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. 50 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT /X/
OF 1940
Amendment No. 50 /X/
LORD ABBETT SECURITIES TRUST
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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
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It is proposed that this filing will become effective (check appropriate box)
/X/ immediately upon filing pursuant to paragraph (b)
/ / on [date] 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.
[LORD ABBETT LOGO]
LORD ABBETT DECEMBER 20,
VALUE OPPORTUNITIES FUND 2005
PROSPECTUS
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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.
TABLE OF CONTENTS
PAGE
THE FUND
What you should Goal 2
know about the Fund Principal Strategy 2
Main Risks 3
Performance 5
Fees and Expenses 5
Additional Investment Information 7
Management 10
YOUR INVESTMENT
Information for Purchases 12
managing Sales Compensation 27
your Fund Opening Your Account 33
account Redemptions 34
Distributions and Taxes 36
Services for Fund Investors 38
ADDITIONAL INFORMATION
How to learn more Back Cover
about the Fund and
other Lord Abbett
Funds
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THE FUND
GOAL
The Fund's investment objective is long-term capital appreciation.
PRINCIPAL STRATEGY
To pursue this goal, the Fund normally invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities of small and mid-sized companies. Small and mid-sized companies are defined as companies having a market capitalization at the time of purchase that falls within the market capitalization range of companies in the Russell 2500(R) Index, a widely used benchmark for small and mid-sized stock performance. As of December 1, 2005, the market capitalization range of the Russell 2500(R) Index was $30.7 million to $11.2 billion. This range varies daily. The Fund may change this policy at any time. Equity securities in which the Fund may invest include common stocks, convertible bonds, convertible preferred stocks, warrants and similar instruments. Common stocks, the most familar type of equity security, represent an ownership interest in a company.
In selecting investments, the Fund attempts to invest in the securities of smaller, less well-known companies, and mid-sized companies, selling at reasonable prices in relation to our assessment of their potential value. The Fund chooses stocks using:
- Quantitative research to identify stocks we believe represent the best
bargains. As part of this process, we may look at the price of a
company's stock in relation to the company's book value, its sales, the
value of its assets, its earnings and cash flow.
- Fundamental research to evaluate a company's operating environment,
resources and strategic plans and to assess its prospects for exceeding
earnings expectations.
[SIDENOTE]
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.
We generally sell a stock when we think it is no longer undervalued, seems less likely to benefit from the current market and economic environment, shows deteriorating fundamentals, or falls short of our expectations.
This Fund is intended for investors who are willing to withstand the risk of short-term price fluctuations in exchange for attractive potential long-term returns.
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 and small and mid-sized company 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. The stocks of small and mid-sized companies may perform differently than the market as a whole and other types of stocks, such as large company stocks and growth stocks.
The Fund has particular risks associated with value stocks. Different types of stocks 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.
Investing in small and mid-sized companies generally involves greater risks than investing in the stocks of large companies. Small and mid-sized companies may be less able to weather economic shifts or other adverse developments than larger, more established companies. They may have less experienced management and unproven track records. They may rely on limited product lines and have more limited financial resources. These factors may make them more susceptible to setbacks or economic downturns. Small and mid-sized company
[SIDENOTE]
VALUE STOCKS are stocks of companies we believe the market undervalues according to certain financial measurements of their intrinsic worth or business prospects.
VALUE OPPORTUNITIES FUND
stocks tend to have fewer shares outstanding and trade less frequently than the stocks of larger companies. In addition, there may be less liquidity in the prices of small and mid-sized company stocks, subjecting them to greater price fluctuations than larger company stocks. Investing in small companies generally involves some degree of information risk. That means that key information about an issuer, security or market may be inaccurate or unavailable.
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 in the 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.
CLASS A CLASS B(1) CLASS C CLASS P
SHAREHOLDER FEES (Fees paid directly from your investment)
Maximum Sales Charge on Purchases
(as a % of offering price) 5.75%(2) None None None
Maximum Deferred Sales Charge
(See "Purchases")(3) None(4) 5.00% 1.00%(5) None
ANNUAL FUND OPERATING EXPENSES
(Expenses deducted from Fund assets) (as a % of average net assets)
Management Fees
(See "Management") 0.75% 0.75% 0.75% 0.75%
Distribution and Service
(12b-1) Fees(6) 0.35% 1.00% 1.00% 0.45%
Other Expenses(7) 0.43% 0.43% 0.43% 0.43%
Total Operating Expenses 1.53% 2.18% 2.18% 1.63%
Expense Reimbursement(8) 0.23% 0.23% 0.23% 0.23%
Net Expenses(8) 1.30% 1.95% 1.95% 1.40%
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(1) Class B shares will automatically convert to Class A shares after the
eighth anniversary of your purchase of Class B shares.
(2) You may be able to reduce or eliminate the sales charge. See "Your
Investment - Purchases."
(3) 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.
(4) A CDSC of 1.00% may be assessed on certain redemptions of Class A shares
made within 12 months following certain purchases made without a sales
charge.
(5) A CDSC of 1.00% may be assessed on Class C shares if they are redeemed
before the first anniversary of their purchase.
(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.
(7) The other expenses are based upon estimated amounts.
(8) For the year ending October 31, 2006, Lord Abbett has contractually agreed to reimburse a portion of the Fund's expenses so that the Fund's Total net Annual Operating Expenses do not exceed an aggregate annual rate of 1.30% of average daily net assets for Class A shares, 1.95% of average daily net assets for Class B and Class C shares, and 1.40% of average daily net assets for Class P shares.
[SIDENOTE]
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.
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 $ 700 $ 1,009 Class B Shares $ 698 $ 960 Class C Shares $ 298 $ 660 Class P Shares $ 143 $ 492 |
You would pay the following expenses if you did not redeem your shares:
Class A Shares $ 700 $ 1,009 Class B Shares $ 198 $ 660 Class C Shares $ 198 $ 660 Class P Shares $ 143 $ 492 |
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 United States. Ownership of ADRs entails similar
investment risks to direct ownership of foreign securities traded outside the United States, including increased market, liquidity, currency, political, information and other risks.
FOREIGN SECURITIES. The Fund may invest up to 10% of their net assets in foreign securities that are primarily traded outside the United States. This limitation does not include ADRs. Foreign securities may pose greater risks than domestic securities. Foreign markets and the securities traded in them may not be subject to the same degree of regulation as U.S. markets. As a result, there may be less information publicly available about foreign companies than most U.S. companies. Securities clearance, settlement procedures and trading practices may be different, and transaction costs may be higher in foreign countries. There may be less trading volume and liquidity in foreign markets, subjecting the securities traded in them to greater price fluctuations. Foreign investments also may be affected by changes in currency rates or currency controls.
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 their portfolios 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 net 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 net assets at the time an option is
written.
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.
INFORMATION ON PORTFOLIO HOLDINGS. The Fund's Annual and Semiannual Reports, which are sent to shareholders
and filed with the Securities and Exchange Commission ("SEC"), contain information about the Fund's portfolio holdings, including a complete schedule of holdings. The Fund also files its complete schedule of portfolio holdings with the SEC on Form N-Q as of the end of its first and third fiscal quarters.
In addition, on or about the first day of the second month following each calendar quarter-end, the Fund makes publicly available a complete schedule of its portfolio holdings as of the last day of each such quarter. The Fund also may make publicly available Fund portfolio commentaries or fact sheets containing a discussion of select portfolio holdings and a list of up to the ten largest portfolio positions, among other things, and/or performance attribution information within thirty days following the end of each calendar quarter for which such information is made available. This information will remain available until the schedule, commentary, fact sheet or performance attribution information for the next quarter is publicly available. You may view this information for the most recently ended calendar quarter at www.LordAbbett.com or request a copy at no charge by calling Lord Abbett at 800-821-5129.
For more information on the Fund's policies and procedures with respect to the disclosure of its portfolio holdings and ongoing arrangements to make available such information on a selective basis to certain third parties, please see "Investment Policies - Policies and Procedures Governing the Disclosure of Portfolio Holdings" in the Statement of Additional Information.
MANAGEMENT
BOARD OF TRUSTEES. The Board oversees the management of the business and affairs of the Fund. The Board meets regularly to review the Fund's portfolio investments, performance, expenses, and operations. The Board appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies authorized by the Board. More than 75 percent of the members of the Board are independent of Lord Abbett.
INVESTMENT ADVISER. 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 $98 billion in 53 mutual fund portfolios and other advisory accounts as of October 31, 2005.
Lord Abbett is entitled to an annual management fee based on the Fund's average daily net assets. The fees are calculated daily and payable monthly as follows:
.75 of 1% on the first $1 billion of average daily net assets,
.70 of 1% on the next $1 billion,
.65 of 1% on assets over $2 billion.
In addition, Lord Abbett provides certain administrative services to the Fund for a fee at the annual rate of .04 of 1% 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.
A discussion regarding the basis for the Board approving the investment advisory contract for the Fund will be available in the Fund's Semiannual report for the fiscal period ending April 30, 2006.
INVESTMENT MANAGERS. Lord Abbett uses a team of investment managers and analysts acting together to manage the Fund's investments.
Steven R. McBoyle, Value Opportunities Fund Senior Investment Manager, heads the Fund's team and has primary responsibility for the day-to-day management of the Fund. Mr. McBoyle joined Lord Abbett in 2001, prior to that he served as Vice President, Mergers and Acquisitions, at Morgan Stanley; he holds an MBA from Columbia University, is a holder of a Chartered Accountant and Certified Public Accountant designation, and has been in the investment business since 1990.
The Statement of Additional Information provides additional information about the Investment Manager's compensation, other accounts managed by the Investment Manager, and the Investment Manager's ownership of securities in the Fund.
YOUR INVESTMENT
PURCHASES
The Fund offers in this Prospectus four classes of shares: Classes A, B, C, and P. Each class represents investments in the same portfolio of securities, but each has different expenses, dividends and sales charges. Class A, B, and C shares are offered to any investor. Class P shares are offered to certain investors as described below. You may purchase shares at the net asset value ("NAV") per share determined after we receive your purchase order submitted in proper form, plus any applicable sales charge. We will not consider an order to be in proper form until we have certain identifying information required under applicable law. For more information, see "Opening Your Account."
We reserve the right to modify, restrict, or reject any purchase order or exchange request if the Fund or LORD ABBETT DISTRIBUTOR LLC determines that it is in the best interest of the Fund and its shareholders. All purchase orders are subject to our acceptance.
PRICING OF SHARES. 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. Assuming they are in proper form, purchase and sale orders must be placed by the close of trading on the NYSE in order to receive that day's NAV; orders placed after the close of trading on the NYSE will receive the next day's NAV.
In calculating NAV, securities listed on any recognized U.S. or non-U.S. exchange (including NASDAQ) are valued at the market closing price on the exchange or system on which they are principally traded. Unlisted equity securities are valued at the last transaction price, or, if
[SIDENOTE]
LORD ABBETT DISTRIBUTOR LLC ("Lord Abbett Distributor" or "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.
there were no transactions that day, at the mean between the most recently quoted bid and asked prices. Unlisted fixed income securities (other than those with remaining maturities of 60 days or less) are valued at prices supplied by independent pricing services, which prices reflect broker/dealer-supplied valuations and electronic data processing techniques, and reflect the mean between the bid and asked prices. Unlisted fixed income securities having remaining maturities of 60 days or less are valued at their amortized cost.
Securities for which prices or market quotations are not available, do not accurately reflect fair value in Lord Abbett's opinion, or have been materially affected by events occurring after the close of the exchange on which the security is principally traded are valued under fair value procedures approved by the Fund's Board. These circumstances may arise, for instance, when trading in a security is suspended, the market on which a security is traded closes early, demand for a security (as reflected by its trading volume) is insufficient calling into question the reliability of the quoted price, or the security is relatively illiquid. The Fund determines fair value in a manner that fairly reflects the market value of the security on the valuation date based on consideration of any information or factors it deems appropriate. These may include recent transactions in comparable securities, information relating to the specific security, developments in the markets and their performance, and current valuations of foreign or U.S. indices. The Fund's use of fair value pricing may cause the NAV of Fund shares to differ from the NAV that would be calculated using market quotations. Fair value pricing involves subjective judgments and it is possible that the fair value determined for a security may be materially different than the value that could be realized upon the sale of that security.
Certain securities that are traded primarily on foreign exchanges may trade on weekends or days when the NAV is not calculated. As a result, the value of securities may
change on days when shareholders are not able to purchase or sell Fund shares.
EXCESSIVE TRADING AND MARKET TIMING. The Fund is designed for long-term investors and is not designed to serve as a vehicle for frequent trading in response to short-term swings in the market. Excessive, short-term or market timing trading practices may disrupt management of the Fund, raise its expenses, and harm long-term shareholders. Volatility resulting from excessive trading may cause the Fund difficulty in implementing long-term investment strategies because it cannot anticipate the amount of cash it will have to invest. The Fund may be forced to sell portfolio securities at disadvantageous times to raise cash to allow for such excessive trading. This, in turn, could increase tax, administrative and other costs and adversely impact the Fund's performance.
To the extent the Fund invests in foreign securities, the Fund may be particularly susceptible to excessive trading because many foreign markets close hours before the Fund values its portfolio holdings. This may allow significant events, including broad market moves, to occur in the interim, potentially affecting the values of foreign securities held by the Fund. The time zone differences among foreign markets may allow a shareholder to exploit differences in the Fund's share prices that are based on closing prices of foreign securities determined before the Fund calculates its NAV per share (known as "time zone arbitrage"). To the extent the Fund invests in securities that are thinly traded or relatively illiquid, the Fund may be particularly susceptible to excessive trading because the current market price for such securities may not accurately reflect current market values. A shareholder may attempt to engage in short-term trading to take advantage of these pricing differences (known as "price arbitrage"). The Fund has adopted fair value procedures designed to adjust closing market prices of these types of securities to reflect what is believed to be their fair value at the time
the Fund calculates its NAV per share. While there is no assurance, the Fund expects that the use of fair value pricing will reduce a shareholder's ability to engage in time zone arbitrage and price arbitrage to the detriment of other Fund shareholders. For more information about these procedures, see "Your Investment - Purchases - Pricing of Shares" above.
The Fund's Board has adopted additional policies and procedures that are designed to prevent or stop excessive short-term trading and market timing ("frequent trading"). We also have longstanding procedures in place to monitor the purchase, sale and exchange activity in Fund shares by investors and FINANCIAL INTERMEDIARIES that place orders on behalf of their clients. The Fund may modify its frequent trading policy and monitoring procedures, which are described below, from time to time without notice as and when deemed appropriate to enhance protection of the Fund and its shareholders.
FREQUENT TRADING POLICY. Under the frequent trading policy, any Lord Abbett Fund shareholder redeeming Fund shares valued at $5,000 or more (other than shares of Lord Abbett U.S. Government & Government Sponsored Enterprises Money Market Fund) will be prohibited from investing in the Fund for 30 calendar days after the redemption. The policy applies to all redemptions and investments that are part of an exchange transaction or transfer of assets, but does not apply to certain other transactions described below. The frequent trading policy will not apply to redemptions by shareholders whose shares are held in an account maintained by a Financial Intermediary in an omnibus environment unless and until such time that the Financial Intermediary has the ability to implement the policy or substantially similar protective measures. The Distributor will encourage Financial Intermediaries to adopt such procedures. Certain types of investments will not be blocked and certain types of redemptions will not trigger a subsequent purchase block, including: (1) systematic purchases and redemptions, such as
[SIDENOTE]
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.
purchases made through reinvestment of dividends or other distributions, or certain automatic or systematic investment, exchange or withdrawal plans (such as payroll deduction plans, and the Fund's Invest-A-Matic and Systematic Withdrawal Plans); (2) RETIREMENT AND BENEFIT PLAN contributions, loans and distributions; and (3) purchase transactions involving certain transfers of assets, rollovers, Roth IRA conversions and IRA re-characterizations; provided that the Financial Intermediary maintaining the account is able to identify the transaction in its records as one of these transactions.
MONITORING PROCEDURES. There are procedures in place to monitor the purchase, sale and exchange/transfer activity in Fund shares by investors and Financial Intermediaries that place orders on behalf of their clients. The procedures currently are designed to enable us to identify undesirable trading activity based on one or more of the following factors: the number of transactions, purpose, amounts involved, period of time involved, past transactional activity, our knowledge of current market activity, and trading activity in multiple accounts under common ownership, control or influence, among other factors. Other than as described above, Lord Abbett has not adopted a particular rule-set for identifying such excessive short-term trading activity, such as a specific number of transactions in Fund shares within a specified time period. However, as a general matter, Lord Abbett will treat any pattern of purchases and redemptions over a period of time as indicative of excessive short-term trading activity.
If, based on these monitoring procedures, we believe that an investor is engaging in, or has engaged in, excessive trading or activity indicative of market timing, and the account is not maintained by a Financial Intermediary in an omnibus environment or by a Retirement and Benefit Plan recordkeeper or other agent, we will generally notify the investor to cease all such activity in the account. If the investor fails to do so, we will place a block on all further purchases or exchanges of the Fund's shares in the
[SIDENOTE]
RETIREMENT AND BENEFIT PLANS include qualified and non-qualified retirement plans, deferred compensation plans and certain other employer sponsored retirement, savings or benefit plans, excluding Individual Retirement Accounts.
Lord Abbett offers a variety of retirement plans. Call 888-522-2388 for information about:
- Traditional, Rollover, Roth and Education IRAs
- Simple IRAs, SEP-IRAs, 401(k) and 403(b) accounts
- Defined Contribution Plans
investor's account and inform the investor to cease all such activity in the account. The investor then has the option of maintaining any existing investment in the Fund, exchanging Fund shares for shares of Lord Abbett U.S. Government & Government Sponsored Enterprises Money Market Fund, or redeeming the account. Investors electing to exchange or redeem Fund shares under these circumstances should consider that the transaction may be subject to a contingent deferred sales charge ("CDSC") or result in tax consequences. As stated above, although we generally notify the investor to cease all activity indicative of market timing prior to placing a block on further purchases or exchanges, we reserve the right to immediately place a block without prior notification.
While we attempt to apply the efforts described above uniformly in all cases to detect excessive trading and market timing practices, there can be no assurance that we will succeed in identifying all such practices or that some investors will not employ tactics that evade our detection. In addition, although the Distributor encourages Financial Intermediaries to adhere to our policies and procedures when placing orders for their clients through omnibus accounts maintained with the Fund and encourages recordkeepers and other agents for Retirement and Benefit Plans to adhere to such policies and procedures when placing orders on behalf of their plan participants, there can be no assurance that such entities will do so. Moreover, the Distributor's ability to monitor these trades and/or implement the procedures may be severely limited. These circumstances may result in policies and procedures in place at certain Financial Intermediaries and Retirement and Benefit Plans that are less effective at detecting and preventing excessive trading than the policies and procedures adopted by the Distributor and other such entities.
Omnibus account arrangements are a commonly used means for broker-dealers and other Financial Intermediaries, such as Retirement and Benefit Plan recordkeepers, to hold Fund shares on behalf of investors.
A substantial portion of a Fund's shares may be held through omnibus accounts and/or held by Retirement and Benefit Plans. When shares are held in this manner, (1) the Distributor may not have any or complete access to the underlying investor or plan participant account information, and/or (2) the Financial Intermediaries or Retirement and Benefit Plan recordkeepers may be unable to implement or support our procedures. In such cases, the Financial Intermediaries or recordkeepers may be able to implement procedures or supply the Distributor with information that differs from that normally used by the Distributor. In such instances, the Distributor will seek to monitor purchase and redemption activity through the overall omnibus account(s) or Retirement and Benefit Plan account(s).
If we identify activity that may be indicative of excessive short-term trading activity, we will notify the Financial Intermediary, recordkeeper or Retirement and Benefit Plan and request it to provide or review information on individual account transactions so that we or the Financial Intermediary, recordkeeper or Retirement and Benefit Plan may determine if any investors are engaged in excessive or short-term trading activity. If an investor is identified as engaging in undesirable trading activity, we will request that the Financial Intermediary, recordkeeper or Retirement and Benefit Plan take appropriate action to curtail the activity and will work with the relevant party to do so. Such action may include actions similar to those that the Distributor would take, such as placing blocks on accounts to prohibit future purchases and exchanges of Fund shares, or requiring that the investor place trades on a manual basis, either indefinitely or for a period of time. If we determine that the Financial Intermediary, recordkeeper or Retirement and Benefit Plan has not demonstrated adequately that it has taken appropriate action to curtail the excessive short-term trading, we may consider whether to terminate the relationship. The nature of these relationships also may inhibit or prevent the Distributor or the Fund from assuring the uniform assessment of
CDSCs on investors, even though Financial Intermediaries operating in omnibus environments or Retirement and Benefit Plan recordkeepers have agreed to assess the CDSCs or assist the Distributor or the Fund in assessing them.
SHARE CLASSES. You should read this section carefully to determine which class of shares is best for you and discuss your selection with your investment professional. You should make a decision only after considering various factors, including the expected effect of any applicable sales charges and the level of class expenses on your investment over time, the amount you wish to invest, and the length of time you plan to hold the investment. Class A shares are sold at the NAV per share, plus a front-end sales charge which may be reduced or eliminated for larger purchases as described below. Class B, C, and P shares are offered at the NAV per share with no front-end sales charge. Early redemptions of Class B and C shares, however, may be subject to a contingent deferred sales charge ("CDSC"). Class A shares normally have the lowest annual expenses while Class B and C shares have the highest annual expenses. Generally, Class A dividends will be higher than dividends of the other share classes. As a result, in many cases if you are investing $100,000 or more and plan to hold the shares for a long time, you may find Class A shares suitable for you because of the expected lower expenses and the reduced sales charges available. You should discuss purchase options with your investment professional.
FOR MORE INFORMATION ON SELECTING A SHARE CLASS, SEE "CLASSES OF SHARES" IN
THE STATEMENT OF ADDITIONAL INFORMATION.
CLASS A - normally offered with a front-end sales charge, which may be
reduced or eliminated in certain circumstances
- generally lowest annual expenses due to lower 12b-1 fees
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 due to higher 12b-1 fees
- 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 due to higher 12b-1 fees
CLASS P - available only to certain investors
- no front-end sales charge and no CDSC
- lower annual expenses than Class B or Class C shares due to lower
12b-1 fees
|
MAXIMUM
TO COMPUTE DEALER'S
AS A AS A OFFERING CONCESSION
% OF % OF PRICE (% OF
OFFERING YOUR DIVIDE OFFERING
YOUR INVESTMENT PRICE INVESTMENT NAV BY PRICE)
--------------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% .9425 5.00%
$50,000 to $99,999 4.75% 4.99% .9525 4.00%
$100,000 to $249,999 3.95% 4.11% .9605 3.25%
$250,000 to $499,999 2.75% 2.83% .9725 2.25%
$500,000 to $999,999 1.95% 1.99% .9805 1.75%
$1,000,000 and over No Sales
Charge 1.0000 +
|
+ See "Dealer Concessions on Class A Share Purchases Without a Front-End Sales Charge."
Note: The above percentages may vary for particular investors due to rounding.
[SIDENOTE]
PLEASE INFORM THE FUND OR YOUR FINANCIAL INTERMEDIARY AT THE TIME OF YOUR PURCHASE OF FUND SHARES IF YOU BELIEVE YOU QUALIFY FOR A REDUCED FRONT-END SALES CHARGE.
REDUCING YOUR CLASS A SHARE FRONT-END SALES CHARGES. As indicated in the above chart, you may purchase Class A shares at a discount if you qualify under the circumstances outlined below. To receive a reduced front-end sales charge, you must let the Fund or your Financial Intermediary know at the time of your purchase of Fund shares that you believe you qualify for a discount. If you or a related party have holdings of ELIGIBLE FUNDS in other accounts with your Financial Intermediary or with other Financial Intermediaries that may be combined with your current purchases in determining the sales charge as described below, you must let the Fund or your Financial Intermediary know. You may be asked to provide supporting account statements or other information to allow us or your Financial Intermediary to verify your eligibility for a discount. If you or your Financial Intermediary do not notify the Fund or provide the requested information, you may not receive the reduced sales charge for which you otherwise qualify. Class A shares may be purchased at a discount if you qualify under either of the following conditions:
- RIGHTS OF ACCUMULATION - A Purchaser may combine the value at the current public offering price of Class A, B, C, and P shares of any Eligible Fund already owned with a new purchase of Class A shares of any Eligible Fund in order to reduce the sales charge on the new purchase.
- LETTER OF INTENTION - A Purchaser may combine purchases of Class A, B, C, and P shares of any Eligible Fund the Purchaser intends to make over a 13-month period in determining the applicable sales charge. Current holdings under Rights of Accumulation may be included in a Letter of Intention. Shares purchased through reinvestment of dividends or distributions are not included. A Letter of Intention may be backdated up to 90 days.
The term "Purchaser" includes: (1) an individual; (2) an individual, his or her spouse, and children under the age of 21; (3) a Retirement and Benefit Plan including a 401(k) plan, profit-sharing plan, money purchase plan, defined benefit plan, SIMPLE IRA plan, SEP IRA plan, and 457(b) plan sponsored by a governmental entity, non-profit organization, school district or church to which employer contributions are made; or (4) a trustee
[SIDENOTE]
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 fund is not offered for sale; (2) Lord Abbett
Series Fund, Inc.; (3) Lord Abbett U.S. Government & Government Sponsored
Enterprises 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 as
to certain omnibus account and other criteria.
or other fiduciary purchasing shares for a single trust, estate or single
fiduciary account. An individual may include under item (1) his or her
holdings in Eligible Funds as described above in Individual Retirement
Accounts ("IRAs"), as a sole participant of a Retirement and Benefit Plan
sponsored by the individual's business, and as a participant in a 403(b)
plan to which only pre-tax salary deferrals are made. An individual and his
or her spouse may include under item (2) their holdings in IRAs, and as the
sole participants in Retirement and Benefit Plans sponsored by a business
owned by either or both of them. A Retirement and Benefit Plan under item
(3) includes all qualified Retirement and Benefit Plans of a single
employer and its consolidated subsidiaries, and all qualified Retirement
and Benefit Plans of multiple employers registered in the name of a single
bank trustee. A Purchaser may include holdings of Class A, B, C, and P
shares of Eligible Funds as described above in accounts with Financial
Intermediaries for purposes of calculating the front-end sales charges.
FOR MORE INFORMATION ON ELIGIBILITY FOR THESE PRIVILEGES, READ THE APPLICABLE SECTIONS IN THE APPLICATION AND THE STATEMENT OF ADDITIONAL INFORMATION. THIS INFORMATION ALSO IS AVAILABLE UNDER "LORD ABBETT FUNDS" AT www.LordAbbett.com OR BY CALLING LORD ABBETT AT 800-821-5129 (AT NO CHARGE.)
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 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 (including so-called "mutual fund wrap account programs"), 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 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 a broker-dealer for clients that participate in an arrangement with the broker-dealer under which the client pays the broker-dealer a fee based on the total asset value of the client's account for all or a specified number of securities transactions, including purchases of mutual fund shares, in the account during a certain period.
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.
DEALER CONCESSIONS ON CLASS A SHARE PURCHASES WITHOUT A FRONT-END SALES CHARGE. Except as otherwise set forth in the following paragraphs, Lord Abbett Distributor may pay dealers distribution-related compensation (i.e. concessions) according to the Schedule set forth below under the following circumstances:
- 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 in connection with multiple fund family recordkeeping platforms and have entered into special arrangements with the Fund and/or Lord Abbett Distributor specifically for such purchases ("Alliance Arrangements").
Dealers receive concessions described below on purchases made within a 12-month period beginning with the first NAV purchase of Class A shares for the account. The concession rate resets on each anniversary date of the initial NAV purchase, provided that the account continues to qualify for treatment at NAV. Current holdings of Class B, C, and P shares will be included for purposes of calculating the breakpoints in the Schedule below and the amount of the concessions payable with respect to the Class A shares investment. Concessions may not be paid 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, any CDSC that might otherwise have applied to any such purchase will be waived.
Financial Intermediaries should contact Lord Abbett Distributor for more complete information on the commission structure.
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%
|
* Class A shares purchased without a sales charge will be subject to a 1% CDSC if they are redeemed on or before the 12th 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.
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 one year 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 first anniversary after the month of their purchase (Class A) or before the first anniversary of their purchase (Class C)
CLASS A SHARE CDSC. If you buy Class A shares of 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 12th month (24th month if shares were purchased prior to November 1, 2004) after the month in which you initially purchased those shares, a CDSC of 1% will normally be collected.
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
- ELIGIBLE MANDATORY DISTRIBUTIONS under 403(b) Plans and individual retirement accounts
[SIDENOTE]
BENEFIT PAYMENT DOCUMENTATION. (Class A CDSC only) Requests for benefit payments of $50,000 or more must be in writing. Use the address indicated under "Opening your Account."
ELIGIBLE MANDATORY DISTRIBUTIONS. If Class A or 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 A or B share investment bears to the total investment.
CLASS B SHARE CDSC. The CDSC for Class B shares normally applies if you redeem your shares before the sixth anniversary of their initial purchase. The CDSC will be remitted to Lord Abbett Distributor. The CDSC declines the longer you own your shares, according to the following schedule:
ANNIVERSARY(1) OF CONTINGENT DEFERRED SALES
THE DAY ON WHICH CHARGE ON REDEMPTION
THE PURCHASE ORDER (AS % OF AMOUNT SUBJECT
WAS ACCEPTED TO CHARGE)
On Before
1st 5.0%
1st 2nd 4.0%
2nd 3rd 3.0%
3rd 4th 3.0%
4th 5th 2.0%
5th 6th 1.0%
on or after the 6th(2) None
|
(1) The anniversary is the same calendar day in each respective year after the
date of purchase. For example, the anniversary for shares purchased on May
1 will be May 1 of each succeeding year.
(2) Class B shares will automatically convert to Class A shares after the
eighth anniversary of your 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 (documentation may be required)
- 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.
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; (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; and (c) orders made by or on behalf of a Financial Intermediary for clients participating in an IRA Rollover program sponsored by the Financial Intermediary that operates the program in an omnibus recordkeeping environment and has entered into special arrangements with the Fund and/or Lord Abbett Distributor specifically for such orders.
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.
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% |
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 will not require payment of any otherwise applicable CDSC.
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
[SIDENOTE]
AUTHORIZED INSTITUTIONS are institutions and persons permitted by law to receive service and/or distribution fees under a Rule 12b-1 Plan. Lord Abbett Distributor is an Authorized Institution.
12b-1 FEES ARE PAYABLE REGARDLESS OF EXPENSES. The amounts payable by 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.
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.
REVENUE SHARING AND OTHER PAYMENTS TO DEALERS AND FINANCIAL INTERMEDIARIES. In addition to the various sales commissions and 12b-1 fees described above, Lord Abbett, Lord Abbett Distributor and the Fund may make other payments to dealers and other firms authorized to accept orders for Fund shares (collectively, "Dealers").
Lord Abbett or Lord Abbett Distributor makes payments to Dealers in its sole discretion, at its own expense and without cost to the Fund or the Fund's shareholders. The payments may be for:
- marketing and/or distribution support for Dealers;
- the Dealers' and their investment professionals' shareholder servicing efforts;
- training and education activities for the Dealers, their investment professionals and/or their clients or potential clients;
- sponsoring or otherwise bearing, in part or in whole, the costs for other meetings of Dealers' investment professionals and/or their clients or potential clients;
- the purchase of products or services from the Dealers, such as investment research, software tools or data for investment analysis purposes; and/or
- certain Dealers' costs associated with orders relating to Fund shares ("ticket charges").
Some of these payments may be referred to as revenue sharing payments. Most of these payments are intended to reimburse Dealers directly or indirectly for the costs that they or their investment professionals incur in connection with educational seminars and training efforts about the Lord Abbett Funds to enable the Dealers and their investment professionals to make recommendations and provide services that are suitable
and useful in meeting shareholder needs, as well as to maintain the necessary infrastructure to make the Lord Abbett Funds available to shareholders. The costs and expenses related to these efforts may include travel, lodging, entertainment and meals, among other things. In addition, Lord Abbett Distributor may, for specified periods of time, decide to forgo the portion of any front-end sales charges to which it normally is entitled and allow Dealers to retain the full sales charge for sales of Fund shares. In some instances, these temporary arrangements will be offered only to certain Dealers expected to sell significant amounts of Fund shares.
