<PAGE>
===============================================================================
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
b(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
LORD ABBETT DEVELOPING GROWTH FUND, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
================================================================================
<PAGE>
LORD ABBETT DEVELOPING GROWTH FUND, INC.
INVESTMENT MANAGEMENT
THE GM BUILDING 767 FIFTH AVENUE NEW YORK NEW YORK 10153
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
the Lord Abbett Developing Growth Fund, Inc. scheduled to be held on June 19,
1996, at 11:00 a.m., at the General Motors Building, 767 Fifth Avenue, New York,
New York. Your Board of Directors looks forward to greeting those shareholders
who are able to attend.
At the meeting, in addition to the election of directors and approval of
the appointment of auditors, you will be asked to vote on a proposed revision of
the Fund's fundamental investment policies and restrictions, a new 12b-1 Plan
and Distribution Agreement and an amendment to the Fund's Articles of
Incorporation.
Such proposals, if approved, are intended to provide for greater
flexibility in the future management of the Fund's portfolio, as well as to
maintain the competitive position of the Fund.
All proposals are fully described in the enclosed proxy statement. I
encourage you to review the proxy statement for all the details regarding the
meeting agenda.
Your Board of Directors believes these proposals are in the best interest
of the Fund and its shareholders and unanimously recommends a vote "for" all
proposals. Regardless of the number of shares you own, it is important that
they be represented and voted. Accordingly, please sign, date and mail the
enclosed proxy card in the postage paid return envelope.
Your prompt response will help save the Fund the expense of additional
solicitation.
Sincerely,
/s/ Ronald P. Lynch
Ronald P. Lynch
Chairman of the Board
April 17, 1996
<PAGE>
LORD ABBETT DEVELOPING GROWTH FUND, INC.
767 Fifth Avenue
New York, New York 10153
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
JUNE 19, 1996
PROXY STATEMENT
You are urged to sign and mail the proxy card in the enclosed postage-paid
envelope whether you own a few or many shares. Your prompt return of the
proxy may save the Fund the necessity and expense of further
solicitations to insure a quorum at this meeting.
<PAGE>
LORD ABBETT DEVELOPING GROWTH FUND, INC.
767 Fifth Avenue
New York, New York 10153
Telephone No. (212) 848-1800
Notice of Annual Meeting of Shareholders
To Be Held June 19, 1996 April 17, 1996
Notice is given hereby of an annual meeting of the shareholders of Lord Abbett
Developing Growth Fund, Inc. (the "Fund"). The meeting will be held at the
offices of Lord, Abbett & Co., on the 11th floor of The General Motors Building,
767 Fifth Avenue, New York, New York, on Wednesday, June 19, 1996, at 11:00
a.m., for the following purposes and to transact such other business as may
properly come before the meeting and any adjournments thereof.
ITEM 1. To elect directors;
ITEM 2. To ratify or reject the selection of Deloitte & Touche LLP as
independent public accountants of the Fund for the current fiscal year;
ITEM 3. To approve or disapprove certain changes in the Fund's fundamental
investment policies and restrictions;
ITEM 4. To approve or disapprove a new Distribution Plan and Agreement for the
Fund's existing class of shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940;
ITEM 5. To approve or disapprove an amendment to the Fund's Articles
of Incorporation (i) authorizing the Board of Directors to create new
-
classes and series of shares of capital stock; and (ii) confirming that
--
the board may impose contingent deferred sales charges in connection
with new classes of shares to be created (this change will have no
effect on your shares); and
ITEM 6. To approve or disapprove an amendment to the Fund's Articles
of Incorporation reducing the par value per share from $1.00 to $0.001
in order to reduce costs when authorizing new shares (this change will
have no effect on the value of your shares).
By order of the Board of Directors
Kenneth B. Cutler
Vice President and Secretary
<PAGE>
The Board of Directors has fixed the close of business on March 22, 1996 as the
record date for determination of shareholders of the Fund entitled to notice of
and to vote at the meeting. Shareholders are entitled to one vote for each share
held. As of March 22, 1996, there were 18,014,402 shares of the Fund issued and
outstanding.
- --------------------------------------------------------------------------------
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD.
SIGN, DATE AND RETURN IT IN THE ENVELOPE PROVIDED.
TO SAVE THE COST OF ADDITIONAL SOLICITATIONS, PLEASE MAIL YOUR PROXY PROMPTLY.
2
<PAGE>
LORD ABBETT DEVELOPING GROWTH FUND, INC.
767 Fifth Avenue
New York, New York 10153
April 17, 1996
PROXY STATEMENT
---------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors of Lord Abbett Developing
Growth Fund, Inc., a diversified open-end management investment company
incorporated under the laws of Maryland (the "Fund"), for use at an annual
meeting of shareholders of the Fund to be held at 11:00 a.m. on Wednesday, June
19, 1996 at the offices of Lord, Abbett & Co., the investment manager and
principal underwriter of the Fund ("Lord Abbett"), on the 11th floor of the
General Motors Building, 767 Fifth Avenue, New York, New York 10153, and at any
adjournments thereof. This proxy statement and the enclosed proxy card are
first being mailed to shareholders on or about April 17, 1996.
At the close of business on March 22, 1996 (the "Record Date"), there
were issued and outstanding 18,014,402 shares of the Fund. Only shareholders of
record at the close of business on the Record Date are entitled to notice of,
and to vote at, the annual meeting or any adjournment thereof. Proxies will be
solicited by mail. Additional solicitations may be made by telephone, facsimile
or personal contact by officers or employees of Lord Abbett and its affiliates.
The Fund may also request brokerage houses, custodians, nominees, and
fiduciaries who are shareholders of record to forward proxy materials to
beneficial owners. D.F. King & Co. has been retained to assist in the
solicitation of proxies at an estimated cost of $16,000. The cost of the
solicitation will be borne by the Fund.
Shareholders are entitled to one vote for each full share, and a pro-
portionate vote for each fractional share, of the Fund held as of the Record
Date. Under Maryland law, shares owned by two or more persons (whether as joint
tenants, co-fiduciaries or otherwise) will be voted as follows, unless a written
instrument or court order providing to the contrary has been filed with the
Secretary of the Fund: (1) if only one votes, that vote binds all; (2) if more
- -
than one votes, the vote of the majority binds all; and (3) if more than one
-
votes and the vote is evenly divided, the vote will be cast proportionately. If
the enclosed form of proxy is properly executed and returned in time to be voted
at the meeting, the proxies named therein will vote the shares represented by
the proxy in accordance with the instructions marked thereon. Unmarked proxies
will be voted FOR each of the items described in this Proxy Statement and any
other matters as deemed appropriate. A proxy may be
<PAGE>
revoked by the signer at any time at or before the meeting by written notice to
the Fund, by execution of a later-dated proxy or by voting in person at the
meeting.
1. ELECTION OF DIRECTORS
The nominees for election as directors are Ronald P. Lynch, Robert S.
Dow, E. Wayne Nordberg, E. Thayer Bigelow, Stewart S. Dixon, John C. Jansing, C.
Alan MacDonald, Hansel B. Millican, Jr. and Thomas J. Neff, who have been
nominated by the Board of Directors to succeed themselves. The individuals
named as proxies intend to vote the proxies, unless otherwise directed, in favor
of the election of such nominees, each of whom has agreed to continue to serve
as a director of the Fund. Management of the Fund has no reason to believe that
any nominee will be unable to serve as a director. If any nominee should be
unable to serve as a director, it is the intention of the individuals named as
proxies to vote for the election of such person or persons as the Board of
Directors may, in its discretion, recommend.
Information about each person nominated for election as a director is set
forth in the following table. Except where indicated, each of the persons
listed in the table has held the principal occupation listed opposite his name
for the past five years.
<TABLE>
<CAPTION>
Director of
Names and Ages of Principal Occupation and Director- the Fund
Directors of the Fund ships Since
- --------------------------- ------------------------------------- ---------------
<C> <S> <C>
Ronald P. Lynch (1)(2) Chairman of the Board of the Fund. 1983
60 Partner of Lord Abbett.
Robert S. Dow (1)(2) President of the Fund. 1995
51 Partner of Lord Abbett.
E. Wayne Nordberg(1)(2) Vice President of the Fund. 1992
57 Partner of Lord Abbett.
E. Thayer Bigelow President and Chief Executive of Time 1994
(2) 54 Warner Cable Programming, Inc.
Formerly President and Chief Operating
Officer of Home Box Office, Inc.
Stewart S. Dixon (2) Partner in the law firm of Wildman, 1976
65 Harrold, Allen & Dixon.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Director of
Names and Ages of Principal Occupation and Director- the Fund
Directors of the Fund ships Since
- --------------------------- ------------------------------------- ---------------
<C> <S> <C>
John C. Jansing (2) Retired. Former Chairman of Inde- 1979
70 pendent Election Corporation of
America, a proxy tabulating firm.
C. Alan MacDonald (2) General Partner, The Marketing 1988
62 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.
Hansel B. Millican, Jr. (2) President and Chief Executive Officer 1983
67 of Rochester Button Company.
Thomas J. Neff (2) President, Spencer Stuart & Associates, 1983
58 an executive search consulting firm.
</TABLE>
- ----------
(1) "Interested person" of the Fund and Lord Abbett, within the meaning of the
Investment Company Act of 1940, as amended, because of his association
with Lord Abbett.
(2) Also an officer and/or a director or trustee of other Lord Abbett-
sponsored funds.
Listed below is the number of shares of the Fund owned beneficially by
each director as of March 22, 1996, together with the number of "phantom" shares
credited to the account of each director under a plan (the "Deferred Plan")
permitting independent directors to defer their directors' fees and to have the
deferred amounts deemed invested in shares of the Fund for later payment. Also
shown is the number of shares owned beneficially by the directors
as a group, together with such "phantom" shares credited to the accounts of
directors and officers as a group. In each case, the amounts shown are less
than 1% of the Fund's outstanding capital stock.
3
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Beneficially
Owned
Name and Phantom Shares/1/
- ---------------------------- ---------------------------------
<S> <C>
Ronald P. Lynch 247,514
Robert S. Dow 9,489
E. Wayne Nordberg 4,125
E. Thayer Bigelow 1,779
Stewart S. Dixon 4,349
John C. Jansing 18,653
C. Alan MacDonald 1,222
Hansel B. Millican, Jr. 6,793
Thomas J. Neff 7,732
Directors and Officers as a 724,805
group
</TABLE>
- ----------
(1) Of the shares listed in the foregoing table, the following constitute
"phantom" shares credited to directors under the Deferred Plan: Mr.
Bigelow, 65 shares; Mr. Dixon, 3,457 shares; Mr. Jansing, 3,501 shares; Mr.
MacDonald, 1,222 shares; Mr. Millican, 3,594 shares; Mr. Neff, 3,617
shares; and directors as a group: 15,456 shares.
