdom-based health care
company providing prescription and over-the-counter drugs and
clinical laboratory services 1,250 109,375
Warner-Lambert Co.-Drugs and consumer products manufacturer 700 70,525
Total 478,480
- --------------------------------------------------------------------------------------------------------------------------=========
Electric Power 1.84% Baltimore Gas & Electric Co.-Regional electric utility company 3,950 103,687
Carolina Power & Light Co.-Electric utility company serving
North and South Carolina 1,900 66,025
CINergy Corp.-Supplier of electricity and natural gas in
southwestern Ohio and adjacent Kentucky and Indiana territories 2,900 101,500
Total 271,212
- --------------------------------------------------------------------------------------------------------------------------=========
Electrical Equipment 1.50% Emerson Electric Co.-Diversified manufacturer of consumer and
industrial electrical components 4,300 232,200
- --------------------------------------------------------------------------------------------------------------------------=========
Electronics: Components .78% Harris Corp.-Manufacturer of advanced electronic systems and
communications equipment 1,300 115,212
- --------------------------------------------------------------------------------------------------------------------------=========
Food 3.33% ConAgra Inc.-Major producer of agricultural and consumer products 2,100 126,263
CPC International Inc.-Producer of diversified packaged foods 1,900 163,400
Heinz H.J. Co.-Domestic packaged foods producer 4,650 199,950
Total 489,613
- --------------------------------------------------------------------------------------------------------------------------=========
Furniture and Appliances .53% Whirlpool Corp.-Major appliance manufacturer 1,550 77,306
- --------------------------------------------------------------------------------------------------------------------------=========
Household Products 1.89% James River Corp.-Producer of paper-based consumer products,
packaging and communication papers 4,100 144,013
Kimberly Clark Corp.-Major producer of consumer and
personal care products 2,662 133,433
Total 277,446
- --------------------------------------------------------------------------------------------------------------------------=========
Insurance 5.13% Aetna Inc.-Major multi-line insurer 900 90,900
Chubb Corp.-Broad-based property and casualty insurance
organization 3,000 183,000
CIGNA Corp.-Multi-line insurance and medical services provider 600 104,250
Jefferson-Pilot Corp.-Life insurance holding company 1,700 108,163
SAFECO Corp.-Insurance and financial services company 3,250 141,375
Transamerica Corp.-Diversified financial services company 1,400 127,225
Total 754,913
- --------------------------------------------------------------------------------------------------------------------------=========
</TABLE>
7
<PAGE>
Statement of Net Assets
BALANCED SERIES May 31, 1997
<TABLE>
<CAPTION>
Shares or
Investments Principal Amount Market Value
===================================================================================================================================
<S> <C> <C> <C>
Machinery: Diversified 1.02% Deere & Co.-World's largest manufacturer of farm equipment 2,950 $ 150,819
- --------------------------------------------------------------------------------------------------------------------------=========
Miscellaneous .75% Minnesota Mining & Mfg. Co.-Diversified global manufacturer
of value-added industrial, consumer and medical products 1,200 110,100
- --------------------------------------------------------------------------------------------------------------------------=========
Natural Gas Distribution 1.27% Consolidated Natural Gas Co.-Producer of integrated natural gas systems 1,500 79,688
Nicor Inc.-Natural gas distributor in Illinois 3,100 106,563
Total 186,251
- --------------------------------------------------------------------------------------------------------------------------=========
Natural Gas Diversified 1.24% The Coastal Corporation-Diversified gas pipeline company 3,650 182,956
- --------------------------------------------------------------------------------------------------------------------------=========
Oil: Domestic 1.06% Amoco Corp.-Major integrated petroleum and natural gas company with
sizable interests in chemicals 1,750 156,406
- --------------------------------------------------------------------------------------------------------------------------=========
Oil: International 1.64% Chevron Corp.-Worldwide petroleum company with important interests
in chemicals and minerals 1,250 87,500
Exxon Corp.-World's largest integrated oil company 1,300 77,025
Mobil Corp.-Large international oil company 550 76,931
Total 241,456
- --------------------------------------------------------------------------------------------------------------------------=========
Paper and Forest Products
1.48% International Paper Co.-Producer of paper and forest products 2,450 117,600
Temple-Inland, Inc.-Leading manufacturer of corrugated boxes,
bleached paperboard, pulp and building materials 1,650 99,825
Total 217,425
- --------------------------------------------------------------------------------------------------------------------------=========
Retail 1.43% May Department Stores Company-Leading department store retailer 1,350 63,619
* Toys R Us Inc.-Discount toy supermarts; department stores 4,700 146,288
Total 209,907
- --------------------------------------------------------------------------------------------------------------------------=========
Savings and Loan .81% Great Western Financial Corp.-Leading savings and loan company 2,450 118,825
- --------------------------------------------------------------------------------------------------------------------------=========
Telecommunications .89% MCI Communications Corp.-Long distance telecommunications provider 3,400 130,475
- --------------------------------------------------------------------------------------------------------------------------=========
Telephone 1.92% Alltel Corp.-Regional telephone holding company 2,800 92,050
Bell Atlantic Corp.-Regional telephone company 950 66,500
BellSouth Corp.-Regional telephone company 1,450 65,794
SBC Communication Inc.-Regional telephone company with interests in Mexico 1,000 58,500
Total 282,844
- --------------------------------------------------------------------------------------------------------------------------=========
Tobacco 1.62% American Brands Inc.-Consumer products conglomerate 1,100 53,900
Philip Morris Inc.-Leading tobacco company 2,250 99,000
RJR Nabisco-Diversified food and tobacco producer 2,650 85,794
Total 238,694
- --------------------------------------------------------------------------------------------------------------------------=========
Waste Management .45% Waste Management Inc.-Leading international provider of solid waste
disposal and other environmental services 2,078 65,977
-------------------------------------------------------------------------------------------=========
Total Investments in Common Stocks (Cost $5,584,112) 7,075,271
===================================================================================================================================
U.S. Government Obligations 39.01%
===================================================================================================================================
Federal National Mortgage Association Discount notes 2,500M 2,433,203
U.S. Treasury Bonds 6% due 2/15/2026 60M 52,819
U.S. Treasury Bonds 6 3/4% due 8/15/2026 250M 243,359
U.S. Treasury Bonds 6 7/8% due 8/15/2025 590M 582,809
U.S. Treasury Notes 5 1/4% due 1/31/2001 320M 308,300
U.S. Treasury Notes 6 1/4% due 5/31/1999 1,000M 1,000,781
U.S. Treasury Notes 6 1/2% due 10/15/2006 100M 98,797
U.S. Treasury Notes 7% due 7/15/2006 1,000M 1,021,719
Total Investments in U.S. Government Obligations (Cost $5,841,727) 5,741,787
