<PAGE>
Lord Abbett Affiliated Fund
Semi-Annual Report For the Six Months Ended April 30, 1998
[PHOTO OMITTED]
Helping you prepare
for tomorrow, today
[LOGO](R)
<PAGE>
Lord Abbett Affiliated Fund Building Investor Confidence Since 1934
A Tradition of
Value
Investing
[PHOTO OMITTED]
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.
- --------------------------------------------------------------------------------
Competitive Total Average Annual Rates of Total Return as of 4/30/98
Returns, Consistently
[THE FOLLOWING WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL]
For the past 40 years +12.7% per year
For the past 30 years +12.8% per year
For the past 20 years +16.3% per year
For the past 10 years +16.2% per year
For the past year +29.4% for the year
- --------------------------------------------------------------------------------
Consistency The Fund has increased in value 33 out of the last 40 fiscal years.
- --------------------------------------------------------------------------------
Large and Growing Shareholders taking dividends in cash saw an increase
Dividends in their dividend checks 35 out of the last 40 fiscal
years.(1)
- --------------------------------------------------------------------------------
Shareholder Lord Abbett Affiliated Fund's history demonstrates
Satisfaction its ability to help shareholders realize their
financial objectives. That's probably why, on
average, Affiliated Fund shareholders have owned the
Fund for over 15 years.(2)
- --------------------------------------------------------------------------------
SEC Average Annual SEC average annual rates of total return, at the
Total Returns Class A share maximum sales charge of 5.75%, for the
periods ended 3/31/98 were:
[THE FOLLOWING WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL]
1 year +26.80%
5 years +18.19%
10 years +15.62%
The Fund's SEC yield for the 30 days ended 4/30/98
for Class A shares was 1.43%.
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.
The Fund's fiscal year-end is 10/31. Results quoted above (unless stated
otherwise) are for periods ending 10/31/97 and reflect Class A share performance
at net asset value with all distributions reinvested.
(1) Capital gains were reinvested. Period ends 10/31/97.
(2) Based on a survey of Lord Abbett Affiliated Fund shareholders conducted by
Lord, Abbett & Co. in 1998.
See Important Information on page 8.
<PAGE>
Report to Shareholders
For the Six Months Ended April 30, 1998
[PHOTO OMITTED]
/s/ Robert S. Dow
- -----------------
Robert S. Dow
Chairman
May 12, 19981
"...we will continue to search out individual stocks that bring value to the
portfolio."
Lord Abbett Affiliated Fund completed the first half of its fiscal year on April
30, 1998. Below is an overview of class-specific data as of the close of the
six-month period.
Six Months
Ended April 30, 1998
-----------------------
Class A Class B Class C Class P Class Y
--------------------------------------------------------
(11/24/97* (3/26/98*
to 4/30/98) to 4/30/98)
- --------------------------------------------------------------------------------
Net asset value $15.46 $15.46 $15.46 $15.46 $15.47
Dividends $ 0.15 $ 0.09 $ 0.09 $ 0.06 --
Capital gains $ 1.39 $ 1.39 $ 1.39 -- --
Total return**+ +16.1% +15.7% +15.7% +9.1% +0.2%
We are pleased to report that your Fund enjoyed strong overall returns during
the past six months in an environment of steady economic growth and low
inflation. Financial stocks (such as banks), our largest sector weighting,
continued to perform well throughout the period and, within the sector, our
increased weighting in insurance stocks proved especially rewarding for the
portfolio. The ongoing crisis in the Asian economies, which decreased U.S.
exports to Asia, has had a slowing effect on the technology industry, causing
several holdings to underperform in recent months. We have increased our
weightings in consumer cyclical areas, such as retail, publishing and airlines.
Valuations have been depressed by investors' global economic concerns, yet the
U.S. consumers' economic prospects remain quite strong.
We believe the economy will gradually slow over the remainder of 1998, and that
inflation will remain moderate. In this environment, we intend to gradually
increase our holdings in selected cyclicals (stocks with earnings highly
sensitive to changes in general economic activity), an area that offers
attractively priced stocks and good growth potential. We also expect our
financial holdings, specifically insurance companies, to continue to add
significantly to your Fund's overall return in the coming months. In keeping
with our value management style, we will continue to search out individual
stocks that bring value to the portfolio.
In light of the continued struggles in the Asian markets, we remain watchful of
the situation, particularly in Japan, where weakness in the economy could have a
negative impact on world trade in general. However, we are encouraged by the
underlying fundamentals of the U.S. economy, including the positive benefits of
the newly balanced budget and the monetary policies set by the Federal Reserve
Board. Despite the concerns inherent in an extended bull market, we believe the
research and careful stock selection techniques of our value investment style
will enable your Fund to post attractive total returns going forward.
Thank you for your continued confidence in Lord Abbett Affiliated Fund. We look
forward to helping you achieve your financial goals in the years to come.
* Commencement of offering respective Class shares.
** Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
+ Not annualized.
1
<PAGE>
The Income Perspective
The Affiliated Advantage: A history of increasing dividends vs. fluctuating
income from guaranteed CDs
Income Generated from $100,000 Investments: 11/1/72-4/30/98
Year
Ended Six-Month CD Affiliated Fund
Oct. 31 Interest(1) Dividends(2)
- --------------------------------------------------------------------------------
1973 $ 8,040 $ 4,134
1974 10,420 4,517
1975 7,480 3,691
1976 6,060 4,748
1977 5,750 5,311
1978 8,180 5,880
1979 11,570 6,740
1980 13,280 8,098
1981 17,580 9,935
1982 14,020 10,611
1983 9,520 10,497
1984 11,270 11,079
1985 8,780 12,676
1986 7,040 13,671
1987 6,920 13,980
1988 7,910 15,017
1989 9,610 15,700
1990 8,560 14,918
1991 6,610 14,654
1992 4,000 14,905
1993 3,380 13,818
1994 4,520 13,396
1995 6,310 13,485
1996 5,630 14,830
1997 5,820 16,107
4/30/98 (6 months) 2,850 8,329
Interest/Dividend Total $ 211,110 $ 280,727
- -------------------------------------------------========== ==========
251/2 Years Later
Initial $100,000
Investment plus Growth $ 100,000 $ 933,336
- -------------------------------------------------========== ==========
Total Value $ 311,110 $1,214,063
- -------------------------------------------------========== ==========
The Real Cost of the
CD Guarantee $ 902,953
================================================================================
If capital gains and dividends had been reinvested, the Fund's total value would
have been $2,994,205
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 upside.
