<PAGE>
Series Fund
Growth and Income
Portfolio
1998 Annual Report
Robert S. Dow
Chairman
January 20, 1999
Report to Shareholders
For the Fiscal Year Ended December 31, 1998
Lord Abbett Series Fund -- Growth & Income Portfolio completed its fiscal
year on December 31, 1998 and provided a total return of 12.82% for its
shareholders during that period.*
Our mid-year concerns regarding the future health of world markets turned
out to be extremely well-founded. As we feared, the Asian economic and currency
crises, along with economic problems in Russia, had a negative impact on U.S.
corporate profits and on U.S. investor confidence. As a result, investors
focused on a very small number of the perceived "safer" largest growth stocks.
The performance of our portfolio was negatively affected by this investor focus
on large-capitalization growth stocks, which caused large value stocks to
underperform.
The economy continues to slow. Financial markets, meanwhile, have shown
increased volatility over concern regarding the likelihood that corporate
earnings will fall short of previous estimates 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 a turning point and will now see
slower growth. Consumer activity, which comprises well over half the economy,
continues to provide support for growth with additional gains seen in job
creation, income and spending. Business spending, however, is slowing down and
recession abroad is likely to reduce exports. Both developments will have a
flattening effect on corporate profit growth.
Overall, we believe gross domestic product is likely to grow at an annual
rate of approximately 2% during the next 6 to 12 months. U.S. interest rates
have fallen, reflecting slowing growth and continuing low inflation, and actions
by the Federal Reserve Board should help to extend the current favorable
investment environment. In sum, it is our view that the underpinnings of sound
equity markets remain in place, while price declines late in the Portfolio's
fiscal year have created more opportunities for long-term investors. The
Portfolio continues to emphasize value opportunities in the domestic economy,
including food, health care services, entertainment and communications stocks.
Thank you for your continued confidence in Lord Abbett Series Fund -- Growth &
Income Portfolio. We look forward to helping you achieve your financial goals in
the years ahead.
* Total return is the percent change in net asset value, assuming the
reinvestment of all distributions. The Portfolio is actively managed and is
subject to change.
LORD ABBETT SERIES FUND - GROWTH AND INCOME PORTFOLIO
December 31, 1998
STATEMENT OF NET ASSETS
Market
Investments Shares Value
INVESTMENTS IN COMMON AND CONVERTIBLE-PREFERRED STOCKS 95.23%
Apparel - .98%
VF Corp. 150,000 $ 7,031,250
Automobiles - 2.37%
Ford Motor Company 130,000 7,629,375
General Motors Corp. 130,000 9,303,125
Total 16,932,500
Banks: Money Center - 2.00%
Chase Manhattan Corp. 210,000 14,293,125
Banks: Regional - 4.28%
Banc One Corp. 160,000 8,170,000
BankAmerica Corp. 140,000 8,417,500
First Union Corp. 230,000 13,986,875
Total 30,574,375
Broadcasting - 1.93%
CBS Inc. 270,000 8,842,500
Time-Warner Inc. 80,000 4,965,000
Total 13,807,500
Brokers - 1.59%
Morgan Stanley, Dean Witter, Discover & Co. 160,000 11,360,000
Chemicals - .89%
DuPont DeNemours, E.I. & Co. 120,000 6,367,500
Computer: Hardware - 5.50%
International Business Machines Corp. 120,000 22,170,000
*Sun Microsystems Inc. 200,000 17,125,000
Total 39,295,000
Computer: Peripherals - 2.84%
EMC Corp. 150,000 12,750,000
*Seagate Technology Inc. 250,000 7,562,500
