<PAGE>
LORD ABBETT MID-CAP
VALUE FUND, INC.
THE GENERAL MOTORS BUILDING
767 FIFTH AVENUE
NEW YORK, NY 10153-0203
800-426-1130
LORD ABBETT MID-CAP VALUE FUND, INC., FORMERLY LORD ABBETT VALUE APPRECIATION
FUND, INC., ("WE" OR THE "FUND"), IS A MUTUAL FUND WITH A SINGLE CLASS OF
SHARES, WITH EQUAL RIGHTS AS TO VOTING, DIVIDENDS, ASSETS AND LIQUIDATION.
WE SEEK CAPITAL APPRECIATION THROUGH INVESTMENTS PRIMARILY IN EQUITY SECURITIES
WHICH ARE BELIEVED TO BE UNDERVALUED IN THE MARKETPLACE. THERE CAN BE NO
ASSURANCE THAT OUR OBJECTIVE WILL BE ACHIEVED. INCOME IS NOT AN OBJECTIVE OF THE
FUND, BUT MAY ARISE INCIDENTALLY IN PURSUIT OF OUR BASIC OBJECTIVE.
WE WILL ENDEAVOR TO ACHIEVE A MEASURE OF PRICE APPRECIATION THAT IS GREATER THAN
THAT OF THE BROAD MARKET AVERAGES OVER THE COURSE OF A FULL MARKET CYCLE.
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE FUND THAT A
PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING. ADDITIONAL INFORMATION ABOUT
THE FUND HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
STATEMENT OF ADDITIONAL INFORMATION IS INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS AND MAY BE OBTAINED, WITHOUT CHARGE, BY WRITING TO THE FUND OR BY
CALLING 800-874-3733. ASK FOR "PART B OF THE PROSPECTUS -- THE STATEMENT OF
ADDITIONAL INFORMATION".
THE DATE OF THIS PROSPECTUS AND OF THE STATEMENT OF ADDITIONAL INFORMATION IS
JULY 15, 1996.
PROSPECTUS
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS. SHAREHOLDER INQUIRIES SHOULD
BE MADE IN WRITING TO THE FUND OR BY CALLING 800-821-5129. YOU ALSO CAN MAKE
INQUIRIES THROUGH YOUR BROKER-DEALER. SHARES OF THE FUND ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY. AN INVESTMENT IN THE FUND INVOLVES RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
1 Investment Objective 2
2 Fee Table 2
3 Financial Highlights 2
4 How We Invest 3
5 Purchases 4
6 Shareholder Services 8
7 Our Management 9
8 Dividends, Capital Gains
Distributions and Taxes 10
9 Redemptions 11
10 Performance 11
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
1 INVESTMENT OBJECTIVE
Our investment objective is to seek capital appreciation through investments,
primarily in equity securities, which are believed to be undervalued in the
marketplace.
2 FEE TABLE
A summary of the Fund's expenses is set forth in the table below. The example
should not be considered a representation of past or future expenses. Actual
expenses may be greater or less than those shown.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Transaction Expenses
(as a percentage of offering price)
Maximum Sales Load(1) on Purchases
(See "Purchases") 5.75%
Deferred Sales Load(1) (See "Purchases") None(2)
Annual Fund Operating Expenses(4)
(as a percentage of average net assets)
Management Fees (See "Our Management") .75%
12b-1 Fees (See "Purchases") .25%(2)(3)
Other Expenses (See"Our Management") .32%
Total Operating Expenses 1.32%
<FN>
Example: Assume an annual return of 5% and there is no change in the level of
expenses described above. For a $1,000 investment, with reinvestment of all
distributions, you would pay the following total expenses if you closed your
account after the number of years indicated.
1 year 3 years 5 years 10 years
$70(4) $97(4) $126(4) $207(4)
(1) Sales "load" is referred to as sales "charge" and "deferred sales load" is
referred to as "contingent deferred sales charge" (or "CDSC") and "12b-1
fees" which consist of a "service fee" and a "distribution fee" are
referred to by either or both of these terms where appropriate with respect
to shares of the Fund throughout this Prospectus.
(2) See "Purchases" for a description of Fund share front-end sales charges,
the CDSC payable on certain redemptions of such shares and 12b-1 plan
applicable to shares of the Fund. The CDSC reimburses the Fund.
(3) With respect to Fund shares, investors should be aware that, long term,
more than the economic equivalent of the maximum front-end sales charge as
permitted by certain rules of the National Association of Securities
Dealers, Inc. may be paid due to the Rule 12b-1 plan applicable to Fund
shares which permits the Fund to pay up to 0.50% in total annual fees, half
for service and the other half for distribution. The 12b-1 fee for the Fund
shares has been restated to reflect estimated current fees under the
recently amended 12b-1 plan; the actual 12b-1 fees for such shares for the
fiscal year ended December 31, 1995 under the former plan were 0.20%.
(4) The annual operating expenses shown in the summary are the actual expenses
for the fiscal year ended December 31, 1995 except for the substitution of
estimated 12b-1 fees for Fund shares as explained in notes 2 and 3.
The foregoing is provided to give investors a better understanding of the
expenses that are incurred by an investment in the Fund.
</FN>
</TABLE>
3 FINANCIAL HIGHLIGHTS
The following table has been audited by Deloitte & Touche llp, independent
public accountants, in connection with their annual audit of the Fund's
financial statements, whose report thereon is incorporated by reference in the
Statement of Additional Information and may be obtained upon request, and has
been included herein in reliance upon their authority as experts in accounting
and auditing.
<TABLE>
<CAPTION>
Ten Months
Ended Year Ended
Per Share Operating Year Ended December 31, Dec. 31, February 28,
Performance: 1995 1994 1993 1992 1991 1990 1989 1988 1987* 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.25 $12.65 $12.60 $11.81 $9.80 $10.59 $9.53 $9.09 $14.59 $13.25 $9.83
Income from investment operations
Net investment income .162 .18 .16 .20 .23 .28 .29 .34 .30 .32 .23
Net realized and unrealized
gain (loss) on securities 2.383 (.545) 1.42 1.31 2.30 (.77) 1.57 1.08 (2.24) 2.11 3.42
Total from investment operations 2.545 (.365) 1.58 1.51 2.53 (.49) 1.86 1.42 (1.94) 2.43 3.65
Distributions
Dividends from net investment income (.17) (.16) (.20) (.22) (.26) (.30) (.32) .-- (.61) (.23) (.23)
Distributions from net realized gain (1.445) (.875) (1.33) (.50) (.26) -- (.48) (.98) (2.95) (.86) .--
Net asset value, end of period $12.18 $11.25 $12.65 $12.60 $11.81 $9.80 $10.59 $9.53 $9.09 $14.59 $13.25
Total Return** 26.09% (3.27)% 13.95% 13.46% 27.36% (4.64)% 20.09% 15.62% (16.40)%+ 19.55% 38.14%
Ratios/Supplemental Data:
Net assets, end of period (000) $227,149 $190,788 $202,519 $173,380 $166,056 $155,018 $190,189 $188,380 $223,288 $318,793 $308,812
Ratios to Average Net Assets:
Expenses 1.27% 1.12% 1.22% 1.22% 1.14% 1.12% .94% 1.02% .81%+ .89% .86%
Net investment income 1.48% 1.53% 1.35% 1.71% 2.16% 2.79% 2.91% 3.41% 2.42%+ 2.42% 2.19%
Portfolio turnover rate 41.42% 57.49% 33.42% 62.55% 34.20% 51.49% 30.42% 26.53% 43.97% 52.41% 21.28%
<FN>
*The Financial Statements cover ten months because the fiscal year-end was
changed during the year from February 28 to December 31. **Total return does not
consider the effects of sales loads.
+Not annualized.
</FN>
</TABLE>
<PAGE>
4 HOW WE INVEST
We invest primarily in common stocks (including securities convertible into
common stocks) of companies with good prospects for improvement in earnings
trends or asset values that are not yet fully recognized in the investment
community. Selection of stocks is based on appreciation potential, without
regard to current income. Under normal circumstances, at least 65% of the Fund's
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.
Our investment portfolio is diversified among many issues representing many
different industries. The holdings in our portfolio typically are selected for
their potential for significant market appreciation from growing recognition of
substantial improvement in the company's financial results or increasing
anticipation of such improvement. This potential may derive from such factors as
(i) changes in the economic and financial environment, (ii) new or improved
products or services, (iii) new or rapidly expanding markets, (iv) changes in
management or structure of the company, (v) price increases due to shortages of
resources or productive capacity, (vi) improved efficiencies resulting from new
technologies or changes in distribution or (vii) changes in governmental
regulations, political climate or competitive conditions. The companies
represented will have a strong or, in our perception, an improving financial
position. The outstanding stock of companies in our portfolio ordinarily will
have an aggregate market value of not less than approximately $50 million. At
the time of purchase, the stocks may be largely neglected by the investment
community or, if widely followed, they may be out of favor or at least
controversial. Characteristically, we will not carry a large cash position as an
investment strategy. While we may take short-term gains if deemed appropriate,
normally we will hold securities in order to realize long-term capital gains.
Although normally we intend to be fully invested in common stocks, we may
temporarily put a portion of our assets in cash or cash equivalents (short-term
obligations of banks, corporations or the U.S. Government) for liquidity
purposes or to create reserve purchasing power pending other investments. Since
we invest primarily in common stocks with their inherent market risks, we
cannot, of course, assure that our investment objective will be achieved. If we
determine that our objective can best be achieved by a substantive change in
investment policy or strategy, we may make such a change without shareholder
approval by disclosing it in our prospectus. We may invest up to 10% of our net
assets in securities (of the type described above) which are primarily traded in
foreign countries.
We will not change our investment objective without shareholder approval.
