Lord Abbett
Developing Growth Fund
2000 Annual Report
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A portfolio of small companies with large growth potential
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Lord Abbett Developing Growth Fund
A Tradition of
Performance
"This fund is a consistently strong performer that limits volatility, something
that can't be said for too many small-growth offerings."
Morningstar, August 6, 1999
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Do the Stocks of Small
Companies 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 pursue their
objectives. Look at equities: stocks of large companies
behave differently than stocks of small companies.
Year-to-year volatility is higher for small company stocks,
but, as the chart below illustrates, small company stocks
have provided double-digit average annual returns during
each of the last six decades.
Average Annual Returns During Each Decade(1)
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Small-cap stocks Large-cap stocks
1940s 20.7% 9.2%
1950s 16.9% 19.4%
1960s 15.5% 7.8%
1970s 11.5% 5.9%
1980s 15.8% 17.6%
1990s 15.2% 18.2%
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Lord Abbett Developing Growth Fund invests in stocks of
small, developing companies. These stocks offer unusual
growth potential and, not surprisingly, entail more investor
risk. However, when used as part of a diversified portfolio,
small company stocks may provide investors with added growth
potential to help them achieve their goals.
The average annual rates of total return, computed using the
SEC-required formula and reflecting the deduction of the
Class A share maximum sales charge of 5.75% for the periods
ended 12/31/99, were:
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1 year 30.20%
5 years 26.82%
10 years 18.72%
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Average Annual
Total Returns
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) Used with permission.(C)1999 Ibbotson Associates, Inc.
All rights reserved. (Certain portions of this work
were derived from copyrighted works of Roger G.
Ibbotson and Rex Sinquefield.) 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, 2000
[PHOTO]
Robert S. Dow
Chairman
February 15, 2000
"We believe we are entering a favorable environment for small growth companies,
as the economy continues to exhibit signs of steady growth and low inflation."
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Lord, Abbett & Co. is proud to announce we have received a DALBAR award for
providing consistently good service to shareholders, the 1999 Key Honor Award
for Mutual Fund Service. DALBAR, Inc., an independent research firm and
evaluator of mutual fund service, presents the awards to financial services
firms that provide consistently solid service to clients.
Lord Abbett Developing Growth Fund completed its fiscal year on January 31,
2000, with net assets of $2.9 billion. Below is an overview of class-specific
data for the period.
Fiscal Year Ended 1/31/00
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Class A Class B Class C Class P Class Y
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Net asset value $19.55 $19.09 $19.11 $19.46 $19.70
Capital gains $0.69 $0.69 $0.69 $0.69 $0.69
Total return* 25.33% 24.55% 24.45% 25.24% 25.88%
The Fund ended its fiscal year with solid performance, as the stocks of small
growth- oriented companies rebounded from their difficulties in the early part
of 1999. Throughout the period, our investment team remained true to its
investment strategy, focusing on acquiring the stocks of well-run small
companies with strong current earnings and future earnings growth potential. Due
to capacity constraints, and in order to maintain the integrity of our
investment philosophy, the Developing Growth Fund closed its doors to all new
investors at the end of business on January 31, 2000. Current investors may
continue to add to existing accounts.
Our investments in technology-related companies significantly contributed to the
Fund's strong performance during the year. In particular, the Fund was helped by
our holdings in technology outsourcing companies -- those that help corporate
America implement and operate Internet businesses and wireless communication
companies.
Conversely, stocks of companies in the Fund whose earnings did not meet Wall
Street expectations did not perform well. Many of these companies were impacted
by business slowdowns as they were forced to focus on potential Y2K problems.
Investors reacted in the extreme to any company that fell short of earnings
expectations, causing its stock price to fall sharply.
The strong performance of the stocks of small technology companies in recent
months increased our technology weighting. While valuations for technology
stocks have reached high levels in some cases, our research suggests that the
demand for technology goods and services warrants continued exposure to the
stocks of some of these companies.
We believe we are entering a favorable environment for small growth companies,
as the economy continues to exhibit signs of steady growth and low inflation.
Our research indicates that substantial value exists in many of these smaller
companies, as they currently offer greater growth potential and better value
than the average large company growth stock.
Thank you for investing with Lord Abbett and in the Developing Growth Fund. We
value the trust that you place in us, and look forward to serving your
investment needs in the years to come.
* Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
1
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Focus on. . .Performance
The Benefits of Long-Term Investing
Lord Abbett Developing Growth Fund has enabled investors to participate in the
growth potential of exciting small companies. During the past 10 years, the Fund
has significantly outperformed its benchmarks, the Russell 2000 Index,(1) and
the Russell 2000 Growth Index.(2)
Growth of a $10,000 Fund Investment: 1/31/90-1/31/00
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Developing Russell Russel 2000
Growth Fund 2000 Index Growth Index
1/31/90 $10,000 $10,000 $10,000
1/30/91 $11,466 $ 9,621 $10,074
1/30/92 $16,226 $13,929 $15,016
1/30/93 $15,852 $15,774 $15,190
1/30/94 $18,454 $18,706 $17,461
1/30/95 $17,947 $17,582 $16,257
1/30/96 $26,961 $22,847 $21,566
1/30/97 $34,603 $27,177 $24,799
1/30/98 $43,043 $32,088 $26,961
1/30/99 $49,170 $32,194 $28,905
1/30/00 $61,623 $37,905 $39,213
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The Fund's results reflect a Class A share investment of $10,000 at Net Asset
Value with dividends and capital gains reinvested. 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.
(1) The Russell 2000 Index measures small company stock market performance,
does not reflect the deduction of fees or expenses, is unmanaged and is not
available for direct investment.
(2) The Russell 2000 Growth Index measures the performance of those Russell
2000 companies with higher price-to-book ratios and higher forecasted
growth values, and does not reflect the deduction of fees or expenses, is
unmanaged and is not available for direct investment.
The Fund Versus the Benchmarks
As shown below, for the last 3- and 5-year periods ended 1/31/00, Lord Abbett
Developing Growth Fund outperformed the Russell 2000 Index and the Russell 2000
Growth Index. Both indexes are unmanaged and broadly measure small company stock
performance. While historically, long-term investors in small company stocks
have been rewarded with strong returns (see charts on inside front cover), there
is no assurance of the Fund's future performance or that this pattern will
continue.
Impressive Total Returns
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The Fund's total returns represent the percent change in Net Asset Value for
Class A shares over the 3- and 5-year periods ended 1/31/00 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.
(1) The Russell 2000 Index measures small company stock market performance,
does not reflect the deduction of fees or expenses, is unmanaged and is not
available for direct investment.
(2) The Russell 2000 Growth Index measures the performance of those Russell
2000 companies with higher price-to-book ratios and higher forecasted
growth values, and does not reflect the deduction of fees or expenses, is
unmanaged and is not available for direct investment.
2
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Focus on. . .Small, Growing Companies
The Fund seeks to invest in companies that have passed through their initial,
formative years and are now in the "developing growth" phase, as illustrated in
the graph below. 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 may offer better opportunity for appreciation over the long
term. However, the stock prices of these companies can fluctuate sharply. That's
why Lord Abbett Developing Growth Fund makes sense for investors who want to
participate in the aggressive growth potential of a diversified, actively
managed small company stock portfolio.
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
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* The Gross Domestic Product or "GDP" represents the output of goods and
services for the U.S. economy. GDP generally grows at a more steady pace as
compared to companies in the earlier phases of business growth.
A Program of Regular Investment Can Help Promote Small-Cap Peace of Mind
Investing even a small amount of money on a regular basis can help you build a
substantial portfolio over the long term. While, historically, investment in
small companies has provided investors with strong returns, you may be
uncomfortable day-to-day with the higher level of price volatility associated
with the small-cap market and, consequently, with professionally managed small
company stock portfolios such as Lord Abbett Developing Growth Fund.
One solution: a systematic investment plan. "Dollar cost averaging" may help you
better tolerate the ups and downs of the small company stock prices. In fact,
dollar cost averaging may actually make market volatility work to your benefit.
Using a systematic investment plan that involves a fixed-dollar amount each
month, you buy more shares when the price is low and fewer shares when the price
is high, thereby reducing the average share price over time as compared with a
single purchase at the higher price.