The Board of Directors has only one standing committee, an Audit
Committee, consisting of Messrs. Bigelow, MacDonald and Millican. The functions
performed by the Audit Committee include recommendation of the selection of
independent public accountants for the Fund to the Board of Directors for
approval, review of the scope and results of audit and non-audit services, the
adequacy of internal controls and material changes in accounting principles and
practices and other matters when requested from time to time by the directors
(the "Independent Directors") who are not "interested persons" of the Fund
within the meaning of the Investment Company Act of 1940, as amended (the
"Act"). The Audit Committee held four meetings during the fiscal year ended
January 31, 1996.
The Board of Directors of the Fund met twelve times during the fiscal
year ended January 31, 1996, and each director attended at least 75% of the
total number of meetings of the board and, if he was a member of the Audit
Committee, of such committee.
The second column of the following table sets forth the compensation
accrued by the Fund for the Independent Directors. The third and fourth columns
set forth information with respect to the retirement plan for Independent
Directors
4
<PAGE>
maintained by the Fund and the other Lord Abbett-sponsored funds. The fifth
column sets forth the total compensation accrued by the Fund and such other
funds for the Independent Directors. The second, third and fourth columns give
information for the Fund's most recent fiscal year; the fifth column gives
information for the calendar 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 Year Ended De-
For the Fiscal Year Ended January 31, 1996 cember 31, 1995
----------------------------------------------------------- -------------------
(I) (II) (III) (IV) (V)
- ------------------------ ----------------- ------------------ ---------------- -------------------
Estimated Annual
Pension or Retire- Benefits Upon Re-
ment Benefits tirement Proposed
Accrued by the to be Paid by the Total Compensation
Aggregate Com- Fund and Fund and Fifteen Accrued by the Fund
pensation Ac- Fifteen Other Other Lord and Fifteen Other
crued by the Lord Abbett- Abbett-sponsored Lord Abbett-spon-
Name of Director Fund/1/ sponsored Funds/2/ Funds/2/ sored Funds/3/
- ------------------------ ----------------- ------------------ ---------------- -------------------
<S> <C> <C> <C> <C>
E. Thayer Bigelow $472 $9,772 $33,600 $41,700
Stewart S. Dixon $463 $22,472 $33,600 $42,000
John C. Jansing $487 $28,480 $33,600 $42,960
C. Alan MacDonald $471 $27,435 $33,600 $42,750
Hansel B. Millican, Jr. $487 $24,707 $33,600 $43,000
Thomas J. Neff $475 $16,126 $33,600 $42,000
</TABLE>
(1) Independent Directors' fees, including attendance fees for board and
committee meetings, are generally 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 Independent Directors is being deferred under a plan that
deems the deferred amounts to be invested in shares of the Fund for later
distribution to the directors. The total amount accrued under the plan for
each Independent Director since the beginning of his tenure with the Fund,
including dividends reinvested and changes in net asset value applicable to
such deemed investments, as of January 31, 1996, were as follows: Mr.
Bigelow, $682; Mr. Dixon, $39,440; Mr. Jansing, $39,873; Mr. MacDonald,
$13,945; Mr. Millican, $40,935; and Mr. Neff, $41,206.
(2) Each Lord Abbett-sponsored fund has a retirement plan providing that
Independent Directors will receive annual retirement benefits for life
equal to 80% of their final annual retainers following retirement at or
after age 72 with at least 10 years of service. Each plan also provides for
a reduced benefit upon early retirement under certain circumstances, a pre-
retirement death benefit and actuarially reduced joint-and-survivor spousal
benefits. The amounts stated in column (IV) would be payable annually under
such retirement plans if the director were to retire at age 72 and the
annual retainers payable by such funds were the same as they are today.
The amounts set forth in column (III) were accrued by the Lord Abbett-
5
<PAGE>
sponsored funds during the fiscal year ended January 31, 1996 with respect
to the retirement benefits set forth in column (IV).
(3) This column shows aggregate Independent Directors' fees, including
attendance fees for board and committee meetings, of a nature referred to
in the first sentence of footnote (1), accrued by the Lord Abbett-sponsored
funds during the year ended December 31, 1995.
Listed below are the executive officers of the Fund, other than Messrs.
Lynch, Dow and Nordberg who are listed above in the table of nominees. Each
executive officer has been associated with Lord Abbett for over five years,
except as indicated. Messrs. Allen, Carper, Cutler, Henderson, Morris and Walsh
are partners of Lord Abbett; the others listed below are employees.
Stephen I. Allen, age 42, Vice President since 1994.
Daniel E. Carper, age 44, Vice President since 1986.
Kenneth B. Cutler, age 63, Vice President and Secretary since 1978.
John J. Gargana, Jr., age 64, Vice President since 1978.
Thomas S. Henderson, age 64, Vice President since 1979.
Paul A. Hilstad, age 53, Vice President since 1995 (with Lord Abbett since 1995;
formerly Senior Vice President and General Counsel of American Capital
Management & Research, Inc.).
Thomas F. Konop, age 54, Vice President since 1987.
Stephen J. McGruder, age 52, Executive Vice President since 1995.
Robert G. Morris, age 51, Vice President since 1995.
Keith F. O'Connor, age 40, Treasurer since 1987.
Victor W. Pizzolato, age 63, Vice President since 1978.
John J. Walsh, age 60, Vice President since 1978.
Pursuant to the Fund's By-Laws, the election of each director of the Fund
requires the affirmative vote of a majority of the votes cast. If a shareholder
abstains from voting on this matter, then the shares held by such shareholder
shall be deemed present at the meeting for purposes of determining a quorum, but
shall not
6
<PAGE>
be deemed to have been voted on this matter. If a broker returns a "non-vote"
proxy, indicating a lack of authority to vote on this matter, then the shares
covered by such non-vote shall be deemed present at the meeting for purposes of
determining a quorum but shall not be deemed to have been voted on this matter.
The Board of Directors recommends that the shareholders vote FOR the
election of each of the nominees as a director of the Fund.
2. RATIFICATION OR REJECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Deloitte & Touche LLP as the in
dependent public accountants of the Fund for the fiscal year ending January 31,
1997. The Act requires that such selection be submitted for ratification or
rejection at the next annual meeting of shareholders if such meeting be held.
Deloitte & Touche LLP (or a predecessor firm) acted as the Fund's independent
public accountants for the year ended January 31, 1996, and for a number of
years prior thereto. Based on information in the possession of the Fund, and
information furnished by Deloitte & Touche LLP, the firm has no direct financial
interest and no material indirect financial interest in the Fund. A
representative of Deloitte & Touche LLP is expected to attend the meeting and
will be provided with an opportunity to make a statement and answer appropriate
questions.
Ratification of the selection of Deloitte & Touche LLP requires the
affirmative vote of a majority of the votes cast. If a shareholder abstains from
voting on this matter, then the shares held by such shareholder shall be deemed
present at the meeting for purposes of determining a quorum, but shall not be
deemed to have been voted on this matter. If a broker returns a "non-vote"
proxy, indicating a lack of authority to vote on this matter, then the shares
covered by such non-vote shall be deemed present at the meeting for purposes of
determining a quorum but shall not be deemed to have been voted on this matter.
The Board of Directors recommends that shareholders vote to ratify the
selection of Deloitte & Touche LLP as the Fund's independent public accountants
for the fiscal year ending January 31, 1997.
3. PROPOSAL TO AMEND THE FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS OF
THE FUND
The Board of Directors has approved various amendments to the Fund's
investment policies and restrictions in order to greater uniformity
among the Lord Abbett-sponsored funds and greater flexibility in the future
management of the Funds' portfolio
7
<PAGE>
The Fund's investment policies and restrictions designated "fundamental"
may be changed only by the vote of a "majority" (as defined in the Act) of the
Fund's voting securities. Those investment policies and restrictions designated
"non-fundamental" may be changed by the vote of the Board of Directors alone.
Therefore, the proposed amendments to the fundamental policies and restrictions
described below require shareholder approval. The Fund's current fundamental
investment policies and restrictions and its proposed fundamental and certain
non-fundamental investment policies and restrictions are set forth in Exhibit A
attached hereto.
The Fund's investment policies and restrictions govern generally the
investment activities of the Fund and limit its ability to invest in certain
types of securities or engage in certain types of transactions. The proposed
changes are not expected to affect materially the current operations of the
Fund. The proposed fundamental investment policies and restrictions have been
made less restrictive in order to provide greater uniformity among the Lord
Abbett-sponsored funds and greater flexibility in the future management of the
Funds' portfolio. The Board of Directors has no present intention of approving
actions permitted by these less restrictive fundamental policies and
restrictions. If it were to do so, the risks of investing in the Fund could be
increased. No change is proposed with respect to the Fund's investment
objective, which 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.
The proposed policies and restrictions restate many of the policies and
restrictions currently in effect for the Fund. In some instances, certain
fundamental policies and restrictions have been modified or eliminated in
accordance with developments in Federal or state blue sky regulations or in the
securities markets since the inception of the Fund. In other instances, as
illustrated in Exhibit A, certain policies and restrictions previously deemed
fundamental have been redesignated non-fundamental. By making certain policies
and restrictions non-fundamental, the board may amend a policy or restriction as
it deems appropriate and in the best interest of the Fund and its shareholders,
without incurring the costs (normally borne by the Fund and its shareholders) of
seeking a shareholder vote. Also, certain of the proposed fundamental
investment policies and restrictions are stated in terms of "to the extent
permitted by applicable law". Applicable law can change over time and may
become more or less restrictive as a result. The policies and restrictions have
been drafted in this manner so that a change in law would not require the Fund
to seek a shareholder vote to amend the policy or restriction to conform to
applicable law, as revised.
8
<PAGE>
The principal effect of the proposed amendments will be to permit the Fund
to take certain actions not now permitted to the Fund without obtaining
additional shareholder approval. The Fund either will not be permitted to, or
does not intend to, take any such action unless such action is approved by the
Board of Directors. The board does not now intend to approve any such action or
to do so in the future unless it deems such action to be an appropriate means of
seeking the Fund's investment objective in the best interests of the Fund and
its shareholders, in which case disclosure of the change would be made in the
Fund's then current prospectus or statement of additional information or both.
