Draft--March 11, 1996
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
b(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
LORD ABBETT MID-CAP VALUE FUND, INC.
(formerly LORD ABBETT VALUE APPRECIATION FUND, INC.)
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
--------------------------
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE>
[Letterhead of Lord Abbett Mid-Cap Value Fund, Inc.]
FROM THE CHAIRMAN OF THE BOARD
- ------------------------------
Dear Shareholder,
The Board of Directors of Lord Abbett Mid-Cap Value Fund, Inc. (the
"Fund") has called an Annual Meeting of Shareholders of the Fund to consider the
matters described below. The board recommends that you vote in favor of each
proposal.
First, the board recommends that you vote to reelect the current
directors of the Fund and to ratify the selection of Deloitte & Touche LLP as
the Fund's independent public accountants.
Second, the board recommends that you vote in favor of a proposed
revision of the fundamental investment policies and restrictions of the Fund
which are intended to provide for greater flexibility in managing the Fund's
portfolio and to permit the board to change applicable policies in the future
without incurring the expense of shareholder meetings.
Third, the directors propose that the Fund enter into a new 12b-1 Plan
and Dis tribution Agreement for your class of shares. This new 12b-1 Plan has
several changes which are designed primarily to maintain the competitive
position of the Fund and to encourage sales of Fund shares. These changes, and
the estimated effect of these changes on the Fund's expenses, are described in
detail in the proxy statement.
Fourth, the directors propose that the Fund's Articles of Incorporation
be amended (i) to authorize the creation of new classes and series of shares of
-
the capital stock of the Fund which is intended to encourage sales of Fund
shares, (ii) to confirm that the Fund may impose contingent deferred sales
--
charges in connection with new classes of shares to be created (this change will
have no effect on your shares) and (iii) to reduce the par value of shares of
---
capital stock of the Fund from $.10 to $.001 per share in order to reduce costs
when authorizing new shares (this change will have no effect on the value of
your shares).
These various matters are to be voted upon at a meeting of the
shareholders of the Fund to be held in New York on Wednesday, June 19, 1996 at
11:00 a.m.
YOUR VOTE ON THESE ISSUES IS CRITICAL. TO ENSURE THAT YOUR VOTE IS
COUNTED, IT IS IMPORTANT THAT YOU:
1. REVIEW THE ENCLOSED PROXY STATEMENT;
2. COMPLETE AND SIGN THE ENCLOSED PROXY CARD; AND
3. RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE.
Your prompt response will help save the Fund the expense of additional
solicitations.
We encourage you to review the enclosed materials. Because we believe
these proposals are in the best interests of shareholders, we encourage you to
vote in favor of the proposals.
Sincerely,
Ronald P. Lynch
Chairman of the Board
April 17, 1996
<PAGE>
PRELIMINARY COPY
LORD ABBETT MID-CAP VALUE FUND, INC.
767 Fifth Avenue
New York, New York 10153
Tel. No. (212) 848-1800
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
JUNE 19, 1996
PROXY STATEMENT
You are urged to sign and mail the proxy card in the enclosed postage-paid
envelope whether you own a few or many shares. Your prompt return of the
proxy may save the Fund the necessity and expense of further solicita-
tions to insure a quorum at this meeting.
<PAGE>
LORD ABBETT MID-CAP VALUE FUND, INC.
767 Fifth Avenue
New York, New York 10153
Telephone No. (212) 848-1800
Notice of Annual Meeting of Shareholders
To Be Held June 19, 1996 April 17, 1996
Notice is given hereby of an annual meeting of the shareholders of Lord Abbett
Mid-Cap Value Fund, Inc. (formerly Lord Abbett Value Appreciation Fund, Inc.)
(the "Fund"). The meeting will be held at the offices of Lord, Abbett & Co., on
the 11th floor of The General Motors Building, 767 Fifth Avenue, New York, New
York, on Wednesday, June 19, 1996, at 11:00 a.m., for the following purposes and
to transact such other business as may properly come before the meeting and any
adjournments thereof.
ITEM 1. To elect directors;
ITEM 2. To ratify or reject the selection of Deloitte & Touche LLP as
independent public accountants of the Fund for the current fiscal year;
ITEM 3. To approve or disapprove certain changes in the Fund's fundamental
investment policies and restrictions;
ITEM 4. To approve or disapprove a new Distribution Plan and Agreement for the
Fund's existing class of shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940;
ITEM 5. To approve or disapprove an amendment to the Fund's Articles of
Incorporation (i) authorizing the Board of Directors to create new
-
classes and series of shares of capital stock; and (ii) confirming that
--
the board may impose contingent deferred sales charges in connection
with new classes of shares to be created (this change will have no
effect on your shares); and
ITEM 6. To approve or disapprove an amendment to the Fund's Articles of
Incorporation reducing the par value per share from $.10 to $0.001 in
order to reduce costs when authorizing new shares (this change will have
no effect on the value of your shares).
By order of the Board of Directors
Kenneth B. Cutler
Vice President and Secretary
<PAGE>
The Board of Directors has fixed the close of business on March 22, 1996 as the
record date for determination of shareholders of the Fund entitled to notice of
and to vote at the meeting. Shareholders are entitled to one vote for each share
held. As of March 22, 1996, there were ____ shares of the Fund issued and
outstanding.
- --------------------------------------------------------------------------------
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD.
SIGN, DATE AND RETURN IT IN THE ENVELOPE PROVIDED.
TO SAVE THE COST OF ADDITIONAL SOLICITATIONS, PLEASE MAIL YOUR PROXY PROMPTLY.
3
<PAGE>
LORD ABBETT MID-CAP VALUE FUND, INC.
767 Fifth Avenue
New York, New York 10153
April 17, 1996
PROXY STATEMENT
---------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors of Lord Abbett Mid-Cap Value
Fund, Inc. (formerly Lord Abbett Value Appreciation Fund, Inc.), a diversified
open-end management investment company incorporated under the laws of Maryland
(the "Fund"), for use at an annual meeting of share holders of the Fund to be
held at 11:00 a.m. on Wednesday, June 19, 1996 at the offices of Lord, Abbett &
Co., the investment manager and principal underwriter of the Fund ("Lord
Abbett"), on the 11th floor of the General Motors Building, 767 Fifth Avenue,
New York, New York 10153, and at any adjournments thereof. This proxy statement
and the enclosed proxy card are first being mailed to shareholders on or about
April 17,1996.
At the close of business on March 22, 1996 (the "Record Date"), there were
issued and outstanding ___________ shares of the Fund. Only shareholders of
record at the close of business on the Record Date are entitled to notice of,
and to vote at, the annual meeting or any adjournment thereof. Proxies will be
solicited by mail. Additional solicitations may be made by telephone, facsimile
or personal contact by officers or employees of Lord Abbett and its affiliates.
The Fund may also request brokerage houses, custodians, nominees, and
fiduciaries who are shareholders of record to forward proxy materials to
beneficial owners. D.F. King & Co. has been retained to assist in the
solicitation of proxies at an estimated cost of $_______. The cost of the
solicitation will be borne by _____________.
Shareholders are entitled to one vote for each full share, and a pro
portionate vote for each fractional share, of the Fund held as of the Record
Date. Under Maryland law, shares owned by two or more persons (whether as joint
tenants, co-fiduciaries or otherwise) will be voted as follows, unless a written
instrument or court order providing to the contrary has been filed with the
Secretary of the Fund: (1) if only one votes, that vote binds all; (2) if more
- -
than one votes, the vote of the majority binds all; and (3) if more than one
-
votes and the vote is evenly divided, the vote will be cast proportionately. If
the enclosed form of proxy is properly executed and returned in time to be voted
at the meeting, the proxies named therein will vote the shares represented by
the proxy in accordance with the instructions marked thereon. Unmarked proxies
will be voted FOR each of the items described in this Proxy Statement and any
other matters as deemed appropriate. A proxy may be revoked by the signer at
any time at or before the meeting by written notice to the Fund, by execution of
a later-dated proxy or by voting in person at the meeting.
1. ELECTION OF DIRECTORS
The nominees for election as directors are Ronald P. Lynch, Robert S.
Dow, Thomas S. Henderson, E. Thayer Bigelow, Stewart S. Dixon, John C. Jansing,
<PAGE>
C. Alan MacDonald, Hansel B. Millican, Jr. and Thomas J. Neff, who have been
nominated by the Board of Directors to succeed themselves. The individuals
named as proxies intend to vote the proxies, unless otherwise directed, in favor
of the election of such nominees, each of whom has agreed to continue to serve
as a director of the Fund. Management of the Fund has no reason to believe that
any nominee will be unable to serve as a director. If any nominee should be
unable to serve as a director, it is the intention of the individuals named as
proxies to vote for the election of such person or persons as the Board of
Directors may, in its discretion, recommend.
Information about each person nominated for election as a director is set
forth in the following table. Except where indicated, each of the persons
listed in the table has held the principal occupation listed opposite his name
for the past five years.
<TABLE>
<CAPTION>
Director of
Names and Ages of Principal Occupation and Director- the Fund
Directors of the Fund ships Since
- ------------------------ ------------------------------------- ---------------
<C> <S> <C>
Ronald P. Lynch (1)(2) Chairman of the Board of the Fund. 1983
60 Partner of Lord Abbett.
Robert S. Dow (1)(2) President of the Fund. 1995
51 Partner of Lord Abbett.
Thomas S. Henderson(1)(2) Vice President of the Fund. 1989
64 Partner of Lord Abbett.
E. Thayer Bigelow (2) President and Chief Executive of 1994
54 Time Warner Cable Programming,
Inc. Formerly President and Chief
Operating Officer of Home Box
Office, Inc.
Stewart S. Dixon (2) Partner in the law firm of Wildman, 1983
65 Harrold, Allen & Dixon.
John C. Jansing (2) Retired. Former Chairman of Inde- 1983
70 pendent Election Corporation of
America, a proxy tabulating firm.
C. Alan MacDonald (2) General Partner, The Marketing 1988
62 Partnership, Inc., a full service
marketing consulting firm. Formerly
Chairman and Chief Executive Officer
of Lincoln Snacks, Inc., manufacturer
of branded snack foods (1992-1994).
Formerly President and Chief
Executive Officer of Nestle Foods
Corp., and prior to that, President
and Chief Executive Officer of
Stouffer Foods Corp., both
subsidiaries of Nestle SA,
Switzerland. Currently serves as
Director of Den West Restaurant Co.,
J. B. Williams, and Fountainhead
Water Company.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Director of
Names and Ages of Principal Occupation and Director- the Fund
Directors of the Fund ships Since
- ------------------------ ------------------------------------- ---------------
<C> <S> <C>
Hansel B. Millican, Jr. (2) President and Chief Executive Officer 1983
67 of Rochester Button Company.
Thomas J. Neff (2) President, Spencer Stuart & Asso- 1983
58 ciates, an executive search consulting
firm.
- ----------------------
</TABLE>
(1) "Interested person" of the Fund and Lord Abbett, within the meaning of the
Investment Company Act of 1940, as amended, because of his association with
Lord Abbett.
(2) Also an officer and/or a director or trustee of other Lord Abbett-sponsored
funds.
Listed below is the number of shares of the Fund owned beneficially by
each director as of March 22, 1996, together with the number of "phantom" shares
credited to the account of each director under a plan (the "Deferred Plan")
permitting independent directors to defer their directors' fees and to have the
deferred amounts deemed invested in shares of the Fund for later payment. Also
shown is the number of shares owned beneficially by the directors and officers
as a group, together with such "phantom" shares credited to the accounts of
directors and officers as a group. In each case, the amounts shown are less than
1% of the Fund's outstanding capital stock.
