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. 87 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [X]
OF 1940
Amendment No. 87 [X]
LORD ABBETT AFFILIATED FUND, INC.
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Exact Name of Registrant as Specified in Charter
90 Hudson Street, Jersey City, New Jersey 07302-3973
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Address of Principal Executive Office
Registrant's Telephone Number (800) 201-6984
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Lawrence H. Kaplan, Vice President
90 Hudson Street, Jersey City, New Jersey 07302
(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)
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X on March 1, 2000 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a) (1)
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on (date) pursuant to paragraph (a) (1)
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- ------ 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, 2000
[GRAPHIC OMITTED]
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
Table of Contents
The Fund
What you should know Goal/Principal Strategy 2
about the Fund Main Risks 2
Performance 3
Fees and Expenses 4
Your Investment
Information for managing Purchases 5
your Fund account Sales Compensation 7
Opening Your Account 8
Redemptions 9
Distributions and Taxes 9
Services For Fund Investors 10
Management 11
For More Information
How to learn more Other Investment Techniques 12
about the Fund Glossary of Shaded Terms 13
Recent Performance 14
Financial Information
Financial Highlights 16
Compensation For Your Dealer 18
Line Graph Comparison 17
How to learn more about the Back Cover
Fund and other Lord Abbett
Funds
<PAGE>
The Fund
GOAL / PRINCIPAL STRATEGY
The Fund's investment objective is long-term growth of capital and income
without excessive fluctuations in market value.
To pursue this goal, the Fund purchases stocks of large, seasoned, U.S. and
multinational companies which we believe are undervalued. The Fund chooses
stocks using
o quantitative research to identify which stocks we believe represent
the best bargains
o fundamental research to learn about a company's operating environment,
resources and strategic plans and to assess its prospects for
exceeding earnings expectations
o business cycle analysis to determine how buying or selling securities
changes our overall portfolio's sensitivity to interest rates and
economic conditions
The Fund is intended for investors looking for long-term growth with low
fluctuations in market value. For this reason, we will forego some
opportunities for gains when, in our judgment, they are too risky. The Fund
tries to keep its assets invested in securities selling at reasonable
prices in relation to value.
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 may 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.
We generally sell a stock when we think it is no longer a bargain, seems
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 the Fund's assets in short-term debt
securities. This could reduce the benefit from any upswing in the market
and prevent the Fund from achieving its investment objective.
MAIN RISKS
The Fund is subject to the general risks and considerations associated with
equity investing, as well as the particular risks associated with bargain
stocks. The value of your investment will fluctuate in response to
movements in the stock market in general and to the changing prospects of
individual companies in which the Fund invests. Bargain stocks may perform
differently than the market as a whole and other types of stocks, such as
small company stocks and growth stocks. This is because different types of
stocks tend to shift in and out of favor depending on market and economic
conditions. The market may fail to recognize the intrinsic value of
particular bargain stocks for a long time. In addition, if the Fund's
assessment of a company's value or prospects for exceeding earnings
expectations or market conditions is wrong, the Fund could suffer losses or
produce poor performance relative to other funds, even in a rising market.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money by investing in
the Fund.
We or the Fund refers to Lord Abbett Affiliated Fund, Inc.
About the Fund. The 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, although 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 com-panies which we believe the market undervalues
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>
Affiliated Fund Symbols: Class A - LAFFX
Class B - LAFBX
Class C - LAFCX
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
90 - -5.2%
91 - 22.0%
92 - 12.4%
93 - 13.2%
94 - 4.1%
95 - 31.7%
96 - 20.1%
97 - 25.2%
98 - 14.4%
99 - 16.9%
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Best Quarter 4th Q `98 17.1% Worst Quarter 2nd Q `90 -12.5%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A, B, C and P shares compare to those of a broad-based securities
market index and a more narrowly based index that more closely reflects the
market sectors in which the Fund invests. The Fund's returns reflect
payment of the maximum applicable front-end or deferred sales charges.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share class 1 Year 5 Years 10 Years Since Inception(1)
Class A shares 10.10% 20.05% 14.34% 12.76%
- --------------------------------------------------------------------------------
Class B shares 11.07% - - 20.00%
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Class C shares 15.07% - - 20.56%
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Class P shares 16.76% - - 15.34%
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S&P 500(R)Index(2) 21.03% 28.54% 18.19% 29.57%(3)
24.76%(4)
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S&P Barra Value Index(2) 12.72% 22.94% 15.37% 21.95%(3)
13.69%(4)
- --------------------------------------------------------------------------------
(1) 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.
(2) Performance for the unmanaged indices does not reflect fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance.
(3) Represents total return for the period 7/31/96 - 12/31/99, to correspond
with Class B and C inception dates.
(4) Represents total return for the period 12/31/97 - 12/31/99, to correspond
with Class P inception date.
The Fund 3
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Fee Table
- -------------------------------------------------------------------------------------------------------
Class A Class B(2) 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 none(1) 5.00% 1.00%(1) none
- -------------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)(3)
- -------------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.31% 0.31% 0.31% 0.31%
Distribution (12b-1) and Service Fees(4) 0.35% 1.00% 1.00% 0.45%
Other Expenses 0.12% 0.12% 0.12% 0.12%
Total Operating Expenses 0.78% 1.43% 1.43% 0.88%
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions (a) of Class A shares made within 24 months following any
purchases made without a sales charge, and (b) Class C shares if they are
redeemed before the first anniversary of their purchase.
(2) Class B shares will convert to Class A shares on the eighth anniversary of
your original purchase of Class B shares.
(3) The annual operating expenses have been restated from fiscal year amounts
to reflect current fees.
(4) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
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Example
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class A shares $650 $810 $983 $1,486
- -------------------------------------------------------------------------------
Class B shares $646 $752 $982 $1,536
- -------------------------------------------------------------------------------
Class C shares $246 $452 $782 $1,713
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Class P shares $ 90 $281 $488 $1,084
You would have paid the following expenses if you did not redeem your shares:
Class A shares $650 $810 $983 $1,486
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Class B shares $146 $452 $782 $1,536
Class C shares $146 $452 $782 $1,713
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Class P shares $ 90 $281 $488 $1,084
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 shareholder
service fees and professional fees.
4 The Fund
<PAGE>
Your Investment
PURCHASES
The Fund offers in this prospectus four classes of shares: Class A, B ,C
and P, each with different expenses and dividends. You may purchase shares
at the net asset value ("NAV") per share determined after we receive your
purchase order submitted in proper form. A front-end sales charge may be
added to the NAV in the case of the Class A shares. There is no front-end
sales charge in the case of Class B, C and P shares, although there
may be a contingent deferred sales charge ("CDSC") 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 purchase 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.
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Share Classes
- --------------------------------------------------------------------------------
Class A o normally offered with a front-end sales charge
Class B o no front-end sales charge, however, a CDSC is applied to shares sold
prior to the sixth anniversary of purchase
o higher annual expenses than Class A shares
o automatically converts to Class A shares after eight years
Class C o no front-end sales charge, however, a CDSC is applied to shares sold
prior to the first anniversary of purchase
o higher annual expenses than Class A shares
Class P o available to certain pension or retirement plans and pursuant to a
Mutual Fund Fee Based Program
- --------------------------------------------------------------------------------
Front-End Sales Charges - Class A Shares
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<TABLE>
<CAPTION>
To Compute
As a % of As a % of OfferingPrice
Your Investment Offering Price Your Investment Divide NAV by
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% .9425
- -----------------------------------------------------------------------------------------
$50,000 to $99,999 4.75% 4.99% .9525
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$100,000 to $249,999 3.95% 4.11% .9605
- -----------------------------------------------------------------------------------------
$250,000 to $499,999 2.75% 2.83% .9725
- -----------------------------------------------------------------------------------------
$500,000 to $999,999 1.95% 1.99% .9805
- -----------------------------------------------------------------------------------------
$1,000,000 and over No Sales Charge 1.0000
- -----------------------------------------------------------------------------------------
</TABLE>
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"), normally
4:00 p.m. Eastern time. Purchases and sales of Fund shares are executed at the
NAV next determined after the Fund receives your order in proper form. 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 of the Fund.
Your Investment 5
<PAGE>
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
conditions:
o Rights of Accumulation -- A Purchaser may apply the value of the
shares already owned 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 all shares were purchased 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 may be included in a
statement of intention.
For more information on eligibility for these privileges, read the
applicable sections in the attached application.
Class A Share Purchases Without A Front-End Sales Charge. Class A shares
may be purchased without a front-end sales charge under any of the
following conditions:
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 Fee Based 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 CDSC.
Class A Share CDSC. If you buy Class A shares under one of the starred (+)
categories listed above and you redeem any within 24 months after the month
in which you initially purchased them, the Fund will normally collect a
CDSC of 1%.
The Class A share CDSC generally will be waived for the following
conditions:
o benefit payments under Retirement Plans in connection with 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
Retirement Plans include employer-sponsored retirement plans under the Internal
Revenue Code, excluding Individual Retirement Accounts.
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
Lord Abbett Distributor LLC ("Lord Abbett Distributor") acts as agent
for the Fund to work with investment professionals that buy and/or sell shares
of the Fund on behalf of their clients. Generally, Lord Abbett Distributor does
not sell Fund shares directly to investors.
Benefit Payment Documentation.
(Class A CDSC 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."
6 Your Investment
<PAGE>
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 the day on Contingent Deferred Sales Charge
which the purchase order on redemption (as % of amount
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) The anniversary is the same calendar day in each respective year after the
date of purchase. For example, the anniversaries for shares purchased on
May 1 will be May 1 of each succeeding year.
(2) Class B shares will automatically convert to Class A shares on the eighth
anniversary of the purchase of Class B shares.
The Class B share CDSC generally will be waived under the following
circumstances:
o benefit payments under Retirement Plans in connection with loans,
hardship withdrawals, death, disability, retirement, separation from
service or any excess contribution or distribution under Retirement
Plans
o Eligible Mandatory Distributions under 403(b) Plans and individual
retirement accounts
o death of the shareholder
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 the purchase of such
shares.
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 Fee Based
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.
SALES 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, as shown in the table "Fees
and Expenses": sales charges which are paid directly by shareholders; and
12b-1 distribution
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, which-ever 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 minimize the amount of any CDSC, the Fund redeems shares in the following
order:
1. shares acquired by reinvestment of dividends and capital gains (always free
of a CDSC)
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)
Your Investment 7
<PAGE>
fees that are paid out of the Fund's assets. Service compensation
originates from 12b-1 service fees. The total 12b-1 fees payable with
respect to each share class are up to .35% of Class A shares (plus
distribution fees of up to 1.00% on certain qualifying purchases), 1.00% of
Class B and C shares, and .45% of Class P shares. The amounts payable as
compensation to Authorized Institutions, such as your dealer, are shown in
the chart at the end of this prospectus. The portion of such compensation
paid to Lord Abbett Distributor is discussed under "Sales Activities" and
"Service Activities." Sometimes we do not pay compensation where tracking
data is not available for certain accounts or where the Authorized
Institution waives part of the compensation. In such cases, we may not
require payment of any otherwise applicable CDSC.
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 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.
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 Fee Based 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 at the address stated below.
You should carefully read the paragraph below entitled "Proper Form" before
placing your order to ensure that your order will be accepted.
Lord Abbett Affiliated Fund, Inc.
P.O. Box 219100
Kansas City, MO 64121
By Exchange. Telephone the Fund at 800-821-5129 to request an exchange from
any eligible Lord Abbett-sponsored fund.
Proper Form. An order submitted directly to the Fund must contain: (1) a
completed application, and (2) payment by check. When purchases are made by
check, redemption
Exchange Limitations. Exchanges should not be used to try to take advantage of
short-term swings in the market. Frequent exchanges create higher expenses for
the Fund. Accordingly, the Fund reserves the right to limit or terminate this
privilege for any shareholder making frequent exchanges or abusing the
privilege. The Fund also may revoke the privilege for all shareholders upon 60
days' written notice.
8 Your Investment
<PAGE>
proceeds will not be paid until the Fund or transfer agent is advised that the
check has cleared, which may take up to 15 calendar days. For more information
call the Fund at 800-821-5129.
REDEMPTIONS
By Broker. Call your investment professional for instructions 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 should 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(s) 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. Under unusual circumstances, the
Fund may suspend redemptions, or postpone payment for more than seven days,
as permitted by federal securities laws.
To determine if a CDSC applies to a redemption, see "Class A share CDSC,"
"Class B share CDSC" or "Class C share CDSC."
DISTRIBUTIONS AND TAXES
The Fund normally pays dividends from its net investment income each
quarter and distributes net capital gains (if any) as "capital gains
distributions" on an annual basis. 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 owned Fund
shares or whether distributions are reinvested or paid in cash.
Except in tax-advantaged accounts, any sale, redemption or exchange of Fund
shares may be taxable to the shareholder.
Information on the tax treatment of distributions, including the source of
dividends and distributions of capital gains by the Fund, will be mailed to
shareholders each year. Because everyone's tax situation is unique, you
should consult your tax adviser regarding the federal, state and local tax
rules that apply to you.
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.
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.
Your Investment 9
<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 may set up most of these services when filling
out your application or by calling 800-821-5129.
- --------------------------------------------------------------------------------
For investing
Invest-A-Matic You may make fixed, periodic investments ($50 minimum) into
(Dollar-cost your Fund account by means of automatic money transfers
averaging) from your bank checking account. See the attached
application for instructions.
Div-Move You may 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 will be paid to you from
Plan ("SWP") 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.
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
SWPrequest. 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 Class C
C shares shares will be redeemed in the order described under "CDSC"
under "Purchases."
- --------------------------------------------------------------------------------
OTHER SERVICES
Telephone Investing. After we have received the attached application
(selecting "yes" under Section 8C and completing Section 7), you may
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.
Exchanges. You or your investment professional may instruct the Fund to
exchange shares of any class for shares of the same class of any Eligible
Fund. Instruction may be provided in writing or by telephone, with proper
identification, 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 in
which case 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 and semi-annual report, unless
additional reports are specifically requested in writing to the 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.
10 Your Investment
<PAGE>
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.
MANAGEMENT
The Fund's investment adviser is Lord, Abbett & Co., located at 90 Hudson
St., Jersey City, NJ 07302-3973. Founded in 1929, Lord Abbett manages one
of the nation's oldest mutual fund complexes, with approximately $35
billion in more than 40 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.
Lord Abbett is entitled to a monthly fee based on the Fund's average daily
net assets for each month as follows:
.50 of 1% on the first $200 million in assets
.40 of 1% on the next $300 million
.375 of 1% on the next $200 million
.35 of 1% on the next $200 million
.30 of 1% on the Fund's assets over $900 million
For the fiscal year ended October 31, 1999, the actual fee paid to Lord
Abbett was at an effective annual rate of .31 of 1%. In addition, the Fund
pays all expenses not expressly assumed by Lord Abbett.
Portfolio Managers. Lord Abbett uses a team of portfolio managers and
analysts acting together to manage the Fund's investments. The senior
members of the team are: Thomas Hudson Jr., Partner of Lord Abbett; Robert
Morris, Partner of Lord Abbett; and Eli Salzman, Portfolio Manager. Messrs.
Hudson and Morris 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 11
<PAGE>
For More Information
OTHER INVESTMENT TECHNIQUES
This section describes some of the investment techniques that might be used
by the Fund and their risks.
Adjusting Investment Exposure. The Fund may, but is not required to, use
various strategies to change its investment exposure to adjust to changing
security prices, interest rates, currency exchange rates, commodity prices
and other factors. The Fund may use these transactions to change the risk
and return characteristics of the Fund's portfolio. If we judge market
conditions incorrectly or use a strategy that does not correlate well with
the Fund's investments, it could result in a loss, even if we intended to
lessen risk or enhance returns. These transactions may involve a small
investment of cash compared to the magnitude of the risk assumed and could
produce disproportionate gains or losses. Also, these strategies could
result in losses if the counterparty to a transaction does not perform as
promised.
Convertible Securities. The Fund may invest in convertible bonds and
convertible preferred stocks. These investments tend to be more volatile
than debt securities but tend to be less volatile and produce more income
than their underlying common stocks.
Debt Securities. The Fund may invest in debt securities such as bonds,
debentures, government obligations, commercial paper and pass-through
instruments. When interest rates rise, prices of these investments are
likely to decline, and when interest rates fall, prices tend to rise. There
is also the risk that an issuer of a debt security will fail to make timely
payments of principal or interest to the Fund.
Diversification. The Fund is a diversified fund, which generally means that
with respect to 75% of its total assets, it will not purchase a security
if, as a result, more than 5% of the Fund's total assets would be invested
in securities of a single issuer or the Fund would hold more than 10% of
the outstanding voting securities of the issuer. U.S. government securities
are not subject to these requirements.
Foreign Securities. The Fund may invest up to 10% of its net assets in
foreign securities. Foreign markets and the securities traded in them are
not subject to the same degree of regulation as U.S. markets. Securities
clearance and settlement procedures may be different in foreign countries.
There may be less trading volume in foreign markets, subjecting the
securities traded in them to higher price fluctuations. Transaction costs
may be higher in foreign markets. The Fund may hold foreign securities
which trade on days when the Fund does not sell shares. As a result, the
value of the Fund's portfolio securities may change on days an investor may
not purchase or sell Fund shares.
Foreign issuers are generally not subject to similar, uniform accounting,
auditing and financial reporting requirements as U.S. issuers. Foreign
investments may be affected by changes in currency rates or currency
controls. Certain foreign countries may limit the Fund's ability to remove
its assets from the country. With respect to certain foreign countries,
there is a possibility of nationalization, expropriation or confiscatory
taxation, imposition of withholding or other taxes, and political or
social instability which could affect investments in those countries.
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 in high yield debt securities.
12 For More Information
<PAGE>
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 the Fund's
securities, if the borrower defaults. The Fund will limit its securities
loans to 30% of its total assets and all loans will be fully
collateralized.
Selling Covered Call Options. The Fund may write or sell covered call
options on equity securities or stock indices that are traded on national
securities exchanges. A call option gives the writer (seller) of the option
the obligation to sell the underlying instrument. When the Fund writes a
call option it gives up the potential for gain on the underlying securities
in excess of the exercise price of the option during the period that the
option is open. The Fund will limit covered call options on securities
having an aggregate market value not to exceed 10% of its total 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 a fund and will be made in the form of cash
or, if permitted, non-cash payments. The non-cash payments will include
business seminars at Lord Abbett's headquarters or other locations,
including meals and entertainment, or the receipt of merchandise. The cash
payments may include payment of various business expenses of the dealer.
In selecting dealers to execute portfolio transactions for the Fund's
portfolio, if two or more dealers are considered capable of obtaining best
execution, we may prefer the dealer who has sold our shares and/or shares
of other Lord Abbett-sponsored funds.
Authorized Institutions. Institutions and persons permitted by law to
receive service and/or distribution fees under a Rule 12b-1 Plan are
"Authorized Institutions." Lord Abbett Distributor is an Authorized
Institution.
Eligible Fund. An Eligible Fund is any Lord Abbett-sponsored fund except
for (1) certain tax-free, single-state funds where the exchanging
shareholder is a resident of a state in which such a Fund is not offered
for sale; (2) Lord Abbett Equity Fund; (3) Lord Abbett Series Fund; (4)
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.
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
[SIGNATURE ILLEGIBLE]
- --------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
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
[SIGNATURE ILLEGIBLE]
- --------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
For More Information 13
<PAGE>
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 (see example in right column, on the
prior page).
Mutual Fund Fee Based Program. Certain unaffiliated authorized brokers,
dealers, registered investment advisers or other financial institutions
("entities") who either (1) 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 entities, or (2) 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: (1) an individual, (2) an
individual and his or her spouse and children under the age of 21, and (3)
a trustee or other fiduciary purchasing shares for a single trust estate or
single fiduciary account (including a pension, profit-sharing, or other
employee benefit trust qualified under Section 401 of the Internal Revenue
Code - more than one qualified employee benefit trust of a single employer,
including its consolidated subsidiaries, may be considered a single trust,
as may qualified plans of multiple employers registered in the name of a
single bank trustee as one account), although more than one beneficiary is
involved.
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 Fee Based 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
The following is a discussion of recent performance for the twelve month
period ending October 31, 1999.
The past fiscal year was characterized by continued overall strength in
both the broad equity market and the U.S. economy. Low interest rates and a
deceleration in earnings have driven the U.S. equity market for the last
two and one-half years. This environment favored a very select group of
large stocks that have had stable earnings growth. Rather than venturing
into "unknown" waters, investors stayed the course and continued to
purchase names familiar to them, remaining with companies that exhibited
strong earnings stories. The result, however, is that many of the larger,
more well-known growth names have become, in our opinion, quite expensive.
In anticipation of an improvement in the global economy, we made an early
entry into the energy sector, a strategy that paid off well for the Fund.
In our view, the rise in oil prices initiated by OPEC, coupled with solid
fundamentals for many energy companies, helped to boost this sector. In
addition, the technology sector continued to outperform the general market.
However, despite strong performance by a number of holdings in this sector,
we recently began to reduce our exposure to technology, as prices began to
reach the upper end of our valuation discipline. We reinvested a good
portion of the proceeds
14 For More Information
<PAGE>
from those sales into more traditional cyclical sectors such as paper,
chemicals and aluminum, and anticipate these areas will benefit from a rise
in commodity prices as the global economy strengthens.
In addition, we have started to focus some attention toward the property
and casualty insurance sector during this period, and will continue to seek
out companies in this market segment that display improving fundamentals.
At the same time, we are generally underweighted in financial companies,
which has worked to our advantage since many of these stocks continued to
struggle during this period as interest rates increased. We believe there
is only a small chance that U.S. interest rates will continue to climb.
This view, coupled with the fact that many financial service companies have
solid fundamentals, will likely result in an increase in our exposure to
the financial services area.
As we look forward, we anticipate the global economy will continue to grow.
However, there are some signs that the robust U.S. economy may be
moderating. A slowdown in consumer spending is possible due to high
consumer debt levels and a decrease in mortgage refinancings (which reduce
consumers' monthly mortgage payments). In addition, the recent volatility
in the equity markets may serve to curtail spending previously attributable
to the "wealth effect" from appreciated portfolios. Consequently, we are
moderately underweighted in consumer stocks, especially those that are
highly sensitive to changes in economic activity.
