<PAGE>
Lord Abbett
Affiliated Fund
1999 ANNUAL REPORT
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Helping you prepare
for tomorrow, today
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Visit our Web Site and get:
up to date statistics and other useful information at
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<PAGE>
Lord Abbett Affiliated Fund Building Investor Confidence Since 1934
A Tradition of Value Investing
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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
returns competitive to the S&P 500 Index, with relatively moderate fluctuations
in price.(1)
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Competitive Total Average Annual Rates of Total Return as of 10/31/99
Returns, Consistently
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Consistency The Fund has increased in value 33 out
of the last 40 fiscal years.
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Large and Growing Shareholders taking dividends in cash
Dividends saw an increase in their dividend checks
33 out of the last 40 fiscal years.(2)
- --------------------------------------------------------------------------------
Shareholder Satisfaction Lord Abbett Affiliated Fund's history
demonstrates 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.(3)
- --------------------------------------------------------------------------------
The Fund: Something "Lord Abbett Affiliated Fund isn't the
to Talk About life of the party, but it has a good
time anyway ... Hudson's ability to pick
up stocks on the cheap and hold on to
them has been the key to the Fund's
success."
Source: Morningstar Mutual Funds, September 1999
- --------------------------------------------------------------------------------
SEC Average Annual SEC average annual rates of total Total
Returns return, at the Class A share
maximum sales charge of 5.75%, for the
periods ended 9/30/99 were:
[GRAPHIC OMITTED]
The Fund's SEC yield for the 30 days
ended 10/31/99 for Class A shares was
0.94%.
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
10/31/99 and reflect Class A share
performance at net asset value with all
distributions reinvested.
(1) The S&P 500 Index consists of 500 stocks
chosen for market size, liquidity and
industry group representation and is
widely regarded as the standard for
measuring U.S. stock market performance.
Indices are unmanaged and not available
for direct investment.
(2) Capital gains were reinvested. Period
ends 10/31/99.
(3) Based on a survey of Lord Abbett
Affiliated Fund shareholders conducted
by Lord, Abbett & Co. in 1998. See
Important Information on page 7.
<PAGE>
Report to Shareholders
For the Period Ended October 31, 1999
[PHOTO]
Robert S. Dow
Chairman
November 10, 1999
"As we look forward, we anticipate the global economy will continue to grow."
Lord Abbett Affiliated Fund completed its fiscal year on October
31, 1999. Below is an overview of some class-specific financial
information for the close of the period.
Twelve Months Ended October 31, 1999
- --------------------------------------------------------------------------------
Class A Class B Class C Class P Class Y
- --------------------------------------------------------------------------------
Net asset value $ 16.22 $16.23 $ 16.23 $16.19 $16.25
Dividends $ 0.24 $ 0.13 $ 0.13 $ 0.21 $ 0.28
Capital gains $ 0.95 $ 0.95 $ 0.95 $ 0.95 $ 0.95
Total return* 20.69% 19.87% 19.80% 20.51% 21.15%
The year under review was characterized by continued overall strength in both
the broad equity market and the U.S. economy. Low interest rates and a
deceleration in earnings have driven the U.S. equity market for the last two and
one-half years. This environment favored a very select group of large stocks
that have had stable earnings growth. Rather than venturing into "unknown"
waters, investors stayed the course and continued to purchase names familiar to
them, remaining with companies that exhibited strong earnings stories. The
result, however, is that many of the larger, more well-known growth names have
become, in our opinion, quite expensive.
In anticipation of an improvement in the global economy, we made an early entry
into the energy sector, a strategy that paid off well for the Fund. In our view,
the rise in oil prices initiated by OPEC, coupled with solid fundamentals for
many energy companies, helped to boost this sector. In addition, the technology
sector continued to outperform the general market. However, despite strong
performance by a number of holdings in this sector, we recently began to reduce
our exposure to technology, as prices began to reach the upper end of our
valuation discipline. We reinvested a good portion of the proceeds from those
sales into more traditional cyclical sectors such as paper, chemicals and
aluminum, and anticipate these areas will benefit from a rise in commodity
prices as the global economy strengthens.
In addition, we have started to focus some attention toward the property and
casualty insurance sector during this period, and will continue to seek out
companies in this market segment that display improving fundamentals. At the
same time, we are generally underweighted in financial companies, which has
worked to our advantage since many of these stocks continued to struggle during
this period as interest rates increased. We believe there is only a small chance
that U.S. interest rates will continue to climb. This view, coupled with the
fact that many financial service companies have solid fundamentals, will likely
result in an increase in our exposure to the financial services area.
As we look forward, we anticipate the global economy will continue to grow.
However, there are some signs that the robust U.S. economy may be moderating. A
slowdown in consumer spending is possible due to high consumer debt levels and a
decrease in mortgage refinancings (which reduce consumers' monthly mortgage
payments). In addition, the recent volatility in the equity markets may serve to
curtail spending previously attributable to the "wealth effect" from appreciated
portfolios. Consequently, we are moderately underweighted in consumer stocks,
especially those that are highly sensitive to changes in economic activity.
A final note: we are proud to announce that on January 17, 2000, we are
relocating our headquarters to the Colgate Center, at 90 Hudson Street, in
Jersey City, New Jersey. Lord Abbett has experienced strong growth during the
90s. We have more than doubled our assets under management in the last five
years to nearly $33 billion. We are very excited about the move and strongly
believe it to be in the best interest of our shareholders.
* Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
1
<PAGE>
The Income Perspective
Income Generated from $100,000 Investments: 10/31/74-10/31/99
By reinvesting capital gains, long-term Affiliated shareholders received a
higher level of income from dividends than the income produced for investors in
short-term guaranteed CDs.
