ASSETS:
|
|
|
|
|
Investments in securities, at fair value (cost $2,910,094,883)
|
|
$
|
3,747,994,811
|
|
Cash
|
|
|
2,729,249
|
|
Receivables:
|
|
|
|
|
Investment securities sold
|
|
|
97,221,331
|
|
Capital shares sold
|
|
|
4,254,131
|
|
Dividends
|
|
|
145,668
|
|
Prepaid expenses and other assets
|
|
|
79,454
|
|
Total assets
|
|
|
3,852,424,644
|
|
LIABILITIES:
|
|
|
|
|
Payables:
|
|
|
|
|
Investment securities purchased
|
|
|
139,919,560
|
|
Capital shares reacquired
|
|
|
5,520,163
|
|
12b-1 distribution fees
|
|
|
1,640,330
|
|
Management fee
|
|
|
1,599,538
|
|
Directors’ fees
|
|
|
503,745
|
|
Fund administration
|
|
|
126,264
|
|
To affiliates (See Note 3)
|
|
|
26,986
|
|
Accrued expenses
|
|
|
1,004,717
|
|
Total liabilities
|
|
|
150,341,303
|
|
NET ASSETS
|
|
$
|
3,702,083,341
|
|
COMPOSITION OF NET ASSETS:
|
|
|
|
|
Paid-in capital
|
|
$
|
2,644,508,861
|
|
Accumulated net investment loss
|
|
|
(13,786,239
|
)
|
Accumulated net realized gain on investments
|
|
|
233,460,791
|
|
Net unrealized appreciation on investments
|
|
|
837,899,928
|
|
Net Assets
|
|
$
|
3,702,083,341
|
|
8
|
See Notes to Financial Statements.
|
|
Statement of Assets and Liabilities (unaudited) (concluded)
January 31, 2014
Net assets by class:
|
|
|
|
|
Class A Shares
|
|
$
|
1,357,289,976
|
|
Class B Shares
|
|
$
|
13,297,247
|
|
Class C Shares
|
|
$
|
127,885,365
|
|
Class F Shares
|
|
$
|
176,370,210
|
|
Class I Shares
|
|
$
|
1,556,876,373
|
|
Class P Shares
|
|
$
|
109,401,904
|
|
Class R2 Shares
|
|
$
|
18,317,868
|
|
Class R3 Shares
|
|
$
|
342,644,398
|
|
Outstanding shares by class:
|
|
|
|
|
Class A Shares (875 million shares of common stock authorized, $.001 par value)
|
|
|
51,951,481
|
|
Class B Shares (40 million shares of common stock authorized, $.001 par value)
|
|
|
620,091
|
|
Class C Shares (25 million shares of common stock authorized, $.001 par value)
|
|
|
5,916,038
|
|
Class F Shares (30 million shares of common stock authorized, $.001 par value)
|
|
|
6,611,114
|
|
Class I Shares (100 million shares of common stock authorized, $.001 par value)
|
|
|
54,188,931
|
|
Class P Shares (30 million shares of common stock authorized, $.001 par value)
|
|
|
4,288,356
|
|
Class R2 Shares (30 million shares of common stock authorized, $.001 par value)
|
|
|
716,682
|
|
Class R3 Shares (30 million shares of common stock authorized, $.001 par value)
|
|
|
13,289,517
|
|
Net asset value, offering and redemption price per
share
(Net assets divided by outstanding shares):
|
|
|
|
|
Class A Shares-Net asset value
|
|
$
|
26.13
|
|
Class A Shares-Maximum offering price
(Net asset value
plus sales charge of 5.75%)
|
|
$
|
27.72
|
|
Class B Shares-Net asset value
|
|
$
|
21.44
|
|
Class C Shares-Net asset value
|
|
$
|
21.62
|
|
Class F Shares-Net asset value
|
|
$
|
26.68
|
|
Class I Shares-Net asset value
|
|
$
|
28.73
|
|
Class P Shares-Net asset value
|
|
$
|
25.51
|
|
Class R2 Shares-Net asset value
|
|
$
|
25.56
|
|
Class R3 Shares-Net asset value
|
|
$
|
25.78
|
|
|
See
Notes to Financial Statements.
|
9
|
Statement of Operations (unaudited)
For the Six Months Ended January 31, 2014
Investment income:
|
|
|
|
|
Dividends (net of foreign withholding taxes of $3,324)
|
|
$
|
3,077,541
|
|
Interest and other
|
|
|
67
|
|
Total investment income
|
|
|
3,077,608
|
|
Expenses:
|
|
|
|
|
Management fee
|
|
|
8,834,271
|
|
12b-1 distribution plan-Class A
|
|
|
2,280,737
|
|
12b-1 distribution plan-Class B
|
|
|
68,884
|
|
12b-1 distribution plan-Class C
|
|
|
623,819
|
|
12b-1 distribution plan-Class F
|
|
|
85,819
|
|
12b-1 distribution plan-Class P
|
|
|
139,152
|
|
12b-1 distribution plan-Class R2
|
|
|
51,545
|
|
12b-1 distribution plan-Class R3
|
|
|
806,412
|
|
Shareholder servicing
|
|
|
2,290,071
|
|
Fund administration
|
|
|
696,659
|
|
Subsidy (See Note 3)
|
|
|
217,276
|
|
Reports to shareholders
|
|
|
91,598
|
|
Directors’ fees
|
|
|
74,033
|
|
Registration
|
|
|
60,161
|
|
Custody
|
|
|
33,945
|
|
Professional
|
|
|
31,855
|
|
Other
|
|
|
30,354
|
|
Gross expenses
|
|
|
16,416,591
|
|
Expense reductions (See Note 8)
|
|
|
(1,504
|
)
|
Net expenses
|
|
|
16,415,087
|
|
Net investment loss
|
|
|
(13,337,479
|
)
|
Net realized and unrealized gain:
|
|
|
|
|
Net realized gain on investments
|
|
|
554,655,698
|
|
Net change in unrealized appreciation/depreciation on investments
|
|
|
35,505,817
|
|
Net realized and unrealized gain
|
|
|
590,161,515
|
|
Net Increase in Net Assets Resulting From Operations
|
|
$
|
576,824,036
|
|
10
|
See Notes to Financial Statements.
|
|
Statements of Changes in Net Assets
|
|
For the Six Months
Ended January 31, 2014
|
|
|
For the Year Ended
|
|
INCREASE IN NET ASSETS
|
|
(unaudited)
|
|
|
July 31, 2013
|
|
Operations:
|
|
|
|
|
|
|
|
|
|
|
Net investment loss
|
|
|
$
|
(13,337,479
|
)
|
|
|
$
|
(16,692,810
|
)
|
Net realized gain on investments
|
|
|
|
554,655,698
|
|
|
|
|
428,901,409
|
|
Net change in unrealized appreciation/depreciation on investments
|
|
|
|
35,505,817
|
|
|
|
|
430,575,088
|
|
Net increase in net assets resulting from operations
|
|
|
|
576,824,036
|
|
|
|
|
842,783,687
|
|
Distributions to shareholders from:
|
|
|
|
|
|
|
|
|
|
|
Net realized gain
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
|
|
(236,161,402
|
)
|
|
|
|
(77,058,196
|
)
|
Class B
|
|
|
|
(2,877,024
|
)
|
|
|
|
(1,190,233
|
)
|
Class C
|
|
|
|
(26,097,350
|
)
|
|
|
|
(9,266,403
|
)
|
Class F
|
|
|
|
(30,372,276
|
)
|
|
|
|
(10,252,440
|
)
|
Class I
|
|
|
|
(236,822,522
|
)
|
|
|
|
(62,625,344
|
)
|
Class P
|
|
|
|
(19,221,012
|
)
|
|
|
|
(6,568,286
|
)
|
Class R2
|
|
|
|
(3,213,714
|
)
|
|
|
|
(983,333
|
)
|
Class R3
|
|
|
|
(59,143,866
|
)
|
|
|
|
(17,642,330
|
)
|
Total distributions to shareholders
|
|
|
|
(613,909,166
|
)
|
|
|
|
(185,586,565
|
)
|
Capital share transactions (Net of share conversions) (See Note 12):
|
|
|
|
|
|
|
|
Net proceeds from sales of shares
|
|
|
|
487,177,956
|
|
|
|
|
571,781,378
|
|
Reinvestment of distributions
|
|
|
|
571,336,804
|
|
|
|
|
173,052,963
|
|
Cost of shares reacquired
|
|
|
|
(433,382,762
|
)
|
|
|
|
(687,427,980
|
)
|
Net increase in net
assets resulting from capital share transactions
|
|
|
|
625,131,998
|
|
|
|
|
57,406,361
|
|
Net increase in net assets
|
|
|
|
588,046,868
|
|
|
|
|
714,603,483
|
|
NET ASSETS:
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
$
|
3,114,036,473
|
|
|
|
$
|
2,399,432,990
|
|
End of period
|
|
|
$
|
3,702,083,341
|
|
|
|
$
|
3,114,036,473
|
|
Accumulated net investment loss
|
|
|
$
|
(13,786,239
|
)
|
|
|
$
|
(448,760
|
)
|
|
See
Notes to Financial Statements.
