<PAGE>
- --------------------------------------------------------------------------------
REPORT TO SHAREHOLDERS For the Six Months Ended May 31, 1995
[PHOTO - Ronald P. Lynch]
/s/ Ronald P. Lynch
- ----------------------------------------
Ronald P. Lynch, Chairman
June 20, 1995
Lord Abbett Research Fund, Inc. completed the first six months of fiscal 1995 on
May 31 with a net asset value of $13.74, 14.8% higher than the $11.97 price
recorded at the close of fiscal 1994 (after adjustment for a capital gain
distribution of $.82 per share paid last December). The Fund produced a total
return of 17.4% compared to a 19.2% return for the unmanaged S&P 500. Since its
inception on June 3, 1992, the Fund has produced a total return of 58.7% versus
39.7% for the S&P 500 over the same period. See Statement of Operations for
expenses currently assumed by Lord, Abbett & Co.
The moderation in economic growth and the decline in interest rates
resulted in a positive environment for stocks in the first half of fiscal 1995.
The Fund continued to concentrate its investments in undervalued issues with
positive fundamentals and earnings that are less dependent on strong economic
activity. Currently, significant valuation disparities are not apparent among
industries and sectors; thus the Research Department's stock selection
capabilities will be critical to the Fund's performance in the second half of
1995.
The investment team responsible for the Fund's performance is comprised of
analysts from Lord Abbett's Equity Research Department. The Fund seeks to be
fully invested at all times in a portfolio of carefully researched securities
which offer exceptional value.
Specific stock selection is the result of recommendations from individual
analysts. In each case, quantitative valuation models are integrated with
fundamental analysis to identify the best values among a universe of
approximately 1,000 common stocks.
Thank you for the confidence you have placed in Lord Abbett Research Fund,
Inc. We look forward to helping you achieve your financial goals in 1995 and
beyond.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Through 6/30/95)/(1)/
- --------------------------------------------------------------------------------
1 Year Life of Fund
- --------------------------------------------------------------------------------
<S> <C>
23.70% 16.72%
- --------------------------------------------------------------------------------
</TABLE>
This past performance is no indication of future results. The investment return
and principal value of an investment in the Fund will fluctuate so that shares,
on any given day or when redeemed, may be worth more or less than their original
cost.
(1) Total return is the percent change in value with all dividends and
distributions reinvested. The Fund's shares are sold without a sales charge
and its management fee has been waived and all expenses have been assumed by
Lord, Abbett & Co.
<PAGE>
================================================================================
Fund Performance
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
LORD ABBETT RESEARCH FUND/(1)/ AND THE UNMANAGED S&P 500
----------------------------------------------------------------
The Fund S&P 500
6/30/92 $10,000 $10,000
11/30/92 10,610 10,534
11/30/93 12,490 11,597
5/31/95 15,873 13,970
Past performance is no guarantee of future results.
(1)/ Data reflects the fact that the Fund is sold without a sales charge.
<PAGE>
LORD ABBETT RESEARCH FUND
May 31, 1995
STATEMENT OF NET ASSETS
- -----------------------
<TABLE>
<CAPTION>
Market
Value
Security Number of Shares (Note 1a)
- --------------------------------------------------------------------------------
INVESTMENTS IN COMMON STOCKS 90.95%
- --------------------------------------------------------------------------------
<S> <C> <C>
Aerospace -- 5.36%
Boeing Co................................. 2,700 $ 158,963
Lockheed Martin Corp...................... 1,793 106,684
Rockwell International Corp............... 2,300 104,938
Total..................................... 370,585
Airlines -- 2.00%
British Airways ADS....................... 2,100 138,075
Auto Parts -- 3.66%
Genuine Parts Co.......................... 5,100 200,175
Snap-On, Inc.............................. 1,500 53,250
Total..................................... 253,425
Automobiles -- 1.39%
General Motors Corp....................... 2,000 96,000
Banks: Money Center -- 1.00%
Chemical Banking Corp..................... 1,500 69,187
Banks: Regional -- 2.20%
BankAmerica Corp.......................... 1,400 73,150
Fleet Financial Group, Inc................ 1,100 38,362
George Mason Bankshares Inc............... 2,000 40,500
Total..................................... 152,012
Chemicals -- 4.75%
Dow Chemical Co........................... 1,200 88,050
