Lord Abbett
Equity
Fund
SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED NOVEMBER 30, 1996
An insured investment
designed to help you
capture capital growth
over the long term
[PHOTO OF THREE JARS]
[LOGO]
<PAGE>
Report to Shareholders
For the Six Months Ended November 30, 1996
[PHOTO]
/S/ Robert S. Dow
- ---------------------
Robert S. Dow
Chairman
DECEMBER 30, 1996
"...we believe our disciplined investment process will continue to uncover
company-specific investment values that provide good opportunity for price
appreciation and less-than-market risk ."
Lord Abbett Equity Fund completed the first half of its fiscal year on November
30, 1996. The Fund's net asset value was $20.64 per share versus $19.05 six
months ago. Over the past six months, the Fund produced a total return (the
percent change in net asset value assuming the reinvestment of all
distributions) of 8.35%.
On December 27, 1996, the Board of Trustees of Lord Abbett Equity Fund declared
a dividend of $.47 per share, a short-term capital gains distribution of $.42
per share and a long-term capital gains distribution of $1.76 per share. These
distributions were reinvested on December 27, 1996 on behalf of shareholders of
record on December 27, 1996. As described in the prospectus, all such
distributions are reinvested in additional shares of the Fund (unless otherwise
instructed) and then a "reverse split" is effected, thus retaining the same
number of shares outstanding and the same total value of the shares that existed
prior to the payment of the distributions. This enables shareholders to see the
Fund's performance on a per-share basis. The Fund encourages shareholders to
reinvest all distributions because it maintains the amount of insurance on your
original investment.
The past six months saw stock market averages climb to new heights, against a
background of modest economic growth, low inflation and volatile interest rates.
During this period, your Fund benefited from an overweighting in financial
companies. Your Fund also benefited from our in-house research team, which
identified a number of non-financial stocks that performed well over the period.
Relative performance was somewhat adversely affected by holdings in the consumer
cyclical area. Heading into 1997, we continue to see value in the financial
sector as we forecast declining long-term interest rates.
We anticipate that, through the end of this year and into 1997, the economy will
slow to a growth rate of 2% or less with inflation averaging between 2 1/2%-3%.
Against this backdrop, long-term interest rates should decline. While the benign
interest-rate environment we expect for next year should bode well for the stock
market, investors should note that many of the positive forces currently
propelling the market are generally reflected in current valuations and, we
believe our disciplined investment process will continue to uncover
company-specific investment values that provide good opportunity for price
appreciation and less-than-market risk.
We are pleased that the Fund is a part of your investment portfolio and thank
you for the trust and confidence you have placed in us.
<PAGE>
Fund Facts
A Reminder of Your Guarantee:
Participate in the stock market's potential rewards without risking the loss of
your original investment in the initial offering, if held until May 31, 2000
with all dividends and distributions reinvested
Lord Abbett Equity Fund: The Insured Investment That Does Not Sacrifice Capital
Growth Potential(1) While investments in both Lord Abbett Equity Fund and a
Certificate of Deposit ("CD") are insured, Fund shareholders participate in the
growth potential of equities. During the period shown below, Lord Abbett Equity
Fund provided impressive total returns relative to the CD.
Comparison Of Change In Value Of A $10,000 Investment In Lord Abbett Equity
Fund(2) And Six-Month CDs(3)
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL]
<INSERT PLOT POINTS HERE>
It is important to remember that the interest rate on a CD, unlike the Fund, is
fixed and this rate and the principal, if held until maturity, are guaranteed.
The Federal Deposit Insurance Corporation (FDIC) insures CDs up to $100,000. The
guarantee applicable to shares of the Fund is issued by Financial Security
Assurance Inc., a private company, rated Aaa by Moody's and AAA by Standard &
Poor's.
SEC-Required Average Annual Rates Of Total Return At The Maximum Sales Charge Of
5.5% For The Periods Ended 12/31/96 Were:
<TABLE>
<CAPTION>
Life of Fund (inception: 6/1/90) 1 Year 5 Years Life of Fund (at net asset value)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
11.55% 5.10% 11.38% 12.51%
</TABLE>
Unless otherwise stated, the results quoted above represent past performance
based on the maximum sales charge of 5.5% and reflect appropriate Rule 12b-1
Plan expenses. Tax consequences are not reflected. The investment return and
principal value of a Fund investment will fluctuate so that shares, on any given
day or when redeemed on a day other than May 31, 2000, may be worth more or less
than their original cost.