Year
Ended Six-Month CD Affiliated Fund
Oct. 31 Interest(1) Dividends(2)
- ----------------------------------------------------------
1975 7,480 4,595
1976 6,060 5,911
1977 5,750 6,612
1978 8,180 7,320
1979 11,570 8,391
1980 13,280 10,082
1981 17,570 12,369
1982 14,020 13,209
1983 9,520 13,067
1984 11,270 13,793
1985 8,770 15,780
1986 7,040 17,020
1987 6,920 17,404
1988 7,910 18,695
1989 9,610 19,545
1990 8,560 18,571
1991 6,610 18,243
1992 4,000 18,555
1993 3,380 17,203
1994 4,520 16,677
1995 6,310 16,788 If capital
1996 5,630 18,462 gains and
1997 5,820 20,052 dividends
1998 5,710 19,388 had been
1999 5,420 18,943 reinvested,
the Fund's
Interest/Dividend Total $200,910 $ 366,675 total value
- ----------------------------======= ========== would have been
Over 25 Years Later --------- $3,880,680
Initial $100,000
Investment plus Growth $100,000 $1,300,604
- ----------------------------======= ==========
Total Value $300,910 $1,667,279
- ----------------------------======= ==========
The Real Cost of the
CD Guarantee $1,366,369
====================================================
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, 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 7.
2
<PAGE>
Affiliated's Growth Record
Results Based on Fiscal Year-End October 31(1)
Growth of Capital(2) Dividend Return(3) Total Return(4)
1989 + 12.8% + 5.2% + 18.0
1990 - 12.0% + 4.4% - 7.6
1991 + 23.1% + 4.9% + 28.0
1992 + 6.3% + 4.1% + 10.4
1993 + 14.3% + 3.5% + 17.8
1994 + 3.7% + 3.0% + 6.7
1995 + 17.6% + 2.9% + 20.5
1996 + 20.5% + 2.7% + 23.2
1997 + 23.3% + 2.5% + 25.8
1998 + 8.4% + 1.9% + 10.3
1999 + 18.9% + 1.7% + 20.7%
(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 7.
Affiliated's Growth Helped Protect Your Purchasing Power
In our illustration, the prices noted for April 1989 and 1998 are actual
costs--then and now. "Affiliated 1999" is what the 1989 amount would have grown
to had it been invested in the Fund.
Investments in Affiliated Fund (up 307.56%) surpassed increases in the cost of
living, which was up 33.92% in these 10 years. Protection against the erosion
caused by inflation is one important way to maintain--and enhance--your
lifestyle.
[GRAPHICS OMMITED]
<TABLE>
<CAPTION>
One-Year Private One-Family House(6) First-Class Stamp Income per Capita(7)
College Tuition(5)
<S> <C> <C> <C> <C>
1989 $11,189 $89,500 $.25 $18,175
1999 $14,508 $128,700 $.33 $26,365
Affiliated 1999 $45,601 $364,768 $.76$ $74,074
</TABLE>
Affiliated's results reflect Class A share total return at net asset value, with
all distributions reinvested for the 10 years ended 10/31/99.
See Important Information on page 7.
(5) National average.
(6) Based on National Average. Metropolitan Area Median home prices.
(7) National average. 1999 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. Postal Service; Department of Commerce, Bureau of Economic
Analysis Statistics.
3
<PAGE>
The Total Return Perspective
The chart below illustrates the growth of a $10,000 investment made in
Affiliated Fund on 10/31/72. Even when investing right before a major stock
market downturn long-term investors in Affiliated Fund did well. (Please see the
chart on page 5.) The Fund's average shareholder ownership of over 15 years
reflects the satisfaction of long-term Affiliated Shareholders.
A History of Consistent Performance
Past performance is no indication of future results.
Growth of a $10,000 Fund Investment: 10/31/72-10/31/99(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 9,560 267 433 10,260
1974 7,258 394 762 8,414
1975 8,995 545 1,394 10,934
1976 10,746 887 2,250 13,883
1977 9,706 1,150 2,627 13,483
1978 9,434 1,382 3,263 14,079
1979 10,570 2,257 4,606 17,433
1980 12,066 3,732 6,519 22,317
1981 10,742 4,887 7,186 22,815
1982 11,364 6,730 9,571 27,665
1983 13,325 9,187 13,197 35,709
1984 12,212 11,251 14,173 37,636
1985 12,993 14,172 17,623 44,788
1986 15,510 21,514 24,060 61,084
1987 13,828 24,951 24,040 62,819
1988 12,768 31,932 25,778 70,478
1989 13,815 37,558 31,817 83,190
1990 11,801 34,617 30,474 76,892
1991 13,629 45,458 39,336 98,423
1992 13,974 50,142 44,501 108,617
1993 14,914 61,407 51,590 127,911
1994 14,609 67,326 54,497 136,432
1995 15,868 84,828 63,654 164,350
1996 17,245 111,153 74,118 202,516
1997 19,656 145,178 89,919 254,753
1998 19,285 168,327 93,307 280,919
1999 $21,483 $208,455 $109,112 $339,050
The dollar amounts of dividends and capital gains distributions reinvested in
shares were $69,848 and $140,769, respectively. The initial investment plus all
distributions reinvested amounted to $220,617. If dividends and capital gains
distributions had been withdrawn in cash, the amounts of these payments would
have been $14,552 and $21,114, 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 7.
4
<PAGE>
The Total Return Perspective
We've lived through several periods of economic, political and stock market
turmoil since 1972. 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), while outpacing guaranteed CDs
and inflation.
