1933 Act File No. 2-10638
1940 Act File No. 811-5
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 68 [X]
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [X]
OF 1940
Amendment No. 18 [X]
AFFILIATED FUND, INC.
Exact Name of Registrant as Specified in Charter
767 FIFTH AVENUE, NEW YORK, N. Y. 10153-0203
Address of Principal Executive Office
Registrant's Telephone Number (212) 848-1800
Kenneth B. Cutler, Vice President & Secretary
767 FIFTH AVENUE, NEW YORK, N. Y. 10153
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box) immediately on filing pursuant to paragraph (b) of Rule 485
X on March 1, 1996 pursuant to paragraph (b) of Rule 485
- ---
60 days after filing pursuant to paragraph (a) (i) of Rule 485
on (date) pursuant to paragraph (a) (i) of Rule 485
75 days after filing pursuant to paragraph (a) (ii) of Rule 485
on (date) pursuant to paragraph (a) (ii) of Rule 485
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Registrant's other Series have registered an indefinite amount of securities
under the Securities Act of 1933 pursuant to Rule 24f-2(a) (1) and a Rule 24f-2
Notice for these series for the most recent fiscal year was filed with the
Commission on December 28, 1995.
<PAGE>
AFFILIATED FUND, INC.
FORM N-1A
Cross Reference Sheet
Post-Effective Amendment No. 68
Pursuant to Rule 481(b)
Form N-1A Location In Prospectus or
Item No. Statement of Additional Information
1 Cover Page
2 Fee Table
3 Financial Highlights; Performance
4 (a) (i) Cover Page
4 (a) (ii) Investment Objective; How We Invest
4 (b) (c) How We Invest
5 (a) (b) (c) Our Management; Back Cover Page
5 (d) N/A
5 (e) Back Cover Page
5 (f) N/A
5 (g) N/A
5 A Performance
6 (a) Cover Page
6 (b) (c) (d) N/A
6 (e) Cover Page
6 (f) (g) Dividends, Capital Gains
Distributions and Taxes
7 (a) Back Cover Page
7 (b) (c) (d) (e) (f) Purchases
8 (a) (b) (c) (d) Redemptions and Repurchases
9 N/A
10 Cover Page
11 Cover Page - Table of Contents
12 N/A
13 (a) (b) (c) (d) Investment Objective and Policies
14 Directors and Officers
15 (a) (b) (c) Directors and Officers
16 (a) (i) Investment Advisory and Other Services
16 (a) (ii) Directors and Officers
16 (a) (iii) Investment Advisory and Other Services
16 (b) Investment Advisory and Other Services
16 (c) (d) (e) (g) N/A
16 (f) Purchases, Redemptions, Repurchases
and Shareholder Services
16 (h) Investment Advisory and Other Services
16 (i) N/A
17 (a) Portfolio Transactions
17 (b) N/A
17 (c) Portfolio Transactions
<PAGE>
Form N-1A Location in Prospectus or
Item No. Statement of Additional Information
17 (d) Portfolio Transactions
17 (e) N/A
18 (a) Cover Page
18 (b) N/A
19 (a) (b) Purchases, Redemptions, Repurchases
and Shareholder Services; Notes
to Financial Statements
19 (c) N/A
20 Taxes
21 (a) Purchases, Redemptions, Repurchases
and Shareholder Services
21 (b) (c) N/A
22 (a) N/A
22 (b) Past Performance
23 Financial Statements; Supplementary
Financial Information
<PAGE>
LORD ABBETT AFFILIATED FUND, INC.
THE GENERAL MOTORS BUILDING
767 FIFTH AVENUE
NEW YORK, NY 10153-0203
800-426-1130
LORD ABBETT AFFILIATED FUND, INC. (WE OR THE FUND) IS A DIVERSIFIED, OPEN-END
MANAGEMENT INVESTMENT COMPANY ORGANIZED IN 1934 AND INCORPORATED UNDER MARYLAND
LAW ON NOVEMBER 26, 1975. WE HAVE A SINGLE CLASS OF SHARES WITH EQUAL RIGHTS AS
TO VOTING, DIVIDENDS, ASSETS AND LIQUIDATION.
OUR INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL AND INCOME WITHOUT
EXCESSIVE FLUCTUATIONS IN MARKET VALUE. WE SEEK TO ATTAIN OUR OBJECTIVE BY
INVESTING IN SECURITIES SELLING AT REASONABLE PRICES IN RELATION TO VALUE. WE
NORMALLY INVEST IN LARGE, SEASONED COMPANIES IN SOUND FINANCIAL CONDITION,
ISSUING COMMON STOCKS WHICH ARE EXPECTED TO PERFORM ABOVE-AVERAGE WITH RESPECT
TO EARNINGS AND APPRECIATION. THERE CAN BE NO ASSURANCE THAT WE WILL ACHIEVE OUR
OBJECTIVE.
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE FUND THAT A
PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING. ADDITIONAL INFORMATION ABOUT
THE FUND HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS
AVAILABLE UPON REQUEST WITHOUT CHARGE. THE STATEMENT OF ADDITIONAL INFORMATION
IS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS AND MAY BE OBTAINED, WITHOUT
CHARGE, BY WRITING TO THE FUND OR BY CALLING 800-874-3733. ASK FOR PART B OF THE
PROSPECTUS THE STATEMENT OF ADDITIONAL INFORMATION.
THE DATE OF THIS PROSPECTUS AND OF THE STATEMENT OF ADDITIONAL INFORMATION IS
MARCH 1, 1996.
PROSPECTUS
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE.
SHAREHOLDER INQUIRIES SHOULD BE MADE IN WRITING DIRECTLY TO THE FUND OR BY
CALLING 800-821-5129. YOU ALSO CAN MAKE INQUIRIES THROUGH YOUR BROKER-DEALER.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. AN
INVESTMENT IN THE FUND INVOLVES RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
CONTENTS PAGE
1 Investment Objective 2
2 Fee Table 2
3 Financial Highlights 2
4 How We Invest 3
5 Purchases 4
6 Shareholder Services 7
7 Our Management 7
8 Dividends, Capital Gains
Distributions and Taxes 8
9 Redemptions 9
10 Performance 9
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
1 INVESTMENT OBJECTIVE
Our investment objective is long-term growth of capital and income without
excessive fluctuations in market value.
2 FEE TABLE
A summary of the Funds expenses is set forth in the table below. The example is
not a representation of past or future expenses. Actual expenses may be greater
or less than those shown.
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
(AS A PERCENTAGE OF OFFERING PRICE)
Maximum Sales Load(1) on Purchases
(See Purchases) 5.75%
Deferred Sales Load(1)(2) (See Purchases) None(2)
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fee (See Our Management) .32%
12b-1 Fees (See Purchases) .19%
Other Expenses (See Our Management) .12%
Total Operating Expenses .63%
<FN>
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.
1 year 3 years 5 years 10 years
$64(3) $77(3) $91(3) $132(3)
(1) Sales load is referred to as sales charge and deferred sales load is
referred to as contingent deferred reimbursement charge throughout this
Prospectus.
(2) Redemptions of shares on which the Funds 1% Rule 12b-1 sales distribution
fee for purchases of $1 million or more has been paid are subject to a 1%
contingent deferred reimbursement charge, if the redemption occurs within
24 months after the month of purchase, subject to certain exceptions
described herein.
(3) Based on total operating expenses shown in the table above.
The foregoing is provided to give investors a better understanding of the
expenses that are incurred by an investment in the Fund.
</FN>
</TABLE>
3 FINANCIAL HIGHLIGHTS
The following table has been audited by Deloitte & Touche llp, independent
accountants, in connection with their annual audit of the Funds Financial
Statements, whose report thereon is incorporated by reference in the Statement
of Additional Information and may be obtained on request, and has been included
herein in reliance upon their authority as experts in accounting and auditing.
<TABLE>
<CAPTION>
Per Share Operating Year Ended October 31,
Performance: 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $11.03 $11.26 $10.55 $10.29 $8.91 $10.43 $9.64 $10.44 $11.71 $9.81
Income from investment operations
Net investment income .32 .31 .31 .38 .40 .44 .46 .46 .51 .53
Net realized and unrealized
gain (loss) on investments 1.70 .38 1.43 .61 1.92 (1.16) 1.16 .57 (.12) 2.74
Total from investment operations 2.02 .69 1.74 .99 2.32 (.72) 1.62 1.03 .39 3.27
Distributions
Dividends from net investment income (.30) (.32) (.35) (.40) (.41) (.44) (.48) (.49) (.52) (.56)
Distributions from net realized gain (.77) (.60) (.68) (.33) (.53) (.36) (.35) (1.34) (1.14) (.81)
Net asset value, end of year $11.98 $11.03 $11.26 $10.55 $10.29 $8.91 $10.43 $9.64 $10.44 $11.71
Total Return* 20.46% 6.66% 17.76% 10.36% 28.00% (7.57)% 18.04% 12.19% 2.84% 36.38%
Ratios/Supplemental Data:
Net assets, end of year (000) $4,964,525$4,229,586$4,174,033$3,680,332$3,565,230$3,032,954$3,550,414$3,339,427$3,364,128$3,212,287
Ratios to Average Net Assets:
Expenses 0.63% 0.63% 0.63% 0.60% 0.58% 0.50% 0.42% 0.43% 0.37% 0.32%
Net investment income 2.90% 2.91% 2.95% 3.73% 4.22% 4.37% 4.64% 5.00% 4.18% 4.90%
Portfolio turnover rate 53.84% 51.48% 45.15% 42.00% 56.38% 31.78% 34.08% 26.95% 43.11% 54.47%
</TABLE>
<PAGE>
4 HOW WE INVEST
We believe that long-term investors purchase and redeem shares to meet their own
financial requirements rather than to take advantage of price fluctuations.
If so, their needs will be best served by a growth investment seeking low
fluctuations in market value. For this reason, we try to keep our assets
invested in securities which are selling at reasonable prices in relation to
value and, thus, we are willing to forgo some opportunities for gains when, in
our judgment, they carry excessive risk.
We try to anticipate major changes in the economy and select stocks which we
believe will benefit most from these changes.
Normally we invest in large, seasoned companies, in sound financial condition,
issuing common stocks (including securities convertible into common stocks)
which are expected to perform above average with respect to earnings and
appreciation. Although the prices of common stocks fluctuate and their dividends
vary, historically, common stocks have appreciated in value and their dividends
have increased when the companies they represent have prospered and grown.
We constantly balance the opportunity for profit against the risk of loss. In
the past, very few industries have continuously provided the best investment
opportunities. We believe it is important to take a flexible approach and adjust
the portfolio to reflect changes in the opportunities for sound investments
relative to the risks assumed. Therefore, we sell securities that we judge to be
overpriced and reinvest the proceeds in other securities which we believe offer
better value.
