<PAGE>
Lord Abbett Affiliated Fund
2000 ANNUAL REPORT
[GRAPHIC OMITTED]
Helping you prepare
for tomorrow, today
[LOGO]
<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)
Competitive Total Average Annual Rates of Total Return as
Returns, Consistently of 10/31/00 for Class A Share
Investments
[GRAPHIC OMITTED]
For the past 50 years +12.80% per year
For the past 40 years +12.56% per year
For the past 30 years +14.11% per year
For the past 20 years +15.38% per year
For the past 10 years +17.64% per year
For the past year +15.12%
--------------------------------------------------------------------------------
Consistency The Fund has increased in value 33 out
of the last 40 fiscal years.
--------------------------------------------------------------------------------
Large and Growing Shareholders taking dividends in cash
Dividends saw an increase in their dividend checks
34 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 "When a company finds its way into this
to Talk About fund's portfolio, it often emerges with
a new lease on life."
Source: Morningstar Mutual Funds, July
7, 2000
--------------------------------------------------------------------------------
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 9/30/00 were:
[GRAPHIC OMITTED]
1 year +10.90%
5 years +16.50%
10 years +16.67%
The Fund's SEC yield for the 30 days
ended 10/31/00 for Class A shares was
1.25%.
Past performance is no indication of
future results. The investment return
and principal value of an investment in
the Fund will fluctuate so that shares,
on any given day or when redeemed, may
be worth more or less than their
original cost.
(1) 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 ended 10/31/00.
(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 Fiscal Year Ended October 31, 2000
[PHOTO]
[GRAPHIC OMITTED]
/s/ Robert S. Dow
ROBERT S. DOW
CHAIRMAN
NOVEMBER 10, 2000
"At home in a value-friendly investment environment, the Affiliated Fund was
able to perform very respectably."
DALBAR
Honors Commitment To:
Investors
1999
Lord, Abbett & Co. is proud to announce we have received a DALBAR award for
providing consistently good service to shareholders, the 1999 Key Honors Award
for Mutual Fund Service. DALBAR, Inc., an independent research firm and
evaluator of mutual fund service, presents the award to financial services firms
that provide consistently solid service to clients.
Lord Abbett Affiliated Fund completed its fiscal year on October 31, 2000. Below
is an overview of some class-specific financial information for the close of the
period.
Fiscal Year Ended October 31, 2000
--------------------------------------------------------------------------------
Class A Class B Class C Class P Class Y
--------------------------------------------------------------------------------
Net asset value $16.47 $ 16.49 $16.49 $ 16.45 $ 16.50
Dividends $ 0.24 $ 0.14 $ 0.14 $ 0.22 $ 0.30
Capital gains $ 1.76 $ 1.76 $ 1.76 $ 1.76 $ 1.76
Total return* 15.12% 14.42% 14.48% 15.11% 15.52%
180 Degrees -- A Return to Value
We have seen a major swing in market sentiment toward value stocks since we last
reported at the end of April. If the signs of a broadening out of the market and
a turn back toward value investing were knocking at the back door then, they
were using a battering ram during the usually quiet summer trading months. The
high-flying growth stocks that had led the market throughout all of 1999
experienced a severe correction that has lasted well into the autumn.
Conversely, the stocks of companies with attractive valuations and positive cash
flows began to garner the interest of investors and surged ahead of the former
market leaders. Granted, growth-oriented tech stocks saw a brief rally in June,
but the first stone had been cast. Investors had been awakened to the perils of
momentum investing, and for the first time in years, value stocks began to
handily outperform growth stocks and the broad equity market. As of October 31,
2000, the S&P 500/BARRA Value Index is up 6.3% on a year-to-date basis versus a
negative return of 8.9% for the S&P 500/BARRA Growth Index and a negative return
of 1.8% for the S&P 500 Index.(1) In addition, earnings shortfalls and other
disparaging company news releases that brought down the stock prices of several
large, widely-held companies once again proved that careful, bottom-up company
research was worth more thanwide-sweeping sector investing.
Excelling In Our Own Element
At home in a value-friendly investment environment, the Affiliated Fund was able
to perform very respectably. Stocks of electric utility companies, which
constituted a large portion of the portfolio, contributed significantly to the
Fund's positive performance, despite investors' concerns about rising interest
rates. Many of our holdings were able to benefit from increasing deregulation in
the industry, as well as high power consumption associated with mounting
technology usage. Moreover, our relatively large exposure to energy companies
paid off well, as rising oil prices helped boost the price of many ofthese
stocks. Our careful stock picking in stocks of consumer non-cyclical companies,
particularly healthcare companies, also significantly buoyed performance.
At the onset of the second quarter, we had already begun to significantly reduce
the portfolio's exposure to many companies in the technology, telecommunications
and media sectors due to high valuations and unstable business fundamentals.
Many telecommunications services stocks experienced difficulties, as price
competition in a number of markets caused companies to miss earnings estimates
and to lower future
1
<PAGE>
Report to Shareholders
For the Fiscal Year Ended October 31, 2000
growth forecasts. As we pared back our exposure to technology companies, we made
select investments in undervalued companies in basic industries, utilities and
financial services (especially insurance companies) where we saw more intrinsic
value. While we maintained this weighting shift throughout the period, some of
our remaining technology holdings still hampered overall performance. After a
shaky start at the beginning of the year, financial services was one of the
Fund's strongest performing areas by the end of the period. We were overweighted
in insurance stocks and other financial intermediaries, many of which posted
double-digit gains. However, we remained underweighted in the banking sector due
to our expectation that some banks may experience credit quality issues. Our
move to basic industries (paper, chemicals, and metals) proved to be a bit
premature and worked against our performance early on. However, if the U.S.
economy continues to slow, we believe investors will begin to anticipate a more
balanced global economic growth environment that should favor the performance of
these stocks.
Sticking To Our Guns -- A Disciplined Approach to Investing
We believe the market is in the final stages of adjusting to a slowing growth
rate for the U.S. economy over the next six to nine months. Interest rates are
down and should be moving irregularly lower still. Current concerns about energy
prices and dollar strength versus the Euro should ebb as our economy slows. We
do not anticipate a change in our investment strategy for the short term. The
low economic sensitivity and high interest rate sensitivity of our portfolio has
served us well throughout this year. As the U.S. economy slows over the next six
months, we will look to add to some of our favorite consumer cyclical stocks, as
well as to rebuild our positions in technology when we see select companies
offer good value.
