<PAGE>
Lord Abbett Mid-Cap
Value Fund
1997 ANNUAL REPORT
[GRAPHIC Birdhouse]
Designed to provide you with capital appreciation
from a stock portfolio of midsized companies
[LOGO]
<PAGE>
Report to Shareholders
For the Fiscal Year Ended December 31, 1997
[PHOTO ROBERT S. DOW]
/s/ ROBERT S. DOW
- --------------------
ROBERT S. DOW
CHAIRMAN
JANUARY 14, 1998
"Our goal: to provide our shareholders with the opportunity for
better-than-market returns with less-than-market risk."
Lord Abbett Mid-Cap Value Fund completed fiscal 1997 on December 31. Below is an
overview of class-specific data as of the close of the year.
12 Months Ended 8 Months Ended
December 31, 1997 December 31, 1997
----------------- ---------------------
Class A Class B Class C
- ----------------------------------------------------- ---------------------
Net asset value $ 13.37 $ 13.33 $ 13.33
Dividends $ 0.23 $ 0.05 $ 0.05
Capital gains paid $ 3.38 $ 2.03 $ 2.03
Total return** +31.5% +27.5%++ +27.5%++
In an environment of continuing economic growth, low inflation and rising stock
market averages, your portfolio performed well. We attribute these strong
returns to our continuing commitment to careful stock selection. Your portfolio
does not seek to emphasize particular sectors, but, instead, focuses on
investing in those companies we believe offer the best value in the
mid-capitalization sector (companies with market capitalizations ranging from
$500 million to $5 billion). At the close of the year, your portfolio had strong
exposure to the insurance, specialty chemical and electric power sectors because
we identified a number of companies in those industries offering exceptional
value. Our goal: to provide our shareholders with the opportunity for
better-than-market returns with less-than-market risk.
Over the coming year, we expect economic growth to slow and inflation to remain
moderate. The yield on the benchmark 30-year U.S. Treasury bond should remain
below 6% as 1998 progresses. We are watchful of the currency crises in Asia, but
believe the absence of inflationary pressures in the U.S., combined with the
virtual elimination of the Federal budget deficit, bodes well for the equity
markets. Overall, we will continue to seek out value opportunities, focusing on
those companies with the potential for relatively strong, predictable earnings
in the economic environment we are forecasting.
We will temper our optimism with a note of caution. The stock market has
provided handsome returns over each of the past three years. Investors should
recognize that these returns are above historical norms and may be difficult to
duplicate going forward. We continue to believe that active portfolio management
and research-driven stock selection will provide you the best opportunity for
attractive returns in the mid-cap market.
We remain committed to helping you achieve your long-term financial goals. Thank
you for including Lord Abbett Mid-Cap Value Fund in your investment portfolio.
We look forward to a long and prosperous relationship.
* Class B and Class C shares were offered on May 1, 1997.
** Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
++ Not annualized.
<PAGE>
The Mid-Cap Advantage
Lord Abbett Mid-Cap Value Fund is one of the few mutual funds in the industry
that focuses on midsized companies while utilizing a value approach to
investing. The Fund generally focuses on companies with market capitalizations
ranging from $500 million to $5 billion. Because midsized companies operate from
a smaller earnings base, it is mathematically easier for these companies to grow
earnings at a faster rate than larger companies. Below are three reasons we
believe opportunity exists in the mid-cap sector.
A Valuation Gap Exists
Mid-cap companies have been less followed by investment analysts and have been
less a focus of investor interest in recent years. As a result, their
price/earnings and price-to-book ratios are relatively attractive compared to
large-cap companies. Also, we believe midsized companies offer the potential for
higher growth rates than large companies.
Decreased Tax Burden
Tax rates for capital gains are lower than rates on ordinary income. By
investing in mid-cap companies, the Fund derives a greater portion of its total
return (price appreciation plus dividends) from capital appreciation than from
income. The result: a smaller tax burden.
Targeted Investing Signals Opportunity
Midsized companies often concentrate their efforts on one product or service.
This singular focus means management's efforts are not diluted across many
industries.
The Fund Versus Inflation
Years pass and prices increase. It seems to be a fact of life. Another fact: if
your purchasing power does not keep up with inflation, your standard of living
will suffer. Historically, stocks have proven to be a successful defense against
the erosion caused by inflation.
In our illustration, 1987 and 1997 are actual costs--then and now. "Mid-Cap
Value Fund 1997" is what the 1987 amount would have grown to had it been
invested in the Fund. Investments in Lord Abbett Mid-Cap Value Fund (up 324.1%)
surpassed increases in the cost of living (up 39.8%) in these 10 years. Finding
investments that grow faster than inflation is one important way to
maintain--and enhance--your lifestyle.
