<PAGE>
Lord Abbett
Value Appreciation Fund
1995 ANNUAL REPORT
[ART - Picture of Violin]
Designed to help provide you with capital appreciation from a portfolio of the
stocks of midsized companies
<PAGE>
Report to Shareholders
For the Fiscal Year Ended December 31, 1995
- --------------- Lord Abbett Value Appreciation Fund completed fiscal 1995
on December 31 with a net asset value of $12.18 per share,
[PHOTO OF versus $9.81 per share one year ago (the latter figure has
RONALD P. LYNCH been adjusted for capital gains distributions totaling
APPEARS HERE] $1.445 per share paid last February). In addition, the
Fund paid dividends totaling $.17 per share during the
- --------------- year. The Fund, which focuses on midsized companies, had a
total return (the percent change in net asset value
/s/ Ronald P. Lynch assuming the reinvestment of all distributions) of 26.1%
for the year. Recently, the Fund's Board of Directors
Ronald P. Lynch declared a dividend of $.16 per share and a capital gains
Chairman distribution of $1.05 per share. Both were paid on January
24, 1996 to shareholders of record on January 17, 1996.
The stock market benefited from a favorable economic
environment in 1995. The economy grew at a modest, annual
rate of 2 1/2%, while inflation (as measured by the
- --------------- Consumer Price Index) averaged just under 3%. The
combination of these factors enabled the Federal Reserve
[PHOTO OF Bank to reverse course and begin gradually lowering the
ROBERT S. DOW Federal Funds Rate in three, one-quarter point increments.
APPEARS HERE] The yield on the 30-year Treasury bond (which began the
year near 8%) was close to 6% by year-end.
- ---------------
We expect Gross Domestic Product in 1996 will grow at an
/s/ Robert S. Dow annual rate of about 2%, with inflation remaining just
below 3%. We believe this environment will enable the
Robert S. Dow Federal Reserve to lower the Federal Funds Rate from the
President current 5 1/4% level toward 4 1/2% by mid-year. In this
"soft landing" scenario, we think 1996's corporate
January 31, 1996 earnings will be modestly below 1995's record levels.
Still, moderate growth and contained inflation, combined
with a lower interest-rate environment, should bode well
for the stock market, overall; although, corrections along
the way are likely.
Your Fund started the year with an overweighting (relative
to the unmanaged S&P Mid-Cap 400) in economically-sensitive
stocks. This position was gradually decreased over the
year, with most of the proceeds reinvested in the stocks of
consumer non-durable companies (such as food and
drugs/health care). We maintained major positions in
savings and loans and insurance companies, which did well
relative to the market. The Fund was underweighted in
commercial banks; we also remained underweighted in
technology stocks, which generally did not meet our value
criteria. This underweighting hurt our relative performance
for much of the year, until the relative overvaluation of
technology stocks began to correct in the last few months.
"As we head into 1996...successful performance...will
depend on individual stock selection."
As we head into 1996, we continue to look for undervalued,
midsized companies. Because we believe the economy will not
be much of a factor in driving any given company's
earnings, successful performance of the portfolio will
depend on individual stock selection.
We are pleased to announce that the Fund's Board of
Directors elected Robert S. Dow as President of the Fund.
Mr. Dow, who has been a partner of Lord, Abbett & Co. for
nine years, is the Firm's Chief Investment Officer. The
Board also voted to amend the Fund's name to better reflect
its investment objective. Effective May 1, 1996, the Fund's
name will be Lord Abbett Mid-Cap Value Fund. We are pleased
to announce that Edward K. von der Linde has been named
portfolio manager. Mr. von der Linde has assisted in the
management of your Fund since 1988.
We are confident that our disciplined, value approach to
investing will prove rewarding to our investors over the
long term, and we look forward to helping you attain your
financial objectives in 1996 and beyond.
<PAGE>
The Mid-Cap Advantage
Lord Abbett Value Appreciation Fund is one of the few
mutual funds in the industry that focuses on midsized
companies while utilizing a value approach to investing.
The Fund generally focuses on companies with market
capitalizations ranging from $500 million to $3 billion.
Because midsized companies operate from a smaller earnings
base, it is mathematically easier for these companies to
grow earnings at a faster rate than larger companies. Below
are three reasons we believe opportunity exists in the
mid-cap sector.
A Valuation Gap Exists
. Mid-cap companies have been less followed by investment
analysts and have been less a focus of investor interest in
recent years. As a result, their price/earnings and price-
to-book ratios are relatively attractive compared to large-
cap companies. Also, we believe midsized companies offer
the potential for higher growth rates than large companies.
