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. 33 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [X]
OF 1940
Amendment No. 32 [X]
LORD ABBETT DEVELOPING GROWTH FUND, INC.
----------------------------------------
Exact Name of Registrant as Specified in Charter
90 Hudson Street, Jersey City, New Jersey 07302-3973
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Address of Principal Executive Office
Registrant's Telephone Number (201) 395-2000
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Lawrence H. Kaplan, Vice President
90 Hudson Street, Jersey city, New Jersey 07302-3973
----------------------------------------------------
(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)
----------
X on June 1, 2000 pursuant to paragraph (b)
-----------
60 days after filing pursuant to paragraph (a) (1)
----------
on (date) pursuant to paragraph (a) (1)
----------
75 days after filing pursuant to paragraph (a) (2)
----------
on (date) pursuant to paragraph (a) (2) of Rule 485
----------
If appropriate, check the following box:
this post-effective amendment designates a new effective date
---------- for a previously filed post-effective amendment
<PAGE>
Lord Abbett
Developing Growth Fund
Prospectus
June 1, 2000
[LOGO]
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
Table of Contents
The Fund
What you should know Goal 2
about the Fund Principal Strategy 2
Main Risks 2
Performance 3
Fees and Expenses 4
Your Investment
Information for managing Purchases* 5
your Fund account Sales Compensation 8
Opening Your Account 8
Redemptions 9
Distributions and Taxes 9
Services For Fund Investors 10
Management 11
For More Information
How to learn more Other Investment Techniques 12
about the Fund Glossary of Shaded Terms 13
Recent Performance 14
Financial Highlights 15
Line Graph Comparison 16
Compensation For Your Dealer 17
How to learn more about Back Cover
the Fund and other
Lord Abbett Funds
* As of February 1, 2000, shares of the Fund have not been available for
purchases by new investors, other than through certain qualified retirement
plans. See "Purchases" in this prospectus for more information.
<PAGE>
GOAL
The Fund's investment objective is long-term growth of capital through a
diversified and actively managed portfolio consisting of developing growth
companies, many of which are traded over the counter.
PRINCIPAL STRATEGY
To pursue its goal, the Fund primarily invests in the common stocks of
companies with above-average, long-term growth potential, particularly
smaller companies considered to be in the developing growth phase. The Fund
uses a bottom-up stock selection process, which means that it focuses on
the investment fundamentals of companies, rather than reacting to stock
market events. The Fund is broadly diversified over many industries and
economic sectors. Normally, the Fund invests at least 65% of its total
assets in securities of small companies.
The Fund tries to identify companies that it believes are strongly
positioned in the developing growth phase. This we define as the period of
swift development after a company's start-up phase when growth occurs at a
rate rarely equaled by established companies in their mature years. Of
course, because the actual growth of a company cannot be foreseen, we may
not always be correct in our judgment.
While typically fully invested, we may take a temporary defensive position
by investing some of the Fund's assets in cash and short-term debt
securities. This could reduce the benefit from any upswing in the market
and prevent the Fund from achieving its investment objective.
MAIN RISKS
The Fund is subject to the general risks and considerations associated with
equity investing. The value of your investment will fluctuate in response
to movements in the stock market in general, and to the changing prospects
of individual companies in which the Fund invests.
The Fund has particular risks associated with growth stocks. Different
types of stocks shift in and out of favor depending on market and economic
conditions. Although growth companies may grow faster than other companies,
they may have greater volatility in their stock prices. In addition, if the
Fund's assessment of a company's potential for growth or market conditions
is wrong, it could suffer losses or produce poor performance relative to
other funds, even in a rising market.
Investing in small companies generally involves greater risks than
investing in the stocks of large companies. Small companies may have less
experienced management
and unproven track records. They may rely on limited product lines and have
limited financial resources. These factors may make them more susceptible
to setbacks or economic downturns. In addition, small company stocks tend
to have fewer shares outstanding and trade less frequently than the stocks
of larger companies. As a result, there may be less liquidity in small
company stocks, subjecting them to greater price fluctuations than larger
company stocks.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money by investing in
the Fund.
We or the Fund refers to Lord Abbett Developing Growth Fund, Inc. About the
Fund. The Fund is a professionally managed portfolio primarily holding
securities purchased with the pooled money of investors. It strives to reach its
stated goal, although as with all mutual funds, it cannot guarantee results.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies used by the Fund and
their risks.
The Fund 2
<PAGE>
Developing Growth Fund ` Symbols: Class A - LAGWX
Class B - LADBX
Class C - LADCX
Class P - LADPX
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
--------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
1989 - 14.1%
1990 - -6.4%
1991 - 56.4%
1992 - -3.1%
1993 - 12.6%
1994 - 6.2%
1995 - 45.7%
1996 - 22.2%
1997 - 30.8%
1998 - 8.3%
1999 - 38.2%
Best Quarter 1st Q `91 30.0% Worst Quarter 3rd Q `90 -25.0%
--------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A, B, C and P shares compared to those of a broad-based securities
market index. The Fund's returns reflect payment of the maximum applicable
front-end or deferred sales charges.
--------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
--------------------------------------------------------------------------------
Share Class 1 Year 5 Years 10 Years Since Inception(1)
--------------------------------------------------------------------------------
Class A shares 30.20% 26.82% 18.72% -
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Class B shares 32.26% - - 25.30%
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Class C shares 36.21% - - 25.84%
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Class P shares 37.96% - - 14.17%
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Russell 2000 Index(2) 21.26% 16.69% 13.40% 16.24%(3)
16.24%(4)
10.01%(5)
--------------------------------------------------------------------------------
(1) 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.
(2) Performance for the unmanaged Russell 2000 Index does not reflect any fees
or expenses. The performance of the index is not necessarily representative
of the Fund's performance.
(3) Represents total returns for the period 7/31/96 to 12/31/99, to correspond
with Class B inception date.
(4) Represents total returns for the period 7/31/96 to 12/31/99, to correspond
with Class C inception date.
(5) Represents total returns for the period 1/31/98 to 12/31/99, to correspond
with Class P inception date.
The Fund 3
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------------------------
Class A Class B(2) Class C Class P
<S> <C> <C> <C> <C>
Shareholder Fees (Fees paid directly from your investment)
--------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
(as a % of offering price) 5.75% none none none
--------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (see "Purchases") none(1) 5.00% 1.00%(1) none
--------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)
--------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.53% 0.53% 0.53% 0.53%
--------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(3) 0.41% 1.00% 1.00% 0.45%
--------------------------------------------------------------------------------------------------
Other Expenses 0.26% 0.26% 0.26% 0.26%
--------------------------------------------------------------------------------------------------
Total Operating Expenses 1.20% 1.79% 1.79% 1.24%
--------------------------------------------------------------------------------------------------
</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions (a) of Class A shares made within 24 months following any
purchases made without a sales charge, and (b) Class C shares if they are
redeemed before the first anniversary of their purchase.
(2) Class B shares will convert to Class A shares on the eighth anniversary of
your original purchase of Class B shares.
(3) 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.
--------------------------------------------------------------------------------
Example
--------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This Example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs (including any applicable contingent deferred sales
charges) would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Class A shares $690 $934 $1,197 $1,946
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Class B shares $682 $863 $1,170 $1,935
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Class C shares $282 $563 $ 970 $2,105
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Class P shares $126 $393 $ 681 $1,500
--------------------------------------------------------------------------------------------------
You would have paid the following expenses if you did not redeem your shares:
Class A shares $690 $934 $1,197 $1,946
--------------------------------------------------------------------------------------------------
Class B shares $182 $563 $ 970 $1,935
--------------------------------------------------------------------------------------------------
Class C shares $182 $563 $ 970 $2,105
--------------------------------------------------------------------------------------------------
Class P shares $126 $393 $ 681 $1,500
--------------------------------------------------------------------------------------------------
</TABLE>
Management fees are payable to Lord, Abbett & Co. ("Lord Abbett") for the Fund's
investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
4 The Fund
<PAGE>
Your Investment
PURCHASES
The Fund offers in this prospectus four classes of shares: Classes A, B, C
and P, each with different expenses and dividends. You may purchase shares
at the net asset value ("NAV") per share determined after we receive your
purchase order submitted in proper form. A front-end sales charge is
normally added to the NAV in the case of the Class A shares. There is no
front-end sales charge in the case of the Class B, Class C, and Class P
shares, although there may be a contingent deferred sales charge ("CDSC")
on Class B and Class 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
purchase options with your investment professional.
For more information, see "Alternative Sales Arrangements" in the Statement
of Additional Information.
We reserve the right to withdraw all or any part of the offering made by
this prospectus or to reject any purchase order. We also reserve the right
to waive or change minimum investment requirements. All purchase orders are
subject to our acceptance and are not binding until confirmed or accepted
in writing.
================================================================================
Share Classes
================================================================================
Class A o normally offered with a front-end sales charge
Class B o no front-end sales charge, however, a CDSC is applied to shares sold
prior to the sixth anniversary of purchase
o higher annual expenses than Class A shares o automatically converts
to Class A shares after eight years
Class C o no front-end sales charge, however, a CDSC is applied to shares sold
prior to the first anniversary of purchase
o higher annual expenses than Class A shares
Class P o available to certain pension or retirement plans and pursuant to a
Mutual Fund Fee Based Program
================================================================================
Front-End Sales Charges - Class A Shares
================================================================================
To Compute
As a % of As a % of OfferingPrice
Your Investment Offering Price Your Investment Divide NAV by
================================================================================
Less than $50,000 5.75% 6.10% .9425
================================================================================
$50,000 to $99,999 4.75% 4.99% .9525
================================================================================
$100,000 to $249,999 3.75% 3.99% .9625
================================================================================
$250,000 to $499,999 2.75% 2.83% .9725
================================================================================
$500,000 to $999,999 2.00% 2.04% .9800
================================================================================
$1,000,000 and over No Sales Charge 1.0000
================================================================================
As of February 1, 2000, all classes (A, B, C and P) have not been available for
purchase by new investors other than through certain qualified retirement plans.
Existing share-holders may continue to invest in the Fund by adding to existing
accounts. Qualified plans currently offering the Fund as an investment option
may open new participant accounts. However, it is the Fund's intention not to
accept any purchase order for more than $5 million.
