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. 41 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT /X/
OF 1940
Amendment No. 41 /X/
LORD ABBETT SECURITIES TRUST
----------------------------
Exact Name of Registrant as Specified in Charter
90 Hudson Street, Jersey City, New Jersey 07302-3973
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Address of Principal Executive Office
Registrant's Telephone Number (201) 395-2000
Christina T. Simmons, Esq., Vice President and Assistant General Counsel
Lord, Abbett & Co. LLC
90 Hudson Street, Jersey City, New Jersey 07302-3973
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Name and Address of Agent for Service
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on June 30, 2003 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a) (1)
/ / on (date) pursuant to paragraph (a) (1)
/ / 75 days after filing pursuant to paragraph (a) (2)
/ / on (date) pursuant to paragraph (a) (2) of rule 485
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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[LORD ABBETT LOGO]
JUNE 30, 2003
PROSPECTUS
LORD ABBETT
LARGE-CAP VALUE 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.
Please call 800-821-5129 for further information.
TABLE OF CONTENTS
PAGE
The FUND
What you should know GOAL 2
about the Fund PRINCIPAL STRATEGY 2
MAIN RISKS 3
PERFORMANCE 4
FEES AND EXPENSES 4
ADDITIONAL INVESTMENT INFORMATION 5
MANAGEMENT 6
Your INVESTMENT
Information for managing PURCHASES 9
your Fund account SALES COMPENSATION 13
OPENING YOUR ACCOUNT 14
REDEMPTIONS 15
DISTRIBUTIONS AND TAXES 15
SERVICES FOR FUND INVESTORS 16
Additional INFORMATION
How to learn more about the Fund BACK COVER
and other Lord Abbett Funds
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THE FUND
GOAL
The Fund's investment objective is to seek a high level of total return.
PRINCIPAL STRATEGY
To pursue this goal, the Fund primarily purchases equity securities of large, seasoned, U.S. and multinational companies that we believe are undervalued. Under normal circumstances, the Fund will invest 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 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 provide shareholders with at least 60 days' notice of any change in this policy. The equity securities the Fund may invest in 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.
The Fund is generally designed for tax-exempt or tax-deferred investors such as retirement and benefit plans, 401(k) plans and individual retirement accounts ("IRAs"). Possible tax consequences and the likelihood of dividend income will not be important considerations in choosing or holding the Fund's individual portfolio investments.
In selecting investments, the Fund attempts to invest in securities selling at reasonable prices in relation to our assessment of their potential value. We believe that a high level of total return (current income and capital appreciation) may be derived from an actively managed, diversified portfolio of such investments. We use a continuous and dynamic investment process in building the portfolio for the Fund. The process involves several elements that interact on an ongoing basis:
- We use quantitative research to assist in our valuation analysis to identify stocks we believe represent attractive valuations.
- We use fundamental research to learn about a company's operating environment, resources and strategic plans and to assess its prospects for exceeding earnings expectations. We try to identify companies we believe have the strongest fundamentals relative to valuations.
- We look for positive factors in a company's near-term outlook that we believe are likely to improve the value of the company's stock price. Among the factors that could be considered are new, improved or unique products or services, changes in the company's management, a business strategy not yet recognized by the marketplace or similar conditions.
- Once the Fund's portfolio is constructed we seek to maintain ongoing awareness of its principal emphasis and themes, with respect to the recognized value benchmarks and the effects of our strategic decisions.
While certain investments may never reach what we think is their full value, or may go down in value, our emphasis on large, seasoned company value stocks is designed to limit the Fund's downside risk because value stocks are believed to be underpriced, and large, seasoned company stocks tend to be less volatile than the stocks of smaller companies.
We generally sell a stock when we think it seems less likely to benefit from the current market and economic environment, shows deteriorating fundamentals, or has reached our valuation target, or is no longer underpriced in our view.
[SIDE NOTE]
WE OR THE FUND OR LARGE-CAP VALUE FUND refers to the Lord Abbett Large-Cap 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.
LARGE COMPANIES are established companies that are considered "known quantities." Large companies often have the resources to weather economic shifts, although they can be slower to innovate than small companies.
SEASONED COMPANIES are usually established companies whose securities have gained a reputation for quality with the investing public and enjoy liquidity in the market.
VALUE STOCKS are stocks of companies that we believe the market undervalues according to certain financial measurements of their intrinsic worth or business prospects.
MULTINATIONAL COMPANIES are those companies that conduct their business operations and activities in more than one country.
2 The Fund
LARGE-CAP VALUE FUND
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. This means the value of your investment will fluctuate in response to movements in the equity securities 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 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. Certain investments may never reach what we think is their full value or may go down in value.
Due to its investments in multinational companies, the Fund may experience increased market, liquidity, currency, political, information, and other risks.
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.
The Fund 3
LARGE-CAP VALUE FUND
PERFORMANCE
The Fund does not show any performance because it has not completed a full calendar year of operations.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
FEE TABLE
CLASS A CLASS B(1) CLASS C CLASS P
SHAREHOLDER FEES (Fees paid directly from your investment)
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Maximum Sales Charge on Purchases
(as a % of offering price) 5.75% none none none
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Maximum Deferred Sales Charge (See "Purchases")(2) none(3) 5.00% 1.00%(4) none
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ANNUAL FUND OPERATING EXPENSES (Expenses deducted from Fund assets)
(as a % of average net assets)(5)
--------------------------------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.40% 0.40% 0.40% 0.40%
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Distribution and Service (12b-1) Fees(6) 0.35% 1.00% 1.00% 0.45%
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Other Expenses 0.41% 0.41% 0.41% 0.41%
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Total Operating Expenses 1.16% 1.81% 1.81% 1.26%
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(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) The annual operating expenses are based on estimated expenses.
(6) Because 12b-1 fees are paid out on an ongoing basis, over time they will increase the cost of your investment and may cost you more than paying other types of sales charges.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. This example, like that in other funds' prospectuses, assumes that you invest $10,000 in the Fund at the maximum sales charge, if any, for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year, that dividends and distributions are reinvested, and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs (including any applicable contingent deferred sales charges) would be:
SHARE CLASS 1 YEAR 3 YEARS Class A Shares $686 $922 ----------------------------------------------------------------------------------------- Class B Shares $684 $869 ----------------------------------------------------------------------------------------- Class C Shares $284 $569 ----------------------------------------------------------------------------------------- Class P Shares $128 $400 ----------------------------------------------------------------------------------------- |
You would pay the following expenses if you did not redeem your shares:
Class A Shares $686 $922 ----------------------------------------------------------------------------------------- Class B Shares $184 $569 ----------------------------------------------------------------------------------------- Class C Shares $184 $569 ----------------------------------------------------------------------------------------- Class P Shares $128 $400 ----------------------------------------------------------------------------------------- |
[SIDE NOTE]
MANAGEMENT FEES are payable to Lord, Abbett & Co. LLC ("Lord Abbett") for the Fund's investment management.
12b-1 FEES are 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.
LORD ABBETT IS CURRENTLY REIMBURSING EXPENSES TO THE EXTENT NECESSARY TO MAINTAIN TOTAL OPERATING EXPENSES FOR CLASS A SHARES AT .95%, FOR CLASS B SHARES AT 1.60%, FOR CLASS C SHARES AT 1.60%, AND FOR CLASS P SHARES AT 1.05% OF AVERAGE DAILY NET ASSETS OF EACH CLASS OF SHARES. LORD ABBETT MAY STOP
REIMBURSING SUCH EXPENSES AT ANY TIME.
4 The Fund
ADDITIONAL INVESTMENT INFORMATION
This section describes some of the investment techniques that might be 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 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 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.
CONVERTIBLE SECURITIES. The Fund may invest in convertible bonds and convertible preferred stocks. These investments tend to be more volatile than debt securities, but tend to be less volatile and produce more income than their underlying common stocks. The markets for convertible securities may be less liquid than markets for common stocks or bonds.
DEPOSITARY RECEIPTS. The Fund may invest in American Depositary Receipts ("ADRs") and similar depositary receipts. ADRs, typically issued by a financial institution (a "depositary"), evidence ownership interests in a security or a pool of securities issued by a foreign company and deposited with the depositary. Prices of ADRs are quoted in U.S. dollars, and ADRs are traded in the U.S. Ownership of ADRs entails similar investment risks to direct ownership of foreign securities traded outside the U.S., including increased market, liquidity, currency, political, information and other risks. Although the Fund may not invest more than 10% of its net assets in foreign securities, ADRs are not subject to this limitation.
LISTED OPTIONS ON SECURITIES. The Fund may purchase and write national securities exchange-listed put and call options on securities or securities indices. The Fund may use options for hedging or cross-hedging purposes, or to seek to increase total return (which is considered a speculative activity). A "call option" is a contract sold for a price giving its holder the right to buy a specific number 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 with respect to securities in its portfolio in an attempt to increase income and to provide greater flexibility in the disposition of portfolio securities. A "put option" gives the text can not go below this line 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. 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 only sell (write) covered put options to the extent that cover for such options does not exceed 15% of its net assets. The Fund may only sell (write) covered call options with respect to securities having an aggregate market value of less than 25% of its total assets at the time an option is written.
The Fund 5
RISKS OF OPTIONS. Fund transactions in options, if any, involve additional risk of loss. Loss may result, for example, from adverse market movements, a lack of correlation between changes in the value of these derivative instruments and the Fund's assets being hedged, the potential illiquidity of the markets for derivative instruments, the risk that the counterparty to an OTC contract will fail to perform its obligations, or the risks arising from margin requirements and related leverage factors associated with such transactions.
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 obligations of the U.S. Government and its agencies and instrumentalities. These investments could reduce the benefit from any upswing in the market and prevent the Fund from achieving its investment objective.
MANAGEMENT
The Fund's 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 $53 billion in more than 40 mutual funds and other advisory accounts as of April 30, 2003.
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 as follows:
.40 of 1% on the first $2 billion in assets,
.375 of 1% on the next $3 billion, and
.35 of 1% on the Fund's assets over $5 billion.
In addition, Lord Abbett provides certain administrative services to the Fund for a fee at the 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 a team of investment managers and analysts acting together to manage the Fund's investments. The senior members of the team are: Sholom Dinsky, Thomas Hudson Jr., Robert G. Morris, Eli M. Salzmann and Kenneth G. Fuller. Messrs. Dinsky, Hudson, Morris, and Salzmann are Partners of Lord Abbett. Messrs. Hudson, Salzmann, and Morris have been with Lord Abbett since 1982, 1997, and 1991, respectively. Mr. Dinsky joined Lord Abbett in 2000 from Prudential Investments, where he served as Managing Director of Prudential Asset Management. Mr. Fuller, Investment Manager - Large Cap Value, joined Lord Abbett in 2002 from Pioneer Investment Management, Inc., where he served as Portfolio Manager and Senior Vice President from 1999 to 2002. Prior thereto, he served as a Principal of Manley, Fuller Asset Management.
6 The Fund
PAST PERFORMANCE OF INSTITUTIONAL ACCOUNTS. The performance information shown below is provided to illustrate the past performance of Lord Abbett in managing accounts that have substantially similar investment objectives, policies and strategies to those of the Fund and are managed by the Fund's portfolio management team. Such performance information does not represent the performance of the Fund, which has no history of operations. Investors should realize that this past performance data is not an indication of the future performance of the Fund.
The chart below illustrates average annual total return performance for Lord Abbett's Large-Cap Value Tax-Exempt Institutional Composite (the "Composite"), the S&P 500/Barra Value Index and the Russell 1000(R) Value Index.
[CHART]
AVERAGE ANNUAL TOTAL RETURNS - FOR PERIODS ENDED 3/31/03
LORD ABBETT'S LARGE-CAP VALUE LORD ABBETT'S LARGE-CAP VALUE S&P
TAX-EXEMPT INSTITUTIONAL TAX-EXEMPT INSTITUTIONAL S&P 500/BARRA
COMPOSITE-NET COMPOSITE-GROSS VALUE INDEX RUSSELL 1000(R) VALUE INDEX
1 year -22.96% -22.37% -26.19% -22.79%
3 years -1.17% -0.42% -11.26% -6.86%
5 years 1.44% 2.20% -4.09% -2.03%
10 years 10.08% 10.90% 7.82% 9.24%
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The data represents institutional accounts with assets as of December 31, 2003 of $1.075 billion, which represented 2.23% of Lord Abbett's total assets under management at that date. The data includes all accounts with substantially similar investment objectives, policies and strategies to those of the Fund. The gross and net performance numbers above for the Composite are net of all transaction costs and markups or markdowns in connection with securities transactions. The net Composite performance data above reflect the deduction of the highest advisory fee borne by any account in the Composite (an annual rate of 0.75% of assets). The gross and net Composite performance numbers do not reflect the deduction of custodian fees. The deduction of such fees (and the compounding effect thereof over time) will reduce the performance results and, correspondingly, the return to an investor. The effect of fees and expenses on performance will vary with the relative size of the fee and account performance.
One of the indices used for comparison is the S&P 500/Barra Value Index, an unmanaged index of the S&P 500(R) companies with lower price-to-book ratios. The S&P 500(R) Index is a broad-based unmanaged index of leading companies in leading industries and is widely regarded as the standard for measuring large-cap U.S. stock market performance. The second index used for comparison is the Russell 1000(R) Value Index, an unmanaged index that measures the performance of the Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 1000(R) Index is an unmanaged index that measures the performance of the 1,000 largest companies in the Russell 3000(R) Index (measuring the performance of the 3,000 largest U.S. companies based on total market capitalization). The data for the indices do not reflect the deduction of fees or expenses.
The Fund 7
The institutional accounts that are included in the data for the Composite above are not subject to the same types of expenses as the Fund and are not subject to the same diversification requirements, tax restrictions and other investment limitations imposed on the Fund by the Investment Company Act of 1940, as amended, or Subchapter M of the Internal Revenue Code of 1986. The performance results of the institutional accounts included in the Composite likely would have been lower if the institutional accounts had been regulated as investment companies under the federal tax and securities laws. In addition, the performance results of the institutional accounts would have been lower had they been subject to the higher fees and expenses of the Fund. Differences in the Securities and Exchange Commission and the Association for Investment Management and Research (AIMR) Performance Presentation Standards (AIMR-PPS(R)) methodologies for calculating performance could result in different performance data for identical time periods.
IMPORTANT INFORMATION REGARDING PAST PERFORMANCE OF INSTITUTIONAL ACCOUNTS. The Composite comprises all fully-invested equity portfolios managed on behalf of tax-exempt investors investing primarily in large-capitalization securities that Lord Abbett deems to be undervalued on a relative basis. Effective January 1, 2000, only accounts with an initial value of $10 million or more are included in the Composite. Performance results are expressed in U.S. dollars and reflect reinvestment of any dividends and distributions. A complete list of Lord Abbett composites and descriptions of the investment strategies is available from Lord Abbett and a performance presentation that adheres to the AIMR-PPS(R) is available at www.LordAbbett.com.
Lord Abbett has prepared and presented the performance of the Composite in compliance with AIMR-PPS(R), the U.S. and Canadian version of the Global Investment Performance Standards. AIMR has not been involved in the preparation or review of this performance information. For AIMR-PPS(R) purposes, Lord Abbett defines the "Firm" as all fee-based accounts managed by Lord Abbett, including institutional accounts, separately managed accounts, and mutual funds, but not including any hedge fund or separately managed accounts for which the records have been maintained by another entity.
8 The Fund
YOUR INVESTMENT
PURCHASES
The Fund offers in this prospectus four classes of shares: Classes A, B, C, and P, each with different expenses and dividends. You may purchase shares at the net asset value ("NAV") per share determined after we receive your purchase order submitted in proper form. We will not consider an order to be in proper form until we have completed 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.
SHARE CLASSES
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 converts 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 - available only to certain investors
- no front-end sales charge and no CDSC
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FRONT-END SALES CHARGES - CLASS A SHARES
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)
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Less than $50,000 5.75% 6.10% .9425 5.00%
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$50,000 to $99,999 4.75% 4.99% .9525 4.00%
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$100,000 to $249,999 3.95% 4.11% .9605 3.25%
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$250,000 to $499,999 2.75% 2.83% .9725 2.25%
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$500,000 to $999,999 1.95% 1.99% .9805 1.75%
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$1,000,000 and over No Sales Charge 1.0000 +
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+ See "Dealer Concessions on Class A Share Purchases Without a Front-End Sales Charge."
[SIDE NOTE]
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 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.
Your Investment 9
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 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 Fund 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 Fund 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 the employees of any consenting securities dealer having a sales agreement with Lord Abbett text can not go below this line Your Investment 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 PURCHASES THAT QUALIFY FOR CLASS A SHARE PURCHASES WITHOUT A FRONT-END SALES CHARGE.
* THESE CATEGORIES MAY BE SUBJECT TO A CDSC.
[SIDE NOTE]
PLEASE 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, 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.
10 Your Investment
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 have entered into special arrangements with the Fund and/or Lord Abbett Distributor specifically for such purchases ("alliance arrangements").
DEALER CONCESSION SCHEDULE - CLASS A SHARES
(FOR CERTAIN PURCHASES WITHOUT A FRONT-END SALES CHARGE)
The dealer concession received is based on the amount of the Class A share investment as follows:
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%
--------------------------------------------------------------------------------------------
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* 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-sponsored 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. The 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, the Fund may waive any CDSC that might otherwise have applied to any such purchase. Financial Intermediaries should contact Lord Abbett Distributor for more complete information on the commission structure.
