Lord Abbett Research
Fund
o Small-Cap Series
o Large-Cap Series
1997 ANNUAL REPORT
[GRAPHIC: SEXTANT]
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: MAP AND COMPASS]
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 since
Large Company Stocks its inception. The Large-Cap Series has produced
long-term returns well 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 11/30/97
[THE FOLLOWING TABLE WAS DEPICTED AS A BAR GRAPH IN THE PRINTED MATERIAL]
Life of
1 year Series(1)
------ ---------
The Small-Cap Series 37.9% 33.6%
Morningstar Average of
Small Company Funds 21.7% 21.3%
Morningstar Average of
Small Value Funds 29.4% 25.3%
Unmanaged Russell 2000 Index 23.4% 19.2%
Large-Cap Series Performance
Average Annual Total Returns as of 11/30/97
[THE FOLLOWING TABLE WAS DEPICTED AS A BAR GRAPH IN THE PRINTED MATERIAL]
3 years 5 years
------- -------
The Large-Cap Series 26.2% 20.7%
Morningstar Average of
Large Value Funds 25.8% 17.4%
Morningstar Average of
Growth & Income Funds 26.6% 17.5%
Performance data shown is for Class A shares at
net asset value and assumes the reinvestment of
all distributions.
- --------------------------------------------------------------------------------
Average Annual Total Returns Average annual compound returns for periods ended
12/31/97 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 +28.80%
Life of Series +29.00%
Large-Cap Series(3)
-------------------
1 year +16.30%
5 years +18.85%
Life of Series +18.64%
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 12/13/95-11/30/97 for the Small-Cap Series;
12/31/95-11/30/97 for Morningstar averages and the
unmanaged Russell 2000 Index.
(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 Fiscal Year Ended November 30, 1997
[PHOTO: ROBERT S. DOW]
/s/ Robert S. Dow
ROBERT S. DOW
CHAIRMAN
DECEMBER 18, 1997
"...we will continue to search for investments which represent value and provide
opportunities for price appreciation with less-than-market risk."
Lord Abbett Research Fund completed its fiscal year on November 30, 1997. Below
is an overview of class-specific data as of the end of the year.
Small-Cap Series Large-Cap Series
--------------------------- ---------------------------
Year 8 Months Year 8 Months
Ended Ended Ended Ended
11/30/97 11/30/97* 11/30/97 11/30/97*
--------------------------- ---------------------------
Class A Class B Class C Class A Class B Class C
--------------------------- ---------------------------
Net asset value $16.56 $16.44 $16.44 $20.08 $20.00 $20.01
Dividends $ -- $ -- $ -- $ 0.12 $ 0.02 $ --
Capital gains $ -- $ -- $ -- $ 0.95 $ 0.95 $ --
Total return+ +37.9% +37.0% +28.3%++ +19.9% +18.9% +18.4%++
Against a backdrop of strong economic growth, low inflation and strong corporate
profits over the past year, U.S. stocks, in general, continued to show returns
above historical averages. In 1998, we expect economic growth to slow somewhat,
to about 211/42%, and inflation to remain in check at approximately 211/42%.
Though most investors in the market have enjoyed positive returns in recent
years, we recognize the risk in an extended bull market. However, relying
heavily on individual stock selection, we will continue to search for
investments which represent value and provide opportunities for price
appreciation with less-than-market risk.
About the Small-Cap Series
The exceptional performance of the Small-Cap Series over the past year can be
attributed to select industrial and technology stocks in the portfolio. During
the year, valuations of small-cap stocks were favorable, providing many
opportunities in the marketplace to purchase companies with performance
characteristics that drive toward consistent, strong performance with low
volatility. We look for companies with long operating histories, strong market
positions within their industry and financial strength. These characteristics
help to reduce business risk and protect companies from both economic and
competitive pressures. We continue to seek issues with solid fundamental
prospects in the small-cap universe to add value to the Series.
About the Large-Cap Series
The Large-Cap Series produced strong returns in 1997. Going forward, we are
mindful that stock market valuations in general remain near historical highs.
Our industry analysts will continue to diligently research securities to find
those that are expected to increase in value over time, while offering more
attractive valuations than the stock market as a whole. Over the year, we
increased exposure to utilities (such as electric power companies) and companies
that produce consumer nondurables (products consumers use regularly or must
replace frequently, such as food). We also began to slightly decrease our
holdings in technology and consumer cyclicals (companies whose profits are
affected by cyclical changes in economic activity). These shifts in the
portfolio proved to be helpful to the performance of the Series.
Thank you for your continued confidence in Lord Abbett Research Fund. We look
forward to maintaining our relationship in the coming years and helping you
achieve your financial goals.
* Class C shares of the Small-Cap Series and Large-Cap Series were first
offered on April 1, 1997.
+ 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 $17,629 as of November
30, 1997, 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) $17,629
Morningstar Average of Small
Value Funds(2) $15,415
Russell 2000 Index(2)(3) $14,015
(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.
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 $27,169 as of November 30, 1997, an average annual gain of 20%.
[THE FOLLOWING TABLE WAS DEPICTED AS A BAR GRAPH IN THE PRINTED MATERIAL]
(Thousands)
Lord Abbett Research Fund --
Large-Cap Series(1) $27,169
Morningstar Average of Large
Value Funds(2) $23,532
Morningstar Average of
Growth & Income Funds(3) $23,582
(1) Series performance is at net asset value for Class A shares and assumes
the reinvestment of all distributions.
(2) Source: Morningstar, Inc.
