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Fund Description
The product seeks to outperform the Russell 2500® Value Index over a full market cycle with lower than benchmark risk.
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Fund Advantages
- Mispriced small-mid company stocks with improving fundamentals can provide significant capital appreciation.
- A disciplined investment philosophy incorporating quantitative screens and fundamental research will identify attractive stocks, while minimizing downside risk.
- A well-diversified portfolio of stocks with attractive fundamentals and strong growth prospects should produce attractive risk-adjusted returns.
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Fund Returns
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As of August 31, 2010
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All returns in percentages
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| Class |
Last
Quarter
06/30/2010
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Year
to Date
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1
Year
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3
Year
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5
Year
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10 Years
or Life
of Fund
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|
A
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NAV
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-9.48
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-1.33
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22.67
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-2.45
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--
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7.14
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| |
Inception date: December 30, 2005
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B
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NAV
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-9.65
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-1.68
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21.73
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-3.08
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--
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6.47
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| |
Inception date: December 30, 2005
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C
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NAV
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-9.65
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-1.68
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21.85
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-3.08
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--
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6.47
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| |
Inception date: December 30, 2005
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Past performance is no guarantee of future results. Investment returns and principal will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. All returns assume the reinvestment of all distributions.
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SEC Returns
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As of June 30, 2010
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All returns in percentages
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Class
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1
Year
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5
Year
|
10 Years
or Life
of Fund
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A
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SEC (A)
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15.58
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--
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5.73
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Inception date: December 30, 2005
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B
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SEC (B)
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17.73
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--
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6.11
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Inception date: December 30, 2005
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C
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SEC (C)
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21.85
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--
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6.47
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Inception date: December 30, 2005
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(A) SEC Returns reflect performance at the maximum 5.75% sales charge applicable to Class A share investments as of 06/30/2010.
(B) A maximum Contingent Deferred Sales Charge (CDSC) of 5% is applied to shares sold prior to the 6th anniversary of purchase. There are also ongoing 12b-1 service and distribution fees. Class B shares automatically convert to class A shares after 8 years.
(C) Class C shares are subject to ongoing 12b-1 service and distribution fees as well as a maximum Contingent Deferred Sales Charge (CDSC) of 1% if you redeem your shares before the first anniversary of your original purchase.
Past performance is no guarantee of future results. Investment returns and principal will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. All returns assume the reinvestment of all distributions.
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Rank
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Fund
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Percentage of Portfolio
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The Fund's portfolio is actively managed and may change significantly over time.
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Sector
(Sector groups include many industries)
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Percentage of Portfolio
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INFORMATION TECHNOLOGY
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15.80
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CONSUMER DISCRETIONARY
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11.00
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The Fund's portfolio is actively managed and may change significantly over time.
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Class
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Record
Date
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Ex Div
Date
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Invest
Date
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Payable
Date
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Reinvest
Price
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Dividend
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A
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11-20-2008
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11-21-2008
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11-21-2008
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11-21-2008
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8.14
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.01740
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B3
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11-20-2008
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11-21-2008
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11-21-2008
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11-21-2008
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8.10
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.01830
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BF
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11-20-2008
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11-21-2008
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11-21-2008
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11-21-2008
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8.10
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.05300
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F
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11-20-2008
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11-21-2008
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11-21-2008
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11-21-2008
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8.10
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.05300
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I
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11-20-2008
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11-21-2008
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11-21-2008
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11-21-2008
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8.15
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.05660
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R3
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11-20-2008
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11-21-2008
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11-21-2008
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11-21-2008
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8.10
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.01830
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Fund Status
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Open to New Investors
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Dividend Frequency
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Annually
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Number of Issues
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97
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Class
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Inception
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Quotron
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CUSIP
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Outstanding
Shares
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A
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December 30, 2005
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LVOAX
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54400A100
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36,679,824
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B
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December 30, 2005
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LVOBX
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54400A209
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1,418,034
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C
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December 30, 2005
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LVOCX
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54400A308
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9,688,246
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F
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September 28, 2007
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LVOFX
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54400A605
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8,583,662
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I
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December 30, 2005
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LVOYX
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54400A506
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12,610,427
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R2
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September 28, 2007
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LVOQX
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54400A704
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151,503
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R3
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September 28, 2007
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LVORX
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54400A803
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1,068,435
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Investment Team
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Porfolio Commentary
As of June 30, 2010
Market Review
Among the primary factors that influenced the market in the second quarter were the European sovereign debt crisis, slowing growth in China, and concerns about the strength of the U.S. economic recovery. In response to these, both domestic and foreign investors shifted away from stocks and toward assets perceived as less risky, such as U.S. Treasuries.1
After the economy posted 3% growth in the first quarter, the expansion showed signs of moderating. Consumer spending, for example, flattened in April after six consecutive months of improvement. In May, retail sales declined 1.7%. Inflation remained subdued, but the unemployment rate stayed between 9.5% and 10.0%. The Federal Reserve kept the fed funds target rate between 0% and 0.25%, explaining that conditions were likely to warrant low rates for an "extended period."