CONTINGENT DEFERRED SALES CHARGE (CDSC)
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, the Fund redeems shares in the following order:
1. shares acquired by reinvestment of dividends and capital gains (always free of a CDSC)
2. shares held for six years or more (Class B) or two years or more after the month of 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)
Your Investment 11
CLASS A SHARE CDSC. If you buy Class A shares of the 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 Fund 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:
CONTINGENT DEFERRED SALES CHARGES - CLASS B SHARES
ANNIVERSARY(1) OF THE DAY ON CONTINGENT DEFERRED SALES CHARGE
WHICH THE PURCHASE ORDER ON REDEMPTION (AS % OF AMOUNT
WAS ACCEPTED SUBJECT TO CHARGE)
ON BEFORE
--------------------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------------------
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(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.
[SIDE NOTE]
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.
12 Your 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 Fund 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 have entered into special arrangements with the Fund and/or Lord Abbett Distributor specifically for such orders.
SALES COMPENSATION
As part of its plan for distributing shares, the Fund and Lord Abbett Distributor pay sales and service compensation to AUTHORIZED INSTITUTIONS that sell the Fund's shares and service its shareholder accounts.
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 Fund. 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 also 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.
[SIDE NOTE]
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 the Fund need not be directly related to expenses. If Lord Abbett Distributor's actual expenses exceed the fee payable to it, the Fund will not have to pay more than that fee. If Lord Abbett Distributor's expenses are less than the fee it receives, Lord Abbett Distributor will keep the full amount of the fee.
Your Investment 13
In selecting dealers to execute portfolio transactions for the Fund's portfolio, if two or more dealers are considered capable of obtaining best execution, we may prefer the dealer who has sold our shares 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 the 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 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.
LORD ABBETT LARGE-CAP VALUE FUND
P.O. Box 219100
Kansas City, MO 64121
PROPER FORM. An order submitted directly to the 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, please 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.
14 Your Investment
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. 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.
DISTRIBUTIONS AND TAXES
The Fund expects to pay you dividends from its net investment income annually and 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. For distributions payable on accounts other than those held in the name of your dealer, if you instruct the Fund to pay your distributions in cash, and the Post Office
[SIDE NOTE]
SMALL ACCOUNTS. The Board may authorize closing any account in which there are fewer than 25 shares if it is in the 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 -
/s/ Robert A. Doe Executor of the Estate of John W. Doe |
[Date]
[SEAL]
- In the case of a corporation - ABC Corporation
/s/ Mary B. Doe By Mary B. Doe, President |
[Date]
[SEAL]
Your Investment 15
is 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.
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, however, certain qualified dividends that the Fund receives are subject to a reduced tax rate. 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
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
(Dollar-cost your Fund account by means of automatic money transfers
averaging) from your bank checking account. See the Application for
instructions.
DIV-MOVE You may automatically reinvest the dividends and
distributions from your account into another account in any
Eligible Fund ($50 minimum).
FOR SELLING SHARES
SYSTEMATIC You can make regular withdrawals from most Lord
WITHDRAWAL Abbett-sponsored funds. Automatic cash withdrawals will be
PLAN ("SWP") paid to you from your account in fixed or 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
CLASS C SHARES shares will be redeemed in the order described under "CDSC"
under "Purchases."
16 Your Investment
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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 for 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 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.
SYSTEMATIC EXCHANGE. You or your investment professional can establish a schedule of exchanges between the same classes of any Eligible Fund.
[SIDE NOTE]
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.
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.
Your Investment 17
To Obtain Information:
BY TELEPHONE. For shareholder ADDITIONAL INFORMATION
account inquiries call the
Fund at: 800-821-5129. For More information on the Fund is or will be
literature requests call the available free upon request, including the
Fund at: 888-522-2388. following:
BY MAIL. Write to the Fund at: ANNUAL/SEMI-ANNUAL REPORT The Fund's Annual
The Lord Abbett Family of and Semi-Annual Reports contain more
Funds 90 Hudson Street Jersey information about the Fund's investments and
City, NJ 07302-3973 performance. The Annual Report also includes
details about the market conditions and
VIA THE INTERNET. LORD, ABBETT investment strategies that had a significant
& CO. LLC effect on the Fund's performance during the
www.LordAbbett.com last fiscal year.
Text only versions of Fund STATEMENT OF ADDITIONAL INFORMATION ("SAI")
documents can be viewed online Provides more details about the Fund and its
or downloaded from the SEC: policies. A current SAI is on file with the
www.sec.gov. Securities and Exchange Commission ("SEC")
and is incorporated by reference (is legally
You can also obtain copies by considered part 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(R)]
Lord Abbett Mutual Fund Lord Abbett Securities Trust
shares are distributed by: Lord Abbett Large-Cap Value Fund LST-LCV-1
LORD ABBETT DISTRIBUTOR LLC (7/03)
90 Hudson Street - Jersey City,
New Jersey 07302-3973
|
SEC FILE NUMBER: 811-7538
LORD ABBETT [GRAPHIC]
JUNE 30, 2003
PROSPECTUS
CLASS Y SHARES
LORD ABBETT
LARGE-CAP VALUE 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.
PLEASE CALL 800-821-5129 FOR FURTHER INFORMATION.
TABLE OF CONTENTS
PAGE
THE FUND
What you should know Goal 2
about the Fund Principal Strategy 2
Main Risks 3
Performance 4
Fees and Expenses 4
Additional Investment Information 5
Management 6
YOUR INVESTMENT
Information for managing Purchases 9
your Fund account Sales Compensation 9
Opening Your Account 9
Redemptions 10
Distributions and Taxes 11
Services for Fund Investors 11
ADDITIONAL INFORMATION
How to learn more about the Fund Back Cover
and other Lord Abbett Funds
|
THE FUND
GOAL
The Fund's investment objective is to seek a high level of total return.
PRINCIPAL STRATEGY
To pursue this goal, the Fund primarily purchases equity securities of large, seasoned, U.S. and multinational companies that we believe are undervalued. Under normal circumstances, the Fund will invest 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 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 provide shareholders with at least 60 days' notice of any change in this policy. The equity securities the Fund may invest in 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.
The Fund is generally designed for tax-exempt or tax-deferred investors such as retirement and benefit plans, 401(k) plans and individual retirement accounts ("IRAs"). Possible tax consequences and the likelihood of dividend income will not be important considerations in choosing or holding the Fund's individual portfolio investments.
In selecting investments, the Fund attempts to invest in securities selling at reasonable prices in relation to our assessment of their potential value. We believe that a high level of total return (current income and capital appreciation) may be derived from an actively managed, diversified portfolio of such investments. We use a continuous and dynamic investment process in building the portfolio for the Fund. The process involves several elements that interact on an ongoing basis:
- We use quantitative research to assist in our valuation analysis to
identify stocks we believe represent attractive valuations.
- We use fundamental research to learn about a company's operating
environment, resources and strategic plans and to assess its prospects
for exceeding earnings expectations. We try to identify companies we
believe have the strongest fundamentals relative to valuations.
- We look for positive factors in a company's near-term outlook that we
believe are likely to improve the value of the company's stock price.
Among the factors that could be considered are new, improved or unique
products or services, changes in the company's management, a business
strategy not yet recognized by the marketplace or similar conditions.
- Once the Fund's portfolio is constructed we seek to maintain ongoing
awareness of its principal emphasis and themes, with respect to the
recognized value benchmarks and the effects of our strategic decisions.
While certain investments may never reach what we think is their full value, or may go down in value, our emphasis on large, seasoned company value stocks is designed to limit the Fund's downside risk because value stocks are believed to be underpriced, and large, seasoned company stocks tend to be less volatile than the stocks of smaller companies.
We generally sell a stock when we think it seems less likely to benefit from the current market and economic environment, shows deteriorating fundamentals, or has reached our valuation target, or is no longer underpriced in our view.
[SIDENOTE]
WE OR THE FUND OR LARGE-CAP VALUE FUND refers to the Lord Abbett Large-Cap 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.
LARGE COMPANIES are established companies that are considered "known quantities." Large companies often have the resources to weather economic shifts, although they can be slower to innovate than small companies.
SEASONED COMPANIES are usually established companies whose securities have gained a reputation for quality with the investing public and enjoy liquidity in the market.
VALUE STOCKS are stocks of companies that we believe the market undervalues according to certain financial measurements of their intrinsic worth or business prospects.
MULTINATIONAL COMPANIES are those companies that conduct their business operations and activities in more than one country.
2 | The Fund
LARGE-CAP VALUE FUND
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. This means the value of your investment will fluctuate in response to movements in the equity securities 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 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. Certain investments may never reach what we think is their full value and may go down in value.
Due to its investments in multinational companies, the Fund may experience increased market, liquidity, currency, political, information, and other risks.
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.
The Fund | 3
LARGE-CAP VALUE FUND
PERFORMANCE
The Fund does not show any performance because it has not completed a full calendar year of operations.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
FEE TABLE
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 (See "Purchases") none
ANNUAL FUND OPERATING EXPENSES (Expenses deducted from Fund
assets) (as a % of average net assets)(1)
Management Fees (See "Management") 0.40%
Other Expenses 0.41%
Total Operating Expenses 0.81%
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(1) The annual operating expenses are based on estimated expenses.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. This example, like that in other funds' prospectuses, assumes that you invest $10,000 in the Fund at the maximum sales charge, if any, for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year, that dividends and distributions are reinvested, and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs (including any applicable contingent deferred sales charges) would be:
1 YEAR 3 YEARS
Class Y Shares $83 $259
|
[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 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.
LORD ABBETT IS CURRENTLY REIMBURSING EXPENSES TO THE EXTENT NECESSARY TO MAINTAIN TOTAL OPERATING EXPENSES FOR CLASS Y SHARES AT .60% OF AVERAGE DAILY
NET ASSETS. LORD ABBETT MAY STOP REIMBURSING SUCH EXPENSES AT ANY TIME.
4 | The Fund
ADDITIONAL INVESTMENT INFORMATION
This section describes some of the investment techniques that might be 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 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 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.
CONVERTIBLE SECURITIES. The Fund may invest in convertible bonds and convertible preferred stocks. These investments tend to be more volatile than debt securities, but tend to be less volatile and produce more income than their underlying common stocks. The markets for convertible securities may be less liquid than markets for common stocks or bonds.
DEPOSITARY RECEIPTS. The Fund may invest in American Depositary Receipts ("ADRs") and similar depositary receipts. ADRs, typically issued by a financial institution (a "depositary"), evidence ownership interests in a security or a pool of securities issued by a foreign company and deposited with the depositary. Prices of ADRs are quoted in U.S. dollars, and ADRs are traded in the U.S. Ownership of ADRs entails similar investment risks to direct ownership of foreign securities traded outside the U.S., including increased market, liquidity, currency, political, information and other risks. Although the Fund may not invest more than 10% of its net assets in foreign securities, ADRs are not subject to this limitation.
LISTED OPTIONS ON SECURITIES. The Fund may purchase and write national
securities exchange-listed put and call options on securities or securities
indices. The Fund may use options for hedging or cross-hedging purposes, or
to seek to increase total return (which is considered a speculative
activity). A "call option" is a contract sold for a price giving its holder
the right to buy a specific number 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 with respect to securities in its portfolio in an attempt to
increase income and to provide greater flexibility in the disposition of
portfolio securities. 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. 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 only sell (write) covered put options to the extent that cover for
such options does not exceed 15% of its net assets. The Fund may only sell
(write) covered call options with respect to securities having an aggregate
market value of less than 25% of its total assets at the time an option is
written.
The Fund | 5
RISKS OF OPTIONS. Fund transactions in options, if any, involve additional risk of loss. Loss may result, for example, from adverse market movements, a lack of correlation between changes in the value of these derivative instruments and the Fund's assets being hedged, the potential illiquidity of the markets for derivative instruments, the risk that the counterparty to an OTC contract will fail to perform its obligations, or the risks arising from margin requirements and related leverage factors associated with such transactions.
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 obligations of the U.S. Government and its agencies and instrumentalities. These investments could reduce the benefit from any upswing in the market and prevent the Fund from achieving its investment objective.
MANAGEMENT
The Fund's 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 $53 billion in more than 40 mutual funds and other advisory accounts as of April 30, 2003.
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 as follows:
.40% of 1% on the first $2 billion in assets, .375% of 1% on the next $3 billion, and .35% of 1% on the Fund's assets over $5 billion.
In addition, Lord Abbett provides certain administrative services to the Fund for a fee at the 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 a team of investment managers and analysts acting together to manage the Fund's investments. The senior members of the team are: Sholom Dinsky, Thomas Hudson Jr., Robert G. Morris, Eli M. Salzmann and Kenneth G. Fuller. Messrs. Dinsky, Hudson, Morris, and Salzmann are Partners of Lord Abbett. Messrs. Hudson, Salzmann, and Morris have been with Lord Abbett since 1982, 1997, and 1991, respectively. Mr. Dinsky joined Lord Abbett in 2000 from Prudential Investments, where he served as Managing Director of Prudential Asset Management. Mr. Fuller, Investment Manager - Large Cap Value, joined Lord Abbett in 2002 from Pioneer Investment Management, Inc., where he served as Portfolio Manager and Senior Vice President from 1999 to 2002. Prior thereto, he served as a Principal of Manley, Fuller Asset Management.
6 | The Fund
PAST PERFORMANCE OF INSTITUTIONAL ACCOUNTS. The performance information shown below is provided to illustrate the past performance of Lord Abbett in managing accounts that have substantially similar investment objectives, policies and strategies to those of the Fund and are managed by the Fund's portfolio management team. Such performance information does not represent the performance of the Fund, which has no history of operations. Investors should realize that this past performance data is not an indication of the future performance of the Fund.
The chart below illustrates average annual total return performance for Lord Abbett's Large-Cap Value Tax-Exempt Institutional Composite (the "Composite"), the S&P 500/Barra Value Index and the Russell 1000(R) Value Index.
[CHART]
AVERAGE ANNUAL TOTAL RETURNS - FOR PERIODS ENDED 3/31/03
Lord Abbett's Large-Cap Value Tax-Exempt Lord Abbett's Large-Cap Value Tax-Exempt S&P 500/Barra Russell 1000(R)
Institutional Composite-Net Institutional Composite-Gross Value Index Value Index
1 year -22.96% -22.37% -26.19% -22.79%
3 years - 1.17% - 0.42% -11.26% - 6.86%
5 years 1.44% 2.20% - 4.09% - 2.03%
10 years 10.08% 10.90% 7.82% 9.24
|
The data represents institutional accounts with assets as of December 31, 2002 of $1.075 billion, which represented 2.23% of Lord Abbett's total assets under management at that date. The data includes all accounts with substantially similar investment objectives, policies and strategies to those of the Fund. The gross and net performance numbers above for the Composite are net of all transaction costs and markups or markdowns in connection with securities transactions. The net Composite performance data above reflect the deduction of the highest advisory fee borne by any account in the Composite (an annual rate of 0.75% of assets). The gross and net Composite performance numbers do not reflect the deduction of custodian fees. The deduction of such fees (and the compounding effect thereof over time) will reduce the performance results and, correspondingly, the return to an investor. The effect of fees and expenses on performance will vary with the relative size of the fee and account performance.
One of the indices used for comparison is the S&P 500/Barra Value Index, an unmanaged index of the S&P 500(R) companies with lower price-to-book ratios. The S&P 500(R) Index is a broad-based unmanaged index of leading companies in leading industries and is widely regarded as the standard for measuring large-cap U.S. stock market performance. The second index used for comparison is the Russell 1000(R) Value Index, an unmanaged index that measures the performance of the Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 1000(R) Index is an unmanaged index that measures the performance of the 1,000 largest companies in the Russell 3000(R) Index (measuring the performance of the 3,000 largest U.S. companies based on total market capitalization). The data for the indices do not reflect the deduction of fees or expenses.
The Fund | 7
The institutional accounts that are included in the data for the Composite above are not subject to the same types of expenses as the Fund and are not subject to the same diversification requirements, tax restrictions and other investment limitations imposed on the Fund by the Investment Company Act of 1940, as amended, or Subchapter M of the Internal Revenue Code of 1986. The performance results of the institutional accounts included in the Composite likely would have been lower if the institutional accounts had been regulated as investment companies under the federal tax and securities laws. In addition, the performance results of the institutional accounts would have been lower had they been subject to the higher fees and expenses of the Fund. Differences in the Securities and Exchange Commission and the Association for Investment Management and Research (AIMR) Performance Presentation Standards (AIMR-PPS(R)) methodologies for calculating performance could result in different performance data for identical time periods.
IMPORTANT INFORMATION REGARDING PAST PERFORMANCE OF INSTITUTIONAL ACCOUNTS. The Composite comprises all fully-invested equity portfolios managed on behalf of tax-exempt investors investing primarily in large-capitalization securities that Lord Abbett deems to be undervalued on a relative basis. Effective January 1, 2000, only accounts with an initial value of $10 million or more are included in the Composite. Performance results are expressed in U.S. dollars and reflect reinvestment of any dividends and distributions. A complete list of Lord Abbett composites and descriptions of the investment strategies is available from Lord Abbett and a performance presentation that adheres to the AIMR-PPS(R) is available at www.LordAbbett.com.
Lord Abbett has prepared and presented the performance of the Composite in compliance with AIMR-PPS(R), the U.S. and Canadian version of the Global Investment Performance Standards. AIMR has not been involved in the preparation or review of this performance information. For AIMR-PPS(R) purposes, Lord Abbett defines the "Firm" as all fee-based accounts managed by Lord Abbett, including institutional accounts, separately managed accounts and mutual funds, but not including any hedge fund or separately managed accounts for which the records have been maintained by another entity.
