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: 811-02871
lord abbett developing growth fund, inc.
(Exact name of Registrant as specified in charter)
90 Hudson Street, Jersey City, NJ 07302
(Address of principal executive offices) (Zip code)
Brooke A. Fapohunda, Esq., 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: 1/31/2016
| Item 1: | Report(s) to Shareholders. |
2016 LORD ABBETT
SEMIANNUAL REPORT
Lord Abbett
Developing Growth Fund
For the six-month period ended January 31, 2016
Table of Contents
Lord Abbett Developing Growth Fund
Semiannual Report
For the six-month period ended January 31, 2016
Daria L. Foster, Director, President and Chief Executive Officer of the Lord Abbett Funds, and E. Thayer Bigelow, Independent Chairman of the Lord Abbett Funds.
Dear Shareholders: We are pleased to provide you with this semiannual report for Lord Abbett Developing Growth Fund for the six-month period ended January 31, 2016. For additional information about the Fund, please visit our website at www.lordabbett.com, where you can access the quarterly commentaries by the Fund’s portfolio managers. General information about Lord Abbett mutual funds, as well as in-depth discussions of market trends and investment strategies, is also provided in Lord Abbett Insights, a quarterly newsletter available on our website.
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.
Best regards,
Daria L. Foster
Director, President and Chief Executive Officer
1
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) 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, 2015 through January 31, 2016).
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 Period 8/1/15 – 1/31/16” 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.
2
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 (loads). 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 | Ending | Expenses | ||||||||||
| Account | Account | Paid During | ||||||||||
| Value | Value | Period† | ||||||||||
| 8/1/15 - | ||||||||||||
| 8/1/15 | 1/31/16 | 1/31/16 | ||||||||||
| Class A | ||||||||||||
| Actual | $ | 1,000.00 | $ | 720.50 | $4.41 | |||||||
| Hypothetical (5% Return Before Expenses) | $ | 1,000.00 | $ | 1,020.01 | $5.18 | |||||||
| Class B | ||||||||||||
| Actual | $ | 1,000.00 | $ | 717.70 | $7.64 | |||||||
| Hypothetical (5% Return Before Expenses) | $ | 1,000.00 | $ | 1,016.24 | $8.97 | |||||||
| Class C | ||||||||||||
| Actual | $ | 1,000.00 | $ | 717.50 | $7.64 | |||||||
| Hypothetical (5% Return Before Expenses) | $ | 1,000.00 | $ | 1,016.24 | $8.97 | |||||||
| Class F | ||||||||||||
| Actual | $ | 1,000.00 | $ | 720.80 | $3.76 | |||||||
| Hypothetical (5% Return Before Expenses) | $ | 1,000.00 | $ | 1,020.76 | $4.42 | |||||||
| Class I | ||||||||||||
| Actual | $ | 1,000.00 | $ | 721.10 | $3.33 | |||||||
| Hypothetical (5% Return Before Expenses) | $ | 1,000.00 | $ | 1,021.27 | $3.91 | |||||||
| Class P | ||||||||||||
| Actual | $ | 1,000.00 | $ | 720.20 | $4.41 | |||||||
| Hypothetical (5% Return Before Expenses) | $ | 1,000.00 | $ | 1,020.01 | $5.18 | |||||||
| Class R2 | ||||||||||||
| Actual | $ | 1,000.00 | $ | 718.70 | $5.92 | |||||||
| Hypothetical (5% Return Before Expenses) | $ | 1,000.00 | $ | 1,018.25 | $6.95 | |||||||
| Class R3 | ||||||||||||
| Actual | $ | 1,000.00 | $ | 719.30 | $5.49 | |||||||
| Hypothetical (5% Return Before Expenses) | $ | 1,000.00 | $ | 1,018.75 | $6.44 | |||||||
| Class R4 | ||||||||||||
| Actual | $ | 1,000.00 | $ | 720.50 | $4.37 | |||||||
| Hypothetical (5% Return Before Expenses) | $ | 1,000.00 | $ | 1,020.06 | $5.13 | |||||||
| Class R5 | ||||||||||||
| Actual | $ | 1,000.00 | $ | 721.30 | $3.29 | |||||||
| Hypothetical (5% Return Before Expenses) | $ | 1,000.00 | $ | 1,021.32 | $3.86 | |||||||
| Class R6 | ||||||||||||
| Actual | $ | 1,000.00 | $ | 721.80 | $2.60 | |||||||
| Hypothetical (5% Return Before Expenses) | $ | 1,000.00 | $ | 1,022.12 | $3.05 | |||||||
| † | For each class of the Fund, net expenses are equal to the annualized expense ratio for such class (1.02% for Class A, 1.77% for Classes B and C, 0.87% for Class F, 0.77% for Class I, 1.02% for Class P, 1.37% for Class R2, 1.27% for Class R3, 1.01% for Class R4, 0.76% for Class R5 and 0.60% for Class R6) multiplied by the average account value over the period, multiplied by 184/366. |
3
Portfolio Holdings Presented by Sector
January 31, 2016
| Sector* | %** | |||
| Consumer Discretionary | 17.46 | % | ||
| Consumer Staples | 5.88 | % | ||
| Energy | 0.26 | % | ||
| Financials | 8.56 | % | ||
| Health Care | 20.85 | % | ||
| Industrials | 7.71 | % | ||
| Information Technology | 33.75 | % | ||
| Utilities | 1.26 | % | ||
| Repurchase Agreement | 4.27 | % | ||
| Total | 100.00 | % | ||
| * | A sector may comprise several industries. | |
| ** | Represents percent of total investments. |
4
Schedule of Investments (unaudited)
January 31, 2016
| Investments | Shares | Fair Value (000) | ||||||
| COMMON STOCKS 97.24% | ||||||||
| Aerospace & Defense 1.08% | ||||||||
| HEICO Corp. | 131,940 | $ | 7,349 | |||||
| Orbital ATK, Inc. | 222,024 | 20,033 | ||||||
| Total | 27,382 | |||||||
| Banks 1.52% | ||||||||
| Bank of the Ozarks, Inc. | 290,272 | 12,871 | ||||||
| PrivateBancorp, Inc. | 336,728 | 12,671 | ||||||
| Western Alliance Bancorp* | 397,433 | 12,948 | ||||||
| Total | 38,490 | |||||||
| Biotechnology 2.97% | ||||||||
| Agios Pharmaceuticals, Inc.* | 100,066 | 4,225 | ||||||
| Anacor Pharmaceuticals, Inc.* | 94,706 | 7,115 | ||||||
| Blueprint Medicines Corp.* | 83,492 | 1,313 | ||||||
| Celldex Therapeutics, Inc.* | 67,999 | 564 | ||||||
| Dynavax Technologies Corp.* | 108,735 | 2,620 | ||||||
| Juno Therapeutics, Inc.* | 77,460 | 2,136 | ||||||
| Kite Pharma, Inc.* | 11,119 | 528 | ||||||
| Neurocrine Biosciences, Inc.* | 420,935 | 17,911 | ||||||
| Ophthotech Corp.* | 139,568 | 7,563 | ||||||
| Portola Pharmaceuticals, Inc.* | 154,109 | 5,090 | ||||||
| Prothena Corp. plc (Ireland)*(a) | 109,861 | 4,279 | ||||||
| Sage Therapeutics, Inc.* | 320,359 | 10,758 | ||||||
| Sarepta Therapeutics, Inc.* | 208,113 | 2,472 | ||||||
