Lord Abbett
Developing
Growth Fund
1997 ANNUAL REPORT
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A portfolio of small
companies with big
growth potential
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Lord Abbett Developing Growth Fund
A Tradition of
Performance
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Lord Abbett is proud of its long Tradition of Performance Through Disciplined
Investing. Over the years, our discipline has paid off and we have provided our
investors with solid performance: Lord Abbett Developing Growth Fund was named
by Mutual Funds magazine as one of America's "Hottest Funds" over the past 1-,
2-, 3-, 4- and 5-year periods ended 12/6/96(1).
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Do Small Stock Have
a Place in Your
Portfolio?
Just as there are different types of investors--with unique goals, strategies
and time horizons--there are different types of securities to help them achieve
their objectives. Look at equities: "large-cap" stocks (companies with market
capitalizations in excess of $5 billion) behave differently than "small-cap"
stocks (companies with market capitalizations of $750 million or less).
Year-to-year volatility is higher for small-cap stocks, but, as the chart below
illustrates, small stocks have provided double-digit returns each of the last
six decades.
Average Annual Returns During Each Decade(2)
[The following table was represented as a bar chart in the printed material.]
1940s 1950s 1960s 1970s 1980s 1990s*
----- ----- ----- ----- ----- ------
Small-cap stocks 20.7% 16.9% 15.5% 11.5% 15.8% 15.6%
Large-cap sotcks 9.2% 19.4% 7.8% 5.9% 17.6% 14.4%
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* 1990-1996
Lord Abbett Developing Growth Fund invests in stocks of small, developing
companies. These securities offer unusual growth potential and, not
surprisingly, entail more investor risk. However, when used as part of a
diversified portfolio of securities, these stocks can provide investors with the
growth potential necessary to achieve their goals.
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Average Annual
Total Returns
Average annual rates of total return at the Class A share maximum sales charge
of 5.75% for the periods ended 12/31/96 were:
[The following table was represented as a bar chart in the printed material.]
1 year 5 years 10 years
------ ------- --------
15.10% 14.21% 12.87%
Past performance is not an indication of future results. The investment return
and principal value of an investment will fluctuate so that shares, on any given
day or when redeemed, may be worth more or less than their original cost.
(1) Source: Mutual Funds magazine, February 1997.
(2) Source: (C) Computed using data from Stocks, Bonds, Bills, & Inflation 1997
Yearbook(TM), Ibbotson Associates, Chicago (annually updates work by Roger
G. Ibbotson and Rex Sinquefield). Used with permission. All rights
reserved. This chart does not represent past or future performance of Lord
Abbett Developing Growth Fund.
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Report to Shareholders
For the Fiscal Year Ended January 31, 1997
[Picture of ROBERT S. DOW]
/s/ ROBERT S. DOW
ROBERT S. DOW
CHAIRMAN
FEBRUARY 10, 1997
"...we will continue to
emphasize small companies
that target specific, faster
growing markets."
Lord Abbett Developing Growth Fund completed its fiscal year on January 31,
1997. Below is an overview of class-specific data as of the close of the year.
Year Ended Six Months Ended
January 31, 1997 January 31, 1997*
--------------------------------------------
Class A Class B Class C
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Net asset value $12.80 $12.75 $12.75
Capital gains distributions $ 1.78 $ 1.62 $ 1.62
Total return** +28.35% +19.43%++ +19.43%++
While the stock market as a whole performed well over the year, the strong
performance your Fund posted over the past 12 months can be attributed to
careful stock selection within the small-cap arena. In particular, the Fund
benefited from its exposure to select companies in the technology, service, and
energy sectors, as well as industrial machinery companies.
Your Fund continued to focus on niche companies. Many of these companies, whose
expertise in specialty products or services precludes much competition, enjoy a
large market share within their industries. Additionally, niche companies are
less vulnerable to economic or marketplace trends. As such, companies in your
Fund enjoyed steady earnings throughout the year. The Fund seeks to temper the
volatility inherent in the small-cap arena through diversity. At the close of
the fiscal year, your Fund owned over 120 companies covering 17 different
industries.
Looking forward, we remain broadly constructive on the prospects for the stock
market in general and small companies in particular. We anticipate that the
economy will slow to a sustainable growth rate of 2% or less, with inflation
averaging between 211/42%-3%. Within this environment of moderate growth and low
inflation, we will continue to emphasize small companies that target specific,
faster growing markets. Investors should note that many of the positive forces
currently propelling the market are generally reflected in current valuations
and will have less impact as time passes. However, we are confident that, in the
coming year, our dedication to fundamental research will uncover many exciting
investment opportunities with good prospects for long-term growth.
We are pleased that Lord Abbett Developing Growth Fund is a part of your
portfolio and thank you for the confidence and trust you have placed in us.
- ----------
* Class B and Class C shares were initially offered on August 1, 1996.
** Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
++ Not annualized.
1
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Focus on...Performance
The Benefits of Long-Term Investing
For over 20 years, Lord Abbett Developing Growth Fund has enabled investors to
participate in the growth potential of small company stocks. During this period,
Developing Growth Fund shareholders realized returns well above inflation.
Growth of a $100,000 Fund Investment: 2/1/77-1/31/97
Inflation
1/31/77
1/31/77 100,000
1/31/78 106,838
1/31/79 116,752
1/31/80 132,991
1/31/81 148,718
1/31/82 161,197
1/31/83 167,179
1/31/84 174,188
1/31/85 180,342
1/31/86 187,350
1/31/87 190,085
1/31/88 197,778
1/31/89 207,009
1/31/90 217,778
1/31/91 230,085
1/31/92 236,068
1/31/93 243,761
1/31/94 249,915
1/31/95 256,923
1/31/96 263,932
1/31/97 271,966
The Fund
1/31/77 100,000
1/31/78 110,955
1/31/79 167,545
1/31/80 211,185
1/31/81 266,872
1/31/82 278,123
1/31/83 406,895
1/13/84 433,957
1/31/85 416,591
1/31/86 428,289
1/31/87 472,034
1/31/88 412,390
1/31/89 456,168
1/31/90 454,445
1/31/91 521,045
1/31/92 737,428
1/31/93 720,417
1/31/94 838,609
1/31/95 815,598
1/31/96 1,225,206
1/31/97 1,572,507
The Fund's results reflect the reduced sales charge of 3.75% applicable to Class
A share investments of $100,000. For the Fund investment, both dividends and
capital gains were reinvested.
