February 10, 1999
Application Inside
Lord Abbett
Series Fund, Inc.
-------------------------------
Mid-Cap Value Portfolio
PROSPECTUS
[LOGO]
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 Lord Abbett Series Fund, Inc.
The General Motors Building
Counsel 767 Fifth Avenue
Debevoise & Plimpton New York, New York 10153-0203
Printed in the U. S. A.
LASF-1 199
(1/99)
<PAGE>
This Prospectus sets forth concisely the information about the Mid-Cap Value
Portfolio (" we" or the "Portfolio") of Lord Abbett Series Fund, Inc. (the
"Fund") that you should know before investing. Please read this Prospectus
before investing and retain it for future reference.
The investment objective is to seek capital appreciation through investments,
primarily in equity securities, which are believed to be undervalued in the
marketplace. There can be no assurance that this objective will be achieved.
The Statement of Additional Information dated February 10, 1999 has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this Prospectus. You may obtain it, 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."
Mutual fund shares are not deposits or obligations of, or guaranteed or endorsed
by, any bank. Shares are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency. An investment in
the Portfolio involves risks, including the possible loss of principal.
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 Net PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
LORD ABBETT
SERIES FUND, INC.
MID-CAP VALUE PORTFOLIO
PROSPECTUS
February 10, 1999
TABLE OF CONTENTS PAGE
How We Invest 2
Risk Factors 2
Portfolio Management 2
Purchases and Redemptions 2
Dividends and Distributions 2
Our Management 3
Investment Policies, Risks and Limits 3
Objective, Restriction and
Policy Changes 4
Tax Status 5
Asset Value 5
Performance 5
LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
The General Motors Building
767 Fifth Avenue o New York o New York o 10153
(800) 426-1130
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HOW WE INVEST
We primarily invest in common stocks of midsized companies while utilizing
a value approach to investing. The Fund generally focuses on companies with
market capitalizations of roughly $500 million to $5 billion, but not less than
approximately $50 million. Selection of stocks is based on appreciation
potential, without regard to current income. Normally, at least 65% of our total
assets will consist of investments in mid-cap companies, determined at the time
of purchase.
Our investment portfolio is diversified among many issues representing
various industries. The holdings in our portfolio typically are selected for
their potential for significant market appreciation from growing recognition of
substantial improvement in the Company's financial results or increasing
anticipation of such improvement. This potential may derive from such factors as
(i) changes in the economic and financial environment, (ii) new or improved
products or services, (iii) new or rapidly expanding markets, (iv) changes in
management or structure of the company, (v) price increases, (vi) improved
efficiencies resulting from new technologies or changes in distribution or (vii)
changes in governmental regulations, political climate or competitive
conditions.
See "Investment Policies, Risks and Limits."
RISK FACTORS
The value of your investment will fluctuate in response to stock market
movements. The Fund employs other investment practices such as investments in
foreign securities and other securities, that could adversely affect
performance. Before you invest, please read "Investment Policies, Risks and
Limits."
PORTFOLIO MANAGEMENT
Edward K. von der Linde, Executive Vice President and portfolio manager of the
Fund is primarily responsible for the day-to-day management of the Fund. Mr. von
der Linde has been with Lord Abbett since 1988 and has over 12 years of
investment experience. Mr. von der Linde is assisted by Howard E. Hansen.
PURCHASES AND REDEMPTIONS
Lord Abbett Distributor LLC (" Lord Abbett Distributor"), located at The General
Motors Building, 767 Fifth Avenue, New York, New York 10153-0203, is the
distributor of the shares of the Portfolio. Shares of the Class (the "shares")
are currently issued and redeemed only in connection with investment in and
payments under certain variable annuity contracts issued by life insurance
companies and their affiliates (" Life Companies"). The shares are purchased and
redeemed at net asset value. Lord Abbett Distributor and the Fund each reserves
the right to suspend, change or withdraw the offering of shares of any Portfolio
or Portfolios or any of the terms of such offering.
In selecting broker-dealers to execute portfolio transactions for the
Fund's Portfolio, if two or more brokerdealers are considered capable of best
execution, the Fund may prefer the broker-dealer who has sold Fund shares
through the sale of such Variable Contracts.
