Lord Abbett Research
Fund
o Small-Cap Series
o Large-Cap Series
SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED MAY 31, 1998
[GRAPHIC OMITTED]
Two portfolios designed to help
you build for your future
[LOGO]
<PAGE>
Lord Abbett Research Fund Small-Cap Series o Large-Cap Series
A Tradition of
Value
Investing
[GRAPHIC OMITTED]
We recognize each investor's need for a
well-diversified portfolio. Our value investing
process benefits investors in both small and large
company stocks. Our goal, to provide investors
competitive returns with relatively moderate
fluctuations in price, applies to both Series.
- --------------------------------------------------------------------------------
Value Investing at Work in The Small-Cap Series has significantly
a Portfolio of Small Company outperformed small company stocks in general and
Stocks and a Portfolio of mutual funds that focus on small companies for the
Large Company Stocks period since its inception. Without a sales
charge, the Large-Cap Series has produced
long-term returns above the average of mutual
funds that focus on large companies, and over the
shorter term, has produced returns comparable to
its benchmark.
Small-Cap Series Performance
Average Annual Total Returns as of 5/31/98
[THE FOLLOWING TABLE WAS DEPICTED AS A BAR GRAPH IN THE PRINTED MATERIAL]
Life of
1 year Series(1)
------ ---------
The Small-Cap Series 23.3% 29.4%
Morningstar Average of
Small Company Funds 23.8% 19.8%
Morningstar Average of
Small Value Funds 25.9% 23.2%
Russell 2000 Index 21.2% 18.0%
Large-Cap Series Performance
Average Annual Total Returns as of 5/31/98
[THE FOLLOWING TABLE WAS DEPICTED AS A BAR GRAPH IN THE PRINTED MATERIAL]
3 years 5 years
------- -------
The Large-Cap Series 24.1% 21.2%
Morningstar Average of
Large Value Funds 24.1% 18.5%
Morningstar Average of
Growth & Income Funds 25.4% 18.9%
Performance data shown is for Class A shares at
net asset value and assumes the reinvest-ment of
all distributions. Comparative fund performance
does not account for the deduction of sales
charges and would be different if sales charges
were included.
- --------------------------------------------------------------------------------
Average Annual Total Returns Average annual compound returns for periods ended
6/30/98 at the Class A share maximum sales charge
of 5.75%, with all distributions reinvested:
[THE FOLLOWING TABLES WERE DEPICTED AS BAR GRAPHS IN THE PRINTED MATERIAL]
Small-Cap Series(2)
-------------------
1 year 7.00%
Life of Series 23.77%
Large-Cap Series(3)
-------------------
1 year 12.00%
5 years 20.07%
Life of Series 19.13%
The results quoted herein represent past
performance, which is no indication of future
results. The investment return and principal value
of an investment in either Series will fluctuate
so that shares, on any given day or when redeemed,
may be worth more or less than their original
cost.
(1) Period 12/13/95 - 6/30/98 for the Small-Cap
Series; 1/1/96 - 6/30/98 for Morningstar averages
and the unmanaged Russell 2000 Index. The Index is
unavailable for investment.
(2) The Small-Cap Series commenced operations
12/13/95.
(3) The Large-Cap Series commenced operations 6/3/92.
During the 5-year and Life-of-Series periods
shown, Lord Abbett waived or assumed a portion of
fees and expenses for each Series. Please see the
Series' prospectus for a history of such waivers
and assumptions. There are no plans to continue
such waivers and assumptions in the future.
<PAGE>
Report to Shareholders
For the Six Months Ended May 31, 1998
[PHOTO OMITTED]
/s/ Robert S. Dow
- ---------------------------
ROBERT S. DOW
CHAIRMAN
JUNE 18, 1998
The value approach employed by these mutual funds enabled each to take advantage
of U.S. stock price volatility...
We are pleased to report that the Small-Cap Series and the Large-Cap Series of
the Lord Abbett Research Fund both posted attractive returns for the six months
ended May 31, 1998 as U.S. markets rebounded from an autumn decline triggered by
concerns about Asia. The value approach employed by these mutual funds enabled
each to take advantage of U.S. stock price volatility and invest in what we
believed to be attractively priced companies during the period. A summary of the
six-month performance follows.
Small-Cap Series Large-Cap Series
-------------------------------- -------------------------
Class A Class B Class C Class Y Class A Class B Class C
-------------------------------- -------------------------
(12/30/97
Inception)
-------------------------------- -------------------------
Net asset value $17.39 $17.25 $17.25 $17.40 $21.61 $21.44 $21.45
Capital gains paid $ 0.29 $ 0.25 $ 0.25 $ -- $ 0.71 $ 0.71 $ 0.71
Total return*+ 6.9% 6.6% 6.6% 6.5% 11.6% 11.2% 11.2%
About the Small-Cap Series
The Fund's research-intensive approach to the stocks of seasoned smaller
companies has provided shareholders with better since-inception average annual
total returns through 5/31/98 (29.4% for Class A shares without a sales charge)
than the Morningstar Average of Small Value Funds (23.2%) and the Russell 2000
Index (18.0%). It also posted a respectable incremental advance of 6.9% during
the period under review, when small-cap stocks underperformed large caps. We
believe the market's move to all-time highs on the strength of large-cap issues
has created significant value for small caps going forward.
The Fund's most significant exposure continued to be industrial sector stocks,
including a paper-clothing manufacturer and selected steel companies. We
increased the Fund's participation in technology stocks early in 1998, when an
upsurge in price volatility yielded attractive buying opportunities. Both these
decisions added value during the period under review, as did our participation
in selected construction- and housing-related names. Healthcare stocks, among
them an HMO and a manufacturer of home medical equipment, also did well. An
additional boost to overall performance came when five of the names we held
merged or were acquired. Holdings in capital goods and energy stocks detracted.
The Fund's largest holding, a shoe manufacturer, began to pick up steam as the
period drew to a close.
About the Large-Cap Series
The performance of your Fund continued to be driven by strong returns from our
selections in banking, insurance and other financial companies, as well as by
returns that outpaced the S&P 500 from our selections in retail companies, and
from "consumer non-cyclicals."Our exposure to utilities stocks detracted. The
Fund's returns rank well against competitors but, like most of them, trailed the
S&P 500 where performance has been largely fueled by a small number of what we
regard as richly valued growth companies.
We are mindful of the increased risk that the Federal Reserve may raise
short-term interest rates in order to slow down a U.S. economy that is currently
far too strong relative to competitors around the globe. Accordingly, we have
trimmed our exposure to banks and certain other companies, chiefly in the
financial area, whose stock prices are likely to take a short-term hit from
increased rates. At the same time, we have increased the Fund's participation in
companies specializing in property and casualty insurance because we believe the
transaction-driven nature of their businesses will be largely immune to interest
rate shifts. As always, our strategy seeks out undervalued companies for which
we believe bad news has already been discounted by the market and good news is
likely to be rewarded.
Important Note: Lord Abbett Research Fund-Small-Cap Series closed to new
investors on April 9, 1998 in order to protect the integrity of its investment
strategy.
* Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
+ Not annualized.
1
<PAGE>
LORD ABBETT RESEARCH FUND--SMALL-CAP SERIES
Seeking the Best Small-Cap Value Stocks
A $10,000 investment made on January 1, 1996 was worth $18,849 as of May 31,
1998, outperforming both the unmanaged Russell 2000 Index and the Morningstar
Average of Small Value Funds.
[THE FOLLOWING TABLE WAS DEPICTED AS A BAR GRAPH IN THE PRINTED MATERIAL]
(Thousands)
Lord Abbett Research Fund --
Small-Cap Series(1) $18,849
Morningstar Average of Small
Value Funds(2) $16,568
Russell 2000 Index(2)(3) $14,926
(1) Series performance is at net asset value for Class A shares and assumes the
reinvestment of all distributions.