Using the Value Method of Investing, Affiliated Fund Reduced Volatility and
Produced Rewarding Gains
Average Annual Total Returns
Over 27 Years(1)
Affiliated: 13.9%
S&P 500: 13.8%
CDs: 8.1%
Inflation: 5.3%
[GRAPHIC OMITTED]
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 5.75% offering
price from 10/31/72 through 10/31/99.
(2) Average of six-month CD rates available each period. Source: Lipper, Inc.
See Important Information on page 7.
5
<PAGE>
Who Owns the Fund?
Investor Profile of Lord Abbett Affiliated Fund
<TABLE>
<CAPTION>
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<S> <C> <C>
Fiduciaries Custodians for Minors 18,983
Pension, Pro1/2t-Sharing and 401(k) Retirement Plans 21,324
Trusts 10,336
457 Retirement and 403(b) Plans 5,379
Estates 269
- ----------------------------------------------------------------------------------------------
Institutions Broker-held Accounts 59,426
Banks, Credit Unions and Other Financial Institutions 376
Corporations 491
Religious, Charitable and welfare organizations 399
Clubs and Fraternal Organizations 98
Cemeteries 64
Nursing homes and hospitals 31
Colleges and universities 38
Government Agencies 26
- ----------------------------------------------------------------------------------------------
Individuals Single and Joint accounts 87,899
IRAs 59,714
Total Accounts in Affiliated on 11/30/99 264,853
==============================================================================================
</TABLE>
A Note About Year 2000 Matters
As you may know, there has been extensive media coverage about possible problems
that may arise as a result of uncertainties about the ability of computers to
"understand" dates using the year 2000. Potentially, these problems could
disrupt the services and systems that the Fund relies on in its daily
operations.
As a general matter, we believe the financial industry has taken a leadership
role addressing year 2000 (Y2K) issues and this should help to inspire
confidence among concerned investors. More specifically, Lord Abbett, Lord
Abbett Distributor LLC and the Fund's transfer agent, custodian and other
providers of services critical to the Fund have been actively working on
reviewing and replacing or updating computer systems and computer-to-computer
interfaces, as needed. Each has completed or is in the process of testing new or
revised systems and interfaces and generally expects that their systems, as well
as those of their key external service providers, will be ready to handle Y2K
without significant problems. Furthermore, the Fund has been routinely taking
companies' Y2K preparations into account when considering or reviewing
investments.
In summary, while the Y2K problem is unprecedented and we cannot completely
eliminate the possibility that the Fund could be affected in some way, we are
confident that all parties involved are taking appropriate steps to resolve Y2K
concerns.
6
<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 refer to the Fund's current
prospectus. If used as sales material after 12/31/99, this report must be
accompanied by Lord Abbett's Performance Quarterly for the most recently
completed calendar quarter.
Statement of Net Assets
October 31, 1999
Shares or
Principal
Investments Amount Value
- --------------------------------------------------------------------------------
Common Stocks and Convertible Securities 97.18%
- --------------------------------------------------------------------------------
Aerospace/Defense
.29% Raytheon Co. Class B 1,000,000 $ 29,250,000
- ------------------------------------------------------------------==============
Aluminum 1.81% Alcoa Inc.+ 3,000,000 182,250,000
- ------------------------------------------------------------------==============
Automotive 1.69% Ford Motor Co. 1,500,000 82,312,500
General Motors Corp. 1,250,000 87,812,500
Total 170,125,000
- ------------------------------------------------------------------==============
Banks: Money Bank of America Corp. 1,400,000 90,125,000
Center 2.89% Chase Manhattan Corp. 2,300,000 200,962,500
Total 291,087,500
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Banks: Regional Bank One Corp.+ 2,000,000 75,125,000
4.16% Fleet Boston Corp. 3,500,000 152,687,500
Wells Fargo Co.+ 4,000,000 191,500,000
Total 419,312,500
- ------------------------------------------------------------------==============
Broadcasting 1.70% Houston Inds Inc.
$3.22 Conv. Pfd. into
Time Warner, Inc. 1,000,000 114,750,000
MediaOne Group Inc.* 800,000 56,850,000
Total 171,600,000
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Chemicals 2.45% Dow Chemical Co.+ 1,200,000 141,900,000
Rohm & Haas Co. 2,750,000 105,187,500
Total 247,087,500
- ------------------------------------------------------------------==============
Communications
Technology 1.99% QUALCOMM Inc.+* 900,000 200,475,000
- ------------------------------------------------------------------==============
Computer Services
.96% Unisys Corp.* 4,000,000 97,000,000
- ------------------------------------------------------------------==============
Computer Technology Apple Computer Inc.+* 750,000 60,093,750
5.79% International Business
Machines Corp.+ 2,100,000 206,587,500
Sun Microsystems Inc.* 3,000,000 317,437,500
Total 584,118,750
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Computer: Hardware EMC Corp.
.89% Conv. 31/4% due
3/15/2002** $14,000,000 90,168,750
- ------------------------------------------------------------------==============
Computer: Software
1.06% Oracle Corp.* 2,250,000 107,015,625
- ------------------------------------------------------------------==============
Conglomerates Minnesota Mining &
1.04% Manufacturing Co.+ 1,100,000 $ 104,568,750
- ------------------------------------------------------------------==============
Containers .66% Owens Illinois Inc.
