Lord Abbett
Investment Trust
Core Fixed Income Series
Strategic Core Fixed Income Series
Prospectus
August 1, 2000
[LOGO]
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
Class P shares of the Fund are neither offered to the general public nor are
available in all states. Please call 800-821-5129 for further information.
<PAGE>
Table of Contents
<TABLE>
The Funds
<S> <C> <C>
Information about investment strategies, Goal 2
risks, performance, Principal Strategy 2
fees and expenses Main Risks 3
Core Fixed Income Fund 4
Strategic Core Fixed Income Fund 6
Your Investment
Information for managing Purchases 8
your Fund account Sales Compensation 10
Opening Your Account 11
Redemptions 12
Distributions and Taxes 12
Services For Fund Investors 13
Management 14
For More Information
How to learn more Other Investment Techniques 15
about the Funds Glossary of Shaded Terms 17
Recent Performance 19
Financial Information
Line graph comparison and Core Fixed Income Fund 20
broker compensations Strategic Core Fixed Income Fund 21
How to learn more about the Back Cover
Funds and other Lord Abbett Funds
</TABLE>
<PAGE>
Core Fixed Income Fund
Strategic Core Fixed Income Fund
GOAL
The investment objective of each Fund is to seek income and capital
appreciation to produce a high total return.
PRINCIPAL STRATEGY
The Core Fixed Income Fund invests primarily in U.S. Government,
mortgage-backed and investment grade debt securities, including those
issued by non-U.S. entities but denominated in U.S. dollars (known as
"Yankees"). The Strategic Core Fixed Income Fund invests primarily in those
securities, as well as in high yield debt securities (sometimes called
"lower-rated bonds" or "junk bonds") and securities issued by non-U.S.
entities and denominated in currencies other than the U.S. dollar.
Investments in high yield debt and non-U.S. debt denominated in foreign
currencies are each limited to 20% of the Strategic Core Fixed Income
Fund's net assets.
Both Funds attempt to manage, but not eliminate, interest rate risk through
their management of the average duration of the securities they hold.
Duration is a mathematical concept that measures a portfolio's exposure to
interest rate changes. Each Fund expects to maintain its average duration
range within two years of the bond market's duration as measured by the
Lehman Aggregate Bond Index (currently approximately 5 years). The higher a
Fund's duration, the more sensitive it is to interest rate risk.
Each Fund may engage in active and frequent trading of its portfolio
securities to achieve its principal investment strategies and can be
expected to have a portfolio turnover rate substantially in excess of 100%.
For the fiscal year ended November 30, 1999, the portfolio turnover rate
for each Fund was approximately 400%. These rates vary year to year. High
turnover increases transaction costs and may increase taxable capital
gains.
We or the Fund refers to Core Fixed Income Series ("Core Fixed Income Fund") or
Strategic Core Fixed Income Series ("Strate gic Core Fixed Income Fund"), each a
series of Lord Abbett Investment Trust (the "Company").
About each Fund. Each Fund is a professionally managed portfolio primarily
holding securities purchased with the pooled money of investors. The Funds
strive to reach their stated goals, although as with all funds, they cannot
guarantee results.
2 The Funds
<PAGE>
MAIN RISKS
These Funds are subject to the general risks and considerations associated
with investing in debt securities. The value of an investment in each Fund
will change as interest rates fluctuate in response to market movements.
When interest rates rise, the prices of debt securities are likely to
decline, and when interest rates fall, the prices of debt securities tend
to rise.
The mortgage-related securities in which each Fund may invest, including
collateralized mortgage obligations ("CMOs"), may be particularly sensitive
to changes in prevailing interest rates. The holders of the underlying
mortgages may be able to repay principal in advance and may do so,
especially when interest rates are falling. When mortgages are prepaid, a
Fund's reinvestment options may carry a lower yield. Conversely, principal
payments may arrive at a slower pace in times of rising interest rates. The
Funds may then be unable to invest in higher yielding securities. These
circumstances may result in lower performance for the Funds.
The lower-rated bonds in which the Strategic Core Fixed Income Fund may
invest involve risks that the bond's issuer will not make payments of
interest and principal payments when due. Some issuers may default as to
principal and/or interest payments after the Fund purchases their
securities. This may result in losses to the Fund. Also, the market for
high yield bonds generally is less liquid than the market for higher-rated
securities.
The Strategic Core Fixed Income Fund may invest in foreign securities.
Investments in foreign securities may present increased market, liquidity,
currency, political, information and other risks.
An investment in the Funds is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Each Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money by investing in
the Funds.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies used by the Funds and
their risks.
The Funds 3
<PAGE>
Core Fixed Income Fund
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class Y shares
from calendar year to calendar year. Performance for Class A, B, C and P
shares is not shown because those classes are new. Returns for Class Y
shares are expected to be somewhat higher than those of the Fund's Class A,
B and C shares because Class Y shares have lower expenses. If the sales
charges were reflected, returns would be less.
--------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class Y Shares
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1998 - 9.4%
1999 - 0.2%
Best Quarter 3rd Q `98 4.4% Worst Quarter 2nd Q `99 -0.9%
--------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class Y shares compare to those of a broad-based securities market index.
--------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
--------------------------------------------------------------------------------
Share Class 1 Year Since Inception(1)
Class Y shares 0.22% 4.96%
--------------------------------------------------------------------------------
Lehman Brothers
Aggregate Bond Index(2) -0.82% 3.82%(3)
(1) The date of inception of Class Y shares is 12/10/97.
(2) Performance for the unmanaged index does not reflect fees or expenses. The
performance of the index is not necessarily representative of the Fund's
performance.
(3) Represents total returns for the period 12/31/97 to 12/31/99, to correspond
with Class Y inception date.
4 The Funds
<PAGE>
Core Fixed Income Fund
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------------------------
Class A Class B(2) Class C Class P
<S> <C> <C> <C> <C>
Shareholder Fees (Fees paid directly from your investment)
--------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
(as a % of offering price) 4.75% none none none
--------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge
(see "Purchases") none(1) 5.00% 1.00%(1) none
--------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)
--------------------------------------------------------------------------------------------------
Management Fees (see "Management") 0.50% 0.50% 0.50% 0.50%
--------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(3) 0.35% 1.00% 1.00% 0.45%
--------------------------------------------------------------------------------------------------
Other Expenses 0.13% 0.13% 0.13% 0.13%
--------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 0.98% 1.63% 1.63% 1.08%
--------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions (a) of Class A shares made within 24 months following any
purchases made without a sales charge, and (b) Class C shares if they are
redeemed before the first anniversary of their purchase.
(2) Class B shares will convert to Class A shares on the eighth anniversary of
your original purchase of Class B shares.
(3) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
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EXAMPLE
--------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
Share class 1 Year 3 Years
Class A shares $570 $772
--------------------------------------------------------------------------------
Class B shares $666 $814
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Class C shares $266 $514
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Class P shares $110 $343
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You would have paid the following expenses if you did not redeem your shares:
Class A shares $570 $772
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Class B shares $166 $514
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Class C shares $166 $514
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Class P shares $110 $343
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Management fees are payable to Lord, Abbett & Co. ("Lord Abbett") for the Fund's
investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
Lord Abbett is currently waiving the management fees and subsidizing the other
expenses of the Fund. Accordingly, the expense ratio of the Fund is 0%. Lord
Abbett may stop waiving the management fees and subsidizing the other expenses
at any time.
The Funds 5
<PAGE>
Strategic Core Fixed Income Fund
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class Y shares
from calendar year to calendar year. Performance for Class A, B, C and P
shares is not shown because those classes are new. Returns for Class Y
shares are expected to be somewhat higher than those of the Fund's Class A,
B and C shares because Class Y shares have lower expenses. If the sales
charges were reflected, returns would be less.
================================================================================
Bar Chart (per calendar year) - Class Y Shares
================================================================================
[GRAPHIC OMITTED]
1999 - -0.8%
Best Quarter 3rd Q `99 1.0% Worst Quarter 2nd Q `99 -0.8%
================================================================================
The table below shows how the average annual total returns of the Fund's
Class Y shares compared to those of a broad-based securities market index.
================================================================================
Average Annual Total Returns Through December 31, 1999
================================================================================
Share Class 1 Year Since Inception(1)
Class Y shares 0.57% 0.57%
--------------------------------------------------------------------------------
Lehman Brothers
Aggregate Bond Index(2) -0.82% -0.82%(3)
--------------------------------------------------------------------------------
(1) The date of inception of Class Y shares is 12/14/98.
(2) Performance for the unmanaged index does not reflect fees or expenses. The
performance of the index is not necessarily representative of the Fund's
performance.
(3) Represents total returns for the period 12/31/97 to 12/31/99, to correspond
with Class Y inception date.
6 The Funds
<PAGE>
Strategic Core Fixed Income Fund
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
======================================================================================================
Fee Table
======================================================================================================
Class A Class B(2) Class C Class P
<S> <C> <C> <C> <C>
Shareholder Fees (Fees paid directly from your investment)
------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
------------------------------------------------------------------------------------------------------
(as a % of offering price) 4.75% none none none
------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge
(see "Purchases") 1.00%(1) 5.00% 1.00%(1) none
------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)
------------------------------------------------------------------------------------------------------
Management Fees (see "Management") 0.50% 0.50% 0.50% 0.50%
------------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(3) 0.35% 1.00% 1.00% 0.45%
------------------------------------------------------------------------------------------------------
Other Expenses 0.42% 0.42% 0.42% 0.42%
------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.27% 1.92% 1.92% 1.37%
------------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions (a) of Class A shares made within 24 months following any
purchases made without a sales charge, and (b) Class C shares if they are
redeemed before the first anniversary of their purchase.
(2) Class B shares will convert to Class A shares on the eighth anniversary of
your original purchase of Class B shares. (3) Because 12b-1 fees are paid
out on an ongoing basis, over time they will increase the cost of your
investment and may cost you more than paying other types of sales charges.
================================================================================
Example
================================================================================
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other Funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
Share class 1 Year 3 Years
Class A shares $598 $859
--------------------------------------------------------------------------------
Class B shares $695 $903
--------------------------------------------------------------------------------
Class C shares $295 $603
--------------------------------------------------------------------------------
Class P shares $139 $434
--------------------------------------------------------------------------------
You would have paid the following expenses if you did not redeem your shares:
Class A shares $598 $859
--------------------------------------------------------------------------------
Class B shares $195 $603
--------------------------------------------------------------------------------
Class C shares $195 $603
--------------------------------------------------------------------------------
Class P shares $139 $434
--------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
Lord Abbett is currently waiving the management fees and subsidizing the other
expenses of the Fund. Accordingly, the expense ratio of the Fund is 0%. Lord
Abbett may stop waiving the management fees and subsidizing the other expenses
at any time.
The Funds 7
<PAGE>
YOUR INVESTMENT
PURCHASES
The Fund offers in this prospectus four classes of shares: Classes A, B, C,
and P, each with different expenses and dividends. You may purchase shares
at the net asset value ("NAV") per share determined after we receive your
purchase order submitted in proper form. A front-end sales charge may be
added to the NAV in the case of the Class A shares. There is no front-end
sales charge in the case of Class B, Class C and Class P shares, although
there may be a contingent deferred sales charge ("CDSC") on Class B and
Class C shares as described below.
You should read this section carefully to determine which class of shares
represents the best investment option for your particular situation. 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 purchase options with your investment
professional.
For more information, see "Alternative Sales Arrangements" in the Statement
of Additional Information.
We reserve the right to withdraw all or any part of the offering made by
this prospectus or to reject any purchase order. We also reserve the right
to waive or change minimum investment requirements. All purchase orders are
subject to our acceptance and are not binding until confirmed or accepted
in writing.
