Lord Abbett Mid-Cap Value Fund
1998 ANNUAL REPORT
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Designed to provide you with
capital appreciation from a stock
portfolio of mid-sized companies
[LOGO](R)
<PAGE>
Report to Shareholders
For the Fiscal Year Ended December 31, 1998
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/s/ Robert S. Dow
- ------------------------
ROBERT S. DOW
CHAIRMAN
January 8, 1999
"We believe the mid-cap sector will benefit in 1999 as investors shift away from
the higher valuation levels that currently exist among large-cap stocks."
Lord Abbett Mid-Cap Value Fund completed its fiscal year on December 31, 1998,
with aggregate net assets of $406.9 million. Below is an overview of
class-specific data during that period.
Fiscal Year Ended December 31, 1998
-----------------------------------
Class A Class B Class C Class P
- --------------------------------------------------------------------------------
Net asset value $ 13.31 $ 13.17 $ 13.16 $ 13.25
Total return* -0.45% -1.20% -1.28% -0.97%
What A Year!
January through December 1998 was as difficult a period as we can remember for
value investing in the mid-cap universe. High volatility and a strong
performance bias toward larger-capitalization and high-expectation growth stocks
characterized the year. While your Fund performed well during the first half,
the second half of 1998 was a different story: the financial panic of the third
quarter hit mid- and small-cap value companies harder than the rest of the
market. Investors seeking to raise cash aggressively sold the shares of
mid-sized and smaller companies across all industry groups regardless of the
fundamental outlook. These companies are our bread and butter -- the companies
where value manifests itself most readily, as the chart on page 1 shows.
To Infinity and Beyond
What surprised us most during 1998 was the speculative frenzy born out of the
panic. Whipsawed investors have raced back into the stocks of companies
perceived to have the highest (if yet distant and vaguely defined) growth
opportunities such as Yahoo, Ebay and other internet stocks. While many of our
portfolio holdings snapped back during the fourth quarter, performance in the
mid-cap segment of the market was heavily concentrated in technology companies
whose valuations and market action we do not find attractive from a risk/reward
standpoint. It is currently a sector where we are not willing to risk your
hard-earned capital.
Staying the Course with Our Long-Term Investment Strategy
While we are disappointed with our short-term performance, we recognize that the
market goes through these phases and that we are best served by sticking to what
we do best. We will remain focused on finding companies that we believe offer
the best mix of attractive valuation and improving fundamentals in the
mid-capitalization sector. That sector includes companies with equity market
capitalizations ranging from $500 million to $5 billion. We believe that our
bottom-up, value-oriented style of stock selection, which emphasizes solid
fundamental research, will continue to lead us to timely investments as it has
in the past.
Looking Forward
The economy continues to slow, and the financial markets have shown increased
volatility over concerns regarding earnings shortfalls and evidence of a global
credit crunch. However, our expectation for the U.S. economy at this time is not
recession, but rather that we have reached an inflection point of slower growth.
Given this backdrop, we remain optimistic regarding the Fund's future prospects.
We believe we have a well-positioned collection of attractively valued companies
with excellent outlooks. We believe the mid-cap sector will benefit in 1999 as
investors shift away from the higher valuation levels that currently exist among
large-cap stocks. As always, we will continue to invest with the goal of
minimizing downside risk while maintaining attractive upside potential.
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.
Mutual funds are not insured by the FDIC, are not deposits or other obligations
of, or guaranteed by banks, and are subject to investment risks, including
possible loss of principal amount invested.
* Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
<PAGE>
The Mid-Cap Advantage
The table below illustrates the wide discrepancy between today's valuation of
ultra-large capitalization stocks, as measured by the 50 largest market cap
stocks and S&P 500 and those of mid-cap stocks, as represented by the S&P
Mid-Cap 400. This valuation advantage is even greater when comparing these
benchmarks with the Lord Abbett Mid-Cap Value Fund.
