Lord Abbett
Equity
Fund
SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED NOVEMBER 30, 1998
[GRAPHIC OMITTED]
An insured investment designed
to help you capture capital
growth over the long term
[LOGO](R)
<PAGE>
Report to Shareholders
For the Six Months Ended November 30, 1998
[PHOTO OMITTED]
/s/ Robert S. Dow
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ROBERT S. DOW
CHAIRMAN
December 15, 1998
"...we will continue emphasizing interest-sensitive stocks, such as utilities
and financial companies, and consumer non-durable holdings, such as drug and
food companies."
Lord Abbett Equity Fund completed the first half of its fiscal year on November
30, 1998. The Fund's net asset value was $26.67 per share versus $24.63 per
share one year ago. The Fund's total return -- its percent change in net asset
value with all distributions reinvested -- for the period was 18.59%.
On December 23, 1998, the Board of Trustees of Lord Abbett Equity Fund declared
a dividend of $0.25 per share, a short-term capital gains distribution of $0.27
per share and a long-term capital gains distribution of $1.90 per share. These
distributions were reinvested on December 28, 1998, on behalf of shareholders of
record on December 28, 1998. 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.
U.S. stocks were subject to significant volatility throughout the first half of
the Fund's fiscal year. The market experienced sizeable downdrafts during the
summer months with a subsequent recovery from late September through November.
Much of the volatility was due to investors' growing reluctance to bear risk in
light of economic and political uncertainties in Japan, the Pacific Rim, Russia,
and the emerging markets. A slowing of U.S. economic growth generated concern
regarding shortfalls in corporate earnings, putting further pressure on stock
prices. We used this as an opportunity to add to the portfolio's technology
holdings. Over the period, the performance of the Fund was affected as investors
concentrated their purchases in large-capitalization growth stocks rather than
value-type equities. During the autumn months, a series of rate cuts initiated
by the U.S. Federal Reserve Board helped to ease investor concern. As a more
optimistic view of global economies emerged, stocks rallied with most sectors
participating in the upswing.
We anticipate that, with low levels of inflation and interest rates, and with
Federal Reserve rate cuts, the high valuation in the U.S. equity market can
continue. However, the slowing of the U.S. economy will likely impact corporate
earnings and employment growth. Given this scenario, we expect that market
volatility will persist as some sectors generate good earnings and others fare
poorly. With this in mind, we will continue emphasizing interest-sensitive
stocks, such as utilities and financial companies, and consumer non-durable
holdings, such as drug and food companies.
Thank you for your continued confidence in Lord Abbett Equity Fund. We look
forward to helping you achieve your financial goals in the years to come.
<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)
[PLOT POINTS TO COME]
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 12/31/98 Were:
Life of Fund (inception: 6/1/90) 1 Year 5 Years
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+12.50% +3.20% +13.03%
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 11/30/98, Lord Abbett Equity Fund was invested in a diversified portfolio of
53 equity securities.
Lord Abbett Equity Fund's Top Five Equity Holdings Percent of
Net Assets
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Mobil Corp. 3.44%
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International Business Machines Corp. 3.16%
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Sun Microsystems Inc. 2.66%
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Emerson Electric Co. 2.49%
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The Coastal Corporation 2.23%
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Total 13.98%
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Data as of 11/30/98
(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 Analytical Services, Inc.
1
<PAGE>
A Note About Year 2000 Matters
As you probably know, the Fund depends on the proper functioning of computer
systems for most, if not all, aspects of its operations. Many computer systems
now in use cannot distinguish between the year 2000 (Y2K) and the year 1900, an
inability that could disrupt the services provided to the Fund.
Lord Abbett, Lord Abbett Distributor LLC, the Fund's transfer agent, the Fund's
custodian and other providers of services critical to the Fund all have advised
the Fund that they have been actively working on changes to their computer
systems to prepare for the year 2000 and expect that their systems, and those of
their external service providers, will be adapted in time. Although the Y2K
issue is unprecedented and the process of Y2K preparedness evaluation and
systems remediation is an ongoing one, we presently believe that there will be
no material effect on the Fund and its financial statements.
