UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: | 811-09597 |
|
LORD ABBETT LARGE-CAP GROWTH FUND |
(Exact name of registrant as specified in charter) |
|
90 Hudson Street, Jersey City, NJ | | 07302 |
(Address of principal executive offices) | | (Zip code) |
|
Christina T. Simmons, Vice President & Assistant Secretary 90 Hudson Street, Jersey City, NJ 07302 |
(Name and address of agent for service) |
|
Registrant’s telephone number, including area code: | (800) 201-6984 | |
|
Date of fiscal year end: | 7/31 | |
|
Date of reporting period: | 1/31/2007 | |
| | | | | | | | |
Item 1: Report to Shareholders.
LORD ABBETT 2007
SEMIANNUAL
REPORT
Lord Abbett Large Cap Growth Fund
For the six-month period ended January 31, 2007
Lord Abbett Large Cap Growth Fund
Semiannual Report
For the six-month period ended January 31, 2007
Dear Shareholders: We are pleased to provide you with this overview of the Lord Abbett Large Cap Growth Fund's performance for the six-month period ended January 31, 2007. On this and the following pages, we discuss the major factors that influenced performance. For detailed and more timely information about the Fund, please visit our Website at www.lordabbett.com, where you also can access the quarterly commentaries of the Fund's portfolio managers.
General information about Lord Abbett mutual funds, as well as in-depth discussion of market trends and investment strategies, is also provided in Lord Abbett Insights, a newsletter accompanying your quarterly account statements. We also encourage you to call Lord Abbett at 800-821-5129 and speak to one of our professionals if you would like more information.
Thank you for investing in Lord Abbett mutual funds. We value the trust that you place in us and look forward to serving your investment needs in the years to come.
From left to right: Robert S. Dow, Director and Chairman of the Lord Abbett Funds; E. Thayer Bigelow, Independent Lead Director of the Lord Abbett Funds; and Daria L. Foster, Director and President of the Lord Abbett Funds.
Best regards,
Robert S. Dow
Chairman
Q: What were the overall market conditions during the six-month period ended January 31, 2007?
A: The S&P Composite 1500® Index1 gained nearly 14% (including dividends) in the six-month period ended January 31, 2007. The positive performance turned in by equities occurred as two very important macro developments unfolded: crude oil prices tumbled and the outlook for short-term interest rates shifted.
Between August 8 and December 31, 2006, oil prices declined roughly 21%, prompting a decline of approximately $0.70 in the average retail cost of a gallon of regular gasoline. As a rule of thumb, every one-cent decline in a gallon of gasoline translates into a $1 billion increase in aggregate discretionary income; therefore,
1
consumers received an extra $70 billion in the fourth quarter, on top of further employment gains. As a result, consumer spending leapt and so did consumer discretionary stocks. Following the strong returns of the consumer discretionary sector, the technology sector also outperformed the broad market. Of course, as the price of crude oil plummeted, so too did the energy sector.
Many market participants were convinced that the Federal Reserve Board (the Fed) would soon lower rates. The yield on the 10-year Treasury bond fell, as did forward rates on short-term deposits, until early December 2006. The financial sector benefited from the prospects of lower short rates; however, a string of positive economic news sent bond investors reeling. The 10-year yield rallied, forward rates rose, and the financial sector stalled. Although the financial sector struggled, led by regional banks, the broader market pushed higher in December and January.
In the six-month period ended January 31, 2007, on a total return basis, large caps (as represented by the S&P 100® Index2) outperformed small and mid caps (as represented by the S&P SmallCap 600® Index3 and the S&P MidCap 400® Index4) by approximately 1.6%, reflecting the superior dividends offered by large caps. The value style of investing continued its streak of outperforming the growth style, but the gap narrowed.
Q: How did the Fund perform during the six-month period ended January 31, 2007?
A: The Fund returned 14.0%, reflecting performance at the net asset value (NAV) of Class A shares, with all distributions reinvested, compared with its benchmark, the Russell 1000® Growth Index,5 which returned 15.1% over the same period.
Q: What were the most significant factors affecting performance?
A: The most significant detractor from the Fund's performance relative to its benchmark was, owing in part to a slightly underweight position, the other energy sector (which includes oil service companies, as well as smaller exploration and production companies, and independent refiners), followed by the materials and processing sector (also owing to an underweight position) and the technology sector.
Among the individual firms that detracted from performance were consumer discretionary holding Circuit City Stores, Inc. (the Fund's number-one detractor), a specialty retailer of brand name consumer electronics, personal computers, entertainment software, and other products; other energy holdings Baker Hughes Inc., a supplier of reservoir-centered products, services, and systems to the worldwide oil and gas industry; Weatherford International Ltd., a provider of equipment and services used for the drilling, completion, and production of oil and natural gas wells; and Schlumberger Ltd., an oil services
2
company; and consumer staples holding CVS Corp., a drugstore chain operator.
The greatest contributor to the Fund's performance relative to its benchmark was the financials services sector, followed by the utilities sector and the healthcare sector.
Among the individual firms that contributed to performance were technology holdings Cisco Systems, Inc. (the Fund's number-one contributor), a supplier of data networking products for the Internet, and Akamai Technologies, Inc., a provider of global delivery services for Internet content, streaming media, and applications and global Internet traffic management; and consumer discretionary holdings Google, Inc., a provider of a Web-based search engine, Hilton Hotels Corp., a global hospitality company and hotel franchiser, and MGM Mirage, a hotel and gaming company.
The Fund's portfolio is actively managed and, therefore, its holdings and weightings of a particular issuer or particular sector as a percentage of portfolio assets are subject to change. Sectors may include many industries.
A prospectus contains important information about a fund, including its investment objectives, risks, charges, and ongoing expenses, which you should carefully consider before investing. To obtain a prospectus on any Lord Abbett mutual fund, please contact your investment professional or Lord Abbett Distributor LLC at 800-874-3733 or visit our Website at www.lordabbett.com. Read the prospectus carefully before investing.
1 The S&P Composite 1500® Index is a broad market portfolio representing the large cap, mid cap, and small cap segments of the U.S. equity market.
2 The S&P 100® Index measures large company U.S. stock market performance. This market capitalization-weighted index is made up of 100 major, blue-chip stocks across diverse industry groups.
3 The S&P SmallCap 600® Index is comprised of 600 small-cap companies that meet specific inclusion criteria to ensure that they are investable and financially viable.
4 The S&P MidCap 400® Index measures the performance of the mid-size company segment of the U.S. market.
5 The Russell 1000® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.
Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment.
Important Performance and Other Information
Performance data quoted reflect past performance and are no guarantee of future results. Current performance may be higher or lower than the performance quoted. The investment return and principal value of an investment in the Fund will fluctuate so that shares, on any given day or when redeemed, may be worth more or less than their original cost. You can obtain performance data current to the most recent month end by calling Lord Abbett at 800-821-5129 or referring to our Website at www.lordabbett.com.
Except where noted, comparative fund performance does not account for the deduction of sales charges and would be different if sales charges were included. The Fund offers additional classes of shares with distinct pricing options. For a full description of the differences in pricing alternatives, please see the Fund's prospectus.