(1) Average of six-month CD rates available each period. Source: Lipper
Analytical Services, Inc.
(2) Reflects the deduction of the 3.75% sales charge for Class A share
investments of $100,000. Dividends were taken in cash; capital gains were
reinvested.
See Important Information on page 8.
2
<PAGE>
Affiliated's Growth Record
Results Based on Fiscal Year-End October 31(1)
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 4/30/98
(6 months
only)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth of Capital(2) + 6.9% +12.8% -12.0% +23.1% + 6.3% +14.3% +3.7% +17.6% +20.5% +23.3% +15.1%
Dividend Return(3) + 5.3 + 5.2 + 4.4 + 4.9 + 4.1 + 3.5 +3.0 + 2.9 + 2.7 + 2.5 + 1.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(4) +12.2 +18.0 - 7.6 +28.0 +10.4 +17.8 +6.7 +20.5 +23.2 +25.8 +16.1%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Class A share performance.
(2) Growth of capital reflects the reinvestment of capital gains
distributions.
(3) Dividend return reflects the reinvestment of dividends.
(4) 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 for class a share
investments of $1 million or more. For performance at the Class A share
maximum sales charge, as well as other information, please turn to the
inside front cover and pages 4 and 8.
Affiliated's Growth Helped Protect Your Purchasing Power
In our illustration, the prices noted for 1988 and 1998 are actual costs--then
and now. "Affiliated 1998" is what the 1988 amount would have grown to had it
been invested in the Fund.
Investments in Affiliated Fund (up 347.6%) surpassed increases in the cost of
living, which was up 38.8%(5) in these 10 years. Protection against the erosion
caused by inflation is one important way to maintain -- and enhance -- your
lifestyle.
<TABLE>
<CAPTION>
[PHOTO OMITTED] [PHOTO OMITTED] [PHOTO OMITTED] [PHOTO OMITTED] [PHOTO OMITTED]
One-Year Private One-Family House(7) U.S. Passport First-Class Stamp Income per
College Tuition(6) Capita(7)
<S> <C> <C> <C> <C> <C>
1988 $10,455 $112,800 $ 55 $ .25 $17,678
1998 $18,357 $155,967 $ 65 $ .32 $19,963
- ------------------------------------------------------------------------------------------------------------
Affiliated 1998 $46,801 $504,947 $ 246 $ 1.12 $79,136
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Affiliated's results reflect Class A share total return at net asset value, with
all distributions reinvested for the 10 years ended 4/30/98.
(5) Based on Consumer Price Index.
(6) National average.
(7) National average. 1998 figure is based on January-March figures.
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.
See Important Information on page 8.3
3
<PAGE>
The Total Return Perspective
The Fund is managed to anticipate change, to find good value and maintain a low
level of risk in relation to expected returns. The Fund's average shareholder
ownership of over 15 years reflects the success of this strategy.
A History of Consistent Performance
Growth of a $10,000 Fund Investment: 11/1/72-4/30/98(1)
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
- --------------------------------------------------------------------------------
1973 $ 9,462 $ 264 $ 428 $ 10,154
1974 7,192 390 755 8,337
1975 8,911 540 1,381 10,832
1976 10,643 878 2,229 13,750
1977 9,606 1,138 2,600 13,344
1978 9,344 1,369 3,231 13,944
1979 10,472 2,237 4,564 17,273
1980 11,955 3,698 6,459 22,112
1981 10,643 4,842 7,120 22,605
1982 11,260 6,668 9,483 27,411
1983 13,202 9,103 13,076 35,381
1984 12,100 11,147 14,043 37,290
1985 12,874 14,042 17,461 44,377
1986 15,367 21,317 23,839 60,523
1987 13,701 24,722 23,819 62,242
1988 12,651 31,639 25,541 69,831
1989 13,688 37,213 31,525 82,426
1990 11,693 34,299 30,194 76,186
1991 13,504 45,040 38,974 97,518
1992 13,845 49,681 44,092 107,618
1993 14,777 60,843 51,116 126,736
1994 14,475 66,708 53,996 135,179
1995 15,722 84,048 63,069 162,839
1996 17,087 110,132 73,437 200,656
1997 19,475 143,844 89,093 252,412
4/30/98 $ 20,289 $177,090 $ 95,754 $ 293,133
The dollar amounts of dividends and capital gains distributions reinvested in
shares were $62,078 and $121,313, respectively. The initial investment plus all
distributions reinvested amounted to $193,391. If dividends and capital gains
distributions had been withdrawn in cash, the amounts of these payments would
have been $13,943 and $19,671, respectively.
(1) Reflects the deduction of the Class A share maximum 5.75% sales charge for
investments under $50,000. All distributions were reinvested.
See Important Information on page 8.
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 Fund 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
Over 25 1/2 Years(1)
Affiliated: 14.2%
S&P 500: 13.7%
CDs: 8.2%
Inflation: 5.4%
1972-1974
The last protracted bear market; S&P 500 declined 28.8%. Affiliated Fund held
the decline to 10.7%
1980-1982
Interest rates rose dramatically; prime rate hit 20%. Economy suffered a
recession. During these two years, Affiliated rose 24.0%.
1986-1991
Two corrections jolted the stock market; war and recession followed a year
later. Affiliated rose 61.1% over this period.
AFFILIATED FUND S&P 500 6-MONTH CD INFLATION
11/1/72 10,000 10,000 10,000 10,000
10/31/73 10,154 9,905 10,804 10,780
10/31/74 8,337 7,053 11,930 12,080
10/31/75 10,832 8,886 12,822 12,979
10/31/76 13,750 10,678 13,599 13,688
10/31/77 13,344 10,033 14,381 14,563
10/31/78 13,944 10,670 15,557 15,863
10/31/79 17,273 12,317 17,357 17,778
10/31/80 22,112 16,267 19,663 20,047
10/31/81 22,605 16,359 23,119 22,080
10/31/82 27,411 19,024 26,361 23,215
10/31/83 35,381 24,341 28,870 23,877
10/31/84 37,290 25,891 32,124 24,894
10/31/85 44,377 30,902 34,944 25,697
10/31/86 60,523 41,282 37,404 26,076
10/31/87 62,242 43,924 39,993 27,258
10/31/88 69,831 50,471 43,156 28,416
10/31/89 82,426 63,735 47,303 29,693
10/31/90 76,186 58,984 51,352 31,560
10/31/91 97,518 78,717 54,747 32,482
10/31/92 107,618 86,544 56,937 33,522
10/31/93 126,736 99,343 58,861 34,444
10/31/94 135,179 103,175 61,522 35,343
10/31/95 162,839 130,423 65,404 36,336
10/31/96 200,656 161,729 69,086 37,423
10/31/97 252,412 213,642 73,107 38,203
4/30/98 293,133 261,657 75,190 38,416
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 the Class A share maximum offering price
from 11/1/72 through 4/30/98.
