Lord Abbett Mid-Cap
Value Fund
1996 ANNUAL REPORT
Designed to provide
you with capital
appreciation from a
stock portfolio of
midsized companies
{PICTURE OF A BUSHEL OF APPLES]
[LOGO]
<PAGE>
Report to Shareholders
For the Fiscal Year Ended December 31, 1996
[PICTURE]
/s/ ROBERT S. DOW
- -----------------
ROBERT S. DOW
CHAIRMAN
JANUARY 24, 1997
"The past year's strong performance
can be attributed
to careful, research-driven
stock selection..."
Lord Abbett Mid-Cap Value Fund completed fiscal 1996 on December 31 with a net
asset value of $13.29 per share, versus $11.13 per share one year ago (the
latter figure has been adjusted for capital gains distributions totaling $1.05
per share paid last January). In addition, the Fund paid dividends totaling
$0.16 per share during the year. The Fund, which focuses on midsized companies,
had a total return (the percent change in net asset value, assuming the
reinvestment of all distributions) of 21.2% for the year. Recently, the Fund's
Board of Directors declared a dividend of $0.15 per share and a capital gains
distribution of $1.35 per share. Both were paid on January 22, 1997 to
shareholders of record on January 15, 1997.
The past year saw stock market averages climb to new heights against a
background of modest economic growth, low inflation and volatile interest rates.
At times, the Fund may overweight certain industries that represent exceptional
value. However, during 1996, the Fund did not overweight any particular sector;
the Fund was invested in select companies among a variety of industries. The
past year's strong performance can be attributed to careful, research-driven
stock selection; this strategy will continue to be dominant in 1997 as well.
We anticipate that the economy will slow in 1997 to a growth rate of 2% or less
with inflation averaging between 21/2%-3%. Against this backdrop, long-term
interest rates should decline. While the benign interest-rate environment we
expect should bode well for the stock market, investors should note that the
positive forces currently propelling the stock market are generally reflected in
current valuations and are not sustainable.
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 1997 and beyond.
<PAGE>
The Mid-Cap Advantage
Lord Abbett Mid-Cap Value 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 $5 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
o 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
o 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
o 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, 1986 and 1996 are actual costs--then and now. "Mid-Cap
Value Fund 1996" is what the 1986 amount would have grown to had it been
invested in the Fund. Investments in Lord Abbett Mid-Cap Value Fund (up
208.9%) surpassed increases in the cost of living (up 43.5%) in these 10
years. Finding investments that grow faster than inflation is one important
way to maintain--and enhance--your lifestyle.
[PICTURE] [PICTURE] [PICTURE]
One-Year
Private
College One-Family Income per
Tuition(1) House(1) Capita(1)
1986 $ 6,581 $ 98,500 $16,981
1996 $12,823 $144,800 $19,261
- --------------------------------------------------------------------------------
Mid-Cap Value Fund 1996 $20,329 $304,267 $52,454
- --------------------------------------------------------------------------------
Lord Abbett Mid-Cap Value Fund's results reflect total return at net asset
value, with all distributions reinvested for the 10 years ended 12/31/96.
See Important Information on page 2.
(1) 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 compounded total returns for periods ended 12/31/96 at the
5.75% maximum sales charge, with all distributions reinvested:
1 year: +14.30%
5 years: +12.51%
10 years: +11.28%
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 3.7%
per year. Over this time frame, the 6.2% average annual return of CDs
outpaced inflation. However, investors in the Fund saw their $100,000
investment grow an average of 11.5% per year, to $297,257.
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 Mid-Cap Value Fund can help your money work harder for
you.
Growth of $100,000: 12/31/86-12/31/96
Cumulative Total
Returns Over
10 Years
The Fund: 197.3%
CDs: 81.8%
Inflation: 43.5%
[The following table was represented as a line graph in the printed material]
Inflation (Consumer
The Fund (1) Six-Month CD(2) Price Index)
------------ --------------- ------------
1986 - 1996........... $297,257 $181,754 $143,529
(1) 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.
(2) Source: Salomon Brothers and The Federal Reserve Bank.