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Share Classes
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Class A o normally offered with a front-end sales charge
Class B o no front-end sales charge, however, a CDSC is applied to shares sold
prior to the sixth anniversary of purchase
o higher annual expenses than Class A shares
o automatically converts to Class A shares after eight years
Class C o no front-end sales charge, however, a CDSC is applied to shares sold
prior to the first anniversary of purchase
o higher annual expenses than Class A shares
Class P o available to certain pension or retirement plans and pursuant to
Mutual Fund Fee Based Program
--------------------------------------------------------------------------------
Front-End Sales Charges - Class A Shares
--------------------------------------------------------------------------------
To Compute
As a % of As a % of OfferingPrice
Your Investment Offering Price Your Investment Divide NAV by
--------------------------------------------------------------------------------
Less than $100,000 4.75% 4.99% .9525
--------------------------------------------------------------------------------
$100,000 to $249,999 3.95% 4.11% .9605
--------------------------------------------------------------------------------
$250,000 to $499,999 2.75% 2.83% .9725
$500,000 to $999,999 1.95% 1.99% .9805
$1,000,000 and over No Sales Charge 1.0000
--------------------------------------------------------------------------------
NAV per share for each class of Fund shares is calculated each business day at
the close of regular trading on the New York Stock Exchange ("NYSE") normally
4:00 p.m. Eastern time. Purchases and sales of Fund shares are executed at the
NAV next determined after the Fund receives your order in proper form. In
calculating NAV, securities for which market quotations are available are valued
at those quotations. Securities for which such quotations are not available are
valued at fair value under procedures approved by the Board of the Company.
8 Your Investment
<PAGE>
Reducing Your Class A Front-End Sales Charges. Class A shares may be
purchased at a discount if you qualify under either of the following
conditions:
o Rights of Accumulation -- A Purchaser may apply the value (at public
offering price) of the shares already owned to a new purchase of Class
A shares of any Eligible Fund in order to reduce the sales charge.
o Letter of Intention -- A Purchaser of Class A shares may purchase
additional shares of any Eligible Fund over a 13-month period and
receive the same sales charge as if all shares were purchased at once.
Shares purchased through reinvestment of dividends or distributions
are not included. A Letter of Intention can be backdated 90 days.
Current holdings under Rights of Accumulation may be included in a
Letter of Intention.
For more information on eligibility for these privileges, read the
applicable sections in the attached application.
Class A Share Purchases Without A Front-End Sales Charge. Class A shares
may be purchased without a front-end sales charge under any of the
following conditions:
o purchases of $1 million or more +
o purchases by Retirement Plans with at least 100 eligible employees +
o purchases under a Special Retirement Wrap Program +
o purchases made with dividends and distributions on Class A shares of
another Eligible Fund
o purchases representing repayment under the loan feature of the Lord
Abbett- sponsored prototype 403(b) Plan for Class A shares
o purchases by employees of any consenting securities dealer having a
sales agreement with Lord Abbett Distributor
o purchases under a Mutual Fund Fee Based Program
o purchases by trustees or custodians of any pension or profit sharing
plan, or payroll deduction IRA for employees of any consenting
securities dealer having a sales agreement with Lord Abbett
Distributor
o purchases by each Lord Abbett-sponsored fund's Directors or Trustees
(including retired Directors or Trustees), officers of each Lord
Abbett-sponsored fund, employees and partners of Lord Abbett. These
categories of purchasers also include other family members of such
purchasers.
See the Statement of Additional Information for a listing of other
categories of purchasers who qualify for Class A share purchases without a
front-end sales charge.
+ These categories may be subject to a CDSC.
Class A Share CDSC. If you buy Class A shares under one of the starred (O)
categories listed above and you redeem any within 24 months after the month
in which you initially purchased them, the Fund normally will collect a
CDSC of 1%.
The Class A share CDSC generally will be waived for the following
conditions:
o benefit payments under Retirement Plans in connection with loans,
hardship withdrawals, death, disability, retirement, separation from
service or any excess distribution under Retirement Plans
(documentation may be required)
o redemptions continuing as investments in another Fund participating in
a Special Retirement Wrap Program
Retirement Plans include employer-sponsored retirement plans under the Internal
Revenue Code, excluding Individual Retirement Accounts.
Lord Abbett offers a variety of Retirement Plans. Call 800-253-7299 for
information about:
o Traditional, Rollover, Roth and Education IRAs
o Simple IRAs, SEP-IRAs, 401(k) and 403(b) accounts
o Defined Contribution Plans
Lord Abbett Distributor LLC ("Lord Abbett Distributor") acts as agent for the
Fund to work with investment professionals that buy and/or sell shares of the
Fund on behalf of their clients. Generally, Lord Abbett Distributor does not
sell Fund shares directly to investors.
Benefit Payment Documentation (Class A CDSC only)
o under $50,000 - no documentation necessary
o Over $50,000 - reason for benefit payment must be received in writing. Use
the address indicated under "Opening your Account."
Your Investment 9
<PAGE>
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 declines the longer you own your shares, according to the
following schedule:
--------------------------------------------------------------------------------
Contingent Deferred Sales Charges - Class B Shares
--------------------------------------------------------------------------------
Anniversary(1) of the day on Contingent Deferred Sales Charge
which the purchase order on redemption (as % of amount
was accepted subject to charge)
On Before
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1st 5.0%
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1st 2nd 4.0%
--------------------------------------------------------------------------------
2nd 3rd 3.0%
3rd 4th 3.0%
4th 5th 2.0%
5th 6th 1.0%
--------------------------------------------------------------------------------
on or after the 6th(2) None
--------------------------------------------------------------------------------
(1) The anniversary is the same calendar day in each respective year after the
date of purchase. For example, the anniversaries for shares purchased on
May 1 will be May 1 of each succeeding year.
(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 under Retirement Plans in connection with loans,
hardship withdrawals, death, disability, retirement, separation from
service or any excess contribution or distribution under Retirement
Plans
o Eligible Mandatory Distributions under 403(b) Plans and individual
retirement accounts
o death of the shareholder
o redemptions of shares in connection with Div-Move and Systematic
Withdrawal Plans (up to 12% per year)
See "Systematic Withdrawal Plan" under "Services For Fund Investors" below
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 the purchase of such
shares.
Class P Shares. Class P shares have lower annual expenses than Class B and
Class C shares, no front-end sales charge, and no CDSC. Class P shares are
currently sold and redeemed at NAV (a) pursuant to a Mutual Fund Fee Based
Program, or (b) to the trustees of, or employer-sponsors with respect to,
pension or retirement plans with at least 100 eligible employees (such as a
plan under Section 401(a), 401(k) or 457(b) of the Internal Revenue Code)
which engage an investment professional providing or participating in an
agreement to provide certain recordkeeping, administrative and/or
sub-transfer agency services to the Fund on behalf of the Class P
shareholders.
SALES COMPENSATION
As part of its plan for distributing shares, each Fund and Lord Abbett
Distributor pay sales and service compensation to Authorized Institutions
that sell the Fund's shares and service its shareholder accounts.
Sales compensation originates from two sources, as shown in the table "Fees
and Expenses": sales charges which are paid directly by shareholders; and
12b-1 distribution
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 at the time
they are being sold, which-ever is lower. In addition, repayment of loans under
Retirement Plans and 403(b) Plans will constitute new sales for purposes of
assessing the CDSC.
To minimize the amount of any CDSC, the Fund redeems shares in the following
order:
1. shares acquired by reinvestment of dividends and capital gains (always free
of a CDSC)
2. shares held for six years or more (Class B) or two years or more after the
month of purchases (Class A) or one year or more (Class C)
3. shares held the longest before the sixth anniversary of their purchase
(Class B) or before the second anniversary after the month of purchase
(Class A) or before the first anniversary of their purchase (Class C).
10 Your Investment
<PAGE>
fees that are paid out of the Fund's assets. Service compensation
originates from 12b-1 service fees. The total 12b-1 fees payable with
respect to each share Class are .35% of Class A shares (plus distribution
fees of up to 1.00% on certain qualifying purchases), 1.00% of Class B and
C shares, and .45% of Class P shares. The amounts payable as compensation
to Authorized Institutions, such as your dealer, are shown in the chart at
the end of this prospectus. The portion of such compensation paid to Lord
Abbett Distributor is discussed under "Sales Activities" and "Service
Activities." Sometimes we do not pay compensation where tracking data is
not available for certain accounts or where the Authorized Institution
waives part of the compensation. In such cases, we may not require payment
of any otherwise applicable CDSC.
We may pay Additional Concessions to Authorized Institutions from time to
time.
Sales Activities. We may use 12b-1 distribution fees to pay Authorized
Institutions to finance any activity which is primarily intended to result
in the sale of shares. Lord Abbett Distributor uses its portion of the
distribution fees attributable to the Fund's Class A and Class C shares for
activities which are primarily intended to result in the sale of such Class
A and Class C shares, respectively. These activities include, but are not
limited to, printing of prospectuses and statements of additional
information and reports for other than existing shareholders, preparation
and distribution of advertising and sales material, expenses of organizing
and conducting sales seminars, Additional Concessions to Authorized
Institutions, the cost necessary to provide distribution-related services
or personnel, travel, office expenses, equipment and other allocable
overhead.
Service Activities. We may pay 12b-1 service fees to Authorized
Institutions for any activity which is primarily intended to result in
personal service and/or the maintenance of shareholder accounts. Any
portion of the service fees paid to Lord Abbett Distributor will be used to
service and maintain shareholder accounts.
OPENING YOUR ACCOUNT
Minimum initial investment
o Regular Account $1,000
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o Individual Retirement Accounts and
403(b) Plans under the Internal Revenue Code $250
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o Uniform Gift to Minor Account $250
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o Invest-A-Matic $250
--------------------------------------------------------------------------------
For Retirement Plans and Mutual Fund Fee Based Programs no minimum
investment is 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 Funds at the address stated below.
You should carefully read the paragraph below entitled "Proper Form" before
placing your order to ensure that your order will be accepted.
Name of the Fund
P.O. Box 219100
Kansas City, MO 64121
By Exchange. Telephone the Funds at 800-821-5129 to request an exchange
from any eligible Lord Abbett-sponsored fund.
12b-1 fees are payable regardless of expenses. The amounts payable by the Fund
need not be directly related to expenses. If Lord Abbett Distributor's actual
expenses exceed the fee payable to it, the Fund will not have to pay more than
that fee. If Lord Abbett Distributor's expenses are less than the fee it
receives, Lord Abbett Distributor will keep the full amount of the fee.
Exchange Limitations. Exchanges should not be used to try to take advantage of
short-term swings in the market. Frequent exchanges create higher expenses for
the Funds. Accordingly, the Funds reserve the right to limit or termi-nate this
privilege for any share-holder making frequent exchanges or abusing the
privilege. The Funds also may revoke the privilege for all shareholders upon 60
days' written notice.
Your Investment 11
<PAGE>
Proper Form. An order submitted directly to the Funds must contain: (1) a
completed application, and (2) payment by check. When purchases are made by
check, redemption proceeds will not be paid until the Funds or transfer
agent is advised that the check has cleared, which may take up to 15
calendar days. For more information call the Funds at 800-821-5129.
REDEMPTIONS
By Broker. Call your investment professional for instructions on how to
redeem your shares.
By Telephone. To obtain the proceeds of a redemption of $50,000 or less
from your account, you or your representative should call the Funds at
800-821-5129.
By Mail. Submit a written redemption request indicating the name(s) in
which the account is registered, the Fund's name, the Class of shares, your
account number, and the dollar value or number of shares you wish to sell.
Include all necessary signatures. If the signer has any Legal Capacity, the
signature and capacity must be guaranteed by an Eligible Guarantor. Certain
other legal documentation may be required. For more information regarding
proper documentation call 800-821-5129.
Normally a check will be mailed to the name(s) and address in which the
account is registered (or otherwise according to your instruction) within
three business days after receipt of your redemption request. Your account
balance must be sufficient to cover the amount being redeemed or your
redemption order will not be processed. Under unusual circumstances, the
Fund may suspend redemptions, or postpone payment for more than seven days,
as permitted by federal securities laws.
