1933 Act File No. 2-62797
1940 Act File No. 811-2871
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 31 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [X]
OF 1940
Amendment No. 30 [X]
LORD ABBETT DEVELOPING GROWTH FUND, INC.
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Exact Name of Registrant as Specified in Charter
767 FIFTH AVENUE, NEW YORK, N. Y. 10153-0203
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Address of Principal Executive Office
Registrant's Telephone Number (212) 848-1800
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Lawrence H. Kaplan, Vice President
767 FIFTH AVENUE, NEW YORK, N. Y. 10153
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately on filing pursuant to paragraph (b)
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X on June 1, 1999 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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on (date) pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of Rule 485
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If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
- ------ previously filed post-effective amendment
1
<PAGE>
Lord Abbett
Developing Growth Fund
Prospectus
June 1, 1999
[LOGO]
Investment Management
A Tradition of Performance Through Disciplined Investing
As with all mutual funds, the Securities and Exchange Commission does not
guarantee that the information in this prospectus is accurate or complete, and
it has not judged this fund for investment merit. It is a criminal offense to
state otherwise.
<PAGE>
Table of Contents
The Fund Page
What you should know Goal/Strategy 2
about the fund Main Risks 2
Past Performance 3
Fees and Expenses 4
Your Investment
Information for managing Purchases 5
fund account your Opening Your Account 7
Redemptions 8
Distributions and Taxes 8
Services For Fund Investors 9
Sales Charges and Service Fees 10
Management 10
For More Information
How to learn more Other Investment Techniques 11
about the fund Glossary of Shaded Terms 11
Recent Performance 13
Financial Information
Financial Highlights 14
Compensation For Your Dealer 16
How to learn more about Back Cover
the fund and other Lord
Abbett funds
<PAGE>
The Fund
GOAL/STRATEGY
The fund seeks capital appreciation. It does this by investing primarily in the
common stocks of small companies with exciting prospects, strong management, and
above-average, long-term growth potential. The fund uses a bottom-up stock
selection process, which means that it focuses on the investment fundamentals of
companies, rather than reacting to market events. Normally, the fund invests at
least 65% of its total assets in securities of small companies.
The fund tries to identify companies that are in the developing growth phase.
This is a period of swift development when growth occurs at a rate rarely
equaled by established companies in their mature years. The fund focuses on
companies that it believes are strongly positioned in this phase. Of course,
because the actual growth of a company cannot be foreseen, Lord Abbett may not
always be correct in its judgments about which phase a company is in.
While typically fully invested, we may take a temporary defensive position in
cash and short-term debt securities. This could prevent the fund from realizing
its investment objective.
MAIN RISKS
Although small-company stocks offer significant appreciation potential, they
generally carry more risk than larger companies. Generally, small companies rely
on limited product lines and markets, financial resources, or other factors, and
may lack management depth or experience. This may make them more susceptible to
setbacks or economic downturns.
Small-company stocks tend to be more volatile in price, have fewer shares
outstanding and trade less frequently than other stocks. Therefore,
small-company stocks often are subject to wider price fluctuations. Many
small-company stocks are traded over the counter and are not traded in the
volume typical of stocks listed on a national securities exchange.
An investment in the fund is not a bank deposit. It is not FDIC insured or
government-endorsed. It is not a complete investment program. You could lose
money in this fund.
WE OR THE FUND refers to Lord Abbett Developing Growth Fund, Inc., which
operates under the supervision of its Board with the advice of Lord, Abbett &
Co. ("Lord Abbett"), its investment manager.
ABOUT THE FUND. This fund is a professionally managed portfolio primarily
holding securities purchased with the pooled money of investors. It strives to
reach its stated goal, although as with all mutual funds, it cannot guarantee
results.
GROWTH STOCKS are stocks which exhibit faster-than-average gains in earnings and
are expected to continue profit growth at a high level, but also tend to be
more volatile than bargain stocks.
SMALL-COMPANY STOCKS are stocks of smaller companies which often are new and
less established, with a tendency to be faster-growing but more volatile than
large-company stocks.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies, and their risks,
used by the fund.
2 The Fund
<PAGE>
Developing Growth Fund Symbols: Class A - LAGWX
Class B - LADBX
Class C - LADCX
PAST PERFORMANCE
The information below provides some indication of the risks of investing in the
fund by showing changes in the fund's class A shares' performance from calendar
year to calendar year and by showing how the fund's average annual returns
compare with those of a broad measure of market performance. The returns shown
do not reflect fund fees and expenses. The deduction of such fees and expenses
(and the compounding effect thereof over time) may reduce the investors' return.
Past performance is not a prediction of future results.
[GRAPH]
89 14.1%
90 (6.4)%
91 56.4%
92 (3.1)%
93 12.6%
94 6.2%
95 45.7%
96 22.2%
97 30.8%
98 8.3%
Best Quarter: 1stQ '91 Worst Quarter: 3rdQ '90
The table below shows a comparison of the fund's class A, B and C average annual
total return to that of a broad measure of market performance, as represented by
the Russell 2000 Index. Fund returns assume reinvestment of dividends and
distributions and payment of the maximum applicable front-end or deferred sales
charge. All periods end on December 31, 1998.
<TABLE>
<CAPTION>
CLASS 1 YEAR 5 YEARS 10 YEARS INCEPTION(i) RUSSELL 2000(ii)
<S> <C> <C> <C> <C> <C>
A 2.00% 20.32% 16.48% 12.53% -
- ---------------------------------------------------------------------------------------
B 3.20% - - 19.84% 14.21%(iii)
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C 7.57% - - 21.42% 14.21%(iv)
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P - - - 7.80% (0.98)%(v)
- ---------------------------------------------------------------------------------------
Russell 2000 Index (2.55)% 11.87% 12.92% - -
- ---------------------------------------------------------------------------------------
</TABLE>
(i) The dates of inception of each class are: A-10/10/73; B-8/1/96; C-8/1/96
and P-1/5/98.
(ii) Performance for the unmanaged Russell 2000 Index does not reflect
transaction costs or management fees.
(iii) Represents total returns for the period 7/31/96 to 12/31/98, to correspond
with class B inception date.
(iv) Represents total returns for the period 7/31/96 to 12/31/98, to correspond
with class C inception date.
(v) Represents total returns for the period 1/31/98 to 12/31/98, to
correspond with class P inception date.
The Fund 3
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund.
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Fee table
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<TABLE>
<CAPTION>
SHAREHOLDER FEES (Fees paid directly from your investment) CLASS A CLASS B CLASS C CLASS P
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge on Purchases (as a % of offering price) 5.75% none none none
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Maximum Deferred Sales Charge (See "Purchases") none 5.00%(1) 1.00% none
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ANNUAL FUND OPERATING EXPENSES (Expenses deducted from fund assets)(as a % of average net assets)
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Management Fees (See "Management") 0.53% 0.53% 0.53% 0.53%
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Distribution and Service (12b-1) Fees(2)(3) 0.35% 1.00% 1.00% 0.45%
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Other Expenses 0.19% 0.19% 0.19% 0.19%
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Total Operating Expenses 1.07% 1.72% 1.72% 1.17%
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</TABLE>
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Expense example
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This example, like that in other funds' prospectuses, assumes a $10,000 initial
investment at maximum sales charge, if any, 5% total return each year and no
changes in expenses. You pay the following expenses over the course of each
period shown if you sell your shares at the end of the period, although your
actual cost may be higher or lower. The expenses include any applicable
contingent deferred sales charges.
SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
Class A shares $657 $830 $1,019 $1,566
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Class B shares $652 $774 $1,018 $1,617
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Class C shares $252 $474 $ 818 $1,793
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Class P shares $ 97 $302 $ 526 $1,169
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You would pay the following expenses on the same investment, assuming you kept
your shares.
Class A shares $657 $830 $1,019 $1,566
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Class B shares $152 $474 $ 818 $1,617
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Class C shares $152 $474 $ 818 $1,793
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Class P shares $ 97 $302 $ 526 $1,169
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This example is for comparison and is not a representation of the fund's actual
expenses or returns, either past or present.
MANAGEMENT FEES are payable to Lord Abbett for the fund's investment
management.
12b-1 FEES refer to fees incurred for activities that are primarily intended to
result in the sale of fund shares and service fees for shareholder account
service and maintenance.
OTHER EXPENSES include fees paid for miscellaneous items such as shareholder
services and professional fees.
(1) Class B shares will convert to class A shares on the eighth anniversary of
your original purchase of class B shares.
(2) The Distribution and Service Fees have been restated from fiscal year
amounts to reflect current fees.
(3) Because 12b-1 distribution fees are paid out on an ongoing basis, over time
they will increase the cost of your investment and may cost you more than
paying other types of sales charges.
4 The Fund
<PAGE>
Your Investment
PURCHASES
This prospectus offers four classes of shares, class A, B, C and P. Although the
fund has more than one class of shares, these different classes of shares
represent investments in the same portfolio of securities but are subject to
different sales charges and expenses. Our shares are continuously offered. The
offering price is based on the Net Asset Value ("NAV") per share next determined
after we receive your purchase order submitted in proper form. A front-end sales
charge is added to the NAV in the case of the class A shares. There is no
front-end sales charge, although there is a Contingent Deferred Sales Charge in
the case of the class B and C shares as described below.
You should read this section carefully to determine which class of shares
represents the best investment option for your particular situation. It may not
be suitable for you to place a purchase order for class B shares of $500,000 or
more, or a purchase order for class C shares of $1,000,000 or more. You should
discuss pricing options with your investment professional.
For more information, see "Alternative Sales Arrangements" in the Statement of
Additional Information.
We reserve the right to withdraw all or any part of the offering made by this
prospectus or to reject any purchase order. We also reserve the right to waive
or change minimum investment requirements. All purchase orders are subject to
our acceptance and are not binding until confirmed or accepted in writing.
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FRONT-END SALES CHARGES - CLASS A SHARES
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TO COMPUTE
AS A % OF AS A % OF OFFERING PRICE
YOUR INVESTMENT OFFERING PRICE YOUR INVESTMENT DIVIDE NAV BY
- -----------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% .9425
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$50,000 to $99,999 4.75% 4.99% .9525
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$100,000 to $249,999 3.75% 3.90% .9625
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$250,000 to $499,999 2.75% 2.83% .9725
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$500,000 to $999,999 2.00% 2.04% .9800
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$1,000,000 and over No Sales Charge 1.0000
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REDUCING YOUR CLASS A FRONT-END SALES CHARGES. Class A shares may be purchased
at a discount if you qualify under either of the following conditions:
RIGHTS OF ACCUMULATION -- A Purchaser can apply the value (at public offering
price) of the shares you already own to a new purchase of class A shares of
any Eligible Fund in order to reduce the sales charge.
STATEMENT OF INTENTION -- A Purchaser of class A shares can purchase
additional shares of any Eligible Fund over a 13-month period and receive the
same sales charge as if you had purchased all shares at once. Shares purchased
through reinvestment of dividends or distributions are not included. A
statement of intention can be backdated 90 days. Current holdings under rights
of accumulation can be included in a statement of intention.
For more information on eligibility for these privileges, read the applicable
sections in the attached application.
NAV per share for each class of fund shares is calculated each business day at
the close of regular trading on the New York Stock Exchange ("NYSE"). Each fund
is open on those business days when the NYSE is open. Purchases and sales of
fund shares are executed at the NAV next determined after the fund receives your
order. In calculating NAV, securities for which market quotations are available
are valued at those quotations. Securities for which such quotations are not
available are valued at fair value under procedures approved by the Board.
Share classes
CLASS A
normally offered with a front-end sales charge
CLASS B
no front-end sales charge, however, a contingent deferred sales charge is
applied to shares sold prior to the sixth anniversary of purchase
higher annual expenses than class A shares
automatically convert to class A shares after eight years
CLASS C
no front-end sales charge
higher annual expenses than class A shares
a contingent deferred sales charge is applied to shares sold prior to the
first anniversary of purchase
CLASS P
available to certain pension or retirement plans and pursuant to
a Mutual Fund Advisory Program
Your Investment 5
<PAGE>
CLASS A SHARE PURCHASES WITHOUT A FRONT-END SALES CHARGE. Class A shares may be
purchased without a front-end sales charge under any of the following
conditions:
purchases of $1 million or more *
purchases by Retirement Plans with at least 100 eligible employees *
purchases under a Special Retirement Wrap Program *
purchases made with dividends and distributions on class A shares of another
Eligible Fund
purchases representing repayment under the loan feature of the Lord Abbett-
sponsored prototype 403(b) Plan for class A shares
purchases by employees of any consenting securities dealer having a sales
agreement with Lord Abbett Distributor
purchases under a Mutual Fund Advisory Program
purchases by trustees or custodians of any pension or profit sharing plan, or
payroll deduction IRA for employees of any consenting securities dealer
having a sales agreement with Lord Abbett Distributor
See the Statement of Additional Information for a listing of other categories of
purchasers who qualify for class A share purchases without a front-end sales
charge.
* These categories may be subject to a Contingent Deferred Sales Charge
("CDSC").
CLASS A SHARE CDSC. If you buy class A shares under one of the starred (*)
categories listed above and you redeem any of them within 24 months after the
month in which you initially purchased them, the fund normally will collect a
CDSC of 1%.
The class A share CDSC generally will be waived for the following conditions:
benefit payments under Retirement Plans such as loans, hardship withdrawals,
death, disability, retirement, separation from service or any excess
distribution under Retirement Plans (documentation may be required)
redemptions continuing as investments in another fund participating in a
Special Retirement Wrap Program
CLASS B SHARE CDSC. The CDSC for class B shares normally applies if you redeem
your shares before the sixth anniversary of their initial purchase. The CDSC
declines the longer you own your shares, according to the following schedule:
- ------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGES - CLASS B SHARES
- ------------------------------------------------------------------------
ANNIVERSARY(1) OF CONTINGENT DEFERRED SALES CHARGE
THE DAY ON WHICH THE ON REDEMPTION (AS % OF AMOUNT
PURCHASE ORDER WAS ACCEPTED SUBJECT TO CHARGE)
On Before
1st 5.0%
1st 2nd 4.0%
2nd 3rd 3.0%
3rd 4th 3.0%
4th 5th 2.0%
5th 6th 1.0%
on or after the 6th(2) None
(1) The anniversary is the same calendar day in each respective year after the
date of purchase. For example, the anniversaries for shares purchased on
May 1 will be May 1 of each succeeding year.
(2) Class B shares will automatically convert to class A shares on the eighth
anniversary of the purchase of class B shares.
CDSC, regardless of class, is not charged on shares acquired through
reinvestment of dividends or capital gains distributions and is charged on the
original purchase cost or the current market value of the shares at the time
they are being sold, whichever is lower. In addition, repayment of loans under
Retirement Plans and 403(b) Plans will constitute new sales for purposes of
assessing the CDSC.
To minimize the amount of any CDSC, the fund redeems shares in the following
order:
1. shares acquired by reinvestment of dividends and capital gains (always free
of a CDSC)
2. shares held for six years or more (class B) or two years or more after the
month of purchase (class A) or one year or more (class C)
3. shares held the longest before the sixth anniversary of their purchase
(class B) or before the second anniversary after the month of purchase
(class A) or before the first anniversary of their purchase (class C)
RETIREMENT PLANS include employer-sponsored retirement plans under the Internal
Revenue Code, excluding Individual Retirement Accounts.
LORD ABBETT DISTRIBUTOR LLC ("Lord Abbett Distributor") acts as agent for the
funds to work with investment professionals that buy and/or sell shares of the
funds on behalf of their clients. Generally, Lord Abbett Distributor does not
sell fund shares directly to investors.
BENEFIT PAYMENT DOCUMENTATION.
(class A CDSC only)
under $50,000 - no documentation necessary
over $50,000 - reason for benefit payment must be received in writing.
Use the address indicated under "Opening Your Account."