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
3/31/98, 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 November 30, 1997
<TABLE>
<CAPTION>
Investments Shares Market Value
===================================================================================================================================
<C> <S> <C> <C>
Investments in Common Stocks 84.97%
===================================================================================================================================
Aerospace 7.88% AAR Corp.-Major supplier of products and services for the worldwide
aviation industry 120,000 $ 4,627,500
*Aviation Sales Company-Distributes aircraft spare parts 110,000 3,925,625
*Doncasters plc ADR-Supplier of tolerance-critical aircraft engine
components 65,000 1,690,000
*Moog Inc. Class A-Manufacturer of electrohydraulic control systems 210,000 7,638,750
Precision Castparts Corp.-Manufactures engine castings and other
components for the aerospace industry 130,000 7,718,750
*SPS Technologies Inc.-Producer of precision fasteners 200,000 8,750,000
Total 34,350,625
- ------------------------------------------------------------------------------------------------------------------------===========
Agricultural Products .32% *Midwest Grain Products Inc.-Manufacturer of wheat gluten, starch and
alcohol 100,000 1,400,000
- ------------------------------------------------------------------------------------------------------------------------===========
Apparel 7.86% Garan Inc.-Supplier of knitted and woven apparel 220,000 5,445,000
*North Face Inc.-Manufacturer of camping and outerwear 135,000 2,936,250
Oshkosh B'Gosh Inc. Class A-Manufacturer of children's clothing 37,700 1,225,250
Stride Rite Corp.-Producer and retail marketer of children's shoes 1,615,000 19,279,063
Phillips Van Heusen Corp.-Branded apparel manufacturer 390,000 5,362,500
Total 34,248,063
- ------------------------------------------------------------------------------------------------------------------------===========
Auto Parts 2.11% Clarcor Inc.-Manufactures oil and air filters 31,800 942,075
*Control Devices Inc.-Manufacturer of circuit breakers and electronic
sensors for the auto industry 163,000 2,852,500
MascoTech Inc.-Forger of power train and chassis parts 230,000 3,981,875
Walbro Corp.-Manufacturer of fuel system components for automobiles and
small engines 96,100 1,399,455
Total 9,175,905
- ------------------------------------------------------------------------------------------------------------------------===========
Banks: Regional .10% Citizens Banking Corp. Mich.-Michigan and Illinois savings and loan 15,000 438,750
- ------------------------------------------------------------------------------------------------------------------------===========
Brokers .93% Piper Jaffray Inc.-Brokerage, investment banking and money management firm 145,600 4,031,300
- ------------------------------------------------------------------------------------------------------------------------===========
Building Materials .83% CalMat Co.-Producer of aggregates and asphalt 60,000 1,571,250
*Cameron Ashley Building Products, Inc.-Distributor of building materials 130,000 2,039,375
Total 3,610,625
- ------------------------------------------------------------------------------------------------------------------------===========
Coal 1.15% Penn Virginia Corp.-Natural resources company engaged in coal mining,
timber and oil/gas exploration and development 185,000 5,006,563
- ------------------------------------------------------------------------------------------------------------------------===========
Communications Equipment 2.60% Telxon Corp.-Supplier of hand-held wireless links to computer networks 465,000 11,334,375
- ------------------------------------------------------------------------------------------------------------------------===========
Computer: Software 2.15% *Evans & Sutherland Computer Corp.-Developer of computer graphics software
systems 105,000 3,255,000
*Structural Dynamics Research Class A-Supplier of mechanical design
automation software 100,000 1,668,750
*Zebra Technologies Corp. Class A-Provider of bar code labeling systems 140,000 4,462,500
Total 9,386,250
-----------------------------------------------------------------------------------------===========
</TABLE>
3
<PAGE>
Statement of Net Assets
SMALL-CAP SERIES November 30, 1997
<TABLE>
<CAPTION>
Investments Shares Market Value
====================================================================================================================================
<C> <S> <C> <C>
Containers .85% *BWAY Corp.-Manufacturer of steel containers such as cans for paint 135,100 $ 2,913,094
*Ivex Packaging Corp.-Designer and manufacturer of flexible packaging
products 40,000 800,000
Total 3,713,094
- ------------------------------------------------------------------------------------------------------------------------===========
Distribution 2.01% Applied Industrial Tech Inc.-Distributor of bearings and industrial
products 170,500 4,816,625
Hughes Supply Inc.-Distributes building materials and electrical plumbing
supplies 120,000 3,930,000
Total 8,746,625
- ------------------------------------------------------------------------------------------------------------------------===========
Electrical Equipment 4.29% American Precision Industries Inc.-Manufactures motion control and
electronic products for aerospace, industry and the military 225,000 4,921,875
Kollmorgen Corp.-Manufacturer of motors and controls 391,500 6,851,250
*Mettler-Toledo Intl.-Manufacturer of scales and measuring devices 200,000 3,575,000
Pacific Scientific Co.-Manufactures motion control and safety products 150,000 2,381,250
Scientific Technologies Inc.-Manufactures industrial safety and
monitoring equipment 30,000 318,750
Woodhead Industries Inc.-Manufacturer of specialty electrical products
for industry 32,400 627,750
Total 18,675,875
- ------------------------------------------------------------------------------------------------------------------------===========
Electronics: Components 4.80% BMC Industries Inc.-Manufactures precision-etched products for TVs and
monitors 260,000 4,826,250
General Cable Corp.-Manufacturer of copper wire and cable 165,000 5,630,625
Methode Electronics Inc. Class A-Producer of electronic components,
connectors and devices 324,800 5,278,000
Penn Engineering & Mfg. Corp.-Manufacturer of fasteners for the
electronics industry 55,000 1,443,750
*Richey Electronics Inc.-Distributor of components to manufacturers of
electronic equipment 300,000 2,625,000
*SpecTran Corp.-Manufacturer of optical glass fibers primarily used in
data and voice communications 100,000 1,118,750
Total 20,922,375
- ------------------------------------------------------------------------------------------------------------------------===========
Electronics: Equipment 2.06% *Perceptron Inc.-Supplier of quality control and guidance systems for the
auto industry 125,000 2,765,625
*Robotic Vision Systems-Supplies machine vision systems 150,000 2,071,875
TSI Inc./Minn-Manufactures instruments to measure air flow and particles 50,900 509,000
Zero Corp.-Manufacturer of electronics enclosures 130,000 3,631,875
Total 8,978,375
- ------------------------------------------------------------------------------------------------------------------------===========
Engineering/Construction *CDI Corp.-Provider of engineering and technical personnel staffing 120,000 4,965,000
2.82% *Michael Baker Corp.-Engineering, operations and maintenance and
construction firm 450,000 4,246,875
*Willbros Group Inc.-Engineering and construction firm serving the oil and
gas industry 175,000 3,062,500
Total 12,274,375
- ------------------------------------------------------------------------------------------------------------------------===========
Fluid Separation .81% *CUNO Inc.-Manufacturer of fluid filtration products for healthcare,
potable water and industrial fluid processing 210,000 3,543,750
