Lord Abbett Affiliated
Fund
SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED APRIL 30, 1996
[GRAPHIC - Graduation cap and diploma]
Helping you prepare
for tomorrow, today
[LOGO]
<PAGE>
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Lord Abbett Affiliated Fund
Building Investor Confidence Since 1934
A Tradition of
Value Investing
[GRAPHIC-presents]
Affiliated's history highlights
the concept of value investing:
buying quality companies when they
are "on sale" and selling them
when they reach their potential.
Through the years, this discipline
has helped Affiliated Fund achieve
competitive returns with
relatively moderate fluctuations
in price.
<TABLE>
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<S> <C>
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
Competitive Total Returns, Consistently Average Annual Rates of Total Return as of 4/30/96
For the past 40 years 11.8% per yeat
For the past 30 years 11.7%per year
For the past 20 years 14.1% per year
For the past 10 years 12.8% per year
For the past year 26.6% for the year
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Consistency The Fund has increased in value 33 out of the
last 40 fiscal years.
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Large and Growing Dividends Shareholders taking dividends in cash saw their
dividend checks increase 32 out of the last 40
fiscal years(1).
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Honorable Mention "There's a lot to be said for consistency. When a
fund suffers only one loss in 15 years and wins
without taking undue risk, you expect satisfied
shareholders...The fund's average shareholder has
stuck with this portfolio for 18 years..."
Source: Mutual Funds magazine, June 1996
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SEC-Required Average annual 1 year: +21.00%
Information compound returns for 5 years: +14.08%
periods ended 3/31/96 10 years: +11.80%
at the 5.75% maximum
sales charge, with all The Fund's SEC yield for the 30 days ended
distributions reinvested: 4/30/96 was 1.89%.
This past performance is no indication of future results. The investment
return and principal value of an investment in the Fund will fluctuate so
that shares, on any given day or when redeemed, may be worth more or less
than their original cost.
(1) Capital gains were reinvested. Period ends 10/31/95.
The Fund's fiscal year-end is 10/31. Results quoted above (unless stated
otherwise) are shown at net asset value with all distributions reinvested.
See Important Information on page 7.
</TABLE>
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Report to Shareholders
For the Six Months Ended April 30, 1996
Lord Abbett Affiliated Fund completed the first half of its
[PICTURE] fiscal year on April 30, 1996, with a net asset value of
$12.27 versus $10.79 six months ago. The latter figure has
RONALD P. LYNCH been adjusted for capital gains distributions totaling $1.19
Chairman per share paid last November. Including the reinvestment of
two quarterly dividends (that totaled $.15) and the capital
gains distributions, Affiliated Fund produced a total return
of 14.7% over the six-month period. The Board of Directors
recently declared a quarterly dividend of $.075 per share,
payable May 15, 1996 to shareholders of record on May 8,
1996.
Over the period, stock market averages remained near
all-time highs, despite weakness in bond markets. The
weakness in the latter can best be attributed to a reversal
in investor expectations. Moderate economic growth and low
inflation paved the way for the Federal Reserve to make
modest reductions in short-term lending rates in December
and January. Many investors anticipated that additional rate
reductions would be forthcoming. As it became clear there
would be no further, near-term action by the Federal Reserve
and as the prospects for legislation requiring a balanced
[PICTURE] federal budget diminished, investor disappointment set in,
ROBERT S. DOW causing long-term bond rates to rise sharply in March and
President April.
We remain broadly positive in our outlook for the stock
June 20, 1996 market. The U.S. economy has not changed dramatically over
these six months: economic growth remains modest and
inflation does not appear to be a big threat. It is becoming
increasingly clear that the U.S. economy is in the midst of
a modest recovery. We forecast the economy will grow at a
rate averaging about 2 1/4% in 1996, with inflation around
3%. Against this backdrop, it is likely the Federal Reserve
will remain neutral for the remainder of the year.
Accordingly, we are optimistic that the bond markets will
stabilize over the next three to six months and yields on
long-term Government bonds should decline toward 6 1/2-
6 1/4%. These factors should benefit the stock market.
Over the last six months, we maintained a modestly
below-average exposure (when compared to the S&P 500) to
cyclical stocks (companies whose stock tends to rise when
the economy is expanding and fall when the economy turns
down). Technology stocks experienced a price drop late in
1995, and we increased our holdings in this group. We also
increased our position in energy stocks, primarily by buying
natural gas and oil service companies. Finally, the
unexpected rise of long-term interest rates late in the
period allowed us to increase our holdings of stocks of
- - ----------------- financial companies. With 1996's corporate earnings expected
We would like to to be little changed from last year's, and with few areas in
thank all share- the market representing broadly compelling value, your
holders who voted Fund's performance will be driven by individual stock
their proxy selection.
ballots. We are
pleased to Shareholders should understand that the consistently high
announce that, on market returns over the last 18 months are well above the
June 19, 1996, market's long-term trend, and are not sustainable. We are
shareholders confident, however, that our disciplined, value investment
approved all the style should help shareholders earn competitive returns
proposals while reducing volatility.
recommended by
your Board of After 17 years with Lord, Abbett & Co., portfolio manager
Directors. and partner, Thomas S. Henderson, will retire in September
- - ----------------- 1996. The Fund has flourished under Mr. Henderson's fine
leadership and Lord, Abbett & Co. appreciates his many
valuable contributions. W. Thomas Hudson, Jr. succeeded Mr.
Henderson as portfolio manager as of May 1, 1996. He has
worked closely with Mr. Henderson in the management of your
Fund for the last three years. Mr. Hudson joined Lord,
Abbett & Co. in 1982 and has over 30 years of investment
experience.
We are pleased that Lord Abbett Affiliated Fund is a part of
your investment portfolio and thank you for the confidence
and trust you have placed in us.