-------------------------------------------------------------------------------------------=========
Total Investments (Cost $11,425,839) 12,817,058
===================================================================================================================================
Other Assets, Less Liabilities 12.91%
===================================================================================================================================
Other Assets
Short-Term Investment,
at Market Federal Home Loan Banks 12 1/2% due 7/22/1997 (Cost $3,304,921) 3,233,000
-------------------------------------------------------------------------------------------=========
</TABLE>
8
<PAGE>
Statement of Net Assets
BALANCED SERIES May 31, 1997
<TABLE>
<CAPTION>
Principal
Investments Amount Market Value
===================================================================================================================================
<S> <C> <C>
Short-Term Investment, at Cost Federal National Mortgage Association 5.52% due 6/2/1997 $1,700M $ 1,699,218
-------------------------------------------------------------------------------------------=========
Total Short-Term Investments 4,932,218
- --------------------------------------------------------------------------------------------------------------------------=========
Cash 89,154
- --------------------------------------------------------------------------------------------------------------------------=========
Receivable for: Interest 194,943
Capital stock sold 39,177
Dividends 15,039
Other 57,548
Total Other Assets 5,328,079
- --------------------------------------------------------------------------------------------------------------------------=========
Payable for: Investments purchased 3,425,859
Other 2,974
Total Liabilities 3,428,833
-------------------------------------------------------------------------------------------=========
Total Other Assets, Less Liabilities 1,899,246
===================================================================================================================================
Net Assets 100.00% $14,716,304
===================================================================================================================================
Class A Shares-Net asset value ($12,375,094 / 1,030,414 shares outstanding) $12.01
Class C Shares-Net asset value ($2,341,210 / 195,188 shares outstanding) $11.99
</TABLE>
*Non-income producing.
See Notes to Financial Statements.
Statements of Operations
<TABLE>
<CAPTION>
For the Six Months Ended May 31, 1997
------------------------------------------------------
Limited Duration
U.S. Government U.S. Government Balanced
Investment Income Securities Series Securities Series Series
===================================================================================================================================
<S> <C> <C> <C> <C>
Income Interest $ 122,315,374 $ 386,579 $ 257,803
Dividends -- -- 76,078
Total income 122,315,374 386,579 333,881
---------------------------------------------------------------------------------------------------------------------
Expenses Management fee 6,578,183 30,198 47,171
Management fee waived -- (27,428) (31,953)
12b-1 distribution plan-Class A 3,314,144 -- --
12b-1 distribution plan-Class B 34,208 -- --
12b-1 distribution plan-Class C 1,232,180 33,926 8,855
Shareholder servicing 1,500,000 10,200 10,500
Reports to shareholders 192,000 2,750 3,000
Professional 95,000 5,750 5,750
Registration 30,000 18,000 16,153
Organization - 7,728 3,822
Other 134,190 9,160 14,339
Expenses assumed by Lord Abbett - (21,440) --
Net expenses 13,109,905 68,844 77,637
---------------------------------------------------------------------------------------------------------------------
Net investment income 109,205,469 317,735 256,244
---------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain(Loss) on Investments
===================================================================================================================================
Realized gain (loss) from investment transactions
Proceeds from sales 20,626,915,256 24,687,218 11,127,512
Cost of investments sold 20,685,089,555 24,715,476 10,744,523
Net realized gain (loss) (58,174,299) (28,258) 382,989
---------------------------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investments (66,783,364) (200,883) 56,224
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (124,957,663) (229,141) 439,213
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations $ (15,752,194) $ 88,594 $ 695,457
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended
Six Months Ended May 31, 1997 November 30, 1996
-------------------------------------------------- ------------------
Limited Duration
U. S. Government U. S. Government Balanced U. S. Government
Increase (Decrease) in Net Assets Securities Series Securities Series Series Securities Series
================================================================================================================== =================
<S> <C> <C> <C> <C>
Operations
Net investment income $ 109,205,469 $ 317,735 $ 256,244 $ 243,527,547
Net realized gain (loss) from investment transactions (58,174,299) (28,258) 382,989 (135,807,633)
Net unrealized appreciation (depreciation) of investments (66,783,364) (200,883) 56,224 24,404,768
Net increase (decrease) in net assets resulting from
operations (15,752,194) 88,594 695,457 132,124,682
Undistributed net investment income included in price of share
transactions -- -- 4,365 --
- ------------------------------------------------------------------------------------------------------------------ -----------------
Distributions to shareholders from:
Net investment income-Class A (95,776,373) (127,527) (205,963) (234,687,601)
Net investment income-Class B (245,346) -- -- (53,288)
Net investment income-Class C (8,773,418) (186,951) (31,058) (7,753,839)
Net realized gain from investment transactions-Class A -- -- (142,310) --
Net realized gain from investment transactions-Class C -- -- (24,938) --
Total distributions (104,795,137) (314,478) (404,269) (242,494,728)
------------------------------------------------------------------------------------------------------------- -----------------
Share transactions:
Net proceeds from sales of shares 43,421,661 2,511,436 3,170,572 205,714,518
Net asset value of shares issued to shareholders
in reinvestment of net investment income and realized
gain from investment transactions 49,050,467 203,865 346,322 115,794,926
Net asset value of shares issued in exchange for assets
acquired in tax-free acquisition -- -- -- 285,355,479
Total 92,472,128 2,715,301 3,516,894 606,864,923
------------------------------------------------------------------------------------------------------------- -----------------
Cost of shares reacquired (457,909,933) (4,001,527) (502,464) (862,069,019)
------------------------------------------------------------------------------------------------------------- -----------------
Increase (decrease) in net assets derived from share
transactions (365,437,805) (1,286,226) 3,014,430 (255,204,096)
------------------------------------------------------------------------------------------------------------- -----------------
Increase (decrease) in net assets (485,985,136) (1,512,110) 3,309,983 (365,574,142)
- ------------------------------------------------------------------------------------------------------------------ -----------------
Net Assets
Beginning of period 2,907,291,166 12,696,352 11,406,321 3,272,865,308
End of period+ $ 2,421,306,030 $ 11,184,242 $ 14,716,304 $2,907,291,166
===============================================================================================================================
</TABLE>
+ Including undistributed (overdistributed) net investment income of
$25,904,961, $(31,649) and $8,239, respectively, as of May 31, 1997
and $21,494,600 as of November 30, 1996. See Notes to Financial
Statements.