Hanna, M.A. Co............................ 4,300 106,425
Lyondell Petrochemical Co................. 2,100 52,500
Union Carbide Corp........................ 2,800 81,900
Total..................................... 328,875
Data Processing Equipment -- 2.10%
Hewlett-Packard Co........................ 2,200 145,475
Data Processing Services -- 2.46%
General Motors Corp. Class E.............. 4,000 170,000
Drugs/Health Care Products -- 9.57%
Baxter International Inc.................. 4,500 156,937
Lilly, Eli & Co........................... 1,300 97,012
Merck & Co., Inc.......................... 4,300 202,637
SmithKline Beecham plc ADR................ 5,200 205,400
Total..................................... 661,986
Electric Power -- 6.11%
Baltimore Gas & Electric Co............... 4,000 104,000
CINergy Corp.............................. 4,900 130,463
Detroit Edison............................ 2,100 63,263
Public Service Enterprises Group Inc...... 4,200 124,950
Total..................................... 422,676
</TABLE>
3
<PAGE>
LORD ABBETT RESEARCH FUND
May 31, 1995
STATEMENT OF NET ASSETS
- -----------------------
<TABLE>
<CAPTION>
Market
Value
Security Number of Shares (Note 1a)
- --------------------------------------------------------------------------------
<S> <C> <C>
Electrical Equipment -- 1.89%
Emerson Electric Co....................... 1,900 $ 130,625
Electronics: Communications -- .69%
Harris Corp............................... 900 47,812
Electronics: Components -- 2.83%
AMP Inc................................... 4,600 196,075
Electronics: Equipment -- 1.76%
Perkin-Elmer Corp......................... 1,500 52,125
Raytheon Co............................... 900 69,750
Total..................................... 121,875
Financial: Miscellaneous -- 2.41%
American Express Co....................... 2,000 71,250
Transamerica Corp......................... 1,600 95,600
Total..................................... 166,850
Food -- 4.60%
Archer-Daniels-Midland Co................. 3,441 63,659
Hershey Foods Corp........................ 3,000 154,875
Supervalu Inc............................. 3,500 99,313
Total..................................... 317,847
Insurance -- 3.05%
Aetna Life & Casualty Company............. 1,600 95,400
Cigna Corp................................ 1,550 115,862
Total..................................... 211,262
Machinery: Diversified -- 1.63%
Deere & Co................................ 1,300 112,450
Miscellaneous -- 2.06%
Moore Corp. Ltd........................... 6,500 142,187
Oil: Domestic -- 3.10%
Coda Energy Inc +......................... 7,300 49,275
Triton Energy Corp +...................... 1,400 64,050
Ultramar Corp............................. 3,800 101,175
Total..................................... 214,500
Oil: International -- 6.72%
Chevron Corp.............................. 3,500 171,937
Exxon Corp................................ 2,600 185,575
Total S.A................................. 3,462 107,323
Total..................................... 464,835
Paper and Forest Products -- .95%
Boise Cascade Corp........................ 2,000 66,000
Printing and Publishing -- .97%
Banta Corp................................ 2,000 67,000
</TABLE>
4
<PAGE>
LORD ABBETT RESEARCH FUND
May 31, 1995
STATEMENT OF NET ASSETS
- -----------------------
<TABLE>
<CAPTION>
Market
Number of Shares Value
Security or Principal Amount (Note 1a)
- --------------------------------------------------------------------------------
INVESTMENTS IN COMMON STOCKS 90.95%
- --------------------------------------------------------------------------------
<S> <C> <C>
Retail -- 2.84%
Dayton Hudson Corp........................ 1,500 $ 106,313
Sears, Roebuck & Co....................... 1,600 90,200
Total..................................... 196,513
Savings and Loan -- 3.22%
Ahmanson, H.F. & Co....................... 1,800 40,950
Great Western Financial Corp.............. 8,300 181,563
Total..................................... 222,513
Telecommunications -- 1.67%
MCI Communications Corp................... 5,700 115,425
Textiles: Apparel -- 1.66%
Fruit of The Loom +....................... 4,300 114,487
Tire and Rubber Goods -- 2.98%
Cooper Tire & Rubber Company.............. 5,000 121,250
Standard Products Co...................... 3,925 84,878
Total..................................... 206,128
Tobacco -- 5.32%
American Brands Inc....................... 4,600 185,725
Philip Morris Inc......................... 2,500 182,187
Total..................................... 367,912
Total Investments in Common Stocks
(Cost $5,283,902)......................... 6,290,592
OTHER ASSETS, LESS LIABILITIES 9.05%
Corporate Obligations at Cost:
American Express Credit Co.
5.86% due 6/2/1995....................... 100M 100,000
Chevron Oil Finance Co.
