1933 Act File No. 2-62797
1940 Act File No. 811-2871
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 20 [X]
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [X]
OF 1940
Post-Effective Amendment No. 20 [X]
LORD ABBETT DEVELOPING GROWTH FUND, INC.
Exact Name of Registrant as Specified in Charter
767 FIFTH AVENUE, NEW YORK, N. Y. 10153-0203
Address of Principal Executive Office
REGISTRANT'S TELEPHONE NUMBER (212) 848-1800
Kenneth B. Cutler, Vice President & Secretary
767 FIFTH AVENUE, NEW YORK, N. Y. 10153
Name and Address of Agent for Service
It is proposed that this filing will become effective (check appropriate box)
immediately on filing pursuant to paragraph (b) of Rule 485
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X on May 28, 1996 pursuant to paragraph (b) of Rule 485
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60 days after filing pursuant to paragraph (a) (1) of Rule 485
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on (date) pursuant to paragraph (a) (1) of Rule 485
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75 days after filing pursuant to paragraph (a) (2) of rule 485
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on (date) pursuant to paragraph (a) (2) of rule 485
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If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2(a) (1) and a Rule 24f-2 Notice for
Registrant's most recent fiscal year was filed with the Commission on or about
March 29, 1996.
<PAGE>
LORD ABBETT DEVELOPING GROWTH FUND, INC.
FORM N-1A
Cross Reference Sheet
Post-Effective Amendment No. 20
Pursuant to Rule 481 (a)
Form N-1A Location In Prospectus or
ITEM NO. STATEMENT OF ADDITIONAL INFORMATION
1 Cover Page
2 Fee Table
3 (a) Financial Highlights; Performance
3 (b) N/A
3 (c) Performance
3 (d) N/A
4 (a) (i) Cover Page
4 (a) (ii) Investment Objective; How We Invest
4 (b) (c) How We Invest
5 (a) Our Management
5 (b) Our Management; Back Cover Page
5 (c) Our Management
5 (d) N/A
5 (e) Back Cover Page
5 (f) Our Management
5 (g) N/A
5 A Performance
6 (a) Cover Page
6 (b) (c) (d) N/A
6 (e) Cover Page
6 (f) (g) Dividends, Capital Gains
Distributions and Taxes
6 (h) N/A
7 (a) Back Cover Page
7 (b) (c) (d)
(e) (f) Purchases
8 Redemptions
9 N/A
10 Cover Page
11 Cover Page - Table of Contents
12 N/A
13 Investment Objective and Policies
14 Directors and Officers
15 (a)(b) N/A
15 (c) Directors and Officers
16 (a)(i) Investment Advisory and Other Services
16 (a)(ii) Directors and Officers
16 (a)(iii) Investment Advisory and Other Services
16 (b) Investment Advisory and Other Services
16 (c)(d)(e)
(g) N/A
16 (f) Purchases, Redemptions; Investment Advisory and
Other Services
and Shareholder Services
16 (h) Investment Advisory and Other Services
16 (i) N/A
<PAGE>
Form N-1A Location In Prospectus or
ITEM NO. STATEMENT OF ADDITIONAL INFORMATION
17 (a) Portfolio Transactions
17 (b) N/A
17 (c)(d) Portfolio Transactions
17 (e) N/A
18 (a) Cover Page
18 (b) N/A
19 (a) (b) Purchases, Redemptions
and Shareholder Services
19 (c) N/A
20 Taxes
21 (a) Purchases, Redemptions
and Shareholder Services
21 (b) (c) N/A
22 (a) N/A
22 (b) Past Performance
23 Financial Statements
<PAGE>
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
MAY 28, 1996.
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.
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 8
8 Dividends, Capital Gains
Distributions and Taxes 8
9 Redemptions 9
10 Performance 10
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.
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") 0.64%
12b-1 Fee (See "Purchases") 0.18%(3)
Other Expenses (See "Our Management") 0.21%
Total Operating Expenses 1.03%(3)
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
$67(4) $88(4) $111(4) $176(4)
(1) Sales load is referred to as sales charge and deferred sales load is
referred to as contingent deferred reimbursement charge throughout this
Prospectus. With a front-end sales charge and the Rule 12b-1 plan described
herein, long-term shareholders may pay more than the economic equivalent of
the maximum permitted front-end sales charge pursuant to the rules of the
National Association of Securities Dealers.
(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) The Board of Directors has approved under a new 12b-1 plan, subject to
shareholder approval, payments that, had they been in effect for the Funds
most recent fiscal year, would have increased 12b-1 fees and total expenses
to 0.19% and 1.04%, respectively. See Rule 12b-1 Plan for more details.
(4) 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.
