UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number | 811-10371 |
|
LORD ABBETT BLEND TRUST |
(Exact name of registrant as specified in charter) |
|
90 Hudson Street, Jersey City, NJ | | 07302 |
(Address of principal executive offices) | | (Zip code) |
|
Christina T. Simmons, Vice President & Assistant Secretary
90 Hudson Street, Jersey City, NJ 07302 |
(Name and address of agent for service) |
|
Registrant’s telephone number, including area code: | (800) 201-6984 | |
|
Date of fiscal year end: | 7/31 | |
|
Date of reporting period: | 7/31/06 | |
| | | | | | | | |
Item 1: Report to Shareholders.
LORD ABBETT
2006
Annual
Report
Lord Abbett
Small Cap Blend Fund
For the fiscal year ended July 31, 2006
Lord Abbett Small Cap Blend Fund
Annual Report
For the fiscal year ended July 31, 2006
Dear Shareholders: We are pleased to provide you with this overview of the Lord Abbett Small Cap Blend Fund's performance for the fiscal year ended July 31, 2006. On this and the following pages, we discuss the major factors that influenced performance. For detailed and more timely information about the Fund, please visit our Website at www.LordAbbett.com, where you also can access the quarterly commentaries of the Fund's portfolio managers.
General information about Lord Abbett mutual funds, as well as in-depth discussion of market trends and investment strategies, is also provided in Lord Abbett Insights, a newsletter accompanying your quarterly account statements. We also encourage you to call Lord Abbett at 800-821-5129 and speak to one of our professionals if you would like more information.
Thank you for investing in Lord Abbett mutual funds. We value the trust that you place in us and look forward to serving your investment needs in the years to come.
Best regards,
Robert S. Dow
Chairman
Q: What were the overall market conditions of the fiscal year ended July 31, 2006?
A: Equities turned in mediocre performance; on a total return basis, however, equities outpaced aggregate bond returns. Macroeconomic fundamentals that support the broad market were mostly positive. For example, the economy expanded above 3%, industrial production accelerated, employment grew, and corporate earnings surged in the 12-month period. Set against these largely favorable trends, short-term interest rates rose, construction spending eased, and petroleum product prices rose as unrest in the Middle East raised tensions. Against these cross currents, equities struggled. As a result of the economic trends listed above, a downward shift in investor confidence was evident. The American Association of Individual Investors sentiment survey, for instance, went from indications that 29% of investors were bearish a year ago to 43% in the most recent poll.
Within the equity market, parity existed among capitalizations. In fact, a mere one-hundredth of a percentage point separated the 12-month total return of the S&P 100® Index1 (the large cap index) and the S&P SmallCap 600® Index.2 Broader indexes, such as the S&P 500® Index3 and S&P Composite 1500® Index,4 which includes mid cap names, fared
1
slightly better than the narrowly defined large and small cap indexes. Across all capitalizations, the value style of investing outperformed the growth style.
In the broad S&P Composite 1500 Index, the top performing sectors were energy, financials, and telecommunications. Energy companies benefited from high crude oil quotes. The sectors that detracted from the broad market's performance were consumer discretionary and information technology. Consumer discretionary companies were affected by soaring energy prices and (until recently) steadily rising interest rates, which lowered the growth of consumer spending to a below-trend rate. Technology stocks suffered from excess production capacity and declining product prices, even though business spending on new equipment and software grew briskly in the year ended July 31, 2006.
Performance data quoted in the following pages reflect past performance and are no guarantee of future results. Current performance may be higher or lower than the performance 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. You can obtain performance data current to the most recent month end by calling Lord Abbett at 800-821-5129 or referring to our Website at www.LordAbbett.com.
Q: How did the Fund perform over the fiscal year ended July 31, 2006?
A: The Fund returned -1.0%, reflecting performance at the net asset value (NAV) of Class A shares, with all distributions reinvested, compared with its benchmark, the Russell 2000® Index,5 which returned 4.2% over the same period. 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 July 31, 2006, are: 1 year: -6.68%, 5 years: 10.73%, and since inception (June 26, 2001): 11.36%. During certain periods shown, expense reimbursements were in place. Without such expense reimbursements, the Fund's returns w ould have been lower.
Q: What were the most significant factors affecting performance?
A: The producer durables sector was the greatest detractor from the Fund's performance relative to its benchmark in the period. The Ryland Group, Inc., a homebuilder and mortgage-related finance firm, was the Fund's number-one individual detractor. Centex Corp., another homebuilder and originator of retail mortgages, also disappointed.
The portfolio's overweight position in the technology sector also took away from relative performance.
The other energy sector was another area of relative underperformance. Within that sector, Massey Energy Co., a supplier of bituminous, low-sulphur coal, was a significant detractor.
2
Among the individual holdings detracting from performance were Tuesday Morning Corp., a closeout retailer of upscale home furnishings and gifts, and the Fund's second largest individual detractor, and Websense, Inc., a technology holding and provider of employee Internet management solutions.
The materials and processing sector was the strongest contributor to the Fund's performance relative to its benchmark in the period. Three materials and processing holdings were among the Fund's top individual contributors: Hughes Supply, Inc., a distributor of construction, repair, and maintenance products (recently acquired by The HomeDepot®); Commercial Metals Co., a steel manufacturer; and Carpenter Technology Corp., a manufacturer of stainless steels, titanium, and specialty metal alloys for the aerospace, defense, and medical device industries.
The consumer discretionary sector also contributed to relative performance. Within that sector, Select Comfort Corp., a producer and retailer of air chamber mattresses, was the Fund's largest individual contributor and the portfolio's largest holding.
Among the individual holdings adding to performance was ICON plc, a provider of contract clinical research services to the pharmaceutical industry and the Fund's second best individual contributor.
The Fund's portfolio is actively managed and, therefore, its holdings and weightings of a particular issuer or particular sector as a percentage of portfolio assets are subject to change. Sectors may include many industries.
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. Please see section "Your Investment—Purchases" in the prospectus for more information on redemptions that may be subject to a CDSC.
A prospectus contains important information about a fund, including its investment objectives, risks, charges, and ongoing expenses, which an investor should carefully consider before investing. To obtain a prospectus on any Lord Abbett mutual fund, please contact your investment professional or Lord Abbett Distributor LLC at 800-874-3733 or visit our Website www.LordAbbett.com. Read the prospectus carefully before investing.
1 The S&P 100® is comprised of the 100 leading U.S. stocks with exchange-listed options. The stocks in S&P 100 are generally among the largest and most established companies in the S&P 500.
2 The S&P SmallCap 600® is comprised of 600 small cap companies that meet specific inclusion criteria to ensure that they are investable and financially viable.
3
3 The S&P 500® is a representative sample of 500 leading companies in leading industries of the U.S. economy. The stocks in the S&P 500 account for over 80% coverage of U.S. equities.