For More Information 15
<PAGE>
FINANCIAL 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, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended October 31, 1999 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: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $14.56 $14.84 $13.02
$11.98 $11.03
Income from investment operations
Net investment income .21(e) .24 .30
.30 .32
Net realized and unrealized gain on investments 2.64 1.14 2.85
2.23 1.70
Total from investment operations 2.85 1.38 3.15
2.53 2.02
Distributions
Dividends from net investment income (.24) (.27) (.30)
(.30) (.30)
Distributions from net realized gain (.95) (1.39) (1.03)
(1.19) (.77)
Net asset value, end of year $16.22 $14.56 $14.84
$13.02 $11.98
Total Return(a) 20.69% 10.27% 25.80%
23.23% 20.46%
Ratios to Average Net Assets:
Expenses(b) .74% .63% .65%
.66% .63%
Net investment income 1.36% 1.64% 2.15%
2.61% 2.90%
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class B Shares Class C Shares
Class P Shares
-------------- --------------
- --------------
Year Ended October 31,
- ---------------------------------------------------------------------------------------------
Per Share Operating Performance: 1999 1998 1997 1996(c) 1999 1998 1997 1996(c)
1999 1998(c)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
Net asset value, beginning of period $14.56 $14.84 $13.03 $11.88 $14.56 $14.84 $13.02 $11.88
$14.53 $14.24
Income from investment operations
Net investment income .10(e) .14 .20 .060 .10(e) .14 .22 .062
.19(e) .18
Net realized and unrealized gain on 2.65 1.12 2.84 1.142 2.65 1.12 2.83 1.130
2.63 .27
securities
Total from investment operations 2.75 1.26 3.04 1.202 2.75 1.26 3.05 1.192
2.82 .45
Distributions
Dividends from net investment income (.13) (.15) (.20) (.052) (.13) (.15) (.20) (.052)
(.21) (.16)
Distribution from net realized gain (.95) (1.39) (1.03) -- (.95) (1.39) (1.03) --
(.95) --
Net asset value, end of year $16.23 $14.56 $14.84 $13.03 $16.23 $14.56 $14.84 $13.02
$16.19 $14.53
Total Return(a) 19.87% 9.41% 24.78% 10.15%(d) 19.80% 9.41% 24.88% 10.07%(d)
20.51% 3.21%(d)
Ratios to average net assets:
Expenses(b) 1.43% 1.38% 1.42% .34%(d) 1.43% 1.40% 1.34% .33%(d)
.88% .76%(d)
Net investment income .66% .87% 1.19% .27%(d) .66% .85% 1.28% .25%(d)
1.22% 1.21%(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended October 31,
- ------------------------------------------------------------------------------------
Supplemental Data For All Classes: 1999 1998 1997
1996 1995
Net Assets, end of year (000) $10,080,754 $8,520,603 $7,697,754
$6,100,665 $4,964,525
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 62.30% 56.49% 46.41%
47.06% 53.84%
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Total return does not consider the effects of sales loads and assumes the reinvestment of all
distributions.
(b) The ratios for 1997, 1998 and 1999 include expenses paid through an expense offset arrangement.
(c) From commencement of operations for each class of shares: August 1, 1996 (Class B and C) and December 8,
1997 (Class P).
(d) Not annualized.
(e) Calculated using average shares outstanding during the period.
</TABLE>
16 Financial Information
<PAGE>
Line Graph Comparison
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in the S&P 500(R) Index and S$P Barra Value Index,
assuming reinvestment of all dividends and distributions.
[GRAPHIC OMITTED]
NAV MAX S&P 500 S&P Barra
10000 9422 10000 10000
9243 8709 9252 8802
11831 11147 12344 11502
13057 12301 13572 12456
15377 14488 15596 15465
16400 15452 16198 15804
19756 18614 20476 19444
24344 22937 25406 24229
30623 28853 33562 31425
33769 31816 40949 25117
40756 38400 51456 41793
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending October 31, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(3) 13.70% 18.55% 14.40%
- --------------------------------------------------------------------------------
Class B(4) 14.87% - 19.26%
- --------------------------------------------------------------------------------
Class C(5) 18.80% - 19.86%
- --------------------------------------------------------------------------------
Class P(6) 20.51% - 13.71%
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 5.75%.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices, particularly that of the S&P 500(R) Index,
is not necessarily representative of the Fund's performance.
(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, 1999 using the SEC-required uniform method to
compute such return.
(4) The Class B shares were first offered on 8/1/96. Performance reflects the
deduction of a CDSC of 5% (for 1 year) and 3% (for life of the class).
(5) The Class C shares were first offered on 8/1/96. Performance reflects the
deduction of a CDSC of 1% (for 1 year) and 0% (for the life of the class).
(6) The Class P shares were first offered on 12/8/97. Performance is at net
asset value.
Financial Information 17
<PAGE>
COMPENSATION FOR YOUR DEALER
<TABLE>
<CAPTION>
====================================================================================================================================
First Year Compensation
Front-end
sales charge Dealer's
paid by investors concession Service fee(1) Total
compensation(2)
Class A investments (% of offering price) (% of offering price) (% of net investment) (% of
offering price)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
<C>
Less than $50,000 5.75% 5.00% 0.25%
5.24%
- ------------------------------------------------------------------------------------------------------------------------------------
$50,000 - $99,999 4.75% 4.00% 0.25%
4.24%
- ------------------------------------------------------------------------------------------------------------------------------------
$100,000 - $249,999 3.95% 3.25% 0.25%
3.49%
- ------------------------------------------------------------------------------------------------------------------------------------
$250,000 - $499,999 2.75% 2.25% 0.25%
2.49%
- ------------------------------------------------------------------------------------------------------------------------------------
$500,000 - $999,999 1.95% 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(4) 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(4)
- ------------------------------------------------------------------------------------------------------------------------------------
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 Percentage of average net assets(5)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25%
0.25%
Class B investments(4)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25%
0.25%
Class C investments(4)
- ------------------------------------------------------------------------------------------------------------------------------------
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 fees for Class A and P shares are paid quarterly. The first
year's service fees on Class B and C shares are 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. Certain purchases of Class A shares are subject to a CDSC.
(4) Class B and C shares are subject to CDSCs.
(5) 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.
18 Financial Information
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
More information on the 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).
Lord Abbett Affiliated Fund, Inc.
90 Hudson Street
Jersey City, NJ 07302-3973
SEC file number: 811-5
To obtain information:
By telephone. Call the Fund at:
800-426-1130
By mail. Write to the Fund at:
The Lord Abbett Family of Funds
90 Hudson Street
Jersey City, NJ 07302-3973
Via the Internet.
Lord, Abbett & Co.
www.lordabbett.com
Text only versions of Fund
documents can be viewed
online or downloaded from:
SEC
www.sec.gov
You can also obtain copies by
visiting the SEC's Public Reference Room in Washington, DC (phone
202-942-8090) or by sending your request and a duplicating fee to
the SEC's Public Reference Section, Washington, DC 20549-6009 or by sending your
request electronically to [email protected].
LAA-1-300
(3/00)
<PAGE>
LORD ABBETT
Statement of Additional Information March 1, 2000
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 90 Hudson Street, Jersey City, N.J. 07302-3973.
This Statement relates to, and should be read in conjunction with, the
Prospectus dated March 1, 2000.
Shareholder inquiries should be made by directly contacting the Fund or by
calling 800-821-5129. The 1999 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 8
4. Portfolio Transactions 8
5. Purchases, Redemptions and
Shareholder Services 9
6. Performance 17
7. Taxes 18
8. Information About the Fund 19
9. Financial Statements 19
<PAGE>
1.
Investment Policies
The Lord Abbett Affiliated Fund, Inc. (the "Company" or the "Fund") is a
diversified open-end investment management company registered under the
Investment Company Act of 1940, as amended (the"Act").
Fundamental Investment Restrictions. The Fund is subject to the following
fundamental investment restrictions, which cannot be changed without approval of
a majority of the Fund's outstanding shares.
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.
Compliance with the investment restrictions above will be determined at the time
of purchase or sale of the portfolio.
Non-Fundamental Investment Restrictions. In addition to the policies in the
Prospectus and 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.
2
<PAGE>
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, 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, 1999, the portfolio turnover rate was 62.30%
versus 56.49% 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,
3
<PAGE>
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
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 Board of Directors of the Fund is responsible for the management of the
business and affairs of the Fund.
The following director is a partner of Lord, Abbett & Co. ("Lord Abbett"), 90
Hudson Street, Jersey City New Jersey 07302-3973. He has been associated with
Lord Abbett for over five years and is also an officer, director or trustee of
the thirteen other Lord Abbett-sponsored funds.
*Robert S. Dow, age 54, Chairman and President
*Mr. Dow is an "interested person" as defined in the Act.
4
<PAGE>
The following outside directors are also directors or trustees of thirteen other
Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow, Director
245 Park Avenue, Suite 2414
New York, New York
Senior Adviser, Time Warner Inc. (since 1998). Formerly, Acting Chief Executive
Officer of Courtroom 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 58.
William H.T. Bush, Trustee
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 (since 1986). Age 61.
Robert B. Calhoun, Jr., Trustee
Monitor Clipper Partners
650 Madision Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners (since 1997) and President of The
Clipper Group L.P., both private equity investment funds (since 1990). Age 57.
Stewart S. Dixon, Trustee
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon (since 1990). Age 69.
John C. Jansing, Trustee
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 74.
C. Alan MacDonald, Trustee
Directorship Inc.
8 Sound Shore Drive
Greenwich, Connecticut
Currently involved in golf development management on a consultancy basis (since
1999). Formerly, Managing Director of The Directorship Inc., a consultancy in
board management and corporate governance (1997-1999). Prior to that 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 66.
5
<PAGE>
Hansel B. Millican, Jr., Trustee
Rochester Button Company
1328 Broadway (Suite 816)
New York, New York
President and Chief Executive Officer of Rochester Button Company (since 1991).
Age 71.
Thomas J. Neff, Trustee
Spencer Stuart
277 Park Avenue
New York, New York
Chairman of Spencer Stuart, an executive search consulting firm (since 1976).
Currently serves as Director of Ace, Ltd. (NYSE). Age 62.
The second column of the following table sets forth the compensation accrued by
the Company for outside directors/trustees. The third column sets forth with
respect to the pension or retirement benefits accrued by all Lord
Abbett-sponsored funds for outside directors/trustees. The fourth column sets
forth the total compensation paid by all Lord Abbett-sponsored funds to the
outside directors/trustees, and amount payable but deferred at the option of the
director/trustee. No directors/trustees of the funds associated with Lord
Abbett and no officer of the funds received any compensation from the funds for
acting as a director/trustee or officer.
<TABLE>
<CAPTION>
For the Fiscal Year ended October 31, 1999
------------------------------------------
(1) (2) (3) (4)
Pension or For Year Ended
Retirement Benefits December 31, 1999
Accrued by the Total Compensation Paid
Aggregate Fund and thirteen by the Fund and
Compensation Other Lord Thirteen 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 $27,341 $17,622 $57,720
William H. T. Bush* $27,240 $15,846 $58,000
Robert B. Calhoun, Jr.** $26,880 $12,276 $57,000
Stewart S. Dixon $27,600 $32,420 $58,500
John C. Jansing $26,880 $41,108(4) $57,500
C. Alan MacDonald $27,120 $26,763 $57,500
Hansel B. Millican, Jr. $27,100 $37,822 $57,250
Thomas J. Neff $28,046 $20,313 $59,660
</TABLE>
* Elected as of August 13, 1998.
** Elected as of June 17, 1998.
1. Outside directors'/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
Company to its outside directors/trustees is being deferred under a
plan ("equity based plan") that deems the deferred amounts to be
invested in shares of the Fund for later distribution to the directors/
trustees. The amounts of the aggregate compensation payable by the
Fund as of October 31, 1999 deemed invested in Fund shares, including
dividends reinvested and changes in net asset value applicable to such
deemed investments, were: Mr. Bigelow, $177,464 ; Mr. Dixon, $337,337 ;
Mr. Jansing, $575,176; Mr. MacDonald, $422,105 ; Mr. Millican, $743,736
and Mr. Neff, $657,888 . If the amounts deemed
invested in Fund shares were added to each director's actual holdings of
Fund shares as of October 31, 1999, each would own, the following: Mr.
Bigelow, $177,464; Mr. Dixon, $351,857; Mr. Jansing, $923,465;
Mr. McDonald,$780,769; Mr. Millican, $743,736; and Mr. Neff, $721,255.
2. The amounts in Column 3 were accrued by the Lord Abbett-Sponsored funds for
the twelve months ended October 31, 1999.
6
<PAGE>
3. This column shows aggregate compensation, including directors/trustees 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, 1999, including fees directors/trustees have
chosen to defer but does not include amounts accrued under the equity-based
plans and shown in Column 3.
4. The equity-based plans superseded a previously approved retirement plan
for all directors/trustees. Directors/trustees had the option to convert
their accrued benefits under the retirement plan. All of the current
outside directors/trustees except one made such election. 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. Messrs. Carper, Hilstad,
Hudson, Morris and Walsh are partners of Lord Abbett; the others are employees.
None have received compensation from the Funds.
Executive Vice President:
W. Thomas Hudson, Jr. age 57
Vice Presidents:
Joan A. Binstock, age 45 (with Lord Abbett since 1999, formerly Chief Operating
Officer of Morgan Grenfell from 1996 to 1999, prior thereto Principal of Ernst &
Young LLP).
Paul A. Hilstad, age 57, 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 48
Lawrence H. Kaplan, age 43 (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.)
Robert G. Morris, age 54
A.Edward Oberhaus III, age 40
Tracie E. Richter, age 32 (with Lord Abbett since 1999, formerly Vice President
- - Head of Fund Administration of Morgan Grenfell from 1998 to 1999, Vice
President of Bankers Trust from 1996 to 1998, prior thereto Tax Associate of
Goldman Sachs)
Eli M. Salzmann, age 34
John J. Walsh, age 62
Treasurer:
Donna M. McManus, age 39 (with Lord Abbett since 1996, formerly a Senior Manager
at Deloitte & Touche LLP)
7
<PAGE>
As of February 15, 2000, our officers and directors, as a group, owned less than
1% of our outstanding shares and there were no record holders of 5% or more of
the Fund's outstanding shares, other than Lord Abbett Distributor.
3.
Investment Advisory and Other Services
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, 1999, 1998 and 1997, the management fees
paid to Lord Abbett by the Fund amounted to $26,317,934, $22,192,209 and
$17,683,694 respectively.
The Fund pays 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 audit services
for the Fund, including the examination of financial statements included in the
Fund's Annual Report to Shareholders.
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
Board of 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 disbursing agent for each Fund.
4.
Portfolio Transactions
The Fund's policy is to obtain best execution on all our portfolio transactions,
which means that it seeks to have purchases and sales of portfolio securities
executed at the most favorable prices, considering all costs of the transaction
including brokerage commissions (if any) and dealer markups and markdowns and
brokerage commissions 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 transaction. This 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 each Lord Abbett-sponsored 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.
8
<PAGE>
We pay a brokerage commission rate that we believe is appropriate to give
maximum assurance that our brokers will provide us, on a continuing basis, the
highest level of brokerage services available. While we do not always seek the
lowest possible commissions on particular trades, we believe that our commission
rates are in line with the rates that many other institutions pay. Our traders
are authorized to pay brokerage commissions in excess of those that other
brokers might accept on the same transactions in recognition of the value of the
services performed by the executing brokers, viewed in terms of either the
particular transaction or the overall responsibilities of Lord Abbett with
respect to us and the other accounts they manage. Such services include showing
us trading opportunities including blocks, a willingness and ability to take
positions in securities, knowledge of a particular security or market proven
ability to handle a particular type of trade, confidential treatment, promptness
and reliability.
Some of these brokers also provide research services at least some of which are
useful to Lord Abbett in their overall responsibilities with respect to us and
the other accounts they manage. Research includes the furnishing of analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts and trading equipment and
computer software packages, acquired from third-party suppliers, that enable
Lord Abbett to access various information bases. Such services may be used by
Lord Abbett in servicing all their accounts, and not all of such services will
necessarily be used by Lord Abbett in connection with their management of the
Fund; conversely, such services furnished in connection with brokerage on other
accounts managed by Lord Abbett may be used in connection with their management
of the Fund, and not all of such services will necessarily be used by Lord
Abbett in connection with their advisory services to such other accounts. We
have been advised by Lord Abbett that research services received from brokers
cannot be allocated to any particular account, are not a substitute for Lord
Abbett's services but are supplemental to their own research effort and when
utilized, are subject to internal analysis before being incorporated by Lord
Abbett into their investment process. As a practical matter, it would not be
possible for Lord Abbett to generate all of the information presently provided
by brokers. While receipt of research services from brokerage firms has not
reduced Lord Abbett's normal research activities, the expenses of Lord Abbett
could be materially increased if it attempted to generate such additional
information through its own staff and purchased such equipment and software
packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or
among brokers, and trades are executed only when they are dictated by investment
decisions of the Fund to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold the Lord
Abbett-sponsored funds' 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 a Lord Abbett-sponsored fund does, 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 a Lord Abbett-sponsored
fund in the buying and selling of the same securities as described above. If
these clients wish to buy or sell the same security as 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 a Lord
Abbett sponsored fund does.
For the fiscal years ended October 31,1999, 1998, and 1997 , we paid total
commissions to independent dealers of $11,088,462, $12,832,030 and $7,681,037,
respectively.
5.
Purchases, Redemptions
and Shareholder Services
9
<PAGE>
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 as of the close
of the New York Stock Exchange ("NYSE") on each day that the NYSE is open for
trading by dividing our total net assets by the number of shares outstanding at
the time of calculation. 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 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.
The maximum offering price of our Class A shares on October 31, 1999 was
computed as follows:
Net asset value per share (net assets divided by
shares outstanding)...................................................$16.22
Maximum offering price per share (net asset value
divided by .9425) ....................................................$17.21
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 follows:
Year Ended October 31,
1999 1998 1997
---- ---- ----
Gross sales charge $18,730,335 $21,698,908 $16,853,194
Amount allowed to dealers $16,074,161 $18,696,650 $14,522,076
----------- ----------- -----------
Net commissions
received by
Lord Abbett $ 2,656,174 $ 3,002,258 $ 2,331,118
=========== =========== ===========
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 in
this Statement of Additional Information. 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.
10
<PAGE>
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 below.
Class B Shares. If you buy Class B shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the sixth anniversary of
buying them, you will normally pay a CDSC to Lord Abbett Distributor LLC ("Lord
Abbett Distributor"). That CDSC varies depending on how long you own shares.
Class B shares are subject to service and distribution fees at an annual rate of
1% of the annual net asset value of the Class B shares. The CDSC and the Rule
12b-1 plan applicable to the Class B shares are described in "Buying Class B
Shares" below.
Class C Shares. If you buy Class C shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the first anniversary of
buying them, you will normally pay the Fund a CDSC of 1%. Class C shares are
subject to service and distribution fees at an annual rate of 1% of the annual
net asset value of the Class C shares. The CDSC and the Rule 12b-1 plan
applicable to the C shares are described in "Buying Class C Shares" below.
Class P Shares. If you buy Class P shares, you pay no sales charge at the time
of purchase, and if you redeem your shares you pay no CDSC. Class P shares are
subject to service and distribution fees at an annual rate of .45 of 1% of the
average daily net asset value of the Class P shares. The Rule 12b-1 plan
applicable to the Class P shares is described in "Class P Rule 12b-1 Plan".
Class P shares are available to a limited number of investors.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial adviser. The Fund's class-specific expenses and the
effect of the different types of sales charges on your investment will affect
your investment results over time. The most important factors are how much you
plan to invest and how long you plan to hold your investment. If your goals and
objectives change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider another class of
shares.
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.
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How Long Do You Expect to Hold Your Investment? While future financial needs
cannot be predicted with certainty, knowing how long you expect to hold your
investment will assist you in selecting the appropriate class of shares. For
example, over time, the reduced sales charges available for larger purchases of
Class A shares may offset the effect of paying an initial sales charge on your
investment, compared to the effect over time of higher class-specific expenses
on Class B or Class C shares for which no initial sales charge is paid. Because
of the effect of class-based expenses, your choice should also depend on how
much you plan to invest.
Investing for the Short Term. If you have a short-term investment horizon (that
is, you plan to hold your shares for not more than six years), you should
probably consider purchasing Class A or Class C shares rather than Class B
shares. This is because of the effect of the Class B CDSC if you redeem before
the sixth anniversary of your purchase, as well as the effect of the Class B
distribution fee on the investment return for that class in the short term.
Class C shares might be the appropriate choice (especially for investments of
less than $100,000), because there is no initial sales charge on Class C shares,
and the CDSC does not apply to amounts you redeem after holding them one year.
However, if you plan to invest more than $100,000 for the short term, then the
more you invest and the more your investment horizon increases toward six years,
the more attractive the Class A share option may become. This is because the
annual distribution fee on Class C shares will have a greater impact on your
account over the longer term than the reduced front-end sales charge available
for larger purchases of Class A shares. For example, Class A might be more
appropriate than Class C for investments of more than $100,000 expected to be
held for 5 or 6 years (or more). For investments over $250,000 expected to be
held 4 to 6 years (or more), Class A shares may become more appropriate than
Class C. If you are investing $500,000 or more, Class A may become more
desirable as your investment horizon approaches 3 years or more.
For most investors who invest $1 million or more or for Retirement Plans with at
least 100 eligible employees or for investments pursuant to a special retirement
wrap program, in most cases Class A shares will be the most advantageous choice,
no matter how long you intend to hold your shares. For that reason, it may not
be suitable for you to place a purchase order for Class B shares of $500,000 or
more or a purchase order for Class C shares of $1,000,000 or more. In addition,
it may not be suitable for you to place an order for Class B or C shares for a
Retirement Plan with at least 100 eligible employees or for a special retirement
wrap program. You should discuss this with your financial advisor.
Investing for the Longer Term. If you are investing for the longer term (for
example, to provide for future college expenses for your child) and do not
expect to need access to your money for seven years or more, Class B shares may
be an appropriate investment option, if you plan to invest less than $100,000.
If you plan to invest more than $100,000 over the long term, Class A shares will
likely be more advantageous than Class B shares or Class C shares, as discussed
above, because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charges available for larger investments in Class
A shares under the Fund's Rights of Accumulation, described in greater detail
below under "Rights of Accumulation".
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.
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Rule 12b-1 Plans. As described in the Prospectus, the Fund
has adopted a Distribution Plan and Agreement pursuant to Rule 12b-1 of the Act
for each of the three Fund Classes: the "A Plan", the "B Plan" and the "C Plan",
respectively. In adopting each Plan and in approving its continuance, the Board
of Directors has concluded that there is a reasonable likelihood that each Plan
will benefit its respective Class and such Class' shareholders. The expected
benefits include greater sales and lower redemptions of Class shares, which
should allow each Class to maintain a consistent cash flow, and a higher quality
of service to shareholders by authorized institutions than would otherwise be
the case. During the last fiscal year, the Fund accrued or paid through Lord
Abbett to authorized institutions $27,926,819 under the A Plan, $4,281,069 under
the B Plan, $1,584,742 under the C Plan and $9,131 under 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 outstanding voting securities.
Contingent Deferred Sales Charges. A Contingent Deferred Sales Charge ("CDSC")
(i) applies regardless of class, (ii) will not apply to shares purchased by the
reinvestment of dividends or capital gains distributions; (iii) will be assessed
on the lesser of the net asset value of the shares at the time of redemption or
the original purchase price and (iv) will not be imposed on the amount of your
account value represented by the increase in net asset value over the initial
purchase price (including increases due to the reinvestment of dividends and
capital gains distributions) and upon early redemption of shares.
Class A Shares. As stated in the Prospectus, a CDSC of 1% is imposed with
respect to those Class A shares (or Class A shares of another Lord
Abbett-sponsored fund or series acquired through exchange of such shares) on
which the Fund has paid the one-time distribution fee of 1% if such shares are
redeemed out of the Lord Abbett-sponsored family of funds within a period of 24
months from the end of the month in which the original sale occurred.
Class B Shares. As stated in the Prospectus, if Class B shares (or Class B
shares of another Lord Abbett-sponsored fund or series acquired through exchange
of such shares) are redeemed out of the Lord Abbett-sponsored family of funds
for cash before the sixth anniversary of their purchase, a CDSC will be deducted
from the redemption proceeds. The Class B CDSC is paid to Lord Abbett
Distributor to reimburse its expenses, in whole or in part, for providing
distribution-related service to the Fund in connection with the sale of Class B
shares.
To determine whether the CDSC applies to a redemption, the Fund redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held on or after the sixth anniversary
of their purchase, and (3) shares held the longest before such sixth
anniversary.
The amount of the contingent deferred sales charge will depend on the number of
years since you invested and the dollar amount being redeemed, according to the
following schedule:
Anniversary of the Day on Contingent Deferred Sales
Which the Purchase Order Was Accepted Charge on Redemptions (As %
of Amount Subject to Charge)
Before the 1st........................................................5.0%
On the 1st, before the 2nd............................................4.0%
On the 2nd, before the 3rd............................................3.0%
On the 3rd, before the 4th............................................3.0%
On the 4th, before the 5th............................................2.0%
On the 5th, before the 6th ...........................................1.0%
On or after the 6th anniversary.......................................None
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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.