3 FINANCIAL HIGHLIGHTS
The following table has been audited by Deloitte & Touche llp, independent
public 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: 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $9.58 $10.65 $10.11 $10.86 $7.98 $6.96 $7.19 $6.50 $8.87 $8.41
Income from investment operations
Net investment income (loss) (.02) (.04) (.05) (.02) .02 .01* .01* .03* (.04) (.04)
Net realized and unrealized
gain (loss) on investments 4.795 (.2225) 1.62 (.24) 3.28 1.01 (.02) .66 (1.05) .89
Total from investment operations 4.775 (.2625) 1.57 (.26) 3.30 1.02 (.01) .69 (1.09) .85
Distributions
Dividends from net investment income (.02) (.02) . (.03) . . .
Distributions from net realized gain (2.865) (.8075) (1.03) (.47) (.40) . (.19) . (1.28) (.39)
Net asset value, end of year $11.49 $9.58 $10.65 $10.11 $10.86 $7.98 $6.96 $7.19 $6.50 $8.87
Total Return** 50.22% (2.74)% 16.41% (2.31)% 41.53% 14.66% (.38)% 10.62% (12.64)% 10.22%
Ratios/Supplemental Data:
Net assets, end of year (000) $197,602 $127,579 $143,693 $151,068 $156,932 $117,786 $119,836 $163,676 $181,401 $265,968
Ratios to Average Net Assets:
Expenses 1.03% 1.31% 1.34% 1.31% 1.14% 1.24% 1.13% 1.08% .92% .90%
Net investment income (loss) (.52)% (.38)% (.51)% (.25)% .26% .20% .08% .37% (.30)% (.41)%
Portfolio turnover rate 50.12% 17.57% 16.29% 17.22% 12.62% 12.76% 14.57% 20.20% 15.09% 6.95%
</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 that is aggressive enough to seize the
opportunities we perceive in each companys 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 companys 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 investment policies
or strategy, we reserve the right to make such a change without shareholder
approval, provided it is not prohibited by our
<PAGE>
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. The dealer is responsible
for the timely transmission of
<PAGE>
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 Abbetts own resources and will be made
in the form of cash or, if permitted, non-cash payments. The non-cash payments
will include business seminars at resorts or other locations, including meals
and entertainment, or the receipt of merchandise. The cash payments will include
payment of various business expenses of the dealer.
</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),
any series of the Lord Abbett Research Fund if not offered to the general public
(LARF) and Lord Abbett U.S. Government Securities Money Market Fund (GSMMF),
except for existing holdings in GSMMF which are attributable to shares exchanged
from a Lord Abbett-sponsored fund offered with a front-end sales charge or from
a fund in the Lord Abbett Counsel Group.) (2) A purchaser may sign a non-binding
13-month statement of intention to invest $50,000 or more in the Fund or in any
of the above eligible funds. If the intended purchases are completed during the
period, each purchase will be at the sales charge, if any, applicable to the
aggregate of such purchasers intended purchases. If not completed, each purchase
will be at the sales charge for the aggregate of the actual purchases. Shares
issued upon reinvestment of dividends or distributions are not included in the
statement of intention. The term purchaser includes (i) an individual, (ii) an
individual and his or her spouse and children under the age of 21 and (iii) a
trustee or other fiduciary purchasing shares for a single trust estate or single
fiduciary account (including a pension, profit-sharing, or other employee
benefit trust qualified under Section 401 of the Internal Revenue Code more than
one qualified employee benefit trust of a single employer, including its
consolidated subsidiaries, may be considered a single trust, as may qualified
plans of multiple employers registered in the name of a single bank trustee as
one account), although more than one beneficiary is involved.
Our shares may be purchased at net asset value by our directors, employees of
Lord Abbett, employees of our shareholder servicing agent and employees of any
securities dealer having a sales agreement with Lord Abbett who consents to such
purchases or by the trustee or custodian under any pension or profit-sharing
plan or Payroll Deduction IRA established for the benefit of such persons or for
the benefit of any national securities trade organization to which Lord Abbett
belongs or any company with an account(s) in excess of $10 million managed by
Lord Abbett on a private-advisory-account basis. For purposes of this paragraph,
the terms directors and employees include a directors or employees spouse
(including the surviving spouse of a deceased director or employee). The terms
directors and employees of Lord Abbett also include other family members and
retired directors and employees. Our shares also may be purchased at net asset
value (a) at $1 million or more, (b) with dividends and distributions from other
Lord Abbett-sponsored funds, except for dividends and distributions on shares of
LARF, LAEF, LASF and Lord Abbett Counsel Group, (c) under the loan feature of
the Lord Abbett-sponsored prototype 403(b) plan for share purchases representing
the repayment of principal and interest, (d) by certain authorized brokers,
dealers, registered investment advisers or other financial institutions who have
entered into an agreement with Lord Abbett in accordance with certain standards
approved by Lord Abbett, providing specifically for the use of our shares in
particular investment products made available for a fee to clients of such
brokers, dealers, registered investment advisers and other financial
institutions (mutual fund wrap fee programs), (e) by employees, partners and
owners of unaffiliated consultants and advisers to Lord Abbett or Lord
Abbett-sponsored funds who consent to such purchase if such persons provide
services to Lord Abbett or such funds on a continuing basis and are familiar
with such funds 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.