The Fund is well positioned to benefit from a slowing economic environment
The Fund Offers The Growth Potential Of Stocks With The Security Of Insurance
At 11/30/96, Lord Abbett Equity Fund was invested in a diversified portfolio of
47 equity securities.
Lord Abbett Equity Fund's Top Five Equity Holdings Percent of
Net Assets
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Mobil Corp. 2.85%
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Corning Inc. 2.72%
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Cincinnati Financial Corp. 2.63%
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Amoco Corp. 2.61%
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Brinker International Inc. 2.49%
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Total 13.30%
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Data as of 11/30/96.
(1) The Fund's insurance policy guarantees unconditionally and irrevocably that
the net asset value of each initially purchased share will not be less than
$10 on May 31, 2000, provided all dividends and distributions attributable
to that share are reinvested.
(2) Data reflects the deduction of the maximum sales charge of 5.5%.
(3) Six-month CDs were rolled over at prevailing rates. Source: Salomon
Brothers and The Federal Reserve Bank.
1
<PAGE>
Statement of Net Assets
November 30, 1996
Investment Shares Market Value
- --------------------------------------------------------------------------------
Investments 95.41%
- --------------------------------------------------------------------------------
Common Stocks 69.26%
- --------------------------------------------------------------------------------
Aerospace 2.00% Boeing Co. 12,000 $ 1,192,500
----------
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Auto Parts 1.51% Genuine Parts Company 20,000 900,000
----------
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Automobiles .97% General Motors Corp. 10,000 576,250
----------
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Banks: Money Chase Manhattan Corp. 8,000 756,000
Center 2.56% First Chicago NBD 13,070 767,863
Total 1,523,863
----------
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Banks: Regional BankAmerica Corp. 4,000 412,000
2.73% First Union Corp. 9,000 687,375
KeyCorp 10,000 523,750
Total 1,623,125
----------
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Brokers 1.15% Dean Witter,
Discover & Co. 10,000 683,750
----------
- ------------------------------------------------------------------------------
Chemicals Dow Chemical Co. 3,000 251,250
3.99% Rohm & Haas Co. 18,000 1,433,250
Union Carbide Corp. 15,000 691,875
Total 2,376,375
----------
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Communications
Equipment 2.72% Corning Inc. 40,000 1,620,000
----------
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Containers 1.37% Sonoco Products Co. 30,000 817,500
----------
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Data Processing
Equipment .20% Seagate Technology Inc. 3,000 118,500
----------
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Drugs/Health Care Baxter International Inc. 15,000 637,500
Products Bristol-Myers Squibb
6.23% Company 5,000 568,750
Lilly, Eli & Co. 14,000 1,071,000
Warner-Lambert Co. 20,000 1,430,000
Total 3,707,250
----------
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Electric Power Central & South
3.16% West Corp. 30,000 802,500
CINergy Corp. 20,000 670,000
SCANA Corp. 15,000 408,750
Total 1,881,250
----------
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Electrical Equipment
2.28% Emerson Electric Co. 13,800 1,354,125
----------
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Food 3.19% CPC International Inc. 10,500 874,125
Heinz H.J. Co. 27,000 1,022,625
Total 1,896,750
----------
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Furniture and
Appliances .84% Whirlpool Corp. 10,000 500,000
----------
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Household Products James River Corp. 10,000 320,000
2.76% Kimberly Clark Corp. 13,500 1,319,625
Total 1,639,625
----------
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Insurance 8.56% Chubb Corp. 6,000 325,500
Cincinnati Financial
Corp. 26,000 1,566,500
Jefferson-Pilot Corp. 15,000 873,750