| Spark Therapeutics, Inc.* | 204,592 | 5,763 | ||||||
| TESARO, Inc.* | 23,659 | 817 | ||||||
| Ultragenyx Pharmaceutical, Inc.* | 37,948 | 2,131 | ||||||
| Total | 75,285 | |||||||
| Building Products 0.54% | ||||||||
| Builders FirstSource, Inc.* | 1,724,197 | 13,845 | ||||||
| Investments | Shares | Fair Value (000) | ||||||
| Capital Markets 0.64% | ||||||||
| Evercore Partners, Inc. Class A | 55,582 | $ | 2,511 | |||||
| Financial Engines, Inc. | 317,782 | 8,570 | ||||||
| WisdomTree Investments, Inc. | 430,555 | 5,167 | ||||||
| Total | 16,248 | |||||||
| Commercial Services & Supplies 0.85% | ||||||||
| Healthcare Services Group, Inc. | 609,819 | 21,569 | ||||||
| Communications Equipment 0.79% | ||||||||
| Arista Networks, Inc.* | 199,161 | 11,956 | ||||||
| Infinera Corp.* | 437,959 | 6,709 | ||||||
| Ruckus Wireless, Inc.* | 152,331 | 1,281 | ||||||
| Total | 19,946 | |||||||
| Distributors 1.46% | ||||||||
| Pool Corp. | 437,253 | 36,948 | ||||||
| Diversified Consumer Services 1.98% | ||||||||
| 2U, Inc.* | 860,265 | 17,369 | ||||||
| Bright Horizons Family Solutions, Inc.* | 468,340 | 32,863 | ||||||
| Total | 50,232 | |||||||
| Diversified Financial Services 3.41% | ||||||||
| CBOE Holdings, Inc. | 499,822 | 33,298 | ||||||
| MarketAxess Holdings, Inc. | 414,482 | 48,175 | ||||||
| Morningstar, Inc. | 62,385 | 5,017 | ||||||
| Total | 86,490 | |||||||
| Electric: Utilities 0.74% | ||||||||
| ITC Holdings Corp. | 473,459 | 18,891 | ||||||
| Electronic Equipment, Instruments & Components 2.86% | ||||||||
| FLIR Systems, Inc. | 851,557 | 24,900 | ||||||
| IPG Photonics Corp.* | 173,932 | 14,059 | ||||||
| Universal Display Corp.* | 684,544 | 33,611 | ||||||
| Total | 72,570 | |||||||
| See Notes to Financial Statements. | 5 |
Schedule of Investments (unaudited)(continued)
January 31, 2016
| Investments | Shares | Fair Value (000) | ||||||
| Food & Staples Retailing 1.92% | ||||||||
| Casey’s General Stores, Inc. | 248,635 | $ | 30,020 | |||||
| Performance Food Group Co.* | 795,055 | 18,604 | ||||||
| Total | 48,624 | |||||||
| Food Products 4.06% | ||||||||
| B&G Foods, Inc. | 425,302 | 15,490 | ||||||
| Blue Buffalo Pet Products, Inc.* | 1,137,147 | 19,354 | ||||||
| Calavo Growers, Inc. | 548,815 | 28,401 | ||||||
| Pilgrim’s Pride Corp.* | 708,709 | 15,719 | ||||||
| Snyder’s-Lance, Inc. | 759,719 | 23,984 | ||||||
| Total | 102,948 | |||||||
| Gas Utilities 0.48% | ||||||||
| ONE Gas, Inc. | 214,704 | 12,144 | ||||||
| Health Care Equipment & Supplies 9.47% | ||||||||
| ABIOMED, Inc.* | 375,439 | 32,036 | ||||||
| Align Technology, Inc.* | 468,502 | 30,987 | ||||||
| Endologix, Inc.* | 469,191 | 3,345 | ||||||
| Glaukos Corp.* | 735,085 | 11,997 | ||||||
| IDEXX Laboratories, Inc.* | 309,196 | 21,687 | ||||||
| Integra LifeSciences Holdings Corp.* | 299,845 | 18,425 | ||||||
| Nevro Corp.* | 477,517 | 29,506 | ||||||
| NuVasive, Inc.* | 383,858 | 17,704 | ||||||
| Penumbra, Inc.* | 382,651 | 16,377 | ||||||
| Sirona Dental Systems, Inc.* | 122,353 | 13,005 | ||||||
| STERIS plc (United Kingdom)(a) | 442,016 | 30,605 | ||||||
| ZELTIQ Aesthetics, Inc.* | 634,390 | 14,731 | ||||||
| Total | 240,405 | |||||||
| Health Care Providers & Services 0.79% | ||||||||
| Diplomat Pharmacy, Inc.* | 9,373 | 255 | ||||||
| HealthEquity, Inc.* | 302,845 | 6,526 | ||||||
| VCA, Inc.* | 256,762 | 13,164 | ||||||
| Total | 19,945 | |||||||
| Investments | Shares | Fair Value (000) | ||||||
| Health Care Technology 4.10% | ||||||||
| athenahealth, Inc.* | 178,574 | $ | 25,322 | |||||
| Evolent Health, Inc. Class A* | 381,586 | 3,766 | ||||||
| Medidata Solutions, Inc.* | 462,280 | 19,753 | ||||||
| Press Ganey Holdings, Inc.* | 1,017,447 | 30,066 | ||||||
| Veeva Systems, Inc. Class A* | 1,038,791 | 25,035 | ||||||
| Total | 103,942 | |||||||
| Hotels, Restaurants & Leisure 5.78% | ||||||||
| Buffalo Wild Wings, Inc.* | 65,994 | 10,051 | ||||||
| Cheesecake Factory, Inc. (The) | 298,414 | 14,413 | ||||||
| Fiesta Restaurant Group, Inc.* | 362,932 | 13,211 | ||||||
| Habit Restaurants, Inc. (The) Class A* | 285,155 | 5,854 | ||||||
| Panera Bread Co. Class A* | 212,459 | 41,217 | ||||||
| Sonic Corp. | 706,251 | 20,750 | ||||||
| Vail Resorts, Inc. | 202,037 | 25,255 | ||||||
| Zoe’s Kitchen, Inc.* | 578,706 | 16,076 | ||||||
| Total | 146,827 | |||||||
| Household Durables 0.39% | ||||||||
| iRobot Corp.* | 294,688 | 9,999 | ||||||
| Information Technology Services 4.21% | ||||||||
| Blackhawk Network Holdings, Inc.* | 504,819 | 19,027 | ||||||
| CSRA, Inc. | 650,663 | 17,425 | ||||||
| EPAM Systems, Inc.* | 443,700 | 33,233 | ||||||
| Euronet Worldwide, Inc.* | 465,403 | 37,125 | ||||||
| Total | 106,810 | |||||||
| Internet & Catalog Retail 2.48% | ||||||||
| Liberty TripAdvisor Holdings, Inc. Class A* | 1,015,639 | 22,679 | ||||||
| Wayfair, Inc. Class A* | 893,726 | 40,397 | ||||||
| Total | 63,076 | |||||||
| 6 | See Notes to Financial Statements. |
Schedule of Investments (unaudited)(continued)
January 31, 2016
| Investments | Shares | Fair Value (000) | ||||||
| Internet Software & Services 8.90% | ||||||||
| Benefitfocus, Inc.* | 653,949 | $ | 19,069 | |||||
| Cimpress NV (Netherlands)*(a) | 300,773 | 23,617 | ||||||
| comScore, Inc.* | 355,419 | 13,694 | ||||||
| Criteo SA ADR* | 645,812 | 19,103 | ||||||
| Cvent, Inc.* | 388,558 | 10,262 | ||||||
| GoDaddy, Inc. Class A* | 1,000,490 | 30,505 | ||||||
| Gogo, Inc.* | 2,023,006 | 29,435 | ||||||
| Match Group, Inc.*(b) | 2,101,258 | 26,371 | ||||||
| New Relic, Inc.* | 215,419 | 6,079 | ||||||
| Shopify, Inc. Class A (Canada)*(a) | 109,307 | 2,538 | ||||||
| Stamps.com, Inc.* | 136,186 | 12,777 | ||||||
| WebMD Health Corp.* | 636,137 | 32,513 | ||||||
| Total | 225,963 | |||||||
| Leisure Products 1.11% | ||||||||
| Brunswick Corp. | 129,990 | 5,180 | ||||||
| Vista Outdoor, Inc.* | 475,990 | 22,948 | ||||||
| Total | 28,128 | |||||||
| Life Sciences Tools & Services 2.17% | ||||||||
| Charles River Laboratories International, Inc.* | 252,849 | 18,769 | ||||||
| Pacific Biosciences of California, Inc.* | 1,728,368 | 18,476 | ||||||
| PerkinElmer, Inc. | 368,183 | 17,791 | ||||||