Thank you for investing with Lord Abbett and the Affiliated Fund. We value the
trust that you place in us, and look forward to serving your investment needs in
the years to come.
*Total return is the percent change in net asset value assuming the reinvestment
of all distributions.
(1) The S&P 500 Index is a market capitalization weighted index consisting of
500 widely held common stocks chosen for market size, liquidity and industry
group representation. The S&P/BARRA Growth and Value Indices are constructed by
dividing the stocks in an index according to a single attribute: book-to-price
ratio. This splits the index into two mutually exclusive groups designed to
track two of the predominant investment styles in the U.S. equity market. The
value index contains firms with higher book-to-price ratios; conversely, the
growth index has firms with lower book-to-price ratios. Indices cited are
unmanaged, do not reflect the deduction of fees or expenses and are not
available for direct investment.
2
<PAGE>
The Income Perspective
Income Generated from $100,000 Investments: 10/31/74-10/31/00
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 4,578
1976 6,060 5,890
1977 5,750 6,588
1978 8,180 7,294
1979 11,570 8,362
1980 13,280 10,047
1981 17,570 12,325
1982 14,020 13,163
1983 9,520 13,022
1984 11,270 13,744
1985 8,770 15,725
1986 7,040 16,960
1987 6,920 17,343
1988 7,910 18,630
1989 9,610 19,477
1990 8,560 18,506
1991 6,610 18,180
1992 4,000 18,490
1993 3,380 17,142
1994 4,520 16,618
1995 6,310 16,729
1996 5,630 18,397
1997 5,820 19,982
1998 5,710 19,320
1999 5,420 18,876
2000 6,710 20,855 If capital
gains and
Interest/Dividend Total $207,620 $386,243 dividends
-------------------------------------------------------- had been
Over 25 Years Later reinvested,
Initial $100,000 the Fund's
Investment plus Growth $100,000 $1,469,516 total value
-------------------------------------------------------- would have been
Total Value $307,620 $1,855,759 <--$4,452,064
--------------------------------------------------------
The Real Cost of the
CD Guarantee $1,548,139
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 3.95% sales charge, which is applicable to
Class A share investments of $100,000 - $249,999. Dividends were taken in cash;
capital gains were reinvested.
See Important Information on page 7.
3
<PAGE>
Affiliated's Growth Record
Results Based on Fiscal Year-End October 31(1)
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth of Capital(2) + 12.8% - 12.0% + 23.1% + 6.3% + 14.3% + 3.7% + 17.6% + 20.5% + 23.3% + 8.4% + 18.9% + 13.4%
Dividend Return(3) + 5.2% + 4.4% + 4.9% + 4.1% + 3.5% + 3.0% + 2.9% + 2.7% + 2.5% + 1.9% + 1.8% + 1.7%
Total Return(4) + 18.0% - 7.6% + 28.0% + 10.4% + 17.8% + 6.7% + 20.5% + 23.2% + 25.8% + 10.3% + 20.7% + 15.1%
</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 5 and 7.
Affiliated's Growth Helped Protect Your Purchasing Power
In our illustration, the prices noted for October 1990 and 2000 are actual costs
-- then and now. "Affiliated 2000" is what the 1990 amount would have grown to
had it been invested in the Fund.
Investments in Affiliated Fund (up 407.6%) surpassed increases in the cost of
living, as represented by the Consumer Price Index, which was up 30.3% in these
10 years. Protection against the erosion caused by inflation is one important
way to maintain -- and enhance -- your lifestyle.
<TABLE>
<CAPTION>
[GRAPHIC [GRAPHIC [GRAPHIC [GRAPHIC
OMITTED] OMITTED] OMITTED] OMITTED]
One-Year Private One-Family House(6) First-Class Stamp(7) Income per Capita(8)
College Tuition(5)
<S> <C> <C> <C> <C>
October 1990 $12,104 $112,300 $.25 $ 19,806
October 2000 $16,332 $142,800 $.33 $ 30,431
Affiliated 2000 $61,444 $570,081 $.96 $100,544
</TABLE>
Affiliated's results reflect Class A share total return at net asset value, with
all distributions reinvested for the 10 years ended 10/31/00.
See Important Information on page 7.
(5) National average. Source: College Board Annual Survey of Colleges.
(6) Based on national average. Metropolitan Area home prices. Source: National
Association of Realtors, Research Division. 2000 Figure is based on
July-September figures.
(7) Source: U.S. Postal Service.
(8) National average. Source: Department of Commerce, Bureau of Economic
Analysis Statistics.
4
<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 6.) The Fund's average shareholder ownership of over 15 years
reflects the satisfaction of long-term Affiliated shareholders.
Past performance is no indication of future results.
Growth of a $10,000 Fund Investment: 10/31/72-10/31/00(1)
A History of Consistent Performance
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
2000 $21,815 $251,822 $116,702 $390,339
The dollar amounts of dividends and capital gains distributions reinvested in
shares were $75,337 and $177,559, respectively. The initial investment plus all
distributions reinvested amounted to $262,896. If dividends and capital gains
distributions had been withdrawn in cash, the amounts of these payments would
have been $14,870 and $23,445, 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.
5
<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
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%; the 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.
1997-1998
Difficulties in Russian and Asian markets spurred a significant correction in
world markets. Affiliated rose 10.3% during this time of trial.
[GRAPHIC OMITTED]
Average Annual Total Returns
Over 28 Years(1)
Affiliated: 14.0%
S&P 500: 13.5%
CDs: 8.0%
Inflation: 5.2%
Affiliated Fund $390,339
S&P 500 $350,037
Six-Month CD(2) $86,921
Inflation $41,135
Fiscal Year Ended Ocotober 31
An investor cannot invest directly in an index, such as the S&P 500. For more
information on CDs, see page 3.
(1) Average annual total return at the Class A share maximum 5.75% offering
price from 10/31/72 through 10/31/00.
(2) Average of six-month CD rates available each period. Source: Lipper, Inc.
See Important Information on page 7.
6
<PAGE>
Who Owns the Fund?
