Market Review as of 06/30/2015

The U.S. equity market (as represented by the S&P 500® Index1) advanced slightly during the second quarter of 2015, supported by a generally supportive earnings season and signs of strength in the domestic labor and housing markets. The quarter was not without some bouts of volatility, however, with questions surrounding the timing and magnitude of the Federal Reserve’s (“the Fed”) first rate hike, political headwinds related to Greek solvency, and fears of a slowing Chinese economy all contributing to investor concerns during the period. In addition, U.S. real gross domestic product (GDP) in the first quarter contracted 0.2% (according to the third estimate by the U.S. Bureau of Economic Analysis2), with declines in exports and state and local government spending among the primary detractors.  

The Fed noted that U.S. economic activity, as a whole, likely expanded around the country between early April and late May, with most districts reporting slight gains in employment and wages along with advances in consumer spending. Construction, real estate activity, and home prices also rose across most districts during the period, while manufacturing was primarily flat, with more than half of the districts reporting tempered manufacturing growth due to the downturn in the oil and gas industry.3

Elsewhere in the world, the European Central Bank’s continued quantitative easing was not enough to overcome the political risk related to Greece’s status in the eurozone, sending European markets generally lower. Chinese markets fluctuated during the quarter, as the supportive decision by the People’s Bank of China to cut its lending rate for the fourth time since November 2014 was offset by uncertainty surrounding the economy’s overall strength. Japanese equities continued to rise in the second quarter, buoyed by the continuation of aggressive monetary easing policies from the Bank of Japan, leading the U.S. dollar to reach a 13-year high relative to the Japanese yen in June.

The S&P 500 advanced 0.28% during the three-month period, but remained below new highs set earlier in the quarter. Gains occurred in five of 10 major sectors. The consumer staples, energy, industrials, materials, and utilities sectors underperformed the broader market. Value stocks (as represented by the Russell 3000® Value Index4) underperformed growth stocks (as represented by the Russell 3000® Growth Index5), while large cap stocks (as represented by the Russell 1000® Index6) trailed small cap stocks (as represented by the Russell 2000® Index7). 

Fund Review as of 06/30/2015

The Fund returned -2.21%, reflecting the performance at the net asset value (NAV) of Class A shares, with all distributions reinvested for the quarter ended June 30, 2015, compared to its benchmark, the S&P 900® 10-Year Dividend Growth Index,8 which returned -1.60% 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 June 30, 2015, are: one year: -3.35%; five years: 12.07%; and 10 years: 6.36%. 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

The performance of select individual overweight positions led to underperformance during the three-month period. The Fund's overweight position in Lowe’s Cos, Inc., a home improvement retailer, detracted from relative performance.  While overall sales trends remain healthy, shares of Lowe’s hit a soft patch after first-quarter results missed expectations. The Fund’s overweight position in ACE Ltd., a property and casualty insurer, also detracted from relative performance.  ACE saw strong underwriting results and relatively good growth prospects during the quarter, but the general strengthening of the U.S. dollar negatively impacted earnings. Finally, the Fund’s overweight position in Norfolk Southern Corp., a provider of rail transportation services, detracted from relative performance. Norfolk’s share price was affected by a negative outlook for coal and crude volume, pressured in part by low oil prices.

The Fund’s overweight in Hasbro Inc., a provider of leisure time products and services, contributed to relative performance. Shares of Hasbro rose during the quarter, supported by toy sales tied to movies such as Avengers, Star Wars, and Jurassic World. Also contributing to relative performance was the Fund’s overweight to Abbvie Inc., a pharmaceutical company. Shares of the firm benefited from a well-received acquisition during the quarter and continued share repurchases. Last, an underweight position in Texas Instruments Inc., a semiconductor company, contributed to relative performance. Shares of Texas Instruments sold off sharply after the company reported weak top-line results for the first quarter. Texas Instrument’s revenue was hurt by weak demand for PCs and wireless infrastructure.

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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