[PHOTO OMITTED] [PHOTO OMITTED] [PHOTO OMITTED]
One-Year Private One-Family House(1) Income per
College Tuition(1) Capita(1)
1987 $10,455 $106,300 $17,164
1997 $18,357 $155,000 $19,573
- --------------------------------------------------------------------------------
Mid-Cap Value Fund 1997 $44,340 $450,818 $72,793
- --------------------------------------------------------------------------------
Lord Abbett Mid-Cap Value Fund's results reflect total return at net asset
value, with all distributions reinvested for the 10 years ended 12/31/97. See
Important Information on page 2.
(1) National average.
Sources: U.S. Department of Education, Statistics Bureau Section, College Board
Annual Survey of Colleges; National Association of Realtors, Research Division;
Department of Commerce, Bureau of Economic Analysis Statistics.
Average Annual Total Returns
Average annual compounded total returns for periods ended 12/31/97, assuming
deduction of the Class A share 5.75% maximum sales charge, with all
distributions reinvested:
1 year: +23.90%
5 years: +15.86%
10 years: +14.87%*
The past performance of the Fund, stocks and inflation 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
<PAGE>
The Value of a Managed Equity Portfolio
The cost of goods and services (as measured by the Consumer Price Index) has
risen steadily over the past 10 years, increasing at an average of 3.4% per
year. Over this time frame, the 6.0% average annual return of CDs outpaced
inflation. However, investors in the Fund saw their $100,000 investment grow an
average of 15.1% per year, to $408,346.
There is no doubt that when it comes to saving for near-term obligations, CDs
are important. But, when investing for long-term goals such as a house, a
child's education or retirement, owning good companies through a fund like Lord
Abbett Mid-Cap Value Fund can help your money work harder for you.
Cumulative Total
Returns Over
10 Years
The Fund: 308.3%
CDs: 79.7%
Inflation: 39.8%
Growth of $100,000: 12/31/87-12/31/97
[THE FOLLOWING IS SHOWN IN A LINE GRAPH]
DATE THE FUND SIX-MONTH CD INFLATION (CPI)
1987 96292 100000 100000
1988 111334 107837 104419
1989 133710 117732 109272
1990 127505 127430 115945
1991 162388 135179 119497
1992 184250 140378 122964
1993 209961 145006 126343
1994 203105 151963 129723
1995 256089 161135 133016
1996 310447 169946 137435
1997 408346 179689 139775
(1) The Fund's results reflect the deduction of the Class A share reduced
sales charge of 3.75% applicable to investments of $100,000. All
distributions were reinvested.
(2) Source: Salomon Brothers and The Federal Reserve Bank.
Total return is the percent change in value assuming the reinvestment of all
distributions. Results of the CD investment reflect the average six-month CD
rate available each year during the period. It is important to remember that,
unlike the Fund, a CD's rate and principal are guaranteed if held until
maturity. The Federal Deposit Insurance Corporation ("FDIC") insures CDs up to
$100,000.
Important Information
Results quoted herein represent past performance based on the current sales
charge schedule and reflect appropriate Rule 12b-1 Plan expenses from
commencement of the Plan. Prior to May 1, 1997, the Fund had only one class of
shares, which is now designated as Class A shares. Results for periods from May
1, 1997 onward relate to Class A shares. Past performance is no indication of
future results. Tax consequences are not reflected. The Fund's sales charge
structure has changed from the past. The investment return and principal value
of a Fund 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 issues
additional classes of shares with distinct pricing options. For a full
discussion of the differences in pricing alternatives, please call Lord Abbett
Distributor LLC at 800-874-3733 (or your investment professional) and ask for
the Fund's current prospectus. If used as sales material after 3/31/98, this
report must be accompanied by Lord Abbett's Performance Quarterly for the most
recently completed calendar quarter.