(2) Source: Morningstar, Inc.
(3) The Russell 2000 Index is an unmanaged index consisting of the common stocks
of 2000 companies. An investor cannot invest directly in an index. Source:
Lipper Analytical Services, Inc.
LORD ABBETT RESEARCH FUND--LARGE-CAP SERIES
Unique Management Style Produces an Outperformer
Shareholders investing $10,000 at the Series' inception on June 3, 1992 had a
portfolio worth $30,315 as of May 31, 1998, an average annual gain of 20.3%.
[THE FOLLOWING TABLE WAS DEPICTED AS A BAR GRAPH IN THE PRINTED MATERIAL]
(Thousands)
Lord Abbett Research Fund --
Large-Cap Series(1) $30,315
Morningstar Average of Large
Value Funds(2) $26,436
Morningstar Average of
Growth & Income Funds(2) $26,515
(1) Series performance is at net asset value for Class A shares and assumes the
reinvestment of all distributions.
(2) Source: Morningstar, Inc.
(3) Morningstar performance reflects the period 6/1/92-5/31/98.
2
<PAGE>
Important Information
Common stocks purchased by the Series are subject to market fluctuations,
providing the potential for gains and the risk of loss. Lord Abbett Research
Fund-Small-Cap Series invests in small-cap companies, which typically have a
higher risk of failure and historically have experienced a greater degree of
illiquidity and market volatility than large-cap companies. Performance results
quoted herein reflect past performance, current sales charges (where applicable)
and appropriate Rule 12b-1 Plan expenses from commencement of the Plan. Past
performance is no indication of future results. Tax consequences are not
reflected. The investment return and principal value of an investment will
fluctuate so that shares, on any given day or when redeemed, may be worth more
or less than their original cost. The Series issues additional classes of
shares, with distinct pricing options. For a full discussion of the differences
in pricing alternatives, please call Lord Abbett Distributor llc at 800-874-3733
and ask for the Fund's current prospectus. If used as sales material after
9/30/98, this report must be accompanied by Lord Abbett's Performance Quarterly
for the most recently completed calendar quarter.
Statement of Net Assets
SMALL-CAP SERIES May 31, 1998
<TABLE>
<CAPTION>
Investments Shares Market Value
====================================================================================================================================
<C> <S> <C> <C>
Investments in Common Stocks 98.47%
====================================================================================================================================
Aerospace 9.67% *Aviation Sales Company-Distributes aircraft spare parts 175,000 $ 6,682,812
AAR Corp.-Major supplier of products and services for the worldwide
aviation industry 140,000 3,701,250
*Doncasters plc ADR-Supplier of tolerance-critical engine components 125,000 4,078,125
*Moog Inc. Class A-Manufacturer of electrohydraulic control systems 555,000 21,714,375
Precision Castparts Corp.-Manufactures engine castings and other
components for the aerospace industry 165,000 9,508,125
*SPS Technologies Inc.-Producer of precision fasteners, super alloys
and magnets 275,000 16,121,875
Tristar Aerospace Co.-Distributes aerospace fasteners and related hardware 110,000 1,780,625
Total 63,587,187
- ------------------------------------------------------------------------------------------------------------------------============
Agricultural Products .34% *Midwest Grain Prods Inc.-Manufacturer of wheat gluten, starch, and alcohol 165,000 2,268,750
- ------------------------------------------------------------------------------------------------------------------------============
Apparel 8.45% Garan Inc.-Supplier of knitted and woven apparel 250,000 6,906,250
*North Face Inc.-Manufacturer of camping and outerwear 465,000 11,537,812
Phillips Van Heusen Corp.-Apparel manufacturer 375,000 4,875,000
Stride Rite Corp.-Producer and retail marketer of children's and adult
shoes 2,425,000 32,282,813
Total 55,601,875
- ------------------------------------------------------------------------------------------------------------------------============
Auto Parts 2.42% Autocam Corp.-Designs and manufactures specialty metal alloys 75,000 1,443,750
Clarcor Inc.-Manufactures oil and air filters 315,000 7,245,000
*Control Devices Inc.-Manufacturer of circuit breakers and electronic
sensors for the auto industry 225,033 3,488,012
OEA Inc.-Manufactures initiators and inflators for automotive air bags 219,400 3,757,225
Total 15,933,987
- ------------------------------------------------------------------------------------------------------------------------============
Banks: Regional .25% Doral Financial Corp.-Originates, purchases, sells and services mortgage
loans for single-family residences 100,000 1,668,750
- ------------------------------------------------------------------------------------------------------------------------============
Building Materials 4.31% Calmat Co.-Producer of aggregates and asphalt 325,000 8,165,625
Medusa Corp.-Producer of masonry cement and construction aggregates 265,000 15,270,625
Simpson Manufacturing Co., Inc.-Manufacturer of construction-related
fasteners 123,400 4,920,575
Total 28,356,825
- ------------------------------------------------------------------------------------------------------------------------============
Capital Equipment 3.00% Manitowoc Company Inc.-Capital goods manufacturer 175,000 7,175,000
Oshkosh Truck Corp.-Markets a broad range of specialized motor vehicles 308,700 7,177,275
Stewart & Stevenson Services, Inc.-A supplier of power and engine-driven
systems 260,000 5,395,000
Total 19,747,275
- ------------------------------------------------------------------------------------------------------------------------============
Communications Equipment 2.65% Telxon Corp.-Supplier of hand-held wireless computer links. 525,000 17,456,250
- ------------------------------------------------------------------------------------------------------------------------============
Computer: Hardware 5.66% Electronics for Imaging-Develops technologies that enable digital color
printing over computer networks 1,350,000 26,662,500
*Zebra Technologies Corp. Class A-Provider of bar code labeling systems 275,800 10,583,825
Total 37,246,325
- ------------------------------------------------------------------------------------------------------------------------============
Computer: Software .88% *Structural Dynamics Research-Supplier of mechanical design automation
software 230,000 5,821,875
-----------------------------------------------------------------------------------------============
</TABLE>
3
<PAGE>
Statement of Net Assets
SMALL-CAP SERIES May 31, 1998
<TABLE>
<CAPTION>
Investments Shares Market Value
====================================================================================================================================
<C> <S> <C> <C>
Containers .66% *BWAY Corp.-Manufacturer of steel containers 170,000 $ 4,324,375
- ------------------------------------------------------------------------------------------------------------------------============
Electrical Equipment 2.28% American Precision Industries Inc.-Manufactures motion control and
electronic products for the aerospace industry and the military 250,000 4,750,000
Kollmorgen Corp.-Manufacturer of motors and controls 450,000 8,718,750
Scientific Technologies Inc.-Manufactures industrial safety and
monitoring equipment 76,000 950,000
Woodhead Industries Inc.-Manufacturer of specialty electrical products 32,400 577,125
Total 14,995,875
- ------------------------------------------------------------------------------------------------------------------------============
Electronics: Components 2.57% BMC Industries Inc.-Manufactures precision imaging and optical products 98,000 1,439,375
General Cable-Manufacturer of copper wire and cable 115,000 3,047,500
Kent Electronics-Manufactures electronic components and interconnect
assemblies 125,800 2,641,800
Methode Electronics Inc. Class A-Producer of electronic component devices 400,000 5,100,000
Plexus Corp.-Offers design, manufacturing and testing services to the
electronics industry 58,400 1,255,600
*Richey Electronics Inc.-Distributor of electronic components to
manufacturers of electronic equipment 363,700 3,455,150
Total 16,939,425
- ------------------------------------------------------------------------------------------------------------------------============
Electronics: Equipment 3.37% General Scanning-Develops and manufactures laser systems for diverse
industries 415,000 6,276,875
GenRad Inc.-Supplier of electrical test and measurement products 280,000 4,900,000
Newport Corp.-Manufactures components and systems for communications
semicon equipment and technology markets 170,000 3,718,750
*Perceptron Inc.-Supplier of quality control and guidance systems for
the auto industry 125,000 1,531,250
Zero Corp.-Manufacturer of electronics enclosures 200,000 5,775,000
Total 22,201,875
- ------------------------------------------------------------------------------------------------------------------------============
Electronics: Semiconductors Microsemi Corp.-Designs and manufactures integrated systems for the
.46% computer and scientific-research markets 222,500 3,045,469
- ------------------------------------------------------------------------------------------------------------------------============
Energy 2.53% Domain Energy-Oil and gas exploration and production 275,000 3,300,000
KCS Energy Inc.-Oil and gas exploration and production 100,000 1,187,500
*Meridian Resource Corp.-Oil and gas exploration and production 850,000 6,109,375
Penn Virginia Corp.-Natural resources company engaged in coal mining,
timber and oil/gas exploration and development 215,000 6,073,750
Total 16,670,625
- ------------------------------------------------------------------------------------------------------------------------============
Engineering/Construction *Michael Baker Corp.-Engineering, operations and maintenance and
