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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act File Number 811-06650
LORD ABBETT RESEARCH FUND, INC.
-------------------------------
(Exact name of Registrant as specified in charter)
90 Hudson Street, Jersey City, NJ 07302
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(Address of principal executive offices) (zip code)
Christina T. Simmons, Vice President & Assistant Secretary
90 Hudson Street, Jersey City, NJ 07302
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(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 201-6984
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Date of fiscal year end: 11/30
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Date of reporting period: 11/30/2004
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ITEM 1: REPORT TO SHAREHOLDERS.
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[LORD ABBETT LOGO]
2004
ANNUAL
REPORT
LORD ABBETT
AMERICA'S VALUE FUND
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2004
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LORD ABBETT AMERICA'S VALUE FUND
ANNUAL REPORT
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2004
DEAR SHAREHOLDERS: We are pleased to provide you with this overview of Lord
Abbett America's Value Fund's strategies and performance for the fiscal year
ended November 30, 2004. On this and the following pages, we discuss the major
factors that influenced performance.
Thank you for investing in Lord Abbett Mutual Funds. We value the trust that
you place in us and look forward to serving your investment needs in the years
to come.
BEST REGARDS,
/s/ Robert S. Dow
ROBERT S. DOW
CHAIRMAN
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Q: WHAT WERE THE OVERALL MARKET CONDITIONS OF THE REPORTING PERIOD?
A: Overall, the U.S. economy showed signs of continued improvement during the
twelve-month period ended November 30, 2004. The employment rate continued to
trend higher as the fiscal year began. By January 2004, the unemployment rate
had declined to 5.6%, but the data also showed lower-than-expected job creation
in December 2003 and January 2004. Gross domestic product (GDP) grew at a 4.1%
annual pace in the fourth quarter of 2003 and, although this was slightly below
expectations, the data continued to support expectations for an improving
economy. In the face of a strengthening equity market, concern about the extent
of any interest rate rise by the Federal Reserve Board (the Fed) intensified.
The positive trend continued in the first half of calendar 2004, largely due
to strong consumer and capital spending. Corporate profits rose, triggered by a
rise in industrial production. As the year began, inflation and short-term rates
remained stable. However, somewhat disappointing employment reports and higher
energy prices weighed on consumer sentiment. In March and April, the U.S.
housing market remained strong, and there were improvements in durable goods
spending. But, retail sales dropped 0.5% in April after a 2% gain in March.
Beginning in April and continuing through July, unemployment stabilized. The
Producer Price Index (PPI) rose 0.1% in July, seasonally adjusted, after a
decrease of 0.3% in June and a 0.8% rise in May. (The PPI measures wholesale
prices of goods, i.e. before they are sold through retailers. It is sometimes
used to predict movements in the Consumer Price Index, which is a measure of
retail prices and commonly used as a measure of inflation.) Equity prices, as
measured by the S&P 500 Index,(1) were roughly flat in April, May and June. On
June 30, the Fed raised the fed funds rate from 1% to 1.25%, and stocks
responded positively to
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the widely expected Fed action. (The fed funds rate is the rate at which banks
lend to each other overnight.) However, equity prices declined slightly in July,
as investors continued to respond to uncertainties surrounding future interest
rate hikes, the continued war in Iraq, the upcoming presidential election and
record-high energy prices.
After slowing during a summer "soft patch," the economy regained some
traction in the third quarter of 2004. Despite indicators of renewed economic
strength, however, stocks finished the third quarter down slightly. One of the
key drivers of stocks during most of the summer seemed to be the direction of
oil prices, with stocks falling as oil prices rose. This negative correlation
lasted until mid-August when crude oil broke through the $45 per barrel price
level. From mid-August through mid-September, stocks benefited from declining
gasoline prices at the pump, a favorable turn of events for consumers. Equities
gathered momentum until a string of hurricanes on the Gulf Coast forced
production disruptions at one of the nation's largest oil-refining facilities,
causing oil prices to rise again as the quarter ended.
The combination of declining gasoline prices during much of the third
quarter and the addition of 300,000 - 400,000 jobs, while lower than expected,
contributed to a pick up in consumer spending in the third-quarter.
Third-quarter unemployment declined to 5.4%. On August 10, the Fed again raised
the fed funds rate from 1.25% to 1.50%. This was followed by another increase to
1.75% on September 21.
In October and November 2004, employment increased. The Consumer Price Index
(CPI) increased 0.5% in October. In addition, the S&P 500 Index(1) gained 1.4%
in October, as the technology sector outperformed all other industries and crude
oil prices fell sharply from record highs. The S&P 500 Index(1) achieved new
52-week highs in November, ending the month up 3.9%.
Q: HOW DID THE FUND PERFORM OVER THE FISCAL YEAR ENDED NOVEMBER 30, 2004?
A: For the fiscal year ended November 30, 2004, the Fund returned 20.3%,
reflecting performance at the Net Asset Value (NAV) of Class A shares with all
distributions reinvested, compared with its benchmark, the S&P 500 Index,(1)
which returned 12.9% over the same period. Standardized Average Annual Total
Returns, which reflect performance at the maximum 5.75% sales charge applicable
to Class A share investments and include the reinvestment of all distributions
are 1 Year: 13.35% and Since Inception (12/27/01): 6.58%. Class A shares
purchased subject to a front-end sales charge have no contingent deferred sales
2
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charge (CDSC). However, certain purchases of Class A shares made without a
front-end sales charge may be subject to a CDSC of 1% if the shares are redeemed
within 12 months of the purchase.
PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE
QUOTED. 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. YOU CAN OBTAIN PERFORMANCE DATA CURRENT
TO THE MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING
TO OUR WEBSITE AT www.lordabbett.com.
NOTE: Lord Abbett America's Value Fund is not a balanced fund and has the
capability to adjust equity and fixed-income allocations, based on relative
value in the market and the investment team's proprietary fundamental research.
Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE?
EQUITY PORTION
Stock selection and an overweight position within the materials sector were
the greatest positive contributors to Fund performance relative to its benchmark
for the twelve-month period. The sector includes producers of manufacturing
materials such as paper, chemicals, forest products and packaging. Overall, this
sector benefited from pricing power due to a strengthening U.S. economy and a
declining U.S. dollar. One chemical holding was boosted by a company-specific
operating turnaround and stronger pricing. A crop nutrient company also
performed well. The price of fertilizers, in particular potash, has increased
due to a rise in demand and limited supply. In addition, as the U.S. agriculture
sector thrives, suppliers to this sector are being rewarded. It is important to
note that the materials sector is the biggest sector in the Fund and it
delivered the biggest positive contribution during the twelve-month period ended
November 30, 2004.
Stock selection within the consumer discretionary sector also aided Fund
performance. The consumer discretionary sector includes stocks within the
consumer durables, apparel, media, hotel and leisure industries. A leading
retail department store holding outperformed due to market share gains and
margin expansion resulting from better merchandising and streamlined operations.
A direct seller of premium plastic goods also reported strong returns based on
an operating turnaround.
The largest detractor to Fund performance relative to its benchmark was
stock selection within the utilities sector. A
3
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utility holding, whose principal activity is to transmit, distribute and market
electricity, underperformed because its unregulated power subsidiary suffered
from declining prices driven by increased competition. Another electrical
utility holding disappointed based on unfavorable regulatory rulings. Stock
selection within the telecommunication services sector also hurt performance. A
provider of voice and data telecommunications products and services reported
poor performance due to investor concerns about tighter profit margins.
THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND
WEIGHTINGS OF A PARTICULAR ISSUER OR SECTOR AS A PERCENTAGE OF PORTFOLIO ASSETS
ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES.
FIXED-INCOME PORTION
Within the fixed-income component, the Fund's emphasis on lower-rated,
high-yield bonds proved beneficial during the twelve-month period ended November
30, 2004. Continued demand for high-yielding investments combined with a
benevolent credit environment contributed to performance in the high-yield bond
sector. In a similar fashion, convertible securities benefited from rising
earnings and participation in the improving stock market. Both high yield and
convertibles broadly outperformed the aggregate U.S. bond market.
The Fund's best performers in the high-yield market were below
investment-grade credits in the containers and packaging, chemicals and
healthcare providers industries. Top performers in convertibles included select
holdings in wireless telecommunications and electronics.
Detracting from performance within the high-yield sectors were individual
holdings in wireless and integrated telecommunications and in electric
generation, while select credits within semiconductors and telecommunications
equipment detracted from performance in the convertible securities sector.
THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND
WEIGHTINGS OF A PARTICULAR ISSUER OR SECTOR AS A PERCENTAGE OF PORTFOLIO ASSETS
ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES.
THE PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE FUND, INCLUDING THE
FUND'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND ONGOING EXPENSES, THAT AN
INVESTOR SHOULD CAREFULLY CONSIDER BEFORE INVESTING. TO OBTAIN A PROSPECTUS ON
THIS FUND OR ANY LORD ABBETT MUTUAL FUND, PLEASE CONTACT YOUR INVESTMENT
PROFESSIONAL OR LORD ABBETT DISTRIBUTOR LLC AT 800-874-3733 OR VISIT
www.lordabbett.com. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
(1) The S&P 500 Index is widely regarded as the standard for measuring large-cap
U.S. stock market performance; this popular index includes a representative
sample of leading companies in leading industries. Indices are unmanaged, do not
reflect the deduction of fees or expenses and are not available for direct
investment.
4
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IMPORTANT PERFORMANCE AND OTHER INFORMATION
The views of the Fund's management and the portfolio holdings described in this
report are as of November 30, 2004; these views and portfolio holdings may have
changed subsequent to this date and they do not guarantee the future performance
of the markets or the Fund. Information provided in this report should not be
considered a recommendation to purchase or sell securities.
A NOTE ABOUT RISK: See Notes to Financial Statements for a discussion of
investment risks. For a more detailed discussion of the risks associated with
the Fund, please see the Fund's Prospectus.
PERFORMANCE: BECAUSE OF ONGOING MARKET VOLATILITY, FUND PERFORMANCE MAY BE
SUBJECT TO SUBSTANTIAL FLUCTUATION. Except where noted, comparative fund
performance does not account for the deduction of sales charges and would be
different if sales charges were included. The Fund offers additional classes of
shares with distinct pricing options. For a full description of the differences
in pricing alternatives, please see the Fund's Prospectus.
MUTUAL FUNDS ARE NOT INSURED BY THE FDIC, ARE NOT DEPOSITS OR OTHER OBLIGATIONS
OF, OR GUARANTEED BY BANKS, AND ARE SUBJECT TO INVESTMENT RISKS INCLUDING
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
5
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INVESTMENT COMPARISON
Below is a comparison of a $10,000 investment in Class A shares with the same
investment in the S&P 500 Index assuming reinvestment of all dividends and
distributions. The performance of other classes will be greater than or less
than the performance shown in the graph below due to different sales loads and
expenses applicable to such classes. The graph and performance table below do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
[CHART]
<Table>
<Caption>
THE FUND (CLASS A SHARES) THE FUND (CLASS A SHARES)
AT NET ASSET VALUE AT MAXIMUM OFFERING PRICE(1) S&P 500 INDEX(2)
Dec 27, 2001 $ 10,000 $ 9,425 $ 10,000
Mar 31, 2002 $ 10,739 $ 10,122 $ 10,028
Jun 30, 2002 $ 10,163 $ 9,579 $ 8,685
Sep 30, 2002 $ 8,818 $ 8,311 $ 7,185
Dec 31, 2002 $ 9,232 $ 8,701 $ 7,791
Mar 31, 2003 $ 8,671 $ 8,172 $ 7,546
Jun 30, 2003 $ 9,708 $ 9,150 $ 8,707
Sep 30, 2003 $ 9,997 $ 9,422 $ 8,938
Dec 31, 2003 $ 11,244 $ 10,597 $ 10,025
Mar 31, 2004 $ 11,641 $ 10,971 $ 10,195
Jun 30, 2004 $ 11,835 $ 11,155 $ 10,370
Sep 30, 2004 $ 12,067 $ 11,373 $ 10,176
Nov 30, 2004 $ 12,784 $ 12,049 $ 10,749
</Table>
AVERAGE ANNUAL TOTAL RETURN AT MAXIMUM APPLICABLE
SALES CHARGE FOR THE PERIODS ENDED NOVEMBER 30, 2004
<Table>
<Caption>
1 YEAR LIFE OF CLASS
CLASS A(3) 13.35% 6.58%
CLASS B(4) 15.50% 7.18%
CLASS C(5) 19.50% 8.10%
CLASS P(6) 20.21% 8.71%
CLASS Y(7) 20.72% 9.15%
</Table>
(1) Reflects the deduction of the maximum initial sales charge of 5.75%
(2) Performance of the unmanaged index does not reflect transaction costs,
management fees or sales charges. The performance of the index is not
necessarily representative of the Fund's performance. Performance of the Index
begins on December 31, 2001.
(3) Class A shares commenced operations on December 27, 2001. Total return,
which is the percentage change in net asset value, after deduction of the
maximum initial sales charge of 5.75% applicable to Class A shares, with all
dividends and distributions reinvested for the periods shown ended November 30,
2004, is calculated using the SEC-required uniform method to compute such
return.
(4) Class B shares commenced operations on December 27, 2001. Performance
reflects the deduction of a CDSC of 4% for 1 year and 3% for life of the class.
(5) Class C shares commenced operations on December 27, 2001. The 1% CDSC for
Class C shares normally applies before the first anniversary of the purchase
date. Performance is at net asset value.
(6) Class P shares commenced operations on December 27, 2001. Performance is at
net asset value.
(7) Class Y shares commenced operations on December 27, 2001. Performance is at
net asset value.
6
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EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges on purchase payments (these charges vary among
the share classes); and (2) ongoing costs, including management fees;
distribution and service (12b-1) fees (these charges vary among the share
classes); and other Fund expenses. This Example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period (June 1, 2004 through November 30,
2004).
ACTUAL EXPENSES
For each class of the Fund, the first line of the applicable table on the
following pages provides information about actual account values and actual
expenses. You may use the information in this line, together with the amount you
invested, to estimate the expenses that you paid over the period. Simply divide
your account value by $1,000 (for example, an $8,600 account value divided by
$1,000 = 8.6), then multiply the result by the number in the first line under
the heading entitled "Expenses Paid During the Period 6/1/04 - 11/30/04" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
For each class of the Fund, the second line of the applicable table on the
following pages provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
7
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Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs, such as
sales charges. Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE PERIOD+
----------- ----------- -----------
6/1/04 -
6/1/04 11/30/04 11/30/04
----------- ----------- -----------
CLASS A
Actual $ 1,000.00 $ 1,109.10 $ 7.07
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,018.30 $ 6.76
CLASS B
Actual $ 1,000.00 $ 1,105.20 $ 10.42
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,015.10 $ 9.98
CLASS C
Actual $ 1,000.00 $ 1,105.20 $ 10.42
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,015.10 $ 9.98
CLASS P
Actual $ 1,000.00 $ 1,108.20 $ 7.54
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,017.85 $ 7.22
CLASS Y
Actual $ 1,000.00 $ 1,111.10 $ 5.76
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,020.10 $ 5.51
</Table>
+ For each class of the Fund, expenses are equal to the annualized expense ratio
for such class (1.34% for Class A, 1.98% for Class B and Class C, 1.43% for
Class P, and 1.09% for Class Y) multiplied by the average account value over the
period, multiplied by 183/366 (to reflect one-half year period).
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PORTFOLIO HOLDINGS PRESENTED BY SECTOR
NOVEMBER 30, 2004
<Table>
<Caption>
SECTOR %*
Consumer Discretionary 16.37%
Consumer Staples 7.01%
Energy 6.74%
Financials 13.31%
Healthcare 4.95%
Industrials 12.97%
Information Technology 1.81%
Materials 17.23%
Telecommunication Services 3.38%
Utilities 9.92%
Short-term Investments 6.31%
Total 100.00%
</Table>
* Represents percent of total investments.
8
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SCHEDULE OF INVESTMENTS
NOVEMBER 30, 2004
<Table>
<Caption>
SHARES
INVESTMENTS (000) VALUE
- -----------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 93.89%
COMMON STOCKS 66.30%
AEROSPACE & DEFENSE 0.30%
Northrop Grumman Corp. 26 $ 1,484,866
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AUTO COMPONENTS 1.89%
Dana Corp. 574 9,384,900
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BIOTECHNOLOGY 0.20%
Amgen, Inc.* 16 978,652
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CHEMICALS 8.65%
Crompton Corp. 633 7,099,293
Dow Chemical Co. 192 9,675,099
Eastman Chemical Co. 226 12,300,756
Monsanto Co. 156 7,160,712
Mosaic Co. (The)* 389 6,757,344
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TOTAL 42,993,204
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COMMERCIAL SERVICES & SUPPLIES 4.50%
R.R. Donnelley & Sons Co. 322 11,183,810
ServiceMaster Co. 849 11,185,281
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TOTAL 22,369,091
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CONTAINERS & PACKAGING 0.98%
Ball Corp. 109 4,875,570
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DIVERSIFIED TELECOMMUNICATION SERVICES 1.79%
SBC Communications, Inc. 353 8,879,976
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ELECTRIC UTILITIES 6.46%
Ameren Corp. 253 12,245,418
Northeast Utilities 539 9,829,616
Puget Energy, Inc. 428 10,046,250
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TOTAL 32,121,284
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ENERGY EQUIPMENT & SERVICES 1.76%
Halliburton Co. 212 8,766,200
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FOOD & STAPLES RETAILING 0.85%
Albertson's, Inc. 167 4,220,040
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</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
9
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SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2004
<Table>
<Caption>
SHARES
(000) VALUE
- -----------------------------------------------------------------------------------------
FOOD PRODUCTS 3.61%
Archer-Daniels-Midland Co. 57 $ 1,216,880
H.J. Heinz Co. 273 10,140,964
Kellogg Co. 151 6,611,810
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TOTAL 17,969,654
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GAS UTILITIES 2.15%
NiSource, Inc. 491 10,705,427
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HOUSEHOLD DURABLES 5.15%
Newell Rubbermaid, Inc. 244 5,640,752
Snap-on, Inc. 242 7,662,264
Tupperware Corp. 656 12,285,936
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TOTAL 25,588,952
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INDUSTRIAL CONGLOMERATES 1.47%
Hubbell, Inc. 150 7,299,720
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INSURANCE 5.50%
ACE Ltd.(a) 101 4,086,462
Allstate Corp. 41 2,075,550
Lincoln National Corp. 77 3,525,132
Max Re Capital Ltd.(a) 62 1,176,002
PartnerRe Ltd.(a) 45 2,779,388
SAFECO Corp. 144 6,979,680
St. Paul Travelers Cos., Inc. (The) 56 2,039,341
XL Capital Ltd. Class A(a) 62 4,664,784
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TOTAL 27,326,339
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LEISURE EQUIPMENT & PRODUCTS 0.50%
Foot Locker, Inc. 96 2,486,286
---------------
MACHINERY 2.90%
CNH Global N.V.(a) 74 1,384,511
Cummins, Inc. 54 4,259,670
Ingersoll-Rand Co.(a) 36 2,664,236
Timken Co. (The) 235 6,117,800
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TOTAL 14,426,217
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METALS & MINING 0.33%
Metal Management, Inc.* 62 1,621,476
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
10
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SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2004
<Table>
<Caption>
SHARES
(000) VALUE
- -----------------------------------------------------------------------------------------
MULTI-LINE RETAIL 1.66%
May Department Stores Co. 293 $ 8,236,348
---------------
OIL & GAS 3.08%
ChevronTexaco Corp. 169 9,221,940
EOG Resources, Inc. 16 1,216,134
Kerr-McGee Corp. 78 4,878,832
---------------
TOTAL 15,316,906
---------------
PAPER & FOREST PRODUCTS 3.05%
Georgia-Pacific Corp. 184 6,721,596
MeadWestvaco Corp. 251 8,429,325
---------------
TOTAL 15,150,921
---------------
PHARMACEUTICALS 2.37%
Bristol-Myers Squibb Co. 434 10,206,050
Mylan Laboratories, Inc. 86 1,554,496
---------------
TOTAL 11,760,546
---------------
REAL ESTATE INVESTMENT TRUSTS 4.47%
Health Care Property Investors, Inc. 407 10,919,810
Healthcare Realty Trust, Inc. 277 11,290,180
---------------
TOTAL 22,209,990
---------------
SPECIALTY RETAIL 0.48%
Limited Brands, Inc. 97 2,360,904
---------------
TRADING COMPANIES & DISTRIBUTORS 2.20%
Genuine Parts Co. 252 10,939,320
---------------
TOTAL COMMON STOCKS (Cost $285,380,807) 329,472,789
===============
<Caption>
PRINCIPAL
INTEREST MATURITY AMOUNT
RATE DATE (000)
-------------------------------------------
CONVERTIBLE BONDS 4.78%
AEROSPACE & DEFENSE 0.27%
Alliant Techsystems, Inc. 2.75% 2/15/2024 $ 1,250 1,325,000
------------
BIOTECHNOLOGY 0.70%
Fisher Scientific Int'l., Inc. 2.50% 10/1/2023 2,500 3,481,250
------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<Page>
SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2004
<Table>
<Caption>
PRINCIPAL
INTEREST MATURITY AMOUNT
RATE DATE (000) VALUE
- -------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES 0.26%
DST Systems, Inc. 4.125% 8/15/2023 $ 1,000 $ 1,273,750
------------
COMMUNICATIONS EQUIPMENT 0.69%
Avaya, Inc. Zero Coupon 10/31/2021 5,500 3,430,625
------------
COMPUTERS & PERIPHERALS 0.33%
EMC Corp. 4.50% 4/1/2007 1,500 1,653,750
------------
HOTELS, RESTAURANTS & LEISURE 0.66%
Hilton Hotels Corp. 3.375% 4/15/2023 1,500 1,723,125
International Game Technology Zero Coupon 1/29/2033 2,000 1,572,500
------------
TOTAL 3,295,625
------------
MACHINERY 0.24%
Agco Corp. 1.75% 12/31/2033 1,000 1,172,500
------------
MEDIA 0.40%
Lamar Advertising Co. 2.875% 12/31/2010 1,000 1,066,250
Liberty Media Corp. Class A 3.25% 3/15/2031 1,000 930,000
------------
TOTAL 1,996,250
------------
METALS & MINING 0.39%
Placer Dome, Inc.(a) 2.75% 10/15/2023 1,500 1,959,375
------------
PHARMACEUTICALS 0.20%
Watson Pharmaceutical, Inc. 1.75% 3/15/2023 1,000 992,500
------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS 0.29%
RF Micro Devices, Inc. 1.50% 7/1/2010 1,250 1,434,375
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 0.14%
LSI Logic Corp. 4.00% 5/15/2010 750 698,438
------------
SOFTWARE 0.21%
Mentor Graphics Corp. 6.875% 6/15/2007 1,000 1,035,000
------------
TOTAL CONVERTIBLE BONDS (Cost $22,129,361) 23,748,438
============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
12
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SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2004
<Table>
<Caption>
INTEREST SHARES
RATE (000) VALUE
- -------------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS 3.33%
ELECTRIC UTILITIES 0.29%
FPL Group, Inc. 8.00% 25 $ 1,427,500
------------
ENERGY EQUIPMENT & SERVICES 0.88%
CMS Energy Corp.+ 4.50% 70 4,348,750
------------
FOOD & STAPLES RETAILING 0.53%
Albertson's, Inc. 7.25% 100 2,636,000
------------
HEALTHCARE PROVIDERS & SERVICES 0.21%
Omnicare, Inc. 4.00% 20 1,046,000
------------
INSURANCE 0.78%
Chubb Corp. 7.00% 40 1,174,800
XL Capital Ltd.(a) 6.50% 110 2,714,800
------------
TOTAL 3,889,600
------------
MEDIA 0.64%
Interpublic Group of Cos. 5.375% 60 2,793,000
Sinclair Broadcast Group, Inc. 6.00% 10 408,800
------------
TOTAL 3,201,800
------------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $15,609,866) 16,549,650
============
<Caption>
PRINCIPAL
MATURITY AMOUNT
DATE (000)
-------------------------
GOVERNMENT SPONSORED ENTERPRISES
PASS-THROUGHS 0.98%
Federal National Mortgage Assoc. 6.00% 5/1/2033 $ 1,348 1,392,265
Federal National Mortgage Assoc. 6.00% 9/1/2034 3,393 3,507,058
------------
TOTAL GOVERNMENT SPONSORED ENTERPRISES
PASS-THROUGHS (Cost $4,875,274) 4,899,323
============
HIGH YIELD CORPORATE BONDS 16.90%
AEROSPACE & DEFENSE 0.10%
DRS Technologies, Inc. 6.875% 11/1/2013 500 525,000
------------
AUTO COMPONENTS 0.22%
Stanadyne Corp.+ 10.00% 8/15/2014 1,000 1,080,000
------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<Page>
SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2004
<Table>
<Caption>
PRINCIPAL
INTEREST MATURITY AMOUNT
RATE DATE (000) VALUE
- -------------------------------------------------------------------------------------------------------------------
BEVERAGES 0.17%
Le-Natures, Inc.+ 9.00% 6/15/2013 $ 750 $ 832,500
------------
CHEMICALS 1.45%
Airgas, Inc. 6.25% 7/15/2014 1,500 1,518,750
Crompton Corp.+ 9.875% 8/1/2012 2,000 2,250,000
Huntsman Int'l. Holdings Zero Coupon 12/31/2009 1,400 787,500
Nalco Co. 8.875% 11/15/2013 1,000 1,108,750
Rockwood Specialties Corp.+ 7.50% 11/15/2014 1,200 1,236,000
Terra Capital, Inc. 11.50% 6/1/2010 260 296,400
------------
TOTAL 7,197,400
------------
COMMERCIAL SERVICES & SUPPLIES 0.29%
Iron Mountain, Inc. 6.625% 1/1/2016 1,500 1,421,250
------------
CONSTRUCTION & ENGINEERING 0.17%
Shaw Group, Inc. 10.75% 3/15/2010 775 838,938
------------
CONTAINERS & PACKAGING 1.67%
Constar Int'l., Inc. 11.00% 12/1/2012 2,000 2,075,000
Crown Cork & Seal, Inc. 7.375% 12/15/2026 1,000 945,000
Graham Packaging Co.+ 9.875% 10/15/2014 1,250 1,312,500
Owens-Brockway Glass Co. 8.875% 2/15/2009 650 705,250
Rayovac Corp. 8.50% 10/1/2013 1,000 1,110,000
Stone Container Finance Co.(a) 7.375% 7/15/2014 2,000 2,155,000
------------
TOTAL 8,302,750
------------
DISTRIBUTORS 0.31%
Ferrellgas Partners, L.P. 6.75% 5/1/2014 1,500 1,552,500
------------
DIVERSIFIED TELECOMMUNICATION SERVICES 0.87%
Cincinnati Bell, Inc. 8.375% 1/15/2014 1,000 1,002,500
Level 3 Financing, Inc.+ 10.75% 10/15/2011 1,000 897,500
Qwest Capital Funding 7.90% 8/15/2010 2,000 1,975,000
Qwest Services Corp.+ 13.50%# 12/15/2010 400 476,000
------------
TOTAL 4,351,000
------------
ELECTRIC UTILITIES 0.22%
NRG Energy, Inc.+ 8.00% 12/15/2013 1,000 1,110,000
------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<Page>
SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2004
<Table>
<Caption>
PRINCIPAL
INTEREST MATURITY AMOUNT
RATE DATE (000) VALUE
- -------------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES 0.39%
Dynegy, Inc. 6.875% 4/1/2011 $ 2,000 $ 1,940,000
------------
FOOD & STAPLES RETAILING 0.80%
Friendly Ice Cream Corp. 8.375% 6/15/2012 1,500 1,477,500
Rite Aid Corp. 8.125% 5/1/2010 850 909,500
Stater Brothers Holdings, Inc. 8.125% 6/15/2012 1,500 1,590,000
------------
TOTAL 3,977,000
------------
FOOD PRODUCTS 1.06%
Chiquita Brands Int'l.+ 7.50% 11/1/2014 1,500 1,526,250
Dole Food Co. 8.875% 3/15/2011 2,000 2,200,000
Land O'Lakes, Inc. 8.75% 11/15/2011 500 487,500
Michael Foods, Inc. 8.00% 11/15/2013 1,000 1,060,000
------------
TOTAL 5,273,750
------------
GAS UTILITIES 0.81%
El Paso Corp. 7.00% 5/15/2011 1,850 1,850,000
Semco Energy, Inc. 7.125% 5/15/2008 2,000 2,160,000
------------
TOTAL 4,010,000
------------
HEALTHCARE PROVIDERS & SERVICES 1.29%
Ameripath, Inc. 10.50% 4/1/2013 1,000 1,035,000
HCA, Inc. 6.375% 1/15/2015 1,960 1,945,756
Medex, Inc. 8.875% 5/15/2013 825 915,750
National Nephrology Assoc.+ 9.00% 11/1/2011 150 174,000
Tenet Healthcare Corp. 7.375% 2/1/2013 1,000 980,000
Tenet Healthcare Corp.+ 9.875% 7/1/2014 1,250 1,350,000
------------
TOTAL 6,400,506
------------
HOTELS, RESTAURANTS & LEISURE 0.87%
Hard Rock Hotel, Inc. 8.875% 6/1/2013 1,000 1,105,000
Loews Cineplex Entertainment+ 9.00% 8/1/2014 1,250 1,350,000
River Rock Entertainment 9.75% 11/1/2011 1,700 1,887,000
------------
TOTAL 4,342,000
------------
HOUSEHOLD DURABLES 0.17%
Fedders North America, Inc. 9.875% 3/1/2014 1,000 820,000
------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<Page>
SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2004
<Table>
<Caption>
PRINCIPAL
INTEREST MATURITY AMOUNT
RATE DATE (000) VALUE
- -------------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES 0.31%
Allied Waste North America, Inc. 6.125% 2/15/2014 $ 1,000 $ 927,500
Park-Ohio Industries, Inc.+ 8.375% 11/15/2014 600 601,500
------------
TOTAL 1,529,000
------------
INTERNET SOFTWARE & SERVICES 0.16%
Affinia Group, Inc.+ 9.00% 11/30/2014 750 776,250
------------
MEDIA 2.21%
Block Communications, Inc. 9.25% 4/15/2009 400 430,000
Emmis Operating Co. 6.875% 5/15/2012 1,200 1,263,000
Gaylord Entertainment Co. 8.00% 11/15/2013 2,375 2,576,875
General Motors Corp. 7.20% 1/15/2011 500 514,723
Insight Communications Co., Inc.** 0.00%/12.25% 2/15/2006 & 2011 1,000 965,000
Interpublic Group of Cos., Inc. 6.25% 11/15/2014 670 665,668
Mediacom Communications Corp. 9.50% 1/15/2013 2,250 2,210,625
Paxson Communications Co. 10.75% 7/15/2008 1,750 1,806,875
Primedia, Inc. 8.875% 5/15/2011 550 569,250
------------
TOTAL 11,002,016
------------
METALS & MINING 0.32%
Neenah Corp.+ 13.00% 9/30/2013 750 772,500
Owens-Brockway Glass Co. 7.75% 5/15/2011 740 802,900
------------
TOTAL 1,575,400
------------
OIL & GAS 0.64%
EXCO Resources, Inc. 7.25% 1/15/2011 1,500 1,616,250
Foundation PA Coal Co.+ 7.25% 8/1/2014 1,000 1,075,000
Range Resources Corp. 7.375% 7/15/2013 470 505,250
------------
TOTAL 3,196,500
------------
PAPER & FOREST PRODUCTS 0.43%
Boise Cascade LLC+ 7.125% 10/15/2014 600 630,000
Buckeye Technologies, Inc. 8.00% 10/15/2010 1,500 1,522,500
------------
TOTAL 2,152,500
------------
SPECIALTY RETAIL 0.69%
J.C. Penney Co., Inc. 6.875% 10/15/2015 1,000 1,087,500
Jean Coutu Group, Inc. (The)+(a) 8.50% 8/1/2014 700 714,000
Playtex Products, Inc. 9.375% 6/1/2011 1,500 1,608,750
------------
TOTAL 3,410,250
------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<Page>
SCHEDULE OF INVESTMENTS (CONCLUDED)
NOVEMBER 30, 2004
<Table>
<Caption>
PRINCIPAL
INTEREST MATURITY AMOUNT
RATE DATE (000) VALUE
- -------------------------------------------------------------------------------------------------------------------
TEXTILES & APPAREL 0.55%
Elizabeth Arden, Inc. 7.75% 1/15/2014 $ 1,000 $ 1,070,000
INVISTA+(a) 9.25% 5/1/2012 1,500 1,676,250
-------------
TOTAL 2,746,250
-------------
WIRELESS TELECOMMUNICATION SERVICES 0.73%
Centennial Cell Communications 10.125% 6/15/2013 1,500 1,642,500
Dobson Communications Corp. 8.875% 10/1/2013 350 239,750
Nextel Partners, Inc. 8.125% 7/1/2011 1,200 1,326,000
Rogers Wireless, Inc.+(a) 7.25% 12/15/2012 400 417,500
-------------
TOTAL 3,625,750
-------------
TOTAL HIGH YIELD CORPORATE BONDS (Cost $80,870,150) 83,988,510
=============
U.S. TREASURY OBLIGATION 1.60%
U.S. Treasury Note (cost $7,971,169) 5.00% 2/15/2011 7,500 7,938,578
-------------
TOTAL LONG-TERM INVESTMENTS (Cost $416,836,627) 466,597,288
=============
SHORT-TERM INVESTMENT 6.32%
REPURCHASE AGREEMENT 6.32%
Repurchase Agreement dated 11/30/2004,
1.61% due 12/1/2004 with State Street
Bank & Trust Co. collateralized by
$24,805,000 of United States Treasury
Notes at 3.375% due 1/15/2007; value:
$32,028,390; proceeds: $31,400,516
(Cost $31,399,112) 31,399 31,399,112
=============
TOTAL INVESTMENTS IN SECURITIES 100.21% (Cost $448,235,739) 497,996,400
=============
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS (0.21%) (1,037,801)
=============
NET ASSETS 100.00% $ 496,958,599
=============
</Table>
* Non-income producing security.
