<PAGE>
Draft--March 11, 1996
================================================================================
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[x] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
b(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
LORD ABBETT AFFILIATED FUND, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
================================================================================
<PAGE>
[Letterhead of Lord Abbett Affiliated Fund, Inc.]
FROM THE CHAIRMAN OF THE BOARD
- ------------------------------
Dear Shareholder,
The Board of Directors of Lord Abbett Affiliated Fund, Inc. (the "Fund")
has called an Annual Meeting of Shareholders of the Fund to consider the matters
described below. The board recommends that you vote in favor of each proposal.
First, the board recommends that you vote to reelect the current
directors of the Fund and to ratify the selection of Deloitte & Touche LLP as
the Fund's independent public accountants.
Second, the board recommends that you vote in favor of a proposed
revision of the fundamental investment policies and restrictions of the Fund
which are intended to provide for greater flexibility in managing the Fund's
portfolio and to permit the board to change applicable policies in the future
without incurring the expense of shareholder meetings.
Third, the directors propose that the Fund enter into a new 12b-1 Plan
and Dis tribution Agreement for your class of shares. This new 12b-1 Plan has
several changes which are designed primarily to maintain the competitive
position of the Fund and to encourage sales of Fund shares. These changes, and
the estimated effect of these changes on the Fund's expenses, are described in
detail in the proxy statement.
Fourth, the directors propose that the Fund's Articles of Incorporation
be amended (i) to authorize the creation of new classes and series of shares of
-
the capital stock of the Fund, which is intended to encourage sales of Fund
shares, (ii) to confirm that the Fund may impose contingent deferred sales
--
charges in connection with new classes of shares to be created (this change
will have no effect on your shares) and (iii) to reduce the par value of shares
---
of capital stock of the Fund from $1.25 to $.001 per share in order to reduce
costs when authorizing new shares (this change will have no effect on the value
of your shares).
These various matters are to be voted upon at a meeting of the
shareholders of the Fund to be held in New York on Wednesday, June 19, 1996 at
11:00 a.m.
YOUR VOTE ON THESE ISSUES IS CRITICAL. TO ENSURE THAT YOUR VOTE IS
COUNTED, IT IS IMPORTANT THAT YOU:
1. REVIEW THE ENCLOSED PROXY STATEMENT;
2. COMPLETE AND SIGN THE ENCLOSED PROXY CARD; AND
3. RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE.
Your prompt response will help save the Fund the expense of additional
solicitations.
We encourage you to review the enclosed materials. Because we believe
these proposals are in the best interests of shareholders, we encourage you to
vote in favor of the proposals.
Sincerely,
Ronald P. Lynch
Chairman of the Board
April 17, 1996
<PAGE>
PRELIMINARY COPY
LORD ABBETT AFFILIATED FUND, INC.
767 Fifth Avenue
New York, New York 10153
Tel. No. (212) 848-1800
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
JUNE 19, 1996
PROXY STATEMENT
You are urged to sign and mail the proxy card in the enclosed postage-paid
envelope whether you own a few or many shares. Your prompt return of the
proxy may save the Fund the necessity and expense of further solicitations to
insure a quorum at this meeting.
<PAGE>
LORD ABBETT AFFILIATED FUND, INC.
767 Fifth Avenue
New York, New York 10153
Telephone No. (212) 848-1800
Notice of Annual Meeting of Shareholders
To Be Held June 19, 1996 April 17, 1996
Notice is given hereby of an annual meeting of the shareholders of Lord Abbett
Affiliated Fund, Inc. (the "Fund"). The meeting will be held at the offices of
Lord, Abbett & Co., on the 11th floor of The General Motors Building, 767 Fifth
Avenue, New York, New York, on Wednesday, June 19, 1996, at 11:00 a.m., for the
following purposes and to transact such other business as may properly come
before the meeting and any adjournments thereof.
ITEM 1. To elect directors;
ITEM 2. To ratify or reject the selection of Deloitte & Touche LLP as
independent public accountants of the Fund for the current fiscal
year;
ITEM 3. To approve or disapprove certain changes in the Fund's fundamental
investment policies and restrictions;
ITEM 4. To approve or disapprove a new Distribution Plan and Agreement for the
Fund's existing class of shares pursuant to Rule 12b-1 under the In
vestment Company Act of 1940;
ITEM 5. To approve or disapprove an amendment to the Fund's Articles
of Incorporation (i) authorizing the Board of Directors to
-
create new classes and series of shares of capital stock; and
(ii) confirming that the board may impose contingent deferred
--
sales charges in connection with new classes of shares to be
created (this change will have no effect on your shares); and
ITEM 6. To approve or disapprove an amendment to the Fund's Articles
of Incorporation reducing the par value per share from $1.25 to $0.001
in order to reduce costs when authorizing new shares (this change will
have no effect on the value of your shares).
By order of the Board of Directors
Kenneth B. Cutler
Vice President and Secretary
<PAGE>
The Board of Directors has fixed the close of business on March 22, 1996 as the
record date for determination of shareholders of the Fund entitled to notice of
and to vote at the meeting. Shareholders are entitled to one vote for each share
held. As of March 22, 1996, there were ____ shares of the Fund issued and
outstanding.
================================================================================
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD.
SIGN, DATE AND RETURN IT IN THE ENVELOPE PROVIDED.
TO SAVE THE COST OF ADDITIONAL SOLICITATIONS, PLEASE MAIL YOUR PROXY PROMPTLY.
<PAGE>
LORD ABBETT AFFILIATED FUND, INC.
767 Fifth Avenue
New York, New York 10153
April 17, 1996
PROXY STATEMENT
---------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors of Lord Abbett Affiliated
Fund, Inc., a diversified open-end management investment company incorporated
under the laws of Maryland (the "Fund"), for use at an annual meeting of
shareholders of the Fund to be held at 11:00 a.m. on Wednesday, June 19, 1996 at
the offices of Lord, Abbett & Co., the investment manager and principal
underwriter of the Fund ("Lord Abbett"), on the 11th floor of the General Motors
Building, 767 Fifth Avenue, New York, New York 10153, and at any adjournments
thereof. This proxy statement and the enclosed proxy card are first being
mailed to shareholders on or about April 17,1996.
At the close of business on March 22, 1996 (the "Record Date"), there
were issued and outstanding ___________ shares of the Fund. Only shareholders
of record at the close of business on the Record Date are entitled to notice of,
and to vote at, the annual meeting or any adjournment thereof. Proxies will be
solicited by mail. Additional solicitations may be made by telephone, facsimile
or personal contact by officers or employees of Lord Abbett and its affiliates.
The Fund may also request brokerage houses, custodians, nominees, and
fiduciaries who are shareholders of record to forward proxy materials to
beneficial owners. D.F. King & Co. has been retained to assist in the
solicitation of proxies at an estimated cost of $_______. The cost of the
solicitation will be borne by _____________.
Shareholders are entitled to one vote for each full share, and a pro
portionate vote for each fractional share, of the Fund held as of the Record
Date. Under Maryland law, shares owned by two or more persons (whether as joint
tenants, co-fiduciaries or otherwise) will be voted as follows, unless a written
instrument or court order providing to the contrary has been filed with the
Secretary of the Fund: (1) if only one votes, that vote binds all; (2) if more
- -
than one votes, the vote of the majority binds all; and (3) if more than one
-
votes and the vote is evenly divided, the vote will be cast proportionately. If
the enclosed form of proxy is properly executed and returned in time to be voted
at the meeting, the proxies named therein will vote the shares represented by
the proxy in accordance with the instructions marked thereon. Unmarked proxies
will be voted FOR each of the items described in this Proxy Statement and any
other matters as deemed appropriate. A proxy may be revoked by the signer at
any time at or before the meeting by written notice to the Fund, by execution of
a later-dated proxy or by voting in person at the meeting.
1. ELECTION OF DIRECTORS
The nominees for election as directors are Ronald P. Lynch, Robert S.
Dow, Thomas S. Henderson, E. Thayer Bigelow, Stewart S. Dixon, John C. Jansing,
<PAGE>
C. Alan MacDonald, Hansel B. Millican, Jr. and Thomas J. Neff, who have been
nominated by the Board of Directors to succeed themselves. The individuals
named as proxies intend to vote the proxies, unless otherwise directed, in favor
of the election of such nominees, each of whom has agreed to continue to serve
as a director of the Fund. Management of the Fund has no reason to believe that
any nominee will be unable to serve as a director. If any nominee should be
unable to serve as a director, it is the intention of the individuals named as
proxies to vote for the election of such person or persons as the Board of
Directors may, in its discretion, recommend.
Information about each person nominated for election as a director is set
forth in the following table. Except where indicated, each of the persons
listed in the table has held the principal occupation listed opposite his name
for the past five years.
<TABLE>
<CAPTION>
Director
of
Names and Ages of Principal Occupation and Director- the Fund
Directors of the Fund ships Since
---------------------- ----------------------------------- --------
<C> <S> <C>
Ronald P. Lynch (1)(2) Chairman of the Board of the Fund. 1983
60 Partner of Lord Abbett.
Robert S. Dow (1)(2) President of the Fund. 1995
51 Partner of Lord Abbett.
Thomas S. Henderson Executive Vice President of the Fund. 1991
(1)(2) 64 Partner of Lord Abbett.
E. Thayer Bigelow President and Chief Executive of 1994
(2) 54 Time Warner Cable Programming,
Inc. Formerly President and Chief
Operating Officer of Home Box
Office, Inc.
Stewart S. Dixon (2) Partner in the law firm of Wildman, 1976
65 Harrold, Allen & Dixon.
John C. Jansing (2) Retired. Former Chairman of Inde- 1979
70 pendent Election Corporation of
America, a proxy tabulating firm.
C. Alan MacDonald (2) General Partner, The Marketing 1988
62 Partnership, Inc., a full service
marketing consulting firm. Formerly
Chairman and Chief Executive Officer
of Lincoln Snacks, Inc., manufacturer
of branded snack foods (1992-1994).
Formerly President and Chief
Executive Officer of Nestle Foods
Corp., and prior to that, President
and Chief Executive Officer of
Stouffer Foods Corp., both
subsidiaries of Nestle SA,
Switzerland. Currently serves as
Director of Den West Restaurant Co.,
J. B. Williams, and Fountainhead
Water Company.
</TABLE>
2
<PAGE>
<TABLE>
Director
of
Names and Ages of Principal Occupation and Director- the Fund
Directors of the Fund ships Since
---------------------- ----------------------------------- --------
<C> <S> <C>
Hansel B. Millican, Jr. (2) President and Chief Executive Officer 1983
67 of Rochester Button Company.
Thomas J. Neff (2) President, Spencer Stuart & Asso- 1983
58 ciates, an executive search consulting
firm.
</TABLE>
- ---------------------------
(1) "Interested person" of the Fund and Lord Abbett, within the meaning of the
Investment Company Act of 1940, as amended, because of his association with
Lord Abbett.
