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 | 811-06650 |
|
LORD ABBETT RESEARCH FUND, INC. |
(Exact name of registrant as specified in charter) |
|
90 Hudson Street, Jersey City, NJ | | 07302 |
(Address of principal executive offices) | | (Zip code) |
|
Thomas R. Phillips, 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: | 11/30 | |
|
Date of reporting period: | 5/31/2008 | |
| | | | | | | |
Item 1: | | Reports to Shareholders. |
2008
LORD ABBETT
SEMIANNUAL REPORT
Lord Abbett America's Value Fund
For the six-month period ended May 31, 2008
Lord Abbett Research Fund
Lord Abbett America's Value Fund
Semiannual Report
For the six-month period ended May 31, 2008
Dear Shareholders: We are pleased to provide you with this overview of the Lord Abbett America's Value Fund's performance for the six-month period ended May 31, 2008. On this page 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 by 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 888-522-2388 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.
Best regards,
Robert S. Dow
Chairman
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.
Q: What were the overall market conditions during the six months ended May 31, 2008?
A: The period was characterized by market volatility as the ongoing fallout from the subprime lending debacle and subsequent liquidity crisis continued to affect the broader markets. Although the S&P 500® Index,1 which returned -9.64% for the six-month period ended April 30, 2008, recovered some of its lost ground in May, it still returned only -4.47% for the six-month period ended May 31, 2008.
Most equity asset classes and investment styles returned negative results for the period. Growth stocks (as measured by the Russell 3000® Growth Index2) generally fared better than value stocks (as measured by the
1
Russell 3000® Value Index3), although both indexes were negative at -2.37% and -5.02%, respectively. Mid cap stocks (as measured by the Russell Midcap® Index4) were the only asset class in positive territory, returning 0.14%, compared with a -3.78% return for large cap stocks (as measured by the Russell 1000® Index5) and a -1.87% return for small cap stocks (as measured by the Russell 2000® Index6).
During the six months ended May 31, 2008, the fixed-income markets continued to feel the impact of the crisis in the subprime mortgage market that began in 2007. The Federal Reserve Board (the Fed) acted to alleviate the squeeze on short-term funding needs. During the six-month period, the Fed cut its fed funds rate five times, from 4.5% to 2%. The Fed also instituted a temporary Term Auction Facility (TAF), which gave banks access to short-term credit. The Fed conducted 11 TAFs during the six-month period. Finally, the Fed allowed investment firms to borrow from the central bank's discount window.
The cuts in the fed funds rate tended to bring down short-term rates. At the same time, long-term yields, in general, increased as investors grew more worried about inflation. One catalyst for inflation fears was the jump in energy costs. Oil rose from below $89 per barrel in early December 2007 to above $130 per barrel in May 2008. As a result of the movement in rates of differing maturities, the yield curve for Treasuries steepened.
Within the corporate market, securities experienced negative excess returns over Treasuries from January through March, but then returns came back to positive territory in April and May. Total return for the six-month period was slightly negative. The supply of new investment-grade corporate bonds slowed in February and March, but picked up later on. In May, $118 billion in new bonds, a record high, were brought to market. The record issuance in the credit market might reflect the fact that commercial banks severely tightened their lending standards for commercial and industrial loans.
Q: How did the America's Value Fund perform during the six months ended May 31, 2008?
A: The Fund returned -3.03%, reflecting performance at the net asset value (NAV) of Class A shares with all distributions reinvested, compared to its benchmark, the S&P 500 Index, which returned -4.47% over the same period.
Note: The Lord Abbett America's Value Fund is not a balanced fund and has the capability to adjust equity and fixed income allocations, based on relative value in the market and the investment team's proprietary fundamental research.
Q: What were the most significant factors affecting performance?
Equity Portion
A: The greatest contributors to the Fund's performance were the financials sector (primarily owing to an underweight
2
position), the energy sector, and the telecommunications services sector were also contributors relative to the benchmark.
Among the individual holdings that contributed to performance were energy holdings EOG Resources, Inc. (the Fund's number-one contributor), an oil and gas company, and Halliburton Co., a provider of energy services and engineering and construction services, as well as products for the energy industry; and consumer discretionary holding Snap-on Inc., a manufacturer of tool and equipment solutions.
The most significant detractors from the Fund's performance relative to its benchmark for the six-month period were the consumer discretionary sector, the industrials sector, and the healthcare sector.
Among the individual holdings that detracted from performance were consumer discretionary holding Idearc Inc. (the Fund's number-one detractor), a publisher of directories; healthcare holding Bristol-Myers Squibb, a health and personal care company; and materials holding AbitibiBowater, Inc., a manufacturer of newsprint, coated and uncoated groundwood papers, bleached kraft pulp, and lumber products.
Bond Portion
A: In the bond market, investments in the health services, electric-generation, and telecommunications-integrated/services industries were top contributors to the Fund's relative performance in the period. Detracting from the Fund's performance were securities in the printing and publishing, chemicals, and forestry/paper industries.
Among the individual credits adding to performance were convertible securities issued by gas distribution holding El Paso Corp., operator of the largest gas transportation system in the United States, and by technology holding DRS Technologies, Inc., a manufacturer of electronic systems that process and store complex military and aerospace data, and the high yield bonds of health services holding LVB Acquisition Merger Sub Inc., a manufacturer of orthopedic medical products.
The most significant individual holdings detracting from performance were the high yield bonds of forestry and paper holding Abitibi-Consolidated (acquired in October 2007 by Bowater, a manufacturer of newsprint and commercial printing papers) and of printing and publishing holding R.H. Donnelley, a Yellow Pages publisher, and the convertible securities of insurance holding XL Capital Ltd., a provider of liability insurance and reinsurance worldwide.
The Fund's portfolio is actively managed and, therefore, its holdings and weightings of a particular issuer or sector as a percentage of portfolio assets are subject to change. Sectors may include many industries.
3
Note: Class A shares purchased subject to a front-end sales charge have no contingent deferred sales charge (CDSC). However, certain purchases of Class A shares made without a front-end sales charge may be subject to a CDSC of 1% if the shares are redeemed before the first day of the month in which the one-year anniversary of the purchase falls. Please see the prospectus for more information on redemptions that may be subject to a CDSC.
A prospectus contains important information about a fund, including its investment objectives, risks, charges, and ongoing expenses, which an investor 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 888-522-2388 or visit our Website at www.lordabbett.com. Read the prospectus carefully before investing.
1 The S&P 500® Index is widely regarded as the standard for measuring large cap U.S. stock market performance and includes a representative sample of leading companies in leading industries.
2 The Russell 3000® Growth Index measures the performance of those Russell 3000® Index companies with higher price-to-book ratios and higher forecasted growth values. The stocks in this index are also members of either the Russell 1000® Growth or the Russell 2000® Growth indexes.
3 The Russell 3000® Value Index measures the performance of those Russell 3000® Index companies with lower price-to-book ratios and lower forecasted growth values. The stocks in this index are also members of either the Russell 1000® Value or the Russell 2000® Value indexes.
4 The Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which represent approximately 25% of the total market capitalization of the Russell 1000® Index.
5 The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000® Index, which represents approximately 92% of the total market capitalization of the Russell 3000® Index.
6 The Russell 2000® Index is composed of 2,000 securities with market values ranging from $25 million to $275 million. The Growth Index is comprised of securities in the Russell 2000® Index with higher price-to-book ratios and higher forecasted growth.
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 888-522-2388 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 several classes of shares with distinct pricing options. For a full description of the differences in pricing alternatives, please see the Fund's prospectus.
The views of the Fund's management and the portfolio holdings described in this report are as of May 31, 2008; 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.
4
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 (December 1, 2007 through May 31, 2008).
Actual Expenses
For each class of the Fund, the first line of the applicable 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 12/1/07 – 5/31/08" 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 applicable 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.
5
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† | |
| | | 12/1/07 | | 5/31/08 | | 12/1/07 -
5/31/08 | |
| Class A | |
| Actual | | $ | 1,000.00 | | | $ | 969.70 | | | $ | 6.40 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,018.51 | | | $ | 6.56 | | |
| Class B | |
| Actual | | $ | 1,000.00 | | | $ | 966.90 | | | $ | 9.59 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,015.25 | | | $ | 9.82 | | |
| Class C | |
| Actual | | $ | 1,000.00 | | | $ | 966.90 | | | $ | 9.59 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,015.25 | | | $ | 9.82 | | |
| Class F | |
| Actual | | $ | 1,000.00 | | | $ | 970.90 | | | $ | 5.32 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,019.59 | | | $ | 5.45 | | |
| Class I | |
| Actual | | $ | 1,000.00 | | | $ | 971.60 | | | $ | 4.68 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,020.26 | | | $ | 4.80 | | |
| Class P | |
| Actual | | $ | 1,000.00 | | | $ | 969.30 | | | $ | 6.89 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,018.01 | | | $ | 7.06 | | |
| Class R2 | |
| Actual | | $ | 1,000.00 | | | $ | 968.40 | | | $ | 7.53 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,017.34 | | | $ | 7.72 | | |
| Class R3 | |
| Actual | | $ | 1,000.00 | | | $ | 969.10 | | | $ | 7.04 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,017.84 | | | $ | 7.21 | | |
† For each class of the Fund, expenses are equal to the annualized expense ratio for such class (1.30% for Class A, 1.95% for Classes B and C, 1.08% for Class F, 0.95% for Class I, 1.40% for Class P, 1.53% for Class R2 and 1.43% for Class R3) multiplied by the average account value over the period, multiplied by 183/366 (to reflect one-half year period).
Portfolio Holdings Presented by Sector
May 31, 2008
| Sector* | | %** | |
| Consumer Discretionary | | | 10.24 | % | |
| Consumer Staples | | | 12.02 | % | |
| Energy | | | 10.02 | % | |
| Financials | | | 17.48 | % | |
| Healthcare | | | 9.10 | % | |
| Industrials | | | 5.44 | % | |
* A sector may comprise several industries.
** Represents percent of total investments.
| Sector* | | %** | |
| Information Technology | | | 2.37 | % | |
| Materials | | | 9.43 | % | |
| Telecommunication Services | | | 12.99 | % | |
| Utilities | | | 8.81 | % | |
| Short-Term Investment | | | 2.10 | % | |
| Total | | | 100.00 | % | |
6
Schedule of Investments (unaudited)
May 31, 2008
| Investments | | Shares
(000) | | Value | |
| LONG-TERM INVESTMENTS 97.55% | |
| COMMON STOCKS 59.62% | |
| Capital Markets 3.20% | |
| ACE Ltd. (Bermuda)(a) | | | 582 | | | $ | 34,954,733 | | |
| PartnerRe Ltd. (Bermuda)(a) | | | 292 | | | | 21,480,635 | | |
| Total | | | | | | | 56,435,368 | | |
| Chemicals 3.67% | |
| Chemtura Corp. | | | 2,350 | | | | 20,516,373 | | |
| Eastman Chemical Co. | | | 482 | | | | 36,918,359 | | |
| Monsanto Co. | | | 57 | | | | 7,185,360 | | |
| Total | | | | | | | 64,620,092 | | |
| Commercial Banks 0.08% | |
| Marshall & Ilsley Corp. | | | 58 | | | | 1,340,228 | | |
| Commercial Services & Supplies 2.03% | |
| R.R. Donnelley & Sons Co. | | | 1,091 | | | | 35,817,530 | | |
| Construction Materials 0.58% | |
| KBR, Inc. | | | 293 | | | | 10,153,855 | | |
| Containers & Packaging 1.65% | |
| Ball Corp. | | | 537 | | | | 29,153,670 | | |
| Distributors 1.21% | |
| Genuine Parts Co. | | | 484 | | | | 21,305,241 | | |
| Diversified Financials 0.75% | |
| Bank of America Corp. | | | 389 | | | | 13,216,286 | | |
| Diversified Telecommunication Services 11.28% | |
| AT&T, Inc. | | | 1,260 | | | | 50,285,970 | | |
| EMBARQ Corp. | | | 933 | | | | 44,144,118 | | |
| Qwest Communications International Inc. | | | 7,768 | | | | 37,676,740 | | |
| Verizon Communications, Inc. | | | 460 | | | | 17,703,894 | | |
| Windstream Corp. | | | 3,672 | | | | 48,985,814 | | |
| Total | | | | | | | 198,796,536 | | |
See Notes to Financial Statements.
7
Schedule of Investments (unaudited)(continued)
May 31, 2008
| Investments | | Shares
(000) | | Value | |
| Electric Utilities 1.11% | |
| Unisource Energy Corp. | | | 577 | | | $ | 19,566,070 | | |
| Electrical Equipment 0.92% | |
| Hubbell, Inc. Class B | | | 346 | | | | 16,182,420 | | |
| Energy Equipment & Services 3.51% | |
| Halliburton Co. | | | 750 | | | | 36,445,736 | | |
| Transocean Inc. (Cayman Islands)*(a) | | | 169 | | | | 25,437,830 | | |
| Total | | | | | | | 61,883,566 | | |
| Food & Staples Retailing 1.73% | |
| Ingles Markets, Inc. | | | 443 | | | | 10,801,541 | | |
| Wal-Mart Stores, Inc. | | | 340 | | | | 19,648,922 | | |
| Total | | | | | | | 30,450,463 | | |
| Food Products 6.03% | |
| H.J. Heinz Co. | | | 812 | | | | 40,531,911 | | |
| Kellogg Co. | | | 354 | | | | 18,361,464 | | |
| Kraft Foods, Inc. Class A | | | 1,461 | | | | 47,443,536 | | |
| Total | | | | | | | 106,336,911 | | |
| Household Durables 2.10% | |
| Newell Rubbermaid, Inc. | | | 353 | | | | 7,096,272 | | |
| Snap-on, Inc. | | | 484 | | | | 29,987,856 | | |
| Total | | | | | | | 37,084,128 | | |
| Industrial Conglomerates 0.59% | |
| Tyco International Ltd. (Bermuda)(a) | | | 232 | | | | 10,475,042 | | |
| Media 1.57% | |
| Idearc Inc. | | | 3,932 | | | | 15,807,347 | | |
| Interpublic Group of Cos., Inc. (The)* | | | 1,194 | | | | 11,901,329 | | |
| Total | | | | | | | 27,708,676 | | |
| Multi-Line Retail 0.76% | |
| Macy's, Inc. | | | 564 | | | | 13,346,472 | | |
| Multi-Utilities & Unregulated Power 4.97% | |
| Ameren Corp. | | | 847 | | | | 38,514,330 | | |
| NiSource, Inc. | | | 2,226 | | | | 40,263,220 | | |
See Notes to Financial Statements.
8
Schedule of Investments (unaudited)(continued)
May 31, 2008
| Investments | | | | | | Shares
(000) | | Value | |
| Multi-Utilities & Unregulated Power (continued) | |
| Puget Energy, Inc. | | | | | | | | | 314 | | | $ | 8,786,621 | | |
| Total | | | | 87,564,171 | |
| Oil & Gas 3.86% | |
| Chevron Corp. | | | | | | | | | 367 | | | | 36,417,795 | | |
| EOG Resources, Inc. | | | | | | | | | 245 | | | | 31,540,076 | | |
| Total | | | | 67,957,871 | |
| Paper & Forest Products 0.84% | |
| MeadWestvaco Corp. | | | | | | | | | 576 | | | | 14,815,334 | | |
| Pharmaceuticals 5.11% | |
| Bristol-Myers Squibb Co. | | | | | | | | | 1,633 | | | | 37,204,675 | | |
| Mylan Inc. | | | | | | | | | 1,552 | | | | 20,723,205 | | |
| Pfizer Inc. | | | | | | | | | 1,663 | | | | 32,193,744 | | |
| Total | | | | 90,121,624 | |
| Semiconductors & Semiconductor Equipment 0.94% | |
Taiwan Semiconductor
Manufacturing Co. Ltd. ADR | | | | | | | | | 1,450 | | | | 16,606,817 | | |
| Specialty Retail 1.13% | |
| OfficeMax, Inc. | | | | | | | | | 919 | | | | 19,932,592 | | |
| Total Common Stocks (cost $1,029,062,631) | | | 1,050,870,963 | | |
| | | Interest
Rate | | Maturity
Date | | Principal
Amount
(000) | | | |
| CONVERTIBLE BONDS 4.64% | |
| Biotechnology 0.83% | |
| Cephalon, Inc. Ser A | | | Zero Coupon | | | 6/15/2033 | | $ | 2,500 | | | | 2,871,875 | | |
| CV Therapeutics, Inc. | | | 3.25 | % | | 8/16/2013 | | | 5,000 | | | | 3,762,500 | | |
| Genzyme Corp. | | | 1.25 | % | | 12/1/2023 | | | 4,500 | | | | 4,860,000 | | |
| Gilead Sciences, Inc. | | | 0.625 | % | | 5/1/2013 | | | 2,000 | | | | 3,075,000 | | |
| Total | | | | 14,569,375 | |
| Capital Markets 0.19% | |
Conseco, Inc.
(Zero Coupon after 9/30/2010)(b) | | | 3.50 | % | | 9/30/2035 | | | 3,850 | | | | 3,267,687 | | |
See Notes to Financial Statements.
9
Schedule of Investments (unaudited)(continued)
May 31, 2008
| Investments | | Interest
Rate | | Maturity
Date | | Principal
Amount
(000) | | Value | |
| Commercial Services & Supplies 0.25% | |
| CRA International, Inc. | | | 2.875 | % | | 6/15/2034 | | $ | 4,000 | | | $ | 4,365,000 | | |
| Diversified Telecommunication Services 0.15% | |
| Qwest Communications International, Inc. | | | 3.50 | % | | 11/15/2025 | | | 2,500 | | | | 2,684,375 | | |
| Electrical Equipment 0.37% | |
Roper Industries, Inc.
(Zero Coupon after 1/15/2009)(c) | | | 1.481 | % | | 1/15/2034 | | | 8,000 | | | | 6,540,000 | | |
| Food Products 0.35% | |
| Archer Daniels Midland Co. | | | 0.875 | % | | 2/15/2014 | | | 5,500 | | | | 6,201,250 | | |
| Healthcare Providers & Services 0.26% | |
| Five Star Quality Care, Inc. | | | 3.75 | % | | 10/15/2026 | | | 6,000 | | | | 4,605,000 | | |
| Information Technology Services 0.21% | |
| Symantec Corp. | | | 0.75 | % | | 6/15/2011 | | | 3,000 | | | | 3,731,250 | | |
| Internet Software & Services 0.21% | |
| Equinix, Inc. | | | 2.50 | % | | 4/15/2012 | | | 3,500 | | | | 3,701,250 | | |
| Media 0.20% | |
| Sinclair Broadcast Group, Inc. | | | 6.00 | % | | 9/15/2012 | | | 4,000 | | | | 3,580,000 | | |
| Metals & Mining 0.47% | |
| Newmont Mining Corp. | | | 1.25 | % | | 7/15/2014 | | | 4,000 | | | | 4,895,000 | | |
| Placer Dome, Inc. (Canada)(a) | | | 2.75 | % | | 10/15/2023 | | | 2,000 | | | | 3,427,500 | | |
| Total | | | | | | | | | | | | | 8,322,500 | | |
| Oil & Gas 0.42% | |
| Devon Energy Corp. | | | 4.90 | % | | 8/15/2008 | | | 4,000 | | | | 7,430,000 | | |
| Pharmaceuticals 0.73% | |
| Teva Pharmaceutical Finance LLC (Israel)(a) | | | 1.75 | % | | 2/1/2026 | | | 8,275 | | | | 9,195,594 | | |
| Wyeth | | | 3.581 | %# | | 1/15/2024 | | | 3,500 | | | | 3,570,735 | | |
| Total | | | | | | | | | | | | | 12,766,329 | | |
| Total Convertible Bonds (cost $78,798,293) | | | 81,764,016 | | |
See Notes to Financial Statements.
10
Schedule of Investments (unaudited)(continued)
May 31, 2008
| Investments | | Interest
Rate | | Shares
(000) | | Value | |
| CONVERTIBLE PREFERRED STOCKS 2.72% | |
| Capital Markets 0.28% | |
| MetLife, Inc. | | | 6.375 | % | | | 60 | | | $ | 1,744,800 | | |
| XL Capital Ltd. (Cayman Islands)(a) | | | 7.00 | % | | | 230 | | | | 3,201,600 | | |
| Total | | | 4,946,400 | | |
| Electric Utilities 0.32% | |
| CMS Energy Corp. | | | 4.50 | % | | | 70 | | | | 5,713,750 | | |
| Food Products 0.55% | |
| Archer Daniels Midland Co.(d) | | | 6.25 | % | | | 94 | | | | 4,664,750 | | |
| Bunge Ltd. (Bermuda)(a) | | | 4.875 | % | | | 35 | | | | 5,040,000 | | |
| Total | | | 9,704,750 | | |
| Oil & Gas 0.72% | |
| El Paso Corp. | | | 4.99 | % | | | 8 | | | | 12,622,000 | | |
| Pharmaceuticals 0.57% | |
| Mylan Inc. | | | 6.50 | % | | | 8 | | | | 7,114,950 | | |
| Schering-Plough Corp. | | | 6.00 | % | | | 15 | | | | 2,932,500 | | |
| Total | | | 10,047,450 | | |
| Thrifts & Mortgage Finance 0.28% | |
| Fannie Mae | | | 8.75 | % | | | 100 | | | | 4,987,500 | | |
| Total Convertible Preferred Stocks (cost $46,288,430) | | | | 48,021,850 | |
| | | | | | | U.S. $
Value | |
| FOREIGN COMMON STOCKS(e) 4.96% | |
| Australia 1.16% | |
| Coca-Cola Amatil Ltd. | | | | | | | 2,638 | | | $ | 20,396,528 | | |
| Canada 0.42% | |
| CI Financial Income Fund Unit | | | | | | | 310 | | | | 7,409,924 | | |
| Germany 0.47% | |
| Henkel KGaA | | | | | | | 184 | | | | 8,292,110 | | |
| Greece 0.87% | |
| National Bank of Greece S.A. | | | | | | | 271 | | | | 15,395,738 | | |
See Notes to Financial Statements.
11
Schedule of Investments (unaudited)(continued)
May 31, 2008
| Investments | | | | | | Shares
(000) | | U.S. $
Value | |
| United Kingdom 2.04% | |
| Cadbury Schweppes plc | | | | | | | | | 1,221 | | | $ | 16,298,212 | | |
| Kesa Electricals plc | | | | | | | | | 3,038 | | | | 12,216,489 | | |
| Royal Bank of Scotland Group plc (The) | | | | | | | | | 1,651 | | | | 7,472,087 | | |
| Total | | | | | | | | | | | | | 35,986,788 | | |
| Total Foreign Common Stocks (cost $89,434,290) | | | 87,481,088 | | |
| FOREIGN PREFERRED STOCK(e) 0.27% | |
| Brazil | |
| Companhia Energetica de Minas Gerais (cost $3,602,709) | | | | | | | | | 199 | | | | 4,658,739 | | |
| | | Interest
Rate | | Maturity
Date | | Principal
Amount
(000) | | Value | |
GOVERNMENT SPONSORED ENTERPRISES
BOND 2.03% | |
Federal Home Loan Mortgage Corp.
(cost $35,330,039) | | | 5.75 | % | | 3/15/2009 | | $ | 35,000 | | | $ | 35,845,355 | | |
GOVERNMENT SPONSORED ENTERPRISES
PASS-THROUGHS 5.84% | |
| Federal National Mortgage Assoc. | | | 5.50 | % | | 6/1/2036-2/1/2038 | | | 23,388 | | | | 23,253,558 | | |
| Federal National Mortgage Assoc. | | | 6.00 | % | | 11/1/2034-10/1/2037 | | | 43,231 | | | | 43,940,967 | | |
| Federal National Mortgage Assoc. | | | 6.50 | % | | 4/1/2035-8/1/2037 | | | 34,544 | | | | 35,682,129 | | |
| Total Government Sponsored Enterprises Pass-Throughs (cost $102,424,407) | | | 102,876,654 | | |
| HIGH YIELD CORPORATE BONDS 16.67% | |
| Aerospace & Defense 0.20% | |
| Hawker Beechcraft Corp. | | | 9.75 | % | | 4/1/2017 | | | 3,500 | | | | 3,605,000 | | |
| Air Freight & Couriers 0.20% | |
| Park-Ohio Industries, Inc. | | | 8.375 | % | | 11/15/2014 | | | 4,000 | | | | 3,465,000 | | |
| Auto Components 0.16% | |
| Cooper-Standard Automotive, Inc. | | | 8.375 | % | | 12/15/2014 | | | 3,500 | | | | 2,861,250 | | |
| Automobiles 0.21% | |
| General Motors Corp. | | | 7.20 | % | | 1/15/2011 | | | 4,500 | | | | 3,791,250 | | |
See Notes to Financial Statements.
12
Schedule of Investments (unaudited)(continued)
May 31, 2008
| Investments | | Interest
Rate | | Maturity
Date | | Principal
Amount
(000) | | Value | |
| Beverages 0.31% | |
| Constellation Brands, Inc. | | | 7.25 | % | | 5/15/2017 | | $ | 1,500 | | | $ | 1,488,750 | | |
| Constellation Brands, Inc. | | | 8.125 | % | | 1/15/2012 | | | 4,000 | | | | 4,070,000 | | |
| Total | | | | | | | | | | | | | 5,558,750 | | |
| Chemicals 0.64% | |
| Equistar Chemicals L.P. | | | 7.55 | % | | 2/15/2026 | | | 3,000 | | | | 2,055,000 | | |
Ineos Group Holdings plc
(United Kingdom)†(a) | | | 8.50 | % | | 2/15/2016 | | | 6,500 | | | | 5,086,250 | | |
| NOVA Chemicals Corp. (Canada)(a) | | | 5.953 | %# | | 11/15/2013 | | | 4,750 | | | | 4,108,750 | | |
| Total | | | | | | | | | | | | | 11,250,000 | | |
| Commercial Services & Supplies 0.32% | |
| Allied Waste North America, Inc. | | | 7.25 | % | | 3/15/2015 | | | 4,000 | | | | 3,990,000 | | |
| FTI Consulting, Inc. | | | 7.75 | % | | 10/1/2016 | | | 1,500 | | | | 1,563,750 | | |
| Total | | | | | | | | | | | | | 5,553,750 | | |
| Communications Equipment 0.20% | |
| Hughes Network Systems LLC | | | 9.50 | % | | 4/15/2014 | | | 3,500 | | | | 3,552,500 | | |
| Consumer Finance 0.94% | |
| Ford Motor Credit Corp. | | | 7.375 | % | | 10/28/2009 | | | 10,000 | | | | 9,742,650 | | |
| GMAC LLC | | | 7.25 | % | | 3/2/2011 | | | 8,000 | | | | 6,856,320 | | |
| Total | | | | | | | | | | | | | 16,598,970 | | |
| Containers & Packaging 0.65% | |
| Berry Plastics Group, Inc. | | | 8.875 | % | | 9/15/2014 | | | 3,000 | | | | 2,760,000 | | |
| Crown Cork & Seal, Inc. | | | 7.375 | % | | 12/15/2026 | | | 6,000 | | | | 5,205,000 | | |
| Graphic Packaging International Corp. | | | 9.50 | % | | 8/15/2013 | | | 3,400 | | | | 3,442,500 | | |
| Total | | | | | | | | | | | | | 11,407,500 | | |
| Diversified Financials 0.97% | |
| Ashtead Capital, Inc.† | | | 9.00 | % | | 8/15/2016 | | | 3,175 | | | | 2,841,625 | | |
| Ford Capital B.V. (Netherlands)(a) | | | 9.50 | % | | 6/1/2010 | | | 5,000 | | | | 4,850,000 | | |
| RBS Global & Rexnord Corp. | | | 8.875 | % | | 9/1/2016 | | | 3,000 | | | | 2,910,000 | | |
| RBS Global & Rexnord Corp. | | | 9.50 | % | | 8/1/2014 | | | 3,500 | | | | 3,526,250 | | |
| RBS Global & Rexnord Corp. | | | 11.75 | % | | 8/1/2016 | | | 3,000 | | | | 2,955,000 | | |
| Total | | | | | | | | | | | | | 17,082,875 | | |
See Notes to Financial Statements.
13
Schedule of Investments (unaudited)(continued)
May 31, 2008
| Investments | | Interest
Rate | | Maturity
Date | | Principal
Amount
(000) | | Value | |
| Diversified Telecommunication Services 1.52% | |
| Cincinnati Bell, Inc. | | | 7.00 | % | | 2/15/2015 | | $ | 10,000 | | | $ | 9,700,000 | | |
| Intelsat Bermuda Ltd. (Bermuda)(a) | | | 9.25 | % | | 6/15/2016 | | | 2,325 | | | | 2,359,875 | | |
| Qwest Capital Funding, Inc. | | | 7.90 | % | | 8/15/2010 | | | 6,000 | | | | 6,015,000 | | |
| Syniverse Technologies Inc. | | | 7.75 | % | | 8/15/2013 | | | 5,000 | | | | 4,825,000 | | |
| Windstream Corp. | | | 7.00 | % | | 3/15/2019 | | | 4,000 | | | | 3,810,000 | | |
| Total | | | | | | | | | | | | | 26,709,875 | | |
| Electric Utilities 1.01% | |
| Commonwealth Edison Co. | | | 5.80 | % | | 3/15/2018 | | | 7,000 | | | | 6,860,364 | | |
| Edison Mission Energy | | | 7.00 | % | | 5/15/2017 | | | 3,000 | | | | 2,947,500 | | |
| Edison Mission Energy | | | 7.75 | % | | 6/15/2016 | | | 4,500 | | | | 4,635,000 | | |
| Reliant Energy, Inc. | | | 7.875 | % | | 6/15/2017 | | | 3,375 | | | | 3,408,750 | | |
| Total | | | | | | | | | | | | | 17,851,614 | | |
| Electrical Equipment 0.26% | |
| Baldor Electric Co. | | | 8.625 | % | | 2/15/2017 | | | 4,500 | | | | 4,612,500 | | |
| Electronic Equipment & Instruments 0.28% | |
| Emerson Electric Co. | | | 5.25 | % | | 10/15/2018 | | | 5,000 | | | | 4,892,250 | | |
| Energy Equipment & Services 0.14% | |
| Hornbeck Offshore Services, Inc. | | | 6.125 | % | | 12/1/2014 | | | 2,500 | | | | 2,418,750 | | |
| Food Products 0.28% | |
| General Mills, Inc. | | | 5.20 | % | | 3/17/2015 | | | 5,000 | | | | 4,965,210 | | |
| Healthcare Equipment & Supplies 0.30% | |
| HCA, Inc. | | | 9.125 | % | | 11/15/2014 | | | 5,000 | | | | 5,237,500 | | |
| Healthcare Providers & Services 0.80% | |
| Community Health Systems | | | 8.875 | % | | 7/15/2015 | | | 6,500 | | | | 6,735,625 | | |
| Tenet Healthcare Corp. | | | 9.25 | % | | 2/1/2015 | | | 3,500 | | | | 3,438,750 | | |
| United Surgical Partners, Inc. PIK | | | 9.25 | % | | 5/1/2017 | | | 4,000 | | | | 3,940,000 | | |
| Total | | | | | | | | | | | | | 14,114,375 | | |
| Healthcare Technology 0.28% | |
| LVB Acquisition Merger Sub, Inc.† | | | 10.00 | % | | 10/15/2017 | | | 4,575 | | | | 4,929,562 | | |
See Notes to Financial Statements.
14
Schedule of Investments (unaudited)(continued)
May 31, 2008
| Investments | | Interest
Rate | | Maturity
Date | | Principal
Amount
(000) | | Value | |
| Hotels, Restaurants & Leisure 0.40% | |
| Gaylord Entertainment Co. | | | 8.00 | % | | 11/15/2013 | | $ | 2,875 | | | $ | 2,788,750 | | |
| River Rock Entertainment Authority | | | 9.75 | % | | 11/1/2011 | | | 1,700 | | | | 1,742,500 | | |
| Station Casinos, Inc. | | | 6.50 | % | | 2/1/2014 | | | 4,000 | | | | 2,540,000 | | |
| Total | | | | | | | | | | | | | 7,071,250 | | |
| Independent Power Producers & Energy Traders 1.10% | |
| AES Corp. (The) | | | 8.00 | % | | 10/15/2017 | | | 2,000 | | | | 2,017,500 | | |
| Dynegy Holdings, Inc. | | | 8.375 | % | | 5/1/2016 | | | 8,000 | | | | 8,080,000 | | |
| Mirant Americas Generation LLC | | | 9.125 | % | | 5/1/2031 | | | 7,000 | | | | 6,685,000 | | |
| NRG Energy, Inc. | | | 7.25 | % | | 2/1/2014 | | | 2,650 | | | | 2,603,625 | | |
| Total | | | | | | | | | | | | | 19,386,125 | | |
| Information Technology Services 0.21% | |
| SunGard Data Systems, Inc. | | | 9.125 | % | | 8/15/2013 | | | 3,500 | | | | 3,622,500 | | |
| Media 1.65% | |
| Affinion Group, Inc. | | | 11.50 | % | | 10/15/2015 | | | 3,000 | | | | 3,063,750 | | |
| Barrington Broadcasting Group | | | 10.50 | % | | 8/15/2014 | | | 3,125 | | | | 2,750,000 | | |
| CCH I Holdings LLC | | | 11.75 | % | | 5/15/2014 | | | 3,500 | | | | 2,327,500 | | |
| CCH I LLC | | | 11.00 | % | | 10/1/2015 | | | 3,000 | | | | 2,565,000 | | |
| Idearc Inc. | | | 8.00 | % | | 11/15/2016 | | | 5,500 | | | | 3,960,000 | | |
| Mediacom Broadband LLC Corp. | | | 8.50 | % | | 10/15/2015 | | | 4,175 | | | | 3,809,688 | | |
| Mediacom Communications Corp. | | | 9.50 | % | | 1/15/2013 | | | 2,250 | | | | 2,160,000 | | |
| R.H. Donnelley Corp. | | | 8.875 | % | | 1/15/2016 | | | 3,000 | | | | 2,070,000 | | |
| R.H. Donnelley Corp.† | | | 8.875 | % | | 10/15/2017 | | | 3,700 | | | | 2,497,500 | | |
| Univision Communications, Inc. PIK† | | | 9.75 | % | | 3/15/2015 | | | 5,000 | | | | 3,800,000 | | |
| Total | | | | | | | | | | | | | 29,003,438 | | |
| Metals & Mining 0.66% | |
| Aleris International, Inc. | | | 10.00 | % | | 12/15/2016 | | | 2,500 | | | | 1,806,250 | | |
| Freeport-McMoRan Copper & Gold | | | 8.375 | % | | 4/1/2017 | | | 5,000 | | | | 5,383,450 | | |
| Noranda Aluminum, Inc. PIK† | | | 6.828 | %# | | 5/15/2015 | | | 5,000 | | | | 4,412,500 | | |
| Total | | | | | | | | | | | | | 11,602,200 | | |
| Oil & Gas 1.34% | |
| Chesapeake Energy Corp. | | | 7.25 | % | | 12/15/2018 | | | 5,000 | | | | 4,987,500 | | |
| Chesapeake Energy Corp. | | | 7.625 | % | | 7/15/2013 | | | 3,500 | | | | 3,578,750 | | |
| El Paso Corp. | | | 7.00 | % | | 6/15/2017 | | | 1,325 | | | | 1,336,232 | | |
See Notes to Financial Statements.
