1933 Act File No. 33-68090
1940 Act File No. 811-7988
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 16 [X]
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [X]
OF 1940
Amendment No. 15 [X]
LORD ABBETT INVESTMENT TRUST
Exact Name of Registrant as Specified in Charter
767 FIFTH AVENUE, NEW YORK, N. Y. 10153-0203
Address of Principal Executive Office
Registrant's Telephone Number (212) 848-1800
Thomas F. Konop, Vice President
767 FIFTH AVENUE, NEW YORK, N. Y. 10153
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
__ immediately on filing pursuant to paragraph (b) of Rule 485
__ on (date)pursuant to paragraph (b) of Rule 485
__ 60 days after filing pursuant to paragraph (a) (1) of Rule 485
x on November 30, 1998 pursuant to paragraph (a) (1) of Rule 485
__ 75 days after filing pursuant to paragraph (a) (2) of Rule 485
__ on (date) pursuant to paragraph (a) (3) of Rule 485
If appropriate, check the following box:
___ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
LORD ABBETT INVESTMENT TRUST
N-1A
Cross Reference Sheet
Post-Effective Amendment No. 16
Pursuant to Rule 481(a)
This Post-Effective Amendment No. 16 (the "Amendment") to the Registrant's
Registration Statement relates only to Lord Abbett High Yield Fund, a new series
of Lord Abbett Investment Trust.
The other series and classes of shares of the Registrant are listed below and
are offered by the Prospectus and Statement of Additional Information in Parts A
and B, respectively, of the Post-Effective Amendment to the Registrant's
Registration Statement as identified. The following are separate series and/or
classes of shares of the Registrant. This Amendment does not relate to, amend or
otherwise affect the Prospectus and Statement of Additional Information
contained in the prior Post-Effective Amendments listed below, and pursuant to
Rule 485(d) under the Securities Act of 1933, does not affect the effectiveness
of such prior Post-Effective Amendments.
Strategic Core Series - Class Y Post-Effective Amendment No. 12
Core Series - Class Y Post-Effective Amendment No. 13
U.S. Government Securities Series; Post-Effective Amendment No. 14
U.S. Government Limited Duration Series;
Balanced Series
Form N-1A Location In Prospectus or
Item No. Statement of Additional Information
1 Cover Page
2 Fee Table
3 N/A
4 (a) (i) Cover Page
4 (a) (ii)I Investment Objectives
4 (b) (c) How We Invest
5 (a) (b) (c) Our Management; Last Page
5 (d) N/A
5 (e) Our Management
5 (f) N/A
5 (g) Purchases
6 (a) Cover Page
6 (b) (c) (d) N/A
6 (e) Cover Page; Purchases
6 (f) (g) Dividends, Capital Gains
Distributions and Taxes
7 (a) Back Cover Page
7 (b) (c) (d) Purchases
8 (a) (b) (c) (d) Redemptions
Purchases, Redemptions and Shareholder
Services
9 N/A
10 Cover Page
11 Cover Page -- Table of Contents
12 N/A
13 (a) (b) (c) (d) Investment Objectives and Policies
14 Trustees and Officers
15 (a) (b) (c) Trustees and Officers
16 (a) (i) Investment Advisory and Other
Services
16 (a) (ii) Trustees and Officers
16 (a) (iii) Investment Advisory and Other
Services
16 (b) Investment Advisory and Other Services
16 (c) (d) (e) (g) N/A
16 (f) Purchases, Redemptions and Shareholder
Services
16 (h) Investment Advisory and Other Services
16 (i) N/A
17 (a) Portfolio Transactions
17 (b) N/A
17 (c) Portfolio Transactions
17 (d) (e) N/A
18 (a) Cover Page
18 (b) N/A
Form N-1A Location in Prospectus or
Item No. Statement of Additional Information
19 (a) (b) Purchases; Redemptions and
Shareholder Services; Notes to
Financial Statements
19 (c) N/A
20 Taxes
21 (a) Purchases, Redemptions and Shareholder
Services
21 (b) (c) N/A
22 N/A
22 (b) Past Performance
23 Financial Statements; Supplementary
<PAGE>
This Prospectus sets forth concisely the information about Lord Abbett High
Yield Fund. ("we" or the "Fund") that you should know before investing. Please
read this Prospectus before investing and retain it for future reference.
This Prospectus offers classes designated Class A, B, and C shares which
provide investors with different purchase options. See "Purchases" for a
description of these choices.
Our investment objective is high current income and the opportunity for
capital appreciation to produce a high total return. There can be no assurance
that this objective will be achieved.
The Statement of Additional Information dated November __, 1998, has been
filed with the Securities and Exchange Commission and is incorporated by
reference into this Prospectus. You may obtain it, without charge, by writing to
the Fund or by calling 800-874-3733. Ask for "Part B of the Prospectus -- the
Statement of Additional Information." In addition, the Commission maintains a
website (http://www.sec.gov) that contains the Statement of Additional
Information, other material incorporated by reference, and other information
regarding registrants that file electronically with the Commission.
Shaded terms are defined in the Glossary of Terms.
Mutual Fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank. Shares are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency. An investment in
the Fund involves risks, including the possible loss of principal.
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.
LORD ABBETT
HIGH YIELD FUND
PROSPECTUS
November __, 1998
TABLE OF CONTENTS PAGE
How We Invest 2
Risk Factors 2
Portfolio Management 2
Investor Expenses 2
Purchases 3
Opening Your Account 5
Shareholder Services 5
Redemptions 6
Dividends and Capital Gains 7
Our Management 7
Investment Policies, Risks and Limits 7
Sales and Service Compensation
and Activities 9
Glossary of Terms 10
LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
The General Motors Building
767 Fifth Avenue o New York o New York o 10153
(800) 426-1130
<PAGE>
HOW WE INVEST
Normally, we invest in lower-rated debt securities, which entail greater risks
than investments in higher-rated debt securities. The former are referred to
colloquially as "junk bonds."
We believe that a high total return (current income and capital
appreciation) may be derived from an actively managed, diversified security
portfolio. Under normal circumstances, we invest at least 65% of our total
assets in lower-rated debt securities, some of which are convertible into
common stocks or have warrants to purchase common stocks.
We seek unusual values, particularly in lower-rated debt securities, some
of which are convertible into common stocks or have warrants to purchase common
stocks. Higher yield on debt securities can occur during periods of inflation
when the demand for borrowed funds is high. Also, buying lower-rated bonds when
the credit risk is above average but, we think, likely to decrease, can generate
higher yields.
See "Investment Policies, Risks and Limits".
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RISK FACTORS
The lower-rated bonds in which the Fund invests involve risks that interest and
principal payments may not be made. Some issuers may default as to principal
and/or interest payments subsequent to our purchase of their securities. Through
portfolio diversification, good 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.
In addition, the value of your investment will change as the general levels of
interest rates fluctuate. When interest rates decline, share value may rise.
When interest rates rise, share value may decline. The Fund employs other
investment practices, such as investments in foreign securities, illiquid
securities and other securities, that could adversely affect performance. Before
you invest, please read "Investment Policies, Risks and Limits."
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PORTFOLIO MANAGEMENT
Christopher J. Towle, Partner of Lord Abbett & Co. ("Lord Abbett") and Executive
Vice President and Co-Portfolio Manager of the Fund, is primarily responsible
for the day-to-day management of the Fund. Mr. Towle has been with Lord Abbett
since 1988 and has over 17 years of investment experience. Mr. Towle is assisted
by, and may delegate management duties to other Lord Abbett employees who may be
Fund officers.
Michael Goldstein, serves as Co-Portfolio Manager of the Fund. Mr. Goldstein has
been with Lord Abbett since April 1997. Prior to Joining Lord Abbett, Mr.
Goldstein was a bond trader for Credit Suisse BEA Associates from August 1992
through April 1997.
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INVESTOR EXPENSES
The expenses shown below are based on estimated expenses for the current fiscal
year. Future expenses may be different than those shown.
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Bond-Debenture Fund Class A Class B Class C
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Shareholder Transaction Expenses
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Maximum Sales Load on Purchases
(as a % of offering price) 4.75% None None
Deferred Sales Charge
(See "Purchases") None 5.00% 1.00%
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Annual Fund Operating Expenses(1) (as a % of average net assets)
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Management Fee (See "Our Management") 0.60% 0.60% 0.60%
12b-1 Fees(1) 0.35% 1.00% 1.00%
Other Expenses (See "Our Management") .25% 0.25% 0.25%
Total Operating Expenses 1.20% 1.85% 1.85%
(1) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
(2) Class B shares will automatically convert to Class A shares on the eighth
anniversary of your original purchase of Class B shares.
Example
Assume an average annual return of 5% and no change in the level of expenses.
For a $1,000 investment with all dividends and distributions reinvested, you
would have paid the following total expenses assuming you sold your shares at
the end of each time period indicated.
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Share Class 1 year 3 years
- --------------------------------------------------------------------------------
Class A shares $56 $75
Class B shares(2) $66 $81
Class C shares $26 $51
You would pay the following expenses on the same investment, assuming you kept
your shares:
Class A shares $56 $75
Class B shares(2) $16 $51
Class C shares $16 $51
This example is for comparison and is not a representation of the Fund's actual
expenses and returns, either past or present.
2
<PAGE>
PURCHASES
This Prospectus offers three classes of shares, Class A, B and C. These classes
of shares represent investments in the same portfolio of securities but are
subject to different expenses. Our shares are continuously offered based on the
per share net asset value ("NAV") next computed after we accept your purchase
order submitted in proper form, plus a front-end sales charge as described
below, in the case of the Class A shares and without a front-end sales charge,
in the case of the Class B and C shares as described below. Investors should
read this section carefully to determine which class of shares represents the
best investment option for their particular situation.
Class A
o Normally offered with a front-end sales charge.
o Lower annual expenses than Class B and Class C shares.
Class B
o No front-end sales charge.
o Higher annual expenses than Class A shares.
o A contingent deferred sales charge is applied to shares sold prior to the
sixth anniversary of purchase.
o Automatically convert to Class A shares after eight years.
Class C
o No front-end sales charge.
o Higher annual expenses than Class A shares.
o A contingent deferred sales charge is applied to shares sold prior to the
first anniversary of purchase.
It may not be suitable for you to place a purchase order for Class B
shares of $500,000 or more or a purchase order for Class C shares of $1,000,000
or more. You should discuss pricing options with your investment professional.
For more information, see "Alternative Sales Arrangements" in the Statement of
Additional Information.
Class A Shares. Front-end sales charges are as follows:
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To Compute
As a % of As a % of Offering Price
Offering Your Divide
Your Investment Price Investment NAV by
- --------------------------------------------------------------------------------
Less than $50,000 4.75% 4.99% .9525
$50,000 to $99,999 4.75% 4.99% .9525
$100,000 to $249,999 3.75% 3.90% .9625
$250,000 to $499,999 2.75% 2.83% .9725
$500,000 to $999,999 2.00% 2.04% .9800
$1,000,000 over No Sales Charge 1.0000
Reducing Your Class A Front-End Sales Charges. There are several ways you can
qualify for a lower sales charge when purchasing Class A shares if you inform
the Fund that you are eligible at the time of purchase.
o Rights of Accumulation -- a Purchaser can add the share value of any
Eligible Fund already owned to the amount of the next purchase of
Class A shares for purposes of calculating the sales charge.
o Statement of Intention -- a Purchaser can purchase Class A shares of
any Eligible Fund over a 13-month period and receive the same sales
charge as if all shares had been purchased at once. Shares purchased
through reinvestment of distributions are not included.