(2) Also an officer and/or a director or trustee of other Lord Abbett-sponsored
funds.
Listed below is the number of shares of the Fund owned beneficially by
each director as of March 22, 1996, together with the number of "phantom" shares
credited to the account of each director under a plan (the "Deferred Plan")
permitting independent directors to defer their directors' fees and to have the
deferred amounts deemed invested in shares of the Fund for later payment. Also
shown is the number of shares owned beneficially by the directors and officers
as a group, together with such "phantom" shares credited to the accounts of
directors and officers as a group. In each case, the amounts shown are less than
1% of the Fund's outstanding capital stock.
<TABLE>
<CAPTION>
Number of Shares Beneficially
Name Owned
and Phantom Shares/(1)/
- ----------------------- -----------------------------------
<S> <C>
Ronald P. Lynch 440,773
Robert S. Dow 8,695
Thomas S. Henderson 166,982
E. Thayer Bigelow 1,714
Stewart S. Dixon 20,124
John C. Jansing 39,013
C. Alan MacDonald 53,650
Hansel B. Millican, Jr. 21,058
Thomas J. Neff 23,148
Directors and Officers as a 1,148,387
group
</TABLE>
- -------------
___________________
(1) Of the shares listed in the foregoing table, the following constitute
"phantom" shares credited to directors under the Deferred Plan: Mr.
Bigelow, 1,714 shares; Mr. Dixon, 19,448 shares; Mr.
3
<PAGE>
Jansing, 20,849 shares; Mr. MacDonald, 14,084 shares; Mr. Millican, 21,058
shares; Mr. Neff, 20,882 shares; and directors and officers as a group:
shares.
The Board of Directors has only one standing committee, an Audit Committee,
consisting of Messrs. Bigelow, MacDonald and Millican. The functions performed
by the Audit Committee include recommendation of the selection of independent
public accountants for the Fund to the Board of Directors for approval, review
of the scope and results of audit and non-audit services, the adequacy of
internal controls and material changes in accounting principles and practices
and other matters when requested from time to time by the directors (the
"Independent Directors") who are not "interested persons" of the Fund within the
meaning of the Investment Company Act of 1940, as amended (the "Act"). The
Audit Committee held four meetings during the fiscal year ended October 31,
1995.
The Board of Directors of the Fund met twelve times during the fiscal year
ended October 31, 1995, and each director attended at least 75% of the total
number of meetings of the Board and, if he was a member of the Audit Committee,
of such committee.
The second column of the following table sets forth the compensation accrued
by the Fund for the Independent Directors. The third and fourth columns set
forth information with respect to the retirement plan for Independent Directors
maintained by the Fund and the other Lord Abbett-sponsored funds. The fifth
column sets forth the total compensation accrued by the Fund and such other
funds for the Independent Directors. The second, third and fourth columns give
information for the Fund's most recent fiscal year; the fifth column gives
information for the calendar year ended December 31, 1995. No director of the
Fund associated with Lord Abbett and no officer of the Fund received any
compensation from the Fund for acting as a director or officer.
<TABLE>
<CAPTION>
For the Fiscal Year Ended October 31, 1995 For Year Ended
December 31, 1995
------------------------------------------------------------ -------------------
(I) (II) (III) (IV) (V)
- --------------------- ----------------- ------------------- ------------------ ---------------------
Name of Director Aggregate Pension or Retire- Estimated Annual Total Compensation
Com- ment Benefits Benefits Upon Re- Accrued by the Fund
pensation Ac- Accrued by the tirement Proposed and Fifteen Other
crued by the Fund and to be Paid by the Lord Abbett-spon-
Fund/1/ Fifteen Other Fund and Fifteen sored Funds/3/
Lord Abbett- Other Lord
sponsored Funds/2/ Abbett-sponsored
Funds/2/
- --------------------- ----------------- ------------------- ------------------ ---------------------
<S> <C> <C> <C> <C>
E. Thayer Bigelow $14,089 $ 9,772 $33,600 $41,700
Stewart S. Dixon $14,245 $22,472 $33,600 $42,000
John C. Jansing $14,520 $28,480 $33,600 $42,960
C. Alan MacDonald $14,500 $27,435 $33,600 $42,750
Hansel B. Millican, Jr. $14,530 $24,707 $33,600 $43,000
Thomas J. Neff $14,191 $16,126 $33,600 $42,000
</TABLE>
4
<PAGE>
(1) Independent Directors' fees, including attendance fees for board and
committee meetings , are generally allocated among all Lord Abbett-
sponsored funds based on net assets of each fund. A portion of the fees
payable by the Fund to its Independent Directors is being deferred under a
plan that deems the deferred amounts to be invested in shares of the Fund
for later distribution to the directors. The total amount accrued under the
plan for each Independent Director since the beginning of his tenure with
the Fund, including dividends reinvested and changes in net asset value
applicable to such deemed investments, as of October 31, 1995, were as
follows: Mr. Bigelow, $15,558; Mr. Dixon, $208,646; Mr. Jansing, $220,753;
Mr. MacDonald, $151,097; Mr. Millican, $222,990; and Mr. Neff, $221,195.
(2) Each Lord Abbett-sponsored fund has a retirement plan providing that
Independent Directors will receive annual retirement benefits for life
equal to 80% of their final annual retainers following retirement at or
after age 72 with at least 10 years of service. Each plan also provides for
a reduced benefit upon early retirement under certain circumstances, a pre-
retirement death benefit and actuarially reduced joint-and-survivor spousal
benefits. The amounts stated in column (IV) would be payable annually under
such re tirement plans if the director were to retire at age 72 and the
annual retainers payable by such funds were the same as they are today.
The amounts set forth in column (III) were accrued by the Lord Abbett-
sponsored funds during the fiscal year ended October 31, 1995 with respect
to the retirement benefits set forth in column (IV).
(3) This column shows aggregate Independent Director's fees, including
attendance fees for board and committee meetings, of a nature referred to
in the first sentence of footnote (1), accrued by the Lord Abbett-sponsored
funds during the year ended December 31, 1995.
Listed below are the executive officers of the Fund, other than Messrs.
Lynch, Dow and Henderson who are listed above in the table of nominees. Each
executive officer has been associated with Lord Abbett for over five years,
except as indicated. Messrs. Allen, Carper, Cutler, Morris, Nordberg and Walsh
are partners of Lord Abbett; the others listed below are employees.
Stephen I. Allen, age 42, Vice President since 1994.
Daniel E. Carper, age 43, Vice President since 1986.
Kenneth B. Cutler, age 63, Vice President and Secretary since 1966.
John J. Gargana, Jr., age 64, Vice President since 1971.
Paul A. Hilstad, age 53, Vice President and Assistant Secretary since 1995 (with
Lord Abbett since 1995 - formerly Senior Vice President and General Counsel of
American Capital Management & Research, Inc.).
Thomas F. Konop, age 54, Vice President and Assistant Secretary since 1987.
Robert G. Morris, age 51, Vice President since 1995.
E. Wayne Nordberg, age 59, Vice President since 1988.
5
<PAGE>
Keith F. O'Connor, age 40, Treasurer since 1987.
Victor W. Pizzolato, age 63, Vice President since 1980.
John J. Walsh, age 60, Vice President since 1974.
Pursuant to the Fund's By-Laws, the election of each director of the Fund
requires the affirmative vote of a majority of the shares of the Fund voted at
the meeting. If a shareholder abstains from voting on this matter, then the
shares held by such shareholder shall be deemed present at the meeting for
purposes of determining a quorum and for purposes of calculating the vote with
respect to this matter, but shall not be deemed to have been voted in favor of
this matter. If a broker returns a "non-vote" proxy, indicating a lack of
authority to vote on this matter, then the shares covered by such non-vote shall
be deemed present at the meeting for purposes of determining a quorum but shall
not be deemed to be represented at the meeting for purposes of calculating the
vote with respect to this matter.
The Board of Directors recommends that the shareholders vote FOR the
election of each of the nominees as a director of the Fund.
2. RATIFICATION OR REJECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Deloitte & Touche LLP as the in
dependent public accountants of the Fund for the fiscal year ending October 31,
1996. The Act requires that such selection be submitted for ratification or
rejection at the next annual meeting of shareholders if such meeting be held.
Deloitte & Touche LLP (or a predecessor firm) acted as the Fund's independent
public accountants for the year ended October 31, 1995, and for a number of
years prior thereto. Based on in formation in the possession of the Fund, and
information furnished by Deloitte & Touche LLP, the firm has no direct financial
interest and no material indirect financial interest in the Fund. A
representative of Deloitte & Touche LLP is expected to attend the meeting and
will be provided with an opportunity to make a statement and answer appropriate
questions.
Ratification of the selection of Deloitte & Touche LLP requires the
affirmative vote of a majority of the shares of the Fund voted at the meeting.
If a shareholder abstains from voting on this matter, then the shares held by
such shareholder shall be deemed present at the meeting for purposes of
determining a quorum and for purposes of calculating the vote with respect to
this matter, but shall not be deemed to have been voted in favor of this matter.
If a broker returns a "non-vote" proxy, indicating a lack of authority to vote
on this matter, then the shares covered by such non-vote shall be deemed present
at the meeting for purposes of determining a quorum but shall not be deemed to
be represented at the meeting for purposes of calculating the vote with respect
to this matter.
The Board of Directors recommends that shareholders vote to ratify the
selection of Deloitte & Touche LLP as the Fund's independent public accountants
for the fiscal year ending October 31, 1996.
6
<PAGE>
3. PROPOSAL TO AMEND THE FUNDAMENTAL INVESTMENT RESTRICTIONS AND POLICIES OF
THE FUND
The Board of Directors has approved various amendments to the Fund's
investment restrictions and policies in order to provide increased flexibility
in managing the Fund's investment portfolio. Those investment policies and
restrictions designated "fundamental" may only be changed by the vote of a
"majority" (as defined in the Act) of the Fund's voting securities. Those
investment policies and restrictions designated "non-fundamental" may be changed
by the vote of the Board of Directors alone. Therefore, the proposed amendments
to the fundamental policies and restrictions described below require shareholder
approval. The Fund's current and proposed investment restrictions and policies
(both fundamental and non-fundamental) with respect to various investment
techniques and securities are set forth in Exhibit A attached hereto.
Investment policies and restrictions govern generally the investment
activities of the Fund and limit its ability to invest in certain types of
securities or engage in certain types of transactions. The proposed changes are
not expected to affect materially the current operations of the Fund. Although
the proposed fundamental investment policies and restrictions are less
restrictive than the current fundamental investment policies and restrictions of
the Fund, non-fundamental restrictions have been adopted, to become effective
with the proposed amendments to the fundamental policies and restrictions, which
will limit the effect of such changes on the operations of the Fund. The
proposed fundamental policies and restrictions are intended principally to
provide greater flexibility in the future management of the Fund's investment
portfolio. The Board of Directors has no present intention of approving actions
permitted by these less restrictive fundamental policies. If it were to do so,
the risks of investing in the Fund could be increased. No change is proposed
with respect to the Fund's investment objective, which is long-term growth of
capital and income without excessive fluctuations in market value.
