LORD ABBETT
DEVELOPING GROWTH FUND, INC.
THE GENERAL MOTORS BUILDING
767 FIFTH AVENUE
NEW YORK, NY 10153-0203
800-426-1130
LORD ABBETT DEVELOPING GROWTH FUND, INC. (WE OR THE FUND), IS A DIVERSIFIED,
OPEN-END MANAGEMENT INVESTMENT COMPANY INCORPORATED UNDER MARYLAND LAW ON AUGUST
21, 1978. OUR PREDECESSOR CORPORATION WAS ORGANIZED ON JULY 11, 1973. WE HAVE A
SINGLE CLASS OF SHARES WITH EQUAL RIGHTS AS TO VOTING, DIVIDENDS, ASSETS AND
LIQUIDATION.
OUR INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL THROUGH A
DIVERSIFIED AND ACTIVELY-MANAGED PORTFOLIO CONSISTING OF DEVELOPING GROWTH
COMPANIES, MANY OF WHICH ARE TRADED OVER THE COUNTER. IN PURSUING OUR OBJECTIVE
WE INVEST PRIMARILY IN THE COMMON STOCKS OF COMPANIES WITH LONG-RANGE GROWTH
POTENTIAL, PARTICULARLY SMALLER COMPANIES CONSIDERED TO BE IN THE DEVELOPING
GROWTH PHASE. THERE CAN BE NO ASSURANCE THAT OUR OBJECTIVE WILL BE ACHIEVED.
VOLATILE PRICE MOVEMENT CAN BE EXPECTED.
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE FUND THAT A
PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING. ADDITIONAL INFORMATION ABOUT
THE FUND HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND IS
AVAILABLE UPON REQUEST WITHOUT CHARGE. THE STATEMENT OF ADDITIONAL INFORMATION
IS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS AND MAY BE OBTAINED, WITHOUT
CHARGE, BY WRITING TO THE FUND OR BY CALLING 800-874-3733. ASK FOR PART B OF THE
PROSPECTUS THE STATEMENT OF ADDITIONAL INFORMATION.
THE DATE OF THIS PROSPECTUS AND OF THE STATEMENT OF ADDITIONAL INFORMATION IS
JUNE 1, 1995.
PROSPECTUS
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS. SHAREHOLDER INQUIRIES SHOULD
BE MADE IN WRITING TO THE FUND OR BY CALLING 800-821-5129. YOU ALSO CAN MAKE
INQUIRIES THROUGH YOUR BROKER-DEALER.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
AN INVESTMENT IN THE FUND INVOLVES RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
CONTENTS PAGE
1 Investment Objective 2
2 Fee Table 2
3 Financial Highlights 2
4 How We Invest 3
5 Purchases 4
6 Shareholder Services 7
7 Our Management 7
8 Dividends, Capital Gains
Distributions and Taxes 8
9 Redemptions 9
10 Performance 9
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
1 INVESTMENT OBJECTIVE
--------------------
Our investment objective is long-term growth of capital through a diversified
and actively-managed portfolio consisting of developing growth companies, many
of which are traded over the counter.
2 FEE TABLE
---------
A summary of the Funds expenses is set forth in the table below. The example is
not a representation of past or future expenses. Actual expenses may be greater
or less than those shown.
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
(AS A PERCENTAGE OF OFFERING PRICE)
Maximum Sales Load(1) on Purchases
(See Purchases) 5.75%
Deferred Sales Load(1) (See Purchases) None(2)
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fee (See Our Management) .69%
12b-1 Fee (See Purchases) .20%
Other Expenses (See Our Management) .42%
Total Operating Expenses 1.31%
<FN>
Example: Assume an annual return of 5% and no change in the level of expenses
described above. For every $1,000 invested, with reinvestment of all
distributions, you would pay the following total expenses if you closed your
account after the number of years indicated.
1 year 3 years 5 years 10 years
------ ------- ------- --------
$70(3) $97(3) $125(3) $206(3)
(1) Sales load is referred to as sales charge and deferred sales load is
referred to as contingent deferred reimbursement charge throughout this
Prospectus.
(2) Redemptions of shares on which the Funds 1% Rule 12b-1 sales distribution
fee for purchases of $1 million or more has been paid are subject to a 1%
contingent deferred reimbursement charge, if the redemption occurs within
24 months after the month of purchase, subject to certain exceptions
described herein.
(3) Based on total operating expenses shown in the table above.
The foregoing is provided to give investors a better understanding of the
expenses that are incurred by an investment in the Fund.
</FN>
</TABLE>
3 FINANCIAL HIGHLIGHTS
--------------------
The following table has been audited by Deloitte & Touche LLP, independent
accountants, in connection with their annual audit of the Funds Financial
Statements, whose report thereon is incorporated by reference in the Statement
of Additional Information and may be obtained on request, and has been included
herein in reliance upon their authority as experts in accounting and auditing.
<TABLE>
<CAPTION>
PER SHARE OPERATING YEAR ENDED JANUARY 31,
PERFORMANCE: 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $10.65 $10.11 $10.86 $7.98 $6.96 $7.19 $6.50 $8.87 $8.41 $8.20
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.04) (.05) (.02) .02 .01* .01* .03* (.04) (.04) --
Net realized and unrealized
gain (loss) on investments (.2225) 1.62 (.24) 3.28 1.01 (.02) .66 (1.05) .89 .23
TOTAL FROM INVESTMENT OPERATIONS (.2625) 1.57 (.26) 3.30 1.02 (.01) .69 (1.09) .85 .23
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from net investment income -- -- (.02) (.02) -- (.03) -- -- -- (.02)
Distributions from net realized gain (.8075) (1.03) (.47) (.40) -- (.19) -- (1.28) (.39) --
NET ASSET VALUE, END OF YEAR $9.58 $10.65 $10.11 $10.86 $7.98 $6.96 $7.19 $6.50 $8.87 $8.41
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN** (2.74)% 16.40% (2.31)% 41.53% 14.66% (.38)% 10.62% (12.64)% 10.22% 2.81%
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $127,579 $143,693 $151,068 $156,932 $117,786 $119,836 $163,676 $181,401 $265,968 $304,296
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.31% 1.34% 1.31% 1.14% 1.24% 1.13% 1.08% .92% .90% .87%
Net investment income (loss) (.38)% (.51)% (.25)% .26% .20% .08% .37% (.30)% (.41)% .02%
PORTFOLIO TURNOVER RATE 17.57% 16.29% 17.22% 12.62% 12.76% 14.57% 20.20% 15.09% 6.95% 13.98%
====================================================================================================================================
<FN>
* Computed by dividing the respective dollar amounts per the Statement of
Operations by average shares outstanding.
** Total return does not consider the effects of sales charges.
</FN>
</TABLE>
<PAGE>
4 HOW WE INVEST
-------------
Our present investment strategy, as developed and perceived by Lord, Abbett &
Co. (Lord Abbett), our investment manager, is based on the concept outlined
below, namely that of the four phases of corporate growth, only the second (or
developing growth) phase is characterized by a dramatic rate of growth. We look
for companies in that phase and, under normal circumstances, will invest at
least 65% of our total assets in securities of such companies. We also may
invest in companies which are in their formative phase. Developing growth
companies are almost always small, usually young and their shares are generally
traded over the counter. Having, in managements view, passed the pitfalls of the
formative years, they are now in a position to grow rapidly in their market.
THE FOUR PHASES OF BUSINESS GROWTH
(AS PERCEIVED BY LORD ABBETT)
PHASE 1 FORMATIVE: Phase 1 has high risk. Companies in this phase are
formative and the perils of infancy take a high toll during these years. Skill
of management and growth of revenues and earnings permit some companies to
survive and advance into the second phase.
PHASE 2 DEVELOPING GROWTH: Phase 2 usually is a period of swift
development, when growth occurs at a rate rarely equaled by established
companies in their mature years. We focus on companies which we believe are
strongly positioned in this phase. Of course, the actual growth of a company
cannot be foreseen and it may be difficult to determine in which phase a company
is presently situated.
PHASE 3 ESTABLISHED GROWTH: Phase 3 is a time of established growth when
competitive forces, regulations and internal bureaucracy often begin to blunt
the sharp edge of success in the marketplace.
PHASE 4 MATURITY: Phase 4 is a time of maturity when companies ease into a
growth pattern that roughly reflects the increase in Gross Domestic Product.
At any given time, there are many hundreds of publicly-traded corporations
in the developing growth phase. In choosing from among them, we look for special
characteristics that will help their growth. These can include a unique product
or service for which we foresee a rising demand; a special area of technological
expertise; the ability to service a region that is growing faster than average;
a competitive advantage or new opportunities in foreign trade or from shifts in
government priorities and programs; or an ability to take advantage of growth of
consumers discretionary income and demographic changes.
We also look for certain financial characteristics such as: at least five
years of higher-than-average growth of revenues and earnings per share;
higher-than-average returns on equity; ability to finance growth in the form of
a lower-than-average ratio of long-term debt to capital and price/earnings
ratios that are below expected growth rates.
We also look for certain characteristics of management in addition to those
that are implied by the financial data. We look for management that is
well-seasoned and diverse in its talent and which is aggressive enough to seize
the opportunities we perceive in each company's future. Finally, we look for
management that has demonstrated an ability to manage through a full economic
cycle. We do not, however, invest in order to control management.
Securities being considered for our portfolio are analyzed solely on
traditional investment fundamentals. We do not select securities based on trends
indicated by chartists technical analyses. In addition to the financial data
already mentioned, we evaluate the market for each company's products or
services, the strengths and weaknesses of competitors, the availability of raw
materials, diversity of product mix, etc. Finally, in assembling our portfolio,
we try to diversify our investments. Within the bounds of other criteria, we try
to invest in many securities and industries so that any misjudgments we might
make are adequately cushioned.
Up to 10% of our net assets (at the time of investment) may be invested in
foreign securities (of the type described above) primarily traded in foreign
countries.
Although we have no present plans to change our policies, if we determine
that our investment objective can best be achieved by a change in
<PAGE>
investment policies or strategy, we reserve the right to make such a change
without shareholder approval, provided it is not prohibited by our investment
restrictions or applicable law. Any material change will first be disclosed in a
current prospectus.
There may be times when management believes that economic conditions or
general levels of common stock prices are such that it would be advisable, for
defensive reasons, to curtail investments in common stocks. During such periods,
we may invest a substantial portion of our portfolio in cash or cash equivalents
(short-term obligations of banks, corporations or the U.S. Government).
We will not change our investment objective without shareholder approval.
RISK FACTORS. An investment in the Fund is not intended as a complete investment
program. The Fund will not provide significant income. Moreover, because stocks
of developing growth companies are more risky and their prices more volatile
than those of mature companies, the Funds net asset value per share is likely to
experience above-average fluctuations.
Securities markets of foreign countries in which the Fund may invest
generally are not subject to the same degree of regulation as the U.S. markets
and may be more volatile and less liquid than the major U.S. markets. Lack of
liquidity may affect the Funds ability to purchase or sell large blocks of
securities and thus obtain the best price. There may be less publicly-available
information on publicly-traded companies, banks and governments in foreign
countries than is generally the case for such entities in the United States. The
lack of uniform accounting standards and practices among countries impairs the
validity of direct comparisons of valuation measures (such as price/earnings
ratios) for securities in different countries. Other considerations include
political and social instability, expropriation, higher transaction costs,
foreign government controls, currency fluctuations, withholding taxes that
cannot be passed through as a tax credit or deduction to shareholders and
different securities settlement practices. Settlement periods for foreign
securities, which are sometimes longer than those for securities of U.S.
issuers, may affect portfolio liquidity. These different settlement practices
may cause missed purchasing opportunities and/or the loss of interest on money
market and debt investments pending further equity or long-term debt
investments. In addition, foreign securities held by the Fund may be traded on
days that the Fund does not value its portfolio securities, such as Saturdays
and customary business holidays, and, accordingly, the Funds net asset value may
be significantly affected on days when shareholders do not have access to the
Fund.
5 PURCHASES
---------
You may buy our shares through any independent securities dealer having a sales
agreement with Lord Abbett, our exclusive selling agent. Place your order with
your investment dealer or send it to Lord Abbett Developing Growth Fund, Inc.
(P.O. Box 419100, Kansas City, Missouri 64141). The minimum initial investment
is $1,000, except for Invest-A-Matic and Div-Move ($250 initial and $50
subsequent minimum) and Retirement Plans ($250 minimum). Subsequent investments
may be made in any amount. See Shareholder Services.
The net asset value of our shares is calculated every business day as of
the close of the New York Stock Exchange (NYSE) by dividing net assets by the
number of shares outstanding. Securities are valued at their market value as
more fully described in the Statement of Additional Information.
Orders for shares received by the Fund prior to the close of the NYSE, or
received by dealers prior to such close and received by Lord Abbett prior to the
close of its business day, will be confirmed at the applicable public offering
price effective at such NYSE close. Orders received by dealers after the NYSE
closes and received by Lord Abbett in proper form prior to the close of its next
business day are executed at the applicable public offering price effective as
of the close of the NYSE on that next business day.
<PAGE>
The dealer is responsible for the timely transmission of orders to Lord Abbett.
A business day is a day on which the NYSE is open for trading.
For information regarding the proper form of a purchase or redemption
order, call the Fund at 800-821-5129. This offering may be suspended, changed or
withdrawn. Lord Abbett reserves the right to reject any order. The offering
price is based on the per-share net asset value next computed after your order
is received plus a sales charge as follows:
<TABLE>
<CAPTION>
Sales Charge as a Dealer's
Percentage of: Concession
as a To Compute
Net Percentage Offering
Offering Amount of Offering Price, Divide
Size of Investment Price Invested Price* NAV by
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00% .9425
$50,000 to $99,999 4.75% 4.99% 4.00% .9525
$100,000 to $249,999 3.75% 3.90% 3.25% .9625
$250,000 to $499,999 2.75% 2.83% 2.25% .9725
$500,000 to $999,999 2.00% 2.04% 1.75% .9800
$1,000,000 or more No Sales Charge 1.00% 1.0000
<FN>
* Lord Abbett may, for specified periods, allow dealers to retain the full
sales charge for sales of shares during such periods, or pay an additional
concession to a dealer who, during a specified period, sells a minimum
dollar amount of our shares and/or shares of other Lord Abbett-sponsored
funds. In some instances, such additional concessions will be offered only
to certain dealers expected to sell significant amounts of shares. Lord
Abbett may, from time to time, implement promotions under which Lord Abbett
will pay a fee to dealers with respect to certain purchases not involving
the imposition of a sales charge. Additional payments may be paid from Lord
Abbett's own resources and will be made in the form of cash or, if
permitted, non-cash payments. The non-cash payments will include business
seminars at resorts or other locations, including meals and entertainment,
or the receipt of merchandise. The cash payments will include payment of
various business expenses of the dealer.
</FN>
</TABLE>
In selecting dealers to execute portfolio transactions for the Funds
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.
VOLUME DISCOUNTS. This section describes several ways to qualify for a lower
sales charge if you inform Lord Abbett or the Fund that you are eligible at the
time of purchase.