Total 20,312,500
Computer: Services - 1.22%
First Data Corp. 275,000 8,714,063
Drugs/Health Care Products - 4.35%
American Home Products Corp. 310,000 17,456,875
Pharmacia & Upjohn Inc. 240,000 13,590,000
Total 31,046,875
Electric Power - 8.37%
Carolina Power & Light Co. 275,000 12,942,187
*Duke Energy Co. 240,000 15,375,000
Firstenergy Corp. 360,000 11,722,500
Florida Progress Corp. 250,000 11,203,125
Houston Inds., Inc. Conv. Pfd. $3.28 80,000 8,510,000
Total 59,752,812
Electrical Equipment - 2.37%
Emerson Electric Co. 280,000 16,940,000
Electronics-Semiconductors - 1.68%
Texas Instruments, Inc. 140,000 11,978,750
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LORD ABBETT SERIES FUND - GROWTH AND INCOME PORTFOLIO
December 31, 1998
STATEMENT OF NET ASSETS
Market
Investments Shares Value
Food - 6.55%
BestFoods 160,000 8,520,000
ConAgra Inc. 300,000 9,450,000
Heinz H.J. Co. 280,000 15,855,000
Ralston Purina Co. 400,000 12,950,000
Total 46,775,000
Health Care: Products - 1.89%
Baxter International Inc. 210,000 13,505,625
Health Care: Services - 3.04%
Aetna Inc. 50,000 3,931,250
Aetna Inc. Conv. Pfd. $4.758 120,000 9,127,500
Columbia /HCA Healthcare 350,000 8,662,500
Total 21,721,250
Insurance - Life - 3.99%
American General Corporation 240,000 18,720,000
Jefferson-Pilot Corp. 130,000 9,750,000
Total 28,470,000
Insurance - Property & Casualty - 3.90%
Chubb Corp. 150,000 9,731,250
Cigna Corp. 100,000 7,731,250
St. Paul Companies, Inc. 300,000 10,425,000
Total 27,887,500
Machinery - Diversified - 1.21%
Deere & Co. 260,000 8,612,500
Manufacturing - Diversified - .91%
United Technologies Corp. 60,000 6,525,000
Natural Gas Diversified - 1.57%
The Coastal Corporation 320,000 11,180,000
Oil: Domestic Integrated - .83%
Occidental Petroleum Corp. 350,000 5,906,250
Oil: International Integrated - 7.16%
BP Amoco PLC Adr 185,000 17,575,000
Mobil Corp. 225,000 19,603,125
Total S.A. Adr 280,000 13,930,000
Total 51,108,125
Paper and Forest Products - 2.31%
Georgia Pacific Timber Group 300,000 7,143,750
Georgia-Pacific Corp. 160,000 9,370,000
Total 16,513,750
Photographic - 1.01%
Eastman Kodak Co. 100,000 7,200,000
Printing and Publishing - 1.41%
Dow Jones & Co., Inc. 210,000 10,106,250
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LORD ABBETT series FUND - GROWTH AND INCOME PORTFOLIO
December 31, 1998
STATEMENT OF NET ASSETS
Shares/ Market
Investments Principal Amount Value
Retail - Department and Merchandise - 3.35%
May Department Stores Company 100,000 $ 6,037,500
Wal Mart Stores, Inc. 220,000 17,916,250
Total 23,953,750
Telephone: Long Distance - 5.49%
AT&T Corp. 330,000 24,832,500
*MCI Worldcom, Inc. 200,000 14,350,000
Total 39,182,500
Telephone: Regional - 6.09%
Alltel Corp. 210,000 12,560,625
Bell Atlantic Corp. 280,000 14,840,000
SBC Communication, Inc. 300,000 16,087,500
Total 43,488,125
Tobacco - 2.06%
Philip Morris Inc. 275,000 14,712,500
Waste Management - 2.09%
Waste Management Inc. 320,000 14,920,000
Total Investments in Securities (Cost $558,325,281) 680,174,375
Other Assets, Less Liabilities 4.77%
Short-Term Investments, At Cost
Federal Home Loan Bank Discount Note - 4.36% due
1/4/99 5,000M 4,997,611
Koch Industries Discount Note - 5.30% due 1/4/99 29,500M 29,482,628
Total Short-Term Investments (Cost $34,480,239) 34,480,239
Cash and Receivables, Net of Liabilities (380,369)
TOTAL OTHER ASSETS, LESS LIABILITIES 34,099,870
Net Assets 100.00% (Equivalent to $20.649 a share, 34,591,149 shares of $.001
par value capital stock outstanding; authorized 50,000,000 shares) $714,274,245
*Non-income producing security.