NAV per share for each class of Fund shares is calculated each business day at
the close of regular trading on the New York Stock Exchange ("NYSE"), normally
4:00 p.m. Eastern time. Purchases and sales of Fund shares are executed at the
NAV next determined after the Fund receives your order in proper form. In
calculating NAV, securities for which market quotations are available are valued
at those quotations. Securities for which such quotations are not available are
valued at fair value under procedures approved by the Board of the Fund.
Your Investment 5
<PAGE>
Reducing Your Class A Front-End Sales Charges. Class A shares may be
purchased at a discount if you qualify under either of the following
conditions:
o Rights of Accumulation -- A Purchaser may apply the value (at public
offering price) of the shares already owned to a new purchase of Class
A shares of any Eligible Fund in order to reduce the sales charge.
o Letter of Intention -- A Purchaser of Class A shares may 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 Letter of Intention can be backdated
90 days. Current holdings under Rights of Accumulation can be included
in a Letter of Intention.
For more information on eligibility for these privileges, read the
applicable sections in the attached application.
Class A Share Purchases Without A Front-End Sales Charge. Class A shares
may be purchased without a front-end sales charge under any of the
following conditions:
o purchases of $1 million or more +
o purchases by Retirement Plans with at least 100 eligible employees +
o purchases under a Special Retirement Wrap Program +
o purchases made with dividends and distributions on Class A shares of
another Eligible Fund
o purchases representing repayment under the loan feature of the Lord
Abbett- sponsored prototype 403(b) Plan for Class A shares
o purchases by employees of any consenting securities dealer having a
sales agreement with Lord Abbett Distributor
o purchases under a Mutual Fund Fee Based Program
o purchases by trustees or custodians of any pension or profit sharing
plan, or payroll deduction IRA for the employees of any consenting
securities dealer having a sales agreement with Lord Abbett
Distributor
o purchases by each Lord Abbett-sponsored fund's Directors or Trustees
(including retired Directors or Trustees), officers of each Lord
Abbett-sponsored fund, employees and partners of Lord Abbett. These
categories of purchasers also include other family members of such
purchasers.
See the Statement of Additional Information for a listing of other
categories of purchasers who qualify for Class A share purchases without a
front-end sales charge.
+ These categories may be subject to a CDSC.
Class A Share CDSC. If you buy Class A shares under one of the starred (o)
categories listed above and you redeem any of them within 24 months after
the month in which you initially purchased them, the Fund will normally
collect a CDSC of 1%.
The Class A share CDSC generally will be waived for the following
conditions:
o benefit payments under Retirement Plans in connection with loans,
hardship withdrawals, death, disability, retirement, separation from
service or any excess distribution under Retirement Plans
(documentation may be required)
o redemptions continuing as investments in another fund participating in
a Special Retirement Wrap Program.
Retirement Plans include employer-sponsored retirement plans under the Internal
Revenue Code, excluding Individual Retirement Accounts. Lord Abbett offers a
variety of Retirement Plans. Call 800-253-7299 for information about:
o Traditional, Rollover, Roth and Education IRAs
o Simple IRAs, SEP-IRAs, 401(k) and 403(b) accounts
o Defined Contribution Plans.
Lord Abbett Distributor LLC ("Lord Abbett Distributor") acts as agent
for the Fund to work with investment professionals who buy and/or sell shares of
the Fund on behalf of their clients. Generally, Lord Abbett Distributor does not
sell Fund shares directly to investors.
Benefit Payment Documentation
(Class A CDSC only)
o under $50,000 - no documentation necessary
o over $50,000 - reason for benefit payment must be received in writing. Use
the address indicated under "Opening your Account".
6 Your Investment
<PAGE>
Class B Share CDSC. The CDSC for Class B shares normally applies if you
redeem your shares before the sixth anniversary of their initial purchase.
The CDSC declines the longer you own your shares, according to the
following schedule:
================================================================================
Contingent Deferred Sales Charges - Class B Shares
================================================================================
Anniversary(1) of the day on Contingent Deferred Sales Charge
which the purchase order on redemption (as % of amount
was accepted subject to charge)
On Before
================================================================================
1st 5.0%
================================================================================
1st 2nd 4.0%
================================================================================
2nd 3rd 3.0%
================================================================================
3rd 4th 3.0%
================================================================================
4th 5th 2.0%
================================================================================
5th 6th 1.0%
================================================================================
on or after the 6th(2) None
================================================================================
(1) The anniversary is the same calendar day in each respective year after the
date of purchase. For example, the anniversary 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.
Different conversion schedules may apply to Class B shares purchased by or
on behalf of retirement plans in connection with certain special programs
or platforms created and maintained by certain broker-dealer firms.
The Class B share CDSC generally will be waived under the following
circumstances:
o benefit payments under Retirement Plans in connection with loans,
hardship withdrawals, death, disability, retirement, separation from
service or any excess contribution or distribution under Retirement
Plans
o Eligible Mandatory Distributions under 403(b) Plans and individual
retirement accounts
o death of the shareholder
o redemptions of shares in connection with Systematic Withdrawal Plans
(up to 12% per year).
See "Systematic Withdrawal Plan" under "Services For Fund Investors" for
more information on CDSCs with respect to Class B shares.
Class C Share CDSC. The 1% CDSC for Class C shares normally applies if you
redeem your shares before the first anniversary of the purchase of such
shares.
Class P Shares. Class P shares have lower annual expenses than Class B and
Class C shares, no front-end sales charge, and no CDSC. Class P shares are
currently sold and redeemed at NAV (a) pursuant to a Mutual Fund Fee Based
Program or (b) to the trustees of, or employer-sponsors with respect to,
pension or retirement plans with at least 100 eligible employees (such as a
plan under Section 401(a), 401(k) or 457(b) of the Internal Revenue Code)
which engage an investment professional providing, or participating in an
agreement to provide, certain recordkeeping, administrative and/or
sub-transfer agency services to the Fund on behalf of the Class P
shareholders.
CDSC, regardless of class, is not charged on shares acquired through
reinvestment of dividends or capital gains distributions and is charged on the
original purchase cost or the current market value of the shares at the time
they are being sold, which-ever is lower. In addition, repayment of loans under
Retirement Plans and 403(b) Plans will constitute new sales for purposes of
assessing the CDSC.
To minimize the amount of any CDSC, the Fund redeems shares in the following
order:
1. shares acquired by reinvestment of dividends and capital gains (always free
of a CDSC)
2. shares held for six years or more (Class B) or two years or more after the
month of purchase (Class A) or one year or more (Class C)
3. shares held the longest before the sixth anniversary of their purchase
(Class B) or before the second anniversary after the month of purchase
(Class A) or before the first anniversary of their purchase (Class C)
investors.
Your Investment
<PAGE>
SALES COMPENSATION
As part of its plan for distributing shares, the Fund and Lord Abbett
Distributor pay sales and service compensation to Authorized Institutions
that sell the Fund's shares and service its shareholder accounts.
Sales compensation originates from two sources, as shown in the table "Fees
and Expenses": sales charges, which are paid directly by shareholders; and
12b-1 distribution fees which are paid out of the Fund's assets. Service
compensation originates from 12b-1 service fees. The total 12b-1 fees
payable with respect to each share class are .35% of Class A shares(plus
distribution fees of up to 1.00% on certain qualifying purchases), 1.00% of
Class B and Class C shares, and .45% of Class P shares. The amounts payable
as compensation to Authorized Institutions, such as your dealer, are shown
in the chart at the end of this prospectus. The portion of such
compensation paid to Lord Abbett Distributor is discussed under "Sales
Activities" and "Service Activities." Sometimes we do not pay compensation
where tracking data is not available for certain accounts or where the
Authorized Institution waives part of the compensation. In such cases, we
may not require payment of any otherwise applicable CDSC.
We may pay Additional Concessions to Authorized Institutions from time to
time.
Sales Activities. We may use 12b-1 distribution fees to pay Authorized
Institutions to finance any activity which is primarily intended to result
in the sale of shares. Lord Abbett Distributor uses its portion of the
distribution fees attributable to the Fund's Class A and Class C shares for
activities which are primarily intended to result in the sale of such Class
A and Class C shares, respectively. These activities include, but are not
limited to, printing of prospectuses and statements of additional
information and reports for other than existing shareholders, preparation
and distribution of advertising and sales material, expenses of organizing
and conducting sales seminars, Additional Concessions to Authorized
Institutions, the cost necessary to provide distribution-related services
or personnel, travel, office expenses, equipment and other allocable
overhead.
Service Activities. We may pay 12b-1 service fees to Authorized
Institutions for any activity which is primarily intended to result in
personal service and/or the maintenance of shareholder accounts. Any
portion of the service fees paid to Lord Abbett Distributor will be used to
service and maintain shareholder accounts.
OPENING YOUR ACCOUNT
MINIMUM INITIAL INVESTMENT
o Regular Account $1,000
--------------------------------------------------------------------------------
o Individual Retirement Accounts and
403(b) Plans under the Internal Revenue Code $250
--------------------------------------------------------------------------------
o Uniform Gift to Minor Account $250
--------------------------------------------------------------------------------
o Invest-A-Matic $250
--------------------------------------------------------------------------------
For Retirement Plans and Mutual Fund Fee Based Programs no minimum investment is
required, regardless of share class.
You may purchase shares through any independent securities dealer who has a
sales agreement with Lord Abbett Distributor or you can fill out the
attached application and send it to the Fund at the address stated below.
You should carefully read the paragraph below entitled "Proper Form" before
placing your order to ensure that your order will be accepted.
8 Your Investment
<PAGE>
Lord Abbett Developing Growth Fund, Inc.
P.O. Box 219100
Kansas City, MO 64121
Proper Form. An order submitted directly to the Fund must contain: (1) a
completed application, and (2) payment by check. When purchases are made by
check, redemption proceeds will not be paid until the Fund or transfer
agent is advised that the check has cleared, which may take up to 15
calendar days. For more information call the Fund at 800-821-5129.
By Exchange. Telephone the Fund at 800-821-5129 to request an exchange from
any eligible Lord Abbett-sponsored fund.
REDEMPTIONS
By Broker. Call your investment professional for instructions on how to
redeem your shares.
By Telephone. To obtain the proceeds of a redemption of $50,000 or less
from your account, you or your representative should call the Fund at
800-821-5129.
By Mail. Submit a written redemption request indicating the name(s) in
which the account is registered, the Fund's name, the class of shares, your
account number, and the dollar value or number of shares you wish to sell.