<TABLE>
<CAPTION>
One Month Ended November 30, 1996 Year Ended October 31, 1996
----------------------------------- --------------------------------
Limited Duration Limited Duration
U.S. Government Balanced U. S. Government Balanced
Increase (Decrease) in Net Assets Securities Series Series Securities Series Series
================================================================================================ ================================
<S> <C> <C> <C> <C>
Operations
Net investment income $ 46,080 $ 27,534 $ 345,962 $ 331,658
Net realized gain (loss) from investment transactions 61,342 26,147 (24,632) 179,639
Net unrealized appreciation of investments 26,842 468,521 93,038 446,760
Net increase in net assets resulting from operations 134,264 522,202 414,368 958,057
------------------------------------------------------------------------------------------- --------------------------------
Undistributed net investment income included in price of share
transactions -- -- -- 974
- ------------------------------------------------------------------------------------------------ --------------------------------
Distributions to shareholders from:
Net investment income-Class A (23,217) (33,810) (304,434) (305,290)
Net investment income-Class C (32,286) (5,272) (101,264) (20,498)
Net realized gain from investment transactions-Class A -- -- -- (99,333)
Net realized gain from investment transactions-Class C -- -- -- (6,322)
Total distributions (55,503) (39,082) (405,698) (431,443)
------------------------------------------------------------------------------------------- --------------------------------
Share transactions:
Net proceeds from sales of shares 201,352 274,243 4,145,228 3,426,542
Net asset value of shares issued to shareholders in
reinvestment of net investment income and realized
gain from investment transactions 38,005 30,893 282,194 357,344
Net asset value of shares issued in exchange for assets
acquired in tax-free acquisition -- -- 7,981,785 2,971,062
Total 239,357 305,136 12,409,207 6,754,948
------------------------------------------------------------------------------------------- --------------------------------
Cost of shares reacquired (356,754) (369,841) (8,604,516) (2,007,309)
------------------------------------------------------------------------------------------- --------------------------------
Increase (decrease) in net assets derived from share
transactions (117,397) (64,705) 3,804,691 4,747,639
------------------------------------------------------------------------------------------- --------------------------------
Increase (decrease) in net assets (38,636) 418,415 3,813,361 5,275,227
- ------------------------------------------------------------------------------------------------ --------------------------------
Net Assets
Beginning of period 12,734,988 10,987,906 8,921,627 5,712,679
------------------------------------------------------------------------------------------- --------------------------------
End of period+ $ 12,696,352 $ 11,406,321 $ 12,734,988 $ 10,987,906
=========================================================================================== ================================
</TABLE>
+ Including (overdistributed) net investment income of $(34,906) and
$(15,202), respectively, as of November 30, 1996 and $(25,483) and
$(3,654), respectively, as of October 31, 1996. See Notes to Financial
Statements.
10
<PAGE>
Financial Highlights
U.S. GOVERNMENT SECURITIES SERIES
<TABLE>
<CAPTION>
Class A Shares
---------------------------------------------------------------------------------------
Six Months
Ended
May 31, Year Ended November 30,
Per Share Operating Performance: 1997 1996 1995 1994 1993 1992
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 2.63 $ 2.73 $ 2.59 $ 3.00 $ 2.94 $ 2.94
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .107(e) .215 .235 .247 .239 .267
Net realized and unrealized gain
(loss) on investments (.115) (.105) .136 (.3685) .070 (.003)
Total from investment operations (.008) .11 .371 (.1215) .309 .264
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.102) (.210) (.231) (.246) (.249) (.264)
Distribution from net realized gain -- -- -- (.0425) -- --
Net asset value, end of period $ 2.52 $ 2.63 $ 2.73 $ 2.59 $ 3.00 $ 2.94
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (0.27)%(c) 4.41% 14.89% (4.24)% 10.70% 9.24%
===================================================================================================================================
Ratios to Average Net Assets:
Expenses 0.46%(c) 0.88% 0.90% 0.90% 0.89% 0.87%
Net investment income 4.18%(c) 8.12% 8.85% 8.92% 7.94% 9.18%
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
-------------------------------- ------------------------------------
Six Months Six Months
Ended Ended
May 31, 8/1/96(b) May 31, 7/15/96(b)
Per Share Operating Performance: 1997 to 11/30/96 1997 to 11/30/96
===================================================================================================================================
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 2.63 $ 2.57 $ 2.63 $ 2.55
- --------------------------------------------------------------------------------------- -----------------------------------
Income from investment operations
Net investment income .094(e) .063 .097(e) .066
Net realized and unrealized gain
(loss) on investments (.1116) .060 (.1146) .085
---------------------------------------------------------------------------------- -----------------------------------
Total from investment operations (.0176) .123 (.0176) .151
Distributions
Dividends from net investment income (.0924) (.063) (.0924) (.071)
Distribution from net realized gain -- -- -- --
---------------------------------------------------------------------------------- -----------------------------------
Net asset value, end of period $ 2.52 $ 2.63 $ 2.52 $ 2.63
- --------------------------------------------------------------------------------------- -----------------------------------
Total Return(a) (0.64)%(c) 5.45%(c) (0.64)%(c) 6.49%(c)
======================================================================================= ===================================
Ratios to Average Net Assets:
Expenses 0.82%(c) 0.48%(c) 0.82%(c) 0.60%(c)
Net investment income 3.72%(c) 2.21%(c) 3.83%(c) 2.60%(c)
================================================================================== ===================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended November 30,
May 31, -------------------------------------------------------------------
Supplemental Data for All Classes: 1997 1996 1995 1994 1993 1992