Statement of Net Assets
November 30, 1998
Investments Shares Market Value
================================================================================
Investments in Securities 96.11%
================================================================================
Common Stocks 79.69%
================================================================================
Apparel 1.41% VF Corp. 18,000 $ 883,125
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Automobiles .89% General Motors Corp. 8,000 560,000
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Banks: Money Center
1.42% Chase Manhattan Corp. 14,000 888,125
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Banks: Regional Banc One Corp. 19,440 997,515
7.01% BankAmerica Corp. 11,316 737,662
First Union Corp. 18,000 1,093,500
Mellon Bank Corp. 10,000 629,375
Wells Fargo Co. 26,000 936,000
Total 4,394,052
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Brokers .89% Morgan Stanley,
Dean Witter, Discover & Co. 8,000 558,000
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Chemicals 3.27% Air Products &
Chemicals Inc. 23,000 876,875
DuPont DeNemours,
E.I. & Co. 20,000 1,175,000
Total 2,051,875
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Computer: Hewlett-Packard Co. 12,000 753,000
Hardware 7.02% International Business
Machines Corp. 12,000 1,980,000
Sun Microsystems Inc. 22,500 1,666,406
Total 4,399,406
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Computer:
Peripherals .71% Seagate Technology Inc. 15,000 442,500
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Data
Processing .63% First Data Corp. 15,000 400,313
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Drugs/Health Care American Home
Products 5.08% Products Corp. 25,000 1,331,250
Bristol-Myers Squibb
Company 10,000 1,225,625
Pharmacia & Upjohn Inc. 12,000 624,750
Total 3,181,625
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Electric Power Baltimore Gas & Electric Co. 20,000 613,750
3.58% Carolina Power & Light Co. 14,000 649,250
SCANA Corp. 30,000 978,750
Total 2,241,750
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Electrical Equipment
2.49% Emerson Electric Co. 24,000 1,560,000
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Electronics:
Semiconductors
1.72% Intel Corp. 10,000 11,076,250
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Financial:
Miscellaneous 1.39% Fed National Mortgage 12,000 873,000
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Food 4.18% Best Foods 22,000 1,278,750
Heinz H.J. Co. 23,000 1,341,188
Total 2,619,938
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Health-Care Products
1.27% Baxter International Inc. 12,500 794,531
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Health-Care Services
1.26% Humana Inc. 40,000 792,500
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Household Products Fort James Corp. 14,000 547,750
2.72% Kimberly Clark Corp. 22,000 1,157,750
Total 1,705,500
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Insurance: Life American General
1.57% Corporation 14,000 986,125
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Insurance: Property Allstate Corp. 18,000 733,500
& Casualty 4.01% Chubb Corp. 14,000 980,875
Reliastar Financial Corp. 17,000 799,000
Total 2,513,375
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Machinery:
Diversified 1.17% Deere & Co. 21,000 733,688
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Manufacturing:
Diversified 1.75% Allied-Signal Inc. 25,000 1,100,000
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Media 1.05% CBS Inc. 22,000 655,875
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Miscellaneous 1.36% Fortune Brands Inc. 25,000 851,563
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Natural Gas: Columbia Energy Group 15,000 851,250
Distribution 2.97% Nicor Inc. 24,000 1,009,500
Total 1,860,750
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Natural Gas:
Diversified 2.23% The Coastal Corporation 40,000 1,395,000
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Office Equipment/
Supplies 1.71% Xerox Corp. 10,000 1,075,000
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Oil: International
Integrated 3.44% Mobil Corp. 25,000 2,154,687
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Photographic 1.68% Eastman Kodak Co. 14,500 1,052,155
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2
<PAGE>
Statement of Net Assets
November 30, 1998
Investments Shares Market Value
================================================================================
Telephone: AT&T Corp. 16,500 $ 1,028,156
Long Distance 3.52% MCI Worldcom Inc. 20,000 1,180,000
Total 2,208,156
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Telephone: Bell Atlantic Corp. 10,000 556,250
Regional 2.80% SBC Communication Inc. 25,000 1,198,438
Total 1,754,688
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Tobacco 1.78% Philip Morris Inc. 20,000 1,118,750
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Waste Management
1.71% Waste Management Inc. 25,000 1,071,875
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Total Investments in
Common Stocks
(Cost $37,593,114) $49,954,177
================================================================================
Principal
Investments Amount Market Value
================================================================================
U.S. Government Obligations 16.42%
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U.S. Treasury Bonds
Zero Coupon due 5/15/2000
(Cost $9,893,125) $11,000M $10,293,594
================================================================================
Total Investments in
Securities
(Cost $47,486,239) 60,247,771
================================================================================
Other Assets, Less Liabilities 3.89%
================================================================================
Short-term Federal Home Loan
Investments Bank Discount Note
5.22% due 12/1/1998 2,400M 2,399,656
================================================================================
Cash and Receivables,
Net of Liabilities 36,420
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Total Other Assets,
Less Liabilities 2,436,076
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Net Assets 100.00% (equivalent to $26.67 a share
on 2,350,279 shares of
beneficial interest outstanding) $62,683,847
================================================================================
*See Notes to Financial Statements.