Shareholder Servicing Plan. Under the Shareholder Servicing Plan (the "Plan"),
the Portfolio, on behalf of the Class, may make payments to Lord Abbett
Distributor for remittance to a Life Company for certain shareholder servicing
activities of such Life Company, provided that such remittances in the aggregate
do not exceed 0.25 of 1%, on an annual basis, of the average daily net asset
value of shares of the Portfolio sold to such Life Company to be used as the
underlying investment for variable life insurance and variable annuity contracts
(" Variable Contracts").
The Plan is intended to provide additional incentives to Life Companies to
provide continuing information and investment services to variable life
insurance policyholders and variable annuity contract owners who invest in the
Portfolio and to encourage such persons to remain invested in the Portfolio.
Variable annuity contract owners should refer to the fee table section of their
separate account prospectuses for further information with respect to the effect
of the Plan on their annuity contract expenses.
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions are distributed to the shareholders and will be
payable in shares or cash at the election of shareholders. The Life Companies,
with
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respect to shares held by their separate accounts, have elected, and intend to
continue to elect, to receive dividends and distributions in shares. Dividends
and distributions are made at such frequency and in such amount as to assure
compliance with the Internal Revenue Code.
OUR MANAGEMENT
The Fund is supervised by a Board of Directors, an independent body which has
ultimate responsibility for the Fund's activities. The Board has retained Lord
Abbett as investment manager pursuant to a Management Agreement. Lord Abbett has
been an investment manager for over 70 years and currently manages over $32
billion in a family of mutual funds and other advisory accounts. Lord Abbett
provides similar services to twelve other funds having various investment
objectives and also advises other investment clients. For more information about
the services Lord Abbett provides to the Fund, see the Statement of Additional
Information.
In accordance with its view of present applicable law, the Fund views the
separate account(s) of Life Companies as shareholders of the Fund having the
right to vote Fund shares at any meeting of shareholders and will provide
pass-through voting privileges to all contract owners. Life Companies will vote
shares of the Fund held in the separate account(s) for which no timely voting
instructions from contract owners are received, as well as shares they own, in
the same proportion as those shares for which voting instructions are received.
Additional information concerning voting rights is described in the separate
account prospectuses.
The Fund pays Lord Abbett a monthly fee, based on average daily net assets
of the Portfolio for each month, at an annual rate of 0.75 of 1%. In addition,
the Fund pays all expenses not expressly assumed by Lord Abbett.
The Fund. The Fund is a diversified open-end management investment company
established in 1989. The Fund is a series fund currently comprised of four
active Portfolios. This Prospectus offers only the single class of shares of the
Mid-Cap Value Portfolio: the Variable Contract Class. Each share of common stock
of the Fund, regardless of Class, has a par value of $. 001 per share and has
one vote and an equal right to dividends and distributions which are affected by
expenses unique to the class. All shares have noncumulative voting rights for
the election of directors. Each share is fully paid, nonassessable and freely
transferable. There are no liquidation, conversion or preemptive rights. The
fiscal year-end of the Fund is December 31.
INVESTMENT POLICIES, RISKS AND LIMITS
The Fund is permitted to utilize, within limits established by the Board of
Directors, the following investment policies in an effort to enhance the Fund's
performance. These policies have risks associated with them. However, the Fund
follows certain practices that may reduce these risks. To the extent the Fund
utilizes some of these policies, its overall performance may be positively or
negatively affected.
Securities Lending: The lending of securities to financial institutions which
provide continuous collateral equal to the market value of the securities
loaned.
Risk: Delay in recovery of collateral and loss should the borrower of the
security fail financially.
Limit: Loans, in the aggregate, may not exceed 30% of the Fund's total
assets.
Foreign Securities: Foreign securities are securities primarily traded in
countries outside the United States.
Risk: These securities are not subject to the same degree of regulation and
may be more volatile and less liquid than securities traded in major U. S.
markets. Other considerations include political and social instability,
expropriations, higher transaction costs, currency fluctuations, nondeductible
withholding taxes and different settlement practices.
Limit: The Fund may invest up to10% of its assets at the time of investment
in foreign securities.
Illiquid Securities: Securities traded on the open market, which may include
illiquid Rule 144A securities.