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net assets, end of period (000) $2,421,306 $2,907,291 $3,272,865 $3,232,012 $3,909,868 $3,275,052
Portfolio turnover rate 525.92% 820.59% 544.31% 790.57% 586.18% 458.70%
==============================================================================================================================
</TABLE>
LIMITED DURATION SERIES
<TABLE>
<CAPTION>
Class A Shares
-------------------------------------------------------------------------------
Six Months One
Ended Month
May 31, Ended Year Ended Year Ended 11/4/93(d)
Per Share Operating Performance: 1997 11/30/96 10/31/96 10/31/95 to 10/31/94
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 4.42 $ 4.39 $ 4.53 $ 4.44 $ 4.85
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .129(e) .0174 .1912 .2316 .2650
Net realized and unrealized gain (loss)
on investments (.083) .0333 (.0751) .1017 (.4123)
Total from investment operations .046 .0507 .1161 .3333 (.1473)
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.126) (.0207) (.2561) (.2433) (.2627)
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 4.34 $ 4.42 $ 4.39 $ 4.53 $ 4.44
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 1.07%(c) 1.15%(c) 2.67% 8.16% (3.09)%(c)
===================================================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver and reimbursement 0.29%(c) 0.11%(c) 1.81% 1.40% 0.89%(c)
Expenses, excluding waiver and reimbursement 0.70%(c) 0.13%(c) 2.73% 1.71% 0.89%(c)
Net investment income 2.97%(c) 0.41%(c) 4.58% 5.62% 5.61%(c)
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
------------------------------------------
Six Months
Ended One Month
May 31, Ended 7/15/96(b)
Per Share Operating Performance: 1997 11/30/96 to 10/31/96
=======================================================================================================
<S> <C> <C> <C>
Net asset value, beginning of period $4.42 $4.39 $4.34
- -------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .106(e) .0138 .0667
Net realized and unrealized gain (loss)
on investments (.0799) .0342 .0515
Total from investment operations .0261 .0480 .1182
--------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.1061) (.0180) (.0682)
--------------------------------------------------------------------------------------------------
Net asset value, end of period $4.34 $4.42 $4.39
- -------------------------------------------------------------------------------------------------------
Total Return(a) 0.61%(c) 1.09%(c) 2.98%(c)
=======================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver and reimbursement 0.76%(c) 0.19%(c) 0.69%(c)
Expenses, excluding waiver and reimbursement 1.16%(c) 0.21%(c) 0.77%(c)
Net investment income 2.43%(c) 0.33%(c) 1.26%(c)
==================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended One
May 31, Month Ended Year Ended Year Ended 11/4/93(d)
Supplemental Data for AllClasses: 1997 11/30/96 10/31/96 10/31/95 to 10/31/94
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net assets, end of period (000) $11,184 $12,696 $12,735 $8,922 $10,256
Portfolio turnover rate 209.81% 175.98% 340.62% 222.00% 895.63%
================================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Commencement of offering Class shares. (c) Not annualized.
(d) Commencement of operations. (e) Calculated using average shares
outstanding during the period.
See Notes to Financial Statements.
11
<PAGE>
Financial Highlights
BALANCED SERIES
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------------------
Six Months
Ended One Month
May 31, Ended Year Ended 12/27/94(d)
Per Share Operating Performance: 1997 11/30/96 10/31/96 to 10/31/95
===================================================================================================================================
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.81 $ 11.30 $ 10.71 $ 9.52
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .242(e) .0312 .472 .365
Net realized and unrealized gain on investments .356 .5208 .732 1.185
Total from investment operations .598 .552 1.204 1.55
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.228) (.0420) (.462) (.36)
Distributions from net realized gain (.170) -- (.152) --
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.01 $ 11.81 $ 11.30 $ 10.71
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 5.27%(c) 4.89%(c) 11.55% 16.32%(c)
===================================================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver and reimbursement 0.53%(c) 0.07%(c) 0.93% 0.37%(c)
Expenses, excluding waiver and reimbursement 0.78%(c) 0.11%(c) 1.59% 1.26%(c)
Net investment income 2.08%(c) 0.26%(c) 4.18% 4.39%(c)
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
-------------------------------------------
Six Months
Ended One Month
May 31, Ended 7/15/96(b)
Per Share Operating Performance: 1997 11/30/96 to 10/31/96
========================================================================================================
<S> <C> <C> <C>
Net asset value, beginning of period $11.79 $11.29 $10.73
- --------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .185(e) .0067 .0349
Net realized and unrealized gain on investments .353 .5298 .6346
Total from investment operations .538 .5365 .6695
---------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.168) .0365) (.0730)
Distributions from net realized gain (.170) -- (.0365)
---------------------------------------------------------------------------------------------------
Net asset value, end of period $11.99 $11.79 $11.29
- --------------------------------------------------------------------------------------------------------
Total Return(a) 4.74%(c) 4.76%(c) 7.78%(c)
========================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver and reimbursement 1.02%(c) 0.16%(c) 0.62%(c)
Expenses, excluding waiver and reimbursement 1.26%(c) 0.20%(c) 0.77%(c)
Net investment income 1.59%(c) 0.17%(c) 0.70%(c)
===================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended One
May 31, Month Ended Year Ended 12/27/94(d)
Supplemental Data for All Classes: 1997 11/30/96 10/31/96 to 10/31/95
===================================================================================================================================
<S> <C> <C> <C> <C>
Net assets, end of period (000) $14,716 $11,406 $10,988 5,713
Portfolio turnover rate 100.84% 10.05% 187.78% 131.80%
Average commissions per share paid on equity transactions $ .057 $ .067 $ .057 $ .056
==============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Commencement of offering Class shares. (c) Not annualized.