(1) Any purchaser (as described below) may aggregate a purchase in the Fund with
purchases of any other eligible Lord Abbett-sponsored fund, together with the
current value at maximum offering price of any shares in the Fund and in any
eligible Lord Abbett-sponsored funds held by the purchaser. (Holdings in the
following funds are not eligible for the above rights of accumulation: Lord
Abbett Equity Fund (LAEF), Lord Abbett Series Fund (LASF), Lord Abbett Research
Fund if not offered to the general public (LARF) and Lord Abbett U.S. Government
Securities Money Market Fund (GSMMF), except for existing holdings in GSMMF
which are attributable to shares exchanged from a Lord Abbett-sponsored fund
offered with a front-end sales charge or from a fund in the Lord Abbett Counsel
Group.) (2) A purchaser may sign a non-binding 13-month statement of intention
to invest $50,000 or more in the Fund or in any of the above eligible funds. If
the intended purchases are completed during the period, each purchase will be at
the sales charge, if any, applicable to the aggregate of such purchasers
intended purchases. If not completed, each purchase will be at the sales charge
for the aggregate of the actual purchases. Shares issued upon reinvestment of
dividends or distributions are not included in the statement of intention. The
term purchaser includes (i) an individual, (ii) an individual and his or her
spouse and children under the age of 21 and (iii) a trustee or other fiduciary
purchasing shares for a single trust estate or single fiduciary account
(including a pension, profit-sharing, or other employee benefit trust qualified
under Section 401 of the Internal Revenue Code more than one qualified employee
benefit trust of a single employer, including its consolidated subsidiaries, may
be considered a single trust, as may qualified plans of multiple employers
registered in the name of a single bank trustee as one account), although more
than one beneficiary is involved.
Our shares may be purchased at net asset value by our directors, employees
of Lord Abbett, employees of our shareholder servicing agent and employees of
any securities dealer having a sales agreement with Lord Abbett who
<PAGE>
consents to such purchases or by the trustee or custodian under any pension or
profit-sharing plan or Payroll Deduction IRA established for the benefit of such
persons or for the benefit of any national securities trade organization to
which Lord Abbett belongs or any company with an account(s) in excess of $10
million managed by Lord Abbett on a private-advisory-account basis. For purposes
of this paragraph, the terms directors and employees include a directors or
employees spouse (including the surviving spouse of a deceased director or
employee). The terms directors and employees of Lord Abbett also include other
family members and retired directors and employees. Our shares also may be
purchased at net asset value (a) at $1 million or more, (b) with dividends and
distributions from other Lord Abbett-sponsored funds, except for dividends and
distributions on shares of LARF, LAEF, LASF and Lord Abbett Counsel Group, (c)
under the loan feature of the Lord Abbett-sponsored prototype 403(b) plan for
share purchases representing the repayment of principal and interest, (d) by
certain authorized brokers, dealers, registered investment advisers or other
financial institutions who have entered into an agreement with Lord Abbett in
accordance with certain standards approved by Lord Abbett, providing
specifically for the use of our shares in particular investment products made
available for a fee to clients of such brokers, dealers, registered investment
advisers and other financial institutions, (e) by employees, partners and owners
of unaffiliated consultants and advisers to Lord Abbett or Lord Abbett-sponsored
funds who consent to such purchase if such persons provide services to Lord
Abbett or such funds on a continuing basis and are familiar with such funds and
(f) subject to appropriate documentation, through a securities dealer where the
amount invested represents redemption proceeds from shares (Redeemed Shares) of
a registered open-end management investment company not distributed or managed
by Lord Abbett (other than a money market fund), if such redemptions have
occurred no more than 60 days prior to the purchase of our shares, the Redeemed
Shares were held for at least six months prior to redemption and the proceeds of
redemption were maintained in cash or a money market fund prior to purchase.
Purchasers should consider the impact, if any, of contingent deferred sales
charges in determining whether to redeem shares for subsequent investment in our
shares. Lord Abbett may suspend or terminate the purchase option referred to in
(f) above at any time.
Our shares may be issued at net asset value in exchange for the assets,
subject to possible tax adjustment, of a personal holding company or an
investment company.
RULE 12B-1 PLAN. We have adopted a Rule 12b-1 Plan (the Plan) which authorizes
the payment of distribution fees to dealers (except as to certain accounts for
which tracking data is not available) in order to provide additional incentives
for them (a) to provide continuing information and investment services to their
shareholder accounts and otherwise to encourage their accounts to remain
invested in the Fund and (b) to sell shares of the Fund. Under the Plan, the
Fund pays Lord Abbett, who passes on to dealers, (1) an annual service fee
(payable quarterly) of .25% of the average daily net asset value of the Funds
shares sold by dealers on or after June 1, 1990 and .15% of the average daily
net asset value of shares sold by dealers prior to that date and (2) a one-time
1% sales distribution fee, at the time of sale, on all shares at the $1 million
level sold by dealers including sales qualifying at such level under the rights
of accumulation and statement of intention privileges. Lord Abbett is required
to pay the sales distribution fee to dealers as compensation for selling our
shares.
Holders of shares on which the 1% sales distribution fee has been paid will
be required to pay to the Fund a contingent deferred reimbursement charge (CDRC)
of 1% of the original cost or the then net asset value, whichever is less, of
all shares so purchased which are redeemed out of the Lord Abbett-sponsored
family of funds on or before the end of the twenty-fourth month after the month
in which the purchase occurred. (An exception is made for redemptions by
tax-qualified plans under Section
<PAGE>
401 of the Internal Revenue Code due to plan loans, hardship withdrawals, death,
retirement or separation from service with respect to plan participants.) If the
shares have been exchanged into another Lord Abbett-sponsored fund and are
thereafter redeemed out of the Lord Abbett family of funds on or before the end
of such twenty-fourth month, the charge will be collected for the Fund by the
other fund. The Fund will collect such a charge for other Lord Abbett-sponsored
funds in a similar situation. Shares of a fund or series on which the 1% sales
distribution fee has been paid may not be exchanged into a fund or series with a
Rule 12b-1 Plan for which the payment provisions have not been in effect for at
least one year.
6 SHAREHOLDER SERVICES
--------------------
We offer the following shareholder services:
TELEPHONE EXCHANGE PRIVILEGE: Shares may be exchanged, without a service charge,
for those of any other Lord Abbett-sponsored fund except for (i) LAEF, LARF,
LASF and Lord Abbett Counsel Group and (ii) certain tax-free single-state series
where the exchanging shareholder is a resident of a state in which such series
is not offered for sale (together, Eligible Funds).
You or YOUR REPRESENTATIVE WITH PROPER IDENTIFICATION can instruct the Fund
to exchange uncertificated shares (held by the transfer agent) by telephone.
Shareholders have this privilege unless they refuse it in writing. The Fund will
not be liable for following instructions communicated by telephone that it
reasonably believes to be genuine and will employ reasonable procedures to
confirm that instructions received are genuine, including requesting proper
identification and recording all telephone exchanges. Instructions must be
received by the Fund in Kansas City (800-521-5315) prior to the close of the
NYSE to obtain each funds net asset value per share on that day. Expedited
exchanges by telephone may be difficult to implement in times of drastic
economic or market change. The exchange privilege should not be used to take
advantage of short-term swings in the market. The Fund reserves the right to
terminate or limit the privilege of any shareholder who makes frequent
exchanges. The Fund can revoke the privilege for all shareholders upon 60 days
prior written notice. A prospectus for the other Lord Abbett-sponsored fund
selected by you should be obtained and read before an exchange. Exercise of the
Exchange Privilege will be treated as a sale for federal income tax purposes
and, depending on the circumstances, a capital gain or loss may be recognized.
SYSTEMATIC WITHDRAWAL PLAN: Except for retirement plans for which there is
no such minimum, if the maximum offering price value of your uncertificated
shares is at least $10,000, you may have periodic cash withdrawals automatically
paid to you in either fixed or variable amounts.
DIV-MOVE: You can invest the dividends paid on your account ($50 minimum
investment) into an existing account in any other Eligible Fund. The account
must be either your account, a joint account for you and your spouse, a single
account for your spouse, or a custodial account for your minor child under the
age of 21. You should read the prospectus of the other fund before investing.
INVEST-A-MATIC: You can make fixed, periodic investments ($50 minimum
investment) into the Fund and/or any Eligible Fund by means of automatic money
transfers from your bank checking account. You should read the prospectus of the
other fund before investing.
RETIREMENT PLANS: Lord Abbett makes available the retirement plan forms and
custodial agreements for IRAs (Individual Retirement Accounts including
Simplified Employee Pensions), 403(b) plans and pension and profit-sharing
plans, including 401(k) plans.
All correspondence should be directed to Lord Abbett Developing Growth
Fund, Inc. (P.O. Box 419100, Kansas City, Missouri 64141; 800-821-5129).
7 OUR MANAGEMENT
--------------
Our business is managed by our officers on a day-to-day basis under the overall
direction of our Board of Directors. We employ Lord Abbett as investment manager
pursuant to a Management Agreement. Lord Abbett has been an investment
<PAGE>
manager for over 65 years and currently manages over $16 billion in a family of
mutual funds and other advisory accounts. Under the Management Agreement, Lord
Abbett provides us with investment management services and executive and other
personnel, pays the remuneration of our officers and our directors affiliated
with Lord Abbett, provides us with office space and pays for ordinary and
necessary office and clerical expenses relating to research, statistical work
and supervision of our portfolio and certain other costs. Lord Abbett provides
similar services to fifteen other Lord Abbett-sponsored funds having various
investment objectives and also advises other investment clients. Stephen J.
McGruder, Executive Vice President of the Fund, serves as portfolio manager for
the Fund and has done so since he joined Lord Abbett in May 1995. Prior to
joining Lord Abbett, Mr. McGruder was a Vice President of Wafra Investments
Advisory Group, a private investment company, since October 1988. Mr. McGruder
has over 25 years of experience in the investment business.
Under the Management Agreement, we pay Lord Abbett a monthly fee based on
average daily net assets for each month. For the fiscal year ended January 31,
1995, the effective fee paid to Lord Abbett as a percentage of average daily net
assets was at the annual rate of .69%. In addition, we pay all expenses not
expressly assumed by Lord Abbett. Our ratio of expenses, including management
fee expenses, to average net assets for the year ended January 31, 1995 was
1.31%.
8 DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
------------------------------------------------
Dividends from net investment income may be taken in cash or reinvested in
additional shares at net asset value without a sales charge.
Checks representing dividends paid in cash will be mailed to shareholders
as soon as practicable after the payment date.
A long-term capital gains distribution is made when we have net profits
during the year from sales of securities which we have held more than one year.
If we realize net short-term capital gains, they also will be distributed. Any
capital gains distribution will be paid in December and/or February. You may
take them in cash or reinvest them in additional shares at net asset value
without a sales charge.
Dividends and distributions may be paid in December and/or February.
Dividends and distributions declared in October, November or December of any
year to shareholders of record as of a date in such a month will be treated for
federal income tax purposes as having been received by shareholders in that year
if they are paid before February 1 of the following year.
We intend to continue to meet the requirements of Subchapter M of the
Internal Revenue Code. We will try to distribute to shareholders all our net
investment income and net realized capital gains, so as to avoid the necessity
of the Fund paying federal income tax. Shareholders, however, must report
dividends and capital gains distributions as taxable income. Distributions
derived from net long-term capital gains which are designated by the Fund as
capital gains dividends will be taxable to shareholders as long-term capital
gains, whether received in cash or shares, regardless of how long a taxpayer has
held the shares. Under current law, net long-term capital gains are taxed at the
rates applicable to ordinary income, except that the maximum rate for long-term
capital gains for individuals is 28%. Provisions of the Contract with America
Tax Relief Act of 1995, that were pending in Congress as of the date of this
Prospectus, would have the effect of reducing the federal income tax rate on
capital gains.
Shareholders may be subject to a $50 penalty under the Internal Revenue
Code and we may be required to withhold and remit to the U.S. Treasury a portion
(31%) of any redemption proceeds (including the value of shares exchanged into
another Lord Abbett-sponsored fund), and of any dividend or distribution on any
account, where the payee (shareholder) failed to provide a correct taxpayer
identification number or to make certain required certifications.
We will inform shareholders of the federal tax status of each dividend and
distribution after the end of each calendar year. Shareholders should consult
their tax advisers concerning applicable
<PAGE>
state and local taxes as well as the tax consequences of gains or losses from
the redemption or exchange of our shares.
9 REDEMPTIONS
-----------
To obtain the proceeds of an expedited redemption of $50,000 or less, YOU OR
YOUR REPRESENTATIVE WITH PROPER IDENTIFICATION can telephone the Fund. The Fund
will not be liable for following instructions communicated by telephone that it
reasonably believes to be genuine and will employ reasonable procedures to
confirm that instructions received are genuine, including requesting proper
identification, recording all telephone redemptions and mailing the proceeds
only to the named shareholder at the address appearing on the account
registration.
If you do not qualify for the expedited procedures described above to
redeem shares directly, send your request to Lord Abbett Developing Growth Fund,
Inc. (P.O. Box 419100, Kansas City, Missouri 64141) with signature(s) and any
legal capacity of the signer(s) guaranteed by an eligible guarantor, accompanied
by any certificates for shares to be redeemed and other required documentation.
We will make payment of the net asset value of the shares on the date the
redemption order was received in proper form. Payment will be made within seven
days (such period to be reduced to three business days on and after June 7,
1995). The Fund may suspend the right to redeem shares for not more than seven
days (or longer under unusual circumstances as permitted by Federal law). If you
have purchased Fund shares by check and subsequently submit a redemption
request, redemption proceeds will be paid upon clearance of your purchase check,
which may take up to 15 days. To avoid delays you may arrange for the bank upon
which a check was drawn to communicate to the Fund that the check has cleared.
Shares also may be redeemed by the Fund at net asset value through your
securities dealer who, as an unaffiliated dealer, may charge you a fee. If your
dealer receives your order prior to the close of the NYSE and communicates it to
Lord Abbett, as our agent, prior to the close of Lord Abbett's business day, you
will receive the net asset value of the shares being redeemed as of the close of
the NYSE on that day. If the dealer does not communicate such an order to Lord
Abbett until the next business day, you will receive the net asset value as of
the close of the NYSE on that next business day.
Shareholders who have redeemed their shares have a one-time right to
reinvest into another account having the identical registration in any of the
Eligible Funds, at the then applicable net asset value of the shares being
purchased, without the payment of a sales charge. Such reinvestment must be made
within 60 days of the redemption and is limited to no more than the dollar
amount of the redemption proceeds.
Under certain circumstances and subject to prior written notice, our Board
of Directors may authorize redemption of all of the shares in any account in
which there are fewer than 25 shares.
TAX-QUALIFIED PLANS: For redemptions of $50,000 or less, follow normal
redemption procedures. Redemptions over $50,000 must be in writing from the
employer, broker or plan administrator stating the reason for the redemption.
The reason for the redemption must be received by the Fund prior to, or
concurrent with, the redemption request.
10 PERFORMANCE
-----------
The Fund completed fiscal 1995 on January 31 with a net asset value of $9.58 per
share, versus $9.84 one year ago (the latter figure has been adjusted for
capital gains distributions totaling $.8075 paid during the fiscal year). The
Board of Directors subsequently declared a capital gain distribution of $.125
which was paid on February 22, 1995 to shareholders of record on February 15,
1995. The Funds total return (the percent change in net asset value, assuming
the reinvestment of all distributions) for the fiscal year was down 2.7%, while
the unmanaged NASDAQ Composite Index was down 5.7%. The Funds negative return
for the fiscal year was due in large part to a weak January 1995, contrasted
against a strong January 1994.
<PAGE>
1994 was a volatile year for the stock and bond markets, due in part to the
abrupt reversal in the direction of interest rates that began in February. While
the Dow Jones Industrial Average and S&P 500 eked out narrow gains for 1994, the
two best-known indices for small stocks, the NASDAQ Composite Index and the
Russell 2000 Index, both declined. Small capitalization stocks tend to be more
volatile than larger company stocks, particularly in periods of rapidly changing
interest rates.
