-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ToozNGNihfKeQ0RWZkkkyoXvBw3/k0KGuVQ3xolhId2WqkhAR0MMK5ceoLa+YGo4 XDqGSbG2zbKq2jgvco2TiA== 0000002691-00-000001.txt : 20000202 0000002691-00-000001.hdr.sgml : 20000202 ACCESSION NUMBER: 0000002691-00-000001 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991031 FILED AS OF DATE: 20000111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LORD ABBETT AFFILIATED FUND INC CENTRAL INDEX KEY: 0000002691 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 136020600 STATE OF INCORPORATION: MD FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-00005 FILM NUMBER: 505257 BUSINESS ADDRESS: STREET 1: 767 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10153 BUSINESS PHONE: 2128481870 MAIL ADDRESS: STREET 1: 767 FIFTH AVE STREET 2: 767 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10153-0203 FORMER COMPANY: FORMER CONFORMED NAME: LORD ABBOTT AFFILIATED FUND INC DATE OF NAME CHANGE: 19960315 FORMER COMPANY: FORMER CONFORMED NAME: AFFILIATED FUND INC DATE OF NAME CHANGE: 19941207 N-30D 1 10/31/99 ANNUAL REPORT Lord Abbett Affiliated Fund 1999 ANNUAL REPORT [GRAPHIC OMITTED] Helping you prepare for tomorrow, today [LOGO] Visit our Web Site and get: up to date statistics and other useful information at www.lordabbett.com Lord Abbett Affiliated Fund Building Investor Confidence Since 1934 A Tradition of Value Investing [GRAPHIC OMITTED] Affiliated's history highlights the concept of value investing: buying quality companies when they are "on sale" and selling them when they reach their potential. Through the years, this discipline has helped Affiliated Fund achieve returns competitive to the S&P 500 Index, with relatively moderate fluctuations in price.(1) - -------------------------------------------------------------------------------- Competitive Total Average Annual Rates of Total Return as of 10/31/99 Returns, Consistently [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Consistency The Fund has increased in value 33 out of the last 40 fiscal years. - -------------------------------------------------------------------------------- Large and Growing Shareholders taking dividends in cash Dividends saw an increase in their dividend checks 33 out of the last 40 fiscal years.(2) - -------------------------------------------------------------------------------- Shareholder Satisfaction Lord Abbett Affiliated Fund's history demonstrates its ability to help shareholders realize their financial objectives. That's probably why, on average, Affiliated Fund shareholders have owned the Fund for over 15 years.(3) - -------------------------------------------------------------------------------- The Fund: Something "Lord Abbett Affiliated Fund isn't the to Talk About life of the party, but it has a good time anyway ... Hudson's ability to pick up stocks on the cheap and hold on to them has been the key to the Fund's success." Source: Morningstar Mutual Funds, September 1999 - -------------------------------------------------------------------------------- SEC Average Annual SEC average annual rates of total Total Returns return, at the Class A share maximum sales charge of 5.75%, for the periods ended 9/30/99 were: [GRAPHIC OMITTED] The Fund's SEC yield for the 30 days ended 10/31/99 for Class A shares was 0.94%. Past performance is no indication of future results. The investment return and principal value of an investment in the Fund will fluctuate so that shares, on any given day or when redeemed, may be worth more or less than their original cost. The Fund's fiscal year-end is 10/31. Results quoted above (unless stated otherwise) are for periods ending 10/31/99 and reflect Class A share performance at net asset value with all distributions reinvested. (1) The S&P 500 Index consists of 500 stocks chosen for market size, liquidity and industry group representation and is widely regarded as the standard for measuring U.S. stock market performance. Indices are unmanaged and not available for direct investment. (2) Capital gains were reinvested. Period ends 10/31/99. (3) Based on a survey of Lord Abbett Affiliated Fund shareholders conducted by Lord, Abbett & Co. in 1998. See Important Information on page 7. Report to Shareholders For the Period Ended October 31, 1999 [PHOTO] Robert S. Dow Chairman November 10, 1999 "As we look forward, we anticipate the global economy will continue to grow." Lord Abbett Affiliated Fund completed its fiscal year on October 31, 1999. Below is an overview of some class-specific financial information for the close of the period. Twelve Months Ended October 31, 1999 - -------------------------------------------------------------------------------- Class A Class B Class C Class P Class Y - -------------------------------------------------------------------------------- Net asset value $ 16.22 $16.23 $ 16.23 $16.19 $16.25 Dividends $ 0.24 $ 0.13 $ 0.13 $ 0.21 $ 0.28 Capital gains $ 0.95 $ 0.95 $ 0.95 $ 0.95 $ 0.95 Total return* 20.69% 19.87% 19.80% 20.51% 21.15% The year under review was characterized by continued overall strength in both the broad equity market and the U.S. economy. Low interest rates and a deceleration in earnings have driven the U.S. equity market for the last two and one-half years. This environment favored a very select group of large stocks that have had stable earnings growth. Rather than venturing into "unknown" waters, investors stayed the course and continued to purchase names familiar to them, remaining with companies that exhibited strong earnings stories. The result, however, is that many of the larger, more well-known growth names have become, in our opinion, quite expensive. In anticipation of an improvement in the global economy, we made an early entry into the energy sector, a strategy that paid off well for the Fund. In our view, the rise in oil prices initiated by OPEC, coupled with solid fundamentals for many energy companies, helped to boost this sector. In addition, the technology sector continued to outperform the general market. However, despite strong performance by a number of holdings in this sector, we recently began to reduce our exposure to technology, as prices began to reach the upper end of our valuation discipline. We reinvested a good portion of the proceeds from those sales into more traditional cyclical sectors such as paper, chemicals and aluminum, and anticipate these areas will benefit from a rise in commodity prices as the global economy strengthens. In addition, we have started to focus some attention toward the property and casualty insurance sector during this period, and will continue to seek out companies in this market segment that display improving fundamentals. At the same time, we are generally underweighted in financial companies, which has worked to our advantage since many of these stocks continued to struggle during this period as interest rates increased. We believe there is only a small chance that U.S. interest rates will continue to climb. This view, coupled with the fact that many financial service companies have solid fundamentals, will likely result in an increase in our exposure to the financial services area. As we look forward, we anticipate the global economy will continue to grow. However, there are some signs that the robust U.S. economy may be moderating. A slowdown in consumer spending is possible due to high consumer debt levels and a decrease in mortgage refinancings (which reduce consumers' monthly mortgage payments). In addition, the recent volatility in the equity markets may serve to curtail spending previously attributable to the "wealth effect" from appreciated portfolios. Consequently, we are moderately underweighted in consumer stocks, especially those that are highly sensitive to changes in economic activity. A final note: we are proud to announce that on January 17, 2000, we are relocating our headquarters to the Colgate Center, at 90 Hudson Street, in Jersey City, New Jersey. Lord Abbett has experienced strong growth during the 90s. We have more than doubled our assets under management in the last five years to nearly $33 billion. We are very excited about the move and strongly believe it to be in the best interest of our shareholders. * Total return is the percent change in net asset value, assuming the reinvestment of all distributions. 