The proposed policies and restrictions restate many of the policies and
restrictions currently in effect for the Fund. In some instances, certain
fundamental policies and restrictions have been modified or eliminated in
accordance with developments in Federal or state blue sky regulations or in the
securities markets since the inception of the Fund. In other instances, as
illustrated in Exhibit A, certain policies and restrictions previously deemed
fundamental have been redesignated non-fundamental. By making certain policies
and restrictions non-fundamental, the Board may amend a policy or restriction as
it deems appropriate and in the best interest of the Fund and its shareholders,
without incurring the costs (normally borne by the Fund and its shareholders) of
seeking a shareholder vote. Also, certain of the proposed fundamental
investment policies and restrictions are stated in terms of "to the extent
permitted by applicable law". Applicable law can change over time and may
become more or less restrictive as a result. The policies and restrictions have
been drafted in this manner so that a change in law would not require the Fund
to seek a shareholder vote to amend the policy or restriction to conform to
applicable law, as revised.
Approval of the proposed amendments to the Fund's fundamental investment
restrictions and policies requires the affirmative vote of a "majority" (as
defined in the Act) of the Fund's voting securities. A "majority" vote is
defined in the Act as the vote of the holders of the lesser of: (i) 67% or more
-
of the voting securities present or represented by proxy at the shareholders
meeting, if the holders
7
<PAGE>
of more than 50% of the outstanding voting securities are present or represented
by proxy, or (ii) more than 50% of the outstanding voting securities. If a
--
shareholder abstains from voting on this matter, then the shares held by such
shareholder shall be deemed present at the meeting for purposes of determining a
quorum and for purposes of calculating the vote with respect to this matter, but
shall not be deemed to have been voted in favor of this matter. If a broker
returns a "non-vote" proxy, indicating a lack of authority to vote on this
matter, then the shares covered by such non-vote shall be deemed present at the
meeting for purposes of determining a quorum but shall not be deemed to be
represented at the meeting for purposes of calculating the vote with respect to
this matter.
If the proposed amendments are not approved by the shareholders of the
Fund, the current fundamental policies and restrictions will continue in effect.
The Board of Directors recommends that shareholders vote in favor of the
proposed amendments to the Fund's fundamental investment restrictions and
policies.
4. NEW DISTRIBUTION PLAN AND AGREEMENT FOR THE
CLASS A SHARES
At a meeting of the Board of Directors of the Fund held on March 14, 1996,
the directors of the Fund unanimously approved, subject to shareholder approval,
and determined to submit to the shareholders for approval, a new Distribution
Plan and Agreement pursuant to Rule 12b-1 under the Act (the "Proposed Plan")
for the existing class of Fund shares. This class of shares is to be designated
the Class A Shares -- see Item 5 below. The text of the Proposed Plan is
attached hereto as Exhibit B. The directors who approved the Proposed Plan
include all of the Independent Directors, none of whom is an "interested person"
of the Fund within the meaning of the Act or has a direct or indirect financial
interest in the operations of the Proposed Plan or in any agreements related
thereto.
If approved by shareholders, the Proposed Plan will replace a dis tribution
plan and agreement (the "Current Plan") that was approved by shareholders on
March 14, 1990 and became effective June 1, 1990. The Current Plan was last
amended by action of the Board of Directors on June 12, 1991. The changes
included in the Proposed Plan, which are described below, are designed primarily
to maintain the competitive position of the Class A Shares of the Fund.
Under the Current Plan (except as to certain accounts for which tracking
data is not available), the Fund pays dealers through Lord Abbett (1) an annual
-
service fee (payable quarterly) of 0.25% of the average daily net asset value of
shares sold by dealers on or after June 1, 1990 (0.15% of the average daily net
asset value of shares sold, or attributable to shares sold, by dealers prior to
that date) and (2) a one-time 1% distribution fee, at the time of sale, on all
-
shares sold at the $1 million level by dealers, including sales qualifying at
such level under the rights of accumulation and statement of intention
privileges described in the Fund's prospectus in effect at such time. These
service and distribution fees provide additional incentives for dealers (a) to
-
provide continuing information and investment services to their shareholder
accounts and otherwise to encourage their accounts to remain invested in the
Fund and (b) to sell shares of the Fund.
-
8
<PAGE>
Under the Current Plan, holders of shares on which the 1% dis tribution fee
has been paid are required to pay to the Fund a contingent deferred
reimbursement charge ("CDRC") of 1% of the original cost or the then net asset
value, whichever is less, of such shares if they are redeemed out of the Lord
Abbett-sponsored family of funds on or before the end of the twenty-fourth month
after the month in which the purchase occurred. (An exception is made for
certain re demptions by tax-qualified plans under Section 401 of the Internal
Revenue Code due to plan loans, hardship withdrawals, death, retirement or
separation from service with respect to plan participants.) If the shares are
exchanged into another Lord Abbett fund and are thereafter redeemed out of the
Lord Abbett family on or before the end of such twenty-fourth month, the charge
is collected for the Fund by the other fund. The Fund collects such a charge for
other Lord Abbett-sponsored funds in a similar situation.
Set forth below is a description of the principal changes to be effected
under the Proposed Plan:
(a) Distribution Fees. The Fund's Board of Directors will be authorized
-----------------
under the Proposed Plan, without further shareholder vote, to increase the
amount of distribution fees up to 0.25% of the average annual net assets
attributable to the Class A Shares (the "Distribution Fee Ceiling"). This
increased spending limit is intended primarily to permit the directors to
increase the amount to be spent for distribution to meet changing sales
competition. The directors believe it is desirable to be able to make these
changes without further shareholder approval because additional shareholder
meetings would be time-consuming and costly to the Fund and its shareholders.
The Board of Directors will approve additional charges under this increased
authority only if a majority of the Independent Directors conclude in their
business judgment that there is a reasonable likelihood that the increase will
benefit the Fund and its shareholders.
The one-time 1% distribution fee, payable at the time of certain sales as
described above, is to be charged against the Distribution Fee Ceiling. During
the Fund's last fiscal year, payments of the one-time 1% distribution fee under
the Current Plan totaled 0.00% of the Fund's average net assets. Subject to
shareholder approval of the Proposed Plan, the Board of Directors has authorized
the Fund to continue paying this one-time distribution fee with respect to sales
of Class A Shares, subject to three changes: First, the payments will be made
-----
in connection with sales to retirement plans with 100 or more eligible
employees, in addition to sales at the $1 million level as under the Current
Plan; Second, the payments will be scaled down at certain breakpoints, as
------
follows: 1% of the first $5 million, 0.55% of the next $5 million, 0.50% of the
next $40 million and 0.25% over $50 million of shares sold to a retirement plan
or other qualifying purchaser within a 12-month period (beginning when the first
purchase is made at net asset value); and Third, the payments will be made to
-----
institutions and persons permitted by applicable law and/or rules to receive
such payments ("Authorized Institutions"), rather than just to dealers as is the
case under the Current Plan.
If shareholders approve the Proposed Plan, the Board of Directors has
authorized the Fund to pay, as an additional distribution fee, a supplemental
payment to dealers who have accounts comprising a significant percentage of the
Fund's Class A Share assets and having a lower than average redemption rate and
who have a satisfactory program for the promotion of Class A Shares. Any such
payments will be 0.10% per annum of the average assets of the Fund represented
by the Class A
9
<PAGE>
Share accounts of qualifying dealers. This supplemental payment is intended by
the Board of Directors to enhance the Fund's relationships with those dealers
most likely to have a significant impact on the growth of the Class A Shares.
(b) Service Fees. Service fee payments, which are to be continued under
------------
the Proposed Plan at an annual rate of 0.25% of the average daily net asset
value of shares sold on or after June 1, 1990 (0.15% of the average daily net
asset value of shares sold, or attributable to shares sold, prior to such date),
could be made to all Authorized Institutions (institutions and persons permitted
by applicable law and/or rules to receive such payments), rather than just to
dealers as is the case under the Current Plan.
(c) Use of Payments by Lord Abbett. Lord Abbett would be permitted to use
------------------------------
payments received under the Proposed Plan to provide continuing services to
shareholder accounts not serviced by Authorized Institutions and, with Board
approval, to finance any activity which is primarily intended to result in the
sale of Class A Shares. Any such payments to finance activities primarily
intended to result in the sale of Class A Shares would be subject to the
Distribution Fee Ceiling.
(d) CDRC. The CDRC applicable to the Class A Shares would be substantially
----
similar to that payable under the Current Plan, except that no CDRC would be
payable in connection with redemptions by retirement plans (not just those
qualified under Section 401 of the Internal Revenue Code) attributable to any
benefit payment or distribution of any excess contribution thereunder (not just
those described above in connection with such exception under the Current Plan).
Because CDRC payments will be made directly to the Fund, they will have the
effect of reducing the amount of the distribution fees paid by the Fund for the
purpose of complying with the Distribution Fee Ceiling. As in the case of the
specific distribution fees authorized by the Board of Directors of the Fund, the
CDRC authorized from time to time by the board for the Class A Shares will be
described in the then current prospectus of the Fund.
If the supplemental payment to dealers, the revised one-time dis tribution
fee and the other changes described above had been in effect for the Fund's last
fiscal year, it is estimated that, in the aggregate, they would have increased
the ratio of expenses to average net assets of the Fund from 0.63% to
approximately 0.64%, representing a difference of 0.01%.
(e) Lord Abbett Distributor. The other party to the Proposed Plan is to be
-----------------------
Lord Abbett Distributor LLC, a New York limited liability company, to be formed
as a subsidiary of Lord Abbett ("Lord Abbett Distributor"), rather than Lord
Abbett. Lord Abbett Distributor is to take on all the underwriting functions
currently performed directly by Lord Abbett.
In considering whether to recommend the Proposed Plan for approval, the
Board considered, among other things, the factors set forth below:
(i) Flexibility in Adapting Distribution Fees to Meet Industry-Wide
---------------------------------------------------------------
Changes. During the last several years, there has been significantly increased
competition and pricing experimentation in the mutual fund industry. As the
pace of change increases, the Board of Directors believes it will be useful to
be able to respond more quickly to marketplace pressures, and change in
appropriate cases the amount of the Class A 12b-1 distribution fees to be paid,
without unnecessarily
10
<PAGE>
burdening the shareholders with the costs of additional proxy solicitations.
