1933 Act File No. 33-58846
1940 Act File No. 811-7538
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 38 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [X]
OF 1940
Amendment No. 38 [X]
|
Registrant's Telephone Number (201) 395-2000
It is proposed that this filing will become effective (check appropriate box)
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
----- previously filed post-effective amendment.
[LORD ABBETT LOGO]
MARCH 1, 2003
PROSPECTUS
LORD ABBETT
ALL VALUE FUND
INTERNATIONAL FUND
ALPHA FUND
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
CLASS P SHARES OF THE INTERNATIONAL FUND ARE CURRENTLY OFFERED BY THIS PROSPECTUS. CLASS P SHARES OF THE ALL VALUE FUND AND ALPHA FUND ARE NEITHER OFFERED TO THE GENERAL PUBLIC NOR AVAILABLE IN ALL STATES.
PLEASE CALL 800-821-5129 FOR FURTHER INFORMATION.
TABLE OF CONTENTS
PAGE
The Funds
Information about the goal, All Value Fund 2
principal strategy, main risks, International Fund 6
performance, fees and expenses Alpha Fund 10
Additional Investment Information 14
Management 15
Your Investment
Information for managing Purchases 17
your Fund account Sales Compensation 21
Opening Your Account 22
Redemptions 23
Distributions and Taxes 23
Services For Fund Investors 24
Financial Information
Financial highlights All Value Fund 26
International Fund 28
Alpha Fund 30
Additional Information
How to learn more about the Funds
and other Lord Abbett Funds Back Cover
|
ALL VALUE FUND
THE FUNDS
GOAL
The Fund's investment objective is long-term growth of capital and income without excessive fluctuations in market value.
PRINCIPAL STRATEGY
To pursue this goal, the Fund primarily purchases equity securities of U.S. and multinational companies that we believe are undervalued in all market capitalization ranges. Under normal circumstances, the Fund will invest at least 50% of its net assets in equity securities of large, seasoned companies with market capitalizations of at least $5 billion at the time of purchase. This market capitalization threshold may vary in response to changes in the markets. The Fund will invest the remainder of its assets in mid-sized and small company securities. Equity securities may include common stocks, preferred stocks, convertible securities, warrants, and similar instruments. Common stocks, the most familiar type of equity security, represent an ownership interest in a company.
In selecting investments, the Fund attempts to invest in securities selling at reasonable prices in relation to our assessment of their potential value. While there is the risk that an investment may never reach what we think is its full value, or may go down in value, our emphasis on large, seasoned company value stocks may limit the Fund's downside risk. This is because value stocks are believed to be underpriced, and large, seasoned company stocks tend to be issued by more established companies and less volatile than mid-sized or small company stocks. Although smaller companies may present greater risks than larger companies as outlined below, they also may present higher potential for attractive long-term returns.
We generally sell a stock when we think it is no longer a bargain, seems less likely to benefit from the current market and economic environment, shows deteriorating fundamentals, or falls short of our expectations.
MAIN RISKS
The Fund is subject to the general risks and considerations associated with equity investing, as well as the particular risks associated with value stocks. The value of your investment will fluctuate in response to movements in the stock market in general and to the changing prospects of individual companies in which the Fund invests. Large value stocks may perform differently than the market as a whole and other types of stocks, such as mid-sized or small-company stocks and growth stocks. This is because different types of stocks tend to shift in and out of favor depending on market and economic conditions. The market may fail to recognize the intrinsic value of particular value stocks for a long time. In addition, if the Fund's assessment of a company's value or prospects for exceeding earnings expectations or market conditions is wrong, the Fund could suffer losses or produce poor performance relative to other funds, even in a rising market.
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
[SIDENOTE]
WE OR THE FUND OR THE ALL VALUE FUND refers to Lord Abbett All Value Fund, a portfolio or series of Lord Abbett Securities Trust (the "Trust").
ABOUT THE FUND. The Fund is a professionally managed portfolio primarily holding securities purchased with the pooled money of investors. It strives to reach its stated goal; although, as with all mutual funds, it cannot guarantee results.
VALUE STOCKS are stocks of companies that we believe the market undervalues according to certain financial measurements of their intrinsic worth or business prospects.
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.
An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund is not a complete investment program and may not be appropriate for all investors. You could lose money by investing in the Fund.
ALL VALUE FUND
PERFORMANCE
The bar chart and table below provide some indication of the risks of investing in the Fund by illustrating the variability of the Fund's returns. Each assumes reinvestment of dividends and distributions. The Fund's past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future.
The bar chart shows changes in the performance of the Fund's Class C shares from calendar year to calendar year. This chart does not reflect the sales charges applicable to Class C shares. If the sales charges were reflected, returns would be less.
[CHART]
95 32.3% 96 18.3% 97 26.6% 98 14.6% 99 19.6% 00 8.5% 01 -4.7% 02 |
BEST QUARTER 4th Q '98 +18.4% WORST QUARTER 3rd Q '98 -11.3% -------------------------------------------------------------------------------- |
The table below shows how the average annual total returns of the Fund's Class A, B, C, and P shares compare to those of a broad-based securities market index and a more narrowly based index that more closely reflects the market sectors in which the Fund invests. The Fund's returns reflect payment of the maximum applicable front-end or deferred sales charges.
The after-tax returns for Class C shares included in the table below are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns for Class A, Class B and Class P shares are not shown in the table and will vary from those shown for Class C shares.
SHARE CLASS 1 YEAR 5 YEARS LIFE OF FUND(1)
Class A shares % % %
-----------------------------------------------------------------------------------------------------
Class B shares % % %
-----------------------------------------------------------------------------------------------------
Class C shares
-----------------------------------------------------------------------------------------------------
Return Before Taxes % % %
-----------------------------------------------------------------------------------------------------
Return After Taxes on Distributions % % %
-----------------------------------------------------------------------------------------------------
Return After Taxes on Distributions
and Sale of Fund Shares % % %
-----------------------------------------------------------------------------------------------------
Class P shares %
-----------------------------------------------------------------------------------------------------
S&P 500/Barra Value Index(2)
(reflects no deduction for fees, expenses or taxes) % % %(3)
%(4)
%(5)
%(6)
-----------------------------------------------------------------------------------------------------
Russell 3000 Value Index(2)
(reflects no deduction for fees, expenses or taxes) % % %(3)
%(4)
%(5)
%(6)
-----------------------------------------------------------------------------------------------------
|
(1) The date each class was first offered to the public is: A - 7/15/96; B -
6/5/97; C - 1/3/94; and P - 8/15/01.
(2) The performance of the unmanaged indices is not necessarily representative
of the Fund's performance.
(3) Represents total return for the period 7/31/96 - 12/31/02, to correspond
with Class A period shown.
(4) Represents total return for the period 5/31/97 - 12/31/02, to correspond
with Class B period shown.
(5) Represents total return for the period 12/31/93 - 12/31/02, to correspond
with Class C period shown.
(6) Represents total return for the period 8/31/01 - 12/31/02, to correspond
with Class P period shown.
[SIDENOTE]
ALL VALUE FUND
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
CLASS A CLASS B(1) CLASS C CLASS P
SHAREHOLDER FEES (Fees paid directly from your investment)
---------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
(as a % of offering price) 5.75% none none none
---------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (See "Purchases")(2) none(3) 5.00% 1.00%(4) none
---------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
((Expenses deducted from Fund assets)
(as a % of average net assets)
---------------------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.71% 0.71% 0.71% 0.71%
---------------------------------------------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees(5) 0.39%(6) 1.00% 1.00%(6) 0.45%
---------------------------------------------------------------------------------------------------------------------
Other Expenses(6) 0.36% 0.36% 0.36% 0.36%
---------------------------------------------------------------------------------------------------------------------
Total Operating Expenses(6) 1.46% 2.07% 2.07% 1.52%
---------------------------------------------------------------------------------------------------------------------
|
(1) Class B shares will convert to Class A shares on the eighth anniversary of
your original purchase of Class B shares.
(2) The maximum contingent deferred sales charge ("CDSC") is a percentage of
the lesser of the net asset value at the time of the redemption or the net
asset value when the shares were originally purchased.
(3) A CDSC of 1.00% may be assessed on certain redemptions of Class A shares
made within 24 months following any purchases made without a sales charge.
(4) A CDSC of 1.00% may be assessed on Class C shares if they are redeemed
before the first anniversary of their purchase.
(5) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
(6) These amounts have been restated from fiscal year amounts to reflect an estimate of current fees.
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. This example, like that in other funds' prospectuses, assumes that you invest $10,000 in the Fund at 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 are reinvested, and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs (including any applicable contingent deferred sales charges) would be:
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A shares $ 715 $ 1,010 $ 1,327 $ 2,221 ------------------------------------------------------------------------------------------------------------ Class B shares $ 710 $ 949 $ 1,314 $ 2,244 ------------------------------------------------------------------------------------------------------------ Class C shares $ 310 $ 649 $ 1,114 $ 2,400 ------------------------------------------------------------------------------------------------------------ Class P shares $ 155 $ 480 $ 829 $ 1,813 ------------------------------------------------------------------------------------------------------------ You would pay the following expenses if you did not redeem your shares: Class A shares $ 715 $ 1,010 $ 1,327 $ 2,221 ------------------------------------------------------------------------------------------------------------ Class B shares $ 210 $ 649 $ 1,114 $ 2,244 ------------------------------------------------------------------------------------------------------------ Class C shares $ 210 $ 649 $ 1,114 $ 2,400 ------------------------------------------------------------------------------------------------------------ Class P shares $ 155 $ 480 $ 829 $ 1,813 ------------------------------------------------------------------------------------------------------------ |
[SIDENOTE]
MANAGEMENT FEES are payable to Lord, Abbett & Co. LLC ("Lord Abbett") for the Fund's investment management.
12b-1 FEES refer to fees incurred for activities that are primarily intended to result in the sale of Fund shares and service fees for shareholder account service and maintenance.
OTHER EXPENSES include fees paid for miscellaneous items such as shareholder services, professional services, administrative services provided by Lord Abbett, and fees to certain Financial Intermediaries for providing recordkeeping or other administrative services in connection with investments in the Fund.
INTERNATIONAL FUND
GOAL
The Fund's investment objective is long-term capital appreciation.
PRINCIPAL STRATEGY
To pursue this goal, the Fund primarily invests in stocks of companies principally based outside the United States. Under normal circumstances, the Fund will invest at least 80% of its net assets in stocks of companies headquartered in at least three different countries outside the United States. The Fund normally intends to invest at least 65% of its net assets in equity securities of small companies, those with market capitalizations of less than $2.5 billion. The Fund may invest its remaining assets in equity securities of larger companies. This market capitalization threshold may vary in response to changes in the markets. Equity securities may include common stocks, preferred stocks, convertible securities, warrants, and similar instruments. Common stocks, the most familiar type of equity securities, represents an ownership interest in a company.
In selecting investments for the Fund, we look for:
- developing global trends to identify industries that will produce
above-trend sales growth,
- companies we see as having the best potential for sales and profit
growth, and
- companies whose shares are attractively valued.
MAIN RISKS
The Fund is subject to the general risks and considerations associated with equity investing. The value of your investment will fluctuate in response to movements in the stock market in general and to the changing prospects of individual companies in which the Fund invests. Although some of the companies in which the Fund may invest may exhibit earnings and revenue growth above the market trend, the stocks of these companies may be more volatile and may drop in value if earnings and revenue growth do not meet expectations. In addition, the Fund is subject to the risks of investing in foreign securities and in the securities of small companies.
Investing in small companies generally involves greater risks than investing in the stocks of large companies. 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. 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 small-company stocks, subjecting them to greater price fluctuations than larger companies.
Foreign securities may pose greater risks than domestic securities. Foreign markets and the securities traded in them may not be subject to the same degree of regulation as U.S. markets. Securities clearance, settlement procedures and trading practices may be different, and transaction costs may be higher in foreign countries. There may be less trading volume and liquidity in foreign markets, subjecting the securities traded in them to greater price fluctuations. Foreign investments also may be affected by changes in currency rates or currency controls. With respect to certain foreign countries, there is a possibility of nationalization, expropriation or confiscatory taxation, imposition of withholding or other taxes, and political or social instability that could affect investments in those countries.
Investing in foreign companies generally involves some degree of information risk. That means that key information about an issuer, security or market may be inaccurate or unavailable.
[SIDENOTE]
WE OR THE FUND OR INTERNATIONAL FUND refers to International Series, a portfolio or series of the Trust.
ABOUT THE FUND. The Fund is a professionally managed portfolio primarily holding securities purchased with the pooled money of investors. It strives to reach its stated goal; although, as with all mutual funds, it cannot guarantee results.
An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund is not a complete investment program and may not be appropriate for all investors. You could lose money by investing in the Fund.
INTERNATIONAL FUND
PERFORMANCE
The bar chart and table below provide some indication of the risks of investing in the Fund by illustrating the variability of the Fund's returns. Each assumes reinvestment of dividends and distributions. The Fund's past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares from calendar year to calendar year. This chart does not reflect the sales charges applicable to Class A shares. If the sales charges were reflected, returns would be less.
[CHART]
97 19.7% 98 15.5% 99 27.3% 00 -23.6% 01 -31.3% 02 |
BEST QUARTER 1st Q '98 +23.7% WORST QUARTER 4th Q '00 -23.3% -------------------------------------------------------------------------------- |
The table below shows how the average annual total returns of the Fund's Class A, B, C, and P shares compare to those of a broad-based securities market index. The Fund's returns reflect payment of the maximum applicable front-end or deferred sales charges.
The after-tax returns for Class A shares included in the table below are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns for Class B, Class C and Class P shares are not shown in the table and will vary from those shown for Class A shares.
SHARE CLASS 1 YEAR 5 YEARS LIFE OF FUND(1) Class A shares ------------------------------------------------------------------------------------------------ Return Before Taxes % % % ------------------------------------------------------------------------------------------------ Return After Taxes on Distributions % % % ------------------------------------------------------------------------------------------------ Return After Taxes on Distributions and Sale of Fund Shares % % % ------------------------------------------------------------------------------------------------ Class B shares % % ------------------------------------------------------------------------------------------------ Class C shares % % ------------------------------------------------------------------------------------------------ Class P shares % % ------------------------------------------------------------------------------------------------ Salomon Smith Barney Small Cap % % %(3) World ex-US Index(4) %(4) (reflects no deduction for fees, expenses or taxes) %(5) ------------------------------------------------------------------------------------------------ |
(1) The date each class was first offered to the public is: A - 12/13/96; B - 6/2/97; C - 6/2/97 and P - 3/9/99.
(2) The performance of the unmanaged index is not necessarily representative of
the Fund's performance.
(3) Represents total return for the period 12/31/96 - 12/31/02, to correspond
with Class A period shown.
(4) Represents total return for the period 5/31/97 - 12/31/02, to correspond
with Class B and Class C period shown.
(5) Represents total return for the period 2/28/99 - 12/31/02, to correspond
with Class P period shown.
[SIDENOTE]
INTERNATIONAL FUND
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
CLASS A CLASS B(1) CLASS C CLASS P
Shareholder Fees (Fees paid directly from your investment)
---------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
(as a % of offering price) 5.75% none none none
---------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (See "Purchases")(2) none(3) 5.00% 1.00%(4) none
---------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(Expenses deducted from Fund assets)
(as a % of average net assets)
---------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.75% 0.75% 0.75% 0.75%
---------------------------------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees(5) 0.35%(6) 1.00% 1.00% 0.45%
---------------------------------------------------------------------------------------------------------
Other Expenses(6) 0.99% 0.99% 0.99% 0.99%
---------------------------------------------------------------------------------------------------------
Total Operating Expenses(6) 2.09% 2.74% 2.74% 2.19%
---------------------------------------------------------------------------------------------------------
|
(1) Class B shares will convert to Class A shares on the eighth anniversary of
your original purchase of Class B shares.
(2) The maximum contingent deferred sales charge ("CDSC") is a percentage of
the lesser of the net asset value at the time of the redemption or the net
asset value when the shares were originally purchased.
(3) A CDSC of 1.00% may be assessed on certain redemptions of Class A shares
made within 24 months following any purchases made without a sales charge.
(4) A CDSC of 1.00% may be assessed on Class C shares if they are redeemed
before the first anniversary of their purchase.
(5) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
(6) These amounts have been restated from fiscal year amounts to reflect an estimate of current fees.
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. This example, like that in other funds' prospectuses, assumes that you invest $10,000 in the Fund at 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 are reinvested, and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs (including any applicable contingent deferred sales charges) would be:
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A shares $ 775 $ 1,192 $ 1,634 $ 2,857 -------------------------------------------------------------------------------- Class B shares $ 777 $ 1,150 $ 1,650 $ 2,915 -------------------------------------------------------------------------------- Class C shares $ 377 $ 850 $ 1,450 $ 3,070 -------------------------------------------------------------------------------- Class P shares $ 222 $ 685 $ 1,175 $ 2,524 -------------------------------------------------------------------------------- You would pay the following expenses if you did not redeem your shares: Class A shares $ 775 $ 1,192 $ 1,634 $ 2,857 -------------------------------------------------------------------------------- Class B shares $ 277 $ 850 $ 1,450 $ 2,915 -------------------------------------------------------------------------------- Class C shares $ 277 $ 850 $ 1,450 $ 3,070 -------------------------------------------------------------------------------- Class P shares $ 222 $ 685 $ 1,175 $ 2,524 -------------------------------------------------------------------------------- |
[SIDENOTE]
MANAGEMENT FEES are payable to Lord Abbett for the Fund's investment management.
12b-1 FEES refer to fees incurred for activities that are primarily intended to result in the sale of Fund shares and service fees for shareholder account service and maintenance.
OTHER EXPENSES include fees paid for miscellaneous items such as shareholder services, professional services, administrative services provided by Lord Abbett, and fees to certain Financial Intermediaries for providing recordkeeping or other administrative services in connection with investments in the Fund.
ALPHA FUND
GOAL
The Fund's investment objective is long-term capital appreciation.
PRINCIPAL STRATEGY
This Fund is a "fund of funds" -- meaning it invests in other mutual funds rather than directly in portfolio securities like stocks, bonds and money market instruments. To pursue its goal, the Fund uses an asset allocation investment process by investing in three underlying funds managed by Lord Abbett. The underlying funds focus on small companies and international companies. The Fund allocates its assets among the underlying funds by attempting to achieve a balance, over time, between foreign and domestic securities similar to that of the unmanaged Salomon Smith Barney Small-Cap World Index. This Fund is intended for investors who are seeking exposure to the stocks of small U.S. and foreign companies managed in both growth and value styles.
As of the date of this prospectus, the Fund invested the following approximate percentages in the underlying funds: 40% in the International Fund, 30% in the Small- Cap Value Fund and 30% in the Developing Growth Fund. We decide how much to invest in the underlying funds at any particular time. These amounts may change at any time without shareholder approval.
MAIN RISKS
The Fund's investments are concentrated in the underlying funds and, as a result, the Fund's performance is directly related to their performance. The Fund's ability to meet its investment objective depends on the ability of the underlying funds to achieve their investment objectives.
Consequently, the Fund is subject to the particular risks of the underlying funds in the proportion in which the Fund invests in them. The underlying funds are subject to the general risks and considerations associated with equity investing. Their values will fluctuate in response to movements in the stock market in general and to the changing prospects of individual companies in which the underlying fund invests. If an underlying fund's assessment of market conditions or companies held in the fund is wrong, the fund could suffer losses or produce poor performance relative to other funds, even in a rising market. Each underlying fund is subject to the risks of investing in the securities of small companies and in foreign securities. The risks presented by the investment practices of the Small-Cap Value Fund and the Developing Growth Fund are discussed in the "Alpha Fund Underlying Funds" section immediately below. The previous section of this prospectus titled "International Fund" discusses the risks of investing in that underlying fund.
You may invest in the underlying funds directly. By investing in the Fund, you will incur a proportionate share of the expenses of the underlying funds in addition to any expenses of the Fund.
An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. While the Fund offers a greater level of diversification than many other types of mutual funds, it is not a complete investment program and may not be appropriate for all investors. You could lose money by investing in the Fund.
[SIDENOTE]
WE OR THE FUND OR ALPHA FUND refers to the Alpha Series, a portfolio or series of the Trust.
UNDERLYING FUNDS in which the Fund invests are:
- LORD ABBETT DEVELOPING GROWTH Fund, Inc. ("Developing Growth Fund")
- LORD ABBETT SECURITIES TRUST - INTERNATIONAL SERIES ("International Fund") and
- LORD ABBETT RESEARCH FUND, INC. - SMALL-CAP VALUE SERIES ("Small-Cap Value
Fund")
FUND'S VOLATILITY AND BALANCE. The Fund's long-term volatility is expected to approximate that of the unmanaged Salomon Smith Barney Small-Cap World Index. Over time, the Fund intends to approximate the index's balance between foreign and domestic securities by varying its investments in the underlying funds, subject to the Fund's cash flow and desire to avoid excessive capital gains distributions. Past performance and volatility of the index do not indicate future results for the index or the Fund. The Fund may not achieve this level of volatility or balance, or other objective.
ALPHA FUND
ABOUT THE ALPHA FUND'S UNDERLYING FUNDS
The Alpha Fund invests in three Lord Abbett underlying funds: the International Fund, the Small-Cap Value Fund and the Developing Growth Fund. The following is a brief description of the investment objectives and practices of the Small-Cap Value Fund and the Developing Growth Fund. No offer is made in this prospectus of either of these two funds. A full description of the investment objectives and practices of the International Fund may be found in this prospectus under the previous section titled "International Fund."
The Small-Cap Value Fund's investment objective is long-term capital appreciation. Under normal circumstances, this fund invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities of companies with market capitalizations of less than $2 billion at the time of purchase. This market capitalization threshold may vary in response to changes in the markets. The Small-Cap Value Fund invests in securities that we believe are selling at reasonable prices in relation to value.
The Developing Growth Fund's investment objective is long-term capital appreciation. The fund primarily invests in the common stocks of companies with above-average, long-term growth potential. Normally, at least 65% of its net assets are invested in the equity securities of small companies in their developing growth stage.
Both the Small-Cap Value Fund and the Developing Growth Fund use extensive fundamental analysis in an attempt to identify outstanding companies for investment.
Investing in small companies generally involves greater risks than investing in the stocks of large companies. 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. In addition, there may be less liquidity in small-company stocks, subjecting them to greater price fluctuations than larger company stocks.
Each of the Small-Cap Value Fund and the Developing Growth Fund may invest up to 10% of its net assets in foreign securities that are primarily traded outside the United States. Foreign securities may pose greater risks than domestic securities. Foreign markets and the securities traded in them may not be subject to the same degree of regulation as U.S. markets. Securities clearance, settlement procedures and trading practices may be different, and transaction costs may be higher in foreign countries. There may be less trading volume and liquidity in foreign markets, subjecting the securities traded in them to greater price fluctuations. Foreign investments also may be affected by changes in currency rates or currency controls. With respect to certain foreign countries, there is a possibility of nationalization, expropriation or confiscatory taxation, imposition of withholding or other taxes, and political or social instability that could affect investments in the Fund.
ALPHA FUND
PERFORMANCE
The bar chart and table below provide some indication of the risks of investing in the Fund by illustrating the variability of the Fund's returns. Each assumes reinvestment of dividends and distributions. The Fund's past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares from calendar year to calendar year. This chart does not reflect the sales charges applicable to Class A shares. If the sales charges were reflected, returns would be less.
[CHART]
99 24.8% 00 -5.7% 01 -11.5% 02 |
BEST QUARTER 4th Q '99 +18.2% WORST QUARTER 3rd Q '01 -18.6% -------------------------------------------------------------------------------- |
The table below shows how the average annual total returns of the Fund's Class A, B and C shares compare to those of a broad-based securities market index. The Fund's returns reflect payment of the maximum applicable front-end or deferred sales charges.
The after-tax returns for Class A shares included in the table below are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns for Class B and Class C shares are not shown in the table and will vary from those shown for Class A shares.
SHARE CLASS 1 YEAR LIFE OF FUND(1) Class A shares ---------------------------------------------------------------------------------------------- Return Before Taxes % % ---------------------------------------------------------------------------------------------- Return After Taxes on Distributions % % ---------------------------------------------------------------------------------------------- Return After Taxes on Distributions and Sale of Fund Shares % % ---------------------------------------------------------------------------------------------- Class B shares % % ---------------------------------------------------------------------------------------------- Class C shares % % ---------------------------------------------------------------------------------------------- Salomon Smith Barney Small Cap World Index(2) (reflects no deduction for fees, expenses or taxes) % %(3) ---------------------------------------------------------------------------------------------- |
(1) The date all classes were first offered to the public is 3/18/98.
(2) The performance of the unmanaged index is not necessarily representative of
the Fund's performance.
(3) Represents total return for the period 3/31/98 - 12/31/02, to correspond
with the Class A, B, and C periods shown.
[SIDENOTE]
ALPHA FUND
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
CLASS A CLASS B(1) CLASS C CLASS P
SHAREHOLDER FEES (Fees paid directly from your investment)
-------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
(as a % of offering price) 5.75% none none none
-------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (See "Purchases")(2) none(3) 5.00% 1.00%(4) none
-------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(Expenses deducted from Fund assets)
(as a % of average net assets)
-------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.50% 0.50% 0.50% 0.50%
-------------------------------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees(5) 0.36%(6) 1.00% 1.00%(6) 0.45%
-------------------------------------------------------------------------------------------------------
Other Expenses(6) 0.56% 0.56% 0.56% 0.56%
-------------------------------------------------------------------------------------------------------
Total Operating Expenses(6) 1.42% 2.06% 2.06% 1.51%
-------------------------------------------------------------------------------------------------------
|
(1) Class B shares will convert to Class A shares on the eighth anniversary of
your original purchase of Class B shares.
(2) The maximum contingent deferred sales charge ("CDSC") is a percentage of
the lesser of the net asset value at the time of the redemption or the net
asset value when the shares were originally purchased.
(3) A CDSC of 1.00% may be assessed on certain redemptions of Class A shares
made within 24 months following any purchases made without a sales charge.
(4) A CDSC of 1.00% may be assessed on Class C shares if they are redeemed
before the first anniversary of their purchase.
(5) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
(6) These amounts have been restated from fiscal year amounts to reflect an estimate of current fees.
While each Class of shares of the Alpha Fund is expected to operate with the direct total operating expenses shown under the "Fee Table" above, shareholders in the Alpha Fund bear indirectly the Class Y share expenses of the underlying funds in which the Alpha Fund invests. The following chart provides the expense ratio for each of the underlying funds' Class Y shares, as well as the approximate percentage of the Alpha Fund's net assets invested in each underlying fund on October 31, 2002:
UNDERLYING FUNDS' % OF ALPHA FUND
EXPENSE RATIOS NET ASSETS
Developing Growth Fund .85% 30%
--------------------------------------------------------------------------------
Small-Cap Value Fund 1.03% 30%
--------------------------------------------------------------------------------
International Fund 1.69% 40%
--------------------------------------------------------------------------------
100%
---------------
|
Based on these figures, the weighted average Class Y share expense ratio for the underlying funds in which Alpha Fund invests is 1.24% (the "underlying expense ratio"). This figure is only an approximation of the Alpha Fund's underlying expense ratio, since the amount of assets invested in each of the underlying funds changes daily.
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. This example, like that in other funds' prospectuses, assumes that you invest $10,000 in the Fund at 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 are reinvested, and that the Fund's operating expenses remain the same. In addition, the example assumes the Fund pays the operating expenses set forth in the fee table above and the Fund's pro rata share of the Class Y expenses of the underlying funds. Although your actual costs may be higher or lower, based on these assumptions your costs (including any applicable contingent deferred sales charges) would be:
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Class A shares $ 829 $ 1,354 $ 1,904 $ 3,396 -------------------------------------------------------------------------------- Class B shares $ 833 $ 1,315 $ 1,922 $ 3,449 -------------------------------------------------------------------------------- Class C shares $ 433 $ 1,015 $ 1,722 $ 3,595 -------------------------------------------------------------------------------- Class P shares $ 278 $ 853 $ 1,454 $ 3,080 -------------------------------------------------------------------------------- You would pay the following expenses if you did not redeem your shares: Class A shares $ 829 $ 1,354 $ 1,904 $ 3,396 -------------------------------------------------------------------------------- Class B shares $ 333 $ 1,015 $ 1,722 $ 3,449 -------------------------------------------------------------------------------- Class C shares $ 333 $ 1,015 $ 1,722 $ 3,595 -------------------------------------------------------------------------------- Class P shares $ 278 $ 853 $ 1,454 $ 3,080 -------------------------------------------------------------------------------- |
[SIDENOTE]
MANAGEMENT FEES are payable to Lord Abbett for the Fund's investment management.
LORD ABBETT IS CURRENTLY WAIVING ITS MANAGEMENT FEES FOR THE FUND. LORD ABBETT
MAY STOP WAIVING THE MANAGEMENT FEES AT ANY TIME. TOTAL OPERATING EXPENSES LESS
THE MANAGEMENT FEE WAIVER AND EXPENSES ASSUMED BY UNDERLYING FUNDS (SEE BELOW)
ARE 0.36% (CLASS A SHARES), 1.00% (CLASS B AND CLASS C SHARES), AND 0.45% (CLASS
P SHARES).
12b-1 FEES refer to fees incurred for activities that are primarily intended to result in the sale of Fund shares and service fees for shareholder account service and maintenance.
OTHER EXPENSES include fees paid for miscellaneous items such as shareholder services, professional services, administrative services provided by Lord Abbett, and fees to certain Financial Intermediaries for providing recordkeeping or other administrative services in connection with investments in the Fund. The Fund has entered into a servicing arrangement with the underlying funds under which the underlying funds may bear certain of the Fund's Other Expenses. As a result, the Fund does not expect to bear any of these Other Expenses.
ADDITIONAL INVESTMENT INFORMATION
This section describes some investment techniques used by each Fund and some of the risks associated with those techniques. In the case of the Alpha Fund, references to each Fund refers to the underlying Funds.
ADJUSTING INVESTMENT EXPOSURE. Each Fund will be subject to the risks associated with investments. Each Fund may, but is not required to, use various strategies to change its investment exposure to adjust to changes in economic, social, political, and general market conditions, which affect security prices, interest rates, currency exchange rates, commodity prices and other factors. For example, a Fund may seek to hedge against certain market risks. These strategies may involve, with board approval, effecting transactions in derivative and similar instruments, including but not limited to options, futures, forward contracts, swap agreements, warrants, and rights. If we judge market conditions incorrectly or use a hedging strategy that does not correlate well with a Fund's investments, it could result in a loss, even if we intended to lessen risk or enhance returns. These strategies may involve a small investment of cash compared to the magnitude of the risk assumed, and could produce disproportionate gains or losses.
DEPOSITARY RECEIPTS. The Funds may invest in sponsored and unsponsored 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.
EMERGING COUNTRIES RISK. The International Fund may invest in emerging country 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 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.
FOREIGN CURRENCY TRANSACTIONS. The International Fund may, but is not required to, engage in various types of foreign currency exchange transactions to seek to hedge against the risk of loss from changes in currency exchange rates. The Fund may employ a variety of investments and techniques including spot and forward foreign exchange transactions, currency swaps, listed or OTC options on currencies, and currency futures and options on currency futures.
There is no guarantee that these hedging activities will be successful, and they may result in losses. Although the Fund may use foreign exchange transactions to hedge against adverse currency movements, foreign exchange transactions involve the risk that anticipated currency movements will not be accurately predicted and that the Fund's hedging strategies will be ineffective. To the extent that the Fund hedges against anticipated currency movements which do not occur, the Fund may realize losses. Foreign exchange transactions may subject the Fund to the risk that the counterparty will be unable to honor its financial obligation to the Fund and the risk that relatively small market movements may result in large changes in the value of a foreign exchange instrument. If the Fund cross-hedges, the Fund will face the risk that the foreign exchange instrument purchased will not correlate as expected with the position being hedged.
TEMPORARY DEFENSIVE INVESTMENTS. At times each Fund may take a temporary defensive position by investing some or all of its assets in short-term fixed income securities. Such securities may be used to attempt to avoid losses in response to adverse market, economic, political or other conditions, to invest uncommitted cash balances, or to maintain liquidity to meet shareholder redemptions. These securities may include: obligations of the U.S. Government and its agencies and instrumentalities, commercial paper, bank certificates of deposit, bankers' acceptances, and repurchase agreements collateralized by cash and U.S. Government, agency and instrumentality obligations. These investments could reduce the benefit from any upswing in the market and prevent a Fund from achieving its investment objective.
MANAGEMENT
The Funds' investment adviser is Lord, Abbett & Co. LLC, 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, with assets under management of approximately $45 billion in more than 40 mutual fund portfolios and other advisory accounts as of October 31, 2002.
Lord Abbett is entitled to an annual management fee based on each Fund's average daily net assets. Each fee is calculated daily and payable monthly.
For the fiscal year ended October 31, 2002, the fee paid to Lord Abbett for
each Fund was as follows:
- for the International Fund the annual rate was .75 of 1%;
- for the Alpha Fund the annual rate was .50 of 1%; and
- for the All Value Fund the annual rate was calculated as follows:
.75 of 1% on the first $200 million of average daily net assets,
.65 of 1% on the next $300 million,
.50 of 1% of the Fund's assets over $500 million.
Based on this calculation, the management fee paid to Lord Abbett for the fiscal year ended October 31, 2002 with respect to the All Value Fund was at an annual rate of .72 of 1% of this Fund's average daily net assets.
In addition, Lord Abbett provides certain administrative services to each Fund pursuant to an Administrative Services Agreement in return for a fee at an annual rate of .04% of each Fund's average daily net assets. Each Fund pays all expenses not expressly assumed by Lord Abbett. For more information about the services Lord Abbett provides to the Funds, see the Statement of Additional Information.
INVESTMENT MANAGERS. Lord Abbett uses teams of investment managers and analysts acting together to manage the Funds' investments.
ALL VALUE FUND. The investment management team is headed by Robert G. Morris. The other senior members of the team are Robert P. Fetch, David G. Builder, Daniel H. Frascarelli, and Gerard S. E. Heffernan. Mr. Morris, Partner and Director of Equity Investments, joined Lord Abbett in 1991. Mr. Morris is a holder of a Chartered Financial Analyst designation and has been in the investment business since 1971. Mr. Fetch, Partner and Small-Cap Value Senior Investment Manager, joined Lord Abbett in 1995. Mr. Fetch is a holder of a Chartered Financial Analyst designation and has been in the investment business since 1983. Mr. Builder, Equity Analyst on the Mid-Cap Value Team, joined Lord Abbett in 1998 from Bear Stearns where he served as an Equity Analyst. Mr. Builder has been in the investment business since 1987. Mr. Frascarelli, Partner and
Investment Manager, joined Lord Abbett in 1990. Mr. Frascarelli is a holder of a Chartered Financial Analyst designation and has been in the investment business since 1983. Mr. Heffernan, Research Analyst on the Small Cap Value team, joined Lord Abbett in 1998 from CL Capital Management where he held served as Portfolio Manager and Equity Research Analyst. Mr. Heffernan is a holder of a Chartered Financial Analyst designation and has been in the investment business since 1988.
INTERNATIONAL FUND. The investment management team is headed by Ingrid C. Holm, Investment Manager-- Global Equity Investment. The other senior member of the team is Robert G. Morris. (See All Value Fund above.) Ms. Holm joined Lord Abbett in 2001 from Batterymarch Financial Management, Inc. where she served as Portfolio Manager-- International from 2000 to 2001, prior thereto she held various positions at the Prudential Insurance Company of America, most recently as a Global Equity Portfolio Manager. Ms. Holm is a holder of a Chartered Financial Analyst designation and has been in the investment business since 1982.
ALPHA SERIES. Robert G. Morris (see All Value Fund above) heads the team, which includes the senior managers of the three underlying funds: Robert P. Fetch, Small-Cap Value Fund (see All Value Fund above); Steven J. McGruder, Developing Growth Fund; and Ingrid C. Holm, International Fund (see International Fund above). Mr. McGruder, Partner and Senior Investment Manager, joined Lord Abbett in 1995, is a holder of a Chartered Financial Analyst designation, and has been in the investment business since 1969.
YOUR INVESTMENT
PURCHASES
The Funds offer in this prospectus four classes of shares: Classes A, B, C, and P, each with different expenses and dividends. You may purchase shares at the net asset value ("NAV") per share determined after we receive your purchase order submitted in proper form and following our review and verification of information provided. A front-end sales charge is normally added to the NAV in the case of the Class A shares. There is no front-end sales charge in the case of the Class B, Class C, and Class P shares, although there may be a contingent deferred sales charge ("CDSC") as described below.
You should read this section carefully to determine which class of shares represents the best investment option for your particular situation. It may not be suitable for you to place a purchase order for Class B shares of $500,000 or more or a purchase order for Class C shares of $1,000,000 or more. You should discuss purchase options with your investment professional.
FOR MORE INFORMATION, SEE "CLASSES OF SHARES" IN THE STATEMENT OF
ADDITIONAL INFORMATION.
We reserve the right to withdraw all or any part of the offering made by this prospectus or to reject any purchase order. We also reserve the right to waive or change minimum investment requirements. All purchase orders are subject to our acceptance and are not binding until confirmed or accepted in writing.
CLASS A - normally offered with a front-end sales charge
CLASS B - no front-end sales charge, but a CDSC is applied to shares redeemed
before the sixth anniversary of purchase
- higher annual expenses than Class A shares
- automatically convert to Class A shares after eight years
CLASS C - no front-end sales charge, but a CDSC is applied to shares redeemed
before the first anniversary of purchase
- higher annual expenses than Class A shares
CLASS P - no front-end sales charge and no CDSC
- available only to certain investors
|
TO COMPUTE MAXIMUM DEALER'S
AS A % OF AS A % OF OFFERING PRICE CONCESSION
YOUR INVESTMENT OFFERING PRICE YOUR INVESTMENT DIVIDE NAV BY (% OF OFFERING PRICE)
----------------------------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% .9425 5.00%
----------------------------------------------------------------------------------------------
$50,000 to $99,999 4.75% 4.99% .9525 4.00%
----------------------------------------------------------------------------------------------
$100,000 to $249,999 3.95% 4.11% .9605 3.25%
----------------------------------------------------------------------------------------------
$250,000 to $499,999 2.75% 2.83% .9725 2.25%
----------------------------------------------------------------------------------------------
$500,000 to $999,999 1.95% 1.99% .9805 1.75%
----------------------------------------------------------------------------------------------
$1,000,000 and over No Sales Charge 1.0000 +
----------------------------------------------------------------------------------------------
|
+ See "Dealer Concessions on Class A Share Purchases Without a Front-End Sales Charge."
[SIDENOTE]
NAV per share for each class of Fund shares is calculated, under normal circumstances, each business day at the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time. Purchases and sales of Fund shares are executed at the NAV next determined after the Fund receives your order in proper form. In calculating NAV, securities for which market quotations are available are valued at those quotations. Securities for which such quotations are not available are valued at fair value under procedures approved by the Trust's Board. Certain foreign securities that are primarily listed on foreign exchanges may trade on weekends or days when a Fund's NAV is not calculated. As a result, a Fund's NAV may change on days when shareholders will not be able to purchase or redeem Fund shares.
REDUCING YOUR CLASS A SHARE FRONT-END SALES CHARGES. Class A shares may be
purchased at a discount if you qualify under either of the following conditions:
- RIGHTS OF ACCUMULATION - A Purchaser may apply the value at public offering price of the Class A shares you already owned to a new purchase of Class A shares of any ELIGIBLE FUND in order to reduce the sales charge.