6 Your Investment
<PAGE>
The class B share CDSC generally will be waived under any one of the following
conditions:
benefit payments under Retirement Plans such as loans, hardship withdrawals,
death, disability, retirement, separation from service or any excess
contribution or distribution under Retirement Plans
Eligible Mandatory Distributions under 403(b) Plans and individual
retirement accounts
death of the shareholder (natural person)
redemptions of shares in connection with Div-Move and Systematic Withdrawal
Plans (up to 12% per year)
See "Systematic Withdrawal Plan" under "Services For Fund Investors" below for
more information on CDSCs with respect to class B shares.
CLASS C SHARE CDSC. The 1% CDSC for class C shares normally applies if you
redeem your shares before the anniversary of the purchase of such shares.
CLASS P SHARES. Class P shares have lower annual expenses than class B and class
C shares, no front-end sales charge, and no CDSC. Class P shares are currently
sold and redeemed at NAV (a) pursuant to a Mutual Fund Advisory Program, or (b)
to the trustees of, or employer-sponsors with respect to, pension or retirement
plans with at least 100 eligible employees (such as a plan under Section 401(a),
401(k) or 457(b) of the Internal Revenue Code) which engage an investment
professional providing or participating in an agreement to provide certain
recordkeeping, administrative and/or sub-transfer agency services to the fund on
behalf of the class P shareholders.
OPENING YOUR ACCOUNT
MINIMUM INITIAL INVESTMENT
Regular account $1,000
Individual Retirement Accounts and
403(b) Plans under the Internal Revenue Code $250
Uniform Gifts to Minors Account $250
For Retirement Plans and Mutual Fund Advisory Programs, no minimum investment is
required, regardless of share class.
You may purchase shares through any independent securities dealer who has a
sales agreement with Lord Abbett Distributor or you can fill out the attached
application and send it to the fund at the address stated below. You should
carefully read the paragraph below entitled "Proper Form" before placing your
order to assure your order will be accepted.
LORD ABBETT
DEVELOPING GROWTH FUND, INC.
P.O. Box 419100
Kansas City, MO 64141
PROPER FORM. An order submitted directly to the fund must contain: (1) a
completed application, and (2) payment by check. When purchases are made by
check, redemptions will not be allowed until the fund or transfer agent is
advised that the check has cleared, which may take up to 15 calendar days. For
more information regarding proper form of a purchase order, call the fund at
800-821-5129.
BY EXCHANGE. Telephone the fund at 800-821-5129 to request an exchange from any
eligible Lord Abbett-sponsored fund.
IMPORTANT INFORMATION. You may be subject to a $50 penalty under the Internal
Revenue Code if you do not provide a correct taxpayer identification number
(Social Security Number for individuals) or make certain required
certifications. In addition, we may be required to withhold from your account
and pay to the U.S. Treasury 31% of any redemption proceeds and of any dividend
or distribution from your account.
SMALL ACCOUNTS. Our Board may authorize closing any account in which there are
fewer than 25 shares if it is in a fund's best interest to do so.
Your Investment 7
<PAGE>
REDEMPTIONS
BY BROKER. Call your investment professional for directions on how to redeem
your shares.
BY TELEPHONE. To obtain the proceeds of a redemption of $50,000 or less from
your account, you or your representative can call the fund at 800-821-5129.
BY MAIL. Submit a written redemption request indicating the name(s) in which the
account is registered, the fund's name, the class of shares, your account
number, and the dollar value or number of shares you wish to sell.
Include all necessary signatures. If the signer has any Legal Capacity, the
signature and capacity must be guaranteed by an Eligible Guarantor. Certain
other legal documentation may be required. For more information regarding proper
documentation call 800-821-5129.
Normally a check will be mailed to the name and address in which the account is
registered (or otherwise according to your instruction) within three business
days after receipt of your redemption request. Your account balance must be
sufficient to cover the amount being redeemed or your redemption order will not
be processed. Under unusual circumstances, the fund may suspend redemptions, or
postpone payment for more than seven days, as permitted by federal securities
laws.
To determine if a CDSC applies to a redemption, see "Class A Share CDSC," "Class
B Share CDSC" or "Class C Share CDSC."
DISTRIBUTIONS AND TAXES
The fund pays its shareholders dividends from its net investment income, and
distributes any net capital gains that it has realized. The fund expects to pay
such income dividends to shareholders annually. If a capital gain distribution
is declared, it is expected to be paid annually. Your distributions will be
reinvested in your fund unless you instruct the fund to pay them to you in cash.
There are no sales charges on reinvestments.
The tax status of distributions is the same for all shareholders regardless of
how long they have been in the fund and whether distributions are reinvested or
paid in cash.
In general, distributions are taxable as follows:
- ---------------------------------------------------------------
FEDERAL TAXABILITY OF DISTRIBUTIONS
<TABLE>
<CAPTION>
Type of Tax rate for taxpayer Tax rate for taxpayer subject
distribution subject to 15% bracket to 28% bracket or above
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
INCOME Ordinary Ordinary
DIVIDENDS income rate income rate
- ---------------------------------------------------------------------------------------------
SHORT-TERM Ordinary Ordinary
CAPITAL GAINS income rate income rate
- ---------------------------------------------------------------------------------------------
LONG-TERM
CAPITAL GAINS 10% 20%
- ---------------------------------------------------------------------------------------------
</TABLE>
Except in tax-advantaged accounts, any sale or exchange of fund shares may be a
taxable event.
ANNUAL INFORMATION - Information concerning the tax treatment of dividends and
other distributions will be mailed to shareholders each year. The fund will also
provide annually to its shareholders information regarding the source of
dividends and distributions of capital gains paid by the fund. Because
everyone's tax situation is unique, you should consult your tax adviser
regarding the treatment of those distributions under the federal, state and
local tax rules that apply to you as well as the tax consequences of gains or
losses from the redemption or exchange of your shares.
ELIGIBLE GUARANTOR is any broker or bank that is a member of the Medallion Stamp
Program. Most major securities firms and banks are members of this program. A
NOTARY PUBLIC IS NOT AN ELIGIBLE GUARANTOR.
TAXES ON TRANSACTIONS. The chart at left also can provide a "rule of thumb"
guide for your potential U.S. federal income tax liability when selling or
exchanging fund shares. The second row, "Short-term capital gains," applies to
fund shares sold within 12 months of purchase. The third row, "Long-term capital
gains," applies to shares held for more than 12 months.
Starting January 1, 2001, sales of securities held for more than five years will
be taxed at special lower rates.
Any gains realized on a fund's transactions in options and financial futures
will be treated as taxable long- or short-term capital gains.
8 Your Investment
<PAGE>
SERVICES FOR FUND INVESTORS
AUTOMATIC SERVICES
Buying or selling shares automatically is easy with the services described
below. With each service, you select a schedule and amount, subject to certain
restrictions. You can set up most of these services when filling out your
application or by calling 800-821-5129.
- --------------------------------------------------------------------------------
For investing
<TABLE>
<S> <C>
INVEST-A-MATIC You can make fixed, periodic investments ($50 minimum) into your
(Dollar-cost fund account by means of automatic money transfers from your bank
checking averaging) account. See the attached application for instructions.
DIV-MOVE You can automatically reinvest the dividends and distributions from
your account into another account in any Eligible Fund ($50 minimum).
FOR SELLING SHARES
SYSTEMATIC You can make regular withdrawals from most Lord Abbett funds.
Automatic WITHDRAWAL cash withdrawals can be paid to you from your account in fixed or variable
PLAN ("SWP") amounts. To establish a plan, the value of your shares must be at least
$10,000, except for Retirement Plans for which there is no minimum.
Your shares must be in non-certificate form.
CLASS B SHARES The CDSC will be waived on SWP redemptions of up to 12% of the
current net asset value of your account at the time of your SWP request. For
class B share SWP redemptions over 12% per year, the CDSC will apply to the
entire redemption. Please contact the fund for assistance in minimizing the CDSC
in this situation.
CLASS B AND Redemption proceeds due to a SWP for class B and class C shares will
C SHARES be redeemed in the order described under "Purchases."
- ----------------------------------------------------------------------------------------------------------
</TABLE>
OTHER SERVICES
TELEPHONE INVESTING. After we have received the attached application (selecting
"yes" under Section 7C and completing Section 7), you can instruct us by phone
to have money transferred from your bank account to purchase shares of the fund
for an existing account. The fund will purchase the requested shares when it
receives the money from your bank.
TELEPHONE EXCHANGES. You or your investment professional, with proper
identification, can instruct your fund by telephone to exchange shares of any
class for shares of the same class of any Eligible Fund by calling 800-821-5129.
The fund must receive instructions for the exchange before the close of the NYSE
on the day of your call. If you meet this requirement, you will get the NAV per
share of the Eligible Fund determined on that day. Exchanges will be treated as
a sale for federal tax purposes. Be sure to read the current prospectus for any
fund into which you are exchanging.
REINVESTMENT PRIVILEGE. If you sell shares of the fund, you have a one time
right to reinvest some or all of the proceeds in the same class of any Eligible
Fund within 60 days without a sales charge. If you paid a CDSC when you sold
your shares, you will be credited with the amount of the CDSC. All accounts
involved must have the same registration.
ACCOUNT STATEMENTS. Every Lord Abbett investor automatically receives quarterly
account statements.
HOUSEHOLDING. Shareholders with the same last name and address will receive a
single copy of a prospectus and an annual or semi-annual report, unless
additional reports are specifically requested in writing to the fund.
ACCOUNT CHANGES. For any changes you need to make to your account, consult your
investment professional or call the fund at 800-821-5129.
SYSTEMATIC EXCHANGE. You or your investment professional can establish a
schedule of exchanges between the same classes of any Eligible Fund.
Lord Abbett offers a variety of Retirement Plans.
Call 800-253-7299 for information about:
Traditional, Rollover, Roth and Education IRAs
Simple IRAs, SEP-IRAs, 401(k) and 403(b) accounts
Defined Contribution Plans
TELEPHONE TRANSACTIONS. You have this privilege unless you refuse it in writing.
For your security, telephone transaction requests are recorded. We will take
measures to verify the identity of the caller, such as asking for your name,
account number, social security or taxpayer identification number and other
relevant information. The fund will not be liable for following instructions
communicated by telephone that it reasonably believes to be genuine.
Transactions by telephone may be difficult to implement in times of drastic
economic or market change.
Exchanges by telephone should not be used to take advantage of short-term swings
in the market. The fund reserves the right to limit or terminate this privilege
for any shareholder making frequent exchanges or abusing the privilege and may
revoke the privilege for all shareholders upon 60 days' written notice.
Your Investment 9
<PAGE>
SALES CHARGES AND SERVICE FEES
Sales and Service Compensation. As part of its plan for distributing shares, the
fund and Lord Abbett Distributor pay sales and service compensation to
Authorized Institutions that sell the fund's shares and service its shareholder
accounts. Sales compensation originates from two sources: sales charges and
12b-1 distribution fees that are paid out of the fund's assets. Service
compensation originates from 12b-1 service fees. The 12b-1 fee rates vary by
share class, according to the Rule 12b-1 Plan adopted by the fund. The sales
charges and 12b-1 fees paid by investors are shown in the class-by-class
information under "Fees and Expenses" and "Purchases." The portion of these
expenses that is paid as sales and service compensation to Authorized
Institutions, such as your dealer, is shown in the chart at the end of this
prospectus. The portion of such sales and service compensation paid to Lord
Abbett Distributor is discussed under "Sales Activities" and "Service
Activities." Sometimes we do not pay sales and service compensation where
tracking data is not available for certain accounts or where the Authorized
Institution waives part of the compensation.
We may pay Additional Concessions to Authorized Institutions from time to time.
Sales Activities. We may use 12b-1 distribution fees to pay Authorized
Institutions to finance any activity which is primarily intended to result in
the sale of shares. Lord Abbett Distributor uses its portion of the distribution
fees attributable to a fund's class A and class C shares for activities which
are primarily intended to result in the sale of such class A and class C shares,
respectively. These activities include, but are not limited to, printing of
prospectuses and statements of additional information and reports for other than
existing shareholders, preparation and distribution of advertising and sales
material, expenses of organizing and conducting sales seminars, Additional
Concessions to Authorized Institutions, the cost necessary to provide
distribution-related services or personnel, travel, office expenses, equipment
and other allocable overhead.
Service Activities. We may pay Rule 12b-1 service fees to Authorized
Institutions for any activity which is primarily intended to result in personal
service and/or the maintenance of shareholder accounts. Any portion of the
service fees paid to Lord Abbett Distributor will be used to service and
maintain shareholder accounts.
MANAGEMENT
The fund's investment adviser is Lord, Abbett & Co., 767 Fifth Avenue, New York,
NY 10153-0203. Founded in 1929, Lord Abbett manages one of the nation's oldest
mutual fund complexes, with over $32 billion in more than 35 mutual fund
portfolios and other advisory accounts. For more information about the services
Lord Abbett provides to the fund, see the Statement of Additional Information.
The fund pays Lord Abbett a monthly fee based on average daily net assets for
each month. For the fiscal year ended January 31, 1999, the fee paid to Lord
Abbett was at an annual rate of .53 of 1%. In addition, the fund pays all
expenses not expressly assumed by Lord Abbett.
Lord Abbett uses a team of portfolio managers and analysts acting together to
manage the fund's investments. Stephen J. McGruder, Partner of Lord Abbett,
heads the team, the other senior members of which include Lesley-Jane Dixon,
Rayna Lesser and Cinda Hughes. Mr. McGruder and Ms. Dixon have been with Lord
Abbett since 1995, Ms. Lesser has been with Lord Abbett since 1996 and Ms.
Hughes since 1998. Prior to joining Lord Abbett, Mr. McGruder was a portfolio
manager with Wafra Investment Advisory Group. Ms. Dixon was an equity analyst
with Wafra Investment Advisory Group before joining Lord Abbett. Ms. Lesser
joined Lord Abbett directly from Barnard College. Ms. Hughes was an Analyst/
Director of Equity Research at Phoenix Investment Counsel and an Associate
Strategist at Paine Webber, Inc./Kidder, Peabody & Co. before joining Lord
Abbett.
12b-1 FEES PAYABLE REGARDLESS OF EXPENSES. The amounts payable by a fund need
not be directly related to expenses. If Lord Abbett Distributor's actual
expenses exceed the fee payable to it, the fund will not have to pay more than
that fee. If Lord Abbett Distributor's expenses are less than the fee it
receives, Lord Abbett Distributor will keep the full amount of the fee.
10 Your Investment
<PAGE>
For More Information
OTHER INVESTMENT TECHNIQUES
This section describes some of the investment techniques that might be used by
the fund and their risks.
ADJUSTING INVESTMENT EXPOSURE. The fund may, but is not required to, use various
strategies to change its investment exposure to adjust to changing security
prices, interest rates, currency exchange rates, commodity prices and other
factors. These strategies may involve buying or selling derivative instruments,
such as financial futures and options on financial futures. The fund may use
these transactions to change the risk and return characteristics of the fund's
portfolio. If we judge market conditions incorrectly or use a strategy that
does not correlate well with the fund's investments, it could result in a loss,
even if we intended to lessen risk or enhance returns. These transactions may
involve a small investment of cash compared to the magnitude of the risk assumed
and could produce disproportionate gains or losses. Also, these strategies could
result in losses if the counterparty to a transaction does not perform as
promised.
DIVERSIFICATION. The fund is a diversified fund. This means that with respect to
75% of its total assets, it will not purchase a security if, as a result, more
than 5% of the fund's total assets would be invested in securities of a single
issuer or the fund would hold more than 10% of the outstanding voting securities
of the issuer. U.S. Government Securities are not subject to these requirements.
FOREIGN SECURITIES. These securities are not subject to the same degree of
regulation and may be more volatile and less liquid than securities traded in
major U.S. markets. Foreign portfolio securities may trade on days when an
underlying fund does not value them. Fund share prices could be affected on days
an investor cannot purchase or sell shares. Other risks include less information
on public companies, banks and governments; political and social instability;
expropriations; higher transaction costs; currency fluctuations; nondeductible
withholding taxes and different accounting and settlement practices. The fund
may invest up to 10% of its assets at the time of investment in foreign
securities.