|
11
|
Financial Highlights
|
|
Class A Shares
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
1/31/2014
|
|
|
Year Ended 7/31
|
|
|
(unaudited)
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
Per Share Operating Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
|
$26.80
|
|
|
|
$21.24
|
|
|
|
$23.11
|
|
|
|
$16.51
|
|
|
|
$13.49
|
|
|
|
$16.64
|
|
Investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment loss
(a)
|
|
|
(.12
|
)
|
|
|
(.17
|
)
|
|
|
(.20
|
)
|
|
|
(.21
|
)
|
|
|
(.16
|
)
|
|
|
(.13
|
)
|
Net realized and unrealized gain (loss)
|
|
|
4.81
|
|
|
|
7.44
|
|
|
|
(.41
|
)
|
|
|
6.81
|
|
|
|
3.18
|
|
|
|
(3.02
|
)
|
Total from investment operations
|
|
|
4.69
|
|
|
|
7.27
|
|
|
|
(.61
|
)
|
|
|
6.60
|
|
|
|
3.02
|
|
|
|
(3.15
|
)
|
Distributions to shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain
|
|
|
(5.36
|
)
|
|
|
(1.71
|
)
|
|
|
(1.26
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net asset value, end of period
|
|
|
$26.13
|
|
|
|
$26.80
|
|
|
|
$21.24
|
|
|
|
$23.11
|
|
|
|
$16.51
|
|
|
|
$13.49
|
|
Total Return
(b)
|
|
|
18.47
|
%
(c)
|
|
|
37.40
|
%
|
|
|
(2.03
|
)%
|
|
|
39.98
|
%
|
|
|
22.48
|
%
|
|
|
(18.99
|
)%
|
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses, including expense reductions
|
|
|
.53
|
%
(c)
|
|
|
1.11
|
%
|
|
|
1.12
|
%
|
|
|
1.09
|
%
|
|
|
1.14
|
%
|
|
|
1.28
|
%
|
Expenses, excluding expense reductions
|
|
|
.53
|
%
(c)
|
|
|
1.11
|
%
|
|
|
1.12
|
%
|
|
|
1.09
|
%
|
|
|
1.14
|
%
|
|
|
1.28
|
%
|
Net investment loss
|
|
|
(.44
|
)%
(c)
|
|
|
(.75
|
)%
|
|
|
(.96
|
)%
|
|
|
(.99
|
)%
|
|
|
(1.01
|
)%
|
|
|
(1.11
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000)
|
|
|
$1,357,290
|
|
|
|
$1,188,182
|
|
|
|
$983,120
|
|
|
|
$979,130
|
|
|
|
$570,044
|
|
|
|
$446,012
|
|
Portfolio turnover rate
|
|
|
111.61
|
%
(c)
|
|
|
201.80
|
%
|
|
|
195.11
|
%
|
|
|
136.95
|
%
|
|
|
156.05
|
%
|
|
|
198.56
|
%
|
(a)
|
Calculated using average shares outstanding during the period.
|
(b)
|
Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
|
(c)
|
Not annualized.
|
12
|
See Notes to Financial Statements.
|
|
Financial Highlights (continued)
|
|
Class B Shares
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
1/31/2014
|
|
|
Year Ended 7/31
|
|
|
(unaudited)
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
Per Share Operating Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
|
$22.92
|
|
|
|
$18.52
|
|
|
|
$20.46
|
|
|
|
$14.72
|
|
|
|
$12.10
|
|
|
|
$15.02
|
|
Investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment loss
(a)
|
|
|
(.18
|
)
|
|
|
(.26
|
)
|
|
|
(.29
|
)
|
|
|
(.30
|
)
|
|
|
(.23
|
)
|
|
|
(.19
|
)
|
Net realized and unrealized gain (loss)
|
|
|
4.06
|
|
|
|
6.37
|
|
|
|
(.39
|
)
|
|
|
6.04
|
|
|
|
2.85
|
|
|
|
(2.73
|
)
|
Total from investment operations
|
|
|
3.88
|
|
|
|
6.11
|
|
|
|
(.68
|
)
|
|
|
5.74
|
|
|
|
2.62
|
|
|
|
(2.92
|
)
|
Distributions to shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain
|
|
|
(5.36
|
)
|
|
|
(1.71
|
)
|
|
|
(1.26
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net asset value, end of period
|
|
|
$21.44
|
|
|
|
$22.92
|
|
|
|
$18.52
|
|
|
|
$20.46
|
|
|
|
$14.72
|
|
|
|
$12.10
|
|
Total Return
(b)
|
|
|
18.12
|
%
(c)
|
|
|
36.44
|
%
|
|
|
(2.61
|
)%
|
|
|
39.09
|
%
|
|
|
21.67
|
%
|
|
|
(19.51
|
)%
|
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses, including expense reductions
|
|
|
.86
|
%
(c)
|
|
|
1.76
|
%
|
|
|
1.76
|
%
|
|
|
1.74
|
%
|
|
|
1.79
|
%
|
|
|
1.93
|
%
|
Expenses, excluding expense reductions
|
|
|
.86
|
%
(c)
|
|
|
1.76
|
%
|
|
|
1.76
|
%
|
|
|
1.74
|
%
|
|
|
1.79
|
%
|
|
|
1.93
|
%
|
Net investment loss
|
|
|
(.77
|
)%
(c)
|
|
|
(1.39
|
)%
|
|
|
(1.59
|
)%
|
|
|
(1.64
|
)%
|
|
|
(1.66
|
)%
|
|
|
(1.76
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000)
|
|
|
$13,297
|
|
|
|
$13,286
|
|
|
|
$14,273
|
|
|
|
$21,161
|
|
|
|
$21,160
|
|
|
|
$22,308
|
|
Portfolio turnover rate
|
|
|
111.61
|
%
(c)
|
|
|
201.80
|
%
|
|
|
195.11
|
%
|
|
|
136.95
|
%
|
|
|
156.05
|
%
|
|
|
198.56
|
%
|
(a)
|
Calculated using average shares outstanding during the period.
|
(b)
|
Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
|
(c)
|
Not annualized.
|
|
See Notes to Financial Statements.