Risk: Certain securities may be difficult or impossible to sell at the time
and price the seller would like.
Limit: The Fund may invest up to 15% of its assets in illiquid securities.
Securities determined by the Board of Directors to be liquid are not subject to
this limitation.
The Fund serves as the underlying investment for Variable Contracts issued by
the Life Companies.
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Section 817(h) of the Internal Revenue Code of 1986, as amended (the "Code"),
imposes certain diversification standards on the underlying assets of Variable
Contracts held in any Portfolios of the Fund. The Code provides that a Variable
Contract shall not be treated as an annuity contract or life insurance for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the Treasury Department, adequately
diversified. Disqualification of a Variable Contract as an annuity contract or
life insurance would result in imposition of federal income tax on contract
owners with respect to earnings allocable to the Variable Contract prior to the
receipt of payments under the Variable Contract. Section 817(h)(2) of the Code
is a safe harbor provision which provides that contracts such as the Variable
Contracts meet the diversification requirements if, as of the close of each
quarter, the underlying assets meet the diversification standards for a
regulated investment company and no more than fifty-five percent (55%) of the
total assets consists of cash, cash items, U. S. Government securities and
securities of other regulated investment companies.
On March 1, 1989, the Treasury Department released Regulations (Treas. Reg.
1.817-5), which established diversification requirements for the investment
portfolios underlying Variable Contracts. The Regulations amplify the
diversification requirements for Variable Contracts set forth in Section 817(h)
of the Code and provide an alternative to the safe harbor provision described
above. Under the Regulations, an investment portfolio will be deemed adequately
diversified if (i) no more than 55 percent of the value of the total assets of
the portfolio is represented by any one investment; (ii) no more than 70 percent
of such value is represented by any two investments; (iii) no more than 80
percent of such value is represented by any three investments; and (iv) no more
than 90 percent of such value is represented by any four investments. For
purposes of these Regulations, all securities of the same issuer are treated as
a single investment.
The Code provides that for purposes of determining whether or not the
diversification standards imposed on the underlying assets of Variable Contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Portfolio will be managed in such a manner as to comply with these
diversification requirements. It is possible that in order to comply with the
diversification requirements, less desirable investment decisions may be made
which would affect the investment performance of the Portfolio.
The Portfolio has a name and an investment objective similar to that of the
Lord Abbett Mid-Cap Value Fund, Inc. The performance of a separate account
investing in the Portfolio is not expected to be the same as the performance of
the Lord Abbett Mid-Cap Value Fund due in part to differences in their
investments. Various insurance related costs at the Life Company's separate
account will also affect performance.
The Portfolio sells its shares to separate accounts of Life Companies that
are unaffiliated with Lord Abbett. The Portfolio does not foresee any
disadvantages to policyholders arising out of the fact that the Portfolio offers
its shares to separate accounts of various Life Companies to serve as the
investment medium for their variable products. Nevertheless, the Board of
Directors intends to monitor events to identify any material irreconcilable
conflicts that may possibly arise, and to determine what action, if any, should
be taken in response to such conflicts. If such a conflict were to arise, one or
more Life Companies might be required to withdraw its investments in the
Portfolio. This might force the Portfolio to sell securities at disadvantageous
prices. In addition, the Board of Directors may refuse to sell shares of the
Portfolio to any Life Company or may suspend or terminate the offering of shares
of any fund if such action is required by law or regulatory authority or is in
the best interests of shareholders of the Portfolio.
For more information about investment policies, restrictions and risk factors,
see the Statement of Additional Information.
OBJECTIVE, RESTRICTION AND POLICY CHANGES
We will not change our investment objective or our fundamental investment
restrictions without shareholder approval. If we determine that our objective
can best be achieved by a substantive change in investment policy, which may be
changed without shareholder approval, we may make such change by disclosing it
in our prospectus.
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TAX STATUS
The Fund intends to cause the Portfolio to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code. The Fund distributes
all of its net income and gains to its shareholders (the separate accounts). The
Portfolio is treated as a separate entity for federal income tax purposes and,
therefore, the investments and results of the Portfolio are determined
separately for purposes of determining whether the Portfolio qualifies as a
"regulated investment company" and for purposes of determining net ordinary
income (or loss) and net realized capital gains (or losses).