- ------------------------------------------------------------------------------------------------------------------------===========
Food 2.56% Dreyer's Grand Ice Cream-Ice cream manufacturer and distributor 292,500 7,166,250
Michael Foods Inc.-Processor and distributor of eggs, potato and dairy
products 125,000 2,757,813
Sanderson Farms Inc.-Engaged in production, processing, marketing and
distribution of fresh and frozen chicken and other prepared food 100,000 1,212,500
Total 11,136,563
- ------------------------------------------------------------------------------------------------------------------------===========
Furniture and Appliances .31% Fedders Corp. Class A-Manufacturer of air conditioners 100,000 568,750
*Neutral Posture Ergonomics Inc.-Producer of office chairs and specialty
ergonomic products 128,000 784,000
Total 1,352,750
- ------------------------------------------------------------------------------------------------------------------------===========
Health Care Products 5.41% Arrow International, Inc.-Supplies disposable catheters and related
clinical products 410,000 14,350,000
*Lunar Corp.-Supplies equipment to diagnose osteoporosis and bone diseases 75,000 1,696,875
*Marquette Medical Systems Class A-Supplier of medical electronic
equipment and systems 335,000 7,537,500
Total 23,584,375
- ------------------------------------------------------------------------------------------------------------------------===========
Health Care Services 2.34% *Sierra Health Services-Provider of managed-care health plans in Nevada,
Colorado and Texas 280,000 10,185,000
- ------------------------------------------------------------------------------------------------------------------------===========
Home Building .93% *Crossmann Communities Inc.-Single-family home builder in the midwest 26,000 591,500
Kaufman & Broad Home Corp.-Single-family home builder in California and
Texas 160,000 3,470,000
Total 4,061,500
-----------------------------------------------------------------------------------------===========
</TABLE>
4
<PAGE>
Statement of Net Assets
SMALL-CAP SERIES November 30, 1997
<TABLE>
<CAPTION>
Investments Shares Market Value
===================================================================================================================================
<C> <S> <C> <C>
Household Products .17% *Acorn Products, Inc.-Manufacturer of gardening and work tools 65,000 $ 755,625
- ------------------------------------------------------------------------------------------------------------------------===========
Insurance: Property and Chartwell Re Corp.-Property casualty insurance and re-insurance company 185,000 6,243,750
Casualty 1.44% *Philadelphia Cons Holding Corp.-Property casualty insurance company 1,000 16,375
Total 6,260,125
- ------------------------------------------------------------------------------------------------------------------------===========
Machine Tools 3.05% Cincinnati Milacron Inc.-Manufacturer of plastics machinery, industrial
products and machine tools 450,000 13,303,125
- ------------------------------------------------------------------------------------------------------------------------===========
Machinery: Diversified 1.29% Applied Power Inc. Class A-Manufacturer of hydraulic industrial and
construction equipment 10,000 610,000
Regal Beloit Corp.-Manufacturer of cutting tools, power transmissions and
motors 120,000 3,262,500
Roper Industries Inc.-Manufacturer of fluid handling and control products 60,000 1,728,750
Total 5,601,250
- ------------------------------------------------------------------------------------------------------------------------===========
Manufacturing: Diversified Brady (WH) Co. Class A-Manufacturer of industrial identification products
1.29% and coated materials 95,000 2,921,250
Standex International Corp.-Manufactures industrial, consumer and food
service products 41,900 1,469,119
Varlen Corp.-Manufactures truck trailer and precision transportation
products 45,000 1,231,875
Total 5,622,244
- ------------------------------------------------------------------------------------------------------------------------===========
Metals: Miscellaneous .78% Autocam Corp.-Manufactures close tolerance components for the automotive
industry 5,000 64,375
*Wolverine Tube Inc.-Manufacturer of copper and copper-alloy tube 105,000 3,333,750
Total 3,398,125
- ------------------------------------------------------------------------------------------------------------------------===========
Miscellaneous 1.63% *Esterline Tech Corp.-Manufacturer of automation equipment for printed
circuit board production, and aerospace and defense products 65,000 2,299,375
*Figgie Intl. Inc. Class A-Manufacturer of safety breathing equipment 350,000 4,812,500
Total 7,111,875
- ------------------------------------------------------------------------------------------------------------------------===========
Natural Gas Transmission 1.66% KN Energy Inc.-Natural gas pipeline 155,000 7,246,250
- ------------------------------------------------------------------------------------------------------------------------===========
Oil and Gas Drilling .91% *Domain Energy-Oil and gas company involved in the exploration, development
and production of domestic oil and natural gas properties 125,000 2,078,125
*Meridian Resource Corp.-Independent oil and gas company involved in the
exploration, development and production of oil and gas properties in the
U.S. 175,000 1,870,313
Total 3,948,438
- ------------------------------------------------------------------------------------------------------------------------============
Paper and Forest Products Blount International Inc. Class A-Manufacturer of timber-cutting equipment
2.97% and small arms accessories 150,000 7,584,375
Wausau Paper Mills Co.-Manufacturer of writing, printing and specialty
papers 250,000 5,359,375
Total 12,943,750
- ------------------------------------------------------------------------------------------------------------------------===========
Photographic 1.20% *Bell & Howell Co.-Provider of services and systems for information access
and dissemination 220,000 5,225,000
- ------------------------------------------------------------------------------------------------------------------------===========
Printing and Publishing 2.05% *Golden Books Family Entertainment Inc.-Publisher of children's books 17,000 159,375
*Scholastic Corp.-A leading publisher of children's books and educational
materials 230,000 8,783,125
Total 8,942,500
- ------------------------------------------------------------------------------------------------------------------------===========
Printing: Specialty 1.15% *Gibson Greetings Inc.-Manufacturer of greeting cards and party goods 215,000 5,025,625
- ------------------------------------------------------------------------------------------------------------------------===========
Retail 1.32% Casey's General Stores-Chain of convenience-style general stores/gas
stations 75,000 1,767,187
Ruddick Corp.-Manufactures sewing thread; supermarket chain in the
southeast 120,000 2,445,000
*The Bombay Company Inc.-Marketer of traditional styled furniture and
accessories 300,000 1,556,250
Total 5,768,437
- ------------------------------------------------------------------------------------------------------------------------===========
Specialty Materials 3.41% *ACX Technologies Inc.-Manufactures ceramics components and packaging 154,000 4,129,125
*Rogers Corp.-Manufacturer of specialty polymers and moldable composites 262,900 10,729,605
Total 14,858,730
- ------------------------------------------------------------------------------------------------------------------------===========
Steel 2.99% Oregon Steel Mills Inc.-Manufacturer of steel plate, pipe and rail 437,200 8,580,050
Quanex Corp.-Manufacturer of specialty steel and aluminum products 150,000 4,462,500
Total 13,042,550
- ------------------------------------------------------------------------------------------------------------------------===========
