GROWTH LEADERS FUND
I
NVESTMENT OBJECTIVE
The Fund’s investment
objective is to seek capital appreciation.
F
EES AND EXPENSES
This table describes the
fees and expenses that you may pay if you buy and hold shares of the Fund. You
may qualify for sales charge discounts if you and certain members of your
family invest, or agree to invest in the future, at least $50,000 in the Lord
Abbett Family of Funds. More information about these and other discounts is
available from your financial professional and in “Sales Charge Reductions and
Waivers” on page 12 of the prospectus and “Purchases, Redemptions, Pricing, and
Payments to Dealers” on page 8-1 of the statement of additional information
(“SAI”).
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Shareholder Fees
(Fees paid directly from your investment)
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Class
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A
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B
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C
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F, I, R2, and R3
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Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of offering price)
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5.75%
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None
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None
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None
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Maximum Deferred Sales
Charge (Load)
(as a percentage of offering price or redemption
proceeds, whichever is lower)
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None
(1)
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5.00%
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1.00%
(2)
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None
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Annual
Fund Operating Expenses
(Expenses
that you pay each year as a percentage of the value of your investment)
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Class
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A
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B
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C
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F
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I
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R2
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R3
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Management Fees
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[0.55%]
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[0.55%]
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[0.55%]
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[0.55%]
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[0.55%]
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[0.55%]
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[0.55%]
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Distribution and Service
(12b-1) Fees
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[0.35%]
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[1.00%]
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[1.00%]
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[0.10%]
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[None]
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[0.60%]
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[0.50%]
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Other Expenses
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[0.74%]
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[0.74%]
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[0.74%]
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[0.74%]
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[0.74%]
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[0.74%]
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[0.74%]
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Total Annual Fund Operating
Expenses
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[1.64%]
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[2.29%]
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[2.29%]
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[1.39%]
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[1.29%]
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[1.89%]
(3)
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[1.79%]
(3)
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Management Fee Waiver
and/or Expense
Reimbursement
(4)
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[0.79%]
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[0.79%]
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[0.79%]
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[0.79%]
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[0.79%]
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[0.79%]
(3)
|
[0.79%]
(3)
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Total Annual Fund Operating
Expenses After
Management Fee Waiver and/or Expense
Reimbursement
(4)
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[0.85%]
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[1.50%]
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[1.50%]
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[0.60]%
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[0.50%]
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[1.10%]
(3)
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[1.00%]
(3)
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(1)
A contingent deferred sales
charge (“CDSC”) of 1.00% may be assessed on certain Class A shares purchased
or acquired without a sales charge if they are redeemed before the first day
of the month of the one-year anniversary of the purchase.
(2)
A CDSC of 1.00% may be
assessed on Class C shares if they are redeemed before the first anniversary
of their purchase.
(3)
[These amounts have been
updated from fiscal year amounts to reflect current fees and expenses.]
(4)
For the period from
[November 28, 2012 through February 28, 2014], Lord Abbett has contractually
agreed to waive all or a portion of its management fee and administrative
services fee and, if necessary, reimburse the Fund’s other expenses to the
extent necessary so that the total net annual operating expenses for each
class, excluding 12b-1 fees, if any, do not exceed an annual rate of [0.50%].
This agreement may be terminated only upon the approval of the Fund’s Board
of Trustees.
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Example
The following example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other mutual funds. The example assumes that you invest $10,000 in
the Fund at the 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, that dividends and
distributions are reinvested, and that the Fund’s operating expenses remain the
same (except that the example takes into account the contractual management fee
waiver and expense reimbursement agreement between the Fund and Lord, Abbett
& Co. LLC for the term of the agreement). The example assumes a deduction
of the applicable contingent deferred sales charge (“CDSC”) for the one-year,
three-year, and five-year periods for Class B shares and for the one-year
period for Class C shares. Class B shares automatically convert to Class A
shares after approximately eight years. The expense example for Class B shares
for the ten-year period reflects the conversion to Class A shares. The first
example assumes that you redeem all of your shares at the end of the periods.
Although your actual costs may be higher or lower, based on these assumptions,
your costs (including any applicable CDSC) would be as shown below. The second
example assumes that you do not redeem and instead keep your shares.
2
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Class
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If Shares Are Redeemed
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If Shares Are Not Redeemed
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1 Year
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3 Years
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5 Years
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10 Years
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1 Year
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3 Years
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5 Years
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10 Years
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Class A Shares
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$
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[657]
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$
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[990]
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$
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[1,345]
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$
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[2,344]
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$
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[657]
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$
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[990]
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$
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[1,345]
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$
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[2,344]
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Class B Shares
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$
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[653]
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$
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[940]
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$
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[1,353]
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$
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[2,400]
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$
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[153]
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$
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[640]
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$
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[1,153]
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$
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[2,400]
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Class C Shares
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$
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[253]
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$
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[640]
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$
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[1,153]
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$
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[2,564]
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$
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[153]
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$
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[640]
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$
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[1,153]
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$
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[2,564]
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Class F Shares
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$
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[61]
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$
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[362]
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$
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[685]
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$
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[1,600]
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$
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[61]
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$
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[362]
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$
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[685]
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$
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[1,600]
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Class I Shares
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$
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[51]
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$
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[331]
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$
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[632]
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$
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[1,487]
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$
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[51]
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$
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[331]
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$
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[632]
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$
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[1,487]
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Class R2 Shares
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$
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[112]
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$
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[517]
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$
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[948]
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$
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[2,147]
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$
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[112]
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$
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[517]
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$
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[948]
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$
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[2,147]
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Class R3 Shares
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$
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[102]
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$
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[486]
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$
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[896]
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$
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[2,040]
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$
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[102]
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$
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[486]
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$
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[896]
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$
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[2,040]
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Portfolio Turnover.
The Fund
pays transaction costs, such as commissions, when it buys and sells securities
(or “turns over” its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Fund shares are
held in a taxable account. These costs, which are not reflected in the annual
fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
[208.96%] of the average value of its portfolio.
P
RINCIPAL INVESTMENT STRATEGIES
To pursue its objective, the
Fund invests principally in the equity securities of U.S. and foreign companies
demonstrating above-average, long-term growth potential in all market
capitalization ranges. Under normal market conditions, the Fund will invest at
least 50% of its net assets in companies having a market capitalization range
within the range of companies included in the Russell 1000
®
Index, a widely used benchmark for large-cap
stock performance. The Fund normally will invest the remainder of its assets in
securities of mid-sized and small companies.
The Fund may invest up to
20% of its net assets in securities of foreign (which may include emerging
market) companies that are traded on a non-U.S. exchange and denominated in a
foreign currency. The Fund may invest without limitation in other types of
securities of foreign companies, including American Depositary Receipts
(“ADRs”). The Fund’s investments primarily include the following types of
securities and other financial instruments:
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•
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Equity
securities
of
large, mid-sized, and small companies. Equity securities may include common
stocks, preferred stocks, and equity interests in trusts (including real
estate investment trusts), partnerships, joint ventures, and limited
liability companies. The Fund considers equity securities to include rights
offerings and investments that convert into the equity securities described
above.
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•
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Growth
companies
of any
size that portfolio management believes exhibit sustainable above-average
gains in earnings.
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The Fund generally will sell
a security when the Fund believes the security is less likely to benefit from
the current market and economic environment, shows signs of deteriorating
fundamentals, or has reached its valuation target, among other reasons. The
Fund seeks to remain fully invested in accordance with its investment
objective; however, in response to adverse economic, market or other
unfavorable conditions, the Fund may invest its assets in a temporary defensive
manner.
P
RINCIPAL RISKS
As with any investment in a
mutual fund, investing in the Fund involves risk, including the risk that you
may receive little or no return on your investment. When you redeem your
shares, they may be worth more or less than what you paid for them, which means
that you may lose a portion or all of the money you invested in the Fund.
The Fund invests principally
in stocks and other securities described above, which may experience
significant volatility at times and may fall sharply in response to adverse
events. Individual securities also may experience dramatic movements in price.
In addition to the risks of overall market movements, risks of events affecting
a particular industry or sector, and risks that are specific to an individual
security, the principal risks of investing in the Fund, which could adversely
affect its performance, include:
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•
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Portfolio
Management Risk:
If
the strategies used and securities selected by the Fund’s portfolio
management fail to produce the intended result, the Fund may suffer losses or
underperform other funds with the same investment objective or strategies,
even in a rising market.
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•
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Growth
Investing Risk:
The
Fund employs a growth investing style, which may be out of favor or may not
produce the best results over short or longer time periods. In addition,
growth stocks generally are more volatile than value stocks.
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•
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Large
Company Risk:
As
compared to smaller successful companies, larger companies may be less able
to respond quickly to certain market developments and may have slower rates
of growth.
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3
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•
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Mid-Sized
and Small Company Risk:
Securities of mid-sized and small companies generally involve
greater risks than investments in larger companies. Mid-sized and small
companies may have limited management experience or depth, limited access to
capital, and limited products or services, or may operate in markets that
have not yet been established. Mid-sized and small company securities tend to
be more volatile and less liquid than equity securities of larger companies.
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•
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Foreign
Company Risk:
The
Fund’s investment exposure to foreign (which may include emerging market)
companies generally is subject to the risk that the value of securities
issued by foreign companies may be adversely affected by political, economic
and social volatility, lack of transparency or inadequate regulatory and
accounting standards, inadequate exchange control regulations, foreign taxes,
higher transaction and other costs, and delays in settlement. Emerging market
securities generally are more volatile than other foreign securities, and are
subject to greater liquidity, regulatory, and political risks.
|
An investment in the Fund is
not a deposit of any bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. For more
information on the principal risks of the Fund, please see the “More
Information About the Fund – Principal Risks” section in the prospectus.
P
ERFORMANCE
This prospectus does not
show performance information for the Fund because the Fund has not been in
operation for a full calendar year as of the date of this prospectus.
Performance for the Fund, which provides some indication of the risks of
investing in the Fund, will vary from year to year. Performance information is
available at www.lordabbett.com or by calling 888-522-2388.
M
ANAGEMENT
Investment Adviser.
The Fund’s investment adviser is Lord, Abbett & Co. LLC.
Portfolio Managers.
The portfolio managers jointly and primarily responsible for the
day-to-day management of the Fund are:
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Portfolio
Manager/Title
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Member of
the Investment
Management
Team Since
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F. Thomas O’Halloran,
Partner and Director
|
2011
|
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Anthony W. Hipple,
Portfolio Manager
|
2011
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Paul J. Volovich, Partner
and Director
|
2011
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Arthur K. Weise, Portfolio
Manager
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2011
|
P
URCHASE AND SALE OF FUND SHARES
The minimum initial and
additional amounts shown below vary depending on the class of shares you buy
and the type of account. Certain financial intermediaries may impose different
restrictions than those described below. Class B shares are not available for
purchase by new or existing investors and only will be issued in connection
with (i) an exchange of Class B shares from another Lord Abbett Fund or (ii) a
reinvestment of a dividend and/or capital gain distribution. For Class I
shares, the minimum investment shown below applies to certain types of
institutional investors, but does not apply to registered investment advisers
or retirement and benefit plans otherwise eligible to invest in Class I shares.
See “Choosing a Share Class – Investment Minimums” in the prospectus for more
information.
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Investment
Minimums — Initial/Additional Investments
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Class
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A and C
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F, R2, and R3
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I
|
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General and IRAs without
Invest-A-Matic Investments
|
$1,500/No
minimum
|
No
minimum
|
$1
million minimum
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Invest-A-Matic Accounts
|
$250/$50
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N/A
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N/A
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IRAs, SIMPLE and SEP
Accounts with Payroll Deductions
|
No
minimum
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N/A
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N/A
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Fee-based Advisory Programs
and Retirement and Benefit Plans
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No
minimum
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No
minimum
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No
minimum
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You may sell (redeem) shares
through your securities broker, financial professional or financial
intermediary. If you have direct account access privileges, you may redeem your
shares by contacting the Fund in writing at P.O. Box 219336, Kansas City, MO
64121, by calling 888-522-2388 or by accessing your account online at
www.lordabbett.com.
4
T
AX INFORMATION
The Fund’s
distributions, if any, generally are taxable to you as ordinary income, capital
gains or a combination of the two, and also may be subject to state and local
taxes. Certain taxes on distributions may not apply to tax exempt investors or
tax deferred accounts, such as a 401(k) plan or an IRA.
P
AYMENTS TO
BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you
purchase Fund shares through a broker-dealer or other financial intermediary
(such as a bank), the Fund and the Fund’s distributor or its affiliates may pay
the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other financial intermediary and your individual financial professional to
recommend the Fund over another investment. Ask your individual financial
professional or visit your financial intermediary’s website for more
information.
I
NVESTMENT OBJECTIVE
The Fund’s
investment objective is to seek capital appreciation.
P
RINCIPAL INVESTMENT STRATEGIES
To pursue its
objective, the Fund invests principally in the equity securities of U.S. and
foreign companies demonstrating above-average, long-term growth potential in
all market capitalization ranges.
Under normal
market conditions, the Fund will invest at least 50% of its net assets in
companies having a market capitalization within the range of companies included
in the Russell 1000
®
Index, a widely-used
benchmark for large-cap stock performance. The market capitalization range of
the Russell 1000
®
Index as of June 22, 2012, following its most recent
annual reconstitution, was approximately $1.3 billion to $546 billion. This
range varies daily. The Fund normally will invest the remainder of its assets
in securities of mid-sized and small companies.
Equity
securities in which the Fund may invest include common stocks; preferred
stocks; equity interests in real estate investment trusts, privately offered
trusts, partnerships, joint ventures, limited liability companies and vehicles
with similar legal structures; and other instruments with similar economic
characteristics. The Fund considers equity securities to include rights
offerings and investments that convert into the equity securities described
above.
The portfolio
managers follow a growth style of investing and look for companies that they
believe exhibit sustainable above-average gains in earnings. The Fund’s
portfolio managers use a “bottom-up” investment approach, meaning that they
identify and select securities for investment by the Fund based on in-depth
company, industry, and market research and analysis. The Fund is diversified
broadly across many industries and sectors.
The Fund may
invest in U.S. and foreign (which may include emerging market) companies.
Foreign companies may include the following: companies that are incorporated
outside of the U.S., but are headquartered within the U.S. and traded on a U.S.
exchange; companies that are incorporated and headquartered outside of the
U.S., but primarily are traded on a U.S. exchange; and companies that are
traded on a non-U.S. exchange and denominated in a foreign currency. The Fund
may invest up to 20% of its net assets in securities of foreign companies that
are traded on a non-U.S. exchange and denominated in a foreign currency. The
Fund may invest without limitation in other types of foreign companies,
including ADRs. ADRs are traded on U.S. exchanges and typically are issued by a
financial institution (often a U.S. bank) acting as a depositary and represent
the depositary’s holdings of a specified number of shares of a foreign company.
An ADR entitles the holder to all dividends and capital gains earned by the
underlying foreign securities.
The Fund may
sell a security if it no longer meets the Fund’s investment criteria or for a
variety of other reasons, such as to secure gains, limit losses, redeploy
assets into opportunities believed to be more promising, or satisfy redemption
requests, among others. In considering whether to sell a security, the Fund may
evaluate factors including, but not limited to, the condition of the economy,
changes in the issuer’s competitive position or financial condition, changes in
the outlook for the issuer’s industry, and the Fund’s valuation target for the
security.
P
RINCIPAL RISKS
As with any
investment in a mutual fund, investing in the Fund involves risk, including the
risk that you may receive little or no return on your investment. When you
redeem your shares, they may be worth more or less than what you paid for them,
which means that you may lose a portion or all of the money you invested in the
Fund. Before you invest in the Fund, you should carefully evaluate the risks in
light of your investment goals. An investment in the Fund held for longer
periods over full market cycles typically provides the most favorable results.
The Fund
invests primarily in common stocks and other equity securities. Stock markets
may experience significant volatility at times and may fall sharply in response
to adverse events. Different segments of the stock market may react differently
than other segments and U.S. markets may react differently than foreign
markets. Individual securities also may experience dramatic movements in price.
5
Factors that
may affect the markets in general or individual stocks include periods of
slower growth or recessionary economic conditions, future expectations of poor
economic conditions or lack of investor confidence. In addition, individual
stocks may be adversely affected by factors such as reduced sales, increased costs
or a negative outlook for the future performance of the company. Common stock
represents ownership in a company. In claims for assets in a liquidation or
bankruptcy and in claims for dividends, common stock has lower priority than
preferred stock and debt securities. Because convertible securities may be
exchanged for common stock, they are subject to the risks affecting both equity
and fixed income securities, including market, credit and interest rate risk.
Although the
Fund maintains a diversified portfolio, from time to time the Fund may favor
investments in one or more particular industries or sectors. To the extent that
the Fund emphasizes a particular industry or sector, the value of the relevant
portion of the Fund’s investments may fluctuate in response to events affecting
that industry or sector (such as government regulations, resource availability
or economic developments) to a greater degree than securities within other
industries or sectors.
In addition to
the risks of overall market movements and risks that are specific to an
individual security, the principal risks you assume when investing in the Fund
are described below. The Fund attempts to manage these risks through careful
security selection, portfolio diversification, and continual portfolio review
and analysis, but there can be no assurance or guarantee that these strategies
will be successful in reducing risk. Please see the statement of additional
information (“SAI”) for a further discussion of strategies employed by the Fund
and the risks associated with an investment in the Fund.
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|
•
|
Portfolio Management Risk:
The strategies
used and securities selected by the Fund’s portfolio management may fail to
produce the intended result and the Fund may not achieve its objective. The
securities selected for the Fund may not perform as well as other securities
that were not selected for the Fund. As a result, the Fund may suffer losses
or underperform other funds with the same investment objective or strategies,
even in a rising market.
|
|
|
|
|
|
|
•
|
Growth Investing Risk:
Growth stocks may
trade at higher multiples of current earnings as compared to other stocks,
which may lead to inflated prices. Growth stocks are subject to potentially
greater declines in value if, among other things, the stock is subject to
significant investor speculation but fails to increase as anticipated. Growth
investing has been in and out of favor during past market cycles. During
periods when growth investing is out of favor or when markets are unstable,
selling growth stocks at a desired price may be more difficult. Growth stocks
may be more volatile than other slower-growing securities.
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|
|
|
|
|
|
•
|
Large Company Risk:
Larger, more established
companies may be unable to respond quickly to certain market developments. In
addition, larger companies may have slower rates of growth as compared to
successful, but less well-established, smaller companies, especially during
market cycles corresponding to periods of economic expansion.
|
|
|
|
|
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•
|
Mid-Sized and Small
Company Risk:
Investments in mid-sized or
small company stocks generally involve greater risks than investments in
large company stocks. Mid-sized or small companies may be less able to
weather economic shifts or other adverse developments than larger, more
established companies. They may have less experienced management and unproven
track records. They may rely on limited product lines and have more limited
financial resources. These factors may make them more susceptible to setbacks
or economic downturns. Mid-sized or small company stocks tend to have fewer
shares outstanding and trade less frequently than the stocks of larger
companies. In addition, there may be less liquidity in mid-sized or small
company stocks, subjecting them to greater price fluctuations than larger company
stocks.
|
|
|
|
|
|
|
•
|
Foreign Company Risk:
The Fund’s investment
exposure to foreign (which may include emerging market) companies generally
is subject to the risk that the value of securities issued by foreign
companies may be adversely affected by political, economic and social
volatility, lack of transparency, or inadequate regulatory and accounting
standards, inadequate exchange control regulations, foreign taxes, higher
transaction and other costs, and delays in settlement. A change in the value
of a foreign currency relative to the U.S. dollar will change the value of
securities held by the Fund that are denominated in that foreign currency,
including the value of any income distributions payable to the Fund as a
holder of such securities. In addition, foreign company securities may be
subject to less trading volume and liquidity, which may lead to greater price
fluctuation. The Fund may invest in securities of issuers whose economic
fortunes are linked to non-U.S. markets, but which principally are traded on
a U.S. securities market or exchange and denominated in U.S. dollars. To the
extent that the Fund invests in this manner, the percentage of the Fund’s
assets that is exposed to the risks associated with foreign companies may
exceed the percentage of the Fund’s assets that is invested in foreign
securities that principally are traded outside of the U.S. The Fund’s
investments in companies tied to emerging markets generally are subject to
more risks than investments in developed market companies because they tend
to have less liquidity, greater price volatility, smaller market
capitalizations, less government regulation, and less extensive and frequent
accounting, financial and other reporting requirements.
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Portfolio Turnover.
The Fund may engage in active and frequent trading in seeking to achieve its
investment objective, and may have a portfolio turnover rate of over 100%
annually. Increased portfolio turnover may result in higher brokerage fees or
other transaction costs. These costs are not reflected in the Fund’s annual
operating expenses or in the expense example, but such costs can reduce the
Fund’s investment performance. If the Fund realizes capital gains when it sells
investments, it generally must pay those gains to shareholders, resulting in
higher taxes when Fund shares are held in a taxable account. The Financial
Highlights table at the end of this prospectus shows the Fund’s portfolio
turnover rate during the past fiscal period.
6
Temporary or Defensive Investments.
The Fund seeks to remain fully invested in accordance with its investment
objective. To respond to adverse economic, market, political or other
conditions that are unfavorable for investors, however, the Fund may invest its
assets in a temporary defensive manner by holding all or a substantial portion
of its assets in cash, cash equivalents or other high quality short-term
investments, money market fund shares, and other money market instruments. The
Fund also may invest in these types of securities or hold cash while looking for
suitable investment opportunities or to maintain liquidity. When investing in
this manner, the Fund may be unable to achieve its investment objective.
D
ISCLOSURE OF PORTFOLIO HOLDINGS
A description
of the Fund’s policies and procedures regarding the disclosure of the Fund’s
portfolio holdings is available in the SAI and further information is available
at www.lordabbett.com.
M
ANAGEMENT AND ORGANIZATION OF THE FUND
Board of Trustees.
The Board oversees the management of the business and affairs of the Fund. The
Board meets regularly to review the Fund’s portfolio investments, performance,
expenses, and operations. The Board appoints officers who are responsible for
the day-to-day operations of the Fund and who execute policies authorized by
the Board. At least 75 percent of the Board members are independent of Lord,
Abbett & Co. LLC (“Lord Abbett”).
Investment Adviser.
The Fund’s investment adviser is Lord Abbett, which is located at 90 Hudson
Street, Jersey City, NJ 07302-3973. Founded in 1929, Lord Abbett manages one of
the nation’s oldest mutual fund complexes, and manages approximately [$114.6]
billion in assets across a full range of mutual funds, institutional accounts
and separately managed accounts, including [$2.3] billion for which Lord Abbett
provides investment models to managed account sponsors, as of [September 30,
2012].
Portfolio Managers.
The Fund is managed by a team of experienced portfolio managers responsible for
investment decisions together with a team of investment professionals who provide
issuer, industry, sector and macroeconomic research and analysis. The SAI
contains additional information about portfolio manager compensation, other
accounts managed, and ownership of Fund shares.
The team is
headed by F. Thomas O’Halloran, Partner and Director, who joined Lord Abbett in
2001. Assisting Mr. O’Halloran are Anthony W. Hipple, Portfolio Manager, who
joined Lord Abbett in 2002; Paul J. Volovich, Partner and Director, who joined
Lord Abbett in 1997; and Arthur K. Weise, Portfolio Manager, who joined Lord
Abbett in 2007. Before 2007, Mr. Weise was a Managing Director, Portfolio
Manager and Analyst at Bank of New York Institutional Asset Management
(2005-2007). Messrs. O’Halloran, Hipple, Volovich, and Weise are jointly and
primarily responsible for the day-to-day management of the Fund and have been
members of the team since the Fund’s inception.
Management Fee.
Lord
Abbett is entitled to a management fee based on the Fund’s average daily net
assets. The management fee is accrued daily and payable monthly at the
following annual rate:
0.55%
on the first $2 billion of average daily net assets; and
0.50%
on average daily net assets over $2 billion.
For the year ended [October
31, 2012], the effective annual rate of the fee paid to Lord Abbett, after
taking into account Lord Abbett’s contractual fee waiver, was [0.00%] for
the Fund.
In addition,
Lord Abbett provides certain administrative services to the Fund pursuant to an
Administrative Services Agreement in return for a fee at an annual rate of
0.04% of the Fund’s average daily net assets. The Fund pays all of its expenses
not expressly assumed by Lord Abbett.
Each year the
Board considers whether to approve the continuation of the existing management
and administrative services agreements between the Fund and Lord Abbett. A
discussion regarding the basis for the Board’s approval generally is available
in the Fund’s semiannual report to shareholders for the six-month period ended
April 30.
C
HOOSING A SHARE
CLASS
Each class of
shares represents an investment in the same portfolio of securities, but each
has different availability and eligibility criteria, sales charges, expenses,
and dividends, allowing you to choose the available class that best meets your
needs. You should read this section carefully to determine which class of
shares is best for you and discuss your selection with your financial
intermediary. Factors you should consider in choosing a class of shares
include:
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the amount you plan to invest;
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•
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the length of time you expect to hold your investment;
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•
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the total costs associated with your investment, including any sales charges that you
pay when you buy or sell your Fund shares and expenses that are paid out of
Fund assets over time;
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•
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whether you qualify for any reduction or waiver of sales charges;
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7
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•
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whether you
plan to take any distributions in the near future;
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•
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the
availability of the share class;
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•
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the services
that will be available to you depending on the share class you choose; and
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•
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the amount
of compensation that your financial intermediary will receive depending on
the share class you choose.
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If you plan to
invest a large amount and your investment horizon is five years or more, Class
A shares may be more advantageous than Class C shares. The higher ongoing
annual expenses of Class C shares may cost you more over the long term than the
front-end sales charge you would pay on larger purchases of Class A shares.
Retirement and Benefit Plans and Fee-Based Programs
The availability of
share classes and certain features of share classes may depend on the type of
financial intermediary through which you invest, including retirement and
benefit plans and fee-based programs. As used in this prospectus, the term
“retirement and benefit plans” refers to qualified and non-qualified retirement
plans, deferred compensation plans and other employer-sponsored retirement,
savings or benefit plans, such as defined benefit plans, 401(k) plans, 457
plans, 403(b) plans, profit-sharing plans, and money purchase pension plans,
but does not include Individual Retirement Accounts (“IRAs”), unless explicitly
stated elsewhere in the prospectus. As used in this prospectus, the term
“fee-based programs” refers to programs sponsored by financial intermediaries
that provide fee-based investment advisory programs or services (including
mutual fund wrap programs) or a bundled suite of services, such as brokerage,
investment advice, research, and account management, for which the client pays
a fee based on the total asset value of the client’s account for all or a
specified number of transactions, including mutual fund purchases, in the
account during a certain period.
Key Features of Share
Classes.
The following table compares key features of
each share class. You should review the fee table and example at the front of
this prospectus carefully before choosing your share class. As a general
matter, share classes with relatively lower expenses tend to have relatively
higher dividends. Your financial intermediary can help you decide which class
meets your goals. Not all share classes may be available through your financial
intermediary. Your financial intermediary may receive different compensation
depending upon which class you choose.
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Class A Shares
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Availability
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Available through financial
intermediaries to individual investors, certain retirement and benefit plans,
and fee-based advisory programs
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Front-End Sales Charge
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Up to 5.75%; reduced or
waived for large purchases and certain investors; eliminated for purchases of
$1 million or more
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CDSC
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1.00% on redemptions made
within one year following purchases of $1 million or more; waived under
certain circumstances
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Distribution and Service
(12b-1) Fee
(1)
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0.35% of the Fund’s average
daily net assets, comprised of:
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Service Fee: 0.25%
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Distribution Fee: 0.10%
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Conversion
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None
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Exchange Privilege
(2)
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Class A shares of most Lord
Abbett Funds
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Class B Shares
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Availability
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Class B shares are not
available for purchase by new or existing investors and only will be issued
in connection with (i) an exchange of Class B shares from another Lord Abbett
Fund or (ii) a reinvestment of a dividend and/or capital gain distribution.
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Front-End Sales Charge
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None
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CDSC
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Up to 5.00% on redemptions;
reduced over time and eliminated after sixth anniversary of purchase; waived
under certain circumstances
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Distribution and Service
(12b-1) Fee
(1)
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1.00% of the Fund’s average
daily net assets, comprised of:
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Service Fee: 0.25%
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Distribution Fee: 0.75%
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Conversion
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Automatic conversion to
Class A shares after approximately the eighth anniversary of purchase
(3)
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Exchange Privilege
(2)
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Class B shares of most Lord
Abbett Funds
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Class C Shares
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Availability
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Available through financial
intermediaries to individual investors and certain retirement and benefit plans;
purchases generally must be under $500,000
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Front-End Sales Charge
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None
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CDSC
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1.00% on redemptions made
before the first anniversary of purchase; waived under certain circumstances
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8
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Distribution and Service
(12b-1) Fee
(1)
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1.00% of the Fund’s average
daily net assets, comprised of:
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Service Fee: 0.25%
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Distribution Fee: 0.75%
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Conversion
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None
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Exchange Privilege
(2)
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Class C shares of most Lord
Abbett Funds
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Class F Shares
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Availability
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Available only to eligible
fee-based advisory programs and certain registered investment advisers
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Front-End Sales Charge
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None
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CDSC
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None
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Distribution and Service
(12b-1) Fee
(1)
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0.10% of the Fund’s average
daily net assets, comprised of:
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Service Fee: None
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Distribution Fee: 0.10%
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Conversion
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None
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Exchange Privilege
(2)
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Class F shares of most Lord
Abbett Funds
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Class I Shares
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Availability
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Available only to eligible
investors
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Front-End Sales Charge
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None
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CDSC
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None
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Distribution and Service
(12b-1) Fee
(1)
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None
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Conversion
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None
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Exchange Privilege
(2)
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Class I shares of most Lord
Abbett Funds
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Class R2 Shares
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Availability
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Available only to eligible
retirement and benefit plans
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Front-End Sales Charge
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None
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CDSC
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None
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Distribution and Service
(12b-1) Fee
(1)
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0.60% of the Fund’s average
daily net assets, comprised of:
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Service Fee: 0.25%
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Distribution Fee: 0.35%
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Conversion
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None
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Exchange Privilege
(2)
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Class R2 shares of most
Lord Abbett Funds
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Class R3 Shares
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Availability
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Available only to eligible
retirement and benefit plans
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Front-End Sales Charge
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None
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CDSC
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None
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Distribution and Service
(12b-1) Fee
(1)
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0.50% of the Fund’s average
daily net assets, comprised of:
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Service Fee: 0.25%
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Distribution Fee: 0.25%
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Conversion
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None
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Exchange Privilege
(2)
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Class R3 shares of most
Lord Abbett Funds
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(1)
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The 12b-1 plan provides
that the maximum payments that may be authorized by the Board are: for Class
A shares, 0.50%; for Class B, C, F, R2, and R3 shares, 1.00%. The rates shown
in the table above are the 12b-1 rates currently authorized by the Board for
each share class and may be changed only upon authorization of the Board. The
12b-1 plan does not permit any payments for Class I shares.
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(2)
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Ask your financial
intermediary about the Lord Abbett Funds available for exchange.
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(3)
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Class B shares
automatically will convert to Class A shares on the 25th day of the month
(or, if the 25th is not a business day, the next business day thereafter)
following the eighth anniversary of the day on which the purchase order was
accepted.
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Investment Minimums.
The minimum initial and additional amounts
shown below vary depending on the class of shares you buy and the type of
account. Certain financial intermediaries may impose different restrictions
than those described below. Consult your financial intermediary for more
information. Class B shares are not available for purchase by new or existing
investors and only will be issued in connection with (i) an exchange of Class B
shares from another Lord Abbett Fund or (ii) a reinvestment of a dividend
and/or capital gain distribution. For Class I shares, the minimum investment
shown below applies to certain types of institutional investors.
9
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Investment
Minimums — Initial/Additional Investments
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Class
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A and C
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F, R2, and R3
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I
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General and IRAs without
Invest-A-Matic Investments
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$1,500/No
minimum
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No
minimum
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See
below
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Invest-A-Matic Accounts
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$250/$50
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N/A
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N/A
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IRAs, SIMPLE and SEP
Accounts with Payroll Deductions
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No
minimum
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N/A
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N/A
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Fee-based Advisory Programs
and Retirement and Benefit Plans
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No
minimum
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No
minimum
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No
minimum
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Class I Share Minimum Investment.
Unless otherwise provided, the minimum
amount of an initial investment in Class I shares is $1 million. There is no
minimum initial investment for (i) purchases through or by registered
investment advisers, bank trust departments, and other financial intermediaries
otherwise eligible to purchase Class I shares that charge a fee for services
that include investment advisory or management services or (ii) purchases by
retirement and benefit plans meeting the Class I eligibility requirements
described below. These investment minimums may be suspended, changed, or
withdrawn by Lord Abbett Distributor LLC (“Lord Abbett Distributor”).
Additional Information About the Availability of Share
Classes
Class
B Shares.
The Fund
does not offer Class B shares for new or additional investments. Existing
shareholders of Class B shares may reinvest dividends into Class B shares and
exchange their Class B shares for Class B shares of other Lord Abbett Funds as
permitted by the current exchange privileges. The 12b-1 fee, CDSC, and
conversion features will continue to apply to Class B shares held by
shareholders. Any purchase requests for Class B shares will be deemed to be a
purchase request for Class A shares and will be subject to any applicable sales
charge.
Class C Shares.
The Fund will not accept purchases of Class C shares of $500,000 or
more, or in any amount that, when combined with the value of all shares of
Eligible Funds (as defined below) under the terms of rights of accumulation,
would result in the investor holding more than $500,000 of shares of Eligible
Funds at the time of such purchase, unless an appropriate representative of the
investor’s broker-dealer firm (or other financial intermediary, as applicable)
provides written authorization for the transaction. Please contact Lord Abbett
Distributor with any questions regarding eligibility to purchase Class C shares
based on the prior written authorization from the investor’s broker-dealer firm
or other financial intermediary.
With respect to qualified
retirement plans, the Fund will not reject a purchase of Class C shares by such
a plan in the event that a purchase amount, when combined with the value of all
shares of Eligible Funds under the terms of rights of accumulation, would
result in the plan holding more than $500,000 of shares of Eligible Funds at
the time of the purchase. Any subsequent purchase orders submitted by the plan,
however, would be subject to the Class C share purchase limit policy described
above. Such subsequent purchases would be considered purchase orders for Class
R3 shares.
Class F Shares.
Class F shares generally are available to investors participating in
fee-based advisory programs that have (or whose trading agents have) an
agreement with Lord Abbett Distributor and to investors that are clients of
certain registered investment advisers that have an agreement with Lord Abbett
Distributor, if it so deems appropriate.
Class I Shares.
Class I shares are available for purchase by the following entities:
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Institutional investors,
including companies, foundations, trusts and endowments, and other entities
determined by Lord Abbett Distributor to be institutional investors, making
an initial minimum investment of at least $1 million;
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•
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Retirement and benefit
plans investing directly or through an intermediary,
provided that
in the case
of an intermediary, the intermediary has entered into a special arrangement
with the Fund and/or Lord Abbett Distributor specifically for such purchases;
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Registered investment
advisers investing on behalf of their advisory clients,
provided that
in the case
of a registered investment adviser that is also a registered broker-dealer,
the firm has not entered into any agreement or arrangement whereby Lord
Abbett makes payments to the firm out of its own resources for various
services, such as marketing support, training and education activities, and
other services for which Lord Abbett may make such revenue sharing payments
to the firm; and
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Bank trust departments and
trust companies purchasing shares for their clients,
provided that
the bank or
trust company (and its trading agent, if any) has entered into a special
arrangement with the Fund and/or Lord Abbett Distributor specifically for
such purchases.
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Class I shares also are
available for purchase by each registered investment company within the Lord
Abbett Family of Funds that operates as a fund of funds and, at the discretion
of Lord Abbett Distributor, other registered investment companies that are not
affiliated with Lord Abbett and operate as funds of funds.
Shareholders who held Class I
shares on July 9, 2010 may continue to hold, purchase, exchange, and redeem
Class I shares, provided that there has been no change in the registration of
the account since that date.
10
Financial
intermediaries should contact Lord Abbett Distributor to determine whether the
financial intermediary may be eligible for such purchases.
Class R2 and R3 (collectively referred to as
“Class R”)
Shares.
Class R shares generally are
available through:
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•
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employer-sponsored
retirement and benefit plans where the employer, administrator, recordkeeper,
sponsor, related person, financial intermediary, or other appropriate party
has entered into an agreement with the Fund or Lord Abbett Distributor to
make Class R shares available to plan participants; or
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•
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dealers that
have entered into certain approved agreements with Lord Abbett Distributor.
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Class R shares
also are available for orders made by or on behalf of a financial intermediary
for clients participating in an IRA rollover program sponsored by the financial
intermediary that operates the program in an omnibus recordkeeping environment
and has entered into special arrangements with the Fund and/or Lord Abbett
Distributor specifically for such orders.
Class R shares
generally are not available to retail non-retirement accounts, traditional and
Roth IRAs, Coverdell Education Savings Accounts, SEPs, SARSEPs, SIMPLE IRAs,
individual 403(b) plans, or 529 college savings plans.
S
ALES CHARGES
As an investor
in the Fund, you may pay one of two types of sales charges: a front-end sales
charge that is deducted from your investment when you buy Fund shares or a CDSC
that applies when you sell Fund shares.
Class A Share Front-End Sales Charge.
Front-end sales charges are applied only to Class A shares. You buy Class A
shares at the offering price, which is the NAV plus a sales charge. You pay a
lower rate as the size of your investment increases to certain levels called
breakpoints. You do not pay a sales charge on the Fund’s distributions or
dividends you reinvest in additional Class A shares. The table below shows the
rate of sales charge you pay (expressed as a percentage of the offering price
and the net amount you invest), depending on the amount you purchase.
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Front-End Sales Charge — Class A Shares
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Your
Investment
|
Front-End Sales
Charge as a % of
Offering Price
|
Front-End Sales
Charge as a % of Your
Investment
|
To Compute Offering
Price Divide NAV by
|
Maximum Dealer’s
Concession as a % of
Offering Price
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Less than $50,000
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5.75%
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6.10%
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.9425
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5.00%
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$50,000 to $99,999
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4.75%
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4.99%
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.9525
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4.00%
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$100,000 to $249,999
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3.95%
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4.11%
|
.9605
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3.25%
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$250,000 to $499,999
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2.75%
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2.83%
|
.9725
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2.25%
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$500,000 to $999,999
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1.95%
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1.99%
|
.9805
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1.75%
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$1,000,000 and over
|
No
Sales Charge
|
No
Sales Charge
|
1.0000
|
†
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† See
“Dealer Concessions on Class A Share Purchases Without a Front-End Sales
Charge.”
Note:
The above percentages may vary for particular investors due to rounding.
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CDSC.
Regardless of
share class, the CDSC 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
redeemed, whichever is lower. In addition, repayment of loans under certain
retirement and benefit 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:
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1.
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shares
acquired by reinvestment of dividends and capital gains (always free of a
CDSC);
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2.
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shares held
for six years or more (Class B), or one year or more (Class A and Class C);
and
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3.
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shares held
the longest before the sixth anniversary of their purchase (Class B), or
before the first anniversary of their purchase (Class A and Class C).
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If you buy
Class A shares of the Fund under certain purchases with a front-end sales
charge waiver or if you acquire Class A shares of the Fund in exchange for
Class A shares of another Lord Abbett Fund subject to a CDSC, and you redeem
any of the Class A shares before the first day of the month in which the
one-year anniversary of your purchase falls, a CDSC of 1% normally will be
collected. Class F, I, R2, and R3 shares are not subject to a CDSC.
If you acquire
Fund shares through an exchange from another Lord Abbett Fund that originally
were purchased subject to a CDSC and you redeem before the applicable CDSC
period has expired, you will be charged the CDSC. The CDSC will be remitted to
the appropriate party.
11
Class B Share CDSC.
The CDSC for Class B shares normally applies if you redeem your shares before
the sixth anniversary of the day on which the purchase order was accepted. The
CDSC will be remitted to Lord Abbett Distributor. The CDSC declines the longer
you own your shares, according to the following schedule:
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CDSC — Class B Shares
|
|
|
Anniversary
of the Day on
Which the Purchase
Order was Accepted
(1)
|
CDSC on Redemptions
as a % of Amount
Subject to CDSC
|
|
Before the 1st
|
5.0%
|
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On the 1st, before the 2nd
|
4.0%
|
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On the 2nd, before the 3rd
|
3.0%
|
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On the 3rd, before the 4th
|
3.0%
|
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On the 4th, before the 5th
|
2.0%
|
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On the 5th, before the 6th
|
1.0%
|
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On or after the 6th
anniversary
(2)
|
None
|
|
(1)
The anniversary is the same calendar day in each respective year after
the date of purchase. For example, the anniversary for shares purchased on
May 1st will be May 1
st
of each succeeding year.
(2)
Class
B shares automatically will convert to Class A shares on the 25th day of the
month (or, if the 25th is not a business day, the next business day
thereafter) following the eighth anniversary of the day on which the purchase
order was accepted.
|
Class C Share CDSC.