4.750% Conv. Pfd. 2,000,000 66,000,000
- ------------------------------------------------------------------==============
Copper 1.12% Phelps Dodge Corp. 2,000,000 112,750,000
Data Processing
Equipment &
Components 1.13% First Data Corp.+ 2,500,000 114,218,750
- ------------------------------------------------------------------==============
Diversified .61% Textron, Inc.+ 800,000 61,750,000
- ------------------------------------------------------------------==============
Drugs 4.41% American Home
Products Corp. 5,000,000 261,250,000
Pharmacia & Upjohn Inc. 3,400,000 183,387,500
Total 444,637,500
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Electric Power Allegheny Energy Inc.+ 3,000,000 95,437,500
6.45% Carolina Power
& Light Co.+ 3,500,000 120,750,000
Duke Energy Corp. 3,500,000 197,750,000
Florida Progress Corp. 3,500,000 160,343,750
Texas Utilities
9.25% Conv. Pfd.+ 1,500,000 76,218,750
Total 650,500,000
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Electrical AlliedSignal Inc.+ 1,600,000 91,100,000
Equipment Emerson Electric Co. 2,500,000 150,156,250
4.16% Honeywell Inc. 1,000,000 105,437,500
Rockwell International
Corp. 1,500,000 72,656,250
Total 419,350,000
- ------------------------------------------------------------------==============
Electronics:
Semiconductor 2.94% Texas Instruments Inc. 3,300,000 296,175,000
- ------------------------------------------------------------------==============
Energy Equipment &
Services 1.35% Schlumberger Ltd.+ 2,250,000 136,265,625
- ------------------------------------------------------------------==============
Entertainment .49% Seagram Co. Ltd.
7.50% Conv. Pfd. 1,000,000 49,437,500
- ------------------------------------------------------------------==============
Financial Services Marsh McLennan
2.60% Cos. Inc.+ 1,500,000 118,593,750
Morgan Stanley
Dean Witter & Co.+ 1,300,000 143,406,250
Total 262,000,000
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7
<PAGE>
Statement of Net Assets
October 31, 1999
Shares or
Principal
Investments Amount Value
- --------------------------------------------------------------------------------
Food 1.42% Heinz H.J. Co. 3,000,000 $ 143,250,000
- ------------------------------------------------------------------==============
Health Care
Management
Services 1.11% CIGNA Corp. 1,500,000 112,125,000
- ------------------------------------------------------------------==============
Health Care
Services Columbia/HCA
.84% Healthcare Corp. 3,500,000 84,437,500
- ------------------------------------------------------------------==============
Hospital Supplies Baxter
.90% International Inc. 1,400,000 90,825,000
- ------------------------------------------------------------------==============
Insurance 6.53% Ace Ltd. 3,500,000 68,031,250
Aegon NV ADR 1,500,000 137,906,250
American General Corp. 3,200,000 237,400,000
Chubb Corp. 2,000,000 109,750,000
St. Paul Companies Inc. 3,300,000 105,600,000
Total 658,687,500
- ------------------------------------------------------------------==============
Machinery:
Agriculture 1.44% Deere & Co.+ 4,000,000 145,000,000
- ------------------------------------------------------------------==============
Natural Gas 2.31% Consolidated Natural
Gas Co. 1,500,000 96,000,000
The Coastal Corp.+ 2,000,000 84,250,000
The Coastal Corp.
6.625% Conv. Pfd. 2,000,000 53,000,000
Total 233,250,000
- ------------------------------------------------------------------==============
Oil: Integrated
Domestic 1.16% Atlantic Richfield Co. 1,250,000 116,484,375
- ------------------------------------------------------------------==============
Oil: Integrated BP Amoco plc ADR+ 2,800,000 161,700,000
International 9.13% Chevron Corp. 1,000,000 91,312,500
Exxon Corp. 1,000,000 74,062,500
Mobil Corp. 3,000,000 289,500,000
Texaco Inc.+ 2,500,000 153,437,500
Total Fina S.A. ADR+ 2,250,000 150,046,875
Total 920,059,375
- ------------------------------------------------------------------==============
Paper and Forest Bowater Inc.+ 2,000,000 105,000,000
Products 4.09% Champion International
Corp. 1,500,000 86,718,750
Georgia-Pacific Group
7.50% Conv. Pfd. 1,000,000 43,250,000
Georgia-Pacific Corp.
(Timber Group) 3,000,000 71,625,000
International Paper Co. 2,000,000 105,250,000
Total 411,843,750
- ------------------------------------------------------------------==============
Publishing 1.57% Dow Jones & Co. Inc. 2,564,575 157,721,363
- ------------------------------------------------------------------==============
Radio & TV
Broadcast 1.70% CBS Corp.* 3,500,000 170,843,750
- ------------------------------------------------------------------==============
Retail 1.01% Wal-Mart Stores Inc.+ 1,800,000 102,037,500
- ------------------------------------------------------------------==============
Telecommunications Alltel Corp.+ 2,750,000 228,937,500
6.29% Bell Atlantic Corp. 3,500,000 227,281,250
SBC Communications Inc. 3,500,000 178,281,250
Total 634,500,000
- ------------------------------------------------------------------==============
Telephone: AT&T Corp.+ 4,500,000 $ 210,375,000
Long Distance MCI WorldCom Inc.* 2,500,000 214,531,250
4.22% Total 424,906,250
- ------------------------------------------------------------------==============
Tobacco .82% Gallaher Group
plc ADR 3,500,000 82,906,250
- ------------------------------------------------------------------==============
Total Investments in
Common Stocks and
Convertible Securities
(Cost $7,138,778,439) 9,796,021,363
- ------------------------------------------------------------------==============
Short-term American General Corp.
Investments 8.69% 5.32% due 11/1/1999 $ 22,920,000 22,920,000
Associates Corp.