1 The Income Perspective Income Generated from $100,000 Investments: 10/31/74-10/31/99 By reinvesting capital gains, long-term Affiliated shareholders received a higher level of income from dividends than the income produced for investors in short-term guaranteed CDs. Year Ended Six-Month CD Affiliated Fund Oct. 31 Interest(1) Dividends(2) - ---------------------------------------------------------- 1975 7,480 4,595 1976 6,060 5,911 1977 5,750 6,612 1978 8,180 7,320 1979 11,570 8,391 1980 13,280 10,082 1981 17,570 12,369 1982 14,020 13,209 1983 9,520 13,067 1984 11,270 13,793 1985 8,770 15,780 1986 7,040 17,020 1987 6,920 17,404 1988 7,910 18,695 1989 9,610 19,545 1990 8,560 18,571 1991 6,610 18,243 1992 4,000 18,555 1993 3,380 17,203 1994 4,520 16,677 1995 6,310 16,788 If capital 1996 5,630 18,462 gains and 1997 5,820 20,052 dividends 1998 5,710 19,388 had been 1999 5,420 18,943 reinvested, the Fund's Interest/Dividend Total $200,910 $ 366,675 total value - ----------------------------======= ========== would have been Over 25 Years Later --------- $3,880,680 Initial $100,000 Investment plus Growth $100,000 $1,300,604 - ----------------------------======= ========== Total Value $300,910 $1,667,279 - ----------------------------======= ========== The Real Cost of the CD Guarantee $1,366,369 ==================================================== Unlike the Fund, a CD is insured, and its rate and principal are guaranteed if held until maturity. The FDIC insures CDs up to $100,000. The CD rate is subject to change when the CD is renewed. Although CDs may offer safety on the downside, they sacrifice capital growth on the upside. (1) Average of six-month CD rates available each period. Source: Lipper, Inc. (2) Reflects the deduction of the 3.75% sales charge for Class A share investments of $100,000. Dividends were taken in cash; capital gains were reinvested. See Important Information on page 7. 2 Affiliated's Growth Record Results Based on Fiscal Year-End October 31(1) Growth of Capital(2) Dividend Return(3) Total Return(4) 1989 + 12.8% + 5.2% + 18.0 1990 - 12.0% + 4.4% - 7.6 1991 + 23.1% + 4.9% + 28.0 1992 + 6.3% + 4.1% + 10.4 1993 + 14.3% + 3.5% + 17.8 1994 + 3.7% + 3.0% + 6.7 1995 + 17.6% + 2.9% + 20.5 1996 + 20.5% + 2.7% + 23.2 1997 + 23.3% + 2.5% + 25.8 1998 + 8.4% + 1.9% + 10.3 1999 + 18.9% + 1.7% + 20.7% (1) Class A share performance. (2) Growth of capital reflects the reinvestment of capital gains distributions. (3) Dividend return reflects the reinvestment of dividends. (4) Total return is the percent change in value with both dividends and capital gains distributions reinvested. These results are at net asset value. Net asset value purchases are available for class a share investments of $1 million or more. For performance at the Class A share maximum sales charge, as well as other information, please turn to the inside front cover and pages 4 and 7. Affiliated's Growth Helped Protect Your Purchasing Power In our illustration, the prices noted for April 1989 and 1998 are actual costs--then and now. "Affiliated 1999" is what the 1989 amount would have grown to had it been invested in the Fund. Investments in Affiliated Fund (up 307.56%) surpassed increases in the cost of living, which was up 33.92% in these 10 years. Protection against the erosion caused by inflation is one important way to maintain--and enhance--your lifestyle. [GRAPHICS OMMITED]
One-Year Private One-Family House(6) First-Class Stamp Income per Capita(7) College Tuition(5) 1989 $11,189 $89,500 $.25 $18,175 1999 $14,508 $128,700 $.33 $26,365 Affiliated 1999 $45,601 $364,768 $.76$ $74,074
Affiliated's results reflect Class A share total return at net asset value, with all distributions reinvested for the 10 years ended 10/31/99. See Important Information on page 7. (5) National average. (6) Based on National Average. Metropolitan Area Median home prices. (7) National average. 1999 figure is based on January-March figures. Sources: U.S. Department of Education, Statistics Bureau Section, College Board Annual Survey of Colleges; National Association of Realtors, Research Division; U.S. Postal Service; Department of Commerce, Bureau of Economic Analysis Statistics. 3 The Total Return Perspective The chart below illustrates the growth of a $10,000 investment made in Affiliated Fund on 10/31/72. Even when investing right before a major stock market downturn long-term investors in Affiliated Fund did well. (Please see the chart on page 5.) The Fund's average shareholder ownership of over 15 years reflects the satisfaction of long-term Affiliated Shareholders. A History of Consistent Performance Past performance is no indication of future results. Growth of a $10,000 Fund Investment: 10/31/72-10/31/99(1) Value of Cumulative Value Cumulative How Year Shares of Capital Gains Value of $10,000 Ended Initially Distributions Reinvested Grew Oct. 31 Acquired Taken in Shares Dividends Total Value - -------------------------------------------------------------------------------- 1973 9,560 267 433 10,260 1974 7,258 394 762 8,414 1975 8,995 545 1,394 10,934 1976 10,746 887 2,250 13,883 1977 9,706 1,150 2,627 13,483 1978 9,434 1,382 3,263 14,079 1979 10,570 2,257 4,606 17,433 1980 12,066 3,732 6,519 22,317 1981 10,742 4,887 7,186 22,815 1982 11,364 6,730 9,571 27,665 1983 13,325 9,187 13,197 35,709 1984 12,212 11,251 14,173 37,636 1985 12,993 14,172 17,623 44,788 1986 15,510 21,514 24,060 61,084 1987 13,828 24,951 24,040 62,819 1988 12,768 31,932 25,778 70,478 1989 13,815 37,558 31,817 83,190 1990 11,801 34,617 30,474 76,892 1991 13,629 45,458 39,336 98,423 1992 13,974 50,142 44,501 108,617 1993 14,914 61,407 51,590 127,911 1994 14,609 67,326 54,497 136,432 1995 15,868 84,828 63,654 164,350 1996 17,245 111,153 74,118 202,516 1997 19,656 145,178 89,919 254,753 1998 19,285 168,327 93,307 280,919 1999 $21,483 $208,455 $109,112 $339,050 The dollar amounts of dividends and capital gains distributions reinvested in shares were $69,848 and $140,769, respectively. The initial investment plus all distributions reinvested amounted to $220,617. If dividends and capital gains distributions had been withdrawn in cash, the amounts of these payments would have been $14,552 and $21,114, respectively. (1) Reflects the deduction of the Class A share maximum 5.75% sales charge for investments under $50,000. All distributions were reinvested. See Important Information on page 7. 4 The Total Return Perspective We've lived through several periods of economic, political and stock market turmoil since 1972. By focusing on value investing, Affiliated Fund reduced downside volatility in periods of stock market weakness and produced returns that outpaced the S&P 500 (an unmanaged index), while outpacing guaranteed CDs and inflation. Using the Value Method of Investing, Affiliated Fund Reduced Volatility and Produced Rewarding Gains Average Annual Total Returns Over 27 Years(1) Affiliated: 13.9% S&P 500: 13.8% CDs: 8.1% Inflation: 5.3% [GRAPHIC OMITTED] An investor cannot invest directly in an index, such as the S&P 500. For more information on CDs, see page 2. (1) Average annual total return at the Class A share maximum 5.75% offering price from 10/31/72 through 10/31/99. (2) Average of six-month CD rates available each period. Source: Lipper, Inc. See Important Information on page 7. 5 Who Owns the Fund? Investor Profile of Lord Abbett Affiliated Fund