Such actions, none of which the board has a present intention of approving,
involve the following matters, among others: (i) short sales of securities and
-
purchases of securities on margin to the extent permitted by applicable law;
(ii) borrowings from banks in amounts up to one-third of total assets (and up to
--
an additional 5% of total assets for temporary purposes) and such short-term
credits as may be necessary for the clearance of purchases and sales of
portfolio securities; (iii) loans of portfolio securities to the extent
---
permitted by law; (iv) purchases and sales of securities directly or
indirectly secured by real estate or interests therein, commodities and
--
commodity contracts in accordance with applicable law so long as registration
would not be required as a commodity pool operator under the Commodity Exchange
Act; (v) with respect to 25% of gross assets, purchasing securities of one
-
issuer representing more than 5% of the gross assets of the Fund or 10% of the
voting securities of such issuer; (vi) investments of up to 15% of gross assets
--
in illiquid securities; (vii) pledges to secure borrowings pledges to secure
borrowings or as permitted by other investment policies and applicable law;
other investment strategies as permitted by law; (viii) investments in the
securities of other investment companies to the extent permitted by applicable
law; (ix) purchases and sales of puts and calls; and (x) investments of more
-- -
than 5% of gross assets in securities of issuers in operation for less than
three years. See Exhibit A hereto for a detailed comparison of the Fund's
current fundamental investment policies and restrictions and its proposed
fundamental and certain non-fundamental investment policies and restrictions.
Approval of the proposed amendments to the Fund's fundamental investment
policies and restrictions requires the affirmative vote of a "majority" (as
defined in the Act) of the Fund's voting securities. A "majority" vote is
defined in the Act as the vote of the holders of the lesser of: (i) 67% or more
-
of the voting securities present or represented by proxy at the shareholders
meeting, if the holders of more than 50% of the outstanding voting securities
are present or represented by proxy, or (ii) more than 50% of the outstanding
--
voting securities. The effect of an abstention or broker non-vote is the same as
a vote against this proposal.
If the proposed amendments are not approved by the shareholders of the
Fund, the current fundamental policies and restrictions will continue in effect.
9
<PAGE>
The Board of Directors recommends that shareholders vote in favor of the
proposed amendments to the Fund's fundamental investment policies and
restrictions.
4. NEW DISTRIBUTION PLAN AND AGREEMENT FOR THE
CLASS A SHARES
At a meeting of the Board of Directors of the Fund held on March 14,
1996, the directors of the Fund unanimously approved, subject to shareholder
approval, and determined to submit to the shareholders for approval, a new
Distribution Plan and Agreement pursuant to Rule 12b-1 under the Act (the
"Proposed Plan") for the existing class of Fund shares. This class of shares is
to be designated the Class A Shares -- see Item 5 below. The text of the
Proposed Plan is attached hereto as Exhibit B. The directors who approved the
Proposed Plan include all of the Independent Directors, none of whom is an
"interested person" of the Fund within the meaning of the Act or has a direct or
indirect financial interest in the operations of the Proposed Plan or in any
agreements related thereto.
If approved by shareholders, the Proposed Plan will replace a
distribution plan and agreement (the "Current Plan") that was approved by
shareholders on March 14, 1990 and became effective June 1, 1990. The changes
included in the Proposed Plan, which are described below, are designed primarily
to maintain the competitive position of the Class A Shares of the Fund.
Under the Current Plan (except as to certain accounts for which tracking
data is not available), the Fund pays dealers through Lord Abbett (1) an annual
-
service fee (payable quarterly) of 0.25% of the average daily net asset value of
shares sold by dealers on or after June 1, 1990 (0.15% of the average daily net
asset value of shares sold, or attributable to shares sold, by dealers prior to
that date) and (2) a one-time 1% distribution fee, at the time of sale, on all
-
shares sold at the $1 million level by dealers, including sales qualifying at
such level under the rights of accumulation and statement of intention
privileges described in the Fund's prospectus in effect at such time. These
service and distribution fees provide additional incentives for dealers (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 Current Plan, holders of shares on which the 1% distribution
fee has been paid are 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 such shares if they are redeemed out of the Lord
Abbett-sponsored family of funds on or before the end of the twenty-fourth month
after the
10
<PAGE>
month in which the purchase occurred. (An exception is made for certain
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 are exchanged
into another Lord Abbett fund and are thereafter redeemed out of the Lord Abbett
family on or before the end of such twenty-fourth month, the charge is collected
for the Fund by the other fund. The Fund collects such a charge for other Lord
Abbett-sponsored funds in a similar situation.
Set forth below is a description of the principal changes to be effected
under the Proposed Plan:
(a) Distribution Fees. The Fund's Board of Directors will be authorized
-----------------
under the Proposed Plan, without further shareholder vote, to increase the
amount of annual distribution fees up to 0.25% of the average annual net assets
attributable to the Class A Shares (the "Distribution Fee Ceiling") (the annual
distribution and service fees could total 0.50% of such average annual net
assets if approved by the board). This increased spending limit is intended
primarily to permit the directors to increase the amount to be spent for
distribution to meet changing sales competition. The directors believe it is
desirable to be able to make these changes without further shareholder approval
because additional shareholder meetings would be time-consuming and costly to
the Fund and its shareholders. The Board of Directors will approve additional
charges under this increased authority only if a majority of the Independent
Directors conclude in their business judgment that there is a reasonable
likelihood that the increase will benefit the Fund and its shareholders.
The one-time 1% distribution fee, payable at the time of certain sales as
described above, is to be charged against the Distribution Fee Ceiling. During
the Fund's last fiscal year, payments of the one-time 1% distribution fee under
the Current Plan totaled 0.01% of the Fund's average net assets. Subject to
shareholder approval of the Proposed Plan, the Board of Directors has authorized
the Fund to continue paying this one-time distribution fee with respect to sales
of Class A Shares, subject to three changes: First, the payments will be made in
-----
connection with sales to retirement plans with 100 or more eligible employees,
in addition to sales at the $1 million level as under the Current Plan; Second,
------
the payments will be scaled down at certain breakpoints, as follows: 1% of the
first $5 million, 0.55% of the next $5 million, 0.50% of the next $40 million
and 0.25% over $50 million of shares sold to a retirement plan or other
qualifying purchaser within a 12-month period (beginning when the first purchase
is made at net asset value); and Third, the payments will be made to
-----
institutions and persons permitted by applicable law and/or rules to receive
such payments ("Authorized Institutions"), rather than just to dealers as is the
case under the Current Plan.
11
<PAGE>
If shareholders approve the Proposed Plan, the Board of Directors has
authorized the Fund to pay, as an additional distribution fee, a supplemental
payment to dealers who have accounts comprising a significant percentage of the
Fund's Class A Share assets and having a lower than average redemption rate and
who have a satisfactory program for the promotion of Class A Shares. Any such
payments will be 0.10% per annum of the average assets of the Fund represented
by the Class A Share accounts of qualifying dealers, and will be charged against
the Distribution Fee Ceiling. This supple mental payment is intended by the
Board of Directors to enhance the Fund's relationships with those dealers most
likely to have a significant impact on the growth of the Class A Shares.
(b) Service Fees. Service fee payments, which are to be continued under
------------
the Proposed Plan at an annual rate of 0.25% of the average daily net asset
value of shares sold on or after June 1, 1990 (0.15% of the average daily net
asset value of shares sold, or attributable to shares sold, prior to such date),
could be made to all Authorized Institutions (institutions and persons permitted
by applicable law and/or rules to receive such payments), rather than just to
dealers as is the case under the Current Plan.
(c) Use of Payments by Lord Abbett. Lord Abbett would be permitted to use
------------------------------
payments received under the Proposed Plan to provide continuing services to
shareholder accounts not serviced by Authorized Institutions and, with board
approval, to finance any activity which is primarily intended to result in the
sale of Class A Shares. Any such payments to finance activities primarily
intended to result in the sale of Class A Shares would be subject to the
Distribution Fee Ceiling.
(d) CDRC. The CDRC applicable to the Class A Shares would be substantially
----
similar to that payable under the Current Plan, except that no CDRC would be
payable in connection with redemptions by retirement plans (not just those
qualified under Section 401 of the Internal Revenue Code) attributable to any
benefit payment. In addition, no CDRC would apply if the plan sponsor requested
a redemption to correct an excess contribution in order to comply with
applicable IRS rules. Because CDRC payments will be made directly to the Fund,
they will have the effect of reducing the amount of the distribution fees paid
by the Fund for the purpose of complying with the Distribution Fee Ceiling. As
in the case of the specific distribution fees authorized by the Board of
Directors of the Fund, the CDRC authorized from time to time by the board for
the Class A Shares will be described in the then current prospectus of the Fund.
If the supplemental payment to dealers, the revised one-time distribution
fee and the other changes described above had been in effect for the Fund's last
fiscal year, it is estimated that, in the aggregate, they would have increased
the
12
<PAGE>
ratio of expenses to average net assets of the Fund from 1.03% to
approximately 1.04%, representing a difference of 0.01%.
(e) Lord Abbett Distributor. The other party to the Proposed Plan is to be
-----------------------
Lord Abbett Distributor LLC, a New York limited liability company, to be formed
as a subsidiary of Lord Abbett ("Lord Abbett Distributor"), rather than Lord
Abbett. Lord Abbett Distributor is to take on all the underwriting functions
currently performed directly by Lord Abbett.
In considering whether to recommend the Proposed Plan for approval, the
board considered, among other things, the factors set forth below:
(i) Flexibility in Adapting Distribution Fees to Meet Industry-Wide
---------------------------------------------------------------
Changes. During the last several years, there has been significantly increased
competition and pricing experimentation in the mutual fund industry. As the
pace of change increases, the Board of Directors believes it will be useful to
be able to respond more quickly to marketplace pressures, and change in
appropriate cases the amount of the Class A 12b-1 distribution fees to be paid,
without unnecessarily burdening the shareholders with the costs of additional
proxy solicitations. The directors believe that the increased distribution
fees described above are good examples of the desirability of this flexibility.
Based on advice received from Lord Abbett, the decision by the board to approve
the payment of distribution fees in connection with sales to retirement plans
with 100 or more eligible employees will enable the Class A Shares to compete
more effectively in this growing and important market. The 0.10% per annum
supplemental payments to dealers who meet certain criteria will permit the Fund
to enhance relationships with those dealers most likely to have a significant
impact on the growth of the Class A Shares.
(ii) Expanding Categories of Persons Eligible to Receive Payments. The
------------------------------------------------------------
Current Plan limits payments thereunder to dealers selling Fund shares. Since
the Current Plan was adopted, different methods of distribution, using different
entities, have developed in the industry. The Board of Directors sees no reason
to limit arbitrarily the categories of persons eligible to receive payments
under the Proposed Plan, and believes that the availability of payments under
the plan will induce such other entities to invest in Class A Shares.
(iii) Flexibility in Distributor's Use of Payments. Lord Abbett has
--------------------------------------------
advised the Board of Directors of the Fund that allowing Lord Abbett Distributor
to retain fees received from the Fund to (i) provide continuing information and
investment services to shareholder accounts and (ii) finance, with board
approval, any activity which is primarily intended to result in the sale of
Class A Shares, will provide useful flexibility and will be in line with common
practice in the industry.