Statement of Operations
Investment Income For the Six Months Ended November 30, 1998
================================================================================
Income Dividends $ 484,120
Interest 457,269
Total income 941,389
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Expenses Management fee 202,391
12b-1 distribution plan 77,692
Insurance 61,025
Shareholder servicing 52,617
Professional 17,665
Reports to shareholders 10,089
Other 1,501
Total expenses 422,980
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Net investment income 518,409
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Realized and Unrealized Gain (Loss) on Investments
===============================================================================
Realized gain (loss) from investment transactions
Proceeds from sales 16,888,052
Cost of investments sold 18,189,850
Net realized gain (loss) (1,301,798)
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Unrealized appreciation of investments 676,386
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Net realized and unrealized gain (loss) on investments (625,412)
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Net decrease in Net Assets Resulting from Operations ($107,003)
===============================================================================
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 1998 1998
==============================================================================================================
<S> <C> <C>
Operations Net investment income $ 518,409 $ 1,118,772
Net realized gain (loss) from securities transactions (1,301,798) 8,390,313
Net unrealized appreciation (depreciation) of investments 676,386 1,336,041
Net increase (decrease) in net assets from operations (107,003) 10,845,126
------------------------------------------------------------------------------------------------
Undistributed net investment income included in price of share transactions -- (88,224)
- --------------------------------------------------------------------------------------------------------------
Distribution to shareholders from:
Net investment income -- (1,300,651)
Net realized gain from investment transactions -- (7,216,887)
Total distribution -- (8,517,538)
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Share transactions:
Net asset value of 0 and 400,701 shares issued to shareholders in
reinvestment of net investment income and net realized gain from
investment transactions, respectively -- 8,517,538
Cost of 147,672 and 219,434 shares reacquired, respectively (3,793,308) (5,426,624)
Reverse share split of 0 and 400,701 shares, respectively -- --
Increase (decrease) in net assets derived from capital share
transactions (net decrease in shares of 147,672 and
219,434, respectively) (3,793,308) 3,090,914
------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (3,900,311) 5,330,278
- --------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of period 66,584,158 61,253,880
------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income of
$1,043,657 and $1,018,151, respectively) $ 62,683,847 $ 66,584,158
================================================================================================
</TABLE>
See Notes to Financial Statements.