We continue to focus our investment attention on a dominant theme in our
society the information revolution. Indeed, it was our technology investments
that made a positive contribution to the Funds performance during most of 1994.
Our research uncovered 15 new companies which were added to the Funds portfolio,
in fields as diverse as digital offset color printing, renal disease treatment,
clinical information software, asynchronous transfer networking and superstores
offering consumer products and office products.
TOTAL RETURN. Total return data may, from time to time, be included in
advertisements about the Fund. Total return for the one-, five- and ten-year
periods represents the average annual compounded rate of return on an investment
of $1,000 in the Fund at the maximum public offering price. Total return also
may be presented for other periods or based on investment at reduced sales
charge levels or net asset value. Any quotation of total return not reflecting
the maximum initial sales charge would be reduced if such sales charge were
used. Quotations of total return for any period when an expense limitation is in
effect will be greater than if the limitation had not been in effect.
See Past Performance in the Statement of Additional Information for a more
detailed discussion of the computation of the Funds total return.
- -------------------------------------------------------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFER IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN SUPPLEMENTAL SALES
MATERIAL AUTHORIZED BY THE FUND AND NO PERSON IS ENTITLED TO RELY UPON ANY
INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN OR THEREIN.
<PAGE>
Comparison of changes in value of a $10,000 investment, assuming reinvestment of
all dividends and distributions, in the Fund and the Russell 2000 Index.
<TABLE>
<CAPTION>
FUND FUND AT RUSSELL
AT NET MAXIMUM 2000
DATE ASSET VALUE OFFERING PRICE INDEX
- ---- ------------ -------------- -------
<S> <C> <C> <C>
1/31/85 $10,000 $ 9,425 $10,000
1/31/86 10,281 9,690 11,755
1/31/87 11,331 10,680 13,643
1/31/88 9,899 9,330 11,639
1/31/89 10,950 10,320 14,566
1/31/90 10,909 10,282 14,794
1/31/91 12,508 11,788 14,234
1/31/92 17,701 16,684 20,608
1/31/93 17,293 16,300 23,337
1/31/94 20,131 18,973 27,674
1/31/95 19,578 18,453 26,012
<FN>
(1) Data reflects the deduction of the maximum sales charge of 5.75%.
(2) Performance numbers for the unmanaged Russell 2000 Index do not reflect
transaction costs or management fees. An investor cannot invest directly in
the Russell 2000 Index.
(3) Total return is the percent change in value, after deduction of the maximum
sales charge of 5.75%, with all dividends and distributions reinvested for
the periods shown ending January 31, 1995 using the SEC-required uniform
method to compute such return.
</FN>
</TABLE>
<PAGE>
UNDERWRITER AND INVESTMENT MANAGER
Lord, Abbett & Co.
The General Motors Building
767 Fifth Avenue
New York, New York 10153-0203
212-848-1800
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10005
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
United Missouri Bank of Kansas City, N.A.
Tenth and Grand
Kansas City, Missouri 64141
SHAREHOLDER SERVICING AGENT
DST Systems, Inc.
P.O. Box 419100
Kansas City, Missouri 64141
800-821-5129
AUDITORS
Deloitte & Touche LLP
COUNSEL
Debevoise & Plimpton
Printed in the
U.S.A.
LADG-1-695
LORD ABBETT
DEVELOPING GROWTH FUND, INC.
THE GENERAL MOTORS BUILDING
767 FIFTH AVENUE
NEW YORK, NY 10153-0203
LORD
ABBETT JUNE 1 95
APPLICATION INSIDE
LORD
ABBETT
DEVELOPING
GROWTH
FUND
A MUTUAL FUND
SEEKING
LONG-TERM
CAPITAL GROWTH.
<PAGE>
LORD ABBETT
STATEMENT OF ADDITIONAL INFORMATION JUNE 1, 1995
LORD ABBETT
DEVELOPING GROWTH
FUND, INC.
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord, Abbett & Co. ("Lord
Abbett") at The General Motors Building, 767 Fifth Avenue, New York, New York
10153-0203. This Statement relates to, and should be read in conjunction with,
the Prospectus dated June 1, 1995.
Lord Abbett Developing Growth Fund, Inc. (sometimes referred to as "we" or the
"Fund") was incorporated under Maryland law on August 21, 1978 and its
predecessor corporation was organized on July 11, 1973. Our authorized capital
stock consists of a single class of 75,000,000 shares, $1.00 par value. All
shares have equal noncumulative voting rights and equal rights with respect to
dividends, assets and liquidation.
Shareholder inquiries should be made by writing directly to the Fund or by
calling 800-821-5129. In addition, you can make inquiries through your dealer.
TABLE OF CONTENTS Page
1 Investment Objective and Policies 2
2 Directors and Officers 4
3 Investment Advisory and Other Services 7
4 Portfolio Transactions 8
5 Purchases, Redemptions and
Shareholder Services 9
6 Past Performance 13
7 Taxes 13
8 Information About the Fund 14
9 Financial Statements 14
<PAGE>
1.
Investment Objective and Policies
The Fund's investment objective and policies are described in the Prospectus on
the cover page and under "How We Invest." In addition to those policies
described in the Prospectus, we are subject to the following investment
restrictions which cannot be changed without shareholder approval. We may not:
(1) sell short securities or buy securities or evidences of interests therein on
margin (good faith deposits made in connection with entering into stock index
futures contracts are not deemed to be margin), although we may obtain
short-term credit necessary for the clearance of purchases of securities; (2)
buy or sell put or call options although we may buy, hold or sell rights,
warrants or stock index futures contracts; (3) borrow money except as a
temporary measure for extraordinary or emergency purposes and then not in excess
of 5% of our gross assets (at cost or market value, whichever is lower) at the
time of borrowing; (4) invest knowingly in securities or other assets not
readily marketable at the time of purchase or subject to legal or contractual
restrictions on resale; (5) act as underwriter of securities issued by others,
unless we are deemed to be one in selling a portfolio security requiring
registration under the Securities Act of 1933; (6) make loans, other than by
making demand or time deposits with banks or buying commercial paper or
publicly-offered debt securities; however, we may enter into short-term
repurchase agreements with those who sell us securities and we may lend our
portfolio securities to registered broker-dealers where the loan is 100% secured
by cash or its equivalent as long as we comply with regulatory requirements and,
in management's opinion, such a loan would not expose us to significant risk or
adversely affect our qualification for pass-through tax treatment under the
Internal Revenue Code; (7) pledge, mortgage or hypothecate our assets -- neither
a deposit required to enter into or to maintain stock index futures contracts
nor an allocation or segregation of portfolio assets to collateralize a position
in such contracts is deemed to be a pledge, mortgage or hypothecation; (8) buy
or sell real estate including limited partnership interests therein (except
securities of companies, such as real estate investment trusts, that deal in
real estate or interests therein) or oil, gas or other mineral leases,
commodities or commodity contracts (for this purpose, stock index futures
contracts are not deemed to be commodities or commodity contracts) in the
ordinary course of our business, except such interests and other property
acquired as a result of owning other securities, though securities will not be
purchased in order to acquire any of these interests; (9) buy securities issued
by any other open-end investment company except pursuant to a merger,
acquisition or consolidation, although we may invest up to 5% of our gross
assets at market value at the time of purchase in closed-end investment
companies if bought in the open market with a fee or commission no greater than
the customary broker's commission; (10) invest more than 5% of our gross assets,
taken at market value at the time of investment, in companies (including their
predecessors) with less than three years' continuous operation; (11) buy
securities if the purchase would then cause us to have more than 5% of our gross
assets, at market value at the time of purchase, invested in securities of any
one issuer, except securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; (12) buy voting securities if the purchase would
then cause us to own more than 10% of the outstanding voting stock of any one
issuer; (13) own securities in a company when any of its officers, directors or
security holders is an officer or director of the Fund or an officer, director
or partner of our investment adviser, if after the purchase any one of such
persons owns beneficially more than 1/2 of 1% of such securities and such
persons together own more than 5% of such securities; (14) concentrate our
investments in any particular industry but, if deemed appropriate for attainment
of our investment objective, up to 25% of our gross assets (at market value at
the time of investment) may be invested in any one industry classification we
use for investment purposes and (15) buy securities from or sell them to our
officers, directors, employees or to our investment adviser or to its partners
and employees, other than capital stock of the Fund.
A repurchase agreement is the purchase and simultaneous commitment to resell a
security at a specified time and price. The underlying security is collateral
under the agreement. As a matter of operating policy, we will not invest more
than 10% of the value of our assets in repurchase agreements maturing in more
than seven days.
We did not invest in repurchase agreements or lend portfolio securities during
our last fiscal year and have no present intent to do so.
<PAGE>
PORTFOLIO TURNOVER RATE
For the year ended January 31, 1995, our portfolio turnover rate was 17.57%,
versus 16.29% for the prior year.
OTHER INVESTMENT RESTRICTIONS (WHICH CAN BE CHANGED WITHOUT
SHAREHOLDER APPROVAL)
Pursuant to Texas regulations, we will not invest more than 5% of our net assets
in warrants and not more than 2% in warrants not listed on the New York or
American Stock Exchanges, except when they form a unit with other securities.
STOCK INDEX FUTURES CONTRACTS
The Fund believes it can reduce the volatility inherent in its portfolio through
the use of stock index futures contracts. (A stock index futures contract is an
agreement pursuant to which two parties agree, one to receive and the other to
pay, on a specified date an amount of cash equal to a specified dollar amount --
established by an exchange or board of trade -- times the difference between the
value of the index at the close of the last trading day of the contract and the
price at which the futures contract is originally written. No consideration is
paid or received at the time the contract is entered into, only the good faith
deposit described herein.) When Lord Abbett, our investment manager, anticipates
a general decline in the sector of the stock market which includes our portfolio
assets, we can reduce risk by hedging the effect of such decline on our ability
to sell assets at best price or otherwise hedge a decision to delay the sale of
portfolio securities. Such hedging would be possible if there were an
established, regularly-quoted stock index for equities of the character in which
we invest and if an active public market were to develop on a stock exchange or
board of trade in futures contracts based on such index.
The market value of a futures contract is based primarily on the value of the
underlying index. Changes in the value of the index will cause roughly
corresponding changes in the market price of the futures contract, except as
otherwise described below. If a stock index is established which is made up of
securities whose market characteristics closely parallel the market
characteristics of the securities in our portfolio, then the market value of a
futures contract on that index should fluctuate in a way closely resembling the
market fluctuation of our portfolio. Thus, if we should sell futures contracts,
a decline in the market value of the portfolio will be offset by an increase in
the value of the short futures position to the extent of the hedge (i.e., the
percentage of the portfolio value represented by the value of the futures
position). Conversely, when we are in a strong cash position (for example,
through substantial sales of our shares) and wish to invest the cash in
anticipation of a rising market, we could rapidly hedge against the expected
market increase by buying futures contracts to offset the cash position and thus
cushion the adverse effect of attempting to buy individual securities in a
rising market.
The public markets for existing stock index futures contracts, such as those
using the Standard & Poor's 100 Index and 500 Index traded on the Chicago
Mercantile Exchange or those using the New York Stock Exchange Composite Index
traded on the New York Stock Exchange ("NYSE"), are active and have developed
substantial liquidity and we expect a similar market to develop for stock index
futures on a representative group of over-the-counter stocks. The existence of
an active market would permit us to close out our position in futures contracts
by purchasing an equal and opposite position in the public market. Under futures
contracts currently in use, the purchaser would be required to segregate in a
separate account, as a good faith deposit, cash or Treasury bills in an amount
set by a board of trade or exchange (currently approximately 5% of the contract
value). Each day during the contract period we would either pay or receive an
amount of cash equal to the daily change in the total value of the contracts.
The amount which we may segregate upon entering into a futures contract may not
exceed, together with the amounts on deposit under all outstanding contracts, 5%
of the value of our total assets, nor may we enter into additional futures
contracts if, as a result, the aggregate amount committed under all our open
futures contracts would exceed more than one-third of the value of such assets.
There are several risks in connection with the use of futures contracts as a
hedging device. One risk is the imperfect correlation between the composition of
our portfolio securities and the applicable stock index. If the value of the
futures contract moves more than the value of the stock being hedged, we would
experience either a loss or a gain on the futures contract which would not be
completely offset by movements in the value of the securities which are the
subject of
<PAGE>
the hedge. Another risk is that the value of futures contracts may not correlate
perfectly with movement in the stock index due to certain market distortions.
Although we will enter into futures contracts strictly to hedge our portfolio or
cash positions, other investors use these investment vehicles for other,
sometimes more speculative, purposes. At times, excess speculation in the
futures market can distort the normal market relationship between the price of
the futures contract and the value of the index. If we decide to enter into or
close out our futures position during a period of such excess speculation, the
hedging strategy will be more or less successful, depending on the direction and
amount of this distortion, than otherwise would be the case. Due to the
possibility of price distortion in the futures market and because of the
imperfect correlation between movements in the stock index and movements in the
price of stock index futures contracts, a correct forecast of general market
trends by Lord Abbett may still not result in a successful hedging transaction.
It is possible that, when we sell futures contracts to hedge our portfolio
against a decline in the market, the market, as measured by the stock index, may
advance while the value of securities held in our portfolio may decline. If this
occurs, we will lose money on the futures contracts and also experience a
decline in value in our portfolio securities. However, Lord Abbett believes that
over time the value of a diversified portfolio will tend to move in the same
direction as the market index upon which the futures contracts are based.
Where futures contracts are purchased to hedge against a possible increase in
the price of stock before we are able to invest our cash position in stock in an
orderly fashion, it is possible that the market may decline instead and we would
realize a loss; if we then decide not to invest in stock at that time because of
concern as to possible further market decline or for other reasons, we would
realize a loss on the futures contract that would be offset, to the extent the
cash position had not been invested in stocks being hedged.
Positions in futures contracts may be closed out only on an exchange or board of
trade which provides a market for such contracts. Although we intend to purchase
or sell futures contracts only if an active market has developed and is
continuing, there is no assurance that a liquid market on an exchange or board
of trade will exist for any particular contract or at any particular time. In
such event, it may not be possible to close out a futures position, and in the
event of adverse price movements, we would continue to be required to make daily
cash payments marking our position to market. However, since futures contracts
would have been used to hedge portfolio securities and such securities would not
be sold until the futures contracts had been terminated, an increase in the
price of the securities, if any, may partially or completely offset losses on
the futures contract.
We may incur additional brokerage commissions through entering into futures
contracts, although we also can save on commissions by hedging through such
contracts rather than through buying or selling individual securities in
anticipation of market moves. Successful use by us of futures contracts will
depend upon Lord Abbett's ability to predict movements in the direction of the
over-the-counter market generally, which requires different skills and
techniques than predicting changes in the prices of individual stocks.
To date, we have not entered into any futures contracts and have no present
intent to do so. An established, regularly-quoted stock index for equities of
the character in which we invest has not yet been established. If such an index
is established and we actually use futures contracts, we will disclose such use
in our Prospectus.
2.
Directors and Officers
The following directors are partners of Lord, Abbett & Co., The General Motors
Building, 767 Fifth Avenue, New York, New York 10153-0203. They have been
associated with Lord Abbett for over five years and are also officers and/or
directors or trustees of the fifteen other Lord Abbett-sponsored funds. They are
"interested persons" as defined in the Investment Company Act of 1940, (the
"Act") as amended, and as such, may be considered to have an indirect financial
interest in the Rule 12b-1 Plan described in the Prospectus.
<PAGE>
Ronald P. Lynch, age 59, President and Chairman
E. Wayne Nordberg, age 57, Vice President
The following outside directors are also directors or trustees of the fifteen
other Lord Abbett-sponsored funds referred to above except for Lord Abbett
Research Fund, Inc., of which only Messrs. Millican and Neff are directors.