(2) Average of six-month CD rates available each period. Source: Lipper
Analytical Services, Inc.
See Important Information on page 8.
5
<PAGE>
The Impact of a Disciplined Investment Plan
Perfectly timing the market is impossible because, often, 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, 1997, 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.
Your investment professional can help you discipline your investing and set up a
systematic plan you are comfortable with
Here's What Happened...
Investment A Timing
Account
Date of Cumulative Value
Investments Investments at Year-End
- --------------------------------------------------------------------------------
2/28/78 $ 5,000 $ 5,275
11/7/79 10,000 12,032
4/21/80 15,000 21,345
9/25/81 20,000 26,521
8/12/82 25,000 39,273
1/3/83 30,000 55,298
7/24/84 35,000 64,741
1/4/85 40,000 88,293
1/22/86 45,000 114,544
10/19/87 50,000 123,527
1/20/88 55,000 144,869
1/3/89 60,000 184,947
10/11/90 65,000 180,640
1/9/91 70,000 226,503
10/9/92 75,000 259,853
1/20/93 80,000 299,716
4/4/94 85,000 317,187
1/30/95 90,000 424,114
1/10/96 95,000 515,120
4/11/97 100,000 650,822
Account Value on 12/31/97 $650,822
- -----------------------------------------------------------------------=========
Average Annual Total Return 17.6%
================================================================================
Investment B Systematic Investing
Account
Date of Cumulative Value
Investments Investments at Year-End
- --------------------------------------------------------------------------------
1/2/78 $ 5,000 $ 4,876
1/2/79 10,000 12,362
1/2/80 15,000 21,371
1/2/81 20,000 26,136
1/4/82 25,000 38,225
1/3/83 30,000 53,982
1/2/84 35,000 62,773
1/2/85 40,000 85,745
1/2/86 45,000 111,300
1/2/87 50,000 119,742
1/4/88 55,000 140,336
1/2/89 60,000 179,347
1/2/90 65,000 174,448
1/2/91 70,000 218,744
1/2/92 75,000 251,271
1/4/93 80,000 289,979
1/3/94 85,000 306,834
1/2/95 90,000 410,518
1/2/96 95,000 489,620
1/2/97 100,000 630,234
Account Value on 12/31/97 $630,234
- -----------------------------------------------------------------------=========
Average Annual Total Return 16.8%
================================================================================
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 Class A share maximum
sales charge of 5.75% for account values up to $50,000 and at the applicable
reduced sales charges thereafter under rights of accumulation. Periodic
investment plans do not always return a profit and do not protect against losses
in a declining market. In addition, since periodic investment plans involve
continuous investment in securities regardless of fluctuating price levels,
investors should consider their financial ability to continue their purchases
through periods of low price levels. If held until 3/31/98 (with no additional
investments made), Investment A and Investment B would have been worth $720,802
and $697,999, respectively.
For performance at the Class A share maximum sales charge, please turn to the
inside front cover.
6
<PAGE>
Who Owns the Fund?
Investor Profile of Lord Abbett Affiliated Fund
- --------------------------------------------------------------------------------
Fiduciaries Custodians for Minors 19,094
Pension, Profit-Sharing and 401(k) Retirement Plans 14,942
Trusts 11,009
457 Retirement and 403(b) Plans 3,993
Estates 497
- --------------------------------------------------------------------------------
Institutions Broker-held Accounts 86,576
Banks, Credit Unions and Other Financial Institutions 433
Corporations 460
Religious, Charitable and welfare organizations 390
Clubs and Fraternal Organizations 104
Cemeteries 64
Nursing homes and hospitals 34
Colleges and universities 33
Government Agencies 25
- --------------------------------------------------------------------------------
Individuals Single and Joint accounts 80,440
IRAs 50,424
Total Accounts in Affiliated on 4/30/98 268,518
================================================================================
Affiliated Shareholder Survey Results
We would like to thank those shareholders who completed the random survey that
we sent out with last year's annual report. While not all respondants answered
every question, we want to share a few of the survey highlights with you.
o The average owner of Affiliated Fund has been a shareholder for over 15
years.
o Over 58% of shareholders have made additional investments to Affiliated
Fund.
o 95% of shareholders are either "very satisfied" or "satisfied" with
Affiliated Fund relative to their other investments.
o The primary investment goals of our shareholders are:
-- Retirement
-- Current Dividend Income
-- Future Education Expenses
-- A Hedge Against Inflation
The survey also showed that more than 63% of Affiliated Fund shareholders rely
primarily on their investment professional for financial advice (versus, for
example, accountants, attorneys, bankers, friends and relatives, television
business programs or personal finance publications).
We appreciate your responses to our survey as well as your suggestions. Our
continuing goal is to help you achieve your financial objectives.
7
<PAGE>
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. The Fund issues additional
classes of shares, with distinct pricing options. For a full discussion of the
differences in pricing alternatives, please call 800-874-3733 and ask for the
Fund's current prospectus. If used as sales material after 6/30/98, this report
must be accompanied by Lord Abbett's Performance Quarterly for the most recently
completed calendar quarter.