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1
<PAGE>
The Income Perspective
Income Generated from $100,000 Investments: 11/1/70-4/30/96
<TABLE>
<CAPTION>
Year Six-Month Affiliated
Ended CD(1) Fund(2)
Oct. 31 Interest Dividends
----------------------------------------------------
<S> <C> <C> <C>
The Affiliated 1971 $ 5,486 $ 4,569
Advantage: 1972 4,900 4,580
A history of 1973 7,504 4,870
increasing 1974 9,921 5,322
dividends vs. 1975 7,417 4,348
fluctuating 1976 6,000 5,594
income from 1977 5,540 6,257
guaranteed CDs 1978 7,779 6,927
1979 10,816 7,941
1980 12,771 9,541
1981 16,038 11,705
1982 13,467 12,500
1983 9,204 12,366
1984 10,711 13,052
1985 8,591 14,933
1986 6,898 16,106
1987 6,644 16,470
1988 7,652 17,692
1989 9,258 18,496
1990 8,263 17,575
1991 6,593 17,264
1992 4,077 17,559
1993 3,337 16,279
1994 4,323 15,781
1995 6,161 15,887
4/30/96 (6 months) 2,658 8,521
If capital
Interest/Dividend Total $202,009 $ 302,135 gains and
-------- ---------- dividends
---------------------------------------------------- had been
25 1/2 Years Later reinvested,
Initial $100,000 Investment the Fund's
plus Growth $100,000 $ 732,131 total value
-------- ---------- would
---------------------------------------------------- have been
Total Value $302,009 $1,034,266 --- $2,439,047
-------- ----------
----------------------------------------------------
The Real Cost of the
CD Guarantee $ 737,257
----------------------------------------------------
</TABLE>
Unlike the Fund, a CD is insured, and its rate and principal
are guaranteed if held until maturity. The FDIC insures CDs
up to $100,000. The CD rate is subject to change when the CD
is renewed. Although CDs may offer safety on the downside,
they sacrifice capital growth on the up side.
(1) Average of six-month CD rates available each period. Source:
Salomon Brothers and The Federal Reserve Bank.
(2) Reflects the deduction of the 3.75% sales charge for
investments of $100,000. Dividends were taken in cash;
capital gains were reinvested.
See Important Information on page 7.
2
<PAGE>
Affiliated's Growth Record
Results Based on Fiscal Year-End October 31
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 4/30/96
(6 months
only)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth of Capital(1) + 30.2% - 2.1% + 6.9% +12.8% -12.0% +23.1% + 6.3% +14.3% + 3.7% +17.6% +13.4%
Dividend Return(1) + 6.2 + 4.9 + 5.3 + 5.2 + 4.4 + 4.9 + 4.1 + 3.5 + 3.0 + 2.9 + 1.3
- - ------------------------------------------------------------------------------------------------------------------------------------
Total Return(2) + 36.4 + 2.8 +12.2 +18.0 - 7.6 +28.0 +10.4 +17.8 + 6.7 +20.5 +14.7
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Growth of capital and dividend return reflect the
reinvestment of capital gains distributions and dividends.
(2) Total return is the percent change in value with both
dividends and capital gains distributions reinvested. These
results are at net asset value. Net asset value purchases
are available to investors of $1 million or more. For
performance at the maximum sales charge, as well as other
information, please turn to the inside front cover and pages
4 and 7.
Affiliated's Growth Exceeded Inflation
In our illustration, 1985 and 1996 are actual costs -- then
and now. "Affiliated 1996" is what the 1985 amount would
have grown to had it been invested in the Fund.
Investments in Affiliated Fund (up 320.9%) surpassed
increases in the cost of living (up 43.8%) in these 10 1/2
years. Protection against the erosion caused by inflation is
one important way to maintain -- and enhance -- your
lifestyle.
<TABLE>
<CAPTION>
[GRAPHIC] [GRAPHIC] [GRAPHIC] [GRAPHIC] [GRAPHIC]
One-Year Private One-Family House(1) U.S. Passport First-Class Stamp Income per Capita(1)
College Tuition(1)
<S> <C> <C> <C> <C> <C>
1985 $ 5,418 $ 90,800 $ 42 $.22 $12,339
1996 $12,432 $138,700 $ 65 $.32 $20,606
- - ------------------------------------------------------------------------------------------------------------------------------------
Affiliated 1996 $22,804 $382,177 $177 $.93 $51,935
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</TABLE>
Affiliated's results reflect total return at net asset
value, with all distributions reinvested for the 101/2 years
ended 4/30/96.
See Important Information on page 7.
(1) National average.
Sources: U.S. Department of Education, Statistics Bureau
Section, College Board Annual Survey of Colleges; National
Association of Realtors, Research Division; U.S. State
Department; U.S. Postal Service; Department of Commerce,
Bureau of Economic Analysis Statistics.
3
<PAGE>
The Total Return Perspective
The Fund is managed to anticipate change, to find good value and to maintain a
low level of risk in relation to expected returns. The Fund's average
shareholder ownership of over 18 1/2 years reflects the success of this
strategy.
Growth of a $10,000 Fund Investment(1): 11/1/70-4/30/96
<TABLE>
<CAPTION>
Value of Cumulative Value Cumulative How
Year Shares of Capital Gains Value of $10,000
Ended Initially Distributions Reinvested Grew
Oct. 31 Acquired Taken in Shares Dividends Total Value
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
A History of 1971 $ 9,840 $ 230 $ 421 $ 10,491
Consistent 1972 10,364 651 920 11,935
Performance 1973 10,510 998 1,481 12,989
1974 7,988 1,001 1,676 10,665
1975 9,898 1,313 2,646 13,857
1976 11,822 1,866 3,901 17,589
1977 10,671 2,127 4,273 17,071
1978 10,379 2,403 5,055 17,837
1979 11,633 3,592 6,871 22,096
1980 13,280 5,565 9,442 28,287
1981 11,822 6,936 10,157 28,915
1982 12,507 9,316 13,242 35,065
1983 14,665 12,565 18,028 45,258
1984 13,440 15,104 19,157 47,701
1985 14,300 18,861 23,605 56,766
1986 17,070 28,340 32,010 77,420
1987 15,219 32,579 31,820 79,618
1988 14,052 41,354 33,920 89,326
1989 15,204 48,557 41,676 105,437
1990 12,988 44,691 39,777 97,456
1991 15,000 58,557 51,187 124,744
1992 15,379 64,517 57,767 137,663
1993 16,414 78,860 66,845 162,119
1994 16,079 86,342 70,499 172,920
1995 17,464 108,610 82,227 208,301
4/30/96 (6 months) $17,886 $133,887 $87,153 $238,926
</TABLE>
The dollar amounts of dividends and capital gains
distributions reinvested in shares were $67,759 and
$105,229, respectively. The initial investment plus all
distributions reinvested amounted to $182,988. If dividends
and capital gains distributions had been withdrawn in cash,
the amounts of these payments would have been $15,479 and
$18,894, respectively.
(1) Reflects the deduction of the maximum 5.75% sales charge for
investments under $50,000. All distributions were
reinvested.
See Important Information on page 7.
Who Owns the Fund?