PORTFOLIO SECURITIES LENDING. The fund may lend securities to broker-dealers and
financial institutions, as a means of earning income. This practice could result
in a loss or delay in recovering a fund's securities if the borrower defaults.
The fund will limit its loans to 30% of its total assets.
REPURCHASE AGREEMENTS. In a repurchase agreement, a fund buys a security at one
price from a broker-dealer or financial institution and simultaneously agrees to
sell the same security back to the same party at a higher price in the future.
If the other party to the agreement defaults or becomes insolvent, the fund
could lose money.
GLOSSARY OF SHADED TERMS
ADDITIONAL CONCESSIONS. Lord Abbett Distributor may, for specified periods,
allow dealers to retain the full sales charge for sales of shares or may pay an
additional concession to a dealer who sells a minimum dollar amount of our
shares and/or shares of other Lord Abbett-sponsored funds. In some instances,
such additional concessions will be offered only to certain dealers expected to
sell significant amounts of shares. Additional payments may be paid from Lord
Abbett Distributor's own resources or from distribution fees
For More Information 11
<PAGE>
received from a fund and will be made in the form of cash or, if permitted,
non-cash payments. The non-cash payments will include business seminars at Lord
Abbett's headquarters or other locations, including meals and entertainment, or
the receipt of merchandise. The cash payments may include payment of various
business expenses of the dealer.
In selecting dealers to execute portfolio transactions for a fund's portfolio,
if two or more dealers are considered capable of obtaining best execution, we
may prefer the dealer who has sold our shares and/or shares of other Lord
Abbett-sponsored funds.
AUTHORIZED INSTITUTIONS. Institutions and persons permitted by law to receive
service and/or distribution fees under a Rule 12b-1 Plan are "Authorized
Institutions." Lord Abbett Distributor is an Authorized Institution.
ELIGIBLE FUND. An Eligible Fund is any Lord Abbett-sponsored fund except for
(1) certain tax-free, single-state funds where the exchanging shareholder is a
resident of a state in which such a fund is not offered for sale; (2) Lord
Abbett Equity Fund; (3) Lord Abbett Series Fund; (4) Lord Abbett U.S. Government
Securities Money Market Fund ("GSMMF") (except for holdings in GSMMF which are
attributable to any shares exchanged from the Lord Abbett family of funds). An
Eligible Fund also is any Authorized Institution's affiliated money market fund
satisfying Lord Abbett Distributor as to certain omnibus account and other
criteria.
ELIGIBLE MANDATORY DISTRIBUTIONS. If class B shares represent a part of an
individual's total IRA or 403(b) investment, the CDSC will be waived only for
that part of a mandatory distribution which bears the same relation to the
entire mandatory distribution as the B share investment bears to the total
investment.
LEGAL CAPACITY. With respect to a redemption request, if (for example) the
request is on behalf of the estate of a deceased shareholder, John W. Doe, by a
person (Robert A. Doe) who has the legal capacity to act for the estate of the
deceased shareholder because he is the executor of the estate, then the request
must be executed as follows: Robert A. Doe, Executor of the Estate of John W.
Doe. That signature using that capacity must be guaranteed by an Eligible
Guarantor.
Similarly, if (for example) the redemption request is on behalf of the ABC
Corporation by a person (Mary B. Doe) who has the legal capacity to act on
behalf of this corporation, because she is the President of the corporation,
then the request must be executed as follows: ABC Corporation by Mary B. Doe,
President. That signature using that capacity must be guaranteed by an Eligible
Guarantor (see example in right column).
MUTUAL FUND ADVISORY PROGRAM. Certain unaffiliated authorized brokers, dealers,
registered investment advisers or other financial institutions who either (1)
have an arrangement with Lord Abbett Distributor in accordance with certain
standards approved by Lord Abbett Distributor, providing specifically for the
use of our shares (and sometimes providing for acceptance of orders for such
shares on our behalf) in particular investment products made available for a fee
to clients of such brokers, dealers, registered investment advisers and other
financial institutions, or (2) charge an advisory, consulting or other fee for
their services and buy shares for their own accounts or the accounts of their
clients.
PURCHASER. The term "purchaser" includes: (1) an individual, (2) an individual
and his or her spouse and children under the age of 21 and (3) a trustee or
other fiduciary purchasing shares for a single trust estate or single fiduciary
account (including a pension, profit-sharing, or other employee benefit trust
qualified under Section 401 of the Internal Revenue Code - more than one
qualified employee benefit trust of a single employer, including its
consolidated subsidiaries, may be considered a single trust, as may qualified
GUARANTEED SIGNATURE. An acceptable form of guarantee would be as follows:
In the case of the estate -
Robert A. Doe
Executor of the Estate of
John W. Doe
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE ILLEGIBLE]
- ------------------------------------------------
AUTHORIZED SIGNATURE
(960) X9603470
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
In the case of the corporation -
ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE ILLEGIBLE]
- ------------------------------------------------
AUTHORIZED SIGNATURE
(960) X9603470
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
12 For More Information
<PAGE>
plans of multiple employers registered in the name of a single bank trustee as
one account), although more than one beneficiary is involved.
SPECIAL RETIREMENT WRAP PROGRAM. A program sponsored by an Authorized
Institution showing one or more characteristics distinguishing it, in the
opinion of Lord Abbett Distributor from a Mutual Fund Advisory Program. Such
characteristics include, among other things, the fact that an Authorized
Institution does not charge its clients any fee of a consulting or advisory
nature that is economically equivalent to the distribution fee under the class A
12b-1 Plan and the fact that the program relates to participant-directed
Retirement Plans.
RECENT PERFORMANCE
Small-cap investors saw positive returns early on in the fund's fiscal year
erased by a sharp third-quarter downturn. This downturn was caused in part by a
"flight to quality" stemming from international monetary and economic crises as
well as political problems that led investors to seek more liquid investments,
such as larger-company stocks and higher-quality bonds. While all major asset
classes of the U.S. equity market experienced weakness during the third quarter
of 1998, small-cap equities had the lowest returns.
The month of October, however, saw some price recovery for small-cap stocks
after August's severe declines. The October upswing turned out to be a harbinger
of extremely strong performance during the entire fourth quarter as economic and
political uncertainties that had previously affected investor confidence
subsided and a more optimistic outlook emerged. Key to this turnaround was the
Federal Reserve Board's decisive move to lower U.S. interest rates through a
series of autumn rate cuts.
Most sectors of the U.S. equity market participated in the fourth quarter
upswing. However, as the market reached its previous highs, certain sectors,
such as technology and consumer non-cyclicals, that had provided price
leadership earlier on, once again moved ahead of the broad market. In addition,
large-cap stocks continued to outperform mid- and small-cap investments.
Our focus on bottom-up stock selection allowed the fund to overcome
industry-specific difficulties throughout most of the period under review.
Our strategy and philosophy remain constant. We concentrate on selecting those
companies that we believe will offer our investors superior long-term stock
price appreciation regardless of industry-specific problems or large-scale
economic trends.
In our view, the current backdrop of growth in the economy, low levels of
inflation and interest rates, paired with adequate liquidity supported by
Federal Reserve policy, should enable the U.S. equity market to show progress in
the next year. However, a slowing U.S. economy could spur small-cap price
volatility due to lower corporate earnings and employment growth. We believe our
focus on identifying financially strong companies that can be purchased at
attractive prices will help the fund to uncover exciting investment
opportunities even during a slowing economy. Since small-cap stocks remain
significantly undervalued with respect to relative earnings versus large-caps,
we also expect that a period of strong relative performance by small-caps is
likely during 1999.
YEAR 2000 ISSUES. The fund could be adversely affected if the computers used by
the fund and their service providers do not properly process and calculate
date-related information from and after January 1, 2000.
Lord Abbett is working to avoid such problems and has received assurances from
each fund's service providers that they are taking similar steps. Of course, the
Year 2000 problem is unprecedented and, therefore, Lord Abbett cannot eliminate
altogether the possibility that it or the funds will be affected.
For More Information 13
<PAGE>
Financial Information
FINANCIAL HIGHLIGHTS
This table describes the fund's performance for the fiscal periods indicated.
"Total return" shows how much your investment in the fund would have increased
(or decreased) during each period, assuming you had reinvested all dividends and
distributions. These Financial Highlights have been audited by Deloitte & Touche
LLP, the fund's independent auditors, in conjunction with their annual audit of
the fund's financial statements. Financial statements for the fiscal year ended
January 31, 1999 and the Independent Auditors' Report thereon appear in the
Annual Report to Shareholders for the fiscal year ended January 31, 1999 and are
incorporated by reference into the Statement of Additional Information, which is
available upon request.
Certain information reflects financial results for a single fund share.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
CLASS A SHARES
--------------------------------------------------------
Year Ended January 31,
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance: 1999 1998 1997 1996 1995
NET ASSET VALUE, BEGINNING OF YEAR $14.27 $12.80 $11.49 $9.58 $10.65
- -----------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------
Net investment loss (.07)(a) (.10)(a) (.03) (.02) (.04)
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized
- -----------------------------------------------------------------------------------------------------------
gain (loss) on investments 2.10 3.16 3.12 4.80 (.22)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations 2.03 3.06 3.09 4.78 (.26)
- -----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------------------
Distributions from net realized gain (.05) (1.59) (1.78) (2.87) (.81)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $16.25 $14.27 $12.80 $11.49 $9.58
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN(b) 14.24% 24.38% 28.35% 50.22% (2.74)%
- -----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- -----------------------------------------------------------------------------------------------------------
Expenses 0.98%(e) 1.06% 1.10% 1.03% 1.31%
- -----------------------------------------------------------------------------------------------------------
Net investment loss (0.46)% (0.72)% (0.67)% (0.52)% (0.38)%
===========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES CLASS P SHARES
-------------------------- ------------------- -------------------
Year Ended January 31, Year Ended January 31, Year Ended January 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance: 1999 1998 1997(d) 1999 1998 1997(d) 1999 1998(d)
NET ASSET VALUE, BEGINNING OF PERIOD $14.12 $12.75 $12.14 $14.13 $12.75 $12.14 $14.26 $14.38
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------
Net investment loss (.17)(a) (.20)(a) (.05) (.17)(a) (.19)(a) (.05) (.10)(a) (.01)(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
- ---------------------------------------------------------------------------------------------------------------------------------
(loss) on investments 2.06 3.14 2.28 2.07 3.14 2.28 2.08 (.11)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.89 2.94 2.23 1.90 2.95 2.23 1.98 (.12)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions
- -----------------------------------------------------------------------------------------------------------
Distributions from net realized gain (.03) (1.57) (1.62) (.03) (1.57) (1.62) (.05) --
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $15.98 $14.12 $12.75 $16.00 $14.13 $12.75 $16.19 $14.26
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(b) 13.37% 23.48% 19.43%(C) 13.43% 23.55% 19.43%(C) 13.89% (0.83)%(C)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses 1.72%(e) 1.76% 0.93%(c) 1.72%(e) 1.71% 0.93%(c) 1.17%(e) 0.08%(c)
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment loss (1.19)% (1.39)% (0.73)%(c) (1.20)% (1.34)% (0.73)%(c) (0.70)% (0.05)%(c)
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended January 31,
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA FOR ALL CLASSES: 1999 1998 1997 1996 1995
NET ASSETS, END OF YEAR (000) $1,344,203 $553,086 $330,358 $197,602 $127,579
- ------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 30.89% 33.60% 42.35% 50.12% 17.57%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(c) Not annualized.
(d) Commencement of offering respective class shares: B - August 1, 1996, C -
August 1, 1996 and P - January 5, 1998.
(e) The ratios for 1999 include expenses paid through an expense offset
arrangement.
14 Financial Information
<PAGE>
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in class A shares
to the same investment in the Russell 2000 Index, assuming reinvestment of
all dividends and distributions.
[GRAPH]
01/31/1989 25.14% $10,000 $9,423
01/31/1990 1.57% $9,962 $9,388
01/31/1991 (3.79)% $11,422 $10,764
01/31/1992 44.78% $16,165 $15,233
01/31/1993 13.24% $15,793 $14,882
01/31/1994 18.59% $18,383 $17,324
01/31/1995 (6.01)% $17,879 $16,849
01/31/1996 29.95% $26,859 $25,309
01/31/1997 18.95% $34,472 $32,484
01/31/1998 18.07% $42,880 $40,406
01/31/1999 0.33% $48,984 $46,160
The fund (class A shares) at net asset value
The fund (class A shares) at maximum offering price(1)
Russell 2000 Index(2)
- --------------------------------------------------------------------------------
Average Annual Total Return With Maximum Sales Charge
For The Periods Ending January 31, 1999
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS LIFE
- -------------------------------------------------------
<S> <C> <C> <C> <C>
Class A(3) 7.60% 20.22% 16.53% 12.69%
- -------------------------------------------------------
Class B(4) 8.37% - - 21.93%
- -------------------------------------------------------
Class C(5) 12.43% - - 22.88%
- -------------------------------------------------------
Class P(6) 13.89% - - 12.95%
- -------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 5.75%.
(2) Performance for the unmanaged Russell 2000 Index does not reflect
transaction costs, management fees or sales charges.
(3) Total return which is the percent change in value, after deduction of the
maximum initial sales charge of 5.75% applicable to class A shares, with all
dividends and distributions reinvested for the periods shown ending January
31, 1999 using the SEC-required uniform method to compute such return.
(4) The class B shares commenced operations on August 1, 1996. Performance
reflects the deduction of a CDSC of 5% (for 1 year) and 3% (for life of the
class).
(5) The class C shares commenced operations on August 1, 1996. Performance
reflects the deduction of a CDSC of 1% (for 1 year) and 0% (for life of the
class).
(6) The class P shares commenced operations on January 5, 1998. Performance is
at net asset value.
Financial Information 15
<PAGE>
COMPENSATION FOR YOUR DEALER
<TABLE>
<CAPTION>
================================================================================
FIRST YEAR COMPENSATION
Front-end
sales charge Dealer's
paid by investors concession Service fee(1) Total compensation(2)
Class A investments (% of offering price) (% of offering price) (% of net investment) (% of offering price)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 5.00% 0.25% 5.24%
- ---------------------------------------------------------------------------------------------------------------------------------
$50,000 - $99,999 4.75% 4.00% 0.25% 4.24%
- ---------------------------------------------------------------------------------------------------------------------------------
$100,000 - $249,999 3.75% 3.25% 0.25% 3.49%
- ---------------------------------------------------------------------------------------------------------------------------------
$250,000 - $499,999 2.75% 2.25% 0.25% 2.49%
- ---------------------------------------------------------------------------------------------------------------------------------
$500,000 - $999,999 2.00% 1.75% 0.25% 2.00%
- ---------------------------------------------------------------------------------------------------------------------------------
$1 million or more(3) or Retirement Plan - 100 or more
eligible employees(3) or Special Retirement Wrap Program(3)
- ---------------------------------------------------------------------------------------------------------------------------------
First $5 million no front-end sales charge 1.00% 0.25% 1.25%
- ---------------------------------------------------------------------------------------------------------------------------------
Next $5 million above that no front-end sales charge 0.55% 0.25% 0.80%
- ---------------------------------------------------------------------------------------------------------------------------------
Next $40 million above that no front-end sales charge 0.50% 0.25% 0.75%
- ---------------------------------------------------------------------------------------------------------------------------------
Over $50 million no front-end sales charge 0.25% 0.25% 0.50%
- ---------------------------------------------------------------------------------------------------------------------------------
Class B investments Paid at time of sale (% of net asset value)(4)
- ---------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 3.75% 0.25% 4.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Class C investments
- ---------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.75% 0.25% 1.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Class P investments Percentage of average net assets
- ---------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.25% 0.20% 0.45%
- ---------------------------------------------------------------------------------------------------------------------------------
=================================================================================================================================
ANNUAL COMPENSATION AFTER FIRST YEAR
Class A investments
- ---------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25% 0.25%
- ---------------------------------------------------------------------------------------------------------------------------------
Class B investments Percentage of average net assets(5)
- ---------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25% 0.25%
- ---------------------------------------------------------------------------------------------------------------------------------
Class C investments
- ---------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.75% 0.25% 1.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Class P investments
- ---------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.25% 0.20% 0.45%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The service fee for class A and P shares is paid quarterly and for class A
shares may not exceed 0.15% if sold prior to June 1, 1990. The first year's
service fee on class B and C shares is paid at the time of sale.