Statement of Net Assets
April 30, 1998
Investments Shares Market Value
================================================================================
Investments in Securities 98.56%
================================================================================
Common Stocks and Convertible Securities 98.56%
================================================================================
Agricultural Products Archer-Daniels-
1.51% Midland Co. 4,200,000 $ 90,300,000
Pioneer Hi-Bred
International, Inc.+ 1,200,000 45,300,000
Total 135,600,000
- -------------------------------------------------------------------=============
Airlines 1.70% Delta Air Lines Inc. 700,000 81,375,000
U.S. Airways Group Inc.+ 1,000,000 71,125,000
Total 152,500,000
- -------------------------------------------------------------------=============
Apparel 1.84% Liz Claiborne, Inc. 1,250,000 61,484,375
VF Corp. 2,003,300 104,171,600
Total 165,655,975
- -------------------------------------------------------------------=============
Automobiles 1.36% General Motors Corp. 1,810,600 121,989,175
- -------------------------------------------------------------------=============
Banks: Money BankAmerica Corp. 700,000 59,500,000
Center 3.52% Bankers Trust NY Corp. 300,000 38,737,500
Chase Manhattan Corp. 902,350 125,031,872
First Chicago NBD 1,002,350 93,093,256
Total 316,362,628
- -------------------------------------------------------------------=============
Banks: Regional Banc One Corp.+ 1,600,000 94,100,000
5.56% BankBoston, N.A. 500,000 53,968,750
Comerica Inc. 800,000 53,550,000
First Union Corp.+ 2,004,400 121,015,650
Mellon Bank Corp. 1,005,200 72,374,400
Washington Mutual Inc.+ 1,500,000 105,093,750
Total 500,102,550
- -------------------------------------------------------------------=============
Brokers 2.28% Morgan Stanley,
Dean Witter,
Discover & Co. 2,600,000 205,075,000
- -------------------------------------------------------------------=============
Chemicals 2.50% Dow Chemical Co. 801,450 77,490,196
DuPont DeNemours,
E.I. & Co.+ 600,000 43,687,500
Lyondell
Petrochemical Co.+ 1,500,000 49,312,500
Rohm & Haas Co. 500,000 53,906,250
Total 224,396,446
- -------------------------------------------------------------------=============
Shares or
Principal
Investments Amount Market Value
================================================================================
Communications Corning Inc.+ 1,900,000 $ 76,000,000
Equipment 1.27% Lucent Technologies Inc. 500,000 38,062,500
Total 114,062,500
- -------------------------------------------------------------------=============
Computer: Digital Equipment Corp. 1,202,700 66,900,188
Hardware 5.97% Hewlett-Packard Co. 2,405,100 181,134,093
International Business
Machines Corp. 1,600,000 185,400,000
Sun Microsystems Inc.+ 2,500,000 102,968,750
Total 536,403,031
- -------------------------------------------------------------------=============
Computer: EMC Corp.+ 2,000,000 92,250,000
Peripherals 2.52% EMC Corp.
Conv. Sub. Notes
3 1/4/2002 15,000M 32,076,562
Seagate Technology Inc. 3,828,400 102,170,425
Total 226,496,987
- -------------------------------------------------------------------=============
Containers 0.70% Crown Cork & Seal Inc.+ 1,205,800 62,776,963
- -------------------------------------------------------------------=============
Cosmetics 0.82% International Flavors &
Fragrances Inc.+ 1,500,000 73,406,250
- -------------------------------------------------------------------=============
Drugs/Health Care American Home
Products 2.43% Products Corp. 1,200,000 111,750,000
SmithKline Beecham
plc ADS 1,000,000 59,562,500
Warner-Lambert Co. 250,000 47,296,875
Total 218,609,375
- -------------------------------------------------------------------=============
Electric Equipment
2.48% Emerson Electric Co. 3,500,000 222,687,500
- -------------------------------------------------------------------=============
Electric Power Allegheny Energy Inc.+ 1,750,000 53,593,750
6.92% Baltimore Gas &
Electric Co. 2,500,000 78,750,000
Carolina Power &
Light Co. 3,000,000 129,187,500
CINergy Corp. 1,500,000 52,312,500
Duke Power Co. 2,000,000 115,750,000
Florida Progress Corp. 2,000,000 81,250,000
FPL Group+ 1,800,000 111,712,500
Total 622,556,250
- -------------------------------------------------------------------=============
8
<PAGE>
Statement of Net Assets
April 30, 1998
Investments Shares Market Value
================================================================================
Food 6.49% Best Foods 2,004,400 $ 109,991,450
ConAgra Inc. 4,000,000 116,750,000
Heinz H.J. Co. 3,000,000 163,500,000
Ralston Purina Co.+ 706,100 74,846,600
Sara Lee Corp. 2,000,000 119,125,000
Total 584,213,050
- -------------------------------------------------------------------=============
Furniture and
Appliances 0.80% Whirlpool Corp. 1,000,000 72,000,000
- -------------------------------------------------------------------=============
Health Care
Products 1.85% Baxter International Inc. 3,000,000 166,312,500
- -------------------------------------------------------------------=============
Health Care Aetna Inc.
Services 1.93% $4.758 Conv. Pfd+ 1,500,000 117,750,000
United Healthcare Corp.+ 800,000 56,200,000
Total 173,950,000
- -------------------------------------------------------------------=============
Household Fort James Corp. 3,200,000 158,800,000
Products 3.10% Kimberly Clark Corp. 2,356,700 119,602,525
Total 278,402,525
- -------------------------------------------------------------------=============
Housewares 1.48% Fortune Brands Inc. 3,600,000 132,750,000
- -------------------------------------------------------------------=============
Insurance: American General
Life 3.75% Corporation+ 2,500,000 166,562,500
Jefferson-Pilot Corp. 939,200 55,119,300
Transamerica Corp. 1,001,550 115,679,025
Total 337,360,825
- -------------------------------------------------------------------=============
Insurance: Allstate Corp. 1,100,000 105,875,000
Property and Casualty Chubb Corp. 2,800,000 221,025,000
7.59% CIGNA Corp. 601,250 124,421,172
Providian Corp. 800,000 48,150,000
St. Paul Companies Inc.+ 1,200,000 101,700,000
The Progressive
Corporation 600,000 81,262,500
Total 682,433,672
- -------------------------------------------------------------------=============
Machinery:
Diversified 2.60% Deere & Co. 4,005,750 234,086,016
- -------------------------------------------------------------------=============
Miscellaneous Houston Inds Inc.
1.15% $3.22 Conv. Pfd 583,000 40,445,625
Textron, Inc. 800,000 62,600,000
Total 103,045,625
- -------------------------------------------------------------------=============
Natural Gas:
Diversified 0.99% Sonat Inc. 2,000,000 88,750,000
- -------------------------------------------------------------------=============
Natural Gas: Consolidated
Pipelines 0.51% Natural Gas Co.+ 800,000 46,000,000
- -------------------------------------------------------------------=============
Oil: Domestic Occidental
Integrated 1.05% Petroleum Corp. 3,200,000 94,200,000
- -------------------------------------------------------------------=============
Oil: International British Petroleum
Integrated 7.01% Ltd. ADS+ 1,500,000 141,750,000
Chevron Corp.+ 1,200,000 99,225,000
ENI ADS+ 1,000,000 66,125,000
Exxon Corp. 1,300,000 94,818,750
Shares or
Principal
Investments Amount Market Value
================================================================================
Mobil Corp. 2,300,000 $ 181,700,000
Total S.A.