Include all necessary signatures. If the signer has any Legal Capacity, the
signature and capacity must be guaranteed by an Eligible Guarantor. Certain
other legal documentation may be required. For more information regarding
proper documentation call 800-821-5129.
Normally a check will be mailed to the name(s) and address in which the
account is registered (or otherwise according to your instruction) within
three business days after receipt of your redemption request. Your account
balance must be sufficient to cover the amount being redeemed or your
redemption order will not be processed. Under unusual circumstances, the
Fund may suspend redemptions, or postpone payment for more than seven days,
as permitted by federal securities laws.
To determine if a CDSC applies to a redemption, see "Class A share CDSC,"
"Class B share CDSC" or "Class C share CDSC."
DISTRIBUTIONS AND TAXES
The Fund expects to pay income dividends and capital gains distributions,
if any, annually. Your distributions will be reinvested in the Fund unless
you instruct the Fund to pay them to you in cash. There are no sales
charges on reinvestments. The tax status of distributions is the same for
all shareholders regardless of how long they have owned Fund shares or
whether distributions are reinvested or paid in cash.
Except in tax-advantaged accounts, any sale, redemption or exchange of Fund
shares may be taxable to the shareholder.
Information on the tax treatment of distributions, including the source of
dividends and distributions of capital gains by the Fund, will be mailed to
shareholders each year. Because everyone's tax situation is unique, you
should consult your tax adviser regarding the treatment of 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.
Exchange Limitations. Exchanges should not be used to try to take advantage of
short-term swings in the market. Frequent exchanges create higher expenses for
the Fund. Accordingly, the Fund reserves the right to limit or terminate this
privilege for any shareholder making frequent exchanges or abusing the
privilege. The Fund also may revoke the privilege for all shareholders upon 60
days written notice.
Small Accounts. Our Board may authorize closing any account in which there are
fewer than 25 shares if it is in the Fund's best interest to do so.
Eligible Guarantor is any broker or bank that is a member of the medallion stamp
program. Most major securities firms and banks are members of this program. A
notary public is not an eligible guarantor.
Your Investment 9
Services for Fund Investors
Automatic Services
Buying or selling shares automatically is easy with the services described
below. With each service, you select a schedule and amount, subject to
certain restrictions. You may set up most of these services when filling
out your application or by calling 800-821-5129.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
<S> <C>
For investing
Invest-A-Matic You may 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 may automatically reinvest the dividends and distributions from your account
into another account in any Eligible Fund ($50 minimum).
For selling shares
Systematic You can make regular withdrawals from most Lord Abbett Funds. Automatic
Withdrawal cash withdrawals will 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 redemptions of up to 12% of the current net
asset value of your account at the time of your SWPrequest. For Class B share
redemptions over 12% per year, the CDSC will apply to the entire redemption.
Please contact the Fund for assistance in minimizing the CDSC in this situation.
Class B and Redemption proceeds due to a SWP for Class B and Class C shares will be
C shares redeemed in the order described under "CDSC" under "Purchases."
--------------------------------------------------------------------------------------------------------------------
</TABLE>
OTHER SERVICES
Telephone Investing. After we have received the attached application
(selecting "yes" under Section 8C and completing Section 7), you may
instruct us by phone to have money transferred from your bank account to
purchase shares of the Fund for an existing account. The Fund will purchase
the requested shares when it receives the money from your bank.
Exchanges. You or your investment professional may instruct the Fund to
exchange shares of any class for shares of the same class of any Eligible
Fund. Instruction may be provided in writing or by telephone, with proper
identification, by calling 800-821-5129. The Fund must receive instructions
for the exchange before the close of the NYSE on the day of your call, in
which case you will get the NAV per share of the Eligible Fund determined
on that day. Exchanges will be treated as a sale for federal tax purposes.
Be sure to read the current prospectus for any Fund into which you are
exchanging.
Reinvestment Privilege. If you sell shares of the Fund, you have a one-time
right to reinvest some or all of the proceeds in the same class of any
Eligible Fund within 60 days without a sales charge. If you paid a CDSC
when you sold your shares, you will be credited with the amount of the
CDSC. All accounts involved must have the same registration.
Account Statements. Every Lord Abbett investor automatically receives
quarterly account statements.
Householding. Shareholders with the same last name and address will receive
a single copy of a prospectus and an annual and semi-annual report, unless
additional reports are specifically requested in writing to the Fund.
Telephone Transactions. You have this privilege unless you refuse it in writing.
For your security, telephone transaction requests are recorded. We will take
measures to verify the identity of the caller, such as asking for your name,
account number, social security or taxpayer identification number and other
relevant information. The Fund will not be liable for following instructions
communicated by telephone that it reasonably believes to be genuine.
Transactions by telephone may be difficult to implement in times of drastic
economic or market change.
10 Your Investment
<PAGE>
Account Changes. For any changes you need to make to your account, consult
your investment professional or call the Fund at 800-821-5129. Systematic
Exchange. You or your investment professional can establish a schedule of
exchanges between the same classes of any Eligible Fund.
MANAGEMENT
The Fund's investment adviser is Lord, Abbett & Co., 90 Hudson Street,
Jersey City, NJ 07302-3973. Founded in 1929, Lord Abbett manages one of the
nation's oldest mutual fund complexes, with approximately $35 billion in
more than 40 mutual fund portfolios and other advisory accounts. For more
information about the services Lord Abbett provides to the Fund, see the
Statement of Additional Information.
Lord Abbett is entitled to a management fee based on the Fund's average
daily net assets. The fee is calculated and payable monthly. The management
fee is calculated at the following annual rate:
.75 of 1% on the first $100 million of average daily net assets,
.50 of 1% on assets over $100 million.
Based on this calculation, the management fee paid to Lord Abbett for the
fiscal year ended January 31, 2000 was at an annual rate of .53 of 1% of
the Fund's average daily net assets.
Lord Abbett uses a team of investment 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 include Lesley-Jane Dixon
and Rayna Lesser. Mr. McGruder and Ms. Dixon have been with Lord Abbett
since 1995; Ms. Lesser has been with Lord Abbett since 1996. Prior to
joining Lord Abbett, Mr. McGruder was a portfolio manager with Wafra
Investment Advisory Group. Prior to joining Lord Abbett, Ms. Dixon was an
equity analyst with Wafra Investment Advisory Group. Ms. Lesser joined Lord
Abbett directly from Barnard College.
Your Investment 11
<PAGE>
For More Information
OTHER INVESTMENT TECHNIQUES
This section describes some of the investment techniques that might be used
by the Funds, and their risks.
Adjusting Investment Exposure. The Fund may, but is not required to, use
various strategies to change its investment exposure to adjust to changing
security prices, interest rates, currency exchange rates, commodity prices
and other factors. The Fund may use these transactions to change the risk
and return characteristics of its portfolio.
If we judge market conditions incorrectly or use a strategy that does not
correlate well with the Fund's investments, it could result in a loss, even
if we intended to lessen risk or enhance returns. These transactions may
involve a small investment of cash compared to the magnitude of the risk
assumed and could produce disproportionate gains or losses. Also, these
strategies could result in losses if the counterparty to a transaction does
not perform as promised.
Foreign Securities. The Fund may invest up to 10% of its assets in foreign
securities. Foreign securities are securities primarily traded in countries
outside the United States. Foreign markets and the securities traded in
them are not subject to the same degree of regulation as U.S. markets.
Securities clearance and settlement procedures may be different in foreign
countries. There may be less trading volume in foreign markets, subjecting
the securities traded in them to higher price fluctuations. Transaction
costs may be higher in foreign markets. The Fund may hold foreign
securities which trade on days when the Fund does not sell shares. As a
result, the value of the Fund's portfolio securities may change on days an
investor may not purchase or sell Fund shares.
Foreign issuers are generally not subject to similar, uniform accounting,
auditing and financial reporting requirements as U.S. issuers. Foreign
investments may be affected by changes in currency rates or currency
controls. Certain foreign countries may limit the Fund's ability to remove
its assets from the country. With respect to certain foreign countries,
there is a possibility of nationalization, expropriation or confiscatory
taxation, imposition of withholding or other taxes, and political or social
instability which could affect investments in those countries.
Short-Term Fixed-Income Securities. The Fund is authorized to invest
temporarily in certain short-term fixed income securities. Such securities
may be used to invest uncommitted cash balances, to maintain liquidity to
meet shareholder redemptions, or to take a temporary defensive position
against market declines. These securities include: oblig-
ations of the U.S. Government and its agencies and instrumentalities;
commercial paper, bank certificates of deposit, and bankers' acceptances;
and repurchase agreements collateralized by these securities.
12 For More Information
<PAGE>
GLOSSARY OF SHADED TERMS
Additional Concessions. Lord Abbett Distributor may, for specified periods,
allow dealers to retain the full sales charge for sales of shares or may
pay an additional concession to a dealer who sells a minimum dollar amount
of our shares and/or shares of other Lord Abbett-sponsored funds. In some
instances, such additional concessions will be offered only to certain
dealers expected to sell significant amounts of shares. Additional payments
may be paid from Lord Abbett Distributor's own resources or from
distribution fees received from the Fund and will be made in the form of
cash or, if permitted, non-cash payments. The non-cash payments will
include business seminars at Lord Abbett's headquarters or other locations,
including meals and entertainment, or the receipt of merchandise. The cash
payments may include payment of various business expenses of the dealer.
In selecting dealers to execute portfolio transactions for the Fund's
portfolio, if two or more dealers are considered capable of obtaining best
execution, we may prefer the dealer who has sold our shares and/or shares
of other Lord Abbett-sponsored funds.
Authorized Institutions. Institutions and persons permitted by law to
receive service and/or distribution fees under a Rule 12b-1 plan are
"Authorized Institutions." Lord Abbett Distributor is an Authorized
Institution.
Eligible Fund. An Eligible Fund is any Lord Abbett-sponsored fund except
for: (1) certain tax-free, single-state funds where the exchanging
shareholder is a resident of a state in which such series is not offered
for sale; (2) Lord Abbett Equity Fund; (3) Lord Abbett Series Fund; and (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 accounts 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 Class B share investment bears to
the total investment.
Legal Capacity. This term refers to the authority of an individual to act
on behalf of an entity or other person(s). For example, if a redemption
request were to be made on behalf of the estate of a deceased shareholder,
John W. Doe, by a person (Robert A. Doe) who has the legal capacity to act
for the estate of the deceased shareholder because he is the executor of
the estate, then the request must be executed as follows: Robert A. Doe,
Executor of the Estate of John W. Doe. That signature using that capacity
must be guaranteed by an Eligible Guarantor.