Lord Abbett or Lord Abbett Distributor, in its sole discretion, determines the amounts of payments to Dealers, with the exception of purchases of products or services and certain expense reimbursements. Lord Abbett and Lord Abbett Distributor consider many factors in determining the basis or amount of any additional payments to Dealers. The factors include the Dealer's sales, assets and redemption rates relating to Lord Abbett Funds, penetration of Lord Abbett Fund sales among investment professionals within the Dealer, and the potential to expand Lord Abbett's relationship with the Dealer. Lord Abbett and Lord Abbett Distributor also may take into account other business relationships Lord Abbett has with a Dealer, including other Lord Abbett financial products or advisory services sold by or provided to a Dealer or one or more of its affiliates. Based on its analysis of these factors, Lord Abbett groups Dealers into tiers, each of which is associated with a particular maximum amount of revenue sharing payments expressed as a percentage of assets of the Lord Abbett Funds attributable to that particular Dealer. The payments presently range from 0.02% to 0.1% of Lord Abbett Fund assets attributable to the Dealer and/or its investment professionals. These maximum payment limitations may not be inclusive of payments for certain items, such as training and education activities, other meetings, and the purchase of certain products and services from the Dealers. The Dealers within a particular tier may receive different amounts of revenue sharing or may not receive any. Lord Abbett or Lord Abbett Distributor may choose not to make payments in relation to certain of the Lord Abbett Funds or certain classes of
shares of any given Fund. In addition, Lord Abbett's formula for calculating revenue sharing payments may be different from the formulas that the Dealers use. Please refer to the Fund's Statement of Additional Information for additional information relating to revenue sharing payments.
Neither Lord Abbett nor Lord Abbett Distributor makes payments directly to a Dealer's investment professionals, but rather they are made solely to the Dealer itself (with the exception of expense reimbursements related to the attendance of a Dealer's investment professionals at training and education meetings and at other meetings involving the Lord Abbett Funds). The Dealers receiving additional payments include those that may recommend that their clients consider or select the Fund or other Lord Abbett Funds for investment purposes, including those that may include one or more of the Lord Abbett Funds on a "preferred" or "recommended" list of mutual funds. In some circumstances, the payments may create an incentive for a Dealer or its investment professionals to recommend or sell shares of Lord Abbett Funds to a client over shares of other funds. For more specific information about any additional payments, including revenue sharing, made to your Dealer, please contact your investment professional.
The Fund's portfolio transactions are not used as a form of sales-related compensation to Dealers that sell shares of the Lord Abbett Funds. Lord Abbett places the Fund's portfolio transactions with broker-dealer firms based on the firm's ability to provide the best net results from the transaction to the Fund. To the extent that Lord Abbett determines that a Dealer can provide the Fund with the best net results, Lord Abbett may place the Fund's portfolio transactions with the Dealer even though it sells or has sold shares of the Fund. In no event, however, does or will Lord Abbett give any consideration to a Dealer's sales in deciding which Dealer to choose to execute the Fund's portfolio transactions. Lord Abbett maintains policies and procedures designed to ensure that it places portfolio transactions based on the Fund's receipt of the best net results only. These policies and procedures also permit Lord Abbett to give consideration to proprietary investment research a Dealer may provide to Lord Abbett.
In addition to the payments from Lord Abbett or Lord Abbett Distributor
described above, from time to time, the Lord Abbett Funds may enter into
arrangements with and pay fees to Financial Intermediaries that provide
recordkeeping services to certain groups of investors in the Lord Abbett
Funds, including participants in Retirement and Benefit Plans, investors in
mutual fund advisory programs, investors in variable insurance products and
clients of Financial Intermediaries that operate in an omnibus environment
(collectively, "Investors"). The recordkeeping services typically include:
(a) establishing and maintaining Investor accounts and records; (b)
recording Investor account balances and changes thereto; (c) arranging for
the wiring of funds; (d) providing statements to Investors; (e) furnishing
proxy materials, periodic Lord Abbett Fund reports, prospectuses and other
communications to Investors as required; (f) transmitting Investor
transaction information; and (g) providing information in order to assist
the Lord Abbett Funds in their compliance with state securities laws. The
fees the Lord Abbett Funds pay: (1) are designed to be equal to or less
than the fees the Funds would pay to their transfer agent for similar
services; and (2) do not relate to distribution services. The Lord Abbett
Funds understand that, in accordance with guidance from the U.S. Department
of Labor, Retirement and Benefit Plans, sponsors of qualified retirement
plans and/or recordkeepers may be required to use the fees they (or, in the
case of recordkeepers, their affiliates) receive for the benefit of the
Retirement and Benefit Plans or the Investors. This may take the form of
recordkeepers passing the fees through to their clients or reducing the
clients' charges by the amount of fees the recordkeeper receives from
mutual funds.
The Lord Abbett Funds may also pay fees to broker-dealers for networking services. Networking services may include but are not limited to:
- establishing and maintaining individual accounts and records;
- providing client account statements; and
- providing 1099 forms and other tax statements.
The networking fees that the Lord Abbett Funds pay to broker-dealers normally result in reduced fees to the transfer agent, which would otherwise provide these services.
OPENING YOUR ACCOUNT
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT REQUIRED BY THE USA PATRIOT ACT. To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions, including the Fund, to obtain, verify, and record information that identifies each person who opens an account. What this means for you - when you open an account, we will ask for your name, address, date of birth, Social Security Number or similar number, and other information that will allow us to identify you. We will ask for similar information in the case of persons who will be signing on behalf of a legal entity that will own the account. We also may ask for copies of documents. If we are unable to obtain the required information within a short period of time after you try to open an account, we will return your Application. Your monies will not be invested until we have all required information. You also should know that we may verify your identity through the use of a database maintained by a third party or through other means. If we are unable to verify your identity, we may liquidate and close the account. This may result in adverse tax consequences. In addition, the Fund reserves the right to reject purchase orders accompanied by cash, cashier's checks, money orders, bank drafts, traveler's checks, and third party or double-endorsed checks, among others.
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 will be subject to review 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 VALUE OPPORTUNITIES FUND
P.O. Box 219336
Kansas City, MO 64121
PROPER FORM. An order submitted directly to the Fund must contain: (1) a completed application with all applicable requested information, 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.
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.
[SIDENOTE]
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 -
Robert A. Doe
Executor of the Estate of
John W. Doe
[Date]
[SEAL]
- In the case of a corporation - ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
[SEAL]
REDEMPTIONS IN KIND. The Fund has the right to pay redemption proceeds to you in whole or in part by a distribution of securities from the Fund's portfolio. It is not expected that the Fund would do so except in unusual circumstances. If the Fund pays your redemption proceeds by a distribution of securities, you could incur brokerage or other charges in converting the securities to cash.
DISTRIBUTIONS AND TAXES
The Fund expects to pay you dividends from its net investment income annually and expects to distribute any net capital gains 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 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 and distributes to you may be subject to a reduced tax rate if you meet holding period and certain other requirements. Distributions of net long-term capital gains are taxable to you as long-term capital gains. This tax treatment of distributions of net long-term capital gains 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 ($250 initial and
(Dollar-cost $50 subsequent minimum) into your Fund account by means of
averaging) automatic money transfers 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 PLAN Abbett-sponsored funds. Automatic cash withdrawals will be
("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."
================================================================================
38
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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.
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 Semiannual report to certain shareholders residing at the same "household." This reduces Fund expenses, which benefits you and other shareholders. If you need additional copies or do not want your mailings to be "householded," please call us at 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 219336, Kansas City, MO 64121.
ACCOUNT CHANGES. For any changes you need to make to your account, consult your investment professional or call the Fund at 800-821-5129.
SYSTEMATIC EXCHANGE. You or your investment professional can establish a schedule of exchanges between the same classes of any Eligible Fund.
[SIDENOTE]
TELEPHONE TRANSACTIONS. You have this privilege unless you refuse it in writing. For your security, telephone transaction requests are recorded. We will take measures to verify the identity of the caller, such as asking for your name, account number, social security or taxpayer identification number and other relevant information. The 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. As described under "Your Investment - Purchases," we reserve the right to modify, restrict, or reject any exchange request if the Fund or Lord Abbett Distributor determines it is in the best interest of the Fund and its shareholders. The Fund also may revoke the privilege for all shareholders upon 60 days' written notice.
TO OBTAIN INFORMATION: ADDITIONAL INFORMATION
BY TELEPHONE. For shareholder More information on the Fund is or will be available
account inquiries call the Fund free upon request, including the following:
at: 800-821-5129. For literature
requests call the Fund at: ANNUAL/SEMIANNUAL REPORT
800-874-3733.
The Fund's Annual and Semiannual Reports contain
BY MAIL. Write to the Fund at: more information about the Fund's investments and
The Lord Abbett Family of Funds performance. The Annual Report also includes details
90 Hudson Street about the market conditions and investment
Jersey City, NJ 07302-3973 strategies that had a significant effect on the
Fund's performance during the last fiscal year. The
VIA THE INTERNET. Reports are available, free of charge, at
LORD, ABBETT & CO. LLC www.LordAbbett.com, and through other means as
www.LordAbbett.com indicated on the left.
Text only versions of Fund STATEMENT OF ADDITIONAL INFORMATION ("SAI")
documents can be viewed online or
downloaded from the SEC: Provides more details about the Fund and its
www.sec.gov. policies. A current SAI is on file with the
Securities and Exchange Commission ("SEC") and is
You can also obtain copies by incorporated by reference (is legally considered
visiting the SEC's Public part of this prospectus). Although the SAI is not
Reference Room in Washington, DC available at www.LordAbbett.com, the SAI is
(phone 202-942-8090) or by available through other means, generally without
sending your request and a charge, indicated on the left.
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(R) LOGO]
Lord Abbett Mutual Fund shares
are distributed by:
LORD ABBETT DISTRIBUTOR LLC Lord Abbett Securities Trust LAVOF-1
90 Hudson Street Lord Abbett Value Opportunities Fund (12/05)
Jersey City, New Jersey 07302-3973
SEC FILE NUMBER: 811-07538
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[LORD ABBETT LOGO]
LORD ABBETT DECEMBER 20,
VALUE OPPORTUNITIES FUND 2005
PROSPECTUS
CLASS Y SHARES
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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.
TABLE OF CONTENTS
PAGE
THE FUND
What you should Goal 2
know about Principal Strategy 2
the Fund Main Risks 3
Performance 5
Fees and Expenses 5
Additional Investment Information 6
Management 9
YOUR INVESTMENT
Information for Purchases 11
managing Redemptions 20
your Fund Distributions and Taxes 21
account Services for Fund Investors 22
ADDITIONAL INFORMATION
How to learn more Back Cover
about the Fund and
other Lord Abbett
Funds
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THE FUND
GOAL
The Fund's investment objective is long term capital appreciation.
PRINCIPAL STRATEGY
To pursue this goal, the Fund normally invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities of small and mid-sized companies. Small and mid-sized companies are defined as companies having a market capitalization at the time of purchase that falls within the market capitalization range of companies in the Russell 2500(R) Index, a widely used benchmark for small and mid-sized stock performance. As of December 1, 2005, the market capitalization range of the Russell 2500(R) Index was $30.7 million to $11.2 billion. This range varies daily. The Fund may change this policy at any time. Equity securities in which the Fund may invest include common stocks, convertible bonds, convertible preferred stocks, warrants and similar instruments. Common stocks, the most familar type of equity security, represent an ownership interest in a company.
In selecting investments, the Fund attempts to invest in the securities of smaller, less well-known companies, and mid-sized companies selling at reasonable prices in relation to our assessment of their potential value. The Fund chooses stocks using:
- Quantitative research to identify stocks we believe represent the best bargains. As part of this process, we may look at the price of a company's stock in relation to the company's book value, its sales, the value of its assets, its earnings and cash flow.
- Fundamental research to evaluate a company's operating environment, resources and strategic plans and to assess its prospects for exceeding earnings expectations.
[SIDENOTE]
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.
We generally sell a stock when we think it is no longer undervalued, seems less likely to benefit from the current market and economic environment, shows deteriorating fundamentals, or falls short of our expectations.
This Fund is intended for investors who are willing to withstand the risk of short-term price fluctuations in exchange for attractive potential long-term returns.
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 and small and mid-sized company 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. The stocks of small and mid-sized companies may perform differently than the market as a whole and other types of stocks, such as large-company stocks and growth stocks.
The Fund has particular risks associated with value stocks. Different types of stocks 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.
Investing in small and mid-sized companies generally involves greater risks than investing in the stocks of large companies. Small and mid-sized companies may be less able to weather economic shifts or other adverse developments than larger, more established companies. They may have less experienced management and unproven track records. They may rely on limited product lines and have more limited financial resources. These factors may make them more susceptible to setbacks or
[SIDENOTE]
VALUE STOCKS are stocks of companies we believe the market undervalues according to certain financial measurements of their intrinsic worth or business prospects.
VALUE OPPORTUNITIES FUND
economic downturns. Mid-sized company stocks tend to have fewer shares outstanding and trade less frequently than the stocks of larger companies. In addition, there may be less liquidity in the prices of small and mid-sized company stocks, subjecting them to greater price fluctuations than larger company stocks. Investing in small companies generally involves some degree of information risk. That means that key information about an issuer, security or market may be inaccurate or unavailable.
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 in the Fund.
VALUE OPPORTUNITIES FUND
PERFORMANCE
The Fund does not show 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.
CLASS Y
SHAREHOLDER FEES (Fees paid directly from your investment)
Maximum Sales Charge on Purchases
(as a % of offering price) none
Maximum Deferred Sales Charge none
ANNUAL FUND OPERATING EXPENSES
(Expenses deducted from Fund assets) (as a % of average net assets)
Management Fees
(See "Management") 0.75%
Other Expenses(1) 0.43%
Total Operating Expenses 1.18%
Expense Reimbursement(2) 0.23%
Net Expenses(2) 0.95%
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(1) The other expenses are based upon estimated amounts.
(2) For the year ending October 31, 2006, Lord Abbett has contractually agreed to reimburse a portion of the Fund's expenses so that the Fund's net Annual Operating Expenses do not exceed an aggregate annual rate of 0.95% of average daily net assets for Class Y shares.
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. This example, like that in other funds' prospectuses, assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year, that dividends 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 would be:
SHARE CLASS 1 YEAR 3 YEARS Class Y Shares $ 97 $ 352 |
Your expenses would be the same if you did not redeem your shares.
[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.
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 United States. Ownership of ADRs entails similar investment risks to direct ownership of foreign securities traded outside the
United States, including increased market, liquidity, currency, political, information and other risks.
FOREIGN SECURITIES. The Fund may invest up to 10% of its net assets in foreign securities that are primarily traded outside the United States. This limitation does not include ADRs. Foreign securities may pose greater risks than domestic securities. Foreign markets and the securities traded in them may not be subject to the same degree of regulation as U.S. markets. As a result, there may be less information publicly available about foreign companies than most U.S. companies. Securities clearance, settlement procedures and trading practices may be different, and transaction costs may be higher in foreign countries. There may be less trading volume and liquidity in foreign markets, subjecting the securities traded in them to greater price fluctuations. Foreign investments also may be affected by changes in currency rates or currency controls.
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 net 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 net assets at the time an option is written.
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 a Fund from achieving its investment objective.
INFORMATION ON PORTFOLIO HOLDINGS. The Fund's Annual and Semiannual Reports, which are sent to shareholders and filed with the Securities and Exchange Commission ("SEC"), contain information about the Fund's portfolio holdings, including a complete schedule of holdings. The Fund also files its complete schedule of portfolio holdings
with the SEC on Form N-Q as of the end of its first and third fiscal quarters.
In addition, on or about the first day of the second month following each calendar quarter-end, the Fund makes publicly available a complete schedule of its portfolio holdings as of the last day of each such quarter. The Fund also may make publicly available Fund portfolio commentaries or fact sheets containing a discussion of select portfolio holdings and a list of up to the ten largest portfolio positions, among other things, and/or performance attribution information within thirty days following the end of each calendar quarter for which such information is made available. This information will remain available until the schedule, commentary, fact sheet or performance attribution information for the next quarter is publicly available. You may view this information for the most recently ended calendar quarter or month at www.LordAbbett.com or request a copy at no charge by calling Lord Abbett at 800-821-5129.
For more information on the Fund's policies and procedures with respect to the disclosure of its portfolio holdings and ongoing arrangements to make available such information on a selective basis to certain third parties, please see "Investment Policies - Policies and Procedures Governing the Disclosure of Portfolio Holdings" in the Statement of Additional Information.
MANAGEMENT
BOARD OF TRUSTEES. The Board oversees the management of the business and affairs of the Fund. The Board meets regularly to review the Fund's portfolio investments, performance, expenses, and operations. The Board appoints officers who are responsible for the day-to-day operations of the Fund and who execute policies authorized by the Board. More than 75 percent of the members of the Board are independent of Lord Abbett.
INVESTMENT ADVISER. 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 $98 billion in 53 mutual fund portfolios and other advisory accounts as of October 31, 2005.
Lord Abbett is entitled to an annual management fee based on the Fund's average daily net assets. The fees are calculated daily and payable monthly as follows:
.75 of 1% on the first 1 billion of average daily net assets,
.70 of 1% on the next 1 billion,
.65 of 1% on assets over 2 billion.
In addition, Lord Abbett provides certain administrative services to the Fund for a fee at the annual rate of .04 of 1% 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.
A discussion regarding the basis for the Board approving an investment advisory contract of the Fund will be available in the Fund's Semiannual report for the fiscal period ending April 30, 2006.
INVESTMENT MANAGERS. Lord Abbett uses a team of investment managers and analysts acting together to manage the Fund's investments. The Statement of Additional Information contains additional information about investment managers' compensation, other accounts managed by them and their ownership of Fund shares.
Steven R. McBoyle, Value Opportunities Fund Senior Investment Manager, heads the Fund's team and has primary responsibility for the day to day management of the Fund. Mr. McBoyle joined Lord Abbett in 2001, prior to that he served as Vice President, Mergers and Acquisitions, at Morgan Stanley; he holds an MBA from Columbia University, is a holder of a Chartered Accountant and Certified Public Accountant designation, and has been in the investment business since 1990.
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 certain identifying information required under applicable law. For more information see below. No sales charges apply.
We reserve the right to modify, restrict or reject any purchase order or exchange request if the Fund or LORD ABBETT DISTRIBUTOR LLC determines that it is in the best interest of the Fund and its shareholders. All purchase orders are subject to our acceptance.
PRICING OF SHARES. 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. Assuming they are in proper form, purchase and sale orders must be placed by the close of trading on the NYSE in order to receive that day's NAV; orders placed after the close of trading on the NYSE will receive the next day's NAV.
In calculating NAV, securities listed on any recognized U.S. or non-U.S. exchange (including NASDAQ) are valued at the market closing price on the exchange or system on which they are principally traded. Unlisted equity securities are valued at the last transaction price, or, if there were no transactions that day, at the mean between the most recently quoted bid and asked prices. Unlisted fixed income securities (other than those with remaining maturities of 60 days or less) are valued at prices supplied by independent pricing services, which prices reflect broker/dealer-supplied valuations and electronic data processing techniques, and reflect the mean between the bid and asked prices. Unlisted fixed income securities
[SIDENOTE]
LORD ABBETT DISTRIBUTOR LLC ("Lord Abbett Distributor" or "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.
having remaining maturities of 60 days or less are valued at their amortized cost.
Securities for which prices or market quotations are not available, do not accurately reflect fair value in Lord Abbett's opinion, or have been materially affected by events occurring after the close of the market on which the security is principally traded are valued under fair value procedures approved by the Fund's Board. These circumstances may arise, for instance, when trading in a security is suspended, the exchange on which a security is traded closes early, or demand for a security (as reflected by its trading volume) is insufficient calling into question the reliability of the quoted price, or the security is relatively illiquid. The Fund determines fair value in a manner that fairly reflects the market value of the security on the valuation date based on consideration of any information or factors it deems appropriate. These may include recent transactions in comparable securities, information relating to the specific security, developments in the markets and their performance, and current valuations of foreign or U.S. indices. The Fund's use of fair value pricing may cause the NAV of Fund shares to differ from the NAV that would be calculated using market quotations. Fair value pricing involves subjective judgments and it is possible that the fair value determined for a security may be materially different than the value that could be realized upon the sale of that security.
Certain securities that are traded primarily on foreign exchanges may trade on weekends or days when the NAV is not calculated. As a result, the value of securities may change on days when shareholders are not able to purchase or sell Fund shares.
EXCESSIVE TRADING AND MARKET TIMING. The Fund is designed for long-term investors and is not designed to serve as a vehicle for frequent trading in response to short-term swings in the market. Excessive, short-term or market timing trading practices may disrupt management of the Fund, raise its expenses, and harm long-term shareholders. Volatility resulting from excessive trading may cause the Fund difficulty in implementing
long-term investment strategies because it cannot anticipate the amount of cash it will have to invest. The Fund may be forced to sell portfolio securities at disadvantageous times to raise cash to allow for such excessive trading. This, in turn, could increase tax, administrative and other costs and adversely impact the Fund's performance.
To the extent the Fund invests in foreign securities, the Fund may be particularly susceptible to excessive trading because many foreign markets close hours before the Fund values its portfolio holdings. This may allow significant events, including broad market moves, to occur in the interim, potentially affecting the values of foreign securities held by the Fund. The time zone differences among foreign markets may allow a shareholder to exploit differences in the Fund's share prices that are based on closing prices of foreign securities determined before the Fund calculates its NAV per share (known as "time zone arbitrage"). To the extent the Fund invests in securities that are thinly traded or relatively illiquid, the Fund may be particularly susceptible to excessive trading because the current market price for such securities may not accurately reflect current market values. A shareholder may attempt to engage in short-term trading to take advantage of these pricing differences (known as "price arbitrage"). The Fund has adopted fair value procedures designed to adjust closing market prices of these types of securities to reflect what is believed to be their fair value at the time the Fund calculates its NAV per share. While there is no assurance, the Fund expects that the use of fair value pricing will reduce a shareholder's ability to engage in time zone arbitrage and price arbitrage to the detriment of other Fund shareholders. For more information about these procedures, see "Your Investment - Purchases - Pricing of Shares" above.
The Fund's Board has adopted additional policies and procedures that are designed to prevent or stop excessive short-term trading and market timing ("frequent
trading"). We also have longstanding procedures in place to monitor the purchase, sale and exchange activity in Fund shares by investors and FINANCIAL INTERMEDIARIES that place orders on behalf of their clients. The Fund may modify its frequent trading policy and monitoring procedures, which are described below, from time to time without notice as and when deemed appropriate to enhance protection of the Fund and its shareholders.
FREQUENT TRADING POLICY. Under the frequent trading policy, any Lord Abbett Fund shareholder redeeming Fund shares valued at $5,000 or more (other than shares of Lord Abbett U.S. Government & Government Sponsored Enterprises Money Market Fund) will be prohibited from investing in the Fund for 30 calendar days after the redemption. The policy applies to all redemptions and investments that are part of an exchange transaction or transfer of assets, but does not apply to certain other transactions described below. The frequent trading policy will not apply to redemptions by shareholders whose shares are held in an account maintained by a Financial Intermediary in an omnibus environment unless and until such time that the Financial Intermediary has the ability to implement the policy or substantially similar protective measures. The Distributor will encourage Financial Intermediaries to adopt such procedures. Certain types of investments will not be blocked and certain types of redemptions will not trigger a subsequent purchase block, including: (1) systematic purchases and redemptions, such as purchases made through reinvestment of dividends or other distributions, or certain automatic or systematic investment, exchange or withdrawal plans (such as payroll deduction plans, and the Fund's Invest-A-Matic and Systematic Withdrawal Plans); (2) RETIREMENT AND BENEFIT PLAN contributions, loans and distributions; and (3) purchase transactions involving certain transfers of assets, rollovers, Roth IRA conversions and IRA re-characterizations; provided that the Financial Intermediary maintaining the account is able to identify the transaction in its records as one of these transactions.
[SIDENOTE]
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.
RETIREMENT AND BENEFIT PLANS include qualified and non-qualified retirement plans, deferred compensation plans and certain other employer sponsored retirement, savings or benefit plans, excluding Individual Retirement Accounts.
Lord Abbett offers a variety of retirement plans. Call 888-522-2388 for information about:
- Traditional, Rollover, Roth and Education IRAs
- Simple IRAs, SEP-IRAs, 401(k) and 403(b) accounts
- Defined Contribution Plans
MONITORING PROCEDURES. There are procedures in place to monitor the purchase, sale and exchange/transfer activity in Fund shares by investors and Financial Intermediaries that place orders on behalf of their clients. The procedures currently are designed to enable us to identify undesirable trading activity based on one or more of the following factors: the number of transactions, purpose, amounts involved, period of time involved, past transactional activity, our knowledge of current market activity, and trading activity in multiple accounts under common ownership, control or influence, among other factors. Other than as described above, Lord Abbett has not adopted a particular rule-set for identifying such excessive short-term trading activity, such as a specific number of transactions in Fund shares within a specified time period. However, as a general matter, Lord Abbett will treat any pattern of purchases and redemptions over a period of time as indicative of excessive short-term trading activity.
If, based on these monitoring procedures, we believe that an investor is engaging in, or has engaged in, excessive trading or activity indicative of market timing, and the account is not maintained by a Financial Intermediary in an omnibus environment or by a Retirement and Benefit Plan recordkeeper or other agent, we will generally notify the investor to cease all such activity in the account. If the investor fails to do so, we will place a block on all further purchases or exchanges of the Fund's shares in the investor's account and inform the investor to cease all such activity in the account. The investor then has the option of maintaining any existing investment in the Fund, exchanging Fund shares for shares of Lord Abbett U.S. Government & Government Sponsored Enterprises Money Market Fund, or redeeming the account. Investors electing to exchange or redeem Fund shares under these circumstances should consider that the transaction may be subject to a contingent deferred sales charge ("CDSC") or result in tax consequences. As stated above, although we generally notify the investor to cease all activity
indicative of market timing prior to placing a block on further purchases or exchanges, we reserve the right to immediately place a block without prior notification.
While we attempt to apply the efforts described above uniformly in all cases to detect excessive trading and market timing practices, there can be no assurance that we will succeed in identifying all such practices or that some investors will not employ tactics that evade our detection. In addition, although the Distributor encourages Financial Intermediaries to adhere to our policies and procedures when placing orders for their clients through omnibus accounts maintained with the Fund and encourages recordkeepers and other agents for Retirement and Benefit Plans to adhere to such policies and procedures when placing orders on behalf of their plan participants, there can be no assurance that such entities will do so. Moreover, the Distributor's ability to monitor these trades and/or implement the procedures may be severely limited. These circumstances may result in policies and procedures in place at certain Financial Intermediaries and Retirement and Benefit Plans that are less effective at detecting and preventing excessive trading than the policies and procedures adopted by the Distributor and other such entities.
Omnibus account arrangements are a commonly used means for broker-dealers and other Financial Intermediaries, such as Retirement and Benefit Plan recordkeepers, to hold Fund shares on behalf of investors. A substantial portion of a Fund's shares may be held through omnibus accounts and/or held by Retirement and Benefit Plans. When shares are held in this manner, (1) the Distributor may not have any or complete access to the underlying investor or plan participant account information, and/or (2) the Financial Intermediaries or Retirement and Benefit Plan recordkeepers may be unable to implement or support our procedures. In such cases, the Financial Intermediaries or recordkeepers may be able to implement procedures or supply the Distributor with information that differs from that
normally used by the Distributor. In such instances, the Distributor will seek to monitor purchase and redemption activity through the overall omnibus account(s) or Retirement and Benefit Plan account(s).
If we identify activity that may be indicative of excessive short-term trading activity, we will notify the Financial Intermediary, recordkeeper or Retirement and Benefit Plan and request it to provide or review information on individual account transactions so that we or the Financial Intermediary, recordkeeper or Retirement and Benefit Plan may determine if any investors are engaged in excessive or short-term trading activity. If an investor is identified as engaging in undesirable trading activity, we will request that the Financial Intermediary, recordkeeper or Retirement and Benefit Plan take appropriate action to curtail the activity and will work with the relevant party to do so. Such action may include actions similar to those that the Distributor would take, such as placing blocks on accounts to prohibit future purchases and exchanges of Fund shares, or requiring that the investor place trades on a manual basis, either indefinitely or for a period of time. If we determine that the Financial Intermediary, recordkeeper or Retirement and Benefit Plan has not demonstrated adequately that it has taken appropriate action to curtail the excessive short-term trading, we may consider whether to terminate the relationship.
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 ("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 219366, Kansas City, Missouri 64121). The minimum initial investment is $1 million, except for (1) certain purchases through Financial Intermediaries that charge a fee for services that include investment advisory or management services, and (2) purchases by Plans meeting the eligibility requirements described in the preceding paragraph, which have no minimum. This offering may be suspended, changed or withdrawn by Lord Abbett Distributor, which reserves the right to reject any order.
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT REQUIRED BY THE USA PATRIOT ACT. To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions including the Fund to obtain, verify, and record information that identifies each person or entity that opens an account. What this means for you - when you open an account, we will require your name, address, date and place of organization or date of birth, Taxpayer Identification Number or Social Security Number, and we may ask for other information that will allow us to identify you. We also will ask for this information in the case of persons who will be signing on behalf of certain entities that will own the account. We
may ask for copies of documents. If we are unable to obtain the required information within a short period of time after you try to open an account, we will return your purchase order or account application. Your monies will not be invested until we have all required information. You also should know that we will verify your identity through the use of a database maintained by a third party or through other means. If we are unable to verify your identity, we may liquidate and close the account. This may result in adverse tax consequences. In addition, the Fund reserves the right to reject purchase orders or account applications accompanied by cash, cashier's checks, money orders, bank drafts, traveler's checks, and third party or double-endorsed checks, among others.
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 888-666-0022, Institutional Trade Dept., to set up your account and to arrange a wire transaction. Wire to: UMB, N.A., Kansas City, Routing number - 101000695, bank account number: 987800033-3, FBO: (account name) and (your Lord Abbett account number). Specify the complete name of the Fund, note Class Y shares and include your new account number and your name. To add to an existing account, wire to: UMB, N.A., Kansas City, routing number - 101000695, bank account number: 987800033-3, FBO: (account name) and (your Lord 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.
[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.
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 888-666-0022, Institutional Trading Dept. (minimum wire: $1,000). Your wire redemption request must be received by the Fund before the close of the NYSE for money to be wired on the next business day.
REDEMPTIONS IN KIND. The Fund has the right to pay redemption proceeds to you in whole or in part by a distribution of securities from the Fund's portfolio. It is not expected that the Fund would do so except in unusual circumstances. If the Fund pays your redemption proceeds by a distribution of securities, you could incur brokerage or other charges in converting the securities to cash.
DISTRIBUTIONS AND TAXES
The Fund expects to pay you dividends from its net investment income annually and expects to distribute any net capital gains 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.
[SIDENOTE]
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]
[SEAL]
- In the case of a corporation -
ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
[SEAL]
Distributions of investment income and short-term capital gains are taxable to you as ordinary income; however, certain qualified dividends that the Fund receives and distributes to you may be subject to a reduced tax rate if you meet the holding period and certain other requirements. Distributions of net long-term capital gains are taxable to you as long-term capital gains. This tax treatment of distributions of net long-term capital gains 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
[SIDENOTE]
EXCHANGE LIMITATIONS. As described under "Your Investment - Purchases," we reserve the right to modify, restrict or reject any exchange request if the Fund or Lord Abbett Distributor determines it is in the best interest of the Fund and its shareholders. The Fund also may revoke the privilege for all shareholders upon 60 days' written notice.
ELIGIBLE FUND. An Eligible Fund is any Lord Abbett-sponsored fund offering Class Y shares.
material, annual report and semiannual report to certain shareholders residing at the same "household." This reduces Fund expenses, which benefits you and other shareholders. If you need additional copies or do not want your mailings to be "householded," please call us at 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 219366, 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.
REVENUE SHARING AND OTHER PAYMENTS TO DEALERS AND FINANCIAL INTERMEDIARIES. Lord Abbett, Lord Abbett Distributor and the Fund may make other payments to dealers and other firms authorized to accept orders for Fund shares (collectively, "Dealers").