The 1% CDSC for Class C shares normally applies if you redeem your shares
before the first anniversary of your purchase. The CDSC will be remitted to
Lord Abbett Distributor.
S
ALES CHARGE
REDUCTIONS AND WAIVERS
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Please
inform the Fund or your financial intermediary at the time of your purchase
of Fund shares if you believe you qualify for a reduced front-end sales
charge. More information about sales charge reductions and waivers is
available free of charge at www.lordabbett.com/flyers/breakpoints_info.pdf.
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Reducing Your Class A Share Front-End Sales
Charge.
You may purchase Class A shares at a discount
if you qualify under the circumstances outlined below. To receive a reduced
front-end sales charge, you must let the Fund or your financial intermediary
know at the time of your purchase of Fund shares that you believe you qualify
for a discount. If you or a related party have holdings of Eligible Funds (as
defined below) in other accounts with your financial intermediary or with other
financial intermediaries that may be combined with your current purchases in
determining the sales charge as described below, you must let the Fund or your
financial intermediary know. You may be asked to provide supporting account
statements or other information to allow us or your financial intermediary to
verify your eligibility for a discount. If you or your financial intermediary
do not notify the Fund or provide the requested information, you may not
receive the reduced sales charge for which you otherwise qualify. Class A
shares may be purchased at a discount if you qualify under any of the following
conditions:
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•
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Larger Purchases
– You may reduce or
eliminate your Class A front-end sales charge by purchasing Class A shares in
greater quantities. The breakpoint discounts offered by the Fund are
indicated in the table under “Sales Charges – Class A Share Front-End Sales
Charge.”
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Rights of Accumulation
– A Purchaser (as
defined below) may combine the value of Class A, B, C, and F shares of any
Eligible Fund currently owned with a new purchase of Class A shares of any
Eligible Fund in order to reduce the sales charge on the new purchase. Class
I, R2, and R3 share holdings may not be combined for these purposes.
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To the
extent that your financial intermediary is able to do so, the value of Class
A, B, C, and F shares of Eligible Funds determined for the purpose of
reducing the sales charge of a new purchase under the Rights of Accumulation
will be calculated at the higher of: (1) the aggregate current maximum
offering price of your existing Class A, B, C, and F shares of Eligible
Funds; or (2) the aggregate amount you invested in such shares (including
dividend reinvestments but excluding capital appreciation) less any
redemptions. You should retain any information and account records necessary
to substantiate the historical amounts you and any related Purchasers have
invested in Eligible Funds. You must inform the Fund and/or your financial
intermediary at the time of purchase if you believe your purchase qualifies
for a reduced sales charge and you may be requested to provide documentation
of your holdings in order to verify your eligibility. If you do not do so,
you may not receive all sales charge reductions for which you are eligible.
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Letter of Intention
– In order to reduce
your Class A front-end sales charge, a Purchaser may combine purchases of Class
A, C, and F shares of any Eligible Fund the Purchaser intends to make over
the next 13 months in determining the applicable sales charge. The 13-month
Letter of Intention period commences on the day that the Letter of Intention
is received by the Fund, and the Purchaser must tell the Fund that later
purchases are subject to the Letter of Intention. Purchases submitted prior
to the date
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12
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the Letter
of Intention is received by the Fund are not counted toward the sales charge
reduction. Current holdings under Rights of Accumulation may be included in a
Letter of Intention in order to reduce the sales charge for purchases during
the 13-month period covered by the Letter of Intention. Shares purchased
through reinvestment of dividends or distributions are not included. Class I,
R2, and R3 share holdings may not be combined for these purposes. Class A
shares valued at 5% of the amount of intended purchases are escrowed and may
be redeemed to cover the additional sales charges payable if the intended
purchases under the Letter of Intention are not completed. The Letter of
Intention is neither a binding obligation on you to buy, nor on the Fund to
sell, any or all of the intended purchase amount.
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Purchaser
A Purchaser includes: (1) an
individual; (2) an individual, his or her spouse, and children under the age of
21; (3) retirement and benefit plans including a 401(k) plan, profit-sharing
plan, money purchase plan, defined benefit plan, and 457(b) plan sponsored by a
governmental entity, non-profit organization, school district or church to
which employer contributions are made, as well as SIMPLE IRA plans and SEP-IRA
plans; or (4) a trustee or other fiduciary purchasing shares for a single
trust, estate or single fiduciary account. An individual may include under item
(1) his or her holdings in Eligible Funds as described above in IRAs, as a sole
participant of a retirement and benefit plan sponsored by the individual’s
business, and as a participant in a 403(b) plan to which only pre-tax salary
deferrals are made. An individual and his or her spouse may include under item
(2) their holdings in IRAs, and as the sole participants in retirement and
benefit plans sponsored by a business owned by either or both of them. A
retirement and benefit plan under item (3) includes all qualified retirement
and benefit plans of a single employer and its consolidated subsidiaries, and
all qualified retirement and benefit plans of multiple employers registered in
the name of a single bank trustee.
Eligible Fund
An Eligible Fund is any Lord
Abbett Fund except for (1) Lord Abbett Series Fund, Inc.; (2) Lord Abbett U.S.
Government & Government Sponsored Enterprises Money Market Fund, Inc.
(“Money Market Fund”) (except for holdings in Money Market Fund which are attributable
to any shares exchanged from the Lord Abbett Funds); and (3) any other fund the
shares of which are not available to the investor at the time of the
transaction due to a limitation on the offering of the fund’s shares.
Front-End Sales Charge Waivers.
Class
A shares may be purchased without a front-end sales charge under any of the
following conditions:
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purchases of
$1 million or more (may be subject to a CDSC);
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purchases by
retirement and benefit plans with at least 100 eligible employees (may be
subject to a CDSC);
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purchases
for retirement and benefit plans made through financial intermediaries that
perform participant recordkeeping or other administrative services for the
plans and that have entered into special arrangements with the Fund and/or
Lord Abbett Distributor specifically for such purchases (may be subject to a
CDSC);
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purchases
made by or on behalf of financial intermediaries for clients that pay the
financial intermediaries fees in connection with a fee-based advisory
program, provided that the financial intermediaries or their trading agents
have entered into special arrangements with the Fund and/or Lord Abbett
Distributor specifically for such purchases;
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purchases by
insurance companies and/or their separate accounts to fund variable insurance
contracts, provided that the insurance company provides recordkeeping and
related administrative services to the contract owners and has entered into
special arrangements with the Fund and/or Lord Abbett Distributor
specifically for such purchases;
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purchases
made with dividends and distributions on Class A shares of another Eligible
Fund;
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purchases
representing repayment under the loan feature of the Lord Abbett prototype
403(b) plan for Class A shares;
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purchases by
employees of any consenting securities dealer having a sales agreement with
Lord Abbett Distributor;
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purchases by
trustees or custodians of any pension or profit sharing plan, or payroll
deduction IRA for the employees of any consenting securities dealer having a
sales agreement with Lord Abbett Distributor;
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purchases
involving the concurrent sale of Class B or C shares of the Fund related to
the requirements of a settlement agreement that the broker-dealer entered
into with a regulatory body relating to share class suitability. These sales
transactions will be subject to the assessment of any applicable CDSCs
(although the broker-dealer may pay on behalf of the investor or reimburse
the investor for any such CDSC), and any investor purchases subsequent to the
original concurrent transactions will be at the applicable public offering
price, which may include a sales charge; and
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certain
other types of investors may qualify to purchase Class A shares without a
front-end sales charge as described in the SAI.
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CDSC Waivers.
The
CDSC generally will not be assessed on Class A, B, or C shares under the
circumstances listed in the table below. Certain other types of redemptions may
qualify for a CDSC waiver. Documentation may be required and some limitations
may apply.
13
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CDSC Waivers
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Share Class(es)
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Benefit payments under
retirement and benefit plans in connection with loans, hardship withdrawals,
death, disability, retirement, separation from service, or any excess
distribution under retirement and benefit plans
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A,
B, C
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Eligible mandatory
distributions under the Internal Revenue Code of 1986
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A,
B, C
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Redemptions by retirement
and benefit plans made through financial intermediaries that have special
arrangements with the Fund and/or Lord Abbett Distributor, provided the plan
has not redeemed all, or substantially all, of its assets from the Lord
Abbett Funds
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A
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Redemptions by retirement
and benefit plans made through financial intermediaries that have special
arrangements with the Fund and/or Lord Abbett Distributor that include the
waiver of CDSCs and that initially were entered into prior to December 2002
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A
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Class A and Class C shares
that are subject to a CDSC and held by certain 401(k) plans for which the
Fund’s transfer agent provides plan administration and recordkeeping services
and which offer Lord Abbett Funds as the only investment options to the
plan’s participants no longer will be subject to the CDSC upon the
401(k)plan’s transition to a financial intermediary that: (1) provides
recordkeeping services to the plan; (2) offers other mutual funds in addition
to the Lord Abbett Funds as investment options for the plan’s participants;
and (3) has entered into a special arrangement with Lord Abbett to facilitate
the 401(k) plan’s transition to the financial intermediary
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A,
C
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Death of the shareholder
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B,
C
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Redemptions under Div-Move
and Systematic Withdrawal Plans (up to 12% per year)
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B,
C
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Concurrent Sales.
A
broker-dealer may pay on behalf of an investor or reimburse an investor for a
CDSC otherwise applicable in the case of transactions involving purchases
through such broker-dealer where the investor concurrently is selling his or
her holdings in Class B or C shares of the Fund and buying Class A shares of
the Fund, provided that the purchases are related to the requirements of a
settlement agreement that the broker-dealer entered into with a regulatory body
relating to share class suitability.
Reinvestment Privilege.
If you redeem Class A or B shares of the Fund, you may reinvest some or all of
the proceeds in the same class of any Eligible Fund on or before the 60th day
after the redemption without a sales charge unless the reinvestment would be
prohibited by the Fund’s frequent trading policy. Special tax rules may apply.
Please see the SAI for more information. If you paid a CDSC when you redeemed
your shares, you will be credited with the amount of the CDSC. All accounts
involved must have the same registration. This privilege does not apply to purchases
made through Invest-A-Matic or other automatic investment services.
F
INANCIAL
INTERMEDIARY COMPENSATION
As part of a
plan for distributing shares, authorized financial intermediaries that sell the
Fund’s shares and service its shareholder accounts receive sales and service
compensation. Additionally, authorized financial intermediaries may charge a
fee to effect transactions in Fund shares.
Sales
compensation originates from sales charges that are paid directly by
shareholders and 12b-1 distribution fees that are paid by the Fund out of share
class assets. Service compensation originates from 12b-1 service fees. Because
12b-1 fees are paid on an ongoing basis, over time the payment of such fees
will increase the cost of an investment in the Fund, which may be more than the
cost of other types of sales charges. The Fund accrues 12b-1 fees daily at
annual rates shown in the “Fees and Expenses” table above based upon average
daily net assets. The portion of the distribution and service (12b-1) fees that
are paid to financial intermediaries for each share class is as follows:
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Class
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Fee
(1)
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A
(2)
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B
(2)
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C
(2)
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F
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I
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R2
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R3
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Service
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0.25%
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0.25%
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0.25%
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—
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—
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0.25%
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0.25%
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Distribution
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—
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—
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0.75%
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—
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—
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0.35%
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0.25%
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(1)
The
Fund may designate a portion of the aggregate fee as attributable to service
activities for purposes of calculating Financial Industry Regulatory
Authority, Inc. sales charge limitations.
(2)
For
purchases of Class A shares without a front-end sales charge and for which
Lord Abbett Distributor pays distribution-related compensation, and for all
purchases of Class B and Class C shares, the 12b-1 payments shall commence 13
months after purchase.
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Lord Abbett
Distributor may pay 12b-1 fees to authorized financial intermediaries or use
the fees for other distribution purposes, including revenue sharing. The
amounts paid by the Fund need not be directly related to expenses. If Lord
Abbett Distributor’s actual expenses exceed the fee paid to it, the Fund will
not have to pay more than that fee. Conversely, if Lord Abbett Distributor’s
expenses are less than the fee it receives, Lord Abbett Distributor will keep
the excess amount of the fee.
Sales Activities.
The
Fund may use 12b-1 distribution fees to pay authorized financial intermediaries
to finance any activity that primarily is intended to result in the sale of
shares. Lord Abbett Distributor uses its portion of the distribution fees
attributable to the shares of a particular class for activities that primarily
are intended to result in the sale of shares of such class. These activities
include,
14
but are not
limited to, printing of prospectuses and statements of additional information
and reports for anyone other than existing shareholders, preparation and
distribution of advertising and sales material, expenses of organizing and
conducting sales seminars, additional payments to authorized financial
intermediaries, maintenance of shareholder accounts, the cost necessary to
provide distribution-related services or personnel, travel, office expenses, equipment
and other allocable overhead.
Service Activities.
Lord Abbett Distributor may pay 12b-1 service fees to authorized financial
intermediaries for any activity that primarily is intended to result in
personal service and/or the maintenance of shareholder accounts or certain
retirement and benefit plans. Any portion of the service fees paid to Lord
Abbett Distributor will be used to service and maintain shareholder accounts.
Dealer Concessions on
Class A Share Purchases With a Front-End Sales Charge.
See “Sales Charges – Class A Share Front-End Sales Charge” for more
information.
Dealer Concessions on Class A Share Purchases
Without a Front-End Sales Charge.
Except as otherwise
set forth in the following paragraphs, Lord Abbett Distributor may pay Dealers
distribution-related compensation (i.e., concessions) according to the schedule
set forth below under the following circumstances:
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purchases of
$1 million or more;
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purchases by
certain retirement and benefit plans with at least 100 eligible employees; or
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purchases
for certain retirement and benefit plans made through financial
intermediaries that perform participant recordkeeping or other administrative
services for the plans in connection with multiple fund family recordkeeping
platforms and have entered into special arrangements with the Fund and/or
Lord Abbett Distributor specifically for such purchases (“Alliance
Arrangements”).
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Dealers
receive concessions described below on purchases made within a 12-month period
beginning with the first NAV purchase of Class A shares for the account. The
concession rate resets on each anniversary date of the initial NAV purchase,
provided that the account continues to qualify for treatment at NAV. Current
holdings of Class B and C shares of Eligible Funds will be included for
purposes of calculating the breakpoints in the schedule below and the amount of
the concessions payable with respect to the Class A share investment.
Concessions may not be paid with respect to Alliance Arrangements unless Lord
Abbett Distributor can monitor the applicability of the CDSC.
Financial
intermediaries should contact Lord Abbett Distributor for more complete
information on the commission structure.
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Dealer
Concession Schedule —
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Class A
Shares for Certain Purchases Without a Front-End Sales Charge
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The dealer concession
received is based on the amount of the Class A share investment as follows:
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Class A
Investments
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Front-End Sales Charge*
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Dealer’s Concession
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$1 million to $5 million
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None
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1.00%
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Next $5 million above that
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None
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0.55%
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Next $40 million above that
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None
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0.50%
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Over $50 million
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None
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0.25%
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* Class A shares purchased without a sales charge
will be subject to a 1% CDSC if they are redeemed before the first day of the
month in which the one-year anniversary of the purchase falls. For Alliance
Arrangements involving financial intermediaries offering multiple fund
families to retirement and benefit plans, the CDSC normally will be collected
only when a plan effects a complete redemption of all or substantially all
shares of all Lord Abbett Funds in which the plan is invested.
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Dealer Concessions on Class B Shares.
The Fund does not offer Class B shares for purchase by new or existing
investors (other than through an exchange or reinvestment of a distribution).
Accordingly, sales concessions on Class B shares are not available.
Dealer Concessions on Class C Shares.
Lord Abbett Distributor may pay financial intermediaries selling Class C shares
a sales concession of up to 1.00% of the purchase price of the Class C shares
and Lord Abbett Distributor will collect and retain any applicable CDSC.
Dealer Concessions on Class F, I, R2, and R3
Shares
. Class F, I, R2, and R3 shares are purchased at
NAV with no front-end sales charge and no CDSC when redeemed. Accordingly,
there are no dealer concessions on these shares.
Revenue Sharing and Other Payments to Dealers
and Financial Intermediaries
. Lord Abbett (the term
“Lord Abbett” in this section also refers to Lord Abbett Distributor unless the
context requires otherwise) may make payments to certain financial
intermediaries for marketing and distribution support activities. Lord Abbett
makes these payments, at its own expense, out of its own resources (including
revenues from advisory fees and 12b-1 fees), and without any additional costs
to the Fund or the Fund’s shareholders.
15
These
payments, which may include amounts that sometimes are referred to as “revenue
sharing” payments, are in addition to the Fund’s fees and expenses described in
this prospectus. In general, these payments are intended to compensate or
reimburse financial intermediary firms for certain activities, including:
promotion of sales of Fund shares, such as placing the Lord Abbett Family of
Funds on a preferred list of fund families; making Fund shares available on
certain platforms, programs, or trading venues; educating a financial
intermediary firm’s sales force about the Lord Abbett Funds; providing services
to shareholders; and various other promotional efforts and/or costs. The payments
made to financial intermediaries may be used to cover costs and expenses
related to these promotional efforts, including travel, lodging, entertainment,
and meals, among other things. In addition, Lord Abbett may provide payments to
a financial intermediary in connection with Lord Abbett’s participation in or
support of conferences and other events sponsored, hosted, or organized by the
financial intermediary. The aggregate amount of these payments may be
substantial and may exceed the actual costs incurred by the financial
intermediary in engaging in these promotional activities or services and the
financial intermediary firm may realize a profit in connection with such
activities or services.
Lord Abbett
may make such payments on a fixed or variable basis based on Fund sales,
assets, transactions processed, and/or accounts attributable to a financial
intermediary, among other factors. Lord Abbett determines the amount of these
payments in its sole discretion. In doing so, Lord Abbett may consider a number
of factors, including: a financial intermediary’s sales, assets, and redemption
rates; the nature and quality of any shareholder services provided by the
financial intermediary; the quality and depth of the financial intermediary’s
existing business relationships with Lord Abbett; the expected potential to
expand such relationships; and the financial intermediary’s anticipated growth
prospects. Not all financial intermediaries receive revenue sharing payments
and the amount of revenue sharing payments may vary for different financial
intermediaries. Lord Abbett may choose not to make payments in relation to
certain of the Lord Abbett Funds or certain classes of shares of any particular
Fund.
In some
circumstances, these payments may create an incentive for a broker-dealer or
its investment professionals to recommend or sell Fund shares to you. Lord
Abbett may benefit from these payments to the extent the broker-dealers sell
more Fund shares or retain more Fund shares in their clients’ accounts because
Lord Abbett receives greater management and other fees as Fund assets increase.
For more specific information about these payments, including revenue sharing
arrangements, made to your broker-dealer or other financial intermediary and
the conflicts of interest that may arise from such arrangements, please contact
your investment professional. In addition, please see the SAI for more
information regarding Lord Abbett’s revenue sharing arrangements with financial
intermediaries.
Payments for Recordkeeping, Networking, and
Other Services.
In addition to the payments from Lord
Abbett or Lord Abbett Distributor described above, from time to time, Lord
Abbett and Lord Abbett Distributor may have other relationships with financial
intermediaries relating to the provision of services to the Fund, such as
providing omnibus account services or executing portfolio transactions for the
Fund. The Fund generally may pay recordkeeping fees for services provided to
plans where the account is a plan-level or fund-level omnibus account and plan
participants have the ability to determine their investments in particular
mutual funds. If your financial intermediary provides these services, Lord
Abbett or the Fund may compensate the financial intermediary for these
services. In addition, your financial intermediary may have other relationships
with Lord Abbett or Lord Abbett Distributor that are not related to the Fund.
For example,
the Lord Abbett Funds may enter into arrangements with and pay fees to
financial intermediaries that provide recordkeeping or other subadministrative
services to certain groups of investors in the Lord Abbett Funds, including
participants in retirement and benefit plans, investors in mutual fund advisory
programs, investors in variable insurance products and clients of financial
intermediaries that operate in an omnibus environment (collectively,
“Investors”). The recordkeeping services typically include: (a) establishing
and maintaining Investor accounts and records; (b) recording Investor account
balances and changes thereto; (c) arranging for the wiring of funds; (d)
providing statements to Investors; (e) furnishing proxy materials, periodic
Lord Abbett Fund reports, prospectuses and other communications to Investors as
required; (f) transmitting Investor transaction information; and (g) providing
information in order to assist the Lord Abbett Funds in their compliance with
state securities laws. The fees that the Lord Abbett Funds pay are designed to
compensate financial intermediaries for such services.
The Lord
Abbett Funds also may pay fees to broker-dealers for networking services.
Networking services may include but are not limited to:
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establishing
and maintaining individual accounts and records;
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providing
client account statements; and
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providing
1099 forms and other tax statements.
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The networking
fees that the Lord Abbett Funds pay to broker-dealers normally result in
reduced fees paid by the Fund to the transfer agent, which otherwise would
provide these services.
Financial
intermediaries may charge additional fees or commissions other than those
disclosed in this prospectus, such as a transaction based fee or other fee for
its service, and may categorize and disclose these arrangements differently
than described in the discussion
16
above and in
the SAI. You may ask your financial intermediary about any payments it receives
from Lord Abbett or the Fund, as well as about fees and/or commissions it
charges.
P
URCHASES
Initial Purchases
.
Lord Abbett Distributor acts as an agent for the Fund to work with financial
intermediaries that buy and sell shares of the Fund on behalf of their clients.
Generally, Lord Abbett Distributor does not sell Fund shares directly to
investors. Initial purchases of Fund shares may be made through any financial
intermediary that has a sales agreement with Lord Abbett Distributor. Unless
you are investing in the Fund through a retirement and benefit plan, fee-based
program or other financial intermediary, you and your investment professional
may fill out the application and send it to the Fund at the address below. To
open an account through a retirement and benefit plan, fee-based program or
other type of financial intermediary, you should contact your financial
intermediary for instructions on opening an account.
[Lord Abbett
Growth Leaders Fund]
P.O. Box 219336
Kansas City, MO 64121
Please do not send account applications,
purchase, exchange or redemption orders to Lord Abbett’s offices in Jersey
City, NJ.
Additional Purchases
.
You may make additional purchases of Fund shares by contacting your investment
professional or financial intermediary. If you have direct account privileges
with the Fund, you may make additional purchases by:
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Telephone
. If you have established a bank
account of record, you may purchase Fund shares by telephone. You or your
investment professional should call the Fund at 888-522-2388.
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Online
.
If you have established a bank account
of record, you may submit a request online to purchase Fund shares by
accessing your account online. Please log onto www.lordabbett.com and enter
your account information and personal identification data.
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Mail
.
You may submit a written request to
purchase Fund shares by indicating the name(s) in which the account is
registered, the Fund’s name, the class of shares, your account number, and
the dollar amount you wish to purchase. Please include a check for the amount
of the purchase, which may be subject to a sales charge. If purchasing Fund
shares by mail, your purchase order will not be accepted or processed until
such orders are received by the Fund at P.O. Box 219336, Kansas City, MO
64121.
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Wire
.
You may purchase Fund shares via wire
by sending your purchase amount to: UMB, N.A., Kansas City, routing number:
101000695, bank account number: 987800033-3, FBO: (your account name) and
(your Lord Abbett account number). Specify the complete name of the Fund and
the class of shares you wish to purchase.
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Proper Form
.
An initial purchase order submitted directly to the Fund, or the Fund’s
authorized agent (or the agent’s designee), must contain: (1) an application
completed in good order with all applicable requested information; and (2)
payment by check or instructions to debit your checking account along with a
canceled check containing account information. Additional purchase requests
must include all required information and proper form of payment.
See “Account
Services and Policies – Procedures Required by the USA PATRIOT Act” for more
information.
Initial and
additional purchases of Fund shares are executed at the NAV next determined
after the Fund or the Fund’s authorized agent receives your purchase order in
proper form. The Fund reserves the right to modify, restrict or reject any
purchase order (including exchanges). All purchase orders are subject to
acceptance by the Fund.
Insufficient Funds
.
If you request a purchase and your bank account does not have sufficient funds
to complete the transaction at the time it is presented to your bank, your
requested transaction will be reversed and you will be subject to any and all
losses, fees and expenses incurred by the Fund in connection with processing
the insufficient funds transaction. The Fund reserves the right to liquidate
all or a portion of your Fund shares to cover such losses, fees and expenses.
E
XCHANGES
You or your
investment professional may instruct the Fund to exchange shares of any class
for shares of the same class of any other Lord Abbett Fund, provided that the
fund shares to be acquired in the exchange are available to new investors in
such other fund. For investors investing through retirement and benefit plans
or fee-based programs, you should contact the financial intermediary that
administers your plan or sponsors the fee-based program to request an exchange.
If you have
direct account privileges with the Fund, you may request an exchange
transaction by:
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Telephone
.
You or your investment
professional should call the Fund at 888-522-2388.
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Online.
You may submit a request online to
exchange your Fund shares by accessing your account online. Please log onto
www.lordabbett.com and enter your account information and personal
identification data.
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Mail.
You may submit a written request to
exchange your Fund shares by indicating the name(s) in which the account is
registered, the Fund’s name, the class of shares, your account number, the
dollar amount or number of shares you wish to exchange, and the name(s) of
the Eligible Fund(s) into which you wish to exchange your Fund shares. If
submitting a written request to exchange Fund shares, your exchange request
will not be processed until the Fund receives the request in good order at
P.O. Box 219336, Kansas City, MO 64121.
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The Fund may
revoke the exchange privilege for all shareholders upon 60 days’ written
notice. In addition, there are limitations on exchanging Fund shares for a
different class of shares, and moving shares held in certain types of accounts
to a different type of account or to a new account maintained by a financial
intermediary. Please speak with your financial intermediary if you have any
questions.
An exchange of
Fund shares for shares of another Lord Abbett Fund will be treated as a sale of
Fund shares and any gain on the transaction may be subject to federal income
tax. You should read the current prospectus for any Lord Abbett Fund into which
you are exchanging.
R
EDEMPTIONS
You may redeem
your Fund shares by contacting your investment professional or financial
intermediary. For shareholders investing through retirement and benefit plans
or fee-based programs, you should contact the financial intermediary that
administers your plan or sponsors the fee-based program to redeem your shares.
If you are redeeming shares held through a retirement and benefit plan, you may
be required to provide the Fund with certain documents completed in good order
before your redemption request will be processed.
If you have
direct account privileges with the Fund, you may redeem your Fund shares by:
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Telephone
.
You may redeem $100,000
or less from your account by telephone. You or your representative should
call the Fund at 888-522-2388.
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Online
.
You may submit a request online to redeem
your Fund shares by accessing your account online. Please log onto
www.lordabbett.com and enter your account information and personal
identification data.
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Mail
.
You may submit a written request to
redeem your Fund shares by indicating the name(s) in which the account is
registered, the Fund’s name, your account number, and the dollar amount or
number of shares you wish to redeem. If submitting a written request to
redeem your shares, your redemption will not be processed until the Fund
receives the request in good order at P.O. Box 219336, Kansas City, MO 64121.
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Insufficient Account Value
.
If you request a redemption transaction for a specific amount and your account
value at the time the transaction is processed is less than the requested redemption
amount, the Fund will deem your request as a request to liquidate your entire
account.
Redemption Payments
.
Redemptions of Fund shares are executed at the NAV next determined after the
Fund receives your order in proper form. Normally, redemption proceeds are paid
within three (but no more than seven) days after your redemption request is
received in good order. If you redeem shares that were recently purchased, the
Fund may delay the payment of the redemption proceeds until your check, bank
draft, electronic funds transfer or wire transfer has cleared, which may take
several days. This process may take up to 15 calendar days for purchases by
check to clear. Under unusual circumstances, the Fund may postpone payment for
more than seven days or suspend redemptions, to the extent permitted by law.
If you have
direct account access privileges, the redemption proceeds will be paid by
electronic transfer via an automated clearing house deposit to your bank
account on record with the Fund. If there is no bank account on record, your
redemption proceeds normally will be paid by check payable to the registered
account owner(s) and mailed to the address to which the account is registered.
You may request that your redemption proceeds of at least $1,000 be disbursed
by wire to your bank account of record by contacting the Fund and requesting
the redemption and wire transfer and providing the proper wiring instructions
for your bank account of record.
You may
request that redemption proceeds be made payable and disbursed to a person or
account other than the shareholder(s) of record, provided that you provide a
signature guarantee by an eligible guarantor, including a broker or bank that
is a member of the medallion stamp program. Please note that a notary public is
not an eligible guarantor.
A guaranteed
signature by an eligible guarantor is designed to protect you from fraud. The
Fund will require a guaranteed signature by an eligible guarantor on requests
for redemption that:
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Are signed
by you in your legal capacity to sign on behalf of another person or entity
(i.e., on behalf of an estate or on behalf of a corporation);
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Request a
redemption check to be payable to anyone other than the shareholder(s) of
record;
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Request a
redemption check to be mailed to an address other than the address of record;
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Request
redemption proceeds to be payable to a bank other than the bank account of
record; or
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Total more
than $100,000.
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Redemptions in Kind
.
The Fund reserves the right to pay redemption proceeds in whole or in part by
distributing liquid securities from the Fund’s portfolio. It is not expected
that the Fund would pay redemptions by an in kind distribution except in
unusual circumstances. If the Fund pays redemption proceeds by distributing
securities in kind, you could incur brokerage or other charges, and tax
liability, and you will bear market risks until the distributed securities are
converted into cash.
You should
note that your purchase, exchange, and redemption requests may be subject to
review and verification on an ongoing basis.
A
CCOUNT SERVICES
AND POLICIES
Certain of the
services and policies described below may not be available through certain
financial intermediaries. Contact your financial intermediary for services and
policies applicable to you.
Account Services
Automatic Services for Fund Investors
.
You may buy or sell shares automatically 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 the
application or by calling 888-522-2388.
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For
investing
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Invest-A-Matic*
(Dollar-cost averaging)
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You can make fixed,
periodic investments ($250 initial and $50 subsequent minimum) into your Fund
account by means of automatic money transfers from your bank checking
account. See the application for instructions.
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Div-Move*
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You may automatically
reinvest the dividends and distributions from your account into another
account in any Eligible Fund ($50 minimum).
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*
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In the case of financial
intermediaries maintaining accounts in omnibus recordkeeping environments or
in nominee name that aggregate the underlying accounts’ purchase orders for
Fund shares, the minimum subsequent investment requirements described above
will not apply to such underlying accounts.
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For
selling shares
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Systematic Withdrawal Plan
(“SWP”)
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You can make regular
withdrawals from most Lord Abbett Funds. Automatic cash withdrawals will be
paid to you from your account in fixed or variable amounts. To establish an
SWP, the value of your shares for Class A or C must be at least $10,000, and
for Class B the value of your shares must be at least $25,000, except in the
case of an SWP established for certain retirement and benefit plans, for
which there is no minimum. Your shares must be in non-certificate form.
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Class B and C Shares
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The CDSC will be waived on
redemptions of up to 12% of the current value of your account at the time of
your SWP request. For SWP redemptions over 12% per year, the CDSC will apply
to the entire redemption. Please contact the Fund for assistance in
minimizing the CDSC in this situation. Redemption proceeds due to an SWP for
Class B and C shares will be redeemed in the order described under “CDSC”
under “Sales Charges.”
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Telephone and Online Purchases and
Redemptions
.
Submitting transactions by telephone or
online may be difficult during times of drastic economic or market changes or
during other times when communications may be under unusual stress. When
initiating a transaction by telephone or online, shareholders should be aware
of the following considerations:
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Securit
y.
The Fund and its service providers
employ verification and security measures for your protection. For your
security, telephone and online transaction requests are recorded. You should
note, however, that any person with access to your account and other personal
information (including personal identification number) may be able to submit
instructions by telephone or online. The Fund will not be liable for relying
on instructions submitted by telephone or online that the Fund reasonably
believes to be genuine.
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Online
Confirmation
.
The Fund is not responsible for online transaction requests that may have
been sent but not received in good order. Requested transactions received by
the Fund in good order are confirmed at the completion of the order and your
requested transaction will not be processed unless you receive the
confirmation message.
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No Cancellations
.
You will be asked to
verify the requested transaction and may cancel the request before it is
submitted to the Fund. The Fund will not cancel a submitted transaction once
it has been received (in good order) and is confirmed at the end of the
telephonic or online transaction.
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Householding
.
We have adopted a policy that allows us to send only one copy of the
prospectus, proxy material, annual report and semiannual report to certain
shareholders residing at the same “household.” This reduces Fund expenses,
which benefits you and other shareholders. If you need additional copies or do
not want your mailings to be “householded,” please call us at 888-522-2388 or
send a
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written
request with your name, the name of your fund or funds, and your account number
or numbers to Lord Abbett Family of Funds, P.O. Box 219336, Kansas City, MO
64121.
Account Statements
.
Every investor automatically receives quarterly account statements.
Account Changes
.
For any changes you need to make to your account, consult your investment
professional or call the Fund at 888-522-2388.
Systematic Exchange
.
You or your investment professional can establish a schedule of exchanges
between the same classes of any other Lord Abbett Fund, provided that the fund
shares to be acquired in the exchange are available to new investors in such
other fund.
Account Policies
Pricing of Fund Shares
.
Under normal circumstances, NAV per share 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 (including exchanges) of Fund
shares are executed at the NAV (subject to any applicable sales charges) next
determined after the Fund or the Fund’s authorized agent receives your order in
proper form. Purchase and sale orders must be placed by the close of trading on
the NYSE in order to receive that day’s NAV; orders placed after the close of
trading on the NYSE will receive the next business day’s NAV. Fund shares will
not be priced on holidays when the NYSE is closed for trading. In the case of
purchase, redemption, or exchange orders placed through your financial
intermediary, when acting as the Fund’s authorized agent (or the agent’s
designee), the Fund will be deemed to have received the order when the agent or
designee receives the order in proper form.
In calculating
NAV, securities listed on any recognized U.S. or non-U.S. exchange (including
NASDAQ) are valued at the market closing price on the exchange or system on
which they are principally traded. Unlisted equity securities are valued at the
last transaction price, or, if there were no transactions that day, at the mean
between the most recently quoted bid and asked prices. Unlisted fixed income
securities (other than those with remaining maturities of 60 days or less) are
valued at prices supplied by independent pricing services, which prices reflect
broker/dealer-supplied valuations and electronic data processing techniques,
and reflect the mean between the bid and asked prices. Unlisted fixed income
securities (other than senior loans) having remaining maturities of 60 days or
less are valued at their amortized cost. The principal markets for non-U.S.
securities and U.S. fixed income securities also generally close prior to the
close of the NYSE. Consequently, values of non-U.S. investments and U.S. fixed
income securities will be determined as of the earlier closing of such
exchanges and markets unless the Fund prices such a security at its fair value.
Securities for
which prices or market quotations are not available, do not accurately reflect
fair value in Lord Abbett’s opinion, or have been materially affected by events
occurring after the close of the market on which the security is principally
traded but before 4:00 p.m. Eastern time are valued under fair value procedures
approved by and administered under the supervision of the Fund’s Board. These
circumstances may arise, for instance, when trading in a security is suspended,
the market on which a security is traded closes early, or demand for a security
(as reflected by its trading volume) is insufficient and thus calls into
question the reliability of the quoted or computed price, or the security is
relatively illiquid. The Fund may use fair value pricing more frequently for
securities primarily traded on foreign exchanges. Because many foreign markets
close hours before the Fund values its foreign portfolio holdings, significant
events, including broad market moves, may occur in the interim potentially
affecting the values of foreign securities held by the Fund. The Fund
determines fair value in a manner that fairly reflects the market value of the
security on the valuation date based on consideration of any information or
factors it deems appropriate. These may include recent transactions in
comparable securities, information relating to the specific security,
developments in the markets and their performance, and current valuations of
foreign or U.S. indices. The Fund’s use of fair value pricing may cause the NAV
of Fund shares to differ from the NAV that would be calculated using market
quotations. Fair value pricing involves subjective judgments and it is possible
that the fair value determined for a security may be materially different from
the value that could be realized upon the sale of that security.
Certain securities
that are traded primarily on foreign exchanges may trade on weekends or days
when the NAV is not calculated. As a result, the value of securities may change
on days when shareholders are not able to purchase or sell Fund shares.
Excessive Trading and Market
Timing.
The Fund is designed for long-term investors and is not intended to serve as a
vehicle for frequent trading in response to short-term swings in the market.
Excessive, short-term or market timing trading practices (“frequent trading”) may
disrupt management of the Fund, raise its expenses, and harm long-term
shareholders in a variety of ways. For example, volatility resulting from
frequent trading may cause the Fund difficulty in implementing long-term
investment strategies because it cannot anticipate the amount of cash it will
have to invest. The Fund may find it necessary to sell portfolio securities at
disadvantageous times to raise cash to meet the redemption demands resulting
from such frequent trading. Each of these, in turn, could increase tax,
administrative, and other costs, and reduce the Fund’s investment return.
To the extent
the Fund invests in foreign securities, the Fund may be particularly
susceptible to frequent trading because many foreign markets close hours before
the Fund values its portfolio holdings. This may allow significant events,
including broad market moves that occur in the interim, to affect the values of
foreign securities held by the Fund. The time zone differences among foreign
markets may allow a shareholder to exploit differences in the Fund’s share
prices that are based on closing prices of foreign securities determined before
the Fund calculates its NAV per share (known as “time zone arbitrage”). To the
extent the Fund invests in securities that are thinly traded or relatively
illiquid, the Fund also may be particularly susceptible to frequent trading
because the current market price for such securities may not accurately reflect
current market values. A shareholder may attempt to engage in frequent trading
to take advantage of these pricing differences (known as “price arbitrage”).
The Fund has adopted fair value procedures that allow the
20
Fund to use
values other than the closing market prices of these types of securities to
reflect what the Fund reasonably believes to be their fair value at the time it
calculates its NAV per share. The Fund expects that the use of fair value
pricing will reduce a shareholder’s ability to engage successfully in time zone
arbitrage and price arbitrage to the detriment of other Fund shareholders,
although there is no assurance that fair value pricing will do so. For more
information about these procedures, see “Pricing of Fund Shares” above.
The Fund’s
Board has adopted additional policies and procedures that are designed to
prevent or stop frequent trading. We recognize, however, that it may not be
possible to identify and stop or avoid every instance of frequent trading in
Fund shares. For this reason, the Fund’s policies and procedures are intended
to identify and stop frequent trading that we believe may be harmful to the
Fund. For this purpose, we consider frequent trading to be harmful if, in
general, it is likely to cause the Fund to incur additional expenses or to sell
portfolio holdings for other than investment-strategy-related reasons. Toward
this end, we have procedures in place to monitor the purchase, sale and
exchange activity in Fund shares by investors and financial intermediaries that
place orders on behalf of their clients, which procedures are described below.
The Fund may modify its frequent trading policy and monitoring procedures from
time to time without notice as and when deemed appropriate to enhance
protection of the Fund and its shareholders.
Frequent Trading Policy and Procedures.
Under the frequent trading policy, any Lord Abbett Fund shareholder redeeming
shares valued at $5,000 or more from a Lord Abbett Fund will be prohibited from
investing in the same Lord Abbett Fund for 30 calendar days after the
redemption date (the “Policy”). The Policy applies to all redemptions and
purchases for an account that are part of an exchange transaction or transfer
of assets, but does not apply to the following types of transactions unless
Lord Abbett Distributor determines in its sole discretion that the transaction
may be harmful to the Fund: (1) systematic purchases and redemptions, such as
purchases made through reinvestment of dividends or other distributions, or
certain automatic or systematic investment, exchange or withdrawal plans (such
as payroll deduction plans, and the Fund’s Invest-A-Matic and Systematic
Withdrawal Plans); (2) retirement and benefit plan payroll and/or employer
contributions, loans and distributions; (3) purchases or redemptions by a
“fund-of-funds” or similar investment vehicle that Lord Abbett Distributor in
its sole discretion has determined is not designed to and/or is not serving as
a vehicle for frequent trading; (4) purchases by an account that is part of a
fee-based program or mutual fund separate account program; and (5) purchases
involving certain transfers of assets, rollovers, Roth IRA conversions and IRA
recharacterizations; provided that the financial intermediary maintaining the
account is able to identify the transaction in its records as one of these
transactions. The Policy does not apply to the Money Market Fund, Lord Abbett
Floating Rate Fund, Lord Abbett Short Duration Income Fund, Lord Abbett
Intermediate Tax Free Fund, and Lord Abbett Short Duration Tax Free Fund,
provided that your financial intermediary is able to implement such exclusions.
In addition to
the Policy, we have procedures in place designed to enable us to monitor the
purchase, sale and exchange activity in Fund shares by investors and financial
intermediaries that place orders on behalf of their clients in order to attempt
to identify activity that is inconsistent with the Policy. If, based on these
monitoring procedures, we believe that an investor is engaging in, or has
engaged in, frequent trading that may be harmful to the Fund, normally, we will
notify the investor (and/or the investor’s financial professional) to cease all
such activity in the account. If the activity occurs again, we will place a
block on all further purchases or exchanges of the Fund’s shares in the
investor’s account and inform the investor (and/or the investor’s financial
professional) to cease all such activity in the account. The investor then has
the option of maintaining any existing investment in the Fund, exchanging Fund
shares for shares of Money Market Fund, or redeeming the account. Investors
electing to exchange or redeem Fund shares under these circumstances should
consider that the transaction may be subject to a CDSC or result in tax
consequences. As stated above, although we generally notify the investor (and/or
the investor’s financial professional) to cease all activity indicative of
frequent trading prior to placing a block on further purchases or exchanges, we
reserve the right to immediately place a block on an account or take other
action without prior notification when we deem such action appropriate in our
sole discretion. While we attempt to apply the Policy and procedures uniformly
to detect frequent trading practices, there can be no assurance that we will
succeed in identifying all such practices or that some investors will not
employ tactics that evade our detection.
