Lord Abbett Glossary

This glossary explains a variety of terms used in the mutual fund industry. Many of these terms are found in fund prospectus documents.

A

AAA rated Bond
According to Fitch Ratings definitions: 'AAA' ratings denote highest credit quality and the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.

A bond or bond mutual fund's credit quality is determined by rating agencies, such as Standard & Poor's, Moody's, and Fitch.

AA Rated Bond
According to Fitch Rating definitions: 'AA' ratings denote very high credit quality and expectations of very low credit risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.

A bond or bond mutual fund's credit quality is determined by rating agencies, such as Standard & Poor's, Moody's, and Fitch.

A Rated Bond
According to Fitch Rating definitions: 'A' ratings denote low credit risk and expectations of low credit risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings.

A bond or bond mutual fund's credit quality is determined by rating agencies, such as Standard & Poor's, Moody's, and Fitch.

Alpha
Alpha is a measurement of performance. For mutual funds, the relationship between the fund's performance and the benchmark index against which it is compared. For example, an alpha of 1.0 suggests the fund outperformed the benchmark index by 1 percent. A negative alpha implies that the fund underperformed compared with the benchmark

Average Coupon
The average coupon is the average interest rate for all the bonds in the portfolio. A coupon refers to the interest rate on a debt security that the issuer promises to pay the bondholder until the bond maturity date.

Average Credit Quality
The average credit quality for all bonds held in the portfolio. Credit quality, known as a bond rating, is used to assess the investment quality of a bond or bond mutual fund. Credit quality indicates a bond or bond portfolio's risk of default

Average Current Yield
The average current annual income, or interest, from a security, stated as a percentage of the current cost for the portfolio. To calculate the current yield, annual income is divided by the market price of the security.

Average Duration
The average duration measures the average bond price volatility for the portfolio. It is expressed as a number of years. The greater the duration, the greater the bond's percentage of volatility.

Average Maturity
Average maturity is the average length of time for which debt instruments in the portfolio are due and payable.

Average Price
The average price of the securities held in the portfolio.

Average Yield-To-Maturity
Yield-to-Maturity (YTM) is the anticipated rate of return for a long-term bond, if that bond is held until the maturity date.

At NAV
The net asset value (NAV) is the market value of a mutual fund share. It usually is calculated daily by taking the total value of the fund's portfolio, less liabilities, and then dividing by the total number of shares outstanding.

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B

BBB Rated Bond
According to Fitch Rating definitions: 'BBB' ratings denote good credit quality and indicate that there are currently expectations of low credit risk. The capacity for payment of financial commitments is considered adequate, but adverse changes in circumstances and economic conditions are more likely to impair this capacity. This is the lowest investment-grade category.

A bond or bond mutual fund's credit quality is determined by rating agencies, such as Standard & Poor's, Moody's, and Fitch.

BB Rated Bond
According to Fitch Rating definitions: 'BB' ratings are speculative and indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment-grade.

A bond or bond mutual fund's credit quality is determined by rating agencies, such as Standard & Poor's, Moody's, and Fitch.

B Rated Bond
According to Fitch Rating definitions: BB ratings are highly speculative and indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment-grade.

A bond or bond mutual fund's credit quality is determined by rating agencies, such as Standard & Poor's, Moody's, and Fitch.

Benchmark
A benchmark is a standard used for measuring the performance of a security, mutual fund, or investment manager. Mutual funds are compared with benchmarks to judge performance.

Beta
Beta is a measurement of volatility for a stock, mutual fund, or portfolio, relative to the rest of stock market. The S&P 500� Index has a beta coefficient of 1.0. A mutual fund with a beta higher than 1.0 is considered more volatile than the market, suggesting that the mutual fund will rise and fall more rapidly than the market.

CCC Rated
According to Fitch Rating definitions: Default is a real possibility for issuers and performing obligations. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic conditions. For individual obligations, this rating may indicate distressed or defaulted obligations with potential for average to superior levels of recovery.

A bond or bond mutual fund's credit quality is determined by rating agencies, such as Standard & Poor's, Moody's, and Fitch.