We may (a) for income and flexibility, write covered call options traded on a
national securities exchange with respect to securities in our portfolio, (b)
invest up to 10% of our net assets (at the time of investment) in foreign
securities and (c) invest in straight bonds or other debt securities, including
lower rated, high-yield bonds. We do not intend to write covered call options
with respect to securities with an aggregate market value of more than 10% of
our gross assets at the time an option is written and at no time during our past
fiscal year was more than 5% of our gross assets committed to such option
writing. We will not invest more than 5% of our net assets (at the time of
investment) in lower rated (BB/Ba or lower), high-yield bonds.
The Fund may engage in the lending of its portfolio securities. These loans may
not exceed 30% of the value of the Funds total assets. In such an arrangement,
the Fund lends securities from its portfolio to registered broker-dealers. Such
loans are continuously collateralized. Such collateral must be maintained on a
current basis at an amount at least equal to the market value of the securities
loaned. Cash collateral is invested in short-term obligations issued or
guaranteed by the U.S. Government or its agencies, commercial paper or bond
obligations rated AA or A-1/P-1 by Standard & Poors Ratings Services (S&P) or
Moodys Investors Service (Moodys) or repurchase agreements with respect to the
foregoing. As with other extensions of credit, there are risks of delay in
recovery and loss should the borrower of the security fail financially.
We do not purchase securities for trading purposes. To create reserve purchasing
power and also for temporary defensive purposes, we may invest in high-quality
money market instruments (short-term obligations of banks, corporations or the
U.S. Government).
The Fund may invest up to 10% of its net assets in illiquid securities. Bonds
determined by the Funds Board of Directors to be liquid pursuant to Securities
and Exchange Commission Rule 144A (Rule 144A) will not be subject to this limit.
Investments by the Fund in Rule 144A securities initially determined to be
liquid could have the effect of diminishing the level of the Funds liquidity
during periods of decreased market interest in such securities. Under Rule 144A,
a qualifying security may be resold to a qualified institutional buyer without
registration and without regard to whether
<PAGE>
the seller originally purchased the security for investment.
We will not change our investment objective or our investment restrictions
without shareholder approval. If we determine that our objective can best be
achieved by a substantive change in investment policy, which may be changed
without shareholder approval, we may make such change by disclosing it in our
prospectus.
Risk Factors. Securities markets of foreign countries are not subject to the
same degree of regulation as the U.S. markets and may be more volatile and less
liquid than the major U.S. markets. There may be less publicly-available
information on publicly-traded issuers in foreign countries than is generally
the case in the United States. The lack of uniform accounting standards and
practices among countries impairs the validity of direct comparisons of
valuation measures (such as price/earnings ratios) for securities in different
countries. Other considerations include political and social instability,
expropriation, higher transaction costs, currency fluctuations, withholding
taxes that cannot be passed through as a tax credit or deduction to shareholders
and different securities settlement practices. Foreign securities may be traded
on days that we do not value our portfolio securities and, accordingly, our net
asset value may be significantly affected on days when shareholders do not have
access to the Fund.
Convertible bonds and convertible preferred stocks tend to be more volatile than
straight bonds but tend to be less volatile and produce more income than their
underlying common stocks.
5 PURCHASES
You may buy our shares through any independent securities dealer having a sales
agreement with Lord Abbett, our exclusive selling agent. Place your order with
your investment dealer or send it to Lord Abbett Affiliated Fund, Inc. (P.O. Box
419100, Kansas City, Missouri 64141). The minimum initial investment is $250.
Subsequent investments may be made in any amount, except for the $50
Invest-A-Matic and Div-Move monthly minimum. See Shareholder Services.
The net asset value of our shares is calculated every business day as of the
close of the New York Stock Exchange (NYSE) by dividing net assets by the number
of shares outstanding. Securities are valued at their market value as more fully
described in the Statement of Additional Information.
Orders for shares received by the Fund prior to the close of the NYSE or
received by dealers prior to such close and received by Lord Abbett prior to the
close of its business day, will be confirmed at the applicable public offering
price effective at such NYSE close. Orders received by dealers after the NYSE
closes and received by Lord Abbett in proper form prior to the close of its next
business day are executed at the applicable public offering price effective as
of the close of the NYSE on that next business day. The dealer is responsible
for the timely transmission of orders to Lord Abbett. A business day is a day on
which the NYSE is open for trading.
For information regarding the proper form of a purchase or redemption order,
call the Fund at 800-821-5129. This offering may be suspended, changed or
withdrawn. Lord Abbett reserves the right to reject any order.The offering price
is based on the per-share net asset value calculated as of the times described
above plus a sales charge as follows:
<TABLE>
<CAPTION>
Sales Charge as a Dealer's
Percentage of: Concession
as a To Compute
Net Percentage Offering
Offering Amount of Offering Price, Divide
Size of Investment Price Invested Price* NAV by
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00% .9425
$50,000 to $99,999 4.75% 4.99% 4.00% .9525
$100,000 to $249,999 3.75% 3.90% 3.25% .9625
$250,000 to $499,999 2.75% 2.83% 2.25% .9725
$500,000 to $999,999 2.00% 2.04% 1.75% .9800
$1,000,000 or more No Sales Charge 1.00% 1.0000
*Lord Abbett may, for specified periods, allow dealers to retain the full sales
charge for sales of shares during such period, or pay an additional concession
to a dealer who, during a specified period, sells a minimum dollar amount of our
shares and/or shares of other Lord Abbett-sponsored funds. In some instances,
such additional concessions will be offered only to certain dealers expected to
sell significant amounts of shares. Lord Abbett may, from time to time,
implement promotions under which Lord Abbett will pay a fee to dealers with
respect to certain purchases not involving imposition of a sales charge.
Additional payments may be paid from Lord Abbetts own resources and will be made
in the form of cash or, if permitted, non-cash payments. The non-cash payments
will include business seminars at resorts or other locations, including meals
and entertainment, or the receipt of merchandise. The cash payments will include
payment of various business expenses of the dealer.
In selecting dealers to execute portfolio transactions, if two or more
dealers are considered capable of providing best execution, we may prefer the
dealer who has sold our shares and/or shares of other Lord Abbett-sponsored
funds.
Volume Discounts. This section describes several ways to qualify for a lower
sales charge if you inform Lord Abbett or the Fund that you are eligible at the
time of purchase. (1) Any purchaser (as described below) may aggregate a
purchase in the Fund with purchases of any other eligible Lord Abbett-sponsored
fund, together with the current value at maximum offering price of any shares in
the Fund and in any eligible Lord Abbett-sponsored funds held by the purchaser.
(Holdings in the following funds are not eligible for the above rights of
accumulation: Lord Abbett Equity Fund (LAEF), Lord Abbett Series Fund (LASF),
any series of the Lord Abbett Research Fund if not offered to the general public
(LARF) and Lord Abbett U.S. Government Securities Money Market Fund (GSMMF),
except for existing holdings in GSMMF which are attributable to shares exchanged
from a Lord Abbett-sponsored fund offered with a front-end sales charge or from
a fund in the Lord Abbett Counsel Group.) (2) A purchaser may sign a non-binding
13-month statement of intention to invest $50,000 or more in the Fund or in any
of the above eligible funds. If the intended purchases are completed during the
period, each purchase will be at the sales charge, if any, applicable to the
aggregate of such purchasers intended purchases. If not completed, each purchase
will be at the sales charge for the aggregate of the actual purchases. Shares
issued upon reinvestment of dividends or distributions are not included in the
statement of intention. The term purchaser includes (i) an individual, (ii) an
individual and his or her spouse and children under the age of 21 and (iii) a
trustee or other fiduciary purchasing shares for a single trust estate or single
fiduciary account (including a pension, profit-sharing, or other employee
benefit trust qualified under Section 401 of the Internal Revenue Code more than
one qualified employee benefit trust of a single employer, including its
consolidated subsidiaries, may be considered a single trust, as may qualified
plans of multiple employers registered in the name of a single bank trustee as
one account), although more than one beneficiary is involved.
Our shares may be purchased at net asset value by our directors, employees of
Lord Abbett, employees of our shareholder servicing agent and employees of any
securities dealer having a sales agreement with Lord Abbett who consents to such
purchases or by the trustee or custodian under any pension or profit-sharing
plan or Payroll Deduction IRA established for the benefit of such persons or for
the benefit of any national securities trade organization to which Lord Abbett
belongs or any company with an account(s) in excess of $10 million managed by
Lord Abbett on a private-advisory-account basis. For purposes of this paragraph,
the terms directors and employees include a directors or employees spouse
(including the surviving spouse of a deceased director or employee). The terms
directors and employees of Lord Abbett also include other family members and
retired directors and employees. Our shares also may be purchased at net asset
value (a) at $1 million or more, (b) with dividends and distributions from other
Lord Abbett-sponsored funds, except for dividends and distributions on shares of
LARF, LAEF, LASF and Lord Abbett Counsel Group, (c) under the loan feature of
<PAGE>
the Lord Abbett-sponsored prototype 403(b) plan for share purchases representing
the repayment of principal and interest, (d) by certain authorized brokers,
dealers, registered investment advisers or other financial institutions who have
entered into an agreement with Lord Abbett in accordance with certain standards
approved by Lord Abbett, providing specifically for the use of our shares in
particular investment products made available for a fee to clients of such
brokers, dealers, registered investment advisers and other financial
institutions (mutual fund wrap fee programs), (e) by employees, partners and
owners of unaffiliated consultants and advisers to Lord Abbett or Lord
Abbett-sponsored funds who consent to such purchase if such persons provide
services to Lord Abbett or such funds on a continuing basis and are familiar
with such funds, (f) subject to appropriate documentation, through a securities
dealer where the amount invested represents redemption proceeds from shares
(Redeemed Shares) of a registered open-end management investment company not
distributed or managed by Lord Abbett (other than a money market fund), if such
redemptions have occurred no more than 60 days prior to the purchase of our
shares, the Redeemed Shares were held for at least six months prior to
redemption and the proceeds of redemption were maintained in cash or a money
market fund prior to purchase and (g) through retirement plans under Sections
401(a) and (k) and 408(k) of the Internal Revenue Code with at least 100
eligible employees (retirement plans). Purchasers should consider the impact, if
any, of contingent deferred sales charges in determining whether to redeem
shares for subsequent investment in our shares. Lord Abbett may suspend or
terminate the purchase option referred to in (f) above at any time.
Our shares may be issued at net asset value in exchange for the assets, subject
to possible tax adjustment, of a personal holding company or an investment
company.
Rule 12b-1 Plan. We have adopted a Rule 12b-1 Plan (the Plan) which authorizes
Lord Abbett to pay distribution fees to dealers in order to provide additional
incentives for them (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
Plan (except as to certain accounts for which tracking data is not available)
the Fund pays Lord Abbett, who passes on to dealers (1) an annual service fee
(payable quarterly) of .15% of the average daily net asset value of the Funds
shares sold by dealers prior to June 1, 1990 and .25% of the average daily net
asset value of shares sold by dealers on or after that date and (2) a one-time
1% sales distribution fee, at the time of sale, on all sales at the $1 million
level sold by dealers, including sales qualifying at such level under the rights
of accumulation and statement of intention privileges. Lord Abbett is required
to pay the sales distribution fee to dealers as compensation for selling our
shares.