15
Schedule of Investments (unaudited)(continued)
May 31, 2008
| Investments | | Interest
Rate | | Maturity
Date | | Principal
Amount
(000) | | Value | |
| Oil & Gas (continued) | |
| El Paso Natural Gas Co. | | | 7.25 | % | | 6/1/2018 | | $ | 3,300 | | | $ | 3,328,875 | | |
| Forest Oil Corp. | | | 7.25 | % | | 6/15/2019 | | | 2,000 | | | | 1,975,000 | | |
| Verasun Energy Corp. | | | 9.375 | % | | 6/1/2017 | | | 5,000 | | | | 3,500,000 | | |
| Williams Cos., Inc. (The) | | | 7.875 | % | | 9/1/2021 | | | 4,500 | | | | 4,927,500 | | |
| Total | | | | | | | | | | | | | 23,633,857 | | |
| Paper & Forest Products 0.24% | |
| AbitibiBowater, Inc. | | | 6.50 | % | | 6/15/2013 | | | 3,500 | | | | 2,222,500 | | |
| Abitibi-Consolidated, Inc. (Canada)(a) | | | 8.55 | % | | 8/1/2010 | | | 1,500 | | | | 832,500 | | |
| Buckeye Technologies, Inc. | | | 8.00 | % | | 10/15/2010 | | | 1,150 | | | | 1,155,750 | | |
| Total | | | | | | | | | | | | | 4,210,750 | | |
| Personal Products 0.16% | |
| Elizabeth Arden, Inc. | | | 7.75 | % | | 1/15/2014 | | | 3,000 | | | | 2,865,000 | | |
| Pharmaceuticals 0.19% | |
| Warner Chilcott Corp. | | | 8.75 | % | | 2/1/2015 | | | 3,250 | | | | 3,347,500 | | |
| Real Estate Investment Trusts 0.14% | |
| Host Marriott L.P. | | | 6.375 | % | | 3/15/2015 | | | 2,525 | | | | 2,411,375 | | |
| Road & Rail 0.28% | |
| Hertz Corp. (The) | | | 8.875 | % | | 1/1/2014 | | | 5,000 | | | | 5,000,000 | | |
| Semiconductors & Semiconductor Equipment 0.31% | |
| Advanced Micro Devices, Inc. | | | 7.75 | % | | 11/1/2012 | | | 2,500 | | | | 2,168,750 | | |
| Freescale Semiconductor, Inc. | | | 8.875 | % | | 12/15/2014 | | | 3,750 | | | | 3,337,500 | | |
| Total | | | | | | | | | | | | | 5,506,250 | | |
| Specialty Retail 0.11% | |
| Brookstone Co. Inc. | | | 12.00 | % | | 10/15/2012 | | | 2,000 | | | | 1,960,000 | | |
| Thrifts & Mortgage Finance 0.21% | |
| Washington Mutual Bank | | | 6.875 | % | | 6/15/2011 | | | 3,975 | | | | 3,719,121 | | |
| Total High Yield Corporate Bonds (cost $312,601,909) | | | 293,797,847 | | |
See Notes to Financial Statements.
16
Schedule of Investments (unaudited)(concluded)
May 31, 2008
| Investments | | Interest
Rate | | | | Shares
(000) | | Value | |
| NON-CONVERTIBLE PREFERRED STOCK 0.17% | |
| Financial: Miscellaneous | |
| Fannie Mae (cost $3,071,479) | | | 8.25 | % | | | | | 122 | | | $ | 2,978,005 | | |
| | | | | | | | | U.S. $
Value | |
| RIGHTS 0.03% | |
| United Kingdom(e) | |
Royal Bank of Scotland Group plc (The)*
(cost $2,390,569) | | | | | | | 1,009 | | | | 559,544 | | |
| | | Interest
Rate | | Maturity
Date | | Principal
Amount
(000) | | Value | |
| U.S. TREASURY OBLIGATION 0.60% | |
| U.S. Treasury Note (cost $10,289,667) | | | 5.00 | % | | 2/15/2011 | | $ | 10,000 | | | | 10,571,100 | | |
| Total Long-Term Investments (cost $1,713,294,423) | | | 1,719,425,161 | | |
| SHORT-TERM INVESTMENT 2.10% | |
| Repurchase Agreement | |
Repurchase Agreement dated 5/30/2008,
1.71% due 6/2/2008 with State Street
Bank & Trust Co. collateralized by
$37,470,000 of Federal Home Loan Bank at
2.55% due 9/12/2008; value: $37,704,188;
proceeds: $36,965,576 (cost $36,960,309) | | | | | | | 36,960 | | | | 36,960,309 | | |
| Total Investments in Securities 99.65% (cost $1,750,254,732) | | | 1,756,385,470 | | |
| Cash, Foreign Cash and Other Assets in Excess of Liabilities 0.35% | | | | | | | | | | | 6,239,334 | | |
| Net Assets 100.00% | | $ | 1,762,624,804 | | |
ADR American Depositary Receipt.
PIK Payment-in-kind.
Unit More than one class of securities traded together.
* Non-income producing security.
** Deferred interest debentures pay the stated rate, after which they pay a predetermined interest rate.
† Security was purchased pursuant to Rule 144A under the Securities Act of 1933 or is a private placement and, unless registered under the Act or exempt from registration, may only be resold to qualified institutional investors. Unless otherwise noted, 144A securities are deemed to be liquid.
# Variable rate security. The interest rate represents the rate at May 31, 2008.
(a) Foreign security traded in U.S. dollars.
(b) The issuer will pay interest on the bonds at a rate of 3.50% until September 30, 2010. Beginning October 1, 2010, the bonds will be subject to daily accretion of the principal amount at the rate of 3.50% per year.
(c) The notes were offered at an issue price of $395.02 per note with an interest rate of 1.4813% per year. Beginning January 16, 2009, the issuer will not pay any cash interest on the notes prior to maturity unless contingent cash interest becomes payable. Instead, on January 15, 2034, the maturity date of the notes, a holder will receive $1,000 per note.
(d) Security purchased on a when-issued basis.
(e) Investments in non-U.S. dollar denominated securities.
See Notes to Financial Statements.
17
Statement of Assets and Liabilities (unaudited)
May 31, 2008
| ASSETS: | |
| Investments in securities, at value (cost $1,750,254,732) | | $ | 1,756,385,470 | | |
| Foreign cash, at value (cost $1,314,875) | | | 1,314,341 | | |
| Receivables: | |
| Capital shares sold | | | 14,644,281 | | |
| Investment securities sold | | | 14,361,948 | | |
| Interest and dividends | | | 10,437,596 | | |
| Prepaid expenses and other assets | | | 200,767 | | |
| Total assets | | | 1,797,344,403 | | |
| LIABILITIES: | |
| Payables: | |
| Investment securities purchased | | | 18,085,603 | | |
| Capital shares reacquired | | | 14,454,846 | | |
| Management fee | | | 1,038,353 | | |
| 12b-1 distribution fees | | | 597,798 | | |
| Directors' fees | | | 97,249 | | |
| To affiliates (See Note 3) | | | 57,619 | | |
| Fund administration | | | 57,042 | | |
| Accrued expenses and other liabilities | | | 331,089 | | |
| Total liabilities | | | 34,719,599 | | |
| NET ASSETS | | $ | 1,762,624,804 | | |
| COMPOSITION OF NET ASSETS: | |
| Paid-in capital | | $ | 1,757,361,363 | | |
| Undistributed net investment income | | | 7,363,600 | | |
| Accumulated net realized loss on investments and foreign currency related transactions | | | (8,226,213 | ) | |
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies | | | 6,126,054 | | |
| Net Assets | | $ | 1,762,624,804 | | |
| Net assets by class: | |
| Class A Shares | | $ | 1,324,431,452 | | |
| Class B Shares | | $ | 68,490,446 | | |
| Class C Shares | | $ | 87,356,674 | | |
| Class F Shares | | $ | 49,303 | | |
| Class I Shares | | $ | 279,100,875 | | |
| Class P Shares | | $ | 3,156,342 | | |
| Class R2 Shares | | $ | 9,439 | | |
| Class R3 Shares | | $ | 30,273 | | |
| Outstanding shares by class: | |
| Class A Shares (300 million shares of common stock authorized, $.001 par value) | | | 107,705,313 | | |
| Class B Shares (30 million shares of common stock authorized, $.001 par value) | | | 5,615,133 | | |
| Class C Shares (20 million shares of common stock authorized, $.001 par value) | | | 7,151,350 | | |
| Class F Shares (30 million shares of common stock authorized, $.001 par value) | | | 4,008 | | |
| Class I Shares (100 million shares of common stock authorized, $.001 par value) | | | 22,569,161 | | |
| Class P Shares (20 million shares of common stock authorized, $.001 par value) | | | 256,016 | | |
| Class R2 Shares (30 million shares of common stock authorized, $.001 par value) | | | 768 | | |
| Class R3 Shares (30 million shares of common stock authorized, $.001 par value) | | | 2,463 | | |
Net asset value, offering and redemption price per share
(Net assets divided by outstanding shares): | | | | | |
| Class A Shares–Net asset value | | $ | 12.30 | | |
Class A Shares–Maximum offering price
(Net asset value plus sales charge of 5.75%) | | $ | 13.05 | | |
| Class B Shares–Net asset value | | $ | 12.20 | | |
| Class C Shares–Net asset value | | $ | 12.22 | | |
| Class F Shares–Net asset value | | $ | 12.30 | | |
| Class I Shares–Net asset value | | $ | 12.37 | | |
| Class P Shares–Net asset value | | $ | 12.33 | | |
| Class R2 Shares–Net asset value | | $ | 12.29 | | |
| Class R3 Shares–Net asset value | | $ | 12.29 | | |
See Notes to Financial Statements.
18
Statement of Operations (unaudited)
For the Six Months Ended May 31, 2008
| Investment income: | |
| Dividends (net of foreign withholding taxes of $70,235) | | $ | 21,133,856 | | |
| Interest | | | 19,066,691 | | |
| Total investment income | | | 40,200,547 | | |
| Expenses: | |
| Management fee | | | 6,307,490 | | |
| 12b-1 distribution plan–Class A | | | 2,277,708 | | |
| 12b-1 distribution plan–Class B | | | 344,449 | | |
| 12b-1 distribution plan–Class C | | | 452,440 | | |
| 12b-1 distribution plan–Class F | | | 5 | | |
| 12b-1 distribution plan–Class P | | | 7,068 | | |
| 12b-1 distribution plan–Class R2 | | | 28 | | |
| 12b-1 distribution plan–Class R3 | | | 41 | | |
| Shareholder servicing | | | 999,311 | | |
| Fund administration | | | 346,142 | | |
| Subsidy (See Note 3) | | | 275,481 | | |
| Registration | | | 97,993 | | |
| Reports to shareholders | | | 79,861 | | |
| Custody | | | 42,892 | | |
| Professional | | | 27,619 | | |
| Directors' fees | | | 21,510 | | |
| Other | | | 25,862 | | |
| Gross expenses | | | 11,305,900 | | |
| Expense reductions (See Note 7) | | | (22,112 | ) | |
| Net expenses | | | 11,283,788 | | |
| Net investment income | | | 28,916,759 | | |
| Net realized and unrealized loss: | |
| Net realized loss on investments and foreign currency related transactions | | | (6,735,114 | ) | |
Net change in unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign currencies | | | (78,509,245 | ) | |
| Net realized and unrealized loss | | | (85,244,359 | ) | |
| Net Decrease in Net Assets Resulting From Operations | | $ | (56,327,600 | ) | |
See Notes to Financial Statements.
19
Statements of Changes in Net Assets
| INCREASE (DECREASE) IN NET ASSETS | | For the Six Months
Ended May 31, 2008
(unaudited) | | For the Year Ended
November 30, 2007 | |
| Operations: | |
| Net investment income | | $ | 28,916,759 | | | $ | 39,723,990 | | |
Net realized gain (loss) on investments and foreign
currency related transactions | | | (6,735,114 | ) | | | 79,594,206 | | |
Net change in unrealized appreciation on investments
and translation of assets and liabilities denominated
in foreign currencies | | | (78,509,245 | ) | | | (60,823,254 | ) | |
| Net increase (decrease) in net assets resulting from operations | | | (56,327,600 | ) | | | 58,494,942 | | |
| Distributions to shareholders from: | |
| Net investment income | |
| Class A | | | (25,595,917 | ) | | | (32,509,786 | ) | |
| Class B | | | (1,140,259 | ) | | | (1,383,751 | ) | |
| Class C | | | (1,493,540 | ) | | | (1,767,365 | ) | |
| Class F | | | (194 | ) | | | – | | |
| Class I | | | (5,641,487 | ) | | | (1,996,921 | ) | |
| Class P | | | (59,029 | ) | | | (68,311 | ) | |
| Class R2 | | | (169 | ) | | | – | | |
| Class R3 | | | (219 | ) | | | – | | |
| Net realized gain | |
| Class A | | | (55,600,525 | ) | | | (34,340,522 | ) | |
| Class B | | | (3,032,001 | ) | | | (1,990,323 | ) | |
| Class C | | | (4,022,495 | ) | | | (2,396,690 | ) | |
| Class F | | | (394 | ) | | | – | | |
| Class I | | | (11,018,113 | ) | | | (324,043 | ) | |
| Class P | | | (127,577 | ) | | | (73,205 | ) | |
| Class R2 | | | (393 | ) | | | – | | |
| Class R3 | | | (393 | ) | | | – | | |
| Total distributions to shareholders | | | (107,732,705 | ) | | | (76,850,917 | ) | |
| Capital share transactions (Net of share conversions) (See Note 11): | |
| Net proceeds from sales of shares | | | 134,375,961 | | | | 700,738,728 | | |
| Reinvestment of distributions | | | 104,762,746 | | | | 74,382,875 | | |
| Cost of shares reacquired | | | (140,835,688 | ) | | | (193,779,679 | ) | |
Net increase in net assets resulting
from capital share transactions | | | 98,303,019 | | | | 581,341,924 | | |
| Net increase (decrease) in net assets | | | (65,757,286 | ) | | | 562,985,949 | | |
| NET ASSETS: | |
| Beginning of period | | $ | 1,828,382,090 | | | $ | 1,265,396,141 | | |
| End of period | | $ | 1,762,624,804 | | | $ | 1,828,382,090 | | |
| Undistributed net investment income | | $ | 7,363,600 | | | $ | 12,377,655 | | |
See Notes to Financial Statements.
20
Financial Highlights
| | | Class A Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 13.49 | | | $ | 13.56 | | | $ | 12.44 | | | $ | 12.12 | | | $ | 10.29 | | | $ | 9.45 | | |
| Investment operations: | |
| Net investment income(a) | | | .20 | | | | .37 | | | | .33 | | | | .31 | | | | .32 | | | | .31 | | |
Net realized and
unrealized gain (loss) | | | (.61 | ) | | | .33 | | | | 1.29 | | | | .43 | | | | 1.74 | | | | .79 | | |
Total from investment
operations | | | (.41 | ) | | | .70 | | | | 1.62 | | | | .74 | | | | 2.06 | | | | 1.10 | | |
| Distributions to shareholders from: | |
| Net investment income | | | (.24 | ) | | | (.35 | ) | | | (.36 | ) | | | (.35 | ) | | | (.23 | ) | | | (.26 | ) | �� |
| Net realized gain | | | (.54 | ) | | | (.42 | ) | | | (.14 | ) | | | (.07 | ) | | | – | | | | – | | |
| Total distributions | | | (.78 | ) | | | (.77 | ) | | | (.50 | ) | | | (.42 | ) | | | (.23 | ) | | | (.26 | ) | |
| Net asset value, end of period | | $ | 12.30 | | | $ | 13.49 | | | $ | 13.56 | | | $ | 12.44 | | | $ | 12.12 | | | $ | 10.29 | | |
| Total Return(b) | | | (3.03 | )%(c) | | | 5.27 | % | | | 13.42 | % | | | 6.27 | % | | | 20.29 | % | | | 11.97 | % | |
| Ratios to Average Net Assets: | |
Expenses, excluding expense
reductions and including
expenses assumed | | | .65 | %(c) | | | 1.29 | % | | | 1.33 | % | | | 1.33 | % | | | 1.35 | % | | | 1.35 | % | |
Expenses, including expense
reductions and expenses
assumed | | | .65 | %(c) | | | 1.29 | % | | | 1.33 | % | | | 1.33 | % | | | 1.35 | % | | | 1.35 | % | |
Expenses, excluding expense
reductions and expenses
assumed | | | .65 | %(c) | | | 1.29 | % | | | 1.33 | % | | | 1.34 | % | | | 1.35 | % | | | 1.46 | % | |
| Net investment income | | | 1.68 | %(c) | | | 2.68 | % | | | 2.60 | % | | | 2.51 | % | | | 2.84 | % | | | 3.24 | % | |
| Supplemental Data: | |
Net assets,
end of period (000) | | $ | 1,324,431 | | | $ | 1,379,814 | | | $ | 1,111,167 | | | $ | 944,488 | | | $ | 439,703 | | | $ | 128,030 | | |
| Portfolio turnover rate | | | 19.38 | %(c) | | | 26.32 | % | | | 43.85 | % | | | 31.65 | % | | | 21.81 | % | | | 28.71 | % | |
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(c) Not annualized.
See Notes to Financial Statements.
21
Financial Highlights (continued)
| | | Class B Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 13.38 | | | $ | 13.46 | | | $ | 12.36 | | | $ | 12.03 | | | $ | 10.23 | | | $ | 9.40 | | |
| Investment operations: | |
| Net investment income(a) | | | .16 | | | | .28 | | | | .24 | | | | .23 | | | | .25 | | | | .25 | | |
Net realized and
unrealized gain (loss) | | | (.60 | ) | | | .33 | | | | 1.28 | | | | .43 | | | | 1.72 | | | | .79 | | |
Total from investment
operations | | | (.44 | ) | | | .61 | | | | 1.52 | | | | .66 | | | | 1.97 | | | | 1.04 | | |
| Distributions to shareholders from: | |
| Net investment income | | | (.20 | ) | | | (.27 | ) | | | (.28 | ) | | | (.26 | ) | | | (.17 | ) | | | (.21 | ) | |
| Net realized gain | | | (.54 | ) | | | (.42 | ) | | | (.14 | ) | | | (.07 | ) | | | – | | | | – | | |
| Total distributions | | | (.74 | ) | | | (.69 | ) | | | (.42 | ) | | | (.33 | ) | | | (.17 | ) | | | (.21 | ) | |
| Net asset value, end of period | | $ | 12.20 | | | $ | 13.38 | | | $ | 13.46 | | | $ | 12.36 | | | $ | 12.03 | | | $ | 10.23 | | |
| Total Return(b) | | | (3.31 | )%(c) | | | 4.56 | % | | | 12.62 | % | | | 5.66 | % | | | 19.50 | % | | | 11.35 | % | |
| Ratios to Average Net Assets: | |
Expenses, excluding expense
reductions and including
expenses assumed | | | .98 | %(c) | | | 1.94 | % | | | 1.98 | % | | | 1.98 | % | | | 1.99 | % | | | 1.99 | % | |
Expenses, including expense
reductions and expenses
assumed | | | .98 | %(c) | | | 1.94 | % | | | 1.98 | % | | | 1.98 | % | | | 1.99 | % | | | 1.99 | % | |
Expenses, excluding expense
reductions and expenses
assumed | | | .98 | %(c) | | | 1.94 | % | | | 1.98 | % | | | 1.98 | % | | | 1.99 | % | | | 2.10 | % | |
| Net investment income | | | 1.35 | %(c) | | | 2.03 | % | | | 1.95 | % | | | 1.86 | % | | | 2.20 | % | | | 2.60 | % | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 68,490 | | | $ | 74,748 | | | $ | 64,045 | | | $ | 58,380 | | | $ | 27,634 | | | $ | 9,398 | | |
| Portfolio turnover rate | | | 19.38 | %(c) | | | 26.32 | % | | | 43.85 | % | | | 31.65 | % | | | 21.81 | % | | | 28.71 | % | |
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(c) Not annualized.
See Notes to Financial Statements.
22
Financial Highlights (continued)
| | | Class C Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 13.40 | | | $ | 13.48 | | | $ | 12.37 | | | $ | 12.05 | | | $ | 10.25 | | | $ | 9.41 | | |
| Investment operations: | |
| Net investment income(a) | | | .16 | | | | .28 | | | | .24 | | | | .23 | | | | .25 | | | | .24 | | |
Net realized and
unrealized gain (loss) | | | (.60 | ) | | | .33 | | | | 1.28 | | | | .43 | | | | 1.73 | | | | .80 | | |
Total from investment
operations | | | (.44 | ) | | | .61 | | | | 1.52 | | | | .66 | | | | 1.98 | | | | 1.04 | | |
| Distributions to shareholders from: | |
| Net investment income | | | (.20 | ) | | | (.27 | ) | | | (.27 | ) | | | (.27 | ) | | | (.18 | ) | | | (.20 | ) | |
| Net realized gain | | | (.54 | ) | | | (.42 | ) | | | (.14 | ) | | | (.07 | ) | | | – | | | | – | | |
| Total distributions | | | (.74 | ) | | | (.69 | ) | | | (.41 | ) | | | (.34 | ) | | | (.18 | ) | | | (.20 | ) | |
| Net asset value, end of period | | $ | 12.22 | | | $ | 13.40 | | | $ | 13.48 | | | $ | 12.37 | | | $ | 12.05 | | | $ | 10.25 | | |
| Total Return(b) | | | (3.31 | )%(c) | | | 4.57 | % | | | 12.68 | % | | | 5.62 | % | | | 19.50 | % | | | 11.27 | % | |
| Ratios to Average Net Assets: | |
Expenses, excluding expense
reductions and including
expenses assumed | | | .98 | %(c) | | | 1.94 | % | | | 1.98 | % | | | 1.98 | % | | | 1.99 | % | | | 1.99 | % | |
Expenses, including expense
reductions and expenses
assumed | | | .98 | %(c) | | | 1.94 | % | | | 1.98 | % | | | 1.98 | % | | | 1.99 | % | | | 1.99 | % | |
Expenses, excluding expense
reductions and expenses
assumed | | | .98 | %(c) | | | 1.94 | % | | | 1.98 | % | | | 1.98 | % | | | 1.99 | % | | | 2.10 | % | |
| Net investment income | | | 1.35 | %(c) | | | 2.03 | % | | | 1.95 | % | | | 1.86 | % | | | 2.20 | % | | | 2.60 | % | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 87,357 | | | $ | 99,713 | | | $ | 77,477 | | | $ | 77,374 | | | $ | 28,696 | | | $ | 5,902 | | |
| Portfolio turnover rate | | | 19.38 | %(c) | | | 26.32 | % | | | 43.85 | % | | | 31.65 | % | | | 21.81 | % | | | 28.71 | % | |
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(c) Not annualized.
See Notes to Financial Statements.
23
Financial Highlights (continued)
| | | Class F Shares | |
| | | Six Months
Ended
5/31/2008
(unaudited) | | 9/28/2007(a)
to
11/30/2007 | |
| Per Share Operating Performance | |
| Net asset value, beginning of period | | $ | 13.49 | | | $ | 13.83 | | |
| Investment operations: | |
| Net investment income(b) | | | .21 | | | | .06 | | |
| Net realized and unrealized loss | | | (.60 | ) | | | (.40 | ) | |
| Total from investment operations | | | (.39 | ) | | | (.34 | ) | |
| Distributions to shareholders from: | |
| Net investment income | | | (.26 | ) | | | – | | |
| Net realized gain | | | (.54 | ) | | | – | | |
| Total distributions | | | (.80 | ) | | | – | | |
| Net asset value, end of period | | $ | 12.30 | | | $ | 13.49 | | |
| Total Return(c) | | | (2.91 | )%(d) | | | (2.46 | )%(d) | |
| Ratios to Average Net Assets: | |
| Expenses, including expense reductions | | | .54 | %(d) | | | .18 | %(d) | |
| Expenses, excluding expense reductions | | | .54 | %(d) | | | .18 | %(d) | |
| Net investment income | | | 1.72 | %(d) | | | .47 | %(d) | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 49 | | | $ | 10 | | |
| Portfolio turnover rate | | | 19.38 | %(d) | | | 26.32 | % | |
(a) Commencement of investment operations was 9/28/2007, SEC effective date was 9/14/2007, and date shares first became available to the public was 10/1/2007.
(b) Calculated using average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(d) Not annualized.
See Notes to Financial Statements.
24
Financial Highlights (continued)
| | | Class I Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 13.56 | | | $ | 13.62 | | | $ | 12.50 | | | $ | 12.18 | | | $ | 10.33 | | | $ | 9.47 | | |
| Investment operations: | |
| Net investment income(a) | | | .23 | | | | .41 | | | | .37 | | | | .35 | | | | .45 | | | | .34 | | |
Net realized and
unrealized gain (loss) | | | (.62 | ) | | | .35 | | | | 1.29 | | | | .44 | | | | 1.66 | | | | .80 | | |
Total from investment
operations | | | (.39 | ) | | | .76 | | | | 1.66 | | | | .79 | | | | 2.11 | | | | 1.14 | | |
| Distributions to shareholders from: | |
| Net investment income | | | (.26 | ) | | | (.40 | ) | | | (.40 | ) | | | (.40 | ) | | | (.26 | ) | | | (.28 | ) | |
| Net realized gain | | | (.54 | ) | | | (.42 | ) | | | (.14 | ) | | | (.07 | ) | | | – | | | | – | | |
| Total distributions | | | (.80 | ) | | | (.82 | ) | | | (.54 | ) | | | (.47 | ) | | | (.26 | ) | | | (.28 | ) | |
| Net asset value, end of period | | $ | 12.37 | | | $ | 13.56 | | | $ | 13.62 | | | $ | 12.50 | | | $ | 12.18 | | | $ | 10.33 | | |
| Total Return(b) | | | (2.84 | )%(c) | | | 5.67 | % | | | 13.75 | % | | | 6.64 | % | | | 20.72 | % | | | 12.47 | % | |
| Ratios to Average Net Assets: | |
Expenses, excluding expense
reductions and including
expenses assumed | | | .47 | %(c) | | | .96 | % | | | .98 | % | | | .99 | % | | | 1.09 | % | | | .99 | %† | |
Expenses, including expense
reductions and expenses
assumed | | | .47 | %(c) | | | .96 | % | | | .98 | % | | | .99 | % | | | 1.09 | % | | | .99 | %† | |
Expenses, excluding expense
reductions and expenses
assumed | | | .47 | %(c) | | | .96 | % | | | .98 | % | | | .99 | % | | | 1.09 | % | | | 1.10 | %† | |
| Net investment income | | | 1.85 | %(c) | | | 2.98 | % | | | 2.95 | % | | | 2.89 | % | | | 3.74 | % | | | 3.60 | %† | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 279,101 | | | $ | 271,015 | | | $ | 10,342 | | | $ | 2,897 | | | $ | 640 | | | $ | 1 | | |
| Portfolio turnover rate | | | 19.38 | %(c) | | | 26.32 | % | | | 43.85 | % | | | 31.65 | % | | | 21.81 | % | | | 28.71 | % | |
† 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) Not annualized.
See Notes to Financial Statements.
25
Financial Highlights (continued)
| | | Class P Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 13.52 | | | $ | 13.59 | | | $ | 12.47 | | | $ | 12.15 | | | $ | 10.31 | | | $ | 9.45 | | |
| Investment operations: | |
| Net investment income(a) | | | .20 | | | | .36 | | | | .32 | | | | .30 | | | | .31 | | | | .31 | | |
Net realized and
unrealized gain (loss) | | | (.61 | ) | | | .33 | | | | 1.29 | | | | .43 | | | | 1.75 | | | | .80 | | |
Total from investment
operations | | | (.41 | ) | | | .69 | | | | 1.61 | | | | .73 | | | | 2.06 | | | | 1.11 | | |
| Distributions to shareholders from: | |
| Net investment income | | | (.24 | ) | | | (.34 | ) | | | (.35 | ) | | | (.34 | ) | | | (.22 | ) | | | (.25 | ) | |
| Net realized gain | | | (.54 | ) | | | (.42 | ) | | | (.14 | ) | | | (.07 | ) | | | – | | | | – | | |
| Total distributions | | | (.78 | ) | | | (.76 | ) | | | (.49 | ) | | | (.41 | ) | | | (.22 | ) | | | (.25 | ) | |
| Net asset value, end of period | | $ | 12.33 | | | $ | 13.52 | | | $ | 13.59 | | | $ | 12.47 | | | $ | 12.15 | | | $ | 10.31 | | |
| Total Return(b) | | | (3.07 | )%(c) | | | 5.15 | % | | | 13.31 | % | | | 6.17 | % | | | 20.21 | % | | | 12.03 | % | |
| Ratios to Average Net Assets: | |
Expenses, excluding expense
reductions and including
expenses assumed | | | .70 | %(c) | | | 1.39 | % | | | 1.43 | % | | | 1.43 | % | | | 1.44 | % | | | 1.44 | % | |
Expenses, including expense
reductions and expenses
assumed | | | .70 | %(c) | | | 1.39 | % | | | 1.43 | % | | | 1.43 | % | | | 1.44 | % | | | 1.44 | % | |
Expenses, excluding expense
reductions and expenses
assumed | | | .70 | %(c) | | | 1.39 | % | | | 1.43 | % | | | 1.44 | % | | | 1.44 | % | | | 1.55 | % | |
| Net investment income | | | 1.62 | %(c) | | | 2.58 | % | | | 2.50 | % | | | 2.42 | % | | | 2.75 | % | | | 3.15 | % | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 3,156 | | | $ | 3,062 | | | $ | 2,365 | | | $ | 1,337 | | | $ | 286 | | | $ | 1 | | |
| Portfolio turnover rate | | | 19.38 | %(c) | | | 26.32 | % | | | 43.85 | % | | | 31.65 | % | | | 21.81 | % | | | 28.71 | % | |
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(c) Not annualized.
See Notes to Financial Statements.
26
Financial Highlights (continued)
| | | Class R2 Shares | |
| | | Six Months
Ended
5/31/2008
(unaudited) | | 9/28/2007(a)
to
11/30/2007 | |
| Per Share Operating Performance | |
| Net asset value, beginning of period | | $ | 13.48 | | | $ | 13.83 | | |
| Investment operations: | |
| Net investment income(b) | | | .19 | | | | .05 | | |
| Net realized and unrealized loss | | | (.62 | ) | | | (.40 | ) | |
| Total from investment operations | | | (.43 | ) | | | (.35 | ) | |
| Distributions to shareholders from: | |
| Net investment income | | | (.22 | ) | | | – | | |
| Net realized gain | | | (.54 | ) | | | – | | |
| Total distributions | | | (.76 | ) | | | – | | |
| Net asset value, end of period | | $ | 12.29 | | | $ | 13.48 | | |
| Total Return(c) | | | (3.16 | )%(d) | | | (2.53 | )%(d) | |
| Ratios to Average Net Assets: | |
| Expenses, including expense reductions | | | .77 | %(d) | | | .27 | %(d) | |
| Expenses, excluding expense reductions | | | .77 | %(d) | | | .27 | %(d) | |
| Net investment income | | | 1.55 | %(d) | | | .37 | %(d) | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 9 | | | $ | 10 | | |
| Portfolio turnover rate | | | 19.38 | %(d) | | | 26.32 | % | |
(a) Commencement of investment operations was 9/28/2007, SEC effective date was 9/14/2007, and date shares first became available to the public was 10/1/2007.
(b) Calculated using average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(d) Not annualized.
See Notes to Financial Statements.
27
Financial Highlights (concluded)
| | | Class R3 Shares | |
| | | Six Months
Ended
5/31/2008
(unaudited) | | 9/28/2007(a)
to
11/30/2007 | |
| Per Share Operating Performance | |
| Net asset value, beginning of period | | $ | 13.48 | | | $ | 13.83 | | |
| Investment operations: | |
| Net investment income(b) | | | .19 | | | | .05 | | |
| Net realized and unrealized loss | | | (.61 | ) | | | (.40 | ) | |
| Total from investment operations | | | (.42 | ) | | | (.35 | ) | |
| Distributions to shareholders from: | |
| Net investment income | | | (.23 | ) | | | – | | |
| Net realized gain | | | (.54 | ) | | | – | | |
| Total distributions | | | (.77 | ) | | | – | | |
| Net asset value, end of period | | $ | 12.29 | | | $ | 13.48 | | |
| Total Return(c) | | | (3.09 | )%(d) | | | (2.53 | )%(d) | |
| Ratios to Average Net Assets: | |
| Expenses, including expense reductions | | | .72 | %(d) | | | .25 | %(d) | |
| Expenses, excluding expense reductions | | | .72 | %(d) | | | .25 | %(d) | |
| Net investment loss | | | 1.54 | %(d) | | | .39 | %(d) | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 30 | | | $ | 10 | | |
| Portfolio turnover rate | | | 19.38 | %(d) | | | 26.32 | % | |
(a) Commencement of investment operations was 9/28/2007, SEC effective date was 9/14/2007, and date shares first became available to the public was 10/1/2007.
(b) Calculated using average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(d) Not annualized.
See Notes to Financial Statements.
28
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Lord Abbett Research Fund, Inc. (the "Company") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified open-end management investment company, incorporated under Maryland law on April 6, 1992. The Company currently consists of four separate funds. This report covers one of the funds and its respective classes–Lord Abbett America's Value Fund (the "Fund").
The Fund's investment objective is to seek current income and capital appreciation. The Fund offers eight classes of shares: Classes A, B, C, F, I, P, R2 and R3, each with different expenses and dividends. A front-end sales charge is normally added to the Net Asset Value ("NAV") for Class A shares. There is no front-end sales charge in the case of Class B, C, F, I, P, R2 and R3 shares, although there may be a contingent deferred sales charge ("CDSC") 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); 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 the next business day thereafter) following the eighth anniversary of the o riginal purchase of Class B shares. As of October 1, 2007, the Fund's Class P shares were closed to substantially all new retirement and benefit plans and fee-based programs, with certain exceptions as set forth in the Fund's Prospectus.