Decreased Tax Burden
. Tax rates for capital gains are lower than rates on
ordinary income. By investing in mid-cap companies, the
Fund derives a greater portion of its total return (price
appreciation plus dividends) from capital appreciation than
from income. The result: a smaller tax burden.
Targeted Investing Signals Opportunity
. Midsized companies often concentrate their efforts on one
product or service. This singular focus means management's
efforts are not diluted across many industries.
The Fund Versus Inflation
Years pass and prices increase. It seems to be a fact of
life. Another fact: if your purchasing power does not keep
up with inflation, your standard of living will suffer.
Historically, stocks have proven a successful defense
against the erosion caused by inflation.
In our illustration, 1985 and 1995 are actual costs--then
and now. "Value Appreciation Fund 1995" is what the 1985
amount would have grown to had it been invested in the
Fund. Investments in Lord Abbett Value Appreciation Fund
(up 196.5%) surpassed increases in the cost of living (up
40.7%(1)) in these 10 years. Finding investments that grow
faster than inflation is one important way to maintain--and
enhance--your lifestyle.
[ART APPEARS HERE]
<TABLE>
<CAPTION>
One-Year Private One-Family House(2) Income per Capita(2)
College Tuition(2)
<S> <C> <C> <C>
1985 $ 5,418 $ 90,800 $12,339
1995 $12,432 $136,700 $19,860
Value Appreciation Fund 1995 $16,064 $269,222 $36,585
</TABLE>
Lord Abbett Value Appreciation Fund's results reflect total
return at net asset value, with all distributions
reinvested for the 10 years ended 12/31/95. See Important
Information on page 2.
(1) December 1995 figure is estimated.
(2) National average.
Sources: U.S. Department of Education, Statistics Bureau
Section, College Board Annual Survey of Colleges; National
Association of Realtors, Research Division; Department of
Commerce, Bureau of Economic Analysis Statistics.
Average Annual Total Returns
Average annual total returns for periods ended 12/31/95 at
the 5.75% maximum sales charge, with all distributions
reinvested:
<TABLE>
<S> <C>
1 year: +18.80%
5 years: +13.61%
10 years: +10.83%
</TABLE>
The past performance of the Fund, stocks and inflation is
no indication of future results. The investment return and
principal value of an investment in the Fund will fluctuate
so that shares, on any given day or when redeemed, may be
worth more or less than their original cost.
1
<PAGE>
The Value of a Managed Equity Portfolio
The cost of goods and services (as measured by the Consumer
Price Index) has risen steadily over the past 10 years,
increasing at an average of 3.5%/(1)/ per year. Over this
time frame, the 6.3% average annual return of CDs outpaced
inflation. However, investors in the Fund saw their
$100,000 investment grow an average of 11.1% per year, to
$285,439.
There is no doubt that when it comes to saving for
near-term obligations, CDs are important. But, when
investing for long-term goals such as a house, a child's
education or retirement, owning good companies through a
fund like Lord Abbett Value Appreciation Fund can help your
money work harder for you.
<TABLE>
<CAPTION>
Growth of $100,000: 12/31/85-12/31/95
Date The Fund (2) Six-Month CD (3) Inflation (Consumer Price Index)
<S> <C> <C> <C>
12/31/85 $ 96272 $100000 $100000
12/31/86 112007 106548 101098
12/31/87 107328 113950 105581
12/31/88 124095 122880 110247
12/31/89 149034 134155 115371
12/31/90 142117 145206 122415
12/31/91 180999 154036 126167
12/31/92 205366 159961 129826
12/31/93 234024 165234 133394
12/31/94 226381 172992 136962
12/31/95 285439 183434 140714
<FN>
Cumulative Total
Returns(2) Over
10 Years
The Fund: 185.4%
CDs: 83.4%
Inflation(1): 40.7%
(1) December 1995 figure is estimated.
(2) The Fund's results reflect the deduction of the reduced
sales charge of 3.75% applicable to investments of
$100,000. All distributions were reinvested.
(3) Source: Salomon Brothers and The Federal Reserve Bank.
</FN>
</TABLE>
Total return is the percent change in value assuming the
reinvestment of all distributions. Results of the CD
investment reflect the average six-month CD rate available
each year during the period. It is important to remember
that, unlike the Fund, a CD's rate and principal are
guaranteed if held until maturity. The Federal Deposit
Insurance Corporation ("FDIC") insures CDs up to $100,000.