Holders of shares on which the 1% sales distribution fee has been paid will be
required to pay to the Fund a contingent deferred reimbursement charge 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. (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 have been exchanged into another
Lord Abbett fund and are thereafter redeemed out of the Lord Abbett family on or
before the end of such twenty-fourth month, the charge will be collected for the
Fund by the other fund. The Fund will collect such a charge for other Lord
Abbett-sponsored funds in a similar situation. Shares of a fund or series on
which the 1% sales distribution fee has been paid may not be exchanged into a
fund or series with a Rule 12b-1 Plan for which the payment provisions have not
been in effect for at least one year.
<PAGE>
6 SHAREHOLDER SERVICES
We offer the following shareholder services:
Telephone Exchange Privilege: Shares may be exchanged, without a service charge,
for those of any other Lord Abbett-sponsored fund except for (i) LAEF, LASF,
LARF and Lord Abbett Counsel Group and (ii) certain tax-free single-state series
where the exchanging shareholder is a resident of a state in which such series
is not offered for sale (together, Eligible Funds).
You or your representative with proper identification can instruct the Fund to
exchange uncertificated shares by telephone. Shareholders have this privilege
unless they refuse it in writing. The Fund will not be liable for following
instructions communicated by telephone that it reasonably believes to be genuine
and will employ reasonable procedures to confirm that instructions received are
genuine, including requesting proper identification, and recording all telephone
exchanges. Instructions must be received by the Fund in Kansas City
(800-521-5315) prior to the close of the NYSE to obtain the Funds net asset
value per share on that day. Expedited exchanges by telephone may be difficult
to implement in times of drastic economic or market change. The exchange
privilege should not be used to take advantage of short-term swings in the
market. The Fund reserves the right to terminate or limit the privilege of any
shareholder who makes frequent exchanges. The Fund can revoke the privilege for
all shareholders upon 60 days prior written notice. A prospectus for the other
Lord Abbett-sponsored fund selected by you should be obtained and read before an
exchange. Exercise of the Exchange Privilege will be treated as a sale for
federal income tax purposes and, depending on the circumstances, a capital gain
or loss may be recognized.
Systematic Withdrawal Plan: If the maximum offering price value of your
uncertificated shares is at least $10,000, you may have periodic cash
withdrawals automatically paid to you in either fixed or variable amounts.
Div-Move: You can invest the dividends paid on your account ($50 minimum monthly
investment) into an existing account in any other Eligible Fund. The account
must be either your account, a joint account for you and your spouse, a single
account for your spouse, or a custodial account for your minor child under the
age of 21. You should read the prospectus of the other fund before investing.
Invest-A-Matic: You can make fixed, periodic investments ($50 minimum
investment) into the Fund and/or any Eligible Fund by means of automatic money
transfers from your bank checking account. You should read the prospectus of the
other fund before investing.
Retirement Plans: Lord Abbett makes available the retirement plan forms and
custodial agreements for IRAs (Individual Retirement Accounts including
Simplified Employee Pensions), 403(b) plans and pension and profit-sharing
plans, including 401(k) plans.
Householding: A new procedure has been inaugurated whereby a single copy of an
annual or semi-annual report is sent to an address to which more than one
registered shareholder of the Fund with the same last name has indicated mail is
to be delivered, unless additional reports are specifically requested in writing
or by telephone.
All correspondence should be directed to Lord Abbett Affiliated Fund, Inc. (P.O.
Box 419100, Kansas City, Missouri 64141; 800-821-5129).
7 OUR MANAGEMENT
Our business is managed by our officers on a day-to-day basis under the overall
direction of our Board of Directors. We employ Lord Abbett as investment manager
pursuant to a Management Agreement. Lord Abbett has been an investment manager
for over 65 years and currently manages approximately $19 billion in a family of
mutual funds and other advisory accounts. Under the Management Agreement, Lord
Abbett provides us with investment management services and executive and other
personnel, pays the remuneration of our officers and of our directors affiliated
with Lord
<PAGE>
Abbett, provides us with office space and pays for ordinary and necessary office
and clerical expenses relating to research, statistical work and supervision of
our portfolio and certain other costs. Lord Abbett provides similar services to
fifteen other funds having various investment objectives and also advises other
investment clients. Thomas S. Henderson, Executive Vice President of the Fund,
is a partner of Lord Abbett and has served as portfolio manager for the Fund
since May 1991. Mr. Henderson has been with Lord Abbett since 1979. In
connection with Mr. Hendersons scheduled retirement in 1996 in accordance with
Lord Abbetts retirement policy, Mr. W. Thomas Hudson, Jr. will become Executive
Vice President and portfolio manager of the Fund on May 1, 1996. Mr. Hudson has
been with Lord Abbett since 1982.
We pay Lord Abbett a monthly fee based on average daily net assets for each
month. For the fiscal year ended October 31, 1995, the fee paid to Lord Abbett
as a percentage of average daily net assets was at the annual rate of .32 of 1%.
In addition, we pay all expenses not expressly assumed by Lord Abbett. Our ratio
of expenses, including management fee expenses, to average net assets for the
year ended October 31, 1995 was .63 of 1%. We will not hold annual meetings of
shareholders unless required to by the Investment Company Act of 1940, the Board
of Directors or the shareholders with one-quarter of the outstanding stock
entitled to vote. See the Statement of Additional Information for more details.
Our former name was Affiliated Fund, Inc. Our name was changed to Lord Abbett
Affiliated Fund, Inc.
8 DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
Our net investment income is paid to shareholders in February, May, August, and
November as dividends. Dividends from net investment income may be taken in cash
or reinvested in additional shares at net asset value without a sales charge. If
you elect a cash payment (i) a check will be mailed to you as soon as possible
after the monthly reinvestment date or (ii) if you arrange for direct deposit,
your payment will be wired directly to your bank account within one day after
the payable date. Supplemental dividends also may be paid on or about December
31. A long-term capital gains distribution is made if we have net profits during
the year from sales of securities which we have held more than one year. If we
realize net short-term capital gains, they also will be distributed. Any capital
gains distribution will be made in December and may be taken in cash or
reinvested in more shares at net asset value without a sales charge.
Dividends and distributions declared in October, November or December of any
year to shareholders of record as of a date in such a month will be treated for
federal income tax purposes as having been received by shareholders in that year
if they are paid before February 1 of the following year.
We intend to continue to meet the requirements of Subchapter M of the Internal
Revenue Code. We try to distribute to shareholders all our net investment income
and net realized capital gains, so as to avoid the necessity of the Fund paying
federal income tax. Shareholders, however, must report dividends and capital
gains distributions as taxable income. Distributions derived from net long-term
capital gains which are designated by the Fund as capital gains dividends will
be taxable to shareholders as long-term capital gains, whether received in cash
or shares, regardless of how long a taxpayer has held the shares. Under current
law, net long-term capital gains of individuals and corporations are taxed at
the rates applicable to ordinary income, except that the maximum rate for
long-term capital gains for individuals is 28%. Legislation pending as of the
date of this Prospectus, would have the effect of reducing the federal income
tax rate on capital gains.
<PAGE>
Shareholders may be subject to a $50 penalty under the Internal Revenue Code and
we may be required to withhold and remit to the U.S. Treasury a portion (31%) of
any redemption proceeds (including the value of shares exchanged into another
Lord Abbett-sponsored fund), and of any dividend or distribution on any account,
where the payee (shareholder) failed to provide a correct taxpayer
identification number or to make certain required certifications.
We will inform shareholders of the federal tax status of each dividend and
distribution after the end of each calendar year. Shareholders should consult
their tax advisers concerning applicable state and local taxes as well as the
tax consequences of gains or losses from the redemption or exchange of our
shares.
9 REDEMPTIONS
To obtain the proceeds of an expedited redemption of $50,000 or less, you or
your representative with proper identification can telephone the Fund. The Fund
will not be liable for following instructions communicated by telephone that it
reasonably believes to be genuine and will employ reasonable procedures to
confirm that instructions received are genuine, including requesting proper
identification, recording all telephone redemptions and mailing the proceeds
only to the named shareholder at the address appearing on the account
registration.
If you do not qualify for the expedited redemption procedures described above to
redeem shares directly, send your request to Lord Abbett Affiliated Fund, Inc.
(P.O. Box 419100, Kansas City, Missouri 64141) with signature(s) and any legal
capacity of the signer(s) guaranteed by an eligible guarantor, accompanied by
any certificates for shares to be redeemed and other required documentation. We
will make payment of the net asset value of the shares as of the date the
redemption order was received in proper form. Payment will be made within three
days. The Fund may suspend the right to redeem shares for not more than seven
days or longer under unusual circumstances as permitted by Federal law. If you
have purchased Fund shares by check and subsequently submit a redemption
request, redemption proceeds will be paid upon clearance of your purchase check,
which may take up to 15 days. To avoid delays you may arrange for the bank upon
which a check was drawn to communicate to the Fund that the check has cleared.
Shares also may be redeemed by the Fund at net asset value through your
securities dealer who, as an unaffiliated dealer, may charge you a fee.
If your dealer receives your order prior to the close of the NYSE and
communicates it to Lord Abbett, as our agent, prior to the close of Lord Abbetts
business day, you will receive the net asset value as of the close of the NYSE
on that day. If the dealer does not communicate such an order to Lord Abbett
until the next business day, you will receive the net asset value as of the
close of the NYSE on that next business day.
Shareholders who have redeemed their shares have a one-time right to reinvest,
into another account having the identical registration, in any of the Eligible
Funds at the then applicable net asset value without the payment of a sales
charge. Such reinvestment must be made within 60 days of the redemption and is
limited to no more than the amount of the redemption proceeds.
Under certain circumstances and subject to 30 days prior written notice, our
Board of Directors may authorize redemption of all of the shares in any account
in which there are fewer than 20 shares, resulting from redemption or exchange
not market action.
10 PERFORMANCE
The Fund ended its fiscal year on October 31, 1995 with a net asset value of
$11.98 per share, 16.8% above the $10.26 per share posted a year earlier (after
adjustment for capital gains of $.77 per-share paid in December 1994). Assuming
reinvestment of both the capital gains distribution and dividends totaling $.30
per share, the Fund produced a total return of 20.5%. Our Board of Directors
declared a capital gains distribution of $1.19 per share, and a regular
quarterly dividend of $.075 per share.
<PAGE>
Given the slow economic growth which was in evidence for most of the fiscal year
ending October 31, 1995, we increased our holdings in less cyclical, consumer
non-durable goods (such as food and drug companies). Also, anticipating lower
interest rates, and given a very favorable inflation environment, we had a
significant overweighting in financial companies. Both of these strategies
contributed importantly for our performance during the period.