Periodic investment plans do not always return a profit and do not protect
against losses in a declining market. In addition, since periodic investment
plans involve continuous investment in securities regardless of fluctuating
price levels, investors should consider their financial ability to continue
their purchases through periods of low price levels.
For additional information regarding the benefits of a regular investment plan
in Lord Abbett Developing Growth Fund, please contact the Lord Abbett Literature
Department at 800-874-3733 and request item number LADG-6-1298 (3/99).
Important Note: Lord Abbett Developing Growth Fund is closed to new investors.
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. Lord Abbett Developing Growth Fund
invests in the securities of small companies. Small companies typically have a
higher risk of failure, and such companies' securities historically have
experienced a greater degree of illiquidity and market volatility, than large
companies and their securities.
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 Russell 2000 is an unmanaged index that measures
small company stock market performance and is widely followed by the investment
community. Performance figures for the unmanaged Russell 2000 do not reflect
deduction of transaction costs or management fees. An investor cannot invest
directly in an index, such as the Russell 2000. The Fund issues multiple classes
of shares with distinct pricing options. For a full discus sion 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 3/31/00, this report
must be accom panied by Lord Abbett's Performance Quarterly for the most
recently completed calendar quarter.
Statement of Net Assets
January 31, 2000
<TABLE>
<CAPTION>
Investments Shares Value
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<S> <C> <C> <C>
Investments in Common Stocks 92.22%
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Advertising .18% *Cobalt Group, Inc.-Provides Internet marketing
and data aggregation services 350,000 $ 5,162,500
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Aerospace/Defense 1.26% *Moog, Inc. Class A-Manufactures precision motion control
components and systems 250,000 4,921,875
+*Orbital Sciences Corp.-A space and information
systems company that designs,
manufactures, operates and markets a broad range of
affordable space-technology products
and satellite-based services 1,820,350 31,742,353
Total 36,664,228
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Air Transportation .32% ++*Frontier Airlines, Inc.-A low-fare, full-service commercial airline 918,000 9,466,875
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Apparel .18% +*Cutter & Buck, Inc.-Designs and markets upscale sportswear and outerwear 480,800 5,318,850
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Biotechnology .35% *Albany Molecular Research-Offers a variety of
chemistry research and developmentservices 240,000 10,290,000
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Broadcasting .36% *Salem Communications Class A-A radio broadcasting company 601,000 10,367,250
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Business Services 11.87% +*Acxiom Corp.-Provides information management
solutions using customer, consumer,and business data 1,275,000 32,313,281
*Aegis Communications Group-Provides inbound and
outbound contract telemarketing services to a variety
of companies in various industries 2,149,900 4,299,800
*Butler International, Inc.-Provides skilled engineers and
technical personnel on a contract basis 462,000 4,764,375
*CDI Corp.-A staffing and outsourcing service provider
to Fortune 1000 customers 153,800 3,585,462
+*Caribiner International, Inc.-International
producer of meetings, events, and training programs 927,500 1,970,938
*Diamond Technology Partners, Inc.-Develops
digital strategies which leverage information technology 408,950 33,508,340
+*First Consulting Group, Inc.-Provides consulting,
integration, and management services 400,000 7,350,000
G & K Services, Inc. Class A-A lessor of work
garments and related textile products 345,780 7,628,771
*Iron Mountain, Inc.-Records management company 992,590 32,631,396
*Jupiter Communications, Inc.-Provides research on Internet commerce 265,600 6,640,000
*Labor Ready, Inc.-Provides temporary workers to the light
industrial, construction and small business markets 607,900 5,053,169
*Management Network Group, Inc.-Provides management consulting
services to the global telecommunications industry 100,000 2,387,500
McGrath Rentcorp.-A lessor of relocatable modular
offices and electronic test equipment 419,020 7,018,585
*MemberWorks, Inc.-Provides membership service programs 300,000 8,325,000
*Modis Professional Services, Inc.-Provides business services
including consulting, outsourcing, outplacement, training
and professional staffing services 1,200,000 20,850,000
4
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Statement of Net Assets
January 31, 2000
Investments Shares Value
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*Multex.com, Inc.-Provides online investment research and
information services designed to meet the needs of institutional
investors, investment banks, brokerage firms, corporations and
individual investors 265,000 $ 6,658,125
*NFO Worldwide, Inc.-Provides custom and syndicated
marketing information services 1,104,500 22,573,218
+*Neoforma.com, Inc.-Provides business-to-business electronic
commerce services to purchasers and sellers of medical
products, supplies, and equipment 40,000 2,012,500
*On Assignment, Inc.-Places professional employees on
both long- and short-term assignments through its Lab Support,
Healthcare Financial Staffing and Enviro-Staff divisions 300,000 9,375,000
*Pegasus Systems, Inc.-Provides global electronic
commerce and transactionprocessing solutions 714,465 19,290,555
+*Professional Staff plc ADR-An international staffing
company specializing in high-level medical placement 340,000 1,700,000
*PurchasePro.com, Inc.-Provides Internet business-to-business
electronic commerce services 50,000 4,143,750
*RailWorks Corp.-Provides integrated rail system services 700,000 7,350,000
*Reckson Service Industries, Inc.-Identifies, acquires interests in,
develops and manages a network of complementary
e-commerce and e-services companies 100,000 5,168,750
*SOS Staffing Services, Inc.-Offers a full range of
staffing services through its 87 offices nationwide 292,670 1,390,183
+*Stamps.com, Inc.-Provides a service for purchasing
and printing postage over the Internet 192,000 6,432,000
*Strategic Distribution, Inc.-Provides proprietary
industrial supply procurement solutions to industrial sites,
primarily through its In-Plant Store program 1,348,500 2,781,281
+*Student Advantage, Inc.-Serves college students through its
national fee-based membership program and web site 1,270,000 22,860,000
*Sykes Enterprises, Inc.-Provides information
technology outsourcing services 351,300 9,726,619
*TeleTech Holdings, Inc.-Provides customer care management
solutions to Fortune 500 and international companies 1,850,000 44,515,625
+*ebookers.com plc ADR-Offers travel booking services on the Internet 70,000 1,513,750
Total 345,817,973
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Cable Services .43% *Cable Design Technologies Corp.-Designs and
manufactures specialty electronic data transmission
cables and network structured wiring systems 550,000 12,650,000
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Capital Goods .74% *Dionex Corp.-Manufacturer of analytical instruments 80,000 2,300,000
*Flow International Corp.-Designs, manufactures and
sells ultra-high-pressure waterjets for cutting
metallic and non-metallic materials 628,070 6,673,244
JLG Industries, Inc.-Leading manufacturer of self-propelled
aerial work platforms 307,120 2,572,130
++*LeCroy Corp.-Develops, manufactures and markets
principally high-performance digital oscilloscopes
and related products 520,500 8,295,469
*Park-Ohio Holdings Corp.-Manufactures plastic
containers for food products and industrial
products for the airline, automotive, rail and
trucking industries 172,400 1,605,475
Total 21,446,318
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Chemicals 1.58% H. B. Fuller Co.-Manufactures and markets adhesives,
sealants, coatings, paints and other
specialty chemical products worldwide 117,100 7,611,500
OM Group, Inc.-Produces metal carbonxylates and metal salts and powders 988,520 37,193,065
Polymer Group, Inc.-Major global manufacturer of non-woven materials 71,800 1,220,600
Total 46,025,165
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Communications Equipment .15% *Brightpoint, Inc.-Provides worldwide distribution
and integrated logistics services to the wireless
communications industry 50,000 656,250
*EMS Technologies, Inc.-Produces microwave
components and subsystems for application in space 250,000 3,656,250
Total 4,312,500
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Communications Services 2.52% +*Clearnet Communications, Inc. Class A-
A wireless communications company 877,500 34,112,812
+*InfoCure Corp.-Provides healthcare practice
management software products and services to
targeted healthcare practice specialties,
as well as larger medical practices 392,500 13,001,563
+*Netcentives, Inc.-Provides Internet loyalty, direct
marketing and promotion products and services used by web sites 125,000 8,531,250
+*Netro Corp.-Provides intelligent broadband wireless access systems to
communications service providers worldwide 125,000 5,375,000
5
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Statement of Net Assets
January 31, 2000
Investments Shares Value
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+*Xceed, Inc.-An integrated marketing and communications company 350,000 $ 12,425,000
