1933 Act File No. 2-10638
1940 Act File No. 811-5
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No.78 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT |X|
OF 1940
Amendment No. 78 |X|
LORD ABBETT AFFILIATED FUND, INC.
---------------------------------
Exact Name of Registrant as Specified in Charter
767 FIFTH AVENUE, NEW YORK, N. Y. 10153-0203
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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
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Name and Address of Agent for Service
It is proposed that this filing will become effective (check appropriate box)
|_| immediately upon filing pursuant to paragraph (b)
|X| on March 1, 1999 pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a) (1)
|_| on (date) pursuant to paragraph (a) (1)
|_| 75 days after filing pursuant to paragraph (a) (2)
|_| on (date) pursuant to paragraph (a) (2) of rule 485
If appropriate, check the following box:
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
Lord
Abbett
Affiliated Fund
Prospectus
March 1, 1999
[LOGO] LORD, ABBETT & CO.
Investment Management
FPO
A Tradition of Performance Through Disciplined Investing
As with all mutual funds, the Securities and Exchange Commission
does not guarantee that the information in this prospectus is
accurate or complete, and it has not judged this fund for its
investment merit. It is a criminal offense to state otherwise.
<PAGE>
Table of Contents
The Fund Page
What you should know about the fund
Goal/Approach 2
Main Risks 2
Past Performance 3
Fees and Expenses 3
Your Investment
Information for managing your fund account
Purchases 4
Opening Your Account 6
Redemptions 7
Distributions and Taxes 7
Services For Fund Investors 8
Sales Charges and Service Fees 9
Management 9
For More Information
How to learn more about the fund
Other Investment Techniques 10
Glossary of Shaded Terms 10
Recent Performance 12
Financial Information
Financial Highlights 13
Broker Compensation 15
How to learn more about the fund and other Lord Abbett funds
Back Cover
<PAGE>
The Fund
GOAL/APPROACH
The fund's investment objective is long-term growth of capital and income
without excessive fluctuations in market value. Typically, in choosing
stocks, we look for companies using a three-step process.
o Quantitative research is performed on a universe of large, seasoned
U.S. and multinational companies to identify those whose stocks we
believe represent the best bargains.
o Fundamental research is conducted to assess a company's operating
environment, resources and strategic plans and to determine its
prospects for exceeding the earnings expectations reflected in its
stock price.
o Business cycle analysis is used to assess the economic and
interest-rate sensitivity of our portfolio. This analysis helps us
assess how adding or deleting stocks changes our portfolio's overall
sensitivity to economic activity and interest rates.
We believe that investors purchase and redeem our shares to meet long-term
financial objectives rather than to try to take advantage of short-term
price fluctuations. If so, their needs are best served by an investment
seeking capital appreciation with less fluctuations in market value than
the Standard & Poor's Composite Index of 500 stocks ("S&P 500(R)"). For
this reason, we try to keep our assets invested in securities which are
selling at reasonable prices and, therefore, we are willing to forego some
opportunities for gains when, in our judgment, they are too risky.
We generally sell a stock when we think it is no longer a bargain, appears
less likely to benefit from the current market and economic environment,
shows deteriorating fundamentals or falls short of our expectations.
While typically fully invested, at times we may take a temporary defensive
position by investing some of our assets in short-term debt securities.
This could have the effect of reducing the benefit from any upswing in the
market and prevent the fund from realizing its investment objective.
MAIN RISKS
While stocks have historically been a leading choice of long-term
investors, they fluctuate in price. The value of your investment in the
fund will go up and down, which means that you could lose money.
Our performance may sometimes be lower or higher than that of other types
of funds (such as those emphasizing small-company stocks or growth stocks)
because different types of stocks tend to shift in and out of favor
depending on market and economic conditions. While there is the risk that
an investment may never reach what we think is its full value, or may go
down in value, our emphasis on large seasoned company bargain stocks could
limit our downside risk because bargain stocks in theory are already
underpriced and large seasoned company stocks tend to be less volatile
than small company stocks. In the long run, we may produce more modest
gains than riskier stock funds as a trade-off for this potentially lower
risk.
An investment in the fund is not a bank deposit. It is not FDIC-insured or
government-endorsed. It is not a complete investment program. You could
lose money in this fund, but you also have the potential to make money.
We or the fund refers to Lord Abbett Affiliated Fund, Inc. (the "company") which
operates under the supervision of its Board with the advice of Lord, Abbett &
Co. ("Lord Abbett"), its investment manager.
About the fund. This fund is a professionally managed portfolio primarily
holding securities purchased with the pooled money of investors. It strives to
reach its stated goal, although as with all funds, it cannot guarantee results.
Large companies are established companies that are considered "known
quantities." Large companies often have the resources to weather economic
shifts, though they can be slower to innovate than small companies.
Seasoned companies are usually established companies whose securities have
gained a reputation for quality with the investing public and enjoy liquidity in
the market.
Bargain stocks are stocks of companies that appear under-priced according to
certain financial measurements of their intrinsic worth or business prospects.
Small-Company Stocks are stocks of smaller companies which often are new and
less established, with a tendency to be faster-growing but more volatile than
large company stocks.
Growth Stocks are stocks which exhibit faster-than-average gains in earnings and
are expected to continue profit growth at a high level, but also tend to be more
volatile than bargain stocks.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies used by the fund and
their risks.
2 / The Fund
<PAGE>
------------------------
Symbols: Class A - LAFFX
Class B - LAFBX
Class C - LAFCX
PAST PERFORMANCE
The information below provides some indication of the risks of investing
in the fund, by showing changes in the fund's performance from calendar
year to calendar year and by showing how the fund's average annual returns
compare with those of a broad measure of market performance.
[The following table was depicted as a bar chart in the printed material.]
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12.8% 23.5% -5.2% 22.0% 12.4% 13.2% 4.1% 31.7% 20.1% 25.2% 14.4%
Best Quarter: 17.10% Worst Quarter -12.57%
=====================================================================================
</TABLE>
The table below shows a comparison of the fund's class A, B, C and P average
annual total return to that of the S&P 500(R) Index. Fund returns assume
reinvestment of dividends and distributions and payment of the maximum
applicable front-end or deferred sales charge. All periods end on December 31,
1998.
Class 1 Year 5 Years 10 Years Inception(i) S&P 500(R)
A 7.90% 17.30% 14.97% 12.67% --
- --------------------------------------------------------------------------------
B 9.09% -- -- 20.94% 33.33(iii)
- --------------------------------------------------------------------------------
C 13.55% -- -- 22.48% 33.33(iii)
- --------------------------------------------------------------------------------
P 14.00% -- -- 11.35% 28.94(iv)
- --------------------------------------------------------------------------------
S&P 500(R)Index(ii) 28.74% 24.08% 19.20% -- --
- --------------------------------------------------------------------------------
Past performance is not a prediction of future results.
- --------------------------------------------------------------------------------
(i) The dates of inception for each class are: A - 1/1/50; B -8/1/96; C
-8/1/96; and P -12/8/97.
(ii) Performance for the unmanaged S&P 500(R) Index does not reflect
transaction costs or management fees.
(iii) Represents total return for the period 7/31/96 - 12/31/98, to correspond
with class B and C inception dates.