- LETTER OF INTENTION - A Purchaser of Class A shares may purchase additional Class A shares of any Eligible Fund over a 13-month period and receive the same sales charge as if all shares were purchased at once. Shares purchased through reinvestment of dividends or distributions are not included. A Letter of Intention may be backdated 90 days. Current holdings under Rights of Accumulation may be included in a Letter of Intention.
- The term "Purchaser" includes: (1) an individual, (2) an individual, his or her spouse and children under the age of 21, or (3) a trustee or other fiduciary purchasing shares for a single trust, estate or single fiduciary account (including a pension, profit-sharing, or other employee benefit trust qualified under Section 401 of the Internal Revenue Code). Please note that more than one qualified employee benefit trust of a single employer, including its consolidated subsidiaries, may be considered a single trust, as may qualified plans of multiple employers registered in the name of a single bank trustee, although more than one beneficiary is involved.
FOR MORE INFORMATION ON ELIGIBILITY FOR THESE PRIVILEGES, READ THE APPLICABLE SECTIONS IN THE APPLICATION.
CLASS A SHARE PURCHASES WITHOUT A FRONT-END SALES CHARGE. Class A shares may be purchased without a front-end sales charge under any of the following conditions:
- purchases of $1 million or more, *
- purchases by RETIREMENT AND BENEFIT PLANS with at least 100 eligible employees, *
- 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 Funds and/or LORD ABBETT DISTRIBUTOR LLC specifically for such purchases,*
- purchases made with dividends and distributions on Class A shares of another Eligible Fund,
- purchases representing repayment under the loan feature of the Lord Abbett- sponsored prototype 403(B) Plan for Class A shares,
- purchases by employees of any consenting securities dealer having a sales agreement with Lord Abbett Distributor,
- purchases made by or on behalf of Financial Intermediaries for clients that pay the Financial Intermediaries fees for services that include investment advisory or management services, provided that the Financial Intermediaries or their trading agents have entered into special arrangements with the Funds and/or Lord Abbett Distributor specifically for such purchases,
- purchases by trustees or custodians of any pension or profit sharing plan, or payroll deduction IRA for employees of any consenting securities dealer having a sales agreement with Lord Abbett Distributor,
- purchases by each Lord Abbett-sponsored fund's Directors or 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
- purchases through an omnibus account of a dealer that features ten or fewer preferred mutual fund families, including the Lord Abbett-sponsored funds, within 30 days of, and with the proceeds from, a redemption through the same dealer's omnibus account of shares of a mutual fund that were originally purchased subject to a sales charge.
SEE THE STATEMENT OF ADDITIONAL INFORMATION FOR A LISTING OF OTHER CATEGORIES OF PURCHASERS WHO QUALIFY FOR CLASS A SHARE PURCHASES WITHOUT A FRONT-END SALES CHARGE.
* THESE CATEGORIES MAY BE SUBJECT TO A CDSC.
[SIDENOTE]
IT IS YOUR RESPONSIBILITY TO INFORM THE FUND IF YOU BELIEVE YOU QUALIFY FOR A REDUCED FRONT-END SALES CHARGE.
ELIGIBLE FUND. An "Eligible Fund" is any Lord Abbett-sponsored fund except for:
(1) certain tax-free, single-state funds where the exchanging shareholder is a
resident of a state in which such a fund is not offered for sale; (2) Lord
Abbett Series Fund, Inc.; (3) Lord Abbett U.S. Government Securities Money
Market Fund, Inc. ("GSMMF") (except for holdings in GSMMF which are attributable
to any shares exchanged from the Lord Abbett-sponsored funds); and (4) 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. An
Eligible Fund also is any Authorized Institution's affiliated money market fund
meeting criteria set by Lord Abbett Distributor LLC as to certain omnibus
account and other criteria.
RETIREMENT AND BENEFIT PLANS include qualified and non-qualified retirement plans, deferred compensation plans and certain other retirement, savings or benefit plans, excluding Individual Retirement Accounts.
Lord Abbett offers a variety of retirement plans. Call 800-253-7299 for information about:
- Traditional, Rollover, Roth and Education IRAs
- Simple IRAs, SEP-IRAs, 401(k) and 403(B) accounts
- Defined Contribution Plans
FINANCIAL INTERMEDIARIES include broker-dealers, registered investment advisers, banks, trust companies, certified financial planners, third-party administrators, record-keepers, trustees, custodians, financial consultants and insurance companies.
LORD ABBETT DISTRIBUTOR LLC ("Lord Abbett Distributor") acts as agent for the Funds to work with investment professionals who buy and/or sell shares of the Funds on behalf of their clients. Generally, Lord Abbett Distributor does not sell Fund shares directly to investors.
DEALER CONCESSIONS ON CLASS A SHARE PURCHASES WITHOUT A FRONT-END SALES
CHARGE.
Dealers may receive distribution-related compensation (i.e., concessions) according to the Schedule set forth below under the following circumstances:
- purchases of $1 million or more,
- purchases by Retirement and Benefit Plans with at least 100 eligible employees, or
- 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 Funds and/or Lord Abbett Distributor specifically for such purchases ("alliance arrangements").
FRONT-END
CLASS A INVESTMENTS SALES CHARGE* DEALER'S CONCESSION
--------------------------------------------------------------------------------
First $5 million None 1.00%
--------------------------------------------------------------------------------
Next $5 million above that None 0.55%
--------------------------------------------------------------------------------
Next $40 million above that None 0.50%
--------------------------------------------------------------------------------
Over $50 million None 0.25%
--------------------------------------------------------------------------------
|
* Class A shares purchased without a sales charge will be subject to a 1% CDSC if they are redeemed on or before the 24th month after the month in which the shares were initially purchased. For alliance arrangements involving Financial Intermediaries offering multiple fund families to Retirement or 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.
Dealers receive concessions expressed above on purchases made within a 12-month period beginning with the first NAV purchase 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. Each Fund may not pay concessions with respect to alliance arrangements unless Lord Abbett Distributor can monitor the applicability of the CDSC. In addition, if a Financial Intermediary decides to waive receipt of the concession, each Fund may waive any CDSC that may otherwise have applied to any such purchase.
Financial Intermediaries should contact Lord Abbett Distributor for more complete information on the commission structure.
A CDSC, regardless of class, is not charged on shares acquired through reinvestment of dividends or capital gains distributions and is charged on the original purchase cost or the current market value of the shares at the time they are redeemed, whichever is lower. In addition, repayment of loans under Retirement and Benefit Plans will constitute new sales for purposes of assessing the CDSC.
To minimize the amount of any CDSC, each Fund redeems shares in the following order:
1. shares acquired by reinvestment of dividends and capital gains (always free of a CDSC)
2. shares held for six years or more (Class B) or two years or more after the month of purchase (Class A) or one year or more (Class C)
3. shares held the longest before the sixth anniversary of their purchase
(Class B) or before the second anniversary after the month of their
purchase (Class A) or before the first anniversary of their purchase
(Class C)
CLASS A SHARE CDSC. If you buy Class A shares of a Fund under one of the starred (*) categories listed above or if you acquire Class A shares 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 on or before the 24th month after the month in which you initially purchased those shares, the Fund normally will collect a CDSC of 1% and remit it to the fund in which you originally purchased the shares.
The Class A share CDSC generally will not be assessed under the following circumstances:
- 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 (documentation may be required)
- redemptions by Retirement and Benefit Plans made through Financial Intermediaries that have special arrangements with the Funds and/or Lord Abbett Distributor, provided the Plan has not redeemed all, or substantially all, of its assets from the Lord Abbett-sponsored funds
CLASS B SHARE CDSC. The CDSC for Class B shares normally applies if you redeem your shares before the sixth anniversary of their initial purchase. The CDSC will be remitted to Lord Abbett Distributor. The CDSC declines the longer you own your shares according to the following schedule:
ANNIVERSARY(1) OF THE DAY ON CONTINGENT DEFERRED SALES CHARGE
WHICH THE PURCHASE ORDER ON REDEMPTION (AS % OF AMOUNT
WAS ACCEPTED SUBJECT TO CHARGE)
On Before
--------------------------------------------------------------------------------
1st 5.0%
--------------------------------------------------------------------------------
1st 2nd 4.0%
--------------------------------------------------------------------------------
2nd 3rd 3.0%
--------------------------------------------------------------------------------
3rd 4th 3.0%
--------------------------------------------------------------------------------
4th 5th 2.0%
--------------------------------------------------------------------------------
5th 6th 1.0%
--------------------------------------------------------------------------------
on or after the 6th(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 1 will be May 1 of each succeeding year.
(2) Class B shares will automatically convert to Class A shares on the eighth anniversary of the purchase of Class B shares.
The Class B share CDSC generally will not be assessed under the following circumstances:
- benefit payments under Retirement and Benefit Plans in connection with loans, hardship withdrawals, death, disability, retirement, separation from service or any excess contribution or distribution under Retirement and Benefit Plans
- ELIGIBLE MANDATORY DISTRIBUTIONS under 403(B) Plans and individual retirement accounts
- death of the shareholder
- redemptions of shares in connection with Div-Move and Systematic Withdrawal Plans (up to 12% per year).
SEE "SYSTEMATIC WITHDRAWAL PLAN" UNDER "SERVICES FOR FUND INVESTORS" FOR
MORE INFORMATION ON CDSCs WITH RESPECT TO CLASS B SHARES.
[SIDENOTE]
BENEFIT PAYMENT DOCUMENTATION. (Class A CDSC only) Requests for benefit payments of $50,000 or more must be in writing. Use the address indicated under "Opening your Account."
ELIGIBLE MANDATORY DISTRIBUTIONS. If Class B shares represent a part of an individual's total IRA or 403(B) investment, the CDSC will be waived only for that part of a mandatory distribution that bears the same relation to the entire mandatory distribution as the Class B share investment bears to the total investment.
CLASS C SHARE CDSC. The 1% CDSC for Class C shares normally applies if you redeem your shares before the first anniversary of their purchase. The CDSC will be remitted to Lord Abbett Distributor.
CLASS P SHARES. Class P shares have lower annual expenses than Class B and Class C shares, no front-end sales charge, and no CDSC. Class P shares are currently sold and redeemed at NAV in connection with (a) orders made by or on behalf of Financial Intermediaries for clients that pay the Financial Intermediaries fees for services that include investment advisory or management services, provided that the Financial Intermediaries or their trading agents have entered into special arrangements with the Funds and/or Lord Abbett Distributor specifically for such orders; and (b) orders 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 Funds and/or Lord Abbett Distributor specifically for such orders.
SALES COMPENSATION
As part of its plan for distributing shares, each Fund and Lord Abbett Distributor pay sales and service compensation to AUTHORIZED INSTITUTIONS that sell the Fund's shares and service its shareholder accounts.
As shown in the table "Fees and Expenses," sales compensation originates from sales charges, which are paid directly by shareholders, and 12b-1 distribution fees, which are paid by the Funds. Service compensation originates from 12b-1 service fees. Because 12b-1 fees are paid on an ongoing basis, over time they will increase the cost of your investment and may cost you more than paying other types of sales charges. The fees are accrued daily at annual rates based upon average daily net assets as follows:
FEE CLASS A CLASS B CLASS C CLASS P -------------------------------------------------------------------------------- Service .25% .25% .25% .20% -------------------------------------------------------------------------------- Distribution .10%* .75% .75% .25% -------------------------------------------------------------------------------- |
* Class A shares pay a one-time distribution fee of up to 1% on certain qualifying purchases, which is generally amortized over a two-year period. See "Dealer Concessions on Class A Share Purchases Without a Front-End Sales Charge."
The Rule 12b-1 plans for Class A and Class P shares provide that the maximum payments that may be authorized by the Board are .50% and .75%, respectively. We 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, we may not require payment of any otherwise applicable CDSC.
ADDITIONAL CONCESSIONS TO AUTHORIZED INSTITUTIONS. Lord Abbett Distributor may, for specified periods, allow dealers to retain the full sales charge for sales of shares or may pay an additional concession to a dealer who sells a minimum dollar amount of our shares and/or shares of other Lord Abbett-sponsored funds. In some instances, such additional concessions will be offered only to certain dealers expected to sell significant amounts of shares. Additional payments may be paid from Lord Abbett Distributor's own resources or from distribution fees received from the Fund and may be made in the form of cash or, if permitted, non-cash payments. The non-cash payments may include business seminars at Lord Abbett's headquarters or other locations, including meals and entertainment, or merchandise. The cash payments may include payment of various business expenses of the dealer.
In selecting dealers to execute portfolio transactions for a Fund's portfolio, if two or more
[SIDENOTE]
AUTHORIZED INSTITUTIONS are institutions and persons permitted by law to receive service and/or distribution fees under a Rule 12b-1 Plan. Lord Abbett Distributor is an Authorized Institution.
12b-1 FEES ARE PAYABLE REGARDLESS OF EXPENSES. The amounts payable by a Fund need not be directly related to expenses. If Lord Abbett Distributor's actual expenses exceed the fee payable to it, a Fund will not have to pay more than that fee. If Lord Abbett Distributor's expenses are less than the fee it receives, Lord Abbett Distributor will keep the full amount of the fee.
dealers are considered capable of obtaining best execution, we may prefer the dealer who has sold our shares or shares of other Lord Abbett-sponsored funds.
SALES ACTIVITIES. We may use 12b-1 distribution fees to pay Authorized Institutions to finance any activity that is primarily intended to result in the sale of shares. Lord Abbett Distributor uses its portion of the distribution fees attributable to a Fund's Class A and Class C shares for activities that are primarily intended to result in the sale of such Class A and Class C shares, respectively. These activities include, but are not limited to, printing of prospectuses and statements of additional information and reports for other than existing shareholders, preparation and distribution of advertising and sales material, expenses of organizing and conducting sales seminars, additional concessions to Authorized Institutions, the cost necessary to provide distribution-related services or personnel, travel, office expenses, equipment and other allocable overhead.
SERVICE ACTIVITIES. We may pay 12b-1 service fees to Authorized Institutions for any activity that is primarily intended to result in personal service and/or the maintenance of shareholder accounts. Any portion of the service fees paid to Lord Abbett Distributor will be used to service and maintain shareholder accounts.
OPENING YOUR ACCOUNT
MINIMUM INITIAL INVESTMENT
- Regular Account $ 1,000 --------------------------------------------------------------------------- - Individual Retirement Accounts and --------------------------------------------------------------------------- 403(b) Plans under the Internal Revenue Code $ 250 --------------------------------------------------------------------------- - Uniform Gift to Minor Account $ 250 --------------------------------------------------------------------------- - Invest-A-Matic $ 250 --------------------------------------------------------------------------- |
No minimum investment is required for certain Retirement and Benefit Plans and certain purchases through Financial Intermediaries that charge their clients a fee for services that include investment advisory or management services.
You may purchase shares through any independent securities dealer who has a sales agreement with Lord Abbett Distributor or you can fill out the Application and send it to the Fund you select at the address stated below. You should note that your purchases and other transactions may be subject to review and verification on an ongoing basis. Please carefully read the paragraph below entitled "Proper Form" before placing your order to ensure that your order will be accepted.
NAME OF FUND
P.O. Box 219100
Kansas City, MO 64121
PROPER FORM. An order submitted directly to a Fund must contain: (1) a completed application, and (2) payment by check. When purchases are made by check, redemption proceeds will not be paid until the Fund or transfer agent is advised that the check has cleared, which may take up to 15 calendar days. For more information call the Fund at 800-821-5129.
BY EXCHANGE. Please call the Fund at 800-821-5129 to request an exchange from any eligible Lord Abbett-sponsored fund.
REDEMPTIONS
Redemptions of Fund shares are executed at the NAV next determined after the Fund receives your order in proper form. In the case of redemptions involving Retirement and Benefit Plans, you may be required to provide the Fund with one or more completed forms before your order will be executed. For more information, please call 800-821-5129. To determine if a CDSC applies to a redemption, see "Class A share CDSC," "Class B share CDSC," or "Class C share CDSC."
BY BROKER. Call your investment professional for instructions on how to redeem your shares.
BY TELEPHONE. To obtain the proceeds of a redemption of less than $50,000 from your account, you or your representative should call the Fund at 800-821-5129.
BY MAIL. Submit a written redemption request indicating the name(s) in which the account is registered, the Fund's name, the class of shares, your account number, and the dollar value or number of shares you wish to redeem and include all necessary signatures.
Normally a check will be mailed to the name(s) and address in which the account is registered (or otherwise according to your instruction) within three business days after receipt of your redemption request. Your account balance must be sufficient to cover the amount being redeemed or your redemption order will not be processed. Under unusual circumstances, the Fund may suspend redemptions, or postpone payment for more than seven days, as permitted by federal securities laws.
If the signer has any legal capacity, (i.e., the authority of an individual to act on behalf of an entity or other person(s)), the signature and capacity must be guaranteed by an ELIGIBLE GUARANTOR. Certain other legal documentation may be required. For more information regarding proper documentation, please call 800-821-5129.
A GUARANTEED SIGNATURE is designed to protect you from fraud by verifying your signature. We require a Guaranteed Signature by an Eligible Guarantor on requests for:
- a redemption check for which you have the legal capacity to sign on behalf of another person or entity (i.e., on behalf of an estate or on behalf of a corporation),
- a redemption check payable to anyone other than the shareholder(s) of record,
- a redemption check to be mailed to an address other than the address of record,
- a redemption check payable to a bank other than the bank we have on file, or
- a redemption for $50,000 or more.
REDEMPTIONS IN KIND. Each Fund has the right to pay redemption proceeds to you in whole or in part by a distribution of securities from the Fund's portfolio. It is not expected that the Fund would do so except in unusual circumstances. If the Fund pays your redemption proceeds by a distribution of securities, you could incur brokerage or other charges in converting the securities to cash.
DISTRIBUTIONS AND TAXES
Each Fund expects to pay you dividends from its net investment income semi-annually for the All Value Fund, and annually for the International Fund and the Alpha Fund. Each Fund expects to distribute its net capital gains (if any) annually as "capital gains distributions."
Distributions will be reinvested in Fund shares unless you instruct a Fund to pay them to you in cash. For distributions payable on accounts other than those held in the name of your dealer, if you instruct a Fund to pay your distributions in cash, and the Post Office is
[SIDENOTE]
SMALL ACCOUNTS. Our Board may authorize closing any account in which there are fewer than 25 shares if it is in a Fund's best interest to do so.
ELIGIBLE GUARANTOR is any broker or bank that is usually a member of the medallion stamp program. Most major securities firms and banks are members of this program. A NOTARY PUBLIC IS NOT AN ELIGIBLE GUARANTOR.
GUARANTEED SIGNATURE. An acceptable form of guarantee would be as follows:
- In the case of an estate -
Robert A. Doe
Executor of the Estate of John W. Doe
[Date]
[GRAPHIC]
- In the case of a corporation - ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
[GRAPHIC]
unable to deliver one or more of your checks or one or more of your checks remains uncashed for a certain period, the Fund reserves the right to reinvest your checks in your account at the NAV on the day of the reinvestment following such period. In addition, the Fund reserves the right to reinvest all subsequent distributions in additional Fund shares in your account. No interest will accrue on checks while they remain uncashed before they are reinvested or on amounts represented by uncashed redemption checks. There are no sales charges on reinvestments.
A Fund's distributions are taxable to you in the year they are considered received for tax purposes. Distributions of investment income and short-term capital gains are taxable to you as ordinary income. Distributions of net long-term capital gains are taxable to you as long-term capital gains. This tax treatment of distributions applies regardless of how long you have owned Fund shares or whether distributions are reinvested or paid in cash.
Except in tax-advantaged accounts, any sale, redemption or exchange of Fund shares may be taxable to you.
If you buy shares when a Fund has realized but not yet distributed 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.
Certain tax reporting information concerning the tax treatment of Fund distributions, including the source of dividends and distributions of capital gains by each Fund, will be mailed to shareholders each year. Because everyone's tax situation is unique, you should consult your tax adviser regarding the treatment of such distributions under the federal, state, and local tax rules that apply to you, as well as the tax consequences of gains or losses from the sale, redemption, or exchange of your shares.
SERVICES FOR FUND INVESTORS
AUTOMATIC SERVICES
Buying or selling shares automatically is easy with the services described below. With each service, you select a schedule and amount, subject to certain restrictions. You may set up most of these services when filling out the Application or by calling 800-821-5129.
------------------------------------------------------------------------------------------------------
For investing
INVEST-A-MATIC You can make fixed, periodic investments ($50 minimum) into your Fund
(Dollar-cost account by means of automatic money transfers from your bank checking
averaging) account. See the Application for instructions.
DIV-MOVE You can automatically reinvest the dividends and distributions from
your account into another account in any Eligible Fund ($50 minimum).
For selling shares
SYSTEMATIC You can make regular withdrawals from most Lord Abbett-sponsored funds.
WITHDRAWAL Automatic cash withdrawals will be paid to you from your account in fixed or
PLAN ("SWP") variable amounts. To establish a SWP, the value of your shares for Class A
or Class 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 a SWP established for
Retirement and Benefit Plans for which there is no minimum. Your shares must be
in non-certificate form.
CLASS B SHARES The CDSC will be waived on redemptions of up to 12% of the current net
asset value of your account at the time of your SWP request. For Class B share
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.
CLASS B AND Redemption proceeds due to a SWP for Class B and Class C shares will be
CLASS C SHARES redeemed in the order described under "CDSC" under "Purchases."
------------------------------------------------------------------------------------------------------
|
OTHER SERVICES
TELEPHONE INVESTING. After we have received the Application (selecting "yes" under Section 8C and completing Section 7), you may instruct us by phone to have money transferred from your bank account to purchase shares of the Fund for an existing account. The Fund will purchase the requested shares when it receives the money from your bank.
EXCHANGES. You or your investment professional may instruct the Fund to exchange shares of any class for shares of the same class of any Eligible Fund. Instructions may be provided in writing or by telephone, with proper identification, by calling 800-821-5129. The Fund must receive instructions for the exchange before the close of the NYSE on the day of your call, in which case you will get the NAV per share of the Eligible Fund determined on that day. Exchanges will be treated as a sale for federal tax purposes and may create a taxable situation to you (see "Distributions and Taxes" section). Be sure to read the current prospectus for any fund into which you are exchanging.
REINVESTMENT PRIVILEGE. If you redeem shares of the Fund, you have a one-time right to reinvest some or all of the proceeds in the same class of any Eligible Fund within 60 days without a sales charge. If you paid a CDSC when you redeemed your shares, you will be credited with the amount of the CDSC. All accounts involved must have the same registration.
ACCOUNT STATEMENTS. Every Lord Abbett investor automatically receives quarterly account statements.
HOUSEHOLDING. We have adopted a policy that allows us to send only one copy of the Funds' prospectus, proxy material, annual report and semi-annual 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 800-821-5129 or send a 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 219100, Kansas City, MO 64121.
ACCOUNT CHANGES. For any changes you need to make to your account, consult your investment professional or call the Fund at 800-821-5129.
SYSTEMATIC EXCHANGE. You or your investment professional can establish a schedule of exchanges between the same classes of any Eligible Fund.
[SIDENOTE]
TELEPHONE TRANSACTIONS. You have this privilege unless you refuse it in writing. For your security, telephone transaction requests are recorded. We will take measures to verify the identity of the caller, such as asking for your name, account number, social security or taxpayer identification number and other relevant information. The Funds will not be liable for following instructions communicated by telephone that they reasonably believe to be genuine.
Transactions by telephone may be difficult to implement in times of drastic economic or market change.
EXCHANGE LIMITATIONS. Exchanges should not be used to try to take advantage of short-term swings in the market. Frequent exchanges and similar trading practices can disrupt management of the Funds and raise their expenses. Accordingly, the Funds reserve the right to limit or terminate this privilege for any shareholder making frequent exchanges or abusing the privilege. The Funds also may revoke the privilege for all shareholders upon 60 days written notice. In addition, as stated under "Purchases," the Funds reserve the right to reject any purchase order, including purchase orders from shareholders whose trading has been or may be disruptive to the Funds.
ALL VALUE FUND
(FORMERLY KNOWN AS GROWTH & INCOME SERIES)
FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
This table describes 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, assuming you had reinvested all dividends and distributions. These Financial Highlights have been audited by Deloitte & Touche LLP, the Fund's independent auditors, in conjunction with their annual audits of the Fund's financial statements. Financial statements and the Independent Auditors' Report thereon appear in the 2002 Annual Report to Shareholders, and are incorporated by reference in the Statement of Additional Information, which is available upon request. Certain information reflects financial results for a single Fund share.
---------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
---------------------------------------------------------------------------
YEAR ENDED 10/31
PER SHARE OPERATING PERFORMANCE 2002 2001 2000 1999 1998
NET ASSET VALUE, BEGINNING OF YEAR $ 11.53 $ 10.87 $ 9.15 $ 8.79
---------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
---------------------------------------------------------------------------------------------------------------------------
Net investment income .04(b) .05(b) .04(b) .06
---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.83) 1.17 2.06 .93
---------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (.79) 1.22 2.10 .99
---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
---------------------------------------------------------------------------------------------------------------------------
Net investment income (.03) -- (.05) (.04)
---------------------------------------------------------------------------------------------------------------------------
Net realized gain (.88) (.56) (.33) (.59)
---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.91) (.56) (.38) (.63)
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.83 $ 11.53 $ 10.87 $ 9.15
---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(d) (7.26)% 11.44% 23.77% 11.97%
---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------------------------------------------------------------
Expenses, including expense reductions 1.42% 1.35% 1.30% 1.22%
---------------------------------------------------------------------------------------------------------------------------
Expenses, excluding expense reductions 1.43% 1.36% 1.30% 1.22%
---------------------------------------------------------------------------------------------------------------------------
Net investment income .40% .48% .36% .88%
===========================================================================================================================
YEAR ENDED 10/31
---------------------------------------------------------------------------
SUPPLEMENTAL DATA: 2002 2001 2000 1999 1998
NET ASSETS, END OF PERIOD (000) $ 166,406 $ 136,038 $ 102,329 $ 72,863
---------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 103.11% 65.06% 37.68% 45.83%
===========================================================================================================================
CLASS B SHARES
---------------------------------------------------------------------------
YEAR ENDED 10/31
PER SHARE OPERATING PERFORMANCE 2002 2001 2000 1999 1998
NET ASSET VALUE, BEGINNING OF YEAR $ 11.42 $ 10.85 $ 9.13 $ 8.80
---------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
---------------------------------------------------------------------------------------------------------------------------
Net investment income (.03)(b) (.02)(b) (.04)(b) --(c)
---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.81) 1.15 2.10 .92
---------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (.84) 1.13 2.06 .92
---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
---------------------------------------------------------------------------------------------------------------------------
Net investment income --(c) -- (.01) --
---------------------------------------------------------------------------------------------------------------------------
Net realized gain (.88) (.56) (.33) (.59)
---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.88) (.56) (.34) (.59)
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.70 $ 11.42 $ 10.85 $ 9.13
---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(d) (7.86)% 10.80% 23.17% 11.17%
---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------------------------------------------------------------
Expenses, including expense reductions 2.03% 2.00% 1.98% 1.98%
---------------------------------------------------------------------------------------------------------------------------
Expenses, excluding expense reductions 2.04% 2.01% 1.98% 1.98%
---------------------------------------------------------------------------------------------------------------------------
Net investment income (.27)% (.17)% (.38)% .09%
===========================================================================================================================
YEAR ENDED 10/31
---------------------------------------------------------------------------
SUPPLEMENTAL DATA: 2002 2001 2000 1999 1998
NET ASSETS, END OF PERIOD (000) $ 39,188 $ 17,453 $ 9,739 $ 3,404
---------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 103.11% 65.06% 37.68% 45.83%
---------------------------------------------------------------------------------------------------------------------------
26
|
ALL VALUE FUND
(FORMERLY KNOWN AS GROWTH & INCOME SERIES)
---------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
---------------------------------------------------------------------------
YEAR ENDED 10/31
PER SHARE OPERATING PERFORMANCE 2002 2001 2000 1999 1998
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.38 $ 10.81 $ 9.11 $ 8.80
---------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.01)(b) (.02)(b) (.03)(b) .01
---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.82) 1.15 2.07 .89
---------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (.83) 1.13 2.04 .90
---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
---------------------------------------------------------------------------------------------------------------------------
Net investment income --(c) -- (.01) --
---------------------------------------------------------------------------------------------------------------------------
Net realized gain (.88) (.56) (.33) (.59)
---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.88) (.56) (.34) (.59)
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.67 $ 11.38 $ 10.81 $ 9.11
---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(d) (7.70)% 10.74% 23.00% 10.94%
---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------------------------------------------------------------
Expenses, including expense reductions 1.98% 2.00% 1.98% 1.98%
---------------------------------------------------------------------------------------------------------------------------
Expenses, excluding expense reductions 1.99% 2.01% 1.98% 1.98%
---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.14)% (.17)% (.31)% .12%
===========================================================================================================================
YEAR ENDED 10/31
----------------------------------------------------------------------------
SUPPLEMENTAL DATA 2002 2001 2000 1999 1998
Net assets, end of period (000) $ 112,299 $ 112,776 $ 104,984 $ 89,637
---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 103.11% 65.06% 37.68% 45.83%
===========================================================================================================================
CLASS P SHARES
------------------------
8/15/2001(a)
TO
PER SHARE OPERATING PERFORMANCE 2002 10/31/2001
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.85
---------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) --(b)(c)
---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (1.02)
---------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (1.02)
---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
---------------------------------------------------------------------------------------------------------------------------
Net investment income --
---------------------------------------------------------------------------------------------------------------------------
Net realized gain --
---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS --
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.83
---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(d) (9.40)%(e)
---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------------------------------------------------------------
Expenses, including expense reductions .31%(e)
---------------------------------------------------------------------------------------------------------------------------
Expenses, excluding expense reductions .31%(e)
---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.01)%(e)
---------------------------------------------------------------------------------------------------------------------------
8/15/2001(a)
TO
SUPPLEMENTAL DATA 2002 10/31/2001
NET ASSETS, END OF PERIOD (000) $ 1
---------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 103.11%
---------------------------------------------------------------------------------------------------------------------------
|
(a) Commencement of offering of class shares.
(b) Calculated using average shares outstanding during the period.
(c) Amount represents less than $.01.
(d) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(e) Not annualized.
INTERNATIONAL FUND
FINANCIAL HIGHLIGHTS
This table describes 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, assuming you had reinvested all dividends and distributions. These Financial Highlights have been audited by Deloitte & Touche LLP, the Fund's independent auditors, in conjunction with their annual audits of the Fund's financial statements. Financial statements and the Independent Auditors' Report thereon appear in the 2002 Annual Report to Shareholders, and are incorporated by reference in the Statement of Additional Information, which is available upon request. Certain information reflects financial results for a single Fund share.
---------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
---------------------------------------------------------------------------
YEAR ENDED 10/31
PER SHARE OPERATING PERFORMANCE 2002 2001 2000 1999 1998
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.48 $ 13.90 $ 12.39 $ 10.86
---------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.06)(b) (.08)(b) .07(b) .11(b)
---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (6.56) 1.54 1.55 1.45
---------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.62) 1.46 1.62 1.56
---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
---------------------------------------------------------------------------------------------------------------------------
Net investment income -- (.06) (.09) (.03)
---------------------------------------------------------------------------------------------------------------------------
Net realized gain (.08) (.82) (.02) --
---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.08) (.88) (.11) (.03)
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 7.78 $ 14.48 $ 13.90 $ 12.39
---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(c) (45.92)% 10.97% 13.16% 14.36%
---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------------------------------------------------------------
Expenses, including expense reductions 2.07% 1.80% 1.51% 1.31%
---------------------------------------------------------------------------------------------------------------------------
Expenses, excluding expense reductions 2.08% 1.80% 1.51% 1.31%
---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.55)% (.53)% .52% .80%
===========================================================================================================================
YEAR ENDED 10/31
---------------------------------------------------------------------------
SUPPLEMENTAL DATA: 2002 2001 2000 1999 1998
NET ASSETS, END OF PERIOD (000) $ 71,591 $ 135,701 $ 104,885 $ 80,606
---------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 65.26% 35.14% 75.15% 20.52%
===========================================================================================================================
CLASS B SHARES
---------------------------------------------------------------------------
YEAR ENDED 10/31
PER SHARE OPERATING PERFORMANCE 2002 2001 2000 1999 1998
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.31 $ 13.75 $ 12.28 $ 10.83
---------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.11)(b) (.17)(b) (.02)(b) .02(b)
---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (6.47) 1.55 1.53 1.43
---------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.58) 1.38 1.51 1.45
---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
---------------------------------------------------------------------------------------------------------------------------
Net investment income -- --(f) (.02) --
---------------------------------------------------------------------------------------------------------------------------
Net realized gain (.08) (.82) (.02) --
---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.08) (.82) (.04) --
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 7.65 $ 14.31 $ 13.75 $ 12.28
---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(c) (46.19)% 10.42% 12.31% 13.39%
---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------------------------------------------------------------
Expenses, including expense reductions 2.59% 2.35% 2.19% 2.03%
---------------------------------------------------------------------------------------------------------------------------
Expenses, excluding expense reductions 2.60% 2.36% 2.19% 2.03%
---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (1.07)% (1.09)% (.16)% .18%
===========================================================================================================================
YEAR ENDED 10/31
---------------------------------------------------------------------------
SUPPLEMENTAL DATA: 2002 2001 2000 1999 1998
NET ASSETS, END OF PERIOD (000) $ 17,743 $ 33,124 $ 22,928 $ 15,933
---------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 65.26% 35.14% 75.15% 20.52%
---------------------------------------------------------------------------------------------------------------------------
28
|
INTERNATIONAL FUND
FINANCIAL HIGHLIGHTS (continued)
---------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
---------------------------------------------------------------------------
YEAR ENDED 10/31
PER SHARE OPERATING PERFORMANCE 2002 2001 2000 1999 1998
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.30 $ 13.75 $ 12.28 $ 10.83
---------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.13)(b) (.17)(b) (.02)(b) .02(b)
---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (6.48) 1.54 1.53 1.43
---------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.61) 1.37 1.51 1.45
---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
---------------------------------------------------------------------------------------------------------------------------
Net investment income -- --(f) (.02) --
---------------------------------------------------------------------------------------------------------------------------
Net realized gain (.08) (.82) (.02) --
---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.08) (.82) (.04) --
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 7.61 $ 14.30 $ 13.75 $ 12.28
---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(c) (46.43)% 10.35% 12.31% 13.39%
---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------------------------------------------------------------
Expenses, including expense reductions 2.83% 2.35% 2.19% 2.05%
---------------------------------------------------------------------------------------------------------------------------
Expenses, excluding expense reductions 2.84% 2.36% 2.19% 2.05%
---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (1.32)% (1.10)% (.15)% .12%
===========================================================================================================================
YEAR ENDED 10/31
---------------------------------------------------------------------------
SUPPLEMENTAL DATA: 2002 2001 2000 1999 1998
NET ASSETS, END OF PERIOD (000) $ 11,399 $ 25,546 $ 20,111 $ 13,723
---------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 65.26% 35.14% 75.15% 20.52%
===========================================================================================================================
CLASS P SHARES
---------------------------------------------------------------------------
YEAR ENDED 10/31 3/9/1999(e)
--------------------------------------------- TO
PER SHARE OPERATING PERFORMANCE 2002 2001 2000 10/31/1999
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.51 $ 13.91 $ 12.70
---------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.06)(b) (.08)(b) .08(b)
---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (6.55) 1.55 1.13
---------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (6.61) 1.47 1.21
---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
---------------------------------------------------------------------------------------------------------------------------
Net investment income -- (.05) --
---------------------------------------------------------------------------------------------------------------------------
Net realized gain (.08) (.82) --
---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.08) (.87) --
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 7.82 $ 14.51 $ 13.91
---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(c) (45.75)% 11.03% 9.53%(d)
---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------------------------------------------------------------
Expenses, including expense reductions 2.04% 1.80% .98%(d)
---------------------------------------------------------------------------------------------------------------------------
Expenses, excluding expense reductions 2.05% 1.80% .98%(d)
---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.55)% (.51)% .60%(d)
===========================================================================================================================
YEAR ENDED 10/31 12/29/1999(a)
--------------------------------------------- TO
SUPPLEMENTAL DATA: 2002 2001 2000 10/31/1999
NET ASSETS, END OF PERIOD (000) $ 1 $ 1 $ 1
---------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 65.26% 35.14% 75.15%
---------------------------------------------------------------------------------------------------------------------------
|
(a) Commencement of operations.
(b) Calculated using average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(d) Not annualized.
(e) Commencement of offering of class shares.
(f) Amount represents less than $.01.
ALPHA FUND
FINANCIAL HIGHLIGHTS
This table describes 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, assuming you had reinvested all dividends and distributions. These Financial Highlights have been audited by Deloitte & Touche LLP, the Fund's independent auditors, in conjunction with their annual audits of the Fund's financial statements. Financial statements and the Independent Auditors' Report thereon appear in the 2002 Annual Report to Shareholders, and are incorporated by reference in the Statement of Additional Information, which is available upon request. Certain information reflects financial results for a single Fund share.
---------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
---------------------------------------------------------------------------
YEAR ENDED 10/31 12/29/1997(a)
----------------------------------------------------------- TO
PER SHARE OPERATING PERFORMANCE 2002 2001 2000 1999 10/31/1998
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.46 $ 15.21 $ 12.91 $ 13.52
---------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.05)(b) (.03)(b) .07(b) (.03)(b)
---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (3.82) 2.60 2.23 (.58)
---------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (3.87) 2.57 2.30 (.61)
---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
---------------------------------------------------------------------------------------------------------------------------
Net investment income (.30) (.21) -- --
---------------------------------------------------------------------------------------------------------------------------
Net realized gain (.33) (.11) -- --
---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.63) (.32) -- --
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.96 $ 17.46 $ 15.21 $ 12.91
---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(c) (22.67)% 17.10% 17.82% (4.51)%(d)
---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver and expense reductions .36% .40% .33% .21%(d)
---------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver and expense reductions 1.34% 1.33% .83% .63%(d)
---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.32)% (.16)% .15% (.18)%(d)
===========================================================================================================================
YEAR ENDED 10/31 12/29/1997(a)
----------------------------------------------------------- TO
SUPPLEMENTAL DATA: 2002 2001 2000 1999 10/31/1998
NET ASSETS, END OF PERIOD (000) $ 70,785 $ 96,652 $ 75,136 $ 49,587
---------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 15.34% 1.54% 1.67% .01%
===========================================================================================================================
CLASS B SHARES
---------------------------------------------------------------------------
YEAR ENDED 10/31 12/29/1997(a)
----------------------------------------------------------- TO
PER SHARE OPERATING PERFORMANCE: 2002 2001 2000 1999 10/31/1998
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.27 $ 15.05 $ 12.85 $ 13.52
---------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
---------------------------------------------------------------------------------------------------------------------------
Net investment loss (.14)(b) (.13)(b) (.03)(b) (.11)(b)
---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (3.79) 2.58 2.23 (.56)
---------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (3.93) 2.45 2.20 (.67)
---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
---------------------------------------------------------------------------------------------------------------------------
Net investment income (.20) (.12) -- --
---------------------------------------------------------------------------------------------------------------------------
Net realized gain (.33) (.11) -- --
---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.53) (.23) -- --
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.81 $ 17.27 $ 15.05 $ 12.85
---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(c) (23.21)% 16.40% 17.12% (4.96)%(d)
---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver and expense reductions 1.00% 1.00% 1.00% .83%(d)
---------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver and expense reductions 1.98% 1.93% 1.50% 1.26%(d)
---------------------------------------------------------------------------------------------------------------------------
Net investment loss (.96)% (.75)% (.83)% (.81)%(d)
YEAR ENDED 10/31 12/29/1997(a)
----------------------------------------------------------- TO
SUPPLEMENTAL DATA: 2002 2001 2000 1999 10/31/1998
NET ASSETS, END OF PERIOD (000) $ 50,377 $ 70,300 $ 52,280 $ 36,202
---------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 15.34% 1.54% 1.67% .01%
---------------------------------------------------------------------------------------------------------------------------
30
|
ALPHA FUND
---------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
---------------------------------------------------------------------------
YEAR ENDED 10/31 12/29/1997(a)
----------------------------------------------------------- TO
PER SHARE OPERATING PERFORMANCE: 2002 2001 2000 1999 10/31/1998
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.25 $ 15.04 $ 12.86 $ 13.52
---------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
---------------------------------------------------------------------------------------------------------------------------
Net investment loss (.14)(b) (.12)(b) (.04)(b) (.11)(b)
---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (3.78) 2.56 2.22 (.55)
---------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (3.92) 2.44 2.18 (.66)
---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
---------------------------------------------------------------------------------------------------------------------------
Net investment income (.20) (.12) -- --
---------------------------------------------------------------------------------------------------------------------------
Net realized gain (.33) (.11) -- --
---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.53) (.23) -- --
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.80 $ 17.25 $ 15.04 $ 12.86
---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(c) (23.25)% 16.34% 16.95% (4.88)%(d)
---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------------------------------------------------------------
Expenses, including waiver and expense reductions 1.00% 1.00% 1.00% .82%(d)
---------------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver and expense reductions 1.98% 1.93% 1.50% 1.24%(d)
---------------------------------------------------------------------------------------------------------------------------
Net investment loss (.97)% (.70)% (.84)% (.82)%(d)
===========================================================================================================================
YEAR ENDED 10/31 12/29/1997(a)
----------------------------------------------------------- TO
SUPPLEMENTAL DATA: 2002 2001 2000 1999 10/31/1998
NET ASSETS, END OF PERIOD (000) $ 35,395 $ 44,977 $ 34,667 $ 20,490
---------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 15.34% 1.54% 1.67% .01%
---------------------------------------------------------------------------------------------------------------------------
|
(a) Commencement of operations.