RISK FACTORS. Securities markets of foreign countries in which the Fund may
invest, generally, are not subject to the same degree of regulation as U.S.
markets and may be more volatile and less liquid than major U.S. markets. Lack
of liquidity may affect the Fund's ability to purchase or sell large blocks of
securities and thus obtain the best price. There may be less publicly-available
information on publicly-traded companies, banks and governments in foreign
countries than generally is the case for such entities in the United States. The
lack of uniform accounting standards and practices among countries impairs the
validity of direct comparisons of valuation measures (such as price/earnings
ratios) for securities in different countries. Other considerations include
political and social instability, currency fluctuation between the dollar and
foreign currencies, expropriation, higher transaction costs, currency controls
of foreign governments, withholding taxes that cannot be passed through as a tax
credit or deduction to shareholders and different securities settlement
practices. Settlement periods for foreign securities, which are sometimes longer
than those for securities of U.S. issuers, may affect portfolio liquidity. These
different settlement practices may cause missed purchasing opportunities and/or
the loss of interest on money market and debt investments pending further equity
or long-term debt investments. In addition, foreign securities held by the Fund
may be traded on days that the Fund does not value its portfolio securities,
such as Saturdays and customary business holidays and, accordingly, the Fund's
net asset value may be significantly affected on days when shareholders do not
have access to the Fund.
<PAGE>
5 PURCHASES
You may buy our shares through any independent securities dealer having a sales
agreement with Lord Abbett Distributor LLC ("Lord Abbett Distributor"), our
exclusive selling agent. Place your order with your investment dealer or send it
to Lord Abbett Mid-Cap Value Fund, Inc. (P.O. Box 419100, Kansas City, Missouri
64141). The minimum initial investment is $1,000 except for Invest-A-Matic and
Div-Move ($250 initial and $50 subsequent minimum) and Retirement Plans ($250
minimum). See "Shareholder Services". For information regarding the proper form
of a purchase or redemption order, call the Fund at 800-821-5129. This offering
may be suspended, changed or withdrawn. Lord Abbett Distributor reserves the
right to reject any order.
You pay an initial sales charge on investments of less than $1 million (or on
investments for employer-sponsored retirement plans under the Internal Revenue
Code (hereinafter referred to as "Retirement Plans") with less than 100 eligible
employees). If you purchase shares as part of an investment of at least $1
million (or for Retirement Plans with at least 100 eligible employees) in shares
of one or more Lord Abbett-sponsored funds, you will not pay an initial sales
charge, but if you redeem any of those shares within 24 months after the month
in which you buy them, you may pay to the Fund a contingent deferred sales
charge ("CDSC") of 1%. Shares are subject to service and distribution fees that
are currently estimated to total annually approximately 0.25 of 1% of the annual
net asset value of the shares. The initial sales charge rates, the CDSC and the
Rule 12b-1 Plan are described in "Buying Shares" below.
The net asset value of our shares is calculated every business day as of the
close of the New York Stock Exchange ("NYSE") by dividing net assets by the
number of shares outstanding. Securi ties are valued at their market value as
more fully described in the Statement of Additional Information.
BUYING SHARES THROUGH YOUR DEALER. Orders for shares received by the Fund prior
to the close of the NYSE, or received by dealers prior to such close and
received by Lord Abbett Distributor prior to the close of its business day, will
be confirmed at the applicable public offering price effective at such NYSE
close. Orders received by dealers after the NYSE closes and received by Lord
Abbett Distributor in proper form prior to the close of its next business day
are executed at the applicable public offering price effective as of the close
of the NYSE on that next business day. The dealer is responsible for the timely
transmission of orders to Lord Abbett Distributor. A business day is a day on
which the NYSE is open for trading.
Lord Abbett Distributor may, for specified periods, allow dealers to retain the
full sales charge for sales of shares during such periods, or pay an additional
concession to a dealer who, during a specified period, sells a minimum dollar
amount of our shares and/or shares of other Lord Abbett-sponsored funds. In some
instances, such additional concessions will be offered only to certain dealers
expected to sell significant amounts of shares. Lord Abbett Distributor may,
from time to time, implement promotions under which Lord Abbett Distributor will
pay a fee to dealers with respect to certain purchases not involving imposition
of a sales charge. Additional payments may be paid from Lord Abbett
Distributor's own resources and will be made in the form of cash or, if
permitted, non-cash payments. The non-cash payments will include business
seminars at resorts or other locations, including meals and entertainment, or
the receipt of merchandise. The cash payments will include payment of various
business expenses of the dealer. In selecting dealers to execute portfolio
transactions for the Fund's portfolio, if two or more dealers are considered
capable of obtaining best execution, we may prefer the dealer who has sold our
shares and/or shares of other Lord Abbett-sponsored funds.
The offering price of our shares is based on the per-share net asset value next
computed after your order is accepted plus a sales charge as follows:
<PAGE>
<TABLE>
<CAPTION>
Sales Charge as a Dealer's
Percentage of: Concession
as a To Compute
Net Percentage Offering
Offering Amount of Offering Price, Divide
Size of Investment Price Invested Price NAV by
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00% .9425
$50,000 to $99,999 4.75% 4.99% 4.00% .9525
$100,000 to $249,999 3.75% 3.90% 3.25% .9625
$250,000 to $499,999 2.75% 2.83% 2.25% .9725
$500,000 to $999,999 2.00% 2.04% 1.75% .9800
$1,000,000 or more No Sales Charge 1.00%* 1.0000
<FN>
*Authorized institutions receive concessions on purchases made by a retirement
plan or other qualified purchaser within a 12-month period (beginning with the
first net asset value purchase) as follows: 1.00% on purchases of $5 million,
0.55% of the next $5 million, 0.50% of the next $40 million and 0.25% on
purchases over $50 million. See Class A Rule 12b-1 Plan below.
</FN>
</TABLE>
VOLUME DISCOUNTS. This section describes several ways to qualify for a lower
sales charge when purchasing shares if you inform Lord Abbett Distributor or the
Fund that you are eligible at the time of purchase. (1) Any purchaser (as
described below) may aggregate a purchase in the Fund with any purchases of any
other eligible Lord Abbett-sponsored fund, together with the current value at
maximum offering price of any shares in the Fund and in any eligible Lord
Abbett-sponsored funds held by the purchaser. (Holdings in the following funds
are not eligible for the above rights of accumulation: Lord Abbett Equity Fund
("LAEF"), Lord Abbett Series Fund ("LASF"), any series of the Lord Abbett
Research Fund not offered to the general public ("LARF") and Lord Abbett U.S.
Government Securities Money Market Fund ("GSMMF"), except for holdings in GSMMF
which are attributable to any shares exchanged from a Lord Abbett-sponsored
fund.) (2) A purchaser may sign a non-binding 13-month statement of intention to
invest $50,000 or more in any shares of the Fund or in any of the above eligible
funds. If the intended purchases are completed during the period, the total
amount of your intended purchases of any shares will determine the reduced sales
charge rate for the shares purchased during the period. If not completed, each
purchase will be at the sales charge for the aggregate of the actual share
purchases. Shares issued upon reinvestment of dividends or distributions are not
included in the statement of intention. The term "purchaser" includes (i) an
individual, (ii) an individual and his or her spouse and children under the age
of 21 and (iii) a trustee or other fiduciary purchasing shares for a single
trust estate or single fiduciary account (including a pension, profit-sharing,
or other employee benefit trust qualified under Section 401 of the Internal
Revenue Code -- more than one qualified employee benefit trust of a single
employer, including its consolidated subsidiaries, may be considered a single
trust, as may qualified plans of multiple employers registered in the name of a
single bank trustee as one account), although more than one beneficiary is
involved.
NET ASSET VALUE PURCHASES. Our shares may be purchased at net asset value by our
directors, employees of Lord Abbett, employees of our shareholder servicing
agent and employees of any securities dealer having a sales agreement with Lord
Abbett Distributor who consents to such purchases or by the trustee or custodian
under any pension or profit-sharing plan or Payroll Deduction IRA established
for the benefit of such persons or for the benefit of any national securities
trade organization to which Lord Abbett or Lord Abbett Distributor belongs or
any company with an account(s) in excess of $10 million managed by Lord Abbett
on a private-advisory-account basis. For purposes of this paragraph, the terms
"directors" and "employees" include a director's or employee's spouse (including
the surviving spouse of a deceased director or employee). The terms "directors"
and "employees of Lord Abbett" also include other family members and retired
directors and employees. Our shares also may be purchased at net asset value (a)
at $1 million or more, (b) with dividends and distributions on shares of other
Lord Abbett-sponsored funds, except for dividends and distributions on shares of
LARF, LAEF and LASF, (c) under the loan feature of the Lord Abbett-sponsored
prototype 403(b) plan for purchases representing the repayment of principal and
interest, (d) by certain authorized brokers, dealers, registered investment
advisers or other financial institutions who have entered into an agreement with
Lord Abbett Distributor in accordance with certain standards approved by Lord
Abbett Distributor, providing specifically for the use of our shares in
particular investment products made available for a fee to clients of such
brokers,
<PAGE>
dealers, registered investment advisers and other financial institutions
("mutual fund wrap fee programs"), (e) by employees, partners and owners of
unaffiliated consultants and advisers to Lord Abbett, Lord Abbett Distributor or
Lord Abbett-sponsored funds who consent to such purchase if such persons provide
services to Lord Abbett, Lord Abbett Distributor or such funds on a continuing
basis and are familiar with such funds, (f) through Retirement Plans with at
least 100 eligible employees and (g) subject to appropriate documentation,
through a securities dealer where the amount invested represents redemption
proceeds from shares ("Redeemed Shares") of a registered open-end management
investment company not distributed or managed by Lord Abbett Distributor or Lord
Abbett (other than a money market fund), if such redemptions have occurred no
more than 60 days prior to the purchase of our shares, the Redeemed Shares were
held for at least six months prior to redemption and the proceeds of redemption
were maintained in cash or a money market fund prior to purchase. Purchasers
should consider the impact, if any, of contingent deferred sales charges in
determining whether to redeem shares for subsequent investment in our shares.