50 Largest
Market Lord Abbett
Capitalization S&P 500 S&P Mid-Cap Mid-Cap
Stocks* Index** 400 Index+ Value Fund++
- --------------------------------------------------------------------------------
Price/Earnings 27.3x 23.7x 17.9x 14.2x
Price/Book 7.0x 4.7x 2.9x 1.9x
All prices and data as of 12/31/98. The portfolio is actively managed and
the Fund's attributes will differ over time. Price/Earnings Ratio (P/E) is
the price of a stock divided by its earnings per share estimated for the
next full fiscal year. Price/Book Ratio is the price of a stock divided by
its stockholders' equity per share.
* Based on data from Compustat, FactSet Data Systems.
** 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. Based on data from Compustat, FactSet Data
Systems.
+ The S&P MidCap 400 Index is comprised of 400 widely held common stocks
chosen for their mid-cap size and industry characterizations.
Based on data from Compustat, FactSet Data Systems.
++ Based on data from Compustat, FactSet Data Systems.
The indices are unmanaged and are not available for investment.
Average Annual Total Returns
Average annual compounded total returns for periods ended 12/31/98. Assumes
deduction of the Class A share 5.75% maximum sales charge, with all
distributions reinvested.
Class A
- -----------------------------------------------------
1 year: -6.20%
5 years: +12.80%
10 years: +13.16%
Since Inception: +12.75%
Portfolio Data(1)
Top Ten Holdings Top Ten Sectors
Holding %TNA(2) Sector %TNA(2)
- --------------------------------------------------------------------------------
Plantronics Inc. 4.23% Consumer Non-Cyclicals 26.92%
Tricon Global Restaurants 3.51% Consumer Cyclicals 13.42%
Ball Corp. 2.81% Utilities 16.59%
Niagara Mohawk Power Corp. 2.58% Finance 9.80%
Universal Foods Corp. 2.36% Technology 9.33%
Northeast Utilities 2.36% Basic Industry 8.28%
Adobe Systems 2.30% Capital Goods 3.26%
Safety Kleen Corp. 2.26% Multi Industry 2.26%
Humana, Inc. 2.22% Cash and Short-term Investments 2.92%
Corn Products Int'l, Inc. 2.09%
(1) The Fund's portfolio is actively managed and is subject to change.
(2) Percent of total net assets.
The past performance of the Fund 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 3.1% per
year. Over this time frame, the 5.9% average annual return of CDs outpaced
inflation. However, investors in the Fund saw their $100,000 investment grow an
average of 13.4% per year to $351,481(1).
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: 251.48%
CDs: 77.9%
Inflation: 36.0%
Growth of $100,000: 12/31/88-12/31/98
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(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. The Fund's initial cap maximum sales charge
is 5.75%.
(2) Source: Lipper Analytical Services, Inc.
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 3/31/99, this
report must be accompanied by Lord Abbett's Performance Quarterly for the most
recently completed calendar quarter.
2
<PAGE>
A Note About Year 2000 Matters
As you probably know, the Fund depends on the proper functioning of computer
systems for most, if not all, aspects of its operations. Many computer systems
now in use cannot distinguish between the year 2000 (Y2K) and the year 1900, an
inability that could disrupt the services provided to the Fund.
Lord Abbett, Lord Abbett Distributor llc, the Fund's transfer agent, the Fund's
custodian and other providers of services critical to the Fund all have advised
the Fund that they have been actively working on changes to their computer
systems to prepare for the Year 2000 and expect that their systems, and those of
their external service providers, will be adapted in time. Although the Y2K
issue is unprecedented and the process of Y2K preparedness evaluation and
systems remediation is an ongoing one, we presently believe that there will be
no material effect on the Fund and its financial statements.