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 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 more accurately reflect their fair value as of the close of regular trading on the New York Stock Exchange LLC. 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. Fixed income secu rities are valued at the mean between the bid and asked prices on the basis of prices supplied by independent pricing services, which reflect broker/dealer supplied valuations and electronic data processing techniques. Securities for which market quotations 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.
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Notes to Financial Statements (unaudited)(continued)
(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 the effective interest method. Withholding taxes on foreign dividends have been provided for in accordance with the Fund's understanding of 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) 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 incurred by the Company that do not specifically relate to an individual fund are generally allocated to the funds within the Company on a pro rata basis. Expenses, excluding class specific expenses, are allocated to each class of shares based upon the relative proportion of net assets at the beginning of the day. Class A, B, C, F, P, R2 and R3 shares bear their class specific share of all expenses and fees relating to the Fund's 12b-1 Distribution Plan.
(f) 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 in Net realized gain (loss) on investments and foreign currency related transactions on the Fund's 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) When-Issued Transactions–The Fund may purchase portfolio securities on a when-issued or forward basis. When-issued or forward transactions involve a commitment by the Fund to purchase securities, with payment and delivery ("settlement") to take place in the future, in order to secure what is considered to be an advantageous price or yield at the time of entering into the transaction.
(h) 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 these securities has dec lined, the Fund may incur a loss upon disposition of the securities.
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Notes to Financial Statements (unaudited)(continued)
(i) Fair Value Measurements–The Fund adopted Financial Accounting Standards Board ("FASB") Statement No. 157, Fair Value Measurements ("SFAS 157"), effective December 1, 2007. In accordance with SFAS 157, fair value is defined as the price that the Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. SFAS 157 established a three-tier hierarchy 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 broadl y 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 including such 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 – 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).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used as of May 31, 2008 in valuing the Fund's investments carried at value:
| Valuation Inputs | | Investments in
Securities | | Other Financial
Instruments | |
| Level 1 – Quoted Prices | | $ | 1,189,530,188 | | | $ | - | | |
Level 2 – Other Significant
Observable Inputs | | | 566,855,282 | | | | - | | |
| Total | | $ | 1,756,385,470 | | | $ | - | | |
3. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management Fees
The Company 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.
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Notes to Financial Statements (unaudited)(continued)
The management fee is based on the 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 May 31, 2008, the effective management fee paid to Lord Abbett was at an annualized rate of .73% of the Fund's average daily net assets.
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.
The Fund, along with certain other funds managed by Lord Abbett (the "Underlying Funds") has entered into Servicing Arrangements with Lord Abbett Balanced Strategy Fund, Lord Abbett Diversified Income Strategy Fund and Lord Abbett Growth & Income 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 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 Arrangements 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 May 31, 2008, the percentages of America's Value Fund's outstanding shares owned by Balanced Strategy Fund, Diversified Income Strategy Fund and Growth & Income Strategy Fund were 12.14%, 1.49% and 2.01%, respectively.
12b-1 Distribution Plan
The Fund has adopted a distribution plan with respect to Class A, B, C, F, P, R2 and R3 shares pursuant to Rule 12b-1 under the Act, which provides for the payment of ongoing distribution and service fees to Lord Abbett Distributor LLC ("Distributor"), an affiliate of Lord Abbett. The fees are accrued daily at annual rates based upon average daily net assets as follows:
| Fees* | | Class A | | Class B | | Class C | | Class F | | Class P | | Class R2 | | Class R3 | |
| Service | | | .25 | % | | | .25 | % | | | .25 | % | | | - | | | | .20 | % | | | .25 | % | | | .25 | % | |
| Distribution | | | .10 | % | | | .75 | % | | | .75 | % | | | .10 | % | | | .25 | % | | | .35 | % | | | .25 | % | |
* The Fund may designate a portion of the aggregate fee as attributable to service activities for purposes of calculating Financial Industry Regulatory Authority, Inc. ("FINRA") sales charge limitations.
Class I 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 May 31, 2008:
Distributor
Commissions | | Dealers'
Concessions | |
| $ | 486,060 | | | $ | 2,523,761 | | |
Distributor received CDSCs of $1,243 and $8,457 for Class A and Class C shares, respectively, for the six months ended May 31, 2008.
Two Directors and certain of the Fund's officers have an interest in Lord Abbett.
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Notes to Financial Statements (unaudited)(continued)
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYFORWARDS
Dividends from net investment income, if any, are declared and paid at least quarterly. 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 d ifferences do not require reclassification. Dividends and distributions, which exceed earnings and profits for tax purposes, are reported as a tax return of capital.
The tax character of distributions paid during the six months ended May 31, 2008 and the fiscal year ended November 30, 2007 was as follows:
| | | Six Months Ended
5/31/2008 (unaudited) | | Year Ended
11/30/2007 | |
| Distributions paid from: | |
| Ordinary income | | $ | 39,308,089 | | | $ | 45,473,885 | | |
| Net long-term capital gains | | | 68,424,616 | | | | 31,377,032 | | |
| Total distributions paid | | $ | 107,732,705 | | | $ | 76,850,917 | | |
As of May 31, 2008, the aggregate unrealized security gains and losses based on cost for U.S. Federal income tax purposes were as follows:
| Tax cost | | $ | 1,752,005,788 | | |
| Gross unrealized gain | | | 173,879,157 | | |
| Gross unrealized loss | | | (169,499,475 | ) | |
| Net unrealized security gain | | $ | 4,379,682 | | |
The difference between book-basis and tax-basis unrealized gains (losses) is attributable to the tax treatment of amortization and other temporary tax adjustments.
5. PORTFOLIO SECURITIES TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments) for the six months ended May 31, 2008 are as follows:
| Purchases | | Sales | |
| $ | 380,184,326 | | | $ | 328,253,088 | | |
There were no purchases or sales of U.S. Government securities for the six months ended May 31, 2008.
6. DIRECTORS' REMUNERATION
The Company's officers and the two Directors who are associated with Lord Abbett do not receive any compensation from the Company for serving in such capacities. Outside Directors' fees are
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Notes to Financial Statements (unaudited)(continued)
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 Directors under which outside 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.
7. EXPENSE REDUCTIONS
The Company has entered into arrangements with the Fund's 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 May 31, 2008, there were no loans outstanding pursuant to this Facility nor was the Facility utilized at any time during the six months ended May 31, 2008.
9. CUSTODIAN AND ACCOUNTING AGENT
State Street Bank & Trust Company ("SSB") is the Company'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 investing in equity and fixed income securities.
The values of the Fund's equity security holdings and, consequently, the value of an investment in the Fund will fluctuate in response to movements in the stock market in general and to the changing prospects of the individual companies involved. With its emphasis on value stocks, the Fund may perform differently than the market as a whole and other types of stocks, such as growth stocks. The market may fail to recognize the intrinsic value of particular value stocks for a long time. The Fund may invest a significant portion of its assets in mid-sized companies that may be less able to weather economic shifts or other adverse developments than larger, more established companies. Because the Fund is not limited to investing in equity securities, the Fund may have smaller gains in a rising stock market than a fund investing solely in equity securities. In addition, if the Fund's assessment of a company's value or prospects for market appreciat ion or market conditions is wrong, the Fund could suffer losses or produce poor performance relative to other funds, even in a rising market.
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Notes to Financial Statements (unaudited)(continued)
The values of the Fund's fixed income holdings, and consequently, the value of an investment in the Fund will change as interest rates fluctuate and in response to market movements. When interest rates rise, the prices of these holdings are likely to decline. There is also the risk that an issuer of a fixed income security will fail to make timely payments of principal or interest to the Fund, a risk that is greater with high yield bonds (sometimes called "junk bonds") in which the Fund may invest. Some issuers, particularly of high yield bonds, may default as to principal and/or interest payments after the Fund purchases their securities. A default, or concerns in the market about an increase in risk of default, may result in losses to the Fund. High yield bonds are subject to greater price fluctuations, as well as additional risks.
The Fund may invest up to 20% of its assets in foreign securities, which present increased market, liquidity, currency, political and other risks. The Fund may invest up to 10% of its net assets in floating rate or adjustable rate senior loans, which are subject to increased credit and liquidity risks. Senior loans are business loans made to borrowers that may be U.S. or foreign corporations, partnerships, or other business entities.
These factors can affect the Fund's performance.
11. SUMMARY OF CAPITAL TRANSACTIONS
Transactions in shares of beneficial interest are as follows:
| | | Six Months Ended
May 31, 2008
(unaudited) | | Year Ended
November 30, 2007 | |
| Class A Shares | | Shares | | Amount | | Shares | | Amount | |
| Shares sold | | | 8,597,755 | | | $ | 104,568,738 | | | | 27,086,362 | | | $ | 372,576,291 | | |
| Converted from Class B* | | | 49,877 | | | | 601,495 | | | | 86,789 | | | | 1,192,487 | | |
| Reinvestment of distributions | | | 6,376,979 | | | | 79,784,176 | | | | 4,867,125 | | | | 65,606,262 | | |
| Shares reacquired | | | (9,624,294 | ) | | | (116,650,420 | ) | | | (11,696,075 | ) | | | (160,097,175 | ) | |
| Increase | | | 5,400,317 | | | $ | 68,303,989 | | | | 20,344,201 | | | $ | 279,277,865 | | |
| Class B Shares | |
| Shares sold | | | 343,314 | | | $ | 4,142,055 | | | | 1,314,197 | | | $ | 17,949,988 | | |
| Reinvestment of distributions | | | 315,026 | | | | 3,918,192 | | | | 235,833 | | | | 3,150,908 | | |
| Shares reacquired | | | (578,092 | ) | | | (6,941,132 | ) | | | (635,470 | ) | | | (8,634,286 | ) | |
| Converted to Class A* | | | (50,283 | ) | | | (601,495 | ) | | | (87,423 | ) | | | (1,192,487 | ) | |
| Increase | | | 29,965 | | | $ | 517,620 | | | | 827,137 | | | $ | 11,274,123 | | |
| Class C Shares | |
| Shares sold | | | 568,212 | | | $ | 6,922,568 | | | | 2,533,081 | | | $ | 34,800,344 | | |
| Reinvestment of distributions | | | 338,269 | | | | 4,215,514 | | | | 236,197 | | | | 3,163,296 | | |
| Shares reacquired | | | (1,196,138 | ) | | | (14,340,149 | ) | | | (1,076,682 | ) | | | (14,658,468 | ) | |
| Increase (decrease) | | | (289,657 | ) | | $ | (3,202,067 | ) | | | 1,692,596 | | | $ | 23,305,172 | | |
| Class F Shares | | | | Period Ended
November 30, 2007† | |
| Shares sold | | | 3,236 | | | $ | 39,500 | | | | 725 | | | $ | 10,028 | | |
| Reinvestment of distributions | | | 47 | | | | 591 | | | | - | | | | - | | |
| Shares reacquired | | | - | | | | - | | | | - | | | | - | | |
| Increase | | | 3,283 | | | $ | 40,091 | | | | 725 | | | $ | 10,028 | | |
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Notes to Financial Statements (unaudited)(concluded)
| | | Six Months Ended
May 31, 2008
(unaudited) | | Year Ended
November 30, 2007 | |
| Class I Shares | | Shares | | Amount | | Shares | | Amount | |
| Shares sold | | | 1,447,420 | | | $ | 18,122,857 | | | | 19,778,135 | | | $ | 274,465,086 | | |
| Reinvestment of distributions | | | 1,326,581 | | | | 16,659,595 | | | | 168,102 | | | | 2,320,897 | | |
| Shares reacquired | | | (191,832 | ) | | | (2,533,947 | ) | | | (718,390 | ) | | | (10,045,908 | ) | |
| Increase | | | 2,582,169 | | | $ | 32,248,505 | | | | 19,227,847 | | | $ | 266,740,075 | | |
| Class P Shares | |
| Shares sold | | | 45,480 | | | $ | 559,804 | | | | 66,846 | | | $ | 916,991 | | |
| Reinvestment of distributions | | | 14,614 | | | | 183,504 | | | | 10,467 | | | | 141,512 | | |
| Shares reacquired | | | (30,539 | ) | | | (369,588 | ) | | | (24,864 | ) | | | (343,842 | ) | |
| Increase | | | 29,555 | | | $ | 373,720 | | | | 52,449 | | | $ | 714,661 | | |
| Class R2 Shares | | | | Period Ended
November 30, 2007† | |
| Shares sold | | | - | | | $ | - | | | | 723 | | | $ | 10,000 | | |
| Reinvestment of distributions | | | 45 | | | | 562 | | | | - | | | | - | | |
| Shares reacquired | | | - | | | | - | | | | - | | | | - | | |
| Increase | | | 45 | | | $ | 562 | | | | 723 | | | $ | 10,000 | | |
| Class R3 Shares | |
| Shares sold | | | 1,729 | | | $ | 20,439 | | | | 723 | | | $ | 10,000 | | |
| Reinvestment of distributions | | | 49 | | | | 612 | | | | - | | | | - | | |
| Shares reacquired | | | (38 | ) | | | (452 | ) | | | - | | | | - | | |
| Increase | | | 1,740 | | | $ | 20,599 | | | | 723 | | | $ | 10,000 | | |
* Automatic conversion of Class B shares occurs approximately eight years after the initial purchase date.
† For the period September 28, 2007 (commencement of investment operations) to November 30, 2007.
12. RECENT ACCOUNTING PRONOUNCEMENTS
In June 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. Effective May 31, 2008, the Fund adopted FIN 48. The adoption of FIN 48 has not resulted in a material impact on the Fund's net assets, results of operations and financial statement disclosures. The Fund files U.S. Federal and various state tax returns. No income tax returns are currently under examination. The Fund's tax returns remain open for examination for the years ended November 30, 2004 through November 30, 2007.
In March 2008, FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities ("SFAS 161"). SFAS 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. Management is currently evaluating the impact the adoption of SFAS 161 will have on the Fund's financial statement disclosures.
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Approval of Advisory Contract
At meetings held on December 12 and 13, 2007, the Board, including all of the Directors who are not interested persons of the Fund or Lord Abbett, 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 ended September 30, 2007, (2) information on the effective management fee rates and expense ratios for one or more groups of funds with similar objectives and of 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 an d 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 noted that there were relatively few, if any, registered investment companies with the same investment approach as the Fund, so that it was not possible to reach definite conclusions about the Fund's relative investment performance or level of expenses. The Board also noted that the Fund tended to invest to a greater degree in below investment grade fixed income securities and in mid-cap value equity securities than most of its competitors. The Board also noted that Lipper recently had changed the Fund's classification from equity income to mixed-asset target allocation growth. Accordingly, the Board considered the investment performance of the Fund in relation to that of two performance universes, the first consisting of equity income funds and the second consisting of mixed-asset target allocation growth funds. As to the first performance universe, the Board observed that the investment performance of the Class A shares of the Fund was in the fourth quintile for the nine-month period, in the third quintile for the one-year period, and in the fifth quintile for the three-year and five-year periods. The Board also observed that the investment performance was below that of the Lipper Equity Income Index for each of those periods. As to the second performance universe, the Board observed that the investment performance of the Class A shares
37
of the Fund was in the fourth quintile for the nine-month period, in the second quintile for the one-year and five-year periods, and in the third quintile for the three-year period. The Board also observed that the investment performance was above that of the Lipper Mixed-Asset Target Allocation Growth Index for the one-year and five-year periods and below that of the Index for the nine-month and three-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, the Board 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 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 levels of the Fund and the expense levels of two peer expense groups, the first consisting of equity income funds and the second consisting of mixed-asset target allocation growth funds. It also considered the amount and nature of the fees paid by shareholders. As to the first peer group, the Board observed that the contractual and actual management and administrative services fees were approximately seven basis points above the median. The Board also observed that at September 30, 2007 the total expense ratio of Class A was approximately seventeen basis points above the median of the first peer group, the total expense ratios of Class B and Class C were approximately seven basis points above the median of the peer group, the total expense ratio of Class F was approximately five basis points above the median of the peer g roup, the total expense ratio of Class I was approximately eleven basis points above the median of the peer group, the total expense ratio of Class P was approximately three basis points above the median of the peer group, the total expense ratio of Class R2 was approximately eighteen basis points above the median of the peer group, and the total expense ratio of Class R3 was approximately eight basis points above the median of the peer group. As to the second peer group, the Board observed that the contractual and actual management and administrative services fees were approximately twenty-one basis points above the median of the second peer group. The Board also observed that the total expense ratio of Class A was approximately twenty basis points above the median of the second peer group, that the total expense ratios of Class B and Class C were approximately six basis points above the median of the peer group, the total expense ratio of Class F was approximately ten basis points above the median of the p eer group, the total expense ratio of Class I was approximately twelve basis points above the median of the peer group, the total expense ratio of Class P was approximately seven basis points above the median of the peer group, the total expense ratio of Class R2 was approximately twenty-two basis points above the median of the peer group, and the total expense ratio of Class R3 was approximately twelve 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
38
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 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 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 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 Funds, and receives a portion of the sales charges on sales and redemptions of some classes of shares. The Board observed that, in addition, Lord Abbett accrues certain benefits for i ts business of providing investment advice to clients other than the Lord Abbett Funds, but that that business also benefits the Funds. The Board also noted that Lord Abbett, as disclosed in the prospectuses of the Lord Abbett Funds, has entered into revenue sharing arrangements with certain entities that distribute shares of the Funds.
Alternative Arrangements. The Board considered whether, instead of approving the 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.
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.
39
Householding
The Company 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 each 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 (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 duplicating fee to the SEC's Public Reference Room, Washington, DC 20549-0102; or (iii) sending your request electronically to publicinfo@sec.gov.
40
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 Research Fund, Inc.
Lord Abbett America's Value Fund
LAAMF-3-0508
(07/08)
2008
LORD ABBETT SEMIANNUAL REPORT
Lord Abbett
Growth Opportunities Fund
For the six-month period ended May 31, 2008
Lord Abbett Research Fund
Lord Abbett Growth Opportunities Fund
Semiannual Report
For the six-month period ended May 31, 2008
Dear Shareholders: We are pleased to provide you with this overview of the Lord Abbett Growth Opportunities Fund's performance for the six-month period ended May 31, 2008. On this page 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 by 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 888-522-2388 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.
Best regards,
Robert S. Dow
Chairman
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.
Q: What were the overall market conditions during the six months ended May 31, 2008?
A: The period was characterized by market volatility as the ongoing fallout from the subprime lending debacle and subsequent liquidity crisis continued to affect the broader markets. Although the S&P 500® Index,1 which returned -9.64% for a six-month period ended April 30, recovered some of its lost ground in May, it still returned only -4.47% for the six-month period ended May 31, 2008.
Most equity asset classes and investment styles returned negative results for the period. Growth stocks (as measured by the Russell 3000® Growth Index2) generally fared better than value
1
stocks (as measured by the Russell 3000® Value Index3), although both indexes were negative at -2.37% and -5.02%, respectively. Mid cap stocks (as measured by the Russell Midcap® Index4) were the only asset class in positive territory, returning 0.14%, compared with a -3.78% return for large cap stocks (as measured by the Russell 1000® Index5) and a -1.87% return for small cap stocks (as measured by the Russell 2000® Index6).
Q: How did the Growth Opportunities Fund perform during the six-month period ended May 31, 2008?
A: The Fund returned -2.47%, reflecting performance at the net asset value (NAV) of Class A shares, with all distributions reinvested, compared to its benchmark, the Russell Midcap® Growth Index,7 which returned 0.82% over the same period.
Q: What were the most significant factors affecting performance?
A: The most significant detractors from the Fund's performance relative to its benchmark for the six-month period were the technology sector, the consumer discretionary sector, and the utilities sector.
Among the individual holdings that detracted from performance were technology holdings Ciena Corp. (the Fund's number-one detractor), a provider of communications network platforms, software, and professional services, and Equinix, Inc., a supplier of core Internet exchange services to networks, Internet infrastructure companies, enterprises, and content providers; and financial services holding GFI Group Inc., an institutional brokerage services, data, and analytics product provider.
The most significant contributors to the Fund's relative performance were the other energy sector (which includes oil service companies, as well as smaller exploration and production companies, and independent refiners), the auto and transportation sector, and the healthcare sector.
Among the individual holdings that contributed to performance were other energy holdings Range Resources Corp. (the Fund's number-one contributor), an independent oil and gas company, and Southwestern Energy Co., an integrated energy company primarily focused on natural gas; and healthcare holding Millennium Pharmaceuticals, Inc., a Massachusetts-based biopharmaceutical company and marketer of VELCADE, a novel cancer product. (Millennium was recently acquired by Takeda Pharmaceutical Company Limited, based in Osaka, Japan.)
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.
Note: Class A shares purchased subject to a front-end sales charge have no contingent deferred sales charge (CDSC). However, certain purchases of
2
Class A shares made without a front-end sales charge may be subject to a CDSC of 1% if the shares are redeemed before the first day of the month in which the one-year anniversary of the purchase falls. Please see the prospectus for more information on redemptions that may be subject to a CDSC.
A prospectus contains important information about a fund, including its investment objectives, risks, charges, and ongoing expenses, which an investor 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 888-522-2388 or visit our Website at www.lordabbett.com. Read the prospectus carefully before investing.
1 The S&P 500® Index is widely regarded as the standard for measuring large cap U.S. stock market performance and includes a representative sample of leading companies in leading industries.
2 The Russell 3000® Growth Index measures the performance of those Russell 3000® Index companies with higher price-to-book ratios and higher forecasted growth values. The stocks in this index are also members of either the Russell 1000® Growth or the Russell 2000® Growth indexes.
3 The Russell 3000® Value Index measures the performance of those Russell 3000® Index companies with lower price-to-book ratios and lower forecasted growth values. The stocks in this index are also members of either the Russell 1000® Value or the Russell 2000® Value indexes.
4 The Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which represent approximately 25% of the total market capitalization of the Russell 1000® Index.
5 The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000® Index, which represents approximately 92% of the total market capitalization of the Russell 3000® Index.
6 The Russell 2000® Index is composed of 2,000 securities with market values ranging from $25 million to $275 million. The Growth Index is comprised of securities in the Russell 2000® Index with higher price-to-book ratios and higher forecasted growth.
7 The Russell Midcap® Growth Index measures the performance of those Russell Midcap companies with higher price to book ratios and higher forecasted growth values. The stocks also are members of the Russell 1000® Growth Index.
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 888-522-2388 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 several classes of shares with distinct pricing options. For a full description of the differences in pricing alternatives, please see the Fund's prospectus.
The views of the Fund's management and the portfolio holdings described in this report are as of May 31, 2008; 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.
Note: During certain periods shown, expense reimbursements were in place. Without such expense reimbursements, the Fund's returns would have been lower.
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 (December 1, 2007 through May 31, 2008).
Actual Expenses
For each class of the Fund, the first line of the applicable 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 12/1/07 – 5/31/08" 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 applicable 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† | |
| | | 12/1/07 | | 5/31/08 | | 12/1/07 –
5/31/08 | |
| Class A | |
| Actual | | $ | 1,000.00 | | | $ | 975.30 | | | $ | 7.60 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,017.29 | | | $ | 7.77 | | |
| Class B | |
| Actual | | $ | 1,000.00 | | | $ | 972.00 | | | $ | 10.80 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,014.04 | | | $ | 11.03 | | |
| Class C | |
| Actual | | $ | 1,000.00 | | | $ | 972.00 | | | $ | 10.80 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,014.04 | | | $ | 11.03 | | |
| Class F | |
| Actual | | $ | 1,000.00 | | | $ | 975.80 | | | $ | 6.47 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,018.45 | | | $ | 6.61 | | |
| Class I | |
| Actual | | $ | 1,000.00 | | | $ | 976.60 | | | $ | 5.88 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,019.05 | | | $ | 6.01 | | |
| Class P | |
| Actual | | $ | 1,000.00 | | | $ | 974.30 | | | $ | 8.09 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,016.79 | | | $ | 8.27 | | |
| Class R2 | |
| Actual | | $ | 1,000.00 | | | $ | 973.80 | | | $ | 8.68 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,016.20 | | | $ | 8.87 | | |
| Class R3 | |
| Actual | | $ | 1,000.00 | | | $ | 974.40 | | | $ | 8.14 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,016.73 | | | $ | 8.32 | | |
† For each class of the Fund, expenses are equal to the annualized expense ratio for such class (1.54% for Class A, 2.19% for Classes B and C, 1.31% for Class F, 1.19% for Class I, 1.64% for Class P, 1.76% for Class R2 and 1.65% for Class R3) multiplied by the average account value over the period, multiplied by 183/366 (to reflect one-half year period).
Portfolio Holdings Presented by Sector
May 31, 2008
| Sector* | | %** | |
| Auto & Transportation | | | 2.55 | % | |
| Consumer Discretionary | | | 14.44 | % | |
| Consumer Staples | | | 2.37 | % | |
| Financial Services | | | 6.48 | % | |
| Healthcare | | | 16.45 | % | |
| Integrated Oils | | | 0.53 | % | |
| Materials & Processing | | | 7.54 | % | |
| Sector* | | %** | |
| Other | | | 2.24 | % | |
| Other Energy | | | 11.30 | % | |
| Producer Durables | | | 10.45 | % | |
| Technology | | | 15.11 | % | |
| Utilities | | | 3.07 | % | |
| Short-Term Investment | | | 7.47 | % | |
| Total | | | 100.00 | % | |
* A sector may comprise several industries.
** Represents percent of total investments.
5
Schedule of Investments (unaudited)
May 31, 2008
| Investments | | Shares | | Value
(000) | |
| COMMON STOCKS 93.87% | |
| Advertising Agency 0.49% | |
| National CineMedia, Inc. | | | 190,500 | | | $ | 3,791 | | |
| Aerospace 3.05% | |
| Alliant Techsystems Inc.* | | | 118,000 | | | | 12,810 | | |
| Goodrich Corp. | | | 87,000 | | | | 5,638 | | |
| Rockwell Collins, Inc. | | | 85,800 | | | | 5,266 | | |
| Total | | | 23,714 | | |
| Banks 1.96% | |
| Northern Trust Corp. | | | 200,100 | | | | 15,208 | | |
| Biotechnology Research & Production 5.89% | |
Alexion
Pharmaceuticals, Inc.* | | | 128,970 | | | | 9,202 | | |
| Celgene Corp.* | | | 169,587 | | | | 10,321 | | |
| Cephalon, Inc.* | | | 28,600 | | | | 1,937 | | |
Charles River Laboratories
International, Inc.* | | | 92,100 | | | | 5,920 | | |
| Genzyme Corp.* | | | 109,800 | | | | 7,517 | | |
| ImClone Systems Inc.* | | | 206,000 | | | | 8,977 | | |
| OSI Pharmaceuticals, Inc.* | | | 53,000 | | | | 1,871 | | |
| Total | | | 45,745 | | |
| Casinos & Gambling 0.49% | |
| WMS Industries, Inc.* | | | 103,000 | | | | 3,815 | | |
| Chemicals 3.50% | |
| Airgas, Inc. | | | 255,800 | | | | 15,136 | | |
| Albemarle Corp. | | | 210,300 | | | | 9,352 | | |
CF Industries
Holdings, Inc. | | | 19,800 | | | | 2,710 | | |
| Total | | | 27,198 | | |
| Communications Technology 3.88% | |
| Ciena Corp.* | | | 143,800 | | | | 4,395 | | |
| Juniper Networks, Inc.* | | | 187,000 | | | | 5,146 | | |
L-3 Communications
Holdings, Inc. | | | 105,300 | | | | 11,308 | | |
| Investments | | Shares | | Value
(000) | |
| McAfee Inc.* | | | 255,200 | | | $ | 9,251 | | |
| Total | | | 30,100 | | |
| Computer Services, Software & Systems 2.22% | |
Akamai
Technologies, Inc.* | | | 121,000 | | | | 4,725 | | |
| BMC Software, Inc.* | | | 201,300 | | | | 8,072 | | |
| Equinix, Inc.* | | | 46,800 | | | | 4,469 | | |
| Total | | | 17,266 | | |
| Computer Technology 0.67% | |
| NVIDIA Corp.* | | | 211,800 | | | | 5,231 | | |
| Consumer Electronics 1.69% | |
| Activision, Inc.* | | | 283,400 | | | | 9,565 | | |
| Electronic Arts Inc.* | | | 71,500 | | | | 3,589 | | |
| Total | | | 13,154 | | |
| Consumer Products 0.94% | |
| Alberto-Culver Co. | | | 275,900 | | | | 7,292 | | |
| Cosmetics 1.11% | |
| Avon Products, Inc. | | | 219,900 | | | | 8,589 | | |
| Diversified Manufacturing 1.49% | |
| Hexcel Corp.* | | | 438,800 | | | | 11,611 | | |
| Drugs & Pharmaceuticals 2.89% | |
BioMarin
Pharmaceutical Inc.* | | | 268,406 | | | | 10,245 | | |
| Elan Corp. plc ADR* | | | 245,200 | | | | 6,140 | | |
United Therapeutics
Corp.* | | | 63,724 | | | | 6,086 | | |
| Total | | | 22,471 | | |
| Education Services 1.40% | |
| Capella Education Co.* | | | 1,550 | | | | 100 | | |
| DeVry, Inc. | | | 102,800 | | | | 5,865 | | |
New Oriental Education &
Technology Group,
Inc. ADR* | | | 74,900 | | | | 4,925 | | |
| Total | | | 10,890 | | |
See Notes to Financial Statements.
6
Schedule of Investments (unaudited)(continued)
May 31, 2008
| Investments | | Shares | | Value
(000) | |
| Electrical Equipment & Components 2.01% | |
| AMETEK, Inc. | | | 305,100 | | | $ | 15,652 | | |
| Electronics 1.54% | |
| Amphenol Corp. Class A | | | 256,100 | | | | 11,942 | | |
| Electronics: Medical Systems 1.63% | |
| Hologic, Inc.* | | | 150,600 | | | | 3,619 | | |
| Illumina, Inc.* | | | 115,100 | | | | 9,033 | | |
| Total | | | 12,652 | | |
Electronics: Semi-Conductors/
Components 5.80% | |
| Broadcom Corp. Class A* | | | 230,000 | | | | 6,599 | | |
| Linear Technology Corp. | | | 258,700 | | | | 9,512 | | |
Marvell Technology
Group Ltd. (Bermuda)*(a) | | | 372,100 | | | | 6,460 | | |
Microchip
Technology Inc. | | | 275,400 | | | | 10,146 | | |
| PMC-Sierra, Inc.* | | | 175,700 | | | | 1,495 | | |
| Silicon Laboratories Inc.* | | | 295,300 | | | | 10,882 | | |
| Total | | | 45,094 | | |
| Engineering & Contracting Services 1.80% | |
Jacobs Engineering
Group Inc.* | | | 111,800 | | | | 10,596 | | |
| Nalco Holding Co. | | | 139,100 | | | | 3,383 | | |
| Total | | | 13,979 | | |
Financial Data Processing Services &
Systems 1.04% | |
| Fiserv, Inc.* | | | 154,200 | | | | 8,074 | | |
| Foods 0.88% | |
| Flowers Foods, Inc. | | | 242,214 | | | | 6,813 | | |
| Healthcare Facilities 0.69% | |
| ICON plc ADR* | | | 75,781 | | | | 5,343 | | |
| Investments | | Shares | | Value
(000) | |
| Healthcare Management Services 1.07% | |
Community Health
Systems Inc.* | | | 93,700 | | | $ | 3,376 | | |
| Phase Forward Inc.* | | | 286,900 | | | | 4,975 | | |
| Total | | | 8,351 | | |
| Hotel/Motel 0.56% | |
Marriott International,
Inc. Class A | | | 133,000 | | | | 4,377 | | |
| Identification Control & Filter Devices 1.44% | |
| Roper Industries, Inc. | | | 172,200 | | | | 11,200 | | |
| Investment Management Companies 3.06% | |
| T. Rowe Price Group, Inc. | | | 218,800 | | | | 12,673 | | |
Waddell & Reed
Financial, Inc. Class A | | | 314,200 | | | | 11,110 | | |
| Total | | | 23,783 | | |
| Jewelry, Watches & Gemstones 0.35% | |
| Tiffany & Co. | | | 54,800 | | | | 2,687 | | |
| Leisure Time 0.38% | |
| Life Time Fitness, Inc.* | | | 73,800 | | | | 2,953 | | |
| Machinery: Agricultural 0.73% | |
| AGCO Corp.* | | | 94,300 | | | | 5,699 | | |
Machinery: Oil Well Equipment &
Services 2.82% | |
Cameron
International Corp.* | | | 246,100 | | | | 13,100 | | |
Weatherford
International Ltd.* | | | 192,200 | | | | 8,770 | | |
| Total | | | 21,870 | | |
Medical & Dental Instruments &
Supplies 4.00% | |
| Beckman Coulter, Inc. | | | 71,600 | | | | 4,968 | | |
DENTSPLY
International Inc. | | | 243,400 | | | | 9,867 | | |
| NuVasive, Inc.* | | | 249,246 | | | | 10,551 | | |
See Notes to Financial Statements.