4 The S&P Composite 1500® combines the S&P 500, S&P 400® (an index of mid cap companies), and S&P SmallCap 600® to create a broad market portfolio representing 90% of U.S. equities.
5 The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.
Indexes are unmanaged, do not reflect the deduction offees or expenses, and are not available for direct investment.
Important Performance and Other Information
The views of the Fund's management and the portfolio holdings described in this report are as of July 31, 2006; these views and portfolio holdings may have changed subsequent to this date, and they do not guarantee the future performance of the markets or the Fund. Information provided in this report should not be considered a recommendation to purchase or sell securities.
A Note about Risk: See Notes to Financial Statements for a discussion of investment risks. For a more detailed discussion of the risks associated with the Fund, please see the Fund's prospectus.
Performance: Because of ongoing market volatility, Fund performance may be subject to substantial fluctuation. Except where noted, comparative Fund performance does not account for the deduction of sales charges and would be different if sales charges were included. The Fund offers additional classes of shares with distinct pricing options. For a full description of the differences in pricing alternatives, please see the Fund's prospectus.
Mutual funds are not insured by the FDIC, are not deposits or other obligations of, or guaranteed by, banks, and are subject to investment risks, including possible loss of principal amount invested.
4
Investment Comparison
Below is a comparison of a $10,000 investment in Class A shares with the same investment in the Russell 2000® Index (the "Index") assuming reinvestment of all distributions. The performance of other classes will be greater than or less than the performance shown in the graph below due to different sales loads and expenses applicable to such classes. The graph and performance table below do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. During certain periods, certain expenses of the Fund have been reimbursed by Lord Abbett; without such reimbursement of expenses, the Fund's returns would have been lower. Past performance is no guarantee of future results.
Average Annual Total Return at Maximum Applicable Sales Charge for the Periods Ended July 31, 2006
| | | 1 Year | | 5 Years | | Life of Class | |
| Class A(3) | | | -6.68 | % | | | 10.73 | % | | | 11.36 | % | |
| Class B(4) | | | -5.52 | % | | | 11.22 | % | | | 11.84 | % | |
| Class C(5) | | | -1.64 | % | | | 11.35 | % | | | 11.96 | % | |
| Class P(6) | | | -1.11 | % | | | 12.07 | % | | | 12.66 | % | |
| Class Y(7) | | | -0.61 | % | | | 12.40 | % | | | 12.99 | % | |
(1) Reflects the deduction of the maximum initial sales charge of 5.75%.
(2) Performance of the unmanaged index does not reflect transaction costs, management fees or sales charges. The performance of the index is not necessarily representative of the Fund's performance.
(3) Performance is calculated from June 26, 2001, SEC effective date. Class A shares were first offered to the public on July 2, 2001. Total return, which is the percent change in net asset value, after deduction of the maximum initial sales charge of 5.75% applicable to Class A Shares, with all distributions reinvested for the periods shown ended July 31, 2006, is calculated using the SEC-required uniform method to compute such return.
(4) Performance is calculated from June 26, 2001, SEC effective date. Class B shares were first offered to the public on July 2, 2001. Performance reflects the deduction of a CDSC of 4% for 1 year and 1% for 5 years and life of the class.
(5) Performance is calculated from June 26, 2001, SEC effective date. Class C shares were first offered to the public on July 2, 2001. The 1% CDSC for Class C shares normally applies before the first anniversary of the purchase date. Performance is at net asset value.
(6) Performance is calculated from June 26, 2001, SEC effective date. Class P shares were first offered to the public on July 2, 2001. Performance is at net asset value.
(7) Performance is calculated from June 26, 2001, SEC effective date. Class Y shares were first offered to the public on July 2, 2001. Performance is at net asset value.
5
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges on purchase payments (these charges vary among the share classes); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees (these charges vary among the share classes); and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 through July 31, 2006).
Actual Expenses
For each class of the Fund, the first line of the table on the following page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period 2/1/06 – 7/31/06" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
For each class of the Fund, the second line of the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
6
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | | Beginning
Account
Value | | Ending
Account
Value | | Expenses
Paid During
Period† | |
| | | 2/1/06 | | 7/31/06 | | 2/1/06 –
7/31/06 | |
| Class A | |
| Actual | | $ | 1,000.00 | | | $ | 897.30 | | | $ | 6.54 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,017.89 | | | $ | 6.95 | | |
| Class B | |
| Actual | | $ | 1,000.00 | | | $ | 894.00 | | | $ | 9.58 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,014.70 | | | $ | 10.19 | | |
| Class C | |
| Actual | | $ | 1,000.00 | | | $ | 894.40 | | | $ | 9.58 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,014.69 | | | $ | 10.19 | | |
| Class P | |
| Actual | | $ | 1,000.00 | | | $ | 896.60 | | | $ | 7.05 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,017.37 | | | $ | 7.50 | | |
| Class Y | |
| Actual | | $ | 1,000.00 | | | $ | 899.10 | | | $ | 4.90 | | |
| Hypothetical (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,019.63 | | | $ | 5.21 | | |
† For each class of the Fund, expenses are equal to the annualized expense ratio for such class (1.39% for Class A, 2.04% for Classes B and C, 1.50% for Class P and 1.04% for Class Y) multiplied by the average account value over the period, multiplied by 181/365 (to reflect one-half year period).
Portfolio Holdings Presented by Sector
July 31, 2006
Sector* | | %** | |
| Auto & Transportation | | | 3.40 | % | |
| Consumer Discretionary | | | 14.71 | % | |
| Consumer Staples | | | 1.85 | % | |
| Financial Services | | | 17.65 | % | |
| Healthcare | | | 18.35 | % | |
| Materials & Processing | | | 9.09 | % | |
| Other Energy | | | 2.21 | % | |
| Producer Durables | | | 13.99 | % | |
| Technology | | | 14.98 | % | |
| Short-Term Investments | | | 3.77 | % | |
| Total | | | 100.00 | % | |
* A sector may be comprised of several industries.