The S&P 500® Index2 reached a 2010 high of 1,217.28 on April 26, but then fell more than 100 points in May, largely due to concerns that the debt crisis in Greece could spread to the rest of Europe and threaten the monetary union. For the quarter, the index lost 11.4%. Declines occurred across all 10 major sectors, but defensive sectors, including telecommunication services and utilities, outperformed the broader market. Value stocks slightly outperformed growth stocks during the period, and small caps outperformed large caps.
Fund Review
The Fund returned -9.48%, reflecting the performance at the net asset value (NAV) of Class A shares with all distributions reinvested for the period ended June 30, 2010, outperforming its benchmark, the Russell 2500™ Value Index,3 which returned -10.16% for the same period. Average annual total return, which reflects performance at the maximum 5.75% sales charge applicable to Class A share investments and include the reinvestment of all distributions, as of June 30, 2010, are 1 year: 15.58%, 3 years: -4.35%, and since inception (December 30, 2005): 5.73%. Expense ratio, gross: 1.46%, and net: 1.35%.
Performance data quoted represent past performance, which is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The investment return and principal value of an investment in the fund will fluctuate so that shares, on any given day or when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, call Lord Abbett at 888-522-2388 or visit us at www.lordabbett.com.
The Fund's outperformance during the period was due in large part to overall stock selection. Within the information technology sector, Sapient Corp. (1.8% portfolio weighting) was among the best performers for the quarter. The software and programming company has had recent large business wins within its SapientNitro division, and also increased 2010 guidance. In the materials sector, the stock of Gerdau Ameristeel Co. (0.5% portfolio weighting), an iron and steel producer, increased as parent company Gerdau S.A. announced an offer to purchase all remaining shares of the company. Stock selection within the industrials sector also contributed to the Fund's performance for the quarter. Hexcel Corp. (1.0% portfolio weighting), a maker of composites, announced strong estimated guidance through 2013 as a result of recent announcements from major producers regarding increased aircraft production schedules. Within the health care sector, AmerisourceBergen Corp. (0.7% portfolio weighting), a drug distributor, reported an impressive quarter, and increased its guidance for the year. The company has seen recent strength in its generic and specialty drug business and is enthusiastic regarding the forecasted U.S. pharmaceutical industry growth from 2012–2014.
The Fund was negatively affected by stock selection within the financials sector. Lazard Ltd., (1.0% portfolio weighting) an investment services company, detracted from performance for the quarter due to its strong presence in the European markets during the recent economic uncertainty, as well as uncertainty in capital markets. During the quarter, shares of Reliance Steel and Aluminum (1.1% portfolio weighting), a metals company in the materials sector, fell due to estimated flat steel pricing and struggling overall demand for the quarter and remainder of the year. In addition, the weak market for non-residential construction is expected to continue. Within the information technology sector, Plexus Corp. (1.0% portfolio weighting), an electronic manufacturing services company, announced strong earnings for the March quarter, but has seen decreased business in the European markets during the June quarter. The company also saw supply constraints during the quarter. Within the industrials sector, TrueBlue Inc. (0.7% portfolio weighting) announced a less than expected loss for the first quarter; however, job market uncertainty and continuing recovery in the temporary staffing industry negatively affected this stock for the second quarter.