We recognize
that financial intermediaries that maintain accounts in omnibus recordkeeping
environments or in nominee name may not be able reasonably to apply the Policy
due to systems limitations or other reasons. In these instances, Lord Abbett
Distributor may review the frequent trading policies and procedures that an
individual financial intermediary is able to put in place to determine whether
its policies and procedures are consistent with the protection of the Fund and
its investors, as described above. Lord Abbett Distributor also will seek the
financial intermediary’s agreement to cooperate with Lord Abbett Distributor’s
efforts to (1) monitor the financial intermediary’s adherence to its policies
and procedures and/or receive an amount and level of information regarding
trading activity that Lord Abbett Distributor in its sole discretion deems
adequate, and (2) stop any trading activity Lord Abbett Distributor identifies
as frequent trading. Nevertheless, these circumstances may result in a
financial intermediary’s application of policies and procedures that are less
effective at detecting and preventing frequent trading than the policies and
procedures adopted by Lord Abbett Distributor and by certain other financial
intermediaries. If an investor would like more information concerning the
policies, procedures and restrictions that may be applicable to his or her
account, the investor should contact the financial intermediary placing
purchase orders on his or her behalf. A substantial portion of the Fund’s
shares may be held by financial intermediaries through omnibus accounts or in
nominee name.
With respect
to monitoring of accounts maintained by a financial intermediary, to our knowledge,
in an omnibus environment or in nominee name, Lord Abbett Distributor will seek
to receive sufficient information from the financial intermediary to enable it
to
21
review the
ratio of purchase versus redemption activity of each underlying sub-account or,
if such information is not readily obtainable, in the overall omnibus
account(s) or nominee name account(s). If we identify activity that we believe
may be indicative of frequent trading activity, we normally will notify the
financial intermediary and request it to provide Lord Abbett Distributor with
additional transaction information so that Lord Abbett Distributor may
determine if any investors appear to have engaged in frequent trading activity.
Lord Abbett Distributor’s monitoring activity normally is limited to review of
historic account activity. This may result in procedures that may be less
effective at detecting and preventing frequent trading than the procedures Lord
Abbett Distributor uses in connection with accounts not maintained in an
omnibus environment or in nominee name.
If an investor
related to an account maintained in an omnibus environment or in nominee name
is identified as engaging in frequent trading activity, we normally will
request that the financial intermediary take appropriate action to curtail the
activity and will work with the relevant party to do so. Such action may
include actions similar to those that Lord Abbett Distributor would take, such
as issuing warnings to cease frequent trading activity, placing blocks on
accounts to prohibit future purchases and exchanges of Fund shares, or
requiring that the investor place trades through the mail only, in each case
either indefinitely or for a period of time. Again, we reserve the right to
immediately attempt to place a block on an account or take other action without
prior notification when we deem such action appropriate in our sole discretion.
If we determine that the financial intermediary has not demonstrated adequately
that it has taken appropriate action to curtail the frequent trading, we may
consider seeking to prohibit the account or sub-account from investing in the
Fund and/or also may terminate our relationship with the financial
intermediary. As noted above, these efforts may be less effective at detecting and
preventing frequent trading than the policies and procedures Lord Abbett
Distributor uses in connection with accounts not maintained in an omnibus
environment or in nominee name. The nature of these relationships also may
inhibit or prevent Lord Abbett Distributor or the Fund from assuring the
uniform assessment of CDSCs on investors, even though financial intermediaries
operating in omnibus environments typically have agreed to assess the CDSCs or
assist Lord Abbett Distributor or the Fund in assessing them.
Procedures Required by the USA PATRIOT Act.
To help the government fight the funding of terrorism and money laundering
activities, federal law requires all financial institutions, including the
Fund, to obtain, verify, and record information that identifies each person who
opens an account. What this means for you – when you open an account, we will
ask for your name, address, date and place of organization or date of birth,
taxpayer identification number or Social Security number, and we may ask for
other information that will allow us to identify you. We will ask for this
information in the case of persons who will be signing on behalf of certain
entities that will own the account. We also may ask for copies of documents. If
we are unable to obtain the required information within a short period of time
after you try to open an account, we will return your purchase order or account
application. Your monies will not be invested until we have all required
information. You also should know that we may verify your identity through the
use of a database maintained by a third party or through other means. If we are
unable to verify your identity, we may liquidate and close the account. This
may result in adverse tax consequences. In addition, the Fund reserves the
right to reject purchase orders or account applications accompanied by cash,
cashier’s checks, money orders, bank drafts, traveler’s checks, and third party
or double-endorsed checks, among others.
Small Account Closing Policy.
The Fund has established a minimum account
balance of $1,500. Subject to the approval of the Fund’s Board of Trustees, the
Fund may redeem your account (without charging a CDSC) if the net asset value
of your account falls below $1,500. The Fund will provide you with at least 60
days’ prior written notice before doing so, during which time you may avoid
involuntary redemption by making additional investments to satisfy minimum
account balance.
D
ISTRIBUTIONS AND
TAXES
The following
discussion is general. Because everyone’s tax situation is unique, you should
consult your tax advisor regarding the effect that an investment in the Fund
may have on your particular tax situation, including the treatment of
distributions under the federal, state, local, and foreign tax rules that apply
to you, as well as the tax consequences of gains or losses from the sale,
redemption, or exchange of your shares.
The Fund expects to declare
and pay dividends from its net investment income annually and to distribute any
of its net capital gains annually. All distributions, including dividends from
net investment income, will be reinvested in Fund shares unless you instruct
the Fund to pay them to you in cash. Retirement and benefit plan accounts may
not receive distributions in cash. There are no sales charges on reinvestments.
All
distributions, including dividends from net investment income, will be
reinvested in Fund shares unless you instruct the Fund to pay them to you in
cash. Your election to receive distributions in cash and payable by check will
apply only to distributions totaling $10.00 or more. Accordingly, any
distribution totaling less than $10.00 will be reinvested in Fund shares and
will not be paid to you by check. This policy does not apply to you if
you have elected to receive distributions that are directly deposited into your
bank account. Retirement and benefit plan accounts may not receive
distributions in cash. There are no sales charges on reinvestments.
For U.S.
federal income tax purposes, the Fund’s distributions generally are taxable to
shareholders, other than tax-exempt shareholders (including certain retirement
and benefit plan shareholders, as discussed below), regardless of whether paid
in cash or reinvested in additional Fund shares. Distributions of net
investment income and short-term capital gains are taxable as ordinary income;
however, for taxable years beginning before January 1, 2013, certain qualified
dividends that the Fund receives and
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distributes
may be subject to a reduced tax rate if you meet holding period and certain
other requirements. Distributions of net long-term capital gains are taxable as
long-term capital gains, regardless of how long you have owned Fund shares. Any
sale, redemption, or exchange of Fund shares may be taxable.
If you buy
shares after the Fund has realized income or capital gains but prior to the
record date for the distribution of such income or capital gains, you will be
“buying a dividend” by paying the full price for shares and then receiving a
portion of the price back in the form of a potentially taxable dividend.
Shareholders
that are exempt from U.S. federal income tax, such as retirement and benefit
plans that are qualified under Section 401 of the Internal Revenue Code,
generally are not subject to U.S. federal income tax on Fund dividends or
distributions or on sales or exchanges of Fund shares. However, in the case of
Fund shares held through a nonqualified deferred compensation plan, Fund
dividends and distributions received by the plan and sales and exchanges of
Fund shares by the plan generally will be taxable to the employer sponsoring
such plan in accordance with U.S. federal income tax laws governing deferred
compensation plans.
A plan
participant whose retirement and benefit plan invests in the Fund generally is
not taxed on Fund dividends or distributions received by the plan or on sales
or exchanges of Fund shares by the plan for U.S. federal income tax purposes.
However, distributions to plan participants from a retirement and benefit plan
generally are taxable to plan participants as ordinary income.
You must
provide your Social Security number or other taxpayer identification number to
the Fund along with certifications required by the Internal Revenue Service
when you open an account. If you do not or it is otherwise legally required to
do so, the Fund will withhold 28% “backup withholding” tax from your
distributions, sale proceeds, and any other payments to you.
Certain tax
reporting information concerning the tax treatment of Fund distributions,
including the source of dividends and distributions of capital gains by the
Fund, will be provided to shareholders each year.
Legislation
passed by Congress in 2008 requires mutual funds to report to the Internal
Revenue Service the “cost basis” of shares acquired by a shareholder on or
after January 1, 2012 and that are subsequently redeemed. These requirements
generally do not apply to investments through a tax-deferred arrangement or to
certain types of entities (such as C corporations). Also, if you hold Fund
shares through a broker (or another nominee), please contact that broker
(nominee) with respect to the reporting of cost basis and available elections
for your account.
If you are a
direct shareholder, you may request that your cost basis reported on Form
1099-B be calculated using any one of the alternative methods offered by the
Fund. Please contact the Fund to make, revoke, or change your election. If you
do not affirmatively elect a cost basis method then the Fund will use the
average cost basis method.
Please note that you will
continue to be responsible for calculating and reporting gains and losses on
redemptions of shares purchased prior to January 1, 2012. You are encouraged to
consult your tax advisor regarding the application of the new cost basis reporting
rules and, in particular, which cost basis calculation method you should elect.
23
FINANCIAL INFORMATION
F
INANCIAL HIGHLIGHTS
[These tables describe the
Fund’s performance for the fiscal periods indicated. “Total Return” shows how
much your investment in the Fund would have increased or decreased during each
period without considering the effects of sales loads and assuming you had
reinvested all dividends and distributions.]
24
GROWTH LEADERS FUND
Financial Highlights
[TO BE FILED BY AMENDMENT]
25
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To Obtain Information:
By telephone. For
shareholder account inquiries and for literature requests call the Fund at:
888-522-2388.
By mail. Write to the Fund at:
The Lord Abbett Family of Funds
90 Hudson Street
Jersey City, NJ 07302-3973
Via the Internet. Lord, Abbett & Co. LLC
www.lordabbett.com
Text
only versions of Fund documents can be viewed online or downloaded from the
SEC: http://www.sec.gov.
You
can also obtain copies by visiting the SEC’s Public Reference Room in
Washington, DC (phone 202-551-8090) or by sending your request and a
duplicating fee to the SEC’s Public Reference Section, Washington, DC
20549-1520 or by sending your request electronically to publicinfo@sec.gov.
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ADDITIONAL INFORMATION
More information on the Fund is available free upon request, including the following:
ANNUAL/SEMIANNUAL REPORTS
The
Fund’s annual and semiannual reports contain more information about the
Fund’s investments and performance. The annual report also includes details
about the market conditions and investment strategies that had a significant
effect on the Fund’s performance during the last fiscal year. The reports are
available free of charge at www.lordabbett.com, and through other means, as
indicated on the left.
STATEMENT OF ADDITIONAL INFORMATION
The SAI provides more details about the Fund and its policies. A current SAI is
on file with the SEC and is incorporated by reference (is legally considered
part of this prospectus). The SAI is available free of charge at
www.lordabbett.com, and through other means, as indicated on the left.
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Lord Abbett Securities Trust
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Lord Abbett Growth Leaders Fund
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**Graphic**
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[XXX-X]
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Lord Abbett Mutual Fund shares are distributed by: LORD ABBETT DISTRIBUTOR LLC
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(11/12)
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Investment Company Act File Number: 811-07538
**Graphic**
26
The information in
this statement of additional information with respect to Lord Abbett Growth
Leaders Fund, a series of Lord Abbett Securities Trust, is not complete and may
be changed. The securities of Lord Abbett Growth Leaders Fund may not be sold until
the registration statement filed with the Securities and Exchange Commission is
effective. This statement of additional information is not an offer to sell nor
does it seek an offer to buy these securities in any state where the offer or
sale is not permitted.
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LORD ABBETT
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Statement of Additional Information
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[November
28], 2012
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LORD
ABBETT SECURITIES TRUST
Lord Abbett Growth Leaders Fund
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CLASS/TICKER
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CLASS A
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LGLAX
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CLASS F
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LGLFX
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CLASS B
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TBD
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CLASS I
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LGLIX
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CLASS C
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LGLCX
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CLASS R2
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LGLQX
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CLASS R3
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LGLRX
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This
statement of additional information (“SAI”) is not a prospectus. A prospectus
may be obtained from your financial intermediary or from Lord Abbett
Distributor LLC (“Lord Abbett Distributor”) at 90 Hudson Street, Jersey City,
NJ 07302-3973. This SAI relates to, and should be read in conjunction with, the
prospectus for Lord Abbett Growth Leaders Fund (“Growth Leaders Fund,” or the
“Fund”), a series of Lord Abbett Securities Trust (the “Trust”) dated [November
28], 2012. Certain capitalized terms used throughout this SAI are defined in
the prospectus.
Shareholder
account inquiries should be made by directly contacting the Fund or by calling
888-522-2388. In addition, you can make inquiries through your financial
intermediary.
TABLE OF CONTENTS
1
.
Fund History
The
Trust is a Delaware statutory trust that was organized on February 26, 1993,
with an unlimited amount of shares of beneficial interest authorized. The Trust
has nine funds or series, one of which is offered by this SAI: Growth Leaders
Fund, a diversified, open-end management investment company registered under
the Investment Company Act of 1940, as amended (the “Act”). The Fund offers
seven classes of these shares (A, B, C, F, I, R2, and R3).
1-1
2
.
Investment Policies
Fundamental Investment Restrictions.
The Fund’s investment objective cannot be changed without the approval of a
“majority of the Fund’s outstanding shares.”
1
The Fund also is
subject to the following fundamental investment restrictions that cannot be
changed without the approval of a majority of the Fund’s outstanding shares.
The Fund may
not:
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(1)
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borrow money, except that (i) it may borrow from banks (as defined in
the Act)
2
in amounts up to 33 1/3% of its total assets (including
the amount borrowed), (ii) it may borrow up to an additional 5% of its total
assets for temporary purposes, (iii) it may obtain such short-term credit as
may be necessary for the clearance of purchases and sales of portfolio
securities, (iv) it may purchase securities on margin to the extent permitted
by applicable law,
3
and (v) it may borrow money from other Lord
Abbett Funds to the extent permitted by applicable law and any exemptive
relief obtained by the Fund;
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(2)
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pledge its assets (other than to secure borrowings, or to the extent
permitted by the Fund’s investment policies as permitted by applicable law);
4
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(3)
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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;
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(4)
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make loans to other persons, except that (i) the acquisition of
bonds, debentures or other corporate debt securities and investments 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, (ii) the Fund
may lend its portfolio securities, provided that the lending of portfolio
securities may be made only in accordance with applicable law, and (iii) the
Fund may lend money to other Lord Abbett Funds to the extent permitted by
applicable law and any exemptive relief obtained by the Fund;
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(5)
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buy or sell real estate (except that the Fund may invest in
securities directly or indirectly secured by real estate or interests therein
or issued by companies which invest in real estate or interests therein), or
commodities or commodity contracts (except to the extent the Fund may do so
in accordance with applicable law and without registering as a commodity pool
operator under the Commodity Exchange Act as, for example, with futures
contracts);
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(6)
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with respect to
75% of its gross assets, buy securities of one
issuer representing more than (i) 5% of its gross assets, or (ii) 10% of
the voting securities of such issuer; except, in either
case, securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities;
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(7)
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invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding securities of the
U.S. Government, its agencies and instrumentalities); or
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(8)
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issue senior securities to the extent such issuance would violate
applicable law.
5
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1
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A “majority of the Fund’s outstanding shares” means the vote of the
lesser of (1) 67% or more of the voting securities present at a shareholder
meeting, provided that more than 50% of the outstanding voting securities of
the Fund are present at the meeting or represented by proxy, or (2) more than
50% of the outstanding voting securities of the Fund regardless of whether such
shareholders are present at the meeting (or represented by proxy).
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2
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The term “bank” is defined in Section 2(a)(5) of the Act.
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3
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U.S. Securities and Exchange Commission (“SEC”) staff guidance
currently prohibits the Fund from purchasing any security on margin, except
such short-term credits as are necessary for the clearance of transactions.
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4
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Current federal securities laws prohibit the Fund from pledging more
than one-third of its total assets (taken at current value) to secure
borrowings made in accordance with the investment restrictions above. For the
purpose of this restriction the deposit of assets in a segregated account
with the Fund’s custodian in connection with any of the Fund’s investment
transactions is not considered to be a pledge of the Fund’s assets.
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5
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Current federal securities laws prohibit the Fund from issuing senior
securities (which generally are defined as securities representing
indebtedness), except that the Fund may borrow money from banks in amounts of
up to 33 1/3% of its total assets (including the amount borrowed).
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2-1
Compliance with these fundamental investment restrictions will be
determined at the time of the purchase or sale of the security, except in the
case of the first fundamental investment restriction, with which the Fund must
comply on a continuous basis.
Non-Fundamental Investment Restrictions.
In addition to the Fund’s investment objective and the investment restrictions
above that cannot be changed without shareholder approval, the Fund also is
subject to the following non-fundamental investment restrictions that may be
changed by the Trust’s Board of Trustees (the “Board”) without shareholder
approval.
The Fund may
not:
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(1)
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make short sales of securities or maintain a short position except to
the extent permitted by applicable law;
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(2)
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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 under the Securities Act of 1933, as amended (“Rule
144A”), determined by Lord Abbett to be liquid, subject to the oversight of
the Board;
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(3)
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invest in securities issued by other investment companies except to
the extent permitted by applicable law. The Fund may not, however, rely on
Sections 12(d)(1)(F) and 12(d)(1)(G) of the Act;
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(4)
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write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except to the extent permitted in its prospectus and
SAI, as they may be amended from time to time; or
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(5)
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buy from or sell to any of the Trust’s officers, trustees, employees,
or its investment adviser or any of the adviser’s officers, partners or
employees, any securities other than the Fund’s shares.
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Compliance
with these non-fundamental investment restrictions will be determined at the
time of the purchase or sale of the security, except in the case of the second
non-fundamental restriction, with which the Fund must comply at the time of
purchase. The Fund will not be required to sell illiquid securities if it exceeds
the 15% limit due to market activity or the sale of liquid securities; however,
in these situations the Fund will take appropriate measures to reduce the
percentage of its assets invested in illiquid securities.
Portfolio
Turnover Rate.
For each of the fiscal years ended October 31, 2012 and 2011,
the portfolio turnover rates for the Fund were as follows:
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2012
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2011
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[ ]%
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208.96%*
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*The Fund commenced
investment operations on June 24, 2011.
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Additional Information on Portfolio Risks, Investments, and
Techniques.
This
section provides further information on certain types of investments and
investment techniques that the Fund may use and some of the risks associated
with some investments and techniques. The composition of the Fund’s portfolio
and the investments and techniques that the Fund uses in seeking its investment
objective and employing its investment strategies will vary over time. The Fund
may use each of the investments and techniques described below at all times, at
some times or not at all.
Borrowing Money.
The Fund may borrow money for certain purposes as described above
under “Fundamental Investment Restrictions.” If the Fund borrows money and
experiences a decline in its net asset value (“NAV”), the borrowing will
increase its losses. The Fund will not purchase additional securities while
outstanding borrowings exceed 5% of its total assets. To the extent that the
Fund’s borrowings exceed the threshold permitted by the Fund’s fundamental
investment restriction, the Fund will take steps to reduce its borrowings.
Convertible Securities.
The Fund may invest in convertible
securities. Convertible securities are preferred stocks or debt obligations
that are convertible into common stock. Generally, convertible securities offer
lower interest or dividend yields than non-convertible securities of similar
quality and less potential for gains or capital appreciation in a rising stock
market than equity securities. They tend to be more volatile than other fixed
income securities, and the markets for convertible securities may be less
liquid than markets for common stocks or bonds. Convertible securities have
both equity and fixed income risk characteristics. Like all fixed income
securities, the value of convertible securities is susceptible to the risk of
market losses attributable to changes in interest rates. The market
2-2
value
of convertible securities tends to decline as interest rates increase. If,
however, the market price of the common stock underlying a convertible security
approaches or exceeds the conversion price of the convertible security, the
convertible security tends to reflect the market price of the underlying common
stock. In such a case, a convertible security may lose much or all of its value
if the value of the underlying common stock then falls below the conversion
price of the security. As the market price of the underlying common stock
declines, the convertible security tends to trade increasingly based on its
fixed income characteristics, and thus, may not necessarily decline in price as
much as the underlying common stock.
Depositary Receipts.
The Fund may invest in American Depositary Receipts (“ADRs”) and
similar depositary receipts. ADRs, typically issued by a financial institution
(a “depositary”), evidence ownership interests in a security or a pool of
securities issued by a foreign company and deposited with the depositary.
Prices of ADRs are quoted in U.S. dollars, and ADRs are traded in the U.S.
Ownership of ADRs entails similar investment risks to direct ownership of
foreign securities traded outside the U.S., including increased market,
liquidity, currency, political, information, and other risks. The Fund may not
invest more than 20% of its assets in foreign securities. ADRs, however, are
not considered to be foreign securities for purposes of such limitation.
Derivatives.
The Fund may invest in, or enter into, derivatives for a variety of
reasons, including to hedge certain market or interest rate risks, or to
provide a substitute for purchasing or selling particular securities or to
increase potential returns. Generally, derivatives are financial contracts
whose value depends upon, or is derived from, the value of an underlying asset,
reference rate or index, and may relate to stocks, bonds, interest rates, currencies
or currency exchange rates, and related indexes. Examples of derivative
instruments the Fund may use, to the extent described in the prospectus and
this SAI, include options contracts, futures contracts, options on futures
contracts, forward currency contracts, structured notes, and swap agreements.
Derivatives may provide a cheaper, quicker or more specifically focused way for
the Fund to invest than “traditional” securities would. The Fund’s portfolio
managers, however, may decide not to employ some or all of these strategies and
there is no assurance that any derivatives strategy used by the Fund will
succeed.
Derivatives
can be volatile and involve various types and degrees of risk, depending upon
the characteristics of the particular derivative and the portfolio as a whole.
Derivatives permit the Fund to increase or decrease the level of risk, or
change the character of the risk, to which its portfolio is exposed in much the
same way as the Fund can increase or decrease the level of risk, or change the
character of the risk, of its portfolio by making investments in specific
securities. However, derivatives may entail investment exposures that are
greater than their cost would suggest, meaning that a small investment in
derivatives could have a large potential impact on the Fund’s performance.
If
the Fund invests in derivatives at inopportune times or judges market
conditions incorrectly, such investments may lower the Fund’s return or result
in a loss. The Fund also could experience losses if its derivatives were poorly
correlated with its other investments, or if the Fund were unable to liquidate
its position because of an illiquid secondary market. The market for many
derivatives is, or suddenly can become, illiquid. Changes in liquidity may result
in significant, rapid and unpredictable changes in the prices for derivatives.
Derivatives
may be purchased on established exchanges or through privately negotiated
transactions referred to as over-the-counter (“OTC”) derivatives.
Exchange-traded derivatives generally are guaranteed by the clearing agency
that is the issuer or counterparty to such derivatives. This guarantee usually
is supported by a daily variation margin system operated by the clearing agency
in order to reduce overall credit risk. As a result, unless the clearing agency
defaults, there is relatively little counterparty credit risk associated with
derivatives purchased on an exchange. In contrast, no clearing agency
guarantees OTC derivatives. Therefore, each party to an OTC derivative bears
the risk that the counterparty will default. Accordingly, Lord Abbett will
consider the creditworthiness of counterparties to OTC derivatives in the same
manner as it would review the credit quality of a security to be purchased by
the Fund. OTC derivatives are less liquid than exchange-traded derivatives
since the other party to the transaction may be the only investor with
sufficient understanding of the derivative to be interested in bidding for it.
The
Fund will be required to “set aside” (often referred to as “asset segregation”)
liquid assets, or engage in other SEC or staff-approved measures, to “cover”
open positions with respect to certain kinds of derivatives. In the case of
futures contracts and forward contracts that are not contractually required to
cash settle, for example, the Fund must set aside liquid assets equal to such
contracts’ full notional value while the positions are open. With respect to
futures contracts and forward contracts that are contractually required to cash
settle, however, the Fund is permitted to set aside liquid assets in an amount
equal to the Fund’s daily marked-to-market net obligations (i.e., the Fund’s
daily net liability) under the contracts, if any, rather than such contracts’
full notional value. By setting aside assets
2-3
equal
to only its net obligations under cash-settled futures contracts, the Fund may
employ leverage to a greater extent than if the Fund were required to segregate
assets equal to the full notional value of such contracts. The Fund reserves
the right to modify its asset segregation policies in the future to comply with
any changes in the positions from time to time articulated by the SEC or its
staff regarding asset segregation.
Combined
Transactions
. The
Fund may enter into multiple transactions, including multiple options
transactions, multiple futures transactions, multiple currency transactions
including forward currency contracts and multiple interest rate transactions,
structured notes and any combination of futures, options, currency and interest
rate transactions (“component transactions”), instead of a single transaction,
as part of a single or combined strategy when, in the opinion of Lord Abbett,
it is in the best interests of the Fund to do so. A combined transaction will usually
contain elements of risk that are present in each of its component
transactions. Although combined transactions are normally entered into based on
Lord Abbett’s judgment that the combined strategies will reduce risk or
otherwise more effectively achieve the desired portfolio management goal, it is
possible that the combination will instead increase such risks or hinder
achievement of the portfolio management objective.
Future
Developments
.
The Fund may take advantage of opportunities
in options and futures contracts and options on futures contracts and any other
derivatives which are not presently contemplated for use by the Fund or which
are not currently available but which may be developed, to the extent such
opportunities are both consistent with the Fund’s investment objective and
legally permissible for the Fund. Before entering into such transactions or
making any such investment, the Fund will provide appropriate disclosure in its
prospectus or SAI.
Emerging Countries.
The Fund’s foreign investment may include emerging market securities.
The securities markets of emerging countries tend to be less liquid, especially
subject to greater price volatility, have a smaller market capitalization, have
less government regulation and not to be subject to as extensive and frequent
accounting, financial and other reporting requirements as securities issued in
more developed countries. Further, investing in the securities of issuers
located in certain emerging countries may present a greater risk of loss resulting
from problems in security registration and custody or substantial economic or
political disruptions. The Fund may invest in securities of companies whose
economic fortunes are linked to emerging markets but which principally are
traded on a non-emerging market exchange. Such investments do not meet the
Fund’s definition of an emerging market security. To the extent the Fund
invests in this manner, the percent of the Fund’s portfolio that is exposed to
emerging market risks may be greater than the percent of the Fund’s assets that
the Fund defines as representing emerging market securities.
Foreign Currency Transactions.
The Fund may enter into foreign currency
transactions for a variety of purposes, including: to fix in U.S. dollars,
between trade and settlement date, the value of a security the Fund has agreed
to buy or sell; to hedge the U.S. dollar value of securities the Fund already
owns, particularly if it expects a decrease in the value of the currency in
which the foreign security is denominated; or to gain or reduce exposure to the
foreign currency for investment purposes. In accordance with the Fund’s
investment objective and policies, the Fund may engage in spot transactions and
may use forward contracts to protect against uncertainty in the level of future
exchange rates.
The
Fund may invest directly in foreign currencies or hold financial instruments
that provide exposure to foreign currencies, in particular “hard currencies,”
or may invest in securities that trade in, or receive revenues in, foreign
currencies. “Hard currencies” are currencies in which investors have confidence
and typically are currencies of economically and politically stable
industrialized nations. To the extent the Fund invests in such currencies, the
Fund will be subject to the risk that those currencies will decline in value
relative to the U.S. dollar. Currency rates in foreign countries may fluctuate
significantly over short periods of time. Fund assets that are denominated in
foreign currencies may be devalued against the U.S. dollar, resulting in a
loss. A U.S. dollar investment in depositary receipts or shares of foreign
issuers traded on U.S. exchanges may be impacted differently by currency
fluctuations than would an investment made in a foreign currency on a foreign
exchange in shares of the same issuer. Foreign currencies also are subject to
risks caused by inflation, interest rates, budget deficits and low savings
rates, political factors and government control.
The
Fund may engage in spot transactions and also may use forward contracts. A
forward contract on foreign currencies involves obligations of one party to
purchase, and another party to sell, a specific currency at a future date
(which may be any fixed number of days from the date of the contract agreed upon
by the parties), at a price set at the time the contract is entered into. These
contracts typically are traded in the OTC derivatives market and entered into
directly between currency traders and their customers.
2-4
The
Fund may enter into forward contracts with respect to specific transactions.
For example, when the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when the Fund anticipates the
receipt in a foreign currency of dividend or interest payments on a security
that it holds, the Fund may desire to “lock in” the U.S. dollar price of the
security or the U.S. dollar equivalent of the payment, by entering into a
forward contract for the purchase or sale, for a fixed amount of U.S. dollars or
foreign currency, of the amount of foreign currency involved in the underlying
transaction. The Fund thereby will be able to protect itself against a possible
loss resulting from an adverse change in the relationship between the currency
exchange rates during the period between the date on which the security is
purchased or sold, or on which the payment is declared, and the date on which
such payments are made or received.
The
Fund also may use forward contracts in connection with existing portfolio
positions to lock in the U.S. dollar value of those positions, to increase the
Fund’s exposure to foreign currencies that Lord Abbett believes may rise in
value relative to the U.S. dollar or to shift the Fund’s exposure to foreign
currency fluctuations from one country to another. For example, when Lord
Abbett believes that the currency of a particular foreign country may suffer a
substantial decline relative to the U.S. dollar or another currency, it may
enter into a forward contract to sell the amount of the former foreign currency
approximating the value of some or all of the Fund’s portfolio securities
denominated in such foreign currency. This investment practice generally is
referred to as “cross-hedging” when another foreign currency is used.
The
precise matching of the forward contract amounts and the value of the
securities involved generally will not be possible because the future value of
such securities 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. Accordingly, it may be
necessary for the Fund to purchase additional foreign currency on the spot
(that is, cash) market (and bear the expense of such purchase) if the market
value of the security is less than the amount of foreign currency the Fund is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency. Conversely, it may be necessary to sell on
the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. Forward contracts involve the risk that
anticipated currency movements may not be accurately predicted, causing the
Fund to sustain losses on these contracts and transaction costs.
At
or before the maturity date of a forward contract that requires the Fund to
sell a currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a forward contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the
same currency on the maturity date of the first contract. The Fund would
realize a gain or loss as a result of entering into such an offsetting forward
contract under either circumstance to the extent the exchange rate between the
currencies involved moved between the execution dates of the first and second
contracts.
The
Fund also may enter into currency forward contracts that are contractually required
to, or may settle in cash, including non-deliverable currency forward contracts
(“NDFs”). The Fund intends to enter into cash-settled currency forward
contracts, including NDFs, that contractually require the netting of the
parties’ liabilities. Under a cash-settled forward contract that requires
netting, the Fund or its counterparty to the contract is required only to
deliver a cash payment in the amount of its net obligation in settlement of the
contract. Forward contracts are marked-to-market on a daily basis, and the Fund
may be required to post collateral to a counterparty pursuant to the terms of a
forward contract if the Fund has a net obligation under the contract. Likewise,
the Fund may be entitled to receive collateral under the terms of a forward
contract if the counterparty has a net obligation under the contract. A
cash-settled forward contract generally does not require any initial cash
outlay by the Fund. The Fund’s currency forward contracts, including its NDFs,
generally will have maturities of approximately one to three months but may
have maturities of up to six months or more. Each currency forward contract
entered into by the Fund will identify a specific “contract settlement rate,”
generally equal to or approximately equal to the current forward price of the
underlying currency at the time the contract is established.
The
cost to the Fund of engaging in forward contracts varies with factors such as
the currencies involved, the length of the contract period and the market
conditions then prevailing. The use of forward contracts does not eliminate
fluctuations in the prices of the underlying securities the Fund owns or
intends to acquire, but it does fix a rate of
2-5
exchange
in advance. In addition, although forward contracts limit the risk of loss due
to a decline in the value of the hedged currencies, at the same time they limit
any potential gain that might result should the value of the currencies
increase.
Foreign
Currency Options
.
The Fund may take positions in options on foreign
currencies. For example, if the Fund were to enter into a contract to purchase
securities denominated in a foreign currency, it effectively could fix the
maximum U.S. dollar cost of the securities by purchasing call options on that
foreign currency. Similarly, if the Fund held securities denominated in a
foreign currency and anticipated a decline in the value of that currency
against the U.S. dollar, it could hedge against such a decline by purchasing a
put option on the currency involved. The Fund’s ability to establish and close
out positions in such options is subject to the maintenance of a liquid
secondary market. There can be no assurance that a liquid secondary market will
exist for a particular option at any specific time. In addition, options on
foreign currencies are affected by all of those factors that influence foreign
exchange rates and investments generally.
Transaction
costs may be higher because the quantities of currencies underlying option
contracts that the Fund may enter into represent odd lots in a market dominated
by transactions between banks.
There
is no systematic reporting of last sale information for foreign currencies or
any regulatory requirement that quotations be firm or revised on a timely
basis. Quotation information generally is representative of very large
transactions in the interbank market and may not reflect smaller transactions
where rates may be less favorable. Option markets may be closed while
round-the-clock interbank currency markets are open, and this can create price
and rate discrepancies.
The
Fund may effectively terminate its rights or obligations under options by
entering into closing transactions. Closing transactions permit the Fund to
realize profits or limit losses on its options positions prior to the exercise
or expiration of the option. The value of a foreign currency option depends on
the value of the underlying currency relative to the U.S. dollar. Other factors
affecting the value of an option are the time remaining until expiration, the
relationship of the exercise price to market price, the historical price
volatility of the underlying currency and general market conditions. As a
result, changes in the value of an option position may have no relationship to
the investment merit of the foreign currency. Whether a profit or loss is
realized on a closing transaction depends on the price movement of the
underlying currency and the market value of the option.
Options
normally have expiration dates of up to twelve months. The exercise price may
be below, equal to or above the current market value of the underlying
currency. Options that expire unexercised have no value, and the Fund will
realize a loss of any premium paid and any transaction costs. Although the Fund
intends to enter into foreign currency options only with dealers which agree to
enter into, and which are expected to be capable of entering into, closing
transactions with the Fund, there can be no assurance that the Fund will be
able to liquidate an option at a favorable price at any time prior to
expiration. In the event of insolvency of the counterparty, the Fund may be
unable to liquidate a foreign currency option. Accordingly, it may not be
possible to effect closing transactions with respect to certain options, with
the result that the Fund would have to exercise those options that they had
purchased in order to realize any profit.
Foreign Securities.
The Fund may invest up to 20% of its net assets in foreign securities
that are traded primarily outside the U.S. Foreign securities may involve
special risks that typically are not associated with U.S. dollar denominated or
quoted securities of U.S. issuers, including the following:
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Foreign
securities may be affected by changes in currency rates, changes in foreign
or U.S. laws or restrictions applicable to foreign securities and changes in
exchange control regulations (i.e., currency blockage). A decline in the
exchange rate of the foreign currency in which a portfolio security is quoted
or denominated relative to the U.S. dollar would reduce the value of the
portfolio security in U.S. dollars.
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Brokerage
commissions, custodial services, and other costs relating to investment in
foreign securities markets generally are more expensive than in the U.S.
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Clearance
and settlement procedures may be different in foreign countries and, in
certain markets, such procedures may be unable to keep pace with the volume
of securities transactions, thus making it difficult to conduct such
transactions.
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2-6
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Foreign
issuers generally are not subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to U.S. issuers.
There may be less publicly available information about a foreign issuer than
about a comparable U.S. issuer.
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There
generally is less government regulation of foreign markets, companies and
securities dealers than in the U.S.
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Foreign
securities markets may have substantially less volume than U.S. securities
markets, and securities of many foreign issuers are less liquid and more
volatile than securities of comparable domestic issuers.
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Foreign
securities may 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 be able to purchase or redeem Fund shares.
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With
respect to certain foreign countries, there is a possibility of
nationalization, expropriation or confiscatory taxation, imposition of
withholding or other taxes on dividend or interest payments (or, in some
cases, capital gains), limitations on the removal of funds or other assets of
the Fund, and political or social instability or diplomatic developments that
could affect investments in those countries. In addition, the Fund may invest
in less developed countries, sometimes referred to as emerging markets. The
risks of investing in foreign markets generally are more severe in emerging
markets.
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Futures Contracts and Options on Futures Contracts.
The Fund may engage in futures and options
on futures transactions in accordance with its investment objective and
policies. The Fund may purchase and sell futures contracts and purchase and
write call and put options on futures contracts. The Fund also may enter into
closing purchase and sale transactions with respect to such contracts and
options. Futures contracts are standardized contracts that provide for the sale
or purchase of a specified financial instrument at a future time at a specified
price. These contracts are traded on exchanges, so that, in most cases, either party
can close out its position on the exchange for cash, without delivering the
security. An option on a futures contract gives the purchaser the right (and
the writer of the option the obligation) to assume a position in a futures
contract at a specified exercise price within a specified period of time. In
addition to incurring fees in connection with futures and options, the Fund is
required to maintain margin deposits. At the time of entering into a futures
transaction or writing an option, the Fund is required to deposit a specified
amount of cash or eligible securities called “initial margin.” Subsequent
payments, called “variation margin,” are made on a daily basis as the market
price of the futures contract or option fluctuates.
Although
some futures contracts call for making or taking delivery of the underlying
securities, generally these obligations are closed out before delivery by
offsetting purchases or sales of matching futures contracts (same exchange,
underlying security or index, and delivery month). Closing out a futures
contract sale is effected by purchasing a futures contract for the same
aggregate amount of the specific type of financial instrument with the same
delivery date. If an offsetting purchase price is less than the original sale price,
the Fund realizes a capital gain, or if it is more, the Fund realizes a capital
loss. Conversely, if an offsetting sale price is more than the original
purchase price, the Fund realizes a capital gain, or if it is less, the Fund
realizes a capital loss. Transaction costs also are included in these
calculations.
The
Fund may enter into futures contracts in U.S. domestic markets or on exchanges
located outside the U.S. Foreign markets may offer advantages such as trading
opportunities or arbitrage possibilities not available in the U.S. Foreign
markets, however, may have greater risk potential than domestic markets. For
example, some foreign exchanges are principal markets so that no common
clearing facility exists and an investor may look only to the broker for
performance of the contract. In addition, any profits that the Fund might
realize in trading could be eliminated by adverse changes in the currency
exchange rate, or the Fund could incur losses as a result of those changes.
Futures
contracts and options on futures contracts present substantial risks, including
the following:
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While
the Fund may benefit from the use of futures and related options,
unanticipated market events may result in poorer overall performance than if
the Fund had not entered into any futures or related options transactions.
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Because
perfect correlation between a futures position and a portfolio position that
the Fund intends to hedge is impossible to achieve, a hedge may not work as
intended, and the Fund thus may be exposed to additional risk of loss.
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2-7
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The
loss that the Fund may incur in entering into futures contracts and in
writing call options on futures is potentially unlimited and may exceed the
amount of the premium received.
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Futures
markets are highly volatile, and the use of futures may increase the
volatility of the Fund’s NAV.
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As
a result of the low margin deposits normally required in futures and options
on futures trading, a relatively small price movement in a contract may
result in substantial losses to the Fund.
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Futures
contracts and related options may be illiquid, and exchanges may limit
fluctuations in futures contract prices during a single day.
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The
counterparty to an OTC contract may fail to perform its obligations under the
contract.
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Specific
Futures Transactions.
The Fund may invest in futures contracts and options on futures
contracts, including those with respect to interest rates, currencies and
securities indexes.
The
Fund may purchase and sell index futures contracts and options thereon. An
index future obligates the Fund to pay or receive an amount of cash equal to a
fixed dollar amount specified in the futures contract multiplied by the
difference between the settlement price of the contract on the contract’s last
trading day and the value of the index based on the prices of the securities
that comprise the index at the opening of trading in such securities on the
next business day.
The
market value of a stock index futures contract is based primarily on the value
of the underlying index. Changes in the value of the index will cause roughly
corresponding changes in the market price of the futures contract. If a stock
index is established that is made up of securities whose market characteristics
closely parallel the market characteristics of the securities in the Fund’s
portfolio, then the market value of a futures contract on that index should
fluctuate in a way closely resembling the market fluctuation of the portfolio.
Thus, if the Fund sells futures contracts, a decline in the market value of the
portfolio will be offset by an increase in the value of the short futures
position to the extent of the hedge (i.e., the size of the futures position).
Conversely, when the Fund has cash available (for example, through substantial
sales of shares) and wishes to invest the cash in anticipation of a rising
market, the Fund could rapidly hedge against the expected market increase by
buying futures contracts to offset the cash position and thus cushion the
adverse effect of attempting to buy individual securities in a rising market.
