Lord Abbett Research
Fund
o Small-Cap Series
o Large-Cap Series
1998 ANNUAL REPORT
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Two portfolios designed to help
you build for your future
[LOGO](R)
<PAGE>
Lord Abbett Research Fund Large-Cap Series o Small--Cap Series
A Tradition of
Value
Investing
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We recognize each investor's need for a
well-diversified portfolio. Our value investing
process can benefit investors in both large and
small company stocks. Our goal, to provide
investors competitive returns with relatively
moderate fluctuations in price, applies to both
Series.
- --------------------------------------------------------------------------------
Value Investing at Work in a Lord Abbett Research Fund--Large-Cap Series has
Portfolio of Large Company produced long-term returns above the average of
Stocks and a Portfolio of mutual funds that focus on large companies.
Small Company Stocks
Large-Cap Series Performance
Average Annual Total Returns as of 11/30/98
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[The following table was depicted as a bar graph in the printed material.]
3 years 5 years
------- -------
The Large-Cap Series 19.7% 19.8%
Morningstar Average of
Large Value Funds 19.2% 17.4%
Morningstar Average of
Growth & Income Funds 21.0% 18.4%
The Small-Cap Series has outperformed small
company stocks in general and the average of
mutual funds that focus on small companies for
the period since its inception.
Small-Cap Series Performance
Average Annual Total Returns as of 11/30/98
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[The following table was depicted as a bar graph in the printed material.]
Life of
1 year Series(1)
------ ---------
The Small-Cap Series -11.7% 16.2%
Morningstar Average of
Small Company Funds -6.0% 11.3%
Morningstar Average of
Small Value Funds -8.7% 13.3%
Russell 2000 Index -6.7% 9.7%
Performance data shown is for Class A shares at
net asset value and assumes the reinvestment of
all distributions. Comparative fund performance
provided by Morningstar, Inc., does not account
for the deduction of sales charges and would be
different if sales charges were included.
- --------------------------------------------------------------------------------
Average Annual Total Returns Average annual total returns for the periods
ended 12/31/98 at the Class A share maximum
sales charge of 5.75%, with all distributions
reinvested:
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[The following table was depicted as a bar graph in the printed material.]
Large-Cap Series(2)
1 year 9.60%
5 years 18.40%
Life of Series 18.27%
Small-Cap Series(3)
1 year -12.70%
Life of Series 15.74%
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 12/13/95-11/30/98 for the Small-Cap
Series; 1/1/96-11/30/98 for Morningstar averages
and the Russell 2000 Index, an unmanaged index
consisting of the common stocks of 2000
companies. The Index is unavailable for
investment.
(2) The Large-Cap Series commenced operations
6/3/92.
(3) The Small-Cap Series commenced operations
12/13/95.
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, 1998
[PHOTO OMITTED]
/s/ Robert S. Dow
- ---------------------------
Robert S. Dow
Chairman
January 5, 1999
"Third quarter price declines provided tremendous opportunities for value
investors, like Lord Abbett..."
Lord Abbett Research Fund completed its fiscal year on November 30, 1998. We are
pleased to present you with an overview of performance and class-specific data
for the period.
<TABLE>
<CAPTION>
Large-Cap Series Small-Cap Series
-----------------------------------------------------------------
Class A Class B Class C Class A Class B Class C Class Y+
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value $21.91 $21.71 $21.73 $14.36 $14.20 $14.20 $14.40
Capital gains paid $ 0.71 $ 0.71 $ 0.71 $ 0.29 $ 0.25 $ 0.25 $ --
Total return* +13.45% +12.56% +12.61% -11.71% -12.27% -12.27% -11.87%
</TABLE>
The market momentum seen in the early months of 1998 was overcome in the third
quarter as concerns regarding economic and political crises in Asia and Russia
hit home. During the fourth quarter, many of the world's financial markets
experienced healthy recoveries that were triggered by interest-rate declines in
the U.S. and Europe. The third quarter price declines that affected stocks in
general, and small-cap stocks in particular, provided tremendous opportunities
for value investors, like Lord Abbett, who focus on undervalued stocks of
companies with prospects that exceed the earnings expectations reflected in
their stock prices.
About the Large-Cap Series
The Series' strong absolute returns for the period were due, in part, to our
decision to maintain an overweighting of financial company holdings. After a
weak start, these holdings benefited from attractive valuations relative to
their expected earnings and from ongoing industry consolidations.
Favorable earnings developments and merger activity among pharmaceutical and
health care holdings enhanced the portfolio's performance, as did our particular
stock selections in the energy sector. Interim price weakness among technology
companies created the opportunity to add technology stocks to the portfolio, as
we anticipated that this industry would continue to perform well into the New
Year. The announcement of the Exxon-Mobil merger had a positive impact on the
Series' performance, although, overall, companies in the electric utilities and
energy sectors did not perform well during the period.
We believe that the anticipated environment of continued low inflation, modest
economic growth and benign interest rates, combined with S&P 500's flat
projected earnings growth in 1999, will favor the Series' research-driven value
investment strategy in the years ahead.
About the Small-Cap Series**
In a year of challenge for small-cap stocks, our management team focused on
various industry sectors. For example, our overweighting of companies in the
technology and consumer non-cyclical industries, such as apparel and general
retailers, which moved ahead of the broad market early in the year and then
again during the fourth quarter, added significant value to the portfolio. On
the other hand, we reduced our exposure to industrial companies late in the year
when they continued to struggle despite improved market conditions.
We believe the stage is set for a small-cap rebound now that these companies are
selling at historically low prices relative to larger companies and that our
value approach will enable us to continue to provide attractive long-term
returns relative to our peers. In addition, we find the Federal Reserve's three
recent rate cuts encouraging because small-cap companies, which are less likely
to be self-financing than their larger counterparts, have often outperformed
large-cap companies in periods following such cuts.
Looking Ahead
We believe that our investment strategy of focusing on company fundamentals and
long-term earnings potential should enable us to uncover solid investment values
across industries in the years ahead. These opportunities should prove
beneficial as the "flight to liquidity" phenomenon subsides and long-term
investors shift their focus away from shorter-term expectations.
* Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
+ Not annualized. Class inception date is 12/30/97.
** Important Note: Lord Abbett Research Fund--Small-Cap Series Class A, B and
C closed to new investors on April 9, 1998 in order to protect the
integrity of its investment strategy.
1
<PAGE>
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 $30,822 as of November 30, 1998, an average annual gain of
18.9%.
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[The following table was depicted as a bar graph in the printed material.]
(Thousands)
Lord Abbett Research Fund --
Large-Cap Series(1) $30,822
Morningstar Average of Large
Value Funds(2) $26,464
Morningstar Average of
Growth & Income Funds(2) $27,000
(1) Series performance is at net asset value for Class A shares and assumes
the reinvestment of all distributions.