<PAGE>
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 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.
The Board of Directors of the Fund has approved, subject to shareholder approval
at a meeting to be held on June 19, 1996, a new Rule 12b-1 plan. Under the most
significant difference between the two plans, the board could approve under the
proposed new plan maximum annual fees of up to 0.50% of average daily net
assets, consisting of a distribution fee of 0.25% and a service fee of 0.25%
(except that the service fee may not exceed 0.15% in the case of shares sold or
attributable to shares sold prior to June 1, 1990). The board has approved under
the proposed new plan, subject to such shareholder approval, payments that, had
they been in effect for the Funds most recent fiscal year, would have increased
12b-1 fees from 0.18% to 0.19% of average net assets.
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.
<PAGE>
Retirement Plans: Lord Abbett makes available the retirement plan forms and
custodial agreements for IRAs (Individual Retirement Accounts including
Simplified Employee Pensions), 403(b) plans and pension and profit-sharing
plans, including 401(k) plans.
Householding: A new procedure has been inaugurated whereby a single copy of an
annual or semi-annual report is sent to an address to which more than one
registered shareholder of the Fund with the same last name has indicated mail is
to be delivered, unless additional reports are specifically requested in writing
or by telephone.
All correspondence should be directed to Lord Abbett 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 manager
for over 65 years and currently manages over $19 billion in a family of mutual
funds and other advisory accounts. Under the Management Agreement, Lord Abbett
provides us with investment management services and executive and other
personnel, pays the remuneration of our officers and 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 had served as 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,
1996, the effective fee paid to Lord Abbett as a percentage of average daily net
assets was at the annual rate of 0.64%. 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, 1996 was
1.03%.
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.
If you elect a cash payment (i) a check will be mailed to you as soon as
possible after the monthly reinvestment date or (ii) if you arrange for direct
deposit, your payment will be wired directly to your bank account within one day
after the date on which the dividend is paid.
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
<PAGE>
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%. Legislation pending 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 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 three
days. The Fund may suspend the right to redeem shares for not more than seven
days (or longer under unusual circumstances as permitted by Federal law). If you
have purchased Fund shares by check and subsequently submit a redemption
request, redemption proceeds will be paid upon clearance of your purchase check,
which may take up to 15 days. To avoid delays you may arrange for the bank upon
which a check was drawn to communicate to the Fund that the check has cleared.
Shares also may be redeemed by the Fund at net asset value through your
securities dealer who, as an unaffiliated dealer, may charge you a fee. If your
dealer receives your order prior to the close of the NYSE and communicates it to
Lord Abbett, as our agent, prior to the close of Lord Abbetts business day, you
will receive the net asset value 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
<PAGE>
to, or concurrent with, the redemption request.
10 PERFORMANCE
The Fund ended fiscal 1996 on January 31, with a per share net asset value of
$11.49 versus $6.71 one year ago. The latter figure has been adjusted for
capital gains distributions totaling $2.865 per share paid over the Funds fiscal
year. The Board of Directors subsequently declared a capital gains distribution
of $.16 per share which was paid on February 21 to shareholders of record on
February 14, 1996. The Funds total return over the fiscal year was 50.2%. 1995
was a superior year for small company growth stocks; and the Fund performed
exceptionally well. We increased the number of holdings by adding over 25
companies to the Funds portfolio, with particular emphasis on small and highly
specialized, niche companies. This strategy benefited the Funds performance, as
did our holdings in technology stocks. During the second half of 1995, we were
net sellers of technology and captured many of the profits made from this
sector. As technology stock prices corrected in December, the Fund used this
opportunity to purchase more niche companies at attractive prices.
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.
[CAPTION]
<TABLE>
FUND FUND AT RUSSELL
AT NET MAXIMUM 2000
DATE ASSET VALUE OFFERING PRICE INDEX
- ---- ------------ -------------- -------
<S> <C> <C> <C>
1/31/86 $10,000 $ 9,428 $10,000
1/31/87 11,021 10,391 11,607
1/31/88 9,629 9,078 9,902
1/31/89 10,651 10,042 12,391
1/31/90 10,611 10,005 12,586
1/31/91 12,166 11,470 12,109
1/31/92 17,218 16,234 17,532
1/31/93 16,821 15,859 19,853
1/31/94 19,581 18,461 23,543
1/31/95 19,043 17,955 22,129
1/31/96 28,606 26,971 28,754
</TABLE>
Average Annual Total Return(1)
1 Year 5 Years 10 Years
40.00% 15.66% 10.39%
(1)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, 1996 using the SEC-required uniform method to
compute such return.
