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. 72 [X]
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [X]
OF 1940
Post-Effective Amendment No. 72 [X]
LORD ABBETT 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
Paul A. Hilstad, 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
- ------
on (date) pursuant to paragraph (b) of Rule 485
- ------
X 60 days after filing pursuant to paragraph (a) (1) of Rule 485
- ------
on (date) pursuant to paragraph (a) (1) of Rule 485
- ------
75 days after filing pursuant to paragraph (a) (2) of rule 485
- ------
on (date) pursuant to paragraph (a) (2) of rule 485
- ------
If appropriate, check the following box:
_____ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
LORD ABBETT AFFILIATED FUND, INC.
FORM N-1A
Cross Reference Sheet
Post-Effective Amendment No. 72
Pursuant to Rule 481 (a)
Form N-1A Location In Prospectus or
ITEM NO. STATEMENT OF ADDITIONAL INFORMATION
1 Cover Page
2 Fee Table
3 (a) Financial Highlights; Performance
3 (b) N/A
3 (c) Performance
3 (d) N/A
4 (a) (i) Cover Page
4 (a) (ii) Investment Objective; How We Invest
4 (b) (c) How We Invest
5 (a) Our Management
5 (b) Our Management; Back Cover Page
5 (c) Our Management
5 (d) N/A
5 (e) Back Cover Page
5 (f) Our Management
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
6 (h) N/A
7 (a) Back Cover Page
7 (b) (c) (d)
(e) (f) Purchases
8 Redemptions
9 N/A
10 Cover Page
11 Cover Page - Table of Contents
12 N/A
13 Investment Objective and Policies
14 Directors and Officers
15 (a) (b) N/A
15 (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
<PAGE>
Form N-1A Location In Prospectus or
ITEM NO. STATEMENT OF ADDITIONAL INFORMATION
16 (c) (d) (e)
(g) N/A
16 (f) Purchases, Redemptions; Investment Advisory and
Other Services and Shareholder Services
16 (h) Investment Advisory and Other Services
16 (i) N/A
17 (a) Portfolio Transactions
17 (b) N/A
17 (c)(d) Portfolio Transactions
17 (e) N/A
18 (a) Cover Page
18 (b) N/A
19 (a) (b) Purchases, Redemptions
and Shareholder Services
19 (c) N/A
20 Taxes
21 (a) Purchases, Redemptions
and Shareholder Services
21 (b) (c) N/A
22 (a) N/A
22 (b) Past Performance
23 Financial Statements
<PAGE>
This Prospectus sets forth concisely the information about Lord Abbett
Affiliated Fund, Inc. ("we" or the "Fund") that you should know before
investing. Please read this Prospectus before investing and retain it for future
reference.
The Fund has five classes of shares. This Prospectus offers four of those
classes designated Class A, B, C and P shares which provide investors with
different purchase options. See "Purchases" for a description of these choices.
The investment objective is long-term growth of capital and income without
excessive fluctuations in market value. There can be no assurance that this
objective will be achieved.
The Statement of Additional Information dated March 1, 1998 has been filed with
the Securities and Exchange Commission and is incorporated by reference into
this Prospectus. You may obtain it, 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".
Shaded terms are defined in the Glossary of Terms.
Mutual Fund shares are not deposits or obligations of, or guaranteed or endorsed
by, any bank. Shares are not 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.
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.
LORD ABBETT
AFFILIATED FUND
PROSPECTUS
March 1, 1998
TABLE OF CONTENTS PAGE
How We Invest 2
Investor Expenses 2
Risk Factors 2
Portfolio Management 2
Financial Highlights 3
Purchases 4
Opening Your Account 6
Shareholder Services 6
Redemptions 7
Dividends and Capital Gains 7
Our Management 8
Fund Performance 8
Investment Policies, Risks and Limits 8
Sales Compensation 9
Glossary of Terms 10
Lord, Abbett & Co.
Investment Management
A tradition of Performance Through Disciplined Investing
Lord Abbett Logo
The General Motors Building
767 Fifth Avenue o New York o New York o10153
(800) 426-1130
<PAGE>
HOW WE INVEST
Normally we invest in the common stocks of large, seasoned companies in sound
financial condition, (including securities convertible into common stocks) which
we expect to perform above average with respect to earnings and price
appreciation.
We believe that investors purchase and redeem our shares to meet long term
financial objectives rather than to take advantage of price fluctuations. If so,
their needs will be best served by an investment seeking capital appreciation
with less fluctuations in market value than the Standard & Poor's 500 Index. For
this reason, we try to keep our assets invested in securities which are selling
at reasonable prices and, therefore, we are willing to forgo some opportunities
for gains when, in our judgment, they carry excessive risk.
See "Investment Policies, Risks and Limits".
RISK FACTORS
The value of your investment will fluctuate in response to stock market
movements. The Fund employs other investment practices such as investments in
foreign securities and other securities, that could adversely affect
performance. Before you invest, please read "Investment Policies, Risks and
Limits" for these investment practices, risks and restrictions.
PORTFOLIO MANAGEMENT
W. Thomas Hudson Jr., Partner of Lord, Abbett & Co. ("Lord Abbett") and
Executive Vice President and portfolio manager of the Fund is primarily
responsible for the day-to-day management of the Fund. Mr. Hudson has been with
Lord Abbett since 1982 and has over 32 years of investment experience. Mr.
Hudson is assisted by, and may delegate management duties to, other Lord Abbett
employees who may be Fund officers.
Investor Expenses
The expenses shown below are based on estimated expenses for the current fiscal
year. Future expenses may be different than those shown.
Class A Class B Class C Class P
Shareholder Transaction Expenses
Maximum Sales Charge on Purchases
(as a % of offering price) 5.75% None None None
Deferred Sales Charge(1) None 5.00% 1.00% None
(See "Purchases")
Annual Fund Operating Expenses (as a % of average net assets)
Management Fees 0.32% 0.32% 0.32% 0.32%
(See "Our Management")
12b-1 Fees 0.23% 1.00%(2) 1.00%(2) 0.45%(2)
Other Expenses 0.10% 0.10% 0.10% 0.10%
(See "Our Management")
Total Operating Expenses 0.65% 1.42% 1.42% 0.87%
Example
Assume an average annual return of 5% and no change in the level of expenses.
For a $1,000 investment with all dividends and distributions reinvested, you
would have paid the following total expenses assuming you sold your shares at
the end of each time period indicated.
Share Class 1 year 3 years 5 years 10 years
Class A shares $64 $77 $92 $134
Class B shares(3) $64 $75 $98 $149
Class C shares $24 $45 $78 $170
Class P shares $ 9 $28 $48 $107
You would pay the following expenses on the same investment, assuming you kept
your shares:
Class A shares $64 $77 $92 $134
Class B shares(3) $14 $45 $78 $149
Class C shares $14 $45 $78 $170
Class P Shares $9 $28 $48 $107
This example is for comparison and is not a representation of the Fund's actual
expenses and returns, either past or present.
(1)See "Purchases" for a description of sales charges, the Contingent Deferred
Sales Charge ("CDSC") payable on certain redemptions and separate Rule 12b-1
plans applicable to each class of shares.
(2)Because of the 12b-1 fee, long-term shareholders may indirectly pay more than
the equivalent of the maximum permitted front-end sales charge.
(3)Class B shares will automatically convert to Class A shares on the eighth
anniversary of your original purchase of Class B shares.
<PAGE>
FINANCIAL HIGHLIGHTS The following table has been audited by Deloitte & Touche
LLP, independent accountants, in connection with their annual audit of the
Fund's Financial Statements, whose report may be obtained on request. Call
800-821-5129 and ask for the Fund's 1997 annual report.
<TABLE>
<CAPTION>
Per Class A Share Operating Year Ended October 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Performance: 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Net asset value, beginning of year $13.02 $11.98 $11.03 $11.26 $10.55 $10.29 $8.91 $10.43 $9.64 $10.44
Income from investment operations
Net investment income .30 .30 .32 .31 .31 .38 .40 .44 .46 .46
Net realized and unrealized
gain (loss) on investments 2.85 2.23 1.70 .38 1.43 .61 1.92 (1.16) 1.16 .57
Total from investment operations 3.15 2.53 2.02 .69 1.74 .99 2.32 (.72) 1.62 1.03
Distributions
Dividends from net investment income (.30) (.30) (.30) (.32) (.35) (.40) (.41) (.44) (.48) (.49)
Distributions from net realized gain (1.03) (1.19) (.77) (.60) (.68) (.33) (.53) (.36 ) (.35) (1.34)
Net asset value, end of year $14.84 $13.02 $11.98 $11.03 $11.26 $10.55 $10.29 $8.91 $10.43 $9.64
Total Return(a) 25.80% 23.23% 20.46% 6.66% 17.76% 10.36% 28.00% (7.57)% 18.04% 12.19%
Ratios to Average Net Assets:
Expenses(d) 0.65% 0.66% 0.63% 0.63% 0.63% 0.60% 0.58% 0.50% 0.42% 0.43%
Net Investment Income 2.15% 2.61% 2.90% 2.91% 2.95% 3.73% 4.22% 4.37% 4.64% 5.00%
Class B Shares Class C Shares
Per Class Share Operating Year Ended August 1, 1996(b) to Year Ended July 15, 1996(b) to
Performance October 31, 1997 October 31, 1996 October 31, 1997 October 31, 1996
<S> <C> <C> <C> <C>
Net asset value, beginning of period $13.03 $11.88 $13.02 $11.88
Income from investment operations
Net investment income .20 .060 .22 .062
Net realized and unrealized
gain (loss) on securities 2.84 1.142 2.83 1.130
Total from investment operations 3.04 1.202 3.05 1.192
Distributions
Dividends from net investment income (.20) (.052) (.20) (.052)
Distribution From Net Realized Gain (1.03) -- (1.03) --
Net asset value, end of period $14.84 $13.03 $14.84 $13.02
Total Return(a) 24.78% 10.15%(c) 24.88% 10.07%(c)
Ratios to Average Net Assets:
Expenses (d) 1.42% 0.34%(c) 1.34% 0.33%(c)
Net investment income 1.19% 0.27%(c) 1.28% 0.25%(c)
Year Ended October 31,
<S> <C> <C> <C> <C>
Supplemental Data For All Classes: 1997 1996 1995 1994
Net Assets, end of year (000) $7,697,754 6,100,665 $4,964,525 $4,229,586
Portfolio turnover rate 46.41% 47.06% 53.84% 51.48%
Average commissions per share
paid on equity transactions $0.062 $0.064 $0.063 __
Year Ended October 31,
<S> <C> <C> <C> <C> <C> <C>
Supplemental Data For All Classes: 1993 1992 1991 1990 1989 1988
Net Assets, end of year (000) $4,174,033 $3,680,332 $3,565,230 $3,032,954 $3,550,414 $3,339,427
Portfolio turnover rate 45.15% 42.00% 56.38% 31.78% 34.08% 26.95%
Average commissions per share
paid on equity transactions __ __ __ __ __ __
<FN>
(a)Total return does not consider the effects of front-end sales or contingent
deferred sales charges
(b)Commencement of offering Class shares.
(c)Not annualized.
(d)The ratio for 1997 include expenses paid through an expense offset
arrangement.
See Notes to Financial Statements.
</FN>
</TABLE>
<PAGE>
PURCHASES
This Prospectus offers four classes of shares, Class A, B, C and P. These
classes of shares represent investments in the same portfolio of securities but
are subject to different expenses. Our shares are continuously offered based on
the per share net asset value ("NAV") next computed after we accept your
purchase order submitted in proper form, plus a front-end sales charge as
described below, in the case of the Class A shares and without a front-end sales
charge, in the case of the Class B, C and P shares as described below. Investors
should read this section carefully to determine which class of shares represents
the best investment option for their particular situation.