| Total | 55,036 | |||||||
| Machinery 0.80% | ||||||||
| Proto Labs, Inc.* | 129,070 | 7,098 | ||||||
| RBC Bearings, Inc.* | 223,938 | 13,286 | ||||||
| Total | 20,384 | |||||||
| Media 2.79% | ||||||||
| IMAX Corp. (Canada)*(a) | 875,212 | 27,184 | ||||||
| Rentrak Corp.* | 177,307 | 7,885 | ||||||
| Sinclair Broadcast Group, Inc. Class A | 1,082,441 | 35,720 | ||||||
| Total | 70,789 | |||||||
| Investments | Shares | Fair Value (000) | ||||||
| Oil, Gas & Consumable Fuels 0.27% | ||||||||
| GasLog Ltd. (Monaco)(a) | 908,645 | $ | 6,788 | |||||
| Pharmaceuticals 1.69% | ||||||||
| Pacira Pharmaceuticals, Inc.* 128,311 | 7,624 | |||||||
| Prestige Brands Holdings, Inc.* | 740,418 | 34,563 | ||||||
| Revance Therapeutics, Inc.* | 37,589 | 779 | ||||||
| Total | 42,966 | |||||||
| Professional Services 2.25% | ||||||||
| On Assignment, Inc.* | 485,316 | 18,758 | ||||||
| Robert Half International, Inc. | 298,051 | 13,046 | ||||||
| TransUnion* | 1,027,262 | 25,414 | ||||||
| Total | 57,218 | |||||||
| Real Estate Investment Trusts 2.64% | ||||||||
| CoreSite Realty Corp. | 211,926 | 13,593 | ||||||
| CubeSmart | 848,471 | 26,548 | ||||||
| Sovran Self Storage, Inc. | 237,475 | 26,759 | ||||||
| Total | 66,900 | |||||||
| Real Estate Management & Development 0.49% | ||||||||
| Realogy Holdings Corp.* | 381,136 | 12,501 | ||||||
| Road & Rail 1.09% | ||||||||
| Knight Transportation, Inc. | 546,170 | 13,365 | ||||||
| Swift Transportation Co.* | 870,567 | 14,199 | ||||||
| Total | 27,564 | |||||||
| Semiconductors & Semiconductor Equipment 5.15% | ||||||||
| Cavium, Inc.* | 222,302 | 12,842 | ||||||
| Cirrus Logic, Inc.* | 643,769 | 22,352 | ||||||
| Cree, Inc.* | 448,863 | 12,582 | ||||||
| Microsemi Corp.* | 643,092 | 20,386 | ||||||
| Monolithic Power Systems, Inc. | 338,108 | 21,155 | ||||||
| SunPower Corp.* | 1,127,004 | 28,671 | ||||||
| Synaptics, Inc.* | 172,309 | 12,632 | ||||||
| Total | 130,620 | |||||||
| See Notes to Financial Statements. | 7 |
Schedule of Investments (unaudited)(continued)
January 31, 2016
| Investments | Shares | Fair Value (000) | ||||||
| Software 11.66% | ||||||||
| Atlassian Corp. plc Class A (United Kingdom)*(a) | 330,009 | $ | 6,854 | |||||
| BroadSoft, Inc.* | 854,392 | 29,229 | ||||||
| Callidus Software, Inc.* | 1,198,370 | 18,491 | ||||||
| Fair Isaac Corp. | 213,109 | 20,367 | ||||||
| Fleetmatics Group plc (Ireland)*(a) | 287,193 | 12,467 | ||||||
| Guidewire Software, Inc.* | 499,478 | 27,491 | ||||||
| HubSpot, Inc.* | 204,651 | 8,307 | ||||||
| Materialise NV ADR* | 762,961 | 4,685 | ||||||
| Paycom Software, Inc.* | 594,632 | 17,928 | ||||||
| Paylocity Holding Corp.* | 579,912 | 18,047 | ||||||
| Proofpoint, Inc.* | 128,613 | 6,477 | ||||||
| Rubicon Project, Inc. (The)* | 1,113,633 | 15,023 | ||||||
| Tableau Software, Inc. Class A* | 154,267 | 12,378 | ||||||
| Tyler Technologies, Inc.* | 207,807 | 32,638 | ||||||
| Ultimate Software Group, Inc. (The)* | 240,219 | 42,190 | ||||||
| Zendesk, Inc.* | 1,064,123 | 23,421 | ||||||
| Total | 295,993 | |||||||
| Specialty Retail 1.00% | ||||||||
| Burlington Stores, Inc.* | 354,363 | 19,040 | ||||||
| Restoration Hardware | ||||||||
| Holdings, Inc.* | 101,527 | 6,256 | ||||||
| Total | 25,296 | |||||||
| Technology Hardware, Storage & Peripherals 0.71% | ||||||||
| Cray, Inc.* | 459,263 | 18,090 | ||||||
| Textiles, Apparel & Luxury Goods 0.74% | ||||||||
| Carter’s, Inc. | 192,444 | 18,709 | ||||||
| Investments | Shares | Fair Value (000) | ||||||
| Trading Companies & Distributors 1.21% | ||||||||
| Beacon Roofing Supply, Inc.* | 760,493 | $ | 30,800 | |||||
| Water Utilities 0.05% | ||||||||
| Aqua America, Inc. | 41,663 | 1,314 | ||||||
| Total Common Stocks (cost $2,456,866,731) | 2,467,675 | |||||||
| Principal Amount (000) | ||||||||
| SHORT-TERM INVESTMENT 4.34% | ||||||||
| Repurchase Agreement | ||||||||
| Repurchase Agreement dated 1/29/2016, 0.03% due 2/1/2016 with Fixed Income Clearing Corp. collateralized by $108,400,000 of U.S. Treasury Note at 3.125% due 4/30/2017; value: $112,329,500; proceeds: $110,125,622 (cost $110,125,347) | $ | 110,125 | 110,125 | |||||
| Total Investments in Securities 101.58% (cost $2,566,992,078) | 2,577,800 | |||||||
| Liabilities in Excess of Other Assets (1.58)% | (40,047 | ) | ||||||
| Net Assets 100.00% | $ | 2,537,753 | ||||||
| ADR | American Depositary Receipt. |
| * | Non-income producing security. |
| (a) | Foreign security traded in U.S. dollars. |
| (b) | Affiliated issuers (holding represents 5% or more of the underlying issuer’s outstanding voting shares). (See Note 10). |
| 8 | See Notes to Financial Statements. |
Schedule of Investments (unaudited)(concluded)
January 31, 2016
The following is a summary of the inputs used as of January 31, 2016 in valuing the Fund’s investments carried at fair value(1):
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Investment Type(2)(3) | (000) | (000) | (000) | (000) | ||||||||||||
| Common Stocks | $ | 2,467,675 | $ | – | $ | – | $ | 2,467,675 | ||||||||
| Repurchase Agreement | – | 110,125 | – | 110,125 | ||||||||||||
| Total | $ | 2,467,675 | $ | 110,125 | $ | – | $ | 2,577,800 | ||||||||
| (1) | Refer to Note 2(g) for a description of fair value measurements and the three-tier hierarchy of inputs. |
| (2) | See Schedule of Investments for fair values in each industry and identification of foreign issuers and/or geography. |
| (3) | There were no Level 1/Level 2 transfers during the period ended January 31, 2016. |
| See Notes to Financial Statements. | 9 |
Statement of Assets and Liabilities (unaudited)
January 31, 2016
| ASSETS: | ||||
| Investments in unaffiliated issuers, at fair value (cost $2,536,726,367) | $ | 2,551,429,422 | ||
| Investments in affiliated issuers, at fair value (cost $30,265,711) | 26,370,788 | |||
| Receivables: | ||||
| Investment securities sold | 104,444,506 | |||
| Capital shares sold | 19,497,918 | |||
| Interest and dividends | 54,975 | |||
| Prepaid expenses and other assets | 108,866 | |||
| Total assets | 2,701,906,475 | |||
| LIABILITIES: | ||||
| Payables: | ||||