The directors believe that the increased distribution fees described above are
good examples of the desirability of this flexibility. Based on advice received
from Lord Abbett, the decision by the Board to approve the payment of
distribution fees in connection with sales to retirement plans with 100 or more
eligible employees will enable the Class A Shares to compete more effectively in
this growing and important market. The 0.10% per annum supplemental payments to
dealers who meet certain criteria will permit the Fund to enhance relationships
with those dealers most likely to have a significant impact on the growth of the
Class A Shares.
(ii) Expanding Categories of Persons Eligible to Receive Payments. The
------------------------------------------------------------
Current Plan limits payments thereunder to dealers selling Fund shares. Since
the Current Plan was adopted, different methods of distribution, using different
entities, have developed in the industry. The Board of Directors sees no reason
to limit arbitrarily the categories of persons eligible to receive payments
under the Proposed Plan, and believes that the availability of payments under
the plan will induce such other entities to invest in Class A Shares.
(iii) Flexibility in Distributor's Use of Payments. Lord Abbett has
--------------------------------------------
advised the Board of Directors of the Fund that allowing Lord Abbett Distributor
to retain fees received from the Fund to (i) provide continuing information and
in vestment services to shareholder accounts and (ii) finance, with Board
approval, any activity which is primarily intended to result in the sale of
Class A Shares, will provide useful flexibility and will be in line with common
practice in the industry.
In light of the anticipated benefits to the Fund and its shareholders as a
result of adopting the Proposed Plan, and having reviewed a comparison of the
costs to the Fund of the Current Plan and the Proposed Plan, the Directors of
the Fund have concluded, in the exercise of reasonable business judgment and in
light of their fiduciary duties, that there is a reasonable likelihood that the
Proposed Plan will benefit the Fund and its shareholders. There can, however,
be no assurance that the anticipated benefits will be realized.
Payments by the Fund to dealers through Lord Abbett under the Current Plan
for the fiscal year ended October 31, 1995 were $8,408,090 (representing 0.19%
of the Fund's average net assets during that period).
Set forth in the table below is a summary comparison of the Fund's
expenses, on a current and pro-forma basis taking into account the increased
fees that could be paid under the Proposed Plan. The annual operating expenses
shown in the second column are the Fund's actual expenses for the fiscal year
ended October 31, 1995. The expenses shown in the third column represent, on a
pro-forma basis, such actual expenses of the Fund adjusted to show the effect of
the maximum distribution fee the Board would be authorized to approve under the
Proposed Plan. The fourth column shows such pro-forma annual operating expenses
based on the distribution fee rate the Board has approved subject to approval of
the Proposed Plan by shareholders. The example set forth below is not a
representation of past or future expenses. Actual expenses may be greater or
less than those shown.
11
<PAGE>
<TABLE>
<CAPTION>
I II III IV
- -----------------------------------------------------------------------------------------
Pro-Forma Pro Forma
(reflecting (reflecting
Year Ended maximum estimated
October 31, 1995 amounts amounts that
(reflecting the payable under would have
Current Plan) the Proposed been paid
--------------- Plan) under the
-------------- Proposed Plan)
--------------
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(AS A PERCENTAGE OF OFFERING PRICE)
- -----------------------------------------------------------------------------------------
Maximum Sales Load/1/ on Purchases 5.75% 5.75% 5.75%
Deferred Sales Load /1/ None/2/ None/2/ None/2/
- -----------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET
ASSETS)
- -----------------------------------------------------------------------------------------
Management Fee 0.32% 0.32% 0.32%
12b-1 Fees 0.19% 0.50%/3/ 0.20%/4/
Other Expenses 0.12% 0.12% 0.12%
- -----------------------------------------------------------------------------------------
Total Operating Expenses 0.63% 0.94% 0.64%
- -----------------------------------------------------------------------------------------
</TABLE>
Example: Assume an annual return of 5% and there is no change in the level of
- -------
expenses described above. For every $1,000 invested, with reinvestment of all
distributions, you would pay the following total expenses if you closed your
account after the number of years indicated.
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current Pro Pro Current Pro Pro Current Pro Pro Current Pro Pro
- --------- Forma Forma ------- Forma Forma ------- Forma Forma ------- Forma Forma
(max.) (est.) (max.) (est.) (max.) (est.) (max.) (est.)
- ------------------------------------------------------------------------------------------------------------------------------
$64/5/ $67/3,5/ $64/4,5/ $77/5/ $86/3,5/ $77/4,5/ $91/5/ $107/3,5/ $91/4,5/ $132/5/ $166/3,5/ $133/4,5/
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Sales "load" is referred to as sales "charge" and "deferred sales load" is
referred to as "contingent deferred reimbursement charge" or "CDRC"
throughout this Proxy State ment.
2. Under both the Current Plan and the Proposed Plan, redemptions of shares on
which the Fund's Rule 12b-1 sales distribution fee has been paid are subject
to a CDRC of 1% of the original cost or the then net asset value, whichever
is less, of all shares so purchased which are redeemed out of the Lord
Abbett-sponsored family of funds on or before the end of the twenty-fourth
month after the month in which the purchase occurred, subject to certain
exceptions described herein.
3. Reflects the maximum annual 12b-1 fee of 0.50% that could be paid under the
proposed plan in any year, consisting of a distribution fee of 0.25% and
a service fee of 0.25%.
4. Reflects the estimated level of distribution fees that would have been paid
under the Proposed Plan had it been in effect for the Fund's last fiscal
year.
12
<PAGE>
5. Based on total current and pro-forma operating expenses shown in the table
above.
If the shareholders approve the Proposed Plan, the Proposed Plan shall,
unless terminated as described below, become effective July 12, 1996 and
continue in effect until July 12, 1997 and from year to year thereafter only so
long as such continuance is specifically approved, at least annually, by the
Fund's Board of Directors and its Independent Directors by a vote cast in person
at a meeting called for the purpose of voting on such continuance. The Proposed
Plan may be terminated at any time by a vote of a majority of the Independent
Directors or by a shareholder vote in compliance with Rule 12b-1 under the Act.
The Plan may not be amended to increase materially the amount to be spent for
distribution above the maximum amounts set forth in the Proposed Plan without a
shareholder vote in compliance with Rule 12b-1 under the Act. All material
amendments must be approved by a majority of the Independent Directors.
The Proposed Plan provides that while it is in effect, the selection and
nomination of Independent Directors is committed to the discretion of the
Independent Directors then sitting on the Board. This does not prevent the
involvement of others in such selection and nomination if the final decision on
any such selection or nomination is approved by a majority of the Independent
Directors.
Pursuant to Rule 12b-1 under the Act, an affirmative vote of the holders of
a "majority" (as defined in the Act) of the Fund's voting securities is required
for approval of the Proposed Plan. A "majority" vote is defined in the Act as
the vote of the holders of the lesser of: (i) 67% or more of the voting
-
securities present or represented by proxy at the shareholders meeting, if the
holders of more than 50% of the outstanding voting securities are present or
represented by proxy, or (ii) more than 50% of the outstanding voting
--
securities. If a shareholder abstains from voting on this matter, then the
shares held by such shareholder shall be deemed present at the meeting for
purposes of determining a quorum and for purposes of calculating the vote with
respect to this matter, but shall not be deemed to have been voted in favor of
this matter. If a broker returns a "non-vote" proxy, indicating a lack of
authority to vote on this matter, then the shares covered by such non-vote shall
be deemed present at the meeting for purposes of determining a quorum but shall
not be deemed to be represented at the meeting for purposes of calculating the
vote with respect to this matter.
If the Proposed Plan is not approved by the shareholders of the Fund, the
Current Plan will continue in effect according to its terms.
The Board of Directors recommends that shareholders vote in favor of
adoption of the Proposed Plan.
5. AMENDMENT OF THE ARTICLES OF INCORPORATION TO AUTHORIZE CLASSES AND SERIES
OF SHARES AND TO CONFIRM THAT THE FUND MAY IMPOSE CONTINGENT DEFERRED SALES
CHARGES IN CONNECTION WITH REDEMPTIONS
On March 14, 1996, the Fund's Board of Directors unanimously voted to
approve an amendment to the Articles of Incorporation of the Fund to give the
Fund's Board of Directors the power to classify the Fund's shares into classes
and
13
<PAGE>
series, and voted to submit such amendment to the Fund's shareholders for
approval. The full text of the amendment is attached hereto as Exhibit C.
The Fund's Articles of Incorporation presently designate one class of
shares of capital stock and do not authorize the Board of Directors to create
additional classes or series. The Board of Directors believes that the Fund's
best interests will be served if the Board of Directors is able to create new
series of shares and classes of shares within a series, with each share of a
series, regardless of class, sharing pro rata (based on net asset value) in the
portfolio and income of the series and in the series' expenses, except for
differences in expenses resulting from different Rule 12b-1 plans for the
various classes and possibly other class-specific expenses. It is expected that
implementation of such a multi-class fund structure will (i) enable investors in
-
the Fund to choose the distribution option that best suits their individual
situations, (ii) facilitate distribution of the Fund's shares, and (iii)
-- ---
maintain the competitive position of the Fund in relation to other funds that
have implemented or are seeking to implement similar distribution arrangements.
The Board of Directors has approved, subject to shareholder approval, two
classes of shares which are to share in the Fund's portfolio but are to have
different distribution arrangements. The existing class of Fund shares, to be
desig nated the "Class A Shares," will continue to be offered as described in
the Fund's current prospectus, except that the Board of Directors is
recommending that share holders approve a new Distribution Plan and Agreement
pursuant to Rule 12b-1 under the Act that, if approved, will be applicable to
the Class A Shares. See Item 4 above.
The second class of shares, to be designated the "Class C Shares," will be
offered at net asset value without an initial sales charge, but if redeemed for
cash before the first anniversary of purchase, will be subject to a CDRC, or
contingent deferred reimbursement charge, equal to 1% of the lower of their cost
or then net asset value. The Class C Shares are to be subject to a Rule 12b-1
plan that involves annual distribution and service fee payments for the account
of such class equal to 1% of the average net asset value of the Class C shares.
None of these charges will be allocated to the Class A Shares.
If the proposed amendment to the Fund's Articles of Incorporation is
approved, the Board of Directors will be authorized to create and issue one or
more additional classes of shares within the existing series and to create
additional series. Lord Abbett has advised the Board of Directors of the Fund
that it intends to propose to the board in the near future that the board
authorize the Fund to issue a third class of shares, to be designated the "Class
B Shares". If authorized, the Class B Shares are expected to be sold without an
initial sales charge and otherwise to be similar to the Class C Shares except
that (i) they will be subject to a contingent deferred sales charge ("CDSC")
-
that is payable to the distributor of such shares, rather than subject to a
contingent deferred reimbursement charge payable to the Fund as is the case with
the Class C Shares, (ii) the B Share CDSC will be substantially larger than the
--
1% CDRC charged on early redemptions of Class C Shares, (iii) the B Share CDSC
---
will apply over a period of time substantially longer than the 12 months
applicable to the C Share CDRC, and will scale down to zero over that longer
period, and (iv) the Class B Shares will convert automatically into Class A
--
Shares at net asset value after a period of time.