2
<PAGE>
Statement of Net Assets
December 31, 1997
<TABLE>
<CAPTION>
Investments Shares Market Value
===================================================================================================================================
Investments in Common Stocks 98.48%
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aerospace 1.30% *Orbital Sciences Corp.-A space and information systems company
that designs, manufactures, operates and markets a broad range
of affordable space-technology products and satellite-based services 150,000 $ 4,462,500
- -----------------------------------------------------------------------------------------------------------------------============
Agricultural Equipment 2.04% AGCO Corp.-Manufacturer and distributor of farm equipment
machinery and parts worldwide 239,600 7,008,300
- -----------------------------------------------------------------------------------------------------------------------============
Apparel 2.24% *Fruit of The Loom Class A-Producer of non-fashion apparel and
undergarments 300,000 7,687,500
- -----------------------------------------------------------------------------------------------------------------------============
Auto Parts: After Market 3.58% Echlin Manufacturing Co.-Manufacturer of auto and truck
replacement parts 150,000 5,428,125
Snap-on, Inc.-Manufacturer and distributor of hand tools
and diagnostic equipment for the automotive industry 157,500 6,870,937
Total 12,299,062
- -----------------------------------------------------------------------------------------------------------------------============
Banks: Regional 4.62% Crestar Financial Corp.-Leading mid-atlantic regional bank 100,000 5,700,000
Cullen/Frost Bankers Inc.-Leading Texas bank 100,000 6,068,750
TCF Financial Inc.-Leading midwestern regional bank 120,000 4,072,500
Total 15,841,250
- -----------------------------------------------------------------------------------------------------------------------============
Banks: Savings and Loan .82% *Golden State Bancorp Inc.-California savings and loan 75,000 2,803,125
- -----------------------------------------------------------------------------------------------------------------------============
Chemical: Specialty 8.40% Crompton & Knowles Corp.-Specialty chemicals and plastic
processing equipment manufacturer 250,000 6,625,000
Hanna, M.A. Co.-Leading producer and distributor of plastic
compounds, resins and additives 200,000 5,050,000
Morton International Inc.-Producer of specialty chemicals
and salt 100,000 3,437,500
*Polymer Group Inc.-Major global manufacturer of non-woven materials 777,300 7,384,350
Witco Corp.-Producer of specialty chemicals and petroleum products
for industrial and consumer applications 155,000 6,325,937
Total 28,822,787
- -----------------------------------------------------------------------------------------------------------------------============
Communications Equipment 3.38% *Plantronics, Inc.-Leading supplier of communication headset
products and services to users and providers worldwide 290,000 11,600,000
- -----------------------------------------------------------------------------------------------------------------------============
Computer: Software 1.80% Adobe Systems-Developer of computer software products 150,000 6,187,500
- -----------------------------------------------------------------------------------------------------------------------============
Containers 2.06% Ball Corp.-Manufacturer of aluminum, plastic and steel
containers for the beverage and food industries 200,000 7,062,500
- -----------------------------------------------------------------------------------------------------------------------============
Drugs/Health Care Products 1.98% Mylan Laboratories-Leading producer of prescription generic
drugs and brand-name dermatological products 325,000 6,804,687
- -----------------------------------------------------------------------------------------------------------------------============
Electric Power 7.49% FirstEnergy Corp.-Major midwestern electric utility holding company 135,000 3,915,000
Ipalco Enterprises Inc.-Major midwestern electric utility holding company 150,000 6,290,625
*Northeast Utilities-Major northeastern electric utility company 450,000 5,315,625
SCANA Corp.-Major southeastern electric and gas utility holding company 215,000 6,436,562
Sierra Pacific Resources-Western electric, water and gas utility
holding company 100,000 3,750,000
Total 25,707,812
- -----------------------------------------------------------------------------------------------------------------------============
Electronics: Equipment 1.81% *ACUSON Corp.-Manufacturer of medical diagnostic ultrasound
imaging systems 20,000 331,250
*Mettler-Toledo International-Manufacturer of scales and measuring
devices 114,500 1,975,125
Perkin-Elmer Corp.-Leading manufacturer of analytical instruments
and life science systems 55,000 3,908,438
Total 6,214,813
- -----------------------------------------------------------------------------------------------------------------------============
Food 6.19% Dean Foods Co.-Major producer of dairy foods, canned and frozen
vegetables 140,000 8,330,000
Dreyer's Grand Ice Cream-Ice cream manufacturer and distributor 100,000 2,412,500
Flowers Industries, Inc.-Major producer of baked goods and
snack-food products in the U.S. 150,000 3,084,375
Universal Foods Corp.-Manufacturer of yeast, flavorings, colorants
and dried spices for the food industry 175,000 7,393,750
Total 21,220,625
- -----------------------------------------------------------------------------------------------------------------------============
Health Care Services 4.32% *Humana Inc.-Major U.S. provider of managed health plans 300,000 6,225,000
*Sierra Health Services-Provider of managed health plans in Nevada
and Texas 100,000 3,362,500
*Trigon Healthcare Inc.-Provider of managed health plans in Virginia 200,000 5,225,000
Total 14,812,500
- -----------------------------------------------------------------------------------------------------------------------============
Insurance 10.52% Ace Ltd.-Insurance holding company specializing in property and
casualty coverage 75,000 7,237,500
CMAC Investment Corp.-Major private mortgage insurance provider 115,000 6,943,125
PennCorp Financial Group Inc.-Insurance holding company specializing
in accident, sickness and life insurance 175,000 6,245,313
ReliaStar Financial Corp.-Insurance holding company specializing in
life insurance and group annuity contracts 120,000 4,942,500
</TABLE>
3
<PAGE>
Statement of Net Assets
December 31, 1997
<TABLE>
<CAPTION>
Shares or
Investments Principal Amount Market Value