5.32% due 11/1/1999 82,911,000 82,911,000
Dow ChemicalCo.
5.32% due 11/1/1999 163,553,000 163,553,000
Total 269,384,000
- ------------------------------------------------------------------==============
Other (See Note 5) 606,910,767
- ------------------------------------------------------------------==============
Total Short-term Investments
(Cost $876,294,767) 876,294,767
Total Investments 105.87%
(Cost $8,015,073,206) 10,672,316,130
- ------------------------------------------------------------------==============
Cash and Receivables, Net of Liabilities (5.87%) (591,562,349)
================================================================================
Net Assets 100.00% $10,080,753,781
================================================================================
Class A Shares-Net asset value
($9,307,645,513 / 573,941,042
shares outstanding) $16.22
Maximum offering price
(net asset value plus sales charge
of 5.75% of the offering price) $17.21
Class B Shares-Net asset value
($524,973,707 / 32,354,165
shares outstanding) $16.23
Class C Shares-Net asset value
($197,439,656 / 12,168,544
shares outstanding) $16.23
Class P Shares-Net asset value
($2,046,305 / 126,369
shares outstanding) $16.19
Class Y Shares-Net asset value
($48,648,600 / 2,994,013
shares outstanding) $16.25
+ Securities (or a portion of securities) on loan. See
Note 5.
* Non-income producing security.
**Restricted security under Rule 144A.
ADR American Depository Receipt.
See Notes to Financial Statements.
8
<PAGE>
Issues added to or eliminated from the portfolio (exclusive of U.S. Government
obligations and short-term investments) during the six months ended October 31,
1999.
Portfolio Changes
Additions
Ace Ltd.
Aegon NV ADR
AlliedSignal Inc.
Apple Computer Inc.
Atlantic Richfield Co.
Dow Chemical Co.
Georgia-Pacific Group 7.50% Conv. Pfd.
Honeywell Inc.
International Paper Co.
Marsh McLennan Cos. Inc.
MediaOneGroup Inc.
Minnesota Mining & Manufacturing Co.
Oracle Corp.
Phelps Dodge Corp.
Raytheon Co. Class B
Seagram Co. Ltd. 7.50% Conv. Pfd.
Texas Utilities 9.25% Conv. Pfd.
The Coastal Corp.
The Coastal Corp. 6.625% Conv. Pfd.
- --------------------------------------------------------------------------------
Eliminations
Aetna Inc.
Aetna Inc. $4.758 Conv. Pfd.
Comcast Corp.Conv. 3.35% 5/15/29
ConAgra Inc.
Eastman Kodak Co.
First UnionCorp.
Jefferson-Pilot Corp.
May Department Stores Co.
Ralston Purina Co.
Waste Management Inc.
VFCorp.
Xerox Corp.
9
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
Investment Income Year Ended October 31, 1999
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Income Dividends $ 182,302,729
Interest 19,083,208
Foreign taxes withheld (100,000)
Total income 201,285,937
-----------------------------------------------------------------------------------------------
Expenses Management fee 29,829,606
12b-1 distribution plan-Class A 27,926,819
12b-1 distribution plan-Class B 4,281,069
12b-1 distribution plan-Class C 1,584,742
12b-1 distribution plan-Class P 9,131
Shareholder servicing 9,042,477
Reports to shareholders 607,178
Registration 359,169
Directors' fees 345,965
Professional 289,504
Other 896,912
Total expenses before reductions 75,172,572
------------------------------------------------------------------------------------------------
Expense reductions (917,037)
------------------------------------------------------------------------------------------------
Net expenses 74,255,535
------------------------------------------------------------------------------------------------
Net investment income 127,030,402
------------------------------------------------------------------------------------------------
Realized and Unrealized Gain on Investments
- -------------------------------------------------------------------------------------------------------------
Net realized gain from investment transactions 1,108,589,813
- -------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 499,850,810
- -------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1,608,440,623
- -------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $1,735,471,025
=============================================================================================================
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, October 31,
Increase in Net Assets 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations Net investment income $ 127,030,402 $ 135,559,651
Net realized gain from investment transactions 1,108,589,813 556,373,895
Net change in unrealized appreciation of investments 499,850,810 78,452,439
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,735,471,025 770,385,985
- ---------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income included in price of share transactions - 40,491
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (137,028,835) (143,194,800)
Class B (3,320,304) (2,266,183)
Class C (1,232,723) (863,613)
Class P (27,346) (19,753)
Class Y (760,283) (172,653)
-------------------------------------------------------------------------------------------------------------------
Total (142,369,491) (146,517,002)
-------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gain from investment
transactions:
Class A (524,634,632) (701,757,786)
Class B (20,854,149) (14,611,561)
Class C (7,962,546) (5,544,532)
Class P (117,804) -
Class Y (2,155,302) -
-------------------------------------------------------------------------------------------------------------------
Total (555,724,433) (721,913,879)
-------------------------------------------------------------------------------------------------------------------
Total distributions (698,093,924) (868,430,881)
Capital share transactions:
Net proceeds from sale of shares 911,822,030 930,460,852
Net asset value of shares issued in reinvestment of dividends and distributions 576,481,381 704,773,197
-------------------------------------------------------------------------------------------------------------------
Total 1,488,303,411 1,635,234,049
-------------------------------------------------------------------------------------------------------------------
Cost of shares reacquired (965,529,945) (714,380,526)
-------------------------------------------------------------------------------------------------------------------
Increase in net assets derived from capital share transactions 522,773,466 920,853,523
-------------------------------------------------------------------------------------------------------------------
Increase in net assets 1,560,150,567 822,849,118
- ---------------------------------------------------------------------------------------------------------------------------------
Net Assets
Beginning of year 8,520,603,214 7,697,754,096