E. Thayer Bigelow
Time Warner Cable
300 First Stamford Place
Stamford, Connecticut
President and Chief Executive Officer of Time Warner Cable Programming, Inc.
Formerly President and Chief Operating Officer of Home Box Office, Inc. Age 53.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 64.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 69.
C. Alan MacDonald
The Marketing Partnership, Inc.
27 Signal Road
Stamford, Connecticut
General Partner, The Marketing Partnership, Inc., a full service marketing
consulting firm that specializes in strategic planning and customer-specific
marketing. Formerly Acquisition Consultant, The Noel Group, a private consulting
firm (1994). Formerly Chairman and Chief Executive Officer of Lincoln Foods,
Inc., manufacturer of branded snack foods (1992- 1994). Formerly President and
Chief Executive Officer of Nestle Foods Corporation, a subsidiary of Nestle S.A.
(Switzerland). Age 61.
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 65.
Thomas J. Neff
Spencer Stuart & Associates
277 Park Avenue
New York, New York
President of Spencer Stuart & Associates, an executive search consulting firm.
Age 57.
<PAGE>
The second column of the following table sets forth the compensation accrued for
the Fund's outside directors. The third and fourth columns set forth information
with respect to the retirement plan for outside directors maintained by the Lord
Abbett-sponsored funds. The fifth column sets forth the total compensation
payable by such funds to the outside directors. No director of the Fund
associated with Lord Abbett and no officer of the Fund received any compensation
from the Fund for acting as a director or officer.
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED JANUARY 31, 1995
- -------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Pension or Estimated Annual For Year Ended
Retirement Benefits Benefits Upon December 31, 1994
Accrued as Expenses Retirement Proposed Total Compensation
by the Fund to be Paid by the Fund Accrued by the Fund and
Aggregate and Fifteen Other and Fifteen Other Fifteen Other Lord
Compensation Lord Abbett-sponsored Lord Abbett-sponsored Abbett-sponsored
Name of Director from the Fund (1) Funds (2) Funds(2) Funds (3)
---------------- ----------------- --------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
E. Thayer Bigelow $134 None $33,600 $8,400
Thomas F. Creamer $263 $27,578 $33,600 $29,650
Stewart S. Dixon $404 $22,595 $33,600 $43,600
John C. Jansing $441 $28,636 $33,600 $42,500
C. Alan MacDonald $385 $27,508 $33,600 $41,500
Hansel B. Millican, Jr. $434 $24,842 $33,600 $41,750
Thomas J. Neff $382 $16,214 $33,600 $41,200
<FN>
1. Outside directors' fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on net
assets of each fund. Fees payable by the Fund to its outside directors are
being deferred under a plan that deems the deferred amounts to be invested
in shares of the Fund for later distribution to the directors. The amounts
accrued by the Fund for the year ended January 31, 1995, are as set forth
after each outside Director's name above. The total amount accrued for each
outside Director since the beginning of his tenure with the Fund, together
with dividends reinvested and changes in net asset value applicable to such
deemed investments, were as follows as of January 31, 1995: Mr. Bigelow,
$132; Mr. Creamer, $18,709; Mr. Dixon, $26,096; Mr. Jansing, $26,052; Mr.
MacDonald, $9,227; Mr. Millican, $26,754 and Mr. Neff, $26,942.
2. Each Lord Abbett-sponsored fund has a retirement plan providing that
outside directors will receive annual retirement benefits for life equal to
80% of their final annual retainers following retirement at or after age 72
with at least 10 years of service. Each plan also provides for a reduced
benefit upon early retirement under certain circumstances, a pre-retirement
death benefit and actuarially reduced joint-and-survivor spousal benefits.
The amounts stated, except in the case of Mr. Creamer, would be payable
annually under such retirement plans if the director were to retire at age
72 and the annual retainers payable by such funds were the same as they are
today. The amounts accrued in column 3 were accrued by the Lord
Abbett-sponsored funds during the fiscal year ended January 31, 1995 with
respect to the retirement benefits in column 4.
3. This column shows aggregate compensation, including director's fees and
attendance fees for board and committee meetings, of a nature referred to
in footnote one, accrued by the Lord Abbett-sponsored funds during the year
ended December 31, 1994.
4. Mr. Bigelow was elected a director of the Fund on October 19, 1994.
5. Mr. Creamer retired as a director of the Fund effective September 21, 1994.
The stated amount of his retirement income (column 4) is the annual amount
payable to him by the Lord Abbett-sponsored funds before reduction for a
joint-and-survivor spousal benefit.
</FN>
</TABLE>
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Allen, Carper, Cutler, Dow, Henderson, Nordberg and Walsh are partners of Lord
<PAGE>
Abbett; the others are employees: Stephen J. McGruder, age 51 (with Lord Abbett
since May 1995 - formerly Vice President of Wafra Investment Advisory Group, a
private investment company), Executive Vice President; Kenneth B. Cutler, age
62, Vice President and Secretary; Stephen I. Allen, age 41; Daniel E. Carper,
age 43; Robert S. Dow, age 50; Thomas S. Henderson, age 63; E. Wayne Nordberg,
age 57; John J. Gargana, Jr., age 63; Thomas F. Konop, age 53; Victor W.
Pizzolato, age 62; John J. Walsh, age 58, Vice Presidents; and Keith F.
O'Connor, age 39, Treasurer.
The Fund's By-Laws provide that the Fund shall not hold an annual meeting of its
stockholders in any year unless one or more matters are required to be acted on
by stockholders under the Act, as amended (the "Act"), or unless called by a
majority of the Board of Directors or by stockholders holding at least one
quarter of the stock of the Fund outstanding and entitled to vote at the
meeting. When any such annual meeting is held, the stockholders will elect
directors and vote on the approval of the independent auditors of the Fund.
As of May 1, 1995, our officers and directors, as a group, owned less than 1% of
our outstanding shares.
3.
Investment Advisory and Other Services
As described under "Our Management" in the Prospectus, Lord Abbett is the Fund's
investment manager. The eight general partners of Lord Abbett, all of whom are
officers and/or directors of the Fund, are: Stephen I. Allen, Daniel E. Carper,
Kenneth B. Cutler, Robert S. Dow, Thomas S. Henderson, Ronald P. Lynch, E. Wayne
Nordberg and John J. Walsh. The address of each partner is The General Motors
Building, 767 Fifth Avenue, New York, New York 10153-0203.
The services performed by Lord Abbett are described under "Our Management" in
the Prospectus. Under the Management Agreement, we are 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 the portion of our net assets not in excess of
$100,000,000 and .50 of 1% of such assets over $100,000,000. For the fiscal
years ended January 31, 1995, 1994 and 1993, the management fees paid to Lord
Abbett amounted to $897,585, $952,381 and $1,044,551, respectively.
We pay all expenses not expressly assumed by Lord Abbett, including, without
limitation, 12b-1 expenses, outside directors' fees and expenses, association
membership dues, legal and auditing fees, taxes, transfer and dividend
disbursing agent fees, shareholder servicing costs, expenses relating to
shareholder meetings, expenses of preparing, printing and mailing stock
certificates and shareholder reports, expenses of registering our shares under
federal and state securities laws, expenses of preparing, printing and mailing
prospectuses to existing shareholders, insurance premiums, brokerage and other
expenses connected with executing portfolio security transactions.
We have agreed with the State of California to limit operating expenses
(including management fees but excluding taxes, interest, extraordinary expenses
and brokerage commissions) to 2 1/2% of average annual net assets up to
$30,000,000, 2% of the next $70,000,000 of such assets and 1 1/2% of such assets
in excess of $100,000,000. The expense limitation is a condition on the
registration of investment company shares for sale in the State and applies so
long as our shares are registered for sale in that State.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281, are
the independent auditors of the Fund and must be approved at least annually by
our Board of Directors to continue in such capacity. They perform audit services
for the Fund including the examination of financial statements included in our
annual report to shareholders.
Morgan Guaranty Trust Company of New York ("Morgan"), 60 Wall Street, New York,
New York 10005, is the Fund's custodian. In accordance with the requirements of
Rule 17f-5 under the Act, the Fund's directors have approved arrangements
permitting the Fund's foreign assets not held by Morgan or its foreign branches
to be held by certain qualified foreign banks and depositories.
<PAGE>
4.
Portfolio Transactions
Our policy is 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, consistent with
obtaining best execution, except to the extent that we may pay a higher
commission as described below. This policy 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.
We select broker-dealers on the basis of their professional capability and the
value and quality of their brokerage and research services. Normally, the
selection is made by our traders who are officers of the Fund and also are
employees of Lord Abbett. Our 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 the negotiation of
prices and commissions.
A broker may receive a commission for portfolio transactions exceeding the
amount another broker would have charged for the same transaction if our traders
determine that such amount is reasonable in relation to the value of the
brokerage and research services performed by the executing broker viewed in
terms of either the particular transaction or the broker's overall
responsibilities with respect to us and other accounts managed by Lord Abbett.
Brokerage services may include such factors as showing us trading opportunities
including blocks, 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, reliability and
quotation and pricing services. Research may include the furnishing of analyses
and reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategy and the performance of accounts. Such research may be
used by Lord Abbett in servicing all their accounts, and not all of such
research will necessarily be used by Lord Abbett in connection with their
services to us; conversely, research furnished in connection with brokerage on
other accounts managed by Lord Abbett may be used in connection with their
services to us, and not all of such research will necessarily be used by Lord
Abbett in connection with their services to such other accounts. We have been
advised by Lord Abbett that, although such research is often useful, no dollar
value can be ascribed to it nor can it be accurately ascribed or allocated to
any account and it is not a substitute for services provided by them to us; nor
does it materially reduce or otherwise affect the expenses incurred by Lord
Abbett in the performance of such services. We make no commitments regarding the
allocation of brokerage business to or among dealers.
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.
We will not seek "reciprocal" dealer business (for the purpose of applying
commissions in whole or in part for our benefit or otherwise) from
broker-dealers as consideration for the direction to them of portfolio business.
If we tender portfolio securities pursuant to a cash tender offer, we will seek
to recapture any fees or commissions involved by designating Lord Abbett our
agent so that the fees may be passed back to us. As other legally permissible
opportunities come to our attention for the direct or indirect recapture by us
of brokerage commissions or similar fees paid on portfolio transactions, our
directors will determine whether we should or should not seek such recapture.
During the fiscal years ended January 31, 1995, 1994 and 1993, we paid total
commissions to independent dealers of $399,634, $647,440 and $675,951,
respectively.
<PAGE>
5.
Purchases, Redemptions
and Shareholder Services
The Fund values its portfolio securities at market value as of the close of the
NYSE. Market value will be determined as follows: securities listed or admitted
to trading privileges on the New York or American Stock Exchange or on the
NASDAQ National Market System are valued at the last sales price, or, if there
is no sale on that day, at the mean between the last bid and asked prices, or,
in the case of bonds, in the over-the-counter market if, in the judgment of the
Fund's officers, that market more accurately reflects the market value of the
bonds. Over-the-counter securities not traded on the NASDAQ National Market
System are valued at the mean between the last bid and asked prices. Securities
for which market quotations are not available are valued at fair market value
under procedures approved by the Board of Directors.
Information concerning how we value our shares for the purchase and redemption
of our shares is described in the Prospectus under "Purchases" and
"Redemptions", respectively.
As disclosed in the Prospectus, we calculate our net asset value and are
otherwise open for business on each day that the NYSE is open for trading. The
NYSE is closed on Saturdays and Sundays and the following holidays -- New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
The maximum offering price of our shares on January 31, 1995 was computed as
follows:
Net asset value per share (net assets divided by
shares outstanding).......................................................$9.58
Maximum offering price per share (net asset value
divided by .9425).......................................................$10.16
The Fund has entered into a distribution agreement with Lord Abbett under which
Lord Abbett is obligated to use its best efforts to find purchasers for the
shares of the Fund and to make reasonable efforts to sell Fund shares, so long
as, in Lord Abbett's judgment, a substantial distribution can be obtained by
reasonable efforts.
For the last three fiscal years, Lord Abbett, as our principal underwriter,
received net commissions after allowance of a portion of the sales charge to
independent dealers as follows:
YEAR ENDED JANUARY 31
1995 1994 1993
---- ---- ----
Gross sales charge $109,370 $115,031 $337,367
Amount allowed
to dealers $ 92,501 $ 99,284 $291,642
-------- -------- --------
Net commissions
received by Lord $ 16,869 $ 15,747 $ 45,725
======== ======== ========
As described in the Prospectus, the Fund has adopted a Distribution Plan and
Agreement (the "Plan") pursuant to Rule 12b-1 of the Investment Company Act of
1940, as amended. In adopting the Plan and in approving its continuance, the
Board of Directors has concluded that there is a reasonable likelihood that the
Plan will benefit the Fund and its shareholders. The expected benefits include
greater sales and lower redemptions of Fund shares, which should allow the Fund
to maintain a consistent cash flow, and a higher quality of service to
shareholders by dealers than would otherwise be the case. During the last fiscal
year, the Fund accrued or paid through Lord Abbett to dealers $263,652 under the
Plan. Lord Abbett uses all amounts received under the Plan for payments to
dealers for (i) providing continuous services to the
<PAGE>
Fund's shareholders, such as answering shareholder inquiries, maintaining
records, and assisting shareholders in making redemptions, transfers, additional
purchases and exchanges and (ii) their assistance in distributing shares of the
Fund.
The Plan requires the Board of Directors to review, on a quarterly basis,
written reports of all amounts expended pursuant to the Plan and the purpose for
which such expenditures were made. The Plan shall continue in effect only if its
continuance is specifically approved at least annually by vote of the Fund's
Board of Directors and of the Fund's 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 such Plan and
agreements. The Plan may not be amended to increase materially the amount spent
for distribution expenses without approval by a majority of the Fund's
outstanding voting securities and the approval of a majority of the directors,
including a majority of the Fund's outside directors. The Plan may be terminated
at any time by vote of a majority of the Fund's outside directors or by vote of
a majority of the Fund's outstanding voting securities.
As stated in the Prospectus, a 1% contingent deferred reimbursement charge
("CDRC") is imposed with respect to those shares (or shares of another Lord
Abbett-sponsored fund or series acquired through exchange of such shares) on
which the Fund has paid the one-time 1% 12b-1 sales distribution fee if such
shares are redeemed out of the Lord Abbett-sponsored family of funds within a
period of 24 months from the end of the month in which the original sale
occurred. No CDRC is payable on redemptions by tax qualified plans under section
401 of the Internal Revenue Code for benefit payments due to plan loans,
hardship withdrawals, death, retirement or separation from service with respect
to plan participants. The CDRC is received by the Fund and is intended to
reimburse all or a portion of the amount paid by the Fund if the shares are
redeemed before the Fund has had an opportunity to realize the anticipated
benefits of having a large, long-term shareholder account in the Fund. Shares of
a fund or series on which such 1% sales distribution fee has been paid may not
be exchanged into a fund or series with a Rule 12b-1 plan for which the payment
provisions have not been in effect for at least one year.
The other Lord Abbett-sponsored funds and series which participate in the
Telephone Exchange Privilege (except Lord Abbett U.S. Government Securities
Money Market Fund, Inc. ("GSMMF") and certain series of Lord Abbett Tax-Free
Income Fund, Inc. and Lord Abbett Tax-Free Income Trust for which a Rule 12b-1
Plan is not yet in effect (collectively, the "Series")) have instituted a CDRC
on the same terms and conditions. No CDRC will be charged on an exchange of
shares between Lord Abbett funds. Upon redemption of shares out of the Lord
Abbett family of funds, the CDRC will be charged on behalf of and paid to the
fund in which the original purchase (subject to a CDRC) occurred. Thus, if
shares of a Lord Abbett fund are exchanged for shares of another such fund and
the shares tendered ("Exchanged Shares") are subject to a CDRC, the CDRC will
carry over to the shares being acquired, including GSMMF ("Acquired Shares").