| Investment securities purchased | 152,496,964 | |||
| Capital shares reacquired | 7,421,883 | |||
| Management fee | 1,136,126 | |||
| 12b-1 distribution plan | 1,019,428 | |||
| Directors’ fees | 609,288 | |||
| Fund administration | 89,196 | |||
| To affiliates (See Note 3) | 67,394 | |||
| Distributions payable | 1,007 | |||
| Accrued expenses | 1,312,603 | |||
| Total liabilities | 164,153,889 | |||
| NET ASSETS | $ | 2,537,752,586 | ||
| COMPOSITION OF NET ASSETS: | ||||
| Paid-in capital | $ | 2,906,793,407 | ||
| Accumulated net investment loss | (10,922,043 | ) | ||
| Accumulated net realized loss on investments | (368,926,910 | ) | ||
| Net unrealized appreciation on investments | 10,808,132 | |||
| Net Assets | $ | 2,537,752,586 |
| 10 | See Notes to Financial Statements. |
Statement of Assets and Liabilities (unaudited) (concluded)
January 31, 2016
| Net assets by class: | ||||
| Class A Shares | $ | 827,377,715 | ||
| Class B Shares | $ | 3,748,604 | ||
| Class C Shares | $ | 66,099,520 | ||
| Class F Shares | $ | 142,713,445 | ||
| Class I Shares | $ | 1,115,922,758 | ||
| Class P Shares | $ | 24,136,005 | ||
| Class R2 Shares | $ | 9,839,287 | ||
| Class R3 Shares | $ | 196,936,051 | ||
| Class R4 Shares | $ | 170,359 | ||
| Class R5 Shares | $ | 82,121 | ||
| Class R6 Shares | $ | 150,726,721 | ||
| Outstanding shares by class: | ||||
| Class A Shares (875 million shares of common stock authorized, $.001 par value) | 51,497,589 | |||
| Class B Shares (40 million shares of common stock authorized, $.001 par value) | 310,625 | |||
| Class C Shares (35 million shares of common stock authorized, $.001 par value) | 5,414,608 | |||
| Class F Shares (40 million shares of common stock authorized, $.001 par value) | 8,604,879 | |||
| Class I Shares (200 million shares of common stock authorized, $.001 par value) | 61,012,922 | |||
| Class P Shares (30 million shares of common stock authorized, $.001 par value) | 1,549,145 | |||
| Class R2 Shares (30 million shares of common stock authorized, $.001 par value) | 635,079 | |||
| Class R3 Shares (40 million shares of common stock authorized, $.001 par value) | 12,534,886 | |||
| Class R4 Shares (30 million shares of common stock authorized, $.001 par value) | 10,604 | |||
| Class R5 Shares (30 million shares of common stock authorized, $.001 par value) | 4,490 | |||
| Class R6 Shares (30 million shares of common stock authorized, $.001 par value) | 8,232,967 | |||
| Net asset value, offering and redemption price per share (Net assets divided by outstanding shares): |
| Class A Shares-Net asset value | $ | 16.07 | ||
| Class A Shares-Maximum offering price (Net asset value plus sales charge of 5.75%) | $ | 17.05 | ||
| Class B Shares-Net asset value | $ | 12.07 | ||
| Class C Shares-Net asset value | $ | 12.21 | ||
| Class F Shares-Net asset value | $ | 16.59 | ||
| Class I Shares-Net asset value | $ | 18.29 | ||
| Class P Shares-Net asset value | $ | 15.58 | ||
| Class R2 Shares-Net asset value | $ | 15.49 | ||
| Class R3 Shares-Net asset value | $ | 15.71 | ||
| Class R4 Shares-Net asset value | $ | 16.07 | ||
| Class R5 Shares-Net asset value | $ | 18.29 | ||
| Class R6 Shares-Net asset value | $ | 18.31 |
| See Notes to Financial Statements. | 11 |
Statement of Operations (unaudited)
For the Six Months Ended January 31, 2016
| Investment income: | ||||
| Dividends | $ | 4,070,466 | ||
| Interest and other | 2,650 | |||
| Total investment income | 4,073,116 | |||
| Expenses: | ||||
| Management fee | 7,883,022 | |||
| 12b-1 distribution plan-Class A | 1,282,288 | |||
| 12b-1 distribution plan-Class B | 29,317 | |||
| 12b-1 distribution plan-Class C | 449,345 | |||
| 12b-1 distribution plan-Class F | 104,961 | |||
| 12b-1 distribution plan-Class P | 37,432 | |||
| 12b-1 distribution plan-Class R2 | 35,941 | |||
| 12b-1 distribution plan-Class R3 | 629,260 | |||
| 12b-1 distribution plan-Class R4 | 90 | |||
| Shareholder servicing | 2,450,718 | |||
| Fund administration | 620,587 | |||
| Subsidy (See Note 3) | 251,108 | |||
| Reports to shareholders | 86,191 | |||
| Registration | 84,089 | |||
| Directors’ fees | 51,737 | |||
| Custody | 44,481 | |||
| Professional | 35,725 | |||
| Other | 348,815 | |||
| Gross expenses | 14,425,107 | |||
| Expense reductions (See Note 8) | (1,851 | ) | ||
| Net expenses | 14,423,256 | |||
| Net investment loss | (10,350,140 | ) | ||
| Net realized and unrealized gain (loss): | ||||
| Net realized loss on investments in unaffiliated issuers | (329,637,169 | ) | ||
| Net realized loss on investments in affiliated issuers | (38,573 | ) | ||
| Net change in unrealized appreciation/depreciation on investments | (667,125,652 | ) | ||
| Net realized and unrealized loss | (996,801,394 | ) | ||
| Net Decrease in Net Assets Resulting From Operations | $ | (1,007,151,534 | ) |
| 12 | See Notes to Financial Statements. |
Statements of Changes in Net Assets
| For the Six Months | ||||||||
| Ended January 31, 2016 | For the Year Ended | |||||||
| INCREASE (DECREASE) IN NET ASSETS | (unaudited) | July 31, 2015 | ||||||
| Operations: | ||||||||
| Net investment loss | $ | (10,350,140 | ) | $ | (19,884,610 | ) | ||
| Net realized gain (loss) on investments in affiliated and unaffiliated issuers | (329,675,742 | ) | 283,824,587 | |||||
| Net change in unrealized appreciation/depreciation on investments | (667,125,652 | ) | 371,333,203 | |||||
| Net increase (decrease) in net assets resulting from operations | (1,007,151,534 | ) | 635,273,180 | |||||
| Distributions to shareholders from: | ||||||||
| Net realized gain | ||||||||
| Class A | (89,976,636 | ) | (198,062,639 | ) | ||||
| Class B | (593,498 | ) | (1,929,339 | ) | ||||
| Class C | (9,955,313 | ) | (22,854,566 | ) | ||||
| Class F | (17,883,908 | ) | (30,495,380 | ) | ||||
| Class I | (110,967,169 | ) | (223,041,281 | ) | ||||
| Class P | (2,680,817 | ) | (15,504,602 | ) | ||||
| Class R2 | (1,148,328 | ) | (2,522,428 | ) | ||||
| Class R3 | (22,229,420 | ) | (49,621,757 | ) | ||||
| Class R4 | (4,167 | ) | – | |||||
| Class R5 | (675 | ) | – | |||||
| Class R6 | (3,551,031 | ) | – | |||||