Textiles: Apparel 1.32% *Dan River Inc.-Manufactures and markets fabrics for home fashions and
apparel 300,000 4,500,000
*Galey & Lord Inc.-Manufacturer of high-quality woven and blended cotton
fabrics 70,100 1,261,800
Total 5,761,800
-----------------------------------------------------------------------------------------===========
</TABLE>
5
<PAGE>
Statement of Net Assets
SMALL-CAP SERIES November 30, 1997
<TABLE>
<CAPTION>
Shares or
Investments Principal Amount Market Value
===================================================================================================================================
<C> <S> <C> <C>
Tire and Rubber Goods .84% Standard Products Co.-Manufactures plastic and rubber products for the
utomotive and appliance industries 145,000 $ 3,643,125
- -----------------------------------------------------------------------------------------------------------------------============
Truckers .38% *Smithway Motor Xpress Corp. Class A-Truckload carrier transporting
diversified manufactured and processed products 120,000 1,657,500
----------------------------------------------------------------------------------------============
Total Investments in Common Stocks (Cost $355,210,426) 370,273,187
===================================================================================================================================
Other Assets, Less Liabilities 15.03%
===================================================================================================================================
Short-Term Investments, American Express Credit Corp. 5.65% due 12/2/1997 15,000M 15,000,000
at Cost Ford Motor Credit Co. 5.41% due 12/1/1997 20,000M 20,000,000
General Electric Capital Corp. 5.58% due 12/4/1997 1,000M 1,000,000
Morgan Stanley & Co. 5.65% due 12/1/1997 5,000M 4,996,076
Prudential Funding Co. 5.65% due 12/2/1997 19,000M 19,000,000
Total 59,996,076
- -----------------------------------------------------------------------------------------------------------------------============
Cash 2,198,188
- -----------------------------------------------------------------------------------------------------------------------============
Receivable for: Capital stock sold 7,620,738
Securities sold 2,727,477
Dividends 261,633
Interest 38,923
Other 161,886
Total Other Assets 73,004,921
- -----------------------------------------------------------------------------------------------------------------------============
Liabilities
Payable for: Securities purchased 7,416,895
Capital stock reacquired 85,370
Total Liabilities 7,502,265
- -----------------------------------------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities 65,502,656
===================================================================================================================================
Net Assets 100.00% $435,775,843
===================================================================================================================================
Class A Shares-Net asset value ($201,862,676 / 12,193,290 shares
outstanding) $16.56
Class B Shares-Net asset value ($182,788,098 / 11,116,615 shares
outstanding) $16.44
Class C Shares-Net asset value ($51,125,069 / 3,109,152 shares
outstanding) $16.44
</TABLE>
*Non-income producing.
The descriptions of the companies shown in the portfolio, which were obtained
from published reports and other sources believed to be reliable, are
supplemental and unaudited.
See Notes to Financial Statements.
Statement of Net Assets
LARGE-CAP SERIES November 30, 1997
<TABLE>
<CAPTION>
Investments Shares Market Value
===================================================================================================================================
Investments in Common Stocks 99.40%
===================================================================================================================================
<C> <S> <C> <C>
Agricultural Equipment .89% Case Corporation-Manufacturer of farm and construction equipment 10,000 $ 620,000
- -----------------------------------------------------------------------------------------------------------------------============
Agricultural Products 2.62% Archer-Daniels-Midland Co.-Leading processor and seller of agricultural
commodities 53,025 1,133,408
Pioneer Hi-Bred International, Inc.-Leading U.S. supplier of hybrid seed 6,800 694,450
Total 1,827,858
- -----------------------------------------------------------------------------------------------------------------------============
Apparel 1.94% *Fruit of The Loom Class A-Producer of non-fashion apparel and
undergarments 22,700 529,194
VF Corp.-Leading producer of blue jeans and other apparel 17,900 826,755
Total 1,355,949
- -----------------------------------------------------------------------------------------------------------------------============
Auto Parts: After Market 2.19% Genuine Parts Company-National distributor of automotive replacement parts 20,925 669,600
Snap-on, Inc.-Manufacturer and distributor of hand tools and diagnostic
equipment for the automotive industry 19,575 860,076
Total 1,529,676
----------------------------------------------------------------------------------------============
</TABLE>
6
<PAGE>
Statement of Net Assets
LARGE-CAP SERIES November 30, 1997
<TABLE>
<CAPTION>
Investments Shares Market Value
===================================================================================================================================
<C> <S> <C> <C>
Banks: Money Center 4.71% BankAmerica Corp.-Major money-center bank 14,500 $ 1,058,500
Chase Manhattan Corp.-Major money-center bank holding company 6,200 673,475
Citicorp-Major money-center bank 6,700 803,580
First Chicago NBD-Major midwest bank 9,600 751,200
Total 3,286,755
- ------------------------------------------------------------------------------------------------------------------------===========
Banks: Regional 7.34% BankBoston, N.A.-Leading New England regional bank 8,150 726,369
Comerica Inc.-Midwestern regional bank holding company 11,100 945,580
First Union Corp.-Major east coast bank 20,200 984,750
Mellon Bank Corp.-Commercial bank located in Pittsburgh, PA 16,300 924,006
Washington Mutual-A leading savings and loan company 22,300 1,541,487
Total 5,122,192
- ------------------------------------------------------------------------------------------------------------------------===========
Brokers 1.10% Morgan Stanley, Dean Witter, Discover & Co.-Major brokerage and credit
card company 14,200 771,237
- ------------------------------------------------------------------------------------------------------------------------===========
Chemicals 2.84% Air Products & Chemicals Inc.-Industrial gas producer 5,000 383,438
Morton International Inc.-Producer of specialty chemicals, salt and
airbags 25,800 878,813
Rohm & Haas Co.-Manufacturer of specialty chemicals and plastics 7,850 721,709
Total 1,983,960
- ------------------------------------------------------------------------------------------------------------------------===========
Communications Equipment Corning Inc.-Major producer of fiber optics and provider of medical
2.37% testing services 20,500 869,969
Motorola Inc.-Leader in wireless communication equipment 12,500 785,937
Total 1,655,906
- ------------------------------------------------------------------------------------------------------------------------===========
Computer: Hardware 4.88% *Digital Equipment Corp.-Manufacturer of data processing equipment 14,800 728,900
Hewlett-Packard Co.-Leading manufacturer of computer products including
printers, servers, workstations and PCs 9,825 599,939
International Business Machines Corp.-Largest computer manufacturer 15,300 1,676,306
Micron Technology-Manufacturer of memory chips 16,000 398,000
Total 3,403,145
- ------------------------------------------------------------------------------------------------------------------------===========