(iv) Represents total return for the period 12/31/97 - 12/31/98, to correspond
with class P inception date.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the fund.
================================================================================
Fee table
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B Class C Class P
<S> <C> <C> <C> <C>
Shareholder Fees (Fees paid directly from your investment)
- ---------------------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- ---------------------------------------------------------------------------------------------------------------
(as a % of offering price) 5.75% none none none
- ---------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (See "Purchases") none 5.00%(2)(5) 1.00%(3) none
- ---------------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from fund assets) (as a % of average net assets)(1)
- ---------------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.31% 0.31% 0.31% 0.31%
- ---------------------------------------------------------------------------------------------------------------
Distribution and Service (12b-1 Fees)(4) 0.35% 1.00% 1.00% 0.45%
- ---------------------------------------------------------------------------------------------------------------
Other Expenses (See "Management") 0.09% 0.09% 0.09% 0.09%
- ---------------------------------------------------------------------------------------------------------------
Total Operating Expenses 0.75% 1.40% 1.40% 0.85%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
Expense example
- --------------------------------------------------------------------------------
This example, like that in other funds' prospectuses, assumes a $10,000 initial
investment at maximum sales charge, if any, 5% total return each year and no
changes in expenses. You pay the following expenses over the course of each
period shown if you sell your shares at the end of the period, although your
actual cost may be higher or lower. The expenses include any applicable
contingent deferred sales charges.
Share class 1 Year 3 Years 5 Years 10 Years
Class A shares $647 $801 $968 $1,454
- --------------------------------------------------------------------------------
Class B shares(5) $642 $743 $966 $1,499
- --------------------------------------------------------------------------------
Class C shares $242 $443 $766 $1,682
- --------------------------------------------------------------------------------
Class P shares $87 $271 $471 $1,051
- --------------------------------------------------------------------------------
You would pay the following expenses on the same investment, assuming you kept
your shares.
Class A shares $647 $801 $968 $1,454
- --------------------------------------------------------------------------------
Class B shares(5) $142 $443 $766 $1,499
- --------------------------------------------------------------------------------
Class C shares $142 $443 $766 $1,682
- --------------------------------------------------------------------------------
Class P shares $87 $271 $471 $1,051
- --------------------------------------------------------------------------------
This example is for comparison and is not a representation of the fund's actual
expenses or returns, either past or present.
Management fees are payable to Lord Abbett for the fund's investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as transfer
agency, legal and share registration fees.
- --------------------------------------------------------------------------------
(1) The annual operating expenses have been restated from fiscal year amounts
to reflect current fees.
(2) 5.00% if shares are redeemed before 1st anniversary of purchase, declining
to 1.00% before 6th anniversary and eliminated on and after 6th
anniversary.
(3) 1.00% if shares are redeemed before 1st anniversary of purchase.
(4) Because 12b-1 distribution fees (up to: 0.10%- class A; 0.75%- classes B
and C; and 0.25%- class P) are paid out on an on-going basis, over time
they will increase the cost of your investment and may cost you more than
paying other types of sales charges. Service fees under each class's 12b-1
Plan equal up to 0.25%, execpt 0.20%- class P.
(5) Class B shares will convert to class A shares on the eighth anniversary of
your original purchase of class B shares.
The Fund / 3
<PAGE>
Your Investment
PURCHASES
This prospectus offers four classes of shares, class A, B, C and P.
Although a fund may have more than one class of shares, these different
classes of shares represent investments in the same portfolio of
securities but are subject to different expenses. Our shares are
continuously offered. The offering price is based on the Net Asset Value
("NAV") per share next determined after we receive your purchase order
submitted in proper form. A front-end sales charge is added to the NAV, in
the case of the class A shares. There is no front-end sales charge,
although there is a CDSC in the case of the class B and C shares, as
described below.
You should read this section carefully to determine which class of shares
represents the best investment option for your particular situation. 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 investment
professional.
For more information, see "Alternative Sales Arrangements" in the
Statement of Additional Information.
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 or change minimum investment requirements. All purchase orders
are subject to our acceptance and are not binding until confirmed or
accepted in writing.
NAV per share for each class of fund shares is calculated each business day at
the close of regular trading on the New York Stock Exchange ("NYSE"). The fund
is open on those business days when the NYSE is open. Purchases and sales of
fund shares are executed at the NAV next determined after the fund receives your
order. In calculating NAV, securities for which market quotations are available
are valued at those quotations. Securities for which such quotations are not
available are valued at fair value under procedures approved by the Board.
================================================================================
Front-End Sales Charges - Class A Shares
- --------------------------------------------------------------------------------
To Compute
As a % of As a % of Offering Price
Your Investment Offering Price Your Investment Divide 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 and over No Sales Charge 1.0000
- --------------------------------------------------------------------------------
Reducing Your Class A Front-End Sales Charges. Class A shares may be
purchased at a discount if you qualify under either of the following:
o Rights of Accumulation -- A Purchaser can apply the value (at public
offering price) of the shares you already own to a new purchase of
class A shares of any Eligible Fund in order to reduce the sales
charge.
o Statement of Intention -- A Purchaser of class A shares can purchase
additional shares of any Eligible Fund over a 13-month period and
receive the same sales charge as if you had purchased all shares at
once. Shares purchased through reinvestment of dividends or
distributions are not included. A statement of intention can be
backdated 90 days. Current holdings under rights of accumulation can
be included in a statement of intention.
For more information on eligibility for these privileges, read the
applicable sections in the attached application.
Share classes
Class A
o normally offered with a front-end sales charge
Class B
o no front-end sales charge, however, a contingent deferred sales charge is
applied to shares sold prior to the sixth anniversary of purchase
o higher annual expenses than class A shares
o automatically convert to class A shares after eight years
Class C
o no front-end sales charge
o higher annual expenses than class A shares
o a contingent deferred sales charge is applied to shares sold prior to the
first anniversary of purchase
Class P
o available to certain pension or retirement plans and pursuant to a Mutual
Fund Advisory Program
4 / Your Investment
<PAGE>
Class A Share Purchases Without A Front-End Sales Charge. Class A shares
may be purchased without a front-end sales charge under any of the
following:
o purchases of $1 million or more *
o purchases by Retirement Plans with at least 100 eligible employees *
o purchases under a Special Retirement Wrap Program *
o purchases made with dividends and distributions on class A shares of
another Eligible Fund
o purchases representing repayment under the loan feature of the Lord
Abbett-sponsored prototype 403(b) Plan for class A shares
o purchases by employees of any consenting securities dealer having a
sales agreement with Lord Abbett Distributor
o purchases under a Mutual Fund Advisory Program
o purchases by trustees or custodians of any pension or profit sharing
plan, or payroll deduction IRA for employees of any consenting
securities dealer having a sales agreement with Lord Abbett
Distributor
See the Statement of Additional Information for a listing of other
categories of purchasers who qualify for class A share purchases without a
front-end sales charge.
* These categories may be subject to a Contingent Deferred Sales Charge
("CDSC").
Class A Share CDSC. If you buy class A shares under one of the starred (*)
categories listed above and you redeem any of them within 24 months after
the month in which you initially purchased them, the fund normally will
collect a CDSC of 1%.