The Fund Versus the Benchmarks
As shown in the charts below, over the last 1- and 3-year periods ended 1/31/97,
Lord Abbett Developing Growth Fund consistently outperformed the Lipper Small
Company Growth Fund Index (a benchmark consisting of the largest mutual funds
within the small company growth category). Furthermore, over these periods, the
Fund outpaced large company stocks (as measured by the unmanaged S&P 500 Index).
Historically, small companies have experienced wider swings in earnings and
stock prices than large companies. While there is no assurance of the Fund's
future performance or that this pattern will continue, historically, long-term
investors in small company stocks have been rewarded with strong returns (see
charts on inside front cover).
[The following table was represented as a bar chart in the printed material.]
Impressive Total Returns
1 Year 3 Years
------ -------
The Fund 28.4% 23.3%
Lipper Small Company 23.7% 15.4%
Growth Fund Index
Unmanaged S&P 500 Index 26.3% 20.7%
Returns represent the percent change in value for Class A shares over the 1- and
3-year periods ended 1/31/97 and reflect the reinvestment of all distributions.
The Fund's results do not include the effect of sales charges. For performance
at the Class A share maximum sales charge see the inside front cover.
2
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Focus on...Small, Growing Companies
The Fund invests in companies that have passed through the initial, formative
years and are in the "developing growth" phase. These companies have not yet
matured, nor have they settled into the slower growth rate of more established
businesses. Because it is arithmetically easier to grow from a small base than a
large one, developing growth companies can offer better opportunity for
appreciation over the long term. The stock prices of these companies can
fluctuate sharply, which is why owning an actively-managed portfolio, such as
Lord Abbett Developing Growth Fund, makes sense for investors who want to
participate in the aggressive growth potential of small companies with the
benefits of diversification and experienced management. The actual growth of a
company cannot be foreseen, and it may be difficult to determine in which phase
a company is presently situated. There is no fixed correlation between the
business growth of a company and the market value of its stock. The illustration
below is not a representation of the performance of the stocks in which the Fund
invests.
Four Phases of Business Growth
1. Formative Phase
Companies are in their infancy, a high-risk period.
2. Developing Growth Phase
An evolving period, often characterized by a dramatic rate of growth; not
without risk.
3. Established Growth Phase
Competitive forces and regulations tend to slow companies' progress.
4. Maturity Phase
Companies' growth patterns tend to resemble the Gross Domestic Product.
Focus on...the Future
Investing and the future--they go hand-in-hand. Your investing plans are made
with future needs and goals in mind; but, you must also consider your present
situation. Lord Abbett Developing Growth Fund's extensive research process is
grounded in the present, but with an eye toward the future--your future and the
future of the exciting small companies in which it invests.
As we move toward the 21st century--a new millennium--our approach to stock
selection is even more focused on the future. Using fundamental research, Lord
Abbett Developing Growth Fund invests in companies we believe are positioned not
only to take advantage of trends and innovations, but to help create them.
3
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Important Information
Investments in common stocks are subject to market fluctuations, providing the
potential for gain and the risk of loss. Small-cap companies typically have a
higher risk of failure and historically have experienced a greater degree of
illiquidity and market volatility than large-cap companies.
Results quoted on the previous pages represent past performance and reflect
appropriate Rule 12b-1 Plan expenses from commencement of the Plan. Tax
consequences are not reflected. The Fund's current sales charge structure has
changed from the past. The S&P 500 is an unmanaged index consisting of the
common stocks of 500 companies widely followed by the investment community.
Performance figures for the unmanaged S&P 500 do not reflect transaction costs
or management fees. An investor cannot invest directly in an index, such as the
S&P 500. The Fund issues additional classes of shares (Class B and C) with
distinct pricing options. For a full discussion of the differences in pricing
alternatives, please call 800-874-3733 and ask for the Fund's current
prospectus. If used as sales material after 3/31/97, this report must be
accompanied by Lord Abbett's Performance Quarterly for the most recently
completed calendar quarter.
Statement of Net Assets
January 31, 1997
<TABLE>
<CAPTION>
Investment Shares Market Value
===============================================================================================================
Investments in Common Stocks 98.50%
===============================================================================================================
<S> <C> <C>
Business Equipment General Binding Corp., Northbrook, IL-The leading
and Supplies .65% vendor of office binding and laminating systems and
related supplies 70,000 $ 2,143,750
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Business Services 11.96% *Amerihost Properties, Inc., Des Plaines, IL-A hotel
operations and development company that builds, buys
and manages mid-market hotels 68,700 425,081
*ATC Communications Group, Dallas, TX-Provides
inbound and outbound contract telemarketing services
to a variety of companies in various industries 524,900 5,905,125
*Butler International Inc., Montvale, NJ-Provides
skilled engineers and technical personnel on a
contract basis in various industries 308,000 3,773,000
Computer Language Research, Inc., Carrollton,
TX-Provides tax and accounting information software
and services to accounting firms, banks,
corporations and partnerships under the trade name
"Fast-Tax" 120,000 1,320,000
Computer Task Group Inc., Buffalo, NY-Provides
computer-related professional services to commercial
clients, including systems analysis, programming and
design projects 60,000 2,617,500
G & K Services, Inc. Class A, Minneapolis, MN-A
lessor of work garments and related textile products 145,000 4,640,000
*Identix Inc., Sunnyvale, CA-A leading designer,
developer, manufacturer and marketer of products for
the capture and comparison of fingerprints for
security, anti-fraud, law enforcement and other
applications 75,300 790,650
*Interim Services, Fort Lauderdale, FL-Provides
temporary personnel to the business and health care
industries 35,000 1,268,750
M/A/R/C Inc., Irving, TX-Offers market research,
database marketing and counseling services for
companies in the pharmaceutical, retailing,
telecommunications and financial services markets 98,000 2,205,000
McGrath Rent Corp., San Leandro, CA-A lessor of
relocatable modular offices and electronic test
equipment 275,000 7,390,625
*NFO Research Inc., Greenwich, CT-A leading provider
of custom market research services that uses a
proprietary panel of consumer households 61,875 1,438,594
*Rush Enterprises Inc., San Antonio, TX-Operates a
regional network of truck centers offering the