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.
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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 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.
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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.
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.
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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 including 401(k) plans 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 excluding 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.
Performance
The Fund computes the average annual compounded rate of total return during
specified periods that would equate the initial amount invested to the ending
redeemable value of such investment by adding one to the computed average annual
total return, raising the sum to a power equal to the number of years covered by
the computation and multiplying the result by one thousand dollars, which
represents a hypothetical initial investment. The calculation assumes deduction
of the maximum sales charge from the initial amount invested and reinvestment of
all income dividends and capital gains distributions on the reinvestment dates
at prices calculated as stated in the Prospectus. The ending redeemable value is
determined by assuming a complete redemption at the end of the period(s) covered
by the average annual total return computation.
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment (unless the return is shown at net asset value). For Class B
shares, the payment of the applicable CDSC (5.0% prior to the first anniversary
of purchase, 4.0% prior to the second anniversary of purchase, 3.0% prior to the
third and fourth anniversaries of purchase, 2.0% prior to the fifth anniversary
of purchase, 1.0% prior to the sixth anniversary of purchase and no CDSC on and
after the sixth anniversary of purchase) is applied to the Fund's investment
result for that class for the time period shown (unless the total return is
shown at net asset value). For Class C shares, the 1.0% CDSC is applied to the
Fund's investment result for that class for the time period shown prior to the
first anniversary of purchase (unless the total return is shown at net asset
value). Total returns also assume that all dividends and capital gains
distributions during the period are reinvested at net asset value per share, and
that the investment is redeemed at the end of the period.
Using the computation method described above, the Fund's average annual
compounded rates of total return for the last one, five and ten fiscal-years
ending on October 31, 1999 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, 1999 and for the period since inception, August 1, 1996, the average
annual compounded rate of total return was 5.03 % and 18.27%, respectively, for
the Fund's Class B shares. For the fiscal year ending October 31, 1999 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.
17
<PAGE>
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, 1999 the yield for the Class A shares of Fund was 0.94%.
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 Fund intends to elect and to qualify for special tax treatment afforded
regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"). If it so qualifies, the Fund (but not its shareholders) will be
relieved of federal income taxes on the amount it distributes to shareholders.
If in any taxable year the Fund does not qualify as a regulated investment
company, all of its taxable income will be taxed to the Fund at regular
corporate rates.
The Fund contemplates declaring as dividends substantially all of its net
investment income. Dividends paid by the Fund from its investment income and
distributions of its net realized short-term capital gains are taxable to
shareholders as ordinary income or capital gain, whether received in cash or
reinvested in additional shares of the Fund. The Fund will send each shareholder
annual information concerning the tax treatment of dividends and other
distributions.
Upon sale, exchange or redemption of shares of the Fund, a shareholder will
recognize short- or long-term capital gain or loss, depending upon the
shareholder's holding period in the Fund's shares. However, if a shareholder's
holding period in his shares is six months or less, any capital loss realized
from a sale or exchange of such shares must be treated as long-term capital loss
to the extent of dividends classified as "capital gains dividends" received with
respect to such shares. The maximum tax rates applicable to net capital gains
recognized by individuals and other non- corporate taxpayers are (i) the same as
ordinary income rates for capital assets held for one year or less and (ii) 20%
for capital assets held for more than one year. Capital gains or losses
recognized by corporate shareholders are subject to tax at the ordinary income
tax rates applicable to corporations.
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.
Some shareholders may be subject to a 31% withholding tax on reportable
dividends, capital gains distributions and redemption payments ("backup
withholding"). Generally, shareholders subject to backup withholding will be
those for whom a certified taxpayer identification number is not on file with
the Fund or who, to the Fund's knowledge, have furnished an incorrect number.
When establishing an account, an investor must certify under penalties of
perjury that such number is correct and that he is not otherwise subject to
backup withholding.
The writing of call options and other investment techniques and practices which
the Fund may utilize may affect the character and timing of the recognition of
gains and losses. 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.
The Fund may be subject to foreign withholding taxes, which would reduce the
yield on its investments. It is generally expected that Fund shareholders who
are subject to U.S. 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 also 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.
18
<PAGE>
Dividends paid by the Fund will qualify for the dividends-received deduction for
corporations to the extent they are derived from dividends paid by domestic
corporations. Corporate shareholders must have held their shares in the Fund for
more than 45 days to qualify for the deduction on dividends paid by the Fund.
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
gain and will be reduced by the net amount, if any, of such foreign exchange
loss.
If the Fund purchases shares in certain foreign investment entities called
"passive foreign investment companies," the Fund may be subject to U.S. 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 U.S. persons (U.S. citizens or residents and United States
domestic corporations, partnerships, trusts and estates). Each shareholder who
is not a U.S. person should consult his tax adviser regarding the U.S. and
foreign tax consequences of the ownership of shares of a Fund, including the
applicable rate of U.S. withholding tax on dividends representing ordinary
income and net short-term capital gains, and the applicability of U.S. gift and
estate taxes.
8.
Information About the Fund
Lord Abbett Affiliated Fund, Inc. was organized in 1934 and was reincorporated
under Maryland law on November 26, 1975. The Fund has 2,000,000,000 shares of
authorized capital stock consisting of five classes (A, B, C, P and Y), $0.001
par value. The 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.
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.
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.
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, 1999 and the
opinion thereon of Deloitte & Touche LLP, independent auditors, included in the
1999 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.
19
<PAGE>
Lord Abbett Affiliated Fund
Lord Abbett Growth Opportunities Fund
Lord Abbett High Yield Fund
Lord Abbett Securities Trust -
International Series
Lord Abbett Research Fund -
Large-Cap Series
Small-Cap Value Series
Class Y Shares
Prospectus
March 1, 2000
[LOGO]
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
Only Class Y shares of the International Series, the Large-Cap Series and the
Small-Cap Value Series are available in all states. Please call 800-821-5129 for
further information.
<PAGE>
Table of Contents
The Funds
Information about goal/ Affiliated Fund 2
principal strategy, main Growth Opportunities Fund 5
risks, performance and fees High Yield Fund 8
and expenses International Series 11
Large-Cap Series 14
Small-Cap Value Series 17
Your Investment
Information for managing Purchases 20
your Fund account Redemptions 21
Distributions and Taxes 21
Services For Fund Investors 22
Management 22
For More Information
How to learn more Other Investment Techniques 24
about the Funds Glossary of Shaded Terms 28
Recent Performance 28
Financial Information
Financial highlights, Affiliated Fund 31
line graph comparisons of each Growth Opportunities Fund 33
Fund and broker compensation High Yield Fund 35
International Series 37
Large-Cap Series 39
Small-Cap Value Series 41
How to learn more about the Back Cover
Funds and other Lord Abbett Funds
<PAGE>
Affiliated Fund
GOAL / PRINCIPAL STRATEGY
The Fund's investment objective is long-term growth of capital and income
without excessive fluctuations in market value.
To pursue this goal, the Fund purchases stocks of large, seasoned, U.S. and
multinational companies which we believe are undervalued. The Fund chooses
stocks using
o quantitative research to identify which stocks we believe represent
the best bargains
o fundamental research to learn about a company's operating environment,
resources and strategic plans and to assess its prospects for
exceeding earnings expectations
o business cycle analysis to determine how buying or selling securities
changes our overall portfolio's sensitivity to interest rates and
economic conditions
The Fund is intended for investors looking for long-term growth with low
fluctuations in market value. For this reason, we will forego some
opportunities for gains when, in our judgment, they are too risky. The Fund
tries to keep its assets invested in securities selling at reasonable
prices in relation to value.
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 may 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.
We generally sell a stock when we think it is no longer a bargain, seems
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 the Fund's assets in short-term debt
securities. This could reduce the benefit from any upswing in the market
and prevent the Fund from achieving its investment objective.
MAIN RISKS
The Fund is subject to the general risks and considerations associated with
equity investing, as well as the particular risks associated with bargain
stocks. The value of your investment will fluctuate in response to
movements in the stock market in general and to the changing prospects of
individual companies in which the Fund invests. Bargain stocks may perform
differently than the market as a whole and other types of stocks, such as
small company stocks and growth stocks. This is because different types of
stocks tend to shift in and out of favor depending on market and economic
conditions. The market may fail to recognize the intrinsic value of
particular bargain stocks for a long time. In addition, if the Fund's
assessment of a company's value or prospects for exceeding earnings
expectations or market conditions is wrong, the Fund could suffer losses or
produce poor performance relative to other funds, even in a rising market.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money in the Fund.
We or the Fund refers to Lord Abbett Affiliated Fund, Inc.
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, although 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 com-panies which we believe the market undervalues
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 Funds
<PAGE>
Affiliated Fund
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class Y shares
from calendar year to calendar year.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class Y Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1998 - 14.4%
Best Quarter 2nd Q `99 10.9% Worst Quarter 3rd Q `99 -6.6%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class Y shares compare to those of a broad-based securities market index
and a more narrowly based index that more closely reflects the market
sectors in which the Fund invests.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year Since Inception(2)
Class Y shares 17.23% 11.66%
- --------------------------------------------------------------------------------
S&P 500(R)Index(1) 21.03% 19.51%(3)
- --------------------------------------------------------------------------------
S&P Barra Value Index(1) 12.72% 8.79%(3)
(1) Performance for the unmanaged indices does not reflect fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance.
(2) The date of inception for Class Y shares is 3/27/98.
(3) This represents total return for the period 3/31/98 - 12/31/99,
to correspond with Class Y inception date.
The Funds 3
<PAGE>
Affiliated Fund
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
- --------------------------------------------------------------------------------
Class Y
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
(as a % of offering price) none
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge none
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of
average net assets)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.31%
- --------------------------------------------------------------------------------
Other Expenses 0.12%
Total Operating Expenses 0.43%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class Y shares $44 $138 $241 $542
- --------------------------------------------------------------------------------
Management fees are payable to Lord, Abbett & Co. ("Lord Abbett") for the Fund's
investment management.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
4 The Funds
<PAGE>
Growth Opportunities Fund
GOAL / PRINCIPAL STRATEGY
The Fund's investment objective is capital appreciation.
To pursue this goal, we normally invest primarily in common stocks of
mid-sized companies with outstanding equity securities having an aggregate
market value between $1 billion and $6 billion. The Fund uses a growth
style of investing which means that we favor companies that show the
potential for stronger than expected earnings or growth. Under normal
circumstances, at least 65% of our total assets will consist of investments
made in growth companies, as determined at the time of purchase. The Fund
may invest up to 35% of its assets in foreign securities.
Typically, in choosing stocks, we look for companies using
o quantitative research to identify mid-sized companies with superior
growth possibilities.
o fundamental research to identify companies likely to produce superior
returns over a thirty-six month time frame, by analyzing the dynamics
in each company within its industry and within the economy.
Before July 15, 1998, the Fund used a value style of investing. This meant
that the Fund selected companies were selected without regard to current
earnings, following a process that sought to identify and invest in
undervalued securities.
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 reduce the benefit from any upswing in the market and prevent
the Fund from achieving its investment objective.
MAIN RISKS
The Fund is subject to the general risks and considerations associated with
equity investing, as well as the particular risks associated with growth
stocks. The value of your investment will fluctuate in response to
movements in the stock market in general and to the changing prospects of
individual companies in which the Fund invests. Growth stocks may grow
faster than other stocks and may be more volatile. In addition, if the
Fund's assessment of a company's potential for growth is wrong, the price
of the company's stock may decrease below the price at which the Fund
purchased the stock.
Foreign securities, in which the Fund may invest may present risks not
typically associated with domestic securities. Foreign markets and the
securities traded in them are not subject to the same degree of regulation
as U.S. markets which may increase the degree of market risk associated
with them. Foreign securities may also be subject to liquidity, currency
and political risk. Foreign investments may be affected by changes in
currency rates or currency controls. With respect to certain foreign
countries, there is a possibility of nationalization, expropriation or
confiscatory taxation, imposition of withholding or other taxes, and
political or social instability which could affect investments in those
countries.
Investors should also be aware that the Fund has the ability to invest in
derivatives, the value of which may fluctuate greatly.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money in the Fund.
We or the Fund refers to Growth Opportunities Fund, a portfolio of Lord Abbett
Research Fund, Inc.
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.
Growth stocks 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.
The Funds 5
<PAGE>
Growth Opportunities Fund
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class Y shares
from calendar year to calendar year.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class Y Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1999 - 58.6%
Best Quarter 4th Q `99 46.4% Worst Quarter 1st Q `99 -4.1%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class Y shares compare to those of a broad-based securities market index.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year Since Inception(2)
Class Y shares 58.63% 88.81%
- --------------------------------------------------------------------------------
Russell Mid-Cap Growth Index(1) 51.29% 63.87%(3)
(1) Performance for the unmanaged Russell Mid-Cap Growth Index does not reflect
any fees or expenses.
(2) The date of inception for Class Y shares is 10/15/98.
(3) This represents total return for the period 10/31/98 - 12/31/99, to
correspond with Class Y inception date.
The Funds 6
<PAGE>
Growth Opportunities Fund
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
- --------------------------------------------------------------------------------
Class Y
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
(as a % of offering price) none
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge none
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of
average net assets)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.90%
- --------------------------------------------------------------------------------
Other Expenses 0.40%
Total Operating Expenses 1.30%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class Y shares $132 $412 $713 $1,568
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
Lord Abbett is currently waiving the management fees of the Fund. Lord
Abbett may stop waiving the management fee at any time.The total operating
expense ratio with the fee waiver for Class Y shares is 0.40%
of average net assets.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
The Funds 7
<PAGE>
High Yield Fund
GOAL / PRINCIPAL STRATEGY
The Fund's investment objective is to seek high current income and the
opportunity for capital appreciation to produce a high total return.
Normally, we invest in lower-rated debt securities, sometimes called "junk
bonds," which entail greater risks than investments in higher-rated debt
securities.
We believe that a high total return (current income and capital
appreciation) may be derived from an actively managed, diversified
portfolio of investments. Under normal circumstances, we invest at least
65% of our total assets in lower-rated debt securities, some of which are
convertible into common stock or have warrants to purchase common stock.
We seek unusual values, particularly in lower-rated debt securities. Higher
yield on debt securities can occur during periods of inflation when the
demand for borrowed money is high. Also, buying lower-rated bonds when the
credit risk is above average but, we think, likely to decrease, may
generate higher yields.
While typically fully invested, we may take a temporary defensive position
by investing some of our assets in short-term debt securities. This could
reduce the benefit from any upswing in the market and prevent the Fund from
achieving its investment objective.
MAIN RISKS
The lower-rated bonds in which the Fund invests involve risks that the
bond's issuers will not make payments of interest and principal payments
when due. Some issuers may default as to principal and/or interest payments
after we purchase their securities. Through portfolio diversification,
credit analysis and attention to current developments and trends in
interest rates and economic conditions, we attempt to reduce investment
risk, but losses may occur. In addition, the value of your investment will
change as interest rates fluctuate. When interest rates decline, share
value may rise. When interest rates rise, share value may decline. The Fund
also uses investment practices that could adversely affect performance,
such as investments in foreign securities and illiquid securities.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money in the Fund.
We or the Fund refers to Lord Abbett High Yield Fund, which is a series of Lord
Abbett Investment Trust.
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.
High yield debt securities, commonly known as "junk bonds," 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.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies used by the Fund and
their risks.
8 The Funds
<PAGE>
High Yield Fund
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less. Performance for Class Y shares is not shown because
the class has less than one year of performance. Returns for Class Y shares
are expected to be somewhat higher than those of Class A shares of the Fund
because Class Y shares have lower expenses.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1999 - 6.6%
Best Quarter 4th Q `99 4.0% Worst Quarter 3rd Q `99 -0.81%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A shares compare to those of two broad-based securities market
indices. The Fund's returns reflect payment of the maximum applicable
front-end sales charges.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year Since Inception(2)
Class A shares 6.57% 6.57%
- --------------------------------------------------------------------------------
Merrill Lynch High Yield Master Index(1) 1.50% 1.50(3)
First Boston High Yield Index(1) 3.29% 3.29%(3)
(1) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices is not necessarily representative of the
Fund's performance.
(2) The date of inception for Class A shares is 12/31/98.
(3) This represents total return for the period 12/31/98 - 12/31/99, to
correspond with Class A inception date.
The Funds 9
<PAGE>
High Yield Fund
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
- --------------------------------------------------------------------------------
Class Y
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
(as a % of offering price) none
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge none
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of
average net assets)(1)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.60%
- --------------------------------------------------------------------------------
Other Expenses 0.26%
Total Operating Expenses 0.86%
- --------------------------------------------------------------------------------
(1) The annual operating expenses are based on estimated expenses for the
current fiscal year.
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class Y shares $88 $274 $477 $1,061
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
Lord Abbett is currently waiving the managemnt fees and subsidizing the other
expenses of the Fund. Lord Abbett may stop waiving the management fees and
subsidizing the other expenses at any time. The total operating expense ratio
with the fee waiver and expense subsidy for Class Y shares is 0.0% of average
net assets.
10 The Funds
<PAGE>
International Series
GOAL / PRINCIPAL STRATEGY
The Fund's investment objective is long-term capital appreciation.
To pursue this goal, the Fund invests in stocks of companies principally
based outside the United States. Under normal conditions, at least 80% of
the Fund's assets will be invested in stocks of companies in at least three
different countries outside the United States.
The Fund intends to primarily invest in stocks of small companies, those
with market capitalizations of less than $2 billion, although the Fund may
also invest in stocks of larger companies.
We look for:
o developing global trends on an industry-by-industry basis
o companies which are the strongest or the best positioned in those
industries
o companies selling at attractive prices
o companies we see as having the best potential for growth or profits
We may limit the number of holdings in the Fund to a greater degree than
other similar funds in an effort to prevent the dilution of the performance
of securities held in the portfolio. However, the Fund is a diversified
fund.
The Fund may temporarily reduce its stock holdings for defensive purposes
in response to adverse market conditions and invest in domestic, Eurodollar
and foreign short-term money market instruments. This could potentially
reduce the Fund's ability to benefit from an upswing in the market and
prevent the Fund from achieving its investment objective.
MAIN RISKS
The Fund is subject to the general risks and considerations associated with
equity investing, such as market risk. The value of your investment in the
Fund will fluctuate in response to movements in the securities markets in
general and to the changing prospects of individual companies in which the
Fund invests. In addition, the Fund is subject to the risks of investing in
foreign securities and in the securities of small companies.
Investing in small companies generally involves greater risks than
investing in the stocks of large companies. Small companies may have less
experienced management, limited product lines, unproven track records, and
limited financial resources. Their securities may carry increased market,
liquidity, and other risks.
Foreign securities may present risks not typically associated with domestic
securities. Foreign markets and the securities traded in them are not
subject to the same degree of regulation as U.S. markets which may increase
the degree of market risk associated with them. Foreign securities may also
be subject to liquidity, currency and political risk. Foreign investments
may be affected by changes in currency rates or currency controls. With
respect to certain foreign countries, there is a possibility of
nationalization, expropriation or confiscatory taxation, imposition of
withholding or other taxes, and political or social instability which could
affect investments in those countries.
Investing in both small and international companies generally involves some
degree of information risk. That means that key information about an
issuer, security or market may be inaccurate or unavailable.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money by investing in
the Fund.
We or the Fund refers to the International Series of Lord Abbett Securities
Trust Fund.
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, although they can be slower to innovate than small companies.
Small companies are often new and less established, with a tendency to be
faster-growing but more volatile and less liquid than large company 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.
The Funds 11
<PAGE>
International Series
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class Y shares
from calendar year to calendar year.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class Y Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1998 - 15.8%
1999 - 27.8%
Best Quarter 1st Q `98 23.8% Worst Quarter 3rd Q `98 -19.0%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class Y shares compare to those of a broad-based securities market index.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year Since Inception(2)
Class Y shares 27.81% 21.76%
- --------------------------------------------------------------------------------
Morgan Stanley Capital International European,
Australasia and Far East Index(1) 27.3% 23.77%(3)
(1) Performance for the unmanaged MSCI EAFE Index does not reflect fees or
expenses.
(2) The date of inception for Class Y shares is 12/30/97.
(3) This represents total return for the period 12/31/97 - 12/31/99, to
correspond with Class Y inception date.
12 The Funds
<PAGE>
International Series
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
- --------------------------------------------------------------------------------
Class Y
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
(as a % of offering price) none
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge none
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of
average net assets)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.44%
Total Operating Expenses 1.19%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class Y shares $121 $378 $654 $1,443
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
The Funds 13
<PAGE>
Large-Cap Series
GOAL / PRINCIPAL STRATEGY
The Fund's investment objective is growth of capital and growth of income
consistent with reasonable risk.
To pursue this goal, the Fund purchases stocks of large, seasoned, U.S. and
multinational companies which we believe are undervalued. Under normal
circumstance at least 65% of the Fund's total assets will consist of
investments mad in large-cap companies, determined at the time of purchase.
The Fund chooses stocks using
o quantitative research to identify which stocks we believe represent
the best bargains
o fundamental research to learn about a company's operating environment,
resources and strategic plans and to assess its prospects for
exceeding earnings expectations
o business cycle analysis to determine how buying or selling securities
changes our overall portfolio's sensitivity to interest rates and
economic conditions
The Fund is intended for investors looking for long-term growth with low
fluctuations in market value. For this reason, we will forego some
opportunities for gains when, in our judgment, they are too risky. The Fund
tries to keep its assets invested in securities selling at reasonable
prices in relation to value.
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 may 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.
We generally sell a stock when we think it is no longer a bargain, seems
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 the Fund's assets in short-term debt
securities. This could reduce the benefit from any upswing in the market
and prevent the Fund from achieving its investment objective.
MAIN RISKS
The Fund is subject to the general risks and considerations associated with
equity investing, as well as the particular risks associated with bargain
stocks. The value of your investment will fluctuate in response to
movements in the stock market in general and to the changing prospects of
individual companies in which the Fund invests. Bargain stocks may perform
differently than the market as a whole and other types of stocks, such as
small company stocks and growth stocks. This is because different types of
stocks tend to shift in and out of favor depending on market and economic
conditions. The market may fail to recognize the intrinsic value of
particular bargain stocks for a long time. In addition, if the Fund's
assessment of a company's value or prospects for exceeding earnings
expectations or market conditions is wrong, the Fund could suffer losses or
produce poor performance relative to other funds, even in a rising market.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money in the Fund.
We or the Fund refers to the Large-Cap Series of Lord Abbett Research Fund, Inc.
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, although 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 com-panies which we believe the market undervalues
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.
14 The Funds
<PAGE>
Large-Cap Series
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less. Performance for Class Y shares is not shown because
the class has less than one year of performance. Returns for Class Y shares
are expected to be somewhat higher than those of Class A shares of the Fund
because Class Y shares have lower expenses.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1993 - 18.4%
1994 - 6.2%
1995 - 34.8%
1996 - 20.2%
1997 - 23.4%
1998 - 16.2%
1999 - 17.4%
Best Quarter 4th Q `98 18.9% Worst Quarter 3rd Q `98 -12.5%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A shares compare to those of a broad-based securities market index
and a more narrowly based index that more closely reflects the market
sectors in which the Fund invests. The Fund's returns reflect payment of
the maximum applicable front-end sales charges.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year 5 Years Since Inception(2)
Class A shares 17.38% 22.24% 19.08%
- --------------------------------------------------------------------------------
S&P 500(R)Index(1) 21.03% 28.54% 21.24%(3)
S&P Barra Value Index(1) 12.72% 22.94% 18.14%(3)
(1) Performance for the unmanaged indices does not reflect fees or expenses.