Important Information
Results quoted herein represent past performance based on
the current sales charge schedule and reflect appropriate
Rule 12b-1 Plan expenses from commencement of the Plan.
Past performance is no indication of future results. Tax
consequences are not reflected. The Fund's sales charge
structure has changed from the past. The investment return
and principal value of a Fund investment will fluctuate so
that shares, on any given day or when redeemed, may be
worth more or less than their original cost. If used as
sales material after 3/31/96, this report must be
accompanied by Lord Abbett's Performance Quarterly for the
most recently completed calendar quarter.
2
<PAGE>
Statement of Net Assets December 31, 1995
<TABLE>
<CAPTION>
Number of Market Value
Security Shares (Note 1a)
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS IN COMMON STOCKS 94.63%
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Aerospace AAR Corp.-Major supplier of products and services for the
2.00% worldwide aviation industry 165,000 $ 3,630,000
SPACEHAB Inc.+-Develops and operates habitable modules for
space-based research and cargo services aboard the U.S. Space
Shuttle system 75,000 918,750
Total 4,548,750
- --------------------------------------------------------------------------------------------------------------------------------
Apparel Jones Apparel Group+-Leading designer, manufacturer and marketer
2.34% of women's apparel 135,000 5,315,625
- --------------------------------------------------------------------------------------------------------------------------------
Auto Parts Genuine Parts Company-National distributor of automotive replacement
9.42% parts 150,000 6,150,000
Johnson Controls, Inc.-Diversified manufacturer of auto seats,
car batteries, plastic beverage containers and systems for
commercial buildings 100,000 6,875,000
Snap-On, Inc.-Manufactures and distributes hand tools and diagnostic
equipment for the automotive industry 185,000 8,371,250
Total 21,396,250
- --------------------------------------------------------------------------------------------------------------------------------
Banks: Money Center
2.04% Bank of Boston Corp.-Major money-center bank 100,000 4,625,000
- --------------------------------------------------------------------------------------------------------------------------------
Chemicals Hanna, M.A. Co.-Leading producer and distributor of plastic
4.29% compounds, resins and additives 130,000 3,640,000
Lyondell Petrochemical Co.-Integrated manufacturer and marketer
of petrochemicals and refined petroleum products 80,000 1,830,000
Nalco Chemical Co.-Producer of specialty chemicals for water and
wastewater treatment and other industrial uses 65,000 1,958,125
Union Carbide Corp.-Major U.S.-based producer of plastics and chemicals 62,000 2,325,000
Total 9,753,125
- --------------------------------------------------------------------------------------------------------------------------------
Containers Sonoco Products Co.-A leading U.S. producer of specialty paper and
2.18% plastic packaging components 189,000 4,961,250
- --------------------------------------------------------------------------------------------------------------------------------
Drugs/Health Care DSG International Ltd.-Global manufacturer of disposable diapers 120,000 1,500,000
Products Laboratory Corporation of America-Major provider of clinical
7.36% laboratory testing services in the U.S. 223,200 2,092,500
Mallinckrodt Group Inc.-Producer of medical products, specialty
chemicals and veterinary supplies 195,000 7,093,125
Vivra Inc.+-Leading provider of end-stage renal dialysis treatment 240,000 6,030,000
Total 16,715,625
- --------------------------------------------------------------------------------------------------------------------------------
Electric Power Ipalco Enterprises Inc.-Major midwestern electric utility holding company 100,000 3,812,500
2.18% SCANA Corp.-Major southeastern electric and gas utility holding company 40,000 1,145,000
Total 4,957,500
- --------------------------------------------------------------------------------------------------------------------------------
Electronics: Equipment EMC Corp.+-A supplier of high-performance storage devices and
3.69% related services 75,000 1,153,125
Loral Corp.-Major manufacturer of electronic warfare and communications
systems 60,000 2,122,500
Perkin-Elmer Corp.-Leading manufacturer of analytical instruments and
life science systems 135,000 5,096,250
Total 8,371,875
- --------------------------------------------------------------------------------------------------------------------------------
Food Dean Foods Co.-Major producer of dairy foods, canned and frozen vegetables 200,000 5,500,000
9.37% Hershey Foods Corp.-Major U.S. maker of chocolate and confectionary products 70,000 4,550,000
Supervalu Inc.-Second largest U.S. food wholesaler 140,000 4,410,000
Universal Foods Corp.-Manufacturer of yeast, flavorings, colorants and
dried spices for the food industry 170,000 6,821,250
Total 21,281,250
- --------------------------------------------------------------------------------------------------------------------------------
Hotel/Motel Patriot American Hospitality Inc.-Hotel real estate investment trust 100,000 2,575,000
2.44% Starwood Lodging Trust-Hotel real estate investment trust 100,000 2,975,000
Total 5,550,000