8 | The Fund
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 your purchase order submitted in proper form. We will not consider an order to be in proper form until we have completed 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; or (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 security 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 for 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
[SIDENOTE]
NAV per share for the Fund 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 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.
Your Investment | 9
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 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. 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.
[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]
10 | Your Investment
DISTRIBUTIONS AND TAXES
The Fund expects to pay you dividends from its net investment income annually and 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, however, certain qualified dividends that the Fund receives are subject to a reduced tax rate. 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.
Your Investment | 11
ADDITIONAL INFORMATION
More information on the Fund is or will be available free upon request, including the following:
ANNUAL/SEMI-ANNUAL REPORT
The Fund's Annual and Semi-Annual Reports contain more information about the Fund's investments and performance. The Annual Report also includes details about the market conditions and investment strategies that had a significant effect on the Fund's performance during the last fiscal year.
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).
Lord Abbett Securities Trust
Lord Abbett Large-Cap Value Fund LST-LCV-Y-1
(7/03)
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. LLC
www.LordAbbett.com
Text only versions of Fund documents can be viewed online or downloaded 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, New Jersey 07302-3973
SEC FILE NUMBER: 811-7538
LORD ABBETT
STATEMENT OF ADDITIONAL INFORMATION JUNE 30, 2003
LORD ABBETT SECURITIES TRUST
LORD ABBETT LARGE-CAP VALUE FUND
(CLASS A, B, C, & P 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 Lord Abbett Securities Trust - Lord Abbett Large-Cap Value Fund (the "Large-Cap Value Fund" or the "Fund") dated June 30, 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 15 6. Brokerage Allocations and Other Practices 16 7. Classes of Shares 18 8. Purchases, Redemptions, and Pricing 23 9. Taxation of the Fund 26 10. Underwriter 27 11. Performance 28 12. Financial Statements 28 |
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 six funds or series, but only the Large-Cap Value Fund is described in this SAI. The Fund has five classes of shares: Class A, Class B, Class C, Class P, and Class Y. Only the Fund's Class A, B, C, and P shares are offered in this SAI. The Fund's Class Y shares are described in a separate statement of additional information.
2.
INVESTMENT POLICIES
FUNDAMENTAL INVESTMENT RESTRICTIONS. The Fund's investment objective in the Prospectus cannot be changed without approval of a majority of the Fund's outstanding shares. The Fund is also 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 investments in government obligations, commercial paper, pass-through instruments, certificates of deposit, bankers acceptances, repurchase agreements or any similar instruments shall not be subject to this limitation, 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 these investment restrictions will be determined at the time of the purchase or sale of the security.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. In addition to the Fund's investment objective 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 restrictions 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, except for securities qualifying for resale under Rule 144A of the Securities Act of 1933, determined by Lord Abbett to be liquid;
(3) invest in securities issued by other investment companies except to the extent permitted by applicable law;
(4) 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);
(5) 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;
(6) 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
(7) buy from or sell to any of the Trust's officers, trustees, employees, or its investment adviser or any of the adviser's officers, partners or employees, any securities other than shares of the Trust.
PORTFOLIO TURNOVER RATE. The Fund has not commenced investment operations as of the date hereof.
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 will increase its losses.
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 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 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 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 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. In accordance with the Fund's investment objective and policies, 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 the investment manager believes 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 that 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. 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 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, options on futures contracts or options on currencies traded on a CFTC-regulated exchange if the aggregate 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, it may 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 a good faith deposit.
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, the Fund has not entered into any stock futures contracts and has no present intention 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 that the Fund cannot rely on Sections 12(d)(1)(F) and (G). These limitations include a prohibition on the Fund acquiring more than 3% of the voting shares of any other investment company, and a prohibition on investing more than 5% of the Fund's total assets in 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 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 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 & Poor's 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 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 its net assets. The Fund may only sell (write) covered call options with respect to securities having an aggregate market value of less than 25% of its net assets at the time an option is written.
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 the market for the issuer's common stock.
Warrants are options to buy a stated number of shares of common stock at a specified price at any time during the life of the warrant. Rights represent a privilege offered to holders of record of issued securities to subscribe (usually on a pro rata basis) for additional securities of the same class, of a different class or of a different issuer. The holders of warrants and rights have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer. The value of a warrant or right may not necessarily change with the value of the underlying securities. Warrants and rights cease to have value if they are not exercised prior to their expiration date. Investments in warrants and rights are thus speculative and may result in a total loss of the money invested.
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 which 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. The Fund's reverse repurchase agreements will not exceed 20% of its 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% 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 persons affiliated with the Fund.
By lending portfolio securities, the Fund can increase 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 INVESTMENTS. As described in the Prospectus, the Fund is authorized to invest temporarily a substantial amount, or even all, of its 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.
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 that 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 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 and 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.
Lord, Abbett & Co. LLC ("Lord Abbett"), a Delaware limited liability company, is the Fund's investment adviser.
INTERESTED TRUSTEE
The following Trustee is the Managing Partner of 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 48 portfolios or series.
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
DATE OF BIRTH WITH TRUST DURING PAST FIVE YEARS DIRECTORSHIPS
------------------------------- ---------------------- ------------------------------------- ------------------------------------
ROBERT S. DOW Trustee since 1993 and Managing Partner and Chief N/A
Lord, Abbett & Co. LLC Chairman since 1996 Investment Officer of Lord Abbett
90 Hudson Street since 1996.
Jersey City, NJ
Date of Birth: 3/8/1945
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INDEPENDENT TRUSTEES
The following independent or outside Trustees are also directors or trustees of each of the fourteen Lord Abbett-sponsored funds, which consist of 48 portfolios or series.
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION
DATE OF BIRTH WITH TRUST DURING PAST FIVE YEARS OTHER DIRECTORSHIPS
------------------------------- ---------------------- ------------------------------------ ------------------------------------
E. THAYER BIGELOW Trustee since 1994 Managing General Partner, Bigelow Currently serves as director of
Bigelow Media, LLC Media, LLC (since 2000); Senior Crane Co. and Huttig Building
41 Madison Ave., Suite 3810 Adviser, Time Warner Inc. (1998 - Products Inc.
New York, NY 2000); Acting Chief Executive
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 Trustee since 1998 Co-founder and Chairman of the Currently serves as director of
Bush-O'Donnell & Co., Inc. Board of the financial advisory Wellpoint Health Network, Inc., DT
101 South Hanley Road firm of Bush-O'Donnell & Company Industries Inc., and Engineered
Suite 1025 (since 1986). Support Systems, Inc.
St. Louis, MO
Date of Birth: 7/14/1938
ROBERT B. CALHOUN, JR. Trustee since 1998 Managing Director of Monitor Currently serves as director of
Monitor Clipper Partners Clipper Partners (since 1997) and Avondale, Inc., Avondale Mills,
Two Canal Park President of Clipper Asset Inc., IGI/Earth Color, Inc.,
Cambridge,MA Management Corp. (since 1991), Integrated Graphics, Inc., and
Date of Birth: 10/25/1942 both private equity investment Interstate Bakeries Corp.
funds.
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FRANKLIN W. HOBBS Trustee since 2000 Senior Advisor (since April 2003) Currently serves as director of
Houlihan Lokey Howard & Zukin and Former Chief Executive Officer Adolph Coors Company.
685 Third Ave. of Houlihan Lokey Howard & Zukin,
New York, NY an investment bank (January 2002
Date of Birth: 7/30/1947 to-April 2003); Chairman of Warburg
Dillon Read (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 Trustee since 1988 Retired - General Business and Currently serves as director of
415 Round Hill Road Governance Consulting (since 1992); Fountainhead Water Company,
Greenwich, CT formerly President and CEO of Careside, Inc., Lincoln Snacks, J.B.
Date of Birth: 5/19/1933 Nestle Foods. Williams Co., Inc. (personal care
products) and Seix Fund, Inc.*
THOMAS J. NEFF Trustee since 1982 Chairman of Spencer Stuart, U.S., Currently serves as director of
Spencer Stuart, U.S. an executive search consulting Ace, Ltd. and Exult, Inc.
277 Park Avenue firm (since 1996); President of
New York, NY Spencer Stuart, U.S. (1979-1996).
Date of Birth: 10/2/1937
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OFFICERS
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 TRUST OF CURRENT POSITION DURING PAST FIVE YEARS
------------------------------- --------------------------- ----------------------------- ------------------------------------
ROBERT S. DOW Chief Executive Officer Elected in 1995 Managing Partner and Chief
(3/8/1945) and President Investment Officer of Lord Abbett
since 1996.
SHOLOM DINSKY Executive Vice President Elected in 2003 Partner and Large Cap Value
(3/24/1944) Investment Manager, joined Lord
Abbett in 2000, formerly Managing
Director of Prudential Asset
Management, prior thereto Director
of Equity Research and Senior Vice
President at Mitchell Hutchins
Asset Management.
ROBERT P. FETCH Executive Vice President Elected in 1999 Partner and Small-Cap Value Senior
(2/18/1953) Investment Manager, joined Lord
Abbett in 1995.
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KENNETH G. FULLER Executive Vice President Elected in 2003 Investment Manager - Large Cap
(4/22/45) Value, joined Lord Abbett in 2002,
formerly Portfolio Manager and
Senior Vice President at Pioneer
Investment Management, Inc. from
1999 to 2002; prior thereto
Principal, Manley, Fuller Asset
Management.
HOWARD E. HANSEN Executive Vice President Elected in 2003 Partner and Investment Manager,
(10/13/1961) joined Lord Abbett in 1995.
INGRID C. HOLM Executive Vice President Elected in 2001 Investment Manager-Global Equity,
(3/21/1959) joined 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.
W. THOMAS HUDSON, JR. Executive Vice President Elected in 2003 Partner and Investment Manager,
(12/16/1941) joined Lord Abbett in 1982.
STEPHEN J. MCGRUDER Executive Vice President Elected in 1999 Partner and Senior Investment
(11/14/1943) Manager, joined Lord Abbett in 1995.
ROBERT G. MORRIS Executive Vice President Elected in 1998 Partner and Director of Equity
(11/6/1944) Investments, joined Lord Abbett in
1991.
F. THOMAS O'HALLORAN Executive Vice President Elected in 2003 Investment Manager, joined Lord
(2/19/1955) Abbett in 2001, formerly Executive
Director/Senior Research Analyst at
Dillon Read/UBS Warburg.
ELI M. SALZMANN Executive Vice President Elected in 2003 Partner and Director of
(3/24/1964) Institutional Equity Investments,
joined Lord Abbett in 1997.
TRACIE E. AHERN Vice President and Elected in 1999 Partner and Director of Portfolio
(1/12/1968) 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.
JOAN A. BINSTOCK Chief Financial Officer Elected in 1999 Partner and Chief Operations
(3/4/1954) and Vice President Officer, joined Lord Abbett in
1999, prior thereto Chief Operating
Officer of Morgan Grenfell.
DAVID G. BUILDER Vice President Elected in 2001 Equity Analyst, joined Lord Abbett
(1/4/1954) in 1998, formerly Equity Analyst at
Bear Stearns.
DANIEL E. CARPER Vice President Elected in 1993 Partner, joined Lord Abbett in 1979.
(1/22/1952)
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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
(1/1/1964) Lord Abbett in 1995.
DANIEL H. FRASCARELLI Vice President Elected in 2001 Partner and Investment Manager,
(3/11/1954) joined Lord Abbett in 1990.
GERARD S. E. HEFFERNAN, JR. Vice President Elected in 1999 Research Analyst, joined Lord
(9/7/1963) Abbett in 1998, prior thereto
Portfolio Manager at CL Capital
Management Company.
PAUL A. HILSTAD Vice President and Elected in 1996 Partner and General Counsel, joined
(12/13/1942) Secretary Lord Abbett in 1995.
LAWRENCE H. KAPLAN Vice President and Elected in 1997 Partner and Deputy General Counsel,
(1/16/1957) Assistant Secretary joined Lord Abbett in 1997.
GREGORY M. MACOSKO Vice President Elected in 1999 Partner and Senior Equity
(3/4/1947) Analyst-Small Cap, joined Lord
Abbett in 1996.
A. EDWARD OBERHAUS, III Vice President Elected in 1993 Partner and Manager of Equity
(12/21/1959) Trading, joined Lord Abbett in 1983.
CHRISTINA T. SIMMONS Vice President and Elected in 2000 Assistant General Counsel, joined
(11/12/1957) Assistant Secretary Lord 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.
BERNARD J. GRZELAK Assistant Treasurer Elected in 2003 Director of Fund Administration,
(6/12/1971) joined Lord Abbett in 2003,
formerly Vice President,
Lazard Asset Management from
2000 to 2003, prior thereto
Manager of Deloitte & Touche
LLP.
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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, and Hobbs. The Audit Committee provides assistance to the Board of Trustees in fulfilling its responsibilities relating to accounting matters, the reporting practices of the Fund, and the quality and integrity of the Fund's financial reports. Among other things, the Audit Committee is responsible for reviewing and evaluating the performance and independence of the Fund's independent 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., Bush, MacDonald, 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 April 22, 2003 and June 19, 2003, the Board of Trustees of the Fund, including all its Trustees who are not interested persons of the Fund (the "Board"), considered whether to approve the management agreement between the Fund and Lord Abbett. The Board received materials relating to the management agreement before the meetings and had the opportunity to ask questions and request further information in connection with their consideration.
INFORMATION RECEIVED BY THE BOARD. The materials received by the Board included, but were not limited to, (1) information on the effective management fee rates and expense ratios (including the specific components thereof) for open-end investment companies investing in large-cap equity securities, with similar sizes and similar distribution arrangement, (2) information regarding the proposed distribution arrangements of the Fund, (3) information regarding the personnel, information technology, and other resources to be devoted by Lord Abbett to managing the Fund, and (4) information regarding the investment performance of a composite of other accounts managed by Lord Abbett that have substantially similar investment objectives as the Fund.
In considering whether to approve the management agreement, the Board did not identify any single factor as paramount or controlling and did not consider any factors to be more important than other factors. This summary does not discuss in detail all matters considered. Matters considered by the Board in connection with its approval of the management agreement included, but were not limited to, the following:
INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board considered the investment management services to be provided by Lord Abbett to the Fund, including investment research, portfolio management, and trading.
INVESTMENT PERFORMANCE. Because the Fund is new and has no operating history, the Board could not consider its historical investment performance. Instead, the Board reviewed the investment performance of a composite of other advisory accounts managed by Lord Abbett that invest primarily in large-capitalization securities, and have the same or substantially similar investment objectives, policies, and strategies as the Fund, in comparison to relevant securities indices, over 1, 3, 5, and 10 year periods..
LORD ABBETT'S PERSONNEL AND METHODS. The Board considered the qualifications of the personnel who will provide 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 considered the nature, quality, costs, and extent of administrative and other services to be performed by Lord Abbett and Lord Abbett Distributor and the nature and extent of Lord Abbett's supervision of third party service providers, including the Fund's transfer agent, custodian, and subcustodians.
EXPENSES. The Board considered the projected expense ratios of each class and the expense ratios of a peer group of funds. They also considered the amount and nature of fees to be paid by shareholders.
PROFITABILITY. Because the Fund is new, the Board could not assess directly its effect on Lord Abbett's profitability. The Board noted that in its December meeting for other Lord Abbett Funds, it had 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 the funds. The Board had concluded that the allocation methodology had a reasonable basis and was appropriate. They had considered the profits realized by Lord Abbett in connection with the operation of the funds and whether the amount of profit is fair for the management of the funds. They also had considered the profits realized from other businesses of Lord Abbett, which may benefit from or be related to the Fund's business. The Board also had 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.
OTHER BENEFITS TO LORD ABBETT. The Board considered the character and amount of fees proposed to be 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. In its December meeting, the Board noted that it had 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 funds.
Because the Fund is new and has no operating history, the Board could not consider matters such as the nature and quality of services provided in the past to the Fund by Lord Abbett. The Board was able, however, to consider the nature and quality of services provided by Lord Abbett to other Lord Abbett Funds.
After considering all of the relevant factors, the Board unanimously voted to approve the proposed management agreement.
COMPENSATION DISCLOSURE
The following table summarizes the compensation for each of the directors/trustees for the Trust and for all Lord Abbett-sponsored funds.
The second column of the following table sets forth the compensation accrued by the Trust 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. 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, 2002
OCTOBER 31, 2002 AGGREGATE TOTAL COMPENSATION PAID BY THE TRUST AND
NAME OF TRUSTEE COMPENSATION ACCRUED BY THE TRUST(1) THIRTEEN OTHER LORD ABBETT-SPONSORED FUNDS(2)
------------------ ------------------------------------ ---------------------------------------------
E. Thayer Bigelow $ 2,228 $ 85,000
William H.T. Bush $ 2,239 $ 85,200
Robert B. Calhoun, Jr. $ 2,257 $ 86,400
Stewart S. Dixon* $ 2,208 $ 84,000
Franklin W. Hobbs $ 2,221 $ 85,000
C. Alan MacDonald $ 2,228 $ 85,000
Thomas J. Neff $ 2,201 $ 84,000
James F. Orr, III** $ 20,058 $ 70,500
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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 Trust 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 the funds 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 Trust and other Lord Abbett-sponsored funds under the equity-based plan. Of the amounts shown in the second column, the total deferred amounts for the Trustees are $2,228, $831, $2,257, $828, $2,221, $825, $2,201 and $20,058, respectively.