(2) Dealer's concession percentages and service fee percentages are calculated
from different amounts, and therefore may not equal total compensation
percentages if combined using simple addition. Additional Concessions may be
paid to Authorized Institutions from time to time.
(3) Concessions are paid at the time of sale on all class A shares sold during
any 12-month period starting from the day of the first net asset value sale.
With respect to (a) class A share purchases at $1 million or more, sales
qualifying at such level under rights of accumulation and statement of
intention privileges are included and (b) for Special Retirement Wrap
Programs, only new sales are eligible and exchanges into the fund are
excluded.
(4) Class C shares of the fund may be purchased under a Mutual Fund Advisory
Program, in which case, an alternative method of payment may be made
quarterly on average net assets, on a pro-rata basis, during the first year
subsequent to the purchase of shares, excluding dividend and distribution
reinvestments. After the first year, payments with respect to C shares under
a Mutual Fund Advisory Program follow the chart above as set forth under
"Annual Compensation After First Year."
(5) With respect to class B, C and P shares, 0.25% and 1.00% and 0.45%,
respectively, of the average annual net asset value of such shares
outstanding during the quarter (including distribution reinvestment shares
after the first anniversary of their issuance) is paid to Authorized
Institutions. These fees are paid quarterly in arrears.
16 Financial Information
<PAGE>
More information on this fund is available free upon request, including the
following:
ANNUAL/SEMI-ANNUAL REPORT
Describes the fund, lists portfolio holdings and contains a letter from the
fund's manager discussing recent market conditions and the fund's investment
strategies.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Provides more details about the fund and its policies. A current SAI is on
file with the Securities and Exchange Commission ("SEC") and is incorporated
by reference (is legally considered part of this prospectus).
To obtain information:
BY TELEPHONE. Call the fund at:
800-426-1130
BY MAIL. Write to the fund at:
The Lord Abbett Family of Funds
767 Fifth Avenue
New York, NY 10153-0203
VIA THE INTERNET.
LORD, ABBETT & CO.
http://www.lordabbett.com
Text only versions of fund
documents can be viewed
online or downloaded from:
SEC
http://www.sec.gov
You can also obtain copies by
visiting the SEC's Public Reference
Room in Washington, DC (phone
800-SEC-0330) or by sending
your request and a duplicating
fee to the SEC's Public Reference
Section, Washington, DC
20549-6009.
LADG-1-699
(6/99)
Lord Abbett Developing Growth Fund, Inc.
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
- -------------------------
SEC file number: 811-2871
<PAGE>
LORD ABBETT
STATEMENT OF ADDITIONAL INFORMATION JUNE 1, 1999
LORD ABBETT
DEVELOPING GROWTH FUND, INC.
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord Abbett Distributor LLC
("Lord Abbett Distributor") at The General Motors Building, 767 Fifth Avenue,
New York, New York 10153-0203. This Statement relates to, and should be read in
conjunction with, the Prospectus dated June 1, 1999.
Lord Abbett Developing Growth Fund, Inc. (sometimes referred to as "we" or the
"Fund") was incorporated under Maryland law on August 21, 1978 and its
predecessor corporation was organized on July 11, 1973. The Fund has
1,000,000,000 shares of authorized capital stock consisting of five classes of
shares. This Statement of Additional Information offers four of those classes
(A, B ,C and P), $0.001 par value. The Board of Directors will allocate these
authorized shares of capital stock among the classes from time to time. All
shares have equal noncumulative voting rights and equal rights with respect to
dividends, assets and liquidation, except for certain class-specific expenses.
They are fully paid and nonassessable when issued and have no preemptive or
conversion rights. Although no present plans exist to do so, further classes may
be added in the future. The Investment Company Act of 1940, as amended (the
"Act"), requires that where more than one class exists, each class must be
preferred over all other classes in respect of assets specifically allocated to
such class.
Rule 18f-2 under the Act provides that any matter required to be submitted, by
the provisions of the Act or applicable state law or otherwise, to the holders
of the outstanding voting securities of an investment company such as the Fund
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each class affected by such
matter. Rule 18f-2 further provides that a class shall be deemed to be affected
by a matter unless the interests of each class in the matter are substantially
identical or the matter does not affect any interest of such class. However, the
Rule exempts the selection of independent public accountants, the approval of a
contract with a principal underwriter and the election of directors from its
separate voting requirements.
Shareholder inquiries should be made by writing directly to the Fund or by
calling 800-821-5129. In addition, you can make inquiries through your dealer.
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C> <C>
1. Investment Objective and Policies 2
2. Directors and Officers 5
3. Investment Advisory and Other Services 8
4. Portfolio Transactions 9
5. Purchases, Redemptions and Shareholder Services 10
6. Past Performance 18
7. Taxes 19
8. Information About the Fund 20
9. Financial Statements 20
</TABLE>
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1.
INVESTMENT OBJECTIVE AND POLICIES
Fundamental Investment Restrictions
The Fund may not: (1) borrow money, except that (i) the Fund may borrow from
banks (as defined in the Investment Company Act of 1940 ("the Act")) in amounts
up to 33 1/3% of its total assets (including the amount borrowed), (ii) the Fund
may borrow up to an additional 5% of its total assets for temporary purposes,
(iii) the Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities and (iv) the Fund may
purchase securities on margin to the extent permitted by applicable law; (2)
pledge its assets (other than to secure such borrowings, or to the extent
permitted by the Fund's investment policies, as permitted by applicable law; (3)
engage in the underwriting of securities, except pursuant to a merger or
acquisition or to the extent that, in connection with the disposition of its
portfolio securities, it may be deemed to be an underwriter under federal
securities laws; (4) make loans to other persons, except that the acquisition of
bonds, debentures or other corporate debt securities and investment in
government obligations, commercial paper, pass-through instruments, certificates
of deposit, bankers acceptances, repurchase agreements or any similar
instruments shall not be subject to this limitation and except further that the
Fund may lend its portfolio securities, provided that the lending of portfolio
securities may be made only in accordance with applicable law; (5) buy or sell
real estate (except that the Fund may invest in securities directly or
indirectly secured by real estate or interests therein or issued by companies
which invest in real estate or interests therein) commodities or commodity
contracts (except to the extent the Fund may do so in accordance with applicable
law and without registering as a commodity pool operator under the Commodity
Exchange Act as, for example, with futures contracts); (6) with respect to 75%
of the gross assets of the Fund, buy securities of one issuer representing more
than (i) 5% of the Fund's gross assets, except securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities or (ii) 10% of the
voting securities of such issuer; (7) invest more than 25% of its assets, taken
at market value, in the securities of issuers in any particular industry
(excluding securities of the U.S. Government, its agencies and
instrumentalities); or (8) issue senior securities to the extent such issuance
would violate applicable law.
With respect to the restrictions mentioned herein, compliance therewith will not
be affected by change in the market value of portfolio securities but will be
determined at the time of purchase or sale of such securities.
Non-Fundamental Investment Restrictions. In addition to the investment
restrictions above which cannot be changed without shareholder approval, we also
are subject to the following non-fundamental investment policies which may be
changed by the Board of Directors without shareholder approval. The Fund may
not: (1) borrow in excess of 33 1/3% of its total assets (including the amount
borrowed), and then only as a temporary measure for extraordinary or emergency
purposes; (2) make short sales of securities or maintain a short position except
to the extent permitted by applicable law; (3) invest knowingly more than 15% of
its net assets (at the time of investment) in illiquid securities, except for
securities qualifying for resale under Rule 144A of the Securities Act of 1933,
deemed to be liquid by the Board of Directors; (4) invest in securities of other
investment companies as defined in the Act, except as permitted by applicable
law; (5) invest in securities of issuers which, with their predecessors, have a
record of less than three years of continuous operation, if more than 5% of the
Fund's total assets would be invested in such securities (this restriction shall
not apply to mortgaged-backed securities, asset-backed securities or obligations
issued or guaranteed by the U. S. Government, its agencies or
instrumentalities); (6) hold securities of any issuer when more than 1/2 of 1%
of the securities of such issuer are owned beneficially by one or more of the
Fund's officers or directors or by one or more partners of the Fund's
underwriter or investment adviser if these owners in the aggregate own
beneficially more than 5% of such securities of such issuer; (7) invest in
warrants if, at the time of acquisition, its investment in warrants, valued at
the lower of cost or market, would exceed 5% of the Fund's total assets
(included within such limitation, but not to exceed 2% of the Funds total
assets, are warrants which are not listed on the New York or American Stock
Exchange or a major foreign exchange); (8) invest in real estate limited
partnership interests or interests in oil, gas or other mineral leases, or
exploration or 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; (9) write, purchase or sell puts, calls,
straddles, spreads or combinations thereof, except to the extent permitted in
the Fund's prospectus and statement
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of additional information, as they may be amended from time to time; or (10) buy
from or sell to any of its officers, directors, employees, or its investment
adviser or any of its officers, directors, partners or employees, any securities
other than shares of the Fund's common stock.
Although it has no current intention to do so, the Fund may invest in financial
futures and options on financial futures.
A repurchase agreement is the purchase and simultaneous commitment to resell a
security at a specified time and price. The underlying security is collateral
under the agreement. As a matter of operating policy, we will not invest more
than 10% of the value of our assets in repurchase agreements maturing in more
than seven days.
We did not invest in repurchase agreements during our last fiscal year and have
no present intent to do so.
PORTFOLIO TURNOVER RATE. For the fiscal year ended January 31, 1999, our
portfolio turnover rate was 30.89% versus 33.60% for the prior fiscal year.
STOCK INDEX FUTURES CONTRACTS. The Fund believes it can reduce the volatility
inherent in its portfolio through the use of stock index futures contracts. (A
stock index futures contract is an agreement pursuant to which two parties
agree, one to receive and the other to pay, on a specified date an amount of
cash equal to a specified dollar amount -- established by an exchange or board
of trade -- times the difference between the value of the index at the close of
the last trading day of the contract and the price at which the futures contract
is originally written. No consideration is paid or received at the time the
contract is entered into, only the good faith deposit described herein.) When
Lord Abbett, our investment manager, anticipates a general decline in the sector
of the stock market which includes our portfolio assets, we can reduce risk by
hedging the effect of such decline on our ability to sell assets at best price
or otherwise hedge a decision to delay the sale of portfolio securities. Such
hedging would be possible if there were an established, regularly-quoted stock
index for equities of the character in which we invest and if an active public
market were to develop on a stock exchange or board of trade in futures
contracts based on such index.
The market value of a futures contract is based primarily on the value of the
underlying index. Changes in the value of the index will cause roughly
corresponding changes in the market price of the futures contract, except as
otherwise described below. If a stock index is established which is made up of
securities whose market characteristics closely parallel the market
characteristics of the securities in our portfolio, then the market value of a
futures contract on that index should fluctuate in a way closely resembling the
market fluctuation of our portfolio. Thus, if we should sell futures contracts,
a decline in the market value of the portfolio will be offset by an increase in
the value of the short futures position to the extent of the hedge (i.e., the
percentage of the portfolio value represented by the value of the futures
position). Conversely, when we are in a strong cash position (for example,
through substantial sales of our shares) and wish to invest the cash in
anticipation of a rising market, we could rapidly hedge against the expected
market increase by buying futures contracts to offset the cash position and thus
cushion the adverse effect of attempting to buy individual securities in a
rising market.
The public markets for existing stock index futures contracts, such as those
using the Standard & Poor's 100 Index and 500 Index traded on the Chicago
Mercantile Exchange or those using the New York Stock Exchange Composite Index
traded on the New York Stock Exchange ("NYSE"), are active and have developed
substantial liquidity and we expect a similar market to develop for stock index
futures on a representative group of over-the-counter stocks. The existence of
an active market would permit us to close out our position in futures contracts
by purchasing an equal and opposite position in the public market. Under futures
contracts currently in use, the purchaser would be required to segregate in a
separate account, as a good faith deposit, cash or Treasury bills in an amount
set by a board of trade or exchange (currently approximately 5% of the contract
value). Each day during the contract period we would either pay or receive an
amount of cash equal to the daily change in the total value of the contracts.
The amount which we may segregate upon entering into a futures contract may not
exceed, together with the amounts on deposit under all outstanding contracts, 5%
of the value of our total assets, nor may we enter into additional
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<PAGE>
futures contracts if, as a result, the aggregate amount committed under all our
open futures contracts would exceed more than one-third of the value of such
assets.
There are several risks in connection with the use of futures contracts as a
hedging device. One risk is the imperfect correlation between the composition of
our portfolio securities and the applicable stock index. If the value of the
futures contract moves more than the value of the stock being hedged, we would
experience either a loss or a gain on the futures contract which would not be
completely offset by movements in the value of the securities which are the
subject of the hedge. Another risk is that the value of futures contracts may
not correlate perfectly with movement in the stock index due to certain market
distortions. Although we will enter into futures contracts strictly to hedge our
portfolio or cash positions, other investors use these investment vehicles for
other, sometimes more speculative, purposes. At times, excess speculation in the
futures market can distort the normal market relationship between the price of
the futures contract and the value of the index. If we decide to enter into or
close out our futures position during a period of such excess speculation, the
hedging strategy will be more or less successful, depending on the direction and
amount of this distortion, than otherwise would be the case. Due to the
possibility of price distortion in the futures market and because of the
imperfect correlation between movements in the stock index and movements in the
price of stock index futures contracts, a correct forecast of general market
trends by Lord Abbett may still not result in a successful hedging transaction.
It is possible that, when we sell futures contracts to hedge our portfolio
against a decline in the market, the market, as measured by the stock index, may
advance while the value of securities held in our portfolio may decline. If this
occurs, we will lose money on the futures contracts and also experience a
decline in value in our portfolio securities. However, Lord Abbett believes that
over time the value of a diversified portfolio will tend to move in the same
direction as the market index upon which the futures contracts are based.
Where futures contracts are purchased to hedge against a possible increase in
the price of stock before we are able to invest our cash position in stock in an
orderly fashion, it is possible that the market may decline instead and we would
realize a loss; if we then decide not to invest in stock at that time because of
concern as to possible further market decline or for other reasons, we would
realize a loss on the futures contract that would be offset, to the extent the
cash position had not been invested in stocks being hedged.
Positions in futures contracts may be closed out only on an exchange or board of
trade which provides a market for such contracts. Although we intend to purchase
or sell futures contracts only if an active market has developed and is
continuing, there is no assurance that a liquid market on an exchange or board
of trade will exist for any particular contract or at any particular time. In
such event, it may not be possible to close out a futures position, and in the
event of adverse price movements, we would continue to be required to make daily
cash payments marking our position to market. However, since futures contracts
would have been used to hedge portfolio securities and such securities would not
be sold until the futures contracts had been terminated, an increase in the
price of the securities, if any, may partially or completely offset losses on
the futures contract.
We may incur additional brokerage commissions through entering into futures
contracts, although we also can save on commissions by hedging through such
contracts rather than through buying or selling individual securities in
anticipation of market moves. Successful use by us of futures contracts will
depend upon Lord Abbett's ability to predict movements in the direction of the
over-the-counter market generally, which requires different skills and
techniques than predicting changes in the prices of individual stocks.
To date, we have not entered into any futures contracts and have no present
intent to do so. An established, regularly-quoted stock index for equities of
the character in which we invest has not yet been established. If such an index
is established and we actually use futures contracts, we will disclose such use
in our Prospectus.
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2.