Lord Abbett Distributor may suspend or terminate the purchase option referred to
in (g) above at any time.
Our shares may be issued at net asset value in exchange for the assets, subject
to possible tax adjustment, of a personal holding company or an investment
company.
RULE 12B-1 PLAN. We have adopted a Rule 12b-1 Plan (the "Plan") which authorizes
the payment of fees to authorized institutions (except as to certain accounts
for which tracking data is not available) in order to provide additional
incentives for them (a) to provide continuing information and investment
services to their shareholder accounts and otherwise to encourage those accounts
to remain invested in the Fund and (b) to sell shares of the Fund. Under the
Plan, in order to save on the expense of shareholders meetings and to provide
flexibility to the Board of Directors, the Board, including a majority of the
outside directors who are not "interested persons" of the Fund as defined in the
Investment Company Act of 1940, is authorized to approve annual fee payments
from our assets of up to 0.50 of 1% of the average net of such assets consisting
of distribution and service fees, each at a maximum annual rate not exceeding
0.25 of 1%, except that the service fee may not exceed 0.15 of 1% in the case of
shares sold or attributable to shares sold prior to July 1, 1990 (the "Fee
Ceiling"). Under the Plan, the Board has approved payments by the Fund to Lord
Abbett Distributor which uses or passes on to authorized institutions (1) an
annual service fee (payable quarterly) of .25% of the average daily net asset
value of the shares serviced by authorized institutions and (2) a one-time
distribution fee of up to 1% (reduced according to the following schedule: 1% of
the first $5 million, .55% of the next $5 million, .50% of the next $40 million
and .25% over $50 million), payable at the time of sale on all shares sold
during any 12-month period starting from the day of the first net asset value
sale (i) at the $1 million level by authorized institutions, including sales
qualifying at such level under the rights of accumulation and statement of
intention privileges; or (ii) through Retirement Plans with at least 100
eligible employees. In addition, the Board has approved for those authorized
institutions which qualify, a supplemental annual distribution fee equal to
0.10% of the average daily net asset value of the shares serviced by authorized
institutions which have a satisfactory program for the promotion of such shares
comprising a significant percentage of the assets, with a lower than average
redemption rate. Institutions and persons permitted by law to receive such fees
are "authorized institutions".
Under the Plan, Lord Abbett Distributor is permitted to use payments received 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 shares. Any such payments are
subject to the Fee Ceiling. Any payments under that Plan not used by Lord Abbett
Distributor in this manner are passed on to authorized institutions.
Holders of shares on which the 1% sales distribution fee has been paid will be
required to pay to the Fund on behalf of its shares a CDSC of 1% of the original
cost or the then net asset value, whichever is less, of all shares so purchased
which are redeemed out of the Lord Abbett-sponsored family of funds on or before
the end of the twenty-fourth month after the month in which the purchase
occurred. (An exception is made for redemptions by Retirement Plans due to any
benefit payment such as Plan loans, hardship withdrawals, death, retirement or
separation from service with
<PAGE>
respect to plan participants or the distribution of any excess contributions.)
If the shares have been exchanged into another Lord Abbett-sponsored fund and
are thereafter redeemed out of the Lord Abbett family of funds on or before the
end of such twenty-fourth month, the charge will be collected for the Fund's
shares by the other fund. The Fund will collect such a charge for other Lord
Abbett-sponsored funds in a similar situation.
6 SHAREHOLDER SERVICES
We offer the following shareholder services:
Telephone Exchange Privilege: Shares of the Fund may be exchanged without a
service charge: (a) for Class A shares of any other Lord Abbett-sponsored fund
except for (i) LAEF, LASF and LARF and (ii) certain tax-free, single-state
series where the exchanging shareholder is a resident of a state in which such
series is not offered for sale and (b) for shares of any authorized
institution's affiliated money market fund satisfying Lord Abbett Distributor as
to certain omnibus account and other criteria (together, "Eligible Funds").
You or your representative with proper identification can instruct the Fund to
exchange uncertificated shares of the Fund (held by the transfer agent) by
telephone. Shareholders have this privilege unless they refuse it in writing.
The Fund will not be liable for following instructions communicated by telephone
that it reasonably believes to be genuine and will employ reasonable procedures
to confirm that instructions received are genuine, including requesting proper
identification and recording all telephone exchanges. Instructions must be
received by the Fund in Kansas City (800-821-5129) prior to the close of the
NYSE to obtain each fund's net asset value per Class A share on that day.
Expedited exchanges by telephone may be difficult to implement in times of
drastic economic or market change. The exchange privilege should not be used to
take advantage of short-term swings in the market. The Fund reserves the right
to terminate or limit the privilege of any shareholder who makes frequent
exchanges. The Fund can revoke the privilege for all shareholders upon 60 days'
prior written notice. A prospectus for the other Lord Abbett-sponsored fund
selected by you should be obtained and read before an exchange. Exercise of the
Exchange Privilege will be treated as a sale for federal income tax purposes
and, depending on the circumstances, a capital gain or loss may be recognized.
SYSTEMATIC WITHDRAWAL PLAN: Except for retirement plans for which there is no
such minimum, if the maximum offering price value of your uncertificated shares
is at least $10,000, you may have periodic cash withdrawals automatically paid
to you in either fixed or variable amounts.
DIV-MOVE: You can invest the dividends paid on your account ($250 initial and
$50 subsequent minimum investment) into an existing account in any other
Eligible Fund. The account must be either your account, a joint account for you
and your spouse, a single account for your spouse, or a custodial account for
your minor child under the age of 21. You should read the prospectus of the
other fund before investing.
INVEST-A-MATIC: You can make fixed, periodic investments ($50 minimum
investment) into the Fund and/or any Eligible Fund by means of automatic money
transfers from your bank checking account. You should read the prospectus of the
other fund before investing.
RETIREMENT PLANS: Lord Abbett makes available the retirement plan forms and
custodial agreements for IRAs (Individual Retirement Accounts including
Simplified Employee Pensions), 403(b) plans and pension and profit-sharing
plans, including 401(k) plans.
HOUSEHOLDING: A single copy of an annual or semi-annual report will be sent to
an address to which more than one registered shareholder of the Fund with the
same last name has indicated mail is to be delivered, unless additional reports
are specifically requested in writing or by telephone.
<PAGE>
All correspondence should be directed to Lord Abbett Mid-Cap Value Fund, Inc.
(P.O. Box 419100, Kansas City, Missouri 64141; 800-821-5129).
7 OUR MANAGEMENT
Our business is managed by our officers on a day-to-day basis under the overall
direction of our Board of Directors. We employ Lord Abbett as investment manager
pursuant to a Management Agreement. Lord Abbett has been an investment manager
for over 65 years and currently manages over $19 billion in a family of mutual
funds and other advisory accounts. Under the Management Agreement, Lord Abbett
provides us with investment management services and executive and other
personnel, pays the remuneration of our officers and our directors affiliated
with Lord Abbett, provides us with office space and pays for ordinary and
necessary office and clerical expenses relating to research, statistical work
and supervision of our portfolio and certain other costs. Lord Abbett provides
similar services to twelve other Lord Abbett-sponsored funds having various
investment objectives and also advises other investment clients. Edward K. von
der Linde, Executive Vice President, has been primarily responsible for the
day-to-day management of the Fund since October 1995, although he has been
involved with the Fund's management since 1988. Mr. von der Linde has been with
Lord, Abbett & Co. since 1988 and has over 10 years of investment experience.
Under the Management Agreement, the Fund is obligated to pay Lord Abbett a
monthly fee based on average daily net assets for each month. For the fiscal
year ended December 31, 1995, the fee paid to Lord Abbett as a percentage of
average daily net assets was at the annual rate of .75%. In addition, we pay all
expenses not expressly assumed by Lord Abbett. Our ratio of expenses, including
management fee expenses, to average net assets for the fiscal year ended
December 31, 1995 was 1.27%.
THE FUND. The Fund is a diversified open-end management investment company
incorporated under Maryland law on March 14, 1983. Our former name was Lord
Abbett Value Appreciation Fund, Inc. Our name was changed to Lord Abbett Mid-Cap
Value Fund, Inc. on February 13, 1996.
8 DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
Dividends from net investment income may be taken in cash or reinvested in
additional shares at net asset value without a sales charge. If you elect a cash
payment (i) a check will be mailed to you as soon as possible after the monthly
reinvestment date or (ii) if you arrange for direct deposit, your payment will
be wired directly to your bank account within one day after the date on which
the dividend is paid. Supplemental dividends also may be paid on or about
December 31.
A long-term capital gains distribution is made when we have net profits during
the year from sales of securities which we have held more than one year. If we
realize net short-term capital gains, they also will be distributed. Any capital
gains distribution will be paid in January. You may take it in cash or reinvest
it in additional shares at net asset value without a sales charge.
Dividends and distributions may be paid in December or January. Dividends and
distributions declared in October, November or December of any year to
shareholders of record as of a date in such a month will be treated for federal
income tax purposes as having been received by shareholders in that year if they
are paid before February 1 of the following year.
