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. ("we" or the "Fund"), is a mutual fund with
three classes of shares. These classes, designated Class A, B and C shares
provide investors with different investment options in purchasing shares of the
Fund. See "Purchases" for a description of these choices. The Class B and Class
C shares will be offered to the public for the first time on or about May 1,
1997.
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
May 1, 1997.
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.
CONTENTS PAGE
1 Investment Objective 2
2 Fee Table 2
3 Financial Highlights 3
4 How We Invest 3
5 Purchases 4
6 Shareholder Services 13
7 Our Management 14
8 Dividends, Capital Gains
Distributions and Taxes 14
9 Redemptions 15
10 Performance 16
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>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES(1)
(AS A PERCENTAGE OF OFFERING PRICE)
Maximum Sales Load(2) on Purchases
(See "Purchases") 5.75% None None
Deferred Sales Load(2) (See "Purchases") None 5% if shares are redeemed 1% if shares
before 1st anniversary are redeemed
of purchase, declining before 1st
to 1% before 6th anniversary
anniversary and of purchase
eliminated on and
after 6th anniversary(3)
- ------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(4)
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees (See "Our Management") 0.73% 0.73% 0.73%
12b-1 Fees (See "Purchases")(1)(2) 0.22% 1.00% 1.00%
Other Expenses (See "Our Management") 0.28% 0.28% 0.28%
- -------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 1.23% 2.01% 2.01%
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
dividends and distributions, you would pay the following total expenses,
assuming redemption on the last day of each period indicated.
1 year 3 years 5 years 10 years
Class A shares $70 $95 $121 $198
Class B shares(3) $70 $93 $128 $213
Class C shares $30 $63 $108 $234
Example: You would pay the following expenses on the same investment, assuming no redemption.
1 year 3 years 5 years 10 years
Class A shares $70 $95 $121 $198
Class B shares(3) $20 $63 $108 $213
Class C shares $20 $63 $108 $234
<FN>
(1)Although the Fund does not, with respect to the Class B and Class C shares,
charge a front-end sales charge, investors should be aware that long-term
shareholders may pay, under each Rule 12b-1 plan applicable to the Class B and
Class C shares of the Fund (both of which pay annual 0.25% service and 0.75%
distribution fees), 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. Likewise, with respect to Class A shares, investors
should be aware that, over the long term, such maximum may be exceeded due to
the Rule 12b-1 plan applicable to Class A 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 fees for the Class A shares have been restated to
reflect the current fees under the recently amended Class A 12b-1 Plans.
(2)Sales "load" is referred to as sales "charge," "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 Class A, Class B
and Class C shares throughout this Prospectus.
(3)Class B shares will automatically convert to Class A shares on the eighth
anniversary of the purchase of Class B shares.
(4)For Class A shares, the annual operating expenses shown in the summary have
been restated from December 31, 1996 fiscal-year amounts to reflect current
fees. For Class B and Class C shares, annual operating expenses have been
estimated based on expenses incurred by Class A shares because Class B and Class
C shares were not available for purchase prior to May 1, 1997.
The foregoing is provided to give investors a better understanding of the
expenses that are incurred by an investment in the Fund.
</FN>
</TABLE>
<PAGE>
3 FINANCIAL HIGHLIGHTS
The following highlights have been audited by Deloitte & Touche LLP, independent
accountants, whose report theron is incorporated by reference into the Statement
of Additional Information and may be obtained upon request.
<TABLE>
<CAPTION>
TEN MONTHS YEAR
ENDED ENDED
PER CLASS A SHARE+ OPERATING YEAR ENDED DECEMBER 31, DEC. 31, FEB. 28,
PERFORMANCE: 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987* 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $12.18 $11.25 $12.65 $12.60 $11.81 $9.80 $10.59 $9.53 $9.09 $14.59 $13.25
INCOME FROM INVESTMENT OPERATIONS
Net investment income .13 .162 .18 .16 .20 .23 .28 .29 .34 .30 .32
Net realized and unrealized
gain (loss) on securities 2.19 2.383 (.545) 1.42 1.31 2.30 (.77) 1.57 1.08 (2.24) 2.11
TOTAL FROM INVESTMENT OPERATIONS 2.32 2.545 (.365) 1.58 1.51 2.53 (.49) 1.86 1.42 (1.94) 2.43
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from net investment income (.16) (.17) (.16) (.20) (.22) (.26) (.30) (.32) -- (.61) (.23)
Distributions from net realized gain (1.05) (1.445) (.875) (1.33) (.50) (.26) -- (.48) (.98) (2.95) (.86)
NET ASSET VALUE, END OF PERIOD $13.29 $12.18 $11.25 $12.65 $12.60 $11.81 $9.80 $10.59 $9.53 $9.09 $14.59
------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN** 21.22% 26.09% (3.27)% 13.95% 13.46% 27.36% (4.64)% 20.09% 15.62% (16.40)%++ 19.55%
------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.22% 1.27% 1.12% 1.22% 1.22% 1.14% 1.12% .94% 1.02% .81%++ .89%
Net investment income 1.12% 1.48% 1.53% 1.35% 1.71% 2.16% 2.79% 2.91% 3.41% 2.42%++ 2.42%
</TABLE>
<TABLE>
TEN MONTHS YEAR
ENDED ENDED
YEAR ENDED DECEMBER 31, DEC. 31, FEB. 28,
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES: 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987* 1987
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net assets, end of period (000) $257,148 $227,149 $190,788 $202,519 $173,380 $166,056 $155,018 $190,189 $188,380 $223,288 $318,793
Portfolio turnover rate 38.88% 41.42% 57.49% 33.42% 62.55% 34.20% 51.49% 30.42% 26.53% 43.97% 52.41%
Average commissions per share
paid on equity transactions $ .064 $ .066 ---- ---- ---- ---- ---- ---- ---- ---- ----
<FN>
*The Financial Statements cover ten months because the fiscal year-end was
changed from February 28 to December 31.
**Total return does not consider the effects of sales loads.
+ The Fund had only one class of shares prior to
May 1, 1997. That class of shares is now designated Class A shares.
++Not annualized.
See Notes to Financial Statements.
</FN>
</TABLE>
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
<PAGE>
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. While we may take short-term gains if
deemed appropriate, normally we will hold securities in order to realize
long-term capital gains. Characteristically, we will not carry a large cash
position as an investment strategy; however, 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. We will not change our investment
objective without shareholder approval. 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.
RISK FACTORS. Securities markets of foreign countries are not subject to the
same degree of regulation as the U.S. markets and may be more volatile and less
liquid than the major U.S. markets. There may be less publicly-available
information on publicly-traded issuers in foreign countries than is generally
the case 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,
expropriation, higher transaction costs, currency fluctuations, withholding
taxes that cannot be passed through as a tax credit or deduction to shareholders
and different securities settlement practices. Foreign securities may be traded
on days that we do not value our portfolio securities and, accordingly, our net
asset value may be significantly affected on days when shareholders do not have
access to the Fund.
PORTFOLIO TURNOVER. The portfolio turnover rate for the fiscal year ended
December 31, 1996 was 38.88% compared to 41.42% for the prior fiscal year.
5 PURCHASES
ALTERNATIVE SALES ARRANGEMENTS
CLASSES OF SHARES. The Fund offers investors three different classes of shares.
The different classes of shares represent investments in the same portfolio of
securities but are subject to different expenses and will likely have different
share prices. Investors should read this section carefully to determine which
class represents the best investment option for their particular situation.
