Lord Abbett Equity
Fund
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SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED NOVEMBER 30, 1997
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[GRAPHIC: Extension Ruler]
An insured investment designed to help you
capture capital growth over the long term
[LORD ABBETT LOGO]
<PAGE>
Report to Shareholders
For the Six Months Ended November 30, 1997
[PHOTO: Robert S. Dow]
/s/ Robert S. Dow
- -------------------------
Robert S. Dow
Chairman
DECEMBER 29, 1997
Lord Abbett Equity Fund completed the first half of its fiscal year on November
30, 1997. The Fund's net asset value was $24.63 per share versus $22.54 per
share six months ago. For the past six months, the Fund produced a total return
(percent change in net asset value, including the reinvestment of all
distributions) of 9.3%.
On December 23, 1997, the Board of Trustees of Lord Abbett Equity Fund declared
a dividend of $0.50 per share, a short-term capital gains distribution of $0.22
per share and a long-term capital gains distribution of $2.56 per share. These
distributions were reinvested on December 26, 1997, on behalf of shareholders of
record on December 26, 1997. 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 a continuation of rising stock market averages, amid
solid economic growth and moderate inflation. Stock market volatility in October
provided an opportunity to reduce the bond portion of the portfolio from 18% to
15%. Often, bond prices increase when stocks experience difficulties. Therefore,
we sold off some bonds that had risen in price and invested the resulting funds
in stocks, taking advantage of the lower prices of stocks we wanted to own. Your
Fund continued to benefit from heavy weightings in interest-sensitive areas such
as the financial services (banks and other financial institutions) and utilities
(telephone and gas and electric companies) sectors.
Our outlook for 1998 is for the economy to slow considerably, with growth
falling to 2% or less in the later half of the year. We anticipate inflation to
remain moderate. Companies that experience stable earnings typically do well in
this type of environment, so we will continue to emphasize interest-sensitive
holdings, and maintain below-average holdings in economic-sensitive sectors
(industries that traditionally rise and fall in line with economic conditions).
We expect the lowering of the federal deficit to positively impact the bond
market, and the changes to the tax law (particularly the lowering of the
long-term capital gains tax) to have a beneficial effect on equities. We believe
our disciplined investment process will continue to uncover company-specific
investment values that provide good opportunity for price appreciation with
less-than-market risk.
We are pleased that you chose to make the Fund a part of your investment
portfolio and look forward to assisting you with your financial goals in the
future. Thank you for placing your trust in Lord Abbett.
"We believe our disciplined
investment process will
continue to uncover
company-specific
investment values that pro-
vide good opportunity for
price appreciation with
less-than-market risk."
<PAGE>
Fund Facts
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.
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
Comparison Of Change In Value Of A $10,000 Investment In Lord Abbett Equity
Fund(2) And Six-Month CDs(3)
11/30/97
--------
The Fund $24,630
CDs $14,712
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 12/31/97 Were:
Life of Fund Life of Fund
(inception: 6/1/90) 1 Year 5 Years (at net asset value)
- --------------------------------------------------------------------------------
+12.96% +16.00% +13.95% +13.81%
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 11/30/97, Lord Abbett Equity Fund was invested in a diversified portfolio of
66 equity securities.
Lord Abbett Equity Fund's Top Five Equity Holdings Percent of
Net Assets
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Mobil Corp. 2.80%
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Kimberly Clark Corp. 2.19%
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Emerson Electric Co. 2.14%
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Mellon Bank Corp. 2.12%
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International Business Machines Corp. 2.05%
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Total 11.30%
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Data as of 11/30/97.