(2) Source: Morningstar, Inc. Morningstar performance reflects the period
6/1/92-11/30/98.
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 $15,565 as of November
30, 1998, outperforming both the unmanaged Russell 2000 Index and the
Morningstar Average of Small Value Funds.
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[The following table was depicted as a bar graph in the printed material.]
(Thousands)
Lord Abbett Research Fund --
Small-Cap Series(1) $15,565
Morningstar Average of Small
Value Funds(2) $14,391
Russell 2000 Index(2)(3) $13,084
(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: Morningstar, Inc.
2
<PAGE>
A Note About Year 2000 Matters
As you probably know, the Fund depends on the proper functioning of computer
systems for most, if not all, aspects of its operations. Many computer systems
now in use cannot distinguish between the year 2000 (Y2K) and the year 1900, an
inability that could disrupt the services provided to the Fund.
Lord Abbett, Lord Abbett Distributor llc, the Fund's transfer agent, the Fund's
custodian and other providers of services critical to the Fund all have advised
the Fund that they have been actively working on changes to their computer
systems to prepare for the Year 2000 and expect that their systems, and those of
their external service providers, will be adapted in time. Although the Y2K
issue is unprecedented and the process of Y2K preparedness evaluation and
systems remediation is an ongoing one, we presently believe that there will be
no material effect on the Fund and its financial statements.
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
3/31/99, 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, 1998
<TABLE>
<CAPTION>
Investments Shares Market Value
====================================================================================================================================
<S> <C> <C> <C>
Investments in Common Stocks 96.45%
- ------------------------------------------------------------------------------------------------------------------------------------
Aerospace 8.19% *Aviation Sales Company-Distributes aircraft spare parts 127,300 $ 4,710,100
AAR Corp.-Major supplier of products and services for the worldwide
aviation industry 200,000 5,050,000
*Doncasters plc ADR-Supplier of tolerance-critical aircraft engine
components 400,000 6,550,000
*Moog Inc.+ Class A-Manufacturer of electrohydraulic control systems 547,100 15,865,900
*SPS Technologies Inc.-Producer of industrial fasteners 175,000 10,018,750
Total 42,194,750
- ------------------------------------------------------------------------------------------------------------------------============
Aluminum .79% IMCO Recycling Inc.-Major aluminum recycle and zinc and magnesium processor 273,700 4,088,393
- ------------------------------------------------------------------------------------------------------------------------============
Apparel 9.94% Garan Inc.+-Supplier of knitted and woven apparel 260,000 7,020,000
*Gerber Childrenswear Inc.+-Markets infant and toddler apparel and related
products 750,000 7,078,125
*North Face Inc.+-Manufacturer of camping and outerwear 900,000 11,362,500
Phillips Van Heusen Corp.-Apparel manufacturer 575,000 4,025,000
Stride Rite Corp.+-Producer and retail marketer of adults and children's
shoes 2,470,000 21,766,875
Total 51,252,500
- ------------------------------------------------------------------------------------------------------------------------============
Auto Parts 2.28% Autocam Corp.-Designs and manufactures specialty metal alloys 78,750 1,097,577
Clarcor Inc.-Manufactures oil and air filters 315,000 5,925,937
Control Devices Inc.-Manufactures circuit breakers and electronic sensors
for the auto industry 281,291 3,973,235
*Hawk Corp.-Class A-Manufactures specialized components for aerospace,
industrial and commercial applications 66,900 769,350
Total 11,766,099
- ------------------------------------------------------------------------------------------------------------------------============
Building Materials 6.08% Calmat Co.-Producer of aggregates and asphalt 388,400 11,943,300
*Simpson Manufacturing Co., Inc.-Manufacturer of construction-related
fasteners 265,400 9,952,500
*Southdown Inc.-Producer of gray portland and masonry cement 161,900 9,430,675
Total 31,326,475
-----------------------------------------------------------------------------------------============
</TABLE>
3
<PAGE>
Statement of Net Assets
SMALL-CAP SERIES November 30, 1998
<TABLE>
<CAPTION>
Investments Shares Market Value
====================================================================================================================================
<S> <C> <C> <C>
Business Services .21% *Right Management Consultants Inc.-Career transition services 74,700 $ 1,064,475
- ------------------------------------------------------------------------------------------------------------------------============
Capital Equipment 6.94% *Gradall Industries Inc.-Makes wheeled hydraulic excavaters and
rough-terrain, variable-reach material handlers, as well as related
service parts 175,700 2,360,969
Hughes Supply Inc.-Supplier of building materials and plumbing products 272,000 7,548,000
Manitowoc Company Inc.-Manufactures cranes and food service equipment 9,000 357,750
Milacron Inc. SA-A leading manufacturer of plastics machinery and
industrial consumable products 666,300 13,492,575
Oshkosh Truck Corp.+-Markets a broad range of heavy specialized motor
vehicles 400,000 12,000,000
Total 35,759,294
- ------------------------------------------------------------------------------------------------------------------------============
Communications Equipment *Commscope Inc.-Designs, makes and markets coaxial cables 235,000 3,569,063
3.11% General Cable Inc.-Manufacturer of copper wire and cable 250,000 4,750,000
Telxon Corp.-Supplier of hand-held wireless computer links 284,600 7,684,200
Total 16,003,263
- ------------------------------------------------------------------------------------------------------------------------============
Computer: Hardware 8.55% *Electronics for Imaging Inc.-Develops technologies that enable digital
color printing over computer networks 1,490,100 39,953,306
Zebra Technologies Corp.-Class A-Provider of bar code labeling systems 123,200 4,134,900
Total 44,088,206
- ------------------------------------------------------------------------------------------------------------------------============
Computer: Software .76% *Inso Corp.-Develops and markets software tools for proofing, reference
and information management 145,000 3,905,938
- ------------------------------------------------------------------------------------------------------------------------============
Containers 1.14% *BWAY Corp.-Manufacturer of steel containers 297,600 4,854,600
*Ivex Packaging Corp.-Designer and manufacturer of flexible packaging
products 28,100 547,950
Tuscarora Inc.-Designs and makes interior protective packaging and material
handling solutions 36,800 473,800
Total 5,876,350
- ------------------------------------------------------------------------------------------------------------------------============
Electrical Equipment 2.71% American Precision Industries Inc.-Manufactures motion control and
electronic products for aerospace, industry and the military 239,000 3,316,125
Ametek, Inc.-Manufactures electrical and electronic products 90,000 1,867,500
*Kollmorgen Corp.+-Manufacturer of motors and controls 450,000 8,550,000
*Scientific Tech Inc.-Manufactures industrial safety and monitoring
equipment 45,600 252,225
Total 13,985,850
- ------------------------------------------------------------------------------------------------------------------------============
Electronics: Components 7.11% *Anadigics Inc.-Supplies radio frequency and microwave integrated circuits
used to receive and transmit signals 107,200 1,340,000
*Artesyn Technologies Inc.-A manufacturer of power supplies and
measurement control systems for industrial equipment 200,000 3,350,000
BEI Technologies Inc.+-Designs, makes and sells electronic devices that
provide vital sensory input for the control systems of advanced
machinery and automation systems 400,000 4,850,000
*DII Group Inc.-Designs, manufactures and tests printed circuit boards 450,000 9,393,750
Methode Electronics Inc.-Producer of electronic components 950,000 12,943,750
*Plexus Corp.-Designs, manufactures and tests printed circuit boards 159,600 4,788,000
Total 36,665,500
- ------------------------------------------------------------------------------------------------------------------------============
Electronics: Equipment 1.59% *Electro Scientific Industries Inc.-Provides electronics manufacturers with
equipment necessary to produce key components used in wireless
communications, computers, automotive electronics and many other
electronic products 83,000 2,484,813
*GenRad Inc.-Electrical test and measurement equipment; auto diagnostic
equipment 350,000 5,687,500
Total 8,172,313
- ------------------------------------------------------------------------------------------------------------------------============