1.40% construction firm 510,000 5,036,250
*Willbros Group Inc.-Independent contractor serving the oil and gas
industry 250,000 4,171,875
Total 9,208,125
- ------------------------------------------------------------------------------------------------------------------------============
Fluid Separation .79% *CUNO Inc.-Manufacturer of fluid filtration products for healthcare,
potable water and industrial fluid processing markets 254,400 5,167,500
- ------------------------------------------------------------------------------------------------------------------------============
Food 1.65% Dreyer's Grand Ice Cream-Ice cream manufacturer and distributor 352,000 8,910,000
Michael Foods Inc.-Processor and distributor of eggs, egg products and
dairy items 26,800 747,050
Sanderson Farms Inc.-Engaged in production, processing, marketing and
distribution of fresh and frozen chicken and other prepared food 100,000 1,162,500
Total 10,819,550
- ------------------------------------------------------------------------------------------------------------------------============
Furniture and Appliances .18% *Neutral Posture Ergonomics-Producer of office chairs and specialty
ergonomic products 310,000 1,162,500
- ------------------------------------------------------------------------------------------------------------------------============
Home Building 1.69% *Crossmann Communities Inc.-Single-family home builder in the Midwest 26,000 786,500
Kaufman & Broad Home Corp.-Single-family home builder in California
and Texas 325,000 8,348,437
Newmark Homes Corp.-Provides single-family homes in five major U.S.
markets 200,000 1,950,000
Total 11,084,937
- ------------------------------------------------------------------------------------------------------------------------============
Industrial Distribution 2.58% Applied Industrial Tech Inc.-Distributor of bearings and industrial
products 500,000 11,750,000
Hughes Supply Inc.-Supplier of building materials and plumbing equipment 155,000 5,221,563
Total 16,971,563
- ------------------------------------------------------------------------------------------------------------------------============
Insurance: Property/Casualty Chartwell Re Corp.-Property casualty insurance company 270,000 7,981,875
2.31% Farm Family Holdings Inc.-Holding company for Farm Family Casualty
Insurance Co. 125,000 5,117,188
*Philadelphia Cons Holding Company-Property casualty insurance company 90,000 2,100,938
Total 15,200,001
-----------------------------------------------------------------------------------------============
</TABLE>
4
<PAGE>
Statement of Net Assets
SMALL-CAP SERIES May 31, 1998
<TABLE>
<CAPTION>
Investments Shares Market Value
====================================================================================================================================
<C> <S> <C> <C>
Leisure Time .64% K2 Inc.-Markets sporting goods, recreational and industrial products 210,000 $ 4,200,000
- ------------------------------------------------------------------------------------------------------------------------============
Machine Tools 2.34% Cincinnati Milacron Inc.-Machine tool manufacturer 515,000 15,417,813
- ------------------------------------------------------------------------------------------------------------------------============
Machinery: Diversified 2.23% Albany International Corp.-Paper clothing machine concern 325,000 9,425,000
Regal Beloit Corp.-Manufacturer of cutting tools and power transmissions 160,000 5,220,000
Total 14,645,000
- ------------------------------------------------------------------------------------------------------------------------============
Manufacturing: Diversified Brady (WH) Co.-Manufacturer of industrial identification products and
2.70% coated materials 120,000 3,480,000
Hawk Corp. Class A-Manufactures specialized components for aerospace,
industrial and commercial applications 29,900 545,675
Sola International-Manufactures and distributes eyeglass lenses 181,000 7,160,813
*Wolverine Tube Inc.-Manufacturer of copper and copper-alloy tubes 180,000 6,570,000
Total 17,756,488
- ------------------------------------------------------------------------------------------------------------------------============
Medical/Health-Care 7.37% Arrow International, Inc.-Supplies disposable catheters and related
clinical products 540,000 18,663,750
Invacare Corp.-Supplier of home medical equipment 100,800 2,658,600
*Marquette Medical Systems Class A-Medical electronic equipment and
systems provider 475,000 13,300,000
*Sierra Health Services-Provider of managed health plans in Nevada and
Texas 372,800 13,840,200
Total 48,462,550
- ------------------------------------------------------------------------------------------------------------------------============
Metals 4.33% Imco Recycling Inc.-Major aluminum recycler and zinc and magnesium
processor 150,000 2,840,625
Oregon Steel Mills Inc.-Manufacturer of steel plate and rail 750,000 18,140,625
Quanex Corp.-Manufacturer of specialty steel and aluminum products 240,900 7,482,955
Total 28,464,205
- ------------------------------------------------------------------------------------------------------------------------============
Miscellaneous 1.38% Ametek, Inc.-Manufactures electrical and electronic products 120,500 3,479,437
Ruddick Corp.-Manufactures sewing thread; supermarket chain in the
Southeast 250,000 4,468,750
Scott International-Manufacturer of safety breathing equipment 75,000 1,106,250
Total 9,054,437
- ------------------------------------------------------------------------------------------------------------------------============
Paper and Forest Products Blount International Inc. Class A-Manufacturer of timber-cutting
2.88% equipment and small arms accessories 455,800 12,847,862
Wausau Mosinee Paper Corp.-Manufacturer of writing, printing and
specialty papers 285,000 6,091,875
Total 18,939,737
- ------------------------------------------------------------------------------------------------------------------------============
Printing and Publishing 4.00% *Gibson Greetings Inc.-Manufacturer of greeting cards and wrappings 385,000 9,288,125
*Scholastic Corp.-A leading publisher of children's books and
educational materials 425,000 17,000,000
Total 26,288,125
- ------------------------------------------------------------------------------------------------------------------------============
Retail 1.60% Casey's General Store-Chain of convenience-style general stores 230,000 3,263,125
Elder-Berrman Stores Corp.-Operates Midwestern department stores 200,000 5,000,000
Maxwell Shoe Company Inc.-Markets casual and dress footwear for
women and children 71,700 1,407,113
*The Bombay Company Inc.-Marketer of traditional styled furniture 194,000 848,750
Total 10,518,988
- ------------------------------------------------------------------------------------------------------------------------============
Service 1.87% Grey Wolf Inc.-Provides contract drilling for oil and gas 500,000 1,937,500
Oceaneering Intl Inc.-Supplies vehicles to explore and construct
platforms for oil and gas producers 150,000 3,225,000
Patterson Energy Inc.-Provides on-track drilling for oil and gas 500,000 5,593,750
Pool Energy Svcs Co.-Oil well services company 75,000 1,528,125
Total 12,284,375
- ------------------------------------------------------------------------------------------------------------------------============
Specialty Materials 2.79% *Rogers Corp.-Manufactures polymeric materials for a wide range of
applications 475,000 18,346,875
- ------------------------------------------------------------------------------------------------------------------------============
Textiles: Apparel 1.40% *Dan River Inc.-Markets textile products for the home fashion and
apparel fabrics markets 483,300 9,243,112
- ------------------------------------------------------------------------------------------------------------------------============
Transportation 2.84% Air Express International Corp.-Air freight forwarding company 550,000 14,196,875
Smithway Motor Express Class A-Truckload carrier transporting
diversified manufactured and processed products 300,000 4,500,000
Total 18,696,875
-----------------------------------------------------------------------------------------============
Total Investments in Common Stocks (Cost $608,483,201) 647,799,499
-----------------------------------------------------------------------------------------============
</TABLE>
5
<PAGE>
Statement of Net Assets
SMALL-CAP SERIES May 31, 1998
<TABLE>
<CAPTION>
Investments Principal Amount Market Value
====================================================================================================================================
<C> <S> <C> <C>
Other Assets, Less Liabilities 1.53%
====================================================================================================================================
Short-Term Investments Federal Home Loan Mortgage Corp. 5.55% due 6/1/1998 $8,260M $ 8,256,180
- ------------------------------------------------------------------------------------------------------------------------============
Cash and Receivables, Net of Liabilities 1,833,759
- ------------------------------------------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities 10,089,939
====================================================================================================================================
Net Assets 100.00% $657,889,438
====================================================================================================================================
Class A Shares-Net asset value ($289,570,523 / 16,655,362 shares outstanding) $17.39
Class B Shares-Net asset value ($260,994,310 / 15,132,856 shares outstanding) $17.25
Class C Shares-Net asset value ($92,039,357 / 5,336,225 shares outstanding) $17.25
Class Y Shares-Net asset value ($15,285,248 / 878,365 shares outstanding) $17.40
</TABLE>
*Non-income producing. See Notes to Financial Statements.