To determine if a CDSC applies to a redemption, see "Class A share CDSC,"
"Class B share CDSC" or "Class C share CDSC."
DISTRIBUTIONS AND TAXES
Each Fund normally pays its shareholders dividends from its net investment
income and distributes its net capital gains (if any) as "capital gains
distributions" on an annual basis. Your distributions will be reinvested in
the Fund unless you instruct the Fund to pay them to you in cash. There are
no sales charges on reinvestments. The tax status of distributions is the
same for all shareholders regardless of how long they have owned Fund
shares or whether distributions are reinvested or paid in cash.
Except in tax-advantaged accounts, any sale, redemption or exchange of Fund
shares may be taxable to the shareholder.
Information on the tax treatment of distributions, including the source of
dividends and distributions of capital gains by the Fund, will be mailed to
shareholders each year. Because everyone's tax situation is unique, you
should consult your tax adviser regarding the treatment of distributions
under the federal, state and local tax rules that apply to you, as well as
the tax consequences of gains or losses from the redemption or exchange of
your shares.
Small Accounts. Our Board may authorize closing any account in which there are
fewer than 25 shares if it is in the Funds' best interest to do so.
Eligible Guarantor is any broker or bank that is a member of the medallion stamp
program. Most major securities firms and banks are members of this program. A
notary public is not an Eligible Guarantor.
12 Your Investment
<PAGE>
SERVICES FOR FUND INVESTORS
AUTOMATIC SERVICES
Buying or selling shares automatically is easy with the services described
below. With each service, you select a schedule and amount, subject to
certain restrictions. You may set up most of these services when filling
out your application or by calling 800-821-5129.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
For investing
Invest-A-Matic You may make fixed, periodic investments ($50 minimum) into your
Fund (Dollar-cost account by means of automatic money transfers from your bank
checking averaging) account. See the attached application for instructions.
Div-Move You may automatically reinvest the dividends and distributions from
your account into another account in any Eligible Fund ($50 minimum).
For selling shares
<S> <C>
Systematic You may make regular withdrawals from most Lord Abbett Funds. Automatic
Withdrawal cash withdrawals will be paid to you from your account in fixed or variable
Plan ("SWP") amounts. To establish a plan, the value of your shares must be at
least $10,000, except for Retirement Plans for which there is no minimum.
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 SWPrequest. 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.
Class B and Redemption proceeds due to a SWP for Class B and Class C shares will be redeemed in the
C shares order described under "CDSC" under "Purchases."
------------------------------------------------------------------------------------------------------------
</TABLE>
OTHER SERVICES
Telephone Investing. After we have received the attached application
(selecting "yes" under Section 8C and completing Section 7), you may
instruct us by phone to have money transferred from your bank account to
purchase shares of the Fund for an existing account. The Fund will purchase
the requested shares when it receives the money from your bank.
Exchanges. You or your investment professional may instruct the Funds to
exchange shares of any class for shares of the same class of any Eligible
Fund. Instruction may be provided in writing or by telephone, with proper
identification, by calling 800-821-5129. The Funds must receive
instructions for the exchange before the close of the NYSE on the day of
your call in which case you will get the NAV per share of the Eligible Fund
determined on that day. Exchanges will be treated as a sale for federal tax
purposes. Be sure to read the current prospectus for any Fund into which
you are exchanging.
Reinvestment Privilege. If you sell shares of the Funds, you have a
one-time right to reinvest some or all of the proceeds in thef same class
of any Eligible Fund within 60 days without a sales charge. If you paid a
CDSC when you sold your shares, you will be credited with the amount of the
CDSC. All accounts involved must have the same registration.
Account Statements. Every Lord Abbett investor automatically receives
quarterly account statements.
Telephone Transactions. You have this privilege unless you refuse it in writing.
For your security, telephone transaction requests are recorded. We will take
measures to verify the identity of the caller, such as asking for your name,
account number, social security or taxpayer identification number and other
relevant information. Each Fund will not be liable for following instructions
communicated by telephone that it reasonably believes to be genuine.
Transactions by telephone may be difficult to implement in times of drastic
economic or market change.
Your Investment 13
<PAGE>
Householding. Shareholders with the same last name and address will receive
a single copy of a prospectus and an annual or semi-annual report, unless
additional reports are specifically requested in writing to the Funds.
Account Changes. For any changes you need to make to your account, consult
your investment professional or call the Funds at 800-821-5129.
Systematic Exchange. You or your investment professional can establish a
schedule of exchanges between the same Classes of any Eligible Fund.
MANAGEMENT
The Funds' investment adviser is Lord, Abbett & Co., located at 90 Hudson
St., Jersey City, NJ 07302-3973. Founded in 1929, Lord Abbett manages one
of the nation's oldest mutual fund complexes, with approximately $35
billion in more than 40 mutual fund portfolios and other advisory accounts.
For more information about the services Lord Abbett provides to the Funds,
see the Statement of Additional Information.
Each Fund pays Lord Abbett a monthly fee based on average daily net assets
for each month at an annual rate of .50 of 1%. For the fiscal year ended
November 30, 1999, Lord Abbett waived its management fee for Core Fixed
Income Fund and Strategic Core Fixed Income Fund. In addition, each Fund
pays all expenses not expressly assumed by Lord Abbett.
Investment Managers. Lord Abbett uses a team of investment managers and
analysts acting together to manage each Fund's investments. Robert Gerber,
Partner of Lord Abbett heads the team, the other senior members include
Walter H. Prahl and Robert A Lee. Mr Gerber joined Lord Abbett in July 1997
as Director of Taxable Fixed Income. Before joining Lord Abbett, Mr. Gerber
served as a Senior Portfolio Manager at Sanford C. Bernstein & Co., Inc.
since 1992. Mr. Prahl joined Lord Abbett in 1997 as Director of
Quantitative Research, Taxable Fixed Income. Before joining Lord Abbett,
Mr. Prahl served as a Fixed Income Research Analyst at Sanford C. Bernstein
& Co., Inc. since 1994. Mr. Lee joined Lord Abbett in 1997 as a Fixed
Income Portfolio Manager; prior to that he served as a Portfolio Manager at
ARM Capital Advisors since 1995 and an Assistant Portfolio Manager at
Kidder Peabody Asset Management from 1993.
14 Your Investment
<PAGE>
For More Information
OTHER INVESTMENT TECHNIQUES
This section describes some of the investment techniques that might be used
by each Fund and their risks.
Adjusting Investment Exposure. Each Fund may, but is not required to, use
various strategies to change its investment exposure to adjust to changing
security prices, inter-est rates, currency exchange rates, commodity prices
and other factors. These strategies may involve buying or selling
derivative instruments, such as options and futures contracts, stripped
securities, currency exchange contracts, swap agreements, short sales of
securities, indexed securities and rights and warrants. Each Fund may use
these transactions to change the risk and return characteristics of each
Fund's portfolio. If we judge market conditions incorrectly or use a
strategy that does not correlate well with the Fund's investments, it could
result in a loss, even if we intended to lessen risk or enhance returns.
These transactions may involve a small investment of cash compared to the
magnitude of the risk assumed and could produce disproportionate gains or
losses. Also, these strategies could result in losses if the counterparty
to a transaction does not perform as promised.
Foreign Currency Transactions. The Strategic Core Fixed Income Fund may use
currency forwards and options to hedge the risk to the portfolio if it
expects that foreign exchange price movements will be unfavorable for U.S.
investors. Generally, these instruments allow the Fund to lock in a
specified exchange rate for a period of time. If the Fund's forecast proves
to be wrong, such a hedge may cause a loss. Also, it may be difficult or
impractical to hedge currency risk in many emerging countries. The Fund
generally will not enter into a forward contract with a term greater than
one year. Under some circumstances, the Fund may commit a substantial
portion or the entire value of its portfolio to the completion of forward
contracts. Although such contracts will be used primarily to attempt to
protect the Fund from adverse currency movements, their use involves the
risk Lord Abbett will not accurately predict currency movements, and the
Fund's return could be reduced.
Foreign Securities. The Strategic Core Fixed Income Fund may invest up to
20% of its net assets in foreign securities. Foreign securities are
securities primarily traded in countries outside the United States. Foreign
markets and the securities traded in them are not subject to the same
degree of regulation as U.S. markets. Securities clearance and settlement
procedures may be different in foreign countries. There may be less trading
volume in foreign markets, subjecting the securities traded in them to
higher price fluctuations. Transaction costs may be higher in foreign
markets. The Fund may hold foreign securities which trade on days when the
Fund does not sell shares. As a result, the value of the Fund's portfolio
securities may change on days an investor may not purchase or sell Fund
shares.
Foreign issuers are generally not subject to similar, uniform accounting,
auditing and financial reporting requirements as U.S. issuers. Foreign
investments may be affected by changes in currency rates or currency
controls. Certain foreign countries may limit the Fund's ability to remove
its assets from the country. With respect to certain foreign countries,
there is a possibility of nationalization, expropriation or confiscatory
taxation, imposition of withholding or other taxes, and political or social
instability which could affect investments in those countries.
For More Information 15
<PAGE>
High Yield Debt Securities. High yield debt securities or "junk bonds" are
rated BB/Ba or lower or unrated and typically pay a higher yield than
investment grade debt securities. These bonds have a higher risk of default
than investment grade bonds and their prices can be much more volatile.
Investment Grade Debt Securities. These are debt securities which are rated
in one of the four highest grades assigned by Moody's Investors Service,
Inc., Standard & Poor's Ratings Services or Fitch Investors Service, or are
unrated but determined by Lord Abbett to be equivalent in quality.
Mortgage-Backed Securities. These securities directly or indirectly
represent a participation in, or are secured by and payable from, mortgage
loans secured by real property. The price of a mortgage-backed security may
be significantly affected by changes in interest rates. Some
mortgage-backed securities have structures that make their reaction to
interest rates and other factors difficult to predict, making their prices
very volatile.
Futures Contracts and Options Transactions. Each Fund may purchase and
write put and call options on securities or stock indices that are traded
on national securities exchanges and enter into financial futures
transactions.
A put option gives the buyer of the option the right to sell, and the
seller of the option the obligation to buy, the underflying instrument
during the option period.
A call option gives the buyer of the option the right to buy, and the
writer (seller) of the option the obligation to sell, the underlying
instrument. Each Fund may write (sell) only "covered" options. This means
that the Fund may only sell call options on securities which the Fund owns.
When a Fund writes a call option it gives up the potential for gain on the
underlying securities in excess of the exercise price of the option during
the period that the option is open.
A financial futures transaction is an exchange-traded contract to buy or
sell a standard quantity and quality of a financial instrument or index at
a specific future date and price. Each Fund may purchase and sell futures
contracts and options thereon.
Each Fund may write (sell) covered call options and secured put options on
up to 25% of its net assets and may purchase put and call options and
purchase and sell futures contracts provided that no more than 5% of its
net assets (at the time of purchase) would be invested in premiums on such
options and initial margin deposits on such futures contracts.
Risks of Futures Contracts and Options Transactions. Transactions in
derivative instruments such as futures, options on futures and other
options involve additional risk of loss. Loss may result from a lack of
correlation between changes in the value of these derivative instruments
and the Fund's assets being hedged, the potential illiquidity of the
markets for derivative instruments, or the risks arising from margin
requirements and related leverage factors associated with such
transactions. The use of these investment techniques also involves the risk
of loss if the portfolio managers are incorrect in their expectation of
fluctuations in securities prices. In addition, the loss that may be
incurred by the Fund in entering into futures contracts and in writing call
options on futures is potentially unlimited and may exceed the amount of
the premium received.
Repurchase Agreements. Each Fund may enter into Repurchase Agreements. In a
Repurchase Agreement, a Fund buys a security at one price from a
broker-dealer or financial institution and simultaneously agrees to sell
the same security back to the same party at a higher price in the future.
If the other party to the agreement defaults or becomes insolvent, a Fund
could lose money.
