Lord Abbett Equity Fund
1999 ANNUAL REPORT
[GRAPHIC OMITTED]
An insured investment designed
to help you capture capital growth
over the long term
<PAGE>
Report to Shareholders
For the Fiscal Year End May 31, 1999
[PHOTO]
ROBERT S. DOW
CHAIRMAN
JUNE 15, 1999
"We will continue to seek out large-company stocks at attractive prices, and
expect that some of these values may be found in energy companies and in the
cyclical commodities sector, which includes aluminum and paper companies and
selected manufacturing companies."
Lord Abbett Equity Fund completed its fiscal year on May 31, 1999. The Fund's
net asset value was $29.36 per share versus $26.66 per share on May 31, 1998.
The Fund's total return -- its percent change in net asset value with all
distributions reinvested -- for the period was 10.17%. At the close of 1998,
your Board of Trustees declared and paid dividends totaling $0.25 per share and
capital gains totaling $2.17 per share.
The Fund will declare and pay a dividend from its net investment income in
December 1999. A distribution of net capital gains realized from the sale of
portfolio securities during the year, if any, will also be declared and paid at
that time. As described in the prospectus, all such distributions are reinvested
in additional shares of the Fund (unless otherwise instructed) until 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 distributions. This
enables shareholders to view the Fund's performance on a per-share basis. If you
do not want to reinvest your dividends, notify DST Systems, Inc. at P. O. Box
419100 Kansas City, MO 64141 by November 30, 1999. The Fund encourages
shareholders to reinvest all distributions because it maintains the amount of
insurance on your original investment.
U. S. stocks were subject to significant volatility during the first half of the
Fund's fiscal year. However, a more favorable environment developed later in the
period as investors' concerns regarding diminished corporate earnings eased
somewhat and low inflation and strong economic growth continued in the U. S. In
the early months of 1999, investor sentiment continued to improve as Asian
countries, which had been hit hard by currency problems and fallout from the
faltering Japanese economy, began to recover. Japan's efforts to address its
economic and banking system problems have given support to other Pacific Rim
economies and have generated hope that the financial crises in that region may
be nearing an end.
The downturn in the market that occurred in the third quarter of 1998 created an
opportunity for the Fund to establish and add to positions in stocks that, in
our opinion, became undervalued due to investor sentiment rather than
deteriorating company fundamentals. During the period, positions we established
or strengthened in telecommunications, technology and select financial services
companies performed well. An increase in long-term interest rates, brought on by
a rise in commodity prices, resulted in markdowns on our electric utility
holdings.
We anticipate that the domestic economy will continue to grow in 1999, fueled in
part by strong consumer spending. If recovery in Asia also continues, a global
economic expansion seems likely for 2000. In any event, we expect to remain
watchful of global inflationary pressures (brought on by rising commodity prices
and a tightening U. S. labor market), interest rates, and valuations and
volatility in the U. S. equity market. Presently, we do not expect inflation to
exceed our earlier forecast of approximately 2-2 1/2% in 1999. We will continue
to seek out large-company stocks at attractive prices, and expect that some of
these values may be found in energy companies and in the cyclical commodities
sector, which includes aluminum and paper companies and selected manufacturing
companies.
Thank you for your confidence in Lord Abbett Equity Fund. We look forward to
helping you achieve your financial goals in the years ahead.
<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)
[GRAPHIC OMITTED]
The Fund $29,370
CDs $16,020
Fiscal Year-end May 31
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. Past performance is no guarantee of future results.
SEC-Required Average Annual Rates Of Total Return At The Maximum Sales Charge Of
5.5% For The Periods Ended 6/30/99 Were:
1 Year 5 Years Life of Fund (inception: 6/1/90)
+5.80% +15.46% +12.87%
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 Offers The Growth Potential Of Stocks With The Security Of Insurance
At 5/31/99, Lord Abbett Equity Fund was invested in a diversified portfolio of
57 equity securities.
Lord Abbett Equity Fund's Top Five Equity Holdings Percent of
Net Assets
AT& T Corp. 4.13%
Mobil Corp. 3.92%
SCANA Corp. 3.51%
Bank One Corp. 2.63%
International Business Machines Corp. 2.52%
Total 16.71%
Data as of 5/31/99
(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) CDs start at 5/31/90. Source: Lipper, Inc.
1
<PAGE>
A Note About Year 2000 Matters
As you may know, there has been extensive media coverage about possible problems
that may arise as a result of uncertainties about the ability of computers to
"understand" dates using the year 2000. Potentially, these problems could
disrupt the services and systems that the Fund relies on in its daily
operations.