** Represents percent of total investments.
7
Schedule of Investments
July 31, 2006
| Investments | | Shares | | Value
(000) | |
| COMMON STOCKS 95.12% | |
| Aerospace 1.18% | |
| Curtiss-Wright Corp. | | | 616,278 | | | $ | 17,909 | | |
| Air Transportation 1.30% | |
| AirTran Holdings, Inc.* | | | 1,307,100 | | | | 16,391 | | |
Republic Airways
Holdings, Inc.* | | | 195,328 | | | | 3,246 | | |
| Total | | | | | | | 19,637 | | |
| Auto Components 0.82% | |
| Wabash National Corp. | | | 872,950 | | | | 12,431 | | |
| Banks 2.09% | |
| Hanmi Financial Corp. | | | 22,449 | | | | 427 | | |
Investors Financial
Services Corp. | | | 438,900 | | | | 19,672 | | |
| PrivateBancorp, Inc. | | | 244,900 | | | | 11,513 | | |
| Total | | | | | | | 31,612 | | |
| Biotechnology Research & Production 2.16% | |
| Digene Corp.* | | | 524,729 | | | | 22,149 | | |
| Kensey Nash Corp.* | | | 374,104 | | | | 10,572 | | |
| Total | | | | | | | 32,721 | | |
| Building: Materials 0.74% | |
NCI Building
Systems, Inc.* | | | 239,200 | | | | 11,180 | | |
| Building: Roofing & Wallboard 2.38% | |
Beacon Roofing
Supply, Inc.* | | | 1,967,797 | | | | 35,991 | | |
| Communications & Media 1.63% | |
Entravision
Communications
Corp.*(a) | | | 3,159,300 | | | | 24,579 | | |
| Investments | | Shares | | Value
(000) | |
| Communications Technology 4.20% | |
Comtech Telecommunications
Corp.* | | | 612,959 | | | $ | 17,016 | | |
| Foundry Network, Inc.* | | | 1,687,400 | | | | 17,481 | | |
| TALX Corp. | | | 439,682 | | | | 9,036 | | |
WebEx
Communication, Inc.* | | | 582,537 | | | | 19,969 | | |
| Total | | | | | | | 63,502 | | |
| Computer Services, Software & Systems 6.28% | |
| CACI Int'l. Inc. Class A* | | | 423,300 | | | | 23,853 | | |
| Epicor Software Corp.* | | | 1,838,604 | | | | 21,548 | | |
| Kanbay Int'l., Inc.* | | | 795,620 | | | | 11,536 | | |
Lionbridge
Technologies, Inc.* | | | 1,701,100 | | | | 10,224 | | |
| Websense, Inc.* | | | 1,487,400 | | | | 27,889 | | |
| Total | | | | | | | 95,050 | | |
| Computer Technology 2.99% | |
| RadiSys Corp.* | | | 959,804 | | | | 20,242 | | |
| Stratasys, Inc.*(a) | | | 902,624 | | | | 24,967 | | |
| Total | | | | | | | 45,209 | | |
| Consumer Electronics 1.62% | |
| LoJack Corp.* | | | 425,499 | | | | 6,727 | | |
Universal Electronics,
Inc.*(a) | | | 1,004,369 | | | | 17,768 | | |
| Total | | | | | | | 24,495 | | |
| Consumer Products 1.91% | |
USANA Health
Sciences, Inc.* | | | 652,699 | | | | 28,947 | | |
| Diversified Financial Services 2.76% | |
| Jones Lang LaSalle, Inc. | | | 135,000 | | | | 11,029 | | |
| USI Holdings Corp.* | | | 2,474,139 | | | | 30,729 | | |
| Total | | | | | | | 41,758 | | |
See Notes to Financial Statements.
8
Schedule of Investments (continued)
July 31, 2006
| Investments | | Shares | | Value
(000) | |
| Diversified Manufacturing 2.54% | |
| CLARCOR Inc. | | | 495,900 | | | $ | 14,098 | | |
| Hexcel Corp.* | | | 1,697,600 | | | | 24,395 | | |
| Total | | | | | | | 38,493 | | |
| Drugs & Pharmaceuticals 0.90% | |
Par Pharmaceutical
Cos., Inc.* | | | 894,835 | | | | 13,637 | | |
| Education Services 1.96% | |
| Strayer Education, Inc. | | | 273,096 | | | | 29,590 | | |
| Electrical Equipment & Components 1.63% | |
| Genlyte Group, Inc. (The)* | | | 355,415 | | | | 24,719 | | |
| Electronics 1.34% | |
| Avid Technology, Inc.* | | | 336,192 | | | | 11,848 | | |
| Power Intergrations, Inc.* | | | 529,900 | | | | 8,426 | | |
| Total | | | | | | | 20,274 | | |
Electronics: Instruments, Gauges &
Meters 1.97% | |
Measurement
Specialties, Inc.*(a) | | | 1,378,145 | | | | 29,851 | | |
| Electronics: Medical Systems 0.71% | |
| TriPath Imaging, Inc.* | | | 1,707,313 | | | | 10,671 | | |
| Foods 1.83% | |
| J & J Snack Foods Corp. | | | 921,538 | | | | 27,729 | | |
| Health & Personal Care 2.80% | |
| Amedisys, Inc.*(a) | | | 1,108,184 | | | | 42,322 | | |
| Healthcare Facilities 6.48% | |
| ICON plc ADR* | | | 453,616 | | | | 29,866 | | |
| LCA-Vision Inc.(a) | | | 1,071,356 | | | | 46,229 | | |
United Surgical
Partners, Inc.* | | | 891,140 | | | | 22,011 | | |
| Total | | | | | | | 98,106 | | |
| Investments | | Shares | | Value
(000) | |
| Homebuilding 3.26% | |
| Centex Corp. | | | 388,700 | | | $ | 18,389 | | |
| Ryland Group, Inc. (The) | | | 757,400 | | | | 30,940 | | |
| Total | | | | | | | 49,329 | | |
| Household Furnishings 3.74% | |
| Select Comfort Corp.*(a) | | | 2,807,938 | | | | 56,580 | | |
Identification Control & Filter
Devices 0.79% | |
| X-Rite, Inc. | | | 1,296,360 | | | | 12,004 | | |
| Insurance: Multi-Line 3.13% | |
| Hilb, Rogal & Hobbs Co. | | | 1,167,500 | | | | 47,284 | | |
| Insurance: Property-Casualty 6.36% | |
| First Acceptance Corp.* | | | 434,300 | | | | 5,229 | | |
HCC Insurance
Holdings, Inc. | | | 1,686,450 | | | | 51,420 | | |
| Ohio Casualty Corp. | | | 1,527,142 | | | | 39,583 | | |
| Total | | | | | | | 96,232 | | |
| Machinery: Industrial/Specialty 2.41% | |
| Actuant Corp. Class A | | | 828,200 | | | | 36,449 | | |
Machinery: Oil Well Equipment &
Services 0.13% | |
Warrior Energy
Service Corp.* | | | 93,400 | | | | 2,021 | | |
| Machinery: Specialty 1.93% | |
| Bucyrus Int'l., Inc | | | 265,200 | | | | 12,918 | | |
| Graco Inc | | | 413,800 | | | | 16,258 | | |
| Total | | | | | | | 29,176 | | |
Medical & Dental Instruments &
Supplies 3.73% | |
| Kyphon Inc.* | | | 847,441 | | | | 28,864 | | |
| Mentor Corp. | | | 323,900 | | | | 14,400 | | |
| Symmetry Medical Inc.* | | | 910,300 | | | | 13,227 | | |
| Total | | | | | | | 56,491 | | |
See Notes to Financial Statements.