(2) The date of inception for Class A shares is 6/3/92.
(3) This represents total return for the period 6/30/92 - 12/31/99, to
correspond with Class A inception date.
The Funds 15
<PAGE>
Large-Cap Series
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
- --------------------------------------------------------------------------------
Class Y
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
(as a % of offering price) none
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge none
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of
average net assets)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.36%
Total Operating Expenses 1.11%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class Y shares $113 $353 $612 $1,352
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
16 The Funds
<PAGE>
Small-Cap Value Series
GOAL / PRINCIPAL STRATEGY
The Fund's investment objective is long-term capital appreciation.
To pursue this goal, the Fund invests primarily in equity securities of
small companies with market capitalizations of less than $1 billion.
Typically, in choosing stocks, we look for companies using
o quantitative research to evaluate various criteria, including the
price of shares in relation to book value, sales, asset value,
earnings, dividends and cash flow.
o fundamental research to assess the dynamics of each company within its
industry and within the economy. We evaluate the company's business
strategies by assessing management's ability to execute those
strategies, and by evaluating the adequacy of its financial resources.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in common stocks issued by smaller, less well-known companies
(with market capitalizations of less than $1 billion) selected by using
fundamental investment analysis. The Fund may invest up to 35% of its total
assets in the securities of larger companies. Companies in which the Fund
is likely to invest may have more limited product lines, markets or
financial resources and may lack management depth or experience as compared
with companies with larger market capitalizations. The Fund may invest up
to 35% of its assets in foreign securities.
While typically fully invested, we may take a temporary defensive position
by investing some of our assets in short-term debt securities. This
could reduce the benefit from any upswing in the market and prevent the
Fund from achieving its investment objective.
MAIN RISKS
The Fund is subject to the general risks and considerations associated with
equity investing, such as market risk.The value of your investment in the
Fund will fluctuate in response to movements in the securities markets in
general and to the changing prospects of individual companies in which the
Fund invests. In addition, the Fund is subject to the risks of investing in
foreign securities and in the securities of small companies.
Investing in small companies generally involves greater risks than
investing in the stocks of large companies. Small companies may have less
experienced management, limited product lines, unproven track records, and
limited financial resources. Their securities may carry increased market,
liquidity, and other risks.
Foreign securities may present risks not typically associated with domestic
securities. Foreign markets and the securities traded in them are not
subject to the same degree of regulation as U.S. markets which may increase
the degree of market risk associated with them. Foreign securities may also
be subject to liquidity, currency and political risk. Foreign investments
may be affected by changes in currency rates or currency controls. With
respect to certain foreign countries, there is a possibility of
nationalization, expropriation or confiscatory taxation, imposition of
withholding or other taxes, and political or social instability which could
affect investments in those countries.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money in the Fund.
We or the Fund refers to Small- Cap Value Series of Lord Abbett Research Fund,
Inc.
About the Fund. The 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, although they can be slower to innovate than small companies.
Small companies often are new and less established, with a tendency to be
faster-growing but more volatile and less liquid than large companies.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies used by the Fund and
their risks.
The Funds 17
<PAGE>
Small-Cap Value Series
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class Y shares
from calendar year to calendar year.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class Y Shares
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1998 - -7.2%
1999 - 8.6%
Best Quarter 4th Q `98 19.6% Worst Quarter 3rd Q `98 -24.1%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class Y shares compare to those of a broad-based securities market index.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year Since Inception(2)
Class Y shares 8.57% .76%
- --------------------------------------------------------------------------------
Russell 2000 Index(1) 21.26% 8.70%(3)
- --------------------------------------------------------------------------------
(1) Performance for the unmanaged Russell 2000 Index does not reflect fees or
expenses. The performance of the index is not necessarily representative of
the Fund's performance.
(2) The date of inception for Class Y shares is 12/30/97.
(3) This represents total return for the period 12/30/97 - 12/31/99, to
correspond with Class Y inception date.
18 The Funds
<PAGE>
Small-Cap Value Series
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
- --------------------------------------------------------------------------------
Class Y
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
(as a % of offering price) none
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge none
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of
average net assets)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.75%
- --------------------------------------------------------------------------------
Other Expenses 0.44%
Total Operating Expenses 1.19%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class Y shares $121 $378 $654 $1,443
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
The Funds 19
<PAGE>
YOUR INVESTMENT
PURCHASES
Class Y shares. You may purchase Class Y shares at the net asset value
("NAV") per share next determined after we receive and accept your purchase
order submitted in a proper form. No sales charges apply.
We reserve the right to withdraw all or 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.
Who May Invest? Eligible purchasers of Class Y shares include: (1) certain
authorized brokers, dealers, registered investment advisers or other
financial institutions ("entities") 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 Class Y
shares in particular investment products made available for a fee to
clients of such entities 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 ("Mutual Fund Fee Based Programs"); (2) the trustee or
custodian under any deferred compensation or pension or profit-sharing plan
or payroll deduction IRA established for the benefit of the employees of
any company with an account(s) in excess of $10 million managed by Lord
Abbett or its sub-advisers on a private-advisory-account basis; (3)
institutional investors, such as retirement plans, companies, foundations,
trusts, endowments and other entities where the total amount of potential
investable assets exceeds $50 million that were not introduced to Lord
Abbett by persons associated with a broker or dealer primarily involved in
the retail securities business. Additional payments may be made by Lord
Abbett out of its own resources with respect to certain of these sales.
How Much Must You Invest? You may buy our shares through any independent
securities dealer having a sales agreement with Lord Abbett Distributor,
our exclusive selling agent. Place your order with your investment dealer
or send the money to the Fund you selected (P.O. Box 219100, Kansas City,
Missouri 64121). The minimum initial investment is $1 million except for
Mutual Fund Fee Based Program, which have no minimum. This offering may be
suspended, changed or withdrawn by Lord Abbett Distributor which reserves
the right to reject any order.
Buying Shares Through Your Dealer. Orders for shares received by a Fund
prior to the close of the NYSE, or received by dealers prior to such close
and received by Lord Abbett Distributor prior to the close of its business
day, will be confirmed at NAV effective at such NYSE close. Orders received
by dealers after the NYSE closes and received by Lord Abbett Distributor in
proper form prior to the close of its next business day are executed at the
NAV effective as of the close of the NYSE on that next business day. The
dealer is responsible for the timely transmission of orders to Lord Abbett
Distributor. A business day is a day on which the NYSE is open for trading.
Buying Shares By Wire. To open an account, call 800-821-5129 Ext. 34028,
Institutional Trade Dept., to set up your account and to arrange a wire
transaction. Wire to: United Missouri Bank of Kansas City, N.A., Routing
number - 101000695, bank account number: 9878002611, FBO: (account name)
and (your Lord Abbett account number). Specify the complete name of the
Fund, note Class Y shares and include your new account number
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"), normally
4:00 p.m. Eastern Time. Purchases and sales of Fund shares are executed at the
NAV next determined after the Fund receives your order in proper form. 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.
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.
Exchange Limitations. Exchanges should not be used to try to take advantage of
short-term swings in the market. Frequent exchanges create higher expenses for
the Funds. Accordingly, each Fund reserves the right to limit or terminate this
privilege for any shareholder making frequent exchanges or abusing the
privilege. The Funds also may revoke the privilege for all shareholders upon 60
days' written notice.
20 Your Investment
<PAGE>
and your name. To add to an existing account, wire to: United Missouri Bank
of Kansas City, N.A., routing number - 101000695, bank account number:
9878002611, FBO: (account name) and (your Lord Abbett account number).
Specify the complete name of the Fund, note Class Y shares and include your
account number and your name.
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 Funds 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. Under unusual circumstances, each
Fund may suspend redemptions, or postpone payment for more than seven days,
as permitted by federal securities laws.
By Wire. In order to receive funds by wire, our servicing agent must have
the wiring instructions on file. To verify that this feature is in place,
call 800-821-5129 Ext. 34028, Institutional Trading Dept. (minimum wire:
$1,000). Your wire redemption request must be received by the Fund before
the close of the NYSE for money to be wired on the next business day.
DISTRIBUTIONS AND TAXES
The Funds normally pay dividends from their net investment income as
follows: quarterly, for the Affiliated Fund; monthly, for the High Yield
Fund; semi-annually, for the Large-Cap Series; and annually, for Growth
Opportunities Fund, International Series and Small-Cap Value Series. Each
Fund distributes net capital gains (if any) as "capital gains
distributions" on an annual basis. Your distributions will be reinvested in
your Fund unless you instruct the Fund to pay them to you in cash. The tax
status of distributions is the same for all shareholders regardless of how
long they have owned Fund shares or whether distributions are reinvested or
paid in cash.
Except in tax-advantaged accounts, any sale, redemption or exchange of Fund
shares may be taxable to the shareholder.
Information on the tax treatment of distributions, including the source of
dividends and distributions of capital gains by the Funds, will be mailed
to shareholders each year. Because everyone's tax situation is unique, you
should consult your tax adviser regarding the treatment of distributions
under the federal, state and local tax rules that apply to you.
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.
Your Investment 21
<PAGE>
SERVICES FOR FUND INVESTORS
AUTOMATIC SERVICES
We offer the following shareholder services:
Telephone Exchange Privilege. Class Y shares may be exchanged without a
service charge for Class Y shares of any Eligible Fund among the Lord
Abbett-sponsored funds.
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 Funds.
Account Changes. For any changes you need to make to your account, consult
your investment professional or call the Funds 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.
MANAGEMENT
The Funds' investment adviser is Lord, Abbett & Co., located at 90 Hudson
St., Jersey City, NJ 07302-3973. Founded in 1929, Lord Abbett manages one
of the nation's oldest mutual fund complexes, with approximately $33
billion in more than 40 mutual fund portfolios and other advisory accounts.
For more information about the services Lord Abbett provides to the Funds,
see the Statement of Additional Information.
Each Fund pays Lord Abbett a monthly fee based on average daily net assets
for each month. Lord Abbett is entitled to a monthly fee based on the
Affiliated Fund's average daily net assets for each month as follows:
.50 of 1% on the first $200 million in assets
.40 of 1% on the next $300 million
.375 of 1% on the next $200 million
.35 of 1% on the next $200 million
.30 of 1% on the Fund's assets over $900 million
Lord Abbett is entitled to a monthly fee based on the following Funds'
average daily net assets for each month as follows: .90% of 1% for Growth
Opportunities Fund; .60 of 1% for High Yield Fund; and .75 of 1% for each
of the International Series, Large-Cap Series and Small-Cap Series.For the
Funds' most recent fiscal years, the fees paid to Lord Abbett were at an
annual rate of .31 of 1% for Affiliated Fund and .75 of 1% for each of
International Series, Large-Cap Series and Small-Cap Value
Series. Lord Abbett waived its entire management fees and
subsidized a portion of the other expenses for the Growth Opportunities
Fund and High Yield Fund. Each Fund pays all expenses not expressly
assumed by Lord Abbett.
Portfolio Managers. Lord Abbett uses teams of portfolio managers and
analysts acting together to manage the Funds' investments.
Affiliated Fund and Large-Cap Series. The senior members of the team are:
Thomas Hudson Jr., Partner of Lord Abbett; Robert G. Morris, Partner of
Lord Abbett; and Eli M. Salzman, Portfolio Manager. Messrs. Hudson and
Morris have been with Lord Abbett since 1982 and 1991, respectively. Mr.
Salzman joined Lord Abbett in 1997; and previously he 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.
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. Each 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.
22 Your Investment
<PAGE>
Growth Opportunities Fund. Stephen J. McGruder, Partner of Lord Abbett,
heads the Fund's team, the other senior member of which is Frederic D. Ohr.
Mr. McGruder has been with Lord Abbett since 1995. Prior to joining Lord
Abbett, Mr. McGruder served as Vice President of Wafra Investment Advisory
Group, a private investment company from 1988 to 1995. Mr. Ohr joined Lord
Abbett in 1998. Before joining Lord Abbett, Mr. Ohr was a Vice President
and Senior Analyst with Chase Asset Management from 1991 to 1998. The Fund
is a portfolio of Lord Abbett Research Fund, Inc.
High Yield Fund. Christopher J. Towle, Partner of Lord Abbett, heads the
Fund's team, the other senior members of which are Michael Goldstein,
Richard Szaro and Thomas Baade. Messrs. Towle and Szaro joined Lord Abbett
in 1988 and 1983, respectively. Mr. Goldstein has been with Lord Abbett
since April 1997. Before joining Lord Abbett, Mr. Goldstein was a bond
trader for Credit Suisse BEA Associates from August 1992 through April
1997. Mr. Baade joined Lord Abbett in 1998; prior to that he was a credit
analyst with Greenwich Street Advisors. The Fund is a portfolio of Lord
Abbett Investment Trust.
International Series. Christopher J. Taylor is Managing Director of the
sub-adviser of the Fund, Fuji-Lord Abbett International Ltd., of which Lord
Abbett is a minority owner (formerly named Fuji Investment Management Co.
(Europe) Ltd.). Mr. Taylor heads the team, the senior member of which is
David Shaw, U.K. Equity Fund Manager. Mr. Shaw joined Fuji-Lord Abbett
International Ltd. in 1999 and previously was U.K. Fund Manager at National
Provident Institutions Asset Management from 1996 to 1999, a Senior
Investment Analyst at NatWest Investment Management from 1995 to 1996, and
was UK Investment Analyst at United Friendly Asset Management from 1992 to
1995. Mr. Taylor has been employed by the sub-adviser and its predecessor
companies since 1987.
Small-Cap Value Series. Robert P. Fetch, Partner of Lord Abbett, heads the
Fund's team, the other senior member of which is Gregory M. Macosko. Mr.
Fetch joined Lord Abbett in 1995; prior to that, he was was a Managing
Director of Prudential Investment Advisors from 1983 to 1995. Mr. Macosko
joined Lord Abbett in 1996; prior to that he was an Equity Analyst with
Quest Advisory Service from 1991 to 1996.
Your Investment 23
<PAGE>
FOR MORE INFORMATION
OTHER INVESTMENT TECHNIQUES
This section describes some of the investment techniques that might be used
by the Funds, and their risks.
Adjusting Investment Exposure. Each Fund may, but is not required to, use
various strategies to change its investment exposure to adjust to changing
security prices, interest rates, currency exchange rates, commodity prices
and other factors. These strategies may involve buying or selling
derivative instruments, such as options and futures contracts, swap
agreements including interest rate swaps, caps, floors, collars and rights
and warrants. Each Fund may use these transactions to change the risk and
return characteristics of its portfolio. If we judge market conditions
incorrectly or use a strategy that does not correlate well with the Fund's
investments, it could result in a loss, even if we intended to lessen risk
or enhance returns. These transactions may involve a small investment of
cash compared to the magnitude of the risk assumed and could produce
disproportionate gains or losses. Also, these strategies could result in
losses if the counterparty to a transaction does not perform as promised.
Closed-End Investment Companies. Each of the Growth Opportunities Fund,
International Series, Large-Cap Series and Small-Cap Value Series may
invest in shares of closed-end investment companies if bought in the
primary or secondary market with a fee or commission no greater than the
customary broker's commission. Each of the Growth Opportunities Fund,
Large-Cap Value Series and Small-Cap Series may not invest more than 5%
of its assets in closed-end investment companies.
Diversification. Each Fund is a diversified fund, which means that with
respect to 75% of its total assets, it will not purchase a security if, as
a result, more than 5% of the Fund's total assets would be invested in
securities of a single issuer or the fund would hold more than 10% of the
outstanding voting securities of the issuer. This does not apply to U.S.
government securities.
Depository Receipts. The International Series and the Small-Cap Value
Series may invest in Depository Receipts which are securities, typically
issued by a financial institution (a "depository"), that evidence ownership
interests in a security or a pool of securities issued by a foreign
issuer (the "underlying issuer") and deposited with the depository.
Generally, Depository Receipts in registered form are designed for use
in U.S. securities markets and Depository Receipts in bearer form are
designed for use in securities markets outside the United States.These
Funds' may invest in sponsored and unsponsored Depository Receipts.
For purposes of the International Series' investment policies,
investments in Depository Receipts will be deemed to be
investments in the underlying securities.
Equity Securities. Each Fund other than the High Yield Fund invests
primarily in equity securities. The High Yield Fund may invest up to 20% of
its total assets in equity securities. These include common stocks,
preferred stocks, convertible securities, warrants, and similar
instruments. Common stocks, the most familiar type, represent an ownership
interest in a corporation. Although equity securities have a history of
long-term growth in their value, their prices fluctuate based on changes in
a company's financial condition and on market and economic conditions.
Emerging Countries Risk. The International Series may invest in emerging
country securities. The securities markets of emerging countries are less
liquid, are especially subject to greater price volatility, have smaller
market capitalizations, have less government
24 For More Information
<PAGE>
regulation and are not subject to as extensive and frequent accounting,
financial and other reporting requirements as the securities markets of
more developed countries. Further, investing in the securities of issuers
located in certain emerging countries may involve a risk of loss resulting
from problems in security registration and custody or substantial economic
or political disruptions. These risks are not normally associated with
investments in more developed countries.
Futures Contracts and Options on Futures Contracts.The High Yield Fund,
Growth Opportunities Fund, International Series and Large-Cap Series
may engage in financial futures transactions. A financial futures
transaction is an exchange-traded contract to buy or sell a standard
quantity and quality of a financial instrument or index at a specific
future date and price. The High Yield Fund may not invest more than
5% of its assets in such transactions. The Growth Opportunities Fund,
International Series and Large-Cap Series will not enter into such
transactions, if the aggregate market value of the
securities covered by such contracts exceeds 50% of each such Fund's total
assets.
The Small-Cap Value Series may not purchase or sell stock index futures if,
immediately after a purchase or sale, more than one-third of its net assets
would be hedged. In addition, except in the case of a call written and held
on the same index, the Small-Cap Value Series will write call options on
indices or sell stock index futures only if the amount resulting from the
multiplication of the then current level of the index (or indices) upon
which the options or futures contract(s) is based, the applicable
multiplier(s), and the number of futures or options contracts which would
be outstanding would not exceed one-third of the value of the Small-Cap
Value Series' net assets.
A Fund's ability to enter into financial transactions is limited by certain
tax requirements in order to qualify as a regulated investment company.
Foreign Currency Transactions The Growth Opportunities Fund, International
Series and the Small-Cap Value Series may purchase or sell foreign
currencies on a cash basis or through forward contracts. A forward contract
involves an obligation to purchase or sell a specific currency at a future
date at a price set at the time of the contract. Although these Funds do
not normally engage in extensive
currency hedging, they may use foreign currency transactions to seek to
protect against anticipated changes in future foreign currency exchange
rates. It may be difficult or impractical to hedge currency risk in many
emerging countries.
In addition, the International Series may enter into such transactions
to seek to increase total return, which is considered a speculative
practice. The Fund generally would not enter
into a forward contract with a term greater than one year. Under some
circumstances, the Fund may commit a substantial portion or the entire
value of its portfolio to the completion of forward contracts.
The use of foreign currency transactions is subject to the general risk
that the portfolio managers will not accurately predict currency movements,
and the Funds' returns could be reduced. In addition, forward foreign
currency exchange contracts and other privately negotiated currency
instruments offer less protection against defaults than is available for
currency instruments traded on an exchange. Since these contracts are not
guaranteed by an exchange or clearinghouse, a default on a contract would
deprive a Fund of unrealized profits, transaction costs, or the benefits of
a currency hedge, or could force the Fund to cover its purchase or sale
commitments, if any, at the current market price. Currency exchange rates
may fluctuate significantly over short periods of time, causing the NAV of
the Fund involved to fluctuate.
Currency exchange rates may be affected unpredictably by the intervention
of U.S. or foreign governments or
For More Information 25
<PAGE>
central banks, or the failure to intervene, or by currency controls or
political developments in the United States or abroad.
Foreign Securities. The Affiliated Fund and High Yield Fund will limit
their investments in foreign securities to 10% and 20%, respectively, of
their total assets. The International Series may invest all of its assets
in foreign securities; the Growth Opportunities Fund and Small-Cap Value
Series will limit their investments in foreign securities to 35% of their
respective total assets. The Large-Cap Series may invest up to 10% in
foreign
securities. Foreign markets and the securities traded in them are not
subject to the same degree of regulation as U.S. markets. Securities
clearance and settlement procedures may be different in foreign countries.
There may be less trading volume in foreign markets, subjecting the
securities traded in them to higher price fluctuations. Transaction costs
may be higher in foreign markets. A Fund may hold foreign securities which
trade on days when the Fund does not sell shares. As a result, the value of
the Fund's portfolio securities may change on days an investor may not
purchase or sell Fund shares.
Foreign issuers are generally not subject to similar, uniform accounting,
auditing and financial reporting requirements as U.S. issuers. Foreign
investments may be affected by changes in currency rates or currency
controls.Certain foreign countries may limit a Fund's ability to remove its
assets from the country. With respect to certain foreign countries, there
is a possibility of nationalization, expropriation or confiscatory
taxation, imposition of withholding or other taxes,and political or social
instability which could affect investments in those countries.
Investment Funds. The International Series may invest (normally not more
than 5% of the Fund's total assets) in investment funds. Some emerging
countries have laws and regulations that currently preclude direct foreign
investment in the securities of their companies. However, indirect foreign
investment in the securities of such countries is permitted through
investment funds which have been specifically authorized. If the Fund
invests in such investment funds, the Fund's shareholders will bear not
only their proportionate share of the expenses of the Fund (including
operating expenses and the fees of Lord Abbett), but also will indirectly
bear similar expenses of the underlying investment funds.
Investment Grade Debt Securities. These are debt securities which are rated
in one of the four highest grades assigned by Moody's Investors Service,
Inc., Standard & Poor's Ratings Services or Fitch Investors Service, or are
unrated but determined by Lord Abbett to be equivalent in quality.
Options Transactions. The Growth Opportunities Fund, High Yield Fund,
International Series and Small-Cap Value Series may purchase and write
put and call options on equity securities or stock indices that are
traded on national securities exchanges.
A put option gives the buyer of the option the right to sell, and the
seller of the option the obligation to buy, the underlying instrument
during the option period. Each of the three Funds listed above may write
only covered put options to the extent that cover for such options does not
exceed 25% of the Fund's net assets. Each will not purchase an option if,
as a result of such purchase, more than 20% (in the case of the Growth
Opportunities Fund and Small-Cap Value Series) and 5% (in the case of the
International Series) of its net assets would be invested in premiums for
such options.
26 For More Information
<PAGE>
A call option gives the buyer of the option the right to buy, and the
writer (seller) of the option the obligation to sell, the underlying
instrument.
All Funds may write (sell) only "covered" options. This means that
Fund may only sell call options on securities which the Fund owns. When a
Fund writes a call option it gives up the potential for gain on the
underlying securities in excess of the exercise price of the option during
the period that the option is open.The Affiliated Fund, Growth
Opportunities Fund, International
Series and Large-Cap Series will only write "covered" call options on
securities having an aggregate market value not to exceed 10% of the
Affiliated Fund's assets or 5% of the Growth Opportunities Fund,
International Series' and Large-Cap Series' assets.
The High Yield Fund will only write covered call options and secured put
options on securities having an aggregate market value not to exceed 25% of
the High Yield Fund's assets.
Risks of Futures Contracts and Options Transactions. A Fund's
transactions, if any, in futures, options on futures and other
options involve additional risk of loss. Loss may result from a lack of
correlation between changes in the value of these derivative instruments
and the Fund's being hedged, the potential illiquidity
of the markets for derivative instruments, or the risks arising from margin
requirements and related leverage factors associated with such
transactions. The use of these investment techniques also involves the risk
of loss if the portfolio managers are incorrect in their expectation of
fluctuations in securities prices. In addition, the loss that may be
incurred by the International Fund in entering into futures contracts and
in writing call options on futures is potentially unlimited and may exceed
the amount of the premium received.