CLASS A SHARES. If you buy Class A shares, you pay an initial sales charge on
investments of less than $1 million (or on investments for employer-sponsored
retirement plans under the Internal Revenue Code (hereinafter referred to as
"Retirement Plans") with less than 100 eligible employees or on investments that
do not qualify to be under a "special retirement wrap program" defined under
"Class A Share Net Asset Value Purchases" below). If you purchase Class A shares
as part of an investment of at least $1 million (or for Retirement Plans with at
least 100 eligible employees or under a special retirement wrap program) in
shares of one or more Lord Abbett-sponsored funds, you will not pay an initial
sales charge, but if you redeem any of those shares within 24 months after the
month in which you buy them, you may pay to the Fund a contingent deferred sales
charge ("CDSC") of 1% except for redemptions under a special retirement wrap
program. Class A shares are subject to service and distribution fees that are
currently estimated to total annually approximately 0.22 of 1% of the annual net
asset value of the Class A shares. The initial sales charge rates, the CDSC and
the Rule 12b-1 plan applicable to the Class A shares are described under
"General" below.
<PAGE>
CLASS B SHARES. If you buy Class B shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the sixth anniversary of
buying them, you will normally pay a CDSC to Lord Abbett Distributor LLC ("Lord
Abbett Distributor"). That CDSC varies depending on how long you own shares.
Class B shares are subject to service and distribution fees at an annual rate of
1% of the annual net asset value of the Class B shares. The CDSC and the Rule
12b-1 plan applicable to the Class B shares are described under "General" below.
CLASS C SHARES. If you buy Class C shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the first anniversary of
buying them, you will normally pay the Fund a CDSC of 1%. Class C shares are
subject to service and distribution fees at an annual rate of 1% of the annual
net asset value of the Class C shares. The CDSC and the Rule 12b-1 plan
applicable to the C shares are described under "General" below.
WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial adviser. The Fund's class-specific expenses and the
effect of the different types of sales charges on your investment will affect
your investment results over time. The most important factors are how much you
plan to invest and how long you plan to hold your investment. If your goals and
objectives change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider another class of
shares. In the following discussion, to help provide you and your financial
adviser with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the sales
charge rates that apply to Class A, Class B and Class C shares, and considered
the effect of the higher distribution fees on Class B and Class C expenses
(which will affect your investment return). Of course, the actual performance of
your investment cannot be predicted and will vary, based on the Fund's actual
investment returns, the operating expenses borne by each class of shares, and
the class of shares you purchase. The factors briefly discussed below are not
intended to be investment advice, guidelines or recommendations, because each
investor's financial considerations are different. The discussion below of the
factors to consider in purchasing a particular class of shares assumes that you
will purchase only one class of shares and not a combination of shares of
different classes.
HOW LONG DO EXPECT TO HOLD YOUR INVESTMENT? While future financial needs cannot
be predicted with certainty, knowing how long you expect to hold your investment
will assist you in selecting the appropriate class of shares. For example, over
time, the reduced sales charges available for larger purchases of Class A shares
may offset the effect of paying an initial sales charge on your investment,
compared to the effect over time of higher class-specific expenses on Class B or
Class C shares for which no initial sales charge is paid. Because of the effect
of class-based expenses, your choice should also depend on how much you plan to
invest.
<PAGE>
Investing for the Short Term. If you have a short-term investment horizon (that
is, you
plan to hold your shares for not more than six years), you should probably
consider purchasing Class A or Class C shares rather than Class B shares. This
is because of the effect of the Class B CDSC if you redeem before the sixth
anniversary of your purchase, as well as the effect of the Class B distribution
fee on the investment return for that class in the short term. Class C shares
might be the appropriate choice (especially for investments of less than
$100,000), because there is no initial sales charge on Class C shares, and the
CDSC does not apply to shares you redeem after holding them for one year.
However, if you plan to invest more than $100,000 for the short term, then the
more you invest and the more your investment horizon increases toward six years,
the more attractive the Class A share option may become. This is because the
annual distribution fee on Class C shares will have a greater impact on your
account over the longer term than the reduced front-end sales charge available
for larger purchases of Class A shares. For example, Class A shares might be
more appropriate than Class C shares for investments of more than $100,000
expected to be held for 5 or 6 years (or more). For investments over $250,000
expected to be held 4 to 6 years (or more), Class A shares may become more
appropriate than Class C shares. If you are investing $500,000 or more, Class A
shares may become more desirable as your investment horizon approaches 3 years
or more.
For most investors who invest $1 million or more, for Retirement Plans with at
least 100 eligible employees or for investments pursuant to a special retirement
wrap program, in most cases Class A shares will be the most advantageous choice,
no matter how long you intend to hold your shares. For that reason, Lord Abbett
Distributor normally will not accept purchase orders (i) for Class B shares of
$500,000 or more and for Class C shares of $1,000,000 or more from a single
investor or (ii) for Class B or C shares (a) from Retirement Plans with at least
100 eligible employees or (b) from special retirement wrap programs.
Investing for the Longer Term. If you are investing for the longer term (for
example, to provide for future college expenses for your child) and do not
expect to need access to your money for seven years or more, Class B shares may
be an appropriate investment option if you plan to invest less than $100,000. If
you plan to invest more than $100,000 over the long term, Class A shares will
likely be more advantageous than Class B shares or Class C shares, as discussed
above, because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charges available for larger investments in Class
A shares under the Fund's rights of accumulation.
Of course, these examples are based on approximations of the effect of current
sales charges and expenses on a hypothetical investment over time, and should
not be relied on as rigid guidelines.
ARE THERE DIFFERENCES IN ACCOUNT FEATURES THAT MATTER TO YOU? Some account
features are available in whole or in part to Class A, Class B and Class C
shareholders. Other features (such as Systematic Withdrawal Plans) might not be
advisable in non-Retirement Plan accounts for Class B shareholders (because of
the effect of the CDSC on the entire amount of a withdrawal if it exceeds 12%
annually) and in any account for Class C shareholders during the first year of
share ownership (due to the CDSC on withdrawals during that year). See
"Systematic Withdrawal Plan" under "Shareholder Services" for more information
about the 12% annual waiver of the CDSC with respect to Class B shares. You
should carefully review how you plan to use your investment account before
deciding which class of shares you buy. For example, the dividends payable to
Class B and Class C shareholders will be reduced by the expenses borne solely by
each of these classes, such as the higher distribution fee to which Class B and
Class C shares are subject, as described below.
<PAGE>
HOW DOES IT AFFECT PAYMENTS TO MY BROKER? A salesperson, such as a broker, or
any other person who is entitled to receive compensation for selling Fund shares
may receive different compensation for selling one class than for selling
another class. As discussed in more detail below, such compensation is primarily
paid at the time of sale in the case of Class A and B shares and is paid over
time, so long as shares remain outstanding, in the case of Class C shares. It is
important that investors understand that the primary purpose of the CDSC for the
Class B shares and the distribution fee for Class B and Class C shares is the
same as the purpose of the front-end sales charge on sales of Class A shares: to
compensate brokers and other persons selling such shares. The CDSC, if payable,
supplements the Class B distribution fee and reduces the Class C distribution
fee expenses for the Fund and Class C shareholders.
GENERAL
HOW MUCH MUST YOU INVEST? You may buy our shares through any independent
securities dealer having a sales agreement with 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 Individual Retirement
Accounts ($250 minimum). For Retirement Plans there is no minimum investment
required. 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.
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. Securities 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.
BUYING CLASS A SHARES. The offering price of Class A shares is based on the
per-share net asset value next computed after your order is accepted plus a
sales charge as follows.
<PAGE>
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
+AUTHORIZED INSTITUTIONS RECEIVE CONCESSIONS ON PURCHASES MADE BY A RETIREMENT
PLAN, PURSUANT TO A SPECIAL RETIREMENT WRAP PROGRAM OR BY ANOTHER 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.