Total 73,445,625
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Computer Services 5.45% +++*BrightStar Information Technology Group,
Inc.-Provides implementation of enterprise
resource planning (ERP) software
systems and enterprise-wide business and technology
solutions to Fortune 1000 companies and other large organizations 712,300 7,634,965
*CIBER, Inc.-Provides management consulting for
business technology solutions 600,000 13,537,500
*Cambridge Technology Partners, Inc.-Provides
management consulting and systems integration 2,600,000 52,162,500
*Computer Horizons Corp.-A leading provider of
information technology solutions 250,000 3,437,500
*Mastech Corp.-Provides information technology services worldwide 1,232,510 30,042,431
*Renaissance Worldwide, Inc.-Provides integrated
business and technology consulting services 1,390,900 9,214,713
*SCB Computer Technology, Inc.-Provides information
technology management and technical services 541,460 1,489,015
*Tanning Technology Corp.-An information technology
services provider that architects, builds and deploys
enterprise solutions for companies throughout the world 130,000 5,671,250
*Technology Solutions Co.-A provider of consulting and
systems integration services 300,000 10,556,250
*USWeb Corp.-Provides intranet, extranet and web
site solutions and services to medium-sized and large companies 750,940 21,542,591
+*Women.com Networks, Inc.-An Internet network
dedicated to women, featuring original content, personalized s
ervices, community and online shopping 275,000 3,489,063
Total 158,777,778
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Computer: Hardware 1.40% *In Focus Systems, Inc.-Manufactures and markets
displays that allow personal computer information to
be displayed on overhead projectors 534,880 13,271,710
*Insight Enterprises, Inc.-A direct marketer of
microcomputers, peripherals and software 581,980 20,078,310
++*MicroTouch Systems, Inc.-A manufacturer of touch-
and pen-sensitive input screens known as touchscreens 565,000 7,486,250
Total 40,836,270
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Computer: Software 11.60% +*Activision, Inc.-Publishes and distributes CD-based
and cartridge-based entertainment software 675,550 10,555,469
*Aspect Development, Inc.-Develops, markets and supports
enterprise client/server software and reference data products 172,400 11,550,800
*Aspen Technology, Inc.-Supplies software products
and services for the analysis, design and
automation of process manufacturing facilities 100,000 3,625,000
*Banyan Systems, Inc.-Designs, develops
and markets networking, directory and messaging
products and services that help people to communicate
across enterprise networks, intranets and the Internet 53,000 1,215,316
++*Best Software, Inc.-A leading provider of asset,
human resources and payroll management
software solutions for middle-market businesses 702,100 24,266,331
*Brio Technology, Inc.-Designs, develops, markets and
supports software products that enable
organizations to rapidly implement enterprise
business intelligence solutions 50,000 1,600,000
*Broadbase Software, Inc.-Provides customer-centric
analytic solutions 62,500 5,507,812
++*Caere Corp.-A world leader in optical character
recognition technology and a leading developer
of desktop forms processing and document management products 750,000 6,562,500
*CheckFree Holdings Corp.-Provides electronic
commerce services, financial application software
and related products 73,200 4,318,800
*Complete Business Solutions, Inc.-A leading provider
of information technology services to large and
mid-size organizations 300,000 6,075,000
+*CyberSource Corp.-Develops and provides real-time
e-commerce transaction services 130,000 4,566,250
+*Cyberonics, Inc.-Develops and provides real-time e-commerce
transaction services 300,000 6,900,000
+*Daleen Technologies, Inc.-Provides next-generation
billing and customer care software 350,000 6,693,750
+*Dendrite International, Inc.-Supplies sales force software products 450,000 13,275,000
*Exchange Applications, Inc.-Provides customer
optimization software and solutions 210,000 18,322,500
*Extensity, Inc.-Provides Internet-based software
applications designed to improve the productivity
of employees across an enterprise and to enhance
enterprise operating efficiency 7,400 428,275
*IMRglobal Corp.-A leading provider of application
software outsourcing and Year 2000 services worldwide 775,070 6,975,630
6
<PAGE>
Statement of Net Assets
January 31, 2000
Investments Shares Value
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++*Landmark Systems Corp.-Manufactures software
products which allow corporate customers to improve the
performance of their computer system and keep critical
business applications working at peak efficiencies 945,000 $ 7,500,937
+*Lionbridge Technologies, Inc.-Provides globalization
and multi-lingual Internet services to technology companies worldwide 480,000 9,480,000
+*NVIDIA Corp.-Designs, develops and markets three
dimensional (3D) graphics processors and related software 620,000 22,978,750
National Computer Systems, Inc.-Provides software, services and systems 729,200 24,975,100
*National Instruments Corp.-Supplies computer-based
instrumentation hardware and software products 425,000 16,176,563
*Optio Software, Inc.-Provides products and services
that help organizations make the transition from paper-intensive
commerce to electronic business, or eBusiness 150,000 2,484,375
*Phoenix Technologies Ltd.-The world's largest
supplier of standards-based compatibility
software to the personal computer industry 521,700 10,760,063
*Primus Knowledge Solutions, Inc.-Provides web-based
problem resolution software for customer support 205,500 15,399,656
*Project Software & Development, Inc.-Develops,
markets and supports enterprise asset maintenance software
used by businesses, government agencies and other organizations 193,400 9,138,150
*RAVISENT Technologies, Inc.-Designs, develops, licenses
and markets modular software solutions 456,100 14,196,113
++*RadiSys Corp.-Designs and produces embedded computer solutions 937,720 38,212,090
+*THQ, Inc.-Develops, publishes and distributes interactive
entertainment software 500,000 10,375,000
+*Transaction Systems Architects, Inc. Class A-Develops,
markets and supports software products for the
global electronics funds transfer market 600,000 12,900,000
*eCollege.com, Inc.-Provides technology and
services that enable colleges and universities to offer an
online environment for distance and on-campus learning 650,000 6,743,750
*iManage, Inc.-Provides content and collaboration management software 160,000 4,080,000
Total 337,838,980
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Construction/ *Catellus Development Corp.-An owner, developer
Home Building .44% and manager of real estate assets 300,000 3,750,000
*Crossmann Communities, Inc.-Single-family home builders in the Midwest 559,280 9,088,300
Total 12,838,300
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Consumer Products 2.85% *Alloy Online, Inc.-An Internet destination, provides
community, content and commerce to boys and girls between
the ages of 10 and 24 475,000 7,481,250
Dreyer's Grand Ice Cream, Inc.-Ice cream manufacturer and distributor 232,400 3,515,050
Educational Development Corp.-A marketer of non-fiction,
instructional children's books for retail trade outlets,
home party plans, and public and school libraries 133,000 432,250
*Horizon Organic Holding Corp.-Produces, processes
and markets a line of organic dairy products 428,520 3,910,245
Matthews International Corp.-A leading designer,
manufacturer and marketer of custom-made
identification products 450,000 10,462,500
*Meade Instruments Corp.-Designs and manufactures
telescopes and accessories for
amateur astronomers of all skill levels 250,000 7,296,875
+Northland Cranberries, Inc. Class A-Grows cranberries
on its properties in central and northern Wisconsin and
Massachusetts, and manufactures and markets a
branded line of juice products 573,000 3,652,875
*Smithfield Foods, Inc.-A leading hog producer,
pork processor and fresh pork and processed
meats marketer 370,000 6,775,625
*Twinlab Corp.-A leading manufacturer of
brand name nutritional supplements 670,000 5,234,375
*U.S.A. Floral Products, Inc.-Imports and
distributes perishable floral products 12,440 24,491
+*Whole Foods Market, Inc.-Owns and operates a chain
of 87 natural food supermarkets in
19 states and the District of Columbia 744,600 34,251,600
Total 83,037,136
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Data Processing Equipment *Advanced Digital Information Corp.-A leading provider
& Components 2.75% of automated data libraries for computer networks and
workstations and microelectronic components
for aerospace and medical applications 697,600 34,182,400
7
<PAGE>
Statement of Net Assets
January 31, 2000
Investments Shares Value
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*Ampex Corp. Class A-A leading innovator in the
fields of magnetic recording image (MRI)
processing and high-performance digital storage 1,270,000 4,127,500
*MICROS Systems, Inc.-Designs, manufactures and
markets point-of-sale electronic information
systems and related peripheral equipment and software 716,620 $ 41,877,481
Total 80,187,381
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Drugs 1.85% +*Corixa Corp.-Conducts biotechnological research 350,000 9,931,250
*ICOS Corp.-A bio-pharmaceutical company that
develops products for chronic and acute diseases 668,500 23,021,469
+*Kos Pharmaceuticals, Inc.-Develops prescription
pharmaceutical products primarily for the treatment of
chronic cardiovascular and respiratory diseases 349,680 3,584,220