Electronics: Semiconductors Microsemi Corp.-Designs and manufactures integrated systems for the
1.82% computer and scientific-research markets 380,000 4,560,000
Unitrode Corp.-Makes and sells analog/linear and mixed-signal integrated
circuits 283,000 4,793,313
Total 9,353,313
- ------------------------------------------------------------------------------------------------------------------------============
Engineering/Construction .99% *Michael Baker Corp.+-Engineering, operations and maintenance and
construction firm 550,000 5,087,500
- ------------------------------------------------------------------------------------------------------------------------============
Fluid Separation .58% *CUNO Inc.-Manufacturer of fluid filtration products for health care,
potable water and industrial fluid processing 200,000 2,987,500
- ------------------------------------------------------------------------------------------------------------------------============
Food 2.44% Dreyer's Grand Ice Cream Inc.-Ice cream manufacturer and distributor 510,000 6,948,750
*Midwest Grain Products Inc.-Manufacturer of wheat gluten, starch and
alcohol 120,000 1,620,000
</TABLE>
4
<PAGE>
Statement of Net Assets
SMALL-CAP SERIES November 30, 1998
<TABLE>
<CAPTION>
Investments Shares Market Value
====================================================================================================================================
<S> <C> <C> <C>
Sanderson Farms Inc.-Produces, processes, markets and distributes fresh
and frozen chicken and other prepared food 250,000 $ 4,000,000
Total 12,568,750
- ------------------------------------------------------------------------------------------------------------------------============
Furniture and Appliances .24% *Neutral Posture Ergonomics Inc.+-Producer of office chairs 310,000 1,240,000
- ------------------------------------------------------------------------------------------------------------------------============
Health Care Products 5.69% Arrow International Inc.-Supplies disposable catheters and related clinical
products 622,400 17,738,400
ADAC Laboratories-Designs, develops, makes, sells and services medical
imaging and health care information systems 18,300 475,800
*Gliatech Inc.-Develops and commercializes medical devices designed to
inhibit excessive surgical scarring and adhesion formation 141,600 3,451,500
Invacare Corp.-Designs, makes and distributes medical equipment for the
home health care, retail and extended care markets 50,000 1,196,875
*ICU Medical-Designs, makes and sells proprietary disposable medical
connection devices for use in intravenous therapy applications 147,800 2,752,775
Mentor Corp.-Develops, makes and sells a broad range of products for
plastic and reconstructive surgery 200,000 3,700,000
Total 29,315,350
- ------------------------------------------------------------------------------------------------------------------------============
Health Care Services 2.73% *Sierra Health Services Inc.-Provider of managed health and workers'
compensation plans in Nevada, Texas and the northeast 615,000 14,068,125
- ------------------------------------------------------------------------------------------------------------------------============
Home Building 1.31% Kaufman & Broad Home Corp.-Single-family home builder in California,
Texas and Nevada 200,000 5,037,500
*Newmark Homes Corp.-Provides single-family homes in five major markets 195,400 1,709,750
Total 6,747,250
- ------------------------------------------------------------------------------------------------------------------------============
Insurance: Property and Chartwell Re Corp.-Property casualty insurance company 225,000 6,215,625
Casualty 1.21%
- ------------------------------------------------------------------------------------------------------------------------============
Leisure Time .38% K2 Inc.-Markets sporting goods, recreational and industrial products 170,000 1,933,750
- ------------------------------------------------------------------------------------------------------------------------============
Machinery: Diversified .98% Albany International Corp.-Class A-Paper clothing machine manufacturer 1 19
Blount International Inc.-Class A-Manufacturer of timber-cutting equipment
and small arms accessories 218,600 5,055,125
Total 5,055,144
- ------------------------------------------------------------------------------------------------------------------------============
Manufacturing: Diversified Varlen Corp.-Manufacturer of metal products used in a variety of industries 68,750 1,813,281
.35%
- ------------------------------------------------------------------------------------------------------------------------============
Metals: Miscellaneous .35% *Wolverine Tube Inc.-Manufacturer of copper and copper-alloy tubing 80,000 1,795,000
- ------------------------------------------------------------------------------------------------------------------------============
Gas and Oil: E&P 1.18% *Meridian Resource Corp.-U.S. gas and oil exploration, development and
production company 1,300,000 5,037,500
Range Resources Corp.-Acquires, develops and produces oil and gas
properties 250,000 1,046,875
Total 6,084,375
- ------------------------------------------------------------------------------------------------------------------------============
Oil and Gas Drilling .45% *Patterson Energy Inc.-Domestic land drilling service company 500,000 2,343,750
- ------------------------------------------------------------------------------------------------------------------------============
Oil Well Equipment/Service CARBO Ceramics Inc.-Produces and supplies ceramic proppants 11,900 248,413
1.89% *Newpark Resources Inc.-Provides comprehensive environmental management and
oilfield construction services to the oil and gas industry 700,000 5,162,500
*Oceaneering Int'l Inc.-Sub-sea diving services provider 260,000 3,233,750
Offshore Logistics Inc.-Provides helicopter transportation services to the
worldwide offshore oil and gas industry 90,000 1,119,375
Total 9,764,038
- ------------------------------------------------------------------------------------------------------------------------============
Printing and Publishing 3.40% *Scholastic Corp.+-A leading publisher of children's books and educational
materials 368,100 17,530,763
- ------------------------------------------------------------------------------------------------------------------------============
Retail: Food .49% Ruddick Corp.-Manufactures sewing thread; operates supermarkets in the
southeast 130,000 2,543,125
- ------------------------------------------------------------------------------------------------------------------------============
Retail: Dept. & Merchandise *Elder-Beerman Stores Corp.+-Operates midwestern department and shoe stores 675,000 9,745,313
1.89%
- ------------------------------------------------------------------------------------------------------------------------============
Specialty Materials 3.61% *Rogers Corp.+-Manufacturer of specialty materials and components 685,000 18,580,625
- ------------------------------------------------------------------------------------------------------------------------============
Steel 1.44% Oregon Steel Mills Inc.-Manufacturer of steel plate, rail and pipe 449,100 5,697,956
Quanex Corp.-Manufacturer of specialty steel and aluminum products 96,000 1,722,000
Total 7,419,956
-----------------------------------------------------------------------------------------============
</TABLE>
5
<PAGE>
Statement of Net Assets
SMALL-CAP SERIES November 30, 1998
<TABLE>
<CAPTION>
Shares or
Investments Principal Amount Market Value
====================================================================================================================================
<S> <C> <C> <C>
Textiles: Apparel .19% *Dan River Inc.-Textile products provider for the home fashion and apparel
fabrics markets 123,000 $ 999,375
- -----------------------------------------------------------------------------------------------------------------------=============
Transportation 2.88% Air Express International Corp.-Air freight forwarding company 572,000 12,727,000
*AirNet Sys Inc.-Operates a national air transportation network and also
offers retail aviation fuel sales and related ground services 141,200 2,118,000
Total 14,845,000
- -----------------------------------------------------------------------------------------------------------------------=============
Truckers .56% *Smithway Motor Express Corp.+-Class A-Truckload carrier concentrating on the
flatbed segment 325,000 2,884,375
----------------------------------------------------------------------------------------=============
Total Investments in Common Stocks (Cost $531,780,040) 497,070,689
====================================================================================================================================
Other Assets, Less Liabilities 3.55%
====================================================================================================================================
Short-Term Investments Baker Hughes Inc.