** Deferred-interest debentures. These do not pay interest for a stipulated
number of years, after which they pay a predetermined interest rate.
+ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration normally to qualified institutional buyers.
# Variable rate security. The interest rate represents the rate at November
30, 2004.
(a) Foreign security traded in U.S. dollars.
SEE NOTES TO FINANCIAL STATEMENTS.
17
<Page>
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 2004
<Table>
ASSETS:
Investment in securities, at value (cost $448,235,739) $ 497,996,400
Cash 572,000
Receivables:
Interest and dividends 2,889,639
Investment securities sold 758,013
Capital shares sold 5,766,917
Prepaid expenses and other assets 38,534
- -------------------------------------------------------------------------------------------------------
TOTAL ASSETS 508,021,503
- -------------------------------------------------------------------------------------------------------
LIABILITIES:
Payables:
Investment securities purchased 10,329,320
Capital shares reacquired 184,174
Management fee 281,235
12b-1 distribution fees 156,727
Fund administration 15,033
Directors' fees 260
Accrued expenses and other liabilities 96,155
- -------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 11,062,904
=======================================================================================================
NET ASSETS $ 496,958,599
=======================================================================================================
COMPOSITION OF NET ASSETS:
Paid-in capital $ 439,678,314
Undistributed net investment income 4,374,454
Accumulated net realized gain on investments 3,145,170
Net unrealized appreciation on investments 49,760,661
- -------------------------------------------------------------------------------------------------------
NET ASSETS $ 496,958,599
=======================================================================================================
NET ASSETS BY CLASS:
Class A Shares $ 439,703,017
Class B Shares $ 27,634,352
Class C Shares $ 28,695,797
Class P Shares $ 285,432
Class Y Shares $ 640,001
OUTSTANDING SHARES BY CLASS:
Class A Shares (50 million shares of common stock authorized, par value $.001) 36,286,268
Class B Shares (30 million shares of common stock authorized, par value $.001) 2,296,567
Class C Shares (20 million shares of common stock authorized, par value $.001) 2,381,244
Class P Shares (20 million shares of common stock authorized, par value $.001) 23,498
Class Y Shares (30 million shares of common stock authorized, par value $.001) 52,565
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(NET ASSETS DIVIDED BY OUTSTANDING SHARES):
Class A Shares-Net asset value $ 12.12
Class A Shares-Maximum offering price
(Net asset value plus sales charge of 5.75%) $ 12.86
Class B Shares-Net asset value $ 12.03
Class C Shares-Net asset value $ 12.05
Class P Shares-Net asset value $ 12.15
Class Y Shares-Net asset value $ 12.18
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<Page>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 2004
<Table>
INVESTMENT INCOME:
Dividends $ 6,929,676
Interest 5,065,718
Foreign withholding tax (2,642)
- -------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 11,992,752
- -------------------------------------------------------------------------------------------------------
EXPENSES:
Management fee 2,135,142
12b-1 distribution plan-Class A 922,936
12b-1 distribution plan-Class B 161,680
12b-1 distribution plan-Class C 138,253
12b-1 distribution plan-Class P 855
Shareholder servicing 415,293
Professional 26,809
Reports to shareholders 65,099
Fund administration 113,874
Custody 22,338
Directors' fees 5,305
Registration 28,777
Other 28,299
- -------------------------------------------------------------------------------------------------------
Gross expenses 4,064,660
Expense reductions (3,808)
- -------------------------------------------------------------------------------------------------------
NET EXPENSES 4,060,852
- -------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 7,931,900
=======================================================================================================
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 4,309,414
Net change in unrealized appreciation (depreciation) on investments 42,043,396
=======================================================================================================
NET REALIZED AND UNREALIZED GAIN 46,352,810
=======================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 54,284,710
=======================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE YEAR ENDED FOR THE YEAR ENDED
INCREASE IN NET ASSETS NOVEMBER 30, 2004 NOVEMBER 30, 2003
OPERATIONS:
Net investment income $ 7,931,900 $ 1,758,995
Net realized gain (loss) on investments 4,309,414 (995,194)
Net change in unrealized appreciation (depreciation) on investments 42,043,396 9,363,448
- -----------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 54,284,710 10,127,249
=================================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (4,319,651) (860,700)
Class B (220,980) (73,731)
Class C (173,278) (62,644)
Class P (2,172) (28)
Class Y (30) (32)
- -----------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (4,716,111) (997,135)
=================================================================================================================
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 322,799,116 117,230,186
Reinvestment of distributions 4,543,239 901,903
Cost of shares reacquired (23,284,752) (10,219,641)
- -----------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM CAPITAL SHARE TRANSACTIONS 304,057,603 107,912,448
=================================================================================================================
NET INCREASE IN NET ASSETS 353,626,202 117,042,562
=================================================================================================================
NET ASSETS:
Beginning of year 143,332,397 26,289,835
- -----------------------------------------------------------------------------------------------------------------
END OF YEAR $ 496,958,599 $ 143,332,397
=================================================================================================================
UNDISTRIBUTED NET INVESTMENT INCOME $ 4,374,454 $ 1,140,219
=================================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<Page>
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
YEAR ENDED 11/30 12/19/2001(a)
------------------------------- TO
2004 2003 11/30/2002
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.29 $ 9.45 $ 10.00
========== ========== =============
Unrealized appreciation on investments .01
-------------
NET ASSET VALUE ON SEC EFFECTIVE DATE $ 10.01
=============
Investment operations:
Net investment income(b) .32 .31 .29
Net realized and unrealized gain (loss) 1.74 .79 (.80)
---------- ---------- -------------
Total from investment operations 2.06 1.10 (.51)
---------- ---------- -------------
Distributions to shareholders from:
Net investment income (.23) (.26) (.05)
---------- ---------- -------------
NET ASSET VALUE, END OF PERIOD $ 12.12 $ 10.29 $ 9.45
========== ========== =============
Total Return(c) .10%(d)(e)
Total Return(c) 20.29% 11.97% (5.10)%(d)(f)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including waiver and expense reductions 1.35% 1.35% 1.29%(d)
Expenses, excluding waiver and expense reductions 1.35% 1.46% 2.25%(d)
Net investment income 2.84% 3.24% 2.99%(d)
<Caption>
YEAR ENDED 11/30 12/19/2001(a)
------------------------------- TO
SUPPLEMENTAL DATA: 2004 2003 11/30/2002
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 439,703 $ 128,030 $ 21,467
Portfolio turnover rate 21.81% 28.71% 33.71%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
YEAR ENDED 11/30 12/19/2001(a)
------------------------------- TO
2004 2003 11/30/2002
---------- ---------- -------------
PER SHARE OPERATING PERFORMANCE (CLASS B SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.23 $ 9.40 $ 10.00
========== ========== =============
Unrealized appreciation on investments .01
-------------
NET ASSET VALUE ON SEC EFFECTIVE DATE $ 10.01
=============
Investment operations:
Net investment income(b) .25 .25 .24
Net realized and unrealized gain (loss) 1.72 .79 (.81)
---------- ---------- -------------
Total from investment operations 1.97 1.04 (.57)
---------- ---------- -------------
Distributions to shareholders from:
Net investment income (.17) (.21) (.04)
---------- ---------- -------------
NET ASSET VALUE, END OF PERIOD $ 12.03 $ 10.23 $ 9.40
========== ========== =============
Total Return(c) .10%(d)(e)
Total Return(c) 19.50% 11.35% (5.69)%(d)(f)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including waiver and expense reductions 1.99% 1.99% 1.85%(d)
Expenses, excluding waiver and expense reductions 1.99% 2.10% 2.81%(d)
Net investment income 2.20% 2.60% 2.43%(d)
<Caption>
YEAR ENDED 11/30 12/19/2001(a)
------------------------------- TO
SUPPLEMENTAL DATA: 2004 2003 11/30/2002
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 27,634 $ 9,398 $ 2,283
Portfolio turnover rate 21.81% 28.71% 33.71%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
YEAR ENDED 11/30 12/19/2001(a)
------------------------------- TO
2004 2003 11/30/2002
PER SHARE OPERATING PERFORMANCE (CLASS C SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.25 $ 9.41 $ 10.00
========== ========== =============
Unrealized appreciation on investments .01
-------------
NET ASSET VALUE ON SEC EFFECTIVE DATE $ 10.01
=============
Investment operations:
Net investment income(b) .25 .24 .24
Net realized and unrealized gain (loss) 1.73 .80 (.79)
---------- ---------- -------------
Total from investment operations 1.98 1.04 (.55)
---------- ---------- -------------
Distributions to shareholders from:
Net investment income (.18) (.20) (.05)
---------- ---------- -------------
NET ASSET VALUE, END OF PERIOD $ 12.05 $ 10.25 $ 9.41
========== ========== =============
Total Return(c) .10%(d)(e)
Total Return(c) 19.50% 11.27% (5.54)%(d)(f)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including waiver and expense reductions 1.99% 1.99% 1.85%(d)
Expenses, excluding waiver and expense reductions 1.99% 2.10% 2.81%(d)
Net investment income 2.20% 2.60% 2.43%(d)
<Caption>
YEAR ENDED 11/30 12/19/2001(a)
------------------------------- TO
SUPPLEMENTAL DATA: 2004 2003 11/30/2002
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 28,696 $ 5,902 $ 2,538
Portfolio turnover rate 21.81% 28.71% 33.71%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
YEAR ENDED 11/30 12/19/2001(a)
------------------------------- TO
2004 2003 11/30/2002
PER SHARE OPERATING PERFORMANCE (CLASS P SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.31 $ 9.45 $ 10.00
========== ========== =============
Unrealized appreciation on investments .01
-------------
NET ASSET VALUE ON SEC EFFECTIVE DATE $ 10.01
=============
Investment operations:
Net investment income(b) .31 .31 .28
Net realized and unrealized gain (loss) 1.75 .80 (.80)
---------- ---------- -------------
Total from investment operations 2.06 1.11 (.52)
---------- ---------- -------------
Distributions to shareholders from:
Net investment income (.22) (.25) (.04)
---------- ---------- -------------
NET ASSET VALUE, END OF PERIOD $ 12.15 $ 10.31 $ 9.45
========== ========== =============
Total Return(c) .10%(d)(e)
Total Return(c) 20.21% 12.03% (5.20)%(d)(f)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including waiver and expense reductions 1.44% 1.44% 1.35%(d)
Expenses, excluding waiver and expense reductions 1.44% 1.55% 2.31%(d)
Net investment income 2.75% 3.15% 2.93%(d)
<Caption>
YEAR ENDED 11/30 12/19/2001(a)
------------------------------- TO
SUPPLEMENTAL DATA: 2004 2003 11/30/2002
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 286 $ 1 $ 1
Portfolio turnover rate 21.81% 28.71% 33.71%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
24
<Page>
FINANCIAL HIGHLIGHTS (CONCLUDED)
<Table>
<Caption>
YEAR ENDED 11/30 12/19/2001(a)
------------------------------- TO
2004 2003 11/30/2002
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.33 $ 9.47 $ 10.00
========== ========== =============
Unrealized appreciation on investments .01
-------------
NET ASSET VALUE ON SEC EFFECTIVE DATE $ 10.01
=============
Investment operations:
Net investment income(b) .45 .34 .32
Net realized and unrealized gain (loss) 1.66 .80 (.80)
---------- ---------- -------------
Total from investment operations 2.11 1.14 (.48)
---------- ---------- -------------
Distributions to shareholders from:
Net investment income (.26) (.28) (.06)
---------- ---------- -------------
NET ASSET VALUE, END OF PERIOD $ 12.18 $ 10.33 $ 9.47
========== ========== =============
Total Return(c) .10%(d)(e)
Total Return(c) 20.72% 12.47% (4.83)%(d)(f)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including waiver and expense reductions 1.09% .99%+ .93%(d)
Expenses, excluding waiver and expense reductions 1.09% 1.10%+ 1.89%(d)
Net investment income 3.74% 3.60%+ 3.35%(d)
<Caption>
YEAR ENDED 11/30 12/19/2001(a)
------------------------------- TO
SUPPLEMENTAL DATA: 2004 2003 11/30/2002
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 640 $ 1 $ 1
Portfolio turnover rate 21.81% 28.71% 33.71%
</Table>
+ The ratios have been determined on a Fund basis.
(a) Commencement of investment operations; SEC effective date and date shares
first became available to the public is 12/27/2001.
(b) Calculated using average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(d) Not annualized.
(e) Total return for the period 12/19/2001 through 12/26/2001.
(f) Total return for the period 12/27/2001 through 11/30/2002.
SEE NOTES TO FINANCIAL STATEMENTS.
25
<Page>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Lord Abbett Research Fund, Inc. (the "Company") is registered under the
Investment Company Act of 1940 (the "Act") as a diversified open-end management
investment company incorporated under Maryland law on April 6, 1992. The Company
currently consists of four separate funds. This report covers one of the
funds--Lord Abbett America's Value Fund (the "Fund").
The Fund's investment objective is to seek current income and capital
appreciation. The Fund offers five classes of shares: Classes A, B, C, P and Y,
each with different expenses and dividends. A front-end sales charge is normally
added to the Net Asset Value ("NAV") for Class A shares. There is no front-end
sales charge in the case of the Class B, C, P and Y shares, although there may
be a contingent deferred sales charge ("CDSC") as follows: certain redemptions
of Class A shares made within 24 months (12 months if shares were purchased on
or after November 1, 2004) following certain purchases made without a sales
charge; Class B shares redeemed before the sixth anniversary of purchase; and
Class C shares redeemed before the first anniversary of purchase. Class B shares
will convert to Class A shares on the eighth anniversary of an original purchase
of Class B shares.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results could
differ from those estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) INVESTMENT VALUATION-Securities traded on any recognized U.S. or non-U.S.
exchange or on NASDAQ, Inc. are valued at the last sales price or official
closing price on the exchange or system on which they are principally
traded. Unlisted equity securities are valued at the last quoted sales
price or, if no sale price is available, at the mean between the most
recently quoted bid and asked prices. Fixed income securities are valued at
the mean between the bid and asked prices on the basis of prices supplied
by independent pricing services, which reflect broker/dealer supplied
valuations and electronic data processing techniques. Securities for which
market quotations are not readily available are valued at fair value as
determined by management and approved in good faith by the Board of
Directors. Short-term securities with 60 days or less remaining to maturity
are valued using the amortized cost method, which approximates current
market value.
(b) SECURITY TRANSACTIONS-Security transactions are recorded as of the date
that the securities are purchased or sold (trade date). Realized gains and
losses from sales of portfolio securities are calculated using the
identified-cost method. 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.
(c) INVESTMENT INCOME-Dividend income is recorded on the ex-dividend date.
Interest income is recorded on the accrual basis. Discounts are accreted
and premiums are amortized using the effective interest method. Investment
income is allocated to each class of shares based upon the relative
proportion of net assets at the beginning of the day.
26
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(d) FEDERAL TAXES-It is the policy of the Fund to meet the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all taxable income and
capital gains to its shareholders. Therefore, no federal income tax
provision is required.
(e) EXPENSES-Expenses incurred by the Company that do not specifically relate
to an individual fund are generally allocated to the Funds within the
Company on a pro-rata basis. Expenses, excluding class specific expenses,
are allocated to each class of shares based upon the relative proportion of
net assets at the beginning of the day. Class A, B, C and P shares bear all
expenses and fees relating to their respective 12b-1 Distribution Plans.
(f) REPURCHASE AGREEMENTS-The Fund may enter into repurchase agreements with
respect to securities. A repurchase agreement is a transaction in which the
Fund acquires a security and simultaneously commits to resell that security
to the seller (a bank or securities dealer) at an agreed-upon price on an
agreed-upon date. The Fund requires at all times that the repurchase
agreement be collateralized by cash, or by securities of the U.S.
Government, its agencies, its instrumentalities, or U.S. Government
sponsored enterprises having a value equal to, or in excess of, the value
of the repurchase agreement (including accrued interest). If the seller of
the agreement defaults on its obligation to repurchase the underlying
securities at a time when the value of those securities has declined, the
Fund may incur a loss upon disposition of the securities.
3. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE
The Company has a management agreement with Lord, Abbett & Co. LLC ("Lord
Abbett") pursuant to which Lord Abbett supplies the Fund 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 and statistical work and supervision of
the Fund's investment portfolio.
The management fee is based on the Fund's average daily net assets at an annual
rate of .75%.
Lord Abbett provides certain administrative services to the Fund pursuant to an
Administrative Services Agreement at an annual rate of .04% of the Fund's
average daily net assets.
12b-1 DISTRIBUTION PLANS
The Company has adopted a distribution plan with respect to one or more classes
of shares pursuant to Rule 12b-1 of the Act, which provides for the payment of
ongoing distribution and service fees to Lord Abbett Distributor LLC
("Distributor"), an affiliate of Lord Abbett. The fees are accrued daily at
annual rates based upon average daily net assets as follows:
<Table>
<Caption>
FEE CLASS A CLASS B CLASS C CLASS P
- -----------------------------------------------------------------------------------
Service .25% .25% .25% .20%
Distribution .10%(1) .75% .75% .25%
</Table>
(1) In addition, until September 30, 2004, the Fund paid a one-time
distribution fee of up to 1.00% on certain qualifying purchases of Class A
shares. Effective October 1, 2004, the Distributor pays such one-time
distribution fee. The unamortized balance of these distribution fees as of
September 30, 2004 was $40,514. This amount will continue to be amortized
by the Fund, generally over a two-year period. The amount of CDSC collected
during the fiscal year ended November 30, 2004 was $6,256.
27
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Class Y does not have a distribution plan.
COMMISSIONS
Distributor received the following commissions on sales of Class A shares of the
Fund, after concessions were paid to authorized dealers, for fiscal year ended
November 30, 2004:
<Table>
<Caption>
DISTRIBUTOR DEALERS'
COMMISSIONS CONCESSIONS
- --------------------------------
$ 1,528,984 $ 7,953,479
</Table>
One Director and certain of the Fund's officers have an interest in Lord Abbett.
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYFORWARDS
Dividends from net investment income, if any, are declared and paid at least
semi-annually. Taxable net realized gains from investment transactions, reduced
by capital loss carryforwards, if any, are declared and distributed to
shareholders at least annually. The capital loss carryforward amount, if any, is
available to offset future net capital gains. Dividends and distributions to
shareholders are recorded on the ex-dividend date. The amount of dividends and
distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from accounting principles generally accepted in the United States of America.
These book/tax differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the components of net assets based on their federal tax
basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed earning and profits for tax purposes
are reported as a tax return of capital.
The following distribution was declared on December 9, 2004, and paid on
December 14, 2004 to the shareholders of record on December 13, 2004:
<Table>
<Caption>
ORDINARY SHORT-TERM LONG-TERM
INCOME CAPITAL GAINS CAPITAL GAINS
- -----------------------------------------------------------
$ 5,710,212 $ 1,302,458 $ 1,854,587
</Table>
The tax character of distributions paid during the fiscal years ended November
30, 2004 and 2003 are as follows:
<Table>
<Caption>
11/30/2004 11/30/2003
- -------------------------------------------------------------
Distributions paid from:
Ordinary income $ 4,716,111 $ 997,135
- -------------------------------------------------------------
Total distributions $ 4,716,111 $ 997,135
=============================================================
</Table>
28
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
As of November 30, 2004, the components of accumulated earnings (losses) on a
tax basis are as follows:
<Table>
Undistributed ordinary income - net $ 5,848,134
Undistributed long-term capital gains 1,864,564
- --------------------------------------------------------------------------------
Total undistributed earnings $ 7,712,698
Temporary differences (260)
Unrealized gains - net 49,567,847
- --------------------------------------------------------------------------------
Total accumulated earning (losses) - net $ 57,280,285
================================================================================
</Table>
As of November 30, 2004, the Fund's aggregate unrealized security gains and
losses based on cost for U.S. federal income tax purposes are as follows:
<Table>
Tax Cost $ 448,428,553
- --------------------------------------------------------------------------------
Gross unrealized gain 51,422,211
Gross unrealized loss (1,854,364)
- --------------------------------------------------------------------------------
Net unrealized security gain $ 49,567,847
================================================================================
</Table>
The difference between book-basis and tax-basis unrealized gains is primarily
attributable to wash sales and other temporary tax adjustments.
Permanent items identified during the year ended November 30, 2004 have been
reclassified among the components of net assets based on their tax basis
treatment as follows:
<Table>
<Caption>
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED
INCOME GAIN
- -------------------------------------
$ 18,446 $ (18,446)
</Table>
The permanent differences are primarily attributable to the tax treatment of
amortization.
5. PORTFOLIO SECURITIES TRANSACTIONS
Purchases and sales of investment securities (other than short-term investments)
for the fiscal year ended November 30, 2004 are as follows:
<Table>
<Caption>
U.S.GOVERNMENT NON-U.S. GOVERNMENT U.S. GOVERNMENT NON-U.S. GOVERNMENT
PURCHASES* PURCHASES SALES* SALES
- ----------------------------------------------------------------------------------
$ 4,141,250 $ 345,095,443 $ 2,070,625 $ 57,698,037
</Table>
* Includes U.S. Government sponsored enterprise securities.
6. DIRECTORS' REMUNERATION
The Company's officers and the one Director who are associated with Lord Abbett
do not receive any compensation from the Company for serving in such capacities.
Outside Directors' fees are allocated among all Lord Abbett-sponsored funds
based on the net assets of each fund. There is an equity based plan available to
all outside Directors under which outside Directors must defer receipt of a
portion of, and may elect to defer receipt of an additional portion of
Directors' fees. The deferred amounts are treated as though equivalent dollar
amounts have been invested proportionately in the funds. Such amounts and
earnings accrued thereon are included in Directors' Fees on the Statement of
Operations and in Directors' Fees Payable on the Statement of Assets and
Liabilities and are not deductible for federal income tax purposes until such
amounts are paid.
29
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. EXPENSE REDUCTIONS
The Company has entered into arrangements with its transfer agent and custodian
whereby credits realized as a result of uninvested cash balances are used to
reduce a portion of the Fund's expenses.
8. LINE OF CREDIT
The Fund, 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.
During the fiscal year ended November 30, 2004, the fee for this Facility was an
annual rate of 0.09%. Effective December 10, 2004, the Facility was renewed at
an annual rate of .08%. At November 30, 2004, there were no loans outstanding
pursuant to this Facility nor was the Facility utilized at any time during the
fiscal year ended November 30, 2004.
9. CUSTODIAN AND ACCOUNTING AGENT
State Street Bank & Trust Company ("SSB") is the Company's custodian and
accounting agent. SSB performs custodian, accounting, and recordkeeping
functions relating to portfolio transactions and calculating the Fund's NAV.
10. INVESTMENT RISKS
The Fund is subject to the general risks and considerations associated with
investing in equity and fixed income securities.
The values of the Fund's equity security holdings and, consequently, the value
of an investment in the Fund will fluctuate in response to movements in the
stock market in general and to the changing prospects of the individual
companies involved. With its emphasis on value stocks, the Fund may perform
differently than the market as a whole and other types of stocks, such as growth
stocks. The market may fail to recognize the intrinsic value of particular value
stocks for a long time. The Fund may invest a significant portion of its assets
in mid-sized companies that may be less able to weather economic shifts or other
adverse developments than larger, more established companies. Because the Fund
is not limited to investing in equity securities, the Fund may have smaller
gains in a rising stock market than a fund investing solely in equity
securities. In addition, if the Fund's assessment of a company's value or
prospects for market appreciation or market conditions is wrong, the Fund could
suffer losses or produce poor performance relative to other funds, even in a
rising market.
The values of the Fund's fixed income holdings, and consequently, the value of
an investment in the Fund will change as interest rates fluctuate and in
response to market movements. When interest rates rise, the prices of these
holdings are likely to decline. There is also the risk that an issuer of a fixed
income security will fail to make timely payments of principal or interest to
the Fund, a risk that is greater with high yield bonds (sometimes called "junk
bonds") in which the Fund may invest. Some issuers, particularly of high yield
bonds, may default as to principal and/or interest payments after the Fund
purchases their securities. A default, or concerns in the market about an
increase in risk of default, may result in losses to the Fund. High yield bonds
are subject to greater price fluctuations, as well as additional risks.
30
<Page>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
The Fund may invest up to 20% of its assets in foreign securities which present
increased market, liquidity, currency, political and other risks.
These factors can affect Fund performance.
11. SUMMARY OF CAPITAL TRANSACTIONS
Transactions in shares of beneficial interest are as follows:
<Table>
<Caption>
YEAR ENDED YEAR ENDED
NOVEMBER 30, 2004 NOVEMBER 30, 2003
- --------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Shares sold 25,253,127 $ 283,249,547 10,952,741 $ 105,792,218
Reinvestment of distributions 387,401 4,226,860 86,219 800,563
Shares reacquired (1,793,329) (20,052,279) (872,630) (8,067,786)
- --------------------------------------------------------------------------------------------------------------
Increase 23,847,199 $ 267,424,128 10,166,330 $ 98,524,995
- --------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 1,534,015 $ 17,186,378 763,447 $ 7,240,325
Reinvestment of distributions 18,238 197,962 6,858 63,496
Shares reacquired (173,932) (1,933,208) (94,792) (862,300)
- --------------------------------------------------------------------------------------------------------------
Increase 1,378,321 $ 15,451,132 675,513 $ 6,441,521
- --------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 1,910,302 $ 21,488,685 439,543 $ 4,197,443
Reinvestment of distributions 10,622 116,218 4,100 37,788
Shares reacquired (115,422) (1,276,917) (137,742) (1,289,555)
- --------------------------------------------------------------------------------------------------------------
Increase 1,805,502 $ 20,327,986 305,901 $ 2,945,676
- --------------------------------------------------------------------------------------------------------------
CLASS P SHARES
Shares sold 24,815 $ 274,503 10.776 $ 100
Reinvestment of distributions 194 2,171 2.847 26
Shares reacquired (1,625) (18,003) - -
- --------------------------------------------------------------------------------------------------------------
Increase 23,384 $ 258,671 13.623 $ 126
- --------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Shares sold 52,806 $ 600,003 10.752 $ 100
Reinvestment of distributions 3 28 3.293 30
Shares reacquired (359) (4,345) - -
- --------------------------------------------------------------------------------------------------------------
Increase 52,450 $ 595,686 14.045 $ 130
- --------------------------------------------------------------------------------------------------------------
</Table>
31
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE BOARD OF DIRECTORS AND SHAREHOLDERS,
LORD ABBETT RESEARCH FUND, INC. - LORD ABBETT AMERICA'S VALUE FUND:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments of Lord Abbett Research Fund, Inc. - Lord Abbett
America's Value Fund (the "Fund") as of November 30, 2004, and the related
statement of operations for the year then ended, the statements of changes in
net assets and the financial highlights for each of the periods presented. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). 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 consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Fund's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 2004 by correspondence with
the custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. Additionally, an audit 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Lord
Abbett Research Fund, Inc. - Lord Abbett America's Value Fund as of November 30,
2004, the results of its operations, the changes in its net assets and the
financial highlights for each of the periods presented, in conformity with
accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
New York, New York
January 26, 2005
32
<Page>
BASIC INFORMATION ABOUT MANAGEMENT
The Board of Directors (the "Board") is responsible for the management of the
business and affairs of each Fund in accordance with the laws of the State of
Maryland. The Board appoints officers who are responsible for the day-to-day
operations of each Fund and who execute policies authorized by the Board. The
Board also approves an investment adviser to each Fund and continues to monitor
the cost and quality of the services provided by the investment adviser, and
annually considers whether to renew the contract with the adviser. Generally,
each Director holds office until his/her successor is elected and qualified or
until his/her earlier resignation or removal, as provided in the Fund's
organizational documents.
Lord, Abbett & Co. LLC ("Lord Abbett"), a Delaware limited liability company, is
the Fund's investment adviser.
INTERESTED DIRECTOR
The following Director is the Managing Partner of Lord Abbett and is an
"interested person" as defined in the Act. Mr. Dow is also an officer, director,
or trustee of each of the fourteen Lord Abbett-sponsored funds, which consist of
50 portfolios or series.