retail sale of "Peterbilt" and used heavy-duty
trucks, after-market parts, service and body-shop
facilities 206,800 2,145,550
</TABLE>
4
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Statement of Net Assets
January 31, 1997
<TABLE>
<CAPTION>
Investment Shares Market Value
===============================================================================================================
<S> <C> <C>
*Snyder Communications Inc., Bethesda, MD-A leading
provider of value-added, outsourced marketing
solutions primarily for Fortune 500 companies 55,000 $ 1,656,875
*SOS Staffing Services, Salt Lake City, UT-Offers a
full range of staffing services through its 87
offices nationwide 100,000 1,075,000
*SPS Transaction Services Inc., Riverwoods, IL-A
provider of transaction processing services and
credit card programs 30,000 547,500
*Triad Systems Corp., Livermore, CA-Designs,
manufactures and markets patient monitoring
instruments and systems 247,500 2,304,844
Total 39,504,094
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Capital Equipment 7.93%
*Applied Materials, Inc., Santa Clara, CA-A major
semiconductor capital equipment supplier 272,000 13,430,000
Fluke Corp., Everett, WA-Designs and sells
electronic test and measurement instruments and
systems 74,100 3,547,540
*LeCroy Corp., Chestnut Ridge, NY-Develops,
manufactures and markets principally
high-performance digital oscilloscopes and related
products 118,000 4,130,000
*Photon Dynamics Inc., Milpitas, CA-A leading
worldwide supplier of test, inspection and repair
systems for the flat panel display industry 237,900 1,992,410
*Semitool Inc., Kalispell, MT-Designs, manufactures,
markets and services equipment used in the
fabrication of semiconductors 20,000 280,000
*Silicon Valley Group Inc., San Jose, CA-A leading
supplier of automated wafer processing technology
for the semiconductor industry 50,000 1,343,750
*Ultratech Stepper Inc., Santa Clara, CA-A
manufacturer of photolithography equipment that
reduces the production cost of integrated circuits 55,000 1,485,000
Total 26,208,700
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Communications 2.31%
*Educational Development Corp., Tulsa, OK-A marketer
of non-fiction, instructional children's books for
retail trade outlets, home party plans and public
and school libraries 100,000 650,000
*IWERKS Entertainment Inc., Burbank, CA-A creator of
interactive "virtual reality" systems and
attractions 510,000 2,773,125
*Lancit Media Productions Ltd., New York,
NY-Acquires, develops and produces movies and
television programs for children and family
audiences 290,000 1,957,500
*Movie Gallery Inc., Dothan, AL-Owns and operates
865 video specialty stores and has 100 franchises
and licensees located in 23 states 100,000 1,175,000
*West Coast Entertainment Corp., Philadelphia,
PA-Owns, operates and franchises video specialty
stores 130,000 1,072,500
Total 7,628,125
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Computer Software *Allin Communications Corp., Pittsburgh, PA-Provides
and Services 10.16% customized interactive television digital imaging
and other communications and media services 250,000 5,312,500
*Alphanet Solutions, Inc., Cedar Knolls, NJ-Provides
information technology products, services and
support 240,000 3,840,000
*BTG Inc., Vienna, VA-An information technology
company that provides systems solutions 230,000 4,772,500
*CACI International Inc. Class A, Arlington,
VA-Provides information technology products and
services including the development and integration
of systems, software and simulation products 70,000 1,470,000
*Caere Corp., Los Gatos, CA-A world leader in
optical character recognition technology and a
leading developer of desktop forms processing and
document management products 230,000 2,501,250
*Computer Learning Centers, Inc., Fairfax,
VA-Provides computer and information technology
education and training 150,000 4,350,000
*Comshare Inc., Ann Arbor, MI-Develops and markets
computer software and services designed to improve
managerial productivity 72,500 1,087,500
*Data Dimensions Inc., Bellevue, WA-A leading
provider of year 2000 services 90,000 3,723,750
*GSE Systems, Inc., Columbia, MD-A designer,
developer and supplier of high-fidelity, real-time
simulation software and services 31,000 294,500
INTERSOLV, Rockville, MD-A leading provider of open
client/server software solutions available for
object-oriented development, enterprise
client/server development, software configuration
management and data warehousing 120,000 1,200,000
*Manchester Equipment Co., Inc., Hauppauge, NY-A
reseller of computer hardware, software and
networking products, primarily for commercial
customers 200,000 1,400,000
*Mentor Graphics Corp., Wilsonville, OR-Designs,
manufactures, markets and services electronic design
automation systems for use in the electrical
engineering industry 80,000 830,000
</TABLE>
5
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Statement of Net Assets
January 31, 1997
<TABLE>
<CAPTION>
Investment Shares Market Value
===============================================================================================================
<S> <C> <C>
*Phoenix Tech Ltd., San Jose, CA-A leading supplier
of systems software and integration services to the
personal computer industry 65,000 $ 1,023,750
*Synopsys, Inc., Mountain View, CA-A supplier of
software for designers of integrated circuits and
electronic systems 40,000 1,766,250
Total 33,572,000
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Consumer Products 6.30%
*Advanced Lighting Technologies, Inc., Twinsburg,
OH-Designs, markets and manufactures metal halide
lighting products, including lamps, lamp components
and lamp production equipment 115,000 2,616,250
*Blyth Industries, Inc., Greenwich, CT-The largest
manufacturer and marketer of candles, fragrance
products and related accessories 60,000 2,227,500
Excel Industries Inc., Elkhart, IN-Manufactures and
designs window systems for the automobile, light
truck/van, bus, heavy truck and recreational vehicle
industries 80,000 1,320,000
Matthews International Corp. Class A, Pittsburgh,
PA-A leading designer, manufacturer and marketer of
custom-made identification products 175,000 4,965,625
Northland Cranberries Class A, Wisconsin Rapids,
WI-World's largest cranberry grower through its
properties in central and northern Wisconsin and
Massachusetts; manufactures and markets a branded
line of juice products 68,000 1,496,000
*O'Gara Company, Fairfield, OH-A leading provider of
vehicle armoring systems for military, commercial
and governmental clients worldwide 235,000 2,731,875
*Polymer Group Inc., San Diego, CA-A major global
manufacturer of non-woven materials 80,000 1,140,000
*Security First Network Bank, Atlanta, GA-The
world's first internet bank, with a unique
multi-layered security platform that protects
on-line transactions 221,000 2,596,750
Smithfield Foods Inc., Norfolk, VA-A leading hog
supplier, pork processor and fresh pork and
processed meats marketer 30,000 1,042,500
*Steiner Leisure, Nassau, Bahamas-Provides spa
services aboard cruise ships worldwide 35,000 665,000
Total 20,801,500
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Data Processing Equipment Advanced Digital Info Corp., Redmond, WA-A leading
and Components 3.02% provider of automated data libraries for computer
network and workstation markets and microelectronic
components for aerospace and medical applications 68,800 1,341,600