|
13
|
Financial Highlights (continued)
|
|
Class C Shares
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
1/31/2014
|
|
|
Year Ended 7/31
|
|
|
(unaudited)
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
Per Share Operating Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
|
$23.06
|
|
|
|
$18.63
|
|
|
|
$20.58
|
|
|
|
$14.80
|
|
|
|
$12.17
|
|
|
|
$15.11
|
|
Investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment loss
(a)
|
|
|
(.18
|
)
|
|
|
(.27
|
)
|
|
|
(.29
|
)
|
|
|
(.31
|
)
|
|
|
(.23
|
)
|
|
|
(.19
|
)
|
Net realized and unrealized gain (loss)
|
|
|
4.10
|
|
|
|
6.41
|
|
|
|
(.40
|
)
|
|
|
6.09
|
|
|
|
2.86
|
|
|
|
(2.75
|
)
|
Total from investment operations
|
|
|
3.92
|
|
|
|
6.14
|
|
|
|
(.69
|
)
|
|
|
5.78
|
|
|
|
2.63
|
|
|
|
(2.94
|
)
|
Distributions to shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain
|
|
|
(5.36
|
)
|
|
|
(1.71
|
)
|
|
|
(1.26
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net asset value, end of period
|
|
|
$21.62
|
|
|
|
$23.06
|
|
|
|
$18.63
|
|
|
|
$20.58
|
|
|
|
$14.80
|
|
|
|
$12.17
|
|
Total Return
(b)
|
|
|
18.10
|
%
(c)
|
|
|
36.44
|
%
|
|
|
(2.60
|
)%
|
|
|
38.99
|
%
|
|
|
21.71
|
%
|
|
|
(19.52
|
)%
|
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses, including expense reductions
|
|
|
.86
|
%
(c)
|
|
|
1.76
|
%
|
|
|
1.77
|
%
|
|
|
1.74
|
%
|
|
|
1.79
|
%
|
|
|
1.93
|
%
|
Expenses, excluding expense reductions
|
|
|
.86
|
%
(c)
|
|
|
1.76
|
%
|
|
|
1.77
|
%
|
|
|
1.74
|
%
|
|
|
1.79
|
%
|
|
|
1.93
|
%
|
Net investment loss
|
|
|
(.77
|
)%
(c)
|
|
|
(1.39
|
)%
|
|
|
(1.60
|
)%
|
|
|
(1.64
|
)%
|
|
|
(1.66
|
)%
|
|
|
(1.76
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000)
|
|
|
$127,885
|
|
|
|
$115,966
|
|
|
|
$107,011
|
|
|
|
$134,684
|
|
|
|
$79,512
|
|
|
|
$56,558
|
|
Portfolio turnover rate
|
|
|
111.61
|
%
(c)
|
|
|
201.80
|
%
|
|
|
195.11
|
%
|
|
|
136.95
|
%
|
|
|
156.05
|
%
|
|
|
198.56
|
%
|
(a)
|
Calculated using average shares outstanding during the period.
|
(b)
|
Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
|
(c)
|
Not annualized.
|
14
|
See Notes to Financial Statements.
|
|
Financial Highlights (continued)
|
|
Class F Shares
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
1/31/2014
|
|
|
Year Ended 7/31
|
|
|
(unaudited)
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
Per Share Operating Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
|
$27.23
|
|
|
|
$21.50
|
|
|
|
$23.33
|
|
|
|
$16.62
|
|
|
|
$13.55
|
|
|
|
$16.67
|
|
Investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment loss
(a)
|
|
|
(.09
|
)
|
|
|
(.11
|
)
|
|
|
(.15
|
)
|
|
|
(.16
|
)
|
|
|
(.12
|
)
|
|
|
(.11
|
)
|
Net realized and unrealized gain (loss)
|
|
|
4.90
|
|
|
|
7.55
|
|
|
|
(.42
|
)
|
|
|
6.87
|
|
|
|
3.19
|
|
|
|
(3.01
|
)
|
Total from investment operations
|
|
|
4.81
|
|
|
|
7.44
|
|
|
|
(.57
|
)
|
|
|
6.71
|
|
|
|
3.07
|
|
|
|
(3.12
|
)
|
Distributions to shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain
|
|
|
(5.36
|
)
|
|
|
(1.71
|
)
|
|
|
(1.26
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net asset value, end of period
|
|
|
$26.68
|
|
|
|
$27.23
|
|
|
|
$21.50
|
|
|
|
$23.33
|
|
|
|
$16.62
|
|
|
|
$13.55
|
|
Total Return
(b)
|
|
|
18.62
|
%
(c)
|
|
|
37.69
|
%
|
|
|
(1.74
|
)%
|
|
|
40.31
|
%
|
|
|
22.75
|
%
|
|
|
(18.78
|
)%
|
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses, including expense reductions
|
|
|
.41
|
%
(c)
|
|
|
.86
|
%
|
|
|
.87
|
%
|
|
|
.84
|
%
|
|
|
.88
|
%
|
|
|
1.06
|
%
|
Expenses, excluding expense reductions
|
|
|
.41
|
%
(c)
|
|
|
.86
|
%
|
|
|
.87
|
%
|
|
|
.84
|
%
|
|
|
.88
|
%
|
|
|
1.06
|
%
|
Net investment loss
|
|
|
(.32
|
)%
(c)
|
|
|
(.50
|
)%
|
|
|
(.71
|
)%
|
|
|
(.74
|
)%
|
|
|
(.75
|
)%
|
|
|
(.91
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000)
|
|
|
$176,370
|
|
|
|
$160,061
|
|
|
|
$141,616
|
|
|
|
$190,426
|
|
|
|
$93,269
|
|
|
|
$23,070
|
|
Portfolio turnover rate
|
|
|
111.61
|
%
(c)
|
|
|
201.80
|
%
|
|
|
195.11
|
%
|
|
|
136.95
|
%
|
|
|
156.05
|
%
|
|
|
198.56
|
%
|
(a)
|
Calculated using average shares outstanding during the period.
|
(b)
|
Total return assumes the reinvestment of all distributions.
|
(c)
|
Not annualized.
|
|
See Notes to Financial Statements.
|
15
|
Financial Highlights (continued)
|
|
Class I Shares
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/31/2014
|
|
|
Year Ended 7/31
|
|
|
(unaudited)
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
Per Share Operating Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
|
$28.95
|
|
|
|
$22.73
|
|
|
|
$24.55
|
|
|
|
$17.48
|
|
|
|
$14.23
|
|
|
|
$17.49
|
|
Investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment loss
(a)
|
|
|
(.08
|
)
|
|
|
(.10
|
)
|
|
|
(.14
|
)
|
|
|
(.15
|
)
|
|
|
(.11
|
)
|
|
|
(.10
|
)
|
Net realized and unrealized gain (loss)
|
|
|
5.22
|
|
|
|
8.03
|
|
|
|
(.42
|
)
|
|
|
7.22
|
|
|
|
3.36
|
|
|
|
(3.16
|
)
|
Total from investment operations
|
|
|
5.14
|
|
|
|
7.93
|
|
|
|
(.56
|
)
|
|
|
7.07
|
|
|
|
3.25
|
|
|
|
(3.26
|
)
|
Distributions to shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain
|
|
|
(5.36
|
)
|
|
|
(1.71
|
)
|
|
|
(1.26
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net asset value, end of period
|
|
|
$28.73
|
|
|
|
$28.95
|
|
|
|
$22.73
|
|
|
|
$24.55
|
|
|
|
$17.48
|
|
|
|
$14.23
|
|
Total Return
(b)
|
|
|
18.74
|
%
(c)
|
|
|
37.83
|
%
|
|
|
(1.69
|
)%
|
|
|
40.45
|
%
|
|
|
22.93
|
%
|
|
|
(18.70
|
)%
|
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses, including expense reductions
|
|
|
.36
|
%
(c)
|
|
|
.76
|
%
|
|
|
.77
|
%
|
|
|
.75
|
%
|
|
|
.79
|
%
|
|
|
.93
|
%
|
Expenses, excluding expense reductions
|
|
|
.36
|
%
(c)
|
|
|
.76
|
%
|
|
|
.77
|
%
|
|
|
.75
|
%
|
|
|
.79
|
%
|
|
|
.93
|
%
|
Net investment loss
|
|
|
(.27
|
)%
(c)
|
|
|
(.41
|
)%
|
|
|
(.61
|
)%
|
|
|
(.65
|
)%
|
|
|
(.66
|
)%
|
|
|
(.77
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000)
|
|
|
$
1,556,876
|
|
|
|
$1,225,883
|
|
|
|
$830,601
|
|
|
|
$601,226
|
|
|
|
$279,772
|
|
|
|
$180,896
|
|
Portfolio turnover rate
|
|
|
111.61
|
%
(c)
|
|
|
201.80
|
%
|
|
|
195.11
|
%
|
|
|
136.95
|
%
|
|
|
156.05
|
%
|
|
|
198.56
|
%
|
(a)
|
Calculated using average shares outstanding during the period.
|
(b)
|
Total return assumes the reinvestment of all distributions.
|
(c)
|
Not annualized.
|
16
|
See Notes to Financial Statements.