Statement of Net Assets
December 31, 1998
<TABLE>
<CAPTION>
Investments Shares Market Value
==================================================================================================================================
Investments in Common Stocks 97.08%
==================================================================================================================================
<S> <C> <C> <C>
Aerospace 1.34% *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 123,200 $ 5,451,600
- ----------------------------------------------------------------------------------------------------------------------============
Auto Parts 1.83% Snap-on, Inc.-Manufacturer and distributor of hand tools and
diagnostic equipment for the automotive industry 100,000 3,481,250
Standard Products Co.-Manufactures plastic and rubber products
for the automotive and appliance industries 195,000 3,973,125
Total 7,454,375
- ----------------------------------------------------------------------------------------------------------------------============
Banks: Regional 1.35% Cullen/Frost Bankers-Leading Texas bank 100,000 5,487,500
- ----------------------------------------------------------------------------------------------------------------------============
Chemical: Specialty 5.39% Crompton & Knowles Corp.-Specialty chemicals and plastic
processing equipment manufacturer 375,000 7,757,813
Morton International Inc.-Producer of specialty chemicals and
salt 255,000 6,247,500
*Polymer Group Inc.-Major global manufacturer of non-woven
materials 800,000 7,950,000
Total 21,955,313
- ----------------------------------------------------------------------------------------------------------------------============
Communications Equipment 4.23% *Plantronics, Inc.-Leading supplier of communication headset
products and services to users and providers worldwide 200,000 17,200,000
- ----------------------------------------------------------------------------------------------------------------------============
Computer: Software 2.30% Adobe Systems Inc.-Developer of computer software products 200,000 9,350,000
- ----------------------------------------------------------------------------------------------------------------------============
Containers 2.81% Ball Corp.-Leading manufacturer of aluminum, plastic and steel
containers for the beverage and food industries 250,000 11,437,500
- ----------------------------------------------------------------------------------------------------------------------============
Drugs/Health Care Products 2.77% *Med Partners Inc.-Leading physician practice management company 1,100,000 5,775,000
Mylan Laboratories Inc.-Leading producer of prescription
generic drugs and brand-name dermatological products 175,000 5,512,500
Total 11,287,500
- ----------------------------------------------------------------------------------------------------------------------============
Electric Power 13.66% Firstenergy Corp.-Major Midwestern electric utility holding
company 220,000 7,163,750
Illinova Corp.-Major midwestern electric utility holding
company 190,000 4,750,000
Ipalco Enterprises Inc.-Major midwestern electric utility
holding company 150,000 8,315,625
LG&E Energy Corp.-Electric and gas utility 160,000 4,530,000
*Niagara Mohawk Power Corp.-Electric and gas utility 650,000 10,481,250
*Northeast Utilities-Major northeastern electric utility
company 600,000 9,600,000
Sierra Pacific Resources-Western electric, water and gas
utility holding company 100,000 3,800,000
SCANA Corp.-Major southeastern electric and gas utility
holding company 215,000 6,933,750
Total 55,574,375
- ----------------------------------------------------------------------------------------------------------------------============
Electronics: Equipment 1.16% Varian Associates, Inc.-Manufactures analytical instruments,
semiconductor equipment, medical and industrial equipment 125,000 4,734,375
- ----------------------------------------------------------------------------------------------------------------------============
Food 8.04% Corn Products International, Inc.-Leading refiner of corn and
other grains 280,000 8,505,000
Dean Foods Co.-Major producer of dairy foods, canned and
frozen vegetables 180,000 7,346,250
</TABLE>
3
<PAGE>
Statement of Net Assets
December 31, 1998
<TABLE>
<CAPTION>
Investments Shares Market Value
==================================================================================================================================
<S> <C> <C> <C>
Dreyer's Grand Ice Cream Inc.-Ice cream manufacturer and
distributor 95,000 $ 1,436,875
Ibp Inc.-Processor of beef and pork 200,000 5,825,000
Universal Foods Corp.-Manufacturer of yeast, flavorings,
colorants and dried spices for the food industry 350,000 9,603,125
Total 32,716,250
- ----------------------------------------------------------------------------------------------------------------------============
Health-Care Products 3.50% *Acuson Corp.-Manufacturer of medical diagnostic ultrasound
imaging systems 510,000 7,586,250
*St. Jude Medical Inc.-A leading manufacturer of artificial
heart valves 240,000 6,645,000
Total 14,231,250
- ----------------------------------------------------------------------------------------------------------------------============