DIRECTORS AND OFFICERS
The following director is a partner of Lord, Abbett & Co. ("Lord Abbett"), The
General Motors Building, 767 Fifth Avenue, New York, New York 10153-0203. He has
been associated with Lord Abbett for over five years and is also an officer
and/or director or trustee of the other Lord Abbett-sponsored funds. He is an
"interested persons" as defined in the Act, and as such, may be considered to
have an indirect financial interest in the Rule 12b-1 Plan described in the
Prospectus.
Robert S. Dow, age 54, Chairman and President
The following outside directors are also directors or trustees of the other Lord
Abbett-sponsored funds referred to above.
E. Thayer Bigelow
Time Warner Inc.
1271 Avenue of the Americas
New York, New York
Senior Adviser, Time Warner Inc. Formerly, Acting Chief Executive Officer of
Courtroom Television Network (1997-1998). Formerly, President and Chief
Executive Officer of Time Warner Cable Programming, Inc.(1991-1997). Prior to
that, President and Chief Operating Officer of Home Box Office, Inc. Age 57.
William H.T. Bush
Bush-O'Donnell & Co., Inc.
101 South Hanley Road, Suite 1025
St. Louis, Missouri
Co-founder and Chairman of the Board of financial advisory firm of
Bush-O'Donnell & Company. Age 60.
Robert B. Calhoun, Jr.
Monitor Clipper Partners
650 Madison Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners and President of The Clipper
Group, both private equity investment funds. Age 56.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 68.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 73.
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C. Alan MacDonald
Directorship Inc.
8 Sound Shore Drive
Greenwich, Connecticut
Managing Director of Directorship Inc., a consultancy in board management and
corporate governance. Formerly, General Partner of The Marketing Partnership,
Inc., a full service marketing consulting firm (1994 - 1997). Prior to that,
Chairman and Chief Executive Officer of Lincoln Snacks, Inc., manufacturer of
branded snack foods (1992 - 1994). His career spans 36 years at Stouffers and
Nestle with 18 of the years as Chief Executive Officer. Currently serves as
Director of DenAmerica Corp., J.B. Williams Company, Inc., Fountainhead Water
Company and Exigent Diagnostics. Age 65.
Hansel B. Millican, Jr.
Rochester Button Company
1328 Broadway (Suite 816)
New York, New York
President and Chief Executive Officer of Rochester Button Company. Currently
serves as Director of PolyVision Corporation. Age 70.
Thomas J. Neff
Spencer Stuart
277 Park Avenue
New York, New York
Chairman of Spencer Stuart, an executive search consulting firm. Currently
serves as a Director of Ace, Ltd. (NYSE). Age 61.
The second column of the following table sets forth the compensation accrued for
the Fund's outside directors. The third column sets forth information with
respect to the equity-based benefits accrued for outside directors by the Lord
Abbett-sponsored funds. The fourth column sets forth the total compensation
payable by such funds to the outside directors. No director of the Fund
associated with Lord Abbett and no officer of the Fund received any compensation
from the Fund for acting as a director or officer.
<TABLE>
<CAPTION>
For the Fiscal Year Ended January 31, 1999
-------------------------------------------
(1) (2) (3) (4)
For Year Ended
Equity-Based December 31, 1998
Benefits Accrued Total Compensation
Aggregate by the Fund and Accrued by the Fund and
Compensation Other Lord Other Lord
Accrued by Abbett-sponsored Abbett-sponsored
Name of Director the Fund(1) Funds(2) Funds(3)
- ---------------- ----------- ----------------- ------------------------
<S> <C> <C> <C>
E. Thayer Bigelow $2,640 $17,068 $57,400
William H. T. Bush* $1,518 $0 $27,500
Robert B. Calhoun, Jr.** $1,794 $0 $33,500
Stewart S. Dixon $2,611 $32,190 $56,500
John C. Jansing $2,553 $45,085(4) $55,500
C. Alan MacDonald $2,530 $30,703 $55,000
Hansel B. Millican, Jr. $2,553 $37,747 $55,500
Thomas J. Neff $2,611 $19,853 $56,500
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Thomas J. Neff $2,611 $19,853 $56,500
</TABLE>
*Elected August 13, 1998.
**Elected June 17, 1998.
1. Outside directors' fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on the
net assets of each fund. A portion of the fees payable by the Fund to its
outside directors/trustees is being deferred under a plan that deems the
deferred amounts to be invested in shares of the Fund for later distribution
to the directors/trustees.
2. The amounts in Column 3 were accrued by the Lord Abbett-Sponsored Funds for
the 12 months ended October 31, 1998 with respect to the equity based
plans established for independent directors in 1996. This plan supercedes a
previously approved retirement plan for all future directors. Current
directors had the option to convert their accrued benefits under the
retirement plan. All of the outside directors except one made such an
election.
3. This column shows aggregate compensation, including directors fees and
attendance fees for board and committee meetings, of a nature referred to in
footnote one, accrued by the Lord Abbett-sponsored funds during the year
ended December 31, 1998. The amounts of the aggregate compensation payable by
the Fund as of January 31, 1999 deemed invested in Fund shares, including
dividends reinvested and changes in net asset value applicable to such deemed
investments, were: Mr. Bigelow, $3,398; Mr. Dixon, $33,318; Mr. Jansing,
$77,308; Mr. MacDonald, $25,279; Mr. Millican, $79,278 and Mr. Neff, $79,774.
If the amounts deemed invested in Fund shares were added to each director's
actual holdings of Fund shares as of January 31, 1998, each would own, the
following: Mr. Bigelow, 260 shares; Mr. Dixon, 3,125 shares; Mr. Jansing,
22,764 shares; Mr. MacDonald, 1,550 shares; Mr. Millican, 4,737 shares; and
Mr. Neff, 8,420 shares.
4. Mr. Jansing chose to continue to receive benefits under the retirement plan,
which provides that outside directors (trustees) may receive annual
retirement benefits for life equal to their final annual retainer following
retirement at or after age 72 with at least ten years of service. Thus,
if Mr. Jansing were to retire and the annual retainer payable by the funds
were the same as it is today, he would receive annual retirement benefits
of $50,000.
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Carper, Hilstad, McGruder, Morris and Walsh are partners of Lord Abbett; the
others are employees:
EXECUTIVE VICE PRESIDENTS:
Stephen J. McGruder, age 55
VICE PRESIDENTS:
Paul A. Hilstad, age 56, Vice President and Secretary (with Lord Abbett since
1995 -- formerly Senior Vice President and General Counsel of American Capital
Management & Research, Inc.)
Daniel E. Carper, age 47
Lawrence H. Kaplan, age 42 (with Lord Abbett since 1997 - formerly Vice
President and Chief Counsel of Salomon Brothers Asset Management Inc. from 1995
to 1997, prior thereto Senior Vice President, Director and General Counsel of
Kidder Peabody Asset Management, Inc.)
Robert G. Morris, age 54
A. Edward Oberhaus III, age 39
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Keith F. O'Connor, age 43
John J. Walsh, age 63
TREASURER:
Donna M. McManus, age 38, (with Lord Abbett since 1996, formerly a Senior
Manager at Deloitte & Touche LLP).
The Fund's By-Laws provide that the Fund shall not hold an annual meeting of its
stockholders in any year unless one or more matters are required to be acted on
by stockholders under the Act, as amended (the "Act"), or unless called by a
majority of the Board of Directors or by stockholders holding at least one
quarter of the stock of the Fund outstanding and entitled to vote at the
meeting. When any such annual meeting is held, the stockholders will elect
directors and vote on the approval of the independent auditors of the Fund.
As of May 15, 1999, our officers and directors, as a group, owned less than 1%
of our outstanding shares. As of May 15, 1999, the record holders of
5% or more of the Fund's outstanding shares are as follows:
Class A: Edward Jones & Co. - 10.60%
201 Progress PKWY
Maryland Hts, MO 63043-3009
MLPF&S-Benefit of its Customers - 15.98%
4800 Deer Lake Drive E FL 3
Jacksonville, FL 32246-6484
Charles Schwab & Co., Inc. - 5.73%
101 Montgomery Street
San Fransico, CA 94104-4122
Great-West Life - 5.76%
8515 E Orchard Road
Englewook, CO 80111-5002
Class B: Edward Jones & Co - 5.83%
201 Progress Pkwy
Maryland Hts, MO 63043-3009
MLPF&S-Benefit of its Customers - 27.94%
4800 Deer Lake Drive E FL 3
Jacksonville, FL 32246-6484
Class C: MLPF&S - Benefit of its Customers - 45.02%
4800 Deer Lake Drive E FL 3
Jacksonville, FL 32246-6484
Class P: MLPF&S - Benefit of its Customers - 84.48%
4800 Deer Lake Drive E Fl 3
Jacksonville, FL 32246-6484
3.
INVESTMENT ADVISORY AND OTHER SERVICES
As described under "Management" in the Prospectus, Lord Abbett is the Fund's
investment manager. Of the general partners of Lord Abbett, the following are
officers and/or directors of the Fund: Daniel E. Carper, Robert S. Dow, Paul A.
Hilstad, Stephen J. McGruder, Robert G. Morris and John J. Walsh. The other
general partners are: Stephen I. Allen, Zane E. Brown, John E. Erard, Robert P.
Fetch, Daria L. Foster, Robert I. Gerber, W. Thomas Hudson, Michael B.
McLaughlin, Robert J. Noelke, R. Mark Pennington and Christopher J. Towle. The
address of each partner is The General Motors Building, 767 Fifth Avenue, New
York, New York 10153-0203.
The services performed by Lord Abbett are described under "Management" in the
Prospectus. Under the Management Agreement, we are obligated to pay Lord Abbett
a monthly fee, based on average daily net assets for each month, at the annual
rate of .75 of 1% of the portion of our net assets not in excess of $100,000,000
and .50 of 1% of such assets over $100,000,000. This fee is allocated among
Class A, B, C and P shares based on the classes' proportionate shares of such
average daily net assets. For the fiscal years ended January 31, 1999, 1998, and
1997, the management fees paid to Lord Abbett amounted to $ 4,444,605,
$2,325,894, and $1,579,214, respectively.
We pay all expenses not expressly assumed by Lord Abbett, including, without
limitation, 12b-1 expenses, outside directors' fees and expenses, association
membership dues, legal and auditing fees, taxes, transfer and dividend
disbursing agent fees, shareholder servicing costs, expenses relating to
shareholder meetings, expenses of preparing, printing and mailing stock
certificates and shareholder reports, expenses of registering our shares under
federal and state securities laws, expenses of preparing, printing and mailing
prospectuses to existing shareholders, insurance premiums, brokerage and other
expenses connected with executing portfolio security transactions.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281, are
the independent auditors of the Fund and must be approved at least annually by
our Board of Directors to continue in such capacity. They perform audit services
for the Fund including the examination of financial statements included in our
annual report to shareholders.
The Bank of New York ("BNY"), 48 Wall Street, New York, New York 10286, is the
Fund's custodian. In accordance with the requirements of Rule 17f-5 under the
Act, the Fund's directors have approved arrangements permitting the Fund's
foreign assets not held by BNY or its foreign branches to be held by certain
qualified foreign banks and depositories.
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4.
PORTFOLIO TRANSACTIONS
Our policy is to obtain best execution on all our portfolio transactions, which
means that we seek to have purchases and sales of portfolio securities executed
at the most favorable prices, considering all costs of the transaction including
brokerage commissions and dealer markups and markdowns and taking into account
the full range and quality of the brokers' services. Consistent with obtaining
best execution, we generally pay, as described below, a higher commission than
some brokers might charge on the same transactions. Our policy with respect to
best execution governs the selection of brokers or dealers and the market in
which the transaction is executed. To the extent permitted by law, we may, if
considered advantageous, make a purchase from or sale to another Lord
Abbett-sponsored fund without the intervention of any broker-dealer.
Broker-dealers are selected on the basis of their professional capability and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of the Fund and also are employees
of Lord Abbett. These traders do the trading as well for other accounts --
investment companies (of which they are also officers) and other investment
clients -- managed by Lord Abbett. They are responsible for obtaining best
execution.
We pay a commission rate that we believe is appropriate to give maximum
assurance that our brokers will provide us, on a continuing basis, with the
highest level of brokerage services available. While we do not always seek the
lowest possible commissions on particular trades, we believe that our commission
rates are in line with the rates that many other institutions pay. Our traders
are authorized to pay brokerage commissions in excess of those that other
brokers might accept on the same transactions in recognition of the value of the
services performed by the executing brokers, viewed in terms of either the
particular transaction or the overall responsibilities of Lord Abbett with
respect to us and the other accounts they manage. Such services include showing
us trading opportunities including blocks, a willingness and ability to take
positions in securities, knowledge of a particular security or market proven
ability to handle a particular type of trade, confidential treatment, promptness
and reliability.
Some of these brokers also provide research services at least some of which are
useful to Lord Abbett in their overall responsibilities with respect to us and
the other accounts they manage. Research includes the furnishing of analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts and trading equipment and
computer software packages, acquired from third-party suppliers, that enable
Lord Abbett to access various information bases. Such services may be used by
Lord Abbett in servicing all their accounts, and not all of such services will
necessarily be used by Lord Abbett in connection with their management of the
Fund; conversely, such services furnished in connection with brokerage on other
accounts managed by Lord Abbett may be used in connection with their management
of the Fund, and not all of such services will necessarily be used by Lord
Abbett in connection with their advisory services to such other accounts. We
have been advised by Lord Abbett that research services received from brokers
cannot be allocated to any particular account, are not a substitute for Lord
Abbett's services but are supplemental to their own research effort and when
utilized, are subject to internal analysis before being incorporated by Lord
Abbett into their investment process. As a practical matter, it would not be
possible for Lord Abbett to generate all of the information presently provided
by brokers. While receipt of research services from brokerage firms has not
reduced Lord Abbett's normal research activities, the expenses of Lord Abbett
could be materially increased if it attempted to generate such additional
information through its own staff and purchased such equipment and software
packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or
among brokers, and trades are executed only when they are dictated by investment
decisions of the Fund to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold our shares and/or
shares of other Lord Abbett-sponsored funds may be preferred.
9
<PAGE>
If other clients of Lord Abbett buy or sell the same security at the same time
as we do, transactions will, to the extent practicable, be allocated among all
participating accounts in proportion to the amount of each order and will be
executed daily until filled so that each account shares the average price and
commission cost of each day. Other clients who direct that their brokerage
business be placed with specific brokers or who invest through wrap accounts
introduced to Lord Abbett by certain brokers may not participate with us in the
buying and selling of the same securities as described above. If these clients
wish to buy or sell the same security as we do, they may have their transactions
executed at times different from our transactions and thus may not receive the
same price or incur the same commission cost as we do.
We will not seek "reciprocal" dealer business (for the purpose of applying
commissions in whole or in part for our benefit or otherwise) from dealers as
consideration for the direction to them of portfolio business.
During the fiscal years ended January 31, 1999, 1998, and 1997, we paid total
commissions to independent dealers of $ 1,187,227, $1,930,696, and $1,696,590,
respectively.
5.
PURCHASES, REDEMPTIONS
AND SHAREHOLDER SERVICES
The Fund values its portfolio securities at market value as of the close of the
NYSE. Market value will be determined as follows: securities listed or admitted
to trading privileges on the New York or American Stock Exchange or on the
NASDAQ National Market System are valued at the last sales price, or, if there
is no sale on that day, at the mean between the last bid and asked prices, or,
in the case of bonds, in the over-the-counter market if, in the judgment of the
Fund's officers, that market more accurately reflects the market value of the
bonds. Over-the-counter securities not traded on the NASDAQ National Market
System are valued at the mean between the last bid and asked prices. Securities
for which market quotations are not available are valued at fair market value
under procedures approved by the Board of Directors.
Information concerning how we value our shares for the purchase and redemption
of our shares is described in the Prospectus under "Purchases" and
"Redemptions," respectively.