Any CDRC that is carried over to Acquired Shares is calculated as if the holder
of the Acquired Shares had held those shares from the date on which he or she
became the holder of the Exchanged Shares. Although GSMMF and the Series will
not pay a 1% sales distribution fee on $1 million purchases of their own shares,
and will therefore not impose their own CDRC, GSMMF will collect the CDRC on
behalf of other Lord Abbett funds. Acquired shares held in GSMMF which are
subject to a CDRC will be credited with the time such shares are held in that
fund.
In no event will the amount of the CDRC exceed 1% of the lesser of (i) the net
asset value of the shares redeemed or (ii) the original cost of such shares (or
of the Exchanged Shares for which such shares were acquired). No CDRC will be
imposed when the investor redeems (i) amounts derived from increases in the
value of the account above the total cost of shares being redeemed due to
increases in net asset value, (ii) shares with respect to which no Lord Abbett
fund paid a 1% sales distribution fee on issuance (including shares acquired
through reinvestment of dividend income and capital gains distributions) or
(iii) shares which, together with Exchanged Shares, have been held continuously
for 24 months from the end of the month in which the original sale occurred. In
determining whether a CDRC is payable, (a) shares not subject to the CDRC will
be redeemed before shares subject to the CDRC and (b) of shares subject to a
CDRC, those held the longest will be the first to be redeemed.
<PAGE>
Under the terms of the Statement of Intention to invest $50,000 or more over a
13-month period as described in the Prospectus, shares of Lord Abbett-sponsored
funds (other than shares of Lord Abbett Equity Fund ("LAEF"), Lord Abbett Series
Fund ("LASF"), Lord Abbett Research Fund if not offered to the general public
("LARF"), and GSMMF, unless holdings in GSMMF are attributable to shares
exchanged from a Lord Abbett-sponsored fund offered with a sales charge or from
a fund in the Lord Abbett Counsel Group) currently owned by you are credited as
purchases (at their current offering prices on the date the Statement is signed)
toward achieving the stated investment. Shares valued at 5% of the amount of
intended purchases are escrowed and may be redeemed to cover the additional
sales charge payable if the Statement is not completed. The Statement of
Intention is neither a binding obligation on you to buy, nor on the Fund to
sell, the full amount indicated.
As stated in the Prospectus, purchasers (as defined in the Prospectus) may
accumulate their investment in Lord Abbett- sponsored funds (other than LAEF,
LARF, LASF, and GSMMF, unless holdings in GSMMF are attributable to shares
exchanged from a Lord Abbett-sponsored fund offered with a front-end sales
charge or from Lord Abbett Counsel Group) so that a current investment, plus the
purchaser's holdings valued at the current maximum offering price, reach a level
eligible for a discounted sales charge.
As stated in the Prospectus, our shares may be purchased at net asset value by
our directors, employees of Lord Abbett, employees of our shareholder servicing
agent and employees of any securities dealer having a sales agreement with Lord
Abbett who consents to such purchases or by the trustee or custodian under any
pension or profit-sharing plan or Payroll Deduction IRA established for the
benefit of such persons or for the benefit of employees of any national
securities trade organization to which Lord Abbett belongs or any company with
an account(s) in excess of $10 million managed by Lord Abbett on a
private-advisory-account basis. For purposes of this paragraph, the terms
"directors" and "employees" include a director's or employee's spouse (including
the surviving spouse of a deceased director or employee). The terms "our
directors" and "employees of Lord Abbett" also include other family members and
retired directors and employees.
Our shares also may be purchased at net asset value (a) at $1 million or more,
(b) with dividends and distributions from other Lord Abbett-sponsored funds,
except for LARF, LAEF, LASF and Lord Abbett Counsel Group, (c) under the loan
feature of the Lord Abbett-sponsored prototype 403(b) plan for share purchases
representing the repayment of principal and interest, (d) by certain authorized
brokers, dealers, registered investment advisers or other financial institutions
who have entered into an agreement with Lord Abbett in accordance with certain
standards approved by Lord Abbett, providing specifically for the use of our
shares in particular investment products made available for a fee to clients of
such brokers, dealers, registered investment advisers and other financial
institutions, and (e) by employees, partners and owners of unaffiliated
consultants and advisors to Lord Abbett or Lord Abbett-sponsored funds who
consent to such purchase if such persons provide service to Lord Abbett or such
funds on a continuing basis and are familiar with such funds. Shares are offered
at net asset value to these investors for the purpose of promoting goodwill with
employees and others with whom Lord Abbett and/or the Fund has business
relationships.
Our shares also may be purchased at net asset value, subject to appropriate
documentation, through a securities dealer where the amount invested represents
redemption proceeds from shares ("Redeemed Shares") of a registered open-end
management investment company not distributed or managed by Lord Abbett (other
than a money market fund), if such redemption has occurred no more than 60 days
prior to the purchase of our shares, the Redeemed Shares were held for at least
six months prior to redemption and the proceeds of redemption were maintained in
cash or a money market fund prior to purchase. Purchasers should consider the
impact, if any, of contingent deferred sales charges in determining whether to
redeem shares for subsequent investment in our shares. Lord Abbett may suspend,
change or terminate this purchase option at any time.
Our shares may be issued at net asset value in exchange for the assets, subject
to possible tax adjustment, of a personal holding company or an investment
company. There are economies of selling efforts and sales-related expenses with
respect to offers to these investors and those referred to above.
<PAGE>
The Prospectus briefly describes the Telephone Exchange Privilege. You may
exchange some or all of your shares for those of Lord Abbett-sponsored funds
currently offered to the public with a sales charge and GSMMF, to the extent
offers and sales may be made in your state. You should read the prospectus of
the other fund before exchanging. In establishing a new account by exchange,
shares of the Fund being exchanged must have a value equal to at least the
minimum initial investment required for the fund into which the exchange is
made.
Shareholders in such other funds have the same right to exchange their shares
for the Fund's shares. Exchanges are based on relative net asset values on the
day instructions are received by the Fund in Kansas City if the instructions are
received prior to the close of the NYSE in proper form. No sales charges are
imposed except in the case of exchanges out of GSMMF (unless a sales charge was
paid on the initial investment). Exercise of the exchange privilege will be
treated as a sale for federal income tax purposes, and, depending on the
circumstances, a gain or loss may be recognized. In the case of an exchange of
shares that have been held for 90 days or less where no sales charge is payable
on the exchange, the original sales charge incurred with respect to the
exchanged shares will be taken into account in determining gain or loss on the
exchange only to the extent such charge exceeds the sales charge that would have
been payable on the acquired shares had they been acquired for cash rather than
by exchange. The portion of the original sales charge not so taken into account
will increase the basis of the acquired shares.
Shareholders have the exchange privilege unless they refuse it in writing. You
should not view the exchange privilege as a means for taking advantage of
short-term swings in the market, and we reserve the right to terminate or limit
the privilege of any shareholder who makes frequent exchanges. We can revoke or
modify the privilege for all shareholders upon 60 days' prior notice. "Eligible
Funds" are other Lord Abbett-sponsored funds which are eligible for the exchange
privilege, except LASF which offers its shares only in connection with certain
variable annuity contracts, LAEF which is not issuing shares, LARF and Lord
Abbett Counsel Group.
A redemption order is in proper form when it contains all of the information and
documentation required by the order form or supplementally by Lord Abbett or the
Fund to carry out the order. The signature(s) and any legal capacity of the
signer(s) must be guaranteed by an eligible guarantor. See the Prospectus for
expedited redemption procedures.
The right to redeem and receive payment, as described in the Prospectus, may be
suspended if the NYSE is closed (except for weekends or customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
deems an emergency to exist.
Our Board of Directors may authorize redemption of all of the shares in any
account in which there are fewer than 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 30 days' prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
Under the Div-Move service described in the Prospectus, you can invest the
dividends paid on your account into an existing account in any other Eligible
Fund. The account must be either your account, a joint account for you and your
spouse, a single account for your spouse, or a custodial account for your minor
child under the age of 21. You should read the prospectus of the other fund
before investing.
The Invest-A-Matic method of investing in the Fund and/or any other Eligible
Fund is described in the Prospectus. To avail yourself of this method you must
complete the application form, selecting the time and amount of your bank
checking account withdrawals and the funds for investment, include a voided,
unsigned check and complete the bank authorization.
The Systematic Withdrawal Plan (the "SWP") also is described in the Prospectus.
You may establish a SWP if you own or purchase uncertificated shares having a
current offering price value of at least $10,000. Lord Abbett prototype
retirement plans have no such minimum. The SWP involves the planned redemption
of shares on a periodic basis by
<PAGE>
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.
The Prospectus indicates the types of retirement plans for which Lord Abbett
provides forms and explanations. Lord Abbett makes available the retirement plan
forms and custodial agreements for IRAs (Individual Retirement Accounts
including Simplified Employee Pensions), 403(b) plans and qualified pension and
profit-sharing plans, including 401(k) plans. The forms name Investors Fiduciary
Trust Company as custodian and contain specific information about the plans.
Explanations of the eligibility requirements, annual custodial fees and
allowable tax advantages and penalties are set forth in the relevant plan
documents. Adoption of any of these plans should be on the advice of your legal
counsel or qualified tax adviser.
6.
Past Performance
The Fund computes the average annual compounded rate of total return during
specified periods that would equate the initial amount invested to the ending
redeemable value of such investment by adding one to the computed average annual
total return, raising the sum to a power equal to the number of years covered by
the computation and multiplying the result by one thousand dollars, which
represents a hypothetical initial investment. The calculation assumes deduction
of the maximum sales charge from the initial amount invested and reinvestment of
all income dividends and capital gains distributions on the reinvestment dates
at prices calculated as stated in the Prospectus. The ending redeemable value is
determined by assuming a complete redemption at the end of the period(s) covered
by the average annual total return computation.
Using this method to compute average annual compounded rates of total return the
Fund's total annual returns for the last one, five and ten fiscal year periods
ending on January 31, 1995 are as follows: -8.30%, 11.10% and 6.32%,
respectively.
These figures represent past performance, and an investor should be aware that
the investment return and principal value of a Fund investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Therefore, there is no assurance that this performance will be
repeated in the future.
7.
Taxes
The value of any shares redeemed by the Fund or otherwise sold may be more or
less than your tax basis in the shares at the time the redemption or sale is
made. Any gain or loss generally will be taxable for federal income tax
purposes. Any loss realized on the sale, or redemption of Fund shares which you
have held for six months or less will be treated for tax purposes as a long-term
capital loss to the extent of any capital gains distributions which you received
with respect to such shares. Losses on the sale of stock or securities are not
deductible if, within a period beginning 30 days before the date of the sale and
ending 30 days after the date of the sale, the taxpayer acquires stock or
securities that are substantially identical.
As described in the Prospectus under "Risk Factors", the Fund may be subject to
foreign withholding taxes which would reduce the yield on its investments. Tax
treaties between certain countries and the United States may reduce or eliminate
such taxes. It is expected that Fund shareholders who are subject to United
States federal income tax will not be entitled to claim a federal income tax
credit or deduction for foreign income taxes paid by the Fund.
Gains and losses realized by the Fund on certain transactions, including sales
of foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gains or losses are attributable to changes in
exchange rates for foreign currencies. Accordingly, distributions taxable as
ordinary income will include the net amount, if any, of such foreign exchange
gains and will be reduced by the net amount, if any, of such foreign exchange
losses.
If the Fund purchases shares in certain foreign investment entities, called
"PFICs" or "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
<PAGE>
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 with respect to deferred taxes
arising from such distributions or gains. Proposed regulations would allow the
Fund to avoid the Fund level tax and interest charges on excess distributions
and dispositions by electing to "mark to market" annually any stock of passive
foreign investment companies held by the Fund. Gain recognized pursuant to such
election would generally be treated as ordinary income subject to the
distribution requirements discussed in the Prospectus. It is unclear, however,
whether this option will be available under any final regulations that might be
adopted. If the Fund were to invest in a passive foreign investment company with
respect to which the Fund elected to make a "qualified electing fund" election,
in lieu of the foregoing requirements, the Fund might be required to include in
income each year a portion of the ordinary earnings and net capital gains of the
qualified electing fund, even if such amount were not distributed to the Fund.
Proposed legislation would revise the passive foreign investment company rules
in various respects; it is unclear whether and in what form such legislation
might be enacted.
The Fund will be subject to a 4% nondeductible excise tax on certain amounts not
distributed (and not treated as having been distributed) on a timely basis in
accordance with a calendar year distribution requirement. The Fund intends to
distribute to shareholders each year an amount adequate to avoid the imposition
of such excise tax.
Dividends paid by the Fund should qualify for the dividends-received deduction
for corporations, to the extent they are derived from dividends paid by domestic
corporations.
8.
Information About the Fund
The directors, trustees and officers of Lord Abbett-sponsored mutual funds,
together with the partners and employees of Lord Abbett, are permitted to
purchase and sell securities for their personal investment accounts. In engaging
in personal securities transactions, however, such persons are subject to
requirements and restrictions contained in the Fund's Code of Ethics which
complies, in substance, with each of the recommendations of the Investment
Company Institute's Advisory Group on Personal Investing. Among other things,
the Code requires that Lord Abbett partners and employees obtain advance
approval before buying or selling securities, submit confirmations and quarterly
transaction reports, and obtain approval before becoming a director of any
company; and it prohibits such persons from investing in a security 7 days
before or after any Lord Abbett-sponsored fund or Lord Abbett-managed account
considers a trade or trades in such security, from profiting on trades of the
same security within 60 days and from 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 the Advisory Group.
9.
Financial Statements
The financial statements for the fiscal year ended January 31, 1995 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1995 Annual Report to Shareholders of Lord Abbett
Developing Growth Fund, Inc. are incorporated herein by reference to such
financial statements and report in reliance upon the authority of Deloitte &
Touche LLP as experts in auditing and accounting.
<PAGE>
LORD, ABBETT & CO.
INVESTMENT MANAGEMENT
A TRADITION OF PERFORMANCE THROUGH DISCIPLINED INVESTING.
<PAGE>
"We believe that an investment firm worthy of the name fosters a sound
professional relationship between the House and the Client."
<PAGE>
PARTNERSHIP AT LORD, ABBETT & CO.
INDEPENDENCE AND EXCELLENCE
Established in 1929, Lord, Abbett & Co. is guided by a long tradition of
independence and excellence. We are a partnership and all of our partners are
active in the daily management of the Firm. Attributes such as dedication,
accountability, involvement and performance define our organization and and
characterize the way we invest.
Assets under management currently total about $16 billion, consisting of a
family of mutual funds and separately-managed equity, fixed-income and balanced
accounts for corporations, institutions and individuals.
<PAGE>
"THE MOST IMPORTANT
ELEMENT IN SECURING THE FIRMS FUTURE:
ALWAYS PUT THE INVESTOR FIRST."