5.92% due 6/1/1995....................... 200M 200,000
General Electric Corp.
5.95% due 6/6/1995....................... 150M 150,000
Prudential Funding Co.
5.96% due 6/7/1995....................... 100M 100,000
Total..................................... 550,000
Cash and Receivables, Net
of Liabilities........................... 75,860
Total Other Assets, Less
Liabilities.............................. 625,860
Net Assets (equivalent to $13.74 a share on 503,447
100.00% shares of $.001 par value capital stock
outstanding; authorized, 50,000,000 shares) $6,916,452
- --------------------------------------------------------------------------------
</TABLE>
+ Non-income producing.
See Notes to Financial Statements.
5
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================================
Statement of Operations For the Six Months Ended May 31, 1995
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME Dividends $ 93,376
-----------------------------------------------------------------------------------------------
Interest 9,886
-----------------------------------------------------------------------------------------------
Total income $ 103,262
----------------------------------------------------------------------------------------------------------------------
EXPENSES Management fee (Note 6) 23,240
-----------------------------------------------------------------------------------------------
Tax fee 2,500
-----------------------------------------------------------------------------------------------
Audit fees 1,500
-----------------------------------------------------------------------------------------------
Shareholder servicing fees 1,500
-----------------------------------------------------------------------------------------------
Registration fees 750
-----------------------------------------------------------------------------------------------
Organization (Note 1e) 601
-----------------------------------------------------------------------------------------------
Other 2,149
-----------------------------------------------------------------------------------------------
Management fees waived and expenses assumed by Lord, Abbett & Co. (32,240)
-----------------------------------------------------------------------------------------------
Net expenses --
-----------------------------------------------------------------------------------------------
Net investment income 103,262
-----------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 5)
----------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN FROM SECURITY TRANSACTIONS (excluding short-term securities)
-----------------------------------------------------------------------------------------------
Proceeds from sales 1,024,185
-----------------------------------------------------------------------------------------------
Cost of securities sold 903,158
-----------------------------------------------------------------------------------------------
Net realized gain 121,027
-----------------------------------------------------------------------------------------------
NET UNREALIZED APPRECIATION OF INVESTMENTS
----------------------------------------------------------------------------------------------------------------------
Beginning of period 222,531
-----------------------------------------------------------------------------------------------
End of period 1,006,690
-----------------------------------------------------------------------------------------------
Net increase in unrealized appreciation 784,159
-----------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 905,186
-----------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,008,448
----------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
=================================================================================================================================
Statements of Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS MAY 31, 1995 NOVEMBER 30, 1994
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS Net investment income $103,262 $119,910
----------------------------------------------------------------------------------------------------------
Net realized gain from security transactions 121,027 356,654
----------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 784,159 (164,590)
----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,008,448 311,974
----------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME INCLUDED IN PRICE OF SHARES SOLD (Note 1d) 26,534 35,300
----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
----------------------------------------------------------------------------------------------------------------------------
Net investment income (126,046) (66,270)
----------------------------------------------------------------------------------------------------------
Net realized gain from security transactions (356,407) (109,342)
----------------------------------------------------------------------------------------------------------
Total distributions (482,453) (175,612)
----------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (exclusive of amounts allocated to net investment income)
----------------------------------------------------------------------------------------------------------------------------
Net proceeds from sales of 47,913 and 118,904 shares, respectively 573,780 1,502,610
----------------------------------------------------------------------------------------------------------
Net asset value of 40,508 and 14,324 shares issued to shareholders in
reinvestment of net investment income and net realized gain from
security transactions 464,652 171,621
----------------------------------------------------------------------------------------------------------
Total 1,038,432 1,674,231
----------------------------------------------------------------------------------------------------------
Cost of 19,460 and 30,076 shares reacquired, respectively (232,629) (373,593)
----------------------------------------------------------------------------------------------------------
Increase in net assets derived from capital share transactions
(net increase of 68,961 and 103,152 shares, respectively) 805,803 1,300,638
----------------------------------------------------------------------------------------------------------
Total increase in net assets 1,358,332 1,472,300
----------------------------------------------------------------------------------------------------------
NET ASSETS
----------------------------------------------------------------------------------------------------------------------------
Beginning of period 5,558,120 4,085,820
----------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income
of $173,462 and $169,712, respectively) $6,916,452 $5,558,120
----------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 3, 1992
NOVEMBER 30, (COMMENCEMENT OF
SIX MONTHS ENDED -------------------- OPERATIONS)+ TO
PER SHARE OPERATING PERFORMANCE: MAY 31, 1995 1994 1993 NOVEMBER 30, 1992
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.79 $12.33 $10.61 $10.00
------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
--------------------------------------------------------------------------------------------------------------------
Net investment income++ .24* .34 .29 .12*
--------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1.82 .65 1.57 .49
--------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.06 .99 1.86 .61
--------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
--------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.29) (.20) (.14) --
--------------------------------------------------------------------------------------------------------------------
Net realized gain from security transactions (.82) (.33) -- --
--------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.74 $12.79 $12.33 $10.61
------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 17.44%* 8.21% 17.72% 6.10%*
------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $6,916 $5,558 $4,086 $2,372
--------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
--------------------------------------------------------------------------------------------------------------------
Expenses, including waiver .00%* .00% .00% .00%*
--------------------------------------------------------------------------------------------------------------------
Expenses, excluding waiver .52%* 1.15% 1.20% .79%*
--------------------------------------------------------------------------------------------------------------------
Net investment income 1.67%* 2.65% 2.44% 1.39%*
--------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 17.76% 43.85% 74.16% 20.70%
------------------------------------------------------------------------------------------------------------------------
</TABLE>
+See Note 2.