NET ASSET VALUE
Portfolio shares are sold and redeemed at a price equal to the share's net asset
value. Net asset value per share is determined as of the close of the New York
Stock Exchange on each day that the New York Stock Exchange is open for trading
by dividing the net assets of each class by the number of shares outstanding for
that class at the time of calculation. The daily net asset value per share is
also determined once daily on each day (other than a day during which no such
shares were tendered for redemption and no order to purchase or sell such shares
was received by the Fund) in which there is a sufficient degree of trading in
the Portfolio's securities that the current net asset value of the Portfolio's
shares might be materially affected by changes in the value of the securities.
Total assets are determined by adding the total current value of the
Portfolio's securities, cash, receivables and other assets and subtracting
liabilities. Portfolio shares are sold and redeemed at the net asset value next
determined after receipt of the sales order or request for redemption.
Securities that are listed on a securities exchange are valued at their
closing sales price on the day of the valuation. Price valuations for listed
securities are based on market quotations where the security is primarily traded
or, if not available, are valued at the mean of the bid and asked prices on any
valuation date. Unlisted securities in a Portfolio are primarily valued based on
their latest quoted bid price or, if not available, are valued by a method
determined by the Directors to accurately reflect fair value. Money market
instruments maturing in 60 days or less are valued on the basis of amortized
cost, which means that they are valued at their acquisition cost to reflect a
constant amortization rate to maturity of any premium or discount, rather than
at current market value.
PERFORMANCE
From time to time, advertisements and other sales materials for the Fund may
include information concerning the historical performance of the Fund. Total
return information will include the Portfolio's average annual compounded rate
of return for a given period, based upon the value of the shares acquired
through a hypothetical $1000 investment at the beginning of the specified period
and the net asset or redemption value of such shares at the end of the period,
assuming reinvestment of all dividends and distributions at net asset value. In
lieu of or in addition to total return calculations, such information may
include performance rankings and similar information from independent
organizations such as Lipper Analytical Services, Inc., Business Week, Forbes or
other industry publications.
Total return figures utilized by the Fund are based on historical
performance and are not intended to indicate future performance. Total return
and net asset value per share can be expected to fluctuate over time. Further
information about the Fund's performance is contained in the Annual Report to
shareholders which may be obtained, without charge, by calling 800-874-3733.
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This Prospectus does not constitute an offering in any jurisdiction in
which such offer is not authorized or in which the person making such offer is
not qualified to do so or to anyone to whom it is unlawful to make such offer.
No person is authorized to give any information or to make any
representations not contained in this Prospectus authorized or in supplemental
sales material by the Fund and no person is entitled to rely upon any
information or representation not contained herein or therein.
5
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LORD ABBETT
Statement of Additional Information February 10, 1999
Lord Abbett Series Fund, Inc.
Mid-Cap Value Portfolio
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained 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 February 10, 1999.
Lord Abbett Series Fund, Inc. (sometimes referred to as "we" or the "Fund") was
incorporated under Maryland law in 1989. The Fund has 1,000,000,000 shares of
authorized capital stock consisting of four portfolios. This Statement of
Additional Information offers the Variable Contract shares of the Mid-Cap Value
Portfolio (the "Portfolio"). They are fully paid and non-assessable when issued
and have no preemptive or conversion rights. Although no present plans exist to
do so, further portfolios 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.
Shareholder inquiries should be made by writing directly to the Fund or by
calling 800-874-3733.