13
<PAGE>
In light of the anticipated benefits to the Fund and its shareholders as a
result of adopting the Proposed Plan, and having reviewed a comparison of the
costs to the Fund of the Current Plan and the Proposed Plan, the Directors of
the Fund have concluded, in the exercise of reasonable business judgment and in
light of their fiduciary duties, that there is a reasonable likelihood that the
Proposed Plan will benefit the Fund and its shareholders. There can, however,
be no assurance that the anticipated benefits will be realized.
Payments by the Fund to dealers through Lord Abbett under the Current Plan
for the fiscal year ended January 31, 1996 were $293,388 (representing 0.18% of
the Fund's average net assets during that period).
Set forth in the table below is a summary comparison of the Fund's
expenses, on a current and pro-forma basis taking into account the increased
fees that could be paid under the Proposed Plan. The annual operating expenses
shown in the second column are the Fund's actual expenses for the fiscal year
ended January 31, 1996. The expenses shown in the third column represent, on a
pro-forma basis, such actual expenses of the Fund adjusted to show the effect of
the maximum distribution fee the board would be authorized to approve under the
Proposed Plan. The fourth column shows such pro-forma annual operating expenses
based on the distribution fee rate the board has approved subject to approval of
the Proposed Plan by shareholders. The example set forth below is not a
representation of past or future expenses. Actual expenses may be greater or
less than those shown.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
I II III IV
- -----------------------------------------------------------------------------------------------
Pro Forma
Pro-Forma (re- (reflecting
flecting estimated
Year ended maximum amounts that
January 31, amounts would have
1996 payable under been paid
(reflecting the the Proposed under the
Current Plan) Plan) Proposed Plan)
--------------- -------------- --------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(AS A PERCENTAGE OF OFFERING PRICE)
Maximum Sales Load/1/ on Purchases 5.75% 5.75% 5.75%
Deferred Sales Load /1 / None/2/ None/2/ None/2/
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
I II III IV
- -----------------------------------------------------------------------------------------------
Pro Forma
Pro-Forma (re- (reflecting
flecting estimated
Year ended maximum amounts that
January 31, amounts would have
1996 payable under been paid
(reflecting the the Proposed under the
Current Plan) Plan) Proposed Plan)
--------------- -------------- --------------
<S> <C> <C> <C>
Management Fee 0.64% 0.64% 0.64%
12b-1 Fees 0.18% 0.50%/3/ 0.19%/4/
Other Expenses 0.21% 0.21% 0.21%
Total Operating Expenses 1.03% 1.35% 1.04%
</TABLE>
Example: Assume an annual return of 5% and there is 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.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- -------- ------- ---------
<S> <C> <C> <C> <C>
CURRENT $ 67/5/ $ 88/5/ $ 111/5/ $ 176/5/
PRO-FORMA $70/3,5/ $98/3,5/ $127/3,5/ $211/3,5/
(MAXIMUM)
PRO-FORMA $68/4,5/ $89/4,5/ $112/4,5/ $177/4,5/
(ESTIMATED)
</TABLE>
1. Sales "load" is referred to as sales "charge" and "deferred sales load" is
referred to as "contingent deferred reimbursement charge" or "CDRC"
throughout this Proxy Statement. Investors should be aware that long-term
shareholders may pay, as a front-end sales charge and under both the
Current Plan and the Proposed Plan, more than the economic equivalent of
the maximum front-end sales charge permitted by certain rules
of the National Association of Securities Dealers, Inc.
2. Under both the Current Plan and the Proposed Plan, redemptions of shares on
which the Fund's Rule 12b-1 sales distribution fee has been paid are
subject to a 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, subject to
certain exceptions described herein.
3. Reflects the maximum annual 12b-1 fees of 0.50% that could be paid under
the Proposed Plan in any year, consisting of a distribution fee of 0.25%
and a service fee of 0.25%.
4. Reflects the estimated level of distribution and service fees that would
have been paid under the Proposed Plan had it been in effect for the Fund's
last fiscal year.
5. Based on total current and pro-forma operating expenses shown in the table
above.
If the shareholders approve the Proposed Plan, the Proposed Plan shall,
unless terminated as described below, become effective July 12, 1996 and
continue in effect until July 12, 1997 and from year to year thereafter only so
long as
15
<PAGE>
such continuance is specifically approved, at least annually, by the Fund's
Board of Directors and its Independent Directors by a vote cast in person at a
meeting called for the purpose of voting on such continuance. The Proposed Plan
may be terminated at any time by a vote of a majority of the Independent
Directors or by a shareholder vote in compliance with Rule 12b-1 under the Act.
The Plan may not be amended to increase materially the amount to be spent for
distribution above the maximum amounts set forth in the Proposed Plan without a
shareholder vote in compliance with Rule 12b-1 under the Act. All material
amendments must be approved by a majority of the Independent Directors.
The Proposed Plan provides that while it is in effect, the selection and
nomination of Independent Directors is committed to the discretion of the
Independent Directors then sitting on the board. This does not prevent the
involvement of others in such selection and nomination if the final decision on
any such selection or nomination is approved by a majority of the Independent
Directors.
Pursuant to Rule 12b-1 under the Act, an affirmative vote of the holders
of a "majority" (as defined in the Act) of the Fund's voting securities is
required for approval of the Proposed Plan. A "majority" vote is defined in the
Act as the vote of the holders of the lesser of: (i) 67% or more of the voting-
securities present or represented by proxy at the shareholders meeting, if the
holders of more than 50% of the outstanding voting securities are present or
represented by proxy, or (ii) more than 50% of the outstanding voting--
securities. The effect of an abstention or broker non-vote is the same as a vote
against this proposal.
If the Proposed Plan is not approved by the shareholders of the Fund,
the Current Plan will continue in effect according to its terms.
The Board of Directors recommends that shareholders vote in favor of
adoption of the Proposed Plan.
5. AMENDMENT OF THE ARTICLES OF INCORPORATION TO AUTHORIZE CLASSES AND SERIES
OF SHARES AND TO CONFIRM THAT THE FUND MAY IMPOSE CONTINGENT DEFERRED SALES
CHARGES IN CONNECTION WITH REDEMPTIONS
On March 14, 1996, the Fund's Board of Directors unanimously voted to
approve an amendment to the Articles of Incorporation of the Fund to give the
Fund's Board of Directors the power to classify the Fund's shares into classes
and series, and voted to submit such amendment to the Fund's shareholders for
approval. The full text of the amendment is attached hereto as Exhibit C.
16
<PAGE>
The Fund's Articles of Incorporation presently designate one class of
shares of capital stock and do not authorize the Board of Directors to create
additional classes or series. The Board of Directors believes that the Fund's
best interests will be served if the Board of Directors is able to create new
series of shares and classes of shares within a series, with each share of a
series, regardless of class, sharing pro rata (based on net asset value) in the
portfolio and income of the series and in the series' expenses, except for
differences in expenses resulting from different Rule 12b-1 plans for the
various classes and possibly other class-specific expenses. It is expected that
implementation of such a multi-class fund structure will (i) enable investors in
-
the Fund to choose the distribution option that best suits their individual
situations, (ii) facilitate distribution of the Fund's shares, and (iii)
-- ---
maintain the competitive position of the Fund in relation to other funds that
have implemented or are seeking to implement similar distribution arrangements.
The Board of Directors has approved, subject to shareholder approval, two
classes of shares which are to share in the Fund's portfolio but are to have
different distribution arrangements. The existing class of Fund shares, to be
designated the "Class A Shares," will continue to be offered as described in the
Fund's current prospectus, except that the Board of Directors is recommending
that shareholders approve a new Distribution Plan and Agreement pursuant to Rule
12b-1 under the Act that, if approved, will be applicable to the Class A Shares.
See Item 4 above.
The second class of shares, to be designated the "Class C Shares," will be
offered at net asset value without an initial sales charge, but if redeemed for
cash before the first anniversary of purchase, will be subject to a CDRC, or
contingent deferred reimbursement charge, equal to 1% of the lower of their cost
or then net asset value. The Class C Shares are to be subject to a Rule 12b-1
plan that involves annual distribution and service fee payments for the account
of such class equal to 1% of the average net asset value of the Class C shares.
None of these charges will be allocated to the Class A Shares.
If the proposed amendment to the Fund's Articles of Incorporation is
approved, the Board of Directors will be authorized to create and issue one or
more additional classes of shares within the existing series and to create
additional series. Lord Abbett has advised the Board of Directors of the Fund
that it intends to propose to the board in the near future that the board
authorize the Fund to issue a third class of shares, to be designated the "Class
B Shares". If authorized, the Class B Shares are expected to be sold without an
initial sales charge and otherwise to be similar to the Class C Shares except
that (i) they will be subject to a contingent deferred sales charge ("CDSC")
-
that is payable to the distributor of such shares, rather than subject to a
contingent deferred reimbursement charge payable to the Fund as is the case with
the Class C Shares, (ii) the B Share CDSC will be substantially larger than the
--
1%
17
<PAGE>
CDRC charged on early redemptions of Class C Shares, (iii) the B Share CDSC
---
will apply over a period of time substantially longer than the 12 months
applicable to the C Share CDRC, and will scale down to zero over that longer
period, and (iv) the Class B Shares will convert automatically into Class A
--
Shares at net asset value after a period of time.
Shares of all classes will vote together on all matters affecting the Fund,
except for matters, such as approval of a Rule 12b-1 plan or a related service
plan, affecting only a particular class or classes. All shares voting on a
matter will have identical voting rights. All issued shares will be fully paid
and non-assessable, and shareholders will have no pre-emptive or other right to
subscribe to any additional shares. All shares within a series will have the
same rights and be subject to the same limitations set forth in the Articles of
Incorporation with respect to dividends, redemptions and liquidation except for
differences resulting from class-specific Rule 12b-1 plans and related service
plans and certain other class-specific expenses.
The proposed amendment to the Fund's Articles of Incorporation will also
make clear that the Fund may impose a CDSC and other charges (which charges may
vary within and among the classes) payable upon redemption as may be established
from time to time by the Board of Directors of the Fund. The Fund's Articles of
Incorporation currently provide that the Fund may deduct a redemption charge not
exceeding 1% of the net asset value of the shares being redeemed. The proposed
amendment is deemed advisable in order to avoid any question as to whether the
proposed B Share CDSC referred to above, which in some instances may exceed 1%,
may be imposed in connection with the proposed issuance of the Class B Shares.
The Board of Directors has no intention of increasing the CDRC currently payable
or proposed to be payable on certain early redemptions of your Fund shares.
See Item 4 above.
Approval of the proposed amendment to the Articles of Incorporation
requires an affirmative vote of more than 50% of the outstanding shares of the
Fund. The effect of an abstention or broker non-vote is the same as a vote
against this proposal.
The Board of Directors recommends that shareholders vote in favor of this
proposed amendment to the Articles of Incorporation.