Stock index futures contracts are subject to the same risks as other futures
contracts.
The
Fund may purchase and sell interest rate futures contracts and options thereon.
An interest rate future obligates the Fund to purchase or sell an amount of a
specific debt security at a future date at a specific price. The Fund also may
purchase and sell currency futures and options thereon, as described above.
Illiquid Securities.
The Fund may invest up to 15% of its net assets in illiquid securities
that cannot be disposed of in seven days in the ordinary course of business at
fair value. Illiquid securities include:
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securities
that are not readily marketable;
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repurchase
agreements and time deposits with a notice or demand period of more than
seven days; and
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certain
restricted securities, unless Lord Abbett determines, subject to the
oversight of the Board, based upon a review of the trading markets for a
specific restricted security, that such restricted security is eligible for
resale pursuant to Rule 144A (“144A Securities”) and is liquid.
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144A
Securities may be resold to a qualified institutional buyer (“QIB”) without
registration and without regard to whether the seller originally purchased the
security for investment. Investing in 144A Securities may decrease the
liquidity of the Fund’s portfolio to the extent that QIBs become for a time
uninterested in purchasing these securities. The purchase price and subsequent
valuation of restricted and illiquid securities normally reflect a discount,
which may be significant, from the market price of comparable securities for
which a liquid market exists.
Initial Public Offerings (“IPOs”).
The Fund may invest in IPOs, which are new
issues of equity securities, including newly issued secondary offerings. IPOs
have many of the same risks as small company stocks. IPOs do not have trading
history, and information about the company may be available only for recent
periods. IPO prices
2-8
may
be highly volatile or may drop shortly after the IPO. IPOs may generate
substantial gains for the Fund, but investors should not rely on any past gains
that may have been produced by IPOs as an indication of the Fund’s future
performance, since there is no guarantee that the Fund will have access to
profitable IPOs in the future. The Fund may be limited in the quantity of IPO
shares that it may buy at the offering price, or the Fund may not be able to
buy any shares of an IPO at the offering price. As the size of the Fund
increases, the impact of IPOs on the Fund’s performance generally would
decrease; conversely, as the size of the Fund decreases, the impact of IPOs on
the Fund’s performance generally would increase.
Investments in Other Investment Companies.
Subject to the limitations prescribed by the
Act and the rules adopted by the SEC thereunder, the Fund may invest in other
investment companies, including money market funds, exchange-traded funds
(“ETFs”), and closed-end funds. (The Fund, however, may not operate as a
fund-of-funds in reliance on Sections 12(d)(1)(F) and (G) of the Act.) These
limitations include a prohibition on the Fund acquiring more than 3% of the
voting shares of any other investment company, and a prohibition on investing
more than 5% of the Fund’s total assets in the securities of any one investment
company or more than 10% of its total assets in securities of other investment
companies. (Pursuant to certain SEC rules, these percentage limitations may not
apply to the Fund’s investments in money market funds.) When the Fund invests
in another investment company, the Fund’s shareholders must bear not only their
proportionate share of the Fund’s fees and expenses, but they also must bear
indirectly the fees and expenses of the other investment company.
The
Fund may invest in ETFs, which typically are open-end funds or unit investment
trusts that are designed to accumulate and hold a portfolio of securities
intended to track the performance and dividend yield of a securities index. The
Fund may use ETFs for several reasons, including to facilitate the handling of
cash flows or trading or to reduce transaction costs. The price movement of
ETFs may not perfectly parallel the price movement of the underlying index.
Similar to common stock, ETFs are subject to market volatility and selection
risk.
The
Fund may invest in foreign countries through investment companies, including
closed-end funds. Some emerging market countries have laws and regulations that
currently preclude direct foreign investments in the securities of their
companies. However, indirect foreign investment in the securities of such
countries is permitted through investment companies that have been specifically
authorized. These investments are subject to the risks of investing in foreign
(including emerging market) securities.
Options on Securities and Securities Indices.
The Fund may purchase call and put options
and write (i.e., sell) covered call and put option contracts in accordance with
its investment objective and policies. A call option gives the purchaser of the
option the right to buy, and obligates the writer to sell, the underlying
security or securities at the exercise price at any time during the option
period, or at a specific date. Conversely, a put option gives the purchaser of
the option the right to sell, and obligates the writer to buy, the underlying
security or securities at the exercise price at any time during the option
period, or at a specific date. The Fund also may enter into “closing purchase
transactions” in order to terminate its obligation to deliver the underlying
security. This may result in a short-term gain or loss. A closing purchase
transaction is the purchase of a call option (at a cost which may be more or
less than the premium received for writing the original call option) on the
same security, with the same exercise price and call period as the option
previously written. If the Fund is unable to enter into a closing purchase
transaction, it may be required to hold a security that it otherwise might have
sold to protect against depreciation.
A
covered call option written by the Fund is a call option with respect to which
the Fund owns the underlying security or otherwise covers the transaction such
as by segregating permissible liquid assets. A put option written by the Fund
is covered when, among other things, the Fund segregates permissible liquid
assets having a value equal to or greater than the exercise price of the option
to fulfill the obligation undertaken or otherwise covers the transaction. The
principal reason for writing covered call and put options is to realize,
through the receipt of premiums, a greater return than would be realized on the
underlying securities alone. The Fund receives a premium from writing covered
call or put options which it retains whether or not the option is exercised.
There
is no assurance that sufficient trading interest to create a liquid secondary
market on a securities exchange will exist for any particular option or at any
particular time, and for some options no such secondary market may exist. A
liquid secondary market in an option may cease to exist for a variety of
reasons. In the past, for example, higher than anticipated trading activity or
order flow, or other unforeseen events, at times have rendered certain of the
clearing facilities inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers’ orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
2-9
covered
call option writer, the Fund is unable to effect a closing purchase transaction
in a secondary market, it will not be able to sell the underlying security
until the option expires or it delivers the underlying security upon exercise
or it otherwise covers its position.
Specific
Options Transactions.
The Fund may purchase and sell call and put
options in respect of specific securities (or groups or “baskets” of specific
securities), including U.S. Government securities, mortgage-related securities,
asset-backed securities, foreign sovereign debt, corporate debt securities,
equity securities, (including convertible securities) and Eurodollar
instruments that are traded on U.S. or foreign securities exchanges or in the
OTC market, or securities indices, currencies or futures.
An
option on an index is similar to an option in respect of specific securities,
except that settlement does not occur by delivery of the securities comprising
the index. Instead, the option holder receives an amount of cash if the closing
level of the index upon which the option is based is greater than in the case
of a call, or less than in the case of a put, the exercise price of the option.
Thus, the effectiveness of purchasing or writing index options will depend upon
price movements in the level of the index rather than the price of a particular
security.
The
Fund may purchase and sell call and put options on foreign currency. These
options convey the right to buy or sell the underlying currency at a price
which is expected to be lower or higher than the spot price of the currency at
the time the option is exercised or expires.
Successful
use by the Fund of options and options on futures will be subject to Lord
Abbett’s ability to predict correctly movements in the prices of individual
securities, the relevant securities market generally, foreign currencies or
interest rates. To the extent Lord Abbett’s predictions are incorrect, the Fund
may incur losses. The use of options also can increase the Fund’s transaction
costs.
The
Fund will not purchase an option if, as a result of such purchase, more than
10% of its net assets would be invested in premiums for such options. The Fund
may only sell (write) covered put options to extent that cover for such options
does not exceed 15% of its net assets. The Fund may only sell (write) covered
call options with respect to securities having an aggregate market value of
less than 25% of its net assets at the time an option is written.
OTC
Options.
The Fund may enter into OTC options contracts
(“OTC options”). OTC options differ from exchange-traded options in several
respects. OTC options are transacted directly with dealers and not with a
clearing corporation and there is a risk of nonperformance by the dealer as a
result of the insolvency of the dealer or otherwise, in which event the Fund
may experience material losses. However, in writing OTC options, the premium is
paid in advance by the dealer. OTC options are available for a greater variety
of securities, and a wider range of expiration dates and exercise prices, than
are exchange-traded options. Since there is no exchange, pricing normally is
done by reference to information from market makers, which information is
carefully monitored by Lord Abbett and verified in appropriate cases.
A
writer or purchaser of a put or call option can terminate it voluntarily only
by entering into a closing transaction. In the case of OTC options, there can
be no assurance that a continuous liquid secondary market will exist for any
particular option at any given time. Consequently, the Fund may be able to
realize the value of an OTC option it has purchased only by exercising it or
entering into a closing sale transaction with the dealer that issued it.
Similarly, when the Fund writes an OTC option, generally it can close out that
option prior to its expiration only by entering into a closing purchase
transaction with the dealer with whom the Fund originally wrote it. If a
covered call option writer cannot effect a closing transaction, it cannot sell
the underlying security until the option expires or the option is exercised.
Therefore, a covered call option writer of an OTC option may not be able to
sell an underlying security even though it otherwise might be advantageous to
do so. Likewise, a secured put writer of an OTC option may be unable to sell
the securities pledged to secure the put for other investment purposes while it
is obligated as a put writer. Similarly, a purchaser of such put or call option
also might find it difficult to terminate its position on a timely basis in the
absence of a secondary market.
The
Fund and Lord Abbett believe that such dealers present minimal credit risks to
the Fund and, therefore, should be able to enter into closing transactions if
necessary. The Fund currently will not engage in OTC options transactions if
the amount invested by the Fund in OTC options plus a “liquidity charge”
related to OTC options written by the Fund, plus the amount invested by the
Fund in illiquid securities, would exceed 10% of the Fund’s net assets. The
“liquidity charge” referred to above is computed as described below.
2-10
The
Fund anticipates entering into agreements with dealers to which the Fund sells
OTC options. Under these agreements the Fund would have the absolute right to
repurchase the OTC options from the dealer at any time at a price no greater
than a price established under the agreements (the “Repurchase Price”). The
“liquidity charge” referred to above for a specific OTC option transaction will
be the Repurchase Price related to the OTC option less the intrinsic value of
the OTC option. The intrinsic value of an OTC call option for such purposes
will be the amount by which the current market value of the underlying security
exceeds the exercise price. In the case of an OTC put option, intrinsic value will
be the amount by which the exercise price exceeds the current market value of
the underlying security. If there is no such agreement requiring a dealer to
allow the Fund to repurchase a specific OTC option written by the Fund, the
“liquidity charge” will be the current market value of the assets serving as
“cover” for such OTC option.
Preferred Stock, Warrants, and Rights.
The Fund may invest in preferred stock,
warrants and rights. Preferred stocks are securities that represent an
ownership interest providing the holder with claims on the issuer’s earnings
and assets before common stockholders, but after bond holders and other
creditors. Unlike debt securities, the obligations of an issuer of preferred
stock, including dividend and other payment obligations, typically may not be
accelerated by the holders of such preferred stock on the occurrence of an
event of default or other non-compliance by the issuer of the preferred stock.
Investments in preferred stock present market and liquidity risks. The value of
a preferred stock may be highly sensitive to the economic condition of the
issuer, and markets for preferred stock may be less liquid than the market for
the issuer’s common stock.
Warrants
are options to buy a stated number of shares of common stock at a specified
price at any time during the life of the warrant. Rights represent a privilege
offered to holders of record of issued securities to subscribe (usually on a
pro rata basis) for additional securities of the same class, of a different
class or of a different issuer. The holders of warrants and rights have no
voting rights, receive no dividends and have no rights with respect to the
assets of the issuer. The value of a warrant or right may not necessarily
change with the value of the underlying securities. Warrants and rights cease
to have value if they are not exercised prior to their expiration date.
Investments in warrants and rights are thus speculative and may result in a
total loss of the money invested.
Real Estate Investment Trusts (“REITs”).
The Fund may invest in REITs, which are
pooled investment vehicles that invest primarily in either real estate or real
estate related loans. The value of a REIT is affected by changes in the value
of the properties owned by the REIT or securing mortgage loans held by the
REIT. REITs are dependent upon the ability of the REITs’ managers, and are
subject to heavy cash flow dependency, default by borrowers and the
qualification of the REITs under applicable regulatory requirements for
favorable income tax treatment. REITs also are subject to risks generally
associated with investments in real estate including possible declines in the
value of real estate, general and local economic conditions, environmental
problems and changes in interest rates. To the extent that assets underlying a
REIT are concentrated geographically, by property type or in certain other
respects, these risks may be heightened. The Fund will indirectly bear its
proportionate share of any expenses, including management fees, paid by a REIT
in which it invests.
Repurchase Agreements.
The Fund may enter into repurchase
agreements with respect to securities. A repurchase agreement is a transaction
by which the purchaser acquires a security and simultaneously commits to resell
that security to the seller (a bank or securities dealer) at an agreed-upon
price on an agreed-upon date. The resale price reflects the purchase price plus
an agreed-upon market rate of interest that is unrelated to the coupon rate or
date of maturity of the purchased security. The Fund requires at all times that
the repurchase agreement be collateralized by cash or by securities of the U.S.
Government, its agencies, its instrumentalities, or U.S. Government sponsored
enterprises (“U.S. Government Securities”) having a value equal to, or in
excess of, the value of the repurchase agreement (including accrued interest).
Such agreements permit the Fund to keep all of its assets at work while
retaining flexibility in pursuit of investments of a longer term nature.
Repurchase agreements are considered a form of lending under the Act. A
repurchase agreement with more than seven days to maturity is considered an
illiquid security and is subject to the Fund’s investment restriction on
illiquid securities.
The
use of repurchase agreements involves certain risks. For example, if the seller
of the agreement defaults on its obligation to repurchase the underlying
securities at a time when the value of these securities has declined, the Fund
may incur a loss upon disposition of them. Even though the repurchase
agreements may have maturities of seven days or less, they may lack liquidity,
especially if the issuer encounters financial difficulties. The Fund intends to
limit repurchase agreements to transactions with dealers and financial institutions
believed by Lord Abbett, as the investment manager, to present minimal credit
risks. Lord Abbett will monitor the creditworthiness of the repurchase
agreement sellers on an ongoing basis.
2-11
Reverse Repurchase Agreements.
The Fund may enter into reverse repurchase
agreements. In a reverse repurchase agreement, the 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 the Fund to
credit risk (that is, the risk that the counterparty will fail to resell the
security to the Fund). This risk is greatly reduced because the Fund generally
receives cash equal to 98% of the price of the security sold. Engaging in
reverse repurchase agreements also may involve the use of leverage, in that the
Fund may reinvest the cash it receives in additional securities. The Fund will
attempt to minimize this risk by managing its duration. Reverse
repurchase agreements are considered a form of borrowing under the Act. The
Fund’s reverse repurchase agreements will not exceed 20% of the Fund’s net
assets.
Short
Sales.
The Fund may make short sales of securities or
maintain a short position, if at all times when a short position is open the
Fund owns an equal amount of such securities (or securities convertible into or
exchangeable into an equal amount of such securities) without payment of any
further consideration. This is commonly referred to as a “short sale against
the box.” The Fund may not engage in any other type of short selling and does
not intend to have more than 5% of its net assets (determined at the time of
the short sale) subject to short sales. This limit does not apply to the Fund’s
use of short positions in U.S. Treasury note futures, or in other security
futures, for bona fide hedging purposes or to pursue risk management
strategies.
Structured Securities and Other Hybrid Instruments.
The Fund may invest in structured securities
and other hybrid instruments. Structured securities and other hybrid
instruments are types of derivative securities, whose value is determined by
reference to changes in the value of specific securities, currencies, interest
rates, commodities, indices or other financial indicators (the “Reference”) or
the relative change in two or more References. The interest rate or the
principal amount payable upon maturity or redemption may be increased or
decreased depending upon changes in the applicable Reference. Structured
securities may be positively or negatively indexed, so the appreciation of the
Reference may produce an increase or decrease in the interest rate or value of
the security at maturity. Structured securities may present additional risks
that are different from those associated with a direct investment in fixed-income
or equity securities; they may be more volatile, less liquid, and more
difficult to price accurately and subject to additional credit risks. The Fund
that invests in structured securities could lose more than the principal amount
invested.
Structured
securities and other hybrid instruments can be used as an efficient means of
pursuing a variety of investment strategies, including currency hedging,
duration management, and increased total return. Hybrids may not bear interest
or pay dividends. The value of a hybrid or its interest rate may be a multiple
of a Reference and, as a result, may be leveraged and move (up or down) more
steeply and rapidly than the Reference. These References may be sensitive to
economic and political events, such as commodity shortages and currency
devaluations, which cannot be readily foreseen by the purchaser of a hybrid.
Under certain conditions, the redemption value of a hybrid could be zero. Thus,
an investment in a hybrid may entail significant market risks that are not associated
with a similar investment in a traditional, U.S. dollar denominated bond that
has a fixed principal amount and pays a fixed rate or floating rate of
interest. The purchase of hybrids also exposes the Fund to the credit risk of
the issuer of the hybrids. These risks may cause significant fluctuations in
the NAV of the Fund.
Swap Transactions.
The Fund may enter into interest rate, equity index, currency and
total return swap agreements and swaptions (options on swaps). The Fund may
enter into these transactions for hedging purposes or in an attempt to obtain a
particular return when it is considered desirable to do so. A swap transaction
involves an agreement between two parties to exchange different types of cash
flows based on a specified or “notional” amount. The cash flows exchanged in a
specific transaction may be, among other things, payments that are the
equivalent of interest on a principal amount, payments that would compensate
the purchaser for losses on a defaulted security or basket of securities, or
payments reflecting the performance of one or more specified securities,
currencies or indices. The Fund may enter into swap transactions with
counterparties that generally are banks, securities dealers or their respective
affiliates.
In
an interest rate swap, the Fund may agree to either make or receive payments
that are equivalent to a fixed rate of interest on the specified notional
amount in exchange for payments that are equivalent to a variable rate of
interest (based on a specified index) on the same notional amount. Interest
rate swaps may enable the Fund to either increase or reduce its interest rate
risk or to adjust the duration of its bond portfolio.
Currency
swaps involve the exchange of cash flows on a notional amount of two or more
currencies based on their relative future values.
2-12
The
Fund may enter into long and short currency positions using swap contracts
under which it will, at the end of the term of the swap contract, make a
payment that is based on a fixed currency exchange rate in exchange for a
payment from the swap counterparty that is based on the prevailing currency
exchange rate. These swap contracts generally will have terms of approximately
one to three months, but may have terms of up to six months or more. Lord
Abbett, however, in its discretion may terminate a swap contract prior to its
term, subject to any potential termination fee that is in addition to the
Fund’s accrued obligation under the swap contract. At the end of a swap
contract’s term, the Fund may enter into a new swap contract. The Fund’s swap
contracts will be made in the OTC market and will be entered into with
counterparties that typically will be banks, investment banking firms or
broker-dealers.
In
a total return swap, the Fund may agree to make payments that are the
equivalent of interest in exchange for the right to receive payments equivalent
to any appreciation in the value of an underlying security, index or other
asset, as well as payments equivalent to any distributions made on that asset,
over the term of the swap. If the value of the asset underlying a total return
swap declines over the term of the swap, the Fund also may be required to pay
an amount equal to that decline in value to its counterparty. The Fund also may
be the seller of a total return swap, in which case it would receive premium
payments and an amount equal to any decline in value of the underlying asset
over the term of the swap, but it would be obligated to pay its counterparty an
amount equal to any appreciation.
The
Fund also may purchase and write (sell) options contracts on swaps, commonly
known as “swaptions.” A swaption is an option to enter into a swap agreement.
As with other types of options, the buyer of a swaption pays a non-refundable
premium for the option and obtains the right, but not the obligations, to enter
into an underlying swap on agreed upon terms. The seller of a swaption receives
the premium in exchange for the obligation to enter into the agreed upon
underlying swap if the option is exercised. The Fund also may purchase or sell
interest rate caps, floors and collars. The purchaser of an interest rate cap
is entitled to receive payments only to the extent that a specified index
exceeds a predetermined interest rate. The purchaser of an interest floor is
entitled to receive payments only to the extent that a specified index is below
a predetermined interest rate. A collar effectively combines a cap and a floor
so that the purchaser receives payments only when market interest rates are
within a specified range of interest rates.
The
use of these transactions is a highly specialized activity that involves
investment techniques and risks that are different from those associated with
ordinary portfolio securities transactions. If Lord Abbett is incorrect in its
forecasts of the interest rates, currency exchange rates or market values or
its assessments of the credit risks, relevant to these transactions that it
enters, the investment performance of the Fund may be less favorable than it
would have been if the Fund had not entered into them. Because these
arrangements are bilateral agreements between the Fund and its counterparty,
each party is exposed to the risk of default by the other. In addition, they
may involve a small investment of cash compared to the risk assumed with the
result that small changes may produce disproportionate and substantial gains or
losses to the Fund. The Fund’s obligations under swap agreements generally are
collateralized by cash or government securities based on the amount by which
the value of the payments that the Fund is required to pay exceed the value of
the payments that its counterparty is required to make. The Fund segregates
liquid assets equal to any difference between that excess and the amount of
collateral that it is required to provide. Conversely, the Fund requires its
counterparties to provide collateral on a comparable basis except in those
instances in which Lord Abbett is satisfied with the claims paying ability of
the counterparty without such collateral.
When-Issued or Forward Transactions.
The Fund may purchase portfolio securities
on a when-issued or forward basis. When-issued or forward transactions involve
a commitment by the 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 the Fund’s 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 the value of fixed-income when-issued securities. At
the time the 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 NAV. The 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
circumstances will settlement for such securities take place more than 120 days
after the purchase date.
2-13
Temporary Defensive Investments.
As described in the prospectus, the Fund is
authorized to temporarily invest a substantial amount, or even all, of its
assets in various short-term fixed-income securities to take a defensive
position. Temporary defensive securities include:
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•
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U.S.
Government Securities.
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•
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Commercial
paper. Commercial paper consists of unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial paper is issued
in bearer form with maturities generally not exceeding nine months.
Commercial paper obligations may include variable amount master demand notes.
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•
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Bank
certificates of deposit and time deposits. Certificates of deposit are
certificates issued against funds deposited in a bank or a savings and loan.
They are issued for a definite period of time and earn a specified rate of
return.
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•
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Bankers’
acceptances. Bankers’ acceptances are short-term credit instruments
evidencing the obligation of a bank to pay a draft that has been drawn on it
by a customer. These instruments reflect the obligations both of the bank and
of the drawer to pay the face amount of the instrument upon maturity. They
primarily are used to finance the import, export, transfer or storage of
goods. They are “accepted” when a bank guarantees their payment at maturity.
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•
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Repurchase
agreements.
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Policies and Procedures Governing Disclosure of Portfolio
Holdings.
Lord Abbett
regularly makes information about the Fund’s portfolio holdings available to the
general public at
www.lordabbett.com
. Generally, Lord Abbett makes a list of
the Fund’s top ten holdings publicly available monthly with a 15-day delay
(lag) and aggregate holdings information publicly available monthly with a
30-day delay (lag). Lord Abbett generally makes holdings information for each
fund-of-funds and money market fund publicly available without any delay. In
addition, consistent with its fiduciary duty and applicable legal requirements,
Lord Abbett may release nonpublic portfolio holdings information to selected
third parties to assist with a variety of investment, distribution, and
operational processes. For example, Lord Abbett may disclose information about
the Fund’s portfolio holdings to a pricing vendor for use in valuing a security.
More specifically, Lord Abbett may provide portfolio holdings information to
the following categories of third parties before making it available to the
public, with a frequency and lag deemed appropriate under the circumstances:
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Service
providers that render accounting, custody, legal, pricing, proxy voting,
trading, and other services to the Fund;
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Financial
intermediaries that sell Fund shares;
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Portfolio
evaluators such as Lipper Analytical Services, Inc. and Morningstar, Inc.;
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•
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Data
aggregators such as Bloomberg;
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•
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Other
advisory clients of Lord Abbett that may be managed in a style substantially
similar to that of the Funds, including institutional clients and their
consultants, managed account program sponsors, and unaffiliated mutual funds;
and
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•
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Other
third parties that may receive portfolio holdings information from Lord
Abbett on a case-by-case basis with the authorization of the Fund’s officers.
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The
Board has adopted policies and procedures that are designed to manage conflicts
of interest that may arise from Lord Abbett’s selective disclosure of portfolio
holdings information and prevent potential misuses of such information. Lord
Abbett’s Chief Compliance Officer administers these policies and procedures and
reports to the Board at least annually about the operation of the policies and
procedures as part of the Board’s oversight of the Fund’s compliance program.
Under
the policies and procedures, Lord Abbett may selectively disclose portfolio holdings
information only when it has a legitimate business purpose for doing so and the
recipient is obligated to keep the information confidential and not trade based
on it (typically by a confidentiality agreement). The sole exception relates to
SG Constellation, LLC
2-14
(“SGC”),
which provides financing for the distribution of the Fund’s Class B shares of
the various series of the Trust. The fees payable to SGC are based in part on
the value of the Fund’s portfolio securities. To reduce the exposure of such
fees to market volatility, SGC aggregates the portfolio holdings information
provided by all of the mutual funds that participate in its Class B share
financing program (including the Lord Abbett Funds) and may engage in certain
hedging transactions based on this information. However, SGC will not engage in
transactions based solely on the Fund’s portfolio holdings.
Neither
the Fund nor Lord Abbett or any of their respective affiliates receives any
compensation for disclosing information about the Fund’s portfolio holdings.
For this purpose, compensation does not include ordinary investment management
or service provider fees.
The
portfolio holdings of Lord Abbett’s similarly managed advisory clients may
closely mirror the Fund’s portfolio holdings. These clients are not subject to
the same portfolio holdings disclosure policies and procedures as the Fund and
therefore may disclose information about their own portfolio holdings
information more frequently than the Fund discloses information about its portfolio
holdings. To mitigate the risk that a recipient of such information could trade
ahead of or against the Fund, Lord Abbett seeks assurances that clients will
protect the confidentiality of portfolio holdings information by not disclosing
it until Lord Abbett makes the Fund’s portfolio holdings publicly available.
Lord Abbett also may monitor its clients’ trading activity, particularly in
cases in which clients recently received sensitive portfolio holdings
information.
The
Board also reviews the Fund’s policies and procedures governing these
arrangements on an annual basis. These policies and procedures may be modified
at any time with the approval of the Board.
Fund
Portfolio Information Recipients.
Attached as Appendix A is a list of the third
parties that are eligible to receive portfolio holdings information pursuant to
ongoing arrangements under the circumstances described above.
2-15
3
.
Management of the Fund
The
Board is responsible for the management of the business and affairs of the
Trust in accordance with the laws of the State of Delaware. The Board elects
officers who are responsible for the day-to-day operations of the Trust and who
execute policies authorized by the Board. As generally discussed in the
semiannual report to shareholders, the Board also approves an investment
adviser to the Trust and continues to monitor the cost and quality of the
services the investment adviser provides, and annually considers whether to
renew the contract with the adviser. Generally, each Trustee holds office until
his/her successor is elected and qualified or until his/her earlier resignation
or removal, as provided in the Trust’s organizational documents.
Lord
Abbett, a Delaware limited liability company, is the Trust’s investment
adviser. Designated Lord Abbett personnel are responsible for the day-to-day
management of the Trust.
Board Leadership Structure
The Board currently
has nine Trustees, seven of whom are persons who are not “interested persons”
of the Fund, sometimes referred to as independent directors/trustees or
Independent Trustees. Robert S. Dow, Senior Partner of Lord Abbett, serves as
the Chairman of the Board and E. Thayer Bigelow serves as the Board’s Lead
Independent Trustee. The Lead Independent Trustee’s role is to serve as a liaison
between the Independent Trustees and Lord Abbett and act as chairperson of
meetings of the Independent Trustees and of the Nominating and Governance and
Contract Committees, among other things. The Lead Independent Trustee speaks
separately with the Chief Compliance Officer on a quarterly basis, or more
frequently as needed, to discuss compliance matters. The Lead Independent
Trustee also meets regularly with the Secretary of the Lord Abbett Funds to
discuss, review, and revise, as necessary the agenda for meetings of the Board
and any related matters.
The
Board has determined that its leadership structure is appropriate in light of
the composition of the Board and its committees and Mr. Dow’s long tenure with
Lord Abbett, familiarity with the Fund’s business and affairs, and regular
interactions with the Lead Independent Trustee. The Board believes that its
leadership structure promotes the efficient and orderly flow of information
from management to the Independent Trustees and otherwise enhances the effectiveness
of the Board’s oversight role.
The
Board generally meets eight times a year, and may hold additional special
meetings to address specific matters that arise between regularly scheduled
meetings. The Independent Trustees also meet regularly without the presence of
management and are advised by independent legal counsel.
As
discussed more fully below, the Board has delegated certain aspects of its
oversight function to committees comprised of solely Independent Trustees. The
committee structure facilitates the Board’s timely and efficient consideration
of matters pertinent to the Fund’s business and affairs and their associated
risks.
For simplicity, the following sections use the term
“directors/trustees” to refer to Trustees of the Trust and the directors/trustees
of all other Lord Abbett-sponsored funds.
Interested Trustees
The following
Trustees are associated with Lord Abbett and are “interested persons” of the
Trust as defined in the Act (as Mr. Dow is the Senior Partner of Lord Abbett
and Ms. Foster is the Managing Partner of Lord Abbett). Mr. Dow and Ms. Foster
are officers and directors/trustees of each of the 13 Lord Abbett-sponsored
funds, which consist of 56 portfolios or series.
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Name, Address and
Year
of Birth
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Current
Position and Length
of Service with the Trust
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Principal
Occupation and Other Directorships During
the Past Five Years
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Robert
S. Dow
Lord,
Abbett & Co. LLC
90 Hudson Street
Jersey City, NJ 07302
(1945)
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Trustee since 1993 and Chairman since 1996
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Principal Occupation:
Senior Partner of Lord Abbett (since 2007) and was formerly Managing
Partner (1996–2007) and Chief Investment Officer (1995–2007), joined Lord
Abbett in 1972.
Other Directorships:
None.
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3-1
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Name, Address and
Year
of Birth
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Current
Position and Length
of Service with the Trust
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Principal
Occupation and Other Directorships During
the Past Five Years
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Daria
L. Foster
Lord, Abbett & Co. LLC
90 Hudson Street
Jersey City, NJ 07302
(1954)
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Trustee and President since 2006
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Principal Occupation:
Managing Partner of Lord Abbett (since
2007), and was formerly Director of
Marketing and Client Service, joined Lord Abbett in 1990.
Other
Directorships:
None.
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Independent Trustees
The following
Independent Trustees also
are directors/trustees of each of the 13 Lord Abbett-sponsored funds, which
consist of 56 portfolios or series.
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Name, Address and
Year of Birth
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Current
Position and Length
of Service with the Trust
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Principal
Occupation and Other Directorships During
the Past Five Years
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E. Thayer Bigelow
Lord, Abbett & Co. LLC
c/o Legal Dept.
90 Hudson Street
Jersey City, NJ 07302
(1941)
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Trustee
since 1994
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Principal Occupation:
Managing General
Partner, Bigelow Media, LLC (since 2000); Senior Adviser, Time Warner Inc.
(1998–2000).
Other Directorships:
Currently
serves as director of Crane Co. (since 1984) and Huttig Building Products
Inc. (since 1998). Previously served as a director of R.H. Donnelley Inc.
(2009–2010) and Adelphia Communications Inc. (2003–2007).
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Robert B. Calhoun, Jr.
Lord, Abbett & Co. LLC
c/o Legal Dept.
90 Hudson Street
Jersey City, NJ 07302
(1942)
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Trustee
since 1998
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Principal Occupation:
Senior Advisor of
Monitor Clipper Partners, a private equity investment fund (since 1997);
President of Clipper Asset Management Corp. (1991–2009).
Other Directorships:
Previously
served as a director of Interstate Bakeries Corp. (1991–2008).
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Evelyn E. Guernsey
Lord, Abbett & Co. LLC
c/o Legal Dept.
90 Hudson Street
Jersey City, NJ 07302
(1955)
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Trustee
since 2011
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Principal Occupation:
CEO, Americas of J.P.
Morgan Asset Management (2004–2010).
Other Directorships:
None.
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Julie A. Hill
Lord, Abbett & Co. LLC
c/o Legal Dept.
90 Hudson Street
Jersey City, NJ 07302
(1946)
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Trustee
since 2004
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Principal Occupation:
Owner and CEO of The
Hill Company, a business consulting firm (since 1998).
Other Directorships:
Currently
serves as director of Lend Lease Corporation Limited (since 2006), and serves
as director of WellPoint, Inc., a health benefits company (since 1994).
Previously served as a director of Resources Connection, Inc., a consulting
firm (2004–2007).
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Franklin W. Hobbs
Lord, Abbett & Co. LLC
c/o Legal Dept.
90 Hudson Street
Jersey City, NJ 07302
(1947)
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Trustee
since 2001
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Principal Occupation:
Advisor of One Equity
Partners, a private equity firm (since 2004).
Other Directorships:
Currently
serves as director and Chairman of the Board of Ally Financial Inc., a
financial services firm (since 2009) and as director of Molson Coors Brewing
Company (since 2002).
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3-2
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Name, Address and
Year of Birth
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Current
Position and Length
of Service with the Trust
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Principal
Occupation and Other Directorships During
the Past Five Years
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Thomas J. Neff
Lord, Abbett & Co. LLC
c/o Legal Dept.
90 Hudson Street
Jersey City, NJ 07302
(1937)
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Trustee
since 1993
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Principal Occupation:
Chairman of Spencer
Stuart (U.S.), an executive search consulting firm (since 1996).
Other Directorships:
Currently
serves as director of Ace, Ltd. (since 1997). Previously served as a director
of Hewitt Associates, Inc. (2004–2010).
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James L.L. Tullis
Lord, Abbett & Co. LLC
c/o Legal Dept.
90 Hudson Street
Jersey City, NJ 07302
(1947)
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Trustee
since 2006
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Principal Occupation:
CEO of Tullis-Dickerson
and Co. Inc., a venture capital management firm (since 1990).
Other Directorships:
Currently
serves as director of Crane Co. (since 1998). Previously served as a director
of Synageva BioPharma Corp., a biopharmaceutical company (2009–201l), and
served as a director of ViaCell, Inc. (2003–2007).
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Officers
None of the officers listed below have received
compensation from the Trust. All of the officers of the Trust also may be
officers of the other Lord Abbett-sponsored funds and maintain offices at 90
Hudson Street, Jersey City, NJ 07302. Unless otherwise indicated, the
position(s) and title(s) listed under the “Principal Occupation During the Past
Five Years” column indicate each officer’s position(s) and title(s) with Lord
Abbett.
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Name and Year of Birth
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Current
Position with
the Trust
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Length of
Service of
Current Position
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Principal
Occupation During
the Past Five Years
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Robert S. Dow
(1945)
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Chief
Executive Officer and Chairman
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Elected in
1996
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Senior
Partner of Lord Abbett (since 2007), and was formerly Managing Partner
(1996–2007) and Chief Investment Officer (1995–2007), joined Lord Abbett in
1972.
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Daria L. Foster
(1954)
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President
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Elected in
2006
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Managing
Partner of Lord Abbett (since 2007), and was formerly Director of Marketing
and Client Service, joined Lord Abbett in 1990.
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Robert P. Fetch
(1953)
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Executive
Vice President
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Elected in
1999
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Partner and
Director, joined Lord Abbett in 1995.
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Robert I. Gerber
(1954)
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Executive
Vice President
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Elected in
2005
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Partner and
Chief Investment Officer (since 2007), joined Lord Abbett in 1997 as Director
of Taxable Fixed Income Management.
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Gerard S. E. Heffernan, Jr.
(1963)
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Executive
Vice President
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Elected in
1999
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Partner and
Director, joined Lord Abbett in 1998.
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Todd D. Jacobson
(1966)
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Executive
Vice President
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Elected in
2003
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Portfolio
Manager, joined Lord Abbett in 2003.
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Vincent J. McBride
(1964)
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Executive
Vice President
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Elected in
2003
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Partner and
Director, joined Lord Abbett in 2003.
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3-3
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Name and Year of Birth
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Current Position with
the Trust
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Length of Service of
Current Position
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Principal Occupation During
the Past Five Years
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F. Thomas
O’Halloran, III
(1955)
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Executive
Vice President
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Elected in
2003
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Partner and
Director, joined Lord Abbett in 2001.
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Harold E. Sharon
(1960)
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Executive
Vice President
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Elected in
2003
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Partner and
Director, joined Lord Abbett in 2003.
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A. Edward Allinson
(1961)
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Vice
President
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Elected in
2011
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Portfolio
Manager, joined Lord Abbett in 2005.
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James W. Bernaiche
(1956)
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Chief
Compliance Officer
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Elected in
2004
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Partner and
Chief Compliance Officer, joined Lord Abbett in 2001.
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Joan A. Binstock
(1954)
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Chief
Financial Officer and Vice President
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Elected in
1999
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Partner and
Chief Operations Officer, joined Lord Abbett in 1999.
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John K. Forst
(1960)
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Vice
President and Assistant Secretary
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Elected in
2005
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Deputy
General Counsel, joined Lord Abbett in 2004.
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Anthony W. Hipple
(1964)
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Vice
President
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Elected in
2006
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Portfolio
Manager, joined Lord Abbett in 2002.
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Lawrence H. Kaplan
(1957)
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Vice
President and Secretary
|
|
Elected in
1997
|
|
Partner and
General Counsel, joined Lord Abbett in 1997.
|
|
Deepak Khanna
(1963)
|
|
Vice
President
|
|
Elected in
2008
|
|
Partner and
Portfolio Manager, rejoined Lord Abbett in 2007.
|
|
David J. Linsen
(1974)
|
|
Vice
President
|
|
Elected in
2011
|
|
Partner and
Director, joined Lord Abbett in 2001.
|
|
Steven M. Lipper
(1961)
|
|
Vice
President
|
|
Elected in
2011
|
|
Director,
Product Management, joined Lord Abbett in 2004.
|
|
Thomas B. Maher
(1967)
|
|
Vice
President
|
|
Elected in
2008
|
|
Partner and
Portfolio Manager, joined Lord Abbett in 2003.
|
|
Justin C. Maurer
(1969)
|
|
Vice
President
|
|
Elected in
2008
|
|
Partner and
Portfolio Manager, joined Lord Abbett in 2001.
|
|
A. Edward Oberhaus,
III
(1959)
|
|
Vice
President
|
|
Elected in
1993
|
|
Partner and
Director, joined Lord Abbett in 1983.
|
|
Thomas R. Phillips
(1960)
|
|
Vice
President and Assistant Secretary
|
|
Elected in
2008
|
|
Partner and
Deputy General Counsel, joined Lord Abbett in 2006.
|
3-4
|
|
|
|
|
|
|
|
|
Name and Year of Birth
|
|
Current Position with
the Trust
|
|
Length of Service of
Current Position
|
|
Principal Occupation During
the Past Five Years
|
|
Lawrence B. Stoller
(1963)
|
|
Vice President and
Assistant Secretary
|
|
Elected in 2007
|
|
Partner and
Senior Deputy General Counsel, joined Lord Abbett in 2007 and was
formerly an Executive Vice President and the General Counsel at Cohen &
Steers Capital Management, Inc. (1999–2007).
|
|
Paul J. Volovich
(1973)
|
|
Vice President
|
|
Elected in 2011
|
|
Partner and Director,
joined Lord Abbett in 1997.
|
|
Arthur K. Weise
(1970)
|
|
Vice President
|
|
Elected in 2011
|
|
Portfolio Manager, joined
Lord Abbett in 2007 and was formerly a Managing Director, Portfolio Manager
and Analyst at Bank of New York Institutional Asset Management (2005–2007).
|
|
Scott
S. Wallner
(1955)
|
|
AML Compliance Officer
|
|
Elected in 2011
|
|
Assistant General Counsel,
joined Lord Abbett in 2004.
|
|
Bernard J. Grzelak
(1971)
|
|
Treasurer
|
|
Elected in 2003
|
|
Partner and
Director of Fund Administration, joined Lord Abbett in 2003.
|
Qualifications
of Directors/Trustees
The individual
qualifications for each of the directors/trustees and related biographical
information are noted below. These qualifications led to the conclusion that
each should serve as a director/trustee for the Fund, in light of the Fund’s
business and structure. In addition to individual qualifications, the following
characteristics are among those qualifications applicable to each of the
existing directors/trustees and are among the qualifications that the
Nominating and Governance Committee will consider for any future nominees:
|
|
|
|
•
|
Irreproachable
reputation for integrity, honesty and the highest ethical standards;
|
|
|
|
|
•
|
Outstanding
skills in disciplines deemed by the Nominating and Governance Committee to be
particularly relevant to the role of Independent Trustee, including business
acumen, experience relevant to the financial services industry generally and
the investment industry particularly, and ability to exercise sound judgment
in matters relating to the current and long-term objectives of the Fund;
|
|
|
|
|
•
|
Understanding
and appreciation of the important role occupied by an Independent Trustees in
the regulatory structure governing registered investment companies;
|
|
|
|
|
•
|
Willingness
and ability to contribute positively to the decision making process for the
Fund, including appropriate interpersonal skills to work effectively with
other Independent Trustees;
|
|
|
|
|
•
|
Desire
and availability to serve as an Independent Trustee for a substantial period
of time;
|
|
•
|
Absence
of conflicts that would interfere with qualifying as an Independent Trustee;
and
|
|
|
|
|
•
|
Diversity
of background.
|
|
|
|
|
|
|
|
Interested Directors/Trustees:
|
|
|
|
•
|
Robert S. Dow.
