LORD ABBETT INVESTMENT TRUST
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
800-426-1130
Lord Abbett Investment Trust (the "Fund") is a mutual fund currently consisting
of three series -- Lord Abbett Limited Duration U.S. Government Securities
Series ("Limited Duration Government Series"), Lord Abbett Balanced Series
("Balanced Series") and Lord Abbett U.S. Government Securities Series ("U.S.
Government Securities Series"). Each Series is sometimes referred to as "we" or
the "Series" individually or collectively. Further series and classes may be
added in the future. The U.S. Government Securities Series offers three classes
of shares: Class A, B and C. The Limited Duration Government Series and the
Balanced Series offer two classes of shares: Class A and C. The existence of a
multi-class structure in the Series provides investors with different investment
options in purchasing shares of the Series. See "Investment in a Multi-Class
Series" under "Purchases" for a description of these choices. LIMITED DURATION
GOVERNMENT SERIES. The investment objective of the Series is to seek a high
level of income from a portfolio consisting primarily of limited duration U.S.
Government securities. BALANCED SERIES. The investment objective of the Series
is to seek current income and capital growth.
U.S. GOVERNMENT SECURITIES SERIES. The investment objective of the Series is
high current income consistent with reasonable risk. See "How We Invest" for
more information. There can be no assurance that any Series will achieve its
objective. This Prospectus sets forth concisely the information about the Fund
and each Series that a prospective investor should know before investing.
Additional information about the Fund and each Series has been filed with the
Securities and Exchange Commission and is available upon request without charge.
The Statement of Additional Information is incorporated by reference into this
Prospectus and may be obtained without charge by writing directly to the Fund or
by calling the Fund at 800-874-3733 -- ask for "Part B of the Prospectus -- the
Statement of Additional Information". The date of this Prospectus, and the date
of the Statement of Additional Information, is March 1, 1997.
PROSPECTUS
Investors should read and retain this Prospectus. Shareholder inquiries should
be made in writing to the Fund or by calling 800-821-5129. You can also make
inquiries through your broker-dealer.
Shares of each Series are not deposits or obligations of, or guaranteed
or endorsed by, any bank, and the shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency. An investment in each Series involves risks, including the possible loss
of principal.
1 Investment Objectives 2
2 Fee Table 2
3 Financial Highlights 3
4 How We Invest 6
5 Purchases 11
6 Shareholder Services 19
7 Our Management 20
8 Dividends, Capital Gains
Distributions and Taxes 21
9 Redemptions 22
10 Performance 23
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
1 INVESTMENT OBJECTIVE
The investment objective of the Limited Duration Government Series is to seek a
high level of income from a portfolio consisting primarily of limited duration
U.S. Government securities. The investment objective of the Balanced Series is
to seek current income and capital growth. See "How We Invest". The investment
objective of the U.S. Government Securities Series is to seek high current
income consistent with reasonable risk. For this purpose, "reasonable risk"
means that the Series, over time, will have a volatility approximating that of
the Lehman Government Bond Index.
2 FEE TABLE
A summary of each Series' expenses is set forth in the table below. This example
should not be considered a representation of past or future expenses. Actual
expenses may be greater or less than those shown.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
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Limited U.S. Government U.S. Government Limited U.S. Government
Duration Balanced Securities Securities Duration Balanced Securities
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
(AS A PERCENTAGE OF OFFERING PRICE)
Maximum Sales Load(2) on Purchases
(See "Purchases") 3.00% 4.75% 4.75% None None None None
Deferred Sales Load(2) (See
"Purchases") None None None 5% if shares are 1% if shares
redeemed before are redeemed before
1st anniversary 1st anniversary
of purchase of purchase.
declining to 1%
before 6th
anniversary and
eliminated on and
after 6th anniversary(3)
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Annual Fund Operating Expenses(4)
(as a percentage of average net assets)
(after management fee waiver)
Management Fees (See "Our Management")(5) 0.25% 0.25% 0.50% 0.50% 0.25% 0.25% 0.50%
12b-1 Fees (See "Purchases")(1)(2) 0.00% 0.00% 0.27% 1.00% 1.00% 1.00% 1.00%
Other Expenses (See "Our Management") 1.08% 0.66% 0.13% 0.13% 1.08% 0.66% 0.13%
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Total Operating Expenses(5) 1.33% 0.91% 0.90% 1.63% 2.33% 1.91% 1.63%
<FN>
Example: Assume each Series' annual return is 5% and there is no change in the
level of expenses described above. For a $1,000 investment with reinvestment of
all dividends and distributions, you would pay the following total expenses
assuming redemption on the last day of each period indicated.
1 year 3 years 5 years 10 years
U.S. Government Securities Series
Class A $56 $75 $95 $153
Class B $66 $80 $107 $174
Class C $27 $51 $89 $193
Limited Duration Government Series
Class A $43 $71 $101 $185
Class C $34 $73 $125 $267
Balanced Series
Class A $56 $75 $96 $154
Class C $29 $60 $103 $223
You would pay the following expenses on the same investment, assuming no
redemption:
1 year 3 years 5 years 10 years U.S. Government Securities Series Class A $56
$75 $95 $153 Class B $17 $51 $89 $174 Class C $17 $51 $89 $193 Limited
Duration Government Series Class A $43 $71 $101 $185 Class C $24 $73 $125
$267 Balanced Series Class A $56 $75 $96 $154 Class C $19 $60 $103 $223
(1)Although no Series, with respect to the Class B and Class C shares,
charges a front-end sales charge, investors should be aware that long-term
shareholders may pay, under the Rule 12b-1 plans applicable to the Class B
and Class C shares (both of which pay annual 0.25% service and 0.75%
distribution fees), more than the economic equivalent of the maximum
front-end sales charge as permitted by certain rules of the National
Association of Securities Dealers, Inc. Likewise, with respect to Class A
shares, investors should be aware that, over the long term, such maximum
may be exceeded due to the Rule 12b-1 plan applicable to Class A shares
which permits a Series to pay up to 0.50% in total annual fees, half for
service and the other half for distribution. The 12b-1 fees for the Class A
shares of the U.S. Government Securities Series have been restated to
reflect estimated current fees under the recently amended Class A 12b-1
plans. The actual 12b-1 fees for such shares for the fiscal year ended
November 30, 1996 under the former plan were 0.25%. The Class A share 12b-1
Plan for the Limited Duration and Balanced Series will go into effect on
the first day of the calendar quarter subsequent to the Series' net assets
reaching $100 million (in the case of the Limited Duration Series) and $50
million (in the case of the Balanced Series).
(2)Sales "load" is referred to as sales "charge" and "deferred sales load" is
referred to as "contingent deferred sales charge" (or "CDSC") and "12b-1
fees" which consist of a "service fee" and a "distribution fee" are
referred to by either or both of these terms where appropriate with respect
to Class A, Class B and Class C shares throughout this Prospectus.
(3)Class B shares will automatically convert to Class A shares on the eighth
anniversary of the purchase of Class B shares.
<PAGE>
(4)The annual operating expenses shown in the summary have been restated from
November 30, 1996 fiscal year amounts to reflect current and estimated
fees.
(5)Although not obligated to, Lord, Abbett & Co. ("Lord Abbett") may waive a
portion of its management fee and assume other expenses with respect to
each Series. Subsequently, Lord Abbett may charge management fees and not
subsidize other expenses on a partial or complete basis. The management fee
would be 0.50% for the Limited Duration and 0.75% for the Balanced Series
absence such waiver and total operating expenses would be 1.58% and 1.41%
for the Class A shares and 2.58% and 2.41% for the Class C shares of the
Limited Duration and Balanced Series, respectively.
The foregoing is provided to give investors a better understanding of the
expenses that are incurred by an investment in each Series.
</FN>
</TABLE>
3 FINANCIAL HIGHLIGHTS
The following tables have been audited by Deloitte & Touche LLP, independent
public accountants, in connection with their annual audits of the Fund's
financial statements, whose report thereon is incorporated by reference into the
Statement of Additional Information and may be obtained upon request, and has
been included herein in reliance upon their authority as experts in auditing and
accounting.
<TABLE>
<CAPTION>
Balanced Series Limited Duration Government Series
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Dec. 27, 1994 Nov. 4, 1993
One Year (Commencement One Year Ended (Commencement
Per Class A Share+ Operating Month Ended Ended of Operations) to Month Ended October 31, of Operations) to
Performance: Nov. 30, 1996 Oct. 31, 1996 Oct. 31, 1995 Nov. 30, 1996 1996 1995 Oct. 31, 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $11.30 $10.71 $9.52 $4.39 $4.53 $4.44 $4.85
Income from investment
operations
Net investment income .0312 .472 .365 .0174 .1912 .2316 .2650
Net realized and unrealized
gain (loss) on securities .5208 .732 1.185 .0333 (.0751) .1017 (.4123)
Total from investment operations .552 1.204 1.55 .0507 .1161 .3333 (.1473)
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Less Distributions
Dividends from net investment income (.0420) (.462) (.36) (.0207) (.2561) (.2433) (.2627)
Distributions from net realized gain -- (.152) -- -- -- -- --
Net asset value, end of period $11.81 $11.30 $10.71 $4.42 $4.39 $4.53 $4.44
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Total Return* 4.89%++ 11.55% 16.32%++ 1.15%++ 2.67% 8.16% (3.09)%++
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Ratios/Supplemental Data:
Ratios to Average Net Assets:
Expenses, including waiver 0.07%++ 0.93% .37%++ 0.11%++ 1.81% 1.40% 0.89%++
Expenses, excluding waiver 0.11%++ 1.59% 1.26%++ 0.13%++ 2.73% 1.71% 0.89%++
Net investment income 0.26%++ 4.18% 4.39%++ 0.41%++ 4.58% 5.62% 5.61%++
</TABLE>
<TABLE>
<CAPTION>
Balanced Series Limited Duration Government Series
One Month Class C Shares One Month Class C Shares
Per Class C Share Operating Ended July 15, 1996** to Ended July 15, 1996** to
Performance: November 30, 1996 October 31, 1996 November 30, 1996 October 31, 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.29 $10.73 $4.39 $4.34
Income from investment operations
Net investment income .0067 .0349 .0138 .0667
Net realized and unrealized gain on securities .5298 .6346 .0342 .0515
Total from investment operations .5365 .6695 .0480 .1182
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Distributions
Dividends from net investment income (.0365) (.0730) (.0180) (.0682)
Dividends from net realized gain -- (.0365) -- --
Net asset value, end of period $11.79 $11.29 $4.42 $4.39
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Total Return* 4.76%+ 7.78%+ 1.09%+ 2.98%+
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Ratios to Average Net Assets:
Expenses, including waiver 0.16%+ 0.62%+ 0.19%+ 0.69%+
Expenses, excluding waiver and reimbursement 0.20%+ 0.77%+ 0.21%+ 0.77%+
Net investment income 0.17%+ 0.70%+ 0.33%+ 1.26%+
<FN>
*Total return does not consider the effects of front-end sales or contingent deferred sales charges.
**Commencement of offering Class shares.
+Not annualized.
See Notes to Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U.S. Government Securities Series
Per Class A Share+ Operating Year Ended November 30,
- -----------------------------------------------------------------------------------------------------------------------------------
Performance: 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $2.73 $2.59 $3.00 $2.94 $2.94 $2.83 $2.92 $2.91 $2.96 $3.34
Income from investment operations
Net investment income .215 .235 .247 .239 .267 .282 .299 .309 .336 .331
Net realized and unrealized
gain (loss) on securities (.105) .136 (.3685) .070 (.003) .105 (.088) .010 (.062) (.323)
Total from investment operations.11 .371 (.1215) .309 .264 .387 .211 .319 .274 .008
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Distributions
Dividends from net investment income (.210) (.231) (.246) (.249) (.264) (.277) (.301) (.309) (.324) (.348)
Distributions from net realized gain -- -- (.0425) .-- .-- .-- .-- .-- .-- (.040)
Net asset value, end of year $2.63 $2.73 $2.59 $3.00 $2.94 $2.94 $2.83 $2.92 $2.91 $2.96
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return* 4.41% 14.89% (4.24)% 10.70% 9.24% 14.35% 7.82% 11.65% 9.64% .35%
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Ratios/Supplemental Data:
Ratios to Average Net Assets:
Expenses .88% .90% .90% .89% .87% .94% .89% .88% .88% .89%
Net investment income 8.12% 8.85% 8.92% 7.94% 9.18% 9.63% 10.55% 10.66% 11.26% 10.48%
</TABLE>
<TABLE>
<CAPTION>
U.S. Government Securities Series
Class B Shares Class C Shares
Per Class Share Operating August 1, 1996** to July 15, 1996** to
Performance: November 30, 1996 November 30, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $2.57 $2.55
Income from investment operations
Net investment income .063 .066
Net realized and unrealized gain on securities .060 .085
Total from investment operations .123 .151
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Distributions
Dividends from net investment income (.063) (.071)
Net asset value, end of period $2.63 $2.63
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Total Return* 5.45%+ 6.49%+
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Ratios to Average Net Assets:
Expenses, including waiver .48%+ .60%+
Net investment income 2.21%+ 2.60%+
</TABLE>
<TABLE>
<CAPTION>
U.S. Government Securities Series
Supplemental Data for All Classes: Year Ended November 30,
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net assets end of year(000)$2,907,291 $3,272,865 $3,232,012 $3,909,868 $3,275,052 $2,293,345 $1,555,648 $1,241,218 $999,131 $749,307
Portfolio turnover rate 820.59% 544.31% 790.57% 586.18% 458.70% 544.19% 578.18% 440.32% 332.36% 429.12%
<FN>
*Total return does not consider the effects of front-end sales or contingent deferred sales charges.
**Commencement of offering Class shares.
+Not annualized.
See Notes to Financial Statements.
</FN>
</TABLE>
<PAGE>
4 HOW WE INVEST
U.S. Government Securities Series. The U.S. Government Securities Series seeks
high current income with relatively low risk of price decline. To achieve this
goal, the Series invests in U.S. Government securities. U.S. Government
securities include: (1) obligations issued by the U.S. Treasury, differing only
in their interest rates, maturities and time of issuance, and including Treasury
bills maturing in one year or less, Treasury notes maturing in one to ten years
and Treasury bonds with maturities of over ten years and (2) obligations issued
or guaranteed by U.S. Government agencies and instrumentalities which are
supported by any of the following: (a) the full faith and credit of the United
States (such as Government National Mortgage Association ("GNMA") certificates),
(b) the right of the issuer to borrow from the U.S. Treasury or (c) the credit
of the instrumentality. Agencies and instrumentalities include the Federal Home
Loan Bank, Federal Home Loan Mortgage Corporation ("FHLMC"), Federal National
Mortgage Association ("FNMA"), Federal Farm Credit Bank, Student Loan Marketing
Association, Tennessee Valley Authority, Financing Corporation and Resolution
Funding Corporation. Obligations issued by the U.S. Treasury and by U.S.
Government agencies and instrumentalities include those so issued in a form
separated into their component parts of principal and coupon payments, i.e.,
"component securities." A security backed by the U.S. Treasury or a U.S.
Government agency, although providing substantial protection against credit
risk, is guaranteed only as to the timely payment of interest and principal when
held to maturity. The market prices for such securities are not guaranteed and
will fluctuate and, accordingly, such securities will not protect investors
against price changes due to changing interest rates. Longer maturity U.S.
Government securities may exhibit greater price volatility in response to
changes in interest rates than shorter maturity securities. In addition, certain
U.S. Government securities may show even greater volatility if, for example, the
interest payment component has been removed, as with zero coupon bonds. The
value of shares of the U.S. Government Securities Series will change as the
general levels of interest rates fluctuate. When interest rates decline, share
value rises. Conversely, when interest rates rise, share value can be expected
to decline.
Investments in GNMA certificates, which are pools of home mortgages and other
mortgage-backed securities, are subject to prepayment of principal as mortgages
are prepaid. The U.S. Government Securities Series must reinvest these
prepayments at prevailing rates, which may be lower than the yield of the GNMA
certificate or other mortgage-backed securities. These prepayments will result
in a further reduction in principal if the GNMA certificate or other
mortgage-backed security is trading over par. Mortgage prepayments generally
increase in a falling interest-rate environment and, accordingly, often result
in a reduction of principal. In a rising interest-rate environment, prepayments
tend to decline which increases the duration and volatility of such GNMA
certificates. The U.S. Government Securities Series may invest in liquid
interest-only and principal-only mortgage-backed securities backed by fixed-rate
mortgages under guidelines established by the Board of Trustees of the Fund to
assure that they may be sold promptly in the ordinary course of business at a
value reasonably close to that used in calculating the U.S. Government
Securities Series' net asset value per share.
Although the longer maturity U.S. Government securities, zero coupon bonds, GNMA
certificates and other mortgage-backed securities mentioned above may be
volatile, this volatility, while not eliminated, is managed by the
above-mentioned policy of Lord Abbett to maintain the average duration of
securities held by the Series at between three and eight years.
While growth of capital is not an objective of the U.S. Government Securities
Series, capital appreciation may result from efforts to secure high current
income.
Limited Duration Government Series. The Limited Duration Government Series is
authorized to invest solely in a portfolio of short- and intermediate-duration
U.S. Government securities. Such securities include direct obligations of the U.
S. Treasury (such as Treasury bills, notes and bonds) and obligations issued by
U.S. Government agencies and instrumentalities, including securities that are
supported by the full faith and credit of the United States such as GNMA
certificates, securities that are supported by the right of the issuer to borrow
from the U.S. Treasury (such as securities of the Federal Home Loan Banks) and
securities supported solely by the creditworthiness of the issuer such as FNMA
and FHLMC securities. Such U.S. Government securities also include component
securities and mortgage-backed securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. Treasury STRIPS are direct
obligations of the U.S. Government and are examples of component securities
whereby Treasury bonds and notes are separated on the books of the Federal
Reserve into their component parts of principal and coupon payments or principal
and coupon strips.
<PAGE>
The maximum dollar-weighted effective average maturity (not stated maturity) of
the portfolio will be seven years. This effective average maturity measures the
average time principal is outstanding and (a) is different from duration because
it does not measure all cash flows and (b) includes securities that prepay
principal, thus shortening their dollar-weighted effective average maturity.