During certain periods shown, expense reimbursements were in place. Without such expense reimbursements, the Fund's returns would have been lower.
The views of the Fund's management and the portfolio holdings described in this report are as of January 31, 2007; these views and portfolio holdings may have changed subsequent to this date, and they do not guarantee the future performance of the markets or the Fund. Information provided in this report should not be considered a recommendation to purchase or sell securities.
A Note about Risk: See Notes to Financial Statements for a discussion of investment risks. For a more detailed discussion of the risks associated with the Fund, please see the Fund's prospectus.
Mutual funds are not insured by the FDIC, are not deposits or other obligations of, or guaranteed by, banks, and are subject to investment risks, including possible loss of principal amount invested.
3
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges on purchase payments (these charges vary among the share classes); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees (these charges vary among the share classes); and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (August 1, 2006 through January 31, 2007).
Actual Expenses
For each class of the Fund, the first line of the table on the following page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period 8/1/06 – 1/31/07" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
For each class of the Fund, the second line of the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
4
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | | Beginning
Account
Value | | Ending
Account
Value | | Expenses
Paid During
Period† | |
| | | 8/1/06 | | 1/31/07 | | 8/1/06 –
1/31/07 | |
| Class A | |
| Actual | | $ | 1,000.00 | | | $ | 1,140.00 | | | $ | 8.09 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,017.65 | | | $ | 7.63 | | |
| Class B | |
| Actual | | $ | 1,000.00 | | | $ | 1,135.80 | | | $ | 11.57 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,014.38 | | | $ | 10.92 | | |
| Class C | |
| Actual | | $ | 1,000.00 | | | $ | 1,133.70 | | | $ | 11.56 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,014.38 | | | $ | 10.92 | | |
| Class P | |
| Actual | | $ | 1,000.00 | | | $ | 1,137.00 | | | $ | 8.62 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,017.08 | | | $ | 8.13 | | |
| Class Y | |
| Actual | | $ | 1,000.00 | | | $ | 1,141.70 | | | $ | 6.21 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,019.43 | | | $ | 5.85 | | |
† For each class of the Fund, expenses are equal to the annualized expense ratio for such class (1.50% for Class A, 2.15% for Classes B and C, 1.60% for Class P and 1.15% for Class Y) multiplied by the average account value over the period, multiplied by 184/365 (to reflect one-half year period).
Portfolio Holdings Presented by Sector
January 31, 2007
| Sector* | | %** | |
| Auto & Transportation | | | 1.37 | % | |
| Consumer Discretionary | | | 17.59 | % | |
| Consumer Staples | | | 7.07 | % | |
| Financial Services | | | 13.30 | % | |
| Healthcare | | | 19.49 | % | |
| Other | | | 1.71 | % | |
| Other Energy | | | 3.08 | % | |
| Producer Durables | | | 7.78 | % | |
| Technology | | | 19.94 | % | |
| Utilities | | | 2.98 | % | |
| Short-Term Investment | | | 5.69 | % | |
| Total | | | 100.00 | % | |
* A sector may be comprised of several industries.
** Represents percent of total investments.
5
Schedule of Investments (unaudited)
January 31, 2007
| Investments | | Shares | | Value
(000) | |
| LONG-TERM INVESTMENTS 95.03% | |
| COMMON STOCKS 94.01% | |
| Aerospace 4.61% | |
| Boeing Co. (The) | | | 83,000 | | | $ | 7,433 | | |
| United Technologies Corp. | | | 53,819 | | | | 3,661 | | |
| Total | | | | | | | 11,094 | | |
| Air Transportation 1.38% | |
| FedEx Corp. | | | 30,000 | | | | 3,312 | | |
| Banks 4.13% | |
Bank of New York Co.,
Inc. (The) | | | 119,000 | | | | 4,761 | | |
| Mellon Financial Corp. | | | 38,000 | | | | 1,624 | | |
| State Street Corp. | | | 50,000 | | | | 3,553 | | |
| Total | | | | | | | 9,938 | | |
| Beverage: Soft Drinks 2.62% | |
| PepsiCo, Inc. | | | 96,600 | | | | 6,302 | | |
| Biotechnology Research & Production 7.00% | |
| Amgen, Inc.* | | | 71,000 | | | | 4,996 | | |
| Baxter Int'l. Inc. | | | 121,000 | | | | 6,009 | | |
| Celgene Corp.* | | | 41,000 | | | | 2,201 | | |
| Genentech, Inc.* | | | 41,700 | | | | 3,643 | | |
| Total | | | | | | | 16,849 | | |
| Communications Technology 6.04% | |
| Cisco Systems, Inc.* | | | 304,000 | | | | 8,084 | | |
| Corning, Inc.* | | | 49,000 | | | | 1,021 | | |
| Ericsson ADR | | | 32,000 | | | | 1,273 | | |
| QUALCOMM Inc. | | | 53,000 | | | | 1,996 | | |
Research In Motion Ltd.
(Canada)*(a) | | | 17,000 | | | | 2,172 | | |
| Total | | | | | | | 14,546 | | |
Computer Services, Software &
Systems 7.79% | |
| Adobe Systems, Inc.* | | | 68,000 | | | | 2,643 | | |
| Akamai Technologies, Inc.* | | | 67,000 | | | | 3,764 | | |
| Investments | | Shares | | Value
(000) | |
Infosys Technologies Ltd.
ADR | | | 62,000 | | | $ | 3,596 | | |
| Microsoft Corp. | | | 284,000 | | | | 8,765 | | |
| Total | | | | | | | 18,768 | | |
| Computer Technology 3.82% | |
| Apple Computer, Inc.* | | | 28,000 | | | | 2,400 | | |
| Network Appliance, Inc.* | | | 152,682 | | | | 5,741 | | |
| NVIDIA Corp.* | | | 34,554 | | | | 1,059 | | |
| Total | | | | | | | 9,200 | | |
| Consumer Electronics 3.02% | |
| Google Inc., Class A* | | | 14,500 | | | | 7,269 | | |
| Diversified Financial Services 6.63% | |
Accenture Ltd., Class A
(Bermuda)(a) | | | 65,000 | | | | 2,454 | | |
| American Express Co. | | | 40,732 | | | | 2,371 | | |
CB Richard Ellis Group
Inc., Class A* | | | 70,000 | | | | 2,633 | | |
Chicago Mercantile
Exchange | | | 7,300 | | | | 4,112 | | |
Goldman Sachs Group,
Inc. (The) | | | 11,000 | | | | 2,334 | | |
| Morgan Stanley | | | 25,000 | | | | 2,070 | | |
| Total | | | | | | | 15,974 | | |
| Diversified Production 2.21% | |
| Danaher Corp. | | | 72,000 | | | | 5,332 | | |
| Drugs & Pharmaceuticals 7.84% | |
| Allergan, Inc. | | | 36,000 | | | | 4,201 | | |
| Gilead Sciences, Inc.* | | | 55,000 | | | | 3,538 | | |
| MedImmune, Inc.* | | | 156,000 | | | | 5,407 | | |
| Roche Holdings Ltd. ADR | | | 49,000 | | | | 4,589 | | |
| Sepracor Inc.* | | | 20,000 | | | | 1,141 | | |
| Total | | | | | | | 18,876 | | |
Electrical Equipment &
Components 1.02% | |
| Emerson Electric Co. | | | 54,712 | | | | 2,460 | | |
See Notes to Financial Statements.