Board tenure with the Lord Abbett Family of Funds (since 1989), chief
investment officer experience, financial services industry experience, chief
executive officer experience, corporate
|
3-5
|
|
|
|
|
|
|
|
|
governance experience, service on the Investment Company Institute’s
executive committee and board of governors, and civic/community involvement.
|
|
|
|
|
|
|
|
|
•
|
Daria L. Foster.
Board
tenure with the Lord Abbett Family of Funds (since 2006), financial services
industry experience, leadership experience, corporate governance experience,
and civic/community involvement.
|
|
|
|
|
|
|
|
Independent
Directors/Trustees:
|
|
|
|
|
|
|
|
•
|
E. Thayer Bigelow.
Board tenure with the Lord Abbett Family of Funds (since 1994), media
investment and consulting experience, chief executive officer experience,
entrepreneurial background, corporate governance experience, financial
expertise, service in academia, and civic/community involvement.
|
|
|
|
|
|
|
|
|
•
|
Robert B. Calhoun,
Jr.
Board tenure with the Lord Abbett Family of
Funds (since 1998), financial services industry experience, leadership
experience, corporate governance experience, financial expertise, service in
academia, and civic/community involvement.
|
|
|
|
|
|
|
|
|
•
|
Evelyn E. Guernsey.
Board tenure with the Lord Abbett Family of Funds (since 2011), financial services
industry experience, chief executive officer experience, marketing
experience, corporate governance experience, and civic/community involvement.
|
|
|
|
|
|
|
|
|
•
|
Julie A. Hill.
Board
tenure with the Lord Abbett Family of Funds (since 2004), business management
and marketing experience, chief executive officer experience, entrepreneurial
background, corporate governance experience, service in academia, and
civic/community involvement.
|
|
|
|
|
|
|
|
|
•
|
Franklin W. Hobbs.
Board tenure with the Lord Abbett Family of Funds (since 2000), financial
services industry experience, chief executive officer experience, corporate
governance experience, financial expertise, service in academia, and
civic/community involvement.
|
|
|
|
|
|
|
|
|
•
|
Thomas J. Neff.
Board tenure with the Lord Abbett Family of Funds (since 1982), executive
recruiting and consulting experience, chief executive officer experience,
corporate governance experience, service in academia, and civic/community
involvement.
|
|
|
|
|
|
|
|
|
•
|
James L.L. Tullis.
Board tenure with the Lord Abbett Family of Funds (since 2006), financial
services industry experience, chief executive officer experience, corporate
governance experience, financial expertise, and civic/community involvement.
|
Committees
The standing
committees of the Board are the Audit Committee, the Proxy Committee, the
Nominating and Governance Committee, and the Contract Committee. The table
below provides information about each such committee’s composition, functions,
and responsibilities.
3-6
|
|
|
|
|
|
|
|
|
Committee
|
|
Committee Members
|
|
Number of
Meetings Held
During the
[2012]
Fiscal Year
|
|
Description
|
|
Audit Committee
|
|
E. Thayer
Bigelow
Robert B. Calhoun, Jr.
Evelyn E.
Guernsey
James L.L. Tullis
|
|
[4]
|
|
The Audit Committee comprises solely directors/trustees who are not
“interested persons” of the Fund. The Audit Committee provides assistance to
the Board in fulfilling its responsibilities relating to accounting matters,
the reporting practices of the Fund, and the quality and integrity of the
Fund’s financial reports. Among other things, the Audit Committee is
responsible for reviewing and evaluating the performance and independence of
the Fund’s independent registered public accounting firm and considering
violations of the Fund’s Code of Ethics to determine what action should be
taken. The Audit Committee meets at least quarterly.
|
|
Proxy Committee
|
|
Julie A.
Hill
Franklin W. Hobbs
Thomas J. Neff
|
|
[3]
|
|
The
Proxy Committee comprises at least two directors/trustees who are not
“interested persons” of the Fund, and also may include one or more
directors/trustees who are partners or employees of Lord Abbett. Currently,
the Proxy Committee comprises solely Independent Trustees. The Proxy
Committee shall (i) monitor the actions of Lord Abbett in voting securities
owned by the Fund; (ii) evaluate the policies of Lord Abbett in voting
securities; and (iii) meet with Lord Abbett to review the policies in voting
securities, the sources of information used in determining how to vote on
particular matters, and the procedures used to determine the votes in any
situation where there may be a conflict of interest.
|
|
Nominating and
Governance
Committee
|
|
E. Thayer
Bigelow
Robert B. Calhoun, Jr.
Evelyn E. Guernsey
Julie A. Hill
Franklin W.
Hobbs
Thomas J. Neff
James L.L. Tullis
|
|
[3]
|
|
The Nominating and Governance Committee comprises all
directors/trustees who are not “interested persons” of the Fund. Among other
things, the Nominating and Governance Committee is responsible for (i)
evaluating and nominating individuals to serve as Independent Trustees
and as committee members; and (ii) periodically reviewing
director/trustee compensation. The Nominating and Governance Committee has
adopted policies for its consideration of any individual recommended by the
Fund’s shareholders to serve as an Independent Trustee. A shareholder who would like to recommend a candidate
may write to the Fund.
|
|
Contract Committee
|
|
E. Thayer
Bigelow
Robert B. Calhoun, Jr.
Evelyn E. Guernsey
Julie A. Hill
Franklin W.
Hobbs
Thomas J. Neff
James L.L. Tullis
|
|
[4]
|
|
The
Contract Committee comprises all directors/trustees who are not “interested
persons” of the Fund. The Contract Committee conducts much of the factual
inquiry undertaken by the directors/trustees in connection with the Board’s
annual consideration of whether to renew the management and other contracts
with Lord Abbett and Lord Abbett Distributor. During the year, the Committee
meets with Lord Abbett management and portfolio management to monitor ongoing
developments involving Lord Abbett and the Fund’s portfolio.
|
3-7
Board
Oversight of Risk Management
Managing the
investment portfolios and the operations of the Fund, like all mutual funds,
involves certain risks. Lord Abbett (and other Fund service providers, subject
to oversight by Lord Abbett) is responsible for day-to-day risk management for
the Fund. The Board oversees the Fund’s risk management as part of its general
management oversight function. The Board, either directly or through
committees, regularly receives and reviews reports from Lord Abbett about the
elements of risk that affect or may affect the Fund, including investment risk,
operational risk, compliance risk, and legal risk, among other elements of risk
related to the operations of the Fund and Lord Abbett, and the steps Lord
Abbett takes to mitigate those risks. The Board has appointed a Chief
Compliance Officer, who oversees the implementation and testing of the Fund’s
compliance program and reports to the Board at least quarterly regarding
compliance matters for the Fund, Lord Abbett, and the Fund’s service providers.
The Board also has appointed a Chief Legal Officer, who is responsible for
overseeing internal reporting requirements imposed under rules adopted by the
SEC pursuant to the Sarbanes-Oxley Act of 2002, which are designed to ensure
that credible indications of material violations of federal securities laws or
breaches of fiduciary duty are investigated and are adequately and
appropriately resolved.
In
addition to the Board’s direct oversight, the Audit Committee and the Contract
Committee play important roles in overseeing risk management on behalf of the
Fund. The Audit Committee oversees the risk management efforts for financial
reporting, pricing and valuation, and liquidity risk and meets regularly with
the Fund’s Chief Financial Officer and independent auditors, as well as with
members of management, to discuss financial reporting and audit issues,
including risks related to financial controls. The Contract Committee regularly
meets with the Fund’s portfolio managers and Lord Abbett’s Chief Investment
Officer to discuss investment performance achieved by the Fund and the
investment risks assumed by the Fund to achieve that performance.
While
Lord Abbett (and the Fund’s service providers) has implemented a number of
measures intended to mitigate risk effectively to the extent practicable, it is
not possible to eliminate all of the risks that are inherent in the operations
of the Fund. Some risks are beyond the control of Lord Abbett and not all risks
that may affect the Fund can be identified before the risk arises or before
Lord Abbett develops processes and controls to eliminate the occurrence or
mitigate the effects of such risks.
Compensation
Disclosure
The following table
summarizes the compensation paid to each of the independent directors/trustees.
The
second column of the following table sets forth the compensation accrued by the
Trust for independent directors/trustees. The third column sets forth the total
compensation paid by all Lord Abbett-sponsored funds to the independent
directors/trustees, and amounts payable but deferred at the option of the
director/trustee. No director/trustee of the Lord Abbett-sponsored funds, and
no officer of the Fund, received any compensation from the Fund for acting as a
director/trustee or officer.
|
|
|
|
|
|
|
Name of Director/Trustee
|
|
For the
Fiscal Year Ended
[October 31, 2012] Aggregate
Compensation
Accrued by the Trust
1
|
|
For the
Year Ended December 31, 2011
Total Compensation Paid by the Trust
and Twelve Other Lord Abbett-
Sponsored Funds
2
|
|
|
|
|
|
|
|
E.
Thayer Bigelow
|
|
$[32,551]
|
|
$278,000
|
|
Robert
B. Calhoun, Jr.
|
|
$[32,262]
|
|
$272,000
|
|
Evelyn
E. Guernsey
|
|
$[26,385]
|
|
$253,000
|
|
Julie
A. Hill
|
|
$[28,645]
|
|
$244,000
|
|
Franklin
W. Hobbs
|
|
$[29,127]
|
|
$247,000
|
|
Thomas
J. Neff
|
|
$[29,341]
|
|
$248,000
|
|
James
L.L. Tullis
|
|
$[28,998]
|
|
$249,000
|
|
1
Independent 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 the Fund. A
portion of the fees payable by the Fund to its independent directors/trustees
may be deferred at the option of a director/trustee under an equity-based
plan (the “equity-based plan”) that deems the deferred amounts to be invested
in shares of the fund for later distribution to the directors/trustees. In
addition, $25,000 of each director’s/trustee’s retainer must be deferred and
is deemed invested in shares of the Fund and other Lord Abbett-sponsored
funds under the equity-based plan. Of the amounts shown in the second column,
the total deferred amounts for Mr. Bigelow, Mr. Calhoun, Ms. Guernsey, Ms.
Hill, Mr. Hobbs, Mr. Neff, and Mr. Tullis are $[3,008], $[32,262], $[2,345],
$[8,773], $[29,127], $[3,008] and $[3,008], respectively.
|
|
2
The third column shows aggregate
compensation, including the types of compensation described in the second
column, accrued by all Lord Abbett-sponsored funds during the year ended
December 31, 2011, including fees independent directors/trustees have chosen
to defer.
|
3-8
The
following chart provides certain information about the dollar range of equity
securities beneficially owned by each director/trustee in the Trust and other
Lord Abbett-sponsored funds as of December 31, 2011. The amounts shown include
deferred compensation (including interest) to the directors/trustees deemed
invested in fund shares. The amounts ultimately received by the
directors/trustees under the deferred compensation plan will be directly linked
to the investment performance of the Fund.
|
|
|
|
|
|
|
Name of Director/Trustee
|
|
Dollar
Range of Equity
Securities in the Fund
|
|
Aggregate
Dollar Range of
Equity Securities in Lord Abbett-
Sponsored Funds
|
|
|
|
|
|
|
|
Interested Directors/Trustees:
|
|
|
|
|
|
Robert
S. Dow
|
|
Over
$100,000
|
|
Over
$100,000
|
|
Daria
L. Foster
|
|
Over
$100,000
|
|
Over
$100,000
|
|
Independent
Directors/Trustees
:
|
|
|
|
|
|
E.
Thayer Bigelow
|
|
$1-$10,000
|
|
Over
$100,000
|
|
Robert
B. Calhoun, Jr.
|
|
$1-$10,000
|
|
Over
$100,000
|
|
Evelyn
E. Guernsey
|
|
$1-$10,000
|
|
$10,001-$50,000
|
|
Julie
A. Hill
|
|
$1-$10,000
|
|
Over
$100,000
|
|
Franklin
W. Hobbs
|
|
$1-$10,000
|
|
Over
$100,000
|
|
Thomas
J. Neff
|
|
$1-$10,000
|
|
Over
$100,000
|
|
James
L.L. Tullis
|
|
$1-$10,000
|
|
Over
$100,000
|
Code of
Ethics
The directors,
trustees and officers of the Lord Abbett-sponsored funds, together with the
partners and employees of Lord Abbett, are permitted to purchase and sell
securities for their personal investment accounts. In engaging in personal
securities transactions, however, such persons are subject to requirements and
restrictions contained in the Trust’s, Lord Abbett’s, and Lord Abbett
Distributor’s Code of Ethics, which complies, in substance, with Rule 17j-1
under the Act and each of the recommendations of the Investment Company
Institute’s Advisory Group on Personal Investing (the “Advisory Group”). Among
other things, the Code of Ethics requires, with limited exceptions, 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 (1) investing in a security seven days before or after any Lord
Abbett-sponsored fund or Lord Abbett-managed account considers a trade or
trades in such security, (2) transacting in a security that the person covers
as an analyst or with respect to which the person has participated in a
non-public investor meeting with company management within the six months
preceding the requested transaction, (3) profiting on trades of the same
security within 60 days, (4) trading on material and non-public information,
and (5) engaging in market timing activities with respect to the Lord
Abbett-sponsored funds. The Code of Ethics imposes certain similar requirements
and restrictions on the independent directors/trustees of each Lord
Abbett-sponsored fund to the extent contemplated by the Act and recommendations
of the Advisory Group.
Proxy
Voting
The Fund has
delegated proxy voting responsibilities to the Fund’s investment adviser, Lord
Abbett, subject to the Proxy Committee’s general oversight. Lord Abbett has
adopted its own proxy voting policies and procedures for this purpose. A copy
of Lord Abbett’s proxy voting policies and procedures is attached as Appendix
B.
In
addition, the Fund is required to file Form N-PX, with its complete proxy
voting records for the twelve months ended June 30
th
, no later than
August 31
st
of each year. The Fund’s Form N-PX filing is available
on the SEC’s website at www.sec.gov. The Fund also has made this information
available, without charge, on Lord Abbett’s website at www.lordabbett.com.
3-9
4.
C
ontrol Persons and Principal Holders of Securities
Shareholders
beneficially owning 25% or more of outstanding shares may control the Fund and
may be able to affect the outcome of certain matters presented for a vote of
shareholders. [As of November 1, 2012, no record holder held more than 25% of
the Fund’s outstanding shares.]
As
of [November 1], 2012, to the best of our knowledge, the only persons or
entities who owned of record or were known by the Fund to own beneficially 5%
or more of the specified class of the Fund’s outstanding shares are listed as
follows:
[As
of November 1, 2012, the Fund’s officers and Trustees, as a group, owned less
than 1% of each class of the Fund’s outstanding shares.]
4-1
5.
Investment
Advisory and Other Services
Investment
Adviser
As described under
“Management and Organization of the Fund” in the prospectus, Lord Abbett is the
Trust’s investment adviser. Lord Abbett is a privately held investment manager.
The address of Lord Abbett is 90 Hudson Street, Jersey City, NJ 07302-3973.
Under
the Management Agreement between Lord Abbett and the Trust, on behalf of the
Fund, Lord Abbett is entitled to an annual management fee based on the Fund’s
average daily net assets. The management fee is allocated to each class of
shares based upon the relative proportion of the Fund’s net assets represented
by that class. The management fee is accrued daily and payable monthly at the
following annual rates:
0.55%
on the first $2 billion of average daily net assets; and
0.50% on the Fund’s
average daily net assets over $2 billion.
The management fees paid to Lord Abbett by the Fund (taking into
account management fee waivers, if any) for the last three fiscal years ended
October 31
st
were as follows:
|
|
|
|
|
Year Ended
October 31, 2012
|
|
|
|
|
|
Gross
Management Fees
|
Management
Fees Waived
|
Net
Management
Fees
|
|
$[21,824]
|
$[21,824]
|
[N/A]
|
|
|
|
|
|
Year Ended
October 31, 2011
|
|
|
|
|
|
Gross
Management Fees
|
Management
Fees Waived
|
Net
Management
Fees
|
|
$21,824*
|
$21,824*
|
$N/A*
|
|
* The Fund commenced
investment operations on June 24, 2011.
|
|
|
|
|
|
Year Ended
October 31, 2010
|
|
|
|
|
|
Gross
Management Fees
|
Management
Fees Waived
|
Net
Management
Fees
|
|
N/A*
|
N/A*
|
N/A*
|
|
* The Fund commenced
investment operations on June 24, 2011.
|
For
the period [November 28, 2012 through February 28, 2014], Lord Abbett has
contractually agreed to waive all or a portion of its management fee and
administrative services fee for the Fund and, if necessary, reimburse the
Fund’s other expenses to the extent necessary so that the total net annual
operating expenses for each class, excluding 12b-1 fees, do not exceed an
annual rate of [0.50%]. This agreement may be terminated only upon the approval
of the Fund’s Board.
The
Fund pays all expenses attributable to its operations not expressly assumed by
Lord Abbett, including, without limitation, 12b-1 expenses, independent
directors’/trustees’ 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
registering its shares under federal and state securities laws, expenses of
preparing, printing and mailing prospectuses and shareholder reports to
existing shareholders, insurance premiums, and other expenses connected with
executing portfolio transactions.
Administrative
Services
Pursuant
to an Administrative Services Agreement with the Fund, Lord Abbett provides
certain administrative services not involving the provision of investment
advice to the Fund. Under the Agreement, the Fund pays Lord Abbett a monthly
fee, based on average daily net assets for each month, at an annual rate of
0.04%. The administrative services fee is allocated to each class of shares
based upon the relative proportion of the Fund’s net assets represented by that
class.
5-1
The administrative services
fees paid to Lord Abbett by the Fund for the last three fiscal years ended
October 31
st
were:
|
|
|
|
|
|
|
|
2012
|
2011
|
2010
|
|
$
|
[1,587]
|
$
|
1,587*
|
|
N/A*
|
|
* The Fund commenced
investment operations on June 24, 2011.
|
Portfolio
Managers
As stated in the
prospectus, the Fund is managed by a team of experienced portfolio managers
responsible for investment decisions together with a team of investment
professionals who provide issuer, industry, sector and macroeconomic research
and analysis.
F.
Thomas O’Halloran heads Growth Leaders Fund’s team. Assisting Mr. O’Halloran
are Anthony W. Hipple, Paul J. Volovich and Arthur K. Weise. Messrs. O’Halloran,
Hipple, Volovich, and Weise are jointly and primarily responsible for the
day-to-day management of the Fund.
The
following table indicates for the Fund as of [October 31, 2012] (or another
date, if indicated): (1) the number of other accounts managed by each portfolio
manager who is jointly and/or primarily responsible for the day-to-day
management of the Fund within certain categories of investment vehicles; and
(2) the total net assets in such accounts managed within each category. For
each of the categories a footnote to the table also provides the number of
accounts and the total net assets in the accounts with respect to which the
management fee is based on the performance of the account. Included in the
Registered Investment Companies category are those U.S. registered funds
managed or sub-advised by Lord Abbett, including funds underlying variable
annuity contracts and variable life insurance policies offered through
insurance companies. The Other Pooled Investment Vehicles category includes collective
investment funds, offshore funds and similar non-registered investment
vehicles. Lord Abbett does not manage any hedge funds. The Other Accounts
category encompasses retirement and benefit plans (including both defined
contribution and defined benefit plans) sponsored by various corporations and
other entities, individually managed institutional accounts of various
corporations, other entities and individuals and separately managed accounts in
so-called wrap fee programs sponsored by financial intermediaries unaffiliated
with Lord Abbett. (The data shown below are approximate.)
|
|
|
|
|
|
|
|
|
Other
Accounts Managed (#Total Net Assets
+
)
|
|
|
|
|
|
Fund
|
Name
|
Registered
Investment
Companies
|
Other
Pooled
Investment
Vehicles
|
Other
Accounts
|
|
Growth
Leaders Fund
|
Thomas F. O’Halloran
|
[6/
$2,457]
|
[0/
$0]
|
[17/
$609]
|
|
Anthony W. Hipple
|
[3/
$213]
|
[0/
$0]
|
[2/
$161]
|
|
Paul J. Volovich
|
[3/
$875]
|
[1/
$42]
|
[1/
$16]
|
|
Arthur K. Weise
|
[3/
$2,244]
|
[0/
$0]
|
[15/
$449]
|
|
+
Total net assets are in millions.
|
Conflicts
of Interest
Conflicts of interest
may arise in connection with the portfolio managers’ management of the
investments of the Fund and the investments of the other accounts included in
the table above. Such conflicts may arise with respect to the allocation of
investment opportunities among the Fund and other accounts with similar
investment objectives and policies. A portfolio manager potentially could use
information concerning the Fund’s transactions to the advantage of other
accounts and to the detriment of the Fund. To address these potential conflicts
of interest, Lord Abbett has adopted and implemented a number of policies and
procedures. Lord Abbett has adopted Policies and Procedures Relating to Client
Brokerage and Soft Dollars, as well as Evaluations of Proprietary Research and
Procedures. The objective of these policies and procedures is to ensure the
fair and equitable treatment of transactions and allocation of investment
opportunities on behalf of all accounts managed by Lord Abbett. In addition,
Lord Abbett’s Code of Ethics sets forth general principles for the conduct of
employee personal securities transactions in a manner that avoids any actual or
potential conflicts of interest with the interests of Lord Abbett’s clients
including the Fund. Moreover, Lord Abbett’s Insider Trading and Receipt of
Material Non-Public Information Policy and Procedure sets forth procedures for
personnel to follow when they have inside information. Lord Abbett is not
affiliated with a full service broker-dealer and therefore does not execute any
portfolio transactions through such an entity, a structure that could give rise
to additional conflicts. Lord Abbett does not conduct any investment bank
functions and does not manage any hedge funds. Lord Abbett does not believe
that
5-2
any
material conflicts of interest exist in connection with the portfolio managers’
management of the investments of the Fund and the investments of the other
accounts referenced in the table above.
Compensation
of Portfolio Managers
When used in this
section, the term “fund” refers to the Fund, as well as any other registered
investment companies, pooled investment vehicles and accounts managed by a
portfolio manager. Each portfolio manager receives compensation from Lord
Abbett consisting of salary, bonus and profit sharing plan contributions. The
level of base compensation takes into account the portfolio manager’s
experience, reputation and competitive market rates.
Fiscal
year-end bonuses, which can be a substantial percentage of overall
compensation, are determined after an evaluation of various factors. These
factors include the portfolio manager’s investment results and style
consistency, the dispersion among funds with similar objectives, the risk taken
to achieve the fund returns and similar factors. In considering the portfolio
manager’s investment results, Lord Abbett’s senior management may evaluate the
Fund’s performance against one or more benchmarks from among the Fund’s primary
benchmark and any supplemental benchmarks as disclosed in the prospectus,
indexes disclosed as performance benchmarks by the portfolio manager’s other
accounts, and other indexes within one or more of the Fund’s peer groups
maintained by rating agencies, as well as the Fund’s peer group. In particular,
investment results are evaluated based on an assessment of the portfolio
manager’s three- and five-year investment returns on a pre-tax basis versus
both the benchmark and the peer groups. Finally, there is a component of the
bonus that reflects leadership and management of the investment team. The
evaluation does not follow a formulaic approach, but rather is reached
following a review of these factors. No part of the bonus payment is based on
the portfolio manager’s assets under management, the revenues generated by
those assets, or the profitability of the portfolio manager’s team. Lord Abbett
does not manage hedge funds. In addition, Lord Abbett may designate a bonus
payment of a manager for participation in the firm’s senior incentive
compensation plan, which provides for a deferred payout over a five-year
period. The plan’s earnings are based on the overall asset growth of the firm
as a whole. Lord Abbett believes this incentive focuses portfolio managers on
the impact their fund’s performance has on the overall reputation of the firm
as a whole and encourages exchanges of investment ideas among investment
professionals managing different mandates.
Lord
Abbett provides a 401(k) profit-sharing plan for all eligible employees.
Contributions to a portfolio manager’s profit-sharing account are based on a
percentage of the portfolio manager’s total base and bonus paid during the
fiscal year, subject to a specified maximum amount. The assets of this
profit-sharing plan are entirely invested in Lord Abbett-sponsored funds.
Holdings of
Portfolio Managers
The following table
indicates for the Fund the dollar range of shares beneficially owned by each
portfolio manager who is jointly and/or primarily responsible for the
day-to-day management of that Fund, as of [October 31, 2012] (or another date,
if indicated). This table includes the value of shares beneficially owned by
such portfolio managers through 401(k) plans and certain other plans or
accounts, if any.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar Range of Shares in the Fund
|
|
Fund
|
Name
|
None
|
$1-
$10,000
|
$10,001-
$50,000
|
$50,001-
$100,000
|
$100,001-
$500,000
|
$500,001-
$
1,000,000
|
Over
$1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
Growth
Leaders Fund
|
Thomas F.
O’Halloran
|
[X]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony W.
Hipple
|
[X]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul J.
Volovich
|
|
|
[X]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arthur K. Weise
|
|
|
|
|
[X]
|
|
|
Principal
Underwriter
Lord Abbett
Distributor, a New York limited liability company and a subsidiary of Lord
Abbett, 90 Hudson Street, Jersey City, NJ 07302-3973, serves as the principal
underwriter for the Fund.
Custodian
and Accounting Agent
State Street Bank and
Trust Company, One Lincoln Street, Boston, MA 02111-2900, is the Fund’s
custodian. The custodian pays for and collects proceeds of securities bought
and sold by the Fund and attends to the collection of principal and income. The
custodian may appoint domestic and foreign subcustodians from time to time to
hold
5-3
certain
securities purchased by the Fund in foreign countries and to hold cash and
currencies for the Fund. In accordance with the requirements of Rule 17f-5
under the Act, the Board has approved arrangements permitting the Fund’s
foreign assets not held by the custodian or its foreign branches to be held by
certain qualified foreign banks and depositories. In addition, State Street
Bank and Trust Company performs certain accounting and recordkeeping functions
relating to portfolio transactions and calculates the Fund’s NAV.
Transfer
Agent
DST Systems, Inc. 210
West 10
th
St., Kansas City, MO 64105, serves as the Fund’s transfer
agent and dividend disbursing agent pursuant to a Transfer Agency Agreement.
Independent Registered Public
Accounting Firm
[TO BE UPDATED]
5-4
6.
Brokerage Allocations and Other Practices
Portfolio Transactions and
Brokerage Allocations
Investment
and Brokerage Discretion.
The Fund’s Management Agreement authorizes Lord Abbett to place orders
for the purchase and sale of portfolio securities. In doing so, Lord Abbett
seeks to obtain “best execution” on all portfolio transactions. This means that
Lord Abbett seeks to have purchases and sales of portfolio securities executed
at the most favorable prices, considering all costs of the transaction,
including brokerage commissions, and taking into account the full range and
quality of the broker-dealers’ services. To the extent consistent with
obtaining best execution, the Fund may pay a higher commission than some
broker-dealers might charge on the same transaction. Lord Abbett is not
obligated to obtain the lowest commission rate available for a portfolio
transaction exclusive of price, service and qualitative considerations.
Selection
of Brokers and Dealers.
The
policy on best execution governs the selection of broker-dealers and selection
of the market and/or trading venue in which to execute the transaction.
Normally, traders who are employees of Lord Abbett make the selection of
broker-dealers. These traders are responsible for seeking best execution. They
also conduct trading for the accounts of other Lord Abbett investment
management clients, including investment companies, institutions and individuals.
To the extent permitted by law, the Fund, if Lord Abbett considers it
advantageous, may make a purchase from or sale to another Lord Abbett-sponsored
fund or client without the intervention of any broker-dealer.
Fixed
Income Securities.
To
the extent the Fund purchases or sells fixed-income securities, the Fund
generally will deal directly with the issuer or through a primary market-maker
acting as principal on a net basis. When dealing with a broker-dealer serving
as a primary market-maker, the Fund pays no brokerage commission but the price,
which reflects the spread between the bid and ask prices of the security,
usually includes undisclosed compensation and may involve the designation of
selling concessions. The Fund also may purchase fixed-income securities from
underwriters at prices that include underwriting fees.
Equity
Securities.
Transactions
on stock exchanges involve the payment of brokerage commissions. In
transactions on stock exchanges in the U.S., these commissions are negotiated.
Traditionally, commission rates have not been negotiated on stock markets
outside the U.S. While an increasing number of overseas stock markets have
adopted a system of negotiated rates or ranges of rates, however, a small
number of markets continue to be subject to a non-negotiable schedule of
minimum commission rates. To the extent the Fund invests in equity securities,
it ordinarily will purchase such securities in their primary trading markets,
whether such securities are traded OTC or listed on a stock exchange, and
purchase listed securities in the OTC market if such market is deemed the
primary market. The Fund may purchase newly issued securities from underwriters
and the price of such transaction usually will include a concession paid to the
underwriter by the issuer. When purchasing from dealers serving as market
makers, the purchase price paid by the Fund may include the spread between the
bid and ask prices of the security.
Evaluating
the Reasonableness of Brokerage Commissions Paid.
The Fund pays a commission rate that Lord
Abbett believes is appropriate under the circumstances. While Lord Abbett seeks
to pay competitive commission rates, the Fund will not necessarily be paying
the lowest possible commissions on particular trades if Lord Abbett believes that
the Fund has obtained best execution and the commission rates paid by the Fund
are reasonable in relation to the value of the services received. Such services
include, but are not limited to, showing the Fund trading opportunities, a
willingness and ability to take principal positions in securities, knowledge of
a particular security or market-proven ability to handle a particular type of
trade, providing and/or facilitating Lord Abbett’s use of proprietary and third
party research, confidential treatment, promptness and reliability. Lord Abbett
may view the value of these services in terms of either a particular
transaction or multiple transactions on behalf of one or more accounts that it
manages.
On
a continuing basis, Lord Abbett seeks to determine what levels of commission
rates are reasonable in the marketplace for transactions executed on behalf of
the Fund and its other clients. In evaluating the reasonableness of commission
rates, Lord Abbett may consider any or all of the following: (a) rates quoted
by broker-dealers; (b) the size of a particular transaction, in terms of the
number of shares, dollar amount, and number of clients involved; (c) the
complexity of a particular transaction in terms of both execution and
settlement; (d) the level and type of business done with a particular firm over
a period of time; (e) the extent to which the broker-dealer has capital at risk
in the transaction; (f) historical commission rates; (g) the value of any
research products and services that may
6-1
be
made available to Lord Abbett based on its placement of transactions with the
broker-dealer; and (h) rates paid by other institutional investors based on
available public information.
Policies on
Broker-Dealer Brokerage and Research Services and Soft Dollars.
Lord Abbett may select broker-dealers that
furnish Lord Abbett with proprietary and third party brokerage and research
services in connection with commissions paid on transactions it places for
client accounts to the extent that Lord Abbett believes that the commissions
paid are reasonable in relation to the value of the services received.
“Commissions,” as defined through applicable guidance issued by the SEC,
include fees paid to brokers for trades conducted on an agency basis, and
certain mark-ups, markdowns, commission equivalents and other fees received by
dealers in riskless principal transactions. The brokerage and research services
Lord Abbett receives are within the eligibility requirements of Section 28(e)
of the Securities Exchange Act of 1934, as amended (“Section 28(e)”), and in
particular, provide Lord Abbett with lawful and appropriate assistance in the
provision of investment advice to client accounts. Brokerage and research
services (collectively referred to herein as “Research Services”) include (1)
furnishing advice as to the value of securities, the advisability of investing
in, purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities; (2) furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts; and (3) effecting
securities transactions and performing functions incidental to securities
transactions (such as clearance, settlement, and custody).
Lord
Abbett generally allocates securities purchased or sold in a batched
transaction among participating client accounts in proportion to the size of
the order placed for each account (i.e., pro-rata). In certain strategies,
however, a pro rata allocation of the securities or proceeds may not be
possible or desirable. In these cases, Lord Abbett will decide how to allocate
the securities or proceeds according to each account’s particular circumstances
and needs and in a manner that Lord Abbett believes is fair and equitable to
clients over time in light of factors relevant to managing an account. Relevant
factors may include, without limitation, client guidelines, an account’s
ability to purchase a tradable lot size, cash available for investment, the risk
exposure or the risk associated with the particular security, the type of
investment, the size of the account, and other holdings in the account.
Accordingly, Lord Abbett may increase or decrease the amount of securities
allocated to one or more accounts if necessary, under certain circumstances,
including (i) to avoid holding odd-lots or small numbers of shares in a client
account; (ii) to facilitate the rebalancing of a client account; or (iii) to
maintain certain investment guidelines or fixed income portfolio
characteristics. Lord Abbett also may deviate from a pro-rata allocation
approach when making initial investments for newly established accounts for the
purpose of seeking to fully invest such accounts as promptly as possible. In
addition, if Lord Abbett is unable to execute fully a batched transaction and
determines that it would be impractical to allocate a small number of
securities on a pro-rata basis among the participating accounts, Lord Abbett
allocates the securities in a manner it determines to be fair to all accounts
over time. Thus, in some cases it is possible that the application of the
factors described herein may result in allocations in which certain client
accounts participating in a batched transaction may receive an allocation when
other accounts do not. Non-proportional allocations may occur frequently in the
fixed income portfolio management area, in many instances because multiple
appropriate or substantially similar investments are available in fixed income
strategies, as well as due to other reasons. But non-proportional allocations
also could occur in other investment strategies.
At
times, Lord Abbett is not able to batch purchases and sales for all accounts or
products it is managing, such as when an individually-managed account client
directs it to use a particular broker for a trade (sometimes referred to herein
as “directed accounts”) or when a client restricts Lord Abbett from selecting
certain brokers to execute trades for such account (sometimes referred to
herein as “restricted accounts”). When it does not batch purchases and sales
among products, Lord Abbett usually uses a rotation process for placing equity
transactions on behalf of the different groups of accounts or products with
respect to which equity transactions are communicated to the trading desk at or
about the same time.
When
transactions for all products using a particular investment strategy are
communicated to the trading desk at or about the same time, Lord Abbett
generally will place trades first for transactions on behalf of the Lord Abbett
funds and non-directed, unrestricted individually managed institutional
accounts; second for restricted accounts; third for managed accounts (“MA”),
dual contract managed accounts (“Dual Contract”), and certain model portfolio
managed accounts (“Model-Based”) programs (collectively, MA, Dual Contract,
Model-Based and similarly named programs are referred to herein as a “Program”
or “Programs”) by Program; and finally for directed accounts. However, Lord
Abbett may determine in its sole discretion to place transactions for one group
of accounts (e.g., directed accounts, restricted accounts or MA Programs, Dual
Contract Programs or Model Based Programs) before or after the remaining
accounts based on a variety of factors, including size of overall trade, the
broker-dealer’s commitment of capital, liquidity or other conditions of the
market, or confidentiality. Most often, however, transactions are
6-2
communicated
to the trading desk first for the Lord Abbett funds and institutional accounts
and then for relevant Programs. In those instances, Lord Abbett normally will
place transactions first, for the Lord Abbett funds and non-directed,
unrestricted institutional accounts, next for restricted accounts, third for MA
Programs, Dual Contract Programs and certain Model-Based Programs by Program
and then for directed accounts.
If
Lord Abbett has received trade instructions from multiple institutional
clients, Lord Abbett will rotate the order in which it places equity transactions
among the accounts or groups of accounts. Lord Abbett normally will use a
rotation methodology designed to treat similarly situated groups of accounts
equitably over time. In instances in which the same equity securities are used
in more than one investment strategy, Lord Abbett normally will place
transactions and, if applicable, use its rotation policies, first on behalf of
the strategy that it views as the primary strategy. For example, Lord Abbett
typically will place transactions/use its rotation for large capitalization
equity accounts before those for balanced strategy accounts that use large
capitalization securities.
In
some cases, Lord Abbett’s batching, allocation and rotation procedures may have
an adverse effect on the size of the position purchased or sold by a particular
account or the price paid or received by certain accounts. From time to time,
these policies may adversely affect the performance of accounts subject to the
rotation process. Lord Abbett’s trading practices are intended to avoid
systematically favoring one product or group of accounts over another and to
provide fair and equitable treatment over time for all products and clients.
Lord
Abbett has entered into Client Commission Arrangements with a number of
broker-dealers that are involved from time to time in executing, clearing or
settling securities transactions on behalf of clients (“Executing Brokers”).
Such Client Commission Arrangements provide for the Executing Brokers to pay a
portion of the commissions paid by eligible client accounts for securities
transactions to providers of Research Services (“Research Providers”). Such
Research Providers shall produce and/or provide Research Services for the
benefit of Lord Abbett. If a Research Provider plays no role in executing
client securities transactions, any Research Services prepared by such Research
Provider may constitute third party research. Research Services that are
proprietary to the Executing Broker or are otherwise produced by the Executing
Broker or its affiliates are referred to herein as proprietary Research
Services. Lord Abbett may initiate a significant percentage, including perhaps
all, of a client’s equity transactions with Executing Brokers pursuant to
Client Commission Arrangements.
Executing
Brokers may provide Research Services to Lord Abbett in written form or through
direct contact with individuals, including telephone contacts and meetings with
securities analysts and/or management representatives from portfolio companies,
and may include information as to particular companies and securities as well
as market, economic, or other information that assists in the evaluation of
investments. Examples of Research Services that Executing Brokers may provide
to Lord Abbett include research reports and other information on the economy,
industries, groups of securities, individual companies, statistical
information, political developments, technical market action, pricing and
appraisal services, credit analysis, risk measurement analysis, performance and
other analysis. Broker-dealers typically make proprietary research available to
investment managers on the basis of their placement of transactions with the
broker-dealer. Some broker-dealers will not sell their proprietary research to
investment managers on a “hard dollar” (or “unbundled”) basis. Executing
Brokers may provide Lord Abbett with proprietary Research Services, at least
some of which are useful to Lord Abbett in its overall responsibilities with
respect to client accounts Lord Abbett manages. In addition, Lord Abbett may
purchase third party research with its own resources.
Lord
Abbett believes that access to independent investment research is beneficial to
its investment decision-making processes and, therefore, to its clients.
Receipt of independent investment research allows Lord Abbett to supplement its
own internal research and analysis and makes available the views of, and
information from, individuals and the research staffs of other firms. Lord
Abbett considers all outside research material and information received in the
context of its own internal analysis before incorporating such content into its
investment process. As a practical matter, Lord Abbett considers independent
investment Research Services to be supplemental to its own research efforts.
The receipt of Research Services from broker-dealers therefore does not tend to
reduce the need for Lord Abbett to maintain its own research personnel. Any
investment advisory or other fees paid by clients to Lord Abbett are not
reduced as a result of Lord Abbett’s receipt of Research Services. It is
unlikely that Lord Abbett would attempt to generate all of the information
presently provided by broker-dealers and third party Research Services in part
because Lord Abbett values the receipt of an independent, supplemental
viewpoint. Also, the expenses of Lord Abbett would be increased substantially
if it attempted to generate such additional information through its own staff
or if it paid for these products or services itself. To the extent that Research
Services of value are provided by or through such broker-dealers, Lord Abbett
will not have to pay for such services itself. These circumstances give rise to
potential conflicts of interest which Lord Abbett manages by following internal
6-3
procedures
designed to ensure that the value, type and quality of any products or services
it receives from broker-dealers are permissible under Section 28(e) and the
regulatory interpretations thereof.
Lord
Abbett does not attempt to allocate to any particular client account the
relative costs or benefits of Research Services received from a broker-dealer.
Rather, Lord Abbett believes that any Research Services received from a
broker-dealer are, in the aggregate, of assistance to Lord Abbett in fulfilling
its overall responsibilities to its clients. Accordingly, Research Services
received for a particular client’s brokerage commissions may be useful to Lord
Abbett in the management of that client’s account, but also may be useful in
Lord Abbett’s management of other clients’ accounts; similarly, the research
received for the commissions of other client accounts may be useful in Lord
Abbett’s management of that client account. Thus, Lord Abbett may use Research
Services received from broker-dealers in servicing any or all of its accounts,
and not all of such services will necessarily be used by Lord Abbett in
connection with its management of every client account. Such products and
services may disproportionately benefit certain clients relative to others
based on the amount of brokerage commissions paid by the client account. For
example, Lord Abbett may use Research Services obtained through soft dollar
arrangements, including Client Commission Arrangements, in its management of
certain directed accounts and Program accounts and accounts of clients who may
have restricted Lord Abbett’s use of soft dollars regardless of the fact that
brokerage commissions paid by such accounts are not used to obtain Research
Services.
In
some cases, Lord Abbett may receive a product or service from a broker-dealer
that has both a “research” and a “non-research” use. When this occurs, Lord
Abbett makes a good faith allocation between the research and non-research uses
of the product or service. The percentage of the product or service Lord Abbett
uses for research purposes may be paid for with client commissions, while Lord
Abbett will use its own funds to pay for the percentage of the product or
service that it uses for non-research purposes. In making this good faith
allocation, Lord Abbett faces a potential conflict of interest, but Lord Abbett
believes that its allocation procedures are reasonably designed to ensure that
it appropriately allocates the anticipated use of such products or services to
their research and non-research uses.
