LORD ABBETT
INVESTMENT TRUST
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
800-426-1130
THE BALANCED SERIES ("We" or the "Series") is a separate series of Lord Abbett
Investment Trust (the "Fund"). The Fund currently consists of five series. Only
shares of the Balanced Series are being offered by this Prospectus. The Series
has three classes called Class A, B, and C shares, which provide investors with
different options in purchasing shares of the Series. See "Purchases" for a
description of these choices.
We seek current income and capital growth.
Although it has invested directly in portfolio securities in the past, the
Series intends to begin investing in a diversified portfolio of underlying
mutual funds, all of which are members of the Lord Abbett Family of Funds.
Currently, the Series invests in two of these underlying mutual funds (the
"Underlying Funds"). There can be no assurance that we will achieve our
objective.
This Prospectus sets forth concisely the information about the Series
and the Fund that a prospective investor should know before investing.
Additional information about the Series and the Fund has been filed with the
Securities and Exchange Commission. The Statement of Additional Information is
incorporated by reference into this Prospectus and may be obtained, 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."
The date of this Prospectus and of the Statement of Additional Information is
April 1, 1998.
PROSPECTUS Investors should read and retain this Prospectus. Shareholder
inquiries should be made in writing to the Fund or by calling 800-821-5129. You
can also make inquiries through your broker-dealer.
Shares of the Series are not
deposits or obligations of, or guaranteed or endorsed by, any bank, and the
shares are not federally insured by the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other agency. An investment in the Series
involves risks, including the possible loss of principal.
CONTENTS PAGE
1 Fee Table 2
2 Financial Highlights 3
3 How We Invest 4
4 Purchases 7
5 Shareholder Services 15
6 Our Management 17
7 Dividends, Capital Gains
Distributions and Taxes 17
8 Redemptions 18
9 Performance 19
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.
1 FEE TABLE
A summary of expenses of the Balanced Series is set forth in the table below.
The example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
BALANCED SERIES Class A Class B Class C
Shares Shares Shares
Shareholder Transaction
Expenses(1) (as a
percentage of
offering price)
Maximum Sales Load(2)
on Purchases
(See "Purchases") 4.75% None None
Deferred Sales Load(2)
(See "Purchases") None 5% if shares are redeemed 1% if shares are
before 1st anniversary of redeemed before 1st
purchase, declining to 1% anniversary of
before 6th anniversary and purchase
eliminated on and after
6th anniversary(3)
Annual Fund Operating
Expenses(4)
(as a percentage of
average net assets)
Management Fees
(See "Our Management"
(5) 0.00% 0.00% 0.00%
12b-1 Fees (See
"Purchases")(1)(2) 0.25% 1.00% 1.00%
Other Expenses
(See "Our Management") .34% 0.34% 0.34%
Total Operating
Expenses(5) 0.59% 1.34% 1.34%
While each
class of shares of the Balanced Series is expected to operate with the direct
total operating expenses shown above ("each Balanced Series class expense
ratio"), shareholders in the Balanced Series bear indirectly the Class Y share
expenses of the Underlying Funds in which the Balanced Series invests
exclusively. The following chart provides the expense ratio for each of the
Underlying Funds invested in by the Balanced Series, as well as the percentage
of the Balanced Series' net assets proposed to be initially invested in each
Underlying Fund:
Underlying Funds' Percentage of Balanced
Expense Ratios Series' Net Assets
Lord Abbett Affiliated Fund .42% 50%
Lord Abbett Bon-Debenture Fund .63% 50%
100%
Based on these figures, the average weighted Class Y share expense
ratio for the Underlying Funds in which Balanced Series invests is .53% (the
"underlying expense ratio"). This figure is only an approximation of the
Balanced Series' underlying expense ratio, since the assets of the Balanced
Series invested in each of the Underlying Funds change daily.
EXAMPLE: Using the
underlying expense ratio combined with each Balanced class expense ratio, the
following example illustrates the expenses that you would incur if you assume
Balanced Series' annual return is 5% and there is no change in the level of
expenses described above. For a $1,000 investment, with reinvestment of all
dividends and distributions, you would pay the following total expenses assuming
redemption on the last day of each period indicated.
Balanced Series 1 year 3years 5 years 10 years
Class A shares $53 $65 $79 $118
Class B shares $64 $72 $93 $141
Class C shares $24 $42 $73 $162
Example: You would pay the expenses in the four right columns on the same
investment, assuming no redemption:
1 year 3 years 5 years 10 years
Class A shares $53 $65 $79 $118
Class B shares(3) $14 $42 $73 $141
Class C shares $14 $42 $73 $162
(1)Although the Balanced Series does not, with respect to the Class B and Class
C shares, charge a front-end sales charge, investors should be aware that
long-term shareholders may pay, under each Rule 12b-1 plan applicable to the
Class B and Class C shares of the Balanced Series (both of which pay annual
0.25% service and 0.75% distribution fees), more than the economic equivalent of
the maximum front-end sales charge as permitted by certain rules of the National
Association of Securities Dealers, Inc. Likewise, with respect to Class A
shares, investors should be aware that, over the long term, such maximum may be
exceeded due to the Rule 12b-1 plan applicable to certain net asset value Class
A share purchases which permits the Balanced Series to pay up to 0.50% in total
annual fees, half for service and the other half for distribution. The 12b-1
fees for the Class A shares are based on estimated fees for the current fiscal
year and will go into effect on the first day of the calendar quarter subsequent
to the Series' net assets reaching $50 million.
(2)Sales "load" is referred to
as sales "charge," "deferred sales load" is referred to as "contingent deferred
sales charge" (or "CDSC") and "12b-1 fees" which consist of a "service fee" and
a "distribution fee" are referred to by either or both of these terms where
appropriate with respect to Class A, Class B and Class C shares throughout this
Prospectus.
(3)Class B shares will automatically convert to Class A shares on
the eighth anniversary of the purchase of Class B shares.
(4)The annual
operating expenses shown in the summary are based on historical expenses
adjusted to include reductions due to subsidization of the Series' expenses by
the Underlying Funds and/or Lord, Abbett & Co.
(5)The Balanced Series is
obligated to pay Lord, Abbett & Co. ("Lord Abbett") a management fee of .75 of
1% for the allocation of the Series' assets among the Underlying Funds. However,
Lord Abbett anticipates waiving this fee for the current fiscal year of the
Series. Total operating expenses would be 1.34%, 2.09%, 2.09% absent such
management fee waiver for Class A, Class B and Class C shares, respectively.
2 FINANCIAL HIGHLIGHTS
The following table has been audited by Deloitte & Touche llp, independent
auditors, in connection with their annual audit of the Balanced Series Financial
Statements, whose report may be obtained on request. Call 800-821-5129 and ask
for the Balanced Series 1997 Annual Report.
BALANCED SERIES CLASS A SHARES
Year One Month Year 12/27/94(d)
Per Share Operating Ended Ended Ended to
Performance: 11/30/97 11/30/96 10/31/96 10/31/95
Net asset value,
beginning of period $11.81 $11.30 $10.71 $9.52
Income from
investment operations
Net investment
income .47(e) .0312 .472 .365
Net realized and
unrealized gain
on securities 1.15 .5208 .732 1.185
Total from
investment
operations 1.62 .552 1.204 1.55
Distributions
Dividends from
net investment
income (.46) (.0420) (.462) (.36)
Distributions from
net realized gain (.17) ---- (.152) ----
Net asset value,
end of period $12.80 $11.81 $11.30 $10.71
Total Return(b) 14.22% 4.89%(c) 11.55% 16.32%(c)
Ratios/Supplemental Data:
Ratios to Average
Net Assets:
Expenses, including
waiver 1.10%(f) .07%(c) .93% .37%(c)
Expenses,
excluding waiver 1.53% .11%(c) 1.59% 1.26%(c)
Net
investment income 3.89% 0.26%(c) 4.18% 4.39%(c)
CLASS C SHARES Year Ended One Month 7/15/96(a)
11/30/97 Ended 11/30/96 to 10/31/96
Per Share Operating
Performance:
Net asset value,
beginning of period $11.79 $11.29 $10.73
Income from
investment operations
Net investment
income .35(e) .0067 .0349
Net realized and
unrealized gain
on securities 1.15 .5298 .6346
Total from
investment
operations 1.50 .5365 .6695
Distributions
Dividends from
net investment
income (.34) (.0365) (.0730)
Distributions from
net realized gain (.17) ---- (.0365)
Net asset value,
end of period $12.78 $11.79 $11.29
Total Return(b) 13.13% 4.76% 7.78%
Ratios/Supplemental Data:
Ratios to Average
Net Assets:
Expenses, including
waiver 2.08%(f) .16%(c) .62%(c)
Expenses,
excluding waiver 2.51% .20%(c) .77%(c)
Net
investment income 2.88% .17%(c) .70%(c)
Year One Month Year 12/27/94(d)
Ended Ended Ended to
Supplemental Data 11/30/97 11/30/96 10/31/96 10/31/95
for All Classes:
Net assets, end
of period (000) $20,340 $11,406 $10,988 $5,713
Portfolio turnover
rate 216.07% 10.05% 187.18% 131.80%
Average commissions
per
share paid on equity
transactions $.058 $.067 $.057 $.056
(a) Commencement of
offering of Class shares.
(b) Total return does not consider the effects of
sales loads.
(c) Not annualized.
(d) Commencement of operations of the Series.
(e) Calculated using average shares outstanding during the period. (f) The
ratios for 1997 include expenses paid through an expenses offset arrangement.
3 HOW WE INVEST
The Balanced Series will invest all of its assets in underlying mutual funds
which are members of the Lord Abbett Family of Funds. Currently, the Balanced
Series invests in two Underlying Funds. The following table shows how the
Balanced Series' assets are initially divided among the two Underlying Funds:
Investment Initial Underlying Funds
Category Percentage of
Balanced Series'
Net Assets
Equity 50% Lord Abbett Affiliated Fund
Fixed Income 50% Lord Abbett Bond-
Debenture Fund
As investments for the Balanced Series Portfolio, the Fund's Trustees have
chosen Lord Abbett Affiliated Fund, Inc. and Lord Abbett Bond-Debenture Fund,
Inc. The selection of the Underlying Funds in which the Balanced Series
Portfolio will invest, as well as the maximum and minimum amounts of the
Balanced Series' assets which can be invested in each Underlying Fund are
determined from time to time by the Fund's "management" (i.e., the officers of
the Fund on a day-to-day basis under the overall supervision of the Fund's
Trustees based on the investment advice of Lord, Abbett & Co. -- "Lord Abbett").
From time to time the Balanced Series' investments in the Underlying Funds may
be limited by certain factors and, therefore, the Balanced Series' offering of
its shares to the public may be limited. The Board of Directors of any of the
Underlying Funds may impose limits on additional investments in a particular
Underlying Fund. For example, if there were restrictions on additional
investments in Lord Abbett Affiliated Fund imposed by its Board of Directors,
such restrictions could close the Balanced Series' investment in the Affiliated
Fund and, therefore, limit Balanced Series' offering of shares to the public.
IMPLEMENTATION OF POLICIES. The Underlying Funds in which the Series may invest,
as well as certain other investment practices of the Series are described below.
Investors desiring more information about an Underlying Fund described below
should call (1-800-874-3733) for the Underlying Fund's prospectus.
THE BALANCED
SERIES INVESTS IN TWO FUNDS. The Underlying Funds consist of Lord Abbett
Affiliated Fund and Lord Abbett Bond-Debenture Fund.
AFFILIATED FUND. The
investment objective of Lord Abbett Affiliated Fund is long-term growth of
capital and income without excessive fluctuations in market value. The
Affiliated Fund seeks to attain its objective by investing in securities selling
at reasonable prices in relation to value. It normally invests in large,
seasoned companies in sound financial condition which are expected to perform
above-average with respect to earnings and price appreciation.
BOND-DEBENTURE
FUND. The investment objective of Lord Abbett Bond-Debenture Fund is high
current income and the opportunity for capital appreciation to produce a high
total return through a professionally-managed portfolio consisting primarily of
convertible and discount debt securities, many of which are lower-rated. Such
lower-rated debt securities entail greater risks than investments in
higher-rated debt securities and are referred to colloquially as "junk bonds."
RISK REDUCTION. The market risk is generally greater in equity securities than
in fixed-income securities. Therefore, the Balanced Series directly or
indirectly at all times maintains at least 25% of its net assets in fixed-income
securities. Moreover, in an effort to reduce risk, among other things, each
Underlying Fund is diversified with respect to its investments under both the
Internal Revenue Code and the Investment Company Act of 1940. Finally, Balanced
Series' assets are allocated according to maximum and minimum amounts which can
be invested in each Underlying Fund as determined from time to time by Fund
management. Collectively, these two Underlying Funds are invested in
approximately 200 to 300 or more companies at any particular time across the
spectrum of investment methods and diversification requirements and Balanced
Series' own asset allocation process between these two funds from time to time.
Regardless of these efforts to reduce risk, investors in the Balanced Series
should consider the following market risks.
STOCK MARKET RISKS. As a mutual fund
investing its assets primarily in common stocks, the Affiliated Fund is subject
to stock market risk -- i.e., the possibility that stock prices in general will
decline over short or even extended periods. The stock market tends to be
cyclical, with periods when stock prices generally rise and periods when stock
prices generally decline.
FIXED-INCOME SECURITIES. Bond-Debenture Fund may
invest substantially in lower-rated bonds because they tend to have higher
yields. In general, the market for lower-rated bonds is more limited than that
for higher-rated bonds and, therefore, may be less liquid. Market prices of
lower-rated bonds may fluctuate more than those of higher-rated bonds,
particularly in times of economic changes and stress. In addition, because the
market for lower-rated corporate debt securities has in past years experienced
wide fluctuations in the values of certain of these securities, past experience
may not provide an accurate indication of the future performance of that market
or of the frequency of default, especially during periods of recession.
Objective pricing data for lower-rated bonds may be more limited 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.
Since the risk of default
generally is higher among lower-rated bonds, the research and analysis performed
by Lord Abbett are especially important in the selection of such bonds. If bonds
are rated BB/Ba or lower, they are described as "high-yield bonds" because of
their generally higher yields and are referred to colloquially as "junk bonds"
because of their greater risks. In selecting lower-rated bonds for investment,
Lord Abbett does not rely upon ratings, which evaluate only the safety of
principal and interest, not market value risk, and which, furthermore, may not
accurately reflect an issuer's current financial condition. We do not have any
minimum rating criteria for our investments in bonds. 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. Laws enacted from time to time could limit the tax or
other advantages of, and the issuance of, lower-rated securities and could
adversely affect their secondary market and the financial condition of their
issuers. On the other hand, such legislation (curtailing the supply of new
issues) could improve the liquidity, market values and demand for outstanding
issues.
During the past fiscal year for the Bond-Debenture Fund, the percentages of its
average net assets invested in (a) rated bonds and (b) unrated bonds judged by
us to be of a quality comparable to rated bonds, on a dollar-weighted basis,
calculated monthly were as follows: 21.43% AAA/Aaa, 2.90% AA/Aa, 4.45% A/A,
6.08% BBB/Baa, 13.20% BB/Ba, 46.60% B/B, 3.30% CCC/Caa, 0.10% D, and 1.93%
unrated.
FOREIGN INVESTMENTS: Securities markets of foreign countries in which the
Underlying Funds may invest generally are not subject to the same degree of
regulation as the U.S. markets and may be more volatile and less liquid than the
major U.S. markets. Lack of liquidity may affect the Underlying Funds' ability
to purchase or sell large blocks of securities and thus obtain the best price.
There may be less publicly available information on publicly traded companies,
banks and governments in foreign countries than generally is the case for such
entities in the United States. The lack of uniform accounting standards and
practices among countries impairs the validity of direct comparisons of
valuation measures (such as price/earnings ratios) for securities in different
countries. Other considerations include political and social instability,
expropriation, higher transaction costs, withholding taxes that cannot be passed
through as a tax credit or deduction to shareholders, currency fluctuations and
different securities settlement practices. Settlement periods for foreign
securities, which are sometimes longer than those for securities of U.S.
issuers, may affect portfolio liquidity. In addition, foreign securities held by
the Underlying Funds may be traded on days that the Underlying Funds do not
value their portfolio securities, such as Saturdays and customary business
holidays and, accordingly, the Underlying Funds' net asset values (and those of
the Balanced Series) may be significantly affected on days when the Balanced
Series, as a shareholder, does not have access to the Underlying Funds.
SOME
POLICIES COMMON TO THE UNDERLYING FUNDS. Diversification. Each Underlying Fund
intends to meet the diversification rules under Subchapter M of the Internal
Revenue Code. Each Underling Fund met the diversification rules under Subchapter
M for its last fiscal year. Generally, this requires, at the end of each quarter
of the taxable year, that (a) not more than 25% of each Underlying Fund's total
assets be invested in any one issuer and (b) with respect to 50% of each
Underlying Fund's total assets, no more than 5% of such Underlying Fund's total
assets be invested in any one issuer except U.S. Government securities.
Each
Underlying Fund, as a "diversified" investment company, under the Investment
Company Act of 1940, is prohibited, with respect to 75% of the value of its
total assets, from investing more than 5% of its total assets in securities of
any one issuer other than U.S. Government securities. For diversification
purposes, the identification of an "issuer" for the fixed-income portion of an
Underlying Fund's assets will be determined on the basis of the source of assets
and revenues committed to meeting interest and principal payments of the
securities. When the assets and revenues of a sovereign (domestic) state's
political subdivision are separate from those of the sovereign (domestic) state
government creating the subdivision, and the security is backed only by the
assets and revenues of the subdivision, then the subdivision would be considered
the sole issuer. Similarly, if a revenue bond is backed only by the assets and
revenues of a nongovernmental user, then such user would be considered the sole
issuer.
ILLIQUID SECURITIES. Each Underlying Fund may invest up to 15% of its
net assets in illiquid securities.
SHORT-TERM FIXED INCOME SECURITIES. The Balanced Series and each of the
Underlying Funds are authorized to invest temporarily in certain short-term
fixed income securities. Such securities may be used to invest uncommitted cash
balances, to maintain liquidity to meet shareholder redemptions, or to take a
temporary defensive position against market declines. These securities include:
obligations of the U.S. Government and its agencies and instrumentalities;
commercial paper, bank certificates of deposit, and bankers' acceptances; and
repurchase agreements collateralized by these securities.
CHANGE OF INVESTMENT
OBJECTIVES AND POLICIES. Neither the Balanced Series nor an Underlying Fund will
change its investment objective without shareholder approval. If the Balanced
Series or an Underlying Fund determines that its objective can best be achieved
by a change in investment policy or strategy, it may make such change without
shareholder approval by disclosing it in its prospectus.
PORTFOLIO TURNOVER. The portfolio turnover rates for the equity portion of the
Balanced Series for the fiscal years ended November 30, 1997 and October 31,
1996 were 41.08% and 62.34%, respectively. The portfolio turnover rates for the
debt portion of the Series for the same periods were 438.90% and 363.31%,
respectively.