For more information on eligibility for these privileges, read the applicable
sections in the attached application.
Class A Share Purchases Without a Front-End Sales Charge. Class A shares may be
purchased without a front-end sales charge under the following circumstances.
1. Purchases of $1 million or more.*
2. Purchases by Retirement Plans with at least 100 eligible employees.*
3. Purchases under a Special Retirement Wrap Program.*
4. Purchases made with dividends and distributions on Class A shares of
another Eligible Fund.
5. Purchases representing repayment under the
3
<PAGE>
loan feature of the Lord Abbett-sponsored prototype 403(b) plan for
Class A shares.
6. Employees of any consenting securities dealer having a sales
agreement with Lord Abbett Distributor.
7. Purchases under a Mutual Fund Wrap-Fee Program.
8. Lord Abbett Consultants/Advisers.
9. Employees of our shareholder servicing agent.
10. Employees of any national securities trade organization to which
Lord Abbett belongs.
11. Employees of Lord Abbett and our Directors/ Trustees (active or
retired), their spouses, including surviving spouses, and other
family members.
12. Trustees or custodians of any pension or profit sharing plan, or
payroll deduction IRA for the persons mentioned in 6, 9, 10 and 11
above.
* May be subject to a CDSC.
Contingent Deferred Sales Charges ("CDSC"). The CDSC, regardless of class, is
not charged on shares acquired through reinvestment of dividends or capital
gains distributions and is charged on the original purchase cost or the current
market value of the shares being sold, whichever is lower. In addition,
repayment of loans under Retirement Plans and 403(b) plans will constitute new
sales for purposes of assessing the CDSC.
Class A Share CDSC. If you buy Class A shares under one of the starred (O)
categories listed above subject to a dealer's concession of up to 1% and you
redeem any of the Class A shares within 24 months after the month in which you
initially purchased such shares, the Fund normally will collect a CDSC of 1%.
The Class A share CDSC generally will be waived under the following
circumstances.
o Benefit payments such as Retirement Plan loans, hardship
withdrawals, death, disability, retirement, separation from service
or any excess distribution under Retirement Plans (documentation may
be required).
o Redemptions continuing as investments in another fund participating
in a Special Retirement Wrap Program.
Class B Share CDSC. The CDSC for Class B shares normally applies if you redeem
your shares before the sixth anniversary of their initial purchase. The CDSC
varies depending on how long you own your shares according to the following
schedule.
- --------------------------------------------------------------------------------
Contingent Deferred
Anniversary(1) Sales Charge on
of the Day on Redemptions
Which the Purchase (As % of Amount
Order Was Accepted Subject to Charge)
- --------------------------------------------------------------------------------
On Before
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
6th anniversary(2) None
(1) Anniversary is the 365th day subsequent to a purchase or a prior
anniversary.
(2) Class B shares will automatically convert to Class A shares on the eighth
anniversary of the purchase of Class B shares.
The Class B share CDSC generally will be waived under the following
circumstances.
o Benefit payments such as Retirement Plan loans, hardship
withdrawals, death, disability, retirement, separation from service
or any excess distribution under Retirement Plans.
o Eligible Mandatory Distributions under 403(b) plans and individual
retirement accounts.
o Death of the shareholder (natural person).
o On redemptions of shares in connection with Div-Move and Systematic
Withdrawal Plans (up to 12% per year).
See "Systematic Withdrawal Plan" for more information on CDSCs with respect to
Class B shares.
Class C Share CDSC. The 1% CDSC for Class C shares normally applies if you
redeem your shares before the first anniversary of your original purchase. An
exception is made for shares redeemed from a Mutual Fund Wrap-Fee Program.
Application of CDSC to a Redemption. To determine if a CDSC applies to a
redemption, the Fund redeems shares in the following order.
1. Shares acquired by reinvestment of dividends and capital gains.
4
<PAGE>
2. Shares held for six years or more (Class B) or one year or more
(Class C).
3. Shares held the longest before the sixth anniversary of their
purchase (Class B) or before the first anniversary of their purchase
(Class C).
OPENING YOUR ACCOUNT
Minimum Initial Investment Per Fund
- --------------------------------------------------------------------------------
o Regular account $1000
- --------------------------------------------------------------------------------
o Individual Retirement Accounts
(Traditional, Education and Roth) and 403(b) $250
- --------------------------------------------------------------------------------
o Invest-A-Matic and Div-Move $250 initial
$50 subsequent minimum
For Retirement Plans and Mutual Fund Wrap Prog-rams, there is no minimum
investment required, regardless of share class.
You may purchase shares through any independent securities dealer who has
a sales agreement with Lord Abbett Distributor or you can fill out the attached
application and send it to the Fund at the address stated below. You may be
charged a fee if you effect transactions through an independent dealer or agent.
You should read this Prospectus carefully before placing your order to assure
your order is in proper form.
Lord Abbett High Yield Fund
P.O. Box 419100 Kansas
City, MO 64141
Proper Form. To be in proper form an order submitted directly to the Fund must
contain (1) a completed Application Form or information and documentation
required supplementally by the Fund, and (2) payment must be credited in U.S.
dollars to our custodian bank's account. For more information regarding proper
form of a purchase order, call the Fund at 800-821-5129.
Payment must be credited in U.S. dollars to our custodian bank's account.
IMPORTANT INFORMATION. If you fail to provide a correct taxpayer identification
number or to make certain required certifications, you may be subject to a $50
penalty under the Internal Revenue Code and we may be required to withhold a
portion (31%) of any redemption proceeds and of any dividend or distribution on
your account.
By Exchange. Telephone the Fund at 1-800-821-5129 to request an exchange from
any eligible Lord Abbett-sponsored fund.
We reserve the right to withdraw all or any part of the offering made by this
Prospectus or to reject any purchase order. We also reserve the right to waive,
increase or establish minimum investment requirements. All purchase orders are
subject to our acceptance and are not binding until confirmed or accepted in
writing.
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SHAREHOLDER SERVICES
Telephone Exchanges. You or your investment professional, with proper
identification, can instruct the Fund by telephone to exchange shares of any
class for the same class of any Eligible Fund.
Instructions must be received by the Fund in Kansas City by calling
1-800-821-5129 prior to the close of the New York Stock Exchange ("NYSE") to
obtain an Eligible Fund's NAV per class share on that day. Exchanges will be
treated as a sale for federal tax purposes.
For your protection, telephone requests for exchanges are recorded. We
will take measures to verify the identity of the caller, such as asking for your
name, account number, social security or taxpayer identification number and
other relevant information. The Fund will not be liable for following
instructions communicated by telephone that it reasonably believes to be
genuine.
Expedited exchanges by telephone may be difficult to implement in times of
drastic economic or market change. The exchange privilege should not be used to
take advantage of short-term swings in the market. The Fund reserves the right
to limit or terminate this privilege for any shareholder making frequent
exchanges and may revoke the privilege for all shareholders upon 60 days' prior
written notice. You have this privilege unless you refuse it in writing.
You should read the prospectus of the other Lord Abbett-sponsored fund(s)
selected before making an exchange.
Invest-A-Matic. You can make fixed, periodic investments ($250 initial and $50
subsequent minimum) into the Fund by means of automatic money transfers from
your bank checking account. See the attached Application Form for instructions.
5
<PAGE>
Div-Move. You can invest the dividends paid on your account ($50 minimum) into
another account, within the same class, in any Eligible Fund.
The account must be either your account, a joint spousal account, or a
custodial account for your minor child.
Investing by Phone. Upon completion and receipt of the attached application form
(in particular, section 7), you can instruct the Fund by phone to have money
transferred from your bank account to purchase shares of the Fund for an
existing account. The Fund will purchase the requested shares upon receipt of
the money from your bank.
Systematic Withdrawal Plan ("SWP"). You can make periodic cash withdrawals from
your account which are automatically paid to you in fixed or variable amounts.
To participate, the value of your shares must be at least $10,000, except for
retirement plans for which there is no minimum.
With respect to Class B shares, the CDSC will be waived on redemptions of
up to 12% of the current net asset value of your account at the time of your SWP
request. For Class B share redemptions over 12% per year, the CDSC will apply to
the entire redemption. Please contact the Fund for assistance in minimizing the
CDSC in this situation.
Redemption proceeds due to a SWP for Class B (up to 12% per year) and
Class C shares, will be redeemed in the order described under "Redemptions".
Lord Abbett's Retirement Plans. The Lord Abbett Family of Funds offers a range
of qualified retirement plans, including IRAs, SIMPLE IRAs, Simplified Employee
Pension Plans, 403(b) and pension and profit-sharing plans, including 401(k)
plans. To find out more about these plans, call the Fund at 1-800-842-0828.
Account Changes. For any changes you need to make to your account, consult your
financial representative or call the Fund at 1-800-821-5129.
Householding. Generally, shareholders with the same last name and address will
receive a single copy of an annual or semi-annual report, unless additional
reports are specifically requested in writing to the Fund.
Reinvestment Privilege. If you sell shares of the Fund, you have the one time
right to reinvest some or all of the proceeds in the same class of any Eligible
Fund within 60 days without a sales charge. If you paid a CDSC when you sold
your shares, you will be credited with the amount of the CDSC. All accounts
involved must have the same registration.
Pricing Shares. The net asset value ("NAV") per share for each class of shares
is calculated each business day at the close of regular trading on the New York
Stock Exchange ("NYSE") by dividing a class's net assets by the number of shares
outstanding. The Fund is open on those business days when the NYSE is open.
Purchases and redemptions are executed at the next NAV to be calculated after
your order is accepted.
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REDEMPTIONS
By Broker. Call your broker or investment professional for directions on how to
redeem your shares.
By Telephone. To obtain the proceeds of an expedited redemption of $50,000 or
less, you or your representative can call the Fund at 1-800-821-5129. The Fund
will employ the procedures described in telephone exchanges to confirm that the
instructions received are genuine.
The Fund will not be liable for following instructions communicated by
telephone that it reasonably believes to be genuine.
By Mail. Submit a written redemption request indicating your Fund's name, your
share class, your account number, the name(s) in which the account is registered
and the dollar value or number of shares you wish to sell.
Include all necessary signatures. If the signer has any Legal Capacity,
the signature and capacity must be guaranteed by an Eligible Guarantor. Certain
other legal documentation may be required. For more information regarding proper
documentation call 1-800-821-5129.
We will verify that the shares being redeemed were purchased at least 15
days earlier. Your account balance must be sufficient to cover the amount being
redeemed or your redemption order will not be processed.
Normally a check will be mailed to the name(s) and addresses in which the
account is registered, or otherwise according to your instruction within one
business day after receipt of your redemption request. The Fund reserves the
right to make payment within three business days.
To determine if a CDSC applies to a redemption, see "Contingent Deferred
Sales Charges" above.
6
<PAGE>
DIVIDENDS AND CAPITAL GAINS
Dividends. The Fund distributes most or all of its net earnings in the form of
dividends which are expected to be paid to shareholders monthly.