<TABLE>
<CAPTION>
Investor Profile of Lord Abbett Affiliated Fund
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<S> <C>
Fiduciaries Custodians for minors 16,603
Trusts 9,858
Pension & profit-sharing plans 6,915
Estates 576
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Institutions Corporate organizations 1,753
Religious, charitable & welfare organizations 342
Clubs & fraternal organizations 94
Cemeteries 66
Nursing homes & hospitals 37
Colleges & universities 34
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Individuals Single & joint accounts 81,645
IRAs 40,461
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Other 53,840
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Total Accounts in Affiliated on 4/30/96 212,224
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</TABLE>
4
<PAGE>
The Total Return Perspective
The past 25 1/2 years have included several periods of
economic, political and stock market turmoil. By focusing on
value investing, Affiliated reduced downside volatility in
periods of stock market weakness and produced returns that
outpaced the S&P 500 (an unmanaged index), guaranteed CDs
and inflation.
Using the Value Method of Investing, Affiliated Fund Reduced
Volatility and Produced Rewarding Gains
Average Annual
Total Returns(1)
Over 25 1/2 Years
Affiliated: 13.3%
S&P 500: 12.7%
CDs: 7.9%
Inflation: 5.6%
A $10,000 investment beginning 11/1/70 ending 4/30/96
Affiliated Fund $238,926
Unmanaged S&P 500 $212,800
Six-month CD(2) $69,219
Inflation $39,670
An investor cannot invest directly in an index, such as the
S&P 500. For more information on CDs, see page 2.
(1) Average annual total return at maximum offering price from
11/1/70 through 4/30/96.
(2) Average of six-month CD rates available each period. Source:
Salomon Brothers and The Federal Reserve Bank.
See Important Information on page 7.
5
<PAGE>
The Impact of a Disciplined Investment Plan
Unless you have a crystal ball, perfectly timing the market
is impossible. Often times opportunity can only be
identified after it has already passed.
For long-term investors in Lord Abbett Affiliated Fund, the
key to one successful strategy has focused on following a
disciplined investment plan -- not timing the market. Let's
compare two hypothetical investments made over the last 20
calendar years ending December 31, 1995, where $5,000 was
invested in the Fund every year. For Investment A, shares
were purchased (with the benefit of hindsight) when the Dow
Jones Industrial Average was at the low for each given year.
Shares were purchased for Investment B on the first business
day of every year.
Here's What Happened...
<TABLE>
<CAPTION>
Investment A Timing Investment B Systematic Investing
Account Account
Date of Cumulative Value Date of Cumulative Value
Investments Investments at Year-End Investments Investments at Year-End
------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Your financial 1/2/76 $ 5,000 $ 6,296 1/2/76 $ 5,000 $ 6,296
adviser can help 11/2/77 10,000 10,875 1/3/77 10,000 10,288
you discipline 2/28/78 15,000 16,539 1/2/78 15,000 15,576
your investing 11/7/79 20,000 26,608 1/2/79 20,000 26,207
and set up a 4/21/80 25,000 39,509 1/2/80 25,000 38,624
systematic plan 9/25/81 30,000 44,744 1/2/81 30,000 43,447
you are comfort- 8/12/82 35,000 61,865 1/4/82 35,000 59,742
able with 1/3/83 40,000 83,726 1/3/83 40,000 81,060
7/24/84 45,000 95,111 1/2/84 45,000 91,702
1/4/85 50,000 126,892 1/2/85 50,000 122,507
1/22/86 55,000 162,058 1/2/86 55,000 156,560
10/19/87 60,000 172,558 1/2/87 60,000 166,448
1/20/88 65,000 200,182 1/4/88 65,000 193,023
1/3/89 70,000 253,275 1/2/89 70,000 244,433
10/11/90 75,000 245,394 1/2/90 75,000 236,180
1/9/91 80,000 305,568 1/2/91 80,000 294,121
10/9/92 85,000 348,715 1/2/92 85,000 336,040
1/20/93 90,000 400,319 1/4/93 90,000 385,950
4/4/94 95,000 421,873 1/3/94 95,000 406,701
1/30/95 100,000 561,985 1/2/95 100,000 542,043
Account Value on 12/31/95 $561,985 Account Value on 12/31/95 $542,043
-------- --------
------------------------------------------ ------------------------------------------
Average Annual Total Return 15.1% Average Annual Total Return 14.3%
========================================== ==========================================
</TABLE>
The disciplined investment plan (B) provided an average
annual total return almost the same as the "perfect"
investment scenario (A). Since determining the "perfect"
time to invest without the benefit of hindsight is
impossible, why not sit down with your financial adviser and
set up a disciplined investment plan today?
The above illustrations assume the reinvestment of all
dividends and distributions. All investments were made at
the applicable sales charge of 5.75% for account values up
to $50,000 and at the applicable reduced sales charges
thereafter under rights of accumulation. Making periodic
investments in the Fund does not guarantee against a loss of
principal. If held until 3/31/96 (with no additional
investments made), Investment A and Investment B would have
been worth $592,788 and $571,752, respectively.
For performance at the maximum sales charge, please turn to
the inside front cover.
6
<PAGE>
Portfolio Diversification
<TABLE>
<CAPTION>
Lord Abbett Affiliated Fund's Top Ten Equity Holdings Percent of
Total
Net Assets
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<S> <C> <C>
MCI Communications Nation's second largest provider of long-distance
telecommunications services 3.12%
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Emerson Electric Co. A leading factor in world markets for electrical
equipment and related components 2.95%
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Deere & Co. World's largest manufacturer of farm equipment 2.75%
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Warner-Lambert Co. Leading producer of prescription pharmaceuticals,
over-the-counter medication and consumer products 2.27%
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Aetna Life & Casualty Co. Major managed health care and retirement
services company 2.20%
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AT&T Corp. Largest U.S.long-distance telephone company 2.16%
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General Motors Corp. Nation's largest automobile manufacturer 2.16%
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Dow Chemical Co. Second largest U.S. chemical company 1.96%
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Kimberly Clark Corp. Major producer of consumer tissue and personal
care products 1.89%
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Hewlett-Packard Co. Leading manufacturer of computer products 1.87%
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Total 23.33%
Data as of 4/30/96.