6
Schedule of Investments (unaudited)(continued)
January 31, 2007
| Investments | | Shares | | Value
(000) | |
| Electronics: Medical Systems 0.98% | |
| Medtronic, Inc. | | | 44,000 | | | $ | 2,352 | | |
Electronics: Semi-Conductors/
Components 2.44% | |
| Broadcom Corp., Class A* | | | 78,000 | | | | 2,490 | | |
| Intel Corp. | | | 161,000 | | | | 3,374 | | |
| Total | | | | | | | 5,864 | | |
| Entertainment 0.92% | |
Dreamworks Animation
SKG Inc.* | | | 79,000 | | | | 2,226 | | |
| Financial Information Services 1.31% | |
| Moody's Corp. | | | 44,000 | | | | 3,149 | | |
| Hotel/Motel 3.37% | |
| Hilton Hotels Corp. | | | 104,000 | | | | 3,681 | | |
Starwood Hotels &
Resorts Worldwide, Inc. | | | 71,000 | | | | 4,443 | | |
| Total | | | | | | | 8,124 | | |
| Investment Management Companies 1.34% | |
| T. Rowe Price Group, Inc. | | | 67,000 | | | | 3,215 | | |
| Jewelry Watches & Gemstones 0.99% | |
| Tiffany & Co. | | | 61,000 | | | | 2,395 | | |
Machinery: Oil Well Equipment &
Services 1.42% | |
National Oilwell
Varco, Inc.* | | | 9,000 | | | | 546 | | |
Schlumberger Ltd.
(Netherlands Antilles)(a) | | | 45,200 | | | | 2,870 | | |
| Total | | | | | | | 3,416 | | |
Medical & Dental Instruments &
Supplies 3.83% | |
| St. Jude Medical, Inc.* | | | 156,000 | | | | 6,671 | | |
| Stryker Corp. | | | 41,000 | | | | 2,539 | | |
| Total | | | | | | | 9,210 | | |
| Investments | | Shares | | Value
(000) | |
| Multi-Sector Companies 1.72% | |
| General Electric Co. | | | 114,818 | | | $ | 4,139 | | |
| Oil: Crude Producers 1.68% | |
| Devon Energy Corp. | | | 16,000 | | | | 1,122 | | |
| XTO Energy Inc. | | | 58,000 | | | | 2,927 | | |
| Total | | | | | | | 4,049 | | |
| Restaurants 0.97% | |
Tim Hortons Inc.
(Canada)(a) | | | 75,379 | | | | 2,337 | | |
| Retail 8.44% | |
| Best Buy Co., Inc. | | | 80,172 | | | | 4,041 | | |
Federated Department
Stores, Inc. | | | 42,000 | | | | 1,742 | | |
| GameStop Corp.* | | | 78,000 | | | | 4,167 | | |
| Staples, Inc. | | | 183,000 | | | | 4,707 | | |
| Target Corp. | | | 92,500 | | | | 5,676 | | |
| Total | | | | | | | 20,333 | | |
| Soaps & Household Chemicals 3.49% | |
| Colgate-Palmolive Co. | | | 43,352 | | | | 2,961 | | |
Procter & Gamble
Co. (The) | | | 83,908 | | | | 5,443 | | |
| Total | | | | | | | 8,404 | | |
| Utilities: Cable TV & Radio 3.00% | |
| Comcast Corp., Class A* | | | 163,000 | | | | 7,224 | | |
Total Common Stocks
(cost $209,167,914) | | | | | | | 226,357 | | |
| | | U.S. $
Value
(000) | |
| FOREIGN COMMON STOCK 1.02% | |
| United Kingdom | |
Tesco plc(b)
(cost $2,225,742) | | | 299,000 | | | | 2,456 | | |
Total Long-Term Investments
(cost $211,393,656) | | | | | | | 228,813 | | |
See Notes to Financial Statements.
7
Schedule of Investments (unaudited)(concluded)
January 31, 2007
| | | Principal
Amount
(000) | | Value
(000) | |
| SHORT-TERM INVESTMENT 5.73% | |
| Repurchase Agreement | |
Repurchase Agreement
dated 1/31/2007,
4.65% due 2/1/2007
with State Street
Bank & Trust Co.
collateralized by
$13,215,000 of Federal
National Mortgage Assoc.
at 6.625% due 11/15/2010;
value: $14,073,975;
proceeds: $13,798,141
(cost $13,796,359) | | $ | 13,796 | | | $ | 13,796 | | |
Total Investments in
Securities 100.76%
(cost $225,190,015) | | | | | 242,609 | | |
Liabilities in Excess of
Other Assets (0.76%) | | | | | (1,822 | ) | |
| Net Assets 100.00% | | | | $ | 240,787 | | |
ADR American Depositary Receipt
* Non-income producing security.
(a) Foreign security traded in U.S. dollars.
(b) Investment in non-U.S. dollar denominated security.
See Notes to Financial Statements.
8
Statement of Assets and Liabilities (unaudited)
January 31, 2007
| ASSETS: | |
| Investments in securities, at value (cost $225,190,015) | | $ | 242,608,992 | | |
| Cash | | | 859,320 | | |
| Receivables: | |
| Investment securities sold | | | 7,037,437 | | |
| Capital shares sold | | | 1,203,883 | | |
| Interest and dividends | | | 92,966 | | |
| From advisor (See Note 3) | | | 12,361 | | |
| Prepaid expenses and other assets | | | 48,871 | | |
| Total assets | | | 251,863,830 | | |
| LIABILITIES: | |
| Payables: | |
| Investment securities purchased | | | 9,974,296 | | |
| Capital shares reacquired | | | 566,248 | | |
| Management fee | | | 151,879 | | |
| 12b-1 distribution fees | | | 131,333 | | |
| To affiliate (See Note 3) | | | 17,643 | | |
| Trustees' fees | | | 17,630 | | |
| Fund administration | | | 12,829 | | |
| Accrued expenses and other liabilities | | | 205,183 | | |
| Total liabilities | | | 11,077,041 | | |
| NET ASSETS | | $ | 240,786,789 | | |
| COMPOSITION OF NET ASSETS: | |
| Paid-in capital | | $ | 275,687,865 | | |
| Accumulated net investment loss | | | (882,191 | ) | |
| Accumulated net realized loss on investments and foreign currency related transactions | | | (51,437,862 | ) | |
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies | | | 17,418,977 | | |
| Net Assets | | $ | 240,786,789 | | |
| Net assets by class: | |
| Class A Shares | | $ | 121,735,129 | | |
| Class B Shares | | $ | 34,310,811 | | |
| Class C Shares | | $ | 40,525,447 | | |
| Class P Shares | | $ | 7,998 | | |
| Class Y Shares | | $ | 44,207,404 | | |
Outstanding shares by class
(unlimited number of authorized shares of beneficial interest): | | | | | |
| Class A Shares | | | 21,079,676 | | |
| Class B Shares | | | 6,218,288 | | |
| Class C Shares | | | 7,351,326 | | |
| Class P Shares | | | 1,376 | | |
| Class Y Shares | | | 7,627,884 | | |
Net asset value, offering and redemption price per share
(Net assets divided by outstanding shares): | | | | | |
| Class A Shares-Net asset value | | $ | 5.78 | | |
Class A Shares-Maximum offering price
(Net asset value plus sales charge of 5.75%) | | $ | 6.13 | | |
| Class B Shares-Net asset value | | $ | 5.52 | | |
| Class C Shares-Net asset value | | $ | 5.51 | | |
| Class P Shares-Net asset value | | $ | 5.81 | | |
| Class Y Shares-Net asset value | | $ | 5.80 | | |
See Notes to Financial Statements.