Shares or
Principal
Investment Amount Market Value
================================================================================
SAFECO Corp. 20,000 $ 832,500
The Progressive
Corporation 13,500 941,625
Transamerica Corp. 7,000 555,625
Total 5,095,500
----------
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Machinery:
Diversified 1.87% Deere & Co. 25,000 1,115,625
----------
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Miscellaneous Minnesota Mining
1.83% & Mfg. Co. 13,000 1,088,750
----------
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Natural Gas:
Diversified 1.04% Sonat Inc. 12,000 621,000
----------
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Oil: Domestic 2.61% Amoco Corp. 20,000 1,552,500
----------
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Oil: International
2.85% Mobil Corp. 14,000 1,694,000
----------
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Restaurants 2.49% Brinker International
Inc.* 80,000 1,480,000
----------
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Retail 3.74% Dillard Department
Stores Inc. 40,000 1,225,000
Jostens Inc. 47,000 998,750
Total 2,223,750
----------
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Telecommunications
2.05% MCI Communications Corp. 40,000 1,220,000
----------
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Tire and Rubber Cooper Tire &
Goods 2.06% Rubber Company 3,000 61,500
Goodyear Tire &
Rubber Co. 24,000 1,164,000
Total 1,225,500
----------
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Tobacco 2.50% American Brands Inc. 16,000 764,000
Philip Morris Inc. 7,000 721,875
Total 1,485,875
----------
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Total Investments in
Common Stocks
(Cost $33,428,183) 41,213,363
==============================================================================
U.S. Government Obligations 26.15%
==============================================================================
U.S. Treasury Bonds
Strips due 5/15/2000
(Cost $14,067,442) 18,900M 15,560,016
==============================================================================
Other Assets, Less Liabilities 4.59%
==============================================================================
Short-term Investments, at Cost
Ford Motor Credit Co.
5.40% due 12/2/1996 1,800M 1,800,000
General Electric
Capital Corp.
5.35% due 12/3/1996 1,200M 1,200,000
Total 3,000,000
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Cash and Receivables, Net of Liabilities (264,285)
----------
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Total Other Assets,
Less Liabilities 2,735,715
==============================================================================
Net Assets 100.00% $59,509,094
==============================================================================
Net asset value
($59,509,094 / 2,883,305
shares outstanding) $ 20.64
*Non-income producing.
See Notes to Financial Statements.
2
<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 November 30,
1996
Additions+
<TABLE>
<S> <C> <C>
Aetna Inc. EMC Corp. Philip Morris Inc.
American Brands Inc. First Union Corp. Rohm & Haas Co.
Brinker International Inc. Ford Motor Co. SAFECO Corp.
Bristol-Myers Squibb Company Goodyear Tire & Rubber Co. SCANA Corp.
Central & South West Corp. Heinz H.J. Co. Seagate Technology Inc.
Cincinnati Financial Corp. Intel Corp. Tambrands Inc.
Corning Inc. Jostens Inc. Warner-Lambert Co.
CPC International Inc. Kimberly Clark Corp. Whirlpool Corp.
Dean Witter, Discover & Co. Lucent Technologies Inc.
Eliminations+
Aetna Inc. Comerica Inc. Imation Corp.
Ahmanson, H.F. & Co. ConAgra Inc. Intel Corp.
Allegiance Corp. Donnelley, R.R. & Sons Co. Lucent Technologies Inc.
American Express Co. DTE Energy May Department Stores Company
AMP Inc. Electronic Data Systems Corp. Merck & Co., Inc.
AT&T Corp. EMC Corp. Public Service Enterprises Group Inc.
Bank of New York Exxon Corp. RJR Nabisco
Browning-Ferris Industries Inc. Ford Motor Co. Sears, Roebuck & Co.
Chevron Corp. Great Western Financial Corp. Supervalu Inc.
CIGNA Corp. Hershey Foods Corp. Tambrands Inc.
The Coastal Corporation Hewlett-Packard Co. VF Corp.
</TABLE>
+ Includes securities previously classified in the Investment Portfolio under
"Other".