Number of Shares
Name Beneficially
Owned and Phantom Shares/1/
- --------------------------- -------------------------------
Ronald P. Lynch 148,433
Robert S. Dow 9,227
Thomas S. Henderson 3,080
E. Thayer Bigelow 73
Stewart S. Dixon 2,960
John C. Jansing 6,390
C. Alan MacDonald 1,059
Hansel B. Millican, Jr. 3,090
Thomas J. Neff 3,775
3
<PAGE>
Number of Shares
Name Beneficially
Owned and Phantom Shares/1/
- --------------------------- -------------------------------
Directors and Officers as a 321,488
group
(1) Of the shares listed in the foregoing table, the following constitute
"phantom" shares credited to directors under the Deferred Plan: Mr.
Bigelow, 73 shares; Mr. Dixon, 2,960 shares; Mr. Jansing, 3,010 shares; Mr.
MacDonald, 1,059 shares; Mr. Millican, 3,090 shares; Mr. Neff, 3,108
shares; and directors and officers as a group: 13,300 shares.
The Board of Directors has only one standing committee, an Audit
Committee, consisting of Messrs. Bigelow, MacDonald and Millican. The functions
performed by the Audit Committee include recommendation of the selection of
independent public accountants for the Fund to the Board of Directors for
approval, review of the scope and results of audit and non-audit services, the
adequacy of internal controls and material changes in accounting principles and
practices and other matters when requested from time to time by the directors
(the "Independent Directors") who are not "interested persons" of the Fund
within the meaning of the Investment Company Act of 1940, as amended (the
"Act"). The Audit Committee held four meetings during the fiscal year ended
December 31, 1995.
The Board of Directors of the Fund met twelve times during the fiscal
year ended December 31, 1995, and each director attended at least 75% of the
total number of meetings of the Board and, if he was a member of the Audit
Committee, of such committee.
The second column of the following table sets forth the compensation
accrued by the Fund for the Independent Directors. The third and fourth columns
set forth information with respect to the retirement plan for Independent
Directors maintained by the Fund and the other Lord Abbett-sponsored funds. The
fifth column sets forth the total compensation accrued by the Fund and such
other funds for the Independent Directors. The second, third and fourth columns
give information for the Fund's most recent fiscal year; the fifth column gives
information for the calendar year ended December 31, 1995. No director of the
Fund associated with Lord Abbett and no officer of the Fund received any
compensation from the Fund for acting as a director or officer.
4
<PAGE>
<TABLE>
<CAPTION>
For Year Ended De-
For the Fiscal Year Ended December 31, 1995 cember 31, 1995
- ------------------- ---------------- ------------------- ------------------- ----------------------------
(I) (II) (III) (IV) (V)
- ------------------- ---------------- ------------------- ------------------- ----------------------------
Estimated Annual
Pension or Retire- Benefits Upon Re-
ment Benefits tirement Proposed
Aggregate Accrued by the to be Paid by the Total Compensation
Com- Fund and Fund and Fifteen Accrued by the Fund
pensation Ac- Fifteen Other Other Lord and Fifteen Other
crued by the Lord Abbett- Abbett-sponsored Lord Abbett-spon-
Name of Director Fund/1/ sponsored Funds/2/ Funds/2/ sored Funds/3/
- ----------------------- --------------- ------------------- ------------------- ------------------------------
<S> <C> <C> <C> <C>
E. Thayer Bigelow $658 $ 9,772 $33,600 $41,700
Stewart S. Dixon $662 $22,472 $33,600 $42,000
John C. Jansing $678 $28,480 $33,600 $42,960
C. Alan MacDonald $675 $27,435 $33,600 $42,750
Hansel B. Millican, Jr. $679 $24,707 $33,600 $43,000
Thomas J. Neff $663 $16,126 $33,600 $42,000
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Independent Directors' fees, including attendance fees for board and
committee meetings, are generally allocated among all Lord Abbett-sponsored
funds based on net assets of each fund. A portion of the fees payable by
the Fund to its Independent Directors is being deferred under a plan that
deems the deferred amounts to be invested in shares of the Fund for later
distribution to the directors. The total amount accrued under the plan for
each Independent Director since the beginning of his tenure with the Fund,
including dividends reinvested and changes in net asset value applicable to
such deemed investments, as of December 31, 1995, were as follows: Mr.
Bigelow, $894; Mr. Dixon, $36,057; Mr. Jansing, $36,665; Mr. MacDonald,
$12,903; Mr. Millican, $37,645; and Mr. Neff, $37,858.
(2) Each Lord Abbett-sponsored fund has a retirement plan providing that
Independent Directors will receive annual retirement benefits for life
equal to 80% of their final annual retainers following retirement at or
after age 72 with at least 10 years of service. Each plan also provides for
a reduced benefit upon early retirement under certain circumstances, a pre-
retirement death benefit and actuarially reduced joint-and-survivor spousal
benefits. The amounts stated in column (IV) would be payable annually under
such re tirement plans if the director were to retire at age 72 and the
annual retainers payable by such funds were the same as they are today.
The amounts set forth in column (III) were accrued by the Lord Abbett-
sponsored funds during the fiscal year ended December 31, 1995 with respect
to the retirement benefits set forth in column (IV).
(3) This column shows aggregate Independent Director's fees, including
attendance fees for board and committee meetings, of a nature referred to
in the first sentence of footnote (1), accrued by the Lord Abbett-sponsored
funds during the year ended December 31, 1995.
5
<PAGE>
Listed below are the executive officers of the Fund, other than Messrs.
Lynch, Dow and Henderson who are listed above in the table of nominees. Each
executive officer has been associated with Lord Abbett for over five years,
except as indicated. Messrs. Allen, Carper, Cutler, Morris, Nordberg and Walsh
are partners of Lord Abbett; the others listed below are employees.
Stephen I. Allen, age 42, Vice President since 1994.
Daniel E. Carper, age 43, Vice President since 1986.
Kenneth B. Cutler, age 63, Vice President and Secretary since 1983.
John J. Gargana, Jr., age 64, Vice President since 1983.
Paul A. Hilstad, age 53, Vice President since 1995 (with Lord Abbett since 1995
- -formerly Senior Vice President and General Counsel of American Capital Manage
ment & Research, Inc.).
Thomas F. Konop, age 54, Vice President since 1987.
Robert G. Morris, age 51, Vice President since 1995.
E. Wayne Nordberg, age 59, Vice President since 1988.
Keith F. O'Connor, age 40, Treasurer since 1987.
Victor W. Pizzolato, age 63, Vice President since 1983.
Edward K. Von der Linde, age 35, Executive Vice President since 1995.
John J. Walsh, age 60, Vice President since 1983.
Pursuant to the Fund's By-Laws, the election of each director of the Fund
requires the affirmative vote of a majority of the shares of the Fund voted at
the meeting. If a shareholder abstains from voting on this matter, then the
shares held by such shareholder shall be deemed present at the meeting for
purposes of determining a quorum and for purposes of calculating the vote with
respect to this matter, but shall not be deemed to have been voted in favor of
this matter. If a broker returns a "non-vote" proxy, indicating a lack of
authority to vote on this matter, then the shares covered by such non-vote shall
be deemed present at the meeting for purposes of determining a quorum but shall
not be deemed to be represented at the meeting for purposes of calculating the
vote with respect to this matter.
The Board of Directors recommends that the shareholders vote FOR the
election of each of the nominees as a director of the Fund.
2. RATIFICATION OR REJECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Deloitte & Touche LLP as the in
dependent public accountants of the Fund for the fiscal year ending December 31,
6
<PAGE>
1996. The Act requires that such selection be submitted for ratification or
rejection at the next annual meeting of shareholders if such meeting be held.
Deloitte & Touche LLP (or a predecessor firm) acted as the Fund's independent
public accountants for the year ended December 31, 1995, and for a number of
years prior thereto. Based on information in the possession of the Fund, and
information furnished by Deloitte & Touche LLP, the firm has no direct financial
interest and no material indirect financial interest in the Fund. A
representative of Deloitte & Touche LLP is expected to attend the meeting and
will be provided with an opportunity to make a statement and answer appropriate
questions.
Ratification of the selection of Deloitte & Touche LLP requires the
affirmative vote of a majority of the shares of the Fund voted at the meeting.
If a shareholder abstains from voting on this matter, then the shares held by
such shareholder shall be deemed present at the meeting for purposes of
determining a quorum and for purposes of calculating the vote with respect to
this matter, but shall not be deemed to have been voted in favor of this matter.
If a broker returns a "non-vote" proxy, indicating a lack of authority to vote
on this matter, then the shares covered by such non-vote shall be deemed present
at the meeting for purposes of determining a quorum but shall not be deemed to
be represented at the meeting for purposes of calculating the vote with respect
to this matter.
The Board of Directors recommends that shareholders vote to ratify the
selection of Deloitte & Touche LLP as the Fund's independent public accountants
for the fiscal year ending December 31, 1996.
3. PROPOSAL TO AMEND THE FUNDAMENTAL INVESTMENT RESTRICTIONS AND POLICIES OF
THE FUND
The Board of Directors has approved various amendments to the Fund's
investment restrictions and policies in order to provide increased flexibility
in managing the Fund's investment portfolio. Those investment policies and
restrictions designated "fundamental" may only be changed by the vote of a
"majority" (as defined in the Act) of the Fund's voting securities. Those
investment policies and restrictions designated "non-fundamental" may be changed
by the vote of the Board of Directors alone. Therefore, the proposed amendments
to the fundamental policies and restrictions described below require shareholder
approval. The Fund's current and proposed investment restrictions and policies
(both fundamental and non-fundamental) with respect to various investment
techniques and securities are set forth in Exhibit A attached hereto.
Investment policies and restrictions govern generally the investment
activities of the Fund and limit its ability to invest in certain types of
securities or engage in certain types of transactions. The proposed changes are
not expected to affect materially the current operations of the Fund. Although
the proposed fundamental investment policies and restrictions are less
restrictive than the current fundamental investment policies and restrictions of
the Fund, non-fundamental restrictions have been adopted, to become effective
with the proposed amendments to the fundamental policies and restrictions, which
will limit the effect of such changes on the operations of the Fund. The
proposed fundamental policies and restrictions are intended principally to
provide greater flexibility in the future management of the Fund's investment
portfolio. The Board of Directors has no present intention of approving actions
permitted by these less restrictive fundamental policies. If it were
7
<PAGE>
to do so, the risks of investing in the Fund could be increased. No change is
proposed with respect to the Fund's investment objective, which is capital
appreciation through investments primarily in equity securities which are
believed to be undervalued in the marketplace.
The proposed policies and restrictions restate many of the policies and
restrictions currently in effect for the Fund. In some instances, certain
fundamental policies and restrictions have been modified or eliminated in
accordance with developments in Federal or state blue sky regulations or in the
securities markets since the inception of the Fund. In other instances, as
illustrated in Exhibit A, certain policies and restrictions previously deemed
fundamental have been redesignated non-fundamental. By making certain policies
and restrictions non-fundamental, the Board may amend a policy or restriction as
it deems appropriate and in the best interest of the Fund and its shareholders,
without incurring the costs (normally borne by the Fund and its shareholders) of
seeking a shareholder vote. Also, certain of the proposed fundamental
investment policies and restrictions are stated in terms of "to the extent
permitted by applicable law". Applicable law can change over time and may
become more or less restrictive as a result. The policies and restrictions have
been drafted in this manner so that a change in law would not require the Fund
to seek a shareholder vote to amend the policy or restriction to conform to
applicable law, as revised.