9
Statement of Operations (unaudited)
For the Six Months Ended January 31, 2007
| Investment income: | |
| Dividends | | $ | 796,385 | | |
| Interest | | | 186,202 | | |
| Total investment income | | | 982,587 | | |
| Expenses: | |
| Management fee | | | 838,748 | | |
| 12b-1 distribution plan-Class A | | | 207,088 | | |
| 12b-1 distribution plan-Class B | | | 165,457 | | |
| 12b-1 distribution plan-Class C | | | 185,543 | | |
| 12b-1 distribution plan-Class P | | | 29 | | |
| Shareholder servicing | | | 348,757 | | |
| Subsidy (See Note 3) | | | 58,651 | | |
| Registration | | | 47,486 | | |
| Fund administration | | | 44,733 | | |
| Reports to shareholders | | | 35,925 | | |
| Professional | | | 23,901 | | |
| Custody | | | 9,549 | | |
| Trustees' fees | | | 2,857 | | |
| Other | | | 3,390 | | |
| Gross expenses | | | 1,972,114 | | |
| Expense reductions (See Note 7) | | | (3,232 | ) | |
| Expenses assumed by advisor (See Note 3) | | | (124,688 | ) | |
| Net expenses | | | 1,844,194 | | |
| Net investment loss | | | (861,607 | ) | |
| Net realized and unrealized gain: | |
| Net realized gain on investments and foreign currency related transactions | | | 9,609,372 | | |
Net change in unrealized appreciation on investments and
translation of assets and liabilities denominated in foreign currencies | | | 19,236,182 | | |
| Net realized and unrealized gain | | | 28,845,554 | | |
| Net Increase in Net Assets Resulting From Operations | | $ | 27,983,947 | | |
See Notes to Financial Statements.
10
Statements of Changes in Net Assets
| INCREASE IN NET ASSETS | | For the Six Months Ended
January 31, 2007
(unaudited) | | For the Year Ended
July 31, 2006 | |
| Operations: | |
| Net investment loss | | $ | (861,607 | ) | | $ | (1,428,639 | ) | |
Net realized gain on investments and foreign currency
related transactions | | | 9,609,372 | | | | 9,665,747 | | |
Net change in unrealized appreciation (depreciation) on
investments and translation of assets and liabilities
denominated in foreign currencies | | | 19,236,182 | | | | (17,094,912 | ) | |
| Net increase (decrease) in net assets resulting from operations | | | 27,983,947 | | | | (8,857,804 | ) | |
| Capital share transactions (See Note 11): | |
| Net proceeds from sales of shares | | | 39,962,889 | | | | 114,591,043 | | |
| Cost of shares reacquired | | | (28,249,385 | ) | | | (43,993,545 | ) | |
Net increase in net assets resulting
from capital share transactions | | | 11,713,504 | | | | 70,597,498 | | |
| Net increase in net assets | | | 39,697,451 | | | | 61,739,694 | | |
| NET ASSETS: | |
| Beginning of period | | $ | 201,089,338 | | | $ | 139,349,644 | | |
| End of period | | $ | 240,786,789 | | | $ | 201,089,338 | | |
| Accumulated net investment loss | | $ | (882,191 | ) | | $ | (20,584 | ) | |
See Notes to Financial Statements.
11
Financial Highlights
| | | Class A Shares | |
| | | Six Months
Ended
1/31/2007 | | Year Ended 7/31 | |
| | | (unaudited) | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |
| Per Share Operating Performance | |
| Net asset value, beginning of period | | $ | 5.07 | | | $ | 5.19 | | | $ | 4.62 | | | $ | 4.41 | | | $ | 4.02 | | | $ | 6.33 | | |
| Investment operations: | |
| Net investment loss(a) | | | (.02 | ) | | | (.03 | ) | | | (.01 | ) | | | (.05 | ) | | | (.04 | ) | | | (.07 | ) | |
Net realized and unrealized
gain (loss) | | | .73 | | | | (.09 | ) | | | .58 | | | | .26 | | | | .43 | | | | (2.24 | ) | |
Total from investment
operations | | | .71 | | | | (.12 | ) | | | .57 | | | | .21 | | | | .39 | | | | (2.31 | ) | |
| Net asset value, end of period | | $ | 5.78 | | | $ | 5.07 | | | $ | 5.19 | | | $ | 4.62 | | | $ | 4.41 | | | $ | 4.02 | | |
| Total Return(b) | | | 14.00 | %(d) | | | (2.31 | )% | | | 12.34 | % | | | 4.76 | % | | | 9.70 | % | | | (36.49 | )% | |
| Ratios to Average Net Assets: | |
Expenses, including expense
reductions and
expenses assumed | | | .76 | %(d) | | | 1.49 | % | | | 1.65 | % | | | 1.90 | % | | | 2.06 | % | | | 2.02 | % | |
Expenses, excluding expense
reductions and including
expenses assumed | | | .76 | %(d) | | | 1.49 | % | | | 1.65 | % | | | 1.90 | % | | | 2.06 | % | | | 2.02 | % | |
Expenses, excluding expense
reductions and
expenses assumed | | | .82 | %(d) | | | 1.68 | % | | | 1.85 | % | | | 1.90 | % | | | 2.06 | % | | | 2.02 | % | |
| Net investment income loss | | | (.31 | )%(d) | | | (.61 | )% | | | (.25 | )% | | | (.98 | )% | | | (1.06 | )% | | | (1.29 | )% | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 121,735 | | | $ | 110,300 | | | $ | 88,882 | | | $ | 79,114 | | | $ | 65,178 | | | $ | 56,665 | | |
| Portfolio turnover rate | | | 83.37 | %(d) | | | 188.26 | % | | | 103.08 | % | | | 28.15 | % | | | 47.02 | % | | | 42.08 | % | |
See Notes to Financial Statements.