Common Stock
Securities that indicate ownership of a public corporation. Investors who hold common stock typically have voting rights, which allow them to vote on the selection of directors and other important issues, as well as receive dividends. If the public corporation is liquidated, common stock holders may be paid only after the claims of secured and unsecured creditors, bondholders, and preferred stock holders have been met.

Compounding
Compounding allows earnings to generate earnings of their own. Over time, an investor earns interest on the initial investment, plus on the interest already paid into the account. Interest can be compounded annually, quarterly, half-yearly, or on any other basis.

Contingent Deferred Sales Charge
A fee that mutual fund investors must pay when selling mutual fund shares within a specified number of days or years of the date on which the shares were initially purchased. The amount may depend on how long the investor holds his or her shares. For example, a contingent deferred sales load might be 5 percent if an investor holds his or her shares for one year, 4 percent if the investor holds his or her shares for two years, and so on until charge goes away completely after the fifth year. The rate at which the charge declines will be disclosed in the fund's prospectus. Please read a fund's prospectus before investing.

Convertible Bonds
A corporate bond that gives investors the right to exchange the bond for a fixed amount of the company's common stock. Convertible bonds tend to have lower interest rates than nonconvertible bonds because they also accrue value as the price of the underlying stock rises. Convertible bonds offer some of the benefits of both stocks and bonds. Convertibles earn interest even when the stock is trading down or sideways, but when the stock prices rise, the value of the convertible increases. In some cases, convertibles may be callable, at which point the yield will cease.

Convertible Bonds/Common and Preferred Stock
See "convertible bonds" and "preferred stock" definitions.

Dividend
A dividend is a distribution of a company's earnings to shareholders. Dividends are usually paid in the form of money or stocks. Mutual fund dividends typically are paid quarterly from the income of the fund's investments.

Dividend Frequency
Dividend frequency shows how often a company pays dividends to shareholders. Most mutual funds distribute dividends on a quarterly basis.

Dividend Yield
Dividend yield is the percentage of return earned by the investor. The yield is calculated by dividing the amount of dividends per share by the current market price per share of stock. For example, if a stock's market price is $20 a share and the annual dividend is $1.00 per share, the dividend yield is 5 percent.

Downside Capture Ratio
The downside capture ratio measures a fund's performance in down markets relative to its particular benchmark. For example, a ratio of 50 percent means that the portfolio's value fell half as much as its benchmark index during the down market.

Ex-dividend
Ex-dividend refers to the amount of time between the announcement and the payment of the dividend. An investor who buys shares within this timeframe is not entitled to the dividend. Instead, the seller receives the dividend. Investors must purchase shares prior to the ex-dividend date in order receive the dividend.

Expense Ratio
An expense ratio is a percentage that mutual fund shareholders pay annually for mutual fund operating expenses and management fees. For example, if you purchase shares of a fund with a 0.75 expense ratio, you will be charged $0.75 for every $100 that you invest in that fund.

High-yield Bonds
According to Fitch, high-yield bonds are rated 'BB' or lower because of high default risk. They often pay a higher yield to compensate for greater risk. These bonds are also known as "junk bonds" or "speculative bonds."

Inception Date
The date a mutual fund began operating. For example, a fund with an inception date of January 9, 1986, has been offering shares since that date.

Investment Grade Straight Debt
Investment-grade straight debt indicates a municipal or corporate bond that has a relatively low risk of default. Letters 'A' and 'B' are used by credit rating agencies to identify a bond with an investment-grade credit quality rating.

Lipper Rankings
Lipper Inc. ranks mutual funds according to a peer-based performance system, which measures returns according to specific timeframes and fund classifications (small, mid, multi, and large cap).

Long-term Capital Gain
Long-term capital gain occurs when the price of a security held by a mutual fund rises above its purchase price when the security is sold more than one year after being purchased.

Market Cap
Market capitalization, or cap, is a measure of the value of a public company. It is calculated by multiplying the number of outstanding shares by the current market price. For example, a company with 100 million shares of outstanding stock at a current market value of $25 a share would have a market capitalization of $2.5 billion. Generally, companies are categorized by capitalization: large, mid, small, and micro.