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 3/31/97, 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, 1996
<TABLE>
<CAPTION>
Investment Shares Market Value
====================================================================================================================================
Investments in Common Stocks 95.23%
====================================================================================================================================
<S> <C> <C> <C>
Aerospace 1.23% AAR Corp.-Major supplier of products and services for the
worldwide aviation industry 75,000 $ 2,268,750
*Spacehab Inc.-Develops and operates habitable modules for space-based
research and cargo services aboard the U.S. Space Shuttle system 150,000 900,000
Total 3,168,750
- -----------------------------------------------------------------------------------------------------------------------=============
Apparel 1.99% *Fruit of The Loom Class A-Producer of non-fashion apparel and undergarments 135,000 5,113,125
- -----------------------------------------------------------------------------------------------------------------------=============
Auto Parts 4.61% Genuine Parts Company-National distributor of automotive replacement parts 60,000 2,670,000
Snap-On, Inc.-Manufactures and distributes hand tools and diagnostic
equipment for the automotive industry 257,500 9,173,438
Total 11,843,438
- -----------------------------------------------------------------------------------------------------------------------=============
Banks: Regional 3.95% Bank of Boston Corp.-Leading New England regional bank 100,000 6,425,000
Crestar Financial Corp.-Leading mid-atlantic regional bank 50,000 3,718,750
Total 10,143,750
- -----------------------------------------------------------------------------------------------------------------------=============
Chemicals 5.51% Crompton & Knowles Corp.-Specialty chemicals and plastic processing
equipment manufacturer 200,000 3,850,000
Hanna, M.A. Co.-Leading producer and distributor of plastic compounds,
resins and additives 180,000 3,937,500
Lyondell Petrochemical Co.-Integrated manufacturer and marketer of
petrochemicals and refined petroleum products 80,000 1,760,000
*Polymer Group Inc.-Major global manufacturer of non-woven materials 333,200 4,623,150
Total 14,170,650
- -----------------------------------------------------------------------------------------------------------------------=============
Containers 1.80% Sonoco Products Co.-A leading U.S. producer of specialty paper and plastic
packaging components 179,000 4,631,625
- -----------------------------------------------------------------------------------------------------------------------=============
Data Processing
Equipment 1.80% EMC Corp.-A supplier of high-performance storage devices and related services 140,000 4,637,500
- -----------------------------------------------------------------------------------------------------------------------=============
Drugs/Health Care
Products 7.66% *Haemonetics Corp.-Major manufacturer of blood collection systems 75,000 1,415,625
Mallinckrodt Group Inc.-Producer of medical products, specialty chemicals and
veterinary supplies 185,000 8,163,125
Mylan Laboratories-Leading producer of prescription generic drugs and
brand-name dermatological products 275,000 4,606,250
*Vivra Inc.-Leading provider of end-stage renal dialysis treatment 200,000 5,525,000
Total 19,710,000
- -----------------------------------------------------------------------------------------------------------------------=============
Electric Power 6.06% Illinova Corp.-Major midwestern electric utility holding company 150,000 4,125,000
Ipalco Enterprises Inc.-Major midwestern electric utility holding company 150,000 4,087,500
SCANA Corp.-Major southeastern electric and gas utility holding company 175,000 4,681,250
Utilicorp United Inc.-Major midwestern electric and gas utility
holding company 100,000 2,700,000
Total 15,593,750
- -----------------------------------------------------------------------------------------------------------------------=============
Electronics:
Equipment 4.68% Perkin-Elmer Corp.-Leading manufacturer of analytical instruments and
life science systems 105,000 6,181,875
*Plantronics, Inc.-Leading supplier of communication headset products and
services to users and providers worldwide 130,000 5,850,000
Total 12,031,875
- -----------------------------------------------------------------------------------------------------------------------=============
Food 8.80% Dean Foods Co.-Major producer of dairy foods, canned and frozen vegetables 235,000 7,578,750