Yield and Total Return. Yield and total return data may, from time to time, be
included in advertisements about the Fund. Yield is calculated by dividing the
Funds annualized net investment income per share during a recent 30-day period
by the maximum public offering price per share on the last day of that period.
The Funds yield reflects the deduction of the maximum initial sales charge and
reinvestment of all income dividends and capital gains distributions. Total
return for the one-, five- and ten-year periods represents the average annual
compounded rate of return on an investment of $1,000 in the Fund at the maximum
public offering price. Total return also may be presented for other periods or
based on investment at reduced sales charge levels or net asset value. Any
quotation of total return not reflecting the maximum initial sales charge would
be reduced if such sales charge were used. Quotations of yield or total return
for any period when an expense limitation is in effect will be greater than if
the limitation had not been in effect. See Past Performance in the Statement of
Additional Information for a more detailed description.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFER IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
NOT CONTAINED IN THIS PROSPECTUS OR IN SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY
THE FUND AND NO PERSON IS ENTITLED TO RELY UPON ANY INFORMATION OR
REPRESENTATION NOT CONTAINED HEREIN OR THEREIN.
<PAGE>
Comparison of change in value of a $10,000 investment, assuming reinvestment of
all dividends and distributions, in the Fund and the unmanaged Standard & Poors
500 Index.
The The
Fund at Fund at
Net Asset Maximum Offering S&P 500
Date Value Price Index
10/31/85 $10000 $ 9429 $10000
10/31/86 13500 12730 13500
10/31/87 13884 13091 13884
10/31/88 15578 14687 15578
10/31/89 18387 17337 18387
10/31/90 16995 16025 16995
10/31/91 21753 20511 21753
10/31/92 24007 22635 24007
10/31/93 28271 26657 28271
10/31/94 30154 28433 30154
10/31/95 36324 34250 36324
(1) Performance numbers for the unmanaged Standard & Poors 500 Index do not
reflect transaction costs or management fees. An investor cannot invest
directly in the Standard & Poors 500 Index.
(2) Data reflects the deduction of the maximum sales charge of 5.75%.
(3) Total return is the percent change in value, after deduction of the maximum
sales charge of 5.75%, with all dividends and distributions reinvested for
the periods shown ending October 31, 1995 using the SEC-required uniform
method to compute such return.
<PAGE>
Underwriter and Investment Manager
Lord, Abbett & Co.
The General Motors Building
767 Fifth Avenue
New York, New York 10153-0203
212-848-1800
Custodian
The Bank of New York
48 Wall Street
New York, New York 10286
Transfer Agent and Dividend
Disbursing Agent
United Missouri Bank of Kansas City, N.A.
Tenth and Grand
Kansas City, Missouri 64141
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419100
Kansas City, Missouri 64141
800-821-5129
Auditors
Deloitte & Touche llp
Counsel
Debevoise & Plimpton
Printed in the U.S.A.
LAA-1-396
Lord Abbett
Affiliated
Fund
A mutual fund for individuals and institutional investors who seek long-term
growth of capital and income without excessive fluctuations in market value.
<PAGE>
LORD ABBETT
Statement of Additional Information March 1, 1996
Lord Abbett Affiliated Fund, Inc.
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord, Abbett & Co. ("Lord
Abbett") at The General Motors Building, 767 Fifth Avenue, New York, New York
10153-0203. This Statement relates to, and should be read in conjunction with,
the Prospectus dated March 1, 1996.
Lord Abbett Affiliated Fund, Inc. (sometimes referred to as "we" or the "Fund")
was organized in 1934 and was incorporated under Maryland law on November 26,
1975. Our authorized capital stock consists of a single class of 500,000,000
shares, $1.25 par value. All shares have equal noncumulative voting rights and
equal rights with respect to dividends, assets and liquidation.
Shareholder inquiries should be made by writing directly to the Fund or by
calling 212-848-1800. In addition, you can make inquiries through your dealer.
TABLE OF CONTENTS Page
1. Investment Objective and Policies 2
2. Directors and Officers 4
3. Investment Advisory and Other Services 6
4. Portfolio Transactions 7
5. Purchases, Redemptions and
Shareholder Services 8
6. Past Performance 12
7. Taxes 12
8. Information About the Fund 13
9. Financial Statements 14
<PAGE>
1.
Investment Objective and Policies
The Fund's investment objective and policies are described in the Prospectus on
the cover page and under "How We Invest". In addition to those policies
described in the Prospectus, we are subject to the following investment
restrictions which cannot be changed without approval of a majority of our
outstanding shares. We may not: (1) sell short or buy on margin; (2) borrow
money, unless immediately thereafter we have an asset coverage of at least 400%
of all borrowings, except that the assets may be less than 400% of borrowings if
reduced because of changes in the value of our investments (we have not borrowed
money since 1950 and have no present plans to do so ) the market risk inherent
in an investment is increased when borrowed money is used); (3) engage in the
underwriting of securities; (4) lend money or securities to any person, except
through entering into short-term repurchase agreements with sellers of
securities we have purchased and through lending our portfolio securities to
registered broker-dealers where the loan is 100% secured by cash or its
equivalent, as long as we comply with regulatory requirements and management
deems such loans not to expose us to significant risk or adversely affect our
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 our assets); (5) pledge, mortgage
or hypothecate our 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; (6) deal in real estate,
commodities, or commodity contracts; (7) invest in securities issued by other
investment companies as defined in the Investment Company Act of 1940; (8)
purchase securities of any issuer unless it or its predecessor has a record of
three years' continuous operation, except that we may purchase securities of
such issuers through subscription offers or other rights we receive as a
security holder of companies offering such subscriptions or rights, and such
purchases will then be limited in the aggregate to 5% of our net assets at the
time of investment; (9) buy securities if the purchase would then cause us to
have more than 5% of our gross assets, at market value at the time of
investment, invested in the securities 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; (10) hold
securities of any issuer when more than 1/2 of 1% of its securities are owned
beneficially by one or more of our officers or directors or by one or more
partners of our underwriter or investment manager if these owners in the
aggregate own beneficially more than 5% of such securities; (11) engage in
security transactions with our underwriter or investment manager, with officers
or directors, or firms (acting as principals) with which any of the foregoing
are associated - however, this provision does not apply to our shares, or to
securities we may become entitled to by reason of our ownership of securities
already held (we have 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 (we have not
had, nor do we intend to have, any such transactions on an exchange) or to
transactions in accordance with Investment Company Act of 1940 Rule 17a-7; or
(12) concentrate our investments in any one industry (our investment policy of
keeping our assets in those securities which are selling at the most reasonable
prices in relation to value normally results in diversification among many
industries - consistent with this, we do not intend to invest more than 25% of
our assets in any one industry classification we use for investment purposes,
although such concentration could, under unusual economic and market conditions,
amount to 30% or conceivably somewhat more).
For the year ended October 31, 1995, the portfolio turnover rate was 53.84%
versus 51.48% for the prior year.
Lending Portfolio Securities
The Fund may lend portfolio securities to registered broker-dealers. These loans
may not exceed 30% of the Fund's total assets. The Fund's loans of securities
will be collateralized by cash or marketable securities issued or guaranteed by
the U.S. Government or its Agencies ("U.S. Government Securities") or other
permissible means. The cash or instruments collateralizing the Fund's loans of
securities will be maintained at all times in an amount at least equal to the
current market value of the loaned securities. From time to time, the Fund may
allow to the borrower and/or a third party that is not affiliated with the Fund
and is acting as a "placing broker" a part of the interest received with respect
<PAGE>
to the investment of collateral received for securities loaned. No fee will be
paid to affiliated persons of the Fund.
By lending portfolio securities, the Fund can increase its income by continuing
to receive interest on the loaned securities as well as by either investing the
cash collateral in permissible investments, such as U.S. Government Securities,
or obtaining yield in the form of interest paid by the borrower when such U.S.
Government Securities are used as collateral. The Fund will comply with the
following conditions whenever it loans securities: (i) the Fund must receive at
least 100% collateral from the borrower; (ii) the borrower must increase the
collateral whenever the market value of the securities loaned rises above the
level of the collateral; (iii) the Fund must be able to terminate the loan at
any time; (iv) the Fund must receive reasonable compensation with respect to the
loan, as well as any dividends, interest or other distributions on the loaned
securities; (v) the Fund may pay only reasonable fees in connection with the
loan and (vi) voting rights on the loaned securities may pass to the borrower
except that, if a material event adversely affecting the investment in the
loaned securities occurs, the Fund's Board of Directors must terminate the loan
and regain the right to vote the securities.
Rule 144A Securities
We may invest in securities qualifying for resale to "qualified institutional
buyers" under SEC Rule 144A that are determined by the Board, or by Lord Abbett
pursuant to the Board's delegation, to be liquid securities. The Board will
review quarterly the liquidity of the investments the Fund makes in such
securities. Investments by the Fund in Rule 144A securities initially determined
to be liquid could have the effect of diminishing the level of the Fund's
liquidity during periods of decreased market interest in such securities among
qualified institutional buyers.
Other Investment Policies (which can be changed without shareholder approval)
As a condition of our registration in Wisconsin, we have agreed not to invest
more than 15% of our assets in restricted securities (restricted securities
eligible for resale pursuant to Rule 144A are excluded from this 15% investment
restriction) and not to invest in oil, gas or mineral development programs or in
puts or calls (other than in connection with the writing of covered call options
as described in the Prospectus under "How We Invest") or like options.
As a condition of our registration in Texas, we have agreed not to invest more
than 5% of our assets in warrants and no more than 2% in warrants not listed on
either the New York or American Stock Exchange.
As stated in the Prospectus, we may write covered call options which are traded
on a national securities exchange with respect to securities in our portfolio in
an attempt to increase our income and to provide greater flexibility in the
disposition of our portfolio securities. A "call option" is a contract sold for
a price (the "premium") giving its holder the right to buy a specific number of
shares of stock at a specific price prior to a specified date. A "covered call
option" is a call option issued on securities already owned by the writer of the
call option for delivery to the holder upon the exercise of the option. During
the period of the option, we forgo the opportunity to profit from any increase
in the market price of the underlying security above the exercise price of the
option (to the extent that the increase exceeds our net premium). We also may
enter into "closing purchase transactions" in order to terminate our obligation
to deliver the underlying security (this may result in a short-term gain or
loss). A closing purchase transaction is the purchase of a call option (at a
cost which may be more or less than the premium received for writing the
original call option) on the same security, with the same exercise price and
call period as the option previously written. If we are unable to enter into a
closing purchase transaction, we may be required to hold a security that we
might otherwise have sold to protect against depreciation. We do not intend to
write covered call options with respect to securities with an aggregate market
value of more than 10% of our gross assets at the time an option is written.
This percentage limitation will not be increased without prior disclosure in our
current Prospectus.