- ---------------------------------------------------------------------------------------------- Fiduciaries Custodians for Minors 18,983 Pension, Pro1/2t-Sharing and 401(k) Retirement Plans 21,324 Trusts 10,336 457 Retirement and 403(b) Plans 5,379 Estates 269 - ---------------------------------------------------------------------------------------------- Institutions Broker-held Accounts 59,426 Banks, Credit Unions and Other Financial Institutions 376 Corporations 491 Religious, Charitable and welfare organizations 399 Clubs and Fraternal Organizations 98 Cemeteries 64 Nursing homes and hospitals 31 Colleges and universities 38 Government Agencies 26 - ---------------------------------------------------------------------------------------------- Individuals Single and Joint accounts 87,899 IRAs 59,714 Total Accounts in Affiliated on 11/30/99 264,853 ==============================================================================================
A Note About Year 2000 Matters As you may know, there has been extensive media coverage about possible problems that may arise as a result of uncertainties about the ability of computers to "understand" dates using the year 2000. Potentially, these problems could disrupt the services and systems that the Fund relies on in its daily operations. As a general matter, we believe the financial industry has taken a leadership role addressing year 2000 (Y2K) issues and this should help to inspire confidence among concerned investors. More specifically, Lord Abbett, Lord Abbett Distributor LLC and the Fund's transfer agent, custodian and other providers of services critical to the Fund have been actively working on reviewing and replacing or updating computer systems and computer-to-computer interfaces, as needed. Each has completed or is in the process of testing new or revised systems and interfaces and generally expects that their systems, as well as those of their key external service providers, will be ready to handle Y2K without significant problems. Furthermore, the Fund has been routinely taking companies' Y2K preparations into account when considering or reviewing investments. In summary, while the Y2K problem is unprecedented and we cannot completely eliminate the possibility that the Fund could be affected in some way, we are confident that all parties involved are taking appropriate steps to resolve Y2K concerns. 6 Important Information Bonds purchased by the Fund are subject to market fluctuations upward and downward inversely to the rise and fall of interest rates. Common stocks are also subject to market fluctuations, providing the potential for gains and the risk of loss. 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 Fund's sales charge structure has changed in the past. The Fund issues additional classes of shares, with distinct pricing options. For a full discussion of the differences in pricing alternatives, please refer to the Fund's current prospectus. If used as sales material after 12/31/99, this report must be accompanied by Lord Abbett's Performance Quarterly for the most recently completed calendar quarter. Statement of Net Assets October 31, 1999 Shares or Principal Investments Amount Value - -------------------------------------------------------------------------------- Common Stocks and Convertible Securities 97.18% - -------------------------------------------------------------------------------- Aerospace/Defense .29% Raytheon Co. Class B 1,000,000 $ 29,250,000 - ------------------------------------------------------------------============== Aluminum 1.81% Alcoa Inc.+ 3,000,000 182,250,000 - ------------------------------------------------------------------============== Automotive 1.69% Ford Motor Co. 1,500,000 82,312,500 General Motors Corp. 1,250,000 87,812,500 Total 170,125,000 - ------------------------------------------------------------------============== Banks: Money Bank of America Corp. 1,400,000 90,125,000 Center 2.89% Chase Manhattan Corp. 2,300,000 200,962,500 Total 291,087,500 - ------------------------------------------------------------------============== Banks: Regional Bank One Corp.+ 2,000,000 75,125,000 4.16% Fleet Boston Corp. 3,500,000 152,687,500 Wells Fargo Co.+ 4,000,000 191,500,000 Total 419,312,500 - ------------------------------------------------------------------============== Broadcasting 1.70% Houston Inds Inc. $3.22 Conv. Pfd. into Time Warner, Inc. 1,000,000 114,750,000 MediaOne Group Inc.* 800,000 56,850,000 Total 171,600,000 - ------------------------------------------------------------------============== Chemicals 2.45% Dow Chemical Co.+ 1,200,000 141,900,000 Rohm & Haas Co. 2,750,000 105,187,500 Total 247,087,500 - ------------------------------------------------------------------============== Communications Technology 1.99% QUALCOMM Inc.+* 900,000 200,475,000 - ------------------------------------------------------------------============== Computer Services .96% Unisys Corp.* 4,000,000 97,000,000 - ------------------------------------------------------------------============== Computer Technology Apple Computer Inc.+* 750,000 60,093,750 5.79% International Business Machines Corp.+ 2,100,000 206,587,500 Sun Microsystems Inc.* 3,000,000 317,437,500 Total 584,118,750 - ------------------------------------------------------------------============== Computer: Hardware EMC Corp. .89% Conv. 31/4% due 3/15/2002** $14,000,000 90,168,750 - ------------------------------------------------------------------============== Computer: Software 1.06% Oracle Corp.* 2,250,000 107,015,625 - ------------------------------------------------------------------============== Conglomerates Minnesota Mining & 1.04% Manufacturing Co.+ 1,100,000 $ 104,568,750 - ------------------------------------------------------------------============== Containers .66% Owens Illinois Inc. 4.750% Conv. Pfd. 2,000,000 66,000,000 - ------------------------------------------------------------------============== Copper 1.12% Phelps Dodge Corp. 2,000,000 112,750,000 Data Processing Equipment & Components 1.13% First Data Corp.+ 2,500,000 114,218,750 - ------------------------------------------------------------------============== Diversified .61% Textron, Inc.+ 800,000 61,750,000 - ------------------------------------------------------------------============== Drugs 4.41% American Home Products Corp. 5,000,000 261,250,000 Pharmacia & Upjohn Inc. 3,400,000 183,387,500 Total 444,637,500 - ------------------------------------------------------------------============== Electric Power Allegheny Energy Inc.+ 3,000,000 95,437,500 6.45% Carolina Power & Light Co.+ 3,500,000 120,750,000 Duke Energy Corp. 3,500,000 197,750,000 Florida Progress Corp. 3,500,000 160,343,750 Texas Utilities 9.25% Conv. Pfd.+ 1,500,000 76,218,750 Total 650,500,000 - ------------------------------------------------------------------============== Electrical AlliedSignal Inc.