CLASS A SHARE VOLUME DISCOUNTS. This section describes several ways to qualify
for a lower sales charge when purchasing Class A 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 Class A share purchase in
the Fund with any share 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 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
Class A shares purchased during the period. If not completed, each Class A share
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.
CLASS A SHARE NET ASSET VALUE PURCHASES. 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 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 Class A shares
also may be purchased at net asset value (a) at $1 million or more, (b) with
dividends and distributions on Class A 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 Class A 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 Class A shares in
particular investment products made available for a fee to clients of such
brokers, dealers, registered investment advisers and other financial
institutions ("mutual fund wrap fee programs"), (e) by employees, partners and
owners of unaffiliated consultants and advisers to Lord Abbett, Lord Abbett
Distributor or
<PAGE>
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 fund, (f) through Retirement Plans with at
least 100 eligible employees, (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 Class A 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 and (h) through
a "special retirement wrap program" sponsored by an authorized institution
having one or more characteristics distinguishing it, in the opinion of Lord
Abbett Distributor from a mutual fund wrap fee program. Such characteristics
include, among other things, the fact that an authorized institution does not
charge its clients any fee of a consulting or advisory nature that is
economically equivalent to the distribution fee under a Class A 12b-1 plan and
the fact that the program relates to participant-directed Retirement Plans.
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 pursuant to the purchase option in (g) above. Lord Abbett
Distributor may suspend or terminate the purchase option in (g) above at any
time. We plan to terminate the net asset value transfer privilege in (g) on June
1, 1997.
CLASS A RULE 12B-1 PLAN. We have adopted a Class A share Rule 12b-1 plan (the "A
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 Class A shareholder accounts and otherwise to
encourage those accounts to remain invested in the Fund and (b) to sell Class A
shares of the Fund. Under the A 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 Class A 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%. (the "Fee
Ceiling").
Under the A 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 Class A 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 Class A 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; (ii) through Retirement Plans with at least 100 eligible
employees
<PAGE>
or (iii) constituting new sales pursuant to a "special retirement wrap program"
and excluding exchanges into the Fund under such a program. 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 Class A shares serviced by authorized institutions which have
a satisfactory program for the promotion of such shares comprising a significant
percentage of the Class A assets, with a lower than average redemption rate.
Institutions and persons permitted by law to receive such fees are "authorized
institutions."
Under the A Plan, Lord Abbett Distributor is permitted to use payments received
to provide continuing services to Class A shareholder accounts not serviced by
authorized institutions and, with Board approval, to finance any activity which
is primarily intended to result in the sale of Class A shares. Any such payments
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 Class A shares on which the 1% sales distribution fee has been paid
may be required to pay to the Fund on behalf of its Class A shares a CDSC of 1%
of the original cost or the then net asset value, whichever is less, of all
Class A 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. (Exceptions are made for: (i) redemptions by
Retirement Plans due to any benefit payment such as Plan loans, hardship
withdrawals, death, retirement or separation from service with respect to plan
participants or the distribution of any excess contributions and (ii)
participant-directed redemptions which continue as program investments in
another fund participating in a "special retirement wrap program.") If the Class
A 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 Class A
shares by the other fund. The Fund will collect such a charge for other Lord
Abbett-sponsored funds in a similar situation.
BUYING CLASS B SHARES. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed for
cash before the sixth anniversary of their purchase, a CDSC may be deducted from
the redemption proceeds. That sales charge will not apply to shares purchased by
the reinvestment of dividends or capital gains distributions. The charge will be
assessed on the lesser of the net asset value of the shares at the time of
redemption or the original purchase price. The Class B CDSC is paid to Lord
Abbett Distributor to compensate it for its services rendered in connection with
the distribution of Class B shares, including the payment and financing of sales
commissions. See "Class B Rule 12b-1 Plan" below.
To determine whether the CDSC applies to a redemption, the Fund redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held until the sixth anniversary of
their purchase or later, and (3) shares held the longest before the sixth
anniversary of their purchase.
The amount of the CDSC will depend on the number of years since you invested and
the dollar amount being redeemed, according to the following schedule.
<PAGE>
ANNIVERSARY
OF THE DAY ON CONTINGENT DEFERRED
WHICH THE PURCHASE SALES CHARGE ON
ORDER WAS ACCEPTED REDEMPTIONS
(AS % OF AMOUNT
On Before SUBJECT TO CHARGE)
- --------------------------------------------------------------------------------
1st 5.0%
- --------------------------------------------------------------------------------
1st 2nd 4.0%
- --------------------------------------------------------------------------------
2nd 3rd 3.0%
- --------------------------------------------------------------------------------
3rd 4th 3.0%
- --------------------------------------------------------------------------------
4th 5th 2.0%
- --------------------------------------------------------------------------------
5th 6th 1.0%
- --------------------------------------------------------------------------------
on or after the None
6th anniversary
In the table, an "anniversary" is the 365th day subsequent to a purchase or a
prior anniversary. All purchases are considered to have been made on the
business day the purchase was made. See "Buying Shares Through Your Dealer"
above.
If Class B shares are exchanged into the same class of another Lord
Abbett-sponsored fund and the new shares are subsequently redeemed for cash
before the sixth anniversary of the original purchase, the CDSC will be payable
on the new shares on the basis of the time elapsed from the original purchase.
The Fund will collect such a charge for other Lord Abbett-sponsored funds in a
similar situation.
WAIVER OF CLASS B SALES CHARGES. The Class B CDSC will not be applied to shares
purchased in certain types of transactions nor will it apply to shares redeemed
in certain circumstances as described below.
The Class B CDSC will be waived for redemptions of shares (i) in connection with
the Systematic Withdrawal Plan and Div-Move services, as described in more
detail under "Shareholder Services" below, (ii) by Retirement Plans due to any
benefit payment such as Plan loans, hardship withdrawals, death, retirement or
separation from service with respect to plan participants or the distribution of
any excess contributions, (iii) in connection with mandatory distributions under
403(b) plans and individual retirement accounts and (iv) in connection with the
death of the shareholder.
CLASS B RULE 12B-1 PLAN. The Fund has adopted a Class B share Rule 12b-1 Plan
(the "B Plan") under which the Fund periodically pays Lord Abbett Distributor
(i) an annual service fee of 0.25 of 1% of the average daily net asset value of
the Class B shares and (ii) an annual distribution fee of 0.75 of 1% of the
average daily net asset value of the Class B shares that are outstanding for
less than eight years.
Lord Abbett Distributor uses the service fee to compensate authorized
institutions (except as to certain accounts for which tracking data is not
available) for providing personal services for accounts that hold Class B
shares. Those services are similar to those provided under the A Plan, described
above.
Lord Abbett Distributor pays an up-front payment to authorized institutions
totalling 4%, consisting of 0.25% for service and 3.75% for a sales commission
as described below.
Lord Abbett Distributor pays the 0.25% service fee to authorized institutions in
advance for the first year after Class B shares have been sold by the authorized
institutions. After the shares have been held for a year, Lord Abbett
Distributor pays the service fee on a quarterly basis. Lord Abbett Distributor
is entitled to retain such service fee payable under the B Plan with respect to
accounts for which there is no authorized institution of record or for which
such authorized institution did not qualify. Although not obligated to do so,
Lord Abbett Distributor may waive receipt from the Fund of part or all of the
service fee payments.
The 0.75% annual distribution fee is paid to Lord Abbett Distributor to
compensate it for its services rendered in connection with the distribution of
Class B shares, including the payment and financing of sales commissions.
Although Class B shares are sold without a front-end sales charge, Lord Abbett
Distributor pays authorized institutions responsible for sales of Class B shares
a sales commission of 3.75% of the purchase price. This payment is made at the
time of sale from Lord Abbett Distributor's own resources. Lord Abbett has made
arrangements to finance these commission payments, which arrangements include
non-recourse assignments by Lord Abbett Distributor to the financing party of
such distribution and CDSC payments concerning Class B shares.