Statement of Operations
<TABLE>
<CAPTION>
Investment Income Six Months Ended November 30, 1996
====================================================================================================================
<S> <C> <C> <C>
Income Interest $ 665,635
Dividends 478,709
Total income $ 1,144,344
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Expenses Management fee 182,238
Insurance 73,922
12b-1 distribution plan 71,341
Shareholder servicing 51,000
Audit and tax 16,998
Reports to shareholders 9,000
Other 6,708
Total expenses 411,207
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Net investment income 733,137
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Realized and Unrealized Gain on Investments
====================================================================================================================
Realized gain from investment transactions
Proceeds from sales 15,936,767
Cost of investments sold 14,062,290
Net realized gain 1,874,477
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Unrealized appreciation of investments 1,988,959
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Net realized and unrealized gain on investments 3,863,436
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Net Increase in Net Assets Resulting from Operations $ 4,596,573
====================================================================================================================
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended Year Ended
November 30, May 31,
Increase (Decrease) in Net Assets 1996 1996
=================================================================================================================================
<S> <C> <C> <C>
Operations Net investment income $ 733,137 $ 1,506,055
Net realized gain from investment transactions 1,874,477 7,816,528
Net unrealized appreciation (depreciation) of investments 1,988,959 (784,689)
Net increase in net assets resulting from operations 4,596,573 8,537,894
------------------------------------------------------------------------------------------- -------------
Undistributed net investment income included in price of shares reacquired (66,153) (96,646)
- --------------------------------------------------------------------------------------------------------- -------------
Distributions to shareholders from:
Net investment income -- (700,109)
Net realized gain from investment transactions -- (5,123,521)
Total distributions -- (5,823,630)
- --------------------------------------------------------------------------------------------------------- -------------
Share transactions:
Net asset value of 351,669 shares issued to shareholders in reinvestment of
net investment income and realized gain from investment transactions -- 5,823,630
Cost of 127,785 and 325,827 shares reacquired, respectively (2,372,208) (5,807,208)
Reverse share split of 0 and 351,669 shares, respectively -- --
Increase (decrease) in net assets derived from share transactions
(net decrease of 127,785 and 325,827 shares, respectively) (2,372,208) 16,422
------------------------------------------------------------------------------------------- -------------
Increase in net assets 2,158,212 2,634,040
- --------------------------------------------------------------------------------------------------------- -------------
Net Assets
Beginning of period 57,350,882 54,716,842
------------------------------------------------------------------------------------------- -------------
End of period (including undistributed net investment income
of $1,898,257 and $1,231,273, respectively) $ 59,509,094 $ 57,350,882
====================================================================================================================
</TABLE>
See Notes to Financial Statements.
Financial Highlights
<TABLE>
<CAPTION>
Six Months
Ended Year Ended May 31,
November 30, --------------------------------------------------------------
Per Share Operating Performance: 1996 1996 1995 1994 1993 1992
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.05 $ 16.40 $ 14.04 $ 13.26 $ 11.61 $ 10.62
----------------------------------------------------------- ------------------------------------------------------------
Income from investment operations
Net investment income .25 .47 .36 .31 .32 .34
Net realized and unrealized gain on investments 1.34 2.18 2.00 .47 1.33 .65
Total from investment operations 1.59 2.65 2.36 .78 1.65 .99
----------------------------------------------------------- ------------------------------------------------------------
Distributions
Dividends from net investment income -- (.22) (.34) (.28) (.34) (.34)
Distributions from capital gains -- (1.61) (1.25) (1.18) (.78) (.215)
Total distributions -- (1.83) (1.59) (1.46) (1.12) (.555)
Reverse share split -- 1.83 1.59 1.46 1.12 .555
----------------------------------------------------------- ------------------------------------------------------------
Net asset value, end of period $ 20.64 $ 19.05 $ 16.40 $ 14.04 $ 13.26 $ 11.61
- ----------------------------------------------------------------- ------------------------------------------------------------
Total Return* 8.35%+ 16.16% 16.81% 5.88% 14.21% 9.32%
================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000) $ 59,509 $ 57,351 $ 54,717 $ 53,014 $ 57,122 $ 58,358
----------------------------------------------------------- ------------------------------------------------------------
Ratios to Average Net Assets:
Expenses, including waiver 0.73%+ 1.50% 1.80% 1.80% 1.80% 1.80%
Expenses, excluding waiver 0.73%+ 1.50% 1.81% 1.96% 2.25% 2.12%
Net investment income 1.30%+ 2.63% 2.48% 2.19% 2.57% 3.09%
Portfolio turnover rate 24.33% 66.48% 35.12% 50.77% 52.29% 24.43%
Average commissions per share paid on equity
transactions$ .066 $ .065 $ .067 n/a n/a n/a
==========================================================================================================================
</TABLE>
* Total return does not consider the effects of sales loads.
+ Not annualized.
See Notes to Financial Statements.