(2) The third column shows aggregate compensation, including the types of compensation described in the second column, accrued by all Lord Abbett-sponsored funds during the year ended December 31, 2002, including fees directors/trustees have chosen to defer.
The following chart provides certain information about the dollar range of equity securities beneficially owned by each Trustee in the Fund 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 AGGREGATED DOLLAR RANGE OF EQUITY SECURITIES IN
NAME OF TRUSTEE SECURITIES IN THE FUND LORD ABBETT-SPONSORED FUNDS
---------------------- ---------------------- -----------------------------------------------
Robert S. Dow None Over $100,000
E. Thayer Bigelow None Over $100,000
William H. T. Bush None $50,001 - $100,000
Robert B. Calhoun, Jr. None Over $100,000
Stewart S. Dixon* None Over $100,000
Franklin W. Hobbs None Over $100,000
C. Alan MacDonald None Over $100,000
Thomas J. Neff None Over $100,000
James F. Orr, III** None Over $100,000
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** Elected effective March 14, 2002. Resigned March 3, 2003.
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 the Fund commences operations Lord Abbett will own 100% of the Fund's outstanding shares. It is also anticipated that over time this percentage of ownership will decrease.
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, Sholom Dinsky, Lesley-Jane Dixon, Robert S. Dow, Robert P. Fetch, Daniel H. Frascarelli, Howard E. Hansen, Paul A. Hilstad, W. Thomas Hudson, Lawrence H. Kaplan, Gregory M. Macosko, Stephen J. McGruder, Robert G. Morris, A. Edward Oberhaus, III, and Eli M. Salzmann. The other Partners are: Michael Brooks, Zane E. Brown, Patrick Brown, Kevin P. Ferguson, Daria L. Foster, Robert I. Gerber, Michael S. Goldstein, Michael A. Grant, Charles Hofer, 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, 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 pays Lord Abbett a monthly fee, based on average daily net assets for each month. This fee is allocated among the classes based on the classes' proportionate share of such average daily net assets. The annual rate for the Fund is as follows:
.40 of 1% of the first $2 billion in assets, .375 of 1% on the next $3 billion, and .35 of 1% of assets over $5 billion.
Lord Abbett is currently reimbursing expense to the extent necessary to maintain total operating expenses for Class A shares at .95%, for Class B shares at 1.60%, for Class C shares at 1.60%, and for Class P shares at 1.05% of average daily net assets of each class of shares. Lord Abbett may stop reimbursing such expenses at any time.
The 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
Pursuant to an Administrative Services Agreement with the Fund, Lord Abbett provides certain administrative services not involving the provision of investment advice to the Fund. Under the Agreement, the Fund pays Lord Abbett a monthly fee, based on average daily net assets for each month, at an annual rate of .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 Fund in foreign countries and to hold cash and currencies for the Fund. In accordance with the requirements of Rule 17f-5, the Board has approved arrangements permitting the Fund's foreign assets not held by the custodian or its foreign branches to be held by certain qualified foreign banks and depositaries. 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, 10281, are the independent auditors of the Fund and must be approved at least annually by the Fund's Board 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 Report 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, 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 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.
7.
CLASSES OF SHARES
The Fund offers investors different classes of shares 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 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 and Agreement of Trust ("Declaration"), 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 the Trust's shareholders shall be entitled to the same limitations of personal liability extended to stockholders of private for profit corporations. The courts of some states, however, may decline to apply Delaware law on this point. The Declaration contains an express disclaimer of shareholder liability for the acts, obligations, or affairs of the Trust and requires that a disclaimer be given in each contract entered into or executed by the Trust. The Declaration provides for indemnification out of the Trust's property of any shareholder or former shareholder held personally liable for the obligations of the Trust. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which Delaware law does not apply, no contractual limitation of liability was in effect and the portfolio is unable to meet its obligations. Lord Abbett believes that, in view of the above, the risk of personal liability to shareholders is extremely remote.
Under the Declaration, the Trustees may, without shareholder vote, cause the Trust to merge or consolidate into, or sell and convey all or substantially all of, the assets of the Trust to one or more trusts, partnerships or corporations, so long as the surviving entity is an open-end management investment company that will succeed to or assume the Trust's registration statement. In addition, the Trustees may, without shareholder vote, cause the Trust to be incorporated under Delaware law.
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 Fund's 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 Fund's 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 Fund's Prospectus. Class P shares are available to a limited number of investors.
RULE 12b-1 PLANS
CLASS A, B, C, AND P. The Fund has adopted a Distribution Plan and Agreement
pursuant to Rule 12b-1 of the Act for each of the 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 has concluded that there is a reasonable likelihood that
each Plan will benefit its respective class and its shareholders. The expected
benefits include greater sales and lower redemptions of class shares, which
should allow each class to maintain a consistent cash flow, and a higher quality
of service to shareholders by authorized institutions than would otherwise be
the case. Each Plan compensates Lord Abbett Distributor for financing activities
primarily intended to sell shares of the Fund. These activities include, but are
not limited to, the preparation and distribution of advertising material and
sales literature and other marketing activities. Lord Abbett Distributor also
uses amounts received under 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 Fund.
Each Plan requires the Board 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 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 the outstanding voting securities of such class.
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 the 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 the Fund in connection with the sale of Class B shares.
To minimize the effects of the CDSC or to determine whether the CDSC applies to a redemption, the Fund redeems 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 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 also 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 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 and Class C 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 and Class C shares before Lord Abbett Distributor has had an opportunity to realize its anticipated reimbursement by having such a long-term shareholder account subject to the B or C 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 the Fund is an appropriate investment for you, the decision as to which class of shares is better suited to your needs depends on a number of factors that you should discuss with your financial adviser. The Fund's class-specific expenses and the effect of the different types of sales charges on your investment will affect your investment results over time. The most important factors are how much you plan to invest and how long you plan to hold your investment. If your goals and objectives change over time and you plan to purchase additional shares, you should re-evaluate those factors to see if you should consider another class of shares.
In the following discussion, to help provide you and your financial adviser with a framework in which to choose a class, we have made some assumptions using a hypothetical investment in the Fund. We used the sales charge rates that 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 the Fund's actual investment returns, the operating expenses borne by each class of shares, and the class of shares you purchase. The factors briefly discussed below are not intended to be investment advice, guidelines or recommendations, because each investor's financial considerations are different. The discussion below of the factors to consider in purchasing a particular class of shares assumes that you will purchase only one class of shares and not a combination of shares of different classes.
HOW LONG DO YOU EXPECT TO HOLD YOUR INVESTMENT? While future financial needs cannot be predicted with certainty, knowing how long you expect to hold your investment will assist you in selecting the appropriate class of shares. For example, over time, the reduced sales charges available for larger purchases of Class A shares may offset the effect of paying an initial sales charge on your investment, compared to the effect over time of higher class-specific expenses on Class B or Class C shares for which no initial sales charge is paid. Because of the effect of class-based expenses, your choice should also depend on how much you plan to invest.
INVESTING FOR THE SHORT TERM. If you have a short-term investment horizon (that is, you plan to hold your shares for not more than six years), you should probably consider purchasing Class A or Class C shares rather than Class B shares. This is because of the effect of the Class B CDSC if you redeem before the sixth anniversary of your purchase, as well as the effect of the Class B distribution fee on the investment return for that class in the short term. Class C shares might be the appropriate choice (especially for investments of less than $50,000), 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 $50,000 for the short term, then the more you invest and the more your investment horizon increases toward six years, the more attractive the Class A share option may become. This is because the annual 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 $50,000 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 $50,000. If you plan to invest more than $50,000 over the long term, Class A shares will likely be more advantageous than Class B shares or Class C shares, as discussed above, because of the effect of the expected lower expenses for Class A shares and the reduced initial sales charges available for larger investments in Class A shares under the Fund's Rights of Accumulation.
Of course, these examples are based on approximations of the effect of current sales charges and expenses on a hypothetical investment over time, and should not be relied on as rigid guidelines.
ARE THERE DIFFERENCES IN ACCOUNT FEATURES THAT MATTER TO YOU? Some account features are available in whole or in part to Class A, Class B, and Class C shareholders. Other features (such as Systematic Withdrawal Plans) might not be advisable in non-Retirement 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 for Class B. 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 the Fund and Class C shareholders.
8.
PURCHASES, REDEMPTIONS
AND PRICING
Information concerning how we value our shares is contained in the Prospectus under "Purchases" and "Redemptions."
Under normal circumstances we calculate the Fund's net asset value as of the close of the New York Stock Exchange ("NYSE") on each day that the NYSE is open for trading by dividing our total net assets by the number of shares outstanding at the time of calculation. The NYSE is closed on Saturdays and Sundays and the following holidays -- New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The Fund values its portfolio securities at market value as of the close of the NYSE. Market value will be determined as follows: securities listed or admitted to trading privileges on 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.
All assets and liabilities expressed in foreign currencies will be converted into United States dollars at the exchange rates of such currencies against United States dollars provided by Reuters at the close of regular trading on the NYSE. If such exchange rates are not available, the rate of exchange will be determined in accordance with the policies established by the Board.
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 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, 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 a 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 the Fund's shares. Exchanges are based on relative net asset values on the day instructions are received by the Fund in Kansas City if the instructions are received 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-sponsored 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-sponsored 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-sponsored 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 $ 50,000 or more over a 13-month period in Class A shares of a Lord Abbett-sponsored fund (other than shares of LASF, GSMMF and AMMF, unless holdings in GSMMF and AMMF are attributable to Class A 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.
The Board 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. 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, however, certain qualified dividends that the Fund receives are subject to a reduced tax rate of 15% (5% for taxpayers in the 10% or 15% tax brackets). 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) 15% (5% for taxpayers in the 10% or 15% tax brackets) 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 28% withholding tax on reportable dividends, capital gain distributions, and redemption payments ("backup withholding"). 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.
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. The Trust has entered into a distribution agreement with Lord Abbett Distributor, under which Lord Abbett Distributor is obligated to use its best efforts to find purchasers for the shares of the Fund, and to make reasonable efforts to sell Fund shares, on a continuous basis, so long as, in Lord Abbett Distributor's judgment, a substantial distribution can be obtained by reasonable efforts.
For the last three fiscal years, Lord Abbett Distributor, as the Trust's principal underwriter, received net commissions after allowance of a portion of the sales charge to independent dealers with respect to Class A shares as follows:
YEAR ENDED OCTOBER 31
---------------------------------------
2002 2001 2000
----------- ----------- -----------
Gross sales charge $ 2,124,928 $ 3,099,029 $ 2,884,037
Amount allowed to dealers $ 1,802,732 $ 2,705,298 $ 2,440,046
----------- ----------- -----------
Net commissions
received by Lord Abbett Distributor $ 322,196 $ 393,731 $ 443,991
=========== =========== ===========
|
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 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 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, if any, 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
redemption of 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 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.
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/or investments for which reliable performance information is available.
12.
FINANCIAL STATEMENTS
Not applicable.
LORD ABBETT
STATEMENT OF ADDITIONAL INFORMATION JUNE 30, 2003
LORD ABBETT SECURITIES TRUST
LORD ABBETT LARGE-CAP 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 Lord Abbett Securities Trust - Lord Abbett Large-Cap Value Fund (the "Large-Cap Value Fund" or the "Fund") dated June 30, 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 15 6. Brokerage Allocations and Other Practices 16 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 22 |
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 six funds or series, but only the Large-Cap Value Fund is described in this SAI. The Fund has five classes of shares: Class A, Class B, Class C, Class P, and Class Y. Only the Fund's Class Y shares are offered in this SAI. The Fund's Class A, B, C, & P shares are described in a separate statement of additional information.
2.
INVESTMENT POLICIES
FUNDAMENTAL INVESTMENT RESTRICTIONS. The Fund's investment objective in the Prospectus cannot be changed without approval of a majority of the Fund's outstanding shares. The Fund is also 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 investments in government obligations, commercial paper, pass-through instruments, certificates of deposit, bankers acceptances, repurchase agreements or any similar instruments shall not be subject to this limitation, 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 these investment restrictions will be determined at the time of the purchase or sale of the security.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. In addition to the Fund's investment objective 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 restrictions 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, except for securities qualifying for resale under Rule 144A of the Securities Act of 1933, determined by Lord Abbett to be liquid;
(3) invest in securities issued by other investment companies except to the extent permitted by applicable law;
(4) 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);
(5) 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;
(6) 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
(7) buy from or sell to any of the Trust's officers, trustees, employees, or its investment adviser or any of the adviser's officers, partners or employees, any securities other than shares of the Trust.
PORTFOLIO TURNOVER RATE. The Fund has not commenced investment operations as of the date hereof.
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 will increase its losses.
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 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 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 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 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. In accordance with the Fund's investment objective and policies, 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 the investment manager believes 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 that 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. 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 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, options on futures contracts or options on currencies traded on a CFTC-regulated exchange if the aggregate 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, it may 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 a good faith deposit.
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, the Fund has not entered into any stock futures contracts and has no present intention 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 that the Fund cannot rely on Sections 12(d)(1)(F) and (G). These limitations include a prohibition on the Fund acquiring more than 3% of the voting shares of any other investment company, and a prohibition on investing more than 5% of the Fund's total assets in 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 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 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 & Poor's 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 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 its net assets. The Fund may only sell (write) covered call options with respect to securities having an aggregate market value of less than 25% of its net assets at the time an option is written.
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 the market for the issuer's common stock.
Warrants are options to buy a stated number of shares of common stock at a specified price at any time during the life of the warrant. Rights represent a privilege offered to holders of record of issued securities to subscribe (usually on a pro rata basis) for additional securities of the same class, of a different class or of a different issuer. The holders of warrants and rights have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer. The value of a warrant or right may not necessarily change with the value of the underlying securities. Warrants and rights cease to have value if they are not exercised prior to their expiration date. Investments in warrants and rights are thus speculative and may result in a total loss of the money invested.
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 which 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. The Fund's reverse repurchase agreements will not exceed 20% of its 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% 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 persons affiliated with the Fund.
By lending portfolio securities, the Fund can increase 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 INVESTMENTS. As described in the Prospectus, the Fund is authorized to invest temporarily a substantial amount, or even all, of its 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.
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 that 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 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 and 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.
Lord, Abbett & Co. LLC ("Lord Abbett"), a Delaware limited liability company, is the Fund's investment adviser.
INTERESTED TRUSTEE
The following Trustee is the Managing Partner of 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 48 portfolios or series.
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION
DATE OF BIRTH WITH TRUST DURING PAST FIVE YEARS OTHER DIRECTORSHIPS
----------------- ----------------- ---------------------- -------------------
ROBERT S. DOW Trustee since 1993 and Managing Partner and Chief N/A
Lord, Abbett & Co. LLC Chairman since 1996 Investment Officer of Lord
90 Hudson Street Abbett since 1996.
Jersey City, NJ
Date of Birth: 3/8/1945
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INDEPENDENT TRUSTEES
The following independent or outside Trustees are also directors or trustees of
each of the fourteen Lord Abbett-sponsored funds, which consist of 48 portfolios
or series.
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION
DATE OF BIRTH WITH TRUST DURING PAST FIVE YEARS OTHER DIRECTORSHIPS
----------------- ----------------- ---------------------- -------------------
E. THAYER BIGELOW Trustee since 1994 Managing General Partner, Bigelow Currently serves as
Bigelow Media, LLC Media, LLC (since 2000); Senior director of Crane Co. and
41 Madison Ave., Suite 3810 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 Trustee 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. Trustee 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.
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FRANKLIN W. HOBBS Trustee since 2000 Senior Advisor (since April 2003) Currently serves as
Houlihan Lokey Howard & Zukin and Former Chief Executive Officer director of Adolph Coors
685 Third Ave. of Houlihan Lokey Howard & Zukin, Company.
New York, NY an investment bank (January 2002 to
Date of Birth: 7/30/1947 April 2003); Chairman of Warburg
Dillon Read (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 Trustee 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.*
THOMAS J. NEFF Trustee 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
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OFFICERS
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 TRUST 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
SHOLOM DINSKY Executive Vice Elected in 2003 Partner and Large Cap Value Investment
(3/24/1944) President Manager, joined Lord Abbett in 2000,
formerly Managing Director of Prudential
Asset Management, prior thereto Director
of Equity Research and Senior Vice President
at Mitchell Hutchins Asset Management.
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.
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KENNETH G. FULLER Executive Vice Elected in 2003 Investment Manager - Large Cap Value,
(4/22/45) President joined Lord Abbett in 2002, formerly
Portfolio Manager and Senior Vice President
at Pioneer Investment Management, Inc. from
1999 to 2002; prior thereto Principal,
Manley, Fuller Asset Management.
HOWARD E. HANSEN Executive Vice Elected in 2003 Partner and Investment Manager, joined
(10/13/1961) President Lord Abbett in 1995.
INGRID C. HOLM Executive Vice Elected in 2001 Investment Manager-Global Equity, joined
(3/21/1959) 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.
W. THOMAS HUDSON, JR. Executive Vice Elected in 2003 Partner and Investment Manager, joined Lord
(12/16/1941) President Abbett in 1982.
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
(11/6/1944) President Investments, joined Lord Abbett in 1991.
F. THOMAS O'HALLORAN Executive Vice Elected in 2003 Investment Manager, joined Lord Abbett in
(2/19/1955) President 2001, formerly Executive Director/Senior
Research Analyst at Dillon Read/UBS Warburg.
ELI M. SALZMANN Executive Vice Elected in 2003 Partner and Director of Institutional
(3/24/1964) President Equity Investments, joined Lord Abbett in
1997.