Approval of the proposed amendments to the Fund's fundamental investment
restrictions and policies requires the affirmative vote of a "majority" (as
defined in the Act) of the Fund's voting securities. A "majority" vote is
defined in the Act as the vote of the holders of the lesser of: (i) 67% or more
-
of the voting securities present or represented by proxy at the shareholders
meeting, if the holders of more than 50% of the outstanding voting securities
are present or represented by proxy, or (ii) more than 50% of the outstanding
--
voting securities. If a shareholder abstains from voting on this matter, then
the shares held by such shareholder shall be deemed present at the meeting for
purposes of determining a quorum and for purposes of calculating the vote with
respect to this matter, but shall not be deemed to have been voted in favor of
this matter. If a broker returns a "non-vote" proxy, indicating a lack of
authority to vote on this matter, then the shares covered by such non-vote shall
be deemed present at the meeting for purposes of determining a quorum but shall
not be deemed to be represented at the meeting for purposes of calculating the
vote with respect to this matter.
If the proposed amendments are not approved by the shareholders of the
Fund, the current fundamental policies and restrictions will continue in effect.
The Board of Directors recommends that shareholders vote in favor of the
proposed amendments to the Fund's fundamental investment restrictions and
policies.
4. NEW DISTRIBUTION PLAN AND AGREEMENT FOR THE
CLASS A SHARES
At a meeting of the Board of Directors of the Fund held on March 14, 1996,
the directors of the Fund unanimously approved, subject to shareholder approval,
and determined to submit to the shareholders for approval, a new Distribution
Plan and Agreement pursuant to Rule 12b-1 under the Act (the "Proposed
8
<PAGE>
Plan") for the existing class of Fund shares. This class of shares is to be
designated the Class A Shares -- see Item 5 below. The text of the Proposed
Plan is attached hereto as Exhibit B. The directors who approved the Proposed
Plan include all of the Independent Directors, none of whom is an "interested
person" of the Fund within the meaning of the Act or has a direct or indirect
financial interest in the operations of the Proposed Plan or in any agreements
related thereto.
If approved by shareholders, the Proposed Plan will replace a dis tribution
plan and agreement (the "Current Plan") that was approved by shareholders on
March 14, 1990 and became effective June 1, 1990. The Current Plan was last
amended by action of the Board of Directors on June 21, 1991. The changes
included in the Proposed Plan, which are described below, are designed primarily
to maintain the competitive position of the Class A Shares of the Fund.
Under the Current Plan (except as to certain accounts for which tracking
data is not available), the Fund pays dealers through Lord Abbett (1) an annual
-
service fee (payable quarterly) of 0.25% of the average daily net asset value of
shares sold by dealers on or after June 1, 1990 (0.15% of the average daily net
asset value of shares sold, or attributable to shares sold, by dealers prior to
that date) and (2) a one-time 1% distribution fee, at the time of sale, on all
-
shares sold at the $1 million level by dealers, including sales qualifying at
such level under the rights of accumulation and statement of intention
privileges described in the Fund's prospectus in effect at such time. These
service and distribution fees provide additional incentives for dealers (a) to
-
provide continuing information and investment services to their shareholder
accounts and otherwise to encourage their accounts to remain invested in the
Fund and (b) to sell shares of the Fund.
-
Under the Current Plan, holders of shares on which the 1% dis tribution fee
has been paid are required to pay to the Fund a contingent deferred
reimbursement charge ("CDRC") of 1% of the original cost or the then net asset
value, whichever is less, of such shares if they are redeemed out of the Lord
Abbett-sponsored family of funds on or before the end of the twenty-fourth month
after the month in which the purchase occurred. (An exception is made for
certain re demptions by tax-qualified plans under Section 401 of the Internal
Revenue Code due to plan loans, hardship withdrawals, death, retirement or
separation from service with respect to plan participants.) If the shares are
exchanged into another Lord Abbett fund and are thereafter redeemed out of the
Lord Abbett family on or before the end of such twenty-fourth month, the charge
is collected for the Fund by the other fund. The Fund collects such a charge for
other Lord Abbett-sponsored funds in a similar situation.
Set forth below is a description of the principal changes to be effected
under the Proposed Plan:
(a) Distribution Fees. The Fund's Board of Directors will be authorized
-----------------
under the Proposed Plan, without further shareholder vote, to increase the
amount of distribution fees up to 0.25% of the average annual net assets
attributable to the Class A Shares (the "Distribution Fee Ceiling"). This
increased spending limit is intended primarily to permit the directors to
increase the amount to be spent for distribution to meet changing sales
competition. The directors believe it is desirable to be able to make these
changes without further shareholder approval because additional shareholder
meetings would be time-consuming and costly to the Fund and its shareholders.
The Board of Directors will approve additional charges under this
9
<PAGE>
increased authority only if a majority of the Independent Directors conclude in
their business judgment that there is a reasonable likelihood that the increase
will benefit the Fund and its shareholders.
The one-time 1% distribution fee, payable at the time of certain sales as
described above, is to be charged against the Distribution Fee Ceiling. During
the Fund's last fiscal year, payments of the one-time 1% distribution fee under
the Current Plan totaled 0.01% of the Fund's average net assets. Subject to
shareholder approval of the Proposed Plan, the Board of Directors has authorized
the Fund to continue paying this one-time distribution fee with respect to sales
of Class A Shares, subject to three changes: First, the payments will be made
-----
in connection with sales to retirement plans with 100 or more eligible
employees, in addition to sales at the $1 million level as under the Current
Plan; Second, the payments will be scaled down at certain breakpoints, as
------
follows: 1% of the first $5 million, 0.55% of the next $5 million, 0.50% of the
next $40 million and 0.25% over $50 million of shares sold to a retirement plan
or other qualifying purchaser within a 12-month period (beginning when the first
purchase is made at net asset value); and Third, the payments will be made to
-----
institutions and persons permitted by applicable law and/or rules to receive
such payments ("Authorized Institutions"), rather than just to dealers as is the
case under the Current Plan.
If shareholders approve the Proposed Plan, the Board of Directors has
authorized the Fund to pay, as an additional distribution fee, a supplemental
payment to dealers who have accounts comprising a significant percentage of the
Fund's Class A Share assets and having a lower than average redemption rate and
who have a satisfactory program for the promotion of Class A Shares. Any such
payments will be 0.10% per annum of the average assets of the Fund represented
by the Class A Share accounts of qualifying dealers. This supplemental payment
is intended by the Board of Directors to enhance the Fund's relationships with
those dealers most likely to have a significant impact on the growth of the
Class A Shares.
(b) Service Fees. Service fee payments, which are to be continued under
------------
the Proposed Plan at an annual rate of 0.25% of the average daily net asset
value of shares sold on or after June 1, 1990 (0.15% of the average daily net
asset value of shares sold, or attributable to shares sold, prior to such date),
could be made to all Authorized Institutions (institutions and persons permitted
by applicable law and/or rules to receive such payments), rather than just to
dealers as is the case under the Current Plan.
(c) Use of Payments by Lord Abbett. Lord Abbett would be permitted to use
------------------------------
payments received under the Proposed Plan to provide continuing services to
shareholder accounts not serviced by Authorized Institutions and, with Board
approval, to finance any activity which is primarily intended to result in the
sale of Class A Shares. Any such payments to finance activities primarily
intended to result in the sale of Class A Shares would be subject to the
Distribution Fee Ceiling.
(d) CDRC. The CDRC applicable to the Class A Shares would be substantially
----
similar to that payable under the Current Plan, except that no CDRC would be
payable in connection with redemptions by retirement plans (not just those
qualified under Section 401 of the Internal Revenue Code) attributable to any
benefit payment or distribution of any excess contribution thereunder (not just
those described above in connection with such exception under the Current Plan).
Because CDRC payments will be made directly to the Fund, they will have the
effect of reducing the
10
<PAGE>
amount of the distribution fees paid by the Fund for the purpose of complying
with the Distribution Fee Ceiling. As in the case of the specific distribution
fees authorized by the Board of Directors of the Fund, the CDRC authorized from
time to time by the board for the Class A Shares will be described in the then
current prospectus of the Fund.
If the supplemental payment to dealers, the revised one-time dis tribution
fee and the other changes described above had been in effect for the Fund's last
fiscal year, it is estimated that, in the aggregate, they would have increased
the ratio of expenses to average net assets of the Fund from 1.27% to
approximately 1.32%, representing a difference of 0.05%.
(e) Lord Abbett Distributor. The other party to the Proposed Plan is to be
-----------------------
Lord Abbett Distributor LLC, a New York limited liability company, to be formed
as a subsidiary of Lord Abbett ("Lord Abbett Distributor"), rather than Lord
Abbett. Lord Abbett Distributor is to take on all the underwriting functions
currently performed directly by Lord Abbett.
In considering whether to recommend the Proposed Plan for approval, the
Board considered, among other things, the factors set forth below:
(i) Flexibility in Adapting Distribution Fees to Meet Industry-Wide
---------------------------------------------------------------
Changes. During the last several years, there has been significantly increased
competition and pricing experimentation in the mutual fund industry. As the
pace of change increases, the Board of Directors believes it will be useful to
be able to respond more quickly to marketplace pressures, and change in
appropriate cases the amount of the Class A 12b-1 distribution fees to be paid,
without unnecessarily burdening the shareholders with the costs of additional
proxy solicitations. The directors believe that the increased distribution
fees described above are good examples of the desirability of this flexibility.
Based on advice received from Lord Abbett, the decision by the Board to approve
the payment of distribution fees in connection with sales to retirement plans
with 100 or more eligible employees will enable the Class A Shares to compete
more effectively in this growing and important market. The 0.10% per annum
supplemental payments to dealers who meet certain criteria will permit the Fund
to enhance relationships with those dealers most likely to have a significant
impact on the growth of the Class A Shares.
(ii) Expanding Categories of Persons Eligible to Receive Payments. The
------------------------------------------------------------
Current Plan limits payments thereunder to dealers selling Fund shares. Since
the Current Plan was adopted, different methods of distribution, using different
entities, have developed in the industry. The Board of Directors sees no reason
to limit arbitrarily the categories of persons eligible to receive payments
under the Proposed Plan, and believes that the availability of payments under
the plan will induce such other entities to invest in Class A Shares.
(iii) Flexibility in Distributor's Use of Payments. Lord Abbett has
--------------------------------------------
advised the Board of Directors of the Fund that allowing Lord Abbett Distributor
to retain fees received from the Fund to (i) provide continuing information and
-
investment services to shareholder accounts and (ii) finance, with Board
--
approval, any activity which is primarily intended to result in the sale of
Class A Shares, will provide useful flexibility and will be in line with common
practice in the industry.
11
<PAGE>
In light of the anticipated benefits to the Fund and its shareholders as a
result of adopting the Proposed Plan, and having reviewed a comparison of the
costs to the Fund of the Current Plan and the Proposed Plan, the Directors of
the Fund have concluded, in the exercise of reasonable business judgment and in
light of their fiduciary duties, that there is a reasonable likelihood that the
Proposed Plan will benefit the Fund and its shareholders. There can, however,
be no assurance that the anticipated benefits will be realized.
Payments by the Fund to dealers through Lord Abbett under the Current Plan
for the fiscal year ended December 31, 1995 were $384,000 (representing 0.19% of
the Fund's average net assets during that period).