To give another example, if a redemption request were to be made on behalf
of the ABC Corporation by a person (Mary B. Doe) who has the legal capacity
to act on the behalf of the Corporation, because she is the president of
the Corporation, the request must be executed as follows: ABC Corporation
by Mary B. Doe, President. That signature using that capacity must be
guaranteed by an Eligible Guarantor (see example in right column).
Mutual Fund Fee Based Program. Certain unaffiliated authorized brokers,
dealers, registered investment advisers or other financial institutions 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 fund 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
GUARANTEED SIGNATURE. An acceptable form of guarantee would be as follows:
In the case of the estate --
Robert A. Doe
Executor of the Estate of
John W. Doe
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE ILLEGIBLE]
--------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
In the case of the corporation --
ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE ILLEGIBLE]
--------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
For More Information 13
<PAGE>
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 plans of multiple employers registered in the name of a
single bank trustee as one account), although more than one beneficiary is
involved.
Special Retirement Wrap Program. A program sponsored by an authorized
institution showing one or more characteristics distinguishing it, in the
opinion of Lord Abbett Distributor from a Mutual Fund Fee Based Program.
Such characteristics include, among other things, the fact that an
Authorized Institution does not charge its clients any fee of a consulting
or advisory nature that is economically equivalent to the distribution fee
under the Class A 12b-1 Plan and the fact that the program relates to
participant- directed Retirement Plans.
RECENT PERFORMANCE
The following is a discussion of recent performance for the 12-month period
ending January 31, 2000.
The Fund ended its fiscal year with solid performance, as the stocks of
small growth- oriented companies rebounded from their difficulties in the
early part of 1999. Throughout the period, our investment team remained
true to its investment strategy, focusing on acquiring the stocks of
well-run small companies with strong current earnings and future earnings
growth potential. Due to capacity constraints, and in order to maintain the
integrity of our investment philosophy, the Developing Growth Fund closed
its doors to all new investors at the end of business on January 31, 2000.
Current investors may continue to add to existing accounts.
Our investments in technology-related companies significantly contributed
to the Fund's strong performance during the year. In particular, the Fund
was helped by our holdings in technology outsourcing companies -- those
that help corporate America implement and operate Internet businesses and
wireless communication companies.
Conversely, stocks of companies in the Fund whose earnings did not meet
Wall Street expectations did not perform well. Many of these companies were
impacted by business slowdowns as they were forced to focus on potential
Y2K problems. Investors reacted in the extreme to any company that fell
short of earnings expectations, causing its stock price to fall sharply.
The strong performance of the stocks of small technology companies in
recent months increased our technology weighting. While valuations for
technology stocks have reached high levels in some cases, our research
suggests that the demand for technology goods and services warrants
continued exposure to the stocks of some of these companies.
We believe we are entering a favorable environment for small growth
companies, as the economy continues to exhibit signs of steady growth and
low inflation. Our research indicates that substantial value exists in many
of these smaller companies, as they offer greater growth potential and
better value than the average large company growth stock.
14 For More Information
<PAGE>
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, 2000 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended January 31, 2000, 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 Class B Shares
------------------------------------------------------------------------------------------------------------------------------------
Year Ended January 31, Year Ended January 31,
Per Share Operating Performance: 2000 1999 1998 1997 1996 2000 1999 1998 1997(d)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $16.25 $14.27 $12.80 $11.49 $9.58 $15.98 $14.12 $12.75 $12.14
====================================================================================================================================
Income (loss) from investment operations
====================================================================================================================================
Net investment loss (.11)(a) (.07)(a) (.10)(a) (.03) (.02) (.21)(a) (.17)(a) (.20)(a) (.05)
====================================================================================================================================
Net realized and unrealized
====================================================================================================================================
gain on investments 4.10 2.10 3.16 3.12 4.80 4.01 2.06 3.14 2.28
====================================================================================================================================
Total from investment operations 3.99 2.03 3.06 3.09 4.78 3.80 1.89 2.94 2.23
====================================================================================================================================
Distributions
====================================================================================================================================
Distributions from net realized gain (.69) (.05) (1.59) (1.78) (2.87) (.69) (.03) (1.57) (1.62)
====================================================================================================================================
Net asset value, end of year $19.55 $16.25 $14.27 $12.80 $11.49 $19.09 $15.98 $14.12 $12.75
====================================================================================================================================
Total Return(b) 25.33% 14.24% 24.38% 28.35% 50.22% 24.55% 13.37% 23.48% 19.43%(c)
====================================================================================================================================
Ratios to Average Net Assets:
====================================================================================================================================
Expenses 1.20%(e) .98%(e) 1.06% 1.10% 1.03% 1.79%(e) 1.72%(e) 1.76% .93%(c)
====================================================================================================================================
Net investment loss (.64)% (.46)% (.72)% (.67)% (.52)% (1.24)% (1.19)% (1.39)% (.73)%(c)
====================================================================================================================================
</TABLE>
<TABLE>
====================================================================================================================================
Class C Shares Class P Shares
------------------------------------------------------------------------------------------------------------------------------------
Year Ended January 31, Year Ended January 31,
Per Share Operating Performance: 2000 1999 1998 1997(d) 2000 1999 1998(d)
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $16.00 $14.13 $12.75 12.14 $16.19 $14.26 $14.38
====================================================================================================================================
Income (loss) from investment operations
====================================================================================================================================
Net investment loss (.21)(a) (.17)(a) (.19)(a) (.05) (.12)(a) (.10)(a) (.01)(a)
====================================================================================================================================
Net realized and unrealized
====================================================================================================================================
gain (loss) on investments 4.01 2.07 3.14 2.28 4.08 2.08 (.11)
====================================================================================================================================
Total from investment operations 3.80 1.90 2.95 2.23 3.96 1.98 (.12)
====================================================================================================================================
Distributions
====================================================================================================================================
Distributions from net realized gain (.69) (.03) (1.57) (1.62) (.69) (.05) --
====================================================================================================================================
Net asset value, end of year $19.11 $16.00 $14.13 $12.75 $19.46 $16.19 $14.26
====================================================================================================================================
Total Return(b) 24.45% 13.43% 23.55% 19.43%(c) 25.24% 13.89% (0.83)%(c)
====================================================================================================================================
Ratios to Average Net Assets:
====================================================================================================================================
Expenses 1.79%(e) 1.72%(e) 1.71% .93%(c) 1.25%(e) 1.17%(e) .08%(c)
====================================================================================================================================
Net investment loss (1.24)% (1.20)% (1.34)% (.73)%(c) (.70)% (.70)% (.05)%(c)
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended January 31,
------------------------------------------------------------------------------------------------------------------------------------
Supplemental Data For All Classes: 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Net assets, end of year (000) $2,912,681 $1,344,203 $553,086 $330,358 $197,602
====================================================================================================================================
Portfolio turnover rate 50.13% 30.89% 33.60% 42.35% 50.12%
====================================================================================================================================
</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 and 2000 include expenses paid through an expense
offset arrangement.
Financial Information 15
<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.
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NAV MAX Russel 2000
1/31/90 $10,000 $ 9,431 $10,000
1/31/91 $11,466 $10,813 $ 9,621
1/31/92 $16,226 $15,303 $13,929
1/31/93 $15,852 $14,951 $15,774
1/31/94 $18,454 $17,403 $18,706
1/31/95 $17,947 $16,926 $17,582
1/31/96 $26,961 $25,426 $22,847
1/31/97 $34,603 $32,634 $27,177
1/31/98 $43,043 $40,592 $32,088
1/31/99 $49,170 $46,371 $32,194
1/31/00 $61,623 $58,116 $37,905
================================================================================
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending January 31, 2000
1 Year 5 Years 10 Years Life
--------------------------------------------------------------------------------
Class A(3) 18.10% 26.48% 19.24% -
--------------------------------------------------------------------------------
Class B(4) 19.55% - - 22.80%
--------------------------------------------------------------------------------
Class C(5) 23.45% - - 23.33%
--------------------------------------------------------------------------------
Class P(6) 25.24% - - 11.08%
--------------------------------------------------------------------------------
(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, 2000 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.
16 Financial Information
<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> <C>
Less than $50,000 5.75% 5.00% 0.25% 5.24%
====================================================================================================================================
$50,000 - $99,999 4.75% 4.00% 0.25% 4.24%
====================================================================================================================================
$100,000 - $249,999 3.95% 3.25% 0.25% 3.49%
====================================================================================================================================
$250,000 - $499,999 2.75% 2.25% 0.25% 2.49%
====================================================================================================================================
$500,000 - $999,999 1.95% 1.75% 0.25% 1.99%
====================================================================================================================================
$1 million or more(3) or Retirement Plan - 100 or more eligible employees(3) or
Special Retirement Wrap Program(3)
====================================================================================================================================
First $5 million no front-end sales charge 1.00% 0.25% 1.25%
====================================================================================================================================
Next $5 million above that no front-end sales charge 0.55% 0.25% 0.80%
====================================================================================================================================
Next $40 million above that no front-end sales charge 0.50% 0.25% 0.75%
====================================================================================================================================
Over $50 million no front-end sales charge 0.25% 0.25% 0.50%
====================================================================================================================================
Class B investments(4) Paid at time of sale (% of net asset value)
====================================================================================================================================
All amounts no front-end sales charge 3.75% 0.25% 4.00%
====================================================================================================================================
Class C investments(4)
====================================================================================================================================
All amounts no front-end sales charge 0.75% 0.25% 1.00%
====================================================================================================================================
Class P investments Percentage of average net assets
====================================================================================================================================
All amounts no front-end sales charge 0.25% 0.20% 0.45%
====================================================================================================================================
</TABLE>
<TABLE>
ANNUAL COMPENSATION AFTER FIRST YEAR
Class A investments Percentage of average net assets(5)
====================================================================================================================================
<S> <C> <C> <C> <C>
All amounts no front-end sales charge none 0.25% 0.25%
====================================================================================================================================
Class B investments(4)
====================================================================================================================================
All amounts no front-end sales charge none 0.25% 0.25%
====================================================================================================================================
Class C investments(4)
====================================================================================================================================
All amounts no front-end sales charge 0.75% 0.25% 1.00%
====================================================================================================================================
Class P investments
====================================================================================================================================
All amounts no front-end sales charge 0.25% 0.20% 0.45%
====================================================================================================================================
</TABLE>
(1) The service fee for Class A and P shares is paid quarterly. 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, such as your dealer, from time to time.