Statement of Net Assets
LARGE-CAP SERIES May 31, 1998
<TABLE>
<CAPTION>
Investments Shares Market Value
====================================================================================================================================
Investments in Common Stocks 90.31%
====================================================================================================================================
<C> <S> <C> <C>
Agricultural Equipment 1.22% Deere & Co.-World's largest manufacturer of farm equipment 25,250 $ 1,309,844
- ------------------------------------------------------------------------------------------------------------------------------------
Agricultural Products 1.00% Archer-Daniels-Midland Co.-Leading processor and seller of agricultural
commodities 57,025 1,076,347
- ------------------------------------------------------------------------------------------------------------------------============
Airlines .43% Delta Air Lines Inc.-A leading U.S. carrier 4,000 460,000
- ------------------------------------------------------------------------------------------------------------------------============
Apparel 1.64% *Fruit of The Loom-Producer of non-fashion apparel and undergarments 22,700 815,781
VF Corp.-Leading producer of blue jeans and other apparel 17,900 952,056
Total 1,767,837
- ------------------------------------------------------------------------------------------------------------------------============
Banks: Money Center 2.36% Chase Manhattan Corp.-Major money-center bank holding company 12,500 1,699,219
First Chicago NBD-Major midwest bank 9,600 839,400
Total 2,538,619
- ------------------------------------------------------------------------------------------------------------------------============
Banks: Regional 6.99% Banc One Corp.-Leading bank-holding company 27,000 1,488,375
BankAmerica Corp.-Major money-center bank 14,500 1,198,969
BankBoston, N.A.-Leading New England regional bank 8,150 858,806
Comerica Inc.-Midwestern regional bank holding company 12,650 831,737
First Union Corp.-Major East Coast bank 15,200 840,750
Mellon Bank Corp.-Commercial bank located in Pittsburgh, PA 27,000 1,820,813
Norwest Corp.-Midwestern regional bank holding company 12,000 466,500
Total 7,505,950
- ------------------------------------------------------------------------------------------------------------------------============
Brokers 1.96% Morgan Stanley, Dean Witter, Discover & Co.-Major brokerage and credit card
company 27,000 2,107,688
- ------------------------------------------------------------------------------------------------------------------------============
Building Materials .48% Fortune Brands Inc.-Consumer products conglomerate 13,300 511,219
- ------------------------------------------------------------------------------------------------------------------------============
Chemicals 3.04% +Air Products & Chemicals Inc.-Industrial gas producer 15,300 1,331,100
DuPont DeNemours, E.I. & Co.-Major U.S.-based producer of plastic and
chemicals 14,000 1,078,000
Rohm & Haas Co.-Manufacturer of specialty chemicals and plastics 7,850 862,518
Total 3,271,618
- ------------------------------------------------------------------------------------------------------------------------============
Computer: Hardware 5.15% *Digital Equipment Corp.-Manufacturer of data processing equipment 29,800 1,635,275
Hewlett-Packard Co.-Leading manufacturer of computer products including
printers, servers, workstations and PCs 9,825 610,378
International Business Machines Corp.-World's largest computer manufacturer 12,000 1,408,500
*Sun Microsystems Inc.-Supplier of network computer products including
workstations, servers, software, microprocessors, and a full range of
services and support 47,000 1,882,938
Total 5,537,091
- ------------------------------------------------------------------------------------------------------------------------============
Computer: Peripherals 1.81% EMC Corp.-Supplier of high-performance storage devices and related services 47,000 1,947,563
-----------------------------------------------------------------------------------------============
</TABLE>
6
<PAGE>
Statement of Net Assets
LARGE-CAP SERIES May 31, 1998
<TABLE>
<CAPTION>
Investments Shares Market Value
====================================================================================================================================
<C> <S> <C> <C>
Containers 2.68% Crown Cork & Seal Inc.-Major producer of a wide variety of steel and aluminum
containers for the food industry 28,000 $ 1,452,500
Sonoco Products Co.-A leading U.S. producer of specialty paper and plastic
packaging components 40,920 1,429,642
Total 2,882,142
- ------------------------------------------------------------------------------------------------------------------------============
Cosmetics .76% International Flavor & Fragrance-World's largest flavors and fragrances
manufacturer 17,000 816,000
- ------------------------------------------------------------------------------------------------------------------------============
Drugs/Health-Care Products American Home Products Corp.-Producer of drugs, food housewares and
3.67% packaged medicine and medical products 30,800 1,488,025
Bristol-Myers-Squibb Company-Major worldwide pharmaceutical concern with
other interests in infant nutrition, non-prescription medications, medical
devices and toiletries 10,100 1,085,750
SmithKline Beecham plc ADS-Major U.K.-based health-care company 12,200 656,513
Warner-Lambert Co.-Drug and consumer products manufacturer 11,100 708,319
Total 3,938,607
- ------------------------------------------------------------------------------------------------------------------------============
Electric Power 3.00% Baltimore Gas & Electric Co.-Regional electric utility company 25,000 760,937
Carolina Power & Light Co.-Electric utility company serving North and
South Carolina 27,500 1,127,500
Firstenergy Corp.-Major Midwestern electric utility holding company 45,000 1,335,938
Total 3,224,375
- ------------------------------------------------------------------------------------------------------------------------============
Electrical Equipment 1.97% CBS Inc.-Largest pure-play radio and TV broadcasting company 33,400 1,060,450
Emerson Electric Co.-Diversified manufacturer of consumer and industrial
electrical components 17,500 1,063,125
Total 2,123,575
- ------------------------------------------------------------------------------------------------------------------------============
Electronics: Semiconductors
.28% Intel Corp.-Leading producer of semiconductor memory circuits 4,200 300,038
- ------------------------------------------------------------------------------------------------------------------------============
Food 5.39% Best Foods-Producer of diversified packaged foods 20,000 1,128,750
ConAgra Inc.-Major producer of agricultural and consumer products 27,700 810,225
Heinz H.J. Co.-Domestic packaged foods producer 44,900 2,382,506
Sara Lee Corp.-Diversified maker of branded food products, apparel and
household consumer products 25,000 1,471,875
Total 5,793,356
- ------------------------------------------------------------------------------------------------------------------------============
Health-Care Products 2.87% Baxter International Inc.-World's leading distributor and major
manufacturer of hospital supplies and related medical equipment 16,800 960,750
Columbia/HCA Healthcare-A leading HMO 40,000 1,307,500
*St. Jude Medical, Inc.-A leading manufacturer of artificial heart valves 23,000 822,250
Total 3,090,500
- ------------------------------------------------------------------------------------------------------------------------============
Health-Care Services 2.68% *Humana Inc.-Major U.S. provider of managed-health plans 37,000 1,149,313
United Healthcare Corp.-Offers health-care coverage and related services
in all 50 states. 27,000 1,728,000
Total 2,877,313
- ------------------------------------------------------------------------------------------------------------------------============
Household Products 2.38% Fort James Corp.-Producer of paper-based consumer products, packaging and