18
<PAGE>
6. AMENDMENT OF THE ARTICLES OF INCORPORATION TO REDUCE THE PAR VALUE OF
SHARES (THIS CHANGE WILL HAVE NO EFFECT ON THE VALUE OF YOUR SHARES)
On March 14, 1996, the Fund's Board of Directors unanimously voted to
approve an amendment to the Articles of Incorporation of the Fund to reduce the
par value of shares of capital stock of the Fund from $1.00 to $0.001 per share,
and voted to submit such amendment to the Fund's shareholders for approval.
This proposed amendment is included in the text of the amendment attached as
Exhibit C.
Under Maryland law, the par value of shares determines the amount of a
corporation's stated capital. Stated capital has little meaning in the case of
an investment company like the Fund. However, when the Fund increases its
authorized capital stock, it must pay a fee based on the aggregate par value of
the new shares. This change will have no effect on the value of your shares.
The Board of Directors therefore recommends that the par value of the Fund's
shares be reduced in order to save the Fund some expense when it increases its
authorized capital stock.
Approval of the proposed amendment to the Articles of Incorporation
requires an affirmative vote of a majority of the outstanding shares of the
Fund. The effect of an abstention or broker non-vote is the same as a vote
against this proposal.
The Board of Directors recommends that shareholders vote in favor of
this proposed amendment to the Articles of Incorporation.
7. OTHER INFORMATION
Management is not aware of any matters to come before the meeting
other than those set forth in the notice. If any such other matters do come
before the meeting, the individuals named as proxies will vote, act, and consent
with respect thereto in accordance with their best judgment.
a. Timeliness of Shareholder Proposals.
-----------------------------------
Any shareholder proposals to be presented for action at the Fund's next
shareholder meeting pursuant to the provisions of Rule 14a-8 under the
Securities Exchange Act of 1934, as amended, must be received at the Fund's
principal executive offices within a reasonable time in advance of the date
solicitation is made for such meeting. The Fund does not intend to hold another
annual or special meeting of shareholders unless required to do so by the Act.
19
<PAGE>
b. Investment Adviser and Underwriter.
----------------------------------
Lord, Abbett & Co., 767 Fifth Avenue, New York, New York, 10153, acts
as investment adviser and principal underwriter with respect to the Fund.
c. Annual Report Available Upon Request.
------------------------------------
The Fund will furnish, without charge, a copy of the Fund's most
recent annual report and the most recent semi-annual report succeeding the
annual report, if any, to a shareholder upon request. A shareholder may obtain
such report(s) by writing to the Fund or by calling 800-874-3733.
d. Portfolio Transactions.
----------------------
The Fund's policy is to obtain best execution on all portfolio
transactions, which means that the Fund seeks 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, the Fund may pay, as
described below, a higher commission than some brokers might charge on the same
transactions. The Fund's 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, the Fund 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
capacity 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.
The Fund pays a commission rate that the Fund believes is appropriate
to give maximum assurance that the Fund's brokers will provide to the Fund, on a
continuing basis, the highest level of brokerage services available. While the
Fund does not always seek the lowest possible commissions on particular trades,
the Fund believes that its commission rates are in line with the rates that many
other institutions pay. The Fund's 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 the Fund and the other
accounts they manage. Such services include showing the
20
<PAGE>
Fund 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 the Fund's brokers also provide research services at least
some of which are useful to Lord Abbett in their overall responsibilities with
respect to the Fund 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. The Fund has been advised by Lord Abbett that research
services received from brokers cannot be allocated to any particular account,
are not a substitute for Lord Abbett's services but are supplemental to their
own research effort and, when utilized, are subject to internal analysis before
being incorporated by Lord Abbett into their investment process. As a practical
matter, it would not be possible for Lord Abbett to generate all of the
information presently provided by brokers. While receipt of research services
from brokerage firms has not reduced Lord Abbett's normal research activities,
the expenses of Lord Abbett could be materially increased if it attempted to
generate such additional information through its own staff and purchased such
equipment and software packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business
to or among brokers and trades are executed only when they are dictated by
investment decisions of the Fund to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the
equivalent likelihood of best execution, the broker-dealer who has sold the
Fund's 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 the Fund, 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 the Fund in the buying and selling
21
<PAGE>
of the same securities as described above. If these clients wish to buy or sell
the same security as the Fund does, they may have their transactions executed at
times different from the Fund's transactions and thus may not receive the same
price or incur the same commission cost as the Fund does.
For the fiscal years ended January 31, 1996, 1995 and 1994, the Fund
paid total commissions to independent broker-dealers of $250,994, $73,312 and
$87,290, respectively.
LORD ABBETT DEVELOPING
GROWTH FUND, INC.
Kenneth B. Cutler
Vice President and Secretary
22
<PAGE>
EXHIBIT A
COMPARISON OF CURRENT FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS AND
PROPOSED FUNDAMENTAL AND CERTAIN NON-FUNDAMENTAL INVESTMENT POLICIES AND
RESTRICTIONS
<TABLE>
<CAPTION>
CURRENT POLICY/RESTRICTION PROPOSED POLICY/RESTRICTION
-------------------------- ---------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C>
SHORT SALES/MARGIN.
FUNDAMENTAL FUNDAMENTAL
The Fund may not sell short securities or buy The Fund may purchase securities on
securities or evidences of interests therein on margin to the extent permitted by applica-
margin, (good faith deposits made in connection ble law.
with entering into stock index futures contracts
are not deemed to be margin), although it may NON-FUNDAMENTAL
obtain short-term credit necessary for the The Fund may not make short sales of
clearance of purchases of securities. securities or maintain a short position
except to the extent permitted by applicable
law.
- ----------------------------------------------------------------------------------------------------------
BORROWING.
FUNDAMENTAL FUNDAMENTAL
The Fund may not borrow money, except as a The Fund may not borrow money, except
temporary measure for extraordinary or emer- that (i) the Fund may borrow from banks
gency purposes and then not in excess of 5% of (as defined in the Act) in amounts up to
the Fund's gross assets (at cost or market value, 33 1/3% of its total assets (including the
whichever is lower) at the time of borrowing. amount borrowed), (ii) the Fund may bor-
row up to an additional 5% of its total
assets for temporary purposes, and (iii) the
Fund may obtain such short-term credit as
may be necessary for the clearance of
purchases and sales of portfolio securities.
NON-FUNDAMENTAL
The Fund may not borrow in excess of 5%
of its gross assets taken at cost or market
value, whichever is lower at the time of
borrowing, and then only as a temporary
measure for extraordinary or emergency
purposes.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICY/RESTRICTION PROPOSED POLICY/RESTRICTION
-------------------------- ---------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C>
UNDERWRITING.
FUNDAMENTAL FUNDAMENTAL
The Fund may not act as underwriter of securi- The Fund may not engage in the under-
ties issued by others, unless it is deemed to be writing of securities, except pursuant to a
one in selling a portfolio security requiring merger or acquisition or to the extent that,
registration under the Securities Act of 1933. in connection with the disposition of its
portfolio securities, it may be deemed to be
an underwriter under federal securities
laws.
- ----------------------------------------------------------------------------------------------------------
LENDING.
FUNDAMENTAL FUNDAMENTAL
The Fund may not make loans, other than by The Fund may not make loans to other
making demand or time deposits with banks or persons, except that the acquisition of
buying commercial paper or publicly-offered bonds, debentures or other corporate debt
debt securities; however, the Fund may enter into securities and investment in government
short-term repurchase agreements with those obligations, commercial paper, pass-
who sell its securities and the Fund may lend its through instruments, certificates of deposit,
portfolio securities to registered broker-dealers bankers acceptances, repurchase agree-
where the loan is 100% secured by cash or its ments or any similar instruments shall not
equivalent as long as the Fund complies with be subject to this limitation, and except
regulatory requirements and, in management's further that the Fund may lend its portfolio
opinion, such a loan would not expose the Fund securities, provided that the lending of
to significant risk or adversely affect its portfolio securities may be made only in
qualification for pass-through tax treatment accordance with applicable law.
under the Internal Revenue Code.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICY/RESTRICTION PROPOSED POLICY/RESTRICTION
-------------------------- ---------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C>
REAL ESTATE/COMMODITIES.
FUNDAMENTAL FUNDAMENTAL
The Fund may not buy or sell real estate in- The Fund may not buy or sell real estate
cluding limited partnership interests therein (except that the Fund may invest in securi-
(except securities of companies, such as real ties directly or indirectly secured by real
estate investment trusts, that deal in real estate or estate or interests therein or issued by
interests therein), or oil, gas or other mineral companies which invest in real estate or
leases, commodities or commodity contracts (for interests therein)or commodities or com-
this purpose, stock index futures are not deemed modity contracts (except to the extent the
to be commodities or commodity contracts) in Fund may do so in accordance with appli-
the ordinary course of its business, except such cable law and without registering as a
interests and other property acquired as a result commodity pool operator under the Com-
of owning other securities, though securities will modity Exchange Act as, for example, with
not be purchased in order to acquire any of these futures contracts).
interests.
NON-FUNDAMENTAL
The Fund may not invest in real estate
limited partnership interests or interests in
oil, gas or other mineral leases, or
exploration or other development programs,
except that the Fund may invest in
securities issued by companies that engage
in oil, gas or other mineral exploration or
development activities.
- ----------------------------------------------------------------------------------------------------------
DIVERSIFICATION.
FUNDAMENTAL FUNDAMENTAL
The Fund may not buy securities if the purchase With respect to 75% of its gross assets, the
would then cause the Fund to have more than 5% Fund may not buy securities of one issuer
of its gross assets, at market value at the time of representing more than (i) 5% of the
purchase, invested in securities of any one issuer, Fund's gross assets, except securities issued
except securities issued or guaranteed by the or guaranteed by the U.S. Government, its
U.S. Government, its agencies or agencies or instrumentalities, or (ii) 10% of
instrumentalities. The Fund may not buy voting the voting securities of such issuer.
securities if the purchase would then cause the
Fund to own more than 10% of the voting stock
of any one issuer.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICY/RESTRICTION PROPOSED POLICY/RESTRICTION
-------------------------- ---------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT IN A SINGLE INDUSTRY.
FUNDAMENTAL FUNDAMENTAL
The Fund may not concentrate its investments in The Fund may not invest more than 25% of
any particular industry but, if deemed appropriate its assets, taken at market value, in the
for attainment of the Fund's investment securities of issuers in any particular indus-
objective, up to 25% of its gross assets (at try (excluding securities of the U.S.
market value at the time of investment) may be Government, its agencies and instrumen-
invested in any one industry classification the talities).
Fund uses for investment purposes.
- ----------------------------------------------------------------------------------------------------------
RESTRICTED/ILLIQUID SECURITIES.