12
Financial Highlights (continued)
| | | Class B Shares | |
| | | Six Months
Ended
1/31/2007 | | Year Ended 7/31 | |
| | | (unaudited) | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |
| Per Share Operating Performance | |
| Net asset value, beginning of period | | $ | 4.86 | | | $ | 5.01 | | | $ | 4.48 | | | $ | 4.31 | | | $ | 3.95 | | | $ | 6.26 | | |
| Investment operations: | |
| Net investment loss(a) | | | (.03 | ) | | | (.07 | ) | | | (.04 | ) | | | (.07 | ) | | | (.07 | ) | | | (.10 | ) | |
Net realized and unrealized
gain (loss) | | | .69 | | | | (.08 | ) | | | .57 | | | | .24 | | | | .43 | | | | (2.21 | ) | |
Total from investment
operations | | | .66 | | | | (.15 | ) | | | .53 | | | | .17 | | | | .36 | | | | (2.31 | ) | |
| Net asset value, end of period | | $ | 5.52 | | | $ | 4.86 | | | $ | 5.01 | | | $ | 4.48 | | | $ | 4.31 | | | $ | 3.95 | | |
| Total Return(b) | | | 13.58 | %(d) | | | (2.99 | )% | | | 11.83 | % | | | 3.94 | % | | | 9.11 | % | | | (36.90 | )% | |
| Ratios to Average Net Assets: | |
Expenses, including expense
reductions and
expenses assumed | | | 1.08 | %(d) | | | 2.14 | % | | | 2.29 | % | | | 2.52 | % | | | 2.67 | % | | | 2.63 | % | |
Expenses, excluding expense
reductions and including
expenses assumed | | | 1.08 | %(d) | | | 2.14 | % | | | 2.29 | % | | | 2.52 | % | | | 2.67 | % | | | 2.63 | % | |
Expenses, excluding expense
reductions and
expenses assumed | | | 1.14 | %(d) | | | 2.33 | % | | | 2.49 | % | | | 2.52 | % | | | 2.67 | % | | | 2.63 | % | |
| Net investment loss | | | (.64 | )%(d) | | | (1.26 | )% | | | (.90 | )% | | | (1.60 | )% | | | (1.67 | )% | | | (1.92 | )% | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 34,311 | | | $ | 30,200 | | | $ | 25,924 | | | $ | 20,731 | | | $ | 15,452 | | | $ | 10,041 | | |
| Portfolio turnover rate | | | 83.37 | %(d) | | | 188.26 | % | | | 103.08 | % | | | 28.15 | % | | | 47.02 | % | | | 42.08 | % | |
See Notes to Financial Statements.
13
Financial Highlights (continued)
| | | Class C Shares | |
| | | Six Months
Ended
1/31/2007 | | Year Ended 7/31 | |
| | | (unaudited) | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |
| Per Share Operating Performance | |
| Net asset value, beginning of period | | $ | 4.86 | | | $ | 5.00 | | | $ | 4.48 | | | $ | 4.31 | | | $ | 3.95 | | | $ | 6.25 | | |
| Investment operations: | |
| Net investment loss(a) | | | (.03 | ) | | | (.07 | ) | | | (.04 | ) | | | (.08 | ) | | | (.07 | ) | | | (.10 | ) | |
Net realized and unrealized
gain (loss) | | | .68 | | | | (.07 | ) | | | .56 | | | | .25 | | | | .43 | | | | (2.20 | ) | |
Total from investment
operations | | | .65 | | | | (.14 | ) | | | .52 | | | | .17 | | | | .36 | | | | (2.30 | ) | |
| Net asset value, end of period | | $ | 5.51 | | | $ | 4.86 | | | $ | 5.00 | | | $ | 4.48 | | | $ | 4.31 | | | $ | 3.95 | | |
| Total Return(b) | | | 13.37 | %(d) | | | (2.80 | )% | | | 11.61 | % | | | 3.94 | % | | | 9.11 | % | | | (36.80 | )% | |
| Ratios to Average Net Assets: | |
Expenses, including expense
reductions and
expenses assumed | | | 1.08 | %(d) | | | 2.14 | % | | | 2.29 | % | | | 2.52 | % | | | 2.67 | % | | | 2.63 | % | |
Expenses, excluding expense
reductions and including
expenses assumed | | | 1.08 | %(d) | | | 2.14 | % | | | 2.29 | % | | | 2.52 | % | | | 2.67 | % | | | 2.63 | % | |
Expenses, excluding expense
reductions and
expenses assumed | | | 1.14 | %(d) | | | 2.33 | % | | | 2.49 | % | | | 2.52 | % | | | 2.67 | % | | | 2.63 | % | |
| Net investment income loss | | | (.64 | )%(d) | | | (1.26 | )% | | | (.90 | )% | | | (1.60 | )% | | | (1.67 | )% | | | (1.91 | )% | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 40,525 | | | $ | 33,206 | | | $ | 22,867 | | | $ | 16,648 | | | $ | 10,550 | | | $ | 5,731 | | |
| Portfolio turnover rate | | | 83.37 | %(d) | | | 188.26 | % | | | 103.08 | % | | | 28.15 | % | | | 47.02 | % | | | 42.08 | % | |
See Notes to Financial Statements.
14
Financial Highlights (continued)
| | | Class P Shares | |
| | | Six Months
Ended
1/31/2007 | | Year Ended 7/31 | |
| | | (unaudited) | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |
| Per Share Operating Performance | |
| Net asset value, beginning of period | | $ | 5.11 | | | $ | 5.23 | | | $ | 4.65 | | | $ | 4.43 | | | $ | 4.03 | | | $ | 6.32 | | |
| Investment operations: | |
| Net investment loss(a) | | | (.02 | ) | | | (.03 | ) | | | (.01 | ) | | | (.04 | ) | | | (.03 | ) | | | (.05 | ) | |
Net realized and unrealized
gain (loss) | | | .72 | | | | (.09 | ) | | | .59 | | | | .26 | | | | .43 | | | | (2.24 | ) | |
Total from investment
operations | | | .70 | | | | (.12 | ) | | | .58 | | | | .22 | | | | .40 | | | | (2.29 | ) | |
| Net asset value, end of period | | $ | 5.81 | | | $ | 5.11 | | | $ | 5.23 | | | $ | 4.65 | | | $ | 4.43 | | | $ | 4.03 | | |
| Total Return(b) | | | 13.70 | %(d) | | | (2.29 | )% | | | 12.47 | % | | | 4.97 | % | | | 9.93 | % | | | (36.23 | )% | |
| Ratios to Average Net Assets: | |
Expenses, including expense
reductions and
expenses assumed | | | .81 | %(d) | | | 1.57 | % | | | 1.53 | % | | | 1.97 | %† | | | 2.12 | %† | | | 2.08 | % | |
Expenses, excluding expense
reductions and including
expenses assumed | | | .81 | %(d) | | | 1.57 | % | | | 1.53 | % | | | 1.97 | %† | | | 2.12 | %† | | | 2.08 | % | |
Expenses, excluding expense
reductions and
expenses assumed | | | .87 | %(d) | | | 1.70 | % | | | 1.64 | % | | | 1.97 | %† | | | 2.12 | %† | | | 2.08 | % | |
| Net investment loss | | | (.36 | )%(d) | | | (.60 | )% | | | (.17 | )% | | | (1.05 | )%† | | | (1.12 | )% | | | (1.35 | )% | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 8 | | | $ | 12 | | | $ | 1 | | | $ | 1 | | | $ | 1 | | | $ | – | (c) | |
| Portfolio turnover rate | | | 83.37 | %(d) | | | 188.26 | % | | | 103.08 | % | | | 28.15 | % | | | 47.02 | % | | | 42.08 | % | |
See Notes to Financial Statements.