(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, 1997
Investments Shares Market Value
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Investments in Securities 95.36%
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Common Stocks 80.46%
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Aerospace .41% Boeing Co. 5,000 $ 265,625
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Agricultural Products
1.33% Archer-Daniels-Midland Co. 40,000 855,000
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Apparel 1.44% VF Corp. 20,000 923,750
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Auto Parts:
After Market .68% Snap-on, Inc. 10,000 439,375
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Automobiles .95% General Motors Corp. 10,000 610,000
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Banks: BankAmerica Corp. 10,000 730,000
Money Center 3.34% Chase Manhattan Corp. 7,250 787,531
First Chicago NBD 8,000 626,000
Total 2,143,531
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Banks: First Union Corp. 20,000 975,000
Regional 4.69% KeyCorp 10,000 674,375
Mellon Bank Corp. 24,000 1,360,500
Total 3,009,875
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Brokers 1.06% Morgan Stanley, Dean Witter,
Discover & Co. 12,500 678,906
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Chemicals 3.88% Air Products & Chemicals Inc. 14,000 1,073,625
Morton International Inc. 28,000 953,750
Rohm & Haas Co. 5,000 459,688
Total 2,487,063
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Communications Corning Inc. 12,000 509,250
Equipment 1.53% Motorola Inc. 7,500 471,563
Total 980,813
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Computer: Hewlett-Packard Co. 16,000 977,000
Hardware 3.57% International Business
Machines Corp. 12,000 1,314,750
Total 2,291,750
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Computer:
Peripherals .57% Seagate Technology Inc. 16,000 363,000
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Computer:
Software 1.12% Sun Microsystems Inc. 20,000 720,000
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Containers 2.37% Crown Cork & Seal Inc. 11,000 536,938
Sonoco Products Co. 30,000 984,375
Total 1,521,313
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Drugs/Health Care American Home
Products 3.20% Products Corp. 10,000 698,750
Bristol-Myers Squibb
Company 10,000 936,250
Warner-Lambert Co. 3,000 419,625
Total 2,054,625
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Electric Power 4.39% Baltimore Gas & Electric Co. 20,000 613,750
Carolina Power & Light Co. 14,000 523,250
CINergy Corp. 24,000 855,000
SCANA Corp. 30,000 828,750
Total 2,820,750
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Electrical Equipment
2.14% Emerson Electric Co. 25,000 1,375,000
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Food 3.88% CPC International Inc. 12,000 1,240,500
Heinz H.J. Co. 25,000 1,251,562
Total 2,492,062
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Health Care Products Baxter International Inc. 12,500 632,812
1.91% St. Jude Medical, Inc. 20,000 592,500
Total 1,225,312
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Health Care Services Humana Inc. 30,000 665,625
1.52% United Healthcare Corp. 6,000 312,375
Total 978,000
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Household Products Fort James Corp. 22,000 860,750
3.53% Kimberly Clark Corp. 27,000 1,405,687
Total 2,266,437
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Housewares 1.13% Fortune Brands Inc. 20,000 723,750
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Insurance: Life 3.60% American General
Corporation 9,000 484,875
Jefferson-Pilot Corp. 14,000 1,068,375
Transamerica Corp. 7,000 759,937
Total 2,313,187
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Insurance: Property Allstate Corp. 12,000 1,030,500
and Casualty 6.47% Chubb Corp. 16,500 1,170,468
Cincinnati Financial Corp. 5,500 558,250
SAFECO Corp. 18,000 879,750
The Progressive Corporation 5,000 510,000
Total 4,148,968
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Machinery: Diversified
1.79% Deere & Co. 21,000 1,151,063
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Miscellaneous 1.85% Jostens Inc. 13,000 312,000
Minnesota Mining &
Manufacturing Co. 9,000 876,938
Total 1,188,938
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Natural Gas:
Distribution 1.50% Nicor Inc. 24,000 966,000
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Natural Gas:
Diversified 1.82% The Coastal Corporation 20,000 1,171,250
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Natural Gas: Columbia Gas Systems Inc. 12,000 873,000
Pipelines 2.30% Consolidated Natural Gas Co. 10,000 603,750
Total 1,476,750
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Oil: International Amoco Corp. 10,000 900,000
Integrated 4.20% Mobil Corp. 25,000 1,798,438
Total 2,698,438
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2
<PAGE>
Statement of Net Assets
November 30, 1997
Investments Shares Market Value
================================================================================
Paper and Forest International Paper Co. 14,000 $ 664,125
Products 1.34% Temple-Inland, Inc. 3,400 194,225