| Total distributions to shareholders | (258,990,962 | ) | (544,031,992 | ) | ||||
| Capital share transactions (Net of share conversions) (See Note 13): | ||||||||
| Net proceeds from sales of shares | 484,616,606 | 684,982,182 | ||||||
| Reinvestment of distributions | 243,957,142 | 510,661,493 | ||||||
| Cost of shares reacquired | (576,649,881 | ) | (983,459,838 | ) | ||||
| Net increase in net assets resulting from capital share transactions | 151,923,867 | 212,183,837 | ||||||
| Net increase (decrease) in net assets | (1,114,218,629 | ) | 303,425,025 | |||||
| NET ASSETS: | ||||||||
| Beginning of period | $ | 3,651,971,215 | $ | 3,348,546,190 | ||||
| End of period | $ | 2,537,752,586 | $ | 3,651,971,215 | ||||
| Accumulated net investment loss | $ | (10,922,043 | ) | $ | (571,903 | ) | ||
| See Notes to Financial Statements. | 13 |
| Per Share Operating Performance: | |||||||||||||||
| Investment operations: | Distributions to shareholders from: | ||||||||||||||
| Net asset value, beginning of period | Net investment loss(a) | Net realized and unrealized gain (loss) | Total from investment operations | Net realized gain | |||||||||||
| Class A | |||||||||||||||
| 1/31/2016(c) | $24.45 | $(0.08 | ) | $(6.45 | ) | $(6.53 | ) | $(1.85 | ) | ||||||
| 7/31/2015 | 24.37 | (0.16 | ) | 4.54 | 4.38 | (4.30 | ) | ||||||||
| 7/31/2014 | 26.80 | (0.23 | ) | 3.16 | 2.93 | (5.36 | ) | ||||||||
| 7/31/2013 | 21.24 | (0.17 | ) | 7.44 | 7.27 | (1.71 | ) | ||||||||
| 7/31/2012 | 23.11 | (0.20 | ) | (0.41 | ) | (0.61 | ) | (1.26 | ) | ||||||
| 7/31/2011 | 16.51 | (0.21 | ) | 6.81 | 6.60 | – | |||||||||
| Class B | |||||||||||||||
| 1/31/2016(c) | 18.97 | (0.12 | ) | (4.93 | ) | (5.05 | ) | (1.85 | ) | ||||||
| 7/31/2015 | 19.94 | (0.26 | ) | 3.59 | 3.33 | (4.30 | ) | ||||||||
| 7/31/2014 | 22.92 | (0.34 | ) | 2.72 | 2.38 | (5.36 | ) | ||||||||
| 7/31/2013 | 18.52 | (0.26 | ) | 6.37 | 6.11 | (1.71 | ) | ||||||||
| 7/31/2012 | 20.46 | (0.29 | ) | (0.39 | ) | (0.68 | ) | (1.26 | ) | ||||||
| 7/31/2011 | 14.72 | (0.30 | ) | 6.04 | 5.74 | – | |||||||||
| Class C | |||||||||||||||
| 1/31/2016(c) | 19.17 | (0.12 | ) | (4.99 | ) | (5.11 | ) | (1.85 | ) | ||||||
| 7/31/2015 | 20.10 | (0.26 | ) | 3.63 | 3.37 | (4.30 | ) | ||||||||
| 7/31/2014 | 23.06 | (0.34 | ) | 2.74 | 2.40 | (5.36 | ) | ||||||||
| 7/31/2013 | 18.63 | (0.27 | ) | 6.41 | 6.14 | (1.71 | ) | ||||||||
| 7/31/2012 | 20.58 | (0.29 | ) | (0.40 | ) | (0.69 | ) | (1.26 | ) | ||||||
| 7/31/2011 | 14.80 | (0.31 | ) | 6.09 | 5.78 | – | |||||||||
| Class F | |||||||||||||||
| 1/31/2016(c) | 25.16 | (0.06 | ) | (6.66 | ) | (6.72 | ) | (1.85 | ) | ||||||
| 7/31/2015 | 24.92 | (0.12 | ) | 4.66 | 4.54 | (4.30 | ) | ||||||||
| 7/31/2014 | 27.23 | (0.17 | ) | 3.22 | 3.05 | (5.36 | ) | ||||||||
| 7/31/2013 | 21.50 | (0.11 | ) | 7.55 | 7.44 | (1.71 | ) | ||||||||
| 7/31/2012 | 23.33 | (0.15 | ) | (0.42 | ) | (0.57 | ) | (1.26 | ) | ||||||
| 7/31/2011 | 16.62 | (0.16 | ) | 6.87 | 6.71 | – | |||||||||
| Class I | |||||||||||||||
| 1/31/2016(c) | 27.51 | (0.06 | ) | (7.31 | ) | (7.37 | ) | (1.85 | ) | ||||||
| 7/31/2015 | 26.85 | (0.10 | ) | 5.06 | 4.96 | (4.30 | ) | ||||||||
| 7/31/2014 | 28.95 | (0.15 | ) | 3.41 | 3.26 | (5.36 | ) | ||||||||
| 7/31/2013 | 22.73 | (0.10 | ) | 8.03 | 7.93 | (1.71 | ) | ||||||||
| 7/31/2012 | 24.55 | (0.14 | ) | (0.42 | ) | (0.56 | ) | (1.26 | ) | ||||||
| 7/31/2011 | 17.48 | (0.15 | ) | 7.22 | 7.07 | – | |||||||||
| 14 | See Notes to Financial Statements. |
| Ratios to Average Net Assets: | Supplemental Data: | ||||||||||||||||
| Net asset value, end of period | Total return(b) (%) | Total expenses (%) | Net investment loss (%) | Net assets, end of period (000) | Portfolio turnover rate (%) | ||||||||||||
| $16.07 | (27.95 | )(d) | 0.51 | (d) | (0.38 | )(d) | $ | 827,378 | 115.73 | (d) | |||||||
| 24.45 | 20.25 | 1.00 | (0.66 | ) | 1,218,062 | 185.77 | |||||||||||
| 24.37 | 10.49 | 1.08 | (0.87 | ) | 1,205,395 | 242.06 | |||||||||||
| 26.80 | 37.40 | 1.11 | (0.75 | ) | 1,188,182 | 201.80 | |||||||||||
| 21.24 | (2.03 | ) | 1.12 | (0.96 | ) | 983,120 | 195.11 | ||||||||||
| 23.11 | 39.98 | 1.09 | (0.99 | ) | 979,130 | 136.95 | |||||||||||
| 12.07 | (28.23 | )(d) | 0.89 | (d) | (0.76 | )(d) | 3,749 | 115.73 | (d) | ||||||||
| 18.97 | 19.36 | 1.73 | (1.39 | ) | 8,036 | 185.77 | |||||||||||
| 19.94 | 9.81 | 1.73 | (1.53 | ) | 9,914 | 242.06 | |||||||||||
| 22.92 | 36.44 | 1.76 | (1.39 | ) | 13,286 | 201.80 | |||||||||||
| 18.52 | (2.61 | ) | 1.76 | (1.59 | ) | 14,273 | 195.11 | ||||||||||
| 20.46 | 39.09 | 1.74 | (1.64 | ) | 21,161 | 136.95 | |||||||||||
| 12.21 | (28.25 | )(d) | 0.89 | (d) | (0.76 | )(d) | 66,100 | 115.73 | (d) | ||||||||
| 19.17 | 19.40 | 1.73 | (1.39 | ) | 111,443 | 185.77 | |||||||||||
| 20.10 | 9.79 | 1.73 | (1.53 | ) | 112,399 | 242.06 | |||||||||||
| 23.06 | 36.44 | 1.76 | (1.39 | ) | 115,966 | 201.80 | |||||||||||
| 18.63 | (2.60 | ) | 1.77 | (1.60 | ) | 107,011 | 195.11 | ||||||||||
| 20.58 | 38.99 | 1.74 | (1.64 | ) | 134,684 | 136.95 | |||||||||||
| 16.59 | (27.92 | )(d) | 0.44 | (d) | (0.30 | )(d) | 142,713 | 115.73 | (d) | ||||||||
| 25.16 | 20.47 | 0.83 | (0.47 | ) | 258,617 | 185.77 | |||||||||||
| 24.92 | 10.80 | 0.83 | (0.63 | ) | 158,298 | 242.06 | |||||||||||
| 27.23 | 37.69 | 0.86 | (0.50 | ) | 160,601 | 201.80 | |||||||||||
| 21.50 | (1.74 | ) | 0.87 | (0.71 | ) | 141,616 | 195.11 | ||||||||||
| 23.33 | 40.31 | 0.84 | (0.74 | ) | 190,426 | 136.95 | |||||||||||
| 18.29 | (27.89 | )(d) | 0.39 | (d) | (0.25 | )(d) | 1,115,923 | 115.73 | (d) | ||||||||
| 27.51 | 20.57 | 0.73 | (0.39 | ) | 1,703,530 | 185.77 | |||||||||||
| 26.85 | 10.93 | 0.74 | (0.53 | ) | 1,463,636 | 242.06 | |||||||||||
| 28.95 | 37.83 | 0.76 | (0.41 | ) | 1,225,883 | 201.80 | |||||||||||
| 22.73 | (1.69 | ) | 0.77 | (0.61 | ) | 830,601 | 195.11 | ||||||||||
| 24.55 | 40.45 | 0.75 | (0.65 | ) | 601,226 | 136.95 | |||||||||||
| See Notes to Financial Statements. | 15 |
Financial Highlights (concluded)
| Per Share Operating Performance: | |||||||||||||||
| Investment operations: | Distributions to shareholders from: | ||||||||||||||