-------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment income of
$12,690,368 and $28,029,457, respectively) $10,080,753,781 $8,520,603,214
===================================================================================================================
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------
Year Ended October 31,
Per Share Operating Performance: 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $14.56 $14.84 $13.02 $11.98 $11.03
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .21(e) .24 .30 .30 .32
Net realized and unrealized gain on investments 2.64 1.14 2.85 2.23 1.70
Total from investment operations 2.85 1.38 3.15 2.53 2.02
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.24) (.27) (.30) (.30) (.30)
Distributions from net realized gain (.95) (1.39) (1.03) (1.19) (.77)
Total distributions (1.19) (1.66) (1.33) (1.49) (1.07)
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $16.22 $14.56 $14.84 $13.02 $11.98
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 20.69% 10.27% 25.80% 23.23% 20.46%
====================================================================================================================================
Ratios to Average Net Assets:
Expenses(b) .74% .63% .65% .66% .63%
Net investment income 1.36% 1.64% 2.15% 2.61% 2.90%
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
------------------------------------------- -----------------------------------------
Year Ended 8/1/96(c) Year Ended 8/1/96(c)
October 31, to October 31, to
Per Share Operating Performance: 1999 1998 1997 10/31/96 1999 1998 1997 10/31/96
- ---------------------------------------------------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $14.56 $14.84 $13.03 $11.88 $14.56 $14.84 $13.02 $11.88
- ---------------------------------------------------------------------------------------- ----------------------------------------
Income from investment operations
Net investment income .10(e) .14 .20 .060 .10(e) .14 .22 .062
Net realized and unrealized gain
on investments 2.65 1.12 2.84 1.142 2.65 1.12 2.83 1.130
Total from investment operations 2.75 1.26 3.04 1.202 2.75 1.26 3.05 1.192
---------------------------------------------------------------------------------- ----------------------------------------
Distributions
Dividends from net investment income (.13) (.15) (.20) (.052) (.13) (.15) (.20) (.052)
Distributions from net realized gain (.95) (1.39) (1.03) - (.95) (1.39) (1.03) -
Total distributions (1.08) (1.54) (1.23) (.052) (1.08) (1.54) (1.23) (.052)
----------------------------------------------------------------------------------- ---------------------------------------
Net asset value, end of year $16.23 $14.56 $14.84 $13.03 $16.23 $14.56 $14.84 $13.02
Total Return(a) 19.87% 9.41% 24.78% 10.15%(d) 19.80% 9.41% 24.88% 10.07%(d)
===================================================================================================================================
Ratios to Average Net Assets:
Expenses(b) 1.43% 1.38% 1.42% .34%(d) 1.43% 1.40% 1.34% .33%(d)
Net investment income .66% .87% 1.19% .27%(d) .66% .85% 1.28% .25%(d)
=============================================================================================================================
</TABLE>
12
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class P Shares Class Y Shares
--------------------------------- ------------------------------
Year Ended 12/8/97(c) Year Ended 3/27/98(c)
Per Share Operating Performance: October 31, 1999 to 10/31/98 October 31, 1999 to 10/31/98
- --------------------------------------------------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $14.53 $14.24 $14.57 $15.44
- --------------------------------------------------------------------------------------------------- -----------------------------
Income from investment operations
Net investment income .19(e) .18 .26(e) .15
Net realized and unrealized gain (loss) on investments 2.63 .27 2.65 (.89)
Total from investment operations 2.82 .45 2.91 (.74)
--------------------------------------------------------------------------------------------- -----------------------------
Distributions
Dividends from net investment income (.21) (.16) (.28) (.13)
Distributions from net realized gain (.95) - (.95) -
Total distributions (1.16) (.16) (1.23) (.13)
- --------------------------------------------------------------------------------------------------- -----------------------------
Net asset value, end of year $16.19 $14.53 $16.25 $14.57
- --------------------------------------------------------------------------------------------------- -----------------------------
Total Return(a) 20.51% 3.21%(d) 21.15% (4.77)%(d)
===================================================================================================================================
Ratios to Average Net Assets:
Expenses(b) .88% .76%(d) .43% .24%(d)
Net investment income 1.22% 1.21%(d) 1.67% 1.03%(d)
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31,
Supplemental Data for All Classes: 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets, end of year (000) $10,080,754 $8,520,603 $7,697,754 $6,100,665 $4,964,525
Portfolio turnover rate 62.30% 56.49% 46.41% 47.06% 53.84%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a)Total return does not consider the effects of sales loads and assumes
the reinvestment of all distributions. (b)The ratios for 1997, 1998 and 1999
include expenses paid through an expense offset arrangement. (c)Commencement of
offering respective class shares. (d)Not annualized. (e)Calculated using average
shares outstanding during the period. 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) Security valuation is determined as follows: Portfolio 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 last 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.
Short-term securities are valued at amortized cost (which approximates market
value) if the maturity is 60 days or less at the time of purchase, or market
value if the maturity is greater than 60 days. 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 investment
transactions are calculated on the identified cost basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income is recorded on the accrual basis. 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) Prior to November 1, 1998, the Company followed the accounting practice of
equalization whereby a portion of the proceeds from the sales and costs of
repurchases of capital shares was allocated to undistributed net investment
income. Effective November 1, 1998, the Fund discontinued the use of
equalization. Discontinuing the use of equalization results in a simpler and
more meaningful financial statement presentation.