Ampex Corp. Class A, Redwood City, CA-A leading
innovator in the fields of magnetic recording image
processing and high-performance digital storage 475,000 3,710,938
*EMC Corp., Hopkinton, MA-A supplier of
high-performance storage devices and related
services 92,865 3,517,262
*Micros Systems Inc., Beltsville, MD-Designs,
manufactures and markets point-of-sale electronic
information systems and related peripheral equipment
and software 30,000 1,173,750
*Storage Computer, Nashua, NH-A leading worldwide
provider of high-performance storage systems 16,600 234,475
Total 9,978,025
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Electronic Components *AdFlex Solutions, Inc., Chandler, AZ-A leading
11.63% supplier of flexible circuits 165,000 2,495,625
*Altron Corp., Wilmington, MA-A manufacturer of
electronic interconnect products employing printed
circuit technology 169,500 3,347,625
Analogic Corp., Peabody, MA-A leading manufacturer
of high-precision medical and industrial diagnostic
and measurement instruments and equipment 45,000 1,434,375
*Ault Inc., Minneapolis, MN-The largest independent
manufacturer of external power conversion products 180,000 1,620,000
*Chicago Miniature Lamp, Inc., Canton,
MA-Manufactures and distributes a variety of
miniature lighting products 35,400 796,500
Computer Products, Inc., Boca Raton, FL-A
manufacturer of power supplies and measurement
control systems for industrial equipment 480,000 8,160,000
Dallas Semiconductor Corporation, Dallas,
TX-Develops, manufactures and markets complementary
metal oxide silicon integrated circuits and
semiconductor-based subsystems 65,000 1,714,375
*Lattice Semiconductor, Hillsboro, OR-Designs,
develops and markets high-speed programmable logic
devices (PLDs) 40,000 2,075,000
*Merix Corp., Forest Grove, OR-Manufacturer of
interconnect solutions for use in sophisticated
electronic equipment 65,000 1,226,875
Molex, Inc. Class A, Lisle, IL-Designs, manufactures
and distributes electrical and electronic devices 146,250 5,155,313
</TABLE>
6
<PAGE>
Statement of Net Assets
January 31, 1997
<TABLE>
<CAPTION>
Investment Shares Market Value
===============================================================================================================
<S> <C> <C>
*Sierra Semiconductor Corporation, San Jose,
CA-Supplies integrated circuits for the PC and
communications markets 50,000 $ 768,750
Technitrol Inc., Trevose, PA-A worldwide
manufacturer of electronic components, electrical
contacts and assemblies, thermostatic and clad-metal
materials and components and related items 180,000 8,640,000
*Valence Technology Inc., San Jose, CA-A producer of
rechargeable batteries based on lithium and polymer
technologies 160,000 990,000
Total 38,424,438
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Energy 11.25% *Benton Oil & Gas Co., Carpinteria, CA-An
independent oil and gas exploration and production
company 130,000 2,535,000
Core Laboratories N.V., Amsterdam, The Netherlands-A
provider of petroleum reservoir analysis and
environmental testing 134,000 2,780,500
*Dailey Petroleum Services Co., Conroe, TX-Provides
directional drilling services and designs,
manufactures and rents technologically-advanced
downhole tools for oil and gas drilling and workover
applications 300,000 3,150,000
*Dawson Geophysical Co., Midland, TX-A provider of
seismic data services to oil and gas drillers 120,000 1,530,000
*Falcon Drilling Inc., Houston, TX-Provides drilling
and workover services for the domestic and
international oil and gas industry 50,000 1,881,250
*Global Industries Ltd., Lafayette, LA-Provides
pipeline construction, derrick and diving services
to the offshore oil and gas industry 60,000 1,260,000
*Harken Energy Corp., Irving, TX-An oil and gas
exploration and production company that explores for
and conducts production activities in the Four
Corners area of the Southwest 427,200 1,548,600
*Mallon Resources Corp., Denver, CO-A Denver-based
oil and gas exploration and production company with
operations primarily in the Delaware and San Juan
Basins of New Mexico 100,000 900,000
Production Operators Corp., Houston, TX-A provider
of contract natural gas handling and enhanced oil
recovery services; an oil and gas producer 55,000 2,667,500
*Seitel Inc., Houston, TX-An operator of a seismic
database and a provider of corollary geophysical
services to the petroleum industry 100,000 3,437,500
*Stone Energy Corp., Lafayette, LA-An independent
oil and gas company; acquires and exploits oil and
gas producing properties located primarily in the
Gulf Coast Basin 120,000 3,420,000
*TPC Corp., Houston, TX-A company engaged in the
gathering, high-deliverability storage and marketing
of natural gas 294,000 3,197,250
*Trico Marine Services Inc., Houma, LA-Provides a
broad range of marine support services to companies
in the oil and gas industry conducting offshore
exploration, production and construction operations 5,000 233,750
*Tuboscope Vetco International Corp., Houston,
TX-Provides oil field tubular coating and inspection
services, oil field solids control services and
coiled tubing equipment to the international
petroleum industry 70,000 1,028,125
Veritas DGC Inc., Houston, TX-Provides seismic data
acquisition and processing services on a worldwide
basis to the petroleum industry 20,000 385,000
Vintage Petroleum Inc., Tulsa, OK-Independent energy
company engaged in the exploitation and development
of oil and gas properties 216,000 7,209,000
Total 37,163,475
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Environmental Services Met-Pro Corp., Harleysville, PA-A manufacturer of
and Equipment .53% environmental treatment systems, specialty pumps and
filtration equipment 128,340 1,764,675
- ----------------------------------------------------------------------------------------------------===========
Industrial and *Dionex Corp., Sunnyvale, CA-A manufacturer of
Capital Goods 9.10% analytical instruments 55,000 2,227,500
*Durakon Industries, Inc., Flint, MI-A leading
manufacturer of pick-up truckbed liners 135,000 1,957,500
*Flow International Corp., Kent, WA-Designs,
manufactures and sells ultra-high pressure waterjets
for cutting metallic and non-metallic materials 160,000 1,480,000
JLG Industries, Inc., McConnellsburg, PA-A leading
manufacturer of self-propelled aerial work platforms 650,800 12,365,200
*Orbital Sciences Corp., Dulles, VA-A space and
information systems company that designs,
manufactures, operates and markets a broad range of
affordable space-technology products and
satellite-based services 201,000 3,467,250
Park-Ohio Industries, Cleveland, OH-Manufactures
plastic containers for food products and industrial
products for the airline, automotive, rail and
trucking industries 280,000 4,322,500
</TABLE>
7
<PAGE>
Statement of Net Assets
January 31, 1997
<TABLE>
<CAPTION>
Investment Shares Market Value
===============================================================================================================
<S> <C> <C>
*Spacehab Inc., Arlington, VA-Develops and operates
habitable modules for space-based research and cargo
services aboard the U.S. Space Shuttle system 165,000 $ 990,000
*Superior Services Inc., West Allis, WI-Provides
solid waste collection, transfer, recycling and
disposal to customers primarily in Wisconsin and
parts of Minnesota, Illinois and Michigan 30,000 570,000
*Utilx Corporation, Kent, WA-Installs, replaces and
renovates underground utilities with "Flowmole,"