(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)Data reflects the deduction of the maximum sales charge of 5.75%.
<PAGE>
Underwriter and Investment Manager
Lord, Abbett & Co.
The General Motors Building
767 Fifth Avenue
New York, New York 10153-0203
212-848-1800
Custodian
The Bank of New York
48 Wall Street
New York, New York 10286
Transfer Agent and Dividend
Disbursing Agent
United Missouri Bank of Kansas City, N.A.
Tenth and Grand
Kansas City, Missouri 64141
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419100
Kansas City, Missouri 64141
800-821-5129
Auditors
Deloitte & Touche llp
Counsel
Debevoise & Plimpton
Printed in the U.S.A.
LADG-1-596
<PAGE>
LORD ABBETT
STATEMENT OF ADDITIONAL INFORMATION MAY 28, 1996
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 May 28, 1996.
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.
PORTFOLIO TURNOVER RATE
For the year ended January 31, 1996, our portfolio turnover rate was 50.12%,
versus 17.57% 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 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, as
amended, and as such, may be considered to have an indirect financial interest
in the Rule 12b-1 Plan described in the Prospectus.
Ronald P. Lynch, age 60, Chairman
Robert S. Dow, age 51, President
The following outside directors are also directors or trustees of the fifteen
other Lord Abbett-sponsored funds referred to above except for Lord Abbett
Research Fund, Inc., of which only Messrs. Millican and Neff are directors.
E. Thayer Bigelow
Time Warner Cable
300 First Stamford Place
Stamford, Connecticut
President and Chief Executive Officer of Time Warner Cable Programming, Inc.
Formerly President and Chief Operating Officer of Home Box Office, Inc. Age 54.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 65.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 70.
C. Alan MacDonald
The Marketing Partnership, Inc.
27 Signal Road
Stamford, Connecticut
General Partner, The Marketing Partnership, Inc., a full service marketing
consulting firm. Formerly Chairman and Chief Executive Officer of Lincoln
Snacks, Inc., manufacturer of branded snack foods (1992-1994). Formerly
President and Chief Executive Officer of Nestle Foods Corp, and prior to that,
President and Chief Executive Officer of Stouffer Foods Corp., both subsidiaries
of Nestle SA, Switzerland. Currently serves as Director of Den West Restaurant
Co., J. B. Williams, and Fountainhead Water Company. Age 62.
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 67.
Thomas J. Neff
Spencer Stuart & Associates
277 Park Avenue
New York, New York
President of Spencer Stuart & Associates, an executive search consulting firm.
Age 58.
The second column of the following table sets forth the compensation accrued for
the Fund's outside directors. The third and fourth columns set forth information
with respect to the retirement plan for outside directors maintained by the Lord
Abbett-sponsored funds. The fifth column sets forth the total compensation
payable by such funds to the outside directors. The first four columns give
information for the Fund's fiscal year ended Januaru 31, 1996; the fifth column
gives information for the year ended December 31, 1995. No director of the Fund
associated with Lord Abbett and no officer of the Fund received any compensation
from the Fund for acting as a director or officer.
<TABLE>
<CAPTION>
For the Fiscal Year Ended January 31, 1996
(1) (2) (3) (4) (5)
Pension or Estimated Annual For Year Ended
Retirement Benefits Benefits Upon December 31, 1995
Accrued as Expenses Retirement Accrued Total Compensation
by the Fund and by the Fund and Accrued by the Fund and
Aggregate Fifteen Other Lord Fifteen Other Lord Fifteen Other Lord
Compensation Abbett-sponsored Abbett-sponsored Abbett-sponsored
Name of Director from the Fund1 Funds2 Funds2 Funds3
<S> <C> <C> <C> <C>
E. Thayer Bigelow $485 $9,772 $33,600 $41,700
Stewart S. Dixon $463 $22,472 $33,600 $42,000
John C. Jansing $500 $28,480 $33,600 $42,960
C. Alan MacDonald $471 $27,435 $33,600 $42,750
Hansel B. Millican, Jr. $502 $24,707 $33,600 $43,000
Thomas J. Neff $484 $16,126 $33,600 $42,000
<FN>
1. Outside directors' fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on net
assets of each fund. A portion of the fees payable by the Fund to its outside
directors are being deferred under a plan that deems the deferred amounts to
be invested in shares of the Fund for later distribution to the directors.