</TABLE>
Important Information
Bonds purchased by the Fund are subject to market
fluctuations upward and downward inversely to the rise and
fall of interest rates. Common stocks are also subject to
market fluctuations, providing the potential for gains and
the risk of loss. Performance results quoted herein reflect
past performance, current sales charges (where applicable)
and appropriate Rule 12b-1 Plan expenses from commencement
of the Plan. Past performance is no indication of future
results. Tax consequences are not reflected. The investment
return and principal value of an investment will fluctuate
so that shares, on any given day or when redeemed, may be
worth more or less than their original cost. The Fund's
sales charge structure has changed in the past. It is the
intent of the Fund to issue additional classes of shares,
with distinct pricing options, in August 1996. For a full
discussion of the differences in pricing alternatives,
please call 800-874-3733 and ask for the Fund's July 15,
1996 prospectus. If used as sales material after 6/30/96,
this report must be accompanied by Lord Abbett's Performance
Quarterly for the most recently completed calendar quarter.
Statement of Net Assets April 30, 1996
<TABLE>
<CAPTION>
Number of Market Value
Security Shares (Note 1a)
================================================================================
<S> <C> <C> <C>
INVESTMENTS IN SECURITIES 94.59%
================================================================================
COMMON STOCKS AND
CONVERTIBLE SECURITIES 92.83%
================================================================================
Aerospace 1.45% Boeing Co. 1,000,000 $ 82,125,000
-------------
- - --------------------------------------------------------------------------------
Agricultural
Products Pioneer Hi-Bred
1.23% International, Inc. 1,250,000 69,687,500
-------------
- - --------------------------------------------------------------------------------
Apparel 1.51% VF Corp. 1,500,000 85,500,000
-------------
- - --------------------------------------------------------------------------------
Auto Parts Genuine Parts Company 1,750,000 77,437,500
2.00% Johnson Controls, Inc. 500,000 35,750,000
Total 113,187,500
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- - --------------------------------------------------------------------------------
Automobiles
2.16% General Motors Corp. 2,250,000 122,062,500
-------------
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Banks: Money
Center 1.12% First Chicago NBD 1,538,500 63,463,125
-------------
- - --------------------------------------------------------------------------------
Banks: Regional Bank of Boston Corp. 1,250,000 60,468,750
4.72% BankAmerica Corp. 1,000,000 75,750,000
Comerica Inc. 1,250,000 54,375,000
First Union Corp. 1,250,000 76,875,000
Total 267,468,750
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- - --------------------------------------------------------------------------------
Chemicals Atlantic Richfield Co.
3.43% (Exch. Lyondell
Petrochemical)
$2.23 Conv. Pfd. 1,000,000 28,250,000
Dow Chemical Co. 1,250,000 111,093,750
Union Carbide Corp. 1,200,000 54,600,000
Total 193,943,750
-------------
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</TABLE>
7
<PAGE>
Statement of Net Assets April 30, 1996
<TABLE>
<CAPTION>
Number of
Shares or
Principal Market Value
Security Amount (Note 1a)
================================================================================
<S> <C> <C> <C>
Communications
Equipment .19% Lucent Technologies Inc. 300,000 $ 10,537,500
-------------
- - --------------------------------------------------------------------------------
Containers .57% Sonoco Products Co. 1,130,000 32,063,750
-------------
- - --------------------------------------------------------------------------------
Data Processing EMC Corp. 2,250,000 46,125,000
Equipment Hewlett-Packard Co. 1,000,000 105,875,000
3.48% Seagate Technology Inc. 590,000 34,220,000
Seagate Technology Inc.
Conv. Sub. Deb. 6 3/4 / 2001 10,000M 10,700,000
Total 196,920,000
-------------
- - --------------------------------------------------------------------------------
Data Processing General Motors Corp.
Services (Electronic Data Systems)
2.08% Class E 1,500,000 84,562,500
H & R Block Inc. 950,000 33,368,750
Total 117,931,250
-------------
- - --------------------------------------------------------------------------------
Drugs/Health Care Baxter International Inc. 1,500,000 66,375,000
Products Lilly, Eli & Co. 850,000 50,150,000
8.58% Mallinckrodt Group Inc. 1,500,000 59,062,500
Merck & Co., Inc. 850,000 51,425,000
SmithKline Beecham
plc ADR 1,750,000 94,500,000
Tambrands Inc. 750,000 35,906,250
Warner-Lambert Co. 1,150,000 128,512,500
Total 485,931,250
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- - --------------------------------------------------------------------------------
Electric Power Allegheny Power
6.55% System, Inc. 1,750,000 51,187,500
American Electric
Power Co., Inc. 850,000 34,531,250
Carolina Power
& Light Co. 2,500,000 90,000,000
Central & South
West Corp. 2,000,000 54,500,000
DTE Energy 2,400,000 74,400,000
Florida Progress Corp. 2,000,000 66,000,000
Total 370,618,750
-------------
- - --------------------------------------------------------------------------------
Electrical
Equipment 2.95% Emerson Electric Co. 2,000,000 167,250,000
-------------
- - --------------------------------------------------------------------------------
Electronics:
Components .99% AMP Inc. 1,250,000 55,937,500
-------------
- - --------------------------------------------------------------------------------
Electronics:
Semiconductors
.78% Intel Corp. 650,000 44,037,500
-------------
- - --------------------------------------------------------------------------------
Financial:
Miscellaneous
1.68% Transamerica Corp. 1,250,000 95,000,000
-------------
- - --------------------------------------------------------------------------------
Food Conagra Inc. 2,650,000 102,356,250
4.74% Hershey Foods Corp. 750,000 56,906,250
Sara Lee Corp. 2,250,000 69,750,000
Supervalu Inc. 1,225,000 39,200,000
Total 268,212,500
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- - --------------------------------------------------------------------------------
Insurance Aetna Life &
7.76% Casualty Co. 1,750,000 124,687,500
Chubb Corp. 775,000 73,334,375
CIGNA Corp. 700,000 79,362,500
Lincoln National Corp. 1,251,300 60,375,225
St. Paul Companies Inc. 1,250,000 66,406,250
The Progressive
Corporation 750,000 34,968,750
Total 439,134,600
-------------
- - --------------------------------------------------------------------------------
Machinery:
Diversified 2.75% Deere & Co. 4,000,000 155,500,000
-------------
- - --------------------------------------------------------------------------------
Miscellaneous Corning Inc. 1,750,000 60,812,500
1.83% Textron, Inc. 500,000 42,875,000
Total 103,687,500
-------------
- - --------------------------------------------------------------------------------
Natural Gas
Distribution Consolidated Natural
1.03% Gas Co. 1,250,000 58,437,500
-------------
- - --------------------------------------------------------------------------------
Natural Gas
Diversified .65% Sonat Inc. 850,000 37,081,250
-------------
- - --------------------------------------------------------------------------------
Oil: Domestic
1.03% Amoco Corporation 800,000 58,400,000
-------------
- - --------------------------------------------------------------------------------
Oil: International Chevron Corp. 1,500,000 87,000,000
5.49% Exxon Corp. 1,000,000 85,000,000
Mobil Corp. 835,000 96,025,000
Total S.A.