CLASS A
- - Normally offered with a front-end sales charge.
- - Lower annual expenses than Class B and Class C shares.
CLASS B
- - No front-end sales charge.
- - Higher annual expenses than Class A shares.
- - A contingent deferred sales charge is applied to shares sold prior to the
sixth anniversary of purchase.
- - Automatically convert to Class A shares after eight years.
CLASS C
- - No front-end sales charge.
- - Higher annual expenses than Class A shares.
- - A contingent deferred sales charge is applied to shares sold prior to the
first anniversary of purchase.
Class P shares, available to a limited number of shareholders, are described on
the next page.
It may not be suitable for you to place a purchase order for Class B shares of
$500,000 or more or a purchase order for Class C shares of $1,000,000 or more.
You should discuss pricing options with your financial advisor.
For more information, see "Alternative Sales Arrangements" in the Statement of
Additional Information.
CLASS A SHARES. Front-end sales charges are as follows:
To Compute
As a % of As a % of Offering Price
Offering Your Divide
Your Investment Price Investment NAV by
Less than $50,000 5.75% 6.10% .9425
$50,000 to $99,999 4.75% 4.99% .9525
$100,000 to $249,999 3.75% 3.90% .9625
$250,000 to $499,999 2.75% 2.83% .9725
$500,000 to $999,999 2.00% 2.04% .9800
$1,000,000 over No Sales Charge 1.0000
REDUCING YOUR CLASS A FRONT-END SALES CHARGES. There are several ways you can
qualify for a lower sales charge when purchasing Class A shares if you inform
the Fund that you are eligible at the time of purchase.
- - RIGHTS OF ACCUMULATION-- a purchaser can add the share value of any
eligible fund already owned to the amount of the next purchase of Class
A shares for purposes of calculating the sales charge.
- - STATEMENT OF INTENTION-- a purchaser can purchase Class A shares of any
eligible fund over a 13-month period and receive the same sales charge
as if all shares had been purchased at once. Shares purchased through
reinvestment of distributions are not included.
For more information on eligibility for these privileges, read the applicable
sections in the attached application.
Class A Share Purchases Without a Front-End Sales Charge. Class A shares may be
purchased without a front-end sales charge under the following circumstances.
- - Employees of any consenting securities dealer having a sales agreement with
Lord Abbett Distributor.
* Purchases of $1 million or more.
- - Employees of our shareholder servicing agent.
- - Employees of any national securities trade organization to which Lord Abbett
belongs.
- - Lord Abbett employees and our directors/trustees (active or retired), their
spouses, including surviving spouses, and other family members.
- - Trustees or custodians of any pension or profit sharing plan, or payroll
deduction IRA for any of the above-mentioned persons.
- - Purchases made with dividends and distributions on Class A shares of another
eligible fund.
- - Purchases representing repayment under the loan feature of the Lord Abbett-
sponsored prototype 403(b) plan for Class A shares.
- - Purchases under a Mutual Fund Wrap-Fee Program.
- - Lord Abbett consultants/advisers.
* Purchases by Retirement Plans with at least 100 eligible employees.
* Purchases under a Special Retirement Wrap Program.
* May be subject to a CDSC.
<PAGE>
CONTINGENT DEFERRED SALES CHARGES ("CDSC"). The CDSC, regardless of class, is
not charged on shares acquired through reinvestment of dividends or capital
gains distributions and is charged on the original purchase cost or the current
market value of the shares being sold, whichever is lower.
CLASS A SHARE CDSC. If you buy Class A shares under one of the starred (*)
categories listed above subject to a dealer's concession of up to 1% and you
redeem any of the Class A shares within 24 months after the month in which you
initially purchased such shares, the Fund normally will collect a CDSC of 1%.
The Class A share CDSC generally will be waived under the following
circumstances.
- - Benefit payments such as Retirement Plan loans, hardship withdrawals, death,
disability, retirement, separation from service or any excess distribution
under Retirement Plans (documentation may be required)
- - Redemptions continuing as investments in another fund participating in a
special retirement wrap program.
CLASS B SHARE CDSC. The CDSC for Class B shares normally applies if you redeem
your shares before the sixth anniversary of their initial purchase. The CDSC
varies depending on how long you own your shares according to the following
schedule.
Contingent Deferred
Anniversary Sales Charge on
of the Day on Redemptions
Which the Purchase (As % of Amount
Order Was Accepted Subject to Charge)
On Before
1st 5.0%
1st 2nd 4.0%
2nd 3rd 3.0%
3rd 4th 3.0%
4th 5th 2.0%
5th 6th 1.0%
on or after the None
6th anniversary(1)
(1) Class B shares will automatically convert to Class A shares on the eighth
anniversary of the purchase of Class B shares.
The Class B share CDSC generally will be waived under the following
circumstances.
- - Benefit payments such as Retirement Plan loans, hardship withdrawals, death,
disability, retirement, separation from service or any excess distribution under
Retirement Plans.
- - Eligible mandatory distributions under 403(b) plans and
individual retirement accounts.
- - Death of the shareholder (natural person).
- - On redemptions of shares in connection with Div-Move and Systematic Withdrawal
Plans (up to 12% per year).
See "Systematic Withdrawal Plan" for more information on CDSCs with respect to
Class B shares.
CLASS C SHARE CDSC. The 1% CDSC for Class C shares normally applies if you
redeem your shares before the first anniversary of your original purchase.
APPLICATION OF CDSC TO A REDEMPTION. To determine if a CDSC applies to a
redemption, the Fund redeems shares in the following order.
1 Shares acquired by reinvestment of dividends and capital gains.
2 Shares held for six years or more (Class B) or one year or more (Class C).
3 Shares held the longest before the sixth anniversary of their purchase
(Class B) or before the first anniversary of their purchase (Class C).
CLASS P SHARES.
- - No front-end sales charge.
- - Lower annual expenses than Class B and Class C shares.
- - No CDSC.
Class P shares are available to a limited number of investors. Class P shares
are currently sold at net asset value to the trustees of, or employer-sponsors
with respect to, pension or retirement plans with at least 100 eligible
employees (such as a plan under Section 401(a), 401(k) or 457(b) of the Internal
Revenue Code) which engage an investment professional providing, or
participating in an agreement to provide, certain recordkeeping, administrative
and/or sub-transfer agency services to the Fund on behalf of the Class P
shareholders.
Purchases and redemption of Class P shares will be effected at net asset value
by trustees, custodians or employers on behalf of plan participants.
<PAGE>
OPENING YOUR ACCOUNT
MINIMUM INITIAL INVESTMENT
- - regular account $250
- - individual retirement accounts, 403(b)
and employer-sponsored retirement plans
under the Internal Revenue Code $250
- - Invest-a-Matic and Div-Move $250 initial
$50 subsequent minimum
You may purchase shares through any independent securities dealer who has a
sales agreement with Lord Abbett Distributor or you can fill out the attached
application and send it to the Fund at the address stated below. You should read
this Prospectus carefully before placing your order to assure your order is in
proper form.
LORD ABBETT AFFILIATED FUND, INC.
P.O. Box 419100
Kansas City, MO 64141
PROPER FORM. To be in proper form an order submitted directly to the Fund must
contain (1) a completed Application Form or information and documentation
required supplementally by the Fund, and (2) payment must be credited in U.S.
dollars to our custodian bank's account. For more information regarding proper
form of a purchase order, call the Fund at 800-821-5129.
IMPORTANT INFORMATION. If you fail to provide a correct taxpayer identification
number or to make certain required certifications, you may be subject to a $50
penalty under the Internal Revenue Code and we may be required to withhold a
portion (31%) of any redemption proceeds and of any dividend or distribution on
your account.
BY EXCHANGE. Telephone the Fund at 1-800-821-5129 to request an exchange from
any eligible Lord Abbett-sponsored fund.
We reserve the right to withdraw all or any part of the offering made by this
Prospectus or to reject any purchase order. We also reserve the right to waive,
increase or establish minimum investment requirements. All purchase orders are
subject to our acceptance and are not binding until confirmed or accepted in
writing.
SHAREHOLDER SERVICES
TELEPHONE EXCHANGES. You or your financial professional, with proper
identification, can instruct the Fund by telephone to exchange shares of any
class for the same class of any eligible fund. Instructions must be received by
the Fund in Kansas City by calling 1-800-821-5129 prior to the close of the New
York Stock Exchange ("NYSE") to obtain an eligible fund's NAV per class share on
that day. Exchanges will be treated as a sale for federal tax purposes.
For your protection, telephone requests for exchanges are recorded. We will take
measures to verify the identity of the caller, such as asking for your name,
account number, Social Security or taxpayer identification number and other
relevant information. The Fund will not be liable for following instructions
communicated by telephone that it reasonably believes to be genuine.
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 limit or terminate this privilege for any shareholder making frequent
exchanges and may revoke the privilege for all shareholders upon 60 days' prior
written notice. You have this privilege unless you refuse it in writing.
You should read the prospectus of the other Lord Abbett-sponsored fund(s)
selected before making an exchange.
INVEST-A-MATIC. You can make fixed, periodic investments ($250 initial and $50
subsequent minimum) into the Fund by means of automatic money transfers from
your bank checking account. See the attached Application Form for instructions.
DIV-MOVE. You can invest the dividends paid on your account ($250 initial and
$50 subsequent minimum) into any new or existing account, within the same class,
in any Eligible Fund. The account must be either your account, a joint spousal
account, or a custodial account for your minor child.
SYSTEMATIC WITHDRAWAL PLAN ("SWP"). You can make periodic cash withdrawals from
your account which are automatically paid to you in fixed or variable amounts.
To participate, the value of your shares must be at least $10,000, except for
retirement plans for which there is no minimum.
With respect to Class B shares, the CDSC will be waived on redemptions of up to
12% of the current net asset value of your account at the time of your SWP
request. For Class B share redemptions over 12% per year, the CDSC will apply to
the entire redemption. Please contact the Fund for assistance in minimizing the
CDSC in this situation. <PAGE>
Redemption proceeds due to a SWP for Class B (up to 12% per year) and Class C
shares, will be redeemed in the order described under "Redemptions".
LORD ABBETT'S PROTOTYPE RETIREMENT PLANS. The Lord Abbett Family of Funds offers
a range of qualified retirement plans, including IRAs, SIMPLE IRAs, Simplified
Employee Pension Plans, 403(b) and pension and profit-sharing plans, including
401(k) plans. To find out more about these plans, call the Fund at
1-800-842-0828.
ACCOUNT CHANGES. For any changes you need to make to your account, consult your
financial representative or call the Fund at 1-800-821-5129.
HOUSEHOLDING. Generally, shareholders with the same last name and address will
receive a single copy of a prospectus, annual or semi-annual report, unless
additional prospectuses and reports are specifically requested in writing to the
Fund.
REINVESTMENT PRIVILEGE. If you sell shares of the Fund, you have the one time
right to reinvest some or all of the proceeds in the same class of any eligible
fund within 60 days without a sales charge. If you paid a CDSC when you sold
your shares, you will be credited with the amount of the CDSC. All accounts
involved must have the same registration.
PRICING SHARES. The net asset value ("NAV") per share for each class of shares
is calculated each business day at the close of regular trading on the New York
Stock Exchange ("NYSE") by dividing a class's net assets by the number of shares
outstanding. The Fund is open on those business days when the NYSE is open.
Purchases and redemptions are executed at the next NAV to be calculated after
your request is accepted.
REDEMPTIONS
BY BROKER. Call your broker or investment professional for directions on how to
redeem your shares.
BY TELEPHONE. To obtain the proceeds of an expedited redemption of $50,000 or
less, you or your representative can call the Fund at 1-800-821-5129. The Fund
will employ the procedures described in telephone exchanges to confirm that the
instructions received are genuine.