The total amount accrued under the plan for each outside director since the
beginning of his tenure with the Fund, including dividends reinvested and
changes in net asset value applicable to such deemed investments were as
follows as of January 31, 1996: Mr. Bigelow, $741; Mr. Dixon, $39,202; Mr.
Jansing, $39,696 ; Mr. MacDonald, $13,861; Mr. Millican, $40,751 and Mr.
Neff, $41,016 .
2. The retirement plan of the Lord Abbett-sponsored funds provides that outside
directors will receive an annual retirement benefit equal to 80% of their
final annual retainer following retirement at or after age 72 with at least
10 years of service. The plan also provides for a reduced benefit upon early
retirement under certain circumstances, a pre-retirement death benefit and
actuarially reduced joint-and-survivor spousal benefits. The amounts stated
would be payable annually under such retirement plan if the director were to
retire at age 72 and the annual retainer payable by such funds were the same
as it is today. The amounts accrued in column 3 by the Lord Abbett-sponsored
funds during the fiscal year ended January 31, 1996 are used to fund the
retirement benefits in column 4.
3. This column shows aggregate compensation, including director's fees and
attendance fees for board and committee meetings, of a nature referred to in
the first sentence of footnote one accrued by the Lord Abbett-sponsored funds
during the year ended December 31, 1995.
</FN>
</TABLE>
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Allen, Carper, Cutler, Henderson, Morris, Nordberg and Walsh are partners of
Lord Abbett; the others are employees: Stephen J. McGruder age 53, Executive
Vice President, Kenneth B. Cutler, age 63, Vice President and Secretary; Stephen
I. Allen, age 42; Daniel E. Carper, age 44; Robert G. Morris, age 51, E. Wayne
Nordberg, age 58; John J. Gargana, Jr., age 64; Paul A. Hilstad, age 53 (with
Lord Abbett since 1995; formerly Senior Vice President and General Counsel of
American Capital Management & Research, Inc.); Thomas F. Konop, age 54; Victor
W. Pizzolato, age 63; John J. Walsh, age 59, Vice Presidents; and Keith F.
O'Connor, age 41, 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, 1996, 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 nine general partners of Lord Abbett, all of whom are
officers and/or directors of the Fund, are: Stephen I. Allen, Daniel E. Carper,
Kenneth B. Cutler, Robert S. Dow, Thomas S. Henderson, Ronald P. Lynch, Robert
G. Morris, E. Wayne Nordberg and John J. Walsh. The address of each partner is
The General Motors Building, 767 Fifth Avenue, New York, New York 10153-0203.
The services performed by Lord Abbett are described 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, 1996, 1995 and 1994, the management fees paid to Lord
Abbett amounted to $1,098,965, $897,585 and $952,381, 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.
The Bank of New York ("BNY"), 48 Wall Street, New York, New York 10286, is the
Fund's custodian. In accordance with the requirements of Rule 17f-5 under the
Act, the Fund's directors have approved arrangements permitting the Fund's
foreign assets not held by BNY or its foreign branches to be held by certain
qualified foreign banks and depositories.
4.
Portfolio Transactions
Our policy is to obtain best execution on all our portfolio transactions, which
means that we seek to have purchases and sales of portfolio securities executed
at the most favorable prices, considering all costs of the transaction including
brokerage commissions and dealer markups and markdowns and taking into account
the full range and quality of the brokers' services. Consistent with obtaining
best execution, we generally pay, as described below, a higher commission than
some brokers might charge on the same transactions. Our policy with respect to
best execution governs the selection of brokers or dealers and the market in
which the transaction is executed. To the extent permitted by law, we may, if
considered advantageous, make a purchase from or sale to another Lord
Abbett-sponsored fund without the intervention of any broker-dealer.
Broker-dealers are selected on the basis of their professional capability and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of the Fund and also are employees
of Lord Abbett. These traders do the trading as well for other accounts --
investment companies (of which they are also officers) and other investment
clients -- managed by Lord Abbett. They are responsible for obtaining best
execution.
We pay a commission rate that we believe is appropriate to give maximum
assurance that our brokers will provide us, on a continuing basis, the highest
level of brokerage services available. While we do not always seek the lowest
possible commissions on particular trades, we believe that our commission rates
are in line with the rates that many other institutions pay. Our traders are
authorized to pay brokerage commissions in excess of those that other brokers
might accept on the same transactions in recognition of the value of the
services performed by the executing brokers, viewed in terms of either the
particular transaction or the overall responsibilities of Lord Abbett with
respect to us and the other accounts they manage. Such services include showing
us trading opportunities including blocks, a willingness and ability to take
positions in securities, knowledge of a particular security or market proven
ability to handle a particular type of trade, confidential treatment, promptness
and reliability.