7
Schedule of Investments (unaudited)(continued)
May 31, 2008
| Investments | | Shares | | Value
(000) | |
Medical & Dental Instruments &
Supplies (continued) | |
| St. Jude Medical, Inc.* | | | 139,600 | | | $ | 5,689 | | |
| Total | | | 31,075 | | |
| Medical Services 0.52% | |
| Covance Inc.* | | | 49,100 | | | | 4,025 | | |
| Metal Fabricating 0.85% | |
| Precision Castparts Corp. | | | 54,900 | | | | 6,632 | | |
| Miscellaneous: Technology 1.21% | |
| IHS Inc. Class A* | | | 158,400 | | | | 9,434 | | |
| Multi-Sector Companies 2.27% | |
| Eaton Corp. | | | 104,700 | | | | 10,122 | | |
| Textron, Inc. | | | 120,200 | | | | 7,519 | | |
| Total | | | 17,641 | | |
| Offshore Drilling 3.33% | |
| Atwood Oceanics, Inc.* | | | 121,000 | | | | 12,331 | | |
Diamond Offshore
Drilling, Inc. | | | 99,200 | | | | 13,535 | | |
| Total | | | 25,866 | | |
| Oil: Crude Producers 5.32% | |
| Noble Energy, Inc. | | | 143,300 | | | | 13,965 | | |
Quicksilver
Resources Inc.* | | | 97,800 | | | | 3,563 | | |
| Range Resources Corp. | | | 178,200 | | | | 11,718 | | |
| Southwestern Energy Co.* | | | 272,000 | | | | 12,060 | | |
| Total | | | 41,306 | | |
| Oil: Integrated Domestic 0.54% | |
| Murphy Oil Corp. | | | 45,000 | | | | 4,169 | | |
| Production Technology Equipment 0.24% | |
Varian Semiconductor
Equipment
Associates, Inc.* | | | 48,400 | | | | 1,841 | | |
| Investments | | Shares | | Value
(000) | |
| Radio & TV Broadcasters 1.58% | |
Central European
Media Enterprises
Ltd. Class A (Bermuda)*(a) | | | 50,700 | | | $ | 5,393 | | |
Rogers Communications,
Inc. Class B (Canada)(a) | | | 156,500 | | | | 6,888 | | |
| Total | | | 12,281 | | |
| Restaurants 1.59% | |
| Panera Bread Co. Class A* | | | 112,000 | | | | 5,817 | | |
| Yum! Brands, Inc. | | | 164,600 | | | | 6,535 | | |
| Total | | | 12,352 | | |
| Retail 2.33% | |
| Kohl's Corp.* | | | 59,800 | | | | 2,679 | | |
| TJX Companies, Inc. | | | 200,700 | | | | 6,435 | | |
| Urban Outfitters, Inc.* | | | 280,000 | | | | 9,013 | | |
| Total | | | 18,127 | | |
| Securities Brokerage & Services 0.52% | |
Intercontinental
Exchange, Inc.* | | | 29,000 | | | | 4,008 | | |
| Services: Commercial 0.73% | |
| FTI Consulting, Inc.* | | | 93,800 | | | | 5,634 | | |
| Soaps & Household Chemicals 1.52% | |
Church & Dwight
Co., Inc. | | | 208,100 | | | | 11,847 | | |
| Telecommunications Equipment 3.13% | |
American Tower
Corp. Class A* | | | 252,300 | | | | 11,535 | | |
Crown Castle
International Corp.* | | | 300,400 | | | | 12,764 | | |
| Total | | | 24,299 | | |
| Toys 0.25% | |
Marvel
Entertainment, Inc.* | | | 56,100 | | | | 1,909 | | |
See Notes to Financial Statements.
8
Schedule of Investments (unaudited)(concluded)
May 31, 2008
| Investments | | Shares | | Value
(000) | |
| Transportation: Miscellaneous 2.58% | |
C.H. Robinson
Worldwide, Inc. | | | 173,500 | | | $ | 11,191 | | |
Expeditors International
of Washington Inc. | | | 188,600 | | | | 8,879 | | |
| Total | | | 20,070 | | |
| Utilities: Electrical 2.26% | |
| Allegheny Energy, Inc. | | | 109,000 | | | | 5,968 | | |
Constellation Energy
Group Inc. | | | 47,700 | | | | 4,113 | | |
| ITC Holdings Corp. | | | 136,800 | | | | 7,465 | | |
| Total | | | 17,546 | | |
| Utilities: Gas Distributors 0.86% | |
| Sempra Energy | | | 115,600 | | | | 6,683 | | |
| Wholesalers 0.77% | |
| LKQ Corp.* | | | 270,431 | | | | 5,993 | | |
Total Common Stocks
(cost $638,767,148) | | | 729,282 | | |
| Investments | | Principal
Amount
(000) | | Value
(000) | |
| SHORT-TERM INVESTMENT 7.58% | |
| Repurchase Agreement | |
Repurchase Agreement
dated 5/30/2008,
1.71% due 6/2/2008
with State Street
Bank & Trust Co.
collateralized by
$60,860,000 of Federal
Home Loan Mortgage
Corp. at Zero Coupon
due 12/30/2008;
value: $60,023,175;
proceeds: $58,850,463
(cost $58,842,078) | | $ | 58,842 | | | $ | 58,842 | | |
Total Investments in Securities 101.45%
(cost $697,609,226) | | | 788,124 | | |
Liabilities in Excess of
Other Assets (1.45%) | | | (11,232 | ) | |
| Net Assets 100.00% | | $ | 776,892 | | |
ADR American Depositary Receipt.
* Non-income producing security.
(a) Foreign security traded in U.S. dollars.
See Notes to Financial Statements.
9
Statement of Assets and Liabilities (unaudited)
May 31, 2008
| ASSETS: | |
| Investments in securities, at value (cost $697,609,226) | | $ | 788,123,638 | | |
| Receivables: | |
| Investment securities sold | | | 8,859,742 | | |
| Capital shares sold | | | 7,622,542 | | |
| Interest and dividends | | | 406,268 | | |
| Prepaid expenses and other assets | | | 104,941 | | |
| Total assets | | | 805,117,131 | | |
| LIABILITIES: | |
| Payables: | |
| Investment securities purchased | | | 18,027,301 | | |
| Capital shares reacquired | | | 8,663,313 | | |
| Management fee | | | 526,316 | | |
| 12b-1 distribution fees | | | 359,863 | | |
| Directors' fees | | | 71,476 | | |
| Fund administration | | | 26,431 | | |
| To affiliates (See Note 3) | | | 7,099 | | |
| Accrued expenses and other liabilities | | | 543,521 | | |
| Total liabilities | | | 28,225,320 | | |
| NET ASSETS | | $ | 776,891,811 | | |
| COMPOSITION OF NET ASSETS: | |
| Paid-in capital | | $ | 651,484,852 | | |
| Accumulated net investment loss | | | (5,252,389 | ) | |
| Accumulated net realized gain on investments and foreign currency related transactions | | | 40,144,506 | | |
| Net unrealized appreciation on investments | | | 90,514,842 | | |
| Net Assets | | $ | 776,891,811 | | |
| Net assets by class: | |
| Class A Shares | | $ | 571,872,824 | | |
| Class B Shares | | $ | 86,837,796 | | |
| Class C Shares | | $ | 77,732,506 | | |
| Class F Shares | | $ | 27,757 | | |
| Class I Shares | | $ | 24,531,890 | | |
| Class P Shares | | $ | 15,686,552 | | |
| Class R2 Shares | | $ | 108,240 | | |
| Class R3 Shares | | $ | 94,246 | | |
| Outstanding shares by class: | |
| Class A Shares (100 million shares of common stock authorized, $.001 par value) | | | 27,970,333 | | |
| Class B Shares (30 million shares of common stock authorized, $.001 par value) | | | 4,573,154 | | |
| Class C Shares (20 million shares of common stock authorized, $.001 par value) | | | 4,095,799 | | |
| Class F Shares (30 million shares of common stock authorized, $.001 par value) | | | 1,356 | | |
| Class I Shares (30 million shares of common stock authorized, $.001 par value) | | | 1,158,181 | | |
| Class P Shares (20 million shares of common stock authorized, $.001 par value) | | | 768,473 | | |
| Class R2 Shares (30 million shares of common stock authorized, $.001 par value) | | | 5,303 | | |
| Class R3 Shares (30 million shares of common stock authorized, $.001 par value) | | | 4,614 | | |
Net asset value, offering and redemption price per share
(Net assets divided by outstanding shares): | | | | | |
| Class A Shares–Net asset value | | $ | 20.45 | | |
Class A Shares–Maximum offering price
(Net asset value plus sales charge of 5.75%) | | $ | 21.70 | | |
| Class B Shares–Net asset value | | $ | 18.99 | | |
| Class C Shares–Net asset value | | $ | 18.98 | | |
| Class F Shares–Net asset value | | $ | 20.47 | | |
| Class I Shares–Net asset value | | $ | 21.18 | | |
| Class P Shares–Net asset value | | $ | 20.41 | | |
| Class R2 Shares–Net asset value | | $ | 20.41 | | |
| Class R3 Shares–Net asset value | | $ | 20.43 | | |
See Notes to Financial Statements.
10
Statement of Operations (unaudited)
For the Six Months Ended May 31, 2008
| Investment income: | |
| Dividends (net of foreign withholding taxes of $14,326) | | $ | 2,060,225 | | |
| Interest | | | 705,689 | | |
| Total investment income | | | 2,765,914 | | |
| Expenses: | |
| Management fee | | | 3,073,478 | | |
| 12b-1 distribution plan–Class A | | | 987,538 | | |
| 12b-1 distribution plan–Class B | | | 449,784 | | |
| 12b-1 distribution plan–Class C | | | 385,107 | | |
| 12b-1 distribution plan–Class F | | | 10 | | |
| 12b-1 distribution plan–Class P | | | 35,305 | | |
| 12b-1 distribution plan–Class R2 | | | 111 | | |
| 12b-1 distribution plan–Class R3 | | | 62 | | |
| Shareholder servicing | | | 1,166,912 | | |
| Fund administration | | | 153,674 | | |
| Reports to shareholders | | | 63,962 | | |
| Registration | | | 51,223 | | |
| Subsidy (See Note 3) | | | 30,568 | | |
| Professional | | | 25,203 | | |
| Directors' fees | | | 11,223 | | |
| Custody | | | 9,422 | | |
| Other | | | 13,864 | | |
| Gross expenses | | | 6,457,446 | | |
| Expense reductions (See Note 7) | | | (8,990 | ) | |
| Expenses assumed by advisor (See Note 3) | | | (21,359 | ) | |
| Net expenses | | | 6,427,097 | | |
| Net investment loss | | | (3,661,183 | ) | |
| Net realized and unrealized gain (loss): | |
| Net realized gain on investments and foreign currency related transactions | | | 32,279,648 | | |
Net change in unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign currencies | | | (51,680,145 | ) | |
| Net realized and unrealized loss | | | (19,400,497 | ) | |
| Net Decrease in Net Assets Resulting From Operations | | $ | (23,061,680 | ) | |
See Notes to Financial Statements.
11
Statements of Changes in Net Assets
| INCREASE (DECREASE) IN NET ASSETS | | For the Six Months
Ended May 31, 2008
(unaudited) | | For the Year Ended
November 30, 2007 | |
| Operations: | |
| Net investment loss | | $ | (3,661,183 | ) | | $ | (8,677,016 | ) | |
Net realized gain on investments and foreign
currency related transactions | | | 32,279,648 | | | | 114,250,000 | | |
Net change in unrealized appreciation
on investments and translation of assets and
liabilities denominated in foreign currencies | | | (51,680,145 | ) | | | 36,272,858 | | |
| Net increase (decrease) in net assets resulting from operations | | | (23,061,680 | ) | | | 141,845,842 | | |
| Distributions to shareholders from: | |
| Net realized gain | |
| Class A | | | (72,990,170 | ) | | | (55,264,297 | ) | |
| Class B | | | (12,846,729 | ) | | | (9,546,014 | ) | |
| Class C | | | (10,679,352 | ) | | | (7,490,738 | ) | |
| Class F | | | (1,202 | ) | | | – | | |
| Class I | | | (2,417,829 | ) | | | (1,764,000 | ) | |
| Class P | | | (2,028,077 | ) | | | (1,438,838 | ) | |
| Class R2 | | | (1,196 | ) | | | – | | |
| Class R3 | | | (1,196 | ) | | | – | | |
| Total distributions to shareholders | | | (100,965,751 | ) | | | (75,503,887 | ) | |
| Capital share transactions (Net of share conversions) (See Note 11): | |
| Net proceeds from sales of shares | | | 55,199,938 | | | | 104,727,803 | | |
| Reinvestment of distributions | | | 96,838,981 | | | | 71,256,786 | | |
| Cost of shares reacquired | | | (84,640,419 | ) | | | (238,951,845 | ) | |
Net increase (decrease) in net assets resulting
from capital share transactions | | | 67,398,500 | | | | (62,967,256 | ) | |
| Net increase (decrease) in net assets | | | (56,628,931 | ) | | | 3,374,699 | | |
| NET ASSETS: | |
| Beginning of period | | $ | 833,520,742 | | | $ | 830,146,043 | | |
| End of period | | $ | 776,891,811 | | | $ | 833,520,742 | | |
| Accumulated net investment loss | | $ | (5,252,389 | ) | | $ | (1,591,206 | ) | |
See Notes to Financial Statements.
12
Financial Highlights
| | | Class A Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 23.84 | | | $ | 22.02 | | | $ | 21.15 | | | $ | 19.21 | | | $ | 17.88 | | | $ | 14.42 | | |
| Investment operations: | |
| Net investment loss(a) | | | (.08 | ) | | | (.20 | ) | | | (.15 | ) | | | (.19 | ) | | | (.23 | ) | | | (.24 | ) | |
Net realized and
unrealized gain (loss) | | | (.46 | ) | | | 4.01 | | | | 1.67 | | | | 2.13 | | | | 1.56 | | | | 3.70 | | |
Total from investment
operations | | | (.54 | ) | | | 3.81 | | | | 1.52 | | | | 1.94 | | | | 1.33 | | | | 3.46 | | |
| Distributions to shareholders from: | |
| Net realized gain | | | (2.85 | ) | | | (1.99 | ) | | | (.65 | ) | | | – | | | | – | | | | – | | |
| Net asset value, end of period | | $ | 20.45 | | | $ | 23.84 | | | $ | 22.02 | | | $ | 21.15 | | | $ | 19.21 | | | $ | 17.88 | | |
| Total Return(b) | | | (2.47 | )%(c) | | | 18.81 | % | | | 7.35 | % | | | 10.10 | % | | | 7.44 | % | | | 23.99 | % | |
| Ratios to Average Net Assets: | |
Expenses, excluding expense
reductions and including
expenses assumed | | | .77 | %(c) | | | 1.53 | % | | | 1.54 | % | | | 1.55 | % | | | 1.73 | % | | | 1.85 | % | |
Expenses, including expense
reductions and expenses
assumed | | | .77 | %(c) | | | 1.53 | % | | | 1.54 | % | | | 1.55 | % | | | 1.73 | % | | | 1.85 | % | |
Expenses, excluding expense
reductions and expenses
assumed | | | .77 | %(c) | | | 1.54 | % | | | 1.56 | % | | | 1.59 | % | | | 1.73 | % | | | 1.85 | % | |
| Net investment loss | | | (.41 | )%(c) | | | (.91 | )% | | | (.70 | )% | | | (.96 | )% | | | (1.27 | )% | | | (1.53 | )% | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 571,873 | | | $ | 613,735 | | | $ | 614,433 | | | $ | 634,059 | | | $ | 594,524 | | | $ | 430,991 | | |
| Portfolio turnover rate | | | 67.61 | %(c) | | | 101.25 | % | | | 159.86 | % | | | 97.35 | % | | | 90.23 | % | | | 78.58 | % | |
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(c) Not annualized.
See Notes to Financial Statements.
13
Financial Highlights (continued)
| | | Class B Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 22.41 | | | $ | 20.94 | | | $ | 20.27 | | | $ | 18.53 | | | $ | 17.35 | | | $ | 14.08 | | |
| Investment operations: | |
| Net investment loss(a) | | | (.14 | ) | | | (.32 | ) | | | (.27 | ) | | | (.31 | ) | | | (.33 | ) | | | (.32 | ) | |
Net realized and
unrealized gain (loss) | | | (.43 | ) | | | 3.78 | | | | 1.59 | | | | 2.05 | | | | 1.51 | | | | 3.59 | | |
Total from investment
operations | | | (.57 | ) | | | 3.46 | | | | 1.32 | | | | 1.74 | | | | 1.18 | | | | 3.27 | | |
| Distributions to shareholders from: | |
| Net realized gain | | | (2.85 | ) | | | (1.99 | ) | | | (.65 | ) | | | – | | | | – | | | | – | | |
| Net asset value, end of period | | $ | 18.99 | | | $ | 22.41 | | | $ | 20.94 | | | $ | 20.27 | | | $ | 18.53 | | | $ | 17.35 | | |
| Total Return(b) | | | (2.80 | )%(c) | | | 18.04 | % | | | 6.66 | % | | | 9.39 | % | | | 6.80 | % | | | 23.22 | % | |
| Ratios to Average Net Assets: | |
Expenses, excluding expense
reductions and including
expenses assumed | | | 1.10 | %(c) | | | 2.18 | % | | | 2.19 | % | | | 2.20 | % | | | 2.30 | % | | | 2.44 | % | |
Expenses, including expense
reductions and expenses
assumed | | | 1.10 | %(c) | | | 2.18 | % | | | 2.19 | % | | | 2.20 | % | | | 2.30 | % | | | 2.44 | % | |
Expenses, excluding expense
reductions and expenses
assumed | | | 1.10 | %(c) | | | 2.19 | % | | | 2.21 | % | | | 2.23 | % | | | 2.30 | % | | | 2.44 | % | |
| Net investment loss | | | (.74 | )%(c) | | | (1.56 | )% | | | (1.35 | )% | | | (1.61 | )% | | | (1.84 | )% | | | (2.12 | )% | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 86,838 | | | $ | 101,200 | | | $ | 100,741 | | | $ | 106,809 | | | $ | 104,282 | | | $ | 94,561 | | |
| Portfolio turnover rate | | | 67.61 | %(c) | | | 101.25 | % | | | 159.86 | % | | | 97.35 | % | | | 90.23 | % | | | 78.58 | % | |
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(c) Not annualized.
See Notes to Financial Statements.
14
Financial Highlights (continued)
| | | Class C Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 22.40 | | | $ | 20.93 | | | $ | 20.26 | | | $ | 18.53 | | | $ | 17.34 | | | $ | 14.08 | | |
| Investment operations: | |
| Net investment loss(a) | | | (.14 | ) | | | (.32 | ) | | | (.27 | ) | | | (.31 | ) | | | (.33 | ) | | | (.32 | ) | |
Net realized and
unrealized gain (loss) | | | (.43 | ) | | | 3.78 | | | | 1.59 | | | | 2.04 | | | | 1.52 | | | | 3.58 | | |
Total from investment
operations | | | (.57 | ) | | | 3.46 | | | | 1.32 | | | | 1.73 | | | | 1.19 | | | | 3.26 | | |
| Distributions to shareholders from: | |
| Net realized gain | | | (2.85 | ) | | | (1.99 | ) | | | (.65 | ) | | | – | | | | – | | | | – | | |
| Net asset value, end of period | | $ | 18.98 | | | $ | 22.40 | | | $ | 20.93 | | | $ | 20.26 | | | $ | 18.53 | | | $ | 17.34 | | |
| Total Return(b) | | | (2.80 | )%(c) | | | 18.05 | % | | | 6.66 | % | | | 9.34 | % | | | 6.86 | % | | | 23.15 | % | |
| Ratios to Average Net Assets: | |
Expenses, excluding expense
reductions and including
expenses assumed | | | 1.10 | %(c) | | | 2.18 | % | | | 2.19 | % | | | 2.20 | % | | | 2.30 | % | | | 2.44 | % | |
Expenses, including expense
reductions and expenses
assumed | | | 1.10 | %(c) | | | 2.18 | % | | | 2.19 | % | | | 2.20 | % | | | 2.30 | % | | | 2.44 | % | |
Expenses, excluding expense
reductions and expenses
assumed | | | 1.10 | %(c) | | | 2.19 | % | | | 2.21 | % | | | 2.23 | % | | | 2.30 | % | | | 2.44 | % | |
| Net investment loss | | | (.74 | )%(c) | | | (1.56 | )% | | | (1.35 | )% | | | (1.61 | )% | | | (1.84 | )% | | | (2.12 | )% | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 77,733 | | | $ | 83,891 | | | $ | 79,485 | | | $ | 83,339 | | | $ | 85,666 | | | $ | 79,415 | | |
| Portfolio turnover rate | | | 67.61 | %(c) | | | 101.25 | % | | | 159.86 | % | | | 97.35 | % | | | 90.23 | % | | | 78.58 | % | |
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(c) Not annualized.
See Notes to Financial Statements.
15
Financial Highlights (continued)
| | | Class F Shares | |
| | | Six Months
Ended
5/31/2008
(unaudited) | | 9/28/2007(a)
to
11/30/2007 | |
| Per Share Operating Performance | |
| Net asset value, beginning of period | | $ | 23.85 | | | $ | 23.81 | | |
| Investment operations: | |
| Net investment loss(b) | | | (.06 | ) | | | (.03 | ) | |
| Net realized and unrealized gain (loss) | | | (.47 | ) | | | .07 | | |
| Total from investment operations | | | (.53 | ) | | | .04 | | |
| Distributions to shareholders from: | |
| Net realized gain | | | (2.85 | ) | | | – | | |
| Net asset value, end of period | | $ | 20.47 | | | $ | 23.85 | | |
| Total Return(c) | | | (2.42 | )%(d) | | | .17 | %(d) | |
| Ratios to Average Net Assets: | |
| Expenses, excluding expense reductions and including expenses assumed | | | .66 | %(d) | | | .22 | %(d) | |
| Expenses, including expense reductions and expenses assumed | | | .66 | %(d) | | | .22 | %(d) | |
| Expenses, excluding expense reductions and expenses assumed | | | .66 | %(d) | | | .22 | %(d) | |
| Net investment loss | | | (.29 | )%(d) | | | (.14 | )%(d) | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 28 | | | $ | 10 | | |
| Portfolio turnover rate | | | 67.61 | %(d) | | | 101.25 | % | |
(a) Commencement of investment operations was 9/28/2007, SEC effective date was 9/14/2007, and date shares first became available to the public was 10/1/2007.
(b) Calculated using average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(d) Not annualized.
See Notes to Financial Statements.
16
Financial Highlights (continued)
| | | Class I Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 24.56 | | | $ | 22.55 | | | $ | 21.57 | | | $ | 19.52 | | | $ | 18.09 | | | $ | 14.56 | | |
| Investment operations: | |
| Net investment loss(a) | | | (.05 | ) | | | (.12 | ) | | | (.07 | ) | | | (.12 | ) | | | (.15 | ) | | | (.20 | ) | |
Net realized and
unrealized gain (loss) | | | (.48 | ) | | | 4.12 | | | | 1.70 | | | | 2.17 | | | | 1.58 | | | | 3.73 | | |
Total from investment
operations | | | (.53 | ) | | | 4.00 | | | | 1.63 | | | | 2.05 | | | | 1.43 | | | | 3.53 | | |
| Distributions to shareholders from: | |
| Net realized gain | | | (2.85 | ) | | | (1.99 | ) | | | (.65 | ) | | | – | | | | – | | | | – | | |
| Net asset value, end of period | | $ | 21.18 | | | $ | 24.56 | | | $ | 22.55 | | | $ | 21.57 | | | $ | 19.52 | | | $ | 18.09 | | |
| Total Return(b) | | | (2.34 | )%(c) | | | 19.24 | % | | | 7.73 | % | | | 10.50 | % | | | 7.90 | % | | | 24.24 | % | |
| Ratios to Average Net Assets: | |
Expenses, excluding expense
reductions and including
expenses assumed | | | .60 | %(c) | | | 1.18 | % | | | 1.19 | % | | | 1.20 | % | | | 1.37 | % | | | 1.44 | %† | |
Expenses, including expense
reductions and expenses
assumed | | | .60 | %(c) | | | 1.18 | % | | | 1.19 | % | | | 1.20 | % | | | 1.37 | % | | | 1.44 | %† | |
Expenses, excluding expense
reductions and expenses
assumed | | | .60 | %(c) | | | 1.19 | % | | | 1.22 | % | | | 1.23 | % | | | 1.37 | % | | | 1.44 | %† | |
| Net investment loss | | | (.23 | )%(c) | | | (.55 | )% | | | (.32 | )% | | | (.60 | )% | | | (.80 | )% | | | (1.12 | )%† | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 24,532 | | | $ | 17,965 | | | $ | 19,631 | | | $ | 8,901 | | | $ | 6,312 | | | $ | 2 | | |
| Portfolio turnover rate | | | 67.61 | %(c) | | | 101.25 | % | | | 159.86 | % | | | 97.35 | % | | | 90.23 | % | | | 78.58 | % | |
† 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) Not annualized.
See Notes to Financial Statements.
17
Financial Highlights (continued)
| | | Class P Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 23.82 | | | $ | 22.02 | | | $ | 21.17 | | | $ | 19.25 | | | $ | 17.92 | | | $ | 14.47 | | |
| Investment operations: | |
| Net investment loss(a) | | | (.09 | ) | | | (.22 | ) | | | (.17 | ) | | | (.21 | ) | | | (.24 | ) | | | (.25 | ) | |
Net realized and
unrealized gain (loss) | | | (.47 | ) | | | 4.01 | | | | 1.67 | | | | 2.13 | | | | 1.57 | | | | 3.70 | | |
Total from investment
operations | | | (.56 | ) | | | 3.79 | | | | 1.50 | | | | 1.92 | | | | 1.33 | | | | 3.45 | | |
| Distributions to shareholders from: | |
| Net realized gain | | | (2.85 | ) | | | (1.99 | ) | | | (.65 | ) | | | – | | | | – | | | | – | | |
| Net asset value, end of period | | $ | 20.41 | | | $ | 23.82 | | | $ | 22.02 | | | $ | 21.17 | | | $ | 19.25 | | | $ | 17.92 | | |
| Total Return(b) | | | (2.57 | )%(c) | | | 18.71 | % | | | 7.24 | % | | | 9.97 | % | | | 7.42 | % | | | 23.84 | % | |
| Ratios to Average Net Assets: | |
Expenses, excluding expense
reductions and including
expenses assumed | | | .82 | %(c) | | | 1.63 | % | | | 1.64 | % | | | 1.65 | % | | | 1.77 | % | | | 1.89 | % | |
Expenses, including expense
reductions and expenses
assumed | | | .82 | %(c) | | | 1.63 | % | | | 1.64 | % | | | 1.65 | % | | | 1.77 | % | | | 1.89 | % | |
Expenses, excluding expense
reductions and expenses
assumed | | | .82 | %(c) | | | 1.64 | % | | | 1.66 | % | | | 1.68 | % | | | 1.77 | % | | | 1.89 | % | |
| Net investment loss | | | (.46 | )%(c) | | | (1.01 | )% | | | (.79 | )% | | | (1.05 | )% | | | (1.31 | )% | | | (1.57 | )% | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 15,687 | | | $ | 16,699 | | | $ | 15,856 | | | $ | 17,536 | | | $ | 12,094 | | | $ | 6,310 | | |
| Portfolio turnover rate | | | 67.61 | %(c) | | | 101.25 | % | | | 159.86 | % | | | 97.35 | % | | | 90.23 | % | | | 78.58 | % | |
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(c) Not annualized.
See Notes to Financial Statements.
18
Financial Highlights (continued)
| | | Class R2 Shares | |
| | | Six Months
Ended
5/31/2008
(unaudited) | | 9/28/2007(a)
to
11/30/2007 | |
| Per Share Operating Performance | |
| Net asset value, beginning of period | | $ | 23.83 | | | $ | 23.81 | | |
| Investment operations: | |
| Net investment loss(b) | | | (.10 | ) | | | (.05 | ) | |
| Net realized and unrealized gain (loss) | | | (.47 | ) | | | .07 | | |
| Total from investment operations | | | (.57 | ) | | | .02 | | |
| Distributions to shareholders from: | |
| Net realized gain | | | (2.85 | ) | | | – | | |
| Net asset value, end of period | | $ | 20.41 | | | $ | 23.83 | | |
| Total Return(c) | | | (2.62 | )%(d) | | | .08 | %(d) | |
| Ratios to Average Net Assets: | |
| Expenses, excluding expense reductions and including expenses assumed | | | .88 | %(d) | | | .28 | %(d) | |
| Expenses, including expense reductions and expenses assumed | | | .88 | %(d) | | | .28 | %(d) | |
| Expenses, excluding expense reductions and expenses assumed | | | .89 | %(d) | | | .29 | %(d) | |
| Net investment loss | | | (.50 | )%(d) | | | (.20 | )%(d) | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 108 | | | $ | 10 | | |
| Portfolio turnover rate | | | 67.61 | %(d) | | | 101.25 | % | |
(a) Commencement of investment operations was 9/28/2007, SEC effective date was 9/14/2007, and date shares first became available to the public was 10/1/2007.
(b) Calculated using average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(d) Not annualized.
See Notes to Financial Statements.
19
Financial Highlights (concluded)
| | | Class R3 Shares | |
| | | Six Months
Ended
5/31/2008
(unaudited) | | 9/28/2007(a)
to
11/30/2007 | |
| Per Share Operating Performance | |
| Net asset value, beginning of period | | $ | 23.84 | | | $ | 23.81 | | |
| Investment operations: | |
| Net investment loss(b) | | | (.08 | ) | | | (.04 | ) | |
| Net realized and unrealized gain (loss) | | | (.48 | ) | | | .07 | | |
| Total from investment operations | | | (.56 | ) | | | .03 | | |
| Distributions to shareholders from: | |
| Net realized gain | | | (2.85 | ) | | | – | | |
| Net asset value, end of period | | $ | 20.43 | | | $ | 23.84 | | |
| Total Return(c) | | | (2.56 | )%(d) | | | .13 | %(d) | |
| Ratios to Average Net Assets: | |
| Expenses, excluding expense reductions and including expenses assumed | | | .83 | %(d) | | | .27 | %(d) | |
| Expenses, including expense reductions and expenses assumed | | | .83 | %(d) | | | .27 | %(d) | |
| Expenses, excluding expense reductions and expenses assumed | | | .84 | %(d) | | | .27 | %(d) | |
| Net investment loss | | | (.42 | )%(d) | | | (.18 | )%(d) | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 94 | | | $ | 10 | | |
| Portfolio turnover rate | | | 67.61 | %(d) | | | 101.25 | % | |
(a) Commencement of investment operations was 9/28/2007, SEC effective date was 9/14/2007, and date shares first became available to the public was 10/1/2007.
(b) Calculated using average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(d) Not annualized.
See Notes to Financial Statements.
20
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Lord Abbett Research Fund, Inc. (the "Company") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified open-end management investment company, incorporated under Maryland law on April 6, 1992. The Company currently consists of four separate funds. This report covers one of the funds and its respective classes – Lord Abbett Growth Opportunities Fund (the "Fund").
The Fund's investment objective is capital appreciation. The Fund offers eight classes of shares: Classes A, B, C, F, I, P, R2 and R3, each with different expenses and dividends. A front-end sales charge is normally added to the Net Asset Value ("NAV") for Class A shares. There is no front-end sales charge in the case of the Class B, C, F, I, P, R2 and R3 shares, although there may be a contingent deferred sales charge ("CDSC") 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); 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 the next business day thereafter) following the eighth anniversary of the original purchase of Cla ss B shares. As of October 1, 2007, the Fund's Class P shares were closed to substantially all new retirement and benefit plans and fee-based programs, with certain exceptions as set forth in the Fund's Prospectus.
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 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 more accurately reflect their fair value as of the close of regular trading on the New York Stock Exchange LLC. 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 wh ich market quotations 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.
21
Notes to Financial Statements (unaudited)(continued)
(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 the effective interest method. Withholding taxes on foreign dividends have been provided for in accordance with the Fund's understanding of 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) 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 incurred by the Company that do not specifically relate to an individual fund are generally allocated to the Funds within the Company on a pro rata basis. Expenses, excluding class specific expenses, are allocated to each class of shares based upon the relative proportion of net assets at the beginning of the day. Class A, B, C, F, P, R2 and R3 shares bear their class specific share of all expenses and fees relating to the Fund's 12b-1 Distribution Plan.
(f) 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 in Net realized gain (loss) on investments and foreign currency related transactions on the Fund's 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 these securities has dec lined, the Fund may incur a loss upon disposition of the securities.
(h) Fair Value Measurements–The Fund adopted Financial Accounting Standards Board ("FASB") Statement No. 157, Fair Value Measurements ("SFAS 157"), effective December 1, 2007. In accordance with SFAS 157, fair value is defined as the price that the Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. SFAS 157 established a three-tier hierarchy 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 r isk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the
22
Notes to Financial Statements (unaudited)(continued)
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 – 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).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used as of May 31, 2008 in valuing the Fund's investments carried at value:
| Valuation Inputs | | Investments in
Securities | | Other Financial
Instruments | |
| Level 1 – Quoted Prices | | $ | 729,281,560 | | | $ | - | | |
Level 2 – Other Significant
Observable Inputs | | | 58,842,078 | | | | - | | |
| Total | | $ | 788,123,638 | | | $ | - | | |
3. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management Fees
The Company 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 average daily net assets at the following annual rates:
| First $1 billion | | | .80 | % | |
| Next $1 billion | | | .75 | % | |
| Next $1 billion | | | .70 | % | |
| Over $3 billion | | | .65 | % | |
For the six months ended May 31, 2008, the effective management fee paid to Lord Abbett was at an annualized rate of .80% of the Fund's average daily net assets.
23
Notes to Financial Statements (unaudited)(continued)
For the period April 1, 2008 through March 31, 2009, Lord Abbett has contractually agreed to reimburse the Fund to the extent necessary so that each class' total annual operating expenses do not exceed the following annual rates:
| Class | | % of Average
Daily Net Assets | |
| A | | | 1.55 | % | |
| B | | | 2.20 | % | |
| C | | | 2.20 | % | |
| F | | | 1.30 | % | |
| I | | | 1.20 | % | |
| P | | | 1.65 | % | |
| R2 | | | 1.80 | % | |
| R3 | | | 1.70 | % | |
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.
The Fund, along with certain other funds managed by Lord Abbett (the "Underlying Funds") has entered into Servicing Arrangements with Lord Abbett Diversified Equity Strategy Fund and Lord Abbett Growth & Income 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 each Fund of Funds in proportion to the average daily value of Underlying Fund shares owned by each Fund of Funds. Amounts paid pursuant to the Servicing Arrangements 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, F, P, R2 and R3 shares pursuant to Rule 12b-1 under the Act, which provides for the payment of ongoing distribution and service fees to Lord Abbett Distributor LLC ("Distributor"), an affiliate of Lord Abbett. The fees are accrued daily at annual rates based upon average daily net assets as follows:
| Fees* | | Class A | | Class B | | Class C | | Class F | | Class P | | Class R2 | | Class R3 | |
| Service | | | .25 | % | | | .25 | % | | | .25 | % | | | - | | | | .20 | % | | | .25 | % | | | .25 | % | |
| Distribution | | | .10 | % | | | .75 | % | | | .75 | % | | | .10 | % | | | .25 | % | | | .35 | % | | | .25 | % | |
* The Fund may designate a portion of the aggregate fee as attributable to service activities for purposes of calculating Financial Industry Regulatory Authority, Inc. ("FINRA") sales charge limitations.
Class I 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 May 31, 2008:
Distributor
Commissions | | Dealers'
Concessions | |
| $ | 83,947 | | | $ | 450,302 | | |
Distributor received CDSCs of $1,594 and $763 for Class A and Class C shares, respectively, for the six months ended May 31, 2008.
Two Directors and certain of the Fund's officers have an interest in Lord Abbett.
24
Notes to Financial Statements (unaudited)(continued)
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 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.