We intend to continue to meet the requirements of Subchapter M of the Internal
Revenue Code. We will try to distribute to shareholders all our net investment
income and net realized capital gains, so as to avoid the necessity of the Fund
paying federal income tax. Shareholders, however, must report dividends and
capital gains distributions as taxable income. Distributions derived from net
long-term capital gains which are designated by the Fund as "capital gains
dividends" will be taxable to shareholders as long-term capital gains, whether
received in cash or shares, regardless of how long a taxpayer has held the
shares. Under current law, net long-term capital gains are taxed at the rates
applicable to ordinary income, except that the maximum rate for long-term
capital gains for individuals is 28%. Legislation pending as of the date of this
Prospectus would have
<PAGE>
the effect of reducing the federal income tax rate on capital gains.
Shareholders may be subject to a $50 penalty under the Internal Revenue Code and
we may be required to withhold and remit to the U.S. Treasury a portion (31%) of
any redemption proceeds (including the value of shares exchanged into another
Lord Abbett-sponsored fund), and of any dividend or distribution on any account,
where the payee (shareholder) failed to provide a correct taxpayer
identification number or to make certain required certifications.
We will inform shareholders of the federal tax status of each dividend and
distribution after the end of each calendar year. Shareholders should consult
their tax advisers concerning applicable state and local taxes as well as the
tax consequences of gains or losses from the redemption or exchange of our
shares.
9 REDEMPTIONS
To obtain the proceeds of an expedited redemption of $50,000 or less, you or
your representative with proper identification can telephone the Fund. The Fund
will not be liable for following instructions communicated by telephone that it
reasonably believes to be genuine and will employ reasonable procedures to
confirm that instructions received are genuine, including requesting proper
identification, recording all telephone redemptions and mailing the proceeds
only to the named shareholder at the address appearing on the account
registration.
If you do not qualify for the expedited procedures described above, to redeem
shares directly, send your request to Lord Abbett Mid-Cap Value Fund, Inc. (P.O.
Box 419100, Kansas City, Missouri 64141) with signature(s) and any legal
capacity of the signer(s) guaranteed by an eligible guarantor, accompanied by
any certificates for shares to be redeemed and other required documentation. We
will make payment of the net asset value of the shares on the date the
redemption order was received in proper form. Payment will be made within three
days. The Fund may suspend the right to redeem shares for not more than seven
days or longer under unusual circumstances as permitted by Federal law. If you
have purchased Fund shares by check and subsequently submit a redemption
request, redemption proceeds will be paid upon clearance of your purchase check,
which may take up to 15 days. To avoid delays you may arrange for the bank upon
which a check was drawn to communicate to the Fund that the check has cleared.
Shares also may be redeemed by the Fund at net asset value through your
securities dealer who, as an unaffiliated dealer, may charge you a fee.
If your dealer receives your order prior to the close of the NYSE and
communicates it to Lord Abbett, as our agent, prior to the close of Lord
Abbett's business day, you will receive the net asset value of the shares being
redeemed as of the close of the NYSE on that day. If the dealer does not
communicate such an order to Lord Abbett until the next business day, you will
receive the net asset value as of the close of the NYSE on that next business
day.
Shareholders who have redeemed their shares have a one-time right to reinvest
into another account having the identical registration in any of the Eligible
Funds at the then applicable net asset value of the shares being purchased, (i)
without the payment of a sales charge or (ii) with reimbursement for the payment
of any CDSC. Such reinvestment must be made within 60 days of the redemption and
is limited to no more than the dollar amount of the redemption proceeds.
Under certain circumstances and subject to prior written notice, our
Board of Directors may authorize redemption of all of the shares in any account
in which there are fewer than 25 shares.
TAX-QUALIFIED PLANS: For redemptions of $50,000 or less, follow normal
redemption procedures. Redemptions over $50,000 must be in writing from the
employer, broker or plan administrator stating the reason for the redemption.
The reason for the redemption must be received by the Fund prior to, or
concurrent with, the redemption request.
10 PERFORMANCE
The Fund ended fiscal 1995 on December 31 with a net asset value of $12.18 per
share, versus $9.81 one year ago. The latter figure has been adjusted for
capital gains distributions totaling $1.445 per share paid in February 1995. In
addition, the Fund paid dividends of $.17 during the fiscal year. The Fund's
total return (which is the percent change in net asset value assuming the
reinvestment of all distributions) was 26.1% for the year.
<PAGE>
The stock market benefited from a favorable economic environment in
1995. The Fund started the year with an overweighting in economically sensitive
stocks. This position was gradually decreased over the year, with most of the
proceeds reinvested in the stocks of consumer non-durable companies (such as
food and drugs/health care).
Yield and Total Return. Yield and total return data may, from time to time, be
included in advertisements about the Fund. "Yield" is calculated by dividing the
Fund's annualized net investment income per share during a recent 30-day period
by the maximum public offering price per share on the last day of that period.
The Fund's yield reflects the deduction of the maximum initial sales charge and
reinvestment of all income dividends and capital gains distributions. "Total
return" for the one-, five- and ten-year periods represents the average annual
compounded rate of return on an investment of $1,000 in the Fund at the maximum
public offering price. When total return is quoted it includes the payment of
the maximum initial sales charge. Total return also may be presented for other
periods or based on investment at reduced sales charge levels or net asset
value. Any quotation of total return not reflecting the maximum initial sales
charge would be reduced if such sales charge were used. Quotations of yield or
total return for any period when an expense limitation is in effect will be
greater than if the limitation had not been in effect.
See "Past Performance" in the Statement of Additional Information for a more
detailed discussion concerning the computation of the Fund's total return and
yield.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFER IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
NOT CONTAINED IN THIS PROSPECTUS, OR IN SUPPLEMENTAL SALES MATERIAL AUTHORIZED
BY THE FUND AND NO PERSON IS ENTITLED TO RELY UPON ANY INFORMATION OR
REPRESENTATION NOT CONTAINED HEREIN OR THEREIN.
<PAGE>
Comparison of change in value of a $10,000 investment, assuming reinvestment of
all dividends and distributions, in Lord Abbett Mid-Cap Value Fund and Russell
Mid-Cap Index.
<TABLE>
<CAPTION>
The Fund The Fund
at Net at Maximum Russell
Asset Value Offering Mid Cap
Date Price (1) Index (2)
- ---- ----------- ---------- --------
<S> <C> <C> <C>
12-31-85 $10,000 $ 9,429 $10,000
12-31-86 11,634 10,970 11,820
12-31-87 11,149 10,511 11,847
12-31-88 12,890 12,153 14,194
12-31-89 15,481 14,596 17,922
12-31-90 14,761 13,918 15,861
12-31-91 18,800 17,726 22,446
12-31-92 21,332 20,113 26,115
12-31-93 24,308 22,919 29,850
12-31-94 23,515 22,172 29,222
12-31-95 29,649 27,956 39,289
Average Annual Total Return(3)
1 Year 5 Years 10 Years
18.80% 13.61% 10.83%
(1) Data reflects the deduction of the maximum sales charge of 5.75%.
(2) Performance numbers for the unmanaged Russell Mid-Cap Index do not reflect
transaction costs or management fees. An investor cannot invest directly in
the Index.
(3) Total return is the percent change in value, after deduction of the maximum
sales charge of 5.75%, with all dividends and distributions reinvested for
the periods shown ending December 31, 1995 using the SEC-required uniform
method to compute such return.
<PAGE>
Investment Manager and Underwriter
Lord, Abbett & Co. and Lord Abbett Distributor LLC
The General Motors Building
767 Fifth Avenue
New York, New York 10153-0203
212-848-1800
Custodian
The Bank of New York
48 Wall Street
New York, New York 10286
Transfer Agent and Dividend
Disbursing Agent
United Missouri Bank of Kansas City, N.A.
Tenth and Grand
Kansas City, Missouri 64141
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419100
Kansas City, Missouri 64141 800-821-5129
Auditors
Deloitte & Touche LLP
Counsel
Debevoise & Plimpton
<PAGE>
LORD ABBETT
Statement of Additional Information July 15, 1996
Lord Abbett
Mid-Cap Value Fund, Inc.
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord Abbett Distributor LLC
("Lord Abbett Distributor") at The General Motors Building, 767 Fifth Avenue,
New York, New York 10153-0203. This Statement relates to, and should be read in
conjunction with, the Prospectus dated July 15, 1996.
Lord Abbett Mid-Cap Value Fund, Inc. (formerly Lord Abbett Value Appreciation
Fund, Inc.) (sometimes referred to as "we" or the "Fund") was incorporated under
Maryland law on March 14, 1983. Our authorized capital stock consists of a
single class of 150,000,000 shares, $0.001 par value, designated as Class A
shares. The Board of Directors has the power to create new classes and series of
shares of capital stock. All shares have equal noncumulative voting rights and
equal rights with respect to dividends, assets and liquidation. They are fully
paid and nonassessable when issued and have no preemptive or conversion rights.
Shareholder inquiries should be made by writing directly to the Fund or by
calling 800-821-5129. In addition, you can make inquiries through your dealer.
TABLE OF CONTENTS Page
1. Investment Policies 2
2. Directors and Officers 3
3. Investment Advisory and Other Services 5
4. Portfolio Transactions 6
5. Purchases, Redemptions and
Shareholder Services 7
6. Past Performance 12
7. Taxes 12
8. Information About the Fund 13
9. Financial Statements 13
<PAGE>
1.