As disclosed in the Prospectus, we calculate our net asset value and are
otherwise open for business on each day that the NYSE is open for trading. The
NYSE is closed on Saturdays and Sundays and the following holidays -- New Year's
Day, Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
The maximum offering price of our Class A shares on January 31, 1999 was
computed as follows:
<TABLE>
<S> <C>
Net asset value per share (net assets divided by
shares outstanding)......................................................$16.25
Maximum offering price per share (net asset value
divided by .9425)........................................................$17.24
</TABLE>
The net asset value per share for the Class B, C and P shares is determined in
the same manner as for the Class A shares (net assets divided by shares
outstanding). Our Class B, C and P shares are sold at net asset value.
The Fund has entered into a distribution agreement with Lord Abbett Distributor,
a New York limited liability company and subsidiary of Lord Abbett under which
Lord Abbett Distributor is obligated to use its best efforts to find purchasers
for the shares of the Fund, and to make reasonable efforts to sell Fund shares
so long as, in Lord Abbett Distributor's judgment, a substantial distribution
can be obtained by reasonable efforts.
10
<PAGE>
For the last three fiscal years, Lord Abbett, as our principal underwriter,
received net commissions after allowance of a portion of the sales charge to
independent dealers with respect to Class A shares as follows:
<TABLE>
<CAPTION>
Year Ended January 31
---------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Gross sales charge $5,690,775 $3,195,724 $2,604,448
Amount allowed to dealers $4,920,536 $2,768,167 $2,285,132
---------- ---------- ----------
Net commissions
received by Lord Abbett $ 770,239 $ 427,557 $ 319,316
========== ========== ==========
</TABLE>
CONVERSION OF CLASS B SHARES. The conversion of Class B shares on the eighth
anniversary of their purchase is subject to the continuing availability of a
private letter ruling from the Internal Revenue Service, or an opinion of
counsel or tax adviser, to the effect that the conversion of Class B shares does
not constitute a taxable event for the holder under Federal income tax law. If
such a revenue ruling or opinion is no longer available, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect. Although
Class B shares could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a sales
charge or fee, such exchange could constitute a taxable event for the holder.
ALTERNATIVE SALES ARRANGEMENTS
CLASSES OF SHARES. The Fund offers investors five different classes of shares.
This Statement of Additional Information offers four of those classes designated
Class A, B, C and P. The different classes of shares represent investments in
the same portfolio of securities but are subject to different expenses and will
likely have different share prices. Investors should read this section carefully
to determine which class represents the best investment option for their
particular situation.
CLASS A SHARES. If you buy Class A shares, you pay an initial sales charge on
investments of less than $1 million (or on investments for employer-sponsored
retirement plans under the Internal Revenue Code (hereinafter referred to as
"Retirement Plans") with less than 100 eligible employees or on investments that
do not qualify to be under a "special retirement wrap program" as a program
sponsored by an authorized institution showing one or more characteristics
distinguishing it, in the opinion of Lord Abbett Distributor from a mutual fund
wrap fee program). If you purchase Class A shares as part of an investment of at
least $1 million (or for Retirement Plans with at least 100 eligible employees
or under a special retirement wrap program) in shares of one or more Lord
Abbett-sponsored funds, you will not pay an initial sales charge, but if you
redeem any of those shares within 24 months after the month in which you buy
them, you may pay to the Fund a contingent deferred sales charge ("CDSC") of 1%
except for redemptions under a special retirement wrap program. Class A shares
are subject to service and distribution fees that are currently estimated to
total annually approximately 0.28 of 1% of the annual net asset value of the
Class A shares. The initial sales charge rates, the CDSC and the Rule 12b-1 plan
applicable to the Class A shares are described in "Buying Class A Shares" below.
CLASS B SHARES. If you buy Class B shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the sixth anniversary of
buying them, you will normally pay a CDSC to Lord Abbett Distributor LLC ("Lord
Abbett Distributor"). That CDSC varies depending on how long you own shares.
Class B shares are subject to service and distribution fees at an annual rate of
1% of the annual net asset value of the Class B shares. The CDSC and the Rule
12b-1 plan applicable to the Class B shares are described below.
CLASS C SHARES. If you buy Class C shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the first anniversary of
buying them, you will normally pay the Fund a CDSC of 1%. Class C
11
<PAGE>
shares are subject to service and distribution fees at an annual rate of 1% of
the annual net asset value of the Class C shares. The CDSC and the Rule 12b-1
plan applicable to the C shares are described below.
CLASS P SHARES. If you buy Class P shares, you pay no sales charge at the time
of purchase, and if you redeem your shares you pay no CDSC. Class P shares are
subject to service and distribution fees at an annual rate of .45 of 1% of the
average daily net asset value of the Class P shares. The Rule 12b-1 plan
applicable to the Class P shares is described below. Class P shares are
available to a limited number of investors.
WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial adviser. The Fund's class-specific expenses and the
effect of the different types of sales charges on your investment will affect
your investment results over time. The most important factors are how much you
plan to invest and how long you plan to hold your investment. If your goals and
objectives change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider another class of
shares.
In the following discussion, to help provide you and your financial adviser with
a framework in which to choose a class, we have made some assumptions using a
hypothetical investment in the Fund. We used the sales charge rates that apply
to Class A, Class B and Class C, and considered the effect of the higher
distribution fees on Class B and Class C expenses (which will affect your
investment return). Of course, the actual performance of your investment cannot
be predicted and will vary, based on the Fund's actual investment returns, the
operating expenses borne by each class of shares, and the class of shares you
purchase. The factors briefly discussed below are not intended to be investment
advice, guidelines or recommendations, because each investor's financial
considerations are different. The discussion below of the factors to consider in
purchasing a particular class of shares assumes that you will purchase only one
class of shares and not a combination of shares of different classes.
HOW LONG DO YOU EXPECT TO HOLD YOUR INVESTMENT? While future financial needs
cannot be predicted with certainty, knowing how long you expect to hold your
investment will assist you in selecting the appropriate class of shares. For
example, over time, the reduced sales charges available for larger purchases of
Class A shares may offset the effect of paying an initial sales charge on your
investment, compared to the effect over time of higher class-specific expenses
on Class B or Class C shares for which no initial sales charge is paid. Because
of the effect of class-based expenses, your choice should also depend on how
much you plan to invest.
Investing for the Short Term. If you have a short-term investment horizon (that
is, you plan to hold your shares for not more than six years), you should
probably consider purchasing Class A or Class C shares rather than Class B
shares. This is because of the effect of the Class B CDSC if you redeem before
the sixth anniversary of your purchase, as well as the effect of the Class B
distribution fee on the investment return for that class in the short term.
Class C shares might be the appropriate choice (especially for investments of
less than $100,000), because there is no initial sales charge on Class C shares,
and the CDSC does not apply to amounts you redeem after holding them one year.
However, if you plan to invest more than $100,000 for the short term, then the
more you invest and the more your investment horizon increases toward six years,
the more attractive the Class A share option may become. This is because the
annual distribution fee on Class C shares will have a greater impact on your
account over the longer term than the reduced front-end sales charge available
for larger purchases of Class A shares. For example, Class A might be more
appropriate than Class C for investments of more than $100,000 expected to be
held for 5 or 6 years (or more). For investments over $250,000 expected to be
held 4 to 6 years (or more), Class A shares may become more appropriate than
Class C. If you are investing $500,000 or more, Class A may become more
desirable as your investment horizon approaches 3 years or more.
For most investors who invest $1 million or more or for Retirement Plans with at
least 100 eligible employees or
12
<PAGE>
for investments pursuant to a special retirement wrap program, in most cases
Class A shares will be the most advantageous choice, no matter how long you
intend to hold your shares. For that reason, it may not be suitable for you to
place a purchase order for Class B shares of $500,000 or more or a purchase
order for Class C shares of $1,000,000 or more. In addition, it may not be
suitable for you to place an order for Class B or C shares for a Retirement Plan
with at least 100 eligible employees or for a special retirement wrap program.
You should discuss this with your financial advisor.
Investing for the Longer Term. If you are investing for the longer term (for
example, to provide for future college expenses for your child) and do not
expect to need access to your money for seven years or more, Class B shares may
be an appropriate investment option, if you plan to invest less than $100,000.
If you plan to invest more than $100,000 over the long term, Class A shares will
likely be more advantageous than Class B shares or Class C shares, as discussed
above, because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charges available for larger investments in Class
A shares under the Fund's Rights of Accumulation. Of course, these examples are
based on approximations of the effect of current sales charges and expenses on a
hypothetical investment over time, and should not be relied on as rigid
guidelines.
ARE THERE DIFFERENCES IN ACCOUNT FEATURES THAT MATTER TO YOU? Some account
features are available in whole or in part to Class A, Class B and Class C
shareholders. Other features (such as Systematic Withdrawal Plans) might not be
advisable in non-Retirement Plan accounts for Class B shareholders (because of
the effect of the CDSC on the entire amount of a withdrawal if it exceeds 12%
annually) and in any account for Class C shareholders during the first year of
share ownership (due to the CDSC on withdrawals during that year). See
"Systematic Withdrawal Plan" under "Shareholder Services" in the Prospectus for
more information about the 12% annual waiver of the CDSC. You should carefully
review how you plan to use your investment account before deciding which class
of shares you buy. For example, the dividends payable to Class B and Class C
shareholders will be reduced by the expenses borne solely by each of these
classes, such as the higher distribution fee to which Class B and Class C shares
are subject, as described below.
HOW DOES IT AFFECT PAYMENTS TO MY BROKER? A salesperson, such as a broker, or
any other person who is entitled to receive compensation for selling Fund shares
may receive different compensation for selling one class than for selling
another class. As discussed in more detail below, such compensation is primarily
paid at the time of sale in the case of Class A and B shares and is paid over
time, so long as shares remain outstanding, in the case of Class C shares. It is
important that investors understand that the primary purpose of the CDSC for the
Class B shares and the distribution fee for Class B and Class C shares is the
same as the purpose of the front-end sales charge on sales of Class A shares: to
compensate brokers and other persons selling such shares. The CDSC, if payable,
supplements the Class B distribution fee and reduces the Class C distribution
fee expenses for the Fund and Class C shareholders.
CLASS A, B, C AND P RULE 12B-1 PLANS. As described in the Prospectus, the Fund
has adopted a Distribution Plan and Agreement pursuant to Rule 12b-1 of the Act
for each of the four Fund Classes: the "A Plan," the "B Plan," the "C Plan," and
the "P Plan," respectively. In adopting each Plan and in approving its
continuance, the Board of Directors has concluded that there is a reasonable
likelihood that each Plan will benefit its respective Class and such Class'
shareholders. The expected benefits include greater sales and lower redemptions
of shares of each Class, which should allow each Class to maintain a consistent
cash flow, and a higher quality of service to shareholders by authorized
institutions than would otherwise be the case. During the last fiscal year ended
January 31, 1999, the Fund accrued or paid through Lord Abbett to authorized
institutions $ 1,646,061, $1,229,213, $ 773,358, and $ 74,034 under the A, B, C
and P Plans, respectively. Lord Abbett used all amounts received under each Plan
for payments to dealers for (i) providing continuous services to shareholders,
such as answering shareholder inquiries, maintaining records, and assisting
shareholders in making redemptions, transfers, additional purchases and
exchanges and (ii) their assistance in distributing shares of the Fund.
Each Plan requires the directors to review, on a quarterly basis, written
reports of all amounts expended pursuant to the Plan and the purposes for which
such expenditures were made. Each Plan shall continue in effect only if its
13
<PAGE>
continuance is specifically approved at least annually by vote of the directors,
including a majority of the directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related to the Plan ("outside directors"), cast in
person at a meeting called for the purpose of voting on the Plan. No Plan may be
amended to increase materially above the limits set forth therein the amount
spent for distribution expenses thereunder without approval by a majority of the
outstanding voting securities of the applicable class and the approval of a
majority of the directors, including a majority of the outside directors. Each
Plan may be terminated at any time by vote of a majority of the outside
directors or by vote of a majority of its Class's outstanding voting securities.
CONTINGENT DEFERRED SALES CHARGES. A Contingent Deferred Sales Charge ("CDSC")
(i) applies regardless of class, (ii) will not apply to shares purchased by the
reinvestment of dividends or capital gains distributions; (iii) will be assessed
on the lesser of the net asset value of the shares at the time of redemption or
the original purchase price and (iv) will not be imposed on (a) the aggregate
dollar amount of your account, in the case of Class A shares, and (b) the
percentage of each share redeemed, in the case of class B and C shares,
representing an increase in net asset value over the initial purchase price
(including increases due to the reinvestment of dividends and capital gains
distributions) and upon early redemption of shares. In the case of Class A
shares, this increase is represented by shares having an aggregate dollar value
in your account. In the case of Class B and C shares, this increase is
represented by that percentage of each share redeemed where the net asset value
exceeded the initial purchase price. CLASS A SHARES. As stated in the
Prospectus, subject to certain exceptions, a CDSC of 1% is imposed with respect
to those Class A shares (or Class A shares of another Lord Abbett-sponsored fund
or series acquired through exchange of such shares) on which the Fund has paid
the one-time distribution fee of 1% if such shares are redeemed out of the Lord
Abbett-sponsored family of funds within a period of 24 months from the end of
the month in which the original sale occurred.
CLASS B SHARES. As stated in the Prospectus, subject to certain exceptions, if
Class B shares (or Class B shares of another Lord Abbett-sponsored fund or
series acquired through exchange of such shares) are redeemed out of the Lord
Abbett-sponsored family of funds for cash before the sixth anniversary of their
purchase, a CDSC will be deducted from the redemption proceeds. The Class B CDSC
is paid to Lord Abbett Distributor to reimburse its expenses, in whole or in
part, for providing distribution-related services to the Fund in connection with
the sale of Class B shares.
To determine whether the CDSC applies to a redemption, the Fund redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held on or after the sixth anniversary
of their purchase, and (3) shares held the longest before such sixth
anniversary.
The amount of the CDSC will depend on the number of years since you invested and
the dollar amount being redeemed, according to the following schedule:
<TABLE>
<CAPTION>
Anniversary of the Day on Contingent Deferred Sales Charge
Which the Purchase Order Was Accepted on Redemptions (As % of Amount Subject to Charge)
<S> <C>
Before the 1st...........................................5.0%
On the 1st, before the 2nd...............................4.0%
On the 2nd, before the 3rd...............................3.0%
On the 3rd, before the 4th...............................3.0%
On the 4th, before the 5th...............................2.0%
On the 5th, before the 6th ..............................1.0%
On or after the 6th anniversary...........................None
</TABLE>
In the table, an "anniversary" is the same calendar day in each respective year
after the date of purchase. For example, the anniversaries for shares purchased
on May 1 will be May 1 of each succeeding year. All purchases are considered to
have been made on the business day on which the purchase order was accepted.
14
<PAGE>
CLASS C SHARES. As stated in the Prospectus, subject to certain exceptions, if
Class C shares are redeemed for cash before the first anniversary of their
purchase, the redeeming shareholder will be required to pay to the Fund on
behalf of Class C shares a CDSC of 1% of the lower of cost or the then net asset
value of Class C shares redeemed. If such shares are exchanged into the same
class of another Lord Abbett-sponsored fund and subsequently redeemed before the
first anniversary of their original purchase, the charge will be collected by
the other fund on behalf of this Fund's Class C shares.
GENERAL. The percentage (1% in the case of Class A and C shares and 5% through
1% in the case of Class B shares) used to calculate CDSCs described above for
the Class A, Class B and Class C shares is sometimes hereinafter referred to as
the "Applicable Percentage."