The Fund will not be liable for following instructions communicated by telephone
that it reasonably believes to be genuine.
BY MAIL. Submit a written redemption request indicating your Fund's name, your
share class, your account number, the name(s) in which the account is registered
and the dollar value or number of shares you wish to sell.
Include all necessary signatures. If the signer has any legal capacity, the
signature and capacity must be guaranteed by an eligible guarantor. Certain
other legal documentation may be required. For more information regarding proper
documentation call 1-800-821-5129.
We will verify that the shares being redeemed were purchased at least 15 days
earlier. Your account balance must be sufficient to cover the amount being
redeemed or your redemption order will not be processed.
Normally a check will be mailed to the name(s) and addresses in which the
account is registered, or otherwise according to your instruction within one
business day after receipt of your redemption request. The Fund reserves the
right to make payment within three business days.
To determine if a CDSC applies to a redemption, see "Contingent Deferred Sales
Charges" above.
DIVIDENDS AND CAPITAL GAINS
DIVIDENDS. The Fund generally distributes most or all of its net earnings in the
form of dividends which are paid to shareholders in February, May, August and
November. A supplemental dividend also may be paid in December. Most investors
reinvest their dividends. If you choose this option, or if you do not indicate
any choice, your dividends will be automatically reinvested on the dividend
reinvestment date.
Capital Gains Distributions. Any capital gains distribution will be made in
November and may be taken in cash or reinvested. Distributions by the Fund of
any net long-term capital gains will be taxable to a shareholder as long-term
capital gains regardless of how long the shareholder has held the shares. Under
recently enacted legislation, the maximum tax rate on long-term capital gains
<PAGE>
for a U.S. individual, estate or trust is reduced to 20% for distributions
derived from the sale of assets held by the Fund for more than 18 months. (If
the taxpayer is in the 15% tax bracket, the rate is 10%.) For distributions
derived from the sale of assets held by the Fund between 12 and 18 months, the
tax rate remains at 28% (15% if the taxpayer is in the 15% tax bracket).
If you elect to receive dividends or capital gains in cash, a check will be
mailed to you as soon as possible after the reinvestment date. If you arrange
for direct deposit, your payment will be electronically transmitted to your bank
account within one day after the payable date.
Taxes. The Fund pays no federal income tax on the earnings it distributes to
shareholders. Consequently, dividends you receive from the Fund, whether
reinvested or taken in cash, are generally considered taxable. Dividends
declared in December of any year 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.
Each January the Fund will mail to you, if applicable, a Form 1099 tax
information statement detailing your dividends and capital gain distributions.
You should consult you tax adviser concerning applicable state and local taxes.
For more information about the tax consequences from dividends and
distributions, see the Statement of Additional Information
OUR MANAGEMENT
The Fund is supervised by a Board of Directors, an independent body which has
ultimate responsibility for the Fund's activities. The Board has retained Lord
Abbett as investment manager pursuant to a Management Agreement. Lord Abbett has
been an investment manager for over 68 years and currently manages about $25
billion in a family of mutual funds and other advisory accounts. Lord Abbett
provides similar services to twelve other funds having various investment
objectives and also advises other investment clients. For more information about
the services Lord Abbett provides to the Fund, see the Statement of Additional
Information.
The Fund pays Lord Abbett a monthly fee based on average daily net assets for
each month. For the fiscal year ended October 31, 1997, the fee paid to Lord
Abbett was at an annual rate of .32 of 1%. In addition, the Fund pays all
expenses not expressly assumed by Lord Abbett. Our Class A share ratio of
expenses, including management fee expenses, to average net assets for the same
period was .65 of 1%.
THE FUND. The Fund is a diversified open-end management investment company
established in 1934. Its Class A, B and C shares have equal rights as to voting,
dividends, assets and liquidation except for differences resulting from certain
class-specific expenses.
FUND PERFORMANCE
During the past year, the stock market and the Fund enjoyed returns above
historical averages due to an environment of solid economic growth, low
inflation and strong corporate profit gains. Throughout most of the period, the
portfolio has been evenly diversified, but with a moderate overweighting in
financial stocks. Furthermore, we have shifted our focus within this group of
stocks towards insurance companies, which are benefiting from industry-wide
consolidation and cost-cutting efforts.
See the performance chart on the second to last page of this Prospectus.
INVESTMENT POLICIES, RISKS AND LIMITS
The Fund is permitted to utilize, within limits established by the Board of
Directors, the following investment policies in an effort to enhance the Fund's
performance. These policies have risks associated with them. However, the Fund
follows certain practices that may reduce these risks. To the extent the Fund
utilizes some of these policies, its overall performance may be positively or
negatively affected.
Securities Lending: The lending of securities to financial institutions which
provide continuous collateral equal to the market value of the securities
loaned.
<PAGE>
Risk: Delay in recovery of collateral and loss should the borrower of the
security fail financially.
Limit: Loans, in the aggregate, may not exceed 30% of the Fund's total assets.
Selling Covered Call Options: A covered call option on stock gives the buyer of
the option, upon payment of a premium to the seller (writer) of the option, the
right to call upon the writer to deliver a specified number of shares of a stock
owned by the writer on or before a fixed date at a predetermined price.
Risk: Although the Fund receives income based on receipt of the premium, it
gives up participation in the appreciation above the predetermined price of the
stock if it is called away by the buyer. The price of the underlying security
may decrease beyond the amount of the premium received resulting in a loss.
Limit: The Fund may write covered call options on securities having an aggregate
market value not to exceed 10% of the Fund's gross assets.
High Yield Debt Securities: High yield debt securities or "junk bonds" are rated
BB/Ba or lower and typically pay a higher yield than investment grade debt
securities.
Risk: The issuer may default or not be able to fulfill the financial obligation
or the market price may decline significantly in periods of economic difficulty.
Limit: The Fund will not invest more than 5% of its assets at the time of
investment in high yield debt securities.
Foreign Securities: Foreign securities are securities primarily traded in
countries outside the United States.
Risk: These securities are not subject to the same degree of regulation and may
be more volatile and less liquid than securities traded in major U.S. markets.
Other considerations include political and social instability, expropriations,
higher transaction costs, currency fluctuations, nondeductable withholding taxes
and different settlement practices.
Limit: The Fund may invest up to 10% of its assets at the time of investment in
foreign securities.
Illiquid Securities: Securities not traded on the open market. May include
illiquid Rule 144A securities.
Risk: Certain securities may be difficult or impossible to sell at the time and
price the seller would like.
Limit: The Fund may invest up to 15% of its assets in illiquid securities.
Securities determined by the Board of Directors to be liquid are not subject to
this limitation.
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.
For more information about investment policies, restrictions and risk factors,
see the Statement of Additional Information.
SALES COMPENSATION
As part of its plan for distributing shares, the Fund, along with Lord Abbett
Distributor, pays compensation to authorized institutions that sell the Fund's
shares. These firms typically pass along a portion of this compensation to your
financial representative.
Compensation payments originate from two sources: sales charges and 12b-1 fees
that are paid out of the Fund's assets ("12b-1"refers to the federal securities
regulation authorizing annual fees of this type). The 12b-1 fee rates vary by
share class, according to Rule 12b-1 plans adopted by the Fund for the share
class. The sales charges and 12b-1 fees paid by investors are detailed in the
class-by-class information under "Investor Expenses" and "Purchases". The
portion of these expenses that are paid as compensation to authorized
institutions, such as your dealer, are shown in the chart on the last page of
this Prospectus. Sometimes compensation is not paid where tracking data is not
available for certain accounts and where the authorized institution waives part
of the compensation as with an account under a mutual fund wrap-fee program.
Rule 12b-1 distribution fees may be used to pay for sales compensation to
authorized institutions, for any activity which is primarily intended to result
in the sale of shares and, for Class B shares, the financing of sales
commissions.
First Year Compensation. Whenever you make an investment in the Fund, the
authorized institution receives compensation as described in the chart on the
last page of this Prospectus.
<PAGE>
ANNUAL COMPENSATION AFTER FIRST YEAR.
Beginning with the second year after an investment is made, the authorized
institution receives annual compensation as described in the chart on the last
page of this Prospectus.
Additional concessions may be paid to authorized institutions from time to time.
GLOSSARY OF TERMS
ADDITIONAL CONCESSIONS. A supplemental annual distribution fee equal to 0.10% of
the average daily net asset value of the Class A shares is available to
authorized institutions which have a program for the promotion and retention of
such shares satisfying Lord Abbett Distributor. Class A shares held pursuant to
a satisfactory program would, for example, (i) constitute a significant
percentage of the Fund's net assets, (ii) be held for a substantial length of
time and/or (iii) have a lower than average redemption rate.
Lord Abbett Distributor may, for specified periods, allow dealers to retain the
full sales charge for sales of shares during such periods, 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 Distributor may,
from time to time, implement promotions under which Lord Abbett Distributor 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 Abbett
Distributor's 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 Lord Abbett's headquarters or other locations, including meals and
entertainment, or the receipt of merchandise. The cash payments may include
payment of various business expenses of the dealer.
In selecting dealers to execute portfolio transactions for the Fund's portfolio,
if two or more dealers are considered capable of obtaining best execution, we
may prefer the dealer who has sold our shares and/or shares of other Lord
Abbett-sponsored funds
AUTHORIZED INSTITUTIONS. Institutions and persons permitted by law to receive
service and/or distribution fees under a Rule 12b-1 plan are "authorized
institutions".
ELIGIBLE FUND. (a) Any Lord Abbett-sponsored fund except 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; Lord Abbett Equity Fund; Lord Abbett
Series Fund; Lord Abbett Research Fund -- Mid-Cap Series; Lord Abbett U.S.
Government Securities Money Market Fund ("GSMMF") (except for holdings in GSMMF
which are attributable to any shares exchanged from the Lord Abbett family of
funds). (b) Any authorized institution's affiliated money market fund satisfying
Lord Abbett Distributor as to certain omnibus account and other criteria.
ELIGIBLE GUARANTOR. Any broker or bank that is a member of the medallion stamp
program. Most major securities firms are members of this program. A notary
public is not an eligible guarantor.
ELIGIBLE MANDATORY DISTRIBUTIONS. If Class B shares represent a part of an
individual's total IRA or 403(b) investment, the CDSC waiver is available only
for that portion of a mandatory distribution which bears the same relation to
the entire mandatory distribution as the B share investment bears to the total
investment.
EMPLOYEES OF LORD ABBETT/FUND DIRECTORS (TRUSTEES). The terms "directors,"
"trustees" (of a Fund) and "employees" (of Lord Abbett) include a director's
(trustee's) or employee's spouse (including the surviving spouse of a deceased
director (trustee) or employee. The terms "directors," "trustees" and "employees
of Lord Abbett" also include other family members and retired directors
(trustees) and employees.
<PAGE>
LEGAL CAPACITY. With respect to a redemption request, if (for example) the
request is on behalf of the estate of a deceased shareholder, John W. Doe, by a
person (Robert A. Doe) who has the legal capacity to act for the estate of the
deceased shareholder because he is the executor of the estate, then the request
must be executed as follows: Robert A. Doe, Executor of the Estate of John W.