Lord Abbett or Lord Abbett Distributor make payments to Dealers in its sole discretion, at its own expense and without cost to the Fund or the Fund's shareholders. The payments may be for:
- marketing and/or distribution support for Dealers;
- the Dealers' and their investment professionals' shareholder servicing efforts;
- training and education activities for the Dealers, their investment professionals and/or their clients or potential clients;
- sponsoring or otherwise bearing, in part or in whole, the costs for other meetings of Dealers' investment professionals and/or their clients or potential clients;
- the purchase of products or services from the Dealers, such as investment research software tools or data for investment analysis purposes; and/or
- certain Dealers' costs associated with orders relating to Fund shares ("ticket charges").
Some of these payments may be referred to as revenue sharing payments. Most of these payments are intended to reimburse Dealers directly or indirectly for the costs
that they or their investment professionals incur in connection with educational seminars and training efforts about the Lord Abbett Funds to enable the Dealers and their investment professionals to make recommendations and provide services that are suitable and useful in meeting shareholder needs, as well as to maintain the necessary infrastructure to make the Lord Abbett Funds available to shareholders. The costs and expenses related to these efforts may include travel, lodging, entertainment and meals, among other things. In addition, Lord Abbett Distributor may, for specified periods of time, decide to forgo the portion of any front-end sales charges to which it normally is entitled and allow Dealers to retain the full sales charge for sales of Fund shares. In some instances, these temporary arrangements will be offered only to certain Dealers expected to sell significant amounts of Fund shares.
Lord Abbett or Lord Abbett Distributor, in its sole discretion, determines the amounts of payments to Dealers, with the exception of purchases of products or services and certain expense reimbursements. Lord Abbett and Lord Abbett Distributor consider many factors in determining the basis or amount of any additional payments to Dealers. The factors include the Dealer's sales, assets and redemption rates relating to Lord Abbett Funds, penetration of Lord Abbett Fund sales among investment professionals within the Dealer, and the potential to expand Lord Abbett's relationship with the Dealer. Lord Abbett and Lord Abbett Distributor also may take into account other business relationships Lord Abbett has with a Dealer, including other Lord Abbett financial products or advisory services sold by or provided to a Dealer or one or more of its affiliates. Based on its analysis of these factors, Lord Abbett groups Dealers into tiers, each of which is associated with a particular maximum amount of revenue sharing payments expressed as a percentage of assets of the Lord Abbett Funds attributable to that particular Dealer. The payments presently range from 0.02% to 0.1% of Lord Abbett Fund assets attributable to the Dealer and/or its
investment professionals. These maximum payment limitations may not be inclusive of payments for certain items, such as training and education activities, other meetings, and the purchase of certain products and services from the Dealers. The Dealers within a particular tier may receive different amounts of revenue sharing or may not receive any. Lord Abbett or Lord Abbett Distributor may choose not to make payments in relation to certain of the Lord Abbett Funds or certain classes of shares of any given Fund. In addition, Lord Abbett's formula for calculating revenue sharing payments may be different from the formulas that the Dealers use. Please refer to the Fund's Statement of Additional Information for additional information relating to revenue sharing payments.
Neither Lord Abbett nor Lord Abbett Distributor make payments directly to a Dealer's investment professionals, but rather they are made solely to the Dealer itself (with the exception of expense reimbursements related to the attendance of a Dealer's investment professionals at training and education meetings and at other meetings involving the Lord Abbett Funds). The Dealers receiving additional payments include those that may recommend that their clients consider or select the Fund or other Lord Abbett Funds for investment purposes, including those that may include one or more of the Lord Abbett Funds on a "preferred" or "recommended" list of mutual funds. In some circumstances, the payments may create an incentive for a Dealer or its investment professionals to recommend or sell shares of Lord Abbett Funds to a client over shares of other funds. For more specific information about any additional payments, including revenue sharing, made to your Dealer, please contact your investment professional.
The Fund's portfolio transactions are not used as a form of sales-related compensation to Dealers that sell shares of the Lord Abbett Funds. Lord Abbett places the Fund's portfolio transactions with broker-dealer firms based on the firm's ability to provide the best net results from the
transaction to the Fund. To the extent that Lord Abbett determines that a Dealer can provide the Fund with the best net results, Lord Abbett may place the Fund's portfolio transactions with the Dealer even though it sells or has sold shares of the Fund. In no event, however, does or will Lord Abbett give any consideration to a Dealer's sales in deciding which Dealer to choose to execute the Fund's portfolio transactions. Lord Abbett maintains policies and procedures designed to ensure that it places portfolio transactions based on the Fund's receipt of the best net results only. These policies and procedures also permit Lord Abbett to give consideration to proprietary investment research a Dealer may provide to Lord Abbett.
In addition to the payments from Lord Abbett or Lord Abbett Distributor
described above, from time to time, the Lord Abbett Funds may enter into
arrangements with and pay fees to Financial Intermediaries that provide
recordkeeping services to certain groups of investors in the Lord Abbett
Funds, including participants in Retirement and Benefit Plans, investors in
mutual fund advisory programs, investors in variable insurance products and
clients of Financial Intermediaries that operate in an omnibus environment
(collectively, "Investors"). The recordkeeping services typically include:
(a) establishing and maintaining Investor accounts and records; (b)
recording Investor account balances and changes thereto; (c) arranging for
the wiring of funds; (d) providing statements to Investors; (e) furnishing
proxy materials, periodic Lord Abbett Fund reports, prospectuses and other
communications to Investors as required; (f) transmitting Investor
transaction information; and (g) providing information in order to assist
the Lord Abbett Funds in their compliance with state securities laws. The
fees the Lord Abbett Funds pay: (1) are designed to be equal to or less
than the fees the Funds would pay to their transfer agent for similar
services; and (2) do not relate to distribution services. The Lord Abbett
Funds understand that, in accordance with guidance from the U.S. Department
of Labor, Retirement and Benefit Plans, sponsors of qualified
retirement plans and/or recordkeepers may be required to use the fees they (or, in the case of recordkeepers, their affiliates) receive for the benefit of the Retirement and Benefit Plans or the Investors. This may take the form of recordkeepers passing the fees through to their clients or reducing the clients' charges by the amount of fees the recordkeeper receives from mutual funds.
The Lord Abbett Funds may also pay fees to broker-dealers for networking services. Networking services may include but are not limited to:
- establishing and maintaining individual accounts and records;
- providing client account statements; and
- providing 1099 forms and other tax statements.
The networking fees that the Lord Abbett Funds pay to broker-dealers normally result in reduced fees to the transfer agent, which would otherwise provide these services.
TO OBTAIN INFORMATION: ADDITIONAL INFORMATION
BY TELEPHONE. For shareholder More information on the Fund is or will be available free upon request,
account inquiries call the Fund including the following:
at: 800-821-5129. For literature
requests call the Fund at: ANNUAL/SEMIANNUAL REPORT
800-874-3733.
The Fund's Annual and Semiannual Reports contain more information about the
BY MAIL. Write to the Fund at: Fund's investments and performance. The Annual Report also includes details
The Lord Abbett Family of Funds about the market conditions and investment strategies that had a
90 Hudson Street significant effect on the Fund's performance during the last fiscal year.
Jersey City, NJ 07302-3973 The Reports are available, free of charge, at www.LordAbbett.com, and
through other means as indicated on the left.
VIA THE INTERNET.
LORD, ABBETT & CO. LLC STATEMENT OF ADDITIONAL INFORMATION ("SAI")
www.LordAbbett.com
Provides more details about the Fund and its policies. A current SAI is on
Text only versions of Fund documents can be viewed file with the Securities and Exchange Commission ("SEC") and is
online or downloaded from the SEC: www.sec.gov. incorporated by reference (is legally considered part of this prospectus).
Although the SAI is not available at www.LordAbbett.com, the SAI is
You can also obtain copies by visiting the SEC's available through other means, generally without charge, indicated on the
Public Reference Room in Washington, DC (phone left.
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(R) LOGO]
Lord Abbett Mutual Fund shares
are distributed by:
LORD ABBETT DISTRIBUTOR LLC Lord Abbett Securities Trust LASTF-Y-1
90 Hudson Street Lord Abbett Value Opportunities Fund (12/05)
Jersey City, New Jersey 07302-3973
SEC FILE NUMBERS: 811-07538
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LORD ABBETT
STATEMENT OF ADDITIONAL INFORMATION DECEMBER 20, 2005
LORD ABBETT SECURITIES TRUST
LORD ABBETT VALUE OPPORTUNITIES FUND
(CLASS A, B, C, AND 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 Value Opportunities Fund (the "Fund") dated December 20, 2005.
Shareholder account inquiries should be made by directly contacting the Fund or by calling 800-821-5129. The Annual Report to Shareholders contains additional performance information and will be available without charge, upon request by calling 800-874-3733. 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 10
4. Control Persons and Principal Holders of Securities 16
5. Investment Advisory and Other Services 16
6. Brokerage Allocations and Other Practices 19
7. Classes of Shares 20
8. Purchases, Redemptions, Pricing, and Payments to Dealers 25
9. Taxation of the Fund 28
10. Underwriter 30
11. Performance 31
12. Financial Statements 32
Appendix A. Fund Portfolio Information Recipients 33
Appendix B. Proxy Voting Policies and Procedures 38
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1.
FUND HISTORY
Lord Abbett Securities Trust (the "Trust") is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (the "Act"). The Trust was organized as a Delaware business trust on February 26, 1993, with an unlimited amount of shares of beneficial interest authorized. The Trust has eight funds or series, but only one is described in this SAI. The Fund consists of five classes of shares: Class A, Class B, Class C, Class P and Class Y. Class Y is described in a separate SAI.
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, except in the case of the first restriction with which the Fund must comply on a continuous basis.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. In addition to the investment objective of the Fund, 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 (the "Board") 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 ("Rule 144A"), determined by Lord Abbett to be liquid, subject to the oversight of the Board;
(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 a Fund's 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 Stock Exchange ("NYSE") 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 SAI, 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.
Compliance with these investment restrictions will be determined at the time of the purchase or sale of the security.
PORTFOLIO TURNOVER RATE. Not applicable as the Fund has not completed its first year as of the date thereof.
ADDITIONAL INFORMATION ON PORTFOLIO RISKS, INVESTMENTS AND TECHNIQUES. The following 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 a 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. Generally, convertible securities offer lower interest or dividend yields than non-convertible securities of similar quality and less potential for gains or capital appreciation in a rising stock market than equity securities. They tend to be more volatile than other fixed income securities, and the markets for convertible securities may be less liquid than markets for common stocks or bonds. Convertible securities have both equity and fixed income risk characteristics. Like all fixed income securities, the value of convertible securities is susceptible to the risk of market losses attributable to changes in interest rates. The market value of convertible securities tends to decline as interest rates increase. If, however, the market price of the common stock underlying a convertible security approaches or exceeds the conversion price of the convertible security, the convertible security tends to reflect the market price of the underlying common stock. In such a case, a convertible security may lose much of its value if the value of the underlying common stock then falls below the conversion price of the security. As the market price of the underlying common stock declines, the convertible security tends to trade increasingly based on its fixed income characteristics, and thus, may not necessarily decline in price as much as the underlying common stock.
DEBT SECURITIES. Consistent with its respective investment objectives, 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 United States, including increased market, liquidity, currency, political, information and other risks. ADRs are not considered to be foreign securities for purposes of the Fund's limitation on investments in foreign securities.
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 transactions. 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 Lord Abbett 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 hedge 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-hedge, 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 in foreign securities in accordance with its investment objectives and policies. Foreign securities may involve special risks that are not typically associated with U.S. dollar denominated or quoted securities of U.S. issuers, including the following:
- Foreign securities may be affected by changes in currency rates, changes
in foreign or U.S. laws or restrictions applicable to foreign securities
and changes in exchange control regulations (i.e., currency blockage). A
decline in the exchange rate of the foreign currency in which a
portfolio security is quoted or denominated relative to the U.S. dollar
would reduce the value of the portfolio security in U.S. dollars.
- Brokerage commissions, custodial services, and other costs relating to
investment in foreign securities markets generally are more expensive
than in the U.S.
- Clearance and settlement procedures may be different in foreign countries
and, in certain markets, such procedures may be unable to keep pace with
the volume of securities transactions, thus making it difficult to
conduct such transactions.
- Foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards comparable to those applicable to U.S.
issuers. There may be less publicly available information about a
foreign issuer than about a comparable U.S. issuer.
- There is generally less government regulation of foreign markets,
companies and securities dealers than in the U.S.
- Foreign securities markets may have substantially less volume than U.S.
securities markets, and securities of many foreign issuers are less
liquid and more volatile than securities of comparable domestic issuers.
- Foreign securities may trade on days when a Fund does not sell shares. As
a result, the value of a Fund's portfolio securities may change on days
an investor may not be able to purchase or redeem Fund shares.
- With respect to certain foreign countries, there is a possibility of
nationalization, expropriation or confiscatory taxation, imposition of
withholding or other taxes on dividend or interest payments (or, in some
cases, capital gains), limitations on the removal of funds or other
assets of a Fund, and political or social instability or diplomatic
developments that could affect investments in those countries.
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 a Fund invests in foreign securities, currency exchange rates, or in order to pursue risk management strategies, including gaining efficient exposure to markets and minimizing transaction costs. The Fund may also enter into closing purchase and sale transactions with respect to such contracts and options. A Fund may not purchase or sell futures contracts, options on futures contracts or options on currencies traded on a CFTC-regulated exchange for non bona fide hedging purposes 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 a 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 a 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 a 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 a 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 a 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 have no current intention of doing so, the Fund 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 a Fund sells futures contracts, a decline in the market value of the portfolio will be offset by an increase in the value of the short futures position to the extent of the hedge (i.e., the size of the futures position). Conversely, when a Fund has cash available (for example, through substantial sales of shares) and wishes to invest the cash in anticipation of a rising market, the Fund could rapidly hedge against the expected market increase by buying futures contracts to offset the cash position and thus cushion the adverse effect of attempting to buy individual securities in a rising market.
Stock Index Futures Contracts are subject to the same risks as other futures contracts discussed above under "Futures Contracts and Options on Futures Contracts." To date, 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 ("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 a 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. These limitations include a prohibition on a Fund acquiring more than 3% of the voting shares of any other investment company, and a prohibition on any Fund investing more than 5% of a Fund's total assets in securities of any one investment company or more than 10% of its total assets in securities of all investment companies. A Fund indirectly will bear its proportionate share of any management fees and other expenses paid by the investment companies in which it invests. Such investment companies will generally be money market funds or have investment objectives, policies and restrictions substantially similar to those of the investing Fund and will be subject to substantially the same risks.
The Fund may, consistent with its investment policies, invest in investment companies established to accumulate and hold a portfolio of securities that is intended to track the price performance and dividend yield of a well-known securities index. A 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 in accordance with its investment objective and policies. 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, a 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 their obligation to deliver the underlying security. This may result in a short-term gain or loss. A closing purchase transaction is the purchase of a call option (at a cost which may be more or less than the premium received for writing the original call option) on the same security, with the same exercise price and call period as the option previously written. If a Fund is unable to enter into a closing purchase transaction, it may be required to hold a security that it might otherwise have sold to protect against depreciation.
A "put option" gives the purchaser of the option the right to sell, and obligates the writer to buy, the underlying securities at the exercise price at any time during the option period. A put option sold by a Fund is covered when, among other things, the Fund segregates permissible liquid assets having a value equal to or greater than the exercise price of the option to fulfill the obligation undertaken. Writing listed put options may be a useful portfolio investment strategy when the Fund has cash or other reserves available for investment as a result of sales of Fund shares or when the investment manager believes a more defensive and less fully invested position is desirable in light of market conditions. The Fund will not purchase an option if, as a result of such purchase, more than 10% of its net assets would be invested in premiums for such options. The Fund may write covered put options to the extent that cover for such options does not exceed 15% of the Fund's net assets. The Fund may only sell (write) covered call options with respect to securities having an aggregate market value of less than 25% of the Fund's 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 Lord Abbett is incorrect in its expectation of changes in market prices or determination of the correlation between the securities on which options are based and a Fund's portfolio securities, the Funds may incur losses. The use of options can also increase a 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 that is unrelated to the coupon rate or date of maturity of the purchased security. The Fund requires at all times that the repurchase agreement be collateralized by cash or by securities of the U.S. Government, its agencies, its instrumentalities, or U.S. Government sponsored enterprises ("U.S. Government Securities") having a value equal to, or in excess of, the value of the repurchase agreement (including accrued interest). Such agreements permit a 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, a Fund sells a security to a securities dealer or bank for cash and also agrees to repurchase the same security later at a set price. Reverse repurchase agreements expose the Fund to credit risk (that is, the risk that the counterparty will fail to resell the security to the Fund). This risk is greatly reduced because the Fund generally receives cash equal to 98% 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 the Fund's net assets.
SECURITIES LENDING. Although the Fund has no current intention of doing so, the Fund may lend portfolio securities to registered broker-dealers. These loans may not exceed 30% of a Fund's total assets. Securities loans will be collateralized by cash or marketable securities issued or guaranteed by the U.S. Government Securities or other permissible means at least equal to 102% of the market value of the domestic securities loaned and 105% in the case of foreign securities loaned. A Fund may pay a part of the interest received with respect to the investment of collateral to a borrower and/or a third party that is not affiliated with the Fund and is acting as a "placing broker." No fee will be paid to affiliated persons of a Fund.
By lending portfolio securities, a 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 a 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 temporarily invest a substantial amount, or even all, of its assets in various short-term fixed-income securities to take a defensive position. These securities include:
- U.S. Government Securities.
- 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.
U.S. GOVERNMENT SECURITIES. The Fund, in accordance with its investment objective and policies, may invest in obligations of the U.S. Government and its agencies and instrumentalities, including Treasury bills, notes, bonds and certificates of indebtedness, that are issued or guaranteed as to principal or interest by the U.S. Treasury or U.S. Government sponsored enterprises.
SECURITIES OF GOVERNMENT SPONSORED ENTERPRISES. The Fund may invest in securities issued or guaranteed by agencies or instrumentalities of the U.S. Government, such as the Government National Mortgage Association ("Ginnie Mae"), Federal National Mortgage Association ("Fannie Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac"), and Federal Home Loan Banks ("FHL Banks"). Ginnie Mae is authorized to guarantee, with the full faith and credit of the United States Government, the timely payment of principal and interest on securities issued by institutions approved by Ginnie Mae (such as savings and loan institutions, commercial banks and mortgage bankers) and backed by pools of mortgages insured or guaranteed by the Federal Housing Administration, the Department of Veterans Affairs, the Rural Housing Service, or the U.S. Department of Housing and Urban Development. Both Fannie Mae and Freddie Mac are federally chartered public corporations owned entirely by their shareholders; the FHL Banks are federally chartered corporations owned by their member financial institutions. Although Fannie Mae, Freddie Mac, and the FHL Banks guarantee the timely payment of interest and ultimate collection of principal with respect to the securities they issue, their securities are not backed by the full faith and credit of the United States Government.
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 a Fund's custodian in order to pay for the commitment. There is a risk that market yields available at settlement may be higher than yields obtained on the purchase date 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. A 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.
POLICIES AND PROCEDURES GOVERNING DISCLOSURE OF PORTFOLIO HOLDINGS. The Board has adopted policies and procedures with respect to the disclosure of the Fund's portfolio holdings and ongoing arrangements making available such information to the general public, as well as to certain third parties on a selective basis. Among other things, the policies and procedures are reasonably designed to ensure that the disclosure is in the best interests of Fund shareholders and to address potential conflicts of interest between the Fund on the one hand and Lord Abbett and its affiliates or affiliates of the Fund on the other hand. Except as noted in the three instances below, the Fund does not provide portfolio holdings to any third party until they are made available to the general public on Lord Abbett's website at www.LordAbbett.com or otherwise. The exceptions are as follows:
1. The Fund may provide its portfolio holdings to (a) third parties that render services to the Fund relating to such holdings (i.e., pricing vendors, ratings organizations, custodians, external administrators, independent public accounting firms, counsel, etc.), as appropriate to the service being provided to the Fund, on a daily, monthly, calendar quarterly or annual basis within 15 days following the end of the period, and (b) third party consultants on a monthly or calendar quarterly basis within 15 days following period-end for the sole purpose of performing their own analyses with respect to the Fund. The Fund may discuss or otherwise share portfolio holdings or related information with counterparties that execute transactions on behalf of the Fund;
2. The Fund may provide portfolio commentaries or fact sheets containing, among other things, a discussion of select portfolio holdings and a list of up to the ten largest portfolio positions, and/or portfolio performance attribution information as of the month-end within 15 days thereafter to certain Financial Intermediaries; and
3. The Fund may provide its portfolio holdings or related information in response to governmental requests or subpoenas or in similar circumstances.
Before providing schedules of its portfolio holdings to a third party in advance of making them available to the general public, the Fund obtains assurances through contractual obligations, certifications or other appropriate means such as due diligence sessions and other meetings to the effect that: (i) neither the receiving party nor any of its officers, employees or agents will be permitted to take any holding-specific investment action based on the portfolio holdings, and (ii) the receiving party will not use or disclose the information except as it relates to rendering services for the Fund related to portfolio holdings, to perform certain internal analyses in connection with its evaluation of the Fund and/or its investment strategies, or for similar purposes. In addition and also in the case of other portfolio related information, written materials will contain appropriate legends requiring that the information be kept confidential and restricting the use of the information. An executive officer of the Fund approves these arrangements subject to the Board's review and oversight, and Lord Abbett provides reports at least semiannually to the Board concerning them. The Board also reviews the Fund's policies and procedures governing these arrangements on an annual basis. These policies and procedures may be modified at any time with the approval of the Board.
Neither the Fund, Lord Abbett nor any other party receives any compensation or other consideration in connection with any arrangement described in this section, other than fees payable to a service provider rendering services to the Fund related to the Fund's portfolio holdings. For these purposes, compensation does not include normal and customary fees that Lord Abbett or an affiliate may receive as a result of investors making investments in the Fund. Neither the Fund, Lord Abbett nor any of their affiliates has entered into an agreement or other arrangement with any third party recipient of portfolio related information under which the third party would maintain assets in the Fund or in other investment companies or accounts managed by Lord Abbett or any of its affiliated persons.
Lord Abbett's Compliance Department periodically reviews and evaluates Lord Abbett's adherence to the above policies and procedures, including the existence of any conflicts of interest between the Funds on the one hand and Lord Abbett and its affiliates or affiliates of the Fund on the other hand. The Compliance Department reports to the Board at least annually regarding its assessment of compliance with these policies and procedures.
FUND PORTFOLIO INFORMATION RECIPIENTS. Attached as Appendix A is a list of the third parties that may receive portfolio holdings information under the circumstances described above.
3.
MANAGEMENT OF THE FUND
The Board 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. 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. Generally, each Trustee holds office until his/her successor is elected and qualified or until his/her earlier resignation or removal, as provided in the Trust's organizational documents.
Lord, Abbett & 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 53 portfolios or series.
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION
YEAR OF BIRTH WITH TRUST DURING PAST FIVE YEARS OTHER DIRECTORSHIPS
------------- ---------- ---------------------- -------------------
ROBERT S. DOW Trustee since 1993; Managing Partner and Chief N/A
Lord, Abbett & Co. LLC Chairman since 1996 Executive Officer of Lord Abbett
90 Hudson Street since 1996.
Jersey City, NJ 07302
(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 53 portfolios or series.
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION
YEAR OF BIRTH WITH TRUST DURING PAST FIVE YEARS OTHER DIRECTORSHIPS
------------- ---------- ---------------------- -------------------
E. THAYER BIGELOW Trustee since 1994 Managing General Partner, Bigelow Currently serves as
Lord, Abbett & Co. LLC Media, LLC (since 2000); Senior director of Adelphia
c/o Legal Dept. Adviser, Time Warner Inc. (1998 - Communications, Inc.,
90 Hudson Street 2000); Acting Chief Executive Crane Co., and Huttig
Jersey City, NJ 07302 Officer of Courtroom Television Building Products Inc.
(1941) Network (1997 - 1998); President
and Chief Executive Officer of Time
Warner Cable Programming, Inc.
(1991 - 1997).
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CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION
YEAR OF BIRTH WITH TRUST DURING PAST FIVE YEARS OTHER DIRECTORSHIPS
------------- ---------- ---------------------- -------------------
WILLIAM H.T. BUSH Trustee since 1998 Co-founder and Chairman of the Currently serves as
Lord, Abbett & Co. LLC Board of the financial advisory director of WellPoint,
c/o Legal Dept. firm of Bush-O'Donnell & Company Inc. (since 2002), and
90 Hudson Street (since 1986). Engineered Support
Jersey City, NJ 07302 Systems, Inc. (since
(1938) 2000).
ROBERT B. CALHOUN, JR. Trustee since 1998 Managing Director of Monitor Currently serves as
Lord, Abbett & Co. LLC Clipper Partners (since 1997) and director of Avondale,
c/o Legal Dept. President of Clipper Asset Inc. and Interstate
90 Hudson Street Management Corp. (since 1991), both Bakeries Corp.
Jersey City, NJ 07302 private equity investment funds.
(1942)
JULIE A. HILL Trustee since 2004 Owner and CEO of the Hillsdale Currently serves as
Lord, Abbett & Co. LLC Companies, a business consulting director of WellPoint,
c/o Legal Dept. firm (since 1998); Founder, Inc.; Resources
90 Hudson Street President and Owner of the Connection Inc.; and
Jersey City, NJ 07302 Hiram-Hill and Hillsdale Holcim (US) Inc. (a
(1946) Development Companies (1998 - subsidiary of Holcim
2000). Ltd.).
FRANKLIN W. HOBBS Trustee since 2001 Former Chief Executive Officer of Currently serves as
Lord, Abbett & Co. LLC Houlihan Lokey Howard & Zukin, an director of Adolph Coors
c/o Legal Dept. investment bank (January 2002 - Company.
90 Hudson Street April 2003); Chairman of Warburg
Jersey City, NJ 07302 Dillon Read (1999 - 2001); Global
(1947) 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 1993 Retired - General Business and Currently serves as
Lord, Abbett & Co. LLC Governance Consulting (since 1992); director of H.J. Baker
c/o Legal Dept. formerly President and CEO of (since 2003).
90 Hudson Street Nestle Foods.
Jersey City, NJ 07302
(1933)
THOMAS J. NEFF Trustee since 1993 Chairman of Spencer Stuart (U.S.), Currently serves as
Lord, Abbett & Co. LLC an executive search consulting firm director of Ace, Ltd.
c/o Legal Dept. (since 1996); President of Spencer (since 1997) and Hewitt
90 Hudson Street Stuart (1979-1996). Associates, Inc.
Jersey City, NJ 07302
(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, NJ 07302.
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
YEAR OF BIRTH WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS
------------- ---------- ------------------- ----------------------
ROBERT S. DOW Chief Executive Elected in 1993 Managing Partner and Chief Executive Officer
(1945) Officer and of Lord Abbett (since 1996).
President
SHOLOM DINSKY Executive Vice Elected in 2003 Partner and Large Cap Value Investment
(1944) President Manager, joined Lord Abbett in 2000.
LESLEY-JANE DIXON Vice President Elected in 1999 Partner and Investment Manager, joined Lord
(1964) Abbett in 1995.
ROBERT P. FETCH Executive Vice Elected in 1999 Partner and Small-Cap Value Senior
(1953) President Investment Manager, joined Lord Abbett in
1995.
KENNETH G. FULLER Executive Vice Elected in 2003 Investment Manager - Large Cap Value, joined
(1945) President Lord Abbett in 2002; formerly Portfolio
Manager and Senior Vice President at Pioneer
Investment Management, Inc.
ROBERT I. GERBER Executive Vice Elected in 2005 Partner and Director of Taxable Fixed Income
(1954) President Management, joined Lord Abbett in 1997.
HOWARD E. HANSEN Executive Vice Elected in 2003 Partner and Investment Manager, joined Lord
(1961) President Abbett in 1995.
GERARD S. E. HEFFERNAN, JR. Executive Vice Elected in 1999 Partner and Research Analyst, joined Lord
(1963 President Abbett in 1998.
TODD D. JACOBSON Executive Vice Elected in 2003 Investment Manager, International Core
(1966) President Equity, joined Lord Abbett in 2003;
formerly Director and Portfolio Manager at
Warburg Pincus Asset Management and Credit
Suisse Asset Management (2002 - 2003); prior
thereto Associate Portfolio Manager of Credit
Suisse Asset Management.
VINCENT J. MCBRIDE Executive Vice Elected in 2003 Senior Investment Manager, International
(1964) President Core Equity, joined Lord Abbett in 2003;
formerly Managing Director and Portfolio
Manager at Warburg Pincus Asset Management
and Credit Suisse Asset Management.
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NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
YEAR OF BIRTH WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS
------------- ---------- ------------------- ----------------------
STEVEN MCBOYLE Executive Vice Elected in 2005 Senior Research Analyst-Small Cap Value,
(1969) President joined Lord Abbett in 2001; formerly Vice
President, Mergers & Acquisition of Morgan
Stanley (2000-2001).
ROBERT G. MORRIS Executive Vice Elected in 1998 Partner and Chief Executive Officer of Lord
(1944) President Abbett; joined Lord Abbett in 1991.
ELI M. SALZMANN Executive Vice Elected in 2003 Partner and Director of Institutional Equity
(1964) President Investments, joined Lord Abbett in 1997.
HAROLD E. SHARON Executive Vice Elected in 2003 Investment Manager and Director,
(1960) President International Core Equity, joined Lord
Abbett in 2003; formerly Financial Industry
Consultant for Venture Capitalist (2001 -
2003); prior thereto Managing Director of
Warburg Pincus Asset Management and Credit
Suisse Asset Management.
CHRISTOPHER J. TOWLE Executive Vice Elected in 2005 Partner and Investment Manager, joined Lord
(1957) President Abbett in 1987.
YAREK ARANOWICZ Vice President Elected in 2004 Investment Manager, joined Lord Abbett in
(1963) 2003; formerly Vice President, Head of
Global Emerging Markets Funds of Warburg
Pincus Asset Management and Credit Suisse
Asset Management.
JAMES BERNAICHE Chief Compliance Elected in 2004 Chief Compliance Officer, joined Lord Abbett
(1956) Officer in 2001; formerly Chief Compliance Officer
with Credit Suisse Asset Management.
JOAN A. BINSTOCK Chief Financial Elected in 1999 Partner and Chief Operations Officer, joined
(1954) Officer and Vice Lord Abbett in 1999.
President
DAVID G. BUILDER Vice President Elected in 2001 Equity Analyst, joined Lord Abbett in 1998.
(1954)
JOHN K. FORST Vice President & Elected in 2005 Deputy General Counsel, joined Lord Abbett
(1960) Secretary in 2004; prior thereto Managing Director and
Associate General Counsel at New York Life
Investment Management LLC (2002-2003);
formerly Attorney at Dechert LLP (2000-2002).
LAWRENCE H. KAPLAN Vice President and Elected in 1997 Partner and General Counsel, joined Lord
(1957) Secretary Abbett in 1997.
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CHARLES P. MASSARE Vice President Elected 2005 Partner and Director of Quantitative
(1948) Research & Risk Management, joined Lord
Abbett in 1998.
A. EDWARD OBERHAUS, III Vice President Elected in 1993 Partner and Manager of Equity Trading,
(1959) joined Lord Abbett in 1983.
F. THOMAS O'HALLORAN Vice President Elected in 2003 Partner and Investment Manager, joined Lord
(1955) Abbett in 2001; formerly Executive
Director/Senior Research Analyst at Dillon
Read/UBS Warburg.
TODOR PETROV Vice President Elected in 2003 Investment Manager, joined Lord Abbett in
(1974) 2003; formerly Associate Portfolio Manager
of Credit Suisse Asset Management.
CHRISTINA T. SIMMONS Vice President and Elected in 2000 Assistant General Counsel, joined Lord
(1957) Assistant Secretary Abbett in 1999.
BERNARD J. GRZELAK Treasurer Elected in 2003 Director of Fund Administration, joined Lord
(1971) Abbett in 2003, formerly Vice President,
Lazard Asset Management LLC (2000-2003),
prior thereto Manager of Deloitte & Touche
LLP.
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COMMITTEES
The standing committees of the Board 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 and Ms. Hill. The Audit Committee provides assistance to the Board in fulfilling its responsibilities relating to accounting matters, the reporting practices of the Fund, and the quality and integrity of the Fund's financial reports. Among other things, the Audit Committee is responsible for reviewing and evaluating the performance and independence of the Fund's independent public accounting firm 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 shall (i) monitor the actions of Lord Abbett in voting securities owned by the Fund; (ii) evaluate the policies of Lord Abbett in voting securities; and (iii) meet with Lord Abbett to review the policies in voting securities, the sources of information used in determining how to vote on particular matters, and the procedures used to determine the votes in any situation where there may be a conflict of interest. During the past fiscal year, the Proxy Committee met six times.