TRACIE E. AHERN Vice President and Elected in 1999 Partner and Director of Portfolio
(1/12/1968) 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.
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.
DAVID G. BUILDER Vice President Elected in 2001 Equity Analyst, joined Lord Abbett in
(1/4/1954) 1998, formerly Equity Analyst at Bear
Stearns.
DANIEL E. CARPER Vice President Elected in 1993 Partner, joined Lord Abbett in 1979.
(1/22/1952)
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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
(3/11/1954) 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 Vice President and Elected in 1997 Partner and Deputy General Counsel, joined
(1/16/1957) Assistant Secretary Lord Abbett in 1997.
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 and Elected in 2000 Assistant General Counsel, joined Lord
(11/12/1957) 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.
BERNARD J. GRZELAK Assistant Treasurer Elected in 2003 Director of Fund Administration, joined
6/12/1971) Lord Abbett in 2003, formerly Vice
President, Lazard Asset Management from
2000 to 2003, prior thereto Manager of
Deloitte & Touche LLP.
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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, and Hobbs. The Audit Committee provides assistance to the Board of Trustees in fulfilling its responsibilities relating to accounting matters, the reporting practices of the Fund, and the quality and integrity of the Fund's financial reports. Among other things, the Audit Committee is responsible for reviewing and evaluating the performance and independence of the Fund's independent 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., Bush, MacDonald, 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 April 22, 2003 and June 19, 2003, the Board of Trustees of the
Fund, including all its Trustees who are not interested persons of the Fund (the
"Board"), considered whether to approve the management agreement between the
Fund and Lord Abbett. The Board received materials relating to the management
agreement before the meetings and had the opportunity to ask questions and
request further information in connection with their consideration.
INFORMATION RECEIVED BY THE BOARD. The materials received by the Board included, but were not limited to, (1) information on the effective management fee rates and expense ratios (including the specific components thereof) for open-end investment companies investing in large-cap equity securities, with similar sizes and similar distribution arrangement, (2) information regarding the proposed distribution arrangements of the Fund, (3) information regarding the personnel, information technology, and other resources to be devoted by Lord Abbett to managing the Fund, and (4) information regarding the investment performance of a composite of other accounts managed by Lord Abbett that have substantially similar investment objectives as the Fund.
In considering whether to approve the management agreement, the Board did not identify any single factor as paramount or controlling and did not consider any factors to be more important than other factors. This summary does not discuss in detail all matters considered. Matters considered by the Board in connection with its approval of the management agreement included, but were not limited to, the following:
INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board considered the investment management services to be provided by Lord Abbett to the Fund, including investment research, portfolio management, and trading.
INVESTMENT PERFORMANCE. Because the Fund is new and has no operating history, the Board could not consider its historical investment performance. Instead, the Board reviewed the investment performance of a composite of other advisory accounts managed by Lord Abbett that invest primarily in large-capitalization securities, and have the same or substantially similar investment objectives, policies, and strategies as the Fund, in comparison to relevant securities indices, over 1, 3, 5, and 10 year periods..
LORD ABBETT'S PERSONNEL AND METHODS. The Board considered the qualifications of the personnel who will provide 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 considered the nature, quality, costs, and extent of administrative and other services to be performed by Lord Abbett and Lord Abbett Distributor and the nature and extent of Lord Abbett's supervision of third party service providers, including the Fund's transfer agent, custodian, and subcustodians.
EXPENSES. The Board considered the projected expense ratios of each class and the expense ratios of a peer group of funds. They also considered the amount and nature of fees to be paid by shareholders.
PROFITABILITY. Because the Fund is new, the Board could not assess directly its effect on Lord Abbett's profitability. The Board noted that in its December meeting for other Lord Abbett Funds, it had 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 the funds. The Board had concluded that the allocation methodology had a reasonable basis and was appropriate. They had considered the profits realized by Lord Abbett in connection with the operation of the funds and whether the amount of profit is fair for the management of the funds. They also had considered the profits realized from other businesses of Lord Abbett, which may benefit from or be related to the Fund's business. The Board also had 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.
OTHER BENEFITS TO LORD ABBETT. The Board considered the character and amount of fees proposed to be 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. In its December meeting, the Board noted that it had 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 funds.
Because the Fund is new and has no operating history, the Board could not consider matters such as the nature and quality of services provided in the past to the Fund by Lord Abbett. The Board was able, however, to consider the nature and quality of services provided by Lord Abbett to other Lord Abbett Funds.
After considering all of the relevant factors, the Board unanimously voted to approve the proposed management agreement.
COMPENSATION DISCLOSURE
The following table summarizes the compensation for each of the
directors/trustees for the Trust and for all Lord Abbett-sponsored funds.
The second column of the following table sets forth the compensation accrued by the Trust 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. 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, 2002
OCTOBER 31, 2002 AGGREGATE TOTAL COMPENSATION PAID BY THE TRUST AND
NAME OF TRUSTEE COMPENSATION ACCRUED BY THE TRUST(1) THIRTEEN OTHER LORD ABBETT-SPONSORED FUNDS(2)
----------------- ------------------------------------ ---------------------------------------------
E. Thayer Bigelow $ 2,228 $ 85,000
William H.T. Bush $ 2,239 $ 85,200
Robert B. Calhoun, Jr. $ 2,257 $ 86,400
Stewart S. Dixon* $ 2,208 $ 84,000
Franklin W. Hobbs $ 2,221 $ 85,000
C. Alan MacDonald $ 2,228 $ 85,000
Thomas J. Neff $ 2,201 $ 84,000
James F. Orr, III** $ 20,058 $ 70,500
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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 Trust 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 the funds 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 Trust and other Lord Abbett-sponsored funds under the equity-based plan. Of the amounts shown in the second column, the total deferred amounts for the Trustees are $2,228, $831, $2,257, $828, $2,221, $825, $2,201 and $20,058, respectively.
(2) The third column shows aggregate compensation, including the types of compensation described in the second column, accrued by all Lord Abbett-sponsored funds during the year ended December 31, 2002, 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 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 AGGREGATED DOLLAR RANGE OF EQUITY SECURITIES IN
NAME OF TRUSTEE SECURITIES IN THE FUND LORD ABBETT-SPONSORED FUNDS
--------------- ---------------------- -----------------------------------------------
Robert S. Dow None Over $100,000
E. Thayer Bigelow None Over $100,000
William H. T. Bush None $50,001 - $100,000
Robert B. Calhoun, Jr. None Over $100,000
Stewart S. Dixon* None Over $100,000
Franklin W. Hobbs None Over $100,000
C. Alan MacDonald None Over $100,000
Thomas J. Neff None Over $100,000
James F. Orr, III** None Over $100,000
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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
It is anticipated that when the Fund commences operations Lord Abbett will own 100% of the Fund's outstanding Class Y shares. It is also anticipated that over time this percentage of ownership will decrease.
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, Sholom Dinsky, Lesley-Jane Dixon, Robert S. Dow,
Robert P. Fetch, Daniel H. Frascarelli, Howard E. Hansen, Paul A. Hilstad, W.
Thomas Hudson, Lawrence H. Kaplan, Gregory M. Macosko, Stephen J. McGruder,
Robert G. Morris, A. Edward Oberhaus, III, and Eli M. Salzmann. The other
Partners are: Michael Brooks, Zane E. Brown, Patrick Brown, Kevin P. Ferguson,
Daria L. Foster, Robert I. Gerber, Michael S. Goldstein, Michael A. Grant,
Charles Hofer, 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, 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 pays
Lord Abbett a monthly fee, based on average daily net assets for each month.
This fee is allocated among the classes based on the classes' proportionate
share of such average daily net assets. The annual rate for the Fund is as
follows:
.40 of 1% of the first $2 billion in assets,
.375 of 1% on the next $3 billion, and
.35 of 1% of assets over $5 billion.
Lord Abbett is currently reimbursing expenses to the extent necessary to maintain total operating expenses for Class Y shares at .60% of average daily net assets. Lord Abbett may stop reimbursing such expenses at any time.
The 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
Pursuant to an Administrative Services Agreement with the Fund, Lord Abbett
provides certain administrative services not involving the provision of
investment advice to the Fund. Under the Agreement, the Fund pays Lord Abbett a
monthly fee, based on average daily net assets for each month, at an annual rate
of .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
Fund in foreign countries and to hold cash and currencies for the Fund. In
accordance with the requirements of Rule 17f-5, the Board has approved
arrangements permitting the Fund's foreign assets not held by the custodian or
its foreign branches to be held by certain qualified foreign banks and
depositaries. 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, 10281, are the
independent auditors of the Fund and must be approved at least annually by the
Fund's Board 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 Report 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, 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 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.
7.
CLASSES OF SHARES
The Fund offers investors 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 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 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 and Agreement of Trust ("Declaration"), 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 the Trust's shareholders shall be entitled to the same limitations of personal liability extended to stockholders of private for profit corporations. The courts of some states, however, may decline to apply Delaware law on this point. The Declaration contains an express disclaimer of shareholder liability for the acts, obligations, or affairs of the Trust and requires that a disclaimer be given in each contract entered into or executed by the Trust. The Declaration provides for indemnification out of the Trust's property of any shareholder or former shareholder held personally liable for the obligations of the Trust. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which Delaware law does not apply, no contractual limitation of liability was in effect and the portfolio is unable to meet its obligations. Lord Abbett believes that, in view of the above, the risk of personal liability to shareholders is extremely remote.
Under the Declaration, the Trustees may, without shareholder vote, cause the Trust to merge or consolidate into, or sell and convey all or substantially all of, the assets of the Trust to one or more trusts, partnerships or corporations, so long as the surviving entity is an open-end management investment company that will succeed to or assume the Trust's registration statement. In addition, the Trustees may, without shareholder vote, cause the Trust to be incorporated under Delaware law.
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 is contained in the Prospectus under "Purchases" and "Redemptions."
Under normal circumstances we calculate the Fund's net asset value as of the close of the New York Stock Exchange ("NYSE") on each day that the NYSE is open for trading by dividing our total net assets by the number of shares outstanding at the time of calculation. The NYSE is closed on Saturdays and Sundays and the following holidays -- New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The Fund values its portfolio securities at market value as of the close of the NYSE. Market value will be determined as follows: securities listed or admitted to trading privileges on 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.
All assets and liabilities expressed in foreign currencies will be converted into United States dollars at the exchange rates of such currencies against United States dollars provided by Reuters at the close of regular trading on the NYSE. If such exchange rates are not available, the rate of exchange will be determined in accordance with the policies established by the Board.
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 funds before exchanging. In establishing a new account by exchange, shares of the fund being exchanged must have a value equal to at least the minimum initial investment required for the other funds 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 supplementary 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.
The Board 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 behalf of the Fund or Lord Abbett Distributor. The Fund will be deemed to have received a purchase or redemption order when an authorized agent or, if applicable, an agent's authorized designee, receives the order. 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, however, certain qualified dividends that the Fund receives are subject to a reduced tax rate of 15% (5% for taxpayers in the 10% or 15% tax brackets). 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) 15% (5% for taxpayers in the 10% or 15% tax brackets) 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 28% withholding tax on reportable dividends, capital gain distributions, and redemption payments ("backup withholding"). 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.
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. The Trust has entered into a distribution agreement with Lord Abbett Distributor, under which Lord Abbett Distributor is obligated to use its best efforts to find purchasers for the shares of the Fund, and to make reasonable efforts to sell Fund shares, on a continuous basis, so long as, in Lord Abbett Distributor's judgment, a substantial distribution can be obtained by reasonable efforts.
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 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 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, if any, 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
redemption of 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 total return is shown at net asset value.
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/or investments for which reliable performance information is available.
12.
FINANCIAL STATEMENTS
Not applicable.
LORD ABBETT SECURITIES TRUST
PART C
OTHER INFORMATION
This Post-Effective Amendment No. 41 (the "Amendment") to the Lord Abbett Securities Trust's (the "Registrant") Registration Statement relates to Lord Abbett Large-Cap Value Fund, Classes A, B, C, P, and Y shares, only.
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.
--------------
Lord Abbett All Value Fund - Classes A, B, C, P, and Y shares 39
Alpha Series - Classes A, B, and C shares 39
International Series - Classes A, B, C, P, and Y shares 39
Lord Abbett Micro-Cap Value Fund - Classes A and Y shares 39
Lord Abbett Micro-Cap Growth Fund - Classes A and Y shares 39
|
Item 23. EXHIBITS
(a) DECLARATION AND AGREEMENT OF TRUST. Incorporated by reference to
Post-Effective Amendment No. 19 to the Registrant's Registration
Statement filed on February 27, 1998.
(i) AMENDMENT TO DECLARATION AND AGREEMENT OF TRUST (LORD ABBETT
LARGE-CAP VALUE FUND). FILED HEREIN.
(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. Management Agreement incorporated
by reference to Post-Effective Amendment No. 38 to the
Registrant's Registration Statement filed on December 26, 2002.
(i) FORM OF ADDENDUM TO THE MANAGEMENT AGREEMENT (LORD ABBETT
LARGE-CAP VALUE FUND - DATED JUNE 30, 2003). 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.
(i) FORM OF AMENDMENT TO CUSTODIAN AGREEMENT. FILED HEREIN.
(h) OTHER MATERIAL CONTRACTS.
(i) TRANSFER AGENCY AGREEMENT. Incorporated by reference.
(ii) ADMINISTRATIVE SERVICES AGREEMENT. Incorporated by reference
to Post-Effective Amendment No. 38 to the Registrant's
Registration Statement filed on December 26, 2002.
(iii) FORM OF AMENDMENT TO ADMINISTRATIVE SERVICE AGREEMENT. FILED
HEREIN.
(i) LEGAL OPINION. FILED HEREIN.
(j) OTHER OPINION. FILED HEREIN.
(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. FILED HEREIN.
(ii) FORM OF CLASS B 12b-1 PLAN. FILED HEREIN.
(iii) FORM OF CLASS C 12b-1 PLAN. FILED HEREIN.
(iv) FORM OF CLASS P 12b-1 PLAN. FILED HEREIN.
(n) RULE 18f-3 PLAN. FILED HEREIN.
(o) RESERVED.
(p) CODE OF ETHICS. Incorporated by reference to Post-Effective
Amendment No. 38 to the Registrant's Registration Statement filed
on December 26, 2002.
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.
The Registrant is a Delaware Business Trust established under Chapter 38 of Title 12 of the Delaware Code. The Registrant's Declaration and Agreement of Trust at Section 4.3 relating to indemnification of Trustees, officers, etc. states the following. The Trust shall indemnify each of its Trustees, officers, employees and agents (including any individual who serves at its request as director, officer, partner, trustee or the like of another organization in which it has any interest as a shareholder, creditor or otherwise) against all liabilities and expenses, including but not limited to amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees reasonably incurred by him or her in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or legislative body in which he or she may be or may have been involved as a party or otherwise or with which he or she may be or may have been threatened, while acting as Trustee or as an officer, employee or agent of the Trust or the Trustees, as the case may be, or thereafter, by reason of his or her being or having been such a Trustee, officer, employee or agent, except with respect to any matter as to which he or she shall have been adjudicated not to have acted in good faith in the reasonable belief that his or her action was in the best interests of the Trust or any Series thereof. Notwithstanding anything herein to the contrary, if any matter which is the subject of indemnification hereunder relates only to one Series (or to more than one but not all of the Series of the Trust), then the indemnity shall be paid only out of the assets of the affected Series. No individual shall be indemnified hereunder against any liability to the Trust or any Series thereof or the Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. In addition, no such indemnity shall be provided with respect to any matter disposed of by settlement or a compromise payment by such Trustee, officer, employee or agent, pursuant to a consent decree or otherwise, either for said payment or for any other expenses unless there has been a determination that such compromise is in the best interests of the Trust or, if appropriate, of any affected Series thereof and that such Person appears to have acted in good faith in the reasonable belief that his or her action was in the best interests of the Trust or, if appropriate, of any affected Series thereof, and did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. All determinations that the applicable standards of conduct have been met for indemnification hereunder shall be made by (a) a majority vote of a quorum consisting of disinterested Trustees who are not parties to the proceeding relating to indemnification, or (b) if such a quorum is not obtainable or, even if obtainable, if a majority vote of such quorum so directs, by independent legal counsel in a written opinion, or (c) a vote of Shareholders (excluding Shares owned of record or beneficially by such individual). In addition, unless a matter is disposed of with a court determination (i) on the merits that such Trustee, officer, employee or agent was not liable or (ii) that such Person was not guilty of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office, no indemnification shall be provided hereunder unless there has been a determination by
independent legal counsel in a written opinion that such Person did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.
The Trustees may make advance payments out of the assets of the Trust or, if appropriate, of the affected Series in connection with the expense of defending any action with respect to which indemnification might be sought under this Section 4.3. The indemnified Trustee, officer, employee or agent shall give a written undertaking to reimburse the Trust or the Series in the event it is subsequently determined that he or she is not entitled to such indemnification and (a) the indemnified Trustee, officer, employee or agent shall provide security for his or her undertaking, (b) the Trust shall be insured against losses arising by reason of lawful advances, or (c) a majority of a quorum of disinterested Trustees or an independent legal counsel in a written opinion shall determine, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the indemnitee ultimately will be found entitled to indemnification. The rights accruing to any Trustee, officer, employee or agent under these provisions shall not exclude any other right to which he or she may be lawfully entitled and shall inure to the benefit of his or her heirs, executors, administrators or other legal representatives.