++Net of management fee waiver and expenses assumed.
*Not annualized.
See Notes to Financial Statements.
7
<PAGE>
================================================================================
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated under Maryland law on April 26, 1992 and is
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The following is a summary of significant
accounting policies consistently followed by the Company. The policies are in
conformity with generally accepted accounting principles.
(A) Market value is determined as follows: Securities listed or admitted to
trading privileges on any national securities exchange are valued at the last
sales price on the principal securities exchange on which such securities are
traded, or, if there is no sale, at the mean between the last bid and asked
price on such exchange. Securities traded in the over-the-counter market are
valued at the mean between the last bid and asked prices in such market, except
that securities admitted to trading on the NASDAQ National Market System are
valued at the last sales price if it is determined that such price more
accurately reflects the value of such securities. Securities for which market
quotations are not available are valued at fair value under procedures approved
by the Board of Directors.
(B) It is the policy of the Company to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income in taxable distributions. Therefore, no federal income tax
provision is required.
(C) Security transactions are accounted for on the date that the securities are
purchased or sold (trade date). Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Interest income is accrued on
a daily basis.
(D) A portion of proceeds from the sales and costs of repurchases of capital
shares, equivalent to the amount of distributable net investment income on the
date of the transaction, is credited or charged to undistributed income.
Undistributed net investment income per share thus is unaffected by sales or
repurchases of shares.
(E) The organizational expenses of the Company are amortized evenly over a
period of five years.
2. INITIAL CAPITALIZATION AND OFFERING OF SHARES
During the period from the date of incorporation to June 3, 1992, the Company
had no operations other than those related to organizational matters, including
the initial capital contribution of $100,000 and the issuance of 10,000 shares
to the partners of Lord, Abbett & Co. which occurred on June 3, 1992. Regular
investment operations commenced on June 3, 1992.
3. DISTRIBUTIONS
Taxable net realized gain from security transactions, if any, is distributed to
shareholders in the succeeding year. At May 31, 1995, the accumulated net
realized gain for financial reporting purposes, which is substantially the same
as for federal income tax purposes, aggregated $121,242.
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. CAPITAL PAID IN
At May 31, 1995, capital paid in aggregated $5,615,058.
5. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities (other than short-term investments)
aggregated $1,335,571 and $1,024,185, respectively. Security gains and losses
are computed on the identified cost basis.
As of May 31, 1995, unrealized appreciation for federal income tax purposes
aggregated $1,006,690 of which $1,046,120 related to appreciated securities and
$39,430 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. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Lord, Abbett & Co. provides 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, statistical work and the supervision of the Company's
investment portfolio. The management fee paid to Lord, Abbett & Co. is based on
average daily net assets for each month at the annual rate of .75 of 1%. During
the six months ended May 31, 1995, Lord, Abbett & Co. waived a management fee of
$23,240 and assumed expenses of $9,000.
All outstanding capital shares of Lord Abbett Research Fund, Inc. are held by
directors and officers of the Company and by partners and employees of Lord,
Abbett & Co.
Copyright (C) 1995 by Lord Abbett Research Fund, Inc.
767 Fifth Avenue, New York, NY 10153-0203
This publication, when not used for the general information of shareholders of
Lord Abbett Research 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, charges and other matters.
All rights reserved. Printed in the U.S.A.
8