The class A share CDSC generally will be waived for the following:
o 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)
o 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 declines the longer you own your shares, according to the
following schedule:
================================================================================
Contingent Deferred Sales Charges - Class B Shares
- --------------------------------------------------------------------------------
Anniversary(1) of Contingent Deferred Sales Charge
the day on which the on redemption (as % of amount
purchase 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 6th(2) None
- --------------------------------------------------------------------------------
(1) Anniversary is the 365th day subsequent to a purchase or a prior
anniversary.
(2) Class B shares will automatically convert to class A shares on the eighth
anniversary of the purchase of class B shares.
CDSC regardless of class, is not charged on shares acquired through reinvestment
of dividends or capital gains distributions and is charged on the original
purchase cost or the current market value of the shares at the time they are
being sold, whichever is lower. In addition, repayment of loans under Retirement
Plans and 403(b) Plans will constitute new sales for purposes of assessing the
CDSC.
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 two years or more after the
month of purchase (class A) or one year or more (class C)
3. shares held the longest before the sixth anniversary of their purchase
(class B) or before the second anniversary after the month of purchase
(class A) or before the first anniversary of their purchase (class C)
Retirement Plans include employer-sponsored retirement plans under the Internal
Revenue Code, excluding Individual Retirement Accounts.
Lord Abbett Distributor LLC ("Lord Abbett Distributor") acts as agent for the
funds to work with investment professionals that buy and/or sell shares of the
funds on behalf of their clients. Generally, Lord Abbett Distributor does not
sell fund shares directly to investors.
Benefit Payment Documentation.
(Class A only)
o under $50,000 - no documentation necessary
o over $50,000 - reason for benefit payment must be received in writing. Use
the address indicated under "Opening Your Account."
Your Investment / 5
<PAGE>
The class B share CDSC generally will be waived under any one of the
following:
o benefit payments such as Retirement Plan loans, hardship
withdrawals, death, disability, retirement, separation from service
or any excess contribution or distribution under Retirement Plans
(documentation may be required)
o Eligible Mandatory Distributions under 403(b) Plans and individual
retirement accounts
o death of the shareholder (natural person)
o redemptions of shares in connection with Div-Move and Systematic
Withdrawal Plans (up to 12% per year)
See "Systematic Withdrawal Plan" under "Services For Fund Investors" below
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.
Class P Shares. Class P shares have lower annual expenses than class B and
class C shares, no front-end sales charge, and no CDSC. Class P shares are
currently sold and redeemed at NAV (a) pursuant to a Mutual Fund Advisory
Program, or (b) 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.
Important Information. You may be subject to a $50 penalty under the Internal
Revenue Code if you do not provide a correct taxpayer identification number
(Social Security Number for individuals) or make certain required
certifications. In addition, we may be required to withhold from your account
and pay to the U.S. Treasury 31% of any redemption proceeds and any dividend or
distribution from your account.
OPENING YOUR ACCOUNT
Minimum initial investment
o Regular account $250
o Individual Retirement Accounts and
403(b) Plans under the Internal
Revenue Code $250
o Uniform Gift to Minor Account $250
For Retirement Plans and Mutual Fund Advisory Programs, no minimum
investment is required, regardless of share class.
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 you select at the address
stated below. You should carefully read the paragraph below entitled
"Proper Form" before placing your order to assure your order will be
accepted.
Name of Fund
P.O. Box 419100
Kansas City, MO 64141
Proper Form. An order submitted directly to the fund must contain: (1) a
completed application, and (2) payment by check. For more information
regarding proper form of a purchase order, call the fund at 800-821-5129.
Payment must be credited in U.S. dollars to our custodian bank's account.
By Exchange. Telephone the fund at 800-821-5129 to request an exchange
from any eligible Lord Abbett-sponsored fund.
6 / Your Investment
<PAGE>
REDEMPTIONS
By Broker. Call your investment professional for directions on how to
redeem your shares.
By Telephone. To obtain the proceeds of a redemption of $50,000 or less
from your account, you or your representative can call the fund at
800-821-5129.
By Mail. Submit a written redemption request indicating, the name(s) in
which the account is registered, the fund's name, the class of shares,
your account number, and the dollar value or number of shares you wish to
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 800-821-5129.
Normally a check will be mailed to the name and address in which the
account is registered (or otherwise according to your instruction) within
three business days after receipt of your redemption request. Your account
balance must be sufficient to cover the amount being redeemed or your
redemption order will not be processed. Redemption requests for shares
initially purchased by check will not be honored for up to 15 days, unless
we are assured that the check has cleared earlier.
To determine if a CDSC applies to a redemption, see "Class A share CDSC,"
"Class B share CDSC" or "Class C share CDSC."
Eligible Guarantor is any broker or bank that is a member of the Medallion Stamp
Program. Most major securities firms and banks are members of this program. A
notary public is not an eligible guarantor.
DISTRIBUTIONS AND TAXES
The fund pays its shareholders dividends from its net investment income,
and distributes any net capital gains that it has realized. The fund
expects that its dividends from investment income will be paid quarterly.
If a capital gain distribution is declared, it will be paid annually. Your
distributions will be reinvested in the fund unless you instruct the fund
to pay them to you in cash. There are no sales charges on reinvestments.
The tax status of distributions is the same for all shareholders
regardless of how long they have been in the fund or whether distributions
are reinvested or paid in cash. In general, distributions are taxable as
follows:
================================================================================
Federal Taxability Of Distributions
Type of Tax rate for taxpayer Tax rate for taxpayer subject
distribution subject to 15% bracket to 28% bracket or above
- --------------------------------------------------------------------------------
Income Ordinary
dividends 15% income rate
- --------------------------------------------------------------------------------
Short-term Ordinary
capital gains 15% income rate
- --------------------------------------------------------------------------------
Long-term
capital gains 10% 20%
- --------------------------------------------------------------------------------
Except in tax-advantaged accounts, any sale or exchange of fund shares may
be a taxable event.
Annual Information. Information concerning the tax treatment of dividends
and other distributions will be mailed to shareholders each year. The fund
will also provide annually to its shareholders information regarding the
source of dividends and distributions of capital gains by the fund.
Because everyone's tax situation is unique, you should consult your tax
adviser regarding the treatment of those distributions under the federal,
state and local tax rules that apply to you as well as the tax
consequences of gains or losses from the redemption or exchange of your
shares.
Small Accounts. Our Board may authorize closing any account in which there are
fewer than 25 shares if it is in the fund's best interest to do so.
Taxes on Transactions. The chart at left also can provide a "rule of thumb"
guide for your potential U.S. federal income tax liability when selling or
exchanging fund shares. The second row, "Short-term capital gains," applies to
fund shares sold within 12 months of purchase. The third row, "Long-term capital
gains," applies to shares held for more than 12 months.
Starting January 1, 2001, sales of securities held for more than five years will
be taxed at special lower rates.
Your Investment / 7
<PAGE>
SERVICES FOR FUND INVESTORS
AUTOMATIC SERVICES
Buying or selling shares automatically is easy with the services described
below. With each service, you select a schedule and amount, subject to
certain restrictions. You can set up most of these services when filling
out your application or by calling 800-821-5129.
================================================================================
For investing
Invest-A-Matic You can make fixed, periodic investments ($50 minimum)
(Dollar-cost into your fund account by means of automatic money
averaging) transfers from your bank checking account. See the
attached application for instructions.