===================================================================================================================================
<S> <C> <C>
The Progressive Corporation-Insurance holding company specializing in
non-standard auto insurance 30,000 $ 3,596,250
Transatlantic Holdings Inc.-International property and casualty reinsurer 100,000 7,150,000
Total 36,114,688
- -----------------------------------------------------------------------------------------------------------------------============
Leisure Time 1.97% *TV AZTECA Sponsored ADR-Major Mexican television broadcasting company 300,000 6,768,750
- -----------------------------------------------------------------------------------------------------------------------============
Machinery: Diversified 2.09% *Coltec Industries Inc.-Diversified manufacturer of aerospace, defense
and automotive products 310,000 7,188,125
- -----------------------------------------------------------------------------------------------------------------------============
Miscellaneous 2.86% Jostens Inc.-Produces class rings, yearbooks and recognition products
for schools and businesses 275,000 6,342,187
National Service Industries, Inc.-Diversified manufacturer of lighting
equipment, rental uniforms and specialty chemicals 70,000 3,469,375
Total 9,811,562
- -----------------------------------------------------------------------------------------------------------------------============
Natural Gas Distribution 4.20% Bay State Gas-Natural gas distributor in Massachusetts 45,000 1,670,625
Eastern Enterprises-Natural gas distributor in Massachusetts 150,000 6,750,000
South Jersey Industries-Natural gas and fuel oil distributor in
New Jersey 60,000 1,818,750
Southwest Gas Corp.-Natural gas distributor in Arizona and Nevada 180,000 3,363,750
Yankee Energy System Inc.-Natural gas distributor in Connecticut 30,000 800,625
Total 14,403,750
- -----------------------------------------------------------------------------------------------------------------------============
Natural Gas Diversified 3.98% NGC Corporation-Major U.S. marketer of natural gas, natural gas
liquids, crude oil and electricity 200,000 3,500,000
Sonat Inc.-Major diversified energy company with interests in
natural gas pipelines, exploration and drilling 100,000 4,575,000
The Coastal Corporation-A diversified gas pipeline company 90,000 5,574,375
Total 13,649,375
- -----------------------------------------------------------------------------------------------------------------------============
Oil: Domestic Integrated 2.09% Ultramar Diamond Shamrock Corp.-Refiner and marketer of
petroleum products 225,000 7,171,875
- -----------------------------------------------------------------------------------------------------------------------============
Oil Well Equipment/Service 2.06% COFLEXIP S.A. Sponsored ADR-World leader in design, manufacture
and installation of flexible pipe for offshore petroleum
transportation 127,400 7,070,700
- -----------------------------------------------------------------------------------------------------------------------============
Paper and Forest Products 3.74% *Buckeye Technologies Inc.-Producer of specialty cellulose pulp 112,300 5,193,875
Fort James Corp.-Producer of paper-based consumer products,
packaging and communication papers 200,000 7,650,000
Total 12,843,875
- -----------------------------------------------------------------------------------------------------------------------============
Real Estate Investment Trusts Equity Office Properties Trust-Office building real estate
1.97% investment trust 99,900 3,153,094
Healthcare Realty Trust-Healthcare facility real estate
investment trust 125,000 3,617,188
Total 6,770,282
- -----------------------------------------------------------------------------------------------------------------------============
Restaurants 1.48% *Tricon Global Restaurants, Inc.-Major operator of fast food
restaurants 175,000 5,085,938
- -----------------------------------------------------------------------------------------------------------------------============
Retail: Department and *Proffitt's Inc.-Regional department store chain 270,000 7,678,125
Merchandise 3.29% Talbots Inc.-Women's apparel retailer 200,000 3,625,000
Total 11,303,125
- -----------------------------------------------------------------------------------------------------------------------============
Retail: Specialty 2.31% *Office Depot Inc.-Largest retail office supply store operator in
North America 200,000 4,787,500
*OFFICEMAX Inc.-Major operator of office product superstores 220,000 3,135,000
Total 7,922,500
- -----------------------------------------------------------------------------------------------------------------------============
Tire and Rubber Goods 1.83% Standard Products Co.-Manufactures plastic and rubber products
for the automotive and appliance industries 245,000 6,278,125
- -----------------------------------------------------------------------------------------------------------------------============
Toys 2.06% Hasbro Inc.-Major U.S. manufacturer of toys and games 225,000 7,087,500
- -----------------------------------------------------------------------------------------------------------------------============
Total Investments in Common Stocks (Cost $248,764,911) 338,005,131
===================================================================================================================================
Other Assets, Less Liabilities 1.52%
===================================================================================================================================
Corporate Obligations American Express Credit Corp. 6.25% due 1/2/1998 (Cost $4,000,000) 4,000M 4,000,000
--------------------------------------------------------------------------------------============
Cash and Receivables, Net of Liabilities 1,230,488
- -----------------------------------------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities 5,230,488
===================================================================================================================================
Net Assets 100.00% $343,235,619
===================================================================================================================================
Class A Shares-Net asset value ($334,399,531 / 25,011,117 shares outstanding) $13.37
Class B Shares-Net asset value ($5,417,449 / 406,303 shares outstanding) $13.33
Class C Shares-Net asset value ($3,418,639 / 256,538 shares outstanding) $13.33
The descriptions of the companies shown in the portfolio, which were obtained
from published reports and other sources believed to be reliable, are
supplemental and are unaudited.