(3) Concessions are paid at the time of sale on all Class A shares sold during
any 12-month period starting from the day of the first net asset value
sale. With respect to (a) Class A share purchases at $1 million or more,
sales qualifying at such level under rights of accumulation and statement
of intention privileges are included and (b) for Special Retirement Wrap
Programs, only new sales are eligible and exchanges into the fund are
excluded.
(4) Class B and C are subject to CDSCs.
(5) With respect to Class B, C and P shares, 0.25%, 1.00% and 0.45%,
respectively, of the average annual net asset value of such shares
outstanding during the quarter (including distribution reinvestment shares
after the first anniversary of their issuance) is paid to Authorized
Institutions, such as your dealer. These fees are paid quarterly in
arrears.
Financial Information 17
<PAGE>
More information on the Fund is available free upon request, including the
following:
ANNUAL/SEMI-ANNUAL REPORT
Describes the Fund, lists portfolio holdings and contains a letter from the
Fund's manager discussing recent market conditions and the Fund's
investment strategies.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Provides more details about the Fund and its policies. A current SAI is on
file with the Securities and Exchange Commission ("SEC") and is
incorporated by reference (is legally considered part of this prospectus).
To obtain information:
By telephone. Call the Fund at:
800-426-1130
By mail. Write to the Fund at:
The Lord Abbett Family of Funds
90 Hudson Street
Jersey City, NJ 07302-3973
Via the Internet.
Lord, Abbett & Co.
www.lordabbett.com
Text only versions of Fund
documents can be viewed
online or downloaded from:
SEC
www.sec.gov
You can also obtain copies by
visiting the SEC's Public Reference Room in Washington, DC (phone
202-942-8090) or by sending your request and a duplicating fee to
the SEC's Public Reference Section, Washington, DC 20549-6009 or by sending your
request electronically to [email protected].
Lord Abbett Developing Growth Fund, Inc.
90 Hudson Street LADG-1-600
Jersey City, NJ 07302-3973 (6/00)
--------------------------------------------------------------------------------
SEC file number: 811-2871
<PAGE>
LORD ABBETT
--------------------------------------------------------------------------------
Statement of Additional Information June 1, 2000
--------------------------------------------------------------------------------
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") located at 90 Hudson Street, Jersey City, New Jersey
07302-3973. This Statement relates to, and should be read in conjunction with,
the Prospectus dated June 1, 2000.
Shareholder inquiries should be made by writing directly to the Fund or by
calling 800-821-5129. The Annual Report to Shareholders is available without
charge, upon request by calling that number. In addition, you can make inquiries
through your dealer.
TABLE OF CONTENTS Page
1. Investment Objective and Policies 2
2. Directors and Officers 6
3. Investment Advisory and Other Services 10
4. Portfolio Transactions 10
5. Purchases, Redemptions and Shareholder Services 11
6. Past Performance 19
7. Taxes 20
8. Information About the Fund 21
9. Financial Statements 21
1
<PAGE>
Lord Abbett Developing Growth Fund, Inc. (sometimes referred to as "we" or the
"Fund") was incorporated under Maryland law on August 21, 1978, as a diversified
open-end management investment company, registered under the Investment Company
Act of 1940, as amended (the "Act"). The Fund's predecessor corporation was
organized on July 11, 1973.
As of February 1, 2000, shares of the Fund have not been available for purchase
by new investors other than through certain qualified retirement plans. Existing
shareholders may continue to invest in the Fund by adding to existing accounts.
Qualified plans currently offering the Fund as an investment option may open new
participant accounts. However, it is the Fund's intention not to accept any
purchase order for more than $5 million.
The Fund has 1,000,000,000 shares of authorized capital stock consisting of five
classes of shares (A, B, C, P, and Y). Only four classes of shares (A, B, C, and
P) are offered by this Statement of Additional Information. 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 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.
1.
Investment Objective and Policies
Fundamental Investment Restrictions. The Fund is subject to the following
investment restrictions which cannot be changed without approval of a majority
of the Fund's outstanding shareholders.
The Fund may not:
(1) borrow money, except that (i) the Fund may borrow from banks (as
defined in the Act) in amounts up to 33 1/3% of its total assets
(including the amount borrowed), (ii) the Fund may borrow up to an
additional 5% of its total assets for temporary purposes, (iii) the
Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities and (iv) the
Fund may purchase securities on margin to the extent permitted by
applicable law);
(2) pledge its assets (other than to secure 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;
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(7) invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding securities
of the U.S. Government, its agencies and instrumentalities); or
(8) issue senior securities to the extent such issuance would violate
applicable law.
Compliance with the investment restrictions in this Section will be determined
at the time of purchase or sale of the portfolio investment.
Non-Fundamental Investment Restrictions. In addition to policies in the
Prospectus and the investment restrictions above which cannot be changed without
shareholder approval, the Fund is also 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 mortgage-backed securities,
asset-backed securities or obligations issued or guaranteed by the U.
S. Government, its agencies or instrumentalities);
(6) hold securities of any issuer 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 Fund's total assets, are warrants which are not
listed on the New York or American Stock Exchange or a major foreign
exchange);
(8) invest in real estate limited partnership interests or interests in
oil, gas or other mineral leases, or exploration or 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 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.
Portfolio Turnover Rate. For the fiscal year ended January 31, 2000, our
portfolio turnover rate was 50.13% versus 30.89% for the prior fiscal year.
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INVESTMENT TECHNIQUES
The Fund intends to use, from time to time, one or more of the investment
techniques described below, including lending portfolio securities, repurchase
agreements, warrants and covered call options. While some of these techniques
involve risk when used independently, the Fund intends to use them to reduce
risk and volatility in its portfolio.
Futures and Options. Although it has no current intention to do so, the Fund may
invest in financial futures and options on financial futures.
Lending of Portfolio Securities. Although the Fund has no current intention of
doing so, it may seek to earn income by lending portfolio securities. Under
present regulatory policies, such loans may be made to member firms of the New
York Stock Exchange ("NYSE") and are required to be secured continuously by
collateral consisting of cash, cash equivalents, or United States Treasury bills
maintained in an amount at least equal to the market value of the securities
loaned. The Fund will have the right to call a loan and obtain the securities
loaned at any time upon five days' notice. During the existence of a loan we
will receive the income earned on investment of collateral. The aggregate value
of the securities loaned will not exceed 30% of the value of the Fund's gross
assets.
Repurchase Agreements. The Fund may enter into repurchase agreements with
respect to a security. A repurchase agreement is a transaction by which the Fund
acquires a security and simultaneously commits to resell that security to the
seller (a bank or securities dealer) at an agreed-upon price on an agreed-upon
date. The resale price reflects the purchase price plus an agreed-upon market
rate of interest which is unrelated to the coupon rate or date of maturity of
the purchased security. In this type of transaction, the securities purchased by
the Fund have a total value in excess of the value of the repurchase agreement.
The Fund requires at all times that the repurchase agreement be collateralized
by cash or U.S. Government securities having a value equal to, or in excess of,
the value of the repurchase agreement. Such agreements permit the Fund to keep
all of its assets at work while retaining flexibility in pursuit of investments
of a longer term nature.
The use of repurchase agreements involves certain risks. For example, if the
seller of the agreement defaults on its obligation to repurchase the underlying
securities at a time when the value of these securities has declined, the Fund
may incur a loss upon disposition of them. If the seller of the agreement
becomes insolvent and subject to liquidation or reorganization under the
Bankruptcy Code or other laws, a bankruptcy court may determine that the
underlying securities are collateral not within the control of the Fund and are
therefore subject to sale by the trustee in bankruptcy. Even though the
repurchase agreements may have maturities of seven days or less, they may lack
liquidity, especially if the issuer encounters financial difficulties. While the
investment adviser acknowledges these risks, it is expected that they can be
controlled through stringent selection criteria and careful monitoring
procedures. The investment manager intends to limit repurchase agreements to
transactions with dealers and financial institutions believed by the investment
manager to present minimal credit risks. The investment manager will monitor
creditworthiness of the repurchase agreement sellers on an ongoing basis.
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
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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 NYSE, are active and have developed substantial liquidity and we
expect a similar market to develop for stock index futures on a representative
group of over-the-counter stocks. The existence of an active market would permit
us to close out our position in futures contracts by purchasing an equal and
opposite position in the public market. Under futures contracts currently in
use, the purchaser would be required to segregate in a separate account, as a
good faith deposit, cash or Treasury bills in an amount set by a board of trade
or exchange (currently approximately 5% of the contract value). Each day during
the contract period we would either pay or receive an amount of cash equal to
the daily change in the total value of the contracts. The amount which we may
segregate upon entering into a futures contract may not exceed, together with
the amounts on deposit under all outstanding contracts, 5% of the value of our
total assets, nor may we enter into additional futures contracts if, as a
result, the aggregate amount committed under all our open futures contracts
would exceed more than one-third of the value of such assets.
There are several risks in connection with the use of futures contracts as a
hedging device. One risk is the imperfect correlation between the composition of
our portfolio securities and the applicable stock index. If the value of the
futures contract moves more than the value of the stock being hedged, we would
experience either a loss or a gain on the futures contract which would not be
completely offset by movements in the value of the securities which are the
subject of the hedge. Another risk is that the value of futures contracts may
not correlate perfectly with movement in the stock index due to certain market
distortions. Although we will enter into futures contracts strictly to hedge our
portfolio or cash positions, other investors use these investment vehicles for
other, sometimes more speculative, purposes. At times, excess speculation in the
futures market can distort the normal market relationship between the price of
the futures contract and the value of the index. If we decide to enter into or
close out our futures position during a period of such excess speculation, the
hedging strategy will be more or less successful, depending on the direction and
amount of this distortion, than otherwise would be the case. Due to the
possibility of price distortion in the futures market and because of the
imperfect correlation between movements in the stock index and movements in the
price of stock index futures contracts, a correct forecast of general market
trends by Lord Abbett may still not result in a successful hedging transaction.
It is possible that, when we sell futures contracts to hedge our portfolio
against a decline in the market, the market, as measured by the stock index, may
advance while the value of securities held in our portfolio may decline. If this
occurs, we will lose money on the futures contracts and also experience a
decline in value in our portfolio securities. However, Lord Abbett believes that
over time the value of a diversified portfolio will tend to move in the same
direction as the market index upon which the futures contracts are based.