Sponsored ADR 1,250,000 42,812,500
Total 310,837,500
-------------
- - --------------------------------------------------------------------------------
Oil Well Equipment/
Service 1.01% Schlumberger Ltd. 650,000 57,362,500
-------------
- - --------------------------------------------------------------------------------
Paper and James River Corp. 1,750,000 46,812,500
Forest Products Kimberly Clark Corp. 1,475,000 107,121,875
3.80% Westvaco Corporation 2,000,000 62,000,000
Total 215,934,375
-------------
- - --------------------------------------------------------------------------------
Printing and Deluxe Corp. 1,250,000 43,750,000
Publishing Donnelley, R.R. &
1.89% Sons Co. 1,750,000 63,000,000
Total 106,750,000
-------------
- - --------------------------------------------------------------------------------
Retail 1.19% Sears, Roebuck & Co. 1,350,000 67,331,250
-------------
- - --------------------------------------------------------------------------------
Savings Ahmanson, H.F. & Co. 2,282,800 54,216,500
and Loan Great Western
1.91% Financial Corp. 2,350,000 54,050,000
Total 108,266,500
-------------
- - --------------------------------------------------------------------------------
Telecommunications AT&T Corp. 2,000,000 122,500,000
5.28% MCI Communications
Corp. 6,000,000 176,625,000
Total 299,125,000
-------------
- - --------------------------------------------------------------------------------
Tire and Rubber Cooper Tire &
Goods Rubber Company 794,600 19,467,700
1.26% Goodyear Tire &
Rubber Co. 1,000,000 52,125,000
Total 71,592,700
-------------
- - --------------------------------------------------------------------------------
Tobacco .74% American Brands Inc. 1,000,000 41,625,000
-------------
- - --------------------------------------------------------------------------------
Transportation:
Miscellaneous
1.13% Ryder Systems Inc. 2,196,900 63,984,713
-------------
------------------------------------------------------------
</TABLE>
8
<PAGE>
Statement of Net Assets April 30, 1996
<TABLE>
<CAPTION>
Number of
Shares or
Principal Market Value
Security Amount (Note 1a)
================================================================================
<S> <C> <C> <C>
Waste Management Browning Ferris
3.10% Industries Inc. 2,750,000 $ 88,687,500
WMX Technologies Inc. 2,500,000 86,875,000
Total 175,562,500
--------------
- - --------------------------------------------------------------------------------
Other .77% 43,673,351
--------------
------------------------------------------------------------
Total Investments in Common
Stocks and Convertible Securities
(Cost $4,067,494,851) 5,256,164,364
================================================================================
U.S. GOVERNMENT OBLIGATIONS 1.76%
================================================================================
U.S. Treasury Bonds
7 7/8% due 2/15/2021 46,000M 50,161,561
U.S. Treasury Notes
6 1/2% due 8/15/2005 50,000M 49,328,125
------------------------------------------------------------
Total Investments in U.S.
Government Obligations
(Cost $100,831,562) 99,489,686
--------------
------------------------------------------------------------
Total Investments in Securities
(Cost $4,168,326,413) 5,355,654,050
================================================================================
OTHER ASSETS, LESS LIABILITIES 5.41%
================================================================================
Short-Term Investments, at Market
- - --------------------------------------------------------------------------------
U.S.Government Federal National
Obligations Mortgage Association
14% due 9/25/1996 58,500M 60,465,234
14% due 11/22/1996 50,000M 52,296,875
Total (Cost $117,112,406) 112,762,109
--------------
------------------------------------------------------------
- - --------------------------------------------------------------------------------
Short-Term Investments, at Cost
- - --------------------------------------------------------------------------------
Corporate American Express
Obligations Credit Corp.
5.28% due 5/7/1996 $45,000M 45,000,000
Chevron Oil Finance Co.
5.10% due 5/3/1996 26,000M 26,000,000
General Electric Co.
5.00% due 5/1/1996 26,000M 26,000,000
Total 97,000,000
--------------
- - --------------------------------------------------------------------------------
U.S.Government Federal Home
Obligations Loan Banks
5.16% due 5/2/1996 31,000M 30,937,793
Federal Home Loan
Mortgage Corp.
5.00% due 5/6/1996 15,000M 14,847,917
5.17% due 5/17/1996 12,000M 11,956,917
Federal National
Mortgage Association
5.17% due 5/20/1996 30,000M 29,857,825
Total 87,600,452
--------------
------------------------------------------------------------
Total Short-Term Investments 297,362,561
- - --------------------------------------------------------------------------------
Cash and Receivables, Net of Liabilities 8,781,972
------------------------------------------------------------
Total Other Assets,
Less Liabilities 306,144,533
================================================================================
Net Assets (equivalent to $12.27 a share on
100.00% 461,426,230 shares of $1.25 par
value capital stock outstanding;
authorized, 500,000,000 shares) $5,661,798,583
============================================================
See Notes to Financial Statements.
</TABLE>
Portfolio Changes
Issues added to or eliminated from the portfolio (exclusive of U.S. Government
obligations and short-term investments) during the six months ended April 30,
1996
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Additions+ Amoco Corporation Lucent Technologies Inc. Sonat Inc.
Central & South West Corp. Schlumberger Ltd. Supervalu Inc.
Corning Inc. Schweitzer-Mauduit Tambrands Inc.
Goodyear Tire & Rubber Co. Seagate Technology Inc. The Progressive Corporation
Intel Corp. Conv. Sub. Deb. 6 3/4% Warner-Lambert Co.
Jefferson-Pilot Corp. due 1/1/2001
- - ------------------------------------------------------------------------------------------------------------------------------------
Eliminations+ American Express Co. General Re Corp. Public Service Enterprises Group Inc.
Apple Computer Inc. International Paper Co. Schweitzer-Mauduit
Dayton Hudson Corp. Jefferson-PilotCorp. TRW Inc.
Federal Paper Board Inc. Minnesota Mining & Mfg. Co.
+ Includes securities previously classified in the Investment Portfolio under "Other".