*Non-income producing. See Notes to Financial Statements.
</TABLE>
4
<PAGE>
Statement of Operations
Investment Income Year Ended December 31, 1997
- --------------------------------------------------------------------------------
Income Dividends $ 4,839,343
Interest 492,786
Total income $ 5,332,129
------------------------------------------------------------------
Expenses Management fee 2,102,611
12b-1 distribution plan-Class A 674,139
12b-1 distribution plan-Class B 12,748
12b-1 distribution plan-Class C 9,028
Shareholder servicing 340,578
Reports to shareholders 92,996
Registration 64,420
Professional 61,877
Directors 6,000
Other 17,998
Total expenses 3,376,395
------------------------------------------------------------------
Net investment income 1,955,734
------------------------------------------------------------------
Realized and Unrealized Gain on Investments
================================================================================
Realized gain from investment transactions
Proceeds from sales 160,481,497
Cost of investments sold 115,209,629
------------------------------------------------------------------
Net realized gain 45,271,868
------------------------------------------------------------------
Unrealized appreciation of investments 32,524,523
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments 77,796,391
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $79,752,125
================================================================================
See Notes to Financial Statements.
Statements of Changes in Net Assets
Year Ended December 31,
Increase (Decrease) in Net Assets 1997 1996
================================================================================
Operations Net investment income $ 1,955,734 $ 2,654,143
Net realized gain from investment
transactions 45,271,868 25,461,909
Net unrealized appreciation of
investments 32,524,523 17,866,612
Net increase in net assets resulting
from operations 79,752,125 45,982,664
-----------------------------------------------------------------
Undistributed (Overdistributed) net investment income
included in price of share transactions 63,709 (47,257)
- -------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income-Class A (4,640,263) (2,962,616)
Net investment income-Class B (16,865) -
Net investment income-Class C (10,681) -
Net realized gain from investment
transactions-Class A (70,221,872) (19,436,362)
Net realized gain from investment
transactions-Class B (684,709) -
Net realized gain from investment
transactions-Class C (433,661) -
Total distributions (76,008,051) (22,398,978)
-----------------------------------------------------------------
Capital share transactions:
Net proceeds from sales of shares 46,415,746 18,759,962
Net asset value of shares issued in
reinvestment of net investment income
and realized gain from investment
transactions 69,433,618 20,251,955
Total 115,849,364 39,011,917
-----------------------------------------------------------------
Cost of shares reacquired (33,569,347) (32,549,103)
-----------------------------------------------------------------
Increase in net assets derived from
capital share transactions 82,280,017 6,462,814
------------------------------------------------------------------
Increase in net assets 86,087,800 29,999,243
- -------------------------------------------------------------------------------
Net Assets
Beginning of year 257,147,819 227,148,576
-----------------------------------------------------------------
End of year (including undistributed
(overdistributed) net investment income
of $(1,047,804) and $1,600,652,
respectively) $343,235,619 $257,147,819
=================================================================
See Notes to Financial Statements.