4 PURCHASES
The Balanced Series offers investors three different classes of shares. 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 defined under
"Class A Share Net Asset Value Purchases" below). 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 Balanced Series 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 .25 of 1% of
the annual net asset value of the Class A shares. The initial sales charge
rates, the CDSC and the Rule 12b-1 plan applicable to the Class A shares are
described under General 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 under General below.
CLASS C SHARES. If you buy Class C shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the first anniversary of
buying them, you will normally pay the Series a CDSC of 1%. Class C shares are
subject to service and distribution fees at an annual rate of 1% of the annual
net asset value of the Class C shares. The CDSC and the Rule 12b-1 plan
applicable to the Class C shares are described under General below.
WHICH CLASS
OF SHARES SHOULD YOU CHOOSE? Once you decide that the Series is an appropriate
investment for you, the decision as to which class of shares is better suited to
your needs depends on a number of factors which you should discuss with your
financial adviser. The Series' class specific expenses and the effect of the
different types of sales charges on your investment will affect your investment
results over time. The most important factors are how much you plan to invest
and how long you plan to hold your investment. If your goals and objectives
change over time and you plan to purchase additional shares, you should
reevaluate 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 Series. We used the sales charge rates that apply
to Class A, Class B and Class C shares, 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 Series' actual investment returns, the
operating expenses borne by each class of shares, and the class of shares you
purchase. The factors briefly discussed below are not intended to be investment
advice, guidelines or recommendations, because each investor's financial
considerations are different. The discussion below of the factors to consider in
purchasing a particular class of shares assumes that you will purchase only one
class of shares and not a combination of shares of different classes.
HOW LONG
DO YOU EXPECT TO HOLD YOUR INVESTMENT? While future financial needs cannot be
predicted with certainty, knowing how long you expect to hold your investment
will assist you in selecting the appropriate class of shares. For example, over
time, the reduced sales charges available for larger purchases of Class A shares
may offset the effect of paying an initial sales charge on your investment,
compared to the effect over time of higher class specific expenses on Class B or
Class C shares for which no initial sales charge is paid. Because of the effect
of class based expenses, your choice should also depend on how much you plan to
invest.
INVESTING FOR THE SHORT TERM. If you have a short term investment
horizon (that is, you plan to hold your shares for not more than six years), you
should probably consider purchasing Class A or Class C shares rather than Class
B shares. This is because of the effect of the Class B CDSC if you redeem before
the sixth anniversary of your purchase, as well as the effect of the Class B
distribution fee on the investment return for that class in the short term.
Class C shares might be the appropriate choice (especially for investments of
less than $100,000), because there is no initial sales charge on Class C shares,
and the CDSC does not apply to shares you redeem after holding them for 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 shares might be
more appropriate than Class C shares for investments of more than $100,000
expected to be held for five or six years (or more). For investments over
$250,000 expected to be held four to six years (or more), Class A shares may
become more appropriate than Class C shares. If you are investing $500,000 or
more, Class A shares may become more desirable as your investment horizon
approaches three years or more.
For most investors who invest $1 million or
more, 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.
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 Series 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. You should discuss your purchase order for
a specific class of shares with your investment professional.
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 for more information about the 12% annual waiver
of the CDSC with respect to Class B shares. 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 Series 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 Series and Class C
shareholders.
GENERAL
HOW MUCH MUST YOU INVEST? You may buy our shares through any independent
securities dealer having a sales agreement with Lord Abbett Distributor, our
exclusive selling agent. Place your order with your investment dealer or send it
to the Balanced Series of the Lord Abbett Securities Trust (P.O. Box 419100,
Kansas City, Missouri 64141). The minimum initial investment is $1,000 except
for Invest-A-Matic ($250 initial and $50 subsequent minimum), Div-Move ($50
minimum) and Individual Retirement Accounts ($250 minimum). For Retirement Plans
there is no minimum investment required. See Shareholder Services. For
information regarding the proper form of a purchase or redemption order, call
the Series at 800-821-5129. This offering may be suspended, changed or
withdrawn. Lord Abbett Distributor reserves the right to reject any order.
The net asset value of our shares is calculated every business day as of the
close of the New York Stock Exchange (NYSE) by dividing net assets by the number
of shares outstanding. Securities are valued at their market value as more fully
described in the Statement of Additional Information.
BUYING SHARES THROUGH YOUR DEALER. Orders for shares received by the Series
prior to the close of the NYSE, or received by dealers prior to such close and
received by Lord Abbett Distributor prior to the close of its business day, will
be confirmed at the applicable public offering price effective at such NYSE
close. Orders received by dealers after the NYSE closes and received by Lord
Abbett Distributor in proper form prior to the close of its next business day
are executed at the applicable public offering price effective as of the close
of the NYSE on that next business day. The dealer is responsible for the timely
transmission of orders to Lord Abbett Distributor. A business day is a day on
which the NYSE is open for trading.
Lord Abbett Distributor may, for specified
periods, allow dealers to retain the full sales charge for sales of shares
during such periods, or pay an additional concession to a dealer who, during a
specified period, sells a minimum dollar amount of our shares and/or shares of
other Lord Abbett-sponsored funds. In some instances, such additional
concessions will be offered only to certain dealers expected to sell significant
amounts of shares.
Lord Abbett Distributor may, from time to time, implement
promotions under which Lord Abbett Distributor will pay a fee to dealers with
respect to certain purchases not involving imposition of a sales charge.
Additional payments may be paid from Lord Abbett Distributors' own resources and
will be made in the form of cash or, if permitted, noncash payments. The noncash
payments will include business seminars at resorts or other locations, including
meals and entertainment, or the receipt of merchandise. The cash payments will
include payment of various business expenses of the dealer. In selecting dealers
to execute portfolio transactions for the Series, 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.
BUYING CLASS
A SHARES. The offering price of Class A shares is based on the per share net
asset value next computed after your order is accepted plus a sales charge as
follows.
Sales Charge as a Dealer's
Percentage of: Concession
as a To Compute
Percentage Offering
Offering Net Amount of Offering Price, Divide
Size of Investment Price Invested Price NAV by
Less than $50,000 4.75% 4.99% 4.00% .9525
$50,000 to $99,999 4.75% 4.99% 4.25% .9525
$100,000 to $249,999 3.75% 3.90% 3.25% .9625
$250,000 to $499,999 2.75% 2.83% 2.50% .9725
$500,000 to $999,999 2.00% 2.04% 1.75% .9800
The following category over $1 million applies only until the Series' Rule 12b-1
Plan becomes effective, at which time no sales charge will apply to sales over
$1 million or for Retirement Plans with at least 100 eligible employees and
authorized institutions will receive concessions on such net asset value
purchases mentioned below in the note designated with a "++".
$1,000,000 1.00% 1.01% 1.00% .9900
or more
++Authorized institutions receive concessions on
purchases made by a Retirement Plan, pursuant to a special retirement wrap
program or by another qualified purchaser within a 12-month period (beginning
with the first net asset value purchase) as follows: 1.00% on purchases of $5
million, 0.55% of the next $5 million, 0.50% of the next $40 million and 0.25%
on purchases over $50 million. See "Class A Rule 12b-1 Plan" on page 12.
CLASS A SHARE VOLUME DISCOUNTS. This section describes several ways to qualify
for a lower sales charge when purchasing Class A shares if you inform Lord
Abbett Distributor or the Series that you are eligible at the time of purchase.
(1) Any purchaser (as described below) may aggregate a Class A share purchase in
the Series with any share purchases of any other eligible Lord Abbett-sponsored
fund, together with the current value at maximum offering price of any shares in
the Series and in any eligible Lord Abbett-sponsored funds held by the
purchaser. (Holdings in the following funds are not eligible for the above
rights of accumulation: Lord Abbett Equity Fund (LAEF), Lord Abbett Series Fund
(LASF), any series of Lord Abbett Research Fund not offered to the general
public (LARF) and Lord Abbett U.S. Government Securities Money Market Fund
(GSMMF), except for holdings in GSMMF which are attributable to any shares
exchanged from a Lord Abbett-sponsored fund.) (2) A purchaser may sign a
nonbinding 13-month statement of intention to invest $50,000 or more in any
shares of the Series or in any of the above eligible funds. If the intended
purchases are completed during the period, the total amount of your intended
purchases of any shares will determine the reduced sales charge rate for the
Class A shares purchased during the period. If not completed, each Class A share
purchase will be at the sales charge for the aggregate of the actual share
purchases. Shares issued upon reinvestment of dividends or distributions are not
included in the statement of intention. The term purchaser includes (i) an
individual, (ii) an individual and his or her spouse and children under the age
of 21 and (iii) a trustee or other fiduciary purchasing shares for a single
trust estate or single fiduciary account (including a pension, profit sharing,
or other employee benefit trust qualified under Section 401 of the Internal
Revenue Code more than one qualified employee benefit trust of a single
employer, including its consolidated subsidiaries, may be considered a single
trust, as may qualified plans of multiple employers registered in the name of a
single bank trustee as one account), although more than one beneficiary is
involved.
CLASS A SHARE NET ASSET VALUE PURCHASES. Our Class A shares may be
purchased at net asset value by our directors, employees of Lord Abbett,
employees of our shareholder servicing agent and employees of any securities
dealer having a sales agreement with Lord Abbett Distributor who consents to
such purchases or by the trustee or custodian under any pension or profit
sharing plan or Payroll Deduction IRA established for the benefit of such
persons or for the benefit of any national securities trade organization to
which Lord Abbett or Lord Abbett Distributor 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 directors and employees of Lord Abbett
also include other family members and retired directors and employees. Our Class
A shares also may be purchased at net asset value (a) at $1 million or more, (b)
with dividends and distributions on Class A shares of other Lord
Abbett-sponsored funds, except for dividends and distributions on shares of
LARF, LAEF and LASF, (c) under the loan feature of the Lord Abbett-sponsored
prototype 403(b) plan for Class A share purchases representing the repayment of
principal and interest, (d) by certain authorized brokers, dealers, registered
investment advisers or other financial institutions who have entered into an
agreement with Lord Abbett Distributor in accordance with certain standards
approved by Lord Abbett Distributor, providing specifically for the use of our
Class A shares in particular investment products made available for a fee to
clients of such brokers, dealers, registered investment advisers and other
financial institutions (mutual fund wrap fee programs), (e) by employees,
partners and owners of unaffiliated consultants and advisers to Lord Abbett,
Lord Abbett Distributor or Lord Abbett-sponsored funds who consent to such
purchase if such persons provide services to Lord Abbett, Lord Abbett
Distributor or such funds on a continuing basis and are familiar with such fund,
(f) through Retirement Plans with at least 100 eligible employees, and (g)
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 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 a Class A 12b-1 plan and
the fact that the program relates to participant-directed Retirement Plans.
CLASS A RULE 12B-1 PLAN. We have adopted a Class A share Rule 12b-1 plan (the "A
Plan") which authorizes the payment of fees to authorized institutions (except
as to certain accounts for which tracking data is not available) in order to
provide additional incentives for them (a) to provide continuing information and
investment services to their Class A shareholder accounts and otherwise to
encourage those accounts to remain invested in the Series and (b) to sell Class
A shares of the Series.
Under the A Plan, in order to save on the expense of
shareholders meetings and to provide flexibility to the Board of Trustees, the
Board, including a majority of the outside trustees who are not interested
persons of the Fund as defined in the Investment Company Act of 1940, is
authorized to approve annual fee payments from our Class A assets of up to 0.50
of 1% of the average net of such assets consisting of distribution and service
fees, each at a maximum annual rate not exceeding 0.25 of 1% (the "Fee
Ceiling").
Under the A Plan, the Board has approved payments by the Series to
Lord Abbett Distributor which uses or passes on to authorized institutions (1)
an annual service fee (payable quarterly) of .25% of the average daily net asset
value of the Class A shares serviced by authorized institutions and (2) a
one-time distribution fee of up to 1% (reduced according to the following
schedule: 1% of the first $5 million, .55% of the next $5 million, .50% of the
next $40 million and .25% over $50 million), payable at the time of sale on all
Class A shares sold during any 12-month period starting from the day of the
first net asset value sale (i) at the $1 million level by authorized
institutions, including sales qualifying at such level under the rights of
accumulation and statement of intention privileges; (ii) through Retirement
Plans with at least 100 eligible employees or (iii) constituting new sales
pursuant to a special retirement wrap program and excluding exchanges into the
Series under such a program. In addition, the Board has approved for those
authorized institutions which qualify a supplemental annual distribution fee
equal to 0.10% of the average daily net asset value of the Class A shares
serviced by authorized institutions which have a program for the promotion and
retention of such shares satisfying Lord Abbett Distributor. Class A shares held
pursuant to a satisfactory program would, for example, (i) constitute a
significant percentage of the Fund's net assets, (ii) be held for a substantial
length of time and/or (iii) have a lower than average redemption rate.
Institutions and persons permitted by law to receive such fees are "authorized
institutions."
Under the A Plan, Lord Abbett Distributor is permitted to use
payments received to provide continuing services to Class A shareholder accounts
not serviced by authorized institutions and, with Board approval, to finance any
activity which is primarily intended to result in the sale of Class A shares.
Any such payments are subject to the Fee Ceiling. Any payments under that Plan
not used by Lord Abbett Distributor in this manner are passed on to authorized
institutions.
Holders of Class A shares on which the 1% sales distribution fee
has been paid may be required to pay to the Series on behalf of its Class A
shares a CDSC of 1% of the original cost or the then net asset value, whichever
is less, of all Class A shares so purchased which are redeemed out of the Lord
Abbett-sponsored family of funds on or before the end of the twenty-fourth month
after the month in which the purchase occurred. (Exceptions are made for: (i)
redemptions by Retirement Plans due to any benefit payment such as Plan loans,
hardship withdrawals, death, retirement or separation from service with respect
to plan participants or the distribution of any excess contributions and (ii)
participant-directed redemptions which continue as program investments in
another fund participating in a special retirement wrap program.) If the Class A
shares have been exchanged into another Lord Abbett-sponsored fund and are
thereafter redeemed out of the Lord Abbett family of funds on or before the end
of such twenty-fourth month, the charge will be collected for the Series Class A
shares by the other fund. The Series will collect such a charge for other Lord
Abbett-sponsored funds in a similar situation.
BUYING CLASS B SHARES. Class B
shares are sold at net asset value per share without an initial sales charge.
However, if Class B shares are redeemed for cash before the sixth anniversary of
their purchase, a CDSC may be deducted from the redemption proceeds. That sales
charge will not apply to shares purchased by the reinvestment of dividends or
capital gains distributions. The charge will be assessed on the lesser of the
net asset value of the shares at the time of redemption or the original purchase
price. The Class B CDSC is paid to Lord Abbett Distributor to compensate it for
its services rendered in connection with the distribution of Class B shares,
including the payment and financing of sales commissions. See Class B Rule 12b-1
Plan below.
To determine whether the CDSC applies to a redemption, the Series
redeems shares in the following order: (1) shares acquired by reinvestment of
dividends and capital gains distributions, (2) shares held until the sixth
anniversary of their purchase or later, and (3) shares held the longest before
the sixth anniversary of their purchase.
The amount of the CDSC will depend on
the number of years since you invested and the dollar amount being redeemed,
according to the following schedule.
Contingent Deferred
Anniversary Sales Charge on
of the Day on Redemption
Which the Purchase (As % of Amount
Was Made Subject to Charge)
On Before
1st 5%
1st 2nd 4%
2nd 3rd 3%
3rd 4th 3%
4th 5th 2%
5th 6th 1%
On or after the None
6th Anniversary
In the table, an anniversary is the 365th day subsequent to a purchase or a
prior anniversary. All purchases are considered to have been made on the
business day the purchase was made. See "Buying Shares Through Your Dealer"
above.
If Class B shares are exchanged into the same class of another Lord
Abbett-sponsored fund and the new shares are subsequently redeemed for cash
before the sixth anniversary of the original purchase, the CDSC will be payable
on the new shares on the basis of the time elapsed from the original purchase.
The Series will collect such a charge for other Lord Abbett-sponsored funds in a
similar situation.
WAIVER OF CLASS B SALES CHARGES. The Class B CDSC will not be
applied to shares purchased in certain types of transactions nor will it apply
to shares redeemed in certain circumstances as described below.
The Class B CDSC
will be waived for redemptions of shares (i) in connection with the Systematic
Withdrawal Plan and Div-Move services, as described in more detail under
Shareholder Services below, (ii) by Retirement Plans due to any benefit payment
such as Plan loans, hardship withdrawals, death, retirement or separation from
service with respect to plan participants or the distribution of any excess
contributions, (iii) in connection with the death of the shareholder (natural
person), and (iv) in connection with mandatory distributions under 403(b) plans
and individual retirement accounts. 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.
CLASS B RULE 12B-1 PLAN. The Series has adopted a Class B share Rule
12b-1 Plan (the "B Plan") under which the Series periodically pays Lord Abbett
Distributor (i) an annual service fee of 0.25 of 1% of the average daily net
asset value of the Class B shares and (ii) an annual distribution fee of 0.75 of
1% of the average daily net asset value of the Class B shares that are
outstanding for less than eight years.
Lord Abbett Distributor uses the service
fee to compensate authorized institutions (except as to certain accounts for
which tracking data is not available) for providing personal services for
accounts that hold Class B shares. Those services are similar to those provided
under the A Plan, described above.
Lord Abbett Distributor pays an up-front payment to authorized institutions
totaling 4%, consisting of 0.25% for service and 3.75% for a sales commission as
described below.
Lord Abbett Distributor pays the 0.25% service fee to authorized institutions in
advance for the first year after Class B shares have been sold by the authorized
institutions. After the shares have been held for a year, Lord Abbett
Distributor pays the service fee on a quarterly basis. Lord Abbett Distributor
is entitled to retain such service fee payable under the B Plan with respect to
accounts for which there is no authorized institution of record or for which
such authorized institution did not qualify. Although not obligated to do so,
Lord Abbett Distributor may waive receipt from the Series of part or all of the
service fee payments.
The 0.75% annual distribution fee is paid to Lord Abbett
Distributor to compensate it for its services rendered in connection with the
distribution of Class B shares, including the payment and financing of sales
commissions. Although Class B shares are sold without a front-end sales charge,
Lord Abbett Distributor pays authorized institutions responsible for sales of
Class B shares a sales commission of 3.75% of the purchase price. This payment
is made at the time of sale from Lord Abbett Distributor's own resources. Lord
Abbett has made arrangements to finance these commission payments, which
arrangements include nonrecourse assignments by Lord Abbett Distributor to the
financing party of such distribution and CDSC payments concerning Class B
shares. The distribution fee and CDSC payments described above allow investors
to buy Class B shares without a front-end sales charge while allowing Lord
Abbett Distributor to compensate authorized institutions that sell Class B
shares. The CDSC is intended to supplement Lord Abbett Distributor's
reimbursement for the commission payments it has made with respect to Class B
shares and its related distribution and financing costs.