Flowers Industries, Inc.-Major producer of baked goods and snack-food
products in the U.S. 100,000 2,150,000
Hershey Foods Corp.-Major U.S. maker of chocolate and
confectionary products 70,000 3,062,500
Supervalu Inc.-Second largest U.S. food wholesaler 80,000 2,270,000
Universal Foods Corp.-Manufacturer of yeast, flavorings, colorants and
dried spices for the food industry 215,000 7,578,750
Total 22,640,000
- -----------------------------------------------------------------------------------------------------------------------=============
Health Care
Services 1.68% *Health Systems International Inc. Class A-Health maintenance organization
operator, primarily in the U.S. 175,000 4,331,250
- -----------------------------------------------------------------------------------------------------------------------=============
Hotel/Motel 3.82% Patriot American Hospitality, Inc.-Hotel real estate investment trust 100,000 4,312,500
Starwood Lodging Trust-Hotel real estate investment trust 100,000 5,512,500
Total 9,825,000
- -----------------------------------------------------------------------------------------------------------------------=============
Household
Products 3.22% James River Corp.-Producer of paper-based consumer products, packaging and
communication papers 250,000 8,281,250
- -----------------------------------------------------------------------------------------------------------------------=============
</TABLE>
3
<PAGE>
Statement of Net Assets
December 31, 1996
<TABLE>
<CAPTION>
Shares or
Investment Principal Amount Market Value
====================================================================================================================================
<S> <C> <C> <C>
Insurance 4.98% CMAC Investment Corp.-Major private mortgage insurance provider 140,000 $ 5,145,000
The Progressive Corporation-Insurance holding company specializing in
non-standard auto insurance 30,000 2,021,250
Transatlantic Holdings Inc.-International property and casualty reinsurer 70,000 5,635,000
Total 12,801,250
- -----------------------------------------------------------------------------------------------------------------------=============
Machinery:
Diversified 3.25% *Coltec Industries Inc.-Diversified manufacturer of aerospace, defense
and automotive products 200,000 3,775,000
Goulds Pumps, Inc.-Largest U.S. producer of industrial and
residential pump systems 200,000 4,587,500
Total 8,362,500
- -----------------------------------------------------------------------------------------------------------------------=============
Miscellaneous 4.27% Moore Corp. Ltd.-World's largest manufacturer of business forms
and related products 300,000 6,112,500
National Service Industries, Inc.-Diversified manufacturer of lighting
equipment, rental uniforms and specialty chemicals 130,000 4,858,750
Total 10,971,250
- -----------------------------------------------------------------------------------------------------------------------=============
Natural Gas
Distribution 4.43% Bay State Gas-Natural gas distributor in Massachusetts 45,000 1,271,250
Connecticut Natural Gas Corp.-Natural gas distributor in Connecticut 25,000 637,500
Eastern Enterprises-Natural gas distributor in Massachusetts 150,000 5,306,250
South Jersey Industries-Natural gas and fuel oil distributor in New Jersey 50,000 1,218,750
Southwest Gas Corp.-Natural gas distributor in Arizona and Nevada 125,000 2,406,250
Yankee Energy Systems Inc.-Natural gas distributor in Connecticut 25,000 534,375
Total 11,374,375
- -----------------------------------------------------------------------------------------------------------------------=============
Natural Gas
Diversified 3.31% The Coastal Corporation-A diversified gas pipeline company 90,000 4,398,750
Sonat Inc.-Major diversified energy company with interests in natural
gas pipelines, exploration and drilling 80,000 4,120,000
Total 8,518,750
- -----------------------------------------------------------------------------------------------------------------------=============
Oil: Domestic 1.41% Ultramar Diamond Shamrock Corp.-Refiner and marketer of petroleum products 115,000 3,636,875
- -----------------------------------------------------------------------------------------------------------------------=============
Oil Well Equipment/
Service 2.36% COFLEXIP S.A. Sponsored ADR-World leader in design, manufacture and
installation of flexible pipe for offshore petroleum transportation 230,900 6,061,125
- -----------------------------------------------------------------------------------------------------------------------=============