Sponsored ADR+ 800,000 47,000,000
Total 630,618,750
- -------------------------------------------------------------------=============
Paper and Forest Bowater Inc.+ 1,502,500 84,046,094
Products 1.79% Georgia-Pacific Corp.+ 500,000 38,593,750
Georgia Pacific
Timber Group 1,500,000 38,437,500
Total 161,077,344
- -------------------------------------------------------------------=============
Photographic 0.64% Eastman Kodak Co. 800,000 57,750,000
- -------------------------------------------------------------------=============
Pollution Control
0.55% U.S.A. Waste Services Inc.+ 1,000,000 49,062,500
- -------------------------------------------------------------------=============
Printing and
Publishing 0.54% Dow Jones & Co., Inc. 1,000,000 48,687,500
- -------------------------------------------------------------------=============
Retail: Department May Department Stores
and Merchandise Company 2,400,000 148,050,000
4.40% Penney, J.C. Co., Inc.+ 1,000,000 71,062,500
Wal-Mart Stores Inc.+ 3,500,000 176,968,750
Total 396,081,250
- -------------------------------------------------------------------=============
Retail: Specialty
0.83% Toys R Us Inc.+ 2,703,800 74,523,488
- -------------------------------------------------------------------=============
Telephone: Bell Atlantic Corp.+ 1,251,300 117,074,756
Local 2.92% SBC Communications Inc. 3,500,000 145,031,250
Total 262,106,006
- -------------------------------------------------------------------=============
Telephone: AT&T Corp.+ 2,700,000 162,168,750
Long Distance 2.87% Worldcom Inc.+ 2,250,000 96,257,813
Total 258,426,563
- -------------------------------------------------------------------=============
Tobacco 0.34% Gallaher Group plc ADS 1,500,000 30,843,750
- -------------------------------------------------------------------=============
Total Investments in
Common Stocks and
Convertible Securities
(Cost $6,273,894,548) 8,861,361,994
================================================================================
Other Assets, Less Liabilities 1.44%
================================================================================
Short-term American Express
Investments Credit Corp.
5.51% due 5/1/1998 50,000M 50,000,000
American Express
Credit Corp.
5.51% due 5/1/1998 49,600M 49,600,000
American Express
Credit Corp.
5.51% due 5/4/1998 45,000M 45,000,000
Dow Chemical Co.
5.52% due 5/1/1998 30,000M 29,995,400
Total 174,595,400
------------------------------------------=============
Other (See Note 5) 939,976,630
------------------------------------------=============
Total Short-term Investments
(Cost $1,114,572,030) 1,114,572,030
- -------------------------------------------------------------------=============
Cash 10,472,595
- -------------------------------------------------------------------=============
9
<PAGE>
Statement of Net Assets
April 30, 1998
Market Value
================================================================================
Receivable for: Securities sold $ 81,473,564
Other 23,346,640
Total Other Assets 1,229,864,829
- -------------------------------------------------------------------=============
Payable for: Securities purchased 1,087,747,778
Other 12,352,267
Total Liabilities 1,100,100,045
- -------------------------------------------------------------------=============
Total Other Assets,
Less Liabilities 129,764,784
================================================================================
Net Assets 100.00% $8,991,126,778
================================================================================
================================================================================
Class A Shares-Net asset value
($8,595,482,175 / 555,933,916
shares outstanding) $15.46
Class B Shares-Net asset value
($273,119,995 / 17,669,617
shares outstanding) $15.46
Class C Shares-Net asset value
($104,024,098 / 6,727,646
shares outstanding) $15.46
Class P Shares-Net asset value
($1,874,675 / 121,257
shares outstanding) $15.46
Class Y Shares-Net asset value
($16,625,835 / 1,074,793
shares outstanding) $15.47
+Securities (or a portion of securities) on loan. See Note 5.
See Notes to Financial Statements.
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,
1998.
Additions
AT&TCorp.
Allstate Corp.
Banc One Corp.
Bankers Trust NYCorp.
British Petroleum Ltd. ADS
Crown Cork &Seal Inc.
Delta Air Lines Inc.
Digital Equipment Corp.
Dow Jones & Co., Inc.
DuPont DeNemours, E.I. & Co.
Eastman Kodak Co.
Georgia Pacific Timber Group
Houston Inds Inc. $3.22 Conv. Pfd.
Jefferson-Pilot Corp.
Occidental Petroleum Corp.
Penney, J.C. Co., Inc.
Ralston Purina Co.
Sun Microsystems Inc.
U.S.A. Waste Services Inc.
U.S. Airways Group Inc.
Worldcom Inc.
- --------------------------------------------------------------------------------
Eliminations
Amoco Corp.
Boeing Co.
Corn Products International Inc.
Deluxe Corp.
Hershey Foods Corp.
Intel Corp.
International Paper Co.
MCI Communications Corp.
Minnesota Mining & Manufacturing Co.
Motorola Inc.
Schlumberger Ltd.
Union Carbide Corp.
Westvaco Corporation10
10
<PAGE>
Statement of Operations
Investment Income Six Months Ended April 30, 1998
- --------------------------------------------------------------------------------
Income Dividends $ 86,154,581
Interest 10,445,288
Total income $ 96,599,869
- --------------------------------------------------------------------------------
Expenses Management fee 12,899,902
12b-1 distribution plan-Class A 9,119,892
12b-1 distribution plan-Class B 1,045,731
12b-1 distribution plan-Class C 390,311
12b-1 distribution plan-Class P 2,978
Shareholder servicing 3,308,682
Reports to shareholders 347,921
Registration 171,773
Professional 117,938
Directors' fees 115,664
Other 156,989
-----------
Total expenses before reductions 27,677,781
Expense reductions (568,716) 27,109,065
------------------------------
Net investment income 69,490,804
---------------------------------------------------------------------
Realized and Unrealized Gain on Investments
================================================================================
Realized gain from investment transactions
Proceeds from sales 2,517,037,708
Cost of securities sold 1,862,014,425
---------------------------------------------------------------------
Net realized gain 655,023,283
---------------------------------------------------------------------
Unrealized appreciation of investments 508,527,771
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1,163,551,054
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $1,233,041,858
================================================================================
See Notes to Financial Statements.