</TABLE>
9
<PAGE>
Statement of Operations For the Six Months Ended April 30, 1996
<TABLE>
<CAPTION>
Investment Income
====================================================================================================================================
<S> <C> <C>
Income Dividends $ 69,290,381
------------------------------------------------------------------------------ ---------------- ----------------
Interest 14,693,504
------------------------------------------------------------------------------ ---------------- ----------------
Total income $ 83,983,885
- - ---------------------------------------------------------------------------------------------- ---------------- ----------------
Expenses Management fee (Note 5) 8,678,968
------------------------------------------------------------------------------ ---------------- ----------------
12b-1 distribution plan (Note 5) 5,485,588
------------------------------------------------------------------------------ ---------------- ----------------
Shareholder servicing 1,998,252
------------------------------------------------------------------------------ ---------------- ----------------
Registration fee 273,889
------------------------------------------------------------------------------ ---------------- ----------------
Reports to shareholders 209,587
------------------------------------------------------------------------------ ---------------- ----------------
Legal and audit 89,891
------------------------------------------------------------------------------ ---------------- ----------------
Directors' fees 47,009
------------------------------------------------------------------------------ ---------------- ----------------
Other 589,194
------------------------------------------------------------------------------ ---------------- ----------------
Total expenses 17,372,378
------------------------------------------------------------------------------ ---------------- ----------------
Net investment income 66,611,507
------------------------------------------------------------------------------ ---------------- ----------------
Realized and Unrealized Gain on Investments (Note 4)
====================================================================================================================================
Realized gain from security transactions
------------------------------------------------------------------------------ ---------------- ----------------
Proceeds from sales 1,316,416,754
------------------------------------------------------------------------------ ---------------- ----------------
Cost of securities sold 970,693,244
------------------------------------------------------------------------------ ---------------- ----------------
Net realized gain 345,723,510
- - ---------------------------------------------------------------------------------------------- ---------------- ----------------
Unrealized appreciation of investments
------------------------------------------------------------------------------ ---------------- ----------------
Beginning of period 871,067,855
------------------------------------------------------------------------------ ---------------- ----------------
End of period 1,182,977,340
------------------------------------------------------------------------------ ---------------- ----------------
Net unrealized appreciation 311,909,485
------------------------------------------------------------------------------ ---------------- ----------------
Net realized and unrealized gain on investments 657,632,995
------------------------------------------------------------------------------ ---------------- ----------------
Net Increase in Net Assets Resulting from Operations $ 724,244,502
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets 1996 1995
============================================================================================== ================ ================
<S> <C> <C>
Operations Net investment income $ 66,611,507 $ 130,521,218
------------------------------------------------------------------------------ ---------------- ----------------
Net realized gain from securities transactions 345,723,510 491,086,481
------------------------------------------------------------------------------ ---------------- ----------------
Net unrealized appreciation of investments 311,909,485 215,819,968
------------------------------------------------------------------------------ ---------------- ----------------
Net increase in net assets resulting from operations 724,244,502 837,427,667
- - ---------------------------------------------------------------------------------------------- ---------------- ----------------
Undistributed net investment income included in price of shares sold and reacquired (Note 1d) 198,463 55,513
- - ---------------------------------------------------------------------------------------------- ---------------- ----------------
Distributions to shareholders from (Note 2)
------------------------------------------------------------------------------ ---------------- ----------------
Net investment income (65,479,672) (120,712,716)
------------------------------------------------------------------------------ ---------------- ----------------
Net realized gain from securities transactions (493,958,520) (295,129,557)
------------------------------------------------------------------------------ ---------------- ----------------
Total distributions (559,438,192) (415,842,273)
- - ---------------------------------------------------------------------------------------------- ---------------- ----------------
Capital share transactions
------------------------------------------------------------------------------ ---------------- ----------------
Net proceeds from sales of 27,058,705 and 29,806,062 shares, respectively 319,950,973 330,545,662
------------------------------------------------------------------------------ ---------------- ----------------
Net asset value of 40,044,685 and 31,322,483 shares, respectively, issued to
shareholders in reinvestment of net investment income and realized gain from
securities transactions 450,125,978 312,141,819
------------------------------------------------------------------------------ ---------------- ----------------
Total 770,076,951 642,687,481
------------------------------------------------------------------------------ ---------------- ----------------
Cost of 20,061,937 and 30,197,287 shares reacquired, respectively (237,808,205) (329,389,161)
------------------------------------------------------------------------------ ---------------- ----------------
Increase in net assets derived from capital share transactions
(net increase of 47,041,453 and 30,931,258 shares, respectively) 532,268,746 313,298,320
- - ---------------------------------------------------------------------------------------------- ---------------- ----------------
Increase in net assets 697,273,519 734,939,227
- - ---------------------------------------------------------------------------------------------- ---------------- ----------------
Net Assets
============================================================================================== ================ ================
Beginning of period 4,964,525,064 4,229,585,837
------------------------------------------------------------------------------ ---------------- ----------------
End of period (including undistributed net investment income of $23,494,690 and
$22,164,392, respectively) $ 5,661,798,583 $ 4,964,525,064
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Six Months
Ended
April 30, Year Ended October 31,
Per Share Operating Performance: 1996 1995 1994 1993 1992 1991
============================================ ============ ============ =========== =========== ========== ===========
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.98 $ 11.03 $ 11.26 $ 10.55 $ 10.29 $ 8.91
--------------------------------------- ------------ ------------ ----------- ----------- ---------- -----------
Income from investment operations
------------------------------------ ------------ ------------ ----------- ----------- ---------- -----------
Net investment income .15 .32 .31 .31 .38 .40
------------------------------------ ------------ ------------ ----------- ----------- ---------- -----------
Net realized and unrealized gain
on investments 1.48 1.70 .38 1.43 .61 1.92
------------------------------------ ------------ ------------ ----------- ----------- ---------- -----------
Total from investment operations 1.63 2.02 .69 1.74 .99 2.32
--------------------------------------- ------------ ------------ ----------- ----------- ---------- -----------
Distributions
------------------------------------ ------------ ------------ ----------- ----------- ---------- -----------
Dividends from net investment income (.15) (.30) (.32) (.35) (.40) (.41)
------------------------------------ ------------ ------------ ----------- ----------- ---------- -----------
Distributions from net realized gain (1.19) (.77) (.60) (.68) (.33) (.53)
- - -------------------------------------------- ------------ ------------ ----------- ----------- ---------- -----------
Net asset value, end of period $ 12.27 $ 11.98 $ 11.03 $ 11.26 $ 10.55 $ 10.29
============================================ ============ ============ =========== =========== ========== ===========
Total Return* 14.70%+ 20.46% 6.66% 17.76% 10.36% 28.00%
============================================ ============ ============ =========== =========== ========== ===========
Ratios/Supplemental Data:
============================================ ============ ============ =========== =========== ========== ===========
Net assets, end of period(000) $5,661,799 $4,964,525 $4,229,586 $4,174,033 $3,680,332 $3,565,230
------------------------------------ ------------ ------------ ----------- ----------- ---------- -----------
Ratios to Average Net Assets:
======================================= ============ ============ =========== =========== ========== ===========
Expenses 0.32%+ 0.63% 0.63% 0.63% 0.60% 0.58%
------------------------------------ ------------ ------------ ----------- ----------- ---------- -----------
Net investment income 1.23%+ 2.90% 2.91% 2.95% 3.73% 4.22%
--------------------------------------- ------------ ------------ ----------- ----------- ---------- -----------
Portfolio turnover rate 26.74% 53.84% 51.48% 45.15% 42.00% 56.38%
====================================================================================================================================
</TABLE>
* Total return does not consider the effects of sales loads.