Discount note, 5.42% due 12/1/1998 (Cost $14,897,757) 14,900M 14,897,757
- -----------------------------------------------------------------------------------------------------------------------=============
Cash and Receivables, Net of Liabilities 3,410,427
- -----------------------------------------------------------------------------------------------------------------------=============
Total Other Assets, Less Liabilities 18,308,184
====================================================================================================================================
Net Assets 100.00% $515,378,873
====================================================================================================================================
Class A Shares-Net asset value ($218,729,592 / 15,226,978 shares outstanding) $14.36
Maximum offering price (Class A Shares) $15.24
Class B Shares-Net asset value ($198,068,498 / 13,952,052 shares outstanding) $14.20
Class C Shares-Net asset value ($62,902,201 / 4,430,191 shares outstanding) $14.20
Class Y Shares-Net asset value ($35,678,582 / 2,478,036 shares outstanding) $14.40
</TABLE>
* Non-income producing security.
+ Affiliated issuer (holdings represent 5% or more
of the outstanding voting securities).
See Notes to Financial Statements.
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.
Statement of Net Assets
LARGE-CAP SERIES May 31, 1998
<TABLE>
<CAPTION>
Investments Shares Market Value
===================================================================================================================================
<S> <C> <C> <C>
Investments in Common Stocks 93.63%
===================================================================================================================================
Apparel 1.03% VF Corp.-Leading producer of blue jeans and other apparel 30,000 $ 1,471,875
- -----------------------------------------------------------------------------------------------------------------------============
Banks: Money Center 1.55% Chase Manhattan Corp.-Major money-center bank holding company 35,000 2,220,313
- -----------------------------------------------------------------------------------------------------------------------============
Banks: Regional 6.34% Banc One Corp.-Leading bank-holding company 52,552 2,696,575
BankAmerica Corp.-Major money-center bank 25,000 1,629,701
Comerica Inc.-Midwestern regional bank holding company 11,150 719,175
First Union Corp.-Major East Coast bank 35,000 2,126,250
Mellon Bank Corp.-Commercial bank located in Pittsburgh, PA 14,900 937,769
Washington Mutual Inc.-Leading savings and loan company 25,000 968,750
Total 9,078,220
- -----------------------------------------------------------------------------------------------------------------------============
Brokers 1.32% Morgan Stanley, Dean Witter, Discover & Co.-Major brokerage and credit card
company 27,000 1,883,250
- -----------------------------------------------------------------------------------------------------------------------============
Chemicals 2.03% Air Products & Chemicals Inc.-Industrial gas producer 37,600 1,433,500
DuPont DeNemours, E.I. & Co.-Major U.S.-based producer of plastic and chemicals25,000 1,468,750
Total 2,902,250
- -----------------------------------------------------------------------------------------------------------------------============
Communications Services 4.14% CBS Inc.-Largest pure-play radio and broadcasting company 50,000 1,490,625
First Data Corp.-Information supplier for credit card processing and related
services 87,000 2,321,813
Time-Warner Inc.-A major entertainment and communications firm 20,000 2,115,000
Total 5,927,438
- -----------------------------------------------------------------------------------------------------------------------============
Computer: Hardware 6.13% International Business Machines Corp.-World's largest computer manufacturer 24,000 3,960,000
</TABLE>
6
<PAGE>
Statement of Net Assets
LARGE-CAP SERIES May 31, 1998
<TABLE>
<CAPTION>
Investments Shares Market Value
===================================================================================================================================
<S> <C> <C> <C>
*Sun Microsystems Inc.-Supplier of network computer products including
workstations, servers, software, microprocessors, and a full range of services
and support 47,000 $ 3,480,938
Unisys Corp.-Provides information services, technology, software and customer
support 47,000 1,339,500
Total 8,780,438
- -----------------------------------------------------------------------------------------------------------------------============
Computer: Peripherals 3.15% EMC Corp.-A supplier of high-performance storage devices and related services 35,000 2,537,500
Seagate Technology Inc.-Manufacturer of computer disk drive equipment 67,000 1,976,500
Total 4,514,000
- -----------------------------------------------------------------------------------------------------------------------============
Drugs/Health Care Products American Home Products Corp.-Producer of drugs, food housewares and packaged
5.34% medicine and medical products 65,000 3,461,250
Bristol-Myers Squibb Company-Major worldwide pharmaceutical concern with other
interests in infant nutrition, non-prescription medications, medical devices
and toiletries 15,000 1,838,438
Pharmacia & Upjohn Inc.-Develops, makes and sells prescription pharmaceutical
and other related health care products 45,000 2,342,812
Total 7,642,500
- -----------------------------------------------------------------------------------------------------------------------============
Electric Power 5.74% Carolina Power & Light Co.-Electric utility company serving North and South
Carolina 60,000 2,782,500
Duke Power Co.-Electric utility company serving North and South Carolina 50,000 3,128,125
Florida Progress Corp.-Supplies electricity in Florida; mines, procures and
transports coal, and transports bulk commodities 50,000 2,137,500
FPL Group-One of the nation's premier electric utilities, serving about
7 million people in Florida's east, southeast and southwest coasts 2,800 171,500
Total 8,219,625
- -----------------------------------------------------------------------------------------------------------------------============
Electrical Equipment 2.27% Emerson Electric Co.-Diversified manufacturer of consumer and industrial
electrical components 50,000 3,250,000
- -----------------------------------------------------------------------------------------------------------------------============
Electronics: Semiconductors Texas Instruments, Inc.-Major producer of semiconductors and electronic
1.60% equipment 30,000 2,291,250
- -----------------------------------------------------------------------------------------------------------------------============
Food 6.74% Best Foods-Producer of diversified packaged foods 35,000 2,034,375
ConAgra Inc.-Major producer of agricultural and consumer products 30,900 971,419
Heinz H.J. Co.-Domestic packaged foods producer 67,000 3,906,937
Ralston Purina Co.-Produces and sells dog and cat foods 50,000 1,740,625
Sara Lee Corp.-A diversified maker of branded food products, apparel
and household consumer products 17,000 992,375
Total 9,645,731
- -----------------------------------------------------------------------------------------------------------------------============
Health Care Products 1.64% Baxter International Inc.-World's leading distributor and major manufacturer