Capital Gains Distributions. Any capital gains distribution is expected to be
made annually and may be taken in cash or reinvested. Distributions by the Fund
of any net long-term capital gains will be taxable to a shareholder as long-term
capital gains regardless of how long the shareholder has held the shares. Under
recently enacted legislation, the maximum tax rate on long-term capital gains
for a U.S. individual, estate or trust is reduced to 20% for distributions
derived from the sale of assets held by the Fund for more than 12 months. (If
the taxpayer is in the 15% tax bracket, the rate is 10%.) Any gains realized on
the Fund's transactions in options and financial futures will be treated as
taxable long- or short-term capital gains.
Dividends/Capital Gains Receipt or Reinvestment. If you elect to receive
dividends or capital gains in cash, a check will be mailed to you as soon as
possible after the reinvestment date. If you arrange for direct deposit, your
payment will be electronically transmitted to your bank account within one day
after the payable date. Most investors reinvest their dividends and capital
gains. If you choose this option, or if you do not indicate any choice, your
dividends and capital gains distributions will be automatically reinvested in
additional shares.
Taxes. The Fund pays no federal income tax on the earnings it distributes to
shareholders. Consequently, dividends you receive from the Fund, whether
reinvested or taken in cash, are generally considered taxable. Dividends
declared in December of any year 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.
Each January the Fund will mail to you, if applicable, a Form 1099 tax
information statement detailing your dividends and capital gain distributions.
You should consult your tax adviser concerning applicable state and local taxes.
For more information about the tax consequences from dividends and
distributions, see the Statement of Additional Information.
OUR MANAGEMENT
The Fund is supervised by a Board of Trustees, an independent body which has
ultimate responsibility for the Fund's activities. The Board has retained Lord
Abbett as investment manager pursuant to a Management Agreement. Lord Abbett has
been an investment manager for over 69 years and currently manages over $27
billion in a family of mutual funds and other advisory accounts. Lord Abbett
provides similar services to over thirty-four other mutual fund portfolios
having various investment objectives and also advises other investment clients.
For more information about the services Lord Abbett provides to the Fund, see
the Statement of Additional Information.
The Fund pays Lord Abbett a monthly fee based on average daily net assets
for each month at the annual rate of 0.60%. In addition, the Fund pays all
expenses not expressly assumed by Lord Abbett.
The Fund. The Fund, established in 1998, is a series of Lord Abbett Investment
Trust a diversified open-end management investment company. The Fund's 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.
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INVESTMENT POLICIES, RISKS AND LIMITS
The Fund is permitted to utilize, within limits established by the Board of
Trustees, the following investment policies in an effort to enhance the Fund's
performance. These policies have risks associated with them. However, the Fund
follows certain practices that may reduce these risks. To the extent the Fund
utilizes some of these policies, its overall performance may be positively or
negatively affected.
High Yield Debt Securities: High yield debt securities or "junk bonds" are rated
BB/Ba or lower and typically pay a higher yield than investment-grade debt
securities.
Risk: The market for lower-rated bonds generally is less liquid than that
for higher-rated bonds. Market prices of 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
7
<PAGE>
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 than for higher-rated bonds and valuation
of such securities may be more difficult and require greater reliance upon
judgment. While the market for lower-rated bonds may be relatively insensitive
to interest rate changes, the market prices of these bonds structured as zero
coupon or pay-in-kind securities may be affected to a greater extent by such
changes and thus may be more volatile than prices of lower-rated securities
paying interest periodically in cash. Lower-rated bonds that are callable prior
to maturity may be more susceptible to refunding during periods of falling
interest rates, requiring replacement with lower-yielding securities.
Limit: There is no limit on the amount of high yield securities we may
invest in.
In no event will we invest more than 10% of our gross assets at the time
of investment in debt securities which are in default as to interest or
principal.
Securities Lending: The lending of securities to financial institutions which
provide continuous collateral equal to the market value of the securities
loaned.
Risk: Delay in recovery of collateral and loss should the borrower of the
security fail financially.
Limit: Loans, in the aggregate, may not exceed 30% of the Fund's total
assets.
Options and Financial Futures Transactions: The Fund may deal in options on
securities securities indexes and financial futures transactions, including
options on financial futures to increase or decrease its exposure to changing
securities prices or interest rates or for bona fide hedging purposes.
An option is the right of the Fund to buy or sell securities of a company
which was granted in exchange for an agreed upon price.
A security index is an index which reflects the market price and number of
shares outstanding for the shares of the index.
A financial futures transaction is an exchange - traded contract to buy or
sell a standard quantity and quality of a financial instrument or index at a
specific future date and price.
Risk: The use of options and financial futures to achieve a Fund's
investment objective could result in a loss due to unanticipated market
conditions and could increase the volatility of the Fund. These transactions may
involve a small investment of cash relative to the risks assumed.
Limit: The Fund may write (sell) covered call options and secured put
options on up to 25% of its net assets and may purchase put and call options and
purchase and sell futures contracts provided that no more than 5% of its assets
(at the time of purchase) may be invested in premiums on such options and
initial margin deposits on such futures contracts.
Foreign Securities: Foreign securities are securities primarily traded in
countries outside the United States.
Risk: These securities are not subject to the same degree of regulation
and may be more volatile and less liquid than securities traded in major U.S.
markets. Other considerations include political and social instability,
expropriations, higher transaction costs, currency fluctuations, nondeductible
withholding taxes and different settlement practices.
Limit: The Fund may invest up to 20% of its assets at the time of
investment in foreign securities.
Illiquid Securities: Securities not traded on the open market. May include
illiquid Rule 144A securities.
Risk: Certain securities may be difficult or impossible to sell at the
time and price the seller would like.
Limit: The Fund may invest up to 15% of its assets in illiquid securities.
Securities determined by the Board of Directors to be liquid are not subject to
this limitation.
Rule 144A Securities: Securities determined by the Trustees to be liquid
pursuant to Securities and Exchange Commission Rule 144A (the "Rule"). Under the
Rule, a qualifying unregistered security may be resold to a qualified
institutional buyer without registration and without regard to whether the
seller originally purchased the security for investment. A substantial part of
the lower-rated debt market consisted of Rule 144A Securities, many of which are
registered within a few months of their purchase.
Risk: Investments in Rule 144A securities initially determined to be
liquid could have the effect of diminishing the level of a Funds' liquidity
during periods of decreased market interest in such securities.
Equity Securities: Securities which may include stocks and preferred stocks.
8
<PAGE>
the common stocks represent an equity ownership interest in a corporation.
Risk: Equity security prices fluctuate based on changes in a company's
financial condition and on overall market and economic conditions.
Limit: The Fund may not invest more that 20% of its total assets in equity
securities.
OTHER POLICIES. (1) We may hold or sell any property or securities which we may
obtain through the exercise of conversion rights or warrants or as a result of
any reorganization, recapitalization or liquidation proceedings for any issuer
of securities owned by us. In no event will we voluntarily purchase any
securities other than debt securities, if, at the time of such purchase or
acquisition, the value of the property and securities, other than debt
securities, in our portfolio is greater than 35% of the value of our gross
assets. A purchase or acquisition will not be considered "voluntary" if made in
order to avoid loss in value of a conversion or other premium.
(2) We may not borrow in excess of 331/3% of our 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.
PORTFOLIO TURNOVER. The portfolio turnover rate for our first fiscal year is not
expected to exceed 100%.
For more information about investment policies, restrictions and risk factors,
see the Statement of Additional Information.
OBJECTIVE, RESTRICTION AND POLICY CHANGES. We will not change our investment
objective or our fundamental investment restrictions without shareholder
approval. If we determine that our objective can best be achieved by a
substantive change in investment policy, which may be changed without
shareholder approval, we may make such change by disclosing it in our
prospectus.
- --------------------------------------------------------------------------------
SALES AND SERVICE COMPENSATION AND ACTIVITIES
Sales Compensation. As part of its plan for distributing shares, the Fund and
Lord Abbett Distributor pay sales and service compensation to Authorized
Institutions that sell the Fund's shares and service its shareholder accounts.
These firms typically pass along a portion of this compensation to your
financial representative.
Sales compensation originates from two sources: sales charges and 12b-1
fees that are paid out of the Fund's assets. Service compensation originates
from 12b-1 fees. ("12b-1" refers to the federal securities regulation
authorizing fees of this type). The 12b-1 fee rates vary by share class,
according to the Rule 12b-1 plan adopted by the Fund for each share class. The
sales charges and 12b-1 fees paid by investors are detailed in the
class-by-class information under "Investor Expenses" and "Purchases". The
portion of these expenses that are paid as sales and service compensation to
Authorized Institutions, such as your dealer, are shown in the chart on the last
page of this Prospectus. Sometimes sales and service compensation is not paid
where tracking data is not available for certain accounts and where the
Authorized Institution waives part of the compensation as with an account under
a Mutual Fund Wrap-Fee Program.
Additional Concessions may be paid to Authorized Institutions from time to time.
Sales Activities. Rule 12b-1 distribution fees may be used to pay Authorized
Institutions to finance any activity which is primarily intended to result in
the sale of shares. Lord Abbett Distributor uses its portion of the distribution
fees attributable to the Fund's Class A and Class C shares for activities which
are primarily intended to result in the sale of such Class A and Class C shares,
respectively. These activities include, but are not limited to, printing of
prospectuses and statements of additional information and reports for other than
existing shareholders, preparation and distribution of advertising material and
sales literature, expenses of organizing and conducting sales seminars,
Additional Concessions to Authorized Institutions, the cost of administering the
Rule 12b-1 plan, the cost necessary to provide distribution-related services or
personnel, travel, office expenses, equipment and other allocable overhead.
Service Activities. Rule 12b-1 service fees may be used to pay Authorized
Institutions for any activity which is primarily intended to result in personal
service and/or the maintenance of shareholder accounts. If any portion of the
service fees are paid to Lord Abbett Distributor LLC, such fees will be
used to service and maintain shareholder accounts.The amounts payable by the
Fund (whether distribution or service fees)
need not be directly related to expenses actually incurred by Lord Abbett
Distributor on behalf
9
<PAGE>
of the Fund. Thus, even if Lord Abbett Distributor's actual expenses exceed the
fee payable to Lord Abbett Distributor at any given time, the Fund will not be
obligated to pay more than that fee, and if Lord Abbett Distributor's expenses
are less than the fee it receives, Lord Abbett Distributor will retain the full
amount of the fee.
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
Additional Concessions. Lord Abbett Distributor may, for specified periods,
allow dealers to retain the full sales charge for sales of shares or may pay an
additional concession to a dealer who sells a minimum dollar amount of our
shares and/or shares of other Lord Abbett-sponsored funds. In some instances,
such additional concessions will be offered only to certain dealers expected to
sell significant amounts of shares. Additional payments may be paid from Lord
Abbett Distributor's own resources or from distribution fees received from the
Fund and will be made in the form of cash or, if permitted, non-cash payments.
The non-cash payments will include business seminars at Lord Abbett's
headquarters or other locations, including meals and entertainment, or the
receipt of merchandise. The cash payments may include payment of various
business expenses of the dealer.