Health-Care Services 7.20% *Humana Inc.-Major U.S. provider of managed-health plans 506,000 9,013,125
Landamerica Financial Group Inc.-Title insurance company 100,000 5,581,250
*Sierra Health Services-Managed health plans in Nevada, Texas
and Northeast; workers compensation 300,000 6,318,750
*Trigon Healthcare Inc. Class A-Provider of managed health
plans in Virginia 225,000 8,395,313
Total 29,308,438
- ----------------------------------------------------------------------------------------------------------------------============
Insurance: Life 2.93% *MONY Group Inc.-Major U.S. life insurer 203,850 6,383,053
Reliastar Financial Corp.-Insurance holding company
specializing in life insurance and group annuity contracts 120,000 5,535,000
Total 11,918,053
- ----------------------------------------------------------------------------------------------------------------------============
Insurance: Property & Casualty Ace Ltd.-Insurance holding company specializing in property
5.53% and casualty coverage 200,000 6,887,500
CMAC Investment Corp.-Major private mortgage insurance provider 110,000 5,053,125
*Exel Ltd. Class A-Excess liability insurer 50,000 3,750,000
Transatlantic Holdings Inc.-International property and
casualty reinsurer 90,000 6,800,625
Total 22,491,250
- ----------------------------------------------------------------------------------------------------------------------============
Machinery: Diversified 1.92% *Coltec Industries Inc.-Diversified manufacturer of aerospace,
defense and automotive products 400,000 7,800,000
- ----------------------------------------------------------------------------------------------------------------------============
Miscellaneous 1.93% Jostens Inc.-Produces class rings, yearbooks and recognition
products for schools and businesses 300,000 7,856,250
- ----------------------------------------------------------------------------------------------------------------------============
Natural Gas Distribution 2.93% Eastern Enterprises-Natural gas distributor in Massachusetts 150,000 6,562,500
Southwest Gas Corp.-Natural gas distributor in Arizona and
Nevada 200,000 5,375,000
Total 11,937,500
- ----------------------------------------------------------------------------------------------------------------------============
Natural Gas Diversified 1.75% Dynegy Inc.-Major U.S. marketer of natural gas, natural gas
liquids, crude oil and electricity 650,000 7,109,375
- ----------------------------------------------------------------------------------------------------------------------============
Office Equipment/Supplies 1.65% *Cabletron Sys Inc.-Manufactures, markets and installs network
connectivity hardware and software 800,000 6,700,000
- ----------------------------------------------------------------------------------------------------------------------============
Oil Well Equipment/Service .99% *COFLEXIP S.A. Sponsored ADR-World leader in design, manufacture
and installation of flexible pipe for offshore petroleum
transportation 125,000 4,015,625
- ----------------------------------------------------------------------------------------------------------------------============
Oil: Domestic Integrated 4.48% Amerada Hess Corp.-Oil and gas exploration, production and
refining 115,000 5,721,250
Kerr-McGee Corp.-Oil and gas exploration and production,
refining and chemicals 150,000 5,737,500
Ultramar Diamond Shamrock Corp.-Refiner and marketer of
petroleum products 280,000 6,790,000
Total 18,248,750
- ----------------------------------------------------------------------------------------------------------------------============
Paper and Forest Products 2.88% *Buckeye Technologies Inc.-Producer of specialty cellulose pulp 300,000 4,481,250
Unisource Worldwide Inc.-Distributor of printing and imaging
supplies in North America 1,000,000 7,250,000
Total 11,731,250
- ----------------------------------------------------------------------------------------------------------------------============
Reits & Finance 1.62% Healthcare Realty Trust Inc.-Healthcare facility real estate
investment trust 294,806 6,577,859
- ----------------------------------------------------------------------------------------------------------------------============
Restaurants 3.51% *Tricon Global Restaurants Inc.-Major operator of fast food
restaurants 285,000 14,285,625
- ----------------------------------------------------------------------------------------------------------------------============
Retail 3.63% *Consolidated Stores Corp.-Major U.S. retailer specializing in
closeouts and toys 225,000 4,542,187
*Nine West Group Inc.-Designs, sources and markets at retail
and wholesale womens footwear 335,000 5,213,437
*Officemax Inc.-Major operator of office product superstores 410,000 5,022,500
Total 14,778,124
- ----------------------------------------------------------------------------------------------------------------------============
Retail: Department and Dillard's Inc.-Southwestern department store chain 170,000 4,823,750
Merchandise 2.16% *Saks Inc.-Major U.S. department store operator 125,200 3,951,625
Total 8,775,375
----------------------------------------------------------------------------------============