4
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Lord Abbett Equity Fund (the "Company") was organized as a Massachusetts
business trust on January 19, 1990 and 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 is a
summary of 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 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 Trustees. (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 federal income tax
provision is required. (c) Security transactions are accounted for on the date
that the securities are purchased or sold (trade date). Realized gains and
losses from security transactions are calculated on the identified cost basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. (d) A portion of the cost of repurchases of shares of
beneficial interest, 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
repurchases of shares. (e) Discounts on U.S. Treasury Bond Strips are accrued to
maturity. The constant yield method is used. (f) Reverse Share Splits - The
Trustees may authorize reverse share splits immediately after, and of a size so
as to exactly offset, the payment of dividends and distributions. After taking
into account the reverse share split, a shareholder reinvesting dividends and
distributions will hold exactly the same number of shares as owned prior to the
distribution and reverse share split. A shareholder electing to receive
dividends and distributions in cash will have fewer shares than previously
owned.
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 paid is based on average daily
net assets at the rate of .65% per annum. Certain of the Company's officers and
trustees have an interest in Lord Abbett. The Company adopted a Rule 12b-1 Plan
which provides for the payment of .25% of the average daily net asset value of
shares of the Company.
3. Paid In Capital
At November 30, 1996, paid in capital aggregated $41,833,769.
4. Purchases and Sales of Securities
Purchases and sales of investment securities (other than U.S. Government
obligations and short-term securities) aggregated $12,970,931 and $15,936,767,
respectively. As of November 30, 1996, net unrealized appreciation for federal
income tax purposes aggregated $9,227,753 of which $9,486,530 related to
appreciated securities and $258,777 related to depreciated securities. The cost
of investments for federal income tax purposes is substantially the same as that
used for financial reporting purposes.
5. Distributions
Net realized gains from investment transactions, if any, are declared and
distributed in December to shareholders. Accumulated undistributed net realized
gain at November 30, 1996 for financial reporting purposes, aggregated
$6,549,315. 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.
The Trustees of the Company declared the following reverse share splits:
Declaration
Date Rate
- --------------------------------------------------------------------------------
12/26/91 .949909748
12/29/92 .909750201
12/28/93 .896600567
12/28/94 .889583333
12/27/95 .900489396
12/27/96 .872289157
- --------------------------------------------------------------------------------
6. Insurance
The Company has entered into an agreement with Financial Security Assurance Inc.
("Financial Security"), pursuant to which Financial Security has guaranteed
unconditionally and irrevocably to the Company that the net asset value of each
initially purchased share will not be less than $10 on May 31, 2000, provided
that all dividends and distributions attributable to that share are reinvested.
Insurance expense includes an annual premium equal to .50% of the total amount
guaranteed.
7. Trustees' Remuneration
The Trustees of the Company associated with Lord Abbett and all officers of the
Company receive no compensation from the Company for acting as such. Outside
Trustees' fees and outside Trustees' retirement costs are allocated among all
funds in the Lord Abbett group based on net assets of each fund. The Trustees'
fees accrued during the period were $630 (exclusive of expenses), a portion of
which has been deemed invested in shares of other funds in the Lord Abbett group
under a deferred compensation plan contemplating future payment of the value of
those shares. As of November 30, 1996, the aggregate amount in Trustees'
accounts maintained under the plan was $22,820.
Copyright (C) 1997 by Lord Abbett Equity Fund, 767 Fifth Avenue, New York,
NY10153-0203
This publication is intended for the general information of shareholders of Lord
Abbett Equity Fund only. There is no guarantee that the forecasts contained
within this publication will come to pass.
All rights reserved. Printed in the U.S.A.
<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
International Mid-Cap Affiliated Fund Balanced Series U.S. Government o National U.S. Government
Series Value Fund Securities Series* o California Securities
Growth & o Connecticut Money Market
Developing Global Fund- Income Series Bond-Debenture o Florida Fund*+
Growth Fund Equity Series Fund o Georgia
Research Fund- o Hawaii
Research Fund- Large-Cap Global Fund- o Michigan
Small-Cap Series Income Series o Minnesota
Series o Missouri
Limited Duration 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.
For more complete information about any 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 Literature:
800-874-3733
For Shareholder Account or
Statement Inquiries:
800-821-5129
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
- ------------------------------------------------------------ LAEF-3-1196
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203 (1/97)