+ 1,600,000 91,100,000 Equipment Emerson Electric Co. 2,500,000 150,156,250 4.16% Honeywell Inc. 1,000,000 105,437,500 Rockwell International Corp. 1,500,000 72,656,250 Total 419,350,000 - ------------------------------------------------------------------============== Electronics: Semiconductor 2.94% Texas Instruments Inc. 3,300,000 296,175,000 - ------------------------------------------------------------------============== Energy Equipment & Services 1.35% Schlumberger Ltd.+ 2,250,000 136,265,625 - ------------------------------------------------------------------============== Entertainment .49% Seagram Co. Ltd. 7.50% Conv. Pfd. 1,000,000 49,437,500 - ------------------------------------------------------------------============== Financial Services Marsh McLennan 2.60% Cos. Inc.+ 1,500,000 118,593,750 Morgan Stanley Dean Witter & Co.+ 1,300,000 143,406,250 Total 262,000,000 - ------------------------------------------------------------------============== 7 Statement of Net Assets October 31, 1999 Shares or Principal Investments Amount Value - -------------------------------------------------------------------------------- Food 1.42% Heinz H.J. Co. 3,000,000 $ 143,250,000 - ------------------------------------------------------------------============== Health Care Management Services 1.11% CIGNA Corp. 1,500,000 112,125,000 - ------------------------------------------------------------------============== Health Care Services Columbia/HCA .84% Healthcare Corp. 3,500,000 84,437,500 - ------------------------------------------------------------------============== Hospital Supplies Baxter .90% International Inc. 1,400,000 90,825,000 - ------------------------------------------------------------------============== Insurance 6.53% Ace Ltd. 3,500,000 68,031,250 Aegon NV ADR 1,500,000 137,906,250 American General Corp. 3,200,000 237,400,000 Chubb Corp. 2,000,000 109,750,000 St. Paul Companies Inc. 3,300,000 105,600,000 Total 658,687,500 - ------------------------------------------------------------------============== Machinery: Agriculture 1.44% Deere & Co.+ 4,000,000 145,000,000 - ------------------------------------------------------------------============== Natural Gas 2.31% Consolidated Natural Gas Co. 1,500,000 96,000,000 The Coastal Corp.+ 2,000,000 84,250,000 The Coastal Corp. 6.625% Conv. Pfd. 2,000,000 53,000,000 Total 233,250,000 - ------------------------------------------------------------------============== Oil: Integrated Domestic 1.16% Atlantic Richfield Co. 1,250,000 116,484,375 - ------------------------------------------------------------------============== Oil: Integrated BP Amoco plc ADR+ 2,800,000 161,700,000 International 9.13% Chevron Corp. 1,000,000 91,312,500 Exxon Corp. 1,000,000 74,062,500 Mobil Corp. 3,000,000 289,500,000 Texaco Inc.+ 2,500,000 153,437,500 Total Fina S.A. ADR+ 2,250,000 150,046,875 Total 920,059,375 - ------------------------------------------------------------------============== Paper and Forest Bowater Inc.+ 2,000,000 105,000,000 Products 4.09% Champion International Corp. 1,500,000 86,718,750 Georgia-Pacific Group 7.50% Conv. Pfd. 1,000,000 43,250,000 Georgia-Pacific Corp. (Timber Group) 3,000,000 71,625,000 International Paper Co. 2,000,000 105,250,000 Total 411,843,750 - ------------------------------------------------------------------============== Publishing 1.57% Dow Jones & Co. Inc. 2,564,575 157,721,363 - ------------------------------------------------------------------============== Radio & TV Broadcast 1.70% CBS Corp.* 3,500,000 170,843,750 - ------------------------------------------------------------------============== Retail 1.01% Wal-Mart Stores Inc.+ 1,800,000 102,037,500 - ------------------------------------------------------------------============== Telecommunications Alltel Corp.+ 2,750,000 228,937,500 6.29% Bell Atlantic Corp. 3,500,000 227,281,250 SBC Communications Inc. 3,500,000 178,281,250 Total 634,500,000 - ------------------------------------------------------------------============== Telephone: AT&T Corp.+ 4,500,000 $ 210,375,000 Long Distance MCI WorldCom Inc.* 2,500,000 214,531,250 4.22% Total 424,906,250 - ------------------------------------------------------------------============== Tobacco .82% Gallaher Group plc ADR 3,500,000 82,906,250 - ------------------------------------------------------------------============== Total Investments in Common Stocks and Convertible Securities (Cost $7,138,778,439) 9,796,021,363 - ------------------------------------------------------------------============== Short-term American General Corp. Investments 8.69% 5.32% due 11/1/1999 $ 22,920,000 22,920,000 Associates Corp. 5.32% due 11/1/1999 82,911,000 82,911,000 Dow ChemicalCo. 5.32% due 11/1/1999 163,553,000 163,553,000 Total 269,384,000 - ------------------------------------------------------------------============== Other (See Note 5) 606,910,767 - ------------------------------------------------------------------============== Total Short-term Investments (Cost $876,294,767) 876,294,767 Total Investments 105.87% (Cost $8,015,073,206) 10,672,316,130 - ------------------------------------------------------------------============== Cash and Receivables, Net of Liabilities (5.87%) (591,562,349) ================================================================================ Net Assets 100.00% $10,080,753,781 ================================================================================ Class A Shares-Net asset value ($9,307,645,513 / 573,941,042 shares outstanding) $16.22 Maximum offering price (net asset value plus sales charge of 5.75% of the offering price) $17.21 Class B Shares-Net asset value ($524,973,707 / 32,354,165 shares outstanding) $16.23 Class C Shares-Net asset value ($197,439,656 / 12,168,544 shares outstanding) $16.23 Class P Shares-Net asset value ($2,046,305 / 126,369 shares outstanding) $16.19 Class Y Shares-Net asset value ($48,648,600 / 2,994,013 shares outstanding) $16.25 + Securities (or a portion of securities) on loan. See Note 5. * Non-income producing security. **Restricted security under Rule 144A. ADR American Depository Receipt. See Notes to Financial Statements. 8 Issues added to or eliminated from the portfolio (exclusive of U.S. Government obligations and short-term investments) during the six months ended October 31, 1999. Portfolio Changes Additions Ace Ltd. Aegon NV ADR AlliedSignal Inc. Apple Computer Inc. Atlantic Richfield Co. Dow Chemical Co. Georgia-Pacific Group 7.50% Conv. Pfd. Honeywell Inc. International Paper Co. Marsh McLennan Cos. Inc. MediaOneGroup Inc. Minnesota Mining & Manufacturing Co. Oracle Corp. Phelps Dodge Corp. Raytheon Co. Class B Seagram Co. Ltd. 7.50% Conv. Pfd. Texas Utilities 9.25% Conv. Pfd. The Coastal Corp. The Coastal Corp. 6.625% Conv. Pfd. - -------------------------------------------------------------------------------- Eliminations Aetna Inc. Aetna Inc. $4.758 Conv. Pfd. Comcast Corp.Conv. 3.35% 5/15/29 ConAgra Inc. Eastman Kodak Co. First UnionCorp. Jefferson-Pilot Corp. May Department Stores Co. Ralston Purina Co. Waste Management Inc. VFCorp. Xerox Corp. 9 Statement of Operations