The tax character of distributions paid during the six months ended May 31, 2008 and the fiscal year ended November 30, 2007 was as follows:
| | | Six Months Ended
5/31/2008
(unaudited) | | Year Ended
11/30/2007 | |
| Distributions paid from: | |
| Ordinary income | | $ | 40,691,670 | | | $ | - | | |
| Net long-term capital gains | | | 60,274,081 | | | | 75,503,887 | | |
| Total distributions paid | | $ | 100,965,751 | | | $ | 75,503,887 | | |
As of May 31, 2008, the aggregate unrealized security gains and losses based on cost for U.S. Federal income tax purposes were as follows:
| Tax cost | | $ | 698,224,972 | | |
| Gross unrealized gain | | | 99,359,802 | | |
| Gross unrealized loss | | | (9,461,136 | ) | |
| Net unrealized security gain | | $ | 89,898,666 | | |
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 May 31, 2008 are as follows:
| Purchases | | Sales | |
| $ | 490,838,759 | | | $ | 528,392,413 | | |
There were no purchases or sales of U.S. Government securities for the six months ended May 31, 2008.
6. DIRECTORS' REMUNERATION
The Company's officers and the two Directors who are associated with Lord Abbett do not receive any compensation from the Company for serving in such capacities. Outside Directors' fees are allocated among all Lord Abbett-sponsored funds based on the net assets of each fund. There is
25
Notes to Financial Statements (unaudited)(continued)
an equity based plan available to all outside Directors under which outside 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.
7. EXPENSE REDUCTIONS
The Company has entered into arrangements with the Fund's 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 May 31, 2008, there were no loans outstanding pursuant to this Facility nor was the Facility utilized at any time during the six months ended May 31, 2008.
9. CUSTODIAN AND ACCOUNTING AGENT
State Street Bank & Trust Company ("SSB") is the Company'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. 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. The Fund has particular risks associated with growth stocks. Growth companies may grow faster than other companies, which may result in more volatility in their stock prices. 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 largely in mid-sized company stocks, which may be less able to weather economic shifts or other adverse developments than larger, more established companies.
These factors can affect the Fund's performance.
26
Notes to Financial Statements (unaudited)(continued)
11. SUMMARY OF CAPITAL TRANSACTIONS
Transactions in shares of beneficial interest are as follows:
| | | Six Months Ended
May 31, 2008
(unaudited) | | Year Ended
November 30, 2007 | |
| Class A Shares | | Shares | | Amount | | Shares | | Amount | |
| Shares sold | | | 1,548,978 | | | $ | 30,988,777 | | | | 2,921,931 | | | $ | 64,102,124 | | |
| Converted from Class B* | | | 258,766 | | | | 5,115,425 | | | | 180,354 | | | | 4,029,782 | | |
| Reinvestment of distributions | | | 3,424,571 | | | | 71,231,176 | | | | 2,593,981 | | | | 52,995,047 | | |
| Shares reacquired | | | (3,002,378 | ) | | | (59,753,986 | ) | | | (7,858,118 | ) | | | (171,440,080 | ) | |
| Increase (decrease) | | | 2,229,937 | | | $ | 47,581,392 | | | | (2,161,852 | ) | | $ | (50,313,127 | ) | |
| Class B Shares | |
| Shares sold | | | 286,041 | | | $ | 5,329,808 | | | | 483,092 | | | $ | 9,996,550 | | |
| Reinvestment of distributions | | | 611,884 | | | | 11,852,191 | | | | 450,203 | | | | 8,702,440 | | |
| Shares reacquired | | | (561,635 | ) | | | (10,280,297 | ) | | | (1,037,995 | ) | | | (21,439,020 | ) | |
| Converted to Class A* | | | (278,223 | ) | | | (5,115,425 | ) | | | (191,370 | ) | | | (4,029,782 | ) | |
| Increase (decrease) | | | 58,067 | | | $ | 1,786,277 | | | | (296,070 | ) | | $ | (6,769,812 | ) | |
| Class C Shares | |
| Shares sold | | | 471,994 | | | $ | 8,796,631 | | | | 693,058 | | | $ | 14,260,536 | | |
| Reinvestment of distributions | | | 485,078 | | | | 9,391,112 | | | | 334,039 | | | | 6,453,629 | | |
| Shares reacquired | | | (605,786 | ) | | | (11,120,620 | ) | | | (1,079,681 | ) | | | (22,349,221 | ) | |
| Increase (decrease) | | | 351,286 | | | $ | 7,067,123 | | | | (52,584 | ) | | $ | (1,635,056 | ) | |
| Class F Shares | | | | Period Ended
November 30, 2007† | |
| Shares sold | | | 876 | | | $ | 16,996 | | | | 422 | | | $ | 10,049 | | |
| Reinvestment of distributions | | | 58 | | | | 1,196 | | | | - | | | | - | | |
| Increase | | | 934 | | | $ | 18,192 | | | | 422 | | | $ | 10,049 | | |
| Class I Shares | | | | Year Ended
November 30, 2007 | |
| Shares sold | | | 331,295 | | | $ | 7,217,697 | | | | 531,717 | | | $ | 12,176,447 | | |
| Reinvestment of distributions | | | 112,404 | | | | 2,417,818 | | | | 84,080 | | | | 1,763,992 | | |
| Shares reacquired | | | (17,003 | ) | | | (339,554 | ) | | | (754,907 | ) | | | (17,728,966 | ) | |
| Increase (decrease) | | | 426,696 | | | $ | 9,295,961 | | | | (139,110 | ) | | $ | (3,788,527 | ) | |
| Class P Shares | |
| Shares sold | | | 134,271 | | | $ | 2,673,970 | | | | 186,887 | | | $ | 4,162,097 | | |
| Reinvestment of distributions | | | 93,553 | | | | 1,943,096 | | | | 65,672 | | | | 1,341,678 | | |
| Shares reacquired | | | (160,386 | ) | | | (3,145,559 | ) | | | (271,510 | ) | | | (5,994,558 | ) | |
| Increase (decrease) | | | 67,438 | | | $ | 1,471,507 | | | | (18,951 | ) | | $ | (490,783 | ) | |
27
Notes to Financial Statements (unaudited)(concluded)
| | | Six Months Ended
May 31, 2008
(unaudited) | | Period Ended
November 30, 2007† | |
| Class R2 Shares | | Shares | | Amount | | Shares | | Amount | |
| Shares sold | | | 4,825 | | | $ | 92,970 | | | | 420 | | | $ | 10,000 | | |
| Reinvestment of distributions | | | 58 | | | | 1,196 | | | | - | | | | - | | |
| Increase | | | 4,883 | | | $ | 94,166 | | | | 420 | | | $ | 10,000 | | |
| Class R3 Shares | |
| Shares sold | | | 4,156 | | | $ | 83,089 | | | | 420 | | | $ | 10,000 | | |
| Reinvestment of distributions | | | 58 | | | | 1,196 | | | | - | | | | - | | |
| Shares reacquired | | | (20 | ) | | | (403 | ) | | | - | | | | - | | |
| Increase | | | 4,194 | | | $ | 83,882 | | | | 420 | | | $ | 10,000 | | |
* Automatic conversion of Class B shares occurs approximately eight years after the initial purchase date.
† For the period September 28, 2007 (commencement of investment operations) to November 30, 2007.
12. RECENT ACCOUNTING PRONOUNCEMENTS
In June 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. Effective May 31, 2008, the Fund adopted FIN 48. The adoption of FIN 48 has not resulted in a material impact on the Fund's net assets, results of operations and financial statement disclosures. The Fund files U.S. Federal and various state tax returns. No income tax returns are currently under examination. The Fund's tax returns remain open for examination for the 2004 through 2007 tax fiscal year ends.
In March 2008, FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities ("SFAS 161"). SFAS 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. Management is currently evaluating the impact the adoption of SFAS 161 will have on the Fund's financial statement disclosures.
28
Approval of Advisory Contract
At meetings held on December 12 and 13, 2007, the Board, including all of the Directors who are not interested persons of the Fund or Lord Abbett, 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 ended September 30, 2007, (2) information on the effective management fee rates and expense ratios for one or more groups of funds with similar objectives and of 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 an d 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 in relation to 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 was in the third quintile of its performance universe for the nine-month, one-year, and ten-year periods and in the fourth quintile for the three-year and five-year periods. The Board also observed that the investment performance was below that of the Lipper Mid-Cap Growth Index for the nine-month, one-year, three-year, and five-year periods and above that of the Index for the ten-year period.
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 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 observed that Lord Abbett had made
29
significant changes in recent years to the investment management personnel responsible for the Fund, in that in 2005 it had hired Bruce Bartlett as Director of Growth Equities, with supervisory responsibility over the growth investment disciplines at Lord Abbett, and in 2006 it had hired Rick Ruvkun to be a 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 levels of the Fund and the expense levels of the peer expense group. It also considered the amount and nature of the fees paid by shareholders. The Board noted that it and Lord Abbett had agreed to an expense reimbursement agreement that limited the Class A total expense ratio to not more than 1.55%, the Class B and Class C total expense ratios to not more than 2.20%, the Class F total expense ratio to not more than 1.30%, the Class I total expense ratio to not more than 1.20%, the Class P total expense ratio to not more than 1.65%, the Class R2 total expense ratio to not more than 1.80%, and the Class R3 total expense ratio to not more than 1.70%, and that Lord Abbett proposed to enter into a new expense reimbursement agreement with the same terms. The Board observed that the contractual and actual management and adminis trative services fees were approximately thirteen basis points above the median of the peer group. The Board observed that at September 30, 2007 the total expense ratio of Class A was approximately twenty-eight basis points above the median of the peer group, the total expense ratios of Class B and Class C were approximately sixteen basis points above the median of the peer group, the total expense ratio of Class F was approximately seventeen basis points above the median of the peer group, the total expense ratio of Class I was approximately twenty-two basis points above the median of the peer group, the total expense ratio of Class P was approximately nine basis points above the median of the peer group, the total expense ratio of Class R2 was approximately twenty-four basis points above the median of the peer group, and the total expense ratio of Class R3 was approximately fourteen basis points above the median of the peer group. The Board also observed that the Fund had a relatively high level of transfe r agent and shareholder servicing costs, due to its relatively small average account size.
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.
30
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 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 Funds, and receives a portion of the sales charges on sales and redemptions of some classes of shares. The Board observed that, in addition, Lord Abbett accrues certain benefits for i ts business of providing investment advice to clients other than the Lord Abbett Funds, but that that business also benefits the Funds. The Board also noted that Lord Abbett, as disclosed in the prospectuses of the Lord Abbett Funds, has entered into revenue sharing arrangements with certain entities that distribute shares of the Funds.
Alternative Arrangements. The Board considered whether, instead of approving the 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.
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.
31
Householding
The Company 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 each 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 (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 duplicating fee to the SEC's Public Reference Room, Washington, DC 20549-0102; or (iii) sending your request electronically to publicinfo@sec.gov.
32
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 Research Fund, Inc.
Lord Abbett Growth Opportunities Fund
LAGOF-3-0508
(7/08)
2008
LORD ABBETT SEMIANNUAL REPORT
Lord Abbett
Large Cap Core Fund
Small Cap Value Fund
For the six-month period ended May 31, 2008
Lord Abbett Research Fund
Lord Abbett Large Cap Core Fund and
Lord Abbett Small Cap Value Fund
Semiannual Report
For the six-month period ended May 31, 2008
Dear Shareholders: We are pleased to provide you with this overview of the Lord Abbett Large Cap Core Fund's and the Lord Abbett Small Cap Value Fund's performance for the six-month period ended May 31, 2008. On this page and the following pages, we discuss the major factors that influenced performance. For detailed and more timely information about the Funds, please visit our Website at www.lordabbett.com, where you also can access the quarterly commentaries by the Funds' 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 888-522-2388 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.
Best regards,
Robert S. Dow
Chairman
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.
Q: What were the overall market conditions during the six months ended May 31, 2008?
A: The period was characterized by market volatility as the ongoing fallout from the subprime lending debacle and subsequent liquidity crisis continued to affect the broader markets. Although the S&P 500® Index,1 which returned -9.64% for a six-month period ended April 30, recovered some of its lost ground in May, it still returned only -4.47% for the six-month period ended May 31, 2008.
1
Most equity asset classes and investment styles returned negative results for the period. Growth stocks (as measured by the Russell 3000® Growth Index2) generally fared better than value stocks (as measured by the Russell 3000® Value Index3), although both indexes were negative at -2.37% and -5.02%, respectively. Mid cap stocks (as measured by the Russell Midcap® Index4) were the only asset class in positive territory, returning 0.14%, compared with a -3.78% return for larg e cap stocks (as measured by the Russell 1000® Index5) and a -1.87% return for small cap stocks (as measured by the Russell 2000® Index6).
Lord Abbett Large Cap Core Fund
Q: How did the Large Cap Core Fund perform during the six-month period ended May 31, 2008?
A: The Fund returned -3.29%, reflecting performance at the net asset value (NAV) of Class A shares with all distributions reinvested, compared to its benchmark, the Russell 1000® Index, which returned -3.78% over the same period.
Q: What were the most significant factors affecting performance?
A: The strongest contributors to the Fund's performance relative to its benchmark for the six-month period were the materials and processing sector, the consumer discretionary sector, and the healthcare sector.
Among the individual holdings that contributed to performance were materials and processing holding Monsanto Co. (the Fund's number-one contributor), a provider of technology-based solutions and agricultural products for growers and downstream customers in the agricultural markets; consumer discretionary holding Activision, Inc., a publisher of interactive entertainment software; and technology holding Qualcomm, Inc., a developer of digital wireless communications products and services based on the Company's CDMA digital technology.
The most significant detractors from the Fund's performance relative to its benchmark were the other energy sector, the producer durables sector, and the integrated oils sector. The Fund's underweight positions in the other energy sector and the integrated oils sector detracted from performance. Holdings in the other energy sector include oil service companies, as well as smaller exploration and production companies, and independent refiners.
Among the individual holdings that detracted from performance were healthcare holding Merck & Co., Inc. (the Fund's number-one detractor), a global pharmaceutical company; producer durables holding Nokia Corp., a company that designs and produces mobile phones; and other sector (diversified corporations) holding General Electric Co., a provider of jet engines, power plant turbines, locomotives, medical imaging equipment, and private label credit cards.
2
The Fund's portfolio is actively managed and, therefore, its holdings and the weightings of a particular issuer or particular sector as a percentage of portfolio assets are subject to change. Sectors may include many industries.
Lord Abbett Small Cap Value Fund
Q: How did the Small Cap Value Fund perform during the six-month period ended May 31, 2008?
A: The Fund returned 0.62%, reflecting performance at the net asset value (NAV) of Class A shares with all distributions reinvested, compared to its benchmark, the Russell 2000® Value Index,7 which returned -1.12% over the same period.
Q: What were the most significant factors affecting performance?
A: The greatest contributors to the Fund's performance relative to its benchmark for the six-month period were the financial services sector (owing to an underweight position), the producer durables sector, and (owing to an overweight position) the other energy sector (which includes oil service companies, as well as smaller exploration and production companies, and independent refiners).
Among the individual holdings that contributed to performance were other energy holdings Oil States International, Inc. (the Fund's number-one contributor), a provider of specialty products and services to oil and gas drilling and production companies, and Petrohawk Energy Corp., an oil and gas company; and producer durables holding Nordson Corp., a maker of systems that apply adhesives, sealants, and coatings to products during manufacturing operations.
The most significant detractors from the Fund's relative performance were the utilities sector and, owing to an overweight position in both, the other sector (diversified corporations) and the materials and processing sector.
Among the individual holdings that detracted from performance were technology holding Macrovision Solutions Corp. (the Fund's number-one detractor), a developer of technologies to prevent the illicit duplication, reception or use of video and audio programs and computer software. In addition, auto and transportation holding AAR Corp., a supplier of aftermarket products and services to the global aviation/aerospace industry, disappointed; and utilities holding Black Hills Corp., an electric power and energy provider in western South Dakota, northeastern Wyoming, and southeastern Montana, took away from performance.
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.
3
Note: Class A shares purchased subject to a front-end sales charge have no contingent deferred sales charge (CDSC). However, certain purchases of Class A shares made without a front-end sales charge may be subject to a CDSC of 1% if the shares are redeemed before the first day of the month in which the one-year anniversary of the purchase falls. Please see the prospectus for more information on redemptions that may be subject to a CDSC.
A prospectus contains important information about a fund, including its investment objectives, risks, charges, and ongoing expenses, which an investor 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 888-522-2388 or visit our Website at www.lordabbett.com. Read the prospectus carefully before investing.
1 The S&P 500® Index is widely regarded as the standard for measuring large cap U.S. stock market performance and includes a representative sample of leading companies in leading industries.
2 The Russell 3000® Growth Index measures the performance of those Russell 3000® Index companies with higher price-to-book ratios and higher forecasted growth values. The stocks in this index are also members of either the Russell 1000® Growth or the Russell 2000® Growth indexes.
3 The Russell 3000® Value Index measures the performance of those Russell 3000® Index companies with lower price-to-book ratios and lower forecasted growth values. The stocks in this index are also members of either the Russell 1000® Value or the Russell 2000® Value indexes.
4 The Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which represent approximately 25% of the total market capitalization of the Russell 1000® Index.
5 The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000® Index.
6 The Russell 2000® Index is composed of 2,000 securities with market values ranging from $25 million to $275 million. The Growth Index is comprised of securities in the Russell 2000® Index with higher price-to-book ratios and higher forecasted growth.
7 The Russell 2000® Value Index measures the performance of those Russell 2000® companies with lower price-to-book ratios and lower 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 888-522-2388 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 Funds offer several classes of shares with distinct pricing options. For a full description of the differences in pricing alternatives, please see each Fund's prospectus.
The views of each Fund's management and the portfolio holdings described in this report are as of May 31, 2008; these views and portfolio holdings may have changed subsequent to this date, and they do not guarantee the future performance of the markets or each 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 Funds, please see each Fund's prospectus.
During certain periods shown, expense reimbursements were in place for the Large Cap Core Fund. Without such expense reimbursements, the Funds' returns would have been lower.
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.
4
Expense Examples
As a shareholder of a 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 each 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 (December 1, 2007 through May 31, 2008).
Actual Expenses
For each class of each Fund, the first line of the applicable table on the following pages 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 12/1/07 – 5/31/08" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
For each class of each Fund, the second line of the applicable table on the following pages 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 each 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.
5
Large Cap Core Fund
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† | |
| | | 12/1/07 | | 5/31/08 | | 12/1/07 –
5/31/08 | |
| Class A | |
| Actual | | $ | 1,000.00 | | | $ | 967.10 | | | $ | 6.39 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,018.51 | | | $ | 6.56 | | |
| Class B | |
| Actual | | $ | 1,000.00 | | | $ | 964.00 | | | $ | 9.57 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,015.35 | | | $ | 9.82 | | |
| Class C | |
| Actual | | $ | 1,000.00 | | | $ | 964.10 | | | $ | 9.57 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,015.25 | | | $ | 9.82 | | |
| Class F | |
| Actual | | $ | 1,000.00 | | | $ | 968.50 | | | $ | 5.12 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,019.81 | | | $ | 5.25 | | |
| Class I | |
| Actual | | $ | 1,000.00 | | | $ | 969.20 | | | $ | 4.68 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,020.26 | | | $ | 4.80 | | |
| Class P | |
| Actual | | $ | 1,000.00 | | | $ | 966.60 | | | $ | 6.88 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,018.00 | | | $ | 7.06 | | |
| Class R2 | |
| Actual | | $ | 1,000.00 | | | $ | 966.10 | | | $ | 7.47 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,017.42 | | | $ | 7.67 | | |
| Class R3 | |
| Actual | | $ | 1,000.00 | | | $ | 966.80 | | | $ | 6.88 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,018.00 | | | $ | 7.06 | | |
† For each class of the Fund, expenses are equal to the annualized expense ratio for such class (1.30% for Class A, 1.95% for Classes B and C, 1.04% for Class F, 0.95% for Class I, 1.40% for Class P, 1.52% for Class R2 and 1.40% for Class R3) multiplied by the average account value over the period, multiplied by 183/366 (to reflect one-half year period).
Portfolio Holdings Presented by Sector
May 31, 2008
| Sector* | | %** | |
| Auto & Transportation | | | 0.66 | % | |
| Consumer Discretionary | | | 9.82 | % | |
| Consumer Staples | | | 12.43 | % | |
| Financial Services | | | 13.67 | % | |
| Healthcare | | | 16.20 | % | |
| Integrated Oils | | | 5.82 | % | |
| Materials & Processing | | | 6.74 | % | |
| Sector* | | %** | |
| Other | | | 2.43 | % | |
| Other Energy | | | 3.18 | % | |
| Producer Durables | | | 6.66 | % | |
| Technology | | | 12.09 | % | |
| Utilities | | | 7.17 | % | |
| Short-Term Investment | | | 3.13 | % | |
| Total | | | 100.00 | % | |
* A sector may comprise several industries.
** Represents percent of total investments.
6
Small Cap Value Fund
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† | |
| | | 12/1/07 | | 5/31/08 | | 12/1/07 –
5/31/08 | |
| Class A | |
| Actual | | $ | 1,000.00 | | | $ | 1,006.20 | | | $ | 6.17 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,018.87 | | | $ | 6.21 | | |
| Class B | |
| Actual | | $ | 1,000.00 | | | $ | 1,002.50 | | | $ | 9.66 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,015.35 | | | $ | 9.72 | | |
| Class C | |
| Actual | | $ | 1,000.00 | | | $ | 1,002.40 | | | $ | 9.66 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,015.36 | | | $ | 9.72 | | |
| Class F | |
| Actual | | $ | 1,000.00 | | | $ | 1,007.00 | | | $ | 5.27 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,019.74 | | | $ | 5.30 | | |
| Class I | |
| Actual | | $ | 1,000.00 | | | $ | 1,007.50 | | | $ | 4.67 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,020.37 | | | $ | 4.70 | | |
| Class P | |
| Actual | | $ | 1,000.00 | | | $ | 1,005.00 | | | $ | 6.92 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,018.11 | | | $ | 6.96 | | |
| Class R2 | |
| Actual | | $ | 1,000.00 | | | $ | 1,096.80 | | | $ | 2.94 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,022.24 | | | $ | 2.84 | | |
| Class R3 | |
| Actual | | $ | 1,000.00 | | | $ | 1,096.80 | | | $ | 2.79 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,022.36 | | | $ | 2.69 | | |
† For each class of the Fund, expenses are equal to the annualized expense ratio for such class (1.23% for Class A, 1.93% for Classes B and C, 1.05% for Class F, 0.93% for Class I, 1.38% for Class P, 1.51% for Class R2 and 1.43% for Class R3) multiplied by the average account value over the period, multiplied by 183/366 for Class A, B, C, F, I and P (to reflect one-half year period) and multiplied by 68/366 for Class R2 and R3 (to reflect the period March 25, 2008, commencement of investment operations, to May 31, 2008).
Portfolio Holdings Presented by Sector
May 31, 2008
| Sector* | | %** | |
| Auto & Transportation | | | 6.68 | % | |
| Consumer Discretionary | | | 2.97 | % | |
| Consumer Staples | | | 1.09 | % | |
| Financial Services | | | 7.95 | % | |
| Healthcare | | | 7.77 | % | |
| Materials & Processing | | | 19.40 | % | |
| Other | | | 3.00 | % | |
| Sector* | | %** | |
| Other Energy | | | 10.16 | % | |
| Producer Durables | | | 12.08 | % | |
| Technology | | | 13.33 | % | |
| Utilities | | | 11.87 | % | |
| Short-Term Investment | | | 3.70 | % | |
| Total | | | 100.00 | % | |
* A sector may comprise several industries.
** Represents percent of total investments.
7
Schedule of Investments (unaudited)
LARGE CAP CORE FUND May 31, 2008
| Investments | | Shares | | Value
(000) | |
| COMMON STOCKS 96.57% | |
| Aerospace 3.72% | |
| Boeing Co. (The) | | | 66,396 | | | $ | 5,496 | | |
| Lockheed Martin Corp. | | | 105,690 | | | | 11,567 | | |
| Raytheon Co. | | | 153,200 | | | | 9,783 | | |
| United Technologies Corp. | | | 201,000 | | | | 14,279 | | |
| Total | | | 41,125 | | |
| Agriculture, Fishing & Ranching 2.93% | |
| Monsanto Co. | | | 254,200 | | | | 32,385 | | |
| Banks 6.03% | |
| Bank of America Corp. | | | 290,948 | | | | 9,895 | | |
| JPMorgan Chase & Co. | | | 414,628 | | | | 17,829 | | |
| Marshall & Ilsley Corp. | | | 78,200 | | | | 1,817 | | |
PNC Financial Services
Group, Inc. (The) | | | 207,000 | | | | 13,300 | | |
| SunTrust Banks, Inc. | | | 62,600 | | | | 3,268 | | |
| U.S. Bancorp | | | 201,700 | | | | 6,695 | | |
| Wachovia Corp. | | | 72,900 | | | | 1,735 | | |
| Wells Fargo & Co. | | | 442,500 | | | | 12,200 | | |
| Total | | | 66,739 | | |
| Beverage: Brewers 0.43% | |
| Anheuser-Busch Cos., Inc. | | | 82,600 | | | | 4,746 | | |
| Beverage: Soft Drinks 2.57% | |
| Coca-Cola Co. (The) | | | 267,500 | | | | 15,317 | | |
| PepsiCo, Inc. | | | 191,300 | | | | 13,066 | | |
| Total | | | 28,383 | | |
| Biotechnology Research & Production 3.68% | |
| Amgen Inc.* | | | 203,300 | | | | 8,951 | | |
| Baxter International, Inc. | | | 107,087 | | | | 6,543 | | |
| Celgene Corp.* | | | 173,500 | | | | 10,559 | | |
| Genzyme Corp.* | | | 129,000 | | | | 8,832 | | |
| ImClone Systems Inc.* | | | 133,178 | | | | 5,804 | | |
| Total | | | 40,689 | | |
| Investments | | Shares | | Value
(000) | |
| Chemicals 1.44% | |
| Praxair, Inc. | | | 167,800 | | | $ | 15,951 | | |
| Communications & Media 0.27% | |
| Time Warner, Inc. | | | 188,300 | | | | 2,990 | | |
| Communications Technology 4.23% | |
| Cisco Systems, Inc.* | | | 530,100 | | | | 14,164 | | |
| Corning, Inc. | | | 401,500 | | | | 10,977 | | |
| Harris Corp. | | | 47,001 | | | | 3,092 | | |
| QUALCOMM Inc. | | | 383,600 | | | | 18,620 | | |
| Total | | | 46,853 | | |
Computer Services, Software &
Systems 3.13% | |
| Adobe Systems Inc.* | | | 150,353 | | | | 6,624 | | |
| Microsoft Corp. | | | 585,800 | | | | 16,590 | | |
| Oracle Corp.* | | | 501,000 | | | | 11,443 | | |
| Total | | | 34,657 | | |
| Computer Technology 2.87% | |
| Hewlett-Packard Co. | | | 313,913 | | | | 14,773 | | |
International Business
Machines Corp. | | | 129,500 | | | | 16,761 | | |
| NVIDIA Corp.* | | | 9,950 | | | | 246 | | |
| Total | | | 31,780 | | |
| Consumer Electronics 3.12% | |
| Activision, Inc.* | | | 575,654 | | | | 19,428 | | |
| Electronic Arts Inc.* | | | 216,400 | | | | 10,863 | | |
| Yahoo! Inc.* | | | 159,700 | | | | 4,274 | | |
| Total | | | 34,565 | | |
| Copper 0.22% | |
Freeport-McMoRan
Copper & Gold, Inc. | | | 21,265 | | | | 2,461 | | |
| Diversified Financial Services 3.88% | |
Bank of New York
Mellon Corp. (The) | | | 332,618 | | | | 14,812 | | |
| Citigroup, Inc. | | | 222,000 | | | | 4,860 | | |
See Notes to Financial Statements.
8
Schedule of Investments (unaudited)(continued)
LARGE CAP CORE FUND May 31, 2008
| Investments | | Shares | | Value
(000) | |
| Diversified Financial Services (continued) | |
Goldman Sachs
Group, Inc. (The) | | | 22,200 | | | $ | 3,916 | | |
| Merrill Lynch & Co., Inc. | | | 179,100 | | | | 7,866 | | |
| MetLife Inc. | | | 88,900 | | | | 5,337 | | |
| Morgan Stanley | | | 138,400 | | | | 6,121 | | |
| Total | | | 42,912 | | |
| Drug & Grocery Store Chains 0.61% | |
| Kroger Co. (The) | | | 174,400 | | | | 4,820 | | |
| Walgreen Co. | | | 52,600 | | | | 1,895 | | |
| Total | | | 6,715 | | |
| Drugs & Pharmaceuticals 6.89% | |
| Abbott Laboratories | | | 202,700 | | | | 11,422 | | |
Amylin Pharmaceuticals,
Inc.* | | | 97,900 | | | | 3,110 | | |
| Bristol-Myers Squibb Co. | | | 148,800 | | | | 3,391 | | |
| Eli Lilly & Co. | | | 165,300 | | | | 7,958 | | |
| Gilead Sciences, Inc.* | | | 253,224 | | | | 14,008 | | |
| Johnson & Johnson | | | 136,000 | | | | 9,077 | | |
| Merck & Co., Inc. | | | 300,100 | | | | 11,692 | | |
| Mylan Inc. | | | 24,300 | | | | 324 | | |
| Pfizer Inc. | | | 408,000 | | | | 7,899 | | |
| Schering-Plough Corp. | | | 358,900 | | | | 7,322 | | |
| Total | | | 76,203 | | |
| Electrical Equipment & Components 0.98% | |
| Emerson Electric Co. | | | 185,634 | | | | 10,800 | | |
| Electronics: Medical Systems 0.52% | |
| Medtronic, Inc. | | | 114,200 | | | | 5,787 | | |
Electronics:
Semi-Conductors/Components 1.38% | |
| Intel Corp. | | | 475,100 | | | | 11,013 | | |
| Texas Instruments, Inc. | | | 131,800 | | | | 4,281 | | |
| Total | | | 15,294 | | |
| Electronics: Technology 0.43% | |
| General Dynamics Corp. | | | 51,454 | | | | 4,741 | | |
| Investments | | Shares | | Value
(000) | |
| Energy: Miscellaneous 0.46% | |
| Valero Energy Corp. | | | 100,100 | | | $ | 5,089 | | |
| Entertainment 0.37% | |
| Walt Disney Co. (The) | | | 122,437 | | | | 4,114 | | |
Financial Data Processing Services &
Systems 0.31% | |
| Western Union Co. | | | 146,700 | | | | 3,468 | | |
| Financial: Miscellaneous 0.77% | |
| Fannie Mae | | | 315,400 | | | | 8,522 | | |
| Foods 3.65% | |
| Campbell Soup Co. | | | 108,195 | | | | 3,622 | | |
| Kellogg Co. | | | 167,400 | | | | 8,673 | | |
| Kraft Foods, Inc. Class A | | | 442,200 | | | | 14,363 | | |
| Wm. Wrigley Jr. Co. | | | 178,300 | | | | 13,752 | | |
| Total | | | 40,410 | | |
| Gold 0.71% | |
Barrick Gold Corp.
(Canada)(a) | | | 195,458 | | | | 7,875 | | |
| Health & Personal Care 3.65% | |
| CVS Caremark Corp. | | | 473,748 | | | | 20,272 | | |
| Express Scripts, Inc.* | | | 198,100 | | | | 14,285 | | |
Medco Health
Solutions, Inc.* | | | 118,002 | | | | 5,717 | | |
WebMD Health
Corp. Class A* | | | 4,700 | | | | 141 | | |
| Total | | | 40,415 | | |
| Healthcare Facilities 0.58% | |
| Quest Diagnostics, Inc. | | | 127,656 | | | | 6,435 | | |
Identification Control & Filter
Devices 0.24% | |
Agilent Technologies,
Inc.* | | | 71,600 | | | | 2,677 | | |
| Insurance: Life 0.44% | |
| Prudential Financial, Inc. | | | 65,500 | | | | 4,893 | | |
See Notes to Financial Statements.
9
Schedule of Investments (unaudited)(continued)
LARGE CAP CORE FUND May 31, 2008
| Investments | | Shares | | Value
(000) | |
| Insurance: Multi-Line 2.19% | |
American International
Group, Inc. | | | 138,392 | | | $ | 4,982 | | |
| Aon Corp. | | | 308,800 | | | | 14,572 | | |
Hartford Financial
Services Group, Inc. (The) | | | 66,100 | | | | 4,698 | | |
| Total | | | 24,252 | | |
| Jewelry, Watches & Gemstones 0.11% | |
| Tiffany & Co. | | | 24,100 | | | | 1,182 | | |
| Leisure Time 0.55% | |
| Carnival Corp. Unit | | | 106,300 | | | | 4,258 | | |
Royal Caribbean
Cruises Ltd. | | | 62,900 | | | | 1,870 | | |
| Total | | | 6,128 | | |
| Machinery: Construction & Handling 0.35% | |
| Caterpillar Inc. | | | 47,000 | | | | 3,884 | | |
Machinery: Oil Well Equipment &
Services 2.39% | |
| Baker Hughes, Inc. | | | 83,543 | | | | 7,404 | | |
Schlumberger Ltd.