9
Schedule of Investments (concluded)
July 31, 2006
| Investments | | Shares | | Value
(000) | |
| Medical Services 1.35% | |
| Option Care, Inc.(a) | | | 1,811,866 | | | $ | 20,492 | | |
| Metal Fabricating 1.69% | |
| Commercial Metals Co. | | | 1,125,200 | | | | 25,531 | | |
| Oil: Crude Producers 2.05% | |
Comstock
Resources, Inc.* | | | 182,800 | | | | 5,378 | | |
| EXCO Resources, Inc.* | | | 1,981,400 | | | | 25,600 | | |
| Total | | | | | | | 30,978 | | |
| Rental & Leasing Services: Commercial 0.81% | |
| Williams Scotsman, Inc.* | | | 571,867 | | | | 12,198 | | |
| Retail 1.47% | |
| Insight Enterprises, Inc.* | | | 503,898 | | | | 8,536 | | |
Rush Enterprises, Inc.
Class A* | | | 747,771 | | | | 13,759 | | |
| Total | | | | | | | 22,295 | | |
| Savings & Loan 1.03% | |
| Brookline Bancorp, Inc. | | | 1,194,618 | | | | 15,506 | | |
| Securities Brokerage & Services 1.27% | |
optionsXpress
Holdings, Inc. | | | 735,290 | | | | 19,250 | | |
| Services: Commercial 1.51% | |
| Harris Interactive Inc.* | | | 2,821,011 | | | | 16,051 | | |
| TeleTech Holdings, Inc.* | | | 533,933 | | | | 6,728 | | |
| Total | | | | | | | 22,779 | | |
| Steel 1.63% | |
Carpenter Technology
Corp. | | | 96,800 | | | | 9,525 | | |
| Gibraltar Industries, Inc. | | | 550,102 | | | | 15,199 | | |
| Total | | | | | | | 24,724 | | |
| Telecommunications Equipment 0.66% | |
| SpectraLink Corp.(a) | | | 1,253,937 | | | | 9,994 | | |
| Investments | | Shares | | Value
(000) | |
| Textiles Apparel Manufacturers 0.71% | |
Warnaco Group,
Inc. (The)* | | | 601,870 | | | $ | 10,719 | | |
| Truckers 1.24% | |
J.B. Hunt Transport
Services, Inc. | | | 913,978 | | | | 18,801 | | |
Total Common Stocks
(cost $1,451,450,894) | | | | | | | 1,439,246 | | |
| | | Principal
Amount
(000) | | | |
| SHORT-TERM INVESTMENT 3.73% | |
| Repurchase Agreement | |
Repurchase Agreement
dated 7/31/2006,
4.64% due 8/1/2006
with State Street
Bank & Trust Co.
collateralized by
$57,465,000 of Federal
National Mortgage Assoc.
at 6.30% due 4/18/2016;
value: $57,536,831;
proceeds: $56,414,538
(cost $56,407,268) | | $ | 56,407 | | | | 56,407 | | |
Total Investments in Securities 98.85%
(cost $1,507,858,162) | | | | | | | 1,495,653 | | |
Other Assets in Excess of
Liabilities 1.15% | | | | | | | 17,361 | | |
| Net Assets 100.00% | | | | | | $ | 1,513,014 | | |
* Non-income producing security.
(a) Affiliated issuer (holding represents 5% or more of the underlying issuer's outstanding voting shares). See Note 10.
ADR American Depository Receipt.
See Notes to Financial Statements.
10
Statement of Assets and Liabilities
July 31, 2006
| ASSETS: | |
| Investments in unaffiliated issuers, at value (cost $1,246,825,985) | | $ | 1,222,872,549 | | |
| Investments in affiliated issuers, at value (cost $261,032,177) | | | 272,780,434 | | |
| Receivables: | |
| Investment securities sold | | | 21,842,926 | | |
| Capital shares sold | | | 6,774,153 | | |
| Interest and dividends | | | 528,132 | | |
| Prepaid expenses and other assets | | | 164,138 | | |
| Total assets | | | 1,524,962,332 | | |
| LIABILITIES: | |
| Payables: | |
| Investment securities purchased | | | 5,354,497 | | |
| Capital shares reacquired | | | 3,937,618 | | |
| Management fee | | | 918,080 | | |
| 12b-1 distribution fees | | | 856,775 | | |
| Trustees' fees | | | 73,240 | | |
| Fund administration | | | 61,089 | | |
| Accrued expenses and other liabilities | | | 746,710 | | |
| Total liabilities | | | 11,948,009 | | |
| NET ASSETS | | $ | 1,513,014,323 | | |
| COMPOSITION OF NET ASSETS: | |
| Paid-in capital | | $ | 1,466,760,711 | | |
| Accumulated net investment loss | | | (73,240 | ) | |
| Accumulated net realized gain on investments | | | 58,532,031 | | |
| Net unrealized depreciation on investments | | | (12,205,179 | ) | |
| Net Assets | | $ | 1,513,014,323 | | |
| Net assets by class: | |
| Class A Shares | | $ | 767,283,015 | | |
| Class B Shares | | $ | 89,943,394 | | |
| Class C Shares | | $ | 317,028,488 | | |
| Class P Shares | | $ | 80,298,129 | | |
| Class Y Shares | | $ | 258,461,297 | | |
Outstanding shares by class (unlimited number of authorized
shares of beneficial interest): | | | | | |
| Class A Shares | | | 47,714,367 | | |
| Class B Shares | | | 5,764,355 | | |
| Class C Shares | | | 20,336,860 | | |
| Class P Shares | | | 4,980,554 | | |
| Class Y Shares | | | 15,850,416 | | |
Net asset value, offering and redemption price per share
(Net assets divided by outstanding shares): | | | | | |
| Class A Shares-Net asset value | | $ | 16.08 | | |
Class A Shares-Maximum offering price
(Net asset value plus sales charge of 5.75%) | | $ | 17.06 | | |
| Class B Shares-Net asset value | | $ | 15.60 | | |
| Class C Shares-Net asset value | | $ | 15.59 | | |
| Class P Shares-Net asset value | | $ | 16.12 | | |
| Class Y Shares-Net asset value | | $ | 16.31 | | |
See Notes to Financial Statements.