communication papers 39,800 1,902,937
Rubbermaid Inc.-Housewares manufacturer 20,000 652,500
Total 2,555,437
- ------------------------------------------------------------------------------------------------------------------------============
Insurance: Life 1.89% American General Corporation-A leading provider of financial services,
including life/health insurance, annuities, consumer credit and mortgage
financing 19,200 1,288,800
Jefferson-Pilot Corp.-Life insurance holding company 13,050 747,112
Total 2,035,912
- ------------------------------------------------------------------------------------------------------------------------============
Insurance: Property/Casualty Allstate Corp.-Second largest provider of personal lines of insurance in
4.26% the U.S. 12,700 1,195,388
Chubb Corp.-Broad-based property and casualty insurance organization 12,550 998,509
Cigna Corp.-Multi-line insurance and medical services 11,550 791,175
Mercury General-Personal lines insurance company 25,000 1,595,313
Total 4,580,385
- ------------------------------------------------------------------------------------------------------------------------============
Leisure Time 1.01% Time-Warner Inc.-A major entertainment and communications firm 14,000 1,089,375
- ------------------------------------------------------------------------------------------------------------------------============
Manufacturing Diversified .44% United Technologies Corp.-Diversified manufacturing company 5,000 470,000
- ------------------------------------------------------------------------------------------------------------------------============
Miscellaneous 2.38% First Data Corp.-Information supplier for credit card processing and
related services 77,000 2,560,250
-----------------------------------------------------------------------------------------============
</TABLE>
7
<PAGE>
Statement of Net Assets
LARGE-CAP SERIES May 31, 1998
<TABLE>
<CAPTION>
Investments Shares Market Value
====================================================================================================================================
<C> <S> <C> <C>
Natural Gas: Distribution .75% Columbia Energy Group-Utility holding company and natural gas provider 9,600 $ 810,000
- ------------------------------------------------------------------------------------------------------------------------============
Natural Gas: Diversified .84% The Coastal Corporation-A diversified gas pipeline company 12,850 905,925
- ------------------------------------------------------------------------------------------------------------------------============
Oil: International Integrated British Petroleum Ltd. ADS-U.K.-based worldwide petroleum company 27,000 2,392,875
7.39% Chevron Corp.-Worldwide petroleum company with important interests in
chemicals and minerals 17,000 1,357,875
Exxon Corp.-World's largest integrated oil company 17,000 1,198,500
Mobil Corp.-Large international oil company 27,000 2,106,000
Total S.A. Adr Sponsored ADR-Leading French international oil and gas company 14,300 891,069
Total 7,946,319
- ------------------------------------------------------------------------------------------------------------------------============
Paper and Forest Products Abitibi-Consolidated Inc.-Largest newsprint manufacturer 40,000 545,000
1.61% Bowater Inc.-Manufacturer of newsprint, groundwood, kraft pulp and lumber
products 23,400 1,184,625
Total 1,729,625
- ------------------------------------------------------------------------------------------------------------------------============
Personal Loans .37% Heller Financial-Commercial finance company 14,300 398,612
- ------------------------------------------------------------------------------------------------------------------------============
Photographic 2.04% Eastman Kodak Co.-Leading manufacturer of photographic film and equipment 16,400 1,170,550
Xerox Corp.-World's leading duplication technology supplier 10,000 1,027,500
Total 2,198,050
- ------------------------------------------------------------------------------------------------------------------------============
Printing and Publishing 1.96% Tribune Co.-Major Chicago-based newspaper company 10,000 668,750
Young & Rubicam-Major advertising agency 51,500 1,442,000
Total 2,110,750
- ------------------------------------------------------------------------------------------------------------------------============
Printing: Specialty 1.13% Donnelley, R.R. & Sons Co.-Largest commercial printer in the U.S. 27,000 1,215,000
- ------------------------------------------------------------------------------------------------------------------------============
Retail: Department and May Department Stores Company-Leading department store retailer 14,700 945,394
Merchandise 2.72% Penney, J.C. Co., Inc.-Leading department store retailer 10,000 718,125
TJX Cos Inc.-Leading specialty chain 27,000 1,262,250
Total 2,925,769
- ------------------------------------------------------------------------------------------------------------------------============
Retail: Specialty .61% *Toys R Us Inc.-Discount toy supermarts; department stores 24,950 661,175
- ------------------------------------------------------------------------------------------------------------------------============
Telephone: Local 2.45% Bell Atlantic Corp.-Regional telephone company 10,000 916,250
BellSouth Corp.-Regional telephone company 12,000 774,000
SBC Communication Inc.-Mexican telephone monopoly 24,200 940,775
Total 2,631,025
- ------------------------------------------------------------------------------------------------------------------------============
Telephone: Long Distance 2.98% AT&T Corp.-Global telecommunications giant 40,000 2,435,000
Worldcom Inc Ga-Diversified telecommunications company 17,000 773,500
Total 3,208,500
- ------------------------------------------------------------------------------------------------------------------------============
Tobacco 1.21% Philip Morris Inc.-Leading tobacco company 17,900 669,012
RJR Nabisco-Diversified food and tobacco producer 22,400 631,400
Total 1,300,412
- ------------------------------------------------------------------------------------------------------------------------============
Toys 1.41% Hasbro Inc.-Major U.S. manufacturer of toys and games 39,750 1,520,437
- ------------------------------------------------------------------------------------------------------------------------============
Waste Management 1.10% U.S.A. Waste Services Inc.-Leading waste-management concern 25,000 1,179,687
-----------------------------------------------------------------------------------------============
Total Investments in Common Stocks (Cost $83,041,063) 97,112,327
====================================================================================================================================
Other Assets, Less Liabilities 9.69%
====================================================================================================================================
Short-Term Investments Federal Home Loan Mortgage Corp. 5.55% due 6/1/1998 9,400M 9,395,653
- ------------------------------------------------------------------------------------------------------------------------============
Cash and Receivables, Net of Liabilities 1,018,983
- ------------------------------------------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities 10,414,636
====================================================================================================================================
Net Assets 100.00% $107,526,963
====================================================================================================================================
Class A Shares-Net asset value ($75,814,093 / 3,507,855 shares outstanding) $21.61
Class B Shares-Net asset value ($26,987,530 / 1,258,826 shares outstanding) $21.44
Class C Shares-Net asset value ($4,725,340 / 220,246 shares outstanding) $21.45
</TABLE>
*Non-income producing. +Security is held in connection with an open option
written. See Notes to Financial Statements.