Div-Move You can automatically reinvest the dividends and
distributions from your account into another account in
any Eligible Fund ($50 minimum).
For selling shares
Systematic You can make regular withdrawals from most Lord Abbett
Withdrawal funds. Automatic cash withdrawals can be paid to you
Plan ("SWP") from your account in fixed or variable amounts. To
establish a plan, the value of your shares must be at
least $10,000, except for Retirement Plans for which
there is no minimum. Your shares must be in
non-certificate form.
Class B shares The CDSC will be waived on redemptions of up to 12% of
the current net asset value of your account at the time
of your SWP request. For class B share redemptions over
12% per year, the CDSC will apply to the entire
redemption. Please contact the fund for assistance in
minimizing the CDSC in this situation.
Class B and Redemption proceeds due to a SWP for class B and
C shares class C shares will be redeemed in the order described
under "Contingent Deferred Sales Charges" under
"Purchases."
================================================================================
Lord Abbett offers a variety of Retirement Plans. Call 800-253-7299 for
information about:
o Traditional, Rollover, Roth and Education IRAs
o Simple IRAs, SEP-IRAs, 401(k) and 403(b) accounts
o Defined Contribution Plans
OTHER SERVICES
Telephone Investing. After we have received the attached application
(selecting "yes" under Section 7C and completing Section 7), you can
instruct us by phone to have money transferred from your bank account to
purchase shares of the fund for an existing account. The fund will
purchase the requested shares when it receives the money from your bank.
Telephone Exchanges. You or your investment professional, with proper
identification, can instruct your fund by telephone to exchange shares of
any class for shares of the same class of any Eligible Fund by calling
800-821-5129. The fund must receive instructions for the exchange before
the close of the NYSE on the day of your call. If you meet this
requirement, you will get the NAV per share of the Eligible Fund
determined on that day. Exchanges will be treated as a sale for federal
tax purposes. Be sure to read the current prospectus for any fund into
which you are exchanging.
Reinvestment Privilege. If you sell shares of the fund, you have a one
time right to reinvest some or all of the proceeds in the same class of
any Eligible Fund within 60 days without a sales charge. If you paid a
CDSC when you sold your shares, you will be credited with the amount of
the CDSC. All accounts involved must have the same registration.
Account Statements. Every Lord Abbett investor automatically receives
quarterly account statements.
Householding. Shareholders with the same last name and address will
receive a single copy of a prospectus and an annual or semi-annual report,
unless additional reports are specifically requested in writing to the
fund.
Account Changes. For any changes you need to make to your account, consult
your investment professional or call the fund at 800-821-5129.
Systematic Exchange. You or your investment professional can establish a
schedule of exchanges between the same classes of any Eligible Fund.
Telephone Transactions. You have this privilege unless you refuse it in writing.
For your security, telephone transaction requests are recorded. We will take
measures to verify the identity of the caller, such as asking for your name,
account number, social security or taxpayer identification number and other
relevant information. The fund will not be liable for following instructions
communicated by telephone that it reasonably believes to be genuine.
Transactions by telephone may be difficult to implement in times of drastic
economic or market change.
Exchanges by telephone 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 or abusing the privilege and may
revoke the privilege for all shareholders upon 60 days' written notice.
8 / Your Investment
<PAGE>
SALES CHARGES AND SERVICE FEES
Sales and Service Compensation. As part of its plan for distributing
shares, the fund and Lord Abbett Distributor pay sales and service
compensation to Authorized Institutions that sell the fund's shares and
service its shareholder accounts.
Sales compensation originates from two sources: sales charges and 12b-1
distribution fees that are paid out of the fund's assets. Service
compensation originates from 12b-1 service fees. The 12b-1 fee rates vary
by share class, according to the Rule 12b-1 plan adopted by the fund. The
sales charges and 12b-1 fees paid by investors are shown in the
class-by-class information under "Fees and Expenses" and "Purchases." The
portion of these expenses that is paid as sales and service compensation
to Authorized Institutions, such as your dealer, is shown in the chart at
the end of this prospectus. The portion of such sales and service
compensation paid to Lord Abbett Distributor is discussed under "Sales
Activities" and "Service Activities." Sometimes we do not pay sales and
service compensation where tracking data is not available for certain
accounts or where the Authorized Institution waives part of the
compensation.
We may pay Additional Concessions to Authorized Institutions from time to
time.
Sales Activities. We may use 12b-1 distribution fees to pay Authorized
Institutions to finance any activity which is primarily intended to result
in the sale of shares. Lord Abbett Distributor uses its portion of the
distribution fees attributable to the fund's class A and class C shares
for activities which are primarily intended to result in the sale of such
class A and class C shares, respectively. These activities include, but
are not limited to, printing of prospectuses and statements of additional
information and reports for other than existing shareholders, preparation
and distribution of advertising and sales material, expenses of organizing
and conducting sales seminars, Additional Concessions to Authorized
Institutions, the cost necessary to provide distribution-related services
or personnel, travel, office expenses, equipment and other allocable
overhead.
Service Activities. We may pay Rule 12b-1 service fees to Authorized
Institutions for any activity which is primarily intended to result in
personal service and/or the maintenance of shareholder accounts. Any
portion of the service fees paid to Lord Abbett Distributor will be used
to service and maintain shareholder accounts.
12b-1 fees are payable regardless of expenses. The amounts payable by a fund
need not be directly related to expenses. If Lord Abbett Distributor's actual
expenses exceed the fee payable to it, a fund will not have to pay more than
that fee. If Lord Abbett Distributor's expenses are less than the fee it
receives, Lord Abbett Distributor will keep the full amount of the fee.
MANAGEMENT
The fund's investment adviser is Lord, Abbett & Co., 767 Fifth Avenue, New
York, NY 10153-0203. Founded in 1929, Lord Abbett manages one of the
nation's oldest mutual fund complexes, with approximately $28 billion in
more than 35 mutual fund portfolios and other advisory accounts. 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, 1998, the fee paid
to Lord Abbett was at an annual rate of .31 of 1%. In addition, the fund
pays all expenses not expressly assumed by Lord Abbett.
Lord Abbett uses a team of portfolio managers and analysts acting together
to manage the company's investments. Thomas Hudson Jr., Partner of Lord
Abbett, heads the team, the senior members of which include Robert Morris,
Partner of Lord Abbett, and Eli Salzman, Portfolio Manager. Messrs. Hudson
and Morris each have been with Lord Abbett since 1982 and 1991,
respectively. Mr Salzman joined Lord Abbett in 1997 and previously was a
Vice President with Mutual of America Capital Corp. since 1997 and a Vice
President with Mitchell Hutchins Asset Management, Inc. from 1986 to 1997.
Your Investment / 9
<PAGE>
For More Information
OTHER INVESTMENT TECHNIQUES
This section describes some of the investment techniques that might be
used by the fund and its risks.
Foreign Securities. 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. This affects block trading. Foreign portfolio
securities may trade on days when the fund does not value them. Fund share
prices could be affected on days an investor cannot purchase or sell
shares. Other risks include less information on public companies, banks
and governments; political and social instability; expropriations; higher
transaction costs; currency fluctuations; nondeductable withholding taxes
and different accounting and settlement practices. The fund will not
invest more than 10% of its net assets measured at the time of investment
in foreign securities.