The distribution fee
payments are at a fixed rate and the CDSC payments are of a nature that, during
any year, both forms of payment may not be sufficient to reimburse Lord Abbett
Distributor for its actual expenses. The Series is not liable for any expenses
incurred by Lord Abbett Distributor in excess of (i) the amount of such
distribution fee payments to be received by Lord Abbett Distributor and (ii)
unreimbursed distribution expenses of Lord Abbett Distributor incurred in a
prior plan year, subject to the right of the Board of Trustees or shareholders
to terminate the B Plan. Over the long term, the expenses incurred by Lord
Abbett Distributor are likely to be greater than such distribution fee and CDSC
payments. Nevertheless, there exists a possibility that for a short-term period
Lord Abbett Distributor may not have sufficient expenses to warrant
reimbursement by receipt of such distribution fee payments. Although Lord Abbett
Distributor does not intend to make a profit under the B Plan, the B Plan is
considered a compensation plan (i.e., distribution fees are paid regardless of
expenses incurred) in order to avoid the possibility of Lord Abbett Distributor
not being able to receive distribution fees because of a temporary timing
difference between its incurring expenses and receipt of such distribution fees.
AUTOMATIC CONVERSION OF CLASS B SHARES. On the eighth anniversary of your
purchase of Class B shares, those shares will automatically convert to Class A
shares. This conversion relieves Class B shareholders of the higher annual
distribution fee that applies to Class B shares under the B Plan. The conversion
is based on the relative net asset values of the two classes, and no sales
charge or other charge is imposed. When Class B shares convert, any other Class
B shares that were acquired by the reinvestment of dividends and distributions
will also convert to Class A shares on a pro rata basis. The conversion feature
is subject to the continued availability of an opinion of counsel or a tax
ruling described in Purchases, Redemptions and Shareholder Services in the
Statement of Additional Information.
BUYING CLASS C SHARES. Class C shares are
sold at net asset value per share without an initial sales charge. However, if
Class C shares are redeemed for cash before the first anniversary of their
purchase, a CDSC of 1% will be deducted from the redemption proceeds. That
reimbursement charge will not apply to shares purchased by the reinvestment of
dividends or capital gains distributions. The charge will be assessed on the
lesser of the net asset value of the shares at the time of redemption or the
original purchase price. The Class C CDSC is paid to the Series to reimburse it,
in whole or in part, for the service and distribution fee payments made by the
Series at the time such shares were sold, as described below.
To determine
whether the CDSC applies to a redemption, the Series redeems shares in the
following order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for one year or more and (3) shares held
the longest before the first anniversary of their purchase. If Class C shares
are exchanged into the same class of another Lord Abbett-sponsored fund and
subsequently redeemed before the first anniversary of their original purchase,
the charge will be collected by the other fund on behalf of this Series Class C
shares. The Series will collect such a charge for other Lord Abbett-sponsored
funds in a similar situation.
CLASS C RULE 12B-1 PLAN. The Series has adopted a
Class C share Rule 12b-1 Plan (the "C Plan") under which (except as to certain
accounts for which tracking data is not available) the Series pays authorized
institutions through Lord Abbett Distributor (1) a service fee and a
distribution fee, at the time shares are sold, not to exceed 0.25 and 0.75 of
1%, respectively, of the net asset value of such shares and (2) at each quarter
end after the first anniversary of the sale of shares, fees for services and
distribution at annual rates not to exceed 0.25 and 0.75 of 1%, respectively, of
the average annual net asset value of such shares outstanding (payments with
respect to shares not outstanding during the full quarter to be prorated). These
service and distribution fees are for purposes similar to those mentioned above
with respect to the A Plan. Sales in clause (1) exclude shares issued for
reinvested dividends and distributions, and shares outstanding in clause (2)
include shares issued for reinvested dividends and distributions after the first
anniversary of their issuance.
5 SHAREHOLDER SERVICES We offer the following shareholder services:
TELEPHONE EXCHANGE PRIVILEGE: Shares of any class may be exchanged without a
service charge: (a) for shares of the same class of any other Lord
Abbett-sponsored fund except for (i) LAEF, LASF and LARF and (ii) certain
tax-free, single state series where the exchanging shareholder is a resident of
a state in which such series is not offered for sale and (b) for shares of any
authorized institution's affiliated money market fund satisfying Lord Abbett
Distributor as to certain omnibus account and other criteria (together, Eligible
Funds).
You or YOUR REPRESENTATIVE WITH PROPER IDENTIFICATION can instruct the Series to
exchange uncertificated shares of a class (held by the transfer agent) by
telephone. Shareholders have this privilege unless they refuse it in writing.
The Series will not be liable for following instructions communicated by
telephone that it reasonably believes to be genuine and will employ reasonable
procedures to confirm that instructions received are genuine, including
requesting proper identification and recording all telephone exchanges.
Instructions must be received by the Series in Kansas City (800-821-5129) prior
to the close of the NYSE to obtain each fund's net asset value per class share
on that day. 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 Series reserves
the right to terminate or limit the privilege of any shareholder who makes
frequent exchanges. The Series can revoke the privilege for all shareholders
upon 60 days, prior written notice. A prospectus for the other Lord
Abbett-sponsored fund selected by you should be obtained and read before an
exchange. Exercise of the exchange privilege will be treated as a sale for
federal income tax purposes and, depending on the circumstances, a capital gain
or loss may be recognized.
SYSTEMATIC WITHDRAWAL PLAN (SWP): Except for
Retirement Plans for which there is no such minimum, if the maximum offering
price value of your uncertificated shares is at least $10,000, you may have
periodic cash withdrawals automatically paid to you in either fixed or variable
amounts. With respect to Class B shares, the CDSC will be waived on redemptions
of up to 12% per year of the current net asset value of your account at the time
your SWP is established. For Class B shares (over 12% per year) and C shares,
redemption proceeds due to a SWP will be derived from the following sources in
the order listed: (1) shares acquired by reinvestment of dividends and capital
gains; (2) shares held for six years or more (Class B) or one year or more
(Class C); and (3) shares held the longest before the sixth anniversary of their
purchase (Class B) or before the first anniversary of their purchase (Class C).
For Class B share redemptions over 12% per year, the CDSC will apply to the
entire redemption. Therefore, please contact the Series for assistance in
minimizing the CDSC in this situation. Shareholders should be careful in
establishing a SWP, especially to the extent that such a withdrawal exceeds the
annual total return for a class, in which case, the shareholders, original
principal will be invaded and, over time, may be depleted.
DIV-MOVE: You can invest the dividends paid on your account ($50 minimum
investment) into an existing account within the same class in any Eligible Fund.
The account must be either your account, a joint account for you and your
spouse, a single account for your spouse or a custodial account for your minor
child under the age of 21. Such dividends are not subject to a CDSC. You should
read the prospectus of any other fund before investing.
INVEST-A-MATIC: You can make fixed, periodic investments ($250 minimum initial
and $50 minimum subsequent investment) into the Series and/or any Eligible Fund
by means of automatic money transfers from your bank checking account. You
should read the prospectus of the other fund before investing.
RETIREMENT PLANS: Lord Abbett makes available the retirement plan documents,
including 401(k) plans and custodial agreements for IRAs (Individual Retirement
Accounts including Simple IRAs and Simplified Employee Pensions), 403(b) plans
and pension and profit-sharing plans.
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.
All correspondence should be directed to the Balanced Series of Lord Abbett
Securities Trust (P.O. Box 419100, Kansas City, Missouri 64141; 800-821-5129).
6 OUR MANAGEMENT
We employ Lord Abbett as investment manager for the Balanced Series pursuant to
a Management Agreement. Lord Abbett has been an investment manager for over 67
years and currently manages approximately $25 billion in a family of mutual
funds and other advisory accounts. Under the Management Agreement, Lord Abbett
is obligated to provide the Series with investment management services and
executive and other personnel, pay the remuneration of our officers and of our
trustees affiliated with Lord Abbett, provide us with office space and pay for
ordinary and necessary office and clerical expenses relating to research,
statistical work and supervision of the Series portfolio and certain other
costs. Lord Abbett provides investment management services to twelve other Lord
Abbett-sponsored funds having various investment objectives and also advises
other investment clients.
The Series investment decisions are made by Robert G. Morris, Lord Abbett
Partner and Executive Vice President of the Fund and Portfolio Manager of the
Series. Mr. Morris has served as Portfolio Manager since the start of the
Series. Under the Management Agreement, the Series is obligated to pay Lord
Abbett a monthly fee, based on average daily net assets, at the annual rate of
.75 of 1% for allocating the Balanced Series assets among the Underlying Funds.
However, because Lord Abbett expects to waive this fee for the current fiscal
year of the Series, the effective fee payable to Lord Abbett by the Series as a
percentage of average daily net assets is expected to be at the annual rate of
zero percent. In addition, we pay all expenses not expressly assumed by Lord
Abbett or the Underlying Funds.
The Officers and Trustees of the Fund also serve in similar positions in the
Underlying Funds. If the interests of the Fund and the Underlying Funds were
ever to become divergent, a concern might arise that this could create a
potential conflict of interest which could affect how the Officers or Trustees
fulfill their fiduciary duties to the Balanced Series and the Underlying Funds.
The Trustees believe that the Fund policy described as follows will avoid the
concerns which could arise.
Conceivably, a situation could occur where proper
portfolio or other action for the Balanced Series could be adverse to the
interests of an Underlying Fund, or the reverse could occur. If such a
possibility appears likely, the Trustees and Officers will carefully analyze the
situation and take all steps they believe reasonable to minimize and, where
possible, eliminate the potential conflict. Moreover, limitations on aggregate
investments in the Underlying Funds and other restrictions will be adopted by
the Balanced Series' management to minimize this possibility from time to time,
and close and continuous monitoring will be exercised to avoid, insofar as
possible, these concerns.
7 DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
With respect to the Series, dividends from taxable net investment income may be
taken in cash or invested in additional shares at net asset value (without a
sales charge) and will be paid to shareholders monthly.
A capital gains distribution is made when the Series has net profits during the
year from sales of securities. Any capital gains distributions will be made
annually in December. They may be taken in cash or invested in more shares at
net asset value without a sales charge.
For tax-deferred retirement accounts
(such as Individual Retirement Accounts or other retirement plans sponsored by
Lord Abbett), dividends and capital gains distributions from the Series most
likely will be reinvested in additional shares.
Dividends and distributions declared in October, November or December of any
year will be treated for federal income tax purposes as having been received by
shareholders of the Series in that year if they are paid before February 1 of
the following year.
The Series intends to meet the requirements of Subchapter M
of the Internal Revenue Code. The Series will try to distribute to shareholders
all of its net investment income and net realized capital gains, so as to avoid
the necessity of paying federal income tax.
If you open an IRA or other tax deferred retirement account, dividend and
capital gains distributions from the Balanced Series will generally be exempt
from current taxation. You are advised to consult with a tax professional on the
specific rules governing your own tax-deferred arrangement. There are varying
restrictions imposed by the Internal Revenue Service on eligibility,
contributions and withdrawals, depending on the type of tax deferred account you
selected. The rules governing tax deferred retirement plans are complex, and
failure to comply with the IRS's rules and regulations governing your specific
type of plan may result in substantial costs to you, including the loss of tax
advantages and the imposition of additional taxes and penalties by the IRS. If
you open an account in the Balanced Series outside a tax-deferred retirement
account, the following tax rules will generally apply. For the regular
investment accounts, dividends paid by the Balanced Series from the net
investment income and net short-term capital gains, whether received in cash or
reinvested in additional shares, will be taxable to shareholders at ordinary
income rates.
Any capital gains distribution may be taken in cash or reinvested.
Distributions 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
18 months. (If the taxpayer is in the 15% tax bracket, the rate is 10%.) For
distributions derived from the sale of assets held by the Fund for between 12
and 18 months, the tax rate remains at 28% (15% if the taxpayer is in the 15%
tax bracket). 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.
Shareholders may be
subject to a $50 penalty under the Internal Revenue Code and we may be required
to withhold and remit to the U.S. Treasury a portion (31%) of any redemption or
repurchase proceeds and of any dividend or distribution on any account, where
the payee (shareholder) failed to provide a correct taxpayer identification
number or to make certain required certifications.
Limitations imposed by the
Internal Revenue Code on regulated investment companies may restrict the Series'
ability to engage in transactions in options, forward contracts and cross
hedges. We will inform shareholders of the federal tax status of each dividend
and distribution after the end of each calendar year.
Shareholders should
consult their tax advisers concerning applicable state and local taxes as well
as on the tax consequences of gains or losses from the redemption or exchange of
our shares.
8 REDEMPTIONS To obtain the proceeds of an expedited redemption of $50,000 or
less, you or your representative with proper identification can telephone the
Series. The Series will not be liable for following instructions communicated by
telephone that it reasonably believes to be genuine and will employ reasonable
procedures to confirm that instructions received are genuine, including
requesting proper identification, recording all telephone redemptions and
mailing the proceeds only to the named shareholder at the address appearing on
the account registration.
If you do not qualify for the expedited procedures described above, to redeem
shares directly, send your request to the Balanced Series of the Lord Abbett
Investment Trust (P.O. Box 419100, Kansas City, Missouri 64141) with
signature(s) and any legal capacity of the signer(s) guaranteed by an eligible
guarantor, accompanied by any certificates for shares to be redeemed and other
required documentation. We will make payment of the net asset value of the
shares on the date the redemption order was received in proper form. Payment
will be made within three days. The Series may suspend the right to redeem
shares for not more than seven days or longer under unusual circumstances as
permitted by Federal law. If you have purchased Series shares by check and
subsequently submit a redemption request, redemption proceeds will be paid upon
clearance of your purchase check, which may take up to 15 days. To avoid delays
you may arrange for the bank upon which a check was drawn to communicate to the
Series that the check has cleared. Shares also may be redeemed by the Series at
net asset value through your securities dealer who, as an unaffiliated dealer,
may charge you a fee. If your dealer receives your order prior to the close of
the NYSE and communicates it to Lord Abbett, as our agent, prior to the close of
Lord Abbett's business day, you will receive the net asset value of the shares
being redeemed as of the close of the NYSE on that day. If the dealer does not
communicate such an order to Lord Abbett until the next business day, you will
receive the net asset value as of the close of the NYSE on that next business
day.
Shareholders who have redeemed their shares have a one-time right to
reinvest into another account having the identical registration in any of the
Eligible Funds at the then applicable net asset value of the shares being
purchased, (i) without the payment of a sales charge or (ii) with reimbursement
for the payment of any CDSC. Such reinvestment must be made within 60 days of
the redemption and is limited to no more than the dollar amount of the
redemption proceeds.
Under certain circumstances and subject to prior written notice, our Board of
Trustees may authorize redemption of all of the shares in any account in which
there are fewer than 25 shares.
TAX-QUALIFIED PLANS: For redemptions of $50,000 or less, follow normal
redemption procedures. Redemptions over $50,000 must be in writing from the
employer, broker or plan administrator stating the reason for the redemption.
The reason for the redemption must be received by the Series prior to, or
concurrent with, the redemption request.
9 PERFORMANCE
Over the last six months of our past fiscal year, in particular, the bond market
continued to perform well, resulting in our maintaining a 50%-50% ratio between
bond and equity holdings in the Balanced Series. The continued low rate of
inflation, along with the volatility of international financial markets, was the
catalyst for relatively strong returns on fixed-income securities over this
period. On the equity side, we continued to overweight financial holdings which
benefited from lower interest rates. Recently, shareholders approved a change to
the Series' investment policy to allow the Balanced Series to gradually shift to
a "fund of funds" structure, with equity assets allocated to the Affiliated Fund
and the fixed-income portion of the portfolio to the Bond-Debenture Fund.
YIELD AND TOTAL RETURN. Total return data may, from time to time, be included in
advertisements about the Series.
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 Series at the
maximum public offering price. When total return is quoted for Class A shares,
it includes the payment of the maximum initial sales charge. When total return
is shown for Class B and Class C shares, it reflects the effect of the
applicable CDSC.
Total return also may be presented for other periods or based
on 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 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.
The
performance of the Class A shares of this multi-class Balanced Series which is
shown in the comparison below will be greater than or less than that shown below
for Class C (and Class B not shown because this class just commenced operations)
based on the difference in sales charges and fees paid by shareholders investing
in the different classes.
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.
Comparison of change in value of a $10,000 investment in Class A shares of
Balanced Series and the unmanaged Merrill Lynch Wilshire Capital Market Index
follows.
Class A shares Classs A shares Merrill Lynch
at NAV at Maximum Wilshire Capital Market
Offering Price(1) Index(2)
1995 12,070 11,497 $12,617
1996 13,611 12,963 $14,726
1997 15,547 14,809 $17,655
Average Annual Total Return
for Class A Shares(3)
1 year Life of Class
8.80% (12/27/94 - 11/30/97)
14.34%
Average Annual Total Return
for Class C Shares(4)
Life of Class
1 Year (7/15/96-11/30/97)
13.10% 19.47%
(1) Data reflects the deduction of the maximum sales charge of 4.75% for the
Balanced Series.
(2) Performance numbers for the unmanaged Merrill Lynch Wilshire Capital Market
Index do not reflect transaction costs or management fees. An investor cannot
invest directly in these indices.
(3) Total return is the percent change in value, after deduction of the maximum
sales charge of 4.75%, applicable to Class A shares of the Balanced Series, with
all dividends and contributions reinvested for the period shown ending November
30, 1997 using the SEC-required uniform method to compute such return. Source:
Bloomberg.
(4) The Class C shares were first offered on 7/15/96. Performance numbers are
not annualized.
Investment Manager and Distributor
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.
LAIT-BAL-1-498
(4/98)
Lord Abbett
Investment
Trust
Prospectus 98
LORD ABBETT
INVESTMENT TRUST
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
<PAGE>
This Prospectus sets forth concisely the information about the Lord Abbett
Investment Trust (the "Fund") that you should know before investing. Please read
this Prospectus before investing and retain it for future reference.
The Fund
consists of five Series. Only shares of two of these Series - (sometimes
referred to collectively, or individually, as "we") Lord Abbett U.S. Government
Securities Series ("U.S. Government Securities Series") and Lord Abbett Limited
Duration U.S. Government Securities Series ("Limited Duration Government
Series") are offered by this Prospectus. The U.S. Government Securities Series
has three classes of shares: Class A, B and C. The Limited Duration Government
Series has two classes of shares: Cla ss A and C. The classes provide investors
with different purchase options. See "Purchases" for a description of these
choices.
U.S. GOVERNMENT SECURITIES SERIES. The investment objective of the
Series is high current income consistent with reasonable risk. For this purpose,
"reasonable risk" means that the Series, over time, will have a volatility
approximating that of the Lehman Government Bond Index. See "How We Invest" for
more information. There can be no assurance that any Series will achieve its
objective.
LIMITED DURATION GOVERNMENT SERIES. The investment objective of the
Series is to seek a high level of income from a portfolio consisting primarily
of limited duration U.S. Government securities.
The Statement of Additional
Information dated April 1, 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."
Shaded
terms are defined in the Glossary of Terms.
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 INVESTMENT TRUST
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.