1. Investment Policies
Fundamental Investment Restrictions
We are subject to the following investment restrictions which cannot be changed
without approval of a majority of our outstanding shares. The Fund may not: (1)
borrow money, except that (i) the Fund may borrow from banks (as defined in the
Investment Company Act of 1940, as amended (the "Act")) in amounts up to 33 1/3%
of its total assets (including the amount borrowed), (ii) the Fund may borrow up
to an additional 5% of its total assets for temporary purposes, (iii) the Fund
may obtain such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities and (iv) the Fund may purchase
securities on margin to the extent permitted by applicable law; (2) pledge its
assets (other than to secure borrowings, or to the extent permitted by the
Fund's investment policies as permitted by applicable law); (3) engage in the
underwriting of securities, except pursuant to a merger or acquisition or to the
extent that, in connection with the disposition of its portfolio securities, it
may be deemed to be an underwriter under federal securities laws; (4) make loans
to other persons, except that the acquisition of bonds, debentures or other
corporate debt securities and investment in government obligations, commercial
paper, pass-through instruments, certificates of deposit, bankers acceptances,
repurchase agreements or any similar instruments shall not be subject to this
limitation, and except further that the Fund may lend its portfolio securities,
provided that the lending of portfolio securities may be made only in accordance
with applicable law; (5) buy or sell real estate (except that the Fund may
invest in securities directly or indirectly secured by real estate or interests
therein or issued by companies which invest in real estate or interests therein)
or commodities or commodity contracts (except to the extent the Fund may do so
in accordance with applicable law and without registering as a commodity pool
operator under the Commodity Exchange Act as, for example, with futures
contracts); (6) with respect to 75% of the gross assets of the Fund, buy
securities of one issuer representing more than (i) 5% of the Fund's gross
assets, except securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities or (ii) 10% of the voting securities of such
issuer; (7) invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding securities of the
U.S. Government, its agencies and instrumentalities); or (8) issue senior
securities to the extent such issuance would violate applicable law.
With respect to the restrictions mentioned herein, compliance therewith will not
be affected by changes in the market value of portfolio securities but will be
determined at the time of purchase or sale of such securities.
Non-Fundamental Investment Restrictions. In addition to the investment
restrictions above which cannot be changed without shareholder approval, we also
are subject to the following non-fundamental investment policies which may be
changed by the Board of Directors without shareholder approval. The Fund may
not: (1) borrow in excess of 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; (2) make short sales of
securities or maintain a short position except to the extent permitted by
applicable law; (3) invest knowingly more than 15% of its net assets (at the
time of investment) in illiquid securities, except for securities qualifying for
resale under Rule 144A of the Securities Act of 1933, deemed to be liquid by the
Board of Directors; (4) invest in the securities of other investment companies
except as permitted by applicable law; (5) invest in securities of issuers
which, with their predecessors, have a record of less than three years'
continuous operations, if more than 5% of the Fund's total assets would be
invested in such securities (this restriction shall not apply to mortgage-backed
securities, asset-backed securities or obligations issued or guaranteed by the
U. S. Government, its agencies or instrumentalities); (6) hold securities of any
issuer if more than 1/2 of 1% of the securities of such issuer are owned
beneficially by one or more officers or directors of the Fund or by one or more
partners or members of the Fund's underwriter or investment adviser if these
owners in the aggregate own beneficially more than 5% of the securities of such
issuer; (7) invest in warrants if, at the time of the acquisition, its
investment in warrants, valued at the lower of cost or market, would exceed 5%
of the Fund's total assets (included within such limitation, but not to exceed
2% of the Fund's total assets, are warrants which are not listed on the New York
or American Stock Exchange or a major foreign exchange); (8) invest in real
estate limited partnership interests or interests in oil, gas or other mineral
leases, or exploration or other development programs, except that the Fund may
invest in securities issued by companies that engage in oil, gas or other
mineral exploration or other development activities; (9) write, purchase or sell
puts, calls, straddles, spreads or combinations thereof, except to the extent
permitted in the Fund's
2
<PAGE>
prospectus and statement of additional information, as they may be amended from
time to time; or (10) buy from or sell to any of its officers, directors,
employees, or its investment adviser or any of its officers, directors, partners
or employees, any securities other than shares of the Fund's common stock.
Under normal circumstances, at least 65% of the Fund's 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 $200,000,000 and
$5,000,000,000.
Although it has no current intention to do so, the Fund may invest in financial
futures and options on financial futures.
Portfolio Turnover Rate. For the year ended December 31, 1995, our portfolio
turnover rate was 41.42% and 57.49% for the prior year.
2.
Directors and Officers
The following director is a partner of Lord, Abbett & Co., The General Motors
Building, 767 Fifth Avenue, New York, New York 10153-0203. He has been
associated with Lord Abbett for over five years and is also an officer and
director or trustee of the twelve other Lord Abbett-sponsored funds. He is an
"interested person" as defined in the Investment Company Act of 1940, as
amended, and as such, may be considered to have an indirect financial interest
in the Rule 12b-1 Plan described in the Prospectus.
Robert S. Dow, age 51, Chairman and President
The following outside directors are also directors or trustees of the twelve
other Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow
Time Warner Cable
300 First Stamford Place
Stamford, Connecticut
President and Chief Executive Officer of Time Warner Cable Programming, Inc.
Formerly President and Chief Operating Officer of Home Box Office, Inc. Age 54.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 65.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 70.
C. Alan MacDonald
The Marketing Partnership, Inc.
27 Signal Road
Stamford, Connecticut
3
<PAGE>
General Partner, The Marketing Partnership, Inc., a full service marketing
consulting firm. Formerly Chairman and Chief Executive Officer of Lincoln
Snacks, Inc., manufacturer of branded snack foods (1992-1994). Formerly
President and Chief Executive Officer of Nestle Foods Corp, and prior to that,
President and Chief Executive Officer of Stouffer Foods Corp., both subsidiaries
of Nestle SA, Switzerland. Currently serves as Director of Den West Restaurant
Co., J. B. Williams, and Fountainhead Water Company. Age 63.
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 68.
Thomas J. Neff
Spencer Stuart & Associates
277 Park Avenue
New York, New York
President of Spencer Stuart & Associates, an executive search consulting firm.
Age 58.
The second column of the following table sets forth the compensation accrued for
the Fund's outside directors. The third and fourth columns set forth information
with respect to the retirement plan for outside directors maintained by the Lord
Abbett-sponsored funds. The fifth column sets forth the total compensation
payable by such funds to the outside directors. The first four columns give
information for the Fund's fiscal year ended December 31, 1995; the fifth column
gives information for the year ended December 31, 1995. No director of the Fund
associated with Lord Abbett or Lord Abbett Distributor and no officer of the
Fund received any compensation from the Fund for acting as a director or
officer.
</TABLE>
<TABLE>
<CAPTION>
For the Fiscal Year Ended December 31, 1995
(1) (2) (3) (4) (5)
Pension or Estimated Annual For Year Ended
Retirement Benefits Benefits Upon December 31, 1995
Accrued as Expenses Retirement Accrued Total Compensation
by the Fund and by the Fund and Accrued by the Fund and
Aggregate Twelve Other Lord Twelve Other Lord Twelve Other Lord
Compensation Abbett-sponsored Abbett-sponsored Abbett-sponsored
Name of Director from the Fund1 Funds2 Funds2 Funds3
<S> <C> <C> <C> <C>
E. Thayer Bigelow $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
<FN>
1. Outside directors' fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on net
assets of each fund. A portion of the fees payable by the Fund to its outside
directors is being deferred under a plan that deems the
4
<PAGE>
deferred amounts to be invested in shares of the Fund for later
distribution to the directors. The total amount accrued under the plan for
each outside director since the beginning of his tenure with the Fund,
including dividends reinvested and changes in net asset value applicable to
such deemed investments were as follows as of December 31,1995: 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. The retirement plan of the Lord Abbett-sponsored funds provides that outside
directors will receive an annual retirement benefit equal to 80% of their
final annual retainer following retirement at or after age 72 with at least
10 years of service. The plan also provides for a reduced benefit upon early
retirement under certain circumstances, a pre-retirement death benefit and
actuarially reduced joint-and-survivor spousal benefits. The amounts stated
would be payable annually under such retirement plan if the director were to
retire at age 72 and the annual retainer payable by such funds were the same
as it is today. The amounts accrued in column 3 by the Lord Abbett-sponsored
funds during the fiscal year ended December 31, 1995 are used to fund the
retirement benefits in column 4.
3. This column shows aggregate compensation, including director's fees and
attendance fees for board and committee meetings, of a nature referred to in
the first sentence of footnote one accrued by the Lord Abbett-sponsored funds
during the year ended December 31, 1995.
</FN>
</TABLE>
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Allen, Carper, Cutler, Henderson, Morris, Nordberg and Walsh are partners of
Lord Abbett; the others are employees: Edward von der Linde age 35, Executive
Vice President, Kenneth B. Cutler, age 64, Vice President and Secretary; Stephen
I. Allen, age 43; Daniel E. Carper, age 44; Robert G. Morris, age 51, E. Wayne
Nordberg, age 58; John J. Gargana, Jr., age 65; Paul A. Hilstad, age 53 (with
Lord Abbett since 1995; formerly Senior Vice President and General Counsel of
American Capital Management & Research, Inc.); Thomas F. Konop, age 54; Victor
W. Pizzolato, age 63; John J. Walsh, age 60, Vice Presidents; and Keith F.
O'Connor, age 41, Treasurer.
The Fund's By-Laws provide that the Fund shall not hold an annual meeting of its
stockholders in any year unless one or more matters are required to be acted on
by stockholders under the Investment Company Act of 1940, as amended (the
"Act"), or unless called by a majority of the Board of Directors or by
stockholders holding at least one quarter of the stock of the Fund outstanding
and entitled to vote at the meeting. When any such annual meeting is held, the
stockholders will elect directors and vote on the approval of the independent
auditors of the Fund.
As of June 30, 1996, our officers and directors, as a group, owned less than
1.5% of our outstanding shares.
3.
Investment Advisory and Other Services
As described under "Our Management" in the Prospectus, Lord Abbett is the Fund's
investment manager. The eight general partners of Lord Abbett, all of whom are
officers and/or directors of the Fund, are: Stephen I. Allen, Daniel E. Carper,
Kenneth B. Cutler, Robert S. Dow, Thomas S. Henderson, Robert G. Morris, E.