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 four times. The Nominating and Governance Committee has adopted policies with respect to its consideration of any individual recommended by the Fund's shareholders to serve as an independent Trustee. A shareholder who would like to recommend a candidate may write to the Fund.
The Contracts Committee consists of all Trustees who are not "interested persons" of the Fund. The Contracts Committee conducts much of the factual inquiry undertaken by the trustees in connection with the Board's annual consideration of whether to renew the management and other contracts with Lord Abbett and Lord Abbett Distributor. Although the Contracts Committee did not hold any formal meeting during the last fiscal year, members of the Committee conducted inquiries into the portfolio
management approach and results of Lord Abbett, and reported the results of those inquiries to the Nominating and Governance Committee.
COMPENSATION DISCLOSURE
The following table summarizes the compensation for each of the directors/trustees of 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, 2004
OCTOBER 31, 2005 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 $ 7,358 $ 127,364
William H.T. Bush $ 7,478 $ 126,320
Robert B. Calhoun, Jr. $ 8,852 $ 127,000
Julie A. Hill $ 7,672 $ 111,417
Franklin W. Hobbs $ 7,944 $ 118,500
C. Alan MacDonald $ 7,838 $ 131,320
Thomas J. Neff $ 7,775 $ 117,000
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(1) Independent Trustees' fees, including attendance fees for board and committee meetings, are allocated among all Lord Abbett-sponsored funds based on the net assets of the fund. A portion of the fees payable by the Trust to its independent Trustees may be deferred at the option of a Trustee under an equity-based plan (the "equity-based plan") that deems the deferred amounts to be invested in shares of a Fund for later distribution to the Trustees. In addition, $25,000 of each Trustee's retainer must be deferred and is deemed invested in shares of the 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 $1,291, $1,983, $8,852, $3,828, $7,944, $1,291 and $7,775, 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, 2004, 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, 2004. The amounts shown include deferred compensation to the Trustees deemed invested in fund shares. The amounts ultimately received by the Trustees under the deferred compensation plan will be directly linked to the investment performance of the funds.
Dollar Range of Equity Securities in the Fund
AGGREGATE DOLLAR RANGE OF
VALUE OPPORTUNITIES EQUITY SECURITIES IN LORD
NAME OF TRUSTEE FUND ABBETT-SPONSORED FUNDS
--------------- ---- ----------------------
Robert S. Dow None Over $100,000
E. Thayer Bigelow None Over $100,000
William H. T. Bush None Over $100,000
Robert B. Calhoun, Jr. None Over $100,000
Julie A. Hill None $50,001-$100,000
Franklin W. Hobbs None Over $100,000
C. Alan MacDonald None Over $100,000
Thomas J. Neff 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 the Advisory Group.
PROXY VOTING
The Fund has delegated proxy voting responsibilities to the Fund's investment adviser, Lord Abbett, subject to the Proxy Committee's general oversight. Lord Abbett has adopted its own proxy voting policies and procedures for this purpose. A copy of Lord Abbett's proxy voting policies and procedures is attached as Appendix B.
In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the twelve months ending June 30th, no later than August 31st of each year. The first such filing is expected to be filed by August 31, 2006, for the period ending June 30, 2006.
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 anticipated that overtime this percentage of ownership will decrease.
5.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
As described under "Management" in the Prospectus, Lord Abbett is the Funds'
investment adviser. The following partners of Lord Abbett are also officers of
the Trust: Joan A. Binstock, John J. DiChiaro, Sholom Dinsky, Lesley-Jane Dixon,
Robert P. Fetch, Daniel H. Frascarelli, Robert I. Gerber, Howard E. Hansen,
Gerard S.E. Heffernan, Lawrence H. Kaplan, Charles P. Massare, Robert G. Morris,
A. Edward Oberhaus, III, F. Thomas O'Halloran, Eli M. Salzmann, and Christopher
J. Towle. Robert S. Dow is the managing partner of Lord Abbett and an officer
and Trustee of the Trust. The other partners of Lord Abbett are: Michael Brooks,
Zane E. Brown, Patrick Browne, Milton Ezrati, Kevin P. Ferguson, Daria L.
Foster, Robert I. Gerber, Michael S. Goldstein, Michael A. Grant, Charles Hofer,
W. Thomas Hudson, Cinda Hughes, Ellen G. Itskovitz, Richard Larsen, Jerald
Lanzotti, Robert A. Lee, Maren Lindstrom, Gregory M. Macosko, Thomas Malone,
Paul McNamara, Robert J. Noelke, R. Mark Pennington, Walter Prahl, Michael
Radziemski, Douglas B. Sieg, Richard Sieling, Michael T. Smith, Richard Smola,
Jarrod Sohosky, Diane Tornejal, Edward von der Linde, and Marion Zapolin. The
address of each partner is 90 Hudson Street, Jersey City, NJ 07302-3973.
Under the Management Agreement between Lord Abbett and the Fund, the Fund pays Lord Abbett a monthly fee, based on average daily net assets for each month. These fees are allocated among the classes based on the classes' proportionate share of such average daily net assets. The annual rate for the Value Opportunities Fund is 0.75% of 1% on 1st 1 billion, .70 of 1% on next 1 billion, and .65% of 1% on assets over 2 billion for Class A, B, C & P shares.
CONTRACTUAL WAIVERS
For the year ending October 31, 2006, Lord Abbett has contractually agreed to reimburse a portion of the Fund's expenses so that the Fund's Net Annual Operation Expenses do not exceed an aggregate annual rate of 1.30% of average daily net assets for Class A shares, 1.95% of average daily net assets for Class B and Class C shares, and 1.40% of average daily net assets for Class P shares.
INVESTMENT MANAGERS
As stated in the Prospectus, Lord Abbett uses a team of investment managers and analysts acting together to manage the investments of the Fund.
Steven R. McBoyle heads the team of the Value Opportunities Fund and is primarily responsible for the day-to-day management of the Fund.
The following table indicates for the Fund as of November 30, 2005: (1) the number of other accounts managed by each investment manager who is primarily responsible for the day-to-day management of the Fund within certain categories of investment vehicles; and (2) the total assets in such accounts managed within each category. For each of the categories a footnote to the table also provides the number of accounts and the total assets in the accounts with respect to which the management fee is based on the performance of the account. Included in the Registered Investment Companies or mutual funds category are those U.S. registered funds managed or sub-advised by Lord Abbett, including funds underlying variable annuity contracts and variable life insurance policies offered through insurance companies. The Other Pooled Investment Vehicles category includes collective investment funds, offshore funds and similar non-registered investment vehicles. Lord Abbett does not manage any hedge funds. The Other Accounts category encompasses Retirement and Benefit Plans (including both defined contribution and defined benefit plans) sponsored by various corporations and other entities, individually managed institutional accounts of various corporations, other entities and individuals, and separately managed accounts in so-called wrap fee programs sponsored by Financial Intermediaries unaffiliated with Lord Abbett. (The data shown below are approximate.)
OTHER ACCOUNTS MANAGED (# AND TOTAL ASSETS IN MILLIONS)*
--------------------------------------------------------
OTHER POOLED
REGISTERED INVESTMENT INVESTMENT
FUND NAME COMPANIES VEHICLES OTHER ACCOUNTS
---- ---- --------- -------- --------------
Value Opportunities
Fund Steven R. McBoyle 0 / $0 0 / $0 1 / $1,198,659
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* Included in the number of accounts and total assets are 0 accounts with respect to which the management fee is based on the performance of the account.
Conflicts of interest may arise in connection with the investment managers' management of the investments of the Fund and the investments of the other accounts included in the table above. Such conflicts may arise with respect to the allocation of investment opportunities among the Fund and other accounts with similar investment objectives and policies. An investment manager potentially could use information concerning the Fund's transactions to the advantage of other accounts and to the detriment of the Fund. To address these potential conflicts of interest, Lord Abbett has adopted and implemented a number of policies and procedures. Lord Abbett has adopted Policies and Procedures for Evaluating Best Execution of Equity Transactions, as well as Trading Practices/Best Execution Procedures. The objective of these policies and procedures is to ensure the fair and equitable treatment of transactions and allocation of investment opportunities on behalf of all accounts managed by Lord Abbett. In addition, Lord Abbett's Code of Ethics sets forth general principles for the conduct of employee personal securities transactions in a manner that avoids any actual or potential conflicts of interest with the interests of Lord Abbett's clients including the Fund. Moreover, Lord Abbett's Statement of Policy and Procedures on Receipt and Use of Inside Information sets forth procedures for personnel to follow when they have inside information. Lord Abbett is not affiliated with a full service broker-dealer and therefore does not execute any portfolio transactions through such an entity, a structure that could give rise to additional conflicts. Lord Abbett does not conduct any investment bank functions and does not manage any hedge funds. Lord Abbett does not believe that any material conflicts of interest exist in connection with the investment managers' management of the investments of the Fund and the investments of the other accounts referenced in the table above.
COMPENSATION OF INVESTMENT MANAGERS
Lord Abbett compensates its investment managers on the basis of salary, bonus and profit sharing plan contributions. The level of compensation takes into account the investment manager's experience, reputation and competitive market rates.
Fiscal year-end bonuses, which can be a substantial percentage of base level compensation, are determined after an evaluation of various factors. These factors include the investment manager's investment results and style consistency, the dispersion among funds with similar objectives, the risk taken to achieve the fund returns, and similar factors. Investment results are evaluated based on an assessment of the investment manager's three- and five-year investment returns on a pre-tax basis vs. both the appropriate style benchmarks and the appropriate peer group rankings. Finally, there is a component of the bonus that reflects leadership and management of the investment team. The evaluation does not follow a formulaic approach, but rather is reached following a review of these factors. No part of the bonus payment is based on the investment manager's assets under management, the revenues generated by those assets, or the profitability of the investment manager's unit. Lord Abbett does not manage hedge funds. Lord Abbett may designate a bonus payment of a manager for participation in the firm's senior incentive compensation plan, which provides for a deferred payout over a five-year period. The plan's earnings are based on the overall asset growth of the firm as a whole. Lord Abbett believes this incentive focuses investment managers on the impact their fund's performance has on the overall reputation of the firm as a whole and encourages exchanges of investment ideas among investment professionals managing different mandates.
Lord Abbett provides a 401(k) profit-sharing plan for all eligible employees. Contributions to an investment manager's profit-sharing account are based on a percentage of the investment manager's total base and bonus paid during the fiscal year, subject to a specified maximum amount. The assets of this profit-sharing plan are entirely invested in Lord Abbett-sponsored funds.
HOLDINGS OF INVESTMENT MANAGERS
The following table indicates for the Fund the dollar range of shares beneficially owned by each investment manager who is primarily responsible for the day-to-day management of the Fund, as of November 30, 2005. This table includes the value of shares beneficially owned by such investment managers through 401(k) plans and certain other plans or accounts, if any.
DOLLAR RANGE OF SHARES IN THE PORTFOLIO
--------------------------------------------------------------------
$1- $10,001- $50,001- $100,001- $500,001- OVER
FUND NAME NONE $10,000 $50,000 $100,000 $500,000 $1,000,000 $1,000,000
---- ---- ---- ------- -------- -------- -------- ---------- ----------
Value Opportunites Steven R. McBoyle* X
Fund
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* The Fund had not commenced investment operations as of November 30, 2005.
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 of 1%. This fee is 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 a subsidiary of Lord Abbett, 90 Hudson Street, Jersey City, NJ 07302-3973, serves as the principal underwriter for the Fund.
CUSTODIAN AND ACCOUNTING AGENT
State Street Bank & Trust Company, 801 Pennsylvania Avenue, Kansas City, MO 64105, 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 depositories. In addition, State Street Bank & Trust Company performs certain accounting and record keeping functions relating to portfolio transactions and calculates the Fund's net asset value.
TRANSFER AGENT
DST Systems, Inc., 210 W. 10th St., Kansas City, MO, 64106, acts as the transfer agent and dividend disbursing agent for the Fund.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP, Two World Financial Center, New York, NY, 10281, is the Independent Registered Public Accounting Firm of the Fund and must be approved at least annually by the Fund's Board to continue in such capacity. Deloitte & Touche LLP performs 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
Lord Abbett's and 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 may pay, as described below, a higher commission than some brokers might charge on the same transaction. Lord Abbett's and the Fund's 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 to obtain best execution of the Fund's portfolio transactions. 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 seeking best execution.
In transactions on stock exchanges in the United States, commissions are typically 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.
The Fund pays a commission rate that Lord Abbett believes is appropriate to give maximum assurance that the Fund's brokers will provide the Fund, on a continuing basis, with the highest level of brokerage services available. While Lord Abbett does not always seek the lowest possible commissions on particular trades, Lord Abbett believes that the Fund's commission rates are in line with the rates that many other institutions pay. The Fund's 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 the Fund and the other accounts Lord Abbett manages. Such services include showing the Fund 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.
While neither Lord Abbett nor the Fund obtains third party research services from brokers executing portfolio transactions for the Fund, some of these brokers may provide proprietary research services, at least some of which are useful to Lord Abbett in its overall responsibilities with respect to the Fund and the other accounts Lord Abbett manages. In addition, Lord Abbett purchases third party research with its own funds. Research includes the furnishing of analyses and reports concerning issuers, industries, securities, economic factors and trends, and portfolio strategy. Such services may be used by Lord Abbett in servicing all its accounts, and not all of such services will necessarily be used by Lord Abbett in connection with its 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 its management of the Fund, and not all of such services will necessarily be used by Lord Abbett in connection with its advisory services to such other accounts. Lord Abbett cannot allocate research services received from brokers to any particular account, research services are not a substitute for Lord Abbett's services but are supplemental to its own research effort and, when utilized, are subject to internal analysis before being incorporated by Lord Abbett into its 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 proprietary research services from brokerage firms has not reduced Lord Abbett's normal research activities, the expenses of Lord Abbett could be increased if it attempted to generate such additional information through its own staff.
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.
Lord Abbett seeks to combine or "batch" purchases or sales of a particular security placed at the same time for similarly situated accounts, including the Fund, to facilitate "best execution" and to reduce other transaction costs, if relevant. Each account that participates in a particular batched order, including the Fund, will do so at the average share price for all transactions related to that order in that security on that business day. Lord Abbett generally allocates securities purchased or sold in a batched transaction among participating accounts in proportion to the size of the order placed for each account (i.e., pro-rata). Lord Abbett, however, may increase or decrease the amount of securities allocated to one or more accounts if necessary to avoid holding odd-lot or small numbers of shares in a client account. In addition, if Lord Abbett is unable to execute fully a batched transaction and determines that it would be impractical to allocate a small number of securities on a pro-rata basis among the participating accounts, Lord Abbett allocates the securities in a manner it determines to be fair to all accounts over time.
At times, Lord Abbett is not able to batch purchases and sales for all accounts or products it is managing, such as when an individually-managed account client directs us to use a particular broker for a trade (sometimes referred to as "directed accounts"), or when Lord Abbett is placing transactions for separately managed account programs (sometimes referred to as "wrap programs"). When it does not batch purchases and sales, Lord Abbett usually uses a rotation process for placing equity transactions on behalf of the different groups of accounts or products with respect to which transactions are communicated to the trading desk or placed at or about the same time. Generally, Lord Abbett will place trades first for transactions on behalf of the Lord Abbett funds and non-directed individually-managed institutional accounts, second for wrap programs, by program, and finally for directed accounts.
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 the independent registered public accounting firm, 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 12th month after the month in which you buy them (24th month if the shares were purchased prior to November 1, 2004), you may pay 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 after 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, for payments to dealers and other agents for (i) providing continuous services to shareholders, such as answering shareholder inquiries, maintaining records, and assisting shareholders in making redemptions, transfers, additional purchases and exchanges and (ii) their assistance in distributing shares of the Fund.
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 Fund and who have no direct or indirect financial interest in the operation of the Plan or in any agreements related to the Plan ("outside Trustees"), cast in person at a meeting called for the purpose of voting on 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.
One Trustee, Thomas J. Neff, may be deemed to have an indirect financial interest in the operation of the Plans. Mr. Neff, an independent trustee of the Fund, also is a director of Hewitt Associates, Inc. and owns less than .01 of 1% of the outstanding shares of Hewitt Associates, Inc. Hewitt Associates is a global human resources outsourcing and consulting firm with approximately $2.2 billion in revenue in fiscal 2004. Hewitt Financial Services LLC, a subsidiary of Hewitt Associates, Inc., may receive payments from the 12b-1 Plans of the Fund and/or other Lord Abbett-sponsored Funds. In the twelve months ended October 31, 2005, Hewitt Financial Services LLC received 12b-1 payments totaling approximately $320,000 from all of the Lord Abbett-sponsored Funds in the aggregate.
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 a one-time distribution fee of up to 1% has been paid if such shares are redeemed out of the Lord Abbett-sponsored fund within a period of 12 months (24 months if the shares were purchased prior to November 1, 2004) from the end of the month in which the original sale occurred.
CLASS B SHARES. As stated in the Prospectus, subject to certain exceptions, if Class B shares of the Fund (or Class B shares of another Lord Abbett-sponsored fund or 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 Lord Abbett Distributor and is intended to reimburse all or a portion of the amount paid by the Fund, or Lord Abbett Distributor, as the case may be, if the shares are redeemed before the Fund or Lord Abbett Distributor 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 services 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 12 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.
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 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 shares. You should carefully review how you plan to use your investment account before deciding which class of shares you buy. For example, the dividends payable to
Class B and Class C shareholders will be reduced by the expenses borne solely by each of these classes, such as the higher distribution fee to which Class B and Class C shares are subject.
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, PRICING, AND PAYMENTS TO DEALERS
Information concerning how we value Fund shares is contained in the Prospectus under "Purchases" and "Redemptions."
The Fund's Board has adopted policies and procedures that are designed to prevent or stop excessive trading and market timing. Please see the Prospectus under "Purchases."
Under normal circumstances we calculate the Fund's net asset value as of the close of the NYSE on each day that the NYSE is open for trading by dividing our total net assets by the number of shares outstanding at the time of calculation. The NYSE is closed on Saturdays and Sundays and the following holidays -- New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
Portfolio securities are valued at market value as of the close of the NYSE. Market value will be determined as follows: securities listed or admitted to trading privileges on any national or foreign securities exchange, or on the NASDAQ National Market System are valued at the last sale price, or, if there is no sale on that day, at the last bid, or, in the case of bonds, in the over-the-counter market if that market more accurately reflects the market value of the bonds. Unlisted equity securities are valued at the last transaction price, or, if there were no transactions that day, at the mean between the last bid and asked prices. Over-the-counter fixed income securities are valued at prices supplied by independent pricing services, which reflect broker-dealer-supplied valuations and electronic data processing techniques reflecting the mean between the bid and asked prices. 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 an independent pricing service at the close of regular trading on the London Stock Exchange. 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 (including so-called "mutual fund wrap account programs"), 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 a broker-dealer for clients that participate in an arrangement with the broker-dealer under which the client pays the broker-dealer a fee based on the total asset value of the client's account for all or a specified number of securities transactions, including purchases of mutual fund shares, in the account
during a certain period.
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) by 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 the 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 & Government Sponsored Enterprises Money Market Fund, Inc. ("GSMMF"), or (iii) any authorized institution's affiliated money market fund meeting certain criteria set by 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. We reserve the right to modify, restrict or reject any purchase order or exchange request if the Fund or Lord Abbett Distributor determines that it is in the best interest of the Fund and its shareholders. The Fund is designed for long-term investors and is not designed to serve as a vehicle for frequent trading in response to short-term swings in the market. We can revoke or modify the privilege for all shareholders upon 60 days' written 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 Municipal Income Fund and Lord Abbett Municipal 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 the 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 the 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, Purchasers (as defined in the Prospectus) may invest $50,000 or more over a 13-month period in Class A, B, C, and P shares of any Eligible Fund. Such Class A, B, C, and P shares as offered by other Lord Abbett sponsored funds, and 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 new purchases of 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 aggregate their investments in Class A, B, C, and P shares of any Eligible Fund 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 otherwise 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 60 days' prior written notice will be given before any such redemption, during which time shareholders may avoid redemption by bringing their accounts up to the minimum set by the Board.
DIV-MOVE. Under the Div-Move service described in the Prospectus, you can invest the dividends paid on your account 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 PLAN. 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.
REVENUE SHARING AND OTHER PAYMENTS TO DEALERS AND FINANCIAL INTERMEDIARIES. As described in the Fund's prospectus, Lord Abbett or Lord Abbett Distributor, in its sole discretion, at its own expense and without cost to the Fund or shareholders, also may make payments to dealers and other firms authorized to accept orders for Fund shares (collectively, "Dealers") in connection with marketing and/or distribution support for Dealers, shareholder servicing, entertainment, training and education activities for the Dealers, their investment professionals and/or their clients or potential clients, and/or the purchase of products or services from such Dealers. Some of these payments may be referred to as revenue sharing payments. As of the date of this statement of additional information, the Dealers to whom Lord Abbett or Lord Abbett Distributor may make revenue sharing payments (not including payments for entertainment, and training and education activities for the Dealers, their investment professionals and/or their clients or potential clients) with respect to the Fund and/or other Lord Abbett Funds were as follows:
Allstate Life Insurance Company Morgan Stanley DW, Inc.
Allstate Life Insurance Company of New York National Financial Partners
A.G. Edwards & Sons, Inc. Piper Jaffrey & Co.
B.C. Ziegler and Company Protective Life Insurance Company
Bodell Overcash Anderson & Co., Inc. Prudential Investment Management Services LLC
Cadaret, Grant & Co., Inc. RBC Dain Rauscher
Citigroup Global Markets, Inc. Raymond James & Associates, Inc.
Edward D. Jones & Co. Raymond James Financial Services, Inc.
Family Investors Company Sun Life Assurance Company of Canada
James I. Black & Co. The Travelers Insurance Company
Legg Mason Wood Walker, Inc. The Travelers Life and Annuity Company
McDonald Investments Inc. UBS Financial Services Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated Wachovia Securities, LLC
(and/or certain of its affiliates)
Metlife Securities, Inc.
|
For more specific information about any revenue sharing payments made to your Dealer, investors should contact their investment professionals.
Thomas J. Neff, an independent trustee of the Fund, is a director of Hewitt Associates, Inc. and owns less than .01 of 1% of the outstanding shares of Hewitt Associates, Inc. Hewitt Associates is a global human resources outsourcing and consulting firm with approximately $2.2 billion in revenue in fiscal 2004. Hewitt Associates LLC, a subsidiary of Hewitt Associates, Inc., may receive recordkeeping payments from the Fund and/or other Lord Abbett-sponsored funds. In the twelve months ended October 31, 2005, Hewitt Associates LLC received recordkeeping payments totaling approximately $414,000 from all of the Lord Abbett-sponsored Funds in the aggregate.
REDEMPTIONS IN KIND. Under circumstances in which it is deemed detrimental to the best interests of the Fund's shareholders to make redemption payments wholly in cash, the Fund may pay any portion of a redemption in excess of the lesser of $250,000 or 1% of the Fund's net assets by a distribution in kind of readily marketable securities in lieu of cash. 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 has elected, has qualified, and intends 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 and when such income is distributed, such distributions will be further taxed at the shareholder level. 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 income from investments. Dividends paid by the Fund from its ordinary income or net realized short-term capital gains are taxable to you as ordinary income; however, certain qualified dividend income that the Fund receives and distributes to you is subject to a reduced tax rate of 15% (5% if you are in the 10% or 15% tax brackets) if you meet the general requirement of having held your Fund shares for more than 60 days, and you satisfy certain other requirements.
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. The maximum federal income tax rates applicable to net capital gains recognized by individuals and other non-corporate taxpayers are currently (i) the same as ordinary income tax rates for capital assets held for one year or less, and (ii) 15% (5% for taxpayers in the 10% or 15% tax brackets) for capital assets held for more than one year. You should also be aware that the benefits of the long-term capital gains and qualified dividend rates may be reduced if you are subject to the alternative minimum tax. Capital gains recognized by corporate shareholders are subject to tax at the ordinary income tax rates applicable to corporations. All dividends are taxable regardless of whether they are received in cash or reinvested in Fund shares.
The Fund's net capital losses for any year cannot be passed through to you but can be carried forward for a period of years to offset the Fund's capital gains in those years. To the extent capital gains are offset by such losses, they do not result in tax liability to the Fund and are not expected to be distributed to you as long-term capital gains dividends.
Dividends paid by the Fund to corporate shareholders may qualify for the dividends received deduction to the extent they are derived from dividends paid to the Fund by domestic corporations. If you are a corporation, you must have held your Fund shares for more than 45 days to qualify for the dividends received deduction. The dividends received deduction may be limited if you incur indebtedness to acquire Fund shares, and may result in reduction to the basis of your shares in the Fund if the dividend constitutes an extraordinary dividend at the Fund level.
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.
At the time of your purchase of Fund shares, a portion of the purchase price may be attributable to realized or unrealized appreciation in the Fund's portfolio or to undistributed taxable income of the Fund. Consequently, subsequent distributions by the Fund with respect to these shares from such appreciation or income may be taxable to you even if the net asset value of your shares is, as a result of the distributions, reduced below your cost for such shares and the distributions economically represent a return of a portion of your investment.
In general, if Fund shares are sold, you will recognize gain or loss equal to the difference between the amount realized on the sale and your adjusted basis in the shares. Such gain or loss generally will be treated as long-term capital gain or loss if the shares were held for more than one year and otherwise generally will be treated as short-term capital gain or loss. However, if your holding period in your Fund shares is six months or less, any capital loss realized from a sale, exchange, or redemption of such shares must be treated as long-term capital loss to the extent of 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.
If your Fund shares are redeemed by a distribution of securities, you will be taxed as if you had received cash equal to the fair
market value of the securities. Consequently, you will have a fair market value basis in the securities.
Under Treasury regulations, if you are an individual and recognize a loss with respect to Fund shares of $2 million or more (if you are a corporation, $10 million or more) in any single taxable year (or greater amounts over a combination of years), you may be required to file a disclosure statement with the Internal Revenue Service.
Certain investment practices that the Fund may utilize, such as investing in options, futures, forward contracts, short sales, foreign currency, or foreign entities classified as "passive foreign investment companies" for U.S. tax purposes, may affect the amount, 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 the Fund will not be eligible to pass through to you the ability 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 redemptions ("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, the number that you have provided is incorrect or backup withholding is applicable as a result of your previous underreporting of interest or dividend income. When establishing an account, you must certify under penalties of perjury that your 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, NJ 07302-3973, serves as the principal underwriter for the Trust. 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:
FISCAL YEAR ENDED OCTOBER 31,
2005 2004 2003
---- ---- ----
Gross sales charge $ 22,161,644 $ 21,403,660 $ 5,836,926
Amount allowed to dealers $ 18,706,435 $ 18,075,549 $ 4,946,816
Net commissions received
by Lord Abbett Distributor $ 3,455,209 $ 3,328,111 $ 890,110
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In addition, Lord Abbett Distributor, as the Trust's principal underwriter, received the following compensation for the fiscal year ended October 31, 2005:
BROKERAGE
COMPENSATION COMMISSIONS
ON REDEMPTION IN CONNECTION OTHER
AND REPURCHASE WITH FUND TRANSACTIONS COMPENSATION
-------------- ---------------------- ------------
Class A $ 0 $ 0 $ 2,064,326.14
Class B $ 0 $ 0 $ 596.67*
Class C $ 0* $ 0 $ 2,516.90*
Class P $ 0 $ 0 $ 119.45
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* Excludes 12b-1 payments and CDSC fees received during the first year of the associated investment as repayment of fees advanced by Lord Abbett Distributor to Broker/Dealers at the time of sale.
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 a Fund's investment result for that class for the time period shown (unless the total return is shown at net asset value). For Class C shares, the 1.0% CDSC is applied to a Fund's investment result for that class for the time period shown prior to the first anniversary of purchase (unless the total return is shown at net asset value). 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.