<Table>
<Caption>
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
DATE OF BIRTH WITH FUND DURING PAST FIVE YEARS DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------
ROBERT S. DOW Director and Chairman since Managing Partner and Chief N/A
Lord, Abbett & Co. LLC 1996 Investment Officer of Lord
90 Hudson Street Abbett since 1996
Jersey City, NJ
Date of Birth: 3/8/1945
</Table>
--------------------
INDEPENDENT DIRECTORS
The following independent or outside Directors are also directors or trustees of
each of the fourteen Lord Abbett-sponsored funds, which consist of 50 portfolios
or series.
<Table>
<Caption>
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
DATE OF BIRTH WITH FUND DURING PAST FIVE YEARS DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------
E. THAYER BIGELOW Director since 1996 Managing General Partner, Currently serves as director
Emmerling Bigelow Media, LLC (since of Adelphia Communications,
Communications 2000); Senior Adviser, Time Inc., Crane Co., and Huttig
41 Madison Ave. Warner Inc. (1998 - 2000); Building Products Inc.
Suite 3810 Acting Chief Executive Officer
New York, NY of Courtroom Television
Date of Birth: 10/22/1941 Network (1997 - 1998);
President and Chief Executive
Officer of Time Warner Cable
Programming, Inc. (1991 -
1997).
</Table>
33
<Page>
BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
<Table>
<Caption>
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
DATE OF BIRTH WITH FUND DURING PAST FIVE YEARS DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------------------------
WILLIAM H.T. BUSH Director since 1998 Co-founder and Chairman of the Currently serves as director
Bush-O'Donnell & Board of the financial of Wellpoint Health Networks
Co., Inc. advisory firm of Bush- Inc. (since 2002), and
101 South Hanley Road O'Donnell & Company (since Engineered Support Systems,
Suite 1250 1986). Inc. (since 2000).
St. Louis, MO
Date of Birth: 7/14/1938
ROBERT B. CALHOUN, JR. Director since 1998 Managing Director of Monitor Currently serves as director
Monitor Clipper Partners Clipper Partners (since 1997) of Avondale, Inc. and
Two Canal Park and President of Clipper Asset Interstate Bakeries Corp.
Cambridge, MA Management Corp. (since 1991),
Date of Birth: 10/25/1942 both private equity investment
funds.
JULIE A. HILL Director since 2004 Owner and CEO of the Hillsdale Currently serves as director
1280 Bison Companies, a business of Wellpoint Health Networks
Newport Coast, CA consulting firm (since 1998); Inc.; Resources Connection
Date of Birth: 7/16/1946 Founder, President and Owner Inc.; and Holcim (US) Inc.
of the Hiram-Hill and
Hillsdale Development
Companies (1998 - 2000).
FRANKLIN W. HOBBS Director since 2001 Former Chief Executive Officer Currently serves as director
One Equity Partners of Houlihan Lokey Howard & of Adolph Coors Company.
320 Park Ave. Zukin, an investment bank
New York, NY (January 2002 - April 2003);
Date of Birth: 7/30/1947 Chairman of Warburg Dillon
Read (1999 - 2001); Global
Head of Corporate Finance of
SBC Warburg Dillon Read (1997
- 1999); Chief Executive
Officer of Dillon, Read & Co.
(1994 - 1997).
C. ALAN MACDONALD Director since 1996 Retired - General Business and Currently serves as director
P.O. Box 4393 Governance Consulting (since of H.J. Baker (since 2003).
Greenwich, CT 1992); formerly President and
Date of Birth: 5/19/1933 CEO of Nestle Foods.
THOMAS J. NEFF Director since 1992 Chairman of Spencer Stuart Currently serves as director
Spencer Stuart (U.S.), an executive search of Ace, Ltd. (since 1997)
277 Park Avenue consulting firm (since 1996); and Hewitt Associates, Inc.
New York, NY President of Spencer Stuart
Date of Birth: 10/2/1937 (1979-1996).
</Table>
34
<Page>
BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
OFFICERS
None of the officers listed below have received compensation from the Company.
All the officers of the Company may also be officers of the other Lord
Abbett-sponsored funds and maintain offices at 90 Hudson Street, Jersey City, NJ
07302.
<Table>
<Caption>
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
(DATE OF BIRTH) WITH COMPANY OF CURRENT POSITION DURING PAST FIVE YEARS
- ---------------------------------------------------------------------------------------------------------------------------
ROBERT S. DOW Chief Executive Officer and Elected in 1996 Managing Partner and
(3/8/1945) President Chief Investment Officer
of Lord Abbett (from
1996).
JAMES BERNAICHE Chief Compliance Officer Elected in 2004 Chief Compliance Officer,
(7/28/1956) joined Lord Abbett in
2001; formerly Chief
Compliance Officer with
Credit-Suisse Asset
Management.
ROBERT P. FETCH Executive Vice President Elected in 1997 Partner and Small-Cap
(2/18/1953) Value Senior Investment
Manager, joined Lord Abbett
in 1995.
KEVIN P. FERGUSON Executive Vice President Elected in 2001 Partner and Mid Cap
(10/3/1964) Growth Investment
Manager, joined Lord Abbett
in 1999, formerly Portfolio
Manager/Senior Vice
President at Lynch & Mayer,
Inc.
ROBERT G. MORRIS Executive Vice President Elected in 1996 Partner and Director of
(11/6/1944) Equity Investments,
joined Lord Abbett in
1991.
CHRISTOPHER J. TOWLE Executive Vice President Elected in 2001 Partner and Investment
(10/12/1957) Manager, joined Lord
Abbett in 1987.
EDWARD K. VON DER LINDE Executive Vice President Elected in 2001 Partner and Investment
(6/12/1960) Manager, joined Lord
Abbett in 1988.
PAUL J. VOLOVICH Vice President Elected in 2004 Investment Manager-
(1/25/73) Large-Cap Core Fund,
joined Lord Abbett in
1997, formerly a
Quantitative Analyst at
RogersCasey.
TRACIE E. AHERN Vice President Elected in 1999 Partner and Director of
(1/12/1968) Portfolio Accounting and
Operations, joined Lord
Abbett in 1999.
JOAN A. BINSTOCK Chief Financial Officer & Vice Elected in 1999 Partner and Chief
(3/4/1954) President Operations Officer,
joined Lord Abbett in
1999.
DANIEL E. CARPER Vice President Elected in 1993 Partner, joined Lord
(1/22/1952) Abbett in 1979.
</Table>
35
<Page>
BASIC INFORMATION ABOUT MANAGEMENT (CONCLUDED)
<Table>
<Caption>
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
(DATE OF BIRTH) WITH COMPANY OF CURRENT POSITION DURING PAST FIVE YEARS
- ---------------------------------------------------------------------------------------------------------------------------
A. EDWARD OBERHAUS, III Vice President Elected in 1996 Partner and Manager of
(12/21/1959) Equity Trading, joined
Lord Abbett in 1983.
PAUL A. HILSTAD Vice President & Secretary Elected in 1995 Partner and General
(12/13/1942) Counsel, joined Lord
Abbett in 1995.
LAWRENCE H. KAPLAN Vice President and Assistant Elected in 1997 Partner and Deputy
(1/16/1957) Secretary General Counsel, joined
Lord Abbett in 1997.
CHRISTINA T. SIMMONS Vice President and Assistant Elected in 2000 Assistant General
(11/12/1957) Secretary Counsel, joined Lord
Abbett in 1999; formerly
Assistant General Counsel
of Prudential Investments
(1998 - 1999); prior
thereto Counsel of Drinker,
Biddle & Reath LLP, a law
firm.
BERNARD J. GRZELAK Treasurer Elected in 2003 Director of Fund
(6/12/1971) Administration, joined
Lord Abbett in 2003,
formerly Vice President,
Lazard Asset Management
LLC; prior thereto Manager
of Deloitte & Touche LLP.
</Table>
Please call 888-522-2388 for a copy of the Statement of Additional Information
(SAI), which contains further information about the Fund's Directors. It is
available free upon request.
36
<Page>
HOUSEHOLDING
The Company has adopted a policy that allows it to send only one copy of the
Fund's Prospectus, proxy material, annual report and semi-annual report to
certain shareholders residing at the same "household." This reduces Fund
expenses, which benefits you and other shareholders. If you need additional
copies or do not want your mailings to be "householded," please call Lord Abbett
at 800-821-5129 or send a written request with your name, the name of your fund
or funds and your account number or numbers to Lord Abbett Family of Funds,
P.O. Box 219336, Kansas City, MO 64121.
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that Lord Abbett uses to vote
proxies related to each Fund's portfolio securities, and information on how Lord
Abbett voted the Fund's proxies during the 12-month period ended June 30, 2004
are available without charge, upon request, (i) by calling 888-522-2388; (ii) on
Lord Abbett's website at www.lordabbett.com; and (iii) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
The Company is required to file the Fund's complete schedule of portfolio
holdings with the SEC for its first and third fiscal quarters on Form N-Q for
fiscal quarters ending on or after July 9, 2004. Once filed, the Form N-Q will
be available without charge, upon request on the SEC's website at www.sec.gov
and may be available by calling Lord Abbett at 800-821-5129. You can also obtain
copies of Form N-Q by (i) visiting the SEC's Public Reference Room in
Washington, DC (information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330); (ii) sending your request and a duplicating
fee to the SEC's Public Reference Room, Washington, DC 20549-0102; or (iii)
sending your request electronically to publicinfo@sec.gov.
TAX INFORMATION
62.02% of the ordinary income distribution paid by the Fund during fiscal
2004 is qualifying dividend income. For corporate shareholders, 62.37% of
the Fund's ordinary income distribution qualified for the dividends
received deduction.
37
<Page>
[LORD ABBETT(R) LOGO]
<Table>
This report when not used for the general
information of shareholders of the Fund, is to
be distributed only if preceded or accompanied
by a current Fund Prospectus. Lord Abbett Research Fund, Inc.
Lord Abbett America's Value Fund
Lord Abbett Mutual Fund shares are distributed by: LAAMF-2-1104
LORD ABBETT DISTRIBUTOR LLC (1/05)
</Table>
<Page>
[LORD ABBETT LOGO]
2004
ANNUAL
REPORT
LORD ABBETT
GROWTH OPPORTUNITIES FUND
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2004
<Page>
- --------------------------------------------------------------------------------
LORD ABBETT GROWTH OPPORTUNITIES FUND
ANNUAL REPORT
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2004
DEAR SHAREHOLDERS: We are pleased to provide you with this overview of the Lord
Abbett Growth Opportunities Fund's strategies and performance for the fiscal
year ended November 30, 2004. On this and the following pages, we discuss the
major factors that influenced performance.
Thank you for investing in Lord Abbett Mutual Funds. We value the trust that
you place in us and look forward to serving your investment needs in the years
to come.
BEST REGARDS,
/s/ Robert S. Dow
ROBERT S. DOW
CHAIRMAN
- --------------------------------------------------------------------------------
Q: WHAT WERE THE OVERALL MARKET CONDITIONS OF THE REPORTING PERIOD?
A: Overall, the U.S. economy showed signs of continued improvement during the
twelve-month period ended November 30, 2004. The employment rate continued to
trend higher as the fiscal year began. By January 2004, the unemployment rate
had declined to 5.6%, but the data also showed lower-than-expected job creation
in December 2003 and January 2004. Gross domestic product (GDP) grew at a 4.1%
annual pace in the fourth quarter of 2003 and, although this was slightly below
expectations, the data continued to support expectations for an improving
economy. In the face of a strengthening equity market, concern about the extent
of any interest rate rise by the Federal Reserve Board (the Fed) intensified.
The positive trend continued in the first half of calendar 2004, largely due
to strong consumer and capital spending. Corporate profits rose, triggered by a
rise in industrial production. As the year began, inflation and short-term rates
remained stable. However, somewhat disappointing employment reports and higher
energy prices weighed on consumer sentiment. In March and April, the U.S.
housing market remained strong, and there were improvements in durable goods
spending. But, retail sales dropped 0.5% in April after a 2% gain in March.
Beginning in April and continuing through July, unemployment stabilized. The
Producer Price Index (PPI) rose 0.1% in July, seasonally adjusted, after a
decrease of 0.3% in June and a 0.8% rise in May. (The PPI measures wholesale
prices of goods, i.e. before they are sold through retailers. It is sometimes
used to predict movements in the Consumer Price Index, which is a measure of
retail prices and is commonly used as a measure of inflation.) Equity prices, as
measured by the S&P 500 Index,(1) were roughly flat in April, May and June. On
June 30, the Fed raised the fed
1
<Page>
- --------------------------------------------------------------------------------
funds rate from 1% to 1.25%, and stocks responded positively to the
widely-expected Fed action. (The fed funds rate is the rate at which banks lend
to each other overnight.) However, equity prices declined slightly in July, as
investors continued to respond to uncertainties surrounding future interest rate
hikes, the continued war in Iraq, the upcoming presidential election and
record-high energy prices.
After slowing during a summer "soft patch," the economy regained some
traction in the third quarter of 2004. Despite indicators of renewed economic
strength, however, stocks finished the third quarter down slightly. One of the
key drivers of stocks during most of the summer seemed to be the direction of
oil prices, with stocks falling as oil prices rose. This negative correlation
lasted until mid-August, when crude oil broke through the $45 per barrel price
level. From mid-August through mid-September, stocks benefited from declining
gasoline prices at the pump, a favorable turn of events for consumers. Equities
gathered momentum until a string of hurricanes on the Gulf Coast forced
production disruptions at one of the nation's largest oil-refining facilities,
causing oil prices to rise again as the quarter ended.
The combination of declining gasoline prices during much of the third
quarter and the addition of 300,000 - 400,000 jobs, while lower than expected,
contributed to a pick up in consumer spending in the third-quarter.
Third-quarter unemployment declined to 5.4%. On August 10, the Fed again raised
the fed funds rate from 1.25% to 1.50%. This was followed by another increase to
1.75% on September 21.
In October and November 2004, employment increased and unemployment remained
virtually unchanged. The Consumer Price Index (CPI) increased 0.5% in October.
In addition, the S&P 500 Index(1) gained 1.4% in October, as the technology
sector outperformed all other industries and crude oil prices fell sharply from
record highs. The S&P 500 Index(1) achieved new 52-week highs in November,
ending the month up 3.9%.
Q: HOW DID THE FUND PERFORM OVER THE FISCAL YEAR ENDED NOVEMBER 30, 2004?
A: For the fiscal year ended November 30, 2004, the Fund returned 7.4%,
reflecting performance at the Net Asset Value (NAV) of Class A shares with all
distributions reinvested, compared with its benchmark, the Russell Midcap(R)
Growth Index,(2) which returned 11.4% over the same period. Standardized Average
Annual Total Returns, which reflect performance at the maximum 5.75% sales
charge applicable to Class A share investments and include the reinvestment of
all distributions as of 11/30/04, are 1 Year: 1.27%, 5 Years: -0.64% and Since
Inception (08/01/95): 10.67%. Class A shares purchased subject to a front-end
sales charge have no contingent deferred sales charge (CDSC). However, certain
purchases of Class A
2
<Page>
- --------------------------------------------------------------------------------
shares made without a front-end sales charge may be subject to a CDSC of 1% if
the shares are redeemed within 12 months of the purchase.
PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE
QUOTED. 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. YOU CAN OBTAIN PERFORMANCE DATA CURRENT
TO THE MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING
TO OUR WEBSITE AT www.LordAbbett.com.
Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE?
A: The greatest detractor from the Fund's performance for the fiscal year ended
November 30, 2004 relative to its benchmark was stock selection within the
health care sector. Despite strong sales of its lead drug, a biotechnology
holding disappointed based on analysts' concerns about the company's potentially
higher operating expenses. Select generic pharmaceutical holdings were weak as a
result of reduced drug reimbursement schedules from insurance providers. A
nursing home operator and long-term car provider also suffered from the same
pricing pressures. Stock selection within the financial services sector
detracted from performance, although overall the sector added to performance in
the period.
Stock selection within the consumer discretionary sector also hurt portfolio
performance for the fiscal year. This sector includes stocks within the consumer
durables, apparel, media, hotel and leisure industries. Although a sector
underweight had a positive impact, this was offset by underperformance by select
business service companies serving the consumer discretionary industry. A
company that tests semiconductor equipment underperformed due to poor
fundamentals associated with the slowdown in the semi-conductor market. A
traditional radio broadcasting holding performed poorly, as a recovery in local
advertising took longer than expected and market share was lost to satellite
broadcasters. Performance in another business services company disappointed,
reflecting the inability of the company's management to effectively integrate
recent acquisitions.
The most significant contribution to positive performance relative to its
benchmark was stock selection within the auto and transportation sector. Several
trucking holdings performed well, reflecting an overall improving economy and
increased market share. The portfolio benefited from an underweight position in
technology, a sector with weaker performance. It was also helped by an
overweight position in energy, as strong oil and natural gas prices made for a
favorable backdrop for energy company profits. Energy stock selection
contributed as well,
3
<Page>
- --------------------------------------------------------------------------------
as holdings related to natural gas and oil services outperformed the benchmark.
THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND
THE WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF
PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES.
THE PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE FUND, INCLUDING THE
FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND ONGOING EXPENSES, THAT AN
INVESTOR SHOULD CAREFULLY CONSIDER BEFORE INVESTING. TO OBTAIN A PROSPECTUS ON
THIS FUND OR ANY LORD ABBETT MUTUAL FUND, PLEASE CONTACT YOUR INVESTMENT
PROFESSIONAL OR LORD ABBETT DISTRIBUTOR LLC AT 800-874-3733 OR VISIT
www.LordAbbett.com. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
(1) The S&P 500 Index is widely regarded as the standard for measuring large-cap
U.S. stock market performance; this popular index includes a representative
sample of leading companies in leading industries. Indices are unmanaged, do not
reflect the deduction of fees or expenses and are not available for direct
investment.
(2) The Russell Midcap(R) Growth Index measures the performance of those Russell
Midcap companies with higher price-to-book ratios and higher forecasted growth
values. The stocks are also members of the Russell 1000(R) Growth Index. Indices
are unmanaged, do not reflect the deductions of fees or expenses and are not
available for direct investment.
IMPORTANT PERFORMANCE AND OTHER INFORMATION
THE VIEWS OF THE FUND'S MANAGEMENT AND THE PORTFOLIO HOLDINGS DESCRIBED IN THIS
REPORT ARE AS OF NOVEMBER 30, 2004; THESE VIEWS AND PORTFOLIO HOLDINGS MAY HAVE
CHANGED SUBSEQUENT TO THIS DATE AND THEY DO NOT GUARANTEE THE FUTURE PERFORMANCE
OF THE MARKETS OR THE FUND. INFORMATION PROVIDED IN THIS REPORT SHOULD NOT BE
CONSIDERED A RECOMMENDATION TO PURCHASE OR SELL SECURITIES.
A NOTE ABOUT RISK: See Notes to Financial Statements for a discussion of
investment risks. For a more detailed discussion of the risks associated with
the Fund, please see the Fund's Prospectus.
PERFORMANCE: BECAUSE OF ONGOING MARKET VOLATILITY, THE FUND'S PERFORMANCE MAY BE
SUBJECT TO SUBSTANTIAL FLUCTUATION. Except where noted, comparative fund
performance does not account for the deduction of sales charges and would be
different if sales charges were included. The Fund offers additional classes of
shares with distinct pricing options. For a full description of the differences
in pricing alternatives, please see the Fund's Prospectus.
MUTUAL FUNDS ARE NOT INSURED BY THE FDIC, ARE NOT DEPOSITS OR OTHER OBLIGATIONS
OF, OR GUARANTEED BY BANKS, AND ARE SUBJECT TO INVESTMENT RISKS INCLUDING
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
4
<Page>
- --------------------------------------------------------------------------------
INVESTMENT COMPARISON
Below is a comparison of a $10,000 investment in Class A shares with the same
investment in both the Russell Midcap(R) Growth Index and the S&P MidCap
400/Barra Growth Index, assuming reinvestment of all dividends and
distributions. The performance of other classes will be greater than or less
than the performance shown in the graph below due to different sales loads and
expenses applicable to such classes. The graph and performance table below do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
[CHART]
<Table>
<Caption>
THE FUND (CLASS A SHARES) THE FUND (CLASS A SHARES) AT RUSSELL MIDCAP S&P MIDCAP 400/
AT NET ASSET VALUE MAXIMUM OFFERING PRICE(1) GROWTH INDEX(2) BARRA GROWTH INDEX(2)
8/1/1995 $ 10,000 $ 9,425 $ 10,000 $ 10,000
11/30/1995 $ 10,180 $ 9,595 $ 10,524 $ 10,372
11/30/1996 $ 13,011 $ 12,263 $ 12,581 $ 12,207
11/30/1997 $ 16,771 $ 15,807 $ 14,962 $ 15,475
11/30/1998 $ 17,727 $ 16,708 $ 16,190 $ 17,732
11/30/1999 $ 26,598 $ 25,069 $ 23,042 $ 25,076
11/30/2000 $ 27,276 $ 25,708 $ 22,662 $ 28,352
11/30/2001 $ 24,857 $ 23,428 $ 18,351 $ 26,375
11/30/2002 $ 20,517 $ 19,337 $ 14,718 $ 23,209
11/30/2003 $ 25,439 $ 23,976 $ 19,522 $ 29,108
11/30/2004 $ 27,331 $ 25,760 $ 21,747 $ 31,679
</Table>
AVERAGE ANNUAL TOTAL RETURN AT MAXIMUM APPLICABLE
SALES CHARGE FOR THE PERIODS ENDED NOVEMBER 30, 2004
<Table>
<Caption>
1 YEAR 5 YEARS LIFE OF CLASS
Class A(3) 1.27% -0.64% 10.67%
Class B(4) 2.80% -0.26% 10.07%
Class C(5) 6.86% -0.05% 9.57%
Class P(6) 7.42% - -2.52%
Class Y(7) 7.90% 0.84% 7.58%
</Table>
(1) Reflects the deduction of the maximum initial sales charge of 5.75%.
(2) Performance for each unmanaged index does not reflect transaction costs,
management fees or sales charges. The performance of each index is not
necessarily representative of the Fund's performance. Performance for each index
begins on July 31, 1995.
(3) Class A shares commenced operations on August 1, 1995. Total return, which
is the percentage change in net asset value, after deduction of the maximum
initial sales charge of 5.75% applicable to Class A shares, with all dividends
and distributions reinvested for the periods shown ended November 30, 2004, is
calculated using the SEC-required uniform method to compute such return.
(4) Class B shares commenced operations on October 16, 1998. Performance
reflects the deduction of a CDSC of 4% for 1 year, 1% for 5 years and 0% for
life of class.
(5) Class C shares commenced operations on October 19, 1998. The 1% CDSC for
Class C shares normally applies before the first anniversary of the purchase
date. Performance is at net asset value.
(6) Class P shares commenced operations on August 15, 2000. Performance is at
net asset value.
(7) Class Y shares commenced operations on December 9, 1998. Performance is at
net asset value.
5
<Page>
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges on purchase payments (these charges vary among
the share classes); and (2) ongoing costs, including management fees;
distribution and service (12b-1) fees (these charges vary among the share
classes); and other Fund expenses. This Example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period (June 1, 2004 through November 30,
2004).
ACTUAL EXPENSES
For each class of the Fund, the first line of the applicable table on the
following pages provides information about actual account values and actual
expenses. You may use the information in this line, together with the amount you
invested, to estimate the expenses that you paid over the period. Simply divide
your account value by $1,000 (for example, an $8,600 account value divided by
$1,000 = 8.6), then multiply the result by the number in the first line under
the heading entitled "Expenses Paid During the Period 6/1/04 - 11/30/04" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
For each class of the Fund, the second line of the applicable table on the
following pages provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
6
<Page>
- --------------------------------------------------------------------------------
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs, such as
sales charges. Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE PERIOD+
----------- ----------- -----------
6/1/04 -
6/1/04 11/30/04 11/30/04
----------- ----------- -----------
CLASS A
Actual $ 1,000.00 $ 1,048.00 $ 8.91
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,016.30 $ 8.77
CLASS B
Actual $ 1,000.00 $ 1,045.10 $ 11.86
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,013.40 $ 11.68
CLASS C
Actual $ 1,000.00 $ 1,045.10 $ 11.86
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,013.40 $ 11.68
CLASS P
Actual $ 1,000.00 $ 1,047.90 $ 9.06
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,016.15 $ 8.92
CLASS Y
Actual $ 1,000.00 $ 1,050.00 $ 7.02
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,018.40 $ 6.91
</Table>
+ For each class of the Fund, expenses are equal to the annualized expense ratio
for such class (1.74% for Class A, 2.31% for Class B and Class C, 1.77% for
Class P, and 1.37% for Class Y) multiplied by the average account value over the
period, multiplied by 183/366 (to reflect one-half year period).
- --------------------------------------------------------------------------------
PORTFOLIO HOLDINGS PRESENTED BY SECTOR
NOVEMBER 30, 2004
<Table>
<Caption>
SECTOR %*
Auto & Transportation 2.10%
Consumer Discretionary 22.01%
Consumer Staples 2.04%
Financial Services 14.29%
Healthcare 17.35%
Materials & Processing 8.29%
Other 0.96%
Other Energy 4.51%
Producer Durables 5.02%
Technology 12.57%
Utilities 1.92%
Short-term Investments 8.94%
Total 100.00%
</Table>
* Represents percent of total investments.
7
<Page>
SCHEDULE OF INVESTMENTS
NOVEMBER 30, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- -----------------------------------------------------------------------------------------------------
COMMON STOCKS 99.20%
ADVERTISING AGENCY 0.42%
ValueClick, Inc.* 259,000 $ 3,341
---------------
AGRICULTURE, FISHING & RANCHING 0.85%
Monsanto Co. 148,300 6,825
---------------
AUTO COMPONENTS 0.79%
Paccar, Inc. 81,700 6,381
---------------
BANKS: OUTSIDE NEW YORK CITY 3.22%
Cullen/Frost Bankers, Inc. 136,600 6,545
Investors Financial
Services^ 238,500 10,456
North Fork Bancorp, Inc. 307,300 8,850
---------------
TOTAL 25,851
---------------
BIOTECHNOLOGY RESEARCH & PRODUCTION 3.71%
Cephalon, Inc.*^ 142,800 6,787
Genzyme Corp.* 187,300 10,491
Invitrogen Corp.* 206,700 12,505
---------------
TOTAL 29,783
---------------
CABLE TELEVISION SERVICES 0.99%
EchoStar Communications
Corp. Class A* 241,700 7,925
---------------
CHEMICALS 2.20%
Ecolab Inc. 219,300 7,671
Rohm & Haas Co. 226,600 9,991
---------------
TOTAL 17,662
---------------
COMMERCIAL INFORMATION SERVICES 0.39%
Ask Jeeves, Inc.*^ 121,300 3,134
---------------
COMMUNICATIONS TECHNOLOGY 3.58%
Avaya, Inc.* 929,700 15,266
Symbol Technologies, Inc. 575,000 8,717
Tibco Software, Inc.* 418,200 4,809
---------------
TOTAL 28,792
---------------
COMPUTER SERVICES, SOFTWARE & SYSTEMS 6.04%
Amdocs Ltd.*(a) 382,900 $ 9,898
Caci International, Inc.
Class A* 210,100 13,054
Cognos, Inc.*(a) 116,100 4,573
Computer Sciences Corp.* 187,500 10,144
Hyperion Solutions Corp.* 115,300 5,167
Informatica Corp.*^ 725,000 5,655
---------------
TOTAL 48,491
---------------
COMPUTER TECHNOLOGY 1.34%
Ingram Micro, Inc.* 557,500 10,726
---------------
CONSUMER ELECTRONICS 2.01%
CNET Networks, Inc.*^ 297,600 2,774
Take-Two Interactive
Software, Inc.*^ 382,900 13,382
---------------
TOTAL 16,156
---------------
COPPER 0.78%
Phelps Dodge Corp. 64,300 6,246
---------------
COSMETICS 0.80%
Nu Skin Enterprises, Inc.
Class A 284,800 6,402
---------------
DIVERSIFIED FINANCIAL SERVICES 2.62%
Calamos Asset
Management, Inc.
Class A* 214,600 5,090
CIT Group, Inc. 372,300 15,916
---------------
TOTAL 21,006
---------------
DIVERSIFIED PRODUCTION 0.59%
Danaher Corp. 83,400 4,744
---------------
DRUGS & PHARMACEUTICALS 5.76%
Barr Pharmaceuticals,
Inc.* 141,100 5,510
Endo Pharmaceuticals
Holdings, Inc.* 424,900 8,702
IVAX Corp.* 568,450 8,874
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<Page>
SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- -----------------------------------------------------------------------------------------------------
Ligand Pharmaceuticals,
Inc. Class B*^ 223,526 $ 2,503
Medicines Co.*^ 81,900 2,043
MedImmune, Inc.* 180,600 4,804
QLT, Inc.*^(a) 455,200 7,306
Teva Pharmaceutical
Industries Ltd. ADR^ 240,000 6,547
---------------
TOTAL 46,289
---------------
EDUCATION SERVICES 1.80%
Corinthian Colleges, Inc.* 340,900 5,940
Education Management
Corp.* 255,800 8,477
---------------
TOTAL 14,417
---------------
ELECTRICAL EQUIPMENT & COMPONENTS 0.78%
Molex, Inc. 228,500 6,300
---------------
ELECTRONICS: INSTRUMENTS, GAUGES &
METERS 0.52%
Tektronix, Inc. 132,100 4,144
---------------
ELECTRONICS: SEMI-CONDUCTORS/
COMPONENTS 2.73%
Broadcom Corp.* 185,000 6,016
Linear Technology Corp. 123,300 4,705
Microchip Technology,
Inc. 233,300 6,574
Silicon Laboratories, Inc.* 154,100 4,645
---------------
TOTAL 21,940
---------------
ENGINEERING & CONTRACTING SERVICES 2.03%
Dycom Industries, Inc.* 230,500 6,717
Jacobs Engineering
Group, Inc.* 208,100 9,566
---------------
TOTAL 16,283
---------------
FERTILIZERS 0.37%
Potash Corp. of
Saskatchewan, Inc.(a) 39,000 2,987
---------------
FINANCIAL DATA PROCESSING SERVICES &
SYSTEMS 2.56%
Alliance Data Systems
Corp.* 215,600 $ 9,249
DST Systems, Inc.* 232,600 11,339
---------------
TOTAL 20,588
---------------
FINANCIAL MISCELLANEOUS 2.77%
CapitalSource, Inc.*^ 286,300 6,642
MGIC Investment Corp. 127,700 8,684
Providian Financial Corp.* 431,000 6,918
---------------
TOTAL 22,244
---------------
FOODS 1.04%
Ralcorp Holdings, Inc. 202,040 8,324
---------------
HEALTH & PERSONAL CARE 1.73%
Lincare Holdings, Inc.*^ 209,800 8,096
Omnicare, Inc. 178,200 5,776
---------------
TOTAL 13,872
---------------
HEALTHCARE FACILITIES 0.81%
Davita Inc.* 194,700 6,468
---------------
HEALTHCARE MANAGEMENT SERVICES 4.63%
Caremark Rx, Inc.* 347,900 12,441
Cerner Corp.*^ 92,000 4,850
Community Health
Systems, Inc.* 441,500 12,208
PacifiCare Health
System, Inc.*^ 159,300 7,710
---------------
TOTAL 37,209
---------------
INVESTMENT MANAGEMENT COMPANIES 1.76%
Affiliated Managers
Group, Inc.*^ 222,950 14,131
---------------
LEISURE TIME 1.88%
Penn National Gaming,
Inc.* 92,500 4,881
Royal Caribbean Cruises 204,900 10,184
---------------
TOTAL 15,065
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<Page>
SCHEDULE OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- -----------------------------------------------------------------------------------------------------
MACHINERY: INDUSTRIAL/SPECIALTY 0.82%
Nordson Corp. 173,600 $ 6,607
---------------
MACHINERY: OIL WELL EQUIPMENT &
SERVICES 4.14%
Halliburton Co. 276,500 11,433
Noble Corp.* 131,600 6,376
Weatherford Int'l., Ltd.* 288,500 15,400
---------------
TOTAL 33,209
---------------
MANUFACTURING 1.96%
Ingersoll-Rand Co.