<PAGE>
The distribution fee and CDSC payments described above allow investors to buy
Class B shares without a front-end sales charge while allowing Lord Abbett
Distributor to compensate authorized institutions that sell Class B shares. The
CDSC is intended to supplement Lord Abbett Distributor's reimbursement for the
commission payments it has made with respect to Class B shares and its related
distribution and financing costs. The distribution fee payments are at a fixed
rate and the CDSC payments are of a nature that, during any year, both forms of
payment may not be sufficient to reimburse Lord Abbett Distributor for its
actual expenses. The Fund is not liable for any expenses incurred by Lord Abbett
Distributor in excess of (i) the amount of such distribution fee payments to be
received by Lord Abbett Distributor and (ii) unreimbursed distribution expenses
of Lord Abbett Distributor incurred in a prior plan year, subject to the right
of the Board of Directors or shareholders to terminate the B Plan. Over the long
term, the expenses incurred by Lord Abbett Distributor are likely to be greater
than such distribution fee and CDSC payments. Nevertheless, there exists a
possibility that for a short-term period Lord Abbett Distributor may not have
sufficient expenses to warrant reimbursement by receipt of such distribution fee
payments. Although Lord Abbett Distributor does not intend to make a profit
under the B Plan, the B Plan is considered a compensation plan (i.e.,
distribution fees are paid regardless of expenses incurred) in order to avoid
the possibility of Lord Abbett Distributor not being able to receive
distribution fees because of a temporary timing difference between its incurring
expenses and receipt of such distribution fees.
AUTOMATIC CONVERSION OF CLASS B SHARES. On the eighth anniversary of your
purchase of Class B shares, those shares will automatically convert to Class A
shares. This conversion relieves Class B shareholders of the higher annual
distribution fee that applies to Class B shares under the B Plan. The conversion
is based on the relative net asset values of the two classes, and no sales
charge or other charge is imposed. When Class B shares convert, any other Class
B shares that were acquired by the reinvestment of dividends and distributions
will also convert to Class A shares on a pro rata basis. The conversion feature
is subject to the continued availability of an opinion of counsel or a tax
ruling described in "Purchases, Redemptions and Shareholder Services" in the
Statement of Additional Information.
BUYING CLASS C SHARES. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed for
cash before the first anniversary of their purchase, a CDSC of 1% will be
deducted from the redemption proceeds. That reimbursement charge will not apply
to shares purchased by the reinvestment of dividends or capital gains
distributions. The charge will be assessed on the lesser of the net asset value
of the shares at the time of redemption or the original purchase price. The
Class C CDSC is paid to the Fund to reimburse it, in whole or in part, for the
service and distribution fee payments made by the Fund at the time such shares
were sold, as described below. To determine whether the CDSC applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for one year or more and (3) shares held the longest before the first
anniversary of their purchase. If Class C shares are exchanged into the same
class of another Lord Abbett-sponsored fund and subsequently redeemed before the
first anniversary of their original purchase, the charge will be collected by
the other fund on behalf of this Fund's Class C shares. The Fund will collect
such a charge for other Lord Abbett-sponsored funds in a similar situation.
<PAGE>
CLASS C 12B-1 PLAN. The Fund has adopted a Class C share Rule 12b-1 Plan (the "C
Plan") under which (except as to certain accounts for which tracking data is not
available) the Fund pays authorized institutions through Lord Abbett Distributor
(1) a service fee and a distribution fee, at the time shares are sold, not to
exceed 0.25 and 0.75 of 1%, respectively, of the net asset value of such shares
and (2) at each quarter-end after the first anniversary of the sale of shares,
fees for services and distribution at annual rates not to exceed 0.25 and 0.75
of 1%, respectively, of the average annual net asset value of such shares
outstanding (payments with respect to shares not outstanding during the full
quarter to be prorated). These service and distribution fees are for purposes
similar to those mentioned above with respect to the A Plan. Sales in clause (1)
exclude shares issued for reinvested dividends and distributions and shares
outstanding in clause (2) include shares issued for reinvested dividends and
distributions after the first anniversary of their issuance.
6 SHAREHOLDER SERVICES
We offer the following shareholder services:
Telephone Exchange Privilege: Shares of any class may be exchanged without a
service charge: (a) for shares of the same class 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 a class (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 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 ("SWP"): 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. With respect to Class B shares,
the CDSC will be waived on redemptions of up to 12% per year of the current net
asset value of your account at the time your SWP is established. For Class B
shares (over 12% per year) and C shares, redemption proceeds due to a SWP will
be derived from the following sources in the order listed: (1) shares acquired
by reinvestment of dividends and capital gains, (2) shares held for six years or
more (Class B) or one year or more (Class C); and (3) shares held the longest
before the sixth anniversary of their purchase (Class B) or before the first
anniversary of their purchase (Class C). For Class B share redemptions over 12%
per year, the CDSC will apply to the entire redemption. Therefore, please
contact the Fund for assistance in minimizing the CDSC in this situation.
Shareholders should be careful in establishing a SWP, especially to the extent
that such a withdrawal exceeds the annual total return for a class, in which
case, the shareholder's original principal will be invaded and, over time, may
be depleted.
<PAGE>
Div-Move: You can invest the dividends paid on your account ($50 minimum
investment) into an existing account within the same class in any 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. Such dividends are not subject to a CDSC. You should
read the prospectus of any 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 documents,
including 401(k) plans and custodial agreements for IRAs (Individual Retirement
Accounts including Simple IRAs and Simplified Employee Pensions), 403(b) plans
and pension and profit-sharing 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.
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 67 years and currently manages approximately $22 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. He is assisted by Howard E.
Hansen. 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, 1996, 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, 1996 was 1.22%.
THE FUND. The Fund is a diversified open-end management investment company
incorporated under Maryland law on March 14, 1983. Its Class A, B and C shares
have equal rights as to voting, dividends, assets and liquidation except for
differences resulting from certain class-specific expenses.
<PAGE>
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 has been proposed that would
have 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
<PAGE>
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 completed its fiscal year on December 31, 1996 with a net asset value
of $13.29 per share, versus $11.13 per share one year ago. The latter figure has
been adjusted for capital gains distributions totaling $1.05 per share paid last
January. In addition, the Fund paid dividends of $0.16 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 21.22% for the year. Recently, the
Fund's Board of Directors declared a dividend of $0.15 per share and a capital
gains distribution of $1.35 per share. Both were paid on January 22, 1997 to
shareholders of record on January 15, 1997.
The past year saw stock market averages climb to new heights against a
background of modest economic growth, low inflation and volatile interest rates.
Within this environment, the Fund's strong performance during 1996 can be
attributed to careful, research-driven stock selection. Over or underweightings
in particular industries did not have a significant impact on the overall
portfolio. The Fund was invested in select companies among a variety of
industries.
YIELD AND TOTAL RETURN . Yield and total return data may, from time to time, be
included in advertisements about the Fund. Each class of shares calculates its
"yield" by dividing the annualized net investment income per share on the
portfolio during a 30-day period by the maximum offering price on the last day
of the period. The yield of each class will differ because of the different
expenses (including actual 12b-1 fees) of each class of shares. The yield data
represents a hypothetical investment return on the portfolio, and does not
measure investment return based on
<PAGE>
dividends actually paid to shareholders. To show that return, a dividend
distribution rate may be calculated. A dividend distribution rate is calculated
by dividing the dividends of a class derived from net investment income during a
stated period by the maximum offering price on the last day of the period. The
yield and dividend distribution rate for Class A shares reflect the deduction of
the maximum initial sales charge, but may also be shown based on the Fund's net
asset value per share. Yields for Class B and Class C shares do not reflect the
deduction of the CDSC.