- --------------------------------------------------------------------------------------------------------------------------------
Insurance Alexander & Alexander Services-Second largest insurance broker in the world 191,500 3,638,500
4.83% The Progressive Corporation-Insurance holding company specializing in
non-standard auto insurance 60,000 2,932,500
Transatlantic Holdings Inc.-International property and casualty reinsurer 60,000 4,402,500
Total 10,973,500
- --------------------------------------------------------------------------------------------------------------------------------
Machinery: Diversified Goulds Pumps, Inc.-Largest U.S. producer of industrial and residential
2.42% pump systems 220,000 5,500,000
--------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
Statement of Net Assets December 31, 1995
<TABLE>
<CAPTION>
Number of Shares Market Value
Security or Principal Amount (Note 1a)
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Miscellaneous Moore Corp. Ltd.-World's largest manufacturer of business forms
5.44% and related products 350,000 $ 6,518,750
National Service Industries, Inc.-Diversified manufacturer of lighting
equipment, rental uniforms and specialty chemicals 180,000 5,827,500
Total 12,346,250
- --------------------------------------------------------------------------------------------------------------------------------
Natural Gas
Diversified Sonat Inc.-Major diversified energy company with interests in natural
1.25% gas pipelines, exploration and drilling 80,000 2,850,000
- --------------------------------------------------------------------------------------------------------------------------------
Natural Gas The Coastal Corporation-A diversified gas pipeline company 95,000 3,538,750
Transmission Eastern Enterprises-Natural gas distributor in Massachusetts 195,000 6,873,750
6.49% Equitable Resources, Inc.-Natural gas distributor in Appalachia;
oil and gas exploration 100,000 3,125,000
Western Gas Resources, Inc.-An owner and operator of natural gas
processing plants 75,000 1,209,375
Total 14,746,875
- --------------------------------------------------------------------------------------------------------------------------------
Oil: Domestic Kerr-McGee Corp.-Oil and gas exploration and production, refining
2.14% and chemicals 30,000 1,905,000
Ultramar Corp.-Refiner and marketer of petroleum products 115,000 2,961,250
Total 4,866,250
- --------------------------------------------------------------------------------------------------------------------------------
Oil Well Equipment/
Service COFLEXIP S.A. Sponsored ADR-World leader in design, manufacture and
1.51% installation of flexible pipe for offshore petroleum transportation 180,900 3,414,488
- --------------------------------------------------------------------------------------------------------------------------------
Paper and Forest
Products James River Corp.-Producer of paper-based consumer products, packaging
3.16% and communication papers 220,000 5,307,500
Westvaco Corporation-Major producer of paper and paperboard products 67,500 1,873,125
Total 7,180,625
- --------------------------------------------------------------------------------------------------------------------------------
Printing and
Publishing
1.55% Banta Corp.-A leading U.S. printer of books, magazines and catalogs 80,000 3,520,000
- --------------------------------------------------------------------------------------------------------------------------------
Railroads Canadian National Railway (partially paid)+-Major Canadian-based
1.39% railroad operator 30,100 451,500
Illinois Central Corp.-Major midwestern freight railroad operator 70,000 2,686,250
Total 3,137,750
- --------------------------------------------------------------------------------------------------------------------------------
Restaurants Brinker International Inc.+-Major developer and operator of casual
2.20% dining restaurants 330,000 4,991,250
- --------------------------------------------------------------------------------------------------------------------------------
Retail Dillard Department Stores Inc.-Southwestern department store chain 70,000 1,995,000
1.32% Nordstrom Inc.-Major national department store chain 25,000 1,012,500
Total 3,007,500
- --------------------------------------------------------------------------------------------------------------------------------
Savings and Loan Ahmanson, H.F. & Co.-Largest savings and loan holding company in the U.S. 250,000 6,625,000
7.22% Glendale Federal Bank FSB-California savings and loan 100,000 1,750,000
Great Western Financial Corp.-A leading savings and loan company 315,000 8,032,500
Total 16,407,500
- --------------------------------------------------------------------------------------------------------------------------------
Textiles: Apparel
1.18% Fruit of The Loom-Low-cost producer of non-fashion apparel and undergarments 110,000 2,681,250
- --------------------------------------------------------------------------------------------------------------------------------
Tire and Rubber Goods Cooper Tire & Rubber Company-Major manufacturer of replacement tires and
3.58% inner tubes for cars, trucks and buses 175,000 4,309,375
Standard Products Co.-Manufactures plastic and rubber products for
the automotive and appliance industries 216,600 3,817,575
Total 8,126,950
- --------------------------------------------------------------------------------------------------------------------------------
Toys