<PAGE>
Risk Factors
As stated in the Prospectus, we may invest no more than 5% of our net assets (at
the time of investment) in lower- rated, high-yield bonds. In general, the
market for lower-rated, high-yield bonds is more limited than the market for
higher-rated bonds, and because trading in such bonds may be thinner and less
active, the market prices of such bonds may fluctuate more than the prices of
higher-rated bonds, particularly in times of market stress. In addition, while
the market for high-yield, corporate debt securities has been in existence for
many years, the market in recent years experienced a dramatic increase in the
large-scale use of such securities to fund highly-leveraged corporate
acquisitions and restructurings. Accordingly, past experience may not provide an
accurate indication of future performance of the high-yield bond market,
especially during periods of economic recession. Other risks which may be
associated with lower-rated, high-yield bonds include their relative
insensitivity to interest-rate changes; the exercise of any of their redemption
or call provisions in a declining market which may result in their replacement
by lower-yielding bonds; and legislation, from time to time, which may adversely
affect their market. Since the risk of default is higher among lower-rated,
high-yield bonds, Lord Abbett's research and analyses are an important
ingredient in the selection of lower-rated, high-yield bonds. Through portfolio
diversification, good credit analysis and attention to current developments and
trends in interest rates and economic conditions, investment risk can be
reduced, although there is no assurance that losses will not occur. The Fund
does not have any minimum rating criteria applicable to the fixed-income
securities in which it invests.
2.
Directors and Officers
The following directors are partners of Lord Abbett, The General Motors
Building, 767 Fifth Avenue, New York, New York 10153-0203. They have been
associated with Lord Abbett for over five years and are also officers and/or
directors or trustees of the fifteen other Lord Abbett-sponsored funds, except
for Lord Abbett Research Fund, Inc., of which only Messrs. Lynch and Dow are
directors. They are "interested persons" as defined in the Investment Company
Act of 1940, as amended (the "Act"), and as such, may be considered to have an
indirect financial interest in the Rule 12b-1 Plan described in the Prospectus.
Ronald P. Lynch, age 60, Chairman
Robert S. Dow, age 50, President
Thomas S. Henderson, age 64 Vice President
The following outside directors are also directors or trustees of the fifteen
other Lord Abbett-sponsored funds referred to above except for Lord Abbett
Research Fund, Inc., of which only Messrs. Millican and Neff are directors.
E. Thayer Bigelow
Time Warner Cable
300 First Stamford Place
Stamford, Connecticut
President and Chief Executive Officer of Time Warner Cable Programming, Inc.
Formerly President and Chief Operating Officer of Home Box Office, Inc. Age 54.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
<PAGE>
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 65.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 70.
C. Alan MacDonald
The Marketing Partnership, Inc.
27 Signal Road
Stamford, Connecticut
General Partner, The Marketing 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 & CEO of Nestle Foods Corp, and prior to that, President & CEO of
Stouffer Foods Corp., both subsidiaries of Nestle SA, Switzerland. Formerly
Chairman and Chief Executive Officer of Lincoln Foods, Inc., manufacturer of
branded snack foods (1992-1994). Currently serves as Director of Den West
Restaurant Co., J. B.
Williams, and Fountainhead Water Company. Age 62.
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 67.
Thomas J. Neff
Spencer Stuart & Associates
277 Park Avenue
New York, New York
President of Spencer Stuart & Associates, an executive search consulting firm.
Age 58.
</TABLE>
<TABLE>
<CAPTION>
The second column of the following table sets forth the compensation accrued for
the Fund's outside directors. The third and fourth columns set forth information
with respect to the retirement plan for outside directors maintained by the Lord
Abbett-sponsored funds. The fifth column sets forth the total compensation
payable by such funds to the outside directors. The first four columns give
information for the Fund's fiscal year ended October 31, 1995; the fifth column
gives information for the 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.
<PAGE>
For the Fiscal Year Ended October 31, 1995
- ----------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Pension or Estimated Annual For Year Ended
Retirement Benefits Benefits Upon December 31, 1995
Accrued as Expenses Retirement Accrued Total Compensation
by the Fund and by the Fund and Accrued by the Fund and
Aggregate Fifteen Other Lord Fifteen Other Lord Fifteen Other Lord
Compensation Abbett-sponsored Abbett-sponsored Abbett-sponsored
Name of Director from the Fund1 Funds2 Funds2 Funds3
<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
<FN>
1. Outside directors' fees, including attendance fees for board and committee
meetings, are 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 outside
directors are 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 outside director since the
beginning of his tenure with the Fund, including dividends reinvested and
changes in net asset value applicable to such deemed investments were as
follows as of October 31,1995: 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. The retirement plan of the Lord Abbett-sponsored funds provides that outside
directors will receive an annual retirement benefit equal to 80% of their
final annual retainer following retirement at or after age 72 with at least
10 years of service. The 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
would be payable annually under such retirement plan if the director were to
retire at age 72 and the annual retainer payable by such funds were the same
as it is today. The amounts accrued in column 3 by the Lord Abbett-sponsored
funds during the fiscal year ended October 31, 1995 are used to fund the
retirement benefits in column 4.
3. This column shows aggregate compensation, including director's fees and
attendance fees for board and committee meetings, of a nature referred to in
the first sentence of footnote one accrued by the Lord Abbett-sponsored funds
during the year ended December 31, 1995.
</FN>
</TABLE>
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Allen, Carper, Cutler, Henderson, Morris, Nordberg and Walsh are partners of
Lord Abbett; the others are employees: Thomas S. Henderson, age 64, Executive
Vice President; William T. Hudson, age 53, Executive Vice President (effective
May 1, 1996); Kenneth B. Cutler, age 63, Vice President and Secretary; Stephen
I. Allen, age 42; Daniel E. Carper, age 44; Robert G. Morris, age 51, E. Wayne
Nordberg, age 59; John J. Gargana, Jr., age 64; Paul A. Hilstad, age 53 (with
Lord Abbett since 1995 - formerly Senior Vice President and General Counsel of
American Capital Management & Research, Inc.); Thomas F. Konop, age 53; Victor
W. Pizzolato, age 63; John J. Walsh, age 58, Vice Presidents; and Keith F.
O'Connor, age 40, Treasurer.
The Fund's By-Laws provide that the Fund shall not hold an annual meeting of its
stockholders in any year unless one or more matters are required to be acted on
by stockholders under the Act, or unless called by a majority of the Board of
Directors or by stockholders holding at least one quarter of the stock of the
Fund outstanding and entitled to vote at the meeting. When any such annual
meeting is held, the stockholders will elect directors and vote on the approval
of the independent auditors of the Fund.
As of January 31, 1996, our officers and directors, as a group, owned less than
1% of our outstanding shares.
<PAGE>
3.
Investment Advisory and Other Services
As described under "Our Management" in the Prospectus, Lord Abbett is the Fund's
investment manager. The nine general partners of Lord Abbett, all of whom are
officers and/or directors of the Fund, are: Stephen I. Allen, Daniel E. Carper,
Kenneth B. Cutler, Robert S. Dow, Thomas S. Henderson, Ronald P. Lynch, Robert
G. Morris, E. Wayne Nordberg and John J. Walsh. The address of each partner is
The General Motors Building, 767 Fifth Avenue, New York, New York 10153-0203.
The services performed by Lord Abbett are described in the Prospectus under "Our
Management". Under the Management Agreement, we pay Lord Abbett a monthly fee,
based on average daily net assets for each month, at the annual rate of .5 of 1%
of the portion of our net assets not in excess of $200,000,000; .4 of 1% of the
portion in excess of $200,000,000, but not in excess of $500,000,000; .375 of 1%
of the portion in excess of $500,000,000, but not in excess of $700,000,000; .35
of 1% of the portion in excess of $700,000,000, but not in excess of
$900,000,000; and .3 of 1% of the portion in excess of $900,000,000.
For the fiscal years ended October 31, 1995, 1994 and 1993, the management fees
paid to Lord Abbett by the Fund amounted to $14,431,000, $13,311,646 and
$12,610,110, respectively.
We pay all expenses not expressly assumed by Lord Abbett, including without
limitation 12b-1 expenses, outside directors' fees and expenses, association
membership dues, legal and auditing fees, taxes, transfer and dividend
disbursing agent fees, shareholder servicing costs, expenses relating to
shareholder meetings, expenses of preparing, printing and mailing stock
certificates and shareholder reports, expenses of registering our shares under
federal and state securities laws, expenses of preparing, printing and mailing
prospectuses to existing shareholders, insurance premiums, brokerage and other
expenses connected with executing portfolio transactions.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281 are
the independent auditors of the Fund and must be approved at least annually by
our Board of Directors to continue in such capacity. They perform audit services
for the Fund including the examination of financial statements included in our
annual report to shareholders.
Bank of New York of New York ("BNY"), 40 Wall Street, New York, New York, is the
Fund's custodian. In accordance with the requirements of Rule 17f-5, the Fund's
directors have approved arrangements permitting the Fund's foreign assets not
held by BNY or its foreign branches to be held by certain qualified foreign
banks and depositories.
4.
Portfolio Transactions
Our policy is to obtain best execution on all our portfolio transactions, which
means that we seek 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, we generally pay, as described below, a higher commission than
some brokers might charge on the same transactions. Our policy with respect to
best execution governs the selection of brokers or dealers and the market in
which the transaction is executed. To the extent permitted by law, we 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 capability 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.
<PAGE>
We pay a commission rate that we believe is appropriate to give maximum
assurance that our brokers will provide us, on a continuing basis, the highest
level of brokerage services available. While we do not always seek the lowest
possible commissions on particular trades, we believe that our commission rates
are in line with the rates that many other institutions pay. Our traders are
authorized to pay brokerage commissions in excess of those that other brokers
might accept on the same transactions in recognition of the value of the
services performed by the executing brokers, viewed in terms of either the
particular transaction or the overall responsibilities of Lord Abbett with
respect to us and the other accounts they manage. Such services include showing
us trading opportunities including blocks, a willingness and ability to take
positions in securities, knowledge of a particular security or market proven
ability to handle a particular type of trade, confidential treatment, promptness
and reliability.
Some of these brokers also provide research services at least some of which are
useful to Lord Abbett in their overall responsibilities with respect to us and
the other accounts they manage. Research includes the furnishing of analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts and trading equipment and
computer software packages, acquired from third-party suppliers, that enable
Lord Abbett to access various information bases. Such services may be used by
Lord Abbett in servicing all their accounts, and not all of such services will
necessarily be used by Lord Abbett in connection with their management of the
Fund; conversely, such services furnished in connection with brokerage on other
accounts managed by Lord Abbett may be used in connection with their management
of the Fund, and not all of such services will necessarily be used by Lord
Abbett in connection with their advisory services to such other accounts. We
have been advised by Lord Abbett that research services received form 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 our 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 we do, 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 us in the
buying and selling of the same securities as described above. If these clients
wish to buy or sell the same security as we do, they may have their transactions
executed at times different from our transactions and thus may not receive the
same price or incur the same commission cost as we do.