11
Statement of Operations
For the Year Ended July 31, 2006
| Investment Income: | |
| Dividends from unaffiliated issuers | | $ | 6,108,012 | | |
| Dividends from affiliated issuers | | | 294,630 | | |
| Interest | | | 2,583,984 | | |
| Total investment income | | | 8,986,626 | | |
| Expenses: | |
| Management fee | | | 9,921,275 | | |
| 12b-1 distribution plan-Class A | | | 2,489,170 | | |
| 12b-1 distribution plan-Class B | | | 955,364 | | |
| 12b-1 distribution plan-Class C | | | 3,142,780 | | |
| 12b-1 distribution plan-Class P | | | 220,915 | | |
| Shareholder servicing | | | 2,738,329 | | |
| Fund administration | | | 538,828 | | |
| Registration | | | 233,387 | | |
| Reports to shareholders | | | 195,600 | | |
| Custody | | | 88,710 | | |
| Trustees' fees | | | 60,000 | | |
| Professional | | | 59,627 | | |
| Other | | | 16,212 | | |
| Gross expenses | | | 20,660,197 | | |
| Expense reductions (See Note 7) | | | (32,685 | ) | |
| Net expenses | | | 20,627,512 | | |
| Net investment loss | | | (11,640,886 | ) | |
| Net realized and unrealized gain (loss): | |
| Net realized gain on investments in unaffiliated issuers | | | 70,886,383 | | |
| Net realized gain on investments in affiliated issuers | | | 2,734,334 | | |
| Net change in unrealized depreciation on investments | | | (110,815,202 | ) | |
| Net realized and unrealized loss | | | (37,194,485 | ) | |
| Net Decrease in Net Assets Resulting From Operations | | $ | (48,835,371 | ) | |
See Notes to Financial Statements.
12
Statements of Changes in Net Assets
| INCREASE IN NET ASSETS | | For the Year Ended
July 31, 2006 | | For the Year Ended
July 31, 2005 | |
| Operations: | |
| Net investment loss | | $ | (11,640,886 | ) | | $ | (5,950,449 | ) | |
| Net realized gain on investments | | | 73,620,717 | | | | 38,787,742 | | |
| Net change in unrealized appreciation (depreciation) on investments | | | (110,815,202 | ) | | | 88,832,217 | | |
| Net increase (decrease) in net assets resulting from operations | | | (48,835,371 | ) | | | 121,669,510 | | |
| Distributions to shareholders from: | |
| Net realized gain | | | | | | | | | |
| Class A | | | (16,715,878 | ) | | | (19,850,931 | ) | |
| Class B | | | (2,674,386 | ) | | | (5,004,449 | ) | |
| Class C | | | (8,323,036 | ) | | | (8,648,412 | ) | |
| Class P | | | (788,460 | ) | | | (36,167 | ) | |
| Class Y | | | (3,630,563 | ) | | | (862,999 | ) | |
| Total distributions to shareholders | | | (32,132,323 | ) | | | (34,402,958 | ) | |
| Capital share transactions (See Note 12): | |
| Net proceeds from sales of shares | | | 961,018,141 | | | | 555,640,932 | | |
| Reinvestment of distributions | | | 27,056,823 | | | | 27,702,802 | | |
| Cost of shares reacquired | | | (271,630,923 | ) | | | (71,067,406 | ) | |
Net increase in net assets resulting
from capital share transactions | | | 716,444,041 | | | | 512,276,328 | | |
| Net increase in net assets | | | 635,476,347 | | | | 599,542,880 | | |
| NET ASSETS: | |
| Beginning of year | | | 877,537,976 | | | | 277,995,096 | | |
| End of year | | $ | 1,513,014,323 | | | $ | 877,537,976 | | |
| Accumulated net investment loss | | $ | (73,240 | ) | | $ | (27,583 | ) | |
See Notes to Financial Statements.
13
Financial Highlights
| | | Year Ended 7/31 | |
| | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |
| Per Share Operating Performance (Class A Shares) | |
| Net asset value, beginning of year | | $ | 16.71 | | | $ | 14.37 | | | $ | 11.71 | | | $ | 9.18 | | | $ | 10.45 | | |
| Investment operations: | |
| Net investment loss(a) | | | (.12 | ) | | | (.15 | ) | | | (.16 | ) | | | (.12 | ) | | | (.12 | ) | |
| Net realized and unrealized gain (loss) | | | (.03 | ) | | | 3.88 | | | | 3.07 | | | | 2.65 | | | | (1.15 | ) | |
| Total from investment operations | | | (.15 | ) | | | 3.73 | | | | 2.91 | | | | 2.53 | | | | (1.27 | ) | |
| Distributions to shareholders from: | |
| Net realized gain | | | (.48 | ) | | | (1.39 | ) | | | (.25 | ) | | | – | | | | – | (c) | |
| Net asset value, end of year | | $ | 16.08 | | | $ | 16.71 | | | $ | 14.37 | | | $ | 11.71 | | | $ | 9.18 | | |
| Total Return(b) | | | (.99 | )% | | | 27.38 | % | | | 24.96 | % | | | 27.56 | % | | | (12.11 | )% | |
| Ratios to Average Net Assets: | |
| Expenses, including expense reductions | | | 1.38 | % | | | 1.47 | % | | | 1.55 | % | | | 1.71 | % | | | 1.66 | % | |
| Expenses, excluding expense reductions | | | 1.38 | % | | | 1.47 | % | | | 1.55 | % | | | 1.89 | % | | | 2.41 | % | |
| Net investment loss | | | (.71 | )% | | | (.96 | )% | | | (1.12 | )% | | | (1.30 | )% | | | (1.09 | )% | |
| | | Year Ended 7/31 | |
| Supplemental Data: | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |
| Net assets, end of year (000) | | $ | 767,283 | | | $ | 465,124 | | | $ | 162,651 | | | $ | 59,717 | | | $ | 29,962 | | |
| Portfolio turnover rate | | | 55.39 | % | | | 58.65 | % | | | 84.91 | % | | | 68.48 | % | | | 47.69 | % | |
See Notes to Financial Statements.
14
Financial Highlights (continued)
| | | Year Ended 7/31 | |
| | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |
| Per Share Operating Performance (Class B Shares) | |
| Net asset value, beginning of year | | $ | 16.34 | | | $ | 14.15 | | | $ | 11.56 | | | $ | 9.12 | | | $ | 10.45 | | |
| Investment operations: | |
| Net investment loss(a) | | | (.23 | ) | | | (.24 | ) | | | (.24 | ) | | | (.18 | ) | | | (.18 | ) | |
| Net realized and unrealized gain (loss) | | | (.03 | ) | | | 3.82 | | | | 3.02 | | | | 2.62 | | | | (1.15 | ) | |
| Total from investment operations | | | (.26 | ) | | | 3.58 | | | | 2.78 | | | | 2.44 | | | | (1.33 | ) | |
| Distributions to shareholders from: | |
| Net realized gain | | | (.48 | ) | | | (1.39 | ) | | | (.19 | ) | | | – | | | | – | (c) | |
| Net asset value, end of year | | $ | 15.60 | | | $ | 16.34 | | | $ | 14.15 | | | $ | 11.56 | | | $ | 9.12 | | |
| Total Return(b) | | | (1.70 | )% | | | 26.71 | % | | | 24.19 | % | | | 26.75 | % | | | (12.68 | )% | |
| Ratios to Average Net Assets: | |
| Expenses, including expense reductions | | | 2.02 | % | | | 2.10 | % | | | 2.18 | % | | | 2.33 | % | | | 2.27 | % | |
| Expenses, excluding expense reductions | | | 2.02 | % | | | 2.10 | % | | | 2.18 | % | | | 2.51 | % | | | 3.02 | % | |
| Net investment loss | | | (1.36 | )% | | | (1.61 | )% | | | (1.75 | )% | | | (1.92 | )% | | | (1.70 | )% | |
| | | Year Ended 7/31 | |
| Supplemental Data: | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |
| Net assets, end of year (000) | | $ | 89,943 | | | $ | 81,117 | | | $ | 45,384 | | | $ | 21,518 | | | $ | 12,013 | | |
| Portfolio turnover rate | | | 55.39 | % | | | 58.65 | % | | | 84.91 | % | | | 68.48 | % | | | 47.69 | % | |
See Notes to Financial Statements.