</TABLE>
4
<PAGE>
Statement of Net Assets
December 31, 1998
<TABLE>
<CAPTION>
Shares or
Investments Principal Amount Market Value
==================================================================================================================================
<S> <C> <C> <C>
Toys 1.33% Hasbro Inc.-Major U.S. manufacturer of toys and games 150,000 $ 5,418,750
- ----------------------------------------------------------------------------------------------------------------------============
Waste Management 2.26% Safety-Kleen Corp.-Largest hazardous waste management company
in North America 650,000 9,181,250
- ----------------------------------------------------------------------------------------------------------------------============
Total Investments in Common Stocks (Cost $326,849,977) 395,013,512
==================================================================================================================================
Other Assets, Less Liabilities 2.92%
==================================================================================================================================
Short-term Investment Koch Industries, Inc. Discount Notes 5.30% due 1/4/1999
(Cost $11,393,287) 11,400M 11,393,287
----------------------------------------------------------------------------------============
Cash and Receivables, Net of
Liabilities 499,197
- ----------------------------------------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities 11,892,484
==================================================================================================================================
Net Assets 100.00% $406,905,996
==================================================================================================================================
Class A Shares-Net asset value ($367,836,386 / 27,641,376
shares outstanding) $13.31
Maximum offering price (Class A shares) $14.12
Class B Shares-Net asset value ($27,319,285 / 2,074,363 shares
outstanding) $13.17
Class C Shares-Net asset value ($11,749,375 / 892,654 shares
outstanding) $13.16
Class P Shares-Net asset value ($950 / 71.681 shares
outstanding) $13.25
</TABLE>
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 security.
See Notes to Financial Statements.
Statement of Operations
<TABLE>
<CAPTION>
Investment Income Year Ended December 31, 1998
===========================================================================================
<S> <C> <C>
Income Dividends $ 5,539,621
Interest 383,025
Total income $ 5,922,646
-----------------------------------------------------------------------------
Expenses Management fee 2,693,928
12b-1 distribution plan-Class A 886,417
12b-1 distribution plan-Class B 175,424
12b-1 distribution plan-Class C 78,451
Shareholder servicing 557,653
Reports to shareholders 96,938
Professional 61,426
Registration 71,421
Other 27,946
Total expenses before reductions 4,649,604
================================
Expense reductions (28,509)
Total expenses 4,621,095
-----------------------------------------------------------------------------
Net investment income 1,301,551
-----------------------------------------------------------------------------
Realized and Unrealized Gain (loss) on Investments
===========================================================================================
Realized gain from investment transactions
Proceeds from sales 170,888,843
Cost of investments sold 154,494,535
-----------------------------------------------------------------------------
Net realized gain 16,394,308
-----------------------------------------------------------------------------
Unrealized depreciation of investments (21,076,685)
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (4,682,377)
- -------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ (3,380,826)
===========================================================================================
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31,
Increase in Net Assets 1998 1997
========================================================================================================================
<S> <C> <C> <C>
Operations Net investment income $ 1,301,551 $ 1,955,734
Net realized gain from investment transactions 16,394,308 45,271,868
Net unrealized appreciation (depreciation) of investments (21,076,685) 32,524,523
Net increase (decrease)in net assets resulting from operations (3,380,826) 79,752,125
----------------------------------------------------------------------------------------------------------
Undistributed net investment income included in price of share transactions -- 63,709
- ------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income-Class A -- (4,640,263)
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)
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)
----------------------------------------------------------------------------------------------------------
Capital share transactions:
Net proceeds from sale of shares 127,473,361 46,415,746
Net asset value of shares issued in reinvestment of net investment
income and realized gain from investment transactions -- 69,433,618
Total 127,473,361 115,849,364
----------------------------------------------------------------------------------------------------------