Some of these brokers also provide research services at least some of which are
useful to Lord Abbett in their overall responsibilities with respect to us and
the other accounts they manage. Research includes the furnishing of analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts and trading equipment and
computer software packages, acquired from third-party suppliers, that enable
Lord Abbett to access various information bases. Such services may be used by
Lord Abbett in servicing all their accounts, and not all of such services will
necessarily be used by Lord Abbett in connection with their management of the
Fund; conversely, such services furnished in connection with brokerage on other
accounts managed by Lord Abbett may be used in connection with their management
of the Fund, and not all of such services will necessarily be used by Lord
Abbett in connection with their advisory services to such other accounts. We
have been advised by Lord Abbett that research services received form brokers
cannot be allocated to any particular account, are not a substitute for Lord
Abbett's services but are supplemental to their own research effort and when
utilized, are subject to internal analysis before being incorporated by Lord
Abbett into their investment process. As a practical matter, it would not be
possible for Lord Abbett to generate all of the information presently provided
by brokers. While receipt of research services from brokerage firms has not
reduced Lord Abbett's normal research activities, the expenses of Lord Abbett
could be materially increased if it attempted to generate such additional
information through its own staff and purchased such equipment and software
packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or
among brokers, and trades are executed only when they are dictated by investment
decisions of the Fund to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold our shares and/or
shares of other Lord Abbett-sponsored funds may be preferred.
If other clients of Lord Abbett buy or sell the same security at the same time
as we do, transactions will, to the extent practicable, be allocated among all
participating accounts in proportion to the amount of each order and will be
executed daily until filled so that each account shares the average price and
commission cost of each day. Other clients who direct that their brokerage
business be placed with specific brokers or who invest through wrap accounts
introduced to Lord Abbett by certain brokers may not participate with us in the
buying and selling of the same securities as described above. If these clients
wish to buy or sell the same security as we do, they may have their transactions
executed at times different from our transactions and thus may not receive the
same price or incur the same commission cost as we do.
We will not seek "reciprocal" dealer business (for the purpose of applying
commissions in whole or in part for our benefit or otherwise) from dealers as
consideration for the direction to them of portfolio business.
During the fiscal years ended January 31, 1996, 1995 and 1994, we paid total
commissions to independent dealers of $981,015, $399,634 and $647,440,
respectively.
5.
Purchases, Redemptions
and Shareholder Services
The Fund values its portfolio securities at market value as of the close of the
NYSE. Market value will be determined as follows: securities listed or admitted
to trading privileges on the New York or American Stock Exchange or on the
NASDAQ National Market System are valued at the last sales price, or, if there
is no sale on that day, at the mean between the last bid and asked prices, or,
in the case of bonds, in the over-the-counter market if, in the judgment of the
Fund's officers, that market more accurately reflects the market value of the
bonds. Over-the-counter securities not traded on the NASDAQ National Market
System are valued at the mean between the last bid and asked prices. Securities
for which market quotations are not available are valued at fair market value
under procedures approved by the Board of Directors.
Information concerning how we value our shares for the purchase and redemption
of our shares is described in the Prospectus under "Purchases" and
"Redemptions", respectively.
As disclosed in the Prospectus, we calculate our net asset value and are
otherwise open for business on each day that the NYSE is open for trading. The
NYSE is closed on Saturdays and Sundays and the following holidays -- New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
The maximum offering price of our shares on January 31, 1996 was computed as
follows:
Net asset value per share (net assets divided by
shares outstanding).....................................................$11.49
Maximum offering price per share (net asset value
divided by .9425)......................................................$12.19
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:
<TABLE>
<CAPTION>
Year Ended January 31
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Gross sales charge $747,825 $109,370 $115,031
Amount allowed to dealers $679,143 $ 92,501 $ 99,284
-------- -------- ---------
Net commissions
received by Lord Abbett $68,682 $16,869 $ 15,747
======== ======== ========
</TABLE>
As described in the Prospectus, the Fund has adopted a Distribution Plan and
Agreement (the "Plan") pursuant to Rule 12b-1 of the Investment Company Act of
1940, as amended. In adopting the Plan and in approving its continuance, the
Board of Directors has concluded that there is a reasonable likelihood that the
Plan will benefit the Fund and its shareholders. The expected benefits include
greater sales 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 $304,960 under the
Plan. Lord Abbett uses all amounts received under the Plan for payments to
dealers for (i) providing continuous services to the Fund's shareholders, such
as answering shareholder inquiries, maintaining records, and assisting
shareholders in making redemptions, transfers, additional purchases and
exchanges and (ii) their assistance in distributing shares of the Fund.
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.
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.
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 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, 1996 are as follows: 40.00%, 15.66% and 10.39%,
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 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, 1996 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1996 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>
PART C OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Part A- Financial Highlights for the ten years ended January 31, 1996.