(Netherlands Antilles)(a) | | | 188,100 | | | | 19,022 | | |
| Total | | | 26,426 | | |
Medical & Dental Instruments &
Supplies 0.83% | |
| St. Jude Medical, Inc.* | | | 226,000 | | | | 9,210 | | |
| Milling: Fruit & Grain Processing 1.41% | |
Archer Daniels
Midland Co. | | | 393,900 | | | | 15,638 | | |
| Miscellaneous: Consumer Staples 0.22% | |
| Diageo plc ADR | | | 31,381 | | | | 2,467 | | |
| Multi-Sector Companies 2.43% | |
| General Electric Co. | | | 640,200 | | | | 19,667 | | |
Honeywell International,
Inc. | | | 120,100 | | | | 7,160 | | |
| Total | | | 26,827 | | |
| Investments | | Shares | | Value
(000) | |
| Oil: Crude Producers 0.33% | |
| XTO Energy Inc. | | | 56,750 | | | $ | 3,610 | | |
| Oil: Integrated Domestic 1.05% | |
| ConocoPhillips | | | 69,200 | | | | 6,442 | | |
| Hess Corp. | | | 20,700 | | | | 2,542 | | |
Occidental Petroleum
Corp. | | | 28,900 | | | | 2,657 | | |
| Total | | | 11,641 | | |
| Oil: Integrated International 4.75% | |
| Chevron Corp. | | | 188,000 | | | | 18,640 | | |
| ExxonMobil Corp. | | | 365,815 | | | | 32,470 | | |
| Marathon Oil Corp. | | | 28,300 | | | | 1,454 | | |
| Total | | | 52,564 | | |
| Restaurants 0.03% | |
| Darden Restaurants, Inc. | | | 9,600 | | | | 329 | | |
| Retail 4.83% | |
| Best Buy Co., Inc. | | | 176,300 | | | | 8,231 | | |
| GameStop Corp. Class A* | | | 65,800 | | | | 3,264 | | |
| Home Depot, Inc. (The) | | | 129,300 | | | | 3,538 | | |
| Kohl's Corp.* | | | 167,100 | | | | 7,486 | | |
| Macy's, Inc. | | | 78,200 | | | | 1,851 | | |
| Target Corp. | | | 133,700 | | | | 7,134 | | |
| Wal-Mart Stores, Inc. | | | 380,800 | | | | 21,987 | | |
| Total | | | 53,491 | | |
| Soaps & Household Chemicals 4.10% | |
| Colgate-Palmolive Co. | | | 193,600 | | | | 14,396 | | |
Procter & Gamble
Co. (The) | | | 468,632 | | | | 30,953 | | |
| Total | | | 45,349 | | |
| Telecommunications Equipment 1.36% | |
| Nokia Corp. ADR | | | 527,800 | | | | 14,990 | | |
| Textiles Apparel Manufacturers 0.50% | |
| Coach, Inc.* | | | 119,044 | | | | 4,321 | | |
| Polo Ralph Lauren Corp. | | | 17,808 | | | | 1,244 | | |
| Total | | | 5,565 | | |
See Notes to Financial Statements.
10
Schedule of Investments (unaudited)(concluded)
LARGE CAP CORE FUND May 31, 2008
| Investments | | Shares | | Value
(000) | |
| Tobacco 0.82% | |
Phillip Morris
International Inc.* | | | 172,000 | | | $ | 9,058 | | |
| Transportation: Miscellaneous 0.66% | |
United Parcel Service, Inc.
Class B | | | 102,800 | | | | 7,301 | | |
| Utilities: Cable TV & Radio 0.26% | |
| Comcast Corp. Class A | | | 129,760 | | | | 2,892 | | |
| Utilities: Electrical 3.84% | |
| Dominion Resources, Inc. | | | 252,600 | | | | 11,695 | | |
| FPL Group, Inc. | | | 129,932 | | | | 8,773 | | |
| Northeast Utilities | | | 246,300 | | | | 6,431 | | |
| PG&E Corp. | | | 194,217 | | | | 7,689 | | |
| Progress Energy, Inc. | | | 185,400 | | | | 7,928 | | |
| Total | | | 42,516 | | |
| Utilities: Telecommunications 3.05% | |
| AT&T Inc. | | | 729,402 | | | | 29,103 | | |
| Sprint Nextel Corp. | | | 59,190 | | | | 554 | | |
Verizon Communications,
Inc. | | | 105,200 | | | | 4,047 | | |
| Total | | | 33,704 | | |
Total Common Stocks
(cost $971,368,111) | | | 1,068,698 | | |
| Investments | | Principal
Amount
(000) | | Value
(000) | |
| SHORT-TERM INVESTMENT 3.12% | |
| Repurchase Agreement | |
Repurchase Agreement
dated 5/30/2008,
1.71% due 6/2/2008
with State Street
Bank & Trust Co.
collateralized by
$35,270,000 of Federal
Home Loan Mortgage
Corp. at Zero Coupon
due 7/28/2008; value:
$35,181,825; proceeds:
$34,496,153
(cost $34,491,238) | | $ | 34,491 | | | $ | 34,491 | | |
Total Investments in Securities 99.69%
(cost $1,005,859,349) | | | 1,103,189 | | |
Other Assets in Excess of
Liabilities 0.31% | | | 3,475 | | |
| Net Assets 100.00% | | $ | 1,106,664 | | |
ADR American Depositary Receipt.
Unit More than one class of securities traded together.
* Non-income producing security.
(a) Foreign security traded in U.S. dollars.
See Notes to Financial Statements.
11
Schedule of Investments (unaudited)
SMALL CAP VALUE FUND May 31, 2008
| Investments | | Shares | | Value
(000) | |
| COMMON STOCKS 95.64% | |
| Aerospace 5.11% | |
| Curtiss-Wright Corp.(a) | | | 2,870,045 | | | $ | 147,836 | | |
| Ladish Co., Inc.* | | | 310,800 | | | | 10,104 | | |
| Moog Inc. Class A* | | | 991,092 | | | | 44,936 | | |
| Total | | | 202,876 | | |
| Air Transportation 2.56% | |
| AAR Corp.*(a) | | | 2,225,064 | | | | 42,899 | | |
| Bristow Group Inc.* | | | 1,125,060 | | | | 58,807 | | |
| Total | | | 101,706 | | |
| Auto Components 0.89% | |
| Gentex Corp. | | | 2,020,000 | | | | 35,471 | | |
| Auto Parts: Original Equipment 1.06% | |
| Tenneco Inc.* | | | 1,750,900 | | | | 41,987 | | |
| Banks 2.97% | |
| BancorpSouth, Inc. | | | 75,835 | | | | 1,795 | | |
Cullen/Frost Bankers,
Inc. | | | 985,300 | | | | 55,078 | | |
First Horizon National
Corp. | | | 1,454,229 | | | | 13,946 | | |
First Midwest
Bancorp, Inc. | | | 892,527 | | | | 23,295 | | |
| Signature Bank* | | | 831,300 | | | | 23,726 | | |
| Total | | | 117,840 | | |
| Beverage: Brewers 0.50% | |
Boston Beer Co., Inc.
(The) Class A* | | | 498,301 | | | | 19,822 | | |
Biotechnology Research &
Production 2.09% | |
| Kensey Nash Corp.* | | | 128,927 | | | | 3,788 | | |
Martek Biosciences
Corp.* | | | 1,207,315 | | | | 45,588 | | |
OSI Pharmaceuticals,
Inc.* | | | 955,000 | | | | 33,712 | | |
| Total | | | 83,088 | | |
| Investments | | Shares | | Value
(000) | |
| Building: Heating & Plumbing 0.18% | |
| Interline Brands, Inc.* | | | 406,400 | | | $ | 7,258 | | |
| Building: Materials 1.31% | |
Quanex Building
Products Corp.*(a) | | | 2,945,022 | | | | 51,832 | | |
| Building: Roofing & Wallboard 0.43% | |
Beacon Roofing
Supply, Inc.* | | | 1,403,189 | | | | 17,133 | | |
| Chemicals 5.77% | |
| A. Schulman, Inc. | | | 666,910 | | | | 15,065 | | |
| Arch Chemicals, Inc. | | | 1,040,009 | | | | 39,551 | | |
| Cabot Corp. | | | 1,670,000 | | | | 53,507 | | |
Cabot Microelectronics
Corp.* | | | 366,867 | | | | 13,611 | | |
| Cytec Industries Inc. | | | 800,000 | | | | 50,528 | | |
| Hercules, Inc. | | | 1,938,500 | | | | 39,991 | | |
Polypore International,
Inc.* | | | 716,482 | | | | 16,981 | | |
| Total | | | 229,234 | | |
| Communications Technology 4.11% | |
| Anaren, Inc.*(a) | | | 1,566,946 | | | | 20,386 | | |
Anixter International,
Inc.*(a) | | | 2,055,005 | | | | 133,596 | | |
Comtech
Telecommunications Corp.* | | | 197,097 | | | | 9,125 | | |
| Total | | | 163,107 | | |
Computer Services, Software &
Systems 1.51% | |
Macrovision Solutions
Corp.* | | | 4,015,052 | | | | 54,324 | | |
| Solera Holdings Inc.* | | | 201,400 | | | | 5,492 | | |
| Total | | | 59,816 | | |
| Computer Technology 1.92% | |
| Intermec, Inc.*(a) | | | 3,375,325 | | | | 76,282 | | |
See Notes to Financial Statements.
12
Schedule of Investments (unaudited)(continued)
SMALL CAP VALUE FUND May 31, 2008
| Investments | | Shares | | Value
(000) | |
Containers & Packaging: Metal &
Glass 0.99% | |
| AptarGroup, Inc. | | | 742,700 | | | $ | 33,214 | | |
| Greif Inc. Class A | | | 92,800 | | | | 6,221 | | |
| Total | | | 39,435 | | |
| Diversified Manufacturing 6.32% | |
| Barnes Group Inc. | | | 1,408,000 | | | | 44,971 | | |
| CLARCOR, Inc. | | | 267,520 | | | | 11,616 | | |
| Hexcel Corp.* | | | 3,475,029 | | | | 91,949 | | |
| Olin Corp.(a) | | | 4,554,783 | | | | 102,483 | | |
| Total | | | 251,019 | | |
| Drug & Grocery Store Chains 0.58% | |
Casey's General Stores,
Inc. | | | 576,103 | | | | 12,611 | | |
| Susser Holdings Corp.*(a) | | | 875,018 | | | | 10,395 | | |
| Total | | | 23,006 | | |
| Drugs & Pharmaceuticals 3.40% | |
K-V Pharmaceutical Co.
Class A*(a) | | | 1,885,000 | | | | 47,144 | | |
| Medicines Co. (The)* | | | 1,900,100 | | | | 34,772 | | |
Onyx Pharmaceuticals,
Inc.* | | | 1,500,000 | | | | 53,010 | | |
| Total | | | 134,926 | | |
| Electrical & Electronics 1.31% | |
| Plexus Corp.* | | | 1,841,244 | | | | 51,978 | | |
| Electrical Equipment & Components 2.14% | |
| AMETEK, Inc. | | | 224,150 | | | | 11,499 | | |
| Baldor Electric Co. | | | 2,091,598 | | | | 73,624 | | |
| Total | | | 85,123 | | |
| Electronics 0.16% | |
Methode Electronics,
Inc. | | | 555,206 | | | | 6,352 | | |
| Electronics: Medical Systems 0.41% | |
| Zoll Medical Corp.* | | | 444,300 | | | | 16,106 | | |
| Investments | | Shares | | Value
(000) | |
Electronics:
Semi-Conductors/Components 2.61% | |
| ANADIGICS, Inc.*(a) | | | 3,129,282 | | | $ | 38,678 | | |
| Microsemi Corp.* | | | 2,367,514 | | | | 64,870 | | |
| Total | | | 103,548 | | |
| Electronics: Technology 1.62% | |
| ScanSource, Inc.*(a) | | | 2,150,710 | | | | 64,435 | | |
| Engineering & Contracting Services 0.46% | |
| URS Corp.* | | | 385,938 | | | | 18,452 | | |
| Financial: Miscellaneous 1.64% | |
Financial Federal
Corp.(a) | | | 2,687,191 | | | | 65,272 | | |
| Forest Products 0.50% | |
Universal Forest
Products, Inc. | | | 590,077 | | | | 20,021 | | |
| Health & Personal Care 0.14% | |
| Odyssey HealthCare, Inc.* | | | 513,500 | | | | 5,602 | | |
| Healthcare Facilities 0.25% | |
Skilled Heathcare
Group Inc. Class A* | | | 751,600 | | | | 10,117 | | |
Identification Control &
Filter Devices 1.36% | |
| IDEX Corp. | | | 787,675 | | | | 30,593 | | |
Mine Safety
Appliance Co. | | | 570,045 | | | | 23,509 | | |
| Total | | | 54,102 | | |
| Insurance: Multi-Line 0.66% | |
Max Capital Group Ltd.
(Bermuda)(b) | | | 1,082,900 | | | | 26,120 | | |
| Insurance: Property - Casualty 0.77% | |
Navigators Group,
Inc. (The)* | | | 289,135 | | | | 14,598 | | |
| RLI Corp. | | | 310,025 | | | | 15,855 | | |
| Total | | | 30,453 | | |
See Notes to Financial Statements.
13
Schedule of Investments (unaudited)(continued)
SMALL CAP VALUE FUND May 31, 2008
| Investments | | Shares | | Value
(000) | |
| Machinery: Industrial/Specialty 2.31% | |
| Kennametal Inc. | | | 669,500 | | | $ | 25,876 | | |
| Nordson Corp. | | | 916,213 | | | | 65,830 | | |
| Total | | | 91,706 | | |
Machinery: Oil Well Equipment &
Services 8.84% | |
| CARBO Ceramics Inc.(a) | | | 1,665,498 | | | | 79,428 | | |
Complete Production
Services, Inc.* | | | 1,975,000 | | | | 56,604 | | |
| Exterran Holdings, Inc.* | | | 212,981 | | | | 15,658 | | |
Key Energy Services,
Inc.* | | | 1,500,000 | | | | 25,890 | | |
| Lufkin Industries, Inc. | | | 443,546 | | | | 35,386 | | |
Oil States International,
Inc.* | | | 1,195,000 | | | | 69,812 | | |
| RPC, Inc. | | | 325,468 | | | | 4,872 | | |
Superior Energy
Services, Inc.* | | | 630,098 | | | | 33,830 | | |
W-H Energy Services,
Inc.* | | | 342,500 | | | | 29,294 | | |
| Total | | | 350,774 | | |
| Machinery: Specialty 0.32% | |
Flow International
Corp.* | | | 1,265,100 | | | | 12,853 | | |
Medical & Dental Instruments &
Supplies 1.20% | |
| Abaxis, Inc.* | | | 288,289 | | | | 8,473 | | |
| Cooper Cos., Inc. (The) | | | 318,797 | | | | 12,895 | | |
| SonoSite, Inc.*(a) | | | 850,000 | | | | 26,112 | | |
| Total | | | 47,480 | | |
| Medical Services 0.23% | |
| Air Methods Corp.* | | | 237,900 | | | | 9,169 | | |
| Metal Fabricating 0.23% | |
Haynes International,
Inc.* | | | 132,691 | | | | 9,067 | | |
| Investments | | Shares | | Value
(000) | |
| Metals & Minerals Miscellaneous 0.28% | |
| A.M. Castle & Co. | | | 217,277 | | | $ | 7,133 | | |
AMCOL International,
Corp. | | | 131,798 | | | | 4,067 | | |
| Total | | | 11,200 | | |
| Miscellaneous: Materials & Processing 1.76% | |
| Rogers Corp.*(a) | | | 1,782,435 | | | | 69,854 | | |
| Multi-Sector Companies 2.98% | |
| Carlisle Cos., Inc. | | | 2,558,870 | | | | 85,543 | | |
| Kaman Corp. | | | 209,420 | | | | 5,424 | | |
| Teleflex Inc. | | | 458,100 | | | | 27,161 | | |
| Total | | | 118,128 | | |
Office Furniture &
Business Equipment 0.27% | |
| HNI Corp. | | | 425,000 | | | | 10,659 | | |
| Oil: Crude Producers 1.26% | |
| Forest Oil Corp.* | | | 166,800 | | | | 11,134 | | |
| Petrohawk Energy Corp.* | | | 1,320,000 | | | | 38,782 | | |
| Total | | | 49,916 | | |
| Paints & Coatings 0.51% | |
| Ferro Corp. | | | 1,037,700 | | | | 20,090 | | |
| Production Technology Equipment 0.48% | |
| ATMI, Inc.* | | | 639,215 | | | | 19,132 | | |
| Railroads 0.04% | |
Genesee & Wyoming,
Inc. Class A* | | | 37,075 | | | | 1,513 | | |
| Real Estate Investment Trusts 0.25% | |
| EastGroup Properties, Inc. | | | 204,449 | | | | 9,717 | | |
Rental & Leasing Services:
Commercial 1.61% | |
| GATX Financial Corp. | | | 1,295,943 | | | | 63,903 | | |
See Notes to Financial Statements.
14
Schedule of Investments (unaudited)(continued)
SMALL CAP VALUE FUND May 31, 2008
| Investments | | Shares | | Value
(000) | |
| Restaurants 0.67% | |
| Benihana Inc.* | | | 160,600 | | | $ | 1,447 | | |
| Benihana Inc. Class A* | | | 348,737 | | | | 3,118 | | |
Cheesecake Factory,
Inc. (The)* | | | 589,088 | | | | 11,799 | | |
McCormick & Schmick's
Seafood Restaurants, Inc.* | | | 629,600 | | | | 5,994 | | |
| Ruby Tuesday, Inc. | | | 540,892 | | | | 4,046 | | |
| Total | | | 26,404 | | |
| Retail 1.88% | |
| Gaiam, Inc. Class A* | | | 752,685 | | | | 11,674 | | |
Penske Automotive
Group, Inc. | | | 875,710 | | | | 18,294 | | |
| Pier 1 Imports, Inc.* | | | 977,300 | | | | 7,046 | | |
Sonic Automotive,
Inc. Class A(a) | | | 2,023,189 | | | | 37,733 | | |
| Total | | | 74,747 | | |
| Services: Commercial 0.26% | |
| Rollins, Inc. | | | 160,376 | | | | 2,551 | | |
| Waste Connections, Inc.* | | | 235,718 | | | | 7,739 | | |
| Total | | | 10,290 | | |
| Shipping 0.72% | |
| Kirby Corp.* | | | 335,000 | | | | 18,646 | | |
UTi Worldwide, Inc.
(British Virgin Islands)(b) | | | 420,401 | | | | 9,989 | | |
| Total | | | 28,635 | | |
| Steel 0.51% | |
Carpenter Technology
Corp. | | | 369,891 | | | | 20,418 | | |
| Investments | | Shares | | Value
(000) | |
| Textiles Apparel Manufacturers 0.15% | |
| Oxford Industries, Inc. | | | 211,900 | | | $ | 5,793 | | |
| Truckers 1.36% | |
| Heartland Express, Inc. | | | 2,611,617 | | | | 40,219 | | |
Knight Transportation,
Inc. | | | 753,000 | | | | 13,750 | | |
| Total | | | 53,969 | | |
| Utilities: Electrical 6.32% | |
| Avista Corp. | | | 1,998,558 | | | | 42,429 | | |
| Black Hills Corp.(a) | | | 2,119,478 | | | | 74,690 | | |
| Cleco Corp. | | | 400,700 | | | | 10,010 | | |
| IDACORP, Inc. | | | 1,672,352 | | | | 51,274 | | |
| MGE Energy, Inc. | | | 923,396 | | | | 31,719 | | |
| Westar Energy, Inc. | | | 1,702,344 | | | | 40,856 | | |
| Total | | | 250,978 | | |
| Utilities: Gas Distributors 5.47% | |
New Jersey Resources
Corp. | | | 1,493,400 | | | | 49,745 | | |
Northwest Natural
Gas Co. | | | 885,000 | | | | 40,347 | | |
Piedmont Natural Gas
Co., Inc. | | | 2,797,800 | | | | 75,625 | | |
| UGI Corp. | | | 1,900,000 | | | | 51,262 | | |
| Total | | | 216,979 | | |
Total Common Stocks
(cost $3,463,199,555) | | | 3,796,893 | | |
See Notes to Financial Statements.
15
Schedule of Investments (unaudited)(concluded)
SMALL CAP VALUE FUND May 31, 2008
| Investments | | Principal
Amount
(000) | | Value
(000) | |
| SHORT-TERM INVESTMENT 3.67% | |
| Repurchase Agreement | |
Repurchase Agreement
dated 5/30/2008,
1.71% due 6/2/2008
with State Street
Bank & Trust Co.
collateralized by
$123,605,000 of Federal
Home Loan Bank at 2.21%
due 10/23/2008 and
$25,325,000 of Federal
Home Loan Mortgage
Corp. at Zero Coupon
due 12/30/2008; value:
$148,73 6,288; proceeds:
$145,836,161
(cost $145,815,383) | | $ | 145,815 | | | $ | 145,815 | | |
Total Investments in Securities 99.31%
(cost $3,609,014,938) | | | 3,942,708 | | |
Other Assets in Excess of
Liabilities 0.69% | | | 27,427 | | |
| Net Assets 100.00% | | $ | 3,970,135 | | |
* Non-income producing security.
(a) Affiliated issuer (holding represents 5% or more of the underlying issuer's outstanding voting shares). (See Note 10).
(b) Foreign security traded in U.S. dollars.
See Notes to Financial Statements.
16
Statements of Assets and Liabilities (unaudited)
May 31, 2008
| | | Large Cap
Core Fund | | Small Cap
Value Fund | |
| ASSETS: | |
| Investments in unaffiliated issuers, at cost | | $ | 1,005,859,349 | | | $ | 2,576,451,608 | | |
| Investments in affiliated issuers, at cost | | | – | | | | 1,032,563,330 | | |
| Investments in unaffiliated issuers, at value | | $ | 1,103,189,201 | | | $ | 2,853,653,486 | | |
| Investments in affiliated issuers, at value | | | – | | | | 1,089,054,683 | | |
| Receivables: | |
| Interest and dividends | | | 1,920,929 | | | | 4,797,039 | | |
| Investment securities sold | | | 2,372,886 | | | | 57,897,936 | | |
| Capital shares sold | | | 9,107,753 | | | | 52,288,833 | | |
| From advisor (See Note 3) | | | 15,296 | | | | – | | |
| Prepaid expenses and other assets | | | 139,751 | | | | 222,516 | | |
| Total assets | | | 1,116,745,816 | | | | 4,057,914,493 | | |
| LIABILITIES: | |
| Payables: | |
| Investment securities purchased | | | – | | | | 32,208,034 | | |
| Capital shares reacquired | | | 8,574,819 | | | | 50,307,834 | | |
| Management fees | | | 634,606 | | | | 2,363,885 | | |
| 12b-1 distribution fees | | | 389,685 | | | | 876,246 | | |
| Fund administration | | | 36,510 | | | | 130,310 | | |
| Directors' fees | | | 83,512 | | | | 289,493 | | |
| To affiliates (See Note 3) | | | 52,464 | | | | 30,942 | | |
| Accrued expenses and other liabilities | | | 310,193 | | | | 1,572,449 | | |
| Total liabilities | | | 10,081,789 | | | | 87,779,193 | | |
| NET ASSETS | | $ | 1,106,664,027 | | | $ | 3,970,135,300 | | |
| COMPOSITION OF NET ASSETS: | |
| Paid-in capital | | $ | 967,986,730 | | | $ | 3,561,609,991 | | |
| Undistributed net investment income | | | 3,256,713 | | | | 3,870,180 | | |
| Accumulated net realized gain on investments | | | 38,090,732 | | | | 70,961,898 | | |
| Net unrealized appreciation on investments | | | 97,329,852 | | | | 333,693,231 | | |
| Net Assets | | $ | 1,106,664,027 | | | $ | 3,970,135,300 | | |
See Notes to Financial Statements.
17
Statements of Assets and Liabilities (unaudited)(concluded)
May 31, 2008
| | | Large Cap
Core Fund | | Small Cap
Value Fund | |
| Net assets by class: | |
| Class A Shares | | $ | 700,682,612 | | | $ | 2,163,638,114 | | |
| Class B Shares | | $ | 66,039,477 | | | $ | 48,516,411 | | |
| Class C Shares | | $ | 92,832,569 | | | $ | 78,921,777 | | |
| Class F Shares | | $ | 262,981 | | | $ | 9,975 | | |
| Class I Shares | | $ | 239,784,211 | | | $ | 1,306,276,699 | | |
| Class P Shares | | $ | 6,810,380 | | | $ | 372,701,221 | | |
| Class R2 Shares | | $ | 9,492 | | | $ | 19,527 | | |
| Class R3 Shares | | $ | 242,305 | | | $ | 51,576 | | |
| Outstanding shares by class: | |
Class A Shares (200 million and 300 million shares of common
stock authorized, respectively, $.001 par value) | | | 23,646,149 | | | | 76,357,751 | | |
Class B Shares (30 million shares of common stock
authorized per Fund, $.001 par value) | | | 2,337,356 | | | | 1,945,470 | | |
Class C Shares (20 million shares of common stock
authorized per Fund, $.001 par value) | | | 3,272,187 | | | | 3,157,978 | | |
Class F Shares (30 million shares of common stock
authorized, $.001 par value) | | | 8,892 | | | | 352.901 | | |
Class I Shares (30 million and 200 million shares of common
stock authorized, respectively, $.001 par value) | | | 8,071,787 | | | | 43,644,819 | | |
Class P Shares (20 million and 50 million shares of common
stock authorized, respectively, $.001 par value) | | | 229,059 | | | | 13,271,949 | | |
Class R2 Shares (30 million shares of common stock
authorized, $.001 par value) | | | 321.520 | | | | 689.580 | | |
Class R3 Shares (30 million shares of common stock
authorized, $.001 par value) | | | 8,203 | | | | 1,821 | | |
Net asset value, offering and redemption price per share
(Net assets divided by outstanding shares): | | | |
| Class A Shares–Net asset value | | $ | 29.63 | | | $ | 28.34 | | |
| Class A Shares–Maximum offering price | |
| (Net asset value plus sales charge of 5.75%) | | $ | 31.44 | | | $ | 30.07 | | |
| Class B Shares–Net asset value | | $ | 28.25 | | | $ | 24.94 | | |
| Class C Shares–Net asset value | | $ | 28.37 | | | $ | 24.99 | | |
| Class F Shares–Net asset value | | $ | 29.58 | | | $ | 28.27 | | |
| Class I Shares–Net asset value | | $ | 29.71 | | | $ | 29.93 | | |
| Class P Shares–Net asset value | | $ | 29.73 | | | $ | 28.08 | | |
| Class R2 Shares–Net asset value | | $ | 29.52 | | | $ | 28.32 | | |
| Class R3 Shares–Net asset value | | $ | 29.54 | | | $ | 28.32 | | |
See Notes to Financial Statements.
18
Statements of Operations (unaudited)
For the Six Months Ended May 31, 2008
| | | Large Cap
Core Fund | | Small Cap
Value Fund | |
| Investment income: | |
Dividends from unaffiliated issuers (net of foreign
withholding taxes of $71,589 and $0 respectively) | | $ | 10,051,135 | | | $ | 17,837,423 | | |
| Dividends from affiliated issuers | | | – | | | | 5,921,901 | | |
| Interest | | | 499,316 | | | | 2,653,171 | | |
| Total investment income | | | 10,550,451 | | | | 26,412,495 | | |
| Expenses: | |
| Management fees | | | 3,747,006 | | | | 13,848,325 | | |
| 12b-1 distribution plan–Class A | | | 1,197,074 | | | | 3,149,471 | | |
| 12b-1 distribution plan–Class B | | | 341,642 | | | | 252,832 | | |
| 12b-1 distribution plan–Class C | | | 451,080 | | | | 385,555 | | |
| 12b-1 distribution plan–Class F | | | 56 | | | | 5 | | |
| 12b-1 distribution plan–Class P | | | 15,547 | | | | 830,835 | | |
| 12b-1 distribution plan–Class R2 | | | 28 | | | | 13 | | |
| 12b-1 distribution plan–Class R3 | | | 102 | | | | 39 | | |
| Shareholder servicing | | | 792,379 | | | | 2,508,484 | | |
| Professional | | | 28,316 | | | | 42,305 | | |
| Reports to shareholders | | | 38,738 | | | | 111,221 | | |
| Fund administration | | | 215,200 | | | | 762,762 | | |
| Custody | | | 11,234 | | | | 43,017 | | |
| Directors' fees | | | 13,324 | | | | 45,406 | | |
| Registration | | | 67,464 | | | | 124,854 | | |
| Subsidy (See Note 3) | | | 243,584 | | | | 135,422 | | |
| Other | | | 17,635 | | | | 63,478 | | |
| Gross expenses | | | 7,180,409 | | | | 22,304,024 | | |
| Expense reductions (See Note 8) | | | (11,505 | ) | | | (47,709 | ) | |
| Expenses assumed by advisor (See Note 3) | | | (65,744 | ) | | | – | | |
| Net expenses | | | 7,103,160 | | | | 22,256,315 | | |
| Net investment income | | | 3,447,291 | | | | 4,156,180 | | |
| Net realized and unrealized gain (loss): | |
| Net realized gain on investments in unaffiliated issuers | | | 39,286,596 | | | | (22,188,814 | ) | |
| Net realized gain on investments in affiliated issuers | | | – | | | | 96,443,729 | | |
| Net realized gain on redemption in-kind (See Note 6) | | | – | | | | 130,330 | | |
| Net change in unrealized appreciation on investments | | | (79,042,736 | ) | | | (77,151,755 | ) | |
| Net realized and unrealized loss | | | (39,756,140 | ) | | | (2,766,510 | ) | |
| Net Increase (Decrease) in Net Assets Resulting From Operations | | $ | (36,308,849 | ) | | $ | 1,389,670 | | |
See Notes to Financial Statements.
19
Statements of Changes in Net Assets
| | | Large Cap Core Fund | |
| INCREASE IN NET ASSETS | | For the Six Months
Ended May 31, 2008
(unaudited) | | For the Year Ended
November 30, 2007 | |
| Operations: | |
| Net investment income | | $ | 3,447,291 | | | $ | 5,113,691 | | |
| Net realized gain on investments | | | 39,286,596 | | | | 72,627,795 | | |
| Net change in unrealized appreciation on investments | | | (79,042,736 | ) | | | 47,082,512 | | |
| Net increase (decrease) in net assets resulting from operations | | | (36,308,849 | ) | | | 124,823,998 | | |
| Distributions to shareholders from: | |
| Net investment income | |
| Class A | | | (3,155,066 | ) | | | (3,660,217 | ) | |
| Class F | | | (75 | ) | | | – | | |
| Class I | | | (1,788,108 | ) | | | (1,804,710 | ) | |
| Class P | | | (27,794 | ) | | | (9,228 | ) | |
| Class R2 | | | (62 | ) | | | – | | |
| Class R3 | | | (65 | ) | | | – | | |
| Net realized gain | | | | | | | | | |
| Class A | | | (45,902,460 | ) | | | (22,816,945 | ) | |
| Class B | | | (5,038,790 | ) | | | (2,873,210 | ) | |
| Class C | | | (6,414,105 | ) | | | (3,173,231 | ) | |
| Class F | | | (641 | ) | | | – | | |
| Class I | | | (14,754,489 | ) | | | (7,179,058 | ) | |
| Class P | | | (467,166 | ) | | | (164,621 | ) | |
| Class R2 | | | (636 | ) | | | – | | |
| Class R3 | | | (636 | ) | | | – | | |
| Total distributions to shareholders | | | (77,550,093 | ) | | | (41,681,220 | ) | |
| Capital share transactions (Net of share conversions) (See Note 13): | |
| Net proceeds from sales of shares | | | 120,379,734 | | | | 177,482,034 | | |
| Reinvestment of distributions | | | 73,283,758 | | | | 39,289,922 | | |
| Cost of shares reacquired | | | (77,947,883 | ) | | | (215,651,510 | ) | |
Net increase in net assets
resulting from capital share transactions | | | 115,715,609 | | | | 1,120,446 | | |
| Net increase in net assets | | | 1,856,667 | | | | 84,263,224 | | |
| NET ASSETS: | |
| Beginning of period | | $ | 1,104,807,360 | | | $ | 1,020,544,136 | | |
| End of period | | $ | 1,106,664,027 | | | $ | 1,104,807,360 | | |
| Undistributed net investment income | | $ | 3,256,713 | | | $ | 4,780,592 | | |
See Notes to Financial Statements.
20
Statements of Changes in Net Assets (concluded)
| | | Small Cap Value Fund | |
| INCREASE (DECREASE) IN NET ASSETS | | For the Six Months
Ended May 31, 2008
(unaudited) | | For the Year Ended
November 30, 2007 | |
| Operations: | |
| Net investment income | | $ | 4,156,180 | | | $ | 6,978,443 | | |
| Net realized gain on investments | | | 74,254,915 | | | | 583,264,165 | | |
| Net realized gain on redemption in-kind (See Note 6) | | | 130,330 | | | | | | |
| Net change in unrealized appreciation on investments | | | (77,151,755 | ) | | | (181,250,735 | ) | |
| Net increase in net assets resulting from operations | | | 1,389,670 | | | | 408,991,873 | | |
| Distributions to shareholders from: | |
| Net investment income | |
| Class A | | | (2,398,135 | ) | | | – | | |
| Class F | | | (40 | ) | | | – | | |
| Class I | | | (5,001,838 | ) | | | – | | |
| Net realized gain | | | | | | | | | |
| Class A | | | (329,757,266 | ) | | | (310,163,573 | ) | |
| Class B | | | (9,462,405 | ) | | | (10,198,214 | ) | |
| Class C | | | (13,963,608 | ) | | | (12,975,390 | ) | |
| Class F | | | (1,442 | ) | | | – | | |
| Class I | | | (171,215,107 | ) | | | (131,798,008 | ) | |
| Class P | | | (60,147,209 | ) | | | (59,201,068 | ) | |
| Total distributions to shareholders | | | (591,947,050 | ) | | | (524,336,253 | ) | |
| Capital share transactions (Net of share conversions) (See Note 13): | |
| Net proceeds from sales of shares | | | 624,807,315 | | | | 961,122,181 | | |
| Reinvestment of distributions | | | 545,620,050 | | | | 468,851,412 | | |
| Cost of shares reacquired | | | (627,653,174 | ) | | | (1,266,437,826 | ) | |
| Cost of redemption in-kind (See Note 6) | | | (54,118,843 | ) | | | – | | |
Net increase in net assets
resulting from capital share transactions | | | 488,655,348 | | | | 163,535,767 | | |
| Net increase (decrease) in net assets | | | (101,902,032 | ) | | | 48,191,387 | | |
| NET ASSETS: | |
| Beginning of period | | $ | 4,072,037,332 | | | $ | 4,023,845,945 | | |
| End of period | | $ | 3,970,135,300 | | | $ | 4,072,037,332 | | |
| Undistributed net investment income | | $ | 3,870,180 | | | $ | 7,114,013 | | |
See Notes to Financial Statements.