Wayne Nordberg and John J. Walsh. The address of each partner is The General
Motors Building, 767 Fifth Avenue, New York, New York 10153- 0203.
The services performed by Lord Abbett are described in the Prospectus under "Our
Management". Under the Management Agreement, we pay Lord Abbett a monthly fee,
based on average daily net assets for each month, at the annual rate of .75 of
1% of the portion of our net assets not in excess of $200,000,000; .65 of 1% of
the portion in excess of $200,000,000 but not in excess of $500,000,000; and .50
of 1% of the portion in excess of $500,000,000. For the fiscal years ended
December 31, 1995, 1994 and 1993, the management fees paid to Lord Abbett
amounted to $1,584,007, $1,385,336 and $1,433,925, respectively.
We pay all expenses not expressly assumed by Lord Abbett, including, without
limitation, 12b-1 expenses, outside directors' fees and expenses, association
membership dues, legal and auditing fees, taxes, transfer and dividend
disbursing agent fees, shareholder servicing costs, expenses relating to
shareholder meetings, expenses of preparing, printing and mailing stock
certificates and shareholder reports, expenses of registering our shares under
federal and state securities laws, expenses of preparing, printing and mailing
prospectuses to existing shareholders, insurance premiums, brokerage and other
expenses connected with executing portfolio security transactions.
5
<PAGE>
We have agreed with the State of California to limit operating expenses
(including management fees but excluding taxes, interest, extraordinary expenses
and brokerage commissions) to 2 1/2% of average annual net assets up to
$30,000,000, 2% of the next $70,000,000 of such assets and 1 1/2% of such assets
in excess of $100,000,000. The expense limitation is a condition on the
registration of investment company shares for sale in the State and applies so
long as our shares are registered for sale in that State.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281, are
the independent public accountants of the Fund and must be approved at least
annually by our Board of Directors to continue in such capacity. They perform
audit services for the Fund including the examination of financial statements
included in our annual report to shareholders.
The Bank of New York ("BNY"), 48 Wall Street, New York, New York 10286, is the
Fund's custodian. In accordance with the requirements of Rule 17f-5 under the
Act, the Fund's directors have approved arrangements permitting the Fund's
foreign assets not held by BNY or its foreign branches to be held by certain
qualified foreign banks and depositories.
4.
Portfolio Transactions
Our policy is to obtain best execution on all our portfolio transactions, which
means that we seek to have purchases and sales of portfolio securities executed
at the most favorable prices, considering all costs of the transaction including
brokerage commissions and dealer markups and markdowns and taking into account
the full range and quality of the brokers' services. Consistent with obtaining
best execution, we generally pay, as described below, a higher commission than
some brokers might charge on the same transactions. Our policy with respect to
best execution governs the selection of brokers or dealers and the market in
which the transaction is executed. To the extent permitted by law, we may, if
considered advantageous, make a purchase from or sale to another Lord
Abbett-sponsored fund without the intervention of any broker-dealer.
Broker-dealers are selected on the basis of their professional capability and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of the Fund and also are employees
of Lord Abbett. These traders do the trading as well for other accounts --
investment companies (of which they are also officers) and other investment
clients -- managed by Lord Abbett. They are responsible for obtaining best
execution.
We pay a commission rate that we believe is appropriate to give maximum
assurance that our brokers will provide us, on a continuing basis, the highest
level of brokerage services available. While we do not always seek the lowest
possible commissions on particular trades, we believe that our commission rates
are in line with the rates that many other institutions pay. Our traders are
authorized to pay brokerage commissions in excess of those that other brokers
might accept on the same transactions in recognition of the value of the
services performed by the executing brokers, viewed in terms of either the
particular transaction or the overall responsibilities of Lord Abbett with
respect to us and the other accounts they manage. Such services include showing
us trading opportunities including blocks, a willingness and ability to take
positions in securities, knowledge of a particular security or market proven
ability to handle a particular type of trade, confidential treatment, promptness
and reliability.
Some of these brokers also provide research services at least some of which are
useful to Lord Abbett in their overall responsibilities with respect to us and
the other accounts they manage. Research includes the furnishing of analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts and trading equipment and
computer software packages, acquired from third-party suppliers, that enable
Lord Abbett to access various information bases. Such services may be used by
Lord Abbett in servicing all their accounts, and not all of such services will
necessarily be used by Lord Abbett in connection with their management of the
Fund; conversely, such services furnished in connection with brokerage on other
accounts managed by Lord Abbett may be used in connection with their management
of the Fund, and not all of such services will necessarily be used by Lord
Abbett in connection with their advisory services to such other accounts. We
have been advised by Lord Abbett
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that research services received form brokers cannot be allocated to any
particular account, are not a substitute for Lord Abbett's services but are
supplemental to their own research effort and when utilized, are subject to
internal analysis before being incorporated by Lord Abbett into their investment
process. As a practical matter, it would not be possible for Lord Abbett to
generate all of the information presently provided by brokers. While receipt of
research services from brokerage firms has not reduced Lord Abbett's normal
research activities, the expenses of Lord Abbett could be materially increased
if it attempted to generate such additional information through its own staff
and purchased such equipment and software packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or
among brokers, and trades are executed only when they are dictated by investment
decisions of the Fund to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold our shares and/or
shares of other Lord Abbett-sponsored funds may be preferred.
If other clients of Lord Abbett buy or sell the same security at the same time
as we do, transactions will, to the extent practicable, be allocated among all
participating accounts in proportion to the amount of each order and will be
executed daily until filled so that each account shares the average price and
commission cost of each day. Other clients who direct that their brokerage
business be placed with specific brokers or who invest through wrap accounts
introduced to Lord Abbett by certain brokers may not participate with us in the
buying and selling of the same securities as described above. If these clients
wish to buy or sell the same security as we do, they may have their transactions
executed at times different from our transactions and thus may not receive the
same price or incur the same commission cost as we do.
We will not seek "reciprocal" dealer business (for the purpose of applying
commissions in whole or in part for our benefit or otherwise) from dealers as
consideration for the direction to them of portfolio business.
During the fiscal years ended December 31, 1995, 1994 and 1993, we paid total
commissions to independent broker-dealers of $586,752, $617,797 and $290,264,
respectively.
5.
Purchases, Redemptions
and Shareholder Services
The Fund values its portfolio securities at market value as of the close of the
New York Stock Exchange. Market value will be determined as follows: securities
listed or admitted to trading privileges on the New York or American Stock
Exchange or on the NASDAQ National Market System are valued at the last sales
price, or, if there is no sale on that day, at the mean between the last bid and
asked prices, or, in the case of bonds, in the over-the-counter market if, in
the judgment of the Fund's officers, that market more accurately reflects the
market value of the bonds. Over-the-counter securities not traded on the NASDAQ
National Market System are valued at the mean between the last bid and asked
prices. Securities for which market quotations are not available are valued at
fair market value under procedures approved by the Board of Directors.
Information concerning how we value our shares for the purchase and redemption
of our shares is described in the Prospectus under "Purchases" and
"Redemptions", respectively.
As disclosed in the Prospectus, we calculate our net asset value and are
otherwise open for business on each day that the NYSE is open for trading. The
NYSE is closed on Saturdays and Sundays and the following holidays -- New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
The maximum offering price of our shares on December 31, 1995 was computed as
follows:
Net asset value per share (net assets divided by
shares outstanding)....................................................$12.18
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Maximum offering price per share (net asset value
divided by .9425).....................................................$12.92
The Fund has entered into a distribution agreement with Lord Abbett Distributor
LLC, a New York limited liability company ("Lord Abbett Distributor") and
subsidiary of Lord Abbett under which Lord Abbett Distributor is obligated to
use its best efforts to find purchasers for the shares of the Fund, and to make
reasonable efforts to sell Fund shares so long as, in Lord Abbett Distributor's
judgment, a substantial distribution can be obtained by reasonable efforts.
For the last three fiscal years, Lord Abbett, as our principal underwriter,
received net commissions after allowance of a portion of the sales charge to
independent dealers as follows:
Year Ended December 31,
1995 1994 1993
Gross sales charge $335,708 $304,416 $320,040
Amount allowed
to dealers $305,733 $ 262,840 276,729
-------- --------- --------
Net commissions
received by Lord Abbett $29,975 $ 41,576 $ 43,311
======== ======== ========
Class A Rule 12b-1 Plan. As described in the Prospectus, the Fund has adopted a
Distribution Plan and Agreement pursuant to Rule 12b-1 of the Act for the Fund
(the "Plan"). In adopting the Plan and in approving its continuance, the Board
of Directors has concluded that there is a reasonable likelihood that the Plan
will benefit the Fund's shareholders. The expected benefits include greater
sales and lower redemptions of shares, which should allow for a consistent cash
flow, and a higher quality of service to shareholders by authorized institutions
than would otherwise be the case. During the last fiscal year, the Fund accrued
or paid through Lord Abbett to authorized institutions $412,336 under the Plan.
Lord Abbett used all amounts received under the Plan for payments to dealers
for (i) providing continuous services to shareholders, such as answering
shareholder inquiries, maintaining records, and assisting shareholders in making
redemptions, transfers, additional purchases and exchanges and (ii) their
assistance in distributing shares of the Fund.
The Plan requires the directors to review, on a quarterly basis, written reports
of all amounts expended pursuant to the Plan and the purposes for which such
expenditures were made. The Plan shall continue in effect only if its
continuance is specifically approved at least annually by vote of the directors,
including a majority of the directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related to the Plan ("outside directors"), cast in
person at a meeting called for the purpose of voting on the Plan. The Plan may
not be amended to increase materially the above limits set forth therein the
amount spent for distribution expenses thereunder without approval by a majority
of the Funds' outstanding voting securities and the approval of a majority of
the directors, including a majority of the outside directors. The Plan may be
terminated at any time by vote of a majority of the outside directors or by vote
of a majority of its outstanding voting securities.