Shares of all classes will vote together on all matters affecting the Fund,
except for matters, such as approval of a Rule 12b-1 plan or a related service
14
<PAGE>
plan, affecting only a particular class or classes. All shares voting on a
matter will have identical voting rights. All issued shares will be fully paid
and non-assessable, and shareholders will have no pre-emptive or other right to
subscribe to any additional shares. All shares within a series will have the
same rights and be subject to the same limitations set forth in the Articles of
Incorporation with respect to dividends, redemptions and liquidation except for
differences resulting from class-specific Rule 12b-1 plans and related service
plans and certain other class-specific expenses.
The proposed amendment to the Fund's Articles of Incorporation will also
make clear that the Fund may impose a CDSC and other charges (which charges may
vary within and among the classes) payable upon redemption as may be estab
lished from time to time by the Board of Directors of the Fund. The Fund's
Articles of Incorporation currently provide that the Fund may deduct a
redemption charge not exceeding 1% of the net asset value of the shares being
redeemed. The proposed amendment is deemed advisable in order to avoid any
question as to whether the proposed B Share CDSC referred to above, which in
some instances may exceed 1%, may be imposed in connection with the proposed
issuance of the Class B Shares. The Board of Directors has no intention of
increasing the CDRC currently payable or proposed to be payable on certain early
redemptions of your Fund shares. See Item 4 above.
Approval of the proposed amendment to the Articles of Incorporation
requires an affirmative vote of more than 50% of the outstanding shares of the
Fund.
If a shareholder abstains from voting on this matter, then the shares held by
such shareholder shall be deemed present at the meeting for purposes of
determining a quorum and for purposes of calculating the vote with respect to
this matter, but shall not be deemed to have been voted in favor of this matter.
If a broker returns a "non-vote" proxy, indicating a lack of authority to vote
on this matter, then the shares covered by such non-vote shall be deemed present
at the meeting for purposes of determining a quorum but shall not be deemed to
be represented at the meeting for purposes of calculating the vote with respect
to this matter.
The Board of Directors recommends that shareholders vote in favor of this
proposed amendment to the Articles of Incorporation.
6. AMENDMENT OF THE ARTICLES OF INCORPORATION TO REDUCE THE PAR VALUE OF
SHARES (THIS CHANGE WILL HAVE NO EFFECT ON THE VALUE OF YOUR SHARES)
On March 14, 1996, the Fund's Board of Directors unanimously voted to
approve an amendment to the Articles of Incorporation of the Fund to reduce the
par value of shares of capital stock of the Fund from $1.25 to $0.001 per share,
and voted to submit such amendment to the Fund's shareholders for approval.
This proposed amendment is included in the text of the amendment attached as
Exhibit C.
Under Maryland law, the par value of shares determines the amount of a
corporation's stated capital. Stated capital has little meaning in the case of
an investment company like the Fund. However, when the Fund increases its
authorized capital stock, it must pay a fee based on the aggregate par value of
the new shares. This change will have no effect on the value of your shares.
The Board of Directors
15
<PAGE>
therefore recommends that the par value of the Fund's shares be reduced in order
to save the Fund some expense when it increases its authorized capital stock.
Approval of the proposed amendment to the Articles of Incorporation
requires an affirmative vote of a majority of the outstanding shares of the
Fund. If a shareholder abstains from voting on this matter, then the shares
held by such shareholder shall be deemed present at the meeting for purposes of
determining a quorum and for purposes of calculating the vote with respect to
this matter, but shall not be deemed to have been voted in favor of this matter.
If a broker returns a "non-vote" proxy, indicating a lack of authority to vote
on this matter, then the shares covered by such non-vote shall be deemed present
at the meeting for purposes of determining a quorum but shall not be deemed to
be represented at the meeting for purposes of calculating the vote with respect
to this matter.
The Board of Directors recommends that shareholders vote in favor of this
proposed amendment to the Articles of Incorporation.
7. OTHER INFORMATION
Management is not aware of any matters to come before the meeting other
than those set forth in the notice. If any such other matters do come before
the meeting, the individuals named as proxies will vote, act, and consent with
respect thereto in accordance with their best judgment.
a. Timeliness of Shareholder Proposals.
-----------------------------------
Any shareholder proposals to be presented for action at the Fund's next
shareholder meeting pursuant to the provisions of Rule 14a-8 under the
Securities Exchange Act of 1934, as amended, must be received at the Fund's
principal execu tive offices within a reasonable time in advance of the date
solicitation is made for such meeting. The Fund does not intend to hold another
annual or special meeting of shareholders unless required to do so by the Act.
b. Investment Adviser and Underwriter.
----------------------------------
Lord, Abbett & Co., 767 Fifth Avenue, New York, New York, 10153, acts as
investment adviser and principal underwriter with respect to the Fund.
c. Annual Report Available Upon Request.
------------------------------------
The Fund will furnish, without charge, a copy of the Fund's most recent
annual report and the most recent semi-annual report succeeding the annual
report, if any, to a shareholder upon request. A shareholder may obtain such
reports(s) by writing to the Fund or by calling 800-___-____.
d. Portfolio Transactions.
----------------------
The Fund's policy is to obtain best execution on all portfolio trans
actions, which means that the Fund seeks to have purchases and sales of
portfolio securities executed at the most favorable prices, considering all
costs of the trans action including brokerage commissions and dealer markups and
markdowns and taking into account the full range and quality of the brokers'
services. Consistent
16
<PAGE>
with obtaining best execution, the Fund may pay, as described below, a higher
commission than some brokers might charge on the same transactions. 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 may, if considered advantageous, make a purchase from
or sale to another Lord Abbett sponsored fund without the intervention of any
broker-dealer.
Broker-dealers are selected on the basis of their professional capacity and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of the Fund and also are employees
of Lord Abbett. These traders do the trading as well for other accounts --
investment companies (of which they are also officers) and other investment
clients -- managed by Lord Abbett. They are responsible for obtaining best
execution.
The Fund pays a commission rate that the Fund believes is appropriate to
give maximum assurance that the Fund's brokers will provide to the Fund, on a
continuing basis, the highest level of brokerage services available. While the
Fund does not always seek the lowest possible commissions on particular trades,
the Fund believes that its 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 they manage. 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.
Some of the Fund's brokers also provide research services at least some of
which are useful to Lord Abbett in their overall responsibilities with respect
to the Fund and the other accounts they manage. Research includes the
furnishing of analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts
and trading equipment and computer software packages, acquired from third-party
suppliers, that enable Lord Abbett to access various information bases. Such
services may be used by Lord Abbett in servicing all their accounts, and not all
of such services will necessarily be used by Lord Abbett in connection with
their management of the Fund; conversely, such services furnished in connection
with brokerage on other accounts managed by Lord Abbett may be used in
connection with their management of the Fund, and not all of such services will
necessarily be used by Lord Abbett in connection with their advisory services to
such other accounts. The Fund has been advised by Lord Abbett that research
services received from brokers cannot be allocated to any particular account,
are not a substitute for Lord Abbett's services but are supplemental to their
own research effort and, when utilized, are subject to internal analysis before
being incorporated by Lord Abbett into their investment process. As a practical
matter, it would not be possible for Lord Abbett to generate all of the
information presently provided by brokers. While receipt of research services
from brokerage firms has not reduced Lord Abbett's normal research activities,
the expenses of Lord Abbett could be materially increased if it attempted to
generate such additional information through its own staff and purchased such
equipment and software packages directly from the suppliers.
17
<PAGE>
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 Fund to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the
equivalent likelihood of best execution, the broker-dealer who has sold the
Fund's shares and/or shares of other Lord Abbett-sponsored funds may be
preferred.
If other clients of Lord Abbett buy or sell the same security at the same
time as the Fund, transactions will, to the extent practicable, be allocated
among all participating accounts in proportion to the amount of each order and
will be executed daily until filled so that each account shares the average
price and com mission cost of each day. Other clients who direct that their
brokerage business be placed with specific brokers or who invest through wrap
accounts introduced to Lord Abbett by certain brokers may not participate with
the Fund in the buying and selling of the same securities as described above.
If these clients wish to buy or sell the same security as the Fund does, they
may have their transactions executed at times different from the Fund's
transactions and thus may not receive the same price or incur the same
commission cost as the Fund does.
For the fiscal years ended October 31, 1995, 1994 and 1993, the Fund paid
total commissions to independent broker-dealers of $6,542,354, $6,133,695 and
$5,835,046, respectively.
LORD ABBETT AFFILIATED
FUND, INC.
By:_______________________
Kenneth B. Cutler
Vice President and Secretary
18
<PAGE>
EXHIBIT A
COMPARISON OF CURRENT AND PROPOSED INVESTMENT POLICIES AND RESTRICTIONS
<TABLE>
<CAPTION>
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- -------------------------------------------------------------------------------------------------
<S> <C>
SHORT SALES/MARGIN.
FUNDAMENTAL FUNDAMENTAL
The Fund may not sell short or buy on The Fund may purchase securities on
margin. margin to the extent permitted by applica-
ble law.
NON-FUNDAMENTAL
The Fund may not make short sales of
securities or maintain a short position
except to the extent permitted by applic-
able law.
- -------------------------------------------------------------------------------------------------
BORROWING.
FUNDAMENTAL FUNDAMENTAL
The Fund may not borrow money, unless im- The Fund may not borrow money, except
mediately thereafter it has an asset coverage of that (i) the Fund may borrow from banks
at least 400% of all borrowings, except that (as defined in the Act) in amounts up to
the assets may be less than 400% of borrow- 33-1/3% of its total assets (including the
ings if reduced because of changes in the value amount borrowed), (ii) the Fund may
of the Fund's investments (the Fund has not borrow up to an additional 5% of its total
borrowed money since 1950 and has no assets for temporary purposes, and
present plans to do so - the market risk (iii) the Fund may obtain such short-term
inherent in an investment is increased when credit as may be necessary for the clear-
borrowed money is used). ance of purchases and sales of portfolio
securities.
NON-FUNDAMENTAL
The Fund may not borrow in excess of
5% of its gross assets taken at cost or
market value, whichever is lower at the
time of borrowing, and then only as a
temporary measure for extraordinary or
emergency purposes.
- -------------------------------------------------------------------------------------------------
UNDERWRITING.
FUNDAMENTAL FUNDAMENTAL
The Fund may not engage in the underwriting The Fund may not engage in the under-
of securities. writing 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 securi-
ties laws.
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- -------------------------------------------------------------------------------------------------
<S> <C>
LENDING.