In selecting dealers to execute portfolio transactions for the Fund's
portfolio, if two or more dealers are considered capable of obtaining best
execution, we may prefer the dealer who has sold our shares and/or shares of
other Lord Abbett-sponsored funds.
Authorized Institutions. Institutions and persons permitted by law to receive
service and/or distribution fees under a Rule 12b-1 plan are "authorized
institutions". Lord Abbett Distributor is an Authorized Institution.
Eligible Fund. (a) Any Lord Abbett-sponsored fund except 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; Lord Abbett Equity Fund; Lord Abbett
Series Fund; Lord Abbett U.S. Government Securities Money Market Fund ("GSMMF")
(except for holdings in GSMMF which are attributable to any shares exchanged
from the Lord Abbett Family of Funds). (b) Any Authorized Institution's
affiliated money market fund satisfying Lord Abbett Distributor as to certain
omnibus account and other criteria.
Eligible Guarantor. Any broker or bank that is a member of the medallion stamp
program. Most major securities firms and banks are members of this program. A
notary public is not an eligible guarantor.
Eligible Mandatory Distributions. If Class B shares represent a part of an
individual's total IRA or 403(b) investment, the CDSC waiver is available only
for that portion of a mandatory distribution which bears the same relation to
the entire mandatory distribution as the B share investment bears to the total
investment.
Employees of Lord Abbett/Fund Directors (Trustees). The terms "directors,"
"trustees" (of a Fund) and "employees" (of Lord Abbett) include a director's
(trustee's) or employee's spouse (including the surviving spouse of a deceased
director (trustee) or employee). The terms "directors," "trustees" and
"employees of Lord Abbett" also include other family members and retired
directors (trustees) and employees.
Legal Capacity. With respect to a redemption request, if (for example) the
request is on behalf of the estate of a deceased shareholder, John W. Doe, by a
person (Robert A. Doe) who has the legal capacity to act for the estate of the
deceased shareholder because he is the executor of the estate, then the request
must be executed as follows: Robert A. Doe, Executor of the Estate of John W.
Doe.
Similarly, if (for example) the redemption request is on behalf of the ABC
Corporation by a person (Mary B. Doe) that has the legal capacity to act on
behalf of this corporation, because she is the President of the corporation,
then the request must be executed as follows: ABC Corporation by Mary B. Doe,
President.
An acceptable form of guarantee would be as follows:
o In the case of the estate -
Robert A. Doe
Executor of the Estate of John W. Doe
[Date]
10
<PAGE>
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
/s/ [ILLEGIBLE]
------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 0 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM(TM)
SR
o In the case of the corporation -
ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
/s/ [ILLEGIBLE]
------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 0 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM(TM)
SR
Lord Abbett Consultants/Advisers. Consultants and advisers to Lord Abbett, Lord
Abbett Distributor or Lord Abbett-sponsored funds who consent to such purchase
if such persons provide services to Lord Abbett, Lord Abbett Distributor or such
funds on a continuing basis and are familiar with such fund.
Lord Abbett Distributor LLC. Lord Abbett Distributor is the Fund's exclusive
selling agent. 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.
Mutual Fund Wrap-Fee Program. Certain unaffiliated 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 (and sometimes providing for acceptance of orders for such
shares on our behalf) in particular investment products made available for a fee
to clients of such brokers, dealers, registered investment advisers and other
financial institutions.
Purchaser. 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.
Retirement Plans. Employer-sponsored retirement plans under the Internal Revenue
Code.
Special Retirement Wrap Program. A program sponsored by an authorized
institution showing one or more characteristics distinguishing it, in the
opinion of Lord Abbett Distributor from a mutual fund 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.
Total Return. "Total return" for the one-, five- and ten-year periods represents
the average annual compounded rate of return on an investment of $1,000 in the
Fund at the maximum public offering price. When total return is quoted for Class
A shares, it includes the payment of the maximum initial sales charge. When
total return is shown for Class B and Class C shares, it reflects the effect of
the applicable CDSC. Total return also may be presented for other periods or
based on investments at reduced sales charge levels or net asset value. Any
quotation of total return not reflecting the maximum sales charge (front-end,
level, or back-end) would be reduced if such sales charge were used. Quotations
of 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. See "Past
Performance" in the Statement of Additional Information for a more detailed
description.
Yield. Each class of shares calculates its "yield" by dividing the annualized
net investment income per share on the portfolio during a 30-day period by the
maximum offering price on the last day of the 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 investment return based on dividends
actu-
11
<PAGE>
ally 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.
- --------------------------------------------------------------------------------
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 any information or to make any
representations not contained in this Prospectus or in supplemental sales
material authorized by the Fund and no person is entitled to rely upon any
information or representation not contained herein or therein
12
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FIRST YEAR COMPENSATION
Class A investments
Front-end
sales charge Dealer's Service fee(1) Total compensation(2)
paid by investors concession (% of net (% of offering
(% of offering price) (% of offering price) investment) price)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 4.75% 4.00% 0.25% 4.24%
$50,000 - $99,999 4.75% 4.25% 0.25% 4.49%
$100,000 - $249,999 3.75% 3.25% 0.25% 3.49%
$250,000 - $499,999 2.75% 2.50% 0.25% 2.74%
$500,000 - $999,999 2.00% 1.75% 0.25% 2.00%
- ---------------------------------------------------------------------------------------------------------------------
$1 million or more(3) or
Retirement Plan - 100 or more eligible employees(3) or Special Retirement Wrap Program
- ---------------------------------------------------------------------------------------------------------------------
First $5 million no front-end sales charge 1.00% 0.25% 1.25%
Next $5 million above that no front-end sales charge 0.55% 0.25% 0.80%
Next $40 million above that no front-end sales charge 0.50% 0.25% 0.75%
Over $50 million no front-end sales charge 0.25% 0.25% 0.50%
- ---------------------------------------------------------------------------------------------------------------------
Class B investments Paid at time of sale (% of net asset value)
- ---------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 3.75% 0.25% 4.00%
- ---------------------------------------------------------------------------------------------------------------------
Class C investments
- ---------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.75% 0.25% 1.00%
- ---------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION AFTER FIRST YEAR
Class A investments
- ---------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25% 0.25%
- ---------------------------------------------------------------------------------------------------------------------
Class B investments Percentage of average net assets (4)
- ---------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25% 0.25%
- ---------------------------------------------------------------------------------------------------------------------
Class C investments
- ---------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.65% 0.25% 0.90%
</TABLE>
(1) The service fee for Class A shares is paid quarterly. The first year's
service fee on Class B and C shares is paid at the time of sale.
(2) Reallowance/concession percentages and service fee percentages are
calculated from different amounts, and therefore may not equal total
compensation percentages if combined using simple addition. Additional
Concessions may be paid to Authorized Institutions from time to time.
(3) Concessions are paid at the time of sale on all Class A shares sold during
any 12-month period starting from the day of the first net asset value
sale. With respect to(a) Class A share purchases at $1 million or more,
sales qualifying at such level under rights of accumulation and statement
of intention privileges are included and(b) for Special Retirement Wrap
Programs, only new sales are eligible and exchanges into the Fund are
excluded.
(4) With respect to Class B and C shares, 0.25% and 1.00%, respectively, of
the average annual net asset value of such shares outstanding during the
quarter (including distribution reinvestment shares after the first
anniversary of their issuance) is paid to Authorized Institutions. These
fees are paid quarterly in arrears.
13
<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.
LAHYF-1-1198
(11/98)
LORD ABBETT
HIGH YIELD FUND, INC.
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
November ___, 1998
Application Inside
Lord Abbett
High Yield Fund
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
[LOGO](R) LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
<PAGE>
- --------------------------------------------------------------------------------
LORD ABBETT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Additional Information November , 1998
- --------------------------------------------------------------------------------
Lord Abbett High Yield Fund
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord Abbett Distributor LLC
("Lord Abbett Distributor") 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 November , 1998.
Lord Abbett High Yield Fund (sometimes referred to as "we" or the "Fund") is a
series of Lord Abbett Investment Trust (referred to as the "Company") organized
on August 16, 1993 as a Delaware business trust. The Company's trustees have
authority to create separate classes and series of shares of beneficial
interest, without further action by shareholders. The Company has six series,
but only Lord Abbett High Yield Fund is described in this Statement of
Additional Information. The Fund has three classes of shares, Class A, Class B
and Class C shares which are described in this Statement of Additional
Information. 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 series exists, each series must be preferred
over all other series in respect of assets specifically allocated to such
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 affected by such
matter. Rule 18f-2 further provides that a class shall be deemed to be affected
by a matter unless the interests of each class in the matter are substantially
identical or the matter does not affect any interest of such class. However, the
Rule exempts the selection of independent public accountants, the approval of a
contract with a principal underwriter and the election of 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 3
3. Investment Advisory and Other Services 7
4. Portfolio Transactions 7
5. Purchases, Redemptions and
Shareholder Services 8
6. Past Performance 16
7. Taxes 17
8. Information About the Fund 18
9. Appendix 19
1
<PAGE>
1.
Investment Policies
Fundamental Investment Restrictions. The Fund's investment objective and
policies are described in the Prospectus under "How We Invest." In addition to
those policies described in the Prospectus, the Fund is subject to the following
fundamental investment restrictions which cannot be changed for the Fund without
the approval of the holders of a majority of the Fund's respective shares. The
Fund may not: (1) borrow money, except that (i) the Fund may borrow from banks
(as defined in the Investment Company Act of 1940, as amended (the "Act")) in
amounts up to 33 1/3% of its total assets (including the amount borrowed), (ii)
the Fund may borrow up to an additional 5% of its total assets for temporary
purposes, (iii) the Fund may obtain such short-term credit as may be necessary
for the clearance of purchases and sales of portfolio securities and (iv) the
Fund 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 Fund's investment policies as permitted by applicable law); (3)
engage in the underwriting of securities, except pursuant to a merger or
acquisition or to the extent that, in connection with the disposition of its
portfolio securities, it may be deemed to be an underwriter under federal
securities laws; (4) make loans to other persons, except that the acquisition of
bonds, debentures or other corporate debt securities and investment in
government obligations, commercial paper, pass-through instruments, certificates
of deposit, bankers acceptances, repurchase agreements or any similar
instruments shall not be subject to this limitation, and except further that the
Fund may lend its portfolio securities, provided that the lending of portfolio
securities may be made only in accordance with applicable law; (5) buy or sell
real estate (except that the Fund may invest in securities directly or
indirectly secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein) or commodities or commodity
contracts (except to the extent the Fund may do so in accordance with applicable
law and without registering as a commodity pool operator under the Commodity
Exchange Act as, for example, with futures contracts); (6) with respect to 75%
of the gross assets of the Fund, buy securities of one issuer representing more
than (i) 5% of the Fund's gross assets, except securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities or (ii) 10% of the
voting securities of such issuer; (7) invest more than 25% of its assets, taken
at market value, in the securities of issuers in any particular industry
(excluding securities of the U.S. Government, its agencies and
instrumentalities); or (8) issue senior securities to the extent such issuance
would violate applicable law.
With respect to the restrictions mentioned herein, compliance therewith will not
be affected by changes in the market value of portfolio securities but will be
determined at the time of purchase or sale of such securities.