1.64% Hasbro Inc.-Major U.S. manufacturer of toys and games 120,000 3,720,000
--------------------------------------------------------------------------------------------------------
Total Investments in Common Stocks (Cost $176,097,353) 214,946,438
- --------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES 5.37%
- --------------------------------------------------------------------------------------------------------------------------------
Short-Term American Express Credit Corp. 5.61% due 1/3/1996 3,400M 3,400,000
Investments, Ford Motor Credit Corp. 5.8% due 1/2/1996 5,100M 5,100,000
at Cost General Electric Capital Corp. 5.9% due 1/4/1996 3,000M 3,000,000
Prudential Funding Corp. 5.65% due 1/5/1996 2,100M 2,100,000
Total Short-Term Investments 13,600,000
--------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
Statement of Net Assets December 31, 1995
<TABLE>
<CAPTION>
Market Value
(Note 1a)
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
Cash and Receivables, Net of Liabilities $ (1,397,862)
- --------------------------------------------------------------------------------------------------------------------------------
Total Other Assets, Less Liabilities (12,202,138)
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets (equivalent to $12.18 a share on 18,649,432 shares of $.10 par
100.00% value capital stock outstanding;
authorized, 150,000,000 shares) $227,148,576
--------------------------------------------------------------------------------------------------------
</TABLE>
The descriptions of the companies shown in the portfolio, which were obtained
from published reports and other sources believed to be reliable, are
supplemental and are not covered by the Independent Auditors' Report.
+Non-income producing.
See Notes to Financial Statements.
Portfolio Changes
Issues added to or eliminated from the portfolio (exclusive of U.S. Government
obligations and short-term investments) during the six months ended December 31,
1995
Additions+ Canadian National Railway
(partially paid)
Crown Vantage Inc.*
Dillard Department Stores Inc.
EMC Corp.
Fruit of The Loom
Glendale Federal Bank FSB
Hasbro Inc.
Laboratory Corporation of America
Nordstrom Inc.
Patriot American Hospitality Inc.
SCANA Corp.
Sonat Inc.
SPACEHAB Inc.
- --------------------------------------------------------------------------------
Eliminations+ Birmingham Steel Corporation
Crown Vantage Inc.*
Equitable of Iowa
Federal Paper Board Inc.
Guidant Corp.
Haemonetics Corp.
Harris Corp.
John Alden Financial Corp.
Praxair, Inc.
Ryder Systems Inc.
VF Corp.
Warnaco Group Class A
+Includes securities previously classified in the Investment Portfolio under
"Other".
*Crown Vantage Inc. was received as a tax-free stock distribution from James
River Corp.
Statement of Operations For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Investment Income
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income Dividends $ 5,024,936
Interest 653,057
Total income $ 5,677,993
- --------------------------------------------------------------------------------------------------------------------------------
Expenses Management fee (Note 5) 1,584,007
12b-1 distribution plan (Note 5) 412,336
Shareholder servicing 372,000
Reports to shareholders 84,000
Audit 48,000
Other 117,624
Total expenses 2,617,967
Net investment income 3,060,026
Net Realized and Unrealized Gain on Investments (Note 4)
- --------------------------------------------------------------------------------------------------------------------------------
Net realized gain from security transactions (excluding short-term securities)
Proceeds from sales 88,266,005
Cost of securities sold 68,221,470
Net realized gain 20,044,535
- --------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
Beginning of year 14,542,344
End of year 38,849,085
Net unrealized appreciation 24,306,741
Net realized and unrealized gain on investments 44,351,276
Net Increase in Net Assets Resulting from Operations $47,411,302
- --------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
5
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31,
Increase (Decrease) in Net Assets 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations Net investment income $ 3,060,026 $ 3,048,458
Net realized gain from securities transactions 20,044,535 24,301,857
Net unrealized appreciation (depreciation) of investments 24,306,741 (34,053,037)
Net increase (decrease) in net assets resulting from operations 47,411,302 (6,702,722)
- --------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income included in price of shares sold (reacquired) (Note 1d) (41,423) 25,456
- --------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income (2,778,098) (2,579,254)
Net realized gain from security transactions (23,613,521) (14,064,523)
Total distributions (26,391,619) (16,643,777)
- --------------------------------------------------------------------------------------------------------------------------------
Capital share transactions
Net proceeds from sales of 2,103,934 and 1,994,914 shares, respectively 22,817,148 22,968,898
Net asset value of 2,422,885 and 1,223,992 shares, respectively, issued to
shareholders in reinvestment of net investment income and realized gain
from security transactions 23,501,594 14,664,505
Total 46,318,742 37,633,403
Cost of 2,829,370 and 2,281,809 shares reacquired, respectively (30,936,149) (26,043,542)
Increase in net assets derived from capital share transactions