15
Financial Highlights (continued)
| | | Year Ended 7/31 | |
| | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |
| Per Share Operating Performance (Class C Shares) | |
| Net asset value, beginning of year | | $ | 16.32 | | | $ | 14.14 | | | $ | 11.56 | | | $ | 9.12 | | | $ | 10.45 | | |
| Investment operations: | |
| Net investment loss(a) | | | (.23 | ) | | | (.24 | ) | | | (.24 | ) | | | (.18 | ) | | | (.18 | ) | |
| Net realized and unrealized gain (loss) | | | (.02 | ) | | | 3.81 | | | | 3.02 | | | | 2.62 | | | | (1.15 | ) | |
| Total from investment operations | | | (.25 | ) | | | 3.57 | | | | 2.78 | | | | 2.44 | | | | (1.33 | ) | |
| Distributions to shareholders from: | |
| Net realized gain | | | (.48 | ) | | | (1.39 | ) | | | (.20 | ) | | | – | | | | – | (c) | |
| Net asset value, end of year | | $ | 15.59 | | | $ | 16.32 | | | $ | 14.14 | | | $ | 11.56 | | | $ | 9.12 | | |
| Total Return(b) | | | (1.64 | )% | | | 26.65 | % | | | 24.18 | % | | | 26.75 | % | | | (12.68 | )% | |
| Ratios to Average Net Assets: | |
| Expenses, including expense reductions | | | 2.02 | % | | | 2.10 | % | | | 2.18 | % | | | 2.33 | % | | | 2.27 | % | |
| Expenses, excluding expense reductions | | | 2.02 | % | | | 2.10 | % | | | 2.18 | % | | | 2.51 | % | | | 3.02 | % | |
| Net investment loss | | | (1.36 | )% | | | (1.60 | )% | | | (1.75 | )% | | | (1.92 | )% | | | (1.70 | )% | |
| | | Year Ended 7/31 | |
| Supplemental Data: | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |
| Net assets, end of year (000) | | $ | 317,028 | | | $ | 221,554 | | | $ | 64,447 | | | $ | 23,039 | | | $ | 10,432 | | |
| Portfolio turnover rate | | | 55.39 | % | | | 58.65 | % | | | 84.91 | % | | | 68.48 | % | | | 47.69 | % | |
See Notes to Financial Statements.
16
Financial Highlights (continued)
| | | Year Ended 7/31 | |
| | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |
| Per Share Operating Performance (Class P Shares) | |
| Net asset value, beginning of year | | $ | 16.77 | | | $ | 14.42 | | | $ | 11.73 | | | $ | 9.19 | | | $ | 10.45 | | |
| Investment operations: | |
| Net investment loss(a) | | | (.14 | ) | | | (.17 | ) | | | (.37 | ) | | | (.10 | ) | | | (.12 | ) | |
| Net realized and unrealized gain (loss) | | | (.03 | ) | | | 3.91 | | | | 3.28 | | | | 2.64 | | | | (1.14 | ) | |
| Total from investment operations | | | (.17 | ) | | | 3.74 | | | | 2.91 | | | | 2.54 | | | | (1.26 | ) | |
| Distributions to shareholders from: | |
| Net realized gain | | | (.48 | ) | | | (1.39 | ) | | | (.22 | ) | | | – | | | | – | (c) | |
| Net asset value, end of year | | $ | 16.12 | | | $ | 16.77 | | | $ | 14.42 | | | $ | 11.73 | | | $ | 9.19 | | |
| Total Return(b) | | | (1.11 | )% | | | 27.35 | % | | | 24.97 | % | | | 27.64 | % | | | (12.01 | )% | |
| Ratios to Average Net Assets: | |
| Expenses, including expense reductions | | | 1.48 | % | | | 1.69 | % | | | 1.63 | %† | | | 1.78 | %† | | | 1.72 | % | |
| Expenses, excluding expense reductions | | | 1.48 | % | | | 1.70 | % | | | 1.63 | %† | | | 1.96 | %† | | | 2.47 | % | |
| Net investment loss | | | (.80 | )% | | | (1.06 | )% | | | (1.20 | )%† | | | (1.37 | )%† | | | (1.15 | )% | |
| | | Year Ended 7/31 | |
| Supplemental Data: | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |
| Net assets, end of year (000) | | $ | 80,298 | | | $ | 13,954 | | | $ | 218 | | | $ | 1 | | | $ | 1 | | |
| Portfolio turnover rate | | | 55.39 | % | | | 58.65 | % | | | 84.91 | % | | | 68.48 | % | | | 47.69 | % | |
See Notes to Financial Statements.
17
Financial Highlights (concluded)
| | | Year Ended 7/31 | |
| | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |
| Per Share Operating Performance (Class Y Shares) | |
| Net asset value, beginning of year | | $ | 16.88 | | | $ | 14.45 | | | $ | 11.75 | | | $ | 9.20 | | | $ | 10.45 | | |
| Investment operations: | |
| Net investment loss(a) | | | (.06 | ) | | | (.09 | ) | | | (.10 | ) | | | (.11 | ) | | | (.10 | ) | |
| Net realized and unrealized gain (loss) | | | (.03 | ) | | | 3.91 | | | | 3.07 | | | | 2.66 | | | | (1.15 | ) | |
| Total from investment operations | | | (.09 | ) | | | 3.82 | | | | 2.97 | | | | 2.55 | | | | (1.25 | ) | |
| Distributions to shareholders from: | |
| Net realized gain | | | (.48 | ) | | | (1.39 | ) | | | (.27 | ) | | | – | | | | – | (c) | |
| Net asset value, end of year | | $ | 16.31 | | | $ | 16.88 | | | $ | 14.45 | | | $ | 11.75 | | | $ | 9.20 | | |
| Total Return(b) | | | (.61 | )% | | | 27.88 | % | | | 24.45 | % | | | 27.72 | % | | | (11.92 | )% | |
| Ratios to Average Net Assets: | |
| Expenses, including expense reductions | | | 1.03 | % | | | 1.17 | % | | | 1.18 | %† | | | 1.33 | %† | | | 1.27 | % | |
| Expenses, excluding expense reductions | | | 1.03 | % | | | 1.17 | % | | | 1.18 | %† | | | 1.51 | %† | | | 2.02 | % | |
| Net investment loss | | | (.36 | )% | | | (.57 | )% | | | (.75 | )%† | | | (.92 | )%† | | | (.70 | )% | |
| | | Year Ended 7/31 | |
| Supplemental Data: | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |
| Net assets, end of year (000) | | $ | 258,461 | | | $ | 95,788 | | | $ | 5,295 | | | $ | 1 | | | $ | 1 | | |
| Portfolio turnover rate | | | 55.39 | % | | | 58.65 | % | | | 84.91 | % | | | 68.48 | % | | | 47.69 | % | |
† The ratios have been determined on a Fund basis.