Cost of shares reacquired (60,422,158) (33,569,347)
----------------------------------------------------------------------------------------------------------
Increase in net assets derived from capital share transactions 67,051,203 82,280,017
----------------------------------------------------------------------------------------------------------
Increase in net assets 63,670,377 86,087,800
- ------------------------------------------------------------------------------------------------------------------------
Net Assets Beginning of year 343,235,619 257,147,819
----------------------------------------------------------------------------------------------------------
End of year (including undistributed (distributions in excess of) net
investment income of $941,011 and $(1,047,804), respectively) $ 406,905,996 $ 343,235,619
==========================================================================================================
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------------
Year Ended December 31,
Per Share Operating Performance: 1998 1997 1996 1995 1994
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $13.37 $13.29 $12.18 $11.25 $12.65
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income .05(e) .08 .13 .162 .18
Net realized and unrealized gain(loss) on investments (.11) 3.61 2.19 2.383 (.545)
Total from investment operations (.06) 3.69 2.32 2.545 (.365)
----------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income -- (.23) (.16) (.17) (.16)
Distributions from net realized gain -- (3.38) (1.05) (1.445) (.875)
----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $13.31 $13.37 $13.29 $12.18 $11.25
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return(a) (0.45)% 31.53%(c) 21.22% 26.09% (3.27)%
==================================================================================================================================
Ratios to Average Net Assets:
Expenses(f) 1.16% 1.25%(c) 1.22%+ 1.27% 1.12%
Net investment income .39% 0.74%(c) 1.12% 1.48% 1.53%
============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares Class P Shares
--------------------------------------------------------------------------------
Year Ended 5/1/97(b) Year Ended 5/1/97(b) 1/1/98(b)
Per Share Operating Performance: 12/31/98 to 12/31/97 12/31/98 to 12/31/97 to 12/31/98
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.33 $12.14 $13.33 $12.14 $13.38
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment (income) (loss) (.05)(e) --(c) (.05)(e) --(c) .02(e)
Net realized and unrealized gain (loss) on
investments (.11) 3.27 (.12) 3.27 (.15)
Total from investment operations (.16) 3.27 (.17) 3.27 (.13)
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income -- (.05) -- (.05) --
Distributions from net realized gain -- (2.03) -- (2.03) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.17 $13.33 $13.16 $13.33 $13.25
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return(a)) (1.20)% 27.51%(d) (1.28)% 27.51%(d) (0.97)%
===================================================================================================================================
Ratios to Average Net Assets:
Expenses(f) 1.92% 1.29%(d) 1.92% 1.28%(d) 1.37%
Net investment (income) (loss) (.35)% (0.15)%(d) (.35)% (0.13)%(d) .20%
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
Supplemental Data for All Classes: 1998 1997 1996 1995 1994
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net assets, end of year (000) $406,906 $343,236 $257,148 $227,149 $190,788
Portfolio turnover rate 46.58% 56.96% 38.88% 41.42% 57.49%
==============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(b) Commencement of operations of respective Class shares.
(c) Amounts less than $0.01.
(d) Not annualized.
(e) Calculated using average shares outstanding during the period.
(f) The ratios for 1998 include expenses paid through an expense offset
arrangement.
See Notes to Financial Statements.
7
<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) Securities are valued as follows: Portfolio
securities listed or admitted to trading privileges on any national securities
exchange are valued at the last sales price on the principal securities exchange
on which such securities are traded, or, if there is no sale, at the mean
between the last bid and asked prices on such exchange. 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. Short-term
securities are valued at amortized cost which approximates market value. (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) Prior to January 1, 1998, the Company followed the accounting practice
known as equalization whereby a portion of the proceeds from the sales and costs
of repurchases of capital shares was allocated to undistributed net investment
income. Effective January 1, 1998, the company discontinued the use of
equalization. Undistributed net investment income of $775,620, representing
accumulated equalization at December 31, 1997, was transferred to
paid-in-capital. Such reclassification had no effect on net assets, results of
operations or net asset value per share. Discontinuing the use of equalization
will result in a simpler and more meaningful financial statement presentation.