PROSPECTUS
April 1, 1998
TABLE OF CONTENTS PAGE
U.S. Government Series
How We Invest 2
Risk Factors 2
Portfolio Management 2
Investor Expenses 2
Financial Highlights 3
Limited Duration Government Series
How We Invest 4
Risk Factors 4
Portfolio Management 2
Investor Expenses 4
Financial Highlights 5
Purchases 6
Opening Your Account 8
Shareholder Services 8
Redemptions 9
Dividends and Capital Gains 10
Our Management 10
Fund Performance 11
Investment Policies, Risks and Limits 11
Sales Compensation 14
Glossary of Terms 14
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 o10153
(800) 426-1130
U.S. GOVERNMENT SECURITIES SERIES
HOW WE INVEST
Normally we invest in U.S. Government securities which we expect to produce high
current income consistent with reasonable risk. For this purpose, "reasonable
risk" means that the Series, over time, will have a volatility approximating
that of the Lehman Government Bond Index. Securities in which the Series invests
include obligations issued by the U.S. Treasury and certain obligations issued
or guaranteed by U.S. Government agencies or instrumentalities, including the
Federal Home Loan Bank, Federal Home Loan Mortgage Corporation ("FHLMC"),
Federal National Mortgage Association ("FNMA"), Federal Farm Credit Bank,
Government National Mortgage Association ("GNMA"), Student Loan Marketing
Association, Tennessee Valley Authority, Financing Corporation and Resolution
Funding Corporation. Securities backed by the U.S. Treasury or a U.S. Government
agency in which the U.S. Government Securities series may invest provide
substantial protection against credit risk. Some of these securities are
guaranteed as to the timely payment of interest and principal.
Growth of capital
is not an objective of the Series, but capital appreciation may result from
efforts to secure high current income. See "Investment Policies, Risks and
Limits."
RISK FACTORS The market price for U.S. Government securities is not
guaranteed and will fluctuate, and such securities will not protect investors
against price changes due to changing interest rates. The value of shares of the
Series will change as the general levels of interest rates fluctuate. When
interest rates decline, share value rises. When interest rates rise, share value
can be expected to decline. The Series may employ other investment practices,
such as investment in illiquid and other securities, that could adversely affect
performance. Before you invest, please read "Investment Policies, Risks and
Limits."
PORTFOLIO MANAGEMENT Our investment decisions are made by Robert
Gerber. Mr. Gerber is Executive Vice President and Portfolio Manager of the
Fund, and has served in this capacity since the date of this Prospectus. He
joined Lord Abbett in July 1997 as Director of Taxable Fixed Income. Before
joining Lord Abbett, Mr. Gerber served as a senior Portfolio Manager of Sanford
C. Bernstein & Co., Inc. since 1992.
Investor Expenses The expenses shown below are based on historical expenses
adjusted to reflect current fees. Future expenses may be different than those
shown.
U.S. GOVERNMENT SECURITIES SERIES Class A Class B Class C
Shareholder Transaction Expenses
Maximum Sales Charge on Purchases
(as a % of offering price) 4.75% None None
Deferred Sales Charge
(See "Purchases") None 5.00% 1.00%
Annual Fund Operating
Expenses (as a % of
average net assets)
Management Fees 0.50% 0.50% 0.50%
(See "Our Management")
12b-1 Fees(1) 0.28% 1.00% 1.00%
Other Expenses 0.14% 0.14% 0.14%
(See "Our Management")
Total Operating Expenses 0.92% 1.64% 1.64%
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.
Share Class 1 year 3 years 5 years 10 years
Class A shares $56 $75 $96 $155
Class B shares(2) $67 $82 $109 $175
Class C shares $27 $52 $89 $195
You would pay the following expenses on the same investment, assuming you kept
your shares:
Class A shares $56 $75 $96 $155
Class B shares(2) $17 $52 $89 $175
Class C shares $17 $52 $89 $195
This example is for comparison and is not a representation of the Series' actual
expenses and returns, either past or present.
(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.
FINANCIAL HIGHLIGHTS The following table has been audited by Deloitte & Touche
LLP, independent auditors in connection with their annual audit of the Fund's
Financial Statements, whose report may be obtained on request. Call 800-821-5129
and ask for the Fund's 1997 annual report.
U.S. GOVERNMENT SECURITIES SERIES
<TABLE>
<CAPTION>
Per Class A Share Operating Year Ended November 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Performance: 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Net asset value, beginning of year $2.63 $2.73 $2.59 $3.00 $2.94 $2.94 $2.83 $2.92 $2.91 $2.96
Income from investment operations
Net investment income .20(d) .215 .235 .247 .239 .267 .282 .299 .309 .336
Net realized and unrealized
gain (loss) on investments (.03) (.105) 1.36 (.3685) .070 (.003) .105 (.088) .010 (.062)
Total from investment operations .17 .11 .371 (.1215) .309 .264 .387 .211 .319 .274
Dividends from net investment income (.21) (.210) (.231) (.246) (.249) (.264) (.277) (.301) (.309) (.324)
Distributions from net realized gain ------ ------- ------ (.0425) ----- ----- ----- ----- ------ ------
Net asset value, end of year $2.59 $2.63 $2.73 $2.59 $3.00 $2.94 $2.94 $2.83 $2.92 $2.91
Total Return(a) 6.67% 4.41% 14.89% (4.24)% 10.70% 9.24% 14.35% 7.82% 11.65% 9.64%
Ratios to Average Net Assets:
Expenses 0.92%(e) 0.88% 0.90% 0.90% 0.89% 0.87% 0.94% 0.89% 0.88% 0.88%
Net Investment Income 7.82% 8.12% 8.85% 8.92% 7.94% 9.18% 9.63% 10.55% 10.66% 11.26%
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
Per Class Share Operating Year Ended August 1, 1996(b) to Year Ended July 15, 1996(b) to
Performance November 30, 1997 November 30, 1996 November 30, 1997 November 30, 1996
<S> <C> <C> <C> <C>
Net asset value, beginning of period $2.63 $2.57 $2.63 $2.55
Income from investment operations
Net investment income .18(d) .063 .18(d) .066
Net realized and unrealized
gain (loss) on securities (.04) .060 (.03) .085
Total from investment operations .14 .123 .15 .151
Distributions
Dividends from net investment income (.19) (.063) (.19) (.071)
Net Asset Value, end of period $2.58 $2.63 $2.59 $2.63
Total Return(a) 5.47% 5.45%(c) 5.86% 6.49%(c)
Ratios to Average Net Assets:
Expenses 1.64%(e) 0.48%(c) 1.55%(e) .60%(c)
Net investment income 6.77% 2.21%(c) 7.25% 2.60%(c)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
Supplemental Data For All Classes: 1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Net assets, end of year (000) $2,286,412 $2,907,291 $3,272,865 $3,232,012 3,909,868 $3,275,052
1991 1990 1989 1988
$2,293,345 $1,555,648 $1,241,218 $999,131
1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Portfolio turnover rate 712.82% 820.59% 544.31% 790.57% 586.18% 458.70%
1991 1990 1989 1988
544.19% 578.18% 440.32% 332.36%
<FN>
(a)Total return does not consider the effects of front-end sales or contingent deferred sales charges.
(b)Commencement of offering Class shares.
(c)Not annualized.
(d)Calculated using average shares outstanding during the period.
(e)The ratios for 1997 include expenses paid through an expense offset arrangement.
See Notes to Financial Statements.
</FN>
</TABLE>
LIMITED DURATION GOVERNMENT
SECURITIES SERIES
HOW WE INVEST
We invest primarily in short- and intermediate-duration U.S. Government
securities that we expect to result in a high level of income. Securities in
which the Series invests include direct obligations of the U.S. Treasury (such
as Treasury bills, notes and bonds) and certain obligations issued by U.S.
Government agencies and instrumentalities, including the Federal Home Loan
Banks, FHLMC, FNMA and GNMA, as well as mortgage-backed securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, including
"component securities," which are separated into their component parts of
principal and coupon payments. The Series is not a money market fund.
See "Investment Policies, Risks and Limits."
RISK FACTORS
The U.S. Government securities in which the Series may invest are guaranteed as
to timely payment of interest and principal, but the market prices for such
securities are not guaranteed, and will rise and fall in value as interest rates
change. The Series does not seek to maintain a stable net asset value, and may
not be able to return dollar-for-dollar the money invested. The level of income
will vary depending on interest rates and the portfolio. When interest rates
rise, the value of securities in the portfolio and the Series' share value will
fall. When interest rates decline, the value of securities in the portfolio and
the Series' share value will rise. The Series may employ other investment
practices, such as investment in illiquid and other securities, that could
adversely affect performance. Before you invest, please read "Investment
Policies, Risks and Limits."
INVESTOR EXPENSES The expenses shown below are based on historical expenses
adjusted to reflect current fees. Future expenses may be different than those
shown.
LIMITED DURATION GOVERNMENT SERIES Class A Class C
Shareholder Transaction
Expenses
Maximum Sales Charge on Purchases
(as a % of offering price) 3.00% None
Deferred Sales Charge(1)
(See "Purchases") None 1.00%
Annual Fund Operating
Expenses (as a % of average net assets)
(after management fee waiver and expense
reimbursements)
Management Fees 0.00% 0.00%
(See "Our Management")(2)
12b-1 Fees 0.00% 1.00%
Other Expenses 0.49% 0.49%
(See "Our Management")
Total Operating Expenses 0.49% 1.49%
(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)Although not obligated to, Lord, Abbett & Co. ("Lord Abbett") may waive a
portion of its management fee and assume other expenses with respect to the
Series. Subsequently, Lord Abbett may charge management fees and subsidize other
expenses on a partial or complete basis. The management fee would be 0.50%,
other expenses would be .90% and total operating expenses would be 1.40% for the
Class A shares and 2.40% for the Class C shares, respectively, absent such
waiver and reimbursements.
Example Assume Limited Duration Government Series' annual return is 5% and
there is no change in the level of expenses described above. 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.
Share Class 1year 3years 5years 10years
Class A $35 $45 $57 $90
Class C $26 $47 $81 $178
You would pay the following expenses on the same investment, assuming you kept
your shares:
Class A shares $35 $45 $57 $90
Class C shares $15 $47 $81 $178
This example is for comparison and is not a representation of the Fund's actual
expenses and returns, either past or present.
FINANCIAL HIGHLIGHTS The following table has been audited by Deloitte & Touche
LLP, independent auditors in connection with their annual audit of the Fund's
Financial Statements, whose report may be obtained on request. Call 800-821-5129
and ask for the Fund's 1997 annual report.
LIMITED DURATION GOVERNMENT SERIES
<TABLE>
<CAPTION>
Per Class A Share Operating Year Ended One Month Ended Year Ended Oct. 31, Nov. 4, 1993(d) to
Performance Nov. 30, 1997 Nov. 30, 1996 1996 1995 Oct. 31, 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $4.42 $4.39 $4.53 $4.44 $4.85
Income from investment operations
Net investment income .25(e) .0174 .1912 .2316 .2650
Net realized and unrealized
gain (loss) on securities (.02) .0333 (.0751) .1017 (.4123)
Total from investment operations .23 .0507 .1161 .3333 (.1473)
Distributions
Dividends from net investment income (.25) (.0207) (.2561) (.2433) (.2627)
Net-Asset Value, end of period $4.40 $4.42 $4.39 $4.53 $4.44
value, end of asset value, end of period
Total Return(b) 5.46% 1.15(c) 2.67% 8.16% (3.09)%(c)
Ratios to Average Net Assets:
Expenses , including waiver .51%(f) 0.11%(c) 1.81% 1.40% 0.89%(c)
Expenses, excluding waiver 1.40% 0.13%(c) 2.73% 1.71% 0.89%(c)
Net investment income 5.81% 0.41%(c) 4.58% 5.62% 5.61%(c)
</TABLE>
<TABLE>
<CAPTION>
LIMITED DURATION GOVERNMENT SERIES
Per Class C Share Operating Year Ended One Month Ended July 15, 1996(a) to
Performance Nov. 30, 1997 Nov. 30, 1996 Oct. 31, 1996
<S> <C> <C> <C>
Net asset value, beginning of period $4.42 $4.39 $4.34
Income from investment operations
Net investment income .21(e) .0138 .0667
Net realized and unrealized
gain (loss) on securities (.02) .0342 .0515
Total from investment operations .19 .0480 .1182
Distributions
Dividends from net investment income (.21) (.0180) (.0682)
Net Asset Value, end of period $4.40 $4.42 $4.39
Total Return(b) 4.45% 1.09%(c) 2.98%(c)
Ratios to Average Net Assets:
Expenses, including waiver 1.44%(f) 0.19%(c) 0.69%(c)
Expenses, excluding waiver
and reimbursement 2.32% 0.21%(c) 0.77%(c)
Net investment income 4.84% 0.33%(c) 1.26%(c)
</TABLE>
<TABLE>
<CAPTION>
Year Ended One Month Ended Year Ended Oct. 31, Nov. 4, 1993(d)to
Supplemental Data For All Classes: Nov. 30, 1997 Nov. 30, 1996 1996 1995 Oct. 31, 1994
<S> <C> <C> <C> <C> <C> <C>
Net assets, end of year (000) $10,276 $12,696 $12,735 $8,922 $10,256
Portfolio turnover rate 343.53% 175.98% 340.62% 222.00% 895.63%
<FN>
(a)Commencement of offering Class Shares.
(b)Total return does not consider the effects of front-end sales or contingent
deferred sales charges.
(c)Not annualized.
(d)Commencement of operations of Series.
(e)Calculated using average shares outstanding during the period.
(f)The ratios for 1997 include expenses paid through an expense offset
arrangement.
See Notes to Financial Statements.
</FN>
</TABLE>
PURCHASES
This Prospectus offers three classes of shares, Class A, B and C. Only the U.S.
Government Securities Series offers Class B shares. 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:
U.S. GOVERNMENT SECURITIES SERIES
As a % of As a % of To Compute Offering Price
Offering Price 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 .9900
LIMITED DURATION GOVERNMENT SERIES
To Compute Offering Price
Offering Your Divide
Your Investment Price Investment NAV by
Less than $100,000 3.00% 3.09% .9700
$100,000 to $249,999 2.50% 2.56% .9750
$250,000 to $499,999 2.00% 2.04% .9800
$500,000 to $999,999 1.50% 1.52% .9850
$1,000,000 to $2,999,999 1.00% 1.01% .9900
$3,000,000 to $9,999,999 .50% .50% .9950
$10,000,000 or more .25% . .25% .9975
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 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
agree ment 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.
CLASS A SHARE CDSC.
If you buy Class A shares under one of the starred (P. ) 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 None
6th anniversary(2)
(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.
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.
2 Shares held
for six years or more (Class B) or one year or more (Class C).
3 A 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 Series
U.S. Government Series
o Regular account $500
Limited Duration Series
o Regular account $1000
o Individual Retirement Accounts,
403(b) and employer-sponsored
retirement plans under the
Internal Revenue Code $250
o Invest-A-Matic and Div-Move $250 initial
$50 subsequent minimum
For Retirement Plans and Mutual Fund Wrap Programs, 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
should read this Prospectus carefully before placing your order to assure your
order is in proper form.
LORD ABBETT INVESTMENT TRUST 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.
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.
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.
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.
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
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 request is accepted.
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.
DIVIDENDS AND
CAPITAL GAINS DIVIDENDS. Each Series distributes most or all of its net earnings
in the form of dividends which are declared daily and paid monthly.
CAPITAL
GAINS DISTRIBUTIONS. Any capital gains distribution is expected to be made in
December and may be taken in cash or reinvested. Distributions by a Series 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 18 months. (If
the taxpayer is in the 15% tax bracket, the rate is 10%.) For distributions
derived from the sale of assets held by the Fund between 12 and 18 months, the
tax rate remains at 28% (15% if the taxpayer is in the 15% tax bracket).
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 a Series,
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 68
years and currently manages about $25 billion in a family of mutual funds and
other advisory accounts. Lord Abbett provides similar services to twelve other
funds 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. Each Series pays Lord Abbett
a monthly fee based on average daily net assets for each month. For the fiscal
year ended November 30, 1997, the fee paid to Lord Abbett was at an annual rate
of .50 of 1% for the U.S. Government Securities Series and .02 of 1% for the
Limited Duration Government Series. In addition, each Series pays all expenses
not expressly assumed by Lord Abbett.
THE FUND. The Fund is a diversified
open-end management investment company established in 1993. Its Class A, B and C
shares have equal rights as to voting, dividends, assets and liquidation except
for differences resulting from certain class-specific expenses.
FUND PERFORMANCE
During the past fiscal year, the bond market continued to perform well, with
both Series benefitting from heavy weightings in mortgage-backed securities,
such as GNMAs and FNMAs. Over the year, the U.S. Government Securities Series
increased its holdings of mortgage-backed securities from approximately half to
two-thirds of its portfolio and the Limited Duration U.S. Government Securities
Series increased these holdings to nearly a third of its portfolio. We will
continue to emphasize mortgage-related securities and maintain a diversification
of maturities and mortgage types.
See the performance chart on the second to
last page of this Prospectus.
INVESTMENT POLICIES, RISKS AND LIMITS U.S.
GOVERNMENT SECURITIES SERIES U.S. Government securities in which the Series may
invest include: (1) obligations issued by the U.S. Treasury with different
interest rates, maturities and issuance dates, including Treasury bills maturing
in one year or less, Treasury notes maturing in one to ten years and Treasury
bonds with maturities of over ten years, and (2) obligations issued or
guaranteed by U.S. Government agencies and instrumentalities which are supported
by either: (a) the full faith and credit of the United States (such as GNMA
certificates), (b) the right of the issuer to borrow from the U.S. Treasury or
(c) the credit of the instrumentality. Obligations issued by the U.S. Treasury
and by U.S. Government agencies and instrumentalities include component
securities.
Longer maturity U.S. Government securities may exhibit greater price
volatility in response to changes in interest rates than shorter maturity
securities. In addition, certain U.S. Government securities may show even
greater volatility if, for example, the interest payment component has been
removed, as with zero coupon bonds.
Investments in GNMA certificates (which
represent an interest in a home mortgage pool) and other mortgage-backed
securities are subject to prepayment of principal as mortgages are prepaid. The
Series must reinvest these prepayments at prevailing rates, which may be lower
than the yield of the GNMA certificate or other mortgage-backed security. These
prepayments will result in a further reduction in principal if the GNMA
certificate or other mortgage-backed security is trading over par. Mortgage
prepayments generally increase when interest rates fall and, accordingly, often
result in a reduction of principal. Prepayments tend to decline when interest
rates are rising, resulting in an increase in the duration and volatility of
GNMA certificates and other mortgage-backed securities.
The Series may invest in
liquid interest-only and principal-only mortgage-backed securities backed by
fixed rate mortgages under guidelines established by the Fund's Board of
Trustees to assure that they may be sold promptly in the reasonable course of
business at a value reasonably close to that used in calculating the Series' net
asset value per share.
Although longer maturity U.S. Government securities, zero
coupon bonds, GNMA certificates and other mortgage-backed securities in which
the Series may invest may be volatile, Lord Abbett manages this volatility (but
does not eliminate it) by maintaining the average duration of securities held by
the Series at between three and eight years.
LIMITED DURATION GOVERNMENT
SECURITIES SERIES Obligations which are issued or guaranteed by U.S. government
agencies or instrumentalities in which the Series may invest include those that
are supported by either: (a) the full faith and credit of the United States
(such as GNMA certificates), (b) the right of the issuer to borrow from the U.S.