(net increase of 1,697,449 and 937,097 shares, respectively) 15,382,593 11,589,861
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 36,360,853 (11,731,182)
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Beginning of year 190,787,723 202,518,905
End of year (including undistributed net investment income of $2,684,267 and
$2,613,098, respectively) $227,148,576 $190,787,723
- --------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended December 31,
Per Share Operating Performance: 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 11.25 $ 12.65 $ 12.60 $ 11.81 $ 9.80
------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .162 .18 .16 .20 .23
Net realized and unrealized gain (loss)
on investments 2.383 (.545) 1.42 1.31 2.30
Total from investment operations 2.545 (.365) 1.58 1.51 2.53
------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.17) (.16) (.20) (.22) (.26)
Distributions from net realized gain (1.445) (.875) (1.33) (.50) (.26)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 12.18 $ 11.25 $ 12.65 $ 12.60 $ 11.81
- ----------------------------------------------------------------------------------------------------------------------
Total Return* 26.09% (3.27)% 13.95% 13.46% 27.36%
- ----------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $227,149 $190,788 $202,519 $173,380 $166,056
Ratios to Average Net Assets:
------------------------------------------------------------------------------------------------------------
Expenses 1.27% 1.12% 1.22% 1.22% 1.14%
Net investment income 1.48% 1.53% 1.35% 1.71% 2.16%
Portfolio turnover rate 41.42% 57.49% 33.42% 62.55% 34.20%
- ----------------------------------------------------------------------------------------------------------------------
*Total return does not consider the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
6
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
The Company is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The following is a summary
of significant accounting policies consistently followed by the Company. The
policies are in conformity with generally accepted accounting principles.
(a) Market value is determined as follows: Securities listed or admitted to
trading privileges on any national securities exchange are valued at the last
sales price on the principal securities exchange on which such securities are
traded, or, if there is no sale, at the mean between the last bid and asked
prices on such exchange. Securities traded only in the over-the-counter market
are valued at the mean between the last bid and asked prices in such market,
except that securities admitted to trading on the NASDAQ National Market System
are valued at the last sales price if it is determined that such price more
accurately reflects the value of such securities. Securities for which market
quotations are not available are valued at fair value under procedures approved
by the Board of Directors; such procedures require the use of estimates.
(b) It is the policy of the Company to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income in taxable distributions. Therefore, no income tax
provision is required.
(c) Security transactions are accounted for on the date that the securities are
purchased or sold (trade date). Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Interest income is accrued on
a daily basis.
(d) A portion of proceeds from sales and costs of repurchases of capital shares,
equivalent to the amount of distributable net investment income on the date of
the transaction, is credited or charged to undistributed income. Undistributed
net investment income per share thus is unaffected by sales or repurchases of
shares.
2. Distributions
Taxable net realized gain from security transactions, if any, is declared in
December of the current year or January of the succeeding year. At December 31,
1995, undistributed net realized gain for financial reporting purposes, which is
substantially the same as for federal income tax purposes, aggregated
$20,132,871.
Income and capital gains distributions are determined in accordance with income
tax regulations which may differ from methods used to determine the
corresponding income and capital gains amounts in accordance with generally
accepted accounting principles. These differences are primarily caused by
differences in the timing of recognition of certain components of income,
expense or capital gain. Where such differences are permanent in nature, they
are reclassified in the Sources of Net Assets based upon their ultimate
characterization for federal income tax purposes. Any such reclassifications
will have no effect on net assets, results of operations or net asset value of
the Fund.
3. Capital Paid In
At December 31, 1995, capital paid in aggregated $164,482,353.
4. Purchases and Sales of Securities
Purchases and sales of investment securities (other than short-term investments)
aggregated $80,866,940 and $88,266,005, respectively.
Security gains and losses are computed on the identified cost basis.
As of December 31, 1995, net unrealized appreciation for federal income tax
purposes aggregated $38,849,085, of which $42,794,777 related to appreciated
securities and $3,945,692 related to depreciated securities. For federal income
tax purposes, the identified cost of investments owned at December 31, 1995 was
substantially the same as the cost for financial reporting purposes.