Lord
Abbett periodically assesses the contributions of the equity brokerage and
Research Services provided by broker-dealers and creates a ranking of
broker-dealers reflecting these assessments. Investment managers and research
analysts each evaluate the proprietary Research Services they receive from
broker-dealers and make judgments as to the value and quality of such services.
These assessments may affect the extent to which Lord Abbett trades with a
broker-dealer, although the actual amount of transactions placed with a
particular broker-dealer may not directly reflect its ranking in the voting
process. Assuming identical execution quality, however, there should be a
correlation between the level of trading activity with a broker-dealer and the
ranking of that broker-dealer’s brokerage and proprietary Research Services.
All portfolio transactions placed with such broker-dealers will be effected in
accordance with Lord Abbett’s obligation to seek best execution for its client
accounts. Lord Abbett periodically monitors the allocation of equity trading
among broker-dealers.
From
time to time, Lord Abbett prepares a list of Research Providers that it
considers to provide valuable Research Services (“Research Firms”) as
determined by Lord Abbett’s investment staff (“Research Evaluation”). Lord
Abbett uses the Research Evaluation as a guide for allocating payments for
Research Services to Research Firms, including Executing Brokers that may
provide proprietary Research Services to Lord Abbett. Lord Abbett may make
payments for proprietary Research Services provided by an Executing Broker
through the use of commissions paid on trades executed by such Executing Broker
pursuant to a Client Commission Arrangement (“Research Commissions”). Lord
Abbett also uses the Research Evaluation as a guide for allocating Research
Commissions and cash payments from its own resources to Research Firms that are
not Executing Brokers. From time to time, Lord Abbett may allocate Research
Commissions to pay for a significant portion of the Research Services that it
receives. Lord Abbett also reserves the right to pay cash to a Research Firm
from its own resources in an amount it determines in its discretion.
Lord
Abbett’s arrangements for Research Services do not involve any commitment by
Lord Abbett or the Fund regarding the allocation of brokerage business to or
among any particular broker-dealer. Rather, Lord Abbett executes portfolio
transactions only when they are dictated by investment decisions to purchase or
sell portfolio securities. The Fund is prohibited from compensating a
broker-dealer for promoting or selling Fund shares by directing the Fund’s
portfolio transactions to the broker-dealer or directing any other remuneration
to the broker-dealer, including commissions, mark-ups, mark downs or other
fees, resulting from the Fund’s portfolio transactions executed by a different
broker-dealer. The Fund is permitted to effect portfolio transactions through
broker-dealers that also sell shares of the Lord Abbett funds, provided that Lord
Abbett does not consider sales of shares of the Lord Abbett funds as a factor
in the selection of broker-dealers to execute portfolio transactions. Thus,
whether a
6-4
particular
broker-dealer sells shares of the Lord Abbett funds is not a factor considered
by Lord Abbett when selecting broker-dealers for portfolio transactions and any
such sales neither qualifies nor disqualifies the broker-dealer from executing
portfolio transactions for the Fund.
Lord
Abbett may select broker-dealers that provide Research Services in order to
ensure the continued receipt of such Research Services which Lord Abbett
believes are useful in its investment decision-making process. Further, Lord
Abbett may have an incentive to execute trades through certain of such broker-dealers
with which it has negotiated more favorable arrangements for Lord Abbett to
receive Research Services. To the extent that Lord Abbett uses brokerage
commissions paid in connection with client portfolio transactions to obtain
Research Services, the brokerage commissions paid by such clients might exceed
those that might otherwise be paid for execution only. In order to manage these
conflicts of interest, Lord Abbett has adopted internal procedures that are
designed to ensure that its primary objective in the selection of a
broker-dealer is to seek best execution for the portfolio transaction.
Lord
Abbett normally seeks to combine or “batch” purchases or sales of a particular
security placed at or about the same time for similarly situated accounts, including
the Fund, to facilitate “best execution” and to reduce other transaction costs,
if relevant. All accounts included in a batched transaction through a
broker-dealer that provides Lord Abbett with research or other services pay the
same commission rate, regardless of whether one or more accounts has prohibited
Lord Abbett from receiving any credit toward such services from its
commissions. Each account that participates in a particular batched order,
including the Fund, will do so at the average share price for all transactions
related to that order.
Brokerage
Commissions Paid to Independent Broker-Dealer Firms.
The Fund paid total
brokerage commissions on transactions of securities to independent broker
dealer firms as follows for the last three fiscal years ended October 31
st
:
|
|
|
|
|
2012
|
2011
|
2010
|
|
$[13,565]
|
$13,565*
|
N/A*
|
|
* The Fund
commenced investment operations on June 24, 2011.
|
Lord Abbett purchased third party Research Services with its own
resources during the fiscal years ended October 31, 2012, 2011, and 2010.
The Fund did not pay any portion of the amounts shown above to firms as
a result of directed brokerage transactions to brokers for Research Services
provided.
All such portfolio transactions were conducted on a “best execution”
basis, as discussed above. The provision of Research Services was not
necessarily a factor in the placement of all such transactions.
Regular
Broker-Dealers.
For each of the following regular
brokers or dealers (as defined in Rule 10b-1 under the Act) that derived, or
has a parent that derived, more than 15% of its gross revenues from the
business of a broker, a dealer, an underwriter, or an investment adviser, the
Fund acquired, during the fiscal year ended [October 31, 2012], either its
securities or the securities of its parent:
6-5
|
|
|
|
Regular Broker or Dealer
|
Value of the Fund’s Aggregate Holdings of the Regular
Broker’s or Dealer’s or Parent’s Securities
As of October 31, [2011]
|
|
[None]
|
[None]
|
6-6
7.
Classes of Shares
The
Fund offers investors different classes of shares. The different classes of
shares represent investments in the same portfolio of securities but are
subject to different expenses and will likely have different share prices.
Investors should read this section carefully together with the corresponding
section in the Fund’s prospectus to determine which class represents the best
investment option for their particular situation.
All
classes of 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. Additional classes, series, or funds may be
added in the future. The Act requires that where more than one class, series,
or fund exists, each class, series, or fund must be preferred over all other
classes, series, or funds in respect of assets specifically allocated to such
class, series, or fund.
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 shall not be deemed
to have been effectively acted upon unless approved by the holders of a
majority of the outstanding shares of each class affected by such matter. Rule
18f-2 further provides that a class shall be deemed to be affected by a matter
unless the interests of each class, series, or fund in the matter are
substantially identical or the matter does not affect any interest of such
class, series, or fund. However, Rule 18f-2 exempts the selection of the
independent registered public accounting firm, the approval of a contract with
a principal underwriter, and the election of directors/trustees from the
separate voting requirements.
The
Trust 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 Trust’s
Declaration and Agreement of Trust (“Declaration”), shareholder meetings may be
called (i) at any time by certain officers of the Trust or by a majority of the
Trustees for the purpose of taking action upon any matter requiring the vote or
authority of the Fund’s shareholders or upon other matters deemed to be
necessary or desirable or (ii) upon the written request of the holders of at
least one-quarter of the Fund’s outstanding shares and entitled to vote at the
meeting.
Shareholder
Liability.
Delaware
law provides that the Trust’s shareholders shall be entitled to the same
limitations of personal liability extended to stockholders of private for
profit corporations. The courts of some states, however, may decline to apply
Delaware law on this point. The Declaration contains an express disclaimer of
shareholder liability for the acts, obligations, or affairs of the Trust and
requires that a disclaimer be given in each contract entered into or executed
by the Trust. The Declaration provides for indemnification out of the Trust’s
property of any shareholder or former shareholder held personally liable for
the obligations of the Trust. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which Delaware law does not apply, no contractual limitation of liability
was in effect and the portfolio is unable to meet its obligations. Lord Abbett
believes that, in view of the above, the risk of personal liability to
shareholders is extremely remote.
Under
the Declaration, the Trustees may, without shareholder vote, cause the Trust to
merge or consolidate into, or sell and convey all or substantially all of, the
assets of the Trust to one or more trusts, partnerships or corporations, so
long as the surviving entity is an open-end management investment company that
will succeed to or assume the Trust’s registration statement. In addition, the
Trustees may, without shareholder vote, cause the Trust to be incorporated
under Delaware law or organize another entity in which the Trust will have an
interest to take over some or all of the Trust’s property or carry on the
Trust’s business.
Derivative
actions on behalf of the Trust may be brought only by shareholders owning not
less than 50% of the then outstanding shares of the Trust and if the
shareholders have requested that the Trustees take such action and the Trustees
failed or refused to do so for a period of 60 days.
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 retirement and benefit plans with less than 100
eligible employees or on investments that do not qualify under the other
categories listed under “NAV Purchases of Class A Shares” discussed below. If
you purchase Class A shares as part of an investment of at least $1 million (or
for certain retirement and benefit plans) in shares of one or more Lord
Abbett-sponsored funds, you will not pay an initial sales charge, but, subject
to certain
7-1
exceptions,
if you redeem any of those shares before the first day of the month in which
the one-year anniversary of your purchase falls, you may pay a contingent
deferred sales charge (“CDSC”) of 1% as a percentage of the offering price or
redemption proceeds, whichever is lower. Class A shares are subject to service
and distribution fees at an annual rate of 0.35% of the average daily NAV of
the Class A shares. Other potential fees and expenses related to Class A shares
are described in the prospectus and 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 normally
will 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 average daily NAV of the Class B shares.
Other potential fees and expenses related to Class B shares are described in
the prospectus and below.
Conversions
of Class B Shares.
The
conversion of Class B shares after approximately the eighth anniversary of
their purchase is subject to the continuing availability of a private letter
ruling from the Internal Revenue Service (the “IRS”), or an opinion of counsel
or tax advisor, 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 NAV
of the two classes, without the imposition of a sales charge or fee, such
exchange could constitute a taxable event for the holder.
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 normally
will pay a CDSC of 1% as a percentage of the offering price or redemption
proceeds, whichever is lower, to Lord Abbett Distributor. Class C shares are
subject to service and distribution fees at an annual rate of 1% of the average
daily NAV of the Class C shares. Other potential fees and expenses related to
Class C shares are described in the prospectus and below.
Class F
Shares.
If you buy
Class F shares, you pay no sales charge at the time of purchase, and if you
redeem your shares you pay no CDSC. Class F shares are subject to service and
distribution fees at an annual rate of 0.10% of the average daily net assets of
the Class F shares. Class F shares generally are available to investors
participating in fee-based programs that have (or whose trading agents have) an
agreement with Lord Abbett Distributor and to certain investors that are
clients of certain registered investment advisors that have an agreement with
Lord Abbett Distributor, if it so deems appropriate. Other potential fees and
expenses related to Class F shares are described in the prospectus and below.
Class I
Shares.
If you buy
Class I shares, you pay no sales charges or 12b-1 service or distribution fees.
Class R2
and R3 Shares.
If you
buy Class R2 or R3 shares, you pay no sales charge at the time of purchase and
if you redeem your shares you pay no CDSC. Class R2 and R3 shares are subject
to service and distribution fees at annual rates of 0.60% and 0.50% of the
average daily NAV of the Class R2 and R3 shares, respectively. Class R2 and R3
generally are available only through certain employer-sponsored retirement and
benefit plans if the financial intermediary has entered into an arrangement to
make available Class R2 or R3 shares to plan participants and other dealers
that have entered into agreements with Lord Abbett Distributor. Class R2 and R3
shares generally are available only to retirement and benefit plans where
plan-level or omnibus accounts are held on the books of the Fund. They
generally are not available to retail non-retirement accounts, traditional and
Roth IRAs, Coverdell Education Savings Accounts, SEPs, SARSEPs, SIMPLE IRAs,
individual 403(b) plans, and 529 college savings plans. Other potential fees
and expenses related to Class R2 and R3 shares are described in the prospectus
and below.
Rule 12b-1
Plan.
The Fund has
adopted an Amended and Restated Joint Distribution Plan pursuant to Rule 12b-1
under the Act for all of the Fund’s share classes except Class I shares (the
“Plan”). The principal features of the Plan are described in the prospectus;
however, this SAI contains additional information that may be of interest to
investors. The Plan is a compensation plan, allowing each applicable class to
pay a fixed fee to Lord Abbett Distributor that may be more or less than the
expenses Lord Abbett Distributor actually incurs for using reasonable efforts
to secure purchasers of Fund shares. These efforts may include, but neither are
required to include nor are limited to, the following: (a) making payments to
authorized institutions in connection with sales of shares and/or servicing of
accounts of shareholders holding shares; (b) providing continuing information
and investment services to shareholder accounts not serviced by authorized
institutions receiving a service fee from Lord Abbett Distributor hereunder and
otherwise to encourage shareholder accounts to remain invested in the shares;
and (c) otherwise
7-2
rendering
service to the Fund, including paying and financing the payment of sales
commissions, service fees and other costs of distributing and selling shares.
In adopting the Plan and in approving its continuance, the Board has concluded
that there is a reasonable likelihood that the Plan will benefit each
applicable class and its shareholders. The expected benefits include greater
sales and lower redemptions of class shares, which should allow each class to
maintain a consistent cash flow, and a higher quality of service to
shareholders by authorized institutions than would otherwise be the case. Under
the Plan, each applicable class compensates Lord Abbett Distributor for
financing activities primarily intended to sell shares of the applicable Fund.
These activities include, but are not limited to, the preparation and
distribution of advertising material and sales literature and other marketing
activities. Lord Abbett Distributor also uses amounts received under the Plan,
as described in the prospectus, for payments to dealers and other agents for
(i) providing continuous services to shareholders, such as answering
shareholder inquiries, maintaining records, and assisting shareholders in
making redemptions, transfers, additional purchases and exchanges and (ii)
their assistance in distributing shares of the Fund.
The
Plan provides that the maximum payments that may be authorized by the Board for
Class A shares are 0.50%; and Class B, Class C, Class F, Class R2, and Class R3
shares, 1.00%; however, the Board has approved payments of 0.35% for Class A
shares, 1.00% for Class B shares, 1.00% for Class C shares, 0.10% for Class F
shares, 0.60% for Class R2 shares, and 0.50% for Class R3 shares. The Fund may
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, the Fund will not require payment of any otherwise applicable CDSC.
The
amounts paid by each applicable class of the Fund to Lord Abbett Distributor
pursuant to the Plan for the fiscal year ended [October 31, 2012] were as
follows:
|
|
|
|
|
|
|
|
Class A
|
Class B*
|
Class C
|
Class F
|
Class R2
|
Class R3
|
|
$[8,114]
|
[N/A]
|
$[230]
|
$[1,167]
|
$[20]
|
$[17]
|
|
* [Class B shares will
commence operations on or about November 28, 2012.]
|
The
Plan requires the Board to review, on a quarterly basis, written reports of all
amounts expended pursuant to the Plan for each class, the purposes for which
such expenditures were made, and any other information the Board reasonably
requests to enable it to make an informed determination of whether the Plan
should be continued. The Plan shall continue in effect only if its continuance
is specifically approved at least annually by vote of the directors/trustees,
including a majority of the directors/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 cast in person
at a meeting called for the purpose of voting on the Plan. The Plan may not be
amended to increase materially above the limits set forth therein the amount
spent for distribution expenses thereunder for each class without approval by a
majority of the outstanding voting securities of the applicable class and the
approval of a majority of the directors/trustees, including a majority of the
directors/trustees who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan. As long as the Plan is in effect, the selection
or nomination of Independent Directors/Trustees is committed to the discretion
of the Independent Directors/Trustees.
One
Trustee, Evelyn E. Guernsey, may be deemed to have an indirect financial
interest in the operation of the Plan. Ms. Guernsey, an Independent
Director/Trustee of the Trust, owns outstanding shares of and was affiliated
with J.P. Morgan Chase & Co., which (or subsidiaries of which) may receive
Rule 12b-1 fees from the Fund and/or other Lord Abbett Funds.
Payments
made pursuant to the Plan are subject to any applicable limitations imposed by
rules of the Financial Industry Regulatory Authority, Inc. The Plan terminates
automatically if it is assigned. In addition, the Plan may be terminated with
respect to a class at any time by vote of a majority of the Independent
Directors/Trustees or by vote of a majority of the outstanding voting securities
of the applicable class.
CDSC.
A CDSC applies upon early redemption of
shares for certain classes, and (i) will be assessed on the lesser of the NAV
of the shares at the time of the redemption or the NAV when the shares
originally were purchased and (ii) will not be imposed on the amount of your
account value represented by the increase in NAV over the initial purchase
price (including increases due to the reinvestment of dividends and capital
gains distributions) and upon early redemption of shares. In the case of Class
A shares, this increase is represented by shares having an aggregate dollar
value in your account. In the case of Class B and C shares, this increase is
represented by that percentage of each share redeemed where the NAV exceeded
the initial purchase price.
7-3
Class A
Shares.
As stated in
the prospectus, subject to certain exceptions, if you buy Class A shares of the
Fund under certain purchases with a front-end sales charge waiver or if you
acquire Class A shares of the Fund in exchange for Class A shares of another
Lord Abbett-sponsored fund subject to a CDSC, and you redeem any of the Class A
shares before the first day of the month in which the one-year anniversary of
your purchase falls, a CDSC of 1% normally will be collected.
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 series acquired
through exchange of such shares) are redeemed out of the Lord Abbett-sponsored funds
for cash before the sixth anniversary of their purchase, a CDSC will be
deducted from the redemption proceeds. The Class B CDSC is paid to Lord Abbett
Distributor to reimburse its expenses, in whole or in part, for providing
distribution-related services to the Fund in connection with the sale of Class
B shares.
To
minimize the effects of the CDSC or to determine whether the CDSC applies to a
redemption, the Fund redeems Class B 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 CDSC will depend on the number of years since you invested and
the dollar amount being redeemed, according to the following schedule:
|
|
|
|
|
Anniversary of the Day on
Which the Purchase Order was Accepted
|
|
CDSC
on Redemptions
(As a % of Amount Subject to Charge)
|
|
Before the 1
st
|
|
5.0%
|
|
On the 1
st
,
before the 2
nd
|
|
4.0%
|
|
On the 2
nd
,
before the 3
rd
|
|
3.0%
|
|
On the 3
rd
,
before the 4
th
|
|
3.0%
|
|
On the 4
th
,
before the 5
th
|
|
2.0%
|
|
On the 5
th
,
before the 6
th
|
|
1.0%
|
|
On or after the 6
th
anniversary
|
|
None
|
In
the table, an “anniversary” is the same calendar day in each respective year
after the date of purchase. All purchases are considered to have been made on
the business day on which the purchase order was accepted. Class B shares
automatically will convert to Class A shares on the 25
th
day of the
month (or, if the 25
th
is not a business day, the next business day
thereafter) following the eighth anniversary of the 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
before the first anniversary of their purchase, the redeeming shareholder
normally will be required to pay to Lord Abbett Distributor a CDSC of 1% of the
offering price at the time of purchase or redemption proceeds, whichever is
lower. 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 also will be collected by Lord Abbett
Distributor.
Eligible
Mandatory Distributions.
If Class A, B, or C shares represent a part of an individual’s total
IRA or 403(b) investment, the CDSC for the applicable share class will be
waived only for that part of a mandatory distribution that bears the same
relation to the entire mandatory distribution as the investment in that class
bears to the total investment.
General.
The percentage used to calculate CDSCs
described above for Class A, B, and C shares (1% in the case of Class A and C
shares and 5% through 1% in the case of Class B shares) is sometimes
hereinafter referred to as the “Applicable Percentage.”
There
is no CDSC charged on Class F, I, R2, or R3 shares; however, financial
intermediaries may charge additional fees or commissions other than those
disclosed in the prospectus and SAI, such as a transaction based fee or other
fee for its service, and may categorize and disclose these arrangements
differently than the discussion here or in the prospectus. You may ask your
financial intermediary about any payments it receives from Lord Abbett or the
Fund, as well as about fees and/or commissions it charges.
7-4
With
respect to Class A shares, a CDSC will not be assessed at the time of certain
transactions, including redemptions by participants or beneficiaries from
certain retirement and benefit plans and benefit payments under retirement and
benefit plans in connection with plan loans, hardship withdrawals, death,
retirement or separation from service and for returns of excess contributions
to retirement plan sponsors. With respect to Class A share purchases by retirement
and benefit plans made through financial intermediaries that have special
arrangements with the Fund and/or Lord Abbett Distributor, no CDSC will be
assessed at the time of redemptions that continue as investments in another
fund participating in the program provided the Plan has not redeemed all, or
substantially all, of its assets from the Lord Abbett-sponsored funds. With
respect to Class B shares, no CDSC is payable for redemptions (i) in connection
with Systematic Withdrawal Plan and Div-Move services as described below under
those headings, (ii) in connection with a mandatory distribution under 403(b)
plans and IRAs and (iii) in connection with the death of the shareholder. In
the case of Class A shares, the CDSC is received by Lord Abbett Distributor and
is intended to reimburse all or a portion of the amount paid by Lord Abbett
Distributor 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 and C shares, the CDSC is received by Lord
Abbett Distributor and is intended to reimburse its expenses of providing
distribution-related services to the Fund (including recoupment of the
commission payments made) in connection with the sale of Class B and C 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 Class B or C distribution fee.
In
no event will the amount of the CDSC exceed the Applicable Percentage of the
lesser of (i) the NAV of the shares redeemed or (ii) the original cost of such
shares (or of the exchanged shares for which such shares were acquired). No
CDSC will be imposed when the investor redeems (i) shares representing an
aggregate dollar amount of his or her account, in the case of Class A shares,
(ii) that percentage of each share redeemed, in the case of Class B and C
shares, derived from increases in the value of the shares above the total cost
of shares being redeemed due to increases in NAV, (iii) shares with respect to
which no Lord Abbett-sponsored fund paid a 12b-1 fee and, in the case of Class
B shares, Lord Abbett Distributor paid no sales charge or service fee
(including shares acquired through reinvestment of dividend income and capital
gains distributions), or (iv) shares that, together with exchanged shares, have
been held continuously (a) until the first day of the month in which the
one-year anniversary of the original purchase falls (in the case of Class A
shares), (b) for six years or more (in the case of Class B shares), and (c) for
one year or more (in the case of Class C shares). In determining whether a CDSC
is payable, (i) shares not subject to the CDSC will be redeemed before shares subject
to the CDSC and (ii) of the shares subject to a CDSC, those held the longest
will be the first to be redeemed.
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 that you should discuss with your financial advisor. 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 advisor with a
framework in which to choose a class, we have made some assumptions using a
hypothetical investment in the Fund. We used the sales charge rates that
generally apply to Class A, B, and C, and considered the effect of the higher
distribution fees on Class B and C expenses (which will affect your investment
return). Of course, the actual performance of your investment cannot be
predicted and will vary based on the Fund’s actual investment returns, the
operating expenses borne by each class of shares, and the class of shares you
purchase. The factors briefly discussed below are not intended to be investment
advice, guidelines or recommendations, because each investor’s financial
considerations are different. The discussion below of the factors to consider
in purchasing a particular class of shares assumes that you will purchase only
one class of shares and not a combination of shares of different classes. If
you are considering an investment through a retirement and benefit plan
(available through certain financial intermediaries as Class A, I, R2, or R3
share investments), or a fee-based program (available through certain financial
intermediaries as Class A, F, or I share investments), you should discuss with
your financial intermediary which class of shares is available to you and makes
the most sense as an appropriate investment.
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
7-5
class-specific
expenses on Class C shares for which no initial sales charge is paid. Because
of the effect of class-based expenses, your choice also should depend on how
much you plan to invest.
Investing
for the Short Term.
Class
C shares might be the appropriate choice (especially for investments of less
than $50,000), because there is no initial sales charge on Class C shares, and
the CDSC does not apply to shares you redeem after holding them for at least
one year.
However,
if you plan to invest more than $50,000 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
12b-1 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.
In
addition, it may not be suitable for you to place an order for Class C shares
for retirement and benefit plans with at least 100 eligible employees or for
retirement and benefit plans made through financial intermediaries that perform
participant recordkeeping or other administrative services for the plans and
that have entered into special arrangements with the Fund and/or Lord Abbett
Distributor specifically for such purchases. You should discuss this with your
financial advisor.
Investing
for the Longer Term.
If
you plan to invest more than $50,000 over the long term, Class A shares will
likely be more advantageous than 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 may be available in
whole or in part to Class A, B, and C shareholders, but not to Class F, I, R2,
or R3 shareholders. Other features (such as Systematic Withdrawal Plans) might
not be advisable in non-retirement and benefit 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
redemptions during that year). See “Systematic Withdrawal Plan” under “Account
Services and Policies” in the prospectus for more information about the 12%
annual waiver of the CDSC for Class B and C shares. You should carefully review
how you plan to use your investment account before deciding which class of
shares you buy. For example, the dividends payable to Class B and 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 C shares are
subject.
How Do
Payments Affect 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 Class B shares and the
distribution fee for Class B and 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. See “Financial Intermediary Compensation” in the
prospectus.
What About Shares
Offered Through Retirement and Benefit Plans or Fee-Based Programs?
The
Fund may be offered as an investment option in retirement and benefit plans and
fee-based programs. Financial intermediaries may provide some of the
shareholder servicing and account maintenance services with respect to these
accounts and their participants, including transfers of registration, dividend
payee changes, and generation of confirmation statements, and may arrange for
third parties to provide other investment or administrative services.
Retirement and benefit plan participants may be charged fees for these and
other services and fee-based program participants generally pay an overall fee
that, among other things, covers the cost of these services. These fees and
expenses are in addition to those paid by the Fund, and could reduce your
ultimate investment return in Fund shares. For questions about such accounts,
contact your sponsor, employee benefits office, plan administrator, or other
appropriate organization.
7-6
8.
Purchases, Redemptions, Pricing, and Payments to
Dealers
Pricing of Fund Shares.
Information concerning how we value Fund shares is contained in the prospectus
under “Account Services and Policies – Pricing of Fund Shares.”
Under normal circumstances, we calculate the NAV per share for each
class of the Fund as of the close of the NYSE on each day that the NYSE is open
for trading by dividing the total net assets of the class by the number of
shares of the class outstanding at the time of calculation. The NYSE is closed
on Saturdays and Sundays and on days when it observes the following holidays –
New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The NYSE may change its holiday schedule or hours of operation at any time.
Portfolio securities are valued 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 any national or foreign securities exchange, or on the
NASDAQ National Market System are valued at the last sale price, or if there is
no sale on that day, at the last bid or, in the case of bonds, in the OTC
market if that market more accurately reflects the market value of the bonds.
Unlisted equity securities are valued at the last transaction price, or if
there were no transactions that day, at the mean between the last bid and asked
prices. OTC fixed income securities are valued at prices supplied by independent
pricing services, which reflect broker-dealer-supplied valuations and
electronic data processing techniques reflecting the mean between the bid and
asked prices. The principal markets for non-U.S. securities and U.S. fixed
income securities also generally close prior to the close of the NYSE.
Consequently, values of non-U.S. investments and U.S. fixed income securities
will be determined as of the earlier closing of such exchanges and markets
unless the Fund prices such a security at its fair value. Securities for which
market quotations are not available are valued at fair market value under
procedures approved by the Board, as described in the prospectus.
All assets and liabilities expressed in foreign currencies will be
converted into U.S. dollars at the exchange rates of such currencies against
U.S. dollars provided by an independent pricing service as of the close of
regular trading on the NYSE. If such exchange rates are not available, the rate
of exchange will be determined in accordance with policies established by the
Board.
NAV Purchases of Class A Shares.
Our Class A shares may be purchased at NAV under the following circumstances:
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(a)
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purchases of $1 million or more;
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(b)
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purchases by retirement and benefit plans with at least 100 eligible
employees;
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(c)
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purchases for retirement and benefit plans made through financial
intermediaries that perform participant recordkeeping or other administrative
services for the plans and that have entered into special arrangements with
the Fund and/or Lord Abbett Distributor specifically for such purchases;
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(d)
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purchases by insurance companies and/or their separate accounts to
fund variable insurance contracts, provided that the insurance company
provides recordkeeping and related administrative services to the contract
owners and has entered into special arrangements with the Fund and/or Lord
Abbett Distributor specifically for such purchases;
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(e)
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purchases made with dividends and distributions on Class A shares of
another Eligible Fund (as defined in the prospectus);
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(f)
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purchases representing repayment under the loan feature of the Lord
Abbett-sponsored prototype 403(b) Plan for Class A shares;
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(g)
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purchases by employees of any consenting securities dealer having a
sales agreement with Lord Abbett Distributor;
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(h)
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purchases made by or on behalf of financial intermediaries for
clients that pay the financial intermediaries fees in connection with
fee-based programs provided that the financial intermediaries or
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8-1
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their trading agents have entered into special arrangements with the
Fund and/or Lord Abbett Distributor specifically for such purchases;
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(i)
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purchases by trustees or custodians of any pension or profit sharing
plan, or payroll deduction IRA for the employees of any consenting securities
dealer having a sales agreement with Lord Abbett Distributor;
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(j)
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purchases by each Lord Abbett-sponsored fund’s directors/trustees,
officers of each Lord Abbett-sponsored fund, employees and partners of Lord
Abbett (including retired persons who formerly held such positions and family
members of such purchasers); or
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(k)
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purchases involving the concurrent sale of Class B or C shares of the
Fund related to the requirements of a settlement agreement that the
broker-dealer entered into with a regulatory body relating to share class
suitability. These sales transactions will be subject to the assessment of
any applicable CDSCs (although the broker-dealer may pay on behalf of the
investor or reimburse the investor for any such CDSC), and any investor
purchases subsequent to the original concurrent transactions will be at the
applicable public offering price, which may include a sales charge.
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Class A shares also may be purchased at NAV (i) 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, (ii) in
connection with a merger, acquisition or other reorganization, (iii) by
employees of our shareholder servicing agent, or (iv) by the trustees or
custodians under any pension or profit-sharing plan or payroll deduction IRA
established for the benefit of the directors/trustees, employees of Lord
Abbett, or employees of our shareholder service agents. Shares are offered at
NAV to these investors for the purpose of promoting goodwill with employees and
others with whom Lord Abbett Distributor and/or the Fund have a business
relationship.
In addition, Class A shares may be acquired without a front-end sales
charge in certain exchange transactions. Please see “Exchanges” below.
Exchanges.
To the
extent offers and sales may be made in your state, you may exchange some or all
of your shares of any class of the Fund for: (i) Lord Abbett-sponsored funds
currently offered to the public with a sales charge (front-end, back-end or
level); or (ii) Lord Abbett U.S. Government & Government Sponsored
Enterprises Money Market Fund, Inc. (“Money Market Fund”). The exchange
privilege will not be available with respect to any fund, the shares of which
at the time are not available to new investors of the type requesting the exchange.
Shareholders in other Lord Abbett-sponsored funds generally have the same right
to exchange their shares for the corresponding class of the Fund’s shares.
In addition, shareholders who own any class of shares of an Eligible
Fund may exchange such shares for a different class of shares of the same
Eligible Fund without any sales charge (or CDSC), provided that (i) such shares
are not subject to a CDSC and (ii) such exchange is necessary to facilitate the
shareholder’s participation in a fee-based program sponsored by the financial
intermediary that is the broker of record on the shareholder’s account that
holds the shares to be relinquished as part of the exchange transaction.
Likewise, shareholders who participate in a fee-based program sponsored by a financial
intermediary and own (directly or beneficially) Class A shares that were
purchased with or without a sales charge, Class F shares may exchange such
shares acquired through the shareholder’s participation in such fee-based
program for Class A shares of the same Eligible Fund without incurring a sales
charge (or a CDSC), provided that (i) such shares are not subject to a CDSC and
(ii) the financial intermediary sponsoring the fee-based program is the broker
of record on the shareholder’s account that will hold the Class A shares of the
Eligible Fund received as a result of the exchange.
The Fund is designed for long-term investors and is not designed to
serve as a vehicle for frequent trading in response to short-term swings in the
market. The Fund reserves the right to modify, restrict, or reject any purchase
order or exchange request if the Fund or Lord Abbett Distributor determines
that it is in the best interest of the Fund and its shareholders. In addition,
the Fund may revoke or modify the privilege for all shareholders upon 60 days’
written notice.
You should read the prospectus of the other fund before exchanging. In
establishing a new account by exchange, shares of the fund being exchanged must
have a value equal to at least the minimum initial investment required for the
other fund into which the exchange is made.
8-2
An exchange transaction is based on the relative NAV of the shares
being exchanged. The NAV, which normally is calculated each business day at the
close of regular trading on the NYSE (typically 4:00 p.m. Eastern time each
business day), will be determined after the Fund or its authorized agent
receives your exchange order in proper form. Exchanges of Fund shares for
shares of another fund generally will be treated as a sale of Fund shares and
any gain on the transaction may be subject to federal income tax. 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.
No sales charges are imposed on exchanges, except in the case of
exchanges out of Money Market Fund. Exchanges of Money Market Fund shares for
shares of any Lord Abbett-sponsored fund (not including shares described under
“Div-Move” below) are subject to a sales charge in accordance with the
prospectus of that fund unless a sales charge (front-end, back-end or level)
was paid on the initial investment in shares of a Lord Abbett-sponsored fund
and those shares subsequently were exchanged for shares of Money Market Fund
that are currently being exchanged. No CDSC will be charged on an exchange of
shares of the same class between Lord Abbett-sponsored funds. Upon redemption
of shares out of the Lord Abbett-sponsored funds, the applicable CDSC will be
charged. Thus, if shares of a Lord Abbett-sponsored fund are tendered in
exchange (“Exchanged Shares”) for shares of the same class of another fund and
the Exchanged Shares are subject to a CDSC, the CDSC will carry over to the
shares being acquired (including shares of Money Market Fund) (“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. Acquired Shares held in
Money Market Fund that are subject to a CDSC will be credited with the time
such shares are held in Money Market Fund.
Rights of Accumulation.
As stated in the prospectus, Purchasers (as defined in the prospectus) may
aggregate their investments in Class A, B, C, F, and P shares of any Eligible
Fund so that the Purchaser’s current investment in such shares, plus the
Purchaser’s new purchase of Class A shares of any Eligible Fund, may reach a
level eligible for a discounted sales charge for such shares. Class I, R2, and
R3 shares are not eligible to be combined with other share classes for purposes
of calculating the applicable sales charge on Class A share purchases.
To the extent your financial intermediary is able to do so, the value
of Class A, B, C, F, and P shares of Eligible Funds determined for the purpose
of reducing the sales charge of a new purchase under the Rights of Accumulation
will be calculated at the higher of: (1) the aggregate current maximum offering
price of your existing Class A, B, C, F, and P shares of Eligible Funds
(“Market Value”) determined as of the time your new purchase order is
processed; or (2) the aggregate amount you invested in such shares (including
reinvestments of dividend and capital gain distributions but excluding capital
appreciation) less any redemptions (“Investment Value”). Depending on the way
in which the registration information is recorded for the account in which your
shares are held, the value of your holdings in that account may not be eligible
for calculation at the Investment Value. For example, shares held in accounts
maintained by financial intermediaries in nominee or street name may not be
eligible for calculation at Investment Value. In such circumstances, the value
of the shares may be calculated at Market Value for purposes of Rights of
Accumulation.
You should retain any information and account records necessary to
substantiate the historical amounts you and any related Purchasers have
invested in Eligible Funds. In certain circumstances, unless you provide
documentation (or your financial intermediary maintains records) that
substantiates a different Investment Value, your shares will be assigned an
initial Investment Value for purposes of Rights of Accumulation. Specifically,
Class A, B, C, F, and P shares of Eligible Funds acquired in calendar year 2007
or earlier will be assigned an initial Investment Value equal to the Market
Value of those holdings as of the last business day of December 31, 2007.
Similarly, Class A, B, C, F, and P shares of Eligible Funds transferred to an
account with another financial intermediary will be assigned an initial
Investment Value equal to the Market Value of such shares on the transfer date.
Thereafter, the Investment Value of such shares will increase or decrease
according to your actual investments, reinvestments, and redemptions. You must
contact your financial intermediary or the Fund if you have additional
information that is relevant to the calculation of the Investment Value of your
holdings for purposes of reducing sales charges pursuant to the Rights of
Accumulation.
Redemptions.
A
redemption order is in proper form when it contains all of the information and
documentation required by the order form or otherwise by Lord Abbett
Distributor or the Fund to carry out the order. If you have
8-3
direct account privileges with the Fund, the Fund will require a
guaranteed signature by an eligible guarantor on requests for redemption that
exceed $100,000 (formerly $50,000). Accordingly, redemption requests may be
submitted by telephone or online without signature guarantee for redemptions up
to and including $100,000.
Redemptions may be suspended or payment postponed during any period in
which any of the following conditions exist: the NYSE is closed or trading on
the NYSE is restricted; an emergency exists as a result of which disposal by
the Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund to fairly determine the value of the net
assets of its portfolio; or the SEC, by order, so permits. Redemptions, even
when followed by repurchases, are taxable transactions for shareholders that
are subject to U.S. federal income tax.
Div-Move.
Under the
Div-Move service described in the prospectus, you can invest the dividends paid
on your account of any class into an existing account of the same class in any
other Eligible Fund. The account must either be your account, a joint account
for you and your spouse, a single account for your spouse, or a custodial
account for your minor child under the age of 21. You should read the
prospectus of the other fund before investing.
Invest-A-Matic.
The
Invest-A-Matic method of investing in the Fund and/or any other Eligible Fund
is described in the prospectus. To avail yourself of this method you must
complete the application form, selecting the time and amount of your bank
checking account withdrawals and the Fund for investment, include a voided,
unsigned check and complete the bank authorization.
Systematic Withdrawal Plan (“SWP”).
The SWP also is described in the prospectus. You may establish an SWP if you
own or purchase uncertificated shares having a current offering price value of
at least $10,000 in the case of Class A or C shares and $25,000 in the case of
Class B shares, except in the case of an SWP established for certain retirement
and benefit plans, for which there is no minimum. Lord Abbett prototype
retirement plans have no such minimum. With respect to Class B and C shares,
the CDSC will be waived on redemptions of up to 12% per year of the current
value of your account at the time the SWP is established. For Class B share
redemptions over 12% per year, the CDSC will apply to the entire redemption.
Therefore, please contact the Fund for assistance in minimizing the CDSC in
this situation. With respect to Class C shares, the CDSC will be waived on and
after the first anniversary of their purchase. The SWP involves the planned
redemption of shares on a periodic basis by receiving either fixed or variable
amounts at periodic intervals. Because 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 including 401(k) plans and custodial agreements for IRAs (Individual
Retirement Accounts, including Traditional, Education, Roth and SIMPLE IRAs and
Simplified Employee Pensions), 403(b) plans and qualified pension and
profit-sharing plans. The forms name State Street Bank and Trust Company as
custodian and contain specific information about the plans excluding 401(k)
plans. Explanations of the eligibility requirements, annual custodial fees and
allowable tax advantages and penalties are set forth in the relevant plan
documents. Adoption of any of these plans should be on the advice of your legal
counsel or qualified tax advisor.
Purchases through Financial Intermediaries.
The Fund and/or Lord Abbett Distributor have authorized one or more agents to
receive on its behalf purchase and redemption orders. Such agents are
authorized to designate other intermediaries to receive purchase and redemption
orders on behalf of the Fund or Lord Abbett Distributor. The Fund will be
deemed to have received a purchase or redemption order when an authorized
agent, or, if applicable, an agent’s authorized designee, receives the order.
The order will be priced at the Fund’s NAV next computed after it is received
by the Fund’s authorized agent, or if applicable, the agent’s authorized
designee. A financial intermediary may charge transaction fees on the purchase
and/or sale of Fund shares.
Revenue Sharing and Other Payments to Dealers
and Financial Intermediaries.
As described in the
prospectus, Lord Abbett or Lord Abbett Distributor, in its sole discretion, at
its own expense and without cost to the Fund or shareholders, also may make payments to dealers and
other firms authorized to accept orders for Fund shares (collectively,
“Dealers”) in connection with marketing and/or distribution support for
Dealers, shareholder servicing, entertainment, training and education
activities for the Dealers, their investment professionals and/or their clients
or potential clients, and/or the purchase of products or services from such
Dealers. Some of these payments
8-4
may be referred to as revenue sharing payments. As of the date of this
SAI, the Dealers to whom Lord Abbett or Lord Abbett Distributor has agreed to
make revenue sharing payments (not including payments for entertainment, and
training and education activities for the Dealers, their investment
professionals and/or their clients or potential clients) with respect to the
Fund and/or other Lord Abbett Funds were as follows:
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AIG Advisor Group, Inc.
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Morgan Stanley Smith Barney, LLC
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Allstate Life Insurance Company
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Multi-Financial Securities Corporation
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Allstate Life Insurance Company of New York
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National Planning Holdings, Inc.
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Ameriprise Financial Services, Inc.
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Nationwide Investment Services Corporation
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Ascensus, Inc.
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Pacific Life & Annuity Company
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AXA Equitable Life Insurance Company
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Pacific Life Insurance Company
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B.C. Ziegler and Company
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Pershing, LLC
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Banc of America
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PHL Variable Insurance Company
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Business Men’s Assurance Company of America
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Phoenix Life and Annuity Company
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RBC Insurance
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Phoenix Life Insurance Company
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Bodell Overcash Anderson & Co., Inc.