(b) Calculated using average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(d) Not annualized.
TO OBTAIN INFORMATION: ADDITIONAL INFORMATION
BY TELEPHONE. For shareholder More information on these Funds is
account inquiries call each Fund available free upon request, including
at: 800-821-5129. For literature the following:
requests call each Fund at:
888-522-2388. ANNUAL/SEMI-ANNUAL REPORT
The Funds' Annual and Semi-Annual
BY MAIL. Write to each Fund at: Reports contain more information about
The Lord Abbett Family of Funds each Fund's investments. The Annual
90 Hudson Street Report also includes details about the
Jersey City, NJ 07302-3973 market conditions and investment
strategies that had a significant effect
on each Fund's performance during the
VIA THE INTERNET. last fiscal year.
LORD, ABBETT & CO. LLC
www.lordabbett.com STATEMENT OF ADDITIONAL INFORMATION
("SAI")
Text only versions of Fund Provides more details about the Funds
documents can be viewed online and their policies. A current SAI is on
or downloaded from the SEC: file with the Securities and Exchange
www.sec.gov. Commission ("SEC") and is incorporated
by reference (is legally considered part
You can also obtain copies by of this prospectus).
visiting the SEC's Public
Reference Room in Washington, DC
(phone 202-942-8090) or by
sending your request and a
duplicating fee to the SEC's
Public Reference Section,
Washington, DC 20549-0102 or by
sending your request
electronically to
publicinfo@sec.gov.
[LORD ABBETT LOGO] Lord Abbett Securities Trust
Lord Abbett All Value Fund
Lord Abbett Mutual Fund shares International Series
are distributed by: Alpha Series
LORD ABBETT DISTRIBUTOR LLC LST-1-
90 Hudson Street - Jersey City, ( )
New Jersey 07302-3973
SEC FILE NUMBERS: 811-7538
--------------------------------------------------------------------------------
|
[LORD ABBETT LOGO]
LORD ABBETT
ALL VALUE FUND
MARCH 1, 2003
PROSPECTUS
CLASS Y SHARES
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
CLASS Y SHARES OF THE FUND ARE NEITHER OFFERED TO THE GENERAL PUBLIC NOR AVAILABLE IN ALL STATES. PLEASE CALL 800-821-5129 FOR FURTHER INFORMATION.
TABLE OF CONTENTS
Page
THE FUND
What you should know about the Fund
Goal 2
Principal Strategy 2
Main Risks 2
Performance 4
Fees and Expenses 5
Additional Investment Information 5
Management 6
YOUR INVESTMENT
Information for managing your Fund account
Purchases 7
Redemptions 8
Distributions and Taxes 9
Services For Fund Investors 9
ADDITIONAL INFORMATION
How to learn more about the Fund and other Lord Abbett Funds
Back Cover
|
ALL VALUE FUND
THE FUND
GOAL
The Fund's investment objective is long-term growth of capital and income without excessive fluctuations in market value.
PRINCIPAL STRATEGY
To pursue this goal, the Fund primarily purchases equity securities of U.S. and multinational companies that we believe are undervalued in all market capitalization ranges. Under normal circumstances, the Fund will invest at least 50% of its net assets in equity securities of large, seasoned companies with market capitalizations of at least $5 billion at the time of purchase. This market capitalization threshold may vary in response to changes in the markets. The Fund will invest the remainder of its assets in mid-sized and small company securities. Equity securities may include common stocks, preferred stocks, convertible securities, warrants, and similar instruments. Common stocks, the most familiar type of equity security, represent an ownership interest in a company.
In selecting investments, the Fund attempts to invest in securities selling at reasonable prices in relation to our assessment of their potential value. While there is the risk that an investment may never reach what we think is its full value, or may go down in value, our emphasis on large, seasoned company value stocks may limit the Fund's downside risk. This is because value stocks are believed to be underpriced, and large, seasoned company stocks tend to be issued by more established companies and less volatile than mid-sized or small company stocks. Although smaller companies may present greater risks than larger companies as outlined below, they also may present higher potential for attractive long-term returns.
We generally sell a stock when we think it is no longer a bargain, seems less likely to benefit from the current market and economic environment, shows deteriorating fundamentals, or falls short of our expectations.
MAIN RISKS
The Fund is subject to the general risks and considerations associated with equity investing, as well as the particular risks associated with value stocks. The value of your investment will fluctuate in response to movements in the stock market in general and to the changing prospects of individual companies in which the Fund invests. Large value stocks may perform differently than the market as a whole and other types of stocks, such as mid-sized or small-company stocks and growth stocks. This is because different types of stocks tend to shift in and out of favor depending on market and economic conditions. The market may fail to recognize the intrinsic value of particular value stocks for a long time. In addition, if the Fund's assessment of a company's value or prospects for exceeding earnings expectations or market conditions is wrong, the Fund could suffer losses or produce poor performance relative to other funds, even in a rising market.
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
[SIDENOTE]
WE OR THE FUND OR THE ALL VALUE FUND refers to Lord Abbett All Value Fund, a portfolio or series of Lord Abbett Securities Trust (the "Trust").
ABOUT THE FUND. The Fund is a professionally managed portfolio primarily holding securities purchased with the pooled money of investors. It strives to reach its stated goal; although, as with all mutual funds, it cannot guarantee results.
VALUE STOCKS are stocks of companies that we believe the market undervalues according to certain financial measurements of their intrinsic worth or business prospects.
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.
An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund is not a complete investment program and may not be appropriate for all investors. You could lose money by investing in the Fund.
ALL VALUE FUND
PERFORMANCE
The bar chart and table below provide some indication of the risks of investing in the Fund by illustrating the variability of the Fund's returns. Each assumes reinvestment of dividends and distributions. The Fund's past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future.
The bar chart shows changes in the performance of the Fund's Class C shares from calendar year to calendar year. Performance for Class Y shares is not shown because the Class has less than one year of performance. This chart does not reflect the sales charges applicable to Class C shares. Returns for Class Y shares are expected to be somewhat higher than those of the Fund's Class C shares because Class Y shares have lower expenses.
[CHART]
95 32.3% 96 18.3% 97 26.6% 98 14.6% 99 19.6% 00 8.5% 01 -4.7% 02 |
BEST QUARTER 4th Q '98 +18.4% WORST QUARTER 3rd Q '98 -11.3% |
(1) Returns are for a class not offered in this Prospectus that would have substantially similar annual returns as Class Y because the shares are invested in the same portfolio of securities. Annual returns for Class Y would differ only to the extent that the classes do not have the same expenses.
The table below shows how the average annual total returns of the Fund's Class C shares compare to those of a broad-based securities market index and a more narrowly based index that more closely reflects the market sectors in which the Fund invests.
The after-tax returns for Class C shares included in the table below are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
Average Annual Total Returns Through December 31, 2002
SHARE CLASS 1 YEAR 5 YEARS LIFE OF FUND(1)
Class C shares
Return Before Taxes % % %
Return After Taxes on Distributions % % %
Return After Taxes on Distributions and
Sale of Fund Shares % % %
S&P 500/Barra Value Index(2) % % %(3)
(reflects no deduction for fees, expenses or taxes)
Russell 3000 Value Index(2) % % %(3)
(reflects no deduction for fees, expenses or taxes)
|
(1) The date Class C was first offered to the public is: 1/3/94.
(2) The performance of the unmanaged indices is not necessarily representative
of the Fund's performance.
(3) Represents total return for the period 12/31/93 - 12/31/02, to correspond with Class C period shown.
ALL VALUE FUND
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
CLASS Y
SHAREHOLDER FEES (Fees paid directly from your investment)
Maximum Sales Charge on Purchases
(as a % of offering price) none
Maximum Deferred Sales Charge none
ANNUAL FUND OPERATING EXPENSES (Expenses deducted from Fund assets) (as a % of average net assets)
Management Fees (See "Management") 0.71%
Other Expenses(1) 0.36%
Total Operating Expenses(1) 1.07%
|
(1) These amounts have been restated from fiscal year amounts to reflect an estimate of current fees.
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. This example, like that in other funds' prospectuses, assumes that you invest $10,000 in the Fund 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 are reinvested, and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Class Y shares $ 109 $ 340 $ 590 $ 1,306 |
ADDITIONAL INVESTMENT INFORMATION
This section describes some investment techniques used by the Fund and some of the risks associated with those techniques.
ADJUSTING INVESTMENT EXPOSURE. The Fund will be subject to the risks associated with investments. The Fund may, but is not required to, use various strategies to change its investment exposure to adjust to changes in economic, social, political, and general market conditions, which affect security prices, interest rates, currency exchange rates, commodity prices and other factors. For example, the Fund may seek to hedge against certain market risks. These strategies may involve, with board approval, effecting transactions in derivatives and similar instruments, including but not limited to options, futures, forward contracts, swap agreements, warrants, and rights. If we judge market conditions incorrectly or use a hedging strategy that does not correlate well with the Fund's investments, it could result in a loss, even if we intended to lessen risk or enhance returns. These strategies may involve a small investment of cash compared to the magnitude of the risk assumed and could produce disproportionate gains or losses.
DEPOSITARY RECEIPTS. The Fund may invest in sponsored and unsponsored 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. Although the Fund may not invest more than 10% of its assets in foreign securities, ADRs are not subject to this limitation.
[SIDENOTE]
MANAGEMENT FEES are payable to Lord, Abbett & Co. LLC ("Lord Abbett") for the Fund's investment management.
OTHER EXPENSES include fees paid for miscellaneous items such as shareholder service, professional services, administrative services provided by Lord Abbett, and fees to certain Financial Intermediaries for providing recordkeeping or other administrative services in connection with investments in the Fund.
TEMPORARY DEFENSIVE INVESTMENTS. At times the Fund may take a temporary defensive position by investing some or all of its assets in short-term fixed income securities. Such securities may be used to attempt to avoid losses in response to adverse market, economic, political or other conditions, to invest uncommitted cash balances, or to maintain liquidity to meet shareholder redemptions. These securities may include: obligations of the U.S. Government and its agencies and instrumentalities, commercial paper, bank certificates of deposit, bankers' acceptances, and repurchase agreements collateralized by cash and U.S. Government, agency and instrumentality obligations. These investments could reduce the benefit from any upswing in the market and prevent a Fund from achieving its investment objective.
MANAGEMENT
The Funds' investment adviser is Lord, Abbett & Co. LLC, 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, with assets under management of approximately $45 billion in more than 40 mutual fund portfolios and other advisory accounts as of October 31, 2002.
Lord Abbett is entitled to an annual management fee based on the Fund's average daily net assets. The fee is calculated daily and payable monthly.
For the fiscal year ended October 31, 2002, the fee paid to Lord Abbett for the Fund was as follows:
.75 of 1% on the first $200 million of average daily net assets, .65 of 1% on the next $300 million, .50 of 1% of the Fund's assets over $500 million.
Based on this calculation, the management fee paid to Lord Abbett for the fiscal year ended October 31, 2002 with respect to the All Value Fund was at an annual rate of .72 of 1% of this Fund's average daily net assets.
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 .04% of the Fund's average daily net assets. The Fund pays all expenses not expressly assumed by Lord Abbett. For more information about the services Lord Abbett provides to the Fund, see the Statement of Additional Information.
INVESTMENT MANAGERS. Lord Abbett uses teams of investment managers and analysts acting together to manage the Funds' investments.
The investment management team is headed by Robert G. Morris. The other senior members of the team are Robert P. Fetch, David G. Builder, Daniel H. Frascarelli, and Gerard S. E. Heffernan. Mr. Morris, Partner and Director of Equity Investments, joined Lord Abbett in 1991. Mr. Morris is a holder of a Chartered Financial Analyst designation and has been in the investment business since 1971. Mr. Fetch, Partner and Small-Cap Value Senior Investment Manager, joined Lord Abbett in 1995. Mr. Fetch is a holder of a Chartered Financial Analyst designation and has been in the investment business since 1983. Mr. Builder, Equity Analyst on the Mid-Cap Value Team, joined Lord Abbett in 1998 from Bear Stearns where he served as an Equity Analyst. Mr. Builder has been in the investment business since 1987. Mr. Frascarelli, Partner and Investment Manager, joined Lord Abbett in 1990. Mr. Frascarelli is a holder of a Chartered Financial Analyst designation and has been in the investment business since 1983. Mr. Heffernan, Research Analyst on the Small Cap Value team, joined Lord Abbett in 1998 from CL Capital Management where he held served as Portfolio Manager and Equity Research Analyst. Mr. Heffernan is a holder of a Chartered Financial Analyst designation and has been in the investment business since 1988.
YOUR INVESTMENT
PURCHASES
CLASS Y SHARES. You may purchase Class Y shares at the net asset value ("NAV") per share next determined after we receive and accept your purchase order submitted in proper form and following our review and verification of information provided. No sales charges apply.
We reserve the right to withdraw all or part of the offering made by this prospectus or to reject any purchase order. We also reserve the right to waive or change minimum investment requirements. All purchase orders are subject to our acceptance and are not binding until confirmed or accepted in writing.
WHO MAY INVEST? Class Y shares are currently available in connection with:
(1) purchases by or on behalf of FINANCIAL INTERMEDIARIES for clients that
pay the Financial Intermediaries fees for services that include investment
advisory or management services, provided that the Financial Intermediaries
or their trading agents have entered into special arrangements with the
Fund and/or LORD ABBETT DISTRIBUTOR LLC specifically for such purchases;
(2) purchases by the trustee or custodian under any deferred compensation
or pension or profit-sharing plan or payroll deduction IRA established for
the benefit of the employees of any company with an account(s) in excess of
$10 million managed by Lord Abbett or its sub-advisers on a
private-advisory-account basis; (3) purchases by institutional investors,
such as retirement plans, companies, foundations, trusts, endowments and
other entities where the total amount of potential investable assets
exceeds $50 million that were not introduced to Lord Abbett by persons
associated with a broker or dealer primarily involved in the retail
securities business. Additional payments may be made by Lord Abbett out of
its own resources with respect to certain of these sales.
HOW MUCH MUST YOU INVEST? You may buy our shares through any independent securities dealer having a sales agreement with Lord Abbett Distributor, our principal underwriter. Place your order with your investment dealer or send the money to the Fund (P.O. Box 219100, Kansas City, Missouri 64121) The minimum initial investment is $1 million except certain purchases through Financial Intermediaries that charge a fee for services that include investment advisory or management services, which have no minimum. This offering may be suspended, changed or withdrawn by Lord Abbett Distributor, which reserves the right to reject any order.
BUYING SHARES THROUGH YOUR DEALER. Orders for shares received by the Fund prior to the close of the NYSE, or received by dealers prior to such close and received by Lord Abbett Distributor prior to the close of its business day, will be confirmed at the NAV effective at such NYSE close. Orders received by dealers after the NYSE closes and received by Lord Abbett Distributor in proper form prior to the close of its next business day are executed at the NAV effective as of the close of the NYSE on that next business day. The dealer is responsible for the timely transmission of orders to Lord Abbett Distributor. A business day is a day on which the NYSE is open for trading.
BUYING SHARES BY WIRE. To open an account, call 800-821-5129 Ext. 34028, Institutional Trade Dept., to set up your account and to arrange a wire transaction. Wire to: UMB, N.A., Kansas City, Routing number - 101000695, bank account number: 987800033-3, FBO: (account name) and (your Lord Abbett account number). Specify the complete name of the Fund, note Class Y shares and include your new account number and your name. To add to an existing account, wire to: UMB, N.A., Kansas City, Routing number - 101000695, bank account number: 987800033-3, FBO: (account name) and (your Lord
[SIDENOTE]
NAV per share for the Fund is, under normal circumstances, calculated each business day at the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time. Purchases and sales of Fund shares are executed at the NAV next determined after the Fund receives your order in proper form. In calculating NAV, securities for which market quotations are available are valued at those quotations. Securities for which such quotations are not available are valued at fair value under procedures approved by the Board. Certain foreign securities that are primarily listed on foreign exchanges may trade on weekends or days when the Fund's NAV is not calculated. As a result, the Fund's NAV may change on days when shareholders will not be able to purchase or redeem Fund shares.
FINANCIAL INTERMEDIARIES include broker-dealers, registered investment advisers, banks, trust companies, certified financial planners, third-party administrators, recordkeepers, trustees, custodians, financial consultants and insurance companies.
LORD ABBETT DISTRIBUTOR LLC ("Lord Abbett Distributor") acts as agent for the Fund to work with investment professionals that buy and/or sell shares of the Fund on behalf of their clients. Generally, Lord Abbett Distributor does not sell Fund shares directly to investors.
Abbett account number). Specify the complete name of the Fund, note Class Y shares and include your account number and your name.
REDEMPTIONS
Redemptions of Fund shares are executed at the NAV next determined after the Fund receives your order in proper form. In the case of redemptions involving Retirement and Benefit Plans, you may be required to provide the Fund with one or more completed forms before your order will be executed. For more information, please call 800-821-5129.
BY BROKER. Call your investment professional for instructions on how to redeem your shares.
BY TELEPHONE. To obtain the proceeds of a redemption of less than $50,000 from your account, you or your representative should call the Fund at 800-821-5129.
BY MAIL. Submit a written redemption request indicating the name(s) in which the account is registered, the Fund's name, the class of shares, your account number, and the dollar value or number of shares you wish to redeem and include all necessary signatures.
Normally a check will be mailed to the name(s) and address in which the account is registered (or otherwise according to your instruction) within three business days after receipt of your redemption request. Your account balance must be sufficient to cover the amount being redeemed or your redemption order will not be processed. Under unusual circumstances, the Fund may suspend redemptions, or postpone payment for more than seven days, as permitted by federal securities laws.
If the signer has any legal capacity, (i.e., the authority of an individual to act on behalf of an entity or other person(s)), the signature and capacity must be guaranteed by an ELIGIBLE GUARANTOR. Certain other legal documentation may be required. For more information regarding proper documentation, please call 800-821-5129.
A GUARANTEED SIGNATURE is designed to protect you from fraud by verifying your signature. We require a Guaranteed Signature by an Eligible Guarantor on requests for:
- a redemption check for which you have the legal capacity to sign on behalf of another person or entity (i.e., on behalf of an estate or on behalf of a corporation),
- a redemption check payable to anyone other than the shareholder(s) of record,
- a redemption check to be mailed to an address other than the address of record,
- a redemption check payable to a bank other than the bank we have on file, or
- a redemption for $50,000 or more.
BY WIRE. In order to receive funds by wire, our servicing agent must have
the wiring instructions on file. To verify that this feature is in place,
call 800-821-5129 Ext. 34028, Institutional Trading Dept. (minimum wire:
$1,000). Your wire redemption request must be received by the Fund before
the close of the NYSE for money to be wired on the next business day.
REDEMPTIONS IN KIND. The Fund has the right to pay redemption proceeds to you in whole or in part by a distribution of securities from the Fund's portfolio. It is not expected that the Fund would do so except in unusual circumstances. If the Fund pays your redemption proceeds by a distribution of securities, you could incur brokerage or other charges in converting the securities to cash.
[SIDENOTE]
TELEPHONE TRANSACTIONS. You have this privilege unless you refuse it in writing. For your security, telephone transaction requests are recorded. We will take measures to verify the identity of the caller, such as asking for your name, account number, social security or taxpayer identification number and other relevant information. The Fund will not be liable for following instructions communicated by telephone that it reasonably believes to be genuine.
Transactions by telephone may be difficult to implement in times of drastic economic or market change.
ELIGIBLE GUARANTOR is any broker or bank that is usually a member of the medallion stamp program. Most major securities firms and banks are members of this program. A NOTARY PUBLIC IS NOT AN ELIGIBLE GUARANTOR.
GUARANTEED SIGNATURE. An acceptable form of guarantee would be as follows:
- In the case of an estate -
Robert A. Doe
Executor of the Estate of
John W. Doe
[Date]
[GRAPHIC]
- In the case of a corporation - ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
[GRAPHIC]
DISTRIBUTIONS AND TAXES
The Fund expects to pay you dividends from its net investment income semi-annually and expects to distribute its net capital gains (if any) annually as "capital gains distributions." Distributions will be reinvested in Fund shares unless you instruct the Fund to pay them to you in cash.
The Fund's distributions are taxable to you in the year they are considered received for tax purposes. Distributions of investment income and short-term capital gains are taxable to you as ordinary income. Distributions of net long-term capital gains are taxable to you as long-term capital gains. This tax treatment of distributions applies regardless of how long you have owned Fund shares or whether distributions are reinvested or paid in cash.
Except in tax-advantaged accounts, any sale, redemption, or exchange of Fund shares may be taxable to you.
If you buy shares when the Fund has realized but not yet distributed 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.
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 mailed to shareholders each year. Because everyone's tax situation is unique, you should consult your tax adviser regarding the treatment of such distributions under the federal, state, and local tax rules that apply to you, as well as the tax consequences of gains or losses from the sale, redemption, or exchange of your shares.
SERVICES FOR FUND INVESTORS
We offer the following shareholder services:
TELEPHONE EXCHANGE PRIVILEGE. Class Y shares may be exchanged without a service charge for Class Y shares of any ELIGIBLE FUND among the Lord Abbett-sponsored funds.
ACCOUNT STATEMENTS. Every Lord Abbett investor automatically receives quarterly account statements.
HOUSEHOLDING. We have adopted a policy that allows us to send only one copy of the Fund's prospectus, proxy material, annual report and semi-annual 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 800-821-5129 or send a 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 219100, Kansas City, MO 64121.
ACCOUNT CHANGES. For any changes you need to make to your account, consult your investment professional or call the Fund at 800-821-5129.
[SIDENOTE]
EXCHANGE LIMITATIONS. Exchanges should not be used to try to take advantage of short-term swings in the market. Frequent exchanges and similar trading practices can disrupt management of the Fund and raise its expenses. Accordingly, the Fund reserves the right to limit or terminate this privilege for any shareholder making frequent exchanges or abusing the privilege. The Fund also may revoke the privilege for all shareholders upon 60 days' written notice. In addition, as stated under "Purchases," the Fund reserves the right to reject any purchase order, including purchase orders from shareholders whose trading has been or may be disruptive to the Fund.
ELIGIBLE FUND. An "Eligible Fund" is any Lord Abbett-sponsored fund offering Class Y shares.
ADDITIONAL INFORMATION
More information on the Fund is be available free upon request, including the following:
ANNUAL/SEMI-ANNUAL REPORT
The Fund's Annual and Semi-Annual Report contain more information about the Fund's investments. 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.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Provides more details about the Fund and its policies. A current SAI is on file with the Securities and Exchange Commission ("SEC") and is incorporated by reference (is legally considered part of this prospectus).
TO OBTAIN INFORMATION:
BY TELEPHONE. For shareholder account inquiries call the Fund at: 800-821-5129. 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.
www.lordabbett.com
Text only versions of Fund documents can be viewed online or downloaded directly from the SEC: www.sec.gov.
You can also obtain copies by visiting the SEC's Public Reference Room in Washington, DC (phone 202-942-8090) or by sending your request and a duplicating fee to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending your request electronically to publicinfo@sec.gov.
[LORD ABBETT LOGO]
Lord Abbett Mutual Fund shares are distributed by:
Lord Abbett Distributor LLC
90 Hudson Street - Jersey City, NJ 07302-3973
Lord Abbett Securities Trust
Lord Abbett All Value Fund
SEC FILE NUMBER: 811-7538
LAAV-Y-1
LORD ABBETT
STATEMENT OF ADDITIONAL INFORMATION MARCH 1, 2003
LORD ABBETT SECURITIES TRUST
LORD ABBETT ALL VALUE FUND
LORD ABBETT ALPHA FUND
LORD ABBETT INTERNATIONAL FUND
(CLASSES A, B, C, & P)
This Statement of Additional Information ("SAI") is not a Prospectus. A Prospectus may be obtained from your securities dealer 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 the Lord Abbett Securities Trust - Lord Abbett All Value Fund (the "All Value Fund"), Alpha Series ("Alpha Fund"), and International Series ("International Fund"), (each individually a "Fund" or collectively the "Funds"), dated March 1, 2003.
Shareholder inquiries should be made by directly contacting the Funds or by calling 800-821-5129. The Annual Report to Shareholders is available without charge, upon request by calling 888-522-2388. In addition, you can make inquiries through your dealer.
TABLE OF CONTENTS PAGE
1. Fund History 2
2. Investment Policies 2
3. Management of the Funds 9
4. Control Persons and Principal Holders of Securities 15
5. Investment Advisory and Other Services 16
6. Brokerage Allocations and Other Practices 17
7. Classes of Stock 18
8. Purchases, Redemptions, and Pricing 23
9. Taxation of the Funds 27
10. Underwriter 28
11. Performance 29
12. Financial Statements 30
1.
FUND HISTORY
Lord Abbett Securities Trust (the "Trust") is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (the "Act"). The Trust was organized as a Delaware business trust on February 26, 1993 with an unlimited amount of shares of beneficial interest authorized. Three of its five funds or series ("Funds") are described in this SAI. All the Funds have four classes of shares (A, B, C, and P), as described in this SAI, while International Fund has an additional class of shares, Class Y, that is described in a separate SAI. Class P shares of the All Value Fund and the Alpha Fund are neither offered to the general public nor available in all states.
2.
INVESTMENT POLICIES
FUNDAMENTAL INVESTMENT RESTRICTIONS. Each Fund is subject to the following fundamental investment restrictions that cannot be changed without approval of a majority of that Fund's outstanding shares.
Each Fund may not:
(1) borrow money, except that (i) it may borrow from banks (as defined in the Act) in amounts up to 33 1/3% of its total assets (including the amount borrowed), (ii) 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, and (iv) it may purchase securities on margin to the extent permitted by applicable law;
(2) pledge its assets (other than to secure borrowings, or to the extent permitted by each Fund's investment policies as permitted by applicable law);
(3) engage in the underwriting of securities, except pursuant to a merger or acquisition or to the extent that, in connection with the disposition of its portfolio securities, it may be deemed to be an underwriter under federal securities laws;
(4) make loans to other persons, except that the acquisition of bonds, debentures or other corporate debt securities and investment in government obligations, commercial paper, pass-through instruments, certificates of deposit, bankers acceptances, repurchase agreements or any similar instruments shall not be subject to this limitation, and except further that each Fund may lend its portfolio securities, provided that the lending of portfolio securities may be made only in accordance with applicable law;
(5) buy or sell real estate (except that each Fund may invest in securities directly or indirectly secured by real estate or interests therein or issued by companies which invest in real estate or interests therein), or commodities or commodity contracts (except to the extent each Fund may do so in accordance with applicable law and without registering as a commodity pool operator under the Commodity Exchange Act as, for example, with futures contracts);
(6) with respect to 75% of its gross assets, buy securities of one issuer representing more than (i) 5% of its gross assets, except securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities or (ii) 10% of the voting securities of such issuer;
(7) invest more than 25% of its assets, taken at market value, in the securities of issuers in any particular industry (excluding securities of the U.S. Government, its agencies and instrumentalities); or
(8) issue senior securities to the extent such issuance would violate applicable law.
Compliance with the investment restrictions in this Section will be determined at the time of the purchase or sale of the security.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. In addition to the policies in the Prospectus and the investment restrictions above that cannot be changed without shareholder approval, each Fund is also subject to the following non-fundamental investment policies that may be changed by the Board of Trustees without shareholder approval.
Each Fund may not:
(1) make short sales of securities or maintain a short position except to the extent permitted by applicable law;
(2) invest knowingly more than 15% of its net assets (at the time of investment) in illiquid securities, except for securities qualifying for resale under Rule 144A of the Securities Act of 1933, deemed to be liquid by the Board of Trustees;
(3) invest in securities issued by other investment companies except to the extent permitted by applicable law (THE All Value Fund and the International Fund may not, however, rely on Sections 12(d)(1)(F) and 12(d)(1)(G) of the Act);
(4) invest in securities of issuers which, with their predecessors, have a record of less than three years' continuous operations, if more than 5% of its total assets would be invested in such securities. (This restriction shall not apply to mortgaged-backed securities, asset-backed securities or obligations issued or guaranteed by the U. S. Government, its agencies or instrumentalities.);
(5) hold securities of any issuer if more than 1/2 of 1% of the securities of such issuer are owned beneficially by one or more of its officers or trustees or by one or more of its partners or members or underwriter or investment adviser if these owners in the aggregate own beneficially more than 5% of the securities of such issuer;
(6) invest in warrants if, at the time of the acquisition, its investment in warrants, valued at the lower of cost or market, would exceed 5% of its total assets (included within such limitation, but not to exceed 2% of its total assets, are warrants which are not listed on the New York or American Stock Exchange or a major foreign exchange);
(7) invest in real estate limited partnership interests or interests in oil, gas or other mineral leases, or exploration or other development programs, except that it may invest in securities issued by companies that engage in oil, gas or other mineral exploration or other development activities;
(8) write, purchase or sell puts, calls, straddles, spreads or combinations thereof, except to the extent permitted in its Prospectus and Statement of Additional Information, as they may be amended from time to time; or
(9) buy from or sell to any of its officers, trustees, employees, or its investment adviser or any of its officers, trustees, partners or employees, any securities other than its shares.
PORTFOLIO TURNOVER. For the fiscal years ended October 31, 2002 and 2001, the portfolio turnover rate was % and 15.34% for the Alpha Fund; % and 103.11% for the All Value Fund; and % and 65.26% for the International Fund; respectively.
ADDITIONAL INFORMATION ON PORTFOLIO RISKS, INVESTMENTS AND TECHNIQUES. This section provides further information on certain types of investments and investment techniques that may be used by each Fund, including their associated risks. In the case of the Alpha Fund, references to each Fund refers to the underlying funds.
BORROWING MONEY. Each Fund may borrow money for certain purposes as described above under "Fundamental Investment Restrictions." If a Fund borrows money and experiences a decline in its net asset value, the borrowing will increase its losses.
CLOSED-END INVESTMENT COMPANIES. Each Fund may invest in shares of closed-end investment companies in the primary or secondary market, if the transaction fee or commission is no greater than the customary broker's fee or commission.
CONVERTIBLE SECURITIES. Each Fund may invest in convertible securities. Convertible securities are preferred stocks or debt obligations that are convertible into common stock. They generally offer lower interest or dividend yields than non-convertible securities of similar quality. 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. Generally, the market value of convertible securities tends to decline as interest rates increase and, conversely, to increase as interest rates decline. However, when 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. As the market price of the underlying common stock declines, the convertible security, like a fixed income security, tends to trade increasingly on a yield basis, and thus, may not decline in price to the same extent as the underlying common stock. The markets for convertible securities may be less liquid than markets for common stocks or bonds.
DEBT SECURITIES. The Funds may invest in debt securities, such as bonds, debentures, government obligations, commercial paper and pass-through instruments. The value of debt securities may fluctuate based on changes in interest rates and the issuer's financial condition. When interest rates rise or the issuer's financial condition worsens or is perceived by the market to be at greater risk, the value of debt securities tends to decline.
DEPOSITARY RECEIPTS. The Funds may invest in sponsored and unsponsored American Depositary Receipts ("ADRs") and similar depository 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 United States. 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. Although the All Value Fund and Alpha Fund may not invest more than 10% of its assets in foreign securities, ADRs are not subject to this limitation. For purposes of the International Fund's investment policies, ADRs are treated as foreign securities.
FOREIGN CURRENCY TRANSACTIONS. In accordance with each Fund's investment objective and policies, the Funds may, but are not required to, engage in various types of foreign currency exchange transactions to seek to hedge against the risk of loss from changes in currency exchange rates. The Funds may employ a variety of investments and techniques, including spot and forward foreign exchange transactions, currency swaps, listed or OTC options on currencies, and currency futures and options on currency futures (collectively, "Foreign Exchange"). Currently, the Funds generally do not intend to hedge most currency risks.
Forward foreign exchange transactions are OTC contracts to purchase or sell a specified amount of a specified currency or multinational currency unit at a price and future date set at the time of the contract. Spot foreign exchange transactions are similar but require current, rather than future, settlement. Currency futures are similar to forward foreign exchange transactions except that futures are standardized, exchange-traded contracts. Currency options are similar to options on securities, but in consideration for an option premium the writer of a currency option is obligated to sell (in the case of a call option) or purchase (in the case of a put option) a specified amount of a specified currency on or before the expiration date for a specified amount of another currency. The Funds may engage in transactions in options on currencies either on exchanges or OTC markets.
The Funds will not speculate in Foreign Exchange. Accordingly, each Fund will
not hedge a currency in excess of the aggregate market value of the securities
which it owns (including receivables for unsettled securities sales), or has
committed to or anticipates purchasing, which are denominated in such currency.
Each Fund may, however, hedge a currency by entering into a Foreign Exchange
transaction in a currency other than the currency being hedged (a
"cross-hedge"). The Funds will only enter into a cross-hedge if we believe that
(i) there is a high correlation between the currency in which the cross-hedge is
denominated and the currency being hedged, and (ii) executing a cross-hedge
through the currency in which the cross-hedge is denominated will be more
cost-effective or provide greater liquidity than executing a similar hedging
transaction in the currency being hedged.
Foreign Exchange transactions involve substantial risks. Although the Funds will use Foreign Exchange transactions to hedge against adverse currency movements, Foreign Exchange transactions involve the risk that anticipated currency movements will not be accurately predicted and that the Funds' hedging strategies will be ineffective. To the extent that the Funds hedge against anticipated currency movements that do not occur, the Funds may realize losses. Foreign Exchange transactions may subject the Funds to the risk that the counterparty will be unable to honor its financial obligation to the Fund, and the risk that relatively small market movements may result in large changes in the value of a Foreign Exchange instrument. If the Funds cross-hedge, the Funds will face the risk that the Foreign Exchange
instrument purchased will not correlate as expected with the position being hedged.
FOREIGN SECURITIES. International Fund may invest all of its net assets in foreign securities of companies principally based outside the United States. The All Value Fund may invest up to 10% of its net assets in foreign securities that are primarily traded outside the United States. The underlying funds in which the Alpha Fund invests also may invest all or a portion of their assets in foreign securities. Foreign securities may involve special risks that are not typically associated with U.S. dollar denominated or quoted securities of U.S. issuers, including the following:
- 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.
- Brokerage commissions, custodial services, and other costs relating to investment in foreign securities markets generally are more expensive than in the U.S.
- 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.
- Foreign issuers are not generally 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.
- There is generally less government regulation of foreign markets, companies and securities dealers than in the U.S.
- 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.
- Foreign securities may trade on days when a Fund does not sell shares. As a result, the value of a Fund's portfolio securities may change on days an investor may not be able to purchase or redeem Fund shares.
- 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 a Fund, and political or social instability or diplomatic developments that could affect investments in those countries. In addition, a Fund may invest in less developed countries, sometimes referred to as emerging markets. The risks of investing in foreign markets are generally more severe in emerging markets.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. Although each Fund has no current intention of doing so, the Funds may, with Board authorization, engage in futures and options on futures transactions in accordance with their investment objective and policies.
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. 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, an investor is required to maintain margin deposits. At the time of entering into a futures transaction or writing an option, an investor 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.
The Funds may purchase and sell futures contracts and purchase and write call and put options on futures contracts for bona fide hedging purposes, including to hedge against changes in interest rates, securities prices, or to the extent a Fund invests in foreign securities, currency exchange rates, or in order to pursue risk management strategies, including gaining efficient exposure to markets and minimizing transaction costs. The Funds may also enter into closing purchase and sale transactions with respect to such contracts and options. A Fund may not purchase or sell futures contracts or options on futures contracts on a CFTC-regulated exchange for non-bona fide hedging purposes if the aggregated initial margin and premiums required to establish such positions would exceed 5% of the liquidation value of the Fund's portfolio, after taking into account unrealized profits and losses on any such contracts it has entered into.
Futures contracts and options on futures contracts present substantial risks, including the following:
- While the Funds may benefit from the use of futures and related options, unanticipated market events may result in poorer overall performance than if the Funds had not entered into any futures or related options transactions.
- Because perfect correlation between a futures position and a portfolio position that the Funds intend to hedge is impossible to achieve, a hedge may not work as intended, and the Funds may thus be exposed to additional risk of loss.
- The loss that the Funds 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.
- Futures markets are highly volatile, and the use of futures may increase the volatility of the Fund's net asset value.
- 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 Funds.
- Futures contracts and related options may be illiquid, and exchanges may limit fluctuations in futures contract prices during a single day.
- The counterparty to an OTC contract may fail to perform its obligations under the contract.
STOCK INDEX FUTURES. Although the Funds have no current intention of doing so, each Fund and the underlying funds in which Alpha Fund invests, may, with Board authorization, seek to reduce the volatility in its portfolio through the use of stock index futures contracts. A stock index futures contract is an agreement pursuant to which two parties agree, one to receive and the other to pay, on a specified date an amount of cash equal to a specified dollar amount -- established by an exchange or board of trade -- times the difference between the value of the index at the close of the last trading day of the contract and the price at which the futures contract is originally written. The purchaser pays no consideration at the time the contract is entered into; the purchaser only pays the good faith deposit described below.
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 Funds' portfolios, then the market value of a futures contract on that index should fluctuate in a way closely resembling the market fluctuation of the portfolios. Thus, if a 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 a 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 discussed above under "Futures Contracts and Options on Futures Contracts." To date, we have not entered into any futures contracts and have no present intent to do so.