Non-Fundamental Investment Restrictions. In addition to the investment
restrictions above which cannot be changed without shareholder approval, the
Fund also is subject to the following non-fundamental investment policies which
may be changed by the Board of Trustees without shareholder approval. The Fund
may not: (1) borrow in excess of 33 1/3% of its total assets (including the
amount borrowed), and then only as a temporary measure for extraordinary or
emergency purposes; (2) make short sales of securities or maintain a short
position except to the extent permitted by applicable law; (3) invest knowingly
more than 15% of its net assets (at the time of investment) in illiquid
securities, except for securities qualifying for resale under Rule 144A of the
Securities Act of 1933, 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 Fund's total assets would be invested in such securities
(this restriction shall not apply to mortgage-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 Company 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 Fund's total assets
(included within such limitation, but not to exceed 2% of the Fund's total
assets, are warrants which are not listed on the New York or American Stock
Exchange or a major foreign exchange); (8) invest in real estate limited
partnership interests or interests in oil, gas or other mineral leases, or
exploration or 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; (10) buy from or sell to any of its
officers, trustees,
2
<PAGE>
employees, or its investment adviser or any of its officers, directors, partners
or employees, any securities other than shares of the Fund's common stock; or
(11) invest more than 10% of the market value of its gross assets at the time of
investment in debt securities which are in default as to interest or principal.
2.
Trustees and Officers
The following trustee is a partner of Lord, Abbett & Co. ("Lord Abbett"), The
General Motors Building, 767 Fifth Avenue, New York, New York 10153-0203. He has
been associated with Lord Abbett for over five years and is also an officer,
director or trustee of the twelve other Lord Abbett-sponsored funds. He is an
"interested person" as defined in the Act, and as such, may be considered to
have an indirect financial interest in the Rule 12b-1 Plan described in the
Prospectus.
Robert S. Dow, age 53, Chairman and President
The following outside trustees are also directors or trustees of some or all of
the twelve other Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow
Courtroom Television Network
600 Third Avenue
New York, New York
Chief Executive Officer of Courtroom Television Network. Formerly President and
Chief Executive Officer of Time Warner Cable Programming, Inc. Prior to that,
formerly President and Chief Operating Officer of Home Box Office, Inc. Age 57.
William H.T. Bush
Bush-O'Donnell & Co., Inc
101 South Hanley Road, Suite 1025
St. Louis, Missouri
Co-founder and Chairman of the Board of financial advisory firm of
Bush-O'Donnell & Company. Age 60.
Robert B. Calhoun
Monitor Clipper Partners
650 Madison Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners and President of the Clipper Group
L.P., both private equity investment funds. Age 56.
3
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Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 67.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 72.
C. Alan MacDonald
Directorship Inc.
8 Sound Shore Drive
Greenwich, Connecticut
Managing Director of Directorship Inc., a consultancy in board management and
corporate governance. Formerly General Partner of The Marketing Partnership,
Inc., a full service marketing consulting firm (1994-1997). Prior to that,
Chairman and Chief Executive Officer of Lincoln Snacks, Inc., manufacturer of
branded snack foods (1992-1994). His career spans 36 years at Stouffers and
Nestle with 18 of the years as Chief Executive Officer. Currently serves as
Director of DenAmerica Corp., J. B. Williams Company, Inc., Fountainhead Water
Company and Exigent Diagnostics. Age 65.
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 70.
Thomas J. Neff
Spencer Stuart
277 Park Avenue
New York, New York
Chairman of Spencer Stuart, an executive search consulting firm. Currently
serves as Director of Ace, Ltd. (NYSE). Age 60.
4
<PAGE>
The second column of the following table sets forth the compensation accrued for
the Company's outside trustees. The third column sets forth information with
respect to the equity-based benefits accrued for outside directors/trustees by
the Lord Abbett-sponsored funds. The fourth column sets forth the total
compensation payable by such funds to the outside directors/trustees. No trustee
of the Company associated with Lord Abbett and no officer of the Company
received any compensation from the Fund for acting as a trustee or officer.
For The Fiscal Year Ended November 30, 1997
-------------------------------------------
(1) (2) (3) (4)
Pension or For Year Ended
Retirement December 31, 1997
Benefits Accrued Total Compensation
Aggregate by the Fund, and Accrued by the Fund
Compensation and all Other Lord and all Other Lord
Accrued by Abbett-sponsored Abbett-sponsored
Name of Trustee the Fund(1) Funds(2) Funds(3)
- --------------- ------------ ------------------ ------------------
E. Thayer Bigelow None $17,068 $56,000
William H. T. Bush* None None None
Robert B. Calhoun** None None None
Stewart S. Dixon None $32,190 $55,000
John C. Jansing None $45,085(4) $55,000
C. Alan MacDonald None $30,703 $57,400
Hansel B. Millican, Jr. None $37,747 $55,000
Thomas J. Neff None $19,853 $56,000
* Elected trustee, June 17, 1998, effective as of August 13, 1998.
** Elected trustee, May 5, 1998, effective as of June 17, 1998.
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. Since the Fund is new, no compensation currently is payable
to its trustees. However, in the future a portion of the fees payable by the
Fund to its outside trustees will be deferred under a plan that deems the
deferred amounts to be invested in shares of the Fund for later distribution to
the trustees so that each trustee's compensation depends in part on the
performance of the Fund.
2. The amounts in column 3 were accrued by the Lord Abbett-sponsored funds for
the twelve months ended November 30, 1997 with respect to the equity-based plans
established for independent directors/trustees in 1996. This plan supercedes a
previously approved retirement plan for all future trustees. Current trustees
had the option to convert their accrued benefits under the retirement plan. All
of the outside trustees except one made such an election. Each plan also
provides for a pre-retirement death benefit and actuarially reduced
joint-and-survivor spousal benefits.
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, 1997. Since no amounts of aggregate compensation were payable by
the Fund for the year ended November 30, 1997, no shares were deemed invested in
Fund shares.
4. Mr. Jansing chose to continue to receive benefits under the retirement plan,
which provides that outside trustees may receive annual retirement benefits for
life equal to their final annual retainer following retirement at or after age
72 with at least ten years of service. Thus, if Mr. Jansing were to retire and
the annual retainer payable by the funds were the same as it is today, he would
receive annual retirement benefits of $50,000.
5
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Except where indicated, the following executive officers of the Company have
been associated with Lord Abbett for over five years. Of the following, Messrs.
Brown, Carper, Hilstad, Hudson and Morris are partners of Lord Abbett; the
others are employees;
Executive Vice Presidents:
Christopher J. Towle, age 42 (with Lord Abbett since 1988 and has over 17 years
of investment experience) Robert Gerber, age 44 (with Lord Abbett since 1997 -
formerly Senior Portfolio Manager at Sanford C. Bernstein & Co. from 1992 -
1997) Robert G. Morris, age 53
Vice Presidents:
Paul A. Hilstad, age 55, Vice President and Secretary (with Lord Abbett since
1995 - formerly Senior Vice President and General Counsel of American Capital
Management & Research, Inc.)
Zane E. Brown, age 46
Daniel E. Carper, age 46
W. Thomas Hudson, age 56
Lawrence H. Kaplan, age 41 (with Lord Abbett since 1997 - formerly Vice
President and Chief Counsel of Salomon Brothers Asset Management Inc from 1995 -
1997; prior thereto Senior Vice President, Director and General Counsel of
Kidder Peabody Asset Management, Inc.)
Thomas F. Konop, age 56
Robert A. Lee, age 29 (with Lord Abbett since 1997 - formerly Portfolio Manager
at Arm Capital Advisors from 1995 - 1997; prior thereto Assistant Portfolio
Manager at Kidder Peabody Asset Management from 1993 - 1995)
A. Edward Oberhaus III, age 38
Keith F. O'Connor, age 43
Walter H. Prahl, age 40 (with Lord Abbett since 1997 - formerly Quantitative
Analyst at Sanford C. Bernstein & Co. from 1994 - 1997)
Treasurer:
Donna McManus, age 37 (with Lord Abbett since 1996 - formerly a Senior Manager
at Deloitte & Touche LLP)
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
Company's Declaration of Trust, shareholder meetings may be called at any time
by certain officers of the Company 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 Fund outstanding and entitled to vote at the meeting.
6
<PAGE>
3.
Investment Advisory and Other Services
As described under "Our Management" in the Prospectus, Lord Abbett is the
Fund's investment manager. Eight (of the seventeen general partners of Lord
Abbett), who are officers and/or trustees of the Company, are: Zane E. Brown,
Daniel E. Carper, Robert S. Dow, Robert I. Gerber, Paul A. Hilstad, W. Thomas
Hudson, Robert G. Morris and Christopher J. Towle. The other general partners of
Lord Abbett who are neither officers nor trustees of the Company are Stephen
Allen, John E. Erard, Robert P. Fetch, Daria L. Foster, Stephen J. McGruder,
Michael B. McLaughlin, Robert J. Noelke, R. Mark Pennington 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 the 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 .60 of 1% of the Fund's average daily net assets.
The Fund 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.
Although not obligated to do so, Lord Abbett may waive all or part of its
management fees and or may assume other expenses of the Fund.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281, are
the independent auditors 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. The Bank of New York ("BONY"), 48
Wall Street, New York, New York, is the Fund's custodian. In accordance with the
requirements of Rule 17f-5, the Company's trustees have approved arrangements
permitting the Fund's foreign assets not held by BONY or its foreign branches to
be held by certain qualified foreign banks and depositories.
4.
Portfolio Transactions
Our policy is to obtain best execution on all our portfolio transactions, which
means that we seek to have purchases and sales of portfolio securities executed
at the most favorable prices, considering all costs of the transaction including
brokerage commissions and dealer markups and markdowns and taking into account
the full range and quality of the brokers' services. Consistent with obtaining
best execution, the Fund may pay, as described below, a higher commission than
some brokers might charge on the same transaction. This policy governs the
selection of brokers or dealers and the market in which the transaction is
executed. To the extent permitted by law, we may, if considered advantageous,
make a purchase from or sale to another Lord Abbett-sponsored fund without the
intervention of any broker-dealer.
Broker-dealers are selected on the basis of their professional capability and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of the Company and also are
employees of Lord Abbett. These traders do the trading as well for other
accounts -- investment companies (of which they are also officers) and other
investment clients -- managed by Lord Abbett. They are responsible for obtaining
best execution.
We pay a commission rate that we believe is appropriate to give maximum
assurance that our brokers will provide us, on a continuing basis, the highest
level of brokerage services available. While we do not always seek the lowest
possible commissions on particular trades, we believe that our commission rates
are in line with the rates that many other institutions pay. Our traders are
authorized to pay brokerage commissions in excess of those that other brokers
might
7
<PAGE>
accept on the same transactions in recognition of the value of the services
performed by the executing brokers, viewed in terms of either the particular
transaction or the overall responsibilities of Lord Abbett with respect to us
and the other accounts they manage. Such services include showing us trading
opportunities including blocks, a willingness and ability to take positions in
securities, knowledge of a particular security or market, proven ability to
handle a particular type of trade, confidential treatment, promptness and
reliability.