Railroads 1.30% Canadian National Railway-Major Canadian-based railroad operator 50,100 1,903,800
Illinois Central Corp. Series A-Major midwestern freight railroad operator 45,000 1,440,000
Total 3,343,800
- -----------------------------------------------------------------------------------------------------------------------=============
Restaurants 2.55% *Brinker International Inc.-Major developer and operator of casual
dining restaurants 410,000 6,560,000
- -----------------------------------------------------------------------------------------------------------------------=============
Retail 5.28% Dillard Department Stores Inc.-Southwestern department store chain 75,000 2,315,625
Jostens Inc.-Produces class rings, yearbooks and recognition products
for schools and businesses 225,000 4,753,125
*Payless Shoe Source-Major U.S. footwear retailer 75,000 2,812,500
*Proffitt's Inc.-Regional department store chain 100,000 3,687,500
Total 13,568,750
- -----------------------------------------------------------------------------------------------------------------------=============
Savings and
Loan .68% *Glendale Federal Bank FSB-California savings and loan 75,000 1,743,750
- -----------------------------------------------------------------------------------------------------------------------=============
Tire and Rubber
Goods 2.43% Standard Products Co.-Manufactures plastic and rubber products for the
automotive and appliance industries 245,000 6,247,500
- -----------------------------------------------------------------------------------------------------------------------=============
Toys 2.12% Hasbro Inc.-Major U.S. manufacturer of toys and games 140,000 5,442,500
- -----------------------------------------------------------------------------------------------------------------------=============
Other 0.05% 127,602
- -----------------------------------------------------------------------------------------------------------------------=============
Total Investments in Common Stocks (Cost $188,166,293) 244,881,990
====================================================================================================================================
Other Assets, Less Liabilities 4.77%
====================================================================================================================================
Corporate
Obligations, American Express Credit Corp. 6.30% due 1/3/1997 $7,600M $ 7,600,000
at Cost
Ford Motor Credit Corp. 6.01% due 1/2/1997 3,300M 3,300,000
General Electric Capital Corp. 5.51% due 1/7/1997 3,000M 3,000,000
Total 13,900,000
------------------------------------------------------------------------------------------------=============
Cash and Receivables, Net of Liabilities (1,634,171)
- -----------------------------------------------------------------------------------------------------------------------=============
Total Other Assets, Less Liabilities 12,265,829
====================================================================================================================================
Net Assets 100.00% (equivalent to $13.29 a share on 19,346,102 shares of $.001 par value capital stock
outstanding; authorized, 150,000,000 shares) $257,147,819
====================================================================================================================================
</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
unaudited.
* Non-income producing. See Notes to Financial Statements.
4
<PAGE>
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, 1996
Additions
Bay State Gas
Cheyenne Software Inc.
CMAC Investment Corp.
Coltec Industries Inc.
Connecticut Natural Gas Corp.
Crestar Financial Corp.
Crompton & Knowles Corp.
DuPont Photomasks Inc.
Fleetwood Enterprises, Inc.
Flowers Industries, Inc.
Haemonetics Corp.
Health Systems International Inc.
Class A
Illinova Corp.
Jostens Inc.
Mylan Laboratories
Payless Shoe Source
Plantronics, Inc.
Polymer Group Inc.
Proffitt's Inc.
South Jersey Industries
Southwest Gas Corp.
Utilicorp United Inc.
Yankee Energy Systems Inc.
- --------------------------------------------------------------------------------
Eliminations
Ahmanson, H.F. & Co.
Alexander & Alexander Services
Banta Corp.
Cheyenne Software Inc.
Cooper Tire & Rubber Company
DuPont Photomasks Inc.
Equitable Resources, Inc.
Fleetwood Enterprises, Inc.
Great Western Financial Corp.
Johnson Controls, Inc.
Jones Apparel Group
Kerr-McGee Corp.
Laboratory Corporation of America
Loral Corp.
Nalco Chemical Co.
Nordstrom Inc.
Union Carbide Corp.
Western Gas Resources, Inc.