FUNDAMENTAL NON-FUNDAMENTAL
The Fund may not invest knowingly in securities The Fund may not invest knowingly more
or assets not readily marketable at the time of than 15% of its net assets (at the time of
purchase or subject to legal or contractual investment) in illiquid securities, except for
restrictions on resale. securities qualifying for resale under Rule
144A of the Securities Act of 1933, deemed
to be liquid by the Board of Directors.
- ----------------------------------------------------------------------------------------------------------
MORTGAGING AND PLEDGING OF
ASSETS.
FUNDAMENTAL FUNDAMENTAL
The Fund may not pledge, mortgage or hypo- The Fund may not pledge its assets (other
thecate its assets -- neither a deposit required to than to secure borrowings, or to the extent
enter into or to maintain stock index futures permitted by the Fund's investment policies,
contracts nor an allocation or segregation of as permitted by applicable law).
portfolio assets to collateralize a position in such
contracts is deemed to be a pledge, mortgage or
hypothecation.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICY/RESTRICTION PROPOSED POLICY/RESTRICTION
-------------------------- ---------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENTS IN SECURITIES OF
OTHER INVESTMENT COMPANIES.
FUNDAMENTAL
The Fund may not buy securities issued by any NON-FUNDAMENTAL
other open-end investment company except pur- The Fund may not invest in the securities of
suant to a merger, acquisition or consolidation, other investment companies, except as
although the Fund may invest up to 5% of its permitted by applicable law.
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.
- ----------------------------------------------------------------------------------------------------------
OPTIONS.
FUNDAMENTAL NON-FUNDAMENTAL
The Fund may not buy or sell put or call options The Fund may not write, purchase or sell
although it may buy, hold or sell rights, warrants puts, calls, straddles, spreads or
or stock index futures contracts. combinations thereof, except to the extent
permitted in the Fund's prospectus and
statement of additional information, as they
may be amended from time to time.
Although it has no current intention to do
so, the Fund may invest in financial futures
and options on financial futures.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICY/RESTRICTION PROPOSED POLICY/RESTRICTION
-------------------------- ---------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENTS IN SECURITIES OF
ISSUERS IN OPERATION FOR LESS
THAN THREE YEARS.
FUNDAMENTAL
The Fund may not invest more than 5% of its
gross assets, taken at market value at the time of NON-FUNDAMENTAL
investment, in companies (including their The Fund may not invest in securities of
predecessors) with less than three years' con- issuers which, with their predecessors, have
tinuous operation. a record of less than three years' continuous
operations, if more than 5% of the Fund's
total assets would be invested in such
securities (this restriction shall not apply to
mortgage-backed securities, asset-backed
securities or obligations issued or
guaranteed by the U.S. Government, its
agencies or instrumentalities).
- ----------------------------------------------------------------------------------------------------------
OWNERSHIP OF PORTFOLIO SECURI-
TIES BY OFFICERS AND DIRECTORS.
FUNDAMENTAL NON-FUNDAMENTAL
The Fund may not own securities in a company The Fund may not hold securities of any
when any of its officers, directors or security issuer if more than 1/2 of 1% of the
holders is an officer or director of the Fund or an securities of such issuer are owned
officer, director or partner of the Fund's beneficially by one or more officers or
investment adviser, if after the purchase any one directors of the Fund or by one or more
of such persons owns beneficially more than 1/2 partners or members of the underwriter or
of 1% of such securities and such persons investment advisor if these owners in the
together own more than 5% of such securities. aggregate own beneficially more than 5%
of the securities of such issuer.
- ----------------------------------------------------------------------------------------------------------
TRANSACTIONS WITH CERTAIN
PERSONS.
FUNDAMENTAL NON-FUNDAMENTAL
The Fund may not buy securities from or sell The Fund may not buy from or sell to any
them to its officers, directors, employees or to its of its officers, directors, employees, or its
investment adviser or to its partners and investment adviser or any of its officers,
employees, other than capital stock of the Fund. directors, partners or employees, any
securities other than shares of the Fund's
common stock.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICY/RESTRICTION PROPOSED POLICY/RESTRICTION
-------------------------- ---------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C>
SENIOR SECURITIES.
FUNDAMENTAL
No Policy/Restriction stated. The Fund may not issue senior securities to
the extent such issuance would violate
applicable law.
- ----------------------------------------------------------------------------------------------------------
PURCHASE OF WARRANTS.
NON-FUNDAMENTAL NON-FUNDAMENTAL
Pursuant to state law, the Fund will not invest The Fund may not invest in warrants if, at
more than 5% of its assets in warrants and not the time of the acquisition, its investment in
more than 2% in warrants not listed on the New warrants, valued at the lower of cost or
York or American Stock Exchanges, except market, would exceed 5% of the Fund's
when they form a unit with other securities. total assets (included within such
limitation, but not to exceed 2% of the
Fund's total assets, are warrants which are
not listed on the New York or American
Stock Exchange or a major foreign
exchange).
- ----------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
EXHIBIT B
Rule 12b-1 Distribution Plan and Agreement
Lord Abbett Developing Growth Fund, Inc. -- Class A Shares
----------------------------------------------------------
RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT dated as of July 12, 1996 by
and between LORD ABBETT DEVELOPING GROWTH FUND, INC., a Maryland corporation
(the "Fund"), and LORD ABBETT DISTRIBUTOR LLC, a New York limited liability
company (the "Distributor").
WHEREAS, the Fund is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "Act"); and
the Distributor is the exclusive selling agent of the Fund's Class A shares of
capital stock (the "Shares") pursuant to the Distribution Agreement between the
Fund and the Distributor, dated as of the date hereof (the "Distribution
Agreement").
WHEREAS, the Fund desires to adopt a Distribution Plan and Agreement
(the "Plan") with the Distributor, as permitted by Rule 12b-1 under the Act,
pursuant to which the Fund may make certain payments to the Distributor to be
used by the Distributor or paid to institutions and persons permitted by
applicable law and/or rules to receive such payments ("Authorized Institutions")
in connection with sales of Shares and/or servicing of accounts of shareholders
holding Shares.
WHEREAS, the Plan will succeed a Rule 12b-1 Distribution Plan and
Agreement between the Fund and Lord, Abbett & Co. ("Lord Abbett"), an affiliate
of the Distributor.
WHEREAS, the Fund's Board of Directors has determined that there is a
reasonable likelihood that the Plan will benefit the Fund and the holders of
the Shares.
NOW, THEREFORE, in consideration of the mutual covenants and of other
good and valuable consideration, receipt of which is hereby acknowledged, it is
agreed as follows:
1. The Fund hereby authorizes the Distributor to enter into agreements
with Authorized Institutions (the "Agreements") which may provide for the
payment to such Authorized Institutions of distribution and service fees which
the Distributor receives from the Fund in order to provide additional incentives
to such Authorized Institutions (i) to sell Shares and (ii) to provide
- --
continuing information and investment services to their accounts holding Shares
and otherwise to encourage their accounts to remain invested in the Shares.
<PAGE>
2. The Fund also hereby authorizes the Distributor to use payments
received hereunder from the Fund in order to (a) finance any activity which is
-
primarily intended to result in the sale of Shares and (b) provide continuing
-
information and investment services to shareholder accounts not serviced by
Authorized Institutions receiving a service fee from the Distributor hereunder
and otherwise to encourage such accounts to remain invested in the Shares;
provided that (i) any payments referred to in the foregoing clause (a) shall not
- -------- -
exceed the distribution fee permitted to be paid at the time under paragraph 3
of this Plan and shall be authorized by the Board of Directors of the Fund by a
vote of the kind referred to in paragraph 10 of this Plan and (ii) any payments
--
referred to in clause (b) shall not exceed the service fee permitted to be paid
at the time under paragraph 3 of this Plan.
3. The Fund is authorized to pay the Distributor hereunder for
remittance to Authorized Institutions and/or use by the Distributor pursuant to
this Plan (a) service fees and (b) distribution fees, each at an annual rate not
- -
to exceed .25 of 1% of the average annual net asset value of Shares outstanding,
except that service fees payable with respect to Shares that were initially
issued, or are attributable to shares that were initially issued, by the Fund or
a predecessor fund prior to June 1, 1990 shall not exceed .15 of 1% of the
average net asset value of such Shares. The Board of Directors of the Fund
shall from time to time determine the amounts, within the foregoing maximum
amounts, that the Fund may pay the Distributor hereunder. Any such fees (which
may be waived by the Authorized Institutions in whole or in part) may be
calculated and paid quarterly or more frequently if approved by the Board of
Directors of the Fund. Such determinations and approvals by the Board of
Directors shall be made and given by votes of the kind referred to in paragraph
10 of this Plan. Payments by holders of Shares to the Fund of contingent
deferred reimbursement charges relating to distribution fees paid by the Fund
hereunder shall reduce the amount of distribution fees for purposes of the
annual 0.25% distribution fee limit. The Distributor will monitor the payments
hereunder and shall reduce such payments or take such other steps as may be
necessary to assure that (i) the payments pursuant to this Plan shall be
-
consistent with Article III, Section 26, subparagraphs (d)(2) and (5) of the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
with respect to investment companies with asset-based sales charges and service
fees, as the same may be in effect from time to time and (ii) the Fund shall not
--
pay with respect to any Authorized Institution service fees equal to more than
.25 of 1% of the average annual net asset value of Shares sold by (or
attributable to Shares or shares sold by) such Authorized Institution and held
in an account covered by an Agreement.
2
<PAGE>
4. The net asset value of the Shares shall be determined as provided in
the Articles of Incorporation of the Fund. If the Distributor waives all or a
portion of the fees which are to be paid by the Fund hereunder, the Distributor
shall not be deemed to have waived its rights under this Agreement to have the
Fund pay such fees in the future.
5. The Secretary of the Fund, or in his absence the Chief Financial
Officer, is hereby authorized to direct the disposition of monies paid or
payable by the Fund hereunder and shall provide to the Fund's Board of
Directors, and the directors shall review at least quarterly, a written report
of the amounts so expended pursuant to this Plan and the purposes for which such
expenditures were made.
6. Neither this Plan nor any other transaction between the parties
hereto pursuant to this Plan shall be invalidated or in any way affected by the
fact that any or all of the directors, officers, shareholders, or other
representatives of the Fund are or may be "interested persons" of the
Distributor, or any successor or assignee thereof, or that any or all of the
directors, officers, partners, members or other representatives of the
Distributor are or may be "interested persons" of the Fund, except as may
otherwise be provided in the Act.
7. The Distributor shall give the Fund the benefit of the Distributor's
best judgment and good faith efforts in rendering services under this Plan.