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
1/45 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. At
October 31, 1999, the Company had a management fee payable in the amount of
$2,625,947.
The Company has Rule 12b-1 plans and agreements (the "Class A, Class B, Class C
and Class P 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) an
annual distribution fee of 0.10% of the average daily net asset value of Class A
shares. 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. At October 31, 1999, the Company had 12b-1 fees
payable in the amount of $6,000,756.
The Company along with certain other funds managed by Lord Abbett (the
"Underlying Funds") has entered into a Servicing Arrangement with the Balanced
Series of Lord Abbett Investment Trust pursuant to which the Underlying Funds
will pay a portion of the expenses of the Balanced Series in proportion to the
average daily value of shares owned by the Balanced Series. Other expenses
include approximately $127,000 accrued pursuant to this Servicing Arrangement.
Distributor received $2,656,174 representing payment of commissions on sales of
Class A shares after deducting $16,074,161 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 as of October 31, 1999 for financial
reporting purposes aggregated $1,106,502,089.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from methods used to determine the
corresponding income and capital gain amounts in accordance with generally
accepted accounting principles.
Distributions declared on November 17, 1999 and paid on November 26, 1999 to
shareholders of record as of November 17, 1999 were as follows:
Rate Per Aggregate
Net Investment Income Share Amount
- --------------------------------------------------------------------------------
Class A $0.060 $34,391,257
Class B 0.034 1,110,596
Class C 0.034 422,362
Class P 0.056 7,078
Class Y 0.074 223,379
- --------------------------------------------------------------------------------
Rate Per Aggregate
Capital Gains Share Amount
- --------------------------------------------------------------------------------
Class A $1.76 $1,008,810,197
Class B 1.76 57,489,704
Class C 1.76 21,863,435
Class P 1.76 222,441
Class Y 1.76 5,312,792
- --------------------------------------------------------------------------------
14
<PAGE>
4. Capital
The Company has authorized 1.5 billion shares of $.001 par value capital stock
designated as follows: 1.15 billion shares Class A, 100 million shares Class B,
100 million shares Class C, 75 million shares Class P and 75 million shares
Class Y. Paid in capital amounted to $6,304,318,400 as of October 31, 1999.
Transactions in shares of capital stock were as follows:
Year Ended Year Ended
October 31, 1999 October 31, 1998
- --------------------------------------------------------------------------------
Class A Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 39,694,036 $ 618,554,913 44,496,423 $647,321,212
Shares issued to
shareholders in
reinvestment of
dividends and
distributions 37,601,360 541,579,692 50,482,142 682,391,630
Total 77,295,396 1,160,134,605 94,978,565 1,329,712,842
- --------------------------------------------------------------------------------
Shares reacquired (56,461,608) (876,717,900) (46,371,906)(672,172,411)
Increase 20,833,788 $ 283,416,705 48,606,659 $657,540,431
- --------------------------------------------------------------------------------
Year Ended Year Ended
October 31, 1999 October 31, 1998
- --------------------------------------------------------------------------------
Class B Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 12,120,448 $189,940,250 12,095,054 $176,522,488
Shares issued to
shareholders in
reinvestment of
dividends and
distributions 1,605,000 23,100,835 1,191,014 16,111,114
Total 13,725,448 213,041,085 13,286,068 192,633,602
- --------------------------------------------------------------------------------
Shares reacquired (3,055,952) (47,511,701) (1,852,596) (26,707,944)
Increase 10,669,496 $165,529,384 11,433,472 $165,925,658
- --------------------------------------------------------------------------------
Year Ended Year Ended
October 31, 1999 October 31, 1998
- --------------------------------------------------------------------------------
Class C Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 5,202,798 $81,918,057 4,987,808 $ 72,979,231
Shares issued to
shareholders in
reinvestment of
dividends and
distributions 607,399 8,739,598 449,243 6,084,002
Total 5,810,197 90,657,655 5,437,051 79,063,233
- --------------------------------------------------------------------------------
Shares reacquired (1,914,461) (29,737,368) (1,074,218) (15,311,549)
Increase 3,895,736 $60,920,287 4,362,833 $ 63,751,684
- --------------------------------------------------------------------------------
December 8, 1997
(Commencement
of Offering
Year Ended Class P Shares) to
October 31, 1999 October 31, 1998
- --------------------------------------------------------------------------------
Class P Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 27,936 $ 430,275 136,502 $1,953,673
Shares issued to
shareholders in
reinvestment of
dividends and
distributions 10,124 145,672 1,376 19,466
Total 38,060 575,947 137,878 1,973,139
- --------------------------------------------------------------------------------
Shares reacquired (36,342) (578,481) (13,227) (188,622)
Increase 1,718 $ (2,534) 124,651 $1,784,517
- --------------------------------------------------------------------------------
March 27, 1998
(Commencement
of Offering
Year Ended Class Y Shares) to
October 31, 1999 October 31, 1998
- --------------------------------------------------------------------------------
Class Y Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 1,351,162 $ 20,978,535 2,136,585 $31,684,248
Shares issued to
shareholders in
reinvestment of
dividends and
distributions 200,651 2,915,584 11,916 166,985
Total 1,551,813 23,894,119 2,148,501 31,851,233
- --------------------------------------------------------------------------------
Shares reacquired (706,301) (10,984,495) - -
Increase 845,512 $ 12,909,624 2,148,501 $31,851,233
- --------------------------------------------------------------------------------
5. Portfolio Securities
The Company may lend its securities to member banks of the Federal Reserve
System and to registered broker-dealers approved by the Company. The loans are
collateralized at all times by cash and/or U.S. Treasury securities in an amount
at least equal to the market value of the securities loaned.