*PathoGenesis Corp.-Develops drugs to treat chronic
infectious diseases, primarily lung infections 782,400 17,408,400
Total 53,945,339
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Electronics 5.69% +*American Xtal Technology, Inc.-Uses a proprietary
crystal growth technique to produce
semiconductor substrates for a variety of electronic
and opto-electronic applications 385,640 6,049,727
Analogic Corp.-A leading manufacturer of
high-precision medical and industrial diagnostic
and measurement instruments and equipment 325,915 11,732,940
*Artesyn Technologies, Inc.-A manufacturer of power
supplies and measurement control systems for industrial equipment 707,410 12,158,609
*Mechanical Technology, Inc.-Manufactures advanced
products that combine sensing capabilities with proprietary
software to serve a variety of applications for the commercial and
military aviation, computer equipment and energy conversion markets 217,500 12,220,781
+*SLI, Inc.-Manufactures and distributes a variety of
miniature lighting products 1,137,450 13,365,038
*Sawtek, Inc.-Supplies electronic signal processing components 837,000 52,940,250
Technitrol, Inc.-A worldwide manufacturer of electronic
components, electrical contacts and assemblies, thermostatic
and clad-metal materials and components, and related items 476,550 20,074,669
*Xircom, Inc.-Develops, manufactures, sells and supports
communications solutions 752,230 37,094,342
Total 165,636,356
- ----------------------------------------------------------------------------------------------------------------------==============
Electronics: Helix Technology Corp.-Designs, manufactures
Semiconductor .69% and services products based on cryogenic
(ultra-low temperatures) and vacuum technologies 100,000 4,862,500
*Rudolph Technologies, Inc.-Designs, develops,
manufactures and supports process control
metrology systems used in semiconductor device manufacturing 80,000 3,560,000
*Three-Five Systems, Inc.-Designs and manufactures
display modules for use in the end products of original
equipment manufacturers 306,666 11,787,474
Total 20,209,974
- ----------------------------------------------------------------------------------------------------------------------==============
Energy Equipment & Services *Core Laboratories NV-A provider of petroleum
5.31% reserve analysis and environmental testing 1,276,710 26,252,349
++*EXCO Resources, Inc.-An independent energy company
that acquires, explores and develops natural gas properties 650,000 4,590,625
++*Edge Petroleum Corp.-An oil and gas exploration company 550,000 1,993,750
*Evergreen Resources, Inc.-Explores, develops, operates
and acquires oil and gas properties 702,580 15,654,360
+*Harken Energy Corp.-An oil and gas exploration
and production company 2,400,000 2,400,000
*Independent Energy Holdings plc ADR-Generates
and markets electricity in the United Kingdom 884,100 39,950,269
+*Louis Dreyfus Natural Gas Corp.-Acquires, develops
and explores natural gas and oil properties 970,000 17,338,750
*Seitel, Inc.-An operator of a seismic database and
a provider of corollary geophysical services
to the petroleum industry 661,860 5,377,613
*Stone Energy Corp.-An independent oil and gas company
that acquires and exploits oil- and gas-producing
properties located primarily in the Gulf Coast Basin 400,000 14,900,000
*Superior Energy Services, Inc.-A provider of oil
field products and services in the Gulf of Mexico 812,510 5,738,352
*TransMontaigne, Inc.-A holding company which operates
through its subsidiaries primarily in the Mid-continent
and Rocky Mountain regions of the United States 500,000 2,406,250
Vintage Petroleum, Inc.-An independent energy company
engaged in the exploitation and development of oil
and gas properties 1,399,960 17,936,988
Total 154,539,306
- ----------------------------------------------------------------------------------------------------------------------==============
Entertainment 1.24% *American Classic Voyages Co.-Owns and operates United
States-flag cruise lines 535,000 15,916,250
*Cinar Corp. Class B sub vtg -An integrated entertainment
and education company 500,000 12,062,500
8
<PAGE>
Statement of Net Assets
January 31, 2000
Investments Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
*Hollywood.com, Inc.-Operates an Internet movie
site with various pages of information such
as movie trailers, reviews and showtime listings 237,500 $ 4,453,125
*Take-Two Interactive Software, Inc.-Develops,
markets, distributes and publishes interactive
entertainment software 300,000 3,731,250
Total 36,163,125
- ----------------------------------------------------------------------------------------------------------------------==============
Environmental Services +*Eco Soil Systems, Inc.-Develops, markets and sells
.42% proprietary biological and traditional chemical
products that provide solutions
for a variety of turf and crop problems
in the golf and agricultural industries 700,000 3,215,625
*Ionics, Inc.-Develops and manufactures systems
and provides related services for water treatment 300,000 8,887,500
Total 12,103,125
- ----------------------------------------------------------------------------------------------------------------------==============
Financial Services 4.39% ++*Federal Agricultural Mortgage Corp. Class C-
A federally chartered instrumentality of the U.S. 625,000 12,226,563
+Healthcare Realty Trust, Inc.-A healthcare facility
real estate investment trust 320,000 5,720,000
+*Net.B@nk, Inc.-Provider of banking services over the Internet 127,270 1,948,822
+*S1 Corp.-Provides Internet-based financial services solutions 1,193,540 108,089,966
Total 127,985,351
- ----------------------------------------------------------------------------------------------------------------------==============
Healthcare Products 4.24% ++*ATS Medical, Inc.-Manufactures and markets pyrolytic
carbon bileaflet mechanical heart valves 1,214,610 14,271,667
*Advance Paradigm, Inc.-Provides health benefit management services 437,100 8,222,944
*Apria Healthcare Group, Inc.-Provides comprehensive
home healthcare services 1,104,200 22,084,000
Arrow International, Inc.-Supplies disposable
catheters and related clinical products 676,610 21,524,656
+*Biopure Corp.-Develops, manufactures and markets oxygen therapeutics 350,000 9,668,750
*Columbia Laboratories, Inc.-An international pharmaceutical company 402,150 3,041,259
*Emisphere Technologies, Inc.-Develops technologies
which are intended to surmount the obstacles associated with
the oral administration of many currently injectable
therapeutic agents 150,000 5,681,250
*Hanger Orthopedic Group, Inc.-A professional practice
management company 933,000 4,198,500
*Orthofix International NV-An international
corporation which develops innovative products in
the medical device market; a leading producer of external
fixation devices, limb lengthening and bone
reconstruction equipment 607,680 9,267,120
+++*SonoSite, Inc.-Designs and develops miniaturized digital
ultrasound imaging devices 450,000 14,371,875
*SurModics, Inc.-Provides surface modification
solutions to the medical device industry 70,000 1,977,500
*Theragenics Corp.-Produces and sells implantable
radiation devices used in the treatment of prostate cancer 903,540 9,204,814
Total 123,514,335
- ----------------------------------------------------------------------------------------------------------------------==============
Healthcare Services 1.40% *Express Scripts, Inc. Class A-Provides pharmacy benefit
management to health maintenance organizations 80,000 4,135,000
++*HealthCare Service Group, Inc.-Provides operational
services to nursing home and retirement complexes 848,350 6,919,355
Hooper Holmes, Inc.-Provides health information to
the insurance industry 928,180 18,041,498
++*Matria Healthcare, Inc.-Provides obstetrical home
healthcare services that assist physicians
in the management of high risk pregnancies 2,016,000 8,946,000
*US Oncology, Inc.-Provides comprehensive management
services for oncology 511,800 2,654,963
Total 40,696,816
- ----------------------------------------------------------------------------------------------------------------------==============
Leisure 1.13% +*Bally Total Fitness Holding Corp.-Operates fitness
centers in the United States and Canada 465,000 10,200,938
*Championship Auto Racing Teams, Inc.-Owns, operates and
sanctions the open-wheel motorsports series in North America 463,330 9,700,972
*Harvey Entertainment Co.-Develops animation and
licensing opportunities based on the Harvey Classic characters 152,200 570,750
*Iwerks Entertainment, Inc.-A creator of interactive
"virtual reality" systems and attractions 138,443 294,191
*Steiner Leisure Ltd.-Provides spa services aboard cruise ships worldwide 698,990 12,276,012
Total 33,042,863
- ----------------------------------------------------------------------------------------------------------------------==============
Manufacturing .28% Westinghouse Air Brake Co.-Provides value-added,
technology-based products and services for the rail industry
on a worldwide basis 723,577 8,049,794
- ----------------------------------------------------------------------------------------------------------------------==============
Media 2.64% *FVC.COM, Inc.-Provides high quality, cost-effective
Internet video networking solutions 650,000 8,450,000
9
<PAGE>
Statement of Net Assets
January 31, 2000
Investments Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
+*NBC Internet, Inc. Class A-A global media company that
integrates media platforms, including Internet, broadcast
and cable television and radio 700,000 $ 66,587,500
+*Regent Communications, Inc.-A radio broadcasting
company that acquires, develops and operates radio stations
in small and mid-sized markets 150,000 1,762,500
Total 76,800,000