of hospital supplies and related medical equipment 37,000 2,351,812
- -----------------------------------------------------------------------------------------------------------------------============
Health Care Services 1.68% Columbia/HCA Healthcare-A leading HMO 60,000 1,477,500
*Humana Inc.-Major U.S. provider of managed-health plans 47,000 931,188
Total 2,408,688
- -----------------------------------------------------------------------------------------------------------------------============
Insurance: Life 3.27% American General Corporation-A leading provider of financial services,
including life/health insurance, annuities, consumer credit and mortgage
financing 47,000 3,310,562
Jefferson-Pilot Corp.-Life insurance holding company 20,000 1,365,000
Total 4,675,562
- -----------------------------------------------------------------------------------------------------------------------============
Insurance: Property and Chubb Corp.-Broad-based property and casualty insurance organization 27,000 1,891,687
Casualty 2.41% Cigna Corp.-Multi-line insurance and medical services company 20,000 1,556,250
Total 3,447,937
- -----------------------------------------------------------------------------------------------------------------------============
Machinery: Diversified 1.22% Deere & Co.-World's largest manufacturer of farm equipment 50,000 1,746,875
- -----------------------------------------------------------------------------------------------------------------------============
Manufacturing Diversified United Technologies Corp.-Diversified manufacturing company 17,000 1,822,188
1.27%
- -----------------------------------------------------------------------------------------------------------------------============
Natural Gas: Distribution .57% Columbia Energy Group-Utility holding company and natural gas provider 14,400 817,200
- -----------------------------------------------------------------------------------------------------------------------============
Natural Gas: Diversified 1.46% The Coastal Corporation-A diversified gas pipeline company 60,000 2,092,500
- -----------------------------------------------------------------------------------------------------------------------============
Office Equipment/Supplies .75% Xerox Corp.-World's leading duplication technology supplier 10,000 1,075,000
- -----------------------------------------------------------------------------------------------------------------------============
Oil: International *British Petroleum Ltd. ADS-U.K.-based worldwide petroleum company 30,000 2,763,750
Integrated 7.45% Exxon Corp.-World's largest integrated oil company 27,000 2,026,687
</TABLE>
7
<PAGE>
Statement of Net Assets
LARGE-CAP SERIES May 31, 1998
<TABLE>
<CAPTION>
Investments Shares Market Value
===================================================================================================================================
<S> <C> <C> <C>
Mobil Corp.-Large international oil company 35,000 $ 3,016,562
Total S.A. ADR-Leading French international oil and gas company 46,800 2,860,650
Total 10,667,649
- -----------------------------------------------------------------------------------------------------------------------============
Paper and Forest Products Bowater Inc.-Manufacturer of newsprint, groundwood, kraft pulp and 47,000 1,856,500
3.13% lumber products
Champion International Corp.-Makes and sells paper for business
communications, commercial printings, publications, newspapers and
wood products 40,000 1,662,500
Georgia-Pacific Corp.-Producer of paper and forest products 17,000 964,750
Total 4,483,750
- -----------------------------------------------------------------------------------------------------------------------============
Photographic 1.52% Eastman Kodak Co.-Leading manufacturer of photographic film and equipment 30,000 2,176,875
- -----------------------------------------------------------------------------------------------------------------------============
Printing and Publishing 2.85% Dow Jones & Co., Inc.-Publisher of the Wall Street Journal and Barron's and
operator of news wires and information retrieval services 45,000 2,151,562
Tribune Co.-Major Chicago-based newsprint company 30,000 1,923,750
Total 4,075,312
- -----------------------------------------------------------------------------------------------------------------------============
Retail: Department & May Department Stores Company-Leading department store retailer 25,500 1,537,969
Merchandise 3.18% Wal Mart Stores Inc.-Largest U.S. discount retailer 40,000 3,012,500
Total 4,550,469
- -----------------------------------------------------------------------------------------------------------------------============
Telephone: Long Distance 4.70% AT&T Corp.-Global telecommunications giant 70,000 4,361,875
MCI Worldcom Inc.-Diversified telecommunications company 40,000 2,360,000
Total 6,721,875
- -----------------------------------------------------------------------------------------------------------------------============
Telephone: Regional 5.32% Alltel Corp.-Regional telephone holding company 48,000 2,544,000
Bell Atlantic Corp.-Regional telephone company 48,000 2,670,000
SBC Communication Inc.-Regional telephone company 50,000 2,396,875
Total 7,610,875
- -----------------------------------------------------------------------------------------------------------------------============
Tobacco 1.45% Philip Morris Inc.-Leading tobacco company 37,000 2,069,687
- -----------------------------------------------------------------------------------------------------------------------============
Waste Management 2.38% Browning Ferris Industries Inc.-A leading international provider of solid
waste disposal services 28,300 834,850
Waste Management Inc.-A leading waste-management concern 60,000 2,572,500
Total 3,407,350
----------------------------------------------------------------------------------------============
Total Investments in Common Stocks (Cost $115,418,413) 134,028,494
===================================================================================================================================
Other Assets, Less Liabilities 6.37%
===================================================================================================================================
Short-Term Investments Baker Hughes Inc.
Discount note 5.42% due 12/1/1998 6,100M 6,099,081
Federal Home Loan Bank
Discount note 5.22% due 12/1/1998 7,000M 6,998,999
Total Short-Term Investments (Cost $13,098,080) 13,098,080
- -----------------------------------------------------------------------------------------------------------------------============
Cash and Receivables, Net of Liabilities (3,973,353)
- -----------------------------------------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities 9,124,727
===================================================================================================================================
Net Assets 100.00% $143,153,221
===================================================================================================================================
Class A Shares-Net asset value ($100,700,724 / 4,596,041 shares outstanding) $21.91
Maximum offering price (Class A Shares) $23.25
Class B Shares-Net asset value ($34,744,462 / 1,600,267 shares outstanding) $21.71
Class C Shares-Net asset value ($7,708,035 / 354,770 shares outstanding) $21.73
</TABLE>
* Non-income producing security.