Investment Income Year Ended October 31, 1999 - ------------------------------------------------------------------------------------------------------------- Income Dividends $ 182,302,729 Interest 19,083,208 Foreign taxes withheld (100,000) Total income 201,285,937 ----------------------------------------------------------------------------------------------- Expenses Management fee 29,829,606 12b-1 distribution plan-Class A 27,926,819 12b-1 distribution plan-Class B 4,281,069 12b-1 distribution plan-Class C 1,584,742 12b-1 distribution plan-Class P 9,131 Shareholder servicing 9,042,477 Reports to shareholders 607,178 Registration 359,169 Directors' fees 345,965 Professional 289,504 Other 896,912 Total expenses before reductions 75,172,572 ------------------------------------------------------------------------------------------------ Expense reductions (917,037) ------------------------------------------------------------------------------------------------ Net expenses 74,255,535 ------------------------------------------------------------------------------------------------ Net investment income 127,030,402 ------------------------------------------------------------------------------------------------ Realized and Unrealized Gain on Investments - ------------------------------------------------------------------------------------------------------------- Net realized gain from investment transactions 1,108,589,813 - ------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation of investments 499,850,810 - ------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain on investments 1,608,440,623 - ------------------------------------------------------------------------------------------------------------- Net Increase in Net Assets Resulting from Operations $1,735,471,025 =============================================================================================================
See Notes to Financial Statements. 10 Statements of Changes in Net Assets
Year Ended Year Ended October 31, October 31, Increase in Net Assets 1999 1998 - --------------------------------------------------------------------------------------------------------------------------------- Operations Net investment income $ 127,030,402 $ 135,559,651 Net realized gain from investment transactions 1,108,589,813 556,373,895 Net change in unrealized appreciation of investments 499,850,810 78,452,439 - --------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 1,735,471,025 770,385,985 - --------------------------------------------------------------------------------------------------------------------------------- Undistributed net investment income included in price of share transactions - 40,491 - --------------------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from net investment income: Class A (137,028,835) (143,194,800) Class B (3,320,304) (2,266,183) Class C (1,232,723) (863,613) Class P (27,346) (19,753) Class Y (760,283) (172,653) ------------------------------------------------------------------------------------------------------------------- Total (142,369,491) (146,517,002) ------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from net realized gain from investment transactions: Class A (524,634,632) (701,757,786) Class B (20,854,149) (14,611,561) Class C (7,962,546) (5,544,532) Class P (117,804) - Class Y (2,155,302) - ------------------------------------------------------------------------------------------------------------------- Total (555,724,433) (721,913,879) ------------------------------------------------------------------------------------------------------------------- Total distributions (698,093,924) (868,430,881) Capital share transactions: Net proceeds from sale of shares 911,822,030 930,460,852 Net asset value of shares issued in reinvestment of dividends and distributions 576,481,381 704,773,197 ------------------------------------------------------------------------------------------------------------------- Total 1,488,303,411 1,635,234,049 ------------------------------------------------------------------------------------------------------------------- Cost of shares reacquired (965,529,945) (714,380,526) ------------------------------------------------------------------------------------------------------------------- Increase in net assets derived from capital share transactions 522,773,466 920,853,523 ------------------------------------------------------------------------------------------------------------------- Increase in net assets 1,560,150,567 822,849,118 - --------------------------------------------------------------------------------------------------------------------------------- Net Assets Beginning of year 8,520,603,214 7,697,754,096 ------------------------------------------------------------------------------------------------------------------- End of year (including undistributed net investment income of $12,690,368 and $28,029,457, respectively) $10,080,753,781 $8,520,603,214 ===================================================================================================================
See Notes to Financial Statements. 11 Financial Highlights
Class A Shares ------------------------------------------------------------ Year Ended October 31, Per Share Operating Performance: 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of year $14.56 $14.84 $13.02 $11.98 $11.03 - ------------------------------------------------------------------------------------------------------------------------------------ Income from investment operations Net investment income .21(e) .24 .30 .30 .32 Net realized and unrealized gain on investments 2.64 1.14 2.85 2.23 1.70 Total from investment operations 2.85 1.38 3.15 2.53 2.02 ------------------------------------------------------------------------------------------------------------------------------ Distributions Dividends from net investment income (.24) (.27) (.30) (.30) (.30) Distributions from net realized gain (.95) (1.39) (1.03) (1.19) (.77) Total distributions (1.19) (1.66) (1.33) (1.49) (1.07) ------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of year $16.22 $14.56 $14.84 $13.02 $11.98 - ------------------------------------------------------------------------------------------------------------------------------------ Total Return(a) 20.69% 10.27% 25.80% 23.23% 20.46% ==================================================================================================================================== Ratios to Average Net Assets: Expenses(b) .74% .63% .65% .66% .63% Net investment income 1.36% 1.64% 2.15% 2.61% 2.90% ==============================================================================================================================
Class B Shares Class C Shares ------------------------------------------- ----------------------------------------- Year Ended 8/1/96(c) Year Ended 8/1/96(c) October 31, to October 31, to Per Share Operating Performance: 1999 1998 1997 10/31/96 1999 1998 1997 10/31/96 - ---------------------------------------------------------------------------------------- ---------------------------------------- Net asset value, beginning of year $14.56 $14.84 $13.03 $11.88 $14.56 $14.84 $13.02 $11.88 - ---------------------------------------------------------------------------------------- ---------------------------------------- Income from investment operations Net investment income .10(e) .14 .20 .060 .10(e) .14 .22 .062 Net realized and unrealized gain on investments 2.65 1.12 2.84 1.142 2.65 1.12 2.83 1.130 Total from investment operations 2.75 1.26 3.04 1.202 2.75 1.26 3.05 1.192 ---------------------------------------------------------------------------------- ---------------------------------------- Distributions Dividends from net investment income (.13) (.15) (.20) (.052) (.13) (.15) (.20) (.052) Distributions from net realized gain (.95) (1.39) (1.03) - (.95) (1.39) (1.03) - Total distributions (1.08) (1.54) (1.23) (.052) (1.08) (1.54) (1.23) (.052) ----------------------------------------------------------------------------------- --------------------------------------- Net asset value, end of year $16.23 $14.56 $14.84 $13.03 $16.23 $14.56 $14.84 $13.02 Total Return(a) 19.87% 9.41% 24.78% 10.15%(d) 19.80% 9.41% 24.88% 10.07%(d) =================================================================================================================================== Ratios to Average Net Assets: Expenses(b) 1.43% 1.38% 1.42% .34%(d) 1.43% 1.40% 1.34% .33%(d) Net investment income .66% .87% 1.19% .27%(d) .66% .85% 1.28% .25%(d) =============================================================================================================================