Total 858,350
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Retail: Specialty .80% Toys R Us Inc. 15,000 511,875
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Telephone: Alltel Corp. 15,000 596,250
Local 4.58% Bell Atlantic Corp. 7,500 669,375
BellSouth Corp. 14,000 766,500
SBC Communication Inc. 12,500 910,156
Total 2,942,281
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Tire and Rubber
Goods .28% Goodyear Tire & Rubber Co. 3,000 182,063
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Tobacco 1.29% Philip Morris Inc. 19,000 826,500
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Total Investments in
Common Stocks
(Cost $40,441,996) 51,661,600
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Principal
Amount Market Value
================================================================================
U.S. Government Obligations 14.90%
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U.S. Treasury Bonds
Strips due 5/15/2000
(Cost $9,090,487) $11,000M $ 9,563,125
================================================================================
Total Investments in
Securities
(Cost $49,532,483) 61,224,725
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Other Assets, Less Liabilities 4.64%
================================================================================
Short-term Investments
General Electric
Capital Corp.
5.55% due 12/1/1997 1,000M 1,000,000
Prudential Funding Corp.
5.55% due 12/1/1997 600M 600,000
Total (Cost $1,600,000) 1,600,000
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Cash and Receivables, Net of Liabilities 1,376,063
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Total Other Assets,
Less Liabilities 2,976,063
================================================================================
Net Assets 100.00% (equivalent to $24.63 a share
on 2,607,067 shares of
beneficial interest outstanding) $64,200,788
================================================================================
See Notes to Financial Statements.
Statement of Operations
Investment Income Six Months Ended November 30, 1997
================================================================================
Income Interest $00,481,421
Dividends 536,349
Total income $1,017,770
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Expenses Management fee 210,726
12b-1 distribution plan 80,333
Insurance 66,658
Shareholder servicing 48,589
Audit and tax 17,071
Reports to shareholders 11,772
Other 7,703
Total expenses 442,852
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Net investment income 574,918
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Realized and Unrealized Gain on Investments
================================================================================
Realized gain from investment transactions
Proceeds from sales 15,040,365
Cost of investments sold 10,949,211
Net realized gain 4,091,154
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Unrealized appreciation of investments 943,137
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Net realized and unrealized gain on investments 5,034,291
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Net Increase in Net Assets Resulting from Operations $5,609,209
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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 1997 1997
==========================================================================================================
<S> <C> <C>
Operations Net investment income $ 574,918 $ 1,530,565
Net realized gain from investment transactions 4,091,154 4,793,670
Net unrealized appreciation of investments 943,137 3,510,311
Net increasein net assets resulting from operations 5,609,209 9,834,546
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Undistributed net investment income included in price of share transactions (51,879) (131,347)
- ----------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income -- (1,342,238)
Net realized gain from investment transactions -- (6,225,701)
Total distributions -- (7,567,939)
- ----------------------------------------------------------------------------------------------------------
Share transactions:
Net asset value of 418,118 shares issued to shareholders in
reinvestment of net investment income and realized gain from
investment transactions -- 7,567,939
Cost of 110,318 and 293,704 shares reacquired, respectively (2,610,422) (5,800,201)
Reverse share split of 418,118 shares -- --
Increase (decrease) in net assets derived from capital share
transactions (net decrease of 110,318 and 293,704, respectively) (2,610,422) 1,767,738
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Increase in net assets 2,946,908 3,902,998
- ----------------------------------------------------------------------------------------------------------
Net Assets
Beginning of period 61,253,880 57,350,882
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End of period (including undistributed net investment income of
$1,811,293 and $1,288,254, respectively) $ 64,200,788 $ 61,253,880
=============================================================================================
</TABLE>
See Notes to Financial Statements.