Outlook
The economic improvement in the United States has appeared to hit some roadblocks. Housing data have weakened, consumer confidence has not improved, and unemployment continues to be a concern. Add to this the turmoil in the European markets and investors seem to be questioning the sustainability of the U.S. recovery. In this environment, we believe the market will be more selective, rewarding companies with improving fundamentals. We are focusing on finding high-quality companies that have been able to generate sustainable cost cuts and margin improvement and that have compelling reward-to-risk characteristics, strong balance sheets, market positions, and management teams.
We remain underweight the financials sector, primarily within REITs. We are close to market weight in banks, finding select opportunities to invest in regional banks. We reduced our exposure to the consumer discretionary sector. During the quarter, we sold out of several retail names that had reached our price targets. We added to our overweight in the industrials sector. We continue to be overweight transportation-related names and added some engineering and construction companies. We reduced our weight within the information technology sector, but continue to maintain an overweight position. We added to our materials exposure, adding some gold-related names that are benefiting from increasing production and higher gold prices.
1Treasuries are debt securities issued by the U.S. government and secured by its full faith and credit. Income from Treasury securities is exempt from state and local taxes. Although U.S. government securities are guaranteed as to payments of interest and principal, their market prices are not guaranteed and will fluctuate in response to market movements.
2The S&P 500® Index is widely regarded as the standard for measuring large cap U.S. stock market performance and includes a representative sample of leading companies in leading industries.
3The Russell 2500™ Value Index measures the performance of those Russell 2500 companies with lower price-to-book ratios and lower forecasted growth values.
Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment.
Expense ratio: The net expense ratio takes into account a contractual management fee waiver/expense reimbursement agreement that currently is scheduled to remain in place through February 28, 2011, without which performance would have been lower.
The Fund's portfolio is actively managed and, therefore, its holdings and the weightings of a particular issuer or a particular sector as a percentage of portfolio assets may change significantly over time. Sectors may include many industries. The mention of specific portfolio holdings is for information only. It does not constitute a recommendation or an offer for a particular security or fund, nor should it be taken as a solicitation or recommendation to buy or sell securities or other investments.
Note: Class A shares purchased subject to a front-end sales charge have no contingent deferred sales charge (CDSC). However, certain purchases of Class A shares made without a front-end sales charge may be subject to a CDSC of 1% if the shares are redeemed before the first day of the month in which the one-year anniversary of the purchase falls. Please refer to the prospectus for more information on redemptions that may be subject to a CDSC. The CDSC is not reflected in the average annual total returns. If these charges were included, performance would be lower.
Instances of high double digit returns were achieved primarily during favorable market conditions and may not be sustainable over time.
A Note about Risk: Investments in equity securities will fluctuate in response to general economic conditions and to changes in the prospects of particular companies and/or sectors in the economy. Investing in small and mid-sized companies generally involves greater risks than investing in the stocks of large companies. These factors can affect Fund performance.
The views and information discussed in this commentary are as of June 30, 2010, are subject to change, and may not reflect the views of the firm as a whole. The views expressed in market commentaries are at a specific point in time, are opinions only, and should not be relied upon as a forecast, research, or investment advice regarding a particular investment or the markets in general. Information discussed should not be considered a recommendation to purchase or sell securities.
Investors should carefully consider the investment objectives, risks, charges, and expenses of the Lord Abbett Funds. This and other important information is contained in the fund's summary prospectus and/or prospectus. To obtain a prospectus or summary prospectus on any Lord Abbett mutual fund, contact your investment professional, Lord Abbett Distributor LLC at (888) 522-2388 or visit us at www.lordabbett.com. Read the prospectus carefully before you invest.
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Prospectus
You agree to receive the following
prospectus electronically and to read and agree to its terms before investing or sending money. It contains detailed information about the fund's investment policies, risks, charges and expenses. If you would like a reprinted copy of the prospectus, please contact your local Edward Jones investment representative.
The following prospectus is not an offer to sell, or a solicitation of an offer to buy shares in the fund nor shall any such shares be offered or sold to any person in any jurisdiction in which such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction.
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