| Net asset value, beginning of period | Net investment loss(a) | Net realized and unrealized gain (loss) | Total from investment operations | Net realized gain | |||||||||||
| Class P | |||||||||||||||
| 1/31/2016(c) | $23.78 | $(0.07 | ) | $(6.28 | ) | $(6.35 | ) | $(1.85 | ) | ||||||
| 7/31/2015 | 23.81 | (0.16 | ) | 4.43 | 4.27 | (4.30 | ) | ||||||||
| 7/31/2014 | 26.27 | (0.20 | ) | 3.10 | 2.90 | (5.36 | ) | ||||||||
| 7/31/2013 | 20.85 | (0.16 | ) | 7.29 | 7.13 | (1.71 | ) | ||||||||
| 7/31/2012 | 22.71 | (0.19 | ) | (0.41 | ) | (0.60 | ) | (1.26 | ) | ||||||
| 7/31/2011 | 16.25 | (0.22 | ) | 6.68 | 6.46 | – | |||||||||
| Class R2 | |||||||||||||||
| 1/31/2016(c) | 23.70 | (0.11 | ) | (6.25 | ) | (6.36 | ) | (1.85 | ) | ||||||
| 7/31/2015 | 23.81 | (0.23 | ) | 4.42 | 4.19 | (4.30 | ) | ||||||||
| 7/31/2014 | 26.35 | (0.29 | ) | 3.11 | 2.82 | (5.36 | ) | ||||||||
| 7/31/2013 | 20.96 | (0.22 | ) | 7.32 | 7.10 | (1.71 | ) | ||||||||
| 7/31/2012 | 22.89 | (0.25 | ) | (0.42 | ) | (0.67 | ) | (1.26 | ) | ||||||
| 7/31/2011 | 16.39 | (0.27 | ) | 6.77 | 6.50 | – | |||||||||
| Class R3 | |||||||||||||||
| 1/31/2016(c) | 23.99 | (0.10 | ) | (6.33 | ) | (6.43 | ) | (1.85 | ) | ||||||
| 7/31/2015 | 24.03 | (0.21 | ) | 4.47 | 4.26 | (4.30 | ) | ||||||||
| 7/31/2014 | 26.53 | (0.27 | ) | 3.13 | 2.86 | (5.36 | ) | ||||||||
| 7/31/2013 | 21.07 | (0.20 | ) | 7.37 | 7.17 | (1.71 | ) | ||||||||
| 7/31/2012 | 22.97 | (0.23 | ) | (0.41 | ) | (0.64 | ) | (1.26 | ) | ||||||
| 7/31/2011 | 16.44 | (0.25 | ) | 6.78 | 6.53 | – | |||||||||
| Class R4 | |||||||||||||||
| 1/31/2016(c) | 24.45 | (0.07 | ) | (6.46 | ) | (6.53 | ) | (1.85 | ) | ||||||
| 6/30/2015 to 7/31/2015(e) | 24.40 | (0.02 | ) | 0.07 | 0.05 | – | |||||||||
| Class R5 | |||||||||||||||
| 1/31/2016(c) | 27.50 | (0.06 | ) | (7.30 | ) | (7.36 | ) | (1.85 | ) | ||||||
| 6/30/2015 to 7/31/2015(e) | 27.44 | (0.01 | ) | 0.07 | 0.06 | – | |||||||||
| Class R6 | |||||||||||||||
| 1/31/2016(c) | 27.51 | (0.04 | ) | (7.31 | ) | (7.35 | ) | (1.85 | ) | ||||||
| 6/30/2015 to 7/31/2015(e) | 27.44 | (0.01 | ) | 0.08 | 0.07 | – | |||||||||
| (a) | Calculated using average shares outstanding during the period. |
| (b) | Total return for Classes A, B and C does not consider the effects of sales loads and assumes the reinvestment of all distributions. Total return for all other classes assumes the reinvestment of all distributions. |
| (c) | Unaudited. |
| (d) | Not annualized. |
| (e) | Commenced on June 30, 2015. |
| (f) | Annualized. |
| 16 | See Notes to Financial Statements. |
| Ratios to Average Net Assets: | Supplemental Data: | ||||||||||||||||
| Net asset value, end of period | Total return(b) (%) | Total expenses (%) | Net investment loss (%) | Net assets, end of period (000) | Portfolio turnover rate (%) | ||||||||||||
| $15.58 | (27.98 | )(d) | 0.51 | (d) | (0.38 | )(d) | $ | 24,136 | 115.73 | (d) | |||||||
| 23.78 | 20.26 | 0.99 | (0.68 | ) | 36,331 | 185.77 | |||||||||||
| 23.81 | 10.64 | 0.98 | (0.78 | ) | 90,665 | 242.06 | |||||||||||
| 26.27 | 37.37 | 1.09 | (0.74 | ) | 110,917 | 201.80 | |||||||||||
| 20.85 | (2.02 | ) | 1.12 | (0.95 | ) | 85,649 | 195.11 | ||||||||||
| 22.71 | 39.75 | 1.19 | (1.09 | ) | 121,589 | 136.95 | |||||||||||
| 15.49 | (28.13 | )(d) | 0.69 | (d) | (0.55 | )(d) | 9,839 | 115.73 | (d) | ||||||||
| 23.70 | 19.88 | 1.33 | (0.99 | ) | 13,747 | 185.77 | |||||||||||
| 23.81 | 10.22 | 1.33 | (1.13 | ) | 14,855 | 242.06 | |||||||||||
| 26.35 | 37.00 | 1.36 | (1.00 | ) | 14,740 | 201.80 | |||||||||||
| 20.96 | (2.23 | ) | 1.37 | (1.21 | ) | 12,522 | 195.11 | ||||||||||
| 22.89 | 39.60 | 1.35 | (1.24 | ) | 11,187 | 136.95 | |||||||||||
| 15.71 | (28.07 | )(d) | 0.64 | (d) | (0.51 | )(d) | 196,936 | 115.73 | (d) | ||||||||
| 23.99 | 19.95 | 1.23 | (0.89 | ) | 302,163 | 185.77 | |||||||||||
| 24.03 | 10.40 | 1.23 | (1.02 | ) | 293,384 | 242.06 | |||||||||||
| 26.53 | 37.09 | 1.26 | (0.90 | ) | 285,000 | 201.80 | |||||||||||
| 21.07 | (2.13 | ) | 1.27 | (1.12 | ) | 224,641 | 195.11 | ||||||||||
| 22.97 | 39.72 | 1.25 | (1.15 | ) | 159,496 | 136.95 | |||||||||||
| 16.07 | (27.95 | )(d) | 0.51 | (d) | (0.41 | )(d) | 170 | 115.73 | (d) | ||||||||
| 24.45 | 0.20 | (d) | 0.92 | (f) | (0.82 | )(f) | 22 | 185.77 | |||||||||
| 18.29 | (27.87 | )(d) | 0.38 | (d) | (0.28 | )(d) | 82 | 115.73 | (d) | ||||||||
| 27.50 | 0.22 | (d) | 0.71 | (f) | (0.59 | )(f) | 10 | 185.77 | |||||||||
| 18.31 | (27.82 | )(d) | 0.30 | (d) | (0.19 | )(d) | 150,727 | 115.73 | (d) | ||||||||
| 27.51 | 0.26 | (d) | 0.59 | (f) | (0.47 | )(f) | 10 | 185.77 | |||||||||
| See Notes to Financial Statements. | 17 |
Notes to Financial Statements (unaudited)
| 1. | ORGANIZATION |
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 eleven classes of shares: Class A, B, C, F, I, P, R2, R3, R4, R5 and R6, 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, R3, R4, R5 and R6 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 is not available for purchase by new investors other than certain new investors described in the Fund’s prospectus. 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 preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) 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. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies.
| 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 utilize 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. |
18
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. 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 the 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 and other income on the Statement of Operations. Withholding taxes on foreign dividends have been provided for in accordance with the applicable country’s tax rules and rates. 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, 2012 through July 31, 2015. 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, R3 and R4 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. |
19
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, 2016 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 Fee
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, 2016, 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.