- ----------------------------------------------------------------------------------------------------------------------==============
Metals & Minerals 1.77% *Stillwater Mining Co.-Explores for, develops, extracts,
processes and refines platinum, palladium and associated
metals from J-M Reef located in Stillwater and Sweet Grass
counties, Montana 1,444,300 51,453,188
- ----------------------------------------------------------------------------------------------------------------------==============
Restaurants .39% *Buca, Inc.-Owns and operates "Buca di Beppo" restaurants 300,000 3,637,500
*P.F. Chang's China Bistro, Inc.-Owns and operates
28 full-service Chinese restaurants 300,000 7,650,000
Total 11,287,500
- ----------------------------------------------------------------------------------------------------------------------==============
Retail 6.25% *Ames Department Stores, Inc.-The nation's fifth
largest discount department store chain, with 303 stores
in 14 Northeastern states 510,000 10,646,250
+*Ann Taylor Stores Corp.-Retails women's apparel,
shoes and accessories primarily under the Ann Taylor brand name 1,100,000 24,200,000
+*Cost Plus, Inc.-Operates 70 retail stores, specializing
in the sale of casual home living and entertainment products 300,045 5,025,754
*Gerald Stevens, Inc.-Retails and markets flowers and
floral-related merchandise and gifts 250,000 1,843,750
*Kenneth Cole Productions, Inc. Class A-Develops, sources
and markets a broad range of footwear, handbags and accessories 301,590 9,990,169
*Pacific Sunwear of California, Inc.-Operates a nationwide
mall-based specialty retail chain of stores specializing in
casual apparel, footwear and related accessories catering to
teenagers and young adults 820,850 24,112,469
++*Quiksilver, Inc.-Designs, arranges, manufactures and
distributes casualwear, snowboardwear and swimwear for
young men, boys and juniors under the Quiksilver label,
and juniors swimwear and sportswear under the Raisin label 1,353,750 16,414,219
++*Shoe Carnival, Inc.-A retailer of family footwear
operating primarily in the Midwestern and
Midsouthern regions of the United States 753,540 6,098,964
*Stage Stores, Inc.-Owns and operates apparel stores
primarily in the Central region of the U.S. 1,302,930 1,547,229
+++*Tarrant Apparel Group-Designs, merchandises and
manufactures casual apparel 920,040 5,750,250
+*The Children's Place-Retails value-priced apparel and
accessories for newborn to 12 year-old children 668,700 9,696,150
*The Sirena Apparel Group, Inc.-Designs, manufactures
and markets branded and private label swimwear and resortwear
for each principal segment of the women's market 330,000 330
*The Timberland Co. Class A-Designs, develops, makes and
markets boots, shoes, apparel and accessories 700,000 25,900,000
++*Tropical Sportswear International Corp.-Produces high
quality casual and dressmen's apparel 740,000 9,527,500
*Tuesday Morning Corp.-A closeout retailer of upscale
house furnishings, gifts and related items 450,000 6,693,750
*Vans, Inc.-Designs, manufactures and distributes casual
and active casual footwear and apparel, performance footwear,
snowboard boots and snowboarding outerwear 666,600 9,249,075
+*Wild Oats Markets, Inc.-A natural foods supermarket chain 600,035 9,900,578
*Zany Brainy, Inc.-Retails toys, games, books and
multimedia products for children 760,000 5,415,000
Total 182,011,437
- ----------------------------------------------------------------------------------------------------------------------==============
Security Services 1.59% ++*Armor Holdings, Inc.-Worldwide manufacturer and distributor
of products and services for the law enforcement,
military and security markets 1,190,000 13,238,750
++*Cornell Corrections, Inc.-Provides privatized correctional,
detention and pre-release services in the United States 712,980 7,263,484
+*Identix, Inc.-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 790,000 7,505,000
*Kroll-O'Gara Co.-A leading provider of vehicle
armoring systems for military, commercial and
governmental clients worldwide 1,060,020 17,689,084
*Thermedics Detection, Inc.-Develops, manufactures
and markets high-speed systems used for product quality
assurance in a variety of industrial processes 90,000 686,250
Total 46,382,568
- ----------------------------------------------------------------------------------------------------------------------==============
10
<PAGE>
Statement of Net Assets
January 31, 2000
Investments Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
Technology 1.52% *Coherent, Inc.-Designs, manufactures and sells lasers,
laser systems, precision optics and related accessories 600,000 $ 26,437,500
+*Internet Pictures Corp.-Provides global visual
content and infrastructure for electronic
commerce and new media web sites 198,505 6,352,160
+*Microvision, Inc.-Develops, manufactures and markets
virtual retinal display (VRD) technology, which projects
images directly onto the eye's retina 45,000 1,290,938
+*Proxicom, Inc.-Provides Internet solutions to Global
1000 companies and other organizations 100,700 10,170,700
Total 44,251,298
- ----------------------------------------------------------------------------------------------------------------------==============
Telecommunications Equipment *Active Voice Corp.-Develops PC-based call processing
3.17% systems and computer telephone integration products 210,000 9,660,000
*PairGain Technologies, Inc.-Designs, manufactures,
markets and supports products that allow telecommunications
carriers and private networks to run efficiently 832,400 9,624,625
++*Plantronics, Inc.-A leading supplier of communication
headset products and services to users and providers worldwide 1,021,100 73,136,288
Total 92,420,913
- ----------------------------------------------------------------------------------------------------------------------==============
markets and provides specialized roaming
services, teleservices and prepaid wireless services to
the wireless telephone industry 805,500 5,890,219
++*CellStar Corp.-An integrated wholesale distributor
of cellular telephones and related products 3,005,000 26,105,938
*GST Telecommunications, Inc.-Offers long distance,
Internet, data transmission, private line
and local dial tone services 600,000 5,212,500
*iGo Corp.-Provides hard-to-find, model-specific
accessories and services for mobile
electronic devices 750,000 6,468,750
*MGC Communications, Inc.-Diversified telecommunications company 400,000 22,825,000
*SBA Communications Corp.-Owns and operates wireless
communications infrastructure 600,000 18,187,500
*TALK.com, Inc.-A nationwide provider of telecommunications
services to more than 215,000 small- and medium-sized
businesses in the U.S. 1,624,500 26,499,656
Total 111,189,563
- ----------------------------------------------------------------------------------------------------------------------==============
Total Investments in Common Stocks (Cost $2,054,791,049) 2,686,165,980
====================================================================================================================================
Short-Term Investments 8.39% Principal Amount (000)
- ------------------------------------------------------------------------------------------------------------------------------------
American General Finance 5.81% due 2/1/2000 $ 68,637 68,637,000
Associates Corp. 5.80% due 2/1/2000 140,780 140,780,000
Textron Inc. 5.82% due 2/1/2000 35,000 35,000,000
Total Short-Term Investments (Cost $244,417,000) 244,417,000
- ----------------------------------------------------------------------------------------------------------------------==============
Total Investments 100.61% (Cost $2,299,208,049) 2,930,582,980
====================================================================================================================================
Other Assets, Less Liabilities (.61)%
- ------------------------------------------------------------------------------------------------------------------------------------
Other (See Note 5) 285,835,892
- ----------------------------------------------------------------------------------------------------------------------==============
Receivables for: Capital stock sold 13,149,603
Securities sold 1,476,167
Dividends and interest 113,053
Total Other Assets 300,574,715
- ----------------------------------------------------------------------------------------------------------------------==============
Payables for: Collateral on securities loaned 285,835,892
Securities purchased 24,400,444
Capital stock reacquired 3,844,233
Other 4,395,719
Total Liabilities 318,476,288
- ----------------------------------------------------------------------------------------------------------------------==============
Total Other Assets, Less Liabilities (17,901,573)
- ----------------------------------------------------------------------------------------------------------------------==============
Net Assets 100.00% $2,912,681,407
====================================================================================================================================
11
<PAGE>
Statement of Net Assets
January 31, 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Shares-Net Asset Value ($1,742,136,285 / 89,115,626 shares outstanding) $19.55
Maximum offering price (Net Asset Value plus sales charge of 5.75% of the offering price) $20.74
Class B Shares-Net Asset Value ($363,168,563 / 19,020,195 shares outstanding) $19.09
Class C Shares-Net Asset Value ($302,527,895 / 15,827,766 shares outstanding) $19.11
Class P Shares-Net Asset Value ($155,610,806 / 7,994,663 shares outstanding) $19.46
Class Y Shares-Net Asset Value ($349,237,858 / 17,731,580 shares outstanding) $19.70
The descriptions of the companies are unaudited.