RONALD P. LYNCH,
MANAGING PARTNER
[Picture]
Seated:
Ronald P. Lynch,
Managing Partner
Standing, left to right:
Thomas S. Henderson,
Partner and Portfolio Manager
Daniel E. Carper,
Partner in charge of Sales and Marketing
Robert S. Dow,
Partner in charge of Fixed Income and Portfolio Manager
<PAGE>
LORD ABBETT'S INVESTMENT PHILOSOPHY
[Picture]
SEATED:
ROBERT S. DOW,
PARTNER IN CHARGE OF FIXED INCOME AND PORTFOLIO MANAGER
STANDING, LEFT TO RIGHT:
ROBERT G. MORRIS,
DIRECTOR OF EQUITY INVESTMENTS
JULIE M. CANNELL,
ASSOCIATE DIRECTOR OF EQUITY RESEARCH
ZANE E. BROWN,
DIRECTOR OF FIXED INCOME AND PORTFOLIO MANAGER
EQUITY MANAGEMENT
For decades, value has been at the heart of our approach to investing. We invest
for the long term in the securities of companies whose earnings potential, cash
flow or net assets are underpriced in the marketplace. Often this means sifting
through companies that are out of favor with Wall Street and the investing
public to identify the best relative values. Our objective is to obtain
above-average total returns consistently, with less volatility than the market.
What distinguishes us as value managers is the investment process used to
find securities that we believe are positioned to benefit from change. This
process combines quantitative, fundamental and economic analysis in the
disciplined selection of securities.
<PAGE>
LORD ABBETT'S INVESTMENT PHILOSPHY
"INVESTING IN SECURITIES THAT ARE UNDERVALUED HAS PRODUCED COMPETITIVE,
CONSISTENT LONG-TERM RETURNS WITH BELOW-MARKET RISK."
ROBERT S. DOW,
PARTNER IN CHARGE OF
FIXED INCOME AND
PORTFOLIO MANAGER
FIXED-INCOME MANAGEMENT
We utilize a total return approach to fixed-income management, with an emphasis
on current income. Maturities and sectors are adjusted to reflect our outlook
for inflation, interest rates, changes in Federal Reserve policy and cyclical
market pressures. Call protection, issuers creditworthiness and prepayment risk
are important considerations in determining intrinsic value. We also believe
bonds can become mispriced for non-economic reasons, which creates
opportunities for value investors.
BALANCED MANAGEMENT
Our balanced portfolios combine our fundamentally-driven, value-oriented equity
management with an actively managed, primarily high-quality, fixed-income
portfolio. The ratio of stocks to bonds is determined at periodic strategy
meetings based on our assessment of the risk-adjusted prospects for both
markets.
<PAGE>
A TALENTED INVESTMENT TEAM
Our investment effort is built on in-house research. We do our own market and
securities analyses and we make our own financial forecasts. On-site plant
inspections and discussions with senior corporate management are an important
part of evaluating the companies currently held in our portfolios as well as
those we are considering for investment. These efforts add perspective on a
companys costs, long-term strategies and the competitive dynamics a company has
within its industry.
Our portfolio managers, research analysts and economist work closely in all
aspects of investment decision making. We currently have a staff of 38
investment professionals, who average 19 years of experience in the business and
8 years of tenure with Lord, Abbett & Co.
<PAGE>
INTERNATIONAL EXPERTISE
"INVESTMENT POTENTIAL SHIFTS THROUGHOUT THE WORLD. GLOBAL INVESTING ALLOWS
INVESTORS TO CAPITALIZE ON GROWTH OPPORTUNITIES ABROAD."
E. WAYNE NORDBERG,
PARTNER AND
PORTFOLIO MANAGER
[Picture]
LEFT TO RIGHT:
E. WAYNE NORDBERG,
PARTNER AND PORTFOLIO MANAGER
ZANE E. BROWN,
DIRECTOR OF FIXED INCOME AND PORTFOLIO MANAGER
BURTON ZWICK,
SENIOR ECONOMIST
We maintain an advisory relationship with Dunedin Fund Managers Limited of
Scotland, which adds a global dimension to our resources. Dunedin and its
predecessors have been managing global investments since 1873.
Dunedin's investment philosophy complements Lord Abbett's: Dunedin's
decision-making process is based on fundamental research, which is applied to
the global markets. Throughout its history, Dunedin has derived its strength and
reputation from its high-quality staff and its record of superior returns.
<PAGE>
CONSISTENCY OF PERFORMANCE
Our performance is the results of a collaborative effort where everyone works
toward a common goal uncommon investment results. We believe that by striving
for consistent performance through our focus on value investing, we will
continually increase the assets we manage. We have not diluted our efforts by
expansion into any other enterprises. Money management is Lord Abbetts only
business.
"TAKING AN INVESTOR
TO HIS OR HER STATED
GOALTHATS OUR DENITION
OF PERFORMANCE."
THOMAS S. HENDERSON,
PARTNER AND
PORTFOLIO MANAGER
[Picture]
LEFT TO RIGHT:
THOMAS S. HENDERSON,
PARTNER AND PORTFOLIO MANAGER
ROBERT G. MORRIS,
DIRECTOR OF EQUITY INVESTMENTS
VICTOR W. PIZZOLATO,
SENIOR SECURITIES TRADER
<PAGE>
LORD, ABBETT & CO.
INVESTMENT
MANAGERS & UNDERWRITERS
SINCE 1929
WE INVITE YOU TO CALL LORD, ABBETT & CO.
800-426-1130
<PAGE>
OUR FAMILY OF FUNDS
LORD, ABBETT & CO.
Investment Management
[P1]
A Tradition of Performance
Through Disciplined Investing
<PAGE>
Founded in 1929, Lord, Abbett & Co. was one of the nation's first mutual
fund managers. While many things have changed since then, we have remained
committed to:
. Putting the investor first - our future depends on it.
. Providing investors with investment options - the Lord Abbett Family of
Funds consists of 25 portfolios to meet a variety of investment needs.
. Working with financial professionals - who provide valuable, informed
advice and help investors select the appropriate funds for their needs.
. Investing with a disciplined, value approach - we believe it is the best
way to achieve competitive returns and reduce portfolio risk.
. Attracting and retaining a qualified staff of investment professionals -
which currently consists of 41 professionals who average 19 years of
industry experience and 9 years of tenure with Lord, Abbett & Co.
This commitment has helped us earn the trust of financial professionals,
mutual fund investors, private investors, corporations and institutions.
"The most important element
[P2] in securing the Firm's future:
Ronald P. Lynch, always put the investor first."
Managing Partner
Ronald P. Lynch,
Managing Partner
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C>
About Lord, Abbett & Co............................................... 1
Selecting A Fund...................................................... 3
Fund Data
. Fund Performance............................................. 4
. Growth Funds................................................. 5
. Growth & Income Funds........................................ 6
. Balanced Fund................................................ 6
. Income Funds................................................. 7
. Tax-Free Income Funds........................................ 8
. Limited-Term Income Funds.................................... 12
Service & Flexibility................................................. 13
</TABLE>
<PAGE>
ABOUT
LORD,
ABBETT
WHO INVESTS IN THE LORD ABBETT FAMILY OF FUNDS? & CO.
- -------------------------------------------------------------------------
Number Of
Accounts*
. FIDUCIARIES
Trusts...................................................... 25,810
Custodians for minors....................................... 24,487
Pension, Profit-Sharing, and 401(k) Retirement Plans........ 24,099
457 Retirement & 403(b) Plans............................... 7,975
Estates..................................................... 1,192
. INSTITUTIONS
Accounts held in Broker/Dealer Street Name.................. 170,297
Corporations................................................ 2,410
Charitable & religious organizations........................ 993
Banks, credit unions & other financial organizations........ 982
Clubs & fraternal organizations............................. 330
Cemeteries.................................................. 148
Government Agencies......................................... 104
Colleges & universities..................................... 79
Nursing homes & hospitals................................... 69
. INDIVIDUALS
Single & joint accounts..................................... 200,831
IRAs........................................................ 85,517
-------
TOTAL 545,323
Lord Abbetts current and retired employees and their families have over $175
million invested in the Lord Abbett Family of Funds.
*As of 3/31/95.
Lord Abbett currently manages over
$16 billion for private investors,
corporations and institutions. [G1]
Assets under management
break out as follows:
1
<PAGE>
ABOUT
LORD,
ABBETT
& CO. WHAT MAKES LORD ABBETT DIFFERENT?
-----------------------------------------------------------------
AN INVESTMENT PHILOSOPHY ROOTED IN VALUE
A focus on value investing is the cornerstone of our investment
philosophy. Simply put, value investing is bargain hunting.
What distinguishes Lord, Abbett & Co. from other equity value managers
is our disciplined, three-step investment process used to identify and
invest in bargain-priced securities. Our goal is to provide investors
with portfolios that offer competitive total returns with less
volatility than the market.
OUR DISCIPLINED INVESTMENT PROCESS
. Quantitive Research is performed
to identify the most attractively
priced stocks. These "Targets of
Opportunity" undergo further
analyses.
. Fundamental Research helps . A Macro-Economic/Interest-
assess a company's resources Rate Screen helps portfolio
and determines if, given these managers identify opportunities
resources, a company's afforded by economic or
strategic plan is realistic. interest-rate influences.
In the management of fixed-income portfolios, our goal is total return
with an emphasis on current income. Based on our outlook for inflation,
interest rates and changes in Federal Reserve policy, we look for
undervalued securities. Active portfolio management strategies,
including adjusting maturities and sectors, and analyzing an issuer's
creditworthiness and prepayment risk, help us identify opportunities in
the fixed-income markets.
These same investment disciplines are used to manage our global mutual
funds. Dunedin Fund Managers Limited of Scotland serves as sub-adviser
and adds a global dimension to our resources. Dunedin and its
predecessors have been managing money since 1873.
"Our goal in investing in undervalued
[P3] securities is to produce competitive long-term
returns with reduced market risk."
Robert G. Morris,
Director of Equity Investments
left to right:
Julie M. Cannell,
Associate Director of
Equity Research
Robert G. Morris,
Director of Equity Investments
2
<PAGE>
SELECTING
A FUND
THE LORD ABBETT INVESTMENT SPECTRUM
- -------------------------------------------------------------------
The Lord Abbett Family of Funds consists of 25 portfolios
designed to meet various investment objectives. Shareholders
may reallocate assets among our funds at any time.
<TABLE>
<CAPTION>
GROWTH INCOME
- ------ ------------
Growth Growth & Balanced Income Tax-Free Limited-Term-
Funds Income Funds Fund Funds Income Funds Income Funds
- ------ ------------ -------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Developing Affiliated Fund Investment U.S. Government -National Investment Trust
Growth Fund Trust- Securities Fund -California Limited Duration
Fundamental Balanced -Connecticut U.S. Government
Value Value Fund Series Bond-Debenture -Florida Securities Series
Appreciation Fund -Georgia
Fund -Hawaii U.S. Government
Global Fund- -Michigan Securities Money
Global Fund- Income Series -Minnesota Market Fund
Equity Series -Missouri
-New Jersey
-New York
-Pennsylvania
-Texas
-Washington
</TABLE>
For more complete information on any of these funds, including charges,
risk factors, expenses assumed and fees waived, please contact your
financial adviser or call Lord, Abbett & Co. at 800-874-3733 for a
prospectus. Please read the prospectus carefully before investing.
"Having access to a complete family of funds
gives the professional financial adviser the
flexibility to build an individualized portfolio
from a combination of funds to meet each [P4]
client's unique investment objective."
Daniel E. Carper,
Partner in Charge of Marketing and Sales
left to right:
Stephen I. Allen,
Partner, National Sales
Manager
Daniel E. Carper,
Partner in Charge of
Marketing and Sales
3
<PAGE>
FUND
DATA
FUND PERFORMANCE (AS OF 3/31/95)
--------------------------------------------------------------------
<TABLE>
<CAPTION>
Average Annual Rates of Return at Maximum
Sales Charge for the Periods Ended 3/31/95
------------------------------------------------
Inception 10 Years or
Date Symbol 1 Year 3 Years 5 Years Since Inception
--------- ------ ------ ------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Growth Funds
------------
Developing Growth Fund 10/10/73 LAGWX 6.00% 6.06% 10.89% 7.79%
Value Appreciation Fund 6/28/83 LAVLX 1.20 7.49 9.39 11.74
Global Fund--Equity Series 9/30/88 LAGEX -6.60 6.68 4.70 5.54*
Growth & Income Funds
---------------------
Affiliated Fund 5/14/34 LAFFX 10.00 10.77 9.70 12.68
Fundamental Value Fund 7/8/86 LDFVX 7.20 8.94 9.19 9.70*
Balanced Fund
-------------
Investment Trust--Balanced Series 12/27/94 LABFX** - - - 0.90*+
Income Funds
------------
U.S. Government Securities Fund 9/19/32 LAGVX -1.60 4.28 7.54 9.17++
Bond-Debenture Fund 4/1/71 LBNDX -3.60 6.79 10.71 9.70
Global Fund--Income Series 9/30/88 LAGIX 3.50 6.32 8.85 8.19*
Tax-Free Income Funds
---------------------
National Series 4/2/84 LANSX 0.50 4.86 6.81 9.10
California Fund 9/3/85 LCFIX -0.90 4.40 6.67 7.96*
Connecticut Series 4/1/91 LACTX 0.60 5.31 - 6.55*
Florida Series 9/25/91 LAFLX 0.70 5.52 - 5.27*
Georgia Series 12/27/94 LAGAX** - - - 1.20*+
Hawaii Series 10/28/91 LAHIX 0.80 5.10 - 5.36*
Michigan Series 12/1/92 LAMIX 1.00 - - 4.57*
Minnesota Series 12/27/94 LAMNX** - - - 0.20*+
Missouri Series 5/31/91 LAMOX 0.00 4.86 - 6.47*
New Jersey Series 1/2/91 LANJX 1.10 5.85 - 7.32*
New York Series 4/2/84 LANYX -1.70 4.34 6.55 8.70
Pennsylvania Series 2/3/92 LAPAX 1.20 5.73 - 5.49*
Texas Series 1/20/87 LATIX 1.90 5.25 7.22 7.29*
Washington Series 4/15/92 LAWAX 0.80 - - 5.11*
Limited-Term Income Funds
-------------------------
Investment Trust--Limited Duration
U.S. Government Securities Series 11/4/93 LALDX** -0.40 - - -2.00*
U.S. Government Securities Money
Market Fund 6/27/79 LACXX 4.17 3.01 4.12 5.55
</TABLE>
* Since inception.
** Proposed.
+ Not annualized.
++ Prior to 10/15/85, the Fund invested in both corporate and U.S.
Government securities. Since that date, the Fund has invested in
U.S. Government securities exclusively. Average annual total return
from that date is 8.32%.
Performance results shown above reflect the percent change in
value assuming the reinvestment of all distributions. The results
quoted herein represent past performance which is no indication of
future results. The investment return and principal value of an
investment in the funds will fluctuate so that shares, on any given
day or when redeemed, may be worth more or less than their original
cost. The maximum sales charge is 3.00% for investments under $100,000
in the Limited Duration U.S. Government Securities Series; 5.75% for
investments under $50,000 in any of the growth or growth & income
funds; and 4.75% for investments under $100,000 in the Balanced Series
and in any of the remaining income funds except for the Money Market
Fund (which has no sales charge). See the prospectus of the fund you
are interested in for a discussion of fees waived and expense
subsidies.
4
<PAGE>
FUND
DATA
GROWTH FUNDS
- -------------------------------------------------------------------------
LORD ABBETT DEVELOPING GROWTH FUND Inception: 10/10/73
-------------------------------------------------------------------------
The goal of the Fund is to allow shareholders Average Annual Total
to participate in the future of selected small Returns as of 3/31/95
companies with above-average prospects for growth.
Composition: A portfolio of stocks of small companies.
Goal: To provide you with long-term price appreciation.