Part B- Statement of Net Assets at January 31, 1996.
Statement of Operations for the year ended January 31, 1996.
Statements of Changes in Net Assets for the years ended
January 31, 1996 and 1995. Financial Highlights for the five
years ended January 31, 1996.
(b) Exhibits -
(11) Consent of Deloitte & Touche LLP*
(16) Total Return Computations*
*Filed herewith.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
Item 26. NUMBER OF RECORD HOLDERS OF SECURITIES
At May 10, 1996 - 17,190
Item 27. INDEMNIFICATION
Registrant is incorporated under the laws of the State of Maryland and
is subject to Section 2-418 of the Corporations and Associations
Article of the Annotated Code of the State of Maryland controlling the
indemnification of the directors and officers. Since Registrant has its
executive offices in the State of New York, and is qualified as a
foreign corporation doing business in such State, the persons covered
by the foregoing statute may also be entitled to and subject to the
limitations of the indemnification provisions of Section 721-726 of the
New York Business Corporation Law.
The general effect of these statutes is to protect officers, directors
and employees of Registrant against legal liability and expenses
incurred by reason of their positions with the Registrant. The statutes
provide for indemnification for liability for proceedings not brought
on behalf of the corporation and for those brought on behalf of the
corporation, and in each case place conditions under which
indemnification will be permitted, including requirements that the
officer, director or employee acted in good faith. Under certain
conditions, payment of expenses in advance of final disposition may be
permitted. The By-laws of Registrant, without limiting the authority of
Registrant to indemnify any of its officers, employees or agents to the
extent consistent with applicable law, make the indemnification of its
directors mandatory subject only to the conditions and limitations
imposed by the above- mentioned Section 2-418 of Maryland law and by
the provisions of Section 17(h) of the Investment Company Act of 1940
as interpreted and required to be implemented by SEC Release No.
IC-11330 of September 4, 1980.
In referring in its By-laws to, and making indemnification of directors
subject to the conditions and limitations of, both Section 2-418 of the
Maryland law and Section 17(h) of the Investment Company Act of 1940,
Registrant intends that conditions and limitations on the extent of the
indemnification of directors imposed by the provisions of either
Section 2-418 or Section 17(h) shall apply and that any inconsistency
between the two will be resolved by applying the provisions of said
Section 17(h) if the condition or limitation imposed by Section 17(h)
is the more stringent. In referring in its By-laws to SEC Release No.
IC-11330 as the source for interpretation and implementation of said
Section 17(h), Registrant understands that it would be required under
its By-laws to use
<PAGE>
reasonable and fair means in determining whether indemnification of a
director should be made and undertakes to use either (1) a final
decision on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified ("indemnitee")
was not liable to Registrant or to its security holders by reason of
willful malfeasance, bad faith, gross negligence, or reckless disregard
of the duties involved in the conduct of his office ("disabling
conduct") or (2) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the indemnitee
was not liable by reason of such disabling conduct, by (a) the vote of
a majority of a quorum of directors who are neither "interested
persons" (as defined in the 1940 Act) of Registrant nor parties to the
proceeding, or (b) an independent legal counsel in a written opinion.
Also, Registrant will make advances of attorneys' fees or other
expenses incurred by a director in his defense only if (in addition to
his undertaking to repay the advance if he is not ultimately entitled
to indemnification) (1) the indemnitee provides a security for his
undertaking, (2) Registrant shall be insured against losses arising by
reason of any lawful advances, or (3) a majority of a quorum of the
non-interested, non-party directors of Registrant, or an independent
legal counsel in a written opinion, shall determine, based on a review
of readily available facts, that there is reason to believe that the
indemnitee ultimately will be found entitled to indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expense incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
In addition, Registrant maintains a directors' and officers' errors and
omissions liability insurance policy protecting directors and officers
against liability for breach of duty, negligent act, error or omission
committed in their capacity as directors or officers. The policy
contains certain exclusions, among which is exclusion from coverage for
active or deliberate dishonest or fraudulent acts and exclusion for
fines or penalties imposed by law or other matters deemed uninsurable.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Lord, Abbett & Co. acts as investment adviser for fifteen other
open-end investment companies (of which it is principal underwriter for
fourteen) and as investment adviser to approximately 5,100 private
accounts. Other than acting as directors and/or officers of open-end
investment companies sponsored by Lord, Abbett & Co., none of Lord,
Abbett & Co.'s partners has, in the past two fiscal years, engaged in
any other business, profession, vocation or employment of a substantial
nature for his own account or in the capacity of director, officer,
employee, or partner of any entity except as follows:
John J. Walsh
Trustee
The Brooklyn Hospital Center
100 Parkside Avenue
Brooklyn, N.Y.