|
|
Financial Highlights (continued)
|
|
Class P Shares
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/31/2014
|
|
|
Year Ended 7/31
|
|
|
(unaudited)
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
Per Share Operating Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
|
$26.27
|
|
|
|
$20.85
|
|
|
|
$22.71
|
|
|
|
$16.25
|
|
|
|
$13.29
|
|
|
|
$16.41
|
|
Investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment loss
(a)
|
|
|
(.11
|
)
|
|
|
(.16
|
)
|
|
|
(.19
|
)
|
|
|
(.22
|
)
|
|
|
(.17
|
)
|
|
|
(.14
|
)
|
Net realized and unrealized gain (loss)
|
|
|
4.71
|
|
|
|
7.29
|
|
|
|
(.41
|
)
|
|
|
6.68
|
|
|
|
3.13
|
|
|
|
(2.98
|
)
|
Total from investment operations
|
|
|
4.60
|
|
|
|
7.13
|
|
|
|
(.60
|
)
|
|
|
6.46
|
|
|
|
2.96
|
|
|
|
(3.12
|
)
|
Distributions to shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain
|
|
|
(5.36
|
)
|
|
|
(1.71
|
)
|
|
|
(1.26
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net asset value, end of period
|
|
|
$25.51
|
|
|
|
$26.27
|
|
|
|
$20.85
|
|
|
|
$22.71
|
|
|
|
$16.25
|
|
|
|
$13.29
|
|
Total Return
(b)
|
|
|
18.59
|
%
(c)
|
|
|
37.37
|
%
|
|
|
(2.02
|
)%
|
|
|
39.75
|
%
|
|
|
22.36
|
%
|
|
|
(19.07
|
)%
|
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses, including expense reductions
|
|
|
.48
|
%
(c)
|
|
|
1.09
|
%
|
|
|
1.12
|
%
|
|
|
1.19
|
%
|
|
|
1.24
|
%
|
|
|
1.38
|
%
|
Expenses, excluding expense reductions
|
|
|
.48
|
%
(c)
|
|
|
1.09
|
%
|
|
|
1.12
|
%
|
|
|
1.19
|
%
|
|
|
1.24
|
%
|
|
|
1.38
|
%
|
Net investment loss
|
|
|
(.39
|
)%
(c)
|
|
|
(.74
|
)%
|
|
|
(.95
|
)%
|
|
|
(1.09
|
)%
|
|
|
(1.11
|
)%
|
|
|
(1.22
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000)
|
|
|
$109,402
|
|
|
|
$110,917
|
|
|
|
$85,649
|
|
|
|
$121,589
|
|
|
|
$115,303
|
|
|
|
$98,786
|
|
Portfolio turnover rate
|
|
|
111.61
|
%
(c)
|
|
|
201.80
|
%
|
|
|
195.11
|
%
|
|
|
136.95
|
%
|
|
|
156.05
|
%
|
|
|
198.56
|
%
|
(a)
|
Calculated using average shares outstanding during the period.
|
(b)
|
Total return assumes the reinvestment of all distributions.
|
(c)
|
Not annualized.
|
|
See Notes to Financial Statements.
|
17
|
Financial Highlights (continued)
|
|
Class R2 Shares
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/31/2014
|
|
|
Year Ended 7/31
|
|
|
(unaudited)
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
Per Share Operating Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
|
$26.35
|
|
|
|
$20.96
|
|
|
|
$22.89
|
|
|
|
$16.39
|
|
|
|
$13.43
|
|
|
|
$16.61
|
|
Investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment loss
(a)
|
|
|
(.15
|
)
|
|
|
(.22
|
)
|
|
|
(.25
|
)
|
|
|
(.27
|
)
|
|
|
(.20
|
)
|
|
|
(.16
|
)
|
Net realized and unrealized gain (loss)
|
|
|
4.72
|
|
|
|
7.32
|
|
|
|
(.42
|
)
|
|
|
6.77
|
|
|
|
3.16
|
|
|
|
(3.02
|
)
|
Total from investment operations
|
|
|
4.57
|
|
|
|
7.10
|
|
|
|
(.67
|
)
|
|
|
6.50
|
|
|
|
2.96
|
|
|
|
(3.18
|
)
|
Distributions to shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain
|
|
|
(5.36
|
)
|
|
|
(1.71
|
)
|
|
|
(1.26
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net asset value, end of period
|
|
|
$25.56
|
|
|
|
$26.35
|
|
|
|
$20.96
|
|
|
|
$22.89
|
|
|
|
$16.39
|
|
|
|
$13.43
|
|
Total Return
(b)
|
|
|
18.32
|
%
(c)
|
|
|
37.00
|
%
|
|
|
(2.23
|
)%
|
|
|
39.60
|
%
|
|
|
22.13
|
%
|
|
|
(19.21
|
)%
|
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses, including expense reductions
|
|
|
.66
|
%
(c)
|
|
|
1.36
|
%
|
|
|
1.37
|
%
|
|
|
1.35
|
%
|
|
|
1.39
|
%
|
|
|
1.54
|
%
|
Expenses, excluding expense reductions
|
|
|
.66
|
%
(c)
|
|
|
1.36
|
%
|
|
|
1.37
|
%
|
|
|
1.35
|
%
|
|
|
1.39
|
%
|
|
|
1.54
|
%
|
Net investment loss
|
|
|
(.57
|
)%
(c)
|
|
|
(1.00
|
)%
|
|
|
(1.21
|
)%
|
|
|
(1.24
|
)%
|
|
|
(1.26
|
)%
|
|
|
(1.37
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000)
|
|
|
$18,318
|
|
|
|
$14,740
|
|
|
|
$12,522
|
|
|
|
$11,187
|
|
|
|
$3,453
|
|
|
|
$1,291
|
|
Portfolio turnover rate
|
|
|
111.61
|
%
(c)
|
|
|
201.80
|
%
|
|
|
195.11
|
%
|
|
|
136.95
|
%
|
|
|
156.05
|
%
|
|
|
198.56
|
%
|
(a)
|
Calculated using average shares outstanding during the period.
|
(b)
|
Total return assumes the reinvestment of all distributions.
|
(c)
|
Not annualized.
|
18
|
See Notes to Financial Statements.
|
|
Financial Highlights (concluded)
|
|
Class R3 Shares
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/31/2014
|
|
|
Year Ended 7/31
|
|
|
(unaudited)
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
Per Share Operating Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
|
$26.53
|
|
|
|
$21.07
|
|
|
|
$22.97
|
|
|
|
$16.44
|
|
|
|
$13.45
|
|
|
|
$16.62
|
|
Investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment loss
(a)
|
|
|
(.14
|
)
|
|
|
(.20
|
)
|
|
|
(.23
|
)
|
|
|
(.25
|
)
|
|
|
(.18
|
)
|
|
|
(.15
|
)
|
Net realized and unrealized gain (loss)
|
|
|
4.75
|
|
|
|
7.37
|
|
|
|
(.41
|
)
|
|
|
6.78
|
|
|
|
3.17
|
|
|
|
(3.02
|
)
|
Total from investment operations
|
|
|
4.61
|
|
|
|
7.17
|
|
|
|
(.64
|
)
|
|
|
6.53
|
|
|
|
2.99
|
|
|
|
(3.17
|
)
|
Distributions to shareholders from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain
|
|
|
(5.36
|
)
|
|
|
(1.71
|
)
|
|
|
(1.26
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net asset value, end of period
|
|
|
$25.78
|
|
|
|
$26.53
|
|
|
|
$21.07
|
|
|
|
$22.97
|
|
|
|
$16.44
|
|
|
|
$13.45
|
|
Total Return
(b)
|
|
|
18.43
|
%
(c)
|
|
|
37.09
|
%
|
|
|
(2.13
|
)%
|
|
|
39.72
|
%
|
|
|
22.32
|
%
|
|
|
(19.13
|
)%
|
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses, including expense reductions
|
|
|
.61
|
%
(c)
|
|
|
1.26
|
%
|
|
|
1.27
|
%
|
|
|
1.25
|
%
|
|
|
1.28
|
%
|
|
|
1.45
|
%
|
Expenses, excluding expense reductions
|
|
|
.61
|
%
(c)
|
|
|
1.26
|
%
|
|
|
1.27
|
%
|
|
|
1.25
|
%
|
|
|
1.28
|
%
|
|
|
1.45
|
%
|
Net investment loss
|
|
|
(.52
|
)%
(c)
|
|
|
(.90
|
)%
|
|
|
(1.12
|
)%
|
|
|
(1.15
|
)%
|
|
|
(1.16
|
)%
|
|
|
(1.28
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000)
|
|
|
$342,644
|
|
|
|
$285,000
|
|
|
|
$224,641
|
|
|
|
$159,496
|
|
|
|
$59,661
|
|
|
|
$15,251
|
|
Portfolio turnover rate
|
|
|
111.61
|
%
(c)
|
|
|
201.80
|
%
|
|
|
195.11
|
%
|
|
|
136.95
|
%
|
|
|
156.06
|
%
|
|
|
198.56
|
%
|
(a)
|
Calculated using average shares outstanding during the period.
|
(b)
|
Total return assumes the reinvestment of all distributions.
|
(c)
|
Not annualized.
|
|
See Notes to Financial Statements.
|
19
|
Notes to Financial Statements (unaudited)
Lord Abbett Developing Growth Fund, Inc. (the “Fund”)
is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management
investment company. The Fund was incorporated under Maryland law on August 21, 1978. The Fund’s predecessor corporation
was organized on July 11, 1973.