Set forth in the table below is a summary comparison of the Fund's
expenses, on a current and pro-forma basis taking into account the increased
fees that could be paid under the Proposed Plan. The annual operating expenses
shown in the second column are the Fund's actual expenses for the fiscal year
ended December 31, 1995. The expenses shown in the third column represent, on a
pro-forma basis, such actual expenses of the Fund adjusted to show the effect of
the maximum distribution fee the Board would be authorized to approve under the
Proposed Plan. The fourth column shows such pro-forma annual operating expenses
based on the distribution fee rate the Board has approved subject to approval of
the Proposed Plan by shareholders. The example set forth below is not a
representation of past or future expenses. Actual expenses may be greater or
less than those shown.
<TABLE>
<CAPTION>
I II III IV
- ---------------------------------------------------------------------------------------------
Pro Forma
(reflecting
Pro-Forma estimated
(reflecting amounts that
Year ended maximum would have
December 31, amounts been paid
1995 (reflecting payable under under the
the Current the Proposed Proposed
Plan) Plan) Plan)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
(AS A PERCENTAGE OF OFFERING PRICE)
- ---------------------------------------------------------------------------------------------
Maximum Sales Load/1/ on Purchases 5.75% 5.75% 5.75%
Deferred Sales Load /1 / None/2/ None/2/ None/2/
- ---------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
- ---------------------------------------------------------------------------------------------
Management Fee .75% .75% 0.75%
12b-1 Fees .20% .50%/3/ 0.25%/4/
Other Expenses .32% .32% 0.32%
- ---------------------------------------------------------------------------------------------
Total Operating Expenses 1.27% 1.57% 1.32%
- ---------------------------------------------------------------------------------------------
</TABLE>
Example: Assume an annual return of 5% and there is no change in the level of
- -------
expenses described above. For every $1,000 invested, with reinvestment of all
12
<PAGE>
distributions, you would pay the following total expenses if you closed your
account after the number of years indicated.
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pro Pro Pro Pro Pro Pro Pro Pro
Forma Forma Forma Forma Forma Forma Forma Forma
Current (max.) (est.) Current (max.) (est.) Current (max.) (est.) Current (max.) (est.)
- --------- -------- -------- ------- --------- -------- ------- --------- --------- ------- --------- --------
- --------------------------------------------------------------------------------------------------------------------------------
$70/5/ $72/3,5/ $70/4,5/ $97/5/ $104/3,5/ $97/4,5/ $125/5/ $137/3,5/ $126/4,5/ $206/5/ $231/3,5/ $207/4,5/
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Sales "load" is referred to as sales "charge" and "deferred sales load" is
referred to as "contingent deferred reimbursement charge" or "CDRC"
throughout this Proxy State ment.
2. Under both the Current Plan and the Proposed Plan, redemptions of shares on
which the Fund's Rule 12b-1 sales distribution fee has been paid are
subject to a CDRC of 1% of the original cost or the then net asset value,
whichever is less, of all shares so purchased which are redeemed out of the
Lord Abbett-sponsored family of funds on or before the end of the twenty-
fourth month after the month in which the purchase occurred, subject to
certain exceptions described herein.
3. Reflects the maximum annual 12b-1 fee of 0.50% that could be paid under the
proposed plan in any year, consisting of a distribution fee of 0.25% and
a service fee of 0.25%.
4. Reflects the estimated level of distribution fees that would have been paid
under the Proposed Plan had it been in effect for the Fund's last fiscal
year.
5. Based on total current and pro-forma operating expenses shown in the table
above.
If the shareholders approve the Proposed Plan, the Proposed Plan shall,
unless terminated as described below, become effective July 12, 1996 and
continue in effect until July 12, 1997 and from year to year thereafter only so
long as such continuance is specifically approved, at least annually, by the
Fund's Board of Directors and its Independent Directors by a vote cast in person
at a meeting called for the purpose of voting on such continuance. The Proposed
Plan may be terminated at any time by a vote of a majority of the Independent
Directors or by a shareholder vote in compliance with Rule 12b-1 under the Act.
The Plan may not be amended to increase materially the amount to be spent for
distribution above the maximum amounts set forth in the Proposed Plan without a
shareholder vote in compliance with Rule 12b-1 under the Act. All material
amendments must be approved by a majority of the Independent Directors.
The Proposed Plan provides that while it is in effect, the selection and
nomination of Independent Directors is committed to the discretion of the
Independent Directors then sitting on the Board. This does not prevent the
involvement of others in such selection and nomination if the final decision on
any such selection or nomination is approved by a majority of the Independent
Directors.
Pursuant to Rule 12b-1 under the Act, an affirmative vote of the holders of
a "majority" (as defined in the Act) of the Fund's voting securities is required
for approval of the Proposed Plan. A "majority" vote is defined in the Act as
the vote of the holders of the lesser of: (i) 67% or more of the voting
-
securities present or represented by proxy at the shareholders meeting, if the
holders of more than 50% of the outstanding voting securities are present or
represented by proxy, or
13
<PAGE>
(ii) more than 50% of the outstanding voting securities. If a shareholder
--
abstains from voting on this matter, then the shares held by such shareholder
shall be deemed present at the meeting for purposes of determining a quorum and
for purposes of calculating the vote with respect to this matter, but shall not
be deemed to have been voted in favor of this matter. If a broker returns a
"non-vote" proxy, indicating a lack of authority to vote on this matter, then
the shares covered by such non-vote shall be deemed present at the meeting for
purposes of determining a quorum but shall not be deemed to be represented at
the meeting for purposes of calculating the vote with respect to this matter.
If the Proposed Plan is not approved by the shareholders of the Fund, the
Current Plan will continue in effect according to its terms.
The Board of Directors recommends that shareholders vote in favor of
adoption of the Proposed Plan.
5. AMENDMENT OF THE ARTICLES OF INCORPORATION TO AUTHORIZE CLASSES AND SERIES
OF SHARES AND TO CONFIRM THAT THE FUND MAY IMPOSE CONTINGENT DEFERRED SALES
CHARGES IN CONNECTION WITH REDEMPTIONS
On March 14, 1996, the Fund's Board of Directors unanimously voted to
approve an amendment to the Articles of Incorporation of the Fund to give the
Fund's Board of Directors the power to classify the Fund's shares into classes
and series, and voted to submit such amendment to the Fund's shareholders for
approval. The full text of the amendment is attached hereto as Exhibit C.
The Fund's Articles of Incorporation presently designate one class of
shares of capital stock and do not authorize the Board of Directors to create
additional classes or series. The Board of Directors believes that the Fund's
best interests will be served if the Board of Directors is able to create new
series of shares and classes of shares within a series, with each share of a
series, regardless of class, sharing pro rata (based on net asset value) in the
portfolio and income of the series and in the series' expenses, except for
differences in expenses resulting from different Rule 12b-1 plans for the
various classes and possibly other class-specific expenses. Although the Board
of Directors of the Fund has no current intention of creating more than one
class of shares, it is expected that implementation of such a multi-class fund
structure in the future, if the directors deem it desirable, would (i) enable
-
investors in the Fund to choose the distribution option that best suits their
individual situations, (ii) facilitate distribution of the Fund's shares, and
--
(iii) maintain the competitive position of the Fund in relation to other funds
- ----
that have implemented or are seeking to implement similar distribution
arrangements.
The Board of Directors has approved, subject to shareholder approval, one
class of shares, to be designated the "Class A Shares," comprising the existing
class of Fund shares. The Class A Shares will continue to be offered as
described in the Fund's current prospectus, except that the Board of Directors
is recommending that shareholders approve a new Distribution Plan and Agreement
pursuant to Rule 12b-1 under the Act that, if approved, will be applicable to
the Class A Shares. See Item 4 above. If the proposed amendment to the Fund's
Articles of Incorporation is approved, the Board of Directors will be authorized
to create and
14
<PAGE>
issue one or more additional classes of shares within the existing series and to
create additional series.
If, in the future, additional classes or series are created by the Board of
Directors, shares of all classes will vote together on all matters affecting the
Fund, except for matters, such as approval of a Rule 12b-1 plan or a related
service plan, affecting only a particular class or classes. All shares voting
on a matter will have identical voting rights. All issued shares will be fully
paid and non-assessable, and shareholders will have no pre-emptive or other
right to subscribe to any additional shares. All shares within a series will
have the same rights and be subject to the same limitations set forth in the
Articles of Incorporation with respect to dividends, redemptions and liquidation
except for differences resulting from class-specific Rule 12b-1 plans and
related service plans and certain other class-specific expenses.
The proposed amendment to the Fund's Articles of Incorporation will also
make clear that the Fund may impose a contingent deferred sales charge ("CDSC")
and other charges (which charges may vary within and among the classes) payable
upon redemption as may be established from time to time by the Board of
Directors of the Fund. The Fund's Articles of Incorporation currently provide
that the Fund may deduct a redemption charge not exceeding 1% of the net asset
value of the shares being redeemed. The proposed amendment is deemed advisable
in order to avoid any question as to whether a CDSC in excess of 1% may be
imposed with respect to a new class of shares created in the future by the Board
of Directors pursuant to the proposed amendment to the Fund's Articles of
Incorporation. The Board of Directors has no intention of increasing the CDRC
currently payable or proposed to be payable on certain early redemptions of your
Fund shares. See Item 4 above.
Approval of the proposed amendment to the Articles of Incorporation
requires an affirmative vote of more than 50% of the outstanding shares of the
Fund. If a shareholder abstains from voting on this matter, then the shares held
by such shareholder shall be deemed present at the meeting for purposes of
determining a quorum and for purposes of calculating the vote with respect to
this matter, but shall not be deemed to have been voted in favor of this matter.
If a broker returns a "non-vote" proxy, indicating a lack of authority to vote
on this matter, then the shares covered by such non-vote shall be deemed present
at the meeting for purposes of determining a quorum but shall not be deemed to
be represented at the meeting for purposes of calculating the vote with respect
to this matter.
The Board of Directors recommends that shareholders vote in favor of this
proposed amendment to the Articles of Incorporation.
6. AMENDMENT OF THE ARTICLES OF INCORPORATION TO REDUCE THE PAR VALUE OF
SHARES (THIS CHANGE WILL HAVE NO EFFECT ON THE VALUE OF YOUR SHARES)
On March 14, 1996, the Fund's Board of Directors unanimously voted to
approve an amendment to the Articles of Incorporation of the Fund to reduce the
par value of shares of capital stock of the Fund from $0.10 to $0.001 per share,
and voted to submit such amendment to the Fund's shareholders for approval.
This proposed amendment is included in the text of the amendment attached as
Exhibit C.
15
<PAGE>
Under Maryland law, the par value of shares determines the amount of a
corporation's stated capital. Stated capital has little meaning in the case of
an investment company like the Fund. However, when the Fund increases its
authorized capital stock, it must pay a fee based on the aggregate par value of
the new shares. This change will have no effect on the value of your shares.
The Board of Directors therefore recommends that the par value of the Fund's
shares be reduced in order to save the Fund some expense when it increases its
authorized capital stock.
Approval of the proposed amendment to the Articles of Incorporation
requires an affirmative vote of a majority of the outstanding shares of the
Fund. If a shareholder abstains from voting on this matter, then the shares held
by such shareholder shall be deemed present at the meeting for purposes of
determining a quorum and for purposes of calculating the vote with respect to
this matter, but shall not be deemed to have been voted in favor of this matter.