APPENDIX A
FUND PORTFOLIO INFORMATION RECIPIENTS
The following is a list of the third parties that may receive portfolio holdings or related information under the circumstances described above under Investment Policies - Policies and Procedures Governing Disclosure of Portfolio Holdings:
PORTFOLIO COMMENTARIES,
FACT SHEETS, PERFORMANCE
PORTFOLIO HOLDINGS ATTRIBUTION INFORMATION
(ITEM #1)* (ITEM #2)*
ABN-AMRO Asset Management Monthly
ADP Retirement Services Monthly
AG Edwards Monthly
AIG SunAmerica Monthly
Allstate Life Insurance Company Monthly
Alpha Investment Consulting Group LLC Monthly
American Express Retirement Services Monthly
American United Life Insurance Company Monthly
AMG Monthly
Amivest Capital Management Monthly
Amvescap Retirement Monthly
AON Consulting Monthly
Arnerich Massena & Associates, Inc. Monthly Monthly
Asset Performance Partners Monthly
Asset Strategies Portfolio Services, Inc. Monthly
AXA Financial Services Monthly
Bank of America Corporation Monthly
Bank of New York Monthly
Bank of Oklahoma Monthly
Bank One Monthly
BC Zeigler Monthly
Becker, Burke Associates Monthly Monthly
Bellweather Consulting Monthly
Berthel Schutter Monthly Monthly
BilkeyKatz Investment Consultants Monthly
Brown Brothers Harriman Monthly
Buck Consultants, Inc. Monthly
Callan Associates Inc. Monthly Monthly
Cambridge Associates LLC Monthly
Cambridge Financial Services Monthly
Ceridian Monthly
Charles Schwab & Co Monthly
Chicago Trust Company Monthly
CIBC Oppenheimer Monthly
CitiStreet Retirement Services Monthly
Clark Consulting Monthly
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PORTFOLIO COMMENTARIES,
FACT SHEETS, PERFORMANCE
PORTFOLIO HOLDINGS ATTRIBUTION INFORMATION
(ITEM #1)* (ITEM #2)*
Columbia Funds Monthly
Columbia Management Group Monthly
Columbia Trust Company Monthly
Concord Advisory Group Ltd. Monthly Monthly
Consulting Services Group, LP Monthly
Copic Financial Monthly
CPI Qualified Plan Consultants Monthly
CRA RogersCasey Monthly
Curcio Webb Monthly Monthly
D.A. Davidson Monthly
Dahab Assoc. Monthly
Daily Access Monthly
Defined Contribution Advisors, Inc. Monthly
Delaware Investment Advisors Monthly
DeMarche Associates, Inc. Monthly
DiMeo Schneider & Associates Monthly
Disabato Associates, Inc. Monthly
Diversified Investment Advisors, Inc. Monthly
EAI Monthly
Edward Jones Monthly
Ennis, Knupp & Associates Monthly
Federated Investors Monthly
Fidelity Investment Monthly
Fidelity Investments Monthly
Fifth Third Bank Monthly
First Mercantile Trust Co. Monthly
FleetBoston Financial Corp. Monthly
Franklin Templeton Monthly
Freedom One Investment Advisors Monthly
Frost Bank Monthly
Fuji Investment Management Co., Ltd. Monthly
Fund Evaluation Group, Inc. Monthly
Goldman Sachs Monthly
Great West Life and Annuity Insurance Company Monthly
Greenwich Associates Monthly
Guardian Life Insurance Monthly
Hartford Life Insurance Company Monthly
Hartland & Co. Monthly
Hewitt Financial Services, LLC Monthly
Hewitt Investment Group Monthly
Highland Consulting Associates, Inc. Monthly
Holbien Associates, Inc. Monthly
Horace Mann Life Insurance Company Monthly
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PORTFOLIO COMMENTARIES,
FACT SHEETS, PERFORMANCE
PORTFOLIO HOLDINGS ATTRIBUTION INFORMATION
(ITEM #1)* (ITEM #2)*
HSBC Monthly
ICMA Retirement Corp. Monthly
ING Monthly
Intuit Monthly
INVESCO Retirement Services Monthly
Invesmart Monthly
Investment Consulting Services, LLC Monthly
Invivia Monthly
Irish Life Inter. Managers Monthly
Janney Montgomery Scott LLC Monthly
Jefferson National Life Insurance Company Monthly
Jeffrey Slocum & Associates, Inc. Monthly Monthly
JP Morgan Consulting Monthly
JP Morgan Fleming Asset Management Monthly
JP Morgan Investment Management Monthly
Kmotion, Inc. Monthly
LCG Associates, Inc. Monthly
Legacy Strategic Asset Mgmt. Co. Monthly
Legg Mason Monthly
Lincoln Financial Monthly
LPL Financial Services Monthly
Manulife Financial Monthly
Marco Consulting Group Monthly
Marquette Associates, Inc. Monthly
MassMutual Financial Group Monthly
McDonald Monthly
Meketa Investment Group Monthly
Mellon Employee Benefit Solutions Monthly
Mellon Human Resources & Investor Solutions Monthly
Mercer HR Services Monthly
Mercer Investment Consulting Monthly
Merrill Lynch Monthly
Merrill Lynch, Pierce, Fenner & Smith, Inc. Monthly
MetLife Monthly
MetLife Investors Monthly
MFS Retirement Services, Inc. Monthly
MFS/Sun Life Financial Distributors, Inc. Monthly
(MFSLF)
Midland National Life Monthly
Milliman & Robertson Inc. Monthly
Minnesota Life Insurance Company Monthly
ML Benefits & Investment Solutions Monthly
Monroe Vos Consulting Group, Inc. Monthly
|
PORTFOLIO COMMENTARIES,
FACT SHEETS, PERFORMANCE
PORTFOLIO HOLDINGS ATTRIBUTION INFORMATION
(ITEM #1)* (ITEM #2)*
Morgan Keegan Monthly
Morgan Stanley Dean Witter Monthly
MorganStanley Monthly
Morningstar Associates, Inc. Monthly
National City Bank Monthly
Nationwide Financial Monthly
NCCI Holdings, Inc. Monthly
New England Pension Consultants Monthly
New York Life Investment Management Monthly
Nordstrom Pension Consulting (NPC) Monthly
NY Life Insurance Company Monthly
Oxford Associates Monthly
Palmer & Cay Investment Services Monthly
Paul L. Nelson & Associates Monthly
Peirce Park Group Monthly
Pension Consultants, Inc. Monthly
PFE Group Monthly
PFM Group Monthly
PFPC, Inc. Monthly
Phoenix Life Insurance Company Monthly
Piper Jaffray/ USBancorp Monthly
Planco Monthly
PNC Advisors Monthly
Portfolio Evaluations, Inc. Monthly
Prime, Buchholz & Associates, Inc. Monthly
Protective Life Corporation Monthly
Prudential Financial Monthly
Prudential Investments Monthly
Prudential Securities, Inc. Monthly
Putnam Investments Monthly
Quant Consulting Monthly
R.V. Kuhns & Associates, Inc. Monthly
Raymond James Financial Monthly
RBC Dain Rauscher Monthly
Rocaton Investment Advisors, LLC Monthly
Ron Blue & Co. Monthly
Roszel Advisors, LLC (MLIG) Monthly
Scudder Investments Monthly
Segal Advisors Monthly
SEI Investment Monthly
Shields Associates Monthly
Smith Barney Monthly
Spagnola-Cosack, Inc. Monthly
Standard & Poor's Monthly
|
PORTFOLIO COMMENTARIES,
FACT SHEETS, PERFORMANCE
PORTFOLIO HOLDINGS ATTRIBUTION INFORMATION
(ITEM #1)* (ITEM #2)*
Stanton Group Monthly
Stearne, Agee & Leach Monthly
Stephen's, Inc. Monthly
Stifel Nicolaus Monthly
Strategic Advisers, Inc. Monthly
Strategic Investment Solutions Monthly
Stratford Advisory Group, Inc. Monthly
Summit Strategies Group Monthly
Sun Life Financial Distributors, Inc. Monthly
T. Rowe Price Associates, Inc. Monthly
TD Asset Management Monthly
The 401k Company Monthly
The Carmack Group, Inc. Monthly
The Managers Fund Monthly
The Vanguard Group Monthly
Towers Perrin Monthly
Transamerica Retirement Services Monthly
Travelers Life & Annuity Company Monthly
UBS- Prime Consulting Group Monthly
UMB Monthly
Union Bank of California Monthly
US Bank Monthly
USI Retirement Monthly
Valic Monthly
Vanguard Monthly
Victory Capital Management Monthly
Vestek Systems, Inc. Monthly
Wachovia Bank Monthly
Watson Wyatt Worldwide Monthly Monthly
Welch Hornsby Monthly
Wells Fargo Monthly
William M. Mercer Consulting Inc. Monthly
Wilshire Associates Incorporated Monthly
Wurts & Associates Monthly Monthly
Wyatt Investment Consulting, Inc. Monthly
Yanni Partners Monthly
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APPENDIX B
November 8, 2005
LORD, ABBETT & CO. LLC
PROXY VOTING POLICIES AND PROCEDURES
INTRODUCTION
Lord Abbett has a Proxy Committee responsible for establishing voting policies and for the oversight of its proxy voting process. Lord Abbett's Proxy Committee consists of the portfolio managers of each investment team and certain members of those teams, the Director of Equity Investments, the Firm's Managing Member and its General Counsel. Once policy is established, it is the responsibility of each investment team leader to assure that each proxy for that team's portfolio is voted in a timely manner in accordance with those policies. In each case where an investment team declines to follow a recommendation of a company's management, a detailed explanation of the reason(s) for the decision is entered into the proxy voting system. Lord Abbett has retained Institutional Shareholder Services ("ISS") to analyze proxy issues and recommend voting on those issues, and to provide assistance in the administration of the proxy process, including maintaining complete proxy voting records.
The Boards of Directors of each of the Lord Abbett Mutual Funds
established several years ago a Proxy Committee, composed solely of independent
directors. The Funds' Proxy Committee Charter provides that the Committee shall
(i) monitor the actions of Lord Abbett in voting securities owned by the Funds;
(ii) evaluate the policies of Lord Abbett in voting securities; (iii) meet with
Lord Abbett to review the policies in voting securities, the sources of
information used in determining how to vote on particular matters, and the
procedures used to determine the votes in any situation where there may be a
conflict of interest.
Lord Abbett is a privately-held firm, and we conduct only one business:
we manage the investment portfolios of our clients. We are not part of a larger
group of companies conducting diverse financial operations. We would therefore
expect, based on our past experience, that the incidence of an actual conflict
of interest involving Lord Abbett's proxy voting process would be limited.
Nevertheless, if a potential conflict of interest were to arise, involving one
or more of the Lord Abbett Funds, where practicable we would disclose this
potential conflict to the affected Funds' Proxy Committees and seek voting
instructions from those Committees in accordance with the procedures described
below under "Specific Procedures for Potential Conflict Situations". If it were
not practicable to seek instructions from those Committees, Lord Abbett would
simply follow its proxy voting policies or, if the particular issue were not
covered by those policies, we would follow a recommendation of ISS. If such a
conflict arose with any other client, Lord Abbett would simply follow its proxy
voting policies or, if the particular issue were not covered by those policies,
we would follow the recommendation of ISS.
SPECIFIC PROCEDURES FOR POTENTIAL CONFLICT SITUATIONS
SITUATION 1. Fund Independent Board Member on Board (or Nominee for Election to Board) of Publicly Held Company Owned by a Lord Abbett Fund.
Lord Abbett will compile a list of all publicly held companies where an Independent Board Member serves on the board of directors, or has indicated to Lord Abbett that he is a nominee for election to the board of directors (a "Fund Director Company"). If a Lord Abbett Fund owns stock in a Fund Director Company, and if Lord Abbett has decided NOT to follow the proxy voting recommendation of ISS, then Lord Abbett shall bring that issue to the Fund's Proxy Committee for instructions on how to vote that proxy issue.
The Independent Directors have decided that the Director on the board of the Fund Director Company will not participate in any discussion by the Fund's Proxy Committee of any proxy issue for that Fund Director Company or in the voting instruction given to Lord Abbett.
SITUATION 2. Lord Abbett has a Significant Business Relationship with a Company.
Lord Abbett will compile a list of all publicly held companies (or which are a subsidiary of a publicly held firm) that have a significant business relationship with Lord Abbett (a "Relationship Firm"). A "significant business relationship" for this
purpose means: (a) a broker dealer firm which sells one percent or more of the
Lord Abbett Funds' total shares for the last 12 months; (b) a firm which is a
sponsor firm with respect to Lord Abbett's Private Advisory Services business;
(c) an institutional client which has an investment management agreement with
Lord Abbett; (d) an institutional investor having at least $5 million in Class Y
shares of the Lord Abbett Funds; and (e) a large plan 401(k) client with at
least $5 million under management with Lord Abbett.
For each proxy issue involving a Relationship Firm, Lord Abbett shall notify the Fund's Proxy Committee and shall seek voting instructions from the Fund's Proxy Committee only in those situations where Lord Abbett has proposed NOT to follow the recommendations of ISS.
SUMMARY OF PROXY VOTING GUIDELINES
Lord Abbett generally votes in accordance with management's recommendations on the election of directors, appointment of independent auditors, changes to the authorized capitalization (barring excessive increases) and most shareholder proposals. This policy is based on the premise that a broad vote of confidence on such matters is due the management of any company whose shares we are willing to hold.
ELECTION OF DIRECTORS
Lord Abbett will generally vote in accordance with management's recommendations on the election of directors. However, votes on director nominees are made on a case-by- case basis. Factors that are considered include current composition of the board and key- board nominees, long-term company performance relative to a market index, and the directors' investment in the company. We also consider whether the Chairman of the board is also serving as CEO, and whether a retired CEO sits on the board, as these situations may create inherent conflicts of interest.
There are some actions by directors that may result in votes being withheld. These actions include:
1) Attending less than 75% of board and committee meetings without a
valid excuse.
2) Ignoring shareholder proposals that are approved by a majority of
votes for two consecutive years.
3) Failing to act on takeover offers where a majority of
shareholders tendered their shares.
4) Serving as inside directors and sit on an audit, compensation,
stock option or nomination committee.
5) Failing to replace management as appropriate.
We will generally approve proposals to elect directors annually. The ability to elect directors is the single most important use of the shareholder franchise, and all directors should be accountable on an annual basis. The basic premise of the staggered election of directors is to provide a continuity of experience on the board and to prevent a precipitous change in the composition of the board. Although shareholders need some form of protection from hostile takeover attempts, and boards need tools and leverage in order to negotiate effectively with potential acquirers, a classified board tips the balance of power too much toward incumbent management at the price of potentially ignoring shareholder interests.
INCENTIVE COMPENSATION PLANS
We usually vote with management regarding employee incentive plans and changes in such plans, but these issues are looked at very closely on a case by case basis. We use ISS for guidance on appropriate compensation ranges for various industries and company sizes. In addition to considering the individual expertise of management and the value they bring to the company, we also consider the costs associated with stock-based incentive packages including shareholder value transfer and voting power dilution.
We scrutinize very closely the approval of repricing or replacing underwater stock options, taking into consideration the following:
1) The stock's volatility, to ensure the stock price will not be
back in the money over the near term.
2) Management's rationale for why the repricing is necessary.
3) The new exercise price, which must be set at a premium to market
price to ensure proper employee motivation.
4) Other factors, such as the number of participants, term of option, and the value for value exchange.
In large-cap companies we would generally vote against plans that promoted short-term performance at the expense of longer-term objectives. Dilution, either actual or potential, is, of course, a major consideration in reviewing all incentive plans. Team leaders in small- and mid-cap companies often view option plans and other employee incentive plans as a critical component of such companies' compensation structure, and have discretion to approve such plans, notwithstanding dilution concerns.
SHAREHOLDER RIGHTS
CUMULATIVE VOTING
We generally oppose cumulative voting proposals on the ground that a shareowner or special group electing a director by cumulative voting may seek to have that director represent a narrow special interest rather than the interests of the shareholders as a whole.
CONFIDENTIAL VOTING
There are both advantages and disadvantages to a confidential ballot. Under the open voting system, any shareholder that desires anonymity may register the shares in the name of a bank, a broker or some other nominee. A confidential ballot may tend to preclude any opportunity for the board to communicate with those who oppose management proposals.
On balance we believe shareholder proposals regarding confidential balloting should generally be approved, unless in a specific case, countervailing arguments appear compelling.
SUPERMAJORITY VOTING
Supermajority provisions violate the principle that a simple majority of voting shares should be all that is necessary to effect change regarding a company and its corporate governance provisions. Requiring more than this may permit management to entrench themselves by blocking amendments that are in the best interest of shareholders.
TAKEOVER ISSUES
Votes on mergers and acquisitions must be considered on a case by case
basis. The voting decision should depend on a number of factors, including:
anticipated financial and operating benefits, the offer price, prospects of the
combined companies, changes in corporate governance and their impact on
shareholder rights. It is our policy to vote against management proposals to
require supermajority shareholder vote to approve mergers and other significant
business combinations, and to vote for shareholder proposals to lower
supermajority vote requirements for mergers and acquisitions. We are also
opposed to amendments that attempt to eliminate shareholder approval for
acquisitions involving the issuance of more that 10% of the company's voting
stock. Restructuring proposals will also be evaluated on a case by case basis
following the same guidelines as those used for mergers.
Among the more important issues that we support, as long as they are not tied in with other measures that clearly entrench management, are:
1) Anti-greenmail provisions, which prohibit management from buying back
shares at above market prices from potential suitors without
shareholder approval.
2) Fair Price Amendments, to protect shareholders from inequitable
two-tier stock acquisition offers.
3) Shareholder Rights Plans (so-called "Poison Pills"), usually "blank
check" preferred and other classes of voting securities that can be
issued without further shareholder approval. However, we look at these
proposals on a case by case basis, and we only approve these devices
when proposed by companies with strong, effective managements to force
corporate raiders to negotiate with management and assure a degree of
stability that will support good long-range
corporate goals. We vote for shareholder proposals asking that a company submit its poison pill for shareholder ratification.
4) "Chewable Pill" provisions, are the preferred form of Shareholder Rights Plan. These provisions allow the shareholders a secondary option when the Board refuses to withdraw a poison pill against a majority shareholder vote. To strike a balance of power between management and the shareholder, ideally "Chewable Pill" provisions should embody the following attributes, allowing sufficient flexibility to maximize shareholder wealth when employing a poison pill in negotiations:
- Redemption Clause allowing the board to rescind a pill after a
potential acquirer has surpassed the ownership threshold.
- No dead-hand or no-hand pills.
- Sunset Provisions which allow the shareholders to review, and
reaffirm or redeem a pill after a predetermined time frame.
- Qualifying Offer Clause which gives shareholders the ability to
redeem a poison pill when faced with a bona fide takeover offer.
SOCIAL ISSUES
It is our general policy to vote as management recommends on social issues, unless we feel that voting otherwise will enhance the value of our holdings. We recognize that highly ethical and competent managements occasionally differ on such matters, and so we review the more controversial issues closely.
LORD ABBETT
STATEMENT OF ADDITIONAL INFORMATION DECEMBER 20, 2005
LORD ABBETT SECURITIES TRUST
LORD ABBETT VALUE OPPORTUNITIES FUND
(CLASS Y SHARES)
This Statement of Additional Information ("SAI") is not a Prospectus. A Prospectus may be obtained from your securities dealer or from Lord Abbett Distributor LLC ("Lord Abbett Distributor") at 90 Hudson Street, Jersey City, NJ 07302-3973. This SAI relates to, and should be read in conjunction with, the Prospectus for the Class Y shares of Lord Abbett Securities Trust - Lord Abbett Value Opportunities Fund (the "Fund") dated December 20, 2005.
Shareholder account inquiries should be made by directly contacting the Fund or by calling 800-821-5129. The Annual Report to Shareholders contains additional performance information and will be available without charge, upon request by calling 800-874-3733. 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 10
4. Control Persons and Principal Holders of Securities 16
5. Investment Advisory and Other Services 16
6. Brokerage Allocations and Other Practices 19
7. Classes of Shares 21
8. Purchases, Redemptions, Pricing, and Payments to Dealers 20
9. Taxation of the Fund 22
10. Underwriter 24
11. Performance 24
12. Financial Statements 25
Appendix A. Fund Portfolio Information Recipients 26
Appendix B. Proxy Voting Policies and Procedures 31
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1.
FUND HISTORY
Lord Abbett Securities Trust (the "Trust") is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (the "Act"). The Trust was organized as a Delaware business trust on February 26, 1993, with an unlimited amount of shares of beneficial interest authorized. The Trust has eight funds or series, but only one is described in this SAI. The Fund consists of five classes of shares: Class A, Class B, Class C, Class P and Class Y. Class Y shares are offered in this SAI.
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, except in the case of the first restriction with which the Fund must comply on a continuous basis.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. In addition to the investment objective of the Fund, 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 (the "Board") 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 ("Rule 144A"), determined by Lord Abbett to be liquid, subject to the oversight of the Board;
(3) invest in securities issued by other investment companies except to the extent permitted by applicable law [(except that Value Opportunities Fund may not rely on Sections 12(d)(1) and 12(d)(G) of the Act)];
(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 a Fund's 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 Stock Exchange ("NYSE") 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 SAI, 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.
Compliance with these investment restrictions will be determined at the time of the purchase or sale of the security.
PORTFOLIO TURNOVER RATE. Not applicable as the Fund has not completed its first year as of the date thereof.
ADDITIONAL INFORMATION ON PORTFOLIO RISKS, INVESTMENTS AND TECHNIQUES. The following 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 a 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. Generally, convertible securities offer lower interest or dividend yields than non-convertible securities of similar quality and less potential for gains or capital appreciation in a rising stock market than equity securities. They tend to be more volatile than other fixed income securities, and the markets for convertible securities may be less liquid than markets for common stocks or bonds. Convertible securities have both equity and fixed income risk characteristics. Like all fixed income securities, the value of convertible securities is susceptible to the risk of market losses attributable to changes in interest rates. The market value of convertible securities tends to decline as interest rates increase. If, however, the market price of the common stock underlying a convertible security approaches or exceeds the conversion price of the convertible security, the convertible security tends to reflect the market price of the underlying common stock. In such a case, a convertible security may lose much of its value if the value of the underlying common stock then falls below the conversion price of the security. As the market price of the underlying common stock declines, the convertible security tends to trade increasingly based on its fixed income characteristics, and thus, may not necessarily decline in price as much as the underlying common stock.
DEBT SECURITIES. Consistent with its respective investment objectives, 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 United States, including increased market, liquidity, currency, political, information and other risks. ADRs are not considered to be foreign securities for purposes of the Fund's limitation on investments in foreign securities.
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 transactions. 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 Lord Abbett 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 hedge 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-hedge, 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 in foreign securities in accordance with its investment objectives and policies. Foreign securities may involve special risks that are not typically associated with U.S. dollar denominated or quoted securities of U.S. issuers, including the following:
- Foreign securities may be affected by changes in currency rates, changes
in foreign or U.S. laws or restrictions applicable to foreign securities
and changes in exchange control regulations (i.e., currency blockage). A
decline in the exchange rate of the foreign currency in which a
portfolio security is quoted or denominated relative to the U.S. dollar
would reduce the value of the portfolio security in U.S. dollars.
- Brokerage commissions, custodial services, and other costs relating to
investment in foreign securities markets generally are more expensive
than in the U.S.
- Clearance and settlement procedures may be different in foreign countries
and, in certain markets, such procedures may be unable to keep pace with
the volume of securities transactions, thus making it difficult to
conduct such transactions.
- Foreign issuers are not generally subject to uniform accounting, auditing
and financial reporting standards comparable to those applicable to U.S.
issuers. There may be less publicly available information about a
foreign issuer than about a comparable U.S. issuer.
- There is generally less government regulation of foreign markets,
companies and securities dealers than in the U.S.
- Foreign securities markets may have substantially less volume than U.S.
securities markets, and securities of many foreign issuers are less
liquid and more volatile than securities of comparable domestic issuers.
- Foreign securities may trade on days when a Fund does not sell shares. As
a result, the value of a Fund's portfolio securities may change on days
an investor may not be able to purchase or redeem Fund shares.
- With respect to certain foreign countries, there is a possibility of
nationalization, expropriation or confiscatory taxation, imposition of
withholding or other taxes on dividend or interest payments (or, in some
cases, capital gains), limitations on the removal of funds or other
assets of a Fund, and political or social instability or diplomatic
developments that could affect investments in those countries.
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 a Fund invests in foreign securities, currency exchange rates, or in order to pursue risk management strategies, including gaining efficient exposure to markets and minimizing transaction costs. The Fund may also enter into closing purchase and sale transactions with respect to such contracts and options. A Fund may not purchase or sell futures contracts, options on futures contracts or options on currencies traded on a CFTC-regulated exchange for non bona fide hedging purposes 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 a 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 a 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 a 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 a 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 a 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 have no current intention of doing so, the Fund 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 portfolios, 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 a Fund sells futures contracts, a decline in the market value of the portfolio will be offset by an increase in the value of the short futures position to the extent of the hedge (i.e., the size of the futures position). Conversely, when a Fund has cash available (for example, through substantial sales of shares) and wishes to invest the cash in anticipation of a rising market, the Fund could rapidly hedge against the expected market increase by buying futures contracts to offset the cash position and thus cushion the adverse effect of attempting to buy individual securities in a rising market.
Stock Index Futures Contracts are subject to the same risks as other futures contracts discussed above under "Futures Contracts and Options on Futures Contracts." To date, 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 ("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 a 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. These limitations include a prohibition on a Fund acquiring more than 3% of the voting shares of any other investment company, and a prohibition on any Fund investing more than 5% of a Fund's total assets in securities of any one investment company or more than 10% of its total assets in securities of all investment companies. A Fund indirectly will bear its proportionate share of any management fees and other expenses paid by the investment companies in which it invests. Such investment companies will generally be money market funds or have investment objectives, policies and restrictions substantially similar to those of the investing Fund and will be subject to substantially the same risks.
The Fund may, consistent with its investment policies, invest in investment companies established to accumulate and hold a portfolio of securities that is intended to track the price performance and dividend yield of a well-known securities index. A 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 in accordance with its investment objective and policies. 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, a 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 their obligation to deliver the underlying security. This may result in a short-term gain or loss. A closing purchase transaction is the purchase of a call option (at a cost which may be more or less than the premium received for writing the original call option) on the same security, with the same exercise price and call period as the option previously written. If a Fund is unable to enter into a closing purchase transaction, it may be required to hold a security that it might otherwise have sold to protect against depreciation.
A "put option" gives the purchaser of the option the right to sell, and obligates the writer to buy, the underlying securities at the exercise price at any time during the option period. A put option sold by a Fund is covered when, among other things, the Fund segregates permissible liquid assets having a value equal to or greater than the exercise price of the option to fulfill the obligation undertaken. Writing listed put options may be a useful portfolio investment strategy when the Fund has cash or other reserves available for investment as a result of sales of Fund shares or when the investment manager believes a more defensive and less fully invested position is desirable in light of market conditions. The Fund will not purchase an option if, as a result of such purchase, more than 10% of its net assets would be invested in premiums for such options. The Fund may write covered put options to the extent that cover for such options does not exceed 15% of the Fund's net assets. The Fund may only sell (write) covered call options with respect to securities having an aggregate market value of less than 25% of the Fund's 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 Lord Abbett is incorrect in its expectation of changes in market prices or determination of the correlation between the securities on which options are based and a Fund's portfolio securities, the Funds may incur losses. The use of options can also increase a 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 that is unrelated to the coupon rate or date of maturity of the purchased security. The Fund requires at all times that the repurchase agreement be collateralized by cash or by securities of the U.S. Government, its agencies, its instrumentalities, or U.S. Government sponsored enterprises ("U.S. Government Securities") having a value equal to, or in excess of, the value of the repurchase agreement (including accrued interest). Such agreements permit a 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, a Fund sells a security to a securities dealer or bank for cash and also agrees to repurchase the same security later at a set price. Reverse repurchase agreements expose the Fund to credit risk (that is, the risk that the counterparty will fail to resell the security to the Fund). This risk is greatly reduced because the Fund generally receives cash equal to 98% 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 the Fund's net assets.
SECURITIES LENDING. Although the Fund has no current intention of doing so, the Fund may lend portfolio securities to registered broker-dealers. These loans may not exceed 30% of a Fund's total assets. Securities loans will be collateralized by cash or marketable securities issued or guaranteed by the U.S. Government Securities or other permissible means at least equal to 102% of the market value of the domestic securities loaned and 105% in the case of foreign securities loaned. A Fund may pay a part of the interest received with respect to the investment of collateral to a borrower and/or a third party that is not affiliated with the Fund and is acting as a "placing broker." No fee will be paid to affiliated persons of a Fund.
By lending portfolio securities, a 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 a 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 temporarily invest a substantial amount, or even all, of its assets in various short-term fixed-income securities to take a defensive position. These securities include:
- U.S. Government Securities.
- 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.
U.S. GOVERNMENT SECURITIES. The Fund, in accordance with its investment objective and policies, may invest in obligations of the U.S. Government and its agencies and instrumentalities, including Treasury bills, notes, bonds and certificates of indebtedness, that are issued or guaranteed as to principal or interest by the U.S. Treasury or U.S. Government sponsored enterprises.
SECURITIES OF GOVERNMENT SPONSORED ENTERPRISES. The Fund may invest in securities issued or guaranteed by agencies or instrumentalities of the U.S. Government, such as the Government National Mortgage Association ("Ginnie Mae"), Federal National Mortgage Association ("Fannie Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac"), and Federal Home Loan Banks ("FHL Banks"). Ginnie Mae is authorized to guarantee, with the full faith and credit of the United States Government, the timely payment of principal and interest on securities issued by institutions approved by Ginnie Mae (such as savings and loan institutions, commercial banks and mortgage bankers) and backed by pools of mortgages insured or guaranteed by the Federal Housing Administration, the Department of Veterans Affairs, the Rural Housing Service, or the U.S. Department of Housing and Urban Development. Both Fannie Mae and Freddie Mac are federally chartered public corporations owned entirely by their shareholders; the FHL Banks are federally chartered corporations owned by their member financial institutions. Although Fannie Mae, Freddie Mac, and the FHL Banks guarantee the timely payment of interest and ultimate collection of principal with respect to the securities they issue, their securities are not backed by the full faith and credit of the United States Government.
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 a Fund's custodian in order to pay for the commitment. There is a risk that market yields available at settlement may be higher than yields obtained on the purchase date 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. A 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.
POLICIES AND PROCEDURES GOVERNING DISCLOSURE OF PORTFOLIO HOLDINGS. The Board has adopted policies and procedures with respect to the disclosure of the Fund's portfolio holdings and ongoing arrangements making available such information to the general public, as well as to certain third parties on a selective basis. Among other things, the policies and procedures are reasonably designed to ensure that the disclosure is in the best interests of Fund shareholders and to address potential conflicts of interest between the Fund on the one hand and Lord Abbett and its affiliates or affiliates of the Fund on the other hand. Except as noted in the three instances below, the Fund does not provide portfolio holdings to any third party until they are made available to the general public on Lord Abbett's website at www.LordAbbett.com or otherwise. The exceptions are as follows:
1. The Fund may provide its portfolio holdings to (a) third parties that render services to the Fund relating to such holdings (i.e., pricing vendors, ratings organizations, custodians, external administrators, independent public accounting firms, counsel, etc.), as appropriate to the service being provided to the Fund, on a daily, monthly, calendar quarterly or annual basis within 15 days following the end of the period, and (b) third party consultants on a monthly or calendar quarterly basis within 15 days following period-end for the sole purpose of performing their own analyses with respect to the Fund. The Fund may discuss or otherwise share portfolio holdings or related information with counterparties that execute transactions on behalf of the Fund;
2. The Fund may provide portfolio commentaries or fact sheets containing, among other things, a discussion of select portfolio holdings and a list of up to the ten largest portfolio positions, and/or portfolio performance attribution information as of the month-end within 15 days thereafter to certain Financial Intermediaries; and
3. The Fund may provide its portfolio holdings or related information in response to governmental requests or subpoenas or in similar circumstances.
Before providing schedules of its portfolio holdings to a third party in advance of making them available to the general public, the Fund obtains assurances through contractual obligations, certifications or other appropriate means such as due diligence sessions and other meetings to the effect that: (i) neither the receiving party nor any of its officers, employees or agents will be permitted to take any holding-specific investment action based on the portfolio holdings, and (ii) the receiving party will not use or disclose the information except as it relates to rendering services for the Fund related to portfolio holdings, to perform certain internal analyses in connection with its evaluation of the Fund and/or its investment strategies, or for similar purposes. In addition and also in the case of other portfolio related information, written materials will contain appropriate legends requiring that the information be kept confidential and restricting the use of the information. An executive officer of the Fund approves these arrangements subject to the Board's review and oversight, and Lord Abbett provides reports at least semiannually to the Board concerning them. The Board also reviews the Fund's policies and procedures governing these arrangements on an annual basis. These policies and procedures may be modified at any time with the approval of the Board.
Neither the Fund, Lord Abbett nor any other party receives any compensation or other consideration in connection with any arrangement described in this section, other than fees payable to a service provider rendering services to the Fund related to the Fund's portfolio holdings. For these purposes, compensation does not include normal and customary fees that Lord Abbett or an affiliate may receive as a result of investors making investments in the Fund. Neither the Fund, Lord Abbett nor any of their affiliates has entered into an agreement or other arrangement with any third party recipient of portfolio related information under which the third party would maintain assets in the Fund or in other investment companies or accounts managed by Lord Abbett or any of its affiliated persons.
Lord Abbett's Compliance Department periodically reviews and evaluates Lord Abbett's adherence to the above policies and procedures, including the existence of any conflicts of interest between the Funds on the one hand and Lord Abbett and its affiliates or affiliates of the Fund on the other hand. The Compliance Department reports to the Board at least annually regarding its assessment of compliance with these policies and procedures.
FUND PORTFOLIO INFORMATION RECIPIENTS. Attached as Appendix A is a list of the third parties that may receive portfolio holdings information under the circumstances described above.
3.
MANAGEMENT OF THE FUND
The Board 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. 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. Generally, each Trustee holds office until his/her successor is elected and qualified or until his/her earlier resignation or removal, as provided in the Trust's organizational documents.
Lord, Abbett & 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 53 portfolios or series.
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION
YEAR OF BIRTH WITH TRUST DURING PAST FIVE YEARS OTHER DIRECTORSHIPS
------------- ---------- ---------------------- -------------------
ROBERT S. DOW Trustee since 1993; Managing Partner and Chief N/A
Lord, Abbett & Co. LLC Chairman since 1996 Executive Officer of Lord Abbett
90 Hudson Street since 1996.
Jersey City, NJ 07302
(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 53 portfolios or series.
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION
YEAR OF BIRTH WITH TRUST DURING PAST FIVE YEARS OTHER DIRECTORSHIPS
------------- ---------- ---------------------- -------------------
E. THAYER BIGELOW Trustee since 1994 Managing General Partner, Bigelow Currently serves as
Lord, Abbett & Co. LLC Media, LLC (since 2000); Senior director of Adelphia
c/o Legal Dept. Adviser, Time Warner Inc. (1998 - Communications, Inc.,
90 Hudson Street 2000); Acting Chief Executive Crane Co., and Huttig
Jersey City, NJ 07302 Officer of Courtroom Television Building Products Inc.
(1941) Network (1997 - 1998); President
and Chief Executive Officer of Time
Warner Cable Programming, Inc.
(1991 - 1997).
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CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION
YEAR OF BIRTH WITH TRUST DURING PAST FIVE YEARS OTHER DIRECTORSHIPS
------------- ---------- ---------------------- -------------------
WILLIAM H.T. BUSH Trustee since 1998 Co-founder and Chairman of the Currently serves as
Lord, Abbett & Co. LLC Board of the financial advisory director of WellPoint,
c/o Legal Dept. firm of Bush-O'Donnell & Company Inc. (since 2002), and
90 Hudson Street (since 1986). Engineered Support
Jersey City, NJ 07302 Systems, Inc. (since
(1938) 2000).
ROBERT B. CALHOUN, JR. Trustee since 1998 Managing Director of Monitor Currently serves as
Lord, Abbett & Co. LLC Clipper Partners (since 1997) and director of Avondale,
c/o Legal Dept. President of Clipper Asset Inc. and Interstate
90 Hudson Street Management Corp. (since 1991), both Bakeries Corp.
Jersey City, NJ 07302 private equity investment funds.