As of October 31, 1999, the value of securities loaned was $603,007,402. These
loans were collateralized by cash of $606,138,841. Income from securities
lending of $917,976 is included in interest income on the Statement of
Operations. The dividend and interest income earned on the securities loaned is
accounted for in the same manner as other dividend and interest income.
Purchases and sales of investment securities (other than short-term securities)
aggregated $5,827,981,059 and $5,953,806,537, respectively. As of October 31,
1999, unrealized appreciation based on cost for federal income tax purposes
aggregated $2,657,242,924, of which $2,809,039,367 related to appreciated
securities and $(151,796,443) 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 on
October 31, 1999 were $2,751,941.
7. Expense Reduction
The Company has entered into an arrangement with its transfer agent whereby
credits realized as a result of uninvested cash balances are 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, has 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 was at an annual rate of 0.06% during the year.
Effective December 17, 1999 the fee increased to an annual rate of 0.09%. There
were no loans outstanding pursuant to this Facility as of October 31, 1999, nor
was the Facility utilized at any time during the year.
9. Subsequent Event
On December 15, 1999, the Company acquired all the net assets of Real Silk
Investments, Incorporated ("Real Silk") pursuant to a plan of merger. The merger
was accomplished by a tax-free exchange of 8,900,457 Class A shares of the
Company valued at $131,459,455 for 164,683 shares of Real Silk.
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 October 31, 1999, 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 October
31, 1999 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 October 31, 1999, the results of its operations, the
changes in its net assets and its financial highlights for the respective
periods, presented in conformity with generally accepted accounting principles.
[GRAPHIC OMITTED]
Deloitte & Touche LLP
New York, New York
December 17, 1999
Our Management
Board of Directors
Robert S. Dow
E. Thayer Bigelow*
William H.T. Bush*+
Robert B. Calhoun, Jr.*
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
Daniel E. Carper, Vice President
Robert G. Morris, Vice President
Eli M. Salzmann, Vice President
John J. Walsh, Vice President
Lawrence H. Kaplan, Vice President
and Assistant Secretary
A. Edward Oberhaus III, Vice President
Joan A. Binstock, Vice President
Tracie E. Richter, Vice President
Donna McManus, 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
Wilmer, Cutler & Pickering
Washington, DC
Copyright(C)1999 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.
Portfolio
Manager
Profile
[PHOTO]
W. Thomas Hudson, Jr.
Partner and Investment Team Leader
Lord Abbett Affiliated Fund
W. Thomas Hudson, Jr., Partner and Investment Team Leader of Lord Abbett
Affiliated Fund, joined the Firm in 1982, and has over 32 years of professional
experience in the financial services industry. During his tenure with Lord
Abbett, Mr. Hudson has served as Director of Research, Portfolio Manager of the
COVA Variable Annuity Growth and Income Portfolio and Portfolio Manager of the
American Skandia Lord Abbett Growth and Income Portfolio.
Mr. Hudson holds a BS in Finance and Accounting from St. Mary`s College in
California.
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'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]
Mr. Bigelow is a graduate of Trinity College and earned his MBA at the
University of Virginia's Darden Business School. He is currently Senior Advisor
at Time Warner Inc. Prior to that, he was acting CEO of Courtroom 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 of Crane Co. He has been an
independent director for all of Lord Abbett's Family of Funds since 1994.
<PAGE>
Investing in the
Lord Abbett
Family of Funds
<TABLE>
<CAPTION>
GROWTH
- ---------------------------------------------------------------------------------------------------------------------------
INCOME
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Funds Growth & Balanced Fund Income Funds Tax-Free Money
Growth Fund Income Funds Income Funds Market Fund
Developing Research Fund - Research Fund - Balanced World Bond- National U. S. Government
Growth Fund* Small-Cap Value Large-Cap Series*** Debenture Series California Securities Money
Series Series Global Fund - Connecticut Market Fund +++
Alpha Series** Growth & Income Series Florida
International Income Series High Yield Fund Georgia
Series Affiliated Fund Bond-Debenture Hawaii
Mid-Cap Fund Michigan
Value Fund Limited Duration Minnesota
Growth U. S. Government Missouri
Opportunities Securities Series+ New Jersey
Fund U. S. Government) New York
Global Fund - Securities Series+ Pennsylvania
Equity Series Texas
Washington
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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 the fund(s) covered by this
report.
For more complete information about any Lord Abbett fund, including risks,
charges and ongoing expenses, call your investment professional or Lord Abbett
Distributor LLC at 800-874-3733 for a prospectus. Read it carefully before
investing.
The Lord Abbett Family of Funds lets you access more than 30 portfolios designed
to meet a variety of investment needs.
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.
You may reallocate assets among our funds at any time. Speak 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 Only: 800-874-3733
24-Hour Automated Shareholder
Service Line: 800-865-7582
Visit Our Web Site:
www.lordabbett.com
* Lord Abbett Developing Growth Fund Class A, B and C closed to new investors
on 9/30/99.
** Lord Abbett Securities Trust - Alpha Series is a fund of funds investing in
shares of Lord Abbett Developing Growth Fund, Lord Abbett Research Fund -
Small-Cap Value Series and Lord Abbett Securities Trust - International
Series.
*** Lord Abbett Balanced Series is a fund of funds investing in shares of
certain other Lord Abbett funds.
+ An investment in this Fund is neither insured nor guaranteed by the U.S.
Government.
++ An investment in this Fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund. This Fund is managed to
maintain, and has maintained its stable $1.00 price per share.
[LOGO]
LAA-2-1099
(12/99)