If a broker returns a "non-vote" proxy, indicating a lack of authority to vote
on this matter, then the shares covered by such non-vote shall be deemed present
at the meeting for purposes of determining a quorum but shall not be deemed to
be represented at the meeting for purposes of calculating the vote with respect
to this matter.
The Board of Directors recommends that shareholders vote in favor of this
proposed amendment to the Articles of Incorporation.
7. OTHER INFORMATION
Management is not aware of any matters to come before the meeting other
than those set forth in the notice. If any such other matters do come before
the meeting, the individuals named as proxies will vote, act, and consent with
respect thereto in accordance with their best judgment.
a. Timeliness of Shareholder Proposals.
-----------------------------------
Any shareholder proposals to be presented for action at the Fund's next
shareholder meeting pursuant to the provisions of Rule 14a-8 under the
Securities Exchange Act of 1934, as amended, must be received at the Fund's
principal execu tive offices within a reasonable time in advance of the date
solicitation is made for such meeting. The Fund does not intend to hold another
annual or special meeting of shareholders unless required to do so by the Act.
b. Investment Adviser and Underwriter.
----------------------------------
Lord, Abbett & Co., 767 Fifth Avenue, New York, New York, 10153, acts as
investment adviser and principal underwriter with respect to the Fund.
c. Annual Report Available Upon Request.
------------------------------------
The Fund will furnish, without charge, a copy of the Fund's most recent
annual report and the most recent semi-annual report succeeding the annual
report, if any, to a shareholder upon request. A shareholder may obtain such
reports(s) by writing to the Fund or by calling 800-___-____.
16
<PAGE>
d. Portfolio Transactions.
----------------------
The Fund's policy is to obtain best execution on all portfolio trans
actions, which means that the Fund seeks to have purchases and sales of
portfolio securities executed at the most favorable prices, considering all
costs of the trans action including brokerage commissions and dealer markups and
markdowns and taking into account the full range and quality of the brokers'
services. Consistent with obtaining best execution, the Fund may pay, as
described below, a higher commission than some brokers might charge on the same
transactions. The Fund's policy with respect to best execution governs the
selection of brokers or dealers and the market in which the transaction is
executed. To the extent permitted by law, the Fund may, if considered
advantageous, make a purchase from or sale to another Lord Abbett sponsored fund
without the intervention of any broker-dealer.
Broker-dealers are selected on the basis of their professional capacity and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of the Fund and also are employees
of Lord Abbett. These traders do the trading as well for other accounts --
investment companies (of which they are also officers) and other investment
clients -- managed by Lord Abbett. They are responsible for obtaining best
execution.
The Fund pays a commission rate that the Fund believes is appropriate to
give maximum assurance that the Fund's brokers will provide to the Fund, on a
continuing basis, the highest level of brokerage services available. While the
Fund does not always seek the lowest possible commissions on particular trades,
the Fund believes that its commission rates are in line with the rates that many
other institutions pay. The Fund's traders are authorized to pay brokerage
commissions in excess of those that other brokers might accept on the same
transactions in recognition of the value of the services performed by the
executing brokers, viewed in terms of either the particular transaction or the
overall responsibilities of Lord Abbett with respect to the Fund and the other
accounts they manage. Such services include showing the Fund trading
opportunities including blocks, a willingness and ability to take positions in
securities, knowledge of a particular security or market, proven ability to
handle a particular type of trade, confidential treatment, promptness and
reliability.
Some of the Fund's brokers also provide research services at least some of
which are useful to Lord Abbett in their overall responsibilities with respect
to the Fund and the other accounts they manage. Research includes the
furnishing of analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts
and trading equipment and computer software packages, acquired from third-party
suppliers, that enable Lord Abbett to access various information bases. Such
services may be used by Lord Abbett in servicing all their accounts, and not all
of such services will necessarily be used by Lord Abbett in connection with
their management of the Fund; conversely, such services furnished in connection
with brokerage on other accounts managed by Lord Abbett may be used in
connection with their management of the Fund, and not all of such services will
necessarily be used by Lord Abbett in connection with their advisory services to
such other accounts. The Fund has been advised by Lord Abbett that research
services received from brokers cannot be allocated to any particular account,
are not a substitute for Lord Abbett's services but are supplemental to their
own research effort and, when utilized, are subject to internal analysis before
being incorporated by Lord Abbett into their investment process. As a practical
matter, it would not be possible for Lord Abbett to generate all of the
information presently
17
<PAGE>
provided by brokers. While receipt of research services from brokerage firms
has not reduced Lord Abbett's normal research activities, the expenses of Lord
Abbett could be materially increased if it attempted to generate such additional
information through its own staff and purchased such equipment and software
packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to
or among brokers and trades are executed only when they are dictated by
investment decisions of the Fund to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the
equivalent likelihood of best execution, the broker-dealer who has sold the
Fund's shares and/or shares of other Lord Abbett-sponsored funds may be
preferred.
If other clients of Lord Abbett buy or sell the same security at the same
time as the Fund, transactions will, to the extent practicable, be allocated
among all participating accounts in proportion to the amount of each order and
will be executed daily until filled so that each account shares the average
price and com mission cost of each day. Other clients who direct that their
brokerage business be placed with specific brokers or who invest through wrap
accounts introduced to Lord Abbett by certain brokers may not participate with
the Fund in the buying and selling of the same securities as described above.
If these clients wish to buy or sell the same security as the Fund does, they
may have their transactions executed at times different from the Fund's
transactions and thus may not receive the same price or incur the same
commission cost as the Fund does.
For the fiscal years ended December 31, 1995, 1994 and 1993, the Fund paid
total commissions to independent broker-dealers of $763,945, $474,279 and
$220,764, respectively.
LORD ABBETT MID-CAP VALUE
FUND, INC.
By:_______________________
Kenneth B. Cutler
Vice President and Secretary
18
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
COMPARISON OF CURRENT AND PROPOSED
INVESTMENT POLICIES AND RESTRICTIONS
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- ----------------------------------------------- -------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
SHORT SALES/MARGIN.
FUNDAMENTAL FUNDAMENTAL
The Fund may not sell short securities or The Fund may purchase securities on
buy securities or evidences of interests margin to the extent permitted by ap-
therein on margin, although it may obtain plicable law.
short-term credit necessary for the
clearance of purchases of securities. NON-FUNDAMENTAL
The Fund may not make short sales
of securities or maintain a short
position except to the extent permitted
by applicable law.
- --------------------------------------------------------------------------------------------------------------------------
BORROWING.
FUNDAMENTAL FUNDAMENTAL
The Fund may not borrow money except The Fund may not borrow money,
as a temporary measure for extraordinary except that (i) the Fund may borrow
or emergency purposes, and then not in from banks (as defined in the Act) in
excess of 5% of the Fund's gross assets (at amounts up to 33% of its total
cost or market value, whichever is lower) assets (including the amount
at the time of borrowing. borrowed), (ii) the Fund may borrow
up to an additional 5% of its total
assets for temporary purposes, and
(iii) the Fund may obtain such short-term
credit as may be necessary for the clearance
of purchases and sales of portfolio securities.
NON-FUNDAMENTAL
The Fund may not borrow in excess of
5% of its gross assets taken at cost or
market value, whichever is lower at the
time of borrowing, and then only as a
temporary measure for extraordinary or
emergency purposes.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- ----------------------------------------------- -------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
UNDERWRITING.
FUNDAMENTAL FUNDAMENTAL
The Fund may not act as underwriter of The Fund may not engage in the
securities issued by others, unless it is underwriting of securities, except
deemed to be one in selling a portfolio pursuant to a merger or acquisition or
security requiring registration under the to the extent that, in connection with
Securities Act of 1933. the disposition of its portfolio
securities, it may be deemed to be an
underwriter under federal securities
laws.
- --------------------------------------------------------------------------------------------------------------------------
LENDING.
FUNDAMENTAL FUNDAMENTAL
The Fund may not make loans other than The Fund may not make loans to
by making demand or time deposits with other persons, except that the
banks or buying commercial paper. 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.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- ----------------------------------------------- -------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
REAL ESTATE/COMMODITIES.
FUNDAMENTAL
The Fund may not buy or sell real estate The Fund may not buy or sell real
including limited partnership interests estate (except that the Fund may in-
therein (except securities of companies, vest in securities directly or indirectly
such as real estate investment trusts, that secured by real estate or interests
deal in real estate or interests therein) or therein or issued by companies which
oil, gas or other mineral leases, invest in real estate or interests
commodities or commodity contracts in the therein), commodity or commodity
ordinary course of its business, except contracts (except to the extent the
such interests and other property acquired Fund may do so in accordance with
as a result of owning other securities, applicable law and without registering
though securities will not be purchased in as a commodity pool operator under
order to acquire any of these interests. the Commodity Exchange Act as, for
example, with futures contracts).
NON-FUNDAMENTAL
The Fund may not invest in real
estate limited partnership interests or
interests in oil, gas or other mineral
leases, or exploration or other
development programs, except that
the Fund may invest in securities
issued by companies that engage in
oil, gas or other mineral exploration
or development activities.
- --------------------------------------------------------------------------------------------------------------------------
DIVERSIFICATION.
FUNDAMENTAL FUNDAMENTAL
The Fund may not buy securities if the With respect to 75% of its gross
purchase would then cause the Fund to assets, the Fund may not buy
have more than 5% of its gross assets, at securities of one issuer representing
market value at the time of purchase, more than (i) 5% of the Fund's gross
invested in securities of any one issuer, assets, except securities issued or
except securities issued or guaranteed by guaranteed by the U.S. Government,
the U.S. Government, its agencies or its agencies or instrumentalities, or
instrumentalities. The Fund may not buy (ii) 10% of the voting securities of
voting securities if the purchase would such issuer.
then cause the Fund to own more than
10% of the voting stock of any one issuer.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- ----------------------------------------------- -------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT IN A SINGLE
INDUSTRY.
FUNDAMENTAL
The Fund may not concentrate its FUNDAMENTAL
investments in any particular industry but, The Fund may not invest more than
if deemed appropriate for attainment of its 25% of its assets, taken at market
investment objective, up to 25% of its value, in the securities of issuers in
gross assets (at market value at the time of any particular industry (excluding
investment) may be invested in any one securities of the U.S. Government, its
industry classification the Fund uses for agencies and instrumentalities).
investment purposes.
- --------------------------------------------------------------------------------------------------------------------------
RESTRICTED/ILLIQUID
SECURITIES.
FUNDAMENTAL NON-FUNDAMENTAL
The Fund may not invest knowingly in The Fund may not invest, knowingly,
securities or other assets not readily more than 15% of its net assets (at
marketable at the time of purchase or the time of investment) in illiquid
subject to legal or contractual restrictions securities, except for securities
on resale. qualifying for resale under Rule 144A
of the Securities Act of 1933, deemed
to be liquid by the Board of
Directors.
- --------------------------------------------------------------------------------------------------------------------------
MORTGAGING AND PLEDGING OF
ASSETS.
FUNDAMENTAL FUNDAMENTAL
The Fund may not pledge, mortgage or The Fund may not pledge its assets
hypothecate its assets. (other than to secure borrowings, or
to the extent permitted by the Fund's
investment policies, in connection
with hedging transactions, short sales,
when-issued and forward commitment
transactions and similar investment
strategies).
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- ----------------------------------------------- -------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENTS IN SECURITIES OF
OTHER INVESTMENT COMPANIES.