("Duration" is generally the weighted average time to receipt of all cash flows
due by maturity from an obligation.) Stated maturity is the stated time to final
principal payment of an obligation without regard to any prepayments of
principal. Therefore, the maximum average stated maturity of the portfolio may
be substantially longer than seven years.
The Limited Duration Government Series is not a money market fund. A money
market fund is designed for stability of principal; consequently, its level of
income fluctuates. A limited duration U.S. Government securities fund, due to
the nature of its portfolio securities, generally has a steadier and higher
level of income than a money market fund. However, the Series' share value will
fluctuate more than a money market fund's over time. Historically, a portfolio
with a duration averaging between one and four years, such as the Limited
Duration Government Series' portfolio, tends to have steadier and higher income
over the course of the business cycle than a short-term money market fund
portfolio. In such a business cycle, the Limited Duration Government Series'
portfolio can "lock in" rates over a longer period, allowing its income to
continue over that period at the locked-in level which adjusts less often in
response to changing interest rates, thereby softening the impact of
interest-rate changes which a money market fund portfolio is exposed to more
often because it can only lock in rates for a shorter period. Of course, past
performance is no guarantee of future results. Unlike a money market fund, the
Limited Duration Government Series does not seek to maintain a stable net asset
value and may not be able to return dollar-for-dollar the money invested. The
level of income will vary depending on interest rates and the portfolio. In
general, because the Limited Duration Government Series invests in longer term
securities than a money market fund, the value of its shares will fluctuate more
than a money market fund, but less than, for example, a long-term U.S.
Government securities fund. When interest rates rise, the value of securities in
the portfolio, as well as the share value, will fall. Conversely, when rates
fall, the value of securities in the portfolio and the share value will rise.
Component securities in which the Series may invest may show greater price
volatility in response to interest-rate changes than will other debt securities
in which the Series may invest. The value of principal-only component securities
will be reduced in a rising interest-rate environment or as the expected amount
of principal prepayments declines. The value of interest-only component
securities will be reduced in a falling interest-rate environment or in
expectation that the amount of principal prepayments will increase. Although the
U.S. Government securities in which the Limited Duration Government Series may
invest are guaranteed as to timely payment of interest and principal, the market
prices for such securities are not guaranteed and, as with other bond
investments, will rise and fall in value as interest rates change.
The Limited Duration Government Series seeks to reduce the effects of
interest-rate volatility on principal by limiting the average duration to a
range of one to four years.
The Limited Duration Government Series limits its investments in mortgage-backed
securities to those issued or guaranteed by the U. S. Government or one of its
agencies or instrumentalities, primarily the GNMA, FNMA or FHLMC.
Mortgage-backed securities guaranteed by GNMA consist of pass-through interests
in pools of mortgage loans guaranteed or issued by agencies or instrumentalities
of the United States. Mortgage-backed securities issued by FNMA and FHLMC most
often represent pass-through interests in pools of conventional mortgage loans
or participations in the pools. Such "pass-through" mortgage-backed securities
represent undivided interests in the underlying mortgage pool, and a
proportionate share of both regular interest and principal payments (net of
certain fees), as well as unscheduled early prepayment on the underlying
mortgage pool, are passed through monthly to the holder of the mortgage-backed
securities.
The Limited Duration Government Series must reinvest such prepayments at
prevailing interest rates, which may be lower than those of the mortgage-backed
securities prepaid. Prepayment will result in a reduction of principal if the
pre-paid mortgage-backed security is trading over par. Principal prepayments
generally increase in a falling interest-rate environment, as indicated above,
and accordingly often result in a reduction of principal. Among the types of
mortgage-backed securities in which the Limited Duration Government Series may
invest are collateralized mortgage obligations ("CMOs"), which are debt
obligations collateralized by mortgage loans or mortgage pass-through securities
guaranteed or issued by GNMA, FNMA or FHLMC. The Limited Duration Government
Series will not invest in privately issued CMOs. The issuer of a series of CMOs
may elect to be treated as a Real Estate Mortgage Investment Conduit (a
"REMIC").
In a CMO, a series of bonds or certificates are issued in multiple classes. Each
class, often referred to as a "tranche", is issued at a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Balanced Series. Fund management (hereinafter meaning the officers of the Fund
on a day-to-day basis subject to the overall direction of the Fund's Board of
Trustees with the advice of Lord Abbett)believes that of all the various kinds
of investments, equity securities generally afford the best opportunity for
investors' capital to grow and for their income to increase. The prices of
equity securities fluctuate and the dividends earned on equity securities vary.
But if the companies they represent prosper and grow, equity securities should
appreciate in value and the income distributed in the form of dividends should
increase.
However, the market risk is generally greater in equity securities than in
fixed-income securities. Therefore, the Balanced Series at all times maintains
at least 25% of its net assets in fixed-income senior securities, such as
high-grade bonds or notes and U.S. Government securities. It also may invest in
lower grade preferred stocks or lower grade bonds, but for capital appreciation
and income and not for capital stability.
The Balanced Series changes the proportions of its assets invested in
fixed-income securities and in equity securities and the individual securities
within those classifications in response to market conditions. The Balanced
Series is guided by an investment philosophy that identifies undervalued areas
of the equity and fixed-income markets in an effort to generate above-average
returns. The equity investment process integrates the results of quantitative
and qualitative valuation analysis with a macro-economic outlook. Fundamental
economic and business factors taken into consideration include government,
fiscal and monetary policies, employment levels, demographics, retail sales and
market share when determining future earnings and market valuation for stocks.
In order to have maximum flexibility in effectuating this equity investment
process, we will invest in small, middle-sized and/or large companies based on
their market capitalization (i.e., the market value of a company's outstanding
stock). For the fixed-income component, a duration target between 3.5 and 7.5
years was established within the context of broad economic and interest-rate
trends identified by Fund management. The fixed-income management strategies are
driven by the shape of the yield curve, yield spread analysis and effects on
value of time.
<PAGE>
The Balanced Series may invest up to 10% of its net assets (at the time of
investment) in each of the following: (a) writing covered call options traded on
a national securities exchange for portfolio securities, (b) foreign securities
and (c) lower rated, high-yield bonds, sometimes referred to as "junk bonds".
These foreign securities will be the kind described herein for the Series'
domestic investment. It is the present intention of Fund management that these
securities be primarily traded in the United Kingdom, Western Europe, Australia,
Canada, the Far East, Latin America and other developed countries as may be
determined from time to time.
To create reserve purchasing power and also for temporary defensive
purposes, the Balanced Series may invest in high-quality, short-term debt
securities, such as those of banks, corporations and the U.S. Government.
The U.S. Government securities in which the Balanced Series may invest include
the same described above for the Limited Duration Government Series except that
they will not be restricted to the same duration.
The Balanced Series may invest in shares of closed-end investment companies if
bought in the primary or secondary market with a fee or commission no greater
than the customary broker's commission in compliance with the Investment Company
Act of 1940, as amended (the "Act"). Shares of such investment companies
sometimes trade at a discount or premium in relation to their net asset value
and there may be duplication of fees, for example, to the extent that the
Balanced Series and the closed-end investment company both charge a management
fee. Policies Common to All Series. Each Series may purchase U.S. Government
securities on a when-issued basis and, while awaiting delivery and before paying
for them ("settlement"), normally may invest in short-term U.S. Government
securities without amortizing any premiums. Each Series does not start earning
interest on these when-issued securities until settlement and often will sell
them prior to settlement. This investment strategy is expected to contribute
significantly to a portfolio turnover rate substantially in excess of 100% for
each Series, including the fixed-income portion of the Balanced Series. This
strategy will have little or no transaction cost or adverse tax consequences for
any series. Transaction costs normally will exclude brokerage because our
fixed-income portfolio transactions are usually on a principal basis when using
this strategy and any mark-ups charged normally will be more than offset by the
beneficial economic consequences anticipated at the time of purchase. During the
period between purchase and settlement, the value of the securities will
fluctuate and assets consisting of cash and/or marketable securities marked to
market daily in an amount sufficient to make payment at settlement will be
segregated at our custodian in order to pay for the commitment. There is a risk
that market yields available at settlement may be higher than yields obtained on
the purchase date which could result in depreciation of value.
Each Series may engage in the lending of its portfolio securities. These loans
may not exceed 30% of the value of each Series' total assets. In such an
arrangement the Series loans securities from its portfolio to registered
broker-dealers. Such loans are continuously collateralized by an amount at least
equal to 100% of the market value of the securities loaned. Cash collateral is
invested in obligations (short term in the case of the Limited Duration
Government and Balanced Series) issued or guaranteed by the U.S. Government or
its agencies, commercial paper or bond obligations rated AA or A-1/P-1 by
Standard & Poor's Rating Services ("S&P") or Moody's Investors Service, Inc.
("Moody's"), respectively, or repurchase agreements with respect to the
foregoing. As with other extensions of credit, there are risks of delay in
recovery and market loss should the borrowers of the portfolio securities fail
financially.
<PAGE>
Each Series may enter into repurchase agreements with respect to a security. A
repurchase agreement is a transaction by which the Series 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. Such
repurchase agreement must, at all times, be collateralized by cash or U.S.
Government securities having a value equal to, or in excess of, the value of the
repurchase agreement.
Each Series may invest up to 15% of its net assets in illiquid securities.
Securities determined by the Trustees to be liquid pursuant to Securities and
Exchange Commission Rule 144A ("Rule 144A") are not subject to this limit.
Investments by a Series in Rule 144A securities initially determined to be
liquid could have the effect of diminishing the level of a Series' liquidity
during periods of decreased market interest in such securities. Under Rule 144A
a qualifying security may be resold to a qualified institutional buyer without
registration and without regard to whether the seller originally purchased the
security for investment.
No Series may borrow money, except that (i) each Series may borrow from banks
(as defined in the Act) in amounts up to 331 1/43% of its total assets
(including the amount borrowed), (ii) each Series may borrow up to an additional
5% of its total assets for temporary purposes, and (iii) each Series may obtain
such short-term credit as may be necessary for the clearance of purchases and
sales of portfolio securities.
Each Series will not change its investment objective or its fundamental
investment restrictions listed in its Statement of Additional Information
without its shareholders' approval. If Fund management determines that a Series'
objective can best be achieved by a substantive change in investment policy,
which may be changed without shareholder approval, it will make such a change by
disclosing it in its prospectus.
Risk Factors--Balanced Series
Foreign Investments. Securities markets of foreign countries are not subject to
the same degree of regulation as the U.S. markets and may be more volatile and
less liquid than the major U.S. markets. There may be less publicly-available
information on publicly-traded companies, banks and governments in foreign
countries than is generally the case for such entities in the United States. The
lack of uniform accounting standards and practices among countries impairs the
validity of direct comparisons of valuation measures (such as price/earnings
ratios) for securities in different countries. Other considerations include
political and social instability, expropriation, higher transaction costs,
currency fluctuations, withholding taxes that cannot be passed through as a tax
credit or deduction to shareholders and different securities settlement
practices. Foreign securities may be traded on days that we do not value our
portfolio securities, and, accordingly, our net asset value may be significantly
affected on days when shareholders do not have access to the Balanced Series.
High-Yield Bonds. The Balanced Series may invest in lower rated bonds
for their higher yields. In general, the market for lower rated bonds is more
limited than that for higher rated bonds and, therefore, may be less liquid;
market prices of such lower rated bonds may fluctuate more than those of higher
rated bonds, particularly in times of economic change and stress. In addition,
because the market for lower rated corporate debt securities has in past years
experienced wide fluctuations in the values of certain of these securities, past
experience may not provide an accurate indication of the future performance of
that market or of the frequency of default, especially during periods of
recession. Objective pricing data for lower rated bonds may be more limited and
valuation of such securities may be more difficult and require greater reliance
upon judgment when compared to higher rated bonds.
While the market for lower rated bonds may be less sensitive to interest-rate
changes than higher rated bonds, the market prices of these lower rated bonds
structured as zero coupon or pay-in-kind securities may be affected to a greater
extent by such interest-rate changes and thus may be more volatile than prices
of lower rated securities periodically paying interest in cash. When compared to
higher rated bonds, lower rated bonds that include redemption prior to maturity
or call provisions may be more susceptible to refunding during periods of
falling interest rates, requiring replacement by lower yielding securities.
<PAGE>
Since the risk of default generally is higher among lower rated bonds, the
research and analysis of Lord Abbett are especially important in the selection
of such bonds which, if rated BB/Ba or lower, are often described as "high-yield
bonds" because of their generally higher yields and referred to as "junk bonds"
because of their greater risks. In selecting lower rated bonds for our
investment portfolio Lord Abbett does not rely upon ratings which, in any event,
evaluate only the safety of principal and interest, not market value risk and
which, furthermore, may not accurately reflect an issuer's current financial
condition. There is no minimum rating criteria for investments in these bonds
and some may default as to principal and/or interest payments subsequent to
their purchase. Through portfolio diversification, credit analysis and attention
to current developments and trends in interest rates and economic conditions,
investment risk can be reduced, although there is no assurance that losses will
not occur.
Small Capitalized Companies. These generally consist of companies in either the
formative or developing growth phase of business growth. The formative phase has
high risk. The perils of infancy take a high toll during these years. Skill of
management and growth of revenues and earnings permit some of these formative
companies to survive and advance into the growth stage. The developing growth
phase is a period of swift development, when growth occurs at a rate rarely
equalled by established companies in their mature years. Of course, the actual
growth of a company cannot be foreseen, and it can be difficult to determine in
which phase a company is presently situated. Small capitalized companies are
usually young and their shares are generally traded over-the-counter.
Portfolio Turnover. The portfolio turnover rate for the Limited Duration
Government Series for the year ended October 31, 1996 was 340.62% versus 222.00%
for the previous year, primarily due to security purchases and sales relating to
purchases and redemptions of Series shares and some portfolio restructuring. The
portfolio turnover rate for the Balanced Series for the fiscal year ended
October 31, 1996 was 62.34% for the equity portion of the Series and 363.31% for
the fixed-income portion of the Series. The portfolio turnover rate for the
predecessor to the U.S. Government Securities Series and the Series itself for
the fiscal year ended November 30, 1996 was 820.59% versus 544.31% for the
previous fiscal year. The high portfolio turnover rate relates to substantial
trading of U.S. and U.S. agency mortgage-backed securities to take advantage of
value changes among different agencies, coupons and maturities.
As a result of the acquisition by the U.S. Government Securities Series of the
shares of the Lord Abbett U.S. Government Securities Fund, Inc. and the Lord
Abbett U.S. Government Securities Trust of Lord Abbett Securities Trust in July
1996, the fiscal year end for all the Series of the Fund was changed to November
30.
5 PURCHASES
GENERAL
How Much Must You Invest? You may buy our shares through any independent
securities dealer having a sales agreement with Lord Abbett Distributor LLC
("Lord Abbett Distributor"), our exclusive selling agent. Place your order with
your investment dealer or send it to Lord Abbett Investment Trust (P.O. Box
419100, Kansas City, Missouri 64141). The minimum initial investment for the
Balanced Series and Limited Duration U.S. Government Securities Series is $1,000
and for the U.S. Government Securities Series it is $500 except for
Invest-A-Matic and Div-Move ($250 initial and $50 subsequent minimum) and
Retirement Plans ($250 minimum). Subsequent investments may be made in any
amount. (See "Shareholder Services"). For information regarding the proper form
of a purchase or redemption order, call the Fund at 800-821-5129. This offering
may be suspended, changed or withdrawn. Lord Abbett reserves the right to reject
any order.
The net asset value of our shares is calculated every business day as of the
close of the New York Stock Exchange ("NYSE") by dividing our net assets by the
number of shares outstanding. Securities are valued at market value as more
fully described in the Statement of Additional Information.
Buying Shares Through Your Dealer. Orders for shares received by the Fund prior
to the close of the NYSE, or received by dealers prior to such close and
received by Lord Abbett Distributor in proper form prior to the close of its
business day, will be confirmed at the applicable public offering price
effective at such NYSE close. Orders received by dealers after the NYSE closes
and received by Lord Abbett Distributor prior to the close of its next business
day are executed at the applicable public offering price effective as of the
close of the NYSE on that next business day. The dealer is responsible for the
timely transmission of orders to Lord Abbett Distributor. A business day is a
day on which the NYSE is open for trading. Lord Abbett may, for specified
periods, allow dealers to retain the full sales charge for sales of shares
during such period, or pay an additional concession to a dealer who, during a
specified period, sells a minimum dollar amount of our shares and/or shares of
other Lord Abbett-sponsored funds. In some instances, such additional
concessions will be offered only to certain dealers expected to sell significant
amounts of shares. Lord Abbett Distributor may, from time to time, implement
promotions under which Lord Abbett Distributor will pay a fee to dealers with
respect to certain purchases not involving imposition of a sales charge.
Additional payments may be paid from Lord Abbett Distributor's own resources and
will be made in the form of cash or, if permitted, non-cash payments. The
non-cash payments will include business seminars at resorts or other locations,
including meals and entertainment, or the receipt of merchandise. The cash
payments will include payment of various business expenses of the dealer.
<PAGE>
In selecting dealers to execute portfolio transactions, if two or more dealers
are considered capable of obtaining best execution, we may prefer the dealer who
has sold our shares and/or shares of other Lord Abbett-sponsored funds.
Alternative Sales Arrangements.
Each Series of the Fund offers investors different classes of shares. The
different classes of shares in a Series represent investments in the same
portfolio of securities but are subject to different expenses and will be likely
to have different share prices. U.S. Government Securities Series. The U.S.
Government Securities Series offers Class A, Class B and Class C shares.
Investors considering an investment in the U.S. Government Securities Series
should pay particular attention to the sections below headed "Investment in a
Multi-Class Series",
"Buying Class A Shares", "Buying Class B Shares" and "Buying Class C Shares".
Limited Duration Government and Balanced Series. The Limited Duration Government
and Balanced Series offer Class A and Class C shares. Investors considering an
investment in the Limited Duration Government or Balanced Series should pay
particular attention to the sections below headed
"Investment in a Multi-Class Series", "Buying Class A Shares" and "Buying Class
C Shares".