Doe. Similarly, if (for example) the redemption request is on behalf of the ABC
Corporation by a person (Mary B. Doe) that has the legal capacity to act on
behalf of this corporation, because she is the President of the corporation,
then the request must be executed as follows: ABC Corporation by Mary B. Doe,
President. An acceptable form of guarantee would be as follows:
- - In the case of the estate -
ROBERT A. DOE, EXECUTOR
OF THE ESTATE OF JOHN W. DOE
Signature guaranteed
[Date] Eligible Guarantor Firm
JAMES B. SMITH
STAMP By James B. Smith,
Authorized Officer
- - In the case of the corporation -
ABC Corporation
MARY B. DOE
By Mary B. Doe, President
Signature guaranteed
[Date]
Eligible Guarantor Firm
JAMES B. SMITH
STAMP By James B. Smith,
Authorized Officer
LORD ABBETT CONSULTANTS/ADVISERS. Consultants and advisers to Lord Abbett, Lord
Abbett Distributor or Lord Abbett-sponsored funds who consent to such purchase
if such persons provide services to Lord Abbett, Lord Abbett Distributor or such
funds on a continuing basis and are familiar with such fund.
LORD ABBETT DISTRIBUTOR LLC. Lord Abbett Distributor is the Fund's exclusive
selling agent. Lord Abbett Distributor is obligated to use its best efforts to
find purchasers for the shares of the Fund, and to make reasonable efforts to
sell Fund shares so long as, in Lord Abbett Distributor's judgment, a
substantial distribution can be obtained.
MUTUAL FUND WRAP-FEE PROGRAM. Certain authorized brokers, dealers, registered
investment advisers or other financial institutions who have entered into an
agreement with Lord Abbett Distributor in accordance with certain standards
approved by Lord Abbett Distributor, providing specifically for the use of our
Class A shares in particular investment products made available for a fee to
clients of such brokers, dealers, registered investment advisers and other
financial institutions.
PURCHASER. 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.
RETIREMENT PLANS. Employer-sponsored retirement plans under the Internal Revenue
Code.
SPECIAL RETIREMENT WRAP PROGRAM. A program sponsored by an authorized
institution showing one or more characteristics distinguishing it, in the
opinion of Lord Abbett Distributor from a mutual fund wrap fee program. Such
characteristics include, among other things, the fact that an authorized
institution does not charge its clients any fee of a consulting or advisory
nature that is economically equivalent to the distribution fee under Class A
12b-1 Plan and the fact that the program relates to participant-directed
Retirement Plans.
<PAGE>
TOTAL RETURN. "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. When total return is quoted for Class
A shares, it includes the payment of the maximum initial sales charge. When
total return is shown for Class B and Class C shares, it reflects the effect of
the applicable CDSC. Total return also may be presented for other periods or
based on investments at reduced sales charge levels or net asset value. Any
quotation of total return not reflecting the maximum sales charge (front-end,
level, or back-end) 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.
YIELD. Each class of shares calculates its "yield" by dividing the annualized
net investment income per share on the portfolio during a 30-day period by the
maximum offering price on the last day of the period. The yield of each class
will differ because of the different expenses (including actual 12b-1 fees) of
each class of shares. The yield data represents a hypothetical investment return
on the portfolio, and does not measure investment return based on dividends
actually paid to shareholders. To show that return, a dividend distribution rate
may be calculated. Dividend distribution rate is calculated by dividing the
dividends of a class derived from net investment income during a stated period
by the maximum offering price on the last day of the period. Yields and dividend
distribution rate for Class A shares reflect the deduction of the maximum
initial sales charge, but may also be shown based on the Fund's net asset value
per share. Yields for Class B and Class C shares do not reflect the deduction of
the CDSC.
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 in Class A shares in the
Fund, assuming reinvestment of all dividends and distributions and the unmanaged
Standard & Poor's 500 Index.
The following is represented by a line graph:
<TABLE>
<CAPTION>
Class A shares Class A shares Standard & Poor's
at Net Asset Value at Maximum Offer- 500 Index (2)
ing Price (1)
<S> <C> <C> <C>
1987 10,000 9,422 10,000
1988 11,220 10,571 11,491
1989 13,243 12,478 14,511
1990 12,240 11,533 13,429
1991 15,668 14,763 17,921
1992 17,290 16,292 19,704
1993 20,361 19,185 22,618
1994 21,718 20,465 23,491
1995 26,168 24,651 29,694
1996 32,238 30,376 36,822
1997 40,554 38,212 48,642
Average Annual Total Return
for Class A Shares(3)
1 Year 5 Years 10 Years
18.60% 17.20% 14.35%
Average Annual Total Return
for Class B Shares(4)
1 Year LIFE
19.79% 24.83%
Average Annual Total Return
for Class C Shares(5)
1 Year LIFE
24.88% 28.98%
<FN>
(1)Data reflects the deduction of the maximum initial sales charge of 5.75%
applicable to Class A shares.
(2)Performance numbers for the unmanaged Standard & Poor's 500 Index do not
reflect transaction costs or management fees. An investor cannot invest directly
in the Standard & Poor's 500 Index.
(3)Total return is the percent change in value, after deduction of the maximum
initial sales charge of 5.75% applicable to Class A shares, with all dividends
and distributions reinvested for the periods shown ending October 31, 1997 using
the SEC-required uniform method to compute such return.
(4)The Class B shares were first offered on 8/1/96; Performance reflects the
deduction of a 4% CDSC.
(5)The Class C shares were first offered on 8/1/96. Performance is at net asset
value.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST YEAR COMPENSATION
Class A Investments
Front-end
sales charge Dealer's
paid by investors Concession Service fee(1) Total compensation(2)
(% of offering price) (% of offering price) (%of net investment) (% of offering price)
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 5.00% 0.25% 5.24%
$50,000 - $99,999 4.75% 4.00% 0.25% 4.24%
$100,000 - $249,999 3.75% 3.25% 0.25% 3.49%
$250,000 - $499,999 2.75% 2.25% 0.25% 2.49%
$500,000 - $999,999 2.00% 1.75% 0.25% 2.00%
$1 million or more(3) or
Retirement Plan -- 100 or more eligible employees(3) or
Special Retirement Wrap Program(3)
First $5 million no front-end sales charge 1.00% 0.25% 1.25%
Next $5 million above that no front-end sales charge 0.55% 0.25% 0.80%
Next $40 million above that no front-end sales charge 0.250% 0.25% 0.50%
Over $50 million no front-end sales charge 0.025% 0.25% 0.275%
Class B investments Paid at time of sale (% of net asset value)
All amounts no front-end sales charge 3.75% 0.25% 3.99%
Class C investments
All amounts no front-end sales charge 0.75% 0.25% 1.00%
Class P investments Percentage of average net assets
All amounts no front-end sales charge 0.25% 0.20% 0.45%
ANNUAL COMPENSATION AFTER FIRST YEAR
Class A investments
All amounts no front-end sales charge none 0.25% 0.25%
Class B investments Percentage of average net assets (4)
All amounts no front-end sales charge none 0.25% 0.25%
Class C investments
All amounts no front-end sales charge 0.75% 0.25% 1.00%
Class P investments
All amounts no front-end sales charge 0.25% 0.20% 0.45%
<FN>
(1) The service fee for Class A and P shares is paid quarterly and for Class A
shares may not exceed 0.15% if sold prior to June 1, 1990 . The first year's
service fee on Class B and C shares is paid at the time of sale
(2) Reallowance/concession percentages and service fee percentages are
calculated from different amounts, and therefore may not equal total
compensation percentages if combined using simple addition. Additional
Concessions may be paid to authorized institutions from time to time.
(3) Concessions are paid at the time of sale on all Class A shares sold during
any 12 month period starting from the day of the first net asset value sale.
With respect to (a) Class A share purchases at $1million or more, sales
qualifying at such level under rights of accumulation and statement of intention
privileges are included and (b)for special retirement wrap programs, only new
sales are eligible and exchanges into the Fund are excluded.
(4) With respect to Class B, C and P shares, 0.25%, 1.00% and 0.45%,
respectively, of the average annual net asset value of such shares outstanding
during the quarter (including distribution reinvestment shares after the first
anniversary of their issuance) is paid to authorized institutions. These fees
are paid quarterly in arrears.
CDSC revenues collected by Lord Abbett Funds may be used to fund commission
payments when there is no initial sales charge.
</FN>
</TABLE>
<PAGE>
INVESTMENT MANAGER AND UNDERWRITER
Lord, Abbett & Co. and Lord Abbett Distributor LLC
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-1-1097
(11/97)
LORD ABBETT
AFFILIATED FUND, INC.
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
Lord Abbett
Prospectus '98
March 1, 1988
Application inside
Lord Abbett
Affiliated
Fund
Lord, Abbett & Co.
Investment Management
A Tradition of Performance Through Disciplined Investing
<PAGE>
LORD ABBETT
STATEMENT OF ADDITIONAL INFORMATION MARCH 1, 1998
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 Distributor LLC
("Lord Abbett Distributor") 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, 1998.
Lord Abbett Affiliated Fund, Inc. (sometimes referred to as "we" or the "Fund")
was organized in 1934 and was reincorporated under Maryland law on November 26,
1975. The Fund has 2,000,000,000 shares of authorized capital stock consisting
of five classes (A, B, C, P and Y), $0.001 par value. The Board of Directors
will allocate these authorized shares of capital stock among the classes from
time to time. All shares have equal noncumulative voting rights and equal rights
with respect to dividends, assets and liquidation, except for certain
class-specific expenses. They are fully paid and nonassessable when issued and
have no preemptive or conversion rights.
Rule 18f-2 under the Act provides that any matter required to be submitted, by
the provisions of the Act or applicable state law or otherwise, to the holders
of the outstanding voting securities of an investment company such as the Fund
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each class affected by such
matter. Rule 18f-2 further provides that a class shall be deemed to be affected
by a matter unless the interests of each class in the matter are substantially
identical or the matter does not affect any interest of such class. However, the
Rule exempts the selection of independent public accountants, the approval of
principal distributing contracts and the election of directors from its separate
voting requirements.
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 Policies 2
2. Directors and Officers 4
3. Investment Advisory and Other Services 7
4. Portfolio Transactions 7
5. Purchases, Redemptions and
Shareholder Services 8
6. Past Performance 17
7. Taxes 17
8. Information About the Fund 19
9. Financial Statements 19
<PAGE>
1.
INVESTMENT POLICIES
FUNDAMENTAL INVESTMENT RESTRICTIONS
We are subject to the following investment restrictions which cannot be changed
without approval of a majority of our outstanding shares. The Fund may not: (1)
borrow money, except that (i) the Fund may borrow from banks (as defined in the
Investment Company Act of 1940, as amended (the "Act")) in amounts up to 33 1/3%
of its total assets (including the amount borrowed), (ii) the Fund may borrow up
to an additional 5% of its total assets for temporary purposes, (iii) the Fund
may obtain such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities and (iv) the Fund may purchase
securities on margin to the extent permitted by applicable law; (2) pledge its
assets (other than to secure borrowings, or to the extent permitted by the
Fund's investment policies, as permitted by applicable law); (3) engage in the
underwriting of securities, except pursuant to a merger or acquisition or to the
extent that, in connection with the disposition of its portfolio securities, it
may be deemed to be an underwriter under federal securities laws; (4) make loans
to other persons, except that the acquisition of bonds, debentures or other
corporate debt securities and investment in government obligations, commercial
paper, pass-through instruments, certificates of deposit, bankers acceptances,
repurchase agreements or any similar instruments shall not be subject to this
limitation, and except further that the Fund may lend its portfolio securities,
provided that the lending of portfolio securities may be made only in accordance
with applicable law; (5) buy or sell real estate (except that the Fund may
invest in securities directly or indirectly secured by real estate or interests
therein or issued by companies which invest in real estate or interests therein)
or commodities or commodity contracts (except to the extent the Fund may do so
in accordance with applicable law and without registering as a commodity pool
operator under the Commodity Exchange Act as, for example, with futures
contracts); (6) with respect to 75% of the gross assets of the Fund, buy
securities of one issuer representing more than (i) 5% of the Fund's gross
assets, except securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities or (ii) 10% of the voting securities of such
issuer; (7) invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding securities of the
U.S. Government, its agencies and instrumentalities); or (8) issue senior
securities to the extent such issuance would violate applicable law.