Other than to abide by the provisions hereof and render the services called for
hereunder in good faith, the Distributor assumes no responsibility under this
Plan and, having so acted, the Distributor shall not be held liable or held
accountable for any mistake of law or fact, or for any loss or damage arising or
resulting therefrom suffered by the Fund or any of the shareholders, creditors,
directors, or officers of the Fund; provided however, that nothing herein shall
be deemed to protect the Distributor against any liability to the Fund or its
shareholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties hereunder, or by reason of the reckless disregard
of its obligations and duties hereunder.
8. This Plan shall become effective upon the date hereof, and shall
continue in effect for a period of more than one year from that date only so
long as such continuance is specifically approved at least annually by a vote of
the Board of Directors of the Fund, including the vote of a majority of the
directors who are not "interested persons" of the Fund and who have no direct or
indirect financial interest in the operation of this Plan or in any agreement
related to this Plan, cast in person at a meeting called for the purpose of
voting on such renewal.
3
<PAGE>
9. This Plan may not be amended to increase materially the amount to be
spent by the Fund hereunder above the maximum amounts referred to in paragraph 3
of this Plan without a shareholder vote in compliance with Rule 12b-1 and Rule
18f-3 under the Act as in effect at such time, and each material amendment must
be approved by a vote of the Board of Directors of the Fund, including the vote
of a majority of the directors who are not "interested persons" of the Fund and
who have no direct or indirect financial interest in the operation of this Plan
or in any agreement related to this Plan, cast in person at a meeting called
for the purpose of voting on such amendment. Amendments to this Plan which do
not increase materially the amount to be spent by the Fund hereunder above the
maximum amounts referred to in paragraph 3 of this Plan may be made pursuant to
paragraph 10 of this Plan.
10. Amendments to this Plan other than material amendments of the kind
referred to in the foregoing paragraph 9 may be adopted by a vote of the Board
of Directors of the Fund, including the vote of a majority of the directors who
are not "interested persons" of the Fund and who have no direct or indirect
financial interest in the operation of this Plan or in any agreement related to
this Plan. The Board of Directors of the Fund may, by such a vote, interpret
this Plan and make all determinations necessary or advisable for its
administration.
11. This Plan may be terminated at any time without the payment of any
penalty (a) by the vote of a majority of the directors of the Fund who are not
-
"interested persons" of the Fund and have no direct or indirect financial
interest in the operation of this Plan or in any agreement related to the Plan,
or (b) by a shareholder vote in compliance with Rule 12b-1 and Rule 18f-3 under
-
the Act as in effect at such time. This Plan shall automatically terminate in
the event of its assignment.
12. So long as this Plan shall remain in effect, the selection and
nomination of those directors of the Fund who are not "interested persons" of
the
4
<PAGE>
Fund are committed to the discretion of such disinterested directors. The terms
"interested persons," "assignment" and "vote of a majority of the outstanding
voting securities" shall have the same meanings as those terms are defined in
the Act.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and on its behalf by its duly authorized representative
as of the date first above written.
LORD ABBETT DEVELOPING GROWTH
FUND, INC.
By:_____________________________
President
ATTEST:
___________________
Assistant Secretary
LORD ABBETT DISTRIBUTOR LLC
By:_____________________________
5
<PAGE>
EXHIBIT C
PROPOSED AMENDMENT TO ARTICLES OF INCORPORATION OF THE FUND AUTHORIZING THE
BOARD OF DIRECTORS TO CREATE NEW CLASSES AND SERIES OF SHARES OF THE CAPITAL
STOCK OF THE FUND, CONFIRMING THAT THE FUND MAY IMPOSE CONTINGENT DEFERRED
SALES CHARGES IN CONNECTION WITH ITS RULE 12b-1 PLANS AND REDUCING
PAR VALUE
The following text shows those provisions of the Articles of Incorporation of
the Fund that are to be amended; the text that is lined through shows deletions
and the text that is double underlined indicates additions.
ARTICLE V
SECTION 1. The total number of shares which the Corporation has authority to
issue is 75,000,000 shares of capital stock of the par value of $.001 each,
having an aggregate par value of $75,000. The Board of Directors of the
Corporation shall have full power and authority, from time to time, to classify
or reclassify any unissued shares of stock of the Corporation, including,
without limitation, the power to classify or reclassify unissued shares into
series, and to classify or reclassify a series into one or more classes of stock
that may be invested together in the common investment portfolio in which the
series is invested, by setting or changing the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption of such shares of stock.
All shares of stock of a series shall represent the same interest in the
Corporation and have the same preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption as the other shares of stock of that series, except to
the extent that the Board of Directors provides for differing preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption of shares of
stock of classes of such series as determined pursuant to Articles Supplementary
filed for record with the State Department of Assessments and Taxation of
Maryland, or as otherwise determined pursuant to these Articles or by the Board
of Directors in accordance with law. Prior to the first classification of
unissued shares of stock into additional series, all outstanding shares of stock
shall be of a single series, and prior to the first classification of a series
into additional classes, all outstanding shares of stock of such series shall be
of a single class. Notwithstanding any other provision of these Articles, upon
the first classification of unissued shares of stock into additional series,
<PAGE>
the Board of Directors shall specify a legal name for the outstanding series, as
well as for the new series, in appropriate charter documents filed for record
with the State Department of Assessments and Taxation of Maryland providing for
such name change and classification, and upon the first classification of a
series into additional classes, the Board of Directors shall specify a legal
name for the outstanding class, as well as for the new class or classes, in
appropriate charter documents filed for record with the State Department of
Assessments and Taxation of Maryland providing for such name change and
classification.
SECTION 2. A description of the relative preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of all series and classes of series of
shares is as follows, unless otherwise set forth in Articles Supplementary filed
for record with the State Department of Assessments and Taxation of Maryland or
otherwise determined pursuant to these Articles:
(a) Assets Belonging to Series. All consideration received or
--------------------------
receivable by the Corporation for the issuance or sale of shares
of a particular series, together with all assets in which such
consideration is invested or reinvested, all income, earnings,
profits and proceeds thereof, including any proceeds derived from
the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to that
series for all purposes, subject only to the rights of creditors,
and shall be so recorded upon the books of account of the
Corporation. Such consideration, assets, income, earnings, profits
and proceeds, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form
the same may be, together with any unallocated items (as
hereinafter defined) relating to that series as provided in the
following sentence, are herein referred to as "assets belonging
to" that series. In the event that there are any assets, income,
earnings, profits or proceeds thereof, funds or payments which are
not readily identifiable as belonging to any particular series
(collectively "Unallocated Items"), the Board of Directors shall
allocate such Unallocated Items
2
<PAGE>
to and among any one or more of the series created from time to
time in such manner and on such basis as it, in its sole
discretion, deems fair and equitable; and any Unallocated Items so
allocated to a particular series shall belong to that series. Each
such allocation by the Board of Directors shall be conclusive and
binding upon the stockholders of all series for all purposes.
(b) Liabilities Belonging to Series. The assets belonging to each
-------------------------------
particular series shall be charged with the liabilities of the
Corporation in respect of that series, including any class
thereof, and with all expenses, costs, charges and reserves
attributable to that series, including any such class, and shall
be so recorded upon the books of account of the Corporation. Such
liabilities, expenses, costs, charges and reserves, together with
any unallocated items (as hereinafter defined) relating to that
series, including any class thereof, as provided in the following
sentence, so charged to that series, are herein referred to as
"liabilities belonging to" that series. In the event there are any
unallocated liabilities, expenses, costs, charges or reserves of
the Corporation which are not readily identifiable as belonging to
any particular series (collectively "Unallocated Items"), the
Board of Directors shall allocate and charge such Unallocated
Items to and among any one or more of the series created from time
to time in such manner and on such basis as the Board of Directors
in its sole discretion deems fair and equitable; and any
Unallocated Items so allocated and charged to a particular series
shall belong to that series. Each such allocation by the Board of
Directors shall be conclusive and binding upon the stockholders of
all series for all purposes. To the extent determined by the Board
of Directors, liabilities and expenses relating solely to a
particular class (including, without limitation, distribution
expenses under a Rule 12b-1 plan and administrative expenses under
an administration or service agreement, plan or other arrangement,
however designated, which may be adopted for such class) shall be
allocated to and borne by such class and shall be appropriately
reflected (in the
3
<PAGE>
manner determined by the Board of Directors) in the net asset
value, dividends and distributions and liquidation rights of the
shares of such class.
(c) Dividends. Dividends and distributions on shares of a particular
---------
series may be paid to the holders of shares of that series at such
times, in such manner and from such of the income and capital
gains, accrued or realized, from the assets belonging to that
series, after providing for actual and accrued liabilities
belonging to that series, as the Board of Directors may determine.
Such dividends and distributions may vary between or among classes
of a series to reflect differing allocations of liabilities and
expenses of such series between or among such classes to such
extent as may be provided in or determined pursuant to Articles
Supplementary filed for record with the State Department of
Assessments and Taxation of Maryland or as may otherwise be
determined by the Board of Directors.
(d) Liquidation. In the event of the liquidation or dissolution of
-----------
the Corporation, the stockholders of each series shall be entitled
to receive, as a series, when and as declared by the Board of
Directors, the excess of the assets belonging to that series over
the liabilities belonging to that series. The assets so
distributable to the stockholders of one or more classes of a
series shall be distributed among such stockholders in proportion
to the respective aggregate net asset values of the shares of such
series held by them and recorded on the books of the Corporation.
(e) Voting. On each matter submitted to vote of the stockholders,
------
each holder of a share shall be entitled to one vote for each such
share standing in his name on the books of the Corporation
irrespective of the series or class thereof and all shares of all
series and classes shall vote as a single class ("Single Class
Voting"); provided, however, that (i) as to any matter with
-
respect to which a separate vote of any series or class is
required by the Investment Company Act of 1940, as amended from
4
<PAGE>
time to time, applicable rules and regulations thereunder, or the
Maryland General Corporation Law, such requirement as to a
separate vote of that series or class shall apply in lieu of
Single Class Voting as described above; (ii) in the event that the
--
separate vote requirements referred to in (i) above apply with
respect to one or more (but less than all) series or classes,
then, subject to (iii) below, the shares of all other series and
---
classes shall vote as a single class; and (iii) as to any matter
---
which does not affect the interest of a particular series or
class, only the holders of shares of the one or more affected
series or classes shall be entitled to vote.
(f) Conversion. At such times (which times may vary among shares of a
----------
class) as may be determined by the Board of Directors, shares of a
particular class of a series may be automatically converted into
shares of another class of such series based on the relative net
asset values of such classes at the time of conversion, subject,
however, to any conditions of conversion that may be imposed by
the Board of Directors.