See Notes to Financial Statements.
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LORD ABBETT series FUND - GROWTH AND INCOME PORTFOLIO
December 31, 1998
STATEMENT OF NET ASSETS
Market
Investments Shares Value
Food - 6.55%
BestFoods 160,000 8,520,000
ConAgra Inc. 300,000 9,450,000
Heinz H.J. Co. 280,000 15,855,000
Ralston Purina Co. 400,000 12,950,000
Total 46,775,000
Health Care: Products - 1.89%
Baxter International Inc. 210,000 13,505,625
Health Care: Services - 3.04%
Aetna Inc. 50,000 3,931,250
Aetna Inc. Conv. Pfd. $4.758 120,000 9,127,500
Columbia /HCA Healthcare 350,000 8,662,500
Total 21,721,250
Insurance - Life - 3.99%
American General Corporation 240,000 18,720,000
Jefferson-Pilot Corp. 130,000 9,750,000
Total 28,470,000
Insurance - Property & Casualty - 3.90%
Chubb Corp. 150,000 9,731,250
Cigna Corp. 100,000 7,731,250
St. Paul Companies, Inc. 300,000 10,425,000
Total 27,887,500
Machinery - Diversified - 1.21%
Deere & Co. 260,000 8,612,500
Manufacturing - Diversified - .91%
United Technologies Corp. 60,000 6,525,000
Natural Gas Diversified - 1.57%
The Coastal Corporation 320,000 11,180,000
Oil: Domestic Integrated - .83%
Occidental Petroleum Corp. 350,000 5,906,250
Oil: International Integrated - 7.16%
BP Amoco PLC Adr 185,000 17,575,000
Mobil Corp. 225,000 19,603,125
Total S.A. Adr 280,000 13,930,000
Total 51,108,125
Paper and Forest Products - 2.31%
Georgia Pacific Timber Group 300,000 7,143,750
Georgia-Pacific Corp. 160,000 9,370,000
Total 16,513,750
Photographic - 1.01%
Eastman Kodak Co. 100,000 7,200,000
Printing and Publishing - 1.41%
Dow Jones & Co., Inc. 210,000 10,106,250
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LORD ABBETT series FUND - GROWTH AND INCOME PORTFOLIO
December 31, 1998
STATEMENT OF NET ASSETS
Shares/ Market
Investments Principal Amount Value
Retail - Department and Merchandise - 3.35%
May Department Stores Company 100,000 6,037,500
Wal Mart Stores, Inc. 220,000 17,916,250
Total 23,953,750
Telephone: Long Distance - 5.49%
AT&T Corp. 330,000 24,832,500
*MCI Worldcom, Inc. 200,000 14,350,000
Total 39,182,500
Telephone: Regional - 6.09%
Alltel Corp. 210,000 12,560,625
Bell Atlantic Corp. 280,000 14,840,000
SBC Communication, Inc. 300,000 16,087,500
Total 43,488,125
Tobacco - 2.06%
Philip Morris Inc. 275,000 14,712,500
Waste Management - 2.09%
Waste Management Inc. 320,000 14,920,000
Total Investments in Securities (Cost $558,325,281) 680,174,375
Other Assets, Less Liabilities 4.77%
Short-Term Investments, At Cost
Federal Home Loan Bank Discount Note - 4.36%
due 1/4/99 5,000M 4,997,611
Koch Industries Discount Note - 5.30% due 1/4/99 29,500M 29,482,628
Total Short-Term Investments (Cost $34,480,239) 34,480,239
Cash and Receivables, Net of Liabilities (380,369)
TOTAL OTHER ASSETS, LESS LIABILITIES 34,099,870
Net Assets 100.00% (Equivalent to $20.649 a share,
34,591,149 shares of $.001
par value capital stock outstanding;
authorized 50,000,000 shares) $714,274,245
*Non-income producing security.