Investor Profile of Lord Abbett Affiliated Fund
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
<S> <C> <C>
Fiduciaries Custodians for Minors 18,270
Pension, Profit-Sharing and 401(k) Retirement Plans 12,245
Trusts 10,187
457 Retirement and 403(b) Plans 5,488
Estates 274
-----------------------------------------------------------------------------------------
Institutions Broker-held Accounts 129,860
Banks, Credit Unions and Other Financial Institutions 431
Corporations 492
Religious, Charitable and welfare organizations 391
Clubs and Fraternal Organizations 96
Cemeteries 69
Nursing homes and hospitals 26
Colleges and universities 36
Government Agencies 76
-----------------------------------------------------------------------------------------
Individuals Single and Joint accounts 68,978
IRAs 61,522
Total Accounts in Affiliated on 10/31/00 308,441
=========================================================================================
</TABLE>
Important Information
Bonds purchased by the Fund are subject to market fluctuations upward and
downward inversely to the rise and fall of interest rates. Common stocks are
also subject to market fluctuations, providing the potential for gains and the
risk of loss. Performance results quoted herein reflect past performance,
current sales charges (where applicable) and appropriate Rule 12b-1 Plan
expenses from commencement of the Plan. Past performance is no indication of
future results. Tax consequences are not reflected. The investment return and
principal value of an investment will fluctuate so that shares, on any given day
or when redeemed, may be worth more or less than their original cost. The Fund's
sales charge structure has changed in the past. 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 12/31/00, this report must be
accompanied by Lord Abbett's Performance Quarterly for the most recently
completed calendar quarter.
7
<PAGE>
Schedule of Investments
October 31, 2000
<TABLE>
<CAPTION>
Investments Shares Value
-------------------------------------------------------------------------------
Common Stocks 91.04%
-------------------------------------------------------------------------------
<S> <C> <C>
Aerospace/Defense Boeing Co. 2,250,000 $ 152,578,125
3.44% Lockheed Martin Corp. 1,850,000 66,322,500
United Technologies
Corp. 2,500,000 174,531,250
----------------
Total 393,431,875
-------------------------------------------------------------------------------
Aluminum 1.61% Alcoa, Inc. 6,400,000 183,600,000
-------------------------------------------------------------------------------
Apparel 0.03% Russell Corp. 179,200 2,867,200
-------------------------------------------------------------------------------
Automotive 0.61% General Motors Corp. 750,000 46,593,750
General Motors Corp.
Class H 712,824 23,095,498
----------------
Total 69,689,248
-------------------------------------------------------------------------------
Banks: Money
Center 1.39% Chase Manhattan Corp. 3,500,000 159,250,000
-------------------------------------------------------------------------------
Banks: Regional Bank One Corp.+ 2,800,000 102,200,000
5.33% FleetBoston+
Financial Corp. 5,500,000 209,000,000
Mellon Financial Corp. 1,650,030 79,613,948
Wells Fargo Co.+ 4,700,000 217,668,750
----------------
Total 608,482,698
-------------------------------------------------------------------------------
Brokers 1.41% Morgan Stanley
Dean Witter & Co. 2,000,000 160,625,000
-------------------------------------------------------------------------------
Cable Services 1.13% Time Warner, Inc. 1,700,000 129,047,000
-------------------------------------------------------------------------------
Chemicals 2.18% Rohm & Haas Co. 2,547,000 76,569,188
Union Carbide Corp. 4,000,000 172,000,000
-------------------------------------------------------------------------------
Total 248,569,188
-------------------------------------------------------------------------------
Communications
Technology 0.17% QUALCOMM, Inc.* 300,000 19,532,820
-------------------------------------------------------------------------------
Computer Hardware Apple Computer, Inc.* 2,000,000 39,125,000
2.96% EMC Corp.*+ 1,250,000 111,328,125
International Business
Machines Corp. 1,000,000 98,500,000
Sun Microsystems, Inc.* 800,000 88,700,000
----------------
Total 337,653,125
-------------------------------------------------------------------------------
Computer Services Computer Sciences
2.11% Corp.* 1,050,000 66,150,000
First Data Corp. 3,500,000 175,437,500
----------------
Total 241,587,500
-------------------------------------------------------------------------------
Computer Software
1.04% Oracle Corp.*+ 3,600,000 118,800,000
-------------------------------------------------------------------------------
Conglomerates Minnesota Mining &
1.57% Manufacturing Co. 1,860,000 179,722,500
-------------------------------------------------------------------------------
Construction/Home
Building 0.04% Manitowoc Co., Inc. 189,000 5,138,438
-------------------------------------------------------------------------------
Consumer Products
0.85% Avon Products, Inc.+ 2,000,000 97,000,000
-------------------------------------------------------------------------------
Drugs 4.02% American Home
Products Corp. 4,500,000 285,750,000
Johnson & Johnson 96,000 8,844,000
Pharmacia Corp. 3,000,000 $ 165,000,000
----------------
Total 459,594,000
-------------------------------------------------------------------------------
Electric Power Allegheny Energy, Inc. 3,250,000 133,046,875
11.32% CP&L Energy, Inc.+ 3,500,000 141,093,750
Dominion Resources, Inc.+ 5,000,000 297,812,500
Duke Energy Corp. 3,500,000 302,531,250
Exelon Corp. 2,500,000 150,312,500
Florida Progress Corp. 3,500,000 186,156,250
Reliant Energy, Inc. 2,000,000 82,625,000
----------------
Total 1,293,578,125
-------------------------------------------------------------------------------
Electrical Equipment
1.29% Emerson Electric Co.+ 2,000,000 146,875,000
-------------------------------------------------------------------------------
Electronics:
Semiconductor
0.79% Texas Instruments, Inc. 1,850,000 90,765,625
-------------------------------------------------------------------------------
Energy Equipment & Schlumberger Ltd. 3,000,000 228,375,000
Services 2.46% Transocean Sedco
Forex, Inc.+ 1,000,000 53,000,000
----------------
Total 281,375,000
-------------------------------------------------------------------------------
Entertainment 1.24% Viacom, Inc.*+ 2,500,000 142,187,500
-------------------------------------------------------------------------------
Financial Services AON Corp.+ 3,500,000 145,031,250
3.89% MBNA Corp. 4,500,000 169,031,250
Marsh & McLennan
Cos., Inc.+ 1,000,000 130,750,000
----------------
Total 444,812,500
-------------------------------------------------------------------------------
Financial: Fannie Mae 2,400,000 184,800,000
Miscellaneous Freddie Mac+ 2,000,000 120,000,000
2.67% --------------------------------------------------------