Where futures contracts are purchased to hedge against a possible increase in
the price of stock before we are able to invest our cash position in stock in an
orderly fashion, it is possible that the market may decline instead and we would
realize a loss; if we then decide not to invest in stock at that time because of
concern as to possible further market decline or for other reasons, we would
realize a loss on the futures contract that would be offset, to the extent the
cash position had not been invested in stocks being hedged.
Positions in futures contracts may be closed out only on an exchange or board of
trade which provides a market for such contracts. Although we intend to purchase
or sell futures contracts only if an active market has developed and is
continuing, there is no assurance that a liquid market on an exchange or board
of trade will exist for any particular contract or at any particular time. In
such event, it may not be possible to close out a futures position, and in the
event of adverse price movements, we would continue to be required to make daily
cash payments marking our position to market. However, since futures contracts
would have been used to hedge portfolio securities and such securities would not
be sold until the futures contracts had been terminated, an increase in the
price of the securities, if any, may partially or completely offset losses on
the futures contract.
We may incur additional brokerage commissions through entering into futures
contracts, although we also can save on commissions by hedging through such
contracts rather than through buying or selling individual securities in
anticipation of market moves. Successful use by us of futures contracts will
depend upon Lord Abbett's ability to predict
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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.
Segregated Account. To the extent required to comply with the Securities and
Exchange Commission Release 10666 and any related SEC policies, when purchasing
a futures contract, or writing a put option, the Fund will maintain in a
segregated account at its custodian bank cash, U.S. Government and other
permitted securities to cover its position.
2.
Directors and Officers
The Fund's Board of Directors is responsible for the management of the business
and affairs of the Fund.
The following director is a partner of Lord, Abbett & Co. ("Lord Abbett"), 90
Hudson Street, Jersey City, New Jersey 07302-3973. He has been associated with
Lord Abbett for over five years and is also an officer, director, or trustee of
thirteen other Lord Abbett-sponsored funds.
*Robert S. Dow, age 55, Chairman and President
Mr. Dow is an "interested person" as defined in the Act.
The following outside directors are also directors or trustees of thirteen other
Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow, Director
245 Park Avenue, Suite 2414
New York, New York
Senior Adviser, Time Warner Inc. Formerly, Acting Chief Executive Officer of
Courtroom Television Network (1997 - 1998). Formerly, President and Chief
Executive Officer of Time Warner Cable Programming, Inc. (1991 - 1997). Prior to
that, President and Chief Operating Officer of Home Box Office, Inc. Age 58.
William H.T. Bush, Director
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 61.
Robert B. Calhoun, Jr., Director
Monitor Clipper Partners
650 Madison Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners (since 1997) and President of The
Clipper Group L.P., both private equity investment funds (since 1990). Age 57.
Stewart S. Dixon, Director
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon (since 1990). Age 69.
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John C. Jansing, Director
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 74.
C. Alan MacDonald, Director
415 Round Hill Road
Greenwich, Connecticut
Currently involved in golf development management on a consultancy basis (since
1999). Formerly, Managing Director of The Directorship Group Inc., a consultancy
in board management and corporate governance (1997-1999). Prior to that, General
Partner of The Marketing Partnership, Inc., a full service marketing consulting
firm (1994-1997). Prior to that, Chairman and Chief Executive Officer of Lincoln
Snacks, Inc., manufacturer of branded snack foods (1992-1994). His career spans
36 years at Stouffers and Nestle with 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 66.
Hansel B. Millican, Jr., Director
Rochester Button Company
1328 Broadway (Suite 816)
New York, New York
President and Chief Executive Officer of Rochester Button Company (since 1991).
Currently serves as Director of Polyvision. Age 71.
Thomas J. Neff, Director
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 62.
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The second column of the following table sets forth the compensation accrued by
the Fund for outside Directors. The third column sets forth information with
respect to the pension or retirement benefits accrued by all Lord
Abbett-sponsored funds for outside directors/trustees. The fourth column sets
forth the total compensation paid by all Lord Abbett-sponsored funds to the
outside directors/trustees, and amounts payable but deferred at the option of
the director/trustee, but does not include amounts accrued under the third
column. No director/trustee of the funds associated with Lord Abbett and no
officer of the funds received any compensation from the funds for acting as a
director/trustee or officer.
<TABLE>
<CAPTION>
For the Fiscal Year Ended January 31, 2000
------------------------------------------
(1) (2) (3) (4)
Pension or For Year Ended
Retirement Benefits December 31, 1999
Accrued by the Total Compensation
Aggregate Company and Paid by the Company and
Compensation Thirteen Other Lord Thirteen Other Lord
Accrued by Abbett-sponsored Abbett-sponsored
Name of Director the Fund/1 Funds/2 Funds/3
<S> <C> <C> <C>
E. Thayer Bigelow $2,468 $17,622 $57,720
William H.T. Bush $1,183 $15,846 $58,000
Robert B. Calhoun, Jr. $1,441 $12,276 $57,000
Stewart S. Dixon $2,430 $32,420 $58,500
John C. Jansing $2,387 $41,108/4 $57,250
C. Alan MacDonald $2,365 $26,763 $57,500
Hansel B. Millican, Jr. $2,387 $37,822 $57,500
Thomas J. Neff $2,430 $20,313 $59,660
</TABLE>
1. Outside directors'/trustees' fees, including attendance fees for board and
committee meetings, are allocated among all Lord Abbett-sponsored funds
based on the net assets of each fund. A portion of the fees payable by the
Fund to its outside directors/trustees may be deferred at the option of a
director/trustee under a plan that deems the deferred amounts to be
invested in shares of the Fund for later distribution to the
directors/trustees.
The amounts of the aggregate compensation payable by the Fund as of January
31, 2000 deemed invested in company shares, including dividends reinvested
and changes in net asset value applicable to such deemed investments, were:
Mr. Bigelow; $12,023.16; Mr. Bush, $1,889.34; Mr. Calhoun, $8,019.18; Mr.
Dixon, $49,520.97; Mr. Jansing, $101,353.28; Mr. MacDonald, $38,072.36; Mr.
Millican, $113,095.78; and Mr. Neff, $109,216.11. If the amounts deemed
invested in Fund shares were added to each director's actual holdings of
Fund shares as of January 31, 2000, each would own, the following: Mr.
Bigelow, $52,880.40; Mr. Bush, $1,889.34; Mr. Calhoun, $8,019.18; Mr.
Dixon, $69,780.77; Mr. Jansing, $101,353.28; Mr. MacDonald, $38,072.36; Mr.
Millican, $154,033.72; and Mr. Neff, $191,784.48.
2. The amounts in Column 3 were accrued by the Lord Abbett-sponsored funds for
the 12 months ended October 31, 1999.
3. The fourth column shows aggregate compensation, including
directors'/trustees' fees and attendance fees for board and committee
meetings, of a nature referred to in footnote one, accrued by the Lord
Abbett-sponsored funds during the year ended December 31, 1999, including
fees directors/trustees have chosen to defer, but does not include amounts
accrued under the equity-based plans and shown in Column 3.
4. The equity-based plans superseded a previously approved retirement plan for
all directors/trustees. Directors had the option to convert their accrued
benefits under the retirement plan. All of the then current outside
directors/trustees except one made such election. Mr. Jansing chose to
continue to receive benefits under the retirement plan which provides that
outside directors (trustees) may receive annual retirement benefits for
life equal to their final annual retainer following retirement at or after
age 72 with at least ten years of service. Thus, if Mr. Jansing were to
retire and the annual retainer payable by the funds were the same as it is
today, he would receive annual retirement benefits of $50,000.
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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, and Morris are partners of Lord Abbett; the others
are employees:
Executive Vice Presidents:
Stephen J. McGruder, age 56
Vice Presidents:
Joan Binstock, age 46 (with Lord Abbett since 1999, formerly Chief Operating
Officer of Morgan Grenfell from 1996 to 1999, prior thereto Principal of Ernst &
Young LLP)
Daniel E. Carper, age 48
Lesley-Jane Dixon, age 36
Paul A. Hilstad, age 57 (with Lord Abbett since 1995; formerly Senior Vice
President and General Counsel of American Capital Management & Research, Inc.)
Cinda C. Hughes, age 37 (with Lord Abbett since 1998, formerly Analyst/Director,
Equity Research at Phoenix Investment Counsel from 1996 to 1998, prior thereto
Associate Strategist - Small-Cap Stocks at PaineWebber, Inc./Kidder, Peabody &
Co., Inc.)
Lawrence H. Kaplan, age 43 (with Lord Abbett since 1997 - formerly Vice
President and Chief Counsel of Salomon Brothers Asset Management, Inc. from 1995
to 1997, prior thereto Senior Vice President, Director and General Counsel of
Kidder Peabody Asset Management, Inc.)
Robert G. Morris, age 55
A. Edward Oberhaus III, age 40
Tracie E. Richter, age 32 (with Lord Abbett since 1999, formerly Vice President
- Head of Fund Administration of Morgan Grenfell from 1998 to 1999, Vice
President of Bankers Trust from 1996 to 1998, prior thereto Tax Associate of
Goldman Sachs)
Treasurer:
Donna M. McManus, age 39, (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 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 11, 2000, our officers and directors, as a group, owned less than 1%
of our outstanding shares. As of May 11, 2000, there were no record holders of
5% or more of the Fund's outstanding shares.
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<PAGE>
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, and Robert G. Morris. 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, Christopher J. Towle and John J. Walsh. The address
of each partner is 90 Hudson Street, Jersey City, New Jersey 07302-3973.
The services performed by Lord Abbett are described under "Management" in the
Prospectus. Under the Management Agreement, the Fund pays 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. In addition, the Fund is obligated to 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
transactions.
For the fiscal years ended January 31, 2000, 1999, and 1998, the management fees
paid to Lord Abbett amounted to $10,423,188; $4,444,605, and $2,325,894,
respectively.
Lord Abbett Distributor LLC, a New York limited liability company, and a
subsidiary of Lord Abbett, 90 Hudson Street, Jersey City, New Jersey 07302,
serves as the principal underwriter for the Fund.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281, are
the independent auditors of the Fund and must be approved at least annually by
our Board of Directors to continue in such capacity. They perform audit services
for the Fund including the examination of financial statements included in 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.
United Missouri Bank of Kansas City, N.A. Tenth and Grand, Kansas City, Missouri
64142, acts as the transfer agent and dividend disbursing agent for the Fund.