The Fund’s investment objective is long-term growth of
capital through a diversified and actively managed portfolio consisting of developing growth companies, many of which are traded
over the counter. The Fund has eight classes of shares: Class A, B, C, F, I, P, R2 and R3, each with different expenses and dividends.
A front-end sales charge is normally added to the net asset value (“NAV”) for Class A shares. There is no front-end
sales charge in the case of Class B, C, F, I, P, R2 and R3 shares, although there may be a contingent deferred sales charge (“CDSC”)
in certain cases as follows: Class A shares purchased without a sales charge and redeemed before the first day of the month in
which the one-year anniversary of the purchase falls (subject to certain exceptions as set forth in the Fund’s prospectus);
Class B shares redeemed before the sixth anniversary of purchase; and Class C shares redeemed before the first anniversary of
purchase. Class B shares will automatically convert to Class A shares on the 25th day of the month (or, if the 25th day is not
a business day, the next business day thereafter) following the eighth anniversary of the day on which the purchase order was
accepted. The Fund no longer issues Class B shares for purchase. The Fund’s Class P shares are closed to substantially all
investors, with certain exceptions as set forth in the Fund’s prospectus. The Fund is closed to most new investors but is
open to certain new investors on a limited basis as set forth in the Fund’s prospectus.
The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting
period. Actual results could differ from those estimates.
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
|
(a)
|
Investment
Valuation
–
Under procedures approved by the Fund’s Board of Directors (the “Board”),
Lord, Abbett & Co. LLC (“Lord Abbett”), the Fund’s investment manager, has formed a Pricing Committee
to administer the pricing and valuation of portfolio investments and to ensure that prices utilized reasonably reflect fair
value. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities
and financial instrument dealers and other market sources to determine fair value.
|
|
|
|
Securities actively traded on any recognized U.S. or non-U.S. exchange or on The NASDAQ Stock Market LLC are valued at
the last sale price or official closing price on the exchange or system on which they are principally traded. Events occurring
after the close of trading on non-U.S. exchanges may result in adjustments to the valuation of foreign securities to reflect
their fair value as of the close of regular trading on the New York Stock Exchange. The Fund may rely on an independent fair
valuation service in adjusting the valuations of foreign securities. Unlisted equity securities are valued at the last quoted
sale price or, if no sale price is available, at the mean between the most recently quoted bid and asked prices.
|
20
Notes to Financial Statements (unaudited)(continued)
|
Securities for which prices are not readily available are valued at fair value as determined by the
Pricing Committee and approved by the Board. The Pricing Committee considers a number of factors, including observable and
unobservable inputs, when arriving at fair value. The Pricing Committee may use related or comparable assets or liabilities,
recent transactions, market multiples, book values and other relevant information to determine fair value of portfolio investments.
The Board or a designated committee thereof regularly reviews fair value determinations made by the Pricing Committee and
employs techniques such as reviewing related market activity, reviewing inputs and assumptions, and retrospectively comparing
prices of subsequent purchases and sales transactions to fair value determinations made by the Pricing Committee.
|
|
|
|
Short-term securities with 60 days or less remaining to maturity are valued using the amortized cost method, which approximates
fair value.
|
|
|
(b)
|
Security
Transactions
–
Security transactions are recorded as of the date that the securities are purchased or
sold (trade date). Realized gains and losses on sales of portfolio securities are calculated using the identified-cost method.
Realized and unrealized gains (losses) are allocated to each class of shares based upon the relative proportion of net assets
at the beginning of the day.
|
|
|
(c)
|
Investment
Income
–
Dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual
basis as earned. Discounts are accreted and premiums are amortized using the effective interest method and are included in
Interest income on the Statement of Operations. Investment income is allocated to each class of shares based upon the relative
proportion of net assets at the beginning of the day.
|
|
|
(d)
|
Income
Taxes
–
It is the policy of the Fund to meet the requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies and to distribute substantially all taxable income and capital gains to
its shareholders. Therefore, no income tax provision is required.
|
|
|
|
The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination.
The statute of limitations on the Fund’s filed U.S. federal tax returns remains open for the fiscal years ended July
31, 2010 through July 31, 2013. The statutes of limitations on the Fund’s state and local tax returns may remain open
for an additional year depending upon the jurisdiction.
|
|
|
(e)
|
Expenses
–
Expenses,
excluding class-specific expenses, are allocated to each class of shares based upon the relative proportion of net assets
at the beginning of the day. Class A, B, C, F, P, R2 and R3 shares bear their class-specific share of all expenses and fees
relating to the Fund’s 12b-1 Distribution Plan.
|
|
|
(f)
|
Repurchase
Agreements
–
The Fund may enter into repurchase agreements with respect to securities. A repurchase
agreement is a transaction in which a fund acquires a security and simultaneously commits to resell that security to the seller
(a bank or securities dealer) at an agreed-upon price on an agreed-upon date. The Fund requires at all times that the repurchase
agreement be collateralized by cash, or by securities of the U.S. Government, its agencies, its instrumentalities, or U.S.
Government sponsored enterprises having a value equal to, or in excess of, the value of the repurchase agreement (including
accrued interest). If the seller of the agreement defaults on its obligation to repurchase the underlying securities at a
time when the fair value of these securities has declined, the Fund may incur a loss upon disposition of the securities.
|
21
Notes to Financial Statements (unaudited)(continued)
(g)
|
Fair
Value Measurements
–
Fair value is defined as the price that the Fund would receive upon selling an
investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous
market of the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use
of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly
to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk—for
example, the risk inherent in a particular valuation technique used to measure fair value (such as a pricing model) and/or
the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect
the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data
obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions
about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the
best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad Levels
listed below:
|
|
|
|
|
|
•
|
Level 1 –
|
unadjusted quoted prices in active markets for identical investments;
|
|
|
|
|
|
•
|
Level 2 –
|
other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds,
credit risk, etc.); and
|
|
|
|
|
|
•
|
Level 3 –
|
significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).
|
|
|
|
|
|
A summary of inputs used in valuing the Fund’s investments as of January 31, 2014 and, if applicable,
Level 1/Level 2 transfers and Level 3 rollforwards for the six months then ended is included in the Fund’s Schedule
of Investments.
|
|
|
|
Changes in valuation techniques may result in transfers into or out of an assigned level within the three-tier
hierarchy. All transfers between different levels within the three-tier hierarchy are deemed to have occurred as of the beginning
of the reporting period. The inputs or methodology used for valuing securities are not necessarily an indication of the risk
associated with investing in those securities.
|
|
|
3.
|
MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
|
Management
Fees
The Fund has a management agreement with Lord Abbett, pursuant
to which Lord Abbett supplies the Fund with investment management services and executive and other personnel, provides office
space and pays for ordinary and necessary office and clerical expenses relating to research and statistical work and supervision
of the Fund’s investment portfolio.
The management fee is based on the Fund’s average daily
net assets at the following annual rate:
First $100 million
|
.75%
|
Over $100 million
|
.50%
|
For the six months ended January 31, 2014, the effective management
fee was at an annualized rate of .51% of the Fund’s average daily net assets.
In addition, Lord Abbett provides certain administrative services
to the Fund pursuant to an Administrative Services Agreement in return for a fee at an annual rate of .04% of the Fund’s
average daily net assets.