With respect to the restrictions mentioned herein, compliance therewith will not
be affected by changes in the market value of portfolio securities but will be
determined at the time of purchase or sale of such securities.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. In addition to the investment
restrictions above which cannot be changed without shareholder approval, we also
are subject to the following non-fundamental investment policies which may be
changed by the Board of Directors without shareholder approval. The Fund may
not: (1) borrow in excess of 33 1/3% of its total assets (including the amount
borrowed), and then only as a temporary measure for extraordinary or emergency
purposes; (2) make short sales of securities or maintain a short position except
to the extent permitted by applicable law; (3) invest knowingly more than 15% of
its net assets (at the time of investment) in illiquid securities, except for
securities qualifying for resale under Rule 144A of the Securities Act of 1933,
deemed to be liquid by the Board of Directors; (4) invest in the securities of
other investment companies except as permitted by applicable law; (5) invest in
securities of issuers which, with their predecessors, have a record of less than
three years' continuous operations, if more than 5% of the Fund's total assets
would be invested in such securities (this restriction shall not apply to
mortgage-backed securities, asset-backed securities or obligations issued or
guaranteed by the U. S. Government, its agencies or instrumentalities); (6) hold
securities of any issuer if more than 1/2 of 1% of the securities of such issuer
are owned beneficially by one or more officers or directors of the Fund or by
one or more partners or members of the Fund's underwriter or investment adviser
if these owners in the aggregate own beneficially more than 5% of the securities
of such issuer; (7) invest in warrants if, at the time of the acquisition, its
investment in warrants, valued at the lower of cost or market, would exceed 5%
of the Fund's total assets (included within such limitation, but not to exceed
2% of the Fund's total assets, are warrants which are not listed on the New York
or American Stock Exchange or a major foreign exchange); (8) invest in real
estate limited partnership interests or interests in oil, gas or other mineral
leases, or exploration or other development programs, except that the Fund may
invest in securities issued by companies that engage in oil, gas or other
mineral exploration or other development activities; (9) write, purchase or sell
puts, calls, straddles, spreads or combinations thereof, except to the extent
permitted in the Fund's prospectus and statement of additional information, as
they may be amended from time to time; (10) buy from or sell to any of its
officers, directors, employees, or its investment adviser or any of its
<PAGE>
officers, directors, partners or employees, any securities other than shares of
the Fund's common stock; or (11) pledge, mortgage or hypothecate its assets,
however, this provision does not apply to the grant of escrow receipts or the
entry into other similar escrow arrangements arising out of the writing of
covered call options.
Although it has no current intention to do so, the Fund may invest in financial
futures and options on financial futures.
For the year ended October 31, 1997, the portfolio turnover rate was 46.41%
versus 47.06% 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 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 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 such 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 & Co. ("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,
directors or trustees of the twelve other Lord Abbett-sponsored funds. They are
"interested persons" as defined in the Act, and as such, may be considered to
have an indirect financial interest in the Rule 12b-1 Plan described in the
Prospectus.
Robert S. Dow, age 52, Chairman and President
E. Wayne Nordberg, age 59
The following outside directors are also directors or trustees of the twelve
other Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow
Courtroom Television Network
600 Third Avenue
New York, New York
Chief Executive Officer of Courtroom Television Network. Formerly President and
Chief Executive Officer of Time Warner Cable Programming, Inc. Prior to that,
formerly President and Chief Operating Officer of Home Box Office, Inc. Age 56.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 67.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 72.
<PAGE>
C. Alan MacDonald
Directorship Inc.
8 Sound Shore Drive
Greenwich, Connecticut
Managing Director of Directorship Inc., a consultancy in board management and
corporate governance. Formerly General Partner of The Marketing Partnership,
Inc., a full service marketing consulting firm (1994-1997). Prior to that,
formerly Chairman and Chief Executive Officer of Lincoln Snacks, 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 64.
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 69.
Thomas J. Neff
Spencer Stuart & Associates
277 Park Avenue
New York, New York
Chairman of Spencer Stuart U.S., an executive search consulting firm. Age 60.
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 equity-based benefits accrued for outside directors
maintained by the Lord Abbett-sponsored funds. The fourth column sets forth the
total compensation payable by such funds to the outside directors. No director
of the Fund associated with Lord Abbett and no officer of the Fund received any
compensation from the Fund for acting as a director or officer.
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997
(1) (2) (3) (4)
Pension or For Year Ended
Retirement Benefits December 31, 1997
Accrued by the Total Compensation
Aggregate Fund and Accrued by the Fund and
Compensation Twelve Other Lord Twelve Other Lord
Accrued by Abbett-sponsored Abbett-sponsored
NAME OF DIRECTOR THE FUND1 FUNDS2 FUNDS3
<S> <C> <C> <C>
E. Thayer Bigelow $22,939 $11,563 $
Stewart S. Dixon $22,527 $22,283 $
John C. Jansing $22,527 $28,242 $
C. Alan MacDonald $23,418 $29,942 $
Hansel B. Millican, Jr. $22,719 $24,499 $
Thomas J. Neff $22,839 $15,990 $
<FN>
1. Outside directors' fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on the
net assets of each fund. A portion of the fees payable by the Fund to its
outside directors is being deferred under a plan that deems the deferred
amounts to be invested in shares of the Fund for later distribution to the
directors. The amounts of the aggregate compensation payable by the Fund as
of October 31, 1997 deemed invested in Fund shares, including dividends
reinvested and changes in net asset value applicable to such deemed
investments, were: Mr. Bigelow, $72,452; Mr. Dixon, $323,416; Mr. Jansing,
$390,389; Mr. MacDonald, $234,210; Mr. Millican, $394,521 and Mr. Neff,
$390,787. If the amounts deemed invested in Fund shares were added to each
director's actual holdings of Fund shares as of October 31, 1997, each would
own, the following: Mr. Bigelow, 1,546 shares; Mr. Dixon, 2,276 shares; Mr.
Jansing, 21,336 shares; Mr. McDonald, 30,234 shares; Mr. Millican, 21,998
shares; and Mr. Neff, 5,823 shares.
2. Each Lord Abbett-sponsored fund has a retirement plan providing that outside
directors may receive annual retirement benefits for life equal to 100% of
their final annual retainers following retirement at or after age 72 with at
least 10 years of service. Each plan also provides for a reduced benefit upon
early retirement under certain circumstances, a pre-retirement death benefit
and actuarially reduced joint-and-survivor spousal benefits. Such retirement
plans, and the deferred compensation plans referred to in footnote one, have
been amended recently to, among other things, enable outside directors to
elect to convert their prospective benefits under the retirement plans to
equity-based benefits under the deferred compensation plans (renamed the
equity-based plans and hereinafter referred to as such). Five of the six
outside directors made such an election. Mr. Jansing did not. The amounts
accrued in column 3 were accrued by the Lord Abbett-sponsored funds for the
twelve months ended October 31, 1997 with respect to the equity-based plans.
These accruals were based on the plans as in effect before the recent
amendments and on the fees payable to outside directors of the Fund for the
twelve months ended October 31, 1997. Under the recent amendments, the annual
retainer was increased to $50,000 and the annual retirement benefits were
increased from 80% to 100% of a director's final annual retainer. Thus, if
Mr. Jansing were to retire at or after age 72 and the annual retainer payable
by the funds were the same as it is today, he would receive annual retirement
benefits of $50,000.
3. This column shows aggregate compensation, including directors fees and
attendance fees for board and committee meetings, of a nature referred to in
footnote one, accrued by the Lord Abbett-sponsored funds during the year
ended December 31, 1996.
</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, Brown, Carper, Ms. Foster, Messrs. Hilstad, Hudson, Morris, Noelke and
Walsh are partners of Lord Abbett; the others are employees: W. Thomas Hudson,
age 56, Executive Vice President, Paul A. Hilstad, age 54, Vice President and
Secretary (with Lord Abbett since 1995; formerly Senior Vice President and
General Counsel of American Capital Management & Research, Inc.); Stephen I.
Allen, age 44; Zane E. Brown, age 46; Daniel E. Carper, age 45; Daria L. Foster,
age 43; Lawrence H. Kaplan, age 40 (with Lord Abbett since 1977 - formerly Vice
President and Chief Counsel of Salomon Brothers Asset Management Inc. - 1995 -
1997; prior thereto Senior Vice President and Associate General Counsel of
Kidder, Peabody & Co. Incorperated); Thomas F. Konop, age 55; Robert G. Morris,
age 52; Robert J. Noelke, age 40; A. Edward Oberhaus, age 37; Keith F. O'Connor,
age 42; John J. Walsh, age 61, Vice Presidents; and Donna M. McManus, age 36,
Treasurer (with Lord Abbett since 1996, formerly a Senior Manager at Deloitte &
Touche LLP).
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 October 31, 1997 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. Eleven of the twelve general partners of Lord Abbett are
officers and/or directors of the Fund and are identified as follows: Stephen I.
Allen, Zane E. Brown, Daniel E. Carper, Robert S. Dow, Daria L. Foster, Paul A.
Hilstad, W. Thomas Hudson, Robert G. Morris, Robert J. Noelke, E. Wayne Nordberg
and John J. Walsh. The other general partner of Lord Abbett who is neither an
officer nor director of the Fund is Michael McLaughlin. 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. This fee is
allocated among Class A, B and C based on the classes' proportionate shares of
such average daily net assets.
For the fiscal years ended October 31, 1997, 1996 and 1995, the management fees
paid to Lord Abbett by the Fund amounted to $22,192,209, $17,683,694 and
$14,431,000, 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.
The Bank of New York ("BNY"), 48 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 from brokers
cannot be allocated to any particular account, are not a substitute for Lord
Abbett's services but are supplemental to their own research effort and when
utilized, are subject to internal analysis before being incorporated by Lord
Abbett into their investment process. As a practical matter, it would not be
possible for Lord Abbett to generate all of the information presently provided
by brokers. While receipt of research services from brokerage firms has not
reduced Lord Abbett's normal research activities, the expenses of Lord Abbett
could be materially increased if it attempted to generate such additional
information through its own staff and purchased such equipment and software
packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or
among brokers, and trades are executed only when they are dictated by investment
decisions of the Fund to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold 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, 1997, 1996 and 1995, we paid total
commissions to independent dealers of $7,681,037, $5,897,259, and $6,542,354,
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 Class A shares on October 31, 1997 was
computed as follows:
Net asset value per share (net assets divided by
shares
outstanding)..........................................................$14.84
Maximum offering price per share (net asset value
divided by .9425).................................................$15.75
The net asset value per share for the Class B and Class C shares will be
determined in the same manner as for the Class A shares (net assets divided by
shares outstanding). Our Class B and Class C shares will be sold at net asset
value.
The Fund has entered into a distribution agreement with Lord Abbett Distributor
LLC, a New York limited liability company ("Lord Abbett Distributor") and
subsidiary of Lord Abbett, under which Lord Abbett Distributor is obligated to
use its best efforts to find purchasers for the shares of the Fund, and to make
reasonable efforts to sell Fund shares so long as, in Lord Abbett Distributor's
judgment, a substantial distribution can be obtained by reasonable efforts.