Investment in a Multi-Class Series.
Investors should read this section carefully to determine which class represents
the best investment option for their particular situation.
Class A Shares. If you buy Class A shares of the Limited Duration Government or
Balanced Series, you will pay an initial sales charge on all investments until
such time as the Rule 12b-1 Plan for such Series goes into effect. If you buy
Class A shares of the U.S. Government Securities Series, you pay an initial
sales charge on investments of less than $1 million (or on investments for
employer-sponsored retirement plans under the Internal Revenue Code (hereinafter
referred to as "Retirement Plans") with less than 100 eligible employees or on
investments that do not qualify to be under a "special retirement wrap program"
defined under "Class A Share Net Asset Value Purchases" below). If you purchase
Class A shares of the U.S. Government Securities Series as part of an investment
of at least $1 million (or for Retirement Plans with at least 100 eligible
employees or under a special retirement wrap program) in shares of one or more
Lord Abbett-sponsored funds, you will not pay an initial sales charge, but if
you redeem any of those shares within 24 months after the month in which you buy
them, you may pay to the Series a contingent deferred sales charge ("CDSC") of
1%, except for redemptions under a special retirement wrap program. Class A
shares of the U.S. Government Securities Series are subject to service and
distribution fees that are currently estimated to total annually approximately
0.27 of 1% of the annual net asset value of the Class A shares of such Series.
The initial sales charge rates, the CDSC and the Rule 12b-1 Plan applicable to
the Class A shares are described in "Buying Class A Shares" below. Class B
Shares. If you buy Class B shares (offered by U.S. Government Securities Series
only), you pay no sales charge at the time of purchase, but if you redeem your
shares before the sixth anniversary of buying them, you will normally pay a CDSC
to Lord Abbett Distributor. That CDSC varies depending on how long you own
shares. Class B shares are subject to service and distribution fees at an annual
rate of 1% of the annual net asset value of the Class B shares. The CDSC and the
Rule 12b-1 Plan applicable to the Class B shares are described in "Buying Class
B Shares" below. Class C Shares. If you buy Class C shares, you pay no sales
charge at the time of purchase, but if you redeem your shares before the first
anniversary of buying them, you will normally pay the Series a CDSC of 1%. Class
C shares are subject to service and distribution fees at an annual rate of 1% of
the annual net asset value of the Class C shares. The CDSC and the Rule 12b-1
Plan applicable to the C shares are described in "Buying Class C Shares" below.
Which Class of Shares Should You Choose? Once you decide that a Series is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial adviser. The Series' class-specific expenses and the
effect of the different types of sales charges on your investment will affect
your investment results over time. The most important factors are how much you
plan to invest and how long you plan to hold your investment. If your goals and
objectives change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider another class of
shares.
<PAGE>
In the following discussion, to help provide you and your financial adviser with
a framework in which to choose a class, we have made some assumptions using a
hypothetical investment. We used the sales charge rates that apply to Class A,
Class B and Class C, and considered the effect of the higher distribution fee on
Class B and Class C expenses (which will affect your investment return). Of
course, the actual performance of your investment cannot be predicted and will
vary, based on the Series' actual investment returns, the operating expenses
borne by each class of shares, and the class of shares you purchase. The factors
briefly discussed below are not intended to be investment advice, guidelines or
recommendations, because each investor's financial considerations are different.
The discussion below of the factors to consider in purchasing a particular class
of shares assumes that you will purchase only one class of shares and not a
combination of shares of different classes.
How Long Do You Expect to Hold Your Investment? While future financial needs
cannot be predicted with certainty, knowing how long you expect to hold your
investment will assist you in selecting the appropriate class of shares. For
example, over time, the reduced sales charges available for larger purchases of
Class A shares may offset the effect of paying an initial sales charge on your
investment, compared to the effect over time of higher class-specific expenses
on Class B or Class C shares for which no initial sales charge is paid. Because
of the effect of class-based expenses, your choice should also depend on how
much you plan to invest.
Investing for the Short Term. If you have a short-term investment horizon (that
is, you plan to hold your shares for not more than six years), you should
probably consider purchasing Class A or Class C shares rather than Class B
shares. This is because of the effect of the Class B CDSC if you redeem before
the sixth anniversary of your purchase, as well as the effect of the Class B
distribution fee on the investment return for that class in the short-term.
Class C shares might be the appropriate choice (especially for investments of
less than $100,000), because there is no initial sales charge on Class C shares,
and the CDSC does not apply to amounts you redeem after holding them one year.
However, if you plan to invest more than $100,000 for the short term, then the
more you invest and the more your investment horizon increases toward six years,
the more attractive the Class A share option may become. This is because the
annual distribution fee on Class C shares will have a greater impact on your
account over the longer term than the reduced front-end sales charge available
for larger purchases of Class A shares. For example, Class A might be more
appropriate than Class C for investments of more than $100,000 expected to be
held for 5 or 6 years (or more). For investments over $250,000 expected to be
held 4 to 6 years (or more), Class A shares may become more appropriate than
Class C. If you are investing $500,000 or more, Class A may become more
desirable as your investment horizon approaches 3 years or more.
For most investors who invest $1 million or more or for Retirement Plans with at
least 100 eligible employees or for U.S. Government Securities Series
investments pursuant to special retirement wrap programs, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend to
hold your shares. For that reason, Lord Abbett Distributor normally will not
accept purchase orders (i) for Class B shares of $500,000 or more and for Class
C shares of $1,000,000 or more from a single investor or (ii) for Class B or C
shares (a) for Retirement Plans with at least 100 eligible employees or (b) for
U.S. Government Securities Series investments pursuant to special retirement
wrap programs.
Investing for the Longer Term. If you are investing in the U.S. Government
Securities Series for the longer term (for example, future college expenses for
your child) and do not expect to need access to your money for seven years or
more, Class B shares may be an appropriate investment option, if you plan to
invest less than $100,000. If you plan to invest more than $100,000 over the
long term, Class A shares will likely be more advantageous than Class B shares
or Class C shares, as discussed above, because of the effect of the expected
lower expenses for Class A shares and the reduced initial sales charges
available for larger investments in Class A shares under the Fund's Rights of
Accumulation. Of course, these examples are based on approximations of the
effect of current sales charges and expenses on a hypothetical investment over
time, and should not be relied on as rigid guidelines.
Are There Differences in Account Features That Matter to You? Some account
features are available in whole or in part to Class A, Class B and Class C
shareholders. Other features (such as Systematic Withdrawal Plans) might not be
advisable in non-Retirement Plan accounts for Class B shareholders (because of
the effect of the CDSC on the entire amount of a withdrawal if it exceeds 12%
annually) and in any account for Class C shareholders during the first year of
share ownership (due to the CDSC on withdrawals during that year). See
"Systematic Withdrawal Plan" under
<PAGE>
"Shareholder Services" for more information about the 12% annual waiver of the
CDSC. You should carefully review how you plan to use your investment account
before deciding which class of shares you buy. For example, the dividends
payable to Class B and Class C shareholders will be reduced by the expenses
borne solely by each of these classes, such as the higher distribution fee to
which Class B and Class C shares are subject, as described below.
How Does It Affect Payments to My Broker? A salesperson, such as a broker, or
any other person who is entitled to receive compensation for selling Fund shares
may receive different compensation for selling one class than for selling
another class. As discussed in more detail below, such compensation is primarily
paid at the time of sale in the case of Class A and B shares and is paid over
time, so long as shares remain outstanding, in the case of Class C shares. It is
important that investors understand that the primary purpose of the CDSC for the
Class B shares and the distribution fee for Class B and Class C shares is the
same as the purpose of the front-end sales charge on sales of Class A shares: to
compensate brokers and other persons selling such shares. The CDSC, if payable,
supplements the Class B distribution fee and reduces the Class C distribution
fee expenses for the Fund and Class C shareholders.
Buying Class A Shares (ALL SERIES). For each Series the offering price of the
Class A shares is based on the per-share net asset value next computed after
your order is received, plus a sales charge as follows.
<TABLE>
<CAPTION>
Limited Duration U.S. Government Securities Series
Sales Charge as a Dealer's
Percentage of: Concession
as a To Compute
Net Percentage Offering
Offering Amount of Offering Price, Divide
Size of Investment Price Invested Price NAV by
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Less than $100,000 3.00% 3.09% 2.50% .9700
- ----------------------------------------------------------------------------
$100,000 to $249,999 2.50% 2.56% 2.25% .9750
- ----------------------------------------------------------------------------
$250,000 to $499,999 2.00% 2.04% 1.75% .9800
- ----------------------------------------------------------------------------
$500,000 to $999,999 1.50% 1.52% 1.25% .9850
- ----------------------------------------------------------------------------
The following categories over $1 million apply only until the Series' Rule
12b-1 Plan becomes effective, at which time no sales charge will apply to sales
over $1 million or for Retirement Plans with at least 100 eligible employees
and the authorized institutions will receive concessions on such net asset
value purchases mentioned below in the note designated with a "+".
$1,000,000 to $2,999,999 1.00% 1.01% 1.00% .9900
- -----------------------------------------------------------------------------
$3,000,000 to $9,999,999 .50% .50% .50% .9950
- -----------------------------------------------------------------------------
$10,000,000 or more .25% .25% .25% .9975
- -----------------------------------------------------------------------------
<FN>
+Authorized institutions receive concessions on purchases made by a $1 million
or more purchaser or a Retirement Plan with at least 100 eligible employees
within a 12-month period (beginning with the first net asset value purchase) as
follows: 1.00% on purchases of $5 million, 0.55% of the next $5 million, 0.50%
of the next $40 million and 0.25% on purchases over $50 million. See "Class A
Rule 12b-1 Plan" below.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Balanced Series
Sales Charge as a Dealer's
Percentage of: Concession
as a To Compute
Net Percentage Offering
Offering Amount of Offering Price, Divide
Size of Investment Price Invested Price NAV by
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Less than $50,000 4.75% 4.99% 4.00% .9525
- -------------------------------------------------------------------------------
$50,000 to $99,999 4.75% 4.99% 4.25% .9525
- -------------------------------------------------------------------------------
$100,000 to $249,999 3.75% 3.90% 3.25% .9625
- -------------------------------------------------------------------------------
$250,000 to $499,999 2.75% 2.83% 2.50% .9725
- -------------------------------------------------------------------------------
$500,000 to $999,999 2.00% 2.04% 1.75% .9800
- -------------------------------------------------------------------------------
The following category over $1 million applies only until the Series' Rule
12b-1 Plan becomes effective, at which time no sales charge will apply to sales
over $1 million or for Retirement Plans with at least 100 eligible employees
and authorized institutions will receive concessions on such net asset value
purchases mentioned below in the note designated with a "+".
$1,000,000 or more 1.00% 1.01% 1.00% .9900
- -------------------------------------------------------------------------------
<FN>
+Authorized institutions receive concessions on purchases made by a $1 million
or more purchaser or a Retirement Plan with at least 100 eligible employees
within a 12-month period (beginning with the first net asset value purchase) as
follows: 1.00% on purchases of $5 million, 0.55% of the next $5 million, 0.50%
of the next $40 million and 0.25% on purchases over $50 million. See "Class A
Rule 12b-1 Plan" below.
</FN>
</TABLE>
<TABLE>
U.S. Government Securities Series
Sales Charge as a Dealer's
Percentage of: Concession
as a To Compute
Net Percentage Offering
Offering Amount of Offering Price, Divide
Size of Investment Price Invested Price NAV by
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Less than $50,000 4.75% 4.99% 4.00% .9525
- --------------------------------------------------------------------------------
$50,000 to $99,999 4.75% 4.99% 4.25% .9525
- -------------------------------------------------------------------------------
$100,000 to $249,999 3.75% 3.90% 3.25% .9625
- --------------------------------------------------------------------------------
$250,000 to $499,999 2.75% 2.83% 2.50% .9725
- --------------------------------------------------------------------------------
$500,000 to $999,999 2.00% 2.04% 1.75% .9800
- --------------------------------------------------------------------------------
$1,000,000 or more No Sales Charge 1.00%+ .9900
- --------------------------------------------------------------------------------
<FN>
+Authorized institutions receive concessions on purchases made by a $1 million
or more purchaser or a Retirement Plan with at least 100 eligible employees or
pursuant to a special retirement wrap program within a 12-month period
(beginning with the first net asset value purchase) as follows: 1.00% on
purchases of $5 million, 0.55% of the next $5 million, 0.50% of the next $40
million and 0.25% on purchases over $50 million. See "Class A Rule 12b-1 Plan"
below.
</FN>
</TABLE>
<PAGE>
Class A Share Volume Discounts. This section describes several ways to qualify
for a lower sales charge if you inform Lord Abbett Distributor or the Fund that
you are eligible at the time of purchase. (1) Any purchaser (as described below)
may aggregate a Class A share purchase in the Fund with purchases of any other
eligible Lord Abbett-sponsored fund, together with the current value at maximum
offering price of any shares in the Fund and in any eligible Lord
Abbett-sponsored funds held by the purchaser. (Holdings in the following funds
are not eligible for the above rights of accumulation: Lord Abbett Equity Fund
("LAEF"), Lord Abbett Series Fund ("LASF"), any series of the Lord Abbett
Research Fund if not offered to the general public ("LARF") and Lord Abbett U.S.
Government Securities Money Market Fund ("GSMMF"), except for existing holdings
in GSMMF which are attributable to shares exchanged from a Lord Abbett-sponsored
fund.) (2) A purchaser may sign a non-binding 13-month statement of intention to
invest $100,000 or more in any shares of the Fund or in any of the above
eligible funds. If the intended purchases are completed during the period, the
total amount of your intended purchases of any shares will determine the reduced
sales charge rate for the Class A shares purchased during the period. If not
completed, each Class A shares purchase will be at the sales charge for the
aggregate of the actual purchases. Shares issued upon reinvestment of dividends
or distributions are not included in the statement of intention. The term
"purchaser" includes (i) an individual, (ii) an individual and his or her spouse
and children under the age of 21 and (iii) a trustee or other fiduciary
purchasing shares for a single trust estate or single fiduciary account
(including a pension, profit-sharing, or other employee benefit trust qualified
under Section 401 of the Internal Revenue Code -- more than one qualified
employee benefit trust of a single employer, including its consolidated
subsidiaries, may be considered a single trust, as may qualified plans of
multiple employers registered in the name of a single bank trustee as one
account), although more than one beneficiary is involved.
Class A Share Net Asset Value Purchase. Each Series' Class A shares may be
purchased at net asset value by our trustees, employees of Lord Abbett,
employees of our shareholder servicing agent and employees of any securities
dealer having a sales agreement with Lord Abbett Distributor who consents to
such purchases or by the trustee or custodian under any pension or
profit-sharing plan or Payroll Deduction IRA established for the benefit of such
persons or for the benefit of any national securities trade organization to
which Lord Abbett belongs or any company with an account(s) in excess of $10
million managed by Lord Abbett on a private-advisory-account basis. For purposes
of this paragraph, the terms "trustees" and "employees" include a trustee's or
employee's spouse (including the surviving spouse of a deceased trustee or
employee). The terms "trustees" and "employees of Lord Abbett" also include
other family members and retired trustees and employees. Our Class A shares also
may be purchased at net asset value (a) at $1 million or more, (b) with
dividends and distributions on Class A shares from other Lord Abbett-sponsored
funds, except for dividends and distributions on shares of LARF, LAEF and LASF,
(c) under the loan feature of the Lord Abbett-sponsored prototype 403(b) plan
for Class A share purchases representing the repayment of principal and
interest, (d) by certain authorized brokers, dealers, registered investment
advisers or other financial institutions who have entered into an agreement with
Lord Abbett Distributor in accordance with certain standards approved by Lord
Abbett Distributor, providing specifically for the use of our Class A shares in
particular investment products made available for a fee to clients of such
brokers, dealers, registered investment advisers and other financial
institutions, (e) by employees, partners and owners of unaffiliated consultants
and advisers to Lord Abbett, Lord Abbett Distributor or Lord Abbett-sponsored
funds who consent to such purchase if such persons provide services to Lord
Abbett, Lord Abbett Distributor or such funds on a continuing basis and are
familiar with such funds, (f) through Retirement Plans with at least 100
eligible employees, (g) subject to appropriate documentation, through a
securities dealer where the amount invested represents redemption proceeds from
shares ("Redeemed Shares") of a registered open-end management investment
company not distributed or managed by Lord Abbett (other than a money market
fund), if such redemptions have occurred no more than 60 days prior to the
purchase of our shares, the Redeemed Shares were held for at least six months
prior to redemption and the proceeds of redemption were maintained in cash or a
money market fund prior to purchase. Purchasers should consider the impact, if
any, of contingent deferred sales charges in determining whether to redeem
shares for subsequent investment in our Class A shares and (h) with respect to
the U.S. Government Securities Series only, through a "special retirement wrap
program" sponsored by an authorized institution showing one or more
characteristics distinguishing it, in the opinion of Lord Abbett Distributor
from a mutual fund wrap fee program. Such characteristics include, among other
things, the fact that an authorized institution does not charge its clients any
fee of a consulting or advisory nature that is economically equivalent to the
distribution fee under Class A 12b-1 Plan and the fact that the program relates
to participant-directed Retirement Plans. Lord Abbett may suspend or terminate
the purchase option referred to in (g) above at any time. We plan that on June
1, 1997, the net asset value transfer privileges will be terminated.
Class A Rule 12b-1 Plans. The Fund has adopted a Class A Rule 12b-1 Plan on
behalf of each Series (the "A" Plans, each an "A Plan") which authorizes the
payment of fees to authorized institutions in order to provide additional
incentives for them (a) to provide continuing information and investment
services to their Class A shareholder accounts and otherwise to encourage those
accounts to remain invested in the applicable Series and (b) to sell Class A
shares of the applicable Series. The A Plan for the U.S. Government Securities
Series is operative. For the Limited Duration and Balanced Series the A Plan is
not operative. Under the A Plan, in order to save on the expense of shareholders
meetings and to provide flexibility to the Board of Trustees, the Board,
including a majority of the outside trustees who are not "interested persons" of
the Fund as defined in the Investment Company Act of 1940, is authorized to
approve annual fee payments from a Series' Class A assets of up to 0.50 of 1% of
the average net of such assets consisting of distribution and service fees, each
at a maximum annual rate not exceeding 0.25 of 1% (the "Fee Ceiling").