Computer: Network .87% *Cisco Systems Inc.-Manufacturer of computer network products 7,000 603,750
- ------------------------------------------------------------------------------------------------------------------------===========
Computer: Peripherals 1.87% EMC Corp.-A supplier of high-performance storage devices and related
services 27,200 824,500
*Seagate Technology Inc.-Manufacturer of computer disk drive equipment 21,200 480,975
Total 1,305,475
- ------------------------------------------------------------------------------------------------------------------------===========
Computer: Software 1.44% *Sun Microsystems Inc.-Supplier of network computer products including
workstations, servers, software, microprocessors and a full range of
services and support 28,000 1,008,000
- ------------------------------------------------------------------------------------------------------------------------===========
Containers 2.18% Crown Cork & Seal Inc.-Major producer of a wide variety of three-piece
and two steel and aluminum containers for the food industry 16,300 795,644
Sonoco Products Co.-A leading U.S. producer of specialty paper and
plastic packaging components 22,200 728,438
Total 1,524,082
- ------------------------------------------------------------------------------------------------------------------------===========
Cosmetics 1.17% International Flavor & Fragrance-Supplier of flavors and fragrances 17,000 819,188
- ------------------------------------------------------------------------------------------------------------------------===========
Drugs/Health Care Products American Home Products Corp.-Producer of drugs, food housewares and
4.32% packaged medicine and medical products 17,400 1,215,825
Bristol-Myers Squibb Company-Major worldwide pharmaceutical concern with
other interests in infant nutrition, non-prescription medications, medical
devices and toiletries 10,100 945,613
SmithKline Beecham plc Class A ADR-United Kingdom-based health care
company providing prescription and over-the-counter drugs and clinical
laboratory services 17,200 853,550
Total 3,014,988
- ------------------------------------------------------------------------------------------------------------------------===========
Electric Power 8.11% Baltimore Gas & Electric Co.-Regional electric utility company 45,000 1,380,938
Carolina Power & Light Co.-Electric utility company serving North and
South Carolina 37,500 1,401,562
CINergy Corp.-Supplier of electricity and natural gas in southwestern
Ohio and adjacent Kentucky and Indiana territories 39,800 1,417,875
Firstenergy Corp.-Electric utility covering 2.9 million people; includes
several of the most highly industrialized cities and agriculturally
productive regions in Ohio and Pennsylvania 54,000 1,458,000
Total 5,658,375
-----------------------------------------------------------------------------------------===========
</TABLE>
7
<PAGE>
Statement of Net Assets
LARGE-CAP SERIES November 30, 1997
<TABLE>
<CAPTION>
Investments Shares Market Value
====================================================================================================================================
<C> <S> <C> <C>
Electrical Equipment 3.44% Emerson Electric Co.-Diversified manufacturer of consumer and industrial
electrical components 25,500 $ 1,402,500
CBS-Largest pure-play radio and broadcasting company 33,400 1,002,000
Total 2,404,500
- ------------------------------------------------------------------------------------------------------------------------===========
Electronics: Semiconductors Intel Corp.-Leading producer of semiconductor memory circuits 13,200 1,024,650
1.47%
- ------------------------------------------------------------------------------------------------------------------------===========
Food 5.79% ConAgra Inc.-Major producer of agricultural and consumer products 26,700 959,531
CPC International Inc.-Producer of diversified packaged foods 9,500 982,062
Heinz H.J. Co.-International packaged foods producer 23,400 1,171,463
Sara Lee Corp.-A diversified maker of branded food products, apparel
and household consumer products 107,500 925,312
Total 4,038,368
- ------------------------------------------------------------------------------------------------------------------------===========
Health Care Products 2.19% Baxter International Inc.-World's leading distributor and major
manufacturer of hospital supplies and related medical equipment 16,800 850,500
*St. Jude Medical, Inc.-A leading manufacturer of artificial heart valves 23,000 681,375
Total 1,531,875
- ------------------------------------------------------------------------------------------------------------------------===========
Health Care Services 3.74% Aetna Inc.-Major multi-line insurer 8,650 651,994
*Humana Inc.-Major U.S. provider of managed health plans 48,500 1,076,094
United Healthcare Corp.-Offers health care coverage and related services
in all 50 states 17,000 885,063
Total 2,613,151
- ------------------------------------------------------------------------------------------------------------------------===========
Household Products 2.25% Fort James Corp.-Producer of paper-based consumer products, packaging and
communication papers 20,900 817,713
Kimberly Clark Corp.-Major producer of consumer and personal care products 14,392 749,284
Total 1,566,997
- ------------------------------------------------------------------------------------------------------------------------===========
Housewares 1.31% Fortune Brands Inc.-Consumer products conglomerate 25,300 915,544
- ------------------------------------------------------------------------------------------------------------------------===========
Insurance: Life 2.43% American General Corporation-A leading provider of financial services,
including life/health insurance, annuities, consumer credit and mortgage
financing 19,200 1,034,400
Jefferson-Pilot Corp.-Life insurance holding company 8,700 663,919
Total 1,698,319
- ------------------------------------------------------------------------------------------------------------------------===========
Insurance: Property and Allstate Corp.-Second largest provider of personal lines of insurance
Casualty 4.80% in the U.S. 8,100 695,588
Chubb Corp.-Broad-based property and casualty insurance organization 16,550 1,174,016
CIGNA Corp.-Multi-line insurance and medical services 3,850 643,913
Providian Corp.-Financial services company 19,000 837,188
Total 3,350,705
- ------------------------------------------------------------------------------------------------------------------------===========
Machinery: Diversified .95% Deere & Co.-World's largest manufacturer of farm equipment 12,150 665,972
- ------------------------------------------------------------------------------------------------------------------------===========
Miscellaneous 1.35% Minnesota Mining & Manufacturing Co.-Diversified global manufacturer
of value-added industrial, consumer and medical products 9,650 940,272
- ------------------------------------------------------------------------------------------------------------------------===========
Natural Gas: Pipelines 1.00% Columbia Gas Systems Inc.-Utility holding company and natural gas proprietor 9,600 698,400
- ------------------------------------------------------------------------------------------------------------------------===========
Natural Gas: Diversified The Coastal Corporation-A diversified gas pipeline company 12,850 752,528
1.08%
- ------------------------------------------------------------------------------------------------------------------------===========
Oil: International Integrated *ENI ADR-Italian oil and gas exploration, development and production company 12,200 708,363
3.27% Mobil Corp.-Large international oil company 11,400 820,088
Total S.A. Sponsored ADR-Leading French international oil and gas company 14,300 751,644
Total 2,280,095
- ------------------------------------------------------------------------------------------------------------------------===========