ILLIQUID SECURITIES. Each 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:
- Domestic and foreign securities that are not readily marketable.
- Repurchase agreements and time deposits with a notice or demand period of more than seven days.
- 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 under the Securities Act of 1933 ("144A Securities") and is liquid.
144A Securities may be resold to a qualified institutional buyer without registration and without regard to whether the seller originally purchased the security for investment. Investing in 144A Securities may decrease the liquidity of each Fund's portfolio to the extent that qualified institutional buyers 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.
INVESTMENT COMPANIES. The Funds may invest in securities of other investment companies subject to limitations prescribed by the Act, except the Funds cannot rely on Sections 12(d)(1)(F) and (G), (other than Alpha Fund, a "fund of funds" that invests substantially all of its assets in certain other Lord Abbett-sponsored funds). These limitations include a prohibition on any 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 securities of any one investment company or more than 10% of its total assets in securities of all investment companies. A Fund indirectly will bear its proportionate share of any management fees and other expenses paid by the investment companies in which it invests. Such investment
companies will generally be money market funds or have investment objectives, policies and restrictions substantially similar to those of the Fund and will be subject to substantially the same risks.
The International Fund invests in foreign countries through investment companies. Some emerging 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 funds that have been specifically authorized. In addition to the additional fees associated with such indirect investments, these investments are subject to the risks of investing in foreign securities.
The Funds may, consistent with their investment policies, invest in investment companies established to accumulate and hold a portfolio of securities that is intended to track the price performance and dividend yield of a well-known securities index. The Fund may use such investment company securities for several reasons, including, but not limited to, facilitating the handling of cash flows or trading, or reducing transaction costs. The price movement of such securities may not perfectly parallel the price movement of the underlying index. An example of this type of security is the Standard & Poors Depositary Receipt, commonly known as a "SPDR."
LISTED OPTIONS ON SECURITIES. The Funds may purchase and write national securities exchange-listed put and call options on securities or securities indices. A "call option" is a contract sold for a price giving its holder the right to buy a specific amount of securities at a specific price prior to a specified date. A "covered call option" is a call option issued on securities already owned by the writer of the call option for delivery to the holder upon the exercise of the option. The Funds may write covered call options that are traded on a national securities exchange with respect to securities in its portfolio in an attempt to increase its income and to provide greater flexibility in the disposition of portfolio securities. During the period of the option, the Funds forgo the opportunity to profit from any increase in the market price of the underlying security above the exercise price of the option (to the extent that the increase exceeds its net premium). The Funds may also enter into "closing purchase transactions" in order to terminate their 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 a Fund is unable to enter into a closing purchase transaction, it may be required to hold a security that it might otherwise have sold to protect against depreciation.
A "put option" gives the purchaser of the option the right to sell, and obligates the writer to buy, the underlying securities at the exercise price at any time during the option period. A put option sold by a 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. Writing listed put options may be a useful portfolio investment strategy when the Fund has cash or other reserves available for investment as a result of sales of Fund shares or when the investment manager believes a more defensive and less fully invested position is desirable in light of market conditions. Each Fund will not purchase an option if, as a result of such purchase, more than 10% of its total assets would be invested in premiums for such options, except that the International Fund may not exceed 5% of its total assets. Each Fund may write covered put options to the extent that cover for such options does not exceed 15% of its net assets, except the International Fund may not exceed 25% of its net assets. Each Fund may only sell (write) covered call options having an aggregate market value of less than 25% of the Fund's net assets.
The purchase and writing of options is a highly specialized activity that involves special investment risks. The Funds may use options for hedging or cross hedging purposes or to seek to increase total return (which is considered a speculative activity). If the investment manager is incorrect in its expectation of changes in market prices or determination of the correlation between the securities on which options are based and the Funds' portfolio securities, the Funds may incur losses. The use of options can also increase the Fund's transaction costs.
PREFERRED STOCK, WARRANTS AND RIGHTS. The Funds 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, may not typically 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 markets 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.
REPURCHASE AGREEMENTS. The Funds 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 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 Funds to keep all of their assets at work while retaining flexibility in pursuit of investments of a longer term nature.
The use of repurchase agreements involves certain risks. For example, if the seller of the agreement defaults on its obligation to repurchase the underlying securities at a time when the value of these securities has declined, the Funds 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 Funds intend 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.
REVERSE REPURCHASE AGREEMENTS. Each Fund may enter into reverse repurchase agreements. In a reverse repurchase agreement, a Fund sells a security to a securities dealer or bank for cash and also agrees to repurchase the same security later at a set price. Reverse repurchase agreements expose 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 receives cash equal to 100% of the price of the security sold. Engaging in reverse repurchase agreements may also involve the use of leverage, in that the Fund may reinvest the cash it receives in additional securities. Each Fund will attempt to minimize this risk by managing its duration. A Fund's reverse repurchase agreements will not exceed 20% of the Fund's net assets.
SECURITIES LENDING. The Funds may lend portfolio securities to registered broker-dealers. These loans may not exceed 30% of a Fund's total assets. Securities loans will be collateralized by cash or marketable securities issued or guaranteed by the U.S. government or its agencies ("U.S. Government securities") or other permissible means at least equal to 102 percent of the market value of the loaned securities. The Funds may pay a part of the interest received with respect to the investment of collateral to a borrower and/or a third party that is not affiliated with the Funds and is acting as a "placing broker." No fee will be paid to affiliated persons of the Funds.
By lending portfolio securities, each of the Funds can increase its income by continuing to receive interest or dividends on the loaned securities as well as by either investing the cash collateral in permissible investments, such as U.S. Government securities, or obtaining yield in the form of interest paid by the borrower when U.S. Government securities or other forms of non-cash collateral are received. Lending portfolio securities could result in a loss or delay in recovering a Fund's securities if the borrower defaults.
SHORT SALES. Each 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, without payment of any further consideration, for an equal amount of the securities of the same issuer as the securities sold short. Each Fund does not intend to have more than 5% of its net assets (determined at the time of the short sale) subject to short sales.
TEMPORARY DEFENSIVE INSTRUMENTS. As described in the Prospectus each Fund is authorized to invest temporarily a substantial amount, or even all, of its total assets in various short-term fixed income securities to take a defensive position. These securities include:
- Obligations of the U.S. Government and its agencies and instrumentalities. U.S. Government obligations are debt securities issued or guaranteed as to principal or interest by the U.S. Treasury. These securities include Treasury bills, notes and bonds.
- 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.
- 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.
- 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 are primarily used to finance the import, export, transfer or storage of goods. They are "accepted" when a bank guarantees their payment at maturity.
- Repurchase agreements. Repurchase agreements are arrangements involving the purchase of an obligation by the Funds and the simultaneous agreement to resell the same obligation on demand or at a specified future date and at an agreed-upon price.
WHEN-ISSUED OR FORWARD TRANSACTIONS. Each 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 our custodian in order to pay for the commitment. There is a risk that market yields available at settlement may be higher than yields obtained on the purchase date which could result in depreciation of the value of fixed-income when-issued securities. At the time each Fund makes the commitment to purchase a security on a when-issued basis, it will record the transaction and reflect the liability for the purchase and the value of the security in determining its net asset value. Each Fund, generally, has the ability to close out a purchase obligation on or before the settlement date rather than take delivery of the security. Under no circumstances will settlement for such securities take place more than 120 days after the purchase date.
3.
MANAGEMENT OF THE FUNDS
The Trust's Board of Trustees is responsible for the management of the business and affairs of the Funds in accordance with the laws of the State of Delaware. The Board appoints officers who are responsible for the day-to-day operations of each Fund and who execute policies authorized by the Board. As discussed fully below, the Board also approves an investment adviser to each Fund and continues to monitor the cost and quality of the services provided by the investment adviser.
The following Trustee is the Managing Partner of Lord, Abbett & Co. LLC ("Lord Abbett"), and is an "interested person" as defined in the Act. Mr. Dow is also an officer, director, or trustee of each of the fourteen Lord Abbett-sponsored funds, which consist of 42 portfolios or series.
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION
DATE OF BIRTH WITH FUND DURING PAST FIVE YEARS OTHER DIRECTORSHIPS
------------- --------- ---------------------- -------------------
ROBERT S. DOW Director since 1993 Managing Partner and Chief N/A
Lord, Abbett & Co. LLC and Chairman since Investment Officer of Lord
90 Hudson Street 1996. Abbett since 1996.
Jersey City, NJ
Date of Birth: 3/8/1945
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The following outside Trustees are also directors or trustees of each of the fourteen Lord Abbett-sponsored funds.
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION
DATE OF BIRTH WITH FUND DURING PAST FIVE YEARS OTHER DIRECTORSHIPS
------------- --------- ---------------------- -------------------
E. THAYER BIGELOW Director since 1994 Managing General Partner, Bigelow Currently serves as
Bigelow Media, LLC Media, LLC (since 2000); Senior director of Crane Co. and
909 Third Ave., 5th Floor Adviser, Time Warner Inc. (1998 - Huttig Building Products
New York, NY 2000); Acting Chief Executive Inc.
Date of Birth: 10/22/1941 Officer of Courtroom Television
Network (1997 - 1998); President
and Chief Executive Officer of Time
Warner Cable Programming, Inc.
(1991 - 1997).
WILLIAM H.T. BUSH Director since 1998 Co-founder and Chairman of the Currently serves as
Bush-O'Donnell & Co., Inc. Board of the financial advisory director of Wellpoint
101 South Hanley Road firm of Bush-O'Donnell & Company Health Network, Inc., DT
Suite 1025 (since 1986). Industries Inc., and
St. Louis, MO Engineered Support
Date of Birth: 7/14/1938 Systems, Inc.
ROBERT B. CALHOUN, JR. Director since 1998 Managing Director of Monitor Currently serves as
Monitor Clipper Partners Clipper Partners (since 1997) and director of Avondale,
Two Canal Park President of Clipper Asset Inc., Avondale Mills,
Cambridge, MA Management Corp. (since 1991), both Inc., IGI/Earth Color,
Date of Birth: 10/25/1942 private equity investment funds. Inc., Integrated
Graphics, Inc., and
Interstate Bakeries Corp.
STEWART S. DIXON Director since 1976 Partner in the law firm of Wildman, N/A
Wildman, Harrold, Allen & Dixon Harrold, Allen & Dixon (since
225 W. Wacker Drive, Suite 2800 1967).
Chicago, IL
Date of Birth: 11/5/1930
FRANKLIN W. HOBBS Director since 2000 Chief Executive Officer of Houlihan Currently serves as
Houlihan Lokey Howard & Zukin Lokey Howard & Zukin, an investment director of Adolph Coors
685 Third Ave. bank, (January 2002 to present); Company.
New York, NY Chairman of Warburg Dillon Read
Date of Birth: 7/30/1947 (1999 - 2000); Global Head of
Corporate Finance of SBC Warburg
Dillon Read (1997 - 1999); Chief
Executive Officer of Dillon, Read &
Co. (1994 - 1997).
C. ALAN MACDONALD Director since 1988 Retired - General Business and Currently serves as
415 Round Hill Road Governance Consulting (since 1992); director of Fountainhead
Greenwich, CT formerly President and CEO of Water Company, Careside,
Date of Birth: 5/19/1933 Nestle Foods. Inc., Lincoln Snacks,
J.B. Williams Co., Inc.
(personal care products)
and Seix Fund, Inc.*
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CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION
DATE OF BIRTH WITH FUND DURING PAST FIVE YEARS OTHER DIRECTORSHIPS
------------- --------- ---------------------- -------------------
THOMAS J. NEFF Director since 1982 Chairman of Spencer Stuart, U.S., Currently serves as
Spencer Stuart, U.S. an executive search consulting firm director of Ace, Ltd.
277 Park Avenue (since 1996); President of Spencer and Exult, Inc.
New York, NY Stuart, U.S. (1979-1996).
Date of Birth: 10/2/1937
JAMES F. ORR, III Director since 2002 President and CEO of LandingPoint Currently serves as
80 Pinckney Street Capital (since 2002); Chairman and Chairman of Rockefeller
Boston, MA CEO of United Asset Management Foundation, Director of
Date of Birth: 3/5/1943 Corporation (2000 to 2001); Nashua Corp. and
Chairman and CEO of UNUM Provident SteelPoint Technologies.
Corporation (1999 - merger);
Chairman and CEO of UNUM
Corporation (1988 - 1999).
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None of the officers listed below have received compensation from the Trust. All the officers of the Trust may also be officers of the other Lord Abbett-sponsored funds and maintain offices at 90 Hudson Street, Jersey City, New Jersey 07302.
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
(DATE OF BIRTH) WITH FUND OF CURRENT POSITION DURING PAST FIVE YEARS
--------------- --------- ------------------- ----------------------
ROBERT S. DOW Chief Executive Elected in 1995 Managing Partner and Chief Investment
(3/8/1945) Officer and Officer of Lord Abbett since 1996.
President
ROBERT P. FETCH Executive Vice Elected in 1999 Partner and Small-Cap Value Senior
(2/18/1953) President Investment Manager, joined Lord Abbett in
1995.
INGRID C. HOLM (3/21/1959) Executive Vice Elected in 2001 Investment Manager-Global Equity, joined
President Lord Abbett in 2001, formerly International
Portfolio Manager of Batterymarch Financial
Management, Inc. from 2000 to 2001, prior
thereto held various positions at the
Prudential Insurance Company of America.
STEPHEN J. MCGRUDER (11/14/1943) Executive Vice Elected in 1999 Partner and Senior Investment Manager,
President joined Lord Abbett in 1995.
ROBERT G. MORRIS (11/6/1944) Executive Vice Elected in 1998 Partner and Director of Equity Investments,
President joined Lord Abbett in 1991.
JOAN A. BINSTOCK Chief Financial Elected in 1999 Partner and Chief Operations Officer, joined
(3/4/1954) Officer and Vice Lord Abbett in 1999, prior thereto Chief
President Operating Officer of Morgan Grenfell.
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NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
(DATE OF BIRTH) WITH FUND OF CURRENT POSITION DURING PAST FIVE YEARS
--------------- --------- ------------------- ----------------------
TRACIE E. AHERN Vice President Elected in 1999 Partner and Director of Portfolio
(1/12/1968) and Treasurer Accounting and Operations, joined Lord
Abbett in 1999, formerly Vice President -
Head of Fund Administration of Morgan
Grenfell from 1998 to 1999, prior thereto
Vice President of Bankers Trust.
DAVID G. BUILDER Vice President Elected in 2001 Equity Analyst, joined Lord Abbett in 1998,
(1/4/1954) formerly Equity Analyst at Bear Stearns.
DANIEL E. CARPER Vice President Elected in 1993 Partner, joined Lord Abbett in 1979.
(1/22/1952)
JOHN J. DICHIARO (7/30/1957) Vice President Elected in 2000 Partner and Senior Strategy
Coordinator-Small Cap Growth, joined Lord Abbett
in 2000, prior thereto Vice President -
Securities Group of Wafra Investment
Advisory Group.
LESLEY-JANE DIXON (1/1/1964) Vice President Elected in 1999 Partner and Equity Analyst, joined Lord
Abbett in 1995.
DANIEL H. FRASCARELLI (3/11/1954) Vice President Elected in 2001 Partner and Investment Manager, joined Lord
Abbett in 1990.
GERARD S. E. HEFFERNAN, JR. Vice President Elected in 1999 Research Analyst, joined Lord Abbett in
(9/7/1963) 1998, prior thereto Portfolio Manager at CL
Capital Management Company.
PAUL A. HILSTAD Vice President and Elected in 1996 Partner and General Counsel, joined Lord
(12/13/1942) Secretary Abbett in 1995.
LAWRENCE H. KAPLAN (1/16/1957) Vice President and Elected in 1997 Partner and Deputy General Counsel, joined
Assistant Secretary Lord Abbett in 1997.
GREGORY M. MACOSKO (3/4/1947) Vice President Elected in 1999 Partner and Senior Equity Analyst-Small Cap,
joined Lord Abbett in 1996.
A. EDWARD OBERHAUS, III Vice President Elected in 1993 Partner and Manager of Equity Trading,
(12/21/1959) joined Lord Abbett in 1983.
CHRISTINA T. SIMMONS (11/12/1957) Vice President and Elected in 2000 Assistant General Counsel, joined Lord
Assistant Secretary Abbett in 1999, formerly Assistant General
Counsel of Prudential Investments from 1998 to
1999, prior thereto Counsel of Drinker,
Biddle & Reath LLP, a law firm.
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COMMITTEES
The standing committees of the Board of Trustees are the Audit Committee, the Proxy Committee, and the Nominating and Governance Committee.
The Audit Committee is composed wholly of Trustees who are not "interested persons" of the Funds. The members of the Audit Committee are Messrs. Bigelow, Calhoun, Hobbs, and MacDonald. The Audit Committee provides assistance to the Board of Trustees in fulfilling its responsibilities relating to corporate accounting, the reporting practices of the Funds, and the quality and integrity of the Funds' financial reports. Among other things, the Audit Committee is responsible for reviewing and evaluating the performance and independence of the Funds' independent auditors and considering violations of the Funds' Code of Ethics to determine what action should be taken. The Audit Committee meets quarterly and during the past fiscal year met four times.
The Proxy Committee is composed of at least two Trustees who are not "interested persons" of the Funds, and also may include one or more Trustees who are partners or employees of Lord Abbett. The current members of the Proxy Committee are three independent Trustees: Messrs. Dixon, Hobbs, and Neff. The Proxy Committee assists the Board of Trustees in fulfilling its responsibilities relating to the voting of securities held by the Funds. During the past fiscal year, the Proxy Committee met once.
The Nominating and Governance Committee is composed of all the Trustees who are not "interested persons" of the Funds. 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. During the past fiscal year, the Nominating and Governance Committee met six times.
APPROVAL OF ADVISORY CONTRACT
At meetings on December 12, 2002, the Board and its outside Trustees considered
whether to approve the continuation of the existing management agreement between
each of the Funds and Lord Abbett. In addition to the materials the Trustees had
reviewed throughout the course of the year, the Trustees received materials
relating to the management agreement before the meeting and had the opportunity
to ask questions and request further information in connection with their
consideration.
INFORMATION RECEIVED BY THE OUTSIDE TRUSTEES. The materials received by the
Trustees included, but were not limited to, (1) information on the investment
performance of each Fund and a peer group of funds for the preceding twelve
months and for other periods, (2) information on the effective management fee
rates and expense ratios for funds with the same objectives and similar size,
(3) sales and redemption information for each Fund, (4) information regarding
Lord Abbett's financial condition, (5) an analysis of the relative profitability
of the management agreement to Lord Abbett, (6) information regarding the
distribution arrangements of each Fund, (7) information regarding the personnel,
information technology, and other resources devoted by Lord Abbett to managing
each Fund.
In considering whether to approve the continuation of the management agreement, the Board and the outside Trustees did not identify any single factor as paramount or controlling. This summary does not discuss in detail all matters considered. Matters considered by the Board and the outside Trustees in connection with their approval of the continuation of the management agreement included, but were not limited to, the following:
INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board and the outside Trustees considered the investment management services provided by Lord Abbett to each Fund, including investment research, portfolio management, and trading.
INVESTMENT PERFORMANCE AND COMPLIANCE. The Board and the outside Trustees reviewed each Fund's investment performance as well as the performance of the peer group of funds, both in terms of total return and in terms of other statistical measures for the preceding twelve months and for other periods. The Board and the outside Trustees also considered whether each Fund had operated within its investment restrictions.
LORD ABBETT'S PERSONNEL AND METHODS. The Board and the outside Trustees considered the qualifications of the personnel providing investment management services to each Fund, in light of the Fund's investment objective and discipline. Among other things, they considered the size, education, and experience of Lord Abbett's investment management staff, its use of technology, and Lord Abbett's approach to recruiting, training, and retaining investment management personnel.
NATURE AND QUALITY OF OTHER SERVICES. The Board and the outside Trustees considered the nature, quality, costs, and extent of administrative and other services performed by Lord Abbett and Lord Abbett Distributor and the nature and extent of Lord Abbett's supervision of third party service providers, including each Fund's transfer agent, custodian, and
subcustodians.
EXPENSES. The Board and the outside Trustees considered each class' expense ratios and the expense ratios of a peer group of funds. They also considered the amount and nature of fees paid by shareholders.
PROFITABILITY. The Board and the outside Trustees considered the level of Lord Abbett's profits in managing the Funds, including a review of Lord Abbett's methodology for allocating its costs to its management of each Fund. The Board and the outside Trustees concluded that the allocation methodology had a reasonable basis and was appropriate. They considered the profits realized by Lord Abbett in connection with the operation of each Fund and whether the amount of profit is fair for the management of each Fund. They also considered the profits realized from other businesses of Lord Abbett, which may benefit from or be related to each Fund's business. The Board and the outside Trustees also considered Lord Abbett's profit margins in comparison with available industry data, both accounting for and ignoring marketing and distribution expenses, and how those profit margins could affect Lord Abbett's ability to recruit and retain investment personnel.
ECONOMIES OF SCALE. The Board and the outside Trustees considered whether there have been any economies of scale in managing each Fund, whether each Fund has appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale.
OTHER BENEFITS TO LORD ABBETT. The Board and the outside Trustees considered the character and amount of fees paid by each Fund and each Fund's shareholders to Lord Abbett and Lord Abbett Distributor for services other than investment management, the allocation of Fund brokerage, and the receipt of research by Lord Abbett in return for fund brokerage. The Board and the outside Trustees also considered the revenues and profitability of Lord Abbett's investment advisory business apart from its mutual fund business, and the intangible benefits enjoyed by Lord Abbett by virtue of its relationship with each Fund.
ALTERNATIVE ARRANGEMENTS. The Board and the outside Trustees considered whether, instead of approving continuation of the management agreement, employing one or more alternative arrangements might be in the best interests of each Fund, such as continuing to employ Lord Abbett, but on different terms.
After considering all of the relevant factors, the Board and the outside Trustees unanimously voted to approve continuation of the existing management agreement.
COMPENSATION DISCLOSURE
The following table summarizes the compensation for each of the
Directors/Trustees for the Funds and for all Lord Abbett-sponsored funds.
The second column of the following table sets forth the compensation accrued by the Funds for outside Trustees. The third column sets forth the total compensation paid by all Lord Abbett-sponsored funds to the outside directors/trustees, and amounts payable but deferred at the option of the director/trustee, but does not include amounts accrued under the third column. No director/trustee of the funds associated with Lord Abbett and no officer of the funds received any compensation from the funds for acting as a director/trustee or officer.
(1) (2) (3)
FOR THE FISCAL YEAR ENDED FOR YEAR ENDED DECEMBER 31, 2001
OCTOBER 31, 2002 AGGREGATE TOTAL COMPENSATION PAID BY THE FUND AND
NAME OF TRUSTEESS COMPENSATION ACCRUED BY THE FUNDS(1) THIRTEEN OTHER LORD ABBETT-SPONSORED FUNDS(2)
----------------- ------------------------------------ ---------------------------------------------
E. Thayer Bigelow $ $86,000
William H.T. Bush $ $87,400
Robert B. Calhoun, Jr. $ $86,000
Stewart S. Dixon $ $86,200
Franklin W. Hobbs $ $85,000
C. Alan MacDonald $ $86,000
Thomas J. Neff $ $85,000
James F. Orr, III* $ None
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1. Outside Trustees' fees, including attendance fees for board and committee meetings, are allocated among all Lord Abbett-sponsored funds based on the net assets of each fund. A portion of the fees payable by the Fund to its outside Trustees may be deferred at the option of a Trustee under an equity-based plan (the "equity-based plan") that deems the deferred amounts to be invested in shares of a Fund for later distribution to the Trustees. In addition, $25,000 of each Trustee's retainer must be deferred and is deemed invested in shares of the Funds and other Lord Abbett-sponsored funds under the equity-based plan.
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, 2001, including fees directors/trustees have chosen to defer.
The following chart provides certain information on the dollar range of equity securities beneficially owned by each Trustee in the Funds and other Lord Abbett-sponsored funds as of December 31, 2002. The amounts shown include deferred compensation to the Trustees deemed invested in Fund shares. The amounts ultimately received by the Trustees under the deferred compensation plan will be directly linked to the investment performance of the Funds.
DOLLAR RANGE OF EQUITY SECURITIES IN THE FUNDS AGGREGATED DOLLAR RANGE OF
EQUITY SECURITIES IN
NAME OF TRUSTEE ALL VALUE FUND ALPHA FUND INTERNATIONAL FUND LORD ABBETT-SPONSORED FUNDS
--------------- -------------- ---------- ------------------ ---------------------------
Robert S. Dow
E. Thayer Bigelow
William H. T. Bush
Robert B. Calhoun, Jr.
Stewart S. Dixon
Franklin W. Hobbs
C. Alan MacDonald
Thomas J. Neff
James F. Orr, III*
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CODE OF ETHICS
The directors, trustees and officers of 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 Code of Ethics which complies, in substance, with Rule 17j-1 of the Act and each of the recommendations of the Investment Company Institute's Advisory Group on Personal Investing. 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 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, prohibiting profiting on trades of the same security within 60 days and trading on material and non-public information. The Code of Ethics imposes certain similar requirements and restrictions on the independent directors and trustees of each Lord Abbett-sponsored fund to the extent contemplated by the recommendations of such Advisory Group.
4.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of December 13, 2002, our officers and trustees, as a group, owned less than one percent of the outstanding shares of each Fund. As of December 13, 2002, to the best of our knowledge, other than Lord Abbett Distributor and other institutional broker-dealers holding shares for the benefit of their clients, the following shareholders owned more than 5% of a particular class of such Fund's outstanding shares:
ALL VALUE FUND -------------- Hartford Life Separate Account 401 Class P 99.78% PO Box 2999 Hartford, CT |
Shareholders owning 25% or more of outstanding shares may be in control and be able to affect the outcome of certain matters presented for a vote of shareholders.
5.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT MANAGER
As described under "Management" in the Prospectus, Lord Abbett is the Fund's
investment manager. The following Partners of Lord Abbett are also officers
and/or Trustees of a Fund: Tracie E. Ahern, Joan A. Binstock, Daniel E. Carper,
John J. DiChiaro, Lesley-Jane Dixon, Robert S. Dow, Robert P. Fetch, Daniel H.
Frascarelli, Paul A. Hilstad, Lawrence H. Kaplan, Gregory M. Macosko, Stephen J.
McGruder, Robert G. Morris and A. Edward Oberhaus, III. The other Partners are:
Michael Brooks, Zane E. Brown, Patrick Brown, Sholom Dinsky, John E. Erard,
Kevin P. Ferguson, Daria L. Foster, Robert I. Gerber, Michael S. Goldstein,
Michael A. Grant, Howard E. Hansen, Charles Hofer, W. Thomas Hudson, Cinda
Hughes, Ellen G. Itskovitz, Robert A. Lee, Maren Lindstrom, Thomas Malone,
Charles Massare, Jr., Paul McNamara, Robert J. Noelke, R. Mark Pennington,
Walter Prahl, Michael Rose, Eli M. Salzmann, Douglas B. Sieg, Richard Sieling,
Michael T. Smith, Richard Smola, Diane Tornejal, Christopher J. Towle, Edward
von der Linde, and Marion Zapolin. The address of each Partner is 90 Hudson
Street, Jersey City, New Jersey 07302-3973.
Under the Management Agreement between Lord Abbett and the Trust, each Fund is obligated to pay Lord Abbett a monthly fee, based on average daily net assets for each month. The annual rates for each Fund are as follows:
- for the International Fund, at an annual rate of .75 of 1%,
- for allocating the Alpha Fund's assets among the underlying funds, at an annual rate of .50 of 1%,
- for the All Value Fund the fee is calculated at the following annual
rates:
.75 of 1% on the first $200 million of average daily net assets,
.65 of 1% on the next $300 million,
.50 of 1% of the Fund's assets over $500 million.
For the fiscal years ended October 31, 2002 and 2001, such fees amounted to $ and $929,447 for Alpha Fund; $ and $2,112,158 for All Value Fund; and $ and $1,523,030 for International Fund for the same periods.
Although not obligated to do so, for the fiscal year ended October 31, 2002, Lord Abbett has waived all or part of its management fees for the Alpha Fund. For the fiscal year ended October 31, 2002, Lord Abbett did not waive management fees for the All Value Fund and the International Fund.
Each Fund pays all expenses attributable to its operations not expressly assumed by Lord Abbett, including, without limitation, 12b-1 expenses, outside 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, fund accounting expenses, insurance premiums, and other expenses connected with executing portfolio transactions.
ADMINISTRATIVE SERVICES
On or about January 1, 2003, Lord Abbett and the Funds will enter into an Administrative Services Agreement under which Lord Abbett will provide certain administrative services not involving the provision of investment advice to the Funds. Pursuant to the Agreement, each Fund will pay Lord Abbett a monthly fee, based on average daily net assets for each month, at an annual rate of .04%. This will be allocated among the classes of shares of each Fund based on average daily net assets.
PRINCIPAL UNDERWRITER
Lord Abbett Distributor LLC, a New York limited liability company and subsidiary of Lord Abbett, 90 Hudson Street, Jersey City, New Jersey 07302-3973, serves as the principal underwriter for each Fund.
CUSTODIAN AND ACCOUNTING AGENT
State Street Bank and Trust Company, 801 Pennsylvania Avenue, Kansas City, Missouri is each 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 sub-custodians from time to time to hold certain securities purchased by each Fund in foreign countries and to hold cash and currencies for each Fund. In accordance with the requirements of Rule 17f-5, the Board of Trustees have approved arrangements permitting each 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 record keeping functions relating to portfolio transactions and calculates each Fund's net asset value.
TRANSFER AGENT
UMB, N.A., 928 Grand Blvd., Kansas City, Missouri, 64106, acts as the transfer agent and dividend disbursing agent for each Fund.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, Two World Financial Center, New York, New York, 10281, are the independent auditors of each Fund and must be approved at least annually by the Board of Trustees to continue in such capacity. Deloitte & Touche LLP perform audit services for each Fund, including the examination of financial statements included in each Fund's Annual Report to Shareholders.
6.
BROKERAGE ALLOCATIONS AND OTHER PRACTICES
Each Fund's policy is to obtain best execution on all portfolio transactions, which means that it 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 dealer markups and markdowns and taking into account the full range and quality of the brokers' services. Consistent with obtaining best execution, each Fund generally pays, as described below, a higher commission than some brokers might charge on the same transaction. Our policy with respect to best execution governs the selection of brokers or dealers and the market in which the transaction is executed. To the extent permitted by law, a Fund, if considered advantageous, may make a purchase from or sale to another Lord Abbett-sponsored fund without the intervention of any broker-dealer.
Broker-dealers are selected on the basis of their professional capability and the value and quality of their brokerage and research services. Normally, the selection is made by traders who are employees of Lord Abbett. These traders also do the trading for other accounts -- investment companies and other investment clients -- managed by Lord Abbett. They are responsible for obtaining best execution.
In transactions on stock exchanges in the United States, commissions are negotiated, whereas on many foreign stock exchanges commissions are fixed. In the case of securities traded in the foreign and domestic over-the-counter markets, there is generally no stated commission, but the price usually includes an undisclosed commission or markup. Purchases from underwriters of newly-issued securities for inclusion in each Fund's portfolio usually will include a concession paid to the underwriter by the issuer and purchases from dealers serving as market makers will include the spread between the bid and asked prices.
We pay a commission rate that we believe is appropriate to give maximum assurance that our brokers will provide us, on a continuing basis, with the highest level of brokerage services available. While we do not always seek the lowest possible commissions on particular trades, we believe that our commission rates are in line with the rates that many other institutions pay. Our traders are authorized to pay brokerage commissions in excess of those that other brokers might accept on the same transactions in recognition of the value of the services performed by the executing brokers, viewed in terms of either the particular transaction or the overall responsibilities of Lord Abbett, with respect to us and the other accounts they manage. Such services include showing us trading opportunities including blocks, a willingness and ability to take positions in securities, knowledge of a particular security or market-proven ability to handle a particular type of trade, confidential treatment, promptness and reliability.
Some of these brokers also provide research services, at least some of which are useful to Lord Abbett in their overall responsibilities with respect to us and the other accounts they manage. Research includes the furnishing of analyses and
reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts and trading equipment and computer software packages, acquired from third-party suppliers, that enable Lord Abbett to access various information bases. Such services may be used by Lord Abbett in servicing all their accounts, and not all of such services will necessarily be used by Lord Abbett in connection with their management of the Funds. Conversely, such services furnished in connection with brokerage on other accounts managed by Lord Abbett may be used in connection with their management of the Funds, and not all of such services will necessarily be used by Lord Abbett in connection with their advisory services to such other accounts. We have been advised by Lord Abbett that research services received from brokers cannot be allocated to any particular account, are not a substitute for Lord Abbett's services but are supplemental to their own research effort and, when utilized, are subject to internal analysis before being incorporated by Lord Abbett into their investment process. As a practical matter, it would not be possible for Lord Abbett to generate all of the information presently provided by brokers. While receipt of research services from brokerage firms has not reduced Lord Abbett's normal research activities, the expenses of Lord Abbett could be materially increased if they attempted to generate such additional information through their own staff and purchased such equipment and software packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or among brokers, and trades are executed only when they are dictated by investment decisions of the Lord Abbett-sponsored funds to purchase or sell portfolio securities.
When, in the opinion of Lord Abbett, two or more broker-dealers (either directly or through their correspondent clearing agents) are in a position to obtain the best price and execution, preference may be given to brokers who have sold shares of each Fund and/or shares of other Lord-Abbett-sponsored funds, or who have provided investment research, statistical, or other related services to each Fund.
If other clients of Lord Abbett buy or sell the same security at the same time as a Lord Abbett-sponsored fund does, transactions will, to the extent practicable, be allocated among all participating accounts in proportion to the amount of each order and will be executed daily until filled so that each account shares the average price and commission cost of each day. Other clients who direct that their brokerage business be placed with specific brokers or who invest through wrap accounts introduced to Lord Abbett by certain brokers may not participate with a Lord Abbett-sponsored fund in the buying and selling of the same securities as described above. If these clients wish to buy or sell the same security as a Lord Abbett-sponsored fund does, they may have their transactions executed at times different from our transactions and thus may not receive the same price or incur the same commission cost as a Lord Abbett-sponsored fund does.
During the fiscal years ended October 31, 2002, 2001, and 2000, the Funds paid total brokerage commissions on transactions of securities to independent broker-dealers of $ , $1,877,299, and $1,118,967, respectively.
7.
CLASSES OF SHARES
Each Fund offers investors different classes of shares as described in this SAI. The different classes of shares represent investments in the same portfolio of securities but are subject to different expenses and will likely have different share prices. Investors should read this section carefully to determine which class represents the best investment option for their particular situation.
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, the Rule exempts the selection of independent public accountants, the approval of a contract with a principal underwriter and the election of trustees from the separate voting requirements.
The Trust does not hold meetings of shareholders unless one or more matters are required to be acted on by shareholders under the Act. Under the Trust's Declaration of Trust, shareholder meetings may be called at any time by certain officers of the Trust or by a majority of the Trustees (i) for the purpose of taking action upon any matter requiring the vote or authority of each 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 each Fund's outstanding shares and entitled to vote at the meeting.
Shareholder Liability. Delaware law provides that 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 of Trust 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 of Trust, 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.
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.
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 "Net Asset Value Purchases of Class A Shares." 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 exceptions, if you redeem any of those shares on or before the 24th month after the month in which you buy them, you may pay to the Fund a contingent deferred sales charge ("CDSC") of 1%.
CLASS B SHARES. If you buy Class B shares, you pay no sales charge at the time of purchase, but if you redeem your shares before the sixth anniversary of buying them, you will normally pay a CDSC to Lord Abbett Distributor. That CDSC varies depending on how long you own shares. Class B shares are subject to service and distribution fees at an annual rate of 1% of the average daily net asset value of the Class B shares. The CDSC and the Rule 12b-1 plan applicable to the Class B shares are described in the Funds' prospectus.
CONVERSIONS OF CLASS B SHARES. The conversion of Class B shares on the eighth anniversary of their purchase is subject to the continuing availability of a private letter ruling from the Internal Revenue Service, or an opinion of counsel or tax adviser, to the effect that the conversion of Class B shares does not constitute a taxable event for the holder under federal income tax law. If such a revenue ruling or opinion is no longer available, the automatic conversion feature may be suspended, in which event no further conversions of Class B shares would occur while such suspension remained in effect. Although Class B shares could then be exchanged for Class A shares on the basis of relative net asset value of the two classes, without the imposition of a sales charge or fee, such exchange could constitute a taxable event for the holder.
CLASS C SHARES. If you buy Class C shares, you pay no sales charge at the time of purchase, but if you redeem your shares before the first anniversary of buying them, you will normally pay a CDSC of 1% to Lord Abbett Distributor. Class C shares are subject to service and distribution fees at an annual rate of 1% of the average daily net asset value of the Class C shares. The CDSC and the Rule 12b-1 plan applicable to the Class C shares are described in the Funds' prospectus.
CLASS P SHARES. If you buy Class P shares, you pay no sales charge at the time of purchase, and if you redeem your shares you pay no CDSC. Class P shares are subject to service and distribution fees at an annual rate of .45 of 1% of the average daily net asset value of the Class P shares. The Rule 12b-1 plan, applicable to the Class P shares, is described in the prospectus of each Fund which offers Class P shares. Class P shares are available to a limited number of investors.
RULE 12b-1 PLANS
CLASS A, B, C, AND P. Each Fund has adopted a Distribution Plan and Agreement pursuant to Rule 12b-1 of the Act for each of the Fund classes offered in this SAI: the "A Plan," the "B Plan," the "C Plan," and the "P Plan," respectively. The principal features of each Plan are described in the Prospectus; however, this SAI contains additional information that may be of interest to investors. Each Plan is a compensation plan, allowing each class to pay a fixed fee to Lord Abbett Distributor that may be more or less than the expenses Lord Abbett Distributor actually incurs. In adopting each Plan and in approving its continuance, the Board of Trustees has concluded that there is a reasonable likelihood that each Plan will benefit its respective class and such class' shareholders. The expected benefits include greater sales and lower redemptions of class shares, which should allow each class to maintain a consistent cash flow, and a higher quality of service to shareholders by authorized institutions than would otherwise be the case. Each Plan compensates Lord Abbett Distributor for financing activities primarily intended to sell shares of the Funds. 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 each Plan as described in the Prospectus and for payments to dealers for (i) providing continuous services to shareholders, such as answering shareholder inquiries, maintaining records, and assisting shareholders in making redemptions, transfers, additional purchases and exchanges and (ii) their assistance in distributing shares of the Funds.
The amounts paid by each Fund pursuant to the A Plan for the fiscal year ended October 31, 2002, in connection with advertising and marketing activities, and payments to dealers and other agents were:
Alpha Fund -- $ and $ totaling $ All Value Fund -- $ and $ totaling $ International Fund -- $ and $ totaling $ |
The amounts paid to dealers and other agents by each Fund pursuant to the B Plan for the fiscal year ended October 31, 2002, were:
Alpha Fund -- $ All Value Fund -- $ International Fund -- $ |
The amounts paid to dealers and other agents by each Fund pursuant to the C Plan for the fiscal year ended October 31, 2002, were:
Alpha Fund -- $ All Value Fund -- $ International Fund -- $ |
The amounts paid to dealers and other agents by each Fund pursuant to the P Plan for the fiscal year ended October 31, 2002, were:
All Value Fund -- $ International Fund -- $ |
Each Plan requires the Board of Trustees to review, on a quarterly basis, written reports of all amounts expended pursuant to the Plan, the purposes for which such expenditures were made, and any other information the Board of Trustees reasonably requests to enable it to make an informed determination of whether the Plans should be continued. Each Plan shall continue in effect only if its continuance is specifically approved at least annually by vote of the Trustees, including a majority of the Trustees who are not interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Plan or in any agreements related to the Plan ("outside Trustees"), cast in person at a meeting called for the purpose of voting on the Plan. No Plan may be amended to increase materially above the limits set forth therein the amount spent for distribution expenses thereunder without approval by a majority of the outstanding voting securities of the applicable class and the approval of a majority of the Trustees, including a majority of the outside Trustees. As long as the Plans are in effect, the selection or nomination of outside Trustees is committed to the discretion of the outside Trustees.