"Revalt" and "CableCure" services 250,000 1,281,250
X-Rite, Inc., Grandville, MI-A developer,
manufacturer and marketer of instruments for color
measurement and control 82,500 1,387,031
Total 30,048,231
- ---------------------------------------------------------------------------------------------------============
Measurement and *LTX Corp., Westwood, MA-A supplier of linear,
Control Systems .97% digital, mixed-signal and discrete semiconductor
test equipment 538,000 3,194,375
- ---------------------------------------------------------------------------------------------------============
Medical Services 3.86% Express Scripts Inc. Class A, Maryland Heights,
MD-Provides pharmacy benefit management to health
maintenance organizations 30,000 1,020,000
Health Care Service Group, Inc., Huntingdon Valley,
PA-Provides operational services to nursing homes
and retirement complexes 288,900 3,430,688
*Horizon Mental Health Management Inc., Denton, TX-A
manager of mental health programs for general acute
care hospitals in the U.S. 135,000 3,712,500
*TheraTx Inc., Atlanta, GA-Manages subacute
rehabilitation and respiratory care programs and
operates owned or leased inpatient facilities that
provide a broad range of subacute, specialty and
long-term care services 383,000 4,596,000
Total 12,759,188
- ---------------------------------------------------------------------------------------------------============
Medical/Health Care 5.74% *ATS Medical Inc., Minneapolis, MN-Manufactures and
markets a pyrolytic carbon bileaflet mechanical
heart valve 180,000 1,417,500
*Haemonetics Corp., Braintree, MA-A major
manufacturer of blood collection systems 25,000 412,500
Life Technologies, Inc., Gaithersburg, MD-A supplier
of products for life science research and
biotechnology manufacturing 135,000 3,442,500
*Maxxim Medical Inc., Sugarland, TX-Develops,
manufactures and distributes physical therapy
equipment and disposable hospital products 159,000 2,285,625
Orthofix International N.V., New York,
NY-International corporation that develops
innovative products in the medical device market; a
leading producer of external fixation devices, limb
lengthening and bone reconstruction equipment 267,200 2,137,600
*Ostex International Inc., Seattle, WA-Develops
products used in the diagnosis of osteoporosis,
osteoarthritis and other skeletal diseases that are
caused by the breakdown of bone, cartilage and other
connective tissue 385,000 2,695,000
*Physio-Control International Corporation, Redmond,
WA-Designs, manufactures, markets and services an
integrated line of non-invasive emergency cardiac
defibrillator and vital sign assessment devices,
disposable electrodes and data management software 50,000 1,087,500
*Protocol Systems Inc., Beaverton, OR-Designs,
manufactures and markets patient monitoring
instruments and systems 247,400 2,504,925
*Resound Corporation, Redwood City, CA-Designs,
develops, manufactures and markets hearing devices
throughout the world for the hearing impaired 260,000 1,690,000
*Thermedics Inc., Waltham, MA-Develops, manufactures
and markets explosives and drug-detection devices,
product quality assurance systems and other
biomedical products 65,000 1,275,625
Total 18,948,775
- ---------------------------------------------------------------------------------------------------============
Miscellaneous 3.24% *Catellus Development Corp., San Francisco, CA-An
owner, developer and manager of real estate assets 300,000 4,125,000
*Pacific Graystone Corp., Los Angeles, CA-A regional
builder of single-family homes primarily targeted to
first-time and move-up homebuyers in markets located
throughout Northern and Southern California 100,000 1,512,500
Patriot American Hospitality, Inc., Dallas, TX-Hotel
real estate investment trust 90,000 4,230,000
Resource America Inc., Philadelphia, PA-A specialty
finance company principally engaged in the
acquisition and resolution of real estate mortgages
and in equipment lease finance 40,000 855,000
Total 10,722,500
- ---------------------------------------------------------------------------------------------------============
Retail 5.65% *Ames Department Stores, Rocky Hill, CT-The nation's
fifth largest discount department store chain with
295 stores in 14 northeastern states 500,000 3,156,250
*CellStar Corp., Carrollton, TX-An integrated
wholesale distributor and retailer of cellular
telephones and related products 350,000 8,093,750
</TABLE>
8
<PAGE>
Statement of Net Assets
January 31, 1997
<TABLE>
<CAPTION>
Investment Shares Market Value
===============================================================================================================
<S> <C> <C>
*Designer Holdings Ltd., New York, NY-Develops,
sources and markets designer sportswear lines for
men, juniors, women and petites under the "Calvin
Klein Jeans," "CK/Calvin Klein Jeans" and "CK/Calvin
Klein Jeans Khakis" labels 100,400 $ 1,418,150
*Norwood Promotional Products, Inc., San Antonio,
TX-Supplies custom-imprinted promotional products to
distributors nationwide 40,000 770,000
*Pacific Sunwear of California Inc., Anaheim,
CA-Operates a nationwide mall-based specialty retail
chain of stores specializing in casual apparel,
footwear and related accessories catering to
teenagers and young adults 58,500 1,550,250
*Quicksilver, Inc., Costa Mesa, CA-Designs and
distributes casualwear, snowboardwear and swimwear
for young men, boys and juniors under the
"Quicksilver" label, and junior swimwear and
sportswear under the "Raisin" label 80,000 1,880,000
*Sirena Apparel Group, Inc., South El Monte,
CA-Designs, manufactures and markets branded and
private label swimwear and resortwear for each
principal segment of the women's market 230,000 646,875
Tiffany & Co., New York, NY-Internationally renowned
jeweler and specialty retailer 31,000 1,154,750
Total 18,670,025
- ---------------------------------------------------------------------------------------------------============
Telecommunications *Digex Inc., Beltsville, MD-A leading independent
internet carrier focusing exclusively on *business
customers 165,000 1,980,000
*FORE Systems, Inc., Warrendale, PA-A leader in the
design, development, manufacture and sale of
high-performance networking products based on
asynchronous transfer mode ("ATM") technology 14,000 407,750
*Plantronics, Inc., Santa Cruz, CA-Leading supplier
of communication headset products and services to
users and providers worldwide 222,000 10,850,250
*Tel-Save Holdings, Inc., New Hope, PA-A nationwide
provider of telecommunications services to more than
215,000 small- and medium-sized businesses in the
U.S. 12,500 319,530
*Voice Control Systems, Inc., Dallas, TX-Researches,
develops and commercializes speech recognition and
related technologies 45,000 326,250
Total 13,883,780
-----------------------------------------------------------------------============
Total Investments in Common Stocks (Cost $216,008,472) 325,415,656
===============================================================================================================
Other Assets, Less Liabilities 1.50%
===============================================================================================================
Corporate Obligations, American Express Credit Corp. 5.38% due 2/3/1997 2,600M 2,600,000
Prudential Funding Corp. 5.39% due 2/4/1997 1,400M 1,400,000
Total Corporate Obligations 4,000,000
- ---------------------------------------------------------------------------------------------------============