Paper and Forest Products Bowater Inc.-Largest U.S. producer of newsprint 6,500 291,688
1.53% Temple-Inland, Inc.-Leading manufacturer of corrugated boxes, bleached
paperboard, pulp and building materials 13,600 776,900
Total 1,068,588
- ------------------------------------------------------------------------------------------------------------------------===========
Restaurants 1.38% *Tricon Global Restaurants-Multi-concept fast food restaurants 28,500 963,656
- ------------------------------------------------------------------------------------------------------------------------===========
Retail: Specialty 1.22% *Toys R Us Inc.-Discount toy supermarts; department stores 24,950 851,419
-----------------------------------------------------------------------------------------===========
</TABLE>
8
<PAGE>
Statement of Net Assets
LARGE-CAP SERIES November 30, 1997
<TABLE>
<CAPTION>
Shares or
Investments Principal Amount Market Value
===================================================================================================================================
<C> <S> <C> <C>
Telephone: Local 5.41% Alltel Corp.-Regional telephone holding company 36,700 $ 1,458,825
Bell Atlantic Corp.-Regional telephone company 9,050 807,713
BellSouth Corp.-Regional telephone company 14,100 771,975
SBC Communication Inc.-Mexican telephone monopoly 10,100 735,406
Total 3,773,919
- -----------------------------------------------------------------------------------------------------------------------============
Tobacco 2.29% Philip Morris Inc.-Leading tobacco company 17,900 778,650
RJR Nabisco-Diversified food and tobacco producer 22,400 816,200
Total 1,594,850
- -----------------------------------------------------------------------------------------------------------------------============
Toys 1.66% Hasbro Inc.-Major U.S. manufacturer of toys and games 39,750 1,155,234
- -----------------------------------------------------------------------------------------------------------------------============
Total Investments in Common Stocks (Cost $61,069,711) 69,379,578
===================================================================================================================================
Other Assets, Less Liabilities .60%
===================================================================================================================================
Short-Term Investments, General Electric Capital Corp. 5.55% due 12/1/1997 2,400M 2,400,000
at Cost
- -----------------------------------------------------------------------------------------------------------------------============
Cash and Receivables, Net
of Liabilities (1,983,259)
- -----------------------------------------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities 416,741
===================================================================================================================================
Net Assets 100.00% $ 69,796,319
===================================================================================================================================
Class A Shares-Net asset value ($49,047,927 / 2,442,503 shares outstanding) $20.08
Class B Shares-Net asset value ($19,138,929 / 957,104 shares outstanding) $20.00
Class C Shares-Net asset value ($1,609,463 / 80,439 shares outstanding) $20.01
</TABLE>
*Non-income producing.
The descriptions of the companies shown in the
portfolio, which were obtained from published
reports and other sources believed to be
reliable, are supplemental and unaudited.
See Notes to Financial Statements.
Statements of Operations
<TABLE>
<CAPTION>
Year Ended November 30, 1997
----------------------------
Small-Cap Large-Cap
Investment Income (Loss) Series Series
====================================================================================================================================
<C> <S> <C> <C>
Income Dividends $ 1,076,361 $ 772,090
Interest 854,030 100,207
Total income 1,930,391 872,297
----------------------------------------------------------------------------------------------------------------------
Expenses Management fee 1,075,019 334,394
12b-1 distribution plan-Class A 236,338 73,684
12b-1 distribution plan-Class B 594,944 133,177
12b-1 distribution plan-Class C 111,432 4,548
Registration fee 47,570 64,856
Shareholder servicing 76,455 67,370
Audit and tax 23,696 20,150
Reports to shareholders 28,440 26,633
Organization fee 746 601
Other 41,642 63,164
Total expenses 2,236,282 788,577
----------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (305,891) 83,720
----------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain on Investments
====================================================================================================================================
Realized gain from investment transactions
Proceeds from sales 59,685,625 13,202,120
Cost of investments sold 52,374,272 10,715,955
Net realized gain 7,311,353 2,486,165
----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation 14,506,701 4,973,080
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 21,818,054 7,459,245
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 21,512,163 $ 7,542,965
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 13, 1995(a) Year Ended
November 30, to November 30, November 30,
1997 1996 1996
-------------------------- -------------------- ------------
Small-Cap Large-Cap Small-Cap Large-Cap
Increase (Decrease) in Net Assets Series Series Series Series
=============================================================================================== ==================== ============
<C> <S> <C> <C> <C> <C>
Operations Net investment income (loss) $ (305,891) $ 83,720 $ 39,350 $ 215,880
Net realized gain from investment transactions 7,311,353 2,486,165 384,187 1,256,915
Net unrealized appreciation of investments 14,506,701 4,973,080 556,060 1,855,639
Net increase in net assets resulting from
operations 21,512,163 7,542,965 979,597 3,328,434
- ----------------------------------------------------------------------------------------------- -------------------- ------------
Undistributed net investment income included in price of share
transactions -- 281,705 29,824 87,151
- ----------------------------------------------------------------------------------------------- -------------------- ------------
Distributions to shareholders from:
Net investment income-Class A -- (157,269) (34,864) (307,886)
Net investment income-Class B -- (7,958) -- (32,704)
Net realized gain from investment transactions-Class A -- (943,694) (347,605) (428,272)
Net realized gain from investment transactions-Class B -- (360,069) -- --
Total distributions -- (1,468,990) (382,469) (768,862)
--------------------------------------------------------------------------------- -------------------- ------------
Capital share transactions:
Net proceeds from the sale of shares 423,020,783 44,131,403 7,839,815 15,705,205
Net asset value of shares issued to shareholders in
reinvestment of net investment income and realized
gain from investment transactions -- 1,404,618 382,601 730,851
Total 423,020,783 45,536,021 8,222,416 16,436,056
- ------------------------------------------------------------------------------------------------------------------------------------
Cost of shares reacquired (17,529,274) (5,687,429) (77,197) (3,039,468)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets derived from capital share
transactions 405,491,509 39,848,592 8,145,219 13,396,588
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 427,003,672 46,204,272 8,772,171 16,043,311
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
Beginning of period 8,772,171 23,592,047 -- 7,548,736
- ------------------------------------------------------------------------------------------------------------------------------------
End of period(b) $435,775,843 $69,796,319 $8,772,171 $23,592,047
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commencement of operations.