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Primevest Financial Services, Inc.
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Cadaret, Grant & Co., Inc.
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Principal Life Insurance Company
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Cambridge Investment Research, Inc.
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Protective Life Insurance Company
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Charles Schwab & Co., Inc.
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RBC Capital Markets Corporation (formerly
RBC Dain Rauscher)
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Citigroup Global Markets, Inc.
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RBC Capital Markets, LLC
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Commonwealth Financial Network
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RBC Insurance d/b/a Liberty Life Insurance
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CRI Securities, LLC
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Raymond James & Associates, Inc.
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Edward D. Jones & Co., L.P.
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Raymond James Financial Services, Inc.
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Family Investors Company
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Securian Financial Services, Inc.
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Fidelity Brokerage Services, LLC
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Securities America, Inc.
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Financial Network Investment Corporation
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Security Benefit Life Insurance Company
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First Security Benefit Life Insurance and
Annuity Company
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SunAmerica Annuity Life Assurance Company
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First SunAmerica Life Insurance Company
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Sun Life Assurance Company of Canada
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First Allied Securities, Inc.
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Sun Life Insurance and Annuity Company of
New York
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Genworth Life & Annuity Insurance
Company
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TIAA-CREF Individual & Institutional
Services, LLC
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Genworth Life Insurance Company of New York
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TFS Securities, Inc.
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Hartford Life and Annuity Insurance Company
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Transamerica Advisors Life Insurance
Company
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Hartford Life Insurance Company
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Transamerica Advisors Life Insurance
Company of New York
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Investacorp, Inc.
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Triad Advisors, Inc.
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James I. Black & Co.
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UBS Financial Services Inc.
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Janney Montgomery Scott LLC
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U.S. Bancorp Investments, Inc.
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Legg Mason Walker Wood Incorporated
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Wells Fargo Advisors
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Lincoln Financial Network (Lincoln
Financial Advisors Corp.
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Wells Fargo Investments LLC
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& Lincoln Financial Securities Corp.)
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Woodbury Financial Services, Inc.
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Lincoln Life & Annuity Company of New
York
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Lincoln National Life Insurance Company
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Linsco/Private Ledger Corp.
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MassMutual Life Investors Services, Inc.
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Merrill Lynch Life Insurance Company/ML
Life Insurance
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Company of New York (n/k/a Transamerica
Advisors)
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Merrill Lynch, Pierce, Fenner & Smith
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Incorporated (and/or certain of its
affiliates)
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MetLife Securities, Inc.
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For more specific information about any revenue sharing payments made
to your Dealer, you should contact your investment professional. See “Financial
Intermediary Compensation” in the prospectus for further information.
The Lord Abbett Funds understand that, in accordance with guidance from
the U.S. Department of Labor, retirement and benefit plans, sponsors of
qualified retirement plans and/or recordkeepers may be required to use the fees
they (or, in the case of recordkeepers, their affiliates) receive for the
benefit of the retirement and benefit plans or the
8-5
investors. This may take the form of recordkeepers passing the fees
through to their clients or reducing the clients’ charges by the amount of fees
the recordkeeper receives from mutual funds.
Evelyn E. Guernsey, an Independent Director/Trustee of the Fund, owns
outstanding shares of and was affiliated with J.P. Morgan Chase & Co.,
which (or subsidiaries of which) may receive recordkeeping payments from the
Fund and/or other Lord Abbett Funds.
Redemptions in Kind.
Under circumstances in which it is deemed detrimental to the best interests of
the Fund’s shareholders to make redemption payments wholly in cash, the Fund
may pay any portion of a redemption in excess of the lesser of $250,000 or 1%
of the Fund’s net assets by a distribution in kind of readily marketable
securities in lieu of cash.
8-6
9.
Taxation of the Fund
The Fund has elected, has qualified, and intends to continue to qualify
for the special tax treatment afforded regulated investment companies under the
Internal Revenue Code of 1986, as amended (the “Code”). Because the Fund is
treated as a separate entity for federal income tax purposes, the status of the
Fund as a regulated investment company is determined separately by the IRS. If
the Fund continues to qualify for such tax treatment, the Fund will not be
liable for U.S. federal income taxes on income and capital gains that the Fund
timely distributes to its shareholders. If in any taxable year the Fund fails
to so qualify, but is eligible for statutory relief, the Fund may be required
to pay penalty taxes (or interest charges in the nature of a penalty) and/or to
dispose of certain assets in order to continue to qualify for such tax
treatment. If the Fund is not so eligible or if the Fund does not choose to
avail itself of such relief, all of the Fund’s taxable income will be taxed to
the Fund at regular corporate rates and when such income is distributed, such
distributions will be further taxed at the shareholder level. Assuming the Fund
continues to qualify for the favorable tax treatment afforded to a regulated
investment company, it will be subject to a 4% non-deductible excise tax on
certain amounts that are not distributed or treated as having been distributed
on a timely basis each calendar year. The Fund intends to distribute to its
shareholders each year an amount adequate to avoid the imposition of this
excise tax.
The Fund intends to declare and pay as dividends each year
substantially all of its net income from investments. Dividends paid by the
Fund from its ordinary income or net realized short-term capital gains are
taxable to you as ordinary income; however, certain qualified dividend income
that the Fund receives and distributes to an individual shareholder may be
subject to a reduced tax rate of 15% (0% for certain shareholders in the 10% or
15% income tax brackets) if the shareholder meets certain holding period and
other requirements.
A dividend that is attributable to qualified dividend income of the
Fund that is paid by the Fund to an individual shareholder will not be taxable
as qualified dividend income to such shareholder (1) if the dividend is
received with respect to any share of the Fund held for fewer than 61 days
during the 121-day period beginning 60 days before the date such shares became
“ex-dividend” with respect to the dividend income, (2) if the shareholder
elects to have the dividend income treated as investment income for purposes of
the limitation on deductibility of investment interest, or (3) to the extent
that the shareholder is under an obligation (whether pursuant to a short sale
or otherwise) to make related payments with respect to positions in
substantially similar or related property.
Distributions paid by the Fund from its net realized long-term capital
gains that are reported to you by the Fund as “capital gain dividends” are
taxable to you as long-term capital gains, regardless of the length of time you
have owned Fund shares. The maximum federal income tax rates applicable to net
capital gains recognized by individuals and other non-corporate taxpayers are
currently (i) the same as ordinary income tax rates for capital assets held for
one year or less, and (ii) 15% (0% for certain taxpayers in the 10% or 15% tax
brackets) for capital assets held for more than one year. You also should be
aware that the benefits of the long-term capital gains and qualified dividend
income rates may be reduced if you are subject to the alternative minimum tax.
Under current law, the reduced federal income tax rates on qualified dividend
income and long-term capital gains will cease to apply to taxable years
beginning after December 31, 2012. Capital gains recognized by corporate
shareholders are subject to tax at the ordinary income tax rates applicable to
corporations. All dividends are taxable regardless of whether they are received
in cash or reinvested in Fund shares.
While the Fund’s net capital losses for any year cannot be passed
through to you, any such losses incurred by the Fund in a taxable year of the
Fund commencing prior to December 23, 2010 can be carried forward for a period
of up to eight years to offset the Fund’s capital gains in those years and any
such losses incurred by the Fund in taxable years commencing on or after such
date may be carried forward indefinitely to offset future capital gains of the
Fund. Pursuant to a new ordering rule, however, net capital losses incurred in
taxable years of the Fund beginning before December 23, 2010 may not be used to
offset the Fund’s future capital gains until all net capital losses incurred in
taxable years of the Fund beginning after December 22, 2010 have been utilized.
As a result of the application of this rule, certain net capital losses
incurred in taxable years of the Fund beginning before December 23, 2010 may
expire unutilized. To the extent capital gains are offset by such losses, they
do not result in tax liability to the Fund and are not expected to be
distributed to you as capital gain dividends.
Dividends paid by the Fund to corporate shareholders may qualify for
the dividends-received deduction to the extent they are derived from dividends
paid to the Fund by domestic corporations. If you are a corporation, you must
have held your Fund shares for more than 45 days to qualify for the
dividends-received deduction. The dividends-
9-1
received deduction may be limited if you incur indebtedness to acquire
Fund shares, and may result in a reduction to the basis of your shares in the
Fund if the dividend constitutes an extraordinary dividend at the Fund level.
Recently enacted legislation imposes a new 3.8% Medicare tax on the net
investment income of certain U.S. individuals, estates and trusts for taxable
years beginning after December 31, 2012. For this purpose, “net investment
income” generally includes taxable dividends and redemption proceeds from
investments in mutual funds, such as the Fund.
Distributions paid by the Fund that do not constitute dividends because
they exceed the Fund’s current and accumulated earnings and profits will be
treated as a return of capital and reduce the tax basis of your Fund shares. To
the extent that such distributions exceed the tax basis of your Fund shares,
the excess amounts will be treated as gain from the sale of the shares.
Ordinarily, you are required to take distributions by the Fund into
account in the year in which they are made. However, a distribution declared as
of a record date in October, November, or December of any year and paid during
the following January is treated as received by shareholders on December 31 of
the year in which it is declared. The Fund will send you annual information
concerning the tax treatment of dividends and other distributions paid to you
by the Fund.
At the time of your purchase of Fund shares, a portion of the purchase
price may be attributable to realized or unrealized appreciation in the Fund’s
portfolio or to undistributed taxable income of the Fund. Consequently,
subsequent distributions by the Fund with respect to these shares from such
appreciation or income may be taxable to you even if the NAV of your shares is,
as a result of the distributions, reduced below your cost for such shares and
the distributions economically represent a return of a portion of your
investment.
Redemptions and exchanges of Fund shares for shares of another fund
generally are taxable events for shareholders that are subject to tax. In
general, if Fund shares are sold, you will recognize gain or loss equal to the
difference between the amount realized on the sale and your adjusted basis in
the shares. Such gain or loss generally will be treated as long-term capital
gain or loss if the shares were held for more than one year and otherwise
generally will be treated as short-term capital gain or loss. However, if your
holding period in your Fund shares is six months or less, any capital loss
realized from a sale, exchange, or redemption of such shares must be treated as
long-term capital loss to the extent of any capital gain dividends received
with respect to such shares. In addition, commencing in 2013, capital gains
recognized from redemptions of Fund shares generally will be included in the
calculation of “net investment income” for purposes of the 3.8% Medicare tax
applicable to certain U.S. individuals, estates and trusts.
Losses on the sale of Fund shares may be disallowed to the extent that,
within a period beginning 30 days before the date of the sale and ending 30
days after the date of the sale, you acquire other shares in the same Fund
(including pursuant to reinvestment of dividends and/or capital gain distributions).
In addition, if shares in the Fund that have been held for less than 91 days
are redeemed and the proceeds are reinvested on or before January 31 of the
calendar year following the year of the redemption in shares of the same Fund
or another fund pursuant to the Reinvestment Privilege, or if shares in the
Fund that have been held for less than 91 days are exchanged for the same class
of shares in another fund at NAV pursuant to the exchange privilege, all or a
portion of any sales charge paid on the shares that are redeemed or exchanged
will not be included in the tax basis of such shares under the Code to the
extent that a sales charge that would otherwise apply to the shares received is
reduced.
If your Fund shares are redeemed by a distribution of securities, you
will be taxed as if you had received cash equal to the fair market value of the
securities. Consequently, you will have a fair market value basis in the
securities.
Shareholders that are exempt from U.S. federal income tax, such as retirement
plans that are qualified under Section 401 of the Code, generally are not
subject to U.S. federal income tax on Fund dividends or distributions or on
sales or exchanges of Fund shares. However, a tax-exempt shareholder may
recognize unrelated business taxable income if (1) the acquisition of Fund
shares was debt financed or (2) the Fund recognizes certain “excess inclusion
income” derived from direct or indirect investments (including from an
investment in a REIT) in (a) residual interests in a real estate mortgage
investment conduit or (b) equity interests in a taxable mortgage pool if the
amount of such income that is recognized by the Fund exceeds the Fund’s
investment company taxable income(after taking into account the deductions for
dividends paid by the Fund). Furthermore, if Fund shares are held through a
non-qualified deferred compensation plan, Fund dividends and distributions
received by the plan and sales and
9-2
exchanges of Fund shares by the plan generally are taxable to the employer
sponsoring such plan in accordance with the U.S. federal income tax laws
governing deferred compensation plans.
A plan participant whose retirement plan invests in the Fund, whether
such plan is qualified or not, generally is not taxed on Fund dividends or
distributions received by the plan or on sales or exchanges of Fund shares by
the plan for U.S. federal income tax purposes. However, distributions to plan
participants from a retirement plan account generally are taxable as ordinary
income and different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions and certain prohibited transactions, is accorded to accounts
maintained as qualified retirement plans. Shareholders and plan participants
should consult their tax advisors for more information.
Under Treasury regulations, if you are an individual and recognize a
loss with respect to Fund shares of $2 million or more (if you are a
corporation, $10 million or more) in any single taxable year (or greater
amounts over a combination of years), you may be required to file a disclosure
statement with the IRS. A shareholder who fails to make the required disclosure
may be subject to substantial penalties.
Foreign exchange gains and losses realized by the Fund in connection
with certain transactions involving foreign currency-denominated debt
securities, certain options and futures contracts relating to foreign currency,
foreign currency forward contracts, foreign currencies or payables or
receivables denominated in a foreign currency are subject to Section 988 of the
Code, which generally causes such gains and losses to be treated as ordinary
income and losses and may affect the amount, timing and character of
distributions to shareholders. U.S. Treasury regulations authorized by the Code
to be promulgated in the future may limit the future ability of the Fund to
engage in such transactions if they are not directly related to the Fund’s
investment in securities.
Options written or purchased by the Fund and futures contracts
purchased on certain securities, indices and foreign currencies, as well as
certain forward foreign currency contracts, may cause the Fund to recognize
gains or losses from marking-to-market even though such options may not have
lapsed, been closed out, or exercised, or such futures or forward contracts may
not have been performed or closed out. The tax rules applicable to these
contracts may affect the characterization of some capital gains and losses
recognized by the Fund as long-term or short-term.
Additionally, the Fund may be required to recognize gain if an option,
futures contract, short sale, or other transaction that is not subject to the
mark-to-market rules is treated as a “constructive sale” of an “appreciated
financial position” held by the Fund under Section 1259 of the Code. Any net
mark-to-market gains and/or gains from constructive sales also may have to be
distributed to satisfy the distribution requirements referred to above even
though the Fund may receive no corresponding cash amounts, possibly requiring
the Fund to dispose of portfolio securities or to borrow to obtain the
necessary cash.
Losses on certain options, futures and/or offsetting positions
(portfolio securities or other positions with respect to which the Fund’s risk
of loss is substantially diminished by one or more options or futures
contracts) also may be deferred under the tax straddle rules of the Code, which
also may affect the characterization of capital gains or losses from straddle
positions and certain successor positions as long-term or short-term. Certain
tax elections may be available that would enable the Fund to ameliorate some
adverse effects of the tax rules described in this paragraph. The tax rules
applicable to options, futures contracts, forward contracts, short sales,
swaps, structured securities, foreign currencies and straddles may affect the
amount, timing and character of the Fund’s income and gains or losses and hence
of its distributions to shareholders.
The Fund may in some cases be subject to foreign withholding taxes,
which would reduce the yield on its investments. If the Fund acquires any
equity interest (under proposed Treasury regulations, generally including not
only stock but also an option to acquire stock such as is inherent in a
convertible bond) in certain foreign corporations that receive at least 75% of
its annual gross income from passive sources (such as interest, dividends,
certain rents and royalties, or capital gains) or that hold at least 50% of its
assets in investments producing such passive income (“passive foreign
investment companies”), the Fund could be subject to U.S. federal income tax
and additional interest charges on “excess distributions” received from such
companies or on gain from the sale of stock in such companies, even if all
income or gain actually received by the Fund is timely distributed to its
shareholders. The Fund would not be able to pass through to its shareholders
any credit or deduction for such a tax. Elections may generally be available
that would ameliorate these adverse tax consequences, but such elections could
require the Fund to recognize taxable income or gain (subject to tax
distribution requirements) without the concurrent receipt of cash. These investments
also could result in the treatment of capital gains from the sale of stock of
passive foreign
9-3
investment companies as ordinary income. The Fund may limit and/or
manage its holdings in passive foreign investment companies to limit its tax
liability or maximize its return from these investments.
You may be subject to a 28% withholding tax on reportable dividends,
capital gain distributions, and redemptions (“backup withholding”). Generally,
you will be subject to backup withholding if the Fund does not have your Social
Security number or other certified taxpayer identification number on file, or,
to the Fund’s knowledge, the number that you have provided is incorrect or
backup withholding is applicable as a result of your previous underreporting of
interest or dividend income. When establishing an account, you must certify
under penalties of perjury that your Social Security number or other taxpayer
identification number is correct and that you are not otherwise subject to
backup withholding. The 28% backup withholding rate currently applies to the
amount paid by the Fund through December 31, 2012 and is scheduled to rise to
31% for amounts paid by the Fund after such date.
The foregoing discussion addresses only the U.S. federal income tax
consequences applicable to shareholders who are subject to U.S. federal income
tax, hold their shares as capital assets, and are U.S. persons (generally, U.S.
citizens or residents (including certain former citizens and former long-term
residents), domestic corporations or domestic entities taxed as corporations
for U.S. tax purposes, estates the income of which is subject to U.S. federal
income taxation regardless of its source, and trusts if a court within the U.S.
is able to exercise primary supervision over their administration and at least
one U.S. person has the authority to control all substantial decisions of the
trusts). The treatment of the owner of an interest in an entity that is a
pass-through entity for U.S. tax purposes (e.g., partnerships and disregarded
entities) and that owns Fund shares generally will depend upon the status of
the owner and the activities of the pass-through entity. Except as otherwise
provided, this description does not address the special tax rules that may be
applicable to particular types of investors, such as financial institutions,
insurance companies, securities dealers, or tax-exempt or tax-deferred plans,
accounts or entities. If you are not a U.S. person or are the owner of an
interest in a pass-through entity that owns Fund shares, you should consult
your tax advisor regarding the U.S. and foreign tax consequences of the
ownership of Fund shares, including the applicable rate of U.S. withholding tax
on amounts treated as ordinary dividends from the Fund (other than certain
dividends derived from short-term capital gains and qualified interest income
of the Fund for certain taxable years of the Fund commencing prior to January
1, 2012, provided that the Fund chooses to report such dividends in a manner
qualifying for such favorable tax treatment), and the applicability of U.S.
gift and estate taxes.
While the Fund does not expect its shares will constitute U.S. real
property interests, if the Fund’s direct and indirect investments in U.S. real
property (which includes investments in REITs and certain other regulated
investment companies that invest in U.S. real property) were to exceed certain
levels, a portion of the Fund’s distributions may be attributable to gain from
the sale or exchange of U.S. real property interests. In such case, if a
non-U.S. shareholder were to own more than 5% of a class of the Fund’s shares
within a one-year period prior to such a distribution, the non-U.S. shareholder
would be (1) subject to a 35% U.S. federal withholding tax on the portion of the
Fund’s distributions attributable to such gain, (2) required to file a U.S.
federal income tax return to report such gain, and (3) subject to certain “wash
sale” rules if the shareholder disposes of Fund shares just prior to a
distribution and reacquires Fund shares shortly thereafter. If a non-U.S.
shareholder were to own 5% or less of each class of the Fund’s shares at all
times within such one-year period, any such distribution by the Fund would not
be subject to these requirements, but if the distribution might otherwise have
been reported as a capital gain dividend or short-term capital gain dividend to
such shareholder, the distribution would be re-characterized as an ordinary
dividend and would be subject to the applicable rate of non-resident alien U.S.
withholding tax.
Recently enacted legislation will impose a 30% withholding tax on
dividends paid by the Fund after December 31, 2013, and on gross redemption
proceeds paid by the Fund after December 31, 2014 to (i) certain foreign
financial institutions unless they agree to collect and disclose to the IRS
information regarding their direct and indirect U.S. account holders and (ii)
certain other foreign entities unless they certify certain information
regarding their direct and indirect U.S. owners. Under certain circumstances, a
foreign shareholder may be eligible for refunds or credits of such taxes.
Non-U.S. shareholders should consult their own tax advisors on these matters.
Because everyone’s tax situation is unique, you should consult your tax
advisor regarding the treatment of distributions under the federal, state,
local, and foreign tax rules that apply to you, as well as the tax consequences
of gains or losses from the sale, exchange, or redemption of your Fund shares.
9-4
1
0.
Underwriter
Lord Abbett Distributor, a New York limited liability company and
subsidiary of Lord Abbett, 90 Hudson Street, Jersey City, NJ 07302-3973, serves
as the principal underwriter for the Fund. The Trust 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 Fund, and to make reasonable efforts to sell Fund shares on a
continuous basis, so long as, in Lord Abbett Distributor’s judgment, a
substantial distribution can be obtained by reasonable efforts.
For the last three fiscal years, Lord Abbett Distributor, as the
Trust’s principal underwriter, received net commissions after allowance of a
portion of the sales charge to independent dealers with respect to Class A
shares of the Fund as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended October 31,
|
|
|
2012
|
2011
|
2010
|
|
|
|
|
|
|
|
|
|
|
Gross sales charge
|
$ [21,067,234]
|
|
$ 21,067,234
|
|
$
|
14,770,264
|
|
|
|
|
|
|
|
|
|
|
|
Amount allowed to dealers
|
$ [17,850,312]
|
|
$ 17,850,312
|
|
$
|
12,498,392
|
|
|
|
|
|
|
|
|
|
|
|
Net commissions received by
Lord Abbett Distributor
|
$ [3,216,922]
|
|
$ 3,216,922
|
|
$
|
2,271,872
|
|
In addition, Lord Abbett Distributor, as the Trust’s principal
underwriter, received the following compensation for the fiscal year ended [October
31, 2011]:
|
|
|
|
|
|
|
|
|
|
|
Compensation
on
Redemption and
Repurchase
|
Brokerage
Commissions in
Connection with Fund
Transactions
|
Other
Compensation
|
|
Class A
|
$0.00
|
|
$0.00
|
|
$
|
4,636,735.04
|
|
|
|
|
|
|
|
|
|
|
|
Class B
|
$0.00
|
|
$0.00
|
|
$
|
1,020.70
|
*
|
|
|
|
|
|
|
|
|
|
|
Class C
|
$0.00*
|
|
$0.00
|
|
$
|
11,008.15
|
*
|
|
|
|
|
|
|
|
|
|
|
Class F
|
$0.00
|
|
$0.00
|
|
$
|
784,767.27
|
|
|
|
|
|
|
|
|
|
|
|
Class P
|
$0.00
|
|
$0.00
|
|
$
|
129.84
|
|
|
|
|
|
|
|
|
|
|
|
Class R2
|
$0.00
|
|
$0.00
|
|
$
|
218.70
|
|
|
|
|
|
|
|
|
|
|
|
Class R3
|
$0.00
|
|
$0.00
|
|
$
|
3,546.36
|
|
|
|
|
|
|
|
|
|
|
|
*Excludes
12b-1 payments and CDSC fees received during the first year of the associated
investment as repayment of fees advanced by Lord Abbett Distributor to
broker/dealers at the time of sale.
** Other compensation includes fees paid to Lord Abbett Distributor for
services rendered in connection with activities primarily intended to result
in the sale of Fund shares.
|
10-1
1
1.
Financial Statements
[TO BE
UPDATED]
A-1
APPE
NDIX A
FUND PORTFOLIO INFORMATION RECIPIENTS
The following
is a list of the third parties that are eligible to receive portfolio holdings
or related information pursuant to ongoing arrangements under the circumstances
described above under Investment Policies – Policies and Procedures Governing
Disclosure of Portfolio Holdings:
|
|
|
|
|
Portfolio Holdings*
|
|
Abel/Noser
Corp.
|
Monthly
|
|
Base-Two
Investment Systems, Inc.
|
Daily
|
|
Becker,
Burke Associates
|
Monthly
|
|
Berthel
Schutter
|
Monthly
|
|
Bloomberg
L.P.
|
Daily
|
|
BNY
Convergex Execution Solutions LLC
|
Upon Request
|
|
Callan
Associates Inc.
|
Monthly
|
|
Cambridge
Associates LLC
|
Monthly
|
|
Cardinal
Investment Advisors LLC
|
Upon Request
|
|
Citigroup/The
Yield Book, Inc.
|
Daily
|
|
CJS
Securities, Inc.
|
Daily
|
|
CL King
& Associates
|
Monthly
|
|
Concord Advisory Group Ltd.
|
Monthly
|
|
Credit
Suisse Transition Management
|
Upon Request
|
|
CTVglobemedia
f/k/a Bell GlobeMedia Publishing Co.
|
Monthly
|
|
Curcio Webb
|
Monthly
|
|
Deloitte
& Touche LLP
|
Annually
|
|
DeMarche
Associates, Inc.
|
Upon Request
|
|
Edward D.
Jones & Co., L.P.
|
Monthly
|
|
Evaluation
Associates, LLC
|
Monthly
|
|
FactSet
Research Systems, Inc.
|
Daily
|
|
Financial
Model Co. (FMC)
|
Daily
|
|
Flow of
Capital, Inc.
|
Upon Request
|
|
Frank
Russell Company
|
Upon Request
|
|
Fund
Evaluation Group, LLC
|
Quarterly
|
|
Hartland
& Co.
|
Monthly
|
|
Inforlago IT
Ltd.
|
Upon Request
|
|
ING Life
Insurance and Annuity Company / ING Insurance Company of America
|
Upon Request
|
|
Institutional
Shareholder Services, Inc. (ISS)
|
Daily
|
|
Investment
Technology Group (ITG)
|
Daily
|
|
Investortools
Inc.
|
Upon Request
|
|
Ipreo
|
Upon Request
|
|
Jeffrey
Slocum & Associates, Inc.
|
Monthly
|
|
John Hancock
Financial Services
|
Upon Request
|
|
JP Morgan
Securities, Inc.
|
Monthly
|
|
Kirkpatrick
& Lockhart Preston Gates Ellis LLP (counsel to Lord, Abbett & Co.
LLC)
|
Upon Request
|
|
LCG
Associates, Inc.
|
Upon Request
|
|
Lipper Inc.,
a Reuters Company
|
Monthly
|
|
Longbow
Research
|
Monthly
|
|
Louise
Yamada Technical Research Advisors, LLC
|
Upon Request
|
|
Marquette
Associates
|
Upon Request
|
|
Merrill
Lynch, Pierce, Fenner & Smith, Incorporated
|
Monthly
|
|
Morningstar
Associates, Inc., Morningstar, Inc.
|
Daily
|
|
MSCI Barra
|
Daily
|
|
Muzea
Insider Consulting Services
|
Weekly
|
|
Natixis
Bleichroeder, Inc.
|
Upon Request
|
|
Nock, Inc.
|
Daily
|
A-2
|
|
|
|
|
Portfolio Holdings*
|
|
Northern Trust Investments, N.A.
|
Upon Request
|
|
Pierce Park Group
|
Monthly
|
|
Prime Buchholz & Associates, Inc.
|
Upon Request
|
|
Princeton Financial Systems
|
Upon Request
|
|
Rabil Stock Research, LLC
|
Upon Request
|
|
RBC Capital Markets Corporation
|
Upon Request
|
|
Reuters America LLC
|
Daily
|
|
Robert W. Baird & Co. Incorporated
|
Upon Request
|
|
Rocaton Investment Advisors, LLC
|
Monthly
|
|
Rogerscasey
|
Monthly
|
|
Russell Implementation Services Inc.
|
Upon Request
|
|
R.V. Kuhns & Associates, Inc.
|
Upon Request
|
|
SG Constellation LLC
|
Daily
|
|
Sidoti & Company, LLC
|
Upon Request
|
|
State Street Corporation
|
Daily
|
|
Stifel, Nicholaus & Co. Inc.
|
Quarterly
|
|
Stratford Advisory Group. Inc.
|
Upon Request
|
|
Sungard Expert Solutions, Inc.
|
Daily
|
|
The Marco Consulting Group
|
Monthly
|
|
Towers Watson Investment Services, Inc.
f/k/a Watson Wyatt Worldwide
|
Monthly
|
|
Wall Street Source
|
Daily
|
|
Watershed Investment Consultants
|
Quarterly
|
|
Wilmer Cutler Pickering Hale and Dorr LLP
|
Upon Request
|
|
|
|
|
* The Fund may provide its portfolio holdings to (a) third parties
that render services to the Fund relating to such holdings (i.e., pricing
vendors, ratings organizations, custodians, external administrators,
independent registered public accounting firms, counsel, etc.) as appropriate
to the service being provided to the Fund, on a daily, monthly, calendar
quarterly or annual basis, and (b) third party consultants on a daily,
monthly or calendar quarterly basis for the purpose of performing their own
analyses with respect to the Fund within one day following each calendar
period end.
|
A-3
A
PPENDIX B
LORD, ABBETT & CO. LLC
PROXY VOTING POLICIES AND PROCEDURES
Under the Investment Advisers Act of 1940, as amended, Lord, Abbett
& Co. LLC (“Lord Abbett” or “we”) acts as a fiduciary that owes each of its
clients duties of care and loyalty with respect to all services undertaken on
the client’s behalf, including proxy voting. This means that Lord Abbett is
required to vote proxies in the manner we believe is in the best interests of
each client, including the Lord Abbett Funds (the “Funds”) and their
shareholders. We take a long-term perspective in investing our clients’ assets
and employ the same perspective in voting proxies on their behalf. Accordingly,
we tend to support proxy proposals that we believe are likely to maximize shareholder
value over time, whether such proposals were initiated by a company or its
shareholders.
|
|
|
Proxy Voting Process Overview
|
|
|
Lord Abbett has a Proxy Group within its Operations Department (the
“Proxy Group”) that oversees proxy voting mechanics on a day-to-day basis and
provides Lord Abbett’s Proxy Policy Committee (the “Proxy Policy Committee”)
and Investment Department personnel with information regarding proxy voting.
The Proxy Policy Committee consists of Lord Abbett’s Chief Investment Officer,
Director of Domestic Equity Portfolio Management, Director of International
Equity, Director of Domestic Equity Research, Chief Administrative Officer for
the Investment Department, and General Counsel. Voting decisions are made by
the Investment Department in accordance with these policies and procedures and
are carried out by the Proxy Group.
Lord Abbett has retained an independent third party service provider
(the “Proxy Advisor”) to analyze proxy issues and recommend how to vote on
those issues, and to provide assistance in the administration of the proxy
process, including maintaining complete proxy voting records.
1
While
Lord Abbett takes into consideration the information and recommendations of the
Proxy Advisor, Lord Abbett votes all proxies based on its own proxy voting
policies, including Lord Abbett’s conclusions regarding the best interests of
the Funds, their shareholders, and other advisory clients, rather than basing
decisions solely on the Proxy Advisor’s recommendations.
Lord Abbett has implemented the following three-pronged approach to the
proxy voting process:
|
|
|
|
|
|
•
|
In cases where we deem any client’s position in a company to be
material,
2
the relevant investment team is responsible for
determining how to vote the security. Once a voting decision has been made,
the investment team provides instructions to the Proxy Group, which is
responsible for submitting Lord Abbett’s vote.
|
|
|
|
|
|
|
|
In cases where we deem all clients’ positions in a company to be
non-material, the Chief Administrative Officer for the Investment Department
is responsible for determining how to vote the security. The Chief
Administrative Officer may seek guidance from the relevant investment team,
the Proxy Policy Committee or any of its members, the Proxy Advisor, or other
sources to determine how to vote. Once a voting decision has been made, the
Chief Administrative Officer provides instructions to the Proxy Group, which
is responsible for submitting Lord Abbett’s vote.
|
|
|
|
|
|
|
•
|
Lord Abbett has identified certain types of proxy proposals that it
considers purely administrative in nature and as to which it always will vote
in the same manner. The Proxy Group is authorized to vote on such proposals
without receiving instructions from the Investment Department, regardless of
the materiality of any client’s position. Lord Abbett presently considers the
following specific types of proposals to fall within this category:
|
|
|
|
|
|
|
|
1 Lord
Abbett currently retains Institutional Shareholder Services Inc. as the Proxy
Advisor.
|
|
|
|
|
2 We
presently consider a position in a particular company to be material if: (1)
it represents more than 1% of any client’s portfolio holdings
and
all clients’ positions in the
company together represent more than 1% of the company’s outstanding shares;
or
(2) all clients’ positions in the
company together represent more than 5% of the company’s outstanding shares.
For purposes of determining materiality, we exclude shares held by clients
with respect to which Lord Abbett does not have authority to vote proxies. We
also exclude shares with respect to which Lord Abbett’s vote is restricted or
limited due to super-voting share structures (where one class of shares has
super-voting rights that effectively disenfranchise other classes of shares),
vote limitation policies, and other similar measures. This definition of
materiality is subject to change at our discretion.
|
B-1
|
|
|
|
|
(1) proposals to change a company’s name, as to which Lord Abbett
always votes in favor; (2) proposals regarding formalities of shareholder
meetings (namely, changes to a meeting’s date, time, or location), as to
which Lord Abbett always votes in favor; and (3) proposals to allow
shareholders to transact other business at a meeting, as to which Lord Abbett
always votes against.
|
When multiple investment teams manage one or more portfolios that hold
the same voting security, the investment team that manages the largest number
of shares of the security will be considered to have the dominant position and
Lord Abbett will vote all shares on behalf of all clients that hold the
security in accordance with the vote determined by the investment team with the
dominant position.
Lord Abbett is an independent, privately held firm with a singular
focus on the management of money. Although Lord Abbett does not face the
conflicts of interest inherent in being part of a larger financial institution,
conflicts of interest nevertheless may arise in the proxy voting process. Such
a conflict may exist, for example, when a client’s account holds shares of a
company that also is a client of Lord Abbett. We have adopted safeguards
designed to ensure that conflicts of interests are identified and resolved in
our clients’ best interests rather than our own. These safeguards include, but
are not limited to, the following:
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•
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Lord Abbett has implemented special voting measures with respect to
companies for which one of the Funds’ independent directors/trustees also
serves on the board of directors or is a nominee for election to the board of
directors. If a Fund owns stock in such a company, Lord Abbett will notify
the Funds’ Proxy Committees
††
and seek voting instructions from
the Committees only in those situations where Lord Abbett proposes not to
follow the Proxy Advisor’s recommendations. In these instances, if
applicable, the independent director/trustee will abstain from any
discussions by the Funds’ Proxy Committees regarding the company.
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•
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Lord Abbett also has implemented special voting measures with respect
to companies that have a significant business relationship with Lord Abbett
(including any subsidiaries of such companies). For this purpose, a
“significant business relationship” means: (1) a broker dealer firm that is responsible
for one percent or more of the Funds’ total dollar amount of shares sold for
the last 12 months; (2) a firm that is a sponsor firm with respect to Lord
Abbett’s separately managed account business; (3) an institutional account
client that has an investment management agreement with Lord Abbett; (4) an
institutional investor that, to Lord Abbett’s knowledge, holds at least $5
million in shares of the Funds; and (5) a retirement plan client that, to
Lord Abbett’s knowledge, has at least $5 million invested in the Funds. If a
Fund owns stock in such a company, Lord Abbett will notify the Funds’ Proxy
Committees and seek voting instructions from the Committees only in those
situations where Lord Abbett proposes not to follow the Proxy Advisor’s
recommendations.
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Proxy Voting Guidelines
A general summary of the guidelines that we normally follow in voting
proxies appears below. These voting guidelines reflect our general views. We
reserve the flexibility to vote in a manner contrary to our general views on
particular issues if we believe doing so is in the best interests of our
clients, including the Funds and their shareholders. Many different specific
types of proposals may arise under the broad categories discussed below, and it
is not possible to contemplate every issue on which we may be asked to vote.
Accordingly, we will vote on proposals concerning issues not expressly covered
by these guidelines based on the specific factors that we believe are relevant.
A. Auditors
– Auditors are responsible for examining, correcting,
and verifying the accuracy of a company’s financial statements. Lord Abbett
believes that companies normally are in the best position to select their
auditors and, therefore, we generally support management’s recommendations
concerning the ratification of the selection of auditors. However, we may
evaluate such proposals on a case-by-case basis due to concerns about impaired
independence, accounting irregularities, or failure of the auditors to act in
shareholders’ best economic interests, among other factors we may deem
relevant.
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3
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The
Boards of Directors and Trustees of the Fund have delegated oversight of
proxy voting to separate Proxy Committees comprised solely of independent
directors and/or trustees, as the case may be. Each Proxy Committee is
responsible for, among other things: (1) monitoring Lord Abbett’s actions in
voting securities owned by the related Fund; (2) evaluating Lord Abbett’s
policies in voting securities; and (3) meeting with Lord Abbett to
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3
The
Boards of Directors and Trustees of the Funds have delegated oversight of
proxy voting to separate Proxy Committees comprised solely of independent
directors and/or trustees, as the case may be. Each Proxy Committee is responsible
for, among other things: (1) monitoring Lord Abbett’s actions in voting
securities owned by the related Fund; (2) evaluating Lord Abbett’s policies
in voting securities; and (3) meeting with Lord Abbett to review the policies
in voting securities, the sources of information used in determining how to
vote on particular matters, and the procedures used to determine the votes in
any situation where there may be a conflict of interest.
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B-2
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review
the policies in voting securities, the sources of information used in
determining how to vote on particular matters, and the procedures used to
determine the votes in any situation where there may be a conflict of
interest.
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B.
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Directors
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1.
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Election of directors
–
The board of directors of a company oversees all aspects of the company’s
business. Companies and, under certain circumstances, their shareholders, may
nominate directors for election by shareholders. Lord Abbett believes that
the independent directors currently serving on a company’s board of directors
(or a nominating committee comprised of such independent directors) generally
are in the best position to identify qualified director nominees.
Accordingly, we normally vote in accordance with management’s recommendations
on the election of directors. In evaluating a director nominee’s candidacy,
however, Lord Abbett may consider the following factors, among others: (1)
the nominee’s experience, qualifications, attributes, and skills, as
disclosed in the company’s proxy statement; (2) the composition of the board
and its committees; (3) whether the nominee is independent of company
management; (4) the nominee’s board meeting attendance; (5) the nominee’s
history of representing shareholder interests on the company’s board or other
boards; (6) the nominee’s investment in the company; (7) the company’s
long-term performance relative to a market index; and (8) takeover activity.
In evaluating a compensation committee nominee’s candidacy, Lord Abbett may
consider additional factors including the nominee’s record on various
compensation issues such as tax gross-ups, severance payments, options
repricing, and pay for performance, although the nominee’s record as to any
single compensation issue alone will not necessarily be determinative. Lord
Abbett may withhold votes for some or all of a company’s director nominees on
a case-by-case basis.
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2.
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Majority voting
–
Under a majority voting standard, director nominees must be elected by an
affirmative majority of the votes cast at a meeting. Majority voting
establishes a higher threshold for director election than plurality voting,
in which nominees who receive the most votes are elected, regardless of how
small the number of votes received is relative to the total number of shares
voted. Lord Abbett generally supports proposals that seek to adopt a majority
voting standard.
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3.
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Board classification
–
A “classified” or “staggered” board is a structure in which only a portion of
a company’s board of directors (typically one-third) is elected each year. A
company may employ such a structure to promote continuity of leadership and
thwart takeover attempts. Lord Abbett generally votes against proposals to
classify a board, absent special circumstances indicating that shareholder
interests would be better served by such a structure. In evaluating a
classified board proposal, Lord Abbett may consider the following factors,
among others: (1) the company’s long-term strategic plan; (2) the extent to
which continuity of leadership is necessary to advance that plan; and (3) the
need to guard against takeover attempts.
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4.
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Independent board and committee members
–
An independent director is one who serves on a company’s board but is not
employed by the company or affiliated with it in any other capacity. While
company boards may apply different standards in assessing director
independence, including any applicable standards prescribed by stock
exchanges and the federal securities laws, a director generally is determined
to qualify as independent if the director does not have any material
relationship with the company (either directly or indirectly) based on all
relevant facts and circumstances. Material relationships can include
employment, business, and familial relationships, among others. Lord Abbett
believes that independent board and committee membership often helps to
mitigate the inherent conflicts of interest that arise when a company’s
executive officers also serve on its board and committees. Therefore, we
generally support the election of board or committee nominees if such
election would cause a majority of a company’s board or committee members to
be independent. However, a nominee’s effect on the independent composition of
the board or any committee is one of many factors Lord Abbett considers in
voting on the nominee and will not necessarily be dispositive.
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5.
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Independent board chairman
–
Proponents of proposals to require independent board chairmen (formerly often
referred to as “separation of chairman and chief executive officer”
proposals) seek to enhance board accountability and mitigate a company’s
risk-taking behavior by requiring that the role of the chairman of the
company’s board of directors be filled by an independent director. We
generally vote with management on proposals that call for independent board
chairmen. We may vote in favor of such proposals on a case-by-case basis,
despite management opposition, if we believe that a company’s governance
structure does not promote independent oversight through other means, such as
a lead director, a board composed of a majority of independent directors,
and/or independent board committees. In evaluating independent chairman
proposals, we will focus in particular on the presence of a lead director,
which is an independent director designated by a board with a non-independent
chairman to serve as the primary liaison between company management and the
independent directors and act as the independent directors’ spokesperson.
