Lord Abbett
Global Income Fund
Global Equity Fund
1998 ANNUAL REPORT
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Two globally diversified mutual funds
to help you achieve your goals
[LOGO](R)
<PAGE>
Report to Shareholders
For the Fiscal Year Ended December 31, 1998
[PHOTO OMITTED]
/s/ Robert S. Dow
- ----------------------------------------------
ROBERT S. DOW
CHAIRMAN
FEBRUARY 5, 1999
Table of Contents
Global Income Fund
- ----------------------------------------------
About the Global Income Fund 1
Statement of Net Assets 2
Global Equity Fund
- ----------------------------------------------
About the Global Equity Fund 4
Statement of Net Assets 5
Global Income and Global Equity Funds
- ----------------------------------------------
Statements of Operations 7
Statements of Changes in
Net Assets 8
Financial Highlights 9
Notes to Financial Statements 11
Lord Abbett Global Income Fund and Lord Abbett Global Equity Fund completed
their fiscal year on December 31, 1998. Below is an overview of each Fund's
class-specific data as of the close of the period.
Global Income Fund Global Equity Fund
------------------------- -------------------------
Fiscal Year Ended Fiscal Year Ended
December 31, 1998 December 31, 1998
------------------------- -------------------------
Class A Class B Class C Class A Class B Class C
------------------------- -------------------------
Net asset value $8.44 $8.44 $8.44 $12.29 $12.18 $12.20
Capital gains paid $ -- $ -- $ -- $ .85 $ .85 $ .85
Total return* +10.79% +10.03% +10.03% +9.07% +8.37% +8.35%
About the Global Income Fund
During the fall months, the Federal Reserve Board (Fed) imposed a series of
three interest rate cuts, which were viewed in most markets as a necessary
action to increase liquidity and restore order to markets in disarray. The Fed's
easing prompted similar cuts at other central banks throughout the world.
Emerging markets, particularly in Latin America, continued to languish as Brazil
grappled with its fiscal reform and speculation about a devaluation. The
International Monetary Fund (IMF), which focuses on lowering trade barriers and
stabilizing currencies, indicated that it would provide weaker countries with
the short-term liquidity needed to work out their fiscal problems in an effort
to achieve economic stability.
Throughout the fiscal year, we were rewarded for our emphasis on high-quality
issues, particularly U.S. Treasuries, which experienced significant price
appreciation due to global demand for "safer, more liquid" investments. We
maintained a large exposure in Greece, in order to capitalize on that country's
efforts to improve its economy and gain entry to the European Economic
Community. We continued to maintain an underweighting of yen assets, which are
currently among the lowest yielding of all global bonds. Our Fund's focus on
high-quality issues helped us achieve strong performance relative to our peer
group average. For the fiscal year ended 12/31/98, the Fund's Class A shares
returned 10.8% at net asset value versus 6.2% for the Lipper Global Income Funds
Average.
The year ahead should provide ample opportunities for global fixed-income
investors if, as we believe, central banks continue to implement rate cuts in an
attempt to stave off economic deceleration. Europe, for example, will likely
need additional rate cuts in order to maintain growth, fuel domestic demand and
ensure that the new euro currency does not become overvalued as central banks
and asset managers re-align their portfolios with the advent of the new
currency.
About the Global Equity Fund
Throughout the year, the Fund's management worked to restructure the portfolio
by reducing the number of stocks held in order to focus on what we consider
"Best of Breed" companies. Given our long-term strategy, we have maintained a
strong exposure to European-based companies. Many of these companies, because of
their significant export sales to North America, were impacted by the decline in
value of the U.S. dollar during the period. We believe, however, that they are
generally undervalued and have potential for significant long-term
outperformance relative to other world equity markets.
We are encouraged by the fact that the euro has had a successful start. Our
current projections call for European economic growth to average over 2% during
the next year, and for continued subdued inflation. In the U.S., we anticipate
slowing economic growth and benign interest rates, which should translate to
further appreciation of the Fund's holdings. We believe corporate restructuring,
rather than economic expansion, will continue to drive European earnings growth.
However, we remain watchful of problems in the emerging markets, which could
hurt economic prospects throughout many global economies.
We thank you for your confidence in Lord Abbett and hope to continue to help you
pursue your investment needs.
* Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
<PAGE>
About Lord Abbett Global Income Fund
Global Diversification
Our research team seeks to identify the best value in relation to risk by
analyzing economic factors and interest-rate trends in the world's major bond
markets. Investing in many bond markets, versus investing only in the U.S., has
the potential to increase returns and reduce risk. The returns below are not
Global Income Fund returns.
A Comparison of 10-Year U.S. and Global Government Bonds, After Currency
Translations
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasuries(1) 8.65% 15.20% 7.21% 10.63% (3.35%) 18.45% 2.61% 9.62% 10.03%
J.P. Morgan Government Bond Index(2) 11.77% 15.44% 4.55% 12.27% 1.28% 19.31% 4.40% 1.40% 15.31%
</TABLE>
Past performance does not indicate future results.
All figures indicate percentage total returns in U.S. dollars; ( ) signify
negative return.