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions.
(c) Amount represents less than $.01.
See Notes to Financial Statements.
18
Notes to Financial Statements
1. ORGANIZATION
Lord Abbett Blend Trust (the "Trust") is registered under the Investment Company Act of 1940 (the "Act") as a diversified, open-end management investment company, organized as a Delaware Statutory Trust on May 1, 2001. The Trust has one series, Lord Abbett Small-Cap Blend Fund (the "Fund"). The Securities and Exchange Commission declared the registration of the Fund and its shares effective on June 26, 2001 and each class of shares became available to the public on July 2, 2001. As of the close of business on January 31, 2006, Class A, B, C, P, and Y shares of the Fund were not available for purchase by new investors other than through certain retirement and benefit plans, and financial intermediaries that provide recordkeeping or advisory services and have entered into special arrangements with the Fund or the Distributor. In addition, Directors/Trustees of the Lord Abbett Funds, partners and employees of Lord Abbett, and the family members of such persons may purchase shares of the Fund. Investors should note, however, that the Fund reserves the right to refuse any order that might disrupt the efficient management of the Fund.
The Fund's investment objective is to seek long-term growth of capital by investing primarily in stocks of small companies. The Fund offers five classes of shares: Classes A, B, C, P and Y, each with different expenses and dividends. A front-end sales charge is normally added to the Net Asset Value ("NAV") for Class A shares. There is no front-end sales charge in the case of the Classes B, C, P and Y shares, although there may be a contingent deferred sales charge ("CDSC") as follows: certain redemptions of Class A shares made within 24 months (12 months if shares were purchased on or after November 1, 2004) following certain purchases made without a sales charge; Class B shares redeemed before the sixth anniversary of purchase; and Class C shares redeemed before the first anniversary of purchase. Class B shares will convert to Class A shares on the eighth anniversary of the original purchase of Class B shares.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Investment Valuation–Securities traded on any recognized U.S. or non-U.S. exchange or on NASDAQ, Inc. are valued at the last sale price or official closing price on the exchange or system on which they are principally traded. Unlisted equity securities are valued at the last quoted sale price or, if no sale price is available, at the mean between the most recently quoted bid and asked prices. Securities for which market quotations are not readily available are valued at fair value as determined by management and approved in good faith by the Board of Trustees. Short-term securities with 60 days or less remaining to maturity are valued using the amortized cost method, which approximates current market value.
(b) Security Transactions–Security transactions are recorded as of the date that the securities are purchased or sold (trade date). Realized gains and losses on sales of portfolio securities are calculated using the identified-cost method. Realized and unrealized gains (losses) are
19
Notes to Financial Statements (continued)
allocated to each class of shares based upon the relative proportion of net assets at the beginning of the day.
(c) Investment Income–Dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Discounts are accreted and premiums are amortized using the effective interest method. Investment income is allocated to each class of shares based upon the relative proportion of net assets at the beginning of the day.
(d) Federal Taxes–It is the policy of the Fund to meet the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all taxable income and capital gains to its shareholders. Therefore, no Federal income tax provision is required.
(e) Expenses–Expenses, excluding class specific expenses, are allocated to each class of shares based upon the relative proportion of net assets at the beginning of the day. Classes A, B, C, and P shares bear all expenses and fees relating to their respective 12b-1 Distribution Plans.
(f) Repurchase Agreements–The Fund may enter into repurchase agreements with respect to securities. A repurchase agreement is a transaction in which the Fund acquires a security and simultaneously commits to resell that security to the seller (a bank or securities dealer) at an agreed-upon price on an agreed-upon date. The Fund requires at all times that the repurchase agreement be collateralized by cash, or by securities of the U.S. Government, its agencies, its instrumentalities, or U.S. Government sponsored enterprises having a value equal to, or in excess of, the value of the repurchase agreement (including accrued interest). If the seller of the agreement defaults on its obligation to repurchase the underlying securities at a time when the value of those securities has dec lined, the Fund may incur a loss upon disposition of the securities.
3. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management Fees
The Trust has a management agreement with Lord, Abbett & Co. LLC ("Lord Abbett") pursuant to which Lord Abbett supplies the Fund with investment management services and executive and other personnel, pays the remuneration of officers, provides office space and pays for ordinary and necessary office and clerical expenses relating to research and statistical work and supervision of the Fund's investment portfolio.
The management fee is based on the Fund's average daily net assets at the following annual rates:
.75% of the first $1 billion of average daily net assets;
.70% of average daily net assets over $1 billion.
For the fiscal year ended July 31, 2006, the management fee paid to Lord Abbett was at an annual rate of .73% of average daily net assets.
Lord Abbett provides certain administrative services to the Fund pursuant to an Administrative Services Agreement at an annual rate of .04% of the Fund's average daily net assets.
20
Notes to Financial Statements (continued)
12b-1 Distribution Plans
The Fund has adopted a distribution plan with respect to one or more classes of shares pursuant to Rule 12b-1 under the Act, which provides for the payment of ongoing distribution and service fees to Lord Abbett Distributor LLC ("Distributor"), an affiliate of Lord Abbett. The fees are accrued daily at annual rates based upon average daily net assets as follows:
| Fee | | Class A | | Class B | | Class C | | Class P | |
| Service | | | .25 | % | | | .25 | % | | | .25 | % | | | .20 | % | |
| Distribution | | | .10 | %(1) | | | .75 | % | | | .75 | % | | | .25 | % | |
(1) The amount of CDSCs collected during the year ended July 31, 2006 was $4,347.
Class Y does not have a distribution plan.
Commissions
Distributor received the following commissions on sales of shares of the Fund, after concessions were paid to authorized dealers, for the year ended July 31, 2006:
Distributor
Commissions | | Dealers'
Concessions | |
| $ | 702,809 | | | $ | 4,008,854 | | |
Distributor received CDSCs of $2,241 and $37,873 for Class A and Class C shares, respectively, for the year ended July 31, 2006.