Insofar as indemnification for liability arising under the Securities Act of 1933 (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 * WITH THE REGISTRANT ------------------ --------------------- Robert S. Dow Chairman, CEO & President Sholom Dinsky Executive Vice President Robert P. Fetch Executive Vice President Howard E. Hansen Executive Vice President W. Thomas Hudson, Jr. Executive Vice President Stephen J. McGruder Executive Vice President Robert G. Morris Executive Vice President Eli M. Salzmann Executive Vice President Tracie E. Ahern Vice President & Treasurer Joan A. Binstock CFO & Vice President Daniel E. Carper Vice President John J. DiChiaro Vice President Lesley-Jane Dixon Vice President Daniel H. Frascarelli Vice President Paul A. Hilstad Vice President & Secretary Lawrence H. Kaplan Vice President & 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, Kevin P. Ferguson, Daria L. Foster, Robert I. Gerber, Michael S. Goldstein, Michael A. Grant, Charles Hofer, 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, 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 certifies that it meets all of the requirements for effectiveness of this Registration Statement under rules 485(b) under the Securities Act and 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 June, 2003.
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 June 26, 2003
--------------------------- -------------------------- -------------
Robert S. Dow
E. Thayer Bigelow* Trustee June 26, 2003
--------------------------- -------------------------- -------------
E. Thayer Bigelow
William H. T. Bush* Trustee June 26, 2003
--------------------------- -------------------------- -------------
William H. T. Bush
Robert B. Calhoun, Jr.* Trustee June 26, 2003
--------------------------- -------------------------- -------------
Robert B. Calhoun, Jr.
Franklin W. Hobbs* Trustee June 26, 2003
--------------------------- -------------------------- -------------
Franklin W. Hobbs
C. Alan Macdonald* Trustee June 26, 2003
--------------------------- -------------------------- -------------
C. Alan MacDonald
Thomas J. Neff* Trustee June 26, 2003
--------------------------- -------------------------- -------------
Thomas J. Neff
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By: /s/ CHRISTINA T. SIMMONS ---------------------------- *Attorney-in-Fact |
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
|
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)(a)
LORD ABBETT SECURITIES TRUST
AMENDMENT TO
DECLARATION AND AGREEMENT OF TRUST
The undersigned, being at least a majority of the Trustees of Lord Abbett
Securities Trust, a Delaware business trust (the "Trust"), organized pursuant to
a Declaration and Agreement of Trust dated February 26, 1993 (the
"Declaration"), do hereby (i) establish, pursuant to Section 5.3 of the
Declaration, a new series of shares of the Trust to be designated the "Lord
Abbett Large Cap Value Fund" and (ii) establish, pursuant to Section 5.3 of the
Declaration, the following classes of the Lord Abbett Large Cap Value Fund:
Class A, Class B, Class C, Class P, and Class Y. Any variations as to purchase
price, determination of net asset value, the price, terms and manner of
redemption and special and relative rights as to dividends on liquidation, and
conditions under which such series or class shall have separate voting rights,
shall be as set forth in the Declaration or as elsewhere determined by the Board
of Trustees of the Trust.
This instrument shall constitute an amendment to the Declaration.
IN WITNESS WHEREOF, the undersigned have executed this instrument this 22nd day of April, 2003.
/s/ ROBERT S. DOW /s/ E. THAYER BIGELOW --------------------------- ----------------------------- Robert S. Dow E. Thayer Bigelow /s/ WILLIAM H. T. BUSH /s/ ROBERT B. CALHOUN, JR --------------------------- ----------------------------- William H.T. Bush Robert B. Calhoun, Jr. /s/ FRANKLIN W. HOBBS /s/ C. ALAN MACDONALD --------------------------- ----------------------------- Franklin W. Hobbs C. Alan MacDonald /s/ THOMAS J. NEFF --------------------------- Thomas J. Neff |
EXHIBIT (23)(d)
ADDENDUM TO MANAGEMENT AGREEMENT
BETWEEN LORD ABBETT
SECURITIES TRUST AND LORD, ABBETT & CO.
DATED: MAY 19, 1993 (THE "AGREEMENT")
Lord, Abbett & Co. LLC and Lord Abbett Securities Trust (the "Trust") on behalf of Lord Abbett Large-Cap Value Fund (the "Fund Series") do hereby agree that (a) the annual management fee rate for the Fund Series with respect to paragraph 2 of the Agreement shall be as follows: 0.40 of 1% of the first $2 billion of average daily net assets of Lord Abbett Large-Cap Value Fund, 0.375 of 1% of the next $3 billion of such assets and 0.35 of 1% of such assets in excess of $5 billion.
For purposes of Section 15 (a) of the Act, this Addendum and the Agreement shall together constitute the investment advisory contract of the Fund Series.
LORD, ABBETT & CO. LLC
Lord Abbett Securities Trust
(on behalf of Lord Abbett Large-Cap Value Fund)
Dated: As of June 30, 2003
EXHIBIT (23)(g)
June 30, 2003
State Street Bank and Trust Company
801 Pennsylvania Avenue
Kansas City, MO 64105
Attn: Vice President, Custody
Dear Sir or Madam:
Lord Abbett Securities Trust (the "Fund"), as a party to the Custodian and
Investment Accounting Agreement between various Lord Abbett-sponsored mutual
funds and State Street Bank and Trust Company ("State Street") dated November 1,
2001 (the "Agreement"), requests an amendment to the Agreement pursuant to
Section 17.
Section 17 of the Agreement provides that, "in the event that a Fund establishes one or more series with respect to which it desires to have State Street render services as custodian and recordkeeping under the terms [of the Agreement], it shall so notify State Street in writing, and if State Street agrees in writing to provide such services, such series of Shares shall become a Portfolio [under the terms of the Agreement]." This letter is to notify State Street that on April 22, 2003, the Fund's Board executed an Amendment to the Declaration and Agreement of Trust establishing a new Portfolio of the Fund, (the "Portfolio") the legal name of which is as follows: Lord Abbett Large-Cap Value Fund. It is the Fund's desire to have State Street render services as custodian and recordkeeper to the Portfolio under the terms of the Agreement; therefore, the Fund requests that State Street agree, in writing, to provide such services to the Portfolio thereby making the Portfolio a Portfolio under the terms of the Agreement.
Attached is an Amended Exhibit A to the Agreement that shows the entity names and series of each fund that participates in the Agreement as of the close of business on June 30, 2003.
It is currently anticipated that the registration statement for the Portfolio will become effective on June 30, 2003. Accordingly, we appreciate your prompt attention to this matter. Please indicate State Street's acceptance by signing below.
Lord Abbett Securities Trust
Accepted:
Enclosures
EXHIBIT A (amended as of June 30, 2003)
TYPE OF
ENTITY AND SERIES ENTITY JURISDICTION
Lord Abbett Developing Growth Fund, Inc. Corporation Maryland
Lord Abbett Affiliated Fund, Inc. Corporation Maryland
Lord Abbett Bond-Debenture Fund, Inc. Corporation Maryland
Lord Abbett Mid-Cap Value Fund, Inc. Corporation Maryland
Lord Abbett Large-Cap Growth Fund Business Trust Delaware
Lord Abbett Blend Trust Business Trust Delaware
Lord Abbett Small-Cap Blend Fund
Lord Abbett Securities Trust Business Trust Delaware
Alpha Series
Lord Abbett All Value Fund
International Series
Lord Abbett Micro-Cap Growth Fund
Lord Abbett Micro-Cap Value Fund
Lord Abbett Large-Cap Value Fund
Lord Abbett Research Fund, Inc. Corporation Maryland
Lord Abbett Growth Opportunities Fund
Large-Cap Series
Small-Cap Value Series
Lord Abbett America's Value Fund
Lord Abbett Investment Trust Business Trust Delaware
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 Convertible Fund
Lord Abbett Series Fund, Inc. Corporation Maryland
All Value Portfolio
America's Value Portfolio
Bond-Debenture Portfolio
Growth and Income Portfolio
Growth Opportunities Portfolio
International Portfolio
Mid-Cap Value Portfolio
Lord Abbett Global Fund, Inc. Corporation Maryland
Equity Series
Income Series
Lord Abbett Tax-Free Income Fund, Inc. Corporation Maryland
Lord Abbett California Tax-Free Income Fund
Lord Abbett Connecticut Tax-Free Income Fund
Lord Abbett Hawaii Tax-Free Income Fund
Lord Abbett Minnesota Tax-Free Income Fund
Lord Abbett Missouri Tax-Free Income Fund
Lord Abbett National Tax-Free Income Fund
Lord Abbett New Jersey Tax-Free Income Fund
Lord Abbett New York Tax-Free Income Fund
Lord Abbett Texas Tax-Free Income Fund
Lord Abbett Washington Tax-Free Income Fund
|
Lord Abbett Tax-Free Income Trust Business Trust Delaware
Florida Series
Georgia Series
Michigan Series
Pennsylvania Series
Lord Abbett Insured Intermediate Tax-Free Fund
Lord Abbett U.S. Government Securities Money Market Fund, Inc. Corporation Maryland
|
EXHIBIT (23)(h)(iii)
AMENDMENT 2
to the
ADMINISTRATIVE SERVICES AGREEMENT
among
The Investment Companies comprising the Lord Abbett Family of Funds (each, a "Fund" or collectively, the "Funds") as set forth on Exhibit 1 and Lord, Abbett & Co. LLC ("Lord Abbett")
WHEREAS, the Investment Companies named on Exhibit 1 and Lord Abbett entered into an Administrative Services Agreement dated December 12, 2002, as may be amended from time to time (the "Agreement");
WHEREAS, Section 9 of the Agreement provides for the addition to the Agreement of new funds created in the Lord Abbett Family of Funds where such funds wish to engage Lord Abbett to perform Administrative Services under the Agreement;
WHEREAS, the Funds and Lord Abbett desire to further amend the Agreement to include additional funds;
NOW THEREFORE, in consideration of the mutual covenants and of other good and valuable consideration, receipt of which is hereby acknowledged, the parties mutually agree to amend the Agreement in the following respects:
1. The Agreement is hereby amended to add the following funds to Exhibit 1 of the Agreement:
Lord Abbett Investment Trust
Lord Abbett Convertible Fund
Lord Abbett Securities Trust
Lord Abbett Large-Cap Value Fund
Lord Abbett Tax-Free Income Trust Lord Abbett Insured Intermediate Tax-Free Fund
2. The Agreement shall remain the same in all other respects.
3. The Amendment is effective as of the 30th day of June, 2003.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to the 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
Attested:
LORD, ABBETT & CO. LLC
Attested:
EXHIBIT 1 (AMENDED AS OF JUNE 30, 2003)
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 Convertible Fund
Lord Abbett Large-Cap Growth Fund
Lord Abbett Mid-Cap Value Fund, Inc.
Lord Abbett Research Fund, Inc.
Lord Abbett America's Value Fund
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 Large-Cap Value Fund
Lord Abbett Series Fund, Inc.
All Value Portfolio
America's Value Portfolio
Bond-Debenture Portfolio
Growth and Income Portfolio
Growth Opportunities Portfolio
International Portfolio
Mid-Cap Value Portfolio
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett California Tax-Free Income Fund
Lord Abbett Connecticut Tax-Free Income Fund
Lord Abbett Hawaii Tax-Free Income Fund
Lord Abbett Minnesota Tax-Free Income Fund
Lord Abbett Missouri Tax-Free Income Fund
Lord Abbett National Tax-Free Income Fund
Lord Abbett New Jersey Tax-Free Income Fund
Lord Abbett New York Tax-Free Income Fund
Lord Abbett Texas Tax-Free Income Fund
Lord Abbett Washington Tax-Free Income Fund
Lord Abbett Tax-Free Income Trust
Florida Series
Georgia Series
Michigan Series
Pennsylvania Series
Lord Abbett Insured Intermediate Tax-Free Fund
Lord Abbett U.S. Government Securities Money Market Fund, Inc.
EXHIBIT (23)(i)
[WILMER, CUTLER & PICKERING Letterhead]
June 26, 2003
Lord Abbett Securities Trust
90 Hudson Street
Jersey City, NJ 07302-3972
Dear Sirs:
You have requested our opinion in connection with your filing of Post-Effective Amendment No. 41 to the Registration Statement on Form N-1A (the "Amendment") under the Securities Act of 1933, as amended (Amendment No. 41 under the Investment Company Act of 1940, as amended), of Lord Abbett Securities Trust, a Delaware business trust (the "Trust"), and in connection therewith your registration of the following shares of beneficial interest, without par value, of the Trust (collectively, the "Shares"): Lord Abbett Large-Cap Value Fund (Classes A, B, C, P, and Y).
We have examined and relied upon originals, or copies certified to our satisfaction, of such company records, documents, certificates, and other instruments as in our judgment are necessary or appropriate to enable us to render the opinion set forth below.
We are of the opinion that the Shares issued in the continuous offering have been duly authorized and, assuming the issuance of the Shares for cash at net asset value and receipt by the Trust of the consideration therefore as set forth in the Amendment, the Shares will be validly issued, fully paid, and nonassessable.
We express no opinion as to matters governed by any laws other than Title 12, Chapter 38 of the Delaware Code. We consent to the filing of this opinion solely in connection with the Amendment. In giving such consent, we do not hereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
WILMER, CUTLER & PICKERING
By: /s/ ROBERT G. BAGNALL
---------------------
Robert G. Bagnall, a partner
|
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to us in this Post-Effective Amendment No. 41 to Registration Statement No. 33-58846 of Lord Abbett Securities Trust on Form N-1A under the headings "Independent Auditors" in the Statements of Additional Information, which are part of this Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
June 26, 2003
EXHIBIT (23)(m)(i)
The following
FORM OF RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT
for
CLASS A
was adopted by
LORD ABBETT LARGE-CAP VALUE FUND.
A substantially identical plan was adopted by the following Funds or Series of
LORD ABBETT SECURITIES TRUST:
on the date indicated
Alpha Series (December 12, 1997)
Lord Abbett All Value Fund (July 12, 1996) International Series (December 13, 1996) Lord Abbett Micro-Cap Growth Fund (March 10, 2000) Lord Abbett Micro-Cap Value Fund (March 10, 2000)
RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT dated as of June 30, 2003 by and between LORD ABBETT SECURITIES TRUST, a Delaware business trust (the "Fund"), on behalf of the LORD ABBETT LARGE-CAP VALUE FUND (the "Series") and LORD ABBETT DISTRIBUTOR LLC, a New York limited liability company (the "Distributor").
WHEREAS, the Fund is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "Act"); and the Distributor is the exclusive selling agent of the Fund's shares of beneficial interest, including the Series' Class A shares (the "Shares") pursuant to the Distribution Agreement between the Fund and the Distributor.
WHEREAS, the Fund desires to adopt a Distribution Plan and Agreement (the "Plan") for the Series with the Distributor, as permitted by Rule 12b-1 under the Act, pursuant to which the Fund may make certain payments to the Distributor to be used by the Distributor or paid to institutions and persons permitted by applicable law and/or rules to receive such payments ("Authorized Institutions") in connection with sales of Shares and/or servicing of accounts of shareholders holding Shares.
WHEREAS, the Fund's Board of Trustees has determined that there is a reasonable likelihood that the Plan will benefit the Series and the holders of the Shares.
NOW, THEREFORE, in consideration of the mutual covenants and of other good and valuable consideration, receipt of which is hereby acknowledged, and subject to the provisions of paragraph 8 of this Plan, it is agreed as follows:
1. The Fund hereby authorizes the Distributor to enter into agreements with Authorized Institutions (the "Agreements") which may provide for the payment to such Authorized Institutions of distribution and service fees which the Distributor receives from the Series in order to provide additional incentives to such Authorized Institutions (i) to sell Shares and (ii) to provide continuing information and investment services to their accounts holding Shares and otherwise to encourage their accounts to remain invested in the Shares.
2. The Fund also hereby authorizes the Distributor to use payments received hereunder from the Series in order to (a) finance any activity which is primarily intended to result in the sale of Shares and (b) provide continuing information and investment services to shareholder accounts not serviced by Authorized Institutions receiving a service fee from the Distributor hereunder and otherwise to encourage such accounts to remain invested in the Shares; PROVIDED that (i) any payments referred to in the foregoing clause (a) shall not exceed the distribution fee permitted to be paid at the time under paragraph 3 of this Plan and shall be authorized by the Board of Trustees of the Fund by a vote of the kind referred to in paragraph 10 of this Plan and (ii) any payments referred to in clause (b) shall not exceed the service fee permitted to be paid at the time under paragraph 3 of this Plan.
3. The Series is authorized to pay the Distributor hereunder for remittance to Authorized Institutions and/or use by the Distributor pursuant to this Plan (a) service fees and (b) distribution fees, each at an annual rate not to exceed .25 of 1% of the average annual net asset value of Shares outstanding. The Board of Trustees of the Fund shall from time to time determine the amounts, within the foregoing maximum amounts, that the Series may pay the Distributor hereunder. Any such fees (which may be waived by the Authorized Institutions in whole or in part) may be calculated and paid quarterly or more frequently if approved by the Board of Trustees of the Fund. Such determinations and approvals by the Board of Trustees shall be made and given by votes of the kind referred to in paragraph 10 of this Plan. Payments by holders of Shares to the Series of contingent deferred reimbursement charges relating to distribution fees paid by the Series hereunder shall reduce the amount of distribution fees for purposes of the annual 0.25% distribution fee limit. The Distributor will monitor the payments hereunder and shall reduce such payments or take such other steps as may be necessary to assure that (i) the payments pursuant to this Plan shall be consistent with Rule 2830, subparagraphs (d)(2) and (5) of the Conduct Rules of the National Association of Securities Dealers, Inc. with respect to investment companies with asset-based sales charges and service fees, as the same may be in effect from time to time and (ii) the Fund shall not pay with respect to any Authorized Institution service fees equal to more than .25 of 1% of the average annual net asset value of Shares sold by (or attributable to Shares or shares sold by) such Authorized Institution and held in an account covered by an Agreement.