<PAGE>
Under the A Plan for the U.S. Government Securities Series, the Board has
approved payments by the Series to Lord Abbett Distributor which uses or passes
on to authorized institutions (1) an annual service fee (payable quarterly) of
.25% of the average daily net asset value of the Class A shares serviced by
authorized institutions except that the service fee may not exceed 0.15 of 1% in
the case of shares sold or attributable to shares sold prior to September 1,
1985 and (2) a one-time distribution fee of up to 1% (reduced according to the
following schedule: 1% of the first $5 million, .55% of the next $5 million,
.50% of the next $40 million and .25% over $50 million), payable at the time of
sale on all Class A shares sold during any 12-month period starting from the day
of the first net asset value sale (i) at the $1 million level by authorized
institutions, including sales qualifying at such level under the rights of
accumulation and statement of intention privileges; (ii) through Retirement
Plans with at least 100 eligible employees or (iii) constituting a new sale
pursuant to a special retirement wrap program and excluding shares exchanged
into the Fund under such a program. In addition, the Board has approved for
those authorized institutions which qualify, a supplemental annual distribution
fee equal to 0.10% of the average daily net asset value of the Class A shares
serviced by authorized institutions which have a satisfactory program for the
promotion of such shares comprising a significant percentage of the Class A
assets, with a lower than average redemption rate. Institutions and persons
permitted by law to receive such fees are "authorized institutions".
The Board has approved similar fee payments under the A Plans for the Limited
Duration and Balanced Series (except that (i) there's no special retirement wrap
program category and (ii) there is no lower service fee for shares sold prior to
September 1, 1985), which fees will begin to be charged, for each Series,
following the operative date for such Series' A Plan.
Under the A Plans, Lord Abbett Distributor is permitted to use payments received
to provide continuing services to Class A shareholder accounts not serviced by
authorized institutions and, with Board approval, to finance any activity which
is primarily intended to result in the sale of Class A shares. Any such payments
are subject to the Fee Ceiling. Any payments under that Plan not used by Lord
Abbett Distributor in this manner are passed on to authorized institutions.
Holders of Class A shares on which a distribution fee has been paid to a Series
may be required to pay to such Series a CDSC of 1% of the original cost or the
then net asset value, whichever is less, of all Class A shares so purchased
which are redeemed out of any fund in the Lord Abbett family having an exchange
privilege with each Series on or before the end of the twenty-fourth month after
the month in which the purchase occurred. (Exceptions are made for: (i)
redemptions by Retirement Plans due to benefit payments such as plan loans,
hardship withdrawals, death, retirement or separation from service with respect
to plan participants or the distribution of any excess contributions and (ii)
redemptions which continue or investments in another fund participating in a
special retirement wrap program.) If the Class A shares have been exchanged into
another fund or series in the Lord Abbett family of funds and are thereafter
redeemed out of the Lord Abbett family of funds on or before the end of such
twenty-fourth month, the charge will be collected for the Series' Class A shares
by the other fund or series. Each Series will collect such a charge for other
Lord Abbett-sponsored funds or series in a similar situation.
Buying Class B Shares (U.S. Government Securities Series Only). Class B shares
are sold at net asset value per share without an initial sales charge. However,
if Class B shares are redeemed for cash before the sixth anniversary of their
purchase, a CDSC may be deducted from the redemption proceeds. That sales charge
will not apply to shares purchased by the reinvestment of dividends or capital
gains distributions. The charge will be assessed on the lesser of the net asset
value of the shares at the time of redemption or the original purchase price.
The Class B CDSC is paid to Lord Abbett Distributor to compensate it for its
services rendered in connection with the distribution of Class B shares,
including the payment and financing of sales commissions. See "Class B Rule
12b-1 Plan" below.
To determine whether the CDSC applies to a redemption, the U.S. Government
Securities Series redeems Class B shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held until the sixth anniversary of their purchase or later, and (3)
shares held the longest before the sixth anniversary of their purchase.
The amount of the CDSC will depend on the number of years since you invested and
the dollar amount being redeemed, according to the following schedule:
Anniversary
of the Day on Contingent Deferred
Which the Purchase Sales Charge on
Order Was Accepted Redemptions
(As % of Amount
On Before Subject to Charge)
- --------------------------------------------------------------------------------
1st 5.0%
- --------------------------------------------------------------------------------
1st 2nd 4.0%
- -----------------------------------------------------------------------------
2nd 3rd 3.0%
- -------------------------------------------------------------------------------
3rd 4th 3.0%
- -------------------------------------------------------------------------------
4th 5th 2.0%
- -------------------------------------------------------------------------------
5th 6th 1.0%
- -------------------------------------------------------------------------------
on or after the None
6th anniversary
<PAGE>
In the table, an "anniversary" is the 365th day subsequent to a purchase or a
prior anniversary. All purchases are considered to have been made on the
business day the purchase was made. See "Buying Shares Through Your Dealer"
above.
If Class B shares are exchanged into the same class of another Lord
Abbett-sponsored fund and the new shares are subsequently redeemed for cash
before the sixth anniversary of the original purchase, the CDSC will be payable
on the new shares on the basis of the time elapsed from the original purchase.
The same will be true if Class B shares of another Lord Abbett-sponsored fund
are exchanged into U.S. Government Securities Series Class B shares that are
subsequently redeemed for cash before the sixth anniversary of the original
purchase.
Waiver of Class B Sales Charges. The Class B CDSC will not be applied to shares
purchased in certain types of transactions nor will it apply to shares redeemed
in certain circumstances as described below.
The Class B CDSC will be waived for redemptions of shares (i) in connection with
the Systematic Withdrawal Plan and Div-Move services, as described in more
detail under "Shareholder Services" below; (ii) by Retirement Plans due to any
benefit payment such as plan loans, hardship withdrawals, death, retirement or
separation from service with respect to plan participants or the distribution of
any excess contributions, (iii) in connection with mandatory distributions under
403(b) plans and individual retirement accounts and (iv) in connection with the
death of the shareholder.
Class B Rule 12b-1 Plan. The Fund has adopted a Class B share Rule 12b-1 Plan
(the "B Plan") for the Class B shares of the U.S. Government Securities Series
under which the U.S. Government Securities Series periodically pays Lord Abbett
Distributor (i) an annual service fee of 0.25 of 1% of the average daily net
asset value of the Class B shares and (ii) an annual distribution fee of 0.75 of
1% of the average daily net asset value of the Class B shares that are
outstanding for less than 8 years. Lord Abbett Distributor uses the service fee
to compensate authorized institutions for providing personal services for
accounts that hold Class B shares. Those services are primarily similar to those
provided under the A Plans, described above.
Lord Abbett Distributor pays an up-front payment to authorized institutions
totaling 4%, consisting of 0.25% for service and 3.75% for a sales commission as
described below.
Lord Abbett Distributor pays the 0.25% service fee to authorized institutions in
advance for the first year after Class B shares have been sold by the authorized
institutions. After the shares have been held for a year, Lord Abbett
Distributor pays the service fee on a quarterly basis. Lord Abbett Distributor
is entitled to retain such service fee payable under the B Plan with respect to
accounts for which there is no authorized institution of record or for which
such authorized institution did not qualify. Although not obligated to do so,
Lord Abbett Distributor may waive receipt from the Fund of part or all of the
service fee payments.
The 0.75% annual distribution fee is paid to Lord Abbett Distributor to
compensate it for its services rendered in connection with the distribution of
Class B shares, including the payment and financing of sales commissions.
Although Class B shares are sold without a front-end sales charge, Lord Abbett
Distributor pays authorized institutions responsible for sales of Class B shares
a sales commission of 3.75% of the purchase price. This payment is made at the
time of sale from Lord Abbett Distributor's own resources. Lord Abbett has made
arrangements to finance these commission payments, which arrangements include
non-recourse assignments by Lord Abbett Distributor to the financing party of
such distribution and CDSC payments which are made to Lord Abbett Distributor by
shareholders who redeem their Class B shares within six years of their purchase.
The distribution fee and the CDSC payments described above allow investors in
the U.S. Government Securities Series to buy Class B shares without a front-end
sales charge while allowing Lord Abbett Distributor to compensate authorized
institutions that sell Class B shares. The CDSC is intended to supplement Lord
Abbett Distributor's reimbursement for the commission payments it has made with
respect to Class B shares and its related distribution and financing costs. The
distribution fee payments are at a fixed rate and the CDSC payments are of a
nature that, during any year, both forms of payment may not be sufficient to
reimburse Lord Abbett Distributor for its actual expenses. The Fund is not
liable for any expenses incurred by Lord Abbett Distributor in excess of (i) the
amount of such distribution fee payments to be received by Lord Abbett
Distributor and (ii) unreimbursed distribution expenses of Lord Abbett
Distributor incurred in a prior plan year, subject to the right of the Board of
Directors or shareholders to terminate the B Plan. Over the long term, the
expenses incurred by Lord Abbett Distributor are likely to be greater than such
distribution fee and CDSC payments. Nevertheless, there exists a possibility
that for a short-term period Lord Abbett Distributor may not have sufficient
expenses to warrant reimbursement by receipt of such distribution fee payments.
Although Lord Abbett Distributor undertakes not to make a profit under the B
Plan, the B Plan is considered a compensation plan (i.e., distribution fees are
paid regardless of expenses incurred) in order to avoid the possibility of Lord
Abbett Distributor not being able to receive distribution fees because of a
temporary timing difference between its incurring expenses and receipt of such
distribution fees.
<PAGE>
Automatic Conversion of Class B Shares. On the eighth anniversary of your
purchase of Class B shares, those shares will automatically convert to Class A
shares of the U.S. Government Securities Series. This conversion relieves Class
B shareholders of the higher annual distribution fee that applies to Class B
shares under the Class B Rule 12b-1 Plan. The conversion is based on the
relative net asset value of the two classes, and no sales charge or other charge
is imposed. When Class B shares convert, any other Class B shares that were
acquired by the reinvestment of dividends and distributions will also convert to
Class A shares on a pro rata basis. The conversion feature is subject to the
continued availability of a private letter ruling from the Internal Revenue
Service or an opinion of counsel described in "Purchases, Redemptions and
Shareholder Services" in the Statement of Additional Information.
Buying Class C Shares (ALL SERIES). Class C shares are sold at net asset value
per share without an initial sales charge. However, if Class C shares are
redeemed for cash before the first anniversary of their purchase, a CDSC of 1.0%
will be deducted from the redemption proceeds. That reimbursement charge will
not apply to shares purchased by the reinvestment of dividends or capital gains
distributions. The charge will be assessed on the lesser of the net asset value
of the shares at the time of redemption or the original purchase. The Class C
CDSC is paid to the Series to reimburse it, in whole or in part, for the service
and distribution fee payment made by the Series at the time such shares were
sold, as described below.
To determine whether the CDSC applies to
a redemption, the Series redeem shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for one year or more, and (3) shares held the longest before the
first anniversary of their purchase. If Class C shares of a Series are exchanged
into the same class of another Series or another Lord Abbett-sponsored fund and
subsequently redeemed before the first anniversary of their original purchase,
the charge will be collected by the other series or fund on behalf of such
Series' Class C shares. Each Series will collect such a charge for other Lord
Abbett-sponsored funds in a similar situation.
Class C Rule 12b-1 Plan. The Fund has adopted a Class C share Rule 12b-1 Plan on
behalf of each Series (the "C Plans") under which (except as to certain accounts
for which tracking data is not available) each Series pays authorized
institutions through Lord Abbett Distributor (1) a service fee and a
distribution fee, at the time shares are sold, not to exceed 0.25 and 0.75 of
1%, respectively, of the net asset value of such shares and (2) at each
quarter-end after the first anniversary of the sale of shares, fees for services
and distribution at annual rates not to exceed 0.25 and 0.75 of 1%,
respectively, of the average annual net asset value of such shares outstanding
(payments with respect to shares not outstanding during the full quarter to be
prorated). These service and distribution fees are for purposes similar to those
mentioned above with respect to the A Plan. Sales in clause (1) exclude shares
issued for reinvested dividends and distributions and shares outstanding in
clause (2) include shares issued for reinvested dividends and distributions
after the first anniversary of their issuance. Lord Abbett Distributor may
retain from the quarterly distribution fee, for the payment of distribution
expenses incurred directly by it, an amount not to exceed 0.10% of the average
annual net asset value of such shares outstanding.
6 SHAREHOLDER SERVICES
We offer the following shareholder services:
Telephone Exchange Privilege: Shares may be exchanged, without a service charge:
(a) for those of any other Lord Abbett-sponsored fund except for (i) LAEF, LARF
and LASF and (ii) certain tax-free single-state series where the exchanging
shareholder is a resident of a state in which such series is not offered for
sale and (b) for shares of any authorized institution's affiliated money market
fund satisfying Lord Abbett Distributor as to certain omnibus account and other
criteria (together, "Eligible Funds"). You or your representative with proper
identification can instruct the Fund to exchange uncertificated shares (held by
the transfer agent) by telephone. Shareholders have this privilege unless they
refuse it in writing. The Fund will not be liable for following instructions
communicated by telephone that it reasonably believes to be genuine and will
employ reasonable procedures to confirm that instructions received are genuine,
including requesting proper identification and recording all telephone
exchanges. Instructions must be received by the Fund in Kansas City
(800-821-5129) prior to the close of the NYSE to obtain each fund's net asset
value per share on that day. Expedited exchanges by telephone may be difficult
to implement in times of drastic economic or market change. The ex-change
privilege should not be used to take advantage of short-term swings in the
market. The Fund reserves the right to terminate or limit the privilege of any
shareholder who makes frequent exchanges. The Fund can revoke the privilege for
all shareholders upon 60 days' prior written notice. A prospectus for the other
Lord Abbett-sponsored fund selected by you should be obtained and read before an
exchange. Exercise of the Exchange Privilege will be treated as a sale for
federal income tax purposes and, depending on the circumstances, a capital gain
or loss may be recognized.
<PAGE>
Systematic Withdrawal Plan ("SWP"): Except for retirement plans for which there
is no such minimum, if the maximum offering price value of your uncertificated
shares is at least $10,000, you may have periodic cash withdrawals automatically
paid to you in either fixed or variable amounts. With respect to Class B shares,
the CDSC will be waived on redemptions of up to 12% per year of the current net
asset value of your account at the time your SWP is established. For Class B
shares (over 12% per year) and C shares, redemption proceeds due to a SWP will
be derived from the following sources in the order listed: (1) shares acquired
by reinvestment of dividends and capital gains, (2) shares held for six years or
more (Class B) or one year or more (Class C); and (3) shares held the longest
before the sixth anniversary of their purchase (Class B) or before the first
anniversary of their purchase (Class C). With respect to Class B shares, for
redemptions over 12% per year, the CDSC will apply to the entire redemption.
Therefore, please contact the Fund for assistance in minimizing the CDSC in this
situation. Shareholders should be careful in establishing a SWP, especially to
the extent that such a withdrawal exceeds the annual total return for a class,
in which case, the shareholder's original principal will be invaded and, over
time, may be depleted.
Div-Move: You can invest the dividends paid on your account ($50 minimum
investment) 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. Such dividends are not subject to a CDSC. You should read the
prospectus of the other fund before investing.
Invest-A-Matic: You can make fixed, periodic investments ($50 minimum
investment) into the Fund and/or any Eligible Fund by means of automatic money
transfers from your bank checking account. You should read the prospectus of the
other fund before investing.
Retirement Plans: Lord Abbett makes available the retirement plan forms and
custodial agreements for IRAs (Individual Retirement Accounts including Simple
IRAs and Simplified Employee Pensions), 403(b) plans and pension and
profit-sharing plans, including 401(k) plans.
Householding: A single copy of an annual or semi-annual report will be sent to
an address to which more than one registered shareholder of the Fund with the
same last name has indicated mail is to be delivered, unless additional reports
are specifically requested in writing or by telephone.
All correspondence should be directed to Lord Abbett Investment Trust (P.O. Box
419100, Kansas City, Missouri 64141; 800-821-5129).
7 OUR MANAGEMENT
Our business is managed by our officers on a day-to-day basis under the overall
direction of our Board of Trustees. Each Series employs Lord Abbett as
investment manager pursuant to a Management Agreement. Lord Abbett has been an
investment manager for over 67 years and currently manages approximately $21
billion in mutual funds and advisory accounts. Under the Management Agreements,
Lord Abbett provides us with investment management services and personnel, pays
the remuneration of our officers and of our trustees affiliated with Lord
Abbett, provides us with office space and pays for ordinary and necessary office
and clerical expenses relating to research, statistical work and supervision of
our portfolios and certain other costs. Lord Abbett provides similar services to
twelve other Lord Abbett-sponsored funds having various investment objectives
and also advises other investment clients. Zane E. Brown, a Lord Abbett partner
and its Director of Fixed Income, is primarily responsible for the day-to-day
management of the U.S. Government Securities Series, Limited Duration Government
Series and the fixed-income portion of the Balanced Series. Mr. Brown is
assisted by, and may delegate management duties to, other Lord Abbett employees
who may be Fund officers. E. Wayne Nordberg, a Lord Abbett partner for over five
years, has been primarily responsible for the day-to-day management of the
equity security portion of the Balanced Series since its inception. Mr. Nordberg
is assisted by, and may delegate duties to, other Lord Abbett employees who may
be Fund officers.
Under each Management Agreement, we are obligated to pay Lord Abbett a monthly
fee based on average daily net assets for each month at the annual rate of (i)
.50 of 1% of the first $3 billion of average daily net assets and .45 of 1% for
average daily net assets in excess of $3 billion (in the case of the U.S.
Government Securities Series), (ii) .50 of 1% (in the case of the Limited
Duration Government Series) and (iii) .75 of 1% (in the case of the Balanced
Series). This last fee is higher than that paid by most investment companies.