FUNDAMENTAL FUNDAMENTAL
The Fund may not lend money or securities to The Fund may not make loans to other
any person, except through entering into short- persons, except that the acquisition of
term repurchase agreements with sellers of bonds, debentures or other corporate debt
securities the Fund has purchased and through securities and investment in government
lending the Fund's portfolio securities to obligations, commercial paper, pass-
registered broker-dealers where the loan is through instruments, certificates of depos-
100% secured by cash or its equivalent, as it, bankers acceptances, repurchase agree-
long as the Fund complies with regulatory ments or any similar instruments shall not
requirements and management deems such be subject to this limitation, and except
loans not to expose the Fund to significant risk further that the Fund may lend its
or adversely affect the Fund's qualification for portfolio securities, provided that the
pass-through tax treatment under the Internal lending of portfolio securities may be
Revenue Code (investment in repurchase made only in accordance with applicable
agreements exceeding seven days and in other law.
illiquid investments is limited to a maximum of
10% of the Fund's assets).
- -------------------------------------------------------------------------------------------------
REAL ESTATE/COMMODITIES.
FUNDAMENTAL FUNDAMENTAL
The Fund may not deal in real estate, com- The Fund may not buy or sell real estate
modities or commodity contracts. (except that the Fund may invest in secu-
rities directly or indirectly secured by
real estate or interests therein or issued
by companies which invest in real estate
or interests therein), commodity or com-
modity contracts (except to the extent the
Fund may do so in accordance with ap-
plicable law and without registering as a
commodity pool operator under the Com-
modity Exchange Act as, for example,
with futures contracts).
NON-FUNDAMENTAL
The Fund may not invest in real estate
limited partnership interests or interests
in oil, gas or other mineral leases, or
exploration or other development
programs, except that the Fund may
invest in securities issued by companies
that engage in oil, gas or other mineral
exploration or development activities.
- -------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- -------------------------------------------------------------------------------------------------
<S> <C>
DIVERSIFICATION.
FUNDAMENTAL FUNDAMENTAL
The Fund may not buy securities if the With respect to 75% of its gross
purchase would then cause the Fund to assets, the Fund may not buy
have more than 5% of its gross assets, at securities of one issuer representing
market value at the time of investment, more than (i) 5% of the Fund's gross
invested in the securities of any one issuer assets, except securities issued or
(except securities issued or guaranteed by guaranteed by the U.S. Government,
the U.S. Government, its agencies or its agencies or instrumentalities, or
instrumentalities), or to own more than (ii) 10% of the voting securities of
10% of the voting securities of any issuer. such issuer.
- -------------------------------------------------------------------------------------------------
INVESTMENT IN A SINGLE
INDUSTRY.
FUNDAMENTAL
FUNDAMENTAL The Fund may not invest more than
The Fund may not concentrate its 25% of its assets, taken at market
investments in any one industry. (The value, in the securities of issuers in
Fund's investment policy of keeping Fund any particular industry (excluding
assets in those securities which are selling securities of the U.S. Government, its
at the most reasonable prices in relation to agencies and instrumentalities).
value normally results in diversification
among many industries -- consistent with
this, the Fund does not intend to invest
more than 25% of its assets in any one
industry classification it uses for
investment purposes, although such
concentration could, under unusual
economic and market conditions, amount
to 30% or conceivably somewhat more.)
- -------------------------------------------------------------------------------------------------
RESTRICTED/ILLIQUID
SECURITIES.
FUNDAMENTAL NON-FUNDAMENTAL
Investment in repurchase agreements The Fund may not invest knowingly
exceeding seven days and in other illiquid more than 15% of its net assets (at
investments is limited to a maximum of the time of investment) in illiquid
10% of Fund assets. securities, except for securities
qualifying for resale under Rule 144A
of the Securities Act of 1933, deemed
to be liquid by the Board of
Directors.
- -------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- -------------------------------------------------------------------------------------------------
<S> <C>
MORTGAGING AND PLEDGING OF
ASSETS.
FUNDAMENTAL
The Fund may not pledge, mortgage or FUNDAMENTAL
hypothecate its assets - however, this The Fund may not pledge its assets
provision does not apply to the grant of (other than to secure borrowings, or
escrow receipts or the entry into other to the extent permitted by the Fund's
similar escrow arrangements arising out of investment policies, in connection
the writing of covered call options. with hedging transactions, short sales,
when-issued and forward commitment
transactions and similar investment
strategies).
NON-FUNDAMENTAL
The Fund may not pledge, mortgage
or hypothecate its assets - however,
this provision does not apply to the
grant of escrow receipts or the entry
into other similar escrow
arrangements arising out of the
writing of covered call options.
- -------------------------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES OF
OTHER INVESTMENT COMPANIES.
FUNDAMENTAL NON-FUNDAMENTAL
The Fund may not invest in securities The Fund may not invest in the
issued by other investment companies as securities of other investment
defined in the Investment Company Act of companies, except as permitted by
1940. applicable law.
- -------------------------------------------------------------------------------------------------
OPTIONS.
NON-FUNDAMENTAL NON-FUNDAMENTAL
The Fund may write covered call options The Fund may not write, purchase or
which are traded on a national securities sell puts, calls, straddles, spreads or
exchange with respect to securities in the combinations thereof, except to the
Fund's portfolio in an attempt to increase extent permitted in the Fund's
Fund income and to provide greater prospectus and statement of additional
flexibility in the disposition of portfolio information, as they may be amended
securities. from time to time.
Although it has no current intention to
do so, the Fund may invest in
financial futures and options on
financial futures.
- -------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- -------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENTS IN SECURITIES OF
ISSUERS IN OPERATION FOR LESS
THAN THREE YEARS.
FUNDAMENTAL NON-FUNDAMENTAL
The Fund may not purchase securities of The Fund may not invest in securities
any issuer unless it or its predecessor has a of issuers which, with their
record of three years' continuous predecessors, have a record of less
operation, except that the Fund may than three years continuous
purchase securities of such issuers through operations, if more than 5% of the
subscription offers or other rights the Fund Fund's total assets would be invested
receives as a security holder of companies in such securities (this restriction shall
offering such subscriptions or rights, and not apply to mortgage-backed
such purchases will then be limited in the securities, asset-backed securities or
aggregate to 5% of the Fund's net assets at obligations issued or guaranteed by
the time of investment. the U.S. Government, its agencies or
instrumentalities).
- -------------------------------------------------------------------------------------------------
OWNERSHIP OF PORTFOLIO SE-
CURITIES BY OFFICERS AND
DIRECTORS.
FUNDAMENTAL NON-FUNDAMENTAL
The Fund may not hold securities of any The Fund may not hold securities of
issuer when more than 1/2 of 1% of its any issuer if more than 1/2 of 1% of
securities are owned beneficially by one or the securities of such issuer are
more of the Fund's officers or directors or owned beneficially by one or more
by one or more partners of the Fund's officers or directors of the Fund or by
underwriter or investment manager if these one or more partners or members of
owners in the aggregate own beneficially the underwriter or investment advisor
more than 5% of such securities. if these owners in the aggregate own
beneficially more than 5% of the
securities of such issuer.
- -------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- -------------------------------------------------------------------------------------------------
<S> <C>
TRANSACTIONS WITH CERTAIN
PERSONS.
FUNDAMENTAL
The Fund may not engage in securities NON-FUNDAMENTAL
transactions with its underwriter or
investment manager, with officers or The Fund may not buy from or sell to
directors, or firms (acting as principals) any of its officers, directors,
with which any of the foregoing are asso- employees, or its investment adviser
ciated - however, this provision does not or any of its officers, directors,
apply to Fund shares, or to securities the partners or employees, any securities
Fund may become entitled to by reason of other than shares of the Fund's
its ownership of securities already held common stock.
(the Fund has no intention of engaging in
any such transactions with respect to any
such securities), or to transactions on a
securities exchange when only the regular
exchange commissions and charges are
imposed (the Fund has not had, nor does it
intend to have, any such transactions on an
exchange) or to transactions in accordance
with Investment Company Act of 1940
Rule 17a-7.
- -------------------------------------------------------------------------------------------------
SENIOR SECURITIES.
No Policy/Restriction stated. FUNDAMENTAL
The Fund may not issue senior se-
curities to the extent such issuance
would violate applicable law.
- -------------------------------------------------------------------------------------------------
PURCHASE OF WARRANTS. NON-FUNDAMENTAL
NON-FUNDAMENTAL The Fund may not invest in warrants
Pursuant to state law, the Fund will not invest if, at the time of the acquisition, its
more than 5% of its assets in warrants and not investment in warrants, valued at the
more than 2% in warrants not listed on the lower of cost or market, would
New York or American Stock Exchanges. exceed 5% of the Fund's total assets
(included within such limitation, but
not to exceed 2% of the Fund's total
assets, are warrants which are not
listed on the New York or American
Stock Exchange or a major foreign
exchange).
- -------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
EXHIBIT B
Rule 12b-1 Distribution Plan and Agreement
Lord Abbett Affiliated Fund, Inc. -- Class A Shares
---------------------------------------------------
RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT dated as of July 12, 1996 by and
between LORD ABBETT AFFILIATED FUND, INC., a Maryland corporation (the "Fund"),
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 Class A shares of
capital stock (the "Shares") pursuant to the Distribution Agreement between the
Fund and the Distributor, dated as of the date hereof (the "Distribution
Agreement").
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 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 Plan will succeed a Rule 12b-1 Distribution Plan and Agreement
between the Fund and Lord, Abbett & Co. ("Lord Abbett"), an affiliate of the
Distributor.
WHEREAS, the Fund's Board of Directors 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 Fund hereby authorizes the Distributor to enter into agree ments
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 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 Fund 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 Directors of the Fund by a
vote of the kind referred to in paragraph
<PAGE>
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 Fund 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, except
that service fees payable with respect to Shares that were initially issued, or
are attributable to shares that were initially issued by the Fund or a
predecessor fund prior to June 1, 1990 shall not exceed .15 of 1% of the average
net asset value of such Shares. The Board of Directors of the Fund shall from
time to time determine the amounts, within the foregoing maximum amounts, that
the Fund 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 Directors of the Fund.
Such determinations and approvals by the Board of Directors 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 Fund of contingent deferred reim bursement charges
relating to distribution fees paid by the Fund 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 Article III, Section 26,
subparagraphs (d)(2) and (5) of the Rules of Fair Practice 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 Articles of Incorporation 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
Fund 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 Fund hereunder and shall provide to the Fund's Board of
Directors, and the Directors 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 directors, 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
directors, 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.
2
<PAGE>
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 Fund or any of the shareholders, creditors,
directors, or officers of the Fund; provided however, that nothing herein shall
be deemed to protect the Distributor against any liability to the Fund or its
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties hereunder, or by reason of the reckless disregard
of its obligations and duties hereunder.