Portfolio Securities Lending. Each 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 Affiliated Fund, High Yield Fund
and International Series will limit their securities loans to 30% of their
total assets, while the Growth Opportunities Fund, Large-Cap Series and
Small-Cap Value Series will limit their securities loans to 5% of their
total assets.
Repurchase Agreements. Each Fund may enter into Repurchase Agreements. In a
repurchase agreement, a Fund buys a security at one price from a
broker-dealer or financial institution and simultaneously agrees to sell
the same security back to the same party at a higher price in the future.
If the other party to the agreement defaults or becomes insolvent, a Fund
could lose money.
When-Issued or Delayed Delivery Securities. Each Fund may purchase
or sell securities with payment and delivery taking place as much as a
month or more later. A Fund would do this in an effort to buy or sell the
securities at an advantageous price and yield. The securities involved are
subject to market fluctuation and no interest accrues to the purchaser
during the period between purchase and settlement. At the time of delivery
of the securities, their market value may be less than the purchase price.
Also, if a Fund commits a significant amount of assets to when-issued or
delayed delivery transactions, it may increase the volatility of the Fund's
portfolio.
GUARANTEED SIGNATURE. An acceptable form of guarantee would be as follows:
In the case of the estate --
Robert A. Doe
Executor of the Estate of
John W. Doe
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE ILLEGIBLE]
- --------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
In the case of the corporation --
ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE ILLEGIBLE]
- --------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
For More Information 27
<PAGE>
GLOSSARY OF SHADED TERMS
Eligible Fund. An Eligible Fund is any Lord Abbett-sponsored fund offering
Class Y shares.
Eurodollar. Eurodollars are U.S. currency held in banks outside the United
States, mainly in Europe, and commonly used for settling international
transactions. Some securities are issued in Eurodollars--that is, with a
promise to pay interest in dollars deposited in foreign bank accounts.
Legal Capacity. This term refers to the authority of an individual to act
on behalf of an entity or other person(s). For example, if a redemption
request were to be made 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.
To give another example, if a redemption request were to be made on behalf
of the ABC Corporation by a person (Mary B. Doe) who has the legal capacity
to act on behalf of the Corporation, because she is the president of the
corporation, 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 (see example in right column).
Mutual Fund Fee Based Program. Certain unaffiliated authorized brokers,
dealers, registered investment advisers or other financial institutions
("entities") who either (1) 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 entities, or (2) charge an advisory, consulting or other fee for their
services and buy shares for their own accounts or the accounts of their
clients.
RECENT PERFORMANCE
The following is a discussion of recent performance for the twelve month
period ending each Fund's respective fiscal year.
Affiliated Fund. The past fiscal year which ended October 31, 1999 was
characterized by continued
overall strength in both the broad equity market and the U.S. economy. Low
interest rates and a deceleration in earnings have driven the U.S. equity
market for the last two and one-half years. This environment favored a very
select group of large stocks that have had stable earnings growth. Rather
than venturing into "unknown" waters, investors stayed the course and
continued to purchase names familiar to them, remaining with companies that
exhibited strong earnings stories. The result, however, is that many of the
larger, more well-known growth names have become, in our opinion, quite
expensive.
In anticipation of an improvement in the global economy, we made an early
entry into the energy sector, a strategy that paid off well for the Fund.
In our view, the rise in oil prices initiated by OPEC, coupled with solid
fundamentals for many energy companies, helped to boost this sector. In
addition, the technology sector continued to outperform the general market.
However, despite strong performance by a number of holdings in this sector,
we recently began to reduce our exposure to technology, as prices began to
reach the upper end of our valuation discipline. We reinvested a good
portion of the proceeds from those sales into more traditional cyclical
sectors such as paper, chemicals and aluminum, and anticipate these areas
will benefit from a rise in commodity prices as the global economy
strengthens.
28 For More Information
<PAGE>
In addition, we have started to focus some attention toward the property
and casualty insurance sector during this period, and will continue to seek
out companies in this market segment that display improving fundamentals.
At the same time, we are generally underweighted in financial companies,
which has worked to our advantage since many of these stocks continued to
struggle during this period as interest rates increased. We believe there
is only a small chance that U.S. interest rates will continue to climb.
This view, coupled with the fact that many financial service companies have
solid fundamentals, will likely result in an increase in our exposure to
the financial services area.
Growth Opportunities Fund. The stock market rebounded sharply in the fourth
quarter ended November 30, 1999, with stocks of small- and mid-sized
growth companies asserting
their leadership versus large company growth stocks. Despite their strong
fourth quarter rally, small- and mid-cap stocks remained relatively cheap
on a price-to-earnings basis, often trading at a discount to large-cap
stocks. In addition, the average small- and mid-cap growth company offered
higher rates of expected earnings growth than the average large-cap
company, confirming the opportunities that exist in this segment of the
market.
During the period, we focused on increasing portfolio diversification both
across and within sectors. The Fund's investments in technology companies
continued to be significant positive contributors. The Fund's technology
holdings included companies from many diverse areas, such as
telecommunication services, software developers, and select equipment
manufacturers. We increased our emphasis on technology-related companies,
all of which turned out strong performances during the fourth quarter. The
ever-increasing demand for wireless communication services and products and
increased broadband access has benefited several of the portfolio's major
holdings.
Stock performance for many companies in the financial and healthcare
services sectors continued to be disappointing, but the Fund was not hurt
significantly, as our weightings in these sectors has been relatively
moderate. While healthcare services companies continued to suffer from
government and managed care-mandated price reductions, select
pharmaceutical companies entered into a new era of profitability as new
products were introduced to the market.
High Yield Fund. Lord Abbett High Yield Fund's strategy is to build a
portfolio of high-yield bonds from companies with strong earnings that are
well managed and are undervalued relative to their fundamentals. In
the fiscal year ended November 30, 1999, we
continued to find value among companies in the cable, media, technology and
telecommunications industries. With ongoing consolidation in these sectors,
many companies exhibit strong earnings potential due to the growth in data,
video and voice services. We increased our exposure to certain basic
industries such as paper companies, and increased our multinational
technology manufacturing and semiconductor holdings, which exhibited
visible price improvements and have the potential to benefit from global
economic growth. We remained underweighted in financial companies (e.g.,
banking, insurance), retail companies and other consumer-oriented companies
that were hurt by fierce competition in their respective industries.
International Series. During the last months of 1998, many of the world's
financial markets began to signal a possible recovery from a two-year
period of financial crisis and global deflation. By mid 1999, it became
apparent that this recovery was real, as economic indicators pointed to a
new phase of global economic expansion.
In the international equity markets, Europe, which remained subdued
throughout much of the period, rallied when recession fears proved false.
In addition, many European companies posted better-than-expected earnings
growth in late 1999 due to a solid local economy and a weak euro, relative
to the dollar and the yen, which boosted
For More Information 29
<PAGE>
exports. Japan, which benefited from a series of economic initiatives
during the period, continued to show signs of improvement, as it attracted
overseas money on the strength of its apparent recovery and its relative
importance to international investors.
In its fiscal year ended October 31, 1999, the Fund continued to implement
its investment strategy of focusing on
attractively priced, industry-dominant companies with global leadership
potential. During the period, the Fund remained overweighted in European
and Canadian companies that demonstrated superior corporate earnings growth
rates and attractive valuation levels relative to many companies in the Far
East and emerging markets. In general, we limited our exposure to Japanese
companies in traditional, old-style industries such as steel, chemicals and
paper, because we believe they require further corporate restructuring. In
addition, the sluggishness of Japan's overall economy does not bode well
for those industries. However, the Fund has invested in select Japanese
companies within new-style industries, such as telecommunications and
software. Indeed, a handful of these high-tech issues have accounted for
the majority of recent gains in the Japanese markets.
Large-Cap Series. We attribute the solid performance of your portfolio in
the fiscal year ended November 30, 1999 to
several factors. First, the new era of technology-related
telecommunications spawned several winning stocks for the portfolio.
Second, we sharply reduced our exposure to the consumer non-cyclical
sector, a group whose performance was poor for the year. Third, we
increased our allocation in the basic materials sector (aluminum, paper,
chemicals, etc.), as we believe this sector contains significant value.
Amidst merger and acquisition activity, the performance of the financial
sector weakened in 1999. Valuations suffered as acquiring banks eventually
found it hard to both cut costs and grow revenue. Intense competition
forced downward earnings revisions in the group and some of our holdings
suffered as a result.
Small-Cap Value Series. Our exposure to technology and telecommunications
stocks helped the overall performance of the portfolio in the fiscal year
ended November 30, 1999. Additionally, the
portfolio benefited from the purchase of several hardware technology stocks
that were depressed earlier in the year, but performed quite well as the
year progressed. When these stocks hit the target prices we had set, they
were sold and the proceeds were used to invest in other parts of the
technology sector such as software and information technology services.
Despite prospects of continuing consolidation, we remained significantly
underweighted in the financial sector. This paid off later as disappointing
earnings drove small-cap financial stocks down.
30 For More Information
<PAGE>
Affiliated Fund
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, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended October 31, 1999 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.
- --------------------------------------------------------------------------------
Class Y Shares
------------------------------------
Year Ended October 31,
Per Share Operating Performance: 1999 1998(c)
Net asset value, beginning of year $14.57 $15.44
Income from investment operations
Net investment income .26(e) .15
Net realized and unrealized gain
(loss) on investments 2.65 (.89)
Total from investment operations 2.91 (.74)
Distributions
Dividends from net investment income (.28) (.13)
Distributions from net realized gain (.95) --
Total distrutions (1.23) (.13)
Net asset value, end of year $16.25 $14.57
Total Return(a) 21.15% (4.77)%(d)
Ratios to Average Net Assets:
Expenses(b) .43% .24%(d)
Net investment income 1.67% 1.03%(d)
- --------------------------------------------------------------------------------
Year Ended October 31,
------------------------------------
Supplemental Data For All Classes: 1999 1998
Net Assets, end of year (000) $10,080,754 $8,520,603
- --------------------------------------------------------------------------------
Portfolio turnover rate 62.30% 56.49%
- --------------------------------------------------------------------------------
(a) Total return assumes the reinvestment of all distributions.
(b) The ratios for 1999 and 1998 include expenses paid through an expense
offset arrangement.
(c) From March 27, 1998 (commencement of offering) to October 31, 1998.
(d) Not annualized.
(e) Calculated using average shares outstanding during the period.
Financial Information 31
<PAGE>
Affiliated Fund
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 and S&P Barra Value Index,
assuming reinvestment of all dividends and distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NAV MAX S&P500 S&P Barra
10000 9422 10000 10000
9243 8709 9252 8802
11831 11147 12344 11502
13057 12301 13572 12456
15377 14488 15596 15465
16400 15452 16198 15804
19756 18614 20476 19444
24244 22937 25406 24229
30623 28853 33562 31425
33769 31816 40949 35117
40756 38400 51456 41793
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending October 31, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(3) 13.70% 18.55% 14.40%
- --------------------------------------------------------------------------------
Class B(4) 14.87% - 19.26%
- --------------------------------------------------------------------------------
Class C(5) 18.80% - 19.86%
- --------------------------------------------------------------------------------
Class P(6) 20.51% - 13.71%
- --------------------------------------------------------------------------------
Class Y(7) 21.15% 9.36%
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 5.75%.
(2) Performance for each unmanaged index does not reflect any fees or expenses.
The performance of the indices, particularly that of the S & P 500(R)
index, is not necessarily representative of the Fund's performance.
(3) This shows total return which is the percent change in net asset 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, 1999 using the SEC-required uniform method
to compute total return.
(4) The Class B shares were first offered on 8/1/96. Performance reflects the
deduction of a CDSC of 5% (for 1 year) and 3% (for life of the class).
(5) The Class C shares were first offered on 8/1/96. Performance reflects the
deduction of a CDSC of 1% (for 1 year) and )% (for the life of the class).
(6) The Class P shares were first offered on 12/8/97. Performance is at net
asset value.
(7) The Class Y shares were first offered on 3/27/98. Performance reflects the
deduction of a CDSCof 1% (for 1 year) and 0% (for the life of the class).
32 Financial Information
<PAGE>
Growth Opportunities
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 November 30, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended November 30, 1999 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.
- ------------------------------------------------------------------------------
Class Y Shares
--------------------------------
Year Ended November 30,
Per Share Operating Performance: 1999(a)
Net asset value, beginning of period $12.76
Income from investment operations
Net investment income .09(d)
Net realized and unrealized
gain on investments 6.09
Total from investment operations 6.18
Net asset value, end of period $18.94
Total Return(b) 48.43%(c)
Ratios to Average Net Assets:
Expenses, including waiver and reimbursements .06%(c)
Expenses, excluding waiver and reimbursements 1.27%(c)
Net investment income (loss) .62%(c)
- ------------------------------------------------------------------------------
Year Ended November 30,
------------------------------
Supplemental Data For All Classes: 1999
Net Assets, end of year (000) $59,647
- ------------------------------------------------------------------------------
Portfolio turnover rate 104.87%
- ------------------------------------------------------------------------------
(a) From December 9, 1998 (commencement of operations of Class Y
shares).
(b) Total return assumes the reinvestment of all distributions.
(c) Not annualized.
(d) Calculated using average shares outstanding during the period.
Financial Information 33
<PAGE>
Growth Opportunities
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in the Russell Mid-Cap Growth Index, assuming
reinvestment of all dividends and distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
10000 10000
10180 10524
13011 12581
16772 14962
17729 16189
26600 23040
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending November 30, 1999
1 Year Life
- --------------------------------------------------------------------------------
Class A(2) 41.40% 26.62%
- --------------------------------------------------------------------------------
Class Y(3) 50.44% 73.61%
- --------------------------------------------------------------------------------
(1) Performance for the unmanaged Russell Mid-Cap Growth Index does not reflect
any fees or expenses.
(2) This shows total return which is the percent change in net asset value,
with all dividends and distributions reinvested for the periods shown
ending November 30, 1999 using the SEC-required uniform method to compute
total return. The Class A share inception date is 8/1/95.
(3) The Class Y shares were first offered on 12/30/98.
34 Financial Information
<PAGE>
High Yield Fund
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 November 30, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended November 30, 1999 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.
- --------------------------------------------------------------------------------
Class Y Shares
-----------------------------
Year Ended November 30,
Per Share Operating Performance: 1999(a)
Net asset value, beginning of year $10.36
Income from investment operations
Net investment income .55
Net realized and unrealized loss on investments (.62)
Total from investment operations (.07)
Distributions
Dividends from net investment income (.56)
Net asset value, end of year $9.73
Total Return(b)(c) (.59)%
Ratios to Average Net Assets:(c),(d)
Expenses, including waiver and reimbursements --
Expenses, excluding waiver and reimbursements .51%
Net investment income 5.59%
- --------------------------------------------------------------------------------
Year Ended November 30,
------------------------------
Supplemental Data For All Classes: 1999
Net Assets, end of year (000) $28,689
- --------------------------------------------------------------------------------
Portfolio turnover rate 109.57%
- --------------------------------------------------------------------------------
(a) From May 4, 1999 (commencement of operations).
(b) Total return assumes the reinvestment of all distributions.
(c) Not annualized.
(d) Calculated using average shares outstanding during the year.
Financial Information 35
<PAGE>
High Yield Fund
Line Graph Comparison
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in both the Merrill Lynch High Yield Master Index
and the First Boston High Yield Index, assuming reinvestment of all
dividends and distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NAV Merrill First Boston
10000 10000 10000
10146 10099 10094
10194 10022 10073
10343 10108 10164
10585 10266 10277
10304 10176 10282
10390 10191 10287
10284 10091 10196
10284 10149 10117
10309 9990 10068
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending November 30, 1999
1 Year Life
- --------------------------------------------------------------------------------
Class A(2) 5.71% 18.74%
- --------------------------------------------------------------------------------
(1) Performance for each unmanaged index does not reflect any fees or expenses.
(2) This shows total return which is the percent change in net asset value,
with all dividends and distributions reinvested for the periods shown
ending November 30, 1999 using the SEC-required uniform method to compute
total return. Because Class Y has less than one year of performance, the
total returns shown are for Class A shares. Returns for Class Y shares are
expected to be somewhat higher than those of Class A shares because Class Y
shares have lower expenses. The Class A share inception date is 8/1/95.
36 Financial Information
<PAGE>
International Series
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, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended October 31, 1999 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.
- --------------------------------------------------------------------------------
Class Y Shares
----------------------------------
Year Ended October 31,
Per Share Operating Performance: 1999 1998(a)
Net asset value, beginning of year $12.41 $11.28
Income (loss) from investment operations
Net investment income(d) .12 .15
Net realized and unrealized gain on
investments and foreign currency holdings 1.56 .98
Total from investment operations 1.68 1.13
Distributions
Dividends from net investment income (.07) --
Distributions from net realized gain (.02) --
Net asset value, end of year $14.00 $12.41
Total Return(b) 13.65% 10.02%(c)
Ratios to Average Net Assets:
Expenses 1.20%(e) .84%(c)
Net investment income .86% 1.11%(c)
- --------------------------------------------------------------------------------
Year Ended October 31,
----------------------------------------
Supplemental Data For All Classes: 1999 1998
Net Assets, end of year (000) $213,087 $153,033
- --------------------------------------------------------------------------------
Portfolio turnover rate 75.15% 20.52%
- --------------------------------------------------------------------------------
(a) From December 30, 1997 (commencement of offering).
(b) Total return assumes the reinvestment of all distributions.
(c) Not annualized.
(d) Calculated using average shares outstanding during the year.
(e) The ratio includes expenses paid through an expense offset arrangement.
Financial Information 37
<PAGE>
International Series
GRAPHIC OMITTED
LINE GRAPH COMPARISON
NAV MSCI EAFE
10000
10047 10000
10174 9652
10609 9812
10673 9850
10662 9905
10938 10551
11224 11136
11245 11319
10874 10475
11553 11064
11521 10217
11325 10114
12027 10205
12558 10675
13601 11362
14877 11715
15517 11809
16003 11755
15610 11847
15631 11970
13398 10489
12643 10170
13175 11233
14909 13859
Immediately below is a comparison of a $10,000
investment in Class A shares to the same investment in the Morgan Capital
International Stanley
European, Australasia and Far East Index("MSCI EAFE Index"), assuming
reinvestment of all dividends and distributions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending October 31, 1999
1 Year Life
- --------------------------------------------------------------------------------
Class A(2) 14.36% 15.76%
- --------------------------------------------------------------------------------
Class Y(3) 13.65% 12.92%
- --------------------------------------------------------------------------------
(1) Performance for the unmanaged index does not reflect any fees or expenses.
Performance for this index begins on 12/31/96.
(2) This shows total return which is the percent change in net asset value,
with all dividends and distributions reinvested for the periods shown
ending October 31, 1999 using the SEC-required uniform method to compute
total return.The Class A share inception date is 12/13/96.
(3) The Class Y shares were first offered on 12/30/97.
38 Financial Information
<PAGE>
Large-Cap Series
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 November 30, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended November 30, 1999 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.
- ------------------------------------------------------------------------------
Class Y Shares
--------------------------------
Year Ended November 30,
Per Share Operating Performance: 1999(c)
Net asset value, beginning of period $25.21
Income from investment operations
Net investment income(a) .04
Net realized and unrealized gain on investments .09
Total from investment operations .13
Distributions
Dividends from net investment income (.04)
Net asset value, end of year $25.30
Total Return(b)(d) .52%
Ratios to Average Net Assets:(d)
Expenses .63%(e)
Net investment income .15%
- ------------------------------------------------------------------------------
Year Ended November 30,
--------------------------------
Supplemental Data For All Classes: 1999
Net Assets, end of year (000) $256,003
- ------------------------------------------------------------------------------
Portfolio turnover rate 60.59%
- ------------------------------------------------------------------------------
(a) Calculated using average shares outstanding during the period.
(b) Total return assumes the reinvestment of all distributions.
(c) From May 4, 1999, commencement of offering of Class Y shares.
(d) Not annualized.
(e) The ratio includes expenses paid through an expense offset arrangement.
Financial Information 39
<PAGE>
Large-Cap Series
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in the S&P500(R) Index and S&P Barra Value Index,
assuming reinvestment of all dividends and distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NAV S&P 500 S&P BARRA
10000 10000 10000
10599 10702 10363
12478 11781 12303
13502 11903 12283
17934 16299 16575
22642 20838 21127
27142 26777 26425
30790 33118 29926
36023 40037 33652
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending November 30, 1999
1 Year 5 Years Life
- --------------------------------------------------------------------------------
Class A(2) 10.30% 20.26% 17.73%
- --------------------------------------------------------------------------------
(1) Performance for each unmanaged index does not reflect fees or expenses.
Performance for these indices begins on 6/30/92.
(2) This shows total return which is the percent change in net asset value,
with all dividends and distributions reinvested for the periods shown
ending November 30, 1999 using the SEC-required uniform method to compute
total return. Because Class Y has less than one year of performance, the
total returns shown are for Class A shares. Returns for Class Y shares are
expected to be somewhat higher than those of Class A shares because Class Y
shares have lower expenses. The Class A share inception date is 6/3/92.
40 Financial Information
<PAGE>
Small-Cap Value Series
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 November 30, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended November 30, 1999 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.
- --------------------------------------------------------------------------------
Class Y Shares
---------------------------------
Year Ended November 30,
Per Share Operating Performance: 1999 1998(a)
Net asset value, beginning of period $14.40 $16.34
Income (loss) from investment operations
Net investment loss(b) (.07) (.01)
Net realized and unrealized gain
(loss) on investments 1.38 (1.93)
Total from investment operations 1.31 (1.94)
Distributions
Distributions from net realized gain -- --
Net asset value, end of year $15.71 $14.40
Total Return(c) 9.10% (11.87)%(d)
Ratios to Average Net Assets
Expenses 1.19%(e) .96%(d)
Net investment loss (.47)%(e) (.05)%(d)
- --------------------------------------------------------------------------------
Year Ended November 30,
---------------------------------------
Supplemental Data For All Classes: 1999 1998
Net Assets, end of year (000) $460,549 $515,379
- --------------------------------------------------------------------------------
Portfolio turnover rate 83.93% 67.86%
- --------------------------------------------------------------------------------
(a) From December 30, 1997 (commencement of offering).
(b) Calculated using average shares outstanding during the period.
(c) Total return assumes the reinvestment of all distributions.
(d) Not annualized.
(e) The ratio includes expenses paid through an expense offset arrangement.
Financial Information 41
<PAGE>
Small-Cap Value Series
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in the Russell 2000 Index, assuming reinvestment of
all dividends and distributions.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NAV RUSSELL 2000
10000 10000
8813 9177
9614 10615
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending November 30, 1999
1 Year Life
- --------------------------------------------------------------------------------
Class A(2) 2.60% 12.61%
- --------------------------------------------------------------------------------
Class Y(3) 9.10% -2.03%
- --------------------------------------------------------------------------------
(1) Performance for the unmanaged Russell 2000 Index does not reflect any fees
or expenses. Performance of this index begins on 12/31/95.
(2) This shows total return which is the percent change in net asset value,
with all dividends and distributions reinvested for the periods shown
ending November 30, 1999 using the SEC-required uniform method to compute
total return. The Class A share inception date is 12/13/95.
(3) The Class Y shares were first offered on 12/30/97.
42 Financial Information
<PAGE>
More information on these Funds is available free upon request, including
the following:
ANNUAL/SEMI-ANNUAL REPORT
Describes each Fund, lists portfolio holdings and contains a letter from
each Fund's manager discussing recent market conditions and each Fund's
investment strategies.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Provides more details about the Funds and their 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).