For the fiscal year ended October 31, 1996 Lord Abbett waived $28,804 in
management fees for the Limited Duration Government Series. The Class A share
ratio of expenses, including management fee expenses, to average net assets for
the year ended October 31, 1996 for the Limited Duration Government Series was
1.81%. This Class A share expense ratio would have been 2.73% had Lord Abbett
not waived all or a portion of its management fee. For the fiscal year ended
October 31, 1996 Lord Abbett waived $53,375 in management fees for the Balanced
Series. The Class A share ratio of expenses to average net assets for the same
period was .93% for the Balanced Series. Lord Abbett waived management fees and
subsidized expenses with respect to the Balanced Series. Without such waiver and
subsidy the Class A share expense ratio would have been 1.59%.
<PAGE>
The Management Agreement for each of the Limited Duration Government Series and
the Balanced Series provides for the Series to repay Lord Abbett without
interest for any expenses assumed by Lord Abbett on and after the first day of
the calendar quarter after the net assets of each such Series first reach $50
million ("commencement date"), to the extent that the expense ratio of such
Series (determined before taking into account any fee waiver or expense
assumption) is less than 1.15% (in the case of the Balanced Series) and less
than .75% (in the case of the Limited Duration Government Series). Thereafter,
such repayment of Lord Abbett by the Limited Duration Government Series will
continue on and after the first day of the calendar quarter after the net assets
of that Series first reach $100 million to the extent that the Series' expense
ratio so determined is less than .95%. Each Series shall not be obligated to
repay any such expenses after the earlier of the termination of its Agreement or
the end of five full fiscal years after the commencement date. The Series will
not record as obligations in their financial statements any expenses which may
possibly be repaid to Lord Abbett under this repayment formula, but each will
disclose in a note to its financials that such expenses are possible. However,
if such expenses become probable, they will be recorded as obligations of the
Series at that time.
We will not hold annual meetings and expect to hold meetings of shareholders
only when necessary under applicable law or the terms of the Fund's Declaration
of Trust. Under the Declaration, a shareholders' meeting may be called at the
request of the holders of one-quarter of the outstanding shares entitled to
vote. See the Statement of Additional Information for more details. The Fund.
The Fund is a diversified open-end management investment company organized as a
Delaware business trust on August 16, 1993. Its Class A, B and C shares have
equal rights as to voting, dividends, assets and liquidation except for
differences resulting from certain class-specific expenses.
8 DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
With respect to each Series, dividends from net investment income are declared
daily (Limited Duration and U.S. Government Securities) or monthly (Balanced)
and paid on the 15th of each month, or if the 15th is not a business day, on the
first business day after the 15th. Dividends for all Series may be taken in cash
or reinvested in additional shares at net asset value without a sales charge. If
you elect a cash payment (i) a check will be mailed to you as soon as possible
after the monthly reinvestment date or (ii) if you arrange for direct deposit,
your payment will be wired directly to your bank account within one day after
the payable date. You begin earning dividends on the business day on which
payment for the purchase of your shares is received. A long-term capital gains
distribution is made when we have net profits during the year from sales of
securities which we have held more than one year. If we realize net short-term
capital gains, they also will be distributed. Any capital gains distribution
will be made in December and you may take it in cash or additional shares
without a sales charge.
Supplemental dividends also may be paid in
December or January. Dividends and distributions declared in October, November
or December of any year to shareholders of record as of a date in such a month
will be treated for federal income tax purposes as having been received by
shareholders in that year if they are paid before February 1 of the following
year.
We intend to continue to meet the requirements of Subchapter M of the Internal
Revenue Code. We will try to distribute to shareholders all our net investment
income and net realized capital gains,
so as to avoid the necessity of the Fund paying federal income tax.
Distributions derived from net long-term capital gains which are designated by
the Fund as "capital gains dividends" will be taxable to shareholders as
long-term capital gains, whether received in cash or shares, regardless of how
long a taxpayer has held the shares. Under current law, net long-term capital
gains are taxed at the rates applicable to ordinary income, except that the
maximum rate for long-term capital gains for individuals is 28%. Legislation has
been proposed which would have the effect of reducing the federal income tax
rate on capital gains.
Shareholders may be subject to a $50 penalty under the Internal Revenue Code and
we may be required to withhold and remit to the U.S. Treasury a portion (31%) of
any redemption proceeds (including the value of shares exchanged into another
Lord Abbett-sponsored fund), and of any dividend or distribution on any account
where the payee failed to provide a correct taxpayer identification number or to
make certain required certifications.
We will inform shareholders of the federal tax status of each dividend and
distribution shortly after year-end. Shareholders should consult their tax
advisers concerning applicable state and local taxes as well as on the tax
consequences of gains or losses from the redemption, repurchase or exchange of
our shares.
<PAGE>
9 REDEMPTIONS
To obtain the proceeds of an expedited redemption of $50,000 or less, you or
your representative with proper identification can telephone the Fund. The Fund
will not be liable for following instructions communicated by telephone that it
reasonably believes to be genuine and will employ reasonable procedures to
confirm that instructions received are genuine, including requesting proper
identification, recording all telephone redemptions and mailing the proceeds
only to the named shareholder at the address appearing on the account
registration.
If you do not qualify for the expedited procedures described above to redeem
shares directly, send your request to Lord Abbett Investment Trust (P.O. Box
419100, Kansas City, Missouri 64141) with signature(s) and any legal capacity of
the signer(s) guaranteed by an eligible guarantor, accompanied by any
certificates for shares to be redeemed and other required documentation. We will
make payment of the net asset value of the shares on the date the redemption
order was received in proper form. Payment will be made within three business
days. The Fund may suspend the right to redeem shares for not more than three
days (or longer under unusual circumstances as permitted by Federal law). If you
have purchased Fund shares by check and subsequently submit a redemption
request, redemption proceeds will be paid upon clearance of your purchase check,
which may take up to 15 days. To avoid delays you may arrange for the bank upon
which a check was drawn to communicate to the Fund that the check has cleared.
Shares also may be redeemed by the Fund at net asset value through your
securities dealer who, as an unaffiliated dealer, may charge you a fee. If your
dealer receives your order prior to the close of the NYSE and communicates it to
Lord Abbett, as our agent, prior to the close of Lord Abbett's business day, you
will receive the net asset value of the shares being redeemed as of the close of
the NYSE on that day. If the dealer does not communicate such an order to Lord
Abbett until the next business day, you will receive the net asset value as of
the close of the NYSE on that next business day.
Shareholders who have redeemed their shares have a one-time right to reinvest
into another account having the identical registration in any of the Eligible
Funds, at the then applicable net asset value (i) without the payment of a
front-end sales charge or (ii) with reimbursement for the payment of any CDSC.
Such reinvestment must be made within 60 days of the redemption and is limited
to no more than the amount of the redemption proceeds.
Under certain circumstances and subject to prior written notice, our Trustees
may authorize redemption of all of the shares in any account in which there are
fewer than 50 shares.
Tax-qualified Plans: For redemptions of $50,000 or less, follow normal
redemption procedures. Redemptions over $50,000 must be received by the Fund
prior to, or concurrent with, the redemption request.
10 PERFORMANCE
With the addition of the U.S. Government Securities Series to the Fund following
the acquisition of the shares of Lord Abbett U.S. Government Securities Fund,
Inc. and the Lord Abbett U.S. Government Securities Trust Series of Lord Abbett
Securities Trust in July 1996, the Fund's fiscal year-end changed to November
30. At the close of the new fiscal year, the combined assets of the three
portfolios were $2.9 billion. Over the past year, stock market averages climbed
to new heights and bond markets, while volatile, also performed well. The
Balanced Series was allocated 55% in stocks and 45% in bonds at the close of the
fiscal year. The equity portion benefited from its exposure to financial
companies, which performed well.
Both the U.S. Government Securities Series and the Limited Duration U.S.
Government Series maintained heavy weightings in mortgage-backed securities over
the course of the fiscal year.
Yield and Total Return. Yield and total return data may, from time to time, be
included in advertisements about each Series. Each class of shares calculates
its yield by dividing the annualized net investment income per share during a
recent 30-day period by the maximum public offering price per share on the last
day of that period. The yield of each class will differ because of the different
expenses (including actual 12b-1 fees) of each class of shares. The yield data
represents a hypothetical investment return on the portfolio, and does not
measure an investment return based on dividends actually paid to shareholders.
To show that return, a dividend distribution rate may be calculated. Dividend
distribution rate is calculated by dividing the dividends of a class derived
from net investment income during a stated period by the maximum offering price
on the last day of the period. Yields and dividend distribution rate for Class A
shares reflect the deduction of the maximum initial sales charge, but may also
be shown based on the Fund's net asset value per share. Yields for Class B and
Class C shares do not reflect the deduction of the CDSC.
"Total return" for the one-, five- and ten-year periods represents the average
annual compounded rate of return on an investment of $1,000 in a Series at the
maximum public offering price. When total return is quoted for Class A shares it
includes the payment of the maximum initial sales charge. When total return is
shown for Class B and Class C shares, it reflects the effect of the applicable
CDSC. Total return also may be presented for other periods or based on
investment at reduced sales charge levels or net asset value. Any quotation of
total return not reflecting the maximum sales charge (front-end, back-end or
level) would be reduced if such sales charge were used. Quotations of yield or
total return for any period when an expense limitation is in effect will be
greater than if the limitation had not been in effect. Our Series' distribution
rates differ from our yields primarily because the Series may purchase short-
and intermediate-term high-coupon securities at a premium and, consistent with
applicable tax regulations, distribute to shareholders all of the interest
income on these securities without amortizing the premiums. This practice also
is used by these Series for financial statement purposes and is in accordance
with generally accepted accounting principles. In other words, these Series may
pay more than face value for a security that pays a greater-than-market rate of
interest and then distribute all such interest as dividends. The principal
payable on the security at maturity will equal face value, and so the market
value of the security will gradually decrease to face value, assuming no changes
in the market rate of interest or in the credit quality of the issuer.
Shareholders should recognize that such dividends will therefore tend to
decrease the net asset value of these Series. Dividends paid from this interest
income are taxable to shareholders at ordinary income rates. This Prospectus
does not constitute an offering in any jurisdiction in which such offer is not
authorized or in which the person making such offer is not qualified to do so or
to anyone to whom it is unlawful to make such offer. No person is authorized to
give information or to make any representations not contained in this Prospectus
or in supplemental literature authorized by the Fund, and no person is entitled
to rely upon any information or representation not contained herein or therein.
<PAGE>
The performance of the Class A shares of each multi-class Series which is shown
in the comparisons below will be greater than or less than that shown below for
Class B and Class C shares based on the differences in sales charges and fees
paid by shareholders investing in the different classes.
Comparison of change in value of a $10,000 investment in Class A shares of U.S.
Government Securities Series (formerly the Lord Abbett U.S. Government
Securities Fund), assuming reinvestment of all dividends and distributions,
Lipper's Average of General U.S. Government bond funds and the Lehman Government
Bond Index.
<TABLE>
<CAPTION>
THE FUND THE FUND LIPPER'S AVG LEHMAN
AT NET AT MAXIMUM OF GENERAL GOVERNMENT
ASSET OFFERING U.S. GOV'T BOND
DATE VALUE PRICE BOND FUNDS FUNDS
<S> <C> <C> <C> <C>
11/30/86 10000 9516 10000 10000
11/30/87 10035 9550 9986 10118
11/30/88 11003 10471 10791 10917
11/30/89 12285 11690 12088 12496
11/30/90 13245 12604 12925 13402
11/30/91 15146 14413 14565 15176
11/30/92 16546 15745 15752 16549
11/30/93 18316 17429 17423 18549
11/30/94 17538 16689 16564 17883
11/30/95 20151 19175 19312 20994
11/30/96 21037 20019 20092 22107
</TABLE>
Comparison of change in value of a $10,000 investment in Class A shares of
Balanced Series and the Merrill Lynch Wilshire Capital Market Index.
<TABLE>
<CAPTION>
The Series The Series Merrill Lynch
at Net at Maximum Wilshire Capital
Date Asset Value Offering Price Markets Index
<S> <C> <C> <C>
12/27/94 $10000 $9525 $10000
10/31/95 11632 11080 12248
10/31/96 12976 12359 14048
</TABLE>
<PAGE>
Comparison of change in value of a $10,000 investment in Class A shares of
Limited Duration Government Series, Lipper's Average Short and Intermediate U.S.
Government Funds and the Lehman Intermediate Government Index.
<TABLE>
<CAPTION>
The Series The Series Lippers Average Lippers Average Lehman
at Net at Maximum Intermediate U.S. Short U.S. Intermediate
Date Asset Value Offering Price Government Funds Government Funds Gov't Index
<S> <C> <C> <C> <C> <C>
11/4/93 $10000 $9700 $10000 $10000 $10000
10/31/94 9691 9400 9575 9873 9799
10/31/95 10482 10168 10733 10659 11165
10/31/96 10762 10439 11223 11208 11899
</TABLE>
(1)Data reflects the deduction of the maximum sales charge as follows: 4.75% for
the U.S. Government Securities Series and the Balanced Series and 3.00% for the
Limited Duration Government Series. (2)Source: Lipper Analytical Services.
(3)Performance numbers for the unmanaged Lehman Intermediate Government Index,
Lehman Government Bond Index and Merrill Lynch Wilshire Capital Market Index do
not reflect transaction costs or management fees. An investor cannot invest
directly in these Indices. (4)Total return is the percent change in value, after
deduction of the maximum sales charge of 3.00%, applicable to Class A shares of
the Limited Duration Government Series and 4.75%, applicable to Class A shares
of the Balanced and U.S. Government Securities Series, with all dividends and
distributions reinvested for the periods shown ending October 31, 1996, with
respect to the Balanced and Limited Duration Government Series and November 30,
1996, with respect to the U.S. Government Securities Series using the
SEC-required uniform method to compute such return. (5)The Class B shares were
first offered on 8/1/96. Performance numbers are not annualized. Performance
reflects the deduction of a 5% CDSC. (6)The Class C shares were first offered on
7/12/96. Performance numbers are not annualized. Performance reflects the
deduction of a 1% CDSC.
<PAGE>
Investment Manager and Underwriter
Lord, Abbett & Co. and Lord Abbett Distributor LLC
The General Motors Building
767 Fifth Avenue
New York, New York 10153-0203
212-848-1800
Custodian
The Bank of New York
48 Wall Street
New York, New York 10286
Transfer Agent and Dividend
Disbursing Agent
United Missouri Bank of Kansas City, N.A.
Tenth and Grand
Kansas City, Missouri 64141
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419100
Kansas City, Missouri 64141 800-821-5129
Auditors
Deloitte & Touche LLP Counsel
Debevoise & Plimpton Printed in the U.S.A.
<PAGE>
LORD ABBETT
STATEMENT OF ADDITIONAL INFORMATION MARCH 1, 1997
LORD ABBETT INVESTMENT TRUST
- -------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord Abbett Distributor LLC
("Lord Abbett Distributor") at The General Motors Building, 767 Fifth Avenue,
New York, New York 10153-0203. This Statement relates to, and should be read in
conjunction with, the Prospectus dated March 1, 1997.
Lord Abbett Investment Trust (referred to as the "Fund") was organized as a
Delaware business trust on August 16, 1993. The Fund's trustees have authority
to create separate classes and series of shares of beneficial interest, without
further action by shareholders. The Fund has three series--Lord Abbett U.S.
Government Securities Series, Lord Abbett Limited Duration U.S. Government
Securities Series and Lord Abbett Balanced Series (sometimes referred to as
"U.S. Government Securities Series", "Limited Duration Government Series" and
"Balanced Series", respectively, or "we" or the "Series", individually or
collectively). The U.S. Government Securities Series offers three classes of
shares: Class A, Class B and Class C. The Limited Duration Government Series and
the Balanced Series offer two classes of shares: Class A and Class C. 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. Further classes or series may be added in the future. The
Investment Company Act of 1940, as amended (the "Act") requires that where more
than one class or series exists, each class or series must be preferred over all
other classes or series in respect of assets specifically allocated to such
class or series.
Rule 18f-2 under the Act provides that any matter required to be submitted, by
the provisions of the Act or applicable state law or otherwise, to the holders
of the outstanding voting securities of an investment company such as the Fund
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each class or series affected
by such matter. Rule 18f-2 further provides that a class or series shall be
deemed to be affected by a matter unless the interests of each class or series
in the matter are substantially identical or the matter does not affect any
interest of such class or series. However, the Rule exempts the selection of
independent public accountants, the approval of principal distributing contracts
and the election of trustees from its separate voting requirements.
Shareholder inquiries should be made by writing directly to the Fund or by
calling 800-821-5129. In addition, you can make inquiries through your dealer.
TABLE OF CONTENTS Page
1. Investment Policies.......................................2
2. Trustees and Officers.....................................5
3. Investment Advisory and Other Services....................7
4. Portfolio Transactions....................................8
5. Purchases, Redemptions
and Shareholder Services..................................9
6. Performance..............................................16
7. Taxes....................................................18
8. Information About the Fund...............................18
9. Financial Statements.....................................19
<PAGE>
1.
Investment Policies
FUNDAMENTAL INVESTMENT RESTRICTIONS
We are subject to the following investment restrictions which cannot be changed
without approval of a majority of our outstanding shares. Each Series may not:
(1) borrow money, except that (i) each Series may borrow from banks (as defined
in the Act) in amounts up to 33 1/3% of its total assets (including the amount
borrowed), (ii) each Series may borrow up to an additional 5% of its total
assets for temporary purposes, (iii) each Series may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of portfolio
securities and (iv) each Series may purchase securities on margin to the extent
permitted by applicable law; (2) pledge its assets (other than to secure
borrowings, or to the extent permitted by the Series' 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 series may lend its portfolio
securities, provided that the lending of portfolio securities may be made only
in accordance with applicable law; (5) buy or sell real estate (except that each
Series may invest in securities directly or indirectly secured by real estate or
interests therein or issued by companies which invest in real estate or
interests therein) or commodities or commodity contracts (except to the extent
each Series may do so in accordance with applicable law and without registering
as a commodity pool operator under the Commodity Exchange Act as, for example,
with futures contracts)); (6) with respect to 75% of its gross assets, buy
securities of one issuer representing more than (i) 5% of the its gross assets,
except securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or (ii) 10% of the voting securities of such issuer; (7)
invest more than 25% of its assets, taken at market value, in the securities of
issuers in any particular industry (excluding securities of the U.S. Government,
its agencies and instrumentalities); (8) issue senior securities to the extent
such issuance would violate applicable law or (9) (with respect to the U.S.