Class A(a) 211,000 15,703
---------------
MEDICAL & DENTAL INSTRUMENTS &
SUPPLIES 1.66%
Boston Scientific Corp.* 165,400 5,758
C.R. Bard, Inc. 72,700 4,355
INAMED Corp.* 59,300 3,181
---------------
TOTAL 13,294
---------------
MEDICAL SERVICES 0.60%
Covance Inc.* 121,800 4,806
---------------
METAL FABRICATING 0.93%
Timken Co. (The) 288,500 7,501
---------------
METALS & MINERALS MISCELLANEOUS 0.91%
GrafTech Int'l., Ltd.*^ 764,700 7,295
---------------
MULTI-SECTOR COMPANIES 1.05%
ITT Industries, Inc. 98,700 8,401
---------------
OFFICE FURNITURE & BUSINESS
EQUIPMENT 0.80%
Lexmark Int'l., Inc.
Class A* 75,900 6,444
---------------
OIL: CRUDE PRODUCERS 0.77%
XTO Energy, Inc. 170,850 6,210
---------------
RADIO & TV BROADCASTERS 1.92%
Entercom
Communications Corp.* 103,400 $ 3,724
Univision
Communications, Inc.
Class A* 130,500 3,928
Westwood One, Inc.* 346,500 7,769
---------------
TOTAL 15,421
---------------
RENTAL & LEASING SERVICES:
COMMERCIAL 0.86%
United Rentals, Inc.*^ 387,300 6,921
---------------
RESTAURANTS 0.98%
Panera Bread Co. Class A*^ 197,800 7,900
---------------
RETAIL 8.27%
Advance Auto Parts* 293,900 12,126
American Eagle
Outfitters, Inc 185,700 7,757
Dollar General Corp. 191,200 3,776
Dollar Tree Stores, Inc.* 222,500 6,192
Fisher Scientific Int'l.,
Inc.* 195,900 11,076
Linens 'N Things, Inc.* 79,810 1,983
MSC Industrial Direct
Co., Inc. Class A 317,000 11,292
PETCO Animal Supplies,
Inc.* 337,150 12,191
---------------
TOTAL 66,393
---------------
SECURITIES BROKERAGE & SERVICES 1.78%
E*Trade Group, Inc.* 542,200 7,515
Legg Mason, Inc. 99,400 6,773
---------------
TOTAL 14,288
---------------
SERVICES: COMMERCIAL 4.53%
ASE Test Ltd.*(a) 328,700 2,025
Hewitt Associates, Inc.
Class A* 223,700 6,745
IAC / InterActiveCorp.*^ 171,623 4,237
Iron Mountain, Inc.* 183,550 5,530
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<Page>
SCHEDULE OF INVESTMENTS (CONCLUDED)
NOVEMBER 30, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- -----------------------------------------------------------------------------------------------------
Kelly Services, Inc.
Class A^ 154,200 $ 4,688
Monster Worldwide, Inc.* 175,800 4,956
Robert Half Int'l., Inc. 303,200 8,195
---------------
TOTAL 36,376
---------------
SOAPS & HOUSEHOLD CHEMICALS 1.18%
Clorox Co. 172,000 9,481
---------------
STEEL 0.96%
United States Steel Corp. 147,600 7,728
---------------
TRUCKERS 1.50%
Heartland Express, Inc. 258,250 5,671
Landstar System, Inc.*^ 90,100 6,353
---------------
TOTAL 12,024
---------------
UTILITIES: TELECOMMUNICATIONS 2.08%
Nextel Partners, Inc.
Class A*^ 924,700 16,728
---------------
TOTAL COMMON STOCKS
(Cost $683,257,834) 796,456
===============
SHORT-TERM INVESTMENTS 9.74%
COLLATERAL FOR SECURITIES ON LOAN 8.56%
State Street Navigator Securities
Lending Prime
Portfolio, 1.96%(b) 68,720,851 $ 68,721
---------------
<Caption>
PRINCIPAL
AMOUNT
(000)
---------------
REPURCHASE AGREEMENT 1.18%
Repurchase Agreement
dated 11/30/2004,
1.61% due 12/1/2004
with State Street
Bank & Trust Co.
collateralized by
$9,200,000 of United
States Treasury
Bonds at 2.375%
due 1/15/2025; value:
$9,703,682;
proceeds: $9,512,704 $ 9,512 9,512
---------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $78,233,130) 78,233
===============
TOTAL INVESTMENTS IN
SECURITIES 108.94%
(Cost $761,490,964) 874,689
===============
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS (8.94%) (71,811)
---------------
NET ASSETS 100.00% $ 802,878
===============
</Table>
* Non-income producing security.
^ Security (or a portion of security) on loan. See Note 5.
(a) Foreign security traded in U.S. dollars.
(b) Rate shown reflects 7 day yield as of November 30, 2004.
ADR American Depository Receipt.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<Page>
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 2004
<Table>
ASSETS:
Investment in securities, at value (cost $761,490,964) $ 874,688,514
Receivables:
Interest and dividends 350,259
Investment securities sold 3,131,552
Capital shares sold 1,049,973
Prepaid expenses and other assets 137,535
- ----------------------------------------------------------------------------------------------------
TOTAL ASSETS 879,357,833
- ----------------------------------------------------------------------------------------------------
LIABILITIES:
Payable upon return of securities on loan 68,720,851
Payables:
Investment securities purchased 5,420,713
Capital shares reacquired 934,109
Management fee 513,134
12b-1 distribution fees 321,365
Fund administration 25,773
Directors' fees 682
Accrued expenses and other liabilities 543,346
- ----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 76,479,973
====================================================================================================
NET ASSETS $ 802,877,860
====================================================================================================
COMPOSITION OF NET ASSETS:
Paid-in capital $ 745,740,818
Distributions in excess of net investment income (1,730,353)
Accumulated net realized loss on investments (54,330,155)
Net unrealized appreciation on investments 113,197,550
- ----------------------------------------------------------------------------------------------------
NET ASSETS $ 802,877,860
====================================================================================================
NET ASSETS BY CLASS:
Class A Shares $ 594,524,440
Class B Shares $ 104,281,884
Class C Shares $ 85,665,550
Class P Shares $ 12,094,287
Class Y Shares $ 6,311,699
OUTSTANDING SHARES BY CLASS:
Class A Shares (50 million shares of common stock authorized, $.001 par value) 30,948,235
Class B Shares (30 million shares of common stock authorized, $.001 par value) 5,627,968
Class C Shares (20 million shares of common stock authorized, $.001 par value) 4,623,995
Class P Shares (20 million shares of common stock authorized, $.001 par value) 628,243
Class Y Shares (30 million shares of common stock authorized, $.001 par value) 323,337
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(NET ASSETS DIVIDED BY OUTSTANDING SHARES):
Class A Shares-Net asset value $ 19.21
Class A Shares-Maximum offering price
(Net asset value plus sales charge of 5.75%) $ 20.38
Class B Shares-Net asset value $ 18.53
Class C Shares-Net asset value $ 18.53
Class P Shares-Net asset value $ 19.25
Class Y Shares-Net asset value $ 19.52
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<Page>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 2004
<Table>
INVESTMENT INCOME:
Dividends $ 3,048,243
Interest 96,319
Securities lending-net 148,742
Foreign withholding tax (9,064)
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 3,284,240
- ----------------------------------------------------------------------------------------------------
EXPENSES:
Management fee 5,917,433
12b-1 distribution plan-Class A 2,103,113
12b-1 distribution plan-Class B 991,198
12b-1 distribution plan-Class C 852,757
12b-1 distribution plan-Class P 37,916
Shareholder servicing 2,675,430
Professional 51,854
Reports to shareholders 204,925
Fund administration 284,645
Custody 39,659
Directors' fees 15,456
Registration 115,814
Other 29,774
- ----------------------------------------------------------------------------------------------------
Gross expenses 13,319,974
Expense reductions (4,999)
- ----------------------------------------------------------------------------------------------------
NET EXPENSES 13,314,975
- ----------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (10,030,735)
====================================================================================================
REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 57,652,736
Net change in unrealized appreciation (depreciation) on investments 4,466,639
====================================================================================================
NET REALIZED AND UNREALIZED GAIN 62,119,375
====================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 52,088,640
====================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE YEAR ENDED FOR THE YEAR ENDED
INCREASE IN NET ASSETS NOVEMBER 30, 2004 NOVEMBER 30, 2003
OPERATIONS:
Net investment loss $ (10,030,735) $ (7,482,669)
Net realized gain on investments 57,652,736 15,583,052
Net change in unrealized appreciation (depreciation)
on investments 4,466,639 92,393,795
- ------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 52,088,640 100,494,178
======================================================================================================
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 282,046,048 223,735,527
Cost of shares reacquired (142,535,623) (86,690,765)
- ------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE TRANSACTIONS 139,510,425 137,044,762
======================================================================================================
NET INCREASE IN NET ASSETS 191,599,065 237,538,940
======================================================================================================
NET ASSETS:
Beginning of year 611,278,795 373,739,855
- ------------------------------------------------------------------------------------------------------
END OF YEAR $ 802,877,860 $ 611,278,795
======================================================================================================
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME $ (1,730,353) $ (1,642,069)
======================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<Page>
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
YEAR ENDED 11/30
---------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 17.88 $ 14.42 $ 17.47 $ 19.17 $ 18.89
========= ========= ========= ========= =========
Investment operations:
Net investment loss(a) (.23) (.24) (.23) (.28) (.25)
Net realized and unrealized gain (loss) 1.56 3.70 (2.82) (1.42) .73
--------- --------- --------- --------- ---------
Total from investment operations 1.33 3.46 (3.05) (1.70) .48
--------- --------- --------- --------- ---------
Distributions to shareholders from:
Net investment income - - - - (.01)
Net realized gain - - - - (.19)
--------- --------- --------- --------- ---------
Total distributions - - - - (.20)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF YEAR $ 19.21 $ 17.88 $ 14.42 $ 17.47 $ 19.17
========= ========= ========= ========= =========
Total Return(b) 7.44% 23.99% (17.46)% (8.87)% 2.55%
RATIOS TO AVERAGE NET ASSETS:
Expenses, including waiver and
expense reductions 1.73% 1.85% 1.80% 1.72% 1.49%
Expenses, excluding waiver and
expense reductions 1.73% 1.85% 1.80% 1.72% 1.61%
Net investment loss (1.27)% (1.53)% (1.48)% (1.48)% (1.18)%
<Caption>
YEAR ENDED 11/30
---------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 594,524 $ 430,991 $ 250,380 $ 213,580 $ 175,077
Portfolio turnover rate 90.23% 78.58% 97.63% 101.15% 112.57%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
YEAR ENDED 11/30
---------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS B SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 17.35 $ 14.08 $ 17.16 $ 18.95 $ 18.78
========= ========= ========= ========= =========
Investment operations:
Net investment loss(a) (.33) (.32) (.32) (.39) (.39)
Net realized and unrealized gain (loss) 1.51 3.59 (2.76) (1.40) .75
--------- --------- --------- --------- ---------
Total from investment operations 1.18 3.27 (3.08) (1.79) .36
--------- --------- --------- --------- ---------
Distributions to shareholders from:
Net realized gain - - - - (.19)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF YEAR $ 18.53 $ 17.35 $ 14.08 $ 17.16 $ 18.95
========= ========= ========= ========= =========
Total Return(b) 6.80% 23.22% (17.95)% (9.45)% 1.96%
RATIOS TO AVERAGE NET ASSETS:
Expenses, including waiver and
expense reductions 2.30% 2.44% 2.43% 2.35% 2.11%
Expenses, excluding waiver and
expense reductions 2.30% 2.44% 2.43% 2.35% 2.23%
Net investment loss (1.84)% (2.12)% (2.10)% (2.11)% (1.82)%
<Caption>
YEAR ENDED 11/30
---------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 104,282 $ 94,561 $ 66,623 $ 69,738 $ 65,510
Portfolio turnover rate 90.23% 78.58% 97.63% 101.15% 112.57%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
YEAR ENDED 11/30
---------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS C SHARES)
Net asset value, beginning of year $ 17.34 $ 14.08 $ 17.15 $ 18.94 $ 18.76
========= ========= ========= ========= =========
Investment operations:
Net investment loss(a) (.33) (.32) (.32) (.39) (.38)
Net realized and unrealized gain (loss) 1.52 3.58 (2.75) (1.40) .75
--------- --------- --------- --------- ---------
Total from investment operations 1.19 3.26 (3.07) (1.79) .37
--------- --------- --------- --------- ---------
Distributions to shareholders from:
Net realized gain - - - - (.19)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF YEAR $ 18.53 $ 17.34 $ 14.08 $ 17.15 $ 18.94
========= ========= ========= ========= =========
Total Return(b) 6.86% 23.15% (17.90)% (9.45)% 1.96%
RATIOS TO AVERAGE NET ASSETS:
Expenses, including waiver and
expense reductions 2.30% 2.44% 2.42% 2.37% 2.11%
Expenses, excluding waiver and
expense reductions 2.30% 2.44% 2.42% 2.37% 2.23%
Net investment loss (1.84)% (2.12)% (2.09)% (2.14)% (1.81)%
<Caption>
YEAR ENDED 11/30
---------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 85,666 $ 79,415 $ 55,115 $ 52,272 $ 49,656
Portfolio turnover rate 90.23% 78.58% 97.63% 101.15% 112.57%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
<Table>
<Caption>
YEAR ENDED 11/30 8/15/2000(c)
--------------------------------------------- TO
2004 2003 2002 2001 11/30/2000
PER SHARE OPERATING PERFORMANCE (CLASS P SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.92 $ 14.47 $ 17.53 $ 19.23 $ 21.48
========= ========= ========= ========= =========
Investment operations:
Net investment loss(a) (.24) (.25) (.24) (.28) (.09)
Net realized and unrealized gain (loss) 1.57 3.70 (2.82) (1.42) (2.16)
--------- --------- --------- --------- ---------
Total from investment operations 1.33 3.45 (3.06) (1.70) (2.25)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 19.25 $ 17.92 $ 14.47 $ 17.53 $ 19.23
========= ========= ========= ========= =========
Total Return(b) 7.42% 23.84% (17.46)% (8.84)% (10.47)%(d)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense
reductions 1.77% 1.89% 1.88% 1.80% .45%(d)
Expenses, excluding expense
reductions 1.77% 1.89% 1.88% 1.80% .49%(d)
Net investment loss (1.31)% (1.57)% (1.55)% (1.52)% (.44)%(d)
<Caption>
YEAR ENDED 11/30 8/15/2000(c)
--------------------------------------------- TO
SUPPLEMENTAL DATA: 2004 2003 2002 2001 11/30/2000
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 12,094 $ 6,310 $ 1,620 $ 294 $ 44
Portfolio turnover rate 90.23% 78.58% 97.63% 101.15% 112.57%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<Page>
FINANCIAL HIGHLIGHTS (CONCLUDED)
<Table>
<Caption>
YEAR ENDED 11/30
----------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 18.09 $ 14.56 $ 17.60 $ 19.26 $ 18.94
========= ========= ========= ========= =========
Investment operations:
Net investment loss(a) (.15) (.20) (.19) (.23) (.14)
Net realized and unrealized gain (loss) 1.58 3.73 (2.85) (1.43) .69
--------- --------- --------- --------- ---------
Total from investment operations 1.43 3.53 (3.04) (1.66) .55
--------- --------- --------- --------- ---------
Distributions to shareholders from:
Net investment income - - - - (.04)
Net realized gain - - - - (.19)
--------- --------- --------- --------- ---------
Total distributions - - - - (.23)
--------- --------- --------- --------- ---------
NET ASSET VALUE, END OF YEAR $ 19.52 $ 18.09 $ 14.56 $ 17.60 $ 19.26
========= ========= ========= ========= =========
Total Return(b) 7.90% 24.24% (17.27)% (8.62)% 2.89%
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense
reductions 1.37% 1.44%+ 1.43% 1.35% 1.11%
Expenses, excluding expense
reductions 1.37% 1.44%+ 1.43% 1.35% 1.23%
Net investment loss (.80)% (1.12)%+ (1.10)% (1.10)% (.66)%
<Caption>
YEAR ENDED 11/30
----------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 6,312 $ 2 $ 2 $ 2 $ 2
Portfolio turnover rate 90.23% 78.58% 97.63% 101.15% 112.57%
</Table>
+ The ratios have been determined on a Fund basis.
(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 of class shares.
(d) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<Page>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Lord Abbett Research Fund, Inc. (the "Company") is registered under the
Investment Company Act of 1940 (the "Act") as a diversified open-end management
investment company incorporated under Maryland law on April 6, 1992. The Company
currently consists of four separate funds. This report covers one of the funds -
Lord Abbett Growth Opportunities Fund (the "Fund").
The Fund's investment objective is capital appreciation. The Fund offers five
classes of shares: Classes A, B, C, P and Y, each with different expenses and
dividends. A front-end sales charge is normally added to the Net Asset Value
("NAV") for Class A shares. There is no front-end sales charge in the case of
the Class B, C, P and Y shares, although there may be a contingent deferred
sales charge ("CDSC") as follows: certain redemptions of Class A shares made
within 24 months (12 months if shares were purchased on or after November 1,
2004) following certain purchases made without a sales charge; Class B shares
redeemed before the sixth anniversary of purchase; and Class C shares redeemed
before the first anniversary of purchase. Class B shares will convert to Class A
shares on the eighth anniversary of the original purchase of Class B shares.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results could
differ from those estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) INVESTMENT VALUATION-Securities traded on any recognized U.S. or non-U.S.
exchange or on NASDAQ, Inc. are valued at the last sales price or official
closing price on the exchange or system on which they are principally
traded. Unlisted equity securities are valued at the last quoted sales
price or, if no sales price is available, at the mean between the most
recently quoted bid and asked prices. Securities for which market
quotations are not readily available are valued at fair value as determined
by management and approved in good faith by the Board of Directors.
Short-term securities with 60 days or less remaining to maturity are valued
using the amortized cost method, which approximates current market value.
(b) SECURITY TRANSACTIONS-Security transactions are recorded as of the date
that the securities are purchased or sold (trade date). Realized gains and
losses from sales of portfolio securities are calculated using the
identified-cost method. 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.
(c) INVESTMENT INCOME-Dividend income is recorded on the ex-dividend date.
Interest income is recorded on the accrual basis. Discounts are accreted
and premiums are amortized using the effective interest method. Investment
income is allocated to each class of shares based upon the relative
proportion of net assets at the beginning of the day.
(d) FEDERAL TAXES-It is the policy of the Fund to meet the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all taxable income and
capital gains to its shareholders. Therefore, no federal income tax
provision is required.
20
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(e) EXPENSES-Expenses incurred by the Company that do not specifically relate
to an individual fund are generally allocated to the funds within the
Company on a pro rata basis. Expenses, excluding class specific expenses,
are allocated to each class of shares based upon the relative proportion of
net assets at the beginning of the day. Class A, B, C and P shares bear all
expenses and fees relating to their respective 12b-1 Distribution Plans.
(f) SECURITIES LENDING-The Fund may lend its securities to member banks of the
Federal Reserve System and to registered broker/dealers approved by the
Fund. The loans are collateralized at all times by cash and/or U.S.
Treasury securities in an amount at least equal to 102% of the market value
of domestic securities loaned (105% in the case of foreign securities
loaned) as determined at the close of business on the preceding business
day. The dividend and interest income earned on the securities loaned is
accounted for in the same manner as other dividend and interest income.
Lending portfolio securities could result in a loss or delay in recovering
the Fund's securities if the borrower defaults.
(g) REPURCHASE AGREEMENTS-The Fund may enter into repurchase agreements with
respect to securities. A repurchase agreement is a transaction in which the
Fund acquires a security and simultaneously commits to resell that security
to the seller (a bank or securities dealer) at an agreed-upon price on an
agreed-upon date. The Fund requires at all times that the repurchase
agreement be collateralized by cash, or by securities of the U.S.
Government, its agencies, its instrumentalities, or U.S. Government
sponsored enterprises having a value equal to, or in excess of, the value
of the repurchase agreement (including accrued interest). If the seller of
the agreement defaults on its obligation to repurchase the underlying
securities at a time when the value of those securities has declined, the
Fund may incur a loss upon disposition of the securities.
3. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE
The Company has a management agreement with Lord, Abbett & Co. LLC ("Lord
Abbett") pursuant to which Lord Abbett supplies the Fund 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 and statistical work and supervision of
the Fund's investment portfolio.
Effective April 1, 2004, the management fee is based on the Fund's average daily
net assets at the following annual rates:
<Table>
First $1 billion .80%
Next $1 billion .75%
Next $1 billion .70%
Over $3 billion .65%
</Table>
Prior to April 1, 2004, the management fee was based on the Fund's average daily
net assets at an annual rate of .90%.
Lord Abbett provides certain administrative services to the Fund pursuant to an
Administrative Services Agreement at an annual rate of .04% of the Fund's
average daily net assets.
21
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12b-1 DISTRIBUTION PLANS
The Fund has adopted a distribution plan with respect to one or more classes of
shares pursuant to Rule 12b-1 of the Act, which provides for the payment of
ongoing distribution and service fees to Lord Abbett Distributor LLC
("Distributor"), an affiliate of Lord Abbett. The fees are accrued daily at
annual rates based upon average daily net assets as follows:
<Table>
<Caption>
FEE CLASS A CLASS B CLASS C CLASS P
- -----------------------------------------------------------------------
Service .25% .25% .25% .20%
Distribution .10%(1) .75% .75% .25%
</Table>
(1) In addition, until September 30, 2004, the Fund paid a one-time
distribution fee of up to 1.00% on certain qualifying purchases of Class A
shares. Effective October 1, 2004, the Distributor pays such one-time
distribution fee. The unamortized balance of these distribution fees as of
September 30, 2004 was $170,450. This amount will continue to be amortized
by the Fund, generally over a two-year period. The amount of CDSC collected
during the fiscal year ended November 30, 2004 was $9,782.
Class Y does not have a distribution plan.
COMMISSIONS
Distributor received the following commissions on sales of Class A shares of the
Fund, after concessions were paid to authorized dealers, for the fiscal year
ended November 30, 2004:
<Table>
<Caption>
DISTRIBUTOR DEALERS'
COMMISSIONS CONCESSIONS
- -------------------------
$ 849,394 $ 4,585,955
</Table>
One Director and certain of the Fund's officers have an interest in Lord Abbett.
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYFORWARD
Dividends from net investment income, if any, are declared and paid at least
annually. Taxable net realized gains from investment transactions, reduced by
capital loss carryforwards, if any, are declared and distributed to shareholders
at least annually. The capital loss carryforward amount, if any, is available to
offset future net capital gains. Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends and distributions from
net investment income and net realized capital gains are determined in
accordance with federal income tax regulations which may differ from accounting
principles generally accepted in the United States of America. These book/tax
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the components of net assets based on their federal tax basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed earnings and profits for tax purposes are reported as
a tax return of capital.
22
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
As of November 30, 2004, the components of accumulated earnings (losses) on a
tax basis are as follows:
<Table>
Capital loss carryforwards* $ (67,516,122)
Temporary differences 14,546,387
Unrealized gains - net 110,106,777
- -----------------------------------------------------
Total accumulated earning - net $ 57,137,042
=====================================================
</Table>
As of September 30, 2004, for the Fund's tax year end, the capital loss
carryforwards along with the related expiration dates were as follows:
<Table>
<Caption>
2010 2011 TOTAL
- --------------------------------------------
$ 6,359,244 $ 61,156,878 $ 67,516,122
</Table>
As of November 30, 2004, the Fund's aggregate unrealized security gains and
losses based on cost for U.S. federal income tax purposes are as follows:
<Table>
Tax Cost $ 764,581,737
- -----------------------------------------------------
Gross Unrealized Gain 126,055,144
Gross Unrealized Loss (15,948,367)
- -----------------------------------------------------
Net unrealized security gain $ 110,106,777
=====================================================
</Table>
The difference between book-basis and tax-basis unrealized gains is primarily
attributable to wash sales and other temporary tax adjustments.
Permanent items identified during the year ended November 30, 2004 have been
reclassified among the components of net assets based on their tax basis
treatment as follows:
<Table>
<Caption>
DISTRIBUTIONS IN ACCUMULATED
EXCESS OF NET NET REALIZED PAID-IN
INVESTMENT INCOME LOSS CAPITAL
- ------------------------------------------------
$ 9,942,451 $ (17) $ (9,942,434)
</Table>
The permanent differences are primarily attributable to net operating losses.
5. PORTFOLIO SECURITIES TRANSACTIONS
As of November 30, 2004, the value of securities loaned was $67,231,500. These
loans were collateralized by cash of $68,720,851, which is invested in a
restricted money market account. In connection with the securities lending
program, State Street Bank and Trust Company ("SSB") received fees of $63,747
for the year ended November 30, 2004, which is netted against securities lending
income on the Statement of Operations. At their October 21, 2004 meeting, the
Board of Directors voted to discontinue, as soon as practicable, the Fund's
participation in the SSB securities lending program.
23
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Purchases and sales of investment securities (other than short-term investments)
for the fiscal year ended November 30, 2004 are as follows:
<Table>
<Caption>
PURCHASES SALES
- ---------------------------------
$ 767,837,144 $ 637,213,354
</Table>
There were no purchases or sales of U.S. Government securities for the year
ended November 30, 2004.
6. DIRECTORS' REMUNERATION
The Company's officers and the one Director who are associated with Lord Abbett
do not receive any compensation from the Fund for serving in such capacities.
Outside Directors' fees are allocated among all Lord Abbett-sponsored funds
based on the net assets of each fund. There is an equity based plan available to
all outside Directors under which outside Directors must defer receipt of a
portion of, and may elect to defer receipt of an additional portion of
Directors' Fees. The deferred amounts are treated as though equivalent dollar
amounts have been invested proportionately in the funds. Such amounts and
earnings accrued thereon are included in Directors' fees on the Statement of
Operations and in Directors' Fees Payable on the Statement of Assets and
Liabilities and are not deductible for federal income tax purposes until such
amounts are paid.
7. EXPENSE REDUCTIONS
The Company has entered into arrangements with its transfer agent and custodian
whereby credits realized as a result of uninvested cash balances are used to
reduce a portion of the Fund's expenses.
8. LINE OF CREDIT
The Fund, 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.
During the fiscal year ended November 30, 2004, the fee for this Facility was an
annual rate of 0.09%. Effective December 10, 2004, the Facility was renewed at
an annual rate of .08%. At November 30, 2004, there were no loans outstanding
pursuant to this Facility nor was the Facility utilized at any time during the
fiscal year ended November 30, 2004.
9. CUSTODIAN AND ACCOUNTING AGENT
SSB is the Company's custodian and accounting agent. SSB performs custodian,
accounting and recordkeeping functions relating to portfolio transactions and
calculating the Fund's NAV.
10. INVESTMENT RISKS
The Fund is subject to the general risks and considerations associated with
equity investing. The value of an investment will fluctuate in response to
movements in the stock market in general, and to the changing prospects of
individual companies in which the Fund invests. The Fund has
24
<Page>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
particular risks associated with growth stocks. Growth companies may grow faster
than other companies, which may result in more volatility in their stock prices.
In addition, if the Fund's assessment of a company's potential for growth or
market condition is wrong, it could suffer losses or produce poor performance
relative to other funds, even in a rising market. The Fund invests largely in
mid-sized company stocks, which may be less able to weather economic shifts or
other adverse developments than larger, more established companies. These
factors can affect fund performance.
11. SUMMARY OF CAPITAL TRANSACTIONS
Transactions in shares of beneficial interest are as follows:
<Table>
<Caption>
YEAR ENDED YEAR ENDED
NOVEMBER 30, 2004 NOVEMBER 30, 2003
- -----------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------
CLASS A SHARES
Shares sold 12,164,999 $ 220,802,534 10,674,409 $ 170,500,182
Shares reacquired (5,326,989) (96,399,497) (3,923,119) (58,912,982)
- -----------------------------------------------------------------------------------------------------
Increase 6,838,010 $ 124,403,037 6,751,290 $ 111,587,200
- -----------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 1,285,543 $ 22,707,457 1,660,415 $ 24,804,171
Shares reacquired (1,108,736) (19,465,289) (941,409) (13,644,778)
- -----------------------------------------------------------------------------------------------------
Increase 176,807 $ 3,242,168 719,006 $ 11,159,393
- -----------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 1,328,073 $ 23,460,896 1,562,453 $ 23,537,109
Shares reacquired (1,283,399) (22,441,443) (898,259) (13,063,207)
- -----------------------------------------------------------------------------------------------------
Increase 44,674 $ 1,019,453 664,194 $ 10,473,902
- -----------------------------------------------------------------------------------------------------
CLASS P SHARES
Shares sold 474,588 $ 8,501,829 308,433 $ 4,894,065
Shares reacquired (198,431) (3,602,630) (68,341) (1,069,798)
- -----------------------------------------------------------------------------------------------------
Increase 276,157 $ 4,899,199 240,092 $ 3,824,267
- -----------------------------------------------------------------------------------------------------
CLASS Y SHARES
Shares sold 357,143 $ 6,573,332 - $ -
Shares reacquired (33,919) (626,764) - -
- -----------------------------------------------------------------------------------------------------
Increase 323,224 $ 5,946,568 - $ -
- -----------------------------------------------------------------------------------------------------
</Table>
12. SUBSEQUENT EVENT
For the fiscal year ending November 30, 2005, Lord Abbett has contractually
agreed to reimburse the Fund to the extent necessary so that each class' total
annual operating expenses do not exceed the following annual rates:
<Table>
<Caption>
CLASS % OF AVERAGE DAILY NET ASSETS
- ------------------------------------------
A 1.55%
B 2.20%
C 2.20%
P 1.65%
Y 1.20%
</Table>
25
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE BOARD OF DIRECTORS AND SHAREHOLDERS,
LORD ABBETT RESEARCH FUND, INC. - LORD ABBETT GROWTH OPPORTUNITIES FUND:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments of Lord Abbett Research Fund, Inc. - Lord Abbett
Growth Opportunities Fund (the "Fund") as of November 30, 2004, and the related
statement of operations for the year then ended, the statements of changes in
net assets and the financial highlights for each of the periods presented. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). 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 consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Fund's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 2004 by correspondence with
the custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. Additionally, an audit 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Lord
Abbett Research Fund, Inc. - Lord Abbett Growth Opportunities Fund as of
November 30, 2004, the results of its operations, the changes in its net assets
and the financial highlights for each of the periods presented, in conformity
with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
New York, New York
January 26, 2005
26
<Page>
BASIC INFORMATION ABOUT MANAGEMENT
The Board of Directors (the "Board") is responsible for the management of the
business and affairs of each Fund in accordance with the laws of the State of
Maryland. The Board appoints officers who are responsible for the day-to-day
operations of each Fund and who execute policies authorized by the Board. The
Board also approves an investment adviser to each Fund and continues to monitor
the cost and quality of the services provided by the investment adviser, and
annually considers whether to renew the contract with the adviser. Generally,
each Director holds office until his/her successor is elected and qualified or
until his/her earlier resignation or removal, as provided in the Fund's
organizational documents.