16 For More Information
<PAGE>
Reverse Repurchase Agreements. Each Fund may enter into reverse repurchase
agreements. In a reverse repurchase agreement, a Fund sells a security to a
securities dealer or bank for cash and also agrees to repurchase the same
security later at a set price. Reverse repurchase agreements expose a Fund
to cre dit risk (that is, the risk that the counterparty will fail to
resell the security to the Fund), but this risk is greatly reduced because
the Fund receives cash equal to 100% of the price of the security sold.
Engaging in reverse repurchase agreements may also involve the use of
leverage, in that the Fund may reinvest the cash it receives in additional
securities. Each Fund will attempt to minimize this risk by managing its
duration. A Fund's reverse repurchase agreements will not exceed 20% of the
Fund's net assets.
Short Sales. Each Fund may make short sales of securities or maintain a
short position, provided that at all times when a short position is open
the Fund owns an equal amount of such securities or securities convertible
into or exchangeable, without payment of any further consideration, for an
equal amount of the securities of the same issuer as the securities sold
short. Each Fund does not intend to have more than 5% of its net assets
(determined at the time of the short sale) subject to short sales against
the box. A short sale is against the box to the extent that the Fund
contemporaneously owns or has the right to obtain at no added cost
securities identical to those sold short.
U.S. Government Securities. U.S. government securities are obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
When-Issued or Delayed Delivery Securities. Each Fund may purchase or sell
securities with payment and delivery taking place as much as a month or
more later. A Fund would do this in an effort to buy or sell the securities
at an advantageous price and yield. The securities involved are subject to
market fluctuation and no interest accrues to the purchaser during the
period between purchase and settlement. At the time of delivery of the
securities, their market value may be less than the purchase price.
GLOSSARY OF SHADED TERMS
Additional Concessions. Lord Abbett Distributor may, for specified periods,
allow dealers to retain the full sales charge for sales of shares or may
pay an additional concession to a dealer who sells a minimum dollar amount
of our shares and/or shares of other Lord Abbett-sponsored funds. In some
instances, such additional concessions will be offered only to certain
dealers expected to sell significant amounts of shares. Additional payments
may be paid from Lord Abbett Distributor's own resources or from
distribution fees received from a fund and will be made in the form of cash
or, if permitted, non-cash payments. The non-cash payments will include
business seminars at Lord Abbett's headquarters or other locations,
including meals and entertainment, or the receipt of merchandise. The cash
payments may include payment of various business expenses of the dealer.
In selecting dealers to execute portfolio transactions for the Fund's
portfolio, if two or more dealers are considered capable of obtaining best
execution, we may prefer the dealer who has sold our shares and/or shares
of other Lord Abbett-sponsored Funds.
Authorized Institutions. Institutions and persons permitted by law to
receive service and/or distribution fees under a Rule 12b-1 Plan are
"Authorized Institutions." Lord Abbett Distributor is an Authorized
Institution.
Eligible Fund. An Eligible Fund is any Lord Abbett-sponsored fund except
for (1) certain tax-free, single-state funds where the exchanging
shareholder is a resident of a state in which such a fund is not offered
for sale; (2) Lord Abbett Series Fund; (3) Lord
For More Information 17
<PAGE>
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). An Eligible Fund also is any Authorized
Institution's affiliated money market Fund satisfying Lord Abbett
Distributor as to certain omnibus account and other criteria.
Eligible Mandatory Distributions. If Class B shares represent a part of an
individual's total IRA or 403(b) investment, the CDSC will be waived only
for that part of a mandatory distribution which bears the same relation to
the entire mandatory distribution as the B share investment bears to the
total investment.
Legal Capacity. With respect to a redemption request, if (for example) the
request is on behalf of the estate of a deceased shareholder, John W. Doe,
by a person (Robert A. Doe) who has the legal capacity to act for the
estate of the deceased shareholder because he is the executor of the
estate, then the request must be executed as follows: Robert A.Doe,
Executor of the Estate of John W. Doe. That signature using that capacity
must be guaranteed by an Eligible Guarantor.
Similarly, if (for example) the redemption request is on behalf of the ABC
Corporation by a person (Mary B. Doe) that has the legal capacity to act on
behalf of this corporation, because she is the President of the
corporation, then the request must be executed as follows: ABC Corporation
by Mary B.Doe, President. That signature using that capacity must be
guaranteed by an Eligible Guarantor (see example in right column).
Mutual Fund Fee Based Program. Certain unaffiliated authorized brokers,
dealers, registered investment advisers or other financial institutions
("entities") who either (1) have an arrangement with Lord Abbett
Distributor in accordance with certain standards approved by Lord Abbett
Distributor, providing specifically for the use of our shares (and
sometimes providing for acceptance of orders for such shares on our behalf)
in particular investment products made available for a fee to clients of
such entities, or (2) charge an advisory, consulting or other fee for their
services and buy shares for their own accounts or the accounts of their
clients.
Purchaser. The term "purchaser" includes: (1) an individual, (2) an
individual and his or her spouse and children under the age of 21, and (3)
a trustee or other fiduciary purchasing shares for a single trust estate or
single fiduciary account (including a pension, profit-sharing, or other
employee benefit trust qualified under Section 401 of the Internal Revenue
Code - more than one qualified employee benefit trust of a single employer,
including its consolidated subsidiaries, may be considered a single trust,
as may qualified plans of multiple employers registered in the name of a
single bank trustee as one account), although more than one beneficiary is
involved.
Special Retirement Wrap Program. A program sponsored by an Authorized
Institution showing one or more characteristics distinguishing it, in the
opinion of Lord Abbett Distributor, from a Mutual Fund Fee Based Program.
Such characteristics include, among other things, the fact that an
Authorized Institution does not charge its clients any fee of a consulting
or advisory nature that is economically equivalent to the distribution fee
under the Class A 12b-1 Plan and the fact that the program relates to
participant-directed Retirement Plans.
GUARANTEED SIGNATURE. An acceptable form of guarantee would be as follows:
In the case of the estate --
Robert A. Doe
Executor of the Estate of
John W. Doe
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE ILLEGIBLE]
--------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
In the case of the corporation --
ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE ILLEGIBLE]
--------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
18 For More Information
<PAGE>
RECENT PERFORMANCE
The following is a discussion of recent performance for the twelve month
period ending November 30, 1999.
For the period under review the Funds, outperformed their benchmark, the
Lehman Aggregate Bond Index. The Funds' outperformance can be largely
attributed to their continued focus on what are termed "spread products,"
which include Freddie Macs (FHLMCs), corporate debentures, and commercial
mortgage-backed securities (CMBS).
These securities offer a higher yield than Treasuries, which in itself adds
performance to the portfolios. More importantly, this yield advantage
varies over time and our tactical portfolio adjustments added relative
capital appreciation to the Funds. For example, as the yield advantage
increased (securities underperformed Treasuries), we added to our holdings,
only to sell these securities after the yield advantage contracted
(securities outperformed Treasuries).
The Federal Reserve Board (the "Fed") has increased interest rates three
times since June, 1999, in an attempt to moderate economic growth. As of
yet, there are few signs that these actions have taken hold. Should the Fed
continue on its "tightening path", interest rates will rise and economic
growth is likely to slow. As a result, our interest rate exposure is
neutral to the market (i.e., about a 5 year duration).
For More Information 19
<PAGE>
Core Fixed Income Fund
Financial Information
Line Graph Comparison
Immediately below is a comparison of a $10,000 investment in Class Y shares
to the same investment in the Lehman Brothers Aggregate Bond Index,
assuming reinvestment of all dividends and distributions.
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
The Fund Lehman Brothers Aggregate Bond Index
12/31/98 10,000 10,000
01/31/99 10,948 10,869
11/30/99 11,066 10,832
================================================================================
Average Annual Total Return At Maximum Applicable
Sales Charges For The Periods Ending November 30, 1999
1 Year Life(2)
--------------------------------------------------------------------------------
Class Y(3) 1.08% 5.42%
--------------------------------------------------------------------------------
(1) Performance for the unmanaged index does not reflect fees or expenses. The
performance of the index is not necessarily representative of the Fund's
performance.
(2) The inception date for the Class Y is 12/10/97.
(3) This shows total return which is the percent change in net asset value,
with all dividends and distributions reinvested for the periods shown
ending November 30, 1999 using the SEC-required uniform method to compute
total return. Because Class A, B, C and P shares have less than one year of
performance the total returns shown are for Class Y shares. Returns for
Class A, B, C and P share are expected to be somewhat lower than those of
Class Y shares because Class A, B, C and P shares have higher expenses.
20 Financial Information
<PAGE>
Strategic Core Fixed Income Fund
Line Graph Comparison
Immediately below is a comparison of a $10,000 investment in Class Y shares
to the same investment in the Lehman Brothers Aggregate Bond Index,
assuming reinvestment of all dividends and distributions.
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
The Fund Lehman Brothers Aggregate Bond Index
12/31/98 10,000 10,000
01/31/99 10,100 10,071
02/29/99 9,920 9,895
03/31/99 10,010 9,949
04/30/99 10,060 9,981
05/31/99 9,950 9,893
06/30/99 9,930 9,862
07/31/99 9,871 9,819
08/31/99 9,861 9,814
09/30/99 10,030 9,928
10/31/99 10,060 9,965
11/30/99 10,090 9,964
================================================================================
Average Annual Total Return At Maximum Applicable
Sales Charges For The Periods Ending November 30, 1999
Life(2)
--------------------------------------------------------------------------------
Class Y(3) 0.90%
--------------------------------------------------------------------------------
(1) Performance for the unmanaged index does not reflect fees or expenses. The
performance of the index is not necessarily representative of the Fund's
performance.
(2) The inception date for the Class Y is 12/14/98.
(3) This shows total return which is the percent change in net asset value,
with all dividends and distributions reinvested for the periods shown
ending November 30, 1999 using the SEC-required uniform method to compute
total return. Because Class A, B, C and P shares have less than one year of
performance the total returns shown are for Class Y shares. Returns for
Class A, B, C and P share are expected to be somewhat lower than those of
Class Y shares because Class A, B, C and P shares have higher expenses.
Financial Information 21
<PAGE>
COMPENSATION FOR YOUR DEALER
<TABLE>
<CAPTION>
====================================================================================================================================
FIRST YEAR COMPENSATION
Front-end
sales charge Dealer's
paid by investors concession Service fee(1) Total compensation(2)
Class A investments (% of offering price) (% of offering price) (% of net investment) (% of offering price)
====================================================================================================================================
<S> <C> <C> <C> <C>
Less than $100,000 4.75% 4.00% 0.25% 4.24%
====================================================================================================================================
$100,000 - $249,999 3.95% 3.25% 0.25% 3.49%
====================================================================================================================================
$250,000 - $499,999 2.75% 2.25% 0.25% 2.49%
====================================================================================================================================
$500,000 - $999,999 1.95% 1.75% 0.25% 1.99%
====================================================================================================================================
$1 million or more(3) or Retirement Plan - 100 or more eligible employees(3) or Special Retirement Wrap Program(3)
====================================================================================================================================
First $5 million no front-end sales charge 1.00% 0.25% 1.25%
====================================================================================================================================
Next $5 million above that no front-end sales charge 0.55% 0.25% 0.80%
====================================================================================================================================
Next $40 million above that no front-end sales charge 0.50% 0.25% 0.75%
====================================================================================================================================
Over $50 million no front-end sales charge 0.25% 0.25% 0.50%
====================================================================================================================================
Class B investments(4) 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(4)
====================================================================================================================================
All amounts no front-end sales charge 0.75% 0.25% 1.00%
====================================================================================================================================
Class P investments Percentage of average net assets
====================================================================================================================================
All amounts no front-end sales charge 0.25% 0.20% 0.45%
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
ANNUAL COMPENSATION AFTER FIRST YEAR
Class A investments Percentage of average net assets(5)
====================================================================================================================================
<S> <C> <C> <C> <C>
All amounts no front-end sales charge none 0.25% 0.25%
Class B investments(4)
====================================================================================================================================
All amounts no front-end sales charge none 0.25% 0.25%
Class C investments(4)
====================================================================================================================================
All amounts no front-end sales charge 0.65% 0.25% 0.90%
====================================================================================================================================
Class P investments
====================================================================================================================================
All amounts no front-end sales charge 0.25% 0.20% 0.45%
====================================================================================================================================
</TABLE>
(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, such as your dealer,
from time to time.