Cash and Receivables, Net of Liabilities 942,512
- ---------------------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities 4,942,512
===============================================================================================================
Net Assets 100.00% $330,358,168
===============================================================================================================
Class A Shares-Net asset value ($318,764,285 /
24,903,156 shares outstanding) $12.80
Class B Shares-Net asset value ($7,152,340 / 561,050
shares outstanding) $12.75
Class C Shares-Net asset value ($4,441,543 / 348,266
shares outstanding) $12.75
The descriptions of the companies shown in the
portfolio, which were obtained from published
reports and other sources believed to be reliable,
are supplemental and are unaudited.
* Non-income producing.
See Notes to Financial Statements.
</TABLE>
9
<PAGE>
Statement of Operations
Investment Income (Loss) Year Ended January 31, 1997
================================================================================
Income Interest $ 338,082
Dividends 807,653
Total income $1,145,735
-----------------------------------------------------------------
Expenses
Management fee 1,579,214
12b-1 distribution plan-Class A 605,347
12b-1 distribution plan-Class B 17,815
12b-1 distribution plan-Class C 10,975
Shareholder servicing 460,000
Reports to shareholders 125,000
Professional 68,000
Registration 60,000
Directors 8,000
Other 17,145
Total expenses -- 2,951,496
-----------------------------------------------------------------
Net investment loss -- (1,805,761)
-----------------------------------------------------------------
Realized and Unrealized Gain on Investments
================================================================================
Realized gain from investment transactions
Proceeds from sales 110,501,102
Cost of investments sold 68,802,923
-----------------------------------------------------------------
Net realized gain 41,698,179
-----------------------------------------------------------------
Unrealized appreciation of investments 22,855,477
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments 64,553,656
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $62,747,895
================================================================================
See Notes to Financial Statements.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended January 31,
Increase (Decrease) in Net Assets 1997 1996
====================================================================================================
<S> <C> <C>
Operations Net investment loss $ (1,805,761) $ (879,659)
Net realized gain from investment transactions 41,698,179 40,442,030
Net unrealized appreciation of investments 22,855,477 23,770,135
Net increase in net assets resulting from operations 62,747,895 63,332,506
-------------------------------------------------------------------------------------
Distributions to shareholders from net realized gain
from investment transactions:
Class A (37,450,454) (39,371,296)
Class B (528,216) --
Class C (352,262) --
Total (38,330,932) (39,371,296)
-------------------------------------------------------------------------------------
Capital share transactions:
Net proceeds from sales of shares 125,237,965 46,602,110
Net asset value of shares issued in reinvestment
of net realized gain from investment transactions 36,371,582 37,420,047
Total 161,609,547 84,022,157
-------------------------------------------------------------------------------------
Cost of shares reacquired (53,270,295) (37,960,819)
-------------------------------------------------------------------------------------
Increase in net assets derived from capital share
transactions 108,339,252 46,061,338
-------------------------------------------------------------------------------------
Increase in net assets 132,756,215 70,022,548
- ----------------------------------------------------------------------------------------------------
Net Assets
Beginning of year 197,601,953 127,579,405
-------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $(271,837) and $(212,267), respectively) $330,358,168 $197,601,953
=====================================================================================
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------
Year Ended January 31,
Per Share Operating Performance: 1997 1996 1995 1994 1993
=====================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $11.49 $ 9.58 $10.65 $10.11 $10.86
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment loss (.03) (.02) (.04) (.05) (.02)
Net realized and unrealized gain (loss) on investments 3.12 4.80 (.22) 1.62 (.24)
Total from investment operations 3.09 4.78 (.26) 1.57 (.26)
----------------------------------------------------------------------------------------------------------------
Distributions
Dividend from net investment income -- -- -- -- (.02)
Dividends from net realized gain (1.78) (2.87) (.81) (1.03) (.47)
----------------------------------------------------------------------------------------------------------------
Net asset value, end of year $12.80 $11.49 $ 9.58 $10.65 $10.11
- ----------------------------------------------------------------------------------------------------------------------
Total Return(a) 28.35% 50.22% (2.74)% 16.41% (2.31)%
======================================================================================================================
Ratios to Average Net Assets:
Expenses 1.10% 1.03% 1.31% 1.34% 1.31%
Net investment loss (.67)% (.52)% (.38)% (.51)% (.25)%
================================================================================================================
</TABLE>
August 1, 1996(b) to January 31, 1997
---------------------------------------
Per Share Operating Performance: Class B Shares Class C Shares
============================================================== =================
Net asset value, beginning of period $12.14 $12.14
- -------------------------------------------------------------- -----------------
Income (loss) from investment operations
Net investment loss (.05) (.05)
Net realized and unrealized gain on investments 2.28 2.28
Total from investment operations 2.23 2.23
-------------------------------------------------------- -----------------
Distributions
Dividends from net realized gain (1.62) (1.62)
-------------------------------------------------------- -----------------
Net asset value, end of period $12.75 $12.75
- -------------------------------------------------------------- -----------------
Total Return(a)(c) 19.43% 19.43%
================================================================================
Ratios to Average Net Assets(c):
Expenses .93% .93%
Net investment loss (.73)% (.73)%
==========================================================================
<TABLE>
<CAPTION>
Year Ended January 31,
Supplemental Data for All Classes: 1997 1996 1995 1994 1993
=============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net assets, end of year (000) $330,358 $197,602 $127,579 $143,693 $151,068
Portfolio turnover rate 42.35% 50.12% 17.57% 16.29% 17.22%
Average commissions per share paid on equity transactions $ .046 $ .053 $ .059 n/a n/a
=======================================================================================================================
</TABLE>
(a) Total return does not consider the effect of sales loads.