SECTION 3. Each share of the capital stock of the Corporation shall be subject
to the following provisions:
(a) All shares of the capital stock of the Corporation now or
hereafter authorized shall be subject to redemption and
redeemable at the option of the stockholder, in the sense used in
the General Laws of the State of Maryland authorizing the
formation of corporations. Each holder of the shares of capital
stock of the Corporation, upon request to the Corporation
accompanied by surrender (to the Corporation, or an agent
designated by it) of the appropriate stock certificate or
certificates, if any, in proper form for transfer, and such other
instruments as the Board of Directors may require, shall be
entitled to require the Corporation to redeem all or any part of
the shares of capital stock outstanding in the name of
such holder on the books of the Corporation, at a redemption
price equal to the net asset value of such shares determined as
hereinafter set forth
5
<PAGE>
Notwithstanding the foregoing, the Corporation may deduct from
the proceeds otherwise due to any stockholder requiring the
Corporation to redeem shares a redemption charge not to exceed
one percent (1%) of such net asset value or a reimbursement
charge, a deferred sales charge or other charge that is integral
to the Corporation's distribution program (which charges may vary
within and among series and classes) as may be established from
time to time by the Board of Directors.
SECTION 4. Notwithstanding any provision of law requiring any action to be
taken or authorized by the affirmative vote of the holders of a designated
proportion greater than a majority of the shares or votes entitled to be cast,
such action shall be effective and valid if taken or authorized by the
affirmative vote of the holders of a majority of the total number of shares
outstanding and entitled to vote thereon pursuant to the provisions of these
Articles of Incorporation.
SECTION 5. No holder of stock of the Corporation shall, as such holder, have
any right to purchase or subscribe for any shares of the capital stock of the
Corporation which it may issue or sell (whether out of the number of shares now
or hereafter authorized by these Articles of Incorporation, or any amendment
thereof, or out of any shares of the capital stock of the Corporation acquired
by it after the issue thereof, or otherwise) other than such right; if any, as
the Board of Directors, in its discretion, may determine.
ARTICLE VII
***
SECTION 1. In furtherance and not in limitation of the power conferred by
statute and pursuant to these Articles of Incorporation, the Board of the
Directors is expressly authorized to do the following:
(b) To distribute, in its discretion, for any fiscal year (in the year
or in the next fiscal year) as ordinary dividends and as capital
gains distributions, respectively, amounts sufficient to enable
the Corporation as a regulated investment company to avoid any
liability for Federal income tax in respect of such year. Any
distribution or
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dividend paid to stockholders from any capital
source shall be accompanied by a written statement showing the
source or sources of such payment.
(g) To authorize any agreement of the character described in
subsection (e) or (f) of this Section 1 with any person,
corporation, association, partnership or other organization,
although one or more of the members of the Board of Directors or
officers of the Corporation may be the other party to any such
agreement or an officer, director, shareholder, or member of such
other party, and no such agreement shall be invalidated or
rendered voidable by reason of the existence of any such
relationship. Any director of the Corporation who is also a
director or officer of such other corporation or who is so
interested may be counted in determining the existence of a quorum
at any meeting of the Board of Directors which shall authorize any
such agreement, and may vote thereat to authorize any such
contract or transaction, with like force and effect as if he were
not such director or officer of such other corporation or not so
interested. Any agreement entered into pursuant to said
subsections (e) or (f) shall be consistent with and subject to the
requirements of the Investment Company Act of 1940,
as amended from time to time, applicable rules and regulations
thereunder, or any other applicable Act of Congress hereafter
enacted, and no amendment to any agreement entered into pursuant
to said subsection (e) (other than an amendment reducing the
compensation of the other party thereto) shall be effective unless
assented to by the affirmative vote of a majority of the
outstanding voting securities of the Corporation (as such phrase
is defined in the Investment Company Act of
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1940, as amended from time to time) entitled to vote on the matter.
***
SECTION 3. For the purposes referred to in these Articles of Incorporation,
the net asset value of shares of the capital stock of the Corporation of each
series and class as of any particular time (a "determination time") shall be
determined by or pursuant to the direction of the Board of Directors as follows:
(a) At times when a series is not classified into multiple classes,
the net asset value of each share of stock of a series, as of a
determination time, shall be the quotient, carried out to not less
than two decimal points, obtained by dividing the net value of the
assets of the Corporation belonging to that series (determined as
hereinafter provided) as of such determination time by the total
number of shares then issued or issuable of that series then
outstanding, including all shares of that series which the
Corporation has agreed to sell for which the price has been
determined, and excluding shares of that series which the
Corporation has agreed to purchase or which are subject to
redemption for which the price has been determined.
The net value of the assets of the Corporation of a series as of a
determination time shall be determined in accordance with sound
accounting practice by deducting from the gross value of the
assets of the Corporation belonging to that series (determined as
hereinafter provided), the amount of all liabilities belonging to
that series (as such terms are defined in subsection (b) of
Section 2 of Article V), in each case as of such determination
time.
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The gross value of the assets of the Corporation belonging to a
series as of such determination time shall be an amount equal to
all cash, receivables, the market value of all securities for
which market quotations are readily available and the fair value
of other assets of the Corporation belonging to that series (as
such terms are defined in subsection (a) of Section 2 of Article
V) at such determination time, all determined in accordance with
sound accounting practice and giving effect to the following:
***
(b) At times when a series is classified into multiple classes, the
net asset value of each share of stock of a class of such series
shall be determined in accordance with subsections (a) and (c) of
this Section 3 with appropriate adjustments to reflect differing
allocations of liabilities and expenses of such series between or
among such classes to such extent as may be provided in or
determined pursuant to Articles Supplementary filed for record
with the State Department of Assessments and Taxation of Maryland
or as may otherwise be determined by the Board of Directors.
(c) The Board of Directors is empowered, in its discretion, to
establish other methods for determining such net asset value
whenever such other methods are deemed by it to be necessary or
desirable, including, but without limiting the generality of the
foregoing, any method deemed necessary or desirable in order to
enable the Corporation to comply with any provision of the
Investment Company Act of 1940 or any rule or regulation
thereunder.
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SECTION 5. Any determination as to any of the following matters made by or
pursuant to the direction of the Board of Directors consistent with these
Articles of Incorporation and in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of duties, shall be final and conclusive
and shall be binding upon the Corporation and every holder of shares of capital
stock of the Corporation, of any series or class, namely, the amount of the
assets, obligations, liabilities and expenses of the Corporation or belonging to
any series or with respect to any class; the amount of the net income of the
Corporation from dividends and interest for any period and the amount of assets
at any time legally available for the payment of dividends with respect to any
series or class; the amount of paid-in surplus, other surplus, annual or other
net profits, or net assets in excess of capital, undivided profits, or excess of
profits over losses on sales of securities belonging to the Corporation or any
series or class; the amount, purpose, time of creation, increase or decrease,
alteration or cancellation of any reserves or charges and the propriety thereof
(whether or not any obligation or liability for which such reserves or charges
shall have been created shall have been paid or discharged) with respect to the
Corporation or any series or class;
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the market value, or any sale, bid or asked price to be applied in determining
the market value, of any security owned or held by the Corporation; the fair
value of any other asset owned by the Corporation; the number of shares of stock
of any series or class issued or issuable; the existence of conditions
permitting the postponement of payment of the repurchase price of shares of
stock of any series or class or the suspension of the right of redemption as
provided by law; any matter relating to the acquisition, holding and disposition
of securities and other assets by the Corporation; any question as to whether
any transaction constitutes a purchase of securities on margin, a short sale of
securities, or an underwriting of the sale of, or participation in any
underwriting or selling group in connection with the public distribution of any
securities; and any matter relating to the issue, sale, repurchase and/or other
acquisition or disposition of shares of stock of any series or class.
11
<PAGE>
LORD ABBETT DEVELOPING GROWTH FUND, INC.
ANNUAL MEETING OF SHAREHOLDERS
JUNE 19, 1996
767 Fifth Avenue
New York, New York 10153
Tel. No. (212) 848-1800
The undersigned hereby appoints KENNETH B. CUTLER, ROBERT S. DOW and
RONALD P. LYNCH and each of them proxies, with full power of substitution, to
vote (according to the number of votes which the undersigned would be entitled
to cast if then personally present) at the annual meeting of shareholders of
LORD ABBETT DEVELOPING GROWTH FUND, INC. (the "Fund") on June 19, 1996,
including all adjournments, as specified below, and in their discretion upon
such other business as may properly be brought before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS WHICH RECOMMENDS
THAT YOU VOTE FOR PROPOSALS 1-6.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE VOTE OF THE UNDERSIGNED
IS TO BE CAST FOR ALL PROPOSALS LISTED BELOW.
1. Election of Directors:
For [ ] Without Authority [ ] For All Except [ ] (NOTE: TO WITHHOLD
AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, CHECK THE "FOR ALL EXCEPT"
BOX AND STRIKE A LINE THROUGH THE NOMINEE'S NAME BELOW.)
Ronald P. Lynch, Robert S. Dow, E. Wayne Nordberg, E. Thayer Bigelow,
Stewart S. Dixon, John C. Jansing, C. Alan MacDonald, Hansel B.
Millican, Jr. and Thomas J. Neff.
2. For [ ] Against [ ] Abstain [ ] To ratify the selection of Deloitte &
Touche LLP as independent public accountants of the Fund for the fiscal
year ending January 31, 1997.
3. For [ ] Against [ ] Abstain [ ] To approve or disapprove the proposed
changes in the Fund's fundamental investment policies and restrictions,
as described in the proxy statement.
4. For [ ] Against [ ] Abstain [ ] To approve or disapprove the proposed
new Distribution Plan and Agreement for the Fund's existing class of
shares pursuant to Rule 12b-1 under the Investment Company Act of 1940,
as described in the proxy statement.
5. For [ ] Against [ ] Abstain [ ] To approve or disapprove an amendment to
the Fund's Articles of Incorporation (i) authorizing the Board of
-
Directors to create new classes and series of shares of capital stock;
and (ii) confirming that the board may impose contingent deferred sales
--
charges in connection with new classes of shares to be created, as
described in the proxy statement.
<PAGE>
6. For [ ] Against [ ] Abstain [ ] To approve or disapprove an amendment to
the Fund's Articles of Incorporation reducing the par value per share
from $1.00 to $0.001 in order to reduce costs when authorizing new
shares (this change will have no effect on the value of your shares).
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<PAGE>
ACCOUNT NUMBER SHARES PROXY NUMBER
LORD ABBETT DEVELOPING
GROWTH FUND, INC.
PLEASE SIGN, DATE AND MAIL THIS PROXY IN THE
POSTAGE PAID RETURN ENVELOPE PROVIDED.
For information as to the voting of stock
registered in more than one name, see page 1
of the proxy statement. When signing the proxy
as attorney, executor, administrator, trustee
or guardian, please indicate the capacity in
which you are acting. Only authorized officers
should sign for corporations.
Date:.........................................
Signature(s) of Shareholder(s) as shown at
left
..............................................
..............................................
(Please read other side)
3
