<PAGE>
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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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
b(e)(2))
[X] 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):
[ ] $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:
[X] 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:
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<PAGE>
LORD ABBETT AFFILIATED FUND, INC.
INVESTMENT MANAGEMENT
THE GM BUILDING 767 FIFTH AVENUE NEW YORK, NEW YORK 10153
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of the Lord Abbett Affiliated Fund, Inc. scheduled to be held on June 19, 1996,
at 11:00 a.m., at the General Motors Building, 767 Fifth Avenue, New York, New
York. Your Board of Directors looks forward to greeting those shareholders who
are able to attend.
At the meeting, in addition to the election of directors and approval
of the appointment of auditors, you will be asked to vote on a proposed revision
of the Fund's fundamental investment policies and restrictions, a new 12b-1 Plan
and Distribution Agreement and an amendment to the Fund's Articles of
Incorporation.
Such proposals, if approved, are intended to provide for greater
flexibility in the future management of the Fund's portfolio, as well as to
maintain the competitive position of the Fund.
All proposals are fully described in the enclosed proxy statement. I
encourage you to review the proxy statement for all the details regarding the
meeting agenda.
Your Board of Directors believes these proposals are in the best
interest of the Fund and its shareholders and unanimously recommends a vote
"for" all proposals. Regardless of the number of shares you own, it is
important that they be represented and voted. Accordingly, please sign, date
and mail the enclosed proxy card in the postage paid return envelope.
Your prompt response will help save the Fund the expense of additional
solicitation.
Sincerely,
/s/ Ronald P. Lynch
Ronald P. Lynch
Chairman of the Board
April 17, 1996
<PAGE>
LORD ABBETT AFFILIATED FUND, INC.
767 Fifth Avenue
New York, New York 10153
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
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 460,823,291 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 $57,000. The cost of the
solicitation will be borne by the Fund.
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
<PAGE>
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,
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 Time 1994
(2) 54 Warner Cable Programming, Inc.
Formerly President and Chief Operating
Officer of Home Box Office, Inc.
Stewart S. Dixon Partner in the law firm of Wildman, 1976
(2) 65 Harrold, Allen & Dixon.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Director of
Names and Ages of Principal Occupation and Director- the Fund
Directors of the Fund ships Since
- --------------------------- --------------------------------------- ----------------
<C> <S> <C>
John C. Jansing Retired. Former Chairman of Inde- 1979
(2) 70 pendent Election Corporation of
America, a proxy tabulating firm.
C. Alan MacDonald General Partner, The Marketing 1988
(2) 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.
Hansel B. Millican, Jr. President and Chief Executive Officer 1983
(2) 67 of Rochester Button Company.
Thomas J. Neff President, Spencer Stuart & Associates, 1983
(2) 58 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 as a group. In each case, the amounts shown are less
than 1% of the Fund's outstanding capital stock.
3
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Beneficially
Name Owned
and Phantom Shares/(1)/
- ------------------------ -------------------------------------
<S> <C>
Ronald P. Lynch 421,335
Robert S. Dow 8,720
Thomas S. Henderson 167,465
E. Thayer Bigelow 1,850
Stewart S. Dixon 20,115
John C. Jansing 39,191
C. Alan MacDonald 53,713
Hansel B. Millican, Jr. 42,387
Thomas J. Neff 24,831
Directors and Officers as a 1,399,739
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, 1,850 shares; Mr. Dixon, 19,437 shares; Mr. Jansing, 20,974
shares; Mr. MacDonald, 14,076 shares; Mr. Millican, 21,183 shares; Mr.
Neff, 20,998 shares; and directors as a group: 98,518 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
4
<PAGE>
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 Year Ended De-
For the Fiscal Year Ended October 31, 1995 cember 31, 1995
------------------------------------------ -------------------
(I) (II) (III) (IV) (V)
- ----------------------------------------------------------------------------------------------------------------------------------
Estimated Annual
Benefits Upon Re-
Pension or Retire- tirement Proposed
ment Benefits to be Paid by the Total Compensation
Accrued by the Fund and Fifteen Accrued by the Fund
Aggregate Com- Fund and Other Lord and Fifteen Other
pensation Accrued Fifteen Other Lord Abbett-sponsored Lord Abbett-spon-
Name of Director by the Fund/1/ Abbett-sponsored Funds/2/ Funds/2/ sored Funds/3/
- ----------------------------------------------------------------------------------------------------------------------------------
<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>
(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 retirement 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-
5
<PAGE>
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 Directors' 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 44, 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.