8
<PAGE>
Statements of Operations
Six Months Ended May 31, 1998
-----------------------------
Small-Cap Large-Cap
Investment Income (Loss) Series Series
================================================================================
Income Dividends $ 1,793,679 $ 786,589
Interest 770,727 101,558
Total income 2,564,406 888,147
------------------------------------------------------------------
Expenses Management fee 2,228,559 308,391
12b-1 distribution plan-Class A 354,453 74,453
12b-1 distribution plan-Class B 1,143,299 115,881
12b-1 distribution plan-Class C 375,203 14,788
Shareholder servicing 319,049 58,608
Reports to shareholders 67,712 17,054
Registration fee 35,614 39,890
Audit and tax 16,544 7,420
Other 13,006 6,159
Total expenses 4,553,439 642,644
------------------------------------------------------------------
Net investment income (loss) (1,989,033) 245,503
------------------------------------------------------------------
Realized and Unrealized Gain on Investments
================================================================================
Realized gain from investment transactions
Proceeds from sales 138,046,596 40,155,360
Cost of investments sold 127,267,212 37,179,786
Net realized gain 10,779,384 2,975,574
------------------------------------------------------------------
Unrealized appreciation of investments 24,253,537 5,766,849
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments 35,032,921 8,742,423
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 33,043,888 $ 8,987,926
================================================================================
See Notes to Financial Statements.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended Year Ended
May 31, November 30,
1998 1998 1997 1997
----------------------- -----------------------
Small-Cap Large-Cap Small-Cap Large-Cap
Increase (Decrease) in Net Assets Series Series Series Series
===================================================================================================================================
<S> <C> <C> <C> <C>
Operations Net investment income (loss) $ (1,989,033) $ 245,503 $ (305,891) $ 83,720
Net realized gain from investment transactions 10,779,384 2,975,574 7,311,353 2,486,165
Net unrealized appreciation of investments 24,253,537 5,766,849 14,506,701 4,973,080
Net increase in net assets resulting from operations 33,043,888 8,987,926 21,512,163 7,542,965
---------------------------------------------------------------------------------------------------------------------
Undistributed net investment income included in price of share transactions -- 276,366 -- 281,705
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income-Class A -- -- -- (157,269)
Net investment income-Class B -- -- -- (7,958)
Net realized gain from investment transactions-Class A (3,626,593) (1,758,495) -- (943,694)
Net realized gain from investment transactions-Class B (2,865,444) (683,991) -- (360,069)
Net realized gain from investment transactions-Class C (808,272) (60,358) -- --
Total distributions (7,300,309) (2,502,844) -- (1,468,990)
---------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Net proceeds from the sale of shares 222,511,804 36,289,633 423,020,783 44,131,403
Net asset value of shares issued to shareholders in
reinvestment of net investment income and realized gain
from investment 6,933,940 2,358,147 -- 1,404,618
Total 229,445,744 38,647,780 423,020,783 45,536,021
---------------------------------------------------------------------------------------------------------------------
Cost of shares reacquired (33,075,728) (7,678,584) (17,529,274) (5,687,429)
---------------------------------------------------------------------------------------------------------------------
Increase in net assets derived from capital share
transactions 196,370,016 30,969,196 405,491,509 39,848,592
---------------------------------------------------------------------------------------------------------------------
Increase in net assets 222,113,595 37,730,644 427,003,672 46,204,272
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets
Beginning of period 435,775,843 69,796,319 8,772,171 23,592,047
---------------------------------------------------------------------------------------------------------------------
End of period+ $657,889,438 $107,526,963 $435,775,843 $69,796,319
=====================================================================================================================
</TABLE>
+Including undistributed (overdistributed) net investment income of $(2,257,625)
and $997,904 as of May 31, 1998 and undistributed (overdistributed) net
investment income of $(271,581) and $423,847 as of November 30, 1997 for the
Small-Cap Series and Large-Cap Series, respectively. See Notes to Financial
Statements.
9
<PAGE>
Financial Highlights
SMALL-CAP SERIES
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------------------------- -------------------------------------------------
Six Months Ended Year Ended December 13, Six Months Ended Year Ended November 15,
May 31, November 30, 1995(a) to May 31, November 30, 1996(b) to
Per Share Operating Performance: 1998 1997 November 30, 1996 1998 1997 November 30, 1996
================================================================================= =================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.56 $12.01 $10.00 $16.44 $12.00 $11.67
- --------------------------------------------------------------------------------- -------------------------------------------------
Income (loss) from
investment operations
Net investment income (loss) (.03) .02(c) .127 (.07) (.09)(c) .001
Net realized and unrealized
gain on investments 1.15 4.53 2.658 1.13 4.53 .329
Total from investment operations 1.12 4.55 2.785 1.06 4.44 .33
--------------------------------------------------------------------------- -------------------------------------------------
Distributions
Dividends from net investment income -- -- (.075) -- -- --
Distribution from net realized gain (.29) -- (.700) (.25) -- --
--------------------------------------------------------------------------- -------------------------------------------------
Net asset value, end of period $17.39 $16.56 $12.01 $17.25 $16.44 $12.00
- --------------------------------------------------------------------------------- -------------------------------------------------
Total Return(d) 6.91%(e) 37.89% 28.24%(e) 6.58%(e) 37.00% 2.84%(e)
====================================================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver and
reimbursements .61%(e) 1.17% .01%(e) .96%(e) 1.86% .04%(e)
Expenses, excluding waiver and
reimbursements .61%(e) 1.17% 1.00%(e) .96%(e) 1.86% .07%(e)
Net investment income (loss) (.16)%(e) .10% 1.02%(e) (.52)%(e) (.56)% .01%(e)
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class C Shares Class Y Shares
--------------------------------------- ------------------
Six Months Ended April 1, 1997(b) to December 30(b) to
May 31, November 30, May 31,
Per Share Operating Performance: 1998 1997 1998
============================================================================================== ==================
<S> <C> <C> <C>
Net asset value, beginning of period $ 16.44 $ 12.81 $ 16.34
- ---------------------------------------------------------------------------------------------- ------------------
Income (loss) from investment operations
Net investment income (loss) (.07) (.05)(c) .00(f)
Net realized and unrealized gain on investments 1.13 3.68 1.06
Total from investment operations 1.06 3.63 1.06
---------------------------------------------------------------------------------------- ------------------
Distributions
Dividends from net investment income -- -- --
Distribution from net realized gain (.25) -- --
---------------------------------------------------------------------------------------- ------------------
Net asset value, end of period $ 17.25 $ 16.44 $ 17.40
- ---------------------------------------------------------------------------------------------- ------------------
Total Return(d)(e) 6.58% 28.34% 6.49%
==================================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver and reimbursements(e) .96% 1.25% .36%
Expenses, excluding waiver and reimbursements(e) .96% 1.25% .36%
Net investment income (loss)(e) (.52)% (.30)% .00%
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 13, 1995(a) to
May 31, November 30, November 30,
Supplemental Data for All Classes: 1998 1997 1996
==========================================================================================================================
<S> <C> <C> <C>
Net assets, end of period (000) $657,889 $435,776 $ 8,772
Portfolio turnover rate 25.58% 45.24% 110.09%
Average commissions per share paid on equity transactions $ .058 $ .061 $ .052
====================================================================================================================
</TABLE>
(a) Commencement of operations.
(b) Commencement of offering respective class shares.
(c) Calculated using average shares outstanding during the period.
(d) Total return does not consider the effects of sales loads.
(e) Not annualized.
(f) Amount less than $.01.
See Notes to Financial Statements.