Some of our brokers also provide research services at least some of which are
useful to Lord Abbett in their overall responsibilities with respect to us and
the other accounts they manage. Research includes the furnishing of analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts and trading equipment and
computer software packages, acquired from third-party suppliers, that enable
Lord Abbett to access various information bases. Such services may be used by
Lord Abbett in servicing all their accounts, and not all of such services will
necessarily be used by Lord Abbett in connection with their management of the
Fund; conversely, such services furnished in connection with brokerage on other
accounts managed by Lord Abbett may be used in connection with their management
of the Fund; and not all of such services will necessarily be used by Lord
Abbett in connection with their advisory services to such other accounts. We
have been advised by Lord Abbett that research services received from brokers
cannot be allocated to any particular account, are not a substitute for Lord
Abbett's services but are supplemental to their own research effort and, when
utilized, are subject to internal analysis before being incorporated by Lord
Abbett into their investment process. As a practical matter, it would not be
possible for Lord Abbett to generate all of the information presently provided
by brokers. While receipt of research services from brokerage firms has not
reduced Lord Abbett's normal research activities, the expenses of Lord Abbett
could be materially increased if it attempted to generate such additional
information through its own staff and purchased such equipment and software
packages directly from the suppliers.
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.
5.
Purchases, Redemptions
and Shareholder Services
Information concerning how we value our shares for the purchase and redemption
of our shares is contained in the Prospectus under "Purchases" and
"Redemptions," respectively.
As disclosed in the Prospectus, we calculate our net asset value as of the close
of the New York Stock Exchange ("NYSE") on each day that the NYSE is open for
trading by dividing our total net assets by the number of shares outstanding at
the time of calculation. The NYSE is closed on Saturdays and Sundays and the
following holidays -- New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
8
<PAGE>
The Fund values its portfolio securities at market value as of the close of the
NYSE. Market value will be determined as follows: securities listed or admitted
to trading privileges on the New York or American Stock Exchange or on the
NASDAQ National Market System are valued at the last sales price, or, if there
is no sale on that day, at the mean between the last bid and asked prices, or,
in the case of bonds, in the over-the-counter market if, in the judgment of the
Company's officers, that market more accurately reflects the market value of the
bonds. Over-the-counter securities not traded on the NASDAQ National Market
System are valued at the mean between the last bid and asked prices. Securities
for which market quotations are not available are valued at fair market value
under procedures approved by the Board of Trustees.
The maximum offering price of Class A shares on December 31, 1997 was computed
as follows:
Class A
-------
Net asset value per share (net assets divided
by shares outstanding) $ 9.53
Maximum offering price per share (net asset
value divided by .9525) $10.00
The net asset value per share for the Class B and Class C shares is determined
in the same manner as for the Class A shares (net assets divided by shares
outstanding). Our Class B and Class C shares are offered at net asset value.
The Fund has entered into a distribution agreement with Lord Abbett Distributor
LLC, a New York limited liability company ("Lord Abbett Distributor") and
subsidiary of Lord Abbett under which Lord Abbett Distributor is obligated to
use its best efforts to find purchasers for the shares of the 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.
Conversion of Class B Shares. The conversion of Class B shares on the eighth
anniversary of their purchase is subject to the continuing availability of a
private letter ruling from the Internal Revenue Service, or an opinion of
counsel or tax adviser, to the effect that the conversion of Class B shares does
not constitute a taxable event for the holder under Federal income tax law. If
such a revenue ruling or opinion is no longer available, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect. Although
Class B shares could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a sales
charge or fee, such exchange could constitute a taxable event for the holder.
ALTERNATIVE SALES ARRANGEMENTS
Classes of Shares. The Fund offers investors four different classes of shares.
This Prospectus offers three of those classes designated Class A, B and C. The
different classes of shares represent investments in the same portfolio of
securities but are subject to different expenses and will likely have different
share prices. Investors should read this section carefully to determine which
class represents the best investment option for their particular situation.
Class A Shares. If you buy Class A shares, you pay an initial sales charge on
investments of less than $1 million (or on investments for employer-sponsored
retirement plans under the Internal Revenue Code (hereinafter referred to as
"Retirement Plans") with less than 100 eligible employees or on investments that
do not qualify to be under a "special retirement wrap program" as a program
sponsored by an authorized institution showing one or more characteristics
distinguishing it, in the opinion of Lord Abbett Distributor from a mutual fund
wrap fee program). If you purchase Class A shares as part of an investment of at
least $1 million (or for Retirement Plans with at least 100 eligible employees
or under a special retirement wrap program) in shares of one or more Lord
Abbett-sponsored funds, you will not pay an initial sales charge, but if you
redeem any of those shares within 24 months after the month in which you buy
them, you may pay to the Fund a contingent deferred sales charge ("CDSC") of 1%
except for redemptions under a special retirement wrap program. Class A shares
are subject to service and distribution fees that are currently estimated to
total annually approximately 0.28 of 1% of the annual net asset value of the
Class A shares. The initial sales charge rates, the CDSC and the Rule 12b-1 plan
applicable to the Class A shares are
9
<PAGE>
described in "Buying Class A Shares" below.
Class B Shares. If you buy Class B shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the sixth anniversary of
buying them, you will normally pay a CDSC to Lord Abbett Distributor LLC ("Lord
Abbett Distributor"). That CDSC varies depending on how long you own shares.
Class B shares are subject to service and distribution fees at an annual rate of
1% of the annual net asset value of the Class B shares. The CDSC and the Rule
12b-1 plan applicable to the Class B shares are described 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 Fund 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 the Fund 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 Fund's class-specific expenses and the
effect of the different types of sales charges on your investment will affect
your investment results over time. The most important factors are how much you
plan to invest and how long you plan to hold your investment. If your goals and
objectives change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider another class of
shares.
In the following discussion, to help provide you and your financial adviser with
a framework in which to choose a class, we have made some assumptions using a
hypothetical investment in the Fund. We used the sales charge rates that apply
to Class A, Class B and Class C, and considered the effect of the higher
distribution fees on Class B and Class C expenses (which will affect your
investment return). Of course, the actual performance of your investment cannot
be predicted and will vary, based on the Fund's 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
10
<PAGE>
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 investments pursuant to a special retirement
wrap program, in most cases Class A shares will be the most advantageous choice,
no matter how long you intend to hold your shares. For that reason, it may not
be suitable for you to place a purchase order for Class B shares of $500,000 or
more or a purchase order for Class C shares of $1,000,000 or more. In addition,
it may not be suitable for you to place an order for Class B or C shares for a
Retirement Plan with at least 100 eligible employees or for a special retirement
wrap program. You should discuss this with your financial advisor.
Investing for the Longer Term. If you are investing for the longer term (for
example, to provide for future college expenses for your child) and do not
expect to need access to your money for seven years or more, Class B shares may
be an appropriate investment option, if you plan to invest less than $100,000.
If you plan to invest more than $100,000 over the long term, Class A shares will
likely be more advantageous than Class B shares or Class C shares, as discussed
above, because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charges available for larger investments in Class
A shares under the 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 "Shareholder Services" in the Prospectus 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.
Class A, B and C Rule 12b-1 Plans. As described in the Prospectus, the Fund has
adopted a Distribution Plan and Agreement pursuant to Rule 12b-1 of the Act for
each of the three Fund Classes: the "A Plan," the "B Plan" and the "C Plan,"
respectively. In adopting each Plan and in approving its continuance, the Board
of Trustees has concluded that there is a reasonable likelihood that each Plan
will benefit its respective Class and such Class' shareholders. The expected
benefits include greater sales and lower redemptions of Class shares, which
should allow each Class to maintain a consistent cash flow, and a higher quality
of service to shareholders by authorized institutions than would otherwise be
the case. Lord Abbett used all amounts received under each Plan for payments to
dealers for (i) providing continuous services to 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 trustees to review, on a quarterly basis, written reports
of all amounts expended pursuant to the Plan and the purposes for which such
expenditures were made. Each Plan shall continue in effect only if its
continuance is specifically approved at least annually by vote of the trustees,
including a majority of the trustees who are not
11
<PAGE>
interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan
("outside trustees"), cast in person at a meeting called for the purpose of
voting on the Plan. No Plan may be amended to increase materially above the
limits set forth therein the amount spent for distribution expenses thereunder
without approval by a majority of the outstanding voting securities of the
applicable class and the approval of a majority of the trustees, including a
majority of the outside trustees. Each Plan may be terminated at any time by
vote of a majority of the outside trustees or by vote of a majority of its
Class's outstanding voting securities.
Contingent Deferred Sales Charges. A Contingent Deferred Sales Charge ("CDSC")
(i) applies regardless of class, (ii) will not apply to shares purchased by the
reinvestment of dividends or capital gains distributions; (iii) 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 (iv) will not be imposed on the amount of your
account value represented by the increase in net asset value over the initial
purchase price (including increases due to the reinvestment of dividends and
capital gains distributions) and upon early redemption of shares. In the case of
Class A shares, this increase is represented by shares having an aggregate
dollar value in your account. In the case of Class B and C shares, this increase
is represented by that percentage of each share redeemed where the net asset
value exceeded the initial purchase price.
Class A Shares. As stated in the Prospectus, subject to certain exceptions, a
CDSC of 1% is imposed with respect to those Class A shares (or Class A shares of
another Lord Abbett-sponsored fund or series acquired through exchange of such
shares) on which the Fund has paid the one-time distribution fee of 1% if such
shares are redeemed out of the Lord Abbett-sponsored family of funds within a
period of 24 months from the end of the month in which the original sale
occurred.
Class B Shares. As stated in the Prospectus, subject to certain exceptions, if
Class B shares (or Class B shares of another Lord Abbett-sponsored fund or
series acquired through exchange of such shares) are redeemed out of the Lord
Abbett-sponsored family of funds for cash before the sixth anniversary of their
purchase, a CDSC will be deducted from the redemption proceeds. The Class B CDSC
is paid to Lord Abbett Distributor to reimburse its expenses, in whole or in
part, for providing distribution-related service to the Fund in connection with
the sale of Class B shares.
To determine whether the CDSC applies to a redemption, the Fund redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held on or after the sixth anniversary
of their purchase, and (3) shares held the longest before such sixth
anniversary.
The amount of the contingent deferred sales charge will depend on the number of
years since you invested and the dollar amount being redeemed, according to the
following schedule:
Anniversary of the Day on Contingent Deferred Sales Charge
Which the Purchase Order Was Accepted on Redemptions (As % of Amount Subject
to Charge)
Before the 1st 5.0%
On the 1st, before the 2nd 4.0%
On the 2nd, before the 3rd 3.0%
On the 3rd, before the 4th 3.0%
On the 4th, before the 5th 2.0%
On the 5th, before the 6th 1.0%
On or after the 6th anniversary None
In the table, an "anniversary" is the 365th day subsequent to the acceptance of
a purchase order or a prior anniversary. All purchases are considered to have
been made on the business day on which the purchase order was accepted.
Class C Shares. As stated in the Prospectus, subject to certain exceptions 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 Fund 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 Fund's Class C shares.
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General. The 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 as investments in another fund participating in the
program. With respect to Class B shares, no CDSC is payable for redemptions (i)
in connection with Systematic Withdrawal Plan and Div-Move services as described
below under those headings, (ii) in connection with mandatory distribution under
403(b) plans and IRAs and (iii) in connection with death of the shareholder. In
the case of Class A and Class C shares, the CDSC is received by the Fund and is
intended to reimburse all or a portion of the amount paid by the Fund if the
shares are redeemed before the Fund has had an opportunity to realize the
anticipated benefits of having a long-term shareholder account in the Fund. 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 Fund (including recoupment of the commission payments made) in connection
with the sale of Class B shares before Lord Abbett Distributor has had an
opportunity to realize its anticipated reimbursement by having such a long-term
shareholder account subject to the B Plan distribution fee.