FUNDAMENTAL NON-FUNDAMENTAL
The Fund may not buy securities issued by The Fund may not invest in the
any other open-end investment company, securities of other investment
except pursuant to a merger, acquisition or companies, except as permitted by
consolidation, although the Fund may applicable law.
invest up to 5% of its gross assets, taken
at market value at the time of purchase in
closed-end investment companies if bought
in the open market with a fee or
commission no greater than the customary
broker's commission.
- --------------------------------------------------------------------------------------------------------------------------
OPTIONS.
FUNDAMENTAL NON-FUNDAMENTAL
The Fund may not buy or sell put or call The Fund may not write, purchase or sell
options, although we may buy, hold or sell puts, calls, straddles, spreads or
warrants. combinations thereof, except to the extent
permitted in the Fund's prospectus and
statement of additional information, as
they may be amended from time to time.
Although it has no current intention to do
so, the Fund may invest in financial
futures and options on financial futures.
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES OF
ISSUERS IN OPERATION FOR LESS
THAN THREE YEARS.
FUNDAMENTAL NON-FUNDAMENTAL
The Fund may not invest more than 5% of The Fund may not invest in securities
its gross assets, taken at market value at of issuers which, with their
the time of investment, in companies predecessors, have a record of less
(including their predecessors) with less than three years continuous
than three years' continuous operation. operations, if more than 5% of the
Fund's total assets would be invested
in such securities (this restriction shall
not apply to mortgage-backed
securities, asset-backed securities or
obligations issued or guaranteed by
the U.S. Government, its agencies or
instrumentalities).
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- ----------------------------------------------- -------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
OWNERSHIP OF PORTFOLIO SE-
CURITIES BY OFFICERS AND
DIRECTORS.
FUNDAMENTAL NON-FUNDAMENTAL
The Fund may not own securities in a The Fund may not hold securities of
company when any of its officers, any issuer if more than 1/2 of 1% of
directors, or security holders is an officer the securities of such issuer are
or director of the Fund or an officer, owned beneficially by one or more
director or partner of the Fund's officers or directors of the Fund or by
investment adviser if, after the purchase, one or more partners or members of
any one of such persons owns beneficially the underwriter or investment advisor
more than 1/2 of 1% of such securities and if these owners in the aggregate own
such persons together own more than 5% beneficially more than 5% of the
of such securities. securities of such issuer.
- --------------------------------------------------------------------------------------------------------------------------
TRANSACTIONS WITH CERTAIN
PERSONS.
FUNDAMENTAL NON-FUNDAMENTAL
The Fund may not buy securities from or The Fund may not buy from or sell to
sell them to its officers, directors, or any of its officers, directors,
employees, or to the Fund's investment employees, or its investment adviser
adviser or to its partners and employees, or any of its officers, directors,
other than capital stock of the Fund. partners or employees, any securities
other than shares of the Fund's
common stock.
- --------------------------------------------------------------------------------------------------------------------------
SENIOR SECURITIES.
No Policy/Restriction stated. FUNDAMENTAL
The Fund may not issue senior se-
curities to the extent such issuance
would violate applicable law.
- --------------------------------------------------------------------------------------------------------------------------
MID-CAP SECURITIES. NON-FUNDAMENTAL
Under normal circumstances, at least
No Policy/Restriction stated. 65% of the Funds total assets will
consist of investments in mid-cap companies,
determined at the time of purchase. "Mid-Cap"
companies are defined for this purpose
as companies whose outstanding equity
securities have an aggregate market value
of between $200 million and $5 billion.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
CURRENT POLICIES/RESTRICTIONS PROPOSED POLICIES/RESTRICTIONS
- ----------------------------------------------- -------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
PURCHASE OF WARRANTS.
NON-FUNDAMENTAL NON-FUNDAMENTAL
Pursuant to state law, the Fund will not The Fund may not invest in warrants
invest more than 5% of its assets in if, at the time of the acquisition, its
warrants and not more than 2% of such investment in warrants, valued at the
value in warrants not listed on the New lower of cost or market, would
York or American Stock Exchanges, exceed 5% of the Fund's total assets
except when they form a unit with other (included within such limitation, but
securities. As a matter of policy the Fund not to exceed 2% of the Fund's total
will not invest more than 5% of its assets assets, are warrants which are not
in rights. listed on the New York or American
Stock Exchange or a major foreign
exchange).
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
EXHIBIT B
Rule 12b-1 Distribution Plan and Agreement
Lord Abbett Mid-Cap Value Fund, Inc. -- Class A Shares
------------------------------------------------------
RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT dated as of July 12, 1996 by
and between LORD ABBETT MID-CAP VALUE FUND, INC., a Maryland corporation (the
"Fund"), and LORD ABBETT DISTRIBUTOR LLC, a New York limited liability company
(the "Distributor").
WHEREAS, the Fund is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "Act"); and
the Distributor is the exclusive selling agent of the Fund's Class A shares of
capital stock (the "Shares") pursuant to the Distribution Agreement between the
Fund and the Distributor, dated as of the date hereof (the "Distribution
Agreement").
WHEREAS, the Fund desires to adopt a Distribution Plan and Agreement
(the "Plan") with the Distributor, as permitted by Rule 12b-1 under the Act,
pursuant to which the Fund may make certain payments to the Distributor to be
used by the Distributor or paid to institutions and persons permitted by
applicable law and/or rules to receive such payments ("Authorized Institutions")
in connection with sales of Shares and/or servicing of accounts of shareholders
holding Shares.
WHEREAS, the Plan will succeed a Rule 12b-1 Distribution Plan and
Agreement between the Fund and Lord, Abbett & Co. ("Lord Abbett"), an affiliate
of the Distributor.
WHEREAS, the Fund's Board of Directors has determined that there is a
reasonable likelihood that the Plan will benefit the Fund and the holders of
the Shares.
NOW, THEREFORE, in consideration of the mutual covenants and of other
good and valuable consideration, receipt of which is hereby acknowledged, it is
agreed as follows.
1. The Fund hereby authorizes the Distributor to enter into agree ments
with Authorized Institutions (the "Agreements") which may provide for the
payment to such Authorized Institutions of distribution and service fees which
the Distributor receives from the Fund in order to provide additional incentives
to such Authorized Institutions (i) to sell Shares and (ii) to provide
- --
continuing information and investment services to their accounts holding Shares
and otherwise to encourage their accounts to remain invested in the Shares.
2. The Fund also hereby authorizes the Distributor to use payments
received hereunder from the Fund in order to (a) finance any activity which is
-
primarily intended to result in the sale of Shares and (b) provide continuing
-
information and investment services to shareholder accounts not serviced by
Authorized Institutions receiving a service fee from the Distributor hereunder
and otherwise to encourage such accounts to remain invested in the Shares;
provided that (i) any payments referred to in the foregoing clause (a) shall not
- -------- -
exceed the distribution fee permitted to be paid at the time under paragraph 3
of this Plan and shall be authorized by the Board of Directors of the Fund by a
vote of the kind referred to in paragraph 10 of this Plan and (ii) any payments
--
referred to in clause (b) shall not exceed the service fee permitted to be paid
at the time under paragraph 3 of this Plan.
<PAGE>
3. The Fund is authorized to pay the Distributor hereunder for
remittance to Authorized Institutions and/or use by the Distributor pursuant to
this Plan (a) service fees and (b) distribution fees, each at an annual rate not
- -
to exceed .25 of 1% of the average annual net asset value of Shares outstanding,
except that service fees payable with respect to Shares that were initially
issued, or are attributable to shares that were initially issued by the Fund or
a predecessor fund prior to June 1, 1990 shall not exceed .15 of 1% of the
average net asset value of such Shares. The Board of Directors of the Fund
shall from time to time determine the amounts, within the foregoing maximum
amounts, that the Fund may pay the Distributor hereunder. Any such fees (which
may be waived by the Authorized Institutions in whole or in part) may be
calculated and paid quarterly or more frequently if approved by the Board of
Directors of the Fund. Such determinations and approvals by the Board of
Directors shall be made and given by votes of the kind referred to in paragraph
10 of this Plan. Payments by holders of Shares to the Fund of contingent
deferred reim bursement charges relating to distribution fees paid by the Fund
hereunder shall reduce the amount of distribution fees for purposes of the
annual 0.25% distribution fee limit. The Distributor will monitor the payments
hereunder and shall reduce such payments or take such other steps as may be
necessary to assure that (i) the payments pursuant to this Plan shall be
-
consistent with Article III, Section 26, subparagraphs (d)(2) and (5) of the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
with respect to investment companies with asset-based sales charges and service
fees, as the same may be in effect from time to time and (ii) the Fund shall not
--
pay with respect to any Authorized Institution service fees equal to more than
.25 of 1% of the average annual net asset value of Shares sold by (or
attributable to Shares or shares sold by) such Authorized Institution and held
in an account covered by an Agreement.
4. The net asset value of the Shares shall be determined as provided in
the Articles of Incorporation of the Fund. If the Distributor waives all or a
portion of the fees which are to be paid by the Fund hereunder, the Distributor
shall not be deemed to have waived its rights under this Agreement to have the
Fund pay such fees in the future.
5. The Secretary of the Fund, or in his absence the Chief Financial
Officer, is hereby authorized to direct the disposition of monies paid or
payable by the Fund hereunder and shall provide to the Fund's Board of
Directors, and the Directors shall review at least quarterly, a written report
of the amounts so expended pursuant to this Plan and the purposes for which such
expenditures were made.
6. Neither this Plan nor any other transaction between the parties hereto
pursuant to this Plan shall be invalidated or in any way affected by the fact
that any or all of the directors, officers, shareholders, or other
representatives of the Fund are or may be "interested persons" of the
Distributor, or any successor or assignee thereof, or that any or all of the
directors, officers, partners, members or other representatives of the
Distributor are or may be "interested persons" of the Fund, except as may
otherwise be provided in the Act.
7. The Distributor shall give the Fund the benefit of the Distributor's
best judgment and good faith efforts in rendering services under this Plan.
Other than to abide by the provisions hereof and render the services called for
hereunder in good
2
<PAGE>
faith, the Distributor assumes no responsibility under this Plan and, having so
acted, the Distributor shall not be held liable or held accountable for any
mistake of law or fact, or for any loss or damage arising or resulting therefrom
suffered by the Fund or any of the shareholders, creditors, directors, or
officers of the Fund; provided however, that nothing herein shall be deemed to
protect the Distributor against any liability to the Fund or its shareholders by
reason of willful misfeasance, bad faith or gross negligence in the performance
of its duties hereunder, or by reason of the reckless disregard of its
obligations and duties hereunder.
8. This Plan shall become effective upon the date hereof, and shall
continue in effect for a period of more than one year from that date only so
long as such continuance is specifically approved at least annually by a vote of
the Board of Directors of the Fund, including the vote of a majority of the
directors who are not "interested persons" of the Fund and who have no direct or
indirect financial interest in the operation of this Plan or in any agreement
related to this Plan, cast in person at a meeting called for the purpose of
voting on such renewal.
9. This Plan may not be amended to increase materially the amount to be
spent by the Fund hereunder above the maximum amounts referred to in paragraph 3
of this Plan without a shareholder vote in compliance with Rule 12b-1 and Rule
18f-3 under the Act as in effect at such time, and each material amendment must
be approved by a vote of the Board of Directors of the Fund, including the vote
of a majority of the directors who are not "interested persons" of the Fund and
who have no direct or indirect financial interest in the operation of this Plan
or in any agree ment related to this Plan, cast in person at a meeting called
for the purpose of voting on such amendment. Amendments to this Plan which do
not increase materially the amount to be spent by the Fund hereunder above the
maximum amounts referred to in paragraph 3 of this Plan may be made pursuant to
paragraph 10 of this Plan.