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. These bonds have a higher risk of default than
investment grade bonds and their prices can be much more volatile. The
fund will not invest more than 5% of its assets measured at the time of
investment in high yield debt securities.
Illiquid Securities. Securities not traded on the open market. Certain
securities may be difficult or impossible to sell at the time and price
the seller would like.The fund may invest up to 15% of its assets in
illiquid securities. Securities determined by the Board to be liquid are
not subject to this limitation, such as those purchased under Securities
and Exchange Commission Rule 144A.
Portfolio Securities Lending. The fund may lend securities to
broker-dealers and financial institutions, as a means of earning income.
This practice could result in a loss or delay in recovering a fund's
securities, if the borrower defaults. The fund will limit its securities
loans to 30% of its 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. The fund receives income based on receipt of the
premium, it gives up participation in the appreciation of the stock above
the predetermined price if it is called away by the buyer. The fund will
limit covered call options on securities having an aggregate market value
not to exceed 10% of the fund's gross assets.
GLOSSARY OF SHADED TERMS
Additional Concessions. Lord Abbett Distributor may, for specified
periods, allow dealers to retain the full sales charge for sales of shares
or may pay an additional concession to a dealer who 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. Additional
payments may be paid from Lord Abbett Distributor's own resources or from
distribution fees received from the fund and will be made in the form of
cash or, if permitted, non-
10 / For More Information
<PAGE>
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." Lord Abbett Distributor is an Authorized
Institution.
Eligible Fund. An Eligible Fund is any Lord Abbett-sponsored fund except
for 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 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). An Eligible Fund also is any Authorized Institution's
affiliated money market fund satisfying Lord Abbett Distributor as to
certain omnibus account and other criteria.
Eligible Mandatory Distributions. If class B shares represent a part of an
individual's total IRA or 403(b) investment, the CDSC will be waived only
for that part of a mandatory distribution which bears the same relation to
the entire mandatory distribution as the B share investment bears to the
total investment.
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. That signature using that capacity
must be guaranteed by an Eligible Guarantor.
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. That signature using that capacity must be
guaranteed by an Eligible Guarantor.
Mutual Fund Advisory Program. Certain unaffiliated authorized brokers,
dealers, registered investment advisers or other financial institutions
who either (a) have an arrangement with Lord Abbett Distributor in
accordance with certain standards approved by Lord Abbett Distributor,
providing specifically for the use of our shares (and sometimes providing
for acceptance of orders for such shares on our behalf) in particular
investment products made available for a fee to clients of such brokers,
dealers, registered investment advisers and other financial institutions,
or (b) charge an advisory, consulting or other fee for their services and
buy shares for their own accounts or the accounts of their clients.
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,
Guaranteed signature. An acceptable form of guarantee would be as follows:
o In the case of the estate -
Robert A. Doe
Executor of the Estate of
John W. Doe
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
/s/ [ILLEGIBLE]
------------------------------------------------
AUTHORIZED SIGNATURE
(960) X9003470
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM(TM)
SR
o In the case of the corporation - ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
/s/ [ILLEGIBLE]
------------------------------------------------
AUTHORIZED SIGNATURE
(960) X9003470
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM(TM)
SR
For More Information / 11
<PAGE>
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.
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 Advisory 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 the class A 12b-1 Plan and the fact that the program relates to
participant-directed Retirement Plans.
RECENT PERFORMANCE
During the past fiscal 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.
Year 2000 issues. The fund could be adversely affected if the computers used by
the fund and their service providers do not properly process and calculate
date-related information from and after January 1, 2000.
While year 2000-related computer problems could have a negative effect on the
fund, Lord Abbett is working to avoid such problems and has assurances from the
fund's service providers that they are taking similar steps. However, because
the problem is unprecedented, we don't know whether these efforts will be
successful. Accordingly, the fund may be adversely affected.
12 / For More Information
<PAGE>
For More Information
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights
have been audited by Deloitte & Touche LLP, the fund's independent
auditors, in conjunction with their annual audit of the fund's financial
statements. Financial statements for the fiscal year ended October 31,
1998 and the Independent Auditors' Report thereon appear in the Annual
Report to Shareholders for the fiscal year ended October 31, 1998 and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single fund share.
<TABLE>
<CAPTION>
===================================================================================================================================
Class A Shares
-----------------------------------------------------------------------
Year Ended October 31,
Per Share Operating Performance: 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $14.84 $13.02 $11.98 $11.03 $11.26
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income .24 .30 .30 .32 .31
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1.14 2.85 2.23 1.70 .38
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.38 3.15 2.53 2.02 .69
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.27) (.30) (.30) (.30) (.32)
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (1.39) (1.03) (1.19) (.77) (.60)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $14.56 $14.84 $13.02 $11.98 $11.03
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 10.27% 25.80% 23.23% 20.46% 6.66%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses(d) 0.63% 0.65% 0.66% 0.63% 0.63%
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.64% 2.15% 2.61% 2.90% 2.91%
===================================================================================================================================
<CAPTION>
Class B Shares Class C Shares Class P Shares
------------------------------- ------------------------------ --------------
Year Ended October 31,
--------------------------------------------------------------------------------
Per Share Operating Performance: 1998 1997 1996(b) 1998 1997 1996(b) 1998(b)
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.84 $13.03 $11.88 $14.84 $13.02 $11.88 $14.24
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income .14 .20 .060 .14 .22 .062 .18
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on securities 1.12 2.84 1.142 1.12 2.83 1.130 .27
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.26 3.04 1.202 1.26 3.05 1.192 .45
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.15) (.20) (.052) (.15) (.20) (.052) (.16)
- -----------------------------------------------------------------------------------------------------------------------------------
Distribution from net realized gain (1.39) (1.03) -- (1.39) (1.03) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $14.56 $14.84 $13.03 $14.56 $14.84 $13.02 $14.53
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 9.41% 24.78% 10.15%(c) 9.41% 24.88% 10.07%(c) 3.21%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses(d) 1.38% 1.42% 0.34%(c) 0.40% 1.34% 0.33%(c) 0.76%
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income 0.87% 1.19% 0.27%(c) 0.85% 1.28% 0.25%(c) 1.21%
===================================================================================================================================
<CAPTION>
Year Ended October 31,
-----------------------------------------------------------------------------------------
Supplemental Data For All Classes: 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Assets, end of year (000) $8,520,603 $7,697,754 $6,100,665 $4,964,525 $4,229,586
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 56.49% 46.41% 47.06% 53.84% 51.48%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(b) From commencement of operations for each class of shares: August 1, 1996
(class B and C) and December 8, 1997 (class P).
(c) Not annualized.
(d) The ratios for 1998 and 1997 includes expenses paid through an expense
offset arrangement.
See Notes to Financial Statements.
Financial Information / 13
<PAGE>
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in class A
shares to the same investment in the S&P 500(R) Index, assuming
reinvestment of all dividends and distributions.
[GRAPHIC OMITTED]
================================================================================
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending October 31, 1998
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(3) 3.90% 15.65% 14.15%
- --------------------------------------------------------------------------------
Class B(4) 5.03% -- 18.27%
- --------------------------------------------------------------------------------
Class C(5) 9.41% -- 19.88%
- --------------------------------------------------------------------------------
Class P(5) -- -- 3.21%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 5.75%.