*Non-income producing security.
+Securities (or a portion of securities) on loan. See Note 5.
++Affiliated issuer (holdings represent 5% or more of the outstanding voting
securities of underlying investments).
Affiliated issuers have a total cost of $287,170,699 and total value of
$330,280,645.
ADR American Depositary Receipt.
</TABLE>
See Notes to Financial Statements.
Statement of Operations
Investment Income Year Ended January 31, 2000
- --------------------------------------------------------------------------------
Income Interest $ 7,591,752
Dividends 2,448,583
Securities lending 894,234
Total income 10,934,569
- --------------------------------------------------------------------------------
Expenses Management fee 10,423,188
12b-1 Distribution plan-Class A 5,032,147
12b-1 Distribution plan-Class B 2,726,166
12b-1 Distribution plan-Class C 2,140,046
12b-1 Distribution plan-Class P 415,712
Shareholder servicing 3,308,684
Reports to shareholders 468,456
Professional 77,854
Directors' fees 49,409
Registration 770,358
Other 615,581
Total expenses before reductions 26,027,601
- --------------------------------------------------------------------------------
Expense reductions (60,703)
- --------------------------------------------------------------------------------
Net expenses 25,966,898
- --------------------------------------------------------------------------------
Net investment loss (15,032,329)
- --------------------------------------------------------------------------------
Realized and Unrealized Gain on Investments
================================================================================
Net realized gain from investment transactions 166,079,323
================================================================================
Net change in unrealized appreciation of investments 365,192,815
================================================================================
Net realized and unrealized gain on investments 531,272,138
================================================================================
Net Increase in Net Assets Resulting from Operations $516,239,809
================================================================================
See Notes to Financial Statements.
12
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Year Ended
January 31, January 31,
Increase in Net Assets 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations Net investment loss $ (15,032,329) $ (5,550,872)
Net realized gain from investment transactions 166,079,323 26,327,061
Net change in unrealized appreciation of investments 365,192,815 120,503,925
Net increase in net assets resulting from operations 516,239,809 141,280,114
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gain from investment
transactions:
Class A (47,584,340) (1,560,147)
Class B (10,846,801) (118,251)
Class C (8,384,959) (65,140)
Class P (3,577,192) (2,871)
Class Y (6,657,438) (11)
Total (77,050,730) (1,746,420)
- ------------------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Net proceeds from sales of shares 1,687,911,437 891,051,508
Net Asset Value of shares issued to shareholders in reinvestment of distributions 74,545,000 1,677,672
Total 1,762,456,437 892,729,180
- ------------------------------------------------------------------------------------------------------------------------------------
Cost of shares reacquired (633,167,138) (241,146,131)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets derived from capital share transactions 1,129,289,299 651,583,049
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 1,568,478,378 791,116,743
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
Beginning of year 1,344,203,029 553,086,286
- ------------------------------------------------------------------------------------------------------------------------------------
End of year (including accumulated net investment loss of
$368,411 and $311,089, respectively) $2,912,681,407 $1,344,203,029
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------------------------
Year Ended
January 31,
Per Share Operating Performance: 2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year $16.25 $14.27 $12.80 $11.49 $ 9.58
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
Net investment loss (.11)(a) (.07)(a) (.10)(a) (.03) (.02)
Net realized and unrealized gain on investments 4.10 2.10 3.16 3.12 4.80
Total from investment operations 3.99 2.03 3.06 3.09 4.78
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (.69) (.05) (1.59) (1.78) (2.87)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of year $19.55 $16.25 $14.27 $12.80 $11.49
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(b) 25.33% 14.24% 24.38% 28.35% 50.22%
====================================================================================================================================
Ratios to Average Net Assets:
Expenses 1.20%(f) .98%(f) 1.06% 1.10% 1.03%
Net investment loss (.64)% (.46)% (.72)% (.67)% (.52)%
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
------------------------------------- --------------------------------------------
Year Ended Year Ended
January 31, 8/1/96(d) to January 31, 8/1/96(d) to
Per Share Operating Performance: 2000 1999 1998 1/31/97 2000 1999 1998 1/31/97
- --------------------------------------------------------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year $15.98 $14.12 $12.75 $12.14 $16.00 $14.13 $12.75 $12.14
- --------------------------------------------------------------------------------------- -------------------------------------------
Income (loss) from investment operations
Net investment loss (.21)(a) (.17)(a) (.20)(a) (.05) (.21)(a) (.17)(a) (.19)(a) (.05)
Net realized and unrealized
gain on investments 4.01 2.06 3.14 2.28 4.01 2.07 3.14 2.28
Total from investment operations 3.80 1.89 2.94 2.23 3.80 1.90 2.95 2.23
- --------------------------------------------------------------------------------------- -------------------------------------------
Distributions from net realized gain (.69) (.03) (1.57) (1.62) (.69) (.03) (1.57) (1.62)
- --------------------------------------------------------------------------------------- -------------------------------------------
Net Asset Value, end of year $19.09 $15.98 $14.12 $12.75 $19.11 $16.00 $14.13 $12.75
- --------------------------------------------------------------------------------------- -------------------------------------------
Total Return(b) 24.55% 13.37% 23.48% 19.43%(c) 24.45% 13.43% 23.55% 19.43%(c)
===================================================================================================================================
Ratios to Average Net Assets:
Expenses 1.79%(f) 1.72%(f) 1.76% .93%(c) 1.79%(f) 1.72%(f) 1.71% .93%(c)
Net investment loss (1.24)% (1.19)% (1.39)% (.73)%(c) (1.24)% (1.20)% (1.34)% (.73)%(c)
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class P Shares Class Y Shares
------------------------------------------ ---------------------------------------
Year Ended Year Ended
January 31, 1/5/98(d) to January 31, 12/30/97(d)
Per Share Operating Performance: 2000 1999 1/31/98 2000 1999 to 1/31/98
- -------------------------------------------------------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year $16.19 $14.26 $14.38 $16.30 $14.27 $14.12
- -------------------------------------------------------------------------------------------- --------------------------------------
Income (loss) from investment operations
Net investment loss (.12)(a) (.10)(a) (.01)(a) (.05)(a) (.03)(a) -(a)(e)
Net realized and unrealized gain (loss)
on investments 4.08 2.08 (.11) 4.14 2.11 .15
Total from investment operations 3.96 1.98 (.12) 4.09 2.08 .15
- -------------------------------------------------------------------------------------------- --------------------------------------
Distributions from net realized gain (.69) (.05) - (.69) (.05) -
- -------------------------------------------------------------------------------------------- --------------------------------------
Net Asset Value, end of year $19.46 $16.19 $14.26 $19.70 $16.30 $14.27
- -------------------------------------------------------------------------------------------- --------------------------------------
Total Return(b) 25.24% 13.89% (.83)%(c) 25.88% 14.59% 1.06%(c)
====================================================================================================================================
Ratios to Average Net Assets:
Expenses 1.25%(f) 1.17%(f) .08%(c) .81%(f) 0.72%(f) .06%(c)
Net investment loss (.70)% (.70)% (.05)%(c) (.26)% (.22)% (.02)%(c)
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Supplemental Data for All Classes: 2000 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets, end of year (000) $2,912,681 $1,344,203 $553,086 $330,358 $197,602
Portfolio turnover rate 50.13% 30.89% 33.60% 42.35% 50.12%
======================================================================================================================
</TABLE>
(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.