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 votes cast. 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, but
shall not be deemed to have been voted on 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
6
<PAGE>
such non-vote shall be deemed present at the meeting for purposes of determining
a quorum but shall not be deemed to have been voted on 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 information 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 votes cast. 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, but shall not be
deemed to have been voted on 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 have been voted on 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.
3. PROPOSAL TO AMEND THE FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS OF
THE FUND
The Board of Directors has approved various amendments to the Fund's
investment policies and restrictions in order to provide increased flexibility
in managing the Fund's investment portfolio and to provide some uniformity in
the investment policies and restrictions among the various Lord Abbett-sponsored
funds.
7
<PAGE>
The Fund's investment policies and restrictions designated "fundamental"
may be changed only 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 fundamental
investment policies and restrictions and its proposed fundamental and certain
non-fundamental investment policies and restrictions are set forth in Exhibit A
attached hereto.
The Fund's 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. The proposed fundamental investment policies and restrictions have been
made less restrictive in order to provide greater flexibility in the future
management of the Fund's investment portfolio and to provide some uniformity
among the Lord Abbett-sponsored funds as noted above. The Board of Directors
has no present intention of approving actions permitted by these less
restrictive fundamental policies and restrictions. 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.
The principal effect of the proposed amendments will be to permit the Fund
to take certain actions not now permitted to the Fund without obtaining
additional shareholder approval. The Fund either will not be permitted to, or
does not intend to, take any such action unless such action is approved by the
Board of
8
<PAGE>
Directors. The board does not now intend to approve any such action or to do so
in the future unless it deems such action to be an appropriate means of seeking
the Fund's investment objective in the best interests of the Fund and its
shareholders, in which case disclosure of the change would be made in the Fund's
then current prospectus or statement of additional information or both. Such
actions, none of which the board has a present intention of approving, involve
the following matters, among others: (i) short sales of securities and purchases
of securities on margin to the extent permitted by applicable law; (ii)
borrowings from banks in amounts up to one-third of total assets (and up to an
additional 5% of total assets for temporary purposes) and such short-term
credits as may be necessary for the clearance of purchases and sales of
portfolio securities; (iii) loans of portfolio securities to the extent
permitted by law; (iv) purchases and sales of securities directly or indirectly
secured by real estate or interests therein, commodities and commodity contracts
in accordance with applicable law so long as registration would not be required
as a commodity pool operator under the Commodity Exchange Act; (v) with respect
to 25% of gross assets, purchasing securities of one issuer representing more
than 5% of the gross assets of the Fund or 10% of the voting securities of such
issuer; (vi) investments of up to 15% of net assets in illiquid securities;
(vii) pledges to secure borrowings pledges to secure borrowings or as permitted
by other investment policies and applicable law; (viii) investments in the
securities of other investment companies to the extent permitted by applicable
law; and (ix) investments of more than 5% of gross assets in securities of
issuers in operation for less than three years. See Exhibit A hereto for a
detailed comparison of the Fund's current fundamental investment policies and
restrictions and its proposed fundamental and certain non-fundamental investment
policies and restrictions.
Approval of the proposed amendments to the Fund's fundamental investment
policies and restrictions 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 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. The effect of an abstention or broker non-vote is the same
as a vote against this proposal.
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 policies and
restrictions.
9
<PAGE>
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 distribution
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.
Under the Current Plan, holders of shares on which the 1% distribution 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 redemptions 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
10
<PAGE>
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 annual distribution fees up to 0.25% of the average annual net assets
attributable to the Class A Shares (the "Distribution Fee Ceiling") (the annual
distribution and service fees could total 0.50% of such average annual net
assets if approved by the board). 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 less than 0.01% 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
11
<PAGE>
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 Share accounts of qualifying dealers, and will be charged against the
Distribution Fee Ceiling. 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. In addition, no CDRC would apply if the plan sponsor requested
a redemption to correct an excess contribution in order to comply with
applicable IRS rules. 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 distribution
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
12
<PAGE>
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 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
investment 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
13
<PAGE>
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.