20
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 certain “Fund of Funds” managed by Lord Abbett, pursuant to which each Underlying Fund pays a portion of the expenses (excluding management fees and distribution and service fees) of each 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, if applicable, 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, 2016, the percentages of the Fund’s outstanding shares owned by Lord Abbett Alpha Strategy Fund and Lord Abbett Diversified Equity Strategy Fund were 7.58% and 0.45%, respectively.
12b-1 Distribution Plan
The Fund has adopted a distribution plan with respect to Class A, B, C, F, P, R2, R3 and R4 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 authorized by the Board pursuant to the plan:
| Fees* | Class A | Class B | Class C | Class F | Class P | Class R2 | Class R3 | Class R4 | ||||||||
| Service | .25% | (1) | .25% | .25% | – | .25% | .25% | .25% | .25% | |||||||
| Distribution | – | .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. | |
| (1) | Annual Service fee on shares sold prior to June 1, 1990 is .15% of the average daily net assets attributable to Class A shares. |
Class I, Class R5 and Class R6 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, 2016:
| Distributor | Dealers’ |
| Commissions | Concessions |
| $7,369 | $41,733 |
Distributor received CDSCs of $1,451 and $782 for Class A and Class C shares, respectively, for the six months ended January 31, 2016.
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 reclassified within the components of net assets based on their federal tax basis treatment;
21
Notes to Financial Statements (unaudited)(continued)
temporary differences do not require reclassification. Dividends and distributions that 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, 2016 and fiscal year ended July 31, 2015 was as follows:
| Six Months Ended | ||||||||
| 1/31/2016 | Year Ended | |||||||
| (unaudited) | 7/31/2015 | |||||||
| Distributions paid from: | ||||||||
| Ordinary income | $ | 26,398,528 | $ | 42,121,218 | ||||
| Net long-term capital gains | 232,592,434 | 501,910,774 | ||||||
| Total distributions paid | $ | 258,990,962 | $ | 544,031,992 | ||||
As of January 31, 2016, the aggregate unrealized security gains and losses based on cost for U.S. federal income tax purposes were as follows:
| Tax cost | $ | 2,606,230,332 | ||
| Gross unrealized gain | 130,349,859 | |||
| Gross unrealized loss | (158,779,981 | ) | ||
| Net unrealized security loss | $ | (28,430,122 | ) |
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, 2016 were as follows:
| Purchases | Sales |
| $3,470,283,721 | $3,540,426,946 |
There were no purchases or sales of U.S. Government securities for the six months ended January 31, 2016.
| 6. | DISCLOSURES ABOUT OFFSETTING ASSETS AND LIABILITIES |
The Financial Accounting Standards Board (“FASB”) requires disclosures intended to help better assess the effect or potential effect of offsetting arrangements on a fund’s financial position. The following tables illustrate gross and net information about recognized assets and liabilities 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 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:
22
Notes to Financial Statements (unaudited)(continued)
| Gross Amounts | Net Amounts of | ||||||
| Offset in the | Assets Presented | ||||||
| Gross Amounts of | Statement of Assets | in the Statement of | |||||
| Description | Recognized Assets | and Liabilities | Assets and Liabilities | ||||
| Repurchase Agreement | $110,125,347 | $ | – | $110,125,347 | |||
| Total | $110,125,347 | $ | – | $110,125,347 | |||
| Net Amounts of Assets Presented in | Amounts Not Offset in the Statement of Assets and Liabilities | |||||||||||||||||||
| Counterparty | the Statement of Assets and Liabilities | Financial Instruments | Cash Collateral Received(a) | Securities Collateral Received(a) | Net Amount(b) | |||||||||||||||
| Fixed Income Clearing Corp. | $ | 110,125,347 | $ | – | $ | – | $ | (110,125,347 | ) | $ | – | |||||||||
| Total | $ | 110,125,347 | $ | – | $ | – | $ | (110,125,347 | ) | $ | – | |||||||||
| (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 owed to the Fund by the counterparty as of January 31, 2016. |
| 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.
| 8. | EXPENSE REDUCTIONS |
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.
| 9. | LINE OF CREDIT |
Effective August 31, 2015, the Fund and certain other funds managed by Lord Abbett (collectively, the “Participating Funds”) entered into a syndicated line of credit facility with various lenders for $550 million (the “Facility”), whereas State Street Bank and Trust Company (“SSB”) participates as a lender and as agent for the lenders. The Facility is to be used for temporary or emergency purposes as an additional source of: liquidity to satisfy redemptions. The Participating Funds are subject to graduated borrowing limits of one-third of Fund assets (if Fund assets are less than $750 million), $250 million, $300 million, or $350 million, based on past borrowings and likelihood of future borrowings. The Facility will continue through August 29, 2016.
Prior to August 31, 2015, the Fund and certain other funds managed by Lord Abbett participated in a $500 million unsecured revolving credit facility with SSB (the “SSB Facility”).
During the six months ended January 31, 2016, the Fund did not utilize the Facility or the SSB Facility.
23
Notes to Financial Statements (unaudited)(continued)
| 10. | TRANSACTIONS WITH AFFILIATED ISSUERS |
An affiliated issuer is one in which a fund has ownership of at least 5% of the outstanding voting securities of the underlying issuer at any point during the fiscal year. The Fund had the following transactions with affiliated issuers during the period ended January 31, 2016:
| Net | |||||||||||||
| Realized | |||||||||||||
| Balance | Affiliated | (Loss) | |||||||||||
| Balance of | of Shares | Issuer | 8/1/2015 | ||||||||||
| Shares Held | Gross | Gross | Held at | Value at | to | ||||||||
| Affiliated Issuer | at 7/31/2015 | Additions | Sales | 1/31/2016 | 1/31/2016 | 1/31/2016 | (a) | ||||||
| Match Group, Inc.(b) | – | 2,130,220 | (28,962) | 2,101,258 | $26,370,788 | $(38,573 | ) |
| (a) | Represents realized gains (losses) only when the issuer was an affiliate of the Fund. |
| (b) | Not an affiliated issuer as of July 31, 2015. |
| 11. | 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.
| 12. | INVESTMENT RISKS |
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.