Lord Abbett Affiliated Fund, Inc.
Lord Abbett Growth Opportunities Fund
Lord Abbett High Yield Fund
Lord Abbett Securities Trust-
International Series
Lord Abbett Research Fund, Inc -
Large-Cap Series
Small-Cap Value Series
90 Hudson Street
Jersey City, NJ 07302-3973
- --------------------------------------------------------------------------------
SEC file numbers: 811-5, 811-6650, 811-7988, 811-7538, 811-6650, 811-6650
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
90 Hudson Street
Jersey City, NJ 07302-3973
Via the Internet.
Lord, Abbett & Co.
www.lordabbett.com
Text only versions of Fund
documents can be viewed
online or downloaded from:
SEC
www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 202-942-8090) or by sending your request and a duplicating
fee to the SEC's Public Reference Section, Washington, DC 20549-6009 or by
sending your request electronically to [email protected].
LAPROSP-Y6-1-599
(5/99)
<PAGE>
Lord, Abbett & Co.
Statement of Additional Information March 1, 2000
Lord Abbett Affiliated Fund, Inc.
Lord Abbett Growth Opportunities Fund
Lord Abbett High Yield Fund
Lord Abbett Securities Trust - International Series
Lord Abbett Research Fund, Inc. - Large-Cap Series
Lord Abbett Research Fund, Inc. - Small-CapValue Series
This Statement of Additional Information is not a Prospectus. A Prospectus for
Class Y shares of the Funds mentioned below may be obtained from your securities
dealer or from Lord Abbett Distributor LLC ("Lord Abbett Distributor") at the 90
Hudson Street, Jersey City, New Jersey 07302-3973. This Statement of Additional
Information relates to, and should be read in conjunction with, the Prospectus
dated March 1, 2000. This Statement of Additional Information, relates to Class
Y shares of Lord Abbett Affiliated Fund, Inc. ("Affiliated Fund"); Lord Abbett
Research Fund, Inc. - Large-Cap Series, ("Large-Cap Series"); Lord Abbett
Research Fund, Inc. - Small-Cap Value Series ("Small-Cap Value Series"); Lord
Abbett Growth Opportunities Fund ("Growth Opportunities Fund"); Lord Abbett
Securities Trust - International Series ("International Series"); and Lord
Abbett High Yield Fund ("High Yield Fund") (each individually "we" or the
"Fund," and collectively the "Funds") and may be obtained from your securities
dealer or from Lord Abbett Distributor at 90 Hudson Street, Jersey City, New
Jersey 07302-3973.
TABLE OF CONTENTS PAGE
1. Investment Policies 2
2. Directors (Trustees) and Officers 11
3. Investment Advisory and Other Services 17
4. Portfolio Transactions 19
5. Purchases, Redemptions
and Shareholder Services 20
6. Taxes 21
7. Performance 22
8. Information About The Funds 23
9. Financial Statements 23
1
<PAGE>
1.
Investment Policies
Fundamental Investment Restrictions. The Funds are subject to the following
investment restrictions which cannot be changed without approval of a majority
of each Fund's outstanding shares.
Each Fund may not:
(1) borrow money, except that (i) each Fund may borrow from banks (as defined
in the Investment Company Act of 1940, as amended (the "Act")) in amounts
up to 33 1/3% of its total assets (including the amount borrowed), (ii)
each Fund may borrow up to an additional 5% of its total assets for
temporary purposes, (iii) each Fund may obtain such short-term credit as
may be necessary for the clearance of purchases and sales of portfolio
securities and (iv) each 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 each 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 each 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 each 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 each Fund, buy securities of one
issuer representing more than (i) 5% of each 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, each
Fund also is subject to the following non-fundamental investment policies which
may be changed by the Boards of Directors (Trustees) without shareholder
approval.
Each Fund may not:
(1) borrow in excess of 33 1/3% of its total assets (including the amount
borrowed), and then only as a temporary measure for extraordinary or
emergency purposes;
(2) make short sales of securities or maintain a short position except to the
extent permitted by applicable law;
(3) invest knowingly more than 15% of its net assets (at the time of
investment) in illiquid securities, except for securities qualifying for
resale under Rule 144A of the Securities Act of 1933, deemed to be liquid
by the Boards of Directors (Trustees);
<PAGE>
(4) invest in the securities of other investment companies as defined under the
Act, except as permitted by applicable law;
(5) invest in securities of issuers which, with their predecessors, have a
record of less than three years of continuous operation, if more than 5% of
each Fund's total assets would be invested in such securities (this
restriction shall not apply to mortgaged-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 of each Fund's officers
or directors (trustees) 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 each
Fund's total assets (included within such limitation, but not to exceed 2%
of each 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 each 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 a 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 a Fund's officers, directors (trustees),
employees, or its investment adviser any securities other than shares of a
Fund;
(11) with respect to Affiliated Fund, 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; and
(12) with respect to High Yield Fund, invest more than 10% of the market value
of its gross assets at the time of investment in debt securities which are
in default as to interest or principal.
For the year ended October 31, 1999, Affiliated Fund's portfolio turnover rate
was 62.30% versus 56.49% for the prior year. For the year ended November 30,
1999, the Small-Cap Value Series' portfolio turnover rate was 83.93% versus
67.86% for the prior year; and the Large-Cap Series' portfolio turnover rate was
60.59% versus 99.14% for the prior year. For the year ended October 31, 1999,
the International Series' portfolio turnover rate was 75.15% versus 20.52% for
the year ended October 31, 1999. For the year ended November 30, 1999, the
Growth Opportunities Fund's turnover rate was 104.87% versus 136.81% for the
prior year.
With respect to the Affiliated Fund, it has no current intention to do so, but
may invest in financial futures & options on financial futures.
INVESTMENT TECHNIQUES
Lending Portfolio Securities (Affiliated Fund, Growth Opportunities Fund,
International Series, Large-Cap Series, Small-Cap Value Series) The Funds may
lend portfolio securities to registered broker-dealers. These loans may not
exceed 30% of total assets. The Funds' 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 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 Funds may allow to the borrower
and/or a third party that is not affiliated with the Funds 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 Funds.
By lending portfolio securities, the Funds can increase their 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 Funds
will comply with the following conditions whenever they loans securities: (i)
the Funds 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 Funds must
be able to terminate the loan at any time; (iv) the Funds must receive
reasonable compensation with respect to the loan, as well as any dividends,
interest or other distributions on the loaned securities; (v) the Funds 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 Funds'
Board must terminate the loan and regain the right to vote the securities.
3
<PAGE>
Rule 144A Securities (Affiliated Fund) The Fund 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 (Affiliated Fund and Large-Cap Series) Both Funds 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 income and
to provide greater flexibility in the disposition of 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, a Fund
will 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 the 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 a Fund is unable to enter into a closing purchase
transaction, it may be required to hold a security that it might otherwise have
sold to protect against depreciation. A Fund does not intend to write covered
call options with respect to securities with an aggregate market value of more
than 10% of its gross assets at the time an option is written. This percentage
limitation will not be increased without prior disclosure in a Fund's current
Prospectus.
Repurchase Agreements (International Series) The Fund may enter into repurchase
agreements with respect to a security. A repurchase agreement is a transaction
by which the Fund acquires a security and simultaneously commits to resell that
security to the seller (a bank or securities dealer) at an agreed upon price on
an agreed upon date. The resale price reflects the purchase price plus an agreed
upon market rate of interest which is unrelated to the coupon rate or date of
maturity of the purchased security. In this type of transaction, the securities
purchased by the Fund have a total value in excess of the value of the
repurchase agreement. The Fund requires at all times that the repurchase
agreement be collateralized by cash or U.S. Government securities having a value
equal to, or in excess of, the value of the repurchase agreement. Such
agreements permit the Fund to keep all of its assets at work while retaining
flexibility in pursuit of investments of a longer term nature.
The use of repurchase agreements involves certain risks. For example, if the
seller of the agreement defaults on its obligation to repurchase the underlying
securities at a time when the value of these securities has declined, the Fund
may incur a loss upon disposition of them. If the seller of the agreement
becomes insolvent and subject to liquidation or reorganization under the
Bankruptcy Code or other laws, a bankruptcy court may determine that the
underlying securities are collateral not within the control of the Fund and are
therefore subject to sale by the trustee in bankruptcy. Even though the
repurchase agreements may have maturities of seven days or less, they may lack
liquidity, especially if the issuer encounters financial difficulties. While
Fund management acknowledges these risks, it is expected that they can be
controlled through stringent selection criteria and careful monitoring
procedures. Fund management intends to limit repurchase agreements to
transactions with dealers and financial institutions believed by Fund management
to present minimal credit risks. Fund management will monitor creditworthiness
of the repurchase agreement sellers on an ongoing basis.
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The Fund will enter into repurchase agreements only with those primary reporting
dealers that report to the Federal Reserve Bank of New York and with the 100
largest United States commercial banks and the underlying securities purchased
under the agreements will consist only of those securities in which the Fund
otherwise may invest.
Warrants (International Series and Large-Cap Series) Pursuant to Texas
regulations, both Funds will not invest more than 5% of its assets in warrants
and not more than 2% of such value in warrants not listed on the New York or
American Stock Exchanges, except when they form a unit with other securities. As
a matter of operating policy, we will not invest more than 5% of our net assets
in rights.
Covered Call Options (International Series and Large-Cap Series) Both Funds may
write covered call options which are traded on a national securities exchange
with respect to securities in its portfolio in an attempt to increase its income
and to provide greater flexibility in the disposition of its 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, a Fund forgoes 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 its net premium). Each Fund may enter into
"closing purchase transactions" in order to terminate its 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 a Fund is unable to enter into a closing
purchase transaction, it may be required to hold a security that it might
otherwise have sold to protect against depreciation. Both Funds intend to write
covered call options with respect to securities with an aggregate market value
of more than 5% of its gross assets at the time an option is written. This
percentage limitation will not be increased without prior disclosure in the
current Prospectus.
The Funds' custodian will segregate cash or liquid high-grade debt securities in
an amount not less than that required by Securities and Exchange Commission
("SEC") Release 10666 with respect to the Funds' assets committed to written
covered call options. If the value of the segregated securities declines,
additional cash or debt securities will be added on a daily basis (i.e.,
marked-to-market) so that the segregated amount will not be less than the amount
of the Funds' commitments with respect to such written options.
Financial Futures Contracts (International Series and Large-Cap Series) Both
Funds may enter into contracts for the future delivery of a financial
instrument, such as a security or the cash value of a securities index. This
investment technique is designed primarily to hedge (i.e., protect) against
anticipated future changes in interest rates or market conditions which
otherwise might adversely affect the value of securities which we hold or intend
to purchase. A "sale" of a futures contract means the undertaking of a
contractual obligation to deliver the securities or the cash value of an index
called for by the contract at a specified price during a specified delivery
period. A "purchase" of a futures contract means the undertaking of a
contractual obligation to acquire the securities or cash value of an index at a
specified price during a specified delivery period. At the time of delivery
pursuant to the contract, adjustments are made to recognize differences in value
arising from the delivery of securities which differ from those specified in the
contract. In some cases, securities called for by a futures contract may not
have been issued at the time the contract was written. Both Funds will not enter
into any futures contracts or options on futures contracts if the aggregate of
the market value of the securities covered by its outstanding futures contracts
and securities covered by futures contracts subject to the outstanding options
written by it would exceed 50% of its total assets.
Although some financial futures contracts by their terms call for the actual
delivery or acquisition of securities, in most cases, a party will close out the
contractual commitment before delivery without having to make or take delivery
of the security by purchasing (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, if effected through a member of an exchange, cancels the
obligation to make or take delivery of the securities. All transactions in the
futures market are made, offset or fulfilled through a clearing house associated
with the exchange on which the contracts are traded. The International Series
will incur brokerage fees when it purchases or sells contracts and will be
required to maintain margin deposits. At the time it enters into a futures
contract, it is required to deposit with its custodian, on behalf of the broker,
a specified amount of cash or eligible securities called "initial margin." The
initial margin required for a futures contract is set by the exchange on which
the contract is traded. Subsequent payments, called "variation margin," to and
from the broker are made on a daily basis as the market price of the futures
contract fluctuates. The costs incurred in connection with futures transactions
could reduce the Funds' return. Futures contracts entail risks. If the
investment adviser's judgment about the general direction of interest rates or
markets is wrong, the overall performance may be poorer than if no such
contracts had been entered into.
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There may be an imperfect correlation between movements in prices of futures
contracts and portfolio securities being hedged. The degree of difference in
price movements between futures contracts and the securities (or securities
indices) being hedged depends upon such things as variations in demand for
futures contracts and securities underlying the contracts and differences
between the liquidity of the markets for such contracts and the securities
underlying them. In addition, the market prices of futures contracts may be
affected by certain factors not directly related to the underlying securities.
At any given time, the availability of futures contracts, and hence their
prices, are influenced by credit conditions and margin requirements. Due to the
possibility of price distortions in the futures market and because of the
imperfect correlation between movements in the prices of securities and
movements in the prices of futures contracts, a correct forecast of market
trends by the investment adviser may not result in a successful hedging
transaction.
Options on Financial Futures Contracts (International Series and Large-Cap
Series) Both Funds may purchase and write call and put options on financial
futures contracts. An option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time during the period of the
option. Upon exercise, the writer of the option delivers the futures contract to
the holder at the exercise price. Both Funds would be required to deposit with
our custodian initial margin and maintenance margin with respect to put and call
options on futures contracts written by us. Options on futures contracts involve
risks similar to the risks relating to transactions in financial futures
contracts described above. Generally speaking, a given dollar amount used to
purchase an option on a financial futures contract can hedge a much greater
value of underlying securities than if that amount were used to directly
purchase the same financial futures. Should the event that a Fund intends to
hedge (or protect) against not materialize, however, the option may expire
worthless, in which case the Fund would lose the premium paid therefor.
Segregated Accounts (International Series and Large-Cap Series) To the extent
required to comply with Securities and Exchange Commission Release 10666 and any
related SEC policies, when purchasing a futures contract, or writing a put
option, each Fund will maintain in a segregated account at its custodian bank
cash, U.S. Government and other permitted securities to cover its position.
Forward Foreign Currency Contracts (Growth Opportunities Fund, Small-Cap Value
Series,) A forward foreign currency contract involves an obligation to purchase
or sell a specific amount of a specific currency at a set price at a future
date. Each Fund expects to enter into forward foreign currency contracts in
primarily two circumstances. First, when a Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, it may desire
to "lock in" the U.S. dollar price of the security. By entering into a forward
contract for the purchase or sale of the amount of foreign currency involved in
the underlying security transaction, each Fund will be able to protect against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the period between the date
the security is purchased or sold and the date on which payment is made or
received.
Second, when management believes that the currency of a particular foreign
country may suffer a decline against the U.S. dollar, each Fund may enter into a
forward contract to sell the amount of foreign currency approximating the value
of some or all of each Fund's portfolio securities denominated in such foreign
currency or, in the alternative, each Fund may use a cross-hedging technique
whereby it sells another currency which each Fund expects to decline in a
similar way but which has a lower transaction cost. Precise matching of the
forward contract amount and the value of the securities involved will not
generally be possible since the future value of such securities denominated in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date the forward contract is entered into and
the date it matures. Each Fund does not intend to enter into such forward
contracts under this second circumstance on a continuous basis.
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Repurchase Agreements (Growth Opportunities Fund, Small-Cap Value Series) If a
Fund enters into repurchase agreements as provided in clause (4) of the
fundamental investment restrictions above, it will do so only with those primary
reporting dealers that report to the Federal Reserve Bank of New York and with
the 100 largest United States commercial banks and the underlying securities
purchased under the agreements will consist only of those securities in which
each Fund otherwise may invest.
Foreign Currency Hedging Techniques (Growth Opportunities Fund, Small-Cap Value
Series) The Funds may utilize various foreign currency hedging techniques,
including forward foreign currency contracts and foreign currency put and call
options.
Foreign Currency Put and Call Options (Growth Opportunities Fund, Small-Cap
Value Series) The Funds also may purchase foreign currency put options and write
foreign currency call options on U.S. exchanges or U.S. over-the-counter
markets. A put option gives the Funds, upon payment of a premium, the right to
sell a currency at the exercise price until the expiration of the option and
serves to insure against adverse currency price movements in the underlying
portfolio assets denominated in that currency.
Exchange-listed options markets in the United States include several major
currencies, and trading may be thin and illiquid. A number of major investment
firms trade unlisted options which are more flexible than exchange-listed
options with respect to strike price and maturity date. Unlisted options
generally are available in a wider range of currencies. Unlisted foreign
currency options are generally less liquid than listed options and involve the
credit risk associated with the individual issuer. Unlisted options, together
with other illiquid securities, are subject to a limit of 15% of each Funds' net
assets.
A call option written by a Fund gives the purchaser, upon payment of a premium,
the right to purchase a currency at the exercise price until the
expiration of the option. The Funds may write call options on a foreign currency
only in conjunction with a purchase of a put option on that currency. Such a
strategy is designed to reduce the cost of downside currency protection by
limiting currency appreciation potential. The face value of such writing may not
exceed 90% of the value of the securities denominated in such currency invested
in by the Funds or in such cross currency (referred to above) to cover such call
writing.
The Funds' custodian will segregate cash or permitted securities belonging to
the Funds in an amount not less than that required by SEC Release 10666 and
related policies with respect to the Funds' assets committed to (a) writing
options, (b) forward foreign currency contracts and (c) cross hedges entered
into by the Funds. If the value of the securities segregated declines,
additional cash or debt securities will be added on a daily basis (i.e., marked
to market), so that the segregated amount will not be less than the amount of
the Funds' commitments with respect to such written options, forward foreign
currency contracts and cross hedges.
Stock Options, Options on Stock Indices and Stock Index Futures (Small-Cap Value
Series) The Fund may write put and call options on stocks only if they are
covered, and such options must remain covered so long as the Fund is obligated
as a writer. The Fund will not (a) write puts having an aggregate exercise price
greater than 25% of the Fund's total net assets; or (b) purchase (i) put options
on stocks not held in the Fund's portfolio, (ii) put options on stock indices or
(iii) call options on stocks or stock indices if, after any such purchase, the
aggregate premiums paid for such options would exceed 20% of the Fund's total
net assets.
Call Options on Stock (Small-Cap Value Series) The Fund may, from time to time,
write call options on its portfolio securities. The Fund may write only call
options which are "covered," meaning that the Fund either owns the underlying
security or has an absolute and immediate right to acquire that security,
without additional cash consideration, upon conversion or exchange of other
securities currently held in its portfolio. In addition, the Fund will not
permit the call to become uncovered prior to the expiration of the option or
termination through a closing purchase transaction as described below. If the
Fund writes a call option, the purchaser of the option has the right to buy (and
the Fund has the obligation to sell) the underlying security at the exercise
price throughout the term of the option. The amount paid to the Fund by the
purchaser of the option is the "premium." The Fund's obligation to deliver the
underlying security against payment of the exercise price would terminate either
upon expiration of the option or earlier if the Fund were to effect a "closing
purchase transaction" through the purchase of an equivalent option on an
exchange. There can be no assurance that a closing purchase transaction can be
effected. The Fund does not intend to write covered call options with respect to
securities with an aggregate market value of more than 5% of it's gross assets
at the time an option is written. This percentage limitation will not be
increased without prior disclosure in our current prospectus.
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The Fund would not be able to effect a closing purchase transaction after it had
received notice of exercise. In order to write a call option, the Fund is
required to comply with the rules of The Options Clearing Corporation and the
various exchanges with respect to collateral requirements. The Fund may not
purchase call options except in connection with a closing purchase transaction.
It is possible that the cost of effecting a closing purchase transaction may be
greater than the premium received by the Fund for writing the option.
Generally, the Fund intends to write listed covered call options during periods
when it anticipates declines in the market values of portfolio securities
because the premiums received may offset to some extent the decline in the
Fund's net asset value occasioned by such declines in market value. Except as
part of the "sell discipline" described below, the Fund will generally not write
listed covered call options when it anticipates that the market values of it's
portfolio securities will increase.
One reason for the Fund to write call options is as part of a "sell discipline."
If the Fund decides that a portfolio security would be overvalued and should be
sold at a certain price higher than the current price, it could write an option
on the stock at the higher price. Should the stock subsequently reach that price
and the option be exercised, the Fund would, in effect, have increased the
selling price of that stock, which it would have sold at that price in any
event, by the amount of the premium. In the event the market price of the stock
declined and the option were not exercised, the premium would offset all or some
portion of the decline. It is possible that the price of the stock could
increase beyond the exercise price; in that event, the Fund would forego the
opportunity to sell the stock at that higher price.
In addition, call options may be used as part of a different strategy in
connection with sales of portfolio securities. If, in the judgment of the Fund's
Management, the market price of a stock is overvalued and it should be sold, the
Fund may elect to write a call option with an exercise price substantially below
the current market price. As long as the value of the underlying security
remains above the exercise price during the term of the option, the option will,
in all probability, be exercised, in which case the Fund will be required to
sell the stock at the exercise price. If the sum of the premium and the exercise
price exceeds the market price of the stock at the time the call option is
written, the Fund would, in effect, have increased the selling price of the
stock. The Fund would not write a call option in these circumstances if the sum
of the premium and the exercise price were less than the current market price of
the stock.
Put Options on Stock (Small-Cap Value Series) The Fund may also write listed put
options. If the Fund writes a put option, it is obligated to purchase a given
security at a specified price at any time during the term of the option.
Writing listed put options is a useful portfolio investment strategy when the
Fund has cash or other reserves available for investment as a result of sales of
Fund shares or, more importantly, because Fund Management believes a more
defensive and less fully invested position is desirable in light of market
conditions. If the Fund Management wishes to invest its cash or reserves in a
particular security at a price lower than current market value, it may write a
put option on that security at an exercise price which reflects the lower price
it is willing to pay. The buyer of the put option generally will not exercise
the option unless the market price of the underlying security declines to a
price near or below the exercise price. If the Fund writes a listed put, the
price of the underlying stock declines and the option is exercised, the premium,
net of transaction charges, will reduce the purchase price paid by the Fund for
the stock. The price of the stock may decline by an amount in excess of the
premium, in which event the Fund would have foregone an opportunity to purchase
the stock at a lower price.
If, prior to the exercise of a put option, the Fund determines that it no longer
wishes to invest in the stock on which the put option had been written, the Fund
may be able to effect a closing purchase transaction on an exchange by
purchasing a put option of the same stock as the one which it has previously
written. The cost of effecting a closing purchase transaction may be greater
than the premium received on writing the put option and there is no guarantee
that a closing purchase transaction can be effected.
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Stock Index Options (Small-Cap Value Series) Except as described below, the Fund
will write call options on indices only if on such date it holds a portfolio of
stocks at least equal to the value of the index times the multiplier times the
number of contracts. When the Fund writes a call option on a broadly-based stock
market index, it will segregate or put into escrow with its custodian, or pledge
to a broker as collateral for the option, one or more "qualified securities"
with a market value at the time the option is written of not less than 100% of
the current index value times the multiplier times the number of contracts.