(b) Commencement of offering Class B and C shares.
(c) Not annualized.
See Notes to Financial Statements.
11
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Lord Abbett Developing Growth Fund, Inc. (the "Company") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The financial statements have been prepared in conformity with
generally accepted accounting principles, which require management to make
certain estimates and assumptions at the date of the financial statements. The
following is a summary of significant accounting policies followed by the
Company.
(a) Market value is determined as follows: Securities listed or admitted to
trading privileges on any national securities exchange are valued at the last
sales price on the principal securities exchange on which such securities are
traded, or, if there is no sale, at the mean between the last bid and asked
prices on such exchange, or, in the case of bonds, in the over-the-counter
market if, in the judgment of the Company's officers, that market more
accurately reflects the market value of the bonds. Securities traded only in the
over-the-counter market are valued at the mean between the bid and asked prices,
except that securities admitted to trading on the NASDAQ National Market System
are valued at the last sales price if it is determined that such price more
accurately reflects the value of such securities. Securities for which market
quotations are not available are valued at fair value under procedures approved
by the Board of Directors.
(b) It is the policy of the Company to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income. Therefore, no federal income tax provision is required.
(c) Security transactions are accounted for on the date that the securities are
purchased or sold (trade date). Realized gains and losses from investment
transactions are calculated on the identified cost basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income is recorded on the accrual basis. Net investment income (other than
distribution and service fees) and realized and unrealized gains or losses are
allocated to each class of shares based upon the relative proportion of net
assets at the beginning of the day.
(d) A portion of the proceeds from sales and costs of repurchases of capital
shares, equivalent to the amount of distributable net investment income on the
date of the transaction, is credited or charged to undistributed income.
Undistributed net investment income per share thus is unaffected by sales or
repurchases of shares.
2. Management Fee and Other Transactions with Affiliates
The Company has a management agreement with Lord, Abbett &Co. ("Lord Abbett")
pursuant to which it supplies the Company 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, statistical work and the supervision of the Company's
investment portfolio. The management fee is based on average daily net
assets for each month at the annual rate of 0.75% of the Company's first $100
million of average daily net assets and 0.50% of such assets over $100 million.
The Company has Rule 12b-1 plans and agreements (the "Class A, Class B and Class
C Plans") with Lord Abbett Distributor LLC ("Distributor"), an affiliate of Lord
Abbett. The Company makes payments to Distributor which uses or passes on such
payments to authorized institutions. Pursuant to the Class A Plan, the Company
pays Distributor (1) an annual service fee of 0.15% of the average daily net
asset value of shares sold prior to June 1, 1990 and 0.25% of the average daily
net asset value of shares sold on or after that date and (2) a one-time
distribution fee of up to 1% on certain qualifying purchases and a supplemental
annual distribution fee of 0.10% of the average daily net asset value of Class A
shares serviced by certain qualifying institutions. Pursuant to the Class B
Plan, the Company pays Distributor an annual service and distribution fee of
0.25% and 0.75%, respectively, of the average daily net asset value of the Class
B shares. Pursuant to the Class C Plan, the Company pays Distributor (1) a
service fee and a distribution fee, at the time such shares are sold, not to
exceed 0.25% and 0.75%, respectively, of the net asset value of such shares sold
and (2) at each quarter-end after the first anniversary of the sale of such
shares, a service fee and a distribution fee at an annual rate not to exceed
0.25% and 0.75%, respectively, of the average annual net asset value of such
shares outstanding.
Distributor received $319,316 representing payment of commissions on sales of
Class A shares after deducting $2,285,132 allowed to authorized distributors as
concessions. Certain of the Company's officers and directors have an interest in
Lord Abbett.
3. Distributions
Net realized gain from investment transactions is distributed to shareholders
annually. Accumulated undistributed net realized gain at January 31, 1997 for
financial reporting purposes aggregated $5,222,405.
Income and capital gains distributions are determined in accordance with income
tax regulations which may differ from methods used to determine the
corresponding income and capital gains amounts in accordance with generally
accepted accounting principles.