"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 for Class A shares,
it includes the payment of the maximum initial sales charge. When total return
is shown for Class B and Class C shares, it reflects the effect of the
applicable CDSC. Total return also may be presented for other periods or based
on investments at reduced sales charge levels or net asset value. Any quotation
of total return not reflecting the maximum sales charge (front-end, level, or
back-end) 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 description.
See "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 or 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.
The performance of the Class A shares which is shown in the comparison below
will be greater than or less than that for Class B and Class C shares based on
the differences in sales charges and fees paid by shareholders investing in the
different classes.
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 the
unmanaged Russell Mid-Cap Index.
The The
Fund at Fund at
Net Asset Maximum Offering Russell Mid-Cap
Date Value Price Index
12/31/86 $10000 $ 9423 $10000
12/31/87 9583 9028 9781
12/31/88 11079 10439 12188
12/31/89 13306 12538 14954
12/31/90 12688 11955 12549
12/31/91 16159 15227 17308
12/31/92 18335 17276 21061
12/31/93 20893 19687 24351
12/31/94 20211 19045 23832
12/31/95 25484 24013 32158
12/31/96 30894 29110 38372
Average Annual Total Return For Class A Shares(3)
1 Year 5 Years 10 Years
14.30% 12.51% 11.28%
(1)Data reflects the deduction of the maximum sales charge of 5.75% applicable
to Class A shares.
(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% applicable to Class A shares, with all dividends and
distributions reinvested for the periods shown ending December 31, 1996 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 Printed in the U.S.A.
<PAGE>
PROSPECTUS 97
MAY 1, 1997
LORD ABBETT
MID-CAP VALUE FUND
<PAGE>
LORD ABBETT
STATEMENT OF ADDITIONAL INFORMATION MAY 1, 1997
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 May 1, 1997.
Lord Abbett Mid-Cap Value Fund, Inc. (sometimes referred to as "we" or the
"Fund") was incorporated under Maryland law on March 14, 1983. The Fund's Board
of Directors has authority to create and classify shares of common stock into
separate series, without further action by shareholders. The Fund currently has
150,000,000 shares of authorized capital stock consisting of three classes (A, B
and C) at $0.001 par value. The Class B and Class C shares will be offered to
the public for the first time on or about May 1, 1997. The Board of Directors
will allocate these authorized shares among the classes from time to time. Prior
to May 1, 1997 the Fund had only one class of shares, which class is now
designated Class A. All shares have equal noncumulative voting rights and equal
rights with respect to dividends, assets and liquidation, except for certain
class-specific expenses. They are fully paid and nonassessable when issued and
have no preemptive or conversion rights. Although no present plans exist to do
so, further series may be added in the future. The Investment Company Act of
1940, as amended (the "Act"), requires that where more than one series exists,
each series must be preferred over all other series in respect of assets
specifically allocated to such series.
Rule 18f-2 under the Act provides that any matter required to be submitted, by
the provisions of the Act or applicable state law, or otherwise, to the holders
of the outstanding voting securities of an investment company such as the Fund
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each class or series affected
by such matter. Rule 18f-2 further provides that a class or series shall be
deemed to be affected by a matter unless the interests of each class or series
in the matter are substantially identical or the matter does not affect any
interest of such class or series. However, the Rule exempts the selection of
independent public accountants, the approval of a contract with a principal
underwriter and the election of directors from the separate voting requirements
of the Rule.
Shareholder inquiries should be made by writing directly to the Fund or by
calling 800-821-5129. In addition, you can make inquiries through Lord Abbett
Distributor.
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 13
7. Taxes 14
8. Information About the Fund 15
9. Financial Statements 15
<PAGE>
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 fiscal year ended December 31, 1996, our
portfolio turnover rate was 38.88% compared to 41.42% for the prior fiscal year.
2.
Directors and Officers
The following directors are partners of Lord, Abbett & Co. ("Lord Abbett"),
General Motors Building, 767 Fifth Avenue, New York, New York 10153-0203. They
have been associated with Lord Abbett for over five years and are also officers
and directors/trustees of the twelve other Lord Abbett-sponsored funds. They are
"interested persons" as defined in the Act, and as such, may be considered to
have an indirect financial interest in the Rule 12b-1 Plans described in the
Prospectus.
Robert S. Dow, age 51, Chairman and President
E. Wayne Nordberg, age 58, Vice President
The following outside directors are also directors or trustees of the twelve
other Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow
Courtroom Television Network
600 Third Avenue
New York, New York 10016
Executive Vice President of Courtroom Television Network. Formerly President and
Chief Executive Officer of Time Warner Cable Programming, Inc. Age 55.
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 66.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a
proxy tabulating firm. Age 71.
3
<PAGE>
C. Alan MacDonald
The Marketing Partnership, Inc.
27 Signal Road
Stamford, Connecticut
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 U.S.
277 Park Avenue
New York, New York
Chairman of Spencer Stuart U.S., an executive search consulting firm. Age 59.
The second column of the following table sets forth the compensation accrued for
the Fund's outside directors. The third column sets forth information with
respect to the equity-based benefits accrued for outside directors by the Lord
Abbett- sponsored funds. The fourth column sets forth information with respect
to the retirement plan for outside directors maintained by each of the Lord
Abbett-sponsored funds. The fifth column sets forth the total compensation
payable by such funds to the outside directors. No director of the Fund
associated with Lord Abbett and no officer of the Fund received any compensation
from the Fund for acting as a director or officer.
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
(1) (2) (3) (4) (5)
<S> <C> <C> <C> <C>
Estimated Annual For Year Ended
Equity-Based Benefits Under December 31, 1996
Benefits Accrued Retirement Plans Total Compensation
Aggregate by the Fund and to be Paid by the Accrued by the Fund and
Compensation Twelve Other Lord Fund and Twelve Twelve Other Lord
Accrued by Abbett-sponsored Other Lord Abbett- Abbett-sponsored
NAME OF DIRECTOR THE FUND1 FUNDS2 SPONSORED FUNDS2 FUNDS3
E. Thayer Bigelow $771 $11,563 None $48,200
Stewart S. Dixon $747 $22,283 None $46,700
John C. Jansing $747 $28,242 $50,000 $46,700
C. Alan MacDonald $771 $29,942 None $48,200
Hansel B. Millican, Jr. $793 $24,499 None $49,600
Thomas J. Neff $750 $15,990 None $46,900
4
<PAGE>
<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 are being deferred under a plan that deems the deferred amounts to be
invested in shares of the Fund for later distribution to the directors. The
amounts of the aggregate compensation payable by the Fund as of December 31,
1996, deemed invested in Fund shares, including dividends reinvested and changes
in net asset value applicable to such deemed investments, were: Mr. Bigelow,
$1,943; Mr. Dixon, $43,710; Mr. Jansing, $45,311; Mr. MacDonald, $15,642; Mr.
Millican, $46,516 and Mr. Neff, $46,737.
2. Each Lord Abbett-sponsored fund has a retirement plan providing that outside
directors may receive annual retirement benefits for life equal to 100% of their
final annual retainers following retirement at or after age 72 with at least 10
years of service. Each plan also provides for a reduced benefit upon early
retirement under certain circumstances, a pre-retirement death benefit and
actuarially reduced joint-and-survivor spousal benefits. Such retirement plans,
and the deferred compensation plans referred to in footnote one, have been
amended recently to, among other things, enable outside directors to elect to
convert their prospective benefits under the retirement plans to equity-based
benefits under the deferred compensation plans (renamed the equity-based plans
and hereinafter referred to as such). Five of the six outside directors made
such an election. The amounts accrued in column 3 were accrued by the Lord
Abbett-sponsored funds during the fiscal year ended October 31, 1996 with
respect to the equity-based plans. These accruals were based on the plans as in
effect before the recent amendments and on the fees payable to outside directors
of the Fund during the year ended October 31, 1996. Under the recent amendments,
the annual retainer was increased to $50,000 and the annual retirement benefits
were increased from 80% to 100% of a director's final annual retainer. The
amount stated in column 4 would be payable annually under the retirement plans
as recently amended if that director was to retire at age 72 and the annual
retainer payable by the funds was the same as it is today.