22
Notes to Financial Statements (unaudited)(continued)
The Fund, along with certain other funds managed by Lord Abbett
(collectively, the “Underlying Funds”), has entered into a Servicing Arrangement with Lord Abbett Alpha Strategy Fund
of Lord Abbett Securities Trust and Lord Abbett Diversified Equity Strategy Fund of Lord Abbett Investment Trust (each, a “Fund
of Funds”), pursuant to which each Underlying Fund pays a portion of the expenses (excluding management fee and distribution
and service fees) of each applicable Fund of Funds in proportion to the average daily value of the Underlying Fund shares owned
by each Fund of Funds. Amounts paid pursuant to the Servicing Arrangement are included in Subsidy expense on the Fund’s
Statement of Operations and Payable to affiliates on the Fund’s Statement of Assets and Liabilities.
As of January 31, 2014, the percentages of the Fund’s
outstanding shares owned by Lord Abbett Alpha Strategy Fund and Lord Abbett Diversified Equity Strategy Fund were 6.28% and .34%,
respectively.
12b-1
Distribution Plan
The Fund has adopted a distribution plan with respect to Class
A, B, C, F, P, R2 and R3 shares pursuant to Rule 12b-1 under the Act, which provides for the payment of ongoing distribution and
service fees to Lord Abbett Distributor LLC (the “Distributor”), an affiliate of Lord Abbett. The following annual
rates have been approved by the Board pursuant to the plan:
Fees*
|
|
Class A
|
|
Class B
|
|
Class C
|
|
Class F
|
|
Class P
|
|
Class R2
|
|
Class R3
|
Service
|
|
.25
|
%
|
|
.25
|
%
|
|
.25
|
%
|
|
—
|
|
|
.25
|
%
|
|
.25
|
%
|
|
.25
|
%
|
Distribution
|
|
.10
|
%
|
|
.75
|
%
|
|
.75
|
%
|
|
.10
|
%
|
|
.20
|
%
|
|
.35
|
%
|
|
.25
|
%
|
*
|
The Fund may designate a portion of the aggregate fee as attributable to service activities for purposes
of calculating Financial Industry Regulatory Authority, Inc. (“FINRA”) sales charge limitations.
|
Class I shares do not have a distribution plan.
Commissions
Distributor received the following commissions on sales of shares
of the Fund, after concessions were paid to authorized dealers, for the six months ended January 31, 2014:
Distributor
Commissions
|
Dealers’
Concessions
|
$16,581
|
$94,045
|
Distributor received CDSCs of $1,996 and $1,470 for Class A
and Class C shares, respectively, for the six months ended January 31, 2014.
A Director and certain of the Fund’s officers have an
interest in Lord Abbett.
4.
|
DISTRIBUTIONS AND CAPITAL LOSS CARRYFORWARDS
|
Dividends from net investment income, if any, are declared and
paid at least annually. Taxable net realized gains from investment transactions, reduced by allowable capital loss carryforwards,
if any, are declared and distributed to shareholders at least annually. The capital loss carryforward amount, if any, is available
to offset future net capital gains. Dividends and distributions to shareholders are recorded on the ex-dividend date. The amounts
of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal
income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These
book/tax differences are either considered temporary or permanent in nature. To the extent these differences are permanent in
nature, such amounts are
23
Notes to Financial Statements (unaudited)(continued)
reclassified within the components of net assets based on their
federal tax basis treatment; temporary differences do not require reclassification. Dividends and distributions, which exceed
earnings and profits for tax purposes, are reported as a tax return of capital.
The tax character of distributions paid during the six months
ended January 31, 2014 and fiscal year ended July 31, 2013 was as follows:
|
|
Six Months Ended
1/31/2014
|
|
|
Year Ended
7/31/2013
|
|
Distributions paid from:
|
|
|
|
|
|
|
|
|
Ordinary income
|
|
$
|
236,981,734
|
|
|
$
|
—
|
|
Net long-term capital gains
|
|
|
376,927,432
|
|
|
|
185,586,565
|
|
Total distributions paid
|
|
$
|
613,909,166
|
|
|
$
|
185,586,565
|
|
As of January 31, 2014, the aggregate unrealized security gains
and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost
|
|
$
|
2,920,166,248
|
|
Gross unrealized gain
|
|
|
857,385,075
|
|
Gross unrealized loss
|
|
|
(29,556,512
|
)
|
Net unrealized security gain
|
|
$
|
827,828,563
|
|
The difference between book-basis and tax-basis unrealized gains
(losses) is attributable to the tax treatment of wash sales.
5.
|
PORTFOLIO SECURITIES TRANSACTIONS
|
Purchases and sales of investment securities (excluding short-term
investments) for the six months ended January 31, 2014 were as follows:
Purchases
|
Sales
|
$3,783,002,044
|
$3,764,067,051
|
There were no purchases or sales of U.S. Government securities
for the six months ended January 31, 2014.
6.
|
DISCLOSURES ABOUT OFFSETTING ASSETS AND LIABILITIES
|
The Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update No. 2011–11 “Disclosures about Offsetting Assets and Liabilities”
(“ASU 2011–11”). These disclosure requirements are intended to help better assess the effect or potential effect
of offsetting arrangements on a fund’s financial position. In addition, FASB issued Accounting Standards Update No. 2013–01
“Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” (“ASU 2013–01”), specifying
which transactions are subject to disclosures about offsetting.
The following tables illustrate gross and net information about
recognized assets eligible for offset in the Statement of Assets and Liabilities; and disclose such amounts subject to an enforceable
master netting agreement or similar agreement, by counterparty. A master netting agreement is an agreement between the Fund and
a counterparty which provides for the net settlement of amounts owed under all contracts traded under that agreement, as well
as cash collateral, through a single payment by one party to the other in the event of default on or termination of any one contract.
The Fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty
or a termination of the agreement, the master netting agreement does
24
Notes to Financial Statements (unaudited)(continued)
not result in an offset of reported amounts of financial assets
and liabilities in the statement of assets and liabilities across transactions between the Fund and the applicable counterparty:
Description
|
|
Gross
Amounts of
Recognized Assets
|
|
|
Gross Amounts
Offset in
the Statement
of Assets
and Liabilities
|
|
|
Net Amounts
of Assets
Presented in
the Statement
of Assets and
Liabilities
|
|
|
|
|
|
Repurchase Agreement
|
|
$
|
61,192,171
|
|
|
$
|
—
|
|
|
$
|
61,192,171
|
|
|
|
|
|
Total
|
|
$
|
61,192,171
|
|
|
$
|
—
|
|
|
$
|
61,192,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Not Offset in the
Statement of Assets and Liabilities
|
|
|
|
|
Counterparty
|
|
Net Amounts
of Assets
Presented in
the Statement
of Assets and
Liabilities
|
|
|
Financial
Instruments
Collateral
(a)
|
|
|
Cash
Collateral
Received
(a)
|
|
|
Net Amount
(b)
|
|
Fixed Income Clearing Corp.
|
|
$
|
61,192,171
|
|
|
$
|
(61,192,171
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Total
|
|
$
|
61,192,171
|
|
|
$
|
(61,192,171
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
(a)
|
Collateral disclosed is limited to an amount not to exceed 100% of the net amount of assets presented
in the Statement of Assets and Liabilities, for each respective counterparty.
|
(b)
|
Net Amount represents the amount that is subject to loss in the event of a counterparty failure as of January 31, 2014.
|
|
|
7.
|
DIRECTORS’ REMUNERATION
|
The Fund’s officers and a Director, who are associated
with Lord Abbett, do not receive any compensation from the Fund for serving in such capacities. Independent Directors’ fees
are allocated among all Lord Abbett-sponsored funds based on the net assets of each fund. There is an equity-based plan available
to all Independent Directors under which Independent Directors must defer receipt of a portion of, and may elect to defer receipt
of an additional portion of Directors’ fees. The deferred amounts are treated as though equivalent dollar amounts had been
invested in the funds. Such amounts and earnings accrued thereon are included in Directors’ fees on the Statement of Operations
and in Directors’ fees payable on the Statement of Assets and Liabilities and are not deductible for U.S. federal income
tax purposes until such amounts are paid.
The Fund has entered into an arrangement with its transfer agent
and custodian, whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s
expenses.