Payments made pursuant to a Plan are subject to any applicable limitations imposed by rules of the National Association of Securities Dealers, Inc. A Plan terminates automatically if it is assigned. In addition, each Plan may be terminated at any time by vote of a majority of the outside Trustees or by vote of a majority of its class' outstanding voting securities.
CONTINGENT DEFERRED SALES CHARGES. A CDSC applies upon early redemption of shares regardless of class, and (i) will be assessed on the lesser of the net asset value of the shares at the time of redemption or the original purchase price and (ii) will not be imposed on the amount of your account value represented by the increase in net asset value over the initial purchase price (including increases due to the reinvestment of dividends and capital gains distributions) and upon early redemption of shares. In the case of Class A shares, this increase is represented by shares having an aggregate dollar value in your account. In the case of Class B and Class C shares, this increase is represented by that percentage of each share redeemed where the net asset value exceeded the initial purchase price.
CLASS A SHARES. As stated in the Prospectus, subject to certain exceptions, a CDSC of 1% is imposed with respect to those Class A shares (or Class A shares of another Lord Abbett-sponsored fund or series acquired through exchange of such shares) on which a Fund has paid the one-time distribution fee of 1% if such shares are redeemed out of the Lord Abbett-sponsored fund within a period of 24 months from the end of the month in which the original sale occurred.
CLASS B SHARES. As stated in the Prospectus, subject to certain exceptions, if Class B shares (or Class B shares of another Lord Abbett-sponsored fund or series acquired through exchange of such shares) are redeemed out of the Lord Abbett-sponsored 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 each 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 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.. CONTINGENT DEFERRED SALES CHARGE WHICH THE PURCHASE ORDER WAS ACCEPTED ON REDEMPTIONS (AS % OF AMOUNT SUBJECT TO CHARGE) ------------------------------------- ------------------------------------------------- Before the 1st 5.0% On the 1st, before the 2nd. 4.0% On the 2nd, before the 3rd. 3.0% On the 3rd, before the 4th. 3.0% On the 4th, before the 5th. 2.0% On the 5th, before the 6th. 1.0% On or after the 6th anniversary None |
In the table, an "anniversary" is the 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 C SHARES. As stated in the Prospectus, subject to certain exceptions, if Class C shares are redeemed for cash before the first anniversary of their purchase, the redeeming shareholder normally will be required to pay to Lord Abbett Distributor on behalf of Class C shares a CDSC of 1% of the lower of cost or the then net asset value of Class C shares redeemed. If such shares are exchanged into the same class of another Lord Abbett-sponsored fund and subsequently redeemed before the first anniversary of their original purchase, the charge will be collected by Lord Abbett Distributor.
GENERAL. The percentage (1% in the case of Class A and Class C shares and 5% through 1% in the case of Class B shares) used to calculate CDSCs described above for the Class A, Class B, and Class C shares is sometimes hereinafter referred to as the "Applicable Percentage."
With respect to Class A 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 and Class C shares, the CDSC is received by the Fund and is intended to reimburse all or a portion of the amount paid by the Fund if the shares are redeemed before the Fund has had an opportunity to realize the anticipated benefits of having a long-term shareholder account in the Fund. In the case of Class B shares, the CDSC is received by Lord Abbett Distributor and is intended to reimburse its expenses of providing distribution-related service to the Fund (including recoupment of the commission payments made) in connection with the sale of Class B shares before Lord Abbett Distributor has had an opportunity to realize its anticipated reimbursement by having such a long-term shareholder account subject to the B Plan distribution fee.
In no event will the amount of the CDSC exceed the Applicable Percentage of the
lesser of (i) the net asset value of the shares redeemed or (ii) the original
cost of such shares (or of the exchanged shares for which such shares were
acquired). No CDSC will be imposed when the investor redeems (i) shares
representing an aggregate dollar amount of 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 Class C shares, derived from increases in the value of the shares
above the total cost of shares being redeemed due to increases in net asset
value, (iii) shares with respect to which no Lord Abbett-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 for 24 months from the end of
the month in which the original sale occurred (in the case of Class A shares);
for six years or more (in the case of Class B shares) and for one year or more
(in the case of Class C shares). In determining whether a CDSC is payable, (a)
shares not subject to the CDSC will be redeemed before shares subject to the
CDSC and (b) of the shares subject to a CDSC, those held the longest will be the
first to be redeemed.
WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that a 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 adviser. A Fund's class-specific expenses and the effect of the different types of sales charges on your investment will affect your investment results over time. The most important factors are how much you plan to invest and how long you plan to hold your investment. If your goals and objectives change over time and you plan to purchase additional shares, you should re-evaluate those factors to see if you should consider another class of shares.
In the following discussion, to help provide you and your financial adviser with a framework in which to choose a class, we have made some assumptions using a hypothetical investment in a Fund. We used the sales charge rates that generally apply to Class A, Class B, and Class C, and considered the effect of the higher distribution fees on Class B and Class C expenses (which will affect your investment return). Of course, the actual performance of your investment cannot be predicted and will vary based on that Fund's actual investment returns, the operating expenses borne by each class of shares, and the class of shares you purchase. The factors briefly discussed below are not intended to be investment advice, guidelines or recommendations, because each investor's financial considerations are different. The discussion below of the factors to consider in purchasing a particular class of shares assumes that you will purchase only one class of shares and not a combination of shares of different classes.
HOW LONG DO YOU EXPECT TO HOLD YOUR INVESTMENT? While future financial needs cannot be predicted with certainty, knowing how long you expect to hold your investment will assist you in selecting the appropriate class of shares. For example, over time, the reduced sales charges available for larger purchases of Class A shares may offset the effect of paying an initial sales charge on your investment, compared to the effect over time of higher class-specific expenses on Class B or Class C shares for which no initial sales charge is paid. Because of the effect of class-based expenses, your choice should also depend on how much you plan to invest.
INVESTING FOR THE SHORT TERM. If you have a short-term investment horizon (that is, you plan to hold your shares for not more than six years), you should probably consider purchasing Class A or Class C shares rather than Class B shares. This is because of the effect of the Class B CDSC if you redeem before the sixth anniversary of your purchase, as well as the effect of the Class B distribution fee on the investment return for that class in the short term. Class C shares might be the appropriate choice (especially for investments of less than $100,000), because there is no initial sales charge on Class C shares, and the CDSC does not apply to amounts you redeem after holding them one year.
However, if you plan to invest more than $100,000 for the short term, then the more you invest and the more your investment horizon increases toward six years, the more attractive the Class A share option may become. This is because the annual distribution fee on Class C shares will have a greater impact on your account over the longer term than the reduced front-end sales charge available for larger purchases of Class A shares. For example, Class A might be more appropriate than Class C for investments of more than $100,000 expected to be held for 5 or 6 years (or more). For investments over $250,000, that are expected to be held 4 to 6 years (or more), Class A shares may become more appropriate than Class C. If you are investing $500,000 or more, Class A may become more desirable as your investment horizon approaches 3 years or more.
For most investors who invest $1 million or more, Class A shares will generally be the most advantageous choice, no matter how long you intend to hold your shares. For that reason, it may not be suitable for you to place a purchase order for Class B shares of $500,000 or more or a purchase order for Class C shares of $1,000,000 or more. In addition, it may not be suitable for you to place an order for Class B or Class C shares for Retirement and Benefit Plans with at least 100 eligible employees or for a 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 are investing for the longer term (for example, to provide for future college expenses for your child) and do not expect to need access to your money for seven years or more, Class B shares may be an appropriate investment option, if you plan to invest less than $100,000. If you plan to invest more than $100,000 over the long term, Class A shares will likely be more advantageous than Class B shares or Class C shares, as discussed above, because of the effect of the expected lower expenses for Class A shares and the reduced initial sales charges available for larger investments in Class A shares under each Fund's Rights of Accumulation.
Of course, these examples are based on approximations of the effect of current sales charges and expenses on a hypothetical investment over time, and should not be relied on as rigid guidelines.
ARE THERE DIFFERENCES IN ACCOUNT FEATURES THAT MATTER TO YOU? Some account features are available in whole or in part to Class A, Class B and Class C shareholders. Other features (such as Systematic Withdrawal Plans) might not be advisable in non-Retirement 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 withdrawals during that year). See "Systematic Withdrawal Plan" under "Services For Fund Investors" in the Prospectus for more information about the 12% annual waiver of the CDSC. You should carefully review how you plan to use your investment account before deciding which class of shares you buy. For example, the dividends payable to Class B and Class C shareholders will be reduced by the expenses borne solely by each of these classes, such as the higher distribution fee to which Class B and Class C shares are subject.
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 Class B shares and is paid over time, so long as shares remain outstanding, in the case of Class C shares. It is important that investors understand that the primary purpose of the CDSC for the Class B shares and the distribution fee for Class B and Class C shares is the same as the purpose of the front-end sales charge on sales of Class A shares: to compensate brokers and other persons selling such shares. The CDSC, if payable, supplements the Class B distribution fee and reduces the Class C distribution fee expenses for a Fund and Class C shareholders.
8.
PURCHASES, REDEMPTIONS
AND PRICING
Information concerning how we value our shares for the purchase and redemption of our shares is contained in the Prospectus under "Purchases" and "Redemptions," respectively.
Under normal circumstances we calculate a Fund's net asset value as of the close of the NYSE on each day that the NYSE is open for trading by dividing our total net assets by the number of shares outstanding at the time of calculation. The NYSE is closed on Saturdays and Sundays and the following holidays -- New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
Each Fund values its portfolio securities at market value as of the close of the NYSE. Market value will be determined as follows: securities listed or admitted to trading privileges on any national or foreign securities exchange, or on the NASDAQ National Market System are valued at the last sales price, or, if there is no sale on that day, at the mean between the last bid and asked price, or, in the case of bonds, in the over-the-counter market if, in the judgment of the Fund's officers, that market more accurately reflects the market value of the bonds. Over-the-counter securities not traded on the NASDAQ National Market System are valued at the mean between the last bid and asked prices. Securities for which market quotations are not available are valued at fair market value under procedures approved by the Board of Trustees.
All assets and liabilities expressed in foreign currencies will be converted into United States dollars at the mean between the buying and selling rates of such currencies against United States dollars last quoted by any major bank chosen by the investment manager. If such quotations are not available, the rate of exchange will be determined in accordance with policies established by the Board of Trustees. The Board of Trustees will monitor, on an ongoing basis, each Fund's method of valuation.
NET ASSET VALUE PURCHASES OF CLASS A SHARES. As stated in the Prospectus, our Class A shares may be purchased at net asset value under the following circumstances: a) purchases of $1 million or more, b) purchases by Retirement and Benefit Plans with at least 100 eligible employees, c) purchases for Retirement and Benefit Plans made though 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, d) purchases made with dividends and distributions on Class A shares of another Eligible Fund, e) purchases representing repayment under the loan feature of the Lord Abbett-sponsored prototype 403(b) Plan for Class A shares f) purchases by employees of any consenting securities dealer having a sales agreement with Lord Abbett Distributor, g) purchases made by or on behalf of Financial Intermediaries for clients that pay the Financial Intermediaries fees for services that include investment advisory or management services, 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, h) 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, i) purchases by each Lord Abbett-sponsored fund's Directors or 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 j) purchases through an omnibus account of a dealer that features ten or fewer preferred mutual fund families, including the Lord Abbett-sponsored funds, within 30 days of, and with the proceeds from, a redemption through the same dealer's omnibus account of shares of a mutual fund that were originally purchased subject to a sales charge.
Our Class A shares also may be purchased at net asset value 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) employees of our shareholder servicing agent, or iv) by the trustee or custodian under any pension or profit-sharing plan or Payroll Deduction IRA established for the benefit of our directors, trustees, employees of Lord Abbett, or employees of our shareholder service agents. Shares are offered at net asset value to these investors for the purpose of promoting goodwill with employees and others with whom Lord Abbett Distributor and/or the Fund has business relationship.
EXCHANGES. The Prospectus briefly describes the Telephone Exchange Privilege. You may exchange some or all of your shares of any class for those in the same class of: (i) Lord Abbett-sponsored funds currently offered to the public with a sales charge (front-end, back-end or level ), (ii) Lord Abbett U.S. Government Securities Money Market Fund, Inc. ("GSMMF"), or (iii) any authorized institution's affiliated money market fund satisfying Lord Abbett Distributor as to certain omnibus accounts and other criteria, hereinafter referred to as an "authorized money market fund" or "AMMF", to the extent offers and sales may be made in your state. You should read the prospectus of the other fund before exchanging. In establishing a new account by exchange, shares of the Fund being exchanged must have a value equal to at least the minimum initial investment required for the other fund into which the exchange is made.
Shareholders in other Lord Abbett-sponsored funds and AMMFs have the same right to exchange their shares for the corresponding class of each Fund's shares. Exchanges are based on relative net asset values on the day instructions are received by the Fund in Kansas City if the instructions are received in proper form prior to the close of the NYSE. No sales charges are imposed except in the case of exchanges out of GSMMF or AMMF (unless a sales charge (front-end, back-end or level) was paid on the initial investment in a Lord Abbett-sponsored fund). Exercise of the exchange
privilege will be treated as a sale for federal income tax purposes, and, depending on the circumstances, a gain or loss may be recognized. In the case of an exchange of shares that have been held for 90 days or less where no sales charge is payable on the exchange, the original sales charge incurred with respect to the exchanged shares will be taken into account in determining gain or loss on the exchange only to the extent such charge exceeds the sales charge that would have been payable on the acquired shares had they been acquired for cash rather than by exchange. The portion of the original sales charge not so taken into account will increase the basis of the acquired shares.
Shareholders have the exchange privilege unless they refuse it in writing. You should not view the exchange privilege as a means for taking advantage of short-term swings in the market, and we reserve the right to terminate or limit the privilege of any shareholder who makes frequent exchanges. We can revoke or modify the privilege for all shareholders upon 60 days' prior notice.
"Eligible Funds" are AMMF and other Lord Abbett-sponsored funds that are eligible for the exchange privilege, except Lord Abbett Series Fund, Inc. ("LASF"). The exchange privilege will not be available with respect to any otherwise "Eligible Funds" the shares of which at the time are not available to new investors of the type requesting the exchange.
The other funds and series that participate in the Telephone Exchange Privilege
[except (a) GSMMF, (b) certain series of Lord Abbett Tax-Free Income Fund and
Lord Abbett Tax-Free Income Trust for which a Rule 12b-1 Plan is not yet in
effect, and (c) AMMF (collectively, the "Non-12b-1 Funds")] have instituted a
CDSC for each class on the same terms and conditions. No CDSC will be charged on
an exchange of shares of the same class between Lord Abbett funds or between
such funds and AMMF. Upon redemption of shares out of the Lord Abbett-sponsored
funds or out of AMMF, the CDSC will be charged on behalf of and paid: (i) to the
fund in which the original purchase (subject to a CDSC) occurred, in the case of
the Class A shares and (ii) to Lord Abbett Distributor if the original purchase
was subject to a CDSC, in the case of the Class B and Class C shares. Thus, if
shares of a Lord Abbett fund are exchanged for shares of the same class of
another such fund and the shares of the same class tendered ("Exchanged Shares")
are subject to a CDSC, the CDSC will carry over to the shares of the same class
being acquired, including GSMMF and AMMF ("Acquired Shares"). Any CDSC that is
carried over to Acquired Shares is calculated as if the holder of the Acquired
Shares had held those shares from the date on which he or she became the holder
of the Exchanged Shares. Although the Non-12b-1 Funds will not pay a
distribution fee on their own shares, and will, therefore, not impose their own
CDSC, the Non-12b-1 Funds will collect the CDSC (a) on behalf of other Lord
Abbett funds, in the case of the Class A shares and (b) on behalf of Lord Abbett
Distributor, in the case of the Class B and Class C shares. Acquired Shares held
in GSMMF and AMMF that are subject to a CDSC will be credited with the time such
shares are held in GSMMF but will not be credited with the time such shares are
held in AMMF. Therefore, if your Acquired Shares held in AMMF qualified for no
CDSC or a lower Applicable Percentage at the time of exchange into AMMF, that
Applicable Percentage will apply to redemptions for cash from AMMF, regardless
of the time you have held Acquired Shares in AMMF.
LETTER OF INTENTION. Under the terms of the Letter of Intention as described in the Prospectus you may invest $100,000 or more over a 13-month period in shares of a Lord Abbett-sponsored fund (other than shares of LASF, GSMMF and AMMF, unless holdings in GSMMF and AMMF are attributable to shares exchanged from a Lord Abbett-sponsored fund offered with a front-end sales charge ). Class A shares currently owned by you are credited as purchases (at their current offering prices on the date the Letter of Intention is signed) toward achieving the stated investment and reduced initial sales charge for Class A shares. Class A shares valued at 5% of the amount of intended purchases are escrowed and may be redeemed to cover the additional sales charge payable if the Letter of Intention is not completed. The Letter of Intention is neither a binding obligation on you to buy, nor on the Fund to sell, the full amount indicated.
RIGHTS OF ACCUMULATION. As stated in the Prospectus, purchasers (as defined in the Prospectus) may accumulate their investment in Class A shares of Lord Abbett-sponsored funds (other than LASF, GSMMF, and AMMF unless holdings in GSMMF or AMMF are attributable to Class A shares exchanged from a Lord Abbett-sponsored fund offered with a front-end sales charge) so that a current investment, plus the purchaser's holdings valued at the public offering price, reach a level eligible for a discounted sales charge for Class A shares.
REDEMPTIONS. A redemption order is in proper form when it contains all of the information and documentation required by the order form or supplementally by Lord Abbett Distributor or the Fund to carry out the order. The signature(s) and any legal capacity of the signer(s) must be guaranteed by an eligible guarantor. See the Prospectus for expedited redemption procedures.
The right to redeem and receive payment, as described in the Prospectus, may be suspended if the NYSE is closed (except for weekends or customary holidays), trading on the NYSE is restricted or the Securities and Exchange Commission ("SEC") deems an emergency to exist.
Our Board of Trustees may authorize redemption of all of the shares in any account in which there are fewer than 25 shares. Before authorizing such redemption, the Board must determine that it is in our economic best interest or necessary to reduce disproportionately burdensome expenses in servicing shareholder accounts. At least 6 months' prior written notice will be given before any such redemption, during which time shareholders may avoid redemption by bringing their accounts up to the minimum set by the Board.
DIV-MOVE. Under the Div-Move service described in the Prospectus, you can invest the dividends paid on your account of any class into an existing account of the same class in any other Eligible Fund. The account must 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 funds for investment, include a voided, unsigned check and complete the bank authorization.
SYSTEMATIC WITHDRAWAL PLANS. The Systematic Withdrawal Plan ("SWP") also is described in the Prospectus. You may establish a SWP if you own or purchase uncertificated shares having a current offering price value of at least $10,000 in the case of Class A or Class C shares and $25,000 in the case of Class B shares. Lord Abbett prototype retirement plans have no such minimum. With respect to Class B shares, the CDSC will be waived on redemptions of up to 12% per year of the current net asset value of your account at the time the SWP is established. For Class B share redemptions over 12% per year, the CDSC will apply to the entire redemption. Therefore, please contact the Fund for assistance in minimizing the CDSC in this situation. With respect to Class C shares, the CDSC will be waived on and after the first anniversary of their purchase. The SWP involves the planned redemption of shares on a periodic basis by receiving either fixed or variable amounts at periodic intervals. 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 & Trust Company as custodian and contain specific information about the plans excluding 401(k) plans. Explanations of the eligibility requirements, annual custodial fees and allowable tax advantages and penalties are set forth in the relevant plan documents. Adoption of any of these plans should be on the advice of your legal counsel or qualified tax adviser.
PURCHASES THROUGH FINANCIAL INTERMEDIARIES. Each Fund and/or Lord Abbett Distributor has 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 a Fund's or Lord Abbett Distributor's behalf. Each 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. A Financial Intermediary may charge transaction fees on the purchase and/or sale of Fund shares.
REDEMPTIONS IN KIND. Under circumstances in which it is deemed detrimental to the best interests of each Fund's shareholders to make redemption payments wholly in cash, the Fund may pay, in accordance with rules adopted by the SEC, 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. Each Fund presently has no intention to make redemptions in kind under normal circumstances, unless specifically requested by a shareholder.
9.
TAXATION OF THE FUNDS
Each Fund intends to elect and to qualify for the special tax treatment afforded regulated investment companies under the Internal Revenue Code of 1986 (the "Code"). Because each Fund is treated as a separate entity for federal income tax purposes, the status of each Fund as a regulated investment company is determined separately by the Internal Revenue Service. If a Fund qualifies as a regulated investment company, 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 a Fund does not qualify as a regulated investment company, all of its taxable income will be taxed to the Fund at regular corporate rates. Assuming a Fund does qualify as 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. Each Fund intends to distribute to its shareholders each year an amount adequate to avoid the imposition of this excise tax.
Each Fund intends to declare and pay as dividends each year substantially all of its net investment income. Dividends paid by a Fund from its ordinary income or net realized short-term capital gains are taxable to you as ordinary income. Dividends paid by a Fund from its net realized long-term capital gains are taxable to you as long-term capital gains, regardless of the length of time you have owned Fund shares. All dividends are taxable to you regardless of whether they are received in cash or reinvested in Fund shares.
Dividends paid by a Fund to corporate shareholders will 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 received deduction may be limited if you incur indebtedness to acquire Fund shares.
Distributions paid by a 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 gains from the sale of the shares.
Ordinarily, you are required to take distributions by a Fund into account in the year in which they are made. A distribution declared in October, November, or December of any year and payable to shareholders of record on a specified date in those months, however, is deemed paid by a Fund and received by you on December 31 of that calendar year if the distribution is paid by the Fund in January of the following year. Each Fund will send you annual information concerning the tax treatment of dividends and other distributions paid to you by the Fund.
Upon your sale, exchange, or redemption of Fund shares, you will recognize short- or long-term capital gain or loss, depending upon whether your holding period of the Fund shares exceeds one year. 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 dividends classified as "capital gain dividends" received with respect to such shares. Losses on the sale of Fund shares are not deductible if, within a period beginning 30 days before the date of the sale and ending 30 days after the date of the sale, you acquire shares that are substantially identical.
The maximum 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) 20% for capital assets held for more than one year. Capital gains or losses recognized by corporate shareholders are subject to tax at the ordinary income tax rates applicable to corporations.
Certain investment practices that a Fund may utilize, such as investing in futures, foreign currency, or foreign entities classified as "passive foreign investment companies" for U.S. tax purposes, may affect the character and timing of the recognition of gains and losses by a Fund. Such transactions may in turn affect the amount and character of Fund distributions to you.
A Fund may in some cases be subject to foreign withholding taxes, which would reduce the yield on its investments. It is generally expected that you will not be entitled to claim a federal income tax credit or deduction for foreign income taxes paid by a Fund. You may be eligible to claim federal income tax credits or deductions for foreign income taxes paid by the International Fund if more than 50 percent of the value of the Fund's total assets at the close of the tax year consists of stocks or securities in foreign corporations, the Fund has distributed at least 90 percent of its investment company taxable income and net tax-exempt interest, and the Fund makes an election to pass through to you the right to take the credit or
deduction for foreign taxes (not in excess of the actual tax liability). If the Fund makes such an election, you will be required to include such taxes in your gross income (in addition to dividends and distributions you actually receive), treat such taxes as foreign taxes paid by you, and may be entitled to a tax deduction for such taxes or a tax credit, subject to a holding period requirement and other limitations under the Code. However, if you do not itemize deductions for federal income tax purposes, you will not be able to deduct your pro rata potion of qualified foreign taxes paid by the Fund, although you will be required to include your share of such taxes in gross income if the Fund makes the election described above. Solely for purposes of determining the amount of federal income tax credits or deductions for foreign income taxes paid, your distributive share of the foreign taxes paid by the Fund plus the portion of any dividends the Fund pays to you that are derived from foreign sources will be treated as income from foreign sources in your hands. Generally, however, distributions derived from the Fund's long-term and short-term capital gains will not be treated as income from foreign sources. If an election is made, the Fund will send an annual written notice to you indicating the amount that you may treat as the proportionate share of foreign taxes paid and income derived from foreign sources.
You may be subject to a 30% withholding tax on reportable dividends, capital gain distributions, and redemption payments ("backup withholding"). The withholding tax is reduced to 29% for dividends, distributions, and payments that are received for tax purposes after December 31, 2003. Generally, you will be subject to backup withholding if a Fund does not have your certified taxpayer identification number on file, or, to the Fund's knowledge, you have furnished an incorrect number. When establishing an account, you must certify under penalties of perjury that your taxpayer identification number is correct and that you are not otherwise subject to backup withholding.
The tax rules of the various states of the United States and their local jurisdictions with respect to distributions from a Fund can differ from the U.S. federal income tax rules described above. Many states allow you to exclude from your state taxable income the percentage of dividends derived from certain federal obligations, including interest on some federal agency obligations. Certain states, however, may require that a specific percentage of a Fund's income be derived from federal obligations before such dividends may be excluded from state taxable income. A Fund may invest some or all of its assets in such federal obligations. Each Fund intends to provide to you on an annual basis information to permit you to determine whether Fund dividends derived from interest on federal obligations may be excluded from state taxable income.
If you are investing through a tax-deferred retirement account, such as an IRA, special tax rules apply and you should consult your tax adviser for detailed information about the tax consequences to you of owning Fund shares.
The foregoing discussion addresses only the U.S. federal income tax consequences applicable to 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 United States 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 will generally depend upon the status of the owner and the activities of the pass-through entity. 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 adviser regarding the U.S. and foreign tax consequences of the ownership of Fund shares, including the applicable rate of U.S. withholding tax on dividends representing ordinary income and net short-term capital gains, and the applicability of U.S. gift and estate taxes.
Because everyone's tax situation is unique, you should consult your tax adviser regarding the treatment of distributions under the federal, state, and local tax rules that apply to you, as well as the tax consequences of gains or losses from the sale, exchange, or redemption of your Fund shares.
10.
UNDERWRITER
Lord Abbett Distributor LLC, a New York limited liability company and subsidiary of Lord Abbett, 90 Hudson Street, Jersey City, New Jersey 07302-3973, serves as the principal underwriter for the Funds. 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 each 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, as the Funds' principal underwriter, received net commissions after allowance of a portion of the sales charge to independent dealers with respect to Class A shares as follows:
YEAR ENDED OCTOBER 31
2002 2001 2000
----------- ----------- -----------
Gross sales charge $ $ 3,099,029 $ 2,884,037
Amount allowed to dealers $ $ 2,705,298 $ 2,440,046
----------- -----------
Net commissions
received by Lord Abbett $ $ 393,731 $ 443,991
=========== ===========
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11.
PERFORMANCE
Each Fund computes the average annual compounded rates of total return during
specified periods (i) before taxes, (ii) after taxes on Fund distributions, and
(iii) after taxes on Fund distributions and redemption, (or sale) of the Funds
shares at the end of the measurement period. The Funds equate the initial amount
invested to the ending (redeemable) value of such investment by adding one to
the computed average annual total return, expressed as a percentage, (i) before
taxes, (ii) after taxes on Fund distributions, and (iii) after-taxes on Fund
distributions and redemption of the Funds shares at the end of the measurement
period. raising the sum to a power equal to the number of years covered by the
computation and multiplying the result by one thousand dollars, which represents
a hypothetical initial investment. The calculation assumes deduction of the
maximum sales charge from the initial amount invested and reinvestment of all
distributions (i) without the effect of taxes, (ii) less taxes due on such Fund
distributions, and (iii) less taxes due on such Fund distributions and a
redemption of the Fund shares, on the reinvestment dates at prices calculated as
stated in the Prospectus. The ending (redeemable) value is determined by
assuming a complete redemption at the end of the period(s) covered by the
average annual total return computation and, in the case of after taxes on Funds
distributions and redemption of Fund shares, includes subtracting capital gains
taxes resulting from the redemption and adjustments to take into account the tax
benefit from any capital losses that may have resulted from the redemption.
In calculating total returns for Class A shares, the current maximum sales charge of 5.75% (as a percentage of the offering price) is deducted from the initial investment (unless the total return is shown at net asset value). For Class B shares, the payment of the applicable CDSC (5.0% prior to the first anniversary of purchase, 4.0% prior to the second anniversary of purchase, 3.0% prior to the third and fourth anniversaries of purchase, 2.0% prior to the fifth anniversary of purchase, 1.0% prior to the sixth anniversary of purchase and no CDSC on and after the sixth anniversary of purchase) is applied to the Fund's investment result for that class for the time period shown (unless the total return is shown at net asset value). For Class C shares, the 1.0% CDSC is applied to the Fund's investment result for that class for the time period shown prior to the first anniversary of purchase (unless the total return is shown at net asset value). For Class P shares total returns are shown at net asset value.
Using the computation methods described above the following table indicates the average annual compounded rates of total return on an initial investment of one thousand dollars as of October 31, 2002, for each Fund, for one, five, or ten-years life of Fund, where applicable. The after-tax returns were calculated using the highest applicable individual federal marginal tax rates in effect on the reinvestment date. The rates used correspond to the tax character of each component of the distribution (e.g., the ordinary income rate for ordinary income distributions, the short-term capital gain rate for short-term capital gains distributions, and the long-term capital gain rate for long-term capital gains distributions). The tax rates may vary over the measurement period. Potential tax liabilities other than federal tax liabilities (e.g., state and local taxes) were disregarded, as were the effect of phaseouts of certain exemptions, deductions and credits at various income levels, and the impact of the federal alternative minimum income tax. Before- and after-tax returns are provided for Class A shares for the Funds. The after-tax returns for the other classes of shares not shown in the table will vary from those shown. Actual after-tax returns will depend on an investor's tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. A Fund's past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future.
1 YEAR 5 YEAR 10 YEAR LIFE OF FUND
------ ------ ------- ------------
ALPHA FUND
29
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Class A shares
Before Taxes % - - %(3/18/98)
Class A shares after
Taxes on Distributions % - - %
Class A shares after Taxes on
Distributions and Sales of
Fund shares % - - %
Class B shares % - - %(3/18/98)
Class C shares % - - %(3/18/98)
ALL VALUE FUND
Class A shares % % - %(7/15/96)
Class B shares % % - %(6/5/97)
Class C shares
Before Taxes % % - %(1/3/94)
Class C shares after
Taxes on Distributions % % - 11.82%
Class C shares after Taxes on
Distributions and Sales of
Fund shares % % - %
Class P shares - - - %(8/15/01)
INTERNATIONAL FUND
Class A shares
Before Taxes -49.02% - - -3.45% (12/13/96)
Class A shares after
Taxes on Distributions -49.08% - - -4.04 %
Class A shares after Taxes on
Distributions and Sales of
Fund shares -29.72% - - -2.85%
Class B shares -48.86% - - -5.37% (6/2/97)
Class C shares -46.96% - - -5.08% (6/2/97)
Class P shares -45.75% - - -14.54% (3/9/99)
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These figures represent past performance, and an investor should be aware that the investment return and principal value of a Fund investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Therefore, there is no assurance that this performance will be repeated in the future.
The Funds may from time to time quote or otherwise use yield and total return information in advertisements, shareholder reports or sales literature. Thirty-day yield and average annual total return values are computed pursuant to formulas specified by the SEC. The Funds may also from time to time quote distribution rates in reports to shareholders and in sales literature. In addition, the Funds may from time to time advertise or describe in sales literature its performance relative to certain averages, performance rankings, indices, other information prepared by recognized mutual fund statistical services and investment for which reliable performance information is available.
12.
FINANCIAL STATEMENTS
To be provided.
LORD ABBETT
STATEMENT OF ADDITIONAL INFORMATION MARCH 1, 2003
LORD ABBETT SECURITIES TRUST
LORD ABBETT ALL VALUE FUND
(CLASS Y SHARES)
This Statement of Additional Information ("SAI") is not a Prospectus. A Prospectus may be obtained from your securities dealer 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 the Class Y shares of the Lord Abbett Securities Trust - Lord Abbett All Value Fund ("All Value Fund" or the "Fund") dated March 1, 2003.
Shareholder inquiries should be made by directly contacting the Fund or by calling 800-821-5129. The Annual Report to Shareholders is available without charge, upon request by calling 888-522-2388. In addition, you can make inquiries through your dealer.
TABLE OF CONTENTS PAGE
1. Fund History 2
2. Investment Policies 2
3. Management of the Fund 9
4 Control Persons and Principal Holders
of Securities 15
5. Investment Advisory and Other Services 16
6. Brokerage Allocations and Other Practices 17
7. Classes of Shares 18
8. Purchases, Redemptions, and Pricing 19
9. Taxation of the Fund 20
10. Underwriter 21
11. Performance 22
12. Financial Statements 23
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1.
FUND HISTORY
Lord Abbett Securities Trust (the "Trust") is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (the "Act"). The Trust was organized as a Delaware business trust on February 26, 1993 with an unlimited amount of shares of beneficial interest authorized. The Trust has five funds or series, but only shares of Class Y of the All Value Fund are described in this SAI.
2.
INVESTMENT POLICIES
FUNDAMENTAL INVESTMENT RESTRICTIONS. The Fund is subject to the following fundamental investment restrictions that cannot be changed without approval of a majority of the Fund's outstanding shares.
The Fund may not:
(1) borrow money, except that (i) it may borrow from banks (as defined in the Act) in amounts up to 33 1/3% of its total assets (including the amount borrowed), (ii) 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, and (iv) it may purchase securities on margin to the extent permitted by applicable law;
(2) pledge its assets (other than to secure borrowings, or to the extent permitted by the Fund's investment policies as permitted by applicable law);
(3) engage in the underwriting of securities, except pursuant to a merger or acquisition or to the extent that, in connection with the disposition of its portfolio securities, it may be deemed to be an underwriter under federal securities laws;
(4) make loans to other persons, except that the acquisition of bonds, debentures or other corporate debt securities and investment in government obligations, commercial paper, pass-through instruments, certificates of deposit, bankers acceptances, repurchase agreements or any similar instruments shall not be subject to this limitation, and except further that the Fund may lend its portfolio securities, provided that the lending of portfolio securities may be made only in accordance with applicable law;
(5) buy or sell real estate (except that the Fund may invest in securities directly or indirectly secured by real estate or interests therein or issued by companies which invest in real estate or interests therein), or commodities or commodity contracts (except to the extent the Fund may do so in accordance with applicable law and without registering as a commodity pool operator under the Commodity Exchange Act as, for example, with futures contracts);
(6) with respect to 75% of its gross assets, buy securities of one issuer representing more than (i) 5% of its gross assets, except securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities or (ii) 10% of the voting securities of such issuer;
(7) invest more than 25% of its assets, taken at market value, in the securities of issuers in any particular industry (excluding securities of the U.S. Government, its agencies and instrumentalities); or
(8) issue senior securities to the extent such issuance would violate applicable law.
Compliance with the investment restrictions in this Section will be determined at the time of purchase or sale of the security.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. In addition to policies in the Prospectus and the investment restrictions above that cannot be changed without shareholder approval, the Fund is also subject to the following non-fundamental investment policies that may be changed by the Board of Trustees without shareholder approval.
The Fund may not:
(1) make short sales of securities or maintain a short position except to the extent permitted by applicable law;
(2) invest knowingly more than 15% of its net assets (at the time of investment) in illiquid securities;
(3) invest in the securities of other investment companies as defined in the Act, except as permitted by applicable law (All Value Fund may not, however, rely on Sections 12(d)(1)(F) and 12(d)(1)(G) of the Act);
(4) invest in securities of issuers which, with their predecessors, have a record of less than three years' continuous operation, if more than 5% of the Fund's total assets would be invested in such securities (this restriction shall not apply to mortgaged-backed securities, asset-backed securities or obligations issued or guaranteed by the U. S. Government, its agencies or instrumentalities);
(5) hold securities of any issuer if more than 1/2 of 1% of the securities of such issuer are owned beneficially by one or more of the officers or directors/trustees of the Fund or by one or more of its partners or members or underwriter or investment adviser if these owners in the aggregate own beneficially more than 5% of the securities of such issuer;
(6) invest in warrants if, at the time of the acquisition, its investment in warrants, valued at the lower of cost or market, would exceed 5% of the Fund's total assets (included within such limitation, but not to exceed 2% of the Fund's total assets, are warrants which are not listed on the New York or American Stock Exchange or a major foreign exchange);
(7) invest in real estate limited partnership interests or interests in oil, gas or other mineral leases, or exploration or development programs, except that the Fund may invest in securities issued by companies that engage in oil, gas or other mineral exploration or development activities;
(8) write, purchase or sell puts, calls, straddles, spreads or combinations thereof, except to the extent permitted in the Fund's Prospectuses and statements of additional information, as they may be amended from time to time; or
(9) buy from or sell to any of the Fund's officers, directors, employees, or its investment adviser or any of the Fund's officers, directors, trustees, partners or employees, any securities other than its shares.
PORTFOLIO TURNOVER RATE. For the fiscal years ended October 31, 2002 and 2001, the portfolio turnover rate was % and 103.11%, respectively.
ADDITIONAL INFORMATION ON PORTFOLIO RISKS, INVESTMENTS AND TECHNIQUES. This section provides further information on certain types of investments and investment techniques that may be used by the Fund, including their associated risks.
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, the borrowing could increase its losses.
CLOSED-END INVESTMENT COMPANIES. The Fund may invest in shares of closed-end investment companies in the primary or secondary market, if the transaction fee or commission is no greater than the customary broker's fee or commission.
CONVERTIBLE SECURITIES. The Fund may invest in convertible securities. Convertible securities are preferred stocks or debt obligations that are convertible into common stock. They generally offer lower interest or dividend yields than non-convertible securities of similar quality. 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. Generally, the market value of convertible securities tends to decline as interest rates increase and, conversely, to increase as interest rates decline. However, when the market price of the common stock underlying a convertible security approached or exceeds the conversion price of the convertible security, the convertible security tends to reflect the market price of the underlying common stock. As the market price of the underlying common stock declines, the convertible security, like a fixed income security, tends to trade increasingly on a yield basis, and thus, may not decline in price to the same extent as the underlying common stock. The markets for convertible securities may be less liquid than markets for common stocks or bonds.
DEBT SECURITIES. The Fund may invest in debt securities, such as bonds, debentures, government obligations, commercial paper and pass-through instruments. The value of debt securities may fluctuate based on changes in interest rates and the issuer's financial condition. When interest rates rise or the issuer's financial condition worsens or is perceived by the market to be at greater risk, the value of debt securities tends to decline.
DEPOSITARY RECEIPTS. The Fund may invest in sponsored and unsponsored American Depositary Receipts ("ADRs") and similar depository 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 United States. 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. Although the Fund may not invest more than 10% of its assets in foreign securities, ADRs are not subject to this limitation.