Total 304,800,000
-------------------------------------------------------------------------------
Food 1.01% ConAgra Foods, Inc. 4,900,000 104,737,500
Hershey Foods Corp. 186,200 10,112,988
----------------
Total 114,850,488
-------------------------------------------------------------------------------
Health Care Products
0.03% Becton Dickinson & Co.* 90,900 3,045,150
-------------------------------------------------------------------------------
Health Care Services CIGNA Corp. 1,500,000 182,925,000
5.51% HCA-The Healthcare Co.+ 4,000,000 159,750,000
McKesson HBOC, Inc. 3,500,000 98,218,750
UnitedHealth Group, Inc. 1,723,000 188,453,125
----------------
Total 629,346,875
-------------------------------------------------------------------------------
Hospital Supplies
0.86% Baxter International, Inc. 1,200,000 98,625,000
-------------------------------------------------------------------------------
Insurance 6.67% ACE Ltd.+ 2,000,000 78,500,000
Aegon NV ADR+ 3,100,000 125,162,500
American General Corp. 2,850,000 229,425,000
Chubb Corp.+ 1,750,000 147,765,625
HSB Group, Inc. 300,000 11,868,750
St. Paul Cos., Inc. 3,300,000 169,125,000
----------------
Total 761,846,875
-------------------------------------------------------------------------------
Machinery: Agriculture
1.77% Deere & Co.+ 5,500,000 202,468,750
-------------------------------------------------------------------------------
See Notes to Financial Statements
8
<PAGE>
Schedule of Investments (continued)
October 31, 2000
Investments Shares Value
-------------------------------------------------------------------------------
Milling: Fruits/Grain Archer-Daniels-
0.39% Midland Co. 4,000,000 $ 44,000,000
-------------------------------------------------------------------------------
Natural Gas 1.32% The Coastal Corp.+ 2,000,000 150,875,000
-------------------------------------------------------------------------------
Office Furniture &
Business Equipment
0.03% Herman Miller, Inc. 144,000 3,762,000
-------------------------------------------------------------------------------
Oil 0.63% Tosco Corp. 2,500,000 71,562,500
-------------------------------------------------------------------------------
Oil: Integrated BP Amoco plc ADR+ 2,300,000 117,156,250
International 7.11% Chevron Corp. 1,500,000 123,187,500
Exxon Mobil Corp. 4,000,000 356,750,000
Total Fina Elf S.A. ADR+ 3,000,000 214,875,000
----------------
Total 811,968,750
-------------------------------------------------------------------------------
Paper and Forest Bowater, Inc. 2,000,000 108,250,000
Products 2.46% Georgia-Pacific Corp.
(Timber Group) 3,000,000 84,937,500
International Paper Co. 2,335,200 85,526,700
Temple-Inland, Inc. 40,000 1,790,000
----------------
Total 280,504,200
-------------------------------------------------------------------------------
Pollution Control
1.05% Waste Management, Inc. 6,000,000 120,000,000
-------------------------------------------------------------------------------
Publishing 1.29% Dow Jones & Co., Inc. 2,500,000 147,187,500
-------------------------------------------------------------------------------
Railroads 0.02% Norfolk Southern Corp. 54,000 762,750
Union Pacific Corp. 34,380 1,611,563
----------------
Total 2,374,313
-------------------------------------------------------------------------------
Retail 0.59% Kroger Co.*+ 3,000,000 67,687,500
-------------------------------------------------------------------------------
Steel 0.30% Nucor Corp. 1,000,000 34,687,500
-------------------------------------------------------------------------------
Telecommunications Alltel Corp. 2,250,000 144,984,372
5.03% BellSouth Corp. 250,000 12,078,125
SBC Communication, Inc. 3,000,000 173,062,500
Verizon Communications+ 3,000,000 173,437,500
WorldCom, Inc.* 3,000,000 71,250,000
----------------
Total 574,812,497
-------------------------------------------------------------------------------
Transportation: Arnold Industries, Inc. 600,000 10,537,500
Miscellaneous 1.42% United Parcel Service, Inc.
Class B+ 2,500,000 151,875,000
----------------
Total 162,412,500
-------------------------------------------------------------------------------
Total Common Stocks
(Cost $7,354,716,282) 10,401,001,740
-------------------------------------------------------------------------------
Convertible Preferred Securities 4.35%
-------------------------------------------------------------------------------
Entertainment 0.92% Seagram Co. Ltd.
7.50% Conv. Pfd. 2,000,000 105,000,000
-------------------------------------------------------------------------------
Financial: CNB Capital Trust I
Miscellaneous 0.16% 6.00% Conv. Pfd. 515,500 18,171,375
-------------------------------------------------------------------------------
Insurance 1.28% ACE Ltd.
8.25% Conv. Pfd. 1,000,000 80,750,000
Metlife Capital Trust I
8.00% Conv. Pfd. 750,000 65,718,750
----------------
Total 146,468,750
-------------------------------------------------------------------------------
Natural Gas 0.94% The Coastal Corp.
6.625% Conv. Pfd. 2,500,000 $ 107,500,000
-------------------------------------------------------------------------------
Paper and Forest Georgia-Pacific Group
Products 0.28% 7.50% Conv. Pfd. 1,000,000 32,062,500
-------------------------------------------------------------------------------
Utilities: Electrical TXU Corp.
0.77% 9.25% Conv. Pfd. 2,000,000 88,000,000
----------------
Total Convertible
Preferred Securities
(Cost $411,088,383) 497,202,625
--------------------------------------------------------------------------------
Principal
Amount
Corporate Bonds 0.06% (000)
-------------------------------------------------------------------------------
Banks: Money Bank of America Corp.
Center 0.02% 7.875% due 12/01/2002 $1,000 1,020,050
Morgan J.P. & Co., Inc.
7.625% due 9/15/2004 1,000 1,021,440
----------------
Total 2,041,490
-------------------------------------------------------------------------------
Electric Power PG&E Corp.
0.00% 6.25% due 3/1/2004 500 487,650
-------------------------------------------------------------------------------
Financial Services Bear Stearns Co., Inc.
0.02% 6.50% due 8/1/2002 500 492,800
GMAC 7.125% due 5/1/2003+ 500 501,680
Household Finance Corp.
7.25% due 7/15/2003 1,000 1,001,920
----------------
Total 1,996,400
-------------------------------------------------------------------------------
Financial:
Miscellaneous CitiFinancial Credit Co.
0.01% 6.875% due 5/1/2002 500 499,220
-------------------------------------------------------------------------------
Insurance 0.01% Lincoln National Corp.
7.25% due 5/15/2005+ 1,500 1,484,400
----------------
Total Corporate Bonds
(Cost $6,646,070) 6,509,160
-------------------------------------------------------------------------------
Short-Term Investments 4.75%
-------------------------------------------------------------------------------
American Express
Credit
6.65% due 11/1/2000 131,153 131,153,000
American Express
Credit
6.63% due 11/1/2000 67,567 67,567,000
Prudential
Funding Corp.