5. Management Fee and Other Transactions with Affiliates
Lord, Abbett & Co. received a management fee of $1,656,007 for which it supplied
investment management, research, statistical and advisory services and paid
officers' remuneration and certain other expenses of the Company. The management
fee is based on average daily net assets at the following annual rates: .75 of
1% on the first $200 million; .65 of 1% on the next $300 million; and .50 of 1%
on the excess over $500 million. Lord, Abbett & Co. also received $29,975,
representing payment of commissions on sales of capital stock of the Company
after deducting $305,733 allowed to authorized distributors as concessions.
Certain of the Company's officers and directors have an interest in Lord, Abbett
& Co.
The Company has a Rule 12b-1 Plan providing for (a) the payment of a service fee
to dealers at the annual rate of .15% of the average daily net asset value of
the Company's shares sold by dealers prior to June 1, 1990 and .25% of the
average daily net asset value of such shares sold on or after that date and (b)
a one-time 1% distribution fee, at the time of sale, on such shares sold at net
asset value of $1 million or more.
6. Directors' Remuneration
The Directors of the Company associated with Lord, Abbett & Co. and all officers
of the Company receive no compensation from the Company for acting as such.
Outside Directors' fees, including attendance fees for board and committee
meetings, and outside Directors' retirement costs, are allocated among all funds
in the Lord Abbett group based on net assets of each fund. The direct
remuneration accrued during the period for outside Directors of the Company as a
group was $4,014 (exclusive of expenses), a portion of which has been deemed
invested in shares of the Company under a deferred compensation plan
contemplating future payment of the value of those shares. As of December 31,
1995, the aggregate amount in Directors' accounts maintained under the plan was
$194,944. Retirement costs accrued during the period amounted to $2,424.
7
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders,
Lord Abbett Value Appreciation Fund, Inc.:
We have audited the accompanying statement of net assets of Lord Abbett Value
Appreciation Fund, Inc. as of December 31, 1995, the related statements of
operations for the year then ended and of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the five-year period then ended. These financial statements and
the financial highlights are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1995 by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Lord Abbett Value
Appreciation Fund, Inc. at December 31, 1995, the results of its operations, the
changes in its net assets and the financial highlights for the above-stated
periods in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
February 9, 1996
This report to shareholders inaugurates a new procedure whereby a single copy of
the report is sent to an address to which more than one registered shareholder
of the Fund with the same last name has indicated mail is to be delivered,
unless additional reports are specifically requested in writing or by telephone.
Our Management
Board of Directors
Ronald P. Lynch
Robert S. Dow
Thomas S. Henderson
E. Thayer Bigelow*+
Stewart S. Dixon*
John C. Jansing*
C. Alan MacDonald*+
Hansel B. Millican, Jr.*+
Thomas J. Neff*
* Outside Director
+ Audit Committee
Officers
Ronald P. Lynch, Chairman
Robert S. Dow, President
Edward K. von der Linde, Executive
Vice President and Portfolio Manager
Kenneth B. Cutler, Vice President
and Secretary
Stephen I. Allen, Vice President
Daniel E. Carper, Vice President
Thomas S. Henderson, Vice President
Robert G. Morris, Vice President
E. Wayne Nordberg, Vice President
John J. Walsh, Vice President
John J. Gargana, Jr., Vice President
Paul A. Hilstad, Vice President
and Assistant Secretary
Thomas F. Konop, Vice President and
Assistant Secretary
Victor W. Pizzolato, Vice President
Keith F. O'Connor, Treasurer
Joseph Van Dyke, Assistant Treasurer
Lydia Guzman, Assistant Secretary
Robert M. Hickey, Assistant Secretary
A. Edward Oberhaus III,
Assistant Secretary
Investment Manager and
Underwriter
Lord, Abbett & Co.
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
212-848-1800
Custodian
The Bank of New York
Transfer Agent
United Missouri Bank of
Kansas City, N.A.
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419100
Kansas City, MO 64141
800-821-5129
Auditors
Deloitte & Touche LLP
New York, NY
Counsel
Debevoise & Plimpton
New York, NY
Copyright (C) 1996 by Lord Abbett Value Appreciation Fund, Inc., 767 Fifth
Avenue, New York, NY 10153-0203
This publication, when not used for the general information of shareholders of
Lord Abbett Value Appreciation Fund, Inc., is to be distributed only if preceded
or accompanied by a current prospectus which includes information concerning the
Fund's investment objective and policies, sales charges and other matters. There
is no guarantee that the forecasts contained within this publication will come
to pass.