(3) Concessions are paid at the time of sale on all Class A shares sold during
any 12-month period starting from the day of the first net asset value
sale. With respect to (a) Class A share purchases at $1 million or more,
sales qualifying at such level under rights of accumulation and Letters of
Intention privileges are included and (b) for Special Retirement Wrap
Programs, only new sales are eligible and exchanges into the Fund are
excluded. Certain purchases of Class A shares are subject to a CDSC.
(4) Class B and C shares are subject to CDSCs.
(5) With respect to Class B, C and P shares, 0.25%, 0.90% and 0.45%,
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
Class C shares for fixed-income Funds, such as U.S. Government Securities
Fund, 0.10% of the average 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 & Co. uses 0.10% for expenses primarily intended to
result in the sale of such Funds' shares.
22 Financial Information
<PAGE>
More information on each Fund is or will be available free upon request,
including the following:
ANNUAL/SEMI-ANNUAL REPORT
Describes the Funds, lists portfolio holdings, and contains a letter from
the Fund's manager discussing recent market conditions and each Fund's
investment strategies.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Provides more details about the Funds and their policies. A current SAI is
on file with the Securities and Exchange Commission ("SEC") and is
incorporated by reference (is legally considered part of this prospectus).
To obtain information:
By telephone. Call the Funds at:
800-426-1130
By mail. Write to the Funds at:
The Lord Abbett Family of Funds 90
Hudson Street Jersey City, NJ 07302-3973
Via the Internet.
Lord, Abbett & Co.
www.lordabbett.com
Text only versions of Fund
documents can be viewed
online or downloaded from:
SEC
www.sec.gov
You can also obtain copies by
visiting the SEC's Public Reference Room in Washington, DC (phone 202-942-8090)
or by sending your request and a duplicating fee to the SEC's Public Reference
Section, Washington, DC 20549-6009 or by sending your request electronically to
[email protected].
Lord Abbett Investment Trust-
Core Fixed Income Series
Strategic Core Fixed Income Series
90 Hudson Street LACORE-1-800
Jersey City, NJ 07302-3973 (8/00)
--------------------------------------------
SEC file number: 811-7988
<PAGE>
LORD ABBETT
Statement of Additional Information August 1, 2000
LORD ABBETT INVESTMENT TRUST
Core Fixed Income Fund
Strategic Core Fixed Income Fund
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord Abbett Distributor LLC
("Lord Abbett Distributor"), located at 90 Hudson Street, Jersey City, New
Jersey 07302-3973. This Statement of Additional Information relates to, and
should be read in conjunction with, the Prospectus dated August 1, 2000.
Shareholder inquiries should be made by directly contacting the Funds or by
calling 800-821-5129. The Annual Report to Shareholders is available, without
charge, upon request by calling that number. In addition, you can make inquiries
through your dealer.
TABLE OF CONTENTS Page
1. Investment Policies 2
2. Trustees and Officers 6
3. Investment Advisory and Other Services 9
4. Portfolio Transactions 10
5. Purchases, Redemptions and Shareholder Services 11
6. Performance 18
7. Taxes 18
8. Information About the Funds 19
9. Financial Statements 20
<PAGE>
Lord Abbett Investment Trust (the "Company") was organized as a Delaware
business trust on August 16, 1993. The Company has six funds, two of which are
discussed in this Statement of Additional Information: the Core Fixed Income
Series ("Core Fixed Income Fund") and the Strategic Core Fixed Income Series
("Strategic Core Fixed Income Fund") (each a "Fund"). These Funds are
diversified open-end investment management companies registered under the
Investment Company Act of 1940, as amended (the "Act"). Each Fund has five
classes of shares (A, B, C, P, and Y), but only four classes of shares (A, B, C,
and P) are offered by this Statement of Additional Information. The Board of
Trustees will allocate authorized shares of capital stock among the classes from
time to time. 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, except as described in this Statement
of Additional Information. Further classes or funds may be added in the future.
The Act requires that where more than one class or fund exists, each class or
fund must be preferred over all other classes or funds in respect of assets
specifically allocated to such class or fund.
1.
Investment Policies
Fundamental Investment Restrictions. Each Fund is subject to the following
investment restrictions, which cannot be changed without the approval of a
majority of its outstanding shares.
Each Fund may not:
(1) borrow money (except that (i) each Fund may borrow from banks (as
defined in the Act) in amounts up to 33 1/3% of its total assets
(including the amount borrowed), (ii) each Fund may borrow up to an
additional 5% of its total assets for temporary purposes, (iii) each
Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities and (iv) each
Fund may purchase securities on margin to the extent permitted by
applicable law);
(2) pledge its assets (other than to secure such borrowings or to the
extent permitted by each Fund's investment policies as permitted by
applicable law);
(3) engage in the underwriting of securities, except pursuant to a merger
or acquisition or to the extent that, in connection with the
disposition of its portfolio securities, it may be deemed to be an
underwriter under federal securities laws;
(4) make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in
government obligations, commercial paper, pass-through instruments,
certificates of deposit, bankers acceptances, repurchase agreements or
any similar instruments shall not be subject to this limitation, and
except further that each Fund may lend its portfolio securities,
provided that the lending of portfolio securities may be made only in
accordance with applicable law;
(5) buy or sell real estate (except that each Fund may invest in
securities directly or indirectly secured by real estate or interests
therein or issued by companies which invest in real estate or
interests therein), commodities or commodity contracts (except to the
extent each Fund may do so in accordance with applicable law and
without registering - as a commodity pool operator under the Commodity
Exchange Act as, for example, with futures contracts);
(6) with respect to 75% of the gross assets, buy securities of one issuer
representing more than (i) 5% of the Fund's gross assets, except
securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities or (ii) 10% of the voting securities of such
issuer;
(7) invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding (i)
securities of the U.S. Government, its agencies and instrumentalities
and (ii) mortgage-backed securities); and
(8) issue senior securities to the extent such issuance would violate
applicable law.
Compliance with the investment restrictions in this Section will be determined
at the time of purchase or sale of the portfolio investment.
2
<PAGE>
Non-Fundamental Investment Restrictions. In addition to the policies in the
Prospectus and the investment restrictions above which cannot be changed without
shareholder approval, each Fund is also subject to the following non-fundamental
investment policies which may be changed by the Board of Trustees without
shareholder approval.
Each Fund may not:
(1) borrow in excess of 5% of its gross assets taken at cost or market
value, whichever is lower at the time of borrowing, and then only as a
temporary measure for extraordinary or emergency purposes;
(2) make short sales of securities or maintain a short position except to
the extent permitted by applicable law;
(3) invest knowingly more than 15% of its net assets (at the time of
investment) in illiquid securities, except for securities qualifying
for resale under Rule 144A of the Securities Act of 1933 deemed to be
liquid by the Board of Trustees;
(4) invest in securities of other investment companies, except as
permitted by applicable law;
(5) hold securities of any issuer if more than 1/2 of 1% of the issuer's
securities are owned beneficially by one or more of the Fund's
officers or directors or by one or more partners or members of each
Fund's underwriter or investment adviser if these owners in the
aggregate own beneficially more than 5% of the securities of such
issuer;
(6) invest in warrants if, at the time of acquisition, its investment in
warrants, valued at the lower of cost or market, would exceed 5% of
each Fund's total assets (included within such limitation, but not to
exceed 2% of the Fund's total assets, are warrants which are not
listed on the New York or American Stock Exchange or a major foreign
exchange);
(7) invest in real estate limited partnership interests or interests in
oil, gas or other mineral leases, or exploration or development
programs, except that each Fund may invest in securities issued by
companies that engage in oil, gas or other mineral exploration or
development activities;
(8) 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
(9) buy from or sell to any of the Fund's officers, directors, employees,
or each Fund's investment adviser or any of the investment adviser's
officers, directors, partners or employees, any securities other than
shares of beneficial interest in the Fund.
Although there is no current intention to do so, each Fund may invest in
financial futures and options on financial futures.
As discussed above, each Fund may purchase securities on a when-issued basis
with settlement taking place after the purchase date (without amortizing any
premiums). If the Funds use this investment technique, it is expected to
contribute significantly to the portfolio turnover rates. However, it will have
little or no transaction cost or adverse tax consequences. Transaction costs
normally will exclude brokerage because each Fund's 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.
3
<PAGE>
INVESTMENT TECHNIQUES
Each Fund intends to use, from time to time, one or more of the investment
techniques described below. While some of these techniques involve risk when
used independently, each Fund intends to use them to reduce risk and volatility
in its portfolio.
Foreign Currency Hedging Techniques. Strategic Core Fixed Income Fund may use
various foreign currency hedging techniques described below, including forward
foreign currency contracts and foreign currency put and call options.
Forward Foreign Currency Contracts. A forward foreign currency contract involves
an obligation to purchase or sell a specific amount of a specific currency at a
set price at a future date. Strategic Core Fixed Income Fund expects to enter
into forward foreign currency contracts in primarily two circumstances. First,
when the fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may desire to "lock in" the U.S. dollar
price of the security. By entering into a forward contract for the purchase or
sale of the amount of foreign currency involved in the underlying security
transaction, the fund will be able to protect against a possible loss resulting
from an adverse change in the relationship between the U.S. dollar and the
subject foreign currency during the period between the date the security is
purchased or sold and the date on which payment is made or received.
Second, when management believes that the currency of a particular foreign
country may suffer a decline against the U.S. dollar, the Fund may enter into a
forward contract to sell the amount of foreign currency approximating the value
of some or all of the fund's portfolio securities denominated in such foreign
currency or, in the alternative, the fund may use a cross-hedging technique
whereby it sells another currency which the fund expects to decline in a similar
way but which has a lower transaction cost. Precise matching of the forward
contract amount and the value of the securities involved will not generally be
possible since the future value of such securities denominated in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The fund does not intend to enter into such forward contracts
under this second circumstance on a continuous basis.
Foreign Currency Put and Call Options. The Fund may also purchase foreign
currency put options and write foreign currency call options on U.S. exchanges
or U.S. over-the-counter markets. A put option gives the fund, upon payment of a
premium, the right to sell a currency at the exercise price until the expiration
of the option and serves to insure against adverse currency price movements in
the underlying portfolio assets denominated in that currency.
4
<PAGE>
Exchange-listed options markets in the United States include several major
currencies, and trading may be thin and illiquid. A number of major investment
firms trade unlisted options which are more flexible than exchange-listed
options with respect to strike price and maturity date. Unlisted options
generally are available in a wider range of currencies, including those of most
of the developed countries. Unlisted foreign currency options are generally less
liquid than listed options and involve the credit risk associated with the
individual issuer. Unlisted options are subject to a limit of 5% of the fund's
net assets.
A call option written by the fund gives the purchaser, upon payment of a
premium, the right to purchase from the fund a currency at the exercise price
until the expiration of the option. The Fund may write a call option on a
foreign currency only in conjunction with a purchase of a put option on that
currency. Such a strategy is designed to reduce the cost of downside currency
protection by limiting currency appreciation potential. The face value of such
writing may not exceed 90% of the value of the securities denominated in such
currency invested in by the fund or in such cross currency (referred to above)
to cover such call writing.
Lending Portfolio Securities. Each Fund may lend portfolio securities to
registered brokers-dealers. These loans, if and when made, may not exceed 30% of
the Fund's total assets. The Funds' 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, each Fund 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 a fund .