6.62% due 11/1/2000 343,604 343,604,000
----------------
Total Short-Term
Investments
-------------------------------------------------------------------------------
(Cost $542,324,000) 542,324,000
Total Investments 100.20%
(Cost $8,314,774,735) $11,447,037,525
-------------------------------------------------------------------------------
*Non-income producing security.
+Security (or a portion of security) on loan. See Note 5.
ADR-American Depositary Receipt.
</TABLE>
See Notes to Financial Statements
9
<PAGE>
Statement of Assets and Liabilities
October 31, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investment in securities, at value (cost $8,314,774,735) $11,447,037,525
Cash 752,306
Market value of collateral for securities loaned 278,143,287
Receivables:
Income 12,169,241
Investment securities sold 10,204,686
Capital shares sold 38,360,043
-----------------------------------------------------------------------------------------------------------
Total assets 11,786,667,088
-----------------------------------------------------------------------------------------------------------
LIABILITIES:
Securities lending collateral 278,143,287
Payables:
Investment securities purchased 61,756,756
Capital shares reacquired 6,252,498
Management fees 2,858,395
Directors' fees 3,784,064
12b-1 distribution fees 7,158,292
Accrued expenses and other liabilities 2,220,748
-----------------------------------------------------------------------------------------------------------
Total liabilities 362,174,040
-----------------------------------------------------------------------------------------------------------
Net Assets $11,424,493,048
===========================================================================================================
COMPOSITION OF NET ASSETS:
Paid-in capital $ 7,295,123,138
Undistributed net investment income 35,944,539
Undistributed net realized gain from investments 961,162,581
Net unrealized appreciation on investments 3,132,262,790
Net Assets $11,424,493,048
===========================================================================================================
Net assets by class:
Class A Shares $10,309,844,891
Class B Shares $ 713,161,030
Class C Shares $ 331,909,873
Class P Shares $ 12,071,630
Class Y Shares $ 57,505,624
Outstanding shares by class:
Class A Shares 625,788,038
Class B Shares 43,258,059
Class C Shares 20,132,771
Class P Shares 733,824
Class Y Shares 3,484,337
Net asset value, offering and redemption price per share (net assets divided by
outstanding shares):
Class A Shares-Net asset value $16.47
Class A Shares-Maximum offering price (Net asset value plus sales charge of 5.75%) $17.47
Class B Shares-Net asset value $16.49
Class C Shares-Net asset value $16.49
Class P Shares-Net asset value $16.45
Class Y Shares-Net asset value $16.50
===========================================================================================================
</TABLE>
See Notes to Financial Statements
10
<PAGE>
Statement of Operations
For the Year Ended October 31, 2000
Investment Income:
Dividends $ 225,525,834
Interest 27,027,284
Foreign withholding tax (248,325)
Total investment income 252,304,793
--------------------------------------------------------------------------------
Expenses:
Management fee 32,372,356
12b-1 distribution plan-Class A 32,841,863
12b-1 distribution plan-Class B 6,050,322
12b-1 distribution plan-Class C 2,560,528
12b-1 distribution plan-Class P 20,639
Shareholder servicing 11,248,679
Reports to shareholders 351,608
Custody 81,738
Professional 293,461
Registration 630,986
Directors 1,467,454
Other 1,138,832
--------------------------------------------------------------------------------
Gross expenses 89,058,466
Expense reductions (1,200,218)
--------------------------------------------------------------------------------
Net expenses 87,858,248
--------------------------------------------------------------------------------
Net investment income 164,446,545
--------------------------------------------------------------------------------
Realized and unrealized gain on investments:
Net realized gain from investment transactions 963,472,558
Net change in unrealized appreciation on investments 378,816,299
================================================================================
Net realized and unrealized gain on investments 1,342,288,857
================================================================================
Net Increase in Net Assets Resulting From Operations $1,506,735,402
================================================================================
See Notes to Financial Statements
11
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, October 31,
2000 1999
-----------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income $ 164,446,545 $ 127,030,402
Net realized gain from investment transactions 963,472,558 1,108,589,813
Net change in unrealized appreciation on investments 378,816,299 499,850,810
-----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,506,735,402 1,735,471,025
-----------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (147,739,267) (137,028,835)
Class B (5,231,082) (3,320,304)
Class C (2,171,815) (1,232,723)
Class P (52,058) (27,346)
Class Y (991,101) (760,283)
Net realized gain
Class A (1,008,917,125) (524,634,632)
Class B (57,499,161) (20,854,149)
Class C (21,866,899) (7,962,546)
Class P (222,559) (117,804)
Class Y (5,313,373) (2,155,302)
-----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (1,250,004,440) (698,093,924)
-----------------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Net proceeds from sales of shares 1,183,710,512 911,822,030
Reinvestment of distributions 1,056,397,318 576,481,381
Cost of shares reacquired (1,153,099,525) (965,529,945)
-----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from capital share transactions 1,087,008,305 522,773,466
-----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 1,343,739,267 1,560,150,567
===================================================================================================================================
NET ASSETS:
Beginning of year 10,080,753,781 8,520,603,214
===================================================================================================================================
End of year $11,424,493,048 $10,080,753,781
===================================================================================================================================
Undistributed net investment income $ 35,944,539 $ 12,690,368
===================================================================================================================================
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended 10/31,
--------------------------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance (Class A Shares)
Net asset value, beginning of year $ 16.22 $ 14.56 $ 14.84 $ 13.02 $ 11.98