(1942)
JULIE A. HILL Trustee since 2004 Owner and CEO of the Hillsdale Currently serves as
Lord, Abbett & Co. LLC Companies, a business consulting director of WellPoint,
c/o Legal Dept. firm (since 1998); Founder, Inc.; Resources
90 Hudson Street President and Owner of the Connection Inc.; and
Jersey City, NJ 07302 Hiram-Hill and Hillsdale Holcim (US) Inc. (a
(1946) Development Companies (1998 - subsidiary of Holcim
2000). Ltd.).
FRANKLIN W. HOBBS Trustee since 2001 Former Chief Executive Officer of Currently serves as
Lord, Abbett & Co. LLC Houlihan Lokey Howard & Zukin, an director of Adolph Coors
c/o Legal Dept. investment bank (January 2002 - Company.
90 Hudson Street April 2003); Chairman of Warburg
Jersey City, NJ 07302 Dillon Read (1999 - 2001); Global
(1947) 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 1993 Retired - General Business and Currently serves as
Lord, Abbett & Co. LLC Governance Consulting (since 1992); director of H.J. Baker
c/o Legal Dept. formerly President and CEO of (since 2003).
90 Hudson Street Nestle Foods.
Jersey City, NJ 07302
(1933)
THOMAS J. NEFF Trustee since 1993 Chairman of Spencer Stuart (U.S.), Currently serves as
Lord, Abbett & Co. LLC an executive search consulting firm director of Ace, Ltd.
c/o Legal Dept. (since 1996); President of Spencer (since 1997) and Hewitt
90 Hudson Street Stuart (1979-1996). Associates, Inc.
Jersey City, NJ 07302
(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, NJ 07302.
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
YEAR OF BIRTH WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS
------------- ---------- ------------------- ----------------------
ROBERT S. DOW Chief Executive Elected in 1993 Managing Partner and Chief Executive Officer
(1945) Officer and of Lord Abbett (since 1996).
President
SHOLOM DINSKY Executive Vice Elected in 2003 Partner and Large Cap Value Investment
(1944) President Manager, joined Lord Abbett in 2000.
LESLEY-JANE DIXON Vice President Elected in 1999 Partner and Investment Manager, joined Lord
(1964) Abbett in 1995.
ROBERT P. FETCH Executive Vice Elected in 1999 Partner and Small-Cap Value Senior
(1953) President Investment Manager, joined Lord Abbett in
1995.
KENNETH G. FULLER Executive Vice Elected in 2003 Investment Manager - Large Cap Value, joined
(1945) President Lord Abbett in 2002; formerly Portfolio
Manager and Senior Vice President at Pioneer
Investment Management, Inc.
ROBERT I. GERBER Executive Vice Elected in 2005 Partner and Director of Taxable Fixed Income
(1954) President Management, joined Lord Abbett in 1997.
HOWARD E. HANSEN Executive Vice Elected in 2003 Partner and Investment Manager, joined Lord
(1961) President Abbett in 1995.
GERARD S. E. HEFFERNAN, JR. Executive Vice Elected in 1999 Partner and Research Analyst, joined Lord
(1963 President Abbett in 1998.
TODD D. JACOBSON Executive Vice Elected in 2003 Investment Manager, International Core
(1966) President Equity, joined Lord Abbett in 2003;
formerly Director and Portfolio Manager at
Warburg Pincus Asset Management and Credit
Suisse Asset Management (2002 - 2003);
prior thereto Associate Portfolio Manager
of Credit Suisse Asset Management.
VINCENT J. MCBRIDE Executive Vice Elected in 2003 Senior Investment Manager, International
(1964) President Core Equity, joined Lord Abbett in 2003;
formerly Managing Director and Portfolio
Manager at Warburg Pincus Asset Management
and Credit Suisse Asset Management.
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NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
YEAR OF BIRTH WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS
------------- ---------- ------------------- ----------------------
STEVEN MCBOYLE Executive Vice Elected in 2005 Senior Research Analyst-Small Cap Value,
(1969) President joined Lord Abbett in 2001; formerly Vice
President, Mergers & Acquisition of Morgan
Stanley (2000-2001).
ROBERT G. MORRIS Executive Vice Elected in 1998 Partner and Chief Investment Officer of Lord
(1944) President Abbett; joined Lord Abbett in 1991.
ELI M. SALZMANN Executive Vice Elected in 2003 Partner and Director of Institutional Equity
(1964) President Investments, joined Lord Abbett in 1997.
HAROLD E. SHARON Executive Vice Elected in 2003 Investment Manager and Director,
(1960) President International Core Equity, joined Lord
Abbett in 2003; formerly Financial Industry
Consultant for Venture Capitalist (2001 -
2003); prior thereto Managing Director of
Warburg Pincus Asset Management and Credit
Suisse Asset Management.
CHRISTOPHER J. TOWLE Executive Vice Elected in 2005 Partner and Investment Manager, joined Lord
(1957) President Abbett in 1987.
YAREK ARANOWICZ Vice President Elected in 2004 Investment Manager, joined Lord Abbett in
(1963) 2003; formerly Vice President, Head of
Global Emerging Markets Funds of Warburg
Pincus Asset Management and Credit Suisse
Asset Management.
JAMES BERNAICHE Chief Compliance Elected in 2004 Chief Compliance Officer, joined Lord Abbett
(1956) Officer in 2001; formerly Chief Compliance Officer
with Credit Suisse Asset Management.
JOAN A. BINSTOCK Chief Financial Elected in 1999 Partner and Chief Operations Officer, joined
(1954) Officer and Vice Lord Abbett in 1999.
President
DAVID G. BUILDER Vice President Elected in 2001 Equity Analyst, joined Lord Abbett in 1998.
(1954)
LAWRENCE H. KAPLAN Vice President and Elected in 1997 Partner and General Counsel, joined Lord
(1957) Secretary Abbett in 1997.
CHARLES P. MASSARE Vice President Elected 2005 Partner and Director of Quantitative
(1948) Research & Risk Management, joined Lord
Abbett in 1998.
A. EDWARD OBERHAUS, III Vice President Elected in 1993 Partner and Manager of Equity Trading,
(1959) joined Lord Abbett in 1983.
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F. THOMAS O'HALLORAN Vice President Elected in 2003 Partner and Investment Manager, joined Lord
(1955) Abbett in 2001; formerly Executive
Director/Senior Research Analyst at Dillon
Read/UBS Warburg.
TODOR PETROV Vice President Elected in 2003 Investment Manager, joined Lord Abbett in
(1974) 2003; formerly Associate Portfolio Manager
of Credit Suisse Asset Management.
CHRISTINA T. SIMMONS Vice President and Elected in 2000 Assistant General Counsel, joined Lord
(1957) Assistant Secretary Abbett in 1999.
BERNARD J. GRZELAK Treasurer Elected in 2003 Director of Fund Administration, joined Lord
(1971) Abbett in 2003, formerly Vice President,
Lazard Asset Management LLC (2000-2003),
prior thereto Manager of Deloitte & Touche
LLP.
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COMMITTEES
The standing committees of the Board 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 and Ms. Hill. The Audit Committee provides assistance to the Board in fulfilling its responsibilities relating to accounting matters, the reporting practices of the Fund, and the quality and integrity of the Fund's financial reports. Among other things, the Audit Committee is responsible for reviewing and evaluating the performance and independence of the Fund's independent public accounting firm 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 shall (i) monitor the actions of Lord Abbett in voting securities owned by the Fund; (ii) evaluate the policies of Lord Abbett in voting securities; and (iii) meet with Lord Abbett to review the policies in voting securities, the sources of information used in determining how to vote on particular matters, and the procedures used to determine the votes in any situation where there may be a conflict of interest. During the past fiscal year, the Proxy Committee met six times.
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 four times. The Nominating and Governance Committee has adopted policies with respect to its consideration of any individual recommended by the Fund's shareholders to serve as an independent Trustee. A shareholder who would like to recommend a candidate may write to the Fund.
The Contracts Committee consists of all Trustees who are not "interested persons" of the Fund. The Contracts Committee conducts much of the factual inquiry undertaken by the trustees in connection with the Board's annual consideration of whether to renew the management and other contracts with Lord Abbett and Lord Abbett Distributor. Although the Contracts Committee did not hold any formal meeting during the last fiscal year, members of the Committee conducted inquiries into the portfolio management approach and results of Lord Abbett, and reported the results of those inquiries to the Nominating and Governance Committee.
COMPENSATION DISCLOSURE
The following table summarizes the compensation for each of the directors/trustees of 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, 2004
OCTOBER 31, 2005 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 $ 7,358 $ 127,364
William H.T. Bush $ 7,478 $ 126,320
Robert B. Calhoun, Jr. $ 8,852 $ 127,000
Julie A. Hill $ 7,672 $ 111,417
Franklin W. Hobbs $ 7,944 $ 118,500
C. Alan MacDonald $ 7,838 $ 131,320
Thomas J. Neff $ 7,775 $ 117,000
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(1) Independent Trustees' fees, including attendance fees for board and committee meetings, are allocated among all Lord Abbett-sponsored funds based on the net assets of the fund. A portion of the fees payable by the Trust to its independent Trustees may be deferred at the option of a Trustee under an equity-based plan (the "equity-based plan") that deems the deferred amounts to be invested in shares of a Fund for later distribution to the Trustees. In addition, $25,000 of each Trustee's retainer must be deferred and is deemed invested in shares of the 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 $1,291, $1,983, $8,852, $3,828, $7,944, $1,291 and $7,775, 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, 2004, 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, 2004. The amounts shown include deferred compensation to the Trustees deemed invested in fund shares. The amounts ultimately received by the Trustees under the deferred compensation plan will be directly linked to the investment performance of the funds.
Dollar Range of Equity Securities in the Fund
AGGREGATE DOLLAR RANGE OF
VALUE OPPORTUNITIES EQUITY SECURITIES IN LORD
NAME OF TRUSTEE FUND ABBETT-SPONSORED FUNDS
--------------- ---- ----------------------
Robert S. Dow None Over $100,000
E. Thayer Bigelow None Over $100,000
William H. T. Bush None Over $100,000
Robert B. Calhoun, Jr. None Over $100,000
Julie A. Hill None $50,001-$100,000
Franklin W. Hobbs None Over $100,000
C. Alan MacDonald None Over $100,000
Thomas J. Neff 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 the Advisory Group.
PROXY VOTING
The Fund has delegated proxy voting responsibilities to the Fund's investment adviser, Lord Abbett, subject to the Proxy Committee's general oversight. Lord Abbett has adopted its own proxy voting policies and procedures for this purpose. A copy of Lord Abbett's proxy voting policies and procedures is attached as Appendix B.
In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the twelve months ending June 30th, no later than August 31st of each year. The first such filing is expected to be filed by August 31, 2006, for the period ending June 30, 2006.
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 anticipated that overtime this percentage of ownership will decrease.
5.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
As described under "Management" in the Prospectus, Lord Abbett is the Funds'
investment adviser. The following partners of Lord Abbett are also officers of
the Trust: Joan A. Binstock, John J. DiChiaro, Sholom Dinsky, Lesley-Jane Dixon,
Robert P. Fetch, Daniel H. Frascarelli, Robert I. Gerber, Howard E. Hansen,
Gerard S.E. Heffernan, Lawrence H. Kaplan, Charles P. Massare, Robert G. Morris,
A. Edward Oberhaus, III, F. Thomas O'Halloran, Eli M. Salzmann, and Christopher
J. Towle. Robert S. Dow is the managing partner of Lord Abbett and an officer
and Trustee of the Trust. The other partners of Lord Abbett are: Michael Brooks,
Zane E. Brown, Patrick Browne, Milton Ezrati, Kevin P. Ferguson, Daria L.
Foster, Robert I. Gerber, Michael S. Goldstein, Michael A. Grant, Charles Hofer,
W. Thomas Hudson, Cinda Hughes, Ellen G. Itskovitz, Richard Larsen, Jerald
Lanzotti, Robert A. Lee, Maren Lindstrom, Gregory M. Macosko, Thomas Malone,
Paul McNamara, Robert J. Noelke, R. Mark Pennington, Walter Prahl, Michael
Radziemski, Douglas B. Sieg, Richard Sieling, Michael T. Smith, Richard Smola,
Jarrod Sohosky, Diane Tornejal, Edward von der Linde, and Marion Zapolin. The
address of each partner is 90 Hudson Street, Jersey City, NJ 07302-3973.
Under the Management Agreement between Lord Abbett and the Fund, the Fund pays Lord Abbett a monthly fee, based on average daily net assets for each month. These fees are allocated among the classes based on the classes' proportionate share of such average daily net assets. The annual rate for the Value Opportunities Fund is 0.75% of 1% on the 1st 1 billion, .70% of 1% on the next 1 billion and .65 of 1% on assets over 2 billion for Class Y shares.
CONTRACTUAL WAIVERS
For the year ending October 31, 2006, Lord Abbett has contractually agreed to reimburse a portion of the Fund's expenses so that the Fund's Net Annual Operating Expenses do not exceed an aggregate annual rate of 0.95% of average daily net assets for Class Y Shares.
INVESTMENT MANAGERS
As stated in the Prospectus, Lord Abbett uses a team of investment managers and analysts acting together to manage the investments of the Fund.
Steven R. McBoyle heads the team of the Value Opportunities Fund and is primarily responsible for the day-to-day management of the Fund.
The following table indicates for the Fund as of November 30, 2005: (1) the number of other accounts managed by each investment manager who is primarily responsible for the day-to-day management of the Fund within certain categories of investment vehicles; and (2) the total assets in such accounts managed within each category. For each of the categories a footnote to the table also provides the number of accounts and the total assets in the accounts with respect to which the management fee is based on the performance of the account. Included in the Registered Investment Companies or mutual funds category are those U.S. registered funds managed or sub-advised by Lord Abbett, including funds underlying variable annuity contracts and variable life insurance policies offered through insurance companies. The Other Pooled Investment Vehicles category includes collective investment funds, offshore funds and similar non-registered investment vehicles. Lord Abbett does not manage any hedge funds. The Other Accounts category encompasses Retirement and Benefit Plans (including both defined contribution and defined benefit plans) sponsored by various corporations and other entities, individually managed institutional accounts of various corporations, other entities and individuals, and separately managed accounts in so-called wrap fee programs sponsored by Financial Intermediaries unaffiliated with Lord Abbett. (The data shown below are approximate.)
OTHER ACCOUNTS MANAGED (# AND TOTAL ASSETS IN MILLIONS)*
--------------------------------------------------------
OTHER POOLED
REGISTERED INVESTMENT INVESTMENT
FUND NAME COMPANIES VEHICLES OTHER ACCOUNTS
---- ---- --------- -------- --------------
Value Opportunities
Fund Steven R. McBoyle 0 / $0 0 / $0 1 / $1,198,659
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* Included in the number of accounts and total assets are 0 accounts with respect to which the management fee is based on the performance of the account.
Conflicts of interest may arise in connection with the investment managers' management of the investments of the Fund and the investments of the other accounts included in the table above. Such conflicts may arise with respect to the allocation of investment opportunities among the Fund and other accounts with similar investment objectives and policies. An investment manager potentially could use information concerning the Fund's transactions to the advantage of other accounts and to the detriment of the Fund. To address these potential conflicts of interest, Lord Abbett has adopted and implemented a number of policies and procedures. Lord Abbett has adopted Policies and Procedures for Evaluating Best Execution of Equity Transactions, as well as Trading Practices/Best Execution Procedures. The objective of these policies and procedures is to ensure the fair and equitable treatment of transactions and allocation of investment opportunities on behalf of all accounts managed by Lord Abbett. In addition, Lord Abbett's Code of Ethics sets forth general principles for the conduct of employee personal securities transactions in a manner that avoids any actual or potential conflicts of interest with the interests of Lord Abbett's clients including the Fund. Moreover, Lord Abbett's Statement of Policy and Procedures on Receipt and Use of Inside Information sets forth procedures for personnel to follow when they have inside information. Lord Abbett is not affiliated with a full service broker-dealer and therefore does not execute any portfolio transactions through such an entity, a structure that could give rise to additional conflicts. Lord Abbett does not conduct any investment bank functions and does not manage any hedge funds. Lord Abbett does not believe that any material conflicts of interest exist in connection with the investment managers' management of the investments of the Fund and the investments of the other accounts referenced in the table above.
COMPENSATION OF INVESTMENT MANAGERS
Lord Abbett compensates its investment managers on the basis of salary, bonus and profit sharing plan contributions. The level of compensation takes into account the investment manager's experience, reputation and competitive market rates.
Fiscal year-end bonuses, which can be a substantial percentage of base level compensation, are determined after an evaluation of various factors. These factors include the investment manager's investment results and style consistency, the dispersion among funds with similar objectives, the risk taken to achieve the fund returns, and similar factors. Investment results are evaluated based on an assessment of the investment manager's three- and five-year investment returns on a pre-tax basis vs. both the appropriate style benchmarks and the appropriate peer group rankings. Finally, there is a component of the bonus that reflects leadership and management of the investment team. The evaluation does not follow a formulaic approach, but rather is reached following a review of these factors. No part of the bonus payment is based on the investment manager's assets under management, the revenues generated by those assets, or the profitability of the investment manager's unit. Lord Abbett does not manage hedge funds. Lord Abbett may designate a bonus payment of a manager for participation in the firm's senior incentive compensation plan, which provides for a deferred payout over a five-year period. The plan's earnings are based on the overall asset growth of the firm as a whole. Lord Abbett believes this incentive focuses investment managers on the impact their fund's performance has on the overall reputation of the firm as a whole and encourages exchanges of investment ideas among investment professionals managing different mandates.
Lord Abbett provides a 401(k) profit-sharing plan for all eligible employees. Contributions to an investment manager's profit-sharing account are based on a percentage of the investment manager's total base and bonus paid during the fiscal year, subject to a specified maximum amount. The assets of this profit-sharing plan are entirely invested in Lord Abbett-sponsored funds.
HOLDINGS OF INVESTMENT MANAGERS
The following table indicates for the Fund the dollar range of shares beneficially owned by each investment manager who is primarily responsible for the day-to-day management of the Fund, as of November 30, 2005. This table includes the value of shares beneficially owned by such investment managers through 401(k) plans and certain other plans or accounts, if any.
DOLLAR RANGE OF SHARES IN THE PORTFOLIO
-----------------------------------------------------------------------------
$1- $10,001- $50,001- $100,001- $500,001- OVER
FUND NAME NONE $10,000 $50,000 $100,000 $500,000 $1,000,000 $1,000,000
---- ---- ---- ------- ------- -------- -------- ---------- ----------
Value Opportunites Steven R. McBoyle* X
Fund
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* The Fund had not commenced investment operations as of November 30, 2005.
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 of 1%. This fee is 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 a
subsidiary of Lord Abbett, 90 Hudson Street, Jersey City, NJ 07302-3973, serves
as the principal underwriter for the Fund.
CUSTODIAN AND ACCOUNTING AGENT
State Street Bank & Trust Company, 801 Pennsylvania Avenue, Kansas City, MO
64105, 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
depositories. In addition, State Street Bank & Trust Company performs certain
accounting and record keeping functions relating to portfolio transactions and
calculates the Fund's net asset value.
TRANSFER AGENT
DST Systems, Inc., 210 W. 10th St., Kansas City, MO, 64106, acts as the transfer
agent and dividend disbursing agent for the Fund.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP, Two World Financial Center, New York, NY, 10281, is the Independent Registered Public Accounting Firm of the Fund and must be approved at least annually by the Fund's Board to continue in such capacity. Deloitte & Touche LLP performs 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
Lord Abbett's and 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 may pay, as described below, a higher commission than some brokers might charge on the same transaction. Lord Abbett's and the Fund's 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 to obtain best execution of the Fund's portfolio transactions. 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 seeking best execution.
In transactions on stock exchanges in the United States, commissions are typically 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.
The Fund pays a commission rate that Lord Abbett believes is appropriate to give maximum assurance that the Fund's brokers will provide the Fund, on a continuing basis, with the highest level of brokerage services available. While Lord Abbett does not always seek the lowest possible commissions on particular trades, Lord Abbett believes that the Fund's commission rates are in line with the rates that many other institutions pay. The Fund's 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 the Fund and the other accounts Lord Abbett manages. Such services include showing the Fund 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.
While neither Lord Abbett nor the Fund obtains third party research services from brokers executing portfolio transactions for the Fund, some of these brokers may provide proprietary research services, at least some of which are useful to Lord Abbett in its overall responsibilities with respect to the Fund and the other accounts Lord Abbett manages. In addition, Lord Abbett purchases third party research with its own funds. Research includes the furnishing of analyses and reports concerning issuers, industries, securities, economic factors and trends, and portfolio strategy. Such services may be used by Lord Abbett in servicing all its accounts, and not all of such services will necessarily be used by Lord Abbett in connection with its 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 its management of the Fund, and not all of such services will necessarily be used by Lord Abbett in connection with its advisory services to such other accounts. Lord Abbett cannot allocate research services received from brokers to any particular account, research services are not a substitute for Lord Abbett's services but are supplemental to its own research
effort and, when utilized, are subject to internal analysis before being incorporated by Lord Abbett into its 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 proprietary research services from brokerage firms has not reduced Lord Abbett's normal research activities, the expenses of Lord Abbett could be increased if it attempted to generate such additional information through its own staff.
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.
Lord Abbett seeks to combine or "batch" purchases or sales of a particular security placed at the same time for similarly situated accounts, including the Fund, to facilitate "best execution" and to reduce other transaction costs, if relevant. Each account that participates in a particular batched order, including the Fund, will do so at the average share price for all transactions related to that order in that security on that business day. Lord Abbett generally allocates securities purchased or sold in a batched transaction among participating accounts in proportion to the size of the order placed for each account (i.e., pro-rata). Lord Abbett, however, may increase or decrease the amount of securities allocated to one or more accounts if necessary to avoid holding odd-lot or small numbers of shares in a client account. In addition, if Lord Abbett is unable to execute fully a batched transaction and determines that it would be impractical to allocate a small number of securities on a pro-rata basis among the participating accounts, Lord Abbett allocates the securities in a manner it determines to be fair to all accounts over time.
At times, Lord Abbett is not able to batch purchases and sales for all accounts or products it is managing, such as when an individually-managed account client directs us to use a particular broker for a trade (sometimes referred to as "directed accounts"), or when Lord Abbett is placing transactions for separately managed account programs (sometimes referred to as "wrap programs"). When it does not batch purchases and sales, Lord Abbett usually uses a rotation process for placing equity transactions on behalf of the different groups of accounts or products with respect to which transactions are communicated to the trading desk or placed at or about the same time. Generally, Lord Abbett will place trades first for transactions on behalf of the Lord Abbett funds and non-directed individually-managed institutional accounts, second for wrap programs, by program, and finally for directed accounts.
7.
CLASSES OF SHARES
The Fund offers different classes of shares to eligible purchasers. Only Class Y shares are offered in this SAI. The different classes of shares represent investments in the same portfolio of securities but are subject to different expenses and will likely have different share prices.
All 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 registered public accounting firm, the approval of a contract with a principal underwriter and the election of directors from the separate voting requirements.
The Fund's By-Laws provide that the Fund shall not hold a meeting of its shareholders in any year unless one or more matters are required to be acted on by shareholders under the Act, or unless called by a majority of the Board or by shareholders holding at least one quarter of the stock of the Fund outstanding and entitled to vote at the meeting. When any such meeting is held, the shareholders will elect directors.
8.
PURCHASES, REDEMPTIONS, PRICING AND PAYMENTS TO DEALERS
Information concerning how we value Fund shares is contained in the Prospectus under "Purchases" and "Redemptions."
The Fund's Board has adopted policies and procedures that are designed to prevent or stop excessive trading and market timing. Please see the Prospectus under "Purchases."
Under normal circumstances we calculate the Fund's net asset value as of the close of the NYSE on each day that the NYSE is open for trading by dividing our total net assets by the number of shares outstanding at the time of calculation. The NYSE is closed on Saturdays and Sundays and the following holidays -- New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
Portfolio securities are valued at market value as of the close of the NYSE. Market value will be determined as follows: securities listed or admitted to trading privileges on any national or foreign securities exchange, or on the NASDAQ National Market System are valued at the last sale price, or, if there is no sale on that day, at the last bid, or, in the case of bonds, in the over-the-counter market if that market more accurately reflects the market value of the bonds. Unlisted equity securities are valued at the last transaction price, or, if there were no transactions that day, at the mean between the last bid and asked prices. Over-the-counter fixed income securities are valued at prices supplied by independent pricing services, which reflect broker-dealer-supplied valuations and electronic data processing techniques reflecting the mean between the bid and asked prices. 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 an independent pricing service at the close of regular trading on the London Stock Exchange. If such exchange rates are not available, the rate of exchange will be determined in accordance with the policies established by the Board.
The net asset value per share for the Class Y shares will be determined by taking the net assets and dividing by the number of Class Y shares outstanding. Our Class Y shares will be offered at net asset value.
CLASS Y SHARE EXCHANGES. The Prospectus briefly describes the Telephone Exchange Privilege. You may exchange some or all of your Class Y shares for Class Y shares of any Lord Abbett-sponsored funds currently offering Class Y shares to the public. You should read the prospectus of the other fund before exchanging. In establishing a new account by exchange, shares of the fund being exchanged must have a value equal to at least the minimum initial investment required for the other fund into which the exchange is made. We reserve the right to reject or restrict any purchase order or exchange request if the Fund or Lord Abbett Distributor determines that it is in the best interest of the Fund and its shareholders. The Fund is designed for long-term investors and is not designed to serve as a vehicle for frequent trading in response to short-term swings in the market.
REDEMPTIONS. A redemption order is in proper form when it contains all of the information and documentation required by the order form or otherwise by Lord Abbett Distributor or the Fund to carry out the order. 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 60 days' prior written notice will be given before any such redemption, during which time shareholders may avoid redemption by bringing their accounts up to the minimum set by the Board.
REVENUE SHARING AND OTHER PAYMENTS TO DEALERS AND FINANCIAL INTERMEDIARIES. As described in the Fund's prospectus, Lord Abbett or Lord Abbett Distributor, in their sole discretion, at their own expense and without cost to the Fund or shareholders, also may make payments to dealers and other firms authorized to accept orders for Fund shares (collectively, "Dealers") in connection with marketing and/or distribution support for Dealers, shareholder servicing, entertainment, training and education activities for the Dealers, their investment professionals and/or their clients or potential clients, and/or
the purchase of products or services from such Dealers. Some of these payments may be referred to as revenue sharing payments. As of the date of this statement of additional information, the Dealers to whom Lord Abbett or Lord Abbett Distributor makes revenue sharing payments (not including payments for entertainment, and training and education activities for the Dealers, their investment professionals and/or their clients or potential clients) with respect to the Fund and/or other Lord Abbett Funds were as follows:
Allstate Life Insurance Company Morgan Stanley DW, Inc.
Allstate Life Insurance Company of New York National Financial Partners
A.G. Edwards & Sons, Inc. Piper Jaffrey & Co.
B.C. Ziegler and Company Protective Life Insurance Company
Bodell Overcash Anderson & Co., Inc. Prudential Investment Management Services LLC
Cadaret, Grant & Co., Inc. RBC Dain Rauscher
Citigroup Global Markets, Inc. Raymond James & Associates, Inc.
Edward D. Jones & Co. Raymond James Financial Services, Inc.
Family Investors Company Sun Life Assurance Company of Canada
James I. Black & Co. The Travelers Insurance Company
Legg Mason Wood Walker, Inc. The Travelers Life and Annuity Company
McDonald Investments Inc. UBS Financial Services Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated Wachovia Securities, LLC
(and/or certain of its affiliates)
Metlife Securities, Inc.
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For more specific information about any revenue sharing payments made to your Dealer, investors should contact their investment professionals.
Thomas J. Neff, an independent trustee of the Fund, is a director of Hewitt Associates, Inc. and owns less than .01 of 1% of the outstanding shares of Hewitt Associates, Inc. Hewitt Associates is a global human resources outsourcing and consulting firm with approximately $2.2 billion in revenue in fiscal 2004. Hewitt Associates LLC, a subsidiary of Hewitt Associates, Inc., may receive recordkeeping payments from the Fund and/or other Lord Abbett-sponsored funds. In the twelve months ended October 31, 2005, Hewitt Associates LLC received recordkeeping payments totaling approximately $414,000 from all of the Lord Abbett-sponsored Funds in the aggregate.
REDEMPTIONS IN KIND. Under circumstances in which it is deemed detrimental to the best interests of the Fund's shareholders to make redemption payments wholly in cash, the Fund may pay any portion of a redemption in excess of the lesser of $250,000 or 1% of the Fund's net assets by a distribution in kind of readily marketable securities in lieu of cash. 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 has elected, has qualified, and intends 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 and when such income is distributed, such distributions will be further taxed at the shareholder level. 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 income from investments. Dividends paid by the Fund from its ordinary income or net realized short-term capital gains are taxable to you as ordinary income; however, certain qualified dividend income that the Fund receives and distributes to you is subject to a reduced tax rate of 15% (5% if you are in the 10% or 15% tax brackets) if you meet the general requirement of having held your Fund shares for more than 60 days, and you satisfy certain other requirements.
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. The maximum federal income tax rates applicable to net capital gains recognized by individuals and other non-corporate taxpayers are currently (i) the same as ordinary income tax rates for capital assets held for one year or less, and (ii) 15% (5% for taxpayers in the 10% or 15% tax brackets) for capital assets held for more than one year. You should also be aware that the benefits of the long-term capital gains and qualified dividend rates may be reduced if you are subject to the alternative minimum tax. Capital gains recognized by corporate shareholders are subject to tax at the ordinary income tax rates applicable to corporations. All dividends are taxable regardless of whether they are received in cash or reinvested in Fund shares.
The Fund's net capital losses for any year cannot be passed through to you but can be carried forward for a period of years to offset the Fund's capital gains in those years. To the extent capital gains are offset by such losses, they do not result in tax liability to the Fund and are not expected to be distributed to you as long-term capital gains dividends.
Dividends paid by the Fund to corporate shareholders may qualify for the dividends received deduction to the extent they are derived from dividends paid to the Fund by domestic corporations. If you are a corporation, you must have held your Fund shares for more than 45 days to qualify for the dividends received deduction. The dividends received deduction may be limited if you incur indebtedness to acquire Fund shares, and may result in reduction to the basis of your shares in the Fund if the dividend constitutes an extraordinary dividend at the Fund level.
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.
At the time of your purchase of Fund shares, a portion of the purchase price may be attributable to realized or unrealized appreciation in the Fund's portfolio or to undistributed taxable income of the Fund. Consequently, subsequent distributions by the Fund with respect to these shares from such appreciation or income may be taxable to you even if the net asset value of your shares is, as a result of the distributions, reduced below your cost for such shares and the distributions economically represent a return of a portion of your investment.
In general, if Fund shares are sold, you will recognize gain or loss equal to the difference between the amount realized on the sale and your adjusted basis in the shares. Such gain or loss generally will be treated as long-term capital gain or loss if the shares were held for more than one year and otherwise generally will be treated as short-term capital gain or loss. However, if your holding period in your Fund shares is six months or less, any capital loss realized from a sale, exchange, or redemption of such shares must be treated as long-term capital loss to the extent of 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.
If your Fund shares are redeemed by a distribution of securities, you will be taxed as if you had received cash equal to the fair market value of the securities. Consequently, you will have a fair market value basis in the securities.
Under Treasury regulations, if you are an individual and recognize a loss with respect to Fund shares of $2 million or more (if you are a corporation, $10 million or more) in any single taxable year (or greater amounts over a combination of years), you may be required to file a disclosure statement with the Internal Revenue Service.