+ Not annualized.
See Notes to Financial Statements.
Notes to Financial Statements
1. Significant Accounting Policies
The Company is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The following is a summary
of significant accounting policies consistently followed by the Company. The
policies are in conformity with generally accepted accounting principles.
(a) Market value is determined as follows: Securities listed or admitted to
trading privileges on any national 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 Company'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 if it is determined that such price more
accurately reflects the value of such securities. Securities for which market
quotations are not available are valued at fair value under procedures approved
by the Board of Directors; such procedures require the use of estimates.
(b) It is the policy of the Company to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income in taxable distributions. Therefore, no federal income tax
provision is required.
(c) Security transactions are accounted for on the date that the securities are
purchased or sold (trade date). Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
(d) A portion of the proceeds from sales and costs of repurchases of capital
shares, equivalent to the amount of distributable net investment income on the
date of the transaction, is credited or charged to undistributed income.
Undistributed net investment income per share thus is unaffected by sales or
repurchases of shares.
(e) Certain amounts of the components of net assets in prior periods have
been reclassified to conform the presentation of such components to that
reported in the current period.
2. Distributions
Net realized gain from security transactions is distributed to shareholders in
the succeeding year. Accumulated undistributed net realized gain at April 30,
1996 for financial reporting purposes, which is substantially the same as for
federal income tax purposes, aggregated $342,601,434.
Income and capital gains distributions are determined in accordance with income
tax regulations which may differ from methods used to determine the
corresponding income and capital gains amounts in accordance with generally
accepted accounting principles.
These differences are primarily caused by differences in the timing of
recognition of certain components of income, expenses or capital gains and
losses. Where such differences are permanent in nature, they are reclassified
based upon their ultimate characterization for federal income tax purposes. Any
such reclassifications will have no effect on net assets, results of operations
or net asset value of the Fund.
A dividend of $.075 a share from net investment income aggregating $34,644,868
was declared on May 8, 1996 and was paid on May 15, 1996 to shareholders of
record on May 8, 1996.
3. Capital Paid In
At April 30, 1996, capital paid in aggregated $4,112,725,119.
4. Portfolio Securities
The Company loans its portfolio securities to brokers. As of April 30, 1996, the
market value of securities on loan to brokers was $49,328,125, for which the
Company has obtained collateral aggregating $50,937,500, consisting of cash and
U.S. Treasury securities.
Purchases and sales of investment securities (other than U.S. Government
obligations and short-term securities) aggregated $1,142,347,301 and
$1,266,248,003, respectively. Security gains and losses are computed on the
identified cost basis.
11
<PAGE>
Notes to Financial Statements
As of April 30, 1996, unrealized appreciation based on cost for federal income
tax purposes aggregated $1,182,977,340 of which $1,196,077,004 related to
appreciated securities and $13,099,664 related to depreciated securities. The
cost of investments for federal income tax purposes is substantially the same as
that used for financial reporting purposes.
5. Management Fee and Other Transactions with Affiliates
Lord, Abbett & Co. received a management fee of $8,678,968 for which it supplied
investment management, research, statistical and advisory services and paid
officers' remuneration and certain other expenses of the Company. The management
fee is based on average daily net assets at the following annual rates: 1/2 of
1% on the first $200 million; 2/5 of 1% on the next $300 million; 3/8 of 1% on
the next $200 million; 7/20 of 1% on the next $200 million and 3/10 of 1% on the
excess over $900 million. Lord, Abbett & Co. also received $964,025 representing
payment of commissions on sales of capital stock of the Company after deducting
$8,135,529 allowed to authorized distributors as concessions. The Company
adopted a Rule 12b-1 Plan which provides for the payment of (1) an annual fee
for services (payable quarterly) of .15% of the average daily net asset value of
the Company's shares sold by dealers prior to the Plan's effective date and .25%
of the average daily net asset value of such shares sold on and after that date
and (2) a one-time 1% sales distribution fee, at the time of sale, on such
shares sold at net asset value of $1 million or more. Certain of the Company's
officers and directors have an interest in Lord, Abbett & Co.
6. Directors' Remuneration
The Directors of theCompany associated with Lord, Abbett & Co. and all officers
of the Company receive no compensation from the Company for acting as such.
Outside Directors' fees, including attendance fees for board and committee
meetings, and outside Directors' retirement costs, are allocated among all funds
in the Lord Abbett group based on net assets of each fund. The direct
remuneration accrued during the period for outside Directors of the Company as a
group was $47,009 (exclusive of expenses), a portion of which has been deemed
invested in shares of the Company under a deferred compensation plan
contemplating future payment of the value of those shares. As of April 30, 1996,
the aggregate amount in Directors' accounts maintained under the Plan was
$1,403,462. Retirement costs accrued during the period amounted to $27,008.
