Market Review as of 12/31/2014

The U.S. equity market (as represented by the S&P 500® Index1) advanced during the fourth quarter of 2014, bolstered by reports indicating growing strength in the U.S. economy. But the market became more volatile as well, with falling oil prices and global economic weakness raising concerns. U.S. real gross domestic product (GDP) in the third quarter expanded 5.0%, (according to the third estimate by the U.S Bureau of Economic Analysis), exceeding Wall Street expectations.2  Business investment and consumer spending, particularly on durable goods, were among the primary contributors. 

The Federal Reserve (the “Fed”) noted that U.S. economic activity expanded around the country, with most districts reporting gains in employment and advances in consumer spending. Manufacturing, construction, and real estate activity also expanded, while lower oil prices presented concerns in two districts.3

Elsewhere, the eurozone narrowly avoided slipping back into recession, and falling prices led to concerns about deflationary pressures.  In Japan, economic activity contracted, making it likely that this year’s planned tax hike will be delayed. In China, the economy appeared to decelerate to its slowest pace in nearly 25 years, prompting the central bank to cut its official interest rate for the first time in two years.

The S&P 500 Index rose 4.9% during the quarter, but remained below new highs set earlier in the quarter. Gains occurred in seven of 10 major sectors. The energy, materials, and telecom sectors underperformed the broader market. Value stocks (as represented by the Russell 3000® Value Index4) edged out growth stocks (as represented by the Russell 3000® Growth Index5). Large cap stocks (as represented by the Russell 1000® Index6) underperformed small caps (as represented by the Russell 2000® Index7). 

Fund Review as of 12/31/2014

The Fund returned 6.07%, reflecting the performance at the net asset value (NAV) of Class A shares, with all distributions reinvested for the quarter ended December 31, 2014, compared to its benchmark, the Russell 1000® Value Index,8 which returned 4.98% for the same period. Average 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, 2014, are: one year: 5.42%; and since inception (December 29, 2011): 18.66%. Expense ratio, gross: 1.08%; and net: 0.75%.

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 that seeks excess returns exclusively through security selection, individual stock positions drove relative performance during the quarter. Specifically, the Fund’s overweight position in Rock-Tenn Co., a packaging manufacturer, was a top contributor to relative performance.  Shares of the firm rose during the quarter after better-than-expected sales and cost savings exceeded analyst expectations. Another contributor to relative performance was the Fund’s overweight position in domestic airline Southwest Airlines Co.  The firm’s shares finished a strong year off on a high note, benefiting from management’s plan for expansion and commitment to return capital to shareholders. The Fund’s overweight position in Allstate Corp., an insurance conglomerate, also contributed to performance during the quarter. Investors reacted positively to Allstate’s most recent earnings report, in which the company announced that underwriting revenues continued to improve.

The Fund’s overweight in Atwood Oceanics, Inc., an offshore drilling contractor, detracted from relative performance.  Although Atwood exceeded analyst expectations for the quarter, shares of the firm fell in sympathy with declining oil prices.  The Fund’s overweight position in Freeport-McMoRan Inc., a natural resources company, also detracted from relative performance.  Shares of Freeport-McMoRan fell after the company announced third-quarter earnings that did not meet expectations. The earnings miss was attributed to weaker average prices for copper, gold, and oil. Finally, the Fund’s overweight position in Chevron Corp., an integrated energy company, also detracted from relative performance.  Even with earnings exceeding expectations for the quarter, shares of the firm declined as oil prices continued to fall.

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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