Certain investment practices that the Fund may utilize, such as investing in options, futures, forward contracts, short sales, foreign currency, or foreign entities classified as "passive foreign investment companies" for U.S. tax purposes, may affect the amount, 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 the Fund will not be eligible to pass through to you the ability 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 redemptions ("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, the number that you have provided is incorrect or backup withholding is applicable as a result of your previous underreporting of interest or dividend income. When establishing an account, you must certify under penalties of perjury that your 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, NJ 07302-3973, serves as the principal underwriter for the Fund. The Fund has entered into a distribution agreement with Lord Abbett Distributor, under which Lord Abbett Distributor is obligated to use its best efforts to find purchasers for the shares of the 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
APPENDIX A
FUND PORTFOLIO INFORMATION RECIPIENTS
The following is a list of the third parties that may receive portfolio holdings or related information under the circumstances described above under Investment Policies - Policies and Procedures Governing Disclosure of Portfolio Holdings:
PORTFOLIO COMMENTARIES,
FACT SHEETS, PERFORMANCE
PORTFOLIO HOLDINGS ATTRIBUTION INFORMATION
(ITEM #1)* (ITEM #2)*
ABN-AMRO Asset Management Monthly
ADP Retirement Services Monthly
AG Edwards Monthly
AIG SunAmerica Monthly
Allstate Life Insurance Company Monthly
Alpha Investment Consulting Group LLC Monthly
American Express Retirement Services Monthly
American United Life Insurance Company Monthly
AMG Monthly
Amivest Capital Management Monthly
Amvescap Retirement Monthly
AON Consulting Monthly
Arnerich Massena & Associates, Inc. Monthly Monthly
Asset Performance Partners Monthly
Asset Strategies Portfolio Services, Inc. Monthly
AXA Financial Services Monthly
Bank of America Corporation Monthly
Bank of New York Monthly
Bank of Oklahoma Monthly
Bank One Monthly
BC Zeigler Monthly
Becker, Burke Associates Monthly Monthly
Bellweather Consulting Monthly
Berthel Schutter Monthly Monthly
BilkeyKatz Investment Consultants Monthly
Brown Brothers Harriman Monthly
Buck Consultants, Inc. Monthly
Callan Associates Inc. Monthly Monthly
Cambridge Associates LLC Monthly
Cambridge Financial Services Monthly
Ceridian Monthly
Charles Schwab & Co Monthly
Chicago Trust Company Monthly
CIBC Oppenheimer Monthly
CitiStreet Retirement Services Monthly
Clark Consulting Monthly
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PORTFOLIO COMMENTARIES,
FACT SHEETS, PERFORMANCE
PORTFOLIO HOLDINGS ATTRIBUTION INFORMATION
(ITEM #1)* (ITEM #2)*
Columbia Funds Monthly
Columbia Management Group Monthly
Columbia Trust Company Monthly
Concord Advisory Group Ltd. Monthly Monthly
Consulting Services Group, LP Monthly
Copic Financial Monthly
CPI Qualified Plan Consultants Monthly
CRA RogersCasey Monthly
Curcio Webb Monthly Monthly
D.A. Davidson Monthly
Dahab Assoc. Monthly
Daily Access Monthly
Defined Contribution Advisors, Inc. Monthly
Delaware Investment Advisors Monthly
DeMarche Associates, Inc. Monthly
DiMeo Schneider & Associates Monthly
Disabato Associates, Inc. Monthly
Diversified Investment Advisors, Inc. Monthly
EAI Monthly
Edward Jones Monthly
Ennis, Knupp & Associates Monthly
Federated Investors Monthly
Fidelity Investment Monthly
Fidelity Investments Monthly
Fifth Third Bank Monthly
First Mercantile Trust Co. Monthly
FleetBoston Financial Corp. Monthly
Franklin Templeton Monthly
Freedom One Investment Advisors Monthly
Frost Bank Monthly
Fuji Investment Management Co., Ltd. Monthly
Fund Evaluation Group, Inc. Monthly
Goldman Sachs Monthly
Great West Life and Annuity Insurance Company Monthly
Greenwich Associates Monthly
Guardian Life Insurance Monthly
Hartford Life Insurance Company Monthly
Hartland & Co. Monthly
Hewitt Financial Services, LLC Monthly
Hewitt Investment Group Monthly
Highland Consulting Associates, Inc. Monthly
Holbien Associates, Inc. Monthly
Horace Mann Life Insurance Company Monthly
|
PORTFOLIO COMMENTARIES,
FACT SHEETS, PERFORMANCE
PORTFOLIO HOLDINGS ATTRIBUTION INFORMATION
(ITEM #1)* (ITEM #2)*
HSBC Monthly
ICMA Retirement Corp. Monthly
ING Monthly
Intuit Monthly
INVESCO Retirement Services Monthly
Invesmart Monthly
Investment Consulting Services, LLC Monthly
Invivia Monthly
Irish Life Inter. Managers Monthly
Janney Montgomery Scott LLC Monthly
Jefferson National Life Insurance Company Monthly
Jeffrey Slocum & Associates, Inc. Monthly Monthly
JP Morgan Consulting Monthly
JP Morgan Fleming Asset Management Monthly
JP Morgan Investment Management Monthly
Kmotion, Inc. Monthly
LCG Associates, Inc. Monthly
Legacy Strategic Asset Mgmt. Co. Monthly
Legg Mason Monthly
Lincoln Financial Monthly
LPL Financial Services Monthly
Manulife Financial Monthly
Marco Consulting Group Monthly
Marquette Associates, Inc. Monthly
MassMutual Financial Group Monthly
McDonald Monthly
Meketa Investment Group Monthly
Mellon Employee Benefit Solutions Monthly
Mellon Human Resources & Investor Solutions Monthly
Mercer HR Services Monthly
Mercer Investment Consulting Monthly
Merrill Lynch Monthly
Merrill Lynch, Pierce, Fenner & Smith, Inc. Monthly
MetLife Monthly
MetLife Investors Monthly
MFS Retirement Services, Inc. Monthly
MFS/Sun Life Financial Distributors, Inc. Monthly
(MFSLF)
Midland National Life Monthly
Milliman & Robertson Inc. Monthly
Minnesota Life Insurance Company Monthly
ML Benefits & Investment Solutions Monthly
Monroe Vos Consulting Group, Inc. Monthly
|
PORTFOLIO COMMENTARIES,
FACT SHEETS, PERFORMANCE
PORTFOLIO HOLDINGS ATTRIBUTION INFORMATION
(ITEM #1)* (ITEM #2)*
Morgan Keegan Monthly
Morgan Stanley Dean Witter Monthly
MorganStanley Monthly
Morningstar Associates, Inc. Monthly
National City Bank Monthly
Nationwide Financial Monthly
NCCI Holdings, Inc. Monthly
New England Pension Consultants Monthly
New York Life Investment Management Monthly
Nordstrom Pension Consulting (NPC) Monthly
NY Life Insurance Company Monthly
Oxford Associates Monthly
Palmer & Cay Investment Services Monthly
Paul L. Nelson & Associates Monthly
Peirce Park Group Monthly
Pension Consultants, Inc. Monthly
PFE Group Monthly
PFM Group Monthly
PFPC, Inc. Monthly
Phoenix Life Insurance Company Monthly
Piper Jaffray/ USBancorp Monthly
Planco Monthly
PNC Advisors Monthly
Portfolio Evaluations, Inc. Monthly
Prime, Buchholz & Associates, Inc. Monthly
Protective Life Corporation Monthly
Prudential Financial Monthly
Prudential Investments Monthly
Prudential Securities, Inc. Monthly
Putnam Investments Monthly
Quant Consulting Monthly
R.V. Kuhns & Associates, Inc. Monthly
Raymond James Financial Monthly
RBC Dain Rauscher Monthly
Rocaton Investment Advisors, LLC Monthly
Ron Blue & Co. Monthly
Roszel Advisors, LLC (MLIG) Monthly
Scudder Investments Monthly
Segal Advisors Monthly
SEI Investment Monthly
Shields Associates Monthly
Smith Barney Monthly
Spagnola-Cosack, Inc. Monthly
Standard & Poor's Monthly
|
PORTFOLIO COMMENTARIES,
FACT SHEETS, PERFORMANCE
PORTFOLIO HOLDINGS ATTRIBUTION INFORMATION
(ITEM #1)* (ITEM #2)*
Stanton Group Monthly
Stearne, Agee & Leach Monthly
Stephen's, Inc. Monthly
Stifel Nicolaus Monthly
Strategic Advisers, Inc. Monthly
Strategic Investment Solutions Monthly
Stratford Advisory Group, Inc. Monthly
Summit Strategies Group Monthly
Sun Life Financial Distributors, Inc. Monthly
T. Rowe Price Associates, Inc. Monthly
TD Asset Management Monthly
The 401k Company Monthly
The Carmack Group, Inc. Monthly
The Managers Fund Monthly
The Vanguard Group Monthly
Towers Perrin Monthly
Transamerica Retirement Services Monthly
Travelers Life & Annuity Company Monthly
UBS- Prime Consulting Group Monthly
UMB Monthly
Union Bank of California Monthly
US Bank Monthly
USI Retirement Monthly
Valic Monthly
Vanguard Monthly
Victory Capital Management Monthly
Vestek Systems, Inc. Monthly
Wachovia Bank Monthly
Watson Wyatt Worldwide Monthly Monthly
Welch Hornsby Monthly
Wells Fargo Monthly
William M. Mercer Consulting Inc. Monthly
Wilshire Associates Incorporated Monthly
Wurts & Associates Monthly Monthly
Wyatt Investment Consulting, Inc. Monthly
Yanni Partners Monthly
|
APPENDIX B
November 8, 2005
LORD, ABBETT & CO. LLC
PROXY VOTING POLICIES AND PROCEDURES
INTRODUCTION
Lord Abbett has a Proxy Committee responsible for establishing voting policies and for the oversight of its proxy voting process. Lord Abbett's Proxy Committee consists of the portfolio managers of each investment team and certain members of those teams, the Director of Equity Investments, the Firm's Managing Member and its General Counsel. Once policy is established, it is the responsibility of each investment team leader to assure that each proxy for that team's portfolio is voted in a timely manner in accordance with those policies. In each case where an investment team declines to follow a recommendation of a company's management, a detailed explanation of the reason(s) for the decision is entered into the proxy voting system. Lord Abbett has retained Institutional Shareholder Services ("ISS") to analyze proxy issues and recommend voting on those issues, and to provide assistance in the administration of the proxy process, including maintaining complete proxy voting records.
The Boards of Directors of each of the Lord Abbett Mutual Funds
established several years ago a Proxy Committee, composed solely of independent
directors. The Funds' Proxy Committee Charter provides that the Committee shall
(i) monitor the actions of Lord Abbett in voting securities owned by the Funds;
(ii) evaluate the policies of Lord Abbett in voting securities; (iii) meet with
Lord Abbett to review the policies in voting securities, the sources of
information used in determining how to vote on particular matters, and the
procedures used to determine the votes in any situation where there may be a
conflict of interest.
Lord Abbett is a privately-held firm, and we conduct only one business:
we manage the investment portfolios of our clients. We are not part of a larger
group of companies conducting diverse financial operations. We would therefore
expect, based on our past experience, that the incidence of an actual conflict
of interest involving Lord Abbett's proxy voting process would be limited.
Nevertheless, if a potential conflict of interest were to arise, involving one
or more of the Lord Abbett Funds, where practicable we would disclose this
potential conflict to the affected Funds' Proxy Committees and seek voting
instructions from those Committees in accordance with the procedures described
below under "Specific Procedures for Potential Conflict Situations". If it were
not practicable to seek instructions from those Committees, Lord Abbett would
simply follow its proxy voting policies or, if the particular issue were not
covered by those policies, we would follow a recommendation of ISS. If such a
conflict arose with any other client, Lord Abbett would simply follow its proxy
voting policies or, if the particular issue were not covered by those policies,
we would follow the recommendation of ISS.
SPECIFIC PROCEDURES FOR POTENTIAL CONFLICT SITUATIONS
SITUATION 1. Fund Independent Board Member on Board (or Nominee for Election to Board) of Publicly Held Company Owned by a Lord Abbett Fund.
Lord Abbett will compile a list of all publicly held companies where an Independent Board Member serves on the board of directors, or has indicated to Lord Abbett that he is a nominee for election to the board of directors (a "Fund Director Company"). If a Lord Abbett Fund owns stock in a Fund Director Company, and if Lord Abbett has decided NOT to follow the proxy voting recommendation of ISS, then Lord Abbett shall bring that issue to the Fund's Proxy Committee for instructions on how to vote that proxy issue.
The Independent Directors have decided that the Director on the board of the Fund Director Company will not participate in any discussion by the Fund's Proxy Committee of any proxy issue for that Fund Director Company or in the voting instruction given to Lord Abbett.
SITUATION 2. Lord Abbett has a Significant Business Relationship with a Company.
Lord Abbett will compile a list of all publicly held companies (or which are a subsidiary of a publicly held firm) that have a significant business relationship with Lord Abbett (a "Relationship Firm"). A "significant business relationship" for this purpose means: (a) a broker dealer firm which sells one percent or more of the Lord Abbett Funds' total shares for the last 12
months; (b) a firm which is a sponsor firm with respect to Lord Abbett's Private Advisory Services business; (c) an institutional client which has an investment management agreement with Lord Abbett; (d) an institutional investor having at least $5 million in Class Y shares of the Lord Abbett Funds; and (e) a large plan 401(k) client with at least $5 million under management with Lord Abbett.
For each proxy issue involving a Relationship Firm, Lord Abbett shall notify the Fund's Proxy Committee and shall seek voting instructions from the Fund's Proxy Committee only in those situations where Lord Abbett has proposed NOT to follow the recommendations of ISS.
SUMMARY OF PROXY VOTING GUIDELINES
Lord Abbett generally votes in accordance with management's recommendations on the election of directors, appointment of independent auditors, changes to the authorized capitalization (barring excessive increases) and most shareholder proposals. This policy is based on the premise that a broad vote of confidence on such matters is due the management of any company whose shares we are willing to hold.
ELECTION OF DIRECTORS
Lord Abbett will generally vote in accordance with management's recommendations on the election of directors. However, votes on director nominees are made on a case-by- case basis. Factors that are considered include current composition of the board and key- board nominees, long-term company performance relative to a market index, and the directors' investment in the company. We also consider whether the Chairman of the board is also serving as CEO, and whether a retired CEO sits on the board, as these situations may create inherent conflicts of interest.
There are some actions by directors that may result in votes being withheld. These actions include:
1) Attending less than 75% of board and committee meetings without a
valid excuse.
2) Ignoring shareholder proposals that are approved by a majority of
votes for two consecutive years.
3) Failing to act on takeover offers where a majority of
shareholders tendered their shares.
4) Serving as inside directors and sit on an audit, compensation,
stock option or nomination committee.
5) Failing to replace management as appropriate.
We will generally approve proposals to elect directors annually. The ability to elect directors is the single most important use of the shareholder franchise, and all directors should be accountable on an annual basis. The basic premise of the staggered election of directors is to provide a continuity of experience on the board and to prevent a precipitous change in the composition of the board. Although shareholders need some form of protection from hostile takeover attempts, and boards need tools and leverage in order to negotiate effectively with potential acquirers, a classified board tips the balance of power too much toward incumbent management at the price of potentially ignoring shareholder interests.
INCENTIVE COMPENSATION PLANS
We usually vote with management regarding employee incentive plans and changes in such plans, but these issues are looked at very closely on a case by case basis. We use ISS for guidance on appropriate compensation ranges for various industries and company sizes. In addition to considering the individual expertise of management and the value they bring to the company, we also consider the costs associated with stock-based incentive packages including shareholder value transfer and voting power dilution.
We scrutinize very closely the approval of repricing or replacing underwater stock options, taking into consideration the following:
1) The stock's volatility, to ensure the stock price will not be
back in the money over the near term.
2) Management's rationale for why the repricing is necessary.
3) The new exercise price, which must be set at a premium to market
price to ensure proper employee motivation.
4) Other factors, such as the number of participants, term of
option, and the value for value exchange.
In large-cap companies we would generally vote against plans that promoted short-term performance at the expense of longer-term objectives. Dilution, either actual or potential, is, of course, a major consideration in reviewing all incentive plans. Team leaders in small- and mid-cap companies often view option plans and other employee incentive plans as a critical component of such companies' compensation structure, and have discretion to approve such plans, notwithstanding dilution concerns.
SHAREHOLDER RIGHTS
CUMULATIVE VOTING
We generally oppose cumulative voting proposals on the ground that a shareowner or special group electing a director by cumulative voting may seek to have that director represent a narrow special interest rather than the interests of the shareholders as a whole.
CONFIDENTIAL VOTING
There are both advantages and disadvantages to a confidential ballot. Under the open voting system, any shareholder that desires anonymity may register the shares in the name of a bank, a broker or some other nominee. A confidential ballot may tend to preclude any opportunity for the board to communicate with those who oppose management proposals.
On balance we believe shareholder proposals regarding confidential balloting should generally be approved, unless in a specific case, countervailing arguments appear compelling.
SUPERMAJORITY VOTING
Supermajority provisions violate the principle that a simple majority of voting shares should be all that is necessary to effect change regarding a company and its corporate governance provisions. Requiring more than this may permit management to entrench themselves by blocking amendments that are in the best interest of shareholders.
TAKEOVER ISSUES
Votes on mergers and acquisitions must be considered on a case by case
basis. The voting decision should depend on a number of factors, including:
anticipated financial and operating benefits, the offer price, prospects of the
combined companies, changes in corporate governance and their impact on
shareholder rights. It is our policy to vote against management proposals to
require supermajority shareholder vote to approve mergers and other significant
business combinations, and to vote for shareholder proposals to lower
supermajority vote requirements for mergers and acquisitions. We are also
opposed to amendments that attempt to eliminate shareholder approval for
acquisitions involving the issuance of more that 10% of the company's voting
stock. Restructuring proposals will also be evaluated on a case by case basis
following the same guidelines as those used for mergers.
Among the more important issues that we support, as long as they are not tied in with other measures that clearly entrench management, are:
1) Anti-greenmail provisions, which prohibit management from buying back shares at above market prices from potential suitors without shareholder approval.
2) Fair Price Amendments, to protect shareholders from inequitable two-tier stock acquisition offers.
3) Shareholder Rights Plans (so-called "Poison Pills"), usually "blank check" preferred and other classes of voting securities that can be issued without further shareholder approval. However, we look at these proposals on a case by case basis, and we only approve these devices when proposed by companies with strong, effective managements to force corporate raiders to negotiate with management and assure a degree of stability that will support good long-range corporate goals. We vote for shareholder proposals asking that a company submit its poison pill for shareholder ratification.
4) "Chewable Pill" provisions, are the preferred form of Shareholder Rights Plan. These provisions allow the shareholders a secondary option when the Board refuses to withdraw a poison pill against a majority shareholder vote. To strike a balance of power between management and the shareholder, ideally "Chewable Pill" provisions should embody the following attributes, allowing sufficient flexibility to maximize shareholder wealth when employing a poison pill in negotiations:
- Redemption Clause allowing the board to rescind a pill after a potential acquirer has surpassed the ownership threshold.
- No dead-hand or no-hand pills.
- Sunset Provisions which allow the shareholders to review, and reaffirm or redeem a pill after a predetermined time frame.
- Qualifying Offer Clause which gives shareholders the ability to redeem a poison pill when faced with a bona fide takeover offer.
SOCIAL ISSUES
It is our general policy to vote as management recommends on social issues, unless we feel that voting otherwise will enhance the value of our holdings. We recognize that highly ethical and competent managements occasionally differ on such matters, and so we review the more controversial issues closely.
LORD ABBETT SECURITIES TRUST
PART C
OTHER INFORMATION
This Post-Effective Amendment No. 50 (the "Amendment") to Lord Abbett Securities Trust's (the "Registrant") Registration Statement is being filed to add the Lord Abbett Value Opportunities portfolio to the Trust.
Item 22. EXHIBITS
(a) DECLARATION AND AGREEMENT OF TRUST. Incorporated by reference to
Post-Effective Amendment No. 19 filed on February 27, 1998.
(i) Amendment to Declaration and Agreement of Trust (Lord Abbett
Large-Cap Value Fund). Incorporated by reference to
Post-Effective Amendment No. 41 filed on June 26, 2003.
(ii) Amendment to Declaration and Agreement of Trust (Lord Abbett
International Core Equity Fund). Incorporated by reference to
Post-Effective Amendment No. 43 filed on December 12, 2003.
(iii) Amendment to Declaration and Agreement of Trust (Lord Abbett
International Opportunities Fund). Incorporated by reference to
Post-Effective Amendment No. 44 filed on February 27, 2004.
(iv) Amendment to Declaration and Agreement of Trust (Lord Abbett
All Value Fund). Incorporated by reference to Post-Effective
Amendment No. 34 filed on March 1, 2001.
(v) Amendments to Declaration and Agreement of Trust (Lord Abbett
Micro-Cap Growth Fund and Lord Abbett Micro-Cap Value Fund).
Incorporated by reference to Post-Effective Amendment No. 44
filed on February 27, 2004.
(vi) Amendment to Declaration and Agreement of Trust (Alpha Series -
Class Y) incorporated by reference to Post-Effective Amendment
No. 45 filed on August 19, 2004.
(vii) Amendment to Declaration and Agreement of Trust (Value
Opportunities Fund - Class A, B, C, P & Y) filed herein.
(b) BY-LAWS. Amended and Restated By-laws (4/20/2004) incorporated by reference to Post-Effective Amendment No. 45 filed on August 19, 2004.
(c) INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS. Not applicable.
(d) INVESTMENT ADVISORY CONTRACTS. Management Agreement incorporated by
reference to Post-Effective Amendment No. 38 filed on December 26,
2002.
(i) Addendum to the Management Agreement (Lord Abbett Large-Cap
Value Fund - dated June 30, 2003) incorporated by reference to
Post-Effective Amendment No. 45 filed on August 19, 2004.
(ii) Addendum to the Management Agreement (Lord Abbett International
Core Equity Fund - dated December 1, 2003). Incorporated by
reference to Post-Effective Amendment No. 43 filed on December
12, 2003.
(iii) Addendum to the Management Agreement (Alpha Series) effective
March 1, 2004 incorporated by reference to Post-Effective
Amendment No. 45 filed on August 19, 2004.
(iv) Form of Addendum to the Management Agreement (Value
Opportunities Fund) filed herein.
(v) Form of Expense Reimbursement Agreement (Value Opportunities
Fund). Filed herein.
(e) UNDERWRITING CONTRACTS. DISTRIBUTION AGREEMENT. Incorporated by reference to Post-Effective Amendment No. 34 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 filed on March 1, 2001.
(g) CUSTODIAN AGREEMENTS. Incorporated by reference to Post-Effective
Amendment No. 48 filed on March 1, 2005.
(i) Form of Amendment to Custodian Agreement (Value Opportunities
Fund). Filed herein.
(h) OTHER MATERIAL CONTRACTS.
(i) TRANSFER AGENCY AGREEMENT. Incorporated by reference to
Post-Effective Amendment No. 48 filed on March 1, 2005.
(i) ADMINISTRATIVE SERVICES AGREEMENT. Incorporated by reference to
Post-Effective Amendment No. 38
filed on December 26, 2002.
(ii) Amendment to Administrative Services Agreement. Incorporated by
reference to Post-Effective Amendment No. 43 filed on December
12, 2003.
(iii) Form of Amendment to Administrative Services Agreement, filed
herein.
(j) LEGAL OPINION. Opinion of Wilmer, Cutler, Pickering Hale & Dorr LLP filed herein.
(k) OTHER OPINION. N/A.
(l) OMITTED FINANCIAL STATEMENTS. N/A.
(m) INITIAL CAPITAL AGREEMENTS. Incorporated by reference.
(n) 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.
(o) RULE 18F-3 PLAN. Filed herein.
(p) RESERVED.
(q) CODE OF ETHICS. Filed herein.
Item 23. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
None.
Item 24. 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 25. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Adviser - Lord Abbett & Co. LLC
Lord Abbett & Co. LLC is the investment adviser of the Registrant and provides investment management services to various pension plans, institutions and individuals. Lord Abbett Distributor, a limited liability company, serves as its distributor and principal underwriter.
(b) Partners
Set forth below is information relating to the business, profession, vocation or employment of a substantial nature that each partner of the adviser, is or has been engaged in within the last two fiscal years for his/her own account in the capacity of director, officer, employee, partner or trustee of Lord Abbett. The principal business address of the following persons is c/o the Lord Abbett & Co. LLC, 90 Hudson Street, Jersey City, NJ 07302-3973.
Except as described below, none of the following named partners have
been engaged by any entity other than Lord Abbett & Co. LLC for the preceding
two years. Joan A. Binstock, Lawrence H. Kaplan, Robert G. Morris, and A.
Edward Oberhaus, III. Robert S. Dow is a partner of Lord Abbett and an
officer and Trustee of the Fund. The other partners of Lord Abbett are:
Michael Brooks, Zane E. Brown, Patrick Browne, John J. DiChiaro, Sholom
Dinsky, Lesley-Jane Dixon, Milton Ezrati, Kevin P. Ferguson, Robert P. Fetch,
Daria L. Foster, Daniel H. Frascarelli, Robert I. Gerber, Michael S.
Goldstein, Michael A. Grant, Howard E. Hansen, Gerald Heffernan, Charles
Hofer, W. Thomas Hudson, Cinda Hughes, Ellen G. Itskovitz, Richard Larsen,
Jerald Lanzotti, Robert A. Lee, Maren Lindstrom, Gregory M. Macosko, Thomas
Malone, Charles Massare, Jr., Paul McNamara, Robert J. Noelke, F. Thomas
O'Halloran, R. Mark Pennington, Walter Prahl, Michael Radziemski, Eli M.
Salzmann, Douglas B. Sieg, Richard Sieling, Michael T. Smith, Richard Smola,
Jarrod Sohosky, Diane Tornejal, Christopher J. Towle, Edward von der Linde
and Marion Zapolin.
Item 26. 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 Municipal Income Fund, Inc.
Lord Abbett Municipal Income Trust
Lord Abbett U.S. Government & Government Sponsored Enterprises
Money Market Fund, Inc.
(b) Lord Abbett Distributor LLC is a wholly-owned subsidiary of Lord, Abbett & Co. LLC. The principal officers of Lord, Abbett Distributor LLC are:
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES BUSINESS ADDRESS * LORD ABBETT DISTRIBUTOR LLC WITH REGISTRANT ------------------- --------------------------- --------------- Robert S. Dow Chief Executive Officer Chairman and President Lawrence H. Kaplan General Counsel Vice President & Secretary John K. Forst Deputy General Counsel Vice President & Assistant Secretary Marion Zapolin Chief Financial Officer Not Applicable |
* Each Officer has a principal business address of:
90 Hudson Street, Jersey City, New Jersey 07302
(c) Not applicable
Item 27. 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 28. MANAGEMENT SERVICES
None.
Item 29. 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, as amended and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement under Rule 485(b) under the Securities Act and had duly caused this Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Jersey City, and State of New Jersey on the 20th day of December, 2005.
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 and Vice President
|
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 Director December 20, 2005
-----------------
Robert S. Dow
E. Thayer Bigelow * Director December 20, 2005
--------------------
E. Thayer Bigelow
William H. T. Bush* Director December 20, 2005
--------------------
William H. T. Bush
Robert B. Calhoun, Jr.* Director December 20, 2005
------------------------
Robert B. Calhoun, Jr.
Julie A. Hill* Director December 20, 2005
---------------
Julie A. Hill
Franklin W. Hobbs* Director December 20, 2005
-------------------
Franklin W. Hobbs
C. Alan MacDonald* Director December 20, 2005
-------------------
C. Alan MacDonald
Thomas J. Neff* Director December 20, 2005
----------------
Thomas J. Neff
|
* BY: /S/ CHRISTINA T. SIMMONS
------------------------
Christina T. Simmons
Attorney - in - Fact*
|
POWER OF ATTORNEY
Each person whose signature appears below on this 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 or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities (until revoked in writing) to sign any and all 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 or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE ---------- ----- ---- /S/ ROBERT S. DOW Chairman, President ----------------- and Director/Trustee December 28, 2004 Robert S. Dow /S/ E. THAYER BIGELOW Director/Trustee December 28, 2004 --------------------- E. Thayer Bigelow /S/ WILLIAM H. T. BUSH Director/Trustee December 28, 2004 ---------------------- William H. T. Bush /S/ ROBERT B. CALHOUN, JR. Director/Trustee December 28, 2004 -------------------------- Robert B. Calhoun, Jr. /S/ JULIE A. HILL Director/Trustee December 28, 2004 ------------------ Julie A. Hill /S/ FRANKLIN W. HOBBS Director/Trustee December 28, 2004 --------------------- Franklin W. Hobbs /S/ C. ALAN MACDONALD Director/Trustee December 28, 2004 --------------------- C. Alan MacDonald /S/ THOMAS J. NEFF Director/Trustee December 28, 2004 --------------------------- Thomas J. Neff |
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 Municipal Income Fund, Inc.
Lord Abbett Municipal Income Trust
Lord Abbett U.S. Government & Government Sponsored Enterprises Money Market Fund, Inc.
Exhibit 99.(a)(vii)
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 statutory 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 Value Opportunities Fund"; and (ii) establish, pursuant to Section 5.3 of the Declaration, the following classes of the Lord Abbett Value Opportunities 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 20th day of October, 2005.
/s/ Robert S. Dow /s/ Julie A. Hill ----------------------------- ------------------------------- Robert S. Dow Julie A. Hill /s/ E. Thayer Bigelow /s/ Franklin W. Hobbs ----------------------------- ------------------------------- E. Thayer Bigelow Franklin W. Hobbs /s/ William H. T. Bush /s/ C. Alan MacDonald ----------------------------- ------------------------------- William H. T. Bush C. Alan MacDonald /s/ Robert B. Calhoun, Jr. /s/ Thomas J. Neff ----------------------------- ------------------------------- Robert B. Calhoun, Jr. Thomas J. Neff |
Exhibit 99.(d)(iv)
[FORM OF]
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 Value Opportunities 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: 0.75 of 1% of the first $1 billion of average daily net assets of Lord Abbett Value Opportunities Fund, 0.70 of 1% of the next $1 billion of such assets and 0.65 of 1% of such assets in excess of $2 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
BY: /s/
----------------------
Member
|
Lord Abbett Securities Trust
(on behalf of Lord Abbett Value Opportunities Fund)
BY: /s/
------------------------------------
Vice President & Assistant Secretary
Dated: As of December 20, 2005
|
[FORM OF]
EXPENSE REIMBURSEMENT AGREEMENT
THIS EXPENSE REIMBURSEMENT AGREEMENT (this "Agreement") is made and entered into this 20th day of December 2005 between Lord, Abbett & Co. LLC ("Lord Abbett") and Lord Abbett Securities Trust (the "Securities Trust") with respect to the Lord Abbett Value Opportunities Fund (the "Fund").
In consideration of good and valuable consideration, receipt of which is hereby acknowledged, it is agreed as follows:
1. With respect to the Lord Abbett Value Opportunities Fund, Lord Abbett agrees to bear directly and/or reimburse the Fund for expenses if and to the extent that Total Operating Expenses exceed or would otherwise exceed an annual rate of (a) one hundred and thirty basis points (1.30%) for Class A shares of the Fund, (b) one hundred and ninety-five basis points (1.95%) for Class B shares of the Fund, (c) one hundred and ninety-five basis points (1.95%) for Class C shares of the Fund, (d) one hundred and forty basis points (1.40%) for Class P shares of the Fund, and (e) ninety-five basis points (0.95%) for Class Y shares of the Fund of the average daily net assets in the Fund for the time period set forth in paragraph 4 below.
2. Lord Abbett's commitment described in paragraphs 1, 2 and 3 will be effective from December 20, 2005 through October 31, 2006.
IN WITNESS WHEREOF, Lord Abbett and the Securities Trust have caused this Agreement to be executed by a duly authorized member and officer, respectively, on the day and year first above written.
LORD ABBETT SECURITIES TRUST
LORD, ABBETT & CO. LLC
Exhibit 99(g)(i)
[FORM OF]
December __, 2005
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 "Trust"), 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 recordkeeper 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 October 20, 2005, the Trust's Board executed an Amendment to Declaration and Agreement of Trust establishing a new Portfolio of the Trust's, (the "Portfolio") the legal name of which is as follows: Lord Abbett Value Opportunities Fund. It is the Trust's desire to have State Street render services as custodian and recordkeeper to the Portfolio under the terms of the Agreement; therefore, the Trust 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 December 20, 2005.