FOREIGN CURRENCY TRANSACTIONS. The Fund may, but is not required to, engage in various types of foreign currency exchange transactions to seek to hedge against the risk of loss from changes in currency exchange rates. The Fund may employ a variety of investments and techniques, including spot and forward foreign exchange transactions, currency swaps, listed or OTC options on currencies, and currency futures and options on currency futures (collectively, "Foreign Exchange"). Currently, the Fund generally does not intend to hedge most currency risks.
Forward foreign exchange transactions are OTC contracts to purchase or sell a specified amount of a specified currency or multinational currency unit at a price and future date set at the time of the contract. Spot foreign exchange transactions are similar but require current, rather than future, settlement. Currency futures are similar to forward foreign exchange transactions except that futures are standardized, exchange-traded contracts. Currency options are similar to options on securities, but in consideration for an option premium the writer of a currency option is obligated to sell (in the case of a call option) or purchase (in the case of a put option) a specified amount of a specified currency on or before the expiration date for a specified amount of another currency. The Fund may engage in transactions in options on currencies either on exchanges or OTC markets.
The Fund will not speculate in Foreign Exchange. Accordingly, the Fund will not hedge a currency in excess of the aggregate market value of the securities which it owns (including receivables for unsettled securities sales), or has committed to or anticipates purchasing, which are denominated in such currency. The Fund may, however, hedge a currency by entering into a Foreign Exchange transaction in a currency other than the currency being hedged (a "cross-hedge"). The Fund will only enter into a cross-hedge if we believe that (i) there is a high correlation between the currency in which the cross-hedge is denominated and the currency being hedged, and (ii) executing a cross-hedge through the currency in which the cross-hedge is denominated will be more cost-effective or provide greater liquidity than executing a similar hedging transaction in the currency being hedged.
Foreign Exchange transactions involve substantial risks. Although the Fund will use Foreign Exchange transactions to hedge against adverse currency movements, Foreign Exchange transactions involve the risk that anticipated currency movements will not be accurately predicted and that the Fund's hedging strategies will be ineffective. To the extent that the Fund hedges against anticipated currency movements which do not occur, the Fund may realize losses. Foreign Exchange transactions may subject the Fund to the risk that the counterparty will be unable to honor its financial obligation to the Fund, and the risk that relatively small market movements may result in large changes in the value of a Foreign Exchange instrument. If the Fund cross-hedges, the Fund will face the risk that the Foreign Exchange instrument purchased will not correlate as expected with the position being hedged.
FOREIGN SECURITIES. The Fund may invest up to 10% of its net assets in foreign securities that are primarily traded outside the United States. This limitation does not include ADRs. Foreign securities may involve special risks that are not typically associated with U.S. dollar denominated or quoted securities of U.S. issuers, including the following:
- 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.
- Brokerage commissions, custodial services, and other costs relating to investment in foreign securities markets generally are more expensive than in the U.S.
- 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.
- Foreign issuers are not generally 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.
- There is generally less government regulation of foreign markets, companies and securities dealers than in the U.S.
- 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.
- 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.
- 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.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. Although the Fund has no current intention of doing so, the Fund may, with Board authorization, engage in futures and options on futures transactions in accordance with its investment objective and policies.
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. 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, an investor is required to maintain margin deposits. At the time of entering into a futures transaction or writing an option, an investor 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.
The Fund may purchase and sell futures contracts and purchase and write call and put options on futures contracts for bona fide hedging purposes, including to hedge against changes in interest rates, securities prices, or to the extent the Fund invests in foreign securities, currency exchange rates, or in order to pursue risk management strategies, including gaining efficient exposure to markets and minimizing transaction costs. The Fund may also enter into closing purchase and sale transactions with respect to such contracts and options. The Fund may not purchase or sell futures contracts or options on futures contracts on a CFTC-regulated exchange for non-bona fide hedging purposes if the aggregated initial margin and premiums required to establish such positions would exceed 5% of the liquidation value of the Fund's portfolio, after taking into account unrealized profits and losses on any such contracts it has entered into.
Futures contracts and options on futures contracts present substantial risks, including the following:
- 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.
- 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 may thus be exposed to additional risk of loss.
- 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.
- Futures markets are highly volatile, and the use of futures may increase the volatility of the Fund's net asset value.
- 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.
- Futures contracts and related options may be illiquid, and exchanges may limit fluctuations in futures contract prices during a single day.
- The counterparty to an OTC contract may fail to perform its obligations under the contract.
STOCK INDEX FUTURES. Although the Fund has no current intention of doing so, the Fund may, with Board authorization, seek to reduce the volatility in its portfolio through the use of stock index futures contracts. A stock index futures contract is an agreement pursuant to which two parties agree, one to receive and the other to pay, on a specified date an amount of cash equal to a specified dollar amount -- established by an exchange or board of trade -- times the difference between the value of the index at the close of the last trading day of the contract and the price at which the futures contract is originally written. The purchaser pays no consideration at the time the contract is entered into; the purchaser only pays the good faith deposit described below.
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 discussed above under "Futures Contracts and Options on Futures Contracts." To date, we have not entered into any futures contracts and have no present intent to do so.
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:
- Domestic and foreign securities that are not readily marketable.
- Repurchase agreements and time deposits with a notice or demand period of more than seven days.
- 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 under the Securities Act of 1933 ("144A Securities") and is liquid.
144A Securities may be resold to a qualified institutional buyer 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 qualified institutional buyers 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.
INVESTMENT COMPANIES. The Fund may invest in securities of other investment companies subject to limitations prescribed by the Act, except the Fund cannot rely on Sections 12(d)(1)(F) and (G). These limitations include a prohibition on any 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 securities of any one investment company or more than 10% of its total assets in securities of all investment companies. The Fund indirectly will bear their proportionate share of any management fees and other expenses paid by the investment companies in which they invest. Such investment companies will generally be money market funds or have investment objectives, policies and restrictions substantially similar to those of the investing Fund and will be subject to substantially the same risks.
The Fund may, consistent with its investment policies, invest in investment companies established to accumulate and hold a portfolio of securities that is intended to track the price performance and dividend yield of a well-known securities index. The Fund may use such investment company securities for several reasons, including, but not limited to, facilitating the handling of cash flows or trading, or reducing transaction costs. The price movement of such securities
may not perfectly parallel the price movement of the underlying index. An example of this type of security is the Standard & Poors Depositary Receipt, commonly known as a "SPDR."
LISTED OPTIONS ON SECURITIES. The Fund may purchase and write national securities exchange-listed put and call options on securities or securities indices. A "call option" is a contract sold for a price giving its holder the right to buy a specific amount of securities at a specific price prior to a specified date. A "covered call option" is a call option issued on securities already owned by the writer of the call option for delivery to the holder upon the exercise of the option. The Fund may write covered call options that are traded on a national securities exchange with respect to securities in its portfolio in an attempt to increase its income and to provide greater flexibility in the disposition of portfolio securities. During the period of the option, the Fund forgoes the opportunity to profit from any increase in the market price of the underlying security above the exercise price of the option (to the extent that the increase exceeds its net premium). The Fund may also 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 might otherwise have sold to protect against depreciation.
A "put option" gives the purchaser of the option the right to sell, and obligates the writer to buy, the underlying securities at the exercise price at any time during the option period. A put option sold 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. Writing listed put options may be a useful portfolio investment strategy when the Fund has cash or other reserves available for investment as a result of sales of Fund shares or when the investment manager believes a more defensive and less fully invested position is desirable in light of market conditions. The Fund will not purchase an option if, as a result of such purchase, more than 10% of its total assets would be invested in premiums for such options. The Fund may write covered put options to the extent that cover for such options does not exceed 15% of the Fund's net assets. The Fund may only sell (write) covered call options having an aggregate market value of less than 25% of the Fund's net assets.
The purchase and writing of options is a highly specialized activity that involves special investment risks. The Fund may use options for hedging or cross hedging purposes or to seek to increase total return (which is considered a speculative activity). If the investment manager is incorrect in its expectation of changes in market prices or determination of the correlation between the securities on which options are based and the Fund's portfolio securities, the Fund may incur losses. The use of options can also increase the Fund's transaction costs.
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, may not typically 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 markets 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.
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 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.
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.
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 receives cash equal to 100% of the price of the security sold. Engaging in reverse repurchase agreements may also involve the use of leverage, in that the Fund may reinvest the cash it receives in additional securities. The Fund will attempt to minimize this risk by managing its duration. A Fund's reverse repurchase agreements will not exceed 20% of the Fund's net assets.
SECURITIES LENDING. The Fund may lend portfolio securities to registered broker-dealers. These loans may not exceed 30% of the Fund's total assets. Securities loans will be collateralized by cash or marketable securities issued or guaranteed by the U.S. government or its agencies ("U.S. Government securities") or other permissible means at least equal to 102 percent of the market value of the loaned securities. The Fund may pay a part of the interest received with respect to the investment of collateral to a borrower and/or a third party that is not affiliated with the Fund and is acting as a "placing broker." No fee will be paid to affiliated persons of the Fund.
By lending portfolio securities, the Fund can increase its income by continuing to receive interest or dividends on the loaned securities as well as by either investing the cash collateral in permissible investments, such as U.S. Government securities, or obtaining yield in the form of interest paid by the borrower when U.S. Government securities or other forms of non-cash collateral are received. Lending portfolio securities could result in a loss or delay in recovering the Fund's securities if the borrower defaults.
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, without payment of any further consideration, for an equal amount of the securities of the same issuer as the securities sold short. The Fund does not intend to have more than 5% of its net assets (determined at the time of the short sale) subject to short sales.
TEMPORARY DEFENSIVE INSTRUMENTS. As described in the prospectus the Fund is authorized to invest temporarily a substantial amount, or even all, of its total assets in various short-term fixed income securities to take a defensive position. These securities include:
- Obligations of the U.S. Government and its agencies and instrumentalities. U.S. Government obligations are debt securities issued or guaranteed as to principal or interest by the U.S. Treasury. These securities include Treasury bills, notes and bonds.
- 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.
- 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.
- 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 are primarily used to finance the import, export, transfer or storage of goods. They are "accepted" when a bank guarantees their payment at maturity.
- Repurchase agreements. Repurchase agreements are arrangements involving the purchase of an obligation by the Fund and the simultaneous agreement to resell the same obligation on demand or at a specified future date and at an agreed-upon price.
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 our custodian in order to pay for the commitment. There is a risk that market yields available at settlement may be higher than yields obtained on the purchase date which could result in depreciation of 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 net asset value. 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.
3.
MANAGEMENT OF THE FUND
The Trust's Board of Trustees is responsible for the management of the business and affairs of the Fund in accordance with the laws of the State of Delaware. The Board appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies authorized by the Board. As discussed fully below, the Board also approves an investment adviser to the Fund, continues to monitor the cost and quality of the services provided by the investment adviser, and annually considers whether to renew the contract with the adviser.
The following Trustee is the Managing Partner of Lord, Abbett & Co. LLC ("Lord Abbett"), and is an "interested person" as defined in the Act. Mr. Dow is also an officer, director, or trustee of each of the fourteen Lord Abbett-sponsored funds, which consist of 42 portfolios or series.
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION
DATE OF BIRTH WITH FUND DURING PAST FIVE YEARS OTHER DIRECTORSHIPS
------------- --------- ---------------------- -------------------
ROBERT S. DOW Director since 1993 Managing Partner and Chief N/A
Lord, Abbett & Co. LLC and Chairman since Investment Officer of Lord
90 Hudson Street 1996. Abbett since 1996.
Jersey City, NJ
Date of Birth: 3/8/1945
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The following outside Trustees are also directors or trustees of each of the fourteen Lord Abbett-sponsored funds.
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION
DATE OF BIRTH WITH FUND DURING PAST FIVE YEARS OTHER DIRECTORSHIPS
------------- --------- ---------------------- -------------------
E. THAYER BIGELOW Director since 1994 Managing General Partner, Bigelow Currently serves as
Bigelow Media, LLC Media, LLC (since 2000); Senior director of Crane Co. and
909 Third Ave., 5th Floor Adviser, Time Warner Inc. (1998 - Huttig Building Products
New York, NY 2000); Acting Chief Executive Inc.
Date of Birth: 10/22/1941 Officer of Courtroom Television
Network (1997 - 1998); President
and Chief Executive Officer of Time
Warner Cable Programming, Inc.
(1991 - 1997).
WILLIAM H.T. BUSH Director since 1998 Co-founder and Chairman of the Currently serves as
Bush-O'Donnell & Co., Inc. Board of the financial advisory director of Wellpoint
101 South Hanley Road firm of Bush-O'Donnell & Company Health Network, Inc., DT
Suite 1025 (since 1986). Industries Inc., and
St. Louis, MO Engineered Support
Date of Birth: 7/14/1938 Systems, Inc.
ROBERT B. CALHOUN, JR. Director since 1998 Managing Director of Monitor Currently serves as
Monitor Clipper Partners Clipper Partners (since 1997) and director of Avondale,
Two Canal Park President of Clipper Asset Inc., Avondale Mills,
Cambridge, MA Management Corp. (since 1991), both Inc., IGI/Earth Color,
Date of Birth: 10/25/1942 private equity investment funds. Inc., Integrated
Graphics, Inc., and
Interstate Bakeries Corp.
STEWART S. DIXON Director since 1976 Partner in the law firm of Wildman, N/A
Wildman, Harrold, Allen & Dixon Harrold, Allen & Dixon (since
225 W. Wacker Drive, Suite 2800 1967).
Chicago, IL
Date of Birth: 11/5/1930
FRANKLIN W. HOBBS Director since 2000 Chief Executive Officer of Houlihan Currently serves as
Houlihan Lokey Howard & Zukin Lokey Howard & Zukin, an investment director of Adolph Coors
685 Third Ave. bank, (January 2002 to present); Company.
New York, NY Chairman of Warburg Dillon Read
Date of Birth: 7/30/1947 (1999 - 2000); Global Head of
Corporate Finance of SBC Warburg
Dillon Read (1997 - 1999); Chief
Executive Officer of Dillon, Read &
Co. (1994 - 1997).
C. ALAN MACDONALD Director since 1988 Retired - General Business and Currently serves as
415 Round Hill Road Governance Consulting (since 1992); director of Fountainhead
Greenwich, CT formerly President and CEO of Water Company, Careside,
Date of Birth: 5/19/1933 Nestle Foods. Inc., Lincoln Snacks,
J.B. Williams Co., Inc.
(personal care products)
and Seix Fund, Inc.*
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CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION
DATE OF BIRTH WITH FUND DURING PAST FIVE YEARS OTHER DIRECTORSHIPS
------------- --------- ---------------------- -------------------
THOMAS J. NEFF Director since 1982 Chairman of Spencer Stuart, U.S., Currently serves as
Spencer Stuart, U.S. an executive search consulting firm director of Ace, Ltd.
277 Park Avenue (since 1996); President of Spencer and Exult, Inc.
New York, NY Stuart, U.S. (1979-1996).
Date of Birth: 10/2/1937
JAMES F. ORR, III Director since 2002 President and CEO of LandingPoint Currently serves as
80 Pinckney Street Capital (since 2002); Chairman and Chairman of Rockefeller
Boston, MA CEO of United Asset Management Foundation, Director of
Date of Birth: 3/5/1943 Corporation (2000 to 2001); Nashua Corp. and
Chairman and CEO of
UNUM Provident SteelPoint Technologies.
Corporation (1999 -
merger); Chairman
and CEO of UNUM
Corporation (1988 -
1999).
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None of the officers listed below have received compensation from the Trust. All the officers of the Trust may also be officers of the other Lord Abbett-sponsored funds and maintain offices at 90 Hudson Street, Jersey City, New Jersey 07302.
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
(DATE OF BIRTH) WITH FUND OF CURRENT POSITION DURING PAST FIVE YEARS
--------------- --------- ------------------- ----------------------
ROBERT S. DOW Chief Executive Elected in 1995 Managing Partner and Chief Investment
(3/8/1945) Officer and Officer of Lord Abbett since 1996.
President
ROBERT P. FETCH Executive Vice Elected in 1999 Partner and Small-Cap Value Senior
(2/18/1953) President Investment Manager, joined Lord Abbett in
1995.
INGRID C. HOLM (3/21/1959) Executive Vice Elected in 2001 Investment Manager-Global Equity, joined
President Lord Abbett in 2001, formerly International
Portfolio Manager of Batterymarch Financial
Management, Inc. from 2000 to 2001, prior
thereto held various positions at the
Prudential Insurance Company of America.
STEPHEN J. MCGRUDER Executive Vice Elected in 1999 Partner and Senior Investment Manager,
(11/14/1943) President joined Lord Abbett in 1995.
ROBERT G. MORRIS Executive Vice Elected in 1998 Partner and Director of Equity Investments,
(11/6/1944) President joined Lord Abbett in 1991.
JOAN A. BINSTOCK Chief Financial Elected in 1999 Partner and Chief Operations Officer,
(3/4/1954) Officer and Vice joined Lord Abbett in 1999, prior thereto
President Chief Operating Officer of Morgan Grenfell.
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NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
(DATE OF BIRTH) WITH FUND OF CURRENT POSITION DURING PAST FIVE YEARS
--------------- --------- ------------------- ----------------------
TRACIE E. AHERN Vice President Elected in 1999 Partner and Director of Portfolio
(1/12/1968) and Treasurer Accounting and Operations, joined Lord
Abbett in 1999, formerly Vice President -
Head of Fund Administration of Morgan
Grenfell from 1998 to 1999, prior thereto
Vice President of Bankers Trust.
DAVID G. BUILDER Vice President Elected in 2001 Equity Analyst, joined Lord Abbett in 1998,
(1/4/1954) formerly Equity Analyst at Bear Stearns.
DANIEL E. CARPER Vice President Elected in 1993 Partner, joined Lord Abbett in 1979.
(1/22/1952)
JOHN J. DICHIARO Vice President Elected in 2000 Partner and Senior Strategy
(7/30/1957) Coordinator-Small Cap Growth, joined Lord
Abbett in 2000, prior thereto Vice
President - Securities Group of Wafra
Investment Advisory Group.
LESLEY-JANE DIXON Vice President Elected in 1999 Partner and Equity Analyst, joined Lord
(1/1/1964) Abbett in 1995.
DANIEL H. FRASCARELLI Vice President Elected in 2001 Partner and Investment Manager, joined Lord
(3/11/1954) Abbett in 1990.
GERARD S. E. HEFFERNAN, JR. Vice President Elected in 1999 Research Analyst, joined Lord Abbett in
(9/7/1963) 1998, prior thereto Portfolio Manager at CL
Capital Management Company.
PAUL A. HILSTAD Vice President Elected in 1996 Partner and General Counsel, joined Lord
(12/13/1942) and Secretary Abbett in 1995.
LAWRENCE H. KAPLAN Vice President Elected in 1997 Partner and Deputy General Counsel, joined
(1/16/1957) and Assistant Lord Abbett in 1997.
Secretary
GREGORY M. MACOSKO Vice President Elected in 1999 Partner and Senior Equity Analyst-Small
(3/4/1947) Cap, joined Lord Abbett in 1996.
A. EDWARD OBERHAUS, III Vice President Elected in 1993 Partner and Manager of Equity Trading,
(12/21/1959) joined Lord Abbett in 1983.
CHRISTINA T. SIMMONS Vice President Elected in 2000 Assistant General Counsel, joined Lord
(11/12/1957) and Assistant Abbett in 1999, formerly Assistant General
Secretary Counsel of Prudential Investments from 1998
to 1999, prior thereto Counsel of Drinker,
Biddle & Reath LLP, a law firm.
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COMMITTEES
The standing committees of the Board of Trustees are the Audit Committee, the
Proxy Committee, and the Nominating and Governance Committee.
The Audit Committee is composed wholly of Trustees who are not "interested persons" of the Fund. The members of the Audit Committee are Messrs. Bigelow, Calhoun, Hobbs, and MacDonald. The Audit Committee provides assistance to
the Board of Trustees in fulfilling its responsibilities relating to corporate accounting, 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 auditors and considering violations of the Fund's Code of Ethics to determine what action should be taken. The Audit Committee meets quarterly and during the past fiscal year met four times.
The Proxy Committee is composed of at least two Trustees who are not "interested persons" of the Fund, and also may include one or more Trustees who are partners or employees of Lord Abbett. The current members of the Proxy Committee are three independent Trustees: Messrs. Dixon, Hobbs, and Neff. The Proxy Committee assists the Board of Trustees in fulfilling its responsibilities relating to the voting of securities held by the Fund. During the past fiscal year, the Proxy Committee met once.
The Nominating and Governance Committee is composed of all the 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. During the past fiscal year, the Nominating and Governance Committee met six times.
APPROVAL OF ADVISORY CONTRACT
At meetings on December 12, 2002, the Board and its outside Trustees considered
whether to approve the continuation of the existing management agreement between
the Fund and Lord Abbett. In addition to the materials the Trustees had reviewed
throughout the course of the year, the Trustees received materials relating to
the management agreement before the meeting and had the opportunity to ask
questions and request further information in connection with their
consideration.
INFORMATION RECEIVED BY THE OUTSIDE TRUSTEES. The materials received by the
Trustees included, but were not limited to, (1) information on the investment
performance of the Fund and a peer group of funds for the preceding twelve
months and for other periods, (2) information on the effective management fee
rates and expense ratios for funds with the same objectives and similar size,
(3) sales and redemption information for the Fund, (4) information regarding
Lord Abbett's financial condition, (5) an analysis of the relative profitability
of the management agreement to Lord Abbett, (6) information regarding the
distribution arrangements of the Fund, (7) information regarding the personnel,
information technology, and other resources devoted by Lord Abbett to managing
the Fund.
In considering whether to approve the continuation of the management agreement, the Board and the outside Trustees did not identify any single factor as paramount or controlling. This summary does not discuss in detail all matters considered. Matters considered by the Board and the outside Trustees in connection with their approval of the continuation of the management agreement included, but were not limited to, the following:
INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board and the outside Trustees considered the investment management services provided by Lord Abbett to the Fund, including investment research, portfolio management, and trading.
INVESTMENT PERFORMANCE AND COMPLIANCE. The Board and the outside Trustees reviewed the Fund's investment performance as well as the performance of the peer group of funds, both in terms of total return and in terms of other statistical measures for the preceding twelve months and for other periods. The Board and the outside Trustees also considered whether the Fund had operated within its investment restrictions.
LORD ABBETT'S PERSONNEL AND METHODS. The Board and the outside Trustees considered the qualifications of the personnel providing investment management services to the Fund, in light of the Fund's investment objective and discipline. Among other things, they considered the size, education, and experience of Lord Abbett's investment management staff, its use of technology, and Lord Abbett's approach to recruiting, training, and retaining investment management personnel.
NATURE AND QUALITY OF OTHER SERVICES. The Board and the outside Trustees considered the nature, quality, costs, and extent of administrative and other services performed by Lord Abbett and Lord Abbett Distributor and the nature and extent of Lord Abbett's supervision of third party service providers, including each Fund's transfer agent, custodian, and subcustodians.
EXPENSES. The Board and the outside Trustees considered each class' expense ratios and the expense ratios of a peer group of funds. They also considered the amount and nature of fees paid by shareholders.
PROFITABILITY. The Board and the outside Trustees considered the level of Lord Abbett's profits in managing the Fund, including a review of Lord Abbett's methodology for allocating its costs to its management of the Fund. The Board and the outside Trustees concluded that the allocation methodology had a reasonable basis and was appropriate. They considered the profits realized by Lord Abbett in connection with the operation of the Fund and whether the amount of profit is fair for the management of the Fund. They also considered the profits realized from other businesses of Lord Abbett, which may benefit from or be related to the Fund's business. The Board and the outside Trustees also considered Lord Abbett's profit margins in comparison with available industry data, both accounting for and ignoring marketing and distribution expenses, and how those profit margins could affect Lord Abbett's ability to recruit and retain investment personnel.
ECONOMIES OF SCALE. The Board and the outside Trustees considered whether there have been any economies of scale in managing the Fund, whether the Fund has appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale.
OTHER BENEFITS TO LORD ABBETT. The Board and the outside Trustees considered the character and amount of fees paid by the Fund and the Fund's shareholders to Lord Abbett and Lord Abbett Distributor for services other than investment management, the allocation of Fund brokerage, and the receipt of research by Lord Abbett in return for fund brokerage. The Board and the outside Trustees also considered the revenues and profitability of Lord Abbett's investment advisory business apart from its mutual fund business, and the intangible benefits enjoyed by Lord Abbett by virtue of its relationship with the Fund.
ALTERNATIVE ARRANGEMENTS. The Board and the outside Trustees considered whether, instead of approving continuation of the management agreement, employing one or more alternative arrangements might be in the best interests of the Fund, such as continuing to employ Lord Abbett, but on different terms.
After considering all of the relevant factors, the Board and the outside Trustees unanimously voted to approve continuation of the existing management agreement.
COMPENSATION DISCLOSURE
The following table summarizes the compensation for each of the
Directors/Trustees for the Fund and for all Lord Abbett-sponsored funds.
The second column of the following table sets forth the compensation accrued by the Fund for outside Trustees. The third column sets forth the total compensation paid by all Lord Abbett-sponsored funds to the outside directors/trustees, and amounts payable but deferred at the option of the director/trustee, but does not include amounts accrued under the third column. No director/trustee of the funds associated with Lord Abbett and no officer of the fund received any compensation from the fund for acting as a director/trustee or officer.
(1) (2) (3)
FOR THE FISCAL YEAR ENDED FOR YEAR ENDED DECEMBER 31, 2001
OCTOBER 31, 2002 AGGREGATE TOTAL COMPENSATION PAID BY THE FUND AND
NAME OF TRUSTEESS COMPENSATION ACCRUED BY THE FUND(1) THIRTEEN OTHER LORD ABBETT-SPONSORED FUNDS(2)
----------------- ----------------------------------- ---------------------------------------------
E. Thayer Bigelow $ $86,000
William H.T. Bush $ $87,400
Robert B. Calhoun, Jr. $ $86,000
Stewart S. Dixon $ $86,200
Franklin W. Hobbs $ $85,000
C. Alan MacDonald $ $86,000
Thomas J. Neff $ $85,000
James F. Orr, III* $ None
|
* Elected effective March 14, 2002
1. Outside directors'/trustees' fees, including attendance fees for board and committee meetings, are allocated among all Lord Abbett-sponsored funds based on the net assets of each fund. A portion of the fees payable by the Fund to its outside 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/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.
2. The third column shows aggregate compensation, including directors'/trustees' fees and attendance fees for board and committee meetings, of a nature referred to in footnote one, accrued by the Lord Abbett-sponsored funds during the year ended December 31, 2001, including fees directors/trustees have chosen to defer.
The following chart provides certain information on the dollar range of equity securities beneficially owned by each Trustee in the Fund and other Lord Abbett-sponsored Fund as of December 31, 2002. The amounts shown include deferred compensation to the Trustees deemed invested in Fund shares. The amount ultimately received by the Trustees under the deferred compensation plan will be directly linked to the investment performance of the Funds.
DOLLAR RANGE OF EQUITY AGGREGATED DOLLAR RANGE OF
SECURITIES IN THE EQUITY SECURITIES IN
NAME OF TRUSTEE ALL VALUE FUND LORD ABBETT SPONSORED FUNDS
--------------- -------------- ---------------------------
Robert S. Dow
E. Thayer Bigelow
William H. T. Bush
Robert B. Calhoun, Jr.
Stewart S. Dixon
Franklin W. Hobbs
C. Alan MacDonald
Thomas J. Neff
James F. Orr III *
|
*Elected in March 14, 2002
CODE OF ETHICS
The directors, trustees and officers of 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 Code of Ethics which complies, in
substance, with Rule 17j-1 of the Act and each of the recommendations of the
Investment Company Institute's Advisory Group on Personal Investing. 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 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, prohibiting profiting on trades of the same security within 60
days and trading on material and non-public information. The Code of Ethics
imposes certain similar requirements and restrictions on the independent
directors and trustees of each Lord Abbett-sponsored fund to the extent
contemplated by the recommendations of such Advisory Group.
4.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
It is anticipated that when Class Y shares of the Fund commences operations Lord Abbett will own approximately 100% of the Fund's outstanding shares. It is also anticipated that over time this percentage of ownership will decrease. As of December 13, 2002, there were no record holders of 5% or more of the outstanding shares of Class Y of the Fund.
5.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT MANAGER
As described under "Management" in the Prospectus, Lord Abbett is the Fund's investment manager. The following Partners of Lord Abbett are also officers and/or Trustees of the Fund: Tracie E. Ahern, Joan A. Binstock, Daniel E. Carper, John J. DiChiaro, Lesley-Jane Dixon, Robert S. Dow, Robert P. Fetch, Daniel H. Frascarelli, Paul A. Hilstad, Lawrence H. Kaplan, Gregory M. Macosko, Stephen J. McGruder, Robert G. Morris and A. Edward Oberhaus, III. The other Partners are: Michael Brooks, Zane E. Brown, Patrick Brown, Sholom Dinsky, John E. Erard, Kevin P. Ferguson, Daria L. Foster, Robert I. Gerber, Michael S. Goldstein, Michael A. Grant, Howard E. Hansen, Charles Hofer, W. Thomas Hudson, Cinda Hughes, Ellen G. Itskovitz, Robert A. Lee, Maren Lindstrom, Thomas Malone, Charles Massare, Jr., Paul McNamara, Robert J. Noelke, R. Mark Pennington, Walter Prahl, Michael Rose, Eli M. Salzmann, Douglas B. Sieg, Richard Sieling, Michael T. Smith, Richard Smola, Diane Tornejal, Christopher J. Towle, Edward von der Linde, and Marion Zapolin. The address of each Partner is 90 Hudson Street, Jersey City, New Jersey 07302-3973.
Under the Management Agreement between Lord Abbett and the Trust, the Fund is obligated to pay Lord Abbett a monthly fee, based on average daily net assets for each month. These fees are allocated among the separate classes based on the Fund's average daily net assets. The fee is calculated at the following annual rates:
.75 of 1% on the first $200 million of average daily net assets, .65 of 1% on the next $300 million, and .50 of 1% of the Fund's assets over $500 million.
For the fiscal years ended October 31, 2002 and 2001, such fees amounted to $ and $2,112,158, respectively.
The Fund pays all expenses attributable to its operations not expressly assumed by Lord Abbett, including, without limitation, outside 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, fund accounting expenses, insurance premiums, and other expenses connected with executing portfolio transactions.
Although not obligated to do so, Lord Abbett may waive all or a part of its management fees and/or may assume other expenses of the Fund.
ADMINISTRATIVE SERVICES
On or about January 1, 2003, Lord Abbett and the Fund will enter into an
Administrative Services Agreement under which Lord Abbett will provide certain
administrative services not involving the provision of investment advice to the
Fund. Pursuant to the Agreement, the Fund will pay Lord Abbett a monthly fee,
based on average daily net assets for each month, at an annual rate of .04%.
This will be allocated among the classes of shares of the Fund based on average
daily net assets.
PRINCIPAL UNDERWRITER
Lord Abbett Distributor LLC, a New York limited liability company and subsidiary
of Lord Abbett, 90 Hudson Street, Jersey City, New Jersey 07302-3973, serves as
the principal underwriter for the Fund.
CUSTODIAN AND ACCOUNTING AGENT
State Street Bank and Trust Company, 801 Pennsylvania Avenue, Kansas City,
Missouri 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
sub-custodians from time to time to hold certain securities purchased by the
Trust in foreign countries and to hold cash and currencies for the Trust. In
accordance with the requirements of Rule 17f-5, the Board of Trustees have
approved arrangements permitting the Fund's foreign assets not held by BNY 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 record keeping functions relating to portfolio transactions and
calculates the Fund's net asset value.
TRANSFER AGENT
UMB, N.A., 928 Grand Blvd., Kansas City, Missouri, 64106, acts as the transfer
agent and dividend disbursing agent for the Fund.
INDEPENDENT AUDITORS
Deloitte & Touche LLP, Two World Financial Center, New York, New York, 10281 are
the independent auditors of the Fund and must be approved at least annually by
the Board of Trustees to continue in such capacity. Deloitte & Touche LLP
perform audit services for the Fund, including the examination of financial
statements included in the Fund's Annual Reports to Shareholders.
6.
BROKERAGE ALLOCATIONS AND OTHER PRACTICES
The Fund's policy is to obtain best execution on all portfolio transactions, which means that it 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 dealer markups and markdowns and taking into account the full range and quality of the brokers' services. Consistent with obtaining best execution, the Fund generally pays, as described below, a higher commission than some brokers might charge on the same transaction. Our policy with respect to best execution governs the selection of brokers or dealers and the market in which the transaction is executed. To the extent permitted by law, the Fund, if considered advantageous, make a purchase from or sale to another Lord Abbett-sponsored fund without the intervention of any broker-dealer.
Broker-dealers are selected on the basis of their professional capability and the value and quality of their brokerage and research services. Normally, the selection is made by traders who are employees of Lord Abbett. These traders also do the trading for other accounts -- investment companies and other investment clients -- managed by Lord Abbett. They are responsible for obtaining best execution.
In transactions on stock exchanges in the United States, commissions are negotiated, whereas on many foreign stock exchanges commissions are fixed. In the case of securities traded in the foreign and domestic over-the-counter markets, there is generally no stated commission, but the price usually includes an undisclosed commission or markup. Purchases from underwriters of newly-issued securities for inclusion in the Fund's portfolio usually will include a concession paid to the underwriter by the issuer and purchases from dealers serving as market makers will include the spread between the bid and asked prices.
We pay a commission rate that we believe is appropriate to give maximum assurance that our brokers will provide us, on a continuing basis, with the highest level of brokerage services available. While we do not always seek the lowest possible commissions on particular trades, we believe that our commission rates are in line with the rates that many other institutions pay. Our traders are authorized to pay brokerage commissions in excess of those that other brokers might accept on the same transactions in recognition of the value of the services performed by the executing brokers, viewed in terms of either the particular transaction or the overall responsibilities of Lord Abbett with respect to us and the other accounts they manage. Such services include showing us trading opportunities including blocks, a willingness and ability to take positions in securities, knowledge of a particular security or market proven ability to handle a particular type of trade, confidential treatment, promptness and reliability.
Some of these brokers also provide research services, at least some of which are useful to Lord Abbett in their overall responsibilities with respect to us and the other accounts they manage. Research includes the furnishing of analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts and trading equipment and computer software packages, acquired from third-party suppliers, that enable Lord Abbett to access various information bases. Such services may be used by Lord Abbett in servicing all their accounts, and not all of such services will necessarily be used by Lord Abbett in connection with their management of the Fund. Conversely, such services furnished in connection with brokerage on other accounts managed by Lord Abbett may be used in connection with their management of the Fund, and not all of such services will necessarily be used by Lord Abbett in connection with their advisory services to such other accounts. We have been advised by Lord Abbett that research services received from brokers cannot be allocated to any particular account, are not a substitute for Lord Abbett's services but are supplemental to their own research effort and, when utilized, are subject to internal analysis before being incorporated by Lord Abbett into their investment process. As a practical matter, it would not be possible for Lord Abbett to generate all of the information presently provided by brokers. While receipt of research services from
brokerage firms has not reduced Lord Abbett's normal research activities, the expenses of Lord Abbett could be materially increased if they attempted to generate such additional information through their own staff and purchased such equipment and software packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or among brokers, and trades are executed only when they are dictated by investment decisions of the Lord Abbett-sponsored funds to purchase or sell portfolio securities.
When, in the opinion of Lord Abbett, two or more broker-dealers (either directly or through their correspondent clearing agents) are in a position to obtain the best price and execution, preference may be given to brokers who have sold shares of the Fund and/or shares of other Lord Abbett-sponsored funds, or who have provided investment research, statistical, or other related services to the Fund.
If other clients of Lord Abbett buy or sell the same security at the same time as a Lord Abbett-sponsored fund does, transactions will, to the extent practicable, be allocated among all participating accounts in proportion to the amount of each order and will be executed daily until filled so that each account shares the average price and commission cost of each day. Other clients who direct that their brokerage business be placed with specific brokers or who invest through wrap accounts introduced to Lord Abbett by certain brokers may not participate with a Lord Abbett-sponsored fund in the buying and selling of the same securities as described above. If these clients wish to buy or sell the same security as a Lord Abbett-sponsored fund does, they may have their transactions executed at times different from our transactions and thus may not receive the same price or incur the same commission cost as a Lord Abbett-sponsored fund does.
During the fiscal year ended October 31, 2002 and 2001, All Value Fund paid total brokerage commission on transactions of securities to independent broker-dealers of $ and $1,052,316, respectively.
7.
CLASSES OF SHARES
The Fund offers different classes of shares to eligible purchasers. Only Class Y shares are offered in this SAI. 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.
All shares have equal noncumulative voting rights and equal rights with respect to dividends, assets and liquidation, except for certain class-specific expenses. They are fully paid and nonassessable when issued and have no preemptive or conversion rights. 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 beneficial interest of an investment company such as a fund shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the beneficial interest 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, the Rule exempts the selection of independent public auditors, the approval of a contract with a principal underwriter and the election of trustees from the separate voting requirements.
The Trust does not hold meetings of shareholders unless one or more matters are required to be acted on by shareholders under the Act. Under the Trust's Declaration of Trust, shareholder meetings may be called at any time by certain officers of the Trust or by a majority of the trustees (i) for the purpose of taking action upon any matter requiring the vote or authority of the Fund's shareholders or upon other matters deemed to be necessary or desirable or (ii) upon the written request of the holders of at least one-quarter of the Fund's outstanding shares and entitled to vote at the meeting.
Shareholder Liability. Delaware law provides that 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 of Trust 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 of Trust, 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.
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.
8.
PURCHASES, REDEMPTIONS
AND PRICING
Information concerning how we value our shares for the purchase and redemption of our shares is contained in the Prospectus under "Purchases" and "Redemptions," respectively.
Under normal circumstance, we calculate the Fund's net asset value as of the close of the NYSE on each day that the NYSE is open for trading by dividing our total net assets by the number of shares outstanding at the time of calculation. The NYSE is closed on Saturdays and Sundays and the following holidays -- New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The Fund values its portfolio securities at market value as of the close of the NYSE. Market value will be determined as follows: securities listed or admitted to trading privileges on any national or foreign securities exchange or on the NASDAQ National Market System are valued at the last sales price, or, if there is no sale on that day, at the mean between the last bid and asked prices, or, in the case of bonds, in the over-the-counter market if, in the judgment of the Fund's officers, that market more accurately reflects the market value of the bonds. Over-the-counter securities, not traded on the NASDAQ National Market System, are valued at the mean between the last bid and asked prices. Securities for which market quotations are not available are valued at fair market value under procedures approved by the Board of Trustees.
The net asset value per share for the Class Y shares will be determined by taking the net assets and dividing by the number of Class Y shares outstanding. Our Class Y shares will be offered at net asset value.
CLASS Y SHARE EXCHANGES. The Prospectus briefly describes the Telephone Exchange Privilege. You may exchange some or all of your Class Y shares for Class Y shares of any Lord Abbett-sponsored funds currently offering Class Y shares to the public. 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.
REDEMPTIONS. A redemption order is in proper form when it contains all of the information and documentation required by the order form or supplementally by Lord Abbett Distributor or the Fund to carry out the order. The signature(s) and any legal capacity of the signer(s) must be guaranteed by an eligible guarantor. See the Prospectus for expedited redemption procedures.
The right to redeem and receive payment, as described in the Prospectus, may be suspended if the NYSE is closed (except for weekends or customary holidays), trading on the NYSE is restricted or the Securities and Exchange Commission ("SEC") deems an emergency to exist.