<TABLE>
<CAPTION>
I II III IV
Pro Forma
(reflecting
Pro-Forma (re- estimated
flecting amounts that
Year Ended maximum would have
October 31, 1995 amounts payable been paid
(reflecting the under the under the
Current Plan) Proposed Plan) 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>
14
<PAGE>
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>
CURRENT $ 64/5/ $ 77/5/ $ 91/5/ $ 132/5/
PRO-FORMA
(MAXIMUM) $67/3,5/ $86/3,5/ $107/3,5/ $166/3,5/
PRO-FORMA
(ESTIMATED) $64/4,5/ $77/4,5/ $ 91/4,5/ $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 Statement. Investors should be aware that long-term shareholders may
pay, as a front-end sales charge and under both the Current Plan and the
Proposed Plan, more than the economic equivalent of the maximum front-
end sales charge permitted by certain rules of the National Association of
Securities Dealers, Inc.
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 fees 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 and service fees that would
have been paid under the Proposed Plan had it been in effect for the Fund's last
fiscal year.
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
15
<PAGE>
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. The effect of an abstention or broker non-vote is the same as a
vote against this proposal.
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 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
16
<PAGE>
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
designated 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 shareholders 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.
17
<PAGE>
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
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 established
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. The effect of an abstention or broker non-vote is the same as a vote
against this proposal.
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.
18
<PAGE>
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 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. The effect of an abstention or broker non-vote is the same as a vote
against this proposal.
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 executive 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.
19
<PAGE>
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
report(s) by writing to the Fund or by calling 800-874-3733.
d. Portfolio Transactions.
----------------------
The Fund's policy is to obtain best execution on all portfolio
transactions, 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 transaction including brokerage commissions and dealer markups and
markdowns and taking into account the full range and quality of the brokers'
services. Consistent with obtaining best execution, the Fund may pay, as
described below, a higher commission than some brokers might charge on the same
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.
20
<PAGE>
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.
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 commission cost of each day. Other clients who direct that their
brokerage business be placed with specific brokers or who invest through wrap
accounts introduced to Lord Abbett by certain brokers may not participate with
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.
21
<PAGE>
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.
Kenneth B. Cutler
Vice President and Secretary
22
<PAGE>
EXHIBIT A
COMPARISON OF CURRENT FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS AND
PROPOSED FUNDAMENTAL AND CERTAIN NON-FUNDAMENTAL 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 margin. The Fund may purchase securities on margin to the extent permitted by applicable
law.
NON-FUNDAMENTAL
The Fund may not make short sales of securities or maintain a short position
except to the extent permitted by applicable law.
BORROWING.
FUNDAMENTAL FUNDAMENTAL
The Fund may not borrow money, unless im- The Fund may not borrow money, except that (i) the Fund may borrow from banks (as
mediately thereafter it has an asset coverage defined in the Act) in amounts up to 33 1/3% of its total assets (including the
of at least 400% of all borrowings, except amount borrowed), (ii) the Fund may borrow up to an additional 5% of its total
that the assets may be less than 400% of assets for temporary purposes, and (iii) the Fund may obtain such short-term
borrowings if reduced because of changes in credit as may be necessary for the clearance of purchases and sales of portfolio
the value of the Fund's investments (the Fund securities.
has not borrowed money since 1950 and has no
present plans to do so - the market risk NON-FUNDAMENTAL
inherent in an investment is increased when The Fund may not borrow in excess of 5% of its gross assets taken at cost or
borrowed money is used). market value, whichever is lower at the time of borrowing, and then only as a
temporary measure for extraordinary or emergency purposes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- ------------------------------------------------ ----------------------------------------------------------------------------------
<S> <C>
UNDERWRITING.
FUNDAMENTAL FUNDAMENTAL
The Fund may not engage in the underwriting of The Fund may not engage in the underwriting of securities, except pursuant to a
securities. merger or acquisition or to the extent that, in connection with the disposition
of its portfolio securities, it may be deemed to be an underwriter under federal
securities laws.
LENDING.
