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USG & GSE Money Market Fund
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Fund Description
The Fund seeks to provide high current income and preservation of capital primarily through investments in short-term, liquid securities issued by the U.S.Government, its agencies and instrumentalities.
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Fund Advantages
- Provides investors with monthly dividends.
- Seeks to achieve its objectives while maintaining a net asset value of $1.00 per share.
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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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0.00
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0.01
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0.02
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1.26
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2.39
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2.05
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Inception date: June 27, 1979
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B
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NAV
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0.00
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0.00
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0.00
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0.89
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1.85
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1.58
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Inception date: August 01, 1996
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C
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NAV
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0.00
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0.01
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0.02
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1.26
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2.39
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2.05
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Inception date: July 15, 1996
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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
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10 Years
or Life
of Fund
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A
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SEC (A)
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0.02
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2.39
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2.05
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Inception date: June 27, 1979
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B
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SEC (B)
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-4.00
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1.67
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1.58
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Inception date: August 01, 1996
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C
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SEC (C)
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0.02
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2.39
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2.05
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Inception date: July 15, 1996
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(A) SEC Returns reflect performance at the maximum 0% 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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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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08-01-2010
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08-31-2010
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08-31-2010
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08-31-2010
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1.00
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.00002
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B
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08-01-2010
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08-31-2010
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08-31-2010
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08-31-2010
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1.00
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.00000
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C
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08-01-2010
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08-31-2010
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08-31-2010
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08-31-2010
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1.00
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.00002
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I
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08-01-2010
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08-31-2010
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08-31-2010
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08-31-2010
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1.00
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.00002
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Fund Status
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Open to New Investors
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Dividend Frequency
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Monthly
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Number of Issues
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16
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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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June 27, 1979
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LACXX
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543918106
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503,510,798
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B
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August 01, 1996
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LABXX
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543918304
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32,499,184
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C
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July 15, 1996
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LCCXX
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543918205
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43,913,443
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I
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October 19, 2004
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LAYXX
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543918403
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8,740,670
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Investment Team
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Porfolio Commentary
As of June 30, 2010
Market Review
The European debt crisis, combined with disappointing economic data, led investors to question the strength of the U.S. recovery. This contributed to a flight to quality, which reduced yields on Treasuries and agency-related securities. As investors shifted to these safer assets, spreads widened in many other sectors of the fixed-income market.
After the economy expanded in the first quarter, the expansion showed signs of moderating. Consumer spending, for example, remained flat in April after six consecutive months of improvement, and in May, retail sales fell 1.7%. The Conference Board's Index of Economic Indicators posted its first decline in more than a year, but the manufacturing sector continued to rebound, and the Federal Reserve's Beige Book indicated that economic activity was expanding in all 12 of the central bank's districts.
Despite the unprecedented fiscal and monetary stimulus of the past two years, inflation remained subdued. The 12-month change in the Consumer Price Index (CPI) stood at 2.2% as of April 2010, down from 2.7% in January 2010. The economy continued to add jobs in the second quarter, but an employment report in May indicated that the pace of job growth in the private sector had declined. Unemployment remained between 9.5% and 10.0%.
Citing the tentative nature of the recovery, the Fed kept the fed funds target rate between 0% and 0.25% during the quarter. The central bank explained that low inflation and low rates of resource utilization were likely to warrant low rates for an "extended period."
Fund Review
The Fund's Class A shares ended the second quarter of 2010 with total net assets of $499.9 million and a seven-day current yield of 0.02%.1 The Fund returned 0.00%, reflecting performance at the net asset value (NAV) of Class A shares, with all distributions reinvested, for the quarter ended June 30, 2010. Its peer group, the Lipper U.S. Government Money Market Funds Average,2 returned 0.00% in the same period. The Fund's average annual total returns, which include the reinvestment of all distributions, as of June 30, 2010, are: 1 year: 0.02%, 5 years: 2.39%, and 10 years: 2.05%. Expense ratio, gross: 0.79%, and net: 0.70%. (An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corp. 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.)