10. Amendments to this Plan other than material amendments of the kind
referred to in the forgoing paragraph 9 may be adopted by a vote of the Board of
Directors of the Fund, including the vote of a majority of the directors who are
not "interested persons" of the Fund and who have no direct or indirect
financial interest in the operation of this Plan or in any agreement related to
this Plan. The Board of Directors of the Fund may, by such a vote, interpret
this Plan and make all determinations necessary or advisable for its
administration.
11. This Plan may be terminated at any time without the payment of any
penalty (a) by the vote of a majority of the directors of the Fund who are not
-
"interested persons" of the Fund and have no direct or indirect financial
interest in the operation of this Plan or in any agreement related to the Plan,
or (b) by a shareholder vote in compliance with Rule 12b-1 and Rule 18f-3 under
-
the Act as in effect at such time. This Plan shall automatically terminate in
the event of its assignment.
12. So long as this Plan shall remain in effect, the selection and
nomination of those directors of the Fund who are not "interested persons" of
the
3
<PAGE>
Fund are committed to the discretion of such disinterested directors. The terms
"interested persons," "assignment" and "vote of a majority of the outstanding
voting securities" shall have the same meanings as those terms are defined in
the Act.
IN WITNESS WHEREOF, each of the parties has caused this in strument to
be executed in its name and on its behalf by its duly authorized repre sentative
as of the date first above written.
LORD ABBETT MID-CAP VALUE FUND, INC.
By:_____________________________
President
ATTEST:
___________________
Assistant Secretary
LORD ABBETT DISTRIBUTOR LLC
By:_____________________________
4
<PAGE>
EXHIBIT C
PROPOSED AMENDMENT TO ARTICLES OF INCORPORATION OF THE FUND
AUTHORIZING THE BOARD OF DIRECTORS TO CREATE
NEW CLASSES AND SERIES OF SHARES OF
THE CAPITAL STOCK OF THE FUND, CONFIRMING THAT THE FUND
MAY IMPOSE CONTINGENT DEFERRED SALES CHARGES IN CONNECTION WITH
ITS RULE 12b-1 PLAN AND REDUCING PAR VALUE
The following text shows those provisions of the Articles of Incorporation of
the Fund that are to be amended; the text that is lined through shows deletions
and the text that is double underlined indicates additions.
ARTICLE VI
SECTION 1. The total number of shares which the Corporation has authority to
issue is 150,000,000 shares of capital stock of the par value of $.001 each,
having an aggregate par value of $150,000. The Board of Directors of the
Corporation shall have full power and authority, from time to time, to classify
or reclassify any unissued shares of stock of the Corporation, including,
without limitation, the power to classify or reclassify unissued shares into
series, and to classify or reclassify a series into one or more classes of stock
that may be invested together in the common investment portfolio in which the
series is invested, by setting or changing the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption of such shares of stock.
All shares of stock of a series shall represent the same interest in the
Corporation and have the same preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption as the other shares of stock of that series, except to
the extent that the Board of Directors provides for differing preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption of shares of
stock of classes of such series as determined pursuant to Articles Supplementary
filed for record with the State Department of Assessments and Taxation of
Maryland, as otherwise determined pursuant to these Articles or by the Board of
Directors in accordance with law. Prior to the first classification of unissued
shares of stock into additional series, all outstanding shares of stock shall be
of a single series, and prior to the first classification of a series into
additional classes, all outstanding shares of stock of such series shall be of a
single class. Notwithstanding any other provision of these Articles, upon the
first classification of unissued shares of stock into additional series, the
Board of Directors shall specify a legal name for the outstanding series, as
well as for the new series, in appropriate charter documents filed for record
with the State Department of Assessments and Taxation of Maryland providing for
such name change and classification, and upon the first classification of a
series into additional classes, the Board of Directors shall specify a legal
name for the outstanding class, as well as for the new class or classes, in
appropriate charter documents filed for record with the State Department of
Assessments and Taxation of Maryland providing for such name change and
classification.
<PAGE>
SECTION 2. A description of the relative preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of all series and classes of series of
shares is as follows, unless otherwise set forth in Articles Supplementary filed
for record with the State Department of Assessments and Taxation of Maryland or
otherwise determined pursuant to these Articles:
(a) Assets Belonging to Series. All consideration received or
receivable by the Corporation for the issue or sale of shares of a particular
series, together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds in whatever
form the same may be, shall irrevocably belong to that series for all purposes,
subject only to the rights of creditors, and shall be so recorded upon the books
of account of the Corporation. Such consideration, assets, income, earnings,
profits and proceeds, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, together with
any unallocated items (as hereinafter defined) relating to that series as
provided in the following sen tence, are herein referred to as "assets belonging
to" that series. In the event that there are any assets, income, earnings,
profits or proceeds thereof, funds or payments which are not readily
identifiable as belonging to any particular series (collectively "Unallocated
Items"), the Board of Directors shall allocate such Unallocated Items to and
among any one or more of the series created from time to time in such manner and
on such basis as it, in its sole discretion, deems fair and equitable; and any
Unallocated Items so allocated to a particular series shall belong to that
series. Each such allocation by the Board of Directors shall be conclusive and
binding upon the stockholders of all series for all purposes.
(b) Liabilities Belonging to Series. The assets belonging to each
particular series shall be charged with the liabilities of the Corporation in
respect of that series, including any class thereof, and with all expenses,
costs, charges and reserves attributable to that series, including any such
class, and shall be so recorded upon the books of account of the Corporation.
Such liabilities, expenses, costs, charges and reserves, together with any
unallo cated items (as hereinafter defined) relating to that series, including
any class thereof, as provided in the following sentence, so charged to that
series, are herein
2
<PAGE>
referred to as "liabilities belonging to" that series. In the event there are
any unallocated liabilities, expenses, costs, charges or reserves of the
Corporation which are not readily identifiable as belonging to any particular
series (collectively "Unallocated Items"), the Board of Directors shall
allocate and charge such Unallocated Items to and among any one or more of the
series created from time to time in such manner and on such basis as the Board
of Directors in its sole discretion deems fair and equitable; and any
Unallocated Items so allocated and charged to a particular series shall belong
to that series. Each such allocation by the Board of Directors shall be
conclusive and binding upon the stockholders of all series for all purposes. To
the extent determined by the Board of Directors, liabilities and expenses
relating solely to a particular class (including, without limitation,
distribution expenses under a Rule 12b-1 plan and administrative expenses under
an administration or service agreement, plan or other arrangement, however
designated, which may be adopted for such class) shall be allocated to and borne
by such class and shall be appropriately reflected (in the manner determined by
the Board of Directors) in the net asset value, dividends and distributions and
liquidation rights of the shares of such class.
(c) Dividends. Dividends and distributions on shares of a particular
series may be paid to the holders of shares of that series at such times, in
such manner and from such of the income and capital gains, accrued or realized,
from the assets belonging to that series, after providing for actual and accrued
liabilities belonging to that series, as the Board of Directors may determine.
Such dividends and distributions may vary between or among classes of a series
to reflect differing allocations of liabilities and expenses of such series
between or among such classes to such extent as may be provided in or determined
pursuant to Articles Supplementary filed for record with the State Department of
Assessments and Taxation of Maryland or as may otherwise be determined by the
Board of Directors.
(d) Liquidation. In the event of the liquidation or dissolution of
the Corporation, the stockholders of each series shall be entitled to receive,
as a series, when and as declared by the Board of Directors, the excess of the
assets belonging to that series over the liabilities belonging to that series.
The assets so distributable to the stockholders of one or more classes of a
series shall be distributed among such stockholders in proportion to the
respective aggregate net asset values of the shares of
3
<PAGE>
such series held by them and recorded on the books of the Corporation.
(e) Voting. On each matter submitted to vote of the stockholders,
each holder of a share shall be entitled to one vote for each such share
standing in his name on the books of the Corporation irrespective of the series
or class thereof and all shares of all series and classes shall vote as a single
class ("Single Class Voting"); provided, however, that (i) as to any matter with
respect to which a separate vote of any series or class is required by the
Investment Company Act of 1940, as amended from time to time, applicable rules
and regulations thereunder, or the Maryland General Corporation Law, such
requirement as to a separate vote of that series or class shall apply in lieu of
Single Class Voting as described above; (ii) in the event that the separate vote
requirements referred to in (i) above apply with respect to one or more (but
less than all) series or classes, then, subject to (iii) below, the shares of
all other series and classes shall vote as a single class; and (iii) as to any
matter which does not affect the interest of a particular series or class, only
the holders of shares of the one or more affected series or classes shall be
entitled to vote.
(f) Conversion. At such times (which times may vary among shares of a
class) as may be determined by the Board of Directors, shares of a particular
class of a series may be automatically converted into shares of another class of
such series based on the relative net asset values of such classes at the time
of conversion, subject, however, to any conditions of conversion that may be
imposed by the Board of Directors.
SECTION 3. Each share of the capital stock of the Corporation shall be
subject to the following provisions:
(a) All shares of the capital stock of the Corporation now or hereafter
authorized shall be subject to redemption and redeemable at the option of
the stockholder, in the sense used in the General Laws of the State of
Maryland authorizing the formation of corporations. Each holder of the
shares of capital stock of the Corporation, upon request to the Corporation
accompanied by surrender (to the Corporation, or an agent designated by it)
of the appropriate stock certificate or certificates, if any, in proper
form for transfer, and such other instruments as the Board of Directors may
require, shall be entitled to require the Corporation to redeem all or any
part of the shares of capital stock outstanding in the name of such holder
on the books of the Corporation, at a
4
<PAGE>
redemption price equal to the net asset value of such shares determined as
hereinafter set forth. Notwithstanding the foregoing, the Corporation may
deduct from the proceeds otherwise due to any stockholder requiring the
Corporation to redeem shares a redemption charge not to exceed one percent
(1%) of such net asset value or a reimbursement charge, a deferred sales
charge or other charge that is integral to the Corporation's distribution
program (which charges may vary within and among series and classes) as may
be established from time to time by the Board of Directors.
SECTION 4. Notwithstanding any provision of Maryland law requiring any
action to be taken or authorized by the affirmative vote of the holders of a
designated proportion greater than a majority of the shares outstanding or of
the votes entitled to be cast, such action shall be effective and valid if taken
or authorized by the affirmative vote of the holders of a majority of the total
number of shares outstanding and entitled to vote thereon pursuant to the
provisions of these Articles of Incorporation.
SECTION 5. No holder of stock of the Corporation shall, as such holder, have
any right to purchase or subscribe for any shares of the capital stock of the
Corporation which it may issue or sell (whether out of the number of shares now
or hereafter authorized by these Articles of Incorporation, or any amendment
thereof, or out of any shares of the capital stock of the Corporation acquired
by it after the issue thereof, or otherwise) other than such right, if any, as
the Board of Directors, in its discretion, may determine.
Article VIII
SECTION 1. In furtherance and not in limitation of the powers conferred by
statute and pursuant to these Articles of Incorporation, the Board of Directors
is expressly authorized to do the following:
(b) To distribute, in its discretion, for any fiscal year (in the year or in
the next fiscal year) as ordinary dividends and as capital gains
distributions, respectively, amounts sufficient to enable the Corporation
as a regulated investment company to avoid any liability for Federal income
tax in respect of such year. Any distribution or dividend paid to
stockholders from any capital source shall be accompanied by a written
statement showing the source or sources of such payment.