Government Securities Series only) invest in securities other than U.S.
Government securities, as described in the Prospectus.
With respect to the restrictions mentioned herein, compliance therewith will not
be affected by changes in the market value of portfolio securities but will be
determined at the time of purchase or sale of such securities.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
In addition to the investment restrictions above which cannot be changed without
shareholder approval, we also are subject to the policies described in the
Prospectus and the following investment policies which may be changed by the
Board of Trustees without shareholder approval. Each Series may not: (1) borrow
in excess of 5% of its gross assets taken at cost or market value, whichever is
lower at the time of borrowing, and then only as a temporary measure for
extraordinary or emergency purposes; (2) make short sales of securities or
maintain a short position except to the extent permitted by applicable law; (3)
invest knowingly more than 15% of its net assets (at the time of investment) in
illiquid securities, except for securities qualifying for resale under Rule 144A
of the Securities Act of 1933, deemed to be liquid by the Board of Trustees; (4)
invest in the securities of other investment companies except as permitted by
applicable law; (5) invest in securities of issuers which, with their
predecessors, have a record of less than three years' continuous operations, if
more than 5% of the Series' total assets would be invested in such securities
(this restriction shall not apply to mortgaged-backed securities, asset-backed
securities or obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities); (6) hold securities of any issuer if more than
1/2 of 1% of the securities of such issuer are owned beneficially by one or more
officers or trustees of the series or by one or more partners or members of the
Fund's underwriter or investment adviser if these owners in the aggregate own
beneficially more than 5% of the securities of such issuer; (7) invest in
warrants if, at the time of the acquisition, its investment in warrants, valued
at the lower of cost or market, would exceed 5% of the Series' total assets
(included within such limitation, but not to exceed 2% of the Series' total
assets, are warrants which are not listed on the New York or American Stock
Exchange or a major foreign exchange); (8) invest in real estate limited
partnership interests or interests in oil, gas or other mineral leases,
2
<PAGE>
or exploration or other development programs, except that the Fund may invest in
securities issued by companies that engage in oil, gas or other mineral
exploration or other development activities; (9) write, purchase or sell puts,
calls, straddles, spreads or combinations thereof, except to the extent
permitted in the Fund's prospectus and statement of additional information, as
they may be amended from time to time; or (10) buy from or sell to any of its
officers, trustees, employees, or its investment adviser or any of its officers,
trustees, partners or employees, any securities other than shares of beneficial
interest in such series.
Although there is no current intention to do so, each Series may invest in
financial futures and options on financial futures.
LENDING PORTFOLIO SECURITIES
Each Series may lend portfolio securities to registered brokers-dealers. These
loans, if and when made, may not exceed 30% of the Series' total assets. The
Series' loans 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 in an amount at least equal
to the market value of the loaned securities. From time to time, the each series
may pay a part of the interest received with respect to the investment of
collateral to the borrower and/or a third party that is not affiliated with the
Fund and is acting as a "placing broker." No fee will be paid to affiliated
persons of the Fund.
By lending portfolio securities, each Series can increase its income by
continuing to receive income 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 such U.S. Government securities or other forms of non-cash
collateral are used as security. Each series will comply with the following
conditions whenever it loans securities: (i) the Series must receive at least
100% collateral from the borrower; (ii) the borrower must increase the
collateral whenever the market value of the securities loaned rises above the
level of the collateral; (iii) the Series must be able to terminate the loan at
any time; (iv) the Series must receive reasonable compensation with respect to
the loan, as well as any dividends, interest or other distributions on the
loaned securities; (v) the Series 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 the Fund has knowledge of a material event adversely
affecting the investment in the loaned securities, the Fund must terminate the
loan and regain the right to vote the securities.
REPURCHASE AGREEMENTS
Each Series may enter into repurchase agreements with respect to a security. A
repurchase agreement is a transaction by which the Series acquires a security
and simultaneously commits to resell that security to the seller (a bank or
securities dealer), and the seller commits to repurchase that security, at an
agreed upon price on an agreed upon date. The resale price reflects the purchase
price plus an agreed upon market rate of interest which is unrelated to the
coupon rate or date of maturity of the purchased security. (In this type of
transaction, the securities purchased by the Series have a total value in excess
of the value of the repurchase agreement.) Each Series requires at all times
that the repurchase agreement be collateralized by cash or U.S. Government
securities having a value equal to, or in excess of, the value of the repurchase
agreement. Such agreements permit the Series 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 provide additional
collateral or to repurchase the underlying securities at a time when the value
of these securities has declined, the Series 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 Series 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 for each Series to transactions with dealers and
3
<PAGE>
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.
Each Series will enter into repurchase agreements only with those primary
reporting dealers that report to the Federal Reserve Bank of New York and with
the 100 largest United States commercial banks and the underlying securities
purchased under the agreements will consist only of those securities in which
the Series otherwise may invest.
WHEN-ISSUED TRANSACTIONS
As stated in the Prospectus, each Series may purchase portfolio securities on a
when-issued basis. When-issued transactions involve a commitment by the Series
to purchase securities, with payment and delivery ("settlement") to take place
in the future, in order to secure what is considered to be an advantageous price
or yield at the time of entering into the transaction. The value of fixed-income
securities to be delivered in the future will fluctuate as interest rates vary.
During the period between purchase and settlement, the value of the securities
will fluctuate and assets consisting of cash and/or marketable securities
(normally short-term U.S. Government securities) marked to market daily in an
amount sufficient to make payment at settlement will be segregated at our
custodian in order to pay for the commitment. There is a risk that market yields
available at settlement may be higher than yields obtained on the purchase date
which could result in depreciation of value of fixed-income when-issued
securities. At the time each Series makes the commitment to purchase a security
on a when-issued basis, it will record the transaction and reflect the liability
for the purchase and the value of the security in determining its net asset
value. Each Series, generally, has the ability to close out a purchase
obligation on or before the settlement date rather than take delivery of the
security. Under no circumstance will settlement for such securities take place
more than 120 days after the purchase date.
AVERAGE DURATION
The Limited Duration Government Series limits its average dollar weighted
portfolio duration to a range of one to four years. However, many of the
securities in which the Series invests will have remaining durations in excess
of four years.
Some of the securities in the Limited Duration Government Series' portfolio may
have periodic interest rate adjustments based upon an index such as the 91-day
Treasury Bill rate. This periodic interest rate adjustment tends to lessen the
volatility of the security's price. With respect to securities with an interest
rate adjustment period of one year or less, the Limited Duration Government
Series will, when determining average-weighted duration, treat such a security's
maturity as the amount of time remaining until the next interest rate
adjustment.
Instruments such as GNMA, FNMA, FHLMC securities and similar securities backed
by amortizing loans generally have shorter effective maturities than their
stated maturities. This is due to changes in amortization caused by demographic
and economic forces such as interest rate movements. These effective maturities
are calculated based upon historical payment patterns and therefore have shorter
duration than would be implied by their stated final maturity. For purposes of
determining the Limited Duration Government Series' average maturity, the
maturities of such securities will be calculated based upon the issuing agency's
payment factors using industry-accepted valuation models.
PORTFOLIO TURNOVER
For the fiscal year ended October 31, 1996, the portfolio turnover rate was
340.62% for the Limited Duration Government Series compared to 222.00% for the
previous year and for the one month ended November 30, 1996 was 175.98%. For the
year ended October 31, 1996, the portfolio turnover rate for the equity portion
of the Balanced Series was 62.34% and 363.31% for the fixed-income portion of
the Balanced Series compared to 131.80% for the period December 27, 1994 through
October 31, 1995.
On July 12, 1996, the Fund acquired the assets of the U.S. Government Securities
Fund, Inc. (the "Acquired Fund"), in exchange for the shares of the newly
created U.S. Government Securities Series. For the fiscal year ended November
30, 1996, the portfolio turnover rate was 820.59%, versus 544.31% for the prior
year for the Acquired Fund.
4
<PAGE>
As discussed above, each Series may purchase U.S. Government securities on a
when-issued basis with settlement taking place after the purchase date (without
amortizing any premiums). This investment technique is expected to contribute
significantly to portfolio turnover rates. However, it will have little or no
transaction cost or adverse tax consequences. Transaction costs normally will
exclude brokerage because each Series' fixed-income portfolio transactions are
usually on a principal basis and any markups charged normally will be more than
offset by the beneficial economic consequences anticipated at the time of
purchase or no purchase will be made. Generally, short-term losses on short-term
U.S. Government securities purchased under this investment technique tend to
offset any short-term gains due to such high portfolio turnover.
2.
Trustees and Officers
The following trustees are partners of Lord Abbett, The General Motors Building,
767 Fifth Avenue, New York, New York 10153-0203. They have been associated with
Lord Abbett for over five years and are also an officers and/or directors or
trustees of the twelve other Lord Abbett-sponsored funds. They are "interested
persons" as defined in the Act, and as such, may be considered to have an
indirect financial interest in the Rule 12b-1 Plan described in the Prospectus.
Robert S. Dow, age 51, Chairman and President
E. Wayne Nordberg, 58, Vice President and Trustee
The following outside trustees are also directors or trustees of the twelve
other Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow
Time Warner Cable
300 First Stamford Place
Stamford, Connecticut
President and Chief Executive Officer of Time Warner Cable Programming, Inc.
Formerly President and Chief Operating Officer of Home Box Office, Inc. Age 55.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 66.
John C. Jansing 162 S. Beach Road Hobe Sound, Florida Retired. Former Chairman
of Independent Election Corporation of America, a proxy tabulating firm. Age 71.
C. Alan MacDonald
The Marketing Partnership, Inc.
27 Signal Road
Stamford, Connecticut
General Partner, The Marketing Partnership, Inc., a full service marketing
consulting firm. Formerly President & CEO of Nestle Foods Corp, and prior to
that, President & CEO of Stouffer Foods Corp., both subsidiaries of Nestle SA,
5
<PAGE>
Switzerland. Currently serves as Director of Den West Restaurant Co., J. B.
Williams, and Fountainhead Water Company. Age 63.
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 68.
Thomas J. Neff
Spencer Stuart & Associates
277 Park Avenue
New York, New York
Chairman of Spencer Stuart U.S., an executive search consulting firm. Age 59.
The second column of the following table sets forth the compensation accrued for
the Fund's outside trustees. The third and fourth columns set forth information
with respect to the retirement plan for outside trustees maintained by the Lord
Abbett-sponsored funds. The fifth column sets forth the total compensation
payable by such funds to the outside trustees. No trustees of the Fund
associated with Lord Abbett and no officer of the Fund received any compensation
from the Fund for acting as a trustee or officer.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1996
(1) (2) (3) (4) (5)
Pension or Estimated Annual For Year Ended
Retirement Benefits Benefits Upon December 31, 1995
Accrued by the Retirement Proposed Total Compensation
Aggregate Fund and to be Paid by the Accrued by the Fund and
Compensation Twelve Other Lord Fund and Twelve Twelve Other Lord
Accrued by Abbett-sponsored Other Lord Abbett- Abbett-sponsored
NAME OF DIRECTOR THE FUND1 FUNDS SPONSORED FUNDS2 FUNDS3
E. Thayer Bigelow $10,590 $11,563 $50,000 $41,700
Stewart S. Dixon $10,314 $22,283 $50,000 $42,000
John C. Jansing $10,371 $28,242 $50,000 $42,960
C. Alan MacDonald $10,649 $29,942 $50,000 $42,750
Hansel B. Millican, Jr. $10,970 $24,499 $50,000 $43,000
Thomas J. Neff $10,348 $15,990 $50,000 $42,000
<FN>
1. Outside trustees fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on net
assets of each fund. A portion of the fees payable by the Fund to its outside
trustees are being deferred under a plan that deems the deferred amounts to
be invested in shares of the Fund for later distribution to the trustees. The
amounts of the aggregate compensation payable by the Fund as of November 30,
1996, deemed invested in Fund shares, including dividends reinvested and
changes in net asset value applicable to such deemed investments, were: Mr.
Bigelow, $27,143; Mr. Dixon, $101,138; Mr. Jansing, $125,269; Mr. MacDonald,
$80,318; Mr. Millican, $126,245 and Mr. Neff, $125,238.
2. Each Lord Abbett-sponsored fund has a retirement plan providing that outside
trustees may receive annual retirement benefits for life equal to 100% of
their final annual retainers following retirement at or after age 72 with at
least 10 years of service. Each plan also provides for a reduced benefit upon
early retirement under certain circumstances, a pre-retirement death benefit
and actuarially reduced joint-and-survivor spousal benefits. Such retirement
plans, and the deferred compensation plans referred to in footnote one, have
been amended recently to, among other things, enable outside trustees to
elect to convert their prospective benefits under the retirement plans to
equity-based benefits under the deferred compensation plans (to be renamed
the equity-based plans). The amounts accrued in column 3 were accrued by the
Lord Abbett-sponsored funds during the fiscal year ended November 30, 1996
with respect to the retirement plans. These accruals were based on the
retirement plans as in effect before the recent
6
<PAGE>
amendments and on the fees payable to outside trustees of the Fund during the
year ended November 30, 1996. Under the recent amendments, the annual retainer
was increased to $50,000 and retirement benefits were increased from 80% to
100% of a director's final annual retainer. The amounts stated in column 4
would be payable annually under the retirement plans as recently amended if
the directors were to retire at age 72 and the annual retainers payable by the
funds were the same as they are today.
3.This column shows aggregate compensation, including trustees fees and
attendance fees for board and committee meetings, of a nature referred to in
footnote one, accrued by the Lord Abbett-sponsored funds during the year ended
December 31, 1995.
</FN>
</TABLE>
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Allen, Brown, Carper, Cutler, Ms. Foster Messrs. Morris, Noelke and Walsh are
partners of Lord Abbett; the others are employees: Zane E. Brown, age 45,
Executive Vice President; Kenneth B. Cutler, age 64, Vice President and
Secretary; Stephen I. Allen, age 43; Daniel E. Carper, age 45; Robert S. Dow,
age 51; Daria L. Foster, age 42; Robert G. Morris, age 52; Robert J. Noelke, age
40; E. Wayne Nordberg, age 59; Paul A. Hilstad, age 54 (with Lord Abbett since
1995 - formerly Senior Vice President and General Counsel of American Capital
Management & Research, Inc.); Thomas F. Konop, age 54; A. Edward Oberhaus, age
36; John J. Walsh, age 60, Vice Presidents; and Keith F. O'Connor, age 41, Vice
President and Treasurer.
The Fund does not hold annual meetings of shareholders unless one or more
matters are required to be acted on by shareholders under the Act. Under the
Fund's Declaration of Trust, shareholder meetings may be called at any time by
certain officers of the Fund or by a majority of the trustees (i) for the
purpose of taking action upon any matter requiring the vote or authority of the
Fund's shareholders or upon other matters deemed to be necessary or desirable or
(ii) upon the written request of the holders of at least one-quarter of the
shares of the Series outstanding and entitled to vote at the meeting.
As of February 1, 1997, our officers and trustees as a group owned less than 1%
of the outstanding shares of the Limited Duration Government Series, Balanced
Series and U.S. Government Securities Series.
3.
Investment Advisory and Other Services
As described under "Our Management" in the Prospectus, Lord Abbett is the Fund's
investment manager. The ten general partners of Lord Abbett, all of whom are
officers and/or directors of the Fund, are: Stephen I. Allen, Zane E. Brown,
Daniel E. Carper, Kenneth B. Cutler, Robert S. Dow, Daria L. Foster, Robert G.
Morris, Robert J. Noelke, E. Wayne Nordberg and John J. Walsh. The address of
each partner is The General Motors Building, 767 Fifth Avenue, New York, New
York 10153-0203.
The services performed by Lord Abbett are described under "Our Management" in
the Prospectus. Under each Management Agreement, we are obligated to pay Lord
Abbett a monthly fee, based on average daily net assets for each month, at the
annual rate of .50 of 1% (in the case of the U.S. Government Securities Series
and the Limited Duration Government Series) and .75 of 1% (in the case of the
Balanced Series). These fees are allocated among the classes of each Series
based on the class' proportionate share of each Series average daily net assets.
Each Series pays all of its expenses not expressly assumed by Lord Abbett,
including, without limitation, 12b-1 expenses, outside trustees' fees and
expenses, association membership dues, legal and audit fees, taxes, transfer and
dividend disbursing agent fees, shareholder servicing costs, expenses relating
to shareholder meetings, expenses of preparing, printing and mailing share
certificates and shareholder reports, expenses of registering our shares under
federal and state securities laws, expenses of preparing, printing and mailing
prospectuses to existing shareholders, insurance premiums and brokerage and
other expenses connected with executing portfolio transactions.
The management fees paid to Lord Abbett by the Limited Duration Government
Series for the period November 4, 1993 (commencement of operations) to October
31, 1994 and the fiscal years ended October 31, 1995 and 1996 amounted to
$46,153, $15,561 and $9,897, respectively. For the one month ended November 30,
1996 the management fee paid to Lord Abbett by the Limited Duration Government
Series was $2,770.
7
<PAGE>
The management fees paid to Lord Abbett by the Balanced Series for the period
December 27, 1994 (commencement of operations) to October 31, 1995, the fiscal
year ended October 31, 1996 and the one month ended November 30, 1996 were $0,
$8,607 and $2,240, respectively.
The management fees paid to Lord Abbett by the Acquired Fund ( and subsequent to
July 12, 1996 by the U.S. Government Securities Series) for the fiscal years
ended November 30, 1994, 1995 and 1996 were $17,590,000, $16,286,000 and
$15,053,629, respectively. Prior to July 12, 1996 these fees were attributable
to the Class A shares of all of the above Series only. For the period August 1,
1996 to November 30 ,1996 with respect to the Class B shares such management
fees were $4,094. For the period July 12, 1996 to November 30, 1996 with respect
to the Class C shares such management fees were $538,618.