TABLE OF CONTENTS Page
1. Investment Policies 2
2. Directors and Officers 4
3. Investment Advisory and Other Services 8
4. Portfolio Transactions 9
5. Purchases, Redemptions and Shareholder Services 11
6. Past Performance 12
7. Taxes 13
8. Information About the Fund 13
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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 Portfolio may not:
(1) borrow money, except that (i) the Portfolio 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 Portfolio may borrow up to an additional 5% of its total assets for
temporary purposes, (iii) the Portfolio may obtain such short-term credit as may
be necessary for the clearance of purchases and sales of portfolio securities
and (iv) the Portfolio 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 Portfolio'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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio, buy
securities of one issuer representing more than (i) 5% of the Portfolio'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
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Directors without shareholder approval. The Portfolio may not: (1) borrow in
excess of 33 1/3% of its total assets (including the amount borrowed), and then
only as a temporary measure for extraordinary or emergency purposes; (2) make
short sales of securities or maintain a short position except to the extent
permitted by applicable law; (3) invest knowingly more than 15% of its net
assets (at the time of investment) in illiquid securities, except for securities
qualifying for resale under Rule 144A of the Securities Act of 1933, deemed to
be liquid by the Board of Directors; (4) invest in 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 Portfolio'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 Portfolio's total assets (included within such limitation, but not to
exceed 2% of the Portfolio'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
Portfolio 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 Portfolio's prospectus and statement of
additional information, as they may be amended from time to time; or (10) buy
from or sell to any of its officers, directors, employees, or its investment
adviser or any of its officers, directors, partners or employees, any securities
other than shares of the Portfolio's common stock.
Under normal circumstances, at least 65% of the Portfolio'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 $500,000,000 and
$5,000,000,000.
Although it has no current intention to do so, the Portfolio may invest in
financial futures and options on financial futures.
Portfolio Turnover Rate. For the first year of operation, our portfolio turnover
is expected to be between 30% and 75%.
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2.
Directors and Officers
The following director is a partner of Lord, Abbett & Co. ("Lord Abbett"), The
General Motors Building, 767 Fifth Avenue, New York, New York 10153-0203. He has
been associated with Lord Abbett for over five years and is also an officer
and/or director or trustee of the other Lord Abbett-sponsored funds. He is an
"interested person" as defined in the Act.
Robert S. Dow, age 54, Chairman and President
The following outside directors are also directors or trustees of the other Lord
Abbett-sponsored funds referred to above.
E. Thayer Bigelow
Time Warner Inc.
1271 Avenue of the Americas
New York, New York
Senior Adviser, Time Warner Inc. Formerly, Acting Chief Executive Officer of
Courtroom Television Network (1997-1998). Formerly President and Chief Executive
Officer of Time Warner Cable Programming, Inc. (1991-1997). Prior to that,
President and Chief Operating Officer of Home Box Office, Inc. Age 57.
William H.T. Bush
Bush-O'Donnell & Co., Inc.
101 South Hanley Road, Suite 1025
St. Louis, Missouri
Co-founder and Chairman of the Board of the financial advisory firm of
Bush-O'Donnell & Co. Age 60.
Robert B. Calhoun, Jr.
Monitor Clipper Partners
650 Madison Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners and President of The Clipper
Group, both private equity investment funds. Age 56.
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Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 68.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 73.
C. Alan MacDonald
Directorship, Inc.
8 Sound Shore Drive
Greenwich, Connecticut
Managing Director of Directorship Inc., a consultancy in board management and
corporate governance. Formerly, General Partner, The Marketing Partnership,
Inc., a full service marketing consulting firm (1994-1997). Prior to that,
Chairman and Chief Executive Officer of Lincoln Snacks, Inc., manufacturer of
branded snack foods (1992-1994). His career spans 36 years at Stouffers and
Nestle with 18 of the years as Chief Executive Officer. Currently serves as
Director of DenAmerica Corp., J.B. Williams Company, Inc., Fountainhead Water
Company and Exigent Diagnostics. Age 65.
Hansel B. Millican, Jr.
Rochester Button Company
1328 Broadway (Suite 816)
New York, New York
President and Chief Executive Officer of Rochester Button Company. Currently
serves as Director of Polyvision Corporation. Age 70.
Thomas J. Neff
Spencer Stuart
277 Park Avenue
New York, New York
Chairman of Spencer Stuart, an executive search consulting firm. Currently
serves as a Director of Ace, Ltd. (NYSE). Age 61.