By lending portfolio securities, each Fund may 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 Fund will comply with the following
conditions whenever it loans securities: (i) the Fund 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 Fund must be able to terminate the loan at any time; (iv)
the Fund must receive reasonable compensation with respect to the loan, as well
as any dividends, interest or other distributions on the loaned securities; (v)
the Fund 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 Fund may enter into repurchase agreements with
respect to a security. A repurchase agreement is a transaction by which the Fund
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 a Fund must have a total
value in excess of the value of the repurchase agreement.) Each Fund requires at
all times that the repurchase agreement be collateralized by cash or U.S.
government securities having a value equal to, or in excess of, the value of the
repurchase agreement. Such agreements permit the Funds to keep all of their
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, a Fund may incur a loss upon disposition of
them. If the seller of the agreement becomes insolvent and subject to
liquidation or reorganization under the Bankruptcy Code or other laws, a
bankruptcy court may determine that the underlying securities are collateral not
within the control of the Fund and are therefore subject to sale by the trustee
in bankruptcy. Even though the repurchase agreements may have maturities of
seven days or less, they may lack liquidity, especially if the issuer encounters
financial difficulties. While management acknowledges these risks, it is
expected that they can be controlled through stringent selection criteria and
careful monitoring procedures. Management intends to limit repurchase agreements
for the funds to transactions with dealers and financial institutions believed
to present minimal credit risks. Management will monitor creditworthiness of the
repurchase agreement sellers on an ongoing basis.
5
<PAGE>
Each Fund 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 a
fund otherwise may invest.
When-Issued Transactions. As stated in the Prospectus, each Fund may purchase
portfolio securities on a when-issued basis. When-issued transactions involve a
commitment by a Fund 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 a Fund
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 Fund 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. Each Fund will maintain a duration within two years of the
bond market's duration as measured by the Lehman Aggregate Bond Index. Currently
this index has a duration of approximately five years.
Some of the securities in each Fund's 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, each Fund 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 each Fund's average maturity, the maturities of such securities will
be calculated based upon the issuing agency's payment factors using
industry-accepted valuation models.
2.
Trustees and Officers
The Board of Trustees of the Company is responsible for the management of the
business and affairs of each Fund.
The following Trustee is a partner of Lord Abbett & Co. ("Lord Abbett"), 90
Hudson Street, Jersey City, New Jersey 07302-3973. He has been associated with
Lord Abbett for over five years and is also an officer, director or trustee of
thirteen other Lord Abbett-sponsored funds.
* Robert S. Dow, age 55, Chairman and President * Mr. Dow is an "interested
person" as defined in the Act.
The following outside trustees are also directors or trustees of thirteen other
Lord Abbett-sponsored funds.
E. Thayer Bigelow, Trustee
245 Park Avenue, Suite 2414
New York, New York
6
<PAGE>
Senior Adviser, Time Warner Inc. (since 1998). Formerly, Acting Chief Executive
Officer of Courtroom Television Network (1997-1998). Formerly, President and
Chief Executive Officer of Time Warner Cable Programming, Inc. (1991-1997).
Prior to that, President and Chief Operating Officer of Home Box Office, Inc.
Age 58.
William H. T. Bush, Trustee
Bush-O'Donnell & Co., Inc.
101 South Hanley Road, Suite 1025
St. Louis, Missouri
Co-founder and Chairman of the Board of financial advisory firm of
Bush-O'Donnell & Company (since 1986). Age 61.
Robert B. Calhoun, Jr., Trustee
Monitor Clipper Partners
650 Madison Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners (since 1997) and President of The
Clipper Group L.P., both private equity investment funds (since 1990). Age 57.
Stewart S. Dixon, Trustee
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon (since 1990). Age 69.
John C. Jansing, Trustee
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 74.
C. Alan MacDonald, Trustee
415 Round Hill Road
Greenwich, Connecticut
Currently involved in golf development management on a consultancy basis (since
1999). Formerly, Managing Director of The Directorship Inc., a consultancy in
board management and corporate governance (1997-1999). Prior to that, General
Partner of The Marketing Partnership, Inc., a full service marketing consulting
firm (1994-1997). Prior to that, Chairman and Chief Executive Officer of Lincoln
Snacks, Inc., manufacturer of branded snack foods (1992-1994). His career spans
36 years at Stouffers and Nestle with eighteen 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 66.
Hansel B. Millican, Jr., Trustee
Rochester Button Company
1328 Broadway (Suite 816)
New York, New York
President and Chief Executive Officer of Rochester Button Company (since 1991).
Age 71.
Thomas J. Neff, Trustee
Spencer Stuart
277 Park Avenue
New York, New York
Chairman of Spencer Stuart, an executive search consulting firm (since 1976).
Currently serves as Director of Ace, Ltd. (NYSE). Age 62.
The second column of the following table sets forth the compensation accrued by
the Company for outside directors/trustees. The third column sets forth
information with respect to the pension or retirement benefits accrued by all
Lord Abbett-sponsored funds for outside directors/trustees. The fourth column
sets forth the total compensation paid by all Lord Abbett-sponsored funds for
outside directors/trustees, and amounts payable but deferred at the option of
the director/trustee. No director/trustee of the Funds associated with Lord
Abbett and no officer of the Funds received any compensation from the Funds for
acting as a director/trustee or officer.
<TABLE>
<CAPTION>
For the Fiscal Year Ended November 30, 1999
Pension or For Year Ended
Retirement Benefits December 31, 1999
Accrued by the Total Compensation
Aggregate Fund and Paid by the Fund and
Compensation Thirteen Other Lord Thirteen Other Lord
Accrued by Abbett-sponsored Abbett-sponsored
Name of Director the Funds/1 Funds/2 Funds/3
---------------- ----------- ------- -------
<S> <C> <C> <C>
E. Thayer Bigelow $9 $17,622 $ 57,720
William H. T. Bush $9 $15,846 $ 58,000
Robert B. Calhoun, Jr. $9 $12,276 $ 57,000
Stewart S. Dixon $9 $32,420 $ 58,500
John C. Jansing $9 $41,108 (4) $ 57,500
C. Alan MacDonald $9 $26,763 $ 57,500
Hansel B. Millican, Jr. $9 $37,822 $ 57,250
Thomas J. Neff $9 $20,313 $ 59,660
</TABLE>
7
<PAGE>
1. Outside directors'/trustees' fees, including attendance fees for board and
committee meetings, are allocated among all Lord Abbett-sponsored funds
based on the net assets of each Fund. A portion of the fee payable by the
Fund to its outside directors/trustees may be deferred under a plan
("equity based plan") that deems the deferred amounts to be invested in
shares of the Fund for later distribution to the directors/trustees. The
amounts of the aggregate compensation payable by the Company in accordance
with the equity-based plan as of November 30, 1999 deemed invested in Fund
shares, including dividends reinvested and changes in net asset value
applicable to such deemed investments were: Mr. Bigelow, $9, Mr. Bush, $0,
Mr. Calhoun, $9, Mr. Dixon, $0, Mr. Jansing, $9, Mr. MacDonald, $0, Mr.
Millican, $9, and Mr. Neff, $9. If the amounts deemed invested in Fund
shares were added to each director's actual holdings of Fund shares as of
November 30, 1999, each would own, the following: Mr. Bigelow, $9, Mr.
Bush, $9, Mr. Calhoun, $9, Mr. Dixon, $0, Mr. Jansing, $9, Mr. MacDonald,
$0, Mr. Millican, $9, and Mr. Neff, $9.
2. The amounts in Column 3 were accrued by the Lord Abbett-sponsored funds for
the twelve months ended October 31, 1999.
3. This column shows aggregate compensation, including directors/trustees'
fees and attendance fees for board and committee meetings, of a nature
referred to in footnote one, paid by the Lord Abbett-sponsored funds during
the year ended December 31, 1999, including fees directors/trustees' have
chosen to defer but does not include amounts accrued under the equity-based
plan and shown in Column 3.
4. The equity-based plans superseded a previously approved retirement plan for
all directors/trustees. Directors/trustees had the option to convert their
accrued benefits under the retirement plan. All of the current outside
directors/trustees except one made such election. Mr. Jansing chose to
continue to receive benefits under the retirement plan which provides that
outside directors/trustees may receive annual retirement benefits for life
equal to their final annual retainer following retirement at or after age
72 with at least ten years of service. Thus, if Mr. Jansing were to retire
and the annual retainer payable by the Funds were the same as it is today,
he would receive annual retirement benefits of $50,000.
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Messrs. Brown, Carper, Gerber,
Hilstad, Hudson, Morris, and Towle are partners of Lord Abbett; the others are
employees. None have received compensation from the Funds.
Executive Vice President:
Zane E. Brown, age 48
Christopher J. Towle, age 42
Robert I. Gerber, age 45 (with Lord Abbett since 1997, formerly Senior Portfolio
manager at Sanford C. Bernstein & Co. from 1992-1997)
Robert G. Morris, age 55
Vice Presidents:
Paul A. Hilstad, age 57, Vice President and Secretary (with Lord Abbett since
1995; formerly Senior Vice President and General Counsel of American Capital
Management & Research, Inc.)
Thomas J. Baade, age 35 (with Lord Abbett since 1998, formerly a credit analyst
with Greenwich Street Advisors)
Joan A. Binstock, age 46 (with Lord Abbett since 1999, formerly Chief Operating
Officer of Morgan Grenfell from 1996 to 1999, prior thereto Principal of Ernst &
Young LLP)
Daniel E. Carper, age 48
Michael S. Goldstein, age 31 (with Lord Abbett since 1997 - formerly involved in
Fixed Income trading and analysis at BEA Associated and Portfolio Administrator
for The Chase Manhattan Bank)
8
<PAGE>
W. Thomas Hudson, Jr., age 58
Lawrence H. Kaplan, age 43, (with Lord Abbett since 1997 - formerly Vice
President and Chief Counsel of Salomon Brothers Asset Management Inc. from 1995
to 1997, prior thereto Senior Vice President, Director and General Counsel of
Kidder Peabody Asset Management, Inc.)
Robert A. Lee, age 28 (with Lord Abbett since 1997 - formerly Portfolio Manager
at Arm Capital Advisors from 1995 - 1997; prior thereto Assistant Portfolio
Manager at Kidder Peabody Asset Management from 1993 - 1995)
A. Edward Oberhaus III, age 40
Walter H. Prahl, age 40 (with Lord Abbett since 1997, formerly Quantitative
Analyst at Sanford C. Bernstein & Co. from 1994-1997)
Tracie E. Richter, age 32 (with Lord Abbett since 1999, formerly Vice
President-Head of Fund Administration of Morgan Grenfell from 1998 to 1999, Vice
President of Bankers Trust from 1996 to 1998, prior thereto Tax Associate of
Goldman Sachs)
Eli M. Salzmann, age 34 (with Lord Abbett since 1997 - formerly Vice President
of Mutual of America Capital Corp.; prior thereto Vice President of Mitchell
Hutchins Asset Mgt. From 1986 to 1996)
Treasurer:
Donna M. McManus, age 39 (with Lord Abbett since 1996, formerly a Senior Manager
at Deloitte & Touche LLP)
As of February 15, 2000, our officers and directors/trustees, as a group, owned
less than 1% of the Fund's outstanding shares and there were no record holders
of 5% or more of the Fund's outstanding shares other than Lord Abbett
Distributor.
3.
Investment Advisory and Other Services
As described under "Management" in the Prospectus, Lord Abbett is the Fund's
investment manager. Of the general partners of Lord Abbett, the following are
officers and/or trustees of the Fund: Daniel E. Carper, Robert S. Dow, Robert I.
Gerber, Paul A. Hilstad, W. Thomas Hudson, Robert G. Morris, and Christopher J.
Towle. The other general partners are: Stephen I. Allen, Zane E. Brown, John E.
Erard, Robert P. Fetch, Daria L. Foster, Stephen J. McGruder, Michael B.
McLaughlin, Robert J. Noelke, R. Mark Pennington, and John J. Walsh. The address
of each partner is 90 Hudson Street, Jersey City, New Jersey 07302-3973.