With respect to Class A and Class B shares, no CDSC is payable on redemptions by
participants or beneficiaries from employer-sponsored retirement plans under the
Internal Revenue Code for benefit payments due to plan loans, hardship
withdrawals, death, retirement or separation from service and for returns of
excess contributions to retirement plan sponsors. With respect to Class A shares
purchased pursuant to a special retirement wrap program, no CDSC is payable on
redemptions which continue as investments in another fund participating in the
program. With respect to Class B shares, no CDSC is payable for redemptions (i)
in connection with Systematic Withdrawal Plan and Div-Move services as described
below under those headings, (ii) in connection with mandatory distribution under
403(b) plans and IRAs and (iii) in connection with death of an individual
shareholder (a natural person). In the case of Class A and Class C shares, the
CDSC is received by the Fund and is intended to reimburse all or a portion of
the amount paid by the Fund if the shares are redeemed before the Fund has had
an opportunity to realize the anticipated benefits of having a long-term
shareholder account in the Fund. In the case of Class B shares, the CDSC is
received by Lord Abbett Distributor and is intended to reimburse its expenses of
providing distribution-related services to the Fund (including recoupment of the
commission payments made) in connection with the sale of Class B shares before
Lord Abbett Distributor has had an opportunity to realize its anticipated
reimbursement by having such a long-term shareholder account subject to the B
Plan distribution fee.
The other funds and series which participate in the Telephone Exchange Privilege
(except (a) Lord Abbett U.S. Government Securities Money Market Fund, Inc.
("GSMMF"), (b) certain series of Lord Abbett Tax-Free Income Fund and Lord
Abbett Tax-Free Income Trust for which a Rule 12b-1 Plan is not yet in effect,
and (c) any authorized institution's affiliated money market fund satisfying
Lord Abbett Distributor as to certain omnibus account and other criteria,
hereinafter referred to as an "authorized money market fund" or "AMMF"
(collectively, the "Non-12b-1 Funds") have instituted a CDSC for each class on
the same terms and conditions. No CDSC will be charged on an exchange of shares
of the same class between Lord Abbett funds or between such funds and AMMF. Upon
redemption of shares out of the Lord Abbett family of funds or out of AMMF, the
CDSC will be charged on behalf of and paid: (i) to the fund in which the
original purchase (subject to a CDSC) occurred, in the case of the Class A and
Class C shares and (ii) to Lord Abbett Distributor if the original purchase was
subject to a CDSC, in the case of the Class B shares. Thus, if shares of a Lord
Abbett fund are exchanged for shares of the same class of another such fund and
the shares of the same class tendered ("Exchanged Shares") are subject to a
CDSC, the CDSC will carry over to the shares of the same class being acquired,
including GSMMF and AMMF ("Acquired Shares"). Any CDSC that is carried over to
Acquired Shares is calculated as if the holder of the Acquired Shares had held
those shares from the date on which he or she became the holder of the Exchanged
Shares. Although the Non-12b-1 Funds will not pay a distribution fee on their
own shares, and will, therefore, not impose their own CDSC, the Non-12b-1 Funds
will collect the CDSC (a) on behalf of other Lord Abbett funds, in the case of
the Class A and Class C shares and (b) on behalf of Lord Abbett Distributor, in
the case of the Class B shares. Acquired Shares held in GSMMF and AMMF which are
subject to a CDSC will be credited with the time such shares are held in GSMMF
but will not be credited with the time such shares are held in AMMF. Therefore,
if your Acquired Shares held in AMMF qualified for no CDSC or a lower Applicable
Percentage at the time of exchange into AMMF, that Applicable Percentage will
apply to redemptions for cash from AMMF, regardless of the time you have held
Acquired Shares in AMMF.
15
<PAGE>
In no event will the amount of the CDSC exceed the Applicable Percentage of the
lesser of (i) the net asset value of the shares redeemed or (ii) the original
cost of such shares (or of the Exchanged Shares for which such shares were
acquired). No CDSC will be imposed when the investor redeems (i) shares
representing an aggregate dollar amount of your account, in the case of Class A
shares, (ii) that percentage of each share redeemed, in the case of Class B and
C shares, derived from increases in the value of the shares above the total cost
of shares being redeemed due to increases in net asset value, (iii) shares with
respect to which no Lord Abbett fund paid a 12b-1 fee and, in the case of Class
B shares, Lord Abbett Distributor paid no sales charge or service fee (including
shares acquired through reinvestment of dividend income and capital gains
distributions) or (iv) shares which, together with Exchanged Shares, have been
held continuously for 24 months from the end of the month in which the original
sale occurred (in the case of Class A shares); for six years or more (in the
case of Class B shares) and for one year or more (in the case of Class C
shares). In determining whether a CDSC is payable, (a) shares not subject to the
CDSC will be redeemed before shares subject to the CDSC and (b) of the shares
subject to a CDSC, those held the longest will be the first to be redeemed.
EXCHANGES. The Prospectus briefly describes the Telephone Exchange Privilege.
You may exchange some or all of your shares of any class for those in the same
class of: (i) Lord Abbett-sponsored funds currently offered to the public with a
sales charge (front-end, back-end or level ), (ii) GSMMF or (iii) AMMF, to the
extent offers and sales may be made in your state. You should read the
prospectus of the other fund before exchanging. In establishing a new account by
exchange, shares of the Fund being exchanged must have a value equal to at least
the minimum initial investment required for the other fund into which the
exchange is made.
Shareholders in other Lord Abbett-sponsored funds and AMMF have the same right
to exchange their shares for the corresponding class of the Fund's shares.
Exchanges are based on relative net asset values on the day instructions are
received by the Fund in Kansas City if the instructions are received prior to
the close of the NYSE in proper form. No sales charges are imposed except in the
case of exchanges out of GSMMF or AMMF (unless a sales charge (front-end,
back-end or level) was paid on the initial investment in a Lord Abbett-sponsored
fund). Exercise of the exchange privilege will be treated as a sale for federal
income tax purposes, and, depending on the circumstances, a gain or loss may be
recognized. In the case of an exchange of shares that have been held for 90 days
or less where no sales charge is payable on the exchange, the original sales
charge incurred with respect to the exchanged shares will be taken into account
in determining gain or loss on the exchange only to the extent such charge
exceeds the sales charge that would have been payable on the acquired shares had
they been acquired for cash rather than by exchange. The portion of the original
sales charge not so taken into account will increase the basis of the acquired
shares.
Shareholders have the exchange privilege unless they refuse it in writing. You
should not view the exchange privilege as a means for taking advantage of
short-term swings in the market, and we reserve the right to terminate or limit
the privilege of any shareholder who makes frequent exchanges. We can revoke or
modify the privilege for all shareholders upon 60 days' prior notice. "Eligible
Funds" are AMMF and other Lord Abbett-sponsored funds which are eligible for the
exchange privilege, except Lord Abbett Series Fund ("LASF") which offers its
shares only in connection with certain variable annuity contracts, Lord Abbett
Equity Fund ("LAEF") which is not issuing shares, and series of Lord Abbett
Research Fund not offered to the general public ("LARF").
STATEMENT OF INTENTION. Under the terms of the Statement of Intention as
described in the Prospectus, you may invest $100,000 or more over a 13-month
period in shares of a Lord Abbett-sponsored fund (other than shares of LAEF,
LASF, LARF, GSMMF and AMMF, unless holdings in GSMMF and AMMF are attributable
to shares exchanged from a Lord Abbett-sponsored fund offered with a front-end,
back-end or level sales charge). Shares currently owned by you are credited as
purchases (at their current offering prices on the date the Statement is signed)
toward achieving the stated investment and reduced initial sales charge for
Class A shares. Class A shares valued at 5% of the amount of intended purchases
are escrowed and may be redeemed to cover the additional sales charge payable if
the Statement of Intention is not completed. The Statement of Intention is
neither a binding obligation on you to buy, nor on the Fund to sell, the full
amount indicated.
16
<PAGE>
RIGHTS OF ACCUMULATION. As stated in the Prospectus, purchasers (as defined in
the Prospectus) may accumulate their investment in Lord Abbett-sponsored funds
(other than LAEF, LARF, LASF, GSMMF, and AMMF unless holdings in GSMMF or AMMF
are attributable to shares exchanged from a Lord Abbett-sponsored fund offered
with a front-end, back-end or level sales charge) so that a current investment,
plus the purchaser's holdings valued at the current maximum offering price,
reach a level eligible for a discounted sales charge for Class A shares.
NET ASSET VALUE PURCHASES OF CLASS A SHARES. As stated in the Prospectus, our
Class A shares may be purchased at net asset value by our directors, employees
of Lord Abbett, employees of our shareholder servicing agent and employees of
any securities dealer having a sales agreement with Lord Abbett who consents to
such purchases or by the director or custodian under any pension or
profit-sharing plan or Payroll Deduction IRA established for the benefit of such
persons or for the benefit of employees of any national securities trade
organization to which Lord Abbett belongs or any company with an account(s) in
excess of $10 million managed by Lord Abbett on a private-advisory-account
basis. For purposes of this paragraph, the terms "directors" and "employees"
include a director's or employee's spouse (including the surviving spouse of a
deceased director or employee). The terms "our directors" and "employees of Lord
Abbett" also include retired directors and employees and other family members
thereof.Our Class A shares also may be purchased at net asset value (a) at $1
million or more, (b) with dividends and distributions from Class A shares of
other Lord Abbett-sponsored funds, except for LARF, LAEF and LASF, (c) under the
loan feature of the Lord Abbett-sponsored prototype 403(b) plan for share
purchases representing the repayment of principal and interest, (d) by certain
authorized brokers, dealers, registered investment advisers or other financial
institutions who have entered into an agreement with Lord Abbett Distributor in
accordance with certain standards approved by Lord Abbett Distributor, providing
specifically for the use of our shares in particular investment products made
available for a fee to clients of such brokers, dealers, registered investment
advisers and other financial institutions ("mutual fund wrap fee program"), (e)
by employees, partners and owners of unaffiliated consultants and advisors to
Lord Abbett, Lord Abbett Distributor or Lord Abbett-sponsored funds who consent
to such purchase if such persons provide service to Lord Abbett, Lord Abbett
Distributor or such funds on a continuing basis and are familiar with such
funds, (f) through Retirement Plans with at least 100 eligible employees and (g)
in connection with a merger, acquisition or other reorganization (h) through a
special retirement wrap program sponsored by an authorized institution having
one or more characteristics distinguishing it, in the opinion of Lord Abbett
Distributor, from a mutual fund wrap program. Such characteristics include,
among other things, the fact that an authorized institution does not charge its
clients any fee of a consulting or advisory nature that is economically
equivalent to the distribution fee under the Class A 12b-1 Plan and the fact
that the program relates to a participant-directed Retirement Plan. Shares are
offered at net asset value to these investors for the purpose of promoting
goodwill with employees and others with whom Lord Abbett Distributor and/or the
Fund has business relationships.
REDEMPTIONS. A redemption order is in proper form when it contains all of the
information and documentation required by the order form or supplementally by
Lord Abbett Distributor or the Fund to carry out the order. The signature(s) and
any legal capacity of the signer(s) must be guaranteed by an eligible guarantor.
See the Prospectus for expedited redemption procedures.
The right to redeem and receive payment, as described in the Prospectus, may be
suspended if the NYSE is closed (except for weekends or customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
deems an emergency to exist.
Our Board of Directors may authorize redemption of all of the shares in any
account in which there are fewer than 25 shares. Before authorizing such
redemption, the Board must determine that it is in our economic best interest or
necessary to reduce disproportionately burdensome expenses in servicing
shareholder accounts. At least 30 days' prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
DIV-MOVE. Under the Div-Move service described in the Prospectus, you can invest
the dividends paid on your account of any class into an existing account of the
same class in any other Eligible Fund. The account must be
17
<PAGE>
either your account, a joint account for you and your spouse, a single account
for your spouse, or a custodial account for your minor child under the age of
21. You should read the prospectus of the other fund before investing.
INVEST-A-MATIC. The Invest-A-Matic method of investing in the Fund and/or any
other Eligible Fund is described in the Prospectus. To avail yourself of this
method you must complete the application form, selecting the time and amount of
your bank checking account withdrawals and the funds for investment, include a
voided, unsigned check and complete the bank authorization.
SYSTEMATIC WITHDRAWAL PLANS. The Systematic Withdrawal Plan ("SWP") also is
described in the Prospectus. You may establish a SWP if you own or purchase
uncertificated shares having a current offering price value of at least $10,000.
Lord Abbett prototype retirement plans have no such minimum. With respect to
Class B shares the CDSC will be waived on redemptions of up to 12% per year of
the current net asset value of your account at the time the SWP is established.
For Class B share redemptions of over 12% per year, the CDSC will apply to the
entire redemption. Therefore, please contact the Fund for assistance in
minimizing the CDSC in this situation. With respect to Class C shares, the CDSC
will be waived on and after the first anniversary of their purchase. The SWP
involves the planned redemption of shares on a periodic basis by receiving
either fixed or variable amounts at periodic intervals. Since the value of
shares redeemed may be more or less than their cost, gain or loss may be
recognized for income tax purposes on each periodic payment. Normally, you may
not make regular investments at the same time you are receiving systematic
withdrawal payments because it is not in your interest to pay a sales charge on
new investments when in effect a portion of that new investment is soon
withdrawn. The minimum investment accepted while a withdrawal plan is in effect
is $1,000. The SWP may be terminated by you or by us at any time by written
notice.
RETIREMENT PLANS. The Prospectus indicates the types of retirement plans for
which Lord Abbett provides forms and explanations. Lord Abbett makes available
the retirement plan forms including 401(k) plans and custodial agreements for
IRAs (Individual Retirement Accounts, including Traditional, Education, Roth and
SIMPLE IRAs and Simplified Employee Pensions), 403(b) plans and qualified
pension and profit-sharing plans. The forms name Investors Fiduciary Trust
Company as custodian and contain specific information about the plans excluding
401(k) plans. Explanations of the eligibility requirements, annual custodial
fees and allowable tax advantages and penalties are set forth in the relevant
plan documents. Adoption of any of these plans should be on the advice of your
legal counsel or qualified tax adviser.
6.
PAST PERFORMANCE
The Fund computes the average annual compounded rate of total return during
specified periods that would equate the initial amount invested to the ending
redeemable value of such investment by adding one to the computed average annual
total return, raising the sum to a power equal to the number of years covered by
the computation and multiplying the result by one thousand dollars, which
represents a hypothetical initial investment. The calculation assumes deduction
of the maximum sales charge (as described in the next paragraph) from the
initial amount invested and reinvestment of all income dividends and capital
gains distributions on the reinvestment dates at prices calculated as stated in
the Prospectus. The ending redeemable value is determined by assuming a complete
redemption at the end of the period covered by the average annual total return
computation.
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment (unless the return is shown at net asset value). For Class B
shares, the payment of the applicable CDSC (5.0% prior to the first anniversary
of purchase, 4.0% prior to the second anniversary of purchase, 3.0% prior to the
third and fourth anniversaries of purchase, 2.0% prior to the fifth anniversary
of purchase, 1.0% prior to the sixth anniversary of purchase and no CDSC on and
after the sixth anniversary of purchase) is applied to the Fund's investment
result for that class for the time period shown (unless the total return is
shown at net asset value). For Class C shares, the 1.0% CDSC is applied to the
Fund's investment result for that class for the time period shown prior to the
first anniversary of purchase (unless the total return is
18
<PAGE>
shown at net asset value). For Class P shares, there is no CDSC. Total returns
also assume that all dividends and capital gains distributions during the period
are reinvested at net asset value per share, and that the investment is redeemed
at the end of the period.
Using the computation method described above, the Fund's average annual
compounded rates of return for the one, five and ten year(s) ending on January
31, 1999 were as follows: 7.60%, 20.22% and 16.53%, respectively for the Fund's
Class A shares. For Class B shares, the Fund's average annual rates of return
for the one year and life of the class periods ending on January 31, 1999 were
8.37% and 21.93%, respectively. For Class C shares, the Fund's average annual
rates of return for the one year and life of the class periods ending on January
31, 1999 were 12.43% and 22.88%, respectively. For Class P shares, the Fund's
total return for the one year period and life of the class period ended January
31, 1999 were 13.89% and 12.95%, respectively.
These figures represent past performance, and an investor should be aware that
the investment return and principal value of a Fund investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Therefore, there is no assurance that this performance will be
repeated in the future.
7.