11
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Year Ended
Ended 4/30, October 31,
Increase (Decrease) in Net Assets 1998 1997
====================================================================================================================================
<S> <C> <C>
Operations Net investment income $ 69,490,804 $ 151,565,568
Net realized gain from investment transactions 655,023,283 728,137,697
Net unrealized appreciation of investments 508,527,771 682,759,831
Net increase in net assets resulting from operations 1,233,041,858 1,562,463,096
------------------------------------------------------------------------------------------------------------------
Undistributed net investment income included in price of share transactions 99,089 46,074
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (76,562,219) (147,797,223)
Class B (1,033,463) (866,777)
Class C (421,741) (355,394)
Class P (7,152) --
Total (78,024,575) (149,019,394)
------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gain from investment
transactions:
Class A (701,764,180) (480,477,970)
Class B (14,606,206) (1,534,145)
Class C (5,544,535) (638,747)
Total (721,914,921) (482,650,862)
------------------------------------------------------------------------------------------------------------------
Total distributions (799,939,496) (631,670,256)
------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Net proceeds from sales of shares 522,428,902 756,660,354
Net asset value of shares issued in reinvestment of net investment income
and realized gain from investment transactions 654,767,035 502,763,678
Total 1,177,195,937 1,259,424,032
------------------------------------------------------------------------------------------------------------------
Cost of shares reacquired (317,024,706) (593,173,986)
------------------------------------------------------------------------------------------------------------------
Increase in net assets derived from capital share transactions 860,171,231 666,250,046
------------------------------------------------------------------------------------------------------------------
Increase in net assets 1,293,372,682 1,597,088,960
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
Beginning of period 7,697,754,096 6,100,665,136
------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income
of $19,530,647 and $27,965,329, respectively) $ 8,991,126,778 $ 7,697,754,096
==================================================================================================================
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A Shares
----------------------------------------------------------------------------
Six Months Ended Year Ended October 31,
Per Share Operating Performance: April 30, 1998 1997 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 14.84 $ 13.02 $ 11.98 $ 11.03 $ 11.26 $ 10.55
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .125 .30 .30 .32 .31 .31
Net realized and unrealized gain on investments 2.030 2.85 2.23 1.70 .38 1.43
Total from investment operations 2.155 3.15 2.53 2.02 .69 1.74
--------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.145) (.30) (.30) (.30) (.32) (.35)
Distributions from net realized gain (1.39) (1.03) (1.19) (.77) (.60) (.68)
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 15.46 $ 14.84 $ 13.02 $ 11.98 $ 11.03 $ 11.26
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 16.13%(d) 25.80% 23.23% 20.46% 6.66% 17.76%
====================================================================================================================================
Ratios to Average Net Assets:
Expenses(b) 0.31%(d) 0.65%(b) 0.66% 0.63% 0.63% 0.63%
Net investment income 0.85%(d) 2.15%(b) 2.61% 2.90% 2.91% 2.95%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Class B Shares
-----------------------------------------------
Six Months Ended Year Ended 8/1/1996(c)
April 30, October 31, to
Per Share Operating Performance: 1998 1997 10/31/96
=====================================================================================================
<S> <C> <C> <C>
Net asset value, beginning of period $ 14.84 $ 13.03 $ 11.88
- -----------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .081 .20 .060
Net realized and unrealized gain on investments 2.022 2.84 1.142
Total from investment operations 2.103 3.04 1.202
-------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.093) (.20) (.052)
Distributions from net realized gain (1.39) (1.03) --
-------------------------------------------------------------------------------------------------
Net asset value, end of period $ 15.46 $ 14.84 $ 13.03
- -----------------------------------------------------------------------------------------------------
Total Return(a) 15.70%(d) 24.78% 10.15%(d)
=====================================================================================================
Ratios to Average Net Assets:
Expenses(b) 0.69%(d) 1.42% 0.34%(d)
Net investment income 0.45%(d) 1.19% 0.27%(d)
=================================================================================================
<CAPTION>
Class C Shares
-----------------------------------------------
Six Months Ended Year Ended 8/1/96(c)
April 30, October 31, to
Per Share Operating Performance: 1998 1997 10/31/96
=====================================================================================================
<S> <C> <C> <C>
Net asset value, beginning of period $ 14.84 $ 13.02 $ 11.88
- -----------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .088 .22 .062
Net realized and unrealized gain on investments 2.015 2.83 1.130
Total from investment operations 2.103 3.05 1.192
-------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.093) (.20) (.052)
Distributions from net realized gain (1.39) (1.03) --
-------------------------------------------------------------------------------------------------
Net asset value, end of period $ 15.46 $ 14.84 $ 13.02
- -----------------------------------------------------------------------------------------------------
Total Return(a) 15.69%(d) 24.88% 10.07%(d)
=====================================================================================================
Ratios to Average Net Assets:
Expenses(b) 0.70%(d) 1.34% 0.33%(d)
Net investment income 0.45%(d) 1.28% 0.25%(d)
=================================================================================================
</TABLE>
Class P Class Y
Shares Shares
---------- ----------
12/8/97(c) 3/27/98(c)
Per Share Operating Performance: to 4/30/98 to 4/30/98
================================================================================
Net asset value, beginning of period $ 14.24 $ 15.44
- --------------------------------------------------------------------------------
Income from investment operations
Net investment income .076 .016
Net realized and unrealized gain on investments 1.206 .014
Total from investment operations 1.282 .03
----------------------------------------------------------------------------
Distributions
Dividends from net investment income (.062) --
----------------------------------------------------------------------------
Net asset value, end of period $ 15.46 $ 15.47
- --------------------------------------------------------------------------------
Total Return(a)(d) 9.05% 0.19%
================================================================================
Ratios to Average Net Assets:
Expenses(d) 0.33%(d) 0.04%
Net investment income 0.53%(d) 0.11%
============================================================================
<TABLE>
<CAPTION>
Six Months Ended Year Ended October 31,
Supplemental Data for All Classes: April 30, 1998 1997 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net assets, end of period (000) $8,991,127 $7,697,754 $6,100,665 $4,964,525 $4,229,586 $4,174,033
Portfolio turnover rate 29.93% 46.41% 47.06% 53.84% 51.48% 45.15%
Average commissions
per share paid on equity
transactions $ .060 $ .062 $ .064 $ .063 n/a n/a
================================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) The ratios for 1997 and 1998 include expenses paid through an expense
offset arrangement.
(c) Commencement of offering respective class shares.
(d) Not annualized.
See Notes to Financial Statements.
13
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Lord Abbett Affiliated Fund, Inc. (the "Company") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to make
certain estimates and assumptions at the date of the financial statements. The
following is a summary of significant accounting policies consistently followed
by the Company:
(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.