As a general matter, we believe the financial industry has taken a leadership
role addressing year 2000 (Y2K) issues and this should help to inspire
confidence among concerned investors. More specifically, Lord Abbett, Lord
Abbett Distributor LLC and the Fund's transfer agent, custodian and other
providers of services critical to the Fund have been actively working on
reviewing and replacing or updating computer systems and computer-to-computer
interfaces, as needed. Each has completed or is in the process of testing new or
revised systems and interfaces and generally expects that their systems, as well
as those of their key external service providers, will be ready to handle Y2K
without significant problems. Furthermore, the Fund has been routinely taking
each company's Y2K preparations into account when considering or reviewing
investments.
In summary, while the Y2K problem is unprecedented and we cannot completely
eliminate the possibility that the Fund could be affected in some way, we are
confident that all parties involved are taking appropriate steps to resolve Y2K
concerns.
Statement of Net Assets
May 31, 1999
Investments Shares Value
----------- ------ -----
Investments in Securities 97.85%
Common Stocks 81.61%
Aerospace 3.37% Allied-Signal Inc. 20,000 $ 1,161,250
Boeing Co. 11,000 462,687
Rockwell International Corp. 10,000 551,875
Total 2,175,812
---------
Aluminum 1.36% Alcoa Inc. 16,000 880,000
---------
Apparel 1.07% VF Corp. 15,000 690,000
---------
Auto Parts .17% Delphi Automotive Systems 5,591 109,723
---------
Automobiles .85% General Motors Corp. 8,000 552,000
---------
Banks: Money BankAmerica Corp. 11,316 732,004
Center 2.37% Chase Manhattan Corp. 11,000 797,500
Total 1,529,504
---------
Banks: Regional Bank One Corp. 30,000 1,696,875
4.97% Mellon Bank Corp. 20,000 713,750
Wells Fargo Co. 20,000 800,000
Total 3,210,625
---------
Brokers .30% Morgan Stanley
Dean Witter & Co. 2,000 193,000
---------
Chemicals 2.81% Dow Chemical Co. 5,000 607,500
Rohm & Haas Co. 30,000 1,203,750
Total 1,811,250
---------
Computer: Hardware International Business
& Services 4.20% Machines Corp. 14,000 1,628,375
Unisys Corp.* 28,500 1,081,219
Total 2,709,594
---------
Computer:
Software .93% Sun Microsystems Inc.* 10,000 597,500
---------
Data Processing
1.53% First Data Corp. 22,000 988,625
---------
Drugs/Health Care American Home
Products 3.50% Products Corp. 20,000 $ 1,152,500
Pharmacia & Upjohn Inc. 20,000 1,108,750
Total 2,261,250
---------
Electric Power 5.58% Carolina Power & Light Co. 14,000 612,500
Duke Energy Corp. 12,000 723,750
SCANA Corp. 85,000 2,268,438
Total 3,604,688
---------
Electrical Equipment
1.48% Emerson Electric Co. 15,000 958,125
---------
Financial: Aon Corp. 15,000 645,000
Miscellaneous 1.84% Fannie Mae 8,000 544,000
Total 1,189,000
---------
Food 1.95% Heinz H. J. Co. 26,000 1,256,125
---------
Health-Care Services Aetna Inc. 11,000 998,938
1.62% Columbia/HCA
Healthcare Corp. 2,000 47,125
Total 1,046,063
---------
Household Products
1.36% Kimberly Clark Corp. 15,000 880,313
---------
Insurance: Life
3.22% American General Corp. 15,000 1,083,750
ReliaStar Financial Corp. 24,000 997,500
Total 2,081,250
---------
Insurance: Property Chubb Corp. 12,000 840,750
& Casualty 2.51% St. Paul Companies Inc. 22,000 782,375
Total 1,623,125
---------
Machinery:
Diversified 1.24% Deere & Co. 21,000 799,312
---------
Media 1.16% CBS Corp. 18,000 751,500
---------
Miscellaneous 1.27% Fortune Brands Inc. 20,000 817,500
---------
2
<PAGE>
Statement of Net Assets
May 31, 1999
Investments Shares Value
----------- ------ -----
Natural Gas:
Distribution .87% Nicor Inc. 15,000 $ 564,375
------------
Natural Gas:
Diversified 2.39% The Coastal Corp. 40,000 1,542,500
------------
Office Equipment/
Supplies 1.00% Xerox Corp. 11,500 646,156
------------
Oil Well Equipment/
Services 1.55% Baker Hughes Inc. 32,000 998,000
------------
Oil: International Chevron Corp. 10,000 926,875
Integrated 7.30% Exxon Corp. 10,000 798,750
Mobil Corp. 25,000 2,531,250
Texaco Inc. 7,000 458,500
Total 4,715,375
------------
Paper and Forest Champion