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 Directors of the Fund, including the vote of a majority of the
directors 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 Directors of the Fund, including the vote
of a majority of the directors 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 agree ment 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 Fund 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 forgoing paragraph 9 may be adopted by a vote of the Board of
Directors of the Fund, including the vote of a majority of the directors 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 Directors 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 directors 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 directors of the Fund who are not "interested persons" of
the Fund are committed to the discretion of such disinterested directors. The
terms
3
<PAGE>
"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.
IN WITNESS WHEREOF, each of the parties has caused this in strument to be
executed in its name and on its behalf by its duly authorized repre sentative as
of the date first above written.
LORD ABBETT AFFILIATED FUND, INC.
By:_____________________________
President
ATTEST:
___________________
Assistant Secretary
LORD ABBETT DISTRIBUTOR LLC
By:_____________________________
4
<PAGE>
EXHIBIT C
PROPOSED AMENDMENT TO ARTICLES OF INCORPORATION OF THE FUND AUTHORIZING THE
BOARD OF DIRECTORS TO CREATE NEW CLASSES AND SERIES OF SHARES OF THE CAPITAL
STOCK OF THE FUND, CONFIRMING THAT THE FUND MAY IMPOSE CONTINGENT DEFERRED
SALES CHARGES IN CONNECTION WITH ITS RULE 12B-1 PLANS AND REDUCING
PAR VALUE
----------------------------------------------------------------------------
The following text shows those provisions of the Articles of Incorporation of
the Fund that are to be amended; the text that is lined through shows deletions
and the text that is double underlined indicates additions.
ARTICLE V
SECTION 1. The total number of shares which the Corporation has authority
to issue is 500,000,000 shares of capital stock of the par value of $.001
each, having an aggregate par value of $500,000. The Board of Directors of the
Corporation shall have full power and authority, from time to time, to classify
or reclassify any unissued shares of stock of the Corporation, including,
without limitation, the power to classify or reclassify unissued shares into
series, and to classify or reclassify a series into one or more classes of stock
that may be invested together in the common investment portfolio in which the
series is invested, by setting or changing the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption of such shares of stock.
All shares of stock of a series shall represent the same interest in the
Corporation and have the same preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption as the other shares of stock of that series, except to
the extent that the Board of Directors provides for differing preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption of shares of
stock of classes of such series as determined pursuant to Articles Supplementary
filed for record with the State Department of Assessments and Taxation of
Maryland, as otherwise determined pursuant to these Articles or by the Board of
Directors in accordance with law. Prior to the first classification of unissued
shares of stock into additional series, all outstanding shares of stock shall be
of a single series, and prior to the first classification of a series into
additional classes, all outstanding shares of stock of such series shall be of a
single class. Notwithstanding any other provision of these Articles, upon the
first classification of unissued shares of stock into additional series, the
Board of Directors shall specify a legal name for the outstanding series, as
well as for the new series, in appropriate charter documents filed for record
with the State Department of Assessments and Taxation of Maryland providing for
such name change and classification, and upon the first classification of a
series into additional classes, the Board of Directors shall specify a legal
name for the outstanding class, as well as for the new class or classes, in
appropriate charter documents filed for record with the State Department of
Assessments and Taxation of Maryland providing for such name change and
classification.
SECTION 2. A description of the relative preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of all series and classes of series of
shares is as
<PAGE>
follows, unless otherwise set forth in Articles Supplementary filed for record
with the State Department of Assessments and Taxation of Maryland or otherwise
determined pursuant to these Articles:
(a) Assets Belonging to Series. All consideration received or
--------------------------
receivable by the Corporation for the issue or sale of shares of a
particular series, together with all assets in which such
consideration is invested or reinvested, all income, earnings,
profits and proceeds thereof, including any proceeds derived from
the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to that
series for all pur poses, subject only to the rights of creditors,
and shall be so recorded upon the books of account of the
Corporation. Such consideration, assets, income, earnings, profits
and proceeds, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form
the same may be, together with any unallocated items (as
hereinafter defined) relating to that series as provided in the
following sentence, are herein referred to as "assets belonging
to" that series. In the event that there are any assets, income,
earnings, profits or proceeds thereof, funds or payments which are
not readily identifiable as belonging to any particular series
(collectively "Unallocated Items"), the Board of Directors shall
allocate such Unallocated Items to and among any one or more of
the series created from time to time in such manner and on such
basis as it, in its sole discretion, deems fair and equitable; and
any Unallocated Items so allocated to a particular series shall
belong to that series. Each such allocation by the Board of
Directors shall be conclusive and binding upon the stockholders of
all series for all purposes.
(b) Liabilities Belonging to Series. The assets belonging to each
-------------------------------
particular series shall be charged with the liabilities of the
Corporation in respect of that series, including any class
thereof, and with all expenses, costs, charges and reserves
attributable to that series, including any such class, and shall
be so recorded upon the books of account of the Corporation. Such
liabilities, expenses, costs, charges and reserves, together with
any unallocated items (as hereinafter defined) relating to that
series, including any class thereof, as provided in the following
sentence, so charged to that series, are herein referred to as
"liabilities belonging to" that series. In the event there are any
unallocated liabilities, expenses, costs, charges or reserves of
the Corporation which are
2
<PAGE>
not readily identifiable as belonging to any particular series
(collectively "Unallocated Items"), the Board of Directors shall
allocate and charge such Unallocated Items to and among any one or
more of the series created from time to time in such manner and on
such basis as the Board of Directors in its sole discretion deems
fair and equitable; and any Unallocated Items so allocated and
charged to a particular series shall belong to that series. Each
such allocation by the Board of Directors shall be conclusive and
binding upon the stockholders of all series for all purposes. To
the extent determined by the Board of Directors, liabilities and
expenses relating solely to a particular class (including, without
limitation, distribution expenses under a Rule 12b-1 plan and
administrative expenses under an administration or service
agreement, plan or other arrangement, however designated, which
may be adopted for such class) shall be allocated to and borne by
such class and shall be appropriately reflected (in the manner
determined by the Board of Directors) in the net asset value,
dividends and distributions and liquidation rights of the shares
of such class.
(c) Dividends. Dividends and distributions on shares of a particular
---------
series may be paid to the holders of shares of that series at such
times, in such manner and from such of the income and capital
gains, accrued or realized, from the assets belonging to that
series, after providing for actual and accrued liabilities
belonging to that series, as the Board of Directors may determine.
Such dividends and distributions may vary between or among classes
of a series to reflect differing allocations of liabilities and
expenses of such series between or among such classes to such
extent as may be provided in or determined pursuant to Articles
Supplementary filed for record with the State Department of
Assessments and Taxation of Maryland or as may otherwise be
determined by the Board of Directors.
(d) Liquidation. In the event of the liquidation or dissolution of
-----------
the Corporation, the stockholders of each series shall be entitled
to receive, as a series, when and as declared by the Board of
Directors, the excess of the assets belonging to that series over
the liabilities belonging to that series. The assets so
distributable to the stockholders of one or more classes of a
series shall be distributed among such stockholders in proportion
to the respective aggregate net asset values of the shares of such
series held by them and recorded on the books of the Corporation.
3
<PAGE>
(e) Voting. On each matter submitted to vote of the stockholders,
------
each holder of a share shall be entitled to one vote for each such
share standing in his name on the books of the Corporation
irrespective of the series or class thereof and all shares of all
series and classes shall vote as a single class ("Single Class
Voting"); provided, however, that (i) as to any matter with
respect to which a separate vote of any series or class is
required by the Investment Company Act of 1940, as amended from
time to time, applicable rules and regulations thereunder, or the
Maryland General Corporation Law, such requirement as to a
separate vote of that series or class shall apply in lieu of
Single Class Voting as described above; (ii) in the event that the
separate vote requirements referred to in (i) above apply with
respect to one or more (but less than all) series or classes,
then, subject to (iii) below, the shares of all other series and
classes shall vote as a single class; and (iii) as to any matter
---
which does not affect the interest of a particular series or
class, only the holders of shares of the one or more affected
series or classes shall be entitled to vote.
(f) Conversion. At such times (which times may vary among shares of a
----------
class) as may be determined by the Board of Directors, shares of a
particular class of a series may be automatically converted into
shares of another class of such series based on the relative net
asset values of such classes at the time of conversion, subject,
however, to any conditions of conversion that may be imposed by
the Board of Directors.
SECTION 3. Each share of the capital stock of the Corporation shall be
subject to the following provisions:
(a) All shares of the capital stock of the Corporation now or hereafter
authorized shall be subject to redemption and redeemable at the option
of the stockholder, in the sense used in the General Laws of the State
of Maryland authorizing the formation of corporations. Each holder of
the shares of capital stock of the Corporation, upon request to the
Corporation accompanied by surrender (to the Corporation, or an agent
designated by it) of the appropriate stock certificate or certificates,
if any, in proper form for transfer, and such other instruments as the
Board of Directors may require, shall be entitled to require the
Corporation to redeem all or any part of the shares of capital stock
outstanding in the name of such holder on the books of the Corporation,
at a redemption price equal to the net asset value of such shares
determined as hereinafter set forth. Notwithstanding the foregoing, the
Corporation may deduct from the proceeds otherwise due to any
stockholder requiring the Corporation to redeem shares a
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redemption charge not to exceed one percent (1%) of such net asset
value or a reimbursement charge, a deferred sales charge or other
charge that is integral to the Corporation's distribution program
(which charges may vary within and among series and classes) as may be
established from time to time by the Board of Directors.
SECTION 4. Notwithstanding any provision of law requiring that any action
be taken or authorized by the affirmative vote of the holders of a designated
proportion greater than a majority of the shares or votes entitled to be cast,
such action shall be effective and valid if taken or authorized by the
affirmative vote of the holders of a majority of the total number of shares
outstanding and entitled to vote thereon.
SECTION 5. No holder of stock of the Corporation shall, as such holder,
have any right to purchase or subscribe for any shares of the capital stock of
the Corpora tion which it may issue or sell (whether out of the number of
shares now or hereafter authorized by these Articles of Incorporation, or any
amendment thereof, or out of any shares of the capital stock of the Corporation
acquired by it after the issue thereof, or otherwise) other than such right, if
any, as the Board of Directors, in its discretion, may determine.
ARTICLE VII
SECTION 1. In furtherance and not in limitation of the powers conferred by
statute and pursuant to these Articles of Incorporation, the Board of Directors
is ex pressly authorized to do the following:
(b) To distribute, in its discretion, for any fiscal year (in the year or
in the next fiscal year) as ordinary dividends and as capital gains
distributions, respectively, amounts sufficient to enable the Cor
poration as a regulated investment company to avoid any liability for
Federal income tax in respect of such year. Any distribution or
dividend paid to stockholders from any capital source shall be
accompanied by a written statement showing the source or sources of
such payment.