TAXES
The value of any shares redeemed by the Fund or otherwise sold may be more or
less than your tax basis in the shares at the time of disposition. Any gain
generally will be taxable for federal income tax purposes. Any loss realized on
the disposition of Fund shares which you have held for six months or less will
be treated for tax purposes as a long-term capital loss to the extent of any
"capital gains distributions" which you received with respect to such shares.
Losses on the sale of shares are not deductible if, within a period beginning 30
days before the date of the sale and ending 30 days after the date of the sale,
the taxpayer acquires shares that are substantially identical.
The Fund may be subject to foreign withholding taxes which would reduce the
yield on its investments. It is generally expected that Fund shareholders who
are subject to United States federal income tax will not be entitled to claim a
federal income tax credit or deduction for foreign income taxes paid by the
Fund.
If the Fund purchases shares in certain foreign investment entities, called
"PFICs" or "passive foreign investment companies," it may be subject to United
States federal income tax on a portion of any "excess distribution" or gain from
the disposition of such shares, even if such income is distributed as a taxable
dividend by the Fund to its shareholders. Additional charges in the nature of
interest may be imposed on either the Fund or its shareholders in respect of
deferred taxes arising from such distributions or gains. If the Fund were to
make a "qualified electing fund" election with respect to its investment in a
passive foreign investment company, in lieu of the foregoing requirements, the
Fund might be required to include in income each year a portion of the ordinary
earnings and net capital gains of the qualified electing fund, even if such
amount were not distributed to the Fund.
Gain and loss realized by the Fund on certain transactions, including sales of
foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gains or losses are attributable to changes in
exchange rates for foreign currencies. Accordingly, distributions taxable as
ordinary income will include the net amount, if any, of such foreign exchange
gains and will be reduced by the net amount, if any, of such foreign exchange
losses.
The Fund will be subject to a 4% nondeductible excise tax on certain amounts not
distributed or treated as having been distributed on a timely basis each
calendar year distribution. The Fund intends to distribute to shareholders each
year an amount adequate to avoid the imposition of such excise tax.
Dividends paid by the Fund should qualify for the dividends-received deduction
for corporations, to the extent they are derived from dividends paid by domestic
corporations.
19
<PAGE>
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to United States persons (United States citizens or residents and
United States domestic corporations, partnerships, trusts and estates). Each
shareholder who is not a United States person should consult his or her tax
adviser regarding the U.S. and foreign tax consequences of the ownership of
shares of the Fund, including a 30% (or lower treaty rate) United States
withholding tax on dividends representing ordinary income and net short-term
capital gains, and the applicability of United States gift and estate taxes.
8.
INFORMATION ABOUT THE FUND
The directors, trustees and officers of Lord Abbett-sponsored mutual funds,
together with the partners and employees of Lord Abbett, are permitted to
purchase and sell securities for their personal investment accounts. In engaging
in personal securities transactions, however, such persons are subject to
requirements and restrictions contained in the Fund's Code of Ethics which
complies, in substance, with each of the recommendations of the Investment
Company Institute's Advisory Group on Personal Investing. Among other things,
the Code requires that Lord Abbett partners and employees obtain advance
approval before buying or selling securities, submit confirmations and quarterly
transaction reports, and obtain approval before becoming a director of any
company; and it prohibits such persons from investing in a security 7 days
before or after any Lord Abbett-sponsored fund or Lord Abbett-managed account
considers a trade or trades in such security, from profiting on trades of the
same security within 60 days and from trading on material and non-public
information. The Code imposes certain similar requirements and restrictions on
the independent directors and trustees of each Lord Abbett-sponsored mutual fund
to the extent contemplated by the recommendations of the Advisory Group.
9.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended January 31, 1999 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1999 Annual Report to Shareholders of Lord Abbett
Developing Growth Fund, Inc. are incorporated herein by reference to such
financial statements and report in reliance upon the authority of Deloitte &
Touche LLP as experts in auditing and accounting.
20
<PAGE>
PART C OTHER INFORMATION
This Post-Effective Amendment No. 31 (the "Amendment") to the Registrant's
Registration Statement relates only to the Developing Growth Fund's Class A, B,
C and P.
The other classes of shares of the Registrant are listed below and are offered
by the Prospectus and Statement of Additional Information in Parts A and B,
respectively, of the Post-Effective Amendment to the Registrant's Registration
Statement as identified. The following are separate classes of shares of the
Registrant. This Amendment does not relate to, amend or otherwise affect the
Prospectus and Statement of Additional Information contained in the prior
Post-Effective Amendment listed below, and pursuant to Rule 485(d) under the
Securities Act of 1933, does not affect the effectiveness of such Post-Effective
Amendment.
POST-EFFECTIVE
AMENDMENT NO.
Class Y 30
<TABLE>
<S> <C>
Item 23 Exhibits
(a) Articles of Incorporation. Incorporated by reference.
Restated Articles of Incorporation. Incorporated by
reference to Post-effective Amendment No. 17 to the
Registration Statement on Form N-1A filed on April 30, 1998.
(b) By-Laws. Incorporated by reference to Post-Effective
Amendment No. 28 to the Registration Statement on Form N-1A
filed on March 1, 1999.
(c) Instruments Defining Rights of Security Holders incorporated
by reference.
(d) Investment Advisory Contracts incorporated by reference.
(e) Underwriting Contracts incorporated by reference.
(f) Bonus or Profit Sharing Contracts is incorporated by
reference to Post Effective Amendment No. 6 to the
Registration Statement on Form N-1A filed on October 7,
1994.
(g) Custodian Agreements incorporated by reference.
(h) Other Material Contracts incorporated by reference.
(i) Legal Opinion.
(j) Other Opinion.
(k) Omitted Financial Statements incorporated by reference.
(l) Initial Capital Agreements incorporated by reference.
(m) Rule 12b-1 Plan incorporated by reference to Post Effective
Amendment No. 12 filed on August 29, 1996.
(n) Financial Data Schedule.
(o) Rule 18f-3 Plan. Incorporated by reference to Post Effective
Amendment No. 4 to the Registration Statement on Form N-1A
filed on May 14, 1996.
Item 24 Persons Controlled by or Under Common Control with the Fund
None.
Item 25 Indemnification
All Trustees, officers, employees and agents of Registrant are to
be indemnified as set forth in Section 4.3 of Registrant's
Declaration of Trust.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to Trustees, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expense incurred or paid by a Trustee,
officer or controlling person of
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
In addition, Registrant maintains a Trustees' and officers'
errors and omissions liability insurance policy protecting
Trustees and officers against liability for breach of duty,
negligent act, error or omission committed in their capacity as
Trustees or officers. The policy contains certain exclusions,
among which is exclusion from coverage for active or deliberate
dishonest or fraudulent acts and exclusion for fines or penalties
imposed by law or other matters deemed uninsurable.
Item 26 Business and Other Connections of Investment Adviser
Lord, Abbett & Co. acts as investment adviser for twelve other
investment companies (of which it is principal underwriter for
thirteen) and as investment adviser to approximately 8,300
private accounts as of September 30, 1998. Other than acting as
trustees, directors and/or officers of open-end investment
companies managed by Lord, Abbett & Co., none of Lord, Abbett &
Co.'s partners has, in the past two fiscal years, engaged in any
other business, profession, vocation or employment of a
substantial nature for his own account or in the capacity of
director, officer, employee, partner or Trustee of any entity.
Item 27 Principal Underwriters
(a) Lord Abbett Bond-Debenture Fund, Inc.
Mid-Cap Value Fund, Inc.
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett Global Fund, Inc.
Lord Abbett Series Fund, Inc.
Lord Abbett U.S. Government Money Market Fund, Inc.
Lord Abbett Equity Fund
Lord Abbett Tax-Free Income Trust
Lord Abbett Affiliated Fund, Inc.
Lord Abbett Investment Trust
Lord Abbett Research Fund, Inc.
Lord Abbett Securities Trust
Investment Advisor
American Skandia Trust (Lord Abbett Growth & Income Portfolio)
(b) The partners of Lord, Abbett & Co. are:
</TABLE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address (1) with Registrant
-------------------- ---------------------
<S> <C> <C>
Robert S. Dow Chairman and President
Paul A. Hilstad Vice President & Secretary
Stephen J. McGruder Executive Vice President
Daniel E. Carper Vice President
Robert G. Morris Vice President
John J. Walsh Vice President
</TABLE>
<TABLE>
<S> <C>
The other general partners of Lord Abbett & Co. who are neither
officers nor directors of the Registrant are Stephen I. Allen,
Zane E. Brown, John E. Erard, Robert P. Fetch, Daria L. Foster,
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Robert I. Gerber, W. Thomas Hudson, Jr., Stephen I. McGruder,
Michael B. McLaughlin, Robert J. Noelke, R. Mark Pennington, and
Christopher J. Towle.
Each of the above has a principal business address:
767 Fifth Avenue, New York, NY 10153
(c) Not applicable
Item 28 Location of Accounts and Records
Registrant maintains the records, required by Rules 31a - 1(a)
and (b), and 31a - 2(a) at its main office.
Lord, Abbett & Co. maintains the records required by Rules 31a -
1(f) and 31a - 2(e) at its main office.
Certain records such as cancelled stock certificates and
correspondence may be physically maintained at the main office of
the Registrant's Transfer Agent, Custodian, or Shareholder
Servicing Agent within the requirements of Rule 31a-3.
Item 29 Management Services
None
Item 30 Undertakings
The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
The registrant undertakes, if requested to do so by the holders
of at least 10% of the registrant's outstanding shares, to call a
meeting of shareholders for the purpose of voting upon the
question of removal of a director or directors and to assist in
communications with other shareholders as required by Section
16(c) of the Investment Company Act of 1940, as amended.
</TABLE>
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Fund certifies that it meets all of the
requirements for effectiveness of this registration statement under rule 485(b)
under the Securities Act and had duly caused this registration statement to be
signed on its behalf by the undersigned, duly authorized, in the City of New
York, and State of New York on the 27th day of May, 1999.
BY: /s/ Lawrence H. Kaplan
____________________________________
Lawrence H. Kaplan
Vice President
LORD ABBET DEVELOPING GROWTH FUND, INC.
5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
Chairman, President
/s/ Robert S. Dow and Director/Trustee May 27, 1999
_____________________________ ______________________________________ _______________________
Robert S. Dow
/s/ E. Thayer Bigelow Director/Trustee May 27, 1999
_____________________________ ______________________________________ _______________________
E. Thayer Bigelow
/s/ William H. T. Bush Director/Trustee May 27, 1999
_____________________________ ______________________________________ _______________________
William H. T. Bush
/s/ Robert B. Calhoun, Jr. Director/Trustee May 27, 1999
_____________________________ ______________________________________ _______________________
Robert B. Calhoun, Jr.
/s/ Stewart S. Dixon Director/Trustee May 27, 1999
_____________________________ ______________________________________ _______________________
Stewart S. Dixon
/s/ John C. Jansing Director/Trustee May 27, 1999
_____________________________ ______________________________________ _______________________
John C. Jansing
/s/ C. Alan MacDonald Director/Trustee May 27, 1999
_____________________________ ______________________________________ _______________________
C. Alan MacDonald
/s/ Hansel B. Millican, Jr. Director/Trustee May 27, 1999
_____________________________ ______________________________________ _______________________
Hansel B. Millican, Jr.
/s/ Thomas J. Neff Director/Trustee May 27, 1999
_____________________________ ______________________________________ _______________________
Thomas J. Neff
</TABLE>
BY: /s/ Lawrence H. Kaplan
______________________
Lawrence H. Kaplan
Attorney - in - Fact
6
STATEMENT OF DIFFERENCES
------------------------
The service mark symbol shall be expressed as............................ 'sm'
April 27, 1999
Lord Abbett Developing Growth Fund, Inc.
The GM Building
767 Fifth Avenue
New York, New York 10153-0203
Dear Sirs:
You have requested our opinion in connection with your filing of
Post-Effective Amendment No. 31 to the Registration Statement on Form
N-1A (the "Post-Effective Amendment") under the Investment Company Act, as
amended (the "Act"), of Lord Abbett Developing Growth Fund, Inc., a Maryland
corporation (the "Company"), and in connection therewith your registration of
shares of capital stock, par value of $.001 per share, of the Company (the
"Shares").
We have examined and relied upon originals, or copies certified to our
satisfaction, of such company records, documents, certificates and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion set forth below.
<PAGE>
We are of the opinion that the Shares issued in the continuous
offering have been duly authorized and, assuming the issuance of the Shares for
cash at net asset value and receipt by the Company of the consideration therefor
as set forth in the Post-Effective Amendment and to the extent such Shares
remain outstanding, the Shares have been and will be validly issued, fully paid
and nonassessable.
We express no opinion as to matters governed by any laws other than
the General Corporation Laws of the State of Maryland and the federal laws of
the United States. We consent to the filing of this opinion solely in connection
with the Post-Effective Amendment. In giving such consent, we do not hereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Act or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
Debevoise & Plimpton
CONSENT OF INDEPENDENT AUDITORS
Lord Abbett Developing Growth Fund, Inc.:
We consent to the incorporation by reference in Post-Effective Amendment No. 31
to Registration Statement No. 2-62797 of our report dated March 12, 1999
appearing in the Annual Report to Shareholders for the year ended January 31,
1999, and to the references to us under the caption "Financial Highlights" in
the Prospectus and under the captions "Investment Advisory and Other Services"
and "Financial Statements" appearing in the Statement of Additional Information,
both of which are part of such Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
May 26, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000276914
<NAME> LORD ABBETT DEVELOPING GROWTH FUND, INC.
<SERIES>
<NUMBER> 001
<NAME> CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 1,085,369,833
<INVESTMENTS-AT-VALUE> 1,349,616,777
<RECEIVABLES> 123,124,939
<ASSETS-OTHER> 2,942,708
<OTHER-ITEMS-ASSETS> 11,041,265
<TOTAL-ASSETS> 1,486,725,688
<PAYABLE-FOR-SECURITIES> 137,532,696
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,744,433
<TOTAL-LIABILITIES> 141,277,129
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,052,291,400
<SHARES-COMMON-STOCK> 54,491,843
<SHARES-COMMON-PRIOR> 46,973,261
<ACCUMULATED-NII-CURRENT> (311,089)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 26,040,602
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 266,182,116
<NET-ASSETS> 1,345,448,559
<DIVIDEND-INCOME> 1,537,729
<INTEREST-INCOME> 2,648,511
<OTHER-INCOME> 467,257
<EXPENSES-NET> 10,204,369
<NET-INVESTMENT-INCOME> (5,550,872)
<REALIZED-GAINS-CURRENT> 26,327,061
<APPREC-INCREASE-CURRENT> 120,503,925
<NET-CHANGE-FROM-OPS> 141,280,114
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 1,746,420
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 34,439,805
<NUMBER-OF-SHARES-REDEEMED> 12,116,669
<SHARES-REINVESTED> 98,898
<NET-CHANGE-IN-ASSETS> 791,116,743
<ACCUMULATED-NII-PRIOR> (62,806)
<ACCUMULATED-GAINS-PRIOR> 31,871,987
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,444,605
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,286,444
<AVERAGE-NET-ASSETS> 741,084,595
<PER-SHARE-NAV-BEGIN> 14.27
<PER-SHARE-NII> (.07)
<PER-SHARE-GAIN-APPREC> 2.10
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.25
<EXPENSE-RATIO> 0.98
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000276914
<NAME> LORD ABBETT DEVELOPING GROWTH FUND, INC.
<SERIES>
<NUMBER> 002
<NAME> CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 1,085,369,833
<INVESTMENTS-AT-VALUE> 1,349,616,777
<RECEIVABLES> 123,124,939
<ASSETS-OTHER> 2,942,708
<OTHER-ITEMS-ASSETS> 11,041,265
<TOTAL-ASSETS> 1,486,725,688
<PAYABLE-FOR-SECURITIES> 137,532,696
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,744,433
<TOTAL-LIABILITIES> 141,277,129
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,052,291,400
<SHARES-COMMON-STOCK> 12,335,425
<SHARES-COMMON-PRIOR> 9,260,597
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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