Lord, Abbett & Co. LLC ("Lord Abbett"), a Delaware limited liability company, is
the Fund's investment adviser.
INTERESTED DIRECTOR
The following Director is the Managing Partner of Lord Abbett and is an
"interested person" as defined in the Act. Mr. Dow is also an officer, director,
or trustee of each of the fourteen Lord Abbett-sponsored funds, which consist of
50 portfolios or series.
<Table>
<Caption>
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
DATE OF BIRTH WITH FUND DURING PAST FIVE YEARS DIRECTORSHIPS
- -------------------------------------------------------------------------------------------------------------------------------
ROBERT S. DOW Director and Chairman Managing Partner and Chief N/A
Lord, Abbett & Co. LLC since 1996 Investment Officer of Lord Abbett
90 Hudson Street since 1996.
Jersey City, NJ
Date of Birth: 3/8/1945
</Table>
----------
INDEPENDENT DIRECTORS
The following independent or outside Directors are also directors or trustees of
each of the fourteen Lord Abbett-sponsored funds, which consist of 50 portfolios
or series.
<Table>
<Caption>
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
DATE OF BIRTH WITH FUND DURING PAST FIVE YEARS DIRECTORSHIPS
- -------------------------------------------------------------------------------------------------------------------------------
E. THAYER BIGELOW Director since 1996 Managing General Partner, Bigelow Currently serves as director
Emmerling Media, LLC (since 2000); Senior of Adelphia Communications,
Communications Adviser, Time Warner Inc. (1998 - Inc., Crane Co., and Huttig
41 Madison Ave. 2000); Acting Chief Executive Building Products Inc.
Suite 3810 Officer of Courtroom Television
New York, NY Network (1997 - 1998); President and
Date of Birth: 10/22/1941 Chief Executive Officer of Time
Warner Cable Programming, Inc. (1991
- 1997).
WILLIAM H.T. BUSH Director since 1998 Co-founder and Chairman of the Board Currently serves as director
Bush-O'Donnell & Co., Inc. of the financial advisory firm of of Wellpoint Health Networks
101 South Hanley Road Bush-O'Donnell & Company (since Inc. (since 2002), and
Suite 1250 1986). Engineered Support Systems,
St. Louis, MO Inc. (since 2000).
Date of Birth: 7/14/1938
</Table>
27
<Page>
BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
<Table>
<Caption>
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
DATE OF BIRTH WITH FUND DURING PAST FIVE YEARS DIRECTORSHIPS
- -------------------------------------------------------------------------------------------------------------------------------
ROBERT B. CALHOUN, JR. Director since 1998 Managing Director of Monitor Clipper Currently serves as director
Monitor Clipper Partners Partners (since 1997) and President of Avondale, Inc. and
Two Canal Park of Clipper Asset Management Corp. Interstate Bakeries Corp.
Cambridge, MA (since 1991), both private equity
Date of Birth: 10/25/1942 investment funds.
JULIE A. HILL Director since 2004 Owner and CEO of the Hillsdale Currently serves as director
1280 Bison Companies, a business consulting of Wellpoint Health Networks
Newport Coast, CA firm (since 1998); Founder, Inc.; Resources Connection
Date of Birth: 7/16/1946 President and Owner of the Inc.; and Holcim (US) Inc.
Hiram-Hill and Hillsdale Development
Companies (1998 - 2000).
FRANKLIN W. HOBBS Director since 2001 Former Chief Executive Officer of Currently serves as director
One Equity Partners Houlihan Lokey Howard & Zukin, an of Adolph Coors Company.
320 Park Ave. investment bank (January 2002 -
New York, NY April 2003); Chairman of Warburg
Date of Birth: 7/30/1947 Dillon Read (1999 - 2001); Global
Head of Corporate Finance of SBC
Warburg Dillon Read (1997 - 1999);
Chief Executive Officer of Dillon,
Read & Co. (1994 - 1997).
C. ALAN MACDONALD Director since 1996 Retired - General Business and Currently serves as director
P.O. Box 4393 Governance Consulting (since 1992); of H.J. Baker (since 2003).
Greenwich, CT formerly President and CEO of Nestle
Date of Birth: 5/19/1933 Foods.
THOMAS J. NEFF Director since 1992 Chairman of Spencer Stuart (U.S.), Currently serves as director
Spencer Stuart an executive search consulting firm of Ace, Ltd. (since 1997) and
277 Park Avenue (since 1996); President of Spencer Hewitt Associates, Inc.
New York, NY Stuart (1979-1996).
Date of Birth: 10/2/1937
</Table>
28
<Page>
BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
OFFICERS
None of the officers listed below have received compensation from the Company.
All the officers of the Company may also be officers of the other Lord
Abbett-sponsored funds and maintain offices at 90 Hudson Street, Jersey City, NJ
07302.
<Table>
<Caption>
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
(DATE OF BIRTH) WITH COMPANY OF CURRENT POSITION DURING PAST FIVE YEARS
- ---------------------------------------------------------------------------------------------------------------------
ROBERT S. DOW Chief Executive Elected in 1996 Managing Partner and Chief Investment
(3/8/1945) Officer and President Officer of Lord Abbett (since 1996).
JAMES BERNAICHE Chief Compliance Elected in 2004 Chief Compliance Officer, joined Lord
(7/28/1956) Officer Abbett in 2001; formerly Chief
Compliance Officer with Credit-Suisse
Asset Management.
ROBERT P. FETCH Executive Vice Elected in 1997 Partner and Small-Cap Value Senior
(2/18/1953) President Investment Manager, joined Lord Abbett
in 1995.
KEVIN P. FERGUSON Executive Vice Elected in 2001 Partner and Mid Cap Growth Investment
(10/3/1964) President Manager, joined Lord Abbett in 1999,
formerly Portfolio Manager/Senior Vice
President at Lynch & Mayer, Inc.
ROBERT G. MORRIS Executive Vice Elected in 1996 Partner and Director of Equity
(11/6/1944) President Investments, joined Lord Abbett in 1991.
CHRISTOPHER J. TOWLE Executive Vice Elected in 2001 Partner and Investment Manager, joined
(10/12/1957) President Lord Abbett in 1987.
EDWARD K. VON DER LINDE Executive Vice Elected in 2001 Partner and Investment Manager, joined
(6/12/1960) President Lord Abbett in 1988.
PAUL J. VOLOVICH Vice President Elected in 2004 Investment Manager-Large-Cap Core Fund,
(1/25/73) joined Lord Abbett in 1997, formerly a
Quantitative Analyst at RogersCasey.
TRACIE E. AHERN Vice President Elected in 1999 Partner and Director of Portfolio
(1/12/1968) Accounting and Operations, joined Lord
Abbett in 1999.
JOAN A. BINSTOCK Chief Financial Elected in 1999 Partner and Chief Operations Officer,
(3/4/1954) Officer & Vice joined Lord Abbett in 1999.
President
DANIEL E. CARPER Vice President Elected in 1993 Partner, joined Lord Abbett in 1979.
(1/22/1952)
</Table>
29
<Page>
BASIC INFORMATION ABOUT MANAGEMENT (CONCLUDED)
<Table>
<Caption>
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
(DATE OF BIRTH) WITH COMPANY OF CURRENT POSITION DURING PAST FIVE YEARS
- ---------------------------------------------------------------------------------------------------------------------
A. EDWARD OBERHAUS, III Vice President Elected in 1996 Partner and Manager of Equity Trading,
(12/21/1959) joined Lord Abbett in 1983.
PAUL A. HILSTAD Vice President & Elected in 1995 Partner and General Counsel, joined
(12/13/1942) Secretary Lord Abbett in 1995.
LAWRENCE H. KAPLAN Vice President and Elected in 1997 Partner and Deputy General Counsel,
(1/16/1957) Assistant Secretary joined Lord Abbett in 1997.
CHRISTINA T. SIMMONS Vice President and Elected in 2000 Assistant General Counsel, joined Lord
(11/12/1957) Assistant Secretary Abbett in 1999; formerly Assistant
General Counsel of Prudential
Investments (1998 - 1999); prior thereto
Counsel of Drinker, Biddle & Reath LLP,
a law firm.
BERNARD J. GRZELAK Treasurer Elected in 2003 Director of Fund Administration, joined
(6/12/1971) Lord Abbett in 2003, formerly Vice
President, Lazard Asset Management LLC
(2000 - 2003); prior thereto Manager of
Deloitte & Touche LLP.
</Table>
Please call 888-522-2388 for a copy of the Statement of Additional Information
(SAI), which contains further information about the Fund's Directors. It is
available free upon request.
30
<Page>
HOUSEHOLDING
The Company has adopted a policy that allows it to send only one copy of the
Fund's Prospectus, proxy material, annual report and semi-annual report to
certain shareholders residing at the same "household." This reduces Fund
expenses, which benefits you and other shareholders. If you need additional
copies or do not want your mailings to be "householded," please call Lord Abbett
at 800-821-5129 or send a written request with your name, the name of your fund
or funds and your account number or numbers to Lord Abbett Family of Funds, P.O.
Box 219336, Kansas City, MO 64121.
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that Lord Abbett uses to vote
proxies related to each Fund's portfolio securities, and information on how Lord
Abbett voted the Fund's proxies during the 12-month period ended June 30, 2004
are available without charge, upon request, (i) by calling 888-522-2388; (ii) on
Lord Abbett's website at www.LordAbbett.com; and (iii) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
The Company is required to file the Fund's complete schedule of portfolio
holdings with the SEC for its first and third fiscal quarters on Form N-Q for
fiscal quarters ending on or after July 9, 2004. Once filed, the Fund's Form N-Q
will be available without charge, upon request on the SEC's website at
www.sec.gov and may be available by calling Lord Abbett at 800-821-5129. You can
also obtain copies of Form N-Q by (i) visiting the SEC's Public Reference Room
in Washington, DC (information on the operation of the Public Reference Room may
be obtained by calling 1-800-SEC-0330); (ii) sending your request and a
duplicating fee to the SEC's Public Reference Room, Washington, DC 20549-0102;
or (iii) sending your request electronically to publicinfo@sec.gov.
31
<Page>
[LORD ABBETT(R) LOGO]
<Table>
This report when not used for the general
information of shareholders of the Fund, is to
be distributed only if preceded or accompanied Lord Abbett Research Fund, Inc.
by a current Fund Prospectus. Lord Abbett Growth Opportunities Fund
Lord Abbett Mutual Fund shares are distributed by: LAGOF-2-1104
LORD ABBETT DISTRIBUTOR LLC (1/05)
</Table>
<Page>
[LORD ABBETT LOGO]
2004
ANNUAL
REPORT
LORD ABBETT
LARGE-CAP CORE FUND
SMALL-CAP VALUE FUND
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2004
<Page>
- --------------------------------------------------------------------------------
LORD ABBETT RESEARCH FUND
ANNUAL REPORT
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2004
DEAR SHAREHOLDERS: We are pleased to provide you with this overview of the Lord
Abbett Large-Cap Core and Small-Cap Value Funds' strategies and performance for
the fiscal year ended November 30, 2004. On this and the following pages, we
discuss the major factors that influenced performance.
Thank you for investing in Lord Abbett Mutual Funds. We value the trust
that you place in us and look forward to serving your investment needs in the
years to come.
BEST REGARDS,
/s/ Robert S. Dow
ROBERT S. DOW
CHAIRMAN
- --------------------------------------------------------------------------------
Q: WHAT WERE THE OVERALL MARKET CONDITIONS OF THE REPORTING PERIOD?
A: Overall, the U.S. economy showed signs of continued improvement during the
twelve-month period ended November 30, 2004. The employment rate continued to
trend higher as the fiscal year began. By January 2004, the unemployment rate
had declined to 5.6%, but the data also showed lower-than-expected job creation
in December 2003 and January 2004. Gross domestic product (GDP) grew at a 4.1%
annual pace in the fourth quarter of 2003 and, although this was slightly below
expectations, the data continued to support expectations for an improving
economy. In the face of a strengthening equity market, concern about the extent
of any interest rate rise by the Federal Reserve Board (the Fed) intensified.
The positive trend continued in the first half of calendar 2004, largely
due to strong consumer and capital spending. Corporate profits rose, triggered
by a rise in industrial production. As the year began, inflation and short-term
rates remained stable. However, somewhat disappointing employment reports and
higher energy prices weighed on consumer sentiment. In March and April, the U.S.
housing market remained strong, and there were improvements in durable goods
spending. But, retail sales dropped 0.5% in April after a 2% gain in March.
Beginning in April and continuing through July, unemployment stabilized.
The Producer Price Index (PPI) rose 0.1% in July, seasonally adjusted, after a
decrease of 0.3% in June and a 0.8% rise in May. (The PPI measures wholesale
prices of goods, i.e. before they are sold through retailers. It is sometimes
used to predict movements in the Consumer Price Index, which is a measure of
retail prices and is commonly used as a measure of inflation.) Equity prices, as
measured by the S&P 500 Index,(1) were roughly flat in April, May and June. On
June 30, the Fed raised the fed funds rate from 1% to 1.25%, and stocks
responded positively to
1
<Page>
- --------------------------------------------------------------------------------
the widely-expected Fed action. (The fed funds rate is the rate at which banks
lend to each other overnight.) However, equity prices declined slightly in July,
as investors continued to respond to uncertainties surrounding future interest
rate hikes, the continued war in Iraq, the upcoming presidential election and
record-high energy prices.
After slowing during a summer "soft patch," the economy regained some
traction in the third quarter of 2004. Despite indicators of renewed economic
strength, however, stocks finished the third quarter down slightly. One of the
key drivers of stocks during most of the summer seemed to be the direction of
oil prices, with stocks falling as oil prices rose. This negative correlation
lasted until mid-August, when crude oil broke through the $45 per barrel price
level. From mid-August through mid-September, stocks benefited from declining
gasoline prices at the pump, a favorable turn of events for consumers. Equities
gathered momentum until a string of hurricanes on the Gulf Coast forced
production disruptions at one of the nation's largest oil-refining facilities,
causing oil prices to rise again as the quarter ended.
The combination of declining gasoline prices during much of the third
quarter and the addition of 300,000 - 400,000 jobs, while lower than expected,
contributed to a pick up in consumer spending in the third-quarter.
Third-quarter unemployment declined to 5.4%. On August 10, the Fed again raised
the fed funds rate from 1.25% to 1.50%. This was followed by another increase to
1.75% on September 21.
In October and November 2004, employment increased and unemployment
remained virtually unchanged. The Consumer Price Index (CPI) increased 0.5% in
October. In addition, the S&P 500 Index(1) gained 1.4% in October, as the
technology sector outperformed all other industries and crude oil prices fell
sharply from record highs. The S&P 500 Index(1) achieved new 52-week highs in
November, ending the month up 3.9%.
LORD ABBETT LARGE-CAP CORE FUND
Lord Abbett Large-Cap Core Fund was formerly named Lord Abbett Large-Cap
Research Fund. On October 1, 2004, the Fund entered the final two months of this
fiscal year with a broader mandate and new name. This new name better reflects
the Fund's shift in investment style from a large-cap value focus to a blend of
value and growth. The shift to a core fund broadens the universe of potential
stocks available for investment in the Fund and will potentially help ease
fluctuations in returns caused by natural shifts in the value/growth cycle over
the long run.
Q: HOW DID THE FUND PERFORM OVER THE FISCAL YEAR ENDED NOVEMBER 30, 2004?
A: For the fiscal year ended November 30, 2004, the Fund returned 14.5%,
reflecting performance at the Net Asset Value (NAV)
2
<Page>
- --------------------------------------------------------------------------------
of Class A shares with all distributions reinvested, compared with its
benchmark, the Russell 1000(R) Index,(2) which returned 12.7% over the same
period. Standardized Average Annual Total Returns, which reflect performance at
the maximum 5.75% sales charge applicable to Class A share investments and
include the reinvestment of all distributions as of 11/30/04, are 1 Year: 7.89%,
5 Years: 3.15% and 10 Years: 12.04%. Class A shares purchased subject to a
front-end sales charge have no contingent deferred sales charge (CDSC). However,
certain purchases of Class A shares made without a front-end sales charge may be
subject to a CDSC of 1% if the shares are redeemed within 12 months of the
purchase.
PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF FUTURE
RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED.
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. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE
MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR
WEBSITE AT www.LordAbbett.com.
Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE?
A: Stock selection within the technology sector was the greatest positive
contributor to the Fund's performance for the fiscal year relative to its
benchmark. A personal computer company outperformed due to its outstanding
research and development efforts and its strong pipeline of products. Another
technology holding, a global provider of communications and electronic products,
contributed favorably based on a re-engineering of the company, including a new
CEO, as well as the introduction of a new product portfolio in 2004. Stock
selection within energy and producer durables, which includes capital goods and
industrials, also helped performance. Separately, a global, diversified provider
of products and services related to fire and security, electronics, healthcare,
engineered products and services, plastics and adhesives performed well
following a company restructuring and a renewed focus on its core business. A
technology and business services company also returned to its core business,
which resulted in favorable performance.
The greatest detractor from the Fund's performance for the fiscal year
ended November 30, 2004 relative to its benchmark was stock selection within the
utilities sector. A cable and internet services provider was hurt by the failure
of a major acquisition bid. Stock selection within the consumer discretionary
sector also hindered performance. A weak advertising environment held back the
earnings of several media stocks in the portfolio. The consumer discretionary
3
<Page>
- --------------------------------------------------------------------------------
sector includes stocks within the consumer durables, apparel, media, hotel and
leisure industries.
THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND
THE WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF
PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES.
LORD ABBETT SMALL-CAP VALUE FUND
Q: HOW DID THE FUND PERFORM OVER THE FISCAL YEAR ENDED NOVEMBER 30, 2004?
A: For the fiscal year ended November 30, 2004, the Fund returned 22.9%,
reflecting performance at the Net Asset Value (NAV) of Class A shares with all
distributions reinvested, compared with its benchmark, the Russell 2000(R) Value
Index,(3) which returned 23.7% over the same period. Standardized Average Annual
Total Returns, which reflect performance at the maximum 5.75% sales charge
applicable to Class A share investments and include the reinvestment of all
distributions as of 11/30/04 are 1 Year: 15.83%, 5 Years: 17.16% and Since
Inception (12/13/95): 15.88%. Class A shares purchased subject to a front-end
sales charge have no contingent deferred sales charge (CDSC). However, certain
purchases of Class A shares made without a front-end sales charge may be subject
to a CDSC of 1% if the shares are redeemed within 12 months of the purchase.
PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF FUTURE
RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED.
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. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE
MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR
WEBSITE AT www.LordAbbett.com.
Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE?
A: Stock selection within technology was the largest contributor to Fund
performance relative to its benchmark for the fiscal year. A company that makes
software for hotel and restaurant management outperformed, benefiting from
increased strength in the hotel industry and its role as the leader in its
business. The portfolio also benefited by holding a distributor of bar coding
and related software for the retail industry. In addition, a company whose
primary business includes the production of magnets and associated equipment for
MRI machines performed well as it won market share and grew through an
acquisition. Selection of stocks within the financial services sector also
helped returns. The Fund was positively impacted by its regional bank holdings,
including two banks in Puerto Rico.
4
<Page>
- --------------------------------------------------------------------------------
Stock selection within the consumer discretionary sector hindered
performance. This sector includes stocks within the consumer durables, apparel,
media, hotel and leisure industries. An importer of gifts and home furnishings
disappointed when its turnaround efforts stalled. Also, a manufacturer of
kitchen and home products underperformed due to volatile sales volumes. Although
the Fund benefited from its overweight position within the energy sector, a
strong sector for the period, stock selection hurt performance relative to the
Fund's benchmark. A number of the Fund's holdings focus on oil services and
natural gas.
THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND
THE WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF
PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES.
THE PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE FUNDS, INCLUDING THE
FUNDS' INVESTMENT OBJECTIVES, RISKS, CHARGES AND ONGOING EXPENSES, THAT AN
INVESTOR SHOULD CAREFULLY CONSIDER BEFORE INVESTING. TO OBTAIN A PROSPECTUS ON
THESE FUNDS OR ANY LORD ABBETT MUTUAL FUND, PLEASE CONTACT YOUR INVESTMENT
PROFESSIONAL OR LORD ABBETT DISTRIBUTOR LLC AT 800-874-3733 OR VISIT
www.LordAbbett.com. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
(1) The S&P 500 Index is widely regarded as the standard for measuring large-cap
U.S. stock market performance; this popular index includes a representative
sample of leading companies in leading industries. Indices are unmanaged, do not
reflect the deduction of fees or expenses and are not available for direct
investment.
(2) The Russell 1000(R) Index measures the performance of the 1,000 largest
companies in the Russell 3000(R) Index, which represents approximately 92% of
the total market capitalization of the Russell 3000(R) Index. Indices are
unmanaged, do not reflect the deduction of fees or expenses and are not
available for direct investment.
(3) The Russell 2000(R) Value Index measures the performance of those Russell
2000 companies with lower price-to-book ratios and lower forecasted growth
values. Indices are unmanaged, do not reflect the deduction of fees or expenses
and are not available for direct investment.
IMPORTANT PERFORMANCE AND OTHER INFORMATION
THE VIEWS OF EACH FUND'S MANAGEMENT AND THE PORTFOLIO HOLDINGS DESCRIBED IN THIS
REPORT ARE AS OF NOVEMBER 30, 2004; THESE VIEWS AND PORTFOLIO HOLDINGS MAY HAVE
CHANGED SUBSEQUENT TO THIS DATE AND THEY DO NOT GUARANTEE THE FUTURE PERFORMANCE
OF THE MARKETS OR EACH FUND. INFORMATION PROVIDED IN THIS REPORT SHOULD NOT BE
CONSIDERED A RECOMMENDATION TO PURCHASE OR SELL SECURITIES.
A NOTE ABOUT RISK: See Notes to Financial Statements for a discussion of
investment risks. For a more detailed discussion of the risks associated with
the Funds, please see the Funds' Prospectus.
PERFORMANCE: BECAUSE OF ONGOING MARKET VOLATILITY, EACH FUND'S PERFORMANCE MAY
BE SUBJECT TO SUBSTANTIAL FLUCTUATION. Except where noted, comparative Funds'
performance does not account for the deduction of sales charges and would be
different if sales charges were included. The Funds offer additional classes of
shares with distinct pricing options. For a full description of the differences
in pricing alternatives, please see the Prospectus.
MUTUAL FUNDS ARE NOT INSURED BY THE FDIC, ARE NOT DEPOSITS OR OTHER OBLIGATIONS
OF, OR GUARANTEED BY BANKS, AND ARE SUBJECT TO INVESTMENT RISKS INCLUDING
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
5
<Page>
LARGE-CAP CORE FUND
- --------------------------------------------------------------------------------
INVESTMENT COMPARISON
Below is a comparison of a $10,000 investment in Class A shares with the same
investment in the S&P 500 Index, the S&P 500/Barra Value Index and the Russell
1000(R) Value Index, assuming reinvestment of all dividends and distributions.
The performance of other classes will be greater than or less than the
performance shown in the graph below due to different sales loads and expenses
applicable to such classes. The graph and performance table below do not reflect
the deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[CHART]
<Table>
<Caption>
THE FUND (CLASS A SHARES) THE FUND (CLASS A SHARES) S&P 500 RUSSELL 1000(R) S & P 500/BARRA
AT NET ASSET VALUE AT MAXIMUM OFFERING PRICE(1) INDEX(2) VALUE INDEX(2) VALUE INDEX(2)
11/30/94 $ 10,000 $ 9,425 $ 10,000 $ 10,000 $ 10,000
11/30/95 $ 13,282 $ 12,518 $ 13,693 $ 13,653 $ 13,494
11/30/96 $ 16,769 $ 15,804 $ 17,507 $ 17,245 $ 17,199
11/30/97 $ 20,100 $ 18,945 $ 22,496 $ 22,362 $ 21,513
11/30/98 $ 22,804 $ 21,493 $ 27,823 $ 25,736 $ 24,361
11/30/99 $ 26,678 $ 25,144 $ 33,635 $ 28,431 $ 27,397
11/30/2000 $ 29,816 $ 28,101 $ 32,212 $ 29,113 $ 28,679
11/30/2001 $ 28,546 $ 26,904 $ 28,279 $ 28,199 $ 26,224
11/30/2002 $ 24,686 $ 23,267 $ 23,610 $ 25,489 $ 22,225
11/30/2003 $ 28,875 $ 27,215 $ 27,171 $ 29,863 $ 26,154
11/30/2004 $ 33,057 $ 31,156 $ 30,662 $ 35,737 $ 31,118
</Table>
AVERAGE ANNUAL TOTAL RETURN AT MAXIMUM APPLICABLE
SALES CHARGE FOR THE PERIODS ENDED NOVEMBER 30, 2004
<Table>
<Caption>
1 YEAR 5 YEARS 10 YEARS LIFE OF CLASS
CLASS A(3) 7.89% 3.15% 12.04% -
CLASS B(4) 9.75% 3.56% - 10.00%
CLASS C(5) 13.75% 3.78% - 8.47%
CLASS P(6) 14.39% 4.41% - 5.22%
CLASS Y(7) 14.89% 4.65% - 4.08%
</Table>
(1) Reflects the deduction of the maximum initial sales charge of 5.75%
(2) Performance for each unmanaged index does not reflect transaction costs,
management fees or sales charges. The performance of each index, particularly
that of the S&P 500 Index, is not necessarily representative of the Fund's
performance. Performance for each index begins on November 30, 1994.
(3) Total return, which is the percentage change in net asset value, after
deduction of the maximum initial sales charge of 5.75% applicable to Class A
shares, with all dividends and distributions reinvested for the periods shown
ended November 30, 2004, is calculated using the SEC-required uniform method to
compute such return.
(4) Class B shares commenced operations on August 1, 1996. Performance reflects
the deduction of a CDSC of 4% for 1 year, 1% for 5 years and 0% for the life of
the class.
(5) Class C shares commenced operations on April 1, 1997. The 1% CDSC for Class
C shares normally applies before the first anniversary of the purchase date.
Performance is at net asset value.
(6) Class P shares commenced operations on April 5, 1999. Performance is at net
asset value.
(7) Class Y shares commenced operations on May 3, 1999. Performance is at net
asset value.
6
<Page>
SMALL-CAP VALUE FUND
- --------------------------------------------------------------------------------
INVESTMENT COMPARISON
Below is a comparison of a $10,000 investment in Class A shares with the same
investment in both the Russell 2000(R) Index and Russell 2000(R) Value Index,
assuming reinvestment of all dividends and distributions. The management of the
Fund believes that the Russell 2000(R) Value Index is a more appropriate measure
of investing in the types of securities the Fund invests in, than is the Russell
2000(R) Index, and therefore, it intends to remove the Russell 2000(R) Index
from the graph below in the future. The performance of other classes will be
greater than or less than the performance shown in the graph below due to
different sales loads and expenses applicable to such classes. The graph and
performance table below do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[CHART]
<Table>
<Caption>
THE FUND (CLASS A SHARES) THE FUND (CLASS A SHARES) RUSSELL 2000 RUSSELL 2000
AT NET ASSET VALUE AT MAXIMUM OFFERING PRICE(1) INDEX(2) VALUE INDEX(2)
12/13/95 $ 10,000 $ 9,425 $ 10,000 $ 10,000
11/30/96 $ 12,824 $ 12,087 $ 11,352 $ 11,755
11/30/97 $ 17,683 $ 16,666 $ 14,010 $ 15,470
11/30/98 $ 15,612 $ 14,715 $ 13,082 $ 14,508
11/30/99 $ 16,992 $ 16,015 $ 15,132 $ 14,300
11/30/2000 $ 21,309 $ 20,083 $ 15,044 $ 16,348
11/30/2001 $ 24,530 $ 23,120 $ 15,769 $ 19,452
11/30/2002 $ 23,863 $ 22,491 $ 14,098 $ 19,101
11/30/2003 $ 32,375 $ 30,514 $ 19,214 $ 25,769
11/30/2004 $ 39,796 $ 37,507 $ 22,530 $ 31,879
</Table>
AVERAGE ANNUAL TOTAL RETURN AT MAXIMUM APPLICABLE
SALES CHARGE FOR THE PERIODS ENDED NOVEMBER 30, 2004
<Table>
<Caption>
1 YEAR 5 YEARS LIFE OF CLASS
CLASS A(3) 15.83% 17.16% 15.88%
CLASS B(4) 18.17% 17.72% 14.79%
CLASS C(5) 22.19% 17.85% 14.19%
CLASS P(6) 22.84% 18.49% 15.84%
CLASS Y(7) 23.40% 19.00% 12.75%
</Table>
(1) Reflects the deduction of the maximum initial sales charge of 5.75%.
(2) Performance for each unmanaged index does not reflect transaction costs,
management fees or sales charges. The performance of each index is not
necessarily representative of the Fund's performance. Performance for each index
begins on December 31, 1995.
(3) Class A shares commenced operations on December 13, 1995. Total return,
which is the percentage change in net asset value, after deduction of the
maximum initial sales charge of 5.75% applicable to Class A shares, with all
dividends and distributions reinvested for the periods shown ended November 30,
2004, is calculated using the SEC-required uniform method to compute such
return.
(4) Class B shares commenced operations on November 15, 1996. Performance
reflects the deduction of a CDSC of 4% for 1 year, 1% for 5 years and 0% for the
life of the class.
(5) Class C shares commenced operations on April 1, 1997. The 1% CDSC for Class
C shares normally applies before the first anniversary of the purchase date.
Performance is at net asset value.
(6) Class P shares commenced operations on June 23, 1999. Performance is at net
asset value.
(7) Class Y shares commenced operations on December 30, 1997. Performance is at
net asset value.