For the last three fiscal years, Lord Abbett, as our principal underwriter,
received net commissions after allowance of a portion of the sales charge to
independent dealers with respect to Class A shares as follows:
YEAR ENDED OCTOBER 31,
1997 1996 1995
---- ---- ----
Gross sales charge $16,853,194 $15,464,565 $6,940,216
Amount allowed to dealers $14,522,076 $13,701,148 $6,295,403
----------- ----------- ----------
Net commissions
received by
Lord Abbett $2,331,118 $1,763,417 $ 644,813
=========== ========== ===========
CONVERSION OF CLASS B SHARES. The conversion of Class B shares on the eighth
anniversary of their purchase is subject to the continuing availability of a
private letter ruling from the Internal Revenue Service, or an opinion of
counsel or tax adviser, to the effect that the conversion of Class B shares does
not constitute a taxable event for the holder under Federal income tax law. If
such a revenue ruling or opinion is no longer available, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect. Although
Class B shares could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a sales
charge or fee, such exchange could constitute a taxable event for the holder.
<PAGE>
ALTERNATIVE SALES ARRANGEMENTS
CLASSES OF SHARES. The Fund offers investors five different classes of shares.
This Prospectus offers four of those classes designated Class A, B, C and P. The
different classes of shares represent investments in the same portfolio of
securities but are subject to different expenses and will likely have different
share prices. Investors should read this section carefully to determine which
class represents the best investment option for their particular situation.
CLASS A SHARES. If you buy Class A shares, you pay an initial sales charge on
investments of less than $1 million (or on investments for employer-sponsored
retirement plans under the Internal Revenue Code (hereinafter referred to as
"Retirement Plans") with less than 100 eligible employees or on investments that
do not qualify to be under a "special retirement wrap program" as a program
sponsored by an authorized institution showing one or more characteristics
distinguishing it, in the opinion of Lord Abbett Distributor from a mutual fund
wrap fee program). If you purchase Class A shares as part of an investment of at
least $1 million (or for Retirement Plans with at least 100 eligible employees
or under a special retirement wrap program) in shares of one or more Lord
Abbett-sponsored funds, you will not pay an initial sales charge, but if you
redeem any of those shares within 24 months after the month in which you buy
them, you may pay to the Fund a contingent deferred sales charge ("CDSC") of 1%
except for redemptions under a special retirement wrap program. Class A shares
are subject to service and distribution fees that are currently estimated to
total annually approximately 0.23 of 1% of the annual net asset value of the
Class A shares. The initial sales charge rates, the CDSC and the Rule 12b-1 plan
applicable to the Class A shares are described in "Buying Class A Shares" below.
CLASS B SHARES. If you buy Class B shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the sixth anniversary of
buying them, you will normally pay a CDSC to Lord Abbett Distributor LLC ("Lord
Abbett Distributor"). That CDSC varies depending on how long you own shares.
Class B shares are subject to service and distribution fees at an annual rate of
1% of the annual net asset value of the Class B shares. The CDSC and the Rule
12b-1 plan applicable to the Class B shares are described in "Buying Class B
Shares" below.
CLASS C SHARES. If you buy Class C shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the first anniversary of
buying them, you will normally pay the Fund a CDSC of 1%. Class C shares are
subject to service and distribution fees at an annual rate of 1% of the annual
net asset value of the Class C shares. The CDSC and the Rule 12b-1 plan
applicable to the C shares are described in "Buying Class C Shares" below.
CLASS P SHARES. If you buy Class P shares, you pay no sales charge at the time
of purchase, and if you redeem your shares you pay no CDSC. Class P shares are
subject to service and distribution fees at an annual rate of .45 of 1% of the
average daily net asset value of the Class P shares. The Rule 12b-1 plan
applicable to the Class P shares is described in "Class P Rule 12b-1 Plan".
Class P shares are available to a limited number of investors.
WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial adviser. The Fund's class-specific expenses and the
effect of the different types of sales charges on your investment will affect
your investment results over time. The most important factors are how much you
plan to invest and how long you plan to hold your investment. If your goals and
objectives change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider another class of
shares.
<PAGE>
In the following discussion, to help provide you and your financial adviser with
a framework in which to choose a class, we have made some assumptions using a
hypothetical investment in the Fund. We used the sales charge rates that apply
to Class A, Class B and Class C, and considered the effect of the higher
distribution fees on Class B and Class C expenses (which will affect your
investment return). Of course, the actual performance of your investment cannot
be predicted and will vary, based on the Fund's actual investment returns, the
operating expenses borne by each class of shares, and the class of shares you
purchase. The factors briefly discussed below are not intended to be investment
advice, guidelines or recommendations, because each investor's financial
considerations are different. The discussion below of the factors to consider in
purchasing a particular class of shares assumes that you will purchase only one
class of shares and not a combination of shares of different classes.
HOW LONG DO YOU EXPECT TO HOLD YOUR INVESTMENT? While future financial needs
cannot be predicted with certainty, knowing how long you expect to hold your
investment will assist you in selecting the appropriate class of shares. For
example, over time, the reduced sales charges available for larger purchases of
Class A shares may offset the effect of paying an initial sales charge on your
investment, compared to the effect over time of higher class-specific expenses
on Class B or Class C shares for which no initial sales charge is paid. Because
of the effect of class-based expenses, your choice should also depend on how
much you plan to invest.
INVESTING FOR THE SHORT TERM. If you have a short-term investment horizon (that
is, you plan to hold your shares for not more than six years), you should
probably consider purchasing Class A or Class C shares rather than Class B
shares. This is because of the effect of the Class B CDSC if you redeem before
the sixth anniversary of your purchase, as well as the effect of the Class B
distribution fee on the investment return for that class in the short term.
Class C shares might be the appropriate choice (especially for investments of
less than $100,000), because there is no initial sales charge on Class C shares,
and the CDSC does not apply to amounts you redeem after holding them one year.
However, if you plan to invest more than $100,000 for the short term, then the
more you invest and the more your investment horizon increases toward six years,
the more attractive the Class A share option may become. This is because the
annual distribution fee on Class C shares will have a greater impact on your
account over the longer term than the reduced front-end sales charge available
for larger purchases of Class A shares. For example, Class A might be more
appropriate than Class C for investments of more than $100,000 expected to be
held for 5 or 6 years (or more). For investments over $250,000 expected to be
held 4 to 6 years (or more), Class A shares may become more appropriate than
Class C. If you are investing $500,000 or more, Class A may become more
desirable as your investment horizon approaches 3 years or more.
For most investors who invest $1 million or more or for Retirement Plans with at
least 100 eligible employees or for investments pursuant to a special retirement
wrap program, in most cases Class A shares will be the most advantageous choice,
no matter how long you intend to hold your shares. For that reason, it may not
be suitable for you to place a purchase order for Class B shares of $500,000 or
more or a purchase order for Class C shares of $1,000,000 or more. In addition,
it may not be suitable for you to place an order for Class B or C shares for a
Retirement Plan with at least 100 eligible employees or for a special retirement
wrap program. You should discuss this with your financial advisor.
INVESTING FOR THE LONGER TERM. If you are investing for the longer term (for
example, to provide for future college expenses for your child) and do not
expect to need access to your money for seven years or more, Class B shares may
be an appropriate investment option, if you plan to invest less than $100,000.
If you plan to invest more than $100,000 over the long term, Class A shares will
likely be more advantageous than Class B shares or Class C shares, as discussed
above, because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charges available for larger investments in Class
A shares under the Fund's Rights of Accumulation. Of course, these examples are
based on approximations of the effect of current sales charges and expenses on a
hypothetical investment over time, and should not be relied on as rigid
guidelines.
<PAGE>
ARE THERE DIFFERENCES IN ACCOUNT FEATURES THAT MATTER TO YOU? Some account
features are available in whole or in part to Class A, Class B and Class C
shareholders. Other features (such as Systematic Withdrawal Plans) might not be
advisable in non-Retirement Plan accounts for Class B shareholders (because of
the effect of the CDSC on the entire amount of a withdrawal if it exceeds 12%
annually) and in any account for Class C shareholders during the first year of
share ownership (due to the CDSC on withdrawals during that year). See
"Systematic Withdrawal Plan" under "Shareholder Services" in the Prospectus for
more information about the 12% annual waiver of the CDSC. You should carefully
review how you plan to use your investment account before deciding which class
of shares you buy. For example, the dividends payable to Class B and Class C
shareholders will be reduced by the expenses borne solely by each of these
classes, such as the higher distribution fee to which Class B and Class C shares
are subject, as described below.
HOW DOES IT AFFECT PAYMENTS TO MY BROKER? A salesperson, such as a broker, or
any other person who is entitled to receive compensation for selling Fund shares
may receive different compensation for selling one class than for selling
another class. As discussed in more detail below, such compensation is primarily
paid at the time of sale in the case of Class A and B shares and is paid over
time, so long as shares remain outstanding, in the case of Class C shares. It is
important that investors understand that the primary purpose of the CDSC for the
Class B shares and the distribution fee for Class B and Class C shares is the
same as the purpose of the front-end sales charge on sales of Class A shares: to
compensate brokers and other persons selling such shares. The CDSC, if payable,
supplements the Class B distribution fee and reduces the Class C distribution
fee expenses for the Fund and Class C shareholders.
CLASS A, B AND C RULE 12B-1 PLANS. As described in the Prospectus, the Fund has
adopted a Distribution Plan and Agreement pursuant to Rule 12b-1 of the Act for
each of the three Fund Classes: the "A Plan", the "B Plan" and the "C Plan",
respectively. In adopting each Plan and in approving its continuance, the Board
of Directors has concluded that there is a reasonable likelihood that each Plan
will benefit its respective Class and such Class' shareholders. The expected
benefits include greater sales and lower redemptions of Class shares, which
should allow each Class to maintain a consistent cash flow, and a higher quality
of service to shareholders by authorized institutions than would otherwise be
the case. During the last fiscal year, the Fund accrued or paid through Lord
Abbett to authorized institutions $11,638,558 under the A Plan, $18,947 under
the B Plan and $8,776 under the C Plan. Lord Abbett used all amounts received
under the A Plan for payments to dealers for (i) providing continuous services
to the Class A 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 Class A shares of the Fund.
Each Plan requires the directors to review, on a quarterly basis, written
reports of all amounts expended pursuant to the Plan and the purposes for which
such expenditures were made. Each Plan shall continue in effect only if its
continuance is specifically approved at least annually by vote of the directors,
including a majority of the directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related to the Plan ("outside directors"), cast in
person at a meeting called for the purpose of voting on the Plan. No Plan may be
amended to increase materially above the limits set forth therein the amount
spent for distribution expenses thereunder without approval by a majority of the
outstanding voting securities of the applicable class and the approval of a
majority of the directors, including a majority of the outside directors. Each
Plan may be terminated at any time by vote of a majority of the outside
directors or by vote of a majority of its Class's outstanding voting securities.
CONTINGENT DEFERRED SALES CHARGES. A Contingent Deferred Sales Charge ("CDSC")
(i) applies regardless of class, (ii) will not apply to shares purchased by the
reinvestment of dividends or capital gains distributions; (iii) will be assessed
on the lesser of the net asset value of the shares at the time of redemption or
the original purchase price and (iv) will not be imposed on the amount of your
account value represented by the increase in net asset value over the initial
purchase price (including increases due to the reinvestment of dividends and
capital gains distributions) and upon early redemption of shares.
CLASS A SHARES. As stated in the Prospectus, a CDSC of 1% is imposed with
respect to those Class A shares (or Class A shares of another Lord
Abbett-sponsored fund or series acquired through exchange of such shares) on
which the Fund has paid the one-time distribution fee of 1% if such shares are
redeemed out of the Lord Abbett-sponsored family of funds within a period of 24
months from the end of the month in which the original sale occurred.
<PAGE>
CLASS B SHARES. As stated in the Prospectus, if Class B shares (or Class B
shares of another Lord Abbett-sponsored fund or series acquired through exchange
of such shares) are redeemed out of the Lord Abbett-sponsored family of funds
for cash before the sixth anniversary of their purchase, a CDSC will be deducted
from the redemption proceeds. The Class B CDSC is paid to Lord Abbett
Distributor to reimburse its expenses, in whole or in part, for providing
distribution-related service to the Fund in connection with the sale of Class B
shares.