12 Financial Highlights
Class P Shares Class Y Shares --------------------------------- ------------------------------ Year Ended 12/8/97(c) Year Ended 3/27/98(c) Per Share Operating Performance: October 31, 1999 to 10/31/98 October 31, 1999 to 10/31/98 - --------------------------------------------------------------------------------------------------- ----------------------------- Net asset value, beginning of year $14.53 $14.24 $14.57 $15.44 - --------------------------------------------------------------------------------------------------- ----------------------------- Income from investment operations Net investment income .19(e) .18 .26(e) .15 Net realized and unrealized gain (loss) on investments 2.63 .27 2.65 (.89) Total from investment operations 2.82 .45 2.91 (.74) --------------------------------------------------------------------------------------------- ----------------------------- Distributions Dividends from net investment income (.21) (.16) (.28) (.13) Distributions from net realized gain (.95) - (.95) - Total distributions (1.16) (.16) (1.23) (.13) - --------------------------------------------------------------------------------------------------- ----------------------------- Net asset value, end of year $16.19 $14.53 $16.25 $14.57 - --------------------------------------------------------------------------------------------------- ----------------------------- Total Return(a) 20.51% 3.21%(d) 21.15% (4.77)%(d) =================================================================================================================================== Ratios to Average Net Assets: Expenses(b) .88% .76%(d) .43% .24%(d) Net investment income 1.22% 1.21%(d) 1.67% 1.03%(d) =============================================================================================================================
Year Ended October 31, Supplemental Data for All Classes: 1999 1998 1997 1996 1995 - ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (000) $10,080,754 $8,520,603 $7,697,754 $6,100,665 $4,964,525 Portfolio turnover rate 62.30% 56.49% 46.41% 47.06% 53.84% - ----------------------------------------------------------------------------------------------------------------------------------
(a)Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions. (b)The ratios for 1997, 1998 and 1999 include expenses paid through an expense offset arrangement. (c)Commencement of offering respective class shares. (d)Not annualized. (e)Calculated using average shares outstanding during the period. See Notes to Financial Statements. 13 Notes to Financial Statements 1. Significant Accounting Policies Lord Abbett Affiliated Fund, Inc. (the "Company") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. 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 is a summary of significant accounting policies consistently followed by the Company: (a) Security valuation is determined as follows: Portfolio securities listed or admitted to trading privileges on any national securities exchange are valued at the last sales price on the principal securities exchange on which such securities are traded, or, if there is no sale, at the mean between the last bid and asked prices on such exchange, 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 asked prices, except that securities admitted to trading on the NASDAQ National Market System are valued at the last sales price if it is determined that such price more accurately reflects the value of such securities. Short-term securities are valued at amortized cost (which approximates market value) if the maturity is 60 days or less at the time of purchase, or market value if the maturity is greater than 60 days. 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) Security transactions are accounted for on the date that the securities are purchased or sold (trade date). Realized gains and losses from investment transactions are calculated on the identified cost basis. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Interest income is recorded on the accrual basis. 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) Prior to November 1, 1998, the Company followed the accounting practice of equalization whereby a portion of the proceeds from the sales and costs of repurchases of capital shares was allocated to undistributed net investment income. Effective November 1, 1998, the Fund discontinued the use of equalization. Discontinuing the use of equalization results in a simpler and more meaningful financial statement presentation. 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 portfolio. The management fee is based on average daily net assets at the following annual rates: 1/2 of 1% on the first $200 million; 2 1/45 of 1% on the next $300 million; 3/8 of 1% on the next $200 million; 7/20 of 1% on the next $200 million and 3/10 of 1% on the excess over $900 million. At October 31, 1999, the Company had a management fee payable in the amount of $2,625,947. The Company has Rule 12b-1 plans and agreements (the "Class A, Class B, Class C and Class P Plans") with Lord Abbett Distributor LLC ("Distributor"), an affiliate of Lord Abbett. The Company makes payments to Distributor which uses or passes on such payments to authorized institutions. Pursuant to the Class A Plan, the Company pays Distributor (1) an annual service fee of 0.15% of the average daily net asset value of shares sold prior to June 1, 1990 and 0.25% of the average daily net asset value of shares sold on or after that date, (2) a one-time distribution fee of up to 1% on certain qualifying purchases and (3) an annual distribution fee of 0.10% of the average daily net asset value of Class A shares. Pursuant to the Class B Plan, the Company 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, the Company 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. Pursuant to the Class P Plan, the Company pays Distributor an annual service and distribution fee of 0.20% and 0.25%, respectively, of the average daily net asset value of the Class P shares. Class Y does not have a Plan. At October 31, 1999, the Company had 12b-1 fees payable in the amount of $6,000,756. The Company along with certain other funds managed by Lord Abbett (the "Underlying Funds") has entered into a Servicing Arrangement with the Balanced Series of Lord Abbett Investment Trust pursuant to which the Underlying Funds will pay a portion of the expenses of the Balanced Series in proportion to the average daily value of shares owned by the Balanced Series. Other expenses include approximately $127,000 accrued pursuant to this Servicing Arrangement. Distributor received $2,656,174 representing payment of commissions on sales of Class A shares after deducting $16,074,161 allowed to authorized distributors as concessions. Certain of the Company's officers and directors have an interest in Lord Abbett. 3. Distributions Dividends from net investment income are declared quarterly. Net realized gain from investment transactions is distributed to shareholders annually. Accumulated undistributed net realized gain as of October 31, 1999 for financial reporting purposes aggregated $1,106,502,089. 