(2) Performance for the unmanaged S&P 500(R) Index does not reflect
transaction costs, management fees or sales charges.
(3) This shows total return which 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, 1998 using the SEC-required uniform method to
compute such return. The inception date for class A shares is 1/1/50.
(4) The class B shares were first offered on 8/1/96. Performance reflects the
deduction of a CDSC of 4% (for 1 year) and 3% (for life of the class).
(5) The class C and P shares were first offered on 8/1/96 and 12/8/97,
respectively. Performance is at net asset value.
14 / Financial Information
<PAGE>
COMPENSATION FOR YOUR DEALER
<TABLE>
<CAPTION>
====================================================================================================================================
FIRST YEAR COMPENSATION
Front-end Total
sales charge Dealer's compensation(2)
paid by investors concession Service fee(1) (% of offering
Class A investments (% of offering price) (% of offering price) (% of net investment) 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 0.50% 0.25% 0.75%
- ------------------------------------------------------------------------------------------------------------------------------------
Over $50 million no front-end sales charge 0.25% 0.25% 0.50%
====================================================================================================================================
Class B investments Paid at time of sale (% of net asset value)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 3.75% 0.25% 4.00%
====================================================================================================================================
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%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The service fee for class A and P shares is paid quarterly and for class A
shares may not exceed 0.15% for shares 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, such as your dealer,
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 $1 million 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, such as your dealer. These fees are paid quarterly in
arrears. Financial Information
Financial Information / 15
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
More information on this fund is available free upon request, including
the following:
ANNUAL/SEMI-ANNUAL REPORT
Describes the fund, lists portfolio holdings and contains a letter from
the fund's manager discussing recent market conditions and the fund's
investment strategies.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Provides more details about the fund and its policies. A current SAI is on
file with the Securities and Exchange Commission ("SEC") and is
incorporated by reference (is legally considered part of this prospectus).
To obtain information:
By telephone. Call the funds at 800-426-1130
By mail. Write to the funds at:
The Lord Abbett Family of Funds
767 Fifth Avenue
New York, NY 10153-0203
Via the Internet. Text only versions of fund documents can be viewed online or
downloaded from:
Lord, Abbett & Co.
http://www.lordabbett.com
SEC
http://www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 800-SEC-0330) or by sending your request and a duplicating
fee to the SEC's Public Reference Section, Washington, DC 20549-6009.
Affiliated Fund LAA-1-399
(3/99)
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
SEC file number: 811-5
<PAGE>
- --------------------------------------------------------------------------------
LORD ABBETT
Statement of Additional Information March 1, 1999
- --------------------------------------------------------------------------------
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, 1999.
Lord Abbett Affiliated Fund, Inc. (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. Only classes A, B, C and P
are offered by this Statement of Additional Information. The Fund is an
open-end, diversified management investment company. 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 Investment Company Act of 1940, as amended (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 a contract with a
principal underwriter and the election of directors from its separate voting
requirements.
Shareholder inquiries should be made by writing directly to the Fund or by
calling 800-821-5129. The 1998 Annual shareholder report is available, without
charge, upon request by calling that number. 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 8
5. Purchases, Redemptions and
Shareholder Services 9
6. Past Performance 16
7. Taxes 17
8. Information About the Fund 18
9. Financial Statements 18
<PAGE>
1.
Investment Policies
Fundamental Investment Restrictions. We will not change our investment objective
mentioned in the Prospectus or the following fundamental investment restrictions
without shareholder approval. If we determine that our objective can best be
achieved by a change in any non-fundamental investment policy, strategy or
restriction, we may make such change without shareholder approval by disclosing
it in the prospectus or statement of additional information.
The Fund may not: (1) borrow money, except that (i) the Fund may borrow from
banks (as defined in the Act)) in amounts up to 33 1/3% of its total assets
(including the amount borrowed), (ii) 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, the
Fund is 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 Act, 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,
2
<PAGE>
employees, or its investment adviser or any of its 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, 1998, the portfolio turnover rate was 56.44%
versus 46.41% 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.
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
3
<PAGE>
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 director is a partner of Lord, Abbett & Co. ("Lord Abbett"), The
General Motors Building, 767 Fifth Avenue, New York, New York 10153-0203. He has
been associated with Lord Abbett for over five years and is also an officer,
director or trustee of the twelve other Lord Abbett-sponsored funds. He is an
"interested person" 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 53, Chairman and President
The following outside directors are also directors or trustees of the twelve
other Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow
Time Warner Inc.
1271 Avenue of the Americas
New York, New York
Senior Adviser, Time Warner Inc. Formerly, Acting Chief Executive Officer
Television Network (1997-1998). Formerly, President and Chief Executive Officer
of Time Warner Cable Programming, Inc. (1991-1997). Prior to that, President and
Chief Operating Officer of Home Box Office, Inc. Age 57.
William H.T. Bush
Bush-O'Donnell & Co., Inc.
101 South Hanley Road, Suite 1025
St. Louis, Missouri
Co-founder and Chairman of the Board of the financial advisory firm of
Bush-O'Donnell & Company. Age 60.
Robert B. Calhoun, Jr.
Monitor Clipper Partners
650 Madision Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners and President of the Clipper Group
L.P., both private equity investment funds. Age 56.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
4
<PAGE>
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 68.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 73.
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,
Chairman and Chief Executive Officer of Lincoln Snacks, Inc., manufacturer of
branded snack foods (1992-1994). His career spans 36 years at Stouffers and
Nestle with eighteen of the years as Chief Executive Officer. Currently serves
as Director of DenAmerica Corp., J. B. Williams Company, Inc., Fountainhead
Water Company and Exigent Diagnostics. Age 65.
Hansel B. Millican, Jr.
Rochester Button Company
1328 Broadway (Suite 816)
New York, New York
President and Chief Executive Officer of Rochester Button Company. Age 70.
Thomas J. Neff
Spencer Stuart
277 Park Avenue
New York, New York
Chairman of Spencer Stuart, an executive search consulting firm. Currently
serves as Director of Ace, Ltd. (NYSE). Age 61.
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, 1998
------------------------------------------
(1) (2) (3) (4)
Pension or For Year Ended
Retirement Benefits December 31, 1998
Accrued by the Total Compensation
Aggregate Fund and Accrued by the Fund
Compensation All Other Lord and All Other Lord
Accrued by Abbett-sponsored Abbett-sponsored
Name of Director the Fund(1) Funds(2) Funds(3)
- ---------------- ------------ ------------------- -------------------
<S> <C> <C> <C>
E. Thayer Bigelow $24,154 $17,068 $57,400
William H. T. Bush* $ 6,971 $ 0 $27,500
Robert B. Calhoun, Jr.** $ 9,506 $ 0 $33,500
</TABLE>
5
<PAGE>
Stewart S. Dixon $23,766 $32,190 $56,500
John C. Jansing $23,449 $45,085 $55,500
C. Alan MacDonald $23,440 $30,703 $55,000
Hansel B. Millican, Jr $23,449 $37,747 $55,500
Thomas J. Neff $23,871 $19,853 $56,500
* Elected as of August 13, 1998.
** Elected as of June 17, 1998.
1. Outside trustees' 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/trustees 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/trustees.