Westvaco Corporation
Statement of Operations
Investment Income Year Ended December 31, 1996
================================================================================
Income Dividends $ 4,992,892
Interest 537,461
Total income $ 5,530,353
-----------------------------------------------------------------
Expenses Management fee 1,733,689
12b-1 distribution plan 580,000
Shareholder servicing 310,000
Reports to shareholders 105,000
Professional 70,000
Registration 35,000
Directors 7,000
Other 35,521
Total expenses 2,876,210
-----------------------------------------------------------------
Net investment income 2,654,143
-----------------------------------------------------------------
Realized and Unrealized Gain on Investments
================================================================================
Realized gain from investment transactions
Proceeds from sales 101,242,138
Cost of investments sold 75,780,229
-----------------------------------------------------------------
Net realized gain 25,461,909
-----------------------------------------------------------------
Unrealized appreciation of investments 17,866,612
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments 43,328,521
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $45,982,664
================================================================================
See Notes to Financial Statements.
5
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31,
Increase (Decrease) in Net Assets 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations Net investment income $ 2,654,143 $ 3,060,026
Net realized gain from investment transactions 25,461,909 20,044,535
Net unrealized appreciation of investments 17,866,612 24,306,741
Net increasein net assets resulting from operations 45,982,664 47,411,302
----------------------------------------------------------------------------------------------------------------------
Undistributed net investment income included in price of share transactions (47,257) (41,423)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (2,962,616) (2,778,098)
Net realized gain from investment transactions (19,436,362) (23,613,521)
Total distributions (22,398,978) (26,391,619)
----------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Net proceeds from sale of 1,578,024 and 2,103,934 shares, respectively 18,759,962 22,817,148
Net asset value of 1,867,268 and 2,422,885 shares, respectively, issued to
shareholders in reinvestment of net investment income and realized
gain from investment transactions 20,251,955 23,501,594
Total 39,011,917 46,318,742
----------------------------------------------------------------------------------------------------------------------
Cost of 2,748,622 and 2,829,370 shares reacquired, respectively (32,549,103) (30,936,149)
----------------------------------------------------------------------------------------------------------------------
Increase in net assets derived from capital share transactions
(net increase of 696,670 and 1,697,449 shares, respectively) 6,462,814 15,382,593
----------------------------------------------------------------------------------------------------------------------
Increase in net assets 29,999,243 36,360,853
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
Beginning of year 227,148,576 190,787,723
----------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment income of $1,600,562 and
$1,956,292, respectively) $257,147,819 $227,148,576
======================================================================================================================
</TABLE>
See Notes to Financial Statements.
Financial Highlights
<TABLE>
<CAPTION>
Year Ended December 31,
Per Share Operating Performance: 1996 1995 1994 1993 1992
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.18 $11.25 $12.65 $12.60 $11.81
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .13 .162 .18 .16 .20
Net realized and unrealized gain (loss) on investments 2.19 2.383 (.545) 1.42 1.31
Total from investment operations 2.32 2.545 (.365) 1.58 1.51
----------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.16) (.17) (.16) (.20) (.22)
Distributions from net realized gain (1.05) (1.445) (.875) (1.33 (.50)
----------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $13.29 $12.18 $11.25 $12.65 $12.60
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return* 21.22% 26.09% (3.27)% 13.95% 13.46%
====================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of year (000) $257,148 $227,149 $190,788 $202,519 $173,380
----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.22% 1.27% 1.12% 1.22% 1.22%
Net investment income 1.12% 1.48% 1.53% 1.35% 1.71%
----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 38.88% 41.42% 57.49% 33.42% 62.55%
----------------------------------------------------------------------------------------------------------------------
Average commissions per share paid on equity transactions $.064 $.066 n/a n/a n/a
----------------------------------------------------------------------------------------------------------------------
</TABLE>
** Total return does not consider the effects of sales loads.
See Notes to Financial Statements.
6
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies Lord Abbett Mid-Cap Value Fund, Inc. (the
"Company") (formerly Lord Abbett Value Appreciation Fund, Inc.) is registered
under the Investment Company Act of 1940 as a diversified, open-end management
investment company. The financial statements have been prepared in conformity
with generally accepted accounting principles which permit management to make
certain estimates and assumptions at the date of the financial statements. The
following summarizes the significant accounting policies of the Company:
(a) Market value is determined as follows: Securities listed or admitted to
trading privileges on any national securities exchange are valued at the last
sales price on the principal securities exchange on which such securities are
traded, or, if there is no sale, at the mean between the last bid and asked
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.
(b) It is the policy of the Company to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income. Therefore, no income tax provision is required.