It is currently anticipated that the registration statement for the Portfolio will become effective on December 20, 2005. 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 December 20, 2005)
ENTITY AND SERIES TYPE OF 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
Lord Abbett International Opportunities Fund
Lord Abbett Micro-Cap Growth Fund
Lord Abbett Micro-Cap Value Fund
Lord Abbett Large-Cap Value Fund
Lord Abbett International Core Equity Fund
Lord Abbett Value Opportunities Fund
Lord Abbett Research Fund, Inc. Corporation Maryland
Lord Abbett Growth Opportunities Fund
Lord Abbett Large-Cap Core Fund
Small-Cap Value Series
Lord Abbett America's Value Fund
Lord Abbett Investment Trust Business Trust Delaware
Balanced Series
Lord Abbett Core Fixed Income Fund
Lord Abbett High Yield Fund
Lord Abbett Limited Duration U.S. Government & Government
Sponsored Enterprises Fund
Lord Abbett Total Return Fund
Lord Abbett U.S. Government & Government Sponsored
Enterprises Fund
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
Large-Cap Core Portfolio
Lord Abbett Global Fund, Inc. Corporation Maryland
Equity Series
Income Series
Lord Abbett Municipal 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 Municipal Income Trust Business Trust Delaware
Florida Series
Georgia Series
Michigan Series
Pennsylvania Series
Lord Abbett Insured Intermediate Tax-Free Fund
Lord Abbett High Yield Municipal Bond Fund
Lord Abbett U.S. Government & Government Sponsored Enterprises Money Corporation Maryland
Market Fund, Inc.
|
Exhibit 99.(i)(iii)
[FORM OF]
AMENDMENT 9
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 an additional fund;
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 fund to Exhibit 1 of the Agreement:
Lord Abbett Securities Trust
-Lord Abbett Value Opportunities Fund
2. The Agreement shall remain the same in all other respects.
3. The Amendment is effective as of the 20th day of December, 2005.
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 DECEMBER 20, 2005)
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
Lord Abbett Core Fixed Income Fund
Lord Abbett High Yield Fund
Lord Abbett Limited Duration U.S. Government & Government Sponsored
Enterprises Fund
Lord Abbett Total Return Fund
Lord Abbett U.S. Government & Government Sponsored Enterprises Fund
Lord Abbett Convertible Fund
Lord Abbett Income Strategy Fund
Lord Abbett World Growth & Income Strategy 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
Lord Abbett Large-Cap Core Fund
Small-Cap Value Series
Lord Abbett Securities Trust
Alpha Series
Lord Abbett All Value Fund
Lord Abbett International Opportunities Fund
Lord Abbett Micro-Cap Growth Fund
Lord Abbett Micro-Cap Value Fund
Lord Abbett Large-Cap Value Fund
Lord Abbett International Core Equity Fund
Lord Abbett Value Opportunities 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
Large-Cap Core Portfolio
Lord Abbett Municipal 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 Municipal Income Trust
Florida Series
Georgia Series
Michigan Series
Pennsylvania Series
Lord Abbett Insured Intermediate Tax-Free Fund
Lord Abbett High Yield Municipal Bond Fund
Lord Abbett U.S. Government & Government Sponsored Enterprises Money Market
Fund, Inc.
Exhibit 99.(j)
[Wilmer Cutler Pickering Hale and Dorr LLP Letterhead]
December 19, 2005
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. 50 to the Registration Statement on Form N-1A (the "Amendment") under the Securities Act of 1933, as amended (Amendment No. 50 under the Investment Company Act of 1940, as amended), of Lord Abbett Securities Trust, a Delaware statutory trust (the "Trust"), and in connection therewith your registration of shares of beneficial interest, without par value, of the following classes of the following series of the Trust (collectively, the "Shares"):
Lord Abbett Value Opportunities Fund (Class A, B, C, P, and Y).
We have examined the Declaration and Agreement of Trust and By-Laws of the Trust, each as amended and restated to date, and originals, or copies certified to our satisfaction, of all pertinent records of the meetings of the trustees and stockholders of the Trust, the Post-Effective Amendment, the Registration Statement and such other documents relating to the Trust as we have deemed material for the purposes of this opinion.
In our examination of the foregoing documents, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, photostatic or other copies, the authenticity of the originals of any such documents and the legal competence of all signatories to such documents.
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 therefor 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
HALE AND DORR LLP
By: /s/ Matthew A. Chambers
------------------------
Matthew A. Chambers, a partner
|
Exhibit 99.(n)(i)
The following
FORM OF RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT
for
CLASS A
was adopted by
LORD ABBETT VALUE OPPORTUNITIES FUND
A substantially identical plan was adopted by the following Funds or Series of
LORD ABBETT SECURITIES TRUST:
on the date indicated
Alpha Strategy Fund (December 12, 1997)
Lord Abbett All Value Fund (July 12, 1996) International Opportunities Fund (December 13, 1996) Lord Abbett Micro-Cap Growth Fund (March 10, 2000) Lord Abbett Micro-Cap Value Fund (March 10, 2000) Lord Abbett Large-Cap Value Fund (June 30, 2003) Lord Abbett International Core Equity Fund (December 1, 2003)
RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT
LORD ABBETT SECURITIES TRUST - LORD ABBETT VALUE OPPORTUNITIES FUND
CLASS A SHARES
RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT dated as of December 20, 2005 by and between LORD ABBETT SECURITIES TRUST, a Delaware business trust (the "Fund"), on behalf of the LORD ABBETT VALUE OPPORTUNITIES 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 99.(n)(ii)
The following
FORM OF RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT
for
CLASS B
was adopted by
LORD ABBETT VALUE OPPORTUNITIES FUND
A substantially identical plan was adopted by the following Funds or Series of
LORD ABBETT SECURITIES TRUST:
on the date indicated
Alpha Strategy Fund (December 12, 1997)
Lord Abbett All Value Fund (May 19, 1997)
International Opportunities Fund (May 19, 1997) Lord Abbett Large-Cap Value Fund (June 30, 2003) Lord Abbett International Core Equity Fund (December 1, 2003)
RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT
LORD ABBETT SECURITIES TRUST - LORD ABBETT VALUE OPPORTUNITIES FUND
CLASS B SHARES
RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT dated as of December 20, 2005 by and between LORD ABBETT SECURITIES TRUST, a Delaware business trust (the "Fund"), on behalf of the LORD ABBETT VALUE OPPORTUNITIES 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 Value Opportunities Fund
ATTEST:
LORD ABBETT DISTRIBUTOR LLC
Exhibit 99(n)(iii)
The following
FORM OF RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT
for
CLASS C
was adopted by
LORD ABBETT VALUE OPPORTUNITIES FUND
A substantially identical plan was adopted by the following Funds or
Series of
LORD ABBETT SECURITIESTRUST:
on the date indicated
Alpha Strategy Fund (November 1, 2001)
Lord Abbett All Value Fund (November 1, 2001) International Opportunities Fund (November 1, 2001) Lord Abbett Large-Cap Value Fund (June 30, 2003) International Core Equity Fund (December 1, 2003)
RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT
LORD ABBETT SECURITIES TRUST - LORD ABBETT VALUE OPPORTUNITIES FUND
CLASS C SHARES
RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT dated as of December 20, 2005 by and between LORD ABBETT SECURITIES TRUST, a Delaware business trust (the "Trust"), on behalf of LORD ABBETT VALUE OPPORTUNITIES 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 Value Opportunities Fund
By: ____________________________________
Vice President
ATTEST:
LORD ABBETT DISTRIBUTOR LLC
By: ____________________________________
A Member
Exhibit 99.(n)(iv)
The following
FORM OF RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT
for
CLASS P
was adopted by
LORD ABBETT VALUE OPPORTUNITIES FUND
A substantially identical plan was adopted by the following Funds or Series of
LORD ABBETT SECURITIES TRUST:
on the date indicated
Alpha Strategy Fund (August 15, 2001)
Lord Abbett All Value Fund August 15, 2001) International Opportunities Fund (March 9, 1999) Lord Abbett Large-Cap Value Fund (June 30, 2003) Lord Abbett International Core Equity Fund (December 1, 2003)
RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT
LORD ABBETT SECURITIES TRUST - LORD ABBETT LARGE-CAP VALUE FUND
CLASS P SHARES
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 VALUE OPPORTUNITIES 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 Value Opportunities Fund
ATTEST:
LORD ABBETT DISTRIBUTOR LLC
Exhibit 99.n
AMENDED AND RESTATED PLANS AS OF NOVEMBER 1, 2004
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) 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 (ii) a continuing service fee at an annual rate not to exceed 0.25% of the average daily NAV of the Class A shares. In addition, Lord Abbett Distributor LLC will generally pay at the time Class A shares are sold a one-time distribution fee of up to 1% of the NAV of the shares sold (i) in the amount of $1 million or more, including sales qualifying at such level under the rights of accumulation and statement of intention privileges, (ii) to retirement plans with 100 or more eligible employees, and (iii) to retirement plans made through financial intermediaries that perform participant recordkeeping or other administrative services for the Plans, as described in the Fund's prospectus as from time to time in effect. 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. 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 Class P 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 12th month (24th month if shares were purchased prior to November 1, 2004) 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 July 1, 2005
The Lord Abbett - Sponsored Funds
ESTABLISHING MULTI-CLASS STRUCTURES
FUNDS CLASSES
----- -------
Lord Abbett Affiliated Fund, Inc. A, B, C, P, Y
Lord Abbett Blend Trust
Lord Abbett Small-Cap Blend Fund A, B, C, P, Y
Lord Abbett Bond-Debenture Fund, Inc. A, B, C, P, Y
Lord Abbett Developing Growth Fund, Inc. A, B, C, P, Y
Lord Abbett Mid-Cap Value Fund, Inc. A, B, C, P, Y
Lord Abbett Large-Cap Growth Fund A, B, C, P, Y
Lord Abbett Global Fund, Inc.
Equity Series A, B, C, P, Y
Income Series A, B, C, P, Y
Lord Abbett Investment Trust
Lord Abbett Balanced Strategy Fund A, B, C, P, Y
Lord Abbett High Yield Fund A, B, C, P, Y
Lord Abbett Limited Duration U.S. Government
& Government Sponsored Enterprises Fund A, B, C, P, Y
Lord Abbett U.S. Government & Government
Sponsored Enterprises Fund A, B, C, P, Y
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 Income Strategy Fund A, B, C, P, Y
Lord Abbett World Growth & Income Strategy Fund A, B, C, P, Y
Lord Abbett Securities Trust
Lord Abbett All Value Fund A, B, C, P, Y
Lord Abbett International Opportunities Fund A, B, C, P, Y
Lord Abbett Alpha Strategy Fund A, B, C, P, Y
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 International Core Equity Fund A, B, C, P, Y
Lord Abbett Municipal 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 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 Municipal 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 High Yield Municipal Bond Fund A, B, C, P Lord Abbett U.S. Government & Government Sponsored Enterprises Money Market Fund, Inc. A, B, C, P, Y Lord Abbett Research Fund, Inc. Large-Cap Core Fund 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) Large-Cap Core Portfolio Large-Cap Core Portfolio (VC) |
Exhibit 99(p)
LORD, ABBETT & CO. LLC
LORD ABBETT DISTRIBUTOR LLC
(TOGETHER, "LORD ABBETT")
AND
LORD ABBETT FAMILY OF FUNDS (THE "FUNDS")
CODE OF ETHICS
I. STANDARDS OF BUSINESS CONDUCT AND ETHICAL PRINCIPLES
Lord Abbett's focus on honesty and integrity has been a critical part of its culture since the firm's founding in 1929. Lord Abbett is a fiduciary to the Funds and to its other clients. In recognition of these fiduciary obligations, the personal investment activities of any officer, director, trustee or employee of the Funds or any partner or employee of Lord Abbett will be governed by the following general principles: (1) Covered Persons(1) have a duty at all times to place first the interests of Fund shareholders and, in the case of employees and partners of Lord Abbett, beneficiaries of managed accounts; (2) all securities transactions by Covered Persons shall be conducted consistent with this Code and in such a manner as to avoid any actual or potential conflict of interest or any abuse of an individual's position of trust and responsibility; (3) Covered Persons should not take inappropriate advantage of their positions with Lord Abbett or the Funds; (4) Covered Persons must comply with the Federal Securities Laws; and (5) Covered Persons are required to maintain all internally distributed and/or proprietary information as confidential; this information should not be disclosed or discussed with people outside Lord Abbett.
II. SPECIFIC PROHIBITIONS
No person covered by this Code, shall purchase or sell a security, except an Excepted Security, if there has been a determination to purchase or sell such security for a Fund (or, in the case of any employee or partner of Lord Abbett, for another client of Lord Abbett), or if such a purchase or sale is under consideration for a Fund (or, in the case of an employee or partner of Lord Abbett, for another client of Lord Abbett), nor may such person have any dealings in a security that he may not purchase or sell for any other account in which he has Beneficial Ownership, or disclose the information to anyone, until such purchase, sale or contemplated action has either been completed or abandoned.
Lord, Abbett & Co. Code of Ethics--November 15, 2005
III. OBTAINING ADVANCE APPROVAL
Except as provided in Sections V and VI of this Code, all proposed transactions in securities (privately or publicly owned) by Covered Persons, except transactions in Excepted Securities and Excepted Transactions, should be approved consistent with the provisions of this Code. In order to obtain approval, the Covered Person must send their request to the Legal Department. The approval request form and instructions for completing the form can be found under "Legal Department/Code of Ethics" in the Public Folders on your computer. After approval has been obtained, the Covered Person may act on it within the two business days following the date of approval, unless he sooner learns of a contemplated action by Lord Abbett. After the two business days, or upon hearing of such contemplated action, a new approval must be obtained.
Furthermore, in addition to the above requirements, partners and employees directly involved must disclose information they may have concerning securities they may want to purchase or sell to any portfolio manager who might be interested in the securities for the portfolios they manage.
IV. REPORTING AND CERTIFICATION REQUIREMENTS; BROKERAGE CONFIRMATIONS
(1) Except as provided in Sections V and VI of this Code, within 30 days following the end of each calendar quarter each Covered Person must file with Lord Abbett's Chief Compliance Officer a signed Personal Securities Transaction Reporting Form. The form must be signed and filed whether or not any security transaction has been effected. If any transaction has been effected during the quarter for the Covered Person's account or for any account in which he has a direct or indirect Beneficial Ownership, it must be reported. Excepted from this reporting requirement are transactions effected in any accounts over which the Covered Person has no direct or indirect influence or control (a "Fully Discretionary Account", as defined in Section VI) and transactions in Excepted Securities. Securities acquired in an Excepted Transaction should be reported, except that securities acquired through an automatic investment plan do not need to be reported, unless any transaction is outside the pre-set schedule or a pre-existing allocation. Lord Abbett's Chief Compliance Officer, or persons under his direction, are responsible for reviewing these transactions and must bring any apparent violation to the attention of the General Counsel of Lord Abbett. The Personal Securities Transaction Reporting Form of the Chief Compliance Officer shall be reviewed by the General Counsel.
(2) Each employee and partner of Lord Abbett will upon commencement of employment (within 10 business days) (the "Initial Report") and annually thereafter (the "Annual Report") disclose all personal securities holdings and annually certify that: (i) they have read and understand this Code and recognize they are subject hereto; and (ii) they have complied with the requirements of this
Code and disclosed or reported all securities transactions required to be disclosed or reported pursuant to the requirements of this Code. Security holdings information for the Initial Report and the Annual Report must be current as of a date not more than 45 days prior to the date of that Report.
(3) Each employee and partner of Lord Abbett will direct his brokerage firms to send copies of all trade confirmations and all monthly statements directly to the Legal Department.
(4) Each employee and partner of Lord Abbett who has a Fully-Discretionary Account shall disclose all pertinent facts regarding such Account to Lord Abbett's Chief Compliance Officer upon commencement of employment. Each such employee or partner shall thereafter annually certify on the prescribed form that he or she has not and will not exercise any direct or indirect influence or control over such Account, and has not discussed any potential investment decisions with such independent fiduciary in advance of any such transactions. Such independent fiduciary shall confirm initially, and annually thereafter, the accuracy of the facts as stated by the Lord Abbett employee or partner.
V. SPECIAL PROVISIONS APPLICABLE TO OUTSIDE DIRECTORS AND TRUSTEES OF THE FUNDS
The primary function of the Outside Directors and Trustees of the Funds is to set policy and monitor the management performance of the Funds' officers and employees and the partners and employees of Lord Abbett involved in the management of the Funds. Although they receive information after the fact as to portfolio transactions by the Funds, Outside Directors and Trustees are not given advance information as to the Funds' contemplated investment transactions.
An Outside Director or Trustee wishing to purchase or sell any security will therefore generally not be required to obtain advance approval of his security transactions. If, however, during discussions at Board meetings or otherwise an Outside Director or Trustee should learn in advance of the Funds' current or contemplated investment transactions, then advance approval of transactions in the securities of such company(ies) shall be required for a period of 30 days from the date of such Board meeting. In addition, an Outside Director or Trustee can voluntarily obtain advance approval of any security transaction or transactions at any time.
No report described in Section IV (1) will be required of an Outside Director or Trustee unless he knew, or in the ordinary course of fulfilling his official duties as a director or trustee should have known, at the time of his transaction, that during the 15-day period immediately before or after the date of the transaction (i.e., a total of 30 days) by the Outside Director or Trustee such security was or was to be purchased or sold by any of the Funds or such a purchase or sale was or was to be considered by a Fund. If he makes any transaction requiring such a report, he must report all securities transactions effected during the quarter for his account or for any account in which he has a direct or indirect
Beneficial Ownership interest and over which he has any direct or indirect influence or control. Each Outside Director and Trustee will direct his brokerage firm to send copies of all confirmations of securities transactions to the Legal Department, and annually make the certification required under Section IV(2)(i) and (ii). Outside Directors' and Trustees' transactions in Excepted Securities are excepted from the provisions of this Code.
It shall be prohibited for an Outside Director or Trustee to trade on material non-public information. Prior to accepting an appointment as a director of any public company, an Outside Director or Trustee will advise Lord Abbett and discuss with Lord Abbett's Managing Partner whether accepting such appointment creates any conflict of interest or other issues.
If an Outside Director or Trustee, who is a director or an employee of, or consultant to, a company, receives a grant of options to purchase securities in that company (or an affiliate), neither the receipt of such options, nor the exercise of those options and the receipt of the underlying security, requires advance approval from Lord Abbett. Further, neither the receipt nor the exercise of such options and receipt of the underlying security is reportable by such Outside Director or Trustee.
VI. ADDITIONAL REQUIREMENTS RELATING TO PARTNERS AND EMPLOYEES OF LORD ABBETT
It shall be prohibited for any partner or employee of Lord Abbett:
(1) To obtain or accept favors or preferential treatment of any kind or gift or other thing (other than an occasional meal or ticket to a sporting event or theatre, or comparable entertainment, which is neither so frequent nor so extensive as to raise any question of propriety) having a value of more than $100 from any person or entity that does business with or on behalf of the Funds;
(2) to trade on material non-public information or otherwise fail to
comply with the Firm's Statement of Policy and Procedures on
Receipt and Use of Inside Information adopted pursuant to
Section 15(f) of the Securities Exchange Act of 1934 and Section
204A of the Investment Advisers Act of 1940. For additional
information regarding these policies and procedures, please
refer to Lord Abbett's inside information policy;
(3) to trade in options with respect to securities covered under this Code;
(4) to profit in the purchase and sale, or sale and purchase, of the same (or equivalent) securities within 60 calendar days (any profits realized on such short-term trades shall be disgorged to the appropriate Fund or as otherwise determined);
(5) to trade in futures or options on commodities, currencies or other financial instruments, although the Firm reserves the right to make rare exceptions in unusual circumstances which have been approved by the Firm in advance;
(6) to engage in short sales or purchase securities on margin;
(7) to buy or sell any security within seven business days before or after any Fund (or other Lord Abbett client) trades in that security (any profits realized on trades within the proscribed periods shall be disgorged to the Fund (or the other client) or as otherwise determined);
(8) to subscribe to new or secondary public offerings, even though the offering is not one in which the Funds or Lord Abbett's advisory accounts are interested;
(9) to become a director of any company without Lord Abbett's prior consent and implementation of appropriate safeguards against conflicts of interest;
(10) to engage in market timing activities with respect to the Funds;
(11) to purchase any security of a company that has a market capitalization at the time of purchase below $3 billion; or
(12) to participate in an outside business activity without Lord Abbett's prior consent.
Any purchase of a Fund (other than Lord Abbett U.S. Government & Government Sponsored Enterprises Money Market Fund) by a partner or employee of Lord Abbett (whether with respect to the Profit Sharing Plan or in any other account) must be held for a minimum of 60 days. This 60-day minimum holding period also applies to any other mutual fund advised or sub-advised by Lord Abbett. Any request for an exception to this requirement must be approved in writing in advance by Lord Abbett's Managing Partner and its General Counsel (or by their designees). Lord Abbett shall promptly report to the Funds' Boards any approved exception request to this minimum holding period.
In connection with any request for approval, pursuant to Section III of this Code, of an acquisition by partners or employees of Lord Abbett of any securities in a private placement, prior approval will take into account, among other factors, whether the investment opportunity should be reserved for any of the Funds and their shareholders (or other clients of Lord Abbett) and whether the opportunity is being offered to the individual by virtue of the individual's position with Lord Abbett or the Funds. An individual's investment in privately-placed securities will be disclosed to the Managing Partner of Lord Abbett if such individual is involved in consideration of an investment by a Fund (or other client) in the issuer of such securities. In such circumstances, the Fund's (or other client's) decision to purchase securities of the issuer will be subject to independent review by personnel with no personal interest in the issuer.
If a spouse of a partner or employee of Lord Abbett who is a director or an employee of, or a consultant to, a company, receives a grant of options to purchase securities in that company (or an affiliate), neither the receipt nor the exercise of those options requires
advance approval from Lord Abbett or reporting. Any subsequent sale of the security acquired by the option exercise by that spouse would require advance approval and is a reportable transaction.
Advance approval is not required for transactions in any account of a
Covered person if the Covered Person has no direct or indirect influence
or control with respect to transactions in the account (a
"Fully-Discretionary Account"). A Covered Person will be deemed to have
"no direct or indirect influence or control" over an account only if:
(i) investment discretion for the account has been delegated to an
independent fiduciary and such investment discretion is not shared with
the employee; (ii) the Covered Person certifies in writing that he or
she has not and will not discuss any potential investment decisions with
such independent fiduciary before any transaction; (iii) the independent
fiduciary confirms in writing the representations by the Covered Person
regarding the Covered Person's having no direct or indirect influence or
control over the account;(2) and (iv) the Chief Compliance Officer of
Lord Abbett has determined that the account satisfies these
requirements. Annually thereafter, the Covered Person and the
independent fiduciary shall certify in writing that the representations
of subparagraphs (ii) and (iii) of this paragraph remain correct.
Transactions in Fully-Discretionary Accounts by an employee or partner
of Lord Abbett are not subject to the post-trade reporting requirements
of this Code.
VII. ENFORCEMENT AND REPORTING OF VIOLATIONS
The General Counsel for Lord Abbett and Lord Abbett's Chief Compliance Officer are charged with the responsibility of enforcing this Code, and may appoint one or more employees to aid them in carrying out their enforcement responsibilities. The Chief Compliance Officer shall implement a procedure to monitor compliance with this Code through an ongoing review of personal trading records provided under this Code against transactions in the Funds and managed portfolios. Any violation of this Code of Ethics must be reported promptly to Lord Abbett's Chief Compliance Officer, or, in his absence, to Lord Abbett's General Counsel. The Chief Compliance Officer shall bring to the attention of the Funds' Audit Committees any apparent violations of this Code, and the action which has been taken by Lord Abbett as a result of such violation, and the Funds' Audit Committees shall consider what additional action, if any, is appropriate. The record of any violation of this Code and any action taken as a result thereof, which may include suspension or removal of the violator from his position, shall be made a part of the permanent records of the Audit Committees of the Funds. Lord Abbett shall provide each employee and partner with a copy of this Code, and of any amendments to the Code, and each employee and partner shall acknowledge, in writing, his or her receipt of the Code and any amendment, which may be provided electronically. Lord Abbett's General Counsel shall prepare an ANNUAL ISSUES AND CERTIFICATION REPORT to the directors or
trustees of the Funds that (a) summarizes Lord Abbett's procedures concerning personal investing, including the procedures followed by Lord Abbett in determining whether to give approvals under Section III and the procedures followed by the Compliance and Legal Departments in determining whether any Funds have determined to purchase or sell a security or are considering such a purchase or sale, and any changes in those procedures during the past year, and certifies to the directors or trustees that the procedures are reasonably necessary to prevent violations, and (b) identifies any recommended changes in the restrictions imposed by this Code or in such procedures with respect to the Code and any changes to the Code based upon experience with the Code, evolving industry practices or developments in the regulatory environment, and (c) summarizes any apparent violations of this Code over the past year and any sanctions imposed by Lord Abbett in response to those violations, including any additional action taken by the Audit Committee of each of the Funds with respect to any such violation.
The Audit Committee of each of the Funds and the General Counsel of Lord Abbett may determine in particular cases that a proposed transaction or proposed series of transactions does not conflict with the policy of this Code and exempt such transaction or series of transactions from one or more provisions of this Code.
VIII. DEFINITIONS
"Covered Person" means any officer, director, trustee, director or employee of any of the Funds and any partner or employee of Lord Abbett.
(See also definition of "Beneficial Ownership.")
"Excepted Securities" are bankers' acceptances, bank certificates of deposit, commercial paper, and other high quality short-term debt instruments, including repurchase agreements, shares of money market funds, shares of other U.S. registered open-end investment companies (other than the Lord Abbett Funds or other funds for which Lord Abbett acts as the investment adviser or sub-adviser) and direct obligations of the U.S. Government. Transactions in Excepted Securities do not require prior approval or reporting. Please note that shares of closed-end investment companies, exchange traded unit-investment trusts ("UITs") and exchange traded funds are all treated as common stock under the Code. Also please note that the exception for other mutual funds includes only open-end funds registered in the U.S., and that transactions and holdings in offshore funds are reportable. Also please note that U.S. Government Agency securities are not considered "Excepted Securities".
"Excepted Transactions" means transactions in the shares of the Lord Abbett Funds or other mutual funds for which Lord Abbett acts as the investment adviser or sub-adviser; securities acquired through tender offers or spin-offs; securities received due to a merger or acquisition; the sale of 300 shares or less of a S&P 500 stock; and any securities purchased through an automatic investment plan, such as Dividend Reinvestment Programs (DRIPs) and/or Employee Stock Ownership Plans (ESOPs). Please note that
any SALES made from DRIPs and/or ESOPs require pre-approval as described in Section III of this Code.(3)
"Outside Directors and Trustees" are directors and trustees who are not "interested persons" as defined in the Investment Company Act of 1940.
"Security" means any stock, bond, debenture or in general any instrument commonly known as a security and includes a warrant or right to subscribe to or purchase any of the foregoing and also includes the writing of an option on any of the foregoing.
"Beneficial Ownership" is interpreted in the same manner as it would be under Section 16 of the Securities Exchange Act of 1934 and Rule 16a-1 thereunder. Accordingly, "beneficial owner" includes any Covered Person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest (i.e. the ability to share in profits derived from such security) in any equity security, including:
(i) securities held by a person's immediate family sharing the same house (with certain exceptions);
(ii) a general partner's interest in portfolio securities held by a general or limited partnership;
(iii) a person's interest in securities held in trust as trustee, beneficiary or settlor, as provided in Rule 16a-8(b); and
(iv) a person's right to acquire securities through options, rights or other derivative securities.
"Federal Securities Laws" include the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the Investment Company Act of 1940, the Investment Advisers Act of 1940, Title V of the Gramm-Leach Bliley Act, and any rules adopted by the SEC under any of those statutes, the Bank Secrecy Act as it applies to mutual funds and investment advisers, and any rules adopted thereunder by the SEC or the Department of the Treasury. A brief summary of the requirements of those laws as they apply to mutual funds and investment advisers is attached to this Code as Exhibit 1.
"Gender/Number" whenever the masculine gender is used in this Code, it includes the feminine gender as well, and the singular includes the plural and the plural includes the singular, unless in each case the context clearly indicates otherwise.
EXHIBIT 1
TO CODE OF ETHICS
The Code of Ethics requires that all Covered Persons must comply with the Federal Securities Laws. Brief summaries of these laws are set forth below.
I. THE SECURITIES ACT OF 1933 ("1933 ACT")
The 1933 Act governs the public offering of securities of mutual funds and other issuers, and establishes civil liability for false or misleading activities during such offerings. This law was enacted "to provide full and fair disclosure of the character of securities sold in interstate and foreign commerce" and to prevent related frauds. Thus, the 1933 Act requires mutual funds and other public issuers to register their securities with the SEC. This process requires disclosures to the SEC and investors of information relating to the issuer, the securities and other matters. The 1933 Act provides a specific civil remedy for purchasers of securities offered by a materially false or misleading registration statement. A registration statement is false or misleading if it contains "an untrue statement of material fact or omit[s] to state a material fact required to be stated therein, or necessary to make the statements therein not misleading."
II. THE SECURITIES EXCHANGE ACT OF 1934 ("1934 ACT")
The 1934 Act regulates various organizations involved in the offer, sale and trading of securities. It regulates, among others, broker-dealers such as Lord Abbett Distributor. The 1934 Act accomplishes its goals in large part by requiring that these regulated organizations register with the SEC and subjects them to regular reporting requirements and examinations by the SEC. The 1934 Act includes anti-fraud provisions that make it unlawful for any person, among other actions, to directly or indirectly: (1) employ any device, scheme, or artifice to defraud; (2) make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (3) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.
III. THE INVESTMENT COMPANY ACT OF 1940 ("1940 ACT")
The 1940 Act regulates mutual funds as well as their investment advisers
and principal underwriters. The 1940 Act was designed "to mitigate and, so far
as is feasible, to eliminate" various abuses involving mutual funds, including:
(1) inadequate, inaccurate or unclear disclosure with respect to a mutual fund
and its securities; (2) self-dealing by insiders; (3) the issuance of securities
with inequitable terms that fail to protect the privileges and preferences of
outstanding security holders; (4) inequitable methods of control and
irresponsible management; and (5) unsound or misleading accounting methods. The
1940 Act seeks to accomplish the foregoing goals by, among other things: (1)
establishing registration and reporting requirements; (2) prohibiting various
affiliated transactions; (3) regulating the sale and redemption of mutual fund
shares; (4) establishing special corporate governance standards relating to the
composition and activities of mutual fund boards of directors; and (5) providing
the SEC with extensive inspection and enforcement powers.
IV. THE INVESTMENT ADVISERS ACT OF 1940 ("ADVISERS ACT")
The Advisers Act regulates investment advisers. Lord Abbett is registered as an investment adviser. Among other matters, the Advisers Act regulates the fee arrangements and certain other contract terms of an investment advisory agreement. The Act also prohibits advisers from engaging in any conduct that would defraud their clients. Lord Abbett has a fiduciary duty to act in the best interests of its clients. The SEC has construed this fiduciary duty broadly and applies the Act's anti-fraud prohibition aggressively to protect clients.
V. THE SARBANES-OXLEY ACT OF 2002 ("SARBANES-OXLEY ACT")
The Sarbanes-Oxley Act implemented new corporate disclosure and financial reporting requirements by, among other actions, creating a new oversight board for the accounting profession, mandating new measures to promote auditor independence, adding new disclosure requirements for investment companies and other public companies, and strengthening criminal penalties for securities fraud. This statute was adopted in direct response to widespread corporate scandals at public corporations that manifested a lack of adequate internal controls and oversight.
VI. THE GRAMM-LEACH-BLILEY ACT (THE "ACT")
In relevant part, the Act requires financial institutions to comply with
certain privacy requirements regarding personal information relating to their
customers. The Act requires the SEC to establish for financial institutions
(including investment companies, investment advisers and broker-dealers)
appropriate standards to protect customer information. The Act and the SEC's
privacy rules have three primary purposes: (1) to require financial institutions
to notify consumers of their privacy policies and practices; (2) to describe the
circumstances under which financial institutions may disclose non-public
personal information regarding customers to unaffiliated third parties; and (3)
to provide a method for customers to opt out of such disclosures, subject to
certain exceptions. Lord Abbett has implemented policies, procedures and
training to protect the integrity and privacy of its clients' information.
VII. THE BANK SECRECY ACT
The USA PATRIOT Act of 2001 (the "Act") amended the Bank Secrecy Act to include mutual funds among the types of financial institutions that are required to establish anti-money laundering compliance programs. The Act requires all such institutions to develop and institute anti-money laundering programs that, at a minimum: (1) include internal policies, procedures, and controls; (2) designate a compliance officer to administer and oversee the program; (3) provide for ongoing employee training; and (4) include an independent audit function to test the program. The Lord Abbett Funds and Lord Abbett have adopted an anti-money laundering compliance program designed to meet these requirements.