21
Financial Highlights
LARGE CAP CORE FUND
| | | Class A Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 32.95 | | | $ | 30.64 | | | $ | 28.66 | | | $ | 28.42 | | | $ | 24.88 | | | $ | 21.27 | | |
| Investment operations: | |
| Net investment income(a) | | | .10 | | | | .16 | | | | .18 | | | | .15 | | | | .18 | | | | .08 | | |
Net realized and
unrealized gain (loss) | | | (1.14 | ) | | | 3.40 | | | | 3.00 | | | | 1.10 | | | | 3.42 | | | | 3.53 | | |
Total from investment
operations | | | (1.04 | ) | | | 3.56 | | | | 3.18 | | | | 1.25 | | | | 3.60 | | | | 3.61 | | |
| Distributions to shareholders from: | |
| Net investment income | | | (.15 | ) | | | (.17 | ) | | | (.10 | ) | | | (.17 | ) | | | (.06 | ) | | | – | | |
| Net realized gain | | | (2.13 | ) | | | (1.08 | ) | | | (1.10 | ) | | | (.84 | ) | | | – | | | | – | | |
| Total distributions | | | (2.28 | ) | | | (1.25 | ) | | | (1.20 | ) | | | (1.01 | ) | | | (.06 | ) | | | – | | |
| Net asset value, end of period | | $ | 29.63 | | | $ | 32.95 | | | $ | 30.64 | | | $ | 28.66 | | | $ | 28.42 | | | $ | 24.88 | | |
| Total Return(b) | | | (3.29 | )%(c) | | | 12.05 | % | | | 11.50 | % | | | 4.49 | % | | | 14.48 | % | | | 16.97 | % | |
| Ratios to Average Net Assets: | |
Expenses, excluding expense
reductions and including
expenses assumed | | | .65 | %(c) | | | 1.30 | % | | | 1.30 | % | | | 1.30 | % | | | 1.39 | % | | | 1.46 | % | |
Expenses, including expense
reductions and expenses
assumed | | | .65 | %(c) | | | 1.30 | % | | | 1.30 | % | | | 1.30 | % | | | 1.39 | % | | | 1.46 | % | |
Expenses, excluding expense
reductions and expenses
assumed | | | .66 | %(c) | | | 1.31 | % | | | 1.33 | % | | | 1.32 | % | | | 1.41 | % | | | 1.46 | % | |
| Net investment income | | | .33 | %(c) | | | .50 | % | | | .63 | % | | | .53 | % | | | .67 | % | | | .36 | % | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 700,683 | | | $ | 707,266 | | | $ | 645,539 | | | $ | 523,322 | | | $ | 324,690 | | | $ | 261,231 | | |
| Portfolio turnover rate | | | 15.32 | %(c) | | | 44.97 | % | | | 39.51 | % | | | 44.86 | % | | | 47.14 | % | | | 34.98 | % | |
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(c) Not annualized.
See Notes to Financial Statements.
22
Financial Highlights (continued)
LARGE CAP CORE FUND
| | | Class B Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 31.47 | | | $ | 29.34 | | | $ | 27.56 | | | $ | 27.38 | | | $ | 24.07 | | | $ | 20.70 | | |
| Investment operations: | |
| Net investment income (loss)(a) | | | – | (b) | | | (.05 | ) | | | (.01 | ) | | | (.03 | ) | | | – | (b) | | | (.06 | ) | |
Net realized and
unrealized gain (loss) | | | (1.09 | ) | | | 3.26 | | | | 2.89 | | | | 1.05 | | | | 3.31 | | | | 3.43 | | |
Total from investment
operations | | | (1.09 | ) | | | 3.21 | | | | 2.88 | | | | 1.02 | | | | 3.31 | | | | 3.37 | | |
| Distributions to shareholders from: | |
| Net investment income | | | – | | | | – | | | | – | | | | – | (b) | | | – | | | | – | | |
| Net realized gain | | | (2.13 | ) | | | (1.08 | ) | | | (1.10 | ) | | | (.84 | ) | | | – | | | | – | | |
| Total distributions | | | (2.13 | ) | | | (1.08 | ) | | | (1.10 | ) | | | (.84 | ) | | | – | | | | – | | |
| Net asset value, end of period | | $ | 28.25 | | | $ | 31.47 | | | $ | 29.34 | | | $ | 27.56 | | | $ | 27.38 | | | $ | 24.07 | | |
| Total Return(c) | | | (3.60 | )%(d) | | | 11.29 | % | | | 10.80 | % | | | 3.78 | % | | | 13.75 | % | | | 16.28 | % | |
| Ratios to Average Net Assets: | |
Expenses, excluding expense
reductions and including
expenses assumed | | | .97 | %(d) | | | 1.95 | % | | | 1.95 | % | | | 1.95 | % | | | 2.03 | % | | | 2.10 | % | |
Expenses, including expense
reductions and expenses
assumed | | | .97 | %(d) | | | 1.95 | % | | | 1.95 | % | | | 1.95 | % | | | 2.03 | % | | | 2.10 | % | |
Expenses, excluding expense
reductions and expenses
assumed | | | .98 | %(d) | | | 1.96 | % | | | 1.98 | % | | | 1.97 | % | | | 2.05 | % | | | 2.10 | % | |
| Net investment income (loss) | | | – | (e) | | | (.15 | )% | | | (.02 | )% | | | (.11 | )% | | | .03 | % | | | (.28 | )% | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 66,039 | | | $ | 74,005 | | | $ | 78,277 | | | $ | 81,373 | | | $ | 82,876 | | | $ | 80,542 | | |
| Portfolio turnover rate | | | 15.32 | %(d) | | | 44.97 | % | | | 39.51 | % | | | 44.86 | % | | | 47.14 | % | | | 34.98 | % | |
(a) Calculated using average shares outstanding during the period.
(b) Amount is less than $.01.
(c) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(d) Not annualized.
(e) Amount is less than 0.01%.
See Notes to Financial Statements.
23
Financial Highlights (continued)
LARGE CAP CORE FUND
| | | Class C Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 31.59 | | | $ | 29.44 | | | $ | 27.66 | | | $ | 27.47 | | | $ | 24.15 | | | $ | 20.77 | | |
| Investment operations: | |
| Net investment income (loss)(a) | | | – | (b) | | | (.05 | ) | | | – | (b) | | | (.03 | ) | | | – | (b) | | | (.06 | ) | |
Net realized and
unrealized gain (loss) | | | (1.09 | ) | | | 3.28 | | | | 2.88 | | | | 1.06 | | | | 3.32 | | | | 3.44 | | |
Total from investment
operations | | | (1.09 | ) | | | 3.23 | | | | 2.88 | | | | 1.03 | | | | 3.32 | | | | 3.38 | | |
| Distributions to shareholders from: | |
| Net investment income | | | – | | | | – | | | | – | | | | – | (b) | | | – | | | | – | | |
| Net realized gain | | | (2.13 | ) | | | (1.08 | ) | | | (1.10 | ) | | | (.84 | ) | | | – | | | | – | | |
| Total distributions | | | (2.13 | ) | | | (1.08 | ) | | | (1.10 | ) | | | (.84 | ) | | | – | | | | – | | |
| Net asset value, end of period | | $ | 28.37 | | | $ | 31.59 | | | $ | 29.44 | | | $ | 27.66 | | | $ | 27.47 | | | $ | 24.15 | | |
| Total Return(c) | | | (3.59 | )%(d) | | | 11.32 | % | | | 10.76 | % | | | 3.81 | % | | | 13.75 | % | | | 16.27 | % | |
| Ratios to Average Net Assets: | |
Expenses, excluding expense
reductions and including
expenses assumed | | | .97 | %(d) | | | 1.95 | % | | | 1.95 | % | | | 1.95 | % | | | 2.03 | % | | | 2.10 | % | |
Expenses, including expense
reductions and expenses
assumed | | | .97 | %(d) | | | 1.95 | % | | | 1.95 | % | | | 1.95 | % | | | 2.03 | % | | | 2.10 | % | |
Expenses, excluding expense
reductions and expenses
assumed | | | .98 | %(d) | | | 1.96 | % | | | 1.98 | % | | | 1.97 | % | | | 2.05 | % | | | 2.10 | % | |
| Net investment income (loss) | | | – | (e) | | | (.15 | )% | | | (.02 | )% | | | (.12 | )% | | | .03 | % | | | (.28 | )% | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 92,833 | | | $ | 94,948 | | | $ | 86,535 | | | $ | 73,328 | | | $ | 39,625 | | | $ | 36,778 | | |
| Portfolio turnover rate | | | 15.32 | %(d) | | | 44.97 | % | | | 39.51 | % | | | 44.86 | % | | | 47.14 | % | | | 34.98 | % | |
(a) Calculated using average shares outstanding during the period.
(b) Amount is less than $.01.
(c) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(d) Not annualized.
(e) Amount is less than 0.01%.
See Notes to Financial Statements.
24
Financial Highlights (continued)
LARGE CAP CORE FUND
| | | Class F Shares | |
| | | Six Months
Ended
5/31/2008
(unaudited) | | 9/28/2007(a)
to
11/30/2007 | |
| Per Share Operating Performance | |
| Net asset value, beginning of period | | $ | 32.96 | | | $ | 33.52 | | |
| Investment operations: | |
| Net investment income(b) | | | .17 | | | | .05 | | |
| Net realized and unrealized loss | | | (1.17 | ) | | | (.61 | ) | |
| Total from investment operations | | | (1.00 | ) | | | (.56 | ) | |
| Distributions to shareholders from: | |
| Net investment income | | | (.25 | ) | | | – | | |
| Net realized gain | | | (2.13 | ) | | | – | | |
| Total distributions | | | (2.38 | ) | | | – | | |
| Net asset value, end of period | | $ | 29.58 | | | $ | 32.96 | | |
| Total Return(c) | | | (3.15 | )%(d) | | | (1.67 | )%(d) | |
| Ratios to Average Net Assets: | |
| Expenses, excluding expense reductions and including expenses assumed | | | .52 | %(d) | | | .18 | %(d) | |
| Expenses, including expense reductions and expenses assumed | | | .52 | %(d) | | | .18 | %(d) | |
| Expenses, excluding expense reductions and expenses assumed | | | .54 | %(d) | | | .19 | %(d) | |
| Net investment income | | | .58 | %(d) | | | .16 | %(d) | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 263 | | | $ | 10 | | |
| Portfolio turnover rate | | | 15.32 | %(d) | | | 44.97 | % | |
(a) Commencement of investment operations was 9/28/2007, SEC effective date was 9/14/2007, and date shares first became available to the public was 10/1/2007.
(b) Calculated using average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(d) Not annualized.
See Notes to Financial Statements.
25
Financial Highlights (continued)
LARGE CAP CORE FUND
| | | Class I Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 33.08 | | | $ | 30.76 | | | $ | 28.74 | | | $ | 28.50 | | | $ | 24.93 | | | $ | 21.23 | | |
| Investment operations: | |
| Net investment income(a) | | | .15 | | | | .26 | | | | .29 | | | | .24 | | | | .93 | | | | .16 | | |
Net realized and
unrealized gain (loss) | | | (1.13 | ) | | | 3.41 | | | | 3.01 | | | | 1.11 | | | | 2.77 | | | | 3.54 | | |
Total from investment
operations | | | (.98 | ) | | | 3.67 | | | | 3.30 | | | | 1.35 | | | | 3.70 | | | | 3.70 | | |
| Distributions to shareholders from: | |
| Net investment income | | | (.26 | ) | | | (.27 | ) | | | (.18 | ) | | | (.27 | ) | | | (.13 | ) | | | – | | |
| Net realized gain | | | (2.13 | ) | | | (1.08 | ) | | | (1.10 | ) | | | (.84 | ) | | | – | | | | – | | |
| Total distributions | | | (2.39 | ) | | | (1.35 | ) | | | (1.28 | ) | | | (1.11 | ) | | | (.13 | ) | | | – | | |
| Net asset value, end of period | | $ | 29.71 | | | $ | 33.08 | | | $ | 30.76 | | | $ | 28.74 | | | $ | 28.50 | | | $ | 24.93 | | |
| Total Return(b) | | | (3.08 | )%(c) | | | 12.40 | % | | | 11.92 | % | | | 4.83 | % | | | 14.89 | % | | | 17.43 | % | |
| Ratios to Average Net Assets: | |
Expenses, excluding expense
reductions and including
expenses assumed | | | .47 | %(c) | | | .95 | % | | | .95 | % | | | .95 | % | | | .93 | % | | | 1.10 | % | |
Expenses, including expense
reductions and expenses
assumed | | | .47 | %(c) | | | .95 | % | | | .95 | % | | | .95 | % | | | .93 | % | | | 1.10 | % | |
Expenses, excluding expense
reductions and expenses
assumed | | | .48 | %(c) | | | .96 | % | | | .98 | % | | | .98 | % | | | 1.07 | % | | | 1.10 | % | |
| Net investment income | | | .51 | %(c) | | | .84 | % | | | .99 | % | | | .84 | % | | | 3.35 | % | | | .72 | % | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 239,784 | | | $ | 221,345 | | | $ | 202,879 | | | $ | 135,677 | | | $ | 12,991 | | | $ | 75 | | |
| Portfolio turnover rate | | | 15.32 | %(c) | | | 44.97 | % | | | 39.51 | % | | | 44.86 | % | | | 47.14 | % | | | 34.98 | % | |
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(c) Not annualized.
See Notes to Financial Statements.
26
Financial Highlights (continued)
LARGE CAP CORE FUND
| | | Class P Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 33.05 | | | $ | 30.65 | | | $ | 28.70 | | | $ | 28.50 | | | $ | 25.01 | | | $ | 21.37 | | |
| Investment operations: | |
| Net investment income(a) | | | .08 | | | | .12 | | | | .15 | | | | .10 | | | | .17 | | | | .02 | | |
Net realized and
unrealized gain (loss) | | | (1.14 | ) | | | 3.42 | | | | 3.01 | | | | 1.12 | | | | 3.42 | | | | 3.62 | | |
Total from investment
operations | | | (1.06 | ) | | | 3.54 | | | | 3.16 | | | | 1.22 | | | | 3.59 | | | | 3.64 | | |
| Distributions to shareholders from: | |
| Net investment income | | | (.13 | ) | | | (.06 | ) | | | (.11 | ) | | | (.18 | ) | | | (.10 | ) | | | – | | |
| Net realized gain | | | (2.13 | ) | | | (1.08 | ) | | | (1.10 | ) | | | (.84 | ) | | | – | | | | – | | |
| Total distributions | | | (2.26 | ) | | | (1.14 | ) | | | (1.21 | ) | | | (1.02 | ) | | | (.10 | ) | | | – | | |
| Net asset value, end of period | | $ | 29.73 | | | $ | 33.05 | | | $ | 30.65 | | | $ | 28.70 | | | $ | 28.50 | | | $ | 25.01 | | |
| Total Return(b) | | | (3.34 | )%(c) | | | 11.93 | % | | | 11.40 | % | | | 4.38 | % | | | 14.39 | % | | | 17.03 | % | |
| Ratios to Average Net Assets: | |
Expenses, excluding expense
reductions and including
expenses assumed | | | .70 | %(c) | | | 1.40 | % | | | 1.40 | % | | | 1.40 | % | | | 1.48 | % | | | 1.55 | %† | |
Expenses, including expense
reductions and expenses
assumed | | | .70 | %(c) | | | 1.40 | % | | | 1.40 | % | | | 1.40 | % | | | 1.48 | % | | | 1.55 | %† | |
Expenses, excluding expense
reductions and expenses
assumed | | | .71 | %(c) | | | 1.41 | % | | | 1.43 | % | | | 1.43 | % | | | 1.50 | % | | | 1.55 | %† | |
| Net investment income | | | .28 | %(c) | | | .38 | % | | | .53 | % | | | .37 | % | | | .58 | % | | | .27 | %† | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 6,810 | | | $ | 7,214 | | | $ | 7,314 | | | $ | 6,749 | | | $ | 294 | | | $ | 152 | | |
| Portfolio turnover rate | | | 15.32 | %(c) | | | 44.97 | % | | | 39.51 | % | | | 44.86 | % | | | 47.14 | % | | | 34.98 | % | |
† 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) Not annualized.
See Notes to Financial Statements.
27
Financial Highlights (continued)
LARGE CAP CORE FUND
| | | Class R2 Shares | |
| | | Six Months
Ended
5/31/2008
(unaudited) | | 9/28/2007(a)
to
11/30/2007 | |
| Per Share Operating Performance | |
| Net asset value, beginning of period | | $ | 32.93 | | | $ | 33.52 | | |
| Investment operations: | |
| Net investment income(b) | | | .06 | | | | .03 | | |
| Net realized and unrealized loss | | | (1.13 | ) | | | (.62 | ) | |
| Total from investment operations | | | (1.07 | ) | | | (.59 | ) | |
| Distributions to shareholders from: | |
| Net investment income | | | (.21 | ) | | | – | | |
| Net realized gain | | | (2.13 | ) | | | – | | |
| Total distributions | | | (2.34 | ) | | | – | | |
| Net asset value, end of period | | $ | 29.52 | | | $ | 32.93 | | |
| Total Return(c) | | | (3.39 | )%(d) | | | (1.76 | )%(d) | |
| Ratios to Average Net Assets: | |
| Expenses, excluding expense reductions and including expenses assumed | | | .76 | %(d) | | | .26 | %(d) | |
| Expenses, including expense reductions and expenses assumed | | | .76 | %(d) | | | .26 | %(d) | |
| Expenses, excluding expense reductions and expenses assumed | | | .77 | %(d) | | | .26 | %(d) | |
| Net investment income | | | .21 | %(d) | | | .08 | %(d) | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 9 | | | $ | 10 | | |
| Portfolio turnover rate | | | 15.32 | %(d) | | | 44.97 | % | |
(a) Commencement of investment operations was 9/28/2007, SEC effective date was 9/14/2007, and date shares first became available to the public was 10/1/2007.
(b) Calculated using average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(d) Not annualized.
See Notes to Financial Statements.
28
Financial Highlights (concluded)
LARGE CAP CORE FUND
| | | Class R3 Shares | |
| | | Six Months
Ended
5/31/2008
(unaudited) | | 9/28/2007(a)
to
11/30/2007 | |
| Per Share Operating Performance | |
| Net asset value, beginning of period | | $ | 32.94 | | | $ | 33.52 | | |
| Investment operations: | |
| Net investment income(b) | | | .20 | | | | .03 | | |
| Net realized and unrealized loss | | | (1.25 | ) | | | (.61 | ) | |
| Total from investment operations | | | (1.05 | ) | | | (.58 | ) | |
| Distributions to shareholders from: | |
| Net investment income | | | (.22 | ) | | | – | | |
| Net realized gain | | | (2.13 | ) | | | – | | |
| Total distributions | | | (2.35 | ) | | | – | | |
| Net asset value, end of period | | $ | 29.54 | | | $ | 32.94 | | |
| Total Return(c) | | | (3.32 | )%(d) | | | (1.73 | )%(d) | |
| Ratios to Average Net Assets: | |
| Expenses, excluding expense reductions and including expenses assumed | | | .70 | %(d) | | | .24 | %(d) | |
| Expenses, including expense reductions and expenses assumed | | | .70 | %(d) | | | .24 | %(d) | |
| Expenses, excluding expense reductions and expenses assumed | | | .72 | %(d) | | | .25 | %(d) | |
| Net investment income | | | .67 | %(d) | | | .10 | %(d) | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 242 | | | $ | 10 | | |
| Portfolio turnover rate | | | 15.32 | %(d) | | | 44.97 | % | |
(a) Commencement of investment operations was 9/28/2007, SEC effective date was 9/14/2007, and date shares first became available to the public was 10/1/2007.
(b) Calculated using average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(d) Not annualized.
See Notes to Financial Statements.
29
Financial Highlights
SMALL CAP VALUE FUND
| | | Class A Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 33.10 | | | $ | 34.60 | | | $ | 31.40 | | | $ | 29.54 | | | $ | 25.66 | | | $ | 20.29 | | |
| Investment operations: | |
| Net investment income (loss)(a) | | | .02 | | | | .04 | | | | (.02 | ) | | | (.09 | ) | | | – | (c) | | | (.10 | ) | |
Net realized and
unrealized gain | | | .07 | | | | 2.99 | | | | 6.09 | | | | 4.60 | | | | 5.52 | | | | 6.81 | | |
Total from investment
operations | | | .09 | | | | 3.03 | | | | 6.07 | | | | 4.51 | | | | 5.52 | | | | 6.71 | | |
| Distributions to shareholders from: | |
| Net investment income | | | (.04 | ) | | | – | | | | – | | | | – | | | | – | | | | – | | |
| Net realized gain | | | (4.81 | ) | | | (4.53 | ) | | | (2.87 | ) | | | (2.65 | ) | | | (1.64 | ) | | | (1.34 | ) | |
| Total distributions | | | (4.85 | ) | | | (4.53 | ) | | | (2.87 | ) | | | (2.65 | ) | | | (1.64 | ) | | | (1.34 | ) | |
| Net asset value, end of period | | $ | 28.34 | | | $ | 33.10 | | | $ | 34.60 | | | $ | 31.40 | | | $ | 29.54 | | | $ | 25.66 | | |
| Total Return(b) | | | .62 | %(d) | | | 10.08 | % | | | 21.14 | % | | | 16.78 | % | | | 22.92 | % | | | 35.67 | % | |
| Ratios to Average Net Assets: | |
Expenses, including
expense reductions | | | .61 | %(d) | | | 1.23 | % | | | 1.23 | % | | | 1.31 | % | | | 1.39 | % | | | 1.45 | % | |
Expenses, excluding
expense reductions | | | .61 | %(d) | | | 1.23 | % | | | 1.24 | % | | | 1.31 | % | | | 1.39 | % | | | 1.45 | % | |
| Net investment income (loss) | | | .08 | %(d) | | | .13 | % | | | (.06 | )% | | | (.31 | )% | | | (.03 | )% | | | (.50 | )% | |
| Supplemental Data: | |
Net assets,
end of period (000) | | $ | 2,163,638 | | | $ | 2,287,085 | | | $ | 2,367,218 | | | $ | 1,714,898 | | | $ | 939,899 | | | $ | 510,582 | | |
| Portfolio turnover rate | | | 37.06 | %(d) | | | 61.44 | % | | | 71.14 | % | | | 71.25 | % | | | 67.04 | % | | | 66.11 | % | |
(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 is less than $.01.
(d) Not annualized.
See Notes to Financial Statements.
30
Financial Highlights (continued)
SMALL CAP VALUE FUND
| | | Class B Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 29.78 | | | $ | 31.77 | | | $ | 29.25 | | | $ | 27.87 | | | $ | 24.44 | | | $ | 19.50 | | |
| Investment operations: | |
| Net investment loss(a) | | | (.06 | ) | | | (.17 | ) | | | (.23 | ) | | | (.27 | ) | | | (.18 | ) | | | (.22 | ) | |
Net realized and
unrealized gain | | | .03 | | | | 2.71 | | | | 5.62 | | | | 4.30 | | | | 5.25 | | | | 6.50 | | |
Total from investment
operations | | | (.03 | ) | | | 2.54 | | | | 5.39 | | | | 4.03 | | | | 5.07 | | | | 6.28 | | |
| Distributions to shareholders from: | |
| Net realized gain | | | (4.81 | ) | | | (4.53 | ) | | | (2.87 | ) | | | (2.65 | ) | | | (1.64 | ) | | | (1.34 | ) | |
| Net asset value, end of period | | $ | 24.94 | | | $ | 29.78 | | | $ | 31.77 | | | $ | 29.25 | | | $ | 27.87 | | | $ | 24.44 | | |
| Total Return(b) | | | .25 | %(c) | | | 9.33 | % | | | 20.29 | % | | | 15.99 | % | | | 22.17 | % | | | 34.78 | % | |
| Ratios to Average Net Assets: | |
Expenses, including
expense reductions | | | .96 | %(c) | | | 1.93 | % | | | 1.92 | % | | | 1.95 | % | | | 2.00 | % | | | 2.07 | % | |
Expenses, excluding
expense reductions | | | .96 | %(c) | | | 1.93 | % | | | 1.93 | % | | | 1.95 | % | | | 2.00 | % | | | 2.07 | % | |
| Net investment loss | | | (.27 | )%(c) | | | (.58 | )% | | | (.77 | )% | | | (1.03 | )% | | | (.74 | )% | | | (1.12 | )% | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 48,516 | | | $ | 58,676 | | | $ | 71,741 | | | $ | 113,208 | | | $ | 192,098 | | | $ | 182,437 | | |
| Portfolio turnover rate | | | 37.06 | %(c) | | | 61.44 | % | | | 71.14 | % | | | 71.25 | % | | | 67.04 | % | | | 66.11 | % | |
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(c) Not annualized.
See Notes to Financial Statements.
31
Financial Highlights (continued)
SMALL CAP VALUE FUND
| | | Class C Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 29.83 | | | $ | 31.82 | | | $ | 29.29 | | | $ | 27.90 | | | $ | 24.46 | | | $ | 19.52 | | |
| Investment operations: | |
| Net investment loss(a) | | | (.06 | ) | | | (.17 | ) | | | (.22 | ) | | | (.26 | ) | | | (.18 | ) | | | (.22 | ) | |
Net realized and
unrealized gain | | | .03 | | | | 2.71 | | | | 5.62 | | | | 4.30 | | | | 5.26 | | | | 6.50 | | |
Total from investment
operations | | | (.03 | ) | | | 2.54 | | | | 5.40 | | | | 4.04 | | | | 5.08 | | | | 6.28 | | |
| Distributions to shareholders from: | |
| Net realized gain | | | (4.81 | ) | | | (4.53 | ) | | | (2.87 | ) | | | (2.65 | ) | | | (1.64 | ) | | | (1.34 | ) | |
| Net asset value, end of period | | $ | 24.99 | | | $ | 29.83 | | | $ | 31.82 | | | $ | 29.29 | | | $ | 27.90 | | | $ | 24.46 | | |
| Total Return(b) | | | .24 | %(c) | | | 9.32 | % | | | 20.30 | % | | | 16.01 | % | | | 22.19 | % | | | 34.74 | % | |
| Ratios to Average Net Assets: | |
Expenses, including
expense reductions | | | .96 | %(c) | | | 1.93 | % | | | 1.93 | % | | | 1.95 | % | | | 2.00 | % | | | 2.07 | % | |
Expenses, excluding
expense reductions | | | .96 | %(c) | | | 1.93 | % | | | 1.93 | % | | | 1.96 | % | | | 2.00 | % | | | 2.07 | % | |
| Net investment loss | | | (.27 | )%(c) | | | (.58 | )% | | | (.76 | )% | | | (.99 | )% | | | (.74 | )% | | | (1.12 | )% | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 78,922 | | | $ | 86,971 | | | $ | 91,715 | | | $ | 91,195 | | | $ | 89,408 | | | $ | 81,967 | | |
| Portfolio turnover rate | | | 37.06 | %(c) | | | 61.44 | % | | | 71.14 | % | | | 71.25 | % | | | 67.04 | % | | | 66.11 | % | |
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(c) Not annualized.
See Notes to Financial Statements.
32
Financial Highlights (continued)
SMALL CAP VALUE FUND
| | | Class F Shares | |
| | | Six Months
Ended
5/31/2008
(unaudited) | | 9/28/2007(a)
to
11/30/2007 | |
| Per Share Operating Performance | |
| Net asset value, beginning of period | | $ | 33.11 | | | $ | 33.61 | | |
| Investment operations: | |
| Net investment income(b) | | | .04 | | | | .01 | | |
| Net realized and unrealized gain (loss) | | | .06 | | | | (.51 | ) | |
| Total from investment operations | | | .10 | | | | (.50 | ) | |
| Distributions to shareholders from: | |
| Net investment income | | | (.13 | ) | | | – | | |
| Net realized gain | | | (4.81 | ) | | | – | | |
| Total distributions | | | (4.94 | ) | | | – | | |
| Net asset value, end of period | | $ | 28.27 | | | $ | 33.11 | | |
| Total Return(c) | | | .70 | %(d) | | | (1.49 | )%(d) | |
| Ratios to Average Net Assets: | |
| Expenses, including expense reductions | | | .53 | %(d) | | | .18 | %(d) | |
| Expenses, excluding expense reductions | | | .53 | %(d) | | | .18 | %(d) | |
| Net investment income | | | .17 | %(d) | | | .04 | %(d) | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 10 | | | $ | 10 | | |
| Portfolio turnover rate | | | 37.06 | %(d) | | | 61.44 | % | |
(a) Commencement of investment operations was 9/28/2007, SEC effective date was 9/14/2007, and date shares first became available to the public was 10/1/2007.
(b) Calculated using average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(d) Not annualized.
See Notes to Financial Statements.
33
Financial Highlights (continued)
SMALL CAP VALUE FUND
| | | Class I Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 34.75 | | | $ | 36.00 | | | $ | 32.46 | | | $ | 30.36 | | | $ | 26.23 | | | $ | 20.64 | | |
| Investment operations: | |
| Net investment income (loss)(a) | | | .07 | | | | .14 | | | | .08 | | | | .02 | | | | .10 | | | | (.02 | ) | |
Net realized and
unrealized gain | | | .06 | | | | 3.14 | | | | 6.33 | | | | 4.73 | | | | 5.67 | | | | 6.95 | | |
Total from investment
operations | | | .13 | | | | 3.28 | | | | 6.41 | | | | 4.75 | | | | 5.77 | | | | 6.93 | | |
| Distributions to shareholders from: | |
| Net investment income | | | (.14 | ) | | | – | | | | – | | | | – | | | | – | | | | – | | |
| Net realized gain | | | (4.81 | ) | | | (4.53 | ) | | | (2.87 | ) | | | (2.65 | ) | | | (1.64 | ) | | | (1.34 | ) | |
| Total distributions | | | (4.95 | ) | | | (4.53 | ) | | | (2.87 | ) | | | (2.65 | ) | | | (1.64 | ) | | | (1.34 | ) | |
| Net asset value, end of period | | $ | 29.93 | | | $ | 34.75 | | | $ | 36.00 | | | $ | 32.46 | | | $ | 30.36 | | | $ | 26.23 | | |
| Total Return(b) | | | .75 | %(c) | | | 10.42 | % | | | 21.53 | % | | | 17.14 | % | | | 23.40 | % | | | 36.10 | % | |
| Ratios to Average Net Assets: | |
Expenses, including
expense reductions | | | .46 | %(c) | | | .93 | % | | | .93 | % | | | .96 | % | | | 1.00 | % | | | 1.07 | % | |
Expenses, excluding
expense reductions | | | .46 | %(c) | | | .93 | % | | | .93 | % | | | .96 | % | | | 1.00 | % | | | 1.07 | % | |
| Net investment income (loss) | | | .23 | %(c) | | | .43 | % | | | .25 | % | | | .05 | % | | | .38 | % | | | (.12 | )% | |
| Supplemental Data: | |
Net assets,
end of period (000) | | $ | 1,306,277 | | | $ | 1,227,169 | | | $ | 1,045,397 | | | $ | 632,444 | | | $ | 304,763 | | | $ | 149,463 | | |
| Portfolio turnover rate | | | 37.06 | %(c) | | | 61.44 | % | | | 71.14 | % | | | 71.25 | % | | | 67.04 | % | | | 66.11 | % | |
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(c) Not annualized.
See Notes to Financial Statements.
34
Financial Highlights (continued)
SMALL CAP VALUE FUND
| | | Class P Shares | |
| | | Six Months
Ended
5/31/2008 | | Year Ended 11/30 | |
| | | (unaudited) | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | |
| Per Share Operating Performance | |
Net asset value,
beginning of period | | $ | 32.84 | | | $ | 34.40 | | | $ | 31.28 | | | $ | 29.47 | | | $ | 25.61 | | | $ | 20.27 | | |
| Investment operations: | |
| Net investment income (loss)(a) | | | – | (b) | | | (.01 | ) | | | (.06 | ) | | | (.11 | ) | | | .01 | | | | (.12 | ) | |
Net realized and
unrealized gain | | | .05 | | | | 2.98 | | | | 6.05 | | | | 4.57 | | | | 5.49 | | | | 6.80 | | |
Total from investment
operations | | | .05 | | | | 2.97 | | | | 5.99 | | | | 4.46 | | | | 5.50 | | | | 6.68 | | |
| Distributions to shareholders from: | |
| Net realized gain | | | (4.81 | ) | | | (4.53 | ) | | | (2.87 | ) | | | (2.65 | ) | | | (1.64 | ) | | | (1.34 | ) | |
| Net asset value, end of period | | $ | 28.08 | | | $ | 32.84 | | | $ | 34.40 | | | $ | 31.28 | | | $ | 29.47 | | | $ | 25.61 | | |
| Total Return(c) | | | .50 | %(d) | | | 9.95 | % | | | 20.95 | % | | | 16.68 | % | | | 22.84 | % | | | 35.48 | % | |
| Ratios to Average Net Assets: | |
Expenses, including
expense reductions | | | .69 | %(d) | | | 1.38 | % | | | 1.38 | % | | | 1.41 | % | | | 1.45 | % | | | 1.52 | % | |
Expenses, excluding
expense reductions | | | .69 | %(d) | | | 1.38 | % | | | 1.38 | % | | | 1.41 | % | | | 1.45 | % | | | 1.52 | % | |
| Net investment income (loss) | | | .01 | %(d) | | | (.03 | )% | | | (.20 | )% | | | (.39 | )% | | | .03 | % | | | (.57 | )% | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 372,701 | | | $ | 412,127 | | | $ | 447,775 | | | $ | 328,055 | | | $ | 141,389 | | | $ | 47,471 | | |
| Portfolio turnover rate | | | 37.06 | %(d) | | | 61.44 | % | | | 71.14 | % | | | 71.25 | % | | | 67.04 | % | | | 66.11 | % | |
(a) Calculated using average shares outstanding during the period.
(b) Amount is less than $.01.
(c) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(d) Not annualized.
See Notes to Financial Statements.
35
Financial Highlights (continued)
SMALL CAP VALUE FUND
| | | Class R2 Shares | |
| | | 3/25/2008(a)
to
5/31/2008 | |
| Per Share Operating Performance | |
| Net asset value, beginning of period | | $ | 25.99 | | |
| Investment operations: | |
| Net investment loss(b) | | | (.01 | ) | |
| Net realized and unrealized gain | | | 2.34 | | |
| Total from investment operations | | | 2.33 | | |
| Net asset value, end of period | | $ | 28.32 | | |
| Total Return(c) | | | 8.13 | %(d) | |
| Ratios to Average Net Assets: | |
| Expenses, including expense reductions | | | .28 | %(d) | |
| Expenses, excluding expense reductions | | | .28 | %(d) | |
| Net investment loss | | | (.05 | )%(d) | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 20 | | |
| Portfolio turnover rate | | | 37.06 | %(d) | |
(a) Commencement of investment operations was 3/25/2008, SEC effective date was 9/14/2007, and date shares first became available to the public was 4/1/2008.
(b) Calculated using average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(d) Not annualized.
See Notes to Financial Statements.
36
Financial Highlights (concluded)
SMALL CAP VALUE FUND
| | | Class R3 Shares | |
| | | 3/25/2008(a)
to
5/31/2008 | |
| Per Share Operating Performance | |
| Net asset value, beginning of period | | $ | 25.99 | | |
| Investment operations: | |
| Net investment loss(b) | | | (.01 | ) | |
| Net realized and unrealized gain | | | 2.34 | | |
| Total from investment operations | | | 2.33 | | |
| Net asset value, end of period | | $ | 28.32 | | |
| Total Return(c) | | | 8.13 | %(d) | |
| Ratios to Average Net Assets: | |
| Expenses, including expense reductions | | | .26 | %(d) | |
| Expenses, excluding expense reductions | | | .26 | %(d) | |
| Net investment loss | | | (.03 | )%(d) | |
| Supplemental Data: | |
| Net assets, end of period (000) | | $ | 52 | | |
| Portfolio turnover rate | | | 37.06 | %(d) | |
(a) Commencement of investment operations was 3/25/2008, SEC effective date was 9/14/2007, and date shares first became available to the public was 4/1/2008.