(1) U.S. Treasury bills and government bonds are guaranteed as to the timely
payment of interest, and if held to maturity, provide a guaranteed return of
principal. Source: Bloomberg, LP.
(2) The J.P. Morgan Government Bond Index is the most widely used benchmark for
measuring performance and quantifying risk across international fixed-income
bond markets. It includes only traded issues available to international
investors. Investors cannot invest directly in an unmanaged index such as The
J.P. Morgan Government Bond Index. Source: J.P. Morgan Securities.
Where in the World Can You Find Higher Yields?
A portfolio that includes high-quality foreign bonds has the opportunity to
search for higher yields around the globe. As shown below, yields on
high-quality bonds vary from country to country. This data does not represent
Global Income Fund performance, nor is there a guarantee that the portfolio will
include holdings from all the countries listed below.
As of 12/31/97 As of 12/31/98
- ----------------------------------------------------
United States 5.75% 4.68%
Australia 6.01% 4.99%
Canada 5.53% 4.94%
Denmark 5.66% 4.21%
France 5.35% 3.95%
Germany 5.32% 3.86%
Greece 10.12% 6.89%
Italy 5.65% 3.98%
Japan 1.95% 2.08%
Netherlands 5.75% 5.07%
New Zealand 7.03% 5.48%
South Africa 13.90% 15.82%
Spain 5.60% 3.96%
Sweden 6.00% 4.20%
United Kingdom 6.21% 4.41%
Past performance does not indicate future results.
Semi-annual yields to maturity on 10-year government benchmark bonds.
Source: Warburg Dillon Read UBS (as of December 31, 1998).
Diversification in High-Quality Global Bonds
In seeking its goal of high income with reasonable risk, the Global Income Fund
focuses on quality. Using global diversification, the Global Income Fund
attempts to reduce risk while striving to capture high interest rates from
quality bonds around the world. See the Global Income Fund's portfolio of
investments in securities on page 2. The geographic data illustrated below does
not include cash and short-term investments.
High Quality
Portfolio Holdings:
AAA 86.5%
A 10.4%
BBB 3.1%
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Data as of 12/31/98. The Global Income Fund's portfolio is actively managed and
its holdings are subject to change.
1
<PAGE>
About Lord Abbett Global Equity Fund
Why Invest Internationally?
International investors have a larger choice of exceptional companies to choose
from than investors who concentrate solely on U.S.-based companies.
Percent of the World's Market Capitalizations
{The following information was depicted as a pie chart in the printed material.]
Based in the U.S. 51%
Based outside of the U.S. 49%
Source: Morgan Stanley Capital International. Data as of 12/31/98, based on
market capitalization.
Managed to Participate in Global Growth
Portfolio diversification positions the Global Equity Fund to participate in
global opportunities. Nine countries were represented in the Global Equity Fund
at period end. See the portfolio of investments in securities on page 5. The
geographic data illustrated below does not include cash and short-term
investments.
[GRAPHIC OMITTED]
Data as of 12/31/98. The Global Equity Fund portfolio is actively managed and
its holdings are subject to change.
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
====================================================================================================================================
<S> <C> <C> <C>
Investments in Common Stocks 97.08%
- ------------------------------------------------------------------------------------------------------------------------------------
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 CreamInc. 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 5.53% Ace Ltd. Insurance holding company specializing in property 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
Merchandise 2.16% Dillard's Inc. Southwestern department store chain 170,000 4,823,750
*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
Investment Income
Year Ended December 31, 1998
<TABLE>
=======================================================================================
<S> <C> <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:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
-------------------------------------------------------------
Class A Shares Amount Shares Amount
- ------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C>
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
- --------------------------------------------------------------------------------------
<CAPTION>
May 1, 1997
(Commencement of
Year Ended operations of Class shares)
December 31, 1998 to December 31, 1997
-------------------------------------------------------------
Class B Shares Amount Shares Amount
- ------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C>
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
- --------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
Notes to Financial Statements
<TABLE>
<CAPTION>
May 1, 1997
(Commencement of
Year Ended operations of Class shares)
December 31, 1998 to December 31, 1997
-------------------------------------------------------------
Class C Shares Amount Shares Amount
- ------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C>
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
- --------------------------------------------------------------------------------------
</TABLE>
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 The Company has entered into an arrangement with its
transfer agent whereby credits realized as a result of uninvested cash balances
were used to reduce a portion of the 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 & Income Funds Balanced Fund Income Funds Tax-Free Money
Growth Fund Income Funds Market Fund
Developing Alpha Fund Affiliated Fund Balanced Series High Yield Fund U.S. Government
Growth Fund o National Securities
Global Equity Fund Growth & Income Fund Bond-Debenture Fund o California Money Market
o Connecticut Fund**+
Growth Opportunities Large-Cap Research Fund Global Income Fund o Florida
Fund o Georgia
o Hawaii
International Fund Limited Duration U.S. o Michigan
Government o Minnesota
Mid-Cap Value Fund Securities Fund** o Missouri
o New Jersey
Small-Cap Value Fund* U.S. Government o New York
Securities Fund** o Pennsylvania
o Texas
World Bond- o Washington
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
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 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 DISTRIBUTOR LLC
- ------------------------------------------------------------ LAG-2-1298
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203 (2/99)