We will not seek "reciprocal" dealer business (for the purpose of applying
commissions in whole or in part for our benefit or otherwise) from dealers as
consideration for the direction to them of portfolio business.
For the fiscal years ended October 31, 1995, 1994 and 1993, we paid total
commissions to independent dealers of $6,542,354, $6,133,695 and $5,835,046,
respectively.
<PAGE>
5.
Purchases, Redemptions
and Shareholder Services
The Fund values its portfolio securities at market value as of the close of the
NYSE. Market value will be determined as follows: securities listed or admitted
to trading privileges on the New York or American Stock Exchange or on the
NASDAQ National Market System are valued at the last sales price, or, if there
is no sale on that day, at the mean between the last bid and asked prices, or,
in the case of bonds, in the over-the-counter market if, in the judgment of the
Fund's officers, that market more accurately reflects the market value of the
bonds. Over-the-counter securities not traded on the NASDAQ National Market
System are valued at the mean between the last bid and asked prices. Securities
for which market quotations are not available are valued at fair market value
under procedures approved by the Board of Directors.
Information concerning how we value our shares for the purchase and redemption
of our shares is described in the Prospectus under "Purchases" and
"Redemptions", respectively.
As disclosed in the Prospectus, we calculate our net asset value and are
otherwise open for business on each day that the NYSE is open for trading. The
NYSE is closed on Saturdays and Sundays and the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
The maximum offering price of our shares on October 31, 1995 was computed as
follows:
Net asset value per share (net assets divided by
shares outstanding).................................................$11.98
Maximum offering price per share (net asset value
divided by .9425)...................................................$12.71
The Fund has entered into a distribution agreement with Lord Abbett under which
Lord Abbett is obligated to use its best efforts to find purchasers for the
shares of the Fund and to make reasonable efforts to sell Fund shares, so long
as, in Lord Abbett's judgment, a substantial distribution can be obtained by
reasonable efforts.
<PAGE>
For the last three fiscal years, Lord Abbett, as our principal underwriter,
received net commissions after allowance of a portion of the sales charge to
independent dealers as follows:
<TABLE>
<CAPTION>
Year Ended October 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Gross sales charge $6,940,216 $5,987,070 $8,290,568
Amount allowed to dealers $6,295,403 $5,165,044 $7,154,247
---------- ---------- ----------
Net commissions
received by
Lord Abbett $ 644,813 $ 822,026 $1,136,321
=========== =========== ==========
</TABLE>
As described in the Prospectus, the Fund has adopted a Distribution Plan and
Agreement (the "Plan") pursuant to Rule 12b-1 of the Investment Company Act of
1940, as amended. In adopting the Plan and in approving its continuance, the
Board of Directors has concluded that there is a reasonable likelihood that the
Plan will benefit the Fund and its shareholders. The expected benefits include
greater sales, lower redemptions of Fund shares and a higher quality of service
to shareholders by dealers than would otherwise be the case. During the last
fiscal year, the Fund accrued or paid through Lord Abbett to dealers $8,547,599
under the Plan. Lord Abbett uses all amounts received under the Plan for
payments to dealers for (i) providing continuous services to the Fund's
shareholders, such as answering shareholder inquiries, maintaining records, and
assisting shareholders in making redemptions, transfers, additional purchases
and exchanges and (ii) their assistance in distributing shares of the Fund.
As stated in the Prospectus, a 1% contingent deferred reimbursement charge
("CDRC") is imposed with respect to those shares (or shares of another Lord
Abbett-sponsored fund or series acquired through exchange of such shares) on
which the Fund has paid the one-time 1% 12b-1 sales distribution fee if such
shares are redeemed out of the Lord Abbett-sponsored family of funds within a
period of 24 months from the end of the month in which the original sale
occurred.
No CDRC is payable on redemptions by tax-qualified plans under section 401 of
the Internal Revenue Code for benefit payments due to plan loans, hardship
withdrawals, death, retirement or separation from service with respect to plan
participants. The CDRC is received by the Fund and is intended to reimburse all
or a portion of the amount paid by the Fund if the shares are redeemed before
the Fund has had an opportunity to realize the anticipated benefits of having a
large, long-term shareholder account in the Fund. Shares of a fund or series on
which such 1% sales distribution fee has been paid may not be exchanged into a
fund or series with a Rule 12b-1 plan for which the payment provisions have not
been in effect for at least one year.
The other Lord Abbett-sponsored funds and series which participate in the
Telephone Exchange Privilege (except Lord Abbett U.S. Government Securities
Money Market Fund, Inc. ("GSMMF") and certain series of Lord Abbett Tax-Free
Income Fund and Lord Abbett Tax-Free Income Trust for which a Rule 12b-1 Plan is
not yet in effect (collectively, the "Series")) have instituted a CDRC on the
same terms and conditions. No CDRC will be charged on an exchange of shares
between Lord Abbett funds. Upon redemption of shares out of the Lord Abbett
family of funds, the CDRC will be charged on behalf of and paid to the fund in
which the original purchase (subject to a CDRC) occurred. Thus, if shares of a
Lord Abbett fund are exchanged for shares of another such fund and the shares
tendered ("Exchanged Shares") are subject to a CDRC, the CDRC will carry over to
the shares being acquired, including GSMMF ("Acquired Shares"). Any CDRC that is
carried over to Acquired Shares is calculated as if the holder of the Acquired
Shares had held those shares from the date on which he or she became the holder
of the Exchanged Shares. Although GSMMF and the Series will not pay a 1% sales
distribution fee on $1 million purchases of their own shares, and will therefore
not impose their own CDRC, GSMMF will collect the CDRC on behalf of other Lord
Abbett funds. Acquired shares held in GSMMF which are subject to a CDRC will be
credited with the time such shares are held in that fund.
In no event will the amount of the CDRC exceed 1% of the lesser of (i) the net
asset value of the shares redeemed or (ii) the original cost of such shares (or
of the Exchanged Shares for which such shares were acquired). No CDRC will be
imposed when the investor redeems (i) amounts derived from increases in the
value of the account above the total cost of shares being redeemed due to
increases in net asset value, (ii) shares with respect to which no Lord Abbett
fund paid a 1% sales distribution fee on issuance (including shares acquired
through reinvestment of dividend income and capital gains distributions) or
(iii) shares which, together with Exchanged Shares, have been held continuously
for 24 months from the end of the month in which the original sale occurred. In
determining whether a CDRC is payable, (a) shares not subject to the CDRC will
be redeemed before shares subject to the CDRC and (b) of shares subject to a
CDRC, those held the longest will be the first to be redeemed.
Under the terms of the Statement of Intention to invest $50,000 or more over a
13-month period as described in the Prospectus, shares of Lord Abbett-sponsored
funds (other than shares of Lord Abbett Equity Fund ("LAEF"), Lord Abbett Series
Fund ("LASF"), series of Lord Abbett Research Fund if not offered to the general
public ("LARF"), and GSMMF, unless holdings in GSMMF are attributable to shares
<PAGE>
exchanged from a Lord Abbett-sponsored fund offered with a sales charge or from
a fund in the Lord Abbett Counsel Group) currently owned by you are credited as
purchases (at their current offering prices on the date the Statement is signed)
toward achieving the stated investment. Shares valued at 5% of the amount of
intended purchases are escrowed and may be redeemed to cover the additional
sales charge payable if the Statement is not completed. The Statement of
Intention is neither a binding obligation on you to buy, nor on the Fund to
sell, the full amount indicated.
As stated in the Prospectus, purchasers (as defined in the Prospectus) may
accumulate their investment in Lord Abbett-sponsored funds (other than LAEF,
LARF, LASF, and GSMMF, unless holdings in GSMMF are attributable to shares
exchanged from a Lord Abbett-sponsored fund offered with a front-end sales
charge or from Lord Abbett Counsel Group) so that a current investment, plus the
purchaser's holdings valued at the current maximum offering price, reach a level
eligible for a discounted sales charge.
As stated in the Prospectus, our shares may be purchased at net asset value by
our directors, employees of Lord Abbett, employees of our shareholder servicing
agent and employees of any securities dealer having a sales agreement with Lord
Abbett who consents to such purchases or by the trustee or custodian under any
pension or profit-sharing plan or Payroll Deduction IRA established for the
benefit of such persons or for the benefit of employees of any national
securities trade organization to which Lord Abbett belongs or any company with
an account(s) in excess of $10 million managed by Lord Abbett on a
private-advisory-account basis. For purposes of this paragraph, the terms
"directors" and "employees" include a director's or employee's spouse (including
the surviving spouse of a deceased director or employee). The terms " directors"
and "employees of Lord Abbett" also include other family members and retired
directors and employees.
Our shares also may be purchased at net asset value (a) at $1 million or more,
(b) with dividends and distributions from other Lord Abbett-sponsored funds,
except for LARF, LAEF, LASF and Lord Abbett Counsel Group, (c) under the loan
feature of the Lord Abbett-sponsored prototype 403(b) plan for share purchases
representing the repayment of principal and interest, (d) by certain authorized
brokers, dealers, registered investment advisers or other financial institutions
who have entered into an agreement with Lord Abbett in accordance with certain
standards approved by Lord Abbett, providing specifically for the use of our
shares in particular investment products made available for a fee to clients of
such brokers, dealers, registered investment advisers and other financial
institutions, and (e) by employees, partners and owners of unaffiliated
consultants and advisors to Lord Abbett or Lord Abbett-sponsored funds who
consent to such purchase if such persons provide service to Lord Abbett or such
funds on a continuing basis and are familiar with such funds. Shares are offered
at net asset value to these investors for the purpose of promoting goodwill with
employees and others with whom Lord Abbett and/or the Fund has business
relationships.
Our shares also may be purchased at net asset value, subject to appropriate
documentation, through a securities dealer where the amount invested represents
redemption proceeds from shares ("Redeemed Shares") of a registered open-end
management investment company not distributed or managed by Lord Abbett (other
than a money market fund), if such redemption has occurred no more than 60 days
prior to the purchase of our shares, the Redeemed Shares were held for at least
six months prior to redemption and the proceeds of redemption were maintained in
cash or a money market fund prior to purchase. Purchasers should consider the
impact, if any, of contingent deferred sales charges in determining whether to
redeem shares for subsequent investment in our shares. Lord Abbett may suspend,
change or terminate this purchase option at any time.
Our shares may be issued at net asset value in exchange for the assets, subject
to possible tax adjustment, of a personal holding company or an investment
company. There are economies of selling efforts and sales-related expenses with
respect to offers to these investors and those referred to above.
The Prospectus briefly describes the Telephone Exchange Privilege. You may
exchange some or all of your shares for those of Lord Abbett-sponsored funds
currently offered to the public with a sales charge and GSMMF, to the extent
<PAGE>
offers and sales may be made in your state. You should read the prospectus of
the other fund before exchanging. In establishing a new account by exchange,
shares of the Fund being exchanged must have a value equal to at least the
minimum initial investment required for the fund into which the exchange is
made.