Independent Auditors' Report
The Board of Directors and Shareholders,
Lord Abbett Affiliated Fund, Inc.:
We have audited the accompanying statement of net assets of Lord Abbett
Affiliated Fund, Inc. as of April 30, 1996, the related statements of operations
for the six months then ended and of changes in net assets for the six months
then ended and the year ended October 31, 1995, and the financial highlights for
the six months ended April 30, 1996, and each of the years in the five-year
period ended October 31, 1995. These financial statements and the financial
highlights are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at April
30, 1996 by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Lord Abbett
Affiliated Fund, Inc. at April 30, 1996, the results of its operations, the
changes in its net assets and the financial highlights for the above-stated
periods, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
May 31, 1996
Our Management
Board of Directors
Ronald P. Lynch
Robert S. Dow
Thomas S. Henderson
E. Thayer Bigelow*+
Stewart S. Dixon*
John C. Jansing*
C. Alan MacDonald*+
Hansel B. Millican, Jr.*+
Thomas J. Neff*
* Outside Director
+ Audit Committee
Officers
Ronald P. Lynch, Chairman
Robert S. Dow, President
W.Thomas Hudson, Jr., Executive
Vice President and Portfolio Manager
Kenneth B. Cutler, Vice President
and Secretary
Stephen I. Allen, Vice President
Daniel E. Carper, Vice President
Thomas S. Henderson, Vice President
Robert G. Morris, Vice President
E. Wayne Nordberg, Vice President
John J. Walsh, Vice President
John J. Gargana, Jr., Vice President
Paul A. Hilstad, Vice President
and Assistant Secretary
Thomas F. Konop, Vice President
and Assistant Secretary
Victor W. Pizzolato, Vice President
Keith F. O'Connor, Treasurer
Joseph Van Dyke, Assistant Treasurer
Lydia Guzman, Assistant Secretary
Robert M. Hickey, Assistant Secretary
A. Edward Oberhaus III,
Assistant Secretary
Investment Manager and
Underwriter
Lord, Abbett & Co.
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
212-848-1800
Custodian
The Bank of New York
New York, NY
Transfer Agent
United Missouri Bank of
Kansas City, N.A.
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419100
Kansas City, MO 64141
800-821-5129
Auditors
Deloitte & Touche LLP
New York, NY
Counsel
Debevoise & Plimpton
New York, NY
Copyright (C) 1996 by Lord Abbett Affiliated Fund, Inc.
767 Fifth Avenue, New York, NY 10153-0203
This publication, when not used for the general information of shareholders of
Lord Abbett Affiliated Fund, Inc., is to be distributed only if preceded or
accompanied by a current prospectus which includes information concerning the
Fund's investment objective and policies, sales charges and other matters. There
is no guarantee that the forecasts contained within this publication will come
to pass.
All rights reserved. Printed in the U.S.A.
12
<PAGE>
- - --------------------------------------------------------------------------------
Lord, Abbett & Co.
A Tradition of Performance Through
Disciplined
Investing
[PICTURE]
(from left to right)
W. Thomas Hudson, Jr.
portfolio manager--
Lord Abbett Affiliated Fund
(seated)
John J. Walsh, partner
Burton Zwick, senior economist
A successful long-term track record is evidence of a
successful investment strategy. For decades we, at Lord,
Abbett & Co., have believed that investing with a
disciplined, value approach is the best way to achieve
competitive returns and reduce portfolio risk. This
commitment and the dedication of our team of 47 investment
professionals have helped us earn the trust of financial
professionals and investors for over 65 years.
- - --------------------------------------------------------------------------------
About Your
Fund's
Board of
Directors
The Securities and Exchange Commission (SEC) views the role of the independent
Board of Directors as one of the most important components in overseeing a
mutual fund. The Board of Directors watches over your Fund's general operations
and represents your interests. Board members review and approve every contract
between your Fund and Lord, Abbett & Co. (the Fund's investment manager). They
meet regularly to review a wide variety of information and issues regarding your
Fund. Every member of the Board possesses extensive business experience; Lord
Abbett Affiliated Fund's shareholders are indeed fortunate to have a group of
independent directors with diverse backgrounds to provide a variety of
viewpoints in the oversight of their Fund. Below, we feature one of our
independent directors, Stewart S. Dixon.
Stewart S. Dixon, Director
Lord Abbett Affiliated Fund
[PICTURE]
An alumnus of Yale University, Mr. Dixon also holds a law degree from the
University of Michigan, and has practiced law for nearly 40 years. He was one of
the founding partners of the firm of Wildman, Harrold, Allen & Dixon (Chicago)
in 1967, where he practices in the areas of corporate/securities; anti-trust;
and estate planning.
He serves as a director of Ortho S.A.Sprague Memorial Institute and as a trustee
of the Chicago Historical Society. He has served as a director of Children's
Memorial Hospital, the Infant Welfare Society and the Chicago Zoological
Society. He has been an independent director for all of Lord Abbett's funds
since 1976.
<PAGE>
Investing in the
Lord Abbett
Family of Funds
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
GROWTH
--------------------------------------------------------------------------------------------------------------------------
INCOME
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Growth Growth & Balanced Income Tax-Free Money
Funds Income Funds Fund Funds Income Funds Market Fund
Developing Affiliated Fund Balanced Series U.S. Government o National U.S. Government
Growth Fund Securities Series* o California Securities
Growth & o Connecticut Money Market
Mid-Cap Income Trust Bond-Debenture o Florida Fund*+
Value Fund Fund o Georgia
o Hawaii
Global Fund- Global Fund- o Michigan
Equity Series Income Series o Minnesota
o Missouri
Limited Duration o New Jersey
U.S. Government o New York
Securities Series* o Pennsylvania
o Texas
o Washington
</TABLE>
Finding the right mutual fund can be confusing. At Lord, Abbett & Co., we
believe your financial adviser provides value in helping you identify and
understand your investment objectives and, ultimately, offering fund
recommendations suitable for your individual needs.
This publication, when used as sales literature, is to be distributed only
if preceded or accompanied by a current prospectus for Lord Abbett
Affiliated Fund.
For more complete information about any other Lord Abbett fund, including
charges and expenses, call your financial adviser or Lord, Abbett & Co. at
800-874-3733 for a prospectus. Read it carefully before investing.
When you invest in a family of funds, you benefit from:
Diversification. You and your financial adviser can diversify your
investments between equity and income funds.
Flexibility. As your investment goals change, your financial adviser can
help you reallocate your portfolio.
As an investor in the Lord Abbett Family of Funds, you have access to 25
portfolios designed to meet a variety of investment needs. While you may
reallocate your assets among our funds at any time, we recommend speaking
with your financial adviser to help you customize your investment plan.
* An investment in this Fund is neither insured nor guaranteed by the U.S.
Government.
+ There can be no assurance that this Fund will be able to maintain a stable
net asset value of $1.00 per share. This Fund is managed to maintain, and
has maintained, its stable $1.00 per share price.
Numbers to Keep Handy
For Literature: 800-874-3733
For Account Information: 800-821-5129
For Fund Information: 800-426-1130
[LOGO] Lord, Abbett & Co.
Investment Management
A Tradition of Performance Through Disciplined Investment
LAA-3-496
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203 (6/96)