Our Board of Trustees may authorize redemption of all of the shares in any account in which there are fewer than 25 shares. Before authorizing such redemption, the Board must determine that it is in our economic best interest or necessary to reduce disproportionately burdensome expenses in servicing shareholder accounts. At least 6 months' prior
written notice will be given before any such redemption, during which time shareholders may avoid redemption by bringing their accounts up to the minimum set by the Board.
PURCHASES THROUGH FINANCIAL INTERMEDIARIES. The Fund and/or Lord Abbett Distributor has 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 the Fund's or Lord Abbett Distributor's behalf. 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. A Financial Intermediary may charge transaction fees on the purchase and/or sale of Fund shares.
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, in accordance with rules adopted by the SEC, 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. The Fund presently has no intention to make redemptions in kind under normal circumstances, unless specifically requested by a shareholder.
9.
TAXATION OF THE FUND
The Fund intends to elect and to qualify for the special tax treatment afforded regulated investment companies under the Internal Revenue Code of 1986 (the "Code"). If it qualifies as a regulated investment company, 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 does not qualify as a regulated investment company, all of its taxable income will be taxed to the Fund at regular corporate rates. Assuming the Fund does qualify as 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 investment income. Dividends paid by the Fund from its ordinary income or net realized short-term capital gains are taxable to you as ordinary income. Dividends paid by the Fund from its net realized long-term capital gains are taxable to you as long-term capital gains, regardless of the length of time you have owned Fund shares. All dividends are taxable to you regardless of whether they are received in cash or reinvested in Fund shares.
Dividends paid by the Fund to corporate shareholders will 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 received deduction may be limited if you incur indebtedness to acquire Fund shares.
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 gains 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. A distribution declared in October, November, or December of any year and payable to shareholders of record on a specified date in those months, however, is deemed paid by the Fund and received by you on December 31 of that calendar year if the distribution is paid by the Fund in January of the following year. The Fund will send you annual information concerning the tax treatment of dividends and other distributions paid to you by the Fund.
Upon your sale, exchange, or redemption of Fund shares, you will recognize short- or long-term capital gain or loss, depending upon whether your holding period of the Fund shares exceeds one year. 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 dividends classified as "capital gain dividends" received with respect to such shares. Losses on the sale of Fund shares are not deductible if, within a period beginning 30 days before the date of the sale and ending 30 days after the date of the sale, you acquire shares that are substantially identical.
The maximum 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) 20% for capital assets held for more than one year. Capital gains or losses recognized by corporate shareholders are subject to tax at the ordinary income tax rates applicable to corporations.
Certain investment practices that the Fund may utilize, such as investing in futures, foreign currency, or foreign entities classified as "passive foreign investment companies" for U.S. tax purposes, may affect the character and timing of the recognition of gains and losses by the Fund. Such transactions may in turn affect the amount and character of Fund distributions to you.
The Fund may in some cases be subject to foreign withholding taxes, which would reduce the yield on its investments. It is generally expected that you will not be entitled to claim a federal income tax credit or deduction for foreign income taxes paid by the Fund.
You may be subject to a 30% withholding tax on reportable dividends, capital gain distributions, and redemption payments ("backup withholding"). The withholding tax is reduced to 29% for dividends, distributions, and payments that are received for tax purposes after December 31, 2003. Generally, you will be subject to backup withholding if the Fund does not have your certified taxpayer identification number on file, or, to the Fund's knowledge, you have furnished an incorrect number. When establishing an account, you must certify under penalties of perjury that your taxpayer identification number is correct and that you are not otherwise subject to backup withholding.
The tax rules of the various states of the United States and their local jurisdictions with respect to distributions from the Fund can differ from the U.S. federal income tax rules described above. Many states allow you to exclude from your state taxable income the percentage of dividends derived from certain federal obligations, including interest on some federal agency obligations. Certain states, however, may require that a specific percentage of the Fund's income be derived from federal obligations before such dividends may be excluded from state taxable income. The Fund may invest some or all of its assets in such federal obligations. The Fund intends to provide to you on an annual basis information to permit you to determine whether Fund dividends derived from interest on federal obligations may be excluded from state taxable income.
If you are investing through a tax-deferred retirement account, such as an IRA, special tax rules apply and you should consult your tax adviser for detailed information about the tax consequences to you of owning Fund shares.
The foregoing discussion addresses only the U.S. federal income tax consequences applicable to 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 United States 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 will generally depend upon the status of the owner and the activities of the pass-through entity. 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 adviser regarding the U.S. and foreign tax consequences of the ownership of Fund shares, including the applicable rate of U.S. withholding tax on dividends representing ordinary income and net short-term capital gains, and the applicability of U.S. gift and estate taxes.
Because everyone's tax situation is unique, you should consult your tax adviser regarding the treatment of distributions under the federal, state, and local tax rules that apply to you, as well as the tax consequences of gains or losses from the sale, exchange, or redemption of your Fund shares.
10.
UNDERWRITERS
Lord Abbett Distributor LLC, a New York limited liability company and subsidiary of Lord Abbett, 90 Hudson Street, Jersey City, New Jersey 07302-3973, serves as the exclusive underwriter for the Fund. The Fund has entered into a distribution agreement with Lord Abbett Distributor, under which Lord Abbett Distributor is obligated to us 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.
11.
PERFORMANCE
The Fund computes the average annual compounded rates of total return during
specified periods (i) before taxes, (ii) after taxes on Fund distributions, and
(iii) after taxes on Fund distributions and redemption, (or sale) of the Fund
shares at the end of the measurement period. The Fund equates the initial amount
invested to the ending (redeemable) value of such investment by adding one to
the computed average annual total return, expressed as a percentage, (i) before
taxes, (ii) after taxes on Fund distributions, and (iii) after-taxes on Fund
distributions and redemption of the Fund shares at the end of the measurement
period, raising the sum to a power equal to the number of years covered by the
computation and multiplying the result by one thousand dollars, which represents
a hypothetical initial investment. The calculation assumes deduction of the
maximum sales charge from the initial amount invested and reinvestment of all
distributions (i) without the effect of taxes, (ii) less taxes due on such Fund
distributions, and (iii) less taxes due on such Fund distributions and a
redemption of the Fund shares, on the reinvestment dates at prices calculated as
stated in the Prospectus. The ending (redeemable) value is determined by
assuming a complete redemption at the end of the period(s) covered by the
average annual total return computation and, in the case of after taxes on Fund
distributions and redemption of Fund shares, includes subtracting capital gains
taxes resulting from the redemption and adjustments to take into account the tax
benefit from any capital losses that may have resulted from the redemption.
In calculating total returns for Class Y shares no sales charge is deducted from the initial investment and the return is shown at net asset value. Total returns also assume that all dividends and capital gains distributions during the period are reinvested at net asset value per share, and that the investment is redeemed at the end of the period.
Using the computation methods described above the following table indicates the average annual compounded rates of total return on an initial investment of one thousand dollars as of October 31, 2002, for the Fund, for one, five, or ten years, and life of Fund, where applicable. The after-tax returns were calculated using the highest applicable individual federal marginal tax rates in effect on the reinvestment date. The rates used correspond to the tax character of each component of the distribution (e.g., the ordinary income rate for ordinary income distributions, the short-term capital gain rate for short-term capital gains distributions, and the long-term capital gain rate for long-term capital gains distributions). The tax rates may vary over the measurement period. Potential tax liabilities other than federal tax liabilities (e.g. state and local taxes) were disregarded, as were the effect of phaseouts of certain exemptions, deductions and credits at various income levels, and the impact of the federal alternative minimum income tax. Before and after tax returns are provided for Class C shares for the Fund, because Class Y shares have less than one year of performance. Actual after-tax returns will depend on an investor's tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. A Fund's past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future.
1 YEAR 5 YEARS 10 YEARS LIFE OF FUND
------ ------- -------- ------------
All Value Fund - Class C
Before Taxes % % % (01/3/94)
Class C shares after
Taxes on Distributions % % %
Class C shares after Taxes
on Distributions and Sales
of Fund shares % % %
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These figures represent past performance, and an investor should be aware that the investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Therefore, there is no assurance that this performance will be repeated in the future.
The Fund may from time to time quote or otherwise use yield and total return information in advertisements, shareholder reports or sales literature. Thirty-day yield and average annual total return values are computed pursuant to formulas specified by the SEC. The Fund may also from time to time quote distribution rates in reports to shareholders and in sales literature. In addition, the Fund may from time to time advertise or describe in sales literature its performance
relative to certain averages, performance rankings, indices, other information prepared by recognized mutual fund statistical services and investment for which reliable performance information is available.
12.
FINANCIAL STATEMENTS
To be provided.
LORD ABBETT SECURITIES TRUST
PART C
OTHER INFORMATION
This Post-Effective Amendment No. 38 (the "Amendment") to the Registrant's Registration Statement relates to Lord Abbett All Value Fund, Alpha Series and International Series, each a series of Lord Abbett Securities Trust.
The other Series and classes of shares of the Registrant are listed below and are offered by the Prospectuses and Statements of Additional Information in Parts A and B, respectively, of the Post-Effective Amendments to the Registrant's Registration Statements as identified. The following are separate series and classes of shares of the Registrant. This Amendment does not relate to, amend or otherwise affect the Prospectuses and Statements of Additional Information contained in the prior Post-Effective Amendments listed below, and pursuant to Rule 485(d) under the Securities Act of 1933, does not affect the effectiveness of such Post-Effective Amendments.
POST-EFFECTIVE
AMENDMENT NO.
International Series - Class Y shares 36
Lord Abbett Micro-Cap Value Fund - Classes A and Y shares 36
Lord Abbett Micro-Cap Growth Fund - Classes A and Y shares 36
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Item 23. EXHIBITS
(a) DECLARATION AND AGREEMENT OF TRUST, AS AMENDED. Amendments to Declaration and Agreement of Trust incorporated by reference to Post-Effective Amendment No. 36 to the Registrant's Registration Statement filed on February 28, 2002.
(b) BY-LAWS. Amended and Restated By-laws incorporated by reference to Post-Effective Amendment No. 34 to the Registrant's Registration Statement filed on March 1, 2001.
(c) INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS. Not applicable.
(d) INVESTMENT ADVISORY CONTRACTS. FILED HEREIN.
(e) UNDERWRITING CONTRACTS. DISTRIBUTION AGREEMENT. Incorporated by reference to Post-Effective Amendment No. 34 to the Registrant's Registration Statement filed on March 1, 2001.
(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 filed on March 1, 2001.
(g) CUSTODIAN AGREEMENTS. Incorporated by reference to Post-Effective Amendment No. 36 to the Registrant's Registration Statement filed on February 28, 2002.
(h) OTHER MATERIAL CONTRACTS.
(i) TRANSFER AGENCY AGREEMENT. Incorporated by reference.
(ii) ADMINISTRATIVE SERVICES AGREEMENT. FILED HEREIN.
(i) LEGAL OPINION. To be filed by Amendment.
(j) OTHER OPINION. To be filed by Amendment.
(k) OMITTED FINANCIAL STATEMENTS. Not applicable.
(l) INITIAL CAPITAL AGREEMENTS. Incorporated by reference.
(m) RULE 12b-1 PLANS.
(i) Form of Class A 12b-1 Plan incorporated by reference to Post-Effective Amendment No. 33 to the Registrant's Registration Statement filed on March 15, 2000.
(ii) Form of Class B 12b-1 Plan Incorporated by reference to Post-Effective Amendment No. 34 to the Registrant's Registration Statement filed on March 1, 2001.
(iii) Form of Class C 12b-1 Plan Incorporated by reference to Post-Effective Amendment No. 34 to the Registrant's Registration Statement filed on March 1, 2001.
(iv) Form of Class P 12b-1 Plan Incorporated by reference to Post-Effective Amendment No. 34 to the Registrant's Registration Statement filed on March 1, 2001.
(n) RULE 18F-3 PLAN. FILED HEREIN.
(o) RESERVED.
(p) CODE OF ETHICS. FILED HEREIN.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
None.
Item 25. INDEMNIFICATION
All Trustees, officers, employees and agents of the Registrant are to be indemnified as set forth in Section 4.3 of the Registrant's Declaration and Agreement of Trust.
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 expenses 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 of 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.
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Lord, Abbett & Co. LLC acts as investment adviser for the Lord Abbett registered investment companies and provides investment management services to various pension plans, institutions and individuals. Lord Abbett Distributor LLC, a limited liability company, serves as their distributor and principal underwriter. Other than acting as trustees, directors and/or officers of open-end investment companies managed by Lord, Abbett & Co. LLC, none of Lord, Abbett & Co. LLC's partners has, in the past two fiscal years, engaged in any other business, profession, vocation or employment of a substantial nature for his own account or in the capacity of director, trustee, officer, employee, or partner of any entity.
Item 27. PRINCIPAL UNDERWRITERS
(a) Lord Abbett Distributor LLC serves as the principal underwriter for the Registrant. Lord Abbett Distributor LLC also serves as principal underwriter for the following Lord Abbett-sponsored funds:
Lord Abbett Affiliated Fund, Inc.
Lord Abbett Blend Trust
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Global Fund, Inc.
Lord Abbett Investment Trust
Lord Abbett Large-Cap Growth Fund
Lord Abbett Mid-Cap Value Fund, Inc.
Lord Abbett Research Fund, Inc.
Lord Abbett Series Fund, Inc.
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett Tax-Free Income Trust
Lord Abbett U.S. Government Securities Money Market Fund, Inc.
(b) Lord Abbett Distributor LLC is a wholly-owned subsidiary of Lord, Abbett & Co. LLC. The partners of Lord, Abbett & Co. LLC, who are also officers of the Registrant are:
NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS (1) WITH THE REGISTRANT -------------------- ------------------- Robert S. Dow Chairman, CEO and President Robert P. Fetch Executive Vice President Stephen J. McGruder Executive Vice President Robert G. Morris Executive Vice President Paul A. Hilstad Vice President & Secretary Joan A. Binstock CFO & Vice President Tracie E. Ahern Vice President & Treasurer Daniel E. Carper Vice President John J. DiChiaro Vice President Lesley-Jane Dixon Vice President Daniel H. Frascarelli Vice President Lawrence H. Kaplan Vice President and Assistant Secretary Gregory M. Macosko Vice President A. Edward Oberhaus Vice President |
The other partners of Lord, Abbett & Co. LLC who are neither officers nor Trustees of the Registrant are Michael Brooks, Zane E. Brown, Patrick Browne, Sholom Dinsky, John E. Erard, Kevin P. Ferguson, Daria L. Foster, Robert I. Gerber, Michael S. Goldstein, Michael A. Grant, Howard E. Hansen, Charles Hofer, W. Thomas Hudson, Cinda Hughes, Ellen G. Itskovitz, Robert A. Lee, Maren Lindstrom, Thomas Malone, Charles Massare, Paul McNamara, Robert J. Noelke, R. Mark Pennington, Walter Prahl, Michael Rose, Eli M. Salzmann, Douglas B. Sieg, Richard Sieling, Michael T. Smith, Richard Smola, Diane Tornejal, Christopher J. Towle, Edward von der Linde, and Marion Zapolin.
* Each Partner has a principal business address of: 90 Hudson Street, Jersey City, New Jersey 07302
(c) Not applicable
Item 28. LOCATION OF ACCOUNTS AND RECORDS
The Registrant maintains the records, required by Rules 31a - 1(a) and
(b), and 31a - 2(a) at its main office.
Lord, Abbett & Co. LLC maintains the records required by Rules 31a - 1(f) and 31a - 2(e) at its main office.
Certain records such as cancelled stock certificates and correspondence may be physically maintained at the main office of the Registrant's Transfer Agent, Custodian, or Shareholder Servicing Agent within the requirements of Rule 31a-3.
Item 29. MANAGEMENT SERVICES
None
Item 30. UNDERTAKINGS
The Registrant undertakes to furnish each person to whom a prospectus is delivered with a copy of the Registrant's latest annual report to shareholders, upon request and without charge.
The Registrant undertakes, if requested to do so by the holders of at least 10% of the Registrant's outstanding shares, to call a meeting of shareholders for the purpose of voting upon the question of removal of a trustee or trustees and to assist in communications with other shareholders as required by Section 16(c) of the Investment Company Act of 1940, as amended.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jersey City, and State of New Jersey on the 26th day of December, 2002.
LORD ABBETT SECURITIES TRUST
BY: /s/ CHRISTINA T. SIMMONS
------------------------
Christina T. Simmons
Vice President & Assistant Secretary
BY: /s/ JOAN A. BINSTOCK
--------------------
Joan A. Binstock
Chief Financial Officer
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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.
Signatures Title Date
---------- ----- ----
Chairman, President
Robert S. Dow* and Trustee December 26, 2002
--------------------------- ------------------------- -----------------
Robert S. Dow
E. Thayer Bigelow* Trustee December 26, 2002
--------------------------- ------------------------- -----------------
E. Thayer Bigelow
William H. T. Bush* Trustee December 26, 2002
--------------------------- ------------------------- -----------------
William H. T. Bush
Robert B. Calhoun, Jr.* Trustee December 26, 2002
--------------------------- ------------------------- -----------------
Robert B. Calhoun, Jr.
Stewart S. Dixon* Trustee December 26, 2002
--------------------------- ------------------------- -----------------
Stewart S. Dixon
Franklin W. Hobbs* Trustee December 26, 2002
--------------------------- ------------------------- -----------------
Franklin W. Hobbs
C. Alan MacDonald* Trustee December 26, 2002
--------------------------- ------------------------- -----------------
C. Alan MacDonald
Thomas J. Neff* Trustee December 26, 2002
--------------------------- ------------------------- -----------------
Thomas J. Neff
James F. Orr, III* Trustee December 26, 2002
--------------------------- ------------------------- -----------------
James F. Orr, III
/s/ CHRISTINA T. SIMMONS
------------------------
Attorney-in-Fact
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POWER OF ATTORNEY
Each person whose signature appears below on this Amendment to the Registration Statement hereby constitutes and appoints Paul A. Hilstad, Lawrence H. Kaplan and Christina T. Simmons, each of them, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (until revoked in writing) to sign any and all amendments to this Registration Statement of each Fund enumerated on Exhibit A hereto (including post-effective amendments and 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 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.
Signatures Title Date
---------- ----- ----
Chairman, President
/s/ Robert S. Dow and Director/Trustee July 23, 2002
------------------ -------------------------- -----------------
Robert S. Dow
/s/ E. Thayer Bigelow Director/Trustee July 23, 2002
--------------------------- -------------------------- -----------------
E. Thayer Bigelow
/s/ William H. T. Bush Director/Trustee July 23, 2002
--------------------------- -------------------------- -----------------
William H. T. Bush
/s/ Robert B. Calhoun, Jr. Director/Trustee July 23, 2002
-------------------------- -------------------------- -----------------
Robert B. Calhoun, Jr.
/s/ Stewart S. Dixon Director/Trustee July 23, 2002
--------------------------- -------------------------- -----------------
Stewart S. Dixon
/s/ Franklin W. Hobbs Director/Trustee July 23, 2002
--------------------------- -------------------------- -----------------
Franklin W. Hobbs
/s/ C. Alan MacDonald Director/Trustee July 23, 2002
--------------------------- -------------------------- -----------------
C. Alan MacDonald
/s/ Thomas J. Neff Director/Trustee July 23, 2002
--------------------------- -------------------------- -----------------
Thomas J. Neff
/s/ James F. Orr, III Director/Trustee July 23, 2002
--------------------------- -------------------------- -----------------
James F. Orr, III
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EXHIBIT A
Lord Abbett Affiliated Fund, Inc.
Lord Abbett Blend Trust
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Global Fund, Inc.
Lord Abbett Investment Trust
Lord Abbett Large-Cap Growth Fund
Lord Abbett Mid-Cap Value Fund, Inc.
Lord Abbett Research Fund, Inc.
Lord Abbett Securities Trust
Lord Abbett Series Fund, Inc.
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett Tax-Free Income Trust
Lord Abbett U.S. Government Securities Money Market Fund, Inc.
Exhibit 23(d) Document 1
MANAGEMENT AGREEMENT
AGREEMENT made as of this 19th day of May, 1993 by and between LORD ABBETT SECURITIES TRUST, a Delaware business trust (hereinafter called the "Trust"), on behalf of each Series of the Trust (hereinafter called the "Series") and LORD, ABBETT & CO., a New York partnership (hereinafter called the "Investment Manager").
WHEREAS, the Trust, on behalf of each Series thereof, desires to obtain the investment management services of the Investment Manager and the Investment Manager is willing to provide services of the nature desired upon the terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants and of other good and valuable consideration, receipt of which is hereby acknowledged, it is agreed as follows:
1. The Trust, on behalf of each Series thereof, hereby employs the Investment Manager under the terms and conditions of this Agreement, and the Investment Manager hereby accepts such employment and agrees to perform supervisory functions of the Trust with respect to the investment and reinvestment of its property and assets (whether or not held in trust or in the custody of a bank or trust company subject to the Trust's direction or control) including, without limitation, the supervision of its investment portfolios and the recommendation of investment policies and procedures within the limitations set forth in the Trust's Registration Statement on file with the Securities and Exchange Commission under the Securities Act of 1933 and the Investment Company Act of 1940, as amended (the "Act").
The Investment Manager agrees to maintain an adequate
organization of competent persons to perform the supervisory functions mentioned herein.
All recommendations with respect to the investment portfolios will be made to the Trust's trading department which, with the approval of authorized officers of the Trust, will execute all trades in accordance with the Trust's investment procedures.
The Investment Manager reserves the right, in its discretion, to purchase or otherwise obtain statistical information and services from other sources, including affiliated persons of the Investment Manager.
Notwithstanding the provisions of this paragraph 1, the investment policies and procedures and all other actions of the Trust are, and shall at all times be, subject to the control and direction of its trustees.
2. Each Series of the Trust will pay the Investment Manager for its services under this Agreement and for the expenses assumed an annual management fee computed and payable monthly, at a percentage of the average daily net assets of such Series as set forth in an Addendum to this Agreement between the Investment Manager and the Trust on behalf of such Series. The value of the net assets of the Series shall include all assets held in trust or in custody of any bank, savings bank or trust company for the Series, subject to its control or direction, and shall be determined as provided in the Declaration and Agreement of Trust of the Trust. The fee shall be paid on the first day of each month for the preceding month.
While recognizing that principal transactions, including riskless principal
transactions, are not afforded the protection of the safe harbor in Section 28
(e) of the Securities Exchange Act of
1934, the Investment Manager may receive research and other statistical information from broker-dealers and from other sources and, in accordance with said Section 28(e), a broker-dealer may be paid a commission for a transaction involving portfolio securities of the Trust exceeding the amount another broker-dealer would have charged for the same transaction if it is determined by the Investment Manager in good faith that such amount of commission is reasonable in relation to the value of the research services provided by the executing broker-dealer, viewed in terms of either the particular transaction or the overall responsibilities of the Investment Manager with respect to the Trust and other accounts (investment companies and other investment clients) with respect to which it exercises investment discretion. Such research services may be used by the Investment Manager in serving all its accounts, and not all of such research services need necessarily be used by the Investment Manager in connection with its services to the Trust.
It is understood that any supplemental advisory or statistical services which may be provided to the Trust or to the Investment Manager from time to time by independent broker-dealers or persons other than the Investment Manager, for whatever reason, shall not reduce the amount of the fees payable to the Investment Manager hereunder. It is recognized that such supplementary advisory or statistical services may be useful to the Investment Manager and the Trust, but their value is indeterminable and is not to be considered a substitute for the services provided by the Investment Manager hereunder.
3. It is understood that the services of the Investment Manager are not deemed to be exclusive, and nothing in this Agreement
shall prevent the Investment Manager, or any officer, director, partner or employee thereof, from providing similar services to other investment companies and other clients (whether or not their investment objectives and policies are similar to those of the Trust) or to engage in other activities. When other clients of the Investment Manager desire to purchase or sell the same portfolio security at the same time as the Trust, it is understood that such purchases and sales will be made as nearly as practicable on a pro rata basis in proportion to the amounts desired to be purchased or sold by each client.
4. The Trust, on behalf of each Series thereof, will, at its own expense, furnish to the Investment Manager periodic (but not less than semi-annually) statements of its books of account, including balance sheets and earnings statements, and all other information which may reasonably be required, from time to time, by the Investment Manager, and will, at its own expense, at all times keep the Investment Manager fully advised as to the cash, securities and other property then comprising its assets, and furnish daily detailed price makeup sheets with respect to its investment portfolio and its shares of beneficial interests outstanding.
5. The Investment Manager shall be under no obligation to pay any fees, costs, expenses or other charges of the Trust, except for the compensation of its officers, the compensation, if any, of its trustees who are affiliated with the Investment Manager, the rental for its office space, and the ordinary and necessary office and clerical expenses relating to research, statistical work and supervision of each Series' investment portfolio, to be performed by the Investment Manager under paragraph 1 of this Agreement. Each Series of the Trust will pay its own fees, costs, expenses or charges relating to its assets and operations, including without limitation: office and clerical expenses not relating to research, statistical work and supervision of its investment portfolio; fees and expenses of trustees not affiliated with the Investment Manager; governmental fees; interest charges; taxes; association membership dues; fees and charges for legal and auditing services; fees and expenses of any custodians or trustees with respect to custody of its assets; fees, charges and expenses of dividend disbursing agents, registrars and transfer agents (including the cost of keeping all necessary shareholder records and accounts, and of handling any problems relating thereto and the expense of furnishing to all shareholders statements of their accounts after every transaction including the expense of mailing); costs and expenses of repurchase and redemption of its shares; costs and expenses of preparing, printing and mailing to shareholders ownership certificates, proxy statements and materials, prospectuses, reports and notices; costs of preparing reports to governmental agencies; brokerage fees and commissions of every kind and expenses in connection with the execution of portfolio security transactions (including the cost of any service or agency
designed to facilitate the purchase and sale of portfolio securities); and all postage, insurance premiums, and any other fee, cost, expense or charge of any kind incurred by and on behalf of the Trust and not expressly assumed by the Investment Manager under this Agreement.
Notwithstanding the above, to encourage sales of shares of beneficial interest in any Series of the Trust, the Investment Manager may, but is not required to, waive its fee hereunder attributable to such Series and directly pay or reimburse the Trust for any portion of the operating expenses of such Series not expressly assumed by the Investment Manager under this Agreement. The amount of any such expenses so voluntarily paid or reimbursed by the Investment Manager shall be paid back to the Investment Manager by the applicable Series of the Trust without interest to the extent provided as follows. No such pay-back will be made prior to the first day of the calendar quarter after the net assets of such Series first reach $50 million (the "commencement date"). Thereafter, if the ratio of operating expenses of such Series (determined before taking into account any fee waiver or payment or reimbursement of expenses by the Investment Manager) to average net assets ("expense ratio") is less than the percentage set forth in an Addendum to this Agreement between the Investment Manager and the Trust on behalf of such Series, such Series shall repay the Investment Manager an amount equal in dollars to the difference between the expenses included in the determination of such expense ratio and the expenses required to achieve such percentage set forth in the addendum to this Agreement. The expense ratios will be determined on a full fiscal year basis and, if the commencement date does not begin at the start of a fiscal
year, the determination will be based on the remaining portion of the fiscal year annualized. Any such repayments shall be made promptly (but in any event within 60 days) after the end of the fiscal years of the Series with respect to which they are payable, and no such repayment shall exceed the amount of the expenses of the applicable Series paid or reimbursed by the Investment Manager and not previously paid back. The amount of any expenses of a Series paid or reimbursed that is subject to the repayment provisions of this paragraph and not repaid as provided above prior to termination of this Agreement, or by the end of the fifth full fiscal year after the commencement date that shares of the Series are first publicly sold, whichever first occurs, shall not be repaid to the Investment Manager.
Notwithstanding any other provision of this Agreement, if expenses (including management fees hereunder but excluding interest, taxes, brokerage fees, and where permitted, extraordinary expenses) borne by the Trust in any fiscal year exceed expense limitations applicable to the Trust imposed by state securities administrators, as such limitations may be lowered or raised from time to time, the Investment Manager will reimburse the applicable Series of the Trust for any such excess. If the Investment Manager pays for other expenses of the Trust or furnishes without charge to the Trust services the cost of which is to be borne by the Trust under this Agreement, the Investment Manager shall not be deemed to have waived its rights under this Agreement to have the Trust pay for such expenses or provide or pay for such services in the future. The Investment Manager may also advance the payment of expenses, subject to reimbursement by the Trust in the ordinary course of business.
6. The Investment Manager agrees that it shall observe and be bound by all of the provisions of the Declaration and Agreement of Trust (including any amendments thereto) of the Trust which shall in any way limit or restrict or prohibit or otherwise regulate any action by the Investment Manager.
7. Other than to abide by the provisions hereof and render the services called for hereunder in good faith, the Investment Manager assumes no responsibility under this Agreement and, having so acted, the Investment Manager shall not be held liable or accountable for any mistakes of law or fact, or for any error or omission of its officers, directors, partners or employees, or for any loss or damage arising or resulting therefrom suffered by the Trust or any of its shareholders, creditors, trustees or officers; provided however, that nothing herein shall be deemed to protect the Investment Manager against any liability to the Trust or to its shareholders by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties hereunder, or by reason of the reckless disregard of its obligations and duties hereunder. The Investment Manager shall not be responsible for any action of the Trustees of the Trust in following or declining to follow any advice or recommendation of the Investment Manager.
8. Neither this Agreement nor any other transaction between the parties hereto pursuant to this Agreement shall be invalidated or in any way affected by the fact that any or all of the trustees, officers, shareholders, or other representatives of the Trust are or may be interested in the Investment Manager, or any successor or assignee thereof, or that any or all of the officers, partners, or other representatives of the Investment Manager are or may be
interested in the Trust, except as otherwise may be provided in the Act. The Investment Manager in acting hereunder shall be an independent contractor and not any agent of the Trust.
9. This Agreement shall become effective upon the date hereof and shall continue in force until January 30, 1995, and is renewable annually thereafter by specific approval of the trustees of the Trust or by vote of a majority of the outstanding voting securities of the Trust; any such renewal shall be approved by the vote of a majority of the trustees who are not parties to this Agreement or interested persons of the Investment Manager or of the Trust, cast in person at a meeting called for the purpose of voting on such renewal.
This Agreement may be terminated without penalty at any time by the trustees of the Trust on 60 days' written notice. This Agreement shall automatically terminate in the event of its assignment. The terms "interested persons", "assignment" and "vote of a majority of the outstanding voting securities" shall have the same meaning as those terms are defined in the Act.
10. The Investment Manager reserves the right to grant the use of the name "LORD ABBETT" or "LORD, ABBETT & CO.", or any derivative thereof, or any other part of the name of the Trust or any Series, to any other investment company, any series of an investment company or any business enterprise. The Investment Manager reserves the right to withdraw from the Trust the use of the name "LORD ABBETT" and the use of its registered service mark; at such time of withdrawal of the right to use the name "LORD ABBETT", the Investment Manager agrees that the question of continuing this Agreement may be submitted to a vote of the Trust's shareholders. In the event of
such withdrawal or the termination of this Agreement, for any reason, the Trust will, on the written request of the Investment Manager, take such action as may be necessary to change its name and eliminate all reference to the words "LORD ABBETT" in any form, and will no longer use such registered service mark.
11. The obligations of the Trust, including those imposed hereby, are not personally binding upon, nor shall resort be had to the private property of, any of the trustees, shareholders, officers, employees or agents of the Trust individually, but are binding only upon the assets and property of the Trust. Any and all personal liability, either at common law or in equity, or by statute or constitution, of every such trustee, shareholder, officer, employee or agent for any breach by the Trust of any agreement, representation or warranty hereunder is hereby expressly waived as a condition of and in consideration for the execution of this Agreement by the Trust.
IN WITNESS WHEREOF, the Trust has caused this Agreement to be executed by its duly authorized officers and its seal to be affixed hereto, and the Investment Manager has caused this Agreement to be executed by one of its partners all on the day and year first above written.
LORD ABBETT SECURITIES TRUST
By: /s/ Ronald P. Lynch ---------------------- Chairman of the Board |
/s/ Thomas F. Konop ---------------------- Assistant Secretary |
LORD, ABBETT & CO.
By: /s/ Kenneth B. Cutler
----------------------
A Partner
|
Exhibit 23 (d) continued Document 2
Addendum to Management Agreement between Lord Abbett Securities Trust and Lord, Abbett & Co.
DATED MAY 19, 1993 (THE "AGREEMENT")
Lord, Abbett & Co. and Lord Abbett Securities Trust (the "Trust") on behalf of Lord Abbett Growth & Income Trust, Lord Abbett Global Income Trust, Lord Abbett Bond-Debenture Trust and Lord Abbett Limited Duration U.S. Government Securities Trust (the "Trust Series") do hereby agree that (a) the annual management fee rate for each Trust Series with respect to paragraph 2 of the Agreement shall be as follows: three-quarters (.75) of one percent (1%) of the average daily net assets of Lord Abbett Growth & Income Trust and one-half (.50) of one percent (1%) of the average daily net assets of each of the Lord Abbett Global Income Trust, Lord Abbett Bond-Debenture Trust and Lord Abbett Limited Duration U.S. Government Securities Trust and (b) the expense ratio for the determination of the repayment by each Trust Series of expenses voluntarily paid or reimbursed by the Investment Manager pursuant to paragraph 5 of the Agreement shall be 1.95% for Lord Abbett Growth & Income Trust, 1.70% for Lord Abbett Bond-Debenture Trust and Limited Duration Government Trust and 1.75% for Lord Abbett Global Income Trust.
Lord, Abbett & Co. and the Trust on behalf of Lord Abbett Global Income Trust do hereby agree that without limiting the obligation of the Investment Manager under paragraph 1 of the Agreement to perform the supervisory functions mentioned therein with respect to all the Trust's property and assets, the Investment Manager may employ a subadvisor for advice and management of the foreign securities in Lord Abbett Global Income Trust's investment portfolio and with respect to foreign currency exchange pursuant to a written contract that is subject to and satisfies all applicable requirements of the Investment Company Act of 1940, as amended. Notwithstanding the provisions of paragraph 1 of the Agreement providing that recommendations with respect to Lord Abbett Global Income Trust's investment portfolio be made to the Trust's trading department, such sub-adviser may place orders directly for the purchase, sale or exchange of foreign portfolio securities for Lord Abbett Global Income Trust's account in a manner set forth in such a sub-investment management agreement.
For purposes of Section 15 (a) of the Act, this Addendum and the Agreement shall together constitute the investment advisory contract of each series.
LORD, ABBETT & CO.
BY:/s/ Ronald P. Lynch ---------------------- Managing Partner |
LORD ABBETT SECURITIES TRUST
(on behalf of Lord Abbett Growth & Income Trust, Lord Abbett Global Income Trust, Lord Abbett Bond-Debenture Trust and Lord Abbett Limited Duration U.S. Government Securities Trust)
BY: /s/ Kenneth B. Cutler
----------------------
Vice President
Dated: October 20, 1993
|
Exhibit 23 (d) continued Document 3
Addendum to Management Agreement between Lord Abbett Securities Trust and Lord, Abbett & Co.
DATED: MAY 19, 1993 (THE "AGREEMENT")
Lord, Abbett & Co and Lord Abbett Securities Trust (the "Trust") on behalf
of Lord Abbett Growth & Income Trust (the "Trust Series") do hereby agree that
(a) the annual management fee rate for the Trust Series with respect to
paragraph 2 of the Agreement shall be as follows: three-quarters (.75) of one
percent (1%) of the first $200 million of average daily net assets of Lord
Abbett Growth & Income Trust, sixty-five percent (.65) of one percent (1%) of
the next $300 million of such assets and fifth percent (.50) of one percent (1%)
of such assets in excess of $500 million.
For purposes of Section 15 (a) of the Act, this Addendum and the Agreement shall together constitute the investment advisory contract of the Trust Series.
LORD, ABBETT & CO.
BY: /s/ Paul A Hilstad
----------------------
Partner
|
Lord Abbett Securities Trust
(on behalf of Lord Abbett Growth & Income Trust)
BY: /s/ Thomas F. Konop
----------------------
Vice President
Dated: As of June 19, 1996
|
Exhibit 23 (d) continued Document 4
Addendum to Management Agreement between Lord Abbett Securities Trust and Lord, Abbett & Co.
DATED MAY 19, 1993 (THE "AGREEMENT")
Lord, Abbett & Co and Lord Abbett Securities Trust (the "Trust") on behalf of International Series (the "Series") do hereby agree that (a) the annual management fee rate for each Trust Series with respect to paragraph 2 of the Agreement shall be three-quarters (.75) of one percent (1%) of the average daily net assets of each Series and (b) the expense ration for the determination of the repayment by the Trust Series of expenses voluntarily paid or reimbursed by the Investment Manager pursuant to paragraph 5 of the Agreement shall be 1.75%.
For purposes of Section 15 (a) of the Act, this Addendum and the Agreement shall together constitute the investment advisory contract of the Trust Series.
LORD, ABBETT & CO.
BY: /s/ Robert S. Dow
----------------------
Managing Partner
|
LORD ABBETT SECURITIES TRUST
(on behalf of the International Series)
BY: /s/ Kenneth B. Cutler
----------------------
Vice President
Dated: November 1, 1996
|
Exhibit 23 (d) continued Document 5
ALPHA SERIES
Addendum to Management
Agreement between Lord Abbett
Securities Trust and Lord, Abbett & Co.
DATED MAY 19, 1993 (THE AGREEMENT')
Lord, Abbett & Co. and Lord Abbett Securities Trust (the "Trust") on behalf of ALPHA SERIES (" Series") do hereby agree that the annual management fee rate for the Series with respect to paragraph 2 of the Agreement shall be .50 of 1% of the average daily net assets of the Series, provided that such management fee, if any, charged is based on services provided that are in addition to, rather than duplicative of, services provided pursuant to the advisory contract for any "acquired company." Since Alpha Series (as an "acquiring company") is permitted to invest in shares of another investment company (an "acquired company") that is in the same "group of investment companies" as the Alpha Series, the terms quoted in this sentence shall have the same meaning (which shall be incorporated by reference into this addendum) as provided under Section 12(d)(1)(G) of the Investment Company Act of 1940, as amended (the "Act"). In addition, the parties hereby agree that the repayment provisions pursuant to paragraph 5 of the Agreement shall not be applicable to the Series.
For purposes of Section 15(a) of the Act, this Addendum and the Agreement shall together constitute the investment advisory contract of the Series.
LORD, ABBETT & CO.
BY: /s/ Robert S Dow
----------------------
Managing Partner
|
LORD ABBETT SECURITIES TRUST
(on behalf of Alpha Series)
BY: /s/ Paul A. Hilstad
----------------------
Vice President
Dated: December 11, 1997
|
Exhibit 23 (d) continued Document 6
MICRO-CAP GROWTH SERIES
MICRO-CAP VALUE SERIES
Addendum to Management
Agreement between Lord Abbett
Securities Trust and Lord, Abbett & Co.
DATED MAY 19, 1993 (THE "AGREEMENT")
Lord, Abbett & Co. and Lord Abbett Securities Trust (the "Trust") on behalf of MICRO-CAP GROWTH SERIES AND MICRO-CAP VALUE SERIES (each a "Series") do hereby agree that the annual management fee rate for each Series with respect to paragraph 2 of the Agreement shall be 1.50% of 1% of the average daily net assets of each respective Series.
For purposes of Section 15 (a) of the Act, this Addendum and the Agreement together shall constitute the investment advisory contract of each Series.
LORD, ABBETT & CO.