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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/trustees
maintained by the Lord Abbett-sponsored funds. The fourth column sets forth the
total compensation payable by such funds to the outside directors/trustees. 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, 1998
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(1) (2) (3) (4)
Pension or For Year Ended
Proposed Retirement Benefits December 31, 1998
Aggregate Accrued by the Total Compensation
Compensation Fund and Accrued by the Fund
Accrued by Twelve Other Lord and Twelve Other Lord
the Abbett-sponsored Abbett-sponsored
Name of Director Portfolio (1) Funds (2) Funds (3)
- ---------------- ------------- ------------------ ---------------------
<S> <C> <C> <C>
E. Thayer Bigelow $1,000 $17,068 $57,400
William H.T. Bush* $1,000 $0 $27,500
Robert Calhoun, Jr.** $1,000 $0 $33,500
Stewart S. Dixon $1,000 $32,190 $56,500
John C. Jansing $1,000 $45,085(4) $55,500
C. Alan MacDonald $1,000 $30,703 $55,000
Hansel B. Millican, Jr. $1,000 $37,747 $55,500
Thomas J. Neff $1,000 $19,853 $56,500
</TABLE>
*Elected effective August 13, 1998.
**Elected effective June 17, 1998.
1. Outside directors' fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on the
net assets of each fund. The Portfolio has not begun paying such fees. When
the Portfolio starts to pay such fees, a portion of the fees payable by the
Portfolio to its outside directors/trustees will be deferred under a plan
that deems the deferred amounts to be invested in shares of the Portfolio
for later distribution to the directors/trustees.
2. The amounts in Column 3 were accrued by the Lord Abbett-sponsored funds for
the year ended December 31, 1998, with respect to the equity based plans
established for independent directors in 1996. This plan superseded a
previously approved retirement plan for all future directors. Current
directors had the option to convert their accrued benefits under the
retirement plan. All of the outside directors except one made such an
election.
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3. This column shows aggregate compensation, including directors' fees and
attendance fees for board and committee meetings, of a nature referred to
in footnote one, accrued by the Lord Abbett-sponsored funds during the year
ended December 31, 1998.
4. Mr. Jansing chose to continue to receive benefits under the retirement plan
which provides that outside directors/trustees may receive annual
retirement benefits for life equal to their final annual retainer following
retirement at or after age 72 with at least ten years of service. Thus, if
Mr. Jansing were to retire and the annual retainer payable by the funds
were the same as it is today, he would receive annual retirement benefits
of $50,000.
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Brown, Carper, Hilstad, Hudson, Morris, Towle and Walsh are partners of Lord
Abbett; the others are employees:
Executive Vice Presidents:
W. Thomas Hudson, Jr., age 56
Edward K. von der Linde, age 38
Christopher Taylor, age 40 (Managing Director of Fuji Lord-Abbett International,
Ltd.)
Christopher J. Towle, age 41
Vice Presidents:
Paul A. Hilstad, age 56, Vice President and Secretary (with Lord Abbett since
1995; formerly Senior Vice President and General Counsel of American Capital
Management & Research, Inc.)
Zane E. Brown, age 47
Daniel E. Carper, age 47
Lawrence H. Kaplan, age 42 (with Lord Abbett since 1997-formerly Vice President
and Chief Counsel of Salomon Brothers Asset Management Inc. from 1995 to 1997,
prior thereto Senior Vice President, Director and General Counsel of Kidder
Peabody Asset Management, Inc.)
Robert G. Morris, age 54
A. Edward Oberhaus, age 39
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Keith F. O'Connor, age 43
John J. Walsh, age 63
Treasurer :
Donna M. McManus, age 38, (with Lord Abbett since 1996, formerly a Senior
Manager at Deloitte & Touche LLP).
The Fund's By-Laws provide that the Fund shall not hold an annual meeting of
stockholders unless one or more matters are required to be acted on by
shareholders under the Act or unless called by a majority of the Board of
Directors by the holders of at least one-quarter of the shares of the Fund
outstanding and entitled to vote at the meeting.
As of October 31, 1998 our directors and officers, 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
investment manager for the Portfolio. The general partners of Lord Abbett who
are officers and/or directors of the Fund, are: Zane E. Brown, Daniel E. Carper,
Robert S. Dow, Paul A. Hilstad, W. Thomas Hudson, Jr., Robert G. Morris,
Christopher J. Towle and John J. Walsh. The address of each partner is The
General Motors Building, 767 Fifth Avenue, New York, New York 10153-0203. The
other general partners of Lord Abbett who are neither officers nor directors of
the Fund are Stephen I. Allen, John E. Erard, Robert P. Fetch, Daria L. Foster,
Robert Gerber, Stephen I. McGruder, Michael McLaughlin, Robert J. Noelke and R.