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 November 17, 1999 and paid on November 26, 1999 to shareholders of record as of November 17, 1999 were as follows: Rate Per Aggregate Net Investment Income Share Amount - -------------------------------------------------------------------------------- Class A $0.060 $34,391,257 Class B 0.034 1,110,596 Class C 0.034 422,362 Class P 0.056 7,078 Class Y 0.074 223,379 - -------------------------------------------------------------------------------- Rate Per Aggregate Capital Gains Share Amount - -------------------------------------------------------------------------------- Class A $1.76 $1,008,810,197 Class B 1.76 57,489,704 Class C 1.76 21,863,435 Class P 1.76 222,441 Class Y 1.76 5,312,792 - -------------------------------------------------------------------------------- 14 4. Capital The Company has authorized 1.5 billion shares of $.001 par value capital stock designated as follows: 1.15 billion shares Class A, 100 million shares Class B, 100 million shares Class C, 75 million shares Class P and 75 million shares Class Y. Paid in capital amounted to $6,304,318,400 as of October 31, 1999. Transactions in shares of capital stock were as follows: Year Ended Year Ended October 31, 1999 October 31, 1998 - -------------------------------------------------------------------------------- Class A Shares Amount Shares Amount - -------------------------------------------------------------------------------- Sales of shares 39,694,036 $ 618,554,913 44,496,423 $647,321,212 Shares issued to shareholders in reinvestment of dividends and distributions 37,601,360 541,579,692 50,482,142 682,391,630 Total 77,295,396 1,160,134,605 94,978,565 1,329,712,842 - -------------------------------------------------------------------------------- Shares reacquired (56,461,608) (876,717,900) (46,371,906)(672,172,411) Increase 20,833,788 $ 283,416,705 48,606,659 $657,540,431 - -------------------------------------------------------------------------------- Year Ended Year Ended October 31, 1999 October 31, 1998 - -------------------------------------------------------------------------------- Class B Shares Amount Shares Amount - -------------------------------------------------------------------------------- Sales of shares 12,120,448 $189,940,250 12,095,054 $176,522,488 Shares issued to shareholders in reinvestment of dividends and distributions 1,605,000 23,100,835 1,191,014 16,111,114 Total 13,725,448 213,041,085 13,286,068 192,633,602 - -------------------------------------------------------------------------------- Shares reacquired (3,055,952) (47,511,701) (1,852,596) (26,707,944) Increase 10,669,496 $165,529,384 11,433,472 $165,925,658 - -------------------------------------------------------------------------------- Year Ended Year Ended October 31, 1999 October 31, 1998 - -------------------------------------------------------------------------------- Class C Shares Amount Shares Amount - -------------------------------------------------------------------------------- Sales of shares 5,202,798 $81,918,057 4,987,808 $ 72,979,231 Shares issued to shareholders in reinvestment of dividends and distributions 607,399 8,739,598 449,243 6,084,002 Total 5,810,197 90,657,655 5,437,051 79,063,233 - -------------------------------------------------------------------------------- Shares reacquired (1,914,461) (29,737,368) (1,074,218) (15,311,549) Increase 3,895,736 $60,920,287 4,362,833 $ 63,751,684 - -------------------------------------------------------------------------------- December 8, 1997 (Commencement of Offering Year Ended Class P Shares) to October 31, 1999 October 31, 1998 - -------------------------------------------------------------------------------- Class P Shares Amount Shares Amount - -------------------------------------------------------------------------------- Sales of shares 27,936 $ 430,275 136,502 $1,953,673 Shares issued to shareholders in reinvestment of dividends and distributions 10,124 145,672 1,376 19,466 Total 38,060 575,947 137,878 1,973,139 - -------------------------------------------------------------------------------- Shares reacquired (36,342) (578,481) (13,227) (188,622) Increase 1,718 $ (2,534) 124,651 $1,784,517 - -------------------------------------------------------------------------------- March 27, 1998 (Commencement of Offering Year Ended Class Y Shares) to October 31, 1999 October 31, 1998 - -------------------------------------------------------------------------------- Class Y Shares Amount Shares Amount - -------------------------------------------------------------------------------- Sales of shares 1,351,162 $ 20,978,535 2,136,585 $31,684,248 Shares issued to shareholders in reinvestment of dividends and distributions 200,651 2,915,584 11,916 166,985 Total 1,551,813 23,894,119 2,148,501 31,851,233 - -------------------------------------------------------------------------------- Shares reacquired (706,301) (10,984,495) - - Increase 845,512 $ 12,909,624 2,148,501 $31,851,233 - -------------------------------------------------------------------------------- 5. Portfolio Securities The Company may lend its securities to member banks of the Federal Reserve System and to registered broker-dealers approved by the Company. The loans are collateralized at all times by cash and/or U.S. Treasury securities in an amount at least equal to the market value of the securities loaned. As of October 31, 1999, the value of securities loaned was $603,007,402. These loans were collateralized by cash of $606,138,841. Income from securities lending of $917,976 is included in interest income on the Statement of Operations. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income. Purchases and sales of investment securities (other than short-term securities) aggregated $5,827,981,059 and $5,953,806,537, respectively. As of October 31, 1999, unrealized appreciation based on cost for federal income tax purposes aggregated $2,657,242,924, of which $2,809,039,367 related to appreciated securities and $(151,796,443) related to depreciated securities. The cost of investments for federal income tax purposes is substantially the same as that used for financial reporting purposes. 6. 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 on October 31, 1999 were $2,751,941. 7. Expense Reduction The Company has entered into an arrangement with its transfer agent whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Company's expenses. 8. Line of Credit The Company, along with certain other funds managed by Lord Abbett, has 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 was at an annual rate of 0.06% during the year. Effective December 17, 1999 the fee increased to an annual rate of 0.09%. There were no loans outstanding pursuant to this Facility as of October 31, 1999, nor was the Facility utilized at any time during the year. 9. Subsequent Event On December 15, 1999, the Company acquired all the net assets of Real Silk Investments, Incorporated ("Real Silk") pursuant to a plan of merger. The merger was accomplished by a tax-free exchange of 8,900,457 Class A shares of the Company valued at $131,459,455 for 164,683 shares of Real Silk. 15 Independent Auditors' Report The Board of Directors and Shareholders, Lord Abbett Affiliated Fund, Inc.: We have audited the accompanying statement of net assets of Lord Abbett Affiliated Fund, Inc. as of October 31, 1999, 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 October 31, 1999 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 Affiliated Fund, Inc. at October 31, 1999, the results of its operations, the changes in its net assets and its financial highlights for the respective periods, presented in conformity with generally accepted accounting principles. [GRAPHIC OMITTED] Deloitte & Touche LLP New York, New York December 17, 1999 Our Management Board of Directors Robert S. Dow E. Thayer Bigelow* William H.T. Bush*+ Robert B. Calhoun, Jr.