3. This column shows aggregate compensation, including directors fees and
attendance fees for board and committee meetings, of a nature referred to in
footnote one, accrued by the Lord Abbett-sponsored funds during the year ended
December 31, 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, Brown, Carper, Cutler, Ms. Foster, Messrs. Morris, Noelke, Nordberg and
Walsh are partners of Lord Abbett; the others are employees; Edward K. von der
Linde, age 37, Executive Vice President; Kenneth B. Cutler, age 64, Vice
President and Secretary; Stephen I. Allen, age 43; Zane E. Brown, age 46; Daniel
E. Carper, age 45; Daria Foster, age 42; Robert G. Morris, age 52; Robert J.
Noelke, age 40; E. Wayne Nordberg, age 58; Paul A. Hilstad, age 54 (with Lord
Abbett since 1995 - formerly Senior Vice President and General Counsel of
American Capital Management & Research, Inc.); Thomas F. Konop, age 55; A.
Edward Oberhaus, age 36; Victor W. Pizzolato, age 64; John J. Walsh, age 61,
Executive Vice President; Vice Presidents; and Keith F. O'Connor, age 41, Vice
President and 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 April 1, 1997, our officers and directors, as a group, owned less than 1%
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 ten general partners of Lord Abbett, all of whom are
officers and/or directors of the Fund, are: Stephen I. Allen, Zane E. Brown,
Daniel E. Carper, Kenneth B. Cutler, Robert S. Dow, Daria L. Foster, Robert G.
Morris, Robert J. Noelke, 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, 1996, 1995 and 1994, the management fees paid to Lord Abbett
amounted to $1,733,689, $1,584,007 and $1,385,336 , respectively.
5
<PAGE>
We pay all expenses not expressly assumed by Lord Abbett, including, without
limitation, 12b-1 expenses, outside directors' fees and expenses, association
membership dues, legal and auditing fees, taxes, transfer and dividend
disbursing agent fees, shareholder servicing costs, expenses relating to
shareholder meetings, expenses of preparing, printing and mailing stock
certificates and shareholder reports, expenses of registering our shares under
federal and state securities laws, expenses of preparing, printing and mailing
prospectuses to existing shareholders, insurance premiums, brokerage and other
expenses connected with executing portfolio security transactions.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281, are
the independent 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
6
<PAGE>
Lord Abbett in connection with their advisory services to such other accounts.
We have been advised by Lord Abbett 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, 1996, 1995 and 1994, we paid total
commissions to independent broker-dealers of $554,002, $586,752 and $617,797,
respectively.
5.
Purchases, Redemptions
and Shareholder Services
Information concerning how we value our shares for the purchase and redemption
of our shares is contained in the Prospectus under "Purchases" and
"Redemptions", respectively.
As disclosed in the Prospectus, we calculate our net asset value as of the close
of the New York Stock Exchange ("NYSE") on each day that the NYSE is open for
trading by dividing our total net assets by the number of shares outstanding at
the time of calculation. The NYSE is closed on Saturdays and Sundays and the
following holidays -- New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The Fund values its portfolio securities at market value as of the close of the
NYSE. Market value will be determined as follows: securities listed or admitted
to trading privileges on the New York or American Stock Exchange or on the
NASDAQ National Market System are valued at the last sales price, or, if there
is no sale on that day, at the mean between the last bid and asked prices, or,
in the case of bonds, in the over-the-counter market if, in the judgment of the
Fund's officers, that market more accurately reflects the market value of the
bonds. Over-the-counter securities not traded on the NASDAQ National Market
System are valued at the mean between the last bid and asked prices. Securities
for which market quotations are not available are valued at fair market value
under procedures approved by the Board of Directors.
7
<PAGE>
The maximum offering price of Class A shares on December 31, 1996 was computed
as follows:
CLASS A
Net asset value per share (net assets divided
by shares outstanding).................................................$13.29
Maximum offering price per share (net asset
value divided by .9425)............................ ...................$14.10
The net asset value per share for the Class B and C shares will be determined in
the same manner as for the Class A shares (net assets divided by shares
outstanding). Our Class B and C shares will be offered at net asset value.
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,
1996 1995 1994
Gross sales charge $337,563 $335,708 $304,416
Amount allowed
to dealers $291,495 $305,733 $262,840
-------- -------- --------
Net commissions
received by Lord Abbett $46,068 $29,975 $ 41,576
======== ======= ========
CONVERSION OF CLASS B SHARES. The conversion of Class B shares on the eighth
anniversary of their purchase is subject to the continuing availability of a
private letter ruling from the Internal Revenue Service, or an opinion of
counsel or tax adviser, to the effect that the conversion of Class B shares does
not constitute a taxable event for the holder under Federal income tax law. If
such a revenue ruling or opinion is no longer available, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect. Although
Class B shares could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a sales
charge or fee, such exchange could constitute a taxable event for the holder.
CLASS A, B AND C RULE 12B-1 PLANS. As described in the Prospectus, the Fund has
adopted a Distribution Plan and Agreement pursuant to Rule 12b-1 of the Act for
each of the three Fund Classes: the "A Plan", the "B Plan" and the "C Plan",
respectively. In adopting each Plan and in approving its continuance, the Board
of Directors has concluded that there is a reasonable likelihood that each Plan
will benefit its respective Class and such Class' shareholders. The expected
benefits include greater sales and lower redemptions of Class shares, which
should allow each Class to maintain a consistent cash flow, and a higher quality
of service to shareholders by authorized institutions than would otherwise be
the case. During the last fiscal year, the Fund accrued or paid through Lord
Abbett to authorized institutions $580,000 under the A Plan. The B Plan and the
C Plan will go into effect on or about May 1, 1997. Lord Abbett used all amounts
received under the A Plan for payments to dealers for (i) providing continuous
services to the Class A shareholders, such as answering shareholder inquiries,
maintaining records, and assisting shareholders in
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making redemptions, transfers, additional purchases and exchanges and (ii) their
assistance in distributing Class A shares of the Fund.
Each Plan requires the directors to review, on a quarterly basis, written
reports of all amounts expended pursuant to the Plan and the purposes for which
such expenditures were made. Each Plan shall continue in effect only if its
continuance is specifically approved at least annually by vote of the directors,
including a majority of the directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related to the Plan ("outside directors"), cast in
person at a meeting called for the purpose of voting on the Plan. No Plan may be
amended to increase materially above the limits set forth therein the amount
spent for distribution expenses thereunder without approval by a majority of the
outstanding voting securities of the applicable class and the approval of a
majority of the directors, including a majority of the outside directors. Each
Plan may be terminated at any time by vote of a majority of the outside
directors or by vote of a majority of its Class's outstanding voting securities.
CONTINGENT DEFERRED SALES CHARGES. A Contingent Deferred Sales Charge ("CDSC")
(i) applies regardless of class, (ii) will not apply to shares purchased by the
reinvestment of dividends or capital gains distributions; (iii) will be assessed
on the lesser of the net asset value of the shares at the time of redemption or
the original purchase price and (iv) will not be imposed on the amount of your
account value represented by the increase in net asset value over the initial
purchase price (including increases due to the reinvestment of dividends and
capital gains distributions) and upon early redemption of shares.