To determine whether the CDSC applies to a redemption, the Fund redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held on or after the sixth anniversary
of their purchase, and (3) shares held the longest before such sixth
anniversary.
The amount of the contingent deferred sales charge will depend on the number of
years since you invested and the dollar amount being redeemed, according to the
following schedule:
Anniversary of the Day on Contingent Deferred Sales Charge
Which the Purchase Order Was Accepted on Redemptions
(As % of Amount Subject to Charge)
Before the 1st........................................................5.0%
On the 1st, before the 2nd............................................4.0%
On the 2nd, before the 3rd............................................3.0%
On the 3rd, before the 4th............................................3.0%
On the 4th, before the 5th............................................2.0%
On the 5th, before the 6th ...........................................1.0%
On or after the 6th anniversary.......................................None
In the table, an "anniversary" is the 365th day subsequent to the acceptance of
a purchase order or a prior anniversary. All purchases are considered to have
been made on the business day on which the purchase order was accepted.
CLASS C SHARES. As stated in the Prospectus, if Class C shares are redeemed for
cash before the first anniversary of their purchase, the redeeming shareholder
will be required to pay to the Fund on behalf of Class C shares a CDSC of 1% of
the lower of cost or the then net asset value of Class C shares redeemed. If
such shares are exchanged into the same class of another Lord Abbett-sponsored
fund and subsequently redeemed before the first anniversary of their original
purchase, the charge will be collected by the other fund on behalf of this
Fund's Class C shares.
GENERAL. Each percentage (1% in the case of Class A and C shares and 5% through
1% in the case of Class B shares) used to calculate CDSCs described above for
the Class A, Class B and Class C shares is sometimes hereinafter referred to as
the "Applicable Percentage".
With respect to Class A and Class B shares, no CDSC is payable on redemptions by
participants or beneficiaries from employer-sponsored retirement plans under the
Internal Revenue Code for benefit payments due to plan loans, hardship
withdrawals, death, retirement or separation from service and for returns of
excess contributions to retirement plan sponsors. With respect to Class A shares
purchased pursuant to a special retirement wrap program, no CDSC is payable on
redemptions which continue or investments in another fund participating in the
program. In the case of Class A and Class C shares, the CDSC is received by the
Fund and is intended to reimburse all or a portion of the amount paid by the
Fund if the shares are redeemed before the Fund has had an opportunity to
realize the anticipated benefits of having a long-term shareholder account in
the Fund. In the case of Class B shares, the CDSC is received by Lord Abbett
Distributor and is intended to reimburse its expenses of providing
distribution-related service to the Fund (including recoupment of the commission
payments made) in connection with the sale of Class B shares before Lord Abbett
Distributor has had an opportunity to realize its anticipated reimbursement by
having such a long-term shareholder account subject to the B Plan distribution
fee.
<PAGE>
The other funds and series which participate in the Telephone Exchange Privilege
(except (a) Lord Abbett U.S. Government Securities Money Market Fund, Inc.
("GSMMF"), (b) certain series of Lord Abbett Tax-Free Income Fund and Lord
Abbett Tax-Free Income Trust for which a Rule 12b-1 Plan is not yet in effect,
and (c) any authorized institution's affiliated money market fund satisfying
Lord Abbett Distributor as to certain omnibus account and other criteria,
hereinafter referred to as an "authorized money market fund" or "AMMF"
(collectively, the "Non-12b-1 Funds")) have instituted a CDSC for each class on
the same terms and conditions. No CDSC will be charged on an exchange of shares
of the same class between Lord Abbett funds or between such funds and AMMF. Upon
redemption of shares out of the Lord Abbett family of funds or out of AMMF, the
CDSC will be charged on behalf of and paid: (i) to the fund in which the
original purchase (subject to a CDSC) occurred, in the case of the Class A and
Class C shares and (ii) to Lord Abbett Distributor if the original purchase was
subject to a CDSC, in the case of the Class B shares. Thus, if shares of a Lord
Abbett fund are exchanged for shares of the same class of another such fund and
the shares of the same class tendered ("Exchanged Shares") are subject to a
CDSC, the CDSC will carry over to the shares of the same class being acquired,
including GSMMF and AMMF ("Acquired Shares"). Any CDSC that is carried over to
Acquired Shares is calculated as if the holder of the Acquired Shares had held
those shares from the date on which he or she became the holder of the Exchanged
Shares. Although the Non-12b-1 Funds will not pay a distribution fee on their
own shares, and will, therefore, not impose their own CDSC, the Non-12b-1 Funds
will collect the CDSC (a) on behalf of other Lord Abbett funds, in the case of
the Class A and Class C shares and (b) on behalf of Lord Abbett Distributor, in
the case of the Class B shares. Acquired Shares held in GSMMF and AMMF which are
subject to a CDSC will be credited with the time such shares are held in GSMMF
but will not be credited with the time such shares are held in AMMF. Therefore,
if your Acquired Shares held in AMMF qualified for no CDSC or a lower Applicable
Percentage at the time of exchange into AMMF, that Applicable Percentage will
apply to redemptions for cash from AMMF, regardless of the time you have held
Acquired Shares in AMMF.
In no event will the amount of the CDSC exceed the Applicable Percentage of the
lesser of (i) the net asset value of the shares redeemed or (ii) the original
cost of such shares (or of the Exchanged Shares for which such shares were
acquired). No CDSC will be imposed when the investor redeems (i) 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 12b-1 fee and, in the case of Class B shares, Lord
Abbett Distributor paid no sales charge or service fee (including shares
acquired through reinvestment of dividend income and capital gains
distributions) or (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 the case of Class A shares); for six years or more (in the
case of Class B shares) and for one year or more (in the case of Class C
shares). In determining whether a CDSC is payable, (a) shares not subject to the
CDSC will be redeemed before shares subject to the CDSC and (b) of the shares
subject to a CDSC, those held the longest will be the first to be redeemed.
EXCHANGES. The Prospectus briefly describes the Telephone Exchange Privilege.
You may exchange some or all of your shares of any class for those in the same
class of: (i) Lord Abbett-sponsored funds currently offered to the public with a
sales charge (front-end, back-end or level ), (ii) GSMMF or (iii) AMMF, to the
extent offers and sales may be made in your state. You should read the
prospectus of the other fund before exchanging. In establishing a new account by
exchange, shares of the Fund being exchanged must have a value equal to at least
the minimum initial investment required for the other fund into which the
exchange is made.
Shareholders in other Lord Abbett-sponsored funds and AMMF have the same right
to exchange their shares for the corresponding class of the Fund's shares.
Exchanges are based on relative net asset values on the day instructions are
received by the Fund in Kansas City if the instructions are received prior to
the close of the NYSE in proper form. No sales charges are imposed except in the
case of exchanges out of GSMMF or AMMF (unless a sales charge (front-end,
back-end or level) was paid on the initial investment in a Lord Abbett-sponsored
fund). Exercise of the exchange privilege will be treated as a sale for federal
income tax purposes, and, depending on the circumstances, a gain or loss may be
recognized. In the case of an exchange of shares that have been held for 90 days
or less where no sales charge is payable on the exchange, the original sales
charge incurred with respect to the exchanged shares will be taken into account
in determining gain or loss on the exchange only to the extent such charge
exceeds the sales charge that would have been payable on the acquired shares had
they been acquired for cash rather than by exchange. The portion of the original
sales charge not so taken into account will increase the basis of the acquired
shares.
<PAGE>
Shareholders have the exchange privilege unless they refuse it in writing. You
should not view the exchange privilege as a means for taking advantage of
short-term swings in the market, and we reserve the right to terminate or limit
the privilege of any shareholder who makes frequent exchanges. We can revoke or
modify the privilege for all shareholders upon 60 days' prior notice. "Eligible
Funds" are AMMF and other Lord Abbett-sponsored funds which are eligible for the
exchange privilege, except Lord Abbett Series Fund ("LASF") which offers its
shares only in connection with certain variable annuity contracts, Lord Abbett
Equity Fund ("LAEF") which is not issuing shares, and series of Lord Abbett
Research Fund not offered to the general public ("LARF").
STATEMENT OF INTENTION. 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
a Lord Abbett-sponsored fund (other than shares of LAEF, LASF, LARF, GSMMF and
AMMF, unless holdings in GSMMF and AMMF are attributable to shares exchanged
from a Lord Abbett-sponsored fund offered with a front-end, back-end or level
sales charge) 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 and reduced initial sales charge for Class A shares. Class A shares
valued at 5% of the amount of intended purchases are escrowed and may be
redeemed to cover the additional sales charge payable if the 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.
RIGHTS OF ACCUMULATION. 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, GSMMF, and AMMF unless holdings in GSMMF or AMMF
are attributable to shares exchanged from a Lord Abbett-sponsored fund offered
with a front-end, back-end or level sales charge) 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 for Class A shares.
NET ASSET VALUE PURCHASES OF CLASS A SHARES. As stated in the Prospectus, our
Class A 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 director 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 "our directors" and "employees of Lord
Abbett" also include retired directors and employees and other family members
thereof.
Our Class A shares also may be purchased at net asset value (a) at $1 million or
more, (b) with dividends and distributions from Class A shares of other Lord
Abbett-sponsored funds, except for LARF, LAEF and LASF, (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 Distributor in accordance
with certain standards approved by Lord Abbett Distributor, 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 program"), (e)
by employees, partners and owners of unaffiliated consultants and advisors to
Lord Abbett, Lord Abbett Distributor or Lord Abbett-sponsored funds who consent
to such purchase if such persons provide service to Lord Abbett, Lord Abbett
Distributor or such funds on a continuing basis and are familiar with such
funds, (f) through Retirement Plans with at least 100 eligible employees, (g) in
connection with a merger, acquisition or other reorganization, and (h) through a
"special retirement wrap program" sponsored by an authorized institution showing
one or more characteristics distinguishing it, in the opinion of Lord Abbett
Distributor from a mutual fund wrap program. Such characteristics include, among
other things, the fact that an authorized institution does not charge its
clients any fee of a consulting or advisory nature that is economically
equivalent to the distribution fee under Class A 12b-1 Plan and the fact that
the program relates to participant-directed Retirement Plan. Shares are offered
at net asset value to these investors for the purpose of promoting goodwill with
employees and others with whom Lord Abbett Distributor and/or the Fund has
business relationships.
<PAGE>
REDEMPTIONS. A redemption order is in proper form when it contains all of the
information and documentation required by the order form or supplementary by
Lord Abbett Distributor or the Fund to carry out the order. The signature(s) and
any legal capacity of the signer(s) must be guaranteed by an eligible guarantor.
See the Prospectus for expedited redemption procedures.
The right to redeem and receive payment, as described in the Prospectus, may be
suspended if the NYSE is closed (except for weekends or customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
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 25 shares. Before authorizing such
redemption, the Board must determine that it is in our economic best interest or
necessary to reduce disproportionately burdensome expenses in servicing
shareholder accounts. At least 6 months prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
DIV-MOVE. Under the Div-Move service described in the Prospectus, you can invest
the dividends paid on your account of any class into an existing account of the
same class in any other Eligible Fund. The account must 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. The Invest-A-Matic method of investing in the Fund and/or any
other Eligible Fund is described in the Prospectus. To avail yourself of this
method you must complete the application form, selecting the time and amount of
your bank checking account withdrawals and the funds for investment, include a
voided, unsigned check and complete the bank authorization.
SYSTEMATIC WITHDRAWAL PLANS. The Systematic Withdrawal Plan ("SWP") also is
described in the Prospectus. You may establish a SWP if you own or purchase
uncertificated shares having a current offering price value of at least $10,000.