Segregated Accounts (Small-Cap Value Series) If the Fund has written an option
on an industry or market segment index, it will segregate or put into escrow
with its custodian, or pledge to a broker as collateral for the option, at least
ten "qualified securities," which are securities of an issuer in such industry
or market segment, with a market value at the time the option is written of not
less than 100% of the current index value times the multiplier times the number
of contracts. A "qualified security" is an equity security which is listed on a
national securities exchange or listed on the National Association of Securities
Dealers Automated Quotation System against which the Fund has not written a
stock call option and which has not been hedged by the Fund by the sale of stock
index futures. Such securities will include stocks which represent at least 50%
of the weighting of the industry or market segment index and will represent at
least 50% of the Fund's holdings in that industry or market segment. No
individual security will represent more than 25% of the amount so segregated,
pledged or escrowed. If at the close of business on any day the market value of
such qualified securities so segregated, escrowed or pledged falls below 100% of
the current index value times the multiplier times the number of contracts, the
Fund will so segregate, escrow or pledge an amount in cash, Treasury bills or
other high-grade short-term obligations equal in value to the difference. In
addition, when the Fund writes a call on an index which is in-the-money at the
time the call is written, the Fund will segregate with its custodian or pledge
to the broker as collateral cash, equity securities, non-investment grade debt,
short term U.S. Government securities or other high-grade short-term debt
obligations equal in value to the amount by which the call is in-the-money times
the multiplier times the number of contracts. Any amount segregated pursuant to
the foregoing sentence may be applied to the Small-Cap Value Series' obligation
to segregate additional amounts in the event that the market value of the
qualified securities falls below 100% of the current index value times the
multiplier times the number of contracts. However, if the Fund holds a call on
the same index as the call written where the exercise price of the call held is
equal to or less than the exercise price of the call written or greater than the
exercise price of the call written if the difference is maintained by the Fund
in cash, equity securities, non-investment grade debt, treasury bills or other
high-grade short-term obligations in a segregated account with its custodian, it
will not be subject to the requirements describe in this paragraph. In instances
involving the purchase of stock index futures contracts by the Fund, an amount
of cash or permitted securities equal to the market value of the futures
contracts will be deposited in a segregated account with its custodian
and/or in a margin account with a broker to collateralize the position and
thereby insure that the use of such futures are unleveraged.
Under regulations of the Commodity Exchange Act, investment companies registered
under the Act are exempt from the definition of "commodity pool operator,"
provided all of the Fund's commodity futures or commodity options transactions
constitute bona fide hedging transactions within the meaning of the CFTC's
regulations. The Fund will use stock index futures and options on futures as
described herein in a manner consistent with this requirement.
Stock Index Futures (Small-CapValue Series) The Fund will engage in transactions
in stock index futures contracts as a hedge against changes resulting from
market conditions in the values of securities which are held in the Fund's
portfolio or which it intends to purchase. The Fund will engage in such
transactions when they are economically appropriate for the reduction of risks
inherent in the ongoing management of the Fund. The Fund may not purchase or
sell stock index futures if, immediately thereafter, more than one-third of its
net assets would be hedged and, in addition, except as described above in the
case of a call written and held on the same index, will write call options on
indices or sell stock index futures only if the amount resulting from the
multiplication of the then current level of the index (or indices) upon which
the option or future contract(s) is based, the applicable multiplier(s), and the
number of futures or options contracts which would be outstanding, would not
exceed one-third of the value of the Fund's net assets.
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RISK FACTORS
Risk Factors (Affiliated Fund) As stated in the Prospectus, the Fund may invest
no more than 5% of its net assets (at the time of investment) in lower-rated,
high-yield bonds. In general, the market for lower-rated, high-yield bonds is
more limited than the market for higher-rated bonds, and because trading in such
bonds may be thinner and less active, the market prices of such bonds may
fluctuate more than the prices of higher-rated bonds, particularly in times of
market stress. In addition, while the market for high-yield, corporate debt
securities has been in existence for many years, the market in recent years
experienced a dramatic increase in the large-scale use of such securities to
fund highly-leveraged corporate acquisitions and restructurings. Accordingly,
past experience may not provide an accurate indication of future performance of
the high-yield bond market, especially during periods of economic recession.
Other risks which may be associated with lower-rated, high-yield bonds include
their relative insensitivity to interest-rate changes; the exercise of any of
their redemption or call provisions in a declining market which may result in
their replacement by lower-yielding bonds; and legislation, from time to time,
which may adversely affect their market. Since the risk of default is higher
among lower-rated, high-yield bonds, Lord Abbett's research and analyses are an
important ingredient in the selection of such bonds. Through portfolio
diversification, good credit analysis and attention to current developments and
trends in interest rates and economic conditions, investment risk can be
reduced, although there is no assurance that losses will not occur. The Fund
does not have any minimum rating criteria applicable to the fixed-income
securities in which it invests.
Risks of Transactions in Stock Options (Small-Cap Value Series) Writing options
involves the risk that there will be no market in which to effect a closing
transaction. An option position may be closed out only on an exchange which
provides a secondary market for an option of the same Fund. Although the Fund
will generally write only those options for which there appears to be an active
secondary market, there is no assurance that a liquid secondary market on an
exchange will exist for any particular option, or at any particular time, and
for some options no secondary market on an exchange may exist. If the Fund, as a
covered call option writer, is unable to effect a closing purchase transaction
in a secondary market, it will not be able to sell the underlying security until
the option expires or it delivers the underlying security upon exercise.
Risks of Options on Indices (Small-CapValue Series) The Fund's purchase and sale
of options on indices will be subject to risks described above under "Risk of
Transactions in Stock Options." In addition, the distinctive characteristics of
options on indices create certain risks that are not present with stock options.
Because the value of an index option depends upon movements in the level of the
index rather than the price of a particular stock, whether the Fund will realize
a gain or loss on the purchase or sale of an option on an index depends upon
movements in the level of stock prices in the stock market generally or in an
industry or market segment rather than movements in the price of a particular
stock. Accordingly, successful use by the Fund of options on indices would be
subject to the investment adviser's ability to predict correctly movements in
the direction of the stock market generally or of a particular industry. This
requires different skills and techniques than predicting changes in the price of
individual stocks.
Index prices may be distorted if trading of certain stocks included in the index
is interrupted. Trading in the index option also may be interrupted in certain
circumstances, such as if trading were halted in a substantial number of stocks
included in the index. If this occurred, the Fund would not be able to close out
options which it had purchased or written and, if restrictions on exercise were
imposed, may be unable to exercise an option it holds, which could result in
substantial losses to the Fund. It is the Fund's policy to purchase or write
options only on indices which include a number of stocks sufficient to minimize
the likelihood of a trading halt in the index.
Trading in index options commenced in April 1983 with the S&P 100 option
(formerly called the CBOE 100). Since that time a number of additional index
option contracts have been introduced including options on industry indices.
Although the markets for certain index option contracts have developed rapidly,
the markets for other index options are still relatively illiquid. The ability
to establish and close out positions on such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
this market will develop in all index option contracts. The Fund will not
purchase or sell any index option contract unless and until, in Fund
management's opinion, the market for such options has developed sufficiently
that such risk in connection with such transactions in no greater than such risk
in connection with options on stocks.
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Special Risks of Writing Calls on Indices (Small-Cap Value Series) Because
exercises of index options are settled in cash, a call writer cannot determine
the amount of its settlement obligations in advance and, unlike call writing on
specific stocks, cannot provide in advance for, or cover, its potential
settlement obligations by acquiring and holding the underlying securities.
However, the Fund will write call options on indices only under the
circumstances described above under "Limitations on the Purchases and Sales of
Stock Options, Options on Stock Indices and Stock Index Futures."
Price movements in the Fund's portfolio probably will not correlate precisely
with movements in the level of the index and, therefore, the Fund bears the risk
that the price of the securities held may not increase as much as the index. In
such event the Fund would bear a loss on the call which is not completely offset
by movements in the price of the Fund's portfolio. It is also possible that the
index may rise when the Fund's portfolio of stocks does not rise. If this
occurred, the Fund would experience a loss on the call which is not offset by an
increase in the value of its portfolio and might also experience a loss in its
portfolio. However, because the value of a diversified portfolio will, over
time, tend to move in the same direction as the market, movements in the value
of the Fund in the opposite direction to the market would be likely to occur for
only a short period or to a small degree.
Unless the Fund has other liquid assets that are sufficient to satisfy the
exercise of a call, the Fund would be required to liquidate portfolio securities
in order to satisfy the exercise. Because an exercise must be settled within
hours after receiving the notice of exercise, if the Fund fails to anticipate an
exercise, it may have to borrow (in amounts not exceeding 20% of the Fund's
total assets) pending settlement of the sale of securities in its portfolio and
would incur interest charges thereon.
When the Fund has written a call, there is also a risk that the market may
decline between the time the call is written and the time the Fund is able to
sell stocks in its portfolio. As with stock options, the Fund will not learn
that an index option has been exercised until the day following the exercise
date but, unlike a call on stock where the Fund would be able to deliver the
underlying securities in settlement, the Fund may have to sell part of its stock
portfolio in order to make settlement in cash, and the price of such stocks
might decline before they can be sold. This timing risk makes certain strategies
involving more than one option substantially more risky with index options than
with stock options. For example, even if an index call which the Fund has
written is "covered" by an index call held by the Fund with the same strike
price, the Fund will bear the risk that the level of the index may decline
between the close of trading on the date the exercise notice is filed with the
clearing corporation and the close of trading on the date the Fund exercises the
call it holds or the time the Fund sells the call which in either case would
occur no earlier than the day following the day the exercise notice was filed.
Special Risks of Purchasing Puts and Calls on Indices (Small-Cap Value Series)
If the Fund holds an index option and exercises it before final determination of
the closing index value for that day, it runs the risk that the level of the
underlying index may change before closing. If such a change causes the
exercised option to fall out-of-the-money, the Fund will be required to pay the
difference between the closing index value and the exercise price of the option
(times the applicable multiple) to the assigned writer. Although the Fund may be
able to minimize this risk by withholding exercise instructions until just
before the daily cut off time or by selling rather than exercising an option
when the index level is close to the exercise price it may not be possible to
eliminate this risk entirely because the cut off times for index options may be
earlier than those fixed for other types of options and may occur before
definitive closing index values are announced.
2.
Directors (Trustees) and Officers
The Board of Directors/Trustees of each Fund is responsible for the management
of the business and affairs of each Fund.
11
<PAGE>
The following director/trustee is a partner of Lord, Abbett & Co. ("Lord
Abbett"), 90 Hudson Street, Jersey City, New Jersey 07302-3973. He has been
associated with Lord Abbett for over five years and is also an officer,
director, or trustee of thirteen other Lord Abbett-sponsored funds.
*Robert S. Dow, age 54, Chairman and President
*Mr. Dow is an "interested person" as defined in the Act.
The following outside directors/trustees are also directors or trustees of
thirteen other Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow, Director/Trustee
245 Park Avenue, Suite 2414
New York, New York
Senior Adviser, Time Warner Inc. (since 1998). Formerly, Acting Chief Executive
Officer of Courtroom 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 58.
William H. T. Bush, Director/Trustee
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 (since 1986). Age 61.
Robert B. Calhoun, Jr., Director/Trustee
Monitor Clipper Partners
650 Madison Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners (since 1997) and President of The
Clipper Group L.P., both private equity investment funds (since 1990). Age 57.
Stewart S. Dixon, Director/Trustee
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. (since 1990). Age
69.
John C. Jansing, Director/Trustee
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 74.
C. Alan MacDonald, Director/Trustee
Directorship Inc.
8 Sound Shore Drive
Greenwich, Connecticut
12
<PAGE>
Currently involved in golf development management on a consultancy basis (since
1999). Formerly, Managing Director of The Directorship Inc., a consultancy in
board management and corporate governance (1997-1999). Prior to that, 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
66.
Hansel B. Millican, Jr., Director/Trustee
Rochester Button Company
1328 Broadway (Suite 816)
New York, New York
President and Chief Executive Officer of Rochester Button Company (since 1991).
Age 71.
Thomas J. Neff, Director/Trustee
Spencer Stuart
277 Park Avenue
New York, New York
Chairman of Spencer Stuart, an executive search consulting firm (since 1976).
Currently serves as Director of Ace, Ltd. (NYSE). Age 62.
For the Fiscal Year Ended October 31, 1999 - Affiliated Fund;
International Series For the Fiscal Year Ended November 30, 1999 - Growth
Opportunities Fund; Large-Cap Series; Small-Cap Value
Series; High Yield Fund
The following table sets forth the compensation accrued for each Fund's
outside directors/trustees for their respective fiscal years.
Aggregate
Name of Director Compensation Accrued by each Fund/1
Affiliated Research Investment Securities
Fund Fund Trust Trust
E. Thayer Bigelow $ 27,341 $ 1,720 $5,906 $ 1,709
William H. T. Bush* $ 27,240 $ 1,718 $5,897 $ 1,703
Robert B. Calhoun, Jr.** $ 26,880 $ 1,695 $5,820 $ 1,680
Stewart S. Dixon $ 27,600 $ 1,740 $5,974 $ 1,725
John C. Jansing/4 $ 26,880 $ 1,695 $5,820 $ 1,680
C. Alan MacDonald $ 27,120 $ 1,710 $5,871 $ 1,695
Hansel B. Millican, Jr. $ 27,120 $ 1,710 $5,871 $ 1,695
Thomas J. Neff $ 28,046 $ 1,775 $6,095 $ 1,753
*Elected as of August 13, 1998
**Elected as of June 17, 1998
13
<PAGE>
The following table sets forth information with respect to the equity-based
benefits accrued for outside directors/trustees by the Lord Abbett-sponsored
funds for the twelve months ended October 31, 1999.
Pension or Retirement Benefits
Accrued by each Fund and All Other
Name of Director Lord Abbett-sponsored Funds/2
- ---------------- -----------------------------
E. Thayer Bigelow $ 17,622
William H.T. Bush* $ 15,846
Robert B. Calhoun, Jr.** $ 12,276
Stewart S. Dixon $ 32,420
John C. Jansing/4 $ 41,108
C. Alan MacDonald $ 26,763
Hansel B. Millican, Jr. $ 37,822
Thomas J. Neff $ 20,313
The following table sets forth the total compensation accrued by all Lord
Abbett sponsored funds for
the outside director/trustees. No director/trustee of the funds associated
with Lord Abbett and no officer of the funds received any compensation from
the funds for acting as a director or officer.
For Year Ended December 31, 1999
Total Compensation Accrued by each Fund and
Name of Director Thirteen Other Lord Abbett-sponsored Funds/3
- ---------------- --------------------------------------------
E. Thayer Bigelow $ 57,720
William H.T. Bush* $ 58,000
Robert B. Calhoun, Jr.** $ 57,000
Stewart S. Dixon $ 58,500
John C. Jansing/4 $ 57,250
C. Alan MacDonald $ 57,500
Hansel B. Millican, Jr. $ 57,500
Thomas J. Neff $ 59,660
1. Outside directors' fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on the
net assets of each Fund. A portion of the fees payable by each Fund to its
outside directors is being deferred under a plan ("equity based plan") that
deems the deferred amounts to be invested in shares of the Fund for later
distribution to the directors/trustees.
2. The amounts were accrued by the Lord Abbett-sponsored funds for the twelve
months ended October 31, 1999 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. Directors
participating in the retirement plan had the option to convert their accrued
benefits under the plan. All of the outside directors except one made such an
election. Each plan also provides for a pre-retirement death benefit and
actuarially reduced joint-and-survivor spousal benefits.
3. This table shows aggregate compensation, including directors/trustees 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, 1999 (including fees directors have chosen to defer) but
does not include amounts accrued under the equity based plan.. The amounts of
the aggregate compensation payable as of each of their respective 1999 fiscal
year ends deemed invested in Fund shares, including dividends reinvested and
changes in net asset value applicable to such deemed investments were:
14
<PAGE>
For Affiliated Fund, the aggregate compensation payable by the Fund as of
October 31, 1999 deemed invested in Fund shares, including dividends reinvested
and changes in net asset value applicable to such deemed investments, were: Mr.
Bigelow, $177,464; Mr. Bush, $1,512; Mr. Calhoun, Jr., $39,595; Mr. Dixon,
$337,337;
Mr. Jansing, $575,176; Mr. MacDonald, $422,105; Mr. Millican, $743,736; and Mr.
Neff, $657,888. If the amounts deemed invested in Fund shares were added to each
director's actual holdings of Fund shares as of October 31, 1999 each would own,
the following: Mr. Bigelow, $177,464; Mr. Bush, $1,512; Mr. Calhoun, $39,595;
Mr. Dixon, $351,857; Mr. Jansing, $923,464; Mr. MacDonald, $780,769;
Mr. Millican, 743,736; and Mr. Neff, $721,255.
The amounts of the aggregate compensation payable by the Large-Cap Series as of
November 30, 1999 deemed invested in Company shares, including dividends
reinvested and changes in net asset value applicable to such deemed investments,
were: Mr. Bigelow, $1,474; Mr. Bush, $23 Mr. Calhoun, $625; Mr. Dixon, $509;
Mr. Jansing,
$852; Mr. MacDonald, $462; Mr. Millican, $1474; and Mr. Neff, $1,187. If the
amounts deemed invested in Company shares were added to each director's actual
holdings of Company shares as of November 30, 1999, each would own, the
following: Mr. Bigelow, ; Mr. Bush, ; Mr. Calhoun, ; Mr. Dixon, ;
Mr. Jansing, ; Mr. MacDonald, ; Mr. Millican,
; and Mr. Neff, .
The amounts of the aggregate compensation payable by the Growth Opportunities
Fund as of November 30, 1999 deemed invested in Company shares, including
dividends reinvested and changes in net asset value applicable to such deemed
investments, were: Mr. Bigelow, $30; Mr. Calhoun, $31; Mr. Jansing, $30;
Mr. Millican, $31; and Mr. Neff, $31. If the amounts deemed
invested in Company shares were added to each director's actual holdings of
Company shares as of November 30, 1999, each would own, the following: Mr.
Bigelow, ; Mr. Dixon, ; Mr. Jansing, ; Mr.
MacDonald, ; Mr. Millican, ; and Mr. Neff, .
The amounts of the aggregate compensation payable by the International Series
as of November 30, 1999 deemed invested in Company shares, including dividends
reinvested and changes in net asset value applicable to such deemed investments,
were: Mr. Bigelow, $793; Mr. Calhoun, $601; Mr. Jansing,
$657; Mr. MacDonald, $49; Mr. Millican, $667; and Mr. Neff, $686.
If the amounts deemed invested in Company shares were added to each director's
actual holdings of Company shares as of November 30, 1998, each would own, the
following: Mr. Bigelow, ; Mr. Calhoun, ; Mr. Dixon, ;
Mr. Jansing, ; Mr. MacDonald, ; Mr. Millican,
; and Mr. Neff, .
For the Small-Cap Value Series,the amounts of the aggregate compensation payable
by the Fund as of October 31, 1999 deemed invested in Company shares, including
dividends reinvested and changes in net asset value applicable to such deemed
investments, were: Mr. Bigelow, $2712; Mr. Bush, $82; Mr. Calhoun, $2084;
Mr. Dixon, $157; Mr. Jansing, $2503; Mr. MacDonald, $481; Mr. Millican,
$2712; and Mr. Neff, $2712. If the amounts deemed invested in Company
shares were added to each
director's actual holdings of Company shares as of October 31, 1999, each would
own, the following: Mr. Bigelow, 183 shares; Mr. Bush, $0; Mr. Calhoun, 28
shares; Mr. Dixon, 625 shares; Mr. Jansing, 7,370 shares; Mr. MacDonald, 1,163
shares; Mr. Millican, 2,709 shares; and Mr. Neff, 3,273 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 each Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Brown, Fetch, Carper, Gerber, Hilstad, Hudson, McGruder, Morris, and Walsh are
partners of Lord Abbett; the others are employees:
Executive Vice Presidents:
Zane E. Brown, age 48 (International Series)
15
<PAGE>
Robert P. Fetch, age 47 (Large-Cap Series; Small-Cap Value Series) (with Lord
Abbett since 1995 - formerly Managing Director at Prudential Investment Advisors
from 1983 to 1995)
Robert I. Gerber, age 45 (High Yield Fund) (with Lord Abbett since 1997 -
formerly Senior Portfolio Manager at Sanford Bernstein & Co. from 1992 - 1997)
W. Thomas Hudson, Jr. age 58 (Affiliated Fund)
Robert G. Morris, age 55 (Growth Opportunities Fund; High Yield Fund;
International Series; Large-Cap Series; Small-Cap Value Series)
Stephen J. McGruder, age 56 (Growth Opportunities Fund; Large-Cap Series) (with
Lord Abbett since 1995 - formerly Vice President of Wafra Securities from 1988
to 1995)
Vice Presidents:
Paul A. Hilstad, age 57, Vice President and Secretary (all Funds) (with Lord
Abbett since 1995 - formerly Senior Vice President and General Counsel of
American Capital Management & Research, Inc.)
Joan A. Binstock, age 45 (with Lord Abbett since 1999, formerly Chief Operating
Officer of Morgan Grenfell from 1996 to 1999, prior thereto Principal of Ernst &
Young LLP)
Zane E. Brown, age 48 (Large-Cap Series; Small-Cap Value Series)
Daniel E. Carper, age 48 (all Funds)
Timothy Horan, age 45 (International Series) (with Lord Abbett since 1996 -
formerly Senior Manager at Credit Suisse from 1994 to 1995; prior thereto Vice
President at Aubrey G. Lanston & Co. from 1992 to 1994)
Lawrence H. Kaplan, age 43, Vice President and Assistant Secretary (all Funds)
(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.)
Jerald Lanzotti, age 32 (International Series)
Gregory M. Macosko, age 52 (Large-Cap Series; Small-Cap Value Series) (with Lord
Abbett since 1997 - formerly Analyst with Royce Associates from 1991 to 1997)
Robert G. Morris, age 55 (Affiliated Fund)
A. Edward Oberhaus III, age 40 (all Funds)
Tracie E. Richter, age 32 (with Lord Abbett since 1999, formerly Vice President
- -Head of Fund Administration of Morgan Grenfell from 1998 to 1999, Vice
President of Bankers Trust from 1996 to 1998, prior thereto Tax Associate of
Goldman Sachs)
Fernando Saldanha, age 47 (International Series) (with Lord Abbett since 1998 -
formerly Economist and Senior Financial Officer of World Bank (IBRO) from 1988
to 1998)
Eli M. Salzman, age 34 (Affiliated Fund) (with Lord Abbett since 1997 - formerly
Vice President of Mutual of America Capital Corp.; prior thereto Vice President
of Mitchell Hutchins Asset Mgt. from 1986 to 1996)
Christopher J. Towle, age 42 (International Series)
16
<PAGE>
John J. Walsh, age 63 (all Funds); and
Treasurer:
Donna M. McManus, age 39, Treasurer (all Funds) (with Lord Abbett since 1996 -
formerly a Senior Manager at Deloitte & Touche LLP).
As of February 12, 2000, our officers and directors owned as a group less than
1% of each Fund's Y shares. As of February 12, 2000, there were no record
holders of 5% or more of each Fund's outstanding Y shares.
The Funds' By-Laws provide that each Fund shall not hold a meeting of its
stockholders in any year unless one or more matters are required to be acted on
by stockholders under the Investment Company Act of 1940, as amended (the
"Act"), or unless called by a majority of the Board of Directors (Trustees) or
by shareholders holding at least one quarter of the stock of each Fund's
outstanding and entitled to vote at the meeting.
3.
Investment Advisory and Other Services
As described under "Management" in the Prospectus, Lord Abbett is the investment
manager of the Funds. Ten of the general partners of Lord Abbett are officers
and/or board members of the Funds, as follows: Zane E. Brown; Daniel E. Carper;
Robert S. Dow; Robert P. Fetch; Robert I. Gerber; Paul A. Hilstad; W. Thomas
Hudson; Stephen J. McGruder; Robert G. Morris; Christopher J. Towle; and John J.
Walsh.
The other general partners who are neither officers nor directors of the Funds
are Stephen Allen, John E. Erard, Daria L. Foster, Michael B. McLaughlin, R.
Mark Pennington, and Robert J. Noelke. The address of each partner is 90 Hudson
Street, Jersey City, New Jersey 07302-3973.