15
Financial Highlights (concluded)
| | | Class Y Shares | |
| | | Six Months
Ended
1/31/2007 | | Year Ended 7/31 | |
| | | (unaudited) | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |
| Per Share Operating Performance | |
| Net asset value, beginning of period | | $ | 5.08 | | | $ | 5.18 | | | $ | 4.59 | | | $ | 4.35 | | | $ | 4.00 | | | $ | 6.31 | | |
| Investment operations: | |
| Net investment income (loss)(a) | | | (.01 | ) | | | (.01 | ) | | | .01 | | | | (.01 | ) | | | (.07 | ) | | | (.08 | ) | |
Net realized and unrealized
gain (loss) | | | .73 | | | | (.09 | ) | | | .58 | | | | .25 | | | | .42 | | | | (2.23 | ) | |
Total from investment
operations | | | .72 | | | | (.10 | ) | | | .59 | | | | .24 | | | | .35 | | | | (2.31 | ) | |
| Net asset value, end of period | | $ | 5.80 | | | $ | 5.08 | | | $ | 5.18 | | | $ | 4.59 | | | $ | 4.35 | | | $ | 4.00 | | |
| Total Return(b) | | | 14.17 | %(d) | | | (1.93 | )% | | | 12.85 | % | | | 5.52 | % | | | 8.75 | % | | | (36.61 | )% | |
| Ratios to Average Net Assets: | |
Expenses, including expense
reductions and
expenses assumed | | | .58 | %(d) | | | 1.14 | % | | | 1.26 | % | | | 1.52 | %† | | | 1.67 | %† | | | 1.63 | % | |
Expenses, excluding expense
reductions and including
expenses assumed | | | .58 | %(d) | | | 1.14 | % | | | 1.26 | % | | | 1.52 | %† | | | 1.67 | %† | | | 1.63 | % | |
Expenses, excluding expense
reductions and
expenses assumed | | | .64 | %(d) | | | 1.30 | % | | | 1.52 | % | | | 1.52 | %† | | | 1.67 | %† | | | 1.63 | % | |
| Net investment income (loss) | | | (.14 | )%(d) | | | (.19 | )% | | | .23 | % | | | (.60 | )%† | | | (.67 | )%† | | | (.87 | )% | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 44,207 | | | $ | 27,371 | | | $ | 1,676 | | | $ | 1 | | | $ | – | (c) | | $ | – | (c) | |
| Portfolio turnover rate | | | 83.37 | %(d) | | | 188.26 | % | | | 103.08 | % | | | 28.15 | % | | | 47.02 | % | | | 42.08 | % | |
† The ratios have been determined on a Fund basis.
(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) Amount represents less than $1,000.
(d) Not Annualized.
See Notes to Financial Statements.
16
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Lord Abbett Large-Cap Growth Fund (the "Fund") is registered under the Investment Company Act of 1940 (the "Act") as a diversified, open-end management investment company. The Fund was organized as a Delaware Statutory Trust on September 29, 1999. The Fund commenced operations on December 15, 1999, and the Securities and Exchange Commission declared the Fund effective and each class of shares became available to the public on December 30, 1999.
The Fund's investment objective is to seek long-term capital growth. The Fund offers five classes of shares: Classes A, B, C, P and Y, 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 the Class B, C, P and Y shares, although there may be a contingent deferred sales charge ("CDSC") as follows: certain redemptions of Class A shares made within 12 months (24 months if shares were purchased prior to November 1, 2004) following certain purchases made without a sales charge; 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 convert to Class A shares on the eighth anniversary of the original purchase of Class B shares.
The preparation of 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–Securities traded on any recognized U.S. or non-U.S. exchange or on NASDAQ, Inc. 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 more accurately 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. Securities for which market quotatio ns are not readily available are valued at fair value as determined by management and approved in good faith by the Board of Directors. Short-term securities with 60 days or less remaining to maturity are valued using the amortized cost method, which approximates current market 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. Discounts are accreted and premiums are amortized using
17
Notes to Financial Statements (unaudited)(continued)
the effective interest method. Investment income is allocated to each class of shares based upon the relative proportion of net assets at the beginning of the day.
(d) Federal 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 Federal income tax provision is required.
(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, and P shares bear their class-specific share of all expenses and fees relating to the Fund's 12b-1 Distribution Plans.
(f) Foreign Transactions–The books and records of the Fund are maintained in U.S. dollars and transactions denominated in foreign currencies are recorded in the Fund's records at the rate prevailing when earned or recorded. Asset and liability accounts that are denominated in foreign currencies are adjusted to reflect current exchange rates. The resultant exchange gains and losses are included as Net realized gain on investments and foreign currency related transactions on the Statement of Operations. The Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in market prices of the securities.
(g) Repurchase Agreements–The Fund may enter into repurchase agreements with respect to securities. A repurchase agreement is a transaction in which the 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 value of those securities has dec lined, the Fund may incur a loss upon disposition of the securities.
3. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management Fees
The Fund has a management agreement with Lord, Abbett & Co. LLC ("Lord Abbett") pursuant to which Lord Abbett supplies the Fund with investment management services and executive and other personnel, pays the remuneration of officers, 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 rates:
| First $1 billion | | | .75 | % | |
| Next $1 billion | | | .70 | % | |
| Over $2 billion | | | .65 | % | |
For the six months ended January 31, 2007, the effective management fee paid to Lord Abbett was at a rate of .75% of the Fund's average daily net assets.
18
Notes to Financial Statements (unaudited)(continued)
Lord Abbett provides certain administrative services to the Fund pursuant to an Administrative Services Agreement at an annual rate of .04% of the Fund's average daily net assets.
For the period August 1, 2006 through November 30, 2007, Lord Abbett contractually agreed to reimburse the Fund to the extent necessary so that each class' net annual operating expenses do not exceed the following annual rates:
| Class | | % of Average Daily Net Assets | |
| A | | | 1.50 | % | |
| B | | | 2.15 | % | |
| C | | | 2.15 | % | |
| P | | | 1.60 | % | |
| Y | | | 1.15 | % | |
The Fund, along with certain other funds managed by Lord Abbett (the "Underlying Funds"), has entered into a Servicing Arrangement with World Growth & Income Strategy Fund and 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 fees and distribution and service fees) of the Fund of Funds in proportion to the average daily value of Underlying Fund shares owned by the 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.
12b-1 Distribution Plan
The Fund has adopted a distribution plan with respect to Class A, B, C and P 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 ("Distributor"), an affiliate of Lord Abbett. The fees are accrued daily at annual rates based upon average daily net assets as follows:
| Fee | | Class A | | Class B | | Class C | | Class P | |
| Service | | | .25 | % | | | .25 | % | | | .25 | % | | | .20 | % | |
| Distribution | | | .10 | %(1) | | | .75 | % | | | .75 | % | | | .25 | % | |
(1) The amount of CDSC collected by the Fund for the six months ended January 31, 2007 was $2,620.