FUNDAMENTAL FUNDAMENTAL
The Fund may not lend money or securities to The Fund may not make loans to other persons, except that the acquisition of
any person, except through entering into bonds, debentures or other corporate debt securities and investment in government
short-term repurchase agreements with sellers obligations, commercial paper, pass-through instruments, certificates of deposit,
of securities the Fund has purchased and bankers acceptances, repurchase agreements or any similar instruments shall not
through lending the Fund's portfolio be subject to this limitation, and except further that the Fund may lend its
securities to registered broker-dealers where portfolio securities, provided that the lending of portfolio securities may be
the loan is 100% secured by cash or its made only in accordance with applicable law.
equivalent, as long as the Fund complies with
regulatory requirements and management deems
such loans not to expose the Fund to
significant risk or adversely affect the
Fund's qualification for pass-through tax
treatment under the Internal Revenue Code
(investment in repurchase agreements exceeding
seven days and in other illiquid investments
is limited to a maximum of 10% of the Fund's
assets).
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- ------------------------------------------------ ----------------------------------------------------------------------------------
<S> <C>
REAL ESTATE/COMMODITIES.
FUNDAMENTAL FUNDAMENTAL
The Fund may not deal in real estate, commodi The Fund may not buy or sell real estate (except that the Fund may invest in
- -ties or commodity contracts. securities directly or indirectly secured by real estate or interests therein or
issued by companies which invest in real estate or interests therein), or
commodities or commodity contracts (except to the extent the Fund may do so in
accordance with applicable law and without registering as a commodity pool
operator under the Commodity Exchange Act as, for example, with futures
contracts).
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.
DIVERSIFICATION.
FUNDAMENTAL FUNDAMENTAL
The Fund may not buy securities if the purchase With respect to 75% of its gross assets, the Fund may not buy securities of one
would then cause the Fund to have more than 5% issuer representing more than (i) 5% of the Fund's gross assets, except
of its gross assets, at market value at the securities issued or guaranteed by the U.S. Government, its agencies or
time of investment, invested in the securities instrumentalities, or (ii) 10% of the voting securities of such issuer.
of any one issuer (except securities issued or
guaranteed by the U.S. Government, its
agencies or instrumentalities), or to own more
than 10% of the voting securities of any
issuer.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- ------------------------------------------------ ----------------------------------------------------------------------------------
<S> <C>
INVESTMENT IN A SINGLE INDUSTRY.
FUNDAMENTAL
The Fund may not concentrate its investments in FUNDAMENTAL
any one industry. (The Fund's investment The Fund may not invest more than 25% of its assets, taken at market value, in
policy of keeping Fund assets in those the securities of issuers in any particular industry (excluding securities of the
securities which are selling at the most U.S. Government, its agencies and instrumentalities).
reasonable prices in relation to 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
Investment in repurchase agreements exceeding NON-FUNDAMENTAL
seven days and in other illiquid investments The Fund may not invest knowingly more than 15% of its net assets (at the time of
is limited to a maximum of 10% of Fund assets. investment) in illiquid securities, except for securities qualifying for resale
under Rule 144A of the Securities Act of 1933, deemed to be liquid by the Board
of Directors.
</TABLE>
4
<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 (other than to secure borrowings, or to the
provision does not apply to the grant of extent permitted by the Fund's investment policies, as permitted by applicable
escrow receipts or the entry into other law).
similar escrow arrangements arising out of the
writing of covered call options. 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 issued by The Fund may not invest in the securities of other investment companies, except
other investment companies as defined in the as permitted by applicable law.
Investment Company Act of 1940.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- ------------------------------------------------ ----------------------------------------------------------------------------------
<S> <C>
OPTIONS.
NON-FUNDAMENTAL NON-FUNDAMENTAL
The Fund may write covered call options which The Fund may not write, purchase or sell puts, calls, straddles, spreads or
are traded on a national securities exchange combinations thereof, except to the extent permitted in the Fund's prospectus and
with respect to securities in the Fund's statement of additional information, as they may be amended from time to time.
portfolio in an attempt to increase Fund
income and to provide greater flexibility in Although it has no current intention to do so, the Fund may invest in financial
the disposition of portfolio securities. futures and options on financial futures.