2. The amounts in Column 3 were accrued by the Lord Abbett-Sponsored Funds
for the 12 months ended October 31, 1998 with respect to the equity based
plans established for independent directors in 1996. This plan supercedes
a previously approved retirement plan for all future directors. Current
directors had the option to convert their accrued benefits under the
retirement plan. All of the outside directors except one made such an
election.
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, 1998 The amounts of the aggregate compensation
payable by the Fund as of October 31, 1998 deemed invested in Fund shares,
including dividends reinvested and changes in net asset value applicable
to such deemed investments, were: Mr. Bigelow, $105,839; Mr. Bush, $ 0 ,
Mr. Calhoun, Jr. $6,971, Mr. Dixon, $ 455,675; Mr. Jansing, $ 455,675; Mr.
MacDonald, $ 258,267; Mr. Millican, $ 460,231 and Mr. Neff, $456,571. If
the amounts deemed invested in Fund shares were added to each director's
actual holdings of Fund shares as of October 31, 1998, each would own, the
following: Mr. Bigelow, shares; Mr. Dixon, shares; Mr. Jansing,
shares; Mr. McDonald, shares; Mr. Millican, shares; and Mr. Neff,
shares.
4. Mr. Jansing chose to continue to receive benefits under the retirement
plan which provides that outside directors (Trustees) may receive annual
retirement benefits for life equal to their final annual retainer
following retirement at or after age 72 with at least ten years of
service. Thus, if Mr. Jansing were to retire and the annual retainer
payable by the funds were the same as it is today, he would receive annual
retirement benefits of $50,000.
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Carper, Hilstad, Hudson, Morris and Walsh are partners of Lord Abbett; the
others are employees:
Executive Vice President:
W. Thomas Hudson, Jr. age 57
Vice Presidents:
Paul A. Hilstad, age 56, Vice President and Secretary (with Lord Abbett since
1995; formerly Senior Vice President and General Counsel of American Capital
Management & Research, Inc.)
Daniel E. Carper, age 47
Lawrence H. Kaplan, age 42 (with Lord Abbett since 1997 - formerly Vice
President and Chief Counsel of Salomon Brothers Asset Management Inc from 1995
to 1997, prior thereto Senior Vice President, Director and General Counsel of
Kidder Peabody Asset Management, Inc.)
Thomas F. Konop, age 56
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<PAGE>
Robert G. Morris, age 54
A. Edward Oberhaus III, age 39
Keith F. O'Connor, age 43
Eli M. Salzmann, age 34
John J. Walsh, age 62
Treasurer:
Donna M. McManus, age 38 (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 February 12, 1999 our officers and directors, as a group, owned less than
1% of our outstanding shares. As of February 12, 1999 there were no record
holders of 5% or more of the Fund's outstanding shares.
3.
Investment Advisory and Other Services
As described under "Management" in the Prospectus, Lord Abbett is the Fund's
investment manager. Of the seventeen general partners of Lord Abbett are
officers and/or directors of the Fund and are identified as follows: Daniel E.
Carper, Robert S. Dow, Paul A. Hilstad, W. Thomas Hudson, Robert G. Morris and
John J. Walsh. The other general partners of Lord Abbett who are neither
officers nor directors of the Fund are: Stephen I. Allen, Zane E. Brown, John E.
Erard, Robert P. Fetch, Daria L. Foster, Robert I. Gerber, Stephen J. McGruder,
Michael McLaughlin, Robert J. Noelke, Robert M. Pennington, and Christopher J.
Towle. 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
"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, 1998, 1997 and 1996, the management fees
paid to Lord Abbett by the Fund amounted to $26,317,934, $22,192,209 and
$17,683,694 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.
Lord Abbett Distributor LLC serves as the principal underwriter for the Fund.
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 auditing
services for the Fund including the audits of financial statements included in
our Annual Report to Shareholders.
7
<PAGE>
The Bank of New York ("BNY"), 48 Wall Street, New York, New York, 10286, 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.
United Missouri Bank of Kansas City, N.A. Tenth and Grand Kansas City, Missouri,
64141, acts as the transfer agent and dividend dispersing agent for each Fund.
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.
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 Lord Abbett 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-
8
<PAGE>
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, 1998, 1997 and 1996, we paid total
commissions to independent dealers of $12,832,030, $7,681,037 and $5,897,259,
respectively.
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, Martin Luther King, Jr. 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, 1998 was
computed as follows:
Net asset value per share (net assets divided by
shares outstanding)......................................$14.56
Maximum offering price per share (net asset value
divided by .9425)........................................$15.45
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.
Lord Abbett Distributor is obligated to distribute our shares on a best effort
basis. Our shares are offered on a continuous basis. For the last three fiscal
years, Lord Abbett Distributor, 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
9
<PAGE>
follows:
Year Ended October 31, 1998
---------------------------
1998 1997 1996
---- ---- ----
Gross sales charge $21,698,908 $16,853,194 $15,464,565
Amount allowed to dealers $18,696,650 $14,522,076 $13,701,148
----------- ----------- -----------
Net commissions
received by
Lord Abbett $ 3,002,258 $ 2,331,118 $ 1,763,417
=========== =========== ===========
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.
ALTERNATIVE SALES ARRANGEMENTS
Classes of Shares. The Fund offers investors five different classes of shares.
This Statement of Additional Information 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 33 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
10
<PAGE>
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.
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
11
<PAGE>
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.
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, C and P 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 four Fund Classes: the "A Plan", the "B Plan" , the "C Plan", and
the "P 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 $18,728,615 under the A
Plan, $2,476,427 under the B Plan , $939,042 under the C Plan and $ 744 Class P
Plan. Lord Abbett uses all amounts received under each Plan as described in the
Prospectus and for payments to dealers for (i) providing continuous services to
the shareholders, such as answering shareholder inquiries, maintaining records,
and assisting shareholders in making redemptions, transfers, additional
purchases and exchanges and (ii) their assistance in distributing shares of the
Fund.
Each Plan requires the 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
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<PAGE>
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.
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:
<TABLE>
<CAPTION>
Anniversary of the Day on Contingent Deferred Sales Charge
Which the Purchase Order Was Accepted on Redemptions (As % of Amount Subject to Charge)
<S> <C>
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
</TABLE>
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.
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<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.
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
14
<PAGE>
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 and Lord
Abbett Equity Fund ("LAEF") which is not issuing shares.
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.
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.
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<PAGE>
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.
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
16
<PAGE>
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, 1998 are as follows: 3.90%, 15.65% and 14.15%,
respectively, for the Fund's Class A shares. For the fiscal year ending on
October 31, 1998 and for the period since inception, August 1, 1996, the average
annual compounded rate of total return 5.03 % and 18.27%, respectively, for the
Fund's Class B shares. For the fiscal year ending October 31, 1998 and for the
period since inception, August 1, 1996, the average annual compounded rate of
total return was 9.41% and 9.88%, respectively, for the Fund's Class C shares.
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, 1998 the yield for the Class A shares of Fund was 1.55%.
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 of
disposition. Any gain will generally be taxable for United States federal income
tax purposes. Any loss realized on 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 shares are not deductible if, within a
period beginning 30 days before the date of the sale and ending 30 days after
the date of the sale, the taxpayer acquires shares that are substantially
identical.