(d) Commencement of offering respective class shares.
(e) Amount less than $.01.
(f) The ratios for 1999 and 2000 include expenses paid through an expense
offset arrangement.
See Notes to Financial Statements.
14
<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 the significant
accounting policies followed by the Company: (a) Security valuation is
determined as follows: Portfolio 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 last 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. Short-term securities are valued at
amortized cost (which approx i mates market value) if the maturity is 60 days or
less at the time of purchase, or market value if the maturity is greater than 60
days. 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 dis tribute 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.
2. Management Fee and Other Transactions with Affiliates The Com pany has a
management agreement with Lord, Abbett &Co. ("Lord Abbett") pursuant to which
Lord Abbett 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. At
January 31, 2000, the management fee payable was $1,257,218.
The Company has Rule 12b-1 plans and agreements (the "Class A, Class B, Class C
and Class P 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, (2) a
one-time distribution fee of up to 1% on certain qualifying purchases and (3) an
annual distribution fee of 0.10% of the average daily Net Asset Value of Class A
shares. 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. Pursuant to the Class P Plan,
the Company pays Distributor an annual service and distribution fee of 0.20% and
0.25%, respectively, of the average daily Net Asset Value of the Class P shares.
Class Y does not have a Plan. At January 31, 2000, the 12b-1 fees payable were
$1,226,908.
Distributor received $655,920 representing payment of commissions on sales of
Class A shares after deducting $4,173,297 allowed to authorized dealers as
concessions. Certain of the Company's officers and directors have an interest in
Lord Abbett.
The Company along with certain other funds managed by Lord Abbett (the
"Underlying Funds") has entered into a Servicing Agreement with the Alpha Series
of Lord Abbett Securities Trust pursuant to which the Underlying Funds will pay
a portion of the expenses of the Alpha Series in proportion to the average daily
value of shares owned by the Alpha Series. Other expenses include approximately
$193,000 accrued pursuant to this Servicing Agreement.
3. Distributions Net realized gain from investment transactions is distributed
to shareholders twice a year. Accumulated net realized gain at January 31, 2000
for financial reporting purposes aggregated $100,021,962. Distributions from net
realized gain declared on February 15, 2000 and paid on February 23, 2000 to
shareholders of record on February 15, 2000 were as follows:
Rate Per Aggregate
Class Share Amount
- ---------------------------------------
A $0.7235 $60,263,698
B $0.7235 $13,725,844
C $0.7235 $11,454,333
P $0.7235 $ 6,118,925
Y $0.7235 $12,867,457
- ---------------------------------------
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 gain amounts in accordance with generally
accepted accounting principles.
4. Capital The Company has authorized 1 billion shares of $.001 par value
capital stock designated as follows: Class A-895 million shares, Class B-20
million shares, Class C-25 million shares, Class P-30 million shares and Class
Y-30 million shares. Paid in capital amounted to $2,181,652,925 at January 31,
2000. Transactions in shares of capital stock were as follows:
Year Ended Year Ended
January 1, 2000 January 31, 1999
- ----------------------------------------------- -------------------------------
Class A Shares Amount Shares Amount
- ----------------------------------------------- -------------------------------
Sales of shares 58,432,866 $986,611,558 34,439,805 $502,454,274
Shares issued to
shareholders in
reinvestment of
distributions 2,758,541 46,297,955 98,898 1,500,289
Total 61,191,407 1,032,909,513 34,538,703 503,954,563
- ----------------------------------------------- -------------------------------
Shares reacquired (26,498,985) (444,560,815) (12,116,669) (170,758,960)
Increase 34,692,422 $588,348,698 22,422,034 $333,195,603
- --------------------------------------------------------------------------------
Year Ended Year Ended
January 1, 2000 January 31, 1999
- ----------------------------------------------- -------------------------------
Class B Shares Amount Shares Amount
- ----------------------------------------------- -------------------------------
Sales of shares 8,603,561 $139,812,675 9,442,316 $137,537,607
Shares issued to
shareholders in
reinvestment of
distributions 620,420 10,205,850 7,448 111,870
Total 9,223,981 150,018,525 9,449,764 137,649,477
- -------------------------------------------------------------------- -----------
Shares reacquired (2,533,652) (41,518,036) (1,517,765) (21,142,892)
Increase 6,690,329 $108,500,489 7,931,999 $116,506,585
- --------------------------------------------------------------------------------
15
<PAGE>
Year Ended Year Ended
January 1, 2000 January 31, 1999
- ----------------------------------------------- -------------------------------
Class C Shares Amount Shares Amount
- ----------------------------------------------- -------------------------------
Sales of shares 10,236,907 $166,790,981 8,526,748 $122,721,386
Shares issued to
shareholders in
reinvestment of
distributions 474,086 7,867,443 4,177 62,820
Total 10,710,993 174,658,424 8,530,925 122,784,206
- ----------------------------------------------- -------------------------------
Shares reacquired (3,122,165) (51,382,164) (2,670,719) (36,314,213)
Increase 7,588,828 $123,276,260 5,860,206 $ 86,469,993
- --------------------------------------------------------------------------------
Year Ended Year Ended
January 1, 2000 January 31, 1999
- ----------------------------------------------- -------------------------------
Class P Shares Amount Shares Amount
- ----------------------------------------------- -------------------------------
Sales of shares 7,183,500 $123,901,578 3,997,976 $57,451,548
Shares issued to
shareholders in
reinvestment
of distributions 209,735 3,538,760 190 2,682
Total 7,393,235 127,440,338 3,998,166 57,454,230
- ----------------------------------------------- -------------------------------
Shares reacquired (2,836,163) (48,311,912) (606,014) (8,760,737)
Increase 4,557,072 $ 79,128,426 3,392,152 $48,693,493
- --------------------------------------------------------------------------------
Year Ended Year Ended
January 1, 2000 January 31, 1999
- ----------------------------------------------- -------------------------------
Class Y Shares Amount Shares Amount
- ----------------------------------------------- -------------------------------
Sales of shares 15,525,460 $270,794,645 4,894,745 $70,886,693
Shares issued to
shareholders in
reinvestment
of distributions 381,945 6,634,992 1 11
Total 15,907,405 277,429,637 4,894,746 70,886,704
- ----------------------------------------------- -------------------------------
Shares reacquired (2,804,864) (47,394,211) (265,936) (4,169,329)
Increase 13,102,541 $230,035,426 4,628,810 $66,717,375
- --------------------------------------------------------------------------------
5. Portfolio Securities The Company may lend its securities to member banks of
the Federal Reserve System and to registered broker-dealers approved by the
Company. The loans are collateralized at all times by cash and/or U.S. Treasury
securities in an amount at least equal to the market value of the securities
loaned. As of January 31, 2000, the value of securities loaned was $269,814,722.
These loans were collateralized by cash of $285,835,892. Income from securities
lending of$894,234 is accounted for in the same manner as other dividend and
interest income on the Statement of Operations.