Mark Pennington.
The services performed by Lord Abbett are described under "Our Management" in
the Prospectus. Under the Management Agreement, the Portfolio is obligated to
pay Lord Abbett a monthly fee, based on average daily net assets for each month,
at the annual rate of .75 of 1%.
Although not obligated to do so, Lord Abbett has waived or may waive all or part
of its management fees and has assumed or may assume other expenses of the
Portfolio.
As discussed in the Prospectus under "Our Management," the Portfolio is
contingently obligated to repay to Lord Abbett the amounts of such assumed other
expenses.
The Portfolio pays all expenses not expressly assumed by Lord Abbett, including,
without limitation, 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
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our shares under federal and state securities laws, expenses of preparing,
printing and mailing prospectuses to existing shareholders, insurance premiums,
brokerage and other expenses connected with executing portfolio transactions.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281, are
the independent auditors of the Fund and must be approved at least annually by
our directors to continue in such capacity. Deloitte & Touche LLP 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.
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, the Fund may pay, as described below, a higher commission than
some brokers might charge on the same transaction. This policy 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.
In transactions on stock exchanges in the United States, commissions are
negotiated, whereas on many foreign stock exchanges commissions are fixed. In
the case of securities traded in the foreign and domestic over-the-counter
markets, there is generally no stated commission, but the price usually includes
an undisclosed commission or markup. Purchases from underwriters of newly-issued
securities for inclusion in the Fund's portfolios usually will include a
concession paid to the underwriter by the issuer and purchases from dealers
serving as market makers will include the spread between the bid and asked
prices. When commissions are negotiated, we pay a commission rate that we
believe is appropriate to give maximum assurance that our brokers will
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provide us, on a continuing basis, the highest level of brokerage services
available. While we do not always seek the lowest possible commission on
particular trades, 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 our brokers also provide research services at least some of which are
useful to Lord Abbett in their overall responsibilities with respect to us and
the other accounts they manage. Research includes the furnishing of analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts and trading equipment and
computer software packages, acquired from third-party suppliers, that enable
Lord Abbett to access various information bases. Such services may be used by
Lord Abbett in servicing all their accounts, and not all of such services will
necessarily be used by Lord Abbett in connection with their management of the
Fund; conversely, such services furnished in connection with brokerage on other
accounts managed by Lord Abbett may be used in connection with their management
of the Fund; and not all of such services will necessarily be used by Lord
Abbett in connection with their advisory services to such other accounts. We
have been advised by Lord Abbett that research services received from brokers
cannot be allocated to any particular account, are not a substitute for Lord
Abbett's services but are supplemental to their own research effort and, when
utilized, are subject to internal analysis before being incorporated by Lord
Abbett into their investment process. As a practical matter, it would not be
possible for Lord Abbett to generate all of the information presently provided
by brokers. While receipt of research services from brokerage firms has not
reduced Lord Abbett's normal research activities, the expenses of Lord Abbett
could be materially increased if it attempted to generate such additional
information through its own staff and purchased such equipment and software
packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or
among brokers, and trades are executed only when they are dictated by investment
decisions of the Fund to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold our shares and/or
shares of other Lord Abbett-sponsored funds may be preferred.
If other clients of Lord Abbett buy or sell the same security at the same time
as we do, transactions will, to the extent practicable, be allocated among all
participating accounts in proportion to the amount of each order and will be
executed daily until filled so that
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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.
5.
Purchases, Redemptions and Shareholder Services
Securities in the Fund's portfolios are valued at their market values as of the
close of the NYSE. Market value will be determined as follows: securities listed
or admitted to trading privileges on any national or foreign securities exchange
are valued at the last sales price on the principal securities exchange on which
such securities are traded, or, if there is no sale, at the mean between the
last bid and asked prices on such exchange, 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. Securities traded only
in the over-the-counter market are valued at the mean between the bid and asked
prices, except that securities admitted to trading on the NASDAQ National Market
System are valued at the last sales price. Securities for which market
quotations are not available are valued at fair value under procedures approved
by the Board of Directors. All assets and liabilities expressed in foreign
currencies will be converted into United States dollars at the mean between the
buying and selling rates of such currencies against United States dollars last
quoted by any major bank. If such quotations are not available, the rate of
exchange will be determined in accordance with policies established by the
Fund's Board of Directors. The Board of Directors will monitor, on an ongoing
basis, the Fund's method of valuation.