2. Management Fee and Other Transactions with Affiliates The Company has a
management agreement with Lord, Abbett & Co. ("Lord Abbett") pursuant to which
Lord Abbett supplies the Company with investment management, 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, Class C
and Class P Plans") with Lord Abbett Distributor llc ("Distributor"), an
affiliate of Lord Abbett. The Company makes payments to Distributor which uses
or passes on such payments to authorized institutions. Pursuant to the Class A
Plan, the Company pays Distributor (1) an annual service fee of 0.15% of the
average daily net asset value of shares sold prior to June 1,1990 and 0.25% of
the average daily net asset value of shares sold on or after that date, (2) a
one-time distribution fee of up to 1% on certain qualifying purchases and (3) a
supplemental annual distribution fee of 0.10% of the average daily net assets of
Class A shares serviced by certain qualifying institutions. Pursuant to the
Class B Plan, the Company pays Distributor an annual service and distribution
fee of 0.25% and 0.75%, respectively, of the average daily net asset value of
the Class B shares. Pursuant to the Class C Plan, the Company pays Distributor
(1) a service fee and a distribution fee, at the time such shares are sold, not
to exceed 0.25% and 0.75%, respectively, of the net asset value of such shares
sold and (2) at each quarter-end after the first anniversary of the sale of such
shares, a service fee and a distribution fee at an annual rate not to exceed
0.25% and 0.75%, respectively, of the average annual net asset value of such
shares outstanding. Pursuant to the Class P Plan, the Company pays distributor
an annual service and distribution fee of 0.20% and 0.25%, respectively, of the
average daily net asset value of the Class P shares.
Distributor received $331,389 representing payment of commissions on sales of
Class A shares after deducting $2,030,873 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, 1998,
undistributed net realized gain for financial reporting purposes aggregated
$16,336,150.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from methods used to determine the
corresponding income and capital gain amounts in accordance with generally
accepted accounting principles.
Distributions declared on January 20, 1999 and paid on January 28, 1999 to
shareholders of record on January 20, 1999 were as follows:
Rate per Aggregate
Net Investment Income Share Amount
- --------------------------------------------------------------------------------
Class A $0.05 $1,370,441
- --------------------------------------------------------------------------------
Class P $0.02 $ 526
- --------------------------------------------------------------------------------
Rate per Aggregate
Capital Gains Share Amount
- --------------------------------------------------------------------------------
Class A $0.54 $14,800,761
- --------------------------------------------------------------------------------
Class B $0.54 $ 1,118,575
- --------------------------------------------------------------------------------
Class C $0.54 $ 486,341
- --------------------------------------------------------------------------------
Class P $0.54 $ 14,193
- --------------------------------------------------------------------------------
4. Capital The Company has authorized 150 million shares of $.001 par value
capital stock designated as follows: Class A-105 million shares, Class B-15
million shares, Class C-15 million shares and Class P-15 million shares. Paid in
capital amounted to $321,465,300 at December 31, 1998. Transactions in shares of
capital stock were as follows:
Year Ended Year Ended
December 31, 1998 December 31, 1997
----------------------------------------------------------
Class A Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 6,679,081 $ 89,842,339 2,714,070 $ 37,708,782
Shares issued to
shareholders in
reinvestment of net
investment income
and realized gain
from investment
transactions -- -- 5,431,935 68,327,594
Total 6,679,081 89,842,339 8,146,005 106,036,376
- --------------------------------------------------------------------------------
Shares reacquired (4,048,822) (54,443,261) (2,480,990) (33,318,181)
Increase 2,630,259 $ 35,399,078) 5,665,015 $ 72,718,195
- --------------------------------------------------------------------------------
May 1, 1997
(Commencement of
Year Ended operations of Class shares)
December 31, 1998 to December 31, 1997
---------------------------------------------------------
Class B Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 1,915,350 $ 26,070,405 359,887 $ 5,284,991
Shares issued to
shareholders in
reinvestment of net
investment income
and realized gain
from investment
transactions -- -- 52,392 675,859
Total 1,915,350 26,070,405 412,279 5,960,850
- --------------------------------------------------------------------------------
Shares reacquired (247,290) (3,182,255) (5,976) (87,713)
Increase 1,668,060 $ 22,888,150) 406,303 $ 5,873,137
- --------------------------------------------------------------------------------
8
<PAGE>
Notes to Financial Statements
May 1, 1997
(Commencement of
Year Ended operations of Class shares)
December 31, 1998 to December 31, 1997
---------------------------------------------------------
Class C Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 848,457 $ 11,559,761 233,963 $ 3,421,973
Shares issued to
shareholders in
reinvestment of net
investment income
and realized gain
from investment
transactions -- -- 33,345 430,165
Total 848,457 11,559,761 267,308 3,852,138
- --------------------------------------------------------------------------------
Shares reacquired (212,341) (2,796,591) (10,770) (163,453)
Increase 636,116 $ 8,763,170) 256,538 $ 3,688,685
- --------------------------------------------------------------------------------
January 1, 1998
(Commencement of
operations of Class shares)
to December 31, 1998
----------------------------
Class P Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 76 $856
Shares issued to shareholders in reinvestment of
net investment income and realized gain from
investment transactions - -
Total 76 856
- --------------------------------------------------------------------------------
Shares reacquired (4) (51)
Increase 72 $805
- --------------------------------------------------------------------------------
5. Purchases and Sales of Securities Purchases and sales of investment
securities (other than short-term investments) aggregated $231,758,370 and
$170,888,843, respectively.