Purchases and sales of investment securities (other than short-term investments)
aggregated $1,829,113,886 and $922,891,670, respectively. As of January 31,
2000, net unrealized appreciation for federal income tax purposes aggregated
$631,374,931, of which $860,696,823 related to appreciated securities and
$229,321,892 related to depreciated securities. For federal income tax purposes,
the identified cost of investments owned at January 31, 2000 was substantially
the same as the cost for financial reporting purposes.
6. Expense Reduction The Company has entered into an arrangement with its
transfer agent whereby credits realized as a result of uninvested cash balances
were used to reduce a portion of the Company's expenses.
7. Transactions with Affiliated Companies An affiliated company is a company in
which the Fund has ownership of at least 5% of the voting securities of the
underlying issuer. Transactions during the year with companies that are
affiliates are as follows:
Balance of
Shares Held Gross Gross
Affiliates Jan. 31, 1999 Purchases Sales
- --------------------------------------------------------------------------------
ATS Medical, Inc. 750,000 464,610 -
Armor Holdings, Inc. 1,150,000 40,000 -
Best Software, Inc. 251,100 451,000 -
BrightStar Information
Technology Group, Inc. 770,000 - (57,700)
Caere Corp. 650,000 100,000 -
CellStar Corp. 1,605,000 1,400,000 -
Cornell Corrections, Inc. 422,800 290,180 -
EXCO Resources, Inc. 650,000 - -
Edge Petroleum Corp. 640,000 5,200 (95,200)
Federal Agricultural
Mortgage Corp. Class C - 300,000 -
Frontier Airlines, Inc. - 1,368,000 (450,000)
HealthCare Service Group, Inc. 708,350 140,000 -
Landmark Systems Corp. 945,000 50,000 (50,000)
LeCroy Corp. 520,500 - -
Matria Healthcare, Inc. 1,200,000 816,000 -
MicroTouch Systems, Inc. 420,000 145,000 -
Plantronics, Inc. 728,400 292,700 -
Quiksilver,Inc. 502,500 600,000 -
RadiSys Corp. 5 85,00040,147 -
ShoeCarnival, Inc. 450,000 303,540 -
SonoSite, Inc. - 450,000 -
Tarrant Apparel Group 507,000 513,040 (100,000)
Tropical Sportswear
International Corp. 32,500 707,500 -
- --------------------------------------------------------------------------------
Realized Gain
Balance of (Loss)
Shares Held Value Feb. 1, 1999 to
Affiliates Jan. 31, 2000 Jan. 31, 2000 Jan. 31, 2000
- --------------------------------------------------------------------------------
ATS Medical, Inc. 1,214,610 $14,271,667 $ -
Armor Holdings, Inc. 1,190,000 13,238,750 -
Best Software, Inc. 702,100 24,266,331 -
BrightStar Information
Technology Group, Inc. 712,300 7,634,965 (334,622)
Caere Corp. 750,000 6,562,500 -
CellStar Corp. 3,005,000 26,105,938 -
Cornell Corrections, Inc. 712,980 7,263,484 -
EXCO Resources, Inc. 650,000 4,590,625 -
Edge Petroleum Corp. 550,000 1,993,750 (979,004)
Federal Agricultural
Mortgage Corp. Class C 625,000(a) 12,226,563 -
Frontier Airlines, Inc. 918,000 9,466,875 (3,189,657)
HealthCare Service Group, Inc. 848,350 6,919,355 -
Landmark Systems Corp. 945,000 7,500,937 (210,291)
LeCroy Corp. 520,500 8,295,469 -
Matria Healthcare, Inc. 2,016,000 8,946,000 -
MicroTouch Systems, Inc. 565,000 7,486,250 -
Plantronics, Inc. 1,021,100 73,136,288 -
Quiksilver, Inc. 1,353,750(b) 16,414,219 -
RadiSys Corp. 937,720(b) 38,212,090 -
ShoeCarnival, Inc. 753,540 6,098,964 -
SonoSite, Inc. 450,000 14,371,875 -
Tarrant Apparel Group 920,040 5,750,250 3,317,294
Tropical Sportswear
International Corp. 740,000 9,527,500 -
- --------------------------------------------------------------------------------
(a) Adjusted for 3 for 1 stock split
(b) Adjusted for 3 for 2 stock split
16
<PAGE>
8. Directors' Remuneration The Directors of theCompany 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.
Directors' fees payable at January 31, 2000, under a deferred compensation plan,
were $438,000.
9. Line of Credit The Company, along with certain other funds managed by Lord
Abbett, has available a $200,000,000 unsecured revolving credit facility
("Facility"), from a consortium of banks, to be used for temporary or emer gency
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 was at an annual
rate of 0.06% during the year. Effective December 17, 1999, this fee was
increased to 0.09% per annum. There were no loans outstanding pursuant to this
Facility at January 31, 2000, nor was the Facility utilized at any time during
the year.
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, 2000, the related statements of
operations for the year then ended and of changes in net assets for each of the
years in the two-year period then ended 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, 2000 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, 2000, 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.
[GRAPHIC OMITTED]
New York, New York
March 21, 2000
Copyright(C)2000 by Lord Abbett Developing Growth Fund, Inc.
90 Hudson Street, Jersey City, NJ 07302-3973
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
Fun d'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>
Investing in the
Lord Abbett
Family of Funds
<TABLE>
<CAPTION>
GROWTH
- ---------------------------------------------------------------------------------------------------------------------------
INCOME
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Funds Growth & Balanced Fund Income Funds Tax-Free Money
Growth Fund Income Funds Income Funds Market Fund
Growth Large-Cap Research Fund - Balanced World Bond- National U. S. Government
Opportunities Growth Fund Large-Cap Series** Debenture Series California Securities Money
Fund Research Fund- Series Global Fund - Connecticut Market Fund +++
Small-Cap Value Growth & Income Series Florida
Series Income Series High Yield Fund Georgia
Alpha Series* Affiliated Fund Bond-Debenture Hawaii
Developing International Fund Michigan
Growth Fund Series Limited Duration Minnesota
Lord Abbett Mid-Cap U. S. Government Missouri
Developing Value Fund Securities Series+ New Jersey
Growth Fund Global Fund- U. S. Government) New York
is closed to Equity Series Securities Series+ Pennsylvania
new investors Texas
Washington
</TABLE>
Finding the right mutual fund can be confusing. At Lord, Abbett & Co., we
believe your investment professional provides value in helping you identify and
under stand your investment objectives and, ultimately, offering fund recom
mendations suitable for your individual needs.
This publication, when used as sales literature, is to be distributed only if
preceded or accompanied by a current prospectus for the fund(s) covered by this
report.
For more complete information about any Lord Abbett fund, in cluding risks,
charges and ongoing expenses, call your investment professional or Lord Abbett
Distributor LLC at 800-874-3733 for a prospectus. Read it carefully before
investing.
The Lord Abbett Family of Funds lets you access more than 30 portfolios designed
to meet a variety of investment needs.
Diversification. You and your investment professional can diversify your
investments between equity and income funds.
Flexibility. As your investment goals change, your investment professional
can help you reallocate your portfolio.
You may reallocate assets among our funds at any time. Speak with your
investment professional to help you customize your investment plan.
Numbers to Keep Handy
For Shareholder Account or Statement Inquiries: 800-821-5129
For Literature Only: 800-874-3733
24-Hour Automated Shareholder
Service Line: 800-865-7582
Visit Our Web Site:
www.lordabbett.com
** Lord Abbett Securities Trust - Alpha Series is a fund of funds investing in
shares of Lord Abbett Developing Growth Fund, Lord Abbett Research Fund -
Small-Cap Value Series and Lord Abbett Securities Trust - International
Series.
** Lord Abbett Balanced Series is a fund of funds investing in shares of
certain other Lord Abbett funds.
+ An investment in this Fund is neither insured nor guaranteed by the U.S.
Government.
++ An investment in this Fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund. This Fund is managed to
maintain and has maintained its stable $1.00 price per share.
[LOGO]
Lord Abbett mutual fund shares are distributed by:
LORD ABBETT DISTRIBUTOR LLC
90 Hudson Street o Jersey City, New Jersey 07302-3973
LADG-2-100
(3/00)