Products 1.83% International Corp. 23,000 1,178,750
------------
Photographic .21% Eastman Kodak Co. 2,000 135,250
------------
Pollution Control
2.38% Waste Management Inc. 29,000 1,533,375
------------
Printing and Gannett Co., Inc. 9,000 650,250
Publishing 2.23% Tribune Co. 10,000 789,375
Total 1,439,625
------------
Retail: Department Federated Department
& Merchandise 1.27% Store Inc. 15,000 817,500
------------
Telecom and AT& T Corp. 48,000 2,664,000
Data Services 5.20% MCI WorldCom Inc.* 8,000 691,000
Total 3,355,000
------------
Shares or
Principal
Investments Amount Value
----------- ------ -----
Telephone: Regional Alltel Corp. 14,000 $ 1,003,625
4.72% Bell Atlantic Corp. 14,000 766,500
SBC Communication Inc. 25,000 1,278,125
Total 3,048,250
------------
Total Investments in
Common Stocks
(Cost $40,613,986) 52,690,040
------------------ ----------
U. S. Government Obligations 16.24%
- --------------------------------------------------------------------------------
U. S. Treasury Strip
due 5/15/2000
(Cost $10,118,297) $11,000,000 10,484,375
------------
Total Investments
in Securities
(Cost $50,732,283) 63,174,415
------------
Other Assets, Less Liabilities 2.15%
- --------------------------------------------------------------------------------
Short-Term FNMA
Investments Discount Note
4.72% due 6/1/1999
(Cost $1,689,335) $ 1,690,000 1,689,335
------------
Cash and Receivables, Net of Liabilities (302,015)
------------
Total Other Assets,
Less Liabilities 1,387,320
------------
Net Assets 100.00% (equivalent to $29.36 a share
on 2,198,838 shares of
beneficial interest outstanding) $64,561,735
------------
*Non-income producing security.
See Notes to Financial Statements.
<TABLE>
<CAPTION>
Statement of Operations
Investment Income Year Ended May 31, 1999
<S> <C> <C>
Income Dividends $948,445
Interest 738,561
Total income $1,687,006
----------
Expenses Management fee 405,523
12b-1 distribution plan 156,317
Shareholder servicing 98,671
Insurance 119,227
Professional 35,177
Reports to shareholders 20,108
Other 12,991
------
Total expense before reductions 848,014
Expense reductions (4,285)
Net expenses 843,729
-------
Net investment income 843,277
-------
Realized and Unrealized Gain on Investments
Net realized gain from investment transactions 4,745,601
Net change in unrealized appreciation of investments 356,986
Net realized and unrealized gain on investments 5,102,587
Net Increase in Net Assets Resulting from Operations $5,945,864
==========
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended May 31,
Increase (Decrease) in Net Assets 1999 1998
--------------------------------- ---- ----
<S> <C> <C> <C>
Operations Net investment income $ 843,277 $ 1,118,772
Net realized gain from investment transactions 4,745,601 8,390,313
Net change in unrealized appreciation of investments 356,986 1,336,041
Net increase in net assets resulting from operations 5,945,864 10,845,126
--------- ----------
Undistributed net investment income included in price of share transactions
(See Note 1d) -- (88,224)
--------- -------
Dividends and Distributions to shareholders from:
Net investment income (594,683) (1,300,651)
Net realized gain from investment transactions (5,153,708) (7,216,887)
Total (5,748,391) (8,517,538)
---------- ----------
Capital share transactions:
Net asset value of 226,821 and 400,701 shares issued in
reinvestment of dividends and distributions, respectively 5,751,284 8,517,538
Cost of 299,113 and 219,434 shares reacquired, respectively (7,971,180) (5,426,624)
Reverse share split of 226,821 and 400,701 shares, respectively -- --
Increase (decrease) in net assets derived from capital share
transactions (net decrease in shares of 299,113 and
219,434, respectively) (2,219,896) 3,090,914
---------- ----------
Increase (decrease) in net assets (2,022,423) 5,330,278
---------- ----------
Net Assets
Beginning of year 66,584,158 61,253,880
---------- ----------
End of year (including undistributed net investment income of
$750,858 and $1,018,151, respectively) $64,561,735 $66,584,158
---------- ----------
See Notes to Financial Statements.