CLASS A SHARES. As stated in the Prospectus, subject to certain exceptions, CDSC
of 1% is imposed with respect to those Class A shares (or Class A shares of
another Lord Abbett-sponsored fund or series acquired through exchange of such
shares) on which the Fund has paid the one-time distribution fee of 1% if such
shares are redeemed out of the Lord Abbett-sponsored family of funds within a
period of 24 months from the end of the month in which the original sale
occurred.
CLASS B SHARES. As stated in the Prospectus, subject to certain exceptions, if
Class B shares (or Class B shares of another Lord Abbett-sponsored fund or
series acquired through exchange of such shares) are redeemed out of the Lord
Abbett-sponsored family of funds for cash before the sixth anniversary of their
purchase, a CDSC will be deducted from the redemption proceeds. The Class B CDSC
is paid to Lord Abbett Distributor to reimburse its expenses, in whole or in
part, for providing distribution-related service to the Fund in connection with
the sale of Class B shares.
To determine whether the CDSC applies to a redemption, the Fund redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held on or after the sixth anniversary
of their purchase, and (3) shares held the longest before such sixth
anniversary.
The amount of the contingent deferred sales charge will depend on the number of
years since you invested and the dollar amount being redeemed, according to the
following schedule:
Anniversary of the Day on Contingent Deferred Sales Charge
Which the Purchase Order Was Accepted on Redemptions
(As % of Amount Subject to Charge)
Before the 1st........................................................5.0%
On the 1st, before the 2nd............................................4.0%
On the 2nd, before the 3rd............................................3.0%
On the 3rd, before the 4th............................................3.0%
On the 4th, before the 5th............................................2.0%
On the 5th, before the 6th ...........................................1.0%
On or after the 6th anniversary........................................None
In the table, an "anniversary" is the 365th day subsequent to the acceptance of
a purchase order or a prior anniversary. All purchases are considered to have
been made on the business day on which the purchase order was accepted.
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CLASS C SHARES. As stated in the Prospectus, subject to certain exceptions, if
Class C shares are redeemed for cash before the first anniversary of their
purchase, the redeeming shareholder will be required to pay to the Fund on
behalf of Class C shares a CDSC of 1% of the lower of cost or the then net asset
value of Class C shares redeemed. If such shares are exchanged into the same
class of another Lord Abbett-sponsored fund and subsequently redeemed before the
first anniversary of their original purchase, the charge will be collected by
the other fund on behalf of this Fund's Class C shares.
GENERAL. Each percentage (1% in the case of Class A and C shares and 5% through
1% in the case of Class B shares) used to calculate CDSCs described above for
the Class A, Class B and Class C shares is sometimes hereinafter referred to as
the "Applicable Percentage".
With respect to Class A and Class B shares, no CDSC is payable on redemptions by
participants or beneficiaries from employer-sponsored retirement plans under the
Internal Revenue Code for benefit payments due to plan loans, hardship
withdrawals, death, retirement or separation from service and for returns of
excess contributions to retirement plan sponsors. With respect to Class A shares
purchased pursuant to a special retirement wrap program, no CDSC is payable on
redemptions which continue as investments in another fund participating in the
program. With respect to Class B shares, no CDSC is payable for redemptions (i)
in connection with Systematic Withdrawal Plan and Div-Move services as described
below under those headings, (ii) in connection with mandatory distribution under
403(b) plans and IRAs and (iii) in connection with death of the shareholder. In
the case of Class A and Class C shares, the CDSC is received by the Fund and is
intended to reimburse all or a portion of the amount paid by the Fund if the
shares are redeemed before the Fund has had an opportunity to realize the
anticipated benefits of having a long-term shareholder account in the Fund. In
the case of Class B shares, the CDSC is received by Lord Abbett Distributor and
is intended to reimburse its expenses of providing distribution-related service
to the Fund (including recoupment of the commission payments made) in connection
with the sale of Class B shares before Lord Abbett Distributor has had an
opportunity to realize its anticipated reimbursement by having such a long-term
shareholder account subject to the B Plan distribution fee.
The other funds and series which participate in the Telephone Exchange Privilege
(except (a) Lord Abbett U.S. Government Securities Money Market Fund, Inc.
("GSMMF"), (b) certain series of Lord Abbett Tax-Free Income Fund and Lord
Abbett Tax-Free Income Trust for which a Rule 12b-1 Plan is not yet in effect,
and (c) any authorized institution's affiliated money market fund satisfying
Lord Abbett Distributor as to certain omnibus account and other criteria,
hereinafter referred to as an "authorized money market fund" or "AMMF"
(collectively, the "Non-12b-1 Funds")) have instituted a CDSC for each class on
the same terms and conditions. No CDSC will be charged on an exchange of shares
of the same class between Lord Abbett funds or between such funds and AMMF. Upon
redemption of shares out of the Lord Abbett family of funds or out of AMMF, the
CDSC will be charged on behalf of and paid: (i) to the fund in which the
original purchase (subject to a CDSC) occurred, in the case of the Class A and
Class C shares and (ii) to Lord Abbett Distributor if the original purchase was
subject to a CDSC, in the case of the Class B shares. Thus, if shares of a Lord
Abbett fund are exchanged for shares of the same class of another such fund and
the shares of the same class tendered ("Exchanged Shares") are subject to a
CDSC, the CDSC will carry over to the shares of the same class being acquired,
including GSMMF and AMMF ("Acquired Shares"). Any CDSC that is carried over to
Acquired Shares is calculated as if the holder of the Acquired Shares had held
those shares from the date on which he or she became the holder of the Exchanged
Shares. Although the Non-12b-1 Funds will not pay a distribution fee on their
own shares, and will, therefore, not impose their own CDSC, the Non-12b-1 Funds
will collect the CDSC (a) on behalf of other Lord Abbett funds, in the case of
the Class A and Class C shares and (b) on behalf of Lord Abbett Distributor, in
the case of the Class B shares. Acquired Shares held in GSMMF and AMMF which are
subject to a CDSC will be credited with the time such shares are held in GSMMF
but will not be credited with the time such shares are held in AMMF. Therefore,
if your Acquired Shares held in AMMF qualified for no CDSC or a lower Applicable
Percentage at the time of exchange into AMMF, that Applicable Percentage will
apply to redemptions for cash from AMMF, regardless of the time you have held
Acquired Shares in AMMF.
In no event will the amount of the CDSC exceed the Applicable Percentage of the
lesser of (i) the net asset value of the shares redeemed or (ii) the original
cost of such shares (or of the Exchanged Shares for which such shares were
acquired). No CDSC will be imposed when the investor redeems (i) amounts derived
from increases in the value of the
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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 and, in the case of Class B shares, Lord Abbett Distributor paid no sales
charge or service fee (including shares acquired through reinvestment of
dividend income and capital gains distributions) or (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 the case of Class A shares);
for six years or more (in the case of Class B shares) and for one year or more
(in the case of Class C shares). In determining whether a CDSC is payable, (a)
shares not subject to the CDSC will be redeemed before shares subject to the
CDSC and (b) of the shares subject to a CDSC, those held the longest will be the
first to be redeemed.
EXCHANGES. The Prospectus briefly describes the Telephone Exchange Privilege.
You may exchange some or all of your shares of any class for those in the same
class of: (i) Lord Abbett-sponsored funds currently offered to the public with a
sales charge (front-end, back-end or level ), (ii) GSMMF or (iii) AMMF, to the
extent offers and sales may be made in your state. You should read the
prospectus of the other fund before exchanging. In establishing a new account by
exchange, shares of the Fund being exchanged must have a value equal to at least
the minimum initial investment required for the other fund into which the
exchange is made.
Shareholders in other Lord Abbett-sponsored funds and AMMF have the same right
to exchange their shares for the corresponding class of the Fund's shares.