(d) Commencement of operations. (e) Calculated using average shares
outstanding during the period.
See Notes to Financial Statements.
Notes to Financial Statements
1. Significant Accounting Policies
Lord Abbett Investment Trust (the "Trust") is an open-end management investment
company, organized as a Delaware business trust on August 16, 1993. The Trust
consists of three separate portfolios ("Series")-- Lord Abbett U.S. Government
Securities Series ("U.S. Government"), Lord Abbett Limited Duration U.S.
Government Securities Series ("Limited Duration") and Lord Abbett Balanced
Series ("Balanced"). Each Series is diversified as defined under the Investment
Company Act of 1940. The financial statements have been prepared in conformity
with generally accepted accounting principles which permit management to make
certain estimates and assumptions at the date of the financial statements. The
following summarizes the significant accounting policies of the Trust:
(a) Market value is determined as follows: Securities listed or admitted to
trading privileges on any securities exchange are valued at the last sales price
on the exchange on which such securities are traded, as of the close of business
on the day the securities are being valued or, lacking any sales, at the latest
price on the basis of current quotations from dealers (as in the case of bonds),
from valuations furnished by an independent pricing service or, in their
absence, fair value as determined under procedures approved by the Board of
Trustees.
(b) It is the policy of the Trust to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income in taxable distributions. Therefore, no federal income tax
provision is required.
(c) Security transactions are accounted for on the date that the securities are
purchased or sold (trade date). Realized gains and losses from investment
transactions are determined on the identified cost basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend date and interest
income is recorded on the accrual basis. Net investment income (other than
distribution and service fees) and realized and unrealized gains or losses are
allocated to each class of shares based upon the relative proportion of net
assets at the beginning of the day. Discounts on strips are accrued to maturity
using the constant yield method. The Trust has elected not to amortize premiums
on U.S. Government bonds, which is consistent with the treatment for federal
income tax purposes.
(d) With respect to Balanced Series, a portion of the proceeds from sales and
costs of repurchases of shares, equivalent to the amount of distributable net
investment income on the date of the transaction, is credited or charged to
undistributed income. Undistributed net investment income per share thus is
unaffected by sales or repurchases of shares.
(e) The organization expenses of Limited Duration Series and Balanced Series are
amortized evenly over a period of five years.
12
<PAGE>
Notes to Financial Statements
2. Management Fee and Other Transactions with Affiliates
The Trust has a management agreement with Lord, Abbett & Co. ("Lord Abbett")
pursuant to which Lord Abbett supplies the Trust with investment management,
research, statistical and advisory services and pays officers' remuneration and
certain other expenses of the Trust. The management fee is based on average
daily net assets for each month at the annual rate of 0.50% for U.S. Government
Series and Limited Duration Series and 0.75% for Balanced Series. The management
fee for U.S. Government Series is reduced to 0.45% for average daily net assets
in excess of $3 billion. Lord Abbett waived a portion of its management fee
during the period for Limited Duration Series and Balanced Series.
Lord Abbett may waive its management fees and reimburse the Trust for certain of
its other expenses. Any such other expenses reimbursed are subject to repayment
by the Series, pursuant to a formula based on the asset size and expense ratio
of each Series. The Series shall not be obligated to repay Lord Abbett after
five full fiscal years after the commencement of operations or the termination
of the management agreement, whichever is earlier. As of May 31, 1997, other
expenses reimbursed by Lord Abbett and not repaid by Limited Duration Series and
Balanced Series amounted to $47,816 and $4,576, respectively.
Each Series of the Trust has Rule 12b-1 plans and agreements with respect to one
or more classes of shares as described below (the "Class A, Class B and Class C
Plans") with Lord Abbett Distributor LLC("Distributor"), an affiliate of Lord
Abbett. Each Series makes payments to Distributor which uses or passes on such
payments to authorized institutions. Pursuant to the Class A Plan, the Series
pay Distributor (1) an annual service fee of (a) 0.15% of the average daily net
asset value of shares sold prior to September 1, 1985 and 0.25% of the average
daily net asset value of shares sold on or after that date for U.S. Government
Series and (b) 0.25% of the average daily net asset value of Class A shares of
Limited Duration Series, Balanced Series, (2) a one-time distribution fee of up
to 1% on certain qualifying purchases and (3) a supplemental annual distribution
fee of 0.10% of the average daily net asset value of Class A shares serviced by
certain qualifying institutions. The Class A Plan of Limited Duration Series and
Balanced Series will not become operative until the first day of the calendar
quarter subsequent to the Series' net assets reaching $100 million and $50
million, respectively. Pursuant to the Class B Plan of U.S. Government Series,
the Series pays Distributor an annual service and distribution fee of 0.25% and
0.75%, respectively, of the average daily net asset value of the Class B shares.
Pursuant to the Class C Plan of each Series, the Series pay Distributor (1)a
service fee and a distribution fee, at the time such shares are sold, not to
exceed 0.25% and 0.75%, respectively, of the net asset value of such shares sold
and (2) at each quarter-end after the first anniversary of the sale of such
shares, a service fee and a distribution fee at an annual rate not to exceed
0.25% and 0.75%, respectively, of the average annual net asset value of such
shares outstanding.