The services performed by Lord Abbett are described in the Prospectus under
"Management." Under its Management Agreement, Affiliated Fund pays 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 its 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.
Under its Management Agreement:
Growth Opportunities Fund is obligated to pay Lord Abbett a monthly fee, based
on average daily net assets for each month, at the annual rate of .90 of 1% of
the Fund's average daily net assets. On September 15, 1999, the Fund's
shareholders voted to raise the management fee to .90 of 1%.
High Yield Fund is obligated to pay Lord Abbett a monthly fee, based on average
daily net assets for each month, at the annual rate of .60 of 1% of its average
daily net assets.
Large-Cap Series and Small-Cap Value Series are each obligated to pay Lord
Abbett a monthly fee, based on average daily net assets for each month, at the
annual rate of .75 of 1% of each's average daily net assets.
International Series is obligated to pay Lord Abbett a monthly fee, based on
average daily net assets for each month, at the annual rate of .75 of 1%.
The following is a summary of the Management Fee for the 1999, 1998 and 1997
fiscal years of the funds:
17
<PAGE>
<TABLE>
<CAPTION>
Gross Management Management
Fund Fiscal Year Management Fees Fees Waived Fees Paid
---- ----------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
Affiliated Fund 1999 $29,829,606 $ 0 $29,829,606
1998 $26,317,934 $ 0 $26,317,934
1997 $22,192,209 $ 0 $22,192,209
Growth 1999 $ 159,804 $ 159,804 $ 0
Opportunities 1998 $ 16,316 $ 16,316 $ 0
Fund 1997 $ 10,844 $ 10,844 $ 0
International 1999 $ 139,980 $ 0 $ 139,980
Series 1998 $ 700,368 $ 0 $ 700,368
1997 $ 127,715 $ 0 $ 127,715
Small-Cap Value 1999 $ 3,562,324 $ 0 $ 3,562,324
Series 1998 $ 4,270,210 $ 0 $ 4,270,210
1997 $ 1,075,019 $ 0 $ 1,075,019
Large-Cap 1999 $ 1,498,289 $ 0 $ 1,498,289
Series 1998 $ 768,947 $ 0 $ 768,547
1997 $ 334,394 $ 0 $ 334,394
</TABLE>
Lord Abbett has entered into an agreement with Fuji-Lord Abbett International
Ltd. ("the Sub-Adviser"), under which the Sub-Adviser provides Lord Abbett with
advice with respect to the International Series' assets. The Sub-Adviser is
controlled by Fuji Investment Management Co. (Tokyo). Fuji Bank Limited of
Tokyo, Japan ("Fuji Bank") directly owned 40% of the outstanding voting stock of
the Sub-Adviser. Fuji Investment Management Co. (Tokyo) is an affiliate of Fuji
Bank. Lord Abbett owns approximately 27% of such outstanding voting stock. As of
November 30, 1999, the Sub-Adviser manages approximately $915 million, which is
invested globally. The Sub-Adviser furnishes Lord Abbett with advice and
recommendations with respect to the International Series' assets, including
advice about the allocation of investments among foreign securities markets and
foreign equity and debt securities markets and foreign equity and debt
securities and, subject to consultation with Lord Abbett, advice as to cash
holdings and what securities in the portfolio should be purchased, held or
disposed of. The Sub-Adviser also gives advice with respect to foreign currency
matters. Lord Abbett is obligated to pay the Sub-Adviser a monthly fee, based on
average daily net assets for each month, at the annual rate of .375 of 1%. For
the fiscal year ended October 31, 1999, October 31, 1998 and for the period
December 13, 1996 (commencement of operations) to October 31, 1997, the fees
paid to the Sub-Adviser by Lord Abbett were $ , $350,184 and $63,857,
respectively.
Each Fund's fee is allocated among all of its classes based on each Fund's
proportionate share of such daily net assets.
In addition, each Fund is obligated to pay all expenses not expressly assumed by
Lord Abbett, including, without limitation, outside directors' fees and
expenses, association membership dues, legal and auditing fees, taxes, transfer
and dividend disbursing agent fees, shareholder servicing costs, expenses
relating to shareholder meetings, expenses of preparing, printing and mailing
stock certificates and shareholder reports, expenses of registering our shares
under federal and state securities laws, expenses of preparing, printing and
mailing prospectuses to existing shareholders, insurance premiums, brokerage and
other expenses connected with executing portfolio transactions.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281 are
the independent auditors for each Fund and must be approved at least annually by
each Fund's Board of Directors (Trustees) to continue in such capacity. They
perform audit services for each Fund including the audits of financial
statements included in each Fund's annual report to shareholders.
18
<PAGE>
The Bank of New York ("BNY"), 48 Wall Street, New York, New York 10268, is each
Fund's custodian. In accordance with the requirements of Rule 17f-5, each Fund's
directors (trustees) have approved arrangements permitting each Fund's foreign
assets not held by BNY or its foreign branches to be held by certain qualified
foreign banks and depositories.
The Sub-Custodians of BNY are:
Euro-Clear (a transnational securities depository); Australia: ANZ Banking
Group; Austria: Creditanstalt-Bankverein; Canada: Canadian Imperial Bank of
Commerce; Chile: Citibank, N.A.; Czech Republic: Ceskoslovenska Obchodni Banka;
Denmark: Den Danske Bank; Finland: Union Bank of Finland; Germany: J.P. Morgan
GmbH; Greece: National Bank of Greece S.A.; Hong Kong, Indonesia, Philippines,
Taiwan and Thailand: Hong Kong & Shanghai Banking Corp.; Hungary: Citibank
Budapest Rt; India: Hong Kong and Shanghai Banking Corporation; Ireland: Allied
Irish Banks, PLC; Israel: Bank Leumi LE-Israel B.M.; Japan: The Fuji Bank, Ltd.;
Jordan: Citibank, N.A.; Korea: Bank of Seoul; Luxembourg: Banque Internationale
A Luxembourg, S.A.; Mexico: Citibank, N.A.; Morocco: Banque Commerciale du
Maroc; Netherlands: Bank van Haften Labouchere; New Zealand: Anz Banking Group
Ltd.; Norway: Den Norske Bank; Pakistan: Citibank, N.A.; Peru: Citibank, N.A.;
Poland: Bank Handlowy w Warszawie S.A.; Portugal: Banco Espirito Santo E
Comercial de Lisboa; Malaysia, Singapore: Development Bank of Singapore; South
Africa: The First National Bank of Southern Africa; Sri Lanka: Hong Kong and
Shanghai Banking Corporation; Sweden: Skandinaviska Enskilda Banken;
Switzerland: Bank Leu; Turkey: Citibank, N.A.; Venezuela: Citibank, N.A.
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 databases. Such services may be used
by Lord Abbett in servicing all their accounts, and not all of such services
will necessarily be used by Lord Abbett in connection with their management of
the Fund; conversely, such services furnished in connection with brokerage on
other accounts managed by Lord Abbett may be used in connection with their
management of the Fund, and not all of such services will necessarily be used by
Lord Abbett in connection with their advisory services to such other accounts.
We have been advised by Lord Abbett that research services received form brokers
cannot be allocated to any particular account, are not a substitute for Lord
Abbett's services but are supplemental to their own research effort and, when
utilized, and 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.
19
<PAGE>
No commitments are made regarding the allocation of brokerage business to or
among brokers, and trades are executed only when they are dictated by investment
decisions of 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-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.
For the fiscal years ended October 31, 1999, 1998 and 1997, Affiliated Fund paid
total commissions to independent dealers of $11,088,462 , $12,832,030, and
$7,681,037, respectively.
For the fiscal year ended November 30, 1999, 1998 and 1997, Growth Opportunities
Fund paid total commissions to independent broker-dealers of $ 91,960 ,
$12,741, and $3,678, respectively.
For the fiscal year ended October 31, 1999, 1998 and the period December 13,
1996 (commencement of operations) through October 31, 1997, International Series
paid total commissions to independent broker-dealers of $ 380,452, $321,480
and $108,281, respectively.
For the fiscal years ended November 30, 1999, 1998, and 1997, the Large-Cap
Series paid total commissions to independent broker-dealers of $395,908,
$321,279 and $88,234, respectively.
For the fiscal years ended November 30, 1999, 1998, and 1997, the Small-Cap
Value Series paid total commissions to independent broker-dealers of $1,492,501
$1,564,340, and $1,812,425, respectively.
5.
Purchases, Redemptions
and Shareholder Services
Information concerning how we value our shares for the purchase and redemption
of our shares is contained in the Prospectus under "Purchases" and
"Redemptions," respectively.
As disclosed in the Prospectus, we calculate our net asset value as of the close
of the New York Stock Exchange ("NYSE") on each day that the NYSE is open for
trading by dividing our total net assets by the number of shares outstanding at
the time of calculation. 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.
20
<PAGE>
Each 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 /Trustees.
The net asset value per share for the Class Y shares will be determined by
taking Class Y shares net assets and dividing by shares outstanding. Our Class Y
shares will be offered at net asset value.
Each 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 each 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.
Class Y Share Exchanges. The Prospectus describes the Telephone Exchange
Privilege. You may exchange some or all of your Y shares for Y shares of any
Lord Abbett-sponsored funds currently offering Class Y shares to the public.
Currently those other funds consist of Lord Abbett Investment Trust - Core Fixed
Income Series, Strategic Core Fixed Income Series, Bond-Debenture Fund,
Developing Growth Fund, and Mid-Cap Value Fund.
Redemptions. A redemption order is in proper form when it contains all of the
information and documentation required by the order form or supplementally by
Lord Abbett 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 each Prospectus for expedited redemption procedures.
The right to redeem and receive payment, as described in each 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 /Trustees may authorize redemption of all of the shares
in any account in which there are fewer than 25 shares (Affiliated Fund, Growth
Opportunities Fund, High Yield Fund, Large-Cap Series, and Small-Cap Value
Series), and 60 shares (International Series). 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.
6.
Taxes
The value of any shares redeemed by each 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 federal income tax purposes.
Any loss realized on the disposition of a Fund's 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.
21
<PAGE>
Each Fund will be subject to a four-percent nondeductible excise tax on certain
amounts not distributed or treated as having been distributed on a timely basis
each calendar year. Each Fund intends to distribute to shareholders each year an
amount adequate to avoid the imposition of such excise tax.
The writing of call options and other investment techniques and practices which
a Fund may utilize may create "straddles" for United States federal income tax
purposes and may affect the character and timing of the recognition of gains and
losses by each Fund. Such transactions may increase the amount of short-term
capital gain realized by such Fund, which is taxed as ordinary income when
distributed to shareholders. Limitations imposed by the Internal Revenue Code on
regulated investment companies may restrict a Fund's ability to engage in
transactions in options.
Each Fund may be subject to foreign withholding taxes which would reduce the
yield on its investments. It is generally expected that shareholders of a Fund
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
such Fund. However, if at the close of any fiscal year, more than 50% of the
assets of a fund consist of stock or securities of foreign corporations, the
Fund may elect to treat foreign income taxes paid by the Fund as having been
paid directly by its shareholder. If a Fund makes such an election, the
shareholders of the Fund will be required to (I) include in ordinary gross
income (in addition to taxable dividends actually received) their pro rata share
of foreign income taxes paid by the Fund and (ii) treat such pro rata share as
foreign income taxes paid by them. Such shareholders may then use such pro rata
portion of foreign income taxes as foreign tax credits, subject to applicable
limitations, or, alternatively, deduct them in computing their taxable income.
Shareholders who do not itemize deductions for federal income tax purposes will
not be entitled to deduct their pro rata portion of foreign taxes paid by the
Fund, although such shareholders will still be required to include their share
of such taxes in gross income. Shareholders who claim a foreign tax credit for
foreign taxes paid by a Fund may be required to treat a portion of the dividends
received from the Fund as separate category income for purposes of computing the
limitations on the foreign tax credit. Tax-exempt shareholders will ordinarily
not benefit from this election. Each year that a Fund qualifies for and makes
the election described above, its shareholders will be notified of the amount of
(i) each shareholder's pro rata share of foreign income taxes paid by the Fund
and (ii) the portion of dividends which represents income from each foreign
country.
Gains and losses realized by each Fund on certain transactions, including sales
of foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gains or losses are attributable to changes in
exchange rates for foreign currencies. Accordingly, distributions taxable as
ordinary income will include the net amount, if any, of such foreign exchange
gains and will be reduced by the net amount, if any, of such foreign exchange
losses.
If either 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 to
deferred taxes arising from such distributions or gains.
If a Fund were to invest in a passive foreign investment company with respect to
which a Fund elected to make a "qualified electing fund" election, in lieu of
the foregoing requirements, the Fund might be required to include in income each
year a portion of the ordinary earnings and net capital gains of the qualified
electing fund, even if such amount were not distributed to a Fund.
Dividends paid by a Fund will qualify for the dividends-received deduction for
corporations to the extent they are derived from dividends paid by domestic
corporations.
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 advisor
regarding U.S. and foreign tax consequences of the ownership of shares of a
Fund, including a 30% (or lower treaty rate) United States withholding tax on
dividends representing ordinary income and net short-term capital gains, and the
applicability of United States gift and estate taxes to non-United States gift
and estate taxes to non-United States persons who own Fund shares.
22
<PAGE>
7.
Past Performance
Each Fund computes the annual compounded rate of total return for Class Y shares
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 no 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 each Prospectus. The ending redeemable
value is determined by assuming a complete redemption at the end of the
period(s) covered by the annual total return computation.
In calculating total returns for Class Y shares no sales charge is deducted from
the initial investment and the 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.
Class Y share performance. Using the computation method described above,
Affiliated Fund's total return for Class Y shares for the fiscal year ended
October 31, 1999 was %. Small-Cap Value Series' total return for Class Y shares
for the fiscal year ended November 30, 1999 %. International Series' total
return for Class Y shares for the fiscal year ended October 31, 1999 was %. All
of these returns are not annualized.
Our yield quotation for Class Y shares 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 net asset value 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 the 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 net asset value 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.Yields for Class Y shares do not reflect the
deduction of any sales charge.
These figures represent past performance, and an investor should be aware that
the investment return and principal value of a Fund's 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.
22
<PAGE>
8.
Information About the Funds
Affiliated Fund is a Maryland Corporation formed in 1934. Small-Cap Value
Series, Large-Cap Series and Growth Opportunities Fund are Funds of Lord Abbett
Research Fund, Inc., a Maryland corporation organized in 1992. The International
Series is a Fund of Lord Abbett Securities Trust, a Delaware business trust
organized in 1993. The High Yield Fund is a Fund of Lord Abbett Investment
Trust, a Delaware business trust organized in 1993.
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 or Lord Abbett-managed account
considers a trade or 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.
Our Boards of Directors/Trustees have authority to create and classify shares in
separate series, without further action by shareholders. To date, the Boards of
Directors/Trustees have authorized five classes of shares for each Fund (Class
A, B, C, P and Y). The Board of a Fund will allocate a Fund's shares among its
classes from time to time. All shares of a Fund 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. Although
no present plans exist to do so, further classes or series may be added to one
or more of the Funds in the future. The Act requires that where more than one
series exists for a Fund, each series must be preferred over all other series in
respect of assets specifically allocated to such series.
Rule 18f-2 under the Act provides that any matter required to be submitted, by
the provisions of the Act or applicable state law or otherwise, to the holders
of the outstanding voting securities of an investment company such as a 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 or series affected
by such matter. Rule 18f-2 further provides that a class or series shall be
deemed to be affected by a matter unless the interests of each class or series
in the matter are substantially identical or the matter does not affect any
interest of such class or series. However, the Rule exempts the selection of
independent public accountants, the approval of principal distribution contracts
and the election of directors from the separate voting requirements of the Rule.
Shareholder inquiries should be made by writing directly to your Fund or by
calling 800-821-5129. In addition, you can make inquiries through Lord Abbett
Distributor.
9.
Financial Statements
The financial statements for the fiscal year ended October 31, 1999 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1999 Annual Report to Shareholders of Lord Abbett
Affiliated Fund, Inc. are incorporated herein by reference to such financial
statements and report in reliance upon the authority of Deloitte & Touche LLP as
experts in auditing and accounting.
The financial statements for the fiscal year ended November 30, 1999 and the
reports of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1999 Annual Reports to Shareholders of the Lord
Abbett Research Fund, Inc. (which includes Growth Opportunities Fund, formerly,
Mid-Cap Fund, Large-Cap Series, and Small-Cap Value Series), are incorporated
herein by reference to such financial statements and report in reliance upon the
authority of Deloitte & Touche LLP as experts in auditing and accounting.
23
<PAGE>
The financial statements for the fiscal year ended October 31, 1999 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1999 Annual Report to Shareholders of Lord Abbett
Securities Trust (which includes International Series) are incorporated herein
by reference to such financial statements and report in reliance upon the
authority of Deloitte & Touche LLP as experts in auditing and accounting.
24
<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. Not
applicable.
(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) Distribution Agreement. Incorporated by reference to
Post-Effective Amendment No. to the Registration Statement
on Form N-1A filed on __________.
(f) Bonus or Profit Sharing Contracts. Incorporated by reference
to Post-Effective Amendment No. 7 to the Registration
Statement on Form N-1A of Lord Abbett Equity Fund (File No.
811-6033).
(g) Custodian Agreements. Incorporated by reference.
(h) Transfer Agency Agreement. Incorporated by reference.
(i) Legal Opinion. Filed herewith.
(j) Consent of Independent Auditors. Filed herewith.
(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 Not applicable.
(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
---------------
The Registrant is incorporated under the laws of the State of
Maryland and is subject to Section 2-418 of the Corporations and
Associations Article of the Annotated Code of the State of
Maryland controlling the indemnification of the directors and
officers. Since Registrant has its executive offices in the State
of New York, and is qualified as a foreign corporation doing
business in such State, the persons covered by the foregoing
statute may also be entitled to and subject to the limitations of
the indemnification provisions of Section 721-726 of the New York
Business Corporation Law.
The general effect of these statutes is to protect officers,
directors and employees of Registrant against legal liability and
expenses incurred by reason of their positions with the
Registrant. The statutes provide for indemnification for
liability for proceedings not brought on behalf of the
corporation and for those brought on behalf of the corporation,
and in each case place conditions under which indemnification
will be permitted, including requirements that the officer,
director or employee acted in good faith. Under certain
conditions, payment of expenses in advance of final disposition
may be permitted. The By-laws of Registrant, without limiting the
authority of Registrant to indemnify any of its officers,
employees or agents to the extent consistent with applicable law,
make the indemnification of its directors mandatory subject only
to the conditions and limitations imposed by the above- mentioned
Section 2-418 of Maryland law and by the provisions of Section
17(h) of the Investment Company Act of 1940 as interpreted and
required to be implemented by SEC Release No. IC-11330 of
September 4, 1980.
<PAGE>
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.
Item 26 Business and Other Connections of Investment Adviser
----------------------------------------------------
<PAGE>
Lord, Abbett & Co. acts as investment adviser for the Lord
Abbett registered investment companies and other than acting as
directors/trustees 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 or her own account or in the capacity of
director, officer, employee, or partner of any entity.
Investment Sub-Adviser
American Skandia Trust (Lord Abbett Growth & Income Portfolio)
Item 27 Principal Underwriters
(a) Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Equity Fund
Lord Abbett Global Fund, Inc.
Lord Abbett Investment Trust
Lord Abbett Mid-Cap Value Fund, Inc
Lord Abbett Research Fund, Inc.
Lord Abbett Securities Trust
Lord Abbett Series Fund, Inc.
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett Tax-Free Income Trust
Lord Abbett U.S. Government Money Market Fund, Inc.
(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:
90 Hudson Street, Jersey City, NJ 07302
(c) Not applicable
Item 28 Location of Accounts and Records
--------------------------------
Registrant maintains the records, required by Rules 31a - 1(a)
and (b), and 31a - 2(a) at its main office.
Lord, Abbett & Co. maintains the records required by Rules 31a
- 1(f) and 31a - 2(e) at its main office.
<PAGE>
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) of the Investment Company Act of
1940, as amended.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended and the Investment Company Act of 1940, as amended,
the Registrant certifies that it meets all of the requirements
for effectiveness of this Registration Statement under rule
485(b) under the Securities Act and has 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 Jersey City, and State of New Jersey on the 1st of
March.
BY:
/s/Lawrence H. Kaplan
---------------------
Lawrence H. Kaplan
Vice President
/s/ Donna M. McManus
----------------------
Donna M. McManus
LORD ABBETT AFFILIATED FUND, INC.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
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 March 1, 2000
- ------------------ -------------------- -----------------
Robert S. Dow
/s/ E. Thayer Bigelow* Director/Trustee March 1, 2000
- ---------------------------- --------------- -----------------
E. Thayer Bigelow
/s/William H. T. Bush* Director/Trustee March 1, 2000
- ---------------------------- ---------------- -----------------
William H. T. Bush
/s/Robert B. Calhoun, Jr*. Director/Trustee March 1, 2000
- -------------------------- ---------------- -----------------
Robert B. Calhoun, Jr.
/s/Stewart S. Dixon* Director/Trustee March 1, 2000
- ---------------------------- ---------------- -----------------
Stewart S. Dixon
/s/John C. Jansing* Director/Trustee March 1, 2000
- ---------------------------- ---------------- -----------------
John C. Jansing
/s/C. Alan MacDonald* Director/Trustee March 1, 2000
- ---------------------------- ---------------- -----------------
C. Alan MacDonald
/s/Hansel B. Millican, Jr*. Director/Trustee March 1, 2000
- --------------------------- ---------------- -----------------
Hansel B. Millican, Jr.
/s/Thomas J. Neff* Director/Trustee March 1, 2000
- ---------------------------- ---------------- -----------------
Thomas J. Neff
<PAGE>
February 28, 2000
Lord Abbett Affiliated Fund, Inc.
90 Hudson Street
Jersey City, NJ 07302-3972
Dear Sirs:
You have requested our opinion in connection with your filing of Amendment
No. 87 to the Registration Statement on Form N-1A (the "Amendment") under the
Investment Company Act of 1940, as amended (the "Act"), of Lord Abbett
Affiliated Fund, Inc., a Maryland Corporation (the "Company"), and in connection
therewith your registration of Class A, B, C, P, and Y shares of capital stock,
with a par value of $.001 each, of the Company (collectively, the "Shares").
We have examined and relied upon originals, or copies certified to our
satisfaction, of such company records, documents, certificates and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion set forth below.
We are of the opinion that the Shares issued in the continuous offering
have been duly authorized and, assuming the issuance of the Shares for cash at
net asset value and receipt by the Company of the consideration therefor as set
forth in the Amendment and that the number of shares issued does not exceed the
number authorized, the Shares will be validly issued, fully paid and
nonassessable.
We express no opinion as to matters governed by any laws other than the
Title 2 of the Maryland Code. We consent to the filing of this opinion solely in
connection with the Amendment. In giving such consent, we do not hereby admit
that we come within the category of persons whose consent is required under
Section 7 of the Act or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
WILMER, CUTLER & PICKERING
By:___________________________
Marianne K. Smythe, a partner
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CONSENT OF INDEPENDENT AUDITORS
Lord Abbett Affiliated Fund, Inc.:
We consent to the incorporation by reference in this Post-Effective Amendment
No. 87 to Registration Statement No. 2-10638 of Lord Abbett Affiliated Fund,
Inc. on Form N-1A of our report dated December 17, 1999, appearing in the annual
report to shareholders of Lord Abbett Affiliated Fund, Inc. for the year ended
October 31, 1999, and to the references to us under the captions "Financial
Highlights" in the Prospectus and "Investment Advisory and Other Services" and
"Financial Statements" in the Statement of Additional Information, both of which
are part of such Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
February 28, 2000
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