7
<Page>
- --------------------------------------------------------------------------------
EXPENSE EXAMPLE
As a shareholder of a Fund, you incur two types of costs: (1) transaction
costs, including sales charges on purchase payments (these charges vary among
the share classes); and (2) ongoing costs, including management fees;
distribution and service (12b-1) fees (these charges vary among the share
classes); and other Fund expenses. This Example is intended to help you
understand your ongoing costs (in dollars) of investing in each Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period (June 1, 2004 through November 30,
2004).
ACTUAL EXPENSES
For each class of each Fund, the first line of the applicable table on the
following pages provides information about actual account values and actual
expenses. You may use the information in this line, together with the amount you
invested, to estimate the expenses that you paid over the period. Simply divide
your account value by $1,000 (for example, an $8,600 account value divided by
$1,000 = 8.6), then multiply the result by the number in the first line under
the heading entitled "Expenses Paid During the Period 6/1/04 - 11/30/04" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
For each class of each Fund, the second line of the applicable table on the
following pages provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in each Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
8
<Page>
LARGE-CAP CORE FUND
- --------------------------------------------------------------------------------
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs, such as
sales charges. Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE PERIOD+
----- ----- -------
6/1/04 -
6/1/04 11/30/04 11/30/04
------ -------- --------
CLASS A*
Actual $ 1,000.00 $ 1,074.10 $ 7.05
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,018.20 $ 6.86
CLASS B*
Actual $ 1,000.00 $ 1,070.80 $ 10.30
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,015.05 $ 10.03
CLASS C*
Actual $ 1,000.00 $ 1,071.00 $ 10.31
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,015.05 $ 10.03
CLASS P*
Actual $ 1,000.00 $ 1,073.40 $ 7.47
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,017.80 $ 7.27
CLASS Y*
Actual $ 1,000.00 $ 1,076.30 $ 4.83
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,020.05 $ 4.70
</Table>
+ For each class of the Fund, expenses are equal to the annualized expense ratio
for such class (1.36% for Class A, 1.99% for Class B, 1.99% for Class C, 1.44%
for Class P and 0.93% for Class Y) multiplied by the average account value over
the period, multiplied by 183/366 (to reflect one-half year period).
* The annualized expenses of each class have been restated (1.30% for Class A,
1.95% for Class B, 1.95% for Class C, 1.40% for Class P and 0.95% for Class Y).
Had these restated expenses been in place throughout the most recent fiscal
half-year, expenses paid during the period would have been:
<Table>
<Caption>
HYPOTHETICAL
(5% RETURN
ACTUAL BEFORE EXPENSES)
Class A $ 6.74 $ 6.56
Class B $ 10.10 $ 9.83
Class C $ 10.10 $ 9.83
Class P $ 7.26 $ 7.07
Class Y $ 4.93 $ 4.80
</Table>
9
<Page>
LARGE-CAP CORE FUND
- --------------------------------------------------------------------------------
PORTFOLIO HOLDINGS PRESENTED BY SECTOR
NOVEMBER 30, 2004
<Table>
<Caption>
SECTOR %*
Consumer Discretionary 11.96%
Consumer Staples 9.15%
Energy 4.92%
Financials 15.26%
Healthcare 10.36%
Industrials 17.31%
Information Technology 14.62%
Materials 9.77%
Telecommunication Services 2.46%
Utilities 0.87%
Short-Term Investments 3.32%
Total 100.00%
</Table>
* Represents percent of total investments.
10
<Page>
SMALL-CAP VALUE FUND
- --------------------------------------------------------------------------------
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs, such as
sales charges. Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE PERIOD+
----- ----- -------
6/1/04 -
6/1/04 11/30/04 11/30/04
------ -------- --------
CLASS A
Actual $ 1,000.00 $ 1,153.90 $ 7.49
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,018.05 $ 7.02
CLASS B
Actual $ 1,000.00 $ 1,150.70 $ 10.70
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,015.05 $ 10.03
CLASS C
Actual $ 1,000.00 $ 1,150.50 $ 10.70
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,015.05 $ 10.03
CLASS P
Actual $ 1,000.00 $ 1,153.50 $ 7.76
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,017.80 $ 7.27
CLASS Y
Actual $ 1,000.00 $ 1,156.60 $ 5.34
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,020.05 $ 5.00
</Table>
+ For each class of the Fund, expenses are equal to the annualized expense ratio
for such class (1.39% for Class A, 1.99% for Class B, 1.99% for Class C, 1.44%
for Class P and 0.99% for Class Y) multiplied by the average account value over
the period, multiplied by 183/366 (to reflect one-half year period).
- --------------------------------------------------------------------------------
PORTFOLIO HOLDINGS PRESENTED BY SECTOR
NOVEMBER 30, 2004
<Table>
<Caption>
SECTOR %*
Auto & Transportation 7.18%
Consumer Discretionary 10.20%
Consumer Staples 0.88%
Financial Services 12.78%
Healthcare 3.40%
Integrated Oils 0.77%
Materials & Processing 19.05%
Other 2.48%
Other Energy 7.82%
Producer Durables 11.38%
Technology 5.26%
Utilities 0.15%
Short-Term Investments 18.65%
Total 100.00%
</Table>
* Represents percent of total investments.
11
<Page>
SCHEDULE OF INVESTMENTS
LARGE-CAP CORE FUND NOVEMBER 30, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- ----------------------------------------------------------------------------------------------------
COMMON STOCKS 96.34%
AEROSPACE & DEFENSE 0.49%
Honeywell International,
Inc. 63,600 $ 2,247
------------
AIR FREIGHT & COURIERS 1.05%
United Parcel Service, Inc.
Class B 57,200 4,813
------------
BEVERAGES 2.15%
Coca-Cola Co. (The) 10,400 409
Diageo plc ADR 49,500 2,789
PepsiCo, Inc. 134,100 6,693
------------
TOTAL 9,891
------------
BIOTECHNOLOGY 0.36%
MedImmune, Inc.* 62,600 1,665
------------
CAPITAL MARKETS 0.15%
Federated Investors, Inc. 23,300 685
------------
CHEMICALS 4.88%
Dow Chemical Co. 16,600 838
E.I. du Pont de
Nemours & Co. 190,600 8,638
Monsanto Co. 65,009 2,991
Potash Corp. of
Saskatchewan, Inc.(a) 45,100 3,454
Praxair, Inc. 120,400 5,406
Rohm & Haas Co. 25,900 1,142
------------
TOTAL 22,469
------------
COMMERCIAL BANKS 5.74%
Bank of America Corp. 107,548 4,976
Bank of New York Co.,
Inc. 189,200 6,226
Mellon Financial Corp. 212,000 6,195
Wachovia Corp. 89,000 4,606
Wells Fargo & Co. 71,700 4,429
------------
TOTAL 26,432
------------
COMMERCIAL SERVICES & SUPPLIES 1.00%
Waste Management, Inc. 154,800 4,615
------------
COMMUNICATIONS EQUIPMENT 2.79%
Corning, Inc.* 150,200 $ 1,890
Motorola, Inc. 569,600 10,970
------------
TOTAL 12,860
------------
COMPUTERS & PERIPHERALS 4.60%
Apple Computer, Inc.* 96,412 6,464
Dell, Inc.* 67,500 2,735
EMC Corp.* 690,600 9,268
International Business
Machines Corp. 28,900 2,724
------------
TOTAL 21,191
------------
DIVERSIFIED FINANCIALS 7.49%
Citigroup, Inc. 193,000 8,637
Goldman Sachs Group,
Inc. (The) 41,100 4,305
JP Morgan Chase & Co. 298,028 11,221
MBNA Corp. 91,435 2,428
Merrill Lynch & Co., Inc. 121,500 6,769
NASDAQ - 100 Index
Tracking Stock 29,500 1,155
------------
TOTAL 34,515
------------
DIVERSIFIED TELECOMMUNICATION
SERVICES 2.45%
SBC Communications, Inc. 158,000 3,977
Sprint Corp. 40,600 926
Verizon Communications,
Inc. 155,200 6,399
------------
TOTAL 11,302
------------
ELECTRIC UTILITIES 0.87%
PG&E Corp.* 21,200 705
Progress Energy, Inc. 75,100 3,298
------------
TOTAL 4,003
------------
ELECTRICAL EQUIPMENT 0.79%
Emerson Electric Co. 54,500 3,642
------------
ELECTRONIC EQUIPMENT &
INSTRUMENTS 1.14%
Solectron Corp.* 840,960 5,256
------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<Page>
SCHEDULE OF INVESTMENTS (CONTINUED)
LARGE-CAP CORE FUND NOVEMBER 30, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- ----------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES 1.43%
Baker Hughes, Inc. 110,643 $ 4,905
GlobalSantaFe Corp. 27,000 847
Schlumberger Ltd.(a) 12,400 814
------------
TOTAL 6,566
------------
FOOD & STAPLES RETAILING 1.01%
CVS Corp. 62,600 2,840
Kroger Co.* 112,400 1,819
------------
TOTAL 4,659
------------
FOOD PRODUCTS 3.66%
Archer-Daniels-Midland
Co. 67,100 1,422
H.J. Heinz Co. 71,600 2,661
Kellogg Co. 96,300 4,208
Kraft Foods, Inc. Class A 250,200 8,557
------------
TOTAL 16,848
------------
HEALTHCARE EQUIPMENT & SUPPLIES 1.54%
Baxter Int'l., Inc. 183,400 5,805
Guidant Corp. 19,500 1,264
------------
TOTAL 7,069
------------
HEALTHCARE PROVIDERS & SERVICES 1.26%
Cardinal Health, Inc. 44,400 2,321
CIGNA Corp. 49,680 3,479
------------
TOTAL 5,800
------------
HOUSEHOLD DURABLES 0.43%
Newell Rubbermaid, Inc. 85,100 1,964
------------
HOUSEHOLD PRODUCTS 1.56%
Clorox Co. 50,300 2,773
Kimberly Clark Corp. 69,000 4,389
------------
TOTAL 7,162
------------
INDUSTRIAL CONGLOMERATES 4.81%
General Electric Co. 412,100 14,572
Tyco Int'l., Ltd.(a) 223,400 7,589
------------
TOTAL 22,161
------------
INSURANCE 1.82%
American Int'l. Group, Inc. 104,292 $ 6,607
Hartford Financial Group,
Inc. 27,400 1,753
------------
TOTAL 8,360
------------
IT SERVICES 0.26%
Computer Sciences Corp.* 22,100 1,196
------------
MACHINERY 6.30%
Caterpillar, Inc. 47,800 4,376
Deere & Co. 168,800 12,108
Eaton Corp. 94,500 6,369
Illinois Tool Works, Inc. 12,300 1,159
Parker Hannifin Corp. 66,800 4,997
------------
TOTAL 29,009
------------
MEDIA 6.91%
Clear Channel Comm., Inc. 143,191 4,823
Comcast Corp. Class A* 228,907 6,787
Tribune Co. 100,900 4,376
Viacom, Inc. Class B 154,550 5,363
Walt Disney Co. (The) 389,713 10,475
------------
TOTAL 31,824
------------
METALS & MINING 2.75%
Alcoa, Inc. 195,400 6,640
Newmont Mining Corp. 127,300 6,027
------------
TOTAL 12,667
------------
MULTI-LINE RETAIL 2.09%
Federated Department
Stores, Inc. 11,600 636
Target Corp. 71,400 3,657
Wal-Mart Stores, Inc. 102,600 5,341
------------
TOTAL 9,634
------------
OFFICE ELECTRONICS 1.50%
Xerox Corp.* 449,900 6,892
------------
OIL & GAS 3.48%
ExxonMobil Corp. 312,715 16,027
------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<Page>
SCHEDULE OF INVESTMENTS (CONCLUDED)
LARGE-CAP CORE FUND NOVEMBER 30, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- ----------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS 2.10%
International Paper Co. 233,300 $ 9,687
------------
PERSONAL PRODUCTS 0.74%
Gillette Co. 78,600 3,418
------------
PHARMACEUTICALS 7.16%
Bristol-Myers Squibb Co. 57,900 1,361
Johnson & Johnson 37,500 2,262
Merck & Co., Inc. 137,000 3,839
Novartis AG ADR 135,900 6,530
Pfizer, Inc. 227,900 6,329
Schering-Plough Corp. 284,000 5,069
Wyeth 190,400 7,591
------------
TOTAL 32,981
------------
ROAD & RAIL 2.81%
Canadian National
Railway Co.(a) 81,720 4,737
CSX Corp. 79,300 3,024
Union Pacific Corp. 81,400 5,164
------------
TOTAL 12,925
------------
SEMICONDUCTOR EQUIPMENT &
PRODUCTS 1.58%
Advanced Micro Devices,
Inc.* 62,900 1,339
Intel Corp. 29,300 655
Novellus Systems, Inc.* 41,614 1,121
Teradyne, Inc.* 89,390 1,525
Texas Instruments, Inc. 109,200 2,640
------------
TOTAL 7,280
------------
SOFTWARE 2.70%
Microsoft Corp. 421,000 11,287
Veritas Software Corp.* 51,600 1,130
------------
TOTAL 12,417
------------
SPECIALTY RETAIL 1.20%
Gap, Inc. (The) 251,888 5,504
------------
TEXTILES & APPAREL 1.29%
NIKE, Inc. Class B 70,400 $ 5,960
------------
TOTAL COMMON STOCKS
(Cost $368,409,796) 443,596
============
<Caption>
PRINCIPAL
AMOUNT
(000)
------------
SHORT-TERM INVESTMENT 3.30%
REPURCHASE AGREEMENT 3.30%
Repurchase Agreement
dated 11/30/2004
1.61% due 12/1/2004
with State Street
Bank & Trust Co.
collateralized by
$15,540,000 of Federal
National Mortgage
Assoc. at 1.72% due
7/3/2018; value:
$15,520,575; proceeds:
$15,212,983
(Cost $15,212,302) $ 15,212 15,212
------------
TOTAL INVESTMENTS IN SECURITIES 99.64%
(Cost $383,622,098) 458,808
============
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES 0.36% 1,668
------------
NET ASSETS 100.00% $ 460,476
============
</Table>
* Non-income producing security.
(a) Foreign security traded in U.S. dollars.
ADR American Depository Receipt
SEE NOTES TO FINANCIAL STATEMENTS.
14
<Page>
SCHEDULE OF INVESTMENTS
SMALL-CAP VALUE FUND NOVEMBER 30, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- ----------------------------------------------------------------------------------------------------
COMMON STOCKS 94.45%
AEROSPACE 4.62%
Curtiss-Wright Corp.^ 511,000 $ 30,456
Moog, Inc. Class A* 545,025 22,902
Orbital Sciences
Corp.*^ 1,222,900 15,898
Teledyne
Technologies, Inc.*^ 265,000 7,870
------------
TOTAL 77,126
------------
AIR TRANSPORTATION 1.19%
Alaska Air Group, Inc.*^ 125,090 3,907
Aviall, Inc.* 124,100 2,822
Frontier Airlines, Inc.*^ 1,119,800 13,135
------------
TOTAL 19,864
------------
AUTO COMPONENTS 1.55%
Modine
Manufacturing Co. 805,000 25,881
------------
AUTO PARTS: AFTER MARKET 1.53%
Commercial Vehicle
Group, Inc.*^ 660,600 12,948
Keystone Automotive
Industries, Inc.*^ 540,000 12,652
------------
TOTAL 25,600
------------
BANKS: NEW YORK CITY 0.64%
Signature Bank*^ 342,300 10,752
------------
BANKS: OUTSIDE NEW YORK CITY 4.10%
Alabama National
BanCorp.^ 67,800 4,287
Amcore Financial, Inc.^ 150,000 4,880
Corus Bankshares, Inc. 214,000 10,415
Cullen/Frost Bankers,
Inc.^ 400,000 19,164
Doral Financial Corp. 380,000 17,632
Provident Bankshares
Corp.^ 315,000 11,573
Southwest Bancorp,
Inc.^ 17,200 462
------------
TOTAL 68,413
------------
BUILDING: MATERIALS 2.63%
Hughes Supply, Inc.^ 300,000 $ 9,864
NCI Building Systems,
Inc.*^ 580,040 21,519
Simpson
Manufacturing Co., Inc. 370,000 12,432
------------
TOTAL 43,815
------------
CHEMICALS 5.48%
Cambrex Corp.^ 198,200 4,915
Cytec Industries, Inc.^ 417,200 20,280
Georgia Gulf Corp.^ 305,000 17,562
Macdermid, Inc.^ 404,200 14,883
OM Group, Inc.* 332,400 10,218
Quaker Chemical
Corp.^ 152,700 3,695
Westlake Chemical
Corp. 630,300 19,785
------------
TOTAL 91,338
------------
COMPUTER SERVICES SOFTWARE &
SYSTEMS 1.56%
MICROS Systems, Inc.* 355,000 26,046
------------
COMPUTER TECHNOLOGY 1.72%
Unova, Inc.*^ 1,295,000 28,697
------------
CONSUMER PRODUCTS 1.69%
Playtex Products, Inc.*^ 2,450,000 18,375
Yankee Candle Co.*^ 324,400 9,881
------------
TOTAL 28,256
------------
CONTAINERS & PACKAGING: PAPER &
PLASTIC 0.37%
Graphic Packaging
Corp.*^ 757,100 6,178
------------
COPPER 0.76%
Mueller Industries,
Inc. 410,040 12,601
------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<Page>
SCHEDULE OF INVESTMENTS (CONTINUED)
SMALL-CAP VALUE FUND NOVEMBER 30, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- ----------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES 1.92%
Bisys Group, Inc.*^ 543,900 $ 8,708
Jones Lang LaSalle,
Inc.*^ 650,000 23,335
------------
TOTAL 32,043
------------
DIVERSIFIED MANUFACTURING 0.81%
CLARCOR, Inc.^ 68,100 3,577
Hexcel Corp.*^ 650,000 9,912
------------
TOTAL 13,489
------------
DRUG & GROCERY STORE CHAINS 0.89%
Casey's General
Stores, Inc.^ 767,300 14,863
------------
ELECTRICAL EQUIPMENT &
COMPONENTS 1.52%
Ametek, Inc. 410,000 13,399
Baldor Electric^ 249,900 6,892
Genlyte Group, Inc.* 63,000 5,051
------------
TOTAL 25,342
------------
ELECTRONICS 0.62%
Vishay
Intertechnology, Inc.*^ 710,000 10,373
------------
ELECTRONICS: INSTRUMENTS, GAUGES &
METERS 0.15%
Metrologic
Instruments, Inc.*^ 124,400 2,541
------------
ELECTRONICS: MEDICAL SYSTEMS 1.38%
Analogic Corp.^ 265,800 12,046
Haemonetics Corp.* 201,500 7,033
Healthtronics, Inc.* 527,600 3,941
------------
TOTAL 23,020
------------
ELECTRONICS: TECHNOLOGY 1.16%
Cubic Corp.^ 407,100 10,381
Intermagnetics
General Corp.* 302,240 8,907
------------
TOTAL 19,288
------------
ENERGY EQUIPMENT 0.69%
Global Power
Equipment Group*^ 1,326,000 $ 11,523
------------
ENGINEERING & CONTRACTING
SERVICES 0.79%
URS Corp.*^ 440,000 13,218
------------
FOODS 0.13%
John B. Sanfilippo &
Son, Inc.* 97,400 2,162
------------
FOREST PRODUCTS 1.29%
Universal Forest
Products, Inc.^ 499,100 21,541
------------
FUNERAL PARLORS & CEMETERY 0.95%
Stewart Enterprises,
Inc.*^ 2,126,100 15,776
------------
HEALTHCARE FACILITIES 1.32%
Capital Senior Living
Corp.*^ 820,000 4,256
Pharmaceutical
Product Development,
Inc.* 420,000 17,686
------------
TOTAL 21,942
------------
HEALTHCARE MANAGEMENT
SERVICES 0.15%
American Med
Security Group, Inc.* 76,200 2,464
------------
HOTEL/MOTEL 0.96%
Marcus Corp. (The)^ 697,400 15,936
------------
HOUSEHOLD FURNISHINGS 0.54%
Ethan Allen Interiors,
Inc.^ 230,000 9,074
------------
IDENTIFICATION CONTROL & FILTER
DEVICES 0.82%
IDEX Corp. 225,050 9,002
Roper Industries, Inc.^ 75,900 4,672
------------
TOTAL 13,674
------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<Page>
SCHEDULE OF INVESTMENTS (CONTINUED)
SMALL-CAP VALUE FUND NOVEMBER 30, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- ----------------------------------------------------------------------------------------------------
INSURANCE: MULTI-LINE 0.10%
Markel Corp.* 5,000 $ 1,610
------------
INSURANCE: PROPERTY-CASUALTY 2.23%
Navigators Group,
Inc. (The)* 228,000 6,441
Odyssey Re Holdings
Corp.^ 410,000 9,901
Philadelphia Cons
Holding Corp.*^ 97,400 6,648
Selective Insurance
Group, Inc.^ 315,300 14,122
------------
TOTAL 37,112
------------
MACHINERY: ENGINES 1.41%
Briggs & Stratton
Corp. 600,000 23,532
------------
MACHINERY: INDUSTRIAL/SPECIALTY 3.50%
Enpro Industries, Inc.* 730,900 21,006
Tennant Co.^ 334,200 13,368
Woodward Governor
Co.^ 330,200 24,055
------------
TOTAL 58,429
------------
MACHINERY: OIL WELL EQUIPMENT &
SERVICES 5.07%
FMC Technologies, Inc.*^ 423,900 13,925
Grant Prideco, Inc.*^ 760,000 16,378
Helmerich & Payne,
Inc.^ 858,100 28,000
Key Energy Services,
Inc.*^ 2,100,000 26,292
------------
TOTAL 84,595
------------
MACHINERY SPECIALITY 0.54%
JLG Industries, Inc.^ 520,000 9,048
------------
MEDICAL & DENTAL INSTRUMENTS &
SUPPLIES 0.50%
Invacare Corp.^ 73,500 3,712
PSS World Medical, Inc.*^ 375,000 4,693
------------
TOTAL 8,405
------------
MEDICAL SERVICES 0.60%
Covance, Inc.*^ 254,500 $ 10,043
------------
METAL FRABRICATING 4.33%
Material Sciences
Corp.*^ 368,300 6,158
Quanex Corp.^(b) 890,000 52,510
Shaw Group, Inc.* 705,800 10,396
Valmont Industries,
Inc. 126,500 3,157
------------
TOTAL 72,221
------------
METALS & MINERALS MISCELLANEOUS 1.83%
Brush Engineered
Materials, Inc.* 66,100 1,289
GrafTech Int'l., Ltd.*^ 1,252,000 11,944
Minerals Technologies,
Inc.^ 259,300 17,205
------------
TOTAL 30,438
------------
MISCELLANEOUS MATERIALS &
PROCESSING 1.86%
Rogers Corp.*^ 652,280 30,951
------------
MISCELLANEOUS PRODUCER DURABLES 0.42%
Blount International,
Inc.* 398,100 6,939
------------
MULTI-SECTOR COMPANIES 2.88%
Carlisle Companies,
Inc. 167,200 10,000
Trinity Industries, Inc.^ 1,075,600 38,022
------------
TOTAL 48,022
------------
OFFSHORE DRILLING 1.12%
Atwood Oceanics, Inc.* 355,000 18,613
------------
OIL: CRUDE PRODUCERS 2.20%
Grey Wolf, Inc.*^ 4,450,000 24,475
Range Resources
Corp.^ 585,000 12,133
------------
TOTAL 36,608
------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<Page>
SCHEDULE OF INVESTMENTS (CONTINUED)
SMALL-CAP VALUE FUND NOVEMBER 30, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- ----------------------------------------------------------------------------------------------------
OIL: INTEGRATED DOMESTIC 0.90%
KCS Energy Services,
Inc.*^ 1,041,900 $ 14,930
------------
PAPER 0.74%
Glatfelter^ 860,000 12,367
------------
POWER TRANSMISSION EQUIPMENT 0.22%
Woodhead Industries,
Inc. 240,000 3,619
------------
PUBLISHING: NEWSPAPERS 0.35%
Journal Register Co.* 308,300 5,830
------------
RAILROAD EQUIPMENT 1.17%
Wabtec Corp.^ 945,000 19,439
------------
RAILROADS 0.22%
Genesee & Wyoming,
Inc. Class A*^ 133,450 3,679
------------
REAL ESTATE INVESTMENT TRUSTS 1.68%
DiamondRock
Hospitality Co.*+ 600,000 6,000
Nationwide Health
Properties, Inc.^ 960,000 21,984
------------
TOTAL 27,984
------------
RESTAURANTS 0.56%
McCormick &
Schmick's Seafood*^ 560,900 9,277
------------
RETAIL 4.72%
AnnTaylor Stores
Corp.*^ 527,500 11,573
Barnes & Noble, Inc.* 345,000 9,343
Brookstone, Inc.*^ 840,000 15,372
Cost Plus, Inc.*^ 255,000 8,104
Pier 1 Imports, Inc.^ 725,000 13,224
School Specialty, Inc.*^ 555,900 21,124
------------
TOTAL 78,740
------------
SAVINGS & LOAN 3.43%
Bank Mutual Corp.^ 565,029 $ 6,967
KNBT Bancorp, Inc.^ 544,830 9,327
W Holding Company,
Inc.^ 1,232,531 27,140
Webster Financial
Corp. 275,000 13,764
------------
TOTAL 57,198
------------
SCIENTIFIC EQUIPMENT & SUPPLIES 1.05%
Varian, Inc.* 466,100 17,455
------------
SECURITIES BROKERAGE & SERVICES 0.74%
Raymond James
Financial, Inc.^ 415,000 12,276
------------
SERVICES: COMMERCIAL 0.65%
Hudson Highland
Group, Inc.*^ 265,900 7,262
Tetra Tech, Inc.*^ 235,100 3,583
------------
TOTAL 10,845
------------
SHIPPING 1.63%
Alexander & Baldwin,
Inc. 180,000 7,616
Kirby Corp.*^ 430,000 19,573
------------
TOTAL 27,189
------------
SHOES 0.49%
Skechers USA, Inc.
Class A*^ 710,100 8,244
------------
STEEL 1.24%
Gibraltar Industries,
Inc.^ 138,400 3,334
Steel Technologies,
Inc.^ 590,100 17,278
------------
TOTAL 20,612
------------
TEXTILES APPAREL MANUFACTURERS 0.94%
Warnaco Group, Inc.* 790,000 15,697
------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<Page>
SCHEDULE OF INVESTMENTS (CONCLUDED)
SMALL-CAP VALUE FUND NOVEMBER 30, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- ----------------------------------------------------------------------------------------------------
TRANSPORTATION MISCELLANEOUS 0.34%
BE Aerospace, Inc.*^ 540,000 $ 5,722
------------
TRUCKERS 0.69%
P.A.M. Transportation
Svcs.* 405,000 8,221
USF Corp. 91,200 3,372
------------
TOTAL 11,593
------------
UTILITIES: WATER 0.17%
Aqua America, Inc.^ 119,800 2,842
------------
TOTAL COMMON STOCKS
(Cost $1,223,247,663) 1,574,940
============
SHORT-TERM INVESTMENTS 21.65%
COLLATERAL FOR SECURITIES ON LOAN 14.37%
State Street Navigator Securities
Lending Prime
PORTFOLIO, 1.96%(a) 239,733,452 239,733
------------
<Caption>
PRINCIPAL
AMOUNT VALUE
INVESTMENTS (000) (000)
- ----------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT 7.28%
Repurchase Agreement
dated 11/30/2004
1.61% due 12/1/2004
with State Street
Bank & Trust Co.
collateralized by
$83,650,000 of Federal
National Mortgage
Assoc. at 7.125% due
3/15/2007 and
$31,645,000 of
United States
Treasury Notes
at 3.625% due
7/15/2009; value:
$123,806,881;
proceeds:
$121,376,011 $ 121,371 $ 121,371
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $361,104,034) 361,104
============
TOTAL INVESTMENTS IN SECURITIES 116.10%
(Cost $1,584,351,697) 1,936,044
============
LIABILITIES IN EXCESS OF CASH AND
OTHER ASSETS (16.10%) (268,487)
------------
NET ASSETS 100.00% $ 1,667,557
============
</Table>
* Non-income producing security.
+ Restricted security under Rule 144A.
^ Security (or a portion of security) on loan. See Note 5.
(a) Rate shown reflects seven day yield as of November 30, 2004.