Distributor received the following commissions on sales of shares of the Trust
after concessions were paid to authorized dealers:
Distributor Dealers'
Series Commissions Concessions
- --------------------------------------------------------------------------------
U.S. Government Series-Class A $113,216 $686,888
- --------------------------------------------------------------------------------
Limited Duration Series-Class A 4,825 32,218
- --------------------------------------------------------------------------------
Balanced Series-Class A 9,012 60,036
- --------------------------------------------------------------------------------
3. Distributions
Dividends from net investment income are declared daily and paid monthly with
respect to U.S. Government Series and Limited Duration Series and declared
quarterly and paid monthly with respect to Balanced Series. Taxable net realized
gains from investment transactions in excess of any capital loss carryforward
are distributed to shareholders annually. At May 31, 1997, accumulated net
realized gain (loss) for financial reporting purposes aggregated $(630,211,788),
$(1,851,738) and $373,518 for U.S. Government Series, Limited Duration Series
and Balanced Series, respectively. The capital loss carryforwards for U.S.
Government Series and Limited Duration Series (which are substantially the same
as the accumulated net realized loss) expire in 2001, 2002, 2003 and 2004.
Income and capital gains distributions are determined in accordance with income
tax regulations which may differ from methods used to determine the
corresponding income and capital gains amounts in accordance with generally
accepted accounting principles.
4. Capital
Transactions in shares of beneficial interest (both shares and dollar amounts)
were as follows:
<TABLE>
<CAPTION>
Six Months Ended May 31, 1997
-------------------------------------------------------------------------------------------
U.S. Government Series Limited Duration Series Balanced Series
Class A Shares Amount Shares Amount Shares Amount
- ---------------------------------------------------------------------- --------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales of shares 12,668,315 $ 32,281,814 496,090 $ 2,160,674 215,284 $ 2,494,513
Shares issued to shareholders in
reinvestment of net investment
income and realized gain
from investment transactions 17,577,533 44,883,514 19,582 85,404 26,460 302,940
Total 30,245,848 77,165,328 515,672 2,246,078 241,744 2,797,453
- ---------------------------------------------------------------------- --------------------------- -------------------------
Shares reacquired (154,029,820) (391,967,851) (602,580) (2,619,770) (31,734) (365,310)
Increase (decrease) in shares (123,783,972) $(314,802,523) (86,908) $ (373,692) 210,010 $ 2,432,143
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended November 30, 1996 One Month Ended November 30, 1996
- ---------------------------------------------------------------------- --------------------------------------------------------
U.S. Government Series Limited Duration Series Balanced Series
Class A Shares Amount Shares Amount Shares Amount
- ---------------------------------------------------------------------- --------------------------- -------------------------
Sales of shares 72,259,734 $ 192,372,587 34,768 $152,780 19,415 $225,934
Shares issued to shareholders in
reinvestment of net investment income 43,159,256 112,858,274 3,669 16,106 2,328 26,976
Total 115,418,990 305,230,861 38,437 168,886 21,743 252,910
- ---------------------------------------------------------------------- --------------------------- -------------------------
Shares reacquired (316,044,390) (824,750,733) (45,364) (199,668) (4,373) (50,932)
Increase (decrease) in shares (200,625,400) $(519,519,872) (6,927) $ (30,782) 17,370 $201,978
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Notes to Financial Statements
<TABLE>
<CAPTION>
Year Ended October 31, 1996
---------------------------------------------------------------
Limited Duration Series Balanced Series
Class A Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C>
Sales of shares 788,323 $ 3,464,010 299,112 $ 3,295,785
Shares issued to shareholders in reinvestment of
net investment income andrealized gain from
investment transactions 50,016 219,212 30,403 334,794
Total 838,339 3,683,222 329,515 3,630,579
- ------------------------------------------------------------------------------------------------- ----------------------------
Shares reacquired (1,697,060) (7,646,454) (59,788) (662,931)
Increase (decrease) in shares (858,721) $(3,963,232) 269,727 $ 2,967,648
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
August 1, 1996
(Commencement of
Six Months Offering Class B Shares)
Ended May 31, 1997 to November 30, 1996
U. S. Government Series U.S. Government Series
----------------------------- ----------------------------
Class B Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C>
Sales of shares 1,933,870 $ 4,907,862 1,832,979 $ 4,727,423
Shares issued to shareholders in reinvestment of
net investment income 35,153 89,512 7,800 20,109
Total 1,969,023 4,997,374 1,840,779 4,747,532
Shares reacquired (248,930) (627,920) (20,500) (52,563)
Increase in shares 1,720,093 $ 4,369,454 1,820,279 $ 4,694,969
<CAPTION>
Six Months Ended May 31, 1997
--------------------------------------------------------------------------------------------
U.S. Government Series Limited Duration Series Balanced Series
Class C Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------- ------------------------- -------------------------
Sales of shares 2,446,931 $ 6,231,985 80,408 $ 350,762 57,637 $ 676,059
Shares issued to shareholders in
reinvestmment of net investment
income and realized gain
from investment transactions 1,596,994 4,077,441 27,177 118,461 3,796 43,382
Total 4,043,925 10,309,426 107,585 469,223 61,433 719,441
- -------------------------------------------------------------------- ------------------------- -------------------------
Shares reacquired (25,762,387) (65,314,162) (317,992) (1,381,757) (11,959) (137,154)
Increase (decrease) in shares (21,718,462) $(55,004,736) (210,407) $ (912,534) 49,474 $ 582,287
- -----------------------------------------------------------------------------------------------------------------------------------
July 15, 1996 (Commencement of Offering
Class C Shares) to November 30, 1996 One Month Ended November 30, 1996
---------------------------------------- ---------------------------------------------------
U.S. Government Series Limited Duration Series Balanced Series
Class C Shares Amount Shares Amount Shares Amount
- --------------------------------------------------------------------------- ---------------------------------------------------
Sales of shares 3,478,886 $ 8,614,508 11,036 $ 48,572 4,185 $ 48,309
Shares issued to shareholders in
reinvestment of net investment
income 1,135,351 2,916,543 4,989 21,899 338 3,917
Shares issued to shareholders in exchange
for assets acquired
in tax-free acquisition 112,123,960 285,355,479 -- -- -- --
Total 116,738,197 296,886,530 16,025 70,471 4,523 52,226
- --------------------------------------------------------------------------- ---------------------------------------------------
Shares reacquired (14,423,073) (37,265,723) (35,688) (157,086) (28,031) (318,909)
Increase (decrease) in shares 102,315,124 $ 259,620,807 (19,663) $ (86,615) (23,508) $ (266,683)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
July 15, 1996 (Commencement of Offering
Class C Shares) to October 31, 1996
------------------------------------------------------
Limited Duration Series Balanced Series
Class C Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------- -----------------------
<S> <C> <C> <C> <C>
Sales of shares 156,244 $ 681,218 12,190 $ 130,757
Shares issued to shareholders in reinvestment of net investment
income and realized gain from investment transactions 14,461 62,982 2,086 22,550
Shares issued to shareholders in exchange for assets acquired
in tax-free acquisition 1,839,969 7,981,785 276,867 2,971,062
Total 2,010,674 8,725,985 291,143 3,124,369
- --------------------------------------------------------------------------------------------- -----------------------
Shares reacquired (219,707) (958,062) (121,921) (1,344,378)
Increase in shares 1,790,967 $ 7,767,923 169,222 $ 1,779,991
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
At May 31, 1997, paid in capital aggregated $3,044,636,141 for U.S. Government
Series, $13,130,228 for Limited Duration Series and $13,015,249 for Balanced
Series.