Item 29.(a) PRINCIPAL UNDERWRITER
Lord Abbett Affiliated Fund, Inc.
Lord Abbett Value Appreciation Fund, Inc.
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett California Tax-Free Income Fund, Inc.
Lord Abbett Fundamental Value Fund, Inc.
Lord Abbett U.S. Government Securities Fund, Inc.
Lord Abbett Global Fund, Inc.
Lord Abbett Series Fund, Inc.
Lord Abbett U.S. Government Money Market Fund, Inc.
Lord Abbett Equity Fund
Lord Abbett Tax-Free Income Trust
Lord Abbett Securities Trust
Lord Abbett Investment Trust
Lord Abbett Research Fund, Inc.
INVESTMENT ADVISOR
American Skandia Trust (Lord Abbett Growth & Income Portfolio)
(b) The partners of Lord, Abbett & Co. are:
Name and Principal Positions and Offices
Business Address(1) with Registrant
------------------- ---------------------
Ronald P. Lynch Chairman and Director
Kenneth B. Cutler Vice President & Secretary
Stephen I. Allen Vice President
Daniel E. Carper Vice President
Robert S. Dow President
Thomas S. Henderson Vice President
Robert G. Morris Vice President
E. Wayne Nordberg Vice President
John J. Walsh Vice President
(1) Each of the above has a principal business address: 767 Fifth Avenue,
New York, NY 10153
(c) Not applicable
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Registrant maintains the records, required by Rules 31a - 1(a) and
(b), and 31a - 2(a) at its main office.
Lord, Abbett & Co. maintains the records required by Rules 31a - 1(f)
and 31a - 2(e) at its main office.
Certain records such as cancelled stock certificates and
correspondence may be physically maintained at the main office of the
Registrant's Transfer Agent, Custodian, or Shareholder Servicing Agent
within the requirements of Rule 31a-3.
Item 31. MANAGEMENT SERVICES
(a) None
Item 32. UNDERTAKINGS
(c) The Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant certifies that it meets all the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement
and/or any amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York on the
28th day of May 1996.
LORD ABBETT DEVELOPING GROWTH FUND, INC.
By /S/ RONALD P. LYNCH
Ronald P. Lynch, Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
NAME TITLE DATE
- ----- ----- ----
Chairman,
/s/ Ronald P. Lynch & Director May 28, 1996
/s/ John J. Gargana, Jr. Vice President & May 28, 1996
Chief Financial Officer
/s/ E. Thayer Bigelow Director May 28, 1996
/s/ Stewart S. Dixon Director May 28, 1996
/s/ Robert S. Dow President & Director May 28, 1996
E. Wayne Nordberg Director
/s/ John C. Jansing Director May 28, 1996
/s/ C. Alan MacDonald Director May 28, 1996
/s/ Hansel B. Millican, Jr. Director May 28, 1996
/s/ Thomas J. Neff Director May 28, 1996
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
EX-99B.11 CONSENT OF DELOITTE & TOUCHE
EX-99B.16 COMPUTATION OF PERFORMANCE
EXHIBIT 11
CONSENT OF INDEPENDENT AUDITORS
Lord Abbett Developing Growth Fund, Inc.:
We consent to the incorporation by reference in Post-Effective Amendment No. 20
to Registration Statement No. 811-2871 of our report dated March 1, 1996
appearing in the annual report to shareholders and to the reference to us under
the captions "Financial Highlights" in the Prospectus and "Investment Advisory
and Other Services" and "Financial Statements" in the Statement of Additional
Information, both of which are part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
New York, New York
May 28, 1996
EXHIBIT 16
Lord Abbett Developing Growth Fund, Inc.
Post Effective Amendment No. 20
Results of a $1,000 investment reflecting the maximum sales charge and the
reinvestment of all distributions:
Period Ending January 31, 1996
P(1+T)N = ERV
One Five 10
Year Years Years
---- ----- -----
P = 1,000 P = 1,000 P = 1,000
N = 1 N = 5 N = 10
ERV = $ ERV = $ ERV = $
T = Average annual total return
1,000 (1+T)1 = 1,000 (1+T)5 = 1000(1+T)10 =
(1+T) = (1+T)5 = (1+T)10 =
--------- --------- -----
1,000 1,000 1,000
(1+T) = (1+T) = [ ]. (1+T) = [ ].10
--------- ----------- -----------
1,000 [1,000] [1,000]
T = [ ]-1 T = [ ].20-1 T = [ ].10-1
------- ---------- -----------
[1,000] [1,000] [1,000]
T = % T = % T = %
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<NAME> LORD ABBETT DEVELOPING GROWTH FUND, INC.
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<PER-SHARE-NAV-BEGIN> 9.58
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