(b) Calculated using average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(d) Not annualized.
See Notes to Financial Statements.
37
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Lord Abbett Research Fund, Inc. (the "Company") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified open-end management investment company, incorporated under Maryland law on April 6, 1992. The Company currently consists of four separate funds. This report covers the following two funds and their respective classes: Lord Abbett Large-Cap Core Fund ("Large Cap Core Fund") and Small-Cap Value Series ("Small Cap Value Fund") (collectively, the "Funds").
Large Cap Core Fund's investment objective is growth of capital and growth of income consistent with reasonable risk. Small Cap Value Fund's investment objective is long-term capital appreciation. Each Fund offers eight classes of shares: Classes A, B, C, F, I, P, R2 and R3, each with different expenses and dividends. A front-end sales charge is normally added to the Net Asset Value ("NAV") for Class A shares. There is no front-end sales charge in the case of Class B, C, F, I, P, R2 and R3 shares, although there may be a contingent deferred sales charge ("CDSC") 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); 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 s hares on the 25th day of the month (or the next business day thereafter) following the eighth anniversary of the original purchase of Class B shares. Small Cap Value Fund is open to certain new investors on a limited basis. As of October 1, 2007, each Fund's Class P shares were closed to substantially all new retirement and benefit plans and fee-based programs, with certain exceptions as set forth in each Fund's Prospectus.
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 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 more accurately reflect their fair value as of the close of regular trading on the New York Stock Exchange LLC. Each 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 w hich market quotations 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.
38
Notes to Financial Statements (unaudited)(continued)
(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. Discounts are accreted and premiums are amortized using the effective interest method. Withholding taxes on foreign dividends have been provided for in accordance with the Fund's understanding of 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) Federal Taxes–It is the policy of each 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 incurred by the Company that do not specifically relate to an individual fund are generally allocated to the Funds within the Company on a pro rata basis. Expenses, excluding class specific expenses, are allocated to each class of shares based upon the relative proportion of net assets at the beginning of the day. Class A, B, C, F, P, R2 and R3 shares bear their class specific share of all expenses and fees relating to the Fund's 12b-1 Distribution Plan.
(f) Repurchase Agreements–Each 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. Each 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 these securities has dec lined, the Funds may incur a loss upon disposition of the securities.
(g) Fair Value Measurements–Each Fund adopted Financial Accounting Standards Board ("FASB") Statement No. 157, Fair Value Measurements ("SFAS 157"), effective December 1, 2007. In accordance with SFAS 157, fair value is defined as the price that each Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. SFAS 157 established a three-tier hierarchy 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 including such 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
39
Notes to Financial Statements (unaudited)(continued)
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 – 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).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used as of May 31, 2008 in valuing each Fund's investments carried at value:
| | | Large Cap Core Fund | | Small Cap Value Fund | |
Valuation
Inputs | | Investments
in Securities | | Other
Financial
Instruments | | Investments
in Securities | | Other
Financial
Instruments | |
| Level 1 – Quoted Prices | | $ | 1,068,697,963 | | | $ | - | | | $ | 3,796,892,786 | | | $ | - | | |
Level 2 – Other Significant
Observable Inputs | | | 34,491,238 | | | | - | | | | 145,815,383 | | | | - | | |
| Total | | $ | 1,103,189,201 | | | $ | - | | | $ | 3,942,708,169 | | | $ | - | | |
3. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management Fees
The Company has a management agreement with Lord, Abbett & Co. LLC ("Lord Abbett") pursuant to which Lord Abbett supplies each 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 each Fund's investment portfolio.
The management fees are based on the average daily net assets at the following annual rates:
| Large Cap Core Fund: | |
| First $1 billion | | | .70 | % | |
| Next $1 billion | | | .65 | % | |
| Over $2 billion | | | .60 | % | |
For the six months ended May 31, 2008, the effective management fee paid to Lord Abbett was at an annualized rate of .70% of the Fund's average daily net assets.
| Small Cap Value Fund: | |
| First $2 billion | | | .75 | % | |
| Over $2 billion | | | .70 | % | |
For the six months ended May 31, 2008, the effective management fee paid to Lord Abbett was at an annualized rate of .73% of the Fund's average daily net assets.
40
Notes to Financial Statements (unaudited)(continued)
For the period from April 1, 2008 through March 31, 2009, Lord Abbett contractually agreed to reimburse the Large Cap Core Fund to the extent necessary so that each class' total annual operating expenses do not exceed the following annual rates:
| Class | | % of Average Daily Net Assets | |
| A | | | 1.30 | % | |
| B | | | 1.95 | % | |
| C | | | 1.95 | % | |
| F | | | 1.05 | % | |
| I | | | 0.95 | % | |
| P | | | 1.40 | % | |
| R2 | | | 1.55 | % | |
| R3 | | | 1.45 | % | |
Lord Abbett provides certain administrative services to each Fund pursuant to an Administrative Services Agreement at an annual rate of .04% of each Fund's average daily net assets.
Large Cap Core Fund and Small Cap Value Fund, along with certain other funds managed by Lord Abbett (the "Underlying Funds"), have entered into Servicing Arrangements with Lord Abbett Alpha Strategy Fund of Lord Abbett Securities Trust and Lord Abbett Balanced Strategy Fund, Lord Abbett Diversified Equity Strategy Fund and Lord Abbett Growth & Income 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 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 Arrangements are included in Subsidy expense on each Fund's Statement of Operations and P ayable to affiliates on each Fund's Statement of Assets and Liabilities.
As of May 31, 2008, the percentages of Large Cap Core Fund's outstanding shares owned by Balanced Strategy Fund, Diversified Equity Strategy Fund and Growth & Income Strategy Fund were 13.24%, 1.71% and 5.99%, respectively.
As of May 31, 2008, the percentage of Small Cap Value Fund's outstanding shares owned by Alpha Strategy Fund was 3.05%.
12b-1 Distribution Plan
Each Fund has adopted a distribution plan with respect to Class A, B, C, F, P, R2 and R3 shares pursuant to Rule 12b-1 under the Act, which provides for the payment of ongoing distribution and service fees to Lord Abbett Distributor LLC ("Distributor"), an affiliate of Lord Abbett. The fees are accrued daily at annual rates based upon average daily net assets as follows:
| Fees* | | Class A | | Class B | | Class C | | Class F | | Class P | | Class R2 | | Class R3 | |
| Service | | | .25 | % | | | .25 | % | | | .25 | % | | | - | | | | .20 | % | | | .25 | % | | | .25 | % | |
| Distribution | | | .10 | %(1) | | | .75 | % | | | .75 | % | | | .10 | % | | | .25 | % | | | .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) Effective October 1, 2005 the Class A Distribution Fee for Small Cap Value Fund was reduced from .10% of average daily net assets to .05% of average daily net assets.
Class I does not have a distribution plan.
41
Notes to Financial Statements (unaudited)(continued)
Commissions
Distributor received the following commissions on sales of shares of the Funds, after concessions were paid to authorized dealers, for the six months ended May 31, 2008:
| | | Distributor
Commissions | | Dealers'
Concessions | |
| Large Cap Core Fund | | $ | 241,208 | | | $ | 1,260,595 | | |
| Small Cap Value Fund | | | 14,892 | | | | 80,610 | | |
Distributor received the following amount of CDSCs for the six months ended May 31, 2008.
| | | Class A | | Class C | |
| Large Cap Core Fund | | $ | 3,434 | | | $ | 307 | | |
| Small Cap Value Fund | | | 2,233 | | | | 206 | | |
Two Directors and certain of the Funds' officers have an interest in Lord Abbett.
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYFORWARDS
Dividends from net investment income, if any, are declared and distributed at least semiannually for Large Cap Core Fund and at least annually for Small Cap Value Fund. 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 differences do not require reclassification. Dividends and distributions, which exceed earnings and profits for tax purposes, are reported as a tax return of capital.
The tax character of distributions paid during the six months ended May 31, 2008 and fiscal year ended November 30, 2007, was as follows:
| | | Large Cap Core Fund | | Small Cap Value Fund | |
| | | Six Months Ended
5/31/2008 (unaudited) | | Year Ended
11/30/2007 | | Six Months Ended
5/31/2008 (unaudited) | | Year Ended
11/30/2007 | |
| Distributions paid from: | |
| Ordinary income | | $ | 12,028,130 | | | $ | 7,002,236 | | | $ | 129,913,466 | | | $ | 171,281,162 | | |
| Net long-term capital gains | | | 65,521,963 | | | | 34,678,984 | | | | 462,033,584 | | | | 353,055,091 | | |
| Total distributions paid | | $ | 77,550,093 | | | $ | 41,681,220 | | | $ | 591,947,050 | | | $ | 524,336,253 | | |
42
Notes to Financial Statements (unaudited)(continued)
As of May 31, 2008, the aggregate unrealized security gains and losses based on cost for U.S. Federal income tax purposes were as follows:
| | | Large Cap Core Fund | | Small Cap Value Fund | |
| Tax cost | | $ | 1,007,050,655 | | | $ | 3,612,426,322 | | |
| Gross unrealized gain | | | 167,347,171 | | | | 472,770,109 | | |
| Gross unrealized loss | | | (71,208,625 | ) | | | (142,488,262 | ) | |
| Net unrealized security gain | | $ | 96,138,546 | | | $ | 330,281,847 | | |
The difference between book-basis and tax-basis unrealized gains (losses) is primarily attributable to wash sales.
5. PORTFOLIO SECURITIES TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments) for the six months ended May 31, 2008 are as follows:
| | | Purchases | | Sales | |
| Large Cap Core Fund | | $ | 198,202,176 | | | $ | 159,550,244 | | |
| Small Cap Value Fund | | | 1,358,005,614 | | | | 1,362,737,181 | | |
There were no purchases or sales of U.S. Government securities for the six months ended May 31, 2008.
6. REDEMPTIONS IN-KIND
In certain circumstances, the Fund may distribute portfolio securities rather than cash as payments for a redemption of Fund shares ("redemptions in-kind"). For financial reporting purposes, the Fund recognizes a gain on redemptions in-kind to the extent the value of the distributed securities exceeds their costs; the Fund recognizes a loss if the cost exceeds value. During the six months ended May 31, 2008, shareholders of the Small Cap Value Fund redeemed Fund shares in exchange for Fund portfolio securities, causing the Fund to realize a net gain of $130,330.
7. DIRECTORS' REMUNERATION
The Company's officers and the two Directors who are associated with Lord Abbett do not receive any compensation from the Company for serving in such capacities. Outside 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 outside Directors under which outside 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 Company has entered into arrangements with the Funds' transfer agent and custodian, whereby credits realized as a result of uninvested cash balances are used to reduce a portion of each Fund's expenses.
43
Notes to Financial Statements (unaudited)(continued)
9. LINE OF CREDIT
Each 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 May 31, 2008, there were no loans outstanding pursuant to this Facility nor was the Facility utilized at any time during the six months ended May 31, 2008.
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. Small Cap Value Fund had the following transactions with affiliated issuers during the six months ended May 31, 2008:
| Affiliated Issuer | |
Balance of
Shares Held
at 11/30/2007 | |
Gross
Additions | |
Gross
Sales | |
Balance of
Shares Held
at 5/31/2008 | |
Value
at
5/31/2008 | | Net Realized
Gain (Loss)
12/1/2007
to 5/31/2008(a) | | Dividend
Income
12/1/2007
to 5/31/2008(a) | |
| AAR Corp.(b) | | | 1,189,264 | | | | 1,308,400 | | | | (272,600 | ) | | | 2,225,064 | | | $ | 42,899,234 | | | $ | - | | | $ | - | | |
| ANADIGICS, Inc. | | | 3,626,572 | | | | 444,400 | | | | (941,690 | ) | | | 3,129,282 | | | | 38,677,926 | | | | 1,269,480 | | | | - | | |
| Anaren, Inc. | | | 1,711,846 | | | | - | | | | (144,900 | ) | | | 1,566,946 | | | | 20,385,967 | | | | (723,687 | ) | | | - | | |
| Anixter International, Inc. | | | 1,755,705 | | | | 330,300 | | | | (31,000 | ) | | | 2,055,005 | | | | 133,595,875 | | | | 582,737 | | | | - | | |
| Black Hills Corp. | | | 2,335,078 | | | | 100,000 | | | | (315,600 | ) | | | 2,119,478 | | | | 74,690,405 | | | | (270,435 | ) | | | 1,659,227 | | |
Boston Beer Co., Inc. (The)
Class A(b)(c) | | | 164,300 | | | | 608,751 | | | | (274,750 | ) | | | 498,301 | | | | - | | | | 3,375 | | | | - | | |
| Bristow Group Inc. (c) | | | 1,335,060 | | | | 39,600 | | | | (249,600 | ) | | | 1,125,060 | | | | - | | | | 1,371,071 | | | | - | | |
| CARBO Ceramics Inc. (b) | | | 1,130,098 | | | | 558,900 | | | | (23,500 | ) | | | 1,665,498 | | | | 79,427,600 | | | | (155,797 | ) | | | 233,170 | | |
| Curtiss-Wright Corp. | | | 2,347,145 | | | | 560,600 | | | | (37,700 | ) | | | 2,870,045 | | | | 147,836,018 | | | | 347,200 | | | | 203,676 | | |
| Financial Federal Corp. | | | 2,696,491 | | | | 33,000 | | | | (42,300 | ) | | | 2,687,191 | | | | 65,271,869 | | | | (246,628 | ) | | | 812,502 | | |
| Intermec, Inc.(b) | | | 2,819,825 | | | | 603,200 | | | | (47,700 | ) | | | 3,375,325 | | | | 76,282,345 | | | | (15,346 | ) | | | - | | |
K-V Pharmaceutical Co.
Class A(b) | | | 1,300,000 | | | | 611,300 | | | | (26,300 | ) | | | 1,885,000 | | | | 47,143,850 | | | | - | | | | - | | |
Macrovision Solutions
Corp.(b)(c) | | | 2,320,078 | | | | 2,034,774 | | | | (339,800 | ) | | | 4,015,052 | | | | - | | | | (444,001 | ) | | | - | | |
| Olin Corp. | | | 4,024,183 | | | | 602,300 | | | | (71,700 | ) | | | 4,554,783 | | | | 102,482,618 | | | | (134,298 | ) | | | 1,813,553 | | |
Quanex Building
Products Corp.(d) | | | 3,280,022 | | | | 3,796,522 | | | | (4,131,522 | ) | | | 2,945,022 | | | | 51,832,387 | | | | 87,139,174 | | | | 956,990 | | |
| Rogers Corp. | | | 1,827,079 | | | | 47,600 | | | | (92,244 | ) | | | 1,782,435 | | | | 69,853,628 | | | | 1,078,007 | | | | - | | |
| ScanSource, Inc. | | | 1,710,864 | | | | 677,874 | | | | (238,028 | ) | | | 2,150,710 | | | | 64,435,272 | | | | 3,013,268 | | | | - | | |
Sonic Automotive, Inc.
Class A(b) | | | 1,720,089 | | | | 335,000 | | | | (31,900 | ) | | | 2,023,189 | | | | 37,732,475 | | | | (271,987 | ) | | | 242,783 | | |
| SonoSite, Inc. | | | 860,000 | | | | 276,600 | | | | (286,600 | ) | | | 850,000 | | | | 26,112,000 | | | | 1,641,665 | | | | - | | |
| Susser Holdings Corp. | | | 1,020,352 | | | | 299,700 | | | | (445,034 | ) | | | 875,018 | | | | 10,395,214 | | | | 2,259,931 | | | | - | | |
| UGI Corp.(b)(c) | | | 1,400,000 | | | | 529,000 | | | | (29,000 | ) | | | 1,900,000 | | | | - | | | | - | | | | - | | |
| Total | | | | | | | | | | | | | | | | | | $ | 1,089,054,683 | | | $ | 96,443,729 | | | $ | 5,921,901 | | |
(a) Represents realized gains (losses) and dividend income earned only when the issuer was an affiliate of the Fund.
(b) Not an affiliated issuer as of November 30, 2007.
(c) No longer an affiliated issuer as of May 31, 2008.
(d) 1 for 1 spinoff of Quanex Building Products Corp. by Quanex Corp. Additions, Sales, Gain (Loss) and Dividend Income are combined of Quanex Corp. and Quanex Building Products Corp.; ex-date April 24, 2008.
44
Notes to Financial Statements (unaudited)(continued)
11. CUSTODIAN AND ACCOUNTING AGENT
State Street Bank & Trust Company ("SSB") is the Company's custodian and accounting agent. SSB performs custodial, accounting and recordkeeping functions relating to portfolio transactions and calculating each Fund's NAV.
12. INVESTMENT RISKS
Large Cap Core Fund is subject to the general risks and considerations associated with equity investing, as well as the particular risks associated with value and growth stocks. This means the value of your 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. Large value and growth stocks may perform differently than the market as a whole and differently than each other or other types of stocks, such as small company stocks. This is because different types of stocks tend to shift in and out of favor depending on market and economic conditions. The market may fail to recognize the intrinsic value of particular value stocks for a long time. Growth stocks may be more volatile than other stocks. In addition, if the Fund's assessment of a company's value or prospects for exceeding earnings expectations or market conditions is wrong, the Fund could suffer losses or produce poor performance relative to other funds, even in a rising market.
Small Cap Value Fund is subject to the general risks and considerations associated with equity investing, as well as the particular risks associated with value 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. Large company value stocks and small company value stocks may perform differently than the market as a whole and other types of stocks such as growth stocks. The market may fail to recognize the intrinsic value of particular value stocks for a long time. In addition, small cap company stocks may be more volatile and less liquid than large cap company stocks. Also, if a Fund's assessment of a company's value or prospects for exceeding earnings expectations or market conditions is wrong, the Fund could suffer losses or produce poor performance relative to other funds, even in a rising market.
These factors can affect each Fund's performance.
45
Notes to Financial Statements (unaudited)(continued)
13. SUMMARY OF CAPITAL TRANSACTIONS
Transactions in shares of beneficial interest are as follows:
LARGE CAP CORE FUND
| | | Six Months Ended
May 31, 2008 (unaudited) | | Year Ended
November 30, 2007 | |
| Class A Shares | | Shares | | Amount | | Shares | | Amount | |
| Shares sold | | | 2,505,617 | | | $ | 73,611,466 | | | | 3,124,756 | | | $ | 98,045,804 | | |
| Converted from Class B* | | | 112,522 | | | | 3,304,875 | | | | 265,147 | | | | 8,377,472 | | |
| Reinvestment of distributions | | | 1,563,557 | | | | 47,219,423 | | | | 850,599 | | | | 25,492,466 | | |
| Shares reacquired | | | (2,001,103 | ) | | | (58,582,193 | ) | | | (3,843,716 | ) | | | (121,315,545 | ) | |
| Increase | | | 2,180,593 | | | $ | 65,553,571 | | | | 396,786 | | | $ | 10,600,197 | | |
| Class B Shares | |
| Shares sold | | | 232,473 | | | $ | 6,581,628 | | | | 335,590 | | | $ | 10,089,476 | | |
| Reinvestment of distributions | | | 148,532 | | | | 4,289,608 | | | | 83,312 | | | | 2,399,391 | | |
| Shares reacquired | | | (277,364 | ) | | | (7,736,630 | ) | | | (458,966 | ) | | | (13,820,894 | ) | |
| Converted to Class A* | | | (117,839 | ) | | | (3,304,875 | ) | | | (276,763 | ) | | | (8,377,472 | ) | |
| Decrease | | | (14,198 | ) | | $ | (170,269 | ) | | | (316,827 | ) | | $ | (9,709,499 | ) | |
| Class C Shares | |
| Shares sold | | | 476,914 | | | $ | 13,468,792 | | | | 634,390 | | | $ | 19,155,653 | | |
| Reinvestment of distributions | | | 163,358 | | | | 4,737,355 | | | | 77,497 | | | | 2,240,453 | | |
| Shares reacquired | | | (373,517 | ) | | | (10,441,060 | ) | | | (645,649 | ) | | | (19,489,211 | ) | |
| Increase | | | 266,755 | | | $ | 7,765,087 | | | | 66,238 | | | $ | 1,906,895 | | |
| Class F Shares | | | | Period Ended
November 30, 2007† | |
| Shares sold | | | 8,568 | | | $ | 250,916 | | | | 300.329 | | | $ | 10,066 | | |
| Reinvestment of distributions | | | 24 | | | | 713 | | | | - | | | | - | | |
| Increase | | | 8,592 | | | $ | 251,629 | | | | 300.329 | | | $ | 10,066 | | |
| Class I Shares | | | | Year Ended
November 30, 2007 | |
| Shares sold | | | 854,720 | | | $ | 25,816,859 | | | | 1,501,843 | | | $ | 46,979,795 | | |
| Reinvestment of distributions | | | 547,149 | | | | 16,540,304 | | | | 299,558 | | | | 8,983,765 | | |
| Shares reacquired | | | (20,311 | ) | | | (604,031 | ) | | | (1,707,776 | ) | | | (57,086,951 | ) | |
| Increase (decrease) | | | 1,381,558 | | | $ | 41,753,132 | | | | 93,625 | | | $ | (1,123,391 | ) | |
| Class P Shares | |
| Shares sold | | | 14,167 | | | $ | 417,087 | | | | 101,611 | | | $ | 3,181,240 | | |
| Reinvestment of distributions | | | 16,324 | | | | 494,955 | | | | 5,779 | | | | 173,847 | | |
| Shares reacquired | | | (19,723 | ) | | | (583,966 | ) | | | (127,762 | ) | | | (3,938,909 | ) | |
| Increase (decrease) | | | 10,768 | | | $ | 328,076 | | | | (20,372 | ) | | $ | (583,822 | ) | |
| Class R2 Shares | | | | Period Ended
November 30, 2007† | |
| Shares sold | | | - | | | $ | - | | | | 298.329 | | | $ | 10,000 | | |
| Reinvestment of distributions | | | 23.191 | | | | 699 | | | | - | | | | - | | |
| Increase | | | 23.191 | | | $ | 699 | | | | 298.329 | | | $ | 10,000 | | |
| Class R3 Shares | |
| Shares sold | | | 7,882 | | | $ | 232,986 | | | | 298.329 | | | $ | 10,000 | | |
| Reinvestment of distributions | | | 23 | | | | 701 | | | | - | | | | - | | |
| Shares reacquired | | | - | | | | (3 | ) | | | - | | | | - | | |
| Increase | | | 7,905 | | | $ | 233,684 | | | | 298.329 | | | $ | 10,000 | | |
* Automatic conversion of Class B shares occurs approximately eight years after the initial purchase date.
† For the period September 28, 2007 (commencement of investment operations) to November 30, 2007.
46
Notes to Financial Statements (unaudited)(continued)
SMALL CAP VALUE FUND
| | | Six Months Ended
May 31, 2008 (unaudited) | | Year Ended
November 30, 2007 | |
| Class A Shares | | Shares | | Amount | | Shares | | Amount | |
| Shares sold | | | 10,291,285 | | | $ | 279,873,152 | | | | 16,498,786 | | | $ | 520,882,163 | | |
| Converted from Class B* | | | 159,122 | | | | 4,264,067 | | | | 276,794 | | | | 8,815,136 | | |
| Reinvestment of distributions | | | 11,483,373 | | | | 317,744,947 | | | | 9,377,886 | | | | 281,993,037 | | |
| Shares reacquired | | | (14,665,775 | ) | | | (396,419,615 | ) | | | (25,480,937 | ) | | | (820,269,541 | ) | |
| Increase (decrease) | | | 7,268,005 | | | $ | 205,462,551 | | | | 672,529 | | | $ | (8,579,205 | ) | |
| Class B Shares | |
| Shares sold | | | 117,337 | | | $ | 2,831,919 | | | | 165,668 | | | $ | 4,650,222 | | |
| Reinvestment of distributions | | | 311,249 | | | | 7,603,874 | | | | 291,747 | | | | 7,944,282 | | |
| Shares reacquired | | | (272,930 | ) | | | (6,394,224 | ) | | | (438,446 | ) | | | (12,577,200 | ) | |
| Converted to Class A* | | | (180,491 | ) | | | (4,264,067 | ) | | | (306,686 | ) | | | (8,815,136 | ) | |
| Decrease | | | (24,835 | ) | | $ | (222,498 | ) | | | (287,717 | ) | | $ | (8,797,832 | ) | |
| Class C Shares | |
| Shares sold | | | 276,237 | | | $ | 6,713,073 | | | | 295,439 | | | $ | 8,226,203 | | |
| Reinvestment of distributions | | | 327,312 | | | | 8,012,611 | | | | 264,030 | | | | 7,202,992 | | |
| Shares reacquired | | | (360,928 | ) | | | (8,548,776 | ) | | | (526,702 | ) | | | (15,236,472 | ) | |
| Increase | | | 242,621 | | | $ | 6,176,908 | | | | 32,767 | | | $ | 192,723 | | |
| Class F Shares | | | | Period Ended
November 30, 2007† | |
| Shares sold | | | - | | | $ | - | | | | 299.530 | | | $ | 10,067 | | |
| Reinvestment of distributions | | | 53.371 | | | | 1,472 | | | | - | | | | - | | |
| Increase | | | 53.371 | | | $ | 1,472 | | | | 299.530 | | | $ | 10,067 | | |
| Class I Shares | | | | Year Ended
November 30, 2007 | |
| Shares sold | | | 9,696,058 | | | $ | 283,391,413 | | | | 9,203,929 | | | $ | 303,758,370 | | |
| Reinvestment of distributions | | | 5,501,589 | | | | 160,591,402 | | | | 3,951,680 | | | | 124,398,880 | | |
| Shares reacquired | | | (6,867,367 | ) | | | (188,684,064 | ) | | | (6,880,359 | ) | | | (231,240,499 | ) | |
| Increase | | | 8,330,280 | | | $ | 255,298,751 | | | | 6,275,250 | | | $ | 196,916,751 | | |
| Class P Shares | |
| Shares sold | | | 1,931,970 | | | $ | 51,931,025 | | | | 3,941,176 | | | $ | 123,595,156 | | |
| Reinvestment of distributions | | | 1,882,862 | | | | 51,665,744 | | | | 1,583,938 | | | | 47,312,221 | | |
| Shares reacquired | | | (3,093,474 | ) | | | (81,725,338 | ) | | | (5,989,832 | ) | | | (187,114,114 | ) | |
| Increase (decrease) | | | 721,358 | | | $ | 21,871,431 | | | | (464,718 | ) | | $ | (16,206,737 | ) | |
| Class R2 Shares | | Period Ended
May 31, 2008
(unaudited)†† | |
| Shares sold | | | 689.580 | | | $ | 18,601 | | |
| Increase | | | 689.580 | | | $ | 18,601 | | |
| Class R3 Shares | |
| Shares sold | | | 1,821 | | | $ | 48,132 | | |
| Increase | | | 1,821 | | | $ | 48,132 | | |
* Automatic conversion of Class B shares occurs approximately eight years after the initial purchase date.
† For the period September 28, 2007 (commencement of investment operations) to November 30, 2007.
†† For the period March 25, 2008 (commencement of investment operations) to May 31, 2008.
47
Notes to Financial Statements (unaudited)(concluded)
14. RECENT ACCOUNTING PRONOUNCEMENTS
In June 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. Effective May 31, 2008, the Funds adopted FIN 48. The adoption of FIN 48 has not resulted in a material impact on the Funds' net assets, results of operations and financial statement disclosures. The Funds file U.S. Federal and various state tax returns. No income tax returns are currently under examination. The Funds' tax returns remain open for examination for the years ended November 30, 2004 through November 30, 2007.
In March 2008, FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities ("SFAS 161"). SFAS 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. Management is currently evaluating the impact the adoption of SFAS 161 will have on the Fund's financial statement disclosures.
48
Approval of Advisory Contracts
At meetings held on December 12 and 13, 2007, the Board, including all of the Directors who are not interested persons of the Company or Lord Abbett, considered whether to approve the continuation of the existing management agreement between each of the Funds 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 teams conducted by members of the Contracts Committee during the year.
The materials received by the Board as to each Fund 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 ended September 30, 2007, (2) information on the effective management fee rates and expense ratios for one or more groups of funds with similar objectives and of 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.
The specific considerations for each Fund are set forth below.
Large Cap Core 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 in relation to 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 was in the first quintile of its performance universe for the nine-month, five-year, and ten-year periods, in the second quintile for the one-year period, and in the third quintile for the three-year period. The Board also observed that the Fund's investment performance was above that of the Lipper Large-Cap Core Index for each of those periods.
Lord Abbett's Personnel and Methods. The Board considered the qualifications of the personnel providing investment management services to the Fund, in light of its investment objective and discipline. Among other things, the Board considered the size, experience, and
49
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 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 levels of the Fund and the expense levels of the peer expense group. It also considered the amount and nature of the fees paid by shareholders. The Board noted that it and Lord Abbett had agreed to an expense reimbursement agreement that limited the total expense ratio of Class A to not more than 1.30%, the total expense ratios of Class B and Class C to not more than 1.95%, the Class F total expense ratio to not more than 1.05%, the total expense ratio of Class I to not more than 0.95%, the total expense ratio of Class P to not more than 1.40%, the total expense ratio of Class R2 to not more than 1.55%, and the total expense ratio of Class R3 to not more than 1.45%, and Lord Abbett proposed to enter into a new expense reimbursement agreement with the same terms. The Board also observed that the contractual and actual mana gement and administrative services fees were approximately fifteen basis points above the median of the peer group. The Board observed that at September 30, 2007 the total expense ratio of Class A was approximately twenty-one 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 F was approximately fifteen basis points above the median of the peer group, the total expense ratio of Class I was approximately twenty basis points above the median of the peer group, the total expense ratio of Class P was approximately fourteen basis points above the median of the peer group, the total expense ratio of Class R2 was approximately twenty-nine basis points above the median of the peer group, and the total expense ratio of Class R3 was approximately nineteen 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.
50
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 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 Funds, 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 it s business of providing investment advice to clients other than the Lord Abbett Funds, but that that business also benefits the Funds. The Board also noted that Lord Abbett, as disclosed in the prospectuses of the Funds, has entered into revenue sharing arrangements with certain entities that distribute shares of the Funds.
Alternative Arrangements. The Board considered whether, instead of approving the 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.
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.
Small Cap Value 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 in relation to that of two performance universes, the first consisting of small-cap core funds and the second consisting of small-cap value funds, both in terms of total return and other measures. The Board observed that the investment performance of the Class A shares of the Fund was in the first quintile of both performance universes for the nine-month, one-year, three-year, five-year, and ten-year periods. The Board also observed that the Fund's investment performance was above that of each of the Lipper Small-Cap Core Index and the Lipper Small-Cap Value Index for each of those periods.
51
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 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 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 levels of the Fund and the expense levels of the peer expense groups, the first consisting of small-cap core funds and the second consisting of small-cap value funds. It also considered the amount and nature of the fees paid by shareholders. As to the first peer group, the Board observed that the contractual and actual management and administrative services fees were approximately one basis point below the median of the peer group. The Board observed that at September 30, 2007 the total expense ratio of Class A was approximately seven basis points below the median of the peer group, the total expense ratios of Class B and Class C were approximately four basis points below the median of the peer group, the total expense ratio of Class F was approximately seven basis points below the median of the peer group, the total expe nse ratio of Class I was approximately four basis points below the median of the peer group, the total expense ratio of Class P was approximately seven basis points below the median of the peer group, the total expense ratio of Class R2 was approximately eight basis points above the median of the peer group, and the total expense ratio of Class R3 was approximately two basis points below the median of the peer group. As to the second peer group, the Board observed that the actual and contractual management and administrative services fees were approximately one basis point above the median of that peer group. The Board observed that the total expense ratio of Class A was approximately three basis points below the median of the peer group, the total expense ratios of Class B and Class C were approximately six basis points below the median of the peer group, the total expense ratio of Class F was approximately eleven basis points below the median of the peer group, the total expense ratio of Class I was approx imately three basis points below the median of the peer group, the total expense ratio of Class P was approximately five basis points below the median of the peer group, the total expense ratio of Class R2 was approximately ten basis points above the median of the peer group, and the total expense ratio of Class R3 was approximately the same as 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
52
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 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 Funds, and receives a portion of the sales charges on sales and redemptions of some classes of shares. The Board observed that, in addition, Lord Abbett accrues certain benefits for i ts business of providing investment advice to clients other than the Lord Abbett Funds, but that that business also benefits the Funds. The Board also noted that Lord Abbett, as disclosed in the prospectuses of the Funds, has entered into revenue sharing arrangements with certain entities that distribute shares of the Funds.
Alternative Arrangements. The Board considered whether, instead of approving the continuation of the management agreement, it might be in the best interest of the Fund to implement one or more alternative arrangements, 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.
53
Householding
The Company has adopted a policy that allows it to send only one copy of each 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 each Fund's portfolio securities, and information on how Lord Abbett voted each 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 Funds are required to file their complete schedule of portfolio holdings with the SEC for their 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 (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 duplicating fee to the SEC's Public Reference Room, Washington, DC 20549-0102; or (iii) sending your request electronically to publicinfo@sec.gov.
54
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This report when not used for the general information
of shareholders of the Fund, is to be distributed only if
preceded or accompanied by a current fund prospectus.
Lord Abbett Mutual Fund shares are distributed by
LORD ABBETT DISTRIBUTOR LLC.
Lord Abbett Research Fund, Inc.
Lord Abbett Large-Cap Core Fund
Small-Cap Value Series
LARF-3-0508
(07/08)
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) | | 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 Investment Company Act of 1940 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 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 RESEARCH FUND, INC. |
| | |
| | |
| | By: | /s/ Robert S. Dow |
| | | Robert S. Dow |
| | | Chief Executive Officer and Chairman |
| | |
| | |
Date: July 23, 2008 | | |
| | |
| | |
| | By: | /s/ Joan A. Binstock |
| | | Joan A. Binstock |
| | | Chief Financial Officer and Vice President |
| | |
| | |
Date: July 23, 2008 | | |
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/ Robert S. Dow |
| | | Robert S. Dow |
| | | Chief Executive Officer and Chairman |
| | |
| | |
Date: July 23, 2008 | | |
| | |
| | |
| | By: | /s/ Joan A. Binstock |
| | | Joan A. Binstock |
| | | Chief Financial Officer and Vice President |
| | |
| | |
Date: July 23, 2008 | | |