Treasury (such as Federal Home Loan Bank securities) or (c) the credit of the
instrumentality (such as FNMA and FHMLC securities). Component securities in
which the Series may invest include Treasury STRIPS, which are Treasury bonds
and notes separated on the books of the Federal Reserve into their component
parts of principal and coupon payments or principal and coupon strips, and which
are direct obligations of the U.S. Government.
The maximum dollar-weighted
effective average maturity (not stated maturity) of the Series' portfolio will
be seven years. This effective average maturity measures the average time
principal is outstanding and (a) is different from duration because it does not
measure all cash flows and (b) includes securities that prepay principal, thus
shortening their dollar-weighted effective average maturity. ("Duration" is
generally the weighted average time to receipt of all cash flows due by maturity
from an obligation.) Stated maturity is the stated time to final principal
payment of an obligation without regard to any prepayments of principal.
Therefore, the maximum average stated maturity of the portfolio may be
substantially longer than seven years.
Unlike a money market fund, which is
designed for stability of principal and consequently has a fluctuating level of
income, a limited duration U.S. Government securities fund, due to the nature of
its portfolio securities, generally has a steadier and higher level of income.
However, the Series' share value will fluctuate more than a money market fund's
over time. Historically, a portfolio with a duration averaging between one and
four years, such as the Series' portfolio, tends to have steadier and higher
income over the course of the business cycle than a short-term money market fund
portfolio. In such a business cycle, the Series' portfolio can "lock in" rates
over a longer period, allowing its income to continue over that period at the
locked-in level (which adjusts less often in response to changing interest
rates). This ability to lock in rates for a longer period softens the impact of
more frequent interest-rate changes to which a money market fund portfolio is
exposed due to the shorter period for which it is able to lock in rates. Of
course, past performance is no guarantee of future results.
In general, because
the Series invests in longer term securities than a money market fund, the value
of its shares will fluctuate more than a money market fund, but less than, for
example, a long-term U.S. Government securities fund. Component securities in
which the Series may invest may show greater price volatility in response to
interest-rate changes than other debt securities in which the Series may invest.
The value of principal-only component securities will be reduced in a rising
interest-rate environment, or as the expected amount of principal prepayments
declines. The value of interest-only component securities will be reduced in a
falling interest-rate environment, or as the expected amount of principal
prepayments increases. The Series seeks to reduce the effects of interest-rate
volatility on principal by limiting the average duration of the portfolio to a
range of one to four years.
The Series limits its investments in mortgage-backed
securities to those issued or guaranteed by the U.S. Government or one of its
agencies or instrumentalities, primarily the GNMA, FNMA or FHLMC.
Mortgage-backed securities guaranteed by GNMA represent pass-through interests
in pools of mortgage loans guaranteed or issued by agencies or instrumentalities
of the United States. Mortgage-backed securities issued by FNMA and FHLMC most
often represent pass-through interests in pools of conventional mortgage loans
or participations in the pools. Such "pass-through" mortgage-backed securities
represent undivided interests in the underlying mortgage pool, and a
proportionate share of both regular interest and principal payments (net of
certain fees), as well as unscheduled prepayments on the underlying mortgage
pool, are passed through monthly to the holder of such securities. The Series
must reinvest such prepayments at prevailing interest rates, which may be lower
than those of the mortgage-backed securities prepaid. Prepayment will result in
a reduction of principal if the pre-paid mortgage-backed security is trading
over par. Principal prepayments generally increase when interest rates fall, as
indicated above, and accordingly often result in a reduction of principal. Among
the types of mortgage-backed securities in which the Series may invest are
collateralized mortgage obligations ("CMOs"), which are debt obligations
collateralized by mortgage loans or mortgage pass-through securities guaranteed
or issued by GNMA, FNMA or FHLMC. The Series will not invest in privately issued
CMOs. The issuer of a series of CMOs may elect to be treated as a Real Estate
Mortgage Investment Conduit (a "REMIC"). In a CMO, a series of bonds or
certificates are issued in multiple classes. Each class, often referred to as a
"tranche," is issued at a specific fixed or floating coupon rate and has a
stated maturity or final distribution date.
INVESTMENT POLICIES, RISKS AND
LIMITS COMMON TO BOTH SERIES Both the U.S. Government Securities Series and the
Limited Duration Government Series may purchase U.S. Government securities on a
when-issued basis and, while awaiting delivery and before paying for them
("settlement"), normally may invest in short-term U.S. Government securities
without amortizing any premiums. Each Series does not start earning interest on
these when-issued securities until settlement and often will sell them prior to
settlement. This investment strategy is expected to contribute significantly to
a portfolio turnover rate substantially in excess of 100% for each Series. This
strategy will have little or no transaction cost or adverse tax consequences for
any Series. Transaction costs normally will exclude brokerage because our
fixed-income portfolio transactions are usually on a principal basis when using
this strategy, and any mark-ups charged normally will be more than offset by the
beneficial economic consequences anticipated at the time of purchase. During the
period between purchase and settlement, the value of the securities will
fluctuate and assets consisting of cash and/or marketable securities marked to
market daily in an amount sufficient to make payment at settlement will be
segregated at our custodian in order to pay for the commitment. There is a risk
that market yields available at settlement may be higher than yields obtained on
the purchase date, which could result in depreciation of value.
Both the U.S.
Government Securities Series and the Limited Duration Government Series are
permitted to utilize, within limits established by the Board of Trustees, the
following investment policies in an effort to enhance each Series' performance.
These policies have risks associated with them. However, each Series follows
certain practices that may reduce these risks. To the extent a Series utilizes
some of these policies, its overall performance may be positively or negatively
impacted.
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 value of each Series' total assets.
REPURCHASE AGREEMENTS:
A repurchase agreement is a transaction by which the buyer acquires a security
and simultaneously commits to resell that security to the seller at an agreed
upon price on an agreed upon date. Risk: The issuer of the security, or the
seller who is counterparty to the contract, may default or otherwise become
unable to honor a financial obligation. Limit: Each Series may enter into
repurchase agreements that are continuously collateralized by cash or U.S.
Government securities having a value equal to, or in excess of, the value of the
repurchase agreement.
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: Each Series may invest up to 15% of its net assets in illiquid
securities. Securities determined by the Trustees to be liquid are not subject
to this limit.
BORROWING MONEY: Each Series may borrow from banks (as defined in
the Act) in amounts up to 33 1/3% of its total assets (including the amount
borrowed). Each Series may borrow up to an additional 5% of its total assets for
temporary purposes and each Series may obtain such short-term credit as may be
necessary for the clearance of purchases and sales of portfolio securities.
OBJECTIVE, RESTRICTION AND POLICY CHANGES: Each Series will not change its
investment objective or its fundamental investment restrictions listed in its
Statement of Additional Information without shareholder approval. If we
determine that a Series' 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 the prospectus. For more information about
investment policies, restrictions and risk factors, see the Statement of
Additional Information.
PORTFOLIO TURNOVER.The portfolio turnover rate for the
U.S. Government Securities Series for the year ended November 30, 1997 was
712.82%, versus 820.59% for the previous fiscal year. The high portfolio
turnover rate relates to substantial trading of U.S. and U.S. agency
mortgage-backed securities to take advantage of value changes among different
agencies, coupons and maturities. The portfolio turnover rate for the Limited
Duration Government Series for the fiscal year ended November 30, 1997 was
343.53%, versus 340.62% for the fiscal year ended October 31, 1996. The
portfolio turnover rate for the one month ended November 30, 1996 was 175.98%.
The portfolio turnover rate was primarily due to security purchases and sales
relating to purchases and redemptions of Series shares and some portfolio
restructuring. The fiscal year end for the Limited Duration Government Series
was changed from October 31 to November 30 to conform to the fiscal year end of
the U.S. Government Securities Series. For more information about investment
policies, restrictions and risk factors, see the Statement of Additional
Information.
SALES COMPENSATION As part of its plan for distributing shares, the
Fund, along with Lord Abbett Distributor, pays compensation to Authorized
Institutions that sell the Fund's shares. These firms typically pass along a
portion of this compensation to your financial representative.
Compensation
payments originate from two sources: sales charges and 12b-1 fees that are paid
out of the Fund's assets ("12b-1"refers to the federal securities regulation
authorizing annual 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 compensation to Authorized
Institutions, such as your dealer, are shown in the charts on the last two pages
of this Prospectus. Sometimes 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. Rule 12b-1 distribution fees may be used to pay for sales compensation
to Authorized Institutions, for any activity which is primarily intended to
result in the sale of shares and, for Class B shares, the financing of sales
commissions.
FIRST YEAR COMPENSATION. Whenever you make an investment in the
Fund, the Authorized Institution receives compensation as described in the
charts on the last two pages of this Prospectus.
ANNUAL COMPENSATION AFTER FIRST
YEAR. Beginning with the second year after an investment is made, the Authorized
Institution receives annual compensation as described in the charts on the last
two pages of this Prospectus. Additional Concessions may be paid to Authorized
Institutions from time to time.
GLOSSARY OF TERMS Additional Concessions. A
supplemental annual distribution fee equal to 0.10% of the average daily net
asset value of the Class A shares is available to Authorized Institutions which
have a program for the promotion and retention of such shares satisfying Lord
Abbett Distributor. Class A shares held pursuant to a satisfactory program
would, for example, (i) constitute a significant percentage of the Fund's net
assets, (ii) be held for a substantial length of time and/or (iii) have a lower
than average redemption rate.
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. Lord Abbett Distributor may,
from time to time, implement promotions under which Lord Abbett Distributor will
pay a fee to dealers with respect to certain purchases not involving imposition
of a sales charge. Additional payments may be paid from Lord Abbett
Distributor's own resources and will be made in the form of cash or, if
permitted, non-cash payments. The non-cash payments will include business
seminars at 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."
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 Research Fund -- Mid-Cap Series; 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]
o In the case of the corporation -
ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
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 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 actually paid to shareholders. To show that return, a
dividend distribution rate may be calculated. Dividend distribution rate is
calculated by dividing the dividends of a class derived from net investment
income during a stated period by the maximum offering price on the last day of
the period. Yields and dividend distribution rate for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based on
the Fund's net asset value per share. Yields for Class B and Class C shares do
not reflect the deduction of the CDSC.
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.
The performance of the Class A shares of each multi-class Series which is shown
in the comparisons below will be greater or less than that shown below for Class
B and Class C shares based on the differences in sales charges and fees paid by
shareholders investing in the different classes.
Comparison of change in value of a $10,000 investment in Class A shares of U.S.
GOVERNMENT SECURITIES SERIES (formerly the Lord Abbett U.S. Government
Securities Fund), assuming reinvestment of dividends and distributions, Lipper's
General U.S. Government Bond Fund Index and the Lehman Government Bond Index
follows:
Class A shares Class A shares Lipper's Average
at NAV at Maximum Offering of General US
Price(1) Government Bond
Funds(2)
1987 10,000 9,518 10,000
1988 10,963 10,434 10,788
1989 12,240 11,650 12,077
1991 15,091 14,363 14,470
1994 17,475 16,632 16,505
1995 20,077 19,109 19,286
1996 20,961 19,950 20,131
1997 22,360 21,281 21,467
Average Annual Total Return for Class A Shares
1 year 5 years 10 years
1.60% 5.22% 7.85%
Average Annual Total Return for Class B Shares(5)
1 year Life of Class(8/1/96 - 11/30/97)
1.25% 5.04%
Average Annual Total Return for Class C Shares
1 year Life of class(7/15/96 - 11/30/97)
5.90% 9.13%
Comparison of change in value of a $10,000 investment in Class A shares of
LIMITED DURATION GOVERNMENT SERIES, Lipper's Short and Intermediate U.S.
Government Fund Index and the Lehman Intermediate Government Index.
Class A shares Class A shares Lipper's Average
at NAV at Maximum Offering of General US
Price(1) Government Bond
Funds(2)
1993 9,979 9,680 9,992
1994 9,672 9,381 9,970
1995 10,579 10,262 10,882
1996 10,886 10,560 11,440
1997 11,480 11,136 12,056
Average Annual Total Return for Class A Shares(4)
1 year Life of Class
(11/4/93-11/30/97)
2.20% 2.68%
Average Annual Total Return for Class C Shares
1 year Life of Class
(7/15/96-11/30/97)
4.40% 6.24%
(1)Data reflects the deduction of the maximum sales charge as follows: 4.75% for
the U.S. Government Securities Series and 3.00% for the Limited Duration
Government Series.
(2)Source: Lipper Analytical Services. Actual performance is from 10/31/93 to
11/31/97.
(3)Source: Lehman Brothers. Performance numbers for the unmanaged
Lehman Intermediate Government Index, Lehman Government Bond Index and Lipper's
Short, intermediate and U.S. Government Fund Indices do not reflect transaction
costs or management fees. An investor cannot invest directly in these Indices.
Actual performance is from10/31/93 to 11/31/97.
(4)Total return is the percent change in value, after deduction of the maximum
sales charge of 3.00%, applicable to Class A shares of the Limited Duration
Government Series and 4.75%, applicable to Class A shares of the U.S. Government
Securities Series, with all dividends and distributions reinvested for the
periods shown ending November 30, 1997, using the SEC-required uniform method to
compute such return.
(5)The Class B shares were first offered on 8/1/96.
Performance reflects the deduction of a 4% CDSC.
U.S. GOVERNMENT SECURITIES SERIES
FIRST YEAR COMPENSATION
<TABLE>
<CAPTION>
Class A investments
Front-end
sales charge Dealer's
paid by investors concession Service fee(1) Total compensation(2)
(% of offering price) (% of offering price) (%of net investment) (% of offering price)
<S> <C> <C> <C> <C> <C>
Less than $50,000 4.75% 4.00% 0.25% 4.25%
$50,000 - $99,999 4.75% 4.25% 0.25% 4.50%
$100,000 - $249,999 3.75% 3.25% 0.25% 3.50%
$250,000 - $499,999 2.75% 2.50% 0.25% 2.75%
$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(3)
First $5 million no front-end sales charge 1.00% .25% 1.25%
Next $5 million
above that no front-end sales charge .55% .25% 0.80%
Next $40 millio
above that no front-end sales charge .50% .25% 0.75%
Over $50 million no front-end sales charge .25% .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%
<FN>
(1) The service fee for Class A shares is paid quarterly and for Class A shares
may not exceed 0.15% if sold prior to September 1, 1985. 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 $1million 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 0.90%, 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. In the case of C shares for fixed-income series, such as U.S.
Government Securities Series and Limited Duration Government Series, 0.10% of
the average annual net asset value of such shares is retained by Lord Abbett
Distributor, thus reducing from 0.75% to 0.65% after the first year. Lord Abbett
Distributor uses this 0.10% for expenses primarily intended to result in the
sale of such Series' shares. With respect to Class B shares, CDSC revenues
collected by Lord Abbett Funds may be used to fund commission payments when
there is no initial sales charge.
</FN>
</TABLE>
LIMITED DURATION GOVERNMENT SERIES
FIRST YEAR COMPENSATION
<TABLE>
<CAPTION>
Class A investments
Front-end
sales charge Dealer's
paid by investors concession Service fee(1) Total compensation(2)
(% of offering price) (% of offering price) (%of net investment) (% of offering price)
<S> <C> <C> <C> <C> <C>
Less than $100,000 3.00% 2.50% 0.00% 2.50%
$100,000 - $249,999 2.50% 2.25% 0.00% 2.25%
$250,000 - $499,999 2.00% 1.75% 0.00% 1.75%
$500,000 - $999,999 1.50% 1.25% 0.00% 1.25%
1,000,000 to 2,999,999 1.00% 1.00% 0.00% 1.00%
3,000,000 to 9,999,999 0.50% 0.50% 0.00% 0.50%
Over $10 million 0.25% 0.25% 0.00% 0.25%
Class C investments Paid at time of sale (% of net asset value)
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 0.00% 0.00%
Class C investments Percentage of average net assets (3)
All amounts no front-end
sales charge 0.65% 0.25% 0.90%
<FN>
(1) The Class A share 12b-1 Plan for the Limited Duration Series will go into
effect on the first day of the calendar quarter subsequent to the Series' net
assets reaching $100 million at which time for the following categories: over $1
million, or a retirement plan -- 100 or more eligible employees, or a special
retirement wrap program, authorized institutions will receive concessions as set
forth on the U.S. Government Securities chart on the prior page for such
categories.
(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) With
respect to Class C shares, 0.90% 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. This fee is paid quarterly in arrears. In the case of C shares for
fixed-income series, such as U.S. Government Securities Series and Limited
Duration Government Series, 0.10% of the average annual net asset value of such
shares is retained by Lord Abbett Distributor, thus reducing the dealer's
concession from 0.75% to 0.65% after the first year. Lord Abbett Distributor
uses this 0.10% for expenses primarily intended to result in the sale of such
Series' shares.
</FN>
</TABLE>
LORD ABBETT
INVESTMENT TRUST, INC.
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
Lord Abbett
Investment Trust
U.S. Government Series
Limited Duration
Government Series
April 1, 1998
<PAGE>
Statement of Additional Information April 1, 1998
LORD ABBETT INVESTMENT TRUST
U.S. GOVERNMENT SECURITIES SERIES
LIMITED DURATION U.S. GOVERNMENT SECURITIES SERIES
BALANCED SERIES
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 April 1, 1998.
Lord Abbett Investment Trust (referred to as the "Fund") was organized as a
Delaware business trust on August 16, 1993. The Fund's trustees have authority
to create separate classes and series of shares of beneficial interest, without
further action by shareholders. The Fund has five series, three of which are
discussed here -U.S. Government Securities Series, Limited Duration U.S.
Government Securities Series and Balanced Series (sometimes referred to as "U.S.
Government Securities Series," "Limited Duration Government Series" and
"Balanced Series," respectively, or "we" or the "Series," individually or
collectively). The U.S. Government Securities Series offers three classes of
shares: Class A, Class B, and Class C. The Limited Duration Government Series
offers two classes of shares: Class A and Class C. The Balanced Series offers
three classes of shares: Class A, Class B and Class C. All shares have equal
noncumulative voting rights and equal rights with respect to dividends, assets
and liquidation, except for certain class-specific expenses. They are fully paid
and nonassessable when issued and have no preemptive or conversion rights.
Further classes or series may be added in the future. The Investment Company Act
of 1940, as amended (the "Act") requires that where more than one class or
series exists, each class or series must be preferred over all other classes or
series in respect of assets specifically allocated to such class or series.
Rule 18f-2 under the Act provides that any matter required to be submitted, by
the provisions of the Act or applicable state law or otherwise, to the holders
of the outstanding voting securities of an investment company such as the Fund
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each class or series affected
by such matter. Rule 18f-2 further provides that a class or series shall be
deemed to be affected by a matter unless the interests of each class or series
in the matter are substantially identical or the matter does not affect any
interest of such class or series. However, the Rule exempts the selection of
independent public accountants, the approval of principal distributing contracts
and the election of trustees from its separate voting requirements.
Shareholder inquiries should be made by writing directly to the Fund or by
calling 800-821-5129. In addition, you can make inquiries through your dealer.