(b) Affiliated issuer (holding represents 5% or more of the underlying
issuer's outstanding voting shares). See Note 9.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<Page>
STATEMENTS OF ASSETS AND LIABILITIES
NOVEMBER 30, 2004
<Table>
<Caption>
LARGE-CAP SMALL-CAP
CORE FUND* VALUE FUND
ASSETS:
Investments in unaffiliated issuers at cost $ 383,622,098 $ 1,548,505,379
Investment in affiliated issuer at cost - 35,846,318
- ------------------------------------------------------------------------------------------------------------
Investments in unaffiliated issuers, at value $ 458,808,468 $ 1,883,533,936
Investment in affiliated issuer, at value - 52,510,000
Receivables:
Interest and dividends 1,846,921 1,308,937
Investment securities sold 2,573,682 2,624,818
Capital shares sold 415,295 3,813,878
From advisor 73,742 -
Prepaid expenses and other assets 14,785 277,403
- ------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 463,732,893 1,944,068,972
- ------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable upon return of securities on loan - 239,733,451
Payables:
Investment securities purchased 1,952,117 30,476,467
Capital shares reacquired 603,652 4,290,003
Management fee 261,268 962,393
12b-1 distribution fees 191,457 526,195
Fund administration 14,919 51,217
Directors' fees 11,759 36,757
To affiliate 2,621 20,416
Accrued expenses and other liabilities 218,781 414,734
- ------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 3,256,574 276,511,633
============================================================================================================
NET ASSETS $ 460,476,319 $ 1,667,557,339
============================================================================================================
COMPOSITION OF NET ASSETS:
Paid-in capital $ 371,960,834 $ 1,162,706,944
Undistributed (distributions in excess of) net investment income 1,947,790 (36,758)
Accumulated net realized gain on investments 11,381,325 153,194,914
Net unrealized appreciation on investments 75,186,370 351,692,239
- ------------------------------------------------------------------------------------------------------------
NET ASSETS $ 460,476,319 $ 1,667,557,339
============================================================================================================
NET ASSETS BY CLASS:
Class A Shares $ 324,690,003 $ 939,899,108
Class B Shares $ 82,875,946 $ 192,098,640
Class C Shares $ 39,624,778 $ 89,407,811
Class P Shares $ 294,733 $ 141,388,769
Class Y Shares $ 12,990,859 $ 304,763,011
OUTSTANDING SHARES BY CLASS:
Class A Shares (20 million and 50 million shares of common
stock authorized, respectively, $.001 par value) 11,423,635 31,813,354
Class B Shares (30 million shares of common stock authorized
per Fund, $.001 par value) 3,027,345 6,892,799
Class C Shares (20 million shares of common stock authorized
per Fund, $.001 par value) 1,442,618 3,204,662
Class P Shares (20 million shares of common stock authorized
per Fund, $.001 par value) 10,342 4,798,318
Class Y Shares (30 million shares of common stock authorized
per Fund, $.001 par value) 455,870 10,038,598
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(NET ASSETS DIVIDED BY OUTSTANDING SHARES):
Class A Shares-Net asset value $ 28.42 $ 29.54
Class A Shares-Maximum offering price
(Net asset value plus sales charge of 5.75%) $ 30.15 $ 31.34
Class B Shares-Net asset value $ 27.38 $ 27.87
Class C Shares-Net asset value $ 27.47 $ 27.90
Class P Shares-Net asset value $ 28.50 $ 29.47
Class Y Shares-Net asset value $ 28.50 $ 30.36
============================================================================================================
</Table>
* Formerly known as Large-Cap Research Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
20
<Page>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 2004
<Table>
<Caption>
LARGE-CAP SMALL-CAP
CORE FUND* VALUE FUND
INVESTMENT INCOME:
Dividends from unaffiliated issuers $ 8,642,963 $ 15,027,500
Dividends from affiliated issuers - 568,009
Interest 160,659 839,723
Securities lending-net - 285,715
Foreign withholding tax (97,806) (37,334)
- ------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 8,705,816 16,683,613
============================================================================================================
EXPENSES:
Management fee 3,126,925 9,202,816
12b-1 distribution plan-Class A 1,087,218 2,584,467
12b-1 distribution plan-Class B 831,064 1,824,952
12b-1 distribution plan-Class C 383,609 828,767
12b-1 distribution plan-Class P 866 372,003
Shareholder servicing 890,018 1,828,209
Professional 40,735 63,270
Reports to shareholders 44,991 153,038
Fund administration 168,727 490,817
Custody 19,988 89,488
Directors' fees 7,710 21,357
Registration 104,100 140,375
Subsidy (see Note 3) 2,621 210,143
Other 17,765 23,845
- ------------------------------------------------------------------------------------------------------------
Gross expenses 6,726,337 17,833,547
Expense reductions (2,925) (9,709)
Expenses assumed by advisor (96,301) -
- ------------------------------------------------------------------------------------------------------------
NET EXPENSES 6,627,111 17,823,838
- ------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 2,078,705 (1,140,225)
- ------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN:
Net realized gain on investments in unaffiliated issuers 22,609,757 134,653,242
Net realized gain on investments in affiliated issuers - 19,422,880
Net change in unrealized appreciation (depreciation) on investments 31,231,873 116,357,254
============================================================================================================
NET REALIZED AND UNREALIZED GAIN 53,841,630 270,433,376
============================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 55,920,335 $ 269,293,151
============================================================================================================
</Table>
* Formerly known as Large-Cap Research Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED NOVEMBER 30, 2004
<Table>
<Caption>
LARGE-CAP SMALL-CAP
CORE FUND* VALUE FUND
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 2,078,705 $ (1,140,225)
Net realized gain on investments 22,609,757 154,076,122
Net change in unrealized appreciation (depreciation) on investments 31,231,873 116,357,254
- ------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 55,920,335 269,293,151
============================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (599,177) -
Class B - -
Class C - -
Class P (597) -
Class Y (379) -
Net realized gain
Class A - (33,408,285)
Class B - (12,214,825)
Class C - (5,477,260)
Class P - (3,229,201)
Class Y - (9,460,860)
- ------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (600,153) (63,790,431)
============================================================================================================
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 95,114,915 703,623,177
Reinvestment of distributions 569,491 48,589,693
Cost of shares reacquired (69,306,028) (262,078,621)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE TRANSACTIONS 26,378,378 490,134,249
============================================================================================================
NET INCREASE IN NET ASSETS 81,698,560 695,636,969
============================================================================================================
NET ASSETS:
Beginning of year 378,777,759 971,920,370
- ------------------------------------------------------------------------------------------------------------
END OF YEAR $ 460,476,319 $ 1,667,557,339
============================================================================================================
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME $ 1,947,790 $ (36,758)
============================================================================================================
</Table>
* Formerly known as Large-Cap Research Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
22
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED NOVEMBER 30, 2003
<Table>
<Caption>
LARGE-CAP SMALL-CAP
CORE FUND* VALUE FUND
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 481,100 $ (4,555,361)
Net realized gain (loss) on investments (4,393,899) 69,175,832
Net change in unrealized appreciation on investments 54,245,352 172,512,238
- ------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 50,332,553 237,132,709
============================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain
Class A - (21,303,825)
Class B - (10,485,449)
Class C - (4,705,031)
Class P - (978,096)
Class Y - (5,696,400)
- ------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS - (43,168,801)
============================================================================================================
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 83,059,077 235,550,069
Reinvestment of distributions - 30,366,101
Cost of shares reacquired (58,728,763) (133,000,120)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE TRANSACTIONS 24,330,314 132,916,050
============================================================================================================
NET INCREASE IN NET ASSETS 74,662,867 326,879,958
============================================================================================================
NET ASSETS:
Beginning of year 304,114,892 645,040,412
- ------------------------------------------------------------------------------------------------------------
END OF YEAR $ 378,777,759 $ 971,920,370
============================================================================================================
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME $ 468,998 $ (40,296)
============================================================================================================
</Table>
* Formerly known as Large-Cap Research Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
23
<Page>
FINANCIAL HIGHLIGHTS
LARGE-CAP CORE FUND*
<Table>
<Caption>
YEAR ENDED 11/30
-----------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 24.88 $ 21.27 $ 24.75 $ 26.83 $ 25.32
======== ======== ======== ======== ========
Investment operations:
Net investment income(a) .18 .08 .04 .06 .11
Net realized and unrealized gain (loss) 3.42 3.53 (3.37) (1.14) 2.74
-------- -------- -------- -------- --------
Total from investment operations 3.60 3.61 (3.33) (1.08) 2.85
-------- -------- -------- -------- --------
Distributions to shareholders from:
Net investment income (.06) - - (.09) (.03)
Net realized gain - - (.15) (.91) (1.31)
-------- -------- -------- -------- --------
Total distributions (.06) - (.15) (1.00) (1.34)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $ 28.42 $ 24.88 $ 21.27 $ 24.75 $ 26.83
======== ======== ======== ======== ========
Total Return(b) 14.48% 16.97% (13.52)% (4.26)% 11.75%
RATIOS TO AVERAGE NET ASSETS
Expenses, including waiver and
expense reductions 1.39% 1.46% 1.45% 1.45% 1.54%
Expenses, excluding waiver and
expense reductions 1.41% 1.46% 1.45% 1.45% 1.54%
Net investment income .67% .36% .16% .22% .46%
<Caption>
YEAR ENDED 11/30
------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 324,690 $ 261,231 $ 201,315 $ 234,533 $ 200,064
Portfolio turnover rate 47.14% 34.98% 74.76% 81.79% 74.72%
- ----------------------------------------------------------------------------------------------------------
</Table>
* Formerly known as Large-Cap Research Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
24
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
LARGE-CAP CORE FUND*
<Table>
<Caption>
YEAR ENDED 11/30
-----------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS B SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 24.07 $ 20.70 $ 24.25 $ 26.37 $ 25.03
======== ======== ======== ======== ========
Investment operations:
Net investment income (loss)(a) -(c) (.06) (.10) (.10) (.04)
Net realized and unrealized gain (loss) 3.31 3.43 (3.30) (1.11) 2.69
-------- -------- -------- -------- --------
Total from investment operations 3.31 3.37 (3.40) (1.21) 2.65
-------- -------- -------- -------- --------
Distributions to shareholders from:
Net realized gain - - (.15) (.91) (1.31)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $ 27.38 $ 24.07 $ 20.70 $ 24.25 $ 26.37
======== ======== ======== ======== ========
Total Return(b) 13.75% 16.28% (14.10)% (4.81)% 11.04%
RATIOS TO AVERAGE NET ASSETS
Expenses, including waiver and
expense reductions 2.03% 2.10% 2.06% 2.07% 2.15%
Expenses, excluding waiver and
expense reductions 2.05% 2.10% 2.06% 2.07% 2.15%
Net investment income (loss) .03% (.28)% (.45)% (.39)% (.16)%
<Caption>
YEAR ENDED 11/30
------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 82,876 $ 80,542 $ 70,636 $ 85,011 $ 79,968
Portfolio turnover rate 47.14% 34.98% 74.76% 81.79% 74.72%
- ----------------------------------------------------------------------------------------------------------
</Table>
* Formerly known as Large-Cap Research Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
25
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
LARGE-CAP CORE FUND*
<Table>
<Caption>
YEAR ENDED 11/30
-----------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS C SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 24.15 $ 20.77 $ 24.27 $ 26.41 $ 25.05
======== ======== ======== ======== ========
Investment operations:
Net investment income (loss)(a) -(c) (.06) (.06) (.11) (.03)
Net realized and unrealized gain (loss) 3.32 3.44 (3.29) (1.12) 2.70
-------- -------- -------- -------- --------
Total from investment operations 3.32 3.38 (3.35) (1.23) 2.67
-------- -------- -------- -------- --------
Distributions to shareholders from:
Net realized gain - - (.15) (.91) (1.31)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $ 27.47 $ 24.15 $ 20.77 $ 24.27 $ 26.41
======== ======== ======== ======== ========
Total Return(b) 13.75% 16.27% (13.88)% (4.88)% 11.12%
RATIOS TO AVERAGE NET ASSETS
Expenses, including waiver and
expense reductions 2.03% 2.10% 1.87% 2.10% 2.15%
Expenses, excluding waiver and
expense reductions 2.05% 2.10% 1.87% 2.10% 2.15%
Net investment income (loss) .03% (.28)% (.26)% (.43)% (.14)%
<Caption>
YEAR ENDED 11/30
------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 39,625 $ 36,778 $ 32,109 $ 37,149 $ 26,954
Portfolio turnover rate 47.14% 34.98% 74.76% 81.79% 74.72%
- ----------------------------------------------------------------------------------------------------------
</Table>
* Formerly known as Large-Cap Research Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
26
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
LARGE-CAP CORE FUND*
<Table>
<Caption>
YEAR ENDED 11/30
-----------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS P SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 25.01 $ 21.37 $ 24.87 $ 26.92 $ 25.36
======== ======== ======== ======== ========
Investment operations:
Net investment income(a) .17 .02 .02 .07 .10
Net realized and unrealized gain (loss) 3.42 3.62 (3.37) (1.13) 2.78
-------- -------- -------- -------- --------
Total from investment operations 3.59 3.64 (3.35) (1.06) 2.88
-------- -------- -------- -------- --------
Distributions to shareholders from:
Net investment income (.10) - - (.08) (.01)
Net realized gain - - (.15) (.91) (1.31)
-------- -------- -------- -------- --------
Total distributions (.10) - (.15) (.99) (1.32)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $ 28.50 $ 25.01 $ 21.37 $ 24.87 $ 26.92
======== ======== ======== ======== ========
Total Return(b) 14.39% 17.03% (13.54)% (4.16)% 11.84%
RATIOS TO AVERAGE NET ASSETS
Expenses, including waiver and
expense reductions 1.48% 1.55%+ 1.51% 1.52% 1.60%
Expenses, excluding waiver and
expense reductions 1.50% 1.55%+ 1.51% 1.52% 1.60%
Net investment income .58% .27%+ .10% .27% .40%
<Caption>
YEAR ENDED 11/30
------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 294 $ 152 $ 1 $ 1 $ 1
Portfolio turnover rate 47.14% 34.98% 74.76% 81.79% 74.72%
- ----------------------------------------------------------------------------------------------------------
</Table>
* Formerly known as Large-Cap Research Fund.
SEE NOTES TO FINANCIAL STATEMENTS.
27
<Page>
FINANCIAL HIGHLIGHTS (CONCLUDED)
LARGE-CAP CORE FUND*
<Table>
<Caption>
YEAR ENDED 11/30
-----------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 24.93 $ 21.23 $ 24.61 $ 26.74 $ 25.30
======== ======== ======== ======== ========
Investment operations:
Net investment income(a) .93 .16 .13 .08 .22
Net realized and unrealized gain (loss) 2.77 3.54 (3.36) (1.12) 2.64
-------- -------- -------- -------- --------
Total from investment operations 3.70 3.70 (3.23) (1.04) 2.86
-------- -------- -------- -------- --------
Distributions to shareholders from:
Net investment income (.13) - - (.18) (.11)
Net realized gain - - (.15) (.91) (1.31)
-------- -------- -------- -------- --------
Total distributions (.13) - (.15) (1.09) (1.42)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $ 28.50 $ 24.93 $ 21.23 $ 24.61 $ 26.74
======== ======== ======== ======== ========
Total Return(b) 14.89% 17.43% (13.19)% (4.14)% 11.82%
RATIOS TO AVERAGE NET ASSETS
Expenses, including waiver and
expense reductions .93% 1.10% 1.06% 1.07% 1.15%
Expenses, excluding waiver and
expense reductions 1.07% 1.10% 1.06% 1.07% 1.15%
Net investment income 3.35% .72% .55% .32% .85%
<Caption>
YEAR ENDED 11/30
------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 12,991 $ 75 $ 54 $ 1 $ 1
Portfolio turnover rate 47.14% 34.98% 74.76% 81.79% 74.72%
- ----------------------------------------------------------------------------------------------------------
</Table>
* Formerly known as Large-Cap Research Fund.
+ The ratios have been determined on a Fund basis.
(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) Amount is less than $.01.
SEE NOTES TO FINANCIAL STATEMENTS.
28
<Page>
FINANCIAL HIGHLIGHTS
SMALL-CAP VALUE FUND
<Table>
<Caption>
YEAR ENDED 11/30
-----------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 25.66 $ 20.29 $ 22.02 $ 19.60 $ 15.63
======== ======== ======== ======== ========
Investment operations:
Net investment loss(a) -(c) (.10) (.07) (.13) (.19)
Net realized and unrealized gain (loss) 5.52 6.81 (.48) 3.04 4.16
-------- -------- -------- -------- --------
Total from investment operations 5.52 6.71 (.55) 2.91 3.97
-------- -------- -------- -------- --------
Distributions to shareholders from:
Net realized gain (1.64) (1.34) (1.18) (.49) -
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $ 29.54 $ 25.66 $ 20.29 $ 22.02 $ 19.60
======== ======== ======== ======== ========
Total Return(b) 22.92% 35.67% (2.72)% 15.12% 25.40%
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense
reductions 1.39% 1.45% 1.41% 1.43% 1.60%
Expenses, excluding expense
reductions 1.39% 1.45% 1.41% 1.44% 1.60%
Net investment loss (.03)% (.50)% (.34)% (.60)% (1.04)%
<Caption>
YEAR ENDED 11/30
------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 939,899 $ 510,582 $ 321,243 $ 394,443 $ 275,010
Portfolio turnover rate 67.04% 66.11% 77.12% 64.76% 76.21%
- ----------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
SMALL-CAP VALUE FUND
<Table>
<Caption>
YEAR ENDED 11/30
-----------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS B SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 24.44 $ 19.50 $ 21.33 $ 19.13 $ 15.34
======== ======== ======== ======== ========
Investment operations:
Net investment loss(a) (.18) (.22) (.20) (.26) (.29)
Net realized and unrealized gain (loss) 5.25 6.50 (.45) 2.95 4.08
-------- -------- -------- -------- --------
Total from investment operations 5.07 6.28 (.65) 2.69 3.79
-------- -------- -------- -------- --------
Distributions to shareholders from:
Net realized gain (1.64) (1.34) (1.18) (.49) -
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $ 27.87 $ 24.44 $ 19.50 $ 21.33 $ 19.13
======== ======== ======== ======== ========
Total Return(b) 22.17% 34.78% (3.25)% 14.33% 24.71%
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense
reductions 2.00% 2.07% 2.04% 2.05% 2.23%
Expenses, excluding expense
reductions 2.00% 2.07% 2.04% 2.06% 2.23%
Net investment loss (.74)% (1.12)% (.97)% (1.22)% (1.67)%
<Caption>
YEAR ENDED 11/30
------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 192,098 $ 182,437 $ 153,101 $ 182,555 $ 153,894
Portfolio turnover rate 67.04% 66.11% 77.12% 64.76% 76.21%
- ----------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
SMALL-CAP VALUE FUND
<Table>
<Caption>
YEAR ENDED 11/30
-----------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS C SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 24.46 $ 19.52 $ 21.31 $ 19.13 $ 15.34
======== ======== ======== ======== ========
Investment operations:
Net investment loss(a) (.18) (.22) (.17) (.28) (.29)
Net realized and unrealized gain (loss) 5.26 6.50 (.44) 2.95 4.08
-------- -------- -------- -------- --------
Total from investment operations 5.08 6.28 (.61) 2.67 3.79
-------- -------- -------- -------- --------
Distributions to shareholders from:
Net realized gain (1.64) (1.34) (1.18) (.49) -
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $ 27.90 $ 24.46 $ 19.52 $ 21.31 $ 19.13
======== ======== ======== ======== ========
Total Return(b) 22.19% 34.74% (3.07)% 14.22% 24.71%
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense
reductions 2.00% 2.07% 1.90% 2.16% 2.23%
Expenses, excluding expense
reductions 2.00% 2.07% 1.90% 2.17% 2.23%
Net investment loss (.74)% (1.12)% (.83)% (1.32)% (1.67)%
<Caption>
YEAR ENDED 11/30
------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 89,408 $ 81,967 $ 69,121 $ 81,396 $ 51,061
Portfolio turnover rate 67.04% 66.11% 77.12% 64.76% 76.21%
- ----------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
SMALL-CAP VALUE FUND
<Table>
<Caption>
YEAR ENDED 11/30
-----------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS P SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 25.61 $ 20.27 $ 22.01 $ 19.61 $ 15.63
======== ======== ======== ======== ========
Investment operations:
Net investment loss(a) .01 (.12) (.08) (.14) (.20)
Net realized and unrealized gain (loss) 5.49 6.80 (.48) 3.03 4.18
-------- -------- -------- -------- --------
Total from investment operations 5.50 6.68 (.56) 2.89 3.98
-------- -------- -------- -------- --------
Distributions to shareholders from:
Net realized gain (1.64) (1.34) (1.18) (.49) -
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $ 29.47 $ 25.61 $ 20.27 $ 22.01 $ 19.61
======== ======== ======== ======== ========
Total Return(b) 22.84% 35.48% (2.72)% 15.01% 25.46%
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense
reductions 1.45% 1.52% 1.49% 1.50% 1.68%
Expenses, excluding expense
reductions 1.45% 1.52% 1.49% 1.51% 1.68%
Net investment income (loss) .03% (.57)% (.42)% (.66)% (1.00)%
<Caption>
YEAR ENDED 11/30
------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 141,389 $ 47,471 $ 14,005 $ 4,150 $ 1
Portfolio turnover rate 67.04% 66.11% 77.12% 64.76% 76.21%
- ----------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<Page>
FINANCIAL HIGHLIGHTS (CONCLUDED)
SMALL-CAP VALUE FUND
<Table>
<Caption>
YEAR ENDED 11/30
-----------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 26.23 $ 20.64 $ 22.30 $ 19.77 $ 15.71
======== ======== ======== ======== ========
Investment operations:
Net investment income (loss)(a) .10 (.02) .01 (.05) (.12)
Net realized and unrealized gain (loss) 5.67 6.95 (.49) 3.07 4.18
-------- -------- -------- -------- --------
Total from investment operations 5.77 6.93 (.48) 3.02 4.06
-------- -------- -------- -------- --------
Distributions to shareholders from:
Net realized gain (1.64) (1.34) (1.18) (.49) -
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $ 30.36 $ 26.23 $ 20.64 $ 22.30 $ 19.77
======== ======== ======== ======== ========
Total Return(b) 23.40% 36.10% (2.31)% 15.56% 25.84%
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense
reductions 1.00% 1.07% 1.04% 1.05% 1.23%
Expenses, excluding expense
reductions 1.00% 1.07% 1.04% 1.06% 1.23%
Net investment income (loss) .38% (.12)% .03% (.24)% (.67)%
<Caption>
YEAR ENDED 11/30
------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 304,763 $ 149,463 $ 87,570 $ 75,402 $ 70,122
Portfolio turnover rate 67.04% 66.11% 77.12% 64.76% 76.21%
- ----------------------------------------------------------------------------------------------------------
</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) Amount is less than $.01.
SEE NOTES TO FINANCIAL STATEMENTS.
33
<Page>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Lord Abbett Research Fund, Inc. (the "Company") is registered under the
Investment Company Act of 1940 (the "Act") as a diversified open-end management
investment company incorporated under Maryland law on April 6, 1992. The Company
currently consists of four separate funds. This report covers the following two
funds: Large-Cap Core Fund ("Large-Cap Core Fund", formerly known as "Large-Cap
Research Fund") and Small-Cap Value Series ("Small-Cap Value Fund")
(collectively, the "Funds").
Large-Cap Core Fund's investment objective is growth of capital and growth of
income consistent with reasonable risk. Small-Cap Value Fund's investment
objective is long-term capital appreciation. Each Fund offers five classes of
shares: Classes A, B, C, P, and Y, each with different expenses and dividends. A
front-end sales charge is normally added to the Net Asset Value ("NAV") for
Class A shares. There is no front-end sales charge in the case of Class B, C, P,
and Y shares, although there may be a contingent deferred sales charge ("CDSC")
as follows: certain redemptions of Class A shares made within 24 months (12
months if shares were purchased on or after November 1, 2004) following certain
purchases made without a sales charge; Class B shares redeemed before the sixth
anniversary of purchase; and Class C shares redeemed before the first
anniversary of purchase. Class B shares will convert to Class A shares on the
eighth anniversary of the original purchase of Class B shares. Small-Cap Value
Fund is open to certain new investors on a limited basis.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results may
differ from those estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) INVESTMENT VALUATION-Securities traded on any recognized U.S. or non-U.S.
exchange or on NASDAQ, Inc. are valued at the last sales price or official
closing price on the exchange or system on which they are principally
traded. Unlisted equity securities are valued at the last quoted sales
price or, if no sale price is available, at the mean between the most
recently quoted bid and asked prices. Securities for which market
quotations are not readily available are valued at fair value as determined
by management and approved in good faith by the Board of Directors.
Short-term securities with 60 days or less remaining to maturity are valued
using the amortized cost method, which approximates current market value.
(b) SECURITY TRANSACTIONS-Security transactions are recorded as of the date
that the securities are purchased or sold (trade date). Realized gains and
losses on sales of portfolio securities are calculated using the
identified-cost method. 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.
(c) INVESTMENT INCOME-Dividend income is recorded on the ex-dividend date.
Interest income is recorded on the accrual basis. Discounts are accreted
and premiums are amortized using the effective interest method. Investment
income is allocated to each class of shares based upon the relative
proportion of net assets at the beginning of the day.
34
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(d) FEDERAL TAXES-It is the policy of each Fund to meet the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all taxable income and
capital gains to its shareholders. Therefore, no federal income tax
provision is required.
(e) EXPENSES-Expenses incurred by the Company that do not specifically relate
to an individual fund are generally allocated to the funds within the
Company on a pro rata basis. Expenses, excluding class specific expenses,
are allocated to each class of shares based upon the relative proportion of
net assets at the beginning of the day. Class A, B, C and P bear all the
expenses and fees relating to their respective 12b-1 Distribution Plans.
(f) SECURITIES LENDING-Each Fund may lend securities to member banks of the
Federal Reserve System and to registered broker/dealers approved by the
Fund. The loans are collateralized at all times by cash and/or U.S.
Treasury securities in an amount at least equal to 102% of the market value
of domestic securities loaned (105% in the case of foreign securities
loaned) as determined at the close of business on the preceding business
day. The dividend and interest income earned on the securities loaned is
accounted for in the same manner as other dividend and interest income.
Lending portfolio securities could result in a loss or delay in recovering
the Fund's securities if the borrower defaults. For the fiscal year ended
November 30, 2004, only Small-Cap Value Fund had securities lending
activity.
(g) REPURCHASE AGREEMENTS-Each Fund may enter into repurchase agreements with
respect to securities. A repurchase agreement is a transaction in which a
Fund acquires a security and simultaneously commits to resell that security
to the seller (a bank or securities dealer) at an agreed-upon price on an
agreed-upon date. Each Fund requires at all times that the repurchase
agreement be collateralized by cash, or by securities of the U.S.
Government, its agencies, its instrumentalities, or U.S. Government
sponsored enterprises having a value equal to, or in excess of, the value
of the repurchase agreement (including accrued interest). If the seller of
the agreement defaults on its obligation to repurchase the underlying
securities at a time when the value of those securities has declined, a
Fund may incur a loss upon disposition of the securities.
3. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE
The Company has a management agreement with Lord, Abbett & Co. LLC ("Lord
Abbett") pursuant to which Lord Abbett supplies each Fund 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 and statistical work and supervision of
each Fund's investment portfolio.
The management fee is based on the average daily net assets at the following
annual rates:
<Table>
<Caption>
LARGE-CAP CORE FUND(1)
- --------------------------------
First $1 billion .70%
Next $1 billion .65%
Over $2 billion .60%
- --------------------------------
Small-Cap Value Fund .75%
</Table>
(1) Rate changed effective October 1, 2004. Prior to October 1, 2004, the
management fee was based upon an annual rate of .75% of average daily net
assets.
35
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Effective October 1, 2004, Lord Abbett voluntarily reimbursed Large-Cap Core
Fund to the extent necessary so that total annual operating expenses did not
exceed the following annualized rates:
<Table>
<Caption>
CLASS % OF AVERAGE DAILY NET ASSETS
- -----------------------------------------------
A 1.30%
B 1.95%
C 1.95%
P 1.40%
Y 0.95%
</Table>
Lord Abbett provides certain administrative services to each Fund pursuant to an
Administrative Services Agreement at an annual rate of .04% of each Fund's
average daily net assets.
12b-1 DISTRIBUTION PLANS
Each Fund has adopted a distribution plan with respect to one or more classes of
shares pursuant to Rule 12b-1 of the Act, which provides for the payment of
ongoing distribution and service fees to Lord Abbett Distributor LLC
("Distributor"), an affiliate of Lord Abbett. The fees are accrued daily at
annual rates based upon average daily net assets as follows:
<Table>
<Caption>
FEE CLASS A CLASS B CLASS C CLASS P
- ---------------------------------------------------------------------------------
Service .25% .25% .25% .20%
Distribution .10%(1) .75% .75% .25%
</Table>
(1) In addition, until September 30, 2004, each Fund paid a one-time
distribution fee of up to 1.00% on certain qualifying purchases of Class A
shares. Effective October 1, 2004, the Distributor pays such one-time
distribution fee. The unamortized balance of these distribution fees as of
September 30, 2004 was as follows:
<Table>
<Caption>
UNAMORTIZED
BALANCE
- --------------------------------------------------------------------------------
Large-Cap Core Fund $ 21,745
Small-Cap Value Fund 314,414
</Table>
These amounts will continue to be amortized by each Fund, generally over a
two-year period.
The amount of CDSC collected during the fiscal year ended November 30, 2004 was
as follows:
<Table>
<Caption>
CDSC
COLLECTED
- --------------------------------------------------------------------------------
Large-Cap Core Fund $ 3,574
Small-Cap Value Fund 3,574
</Table>
Class Y does not have a distribution plan.
COMMISSIONS
Distributor received the following commissions on sales of Class A shares of the
Funds, after concessions were paid to authorized dealers, for the fiscal year
ended November 30, 2004:
<Table>
<Caption>
DISTRIBUTOR DEALERS'
COMMISSIONS CONCESSIONS
- --------------------------------------------------------------------------------
Large-Cap Core Fund $ 276,798 $ 1,444,616
Small-Cap Value Fund 32,054 181,287
</Table>
One Director and certain of the Funds' officers have an interest in Lord Abbett.
Small-Cap Value Fund, along with certain other funds managed by Lord Abbett (the
"Underlying Funds"), has entered into a Servicing Agreement with Alpha Series of
Lord Abbett Securities Trust ("Alpha Series") pursuant to which each Underlying
Fund pays a portion of the expenses of Alpha
36
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Series in proportion to the average daily value of the Underlying Fund shares
owned by Alpha Series. Amounts paid pursuant to the Servicing Agreement are
included in Subsidy on the Statement of Operations.
In addition, Large-Cap Core Fund, along with certain other funds managed by Lord
Abbett (together, the "Underlying Funds"), has entered into a Servicing
Agreement with Balanced Series of Lord Abbett Investment Trust ("Balanced Fund")
pursuant to which each Underlying Fund pays a portion of the expenses of
Balanced Fund in proportion to the average daily value of Underlying Fund shares
owned by the Balanced Fund. Amounts paid pursuant to the Servicing Agreement are
included in Subsidy on the Statement of Operations.
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYFORWARDS
Dividends from net investment income, if any, are declared and distributed at
least semi-annually for Large-Cap Core Fund and at least annually for Small-Cap
Value Fund. Taxable net realized gains from securities transactions, reduced by
capital loss carryforwards, if any, are declared and distributed to shareholders
at least annually. The capital loss carryforward amount, if any, is available to
offset future net capital gains. Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends and distributions from
net investment income and net realized capital gains are determined in
accordance with federal income tax regulations which may differ from accounting
principles generally accepted in the United States of America. These book/tax
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the components of net assets based on their federal tax basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed earnings and profits for tax purposes are reported as
a tax return of capital.
The following distribution was declared on December 9, 2004, and paid on
December 14, 2004 to the shareholders of record on December 13, 2004:
<Table>
<Caption>
ORDINARY SHORT-TERM LONG-TERM
INCOME CAPITAL GAINS CAPITAL GAINS
- --------------------------------------------------------------------------------
Large-Cap Core Fund $ 2,100,000 $ - $ 13,761,283
Small-Cap Value Fund - 11,601,479 142,059,531
</Table>
The tax character of distributions paid during the fiscal years ended November
30, 2004 and 2003 are as follows:
<Table>
<Caption>
LARGE-CAP CORE FUND SMALL-CAP VALUE FUND
- ----------------------------------------------------------------------------------
11/30/2004 11/30/2003 11/30/2004 11/30/2003
- ----------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 600,153 $ - $ 10,184,296 -
Net long-term capital gains - - 53,606,135 $ 43,168,801
- ----------------------------------------------------------------------------------
Total distributions $ 600,153 $ - $ 63,790,431 $ 43,168,801
==================================================================================
</Table>
37
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
As of November 30, 2004, the components of accumulated earnings (losses) on a
tax basis are as follows:
<Table>
<Caption>
LARGE-CAP CORE FUND SMALL-CAP VALUE FUND
- --------------------------------------------------------------------------------------------
Undistributed ordinary income - net $ 1,959,549 $ 11,599,395
Undistributed long-term capital gains 13,761,283 142,059,531
- --------------------------------------------------------------------------------------------
Total undistributed earnings $ 15,720,832 $ 153,658,926
Temporary differences (11,759) (36,758)
Unrealized gains - net 72,806,412 351,228,227
- --------------------------------------------------------------------------------------------
Total accumulated earning (losses) - net $ 88,515,485 $ 504,850,395
============================================================================================
</Table>
As of November 30, 2004, the Funds' aggregate unrealized security gains and
losses based on cost for U.S. federal income tax purposes are as follows:
<Table>
<Caption>
LARGE-CAP CORE FUND SMALL-CAP VALUE FUND
- --------------------------------------------------------------------------------------------
Tax cost $ 386,002,056 $ 1,584,815,709
- --------------------------------------------------------------------------------------------
Gross unrealized gain 83,832,408 360,169,338
Gross unrealized loss (11,025,996) (8,941,111)
- --------------------------------------------------------------------------------------------
Net unrealized security gain $ 72,806,412 $ 351,228,227
============================================================================================
</Table>
The difference between book-basis and tax-basis unrealized gains is primarily
attributable to wash sales and other temporary tax adjustments.