Financial Highlights
<TABLE>
<CAPTION>
Six Months
Ended Year Ended May 31,
November 30, --------------------------------------------------------
Per Share Operating Performance: 1997 1997 1996 1995 1994 1993
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 22.54 $ 19.05 $ 16.40 $ 14.04 $ 13.26 $ 11.61
-----------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .22 .54 .47 .36 .31 .32
Net realized and unrealized gain on investments 1.87 2.95 2.18 2.00 .47 1.33
Total from investment operations 2.09 3.49 2.65 2.36 .78 1.65
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Distributions
Dividends from net investment income -- (.47) (.22) (.34) (.28) (.34)
Distributions from capital gains -- (2.18) (1.61) (1.25) (1.18) (.78)
Total distributions -- (2.65) (1.83) (1.59) (1.46) (1.12)
Reverse share split -- 2.65 1.83 1.59 1.46 1.12
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Net asset value, end of period $ 24.63 $ 22.54 $ 19.05 $ 16.40 $ 14.04 $ 13.26
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 9.27%(b) 18.32% 16.16% 16.81% 5.88% 14.21%
=================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000) $ 64,201 $ 61,254 $ 57,351 $ 54,717 $ 53,014 $ 57,122
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Ratios to Average Net Assets:
Expenses, including waiver 0.69%(b) 1.45% 1.50% 1.80% 1.80% 1.80%
Expenses, excluding waiver 0.69%(b) 1.45% 1.50% 1.81% 1.96% 2.25%
Net investment income 0.90%(b) 2.66% 2.63% 2.48% 2.19% 2.57%
Portfolio turnover rate 19.40% 51.68% 66.48% 35.12% 50.77% 52.29%
Average commissions per share paid on equity
transactions $ .064 $ .066 $ .065 $ .067 n/a n/a
=============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) 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 require 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. Therefore, no federal income tax provision is required. (c)
Investment transactions are accounted for on the date that the investments are
purchased or sold (trade date). Realized gains and losses from investment
transactions are calculated on the identified cost basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend date. (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 Lord Abbett 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, 1997, paid in capital aggregated $43,363,293.
4. Purchases and Sales of Securities
Purchases and sales of investment securities (other than U.S. Government
obligations and short-term securities) aggregated $11,208,896 and $12,883,068,
respectively. As of November 30, 1997, net unrealized appreciation for federal
income tax purposes aggregated $11,692,242 of which $12,253,411 related to
appreciated securities and $561,169 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
Distributions from net investment income and net realized gains from investment
transactions are declared annually. Accumulated undistributed net realized gain
at November 30, 1997 for financial reporting purposes, aggregated $7,333,960.
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
- --------------------------------------------------------------------------------
12/29/92 .909750201
12/28/93 .896600567
12/28/94 .889583333
12/27/95 .900489396
12/27/96 .872289157
12/23/97 .866286180
- --------------------------------------------------------------------------------
On December 23, 1997, the Company declared a net investment income dividend of
$0.50, a short-term capital gain distribution of $0.22, and a long-term
distribution of $2.56.
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 Trust associated with Lord Abbett and all officers of the
Trust receive no compensation from the Trust for acting as such. Outside
Trustees' fees and retirement costs are allocated among all funds in the Lord
Abbett group based on net assets of each fund. Trustees' fees payable at
November 30, 1997, under a deferred compensation plan, were $29,000.
Copyright (C) 1998 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
- ----------------------------------------------------------------------------------------------------------------------------
Growth Funds Growth & Balanced Fund Income Funds Tax-Free Money
Income Funds Income Funds Market Fund
<S> <C> <C> <C> <C> <C> <C>
Developing Global Fund-- Affiliated Fund Balanced Series Bond-Debenture o National U.S. Government
Growth Fund Equity Series Fund o California Securities
Growth & Income o Connecticut Money Market
International Mid-Cap 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.
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 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](R) LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
LORD ABBETT DISTRIBUTOR LLC LAEF-3-1197
- ------------------------------------------------------------
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203 (1/98)