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B-3
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C.
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Compensation and Benefits
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1.
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General
– In the
wake of recent corporate scandals and market volatility, shareholders
increasingly have scrutinized the nature and amount of compensation paid by a
company to its executive officers and other employees. Lord Abbett believes
that because a company has exclusive knowledge of material information not
available to shareholders regarding its business, financial condition, and
prospects, the company itself usually is in the best position to make
decisions about compensation and benefits. Accordingly, we generally vote
with management on such matters. However, we may oppose management on a
case-by-case basis if we deem a company’s compensation to be excessive or
inconsistent with its peer companies’ compensation, we believe a company’s
compensation measures do not foster a long-term focus among its executive
officers and other employees, or we believe a company has not met performance
expectations, among other reasons. Discussed below are some specific types of
compensation-related proposals that we may encounter.
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2.
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Incentive compensation plans
–
An incentive compensation plan rewards an executive’s performance through a
combination of cash compensation and stock awards. Incentive compensation
plans are designed to align an executive’s compensation with a company’s
long-term performance. As noted above, Lord Abbett believes that management
generally is in the best position to assess executive compensation levels
and, therefore, generally votes with management on proposals relating to
incentive compensation plans. In evaluating such a proposal, however, Lord
Abbett may consider the following factors, among others: (1) the executive’s
expertise and the value he or she brings to the company; (2) the company’s
performance, particularly during the executive’s tenure; (3) the percentage
of overall compensation that consists of stock; (4) whether and/or to what
extent the incentive compensation plan has any potential to dilute the voting
power or economic interests of other shareholders; (5) the features of the
plan and costs associated with it; (6) whether the plan provides for
repricing or replacement of underwater stock options; and (7) quantitative
data from the Proxy Advisor regarding compensation ranges by industry and
company size. We also scrutinize very closely the proposed repricing or
replacement of underwater stock options, taking into consideration the
stock’s volatility, management’s rationale for the repricing or replacement,
the new exercise price, and any other factors we deem relevant.
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3.
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Say on pay
– “Say
on pay” proposals give shareholders a nonbinding vote on executive
compensation. These proposals are designed to serve as a means of conveying
to company management shareholder concerns, if any, about executive
compensation. Lord Abbett believes that management generally is in the best
position to assess executive compensation. Thus, we generally vote with
management on say on pay proposals unless we believe that compensation has
been excessive or direct feedback to management about compensation has not
resulted in any changes. We also generally vote with management on proposals
regarding the frequency of say on pay votes. However, any particular vote
will be based on the specific facts and circumstances we deem relevant.
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4.
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Pay for performance
–
“Pay for performance” proposals are shareholder proposals that seek to
achieve greater alignment between executive compensation and company
performance. Shareholders initiating these proposals tend to focus on board
compensation committees’ accountability, the use of independent compensation
consultants, enhanced disclosure of compensation packages, and perquisites
given to executives. Because Lord Abbett believes that management generally
is in the best position to assess executive compensation, we generally follow
management’s voting recommendations regarding pay for performance proposals.
However, we may evaluate such proposals on a case-by-case basis if we believe
a company’s long-term interests and its executives’ financial incentives are
not properly aligned or if we question the methodology a company followed in
setting executive compensation, among other reasons.
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5.
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Clawback provisions
–
A clawback provision allows a company to recoup or “claw back” incentive
compensation paid to an executive if the company later determines that the
executive did not actually meet applicable performance goals. For example,
such provisions might be used when a company calculated an executive’s
compensation based on materially inaccurate or fraudulent financial
statements. Some clawback provisions are triggered only if the misalignment
between compensation and performance is attributable to improper conduct on
the part of the executive. Shareholder proponents of clawback proposals
believe that they encourage executive accountability and mitigate a company’s
risk-taking behavior. Because Lord Abbett believes that management generally
is in the best position to assess executive compensation, we generally vote
with management on clawback proposals. We may, however, evaluate such a
proposal on a case-by-case basis due to concerns about the amount of
compensation paid to the executive, the executive’s or the company’s
performance, or accounting irregularities, among other factors we may deem
relevant.
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6.
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Anti-gross-up policies
–
Tax “gross-ups” are payments by a company to an executive intended to
reimburse some or all of the executive’s tax liability with respect to
compensation, perquisites, and other benefits. Because the gross-up payment
also is taxable, it typically is inflated to cover the amount of the tax
liability and the gross-up payment itself. Critics of such payments argue
that they often are not transparent to shareholders and can substantially
enhance an executive’s overall compensation. Thus, shareholders increasingly
are urging companies to establish policies prohibiting tax gross-ups. Lord
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B-4
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Abbett generally favors adoption of anti-tax gross-up policies
themselves, but will not automatically vote against a compensation committee
nominee solely because the nominee approved a gross-up.
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7.
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Severance agreements and executive death
benefits
– Severance or so-called “golden parachute”
payments sometimes are made to departing executives after termination or upon
a company’s change in control. Similarly, companies sometimes make executive
death benefit or so-called “golden coffin” payments to an executive’s estate.
Both practices increasingly are coming under shareholder scrutiny. While we
generally vote with management on compensation matters and acknowledge that
companies may have contractual obligations to pay severance or executive
death benefits, we scrutinize cases in which such benefits are especially
lucrative or are granted despite the executive’s or the company’s poor
performance, and may vote against management on a case-by-case basis as we
deem appropriate. We also generally support proposals to require that
companies submit severance agreements and executive death benefits for
shareholder ratification.
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8.
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Executive pay limits
–
Lord Abbett believes that a company’s flexibility with regard to its
compensation practices is critical to its ability to recruit, retain, and
motivate key talent. Accordingly, we generally vote with management on
shareholder proposals that seek to impose limits on executive compensation.
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9.
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Employee stock purchase plans
–
Employee stock purchase plans permit employees to purchase company stock at
discounted prices and, under certain circumstances, receive favorable tax
treatment when they sell the stock. Lord Abbett generally follows
management’s voting recommendation concerning employee stock purchase plans,
although we generally do not support plans that are dilutive.
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D.
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Corporate Matters
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1.
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Charter amendments
–
A company’s charter documents, which may consist of articles of incorporation
or a declaration of trust and bylaws, govern the company’s organizational
matters and affairs. Lord Abbett believes that management normally is in the
best position to determine appropriate amendments to a company’s governing
documents. Some charter amendment proposals involve routine matters, such as
changing a company’s name or procedures relating to the conduct of
shareholder meetings. Lord Abbett believes that such routine matters do not
materially affect shareholder interests and, therefore, we vote with
management with respect to them in all cases. Other types of charter
amendments, however, are more substantive in nature and may impact
shareholder interests. We consider such proposals on a case-by-case basis to
the extent they are not explicitly covered by these guidelines.
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2.
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Changes to capital structure
–
A company may propose amendments to its charter documents to change the
number of authorized shares or create new classes of stock. We generally
support proposals to increase a company’s number of authorized shares when
the company has articulated a clear and reasonable purpose for the increase
(for example, to facilitate a stock split, merger, acquisition, or restructuring).
However, we generally oppose share capital increases that would have a
dilutive effect. We also generally oppose proposals to create a new class of
stock with superior voting rights.
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3.
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Reincorporation
–
We generally follow management’s recommendation regarding proposals to change
a company’s state of incorporation, although we consider the rationale for
the reincorporation and the financial, legal, and corporate governance
implications of the reincorporation. We will vote against reincorporation
proposals that we believe contravene shareholders’ interests.
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4.
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Mergers, acquisitions, and restructurings
–
A merger or acquisition involves combining two distinct companies into a
single corporate entity. A restructuring involves a significant change in a
company’s legal, operational, or structural features. After these kinds of
transactions are completed, shareholders typically will own stock in a
company that differs from the company whose shares they initially purchased.
Thus, Lord Abbett views the decision to approve or reject a potential merger,
acquisition, or restructuring as being equivalent to an investment decision.
In evaluating such a proposal, Lord Abbett may consider the following
factors, among others: (1) the anticipated financial and operating benefits;
(2) the offer price; (3) the prospects of the resulting company; and (4) any
expected changes in corporate governance and their impact on shareholder
rights. We generally vote against management proposals to require a supermajority
shareholder vote to approve mergers or other significant business
combinations. We generally vote for shareholder proposals to lower
supermajority vote requirements for mergers and acquisitions. We also
generally vote against charter amendments that attempt to eliminate
shareholder approval for acquisitions involving the issuance of more than 10%
of a company’s voting stock.
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E.
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Anti-Takeover Issues and Shareholder Rights
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B-5
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1.
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Proxy access
–
Proxy access proposals advocate permitting shareholders to have their
nominees for election to a company’s board of directors included in the
company’s proxy statement in opposition to the company’s own nominees. Proxy
access initiatives enable shareholders to nominate their own directors
without incurring the often substantial cost of preparing and mailing a proxy
statement, making it less expensive and easier for shareholders to challenge
incumbent directors. Lord Abbett generally votes with management on proposals
that seek to allow proxy access subject to less stringent requirements.
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2.
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Shareholder rights plans
–
Shareholder rights plans or “poison pills” are a mechanism of defending a
company against takeover efforts. Poison pills allow current shareholders to
purchase stock at discounted prices or redeem shares at a premium after a
takeover, effectively making the company more expensive and less attractive
to potential acquirers. Companies may employ other defensive tactics in
combination with poison pills, such as golden parachutes that take effect
upon a company’s change in control and therefore increase the cost of a
takeover. Because poison pills can serve to entrench management and
discourage takeover offers that may be attractive to shareholders, we
generally vote in favor of proposals to eliminate poison pills and proposals
to require that companies submit poison pills for shareholder ratification.
In evaluating a poison pill proposal, however, Lord Abbett may consider the
following factors, among others: (1) the duration of the poison pill; (2)
whether we believe the poison pill facilitates a legitimate business strategy
that is likely to enhance shareholder value; (3) our level of confidence in
management; (4) whether we believe the poison pill will be used to force
potential acquirers to negotiate with management and assure a degree of
stability that will support good long-range corporate goals; and (5) the need
to guard against takeover attempts.
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3.
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Chewable pill provisions
–
A “chewable pill” is a variant of the poison pill that mandates a shareholder
vote in certain situations, preventing management from automatically
discouraging takeover offers that may be attractive to shareholders. We
generally support chewable pill provisions that balance management’s and
shareholders’ interests by including: (1) a redemption clause allowing the
board to rescind a pill after a potential acquirer’s holdings exceed the
applicable ownership threshold; (2) no dead-hand or no-hand pills, which
would allow the incumbent board and their approved successors to control the
pill even after they have been voted out of office; (3) sunset provisions
that allow shareholders to review and reaffirm or redeem a pill after a
predetermined time frame; and (4) a qualifying offer clause, which gives
shareholders the ability to redeem a poison pill when faced with a bona fide
takeover offer.
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4.
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Anti-greenmail provisions
–
An anti-greenmail provision is a special charter provision that prohibits a
company’s management from buying back shares at above market prices from
potential acquirers without shareholder approval. We generally support such
provisions, provided that they are not bundled with other measures that serve
to entrench management or discourage attractive takeover offers.
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5.
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Fair price provisions
–
A fair price provision is a special charter provision that requires that all
selling shareholders receive the same price from a buyer. Fair price
provisions are designed to protect shareholders from inequitable two-tier
stock acquisition offers in which some shareholders may be bought out on
disadvantageous terms. We generally support such provisions, provided that
they are not bundled with other measures that serve to entrench management or
discourage attractive takeover offers.
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6.
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Rights to call special shareholder meetings
– Proposals regarding rights to call special
shareholder meetings normally seek approval of amendments to a company’s
charter documents. Lord Abbett generally votes with management on proposals
concerning rights to call special shareholder meetings. In evaluating such a
proposal, Lord Abbett may consider the following factors, among others: (1)
the stock ownership threshold required to call a special meeting; (2) the
purposes for which shareholders may call a special meeting; (3) whether the
company’s annual meetings offer an adequate forum in which shareholders may
raise their concerns; and (4) the anticipated economic impact on the company
of having to hold additional shareholder meetings.
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7.
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Supermajority vote requirements
–
A proposal that is subject to a supermajority vote must receive the support
of more than a simple majority in order to pass. Supermajority vote
requirements can have the effect of entrenching management by making it more
difficult to effect change regarding a company and its corporate governance
practices. Lord Abbett normally supports shareholders’ ability to approve or
reject proposals based on a simple majority vote. Thus, we generally vote for
proposals to remove supermajority vote requirements and against proposals to
add them.
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8.
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Cumulative voting
–
Under cumulative or proportional voting, each shareholder is allotted a
number of votes equal to the number of shares owned multiplied by the number
of directors to be elected. This voting regime strengthens the voting power
of minority shareholders because it enables shareholders to cast multiple
votes for a single nominee. Lord Abbett believes that a shareholder or group
of shareholders using this technique to elect a director may seek to have the
director represent a narrow special interest rather than the interests of the
broader shareholder population. Accordingly, we generally vote against
cumulative voting proposals.
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B-6
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9.
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Confidential voting
–
In a confidential voting system, all proxies, ballots, and voting tabulations
that identify individual shareholders are kept confidential. An open voting
system, by contrast, gives management the ability to identify shareholders
who oppose its proposals. Lord Abbett believes that confidential voting
allows shareholders to vote without fear of retribution or coercion based on
their views. Thus, we generally support proposals that seek to preserve
shareholders’ anonymity.
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10.
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Reimbursing proxy solicitation expenses
-
Lord Abbett generally votes with management on shareholder proposals to
require a company to reimburse reasonable expenses incurred by one or more
shareholders in a successful proxy contest, and may consider factors
including whether the board has a plurality or majority vote standard for the
election of directors, the percentage of directors to be elected in the
contest, and shareholders’ ability to cumulate their votes for the directors.
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11.
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Transacting other business
–
Lord Abbett believes that proposals to allow shareholders to transact other
business at a meeting deprive other shareholders of sufficient time and
information to carefully evaluate the relevant business issues and determine
how to vote with respect to them. Therefore, Lord Abbett always votes against
such proposals.
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F.
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Social, Political, and Environmental Issues
– Proposals relating to social, political, or
environmental issues typically are initiated by shareholders and urge a
company to disclose certain information or change certain business practices.
Lord Abbett evaluates such proposals based on their effect on shareholder
value rather than on their ideological merits. We generally follow
management’s recommendation on social, political, and environmental proposals
and tend to vote against proposals that are unduly burdensome or impose
substantial costs on a company with no countervailing economic benefits to
the company’s shareholders. Nonetheless, we pay particular attention to
highly controversial issues, as well as instances where management has failed
repeatedly to take corrective actions with respect to an issue.
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G.
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Share Blocking
–
Certain foreign countries impose share blocking restrictions that would
prohibit Lord Abbett from trading a company’s stock during a specified period
before the company’s shareholder meeting. Lord Abbett believes that in these
situations, the benefit of maintaining liquidity during the share blocking
period outweighs the benefit of exercising our right to vote. Therefore, it
is Lord Abbett’s general policy to not vote securities in cases where share
blocking restrictions apply.
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Amended: September 13, 2012
B-7
[XXX-XX]
[11/12]
B-8
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[This
Amendment does not relate to, amend or otherwise affect the Registrant’s
Prospectus and Statement of Additional Information contained in
Post-Effective Amendment No. 68 to the Registration Statement on Form N-1A
filed on February 27, 2012, and pursuant to Rule 485(d) under the Securities
Act of 1933, as amended, does not affect the effectiveness of such previously
filed Post-Effective Amendment.]
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LORD ABBETT
SECURITIES TRUST
PART C
OTHER INFORMATION
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(a)
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Declaration and Agreement of Trust
.
Incorporated by reference to Post-Effective Amendment No. 19 to the
Registrant’s Registration Statement on Form N-1A filed on February 27, 1998.
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i.
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Amendment to Declaration
and Agreement of Trust (Lord Abbett Large-Cap Value Fund). Incorporated by
reference to Post-Effective Amendment No. 41 to the Registrant’s Registration
Statement on Form N-1A filed on June 26, 2003.
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ii.
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Amendment to Declaration
and Agreement of Trust (Lord Abbett International Core Equity Fund).
Incorporated by reference to Post-Effective Amendment No. 43 to the
Registrant’s Registration Statement on Form N-1A filed on December 12, 2003.
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|
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|
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|
iii.
|
Amendment to Declaration
and Agreement of Trust (Lord Abbett International Opportunities Fund).
Incorporated by reference to Post-Effective Amendment No. 44 to the
Registrant’s Registration Statement on Form N-1A filed on February 27, 2004.
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|
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|
|
|
|
iv.
|
Amendment to Declaration
and Agreement of Trust (Lord Abbett All Value Fund). Incorporated by
reference to Post-Effective Amendment No. 34 to the Registrant’s Registration
Statement on Form N-1A filed on March 1, 2001.
|
|
|
|
|
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|
v.
|
Amendments to Declaration
and Agreement of Trust (Lord Abbett Micro-Cap Growth Fund and Lord Abbett
Micro-Cap Value Fund). Incorporated by reference to Post-Effective Amendment
No. 44 to the Registrant’s Registration Statement on Form N-1A filed on
February 27, 2004.
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|
|
|
|
|
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vi.
|
Amendment to Declaration
and Agreement of Trust (Lord Abbett Alpha Series – Class Y). Incorporated by
reference to Post-Effective Amendment No. 45 to the Registrant’s Registration
Statement on Form N-1A filed on August 19, 2004.
|
|
|
|
|
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|
vii.
|
Amendment to Declaration
and Agreement of Trust (Lord Abbett Value Opportunities Fund – Class A, B, C,
P & Y). Incorporated by reference to Post-Effective Amendment No. 50 to
the Registrant’s Registration Statement on Form N-1A filed on December 20,
2005.
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|
|
|
|
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|
viii.
|
Amendment
to Declaration and Agreement of Trust dated July 26, 2007. Incorporated by reference to Post-Effective
Amendment No. 54 to the Registrant’s Registration Statement on Form N-1A
filed on September 13, 2007.
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|
|
|
|
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|
ix.
|
Amendment
to Declaration and Agreement of Trust (renaming Class Y to Class I shares)
dated July 26, 2007. Incorporated
by reference to Post-Effective Amendment No. 54 to the Registrant’s
Registration Statement on Form N-1A filed on September 13, 2007.
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|
x.
|
Amendment
to Declaration and Agreement of Trust (Lord Abbett International Dividend
Income Fund – Class A, B, C, F, I, R2, & R3) dated March 19, 2008. Incorporated by reference to Post-Effective
Amendment No. 56 to the Registrant’s Registration Statement on Form N-1A
filed on April 2, 2008.
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|
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|
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xi.
|
Amendment
to Declaration and Agreement of Trust (name change for Growth & Income,
International, World-Bond Debenture and Alpha Series) dated May 19, 1999. Incorporated by reference to Post-Effective
Amendment No. 59 to the Registrant’s Registration Statement on Form N-1A
filed on June 20, 2008.
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|
|
|
|
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xii.
|
Amendment
to Declaration and Agreement of Trust (new series, Lord Abbett Micro-Cap
Value Fund and Lord Abbett Micro-Cap Growth Fund) dated January 20, 2000. Incorporated by reference to Post-Effective
Amendment No. 59 to the Registrant’s Registration Statement on Form N-1A
filed on June 20, 2008.
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|
|
|
|
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xiii.
|
Amendment
to Declaration and Agreement of Trust (Section 2.7) dated April 20, 2004. Incorporated by reference to Post-Effective
Amendment No. 59 to the Registrant’s Registration Statement on Form N-1A
filed on June 20, 2008.
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|
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|
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|
xiv.
|
Amendment
to Declaration and Agreement of Trust (Alpha Series name change) dated June
23, 2005. Incorporated
by reference to Post-Effective Amendment No. 59 to the Registrant’s
Registration Statement on Form N-1A filed on June 20, 2008.
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xv.
|
Amendment
to Declaration and Agreement of Trust (Lord Abbett All Value Fund name
change) dated June 4, 2009. Incorporated by reference to Post-Effective Amendment No. 61 to the
Registrant’s Registration Statement on Form N-1A filed on December 29, 2009.
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|
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xvi.
|
Amendment
to Declaration and Agreement of Trust (new series Lord Abbett Growth Leaders
Fund) dated March 10, 2011. Incorporated by reference to Post-Effective
Amendment No. 65 to the Registrant’s Registration Statement on Form N-1A
filed on March 18, 2011.
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xvii.
|
Amendment to Declaration and Agreement of Trust (Growth
Leaders Fund adding Class B shares) dated September 13, 2012. Filed herein.
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(b)
|
By-Laws
. Amended and Restated By-laws (4/20/2004) incorporated by reference
to Post-Effective Amendment No. 45 to the Registrant’s Registration Statement
on Form N-1A filed on August 19, 2004.
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(c)
|
Instruments Defining Rights of Security Holders
. Not applicable.
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(d)
|
Investment Advisory Contracts
.
Management Agreement incorporated by reference to Post-Effective Amendment
No. 38 to the Registrant’s Registration Statement on Form N-1A filed on
December 26, 2002.
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|
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i.
|
Addendum to the Management
Agreement (Lord Abbett Large-Cap Value Fund – dated June 30, 2003)
incorporated by reference to Post-Effective Amendment No. 45 to the
Registrant’s Registration Statement on Form N-1A filed on August 19, 2004.
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ii.
|
Addendum to the Management
Agreement (Lord Abbett International Core Equity Fund – dated December 1,
2003). Incorporated by reference to Post-Effective Amendment No. 43 to the
Registrant’s Registration Statement on Form N-1A filed on December 12, 2003.
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|
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iii.
|
Addendum to the Management
Agreement (Alpha Series) effective March 1, 2004. Incorporated by reference
to Post-Effective Amendment No. 45 to the Registrant’s Registration Statement
on Form N-1A filed on August 19, 2004.
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|
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iv.
|
Addendum to the Management
Agreement (Lord Abbett International Opportunities Fund) dated November 1,
2005. Incorporated by reference to Post-Effective Amendment No. 51 to the Registrant’s
Registration Statement on Form N-1A filed on February 28, 2006.
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|
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v.
|
Addendum to the Management
Agreement (Lord Abbett Value Opportunities Fund) dated December 20, 2005.
Incorporated by reference to Post-Effective Amendment No. 51 to the
Registrant’s Registration Statement on Form N-1A filed on February 28, 2006.
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|
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vi.
|
Addendum to the Management
Agreement (Lord Abbett International Dividend Income Fund) dated June 20,
2008. Incorporated by reference to Post-Effective Amendment No. 59 to the
Registrant’s Registration Statement on Form N-1A filed on June 20, 2008.
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|
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vii.
|
Addendum to the Management
Agreement (Lord Abbett Growth Leaders Fund) dated June 15, 2011. Incorporated
by reference to Post-Effective Amendment No. 66 to the Registrant’s
Registration Statement on Form N-1A filed on June 14, 2011.
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|
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viii.
|
Management Fee Waiver and
Expense Limitation Agreement (Lord Abbett Growth Leaders Fund) effective June
15, 2011. Incorporated by reference to Post-Effective Amendment No. 66 to the
Registrant’s Registration Statement of Form N-1A filed on June 14, 2011.
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ix.
|
Management Fee Waiver
(Alpha Strategy Fund) effective March 1, 2012. Incorporated by reference to
Post-Effective Amendment No. 68 to the Registrant’s Registration Statement of
Form N-1A filed on February 27, 2012.
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x.
|
Management Fee Waiver and
Expense Limitation Agreement (Lord Abbett International Core Equity Fund,
Lord Abbett International Dividend Income Fund, Lord Abbett Micro Cap Growth
Fund, and Lord Abbett Micro Cap Value Fund) effective March 1, 2012.
Incorporated by reference to Post-Effective Amendment No. 68 to the
Registrant’s Registration Statement of Form N-1A filed on February 27, 2012.
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xi.
|
Form of Management Fee Waiver and Expense Limitation Agreement
(Lord Abbett Growth Leaders Fund) effective [November 28, 2012]. Filed
herein.
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(e)
|
Underwriting Contracts
. Distribution Agreement incorporated by
reference to Post-Effective Amendment No. 34 to the Registrant’s Registration
Statement on Form N-1A filed on March 1, 2001.
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(f)
|
Bonus or Profit Sharing Contracts
. Equity Based Plans for Non-Interested
Person Directors and Trustees of Lord Abbett Funds. Incorporated by reference
to Post-Effective Amendment No. 34 to the Registrant’s Registration Statement
on Form N-1A filed on March 1, 2001.
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(g)
|
Custodian Agreement.
Custodian Agreement dated November 1, 2001
and updated Exhibit A dated as of December 15, 2011. Incorporated by
reference to Post-Effective Amendment No. 68 to the Registrant’s Registration
Statement of Form N-1A filed on February 27, 2012.
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(h)
|
Other Material Contracts
.
|
|
|
|
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|
|
i.
|
Agency
Agreement dated as of April 30, 2010, including amended Schedule A dated as
of December 15, 2011. Incorporated
by reference to Post-Effective Amendment No. 68 to the Registrant’s
Registration Statement of Form N-1A filed on February 27, 2012.
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|
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ii.
|
Amendment
to the Agency Agreement dated April 30, 2010 (amended March 15, 2011). Incorporated by reference to Post-Effective
Amendment No. 68 to the Registrant’s Registration Statement of Form N-1A
filed on February 27, 2012.
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|
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iii.
|
Administrative Services
Agreement dated December 12, 2002 (including amendments #1-13). Incorporated
by reference to Post-Effective Amendment No. 60 to the Registrant’s
Registration Statement on Form N-1A filed on February 27, 2009.
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|
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iv.
|
Amendment #14 to the
Administrative Services Agreement dated May 1, 2010. Incorporated by
reference to Post Amendment No. 63 to the Registration Statement on Form N-1A
filed on February 24, 2011.
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|
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v.
|
Amendment #15 to the
Administrative Services Agreement dated October 26, 2010. Incorporated
by reference to Post Amendment No. 63 to the Registration Statement on Form
N-1A filed on February 24, 2011.
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|
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vi.
|
Amendment #16 to
Administrative Services Agreement dated as of November 19, 2010.
Incorporated by reference to Post Amendment No. 63 to the Registration
Statement on Form N-1A filed on February 24, 2011.
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|
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vii.
|
Amendment #17 to
Administrative Services Agreement dated as of April 20, 2011. Incorporated by
reference to Post Amendment No. 66 to the Registration Statement on Form N-1A
filed on June 14, 2011.
|
|
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|
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viii.
|
Amendment #18 to
Administrative Services Agreement dated as of June 15, 2011. Incorporated by
reference to Post Amendment No. 66 to the Registration Statement on Form N-1A
filed on June 14, 2011.
|
|
|
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ix.
|
Amendment #19 to
Administrative Services Agreement dated as of December 15, 2011. Incorporated
by reference to Post-Effective Amendment No. 68 to the Registrant’s
Registration Statement of Form N-1A filed on February 27, 2012.
|
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|
(i)
|
Legal Opinion
.
Opinion of Wilmer Cutler Pickering Hale and Dorr LLP. To be filed.
|
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|
(j)
|
Other Opinion.
To be filed.
|
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(i)
|
Omitted Financial Statements
.
Not
applicable.
|
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(j)
|
Initial Capital Agreements
. Not applicable.
|
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|
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(k)
|
Rule 12b-1
Plan
.
|
|
|
|
|
|
|
i.
|
Amended and Restated Joint Rule 12b-1 Distribution Plan and
Agreement for Lord Abbett Family of Funds dated August 10, 2007 with updated
Schedule A dated as of June 15, 2012 and Schedule B dated as of June 15,
2012. Filed herein.
|
|
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|
|
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|
ii.
|
Form of updated Schedule A dated as of [November 28, 2012]
to Amended and Restated Joint Rule 12b-1 Distribution Plan and Agreement for
Lord Abbett Family of Funds dated August 10, 2007. Filed herein.
|
|
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|
|
|
(l)
|
Rule 18f-3 Plan
.
|
|
|
|
|
|
|
i.
|
Amended and Restated Rule 18f-3 Plan dated as of July 1,
2008 pursuant to Rule 18f-3(d) under the Investment Company Act of 1940 with
updated Schedule A dated as of June 15, 2012.
Filed herein.
|
|
|
|
|
|
|
ii.
|
Form of updated Schedule A dated as of [November 28, 2012]
to Amended and Restated Rule 18f-3 Plan dated as of July 1, 2008. Filed
herein.
|
|
|
|
|
|
(m)
|
[Reserved].
|
|
|
|
|
|
(n)
|
Code of
Ethics dated as of January 26, 2012.
Incorporated by reference to Post-Effective
Amendment No. 68 to the Registrant’s Registration Statement of Form N-1A
filed February 27, 2012.
|
|
|
|
|
Item 29.
|
Persons Controlled
by or Under Common Control with the Fund.
|
|
|
|
|
|
None.
|
|
|
|
|
Item 30.
|
Indemnification.
|
|
|
|
|
|
The Registrant is a Delaware statutory trust established under
Chapter 38 of Title 12 of the Delaware Code. The Registrant’s Declaration and
Agreement of Trust at Section 4.3 relating to indemnification of trustees,
officers, etc. states the following:
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|
The Trust shall indemnify each of its Trustees, officers, employees
and agents (including any individual who serves at its request as director,
officer, partner, trustee or the like of another organization in which it has
any interest as a shareholder, creditor or otherwise) against all liabilities
and expenses, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and counsel fees
reasonably incurred by him or her in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or legislative body in which he
or she may be or may have been involved as a party or otherwise or with which
he or she may be or may have been threatened, while acting as Trustee or as
an officer, employee or agent of the Trust or the Trustees, as the case may
be, or thereafter, by reason of his or her being or having been such a
Trustee, officer, employee or agent,
except
with respect to any matter
as to which he or she shall have been adjudicated not to have acted in good
faith in the reasonable belief that his or her action was in the best
interests of the Trust or any Series thereof. Notwithstanding anything herein
to the contrary, if any matter which is the subject of indemnification
hereunder relates only to one Series (or to more than one but not all of the
Series of the Trust), then the indemnity shall be paid only out of the assets
of the affected Series. No individual shall be indemnified hereunder against
any liability to the Trust or any Series thereof or the Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office. In
addition, no such indemnity shall be provided with respect to any matter
disposed of by settlement or a compromise payment by such Trustee, officer,
employee or agent, pursuant to a consent decree or otherwise, either for said
payment or for any other expenses unless there has been a determination that
such compromise is in the best interests of the Trust or, if appropriate, of
any affected Series thereof and that such Person appears to have acted in
good faith in the reasonable belief that his or her action was in the best
interests of the Trust or, if appropriate, of any affected Series thereof,
and did not engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her
office. All determinations that the applicable standards of conduct have been
met for indemnification hereunder shall be made by (a) a majority vote of a
quorum consisting of disinterested Trustees who are not parties to the
proceeding relating to indemnification, or (b) if such a quorum is not
obtainable or, even if obtainable, if a majority vote of such quorum so
directs, by independent legal counsel in a written opinion, or (c) a vote of
Shareholders (excluding Shares owned of record or beneficially by such
individual). In addition, unless a matter is disposed of with a court
determination (i) on the merits that such Trustee, officer, employee or agent
was not liable or (ii) that such Person was not guilty of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office, no indemnification shall be
provided hereunder unless there has been a determination by independent legal
counsel in a written opinion that such Person did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.
|
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|
|
|
|
The Trustees may make advance payments out of the assets of the Trust
or, if appropriate, of the affected Series in connection with the expense of
defending any action with respect to which indemnification might be sought
under this Section 4.3. The indemnified Trustee, officer, employee or agent
shall give a written undertaking to reimburse the Trust or the Series in the
event it is subsequently determined that he or she is not entitled to such
indemnification and (a)
|
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|
|
the indemnified Trustee, officer, employee or agent shall provide
security for his or her undertaking, (b) the Trust shall be insured against
losses arising by reason of lawful advances, or (c) a majority of a
quorum of disinterested Trustees or an independent legal counsel in a written
opinion shall determine, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is reason to believe that
the indemnitee ultimately will be found entitled to indemnification. The
rights accruing to any Trustee, officer, employee or agent under these
provisions shall not exclude any other right to which he or she may be
lawfully entitled and shall inure to the benefit of his or her heirs, executors,
administrators or other legal representatives.
|
|
|
|
|
|
Insofar as indemnification for liability arising under the Securities
Act of 1933 (the “Act”) may be permitted to trustees, officers, and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expense incurred or paid by a trustee, officer,
or controlling person of the Registrant in the successful defense of any
action, suit, or proceeding) is asserted by such trustee, officer, or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
|
|
|
|
|
|
In addition, the Registrant maintains a trustees’ and officers’
errors and omissions liability insurance policy protecting trustees and
officers against liability for breach of duty, negligent act, error or
omission committed in their capacity as trustees or officers. The policy
contains certain exclusions, among which is exclusion from coverage for active
or deliberate dishonest or fraudulent acts and exclusion for fines or
penalties imposed by law or other matters deemed uninsurable.
|
|
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|
|
Item 31.
|
Business and Other
Connections of the Investment Adviser.
|
|
|
|
|
|
Adviser – Lord, Abbett & Co. LLC
|
|
|
|
|
|
Lord, Abbett & Co. LLC is the investment adviser of the
Registrant and provides investment management services to the Lord Abbett
Family of Funds and to various pension plans, institutions and individuals.
Lord Abbett Distributor LLC, a limited liability company, serves as its
distributor and principal underwriter.
|
|
|
|
|
|
Set forth below is information relating to the business, profession,
vocation or employment of a substantial nature that each partner of the
adviser, is or has been engaged in within the last two fiscal years for
his/her own account in the capacity of director, officer, employee, partner
or trustee of Lord Abbett. The principal business address of each partner is
c/o Lord, Abbett & Co. LLC, 90 Hudson Street, Jersey City, NJ 07302-3973.
|
|
|
|
|
|
None.
|
|
|
|
|
Item 32.
|
Principal
Underwriters.
|
|
|
|
|
|
Lord Abbett Distributor LLC serves as principal underwriter for the
Registrant. Lord Abbett Distributor LLC also serves as principal underwriter
for the following registered open-end investment companies sponsored by Lord,
Abbett & Co. LLC:
|
|
|
|
|
|
|
|
|
(a)
|
Lord Abbett Affiliated Fund, Inc.
|
|
|
|
|
|
Lord Abbett
Bond-Debenture Fund, Inc.
|
|
|
Lord Abbett
Developing Growth Fund, Inc.
|
|
|
Lord Abbett
Equity Trust
|
|
|
Lord Abbett
Global Fund, Inc.
|
|
|
Lord Abbett
Investment Trust
|
|
|
Lord Abbett
Mid Cap Stock Fund, Inc.
|
|
|
Lord Abbett
Municipal Income Fund, Inc.
|
|
|
Lord Abbett
Research Fund, Inc.
|
|
|
Lord Abbett
Series Fund, Inc.
|
|
|
Lord Abbett
Stock Appreciation Fund
|
|
|
Lord Abbett
U.S. Government & Government Sponsored Enterprises
|
|
|
Money
Market Fund, Inc.
|
|
|
|
|
|
|
|
|
|
|
(b)
|
Lord Abbett
Distributor LLC is a wholly owned subsidiary of Lord, Abbett & Co. LLC.
The principal officers of Lord Abbett Distributor LLC are:
|
|
|
|
|
|
|
|
Name and
Principal
Business Address
*
|
|
Positions
and Offices with
Lord Abbett Distributor LLC
|
|
Positions
and Offices
with the Registrant
|
|
|
|
|
|
|
|
Robert S.
Dow
|
|
Chief
Executive Officer
|
|
Chairman and
Chief Executive Officer
|
|
|
|
|
|
|
|
Lawrence H.
Kaplan
|
|
General
Counsel
|
|
Vice
President and Secretary
|
|
|
|
|
|
|
|
Lynn M.
Gargano
|
|
Chief
Financial Officer
|
|
None
|
|
|
|
|
|
|
|
James W.
Bernaiche
|
|
Chief
Compliance Officer
|
|
Chief
Compliance Officer
|
|
|
|
|
|
|
|
|
|
* Each Officer has a principal business address of: 90 Hudson Street,
Jersey City, New Jersey 07302
|
|
|
|
|
Item 33.
|
Location of
Accounts and Records.
|
|
|
|
|
|
Registrant maintains the records required by Rules 31a-1(a) and (b)
and 31a-2(a) under the Investment Company Act of 1940, as amended (the “1940
Act”), at its main office.
|
|
|
|
|
|
Lord, Abbett & Co. LLC maintains the records required by Rules
31a-1(f) and 31a-2(e) under the 1940 Act at its main office.
|
|
|
|
|
|
Certain records such as cancelled stock certificates and
correspondence may be physically maintained at the main office of
Registrant’s Transfer Agent, Custodian, or Shareholder Servicing Agent within
the requirements of Rule 31a-3 under the 1940 Act.
|
|
|
|
|
Item 34.
|
Management
Services.
|
|
|
|
|
|
None.
|
|
|
|
|
Item 35.
|
Undertakings.
|
|
|
|
|
|
None.
|
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant has duly
caused this Registration Statement under Rule to be signed on its behalf by the
undersigned, duly authorized, in the City of Jersey City, and State of New
Jersey on the 21
st
day of September, 2012.
|
|
|
|
|
|
|
|
LORD ABBETT SECURITIES TRUST
|
|
|
|
|
|
|
|
BY:
|
/s/ Thomas
R. Phillips
|
|
|
|
|
|
|
|
|
|
Thomas R.
Phillips
|
|
|
|
|
Vice
President and Assistant Secretary
|
|
|
|
|
|
|
|
BY:
|
/s/ Joan A.
Binstock
|
|
|
|
|
|
|
|
|
|
Joan A.
Binstock
|
|
|
|
Chief
Financial Officer and Vice President
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Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
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Signatures
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Title
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Date
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Robert S.
Dow*
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Chairman, Chief
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September 21, 2012
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Robert S.
Dow
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Executive Officer and Trustee
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Daria L. Foster*
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President and Trustee
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September 21, 2012
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Daria L. Foster
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E. Thayer
Bigelow*
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Trustee
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September 21, 2012
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E. Thayer
Bigelow
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Robert B.
Calhoun, Jr.*
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Trustee
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September 21, 2012
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Robert B.
Calhoun, Jr.
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Evelyn E.
Guernsey*
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Trustee
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September 21, 2012
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Evelyn E.
Guernsey
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Julie A.
Hill*
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Trustee
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September 21, 2012
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Julie A.
Hill
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Franklin W.
Hobbs*
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Trustee
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September 21, 2012
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Franklin W.
Hobbs
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Thomas J.
Neff*
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Trustee
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September 21, 2012
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Thomas J.
Neff
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James L.L. Tullis*
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Trustee
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September 21, 2012
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James L.L. Tullis
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*BY:
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/s/ Thomas
R. Phillips
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Thomas R.
Phillips
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Attorney-in-Fact*
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POWER OF ATTORNEY
Each person
whose signature appears below on this Registration Statement hereby constitutes
and appoints Lawrence H. Kaplan, Lawrence B. Stoller, John K. Forst, and Thomas
R. Phillips, each of them, with full power to act without the other, his or her
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities (until revoked in writing) to sign any and all Registration
Statements of each Fund enumerated on Exhibit A hereto for which such person
serves as a Director/Trustee (including Registration Statements on Forms N-1A
and N-14 and any amendments thereto), and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to
the requirements of the Securities Act of 1933, this Registration Statement has
been signed below by the following persons in the capacities and on the dates
indicated.
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Signatures
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Title
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Date
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/s/ Robert S. Dow
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Chairman, CEO
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April 19, 2012
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Robert S. Dow
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and Director/Trustee
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/s/ Daria L. Foster
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President and
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April 19, 2012
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Daria L. Foster
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Director/Trustee
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/s/ E. Thayer Bigelow
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Director/Trustee
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April 19, 2012
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E. Thayer Bigelow
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/s/ Robert B. Calhoun, Jr.
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Director/Trustee
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April 19, 2012
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Robert B. Calhoun, Jr.
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/s/ Evelyn E. Guernsey
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Director/Trustee
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April 19, 2012
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Evelyn E. Guernsey
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/s/ Julie A. Hill
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Director/Trustee
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April 19, 2012
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Julie A. Hill
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/s/ Franklin W. Hobbs
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Director/Trustee
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April 19, 2012
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Franklin W. Hobbs
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/s/ Thomas J. Neff
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Director/Trustee
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April 19, 2012
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Thomas J. Neff
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/s/ James L.L. Tullis
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Director/Trustee
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April 19, 2012
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James L.L. Tullis
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EXHIBIT A
Lord Abbett Affiliated Fund, Inc.
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Equity Trust
Lord Abbett Global Fund, Inc.
Lord Abbett Investment Trust
Lord Abbett Mid Cap Stock Fund, Inc.
Lord Abbett Municipal Income Fund, Inc.
Lord Abbett Research Fund, Inc.
Lord Abbett Securities Trust
Lord Abbett Series Fund, Inc.
Lord Abbett Stock Appreciation Fund
Lord Abbett U.S. Government & Government Sponsored Enterprises
Money Market Fund, Inc.