The services performed by Lord Abbett are described under "Management" in the
Prospectus. Under the Management Agreement, each Fund pays Lord Abbett a monthly
fee, based on average daily net assets for each month, at the annual rate of .50
of 1%. This fee is allocated among Class A, B, C and P shares based on the
classes' proportionate shares of such average daily net assets. In addition, the
Fund is obligated to pay all expenses not expressly assumed by Lord Abbett,
including, without limitation, 12b-1 expenses, outside directors' fees and
expenses, association membership dues, legal and auditing fees, taxes, transfer
and dividend disbursing agent fees, shareholder servicing costs, expenses
relating to shareholder meetings, expenses of preparing, printing and mailing
stock certificates and shareholder reports, expenses of registering our shares
under federal and state securities laws, expenses of preparing, printing and
mailing prospectuses to existing shareholders, insurance premiums, brokerage and
other expenses connected with executing portfolio transactions.
Although not obligated to do so, Lord Abbett may waive all or a portion of its
management fees and or may assume other expenses of each Fund.
Lord Abbett Distributor LLC, a New York limited liability company ("Lord Abbett
Distributor"), and a subsidiary of Lord Abbett, 90 Hudson Street, Jersey City,
New Jersey 07303-3973, serves as the principal underwriter for each Fund.
The Bank of New York ("BNY"), 48 Wall Street, New York, New York 10268, serves
as each Fund's custodian.
9
<PAGE>
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281, are
the independent auditors of each Fund and must be approved at least annually by
our Board of Trustees to continue in such capacity. Deloitte & Touche LLP
perform audit services for each Fund, including the examination of financial
statements included in the Funds' Annual Report to Shareholders.
United Missouri Bank of Kansas City, N.A., Tenth and Grand Kansas City, Missouri
64141, acts as the transfer agent and dividend disbursing agent for each Fund.
4.
Portfolio Transactions
Each Fund's policy is to obtain best execution on all our portfolio
transactions, which means that each Fund seeks to have purchases and sales of
portfolio securities executed at the most favorable prices, considering all
costs of the transaction including brokerage commissions (if any) and dealer
markups and markdowns and any brokerage commissions and taking into account the
full range and quality of the brokers' services. Consistent with obtaining best
execution, we generally pay, as described below, a higher commission than some
brokers might charge on the same transaction. This policy with respect to best
execution governs the selection of brokers or dealers and the market in which
the transaction is executed. To the extent permitted by law, we may, if
considered advantageous, make a purchase from or sale to another Lord
Abbett-sponsored fund without the intervention of any broker-dealer.
Broker-dealers are selected on the basis of their professional capability and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of each Lord Abbett-sponsored fund
and also are employees of Lord Abbett. These traders do the trading as well for
other accounts -- investment companies (of which they are also officers) and
other investment clients -- managed by Lord Abbett. They are responsible for
obtaining best execution.
We 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 Lord Abbett-sponsored funds to purchase or sell portfolio
securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold the Lord
Abbett-sponsored funds' shares and/or shares of other Lord Abbett-sponsored
funds may be preferred. When, in the opinion of the investment adviser, two or
more broker (either directly or through their correspondent clearing agents) are
in a position to obtain the best execution, preference may be given to brokers
who have sold shares of a Fund or who have provided investment research,
statistical, or other related services to the investment adviser.
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If other clients of Lord Abbett buy or sell the same security at the same time
as a Lord Abbett-sponsored fund does, transactions will, to the extent
practicable, be allocated among all participating accounts in proportion to the
amount of each order and will be executed daily until filled so that each
account shares the average price and commission cost of each day. Other clients
who direct that their brokerage business be placed with specific brokers or who
invest through wrap accounts introduced to Lord Abbett by certain brokers may
not participate with 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 a
Lord Abbett-sponsored fund does, they may have their transactions executed at
times different from our transactions and thus may not receive the same price or
incur the same commission cost as Lord Abbett-sponsored fund does.
5.
Purchases, Redemptions
and Shareholder Services
Information concerning how we value our shares for the purchase and redemption
of our shares is described in the Prospectus under "Purchases" and
"Redemptions", respectively.
As disclosed in the Prospectus, we calculate our net asset value as of the close
of the New York Stock Exchange ("NYSE") on each day that the NYSE is open for
trading by dividing our total net assets by the number of shares outstanding at
the time of calculation. The NYSE is closed on Saturdays and Sundays and the
following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
The Fund values its portfolio securities at market value as of the close of the
NYSE. Market value will be determined as follows: securities listed or admitted
to trading privileges on the New York or American Stock Exchange or on the
NASDAQ National Market System are valued at the last sales price, or, if there
is no sale on that day, at the mean between the last bid and asked prices, or,
in the case of bonds, in the over-the-counter market if, in the judgment of the
Fund's officers, that market more accurately reflects the market value of the
bonds. Over-the-counter securities not traded on the NASDAQ National Market
System are valued at the mean between the last bid and asked prices. Securities
for which market quotations are not available are valued at fair market value
under procedures approved by the Board of Trustees.
For each class of shares, the net asset value per share will be determined by
taking the net assets and dividing by the number of shares outstanding.
The Fund has entered into a distribution agreement with Lord Abbett Distributor
under which Lord Abbett Distributor is obligated to use its best efforts to find
purchasers for the shares of the Funds, and to make reasonable efforts to sell
Fund shares so long as, in Lord Abbett Distributor's judgment, a substantial
distribution can be obtained by reasonable efforts.
Conversion of Class B Shares. The conversion of Class B shares on the eighth
anniversary of their purchase is subject to the continuing availability of a
private letter ruling from the Internal Revenue Service or an opinion of counsel
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. Each Fund offers share classes (Class A, B, C, or P) as
described in the Prospectus. 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.
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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 The initial sales charge rates, the CDSC and the Rule 12b-1 plan
applicable to the Class A shares are described 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. 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 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 below.
Class P Shares. If you buy Class P shares, you pay no sales charge at the time
of purchase, and if you redeem your shares you pay no CDSC. Class P shares are
subject to service and distribution fees at an annual rate of .45 of 1% of the
average daily net asset value of the Class P shares. The Rule 12b-1 plan
applicable to the Class P shares is described in "Class P Rule 12b-1 Plan".
Class P shares are available to a limited number of investors.
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 a 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 a 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.
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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 "Services For Fund Investors" 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.
Rule 12b-1 Plans. As described in the Prospectus, the Fund has adopted a
Distribution Plan and Agreement on behalf of each Fund pursuant to Rule 12b-1 of
the Act for each class of such Fund: the "A Plan", the "B Plan" and the "C
Plan", respectively. In adopting each Plan and in approving its continuance, the
Board of has concluded that there is a reasonable likelihood that each Plan will
benefit its respective Class and such Classes' shareholders. The expected
benefits include greater sales and lower redemptions of shares, which should
allow each Class to maintain a consistent cash flow, and a higher quality of
service to shareholders by authorized institutions than would otherwise be the
case. Lord Abbett used all amounts received under the A, B and C Plans for
payments to dealers for (i) providing continuous services to the shareholders,
such as answering shareholder inquiries, maintaining records, and assisting
shareholders in making redemptions, transfers, additional purchases and
exchanges and (ii) their assistance in distributing shares of each Fund.
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Each Plan requires the Trustees to review, on a quarterly basis, written reports
of all amounts expended pursuant to the Plan and the purposes for which such
expenditures were made. Each Plan shall continue in effect only if its
continuance is specifically approved at least annually by vote of the Trustees,
including a majority of the Trustees who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related to the Plan ("outside directors"), cast in
person at a meeting called for the purpose of voting on the Plan. No Plan may be
amended to increase materially above the limits set forth therein the amount
spent for distribution expenses without approval by a majority of the
outstanding voting securities of the applicable class and the approval of a
majority of the directors, including a majority of the outside directors. Each
Plan may be terminated at any time by vote of a majority of the outside
directors or by vote of a majority of its class's outstanding voting securities.
Contingent Deferred Sales Charges. A Contingent Deferred Sales Charge ("CDSC"),
applies regardless of class, and (i) will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original purchase
price and (ii) is not imposed on the amount of your account value represented by
the increase in net asset value over the initial purchase price (including
increases due to the reinvestment of dividends and capital gains distributions).
Class A Shares. As stated in the Prospectus, subject to certain exceptions, a
CDSC of 1% is imposed with respect to those Class A shares (or Class A shares of
another Lord Abbett-sponsored fund or fund acquired through exchange of such
shares) on which a fund has paid the one-time distribution fee of 1% if such
shares are redeemed out of the Lord Abbett-sponsored family of funds within a
period of 24 months from the end of the month in which the original sale
occurred.
Class B Shares. As stated in the Prospectus, subject to certain exceptions, if
Class B shares of the Fund (or Class B shares of another Lord Abbett-sponsored
fund or fund 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 Fund in connection
with the sale of Class B shares.
To determine whether the CDSC applies to a redemption, the Funds redeem 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:
<TABLE>
<CAPTION>
Anniversary of the day on Contingent Deferred Sales Charge
which the Purchase order was accepted on Redemptions (As % of Amount Subject to Charge)
<S> <C>
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
</TABLE>
In the table, an "anniversary" is the same calendar day in each respective year
after the date of purchase. For example, the anniversaries for shares purchased
on May 1 of each succeeding year. All purchases are considered to have been made
on the business day on which the purchase order was accepted.
Class C Shares. As stated in the Prospectus, subject to certain exceptions, if
Class C shares are redeemed for cash before the first anniversary of their
purchase, the redeeming shareholder will be required to pay to the Fund on
behalf of Class C shares a CDSC of 1% of the lower of cost or the then net asset
value of Class C shares redeemed. If such shares are exchanged into the same
class of another Lord Abbett-sponsored fund and subsequently redeemed before the
first anniversary of their original purchase, the charge will be collected by
the other fund on behalf of the Fund's 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".
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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. In the case of Class A and
Class C shares, the CDSC is received by the applicable fund and is intended to
reimburse all or a portion of the amount paid by the fund if the shares are
redeemed before the fund has had an opportunity to realize the anticipated
benefits of having a long-term shareholder account in the fund. In the case of
Class B shares, the CDSC is received by Lord Abbett Distributor and is intended
to reimburse its expenses of providing distribution-related service to the Fund
(including recoupment of the commission payments made) in connection with the
sale of Class B shares before Lord Abbett Distributor has had an opportunity to
realize its anticipated reimbursement by having such a long-term shareholder
account subject to the B Plan distribution fee.
The other funds which participate in the Telephone Exchange Privilege (except
(a) Lord Abbett U.S. Government Securities Money Market Fund, Inc. ("GSMMF"),
(b) certain funds and Lord Abbett Tax-Free Income Trust for which a Rule 12b-1
Plan is not yet in effect, and (c) any authorized institution's affiliated money
market fund satisfying Lord Abbett Distributor as to certain omnibus account and
other criteria, hereinafter referred to as an "authorized money market fund" or
"AMMF" (collectively, the "Non-12b-1 Funds")) have instituted a CDSC for each
class on the same terms and conditions. No CDSC will be charged on an exchange
of shares of the same class between Lord Abbett Funds or between such Funds and
AMMF. Upon redemption of shares out of the Lord Abbett 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 Fund paid a 12b-1 fee and, in the case of Class B shares,
Lord Abbett Distributor paid no sales charge or service fee (including shares
acquired through reinvestment of dividend income and capital gains
distributions) or (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 the same class of: (i)
Lord Abbett-sponsored funds currently offered to the public with a sales charge
(front-end, back-end or level), (ii) GSMMF or (iii) AMMF, to the extent offers
and sales may be made in your state. You should read the prospectus of the other
Funds before exchanging. In establishing a new account by exchange, shares of
the Fund being exchanged must have a value equal to at least the minimum initial
investment required for the Fund into which the exchange is made.
Shareholders in other Lord Abbett-sponsored funds and AMMF have the same right
to exchange their shares for the Fund's shares. Exchanges are based on relative
net asset values on the day instructions are received by the Fund in Kansas City
if the instructions are received prior to the close of the NYSE in proper form.