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(g) To authorize any agreement of the character described in subsection (e) or
(f) of this Section 1 with any person, corporation, association,
partnership or other organization, although one or more of the members of
the Board of Directors or officers of the Corporation may be the other
party to any such agreement or an officer, director, shareholder, or member
of such other party, and no such agreement shall be invalidated or rendered
voidable by reason of the existence of any such relationship. Any director
of the Corporation who is also a director or officer of such corporation or
who is so interested may be counted in determining the existence of a
quorum at any meeting of the Board of Directors which shall authorize any
such agreement, and may vote thereat to authorize any such contract or
transaction, with like force and effect as if he were not such director or
officer of such other corporation or not so interested. Any agreement
entered into pursuant to said subsections (e) or (f), shall be consistent
with and subject to the requirements of the Investment Company Act of 1940,
as amended from time to time, applicable rules and regulations thereunder,
or any other applicable Act of Congress hereafter enacted, and no amendment
to any agreement entered into pursuant to said subsection (e) (other than
an amendment reducing the compensation of the other party thereto) shall be
effective unless assented to by the affirmative vote of a majority of the
outstanding voting securities of the Corporation (as such phrase is defined
in the Investment Company Act of 1940, as amended from time to time)
entitled to vote on the matter.
SECTION 3. For the purposes referred to in these Articles of Incorporation,
the net asset value of shares of the capital stock of the Corporation of each
series and class as of any particular time (a "determination time") shall be
determined by or pursuant to the direction of the Board of Directors as follows:
(a) At times when a series is not classified into multiple classes,
the net asset value of each share of stock of a series, as of a determination
time, shall be the quotient, carried out to not less than two decimal points,
obtained by dividing the net value of the assets of the Corporation belonging to
that series (determined as hereinafter provided) as of such determination time
by the total number of shares of that series then outstanding, including all
shares of that series which the Corporation has agreed to sell for which the
price has been determined, and excluding shares of that series which the
Corporation has
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agreed to purchase or which are subject to redemption for which the price has
been determined.
The net value of the assets of the Corporation of a series as of a determination
time shall be determined in accordance with sound accounting practice by
deducting from the gross value of the assets of the Corporation belonging to
that series (determined as hereinafter provided), the amount of all liabilities
belonging to that series (as such terms are defined in subsection (b) of Section
2 of Article VI), in each case as of such determination time.
The gross value of the assets of the Corporation belonging to a series as of
such determination time shall be an amount equal to all cash, receivables, the
market value of all securities for which market quotations are readily available
and the fair value of other assets of the Corporation belonging to that series
(as such terms are defined in subsection (a) of Section 2 of Article VI) at such
determination time, all determined in accordance with sound accounting practice
and giving effect to the following:
(b) At times when a series is classified into multiple classes, the net asset
value of each share of stock of a class of such series shall be determined
in accordance with subsections (a) and (c) of this Section 3 with
appropriate adjustments to reflect differing allocations of liabilities and
expenses of such series between or among such classes to such extent as may
be provided in or determined pursuant to Articles Supplementary filed for
record with the State Department of Assessments and Taxation of Maryland or
as may otherwise be determined by the Board of Directors.
(c) The Board of Directors is empowered, in its discretion, to establish other
methods for determining such net asset value whenever such other methods
are deemed by it to be necessary or desirable, including, but without
limiting the generality of the foregoing, any method deemed necessary or
desirable in order to enable the Corporation to comply with any provision
of the Investment Company Act of 1940 or any rule or regulation thereunder.
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SECTION 4. The presence in person or by proxy of the holders of one-third of
the shares of capital stock of the Corporation issued and outstanding and
entitled to vote thereat shall constitute a quorum for the transaction of any
business at all meetings of the shareholders, except as otherwise provided by
law or in these Articles of Incorporation and except that where the holders of
shares of stock of any series or class are entitled to a separate vote as such
series or class (each such series or class, a "Separate Class") or where the
holders of shares of stock of two or more (but not all) series or classes are
required to vote as a single series or class (each such single series or class,
a "Combined Class"), the presence in person or by proxy of the holders of one-
third of the shares of stock of that Separate Class or Combined Class, as the
case may be, issued and outstanding and entitled to vote thereat shall
constitute a quorum for such vote. If, however, a quorum with respect to all
series, including all classes thereof, a Separate Class or a Combined Class, as
the case may be, shall not be present or represented at any meeting of the
shareholders, the holders of a majority of the shares of stock of all series,
such Separate Class or such Combined Class, as the case may be, present in
person or by proxy and entitled to vote shall have power to adjourn the meeting
from time to time as to all series, such Separate Class or such Combined Class,
as the case may be, without notice other than announcement at the meeting, until
the requisite number of shares of the capital stock of the Corporation entitled
to vote at such meeting shall be present. At such adjourned meeting at which
the requisite number of shares of the capital stock of the Corporation entitled
to vote thereat shall be represented any business may be transacted which might
have been transacted at the meeting as originally notified. The absence from any
meeting of stockholders of the number of shares of capital stock of the
Corporation in excess of one-third of the shares of stock of all series or
classes, or of the affected series or classes, as the case may be, which may be
required by the laws of the State of Maryland, the Investment Company Act of
1940 or any other applicable law, or by these Articles of Incorporation, for
action upon any given matter shall not prevent action at such meeting upon any
other matter or matters which may properly come before the meeting, if there
shall be present thereat, in person or by proxy, holders of the number of shares
of stock of the Corporation required for action in respect of such other matter
or matters.
SECTION 5. Any determination as to any of the following matters made
by or pursuant to the direction of the Board of Directors consistent with these
Articles of Incorporation and in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of duties, shall be final and conclusive
and shall be binding upon the Corporation and every holder of shares of
capital stock of the Corporation, of any series or class, namely, the amount of
the assets, obligations, liabilities and expenses of the Corporation or
belonging to any series or with respect to any class; the amount of the net
income of the Corporation from dividends and interest for any period and the
amount of assets at any time legally available for the payment of dividends with
respect to any series or class; the amount of paid-in surplus, other surplus,
annual or other net profits, or net assets in excess of capital, undivided
profits, or excess of profits over losses on sales of securities belonging to
the Corporation or any series or class; the amount, purpose, time of creation,
increase or decrease, alteration or cancellation of any reserves or charges and
the propriety thereof (whether or not any obligation or liability for which such
reserves or charges shall have been created shall have been paid or discharged)
with respect to the Corporation or any series or class; the market value, or any
sale, bid or asked price
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to be applied in determining the market value, of any security owned or held by
the Corporation; the fair value of any other asset owned by the Corporation; the
number of shares of stock of any series or class issued or issuable; the
existence of conditions permitting the postponement of payment of the
repurchase price of shares of stock of any series or class or the suspension of
the right of redemption as provided by law; any matter relating to the
acquisition, holding and disposition of securities and other assets by the
Corporation; any question as to whether any transaction constitutes a purchase
of securities on margin, a short sale of securities, or an underwriting of the
sale of, or participation in any underwriting or selling group in connection
with the public distribution of, any securities; and any matter relating to the
issue, sale, repurchase and/or other acquisition or disposition of shares of
stock of any series or class.
SECTION 6. If the Corporation should change its name and adopt its
corporate title through permission of the firm of Lord, Abbett & Co., which
shall have entered into a management or advisory contract with the Corporation,
the Corporation shall make appropriate agreements that upon the termination of
such contract for any cause, or if such firm or subsidiary or affiliate or
successor deems it advisable to withdraw the right to the use of its name, the
Corporation will at the request of such firm or subsidiary or affiliate or
successor, take such action as may be necessary to change its name to eliminate
all use of or reference to the words "Lord Abbett" in any form and will neither
use the registered service mark of Lord, Abbett & Co., without the written
consent of such firm or subsidiary or affiliate or successor. The Corporation
shall also agree in such contract that investment companies other than the
Corporation for which such firm or a subsidiary successor may act as investment
adviser, and other companies affiliated with Lord, Abbett & Co., may be formed
with the words "Lord Abbett" in their corporate titles. Such agreements on the
part of the Corporation are hereby made binding upon it, its directors,
officers, stockholders, creditors and all other persons claiming under or
through it.
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LORD ABBETT MID-CAP VALUE FUND, INC.
(formerly Lord Abbett Value Appreciation Fund, Inc.)
ANNUAL MEETING OF SHAREHOLDERS
JUNE 19, 1996
767 Fifth Avenue
New York, New York 10153
Tel. No. (212) 848-1800
The undersigned hereby appoints KENNETH B. CUTLER, ROBERT S. DOW and
RONALD P. LYNCH and each of them proxies, with full power of substitution, to
vote (according to the number of votes which the undersigned would be entitled
to cast if then personally present) at the annual meeting of shareholders of
LORD ABBETT MID-CAP VALUE FUND, INC. (the "Fund") on June 19, 1996, including
all adjournments, as specified below, and in their discretion upon such other
business as may properly be brought before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS WHICH RECOMMENDS
THAT YOU VOTE FOR PROPOSALS 1-6.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE VOTE OF THE UNDERSIGNED
IS TO BE CAST FOR ALL PROPOSALS LISTED BELOW.
1. Election of Directors:
For [_] Without Authority [_] For All Except [_]
(NOTE: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, CHECK
THE "FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THE NOMINEE'S NAME
BELOW.)
Ronald P. Lynch, Robert S. Dow, Thomas S. Henderson, E. Thayer Bigelow,
Stewart S. Dixon, John C. Jansing, C. Alan MacDonald, Hansel B.
Millican, Jr. and Thomas J. Neff.
2. For [_] Against [_] Abstain [_] To ratify the selection of Deloitte &
Touche LLP as independent public accountants of the Fund for the fiscal
year ending December 31, 1996.
3. For [_] Against [_] Abstain [_] To approve or disapprove the proposed
changes in the Fund's fundamental investment policies and restrictions,
as described in the proxy statement.
4. For [_] Against [_] Abstain [_] To approve or disapprove the proposed
new Distribution Plan and Agreement for the Fund's existing class of
shares pursuant to Rule 12b-1 under the Investment Company Act of 1940,
as described in the proxy statement.
5. For [_] Against [_] Abstain [_] To approve or disapprove an amendment to
the Fund's Articles of Incorporation (i) authorizing the Board of
Directors -
to create new classes and series of shares of capital stock; and (ii)
--
confirming that the board may impose contingent deferred sales charges
in
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connection with new classes of shares to be created, as described in the proxy
statement.
6. For [_] Against [_] Abstain [_] To approve or disapprove an amendment to
the Fund's Articles of Incorporation reducing the par value per share
from $0.10 to $0.001 in order to reduce costs when authorizing new
shares (this change will have no effect on the value of your shares).
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ACCOUNT NUMBER SHARES PROXY NUMBER
LORD ABBETT MID-CAP
VALUE FUND, INC.
PLEASE SIGN, DATE AND MAIL THIS PROXY IN THE
POSTAGE PAID RETURN ENVELOPE PROVIDED.
For information as to the voting of stock
registered in more than one name, see page 1 of
the proxy statement. When signing the proxy as
attorney, executor, administrator, trustee or
guardian, please indicate the capacity in which
you are acting. Only authorized officers should
sign for corporations.
Date:............................
Signature(s) of Shareholder(s) as shown at left
.................................
.................................
(Please read other side)
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