(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. 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). Realized gains and losses from security
transactions are calculated on the identified cost basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Net
investment income (other than distribution and service fees) and realized and
unrealized gains or losses are allocated to each class of shares based upon the
relative proportion of net assets at the beginning of the day.
(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.
2. Management Fee and Other Transactions with Affiliates
The Company has a management agreement with Lord, Abbett &Co. ("Lord Abbett")
pursuant to which Lord Abbett supplies the Company with investment management
services and executive and other personnel, pays the remuneration of officers,
provides office space and pays for ordinary and necessary office and clerical
expenses relating to research, statistical work and the supervision of the
Company's investment portfolio. 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.
The Company has Rule 12b-1 plans and agreements (the "Class A, Class B and Class
C Plans") with Lord Abbett Distributor LLC ("Distributor"), an affiliate of Lord
Abbett. The Company makes payments to Distributor which uses or passes on such
payments to authorized institutions. Pursuant to the Class A Plan, the Company
pays Distributor (1) an annual service fee of 0.15% of the average daily net
asset value of shares sold prior to June 1, 1990 and 0.25% of the average daily
net asset value of shares sold on or after that date, (2) a one-time
distribution fee of up to 1% on certain qualifying purchases and (3) a
supplemental annual distribution fee of 0.10% of the average daily net assets of
Class A shares serviced by certain qualifying institutions. Pursuant to the
Class B Plan, the Company pays Distributor an annual service and distribution
fee of 0.25% and 0.75%, respectively, of the average daily net asset value of
the Class B shares. Pursuant to the Class C Plan, the Company pays Distributor
(1) a service fee and a distribution fee, at the time such shares are sold, not
to exceed 0.25% and 0.75%, respectively, of the net asset value of such shares
sold and (2) at each quarter-end after the first anniversary of the sale of such
shares, a service fee and a distribution fee at an annual rate not to exceed
0.25% and 0.75%, respectively, of the average annual net asset value of such
shares outstanding. Pursuant to the Class P Plan, the Company pays Distributor
an annual service and distribution fee of 0.20% and 0.25%, respectively, of the
average daily net asset value of the Class P shares. Class Y does not have a
Plan.
Distributor received $1,705,759 representing payment of commissions on sales of
Class A shares after deducting $10,573,780 allowed to authorized distributors as
concessions. Certain of the Company's officers and directors have an interest in
Lord Abbett.
3. Distributions
Dividends from net investment income are declared quarterly. Net realized gain
from investment transactions is distributed to shareholders annually.
Accumulated undistributed net realized gain at April 30, 1998 for financial
reporting purposes aggregated $704,263,636.
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.
Distributions declared on May 5, 1998 were as follows:
Rate Per Aggregate
Net Investment Income Share Amount
- --------------------------------------------------------------------------------
Class A $.060 $33,360,702
Class B $.030 $ 533,707
Class C $.030 $ 203,356
Class P $.051 $ 6,184
Class Y $.064 $ 69,446
- --------------------------------------------------------------------------------
4. Capital
The Company has authorized 1,150 million shares of $.001 par value capital stock
designated Class A, 100 million shares of $.001 par value capital stock
designated Class B, 100 million shares of $.001 par value capital stock
designated Class C, 75 million shares of $.001 par value capital stock
designated Class P and 75 million shares of $.001 par value capital stock
designated Class Y. Paid in capital amounted to $5,679,865,049 at April 30,
1998. Transactions in shares of capital stock were as follows:
Six Months Ended Year Ended
April 30, 1998 October 31, 1997
-----------------------------------------------------------
Class A Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 25,043,393 $ 363,259,909 41,249,386 $ 575,438,146
Shares issued to
shareholders in
reinvestment of net
investment income
and realized gain
from investment
transactions 47,174,709 634,068,094 38,407,350 499,579,938
Total 72,218,102 997,328,003 79,656,736 1,075,018,084
- --------------------------------------------------------------------------------
Shares reacquired (20,784,781) (302,740,849) (41,932,725) (584,724,363)
Increase in shares 51,433,321 $ 694,587,154 37,724,011 $ 490,293,721
- --------------------------------------------------------------------------------
14
<PAGE>
Notes to Financial Statements
Six Months Ended Year Ended
April 30, 1998 October 31, 1997
-----------------------------------------------------------
Class B Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 6,878,682 $ 100,081,427 9,261,683 $ 131,415,142
Shares issued to
shareholders in
reinvestment of net
investment income
and realized gain
from investment
transactions 1,116,738 15,027,684 169,389 2,251,936
Total 7,995,420 115,109,111 9,431,072 133,667,078
- --------------------------------------------------------------------------------
Shares reacquired (577,000) (8,448,505) (353,069) (5,141,805)
Increase in shares 7,418,420 $ 106,660,606 9,078,003 $ 128,525,273
- --------------------------------------------------------------------------------
Six Months Ended Year Ended
April 30, 1998 October 31, 1997
-----------------------------------------------------------
Class C Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 2,795,842 $ 40,683,213 3,536,298 $ 49,807,066
Shares issued to
shareholders in
reinvestment of net
investment income
and realized gain
from investment
transactions 420,916 5,664,106 70,220 931,804
Total 3,216,758 46,347,319 3,606,518 50,738,870
- --------------------------------------------------------------------------------
Shares reacquired (399,087) (5,769,122) (229,278) (3,307,818)
Increase in shares 2,817,671 $ 40,578,197 3,377,240 $ 47,431,052
- --------------------------------------------------------------------------------
December 8, 1997
(Commencement
of Offering
Class P Shares) to
April 30, 1998
-------------------------------
Class P Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 125,085 $ 1,787,896
Shares issued to
shareholders in
reinvestment of net
investment income
and realized gain
from investment
transactions 514 7,151
Total 125,599 1,795,047
- --------------------------------------------------------------------------------
Shares reacquired (4,342) (66,270)
Increase in shares 121,257 $ 1,728,777
- --------------------------------------------------------------------------------
March 27, 1998
(Commencement
of Offering
Class Y Shares) to
April 30, 1998
------------------------------
Class Y Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 1,074,793 $16,616,497
Increase in shares 1,074,793 $16,616,497
- --------------------------------------------------------------------------------
5. Portfolio Securities
The Company loans its portfolio securities to brokers to generate additional
revenue to the Fund. As of April 30, 1998, the market value of securities on
loan to brokers was $922,693,596, for which the Company has obtained collateral
aggregating $941,147,468, 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 $2,645,340,577 and
$2,243,498,876, respectively.