The other funds and series which participate in the Telephone Exchange Privilege
(except (a) Lord Abbett U.S. Government Securities Money Market Fund, Inc.
("GSMMF"), (b) certain series of Lord Abbett Tax-Free Income Fund and Lord
Abbett Tax-Free Income Trust for which a Rule 12b-1 Plan is not yet in effect,
and (c) any authorized institution's affiliated money market fund satisfying
Lord Abbett Distributor as to certain omnibus account and other criteria,
hereinafter referred to as an "authorized money market fund" or "AMMF"
(collectively, the "Non-12b-1 Funds")) have instituted a CDSC for each class on
the same terms and conditions. No CDSC will be charged on an exchange of shares
of the same class between Lord Abbett funds or between such funds and AMMF. Upon
redemption of shares out of the Lord Abbett family of funds or out of AMMF, the
CDSC will be charged on behalf of and paid: (i) to the fund in which the
original purchase (subject to a CDSC) occurred, in the case of the Class A and
Class C shares and (ii) to Lord Abbett Distributor if the original purchase was
subject to a CDSC, in the case of the Class B shares. Thus, if shares of a Lord
Abbett fund are exchanged for shares of the same class of another such fund and
the shares of the same class tendered ("Exchanged Shares") are subject to a
CDSC, the CDSC will carry over to the shares of the same class being acquired,
including GSMMF and AMMF ("Acquired Shares"). Any CDSC that is carried over to
Acquired Shares is calculated as if the holder of the Acquired Shares had held
those shares from the date on which he or she became the holder of the Exchanged
Shares. Although the Non-12b-1 Funds will not pay a distribution fee on their
own shares, and will, therefore, not impose their own CDSC, the Non-12b-1 Funds
will collect the CDSC (a) on behalf of other Lord Abbett funds, in the case of
the Class A and Class C shares and (b) on behalf of Lord Abbett Distributor, in
the case of the Class B shares. Acquired Shares held in GSMMF and AMMF which are
subject to a CDSC will be credited with the time such shares are held in GSMMF
but will not be credited with the time such shares are held in AMMF. Therefore,
if your Acquired Shares held in AMMF qualified for no CDSC or a lower Applicable
Percentage at the time of exchange into AMMF, that Applicable Percentage will
apply to redemptions for cash from AMMF, regardless of the time you have held
Acquired Shares in AMMF.
In no event will the amount of the CDSC exceed the Applicable Percentage of the
lesser of (i) the net asset value of the shares redeemed or (ii) the original
cost of such shares (or of the Exchanged Shares for which such shares were
acquired). No CDSC will be imposed when the investor redeems (i) shares
representing an aggregate dollar amount of your account, in the case of Class A
shares, (ii) that percentage of each share redeemed, in the case of Class B and
C shares, derived from increases in the value of the shares above the total cost
of shares being redeemed due to increases in net asset value, (iii) shares with
respect to which no Lord Abbett fund paid a 12b-1 fee and, in the case of Class
B shares, Lord Abbett Distributor paid no sales charge or service fee (including
shares acquired through reinvestment of dividend income and capital gains
distributions) or (iv) shares which, together with Exchanged Shares, have been
held continuously for 24 months from the end of the month in which the original
sale occurred (in the case of Class A shares); for six years or more (in the
case of Class B shares) and for one year or more (in the case of Class C
shares). In determining whether a CDSC is payable, (a) shares not subject to the
CDSC will be redeemed before shares subject to the CDSC and (b) of the shares
subject to a CDSC, those held the longest will be the first to be redeemed.
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<PAGE>
Exchanges. The Prospectus briefly describes the Telephone Exchange Privilege.
You may exchange some or all of your shares of any class for those in the same
class of: (i) Lord Abbett-sponsored funds currently offered to the public with a
sales charge (front-end, back-end or level ), (ii) GSMMF or (iii) AMMF, to the
extent offers and sales may be made in your state. You should read the
prospectus of the other fund before exchanging. In establishing a new account by
exchange, shares of the Fund being exchanged must have a value equal to at least
the minimum initial investment required for the other fund into which the
exchange is made.
Shareholders in other Lord Abbett-sponsored funds and AMMF have the same right
to exchange their shares for the corresponding class of the Fund's shares.
Exchanges are based on relative net asset values on the day instructions are
received by the Fund in Kansas City if the instructions are received prior to
the close of the NYSE in proper form. No sales charges are imposed except in the
case of exchanges out of GSMMF or AMMF (unless a sales charge (front-end,
back-end or level) was paid on the initial investment 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 as
described in the Prospectus you may invest $100,000 or more over a 13-month
period in shares of a Lord Abbett-sponsored fund (other than shares of LAEF,
LASF, LARF, GSMMF and AMMF, unless holdings in GSMMF and AMMF are attributable
to shares exchanged from a Lord Abbett-sponsored fund offered with a front-end,
back-end or level sales charge). Shares currently owned by you are credited as
purchases (at their current offering prices on the date the Statement is signed)
toward achieving the stated investment and reduced initial sales charge for
Class A shares. Class A shares valued at 5% of the amount of intended purchases
are escrowed and may be redeemed to cover the additional sales charge payable if
the Statement of Intention 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, GSMMF, and AMMF unless holdings in GSMMF or AMMF
are attributable to shares exchanged from a Lord Abbett-sponsored fund offered
with a front-end, back-end or level sales charge) so that a current investment,
plus the purchaser's holdings valued at the current maximum offering price,
reach a level eligible for a discounted sales charge for Class A shares.
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 director or custodian under any pension or profit-sharing
plan or Payroll Deduction IRA established for the benefit of such persons or for
the benefit of employees of any national securities trade organization to which
Lord Abbett belongs or any company with an account(s) in excess of $10 million
managed by Lord Abbett on a private-advisory-account basis. For purposes of this
paragraph, the terms "directors" and "employees" include a director's or
employee's spouse (including the surviving spouse of a deceased director or
employee). The terms "our directors" and "employees of Lord Abbett" also include
retired directors and employees and other family members thereof.
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<PAGE>
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) in
connection with a merger, acquisition or other reorganization (h) through a
"special retirement wrap program" sponsored by an authorized institution having
one or more characteristics distinguishing it, in the opinion of Lord Abbett
Distributor, from a mutual fund wrap program. Such characteristics include,
among other things, the fact that an authorized institution does not charge its
clients any fee of a consulting or advisory nature that is economically
equivalent to the distribution fee under Class A 12b-1 Plan and the fact that
the program relates to participant-directed Retirement Plan. Shares are offered
at net asset value to these investors for the purpose of promoting goodwill with
employees and others with whom Lord Abbett Distributor and/or the Fund has
business relationships.
Redemptions. A redemption order is in proper form when it contains all of the
information and documentation required by the order form or supplementally by
Lord Abbett Distributor or the Fund to carry out the order. The signature(s) and
any legal capacity of the signer(s) must be guaranteed by an eligible guarantor.
See the Prospectus for expedited redemption procedures.
The right to redeem and receive payment, as described in the Prospectus, may be
suspended if the NYSE is closed (except for weekends or customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
deems an emergency to exist.
Our Board of Trustees may authorize redemption of all of the shares in any
account in which there are fewer than 25 shares. Before authorizing such
redemption, the Board must determine that it is in our economic best interest or
necessary to reduce disproportionately burdensome expenses in servicing
shareholder accounts. At least 6 months' prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
Div-Move. Under the Div-Move service described in the Prospectus, you can invest
the dividends paid on your account of any class into an existing account of the
same class in any other Eligible Fund. The account must be either your account,
a joint account for you and your spouse, a single account for your spouse, or a
custodial account for your minor child under the age of 21. You should read the
prospectus of the other fund before investing.
Invest-A-Matic. The Invest-A-Matic method of investing in the 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 ("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
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 the SWP is established.
For Class B share 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
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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 including 401(k) plans and custodial agreements for
IRAs (Individual Retirement Accounts, including Traditional, Education, Roth and
SIMPLE IRAs and Simplified Employee Pensions), 403(b) plans and qualified
pension and profit-sharing plans. The forms name Investors Fiduciary Trust
Company as custodian and contain specific information about the plans excluding
401(k) plans. Explanations of the eligibility requirements, annual custodial
fees and allowable tax advantages and penalties are set forth in the relevant
plan documents. Adoption of any of these plans should be on the advice of your
legal counsel or qualified tax adviser.
6.
Past Performance
The Fund 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 one thousand
dollars which represents a hypothetical initial investment. The calculation
assumes deduction of the maximum sales charge (as described in the next
paragraph) from the amount invested and reinvestment of all income dividends and
capital gains distributions on the reinvestment dates at prices calculated as
stated in the Prospectus. The ending redeemable value is determined by assuming
a complete redemption at the end of the period covered by the average annual
total return computation.
In calculating total returns for Class A shares, the current maximum sales
charge of 4.75% (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, 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 Fund's 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
Fund's 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.
Yield quotation for each Class 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 the maximum offering price per share of such Class on the last day of
the period. This is determined by finding the following quotient: take the
Class' 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 shares of such Class outstanding during the period that were entitled to
receive dividends and (ii) the maximum offering price per share of such Class on
the last day of the period. To this quotient add one. This sum is multiplied by
itself five times. Then one is subtracted from the product of this
multiplication and the remainder is multiplied by two. Yield for the Class A
shares reflects the deduction of the maximum initial sales charge, but may also
be shown based on the Fund's net asset value per share. Yields for Class B and C
shares do not reflect the deduction of the CDSC.
These figures represent past performance, and an investor should be aware that
the investment return and principal value of a Fund investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Therefore, there is no assurance that this performance will be
repeated in the future.
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7.
Taxes
The value of any shares redeemed by the Fund or repurchased or otherwise sold
may be more or less than your tax basis in the shares at the time the
redemption, repurchase or sale is made. Any gain or loss will generally be
taxable for federal income tax purposes. Any loss realized on the sale,
redemption or repurchase of Fund shares which you have held for six months or
less will be treated for tax purposes as a long-term capital loss to the extent
of any capital gains distributions which you received with respect to such
shares. Losses on the sale of stock or securities are not deductible if, within
a period beginning 30 days before the date of the sale and ending 30 days after
the date of the sale, the taxpayer acquires stock or securities that are
substantially identical.
The Fund will be subject to a 4% non-deductible excise tax on certain amounts
not distributed (and not treated as having been distributed) on a timely basis
in accordance with a calendar-year distribution requirement. The Fund intends to
distribute to shareholders each year an amount adequate to avoid the imposition
of such excise tax. Dividends paid by the Fund will qualify for the
dividends-received deduction for corporations to the extent they are derived
from dividends paid by domestic corporations.
As described in the Prospectus under "Risk Factors," the Fund may be subject to
foreign withholding taxes which would reduce the yield on its investments. Tax
treaties between certain countries and the United States may reduce or eliminate
such taxes. It is expected that Fund shareholders who are subject to United
States federal income tax will not be entitled to claim a federal income tax
credit or deduction for foreign income taxes paid by the Fund.