Contingent Deferred Sales Charges. A Contingent Deferred Sales Charge ("CDSC")
applies upon redemption of shares and (i) will not apply to shares purchased by
the reinvestment of dividends or capital gains distributions; (ii) will be
assessed on the lesser of the net asset value of the shares at the time of
redemption or the original purchase price and (iii) will not be imposed on the
amount of your account value represented by the increase in net asset value over
the initial purchase price (including increases due to the reinvestment of
dividends and capital gains distributions).
As stated in the Prospectus, a CDSC of 1% is imposed with respect to those Class
A shares (or Class A shares of another Lord Abbett-sponsored fund or series
acquired through exchange of such shares) on which the Fund has paid the
one-time distribution fee of 1% if such shares are redeemed out of the Lord
Abbett-sponsored family of funds within a period of 24 months from the end of
the month in which the original sale occurred.
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With respect to Class A shares, no CDSC is payable on redemptions by
participants or beneficiaries from employer-sponsored retirement plans under the
Internal Revenue Code for benefit payments due to plan loans, hardship
withdrawals, death, retirement or separation from service and for returns of
excess contributions to retirement plan sponsors. The CDSC is received by the
Fund and is intended to reimburse all or a portion of the amount paid by the
Fund if the shares are redeemed before the Fund has had an opportunity to
realize the anticipated benefits of having a long-term shareholder account in
the Fund.
The other Lord Abbett-sponsored funds and series which participate in the
Telephone Exchange Privilege [except (a) Lord Abbett U.S. Government Securities
Money Market Fund, Inc. ("GSMMF"), (b) certain series of Lord Abbett Tax- Free
Income Fund and Lord Abbett Tax-Free Income Trust for which a Rule 12b-1 Plan is
not yet in effect, and (c) any authorized institution's affiliated money market
fund satisfying Lord Abbett Distributor as to certain omnibus account and other
criteria- hereinafter referred to as an "authorized money market fund" or "AMMF"
(collectively, the "Non- 12b-1 funds")] have instituted a CDSC for each class on
the same terms and conditions. No CDSC will be charged on an exchange of shares
of the same class between Lord Abbett funds or between such funds and AMMF. Upon
redemption of shares out of the Lord Abbett family of funds or out of AMMF, the
CDSC will be charged on behalf of and paid to the fund in which the original
purchase (subject to a CDSC) occurred, in the case of the Class A shares. Thus,
if shares of a Lord Abbett fund are exchanged for shares of the same class of
another such fund and the shares of the same class tendered ("Exchanged Shares")
are subject to a CDSC, the CDSC will carry over to the shares of the same class
being acquired, including GSMMF and AMMF ("Acquired Shares"). Any CDSC that is
carried over to Acquired Shares is calculated as if the holder of the Acquired
Shares had held those shares from the date on which he or she became the holder
of the Exchanged Shares. Although the Non-12b-1 funds will not pay a
distribution fee on their own shares, and will, therefore, not impose their own
CDSC, the Non-12b-1 funds will collect the CDSC on behalf of other Lord Abbett
funds, in the case of the Class A share. Acquired Shares held in GSMMF and AMMF
which are subject to a CDSC will be credited with the time such shares are held
in GSMMF but will not be credited with the time such shares are held in AMMF.
Therefore, if your Acquired Shares held in AMMF qualified for no CDSC at the
time of exchange into AMMF, no CDSC will be imposed upon redeeming for cash from
AMMF; but if your Acquired Shares did not so qualify at the time of exchange
into AMMF, a CDSC will be imposed upon redemption, regardless of the time you
have held Acquired Shares in AMMF.
In no event will the amount of the CDSC exceed 1% of the lesser of (i) the net
asset value of the shares redeemed or (ii) the original cost of such shares (or
of the Exchanged Shares for which such shares were acquired). No CDSC will be
imposed when the investor redeems (i) amounts derived from increases in the
value of the account above the total cost of shares being redeemed due to
increases in net asset value, (ii) shares with respect to which no Lord Abbett
fund paid a 12b-1 fee, or (iii) shares which, together with Exchanged Shares,
have been held continuously for 24 months from the end of the month in which the
original sale occurred. In determining whether a CDSC is payable, (a) shares not
subject to the CDSC will be redeemed before shares subject to the CDSC and (b)
of the shares subject to a CDSC, those held the longest will be the first to be
redeemed.
Exchanges. The Prospectus briefly describes the Telephone Exchange Privilege.
You may exchange some or all of your shares of any class for those in the same
class of: (i) Lord Abbett-sponsored funds currently offered to the public with a
sales charge (front-end, back-end or level ), (ii) GSMMF or (iii) AMMF, to the
extent offers and sales may be made in your state. You should read the
prospectus of the other fund before exchanging. In establishing a new account by
exchange, shares of the Fund being exchanged must have a value equal to at least
the minimum initial investment required for the other fund into which the
exchange is made.
Shareholders in other Lord Abbett-sponsored funds and AMMF have the same right
to exchange their shares for the corresponding class of the Fund's shares.
Exchanges are based on relative net asset values on the day instructions are
received by the Fund in Kansas City if the instructions are received prior to
the close of the NYSE in proper form. No sales charges are imposed except in the
case of exchanges out of GSMMF or AMMF (unless a sales charge (front-end,
back-end or level) was paid on the initial investment in a Lord Abbett-sponsored
fund). Exercise of the exchange privilege will be treated as a sale for federal
income tax purposes, and, depending on the circumstances, a gain or loss may be
recognized. In the case of an exchange of shares that have been held for 90 days
or less where no sales charge
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<PAGE>
is payable on the exchange, the original sales charge incurred with respect to
the exchanged shares will be taken into account in determining gain or loss on
the exchange only to the extent such charge exceeds the sales charge that would
have been payable on the acquired shares had they been acquired for cash rather
than by exchange. The portion of the original sales charge not so taken into
account will increase the basis of the acquired shares.
Shareholders have the exchange privilege unless they refuse it in writing. You
should not view the exchange privilege as a means for taking advantage of
short-term swings in the market, and we reserve the right to terminate or limit
the privilege of any shareholder who makes frequent exchanges. We can revoke or
modify the privilege for all shareholders upon 60 days' prior notice. "Eligible
Funds" are AMMF and other Lord Abbett-sponsored funds which are eligible for the
exchange privilege, except Lord Abbett Series Fund (" LASF") which offers its
shares only in connection with certain variable annuity contracts, Lord Abbett
Equity Fund (" LAEF") which is not issuing shares, and series of Lord Abbett
Research Fund not offered to the general public ("LARF").
Statement of Intention. Under the terms of the Statement of Intention to invest
$50,000 or more over a 13-month period as described in the Prospectus, in shares
of a Lord Abbett-sponsored fund (other than shares of LAEF, LASF, LARF, GSMMF
and AMMF, unless holdings in GSMMF and AMMF are attributable to shares exchanged
from a Lord Abbett-sponsored fund offered with a front-end, back-end or level
sales charge) shares currently owned by you are credited as purchases (at their
current offering prices on the date the Statement is signed) toward achieving
the stated investment and reduced initial sales charge for Class A shares. Class
A shares valued at 5% of the amount of intended purchases are escrowed and may
be redeemed to cover the additional sales charge payable if the Statement is not
completed. The Statement of Intention is neither a binding obligation on you to
buy, nor on the Fund to sell, the full amount indicated.
Rights of Accumulation. As stated in the Prospectus, purchasers (as defined in
the Prospectus) may accumulate their investment in Lord Abbett-sponsored funds
(other than LAEF, LARF, LASF, GSMMF, and AMMF unless holdings in GSMMF or AMMF
are attributable to shares exchanged from a Lord Abbett-sponsored fund offered
with a front-end, back-end or level sales charge) so that a current investment,
plus the purchaser's holdings valued at the current maximum offering price,
reach a level eligible for a discounted sales charge for Class A shares.
Net Asset Value Purchases of Class A Shares. As stated in the Prospectus, our
Class A shares may be purchased at net asset value by our directors, employees
of Lord Abbett, employees of our shareholder servicing agent and employees of
any securities dealer having a sales agreement with Lord Abbett who consents to
such purchases or by the director or custodian under any pension or
profit-sharing plan or Payroll Deduction IRA established for the benefit of such
persons or for the benefit of employees of any national securities trade
organization to which Lord Abbett belongs or any company with an account(s) in
excess of $10 million managed by Lord Abbett on a private-advisory- account
basis. For purposes of this paragraph, the terms "directors" and "employees"
include a director's or employee's spouse (including the surviving spouse of a
deceased director or employee). The terms "our directors" and "employees of Lord
Abbett" also include retired directors and employees and other family members
thereof.
Our Class A shares also may be purchased at net asset value (a) at $1 million or
more, (b) with dividends and distributions from Class A shares of other Lord
Abbett-sponsored funds, except for LARF, LAEF and LASF, (c) under the loan
feature of the Lord Abbett-sponsored prototype 403(b) plan for share purchases
representing the repayment of principal and interest, (d) by certain authorized
brokers, dealers, registered investment advisers or other financial institutions
who have entered into an agreement with Lord Abbett Distributor in accordance
with certain standards approved by Lord Abbett Distributor, providing
specifically for the use of our shares in particular investment products made
available for a fee to clients of such brokers, dealers, registered investment
advisers and other financial institutions, and (e) by employees, partners and
owners of unaffiliated consultants and advisors to Lord Abbett, Lord Abbett
Distributor or Lord Abbett-sponsored funds who consent to such purchase if such
persons provide service to Lord Abbett, Lord Abbett Distributor or such funds on
a continuing basis and are familiar with such funds. Shares are offered at net
asset value to these investors for the purpose of promoting goodwill with
employees and others with whom Lord Abbett Distributor and/or the Fund has
business relationships.