</TABLE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended May 31,
Per Share Operating Performance: 1999 1998 1997 1996 1995
-------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 26.66 $ 22.54 $ 19.05 $ 16.40 $ 14.04
--------- --------- --------- ---------- ---------
Income from investment operations
Net investment income .36 .43 .54 .47 .36
Net realized and unrealized gain on investments 2.34 3.69 2.95 2.18 2.00
Total from investment operations 2.70 4.12 3.49 2.65 2.36
---- ---- ---- ---- ----
Distributions
Dividends from net investment income (.25) (.50) (.47) (.22) (.34)
Distributions from net realized gain (2.17) (2.78) (2.18) (1.61) (1.25)
Total distributions (2.42) (3.28) (2.65) (1.83) (1.59)
Reverse share split 2.42 3.28 2.65 1.83 1.59
Net asset value, end of year $ 29.36 $ 26.66 $ 22.54 $ 19.05 $ 16.40
---------- --------- ---------- -------- ---------
Total Return (a) 10.17% 18.27% 18.32% 16.16% 16.81%
====== ====== ====== ====== ======
Ratios/Supplemental Data:
Net assets, end of year (000) $64,562 $66,584 $61,254 $57,351 $54,717
---- ------- ------- ------- ------- -------
Ratios to Average Net Assets:
Expenses, including waiver 1.35% (b) 1.36% 1.45% 1.50% 1.80%
Expenses, excluding waiver 1.35% 1.36% 1.45% 1.50% 1.81%
Net investment income 1.35% 1.71% 2.66% 2.63% 2.48%
Portfolio turnover rate 59.17% 43.10% 51.68% 66.48% 35.12%
----- ----- ----- ----- -----
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(b) The ratio includes expenses paid through an expense offset arrangement. See
Notes to Financial Statements.
4
<PAGE>
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) Security
valuation is determined as follows: Portfolio 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. Short-term securities maturing
in 60 days or less are valued at amortized cost which approximates market value.
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) Effective June 1, 1998,
the Company discontinued the accounting practice of equalization. Undistributed
net investment income of $135,761, representing accumulated equalization at May
31, 1998, was transferred from paid-in-capital. Such reclassification has no
effect on net assets, results of operations, or net asset value per share.
Discontinuing the use of equalization will result in a simpler and more
meaningful financial statement presentation. (e) It is the policy of the Company
to accrue discounts on U. S. Treasury Strips using the constant
yield-to-maturity method. (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 May 31, 1999, paid in capital aggregated $46,708,973.
4. Purchases and Sales of Securities
Purchases and sales of investment securities (other than U. S. Government
obligations and short-term securities) aggregated $35,823,450 and $43,229,288,
respectively. As of May 31, 1999, net unrealized appreciation for federal income
tax purposes aggregated $12,442,132 of which $12,568,638 related to appreciated
securities and $126,506 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 May 31, 1999 for financial reporting purposes, aggregated $4,659,772. 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
- --------------------------------------------------------------------------------
12/28/94 .889583333
12/27/95 .900489396
12/27/96 .872289157
12/23/97 .866286180
12/23/98 .911290323
- --------------------------------------------------------------------------------
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 the net assets of each fund.
8. Expense Reduction
The Company has entered into an arrangement with its transfer agent whereby
credits realized as a result of uninvested cash balances were used to reduce a
portion of the Company's expenses.
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders,
Lord Abbett Equity Fund:
We have audited the accompanying statement of net assets of Lord Abbett Equity
Fund as of May 31, 1999, the related statements of operations for the year then
ended and of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and 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 May 31,
1999 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 Equity
Fund at May 31, 1999, 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.
Deloitte & Touche LLP
New York, New York
July 9, 1999
Numbers to Keep Handy
For Shareholder Account or Statement
Inquiries: 800-821-5129
For Literature Only: 800-874-3733
24-Hour Automated Shareholder
Service Line: 800-865-7582
Visit our Web Site:
http://www.lordabbett.com
Copyright (C) 1999 by Lord Abbett Equity Fund, 767 Fifth Avenue, New York, NY
10153-0203
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.
[LOGO]
All rights reserved. Printed in the U. S. A.
The GM Building 767 Fifth Avenue New York, NY 10153-0203
LAEF-2-5/99
(7/99)