4.
Portfolio Transactions
The Fund's 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, the Fund may 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.
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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.
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.
During the fiscal years ended January 31, 2000, 1999, and 1998, we paid total
commissions to independent dealers of $1,632,845, $1,187,227, and $1,930,696,
respectively.
5.
Purchases, Redemptions
and Shareholder Services
Information concerning how we value our shares for the purchase and redemption
of our shares is contained in the Prospectus under "Purchases" and
"Redemptions," respectively.
As disclosed in the Prospectus, we calculate our net asset value as of the close
of the NYSE on each day that the NYSE is open for trading by dividing our total
net assets by the number of shares outstanding at the time of calculation. The
NYSE is closed on Saturdays and Sundays and the following holidays -- New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
11
<PAGE>
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.
For each class of shares the net asset value will be determined by taking the
net asset value and dividing by the shares outstanding.
The maximum offering price of our Class A shares on January 31, 2000 was
computed as follows:
Class A
-------
Net asset value per share (net assets divided
by shares outstanding) $19.55
Maximum offering price per share (net asset
value divided by .9425) $20.74
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,
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.
For the last three fiscal years, Lord Abbett, as the Fund's principal
underwriter, received net commissions after allowance of a portion of the sales
charge to independent dealers with respect to Class A shares as follows:
Year Ended January 31
---------------------
2000 1999 1998
--------- --------- ----------
Gross sales charge $4,829,217 $5,690,775 $3,195,724
Amount allowed to dealers $4,173,297 $4,920,536 $2,768,167
---------- ---------- ----------
Net commissions
received by Lord Abbett $ 644,920 $ 770,239 $ 427,557
========== ========== ==========
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 four different classes of shares in
this Statement of Additional Information. The different classes of shares
represent investments in the same portfolio of securities but are subject to
different expenses and will likely have different share prices. Investors should
read this section carefully to determine which class represents the best
investment option for their particular situation.
12
<PAGE>
Class A Shares. If you buy Class A shares, you pay an initial sales charge,
unless your purchase meets one of the following conditions: (i) your purchase is
for $1 million or more in one or more Lord Abbett-sponsored funds; (ii) you
purchase through an employer-sponsored retirement plan (a "Retirement Plan")
with at least 100 eligible employees under the Internal Revenue Code (which
excludes Individual Retirement Accounts): or (iii) you purchase through a
"special retirement program" which is a certain type program sponsored by an
institution or other entity permitted to receive service and/or distribution
fees under a Rule 12b-1 Plan (an "Authorized Institution"). The program must
also have one or more characteristics distinquishing it, in the opinion of Lord
Abbett Distributor, from a Mutual Fund Fee Based Program. Such characteristics
include, among other things, the fact that an Authorized Institution does not
charge its clients any fee of a consulting or advisory nature that is
economically equivalent to the distribution fee under the Class A 12b-1 Plan and
the fact that the program relates to participant-directed Retirement Plans.
However, if you meet a condition which allows you to purchase Class A shares
without an initial sales charge, but you redeem any of those shares within 24
months after the month in which you buy them, you may pay the Fund a contingent
deferred sales charge ("CDSC") of 1%. There is an exception to the CDSC for
redemptions under a special retirement wrap program. Class A shares are subject
to service and distribution fees that are currently estimated at an annual rate
of .35 of 1% of the average 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 the sections 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. That CDSC
varies depending on how long you own shares. Class B shares are subject to
service and distribution fees at an annual rate of 1% of the annual net asset
value of the Class B shares. The CDSC and the Rule 12b-1 plan applicable to the
Class B shares are described in the sections below.
Class C Shares. If you buy Class C shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the first anniversary of
buying them, you will normally pay the Fund a CDSC of 1%. Class C shares are
subject to service and distribution fees at an annual rate of 1% of the average
net asset value of the Class C shares. The CDSC and the Rule 12b-1 plan
applicable to the C shares are described in the sections below.
Class P Shares. If you buy Class P shares, you pay no sales charge at the time
of purchase, and if you redeem your shares you pay no CDSC. Class P shares are
subject to service and distribution fees at an annual rate of .45 of 1% of the
average daily net asset value of the Class P shares. The Rule 12b-1 plan
applicable to the Class P shares is described in the sections 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.
13
<PAGE>
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 three years or more.
For most investors who invest $1 million or more or for Retirement Plans with at
least 100 eligible employees or for investments pursuant to a special retirement
wrap program, in most cases Class A shares will be the most advantageous choice,
no matter how long you intend to hold your shares. For that reason, it may not
be suitable for you to place a purchase order for Class B shares of $500,000 or
more or a purchase order for Class C shares of $1,000,000 or more. In addition,
it may not be suitable for you to place an order for Class B or C shares for a
Retirement Plan with at least 100 eligible employees or for a special retirement
wrap program. You should discuss this with your financial adviser.
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 "Services For Fund Investors" 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.
14
<PAGE>
Rule 12b-1 Plans
Classes A, B, C, and P. As described in the Prospectus, the Fund has adopted a
Distribution Plan and Agreement pursuant to Rule 12b-1 of the Act for 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 Class shares, which
should allow each Class to maintain a consistent cash flow, and a higher quality
of service to shareholders by authorized institutions than would otherwise be
the case. Lord Abbett uses all amounts received under each Plan as described in
the Prospectus and for payments to dealers for (i) providing continuous services
to the shareholders, such as answering shareholder inquiries, maintaining
records, and assisting shareholders in making redemptions, transfers, additional
purchases and exchanges and (ii) their assistance in distributing shares of the
Fund.
During the last fiscal year ended January 31, 2000, the Fund accrued or paid
through Lord Abbett to authorized institutions $5,032,147, $2,726,166,
$2,140,046, and $415,712, under the A, B, C and P Plans, respectively.
Each Plan requires the Board of Directors to review, on a quarterly basis,
written reports of all amounts expended pursuant to the Plan and the purposes
for which such expenditures were made. Each Plan shall continue in effect only
if its continuance is specifically approved at least annually by vote of the
directors, including a majority of the directors who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan or in any agreements related to the Plan ("outside
directors"), cast in person at a meeting called for the purpose of voting on the
Plan. No Plan may be amended to increase materially above the limits set forth
therein the amount spent for distribution expenses thereunder without approval
by a majority of the outstanding voting securities of the applicable class and
the approval of a majority of the directors, including a majority of the outside
directors. Each Plan may be terminated at any time by vote of a majority of the
outside directors or by vote of a majority of its class outstanding voting
securities.
Contingent Deferred Sales Charges. A Contingent Deferred Sales Charge ("CDSC")
applies upon early redemption of shares regardless of class, and (i) 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 (ii) will not be imposed on the
amount of your account value represented by the increase in net asset value over
the initial purchase price (including increases due to the reinvestment of
dividends and capital gains distributions) and upon early redemption of shares.
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, a CDSC of 1% is imposed with
respect to those Class A shares (or Class A shares of another Lord
Abbett-sponsored fund acquired through exchange of such shares) on which the
Fund has paid the one-time distribution fee of 1% if such shares are redeemed
out of the Lord Abbett-sponsored family of funds within a period of 24 months
from the end of the month in which the original sale occurred.
Class B Shares. As stated in the Prospectus, if Class B shares (or Class B
shares of another Lord Abbett-sponsored fund 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:
15
<PAGE>
<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. All purchases are considered to have been made on
the business day on which the purchase order was accepted.
Class C Shares. As stated in the Prospectus, 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 the shareholder. In
the case of Class A and Class C shares, the CDSC is received by the Fund and is
intended to reimburse all or a portion of the amount paid by the Fund if the
shares are redeemed before the Fund has had an opportunity to realize the
anticipated benefits of having a long-term shareholder account in the Fund. In
the case of Class B shares, the CDSC is received by Lord Abbett Distributor and
is intended to reimburse its expenses of providing distribution-related service
to the Fund (including recoupment of the commission payments made) in connection
with the sale of Class B shares before Lord Abbett Distributor has had an
opportunity to realize its anticipated reimbursement by having such a long-term
shareholder account subject to the B Plan distribution fee.
The other funds which participate in the Telephone Exchange Privilege (except
(a) Lord Abbett U.S. Government Securities Money Market Fund, Inc. ("GSMMF"),
(b) certain funds 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.
16
<PAGE>
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.
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
Class 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. The exchange privilege will
not be available with respect to any otherwise "Eligible Funds" the shares of
which are not available to new investors of the type requesting the exchange.
Letter of Intention. Under the terms of the Letter of Intention, as described in
the Prospectus, you may invest $50,000 or more over a 13-month period in shares
of a Lord Abbett-sponsored fund (other than shares of LAEF, LASF, 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 Letter of Intention 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
Letter is not completed. The Letter of Intention is neither a binding obligation
on you to buy, nor on the Fund to sell, the full amount indicated.
Rights of Accumulation. As stated in the Prospectus, purchasers (as defined in
the Prospectus) may accumulate their investment in Lord Abbett-sponsored funds
(other than LAEF, 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
17
<PAGE>
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 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 advisory program"), (e) by
employees, partners and owners of unaffiliated consultants and advisors to Lord
Abbett, Lord Abbett Distributor or Lord Abbett-sponsored funds who consent to
such purchase if such persons provide service to Lord Abbett, Lord Abbett
Distributor or such funds on a continuing basis and are familiar with such
funds, (f) through Retirement Plans with at least 100 eligible employees; (g) in
connection with a merger, acquisition or other reorganization; and (h) through a
"special retirement wrap program" sponsored by an authorized institution showing
one or more characteristics distinguishing it, in the opinion of Lord Abbett
Distributor from a mutual fund 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 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
Funds have 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,
which is any broker or bank that is a member of the medallion stamp program. 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
is 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 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.
18
<PAGE>
Systematic Withdrawal Plans. The Systematic Withdrawal Plan ("SWP") also is
described in the Prospectus. You may establish a SWP if you own or purchase
uncertificated shares having a current offering price value of at least $10,000.
Lord Abbett prototype retirement plans have no such minimum. With respect to a
SWP for Class B shares, 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 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 except in the case of 401(k) plans and contain specific
information about the plans. Explanations of the eligibility requirements,
annual custodial fees and allowable tax advantages and penalties are set forth
in the relevant plan documents. Adoption of any of these plans should be on the
advice of your legal counsel or qualified tax adviser.
6.