Shareholders in other Lord Abbett-sponsored funds have the same right to
exchange their shares for the Fund's shares. Exchanges are based on relative net
asset values on the day instructions are received by the Fund in Kansas City if
the instructions are received prior to the close of the NYSE in proper form. No
sales charges are imposed except in the case of exchanges out of GSMMF (unless a
sales charge was paid on the initial investment). Exercise of the exchange
privilege will be treated as a sale for federal income tax purposes, and,
depending on the circumstances, a gain or loss may be recognized. In the case of
an exchange of shares that have been held for 90 days or less where no sales
charge is payable on the exchange, the original sales charge incurred with
respect to the exchanged shares will be taken into account in determining gain
or loss on the exchange only to the extent such charge exceeds the sales charge
that would have been payable on the acquired shares had they been acquired for
cash rather than by exchange. The portion of the original sales charge not so
taken into account will increase the basis of the acquired shares.
Shareholders have the exchange privilege unless they refuse it in writing. You
should not view the exchange privilege as a means for taking advantage of
short-term swings in the market, and we reserve the right to terminate or limit
the privilege of any shareholder who makes frequent exchanges. We can revoke or
modify the privilege for all shareholders upon 60 days' prior notice. "Eligible
Funds" are other Lord Abbett-sponsored funds which are eligible for the exchange
privilege, except LASF which offers its shares only in connection with certain
variable annuity contracts, LAEF which is not issuing shares, LARF and Lord
Abbett Counsel Group.
A redemption order is in proper form when it contains all of the information and
documentation required by the order form or supplementally by Lord Abbett or the
Fund to carry out the order. The signature(s) and any legal capacity of the
signer(s) must be guaranteed by an eligible guarantor. See the Prospectus for
expedited redemption procedures.
The right to redeem and receive payment, as described in the Prospectus, may be
suspended if the NYSE is closed (except for weekends or customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
deems an emergency to exist.
Our Board of Directors may authorize redemption of all of the shares in any
account in which there are fewer than 20 shares. Before authorizing such
redemption, the Board must determine that it is in our economic best interest or
necessary to reduce disproportionately burdensome expenses in servicing
shareholder accounts. At least 60 days' prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
Under the Div-Move service described in the Prospectus, you can invest the
dividends paid on your account into an existing account in any other Eligible
Fund. The account must be either your account, a joint account for you and your
spouse, a single account for your spouse, or a custodial account for your minor
child under the age of 21. You should read the prospectus of the other fund
before investing.
The Invest-A-Matic method of investing in the Fund and/or any other Eligible
Fund is described in the Prospectus. To avail yourself of this method you must
complete the application form, selecting the time and amount of your bank
checking account withdrawals and the funds for investment, include a voided,
unsigned check and complete the bank authorization.
The Systematic Withdrawal Plan (the "SWP") also is described in the Prospectus.
You may establish a SWP if you own or purchase uncertificated shares having a
current offering price value of at least $10,000. Lord Abbett prototype
retirement plans have no such minimum. The SWP involves the planned redemption
of shares on a periodic basis by receiving either fixed or variable amounts at
periodic intervals. Since the value of shares redeemed may be more or less than
their cost, gain or loss may be recognized for income tax purposes on each
periodic payment. Normally, you may not make regular investments at the same
time you are receiving systematic withdrawal payments because it is not in your
interest to pay a sales charge on new investments when in effect a portion of
that new investment is soon withdrawn. The minimum investment accepted while a
withdrawal plan is in effect is $1,000. The SWP may be terminated by you or by
us at any time by written notice.
<PAGE>
The Prospectus indicates the types of retirement plans for which Lord Abbett
provides forms and explanations. Lord Abbett makes available the retirement plan
forms and custodial agreements for IRAs (Individual Retirement Accounts
including Simplified Employee Pensions), 403(b) plans and qualified pension and
profit-sharing plans, including 401(k) plans. The forms name Investors Fiduciary
Trust Company as custodian and contain specific information about the plans.
Explanations of the eligibility requirements, annual custodial fees and
allowable tax advantages and penalties are set forth in the relevant plan
documents. Adoption of any of these plans should be on the advice of your legal
counsel or qualified tax adviser.
6.
Past Performance
The Fund computes the average annual compounded rate of total return during
specified periods that would equate the initial amount invested to the ending
redeemable value of such investment by adding one to the computed average annual
total return, raising the sum to a power equal to the number of years covered by
the computation and multiplying the result by one thousand dollars, which
represents a hypothetical initial investment. The calculation assumes deduction
of the maximum sales charge from the initial amount invested and reinvestment of
all income dividends and capital gains distributions on the reinvestment dates
at prices calculated as stated in the Prospectus. The ending redeemable value is
determined by assuming a complete redemption at the end of the period(s) covered
by the average annual total return computation.
Using the method described above to compute average annual total return, the
one- and five-year and ten-year total annual returns for such periods ended
October 31, 1995 amounted to 13.60%, 15.04%, and 13.21%, respectively. The
ending redeemable values were $1,136, $2,015 and $3,458, respectively.
Our yield quotation is based on a 30-day period ended on a specified date,
computed by dividing our net investment income per share earned during the
period by our maximum offering price per share on the last day of the period.
This is determined by finding the following quotient: take the Fund's dividends
and interest earned during the period minus its expenses accrued for the period
and divide by the product of (i) the average daily number of Fund shares
outstanding during the period that were entitled to receive dividends, (ii) the
Fund's maximum offering price per share on the last day of the period. To this
quotient add one. This sum is multiplied by itself five times. Then one is
subtracted from the product of this multiplication and the remainder is
multiplied by two. For the 30-day period ended October 31, 1995, the yield for
the Fund was 2.20%.
These figures represent past performance, and an investor should be aware that
the investment return and principal value of a Fund investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Therefore, there is no assurance that this performance will be
repeated in the future.
7.
Taxes
The value of any shares redeemed by the Fund or repurchased or otherwise sold
may be more or less than your tax basis in the shares at the time the
redemption, repurchase or sale is made. Any gain or loss will generally be
taxable for federal income tax purposes. Any loss realized on the sale,
redemption or repurchase of Fund shares which you have held for six months or
less will be treated for tax purposes as a long-term capital loss to the extent
of any capital gains distributions which you received with respect to such
shares. Losses on the sale of stock or securities are not deductible if, within
a period beginning 30 days before the date of the sale and ending 30 days after
the date of the sale, the taxpayer acquires stock or securities that are
substantially identical.
<PAGE>
The writing of call options and other investment techniques and practices which
the Fund may utilize, as described above under "Investment Objectives and
Policies," may create "straddles" for United States federal income tax purposes
and may affect the character and timing of the recognition of gains and losses
by the Fund. Such transactions may increase the amount of short-term capital
gain realized by the Fund, which is taxed as ordinary income when distributed to
shareholders. Limitations imposed by the Internal Revenue Code on regulated
investment companies may restrict the Fund's ability to engage in transactions
in options.
As described in the Prospectus under "How We Invest - Risk Factors," the Fund
may be subject to foreign withholding taxes which would reduce the yield on its
investments. Tax treaties between certain countries and the United States may
reduce or eliminate such taxes. It is expected that Fund shareholders who are
subject to United States federal income tax will not be entitled to claim a
federal income tax credit or deduction for foreign income taxes paid by the
Fund.
The Fund will be subject to a 4% non-deductible excise tax on certain amounts
not distributed (and not treated as having been distributed) on a timely basis
in accordance with a calendar-year distribution requirement. The Fund intends to
distribute to shareholders each year an amount adequate to avoid the imposition
of such excise tax. Dividends paid by the Fund will qualify for the
dividends-received deduction for corporations to the extent they are derived
from dividends paid by domestic corporations.
Gains and losses realized by the Fund on certain transactions, including sales
of foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gains or losses are attributable to changes in
exchange rates for foreign currencies. Accordingly, distributions taxable as
ordinary income will include the net amount, if any, of such foreign exchange
gains and will be reduced by the net amount, if any, of such foreign exchange
losses.
If the Fund purchases shares in certain foreign investment entities, called
"passive foreign investment companies," it may be subject to United States
federal income tax on a portion of any "excess distribution" or gain from the
disposition of such shares, even if such income is distributed as a taxable
dividend by the Fund to its shareholders. Additional charges in the nature of
interest may be imposed on either the Fund or its shareholders in respect of
deferred taxes arising from such distributions or gains.
If the Fund were to invest in a passive foreign investment company with respect
to which the Fund elected to make a "qualified electing fund" election, in lieu
of the foregoing requirements, the Fund might be required to include in income
each year a portion of the ordinary earnings and net capital gains of the
qualified electing fund, even if such amount were not distributed to the Fund.
The foregoing discussion relates soley to U.S. federal income tax law as
applicable to United States persons (United States citizens or residents and
United States domestic corporations, partnerships, trusts and estates.) Each
shareholder who is not a United States person should consult his tax adviser
regarding the U.S. and foreign tax consequences of the ownership of shares of
the Fund, including a 30% (or lower treaty rate) United States withholding tax
on dividends representing ordinary income and net short-term capital gains, and
the applicability of United States gift and estate taxes to non-United States
persons who own Fund shares.
8.
Information About the Fund
The directors, trustees and officers of Lord Abbett-sponsored mutual funds,
together with the partners and employees of Lord Abbett, are permitted to
purchase and sell securities for their personal investment accounts. In engaging
in personal securities transactions, however, such persons are subject to
requirements and restrictions contained in the Fund's Code of Ethics which
complies, in substance, with each of the recommendations of the Investment
<PAGE>
Company Institute's Advisory Group on Personal Investing. Among other things,
the Code requires that Lord Abbett partners and employees obtain advance
approval before buying or selling securities, submit confirmations and quarterly
transaction reports, and obtain approval before becoming a director of any
company; and it prohibits such persons from investing in a security 7 days
before or after any Lord Abbett-sponsored fund trades in such security,
prohibiting profiting on trades of the same security within 60 days and trading
on material and non-public information. The Code imposes certain similar
requirements and restrictions on the independent directors and trustees of each
Lord Abbett-sponsored mutual fund to the extent contemplated by the
recommendations of such Advisory Group.
9.
Financial Statements
The financial statements for the fiscal year ended October 31, 1995 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1995 Annual Report to Shareholders of Affiliated
Fund, Inc. are incorporated herein by reference to such financial statements and
report in reliance upon the authority of Deloitte & Touche LLP as experts in
auditing and accounting.
<PAGE>
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Part A - Financial Highlights for the ten years ended October 31, 1995
Part B - Statement of Net Assets at October 31, 1995; Statement of
Operations for the year ended October 31, 1995; Statements of
Changes in Net Assets for the year ended October 31, 1995, and
the year ended October 31, 1994; Financial Highlights for the
five years ended October 31, 1995.
(b) Exhibits -
(11) Consent of Deloitte & Touche LLP*
(16) Total Return and Yield Computations*
* Filed herewith.