INVESTMENTS IN SECURITIES OF ISSUERS IN
OPERATION FOR LESS THAN THREE YEARS.
FUNDAMENTAL
The Fund may not purchase securities of any NON-FUNDAMENTAL
issuer unless it or its predecessor has a The Fund may not invest in securities of issuers which, with their predecessors,
record of three years' continuous operation, have a record of less than three years continuous operations, if more than 5% of
except that the Fund may purchase securities the Fund's total assets would be invested in such securities (this restriction
of such issuers through subscription offers or shall not apply to mortgage-backed securities, asset-backed securities or
other rights the Fund receives as a security obligations issued or guaranteed by the U.S. Government, its agencies or
holder of companies offering such instrumentalities).
subscriptions or rights, and such purchases
will then be limited in the aggregate to 5% of
the Fund's net assets at the time of
investment.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- ------------------------------------------------ ----------------------------------------------------------------------------------
<S> <C>
OWNERSHIP OF PORTFOLIO SECURITIES BY OFFICERS
AND DIRECTORS.
FUNDAMENTAL
The Fund may not hold securities of any issuer NON-FUNDAMENTAL
when more than 1/2 of 1% of its securities The Fund may not hold securities of any issuer if more than 1/2 of 1% of the
are owned beneficially by one or more of the securities of such issuer are owned beneficially by one or more officers or
Fund's officers or directors or by one or more directors of the Fund or by one or more partners or members of the underwriter or
partners of the Fund's underwriter or investment advisor if these owners in the aggregate own beneficially more than 5%
investment manager if these owners in the of the securities of such issuer.
aggregate own beneficially more than 5% of
such securities.
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 any of its officers, directors, employees,
directors, or firms (acting as principals) or its investment adviser or any of its officers, directors, partners or
with which any of the foregoing are associated employees, any securities other than shares of the Fund's common stock.
-however, this provision does not apply to
Fund shares, or to securities the Fund may
become entitled to by reason of its ownership
of securities already held (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.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- ------------------------------------------------ ----------------------------------------------------------------------------------
<S> <C>
SENIOR SECURITIES.
No Policy/Restriction stated. FUNDAMENTAL
The Fund may not issue senior securities to the extent such issuance would
violate applicable law.
PURCHASE OF WARRANTS.
NON-FUNDAMENTAL NON-FUNDAMENTAL
Pursuant to state law, the Fund will not invest The Fund may not invest in warrants if, at the time of the acquisition, its
more than 5% of its assets in warrants and not investment in warrants, valued at the lower of cost or market, would exceed 5% of
more than 2% in warrants not listed on the New the Fund's total assets (included within such limitation, but not to exceed 2% of
York or American Stock Exchanges. 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>
8
<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 agreements
with Authorized Institutions (the "Agreements") which may provide for the
payment to such Authorized Institutions of distribution and service fees which
the Distributor receives from the Fund in order to provide 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.
<PAGE>
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 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 reimbursement 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.
2
<PAGE>
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.
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.
3
<PAGE>
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 agreement related to this Plan, cast in person at a meeting called for
the purpose of voting on such amendment. Amendments to this Plan which do not
increase materially the amount to be spent by the 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 fore going 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 "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.
4
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and on its behalf by its duly authorized representative as
of the date first above written.
LORD ABBETT AFFILIATED FUND, INC.
By:_____________________________
President
ATTEST:
___________________
Assistant Secretary
LORD ABBETT DISTRIBUTOR LLC
By:_____________________________
5
<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, or 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 classi fication 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
<PAGE>
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 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 issuance 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
2
<PAGE>
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 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
3
<PAGE>
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.
(e) Voting. On each matter submitted to vote of the stock holders,
------
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,
4
<PAGE>
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
5
<PAGE>
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 Corporation 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 expressly 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 Corporation
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.
6
<PAGE>
(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 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:
7
<PAGE>
(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) at such time, the amount of all
liabilities 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
8
<PAGE>
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.
9
<PAGE>
SECTION 4. 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.
***
10
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11
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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.
<PAGE>
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 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
authorized officers should sign for corporations.
Date:..................................
Signature(s) of Shareholder(s) as shown at left
.......................................
.......................................
(Please read other side)
2