See Notes to Financial Statements.
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LORD ABBETT SERIES FUND -- GROWTH & INCOME PORTFOLIO For the Year Ended December
31, 1998
STATEMENT OF OPERATIONS
Investment Income
Income
Dividends $12,749,579
Interest 1,262,369
Total income $14,011,948
Expenses
Management Fee 3,070,876
Professional 49,200
Directors 13,413
Other 3,060
Total expenses 3,136,549
Net investment income 10,875,399
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain from investment transactions
Proceeds from sales 451,629,557
Cost of investments sold 417,389,510
Net realized gain 34,240,047
Unrealized appreciation of investments 29,394,800
Net realized and unrealized gain on investments 63,634,847
Net Increase in Net Assets Resulting
from Operations 74,510,246
See Notes to Financial Statements.
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LORD ABBETT SERIES FUND -- GROWTH & INCOME PORTFOLIO
STATEMENTS OF Changes in Net Assets
Year Ended Year Ended
December 31, December 31,
1998 1997
Increase (Decrease) in Net Assets
Operations
Net investment income 10,875,399 8,165,291
Net realized gain from investment transactions 34,240,047 31,511,295
Net unrealized appreciation of investments 29,394,800 43,838,365
Net increase in net assets resulting from
operations 74,510,246 83,514,951
Undistributed net investment income included
in price of share transactions 0 8,042,878
Distributions to shareholders from:
Net investment income (10,531,538) (8,188,444)
Net realized gain from investment transactions (33,862,945) (31,790,430)
Total distributions (44,394,483) (39,978,874)
Capital Share Transactions:
Net proceeds from sales of 6,898,183 and 6,522,797
shares, respectively 141,925,049 123,356,702
Net asset value of 2,156,014 and 2,110,148 shares, respectively issued to
shareholders in reinvestment of net investment income and realized gain
from investment transactions 44,394,483 37,690,059
Total 186,319,532 161,046,761
Cost of 728,296 and 225,920 shares reacquired,
respectively (14,598,679) (4,169,703)
Increase in Net Assets derived from capital share transactions (net increase of
8,325,901 and 8,407,025
shares, respectively) 171,720,853 156,877,058
Increase in net assets 201,836,616 208,456,013
Net Assets
Beginning of year 512,437,629 303,981,616
End of year (including distributions in excess
of net investment
income of $109,891 and $154,760, respectively) 714,274,245 512,437,629
See Notes to Financial Statements.
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LORD ABBETT SERIES FUND -- GROWTH AND INCOME PORTFOLIO
December 31, 1998
Financial Highlights
Year Ended December 31,
Per Share Operating Performance: 1998 1997 1996 1995 1994
Net asset value, beginning of year 19.510 17.022 15.241 12.71 13.15
Income from investment operations
Net investment income .360(a) .393(a) .408 .459 .41
Net realized and unrealized gain
(loss) on investments 2.149 3.755 2.563 3.332 (.045)
Total from investment operations 2.509 4.148 2.971 3.791 .365
Distributions
Dividends from net investment income (.325) (.34) (.36) (.36) (.33)
Distributions from net realized gain (1.045) (1.32) (.83) (.90) (.475)
Net asset value, end of year 20.649 19.510 17.022 15.241 12.71
Total Return 12.82% 24.34% 19.49% 29.82% 2.76%
Ratios/Supplemental Data:
Net assets, end of year (000) 714,274 512,438 303,982 193,575 114,608
Ratios to Average Net Assets:
Expenses .51% .52% .52% .52% .59%
Net investment income 1.78% 2.02% 2.32% 2.91% 2.97%
Portfolio turnover rate 76.62% 43.09% 48.93% 70.30% 68.94%
(a)Calculated using average shares outstanding during the period.
See Notes to Financial Statements.