14
<PAGE>
5. Portfolio Securities
Purchases and sales of investment securities (other than short-term investments)
were as follows:
Series Purchases Sales
- --------------------------------------------------------------------------------
U.S. Government Series $16,899,304,349 $17,616,455,326
- --------------------------------------------------------------------------------
Limited Duration Series $ 19,308,016 $ 22,265,561
- --------------------------------------------------------------------------------
Balanced Series $ 13,015,500 $ 11,127,512
- --------------------------------------------------------------------------------
As of May 31, 1997, net unrealized appreciation, unrealized appreciation and
unrealized depreciation of investments based on cost for federal income tax
purposes were as follows:
Net Unrealized
Appreciation Unrealized Unrealized
Series (Depreciation) Appreciation Depreciation
- --------------------------------------------------------------------------------
U.S. Government Series $(19,023,284) $14,165,296 $(33,188,580)
- --------------------------------------------------------------------------------
Limited Duration Series $ (62,599) $ 3,879 $ (66,478)
- --------------------------------------------------------------------------------
Balanced Series $ 1,319,298 $ 1,509,588 $ (190,290)
- --------------------------------------------------------------------------------
The cost of investments for federal income tax purposes is substantially the
same as that used for financial reporting purposes.
The U.S. Government Series loans its portfolio investments to brokers. As of May
31, 1997, the market value of securities on loan to brokers was $609,227,107 for
which the Series has obtained collateral aggregating $627,966,455 consisting of
cash and U.S. Treasury securities.
6. Trustees' Remuneration
The Trustees of the Trust associated with Lord Abbett and all officers of the
Trust receive no compensation from the Trust for acting as such. Outside
Trustees' fees and retirement costs are allocated among all funds in the Lord
Abbett group based on the net assets of each fund. Trustees' fees payable at May
31, 1997 under a deferred compensation plan were $687,048.
7. Acquisition
On July 12, 1996, the U.S. Government Series, Limited Duration Series and
Balanced Series acquired the net assets of the respective Series of Lord Abbett
Securities Trust ("Securities Trust") pursuant to a plan of reorganization
approved by the Securities Trust's shareholders on June 19, 1996. The
acquisition was accomplished by a tax-free exchange of newly issued Class C
shares of each Series for shares of the respective Series of the Securities
Trust. The number of Class C shares of each Series issued, the number of shares
of each Series of the Securities Trust exchanged, and the aggregate net assets
of each Series of the Trust and Securities Trust (including net unrealized
appreciation and accumulated net realized losses for the Securities Trust)
immediately before the acquisition were as follows:
Securities
Class C Trust Shares Net Assets
Shares Issued Exchanged of Trust
- --------------------------------------------------------------------------------
U.S. Government Series 112,123,960 66,150,183 $2,752,491,293
- --------------------------------------------------------------------------------
Limited Duration Series 1,839,969 1,777,883 $ 4,482,517
- --------------------------------------------------------------------------------
Balanced Series 276,867 272,026 $ 7,831,343
- --------------------------------------------------------------------------------
Unrealized
Net Assets Appreciation Accumulated Net
of Securities Trust (Depreciation) Realized Loss
- --------------------------------------------------------------------------------
U.S. Government Series $285,355,479 $(1,704,531) $ (55,655,663)
- --------------------------------------------------------------------------------
Limited Duration Series $ 7,981,785 $ (99,776) $ (843,841)
- --------------------------------------------------------------------------------
Balanced Series $ 2,971,062 $ 63,398 $ (1,195)
- --------------------------------------------------------------------------------
8. U.S. Government Series
On July 12, 1996, Lord Abbett U.S. Government Securities Fund, Inc. became a
Series of the Trust. The Limited Duration Series and Balanced Series changed
their fiscal year end from October 31 to November 30 to conform to the fiscal
year end of the U.S. Government Series. Accordingly, the financial statements of
the Limited Duration Series and Balanced Series cover a one month period from
November 1, 1996 to November 30, 1996.
15
<PAGE>
Our Management Investment Manager and
Underwriter
Board of Trustees Lord, Abbett & Co. and
Robert S. Dow Lord Abbett Distributor LLC
E. Wayne Nordberg
E. Thayer Bigelow*+ The General Motors Building
Stewart S. Dixon* 767 Fifth Avenue
John C. Jansing* New York, NY 10153-0203
C. Alan MacDonald*+ 212-848-1800
Hansel B. Millican, Jr.*
Thomas J. Neff*+ Custodian
* Outside Trustee The Bank of New York
+ Audit Committee New York, NY
Officers Transfer Agent
Robert S. Dow, Chairman and President United Missouri Bank of
Zane E. Brown, Executive Vice Kansas City, N.A.
President and Portfolio Manager
Kenneth B. Cutler, Vice President Shareholder Servicing Agent
and Secretary DST Systems, Inc.