As of December 31, 1998, unrealized appreciation based on cost for federal
income tax purposes aggregated $68,163,535, of which $86,822,438 related to
appreciated securities and $18,658,903 related to depreciated securities. The
cost of investments for federal income tax purposes is substantially the same as
that used for financial reporting purposes.
6. Directors' Remuneration The Directors of the Company associated with Lord
Abbett and all officers of the Company receive no compensation from the Company
for acting as such. Outside Directors' fees and retirement costs are allocated
among all funds in the Lord Abbett group based on net assets of each fund.
Directors' fees payable at December 31, 1998, under a deferred compensation
plan, were approximately $279,616.
7. Expense Reduction TheCompany has entered into an arrangement with its
transfer agent whereby credits realized as a result of uninvested cash balances
were used to reduce a portion of the Fund's expenses.
8. 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 is 0.06% per annum.
There were no loans outstanding pursuant to this Facility at December 31, 1998,
nor was the Facility utilized at any time during the year.
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, 1998, the related statements of operations
for the year then ended and of changes in net assets for each of the years in
the two-year 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 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, 1998 by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Lord Abbett Mid-Cap
Value Fund, Inc. at December 31, 1998, the results of its operations, the
changes in its net assets and the financial highlights for each of the periods
presented in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
February 12, 1999
Copyright (C) 1999 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.
<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 Alpha Fund Affiliated Fund Balanced Fund High Yield Fund o National U.S. Government
Growth Fund o California Securities
Global Equity Growth & Bond-Debenture o Connecticut Money Market
Fund Income Fund Fund o Florida Fund**+
o Georgia
Growth Large-Cap Global Income o Hawaii
Opportunities Research Fund Fund o Michigan
Fund o Minnesota
Limited Duration o Missouri
International U.S. Government o New Jersey
Fund Securities Fund** o New York
o Pennsylvania
Mid-Cap U.S. Government o Texas
Value Fund Securities Fund** o Washington
Small-Cap World Bond-
Value Fund* Debenture Fund
</TABLE>
Finding the right mutual fund can be confusing. At Lord, Abbett & Co., we
believe your investment professional provides value in helping you identify and
understand your investment objectives and, ultimately, offering fund
recommendations suitable for your individual needs.
This publication, when used as sales literature, is to be distributed only if
preceded or accompanied by a current prospectus for the Funds covered by this
report.
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 more than
30 portfolios designed to meet a variety of investment needs. While you may
reallocate your assets among our funds at any time, we recommend speaking with
your investment professional to help you customize your investment plan.
Numbers to Keep Handy
For Shareholder Account or Statement
Inquiries: 800-821-5129
For Literature Only: 800-874-3733
24-Hour Automated Shareholder
Service Line: 800-865-7582
Visit Our Web Site:
http://www.lordabbett.com
* The Lord Abbett Small-Cap Value Fund Classes A, B and C are closed to new
investors.
** An investment in this Fund is neither insured nor guaranteed by the U.S.
Government.
+ An investment in the Fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund. This Fund is managed
to maintain, and has maintained its stable $1.00 price per share.
[LOGO](R) LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
Lord Abbett mutual fund shares are distributed by:
LORD ABBETT DISTRIBUTOR LLC
- ------------------------------------------------------------ LAMCVF-2-1298
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203 (2/99)