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Our Class A shares also may be purchased at net asset value, subject to
appropriate documentation, through a securities dealer where the amount invested
represents redemption proceeds from shares ("Redeemed Shares") of a registered
open-end management investment company not distributed or managed by Lord Abbett
(other than a money market fund), if such redemption has occurred no more than
60 days prior to the purchase of our shares, the Redeemed Shares were held for
at least six months prior to redemption and the proceeds of redemption were
maintained in cash or a money market fund prior to purchase. Purchasers should
consider the impact, if any, of contingent deferred sales charges in determining
whether to redeem shares for subsequent investment in our Class A shares. Lord
Abbett may suspend, change or terminate this purchase option at any time.
Our Class A shares may be issued at net asset value in exchange for the assets,
subject to possible tax adjustment, of a personal holding company or an
investment company. There are economies of selling efforts and sales-related
expenses with respect to offers to these investors and those referred to above.
Redemptions. A redemption order is in proper form when it contains all of the
information and documentation required by the order form or supplementally by
Lord Abbett Distributor or the Fund to carry out the order. The signature(s) and
any legal capacity of the signer(s) must be guaranteed by an eligible guarantor.
See the Prospectus for expedited redemption procedures.
The right to redeem and receive payment, as described in the Prospectus, may be
suspended if the NYSE is closed (except for weekends or customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
deems an emergency to exist.
Our Board of Directors may authorize redemption of all of the shares in any
account in which there are fewer than 25 shares. Before authorizing such
redemption, the Board must determine that it is in our economic best interest or
necessary to reduce disproportionately burdensome expenses in servicing
shareholder accounts. At least 30 day's prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
Div-Move. Under the Div-Move service described in the Prospectus, you can invest
the dividends paid on your account of any class into an existing account of the
same class in any other Eligible Fund. The account must be either your account,
a joint account for you and your spouse, a single account for your spouse, or a
custodial account for your minor child under the age of 21. You should read the
prospectus of the other fund before investing.
Invest-A-Matic. The Invest-A-Matic method of investing in the Fund and/or any
other Eligible Fund is described in the Prospectus. To avail yourself of this
method you must complete the application form, selecting the time and amount of
your bank checking account withdrawals and the funds for investment, include a
voided, unsigned check and complete the bank authorization.
Systematic Withdrawal Plans. The Systematic Withdrawal Plan ("SWP") also is
described in the Prospectus. You may establish a SWP if you own or purchase
uncertificated shares having a current offering price value of at least $10,000.
Lord Abbett prototype retirement plans have no such minimum. The SWP involves
the planned redemption of shares on a periodic basis by receiving either fixed
or variable amounts at periodic intervals. Since the value of shares redeemed
may be more or less than their cost, gain or loss may be recognized for income
tax purposes on each periodic payment. Normally, you may not make regular
investments at the same time you are receiving systematic withdrawal payments
because it is not in your interest to pay a sales charge on new investments when
in effect a portion of that new investment is soon withdrawn. The minimum
investment accepted while a withdrawal plan is in effect is $1,000. The SWP may
be terminated by you or by us at any time by written notice.
Retirement Plans. The Prospectus indicates the types of retirement plans for
which Lord Abbett provides forms and explanations. Lord Abbett makes available
the retirement plan forms and custodial agreements for IRAs (Individual
Retirement Accounts, including Simplified Employee Pensions), 403(b) plans and
qualified pension and profit-sharing plans, including 401(k) plans. The forms
name Investors Fiduciary Trust Company as custodian and contain specific
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<PAGE>
information about the plans. Explanations of the eligibility requirements,
annual custodial fees and allowable tax advantages and penalties are set forth
in the relevant plan documents. Adoption of any of these plans should be on the
advice of your legal counsel or qualified tax adviser.
6.
Past Performance
The Fund computes the average annual compounded rate of total return during
specified periods that would equate the initial amount invested to the ending
redeemable value of such investment by adding one to the computed average annual
total return, raising the sum to a power equal to the number of years covered by
the computation and multiplying the result by one thousand dollars, which
represents a hypothetical initial investment. The calculation assumes deduction
of the maximum sales charge from the initial amount invested and reinvestment of
all income dividends and capital gains distributions on the reinvestment dates
at prices calculated as stated in the Prospectus. The ending redeemable value is
determined by assuming a complete redemption at the end of the period(s) covered
by the average annual total return computation.
Using this method to compute average annual compounded rates of total return for
the Fund's last one, five and ten fiscal year periods ending on December 31,
1995 are as follows: 18.80%,13.61% and 10.83%, respectively.
Our yield quotation is based on a 30-day period ended on a specified date,
computed by dividing our net investment income per share earned during the
period by our maximum offering price per share on the last day of the period.
This is determined by finding the following quotient: take the Fund's dividends
and interest earned during the period minus its expenses accrued for the period
and divide by the product of (i) the average daily number of Fund shares
outstanding during the period that were entitled to receive dividends and (ii)
the Fund's maximum offering price per share on the last day of the period. To
this quotient add one. This sum is multiplied by itself five times. Then one is
subtracted from the product of this multiplication and the remainder is
multiplied by two. For the 30-day period ended December 31, 1995, the yield for
the Fund was 8.13%.
These figures represent past performance, and an investor should be aware that
the investment return and principal value of a Fund investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Therefore, there is no assurance that this performance will be
repeated in the future.
7.
Taxes
The value of any shares redeemed by the Fund or otherwise sold may be more or
less than your tax basis in the shares at the time the redemption or sale is
made. Any gain or loss generally will be taxable for federal income tax
purposes. Any loss realized on the sale or redemption of Fund shares which you
have held for six months or less will be treated for tax purposes as a long-term
capital loss to the extent of any capital gains distributions which you received
with respect to such shares. Losses on the sale of stock or securities are not
deductible if, within a period beginning 30 days before the date of the sale and
ending 30 days after the date of the sale, the taxpayer acquires stock or
securities that are substantially identical.
The Fund will be subject to a 4% nondeductible excise tax on certain amounts not
distributed (and not treated as having been distributed) on a timely basis in
accordance with a calendar-year distribution requirement. The Fund intends to
distribute to shareholders each year an amount adequate to avoid the imposition
of such excise tax.
As described in the Prospectus under "Risk Factors", the Fund may be subject to
foreign withholding taxes which would reduce the yield on its investments. Tax
treaties between certain countries and the United States may reduce or eliminate
such taxes. It is expected that Fund shareholders who are subject to United
States federal income tax will not be entitled to claim a federal income tax
credit or deduction for foreign income taxes paid by the Fund.
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Gains and losses realized by the Fund on certain transactions, including sales
of foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gains or losses are attributable to changes in
exchange rates for foreign currencies. Accordingly, distributions taxable as
ordinary income will include the net amount, if any, of such foreign exchange
gains and will be reduced by the net amount, if any, of such foreign exchange
losses.
If the Fund purchases shares in certain foreign investment entities, called
"passive foreign investment companies," it may be subject to United States
federal income tax on a portion of any "excess distribution" or gain from the
disposition of such shares, even if such income is distributed as a taxable
dividend by the Fund to its shareholders. Additional charges in the nature of
interest may be imposed on either the Fund or its shareholders with respect to
deferred taxes arising from such distributions or gains. If the Fund were to
invest in a passive foreign investment company with respect to which the Fund
elected to make a "qualified electing fund" election in lieu of the foregoing
requirements, the Fund might be required to include in income each year a
portion of the ordinary earnings and net capital gains of the qualified electing
fund, even if such amount were not distributed to the Fund.
Dividends paid by the Fund will qualify for the dividends-received deduction for
corporations to the extent they are derived from dividends paid by domestic
corporations.
The foregoing discussion relates solely to U. S. federal income tax law as
applicable to United States persons (United States citizens or residents and
United States domestic corporations, partnerships, trusts and estates). Each
shareholder who is not a United States person should consult his tax adviser
regarding the U. S. and foreign tax consequences of the ownership of shares of
the Fund, including a 30% (or lower treaty rate) United States withholding tax
on dividends representing ordinary income and net short-term capital gains, and
the applicability of United States gift and estate taxes to non-United States
persons who own Fund shares.
8.
Information About the Fund
The directors, trustees and officers of Lord Abbett-sponsored mutual funds,
together with the partners and employees of Lord Abbett, are permitted to
purchase and sell securities for their personal investment accounts. In engaging
in personal securities transactions, however, such persons are subject to
requirements and restrictions contained in the Fund's Code of Ethics which
complies, in substance, with each of the recommendations of the Investment
Company Institute's Advisory Group on Personal Investing. Among other things,
the Code requires that Lord Abbett partners and employees obtain advance
approval before buying or selling securities, submit confirmations and quarterly
transaction reports, and obtain approval before becoming a director of any
company; and it prohibits such persons from investing in a security 7 days
before or after any Lord Abbett-sponsored fund or Lord Abbett-managed account
considers a trade or trades in such security, from profiting on trades of the
same security within 60 days and from trading on material and non-public
information. The Code imposes certain similar requirements and restrictions on
the independent directors and trustees of each Lord Abbett-sponsored mutual fund
to the extent contemplated by the recommendations of the Advisory Group.
9.
Financial Statements
The financial statements for the fiscal year ended December 31, 1995 and the
report of Deloitte & Touche LLP, independent public accountants, on such
financial statements contained in the 1995 Annual Report to Shareholders of Lord
Abbett Mid-Cap Value Fund, Inc. are incorporated herein by reference to such
financial statements and report in reliance upon the authority of Deloitte &
Touche LLP as experts in auditing and accounting.
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