Stephen I. Allen, Vice President P.O. Box 419100
Daniel E. Carper, Vice President Kansas City, MO 64141
Daria L. Foster, Vice President 800-821-5129
Robert G. Morris, Vice President
Robert J. Noelke, Vice President Auditors
E. Wayne Nordberg, Vice President Deloitte & Touche LLP
John J. Walsh, Vice President New York, NY
Paul A. Hilstad, Vice President
and Assistant Secretary Counsel
Thomas F. Konop, Vice President Debevoise & Plimpton
and Assistant Secretary New York, NY
Keith F. O'Connor, Vice President
and Treasurer
A. Edward Oberhaus III, Vice President
Victor W. Pizzolato, Vice President
Donna McManus, Assistant Treasurer
Joseph Van Dyke, Assistant Treasurer
Lydia Guzman, Assistant Secretary
Robert M. Hickey, Assistant Secretary
Copyright (C) 1997 by Lord Abbett Investment Trust, 767 Fifth Avenue, New York,
NY 10153-0203
This publication, when not used for the general information of shareholders of
Lord Abbett Investment Trust, is to be distributed only if preceded or
accompanied by a current prospectus which includes information concerning each
Series' investment objective and policies, sales charges and other matters.
There is no guarantee that the forecasts contained within this publication will
come to pass.
All rights reserved. Printed in the U.S.A.
16
<PAGE>
Lord, Abbett & Co.
A Tradition of Performance Through
Disciplined
Investing
[PHOTO: Zane E. Brown, E. Wayne Nordberg, David Seto]
(from left to right)
Zane E. Brown, partner and
portfolio manager--
Lord Abbett Investment Trust
E. Wayne Nordberg, partner and
portfolio manager--
Lord Abbett Investment Trust
David Seto, portfolio manager
A successful long-term track record is evidence of a successful investment
strategy. For decades we, at Lord, Abbett & Co., have believed that investing
with a disciplined, value approach is the best way to achieve competitive
returns and reduce portfolio risk. This commitment and the dedication of our
team of 51 investment professionals have helped us earn the trust of financial
professionals and investors for over 65 years.
About Your
Trust's
Board of
Trustees
The Securities and Exchange Commission (SEC) views the role of the independent
Board of Trustees as one of the most important components in overseeing a mutual
fund. The Board of Trustees watches over your Trust's general operations and
represents your interests. Board members review and approve every contract
between your Trust and Lord, Abbett & Co. (the Trust's investment manager) and
Lord Abbett Distributor LLC (the Trust's underwriter). They meet regularly to
review a wide variety of information and issues regarding your Trust. Every
member of the Board possesses extensive business experience. Lord Abbett
Investment Trust's shareholders are indeed fortunate to have a group of
independent trustees with diverse backgrounds to provide a variety of viewpoints
in the oversight of their Trust. Below, we feature one of our independent
trustees, Hansel B. Millican, Jr.
Hansel B. Millican, Jr.
Trustee--Lord Abbett
Investment Trust
[PHOTO: Hansel B. Millican, Jr.]
An alumnus of North Carolina State University (Raleigh), Mr. Millican has over
45 years of corporate management experience. He is currently the President and
CEO of Rochester Button Company.
Mr. Millican serves as Chairman of the Board of the Central Florida Autism
Institute, Inc. He has been an independent trustee/director for all of Lord
Abbett's funds since 1982.
<PAGE>
Investing in the
Lord Abbett
Family of Funds
<TABLE>
<CAPTION>
====================================================================================================================================
GROWTH
====================================================================================================================================
INCOME
====================================================================================================================================
Growth Funds Growth & Income Funds Balanced Fund Income Funds Tax-Free Money
Income Funds Market Fund
<S> <C> <C> <C> <C> <C> <C>
Developing Global Fund- Affiliated Fund Balanced Series Bond-Debenture o National U.S. Government
Growth Fund Equity Series Fund o California Securities
Growth & o Connecticut Money Market
International Mid-Cap Income Series Global Fund- o Florida Fund*+
Series Value Fund Income Series o Georgia
Research Fund- o Hawaii
Research Fund- Large-Cap Series Limited Duration o Michigan
Small-Cap Series U.S. Government o Minnesota
Securities Series* o Missouri
o New Jersey
U.S. Government o New York
Securities Series* o Pennsylvania
o Texas
o Washington
</TABLE>
Finding the right mutual fund can be confusing. At Lord, Abbett & Co., we
believe your financial adviser provides value in helping you identify and
understand your investment objectives and, ultimately, offering fund
recommendations suitable for your individual needs.
This publication, when used as sales literature, is to be distributed only if
preceded or accompanied by a current prospectus for Lord Abbett Investment
Trust.
For more complete information about any other Lord Abbett fund, including
charges and expenses, call your financial adviser or Lord Abbett Distributor LLC
at 800-874-3733 for a prospectus. Read it carefully before investing.
When you invest in a family of funds, you benefit from:
Diversification. You and your financial adviser can diversify your investments
between equity and income funds.
Flexibility. As your investment goals change, your financial adviser can help
you reallocate your portfolio.
As an investor in the Lord Abbett Family of Funds, you have access to 28
portfolios designed to meet a variety of investment needs. While you may
reallocate your assets among our funds at any time, we recommend speaking with
your financial adviser to help you customize your investment plan.
Numbers to Keep Handy
For Shareholder Account or
Statement Inquiries:
800-821-5129
For Literature:
800-874-3733
For More Information:
800-426-1130
Visit our Web Site:
http://www.lordabbett.com
* An investment in this Fund is neither insured nor guaranteed by the U.S.
Government.
+ There can be no assurance that this Fund will be able to maintain a stable
net asset value of $1.00 per share. This Fund is managed to maintain, and
has maintained, its stable $1.00 per share price.
[LOGO](R) LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
LORD ABBETT DISTRIBUTOR LLC
- ----------------------------------------------------------------- LAIT-3-597
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203 (7/97)