During the six months ended January 31, 2014, the Fund and certain
other funds managed by Lord Abbett (the “participating funds”) participated in an unsecured revolving credit facility
(“Facility”) with State Street Bank and Trust Company (“SSB”). The Facility is to be used for temporary
or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Board considers annual
renewal of the Facility, which is currently in effect through June 30, 2014, under terms that depend on market conditions at the
time of the renewal. The amounts available under the Facility are (i) the lesser of either $250,000,000 or 33.33% of total assets
per participating fund and (ii) $350,000,000 in the aggregate for all participating funds. The annual fee
25
Notes to Financial Statements (unaudited)(continued)
to maintain the Facility during the period was .09% of the amount
available under the Facility. Each participating fund pays its pro rata share based on the net assets of each participating fund.
This amount is included in Other expenses on the Fund’s Statement of Operations. Any borrowings under this Facility will
bear interest at current market rates as set forth in the credit agreement.
As of January 31, 2014, there were no loans outstanding pursuant
to this Facility.
10.
|
CUSTODIAN AND ACCOUNTING AGENT
|
SSB is the Fund’s custodian and accounting agent. SSB
performs custodial, accounting and recordkeeping functions relating to portfolio transactions and calculating the Fund’s
NAV.
The Fund is subject to the general risks and considerations
associated with equity investing. The value of an investment will fluctuate in response to movements in the equity securities
market in general, and to the changing prospects of individual companies in which the Fund invests.
The Fund has particular risks associated with growth stocks.
Different types of stocks shift in and out of favor depending on market and economic conditions. Growth stocks tend to be more
volatile than other stocks. In addition, if the Fund’s assessment of a company’s potential for growth or market conditions
is wrong, it could suffer losses or produce poor performance relative to other funds, even in a rising market. The Fund invests
primarily in small-cap growth company stocks, which tend to be more volatile and can be less liquid than other types of stocks.
Small-cap companies may also have more limited product lines, markets or financial resources, and typically experience a higher
risk of failure than large-cap companies. Because the Fund may invest a portion of its assets in foreign securities and American
Depositary Receipts, it may experience increased market, liquidity, currency, political, information and other risks.
These factors can affect the Fund’s performance.
12.
|
SUMMARY OF CAPITAL TRANSACTIONS
|
Transactions in shares of beneficial interest were as follows:
|
|
Six Months Ended
January 31, 2014
(unaudited)
|
|
|
Year Ended
July 31, 2013
|
|
Class A Shares
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
Shares sold
|
|
|
5,529,999
|
|
|
$
|
150,699,464
|
|
|
|
8,861,391
|
|
|
$
|
198,422,726
|
|
Converted from Class B*
|
|
|
20,334
|
|
|
|
555,258
|
|
|
|
89,895
|
|
|
|
1,991,207
|
|
Reinvestment of distributions
|
|
|
8,682,256
|
|
|
|
216,535,469
|
|
|
|
3,690,136
|
|
|
|
70,924,405
|
|
Shares reacquired
|
|
|
(6,617,032
|
)
|
|
|
(179,096,850
|
)
|
|
|
(14,593,941
|
)
|
|
|
(320,519,955
|
)
|
Increase (decrease)
|
|
|
7,615,557
|
|
|
$
|
188,693,341
|
|
|
|
(1,952,519
|
)
|
|
$
|
(49,181,617
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares sold
|
|
|
10,994
|
|
|
$
|
243,370
|
|
|
|
16,882
|
|
|
$
|
310,950
|
|
Reinvestment of distributions
|
|
|
134,473
|
|
|
|
2,756,701
|
|
|
|
69,356
|
|
|
|
1,145,066
|
|
Shares reacquired
|
|
|
(80,889
|
)
|
|
|
(1,829,248
|
)
|
|
|
(172,583
|
)
|
|
|
(3,290,225
|
)
|
Converted to Class A*
|
|
|
(24,293
|
)
|
|
|
(555,258
|
)
|
|
|
(104,370
|
)
|
|
|
(1,991,207
|
)
|
Increase (decrease)
|
|
|
40,285
|
|
|
$
|
615,565
|
|
|
|
(190,715
|
)
|
|
$
|
(3,825,416
|
)
|
26
Notes to Financial Statements (unaudited)(concluded)
|
|
Six Months Ended
January 31, 2014
(unaudited)
|
|
Year Ended
July 31, 2013
|
|
Class C Shares
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
Shares sold
|
|
|
347,138
|
|
$
|
7,471,757
|
|
|
288,546
|
|
$
|
5,384,798
|
|
Reinvestment of distributions
|
|
|
987,632
|
|
|
20,404,475
|
|
|
441,179
|
|
|
7,332,394
|
|
Shares reacquired
|
|
|
(447,229
|
)
|
|
(10,297,902
|
)
|
|
(1,444,930
|
)
|
|
(26,923,917
|
)
|
Increase (decrease)
|
|
|
887,541
|
|
$
|
17,578,330
|
|
|
(715,205
|
)
|
$
|
(14,206,725
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class F Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares sold
|
|
|
631,468
|
|
$
|
17,353,824
|
|
|
1,097,564
|
|
$
|
24,839,996
|
|
Reinvestment of distributions
|
|
|
1,034,882
|
|
|
26,348,098
|
|
|
461,921
|
|
|
9,007,465
|
|
Shares reacquired
|
|
|
(932,801
|
)
|
|
(25,857,560
|
)
|
|
(2,267,618
|
)
|
|
(50,053,635
|
)
|
Increase (decrease)
|
|
|
733,549
|
|
$
|
17,844,362
|
|
|
(708,133
|
)
|
$
|
(16,206,174
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class I Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares sold
|
|
|
8,436,596
|
|
$
|
252,071,525
|
|
|
10,876,378
|
|
$
|
269,848,806
|
|
Reinvestment of distributions
|
|
|
8,205,040
|
|
|
224,900,148
|
|
|
2,890,545
|
|
|
59,863,193
|
|
Shares reacquired
|
|
|
(4,798,728
|
)
|
|
(143,372,212
|
)
|
|
(7,964,662
|
)
|
|
(190,360,251
|
)
|
Increase
|
|
|
11,842,908
|
|
$
|
333,599,461
|
|
|
5,802,261
|
|
$
|
139,351,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class P Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares sold
|
|
|
182,255
|
|
$
|
4,885,786
|
|
|
879,442
|
|
$
|
19,214,082
|
|
Reinvestment of distributions
|
|
|
785,802
|
|
|
19,134,279
|
|
|
346,749
|
|
|
6,532,744
|
|
Shares reacquired
|
|
|
(902,209
|
)
|
|
(25,198,749
|
)
|
|
(1,111,661
|
)
|
|
(24,149,321
|
)
|
Increase (decrease)
|
|
|
65,848
|
|
$
|
(1,178,684
|
)
|
|
114,530
|
|
$
|
1,597,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class R2 Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares sold
|
|
|
204,771
|
|
$
|
5,483,876
|
|
|
251,158
|
|
$
|
5,614,455
|
|
Reinvestment of distributions
|
|
|
86,596
|
|
|
2,113,801
|
|
|
31,978
|
|
|
605,355
|
|
Shares reacquired
|
|
|
(134,020
|
)
|
|
(3,572,110
|
)
|
|
(321,112
|
)
|
|
(7,074,467
|
)
|
Increase (decrease)
|
|
|
157,347
|
|
$
|
4,025,567
|
|
|
(37,976
|
)
|
$
|
(854,657
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class R3 Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares sold
|
|
|
1,780,732
|
|
$
|
48,968,354
|
|
|
2,135,683
|
|
$
|
48,145,565
|
|
Reinvestment of distributions
|
|
|
2,402,268
|
|
|
59,143,833
|
|
|
926,107
|
|
|
17,642,341
|
|
Shares reacquired
|
|
|
(1,636,625
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)
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|
(44,158,131
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)
|
|
(2,979,528
|
)
|
|
(65,056,209
|
)
|
Increase
|
|
|
2,546,375
|
|
$
|
63,954,056
|
|
|
82,262
|
|
$
|
731,697
|
|
|
|
*
|
Automatic conversion of Class B shares occurs on the 25th day of the month (or if
the 25th day is not a business day, the next business day thereafter) following the eighth anniversary of the day on which the
purchase order was accepted.
|
27
Approval of Advisory Contract
The Board of Directors of the Fund, including all of the Directors
who are not interested persons of the Fund or of Lord Abbett, annually considers whether to approve the continuation of the existing
management agreement between the Fund and Lord Abbett. In connection with its most recent approval, the Board reviewed materials
relating specifically to the management agreement, as well as numerous materials received throughout the course of the year, including
information about the Fund’s investment performance compared to the performance of its benchmark. Before making its decision
as to the Fund, the Board had the opportunity to ask questions and request further information, taking into account its familiarity
with Lord Abbett gained through its meetings and discussions. These meetings and discussions included the examination of the portfolio
management team conducted by members of the Contract Committee, the deliberations of the Contract Committee, and discussions between
the Contract Committee and Lord Abbett’s management.