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 maintained its strategy of investing only in short-term, liquid government and government-sponsored enterprise (GSE) securities, including agency discount notes and repurchase agreements collateralized by agency debentures. The Fund sought to maintain a balance among discount note issuers Fannie Mae, Freddie Mac, and the Federal Home Loan Bank, with more being allocated to Fannie and Freddie, as their short paper is protected by the fact that they are in conservatorship.
Rates from overnight repurchase agreements to three-month maturities remained at abnormally low levels in the second quarter, though they saw a steady increase of a few basis points. We chose not to extend past three months in order to keep the average maturity low, and we increased our cash position, as repo rates rose to similar levels as three-month notes. As a result, the Fund's weighted average maturity enters the third quarter at 38 days, while the yield increased to 0.19%. The fed funds target rate is still bound to a range of 0–0.25%.
Demand for agency discount notes remained strong from money market fund participants in the second as investors sought any kind of yield pickup versus Treasury bills. Our active management and daily monitoring of rates enabled us to find the most attractive securities in this sector based on yields relative to other issues of similar maturity. We found incremental value by participating in the weekly discount note auctions by Fannie Mae, Freddie Mac, and the Federal Home Loan Bank. The new SEC 2a-7 rules also took effect in the second quarter; these require the Fund to keep 10% of its assets in overnights, repo, or Treasury bills. We chose to opportunistically establish a position in T-bills when they offered attractive rates as compared to repo and overnights.
Outlook
While most readings on the U.S. economy continue to be positive, there have been some disappointing signs of sluggishness in terms of the labor and housing markets, which have kept investors on edge and have raised the specter of a "double-dip" return to economic stagnation or contraction. Moreover, the European debt crisis has raised the levels of volatility in the financial markets. We do not, however, expect events in Europe to have a significant impact on the U.S. economy, but the uncertainty has caused a general sense of unease with global economic prospects. There continues to be ample slack in productive and labor capacity in the United States, leading us to conclude that inflation will remain tame throughout the next several quarters, which in turn will likely keep the Fed on hold. The government has been withdrawing many of the quantitative easing measures it adopted in late 2008 and early 2009 to deal with the recession and financial markets crisis. This includes the agency mortgage-backed securities (MBS) purchase program, which expired at the end of March. We expect MBS yields to rise relative to Treasuries, which might provide an opportunity for us to add back to our MBS allocation at more attractive valuations.
1The Fund's Class A current yield refers to the income generated by an investment in the Fund over a seven-day period, which is then annualized. The yield quotation more closely reflects the current earnings of the Fund than the one-year total return quotation. Past performance is no indication of future results.
2The Lipper U.S. Government Money Market Funds Average aims at investments in financial instruments issued or guaranteed by the U.S. government, its agencies, or its instrumentalities, with dollar-weighted average maturities of less than 90 days. Lipper, Inc. Copyright © 2010 by Reuters. All rights reserved. Any copying, republication, or redistribution of Lipper content is expressly prohibited without the prior written consent of Lipper.
Treasuries 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.
The net expense ratio takes into account a voluntary expense reimbursement arrangement, which may be modified at any time and 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 particular sector as a percentage of portfolio assets may change significantly over time. Current and future portfolio holdings are subject to risks that may impact negatively on the Fund's net asset value. 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. The CDSC is not reflected in the average annual returns. If these changes were included, performance would be lower. Please refer to the prospectus for more information on redemptions that may be subject to a CDSC.
A Note about Risk: An investment in the Fund is not a bank deposit and 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.
The views and portfolio holdings in this commentary are as of June 30, 2010, are subject to change, and may not reflect current views or holdings. This commentary represents Lord Abbett's assessment of the Fund and market environment at a specific point in time and should not be relied upon by the reader as research or investment advice regarding a particular investment or the markets in general. Information provided 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 or Lord Abbett Distributor LLC at (888) 522-2388, or visit us at www.lordabbett.com. Read the prospectus carefully before investing.
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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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