The writing of call options and other investment techniques and practices which
the Fund may utilize, as described above under "Investment Policies," may affect
the character and timing of the recognition of gains and losses by the Fund. In
particular, 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.
The Fund may be subject to foreign withholding taxes, which would reduce the
yield on its investments. 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 or treated as having been distributed on a timely basis each
calendar year. 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
17
<PAGE>
derived from dividends paid by domestic corporations.
Gain and loss 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 gain or loss is 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
make a "qualified electing fund" election with respect to its investment in a
passive foreign investment company, 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.
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, 1998 and the
opinion thereon of Deloitte & Touche LLP, independent auditors, included in the
1998 Annual Report to Shareholders of Lord Abbett Affiliated Fund, Inc., are
incorporated herein by reference in reliance upon the authority of Deloitte &
Touche LLP as experts in auditing and accounting.
18
<PAGE>
PART C OTHER INFORMATION
Item 23 Exhibits
(a) Articles of Incorporation, Articles Supplementary.
Incorporated by reference to Post-Effective Amendment No. 73
to the Registration Statement on Form N-1A filed on March 2,
1998.
(b) By-Laws. Incorporated by reference to Post-Effective Amendment
No. 76 to the Registration Statement on Form N-1A filed on
December 18, 1998.
(c) Instruments Defining Rights of Security Holders. Incorporated
by reference.
(d) Investment Advisory Contracts, Management Agreement.
Incorporated by reference to Post-Effective Amendment No. 8 to
the Registration Statement on Form N-1A of Lord Abbett Equity
Fund, Inc. (File No. 811-6033).
(e) Underwriting Contracts. Incorporated by reference.
(f) Bonus or Profit Sharing Contracts. Incorporated by reference
to Post-Effective Amendment No. 6 to the Registration
Statement on Form N-1A of Lord Abbett Securities Trust (File
No. 811-7538).
(g) Custodian Agreements. Incorporated by reference.
(h) Other Material Contracts. Incorporated by reference.
(i) Legal Opinion. Incorporated by reference.
(j) Other Opinions. Consent of Independent Auditors. Incorporated
by referenced to Post-Effective Amendment No. 76 to the
Registration Statement on Form N-1A filed on December 18,
1998.
(k) Omitted Financial Statements. Incorporated by reference.
(l) Initial Capital Agreements. Incorporated by reference.
(m) Rule 12b-1 Plan. Incorporated by reference to Post-Effective
Amendment No. 12 to the Registration Statement on Form N-1A of
Lord Abbett Research Fund, Inc. (File No. 811-6650).
(n) Financial Data Schedule.
(o) Rule 18f-3 Plan. Incorporated by reference to Post-Effective
Amendment No. 40 to the Registration Statement on Form N-1A of
Lord Abbett Bond-Debenture Fund, Inc. (File No. 811-2145).
Item 24 Persons Controlled by or Under Common Control with the Fund
None.
Item 25 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
1
<PAGE>
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.
2
<PAGE>
Item 26 Business and Other Connections of Investment Adviser
Lord, Abbett & Co. acts as investment adviser for twelve other
investment companies (of which it is principal underwriter for
thirteen) and as investment adviser to approximately 8,300 private
accounts as of September 30, 1998. Other than acting as directors
and/or officers of open-end investment companies managed by Lord,
Abbett & Co., none of Lord, Abbett & Co.'s partners has, in the past
two fiscal years, engaged in any other business, profession,
vocation or employment of a substantial nature for his own account
or in the capacity of director, officer, employee, or partner of any
entity.
Item 27 Principal Underwriters
(a) 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
Paul A. Hilstad Vice President & Secretary
Zane E. Brown Vice President
Daniel E. Carper Vice President
W. Thomas Hudson, Jr. Executive Vice President
Robert G. Morris Vice President
John J. Walsh Vice President
The other general partners of Lord Abbett & Co. who are neither
officers nor directors of the Registrant are Stephen I. Allen, John
E. Erard, Robert P. Fetch, Daria L. Foster, Robert I. Gerber,
Stephen J. McGruder, Michael McLaughlin, Robert J. Noelke, R. Mark
Pennington and Christopher Towle.
Each of the above has a principal business address:
767 Fifth Avenue, New York, NY 10153
(c) Not applicable
Item 28 Location of Accounts and Records
3
<PAGE>
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 29 Management Services
None
Item 30 Undertakings
The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
The registrant undertakes, if requested to do so by the holders of
at least 10% of the registrant's outstanding shares, to call a
meeting of shareholders for the purpose of voting upon the question
of removal of a director or directors and to assist in
communications with other shareholders as required by Section 16(c).
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant had duly caused this Registration
Statement 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 23rd day of
February, 1999.
BY: /s/ Thomas F. Konop
--------------------------------
Thomas F. Konop
Vice President
LORD ABBETT AFFILIATED FUND, INC.
5
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below on this Amendment to the
Registration Statement hereby constitutes and appoints Paul A. Hilstad, Lawrence
H. Kaplan and Thomas F. Konop, each of them, with full power to act without the
other, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (until revoked in writing) to sign any and all amendments
to this Registration Statement of each Fund enumerated on Exhibit A hereto
(including post-effective amendments and amendments thereto), and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in
fact and agents, and each of them, full power and authority to do and perform
each and every act and thing ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
Chairman, President
/s/ Robert S. Dow* and Director/Trustee February 23, 1999
- --------------------------- --------------------- -----------------
Robert S. Dow
/s/ E. Thayer Bigelow* Director/Trustee February 23, 1999
- --------------------------- --------------------- -----------------
E. Thayer Bigelow
/s/ William H. T. Bush* Director/Trustee February 23, 1999
- --------------------------- --------------------- -----------------
William H. T. Bush
/s/ Robert B. Calhoun, Jr*. Director/Trustee February 23, 1999
- --------------------------- --------------------- -----------------
Robert B. Calhoun, Jr.
/s/ Stewart S. Dixon* Director/Trustee February 23, 1999
- --------------------------- --------------------- -----------------
Stewart S. Dixon
/s/ John C. Jansing* Director/Trustee February 23, 1999
- --------------------------- --------------------- -----------------
John C. Jansing
/s/ C. Alan MacDonald* Director/Trustee February 23, 1999
- --------------------------- --------------------- -----------------
C. Alan MacDonald
/s/ Hansel B. Millican, Jr*. Director/Trustee February 23, 1999
- --------------------------- --------------------- -----------------
Hansel B. Millican, Jr.
/s/ Thomas J. Neff* Director/Trustee February 23, 1999
- --------------------------- --------------------- -----------------
Thomas J. Neff
*BY: /s/ Thomas F. Konop
-------------------
Thomas F. Konop
Attorney-in-Fact
6
<PAGE>
EXHIBIT A
Lord Abbett Affiliated Fund, Inc.
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Mid-Cap Value Fund, Inc.
Lord Abbett Global Fund, Inc.
Lord Abbett Investment Trust
Lord Abbett Securities Trust
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett Tax-Free Income Trust
Lord Abbett U.S. Government Securities Money Market Fund, Inc.
Lord Abbett Research Fund, Inc.
Lord Abbett Series Fund, Inc.
Lord Abbett Equity Fund, Inc.
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