Past Performance
The Fund computes the average annual compounded rate of total return for each
class 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 net asset
value. The ending redeemable value is determined by assuming a complete
redemption at the end of the period(s) covered by the average annual total
return computation.
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment (unless the return is shown at net asset value). For Class B
shares, the payment of the applicable CDSC (5.0% prior to the first anniversary
of purchase, 4.0% prior to the second anniversary of purchase, 3.0% prior to the
third and fourth anniversaries of purchase, 2.0% prior to the fifth anniversary
of purchase, 1.0% prior to the sixth anniversary of purchase and no CDSC on and
after the sixth anniversary of purchase) is applied to the Fund's investment
result for that class for the time period shown (unless the total return is
shown at net asset value). For Class C shares, the 1.0% CDSC is applied to the
Fund's investment result for that class for the time period shown prior to the
first anniversary of purchase (unless the total return is shown at net asset
value). Total returns also assume that all dividends and capital gains
distributions during the period are reinvested at net asset value per share, and
that the investment is redeemed at the end of the period.
Using the computation method described above, the Fund's average annual
compounded rates of total return for the last one-, five-, and ten-year period
ending on January 31, 2000 were as follows: 18.10%, 26.48% and 19.24%,
respectively for the Fund's Class A shares. For Class B shares, the average
annual compounded rate of total return for the one-year and life-of-the-Fund
periods ending on January 31, 2000 were 19.55% and 22.80%, respectively. For
Class C shares, the average annual compounded rate of total return for the
one-year and life-of-the-Fund periods ending on January 31, 2000 were 23.45% and
23.33%, respectively. For Class P shares, the average annual compounded rate of
total return for the one-year period and life-of-the-Fund periods ended January
31, 2000 were 25.24% and 11.08%, 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.
19
<PAGE>
7.
Taxes
The Fund intends to elect and to qualify for special tax treatment afforded
regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"). If it so qualifies, the Fund (but not its shareholders) will be
relieved of federal income taxes on the amount it timely distributes to
shareholders. If in any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income will be taxed to the Fund at
regular corporate rates.
The Fund contemplates declaring as dividends substantially all of its net
investment income. Dividends paid by the Fund from its investment income and
distributions out of short-term capital gains are taxable to its shareholders as
ordinary income from dividends, whether received in cash or reinvested in
additional shares of the Fund. Distributions paid by the Fund of its net
realized long-term capital gains are taxable to shareholders as capital gains,
also whether received in cash or reinvested in shares. The Fund will send its
shareholders annual information concerning the tax treatment of dividends and
other distributions.
Upon a sale, exchange or redemption of shares of the Fund, a shareholder will
recognize short- or long-term capital gain or loss, depending upon the
shareholder's holding period in the Fund's shares. However, if a shareholder's
holding period in his shares is six month or less, any capital loss realized
from a sale or exchange of such shares must be treated as long-term capital loss
to the extent of dividends classified as "capital gains dividends" received with
respect to such shares. The maximum tax rates applicable to net capital gains
recognized by individuals and other non-corporate taxpayers are (i) the same as
ordinary income rates for capital assets held for one year or less and (ii) 20%
for capital assets held for more than one year. Capital gains or losses
recognized by corporate shareholders are subject to tax at the ordinary income
tax rates applicable to corporations.
Losses on the sale of shares are not deductible if, within a period beginning 30
days before the date of the sale and ending 30 days after the date of the sale,
the taxpayer acquires shares that are substantially identical.
Some shareholders may be subject to a 31% withholding tax on reportable
dividends, capital gains distributions and redemption payments ("backup
withholding"). Generally, shareholders subject to backup withholding will be
those for whom a certified taxpayer identification number is not on file with
the Fund or who, to the Fund's knowledge, have furnished an incorrect number.
When establishing an account, an investor must certify under penalties of
perjury that such number is correct and that he or she is not otherwise subject
to backup withholding.
The writing of call options and other investment techniques and practices which
the Fund may utilize may affect the character and timing of the recognition of
gains and losses. Such transactions may increase the amount of short-term
capital gain realized by the Fund, which is taxed as ordinary income when
distributed to shareholders.
The Fund may be subject to foreign withholding taxes, which would reduce the
yield on its investments. It is generally expected that Fund shareholders who
are subject to 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.
The Fund will be subject to a 4% non-deductible excise tax on certain amounts
not distributed or treated as having been distributed on a timely basis each
calendar year. The Fund intends to distribute to shareholders each year an
amount adequate to avoid the imposition of such excise tax.
Dividends paid by the Fund will qualify for the dividends-received deduction for
corporations to the extent they are derived from dividends paid by domestic
corporations. Corporate shareholders must have held their shares in the Fund for
more than 45 days to qualify for the deduction for dividends paid by the Fund.
Gain and loss realized by the Fund on certain transactions, including sales of
foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gain or loss is attributable to changes in
exchange rates for foreign currencies. Accordingly, distributions taxable as
ordinary income will include the net amount, if any, of such foreign exchange
gain and will be reduced by the net amount, if any, of such foreign exchange
loss.
If the Fund purchases shares in certain foreign investment entities called
"passive foreign investment companies," the Fund may be subject to United States
federal income tax on a portion of any "excess distribution" or gain from the
20
<PAGE>
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 the Fund 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. Alternatively, if the Fund were to make a "mark-to-market" election
with respect to its investment in a passive foreign investment company, gain or
loss with respect to the investment would be considered realized at the end of
each taxable year of the Fund even if the Fund continued to hold the investment,
and would be treated as ordinary income or loss to the Fund.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to United States persons (United States citizens or residents and
United States domestic corporations, partnerships, trusts and estates.) Each
shareholder who is not a United States person should consult his tax adviser
regarding the U.S. and foreign tax consequences of the ownership of shares of
the Fund, including the applicable rate of U.S. withholding tax on dividends
representing ordinary income and net short-term capital gains, and the
applicability of U.S. gift and estate taxes.
8.
Information About the Fund
The directors, trustees and officers of Lord Abbett-sponsored 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 fund to the extent contemplated by the
recommendations of such Advisory Group.
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.
9.
Financial Statements
The financial statements for the fiscal year ended January 31, 2000 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 2000 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.
21
<PAGE>
PART C
OTHER INFORMATION
This Post-Effective Amendment No. 33 (the "Amendment") to the Registrant's
Registration Statement relates only to the Developing Growth Fund's Class A, B,
C and P.
The other class of shares of the Registrant is listed below and is 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 is a separate class 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 32
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. Filed herein
(j) Other Opinion. Filed herein
(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. Incorporated by reference to
Registrant's Form N-SAR filed March 31, 2000 (Accession
No. 0000276914-00-000013).
(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.
(p) Code of Ethics. Incorporated by reference to Post-
Effective Amendment No. 32 filed on April 28, 2000.
Item 24 Persons Controlled by or Under Common Control with the Fund
None.
Item 25 Indemnification
All Directors/Trustees, officers, employees and agents of Registrant
are to be indemnified as set forth in Section 4.3 of Registrant's
Declaration of Trust.
<PAGE>
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Directors/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 Director/Trustee,
officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
Director/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 Directors'/Trustees' and
officers' errors and omissions liability insurance policy protecting
Directors/Trustees and officers against liability for breach of duty,
negligent act, error or omission committed in their capacity as
Directors/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 and as investment adviser to approximately 8,300
private accounts as of December 31, 1999. 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, trustee, officer,
employee, or partner 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
(b) The partners of Lord, Abbett & Co. are:
Name and Principal Positions and Offices
Business Address (1) with Registrant
-------------------- ---------------
Robert S. Dow Chairman and President
Paul A. Hilstad Vice President & Secretary
Stephen J. McGruder Executive Vice President
Daniel E. Carper Vice President
Robert G. Morris Vice President
John J. Walsh Vice President
<PAGE>
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, 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:
90 Hudson Street, Jersey City, New Jersey -07302
(c) Not applicable
Item 28 Location of Accounts and Records
Registrant maintains the records, required by Rules 31a - 1(a) and
(b), and 31a - 2(a) at its main office.
Lord, Abbett & Co. maintains the records required by Rules 31a - 1(f)
and 31a - 2(e) at its main office.
Certain records such as cancelled stock certificates and
correspondence may be physically maintained at the main office of the
Registrant's Transfer Agent, Custodian, or Shareholder Servicing
Agent within the requirements of Rule 31a-3.
Item 29 Management Services
None
Item 30 Undertakings
The Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
The registrant undertakes, if requested to do so by the holders of at
least 10% of the registrant's outstanding shares, to call a meeting
of shareholders for the purpose of voting upon the question of
removal of a director or directors and to assist in communications
with other shareholders as required by Section 16(c) of the
Investment Company Act of 1940, as amended.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 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 31st day of May, 2000.
LORD ABBET DEVELOPING GROWTH FUND, INC.
BY: /s/ Lawrence H. Kaplan
----------------------
Lawrence H. Kaplan
Vice President
By: /s/ Donna M. McManus
----------------------
Donna M. McManus
Treasurer
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.
Signatures Title Date
Chairman, President
/s/ Robert S. Dow and Director/Trustee May 31, 2000
--------------------------- -------------------------- ------------
Robert S. Dow
/s/ E. Thayer Bigelow Director/Trustee May 31, 2000
--------------------------- -------------------------- ------------
E. Thayer Bigelow
/s/ William H. T. Bush Director/Trustee May 31, 2000
--------------------------- -------------------------- ------------
William H. T. Bush
/s/ Robert B. Calhoun, Jr. Director/Trustee May 31, 2000
--------------------------- -------------------------- ------------
Robert B. Calhoun, Jr
/s/ Stewart S. Dixon Director/Trustee May 31, 2000
--------------------------- -------------------------- ------------
Stewart S. Dixon
/s/ John C. Jansing Director/Trustee May 31, 2000
--------------------------- -------------------------- ------------
John C. Jansing
/s/ C. Alan MacDonald Director/Trustee May 31, 2000
--------------------------- -------------------------- ------------
C. Alan MacDonald
/s/ Hansel B. Millican, Jr. Director/Trustee May 31, 2000
--------------------------- --------------------------- ------------
Hansel B. Millican, Jr.
/s/ Thomas J. Neff Director/Trustee May 31, 2000
--------------------------- -------------------------- ------------
Thomas J. Neff
BY: /s/ Lawrence H. Kaplan
----------------------
Lawrence H. Kaplan
Attorney - in - Fact