(g) To authorize any agreement of the character described in subsection (e)
or (f) of this Section 1 or other agreement or transaction with any
person, corporation, association, partnership or other organization,
although one or more of the members of the Board of Directors or
officers of the Corporation may be the other party to any such
agreement or transaction or an officer, director, shareholder, or
member of such other party, and no such agreement or transaction shall
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be invalidated or rendered voidable by reason of the existence of any
such relationship. Any director of the Corporation who is also an
officer, director, shareholder, or member of such other party or who is
so interested may be counted in determining the existence of a quorum
at any meeting of the Board of Directors which shall authorize any such
agreement or transaction, and may vote thereat to authorize any such
agreement or transaction, with like force and effect as if he were not
such officer, director, shareholder, or member of such other party or
not so interested. Any agreement entered into pursuant to said
subsections (e) or (f) shall be consistent with and subject to the
requirements of the Investment Company Act of 1940, as amended from
time to time, applicable rules and regulations thereunder, or any other
applicable Act of Congress hereafter enacted, and no amendment to any
agreement entered into pursuant to said subsection (e) (other than an
amendment reducing the compensation of the other party thereto) shall
be effective unless assented to by the affirmative vote of a majority
of the outstanding voting securities of the Corporation (as such phrase
is defined in the Investment Company Act of 1940, as amended from time
to time) entitled to vote on the matter.
SECTION 3. For the purposes referred to in these Articles of
Incorporation, the net asset value of shares of the capital stock of the
Corporation of each series and class as of any particular time (a "determination
time") shall be determined by or pursuant to the direction of the Board of
Directors as follows:
(a) At times when a series is not classified into multiple classes, the net
asset value of each share of stock of a series, as of a determination
time, shall be the quotient, carried out to not less than three decimal
points, obtained by dividing the net value of the assets of the
Corporation belonging to that series (determined as hereinafter
provided) as of such determination time by the total number of shares
of that series then outstanding, including all shares of that series
which the Corporation has agreed to sell for which the price has been
determined, and excluding shares of that series which the Corporation
has agreed to purchase or which are subject to redemption for which the
price has been determined.
The net value of the assets of the Corporation of a series as of a
determination time shall be determined in accordance with sound
accounting practice by deducting from the gross value of the assets of
the Corporation belonging to that series (determined as hereinafter
provided), the amount of all liabilities
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belonging to that series (as such terms are defined in subsection (b)
of Section 2 of Article V), in each case as of such determination time.
The gross value of the assets of the Corporation belonging to a series
as of such determination time shall be an amount equal to all cash,
receivables, the market value of all securities for which market
quotations are readily available and the fair value of other assets of
the Corporation belonging to that series (as such terms are defined in
subsection (a) of Section 2 of Article V) at such determination time,
all determined in accordance with sound accounting practice and giving
effect to the following:
(b) At times when a series is classified into multiple classes, the net
asset value of each share of stock of a class of such series shall be
determined in accordance with subsections (a) and (c) of this Section 3
with appropriate adjustments to reflect differing allocations of
liabilities and expenses of such series between or among such classes
to such extent as may be provided in or determined pursuant to Articles
Supplementary filed for record with the State Department of Assessments
and Taxation of Maryland or as may otherwise be determined by the Board
of Directors.
(c) The Board of Directors is empowered, in its discretion, to establish
other methods for determining such net asset value whenever such other
methods are deemed by it to be necessary or desirable, including, but
without limiting the generality of the foregoing, any method deemed
necessary or desirable in order to enable the Corporation to comply
with any provision of the Investment Company Act of 1940 or any rule or
regulation thereunder.
SECTION 4. The presence in person or by proxy of the holders of one-third
of the shares of capital stock of the Corporation issued and outstanding and
entitled to vote thereat shall constitute a quorum for the transaction of any
business at all meetings of the shareholders, except as otherwise provided by
law or in these Articles of Incorporation and except that where the holders of
shares of stock of any series or class are entitled to a separate vote as such
series or class (each such series or class, a "Separate Class") or where the
holders of shares of stock of two or more (but not all) series or classes are
required to vote as a single series or class (each such single series or class,
a "Combined Class"), the presence in person or by proxy of the holders of one-
third of the shares of stock of that Separate Class or Combined Class, as the
case may be, issued and outstanding and entitled to vote thereat shall
constitute a quorum for such vote. If, however, a quorum with respect to all
series, including all classes thereof, a Separate Class or a Combined Class, as
the case may be, shall not be present or represented at any meeting of the
shareholders, the holders of a majority of the shares of stock of all series,
such Separate Class or such Combined Class, as the case may be, present in
person or by proxy and entitled to vote shall
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have power to adjourn the meeting from time to time as to all series, such
Separate Class or such Combined Class, as the case may be, without notice other
than announcement at the meeting, until the requisite number of shares of the
capital stock of the Corporation entitled to vote at such meeting shall be
present. At such adjourned meeting at which the requisite number of shares of
the capital stock of the Corporation entitled to vote thereat shall be
represented any business may be transacted which might have been transacted at
the meeting as originally notified. The absence from any meeting of stockholders
of the number of shares of capital stock of the Corporation in excess of one-
third of the shares of stock of all series or classes, or of the affected series
or classes, as the case may be, which may be required by the laws of the State
of Maryland, the Investment Company Act of 1940 or any other applicable law, or
by these Articles of Incorporation, for action upon any given matter shall not
prevent action at such meeting upon any other matter or matters which may
properly come before the meeting, if there shall be present thereat, in person
or by proxy, holders of the number of shares of stock of the Corporation
required for action in respect of such other matter or matters.
SECTION 5. Any determination as to any of the following matters made by
or pursuant to the direction of the Board of Directors consistent with these
Articles of Incorporation and in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of duties, shall be final and conclusive
and shall be binding upon the Corporation and every holder of shares of capital
stock of the Corporation, of any series or class, namely, the amount of the
assets, obligations, liabilities and expenses of the Corporation or belonging
to any series or with respect to any class; the amount of the net
income of the Corporation from dividends and interest for any period and the
amount of assets at any time legally available for the payment of dividends with
respect to any series or class; the amount of paid-in surplus, other surplus,
annual or other net profits, or net assets in excess of capital, undivided
profits, or excess of profits over losses on sales of securities belonging to
the Corporation or any series or class; the amount, purpose, time of creation,
increase or decrease, alteration or cancellation of any reserves or charges and
the propriety thereof (whether or not any obligation or liability for which
such reserves or charges shall have been created shall have been paid or
discharged) with respect to the Corporation or any series or class; the market
value, or any sale, bid or asked price to be applied in determining the market
value, of any security owned or held by the Corporation; the fair value of any
other asset owned by the Corporation; the number of shares of stock of any
series or class issued or issuable; the existence of conditions permitting the
postponement of payment of the repurchase price of shares of stock of any
series or class or the suspension of the right of redemption as provided by law;
any matter relating to the acquisition, holding and disposition of securities
and other assets by the Corporation; any question as to whether any transaction
constitutes a purchase of securities on margin, a short sale of securities, or
an underwriting of the sale of, or participation in any underwriting or selling
group in connection with the public distribution of any securities; and any
matter relating to the issue, sale, repurchase and/or other acquisition or
disposition of shares of stock of any series or class.
SECTION 6. Any director, or any officer elected or appointed by the
Board of Directors, or by any committee of said board, or by the stockholders or
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otherwise, may be removed at any time, with or without cause, in such lawful
manner as may be provided in the by-laws of the corporation.
SECTION 7. The consideration (or the value thereof as determined by the
Board of Directors) per share to be received by the Corporation upon the
issuance or sale of any shares of its capital stock (including treasury shares)
shall not be less than the greater of the par value or the asset value
(determined as provided in Section 3 of this Article) per share of such capital
stock outstanding at the time as of which the computation of such asset value
shall be made (such time to be determined by the Board of Directors and being
hereinafter referred to as a Determination Time), and that no shares of such
capital stock shall be issued or sold in contravention of any statute, rule or
regulation which at the time shall be lawfully applicable to the
Corporation.
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LORD ABBETT AFFILIATED FUND, INC.
ANNUAL MEETING OF SHAREHOLDERS
JUNE 19, 1996
767 Fifth Avenue
New York, New York 10153
Tel. No. (212) 848-1800
The undersigned hereby appoints KENNETH B. CUTLER, ROBERT S. DOW and RONALD
P. LYNCH and each of them proxies, with full power of substitution, to vote
(according to the number of votes which the undersigned would be entitled to
cast if then personally present) at the annual meeting of shareholders of LORD
ABBETT AFFILIATED FUND, INC. (the "Fund") on June 19, 1996, including all
adjournments, as specified below, and in their discretion upon such other
business as may properly be brought before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS WHICH RECOMMENDS
THAT YOU VOTE FOR PROPOSALS 1-6.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE VOTE OF THE UNDERSIGNED
IS TO BE CAST FOR ALL PROPOSALS LISTED BELOW.
1. Election of Directors:
For [_] Without Authority [_] For All Except [_]
(NOTE: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, CHECK THE
"FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THE NOMINEE'S NAME BELOW.)
Ronald P. Lynch, Robert S. Dow, Thomas S. Henderson, E. Thayer Bigelow,
Stewart S. Dixon, John C. Jansing, C. Alan MacDonald, Hansel B. Millican,
Jr. and Thomas J. Neff.
2. For [_] Against [_] Abstain [_] To ratify the selection of Deloitte &
Touche LLP as independent public accountants of the Fund for the fiscal
year ending October 31, 1996.
3. For [_] Against [_] Abstain [_] To approve or disapprove the
proposed changes in the Fund's fundamental investment policies and
restrictions, as described in the proxy statement.
4. For [_] Against [_] Abstain [_] To approve or disapprove the
proposed new Distribution Plan and Agreement for the Fund's existing class
of shares pursuant to Rule 12b-1 under the Investment Company Act of 1940,
as described in the proxy statement.
5. For [_] Against [_] Abstain [_] To approve or disapprove an
amendment to the Fund's Articles of Incorporation (i) authorizing the Board
-
of Directors to create new classes and series of shares of capital stock;
and (ii) confirming that the board may impose contingent deferred sales
--
charges in connection with new classes of shares to be created, as
described in the proxy statement.
6. For [_] Against [_] Abstain [_] To approve or disapprove an
amendment to the Fund's Articles of Incorporation reducing the
<PAGE>
par value per share from $1.25 to $0.001 in order to reduce costs when
authorizing new shares (this change will have no effect on the value of
your shares).
ACCOUNT NUMBER SHARES PROXY NUMBER
LORD ABBETT AFFILIATED FUND, INC. PLEASE SIGN, DATE AND MAIL THIS
PROXY IN THE POSTAGE PAID
RETURN ENVELOPE PROVIDED.
For information as to the voting of stock
registered in more than one name, see page 1
of the proxy statement. When signing the
proxy as attorney, executor, administrator,
trustee or guardian, please indicate the
capacity in which you are acting. Only author
ized officers should sign for corporations.
Date:............................
Signature(s) of Shareholder(s) as shown at
left
.................................
.................................
(Please read other side)