| 13. | SUMMARY OF CAPITAL TRANSACTIONS |
Transactions in shares of beneficial interest were as follows:
| Six Months Ended | ||||||||||||||||
| January 31, 2016 | Year Ended | |||||||||||||||
| (unaudited) | July 31, 2015 | |||||||||||||||
| Class A Shares | Shares | Amount | Shares | Amount | ||||||||||||
| Shares sold | 4,195,005 | $ | 83,396,479 | 7,514,281 | $ | 177,495,130 | ||||||||||
| Converted from Class B* | 93,547 | 2,004,250 | 71,793 | 1,703,628 | ||||||||||||
| Reinvestment of distributions | 4,259,398 | 81,950,813 | 8,335,886 | 180,471,923 | ||||||||||||
| Shares reacquired | (6,860,022 | ) | (134,606,937 | ) | (15,570,297 | ) | (366,649,096 | ) | ||||||||
| Increase (decrease) | 1,687,928 | $ | 32,744,605 | 351,663 | $ | (6,978,415 | ) | |||||||||
24
Notes to Financial Statements (unaudited)(continued)
| Six Months Ended | ||||||||||||||||
| January 31, 2016 | Year Ended | |||||||||||||||
| (unaudited) | July 31, 2015 | |||||||||||||||
| Class B Shares | Shares | Amount | Shares | Amount | ||||||||||||
| Shares sold | 6,764 | $ | 106,792 | 10,749 | $ | 192,708 | ||||||||||
| Reinvestment of distributions | 39,560 | 572,427 | 110,911 | 1,872,179 | ||||||||||||
| Shares reacquired | (37,767 | ) | (440,527 | ) | (103,945 | ) | (1,934,553 | ) | ||||||||
| Converted to Class A* | (121,497 | ) | (2,004,250 | ) | (91,366 | ) | (1,703,628 | ) | ||||||||
| Decrease | (112,940 | ) | $ | (1,765,558 | ) | (73,651 | ) | $ | (1,573,294 | ) | ||||||
| Class C Shares | ||||||||||||||||
| Shares sold | 195,648 | $ | 2,806,572 | 383,265 | $ | 6,846,192 | ||||||||||
| Reinvestment of distributions | 550,063 | 8,052,791 | 1,060,343 | 18,089,454 | ||||||||||||
| Shares reacquired | (1,145,605 | ) | (16,964,784 | ) | (1,221,014 | ) | (22,835,063 | ) | ||||||||
| Increase (decrease) | (399,894 | ) | $ | (6,105,421 | ) | 222,594 | $ | 2,100,583 | ||||||||
| Class F Shares | ||||||||||||||||
| Shares sold | 537,050 | $ | 10,622,728 | 5,582,198 | $ | 129,800,152 | ||||||||||
| Reinvestment of distributions | 826,560 | 16,415,497 | 1,221,649 | 27,181,678 | ||||||||||||
| Shares reacquired | (3,039,184 | ) | (57,987,869 | ) | (2,876,369 | ) | (69,305,627 | ) | ||||||||
| Increase (decrease) | (1,675,574 | ) | $ | (30,949,644 | ) | 3,927,478 | $ | 87,676,203 | ||||||||
| Class I Shares | ||||||||||||||||
| Shares sold | 8,042,000 | $ | 175,606,288 | 11,650,068 | $ | 308,495,052 | ||||||||||
| Reinvestment of distributions | 4,917,092 | 107,635,144 | 8,892,816 | 216,184,364 | ||||||||||||
| Shares reacquired | (13,873,516 | ) | (305,188,524 | ) | (13,131,488 | ) | (348,013,428 | ) | ||||||||
| Increase (decrease) | (914,424 | ) | $ | (21,947,092 | ) | 7,411,396 | $ | 176,665,988 | ||||||||
| Class P Shares | ||||||||||||||||
| Shares sold | 87,911 | $ | 1,706,841 | 230,776 | $ | 5,389,206 | ||||||||||
| Reinvestment of distributions | 142,578 | 2,660,495 | 732,357 | 15,423,439 | ||||||||||||
| Shares reacquired | (209,198 | ) | (4,108,506 | ) | (3,243,117 | ) | (70,111,377 | ) | ||||||||
| Increase (decrease) | 21,291 | $ | 258,830 | (2,279,984 | ) | $ | (49,298,732 | ) | ||||||||
| Class R2 Shares | ||||||||||||||||
| Shares sold | 151,583 | $ | 3,029,120 | 177,856 | $ | 4,055,270 | ||||||||||
| Reinvestment of distributions | 47,817 | 887,974 | 86,407 | 1,817,129 | ||||||||||||
| Shares reacquired | (144,420 | ) | (2,856,465 | ) | (307,988 | ) | (7,090,493 | ) | ||||||||
| Increase (decrease) | 54,980 | $ | 1,060,629 | (43,725 | ) | $ | (1,218,094 | ) | ||||||||
| Class R3 Shares | ||||||||||||||||
| Shares sold | 1,158,301 | $ | 23,171,569 | 2,240,190 | $ | 52,666,547 | ||||||||||
| Reinvestment of distributions | 1,180,979 | 22,226,129 | 2,331,829 | 49,621,327 | ||||||||||||
| Shares reacquired | (2,399,502 | ) | (46,229,707 | ) | (4,183,529 | ) | (97,520,201 | ) | ||||||||
| Increase (decrease) | (60,222 | ) | $ | (832,009 | ) | 388,490 | $ | 4,767,673 | ||||||||
| Class R4 Shares(a) | ||||||||||||||||
| Shares sold | 9,727 | $ | 185,672 | 907 | $ | 21,925 | ||||||||||
| Reinvestment of distributions | 217 | 4,167 | – | – | ||||||||||||
| Shares reacquired | (247 | ) | (4,161 | ) | – | – | ||||||||||
| Increase | 9,697 | $ | 185,678 | 907 | $ | 21,925 | ||||||||||
25
Notes to Financial Statements (unaudited)(concluded)
| Six Months Ended | ||||||||||||||||
| January 31, 2016 | Year Ended | |||||||||||||||
| (unaudited) | July 31, 2015 | |||||||||||||||
| Class R5 Shares(a) | Shares | Amount | Shares | Amount | ||||||||||||
| Shares sold | 4,095 | $ | 77,949 | 364 | $ | 10,000 | ||||||||||
| Reinvestment of distributions | 31 | 675 | – | – | ||||||||||||
| Increase | 4,126 | $ | 78,624 | 364 | $ | 10,000 | ||||||||||
| Class R6 Shares(a) | ||||||||||||||||
| Shares sold | 8,492,364 | $ | 183,906,596 | 364 | $ | 10,000 | ||||||||||
| Reinvestment of distributions | 162,148 | 3,551,030 | – | – | ||||||||||||
| Shares reacquired | (421,909 | ) | (8,262,401 | ) | – | – | ||||||||||
| Increase | 8,232,603 | $ | 179,195,225 | 364 | $ | 10,000 | ||||||||||
| * | 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. |
| (a) | Shares commenced on June 30, 2015. |
26
Supplemental Proxy Information (unaudited)
A special meeting of shareholders of the Fund was held on December 8, 2015. The special meeting was held for shareholders of the Fund to vote on the following matters:
| 1. | To amend the Fund’s fundamental restrictions related to borrowing and lending to enable the Fund to participate in an interfund lending program; and |
| 2. | To ratify the selection of Deloitte & Touche LLP as independent registered public accounting firm for the Fund’s current fiscal year. |
The results of the proxy solicitation on the preceding matter were as follows:
| 1. | To approve the amendment to the fundamental investment restrictions of the Fund as described in the proxy statement: |
| (a) | Amend the fundamental investment restriction with respect to Borrowing |
| Votes For | Votes Against | Abstain | Broker Non-Votes | |
| 50,951,726 | 4,551,689 | 2,211,591 | 14,078,005 |
| 1. | To approve the amendment to the fundamental investment restrictions of the Fund as described in the proxy statement: |
| (b) | Amend the fundamental investment restriction with respect to Lending |
| Votes For | Votes Against | Abstain | Broker Non-Votes | |
| 50,092,165 | 5,407,441 | 2,215,400 | 14,078,005 |
| 2. | To ratify the selection of Deloitte & Touche LLP as the Fund’s independent registered public accounting firm for the Fund’s current fiscal year |
| Votes For | Votes Against | Abstain | Broker Non-Votes | |
| 68,706,216 | 1,316,938 | 1,769,857 | – |
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 (the “Independent Board Members”), 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 Independent Board Members also discussed the materials described above with their independent legal counsel in a private session at which no representatives of management were present.
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) certain supplemental investment performance information provided by Lord Abbett; (4) information provided by Lord Abbett on the projected expense ratios, management fee rates, and other expense components for the Fund; (5) sales and redemption information for the Fund; (6) information regarding Lord Abbett’s financial condition; (7) an analysis of the relative profitability of the management agreement to Lord Abbett; (8) 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; 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, 2015. The Board observed that the Fund’s investment performance was below the median of the performance peer group for the one-year period and above the median of the performance peer group for the three-year, five-year, and ten-year periods.
28
Approval of Advisory Contract (continued)
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, 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 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 the extent to which there had been economies of scale in managing the Fund, whether the Fund had appropriately benefited from 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 Lord Abbett Distributor LLC (“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
29
Approval of Advisory Contract (concluded)
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.
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
| 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. | Lord Abbett Developing Growth Fund, Inc. | LADG-3 (03/16) |
| 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: | 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 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) | 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 Investment Company Act of 1940 is attached hereto as a part of EX-99.CERT. |
| (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 provided 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 DEVELOPING GROWTH FUND, INC. | ||||
| By: | /s/ Daria L. Foster | |||
| Daria L. Foster | ||||
| President and Chief Executive Officer | ||||
Date: March 28, 2016
| By: | /s/ Joan A. Binstock | |||
| Joan A. Binstock | ||||
| Chief Financial Officer and Vice President |
Date: March 28, 2016
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.
| By: | /s/ Daria L. Foster | |||
| Daria L. Foster | ||||
| President and Chief Executive Officer |
Date: March 28, 2016
| By: | /s/ Joan A. Binstock | |||
| Joan A. Binstock | ||||
| Chief Financial Officer and Vice President |
Date: March 28, 2016