5
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A Shares
-----------------------------------------------
Year Ended December 31,
Per Share Operating Performance 1997 1996 1995 1994 1993
===============================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.29 $12.18 $11.25 $12.65 $12.60
- ---------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .08 .13 .162 .18 .16
Net realized and unrealized gain (loss) on investments 3.61 2.19 2.383 (.545) 1.42
Total from investment operations 3.69 2.32 2.545 (.365) 1.58
---------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.23) (.16) (.17) (.16) (.20)
Distributions from net realized gain (3.38) (1.05) (1.445) (.875) (1.33)
---------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.37 $13.29 $12.18 $11.25 $12.65
- ---------------------------------------------------------------------------------------------------------------
Total Return(a) 31.53% 21.22% 26.09% (3.27) 13.95%
===============================================================================================================
Ratios to Average Net Assets:
Expenses 1.25% 1.22% 1.27% 1.12% 1.22%
Net investment income 0.74% 1.12% 1.48% 1.53% 1.35%
=========================================================================================================
</TABLE>
Class B Class C
Shares Shares
----------- ----------
5/1/97(b) 5/1/97(b)
Per Share Operating Performance: to 12/31/97 to 12/31/97
==================================================================== ===========
Net asset value, beginning of period $12.14 $12.14
- -------------------------------------------------------------------- -----------
Income (loss) from investment operations
Net investment loss -(c) -(c)
Net realized and unrealized gain on investments 3.27 3.27
Total from investment operations 3.27 3.27
- -------------------------------------------------------------------- -----------
Distributions
Dividends from net investment income (.05) (.05)
Distributions from net realized gain (2.03) (2.03)
- -------------------------------------------------------------------- -----------
Net asset value, end of period $13.33 $13.33
- -------------------------------------------------------------------- -----------
Total Return(a)(c) 27.51% 27.51%
================================================================================
Ratios to Average Net Assets(d):
Expenses 1.29% 1.28%
Net investment loss (0.15)% (0.13)%
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31,
Supplemental Data for All Classes: 1997 1996 1995 1994 1993
=====================================================================================================
<S> <C> <C> <C> <C> <C>
Net assets, end of period (000) $343,236 $257,148 $227,149 $190,788 $202,519
Portfolio turnover rate 56.96% 38.88% 41.42% 57.49% 33.42%
Average commissions per share paid
on equity transactions $ .063 $ .064 $ .066 n/a n/a
=====================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Commencement of offering Class shares.
(c) Amounts less than $0.01.
(d) Not annualized.
See Notes to Financial Statements.
6
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies Lord Abbett Mid-Cap Value 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 summarizes the significant accounting
policies of the Company: (a) Market value is determined as follows: Securities
listed or admitted to trading privileges on any national securities exchange are
valued at the last sales price on the principal securities exchange on which
such securities are traded, or, if there is no sale, at the mean between the
last bid and asked prices on such exchange. Securities traded only in the
over-the-counter market are valued at the mean between the last bid and asked
prices in such market, except that securities admitted to trading on the NASDAQ
National Market System are valued at the last sales price if it is determined
that such price more accurately reflects the value of such securities.
Securities for which market quotations are not available are valued at fair
value under procedures approved by the Board of Directors. (b) It is the policy
of the Company to meet the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its taxable income.
Therefore, no income tax provision is required. (c) Security transactions are
accounted for on the date that the securities are purchased or sold (trade
date). Realized gains and losses from security transactions are calculated on
the identified cost basis. Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income is accrued on a daily 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) A portion
of proceeds from sales and costs of repurchases of capital shares, equivalent to
the amount of distributable net investment income on the date of the
transaction, is credited or charged to undistributed income. Undistributed net
investment income per share thus is unaffected by sales or repurchases of
shares.
2. Management Fee and Other Transactions with Affiliates The Company has a
management agreement with Lord, Abbett & Co. ("Lord Abbett") pursuant to which
Lord Abbett supplies the Company with investment management, research,
statistical and advisory services and pays officers' remuneration and certain
other expenses of the Company. The management fee is based on average daily net
assets at the following annual rates: .75 of 1% on the first $200 million; .65
of 1% on the next $300 million; and .50 of 1% on the excess over $500 million.
The Company has Rule 12b-1 plans and agreements (the "Class A, Class B and Class
C Plans") with Lord Abbett Distributor LLC ("Distributor"), an affiliate of Lord
Abbett. The Company makes payments to Distributor which uses or passes on such
payments to authorized institutions. Pursuant to the Class A Plan, the Company
pays Distributor (1) an annual service fee of 0.15% of the average daily net
asset value of shares sold prior to June 1, 1990 and 0.25% of the average daily
net asset value of shares sold on or after that date, (2) a one-time
distribution fee of up to 1% on certain qualifying purchases and (3) a
supplemental annual distribution fee of 0.10% of the average daily net assets of
Class A shares serviced by certain qualifying institutions. Pursuant to the
Class B Plan, the Company pays Distributor an annual service and distribution
fee of 0.25% and 0.75%, respectively, of the average daily net asset value of
the Class B shares. Pursuant to the Class C Plan, the Company pays Distributor
(1) a service fee and a distribution fee, at the time such shares are sold, not
to exceed 0.25% and 0.75%, respectively, of the net asset value of such shares
sold and (2) at each quarter-end after the first anniversary of the sale of such
shares, a service fee and a distribution fee at an annual rate not to exceed
0.25% and 0.75%, respectively, of the average annual net asset value of such
shares outstanding.