TABLE OF CONTENTS Page
1. Investment Policies......................2
2. Trustees and Officers....................5
3. Investment Advisory and Other Services...7
4. Portfolio Transactions...................8
5. Purchases, Redemptions and Shareholder Services..9
6. Performance.....................................18
7. Taxes...........................................19
8. Information About the Fund......................19
9. Financial Statements............................20
<PAGE>
1. Investment Policies
FUNDAMENTAL INVESTMENT RESTRICTIONS
We are subject to the following investment restrictions which cannot be changed
without approval of a majority of our outstanding shares. Each Series may not:
(1) borrow money, except that (i) each Series may borrow from banks (as defined
in the Act) in amounts up to 33 1/3% of its total assets (including the amount
borrowed), (ii) each Series may borrow up to an additional 5% of its total
assets for temporary purposes, (iii) each Series may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of portfolio
securities and (iv) each Series may purchase securities on margin to the extent
permitted by applicable law; (2) pledge its assets (other than to secure
borrowings, or to the extent permitted by the Series' investment policies as
permitted by applicable law); (3) engage in the underwriting of securities,
except pursuant to a merger or acquisition or to the extent that, in connection
with the disposition of its portfolio securities, it may be deemed to be an
underwriter under federal securities laws; (4) make loans to other persons,
except that the acquisition of bonds, debentures or other corporate debt
securities and investment in government obligations, commercial paper,
pass-through instruments, certificates of deposit, bankers acceptances,
repurchase agreements or any similar instruments shall not be subject to this
limitation, and except further that each series may lend its portfolio
securities, provided that the lending of portfolio securities may be made only
in accordance with applicable law; (5) buy or sell real estate (except that each
Series may invest in securities directly or indirectly secured by real estate or
interests therein or issued by companies which invest in real estate or
interests therein) or commodities or commodity contracts (except to the extent
each Series may do so in accordance with applicable law and without registering
as a commodity pool operator under the Commodity Exchange Act as, for example,
with futures contracts)); (6) with respect to 75% of its gross assets, buy
securities of one issuer representing more than (i) 5% of the its gross assets,
except securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities , and for the Balanced Series, securities issued by an
investment company or (ii) 10% of the voting securities of such issuer; (7)
invest more than 25% of its assets, taken at market value, in the securities of
issuers in any particular industry (excluding securities of the U.S. Government,
its agencies and instrumentalities); (8) issue senior securities to the extent
such issuance would violate applicable law or (9) (with respect to the U.S.
Government Securities Series only) invest in securities other than U.S.
Government securities, as described in the Prospectus.
With respect to the restrictions mentioned herein, compliance therewith will not
be affected by changes in the market value of portfolio securities but will be
determined at the time of purchase or sale of such securities.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
In addition to the investment restrictions above which cannot be changed without
shareholder approval, we also are subject to the policies described in the
Prospectus and the following investment policies which may be changed by the
Board of Trustees without shareholder approval. Each Series may not: (1) borrow
in excess of 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 Series' total assets
would be invested in such securities (this restriction shall not apply to
mortgaged-backed securities, asset-backed securities or obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities); (6) hold
securities of any issuer if more than 1/2 of 1% of the securities of such issuer
are owned beneficially by one or more officers or trustees of the series or by
one or more partners or members of the Fund's underwriter or investment adviser
if these owners in the aggregate own beneficially more than 5% of the securities
of such issuer; (7) invest in warrants if, at the time of the acquisition, its
investment in warrants, valued at the lower of cost or market, would exceed 5%
of the Series' total assets (included within such limitation, but not to exceed
2% of the Series' total assets, are warrants which are not listed on the New
York or American Stock Exchange or a major foreign exchange); (8) invest in real
estate limited partnership interests or interests in oil, gas or other mineral
leases, or exploration or other development programs, except that the Fund may
invest in securities issued by companies that engage in oil, gas or other
mineral exploration or other development activities; (9) write, purchase or sell
puts, calls, straddles, spreads or combinations thereof, except to the extent
permitted in the Fund's prospectus and statement of additional information, as
they may be amended from time to time; or (10) buy from or sell to any of its
officers, trustees, employees, or its investment adviser or any of its officers,
trustees, partners or employees, any securities other than shares of beneficial
interest in such series.
Although there is no current intention to do so, each Series may invest in
financial futures and options on financial futures.
LENDING PORTFOLIO SECURITIES
Each Series may lend portfolio securities to registered brokers-dealers. These
loans, if and when made, may not exceed 30% of the Series' total assets. The
Series' loans of securities will be collateralized by cash or marketable
securities issued or guaranteed by the U.S. Government or its agencies ("U.S.
Government securities") or other permissible means in an amount at least equal
to the market value of the loaned securities. From time to time, the each series
may pay a part of the interest received with respect to the investment of
collateral to the borrower and/or a third party that is not affiliated with the
Fund and is acting as a "placing broker." No fee will be paid to affiliated
persons of the Fund.
By lending portfolio securities, each Series can increase its income by
continuing to receive income on the loaned securities as well as by either
investing the cash collateral in permissible investments, such as U.S.
Government securities, or obtaining yield in the form of interest paid by the
borrower when such U.S. Government securities or other forms of non-cash
collateral are used as security. Each series will comply with the following
conditions whenever it loans securities: (i) the Series must receive at least
100% collateral from the borrower; (ii) the borrower must increase the
collateral whenever the market value of the securities loaned rises above the
level of the collateral; (iii) the Series must be able to terminate the loan at
any time; (iv) the Series must receive reasonable compensation with respect to
the loan, as well as any dividends, interest or other distributions on the
loaned securities; (v) the Series may pay only reasonable fees in connection
with the loan; and (vi) voting rights on the loaned securities may pass to the
borrower except that, if the Fund has knowledge of a material event adversely
affecting the investment in the loaned securities, the Fund must terminate the
loan and regain the right to vote the securities.
REPURCHASE AGREEMENTS
Each Series may enter into repurchase agreements with respect to a security. A
repurchase agreement is a transaction by which the Series acquires a security
and simultaneously commits to resell that security to the seller (a bank or
securities dealer), and the seller commits to repurchase that security, at an
agreed upon price on an agreed upon date. The resale price reflects the purchase
price plus an agreed upon market rate of interest which is unrelated to the
coupon rate or date of maturity of the purchased security. (In this type of
transaction, the securities purchased by the Series have a total value in excess
of the value of the repurchase agreement.) Each Series requires at all times
that the repurchase agreement be collateralized by cash or U.S. Government
securities having a value equal to, or in excess of, the value of the repurchase
agreement. Such agreements permit the Series to keep all of its assets at work
while retaining flexibility in pursuit of investments of a longer term nature.
The use of repurchase agreements involves certain risks. For example, if the
seller of the agreement defaults on its obligation to provide additional
collateral or to repurchase the underlying securities at a time when the value
of these securities has declined, the Series may incur a loss upon disposition
of them. If the seller of the agreement becomes insolvent and subject to
liquidation or reorganization under the Bankruptcy Code or other laws, a
bankruptcy court may determine that the underlying securities are collateral not
within the control of the Series and are therefore subject to sale by the
trustee in bankruptcy. Even though the repurchase agreements may have maturities
of seven days or less, they may lack liquidity, especially if the issuer
encounters financial difficulties. While Fund management acknowledges these
risks, it is expected that they can be controlled through stringent selection
criteria and careful monitoring procedures. Fund management intends to limit
repurchase agreements for each Series to transactions with dealers and financial
institutions believed by Fund management to present minimal credit risks. Fund
management will monitor creditworthiness of the repurchase agreement sellers on
an ongoing basis.
Each Series will enter into repurchase agreements only with those primary
reporting dealers that report to the Federal Reserve Bank of New York and with
the 100 largest United States commercial banks and the underlying securities
purchased under the agreements will consist only of those securities in which
the Series otherwise may invest.
WHEN-ISSUED TRANSACTIONS
As stated in the Prospectus, each Series may purchase portfolio securities on a
when-issued basis. When-issued transactions involve a commitment by the Series
to purchase securities, with payment and delivery ("settlement") to take place
in the future, in order to secure what is considered to be an advantageous price
or yield at the time of entering into the transaction. The value of fixed-income
securities to be delivered in the future will fluctuate as interest rates vary.
During the period between purchase and settlement, the value of the securities
will fluctuate and assets consisting of cash and/or marketable securities
(normally short-term U.S. Government securities) marked to market daily in an
amount sufficient to make payment at settlement will be segregated at our
custodian in order to pay for the commitment. There is a risk that market yields
available at settlement may be higher than yields obtained on the purchase date
which could result in depreciation of value of fixed-income when-issued
securities. At the time each Series makes the commitment to purchase a security
on a when-issued basis, it will record the transaction and reflect the liability
for the purchase and the value of the security in determining its net asset
value. Each Series, generally, has the ability to close out a purchase
obligation on or before the settlement date rather than take delivery of the
security. Under no circumstance will settlement for such securities take place
more than 120 days after the purchase date.
AVERAGE DURATION
The Limited Duration Government Series limits its average dollar weighted
portfolio duration to a range of one to four years. However, many of the
securities in which the Series invests will have remaining durations in excess
of four years.
Some of the securities in the Limited Duration Government Series' portfolio may
have periodic interest rate adjustments based upon an index such as the 91-day
Treasury Bill rate. This periodic interest rate adjustment tends to lessen the
volatility of the security's price. With respect to securities with an interest
rate adjustment period of one year or less, the Limited Duration Government
Series will, when determining average-weighted duration, treat such a security's
maturity as the amount of time remaining until the next interest rate
adjustment.
Instruments such as GNMA, FNMA, FHLMC securities and similar securities backed
by amortizing loans generally have shorter effective maturities than their
stated maturities. This is due to changes in amortization caused by demographic
and economic forces such as interest rate movements. These effective maturities
are calculated based upon historical payment patterns and therefore have shorter
duration than would be implied by their stated final maturity. For purposes of
determining the Limited Duration Government Series' average maturity, the
maturities of such securities will be calculated based upon the issuing agency's
payment factors using industry-accepted valuation models.
PORTFOLIO TURNOVER
For the fiscal year ended November 30, 1997, the portfolio turnover rate for the
U.S. Government Securities Series was 712.82% as compared to 820.59% for the
previous year; 343.53% for the Limited Duration Government Series compared to
340.62% for the year ended October 31, 1996 and 175.98% for the one month ended
November 30, 1996; 216.07% for the Balanced Series as compared to 187.78% for
the year ended October 31, 1996 and 10.05% for the one month ended November 30,
1996.
On July 12, 1996, the Fund acquired the assets of the U.S. Government Securities
Fund, Inc. (the "Acquired Fund"), in exchange for the shares of the newly
created U.S. Government Securities Series. As discussed above, each Series may
purchase U.S. Government securities on a when-issued basis with settlement
taking place after the purchase date (without amortizing any premiums). This
investment technique is expected to contribute significantly to portfolio
turnover rates. However, it will have little or no transaction cost or adverse
tax consequences. Transaction costs normally will exclude brokerage because each
Series' fixed-income portfolio transactions are usually on a principal basis and
any markups charged normally will be more than offset by the beneficial economic
consequences anticipated at the time of purchase or no purchase will be made.
Generally, short-term losses on short-term U.S. Government securities purchased
under this investment technique tend to offset any short-term gains due to such
high portfolio turnover.
2.
Trustees and Officers
The following trustees are partners of Lord Abbett, The General Motors Building,
767 Fifth Avenue, New York, New York 10153-0203. They have been associated with
Lord Abbett for over five years and are also officers and/or directors or
trustees of the twelve other Lord Abbett-sponsored funds. They are "interested
persons" as defined in the Act, and as such, may be considered to have an
indirect financial interest in the Rule 12b-1 Plan described in the Prospectus.
Robert S. Dow, age 53, Chairman and President
E. Wayne Nordberg, 59, Vice President and Trustee
The following outside trustees are also directors or trustees of the twelve
other Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow
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 56.
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
Stamford, 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, he
was 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 64.
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 69.
Thomas J. Neff
Spencer Stuart U.S.
277 Park Avenue
New York, New York
Chairman of Spencer Stuart U.S., an executive search consulting firm. Age 60.
The second column of the following table sets forth the compensation accrued for
the Fund's outside trustees. The third and fourth columns set forth information
with respect to the retirement plan for outside trustees maintained by the Lord
Abbett-sponsored funds. The fifth column sets forth the total compensation
payable by such funds to the outside trustees. No trustees of the Fund
associated with Lord Abbett and no officer of the Fund received any compensation
from the Fund for acting as a trustee or officer.
<TABLE>
<CAPTION>
For the Fiscal Year Ended November 30, 1997
(1) (2) (3) (4)
Pension or For Year Ended
Retirement Benefits December 31, 1997
Accrued by the Total Compensation
Aggregate Fund and Accrued by the Fund and
Compensation Twelve Other Lord Twelve Other Lord
Accrued by Abbett-sponsored Abbett-sponsored
Name of Director the Fund1 Funds2
Funds3
<S> <C> <C> <C>
E. Thayer Bigelow $10,580 $17,068 $56,000
Stewart S. Dixon $10,388 $32,190 $55,000
John C. Jansing $10,388 $45,0854 $55,000
C. Alan MacDonald $10,843 $30,703 $57,400
Hansel B. Millican, Jr. $10,438 $37,747 $55,000
Thomas J. Neff $10,528 $19,853 $56,000
<FN>
1. Outside directors' fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on the
net assets of each fund. A portion of the fees payable by the Fund to its
outside directors is being deferred under a plan that deems the deferred
amounts to be invested in shares of the Fund for later distribution to the
directors.
2. The amounts in Column 3 were accrued by the Lord Abbett-Sponsored Funds for
the 12 months ended November 30, 1997 with respect to the equity based plans
established for independent directors in 1996. This plan supercedes a
previously approved retirement plan for all future directors. Current
directors had the option to convert their accrued benefits under the
retirement plan. All of the outside directors 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 directors 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. The amounts of the aggregate compensation payable by
the Fund as of November 30, 1997 deemed invested in Fund shares, including
dividends reinvested and changes in net asset value applicable to such deemed
investments, were: Mr. Bigelow, $39,081; Mr. Dixon, $107,152; Mr. Jansing,
$142,903; Mr. MacDonald, $84,555; Mr. Millican, $143,927 and Mr. Neff,
$143,008. If the amounts deemed invested in Fund shares were added to each
director's actual holdings of Fund shares as of November 30, 1997, each would
own, the following: Mr. Bigelow, 1,233 shares; Mr. Dixon, 4,267.85 shares;
Mr. Jansing, 8,833 shares; Mr. McDonald, 214,120 shares; Mr. Millican, 0
shares; and Mr. Neff, 5,896 shares.
4. Mr. Jansing chose to continue to receive benefits under the retirement plan
which provides that outside directors (Trustees) may receive annual
retirement benefits for life equal to their final annual retainer following
retirement at or after age 72 with at least ten years of service. Thus, if
Mr. Jansing were to retire and the annual retainer payable by the funds were
the same as it is today, he would receive annual retirement benefits of
$50,000.
</FN>
</TABLE>
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Brown, Carper, Hilstad, Hudson, Morris and Nordberg are partners of Lord Abbett;
the others are employees: Zane Brown, age 46, Vice President; 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.); Daniel E. Carper, age 46, Vice President; Robert I. Gerber, age
43, Executive Vice President (with Lord Abbett since 1997 - formerly Senior
Portfolio Manager and Shareholder at Sanford Bernstein); Vice President;
Lawrence H. Kaplan, age 41 (with Lord Abbett since 1997 - formerly Vice
President and Chief Counsel of Salomon Brothers Asset Management Inc from 1995
to 1997; prior thereto Senior Vice President, Director and General Counsel of
Kidder Peabody Asset Management, Inc.); Thomas F. Konop, age 55, Vice President
Secretary; Robert A. Lee, age 28 (with Lord Abbett since 1997 - formerly
Portfolio Manager at ARM Capital Advisors, prior thereto Assistant Portfolio
Manager at Peabody Asset Management); Robert G. Morris, age 53; E. Wayne
Nordberg, age 60; W. Thomas Hudson, age 57; A. Edward Oberhaus, age 38; Keith F.
O'Connor, age 42; Walter H. Prahl, age 40 (with Lord Abbett since 1997 -
formerly Quantitative Analyst at Sanford Bernstsein); Vice Presidents; and Donna
M. McManus, age 37, Treasurer (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
Fund's Declaration of Trust, shareholder meetings may be called at any time by
certain officers of the Fund or by a majority of the trustees (i) for the
purpose of taking action upon any matter requiring the vote or authority of the
Fund's shareholders or upon other matters deemed to be necessary or desirable or
(ii) upon the written request of the holders of at least one-quarter of the
shares of the Series outstanding and entitled to vote at the meeting.
As of February 1, 1998, our officers and trustees as a group owned less than 1%
of the outstanding shares of the Limited Duration Government Series, Balanced
Series and U.S. Government Securities Series.
3.
Investment Advisory and Other Services
As described under "Our Management" in the Prospectus, Lord Abbett is the Fund's
investment manager. Seven of the twelve general partners of Lord Abbett are
officers and/or directors of the Fund, as follows: Zane E. Brown, Daniel E.
Carper, Robert S. Dow, Paul A. Hilstad, Robert G. Morris, E. Wayne Nordberg and
John J. Walsh. The other partners who are neither officers nor directors of the
Fund are Stephen I. Allen, Daria Foster, W. Thomas Hudson, Michael McLaughlin
and Robert J. Noelke. The address of each partner is The General Motors
Building, 767 Fifth Avenue, New York, New York 10153-0203.
The services performed by Lord Abbett are described under "Our Management" in
the Prospectus. Under each Management Agreement, we are obligated to pay Lord
Abbett a monthly fee, based on average daily net assets for each month, at the
annual rate of .50 of 1% (in the case of the U.S. Government Securities Series
and the Limited Duration Government Series) and .75 of 1% (in the case of the
Balanced Series). These fees are allocated among the classes of each Series
based on the class' proportionate share of each Series average daily net assets.
Each Series pays all of its expenses not expressly assumed by Lord Abbett,
including, without limitation, 12b-1 expenses, outside trustees' fees and
expenses, association membership dues, legal and audit fees, taxes, transfer and
dividend disbursing agent fees, shareholder servicing costs, expenses relating
to shareholder meetings, expenses of preparing, printing and mailing share
certificates and shareholder reports, expenses of registering our shares under
federal and state securities laws, expenses of preparing, printing and mailing
prospectuses to existing shareholders, insurance premiums and brokerage and
other expenses connected with executing portfolio transactions.
The management fees paid to Lord Abbett by the Limited Duration Government
Series for the fiscal years ended October 31, 1995, October 31, 1996, and
November 30, 1997 amounted to $15,561, $9,897 and $2,770, respectively. For the
one month ended November 30, 1996 the management fee paid to Lord Abbett by the
Limited Duration Government Series was $2,770.
The management fees paid to Lord Abbett by the Balanced Series for the period
December 27, 1994 (commencement of operations) to October 31, 1995, and the
fiscal years ended October 31, 1996 and November 30, 1997 were $0, $8,607 and
$48,151, respectively. For the one month ended November 30, 1996, the management
fee paid to Lord Abbett by the Balanced Series was $2,240.