Exchanges are based on relative net asset values on the day instructions are
received by the Fund in Kansas City if the instructions are received prior to
the close of the NYSE in proper form. No sales charges are imposed except in the
case of exchanges out of GSMMF or AMMF (unless a sales charge (front-end,
back-end or level) was paid on the initial investment in a Lord Abbett-sponsored
fund). Exercise of the exchange privilege will be treated as a sale for federal
income tax purposes, and, depending on the circumstances, a gain or loss may be
recognized. In the case of an exchange of shares that have been held for 90 days
or less where no sales charge is payable on the exchange, the original sales
charge incurred with respect to the exchanged shares will be taken into account
in determining gain or loss on the exchange only to the extent such charge
exceeds the sales charge that would have been payable on the acquired shares had
they been acquired for cash rather than by exchange. The portion of the original
sales charge not so taken into account will increase the basis of the acquired
shares.
Shareholders have the exchange privilege unless they refuse it in writing. You
should not view the exchange privilege as a means for taking advantage of
short-term swings in the market, and we reserve the right to terminate or limit
the privilege of any shareholder who makes frequent exchanges. We can revoke or
modify the privilege for all shareholders upon 60 days' prior notice. "Eligible
Funds" are AMMF and other Lord Abbett-sponsored funds which are eligible for the
exchange privilege, except Lord Abbett Series Fund (" LASF") which offers its
shares only in connection with certain variable annuity contracts, Lord Abbett
Equity Fund (" LAEF") which is not issuing shares, and series of Lord Abbett
Research Fund not offered to the general public ("LARF").
STATEMENT OF INTENTION. Under the terms of the Statement of Intention 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.
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<PAGE>
NET ASSET VALUE PURCHASES OF CLASS A SHARES. As stated in the Prospectus, our
Class A shares may be purchased at net asset value by our directors, employees
of Lord Abbett, employees of our shareholder servicing agent and employees of
any securities dealer having a sales agreement with Lord Abbett who consents to
such purchases or by the director or custodian under any pension or
profit-sharing plan or Payroll Deduction IRA established for the benefit of such
persons or for the benefit of employees of any national securities trade
organization to which Lord Abbett belongs or any company with an account(s) in
excess of $10 million managed by Lord Abbett on a private-advisory-account
basis. For purposes of this paragraph, the terms "directors" and "employees"
include a director's or employee's spouse (including the surviving spouse of a
deceased director or employee). The terms "our directors" and "employees of Lord
Abbett" also include retired directors and employees and other family members
thereof.
Our Class A shares also may be purchased at net asset value (a) at $1 million or
more, (b) with dividends and distributions from Class A shares of other Lord
Abbett-sponsored funds, except for LARF, LAEF and LASF, (c) under the loan
feature of the Lord Abbett-sponsored prototype 403(b) plan for share purchases
representing the repayment of principal and interest, (d) by certain authorized
brokers, dealers, registered investment advisers or other financial institutions
who have entered into an agreement with Lord Abbett Distributor in accordance
with certain standards approved by Lord Abbett Distributor, providing
specifically for the use of our shares in particular investment products made
available for a fee to clients of such brokers, dealers, registered investment
advisers and other financial institutions, ("mutual fund wrap fee program"), (e)
by employees, partners and owners of unaffiliated consultants and advisors to
Lord Abbett, Lord Abbett Distributor or Lord Abbett-sponsored funds who consent
to such purchase if such persons provide service to Lord Abbett, Lord Abbett
Distributor or such funds on a continuing basis and are familiar with such
funds, (f) through Retirement Plans with at least 100 eligible employees, (g)
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 and (h) through a
special retirement wrap program sponsored by an authorized institution having
one or more characteristics distinguishing it, in the opinion of Lord Abbett
Distributor, from a mutual fund wrap program. Such characteristics include,
among other things, the fact that an authorized institution does not charge its
clients any fee of a consulting or advisory nature that is economically
equivalent to the distribution fee under Class A 12b-1 Plan and the fact that
the program relates to participant-directed Retirement Plan. 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
pursuant to the purchase option in (g) above. Lord Abbett may suspend, change or
terminate the purchase option in (g) above at any time. 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. We plan to terminate this net asset value transfer
privilege in (g) on June 1, 1997.
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.
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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. With respect to
Class B shares the CDSC will be waived on redemptions of up to 12% per year of
the current net asset value of your account at the time the SWP is established.
For Class B share redemptions over 12% per year, the CDSC will apply to the
entire redemption. Therefore, please contact the Fund for assistance in
minimizing the CDSC in this situation. With respect to Class C shares, the CDSC
will be waived on and after the first anniversary of their purchase. The SWP
involves the planned redemption of shares on a periodic basis by receiving
either fixed or variable amounts at periodic intervals. Since the value of
shares redeemed may be more or less than their cost, gain or loss may be
recognized for income tax purposes on each periodic payment. Normally, you may
not make regular investments at the same time you are receiving systematic
withdrawal payments because it is not in your interest to pay a sales charge on
new investments when in effect a portion of that new investment is soon
withdrawn. The minimum investment accepted while a withdrawal plan is in effect
is $1,000. The SWP may be terminated by you or by us at any time by written
notice.
RETIREMENT PLANS. The Prospectus indicates the types of retirement plans for
which Lord Abbett provides forms and explanations. Lord Abbett makes available
the retirement plan forms including 401(k) plans and custodial agreements for
IRAs (Individual Retirement Accounts, including SIMPLE IRAs and Simplified
Employee Pensions), 403(b) plans and qualified pension and profit-sharing plans.
The forms name Investors Fiduciary Trust Company as custodian except in the case
of 401(k) plans and contain specific information about the plans. Explanations
of the eligibility requirements, annual custodial fees and allowable tax
advantages and penalties are set forth in the relevant plan documents. Adoption
of any of these plans should be on the advice of your legal counsel or qualified
tax adviser.
6.
Past Performance
The Fund computes the average annual compounded rate of total return 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.
In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment (unless the return is shown at net asset value). For Class B
shares, the payment of the applicable CDSC (5.0% prior to the first anniversary
of purchase, 4.0% prior to the second anniversary of purchase, 3.0% prior to the
third and fourth anniversaries of purchase, 2.0% prior to the fifth anniversary
of purchase, 1.0% prior to the sixth anniversary of purchase and no CDSC on and
after the sixth anniversary of purchase) is applied to the Fund's investment
result for that class for the time period shown (unless the total return is
shown at net asset value). For Class C shares, the 1.0% CDSC is applied to the
Fund's investment result for that class for the time period shown prior to the
first anniversary of purchase (unless the total return is shown at net asset
value).
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Total returns also assume that all dividends and capital gains distributions
during the period are reinvested at net asset value per share, and that the
investment is redeemed at the end of the period.
Using this method to compute average annual compounded rates of total return for
the Fund's Class A shares last one, five and ten fiscal year period(s) ending on
December 31, 1996 are as follows: 14.30%, 12.51% and 11.28%, respectively.
Our yield quotation for each class is based on a 30-day period ended on a
specified date, computed by dividing the net investment income per share earned
during the period by the maximum offering price per share of such class on the
last day of the period. This is determined by finding the following quotient:
take the dividends and interest earned during the period for a class minus its
expenses accrued for the period and divide by the product of (i) the average
daily number of Class shares outstanding during the period that were entitled to
receive dividends and (ii) the maximum offering price per share of such class 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. Yield for the Class A
shares reflects the deduction of the maximum initial sales charge, but may also
be shown based on the Class A net asset value per share. Yields for Class B and
C shares do not reflect the deduction of the CDSC. For the 30-day period ended
December 31, 1996, the yield for the Class A shares of Fund was 0.99%.
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.
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
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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, 1996 and the
report of Deloitte & Touche LLP, independent accountants, on such financial
statements contained in the 1996 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.
15