10
<PAGE>
Financial Highlights
LARGE-CAP SERIES
<TABLE>
<CAPTION>
Class A Shares
-----------------------------------------------------------------------------------
Six Months Ended
May 31, Year Ended November 30,
Per Share Operating Performance: 1998 1997 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $20.08 $17.86 $15.54 $12.79 $12.33 $10.61
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .08(a) .08(a) .270 .42 .34 .29
Net realized and unrealized gain on investments 2.16 3.21 3.505 3.44 .65 1.57
Total from investment operations 2.24 3.29 3.775 3.86 .99 1.86
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income -- (.12) (.57) (.29) (.20) (.14)
Distributions from net realized gain (.71) (.95) (.885) (.82) (.33) --
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $21.61 $20.08 $17.86 $15.54 $12.79 $12.33
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(b) 11.58%(d) 19.87%(d) 26.25% 32.82% 8.21% 17.72%
====================================================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver and reimbursements .60%(d) 1.52%(d) .36% .00% .00% .00%
Expenses, excluding waiver and reimbursements .60%(d) 1.52% .96% 1.02% 1.15% 1.20%
Net investment income .38%(d) 0.42% 2.24% 3.27% 2.65% 2.44%
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
------------------------------------------------- -----------------------------------
Six Months Ended Year Ended August 1, Six Months Ended April 1,
May 31, November 30, 1996(c) to May 31, 1997(c) to
Per Share Operating Performance: 1998 1997 November 30, 1996 1998 November 30, 1997
=============================================================================================== ===================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $20.00 $17.83 $15.24 $20.01 $16.90
- ----------------------------------------------------------------------------------------------- -----------------------------------
Income (loss) from investment operations
Net investment income (loss) (.00)(a)(e) (.06)(a) .12 (.00)(a)(e) (.07)(a)
Net realized and unrealized gain on
investments 2.15 3.20 2.66 2.15 3.18
Total from investment operations 2.15 3.14 2.78 2.15 3.11
----------------------------------------------------------------------------------------- -----------------------------------
Distributions
Dividends from net investment income -- (.02) (.19) -- --
Distributions from net realized gain (.71) (.95) -- (.71) --
----------------------------------------------------------------------------------------- -----------------------------------
Net asset value, end of period $21.44 $20.00 $17.83 $21.45 $20.01
- ----------------------------------------------------------------------------------------------- -----------------------------------
Total Return(b) 11.16%(d) 18.92% 18.39%(d) 11.16%(d) 18.40%(d)
====================================================================================================================================
Ratios to Average Net Assets:
Expenses .98%(d) 2.28% .59%(d) .97%(d) 1.54%(d)
Net investment income (loss) .01%(d) (.34)% .22%(d) (.01%)(d) (.37)%(d)
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
May 31, Year Ended November 30,
Supplemental Data For All Classes: 1998 1997 1996 1995 1994 1993
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net assets, end of period (000) $107,527 $69,796 $23,592 $7,549 $5,558 $4,086
Portfolio turnover rate 46.96% 30.81% 62.25% 37.17% 43.85% 74.16%
Average commissions per share paid on equity transactions $ .066 $ .063 $ .056 n/a n/a n/a
=============================================================================================================================
</TABLE>
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads.
(c) Commencement of offering respective class shares.
(d) Not annualized.
(e) Amount less than $.01.
See Notes to Financial Statements.
11
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Lord Abbett Research Fund, Inc. (the "Company") is an open-end management
investment company incorporated under Maryland law on April 26, 1992. The
Company consists of three separate portfolios ("Series"). This report covers two
of the Series - Small-Cap Series and Large-Cap Series. Each Series is
diversified as defined under the Investment Company Act of 1940. The financial
statements have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and assumptions at
the date of the financial statements. The following summarizes the significant
accounting policies of the Company:
(a) Market value is determined as follows: Securities listed or admitted to
trading privileges on any national securities exchange are valued at the last
sales price on the principal securities exchange on which such securities are
traded, or, if there is no sale, at the mean between the last bid and asked
price on such exchange, or, in the case of bonds, in the over-the-counter market
if, in the judgment of the Company's officers, that market more accurately
reflects the market value of the bonds. Securities traded only in the
over-the-counter market are valued at the mean between the 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. Short-term securities are
valued at amortized cost which approximates market value. Securities for which
market quotations are not available are valued at fair value under procedures
approved by the Board of Directors.
(b) It is the policy of the Company to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income. Therefore, no 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. Net
investment income (other than distribution and service fees) and realized and
unrealized gains or losses are allocated to each class of shares based upon the
relative proportion of net assets at the beginning of the day.
(d) A portion of proceeds from 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 organization expenses of the Company are amortized evenly over a period
of five years.
(f) The Company may write call options on securities it owns. Premiums received
by the Company upon writing covered call options are included in the Company's
statement of net assets as an asset and an equivalent liability. The liability
is adjusted daily to the market value of the options written. If an option
expires, or if the Company enters into a closing purchase transaction, the
Company realizes a gain or, if the cost of a closing purchase transaction
exceeds the premium originally received, a loss, and the liability related to
the option is extinguished. If an option is exercised, the proceeds of the sale
of the underlying security are increased by the premium originally received when
the option was written.
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, statistical work and the supervision of the
Company's investment portfolios. The management fee paid is based on average
daily net assets for each month at the annual rate of .75 of 1%.
The Small-Cap Series and Large-Cap Series of the Company have Rule 12b-1 plans
and agreements (the "Class A, Class B and Class C Plans") with Lord Abbett
Distributor llc ("Distributor"), an affiliate of Lord Abbett. Each Series makes
payments to Distributor which uses or passes on such payments to authorized
institutions. Pursuant to the Class A Plan, each Series pays Distributor (1) an
annual service fee of 0.25% of the average daily net assets of Class A shares,
(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, each Series 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, each Series
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. Class Y does not have a Rule
12b-1 plan.
Lord Abbett received the following commissions on sales of Class A shares of the
Company after concessions were paid to authorized dealers:
Lord Abbett Dealers'
Series Commissions Concessions
- ------------------------------------------------------------------
Small-Cap $414,654 $2,643,979
Large-Cap $104,606 $ 631,145
- ------------------------------------------------------------------
Certain of the Company's officers and directors have an interest in
Lord Abbett.