Class Y does 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, 2007:
Distributor
Commissions | | Dealers'
Concessions | |
| $ | 41,728 | | | $ | 223,558 | | |
Distributor received CDSCs of $7,620 and $3,136 for Class A and Class C shares, respectively, for the six months ended January 31, 2007.
Two Trustees and certain of the Fund's officers have an interest in Lord Abbett.
19
Notes to Financial Statements (unaudited)(continued)
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYFORWARD
Dividends from net investment income, if any, are declared and paid at least annually. Taxable net realized gains from investment transactions, reduced by 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 amount 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 reclassified within the components of net assets based on their federal tax basis treatment; temporary di fferences do not require reclassification. Dividends and distributions, which exceed earnings and profits for tax purposes, are reported as a tax return of capital.
As of July 31, 2006, the capital loss carryforwards along with the related expiration dates are as follows:
| 2010 | | 2011 | | 2012 | | Total | |
| $ | 7,924,324 | | | $ | 47,696,550 | | | $ | 3,496,442 | | | $ | 59,117,316 | | |
As of January 31, 2007, the aggregate unrealized security gains and losses based on cost for U.S. Federal income tax purposes are as follows:
| Tax cost | | $ | 227,119,933 | | |
| Gross unrealized gain | | | 17,161,345 | | |
| Gross unrealized loss | | | (1,672,286 | ) | |
| Net unrealized security gain | | $ | 15,489,059 | | |
The difference between book-basis and tax-basis unrealized gains (losses) is attributable to wash sales.
5. PORTFOLIO SECURITIES TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments) for the six months ended January 31, 2007 are as follows:
| Purchases | | Sales | |
| $ | 192,501,584 | | | $ | 178,020,764 | | |
There were no purchases or sales of U.S. Government securities for the six months ended January 31, 2007.
6. TRUSTEES' REMUNERATION
The Fund's officers and the two Trustees, who are associated with Lord Abbett, do not receive any compensation from the Fund for serving in such capacities. Outside Trustees' 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 outside Trustees under which outside Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of Trustees' fees. The deferred
20
Notes to Financial Statements (unaudited)(continued)
amounts are treated as though equivalent dollar amounts have been invested proportionately in the funds. Such amounts and earnings accrued thereon are included in Trustees' fees on the Statement of Operations and Trustees' 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.
7. EXPENSE REDUCTIONS
The Fund has entered into arrangements 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.
8. LINE OF CREDIT
The Fund, along with certain other funds managed by Lord Abbett, has available a $250,000,000 unsecured revolving credit facility ("Facility") from a consortium of banks, to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Any borrowings under this Facility will bear interest at current market rates as defined in the agreement. The fee for this Facility is at an annual rate of .08%. As of January 31, 2007, there were no loans outstanding pursuant to this Facility nor was the Facility utilized at any time during the six months ended January 31, 2007.
9. CUSTODIAN AND ACCOUNTING AGENT
State Street Bank & Trust Company ("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.
10. INVESTMENT RISKS
The Fund is subject to the general risks and considerations associated with equity investing as well as the particular risks associated with growth stocks. The value of an investment will fluctuate in response to movements in the stock market in general, and to the changing prospects of individual companies in which the Fund invests. 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.
These factors can affect the Fund's performance.
21
Notes to Financial Statements (unaudited)(concluded)
11. SUMMARY OF CAPITAL TRANSACTIONS
Transactions in shares of beneficial interest are as follows:
| | | Six Months Ended
January 31, 2007
(unaudited) | | Year Ended
July 31, 2006 | |
| Class A Shares | | Shares | | Amount | | Shares | | Amount | |
| Shares sold | | | 2,755,507 | | | $ | 15,284,908 | | | | 10,063,104 | | | $ | 55,101,750 | | |
| Shares reacquired | | | (3,422,145 | ) | | | (18,832,089 | ) | | | (5,447,703 | ) | | | (29,445,581 | ) | |
| Increase (decrease) | | | (666,638 | ) | | $ | (3,547,181 | ) | | | 4,615,401 | | | $ | 25,656,169 | | |
| Class B Shares | |
| Shares sold | | | 714,032 | | | $ | 3,754,486 | | | | 2,354,195 | | | $ | 12,381,974 | | |
| Shares reacquired | | | (707,120 | ) | | | (3,732,931 | ) | | | (1,320,507 | ) | | | (6,847,058 | ) | |
| Increase | | | 6,912 | | | $ | 21,555 | | | | 1,033,688 | | | $ | 5,534,916 | | |
| Class C Shares | |
| Shares sold | | | 1,520,159 | | | $ | 8,056,042 | | | | 3,448,716 | | | $ | 18,033,254 | | |
| Shares reacquired | | | (1,004,244 | ) | | | (5,307,918 | ) | | | (1,183,962 | ) | | | (6,174,068 | ) | |
| Increase | | | 515,915 | | | $ | 2,748,124 | | | | 2,264,754 | | | $ | 11,859,186 | | |
| Class P Shares | |
| Shares sold | | | 1,441 | | | $ | 7,997 | | | | 2,320 | | | $ | 13,015 | | |
| Shares reacquired | | | (2,497 | ) | | | (14,486 | ) | | | - | | | | - | | |
| Increase (decrease) | | | (1,056 | ) | | $ | (6,489 | ) | | | 2,320 | | | $ | 13,015 | | |
| Class Y Shares | |
| Shares sold | | | 2,305,420 | | | $ | 12,859,456 | | | | 5,342,926 | | | $ | 29,061,050 | | |
| Shares reacquired | | | (64,520 | ) | | | (361,961 | ) | | | (279,727 | ) | | | (1,526,838 | ) | |
| Increase | | | 2,240,900 | | | $ | 12,497,495 | | | | 5,063,199 | | | $ | 27,534,212 | | |
12. RECENT ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position must meet before being recognized in the financial statements. The Fund will adopt FIN 48 no later than January 31, 2008 and the impact to the Fund's financial statements, if any, is currently being assessed.
In September 2006, Statement of Financial Accounting Standards No.157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures.
22
Supplemental Proxy Information (unaudited)
A meeting of the Fund's shareholders was held on December 18, 2006. The meeting was held for the purpose of approving the election of the following nine (9) Directors:
• E. Thayer Bigelow
• William H.T. Bush
• Robert B. Calhoun, Jr.