Lord Abbett prototype retirement plans have no such minimum. With respect to a
SWP for Class B shares, on redemptions over 12% per year, the CDSC will apply to
the entire redemption. Therefore, please contact the Fund for assistance in
minimizing the CDSC in this situation. With respect to Class C shares, the CDSC
will be waived on and after the first anniversary of their purchase. The SWP
involves the planned redemption of shares on a periodic basis by receiving
either fixed or variable amounts at periodic intervals. 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.
RETIREMENT PLANS. The Prospectus indicates the types of retirement plans for
which Lord Abbett provides forms and explanations. Lord Abbett makes available
the retirement plan forms and custodial agreements for IRAs (Individual
Retirement Accounts, including Simple IRAs and 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.
<PAGE>
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.
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment (unless the return is shown at net asset value). For Class B
shares, the payment of the applicable CDSC (5.0% prior to the first anniversary
of purchase, 4.0% prior to the second anniversary of purchase, 3.0% prior to the
third and fourth anniversaries of purchase, 2.0% prior to the fifth anniversary
of purchase, 1.0% prior to the sixth anniversary of purchase and no CDSC on and
after the sixth anniversary of purchase) is applied to the Fund's investment
result for that class for the time period shown (unless the total return is
shown at net asset value). For Class C shares, the 1.0% CDSC is applied to the
Fund's investment result for that class for the time period shown prior to the
first anniversary of purchase (unless the total return is shown at net asset
value). Total returns also assume that all dividends and capital gains
distributions during the period are reinvested at net asset value per share, and
that the investment is redeemed at the end of the period.
Using the computation method described above, the Fund's average annual
compounded rates of total return for the last one, five and ten fiscal-years
ending on October 31, 1997 are as follows: 18.60%, 17.20% and 14.35% for the
Fund's Class A shares, respectively. For the period August 1, 1996 to October
31, 1996 the average annual compounded rates of total return for the Class B
shares was 4.64% (not annualized). For the fiscal year ending October 31, 1997
the annual compounded rates for Class B shares was 19.79%. For the period August
1, 1996 to October 31, 1996 the average annual compounded rates of total return
for Class C shares was 8.96% (not annualized). For the fiscal year ending
October 31, 1997 the annual compounded rates for Class C shares was 24.88%.
Our yield quotation for each class is based on a 30-day period ended on a
specified date, computed by dividing the net investment income per share earned
during the period by the maximum offering price per share of such class on the
last day of the period. This is determined by finding the following quotient:
take the dividends and interest earned during the period for a class minus its
expenses accrued for the period and divide by the product of (i) the average
daily number of Class shares outstanding during the period that were entitled to
receive dividends and (ii) the maximum offering price per share of such class 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. Yield for the Class A
shares reflects the deduction of the maximum initial sales charge, but may also
be shown based on the Class A net asset value per share. Yields for Class B and
C shares do not reflect the deduction of the CDSC. For the 30-day period ended
October 31, 1997, the yield for the Class A shares of Fund was 1.60%.
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 solely 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
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, 1997 and the
report of Deloitte & Touche LLP, independent public accountants, on such
financial statements contained in the 1997 Annual Report to Shareholders of Lord
Abbett 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, 1997.
Part B- Statement of Net Assets at October 31, 1997.
Statement of Operations for the year ended October
31, 1997. Statements of Changes in Net Assets for
the years ended October 31, 1996 and 1997. Financial
Highlights for the five years ended October 31, 1997.
(b) Exhibits -
99.B1 Form of Articles Supplementary*
99.B11 Consent of Deloitte & Touche*
99.B16 Computation of Performance and Yield*
99.B18 Form of Plan entered into by Registrant pursuant
to Rule 18f-3.**
Ex. 27 Financial Data Schedule*
* Filed herewith.
** Incorporated by Reference to Post-Effective
Amendment No. 12 to the Registration Statement
on Form N-1A of Lord Abbett Investment Trust
(File No. 33-68090).
Exhibit items not listed above are not applicable.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
Item 26. NUMBER OF RECORD HOLDERS OF SECURITIES
As of December 5, 1997
230,856 - (Class A)
12,742 - (Class B)
4,822 - (Class C)
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 the 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, make 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.
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.
<PAGE>
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Lord, Abbett & Co. acts as investment adviser for twelve other open-end
investment companies (of which it is principal underwriter for
thirteen) and as investment adviser to approximately 5,757 private
accounts as of July 31, 1997. Other than acting as directors and/or
officers of open-end investment companies sponsored 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, or partner of any entity
except as follows:
John J. Walsh
Trustee
The Brooklyn Hospital Center
100 Parkside Avenue
Brooklyn, N.Y.
Item 29.(a) PRINCIPAL UNDERWRITER
Lord Abbett Mid-Cap Value Fund, Inc.
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett Global Fund, Inc.
Lord Abbett Series Fund, Inc.
Lord Abbett U.S. Government Money Market Fund, Inc.
Lord Abbett Equity Fund
Lord Abbett Tax-Free Income Trust
Lord Abbett Securities Trust
Lord Abbett Investment Trust
Lord Abbett Research Fund, Inc.
INVESTMENT ADVISOR
American Skandia Trust (Lord Abbett Growth & Income Portfolio)
(b) The partners of Lord, Abbett & Co. are:
Name and Principal Positions and Offices
BUSINESS ADDRESS (1) WITH REGISTRANT
Robert S. Dow Chairman and President
Kenneth B. Cutler Vice President & Secretary
Stephen I. Allen Vice President
Zane E. Brown Vice President
Daniel E. Carper Vice President
Daria L. Foster Vice President
W. Thomas Hudson, Jr. Executive Vice President
Robert G. Morris Vice President
Robert J. Noelke Vice President
E. Wayne Nordberg Vice President
John J. Walsh Vice President
<PAGE>
The other general partner of Lord Abbett & Co. who is neither
an officer nor a director of the Registrant is Michael
McLaughlin.
(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 cancelled stock certificates and
correspondence may be physically maintained at the main office of the
Registrant's Transfer Agent, Custodian, or Shareholder Servicing Agent
within the requirements of Rule 31a-3.
Item 31. MANAGEMENT SERVICES
(a) None
Item 32. UNDERTAKINGS
(c) The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
The registrant undertakes, if requested to do so by the holders of
at least 10% of the registrant's outstanding shares, to call a
meeting of shareholders for the purpose of voting upon the
question of removal of a director or directors and to assist in
communications with other shareholders as required by Section
16(c).
<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
19th day of December 1997.
LORD ABBETT AFFILIATED FUND, INC.
By s/Robert S. Dow
-----------------------------
Robert S. Dow,
Chairman of the Board
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.
Chairman, President
s/Robert S. Dow and Director December 19, 1997
- ------------------------- ---------------------------- --------------------
Robert S. Dow (Title) (Date)
Vice President and
s/Keith F. O'Conner Chief Fiancial Officer December 19, 1997
- ------------------------- ---------------------------- --------------------
Keith F. O'Connor (Title) (Date)
s/E. Wayne Nordberg Director December 19, 1997
- ------------------------- ---------------------------- --------------------
E. Wayne Nordberg (Title) (Date)
s/Stewart S. Dixon Director December 19, 1997
- ------------------------- ---------------------------- --------------------
Stewart S. Dixon (Title) (Date)
s/John C. Jansing Director December 19, 1997
- ------------------------- ---------------------------- --------------------
John C. Jansing (Title) (Date)
s/C. Alan MacDonald Director December 19, 1997
- ------------------------- ---------------------------- --------------------
C. Alan MacDonald (Title) (Date)
s/Hansel B. Millican Director December 19, 1997
- ------------------------- ---------------------------- --------------------
Hansel B. Millican, Jr. (Title) (Date)
s/Thomas J. Neff Director December 19, 1997
- ------------------------- ---------------------------- --------------------
Thomas J. Neff (Title) (Date)
s/E. Thayer Bigelow Director December 19, 1997
- ------------------------- ---------------------------- --------------------
E. Thayer Bigelow (Title) (Date)
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
LORD ABBETT AFFILIATED FUND, INC.
LORD ABBETT AFFILIATED FUND, INC., a Maryland corporation having its
principal office c/o The Prentice-Hall Corporation System, 11 Chase Street,
Baltimore, Maryland 21202 (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland, that:
FIRST: The Corporation presently has authority to issue 1,000,000,000
shares of capital stock, of the par value $.001 each, having an aggregate par
value of $1,000,000. The Board of Directors has previously classified and
designated 725,000,000 authorized shares as Class A shares, 100,000,000
authorized shares as Class B shares, 100,000,000 authorized shares as Class C
shares, and 75,000,000 as Class Y shares.
SECOND: Pursuant to the authority of the Board of Directors to
classify and reclassify unissued shares of stock of the Corporation and to
classify a series into one or more classes of such series, the Board of
Directors hereby classifies and reclassifies 75,000,000 authorized but unissued
Class A shares as Class P shares.
THIRD: Subject to the power of the Board of Directors to classify and
reclassify unissued shares, all shares of the Corporation's Class P stock shall
be invested in the same investment portfolio of the Corporation as the Class A,
Class B, Class C and Class Y stock and shall have the preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption set forth in Article V of
the Articles of Incorporation of the Corporation (hereafter called the
"Articles") and shall be subject to all other provisions of the Articles
relating to stock of the Corporation generally.
<PAGE>
FOURTH: The Class P shares aforesaid have been duly classified by
the Board of Directors under the authority contained in the Articles.
IN WITNESS WHEREOF, Lord Abbett Affiliated Fund, Inc. has caused
these presents to be signed in its name and on its behalf by its Vice President
and witnessed by its Assistant Secretary on December ___, 1997.
LORD ABBETT AFFILIATED FUND, INC.
By
Thomas F. Konop
Vice President
WITNESS:
Lawrence H. Kaplan
Vice President and Assistant Secretary
<PAGE>
THE UNDERSIGNED, Vice President of LORD ABBETT AFFILIATED FUND, INC.,
who executed on behalf of said Corporation the foregoing Articles Supplementary,
of which this certificate is made a part, hereby acknowledges, in the name and
on behalf of said Corporation, the foregoing Articles Supplementary to be the
corporate act of said Corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
Thomas F. Konop
Vice President
CONSENT OF INDEPENDENT AUDITORS
Lord Abbett Affiliated Fund, Inc.:
We consent to the incorporation by reference in Post-Effective Amendment 72 to
Registration Statement No. 2-10638 of our report dated December 2,1997 appearing
in the annual report to shareholders and to the reference to us under the
caption "Financial Highlights" in the Prospectus and to the references to us
under the captions "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
December 16, 1997
EXHIBIT 16
AFFILIATED FUND
Post Effective Amendment No. 72
Results of a $1,000 investment reflecting the maximum sales charge and the
reinvestment of all distributions for:
Periods Ending October 31, 1997
One Five Ten
YEAR YEARS YEARS
$1,186 ERV $2,211 ERV $3,821 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 = $1,186 ERV = $2,211 ERV = $3,821
T = Average annual total return
ONE YEAR FIVE YEARS TEN YEARS
1000(1+T)1 = $1,186 1000(1+T)5= $2,211 1000(1+T)10 =$3,821
(1 + T)1 = 1,186 (1+T)5 = (2,211) (1+T)10 = 3,821
------ ------ -----
1,000 (1,000 ) 1,000
(1 + T) = 1,186 (1+T) = (2,211).20 (1+T) = (3,812).10
------ -------- ------
1,000 (1,000) (1,000)
T = 1,186-1 T = (2,211).20-1 T = ( 3,125).10-1
------ ------ -----
1,000 (1,000) (1,000)
T = 18.60% T = 17.20% T = 14.35%
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