Distributions declared on February 12, 1997 are as follows:
Rate Per Aggregate
Capital Gains Share Amount
- --------------------------------------------------------------------------------
Class A $.21 $5,234,174
Class B $.21 $ 123,462
Class C $.21 $ 78,177
- --------------------------------------------------------------------------------
4. Capital
The Company has authorized 955 million shares of $.001 par value capital stock
designated Class A, 20 million shares of $.001 par value capital stock
designated Class B and 25 million shares of $.001 par value capital stock
designated Class C. Paid in capital amounted to $216,000,416 at January 31,
1997. Transactions in shares of capital stock were as follows:
Year Ended Year Ended
January 31, 1997 January 31, 1996
----------------------------------------------------------
Class A Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 8,862,837 $ 114,151,161 3,597,160 $ 46,602,110
Shares issued to
shareholders in
reinvestment of
realized gains
from investment
transactions 2,999,455 35,526,973 3,264,100 37,420,047
Total 11,862,292 149,678,134 6,861,260 84,022,157
- --------------------------------------------------------------------------------
Shares reacquired (4,153,205) (52,746,393) (2,978,218) (37,960,819)
Increase in shares 7,709,087 $ 96,931,741 3,883,042 $ 46,061,338
- --------------------------------------------------------------------------------
12
<PAGE>
August 1, 1996
(Commencement of
offering Class B shares)
to January 31, 1997
------------------------
Class B Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 548,162 $6,897,730
Shares issued to
shareholders in
reinvestment of
realized gains from
investment transactions 43,297 511,339
Total 591,459 7,409,069
- --------------------------------------------------------------------------------
Shares reacquired (30,409) (389,040)
Increase in shares 561,050 $7,020,029
- --------------------------------------------------------------------------------
August 1, 1996
(Commencement of
offering Class C shares)
to January 31, 1997
------------------------
Class C Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 330,830 $4,189,074
Shares issued to
shareholders in
reinvestment of
realized gains from
investment transactions 28,220 333,270
Total 359,050 4,522,344
- --------------------------------------------------------------------------------
Shares reacquired (10,784) (134,862)
Increase in shares 348,266 $4,387,482
- --------------------------------------------------------------------------------
5. Purchases and Sales of Securities
Purchases and sales of investment securities (other than short-term investments)
aggregated $177,172,967 and $110,501,102, respectively. As of January 31, 1997,
net unrealized appreciation for federal income tax purposes aggregated
$109,407,184, of which $128,357,609 related to appreciated securities and
$18,950,425 related to depreciated securities. For federal income tax purposes,
the identified cost of investments owned at January 31, 1997 was substantially
the same as the cost for financial reporting purposes.
6. Directors` Remuneration
The Directors of the Company associated with Lord Abbett and all officers of the
Company receive no compensation from the Company for acting as such. Outside
Directors' fees and retirement costs are allocated among all funds in the Lord
Abbett group based on net assets of each fund. A portion of the Directors' fees
accrued has been deemed invested in shares of the Company under a deferred
compensation plan contemplating future payment of the value of those shares. As
of January 31, 1997, the aggregate amount in Directors' accounts maintained
under the Plan approximated $272,000.
7. Proxy Results (unaudited)
The Company's shareholders voted on the following proposals at the Annual
Meeting of Shareholders held on June 19, 1996. Each Director was elected and all
other proposals were approved. The description of each proposal and the results
of the shareholder vote are as follows:
Election of Directors For Withheld
- --------------------------------------------------------------------------------
Ronald P. Lynch (Deceased June, 1996) 11,922,560 189,731
Robert S. Dow 11,929,058 183,233
E. Wayne Nordberg 11,927,881 184,410
E. Thayer Bigelow 11,905,470 206,821
Stewart S. Dixon 11,913,845 198,446
John C. Jansing 11,923,202 189,089
C. Alan MacDonald 11,915,542 196,749
Hansel B. Millican, Jr. 11,921,848 190,443
Thomas J. Neff 11,930,239 182,052
- --------------------------------------------------------------------------------
For Against Abstain Non-Vote
- --------------------------------------------------------------------------------
Ratification of Deloitte &
Touche LLP as independent
public accountants 11,768,273 75,663 268,355 --
Approval of certain changes
in fundamental investment
policies and restrictions 9,297,829 742,953 561,690 1,509,819
Approval of new Class A share
Distribution Plan and
Agreement 9,141,332 852,283 609,885 1,508,791
Approval of an amendment
to the Articles of Incorporation
authorizing the creation of
classes and series of shares
and confirming that the
Directors may impose
contingent deferred sales
charges on certain redemptions
of new classes of shares 9,543,071 860,702 488,185 1,220,333
Approval of an amendment
to the Articles of Incorporation
to reduce the par value of
capital stock to $.001 9,855,709 506,954 529,296 1,220,332
- --------------------------------------------------------------------------------
Copyright (C) 1997 by Lord Abbett Developing Growth Fund, Inc., 767 Fifth
Avenue, New York, NY 10153-0203
This publication, when not used for the general information of shareholders of
Lord Abbett Developing Growth Fund, Inc., is to be distributed only if preceded
or accompanied by a current prospectus which includes information concerning the
Fund's investment objective and policies, sales charges and other matters. There
is no guarantee that the forecasts contained within this publication will come
to pass. All rights reserved. Printed in the U.S.A.
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders,
Lord Abbett Developing Growth Fund, Inc.:
We have audited the accompanying statement of net assets of Lord Abbett
Developing Growth Fund, Inc. as of January 31, 1997, the related statements of
operations and of changes in net assets and the financial highlights for each of
the periods presented. These financial statements and the financial highlights
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and the financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at January
31, 1997 by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Lord Abbett
Developing Growth Fund, Inc. at January 31, 1997, the results of its operations,
the changes in its net assets and the financial highlights for each of the
periods presented in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
March 6, 1997
Our Management
Board of Directors
Robert S. Dow
E. Wayne Nordberg
E. Thayer Bigelow*+
Stewart S. Dixon*
John C. Jansing*
C. Alan MacDonald*+
Hansel B. Millican, Jr.*
Thomas J. Neff*+
* Outside Director
+ Audit Committee
Investment Manager and
Underwriter
Lord, Abbett & Co. and
Lord Abbett Distributor LLC
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
212-848-1800
Custodian
The Bank of New York
New York, NY
Transfer Agent
United Missouri Bank of
Kansas City, N.A.
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419100
Kansas City, MO 64141
800-821-5129
Auditors
Deloitte & Touche LLP
New York, NY
Counsel
Debevoise & Plimpton
New York, NY
- --------------------------------------------------------------------------------
[LOGO] LORD ABBETT & CO
Investment Management
A Tradition of Performance Through Disciplined INvesting
LORD ABBETT DISTRIBUTOR LLC LADG-2-197
- ------------------------------------------------------------
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203 (3/97)