Permanent items identified during the year ended November 30, 2004 have been
reclassified among the components of net assets based on their tax basis
treatment as follows:
<Table>
<Caption>
UNDISTRIBUTED
(DISTRIBUTIONS
IN EXCESS OF) ACCUMULATED
NET INVESTMENT NET REALIZED PAID-IN
INCOME GAIN CAPITAL
- -----------------------------------------------------------------------------------------
Large-Cap Core Fund $ 240 $ (240) $ -
Small-Cap Value Fund 1,143,763 (1,143,764) 1
</Table>
The permanent differences are primarily attributable to the tax treatment of
currency gains and losses, and net investment losses.
5. PORTFOLIO SECURITIES TRANSACTIONS
As of November 30, 2004, the value of securities loaned for Small-Cap Value Fund
is $233,638,100. These loans are collateralized by cash of $239,733,451, which
is invested in a restricted money market account. In connection with the
securities lending program, State Street Bank and Trust Company ("SSB") received
fees of $122,449 for the fiscal year ended November 30, 2004, which are netted
against Securities lending income on the Statement of Operations. At their
October 21, 2004 meeting, the Board of Directors voted to discontinue, as soon
as practicable, the Funds' participation in the SSB securities lending program.
As of November 30, 2004, there were no securities on loan and there was no
securities lending activity during the year for Large-Cap Core Fund.
38
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Purchases and sales of investment securities (other than short-term investments)
for the fiscal year ended November 30, 2004 are as follows:
<Table>
<Caption>
PURCHASES SALES
- -------------------------------------------------------------------
Large-Cap Core Fund $ 223,134,183 $ 191,830,404
Small-Cap Value Fund 1,160,521,750 785,978,033
</Table>
There were no purchases or sales of U.S. Government securities for the fiscal
year ended November 30, 2004.
6. DIRECTORS' REMUNERATION
The Company's officers and the one Director who are associated with Lord Abbett
do not receive any compensation from the Company for serving in such capacities.
Outside Directors' fees are allocated among all Lord Abbett-sponsored funds
based on the net assets of each fund. There is an equity based plan available to
all outside Directors under which outside Directors must defer receipt of a
portion of, and may elect to defer receipt of an additional portion of
Directors' fees. The deferred amounts are treated as though equivalent dollar
amounts have been invested proportionately in the funds. Such amounts and
earnings accrued thereon are included in Directors' Fees on the Statements of
Operations and in Directors' Fees Payable on the Statements of Assets and
Liabilities and are not deductible for federal income tax purposes until such
amounts are paid.
7. EXPENSE REDUCTIONS
The Company has entered into arrangements with its transfer agent and custodian
whereby credits realized as a result of uninvested cash balances are used to
reduce a portion of each Fund's expenses.
8. LINE OF CREDIT
Each Fund, 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. During the fiscal year ended November 30, 2004, the
fee for this Facility was an annual rate of 0.09%. Effective December 10, 2004,
the Facility was renewed at an annual rate of .08%. At November 30, 2004, there
were no loans outstanding pursuant to this Facility nor was the Facility
utilized at any time during the fiscal year ended November 30, 2004.
39
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. TRANSACTIONS WITH AFFILIATED ISSUERS
An affiliated issuer is one in which a Fund had ownership of at least 5% of the
outstanding voting securities of the underlying issuer at any point during the
fiscal year. Small-Cap Value Fund had the following transactions during the year
with affiliated issuers:
<Table>
<Caption>
NET
REALIZED DIVIDEND
BALANCE OF BALANCE OF VALUE GAIN INCOME
SHARES HELD GROSS GROSS SHARES HELD AT YEAR ENDED YEAR ENDED
AFFILIATED ISSUER AT 11/30/2003 PURCHASES SALES AT 11/30/2004 11/30/2004 11/30/2004 11/30/2004
- ----------------------------------------------------------------------------------------------------------------------------------
Quanex Corp. 502,000 388,000 - 890,000 $ 52,510,000 $ - $ 413,580
Scansource, Inc.* 534,000 - (534,000) - - 18,890,850 -
Marcus Corp. (The)* 753,800 20,800 (77,200) 697,400 15,935,590 532,030 154,429
</Table>
*No longer an affiliated issuer at November 30, 2004.
10. CUSTODIAN AND ACCOUNTING AGENT
SSB is the Company's custodian and accounting agent. SSB performs custodian,
accounting and recordkeeping functions relating to portfolio transactions and
calculating each Fund's NAV.
11. INVESTMENT RISKS
Each Fund is subject to the general risks and considerations associated with
equity investing as well as the particular risks associated with value stocks.
The value of an investment will fluctuate in response to movements in the stock
market in general and to the changing prospects of individual companies in which
the Funds invest. Large company value stocks and small company value stocks may
perform differently than the market as a whole and other types of stocks such as
growth stocks. The market may fail to recognize the intrinsic value of
particular value stocks for a long time. In addition, small-cap company stocks
may be more volatile and less liquid than large-cap company stocks. Also, if a
Fund's assessment of a company's value or prospects for exceeding earnings
expectations or market conditions is wrong, the Fund could suffer losses or
produce poor performance relative to other funds, even in a rising market. These
factors can affect Fund performance.
40
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. SUMMARY OF CAPITAL TRANSACTIONS
Transactions in shares of beneficial interest are as follows:
LARGE-CAP CORE FUND*
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
NOVEMBER 30, 2004 NOVEMBER 30, 2003
- -----------------------------------------------------------------------------------------------------
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------
Shares sold 2,628,672 $ 69,719,713 2,880,499 $ 64,714,996
Reinvestment of distributions 22,480 568,516 - -
Shares reacquired (1,726,790) (45,784,365) (1,847,457) (38,966,116)
- -----------------------------------------------------------------------------------------------------
Increase 924,362 $ 24,503,864 1,033,042 $ 25,748,880
- -----------------------------------------------------------------------------------------------------
CLASS B SHARES
- -----------------------------------------------------------------------------------------------------
Shares sold 312,122 $ 8,005,975 528,568 $ 11,066,796
Shares reacquired (631,529) (16,175,025) (594,239) (12,172,653)
- -----------------------------------------------------------------------------------------------------
Decrease (319,407) $ (8,169,050) (65,671) $ (1,105,857)
- -----------------------------------------------------------------------------------------------------
CLASS C SHARES
- -----------------------------------------------------------------------------------------------------
Shares sold 201,008 $ 5,166,992 342,487 $ 7,101,096
Shares reacquired (281,543) (7,258,773) (365,186) (7,563,710)
- -----------------------------------------------------------------------------------------------------
Decrease (80,535) $ (2,091,781) (22,699) $ (462,614)
- -----------------------------------------------------------------------------------------------------
CLASS P SHARES
- -----------------------------------------------------------------------------------------------------
Shares sold 4,346 $ 118,598 7,171 $ 165,560
Reinvestment of distributions 23 597 - -
Shares reacquired (123) (3,335) (1,125) (26,284)
- -----------------------------------------------------------------------------------------------------
Increase 4,246 $ 115,860 6,046 $ 139,276
- -----------------------------------------------------------------------------------------------------
CLASS Y SHARES
- -----------------------------------------------------------------------------------------------------
Shares sold 455,866 $ 12,103,637 477 $ 10,629
Reinvestment of distributions 15 378 - -
Shares reacquired (3,010) (84,530) - -
- -----------------------------------------------------------------------------------------------------
Increase 452,871 $ 12,019,485 477 $ 10,629
- -----------------------------------------------------------------------------------------------------
</Table>
* Formerly known as Large-Cap Research Fund.
41
<Page>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
SMALL CAP VALUE FUND
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
NOVEMBER 30, 2004 NOVEMBER 30, 2003
- -----------------------------------------------------------------------------------------------------
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------
Shares sold 16,482,423 $ 435,592,252 7,180,621 $ 152,641,665
Reinvestment of distributions 1,059,544 25,672,755 789,137 14,654,269
Shares reacquired (5,629,510) (146,387,925) (3,903,123) (79,537,104)
- -----------------------------------------------------------------------------------------------------
Increase 11.912,457 $ 314,877,082 4,066,635 $ 87,758,830
- -----------------------------------------------------------------------------------------------------
CLASS B SHARES
- -----------------------------------------------------------------------------------------------------
Shares sold 310,245 $ 7,469,508 397,567 $ 7,476,943
Reinvestment of distributions 384,276 8,838,348 412,446 7,341,544
Shares reacquired (1,267,786) (31,193,691) (1,195,609) (22,966,181)
- -----------------------------------------------------------------------------------------------------
Decrease (573,265) $ (14,885,835) (385,596) $ (8,147,694)
- -----------------------------------------------------------------------------------------------------
CLASS C SHARES
- -----------------------------------------------------------------------------------------------------
Shares sold 228,182 $ 5,453,445 283,691 $ 5,342,331
Reinvestment of distributions 121,312 2,792,598 128,207 2,284,644
Shares reacquired (495,891) (12,206,574) (602,174) (11,631,813)
- -----------------------------------------------------------------------------------------------------
Decrease (146,397) $ (3,960,531) (190,276) $ (4,004,838)
- -----------------------------------------------------------------------------------------------------
CLASS P SHARES
- -----------------------------------------------------------------------------------------------------
Shares sold 4,140,611 $ 108,853,556 1,670,139 $ 35,690,335
Reinvestment of distributions 77,299 1,869,083 27,682 513,508
Shares reacquired (1,273,478) (33,218,315) (535,047) (11,354,120)
- -----------------------------------------------------------------------------------------------------
Increase 2,944,432 $ 77,504,324 1,162,774 $ 24,849,723
- -----------------------------------------------------------------------------------------------------
CLASS Y SHARES
- -----------------------------------------------------------------------------------------------------
Shares sold 5,429,820 $ 146,254,416 1,532,487 $ 34,398,795
Reinvestment of distributions 379,561 9,416,909 294,510 5,572,136
Shares reacquired (1,469,872) (39,072,116) (371,626) (7,510,902)
- -----------------------------------------------------------------------------------------------------
Increase 4,339,509 $ 116,599,209 1,455,371 $ 32,460,029
- -----------------------------------------------------------------------------------------------------
</Table>
13. SUBSEQUENT EVENT
For the fiscal year ending November 30, 2005, Lord Abbett has contractually
agreed to reimburse Large-Cap Core Fund to the extent necessary so that each
class' total annual operating expenses do not exceed the following annual rates:
<Table>
<Caption>
CLASS % OF AVERAGE DAILY NET ASSETS
- -----------------------------------------------
A 1.30%
B 1.95%
C 1.95%
P 1.40%
Y 0.95%
</Table>
42
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE BOARD OF DIRECTORS AND SHAREHOLDERS,
LORD ABBETT RESEARCH FUND, INC. - LORD ABBETT LARGE-CAP CORE FUND (FORMERLY
KNOWN AS LARGE-CAP SERIES) AND SMALL-CAP VALUE SERIES:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments of Lord Abbett Research Fund, Inc. - Lord Abbett
Large-Cap Core Fund (formerly known as Large-Cap Series) and Small-Cap Value
Series (the "Funds") as of November 30, 2004, and the related statements of
operations for the year then ended, the statements of changes in net assets and
the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). 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 consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Funds'
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 2004 by correspondence with
the custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. Additionally, an audit 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Lord
Abbett Research Fund, Inc. - Lord Abbett Large-Cap Core Fund and Small-Cap Value
Series as of November 30, 2004, the results of their operations, the changes in
their net assets and the financial highlights for each of the periods presented,
in conformity with accounting principles generally accepted in the United States
of America.
Deloitte & Touche LLP
New York, New York
January 26, 2005
43
<Page>
BASIC INFORMATION ABOUT MANAGEMENT
The Board of Directors (the "Board") is responsible for the management of the
business and affairs of each Fund in accordance with the laws of the State of
Maryland. The Board appoints officers who are responsible for the day-to-day
operations of each Fund and who execute policies authorized by the Board. The
Board also approves an investment adviser to each Fund and continues to monitor
the cost and quality of the services provided by the investment adviser, and
annually considers whether to renew the contract with the adviser. Generally,
each Director holds office until his/her successor is elected and qualified or
until his/her earlier resignation or removal, as provided in the Fund's
organizational documents.
Lord, Abbett & Co. LLC ("Lord Abbett"), a Delaware limited liability company, is
the Funds' investment adviser.
INTERESTED DIRECTOR
The following Director is the Managing Partner of Lord Abbett and is an
"interested person" as defined in the Act. Mr. Dow is also an officer, director,
or trustee of each of the fourteen Lord Abbett-sponsored funds, which consist of
50 portfolios or series.
<Table>
<Caption>
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
DATE OF BIRTH WITH FUND DURING PAST FIVE YEARS DIRECTORSHIPS
- ---------------------------------------------------------------------------------------------------------------------------
ROBERT S. DOW Director and Managing Partner and Chief Investment N/A
Lord, Abbett & Co. LLC Chairman since 1996 Officer of Lord Abbett since 1996.
90 Hudson Street
Jersey City, NJ
Date of Birth: 3/8/1945
</Table>
-----------------
INDEPENDENT DIRECTORS
The following independent or outside Directors are also directors or
trustees of each of the fourteen Lord Abbett-sponsored funds, which
consist of 50 portfolios or series.
<Table>
<Caption>
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
DATE OF BIRTH WITH FUND DURING PAST FIVE YEARS DIRECTORSHIPS
- ---------------------------------------------------------------------------------------------------------------------------
E. THAYER BIGELOW Director since 1996 Managing General Partner, Bigelow Currently serves as
Emmerling Communications Media, LLC (since 2000); Senior director of Adelphia
41 Madison Ave. Suite 3810 Adviser, Time Warner Inc. (1998 - Communications, Inc.,
New York, NY 2000); Acting Chief Executive Officer Crane Co., and Huttig
Date of Birth: 10/22/1941 of Courtroom Television Network (1997 Building Products Inc.
- 1998); President and Chief
Executive Officer of Time Warner
Cable Programming, Inc. (1991 -
1997).
WILLIAM H.T. BUSH Director since 1998 Co-founder and Chairman of the Board Currently serves as
Bush-O'Donnell & Co., Inc. of the financial advisory firm of director of Wellpoint
101 South Hanley Road Bush-O'Donnell & Company (since Health Networks Inc.
Suite 1250 1986). (since 2002), and
St. Louis, MO Engineered Support
Date of Birth: 7/14/1938 Systems, Inc. (since
2000).
</Table>
44
<Page>
BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
<Table>
<Caption>
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
DATE OF BIRTH WITH FUND DURING PAST FIVE YEARS DIRECTORSHIPS
- ---------------------------------------------------------------------------------------------------------------------------
ROBERT B. CALHOUN, JR. Director since 1998 Managing Director of Monitor Clipper Currently serves as
Monitor Clipper Partners Partners (since 1997) and President director of Avondale,
Two Canal Park of Clipper Asset Management Corp. Inc. and Interstate
Cambridge, MA (since 1991), both private equity Bakeries Corp.
Date of Birth: 10/25/1942 investment funds.
JULIE A. HILL Director since 2004 Owner and CEO of the Hillsdale Currently serves as
1280 Bison Companies, a business consulting firm director of Wellpoint
Newport Coast, CA (since 1998); Founder, President and Health Networks Inc.;
Date of Birth: 7/16/1946 Owner of the Hiram-Hill and Hillsdale Resources Connection
Development Companies (1998 - 2000). Inc.; and Holcim (US)
Inc.
FRANKLIN W. HOBBS Director since 2001 Former Chief Executive Officer of Currently serves as
One Equity Partners Houlihan Lokey Howard & Zukin, an director of Adolph
320 Park Ave. investment bank (January 2002 - April Coors Company.
New York, NY 2003); Chairman of Warburg Dillon
Date of Birth: 7/30/1947 Read (1999 - 2001); Global Head of
Corporate Finance of SBC Warburg
Dillon Read (1997 - 1999); Chief
Executive Officer of Dillon, Read &
Co. (1994 - 1997).
C. ALAN MACDONALD Director since 1996 Retired - General Business and Currently serves as
P.O. Box 4393 Governance Consulting (since 1992); director of H.J. Baker
Greenwich, CT formerly President and CEO of Nestle (since 2003).
Date of Birth: 5/19/1933 Foods.
THOMAS J. NEFF Director since 1992 Chairman of Spencer Stuart (U.S.), an Currently serves as
Spencer Stuart executive search consulting firm director of Ace, Ltd.
277 Park Avenue (since 1996); President of Spencer (since 1997) and
New York, NY Stuart (1979 - 1996). Hewitt Associates,
Date of Birth: 10/2/1937 Inc.
</Table>
45
<Page>
BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
OFFICERS
None of the officers listed below have received compensation from the Company.
All the officers of the Company may also be officers of the other Lord
Abbett-sponsored funds and maintain offices at 90 Hudson Street, Jersey City, NJ
07302.
<Table>
<Caption>
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
(DATE OF BIRTH) WITH COMPANY OF CURRENT POSITION DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------------------------------------------
ROBERT S. DOW Chief Executive Elected in 1996 Managing Partner and
(3/8/1945) Officer and President Chief Investment
Officer of Lord Abbett
(since 1996).
JAMES BERNAICHE Chief Compliance Elected in 2004 Chief Compliance
(7/28/1956) Officer Officer, joined Lord
Abbett in 2001;
formerly Chief
Compliance Officer with
Credit-Suisse Asset
Management.
ROBERT P. FETCH Executive Vice Elected in 1997 Partner and Small-Cap
(2/18/1953) President Value Senior Investment
Manager, joined Lord
Abbett in 1995.
KEVIN P. FERGUSON Executive Vice Elected in 2001 Partner and Mid Cap
(10/3/1964) President Growth Investment
Manager, joined Lord
Abbett in 1999,
formerly Portfolio
Manager/Senior Vice
President at Lynch &
Mayer, Inc.
ROBERT G. MORRIS Executive Vice Elected in 1996 Partner and Director of
(11/6/1944) President Equity Investments,
joined Lord Abbett in
1991.
CHRISTOPHER J. TOWLE Executive Vice Elected in 2001 Partner and Investment
(10/12/1957) President Manager, joined Lord
Abbett in 1987.
EDWARD K. VON DER LINDE Executive Vice Elected in 2001 Partner and Investment
(6/12/1960) President Manager, joined Lord
Abbett in 1988.
PAUL J. VOLOVICH Vice President Elected in 2004 Investment
(1/25/73) Manager-Large-Cap Core
Fund, joined Lord
Abbett in 1997,
formerly a Quantitative
Analyst at RogersCasey.
TRACIE E. AHERN Vice President Elected in 1999 Partner and Director of
(1/12/1968) Portfolio Accounting
and Operations, joined
Lord Abbett in 1999.
JOAN A. BINSTOCK Chief Financial Elected in 1999 Partner and Chief
(3/4/1954) Officer & Vice Operations Officer,
President joined Lord Abbett in
1999.
</Table>
46
<Page>
BASIC INFORMATION ABOUT MANAGEMENT (CONCLUDED)
<Table>
<Caption>
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
(DATE OF BIRTH) WITH COMPANY OF CURRENT POSITION DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------------------------------------------
DANIEL E. CARPER Vice President Elected in 1993 Partner, joined Lord
(1/22/1952) Abbett in 1979.
A. EDWARD OBERHAUS, III Vice President Elected in 1996 Partner and Manager of
(12/21/1959) Equity Trading, joined
Lord Abbett in 1983.
PAUL A. HILSTAD Vice President & Elected in 1995 Partner and General
(12/13/1942) Secretary Counsel, joined Lord
Abbett in 1995.
LAWRENCE H. KAPLAN Vice President and Elected in 1997 Partner and Deputy
(1/16/1957) Assistant Secretary General Counsel, joined
Lord Abbett in 1997.
CHRISTINA T. SIMMONS Vice President and Elected in 2000 Assistant General
(11/12/1957) Assistant Secretary Counsel, joined Lord
Abbett in 1999;
formerly Assistant
General Counsel of
Prudential Investments
(1998 - 1999); prior
thereto Counsel of
Drinker, Biddle & Reath
LLP, a law firm.
BERNARD J. GRZELAK Treasurer Elected in 2003 Director of Fund
(6/12/1971) Administration, joined
Lord Abbett in 2003,
formerly Vice
President, Lazard Asset
Management LLC; prior
thereto Manager of
Deloitte & Touche LLP.
</Table>
Please call 888-522-2388 for a copy of the Statement of Additional Information
(SAI), which contains further information about the Fund's Directors. It is
available free upon request.
47
<Page>
HOUSE HOLDING
The Company has adopted a policy that allows it to send only one copy of the
Funds' Prospectus, proxy material, annual report and semi-annual report to
certain shareholders residing at the same "household." This reduces Fund
expenses, which benefits you and other shareholders. If you need additional
copies or do not want your mailings to be "householded," please call Lord Abbett
at 800-821-5129 or send a written request with your name, the name of your fund
or funds and your account number or numbers to Lord Abbett Family of Funds, P.O.
Box 219336, Kansas City, MO 64121.
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that Lord Abbett uses to vote
proxies related to each Fund's portfolio securities, and information on how Lord
Abbett voted the Funds' proxies during the 12-month period ended June 30, 2004
are available without charge, upon request, (i) by calling 888-522-2388; (ii) on
Lord Abbett's website at www.LordAbbett.com; and (iii) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
The Company is required to file the Funds' complete schedules of portfolio
holdings with the SEC for their first and third fiscal quarters on Form N-Q for
fiscal quarters ending on or after July 9, 2004. Once filed, the Forms N-Q will
be available without charge, upon request on the SEC's website at www.sec.gov
and may be available by calling Lord Abbett at 800-821-5129. You can also obtain
copies of Form N-Q by (i) visiting the SEC's Public Reference Room in
Washington, DC (information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330); (ii) sending your request and a duplicating
fee to the SEC's Public Reference Room, Washington, DC 20549-0102; or (iii)
sending your request electronically to publicinfo@sec.gov.
TAX INFORMATION
100% and 36.46% of the ordinary income distribution paid by the Large-Cap Core
Fund and Small Cap Research Fund, respectively, during fiscal 2004 is qualifying
dividend income. For corporate shareholders, 100% and 40.19% of the Large-Cap
Core Fund and Small Cap Research Fund, respectively, of the ordinary income
distribution qualified for the dividends received deduction.
Additionally, of the distributions paid to shareholders during the fiscal year
ended November 30, 2004, $53,606,135 represents long-term capital gains for
Small Cap Research Fund.
48
<Page>
[LORD ABBETT(R) LOGO]
<Table>
This report when not used for the general
information of shareholders of the Fund, is to
be distributed only if preceded or accompanied
by a current Fund Prospectus.
Lord Abbett Research Fund, Inc.
Lord Abbett Mutual Fund shares are distributed by: Large-Cap Core Fund
LORD ABBETT DISTRIBUTOR LLC Small-Cap Value Fund LARF-2-1104
(1/05)
</Table>
<Page>
ITEM 2: CODE OF ETHICS.
(a) In accordance with applicable requirements, the Registrant adopted
a Sarbanes-Oxley Code of Ethics on June 19, 2003 that applies to
the principal executive officer and senior financial officers of
the Registrant ("Code of Ethics"). The Code of Ethics was in
effect during the fiscal year ended November 30, 2004 (the
"Period").
(b) Not applicable.
(c) The Registrant has not amended the Code of Ethics as described in
Form N-CSR during the Period.
(d) The Registrant has not granted any waiver, including an implicit
waiver, from a provision of the Code of Ethics as described in
Form N-CSR during the Period.
(e) Not applicable.
(f) See Item 11(a) concerning the filing of the Code of Ethics. The
Registrant will provide a copy of the Code of Ethics to any person
without charge, upon request. To obtain a copy, please call Lord
Abbett at 800-821-5129.
ITEM 3: AUDIT COMMITTEE FINANCIAL EXPERT.
The Registrant's Board of Directors has determined that each of
the following independent Directors who are members of the audit
committee are audit committee financial experts: E. Thayer
Bigelow, Robert B. Calhoun, and Franklin W. Hobbs. Each of these
persons is independent within the meaning of the Form N-CSR.
ITEM 4: PRINCIPAL ACCOUNTANT FEES AND SERVICES.
In response to sections (a), (b), (c) and (d) of Item 4, the aggregate fees
billed to the Registrant for the fiscal years ended November 30, 2004 and 2003
by the Registrant's principal accounting firm, Deloitte & Touche LLP, the member
firms of Deloitte Touche Tohmatsu and their respective affiliates (collectively,
"Deloitte") were as follows:
<Table>
<Caption>
FISCAL YEAR ENDED:
2004 2003
Audit Fees {a} $ 117,000 $ 111,000
Audit-Related Fees {b} 518 364
-----------------------
</Table>
<Page>
<Table>
Total audit and audit-related fees 117,518 111,364
-----------------------
Tax Fees {c} 26,221 26,065
All Other Fees {d} - 547
-----------------------
Total Fees $ 143,739 $ 137,976
-----------------------
</Table>
- ----------
{a} Consists of fees for audits of the Registrant's annual financial
statements.
{b} Consists of the Registrant's proportionate share of fees for
performing certain agreed-upon procedures regarding compliance with the
provisions of Rule 17a-7 of the Investment Company Act of 1940 and
related Board approved procedures.
{c} Fees for the fiscal years ended November 30, 2004 and 2003 consist
of fees for preparing the U.S. Income Tax Return for Regulated
Investment Companies, New Jersey Corporation Business Tax Return,
New Jersey Annual Report Form, U.S. Return of Excise Tax on
Undistributed Income of Investment Companies, IRS Forms 1099-MISC and
1096 Annual Summary and Transmittal of U.S. Information Returns.
{d} Consists of the Registrant's proportionate share of fees for testing
of Anti-Money Laundering Compliance.
(e) (1) Pursuant to Rule 2-01(c) (7) of Regulation S-X, the Registrant's Audit
Committee has adopted pre-approval policies and procedures. Such policies and
procedures generally provide that the Audit Committee must pre-approve:
- any audit, audit-related, tax, and other services to be
provided to the Lord Abbett Funds, including the Registrant,
and
- any audit-related, tax, and other services to be provided to
the Registrant's investment adviser and any entity
controlling, controlled by or under common control with the
investment adviser that provides ongoing services to one or
more Funds comprising the Registrant if the engagement
relates directly to operations and financial reporting of a
Fund, by the independent auditor to assure that the
provision of such services does not impair the auditor's
independence.
The Audit Committee has delegated pre-approval authority to its Chairman,
subject to a fee limit of $10,000 per event, and not to exceed $25,000 annually.
The Chairman will report any pre-approval decisions to the Audit Committee at
its next scheduled meeting. Unless a type of service to be provided by the
independent auditor has received general pre-approval, it must be pre-approved
by the Audit Committee. Any proposed services exceeding pre-approved cost levels
will require specific pre-approval by the Audit Committee.
<Page>
(e) (2) The Registrant's Audit Committee has approved 100% of the services
described in this Item 4 (b) through (d).
(f) Not applicable.
(g) The aggregate non-audit fees billed by Deloitte for services rendered to the
Registrant are shown above in the response to Item 4 (a), (b), (c) and (d) as
"All Other Fees".
The aggregate non-audit fees billed by Deloitte for services rendered to the
Registrant's investment adviser, Lord, Abbett & Co. LLC ("Lord Abbett"), for the
fiscal years ended November 30, 2004 and 2003 were:
<Table>
<Caption>
FISCAL YEAR ENDED:
2004 2003
All Other Fees {a} $ 120,650 $ 101,900
</Table>
- ----------
{a} Fees for the fiscal years ended November 30, 2004 and 2003 consist
of fees for Independent Services Auditors' Report on Controls Placed in
Operation and Tests of Operating Effectiveness related to Lord Abbett's
Asset Management Services ("SAS 70 Report").
The aggregate non-audit fees billed by Deloitte for services rendered to
entities under the common control of Lord Abbett (i.e., Lord Abbett Distributor
LLC, the Registrant's principal underwriter) for the fiscal years ended November
30, 2004 and 2003 were:
<Table>
<Caption>
FISCAL YEAR ENDED:
2004 2003
All Other Fees {b} $ - 0 - $ 11,378
</Table>
- ----------
{b} Fees for the fiscal year ended November 30, 2003 represent fees for
testing of Anti-Money Laundering Compliance.
(h) The Registrant's Audit Committee has considered the provision of non-audit
services that were rendered to the Registrant's investment adviser, and any
entity controlling, controlled by or under common control with the investment
adviser that provides ongoing services to the Registrant, that were not
pre-approved pursuant to Rule 2-01 (c)(7)(ii) of Regulation S-X and has
determined that the provision of such services is compatible with maintaining
Deloitte's independence.
<Page>
ITEM 5: AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6: SCHEDULE OF INVESTMENTS.
NOT APPLICABLE.
ITEM 7: DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8: PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable
ITEM10: CONTROLS AND PROCEDURES.
(a) Based on their evaluation of the Registrant's disclosure
controls and procedures (as defined in Rule 30a-2(c) under the
Investment Company Act of 1940) as of a date within 90 days
prior to the filing date of this report, the Chief Executive
Officer and Chief Financial Officer of the Registrant have
concluded that such disclosure controls and procedures are
reasonably designed and effective to ensure that material
information relating to the Registrant, including its
consolidated subsidiaries, is made known to them by others
within those entities.
(b) There were no significant changes in the Registrant's internal
control over financial reporting (as defined in Rule 30a-3(d)
under the Investment Company Act of 1940) that occurred during
the Registrant's last fiscal half-year that have materially
affected, or are reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 11: EXHIBITS.
(a)(1) Amendments to Code of Ethics - Not applicable.
(a)(2) Certification of each principal executive officer and principal
financial officer of the Registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2) is attached hereto as a part of
EX-99.CERT.
<Page>
(a)(3) Certification of each principal executive officer and principal
financial officer of the Registrant as required by Section 906
of the Sarbanes-Oxley Act of 2002 is attached hereto as a part
of EX-99.906CERT.
<Page>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
LORD ABBETT RESEARCH FUND, INC.
/s/ Robert S. Dow
-------------------------------
Robert S. Dow
Chief Executive Officer,
Chairman and President
/s/ Joan A. Binstock
-------------------------------
Joan A. Binstock
Chief Financial Officer and Vice President
Date: January 26, 2005
<Page>
Pursuant to the requirements of the Securities and Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
LORD ABBETT RESEARCH FUND, INC.
/s/ Robert S. Dow
-------------------------------
Robert S. Dow
Chief Executive Officer,
Chairman and President
/s/ Joan A. Binstock
-------------------------------
Joan A. Binstock
Chief Financial Officer and Vice President
Date: January 26, 2005