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Record Holders of Securities
At February 16, 1996 - 198,959
Item 27. Indemnification
Registrant is incorporated under the laws of the State of Maryland and
is subject to Section 2-418 of the Corporations and Associations
Article of the Annotated Code of the State of Maryland controlling the
indemnification of directors and officers. Since Registrant has its
executive offices in the State of New York, and is qualified as a
foreign corporation doing business in such State, the persons covered
by the foregoing statute may also be entitled to and subject to the
limitations of the indemnification provisions of Section 721-726 of the
New York Business Corporation Law.
The general effect of these statutes is to protect officers, directors
and employees of Registrant against legal liability and expenses
incurred by reason of their positions with the Registrant. The statutes
provide for indemnification for liability for proceedings not brought
on behalf of the corporation and for those brought on behalf of the
corporation, and in each case place conditions under which
indemnification will be permitted, including requirements that the
officer, director or employee acted in good faith. Under certain
conditions, payment of expenses in advance of final disposition may be
permitted. The By-Laws of Registrant, without limiting the authority of
Registrant to indemnify any of its officers, employees or agents to the
extent consistent with applicable law, makes the indemnification of its
directors mandatory subject only to the conditions and limitations
imposed by the above-mentioned Section 2-418 of Maryland Law and by the
provisions of Section 17(h) of the Investment Company Act of 1940 as
interpreted and required to be implemented by SEC Release No. IC-11330
of September 4, 1980.
In referring in its By-Laws to, and making indemnification of directors
subject to the conditions and limitations of, both Section 2-418 of the
Maryland Law and Section 17(h) of the Investment Company Act of 1940,
Registrant intends that conditions and limitations on the extent of the
indemnification of directors imposed by the provisions of either
Section 2-418 or Section 17(h) shall apply and that any inconsistency
between the two will be resolved by applying the provisions of said
Section 17(h) if the condition or limitation imposed by Section 17(h)
is the more stringent. In referring in its By-Laws to SEC Release No.
IC-11330 as the source for interpretation and implementation of said
Section 17(h), Registrant understands that it would be required under
its By-Laws to use reasonable and fair means in determining whether
indemnification of a director should be made and undertakes to use
either (1) a final decision on the merits by a court or other body
before whom the proceeding was brought that the person to be
indemnified ("indemnitee") was not liable to Registrant or to its
security holders by reason of willful malfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct
of his office ("disabling conduct") or (2) in the absence of such a
decision, a reasonable determination, based upon a review of the facts,
that the indemnitee was not liable by reason of such disabling conduct,
by (a) the vote of a majority of a quorum of directors who are neither
"interested persons" (as defined in the 1940 Act) of Registrant nor
parties to the proceeding, or (b) an independent legal counsel in a
written opinion. Also, Registrant will make advances of attorneys' fees
or other expenses incurred by a director in his defense only if (in
addition to his undertaking to repay the advance if he is not
ultimately entitled to indemnification) (1) the indemnitee provides a
security for his undertaking, (2) Registrant shall be insured against
losses arising by reason of any lawful advances, or (3) a majority of a
quorum of the non- interested, non-party directors of Registrant, or an
independent legal counsel in a written opinion, shall determine, based
on a review of readily available facts, that there is reason to believe
that the indemnitee ultimately will be found entitled to
indemnification.
<PAGE>
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expense incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
In addition, Registrant maintains a directors' and officers' errors and
omissions liability insurance policy protecting directors and officers
against liability for breach of duty, negligent act, error or omission
committed in their capacity as directors or officers. The policy
contains certain exclusions, among which is exclusion from coverage for
active or deliberate dishonest or fraudulent acts and exclusion for
fines or penalties imposed by law or other matters deemed uninsurable.
Item 28. Business and Other Connections of Investment Adviser
Lord, Abbett & Co. acts as investment advisor for seventeen, other
open-end investment companies (of which it is principal underwriter for
fifteen), and as investment adviser to approximately 5,100 private
accounts. Other than acting as directors and/or officers of open-end
investment companies managed by Lord, Abbett & Co., none of Lord,
Abbett & Co.'s partners has, in the past two fiscal years, engaged in
any other business, profession, vocation or employment of a substantial
nature for his own account or in the capacity of director, officer,
employee, partner or trustee of any entity except as follows:
John J. Walsh
Trustee
The Brooklyn Hospital Center
100 Parkside Avenue
Brooklyn, N.Y.
Item 29. Principal Underwriter
(a) Lord Abbett U. S. Government Securities Fund, Inc.
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Value Appreciation Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett California Tax-Free Income Fund, Inc.
Lord Abbett Fundamental Value Fund, Inc.
Lord Abbett Global Fund, Inc.
Lord Abbett U.S. Government Securities Money Market Fund, Inc.
Lord Abbett Series Fund, Inc.
Lord Abbett Equity Fund
Lord Abbett Tax-Free Income Trust
Lord Abbett Securities Trust
Lord Abbett Investment Trust
Investment Advisor
American Skandia Trust
(Lord Abbett Growth and Income Portfolio)
(b) The partners of Lord, Abbett & Co. are:
Name and Principal Positions and Offices
Business Address (1) with Registrant
-------------------- ---------------
Ronald P. Lynch Chairman and Director
Robert S. Dow President
Thomas S. Henderson Executive Vice President
Kenneth B. Cutler Vice President & Secretary
Stephen I. Allen Vice President
Daniel E. Carper Vice President
Robert G. Morris Vice President
E. Wayne Nordberg Vice President
John J. Walsh Vice President
(1) Each of the above has a principal business address
767 Fifth Avenue, New York, NY 10153
(c) Not applicable
Item 30. Location of Accounts and Records
Registrant maintains the records, required by Rules 31a - 1(a) and (b),
and 31a - 2(a) at its main office.
Lord, Abbett & Co. maintains the records required by Rules
31a - 1(f) and 31a - 2(e) at its main office.
Certain records such as canceled stock certificates and correspondence
may be physically maintained at the main office of the Registrant's
Transfer Agent, Custodian, or Shareholder Servicing Agent within the
requirements of Rule 31a-3.
Item 31. Management Services
None
Item 32. Undertakings
The Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant has duly caused this Registration Statement
and/or any amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York on the
28th day of February 1996.
LORD ABBETT AFFILIATED FUND, INC.
By /S/ RONALD P. LYNCH
Ronald P. Lynch, Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
NAME TITLE DATE
- ----- ----- ----
Chairman,
/s/ Ronald P. Lynch Director February 28, 1996
/s/ John J. Gargana, Jr. Vice President & February 28, 1996
Chief Financial Officer
/s/ E. Thayer Bigelow Director February 28, 1996
/s/ Thomas S. Henderson Director February 28, 1996
/s/ Stewart S. Dixon Director February 28, 1996
/s/ Robert S. Dow Director & President February 28, 1996
/s/ John C. Jansing Director February 28, 1996
/s/ C. Alan MacDonald Director February 28, 1996
/s/ Hansel B. Millican, Jr. Director February 28, 1996
Thomas J. Neff Director February 28, 1996
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
EX-99.B11 Consent of Deloitte & Touche LLP
EX-99.B16 Computation of Performance and Yield
CONSENT OF INDEPENDENT AUDITORS
Lord Abbett Affiliated Fund, Inc.:
We consent to the incorporation by reference in Post-Effective Amendment No. 68
to Registration Statement No. 2-10638 of our report dated December 8,1995
appearing in the annual report to shareholders and to the reference to us under
the captions "Financial Highlights" in the Prospectus and "Investment Advisory
and Other Services" and "Financial Statements" in the Statement of Additional
Information, both of which are part of such Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
February 29, 1996
EXHIBIT 16
Affiliated Fund
Post Effective Amendment No. 68
Results of a $1,000 investment reflecting the maximum sales charge and the
reinvestment of all distributions for:
Periods Ending October 31, 1995
One Five Ten
Year Years Years
$1,136 ERV $2,015 ERV $3,458 ERV
SEC Formula for calculating Average
Annual Rate of Total Return:
P = (1+T)N = ERV,
WHERE:
P = $ 1,000 P = $1,000 P = $ 1,000
N = 1 N = 5 N = 10
ERV = $1,136 ERV = $2,015 ERV = $3,458
T = Average annual total return
One year Five years Ten years
1000(1+T)1 = $1,136 1000(1+T)5 = $2,015 1000(1+T)10 = $3,458
(1 + T)1 = 1,136 (1+T)5 = 2,015 (1+T)10 = 3,458
----- ----- -----
1,000 1,000 1,000
(1 + T) = 1,136 (1+T) = (2,015).20 (1+T) = (3,458).10
----- ----- -------
1,000 1,000 1,000
T = 1,136-1 T = (2,015).20-1 T = (3,458).10-1
------- ------- -------
1,000 (1,000) (1,000)
T = +13.60 T = +15.04 T = +13.21
<PAGE>
EXHIBIT 16
Calculation of yield appearing in the Statement of Additional Information for
the Affiliated Fund Post-Effective Amendment No. 68 on Form N-1A.
YIELD FORMULA
For the 30 Days
Ended October 31, 1995
YIELD = 2[(a-b + 1)6 -1] = 2.20%
cd
Where: a = Fund dividends and interest earned during the period
in the amount of $11,880,323.
b = Fund expenses accrued for the period (net of
reimbursements) in the amount of $3,147,741.
c = the average daily number of Fund shares outstanding
during the period that were entitled to receive
dividends were 413,995,948.
d = the maximum offering price per Fund share on the
last day of the period was $12.71.
<TABLE> <S> <C>
<ARTICLE> 6
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<NAME> AFFILIATED FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
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<INVESTMENTS-AT-VALUE> 4772622463
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<OTHER-ITEMS-LIABILITIES> 7239161
<TOTAL-LIABILITIES> 21504768
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<EXPENSES-NET> 28337710
<NET-INVESTMENT-INCOME> 130521218
<REALIZED-GAINS-CURRENT> 491086481
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<NET-CHANGE-FROM-OPS> 706906449
<EQUALIZATION> 55513
<DISTRIBUTIONS-OF-INCOME> 120712716
<DISTRIBUTIONS-OF-GAINS> 295129557
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<NUMBER-OF-SHARES-SOLD> 29806062
<NUMBER-OF-SHARES-REDEEMED> 30197287
<SHARES-REINVESTED> 31322483
<NET-CHANGE-IN-ASSETS> 734939227
<ACCUMULATED-NII-PRIOR> 5637421
<ACCUMULATED-GAINS-PRIOR> 295548697
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14431000
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 28337710
<AVERAGE-NET-ASSETS> 4503001353
<PER-SHARE-NAV-BEGIN> 11.03
<PER-SHARE-NII> .32
<PER-SHARE-GAIN-APPREC> 1.70
<PER-SHARE-DIVIDEND> .30
<PER-SHARE-DISTRIBUTIONS> .77
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<PER-SHARE-NAV-END> 11.98
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