All rights reserved. Printed in the U.S.A.
8
<PAGE>
Lord, Abbett & Co.
A Tradition of Performance Through
Disciplined
Investing
--------------------
[PHOTO - Of Lord Abbett Personnel below]
--------------------
(seated)
John J. Walsh, partner
(standing, left to right)
Edward K. von der Linde,
portfolio manager--Lord Abbett
Value Appreciation Fund
W. Thomas Hudson, Jr.,
portfolio manager
A successful long-term track record is evidence of a successful investment
strategy. For decades we, at Lord, Abbett & Co., have believed that investing
with a disciplined, value approach is the best way to achieve competitive
returns and reduce portfolio risk. This commitment and the dedication of our
team of 47 investment professionals have helped us earn the trust of financial
professionals and investors for over 65 years.
About Your Fund's
Board of
Directors
The Securities and Exchange Commission (SEC) views the role of the independent
Board of Directors as one of the most important components in overseeing a
mutual fund. The Board of Directors watches over your Fund's general operations
and represents your interests. Board members review and approve every contract
between your Fund and Lord, Abbett & Co. (the Fund's investment manager). They
meet regularly to review a wide variety of information and issues regarding your
Fund. Every member of the Board possesses extensive business experience; Lord
Abbett Value Appreciation Fund's shareholders are indeed fortunate to have a
group of independent directors with diverse backgrounds to provide a variety of
viewpoints in the oversight of their Fund. Below, we feature one of our
independent directors, John C. Jansing.
John C. Jansing,
Director--Lord Abbett
Value Appreciation Fund
-----------------------
[PHOTO John C. Jansing]
-----------------------
An alumnus of Dartmouth College, Mr. Jansing is the founder and retired Chairman
of Independent Election Corporation of America, a proxy tabulating firm. His
diversified business career has spanned 40 years and includes extensive
experience in the investment company industry.
Mr. Jansing has served on the American Stock Exchange Board of Governors as well
as on a Securities and Exchange Commission Special Advisory Committee on
Investment Advisors. He has been an independent director for all of Lord
Abbett's funds since 1978.
<PAGE>
Investing in the
Lord Abbett
Family of Funds
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
GROWTH
- ---------------------------------------------------------------------------------------------------------------
INCOME
- ---------------------------------------------------------------------------------------------------------------
Growth Growth & Balanced Income Tax-Free Money
Funds Income Funds Fund Funds Income Funds Market Fund
<S> <C> <C> <C> <C> <C>
Developing Affiliated Fund Investment U.S. Government *National U.S. Government
Growth Fund Trust- Securities Fund* Securities
Balanced Series *California Money Market Fund*+
Value Fundamental Bond-Debenture
Appreciation Value Fund Fund *Connecticut
Fund
Global Fund- *Florida
Global Fund- Income Series
Equity Series *Georgia
Investment
Trust-Limited *Hawaii
Duration U.S.
Government Securities *Michigan
Series*
*Minnesota
*Missouri
*New Jersey
*New York
*Pennsylvania
*Texas
*Washington
</TABLE>
Finding the right mutual fund can be confusing. At Lord, Abbett & Co., we
believe your financial adviser provides value in helping you identify and
understand your investment objectives and, ultimately, offering fund
recommendations suitable for your individual needs.
This publication, when used as sales literature, is to be distributed only if
preceded or accompanied by a current prospectus for Lord Abbett Value
Appreciation Fund.
For more complete information about any other Lord Abbett fund, including
charges and expenses, call your financial adviser or Lord, Abbett & Co. at
800-874-3733 for a prospectus. Read it carefully before investing.
When you invest in a family of funds, you benefit from:
Diversification. You and your financial adviser can diversify your investments
between equity and income funds.
Flexibility. As your investment goals change, your financial adviser can help
you reallocate your portfolio.
As an investor in the Lord Abbett Family of Funds, you have access to 25
portfolios designed to meet a variety of investment needs. While you may
reallocate your assets among our funds at any time, we recommend speaking with
your financial adviser to help you customize your investment plan.
* An investment in this Fund is neither insured nor guaranteed by the U.S.
Government.
+ There can be no assurance that this Fund will be able to maintain a stable net
asset value of $1.00 per share. This Fund is managed to maintain, and has
maintained, its stable $1.00 per share price.
[LOGO OF LORD, ABBETT & CO. APPEARS HERE]
LAVA-2-1295
The GM Building * 767 Fifth Avenue * New York, NY 10153-0203 (2/96)
