Market Review as of 12/31/2015

The U.S. equity market1 advanced during the fourth quarter of 2015, rebounding from the correction experienced in the previous quarter. Markets were supported during the period by a reasonably positive earnings season in which 74% of the companies in the S&P 500 beat consensus earnings estimates. In December, the U.S. Federal Reserve (Fed) raised interest rates for the first time since 2006, as economic data during the quarter continued to suggest a strengthening domestic economy. Specifically, U.S. real gross domestic product (GDP) in the third quarter expanded by 2.0%2, with a rise in personal consumption expenditures and state and local government spending among the primary contributors. 

The Fed noted that U.S. economic activity, as a whole, continued to increase at a modest pace around the country between October and December. Most districts reported improving growth in consumer activity, and positive developments in their residential and commercial real estate markets. Conversely, manufacturing activity struggled in a number of regions3.

International equities4 also rebounded in the fourth quarter, as generally accommodative monetary policies around the globe helped lift equity markets. In Europe, markets were bolstered by the European Central Bank’s announcement that it would be willing to increase the size of its quantitative easing program. In Japan, expectations of further quantitative easing by the Bank of Japan increased, while an upward revision to third quarter GDP growth showed that the country narrowly avoided a technical recession. Finally, the People’s Bank of China cut interest rates for the sixth time in a year, as it sought to support economic growth in its economy.

The S&P 500 returned 7.04% during the fourth quarter. Of the 10 major sectors, the materials, consumer staples, healthcare, industrials, and information technology sectors outperformed the broader market. Value stocks5 underperformed growth stocks6, while large cap stocks7 outperformed small cap stocks8


Fund Review as of 12/31/2015

The Fund returned 6.01%, reflecting the performance at the net asset value (NAV) of Class A shares, with all distributions reinvested for the quarter ended December 31, 2015, compared to its benchmark, the S&P 900® 10-Year Dividend Growth Index,9 which returned 5.72% for the same period. (Please note: Effective September 27, 2012, the Lord Abbett Capital Structure Fund underwent an investment strategy change and became the Lord Abbett Calibrated Dividend Growth Fund. Therefore, the performance of the Fund for periods prior to September 27, 2012, is not representative of the Fund’s current strategy.) Average annual total returns, which reflect performance at the maximum 5.75% sales charge applicable to Class A share investments and include the reinvestment of all distributions, as of December 31, 2015, are: one year: -8.02%; five years: 8.17%; and 10 years: 6.06%. Expense ratio, gross: 1.07%, and net: 0.85%.

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

Consistent with our Calibrated investment approach, which seeks to achieve excess returns through a focus on security selection, individual stock positions drove relative performance during the quarter. The performance of select individual positions led to the Fund’s underperformance relative to its benchmark, the S&P 900® 10-Year Dividend Growth Index, during the three-month period.  The Fund’s overweight in ACE Ltd., a global insurance and reinsurance company, contributed to relative performance. During the period, ACE announced the acquisition of Chubb Corp.; the merger should provide economies of scale, increased client reach, and geographic diversification. Another contributor to relative performance was the Fund’s overweight position to integrated energy company Chevron Corp. Chevron’s focus on responsible capital spending, shareholder-friendly payout policies, and low-cost assets benefited its share price during the period, especially as oil prices remained volatile. Last, an overweight position in in Lowe’s Cos, Inc., a home improvement retailer, contributed to relative performance. Shares of the firm continued to benefit from a strong home-improvement environment, which contributed to better than expected earnings.

Conversely, the Fund's overweight position in Hasbro Inc., a provider of leisure-time products and services, detracted from relative performance.  Despite reporting revenue growth, the share price of Hasbro fell during the period; the weakness reflected investor’s expectations for Star Wars to drive more significant financial upside. The Fund’s underweight position in food-services company McDonald’s Corp. also detracted from relative performance.  The selection of a new CEO, who has a track record for successful organization turnarounds and an effective playbook for turning around brand perceptions, pushed the company’s share price higher during the period. Finally, the Fund’s overweight position in Oneok, Inc., a natural gas transportation and storage company, detracted from relative performance during the quarter. Oneok’s share price traded lower amid a difficult market environment characterized by depressed natural gas liquids prices and slowing volume growth.

Please refer to under the “Portfolio” tab for a complete list of holdings of the Fund, including the securities discussed above.

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