Financial Highlights
<TABLE>
<CAPTION>
Six Months
Ended Year Ended May 31,
November 30, --------------------------------------------------
Per Share Operating Performance: 1998 1998 1997 1996 1995 1994
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 26.66 $ 22.54 $ 19.05 $ 16.40 $ 14.04 $ 13.26
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Income from investment operations
Net investment income .21 .43 .54 .47 .36 .31
Net realized and unrealized gain on investments (.20) 3.69 2.95 2.18 2.00 .47
Total from investment operations .01 4.12 3.49 2.65 2.36 .78
---------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income -- (.50) (.47) (.22) (.34) (.28)
Distributions from capital gains -- (2.78) (2.18) (1.61) (1.25) (1.18)
Total distributions -- (3.28) (2.65) (1.83) (1.59) (1.46)
Reverse share split -- 3.28 2.65 1.83 1.59 1.46
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Net asset value, end of period $ 26.67 $ 26.66 $ 22.54 $ 19.05 $ 16.40 $ 14.04
- ---------------------------------------------------------------------------------------------------------------------------
Total Return(a) 0.04%(b) 18.59% 18.32% 16.16% 16.81% 5.88%
===========================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000) $62,684 $66,584 $61,254 $57,351 $54,717 $53,014
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Ratios to Average Net Assets:
Expenses, including waiver .69%(b) 1.36% 1.45% 1.50% 1.80% 1.80%
Expenses, excluding waiver .69%(b) 1.36% 1.45% 1.50% 1.81% 1.96%
Net investment income .84%(b) 1.71% 2.66% 2.63% 2.48% 2.19%
Portfolio turnover rate 21.57% 43.10% 51.68% 66.48% 35.12% 50.77%
=====================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(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) 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 ask prices
on such exchange. Securities traded in the over-the-counter market are valued at
the mean between the last bid and ask 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 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
$147,120, representing accumulated equalization at May 31, 1998, was transferred
to paid-in-capital. Such reclassification had no effect on net assets, results
of operations, or net asset value per share. (e) It is the policy of the Company
to accrue discounts on U.S. Treasury Bond Strips 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, 1998, paid-in-capital aggregated $45,124,202.
4. Purchases and Sales of Securities
Purchases and sales of investment securities (other than U.S. Government
obligations and short-term securities) aggregated $12,872,957 and $16,888,052,
respectively. As of November 30, 1998, net unrealized appreciation for federal
income tax purposes aggregated $12,761,532 of which $13,496,607 related to
appreciated securities and $735,075 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, 1998 for financial reporting purposes, aggregated $3,754,456.
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
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12/28/93 .896600567
12/28/94 .889583333
12/27/95 .900489396
12/27/96 .872289157
12/23/97 .866286180
12/23/98 .911290323
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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.
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.
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 Funds Growth & Balanced Income Funds Tax-Free Money
Growth Fund Income Funds Fund Income Funds Market Fund
Developing Alpha Series Affiliated Fund Balanced Bond-Debenture o National U.S. Government
Growth Fund Series Fund Securities
Global Fund- Growth & o California Money Market
Equity Series Income Series Global Fund- Fund**+
Income Series o Connecticut
Growth Research Fund-
Opportunities Large-Cap High Yield Fund o Florida
Fund Series
Limited Duration o Georgia
International U.S. Government
Series Securities Series** o Hawaii
Mid-Cap U.S. Government o Michigan
Value Fund Securities Series**
o Minnesota
Research Fund- World Bond-
Small-Cap Debenture Series o Missouri
Series*
o New Jersey
o New York
o Pennsylvania
o Texas
o Washington
</TABLE>
Finding the right mutual fund can be confusing. At Lord, Abbett & Co., we
believe your investment professional 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 Equity Fund.
For more complete information about any other Lord Abbett fund, including
charges and expenses, call your investment professional 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 investment professional can diversify your
investments between equity and income funds.
Flexibility. As your investment goals change, your investment professional can
help you reallocate your portfolio.
As an investor in the Lord Abbett Family of Funds, you have access to 32
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 invest-ment professional to help you customize your investment plan.
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
* The Lord Abbett Research Fund-Small-Cap Series is closed to new investors.
** An investment in this Fund is neither insured nor guaranteed by the U.S.
Government.
+ An investment in the Fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund. This Fund is managed
to maintain, and has maintained its stable $1.00 price per share.
- --------------------------------------------------------------------------------
[LOGO](R) LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
Lord Abbett mutual fund shares are distributed by:
LORD ABBETT DISTRIBUTOR LLC
- ------------------------------------------------------------ LAEF-3-1198
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203 (1/99)