============ ============= ============= ============ ==========
Investment operations
Net investment income .24(e) .21(e) .24 .30 .30
Net realized and unrealized gain on investments 2.01 2.64 1.14 2.85 2.23
------------ ------------- ------------- ------------ ----------
Total from investment operations 2.25 2.85 1.38 3.15 2.53
------------ ------------- ------------- ------------ ----------
Distributions to shareholders from:
Net investment income (.24) (.24) (.27) (.30) (.30)
Net realized gain (1.76) (.95) (1.39) (1.03) (1.19)
------------ ------------- ------------- ------------ ----------
Total distributions (2.00) (1.19) (1.66) (1.33) (1.49)
------------ ------------- ------------- ------------ ----------
Net asset value, end of year $ 16.47 $ 16.22 $ 14.56 $ 14.84 $ 13.02
============ ============= ============= ============ ==========
Total Return(a) 15.12% 20.69% 10.27% 25.80% 23.23%
Ratios to Average Net Assets
Expenses, including expense reduction .79%(b) .74%(b) .63%(b) .65%(b) .66%
Expenses, excluding expense reduction .80% .74%(b) .63%(b) .65%(b) .66%
Net investment income 1.62% 1.36% 1.64% 2.15% 2.61%
</TABLE>
<TABLE>
<CAPTION>
Year Ended 10/31, 8/1/1996(c)
------------------------------------------------------- to
2000 1999 1998 1997 10/31/1996
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance (Class B Shares)
Net asset value, beginning of period $ 16.23 $ 14.56 $ 14.84 $ 13.03 $ 11.88
============ ============= ============= ============ ==========
Investment operations
Net investment income .14(e) .10(e) .14 .20 .06
Net realized and unrealized gain on investments 2.02 2.65 1.12 2.84 1.14
------------ ------------- ------------- ------------ ----------
Total from investment operations 2.16 2.75 1.26 3.04 1.20
------------ ------------- ------------- ------------ ----------
Distributions to shareholders from:
Net investment income (.14) (.13) (.15) (.20) (.05)
Net realized gain (1.76) (.95) (1.39) (1.03) -
------------ ------------- ------------- ------------ ----------
Total distributions (1.90) (1.08) (1.54) (1.23) (.05)
------------ ------------- ------------- ------------ ----------
Net asset value, end of period $ 16.49 $ 16.23 $ 14.56 $ 14.84 $ 13.03
============ ============= ============= ============ ==========
Total Return(a) 14.42% 19.87% 9.41% 24.78% 10.15%(d)
Expenses, including expense reduction 1.44%(b) 1.43%(b) 1.38%(b) 1.42%(b) .34%(d)
Expenses, excluding expense reduction 1.45% 1.43%(b) 1.38%(b) 1.42%(b) .34%(d)
Net investment income .94% .66% .87% 1.19% .27%(d)
</TABLE>
See Notes to Financial Statements
13
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Year Ended 10/31, 8/1/1996(c)
------------------------------------------------------- to
2000 1999 1998 1997 10/31/1996
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance (Class C Shares)
Net asset value, beginning of period $ 16.23 $ 14.56 $ 14.84 $ 13.02 $ 11.88
=========== =========== =========== =========== ===========
Investment operations
Net investment income .14(e) .10(e) .14 .22 .06
Net realized and unrealized gain on investments 2.02 2.65 1.12 2.83 1.13
----------- ----------- ----------- ----------- -----------
Total from investment operations 2.16 2.75 1.26 3.05 1.19
----------- ----------- ----------- ----------- -----------
Distributions to shareholders from:
Net investment income (.14) (.13) (.15) (.20) (.05)
Net realized gain (1.76) (.95) (1.39) (1.03) -
----------- ----------- ----------- ----------- -----------
Total distributions (1.90) (1.08) (1.54) (1.23) (.05)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 16.49 $ 16.23 $ 14.56 $ 14.84 $ 13.02
=========== =========== =========== =========== ===========
Total Return(a) 14.48% 19.80% 9.41% 24.88% 10.07%(d)
Expenses, including expense reduction 1.44%(b) 1.43%(b) 1.40%(b) 1.34%(b) .33%(d)
Expenses, excluding expense reduction 1.45% 1.43%(b) 1.40%(b) 1.34%(b) .33%(d)
Net investment income .93% .66% .85% 1.28% .25%(d)
</TABLE>
<TABLE>
<CAPTION>
Year Ended 10/31, 12/8/1997(c)
----------------------------------------------------------------------------- to
2000 1999 10/31/1998
<S> <C> <C> <C>
Per Share Operating Performance (Class P Shares)
Net asset value, beginning of period $ 16.19 $ 14.53 $ 14.24
=========== =========== ===========
Investment operations
Net investment income .22(e) .19(e) .18
Net realized and unrealized gain on investments 2.02 2.63 .27
----------- ----------- -----------
Total from investment operations 2.24 2.82 .45
----------- ----------- -----------
Distributions to shareholders from:
Net investment income (.22) (.21) (.16)
Net realized gain (1.76) (.95) -
----------- ----------- -----------
Total distributions (1.98) (1.16) (.16)
----------- ----------- -----------
Net asset value, end of period $ 16.45 $ 16.19 $ 14.53
----------- ----------- -----------
=========== =========== ===========
Total Return(a) 15.11% 20.51% 3.21%(d)
Ratios to Average Net Assets
Expenses, including expense reduction .89%(b) .88%(b) .76%(b)(d)
Expenses, excluding expense reduction .89% .88%(b) .76%(b)(d)
Net investment income 1.30% 1.22% 1.21%(d)
</TABLE>
14
See Notes to Financial Statements
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Year Ended 10/31, 3/27/1998(c)
-------------------------- to
Per Share Operating Performance (Class Y Shares) 2000 1999 10/31/1998
<S> <C> <C> <C>
Net asset value, beginning of period $ 16.25 $ 14.57 $ 15.44
=========== =========== ===========
Investment operations
Net investment income .30(e) .26(e) .15
Net realized and unrealized gain (loss) on investments 2.01 2.65 (.89)
----------- ----------- -----------
Total from investment operations 2.31 2.91 (.74)
----------- ----------- -----------
Distributions to shareholders from:
Net investment income (.30) (.28) (.13)
Net realized gain (1.76) (.95) -
----------- ----------- -----------
Total distributions (2.06) (1.23) (.13)
----------- ----------- -----------
Net asset value, end of period $ 16.50 $ 16.25 $ 14.57
=========== =========== ===========
Total Return(a) 15.52% 21.15% (4.77)%(d)
Ratios to Average Net Assets
Expenses, including expense reduction .44%(b) .43%(b) .24%(b)(d)
Expenses, excluding expense reduction .46% .43%(b) .24%(b)(d)
Net investment income 1.96% 1.67% 1.03%(d)
</TABLE>
<TABLE>
<CAPTION>
Year Ended 10/31,
----------------------------------------------------------------------------------------------------------------------
Supplemental Data for All Classes: 2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets, end of year (000) $11,424,493 $10,080,754 $8,520,603 $7,697,754 $6,100,665
Portfolio turnover rate 52.27% 62.30% 56.49% 46.41% 47.06%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(b) The ratio includes expenses paid through an expense offset arrangement.
(c) Commencement of offering of class shares.
(d) Not annualized.
(e) Calculated using average shares outstanding during the year.