Morningstar Ratings
A rating system for mutual funds based on one to five stars and developed by Morningstar, Inc.

NAV
Net asset value, indicating how much one share in a mutual fund is worth. It is calculated on a daily basis by subtracting liabilities from the total value of the fund's portfolio.

Nominee
A shareholder who receives a Form 1099-DIV that includes assets belonging to another person. Information on nominees can be found in the Mutual Fund Distributions section of IRS Publication 564, by calling the IRS at 800-TAX-FORM (800-829-3676), or visiting the IRS Website, IRS website.

NR
Non-rated, used for bonds.

Ordinary dividend
A fund distribution. An ordinary dividend is comprised of net income and short-term capital gains. This information is reported to shareholders on tax form 1099-DIV, in box 1a.

Payable
The date when the dividend is paid to shareholders.

P/B Ratio
Price-to-book ratio. The P/B ratio helps determine whether a stock is undervalued or overvalued. It is calculated by dividing a stock's price per share by its book value per share.

P/E Ratio
Price-to-earnings ratio. The P/E ratio, also known as the multiple, reflects how much a stock costs relative to its earnings. It is calculated by dividing the current stock price (the P) by the current earnings (the E).

Portfolio Turnover Ratio
This shows how much of a mutual fund's portfolio is traded, on an annualized basis

Preferred Stock
A type of stock that receives preferential treatment relative to common stock. For example, owners of preferred stock in a company will receive dividends before owners of common stock. But owners of preferred shares generally do not have voting rights in the company.

Qualified dividends
Dividends that "qualify" for the same tax status as long-term capital gains. Also known as ordinary dividends.

R-squared
A statistic showing the percentage of a fund's price movements that are explained by movements in the fund's benchmark index. R-squared values range from zero to 100, with an R-squared of 100 meaning that 100% of a fund's price movements can be explained by movements in the index.

Record
The date determining whether a shareholder is eligible to receive a dividend or capital gain distribution from a mutual fund or stock. When a company declares a dividend and sets a record date, shareholders must own the fund or stock on that date to receive the distribution.

Return on Equity
Shows how much profit a company earned relative to the amount of a shareholder's equity that is found on a company's balance sheet.

Rule of 72
A way of calculating how long it will take to double your money, using an interest rate and the number 72. For example, if you want to know how many years it will take to double your money at a 10% rate, divide 10 into 72 and you get 7.2 years.

Sharpe Ratio
Created by Stanford University Professor William F. Sharpe, this is a way of measuring the return on an investment relative to the risk involved in holding that investment.

Short-term Capital Gain
A profit from an investment that is sold after being held for less than a year. Short-term capital gains are taxed at ordinary income tax rates

Standard Deviation
Measures how far a set of data is from its mean. The farther away from the mean, the higher the standard deviation. Standard deviation is a way of measuring the volatility of an investment.

Upside Capture Ratio
A way of measuring a fund's performance relative to its benchmark during a rising market environment. A ratio of 25 percent, for example, means that the value of a portfolio increased 25 percent as much as its benchmark.

Value Funds
A mutual fund that invests in companies that analysts think are undervalued relative to their intrinsic worth.

Weighted Average Dividend Yield
The value of dividends, expressed as a percentage, that are distributed by a mutual fund relative to the fund's net asset value per share.

Weighted Market Capitalization
Indicates which type of stocks a fund or index tends to own. It is determined by weighing the market value of each stock in the fund or index. Most indexes, like the S&P 500, are constructed by market weight; others, like the Dow Jones Industrial Average, are price-weighted.

With Maximum Sales Charge
Reflects a mutual fund's performance using the maximum sales charge that is applied to the purchase of Class A shares
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12b-1 fees
Fees incurred for activities that are primarily intended to result in the sale of fund shares and service fees for shareholder account service and maintenance. Because 12b-1 fees are paid out on an ongoing basis, over time they will increase the cost of your investment and may cost you more than paying other types of sales charges.

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, you can click here or contact your investment professional or Lord Abbett Distributor LLC at (888) 522-2388. Read the prospectus carefully before you invest or send money.

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