Gains and losses realized by the Fund on certain transactions, including sales
of foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gains or losses are attributable to changes in
exchange rates for foreign currencies. Accordingly, distributions taxable as
ordinary income will include the net amount, if any, of such foreign exchange
gains and will be reduced by the net amount, if any, of such foreign exchange
losses.
The foregoing discussion relates solely to U. S. federal income tax law as
applicable to United States persons (United States citizens or residents and
United States domestic corporations, partnerships, trusts and estates). Each
shareholder who is not a United States person should consult his tax adviser
regarding the U. S. and foreign tax consequences of the ownership of shares of
the Fund, including a 30% (or lower treaty rate) United States withholding tax
on dividends representing ordinary income and net short-term capital gains, and
the applicability of United States gift and estate taxes to non-United States
persons who own Fund shares.
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8.
Information About the Fund
The directors, trustees and officers of Lord Abbett-sponsored mutual funds,
together with the partners and employees of Lord Abbett, are permitted to
purchase and sell securities for their personal investment accounts. 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 7 days
before or after any Lord Abbett-sponsored fund or Lord Abbett-managed account
considers a trade or trades in such security, from profiting on trades of the
same security within 60 days and from trading on material and non-public
information. The Code imposes certain similar requirements and restrictions on
the independent directors and trustees of each Lord Abbett-sponsored mutual fund
to the extent contemplated by the recommendations of the Advisory Group.
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9.
Appendix
Corporate Bond Ratings
Moody's Investors Service, Inc.'s Corporate Bond Ratings
Aaa - Bonds which are rated Aaa are judged to be of the best quality and carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin, and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds which are rated Aa are judged to be of high-quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance and
other terms of the contract over any long period of time may be small.
Caa - Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds that are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds that are rated C are the lowest-rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Standard & Poor's Corporation's Corporate Bond Ratings
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong and in the majority of instances they
differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
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BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB-B-CCC-CC-C - Debt rated BB, B, CCC, CC and C is regarded as having
predominately speculative characteristics with respect to capacity to pay
interest and repay principal. 'BB' indicates the least degree of speculation and
'CCC' the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
D - Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes such payments will
be made during such grace period. The 'D' rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
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PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements - Not applicable.
(b) Exhibits - The exhibits which are not mentioned are not applicable.
(1) Declaration of Trust*
(2) By-Laws of Registrant**
(3) Amended Management Agreement between Registrant and Lord, Abbett & Co.*
(4) Form of Distribution Agreement between Registrant and Lord Abbett &
Co.****
(5) Retirement Plan for Non-interested Person, Trustees and Trustees of
Lord Abbett Funds*****
Lord Abbett Prototype Retirements Plans, (1) 401 (k), (2) IRA, (3)
403 (b), (4) Profit-Sharing, and (5)Money Purchases*****
(6) Forms of Distribution Plan for Class A and Class C shares****
(7) Amendment to Plan entered into by Registrant pursuant to Rule 18f-3*
*To be filed.
**Incorporated by reference to Post-Effective Amendment No. 15 to
the Fund's Registration Statement on Form N-1A, filed with the Commission on
March 18, 1998.
***Incorporated by reference to Post-Effective No.41 to Lord Abbett's Bond
Debenture Fund (File No. 811-2145).
****Incorporated by reference to Post-Effective No. 7 to Lord Abbett's
Equity Fund (File No. 811-6033).
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Record Holders of Securities
(as of September 8, 1998)
U.S. Government Securities Series 62,410 Class A
656 Class B
3,148 Class C
Limited Duration Government 182 Class A
106 Class C
Balanced 970 Class A
125 Class B
1,148 Class C
Core Series 12 Class Y
Strategic Core Series 0 Class Y
Item 27. Indemnification
The Registrant is a Delaware Business Trust established under
Chapter 38 of Title 12 of the Delaware Code. The Registrant's
Declaration and Instrument of Trust at Section 4.3 relating to
indemnification of Trustees, officers, etc. states the
following.
<PAGE>
The Trust shall indemnify each of its Trustees, officers,
employees and agents (including any individual who serves at
its request as director, officer, partner, trustee or the like
of another organization in which it has any interest as a
shareholder, creditor or otherwise) against all liabilities
and expenses, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees reasonably incurred by him or her
in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, before
any court or administrative or legislative body in which he or
she may be or may have been involved as a party or otherwise
or with which he or she may be or may have been threatened,
while acting as Trustee or as an officer, employee or agent of
the Trust or the Trustees, as the case may be, or thereafter,
by reason of his or her being or having been such a Trustee,
officer, employee or agent, except with respect to any matter
as to which he or she shall have been adjudicated not to have
acted in good faith in the reasonable belief that his or her
action was in the best interests of the Trust or any Series
thereof. Notwithstanding anything herein to the contrary, if
any matter which is the subject of indemnification hereunder
relates only to one Series (or to more than one but not all of
the Series of the Trust), then the indemnity shall be paid
only out of the assets of the affected Series. No individual
shall be indemnified hereunder against any liability to the
Trust or any Series thereof or the Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her
office. In addition, no such indemnity shall be provided with
respect to any matter disposed of by settlement or a
compromise payment by such Trustee, officer, employee or
agent, pursuant to a consent decree or otherwise, either for
said payment or for any other expenses unless there has been a
determination that such compromise is in the best interests of
the Trust or, if appropriate, of any affected Series thereof
and that such Person appears to have acted in good faith in
the reasonable belief that his or her action was in the best
interests of the Trust or, if appropriate, of any affected
Series thereof, and did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office. All
determinations that the applicable standards of conduct have
been met for indemnification hereunder shall be made by (a) a
majority vote of a quorum consisting of disinterested Trustees
who are not parties to the proceeding relating to
indemnification, or (b) if such a quorum is not obtainable or,
even if obtainable, if a majority vote of such quorum so
directs, by independent legal counsel in a written opinion, or
(c) a vote of Shareholders (excluding Shares owned of record
or beneficially by such individual). In addition, unless a
matter is disposed of with a court determination (i) on the
merits that such Trustee, officer, employee or agent was not
liable or (ii) that such Person was not guilty of willful
misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office, no
indemnification shall be provided hereunder unless there has
been a determination by independent legal counsel in a written
opinion that such Person did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office.
<PAGE>
The Trustees may make advance payments out of the assets of
the Trust or, if appropriate, of the affected Series in
connection with the expense of defending any action with
respect to which indemnification might be sought under this
Section 4.3. The indemnified Trustee, officer, employee or
agent shall give a written undertaking to reimburse the Trust
or the Series in the event it is subsequently determined that
he or she is not entitled to such indemnification and (a) the
indemnified Trustee, officer, employee or agent shall provide
security for his or her undertaking, (b) the Trust shall be
insured against losses arising by reason of lawful advances,
or (c) a majority of a quorum of disinterested Trustees or an
independent legal counsel in a written opinion shall
determine, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be found entitled
to indemnification. The rights accruing to any Trustee,
officer, employee or agent under these provisions shall not
exclude any other right to which he or she may be lawfully
entitled and shall inure to the benefit of his or her heirs,
executors, administrators or other legal representatives.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to Trustees, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expense incurred or paid by a Trustee, officer or controlling
person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such Trustee,
officer or controlling person in connection with the
securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Lord, Abbett & Co. acts as investment manager and/or principal
underwriter for twelve other Lord Abbett open-end investment
companies (of which it is principal underwriter for thirteen),
and as investment adviser to approximately 6,220 private
accounts. Other than acting as Trustees (directors) and/or
officers of open-end investment companies managed by Lord,
Abbett & Co., none of Lord, Abbett & Co.'s partners has, in
the past two fiscal years, engaged in any other business,
profession, vocation or employment of a substantial nature for
his own account or in the capacity of director, officer,
employee, partner or trustee of any entity.
<PAGE>
Item 29. Principal Underwriter
(a) Lord Abbett Affiliated Fund, Inc.
Lord Abbett U. S. Government Securities Fund, Inc.
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Mid-Cap Value Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett Government Securities Money Market Fund, Inc.
Lord Abbett Tax-Free Income Trust
Lord Abbett Global Fund, Inc.
Lord Abbett Equity Fund
Lord Abbett Series Fund, Inc.
Lord Abbett Research Fund, Inc.
Lord Abbett Investment Trust
Investment Adviser
American Skandia Trust (Lord Abbett Growth and Income Portfolio)
(b) The partners of Lord, Abbett & Co. are:
Name and Principal Positions and Offices
Business Address (1) with Registrant
Robert S. Dow Chairman and President
Robert I. Gerber* Executive Vice President
Robert G. Morris Executive Vice President
Christopher J. Towle* Executive Vice President
Paul A. Hilstad Vice President & Secretary
Zane E. Brown Vice President
Daniel E. Carper Vice President
W. Thomas Hudson Vice President
*As of October 1, 1998
(c) The other general partners of Lord, Abbett & Co. who are neither
officers nor trustees of the Company are: Stephen Allen, John E. Erard*, Robert
P. Fetch, Daria L. Foster, Stephen J. McGruder*, Michael B. McLaughlin, Robert
J. Noelke, R. Mark Pennington* and John J. Walsh.
(1) Each of the above has a principal business address at 767 Fifth Avenue,
New York, NY 10153
(c) Not applicable
Item 30. Location of Accounts and Records
Registrant maintains the records, required by Rules 31a - 1(a) and (b), and
31a - 2(a) at its main office.
Lord, Abbett & Co. maintains the records required by Rules 31a - 1(f) and
31a - 2(e) at its main office.
Certain records such as correspondence may be physically
maintained at the main office of the Registrant's Transfer
Agent, Custodian, or Shareholder Servicing Agent within the
requirements of Rule 31a-3.
<PAGE>
Item 31. Management Services
None.
Item 32. Undertakings
(c) The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without
charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this Registration
Statement and/or any amendment thereto to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and State of New
York on the 24th day of September, 1998.
LORD ABBETT INVESTMENT TRUST
By /s/Robert S. Dow
Robert S. Dow,
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Chairman, President
/s/Robert S. Dow and Trustee 9/24/98
Robert S. Dow (Title) (Date)
/s/ E. Thayer Bigelow Trustee 9/24/98
E. Thayer Bigelow (Title) (Date)
/s/ William H. T. Bush Trustee 9/24/98
William H. T. Bush (Title) (Date)
/s/ Robert B. Calhoun Trustee 9/24/98
Robert B. Calhoun (Title) (Date)
/s/ Stewart S. Dixon Trustee 9/24/98
Stewart S. Dixon (Title) (Date)
/s/ John C. Jansing Trustee 9/24/98
John C. Jansing (Title) (Date)
/s/ Alan MacDonal Trustee 9/24/98
C. Alan MacDonald (Title) (Date)
/s/ Hansel B. Millican, Jr. Trustee 9/24/98
Hansel B. Millican, Jr. (Title) (Date)
/s/ Thomas J. Neff Trustee 9/24/98
Thomas J. Neff (Title) (Date)
Vice President and
/s/ Keith F. O'Connor Chief Financial Officer 9/24/98
Keith F. O'Connor (Title) (Date)