No sales charges are imposed except in the case of exchanges out of GSMMF or
AMMF (unless a sales charge (front-end, back-end or level) was paid on the
initial investment). Exercise of the exchange privilege will be treated as a
sale for federal income tax purposes, and, depending on the circumstances, a
gain or loss may be recognized. In the case of an exchange of shares that have
been held for 90 days or less where no sales charge is payable on the exchange,
the original sales charge incurred with respect to the exchanged shares will be
taken into account in determining gain or loss on the exchange only to the
extent such charge exceeds the sales charge that would have been payable on the
acquired shares had they been acquired for cash rather than by exchange. The
portion of the original sales charge not so taken into account will increase the
basis of the acquired shares.
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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.
Letter of Intention. Under the terms of the Letter of Intention as described in
the Prospectus to invest $100,000 or more over a 13-month period as described in
the Prospectus, shares of Lord Abbett-sponsored funds (other than shares of LASF
and GSMMF, unless holdings in GSMMF are attributable to shares exchanged from a
Lord Abbett-sponsored fund offered with a front-end, back-end or level sales
charge) currently owned by you are credited as purchases (at their current
offering prices on the date the Letter is signed) toward achieving the stated
investment and reduced initial charges for Class A shares. Class A shares valued
at 5% of the amount of intended purchases are escrowed and may be redeemed to
cover the additional sales charge payable if the Letter is not completed. The
Letter of Intention is neither a binding obligation on you to buy, nor on the
Fund to sell, the full amount indicated.
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 LASF and GSMMF, unless holdings in GSMMF are attributable to shares
exchanged from a Lord Abbett-sponsored Fund offered with a front-end, back-end
or level sales charge) so that a current investment, plus the purchaser's
holdings valued at the current maximum offering price, reach a level eligible
for a discounted sales charge for Class A shares.
Net Asset Value Purchases of Class A Shares. As stated in the Prospectus, our
Class A shares may be purchased at net asset value by our directors, employees
of Lord Abbett, employees of our shareholder servicing agent and employees of
any securities dealer having a sales agreement with Lord Abbett who consents to
such purchases or by the trustee or custodian under any pension or
profit-sharing plan or Payroll Deduction IRA established for the benefit of such
persons or for the benefit of employees of any national securities trade
organization to which Lord Abbett belongs or any company with an account(s) in
excess of $10 million managed by Lord Abbett on a private-advisory-account
basis. For purposes of this paragraph, the terms "directors" 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 from Class A shares and other Lord
Abbett-sponsored funds, except for 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, and (e) by employees, partners and owners of
unaffiliated consultants and advisors to Lord Abbett, Lord Abbett Distributor or
Lord Abbett-sponsored funds who consent to such purchase if such persons provide
service to Lord Abbett, Lord Abbett Distributor or such funds on a continuing
basis and are familiar with such funds, (f) through Retirement Plans with at
least 100 eligible employees, (g) in connection with a merger, acquisition or
other reorganization, 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
advisory 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 a participant-directed Retirement Plan. Shares are offered at net asset value
to these investors for the purpose of promoting goodwill with employees and
others with whom Lord Abbett Distributor and/or the fund has business
relationships.
Our shares may be issued at net asset value in exchange for the assets, subject
to possible tax adjustment, of a personal holding company or an investment
company. There are economies of selling efforts and sales-related expenses with
respect to offers to these investors and those referred to above.
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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,
which is any broker or bank that is a member of the medallion stamp program. 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 Funds and/or any
other Eligible Fund is described in the Prospectus. To avail yourself of this
method you must complete the application form, selecting the time and amount of
your bank checking account withdrawals and the funds for investment, include a
voided, unsigned check and complete the bank authorization.
Systematic Withdrawal Plans. The Systematic Withdrawal Plan (the "SWP") also is
described in the Prospectus. You may establish a SWP if you own or purchase
uncertificated shares having a current offering price value of at least $10,000.
Lord Abbett prototype retirement plans have no such minimum. With respect to a
SWP for Class B shares, the CDSC will be waived on redemptions of up to 12% per
year of either the current net asset value of your account or your original
purchase price, whichever is higher. 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 Simplified Employee Pensions), 403(b) plans and
qualified pension and profit-sharing plans, including 401(k) plans. The forms
name Investors Fiduciary Trust Company as custodian and contain specific
information about the plans. Explanations of the eligibility requirements,
annual custodial fees and allowable tax advantages and penalties are set forth
in the relevant plan documents. Adoption of any of these plans should be on the
advice of your legal counsel or qualified tax adviser.
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6.
Performance
The Fund computes the average annual compounded rate of total return for each
class during specified periods that would equate the initial amount invested to
the ending redeemable value of such investment by adding one to the computed
average annual total return, raising the sum to a power equal to the number of
years covered by the computation and multiplying the result by one thousand
dollars which represents a hypothetical initial investment. The calculation
assumes deduction of the maximum sales charge (as described in the next
paragraph) from the amount invested and reinvestment of all income dividends and
capital gains distributions on the reinvestment dates at prices calculated as
stated in the Prospectus. The ending redeemable value is determined by assuming
a complete redemption at the end of the period covered by the average annual
total return computation.
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment (unless the return is shown at net asset value). For Class B
shares, the payment of the applicable CDSC (5.0% prior to the first anniversary
of purchase, 4.0% prior to the second anniversary of purchase, 3.0% prior to the
third and fourth anniversaries of purchase, 2.0% prior to the fifth anniversary
of purchase, 1.0% prior to the sixth anniversary of purchase and no CDSC on and
after the sixth anniversary of purchase) is applied to the Fund's investment
result for that class for the time period shown (unless the total return is
shown at net asset value). For Class C shares, the 1.0% CDSC is applied to a
Fund's investment result for that class for the time period shown prior to the
first anniversary of purchase (unless the total return is shown at net asset
value). Total returns also assume that all dividends and capital gains
distributions during the period are reinvested at net asset value per share, and
that the investment is redeemed at the end of the period.
Yield quotation for each Class is based on a 30-day period ended on a specified
date, computed by dividing our net investment income per share earned during the
period by the maximum offering price per share of such Class on the last day of
the period. This is determined by finding the following quotient: take the
Class' dividends and interest earned during the period minus its expenses
accrued for the period and divide by the product of (i) the average daily number
of shares of such Class outstanding during the period that were entitled to
receive dividends and (ii) the maximum offering price per share of such Class on
the last day of the period. To this quotient add one. This sum is multiplied by
itself five times. Then one is subtracted from the product of this
multiplication and the remainder is multiplied by two. Yield for the Class A
shares reflects the deduction of the maximum initial sales charge, but may also
be shown based on a Fund's net asset value per share. Yields for Class B and C
shares do not reflect the deduction of the CDSC.
7.
Taxes
Each Fund intends to elect and to qualify for special tax treatment afforded
regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"). If it so qualifies, each Fund (but not its shareholders) will be
relieved of federal income taxes on the amount it timely distributes to
shareholders. If in any taxable year a Fund does not qualify as a regulated
investment company, all of its taxable income will be taxed to the Fund at
regular corporate rates.
Each Fund contemplates declaring as dividends substantially all of its net
investment income. Dividends paid by a Fund from its investment income and
distributions out of short-term capital gains are taxable to its shareholders as
ordinary income from dividends, whether received in cash or reinvested in
additional shares of a Fund. Distributions paid by a Fund of its net realized
long-term capital gains are taxable to shareholders as capital gains, also
whether received in cash or reinvested in shares. Each Fund will send its
shareholders annual information concerning the tax treatment of dividends and
other distributions.
Upon a sale, exchange or redemption of shares of a Fund, a shareholder will
recognize short- or long-term capital gain or loss, depending upon the
shareholder's holding period in the Fund's shares. However, if a shareholder's
holding period in his shares is six month or less, any capital loss realized
from a sale or exchange of such shares must be treated as long-term capital loss
to the extent of dividends classified as "capital gains dividends" received with
respect to such shares. The maximum tax rates applicable to net capital gains
recognized by individuals and other non-corporate taxpayers are (i) the same as
ordinary income rates for capital assets held for one year or less and (ii) 20%
for capital assets held for more than one year. Capital gains or losses
recognized by corporate shareholders are subject to tax at the ordinary income
tax rates applicable to corporations.
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Losses on the sale of shares are not deductible if, within a period beginning 30
days before the date of the sale and ending 30 days after the date of the sale,
the taxpayer acquires shares that are substantially identical.
Some shareholders may be subject to a 31% withholding tax on reportable
dividends, capital gains distributions and redemption payments ("backup
withholding"). Generally, shareholders subject to backup withholding will be
those for whom a certified taxpayer identification number is not on file with a
Fund or who, to a Fund's knowledge, have furnished an incorrect number. When
establishing an account, an investor must certify under penalties of perjury
that such number is correct and that he or she is not otherwise subject to
backup withholding.
The writing of call options and other investment techniques and practices which
each Fund may utilize may affect the character and timing of the recognition of
gains and losses. Such transactions may increase the amount of short-term
capital gain realized by a Fund, which is taxed as ordinary income when
distributed to shareholders.
Each Fund may be subject to foreign withholding taxes, which would reduce the
yield on its investments. It is generally expected that a Fund's shareholders,
who are subject to United States federal income tax, will not be entitled to
claim a federal income tax credit or deduction for foreign income taxes paid by
the Fund.
Each Fund will be subject to a 4% non-deductible excise tax on certain amounts
not distributed or treated as having been distributed on a timely basis each
calendar year. Each Fund intends to distribute to shareholders each year an
amount adequate to avoid the imposition of such excise tax.
Gain and loss realized by each Fund on certain transactions, including sales of
foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gain or loss is attributable to changes in
exchange rates for foreign currencies. Accordingly, distributions taxable as
ordinary income will include the net amount, if any, of such foreign exchange
gain and will be reduced by the net amount, if any, of such foreign exchange
loss.
If a Fund purchases shares in certain foreign investment entities called
"passive foreign investment companies," the Fund may be subject to United States
federal income tax on a portion of any "excess distribution" or gain from the
disposition of such shares, even if such income is distributed as a taxable
dividend by the Fund to its shareholders. Additional charges in the nature of
interest may be imposed on each Fund in respect of deferred taxes arising from
such distributions or gains. If each Fund were to make a "qualified electing
fund" election with respect to its investment in a passive foreign investment
company, in lieu of the foregoing requirements, a Fund might be required to
include in income each year a portion of the ordinary earnings and net capital
gains of the qualified electing fund, even if such amount were not distributed
to the Fund. Alternatively, if each Fund were to make a "mark-to-market"
election with respect to its investment in a passive foreign investment company,
gain or loss with respect to the investment would be considered realized at the
end of each taxable year of a Fund even if a Fund continued to hold the
investment, and would be treated as ordinary income or loss to the Fund.
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 a
Fund, including the applicable rate of U.S. withholding tax on dividends
representing ordinary income and net short-term capital gains, and the
applicability of U.S. gift and estate taxes.
Except as discussed in the Prospectus, the receipt of dividends from a Fund may
be subject to tax under laws of state or local tax authorities. You should
consult your tax adviser on state and local tax matters.
8.
Information About the Funds
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
Company 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 fund
affected by such matter. Rule 18f-2 further provides that a class or fund shall
be deemed to be affected by a matter unless the interests of each class or fund
in the matter are substantially identical or the matter does not affect any
interest of such class or fund.
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The Company does not hold annual meetings of shareholders unless one or more
matters are required to be acted on by shareholders under the Act. Under the
Company's Declaration of Trust, shareholder meetings may be called at any time
by certain officers of the Company or by a majority of the Trustees (i) for the
purpose of taking action upon any matter requiring the vote or authority of the
Company's shareholders or upon other matters deemed to be necessary or desirable
or (ii) upon the written request of the holders of a least one-quarter of the
shares of the Company's outstanding shares and entitled to vote at the meeting.
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 Company'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 Company to the extent
contemplated by the recommendations of such Advisory Group.
9.
Financial Statements
No applicable.
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