4. The net asset value of the Shares shall be determined as provided in the Declaration and Agreement of Trust of the Fund. If the Distributor waives all or a portion of the fees which are to be paid by the Fund hereunder, the Distributor shall not be deemed to have waived its rights under this Agreement to have the Series pay such fees in the future.
5. The Secretary of the Fund, or in his absence the Chief Financial Officer, is hereby authorized to direct the disposition of monies paid or payable by the Series hereunder and shall provide to the Fund's Board of Trustees, and the Trustees shall review at least quarterly, a written report of the amounts so expended pursuant to this Plan and the purposes for which such expenditures were made.
6. Neither this Plan nor any other transaction between the parties hereto pursuant to this Plan 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 Fund are or may be "interested persons" of the Distributor, or any successor or assignee thereof, or that any or all of the Trustees, officers, partners, members or other representatives of the Distributor are or may be "interested persons" of the Fund, except as may otherwise be provided in the Act.
7. The Distributor shall give the Fund the benefit of the Distributor's best judgment and good faith efforts in rendering services under this Plan. Other than to abide by the provisions hereof and render the services called for hereunder in good faith, the Distributor assumes no responsibility under this Plan and, having so acted, the Distributor shall not be held liable or held accountable for any mistake of law or fact, or for any loss or damage arising or resulting therefrom suffered by the Fundor Series, or any of the shareholders, creditors, trustees, or officers of the Fund; provided however, that nothing herein shall be deemed to protect the Distributor against any liability to the Fund or the 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.
8. This Plan shall become effective upon the date hereof, and shall continue in effect for a period of more than one year from that date only so long as such continuance is specifically approved at least annually by a vote of the Board of Trustees of the Fund, including the vote of a majority of the trustees who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of this Plan or in any agreement related to this Plan, cast in person at a meeting called for the purpose of voting on such renewal.
9. This Plan may not be amended to increase materially the amount to be spent by the Fund hereunder above the maximum amounts referred to in paragraph 3 of this Plan without a shareholder vote in compliance with Rule 12b-1 and Rule 18f-3 under the Act as in effect at such time, and each material amendment must be approved by a vote of the Board of Trustees of the Fund, including the vote of a majority of the Trustees who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of this Plan or in any agreement related to this Plan, cast in person at a meeting called for the purpose of voting on such amendment. Amendments to this Plan which do not increase materially the amount to be spent by the Series hereunder above the maximum amounts referred to in paragraph 3 of this Plan may be made pursuant to paragraph 10 of this Plan.
10. Amendments to this Plan other than material amendments of the kind referred to in the foregoing paragraph 9 may be adopted by a vote of the Board of Trustees of the Fund, including the vote of a majority of the Trustees who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of this Plan or in any agreement related to this Plan. The Board of Trustees of the Fund may, by such a vote, interpret this Plan and make all determinations necessary or advisable for its administration.
11. This Plan may be terminated at any time without the payment of any penalty (a) by the vote of a majority of the Trustees of the Fund who are not "interested persons" of the Fund and have no direct or indirect financial interest in the operation of this Plan or in any agreement related to the Plan, or (b) by a shareholder vote in compliance with Rule 12b-1 and Rule 18f-3 under the Act as in effect at such time. This Plan shall automatically terminate in the event of its assignment.
12. So long as this Plan shall remain in effect, the selection and nomination of those Trustees of the Fund who are not "interested persons" of the Fund are committed to the discretion of such disinterested Trustees. The terms "interested persons," "assignment" and "vote of a majority of the outstanding voting securities" shall have the same meanings as those terms are defined in the Act.
13. The obligations of the Fund and the Series, 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 Fund or Series individually, but are binding only upon the assets and property of the Series. 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 of the Fund or Series 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 Fund.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and on its behalf by its duly authorized representative as of the date first above written.
LORD ABBETT SECURITIES TRUST
ATTEST:
LORD ABBETT DISTRIBUTOR LLC
EXHIBIT (23)(m)(ii)
The following
FORM OF RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT
for
CLASS B
was adopted by
LORD ABBETT LARGE-CAP VALUE FUND.
A substantially identical plan was adopted by the following Funds or Series of
LORD ABBETT SECURITIES TRUST:
on the date indicated
Alpha Series (December 12, 1997)
Lord Abbett All Value Fund (May 19, 1997)
International Series (May 19, 1997)
RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT dated as of June 30, 2003 by and between LORD ABBETT SECURITIES TRUST, a Delaware business trust (the "Fund"), on behalf of the LORD ABBETT LARGE-CAP VALUE FUND, (the "Series"), and LORD ABBETT DISTRIBUTOR LLC, a New York limited liability company (the "Distributor").
WHEREAS, the Fund is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "Act"); and the Distributor is the exclusive selling agent of the Fund's shares of beneficial interest, including the Series' Class B shares (the "Shares") pursuant to the Distribution Agreement between the Fund and the Distributor.
WHEREAS, the Fund desires to adopt a Distribution Plan and Agreement (the "Plan") with the Distributor, as permitted by Rule 12b-1 under the Act, pursuant to which the Series may make certain payments to the Distributor (a) to help reimburse the Distributor for the payment of sales commissions to institutions and persons permitted by applicable law and/or rules to receive such payments ("Authorized Institutions") in connection with sales of Shares and (b) for use by the Distributor in rendering service to the Fund, including paying and financing the payment of sales commissions, service fees, and other costs of distributing and selling Shares as provided in paragraph 3 of this Plan, and
WHEREAS, the Fund's Board of Trustees has determined that there is a reasonable likelihood that the Plan will benefit the Series and the holders of the Shares.
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 Fund hereby authorizes the Distributor to enter into agreements with Authorized Institutions (the "Agreements") which may provide for the payment to such Authorized Institutions of (a) sales commissions (particularly those paid or financed with payments received hereunder) and (b) service fees received hereunder in order to provide incentives to such Authorized Institutions (i) to sell Shares and (ii) to provide continuing information and investment services to their accounts holding Shares and otherwise to encourage their accounts to remain invested in the Shares, respectively. The Distributor may, from time to time, waive or defer payment of some fees payable at the time of the sale of Shares provided for under paragraph 2 hereof.
2. Subject to possible reductions as provided below in this paragraph 2, the Series periodically, as determined by the Fund's Board of Trustees (in the manner contemplated in paragraph 11), shall pay to the Distributor fees (a) for services, at an annual rate not to exceed .25 of 1% of the average annual net asset value of Shares outstanding and (b) for distribution, at an annual rate not to exceed .75 of 1% of the average annual net asset value of Shares outstanding. Payments
will be based on Shares outstanding during any such period. Shares outstanding include Shares issued for reinvested dividends and distributions. The Board of Trustees of the Fund shall from time to time determine the amounts, within the foregoing maximum amounts, that the Series may pay the Distributor hereunder. Such determinations by the Board of Trustees shall be made by votes of the kind referred to in paragraph 11 of this Plan. The service fees mentioned in this paragraph are for the purposes mentioned in clause (b) (ii) of paragraph 1 of this Plan and the distribution fees mentioned in this paragraph are for the purposes mentioned in clause (b) (i) of paragraph 1 of this Plan. The Distributor will monitor the payments hereunder and shall reduce such payments or take such other steps as may be necessary to assure that (x) the payments pursuant to this Plan shall be consistent with Rule 2830, subparagraphs (d)(2) and (5) of the Conduct Rules of the National Association of Securities Dealers, Inc. with respect to investment companies with asset-based sales charges and service fees as the same may be in effect from time to time and (y) the Fund shall not pay with respect to any Authorized Institution service fees equal to more than .25 of 1% of the average annual net asset value of Shares sold by (or attributable to shares sold by) such Authorized Institution and held in an account covered by an Agreement.
3. The Distributor may use amounts received as distribution fees hereunder from the Series to engage directly or indirectly in financing any activity which is primarily intended to result in the sale of Shares including, but not limited to: (a) paying and financing the payment of commissions or other payments relating to selling or servicing efforts and (b) paying interest, carrying, or any other financing charges on any unreimbursed distribution or other expense incurred in a prior fiscal year of the Series whether or not such charges and unreimbursed distribution or other expense are determined to be a legal obligation of the Series, in whole or in part, by the Fund's Board of Trustees. The Fund's Board of Trustees (in the manner contemplated in paragraph 11 of this Plan) shall approve the timing, categories and calculation of any payments under this paragraph 3.
4.1. The Series will pay each person which has acted as Distributor of Shares its Allocable Portion (as such term is defined in paragraphs 13.1 through 13.3) of the distribution fees with respect to Shares of the Series in consideration of its services as principal underwriter for the Shares of the Fund. The distribution agreement pursuant to which a person acts or acted as principal underwriter of the Shares is referred to as the "Applicable Distribution Agreement". Such person shall be paid its Allocable Portion of such distribution fees notwithstanding such person's termination as Distributor of the Shares, such payments to be changed or terminated only (i) as required by a change in applicable law or a change in accounting policy adopted by the Investment Companies Committee of the AICPA and approved by FASB that results in a determination by the Fund's independent accountants that any sales charges in respect of such Fund, which are not contingent deferred sales charges and which are not yet due and payable, must be accounted for by such Fund as a liability in accordance with GAAP, each after the effective date of this Plan and restatement; (ii) if in the sole discretion of the Board of Trustees, after due consideration of such factors as they considered relevant, including the transactions contemplated in any purchase and sale agreement entered into between the Fund's Distributor and any commission financing entity, the Board of Trustees determines (in the manner contemplated in paragraph 12), in the exercise of its fiduciary duty, that this Plan and the payments thereunder must be changed or terminated, notwithstanding the effect this action might have on the Fund's ability to offer and sell Shares; or (iii) in connection with a
Complete Termination of this Plan, it being understood that for this purpose a Complete Termination of this Plan occurs only if this Plan is terminated and the Fund has discontinued the distribution of Shares or other back-end load or substantially similar classes of shares; it being understood that such does not include Class C shares, I.E., those sold with a level load. The services rendered by a Distributor for which that Distributor is entitled to receive its Allocable Portion of the distribution fee shall be deemed to have been completed at the time of the initial purchase of the Shares (as defined in the Applicable Distribution Agreement) (whether of that Fund or another fund) taken into account in computing that Distributor's Allocable Portion of the distribution fee.
4.2. The obligation of the Series to pay the distribution fee shall terminate upon the termination of this Plan in accordance with the terms hereof.
4.3. The right of a Distributor to receive payments hereunder may be transferred by that Distributor (but not the distribution agreement itself or that Distributor's obligations thereunder) in order to raise funds which may be useful or necessary to perform its duties as principal underwriter, and any such transfer shall be effective upon written notice from that Distributor to the Fund. In connection with the foregoing, the Series is authorized to pay all or part of the distribution fee and/or contingent deferred sales charges with respect to Shares (upon the terms and conditions set forth in the then current Fund prospectus) directly to such transferee as directed by that Distributor.
4.4. As long as this Plan is in effect, the Fund shall not change the manner in which the distribution fee is computed (except as may be required by a change in applicable law or a change in accounting policy adopted by the Investment Companies Committee of the AICPA and approved by FASB that results in a determination by the Fund's independent accountants that any distribution fees which are not yet due and payable, must be accounted for by such Fund as a liability in accordance with GAAP).
5. The net asset value of the Shares shall be determined as provided in the Declaration and Agreement of Trust of the Fund. If the Distributor waives all or a portion of fees which are to be paid by the Fund hereunder, the Distributor shall not be deemed to have waived its rights under this Agreement to have the Fund pay such fees in the future.
6. The Secretary of the Fund, or in his absence the Chief Financial Officer, is hereby authorized to direct the disposition of monies paid or payable by the Fund hereunder and shall provide to the Fund's Board of Trustees, and the Board of Trustees shall review, at least quarterly, a written report of the amounts so expended pursuant to this Plan and the purposes for which such expenditures were made. Over the long-term the expenses incurred by the Distributor for engaging directly or indirectly in financing any activity which is primarily intended to result in the sale of Shares are likely to be greater then the distribution fees receivable by the Distributor hereunder. Nevertheless, there exists the possibility that for a short-term period the Distributor may not have a sufficient amount of such expenses to warrant reimbursement by receipt of such distribution fees. Although the Distributor undertakes not to make a profit under this Plan, the Plan will be considered a compensation plan (i.e. distribution fees will be paid regardless of expenses incurred) in order to avoid the possibility of the Distributor not being able to receive such distribution fees because of a
temporary timing difference between its incurring such expenses and the receipt of such distribution fees.
7. Neither this Plan nor any other transaction between the Fund and the Distributor, or any successor or assignee thereof, pursuant to this Plan 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 Fund are or may be "interested persons" of the Distributor, or any successor or assignee thereof, or that any or all of the trustees, officers, partners, members or other representatives of the Distributor are or may be "interested persons" of the Fund, except as otherwise may be provided in the Act.
8. The Distributor shall give the Fund the benefit of the Distributor's best judgment and good faith efforts in rendering services under this Plan. Other than to abide by the provisions hereof and render the services called for hereunder in good faith, the Distributor assumes no responsibility under this Plan and, having so acted, the Distributor shall not be held liable or held accountable for any mistake of law or fact, or for any loss or damage arising or resulting therefrom suffered by the Fund or any of its shareholders, creditors, Trustees or officers; provided however, that nothing herein shall be deemed to protect the Distributor against any liability to the Fund or the Fund's 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.
9. This Plan shall become effective on the date hereof, and shall continue in effect for a period of more than one year from such date only so long as such continuance is specifically approved at least annually by a vote of the Board of Trustees of the Fund, including the vote of a majority of the Trustees who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of this Plan or in any agreement related to this Plan, cast in person at a meeting called for the purpose of voting on such renewal.
10. This Plan may not be amended to increase materially the amount to be spent by the Fund hereunder without the vote of a majority of its outstanding voting securities and each material amendment must be approved by a vote of the Board of Trustees of the Fund, including the vote of a majority of the Trustees who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of this Plan or in any agreement related to this Plan, cast in person at a meeting called for the purpose of voting on such amendment.
11. Amendments to this Plan other than material amendments of the kind referred to in the foregoing paragraph 10 of this Plan may be adopted by a vote of the Board of Trustees of the Fund, including the vote of a majority of the Trustees who are not "interested persons" of the Fund and who have no direct or indirect financial interest in the operation of this Plan or in any agreement related to this Plan. The Board of Trustees of the Fund may, by such a vote, interpret this Plan and make all determinations necessary or advisable for its administration.
12. This Plan may be terminated at any time without the payment of any penalty by (a) the vote of a majority of the Trustees of the Fund who are not "interested persons" of the Fund and have no direct or indirect financial interest in the operation of this Plan or in any agreement related to this
Plan, or (b) by a shareholder vote in compliance with Rule 12b-1 and Rule 18f-3 under the Act as in effect at such time. This Plan shall automatically terminate in the event of its assignment.
13.1. For purposes of this Plan, the Distributor's "Allocable Portion" of
the distribution fee shall be 100% of such distribution fees unless or until the
Fund uses a principal underwriter other than the Distributor. Thereafter the
Allocable Portion shall be the portion of the distribution fee attributable to
(i) Shares of the Fund sold by the Distributor before there is a new principal
underwriter, plus (ii) Shares of the Fund issued in connection with the exchange
of Shares of another Fund in the Lord, Abbett Family of Funds, plus (iii) Shares
of the Fund issued in connection with the reinvestment of dividends and capital
gains.
13.2. The Distributor's Allocable Portion of the distribution fees and the contingent deferred sales charges arising with respect to Shares taken into account in computing the Distributor's Allocable Portion shall be limited under Article III, Sections 26(b) and (d) or other applicable regulations of the NASD as if the Shares taken into account in computing the Distributor's Allocable Portion themselves constituted a separate class of shares of the Fund.
13.3. The services rendered by the Distributor for which the Distributor is entitled to receive the Distributor's Allocable Portion of the distribution fees shall be deemed to have been completed at the time of the initial purchase of the Shares (or shares of another Fund in the Lord Abbett Family of Funds) taken into account in computing the Distributor's Allocable Portion. In addition, the Fund will pay to the Distributor any contingent deferred sales charges imposed on redemption of Shares (upon the terms and conditions set forth in the then current Fund prospectus) taken into account in computing the Distributor's Allocable Portion of the distribution fees. Notwithstanding anything to the contrary in this Plan, the Distributor shall be paid its Allocable Portion of the distribution fees regardless of the Distributor's termination as principal underwriter of the Shares of the Fund, or any termination of this Agreement other than in connection with a Complete Termination (as defined in paragraph 4.1) of the Plan as in effect on the date of execution of Distribution Agreement with the new Distributor. Except as provided in paragraph 4.1 and in the preceding sentence, the Fund's obligation to pay the distribution fees to the Distributor shall be absolute and unconditional and shall not be subject to any dispute, offset, counterclaim or defense whatsoever (it being understood that nothing in this sentence shall be deemed a waiver by the Fund of its right separately to pursue any claims it may have against the Distributor and to enforce such claims against any assets of the Distributor (other than the assets represented by the Distributor's rights to be paid its Allocable Portion of the distribution fees and to be paid the contingent deferred sales charges).