Although not obligated to do so, Lord Abbett has waived and may waive all or
part of its management fees and has assumed or may assume other expenses of the
Limited Duration U.S. Government Securities Series and Balances Series. For the
fiscal year ended October 31, 1996 and for the one month ended November 30,
1996, Lord Abbett waived $28,804 and $2,657 in management fees for the Limited
Duration Government Series. With respect to the Balanced Series, for the fiscal
year ended October 31, 1996 and for the one month ended November 30, 1996, Lord
Abbett waived $53,375 and $4,638 in management fees.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281, are
the independent public accountants of the Fund and must be approved at least
annually by our trustees to continue in such capacity. Deloitte & Touche LLP
perform audit services for the Fund including the examination of financial
statements included in our annual report to shareholders.
Bank of New York, 40 Wall Street, New York, New York, is the Fund's custodian.
4.
Portfolio Transactions
It is expected that purchases and sales of each Series' fixed-income portfolio
securities usually will be principal transactions and normally such securities
will be purchased directly from the issuer or from an underwriter or market
maker for the securities. Therefore, each Series usually will pay no brokerage
commissions for such purchases. Purchases from underwriters of portfolio
securities will include a commission or concession paid by the issuer to the
underwriter and purchases from dealers serving as market makers will include a
dealer's markup. Principal transactions, including riskless principal
transactions, are not afforded the protection of the safe harbor in Section 28
(e) of the Securities Exchange Act of 1934.
Each Series' policy is to have purchases and sales of portfolio securities
executed at most favorable prices, considering all costs of the transaction
including brokerage commissions and dealer markups and markdowns, consistent
with obtaining best execution, except to the extent that we may pay a higher
commission rate as described below. This policy governs the selection of brokers
or dealers and the market in which the transaction is executed. To the extent
permitted by law, we may, if considered advantageous, make a purchase from or
sale to another Lord Abbett-sponsored fund without the intervention of any
dealer.
Broker-dealers are selected on the basis of their professional capability and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of the 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 the negotiation of
prices and any commissions.
We may pay a brokerage commission on the purchase or sale of a security that
could be purchased from or sold to a market maker if our net cost of the
purchase or the net proceeds to us of the sale are at least as favorable as we
could obtain on a direct purchase or sale. Brokers who receive such commissions
may also provide research services at least
8
<PAGE>
some of which are useful to Lord Abbett in their overall responsibilities with
respect to us and the other accounts they manage. Research includes trading
equipment and computer software packages, acquired from third-party suppliers,
that enable Lord Abbett to access various information bases and may include the
furnishing of analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
Such services may be used by Lord Abbett in servicing all their accounts, and
not all of such services will necessarily be used by Lord Abbett in connection
with their management of the Fund; conversely, such services furnished in
connection with brokerage on other accounts managed by Lord Abbett may be used
in connection with their management of the Fund, and not all of such services
will necessarily be used by Lord Abbett in connection with their advisory
services to such other accounts. We have been advised by Lord Abbett that
research services received from brokers cannot be allocated to any particular
account, are not a substitute for Lord Abbett's services but are supplemental to
their own research effort and, when utilized, are subject to internal analysis
before being incorporated by Lord Abbett into their investment process. As a
practical matter, it would not be possible for Lord Abbett to generate all of
the information presently provided by brokers. While receipt of research
services from brokerage firms has not reduced Lord Abbett's normal research
activities, the expenses of Lord Abbett could be materially increased if it
attempted to generate such additional information through its own staff and
purchased such equipment and software packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or
among brokers, and trades are executed only when they are dictated by investment
decisions of the Fund to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold our shares and/or
shares of other Lord Abbett-sponsored funds may be preferred.
If other clients of Lord Abbett buy or sell the same security at the same time
as we do, transactions will, to the extent practicable, be allocated among all
participating accounts in proportion to the amount of each order and will be
executed daily until filled so that each account shares the average price and
commission cost of each day. Other clients who direct that their brokerage
business be placed with specific brokers or who invest through wrap accounts
introduced to Lord Abbett by certain brokers may not participate with us in the
buying and selling of the same securities as described above. If these clients
wish to buy or sell the same security as we do, they may have their transactions
executed at times different from our transactions and thus may not receive the
same price or incur the same commission cost as we do.
We will not seek "reciprocal" dealer business (for the purpose of applying
commissions in whole or in part for our benefit or otherwise) from dealers as
consideration for the direction to them of portfolio business.
During the period from November 4, 1993 to October 31, 1994, the fiscal year
ended October 31,1995, and 1996 and the one month ended November 30, 1996, the
Limited Duration Government Series paid no commissions to independent brokers.
For the period December 27, 1994 to October 31, 1995, the fiscal year ended
October 31, 1996 and the one month ended November 30, 1996 the Balanced Series
paid total commissions to independent brokers of $4,566, $7,364 and $767.
5.
Purchases, Redemptions
and Shareholder Services
Securities in each Series' portfolio are valued at their market values as of the
close of the NYSE. Market value will be determined as follows: securities listed
or admitted to trading privileges on any national securities exchange are valued
at the last sales price on the principal securities exchange on which such
securities are traded or, if there is no sale, at the mean between the last bid
and asked prices on such exchange or, in the case of bonds, in the
over-the-counter market if, in the judgment of the Fund's officers, that market
more accurately reflects the market value of the bonds. Securities traded only
in the over-the-counter market are valued at the mean between the bid and asked
prices, except that securities admitted to trading on the NASDAQ National Market
System are valued at the last sales price. Securities for which market
quotations are not available are valued at fair value under procedures approved
by the Board of Trustees.
9
<PAGE>
With respect to the Balanced Series, all assets and liabilities expressed in
foreign currencies will be converted into United States dollars at the mean
between the buying and selling rates of such currencies against United States
dollars last quoted by any major bank. If such quotations are not available, the
rate of exchange will be determined in accordance with policies established by
the Board of Trustees of the Fund. The Board of Trustees will monitor, on an
ongoing basis, the Fund's method of valuation.
Information concerning how we value our shares for the purchase and redemption
of our shares is described in the Prospectus under "Purchases" and Redemptions",
respectively.
As disclosed in the Prospectus, we calculate our net asset value and are
otherwise open for business on each day that the New York Stock Exchange
("NYSE") is open for trading. The NYSE is closed on Saturdays and Sundays and
the following holidays -- New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The net asset value per share for the Class B shares of the U.S. Government
Securities Series and the Class C shares will be determined in the same manner
as for the Class A shares (net assets divided by shares outstanding). Our Class
B and Class C shares will be sold at net asset value.
The offering price of Class A shares of the Limited Duration Government Series
and the Balanced Series for the periods indicated below
were computed as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
One Month Ended
OCTOBER 31, 1996 NOVEMBER 30, 1996
--------------------------------- -------------------
Limited Duration Limited Duration
Government Balanced Government Balanced
SERIES SERIES SERIES SERIES
Net asset value per share (net assets divided
by shares outstanding)..................................$4.39 $11.30 $4.42 $11.81
Maximum offering price per share - net asset
value divided by (.9700 for Limited Duration
Government Series) and (.9525 for Balanced Series) $4.53 $11.86 $4.56 $12.40
</TABLE>
The offering price of Class A shares of the U.S. Government Securities Series
for the fiscal year ended November 30, 1996 was computed as follows:
Net asset value per
share (net assets divided
by shares outstanding)....................................$2.63
Maximum offering price per share - net asset
value (divided by .9525)................................$2.76
The offering price of Class C shares of the Limited Duration Government Series
and the Balanced Series for the periods indicated below were computed as
follows:
10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
One Month Ended
OCTOBER 31, 1996 NOVEMBER 30, 1996
-------------------------------- --------------------
Limited Duration Limited Duration
Government Balanced Government Balanced
SERIES SERIES SERIES SERIES
Net asset value per share (net assets divided
by shares outstanding).............................$4.39 $11.29 $4.42 $11.79
</TABLE>
The Fund has entered into a distribution agreement with Lord Abbett Distributor
LLC, a New York limited liability company ("Lord Abbett Distributor"), under
which Lord Abbett Distributor is obligated to use its best efforts to find
purchasers for the shares of the Fund, and to make reasonable efforts to sell
Fund shares so long as, in Lord Abbett Distributor's judgment, a substantial
distribution can be obtained by reasonable efforts.
Since commencement of operations, Lord Abbett as our principal underwriter
received net commissions after allowance of a portion of the sales charge to
independent dealers with respect to Class A shares of the Limited Duration U.S.
Government Securities Series and the Balanced Series as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
November 4, 1993
to Year ended Year ended One month ended
OCTOBER 31, 1994 OCTOBER 31, 1995 OCTOBER 31, 1996 NOVEMBER 30, 1996
Gross sales charge $102,403 $205,002 $140,941 $8,059
Amount allowed
to dealers $ 87,791 $192,792 $123,303 $7,068
Net Commissions received
by Lord Abbett $ 14,612 $ 12,210 $ 17,638 $ 991
======== ======== ======== =====
</TABLE>
For the fiscal years ended November 30, 1994, 1995 and 1996, Lord Abbett as
principal underwriter received net commissions after allowance of a portion of
the sales charge to independent dealers with respect to Class A shares of the
Acquired Fund (and subsequent to July 12, 1996, the U.S. Government Securities
Series) as follows:
1994 1995 1996
---- ---- ----
Gross sales charge $14,334,294 $8,891,483 $4,248,800
Amount allowed
to dealers $12,360,904 $7,684,528 $3,623,071
Net Commissions received
by Lord Abbett $1,973,390 $1,206,955 $625,729
CONVERSION OF CLASS B SHARES. The conversion of Class B shares of the U.S.
Government Securities Series on the eighth anniversary of their purchase is
subject to the continuing availability of a private letter ruling from the
Internal
11
<PAGE>
Revenue Service or an opinion of counsel to the effect that the conversion of
Class B shares does not constitute a taxable event for the holder under Federal
income tax law. If such a revenue ruling or opinion is no longer available, the
automatic conversion feature may be suspended, in which event no further
conversions of Class B shares would occur while such suspension remained in
effect. Although Class B shares could then be exchanged for Class A shares on
the basis of relative net asset value of the two classes, without the imposition
of a sales charge or fee, such exchange could constitute a taxable event for the
holder.
CLASS A, B AND C RULE 12B-1 PLANS. As described in the Prospectus, the Fund has
adopted a Distribution Plan and Agreement on behalf of each Series pursuant to
Rule 12b-1 of the Act for each class of shares available in the applicable
series: the "A Plan", the "B Plan" (U.S. Government Securities Series only) and
the "C Plan", respectively. In adopting each Plan and in approving its
continuance, the Board of Trustees has concluded that there is a reasonable
likelihood that each Plan will benefit its respective Class and such Class'
shareholders. The expected benefits include greater sales and lower redemptions
of Class shares, which should allow each Class to maintain a consistent cash
flow, and a higher quality of service to shareholders by authorized institutions
than would otherwise be the case. Both the B Plan and the C Plans were adopted
by the Fund subsequent to its last fiscal year. Lord Abbett used all amounts
received under the A Plan for payments to dealers for (i) providing continuous
services to the Class A shareholders, such as answering shareholder inquiries,
maintaining records, and assisting shareholders in making redemptions,
transfers, additional purchases and exchanges and (ii) their assistance in
distributing Class A shares of the Fund.
Each Plan requires the Board of Trustees to review, on a quarterly basis,
written reports of all amounts expended pursuant to the Plan and the purpose for
which such expenditures were made. Each Plan shall continue in effect only if
its continuance is specifically approved at least annually by vote of the Fund's
Board of Trustees and of the Fund's trustees who are not interested persons of
the Fund and who have no direct or indirect financial interest in the operation
of the Plan or in any agreements related to the Plan ("outside trustees"), cast
in person at a meeting called for the purpose of voting on such Plan and
agreements. No Plan may be amended to increase materially the amount spent for
distribution expenses without approval by a majority of the outstanding voting
securities of the appropriate class and the approval of a majority of the
trustees including a majority of the Fund's outside trustees. Each Plan may be
terminated at any time by vote of a majority of the Fund's outside trustees or
by vote of a majority of its Class's outstanding voting securities.
CONTINGENT DEFERRED SALES CHARGES. A Contingent Deferred Sales Charge ("CDSC"),
applies upon early redemption of shares regardless of class, and (i) will be
assessed on the lesser of the net asset value of the shares at the time of
redemption or the original purchase price and (ii) 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. (ALL SERIES) As stated in the Prospectus, a CDSC is imposed with
respect to those Class A shares (or Class A shares of another Lord
Abbett-sponsored fund or series acquired through exchange of such shares) on
which a Series has paid the one-time 1% distribution fee if such shares are
redeemed out of the Lord Abbett-sponsored family of funds within a period of 24
months from the end of the month in which the original sale occurred.
CLASS B SHARES. ( U.S. GOVERNMENT SECURITIES SERIES ONLY) As stated in the
Prospectus, if Class B shares (or Class B shares of another Lord
Abbett-sponsored fund or series acquired through exchange of such shares) are
redeemed out of the Lord Abbett-sponsored family of funds for cash before the
sixth anniversary of their purchase, a CDSC will be deducted from the redemption
proceeds. The Class B CDSC is paid to Lord Abbett Distributor to reimburse its
expenses, in whole or in part, of providing distribution-related service to the
Series in connection with the sale of Class B shares.
To determine whether the CDSC applies to a redemption, the Series redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held on or after the sixth anniversary
of their purchase, and (3) shares held the longest before such sixth
anniversary.
12
<PAGE>
The amount of the contingent deferred sales charge will depend on the number of
years since you invested and the dollar amount being redeemed, according to the
following schedule:
Anniversary of Contingent Deferred Sales Charge
Purchase on Redemptions (As % of Amount
Subject to Charge)
Before the 1st..........................................5.0%
On the 1st, before the 2nd..............................4.0%
On the 2nd, before the 3rd..............................3.0%
On the 3rd, before the 4th..............................3.0%
On the 4th, before the 5th..............................2.0%
On the 5th, before the 6th .............................1.0%
On or after the 6th anniversary.........................None
In the table, an "anniversary" is the 365th day subsequent to the acceptance of
a purchase order or a prior anniversary. All purchases are considered to have
been made on the business day on which the purchase order was accepted.
CLASS C SHARES (ALL SERIES). As stated in the Prospectus, if Class C shares are
redeemed for cash before the first anniversary of their purchase, the redeeming
shareholder will be required to pay to the Series on behalf of Class C shares a
CDSC of 1% of the lower of cost or the then net asset value of Class C shares
redeemed. If such shares are exchanged into the same class of another Lord
Abbett-sponsored fund and subsequently redeemed before the first anniversary of
their original purchase, the charge will be collected by the other fund on
behalf of this Series' Class C shares.
GENERAL. Each percentage (1% in the case of Class A and C shares and 5% through
1% in the case of Class B shares) used to calculate CDSCs described above for
the Class A, Class B and Class C shares is sometimes hereinafter referred to as
the "Applicable Percentage".
With respect to Class A and Class B shares, no CDSC is payable on redemptions by
participants or beneficiaries from employer-sponsored retirement plans under the
Internal Revenue Code for benefit payments due to plan loans, hardship
withdrawals, death, retirement or separation from service and for returns of
excess contributions to retirement plan sponsors With respect to Class A shares
purchased pursuant to a special retirement wrap program, no CDSC is payable on
redemptions which continue or investments in another fund participating in the
program. In the case of Class A and Class C shares, the CDSC is received by the
Series and is intended to reimburse all or a portion of the amount paid by the
Series if the shares are redeemed before the Series has had an opportunity to
realize the anticipated benefits of having a long-term shareholder account in
the Series. In the case of Class B shares, the CDSC is received by Lord Abbett
Distributor and is intended to reimburse its expenses of providing
distribution-related service to the Series (including recoupment of the
commission payments made) in connection with the sale of Class B shares before
Lord Abbett Distributor has had an opportunity to realize its anticipated
reimbursement by having such a long-term shareholder account subject to the B
Plan distribution fee.
The other funds and series which participate in the Telephone Exchange Privilege
(except (a) Lord Abbett U.S. Government Securities Money Market Fund, Inc.
("GSMMF"), (b) certain series of Lord Abbett Tax-Free Income Fund and Lord
Abbett Tax-Free Income Trust for which a Rule 12b-1 Plan is not yet in effect,
and (c) any authorized institution's affiliated money market fund satisfying
Lord Abbett Distributor as to certain omnibus account and other criteria,
hereinafter referred to as an "authorized money market fund" or "AMMF"
(collectively, the "Non-12b-1 Funds")) have instituted a CDSC for each class on
the same terms and conditions. No CDSC will be charged on an exchange of shares
of the same class between Lord Abbett funds or between such funds and AMMF. Upon
redemption of shares out of the Lord Abbett family of funds or out of AMMF, the
CDSC will be charged on behalf of and paid: (i) to the fund in which the
original purchase (subject to a CDSC) occurred, in the case of the Class A and
Class C shares and (ii) to Lord Abbett Distributor if the original purchase was
subject to a CDSC, in the case of the Class B shares. Thus, if shares of a Lord
Abbett fund are exchanged for shares of the same class of another such fund and
the shares of the same class tendered ("Exchanged Shares") are subject to a
CDSC, the CDSC will carry over to the shares of the same class being acquired,
including GSMMF and AMMF ("Acquired Shares"). Any CDSC that is carried over to
13
<PAGE>
Acquired Shares is calculated as if the holder of the Acquired Shares had held
those shares from the date on which he or she became the holder of the Exchanged
Shares. Although the Non-12b-1 Funds will not pay a distribution fee on their
own shares, and will, therefore, not impose their own CDSC, the Non-12b-1 Funds
will collect the CDSC (a) on behalf of other Lord Abbett funds, in the case of
the Class A and Class C shares and (b) on behalf of Lord Abbett Distributor, in
the case of the Class B shares. Acquired Shares held in GSMMF and AMMF which are
subject to a CDSC will be credited with the time such shares are held in GSMMF
but will not be credited with the time such shares are held in AMMF. Therefore,
if your Acquired Shares held in AMMF qualified for no CDSC or a lower Applicable
Percentage at the time of exchange into AMMF, that Applicable Percentage will
apply to redemptions for cash from AMMF, regardless of the time you have held
Acquired Shares in AMMF.