(c) Security transactions are accounted for on the date that the securities are
purchased or sold (trade date). Realized gains and losses from security
transactions are calculated on the identified cost basis. 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.
(e) Certain components of net assets in the prior period have been reclassified
to conform to the current year presentation.
2. Management Fee and Other Transactions with Affiliates The Company has a
management agreement with Lord, Abbett & Co. ("Lord Abbett") pursuant to which
it supplies the Company with investment management, research, statistical and
advisory services and pays 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
Distributor LLC received $46,068, representing payment of commissions on sales
of capital stock of the Company after deducting $291,495 allowed to authorized
distributors as concessions. Certain of the Company's officers and directors
have an interest in Lord Abbett.
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 distribution fee of up to 1% on certain qualifying purchases and a
supplemental annual distribution fee of 0.10% of the average daily net assets of
Class A shares serviced by certain qualifying institutions.
3. Paid In Capital At December 31, 1996, paid in capital aggregated
$171,699,870.
4. Purchases and Sales of Securities Purchases and sales of investment
securities (other than short-term investments) aggregated $87,849,170 and
$101,242,138, respectively. As of December 31, 1996, net unrealized appreciation
for federal income tax purposes aggregated $56,715,697, of which $58,665,543
related to appreciated securities and $1,949,846 related to depreciated
securities. For federal income tax purposes, the identified cost of investments
owned at December 31, 1996 was substantially the same as the cost for financial
reporting purposes.
5. Distributions Dividends from net investment income and net realized gain from
investment transactions, if any, are declared annually. At December 31, 1996,
undistributed net realized gain for financial reporting purposes aggregated
$27,131,690.
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.
6. Directors' Remuneration The Directors of the Company associated with Lord
Abbett and all officers of the Company receive no compensation from the Company
for acting as such. Outside Directors' fees and retirement costs are allocated
among all the funds in the Lord Abbett group based on net assets of each fund. A
portion of the Directors' fees accrued is 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, 1996, the aggregate amount in
Directors' accounts maintained under the plan was $237,079.
7. Proxy Results (unaudited) The Company's shareholders voted on the following
proposals at the Annual Meeting of Shareholders held on June 19, 1996. Each
Director was elected and all other proposals were approved. The description of
each proposal and the results of the shareholder vote are as follows:
Election of Directors For Withheld
- --------------------------------------------------------------------------------
Ronald P. Lynch 13,088,983 284,198
Robert S. Dow 13,099,094 274,087
Thomas S. Henderson 13,093,622 279,559
E. Thayer Bigelow 13,084,631 288,550
Stewart S. Dixon 13,086,003 287,178
John C. Jansing 13,079,265 293,916
C. Alan MacDonald 13,091,233 281,948
Hansel B. Millican, Jr. 13,095,479 277,702
Thomas J. Neff 13,095,664 277,517
- --------------------------------------------------------------------------------
For Against Abstain Non-Vote
- --------------------------------------------------------------------------------
Ratification of Deloitte &
Touche LLP as independent
public accountants 13,042,215 78,400 209,591 42,975
Approval of certain changes
in fundamental investment
policies and restrictions 10,504,462 890,900 621,432 1,356,387
Approval of new Distribution
Plan and Agreement 10,250,385 1,120,829 645,579 1,356,388
Approval of an amendment
to the Articles of Incorporation
authorizing the creation of
classes and series of shares
and confirming that the
Directors may impose contingent
deferred sales charges on
certain redemptions of new
classes of shares 10,184,750 1,196,385 635,657 1,356,389
Approval of an amendment
to the Articles of Incorporation
to reduce the par value of
capital stock to $0.001 10,850,146 662,582 504,064 1,356,389
- --------------------------------------------------------------------------------
7
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders,
Lord Abbett Mid-Cap Value Fund, Inc.:
We have audited the accompanying statement of net assets of Lord Abbett Mid-Cap