14. So long as this Plan shall remain in effect, the selection and nomination of those Trustees of the Fund who are not "interested persons" of the Fund are committed to the discretion of such disinterested Trustees. 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.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and on its behalf by its duly authorized representative as of the date first above written.
LORD ABBETT SECURITIES TRUST
Lord Abbett Large-Cap Value Fund
ATTEST:
LORD ABBETT DISTRIBUTOR LLC
EXHIBIT (23)(m)(iii)
The following
FORM OF RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT
for
CLASS C
was adopted by
LORD ABBETT LARGE-CAP VALUE FUND.
A substantially identical plan was adopted by the following Funds or Series of
LORD ABBETT SECURITIES TRUST:
on the date indicated
Alpha Series (November 1, 2001)
Lord Abbett All Value Fund (November 1, 2001) International Series (November 1, 2001)
RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT dated as of June 30, 2003 by and between LORD ABBETT SECURITIES TRUST, a Delaware business trust (the "Trust"), on behalf of LORD ABBETT LARGE-CAP VALUE FUND, (the "Fund"), and LORD ABBETT DISTRIBUTOR LLC, a New York limited liability company (the "Distributor").
WHEREAS, the Trust is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "Act"); and the Distributor is the exclusive selling agent of the Fund's Class C shares of beneficial interest, (the "Shares") pursuant to the Distribution Agreement between the Trust and the Distributor.
WHEREAS, the Trust desires to adopt a Distribution Plan and Agreement for the Fund's Shares (the "Plan") with the Distributor, as permitted by Rule 12b-1 under the Act, pursuant to which the Fund may make certain payments to the Distributor for payment to institutions and persons permitted by applicable law and/or rules to receive such payments ("Authorized Institutions") in connection with sales of Shares and for use by the Distributor as provided in paragraph 3 of this Plan, and
WHEREAS, the Trust's Board of Trustees has determined that there is a reasonable likelihood that the Plan will benefit the Fund and the holders of the Shares.
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 hereby authorizes the Distributor to enter into
agreements with Authorized Institutions (the "Agreements") which may provide for
the payment to such Authorized Institutions of distribution and service fees
which the Distributor receives from (or is reimbursed for by) the Fund in order
to provide incentives to such Authorized Institutions (i) to sell Shares and
(ii) to provide continuing information and investment services to their accounts
holding Shares and otherwise to encourage their accounts to remain invested in
the Shares. The Distributor may, from time to time, waive or defer payment of
some fees payable at the time of the sale of Shares provided for under paragraph
2 hereof.
2. Subject to possible reduction as provided below in this paragraph 2, the Fund shall pay to the Distributor fees at each month-end after the sale of Shares (a) for services, at an annual rate not to exceed .25 of 1% of the average annual net asset value of Shares outstanding and (b) for distribution, at an annual rate not to exceed .75 of 1% of the average annual net asset value of Shares outstanding. For purposes of the payment of the fees above, (A) Shares issued pursuant to an exchange for Class C shares of another series of the Trust or another Lord Abbett-sponsored fund (or for shares of a fund acquired by the Trust) will be credited with the time held from the initial purchase of such other shares when determining how long Shares mentioned above have been outstanding and (B) payments will be based on Shares outstanding during any such month. Shares
outstanding above include Shares issued for reinvested dividends and distributions. The Board of Trustees of the Trust shall from time to time determine the amounts, within the foregoing maximum amounts, that the Fund may pay the Distributor hereunder. Such determinations by the Board of Trustees shall be made by votes of the kind referred to in paragraph 10 of this Plan. The service fees mentioned in this paragraph are for the purposes mentioned in clause (ii) of paragraph 1 of this Plan and the distribution fees mentioned in this paragraph are for the purposes mentioned in clause (i) of paragraph 1. The Distributor will monitor the payments hereunder and shall reduce such payments or take such other steps as may be necessary to assure that (x) the payments pursuant to this Plan shall be consistent with Rule 2830 subparagraphs (d)(2) and (5) of the Conduct Rules of the National Association of Securities Dealers, Inc. with respect to investment companies with asset-based sales charges and service fees as the same may be in effect from time to time and (y) the Fund shall not pay with respect to any Authorized Institution service fees equal to more than .25 of 1% of the average annual net asset value of Shares sold by (or attributable to shares sold by) such Authorized Institution and held in an account covered by an Agreement.
3. The Distributor may use amounts received as distribution fees hereunder from the Fund to finance any activity which is primarily intended to result in the sale of Shares including, but not limited to, commissions or other payments relating to selling or servicing efforts. The Trust's Board of Trustees (in the manner contemplated in paragraph 10 of this Plan) shall approve the timing, categories and calculation of any payments under this paragraph 3.
4. The net asset value of the Shares shall be determined as provided in the Declaration and Agreement of Trust of the Trust. If the Distributor waives all or a portion of fees which are to be paid by the Fund hereunder, the Distributor shall not be deemed to have waived its rights under this Agreement to have the Fund pay such fees in the future.
5. The Secretary of the Trust, or in his absence the Chief Financial Officer, is hereby authorized to direct the disposition of monies paid or payable by the Fund hereunder and shall provide to the Trust's Board of Trustees, and the Board of Trustees shall review, at least quarterly, a written report of the amounts so expended pursuant to this Plan and the purposes for which such expenditures were made.
6. Neither this Plan nor any other transaction between the parties hereto pursuant to this Plan 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 persons" of the Distributor, or any successor or assignee thereof, or that any or all of the directors, officers, partners, members or other representatives of the Distributor are or may be "interested persons" of the Trust, except as otherwise may be provided in the Act.
7. The Distributor shall give the Trust the benefit of the Distributor's best judgment and good faith efforts in rendering services under this Plan. Other than to abide by the provisions hereof and render the services called for hereunder in good faith, the Distributor assumes no responsibility under this Plan and, having so acted, the Distributor shall not be held liable or held accountable for any mistake of law or fact, or for any loss or damage arising or resulting therefrom suffered by the Trust or any of its shareholders, creditors, directors, trustees, or officers; provided
however, that nothing herein shall be deemed to protect the Distributor against any liability to the Trust or the Trust's 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.
8. This Plan shall become effective on the date hereof, and shall continue in effect for a period of more than one year from such date only so long as such continuance is specifically approved at least annually by a vote of the Board of Trustees of the Trust, including the vote of 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 this Plan or in any agreement related to this Plan, cast in person at a meeting called for the purpose of voting on such renewal.
9. This Plan may not be amended to increase materially the amount to be spent by the Fund hereunder without the vote of a majority of its outstanding Shares and each material amendment must be approved by a vote of the Board of Trustees of the Trust, including the vote of 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 this Plan or in any agreement related to this Plan, cast in person at a meeting called for the purpose of voting on such amendment.
10. Amendments to this Plan other than material amendments of the kind referred to in the foregoing paragraph 9 of this Plan may be adopted with respect to the Fund by a vote of the Board of Trustees of the Trust, including the vote of 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 this Plan or in any agreement related to this Plan. The Board of Trustees of the Trust may, by such a vote, interpret this Plan and make all determinations necessary or advisable for its administration.
11. This Plan may be terminated with respect to the Fund at any time without the payment of any penalty by (a) the vote of a majority of the Trustees of the Trust who are not "interested persons" of the Trust and have no direct or indirect financial interest in the operation of this Plan or in any agreement related to this Plan, or (b) by a shareholder vote in compliance with Rule 12b-1 and Rule 18f-3 under the Act as in effect at such time. This Plan shall automatically terminate in the event of its assignment.
12. So long as this Plan shall remain in effect, the selection and nomination of those Trustees of the Trust who are not "interested persons" of the Trust are committed to the discretion of such disinterested trustees. 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.
13. The obligations of the Trust and the Fund, 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 or Fund individually, but are binding only upon the assets and property of the Trust or Fund. 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 of the Trust or Fund 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, each of the parties has this instrument to be executed in its name and on its behalf by its duly authorized representative as of the date first above written.
LORD ABBETT SECURITIES TRUST
Lord Abbett Large-Cap Value Fund
ATTEST:
LORD ABBETT DISTRIBUTOR LLC
EXHIBIT (23)(m)(iv)
The following
FORM OF RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT
for
CLASS P
was adopted by
LORD ABBETT LARGE-CAP VALUE FUND.
A substantially identical plan was adopted by the following Funds or Series of
LORD ABBETT SECURITIES TRUST:
on the date indicated
Alpha Series (August 15, 2001)
Lord Abbett All Value Fund August 15, 2001) International Series (March 9, 1999)
RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT dated as of June 30, 2003 by and between LORD ABBETT SECURITIES TRUST, a Delaware business trust (the "Trust"), on behalf of LORD ABBETT LARGE-CAP VALUE FUND, (the "Fund"), and LORD ABBETT DISTRIBUTOR LLC, a New York limited liability company (the "Distributor").
WHEREAS, the Trust is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "Act"); and the Distributor is the exclusive selling agent of the Trust's shares of beneficial interest, including the Fund's Class P shares (the "Shares"), pursuant to the Distribution Agreement between the Trust and the Distributor, and
WHEREAS, the Trust desires to adopt a Distribution Plan and Agreement (the "Plan") for the Fund's Shares with the Distributor, as permitted by Rule 12b-1 under the Act, pursuant to which the Fund may make certain payments to the Distributor for payment to institutions and persons permitted by applicable law and/or rules to receive such payments ("Authorized Institutions") in connection with sales of Shares and for use by the Distributor as provided in paragraph 3 of this Plan, and
WHEREAS, the Trust's Board of Trustees has determined that there is a reasonable likelihood that the Plan will benefit the Fund and the holders of the Shares.
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 hereby authorizes the Distributor to enter into agreements with Authorized Institutions (the "Agreements") which may provide for the payment to such Authorized Institutions of distribution and service fees which the Distributor receives from the Fund in order to provide incentives to such Authorized Institutions (i) to sell Shares and (ii) to provide continuing information and investment services to their accounts holding Shares and otherwise to encourage their accounts to remain invested in the Shares. The Distributor may, from time to time, waive or defer payment of some fees payable at the time of the sale of Shares provided for under paragraph 2 hereof.
2. Subject to possible reduction as provided below in this paragraph 2, the Fund shall pay to the Distributor fees at each quarter-end (a) for services, at an annual rate not to exceed .20% of 1% of the average annual net asset value of Shares outstanding for the quarter or more and (b) for distribution, at an annual rate not to exceed .25 of 1% of the average annual net asset value of Shares outstanding for the quarter or more. For purposes of the quarter-end fee payments above (A) Shares issued pursuant to an exchange for shares of another series of the Trust or another Lord Abbett-sponsored fund (or for shares of a fund acquired by the Trust) will be credited with the time held from the initial purchase of such other shares when determining how long Shares mentioned in clauses (a) and (b) have been outstanding and (B) payments will be based on Shares outstanding
during any such quarter. Shares outstanding in clauses (a) and (b) above include Shares issued for reinvested dividends and distributions that have been outstanding for the quarter or more.
The Board of Trustees of the Trust shall from time to time determine the amounts and the time of payments (such as, at the time of sale, quarterly or otherwise), within the foregoing maximum amounts, that the Fund may pay the Distributor hereunder. Such determinations by the Board of Trustees shall be made by votes of the kind referred to in paragraph 10 of this Plan. The service fees mentioned in this paragraph are for the purposes mentioned in clause (ii) of paragraph 1 of this Plan and the distribution fees mentioned in this paragraph are for the purposes mentioned in clause (i) of paragraph 1 and the second sentence of paragraph 3 of this Plan. The Distributor will monitor the payments hereunder and shall reduce such payments or take such other steps as may be necessary to assure that (x) the payments pursuant to this Plan shall be consistent with Rule 2830, subparagraphs (d)(2) and (5) of the Conduct Rules of the National Association of Securities Dealers, Inc. with respect to investment companies with asset-based sales charges and service fees as the same may be in effect from time to time and (y) the Fund shall not pay with respect to any Authorized Institution service fees equal to more than .20% of 1% of the average annual net asset value of Shares sold by (or attributable to shares sold by) such Authorized Institution and held in an account covered by an Agreement.
3. Within the foregoing maximum amounts, the Distributor may use amounts received as distribution fees hereunder from the Fund to finance any activity that is primarily intended to result in the sale of Shares including, but not limited to, commissions or other payments relating to selling or servicing efforts. Without limiting the generality of the foregoing, the Distributor may apply amounts authorized by the Trust's Board of Trustees designated as the distribution fee referred to in clause (b) of paragraph 2 to expenses incurred by the Distributor if such expenses are primarily intended to result in the sale of Shares. The Trust's Board of Trustees (in the manner contemplated in paragraph 10 of this Plan) shall approve the timing, categories and calculation of any payments under this paragraph 3 other than those referred to in the foregoing sentence.
4. The net asset value of the Shares shall be determined as provided in the Declaration and Agreement of Trust of the Trust. If the Distributor waives all or a portion of fees which are to be paid by the Fund hereunder, the Distributor shall not be deemed to have waived its rights under this Agreement to have the Trust pay such fees in the future.
5. The Secretary of the Trust, or in his absence the Chief Financial Officer, is hereby authorized to direct the disposition of monies paid or payable by the Fund hereunder and shall provide to the Trust's Board of Trustees, and the Board of Trustees shall review, at least quarterly, a written report of the amounts so expended pursuant to this Plan and the purposes for which such expenditures were made.
6. Neither this Plan nor any other transaction between the parties hereto pursuant to this Plan 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 persons" of the Distributor, or any successor or assignee thereof, or that any or all of the trustees, officers, partners,
members or other representatives of the Distributor are or may be "interested persons" of the Trust, except as otherwise may be provided in the Act.
7. The Distributor shall give the Trust the benefit of the Distributor's best judgment and good faith efforts in rendering services under this Plan. Other than to abide by the provisions hereof and render the services called for hereunder in good faith, the Distributor assumes no responsibility under this Plan and, having so acted, the Distributor shall not be held liable or held accountable for any mistake of law or fact, or for any loss or damage arising or resulting therefrom suffered by the Trust, the Fund or any of the shareholders, creditors, Trustees or officers of the Trust; provided however, that nothing herein shall be deemed to protect the Distributor against any liability to the Trust or the Fund's 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.
8. This Plan shall become effective on the date hereof, and shall continue in effect for a period of more than one year from such date only so long as such continuance is specifically approved at least annually by a vote of the Board of Trustees of the Trust, including the vote of 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 this Plan or in any agreement related to this Plan, cast in person at a meeting called for the purpose of voting on such renewal.
9. This Plan may not be amended to increase materially the amount to be spent by the Fund hereunder without the vote of a majority of the Shares and each material amendment must be approved by a vote of the Board of Trustees of the Trust, including the vote of 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 this Plan or in any agreement related to this Plan, cast in person at a meeting called for the purpose of voting on such amendment.
10. Amendments to this Plan other than material amendments of the kind referred to in the foregoing paragraph 9 of this Plan may be adopted by a vote of the Board of Trustees of the Trust, including the vote of 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 this Plan or in any agreement related to this Plan. The Board of Trustees of the Trust may, by such a vote, interpret this Plan and make all determinations necessary or advisable for its administration.
11. This Plan may be terminated at any time without the payment of any penalty by (a) the vote of a majority of the Trustees of the Trust who are not "interested persons" of the Trust and have no direct or indirect financial interest in the operation of this Plan or in any agreement related to this Plan, or (b) by a shareholder vote in compliance with Rule 12b-1 and Rule 18f-3 under the Act as in effect at such time.
12. So long as this Plan shall remain in effect, the selection and nomination of those Trustees of the Trust who are not "interested persons" of the Trust are committed to the discretion of such disinterested trustees. 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.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and on its behalf by its duly authorized representative as of the date first above written.
LORD ABBETT SECURITIES TRUST
Lord Abbett Large-Cap Value Fund
ATTEST:
LORD ABBETT DISTRIBUTOR LLC
EXHIBIT (23)(n)
AMENDED AND RESTATED PLANS AS OF JUNE 30, 2003
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, Inc. shares of the Growth and Income Portfolio shall be divided into Variable Contract Class shares (Class VC shares) and Class P shares and shares of all other Portfolios shall be comprised of one class of shares as indicated on Schedule A, each of which shall also be known as Class VC shares of the respective portfolio.
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 June 30, 2003
The Lord Abbett - Sponsored Funds
ESTABLISHING MULTI-CLASS STRUCTURES
FUNDS CLASSES
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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 Convertible 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 Large-Cap Value Fund A, B, C, P, Y
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett California Tax-Free Income Fund A, C, P
Lord Abbett National Tax-Free Income Fund A, B, C, P
Lord Abbett New York Tax-Free Income Fund A, C, P
Lord Abbett Texas Tax-Free Income Fund A, P
Lord Abbett New Jersey Tax-Free Income Fund A, P
Lord Abbett Connecticut Tax-Free Income Fund A, P
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Lord Abbett Missouri Tax-Free Income Fund A, P Lord Abbett Hawaii Tax-Free Income Fund A, P Lord Abbett Washington Tax-Free Income Fund A, P Lord Abbett 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 Insured Intermediate Tax-Free Fund A, B, C, 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 Value Series A, B, C, P, Y Lord Abbett America's Value Fund A, B, C, P, Y Lord Abbett Series Fund, Inc. Growth and 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) All Value Portfolio All Value Portfolio (VC) America's Value Portfolio America's Value Portfolio (VC) Growth Opportunities Portfolio Growth Opportunities Portfolio (VC) |