See Notes to Financial Statements.
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.
8
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
Year Ended November 30, 1998
----------------------------
Small-Cap Large-Cap
Investment Income (Loss) Series Series
================================================================================================
<S> <C> <C> <C>
Income Dividends $ 3,973,730 $ 1,683,924
Interest 1,075,114 411,358
Total income 5,048,844 2,095,282
----------------------------------------------------------------------------------
Expenses Management fee 4,270,210 768,547
12b-1 distribution plan-Class A 692,900 183,383
12b-1 distribution plan-Class B 2,199,355 265,809
12b-1 distribution plan-Class C 730,710 44,918
Registration fee 82,000 56,274
Shareholder servicing 976,918 171,428
Professional 37,044 17,401
Reports to shareholders 137,898 33,582
Other 10,374 9,857
Total expenses 9,137,409 1,551,199
----------------------------------------------------------------------------------
Net investment income (loss) (4,088,565) 544,083
----------------------------------------------------------------------------------
Realized and Unrealized (Loss) Gain on Investments
================================================================================================
Realized gain (loss) from investment transactions
Proceeds from sales 355,342,025 97,382,850
Cost of investments sold 385,722,200 96,157,021
Net realized gain (loss) (30,380,175) 1,225,829
----------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investments (49,772,112) 10,300,214
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (80,152,287) 11,526,043
- ------------------------------------------------------------------------------------------------
Net Increase (decrease) in Net Assets Resulting from Operations $ (84,240,852) $ 12,070,126
================================================================================================
</TABLE>
See Notes to Financial Statements.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended November 30, Year EndedNovember 30,
1998 1998 1997 1997
----------------------- --------------------------
Small-Cap Large-Cap Small-Cap Large-Cap
Increase in Net Assets Series Series Series Series
======================================================================================================= ==========================
<S> <C> <C> <C> <C>
Operations Net investment income $ (4,088,565) $ 544,083 $ (305,891) $ 83,720
Net realized gain (loss) from investment transactions (30,380,175) 1,225,829 7,311,353 2,486,165
Net unrealized appreciation (depreciation) of investments (49,772,112) 10,300,214 14,506,701 4,973,080
Net increase (decrease) in net assets resulting from
operations (84,240,852) 12,070,126 21,512,163 7,542,965
----------------------------------------------------------------------------------------- --------------------------
Undistributed net investment income included in price of share
transactions - 550,688 - 281,705
- ------------------------------------------------------------------------------------------------------- --------------------------
Distributions to shareholders from:
Net investment income-Class A - (217,361) - (157,269)
Net investment income-Class B - - - (7,958)
Net investment income-Class C - - - -
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) (2,720,205) - (1,468,990)
----------------------------------------------------------------------------------------- --------------------------
Capital share transactions:
Net proceeds from the sale of shares 276,645,136 78,226,590 423,020,783 44,131,403
Net asset value of shares issued to shareholders in
reinvestment of net investment income and realized gain
from investment transactions 6,933,940 2,588,508 - 1,404,618
Total 283,579,076 80,815,098 423,020,783 45,536,021
----------------------------------------------------------------------------------------- --------------------------
Cost of shares reacquired (112,434,885) (17,358,805) (17,529,274) (5,687,429)
----------------------------------------------------------------------------------------- --------------------------
Increase in net assets derived from capital share
transactions 171,144,191 63,456,293 405,491,509 39,848,592
----------------------------------------------------------------------------------------- --------------------------
Increase in net assets 79,603,030 73,356,902 427,003,672 46,204,272
- ------------------------------------------------------------------------------------------------------- --------------------------
Net Assets
Beginning of period 435,775,843 69,796,319 8,772,171 23,592,047
----------------------------------------------------------------------------------------- --------------------------
End of period+ $515,378,873 $143,153,221 $435,775,843 $69,796,319
=====================================================================================================================
</TABLE>
+ Including undistributed (overdistributed) net investment income of
$(1,774) and $278,752 as of November 30, 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
----------------------------------------- -----------------------------------------
December 13, December 13,
Year Ended 1995(a) to Year Ended 1995(a) to
November 30, November 30, November 30, November 30, November 30, November 30,
Per Share Operating Performance: 1998 1997 1996 1998 1997 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) (.06)(c) .02(c) .127 (.17)(c) (.09)(c) .001
Net realized and unrealized
gain (loss) on investments (1.85) 4.53 2.658 (1.82) 4.53 .329
Total from investment operations(1.91) 4.55 2.785 (1.99) 4.44 .33
------------------------------------------------------------------------------- ----------------------------------------
Distributions
Dividends from net investment income -- -- (.075) -- -- --
Distributions from net realized gain (.29) -- (.700) (.25) -- --
------------------------------------------------------------------------------- ----------------------------------------
Net asset value, end of period $ 14.36 $ 16.56 $ 12.01 $ 14.20 $ 16.44 $ 12.00
- ------------------------------------------------------------------------------------ ----------------------------------------
Total Return(d) (11.71)% 37.89% 28.24%(e) (12.27)% 37.00% 2.84%(e)
===============================================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver and
reimbursements 1.28% 1.17% .01%(e) 2.00% 1.86% .04%(e)
Expenses, excluding waiver and
reimbursements 1.28% 1.17% 1.00%(e) 2.00% 1.86% .07%(e)
Net investment income (loss) (.37)% .10% 1.02%(e) (1.09)% (.56)% .01%(e)
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class C Shares Class Y Shares
-------------------------------------- -----------------------
Year Ended April 1, 1997(b) to December 30, 1997(b) to
November 30, November 30, November 30,
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 loss (.17)(c) (.05)(c) (.01)(c)
Net realized and unrealized gain (loss) on investments (1.82) 3.68 (1.93)
Total from investment operations (1.99) 3.63 (1.94)
--------------------------------------------------------------------------------------------- -----------------------
Distributions
--------------------------------------------------------------------------------------------- -----------------------
Distributions from net realized gain (.25) -- --
Net asset value, end of period $ 14.20 $ 16.44 $ 14.40
- --------------------------------------------------------------------------------------------------- -----------------------
Total Return(d) (12.27)% 28.34%(e) (11.87)%(e)
===============================================================================================================================
Ratios to Average Net Assets:
Expenses 2.00% 1.25%(e) .96%(e)
Net investment loss (1.09)% (.30)%(e) (.05)%(e)
=========================================================================================================================
</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> <C>
Net assets, end of period (000) $515,379 $435,776 $8,772
Portfolio turnover rate 67.86% 45.24% 110.09%
=============================================================================================================================
</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 and assumes the
reinvestment of all distributions.