Distributor received $123,052 representing payment of commissions on sales of
Class A shares after deducting $739,167 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 and net realized gain from
investment transactions, if any, are declared annually. At December 31, 1997,
undistributed net realized gain for financial reporting purposes aggregated
$1,063,316.
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.
4. Capital The Company has authorized 105 million shares of $.001 par value
capital stock designated Class A, 15 million shares of $.001 par value capital
stock designated Class B and 15 million shares of $.001 par value capital stock
designated Class C. Paid in capital amounted to $253,979,887 at December 31,
1997. Transactions in shares of capital stock were as follows:
Year Ended Year Ended
December 31, 1997 December 31, 1996
------------------------ -----------------------------
Class A Shares Amount Shares Amount
- ------------------------------------------------- -----------------------------
Sales of shares 2,714,070 $ 37,708,782 1,578,024 $ 18,759,962
Shares issued to
shareholders in
reinvestment of net
investment income
and realized gain
from investment
transactions 5,431,935 68,327,594 1,867,268 20,251,955
Total 8,146,005 106,036,376 3,445,292 39,011,917
- ------------------------------------------------- -----------------------------
Shares reacquired (2,480,990) (33,318,181) (2,748,622) (32,549,103)
Increase in shares 5,665,015 $ 72,718,195 696,670 $ 6,462,814
- --------------------------------------------------------------------------------
May 1, 1997 (Commencement of
offering Class shares) to December 31, 1997
-----------------------------------------------
Class B Shares Class C Shares
--------------------- ------------------------
Shares Amount Shares Amount
- ----------------------------------------------------- ------------------------
Sales of shares 359,887 $5,284,991 233,963 $3,421,973
Shares issued to
shareholders in
reinvestment of net
investment income
and realized gain
from investment
transactions 52,392 675,859 33,345 430,165
Total 412,279 5,960,850 267,308 3,852,138
- ----------------------------------------------------- ------------------------
Shares reacquired (5,976) (87,713) (10,770) (163,453)
Increase in shares 406,303 $5,873,137 256,538 $3,688,685
- -------------------------------------------------------------------------------
5. Purchases and Sales of Securities Purchases and sales of investment
securities (other than short-term investments) aggregated $175,808,279 and
$160,481,497, respectively.
As of December 31, 1997, unrealized appreciation based on cost for federal
income tax purposes aggregated $89,240,220, of which $93,378,301 related to
appreciated securities and $4,138,081 related to depreciated securities. The
cost of investments for federal income tax purposes is substantially the same as
that used for financial re porting 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 net assets of each fund.
Directors' fees payable at December 31, 1997, under a deferred compensation
plan, were $313,000.
7
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders,
Lord Abbett Mid-Cap Value Fund, Inc.:
We have audited the accompanying statement of net assets of Lord Abbett Mid-Cap
Value Fund, Inc. as of December 31, 1997, 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 December
31, 1997 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 Mid-Cap
Value Fund, Inc. at December 31, 1997, the results of its operations, the
changes in its net assets and the financial highlights for each of the periods
presented in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
January 28, 1998
Copyright(C) 1998 by Lord Abbett Mid-Cap Value Fund, Inc. 767 Fifth Avenue,
New York, NY 10153-0203
This publication, when not used for the general information of shareholders of
Lord Abbett Mid-Cap Value 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.
Our Management
Board of Directors
Robert S. Dow
E. Wayne Nordberg
E. Thayer Bigelow*+
Stewart S. Dixon*
John C. Jansing*
C. Alan MacDonald*+
Hansel B. Millican, Jr.*
Thomas J. Neff*+
* Outside Director
+ Audit Committee
Officers
Robert S. Dow, Chairman and President
Edward K. von der Linde, Executive Vice
President and Portfolio Manager
Kenneth B. Cutler, Vice President
and Secretary
Stephen I. Allen, Vice President
Zane E. Brown, Vice President
Daniel E. Carper, Vice President
Daria L. Foster, Vice President
Robert G. Morris, Vice President
Robert J. Noelke, Vice President
E. Wayne Nordberg, Vice President
John J. Walsh, Vice President
Paul A. Hilstad, Vice President
and Assistant Secretary
Thomas F. Konop, Vice President
and Assistant Secretary
Keith F. O'Connor, Vice President
and Treasurer
A. Edward Oberhaus III, Vice President
Donna McManus, Assistant Treasurer
Joseph Van Dyke, Assistant Treasurer
Lydia Guzman, Assistant Secretary
Robert M. Hickey, Assistant Secretary
Investment Manager and
Underwriter
Lord, Abbett & Co. and
Lord Abbett Distributor LLC
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
212-848-1800
Custodian
The Bank of New York
New York, NY
Transfer Agent
United Missouri Bank of
Kansas City, N.A.