See Notes to Financial Statements
15
<PAGE>
Notes to Financial Statements
1. Organization
Lord Abbett Affiliated Fund, Inc. (the "Company") is registered under the
Investment Company Act of 1940 (the "Act") as a diversified, open-end management
investment company. The financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which permit management to make certain estimates and assumptions that affect
the reported amounts and disclosures at the date of the financial statements.
Actual results could differ from those estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Investment Valuation-Securities traded on national or foreign securities
exchanges are valued at the last quoted sales price, or if no sales price
is available, at the mean between the latest bid and ask prices on such
exchange, or, in the case of bonds, in the over-the-counter market if, in
the judgement 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 latest bid and
ask 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 readily
available are valued at fair value as determined by management and approved
in good faith by the Board of Directors. Short-term securities with 60 days
or less remaining to maturity are valued using the amortized cost method,
which approximates current market value.
(b) Security Transactions and Investment Income-Security transactions are
recorded as of the date that the securities are purchased or sold (trade
date). Realized gains and losses on sales of portfolio securities are
calculated using the identified-cost method. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income is recorded on the accrual basis. Net investment income 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.
(c) Federal Taxes-It is the policy of the Company to meet the requirements of
the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of its taxable net investment income and
capital gains to its shareholders. Therefore, no federal income tax
provision is required.
(d) The Company will adopt the provisions of the AICPA Audit and Accounting
Guide for Investment Companies, as revised, effective for fiscal years
beginning after December 15, 2000. As required, the Company will begin
amortizing premiums and discounts on debt securities effective November 1,
2000. Prior to this date, the Company did not amortize premiums or
discounts on debt securities. The cumulative effect of this accounting
change will have no impact on the total net assets of the Company, but will
result in a $36,376 increase to cost of securities and a corresponding
$36,376 decrease in net unrealized appreciation, based on securities held
as of October 31, 2000.
3. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Management Fee
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 and statistical work and supervision of the
Company's investment portfolio. The management fee is based on average daily net
assets at the following annual rates:
-------------------------------------------
First $200 million 0.50%
Next $300 million 0.40%
Next $200 million 0.375%
Next $200 million 0.35%
Over $900 million 0.30%
16
<PAGE>
Notes to Financial Statements (continued)
12b-1 Plans
The Company has adopted distribution plans (the "Plans") with respect to one or
more classes of shares pursuant to Rule 12b-1 of the Act, which provides for the
payment of ongoing account maintenance and distribution fees to Lord Abbett
Distributor LLC ("Distributor"), an affiliate of Lord Abbett. The fees are
accrued daily at annual rates based upon average daily net assets as follows:
Fee Class A Class B Class C(3)(4) Class P
--------------------------------------------------------------------------------
Service .25%(1) .25% up to .25% .20%
Distribution .10%(2) .75% up to .75% .25%
(1) Annual service fee of shares sold prior to June 1, 1990 is 0.15% of the
average daily net asset value. (2) In addition, the Company pays a one time
distribution fee of up to 1% on certain qualifying purchases, which is
generally amortized over a one-year period.
(3) Paid at the time such shares are sold, which is generally amortized over a
one-year period. (4) Paid at each quarter-end after the first anniversary
of the sale of such shares.
Class Y does not have a Plan.
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. Accrued expenses and
other liabilities include $197,226 and other expenses include $235,110 pursuant
to this Servicing Agreement.
Commissions
Distributor received the following commissions on sales of shares of the Company
after concessions were paid to authorized distributors for the year ended
October 31, 2000:
Distributor Commissions Dealers' Concessions
-----------------------------------------------------
$2,466,804 $14,174,968
Certain of the Company's officers and directors have an interest in Lord Abbett.
4. DISTRIBUTIONS
Dividends from net investment income, if any, are declared quarterly. Net
realized gain from investment transactions, if any, is distributed to
shareholders annually.
5. PORTFOLIO SECURITIES TRANSACTIONS
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, 2000, the value of securities loaned was $268,955,397. These
loans were collateralized by cash of $278,143,287, which is invested in a
restricted money market account. Income from securities lending of $1,263,595 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 investments)
are as follows for the year ended October 31, 2000:
Purchases Sales
---------------------------------------------
$5,288,374,361 $5,618,177,590
17
<PAGE>
Notes to Financial Statements (continued)
As of October 31, 2000, the aggregate cost of investments, gross unrealized
appreciation, gross unrealized depreciation and net unrealized appreciation on
investments based on cost for federal income tax purposes were as follows:
Gross Gross Net
Unrealized Unrealized Unrealized
Tax Cost Appreciation Depreciation Appreciation
--------------------------------------------------------------------------------
$8,316,779,705 $3,256,771,328 $126,513,508 $3,130,257,820
The cost of investments for federal income tax purposes differs from that used
for financial reporting purposes. These differences are due to differing
treatments for items such as deferral of wash sales.
6. CERTAIN RECLASSIFICATIONS
Net investment income distributions and capital gains distributions are
determined in accordance with income tax regulations, which may differ from
accounting principles generally accepted in the United States of America. These
differences are either considered temporary or permanent in nature. Permanent
items identified during the year ended October 31, 2000, have been reclassified
among the components of net assets based on their tax basis treatment as
follows:
Undistributed Undistributed
Net Investment Net Realized Gain
Income from Investments
Increase (decrease)
------------------------------------
$14,992,949 $(14,992,949)
7. DIRECTORS' REMUNERATION
The Directors 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. The outside Directors may elect to defer
receipt of such fees. The deferred fees earn a return based on the performance
of the Company or other funds within the Lord Abbett Family of Funds. Such cost
and earnings accrued thereon are included in Directors' expense on the Statement
of Operations and are not deductible for Federal income tax purposes until such
amounts are paid.
8. SUMMARY OF CAPITAL TRANSACTIONS
The Company had 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.
Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 2000 October 31, 1999
=====================================================================================================================
Class A Shares Shares Amount Shares Amount
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 45,428,776 $ 693,387,616 39,694,036 $ 618,554,913
Shares issued in connection with acquisition of
Real Silk Investments, Inc. 8,900,457 131,459,455 - -
Reinvestment of distributions 63,993,291 967,164,636 37,601,360 541,579,692
Shares reacquired (66,475,528) (1,010,445,043) (56,461,608) (876,717,900)
---------------------------------------------------------------------------------------------------------------------
Increase 51,846,996 $ 781,566,664 20,833,788 $ 283,416,705
---------------------------------------------------------------------------------------------------------------------
Class B Shares Shares Amount Shares Amount
---------------------------------------------------------------------------------------------------------------------
Shares sold 13,126,550 $ 200,315,595 12,120,448 $ 189,940,250
Reinvestment of distributions 3,951,150 59,817,064 1,605,000 23,100,835
Shares reacquired (6,173,806) (93,343,477) (3,055,952) (47,511,701)
---------------------------------------------------------------------------------------------------------------------
Increase 10,903,894 $ 166,789,182 10,669,496 $ 165,529,384
---------------------------------------------------------------------------------------------------------------------
18
<PAGE>
Notes to Financial Statements (continued)
Year Ended Year Ended
October 31, 2000 October 31, 1999
=====================================================================================================================
Class C Shares Shares Amount Shares Amount
---------------------------------------------------------------------------------------------------------------------
Shares sold 9,474,095 $144,699,119 5,202,798 $ 81,918,057
Reinvestment of distributions 1,508,049 22,836,722 607,399 8,739,598
Shares reacquired (3,017,917) (45,806,301) (1,914,461) (29,737,368)
---------------------------------------------------------------------------------------------------------------------
Increase 7,964,227 $121,729,540 3,895,736 $ 60,920,287
---------------------------------------------------------------------------------------------------------------------
Class P Shares Shares Amount Shares Amount
---------------------------------------------------------------------------------------------------------------------
Shares sold 685,444 $ 10,753,315 27,936 $ 430,275
Reinvestment of distributions 18,127 274,516 10,124 145,672
Shares reacquired (96,116) (1,478,072) (36,342) (578,481)
---------------------------------------------------------------------------------------------------------------------
Increase (Decrease) 607,455 $ 9,549,759 1,718 $ (2,534)
---------------------------------------------------------------------------------------------------------------------
Class Y Shares Shares Amount Shares Amount
---------------------------------------------------------------------------------------------------------------------
Shares sold 206,588 $ 3,095,412 1,351,162 $ 20,978,535
Reinvestment of distributions 416,347 6,304,380 200,651 2,915,584
Shares reacquired (132,611) (2,026,632) (706,301) (10,984,495)
---------------------------------------------------------------------------------------------------------------------
Increase 490,324 $ 7,373,160 845,512 $ 12,909,624
---------------------------------------------------------------------------------------------------------------------
</TABLE>
9. EXPENSE REDUCTION
The Company has entered into arrangements with its transfer agent and custodian
whereby credits realized as a result of uninvested cash balances were used to
reduce a portion of the Company's expenses.
10. LINE OF CREDIT
The Company, along with certain other funds managed by Lord Abbett, has
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 was at an annual rate of
0.06% during the year. Effective December 17, 1999, this fee was increased to
0.09% per annum. There were no loans outstanding pursuant to this Facility at
October 31, 2000, nor was the Facility utilized at any time during the year.
11. ACQUISITION OF REAL SILK INVESTMENTS, INC.
On December 15, 1999, the Company acquired all the net assets of Real Silk
Investments, Inc. ("Real Silk") valued at $131,459,455 (including $96,203,567 of
unrealized appreciation) 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
for 164,683 shares of Real Silk.
--------------------------------------------------------------------------------
The Company (unaudited)
All of the net investment income distributions paid quarterly by the Company
qualify for the dividends received deduction for corporations. Additionally, the
Company paid long-term capital gain distributions of $1.3716 per share to
shareholders of record on November 20, 2000.
--------------------------------------------------------------------------------
19
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders,
Lord Abbett Affiliated Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Lord Abbett Affiliated Fund, Inc. (the
"Company") as of October 31, 2000, the related statement of operations for the
year then ended and changes in net assets for each of the two years in the
period then ended, 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 auditing standards generally accepted
in the United States of America. 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 as of October 31, 2000 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Lord
Abbett Affiliated Fund, Inc. as of October 31, 2000, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods presented, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Deloitte & Touche LLP
New York, New York
December 20, 2000
Copyright(C)2000 by Lord Abbett Affiliated Fund, Inc., 90 Hudson Street, Jersey
City, NJ 07302-3973
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.
20
<PAGE>
Lord Abbett & Co.
Senior
Investment
Team Member
Profile
[PHOTO]
W. Thomas Hudson, Jr.
Partner and Senior Investment Team Member
Lord Abbett Affiliated Fund
W. Thomas Hudson, Jr., Partner and Senior Investment Team Member 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 Ex change Com mission (SEC) views the role of the independent
Board of Directors as one of the most important com po nents in overseeing a
mutual fund. The Board of Directors watches over your Fund's general oper ations
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 regard ing 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.
[PHOTO]
E. Thayer Bigelow, Jr.
Director - Lord Abbett Affiliated Fund
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>
GROWTH FUNDS GROWTH & INCOME FUNDS TAX-FREE MONEY
INCOME FUNDS INCOME FUNDS MARKET FUND
<S> <C> <C> <C> <C>
Alpha Series(1) Affiliated Fund Bond-Debenture Fund o California U.S. Government
Global Fund o Connecticut Securities Money
Balanced Series(2) High Yield Fund o Florida Market Fund(3)(4)
Equity Series o Georgia
Growth & Income Series Global Fund-- o Hawaii
Growth Income Series o Michigan
Opportunities Research Fund -- o Minnesota
Fund Large-Cap Series U.S. Government o Missouri
Securities Series(3) o National
International Series o New Jersey
Limited Duration U.S. o New York
Large-Cap Growth Fund Government Securities o Pennsylvania
Series(3) o Texas
Mid-Cap Value Fund o Washington
World Bond-
Research Fund Debenture Series
Small-Cap Value Series
</TABLE>
Finding the right mutual fund can be confusing. At Lord, Abbett & Co., we
believe that your investment professional provides value in helping you identify
and understand your investment objectives and, ultimately, offering fund
recommendations suitable for your individual needs.
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.
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 Website: www.lordabbett.com
(1)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.
(2)Lord Abbett Investment Trust - Balanced Series is a "fund of funds" investing
in shares of certain other Lord Abbett Funds.
(3)An investment in this Fund is neither insured nor guaranteed by the U.S.
Government.
(4)An investment in the Fund is neither insured nor 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]
LORD, ABBETT & CO
Investment Management
A Tradition of Performance Through Disciplined Investing
Lord Abbett Mutual Fund shares are distributed by:
LORD ABBETT DISTRIBUTOR LLC
90 Hudson Street o Jersey City, New Jersey 07302-3973
LAA-2-1000
(12/00)