Value Fund, Inc. as of December 31, 1996, 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, 1996 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 Mid-Cap
Value Fund, Inc. at December 31, 1996, 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 5, 1997
Our Management
Board of Directors
Robert S. Dow
E. Wayne Nordberg
E. Thayer Bigelow*+
Stewart S. Dixon*
John C. Jansing*
C. Alan MacDonald*+
Hansel B. Millican, Jr.*+
Thomas J. Neff*
* Outside Director
+ Audit Committee
Officers
Robert S. Dow, Chairman and President
Edward K. von der Linde, Executive Vice
President and Portfolio Manager
Kenneth B. Cutler, Vice President
and Secretary
Stephen I. Allen, Vice President
Zane E. Brown, Vice President
Daniel E. Carper, Vice President
Daria L. Foster, Vice President
Robert G. Morris, Vice President
Robert J. Noelke, Vice President
E. Wayne Nordberg, Vice President
John J. Walsh, Vice President
Paul A. Hilstad, Vice President
and Assistant Secretary
Thomas F. Konop, Vice President
and Assistant Secretary
Keith F. O'Connor, Vice President
and Treasurer
A. Edward Oberhaus III, Vice President
Victor W. Pizzolato, Vice President
Donna McManus, Assistant Treasurer
Joseph Van Dyke, Assistant Treasurer
Lydia Guzman, Assistant Secretary
Robert M. Hickey, Assistant Secretary
Investment Manager and
Underwriter
Lord, Abbett & Co. and
Lord Abbett Distributor LLC
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
212-848-1800
Custodian
The Bank of New York
New York, NY
Transfer Agent
United Missouri Bank of
Kansas City, N.A.
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419100
Kansas City, MO 64141
800-821-5129
Auditors
Deloitte & Touche LLP
New York, NY
Counsel
Debevoise & Plimpton
New York, NY
Copyright (C) 1997 by Lord Abbett Mid-Cap Value Fund, Inc., 767 Fifth Avenue,
New York, NY 10153-0203
This publication, when not used for the general information of shareholders of
Lord Abbett Mid-Cap Value 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
[PICTURE]
(from left to right)
John J. Walsh, partner
Edward K. von der Linde,
portfolio manager--Lord Abbett
Mid-Cap Value Fund
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 50 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) and
Lord Abbett Distributor LLC (the Fund's underwriter). They meet regularly to
review a wide variety of information and issues regarding your Fund. Every
member of the Board possesses extensive business experience; Lord Abbett Mid-Cap
Value 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,
Thomas J. Neff.
Thomas J. Neff,
Director--Lord Abbett
Mid-Cap Value Fund
[PICTURE]
An alumnus of Lafayette College, Mr. Neff also holds an MBA from Lehigh
University. He is Chairman of Spencer Stuart U.S., an executive search
consulting firm based in New York.
Mr. Neff is a trustee of Lafayette College and also has served as Chairman of
the Board of Trustees of the Brunswick School in Greenwich, CT. He has been a
director for all of Lord Abbett's funds since 1982.
<PAGE>
Investing in the
Lord Abbett
Family of Funds
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
GROWTH
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Growth & Balanced Income Tax-Free Money
Growth Funds Funds Income Funds Fund Funds Income Funds Market Fund
Developing Global Fund- Affiliated Fund Balanced Series Bond-Debenture o National U.S. Government
Growth Fund Equity Series Fund o California Securities
Growth & o Connecticut Money Market
International Mid-Cap Income Series Global Fund- o Florida Fund*
Series Value Fund Income Series o Georgia
Research Fund- o Hawaii
Research Fund- Large-Cap Limited Duration o Michigan
Small-Cap Series U.S. Government o Minnesota
Series Securities Series* o Missouri
o New Jersey
U.S. Government o New York
Securities Series* o Pennsylvania
o Texas
o 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 Mid-Cap Value
Fund.
For more complete information about any other Lord Abbett fund, including
charges and expenses, call your financial adviser or Lord Abbett Distributor LLC
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 28
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.
Numbers to Keep Handy
For Shareholder Account or
Statement Inquiries:
800-821-5129
For Literature:
800-874-3733
For More Information:
800-426-1130
Visit our Web site:
http://www.lordabbett.com
* 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] LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
LORD ABBETT DISTRIBUTOR LLC
- ------------------------------------------------------------ LAMCVF-2-1296
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203 (2/97)