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419100
Kansas City, MO 64141
800-821-5129
Auditors
Deloitte & Touche LLP
New York, NY
Counsel
Debevoise & Plimpton
New York, NY
8
<PAGE>
Lord, Abbett & Co.
A Tradition of Performance Through
Disciplined
Investing
[PHOTO: John J. Walsh and Edward K. von der Linde]
(from left to right)
John J. Walsh, partner
Edward K. von der Linde,
portfolio manager--Lord Abbett
Mid-Cap Value Fund
A successful long-term track record is evidence of a successful investment
strategy. For decades we, at Lord, Abbett & Co., have believed that investing
with a disciplined, value approach is the best way to achieve competitive
returns and reduce portfolio risk. This commitment and the dedication of our
team of 55 investment professionals have helped us earn the trust of investment
professionals and investors for over 65 years.
About Your
Fund's
Board of
Directors
The Securities and Exchange Commission (SEC) views the role of the independent
Board of Directors as one of the most important components in overseeing a
mutual fund. The Board of Directors watches over your Fund's general operations
and represents your interests. Board members review and approve every contract
between your Fund and Lord, Abbett & Co. (the Fund's investment manager) and
Lord Abbett Distributor LLC (the Fund's underwriter). They meet regularly to
review a wide variety of information and issues regarding your Fund. Every
member of the Board possesses extensive business experience. Lord Abbett Mid-Cap
Value Fund's shareholders are indeed fortunate to have a group of independent
directors with diverse backgrounds to provide a variety of viewpoints in the
oversight of their Fund. Below, we feature one of our independent directors, C.
Alan MacDonald.
C. Alan MacDonald
Director--Lord Abbett
Mid-Cap Value Fund
[PHOTO OMITTED]
Mr. MacDonald is a graduate of Cornell University's School of Hotel
Administration and has over 40 years of corporate management experience. He is
currently the Managing Director of Directorship, a firm that focuses on the
responsibilities of corporate boards.
Mr. MacDonald serves as director for Fountainhead Water Company, DenAmerica
Corp., J.B. Williams and Exigent Diagnostics, Inc. He has been an independent
director for all of Lord Abbett's funds since 1988.
<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 Global Fund- Affiliated Fund Balanced Series Bond-Debenture o National U.S. Government
Growth Fund Equity Series Fund o California Securities
International Growth & Global Fund- o Connecticut Money Market
Series Income Series Income Series o Florida Fund**+*
o Georgia
Mid-Cap Research Fund- Limited Duration o Hawaii
Value Fund Large-Cap U.S. Government o Michigan
Series Securities Series** o Minnesota
Research Fund- o Missouri
Small-Cap U.S. Government o New Jersey
Series Securities Series** o New York
o Pennsylvania
o Texas
o Washington
</TABLE>
Finding the right mutual fund can be confusing. At Lord, Abbett & Co., we
believe your investment professional provides value in helping you identify and
under stand your investment objectives and, ultimately, offering fund
recommendations suitable for your individual needs.
This publication, when used as sales literature, is to be distributed only if
preceded or accompanied by a current prospectus for Lord Abbett Mid-Cap Value
Fund.
For more complete information about any other Lord Abbett fund, including
charges and expenses, call your investment professional or Lord Abbett
Distributor LLC at 800-874-3733 for a prospectus. Read it carefully before
investing.
When you invest in a family of funds, you benefit from:
Diversification. You and your investment professional can diversify your
investments between equity and income funds.
Flexibility. As your investment goals change, your investment professional can
help you reallocate your portfolio.
As an investor in the Lord Abbett Family of Funds, you have access to 28
portfolios designed to meet a variety of investment needs. While you may
reallocate your assets among our funds at any time, we recommend speaking with
your investment professional to help you customize your investment plan.
Numbers to Keep Handy
For Shareholder Account or
Statement Inquiries:
800-821-5129
For Literature:
800-874-3733
For More Information:
800-426-1130
Visit Our Web Site:
http://www.lordabbett.com
*Lord Abbett intends to close Lord Abbett Research Fund-Small-Cap Series to new
investors in the first half of 1998. For information, call Lord Abbett
Distributor LLC at 800-426-1130.
**An investment in this Fund is neither insured nor guaranteed by the U.S.
Government.
+There can be no assurance that this Fund will be able to maintain a stable net
asset value of $1.00 per share. This Fund is man aged to maintain, and has
maintained, its stable $1.00 per share price.
[LOGO] LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
LORD ABBETT DISTRIBUTOR LLC
- -----------------------------------------------------------
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203 LAMCVF-2-1297
(2/98)