As of April 30, 1998, unrealized appreciation based on cost for federal income
tax purposes aggregated $2,587,467,446 of which $2,631,000,635 related to
appreciated securities and $43,533,189 related to depreciated securities. The
cost of investments for federal income tax purposes is substantially the same as
that used for financial reporting purposes.
6. Directors' Remuneration
The Directors of the Company associated with Lord Abbett and all officers of the
Company receive no compensation from the Company for acting as such. Outside
Directors' fees and retirement costs are allocated among all funds in the Lord
Abbett group based on the net assets of each fund. Directors' fees payable at
April 30, 1998 were $2,226,151.
7. Expense Reduction
The Company has entered into an arrangement with its transfer agent whereby
credits realized as a result of uninvested cash balances were used to reduce a
portion of the Company's expenses.
8. Line of Credit
The Company along with certain other funds managed by Lord Abbett, have
available a $200,000,000 unsecured revolving credit facility ("Facility"), from
a consortium of banks, to be used for temporary or emergency purposes as an
additional source of liquidity to fund redemptions of investor shares. Any
borrowings under this Facility will bear interest at current market rates as
defined in the agreement. The fee for this Facility is 0.05% per annum. There
were no loans outstanding pursuant to this Facility at April 30, 1998, nor was
the Facility utilized at any time during the year.
15
<PAGE>
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, 1998, the related statements of operations
and of changes in net assets and the financial highlights for each of the
periods presented. 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, 1998 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, 1998, the results of its operations, the
changes in its net assets and the financial highlights for each of the periods
presented in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
May 29,1998
Our Management
Board of Directors
Robert S. Dow
E. Wayne Nordberg
E. Thayer Bigelow*+
Stewart S. Dixon*
John C. Jansing*
C. Alan MacDonald*+
Hansel B. Millican, Jr.*
Thomas J. Neff*+
* Outside Director
+ Audit Committee
Officers
Robert S. Dow, Chairman and President
W. Thomas Hudson, Jr., Executive Vice
President and Portfolio Manager
Paul A. Hilstad, Vice President
and Secretary
Stephen I. Allen, Vice President
Zane E. Brown, Vice President
Daniel E. Carper, Vice President
Daria L. Foster, Vice President
Robert G. Morris, Vice President
Robert J. Noelke, Vice President
E. Wayne Nordberg, Vice President
John J. Walsh, Vice President
Lawrence H. Kaplan, Vice President
and Assistant Secretary
Thomas F. Konop, Vice President
and Assistant Secretary
A. Edward Oberhaus III, Vice President
Keith F. O'Connor, Vice President
Donna McManus, Treasurer
Joseph Van Dyke, Assistant Treasurer
Lydia Guzman, Assistant Secretary
Robert M. Hickey, Assistant Secretary
Investment Manager and
Underwriter
Lord, Abbett & Co. and
Lord Abbett Distributor LLC
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) 1998 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.
16
<PAGE>
Lord, Abbett & Co.
A Tradition of Performance Through
Disciplined
Investing
[PHOTO OMITTED]
(standing, left to right)
Daniel H. Frascarelli
Director--Portfolio management Team
Eli Salzmann
Director of Research
Melanie M. Smith
Equity Analyst
(seated, left to right)
W. Thomas Hudson, Jr.
Partner and Portfolio Manager--
Lord Abbett Affiliated Fund
Robert G. Morris
Partner and Director of Equity Investments
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 59 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) and
Lord Abbett Distributor LLC (the Fund's underwriter). 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, E. Thayer Bigelow, Jr.
E. Thayer Bigelow, Jr.
Director--Lord Abbett
Affiliated Fund
[PHOTO OMITTED]
Mr. Bigelow is a graduate of Trinity College and earned his MBA at the
University of Colgate Darden Business School. He is currently the CEO of Court
Room Television Network, and previously served for five years as President and
CEO of Time Warner Cable Programming, Inc.
Mr. Bigelow serves as a member of the Board of Trustees for the Cate School. He
is also a member of the Board of Directors for the Visiting Nurse Service of New
York, Crane Co., Medusa Inc., and The Boy's Club of New York. He has been an
independent director for all of Lord Abbett's funds since 1994.
<PAGE>
Investing in the Lord Abbett Family of Funds
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
GROWTH
- -------------------------------------------------------------------------------------------------------------------------
INCOME
- -------------------------------------------------------------------------------------------------------------------------
Aggressive Growth Funds Growth & Balanced Fund Income Funds Tax-Free Money
Growth Fund Income Funds Income Funds Market Fund
<S> <C> <C> <C> <C> <C> <C>
Developing Alpha Series Affiliated Fund Balanced Series Bond-Debenture o National U.S. Government
Growth Fund Fund o California Securities
Global Fund- Growth & o Connecticut Money Market
Equity Series Income Series Global Fund- o Florida Fund**+
Income Series o Georgia
International Research Fund- o Hawaii
Series Large-Cap Series Limited Duration o Michigan
U.S. Government o Minnesota
Mid-Cap Securities Series* o Missouri
Value Fund o New Jersey
U.S. Government o New York
Research Fund- Securities Series* o Pennsylvania
Small-Cap o Texas
Series World Bond- o Washington
Debenture
Series
</TABLE>
Finding the right mutual fund can be confusing. At Lord, Abbett & Co., we
believe your investment professional 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 investment professional or Lord Abbett
Distributor LLC 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 investment professional can diversify your
investments between equity and income funds.
Flexibility. As your investment goals change, your investment professional can
help you reallocate your portfolio.
As an investor in the Lord Abbett Family of Funds, you have access to 30
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 investment professional to help you customize your investment plan.
Numbers to Keep Handy
For Shareholder Account or Statement Inquiries: 800-821-5129
For Literature: 800-874-3733
For More Information: 800-426-1130
Visit Our Web Site: http://www.lordabbett.com
* The Lord Abbett Research Fund-Small-Cap Series is closed to new investors.
For more information, call Lord Abbett Distributor LLC at 800-426-1130.
** An investment in this Fund is neither insured nor guaranteed by the U.S.
Government.
+ Although the Fund is managed to maintain, and has maintained, its stable
net asset value of $1.00 per share price, there can be no assurance that a
stable net asset value of $1.00 per share will be maintained.
[LOGO](R) LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
LORD ABBETT DISTRIBUTOR LLC
- ------------------------------------------------------------
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203
LAA-3-498
(6/98)