(b) Including undistributed (overdistributed) net investment
income of $(271,581) and $423,847 as of November 30, 1997 and
undistributed net investment income of $34,310 and $223,649 as
of November 30, 1996 for the Small-Cap Series and Large-Cap
Series, respectively.
See Notes to Financial Statements.
Financial Highlights
SMALL-CAP SERIES
<TABLE>
<CAPTION>
Class A Shares Class B Shares
----------------------------------------- ------------------------------------------
Year Ended December 13, 1995(a) to Year Ended November 15, 1996(b) to
November 30, November 30, November 30, November 30,
Per Share Operating Performance: 1997 1996 1997 1996
======================================================================================= ==========================================
<S> <C> <C> <C> <C>
Net asset value, beginning of period $12.01 $10.00 $12.00 $11.67
- --------------------------------------------------------------------------------------- ------------------------------------------
Income (loss) from investment operations
Net investment income (loss) .02(c) .127 (.09)(c) .001
Net realized and unrealized gain on
investments 4.53 2.658 4.53 .329
Total from investment operations 4.55 2.785 4.44 .33
----------------------------------------------------------------------------------- ------------------------------------------
Distributions
Dividends from net investment income -- (.075) -- --
Distribution from net realized gain -- (.700) -- --
----------------------------------------------------------------------------------- ------------------------------------------
Net asset value, end of period $16.56 $12.01 $16.44 $12.00
- --------------------------------------------------------------------------------------- ------------------------------------------
Total Return(d) 37.89% 28.24%(e) 37.00% 2.84%(e)
====================================================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver and
reimbursements 1.17% .01%(e) 1.86% .04%(e)
Expenses, excluding waiver and
reimbursements 1.17% 1.00%(e) 1.86% .07%(e)
Net investment income (loss) .10% 1.02%(e) (.56)% .01%(e)
================================================================================================================================
</TABLE>
Class C Shares
--------------------
April 1, 1997(b) to
November 30,
Per Share Operating Performance: 1997
=========================================================================
Net asset value, beginning of period $12.81
- -------------------------------------------------------------------------
Income (loss) from investment operations
Net investment income (loss) (.05)(c)
Net realized and unrealized gain on investments 3.68
Total from investment operations 3.63
---------------------------------------------------------------------
Distributions
Dividends from net investment income --
Distribution from net realized gain --
---------------------------------------------------------------------
Net asset value, end of period $16.44
- -------------------------------------------------------------------------
Total Return(d) 28.34%(e)
=========================================================================
Ratios to Average Net Assets:
Expenses, including waiver and reimbursements 1.25%(e)
Expenses, excluding waiver and reimbursements 1.25%(e)
Net investment income (loss) (.30)%(e)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 13, 1995(a) to
November 30, November 30,
Supplemental Data for All Classes: 1997 1996
==========================================================================================================
<S> <C> <C>
Net assets, end of period (000) $435,776 $ 8,772
Portfolio turnover rate 45.24% 110.09%
Average commissions per share paid on equity transactions $ .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. See Notes to Financial Statements.
10
<PAGE>
Financial Highlights
LARGE-CAP SERIES
<TABLE>
<CAPTION>
Class A Shares
-----------------------------------------------------------------
Year Ended November 30,
Per Share Operating Performance: 1997 1996 1995 1994 1993
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.86 $ 15.54 $ 12.79 $ 12.33 $ 10.61
- ------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .08(a) .270 .42 .34 .29
Net realized and unrealized gain on investments 3.21 3.505 3.44 .65 1.57
Total from investment operations 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 (.95) (.885) (.82) (.33) --
------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 20.08 $ 17.86 $ 15.54 $ 12.79 $ 12.33
- ------------------------------------------------------------------------------------------------------------------------
Total Return(b) 19.87%(d) 26.25% 32.82% 8.21% 17.72%
========================================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver and reimbursements 1.52%(d) .36% .00% .00% .00%
Expenses, excluding waiver and reimbursements 1.52% .96% 1.02% 1.15% 1.20%
Net investment income 0.42% 2.24% 3.27% 2.65% 2.44%
==================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
----------------------------------------- ---------------------
Year Ended August 1, 1996(c) to April 1, 1997(c) to
November 30, November 30, November 30,
Per Share Operating Performance: 1997 1996 1997
=================================================================================================== =====================
<S> <C> <C> <C>
Net asset value, beginning of period $ 17.83 $ 15.24 $ 16.90
- --------------------------------------------------------------------------------------------------- ---------------------
Income (loss) from investment operations
Net investment income (loss) (.06)(a) .12 (.07)(a)
Net realized and unrealized gain on investments 3.20 2.66 3.18
Total from investment operations 3.14 2.78 3.11
--------------------------------------------------------------------------------------------- ---------------------
Distributions
Dividends from net investment income (.02) (.19) --
Distributions from net realized gain (.95) -- --
--------------------------------------------------------------------------------------------- ---------------------
Net asset value, end of period $ 20.00 $ 17.83 $ 20.01
- --------------------------------------------------------------------------------------------------- ---------------------
Total Return(b) 18.92% 18.39%(d) 18.40%(d)
==========================================================================================================================
Ratios to Average Net Assets:
Expenses 2.28% .59%(d) 1.54%(d)
Net investment income (loss) (.34)% .22%(d) (.37)%(d)
==========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended November 30,
Supplemental Data For All Classes: 1997 1996 1995 1994 1993
=====================================================================================================================
<S> <C> <C> <C> <C> <C>
Net assets, end of period (000) $69,796 $23,592 $7,549 $5,558 $4,086
Portfolio turnover rate 30.81% 62.25% 37.17% 43.85% 74.16%
Average commissions per share paid on
equity transactions $ .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.
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. 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.
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.