(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: 1998 1997 1996 1995 1994
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 20.08 $ 17.86 $ 15.54 $ 12.79 $ 12.33
- -------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .15(a) .08(a) .270 .42 .34
Net realized and unrealized gain on investments 2.45 3.21 3.505 3.44 .65
Total from investment operations 2.60 3.29 3.775 3.86 .99
-------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.06) (.12) (.57) (.29) (.20)
Distributions from net realized gain (.71) (.95) (.885) (.82) (.33)
-------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 21.91 $ 20.08 $ 17.86 $ 15.54 $ 12.79
- -------------------------------------------------------------------------------------------------------------------
Total Return(b) 13.45% 19.87%(d) 26.25% 32.82% 8.21%
===================================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver and reimbursements 1.24% 1.52%(d) .36% .00% .00%
Expenses, excluding waiver and reimbursements 1.24% 1.52% .96% 1.02% 1.15%
Net investment income 0.74% 0.42% 2.24% 3.27% 2.65%
=============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
---------------------------------------- ----------------------------
August 1, April 1,
Year Ended 1996(c) to 1997(c) to
November 30, November 30, November 30,
Per Share Operating Performance: 1998 1997 1996 1998 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) --(a)(e) (.06)(a) .12 (.01)(a) (.07)(a)
Net realized and unrealized gain on investments 2.42 3.20 2.66 2.44 3.18
Total from investment operations 2.42 3.14 2.78 2.43 3.11
------------------------------------------------------------------------------------------ ----------------------------
Distributions
Dividends from net investment income -- (.02) (.19) -- --
Distributions from net realized gain (.71) (.95) -- (.71) --
------------------------------------------------------------------------------------------ ----------------------------
Net asset value, end of period $ 21.71 $ 20.00 $ 17.83 $ 21.73 $ 20.01
- ------------------------------------------------------------------------------------------------ ----------------------------
Total Return(b) 12.56% 18.92% 18.39%(d) 12.61% 18.40%(d)
===============================================================================================================================
Ratios to Average Net Assets:
Expenses 2.00% 2.28% .59%(d) 2.00% 1.54%(d)
Net investment income (loss) (.01)% (.34)% .22%(d) (.04)% (.37)%(d)
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended November 30,
Supplemental Data For All Classes: 1998 1997 1996 1995 1994
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net assets, end of year (000) $143,153 $69,796 $23,592 $7,549 $5,558
Portfolio turnover rate 99.14% 30.81% 62.25% 37.17% 43.85%
============================================================================================================================
</TABLE>
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(c) Commencement of offering respective class shares.
(d) Not annualized.
(e) Amount less than $.01.
See Notes to Financial Statements.
Copyright (C) 1999 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.
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. This report covers two of the
portfolios - Small-Cap Series and Large-Cap Series ("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) Securites are valued as follows:
Portfolio securities listed or admitted to trading privileges on any national
securities exchange are valued at the last sales price on the principal
securities exchange on which such securities are traded, or, if there is no
sale, at the mean between the last bid and ask 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 last bid and ask 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) For Large-Cap Series, 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 each Series are amortized evenly over a period
of five years.
(f) Each Series may write call options on securities it owns. Premiums received
by the Series upon writing covered call options are included in the Series'
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 Series enters into a closing purchase transaction, the Series
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%. Each Series of
the Company has 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 for Small-Cap
Series does not have a Rule 12b-1 plan. Distributor received the following
commissions on sales of Class A shares of each Series after concessions were
paid to authorized dealers:
Distributor Dealers'
Series Commissions Concessions
- --------------------------------------------------------------------------------
Small-Cap $ 467,657 $2,980,530
Large-Cap $ 214,749 $1,294,173
- --------------------------------------------------------------------------------
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
for these two Series, 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 $580,470,173 for the Small-Cap
Series and $123,076,752 for the Large-Cap Series at November 30, 1998.
Transactions in capital stock were as follows:
Year Ended 11/30/98
------------------------------------------------------
Small-Cap Series Large-Cap Series
-------------------------- --------------------------
Class A Shares Amount Shares Amount
- --------------------------------------------------- --------------------------
Sales of shares 6,447,168 $ 106,238,429 2,662,006 $ 54,926,487
- --------------------------------------------------- --------------------------
Shares issued to share-
holders in reinvestment
of realized gain from
investment transactions 214,484 3,431,712 97,208 1,896,265
- --------------------------------------------------- --------------------------
Total 6,661,652 109,670,141 2,759,214 56,822,752
- --------------------------------------------------- --------------------------
Shares reacquired (3,627,964) (54,893,698) (605,676) (12,303,172)
- --------------------------------------------------- --------------------------
Increase 3,033,688 $ 54,776,443) 2,153,538 $ 44,519,580
- -------------------------------------------------------------------------------
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 11,504,252 $179,825,798) 1,485,520 $ 27,442,166
- -------------------------------------------------------------------------------
12
<PAGE>
Notes to Financial Statements
Year Ended 11/30/98
----------------------------------------------------
Small-Cap Series Large-Cap Series
------------------------- -------------------------
Class B Shares Amount Shares Amount
- ---------------------------------------------------- -------------------------
Sales of shares 5,076,837 $ 83,914,314 822,431 $ 17,009,086
- ---------------------------------------------------- -------------------------
Shares issued to share-
holders in reinvestment
of realized gain from
investment transactions 171,715 2,735,421 32,991 633,431
- ---------------------------------------------------- -------------------------
Total 5,248,552 86,649,735 855,422 17,642,517
- ---------------------------------------------------- -------------------------
Shares reacquired (2,413,115) (35,334,535) (212,259) (4,357,417)
- ---------------------------------------------------- -------------------------
Increase 2,835,437 $ 51,315,200) 643,163 $ 13,285,100
- -------------------------------------------------------------------------------
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 11,075,172 $174,445,849) 592,640 $ 10,828,746
- -------------------------------------------------------------------------------
Year Ended 11/30/98
----------------------------------------------------
Small-Cap Series Large-Cap Series
------------------------- -------------------------
Class C Shares Amount Shares Amount
- ---------------------------------------------------- -------------------------
Sales of shares 2,714,384 $ 45,179,963 306,208 $ 6,291,017
- ---------------------------------------------------- -------------------------
Shares issued to share-
holders in reinvestment
of realized gain from
investment transactions48 766,807 3,059 58,812
- ---------------------------------------------------- -------------------------
Total 2,762,520 45,946,770 309,267 6,349,829
- ---------------------------------------------------- -------------------------
Shares reacquired (1,441,481) (21,034,948) (34,936) (698,216)
- ---------------------------------------------------- -------------------------
Increase 1,321,039 $ 24,911,822) 274,331 $ 5,651,613
- -------------------------------------------------------------------------------