Information concerning how we value our Shares for the purchase and redemption
of our Shares is described in the Prospectus under "Purchases and Redemptions."
As disclosed in the Prospectus, we calculate our net asset values and are
otherwise open for business on each day that the NYSE is open for trading. The
NYSE is closed on Saturdays and Sundays and the following holidays -- New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
The Fund has entered into a distribution agreement with Lord Abbett Distributor
LLC, a New York limited liability company ("Lord Abbett Distributor"), under
which Lord Abbett Distributor is obligated to use its best efforts to find
purchasers for the shares of
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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.
Shareholder Servicing Plan. As described in the Prospectus, under the
Shareholder Servicing Plan (the "Plan"), the Portfolio, on behalf of the Class,
may make payments to Lord Abbett Distributor for remittance to a Life Company
for certain shareholder servicing activities of such Life Company, provided that
such remittances in the aggregate do not exceed 0.25 of 1%, on an annual basis,
of the average daily net asset value of shares of the Portfolio sold to such
Life Company to be used as the underlying investment for variable life insurance
and variable annuity contracts ("Variable Contracts").
The Plan is intended to provide additional incentives to Life Companies to
provide continuiing information and investment services to variable life
insurance policyholders and variable annuity contract owners who invest in the
Portfolio and to encourage such persons to remain invested in the Portfolio.
Variable annuity contract owners should refer to the fee table section of their
separate account prospectuses for further information with respect to the effect
of the Plan on their annuity contract expenses.
6.
Past Performance
The Portfolio computes the average annual compounded rate of total return for
the Variable Contract Class during specified periods that would equate the
initial amount invested to the ending redeemable value of such investment by
adding one to the computed average annual total return, raising the sum to a
power equal to the number of years covered by the computation and multiplying
the result by $1,000, which represents a hypothetical initial investment. The
calculation assumes deduction of the maximum sales charge (as described in the
next paragraph) from the amount invested and reinvestment of all income
dividends and capital gains distributions on the reinvestment dates at net asset
value. The ending redeemable value is determined by assuming a complete
redemption at the end of the period(s) covered by the average annual total
return computation.
The Portfolio's yield quotation for each class is based on a 30-day period ended
on a specified date, computed by dividing the Portfolio's net investment income
per share earned during the period by such Portfolio' maximum offering price per
share on the last day of the period. This is determined by finding the following
quotient: take the dividends and interest earned during the period minus its
expenses accrued for the period and divide by the product of (i) the average
daily number of Class shares outstanding during the period that were entitled to
receive dividends and (ii) the Portfolio's maximum offering price per share on
the last day of the period. To this quotient add one. This sum is multiplied by
itself five times. Then one is subtracted from the product of this
multiplication and the remainder is multiplied by two.
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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 Fund intends to qualify as a regulated investment company under Subchapter M
of the Internal Revenue Code of 1986, as amended. Under such provisions, the
Fund will not be subject to Federal income tax on that part of its net ordinary
income and net realized capital gains which it distributes to shareholders. The
Portfolio will be treated as a separate entity for Federal income tax purposes
and, therefore, the investments and results of the Portfolio are determined
separately for purposes of determining whether the Fund qualifies as a regulated
investment company and for purposes of determining the Fund's net ordinary
income (or loss) and net realized capital gains (or losses). To qualify for
treatment as a regulated investment company, the Fund must, among other things,
derive in each taxable year at least 90% of its gross income from dividends,
interest and gains from the sale or other disposition of securities and certain
other related income.
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 account. 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 seven days
before or after any Lord Abbett-sponsored fund trades in such security,
profiting from trades of the same security within 60 days and trading on
material non-public information. The Code imposes similar requirements and
restrictions on the independent directors of the Fund to the extent contemplated
by the recommendations of such Advisory Group.
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