The management fees paid to Lord Abbett by the Acquired Fund ( and subsequent to
July 12, 1996 by the U.S. Government Securities Series) for the fiscal years
ended October 31, 1995, October 31, 1996 and November 30, 1997 were $16,286,000,
$15,053,629 and $12,500,454, respectively.
Although not obligated to do so, Lord Abbett has waived and may waive all or
part of its management fees and has assumed or may assume other expenses of the
Limited Duration U.S. Government Securities Series and Balances Series. For the
fiscal year ended October 31, 1996, the one month ended November 30, 1996, and
the fiscal year ended November 30, 1997, Lord Abbett waived $28,804 , $2,657,
and $54,884 in management fees for the Limited Duration Government Series. With
respect to the Balanced Series, for the fiscal year ended October 31, 1996, the
one month ended November 30, 1996, and the fiscal year ended November 30, 1997,
Lord Abbett waived $53,375, $4,638 and $65,087 in management fees.
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.
Bank of New York, 40 Wall Street, New York, New York, is the Fund's custodian.
4.
Portfolio Transactions
It is expected that purchases and sales of each Series' fixed-income portfolio
securities usually will be principal transactions and normally such securities
will be purchased directly from the issuer or from an underwriter or market
maker for the securities. Therefore, each Series usually will pay no brokerage
commissions for such purchases. Purchases from underwriters of portfolio
securities will include a commission or concession paid by the issuer to the
underwriter and purchases from dealers serving as market makers will include a
dealer's markup. Principal transactions, including riskless principal
transactions, are not afforded the protection of the safe harbor in Section 28
(e) of the Securities Exchange Act of 1934.
Each Series' policy is to have purchases and sales of portfolio securities
executed at most favorable prices, considering all costs of the transaction
including brokerage commissions and dealer markups and markdowns, consistent
with obtaining best execution, except to the extent that we may pay a higher
commission rate as described below. This policy governs the selection of brokers
or dealers and the market in which the transaction is executed. To the extent
permitted by law, we may, if considered advantageous, make a purchase from or
sale to another Lord Abbett-sponsored fund without the intervention of any
dealer.
Broker-dealers are selected on the basis of their professional capability and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of the Fund and also are employees
of Lord Abbett. These traders do the trading as well for other accounts --
investment companies (of which they are also officers) and other investment
clients -- managed by Lord Abbett. They are responsible for the negotiation of
prices and any commissions.
We may pay a brokerage commission on the purchase or sale of a security that
could be purchased from or sold to a market maker if our net cost of the
purchase or the net proceeds to us of the sale are at least as favorable as we
could obtain on a direct purchase or sale. Brokers who receive such commissions
may also provide research services at least some of which are useful to Lord
Abbett in their overall responsibilities with respect to us and the other
accounts they manage. Research includes trading equipment and computer software
packages, acquired from third-party suppliers, that enable Lord Abbett to access
various information bases and may include the furnishing of analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts. Such services may be used by
Lord Abbett in servicing all their accounts, and not all of such services will
necessarily be used by Lord Abbett in connection with their management of the
Fund; conversely, such services furnished in connection with brokerage on other
accounts managed by Lord Abbett may be used in connection with their management
of the Fund, and not all of such services will necessarily be used by Lord
Abbett in connection with their advisory services to such other accounts. We
have been advised by Lord Abbett that research services received from brokers
cannot be allocated to any particular account, are not a substitute for Lord
Abbett's services but are supplemental to their own research effort and, when
utilized, are subject to internal analysis before being incorporated by Lord
Abbett into their investment process. As a practical matter, it would not be
possible for Lord Abbett to generate all of the information presently provided
by brokers. While receipt of research services from brokerage firms has not
reduced Lord Abbett's normal research activities, the expenses of Lord Abbett
could be materially increased if it attempted to generate such additional
information through its own staff and purchased such equipment and software
packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or
among brokers, and trades are executed only when they are dictated by investment
decisions of the Fund to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold our shares and/or
shares of other Lord Abbett-sponsored funds may be preferred.
If other clients of Lord Abbett buy or sell the same security at the same time
as we do, transactions will, to the extent practicable, be allocated among all
participating accounts in proportion to the amount of each order and will be
executed daily until filled so that each account shares the average price and
commission cost of each day. Other clients who direct that their brokerage
business be placed with specific brokers or who invest through wrap accounts
introduced to Lord Abbett by certain brokers may not participate with us in the
buying and selling of the same securities as described above. If these clients
wish to buy or sell the same security as we do, they may have their transactions
executed at times different from our transactions and thus may not receive the
same price or incur the same commission cost as we do.
We will not seek "reciprocal" dealer business (for the purpose of applying
commissions in whole or in part for our benefit or otherwise) from dealers as
consideration for the direction to them of portfolio business.
During the fiscal year ended October 31,1995, October 31 1996, the one month
ended November 30, 1996, and the fiscal year ended November 30, 1997, the
Limited Duration Government Series paid no commissions to independent brokers.
For the period December 17, 1994 to October 31, 1995, the fiscal year ended
October 31, 1996 , the one month ended November 30, 1996, and the fiscal year
ended November 30, 1997, the Balanced Series paid total commissions to
independent brokers of $4,566, $7,364, $767, and $9,927 .
5.
Purchases, Redemptions
and Shareholder Services
Securities in each Series' portfolio are valued at their market values as of the
close of the NYSE. Market value will be determined as follows: securities listed
or admitted to trading privileges on any national securities exchange are valued
at the last sales price on the principal securities exchange on which such
securities are traded or, if there is no sale, at the mean between the last bid
and asked prices on such exchange or, in the case of bonds, in the
over-the-counter market if, in the judgment of the Fund's officers, that market
more accurately reflects the market value of the bonds. Securities traded only
in the over-the-counter market are valued at the mean between the bid and asked
prices, except that securities admitted to trading on the NASDAQ National Market
System are valued at the last sales price. Securities for which market
quotations are not available are valued at fair value under procedures approved
by the Board of Trustees. With respect to the Balanced Series, all assets and
liabilities expressed in foreign currencies will be converted into United States
dollars at the mean between the buying and selling rates of such currencies
against United States dollars last quoted by any major bank. If such quotations
are not available, the rate of exchange will be determined in accordance with
policies established by the Board of Trustees of the Fund. The Board of Trustees
will monitor, on an ongoing basis, the Fund's method of valuation.
Information concerning how we value our shares for the purchase and redemption
of our shares is described in the Prospectus under "Purchases" and Redemptions,"
respectively.
As disclosed in the Prospectus, we calculate our net asset value and are
otherwise open for business on each day that the New York Stock Exchange
("NYSE") is open for trading. The NYSE is closed on Saturdays and Sundays and
the following holidays -- New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
The net asset value per share for the Class B and Class C shares will be
determined in the same manner as for the Class A shares (net assets divided by
shares outstanding). Our Class B and Class C shares will be sold at net asset
value.
The offering price of Class A shares of the U. S. Government Securities Series,
the Limited Duration Government Series and the Balanced Series on November 30,
1997 were computed as follows:
<TABLE>
<CAPTION>
Limited Duration U. S. Government
Government Balanced Securities
Series Series Series
Net asset value per share (net assets divided
<S> <C> <C> <C>
by shares outstanding)..................................$4.40 $12.80 $2.59
Maximum offering price per share - net asset value divided by (.9700 for Limited
Duration Government Series
and U. S. Government Securities Series)
and (.9525 for Balanced Series)........................$4.54 $13.44 $2.72
</TABLE>
The Fund has entered into a distribution agreement with Lord Abbett Distributor
LLC, a New York limited liability company ("Lord Abbett Distributor"), under
which Lord Abbett Distributor is obligated to use its best efforts to find
purchasers for the shares of the Fund, and to make reasonable efforts to sell
Fund shares so long as, in Lord Abbett Distributor's judgment, a substantial
distribution can be obtained by reasonable efforts.
Since commencement of operations, Lord Abbett as our principal underwriter
received net commissions after allowance of a portion of the sales charge to
independent dealers with respect to Class A shares of the Limited Duration U.S.
Government Securities Series and the Balanced Series as follows:
<TABLE>
<CAPTION>
Year ended Year ended One month ended
Year ended
October 31, 1995 October 31, 1996 November 30, 1996 November 30, 1997
---------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Gross sales charge $205,002 $140,941 $8,059 $269,184
Amount allowed
to dealers $192,792 $123,303 $7,068 $233,663
--------- --------- ------ --------
Net Commissions received
by Lord Abbett $ 12,210 $ 17,638 $ 991 $35,521
======== ======== ==================-=======
</TABLE>
For the fiscal years ended November 30, 1995, 1996 and 1997, Lord Abbett as
principal underwriter received net commissions after allowance of a portion of
the sales charge to independent dealers with respect to Class A shares of the
Acquired Fund (and subsequent to July 12, 1996, the U.S. Government Securities
Series) as follows:
1995 1996 1997
---- ---- ----
Gross sales charge $8,891,483 $4,248,800 $1,469,770
Amount allowed
to dealers $7,684,528 $3,623,071 $1,259,215
---------- ----------
Net Commissions
received
by Lord Abbett $1,206,955 $625,729 $210,555
======== =======
Conversion of Class B Shares. The conversion of Class B shares of the U.S.
Government Securities Series on the eighth anniversary of their purchase is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service or an opinion of counsel to the effect that the
conversion of Class B shares does not constitute a taxable event for the holder
under Federal income tax law. If such a revenue ruling or opinion is no longer
available, the automatic conversion feature may be suspended, in which event no
further conversions of Class B shares would occur while such suspension remained
in effect. Although Class B shares could then be exchanged for Class A shares on
the basis of relative net asset value of the two classes, without the imposition
of a sales charge or fee, such exchange could constitute a taxable event for the
holder.
ALTERNATIVE SALES ARRANGEMENTS
CLASSES OF SHARES. The Fund offers investors five different classes of shares.
This Prospectus offers four of those classes designated Class A, B, C and P. 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 0.23 of 1% of the annual net asset value of the
Class A shares. The initial sales charge rates, the CDSC and the Rule 12b-1 plan
applicable to the Class A shares are described in "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 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 on behalf of each Series pursuant to
Rule 12b-1 of the Act for each class of shares available in the applicable
series: the "A Plan," the "B Plan" (U.S. Government Securities Series only) and
the "C Plan," respectively. In adopting each Plan and in approving its
continuance, the Board of Trustees has concluded that there is a reasonable
likelihood that each Plan will benefit its respective Class and such Class'
shareholders. The expected benefits include greater sales and lower redemptions
of Class shares, which should allow each Class to maintain a consistent cash
flow, and a higher quality of service to shareholders by authorized institutions
than would otherwise be the case. During the last fiscal year, the Fund accrued
or paid through Lord Abbett to authorized institutions $6,368,420 under the A
Plan, $93,175 under the B Plan and $1,929,168 under the C Plan. Both the B Plan
and the C Plans were adopted by the Fund subsequent to its last fiscal year.
Lord Abbett used all amounts received under the A Plan for payments to dealers
for (i) providing continuous services to the Class A shareholders, such as
answering shareholder inquiries, maintaining records, and assisting shareholders
in making redemptions, transfers, additional purchases and exchanges and (ii)
their assistance in distributing Class A shares of the Fund.
Each Plan requires the Board of Trustees to review, on a quarterly basis,
written reports of all amounts expended pursuant to the Plan and the purpose for
which such expenditures were made. Each Plan shall continue in effect only if
its continuance is specifically approved at least annually by vote of the Fund's
Board of Trustees and of the Fund's trustees who are not interested persons of
the Fund and who have no direct or indirect financial interest in the operation
of the Plan or in any agreements related to the Plan ("outside trustees"), cast
in person at a meeting called for the purpose of voting on such Plan and
agreements. No Plan may be amended to increase materially the amount spent for
distribution expenses without approval by a majority of the outstanding voting
securities of the appropriate class and the approval of a majority of the
trustees including a majority of the Fund's outside trustees. Each Plan may be
terminated at any time by vote of a majority of the Fund's outside trustees or
by vote of a majority of its Class's outstanding voting securities.
CONTINGENT DEFERRED SALES CHARGES. A Contingent Deferred Sales Charge ("CDSC"),
applies upon early redemption of shares regardless of class, and (i) will be
assessed on the lesser of the net asset value of the shares at the time of
redemption or the original purchase price and (ii) is not imposed on the amount
of your account value represented by the increase in net asset value over the
initial purchase price (including increases due to the reinvestment of dividends
and capital gains distributions).
CLASS A SHARES. (all Series) As stated in the Prospectus, a CDSC is imposed with
respect to those Class A shares (or Class A shares of another Lord
Abbett-sponsored fund or series acquired through exchange of such shares) on
which a Series has paid the one-time 1% distribution fee if such shares are
redeemed out of the Lord Abbett-sponsored family of funds within a period of 24
months from the end of the month in which the original sale occurred.
CLASS B SHARES. ( U.S. Government Securities Series and Balanced Series) As
stated in the Prospectus, if Class B shares (or Class B shares of another Lord
Abbett-sponsored fund or series acquired through exchange of such shares) are
redeemed out of the Lord Abbett-sponsored family of funds for cash before the
sixth anniversary of their purchase, a CDSC will be deducted from the redemption
proceeds. The Class B CDSC is paid to Lord Abbett Distributor to reimburse its
expenses, in whole or in part, of providing distribution-related service to the
Series in connection with the sale of Class B shares.
To determine whether the CDSC applies to a redemption, the Series redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held on or after the sixth anniversary
of their purchase, and (3) shares held the longest before such sixth
anniversary.
The amount of the contingent deferred sales charge will depend on the number of
years since you invested and the dollar amount being redeemed, according to the
following schedule:
Anniversary of Contingent Deferred Sales Charge
Purchase n Redemptions (As % of Amount Subject to Charge)
Before the 1st........................................................5.0%
On the 1st, before the 2nd............................................4.0%
On the 2nd, before the 3rd............................................3.0%
On the 3rd, before the 4th............................................3.0%
On the 4th, before the 5th............................................2.0%
On the 5th, before the 6th ...........................................1.0%
On or after the 6th anniversary........................................None
In the table, an "anniversary" is the 365th day subsequent to the acceptance of
a purchase order or a prior anniversary. All purchases are considered to have
been made on the business day on which the purchase order was accepted.
CLASS C SHARES (All Series). As stated in the Prospectus, if Class C shares are
redeemed for cash before the first anniversary of their purchase, the redeeming
shareholder will be required to pay to the Series on behalf of Class C shares a
CDSC of 1% of the lower of cost or the then net asset value of Class C shares
redeemed. If such shares are exchanged into the same class of another Lord
Abbett-sponsored fund and subsequently redeemed before the first anniversary of
their original purchase, the charge will be collected by the other fund on
behalf of this Series' Class C shares.
GENERAL. Each percentage (1% in the case of Class A and C shares and 5% through
1% in the case of Class B shares) used to calculate CDSCs described above for
the Class A, Class B and Class C shares is sometimes hereinafter referred to as
the "Applicable Percentage."
With respect to Class A and Class B shares, no CDSC is payable on redemptions by
participants or beneficiaries from employer-sponsored retirement plans under the
Internal Revenue Code for benefit payments due to plan loans, hardship
withdrawals, death, retirement or separation from service and for returns of
excess contributions to retirement plan sponsors With respect to Class A shares
purchased pursuant to a special retirement wrap program, no CDSC is payable on
redemptions which continue or investments in another fund participating in the
program. In the case of Class A and Class C shares, the CDSC is received by the
Series and is intended to reimburse all or a portion of the amount paid by the
Series if the shares are redeemed before the Series has had an opportunity to
realize the anticipated benefits of having a long-term shareholder account in
the Series. In the case of Class B shares, the CDSC is received by Lord Abbett
Distributor and is intended to reimburse its expenses of providing
distribution-related service to the Series (including recoupment of the
commission payments made) in connection with the sale of Class B shares before
Lord Abbett Distributor has had an opportunity to realize its anticipated
reimbursement by having such a long-term shareholder account subject to the B
Plan distribution fee.
The other funds and series which participate in the Telephone Exchange Privilege
(except (a) Lord Abbett U.S. Government Securities Money Market Fund, Inc.
("GSMMF"), (b) certain series of Lord Abbett Tax-Free Income Fund and Lord
Abbett Tax-Free Income Trust for which a Rule 12b-1 Plan is not yet in effect,
and (c) any authorized institution's affiliated money market fund satisfying
Lord Abbett Distributor as to certain omnibus account and other criteria,
hereinafter referred to as an "authorized money market fund" or "AMMF"
(collectively, the "Non-12b-1 Funds")) have instituted a CDSC for each class on
the same terms and conditions. No CDSC will be charged on an exchange of shares
of the same class between Lord Abbett funds or between such funds and AMMF. Upon
redemption of shares out of the Lord Abbett family of funds or out of AMMF, the
CDSC will be charged on behalf of and paid: (i) to the fund in which the
original purchase (subject to a CDSC) occurred, in the case of the Class A and
Class C shares and (ii) to Lord Abbett Distributor if the original purchase was
subject to a CDSC, in the case of the Class B shares. Thus, if shares of a Lord
Abbett fund are exchanged for shares of the same class of another such fund and
the shares of the same class tendered ("Exchanged Shares") are subject to a
CDSC, the CDSC will carry over to the shares of the same class being acquired,
including GSMMF and AMMF ("Acquired Shares"). Any CDSC that is carried over to
Acquired Shares is calculated as if the holder of the Acquired Shares had held
those shares from the date on which he or she became the holder of the Exchanged
Shares. Although the Non-12b-1 Funds will not pay a distribution fee on their
own shares, and will, therefore, not impose their own CDSC, the Non-12b-1 Funds
will collect the CDSC (a) on behalf of other Lord Abbett funds, in the case of
the Class A and Class C shares and (b) on behalf of Lord Abbett Distributor, in
the case of the Class B shares. Acquired Shares held in GSMMF and AMMF which are
subject to a CDSC will be credited with the time such shares are held in GSMMF
but will not be credited with the time such shares are held in AMMF. Therefore,
if your Acquired Shares held in AMMF qualified for no CDSC or a lower Applicable
Percentage at the time of exchange into AMMF, that Applicable Percentage will
apply to redemptions for cash from AMMF, regardless of the time you have held
Acquired Shares in AMMF.
In no event will the amount of the CDSC exceed the Applicable Percentage of the
lesser of (i) the net asset value of the shares redeemed or (ii) the original
cost of such shares (or of the Exchanged Shares for which such shares were
acquired). No CDSC will be imposed when the investor redeems (i) amounts derived
from increases in the value of the account above the total cost of shares being
redeemed due to increases in net asset value, (ii) shares with respect to which
no Lord Abbett fund or series paid a 12b-1 fee and, in the case of Class B
shares, Lord Abbett Distributor paid no sales charge or service or Series fee
(including shares acquired through reinvestment of dividend income and capital
gains distributions) or (iii) shares which, together with Exchanged Shares, have
been held continuously for 24 months from the end of the month in which the
original sale occurred (in the case of Class A shares); for six years or more
(in the case of Class B shares) or for one year or more (in the case of Class C
shares). In determining whether a CDSC is payable, (a) shares not subject to the
CDSC will be redeemed before shares subject to the CDSC and (b) of the shares
subject to a CDSC, those held the longest will be the first to be redeemed.