• Robert S. Dow
• Daria L. Foster
• Julie A. Hill
• Franklin W. Hobbs
• Thomas J. Neff
• James L.L. Tullis
The results of the proxy solicitation on the preceding matter were as follows:
| Matter | | Votes For | | Votes
Against | | Votes
Withheld | | Abstentions | |
| E. Thayer Bigelow | | | 25,008,700.284 | | | | 126,041.556 | | | | – | | | | – | | |
| William H.T. Bush | | | 24,999,018.382 | | | | 135,723.458 | | | | – | | | | – | | |
| Robert B. Calhoun, Jr. | | | 25,005,565.217 | | | | 129,176.623 | | | | – | | | | – | | |
| Robert S. Dow | | | 24,994,954.985 | | | | 139,786.855 | | | | – | | | | – | | |
| Daria L. Foster | | | 25,015,951.637 | | | | 118,790.203 | | | | – | | | | – | | |
| Julie A. Hill | | | 25,006,394.400 | | | | 128,347.440 | | | | – | | | | – | | |
| Franklin W. Hobbs | | | 25,002,537.646 | | | | 132,204.194 | | | | – | | | | – | | |
| Thomas J. Neff | | | 25,006,966.470 | | | | 127,775.370 | | | | – | | | | – | | |
| James L.L. Tullis | | | 25,003,020.362 | | | | 131,721.478 | | | | – | | | | – | | |
23
Approval of Advisory Contract
At meetings on December 11 and 12, 2006, the Board, including all of the Trustees who are not interested persons, considered whether to approve the continuation of the existing management agreement between the Fund and Lord Abbett. In addition to the materials the Board had reviewed throughout the course of the year, the Board received materials relating to the management agreement before the meeting and had the opportunity to ask questions and request further information in connection with its consideration. The Board also took into account its familiarity with Lord Abbett gained through its previous meetings and discussions, and the examination of the portfolio management team conducted by members of the Contracts Committee during the year.
The materials received by the Board included, but were not limited to, (1) information provided by Lipper Inc. regarding the investment performance of the Fund compared to the investment performance of one or more groups of funds with substantially similar investment objectives (the "performance universe") and to the investment performance of an appropriate securities index (if such an index existed), for various time periods each ending September 30, 2006, (2) information on the effective management fee rates and expense ratios for one or more groups of funds with similar objectives and similar size (the "peer expense group"), (3) sales and redemption information for the Fund, (4) information regarding Lord Abbett's financial condition, (5) an analysis of the relative profitability of the management agreement to Lord Abbett, (6) information regarding the distribution arrangements of the Fund, and (7) 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 relevant 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 resulting from being engaged in other lines of business. The Board noted that Lord Abbett did not use brokerage commissions to purchase third-party research. 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 and Compliance. The Board reviewed the Fund's investment performance versus that of the performance universe, both in terms of total return and in terms of other statistical measures. The Board observed that the investment performance of the Class A shares of the Fund ranked in the third quintile of its performance universe for the nine-month and one-year periods, in the fourth quintile for the three-year period, and in the fifth quintile for the five-year period. The Board also observed that investment performance was above that of the Lipper Large-Cap Growth Index for the nine-month and one-year periods and below that of the Index for the three-year and five-year 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, they considered the size, experience, and turnover rates of Lord Abbett's investment management staff, Lord Abbett's investment methodology and philosophy, and Lord Abbett's approach to recruiting, training, and retaining investment management personnel. The Board also noted that Lord Abbett had made a significant change in
24
its investment personnel in the growth area in 2005 with the hiring of Bruce Bartlett as Director of Growth Equities and as portfolio manager for the Fund. The Board determined that Lord Abbett had the expertise and resources to manage the Fund effectively.
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 Lord Abbett 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 ratio of the Fund and the expense ratios of the peer expense groups. It also considered the amount and nature of the fees paid by shareholders. The Board observed that Lord Abbett had agreed to an expense reimbursement agreement for the Fund that limited the total expense ratio of Class A to not more than 1.50%, the total expense ratios of Class B and Class C to not more than 2.15%, the total expense ratio of Class P to not more than 1.60%, and the total expense ratio of Class Y to not more than 1.15%, and that the Board and Lord Abbett had agreed to a new expense reimbursement agreement with the same terms. The Board observed that the contractual and actual management and administrative services fees were approximately six basis points above the median of the peer group. The Board observed that the total expense ratio of Class A was approximately nine basis points above the median of the peer group, the total expense ratios of Class B and Class C were approximately the same as the median of the peer group, the total expense ratio of Class P was approximately thirty-seven basis points above the median of the peer group, and the total expense ratio of Class Y was approximately ten basis points above the median of the 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 the profits realized by Lord Abbett in connection with the operation of 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 businesses 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 personn el. 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 noted that Lord Abbett's profitability had increased in recent years, in part due to an increase in assets under management, but concluded that Lord Abbett's profitability overall and 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 advisory fee schedule, with its breakpoints in the level of the advisory 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 Lord Abbett 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
25
observed that Lord Abbett 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 from the Fund, and receives a portion of the sales charges on sales and redemptions of some classes of shares. In addition, Lord Abbett accrues certain benefits for its business of providing investment advice to clients other than the Fund, but that business also benefits the Fund. 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.
Alternative Arrangements. The Board considered whether, instead of approving continuation of the management agreement, employing one or more alternative arrangements might be in the best interests of the Fund, such as continuing to employ Lord Abbett, but on different terms.
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. 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.
26
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 800-821-5129 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 Record
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, 2006 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 800-821-5129. You can also obtain copies of Form N-Q by (i) 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); (ii) sending your request and a duplicating fee to the SEC's Public Reference Room, Washington, DC 20549-0102; or (iii) sending your request electronically to publicinfo@sec.gov.
27
LALCG-3-107
(03/07)
Lord Abbett Large-Cap Growth Fund
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.
Lord Abbett mutual fund shares are distributed by
LORD ABBETT DISTRIBUTOR LLC.
Item 2: Code of Ethics.
Not applicable.
Item 3: Audit Committee Financial Expert.
Not applicable.
Item 4: Principal Accountant Fees and Services.
Not applicable.
Item 5: Audit Committee of Listed Registrants.
Not applicable.
Item 6: Schedule of Investments.
Not applicable.
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8: Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9: Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10: Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11: Controls and Procedures.
(a) Based on their evaluation of the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) as of a date within 90 days prior to the filing date of this report, the Chief Executive Officer and Chief Financial Officer of the Registrant have concluded that such disclosure controls and procedures are reasonably designed and effective to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to them by others within those entities.
(b) There were no significant changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Item 12: Exhibits.
(a)(1) | Amendments to Code of Ethics – Not applicable. |
| |
(a)(2) | Certification of each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2) is attached hereto as a part of EX-99.CERT. |
| |
(a)(3) | Not applicable. |
| |
(b) | Certification of each principal executive officer and principal financial officer of the Registrant as required by Section 906 of the Sarbanes-Oxley Act of 2002 is attached hereto as a part of EX-99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | LORD ABBETT LARGE-CAP GROWTH FUND |
| | |
| | |
| | /s/ Robert S. Dow | |
| | Robert S. Dow |
| | Chief Executive Officer and Chairman |
| | |
| | |
| | /s/ Joan A. Binstock | |
| | Joan A. Binstock |
| | Chief Financial Officer and Vice President |
| | |
| | |
Date: March 22, 2007 | | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| | LORD ABBETT LARGE-CAP GROWTH FUND |
| | |
| | |
| | /s/ Robert S. Dow | |
| | Robert S. Dow |
| | Chief Executive Officer and Chairman |
| | |
| | |
| | /s/ Joan A. Binstock | |
| | Joan A. Binstock |
| | Chief Financial Officer and Vice President |
| | |
| | |
Date: March 22, 2007 | | |