Net Assets: $138.9 million
Initial [G2]
Investment: $1,000 minimum; $250 for IRAs
Dividends: Paid or reinvested annually (if declared)
LORD ABBETT VALUE APPRECIATION FUND Inception: 6/28/83
--------------------------------------------------------------------------
The Fund is one of only a few funds that focuses Average Annual Total
on out-of-favor midsized companies (those with Returns as of 3/31/95
market capitalizations of roughly $500 million
to $3 billion).
Composition: A portfolio of undervalued stocks of midsized companies.
Goal: To provide you with growth of capital.
Net Assets: $194.5 million
Initial [G3]
Investment: $1,000 minimum; $250 for IRAs
Dividends: Paid or reinvested annually
LORD ABBETT GLOBAL FUND - EQUITY SERIES Inception: 9/30/88
--------------------------------------------------------------------------
Global diversification gives the Series the Average Annual Total
potential to benefit from favorable economic Returns as of 3/31/95
trends and undervalued securities throughout
the world.
Composition: A portfolio of undervalued stocks from around the world.
Goal: To provide you with long-term growth and income.
Net Assets: $80.6 million
Initial [G4]
Investment: $1,000 minimum; $250 for IRAs
Dividends: Paid or reinvested semi-annually
Country Diversification
on 3/31/95
[G5]
All results are at net asset value. See "Fund Performance" on page 4 for
performance at the applicable maximum sales charge. For a description of
fees waived and expense subsidies, see the prospectus of the fund you are
interested in.
5
<PAGE>
FUND
DATA
GROWTH & INCOME FUNDS
- -------------------------------------------------------------------------
LORD ABBETT'S AFFILIATED FUND Inception: 5/14/34
---------------------------------------------------------------------------
The Fund utilizes a disciplined investment approach Average Annual Total
to identify out-of-favor stocks of large, blue-chip Returns as of 3/31/95
companies.
Composition: A portfolio of undervalued stocks of
large, well-seasoned companies.
Goal: To provide you with long-term growth
of capital and income without excessive
price fluctuations.
Net Assets: $4.4 billion
Initial [G6]
Investment: $250 minimum
Dividends: Paid or reinvested quarterly
LORD ABBETT FUNDAMENTAL VALUE FUND Inception: 7/8/86
---------------------------------------------------------------------------
The Fund invests in out-of-favor stocks of Average Annual Total
large and midsized companies. This policy allows Returns as of 3/31/95
management to look at opportunities in a very
large universe.
Composition: A portfolio of stocks of large and
midsized companies.
Goal: To provide you with growth of capital and income.
Net Assets: $35.6 million
Initial [G7]
Investment: $1,000 minimum; $250 for IRAs
Dividends: Paid or reinvested semi-annually
BALANCED FUND
- -------------------------------------------------------------------------
LORD ABBETT INVESTMENT TRUST--BALANCED SERIES Inception: 12/27/94
---------------------------------------------------------------------------
Composition: A portfolio that combines fundamentally
driven, value-oriented stocks with
actively-managed fixed-income investments. [NEW]
Goal: To provide you with current income and
long-term growth of capital.
Initial
Investment: $1,000 minimum; $250 for IRAs
Dividends: Paid or reinvested monthly
All results are at net asset value. See "Fund Performance" on page 4 for
performance at the applicable maximum sales charge. For a description of
fees waived and expense subsidies, see the prospectus of the fund you are
interested in.
6
<PAGE>
FUND
DATA
INCOME FUNDS
- --------------------------------------------------------------------------
Lord Abbett U.S. Government Securities Fund Inception: 9/19/32
---------------------------------------------------------------------------
Invests exclusively in obligations issued Average Annual Total
or backed by the U.S. Government, its agencies or Returns as of 3/31/95
instrumentalities.
Composition: A portfolio of U.S. Government securities.
Goal: To provide you with high current income.
Net Assets: $3.2 billion
Initial [G8]
Investment: $500 minimum; $250 for IRAs
Dividends: Paid or reinvested monthly
* Prior to 10/15/85, the Fund invested in both corporate and U.S.
Government securities. Since that date, the Fund has invested exclusively
in U.S. Government securities. Average annual total return from that date
is 8.9%.
LORD ABBETT BOND-DEBENTURE FUND Inception: 4/1/71
---------------------------------------------------------------------------
The Fund emphasizes convertible issues and lower Average Annual Total
rated debt. The Fund focuses on the most attractive Returns as of 3/31/95
sectors of the bond market based on Lord Abbetts
judgment with respect to anticipated changes in
interest rates, the economy and the financial markets.
Composition: A portfolio of lower rated corporate bonds, equity-related
securities and high-grade bonds.
Goal: To provide you with high current income and capital growth
to produce high total returns.
Net Assets: $1.0 billion
Initial [G9]
Investment: $1,000 minimum; $250 for IRAs
Dividends: Paid or reinvested monthly Portfolio Composition
on 3/31/95
[G10]
All results are at net asset value. See "Fund Performance" on page 4 for
performance at the applicable maximum sales charge. For a description of
fees waived and expense subsidies, see the prospectus of the fund you are
interested in.
7
<PAGE>
FUND
DATA
INCOME FUNDS (Continued)
---------------------------------------------------------------------
Lord Abbett Global Fund Income Series Inception: 9/30/88
-----------------------------------------------------------------------
The Series seeks high real returns (i.e., yield Average Annual Total
minus inflation) by primarily investing in high- Returns as of 3/31/95
quality debt securities issued or guaranteed by
the U.S. or other foreign governments or their
agencies; high-quality U.S. and foreign
corporate debt and debt obligations of banks and
bank holding companies.
Composition: A portfolio of high-quality international and U.S. debt.
Goal: To provide you with high current income. Although not a
primary objective, the Series also is managed for growth
of capital.
Net Assets: $252.6 million
Initial [G11]
Investment: $1,000 minimum; $250 for IRAs
Dividends: Paid or reinvested monthly
Portfolio quality Country Diversification
on 3/31/95 on 3/31/95
[G12] [G13]
TAX-FREE INCOME FUNDS
- --------------------------------------------------------------------------
Lord Abbett manages several tax-free funds to provide you with high
current income exempt from federal income taxes and, for single-state
portfolios, exemption from state income and/or personal property taxes
(if applicable). All of Lord Abbett's tax-free income funds focus on
high-quality securities.
NATIONAL SERIES INCEPTION: 4/2/84
------------------------------------------------------------------------
Goal: To provide you with income Average Annual Total
exempt from federal income taxes. Returns as of 3/31/95
Net Assets: $655.8 million
Initial [G14]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly Portfolio quality
on 3/31/95
[G15]
* Includes holdings which are not rated by an independent ratings
service but are, in Lord Abbett's opinion, of comparable quality.
Please see the prospectus of the fund you are interested in for a
description of fees waived and expense subsidies for certain Lord Abbett
tax-free portfolios. All results are at net asset value. A portion of
income derived from tax-free portfolios may be subject to the
Alternative Minimum Tax. See "Fund Performance" on page 4 for
performance at the maximum sales charge and page 12 for important
information.
8
<PAGE>
FUND
DATA
TAX-FREE INCOME FUNDS (Continued)
- --------------------------------------------------------------------------
CALIFORNIA FUND Inception: 9/3/85
---------------------------------------------------------------------------
Goal: To provide you with income Average Annual Total
exempt from federal and Returns as of 3/31/95
California income taxes.
Net Assets: $308.9 million
Initial [G16]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly Portfolio Quality
on 3/31/95
[G17]
CONNECTICUT SERIES Inception: 4/1/91
---------------------------------------------------------------------------
Goal: To provide you with income
exempt from federal and
Connecticut income taxes.
Net Assets: $111.0 million
Initial [G18]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly Portfolio Quality
on 3/31/95
[G19]
FLORIDA SERIES Inception: 9/25/91
---------------------------------------------------------------------------
Goal: To provide you with income
free from federal income taxes
with shares free from Florida
personal property tax.
Net Assets: $180.7 million
Initial [G20]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly Portfolio Quality
on 3/31/95
[G21]
GEORGIA SERIES Inception: 12/27/94
---------------------------------------------------------------------------
Goal: To provide you with income free from
federal and Georgia income taxes. [NEW]
Shares of the Georgia Series are
subject to the Georgia intangibles
tax.
Initial
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly
Please see the prospectus of the fund you are interested in for a
description of fees waived and expense subsidies for certain Lord Abbett
tax-free portfolios. All results are at net asset value. A portion of
income derived from tax-free portfolios may be subject to the Alternative
Minimum Tax. See Fund Performance on page 4 for performance at the maximum
sales charge and page 12 for important information.
9
<PAGE>
FUND
DATA
TAX-FREE INCOME FUNDS (Continued)
- --------------------------------------------------------------------------------
HAWAII SERIES Inception: 10/28/91
---------------------------------------------------------------------
Goal: To provide you with income Average Annual Total
exempt from federal and Returns as of 3/31/95
Hawaii income taxes.
Net Assets: $87.6 million
Initial [G22]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly Portfolio Quality
on 3/31/95
[G23]
MICHIGAN SERIES Inception: 12/1/92
---------------------------------------------------------------------
Goal: To provide you with income Portfolio Quality
free from federal and Michigan on 3/31/95
income taxes with shares FUND IS
free from Michigan UNDER
personal property tax. 3 YEARS OLD
Net Assets: $49.8 million [G24]
Initial
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly
MINNESOTA SERIES Inception: 12/27/94
---------------------------------------------------------------------
Goal: To provide you with income exempt from federal and
Minnesota income taxes.
Initial [NEW]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly
MISSOURI SERIES Inception: 5/31/91
---------------------------------------------------------------------------
Goal: To provide you with income Average Annual Total
exempt from federal and Returns as of 3/31/95
Missouri income taxes.
Net Assets: $127.2 million [G25]
Initial
Investment: $1,000 minimum Portfolio Quality
Dividends: Paid or reinvested monthly on 3/31/95
[G26]
* Includes holdings which are not rated by an independent ratings service
but are, in Lord Abbett's opinion, of comparable quality.
Please see the prospectus of the fund you are interested in for a
description of fees waived and expense subsidies for certain Lord Abbett
tax-free portfolios. All results are at net asset value. A portion of
income derived from tax-free portfolios may be subject to the Alternative
Minimum Tax. See "Fund Performance" on page 4 for performance at the
maximum sales charge and page 12 for important information.
10
<PAGE>
FUND
DATA
TAX-FREE INCOME FUNDS (Continued)
- --------------------------------------------------------------------------------
NEW JERSEY SERIES Inception: 1/2/91
--------------------------------------------------------------------------
Goal: To provide you with income Average Annual Total
exempt from federal and Returns as of 3/31/95
New Jersey income taxes.
Net Assets: $188.0 million
Initial [G27]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly Portfolio Quality
on 3/31/95
[G28]
NEW YORK SERIES Inception: 4/2/84
--------------------------------------------------------------------------
Goal: To provide you with income Average Annual Total
exempt from federal, New York Returns as of 3/31/95
State and City income taxes.
Net Assets: $332.9 million
Initial [G29]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly Portfolio Quality
on 3/31/95
[G30]
PENNSYLVANIA SERIES Inception: 2/3/92
--------------------------------------------------------------------------
Goal: To provide you with income free Average Annual Total
from federal and Pennsylvania Returns as of 3/31/95
income taxes with shares
free from Pennsylvania
personal property tax.
Net Assets: $89.0 million
Initial [G31]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly Portfolio Quality
on 3/31/95
[G32]
TEXAS SERIES Inception: 1/20/87
--------------------------------------------------------------------------
Goal: To provide you with income Average Annual Total
exempt from federal Returns as of 3/31/95
income taxes.
Net Assets: $101.6 million
Initial [G33]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly Portfolio Quality
on 3/31/95
[G34]
* Includes holdings which are not rated by an independent ratings service
but are, in Lord Abbetts opinion, of comparable quality.
Please see the prospectus of the fund you are interested in for a
description of fees waived and expense subsidies for certain Lord Abbett
tax-free portfolios. All results are at net asset value. A portion of
income derived from tax-free portfolios may be subject to the Alternative
Minimum Tax. See Fund Performance on page 4 for performance at the
maximum sales charge and page 12 for important information.
11
<PAGE>
FUND
DATA
TAX-FREE INCOME FUNDS (Continued)
---------------------------------------------------------------------------
WASHINGTON SERIES Inception: 4/15/92
------------------------------------------------------------------------
Goal: To provide you with income
exempt from federal Portfolio Quality
income taxes. on 3/31/95
Net Assets: $73.9 million FUND IS
Initial UNDER
Investment: $1,000 minimum 3 YEARS OLD
Dividends: Paid or reinvested monthly [G35]
Limited-Term Income Funds
---------------------------------------------------------------------------
Lord Abbett Investment Trust -
Limited Duration U.S. Government Securities Series Inception: 11/4/93
------------------------------------------------------------------------
The Fund aims for higher total returns than shorter
term instruments, such as Treasury bills. In addition, FUND IS
the Fund strives to provide total returns that outpace UNDER
inflation and shorter term savings vehicles. Unlike a money 3 YEARS OLD
market fund, the Fund does not seek to maintain a stable
share price. The Fund also will not have the income potential
of a fund investing in longer term securities.
Composition: A portfolio of primarily short- and intermediate-duration
U.S. Government securities and high-quality securities.
Goal: To provide you with high income (relative to money market
instruments) with less fluctuation in principal than long-
term U.S. Government securities.
Net Assets: $7.8 million
Initial
Investment: $1,000 minimum; $250 for IRAs
Dividends: Paid or reinvested monthly
Please see the prospectus of the fund you are interested in for a
description of fees waived and expense subsidies for certain Lord Abbett
portfolios. All results are at net asset value. A portion of income
derived from tax-free portfolios may be subject to the Alternative
Minimum Tax. See Fund Performance on page 4 for performance at the
maximum sales charge.
Each tax-free portfolio may invest up to 20% of its net assets in
residual interest bonds (RIBs). A RIB, sometimes referred to as an
inverse floater, is a debt instrument with a floating or variable
interest rate that moves in the opposite direction of the interest rate
on another security or the value of an index. Changes in the interest
rate on the other security or index inversely affect the residual
interest paid on the RIB, with the result that when interest rates rise,
RIBs give lower interest payments and their values fall faster than
other similar fixed-rate bonds. But when interest rates fall, not only
do RIBs give higher interest payments, their values also rise faster
than other similar fixed-rate bonds. The market for RIBs is relatively
new.
12
<PAGE>
FUND
DATA
LIMITED-TERM INCOME FUNDS (Continued)
- --------------------------------------------------------------------------------
LORD ABBETT U.S. GOVERNMENT SECURITIES
MONEY MARKET FUND Inception: 6/27/79
-------------------------------------------------------------------------
(formerly Lord Abbett Cash Reserve Fund) Average Annual Total
Returns as of 3/31/95
Primarily invests in obligations issued or
backed by the U.S. Government, its agencies
or instrumentalities.
COMPOSITION: A portfolio of short-term U.S. Government securities.
GOAL: To provide you with high current income on your cash
reserves, while preserving capital and maintaining liquidity.
NET ASSETS: $145.6 million
INITIAL [G36]
INVESTMENT: $1,000 minimum; $250 for IRAs
DIVIDENDS: Paid or reinvested monthly
An investment in this Fund is neither insured nor guaranteed by the U.S.
Government and there can be no assurance that the Fund will maintain a
constant net asset value of $1.00 per share. This Fund is managed to
maintain, and has maintained, its stable $1.00 per share price.
All results are at net asset value. For a description of fees waived and
expense subsidies, see the prospectus of the fund you are interested in.