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LORD ABBETT SERIES FUND -- GROWTH AND INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies Lord Abbett Series Fund, Inc. (the
"Company") is an open-end management investment company incorporated under
Maryland law on August 28, 1989. The Company currently consists of one active
portfolio - Growth and Income Series (the "Series"). The Series is diversified
as defined under the Investment Company Act of 1940. The Series commenced
operations on December 11, 1989. Shares of the Series are currently issued and
redeemed only in connection with investment in, and payments under, variable
annuity contracts issued by life insurance and insurance related companies. 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 in the over-the-counter
market are valued at the mean between the last bid and asked prices, except that
securities admitted to trading on the NASDAQ National Market System are valued
at the last sales price if it is determined that such price more accurately
reflects the value of such securities. 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.
(b) It is the policy of the Company to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income. Therefore, no federal income tax provision
is required.
(c) Investment transactions are accounted for on the date that the
securities are purchased or sold (trade date). Realized gains and losses from
investment transactions are calculated on the identified cost basis. Dividend
income and distributions to shareholders are recorded on the ex-dividend date.
Interest income is recorded on the accrual basis.
(d) Prior to January 1, 1998, the Series followed the accounting practice
known as equalization by which 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 Series discontinued
equalization. Undistributed net investment income of $19,000,976 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.
LORD ABBETT SERIES FUND -- GROWTH AND INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
2. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES The Company has a
management agreement with Lord, Abbett & Co. ("Lord Abbett") pursuant to which
Lord Abbett supplies the Company with investment management services and
executive and other personnel, pays the remuneration of officers, provides
office space and pays for ordinary and necessary office and clerical expenses
relating to research and statistical work. The management fee paid to Lord
Abbett is based on average daily net assets at the rate of .50% per annum.
Certain of the Company's officers and Directors have an interest in Lord Abbett.
The Company adopted a Rule 12b-1 Plan on April 20, 1994, which permits the
Company to make payments to life insurance companies at the annual rate of .15%
of the average daily net asset value of shares of the Company attributable to
life insurance companies' variable annuity contract owners. No payments were
made under the Plan during the period.
3. DISTRIBUTIONS Distributions from net investment income and net realized
gain from investment transactions, if any, are declared annually. Accumulated
undistributed net realized capital gains at December 31, 1998, for financial
statement purposes, aggregated $178,736.
Income and capital gains distributions are determined in accordance with
income tax regulations which may differ from methods used to determine the
corresponding income and capital gain amounts in accordance with generally
accepted accounting principles.
4. PAID-IN-CAPITAL
At December 31, 1998, paid-in-capital aggregated $592,356,306.
5. PURCHASES AND SALES OF SECURITIES Purchases and sales of investment
securities (other than short-term investments) aggregated $575,504,874 and
$451,629,557, respectively.
As of December 31, 1998, net unrealized appreciation for federal income tax
purposes for the Company aggregated $121,849,094, of which $136,496,861 related
to appreciated securities and $14,647,767 related to depreciated securities. For
federal income tax purposes, the identified cost of investments owned at
December 31, 1998, was substantially the same as the cost for financial
reporting purposes.
6. DIRECTORS' REMUNERATION The Directors of the Company associated with Lord
Abbett and all officers of the Company receive no compensation from the Company
for acting as such. Outside Directors' fees and retirement costs are allocated
among all funds in the Lord Abbett group based on the net assets of each fund.
The Directors' fees payable at December 31, 1998, under a deferred compensation
plan, were $26,000.
7. SUBSEQUENT EVENT On January 8, 1999, a separate account of COVA Financial
Services Life Insurance Company ("COVA") redeemed 34,287,022 shares.
Net assets after the redemption amounted to $7,356,464.
<PAGE>
LORD ABBETT SERIES FUND -- GROWTH AND INCOME PORTFOLIO
Independent Auditors' Report
The Board of Directors and Shareholders,
Lord Abbett Series Fund, Inc.:
We have audited the accompanying statement of net assets of the Growth and
Income Portfolio of Lord Abbett Series 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 five years 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 the Growth and
Income Portfolio of Lord Abbett Series 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.
Deloitte & Touche llp
New York, New York
February 12, 1999