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 3,109,152 $ 51,219,862) 80,439 $ 1,577,680
- -------------------------------------------------------------------------------
12/30/97
(Commencement of
Offering Class Y Shares) to
11/30/98
-------------------------------
Small-Cap Series
-------------------------------
Class Y Shares Amount
- -------------------------------------------------------------------------------
Sales of shares 2,570,909 $ 41,312,430
- -------------------------------------------------------------------------------
Shares reacquired (92,873) (1,171,704)
- -------------------------------------------------------------------------------
Increase 2,478,036 $ 40,140,726
- -------------------------------------------------------------------------------
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
November 30, 1998, accumulated net realized gain (loss) for each Series was as
follows:
- -------------------------------------------------------------------------------
Small-Cap Series $(30,380,175)
Large-Cap Series $ 1,187,636
- -------------------------------------------------------------------------------
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from methods used to determine the
corresponding income and capital gain amounts in accordance with generally
accepted accounting principles. Distributions declared on December 10, 1998 and
payable on December 18, 1998 to shareholders of record on December 10, 1998 were
as follows:
Rate Aggregate
Dividends Per Share Amount
- --------------------------------------------------------------------------------
Large-Cap Series-Class A - Net Investment Income $0.07 $307,591
Large-Cap Series-Class A - Capital Gains 0.17 747,006
Large-Cap Series-Class B - Capital Gains 0.17 272,904
Large-Cap Series-Class C - Capital Gains 0.17 60,913
- --------------------------------------------------------------------------------
5. Purchases and Sales of Securities
Purchases and sales of securities (other than short-term investments) for the
year ended November 30, 1998 were as follows:
Series Purchases Sales
- --------------------------------------------------------------------------------
Small-Cap $562,296,840 $355,342,025
Large-Cap $150,505,731 $ 97,337,280
- --------------------------------------------------------------------------------
As of November 30, 1998, net unrealized appreciation, unrealized appreciation
and unrealized depreciation of investments based on cost for federal income tax
purposes were as follows:
Net Unrealized
Appreciation Unrealized Unrealized
Series (Depreciation) Appreciation Depreciation
- --------------------------------------------------------------------------------
Small-Cap $(34,709,351) $ 47,268,740 $ 81,978,091
Large-Cap $ 18,610,081 $ 20,324,649 $ 1,714,568
- --------------------------------------------------------------------------------
The cost of investments for federal income tax purposes is substantially the
same as that used for financial reporting purposes. Transactions in call options
written during the year ended November 30, 1998 for the Large-Cap Series were as
follows:
Number Premiums
Series of Contracts Received
- -------------------------------------------------------------------------------
Options outstanding at November 30, 1997 -- $ --
- -------------------------------------------------------------------------------
Options written 305 $ 45,570
- -------------------------------------------------------------------------------
Options exercised (145) $(21,290)
- -------------------------------------------------------------------------------
Options expired (160) $(24,280)
- -------------------------------------------------------------------------------
Options outstanding at November 30, 1998 -- $ --
- -------------------------------------------------------------------------------
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. Directors' fees payable at
November 30, 1998, under a deferred compensation plan, were $4,900.
7. Line of Credit
Each Series, along with certain other funds managed by Lord Abbett, has
available a $200,000,000 unsecured revolving credit facility ("Facility"), from
a consortium of banks, to be used for temporary or emergency purposes as an
additional source of liquidity to fund redemptions of investor shares. Any
borrowings under this Facility will bear interest at current market rates as
defined in the agreement. The fee for this Facility is 0.06% per annum. There
were no loans outstanding pursuant to this Facility at November 30, 1998, nor
was the Facility utilized at any time during the year.
<PAGE>
Notes to Financial Statements
8. Transactions with Affiliated Companies
An affiliated company is a company in which a Series has ownership of at least
5% of the voting securities of the underlying issuer. Small-Cap-Series had the
following transactions during the period with companies that are affiliates:
<TABLE>
<CAPTION>
Realized Dividend
Balance of Balance of Market Gain (Loss) Income
Shares Held Gross Gross Shares Held Value Dec. 1, 1997 to Dec. 1, 1997 to
Affiliates Nov. 30, 1997 Purchases Sales Nov. 30, 1998 Nov. 30, 1998 Nov. 30, 1998 Nov. 30,1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BEI Technologies Inc. -- 400,000 -- 400,000 $ 4,850,000 $ -- $ 2,946
- ------------------------------------------------------------------------------------------------------------------------------------
Michael Baker Corp. 450,000 100,000 -- 550,000 5,087,500 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Elder-Beerman Stores Corp. -- 675,000 -- 675,000 9,745,313 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Garan Inc. 220,000 50,000 10,000 260,000 7,020,000 25,215 367,000
- ------------------------------------------------------------------------------------------------------------------------------------
Gerber Childrenswear Inc. -- 750,000 -- 750,000 7,078,125 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Kollmorgen Corp. 391,500 83,500 25,000 450,000 8,550,000 78 36,054
- ------------------------------------------------------------------------------------------------------------------------------------
Moog Inc. Class A 210,000 345,000 7,900 547,100 15,865,900 (19,806) --
- ------------------------------------------------------------------------------------------------------------------------------------
Neutral Posture Ergonomics, Inc. 128,000 182,000 -- 310,000 1,240,000 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
North Face Inc. 135,000 794,600 29,600 900,000 11,362,500 (232,928) --
- ------------------------------------------------------------------------------------------------------------------------------------
Oshkosh Truck Corp. -- 400,000 -- 400,000 12,000,000 -- 116,200
- ------------------------------------------------------------------------------------------------------------------------------------
Rogers Corp. 262,900 422,100 -- 685,000 18,580,625 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Scholastic Corp. 230,000 236,600 98,500 368,100 17,530,763 897,024 --
- ------------------------------------------------------------------------------------------------------------------------------------
Smithway Motor Express Corp. 120,000 205,000 -- 325,000 2,884,375 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Stride Rite Corp. 1,615,000 855,000 -- 2,470,000 $21,766,875 $ -- $ 468,325
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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,
1998, the related statements of operations for the year then ended and of
changes in net assets for each of the years in the two-year period then ended
and the financial highlights for each of the periods presented. These financial
statements and the financial highlights are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at November
30, 1998 by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Lord Abbett Research
Fund, Inc.-Small-Cap Series and Large-Cap Series at November 30, 1998, the
results of their operations, the changes in their net assets and their 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 8, 1999 ---------------
BULK RATE
[LOGO](R) LORD, ABBETT & CO. U.S. POSTAGE
Investment Management PAID
A Tradition of Performance Through Disciplined Investing PERMIT NO. 2405
NEW YORK, N.Y.
Lord Abbett mutual fund shares are distributed by: ---------------
LORD ABBETT DISTRIBUTOR LLC LARF-2-1198
- ------------------------------------------------------------
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203 (1/99)