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 $ 994,255 $ 6,026,914
Large-Cap $ 140,809 $ 864,739
- --------------------------------------------------------------------------------
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-50 million, Class B-30 million,
Class C-20 million; Large-Cap Series: Class A- 20 million, Class B-30 million,
Class C-20 million. Paid in capital for the Company amounted to $413,636,728 for
the Small-Cap Series and $58,622,497 for the Large-Cap Series at November 30,
1997. Transactions in capital stock were as follows:
12
<PAGE>
Notes to Financial Statements
<TABLE>
<CAPTION>
12/13/95 (Commencement
of Operations)
Year Ended 11/30/97 to 11/30/96
---------------------------------------------------------- --------------------------
Small-Cap Series Large-Cap Series Small-Cap Series
-------------------------- ---------------------------- --------------------------
Class A Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales of shares 12,367,107 $ 193,725,849 1,647,477 $ 30,647,212 662,268 $ 7,351,610
- ----------------------------------------------------------------------------------------------- --------------------------
Shares issued to shareholders in
reinvestment of net investment
income and realized gain from
investment transactions -- -- 64,527 1,054,314 33,296 382,601
- ----------------------------------------------------------------------------------------------- --------------------------
Total 12,367,107 193,725,849 1,712,004 31,701,526 695,564 7,734,211
- ----------------------------------------------------------------------------------------------- --------------------------
Shares reacquired (862,855) (13,900,051) (226,484) (4,259,360) (6,526) (77,197)
- ----------------------------------------------------------------------------------------------- --------------------------
Increase in shares 11,504,252 $ 179,825,798 1,485,520 $ 27,442,166 689,038 $ 7,657,014
- ----------------------------------------------------------------------------------------------- --------------------------
</TABLE>
Year Ended 11/30/96
--------------------------
Large-Cap Series
--------------------------
Class A Shares Amount
- ---------------------------------------------------------------
Sales of shares 594,545 $ 9,601,985
- ---------------------------------------------------------------
Shares issued to shareholders in
reinvestment of net investment
income and realized gain from
investment transactions 48,560 700,600
- ---------------------------------------------------------------
Total 643,105 10,302,585
- ---------------------------------------------------------------
Shares reacquired (172,002) (2,736,592)
- ---------------------------------------------------------------
Increase in shares 471,103 $ 7,565,993
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
11/15/96 (Commencement
of Offering Class B Shares)
Year Ended 11/30/97 to 11/30/96
---------------------------------------------------------- ---------------------------
Small-Cap Series Large-Cap Series Small-Cap Series
-------------------------- ----------------------------- ---------------------------
Class B Shares Amount Shares Amount Shares Amount
- --------------------------------------------------------------- ----------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales of shares 11,224,852 $ 176,836,027 637,050 $ 11,698,773 41,443 $ 488,205
- --------------------------------------------------------------- ----------------------------- ---------------------------
Shares issued to shareholders in
reinvestment of net investment
income and realized gain from
investment transactions -- -- 21,691 350,304 -- --
- --------------------------------------------------------------- ----------------------------- ---------------------------
Total 11,224,852 176,836,027 658,741 12,049,077 41,443 488,205
- --------------------------------------------------------------- ----------------------------- ---------------------------
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 41,443 $ 488,205
- --------------------------------------------------------------- ----------------------------- ---------------------------
</TABLE>
8/1/96 (Commencement
of Offering Class B Shares)
to 11/30/96
---------------------------
Large-Cap Series
---------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Sales of shares 380,322 $ 6,103,220
- ----------------------------------------------------------------
Shares issued to shareholders in
reinvestment of net investment
income and realized gain from
investment transactions 1,904 30,251
- ----------------------------------------------------------------
Total 382,226 6,133,471
- ----------------------------------------------------------------
Shares reacquired (17,762) (302,876)
- ----------------------------------------------------------------
Increase in shares 364,464 $ 5,830,595
- ----------------------------------------------------------------
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
- ------------------------------------------------- ---------------------------
4. Distributions
Dividends from net investment income are declared annually for the Small-Cap
Series and quarterly for the Large-Cap Series. Net realized gain from investment
transactions is distributed to shareholders annually. At November 30, 1997,
accumulated net realized gain for each Series was as follows:
- --------------------------------------------------------------------------------
Small-Cap Series $7,347,935
Large-Cap Series $2,440,108
- --------------------------------------------------------------------------------
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.
Capital gain distributions declared on December 11, 1997 were as follows:
Rate Aggregate
Capital Gains Per Share Amount
- --------------------------------------------------------------------------------
Small-Cap Series--Class A $.29 $3,627,209
Small-Cap Series--Class B $.25 $2,865,148
Small-Cap Series--Class C $.25 $ 808,343
Large-Cap Series--Class A $.71 $1,758,056
Large-Cap Series--Class B $.71 $ 684,146
Large-Cap Series--Class C $.71 $ 60,358
- --------------------------------------------------------------------------------
5. Purchases and Sales of Securities
Purchases and sales of investments for the year ended November 30, 1997 were as
follows:
Series Purchases Sales
- --------------------------------------------------------------------------------
Small-Cap $399,767,834 $59,685,625
Large-Cap $ 53,048,448 $13,202,120
- --------------------------------------------------------------------------------
As of November 30, 1997, 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 $15,062,761 $27,980,820 $12,918,059
Large-Cap $ 8,309,867 $10,162,460 $ 1,852,593
- --------------------------------------------------------------------------------
The cost of investments for federal income tax purposes is substantially the
same as that used for financial reporting purposes.
6. Directors' Remuneration
The Directors of the Company associated with Lord Abbett and all officers of the
Company receive no compensation from the Company for acting as such. Outside
Directors' fees and retirement costs are allocated among all funds in the Lord
Abbett group based on the net assets of each fund.
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders,
Lord Abbett Research Fund, Inc.:
We have audited the accompanying statements of net assets of Lord Abbett
Research Fund, Inc.-Small-Cap Series and Large-Cap Series as of November 30,
1997, the related statements of operations and of changes in net assets and the
financial highlights for each of the periods presented. These financial
statements and the financial highlights are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at November
30, 1997 by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Lord Abbett Research
Fund, Inc.-Small-Cap Series and Large-Cap Series at November 30, 1997, the
results of their operations, the changes in their net assets and the financial
highlights for each of the periods presented in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
January 5, 1998
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.
[LOGO](R) LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
LORD ABBETT DISTRIBUTOR LLC LARF-2-1197
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The GM Building o 767 Fifth Avenue o New York, NY 10153-0203 (1/98)