SERVICE &
FEXIBILITY
AT YOUR SERVICE
- --------------------------------------------------------------------------------
DISTRIBUTION OPTIONS:
-------------------------------------------------------------------------
. REINVEST: You can reinvest dividends and capital gains distributions to
purchase additional shares in each Fund. Reinvested dividends and
distributions continue working for you.
. DIVIDEND-MOVE: You can invest dividends ($50 or more) from one fund
into another fund. If no account exists in the second fund, one can be
established by investing $250.
. CASH: You can receive dividends and/or capital gains in cash.
AUTOMATIC INVESTMENT PLANS:
-------------------------------------------------------------------------
. INVEST-A-MATIC (DOLLAR-COST AVERAGING): A set dollar amount ($50 or
more) can be deducted from your bank account and invested in any
fund(s) automatically - monthly, quarterly or semi-annually ($250
minimum initial investment).
. SYSTEMATIC WITHDRAWAL PLAN: A check for a specific dollar amount can be
sent to you (or deposited in your bank account) monthly, quarterly,
semi-annually or annually, from an account with a balance of at least
$10,000.
. SYSTEMATIC EXCHANGE: A set dollar amount of $50 or more can be
automatically exchanged between funds monthly, quarterly, semi-annually
or annually, to dollar-cost average. If no account exists in the second
fund, a $250 initial investment requirement must be met.
13
<PAGE>
SERVICE &
FLEXIBILITY
AT YOUR SERVICE (Continued)
--------------------------------------------------------------------
SHAREHOLDER PRIVILEGES:
--------------------------------------------------------
. Lifetime Discounts or Rights of Accumulation*:
You and your family may qualify for a discount
on purchases of one fund or a combination of
funds based on the total assets you have invested
in the Lord Abbett Family. See the prospectus(es)
for further information.
. Letter of Intention (LOI)*: You and your family
can sign a non-binding 13-month statement of
intention to invest a fixed-dollar amount in the
Family, in order to qualify for the maximum discount.
. Exchange Privileges: You can reposition your
assets by exchanging shares of one fund for
another fund in the Family by calling 800-521-5315.
The exchange privilege can be modified or terminated.
. Account Information: You have access to an
automated telephone information service that
provides data on your fund investments.
. Free Checkwriting Privileges: You can write
checks (bank drafts) for $500 or more. Your
account continues to earn interest until checks
clear. (Applies to Lord Abbett U.S. Government
Securities Money Market Fund only.)
Lord Abbett Retirement Plan Services:
--------------------------------------------------------
Lord Abbett has been a pioneer in the mutual fund
retirement planning market. We have maintained a
structured retirement planning department for over
two decades under the direction of ERISA attorneys.
Lord Abbett offers a full menu of retirement
planning services. IRS-approved sign-up documents
are available for IRA, Rollover IRA, SEP-IRA, 403(b)
and Defined Contribution Retirement Plans. A complete
TurnKey package is available for 401(k) plans.
Reports Provided by the Lord Abbett
Family of Funds:
---------------------------------------------------------
Shareholders receive annual (audited) and semi-annual
reports for their fund(s), and year-to-date statements
reflecting every transaction, current share balance and
the cost basis for purchases made within the year.
* Does not include initial purchases of shares of
Lord Abbett U.S. Government Securities Money Market
Fund purchased without a sales charge.
Additional Information
--------------------------------------------------------------------
If used as sales material after 6/30/95, this
piece must be accompanied by Lord Abbett's
Performance Quarterly for the most recently
completed calendar quarter. Results quoted herein
represent past performance and are no guarantee
of future results.
For additional information and literature
(including a prospectus) for any Lord Abbett
mutual fund, call your financial adviser or Lord,
Abbett & Co. at 800-874-3733. A prospectus
contains important information, including sales
charges, expenses, and a full discussion of risk
factors, and should be read carefully before you
invest.
Lord, Abbett & Co.
Investment Management
The GM Building . 767 Fifth Avenue . New York, NY . 10153-0203
800-426-1130
LAFOFB-40-395
14
<PAGE>
FUND ACTION
THE MUTUAL FUND NEWS REPORT THAT SPARKS IDEAS
WE WERE PLEASED THAT OUR MANAGING
PARTNER RECEIVED THIS HONOR. I WANTED
TO SHARE THIS ARTICLE WITH YOU.
MIKE MCLAUGHLIN
DIRECTOR OF MARKETING
EXCERPTED FROM
VOLUME 6, NUMBER 1,
JANUARY 3, 1995
SPECIAL REPORT:
RONALD P. LYNCH
NAMED FUND LEADER
OF 1994
SPECIAL REPORT: RONALD P. LYNCH
NAMED FUND LEADER OF 1994
1994 was a watershed year for the fund industry. The press fell out of
love with mutual funds. News of INVESCOs insider trading flap, derivatives
debacles, multiple money fund rescues and Fidelity's price reporting snafu
peppered the country's newspapers. It was a year the industry needed a statesman
at its helm. And fortunately it was a year the industry had one. That statesman
was Lord Abbett's managing partner Ron Lynch.
As chairman of the Investment Company Institute, Ron Lynch kept a steady
hand on the industrys tiller throughout a tempestuous 1994. When regulators and
the press began questioning industry ethical standards, Lynch faced the issue
head-on. He quickly assembled a Blue Ribbon Panel to study intra-industry
trading practices and make recommendations for possible improvement. The result?
Accolades from SEC Chairman Arthur Levitt, who praised the industry for its
quick and diligent response.
More importantly, Lynch's actions underscored the industrys dedication to
high ethical standards and fiduciary responsibility. It is because of Lynch's
successful skippering of the industry through rough waters that Fund Action is
naming him the 1994 Fund Leader of the Year.
HE'S A QUIET LEADER WHO LEADS WITH MORAL SUASION.
OPPENHEIMERS JON FOSSEL
Perseverance and consensus building, say friends and associates, are the
qualities that best characterize Lynch. Whether he's forging a business strategy
with his partners at Lord Abbett or piloting the ICI, he gets the job done. And
in getting the job done, he studies all the angles and strives to build a
consensus among constituents. Constructive compromise, not coercion, is Lynch's
stock in trade.
HE PUT ASIDE WHATEVER HIS GROUP OR ANY INDIVIDUAL FUND GROUP MIGHT THINK WAS
BEST FOR THEMSELVES.
BOB GRAHAM OF AIM
Nipping issues in the bud before they become full-blown problems has been
Lynch's modus operandi. And, those who speak for the industry must, like Lynch,
be willing to fight to maintain its integrity.
When INVESCO fired portfolio manager John Kaweske for failing to report
personal trades, the industry faced press reports and congressional inquiries
regarding its ethical standards. Reporters immediately set to work trying to
ferret out similar abuses at other advisory firms. Lynch took a proactive step.
He formed a Blue Ribbon Panel of fund company chiefs. Its mission was to examine
the personal trading issue, and make recommendations that would raise investor
confidence in the industrys ability to police itself.
"We raised the bar so that it is very difficult for abuses to occur," says
Lynch proudly. And what particularly pleases him is that the industry took the
bull by the horns.
The results of the panel exemplify Lynch's talents as a consensus builder.
Panel members represented differing opinions on personal trading within the
industry. Weaving our way around that to get a balance was quite a challenge,
says T.Rowe Price chief Jim Riepe. "Ron's concern was to come up with a solution
that was best for the industry," points out Bob Graham of AIM. "He put aside
whatever his group or any individual fund group might think was best for
themselves." Some have criticized the Blue Ribbon Panel for being too harsh.
Lynch responds, "I'd rather err on the side of being too strict. Riepe agrees:
"It has preempted any harsher reaction by the regulators, by Congress or by the
press."
Colleagues who watched Lynch work with the ICI's Blue Ribbon Panel weren't
surprised by his consensus-building skills. Many had previously observed him
forge a meeting of the minds between the SEC and the industry on Rule 12b-1.
Lynch was vice chairman of the National Association of Securities Dealers group
that revamped the 12b-1 Rule. Lynch boosters suggest that his efforts kept 12b-1
plans from being squelched by an unappreciative SEC.
Back in 1988, the regulators proposed rules to rein in 12b-1 plans. "Our
proposal was greeted with horror by the industry moguls on Wall Street," says
Kathy McGrath, then SEC director of Investment Management.
Lynch decided it would be better for those who were affected by changes in
Rule 12b-1 to do something about it. "I went to the industry and told them that
if we didn't get it done, someone would want to do it for us," he says. The
debate centered around how to rejigger 12b-1 fees so that the industry and the
SEC would accept them. Lynch and others approached the NASD with their proposal
to study the 12b-1 plan problem.
The NASD gave its Investment Companies Committee the thumbs up to
examine 12b-1 fees. Lynch chaired the committee from 1989 to 1991.
In 1990 the Investment Companies Committee announced rule changes of
mind-boggling complexity. The bottom line was that annual sales charges and
service charges paid by a fund to distributors could not exceed 1%. "Our aim was
to get financial parity between front-end and back-end shares," says Lynch. The
industry and the SEC were satisfied.
"HE IS ONE OF THOSE PEOPLE
WHO GETS THINGS DONE."
CHARLIE JOHNSON, FRANKLIN
A key to the success of the 12b-1 issue was Lynch's constant contact with
the SEC. He gave them regular updates on the NASD committees progress. "He's a
wonderful and delightful person to work with," says McGrath. "And he's as
honest as the day is long."
Franklin chief Charlie Johnson, an old friend of Lynch's, worked on the
12b-1 issue with him. "He was very much responsible for grasping the problems
and bringing to fruition the whole 12b-1 Rule that the NASD adopted," says
Johnson. "He is one of those people who gets things done."
Ron Lynch's laundry list of achievements begins before he started his
career at Lord Abbett. First he put himself through Cornell University, where he
received a BS in economics. A short while later, Lynch hooked up with Lord
Abbett. A regional sales manager at 28, he was 10 years younger than any other
professional at the firm. Lynch's first wholesale region covered New England,
New York and Pennsylvania. Lynch then moved to the warmer climes of California
where he headed sales in the West then a relatively untapped market. After eight
years, Lynch returned to New York, but not before he had doubled Lord Abbett's
share of the market out West. When he returned to Lord Abbett in New York, Lynch
was made a senior partner. In 1983, he became managing partner.
When Lynch takes time off from mutual funds, he's fundraising for his alma
mater, Cornell. He's vice chairman of the board of trustees and the chair of the
investment committee, responsible for a $1.8 billion endowment. Lynch has a
special interest in the Cornell University Medical Center, where he's on the
Joint Board and the Board of Overseers.
He and his wife Susan have three sons. The two younger Lynchs are
following in their father's academic footsteps at Cornell. The eldest, Ron Lynch
Jr., has already caught the fund bug. He is a wholesaler for Chase Manhattan's
Vista Funds on the West Coast. -- S.E. Canaday
For more complete information on any Lord Abbett-managed fund, call 800-874-3733
for a prospectus. A prospectus contains information on a fund, including charges
and expenses and should be read carefully before investing in a fund.
LORD, ABBETT & CO.
INVESTMENT MANAGEMENT
A TRADITION OF PERFORMANCE THROUGH DISCIPLINED INVESTING
EXCERPTED FROM FUND ACTION, COPYRIGHT 1995 FUND WORLD, INC. ALL RIGHTS RESERVED.
<PAGE>
GRAPHIC APPENDIX
P1 LORD ABBETT & CO. COMPANY LOGO
P2 PICTURE OF COMPANY CHAIRMAN, RONALD P. LYNCH
G1 PIE CHART - 41.8% EQUITY
38.8% TAXABLE FIXED INCOME
19.4% TAX-FREE FIXED INCOME
P3 PICTURE OF LORD ABBETT PERSONNEL DESCRIBED UNDER PICTURE
P4 PICTURE OF LORD ABBETT PERSONNEL DESCRIBED UNDER PICTURE
G2 BAR GRAPH - 3 YEARS - 8.2%
5 YEARS - 12.2%
10 YEARS - 8.4%
G3 BAR GRAPH - 3 YEARS - 9.6%
5 YEARS - 10.7%
10 YEARS - 12.4%
G4 BAR GRAPH - 3 YEARS - 8.8%
5 YEARS - 6.0%
LIFE - 6.5%
G5 PIE CHART - 29.2% PACIFIC RIM
25.8% USA
18.4% EUROPE
12.5% CASH/EQUIVALENT
11.9% UK
2.1% EMERGING MARKETS
0.1% CANADA
G6 BAR GRAPH - 3 YEARS - 13.0%
5 YEARS - 11.0%
10 YEARS - 13.3%
G7 BAR GRAPH - 3 YEARS - 11.1%
5 YEARS - 10.5%
LIFE - 10.5%
G8 BAR GRAPH - 3 YEARS - 6.1%
5 YEARS - 8.6%
10 YEARS - 9.7%*
G9 BAR GRAPH - 3 YEARS - 8.5%
5 YEARS - 11.8%
10 YEARS - 10.2%
G10 PIE CHART - 65.3% LOWER RATED DEBT
18.5% EQUITY-RELATED SECURITIES
16.2% HIGH-GRADE DEBT
(INCLUDING OTHER ASSETS, LESS LIABILITIES)
G11 BAR GRAPH - 3 YEARS - 8.0%
5 YEARS - 9.9%
LIFE - 9.0%
G12 PIE CHART - 91.5% AAA
8.5% AA
G13 PIE CHART - 43.8% USA
38.7% EUROPE
17.5% FAR EAST
G14 PIE CHART - 67.8% AAA
18.4% AA
7.6% A
6.2% BBB
G15 BAR GRAPH - 3 YEARS - 6.6%
5 YEARS - 7.9%
10 YEARS - 9.6%
G16 PIE CHART - 69.3% AAA
22.4% AA
8.3% A
G17 BAR GRAPH - 3 YEARS - 6.1%
5 YEARS - 7.7%
LIFE - 8.5%
G18 PIE CHART - 61.6% AAA
19.0% AA
16.8% A
2.6% BBB
G19 BAR GRAPH - 3 YEARS - 7.1%
LIFE - 7.9%
G20 PIE CHART - 70.0% AAA
16.4% AA
13.0% A
0.6% BBB
G21 BAR GRAPH - 3 YEARS - 7.3%
LIFE - 6.8%
G22 PIE CHART - 77.9% AAA
12.7% AA
9.4% A
G23 BAR GRAPH - 3 YEARS - 6.9%
LIFE - 6.9%
G24 PIE CHART - 64.4% AAA
14.4% AA
17.0% A
4.2% BBB
G25 PIE CHART - 74.7% AAA
16.0% AA
4.6% A
4.7% BBB
G26 BAR GRAPH - 3 YEARS - 6.6%
LIFE - 7.8%
G27 PIE CHART - 71.0% AAA
17.5% AA
6.2% A
5.3% BBB*
G28 BAR GRAPH - 3 YEARS - 7.6%
LIFE - 8.6%
G29 PIE CHART - 60.9% AAA
14.0% AA
19.6% A
5.5% BBB
G30 BAR GRAPH - 3 YEARS - 6.0%
5 YEARS - 7.6%
10 YEARS - 9.2%
G31 PIE CHART - 70.6% AAA
11.8% AA
14.8% A
2.8% BBB
G32 BAR GRAPH - 3 YEARS - 7.5%
LIFE - 7.2%
G33 PIE CHART - 54.7% AAA
28.9% AA
15.9% A
0.5% BBB*
G34 BAR GRAPH - 3 YEARS - 7.0%
5 YEARS - 8.3%
LIFE - 7.9%
G35 PIE CHART - 81.9% AAA
9.0% AA
9.1% A
G36 BAR GRAPH - 3 YEARS - 3.0%
5 YEARS - 4.1%
10 YEARS - 5.6%