BY: /s/ Paul A. Hilstad
----------------------
Partner
|
LORD ABBETT SECURITIES TRUST
(on behalf of Micro-Cap Growth Series and Micro-Cap Value Series)
BY: /s/ Lawrence H. Kaplan
----------------------
Vice President
Dated: July 22, 1999
|
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement ("Agreement") is made as of December 12, 2002 by and among each of the investment companies in the Lord Abbett Family of Funds, as set forth on Exhibit 1 hereto, and each new Lord Abbett Fund added as a party to this Agreement pursuant to section 9, (each, a "Fund" or collectively, the "Funds") and Lord, Abbett & Co. LLC, a Delaware limited liability company ("Lord Abbett").
RECITALS
A. WHEREAS, Lord Abbett has entered into a Management Agreement with each Fund whereby Lord Abbett provides investment management services to each Fund.
B. WHEREAS, each Fund desires to retain Lord Abbett to provide certain administrative services and Lord Abbett is willing to provide, or arrange to have provided, such services upon the terms and conditions as hereinafter provided.
NOW THEREFORE, in consideration of the mutual covenants and of other good and valuable consideration, receipt of which is hereby acknowledged, it is agreed as follows:
1. AGREEMENT TO PERFORM ADMINISTRATIVE SERVICES. Each Fund hereby employs Lord Abbett under the terms and conditions of this Agreement, and Lord Abbett hereby accepts such employment and agrees to perform the administrative services described below. It is understood that the persons employed by Lord Abbett to assist in the performance of its duties hereunder will not devote their full time to such services, and may in fact devote a substantial portion of their time to the performance of duties relating to Lord Abbett's provision of services to other clients, and nothing herein shall be deemed to limit or restrict the right of Lord Abbett, its affiliates, and their respective employees, to engage in and devote time and attention to other business or to render services of whatever kind or nature to Lord Abbett's other clients.
2. LORD ABBETT SERVICES AND DUTIES. Lord Abbett will provide, or arrange to have provided in accordance with section 3 below, for each Fund those facilities, equipment, and personnel to carry out the administrative services which are described in Exhibit 2 hereto ("Administrative Services"). Lord Abbett represents that it has sufficient personnel and experience to perform the
Administrative Services, and agrees to perform such Administrative Services in accordance with industry standards for mutual fund administrators.
In performing its duties under this Agreement, Lord Abbett agrees that it
shall observe and be bound by all of the provisions of (1) each Fund's Articles
of Incorporation/Declaration and Agreement of Trust and By-laws (including any
amendments thereto) which in any way limit or restrict or prohibit or otherwise
regulate any action by Lord Abbett, (2) each Fund's registration statement, and
(3) the instructions and directions of the Boards of Directors/Trustees of each
Fund. In addition, Lord Abbett agrees and warrants that it will use its best
efforts to conform to and comply with the requirements of the Investment Company
Act of 1940, as amended ("1940 Act") and all other applicable federal and state
laws and regulations.
3. LORD ABBETT SUBCONTRACTORS. It is understood that Lord Abbett may from time to time employ or associate with such person or persons ("Subcontractors") as Lord Abbett may believe to be particularly fitted to assist in its performance of this Agreement; provided, however, that the compensation of such Subcontractors shall be paid by Lord Abbett and that Lord Abbett shall be as fully responsible to each Fund for the acts and omissions of any Subcontractor as it is for its own acts and omissions. Lord Abbett shall use its best efforts to ensure that any Subcontractor complies with the provisions of section 2 above.
4. EXPENSES ASSUMED. Except as otherwise set forth in this section 4 or as
otherwise approved by the Funds' Boards of Directors/Trustees, Lord Abbett shall
pay all expenses incurred by it in performing the Administrative Services,
including the cost of providing office facilities, equipment and personnel
related to such services. Each Fund will pay its own fees, costs, expenses or
charges relating to its assets and operations, including without limitation:
fees and expenses under the Management Agreement; fees and expenses of
Directors/Trustees not affiliated with Lord Abbett; governmental fees; interest
charges; taxes; association membership dues; fees and charges for legal and
auditing services; fees and expenses of any custodians or trustees with respect
to custody of its assets; fees, charges and expenses of dividend disbursing
agents, registrars and transfer agents (including the cost of keeping all
necessary shareholder records and accounts, and of handling any problems
relating thereto and the expense of furnishing to all shareholders statements of
their accounts after every transaction, including the expense of mailing); costs
and expenses of repurchase and redemption of its shares; costs and expenses of
preparing, printing and mailing to shareholders ownership certificates, proxy
statements and materials, prospectuses, reports and notices; costs of preparing
reports to governmental agencies; brokerage fees and commissions of every kind
and expenses in connection with the execution of portfolio security transactions
(including the cost of any service or agency designed to facilitate the purchase
and sale of portfolio securities); and all postage, insurance premiums, and any other fee, cost, expense or charge of any kind incurred by and on behalf of the Trust and not expressly assumed by Lord Abbett under this Agreement or the Management Agreement.
5. COMPENSATION. For the services rendered, facilities furnished and expenses assumed by Lord Abbett under this Agreement, each Fund will pay to Lord Abbett an annual administrative services fee, computed and payable monthly, at the annual rate of .04% of the value of the Fund's average daily net assets. Such value shall be calculated in the same manner as provided in each Fund's Management Agreement. It is specifically understood and agreed that any fees for fund accounting services payable by the Funds to State Street Bank and Trust Company pursuant to that separate Custodian and Investment Accounting Agreement dated November 1, 2001 shall be paid directly by Lord Abbett on behalf of the Funds. It is further understood and agreed that should the Funds' regulatory environment change so that the costs to Lord Abbett of providing Administrative Services increase or decrease significantly, then Lord Abbett and the Funds' Boards of Directors/Trustees will consider whether it would be appropriate to adjust the compensation under this Agreement.
6. STANDARD OF CARE. Other than to abide by the provisions hereof and render the services called for hereunder in good faith, Lord Abbett assumes no responsibility under this Agreement and, having so acted, Lord Abbett shall not be held liable or accountable for any mistakes of law or fact, or for any error or omission of its officers, directors, members or employees, or for any loss or damage arising or resulting therefrom suffered by a Fund or any of its shareholders, creditors, Directors/Trustees or officers; provided however, that nothing herein shall be deemed to protect Lord Abbett against any liability to the Fund or its shareholders by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties hereunder, or by reason of the reckless disregard of its obligations and duties hereunder.
7. CONFLICTS OF INTEREST. Neither this Agreement nor any other transaction between the parties hereto pursuant to this Agreement shall be invalidated or in any way affected by the fact that any of the Directors/Trustees, officers, shareholders, or other representatives of a Fund are or may be an interested person of Lord Abbett, or any successor or assignee thereof, or that any or all of the officers, members, or other representatives of Lord Abbett are or may be an interested person of the Fund, except as otherwise may be provided in the 1940 Act. Lord Abbett in acting hereunder shall be an independent contractor and not an agent of the Funds.
8. EFFECTIVE DATE AND TERMINATION. This Agreement shall become effective with respect to a Fund on January 1, 2003, or at such other date as may be set by the Fund's Board of Directors/Trustees by resolution, and shall
continue in force for two years from the date hereof, and is renewable annually thereafter by specific approval of the Directors/Trustees of the Fund or by vote of a majority of the outstanding voting securities of the Fund; any such renewal shall be approved by the vote of a majority of the Directors/Trustees who are not parties to this Agreement or interested persons of Lord Abbett or of the Fund, cast in person at a meeting called for the purpose of voting on such renewal.
This Agreement may be terminated without penalty at any time by the Directors/Trustees of a Fund or by Lord Abbett on 60 days' written notice. This Agreement shall automatically terminate in the event of its assignment. The terms "interested persons," "assignment" and "vote of a majority of the outstanding voting securities" shall have the same meaning as those terms are defined in the 1940 Act.
9. ADDITION OF NEW FUNDS TO AGREEMENT. In the event that a new fund is created in the Lord Abbett Family of Funds and such fund wishes to engage Lord Abbett to perform Administrative Services under this Ageement, such fund shall be entitled to do so by executing and delivering to Lord Abbett a document accepting this Agreement. The employment of Lord Abbett on behalf of any new fund shall become effective upon Lord Abbett's receipt of such counterpart executed by such new fund.
10. INDIVIDUAL LIABILITY. The obligations of each Company/Trust, including those imposed hereby, are not personally binding upon, nor shall resort be had to the private property of, any of the Directors/Trustees, shareholders, officers, employees or agents of the Company/Trust individually, but are binding only upon the assets and property of the Company/Trust. Any and all personal liability, either at common law or in equity, or by statute or constitution, of every such Director/Trustee, shareholder, officer, employee or agent for any breach by the Company/Trust of any agreement, representation or warranty hereunder is hereby expressly waived as a condition of and in consideration for the execution of this Agreement by the Company/Trust.
11. LIABILITY OF FUNDS SEVERAL AND NOT JOINT. The obligations of a Fund under this Agreement are enforceable solely against that Fund and its assets.
12. DELAWARE LAW. This Agreement shall be construed and the provisions interpreted under and in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed in its name and on its behalf by its duly authorized representative.
On Behalf of each of the Lord Abbett Funds listed on Exhibit 1 Attached hereto
By:
/s/Joan A. Binstock ------------------------ Joan A. Binstock Chief Financial Officer |
Attested:
/s/Christina T. Simmons ----------------------- Christina T. Simmons Assistant Secretary |
LORD, ABBETT & CO. LLC
By:
/s/Robert S. Dow ------------------------ Robert S. Dow Managing Member |
Attested:
/s/Paul A. Hilstad ----------------------- Paul A. Hilstad Member, General Counsel |
EXHIBIT 1
TO
ADMINISTRATIVE SERVICES AGREEMENT
The following funds comprise the Lord Abbett Family of Funds:
Lord Abbett Affiliated Fund, Inc.
Lord Abbett Blend Trust
Lord Abbett Small-Cap Blend Fund
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Global Fund, Inc.
Equity Series
Income Series
Lord Abbett Investment Trust
Balanced Series
Core Fixed Income Fund
Lord Abbett High Yield Fund
Limited Duration U.S. Government Securities Series
Lord Abbett Total Return Fund
U.S. Government Securities Series
Lord Abbett Large-Cap Growth Fund
Lord Abbett Mid-Cap Value Fund, Inc.
Lord Abbett Research Fund, Inc.
Lord Abbett Growth Opportunities Fund
Large-Cap Series
Small-Cap Value Series
Lord Abbett Securities Trust
Alpha Series
Lord Abbett All Value Fund
International Series
Lord Abbett Micro-Cap Growth Fund
Lord Abbett Micro-Cap Value Fund
Lord Abbett Series Fund, Inc.
Bond-Debenture Portfolio
Growth and Income Portfolio
International Portfolio
Mid-Cap Value Portfolio
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett Tax-Free Income Trust
Lord Abbett U.S. Government Securities Money Market Fund, Inc.
EXHIBIT 2
TO
ADMINISTRATIVE SERVICES AGREEMENT
In accordance with section 2 of the Agreement, Lord Abbett will provide, or arrange to have provided, the following Administrative Services for each Fund:
(a) FUND ACCOUNTING, FINANCIAL REPORTING, SHAREHOLDER SERVICING AND TECHNOLOGY
(1) Perform Fund accounting services which include, but are not
limited to, daily NAV calculation and dissemination, and
maintenance of books and records as required by Rule 31(a) of
the 1940 Act.
(2) Perform the functions of a mutual fund's chief financial officer
and treasurer.
(3) Perform Fund budgeting and accounts payable functions.
(4) Perform Financial Reporting, including reports to the Board of
Directors/Trustees, and preparation of financial statements,
NSARs and registration statements.
(5) Coordinate regulatory examinations.
(6) Calculate and facilitate payment of dividends.
(7) Oversee the preparation and ensure the filing of all
Federal/State Tax Returns.
(8) Monitor the Fund's compliance with IRS regulations.
(9) Monitor compliance with Fund policies on valuing (pricing) all
Fund assets.
(10) Monitor Transfer Agent to ensure shareholder accounts are being
processed in compliance with the appropriate regulations and are
reflected appropriately in the Fund's records. Ensure 12b-1
payments being paid by the Fund are accurate and in accordance
with the 12b-1 plans.
(11) Maintain the technology platforms and market data feeds necessary
for the daily accounting and reporting functions set forth in
this Agreement.
(b) LEGAL, COMPLIANCE AND BLUE SKY FUNCTIONS
(1) Prepare and maintain files of all Board and shareholder meeting
materials, including minutes.
(2) Monitor compliance by each Fund with various conditions imposed
by exemptive orders and/or regulatory requirements relating to
multiple classes of shares, and fund of funds.
(3) Prepare and review periodic Prospectus/Statement of Additional
Information compliance reports.
(4) Prepare, update and file with the SEC the Funds' registration
statements, including pre-effective and post-effective
amendments, Prospectuses, SAIs, and supplements.
(5) Prepare and/or review and file proxy materials with the SEC.
(6) Review annual and semi-annual reports of the Funds.
(7) Negotiate D&O/E&O insurance matters and annual renewals on behalf
of the Funds.
(8) Monitor fidelity bond coverage for the Funds.
(9) Review Rule 24f-2 notices relating to registration fees and file
with the SEC.
(10) Coordinate regulatory examinations of the Funds.
(11) Assist in preparation of Board members' questionnaires.
(12) Register Fund shares with appropriate state blue sky authorities.
(13) Obtain and renew all sales permits required by relevant state
authorities in order to permit the sale of shares in the state.
(14) Monitor the sale of shares in individual states.
(15) Respond to all blue sky audit and examination issues.
AMENDED AND RESTATED PLANS AS OF OCTOBER 22, 2002
PURSUANT TO RULE 18f-3(d)
UNDER THE INVESTMENT COMPANY ACT OF 1940
(ORIGINALLY ADOPTED AUGUST 15, 1996)
Rule 18f-3 (the "Rule") under the Investment Company Act of 1940, as amended (the "1940 Act"), requires that the Board of Directors or Trustees of an investment company desiring to offer multiple classes pursuant to the Rule adopt a plan setting forth the separate arrangement and expense allocation of each class, and any related conversion features or exchange privileges. This document constitutes an amended and restated plan (individually, a "Plan" and collectively, the "Plans") of each of the investment companies, or series thereof, listed on Schedule A attached hereto (each, a "Fund"). The Plan of any Fund is subject to amendment by action of the Board of Directors or Trustees (the "Board") of such Fund and without the approval of shareholders of any class, to the extent permitted by law and by the governing documents of such Fund.
The Board, including a majority of the non-interested Board members, has determined that the following separate arrangement and expense allocation, and the related conversion features, if any, and exchange privileges, of each class of each Fund are in the best interest of each class of each Fund individually and each Fund as a whole.
1. CLASS DESIGNATION. Shares of all Funds except Lord Abbett Series Fund, Inc. shall be divided into Class A, Class B, Class C, Class Y and Class P (Pension Class) shares as indicated for each Fund on Schedule A attached hereto. In the case of the Lord Abbett Series Fund, shares of the Growth and Income Portfolio shall be divided into Variable Contract Class shares (Class VC shares) and P Class shares and shares of the Bond-Debenture Portfolio, International Portfolio, and Mid-Cap Value Portfolio shall be designated Bond-Debenture Portfolio shares, International Portfolio shares, and Mid-Cap Value Portfolio shares, respectively, all of which are also known as Class VC shares of the respective portfolio, as indicated on Schedule A.
2. SALES CHARGES AND DISTRIBUTION AND SERVICE FEES.
(a) INITIAL SALES CHARGE. Class A shares will be traditional front-end sales charge shares, offered at their net asset value ("NAV") plus a sales charge in the case of each Fund as described in such Fund's prospectus as from time to time in effect.
Class B shares, Class C shares, Class Y shares, Variable Contract Class shares and P Class shares will be offered at their NAV without an initial sales charge.
(b) SERVICE AND DISTRIBUTION FEES. In respect of the Class A shares, Class B shares, Class C shares, and P Class shares, each Fund will pay service and/or distribution fees under plans from time to time in effect adopted for such classes pursuant to Rule 12b-1 under the 1940 Act (each, a "12b-1 Plan").
Pursuant to a 12b-1 Plan with respect to the Class A shares, if effective, each Fund will generally pay (i) at the time such shares are sold, a one-time distribution fee of up to 1% of the NAV of the shares sold in the amount of $1 million or more, including sales qualifying at such level under the rights of accumulation and statement of intention privileges, or to retirement plans with 100 or more eligible employees, as described in the Fund's prospectus as from time to time in effect, (ii) a continuing distribution fee at an annual rate of 0.10% of the average daily NAV of the Class A share accounts of dealers who meet certain sales and redemption criteria, and (iii) a continuing service fee at an annual rate not to exceed 0.25% of the average daily NAV of the Class A shares. The Board has the authority to increase the distribution fees payable under such 12b-1 Plan by a vote of the Board, including a majority of the independent directors thereof, up to an annual rate of 0.25% of the average daily NAV of the Class A shares. Pursuant to such authority, the Board has approved in connection with a marketing program the payment of certain amounts over a period of years by those Funds
with operational 12b-1 Plans for their Class A shares subject to certain conditions. The effective dates of various of the 12b-1 Plans for the Class A shares are based on achievement by the Funds of specified total net assets for the Class A shares of such Funds.
Pursuant to a 12b-1 Plan with respect to the Class B shares, if effective, each Fund will generally pay a continuing annual fee of up to 1% of the average annual NAV of such shares then outstanding (each fee comprising .25% in service fee and .75% in distribution fee).
Pursuant to a 12b-1 Plan with respect to the Class C shares, if effective, each Fund will generally pay a continuing annual fee of up to 1% of the average annual NAV of such shares then outstanding (each fee comprising .25% in service fees and .75% in distribution fees).
The Class VC shares do not have a Rule 12b-1 Plan. However, pursuant to a separate Services Agreement for the Class VC shares, each Fund will generally pay a continuing annual fee of up to .25% of the average annual NAV of such shares then outstanding to certain insurance companies for the service and maintenance of shareholder accounts.
Pursuant to a 12b-1 Plan with respect to the P Class shares, if operational, each Fund will generally pay a continuing annual fee of .45% of the average annual NAV of such shares then outstanding. The Board has the authority to increase the distribution fees payable under such 12b-1 Plan by a vote of the Board, including a majority of the independent directors thereof, up to an annual rate of 0.75% of the average daily NAV of such shares (consisting of distribution and service fees, at maximum annual rates not exceeding 0.50 and 0.25 of 1%, respectively).
The Class Y shares do not have a Rule 12b-1 Plan.
(c) CONTINGENT DEFERRED SALES CHARGES ("CDSC"). Subject to some exceptions, Class A shares subject to the one-time sales distribution fee of up to 1% under the Rule 12b-1 Plan for the Class A shares will be subject to a CDSC equal to 1% of the lower of the cost or the NAV of such shares if the shares are redeemed for cash on or before the end of the twenty-fourth month after the month in which the shares were purchased.
Class B shares will be subject to a CDSC ranging from 5% to 1% of the lower of the cost or the NAV of the shares, if the shares are redeemed for cash before the sixth anniversary of their purchase. The CDSC for the Class B shares may be waived for certain transactions. Class C shares will be subject to a CDSC equal to 1% of the lower of the cost or the NAV of the shares if the shares are redeemed for cash before the first anniversary of their purchase.
Neither the Class Y, Variable Contract Class nor the Class P shares will be subject to a CDSC.
3. CLASS-SPECIFIC EXPENSES. The following expenses shall be allocated, to the
extent such expenses can reasonably be identified as relating to a particular
class and consistent with Revenue Procedure 96-47, on a class-specific basis:
(a) fees under a 12b-1 Plan applicable to a specific class (net of any CDSC paid
with respect to shares of such class and retained by the Fund) and any other
costs relating to implementing or amending such Plan, including obtaining
shareholder approval of such Plan or any amendment thereto; (b) transfer and
shareholder servicing agent fees and shareholder servicing costs identifiable as
being attributable to the particular provisions of a specific class; (c)
stationery, printing, postage and delivery expenses related to preparing and
distributing materials such as shareholder reports, prospectuses and proxy
statements to current share holders of a specific class; (d) Securities and
Exchange Commission registration fees incurred by a specific class; (e) Board
fees or expenses identifiable as being attributable to a specific class; (f)
fees for outside accountants and related expenses relating solely to a specific
class; (g) litigation expenses and legal fees and expense relating solely to a
specific class; (h) expenses incurred in connection with shareholders meetings
as a result of issues relating solely to a specific class and (i) other expenses
relating solely to a specific class, provided, that advisory fees and other
expenses related to the management of a Fund's assets (including custodial fees
and tax-return preparation fees) shall be allocated to all shares of such Fund
on the basis of NAV, regardless of whether they can be specifically attributed
to a particular class. All common expenses shall be allocated to shares of each
class at the same time they are allocated to the shares of all other classes.
All such expenses incurred by a class of shares will be charged directly to the
net assets of the particular class and thus will be borne on a pro rata basis by
the outstanding shares of such class. For all Funds, with the exception of
Series Fund, each Fund's Blue Sky expenses will be treated as common expenses.
In the case of Series Fund, Blue Sky expenses will be allocated entirely to the
P Class, as the Variable Contract Class of Series Fund has no Blue Sky expenses.
4. INCOME AND EXPENSE ALLOCATIONS. Income, realized and unrealized capital gains and losses and expenses not allocated to a class as provided above shall be allocated to each class on the basis of the net assets of that class in relation to the net assets of the Fund, except that, in the case of each daily dividend Fund, income and expenses shall be allocated on the basis of relative net assets (settled shares).
5. DIVIDENDS AND DISTRIBUTIONS. Dividends and Distributions paid by a Fund on each class of its shares, to the extent paid, will be calculated in the same manner, will be paid at the same time, and will be in the same amount, except that the amount of the dividends declared and paid by a particular class may be different from that paid by another class because of expenses borne exclusively by that class.
6. NET ASSET VALUES. The NAV of each share of a class of a Fund shall be determined in accordance with the Articles of Incorporation or Declaration of Trust of such Fund with appropriate adjustments to reflect the allocations of expenses, income and realized and unrealized capital gains and losses of such Fund between or among its classes as provided above.
7. CONVERSION FEATURES. The Class B shares will automatically convert to Class A shares 8 years after the date of purchase. Such conversion will occur at the relative NAV per share of each Class without the imposition of any sales charge, fee or other charge. When Class B shares convert, any other Class B shares that were acquired by the shareholder by the reinvestment of dividends and distributions will also convert to Class A shares on a pro rata basis. The conversion of Class B shares to Class A shares after 8 years is subject to the continuing availability of a private letter ruling from the Internal Revenue Service or an opinion of counsel to the effect that the conversion does not constitute a taxable event for the Class B shareholder 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.
Subject to amendment by the Board, Class A shares and Class C shares shall not be subject to any automatic conversion feature.
8. EXCHANGE PRIVILEGES. Except as set forth in a Fund's prospectus as from time to time in effect, shares of any class of such Fund may be exchanged, at the holder's option, for shares of the same class of another Fund, or other Lord Abbett-sponsored fund or series thereof, without the imposition of any sales charge, fee or other charge.
Each Plan is qualified by and subject to the terms of the then current prospectus for the applicable Fund; provided, however, that none of the terms set forth in any such prospectus shall be inconsistent with the terms contained herein. The prospectus for each Fund contains additional information about that Fund's classes and its multiple-class structure.
Each Plan has been adopted for a Fund with the approval of, and all material amendments thereto must be approved by, a majority of the members of the Board of such Fund, including a majority of the Board members who are not interested persons of the Fund.
SCHEDULE A
As of October 22, 2002
The Lord Abbett - Sponsored Funds
ESTABLISHING MULTI-CLASS STRUCTURES
FUNDS CLASSES
----- -------
Lord Abbett Affiliated Fund, Inc. A, B, C, P, Y
Lord Abbett Blend Trust
Lord Abbett Small-Cap Blend Fund A, B, C, P, Y
Lord Abbett Bond-Debenture Fund, Inc. A, B, C, P, Y
Lord Abbett Developing Growth Fund, Inc. A, B, C, P, Y
Lord Abbett Mid-Cap Value Fund, Inc. A, B, C, P, Y
Lord Abbett Large-Cap Growth Fund A, B, C, P, Y
Lord Abbett Global Fund, Inc.
Equity Series A, B, C, P
Income Series A, B, C, P
Lord Abbett Investment Trust
Balanced Series A, B, C, P
High Yield Fund A, B, C, P, Y
Limited Duration U.S. Government
Securities Series A, B, C, P
U.S. Government Securities Series A, B, C, P
Lord Abbett Core Fixed Income Fund A, B, C, P, Y
Lord Abbett Total Return Fund A, B, C, P, Y
Lord Abbett Securities Trust
Lord Abbett All Value Fund A, B, C, P, Y
International Series A, B, C, P, Y
Alpha Series A, B, C, P
Lord Abbett Micro-Cap Growth Fund A, Y
Lord Abbett Micro-Cap Value Fund A, Y
Lord Abbett Tax-Free Income Fund, Inc.
California Series A, C, P
National Series A, B, C, P
New York Series A, C, P
Texas Series A, P
New Jersey Series A, P
Connecticut Series A, P
Missouri Series A, P
|
FUNDS CLASSES
----- -------
Hawaii Series A, P
Washington Series A, P
Minnesota Series A, P
Lord Abbett Tax-Free Income Trust
Florida Series A, C, P
Pennsylvania Series A, P
Michigan Series A, P
Georgia Series A, P
Lord Abbett U.S. Government Securities
Money Market Fund, Inc. A, B, C
Lord Abbett Research Fund, Inc.
Large-Cap Series A, B, C, P, Y
Lord Abbett Growth Opportunities Fund A, B, C, P, Y
Small-Cap Series A, B, C, P, Y
Lord Abbett America's Value Fund A, B, C, P, Y
Lord Abbett Series Fund
Growth & Income Portfolio VC, P
Bond-Debenture Portfolio Bond-Debenture Portfolio (VC)
International Portfolio International Portfolio (VC)
Mid-Cap Value Portfolio Mid-Cap Value Portfolio (VC)
|
LORD, ABBETT & CO.
LORD ABBETT-SPONSORED FUNDS
AND
LORD ABBETT DISTRIBUTOR LLC
CODE OF ETHICS
I. STATEMENT OF GENERAL PRINCIPLES
The personal investment activities of any officer, director, trustee or
employee of the Lord Abbett-sponsored Funds (the Funds) or any partner or
employee of Lord, Abbett & Co. (Lord Abbett) will be governed by the
following general principles: (1) Covered Persons have a duty at all times
to place first the interests of Fund shareholders and, in the case of
employees and partners of Lord Abbett, beneficiaries of managed accounts;
(2) all securities transactions by Covered Persons shall be conducted
consistent with this Code and in such a manner as to avoid any actual or
potential conflict of interest or any abuse of an individual's position of
trust and responsibility; and (3) Covered Persons should not take
inappropriate advantage of their positions with Lord Abbett or the Funds.
II. SPECIFIC PROHIBITIONS
No person covered by this Code, shall purchase or sell a security, except an Excepted Security, if there has been a determination to purchase or sell such security for a Fund (or, in the case of any employee or partner of Lord Abbett, for another client of Lord Abbett), or if such a purchase or sale is under consideration for a Fund (or, in the case of an employee or partner of Lord Abbett, for another client of Lord Abbett), nor may such person have any dealings in a security that he may not purchase or sell for any other account in which he has Beneficial Ownership, or disclose the information to anyone, until such purchase, sale or contemplated action has either been completed or abandoned. No employee or partner of Lord Abbett may purchase the common stock of a company that has a market capitalization at the time of purchase below $3 billion.
III. OBTAINING ADVANCE APPROVAL
Except as provided in Sections V and VI of this Code, all proposed transactions in securities (privately or publicly owned) by Covered Persons, except transactions in Excepted Securities and Excepted Transactions, should be approved consistent with the provisions of this Code. In order to obtain approval, the Covered Person must send their request to the Legal Department (see Appendix I for details on the approval process). After approval has been obtained, the Covered Person may act on it within the next seven business days, unless he sooner learns of a contemplated action by Lord Abbett. After the seven business days, or upon hearing of such contemplated action, a new approval must be obtained.
Furthermore, in addition to the above requirements, partners and employees directly involved must disclose information they may have concerning securities they may want to purchase or
Lord, Abbett & Co. Code of Ethics April 2002
sell to any portfolio manager who might be interested in the securities for the portfolios they manage.
IV. REPORTING AND CERTIFICATION REQUIREMENTS; BROKERAGE CONFIRMATIONS
(1) Except as provided in Sections V and VI of this Code, within 10 days following the end of each calendar quarter each Covered Person must file a signed Security Transaction Reporting Form. The form must be signed and filed whether or not any security transaction has been effected. If any transaction has been effected during the quarter for the Covered Person's account or for any account in which he has a direct or indirect Beneficial Ownership, it must be reported. Excepted from this reporting requirement are transactions effected in any accounts over which the Covered Person has no direct or indirect influence or control and transactions in Excepted Securities. Securities acquired in an Excepted Transaction should be reported. The Legal Department is responsible for reviewing these transactions and must bring any apparent violation to the attention of the General Counsel of Lord Abbett.
(2) Each employee and partner of Lord Abbett will upon commencement of employment (within 5 business days) and annually thereafter disclose all personal securities holdings and annually certify that: (i) they have read and understand this Code and recognize they are subject hereto; and (ii) they have complied with the requirements of this Code and disclosed or reported all securities transactions required to be disclosed or reported pursuant to the requirements of this Code.
(3) Each employee and partner of Lord Abbett will direct his brokerage firm to send copies of all confirmations and all monthly statements directly to the Legal Department.
(4) Each employee and partner of Lord Abbett who has a Fully-Discretionary Account (as defined in Section VI) shall disclose all pertinent facts regarding such Account to Lord Abbett's General Counsel upon commencement of employment. Each such employee or partner shall thereafter annually certify on the prescribed form that he or she has not and will not exercise any direct or indirect influence or control over such Account, and has not discussed any potential investment decisions with such independent fiduciary in advance of any such transactions.
V. SPECIAL PROVISIONS APPLICABLE TO OUTSIDE DIRECTORS AND TRUSTEES OF THE FUNDS
The primary function of the Outside Directors and Trustees of the Funds is to set policy and monitor the management performance of the Funds' officers and employees and the partners and employees of Lord Abbett involved in the management of the Funds. Although they receive complete information as to actual portfolio transactions, Outside Directors and Trustees are not given advance information as to the Funds' contemplated investment transactions.
An Outside Director or Trustee wishing to purchase or sell any security will therefore generally not be required to obtain advance approval of his security transactions. If, however, during discussions at Board meetings or otherwise an Outside Director or Trustee should learn in advance of the Funds' current or contemplated investment transactions, then advance approval of transactions in the securities of such company(ies) shall be required for a period of 30 days from the date of such Board meeting. In addition, an Outside Director or Trustee can voluntarily obtain advance approval of any security transaction or transactions at any time.
No report described in Section IV (1) will be required of an Outside Director or Trustee unless he knew, or in the ordinary course of fulfilling his official duties as a director or trustee should have known, at the time of his transaction, that during the 15-day period immediately before or after the date of the transaction (i.e., a total of 30 days) by the Outside Director or Trustee such security was or was to be purchased or sold by any of the Funds or such a purchase or sale was or was to be considered by a Fund. If he makes any transaction requiring such a report, he must report all securities transactions effected during the quarter for his account or for any account in which he has a direct or indirect Beneficial Ownership interest and over which he has any direct or indirect influence or control. Each Outside Director and Trustee will direct his brokerage firm to send copies of all confirmations of securities transactions to the Legal Department, and annually make the certification required under Section IV(2)(i) and (ii). Outside Directors' and Trustees' transactions in Excepted Securities are excepted from the provisions of this Code.
It shall be prohibited for an Outside Director or Trustee to (i) trade on material non-public information, or (ii) trade in options with respect to securities covered by this Code without advance approval from Lord Abbett. Prior to accepting an appointment as a director of any public company, an Outside Director or Trustee will advise Lord Abbett and discuss with Lord Abbett's Managing Partner whether accepting such appointment creates any conflict of interest or other issues.
If an Outside Director or Trustee, who is a director or an employee of, or consultant to, a company, receives a grant of options to purchase securities in that company (or an affiliate), neither the receipt of such options, nor the exercise of those options and the receipt of the underlying security, requires advance approval from Lord Abbett. Further, neither the receipt nor the exercise of such options and receipt of the underlying security is reportable by such Outside Director or Trustee. Finally, neither the receipt nor the exercise of such options shall be considered "trading in options" within the meaning of the preceding paragraph of this Section V.
VI. ADDITIONAL REQUIREMENTS RELATING TO PARTNERS AND EMPLOYEES OF LORD ABBETT
It shall be prohibited for any partner or employee of Lord Abbett:
(1) To obtain or accept favors or preferential treatment of any kind or gift or other thing having a value of more than $100 from any person or entity that does business with or on behalf of the investment company
(2) to trade on material non-public information or otherwise fail to comply with the Firm's Statement of Policy and Procedures on Receipt and Use of Inside Information adopted pursuant to Section 15(f) of the Securities Exchange Act of 1934 and Section 204A of the Investment Advisers Act of 1940;
(3) to trade in options with respect to securities covered under this Code;
(4) to profit in the purchase and sale, or sale and purchase, of the same (or equivalent) securities within 60 calendar days (any profits realized on such short-term trades shall be disgorged to the appropriate Fund or as otherwise determined);
(5) to trade in futures or options on commodities, currencies or other financial instruments, although the Firm reserves the right to make rare exceptions in unusual circumstances which have been approved by the Firm in advance;
(6) to engage in short sales or purchase securities on margin;
(7) to buy or sell any security within seven business days before or after any Fund (or other Lord Abbett client) trades in that security (any profits realized on trades within the proscribed periods shall be disgorged to the Fund (or the other client) or as otherwise determined);
(8) to subscribe to new or secondary public offerings, even though the offering is not one in which the Funds or Lord Abbett's advisory accounts are interested;
(9) to become a director of any company without the Firm's prior consent and implementation of appropriate safeguards against conflicts of interest.
In connection with any request for approval, pursuant to Section III of this Code, of an acquisition by partners or employees of Lord Abbett of any securities in a private placement, prior approval will take into account, among other factors, whether the investment opportunity should be reserved for any of the Funds and their shareholders (or other clients of Lord Abbett) and whether the opportunity is being offered to the individual by virtue of the individual's position with Lord Abbett or the Funds. An individual's investment in privately-placed securities will be disclosed to the Managing Partner of Lord Abbett if such individual is involved in consideration of an investment by a Fund (or other client) in the issuer of such securities. In such circumstances, the Fund's (or other client's) decision to purchase securities of the issuer will be subject to independent review by personnel with no personal interest in the issuer.
If a spouse of a partner or employee of Lord Abbett who is a director or an employee of, or a consultant to, a company, receives a grant of options to purchase securities in that company (or an affiliate), neither the receipt nor the exercise of those options requires advance approval from Lord Abbett or reporting. Any subsequent sale of the security acquired by the option exercise by that spouse would require advance approval and is a reportable transaction.
Advance approval is not required for transactions in any account of a Covered person if the Covered Person has no direct or indirect influence or control ( a "Fully-Discretionary Account"). A Covered person will be deemed to have "no direct or indirect influence or control" over an account only if : (i) investment discretion for the account has been delegated to an independent fiduciary and such investment discretion is not shared with the employee, (ii) the Covered Person certifies in writing that he or she has not and will not discuss any potential investment decisions with such independent fiduciary before any transaction and (iii) the General Counsel of Lord Abbett has determined that the account satisfies these requirements. Transaction in Fully-Discretionary Accounts by an employee or partner of Lord Abbett are subject to the post-trade reporting requirements of this Code.
VII. ENFORCEMENT
The Secretary of the Funds and General Counsel for Lord Abbett (who may be the same person) each is charged with the responsibility of enforcing this Code, and may appoint one or more employees to aid him in carrying out his enforcement responsibilities. The Secretary shall implement a procedure to monitor compliance with this Code through an ongoing review of personal trading records provided under this Code against transactions in the Funds and managed portfolios. The Secretary shall bring to the attention of the Funds' Audit Committees any apparent violations of this Code, and the Audit Committees shall determine what action shall be taken as a result of such violation. The record of any violation of this Code and any action taken as a result thereof, which may include suspension or removal of the violator from his position, shall be made a part of the permanent records of the Audit Committees of the Funds. The Secretary shall also prepare an ANNUAL ISSUES AND CERTIFICATION REPORT to the directors or trustees of the Funds that (A) summarizes Lord Abbett's procedures concerning personal investing, including the procedures followed by partners in determining whether to give approvals under Section III and the procedures followed by the Legal Department in determining pursuant to Section IV whether any Funds have determined to purchase or sell a security or are considering such a purchase or sale, and any changes in those procedures during the past year, and certifies to the directors or trustees that the procedures are reasonably necessary to prevent violations, and (B) identifies any recommended changes in the restrictions imposed by this Code or in such procedures with respect to the Code and any changes to the Code based upon experience with the Code, evolving industry practices or developments in the regulatory environment, and (c) summarizes any apparent violations of this Code over the past year and any sanctions imposed in response to those violations including any action taken by the Audit Committee of each of the Funds.
The Audit Committee of each of the Funds and the General Counsel of Lord Abbett may determine in particular cases that a proposed transaction or proposed series of transactions does not conflict with the policy of this Code and exempt such transaction or series of transactions from one or more provisions of this Code.
VIII. DEFINITIONS
"Covered Person" means any officer, director, trustee, director or trustee emeritus or employee of any of the Funds and any partner or employee of Lord Abbett. (See also definition of "Beneficial Ownership.")
"Excepted Securities" are shares of the Funds, bankers' acceptances, bank certificates of deposit, commercial paper, shares of registered open-end investment companies and U.S. Government and Agency securities. Please note that shares of closed-end investment companies and/or exchange traded unit-investment trusts ("UITs") are treated as common stock under the Code.
"Excepted Transactions" means securities acquired through tender offers or spin-offs; securities received due to a merger or acquisition; the sale of 300 shares or less of a S&P 500 stock; and any securities purchased through Dividend Reinvestment Programs (DRIPs) and/or Employee Stock Ownership Plans (ESOPs). Please note that any sales made from DRIPs and/or ESOPs require pre-approval as described in Section III of this Code.(2) "Outside Directors and Trustees" are directors and trustees who are not "interested persons" as defined in the Investment Company Act of 1940. "Security" means any stock, bond, debenture or in general any instrument commonly known as a security and includes a warrant or right to subscribe to or purchase any of the foregoing and also includes the writing of an option on any of the foregoing.
"Beneficial Ownership" is interpreted in the same manner as it would be under Section 16 of the Securities Exchange Act of 1934 and Rule 16a-1 thereunder. Accordingly, "beneficial owner" includes any Covered Person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest (i.e. the ability to share in profits derived from such security) in any equity security, including:
(i) securities held by a person's immediate family sharing the same house (with certain exceptions);
(ii) a general partner's interest in portfolio securities held by a general or limited partnership;
(iii) a person's interest in securities held in trust as trustee, beneficiary or settlor, as provided in Rule 16a-8(b); and
(iv) a person's right to acquire securities through options, rights or other derivative securities.
(2)All Excepted Transactions are subject to the reporting requirements of
Section IV and VI. However, with respect to DRIPs and ESOPs only the initial
purchase must be reported on the quarterly transaction forms and the present
balance updated annually on the Annual Holdings Report.
"Gender/Number" whenever the masculine gender is used herein, it includes the feminine gender as well, and the singular includes the plural and the plural includes the singular, unless in each case the context clearly indicates otherwise.