EXCHANGES. The Prospectus briefly describes the Telephone Exchange Privilege.
You may exchange some or all of your shares for those of (i) Lord
Abbett-sponsored funds currently offered to the public with a sales charge
(front-end, back-end or level), (ii) GSMMF or (iii) AMMF, to the extent offers
and sales may be made in your state. You should read the prospectus of the other
fund before exchanging. In establishing a new account by exchange, shares of the
Fund being exchanged must have a value equal to at least the minimum initial
investment required for the fund into which the exchange is made.
Shareholders in other Lord Abbett-sponsored funds have the same right to
exchange their shares for the corresponding class of the Series' shares.
Exchanges are based on relative net asset values on the day instructions are
received by the Fund in Kansas City if the instructions are received prior to
the close of the NYSE in proper form. No sales charges are imposed except in the
case of exchanges out of GSMMF or AMMF (unless a sales charge (front-end,
back-end or level) was paid on the initial investment in a Lord Abbett sponsored
fund). Exercise of the exchange privilege will be treated as a sale for federal
income tax purposes, and, depending on the circumstances, a gain or loss may be
recognized. In the case of an exchange of shares that have been held for 90 days
or less where no sales charge is payable on the exchange, the original sales
charge incurred with respect to the exchanged shares will be taken into account
in determining gain or loss on the exchange only to the extent such charge
exceeds the sales charge that would have been payable on the acquired shares had
they been acquired for cash rather than by exchange. The portion of the original
sales charge not so taken into account will increase the basis of the acquired
shares.
Shareholders have the exchange privilege unless they refuse it in writing. You
should not view the exchange privilege as a means for taking advantage of
short-term swings in the market, and we reserve the right to terminate or limit
the privilege of any shareholder who makes frequent exchanges. We can revoke or
modify the privilege for all shareholders upon 60 days' prior notice. "Eligible
Funds" are AMMF and other Lord Abbett-sponsored funds which are eligible for the
exchange privilege, except Lord Abbett Series Fund ("LASF") which offers its
shares only in connection with certain variable annuity contracts, Lord Abbett
Equity Fund ("LAEF") which is not issuing shares, and series of Lord Abbett
Research Fund not offered to the general public ("LARF").
STATEMENT OF INTENTION. Under the terms of the Statement of Intention to invest
$50,000 or more over a 13-month period as described in the Prospectus, shares of
Lord Abbett-sponsored funds (other than shares of LAEF, LASF, LARF, and GSMMF,
unless holdings in GSMMF are attributable to shares exchanged from a Lord
Abbett-sponsored fund offered with a front-end, back-end or level sales charge)
currently owned by you are credited as purchases (at their current offering
prices on the date the Statement is signed) toward achieving the stated
investment and reduced initial sales charges for Class A shares. Class A shares
valued at 5% of the amount of intended purchases are escrowed and may be
redeemed to cover the additional sales charge payable if the Statement is not
completed. The Statement of Intention is neither a binding obligation on you to
buy, nor on the Fund to sell, the full amount indicated.
RIGHTS OF ACCUMULATION. As stated in the Prospectus, purchasers (as defined in
the Prospectus) may accumulate their investment in Lord Abbett-sponsored funds
(other than LAEF, LARF, LASF, and GSMMF, unless holdings in GSMMF are
attributable to shares exchanged from a Lord Abbett-sponsored fund offered with
a front-end, back-end or level sales charge) so that a current investment, plus
the purchaser's holdings valued at the current maximum offering price, reach a
level eligible for a discounted sales charge for Class A shares.
NET ASSET VALUE PURCHASES OF CLASS A SHARES. As stated in the Prospectus, our
Class A shares may be purchased at net asset value by our trustees, employees of
Lord Abbett, employees of our shareholder servicing agent and employees of any
securities dealer having a sales agreement with Lord Abbett who consents to such
purchases or by the trustee or custodian under any pension or profit-sharing
plan or Payroll Deduction IRA established for the benefit of such persons or for
the benefit of employees of any national securities trade organization to which
Lord Abbett belongs or any company with an account(s) in excess of $10 million
managed by Lord Abbett on a private-advisory-account basis. For purposes of this
paragraph, the terms "trustees" and "employees" include a trustee's or
employee's spouse (including the surviving spouse of a deceased director or
employee). The terms "directors" and "employees of Lord Abbett" also include
other family members and retired trustees and employees.
Our Class A shares also may be purchased at net asset value (a) at $1 million or
more, (b) with dividends and distributions from Class A shares of other Lord
Abbett-sponsored funds, except for LARF, LAEF and LASF, (c) under the loan
feature of the Lord Abbett-sponsored prototype 403(b) plan for share purchases
representing the repayment of principal and interest, (d) by certain authorized
brokers, dealers, registered investment advisers or other financial institutions
who have entered into an agreement with Lord Abbett Distributor in accordance
with certain standards approved by Lord Abbett Distributor, providing
specifically for the use of our shares in particular investment products made
available for a fee to clients of such brokers, dealers, registered investment
advisers and other financial institutions, ("mutual fund wrap fee program"), (e)
by employees, partners and owners of unaffiliated consultants and advisors to
Lord Abbett, Lord Abbett Distributor or Lord Abbett-sponsored funds who consent
to such purchase if such persons provide service to Lord Abbett, Lord Abbett
Distributor or such funds on a continuing basis and are familiar with such
funds, (f) through Retirement Plans with at least 100 eligible employees, (g)
our Class A shares also may be purchased at net asset value, subject to
appropriate documentation, through a securities dealer where the amount invested
represents redemption proceeds from shares ("Redeemed Shares") of a registered
open-end management investment company not distributed or managed by Lord Abbett
(other than a money market fund), if such redemption has occurred no more than
60 days prior to the purchase of our shares, the Redeemed Shares were held for
at least six months prior to redemption and the proceeds of redemption were
maintained in cash or a money market fund prior to purchase. Purchasers should
consider the impact, if any, of contingent deferred sales charges in determining
whether to redeem shares for subsequent investment in our Class A shares. Lord
Abbett may suspend, change or terminate this purchase option referred to in (g)
above at any time, we plan that on June 1, 1997 the net asset value transfer
privilege will be terminated, and (h) through a "special retirement wrap
program" sponsored by an authorized institution showing one or more
characteristics distinguishing it, in the opinion of Lord Abbett Distributor
from a mutual fund wrap program. Such characteristics include, among other
things, the fact that an authorized institution does not charge its clients any
fee of a consulting or advisory nature that is economically equivalent to the
distribution fee under Class A 12b-1 Plan and the fact that the program relates
to participant-directed Retirement Plan with respect to the U.S. Government
Securities Series only, . Shares are offered at net asset value to these
investors for the purpose of promoting goodwill with employees and others with
whom Lord Abbett Distributor and/or the Fund has business relationships.
REDEMPTIONS. A redemption order is in proper form when it contains all of the
information and documentation required by the order form or supplementally by
Lord Abbett Distributor or the Fund to carry out the order. The signature(s) and
any legal capacity of the signer(s) must be guaranteed by an eligible guarantor.
See the Prospectus for expedited redemption procedures.
The right to redeem and receive payment, as described in the Prospectus, may be
suspended if the NYSE is closed (except for weekends or customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
deems an emergency to exist.
Our Board of Trustees may authorize redemption of all of the shares in any
account in which there are fewer than 25 shares. Before authorizing such
redemption, the Board must determine that it is in our economic best interest or
necessary to reduce disproportionately burdensome expenses in servicing
shareholder accounts. At least 30 days' prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
DIV-MOVE. Under the Div-Move service described in the Prospectus, you can invest
the dividends paid on your account into an existing account in any other
Eligible Fund. The account must be either your account, a joint account for you
and your spouse, a single account for your spouse, or a custodial account for
your minor child under the age of 21. You should read the prospectus of the
other fund before investing.
INVEST-A-MATIC. The Invest-A-Matic method of investing in the Fund and/or any
other Eligible Fund is described in the Prospectus. To avail yourself of this
method you must complete the application form, selecting the time and amount of
your bank checking account withdrawals and the funds for investment, include a
voided, unsigned check and complete the bank authorization.
SYSTEMATIC WITHDRAWAL PLANS. The Systematic Withdrawal Plan (the "SWP") also is
described in the Prospectus. You may establish a SWP if you own or purchase
uncertificated shares having a current offering price value of at least $10,000.
Lord Abbett prototype retirement plans have no such minimum. With respect to a
SWP for Class B shares, on redemptions over 12% per year, the CDSC will apply to
the entire redemption. Therefore, please contact the Fund for assistance in
minimizing the CDSC in this situation . With respect to Class C shares, the CDSC
will be waived on and after the first anniversary of their purchase. The SWP
involves the planned redemption of shares on a periodic basis by receiving
either fixed or variable amounts at periodic intervals. Since the value of
shares redeemed may be more or less than their cost, gain or loss may be
recognized for income tax purposes on each periodic payment. Normally, you may
not make regular investments at the same time you are receiving systematic
withdrawal payments because it is not in your interest to pay a sales charge on
new investments when in effect a portion of that new investment is soon
withdrawn. The minimum investment accepted while a withdrawal plan is in effect
is $1,000. The SWP may be terminated by you or by us at any time by written
notice.
RETIREMENT PLANS. The Prospectus indicates the types of retirement plans for
which Lord Abbett provides forms and explanations. Lord Abbett makes available
the retirement plan forms and custodial agreements for IRAs (Individual
Retirement Accounts including Simple IRAs and Simplified Employee Pensions),
403(b) plans and qualified pension and profit-sharing plans, including 401(k)
plans. The forms name Investors Fiduciary Trust Company as custodian and contain
specific information about the plans. Explanations of the eligibility
requirements, annual custodial fees and allowable tax advantages and penalties
are set forth in the relevant plan documents. Adoption of any of these plans
should be on the advice of your legal counsel or qualified tax adviser.
6.
Performance
Each Series computes the average annual compounded rate of total return for each
Class during specified periods that would equate the initial amount invested to
the ending redeemable value of such investment by adding one to the computed
average annual total return, raising the sum to a power equal to the number of
years covered by the computation and multiplying the result by $1,000, which
represents a hypothetical initial investment. The calculation assumes deduction
of the maximum sales charge (as described in the next paragraph) from the amount
invested and reinvestment of all income dividends and capital gains
distributions on the reinvestment dates at net asset value. The ending
redeemable value is determined by assuming a complete redemption at the end of
the period(s) covered by the average annual total return computation.
In calculating total returns for Class A shares, the current maximum sales
charge of 3.0% with respect to the Balanced Series and 4.75% with respect to the
Limited Duration Government and U.S. Government Securities Series (as a
percentage of the offering price) is deducted from the initial investment
(unless the return is shown at net asset value). For Class B shares of the U.S.
Government Securities Series, the payment of the applicable CDSC (5.0% prior to
the first anniversary of purchase, 4.0% prior to the second anniversary of
purchase, 3.0% prior to the third and fourth anniversaries of purchase, 2.0%
prior to the fifth anniversary of purchase, 1.0% prior to the sixth anniversary
of purchase and no CDSC on and after the sixth anniversary of purchase) is
applied to the Series' investment result for that class for the time period
shown (unless the total return is shown at net asset value). For Class C shares,
the 1.0% CDSC is applied to the applicable Series' investment result for that
class for the time period shown prior to the first anniversary of purchase
(unless the total return is shown at net asset value). Total returns also assume
that all dividends and capital gains distributions during the period are
reinvested at net asset value per share, and that the investment is redeemed at
the end of the period.
Using the method to compute average annual compounded total return described
above, the total annual return for the Acquired Fund (and subsequent to July 12,
1996 for the U.S. Government Securities Series) for the one, five and ten year
periods ended November 30, 1997 were 1.60%, 5.22% and 7.85% for the Class A
shares. The total return for the Limited Duration Government Series for the
period from November 4, 1993 (commencement of operations) to October 31, 1994 ,
the fiscal year ended October 31, 1996 and fiscal year ended November 30, 1997
were -6.00%, 4.90%, and -0.40% for the Class A shares. For the period December
27, 1994 (commencement of operations) to October 31, 1995, the fiscal year ended
October 31, 1996, and the fiscal year ended November 30, 1997, the total returns
for the Balanced Series were 10.80%, 6.20%, and 8.80 % for the Class A shares.
The ending redeemable value of shares of the Limited Duration Government Series
and the Balanced Series for the fiscal year November 30, 1997 were $1,022 and
$1,088, respectively. The ending redeemable values for the Acquired Fund (and
subsequent to July 12, 1996 for the U.S. Government Securities Series) for the
one, five and ten year periods ended November 30, 1997 were $1,016, $1,290 and
$2,129, respectively.
The total return for Class C shares of the Limited Duration Government
Securities and Balanced Series for the period July 15, 1996 to October 31, 1996
,the one month ended November 30, 1996, and the fiscal year ended November 30,
1997 were 1.97% , 0.09%, 4.40% , and 6.72%, 3.65%, and 13.10% respectively. The
total return for Class C shares of the U.S. Government Securities Series for the
period July 15, 1996 to November 30, 1996 and the fiscal year ended November 30,
1997 were 5.34% and 5.90%.
The total return for Class B shares of the U. S. Government Securities Series
for the fiscal year ended November 30, 1997 was 1.28%.
Each Series' yield quotation is based on a 30-day period ended on a specified
date, computed by dividing our net investment income per share earned during the
period by our maximum offering price per share on the last day of the period.
This is determined by finding the following quotient: take the Series' dividends
and interest earned during the period minus its expenses accrued for the period
and divide by the product of (i) the average daily number of Series shares
outstanding during the period that were entitled to receive dividends and (ii)
the Series' at maximum offering price per share on the last day of the period.
To this quotient add one. This sum is multiplied by itself five times. Then one
is subtracted from the product of the multiplication and the remainder is
multiplied by two. Yield for the Class A shares reflects the deduction of the
maximum initial sales charge, but may also be shown based on the Fund's net
asset value per share. Yields for Class B and C shares do not reflect the
deduction of the CDSC. For the 30-day period ended November 30, 1997, the
Limited Duration Government Series and Balanced Series yields were 4.60% and
2.12%, respectively. For the 30-day period ended on November 30, 1997, the yield
for the U.S. Government Securities Series was 4.54%.
It is important to remember that any figures developed using the formulas above
represent past performance and an investor should be aware that the investment
return and principal value of the Series investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Therefore, there is no assurance that this performance will be repeated in
the future.
7.
Taxes
The value of any shares redeemed, repurchased or otherwise sold may be more or
less than your tax basis in the shares at the time the redemption, repurchase or
sale is made. Any gain or loss generally will be taxable for federal income tax
purposes. Any loss realized on the sale, redemption or repurchase of Series
shares which you have held for six months or less will be treated for federal
income tax purposes as a long-term capital loss to the extent of any capital
gains distributions which you received with respect to such shares. Losses on
the sale of Series shares are not deductible if, within a period beginning 30
days before the date of the sale and ending 30 days after the date of the sale,
the taxpayer acquires stock or securities that are substantially identical.
Each Series will be subject to a 4% nondeductible excise tax on certain amounts
not distributed (and not treated as having been distributed) on a timely basis
in accordance with a calendar year distribution requirement. Each Series intends
to distribute to shareholders each year an amount adequate to avoid the
imposition of such excise tax. Dividends paid by the Series will qualify for the
dividends-received deduction for corporations to the extent that they are
derived from dividends paid by domestic corporations.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to United States persons (United States citizens or residents and
United States domestic corporations, partnerships, trusts and estates). Each
shareholder who is not a United States person should consult his tax adviser
regarding the U.S. and foreign tax consequences of the ownership of shares of
each Series, including a 30% (or lower treaty rate) United States withholding
tax on dividends representing ordinary income and net short-term capital gains
and the applicability of United States gift and estate taxes to non-United
States persons who own Series shares.
8.
Information About the Fund
SHAREHOLDER LIABILITY. Delaware law provides that Fund shareholders shall be
entitled to the same limitations of personal liability extended to shareholders
of private corporations for profit. The courts of some states, however, may
decline to apply Delaware law on this point. The Fund's Declaration of Trust
contains an express disclaimer of shareholder liability for the acts,
obligations, or affairs of the Fund or any series and requires that a disclaimer
be given in each contract entered into or executed by the Fund. The Declaration
provides for indemnification out of the Fund's property of any shareholder or
former shareholder held personally liable for the obligations of the Fund. Thus,
the risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which Delaware law does not apply, no
contractual limitation of liability was in effect and the portfolio is unable to
meet its obligations. Lord Abbett believes that, in view of the above, the risk
of personal liability to shareholders is extremely remote.
GENERAL. The assets of the Fund received for the issue or sale of the shares of
each Series and all income, earnings, profits, and proceeds thereof, subject
only to the rights of creditors, are especially allocated to each Series, and
constitute the underlying assets of such Series. The underlying assets of each
Series are recorded on the books of account of the Fund, and are to be charged
with the liabilities with respect to such Series and with a share of the general
expenses of the Fund. Expenses with respect to the Fund are to be allocated in a
manner and on a basis (generally in proportion to relative assets) deemed fair
and equitable by the trustees. In the event of the dissolution or liquidation of
the Fund, the holders of the shares of each Series are entitled to receive as a
class the underlying assets of such Series available for distribution.
Under the Fund's Declaration of Trust, the trustees may, upon shareholder vote,
cause the Fund to merge or consolidate into, or sell and convey all or
substantially all of, the assets of the Fund or any Series to one or more
trusts, partnerships or corporations, so long as the surviving entity is an
open-end management investment company that will succeed to or assume the Fund's
registration statement. In addition, the trustees may, without shareholder vote,
cause the Fund to be incorporated under Delaware law.
Derivative actions on behalf of the Fund or any Series may be brought only by
shareholders owning not less than 50% of the then outstanding shares of the Fund
or any Series, as applicable.
The directors, trustees and officers of Lord Abbett-sponsored mutual funds,
together with the partners and employees of Lord Abbett, are permitted to
purchase and sell securities for their personal investment account. In engaging
in personal securities transactions, however, such persons are subject to
requirements and restrictions contained in the Fund's Code of Ethics which
complies, in substance, with each of the recommendations of the Investment
Company Institute's Advisory Group on Personal Investing. Among other things,
the Code requires that Lord Abbett partners and employees obtain advance
approval before buying or selling securities, submit confirmations and quarterly
transaction reports, and obtain approval before becoming a director of any
company; and it prohibits such persons from investing in a security seven days
before or after any Lord Abbett-sponsored fund trades in such security,
profiting from trades of the same security within 60 days and trading on
material non-public information. The Code imposes similar requirements and
restrictions on the independent Trustees of the Fund to the extent contemplated
by the recommendations of such Advisory Group.
9.
Financial Statements
The financial statements for fiscal year ended November 30, 1997 and the report
of Deloitte & Touche LLP, independent auditors, on such annual financial
statements contained in the 1997 Annual Report to Shareholders of the Lord
Abbett Investment Trust are incorporated herein by reference to such financial
statements and report in reliance upon the authority of Deloitte & Touche LLP as
experts in auditing and accounting.
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