* Stewart S. Dixon*+ John C. Jansing*+ C. Alan MacDonald* Hansel B. Millican, Jr.* Thomas J. Neff*+ * Outside Director + Audit Committee Officers Robert S. Dow, Chairman and President W. Thomas Hudson, Jr., Executive Vice President and Portfolio Manager Paul A. Hilstad, Vice President and Secretary Daniel E. Carper, Vice President Robert G. Morris, Vice President Eli M. Salzmann, Vice President John J. Walsh, Vice President Lawrence H. Kaplan, Vice President and Assistant Secretary A. Edward Oberhaus III, Vice President Joan A. Binstock, Vice President Tracie E. Richter, Vice President Donna McManus, Treasurer Lydia Guzman, Assistant Secretary Robert M. Hickey, Assistant Secretary Investment Manager and Underwriter Lord, Abbett & Co. and Lord Abbett Distributor LLC The General Motors Building 767 Fifth Avenue New York, NY 10153-0203 212-848-1800 Custodian The Bank of New York New York, NY Transfer Agent United Missouri Bank of Kansas City, N.A. Shareholder Servicing Agent DST Systems, Inc. P.O. Box 419100 Kansas City, MO 64141 800-821-5129 Auditors Deloitte & Touche LLP New York, NY Counsel Wilmer, Cutler & Pickering Washington, DC Copyright(C)1999 by Lord Abbett Affiliated Fund, Inc., 767 Fifth Avenue, New York, NY 10153-0203 This publication, when not used for the general information of shareholders of Lord Abbett Affiliated Fund, Inc., is to be distributed only if preceded or accompanied by a current prospectus which includes information concerning the Fund's investment objective and policies, sales charges and other matters. There is no guarantee that the forecasts contained within this publication will come to pass. All rights reserved. Printed in the U.S.A. 16 Lord, Abbett & Co. Portfolio Manager Profile [PHOTO] W. Thomas Hudson, Jr. Partner and Investment Team Leader Lord Abbett Affiliated Fund W. Thomas Hudson, Jr., Partner and Investment Team Leader of Lord Abbett Affiliated Fund, joined the Firm in 1982, and has over 32 years of professional experience in the financial services industry. During his tenure with Lord Abbett, Mr. Hudson has served as Director of Research, Portfolio Manager of the COVA Variable Annuity Growth and Income Portfolio and Portfolio Manager of the American Skandia Lord Abbett Growth and Income Portfolio. Mr. Hudson holds a BS in Finance and Accounting from St. Mary`s College in California. About Your Fund's Board of Directors The Securities and Exchange Commission (SEC) views the role of the independent Board of Directors as one of the most important components in overseeing a mutual fund. The Board of Directors watches over your Fund's general operations and represents your interests. Board members review and approve every contract between your Fund and Lord, Abbett & Co. (the Fund's investment manager) and Lord Abbett Distributor LLC (the Fund's underwriter). They meet regularly to review a wide variety of information and issues regarding your Fund. Every member of the Board possesses extensive business experience. Lord Abbett Affiliated's shareholders are indeed fortunate to have a group of independent directors with diverse backgrounds to provide a variety of viewpoints in the oversight of their Fund. Below, we feature one of our independent directors, E. Thayer Bigelow, Jr. E. Thayer Bigelow, Jr. Director-Lord Abbett Affiliated Fund [PHOTO] Mr. Bigelow is a graduate of Trinity College and earned his MBA at the University of Virginia's Darden Business School. He is currently Senior Advisor at Time Warner Inc. Prior to that, he was acting CEO of Courtroom Television Network, and previously served for five years as President and CEO of Time Warner Cable Programming, Inc. Mr. Bigelow serves as a member of the Board of Trustees for the Cate School. He is also a member of the Board of Directors of Crane Co. He has been an independent director for all of Lord Abbett's Family of Funds since 1994. Investing in the Lord Abbett Family of Funds
GROWTH - --------------------------------------------------------------------------------------------------------------------------- INCOME - --------------------------------------------------------------------------------------------------------------------------- Aggressive Growth Funds Growth & Balanced Fund Income Funds Tax-Free Money Growth Fund Income Funds Income Funds Market Fund Developing Research Fund - Research Fund - Balanced World Bond- National U. S. Government Growth Fund* Small-Cap Value Large-Cap Series*** Debenture Series California Securities Money Series Series Global Fund - Connecticut Market Fund +++ Alpha Series** Growth & Income Series Florida International Income Series High Yield Fund Georgia Series Affiliated Fund Bond-Debenture Hawaii Mid-Cap Fund Michigan Value Fund Limited Duration Minnesota Growth U. S. Government Missouri Opportunities Securities Series+ New Jersey Fund U. S. Government) New York Global Fund - Securities Series+ Pennsylvania Equity Series Texas Washington
Finding the right mutual fund can be confusing. At Lord, Abbett & Co., we believe your investment professional provides value in helping you identify and understand your investment objectives and, ultimately, offering fund recommendations suitable for your individual needs. This publication, when used as sales literature, is to be distributed only if preceded or accompanied by a current prospectus for the fund(s) covered by this report. For more complete information about any Lord Abbett fund, including risks, charges and ongoing expenses, call your investment professional or Lord Abbett Distributor LLC at 800-874-3733 for a prospectus. Read it carefully before investing. The Lord Abbett Family of Funds lets you access more than 30 portfolios designed to meet a variety of investment needs. Diversification. You and your investment professional can diversify your investments between equity and income funds. Flexibility. As your investment goals change, your investment professional can help you reallocate your portfolio. You may reallocate assets among our funds at any time. Speak with your investment professional to help you customize your investment plan. Numbers to Keep Handy For Shareholder Account or Statement Inquiries: 800-821-5129 For Literature Only: 800-874-3733 24-Hour Automated Shareholder Service Line: 800-865-7582 Visit Our Web Site: www.lordabbett.com * Lord Abbett Developing Growth Fund Class A, B and C closed to new investors on 9/30/99. ** Lord Abbett Securities Trust - Alpha Series is a fund of funds investing in shares of Lord Abbett Developing Growth Fund, Lord Abbett Research Fund - Small-Cap Value Series and Lord Abbett Securities Trust - International Series. *** Lord Abbett Balanced Series is a fund of funds investing in shares of certain other Lord Abbett funds. + An investment in this Fund is neither insured nor guaranteed by the U.S. Government. ++ An investment in this Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. This Fund is managed to maintain, and has maintained its stable $1.00 price per share. [LOGO] LAA-2-1099 (12/99) -----END PRIVACY-ENHANCED MESSAGE-----