3. Capital
The Company has authorized 170 million shares of $.001 par value capital stock
designated as follows: Small-Cap Series: Class A-20 million, Class B-30 million,
Class C-20 million, Class Y-30 million; Large-Cap Series: Class A-20 million,
Class B-30 million, Class C-20 million. Paid in capital for the Company amounted
to $610,003,755 for the Small-Cap Series and $89,539,505 for the Large-Cap
Series at May 31, 1998. Transactions in capital stock were as follows:
12
<PAGE>
Notes to Financial Statements
Six Months Ended 5/31/98
----------------------------------------------------
Small-Cap Series Large-Cap Series
-------------------------- ------------------------
Class A Shares Amount Shares Amount
- ----------------------------------------------------- ------------------------
Sales of shares 5,342,811 $ 90,796,458 1,237,604 $ 25,531,612
- ----------------------------------------------------- ------------------------
Shares issued to share-
holders in reinvestment
of realized gain from
investment transactions 214,484 3,431,712 87,424 1,665,904
- ----------------------------------------------------- ------------------------
Total 5,557,295 94,228,170 1,325,028 27,197,516
- ----------------------------------------------------- ------------------------
Shares reacquired (1,095,223) (18,746,236) (259,676) (5,341,440)
- ----------------------------------------------------- ------------------------
Increase in shares 4,462,072 $ 75,481,934 1,065,352 $ 21,856,076
- -------------------------------------------------------------------------------
Year Ended 11/30/97
----------------------------------------------------
Small-Cap Series Large-Cap Series
-------------------------- ------------------------
Class A Shares Amount Shares Amount
- ----------------------------------------------------- ------------------------
Sales of shares 12,367,107 $193,725,849 1,647,477 $ 30,647,212
- ----------------------------------------------------- ------------------------
Shares issued to share-
holders in reinvestment
of realized gain from
investment transactions -- -- 64,527 1,054,314
- ----------------------------------------------------- ------------------------
Total 12,367,107 193,725,849 1,712,004 31,701,526
- ----------------------------------------------------- ------------------------
Shares reacquired (862,855) (13,900,051) (226,484) (4,259,360)
- ----------------------------------------------------- ------------------------
Increase in shares 11,504,252 $179,825,798 1,485,520 $ 27,442,166
- -------------------------------------------------------------------------------
Six Months Ended 5/31/98
----------------------------------------------------
Small-Cap Series Large-Cap Series
-------------------------- ------------------------
Class B Shares Amount Shares Amount
- ----------------------------------------------------- ------------------------
Sales of shares 4,419,485 $ 74,575,225 376,724 $ 7,814,802
- ----------------------------------------------------- ------------------------
Shares issued to share-
holders in reinvestment
of realized gain from
investment transactions 171,715 2,735,421 32,991 633,431
- ----------------------------------------------------- ------------------------
Total 4,591,200 77,310,646 409,715 8,448,233
- ----------------------------------------------------- ------------------------
Shares reacquired (574,959) (9,802,540) (107,993) (2,258,455)
- ----------------------------------------------------- ------------------------
Increase in shares 4,016,241 $ 67,508,106 301,722 $ 6,189,778
- -------------------------------------------------------------------------------
Year Ended 11/30/97
----------------------------------------------------
Small-Cap Series Large-Cap Series
-------------------------- ------------------------
Class B Shares Amount Shares Amount
- ----------------------------------------------------- ------------------------
Sales of shares 11,224,852 $176,836,027 637,050 $ 11,698,773
- ----------------------------------------------------- ------------------------
Shares issued to share-
holders in reinvestment
of realized gain from
investment transactions -- -- 21,691 350,304
- ----------------------------------------------------- ------------------------
Total 11,224,852 176,836,027 658,741 12,049,077
- ----------------------------------------------------- ------------------------
Shares reacquired (149,680) (2,390,178) (66,101) (1,220,331)
- ----------------------------------------------------- ------------------------
Increase in shares 11,075,172 $174,445,849 592,640 $ 10,828,746
- -------------------------------------------------------------------------------
Six Months Ended 5/31/98
----------------------------------------------------
Small-Cap Series Large-Cap Series
-------------------------- ------------------------
Class C Shares Amount Shares Amount
- ----------------------------------------------------- ------------------------
Sales of shares 2,444,507 $ 41,331,967 140,495 $ 2,943,219
- ----------------------------------------------------- ------------------------
Shares issued to share-
holders in reinvestment
of realized gain from
investment transactions 48,136 766,807 3,059 58,812
- ----------------------------------------------------- ------------------------
Total 2,492,643 42,098,774 143,554 3,002,031
- ----------------------------------------------------- ------------------------
Shares reacquired (265,570) (4,526,952) (3,747) (78,689)
- ----------------------------------------------------- ------------------------
Increase in shares 2,227,073 $ 37,571,822 139,807 $ 2,923,342
- -------------------------------------------------------------------------------
4/1/97
(Commencement of
Offering Class C Shares) to 11/30/97
----------------------------------------------------
Small-Cap Series Large-Cap Series
-------------------------- ------------------------
Class C Shares Amount Shares Amount
- ----------------------------------------------------- ------------------------
Sales of shares 3,183,837 $ 52,458,907 91,007 $ 1,785,418
- ----------------------------------------------------- ------------------------
Shares reacquired (74,685) (1,239,045) (10,568) (207,738)
- ----------------------------------------------------- ------------------------
Increase in shares 3,109,152 $ 51,219,862 80,439 $ 1,577,680
- -------------------------------------------------------------------------------
12/30/97
(Commencement of
Offering Class Y Shares) to
5/31/98
---------------------------
Small-Cap Series
---------------------------
Class Y Shares Amount
- -------------------------------------------------------------------------------
Sales of shares 878,365 $15,808,154
- -------------------------------------------------------------------------------
Increase in shares 878,365 $15,808,154
- -------------------------------------------------------------------------------
4. Distributions
Dividends from net investment income are declared annually for the Small-Cap
Series and semi-annually for the Large-Cap Series. Net realized gain from
investment transactions, if any, is distributed to shareholders annually. At May
31, 1998, accumulated net realized gain for each Series was as follows:
- --------------------------------------------------------------------------------
Small-Cap Series $10,827,010
Large-Cap Series $ 2,912,838
- --------------------------------------------------------------------------------
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.
Dividends from net investment income declared on June 17, 1998 were as follows:
Rate Aggregate
Dividends Per Share Amount
- --------------------------------------------------------------------------------
Large-Cap Series - Class A $.06 $217,421
- --------------------------------------------------------------------------------
5. Purchases and Sales of Securities
Purchases and sales of investments for the year ended May 31, 1998 were as
follows:
Series Purchases Sales
- --------------------------------------------------------------------------------
Small-Cap $380,544,986 $138,046,596
Large-Cap $ 59,197,624 $ 40,122,750
- --------------------------------------------------------------------------------
As of May 31, 1998, net unrealized appreciation, unrealized appreciation and
unrealized depreciation of investments based on cost for federal income tax
purposes were as follows:
Net
Unrealized Unrealized Unrealized
Series Appreciation Appreciation (Depreciation)
- --------------------------------------------------------------------------------
Small-Cap $39,316,298 $62,098,764 $(22,782,466)
Large-Cap $14,071,264 $15,120,220 $ (1,048,956)
- --------------------------------------------------------------------------------
The cost of investments for federal income tax purposes is substantially the
same as that used for financial reporting purposes.
At May 31, 1998, the Large-Cap Series had outstanding covered written call
option contracts as follows:
Contract
Underlying Expiration Premium
Investments Shares Date Received Value Appreciation
- --------------------------------------------------------------------------------
Air Products &
Chemical, Inc. 8,000 6/20/98 $12,952 $7,500 $5,452
- --------------------------------------------------------------------------------
<PAGE>
Notes to Financial Statements
Transactions in call options written during the six months ended May 31, 1998
were as follows:
Number Premiums
Series of Contracts Received
- --------------------------------------------------------------------------------
Options written 305 $45,570
- --------------------------------------------------------------------------------
Options expired 225 $32,618
- --------------------------------------------------------------------------------
Options outstanding at May 31, 1998 80 $12,952
- --------------------------------------------------------------------------------
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.
Copyright(C) 1998 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 each
Series' investment objective and policies, sales charges and other matters.
There is no guarantee that the forecasts contained in this publication will come
to pass.
All rights reserved. Printed in the U.S.A.
Our Management
Board of Directors
Robert S. Dow
E. Thayer Bigelow*+
Stewart S. Dixon*
John C. Jansing*
C. Alan MacDonald*+
Hansel B. Millican, Jr.*
Thomas J. Neff*+
E.Wayne Nordberg
* Outside Director
+ Audit Committee
Investment Manager and
Underwriter
Lord, Abbett & Co. and
Lord Abbett Distributor LLC
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
212-848-1800
Custodian
The Bank of New York
New York, NY
Transfer Agent
United Missouri Bank of
Kansas City, N.A.
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419100
Kansas City, MO 64141
800-821-5129
Auditors
Deloitte & Touche LLP
New York, NY
Counsel
Debevoise & Plimpton
New York, NY
Numbers to Keep Handy
For Literature: 800-874-3733
For Account Information: 800-821-5129
For Fund Information: 800-426-1130
All rights reserved. Printed in the U.S.A.
[LOGO](R) LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
LORD ABBETT DISTRIBUTOR LLC LARF-2-598
- ------------------------------------------------------------
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203 (1/98)