The materials received by the Board included, but were not limited
to: (1) information provided by Morningstar Associates, LLC (“Morningstar”) regarding the investment performance of
the Fund compared to the investment performance of a group of funds in the same Morningstar investment category (the “performance
peer group”) and the investment performance of one or more appropriate benchmarks; (2) information provided by Morningstar
regarding the expense ratios, contractual and effective management fee rates, and other expense components for the Fund and one
or more groups of funds in the same Morningstar category, with the same share classes and operational characteristics, including
asset size (the “expense peer group”); (3) information provided by Lord Abbett on the projected expense ratios, management
fee rates, and other expense components for the Fund; (4) sales and redemption information for the Fund; (5) information regarding
Lord Abbett’s financial condition; (6) an analysis of the relative profitability of the management agreement to Lord Abbett;
(7) information provided by Lord Abbett regarding the investment management fees Lord Abbett receives from its other advisory clients
maintaining accounts with a similar investment strategy as the Fund; (8) information regarding the distribution arrangements of
the Fund; and (9) information regarding the personnel and other resources devoted by Lord Abbett to managing the Fund.
Investment Management Services Generally.
The Board considered
the investment management services provided by Lord Abbett to the Fund, including investment research, portfolio management, and
trading, and Lord Abbett’s commitment to compliance with all applicable legal requirements. The Board also observed that
Lord Abbett was solely engaged in the investment management business and accordingly did not experience the conflicts of interest
that may result from being engaged in other lines of business. The Board considered the investment advisory services provided by
Lord Abbett to other clients, the fees charged for the services, and the differences in the nature of the services provided to
the Fund and other Lord Abbett Funds, on the one hand, and the services provided to other clients, on the other.
Investment Performance.
The Board reviewed the Fund’s
investment performance in relation to that of the performance peer group as of various periods ended August 31, 2013. The Board
observed that the Fund’s investment performance was above the median of the performance peer group for each of the periods.
Lord Abbett’s Personnel and Methods.
The Board considered
the qualifications of the personnel providing investment management services to the Fund, in light of its investment objective
and discipline. Among other things, the Board considered the size, experience, and turnover of Lord Abbett’s investment management
staff, Lord Abbett’s investment methodology and philosophy,
28
Approval of Advisory Contract (continued)
and Lord Abbett’s approach to recruiting, training, and
retaining investment management personnel.
Nature and Quality of Other Services.
The Board considered
the nature, quality, costs, and extent of compliance, administrative, and other services performed by Lord Abbett and the Distributor
and the nature and extent of Lord Abbett’s supervision of third party service providers, including the Fund’s transfer
agent and custodian.
Expenses.
The Board considered the expense level of the
Fund and the expense levels of the expense peer group. It also considered the projected expense levels and how those levels would
relate to those of the expense peer group and the amount and nature of the fees paid by shareholders. The Board observed that the
overall expense level of the Fund was well below the median of the expense peer group.
Profitability.
The Board considered the level of Lord
Abbett’s profits in managing the Fund, including a review of Lord Abbett’s methodology for allocating its costs to
its management of the Fund. The Board concluded that the allocation methodology had a reasonable basis and was appropriate. It
considered any profits realized by Lord Abbett in connection with the operation of the Fund, including the fee that Lord Abbett
receives from the Fund for providing administrative services to the Fund, and whether the amount of profit was fair for the management
of the Fund. The Board also considered the profits realized from other business segments of Lord Abbett, which may benefit from
or be related to the Fund’s business. The Board considered Lord Abbett’s profit margins in comparison with available
industry data, both accounting for and ignoring marketing and distribution expenses, and how those profit margins could affect
Lord Abbett’s ability to recruit and retain investment personnel. The Board recognized that Lord Abbett’s profitability
was a factor in enabling it to attract and retain qualified investment management personnel to provide services to the Fund. The
Board concluded that Lord Abbett’s profitability as to the Fund was not excessive.
Economies of Scale.
The Board considered whether there
had been any economies of scale in managing the Fund, whether the Fund had appropriately benefited from any such economies of scale,
and whether there was potential for realization of any further economies of scale. The Board concluded that the existing management
fee schedule, with its breakpoint or breakpoints in the level of the management fee, adequately addressed any economies of scale
in managing the Fund.
Other Benefits to Lord Abbett.
The Board considered the
character and amount of fees paid by the Fund and the Fund’s shareholders to Lord Abbett and the Distributor for services
other than investment advisory services. The Board also considered the revenues and profitability of Lord Abbett’s investment
advisory business apart from its mutual fund business, and the intangible benefits enjoyed by Lord Abbett by virtue of its relationship
with the Fund. The Board observed that the Distributor receives 12b-1 fees from certain of the Lord Abbett Funds as to shares held
in accounts for which there is no other broker of record, may retain a portion of the 12b-1 fees it receives, and receives a portion
of the sales charges on sales and redemptions of some classes of shares. In addition, the Board observed that Lord Abbett accrues
certain benefits for its business of providing investment advice to clients other than the Lord Abbett Funds, but that business
also benefits the Funds. The Board also noted that Lord Abbett, as disclosed in the prospectus of the Fund, has entered into revenue
sharing arrangements with certain entities that distribute shares of the Fund. The Board also took into consideration the investment
research that Lord Abbett receives as a result of Fund brokerage transactions.
29
Approval of Advisory Contract (concluded)
Alternative Arrangements.
The Board considered whether,
instead of approving continuation of the management agreement, it might be in the best interests of the Fund to implement one or
more alternative arrangements, such as continuing to employ Lord Abbett, but on different terms. After considering all of the relevant
factors, the Board unanimously found that continuation of the existing management agreement was in the best interests of the Fund
and its shareholders and voted unanimously to approve the continuation of the management agreement. In considering whether to approve
the continuation of the management agreement, the Board did not identify any single factor as paramount or controlling. This summary
does not discuss in detail all matters considered.
30
Householding
The Fund has adopted a policy that allows it to send only one
copy of the Fund’s prospectus, proxy material, annual report and semiannual report to certain shareholders residing at the
same “household.” This reduces Fund expenses, which benefits you and other shareholders. If you need additional copies
or do not want your mailings to be “householded,” please call Lord Abbett at 888-522-2388 or send a written request
with your name, the name of your fund or funds and your account number or numbers to Lord Abbett Family of Funds, P.O. Box 219336,
Kansas City, MO 64121.
Proxy Voting Policies, Procedures and Records
A description of the policies and procedures that Lord Abbett
uses to vote proxies related to the Fund’s portfolio securities, and information on how Lord Abbett voted the Fund’s
proxies during the 12-month period ended June 30 are available without charge, upon request, (i) by calling 888-522-2388; (ii)
on Lord Abbett’s Website at www.lordabbett.com; and (iii) on the Securities and Exchange Commission’s (“SEC”)
Website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Fund is required to file its complete schedule of portfolio
holdings with the SEC for its first and third fiscal quarters on Form N-Q. Copies of the filings are available without charge,
upon request on the SEC’s Website at www.sec.gov and may be available by calling Lord Abbett at 888-522-2388. You can also
obtain copies of Form N-Q by visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of
the Public Reference Room may be obtained by calling 800-SEC-0330).
31
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This report, when not used for the general information of shareholders of the Fund, is to be distributed only if preceded or accompanied by a current fund prospectus.
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Lord Abbett mutual fund shares are distributed by LORD ABBETT DISTRIBUTOR LLC.
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Lord Abbett Developing Growth Fund,
Inc.
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LADG-3-0114
(03/14)
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