In no event will the amount of the CDSC exceed the Applicable Percentage of the
lesser of (i) the net asset value of the shares redeemed or (ii) the original
cost of such shares (or of the Exchanged Shares for which such shares were
acquired). No CDSC will be imposed when the investor redeems (i) amounts derived
from increases in the value of the account above the total cost of shares being
redeemed due to increases in net asset value, (ii) shares with respect to which
no Lord Abbett fund or series paid a 12b-1 fee and, in the case of Class B
shares, Lord Abbett Distributor paid no sales charge or service or Series fee
(including shares acquired through reinvestment of dividend income and capital
gains distributions) or (iii) shares which, together with Exchanged Shares, have
been held continuously for 24 months from the end of the month in which the
original sale occurred (in the case of Class A shares); for six years or more
(in the case of Class B shares) or for one year or more (in the case of Class C
shares). In determining whether a CDSC is payable, (a) shares not subject to the
CDSC will be redeemed before shares subject to the CDSC and (b) of the shares
subject to a CDSC, those held the longest will be the first to be redeemed.
EXCHANGES. The Prospectus briefly describes the Telephone Exchange Privilege.
You may exchange some or all of your shares for those of (i) Lord
Abbett-sponsored funds currently offered to the public with a sales charge
(front-end, back-end or level), (ii) GSMMF or (iii) AMMF, to the extent offers
and sales may be made in your state. You should read the prospectus of the other
fund before exchanging. In establishing a new account by exchange, shares of the
Fund being exchanged must have a value equal to at least the minimum initial
investment required for the fund into which the exchange is made.
Shareholders in other Lord Abbett-sponsored funds have the same right to
exchange their shares for the corresponding class of the Series' shares.
Exchanges are based on relative net asset values on the day instructions are
received by the Fund in Kansas City if the instructions are received prior to
the close of the NYSE in proper form. No sales charges are imposed except in the
case of exchanges out of GSMMF or AMMF (unless a sales charge (front-end,
back-end or level) was paid on the initial investment in a Lord Abbett sponsored
fund). Exercise of the exchange privilege will be treated as a sale for federal
income tax purposes, and, depending on the circumstances, a gain or loss may be
recognized. In the case of an exchange of shares that have been held for 90 days
or less where no sales charge is payable on the exchange, the original sales
charge incurred with respect to the exchanged shares will be taken into account
in determining gain or loss on the exchange only to the extent such charge
exceeds the sales charge that would have been payable on the acquired shares had
they been acquired for cash rather than by exchange. The portion of the original
sales charge not so taken into account will increase the basis of the acquired
shares.
Shareholders have the exchange privilege unless they refuse it in writing. You
should not view the exchange privilege as a means for taking advantage of
short-term swings in the market, and we reserve the right to terminate or limit
the privilege of any shareholder who makes frequent exchanges. We can revoke or
modify the privilege for all shareholders upon 60 days' prior notice. "Eligible
Funds" are AMMF and other Lord Abbett-sponsored funds which are eligible for the
exchange privilege, except Lord Abbett Series Fund ("LASF") which offers its
shares only in connection with certain variable annuity contracts, Lord Abbett
Equity Fund ("LAEF") which is not issuing shares, and series of Lord Abbett
Research Fund not offered to the general public ("LARF").
STATEMENT OF INTENTION. Under the terms of the Statement of Intention to invest
$50,000 or more over a 13-month period as described in the Prospectus, shares of
Lord Abbett-sponsored funds (other than shares of LAEF, LASF, LARF, and GSMMF,
unless holdings in GSMMF are attributable to shares exchanged from a Lord
Abbett-sponsored fund
14
<PAGE>
offered with a front-end, back-end or level sales charge) currently owned by you
are credited as purchases (at their current offering prices on the date the
Statement is signed) toward achieving the stated investment and reduced initial
sales charges for Class A shares. Class A shares valued at 5% of the amount of
intended purchases are escrowed and may be redeemed to cover the additional
sales charge payable if the Statement is not completed. The Statement of
Intention is neither a binding obligation on you to buy, nor on the Fund to
sell, the full amount indicated.
RIGHTS OF ACCUMULATION. As stated in the Prospectus, purchasers (as defined in
the Prospectus) may accumulate their investment in Lord Abbett-sponsored funds
(other than LAEF, LARF, LASF, and GSMMF, unless holdings in GSMMF are
attributable to shares exchanged from a Lord Abbett-sponsored fund offered with
a front-end, back-end or level sales charge) so that a current investment, plus
the purchaser's holdings valued at the current maximum offering price, reach a
level eligible for a discounted sales charge for Class A shares.
NET ASSET VALUE PURCHASES OF CLASS A SHARES. As stated in the Prospectus, our
Class A shares may be purchased at net asset value by our trustees, 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 "trustees" and "employees" include a trustee's or
employee's spouse (including the surviving spouse of a deceased director or
employee). The terms " directors" and "employees of Lord Abbett" also include
other family members and retired trustees and employees.
Our Class A shares also may be purchased at net asset value (a) at $1 million or
more, (b) with dividends and distributions from Class A shares of other Lord
Abbett-sponsored funds, except for LARF, LAEF and LASF, (c) under the loan
feature of the Lord Abbett-sponsored prototype 403(b) plan for share purchases
representing the repayment of principal and interest, (d) by certain authorized
brokers, dealers, registered investment advisers or other financial institutions
who have entered into an agreement with Lord Abbett Distributor in accordance
with certain standards approved by Lord Abbett Distributor, providing
specifically for the use of our shares in particular investment products made
available for a fee to clients of such brokers, dealers, registered investment
advisers and other financial institutions, ("mutual fund wrap fee program"), (e)
by employees, partners and owners of unaffiliated consultants and advisors to
Lord Abbett, Lord Abbett Distributor or Lord Abbett-sponsored funds who consent
to such purchase if such persons provide service to Lord Abbett, Lord Abbett
Distributor or such funds on a continuing basis and are familiar with such
funds, (f) through Retirement Plans with at least 100 eligible employees, (g)
our Class A shares also may be purchased at net asset value, subject to
appropriate documentation, through a securities dealer where the amount invested
represents redemption proceeds from shares ("Redeemed Shares") of a registered
open-end management investment company not distributed or managed by Lord Abbett
(other than a money market fund), if such redemption has occurred no more than
60 days prior to the purchase of our shares, the Redeemed Shares were held for
at least six months prior to redemption and the proceeds of redemption were
maintained in cash or a money market fund prior to purchase. Purchasers should
consider the impact, if any, of contingent deferred sales charges in determining
whether to redeem shares for subsequent investment in our Class A shares. Lord
Abbett may suspend, change or terminate this purchase option referred to in (g)
above at any time, we plan that on June 1, 1997 the net asset value transfer
privilege will be terminated, and (h) through a "special retirement wrap
program" sponsored by an authorized institution showing one or more
characteristics distinguishing it, in the opinion of Lord Abbett Distributor
from a mutual fund wrap program. Such characteristics include, among other
things, the fact that an authorized institution does not charge its clients any
fee of a consulting or advisory nature that is economically equivalent to the
distribution fee under Class A 12b-1 Plan and the fact that the program relates
to participant-directed Retirement Plan with respect to the U.S. Government
Securites Series only, . 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.
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
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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 30 days' prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
DIV-MOVE. Under the Div-Move service described in the Prospectus, you can invest
the dividends paid on your account 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 Fund and/or any
other Eligible Fund is described in the Prospectus. To avail yourself of this
method you must complete the application form, selecting the time and amount of
your bank checking account withdrawals and the funds for investment, include a
voided, unsigned check and complete the bank authorization.
SYSTEMATIC WITHDRAWAL PLANS. The Systematic Withdrawal Plan (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. With respect to a
SWP for Class B shares, on redemptions over 12% per year,the CDSC will apply to
the entire redemption. Therefore, please contact the Fund for assistance in
minimizing the CDSC in this situation . With respect to Class C shares, the CDSC
will be waived on and after the first anniversary of their purchase. The SWP
involves the planned redemption of shares on a periodic basis by receiving
either fixed or variable amounts at periodic intervals. Since the value of
shares redeemed may be more or less than their cost, gain or loss may be
recognized for income tax purposes on each periodic payment. Normally, you may
not make regular investments at the same time you are receiving systematic
withdrawal payments because it is not in your interest to pay a sales charge on
new investments when in effect a portion of that new investment is soon
withdrawn. The minimum investment accepted while a withdrawal plan is in effect
is $1,000. The SWP may be terminated by you or by us at any time by written
notice.
RETIREMENT PLANS. The Prospectus indicates the types of retirement plans for
which Lord Abbett provides forms and explanations. Lord Abbett makes available
the retirement plan forms and custodial agreements for IRAs (Individual
Retirement Accounts including Simple IRAs and Simplified Employee Pensions),
403(b) plans and qualified pension and profit-sharing plans, including 401(k)
plans. The forms name Investors Fiduciary Trust Company as custodian and contain
specific information about the plans. Explanations of the eligibility
requirements, annual custodial fees and allowable tax advantages and penalties
are set forth in the relevant plan documents. Adoption of any of these plans
should be on the advice of your legal counsel or qualified tax adviser.
6.
Performance
Each Series computes the average annual compounded rate of total return for each
Class during specified periods that would equate the initial amount invested to
the ending redeemable value of such investment by adding one to the computed
average annual total return, raising the sum to a power equal to the number of
years covered by the computation and multiplying the result by $1,000, which
represents a hypothetical initial investment. The calculation assumes deduction
of the maximum sales charge (as described in the next paragraph) from the amount
invested and
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reinvestment of all income dividends and capital gains distributions on the
reinvestment dates at net asset value. The ending redeemable value is determined
by assuming a complete redemption at the end of the period(s) covered by the
average annual total return computation.
In calculating total returns for Class A shares, the current maximum sales
charge of 3.0% with respect to the Balanced Series and 4.75% with respect to the
Limited Duration Government and U.S. Government Securities Series (as a
percentage of the offering price) is deducted from the initial investment
(unless the return is shown at net asset value). For Class B shares of the U.S.
Government Securities Series, the payment of the applicable CDSC (5.0% prior to
the first anniversary of purchase, 4.0% prior to the second anniversary of
purchase, 3.0% prior to the third and fourth anniversaries of purchase, 2.0%
prior to the fifth anniversary of purchase, 1.0% prior to the sixth anniversary
of purchase and no CDSC on and after the sixth anniversary of purchase) is
applied to the Series' investment result for that class for the time period
shown (unless the total return is shown at net asset value). For Class C shares,
the 1.0% CDSC is applied to the applicable Series' investment result for that
class for the time period shown prior to the first anniversary of purchase
(unless the total return is shown at net asset value). Total returns also assume
that all dividends and capital gains distributions during the period are
reinvested at net asset value per share, and that the investment is redeemed at
the end of the period.
Using the method to compute average annual compounded total return described
above, the total annual return for the Acquired Fund (and subsequent to July 12,
1996 for the U.S. Government Securities Series) for the one, five and ten year
periods ended November 30, 1996 was -0.70%, 5.73% and 7.18% for the Class A
shares. The total return for the Limited Duration Government Series for the
period from November 4, 1993 (commencement of operations) to October 31, 1994
and the fiscal year ended October 31, 1996 were 1.45% and -0.40% for the Class A
shares. For the period December 27, 1994 (commencement of operations) to October
31, 1995 and the fiscal year ended October 31, 1996 the total returns for the
Balanced Series were 12.16% and 6.20% for the Class A shares. The ending
redeemable value of shares of the Limited Duration Government Series and the
Balanced Series for the fiscal year ended October 31, 1996 were $996 and $1,062,
respectively. The ending redeemable values for the Acquired Fund (and subsequent
to July 12, 1996 for the U.S. Government Securities Series) for the one, five
and ten year periods ended November 30, 1996 were, $993, $1,321 and $2,002,
respectively.
The total return for Class C shares of the Limited Duration Government
Securities and Balanced Series for the period July 15, 1996 to October 31, 1996
and the one month ended November 30, 1996 were 1.97% and 6.72%, respectively.
The total return for Class C shares of the U.S. Government Securities Series for
the period July 15, 1996 to November 30, 1996 was 5.34%
The total return for Class B shares of the Acquired Fund for the period August
1, 1996 to November 30, 1996 was 0.13%.
Each Series' yield quotation is based on a 30-day period ended on a specified
date, computed by dividing our net investment income per share earned during the
period by our maximum offering price per share on the last day of the period.
This is determined by finding the following quotient: take the Series' dividends
and interest earned during the period minus its expenses accrued for the period
and divide by the product of (i) the average daily number of Series shares
outstanding during the period that were entitled to receive dividends and (ii)
the Series' at 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 the multiplication and the remainder is
multiplied by two. Yield for the Class A shares reflects the deduction of the
maximum initial sales charge, but may also be shown based on the Fund's net
asset value per share. Yields for Class B and C shares do not reflect the
deduction of the CDSC. For the 30-day period ended October 31, 1996, the Limited
Duration Government Series and Balanced Series yields were 3.24% and 2.54%,
respectively. For the 30-day period ended on November 30, 1996, the yield for
the U.S. Government Securities Series was 4.24%.
It is important to remember that any figures developed using the formulas above
represent past performance and an investor should be aware that the investment
return and principal value of the Series investment will fluctuate so that
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an investor's shares, when redeemed, may be worth more or less than their
original cost. Therefore, there is no assurance that this performance will be
repeated in the future.
7.
Taxes
The value of any shares redeemed, repurchased or otherwise sold may be more or
less than your tax basis in the shares at the time the redemption, repurchase or
sale is made. Any gain or loss generally will be taxable for federal income tax
purposes. Any loss realized on the sale, redemption or repurchase of Series
shares which you have held for six months or less will be treated for federal
income tax purposes as a long-term capital loss to the extent of any capital
gains distributions which you received with respect to such shares. Losses on
the sale of Series 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 stock or securities that are substantially identical.
Each Series will be subject to a 4% nondeductible excise tax on certain amounts
not distributed (and not treated as having been distributed) on a timely basis
in accordance with a calendar year distribution requirement. Each Series intends
to distribute to shareholders each year an amount adequate to avoid the
imposition of such excise tax. Dividends paid by the Series will qualify for the
dividends-received deduction for corporations to the extent that they are
derived from dividends paid by domestic corporations.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to United States persons (United States citizens or residents and
United States domestic corporations, partnerships, trusts and estates). Each
shareholder who is not a United States person should consult his tax adviser
regarding the U.S. and foreign tax consequences of the ownership of shares of
each Series, including a 30% (or lower treaty rate) United States withholding
tax on dividends representing ordinary income and net short-term capital gains
and the applicability of United States gift and estate taxes to non-United
States persons who own Series shares.
8.
Information About the Fund
SHAREHOLDER LIABILITY. Delaware law provides that Fund shareholders shall be
entitled to the same limitations of personal liability extended to shareholders
of private corporations for profit. The courts of some states, however, may
decline to apply Delaware law on this point. The Fund's Declaration of Trust
contains an express disclaimer of shareholder liability for the acts,
obligations, or affairs of the Fund or any series and requires that a disclaimer
be given in each contract entered into or executed by the Fund. The Declaration
provides for indemnification out of the Fund's property of any shareholder or
former shareholder held personally liable for the obligations of the Fund. Thus,
the risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which Delaware law does not apply, no
contractual limitation of liability was in effect and the portfolio is unable to
meet its obligations. Lord Abbett believes that, in view of the above, the risk
of personal liability to shareholders is extremely remote.
GENERAL. The assets of the Fund received for the issue or sale of the shares of
each Series and all income, earnings, profits, and proceeds thereof, subject
only to the rights of creditors, are especially allocated to each Series, and
constitute the underlying assets of such Series. The underlying assets of each
Series are recorded on the books of account of the Fund, and are to be charged
with the liabilities with respect to such Series and with a share of the general
expenses of the Fund. Expenses with respect to the Fund are to be allocated in a
manner and on a basis (generally in proportion to relative assets) deemed fair
and equitable by the trustees. In the event of the dissolution or liquidation of
the Fund, the holders of the shares of each Series are entitled to receive as a
class the underlying assets of such Series available for distribution.
Under the Fund's Declaration of Trust, the trustees may, upon shareholder vote,
cause the Fund to merge or consolidate into, or sell and convey all or
substantially all of, the assets of the Fund or any Series to one or more
trusts, partnerships
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or corporations, so long as the surviving entity is an open-end management
investment company that will succeed to or assume the Fund's registration
statement. In addition, the trustees may, without shareholder vote, cause the
Fund to be incorporated under Delaware law.
Derivative actions on behalf of the Fund or any Series may be brought only by
shareholders owning not less than 50% of the then outstanding shares of the Fund
or any Series, as applicable.
The directors, trustees and officers of Lord Abbett-sponsored mutual funds,
together with the partners and employees of Lord Abbett, are permitted to
purchase and sell securities for their personal investment account. In engaging
in personal securities transactions, however, such persons are subject to
requirements and restrictions contained in the Fund's Code of Ethics which
complies, in substance, with each of the recommendations of the Investment
Company Institute's Advisory Group on Personal Investing. Among other things,
the Code requires that Lord Abbett partners and employees obtain advance
approval before buying or selling securities, submit confirmations and quarterly
transaction reports, and obtain approval before becoming a director of any
company; and it prohibits such persons from investing in a security seven days
before or after any Lord Abbett-sponsored fund trades in such security,
profiting from trades of the same security within 60 days and trading on
material non-public information. The Code imposes similar requirements and
restrictions on the independent Trustees of the Fund to the extent contemplated
by the recommendations of such Advisory Group.
9.
Financial Statements
The financial statements for fiscal year ended November 30, 1996 and the report
of Deloitte & Touche LLP, independent public accountants, on such annual
financial statements contained in the 1996 Annual Report to Shareholders of the
Lord Abbett Investment Trust are incorporated herein by reference to such
financial statements and report in reliance upon the authority of Deloitte &
Touche LLP as experts in auditing and accounting.
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