One Trustee and certain of the Trust's officers have an interest in Lord Abbett.
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYFORWARD
Dividends from net investment income, if any, are declared and paid at least annually. Taxable net realized gains from investment transactions, reduced by capital loss carryforwards, if any, are declared and distributed to shareholders at least annually. The capital loss carryforward amount, if any, is available to offset future net capital gains. Dividends and distributions to shareholders are recorded on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with Federal income tax regulations which may differ from accounting principles generally accepted in the United States of America. These book/tax differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the components of net assets based on their federal tax basis treatment; temporary di fferences do not require reclassification. Dividends and distributions, which exceed earnings and profits for tax purposes, are reported as a tax return of capital.
The tax character of distributions paid during the years ended July 31, 2006 and 2005 are as follows:
| | | Year Ended
7/31/2006 | | Year Ended
7/31/2005 | |
| Distributions paid from: | |
| Ordinary income | | $ | 16,605,582 | | | $ | 17,492,584 | | |
| Net long-term capital gains | | | 15,526,741 | | | | 16,910,374 | | |
| Total distributions paid | | $ | 32,132,323 | | | $ | 34,402,958 | | |
21
Notes to Financial Statements (continued)
As of July 31, 2006, the Fund's components of accumulated earnings (losses) on a tax basis are as follows:
| Undistributed ordinary income – net | | $ | 24,119,861 | | |
| Undistributed long-term capital gains | | | 35,030,803 | | |
| Total undistributed earnings | | | 59,150,664 | | |
| Temporary differences | | | (73,240 | ) | |
| Unrealized losses – net | | | (12,823,812 | ) | |
| Total accumulated gains – net | | $ | 46,253,612 | | |
As of July 31, 2006, the Fund's aggregate unrealized security gains and losses based on cost for U.S. Federal income tax purposes are as follows:
| Tax cost | | $ | 1,508,476,795 | | |
| Gross unrealized gain | | | 111,719,867 | | |
| Gross unrealized loss | | | (124,543,679 | ) | |
| Net unrealized security loss | | $ | (12,823,812 | ) | |
The difference between book-basis and tax-basis unrealized gains (losses) is attributable to wash sales.
Permanent items identified during the year ended July 31, 2006, have been reclassified among the components of net assets based on their tax basis treatment as follows:
Accumulated
Net Investment
Loss | | Accumulated
Net Realized
Gains | |
| $ | 11,595,499 | | | $ | (11,595,499 | ) | |
The permanent difference is due to tax net investment losses.
5. PORTFOLIO SECURITIES TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments) for the year ended July 31, 2006 are as follows:
| Purchases | | Sales | |
| $ | 1,363,630,801 | | | $ | 709,935,638 | | |
There were no purchases or sales of U.S. Government securities for the year ended July 31, 2006.
6. TRUSTEES' REMUNERATION
The Trust's officers and the one Trustee, who are associated with Lord Abbett, do not receive any compensation from the Trust for serving in such capacities. Outside Trustees' fees are allocated among all Lord Abbett-sponsored funds based on the net assets of each fund. There is an equity based plan available to all outside Trustees under which outside Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, Trustees' fees. The deferred amounts are treated as though equivalent dollar amounts have been invested proportionately in the funds. Such amounts and earnings accrued thereon are included in Trustees' Fees on the Statement of Operations and in Trustees' Fees Payable on the Statement of Assets and Liabilities and are not deductible for U.S. Federal income tax purposes until such amounts are paid.
22
Notes to Financial Statements (continued)
7. EXPENSE REDUCTIONS
The Fund has entered into arrangements with its transfer agent and custodian, whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund's expenses.
8. LINE OF CREDIT
The Fund, along with certain other funds managed by Lord Abbett, has available a $250,000,000 unsecured revolving credit facility ("Facility") from a consortium of banks, to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Any borrowings under this Facility will bear interest at current market rates as defined in the agreement. The fee for this Facility is at an annual rate of .08%. As of July 31, 2006, there were no loans outstanding pursuant to this Facility nor was the Facility utilized at any time during the year ended July 31, 2006.
9. CUSTODIAN AND ACCOUNTING AGENT
State Street Bank & Trust Company ("SSB") is the Fund's custodian and accounting agent. SSB performs custodial, accounting and recordkeeping functions relating to portfolio transactions and calculating the Fund's NAV.
10. TRANSACTIONS WITH AFFILIATED ISSUERS
An affiliated issuer is one in which the Fund has ownership of at least 5% of the outstanding voting securities of the underlying issuer at any point during the fiscal year. The Fund had the following transactions with an affiliated issuers during the fiscal year ended July 31, 2006:
| Affiliated Issuer | | Balance of
Shares Held
at 7/31/2005 | | Gross
Additions | | Gross
Sales | | Balance of
Shares Held
at 7/31/2006 | | Value
at
7/31/2006 | | Realized
Gain (Loss)
8/1/2005
to 7/31/2006(c) | | Dividend
Income
8/1/2005
to 7/31/2006(c) | |
| Amedisys, Inc. | | | 222,398 | | | | 885,786 | | | | - | | | | 1,108,184 | | | $ | 42,321,547 | | | $ | - | | | $ | - | | |
Entravision
Communications | | | 1,565,300 | | | | 1,675,700 | | | | (81,700 | ) | | | 3,159,300 | | | | 24,579,354 | | | | (217,561 | ) | | | - | | |
| LCA-Vision Inc. | | | 326,394 | | | | 1,013,962 | | | | (269,000 | ) | | | 1,071,356 | | | | 46,229,011 | | | | 5,274,634 | | | | 226,801 | | |
Measurement
Specialties, Inc. | | | 721,400 | | | | 656,745 | | | | - | | | | 1,378,145 | | | | 29,850,621 | | | | - | | | | - | | |
| Option Care, Inc. | | | 861,987 | | | | 949,879 | | | | - | | | | 1,811,866 | | | | 20,492,204 | | | | - | | | | 36,237 | | |
| Select Comfort Corp.(b) | | | 1,453,445 | | | | 1,608,394 | | | | (253,901 | ) | | | 2,807,938 | | | | 56,579,951 | | | | (5 | ) | | | - | | |
| SM&A(a) | | | 1,539,691 | | | | - | | | | (1,539,691 | ) | | | - | | | | - | | | | (2,322,734 | ) | | | - | | |
| SpectraLink Corp. | | | 401,360 | | | | 852,577 | | | | - | | | | 1,253,937 | | | | 9,993,878 | | | | - | | | | - | | |
| Stratasys, Inc. | | | 461,009 | | | | 441,615 | | | | - | | | | 902,624 | | | | 24,966,580 | | | | - | | | | - | | |
| Universal Electronics, Inc. | | | 568,905 | | | | 435,464 | | | | - | | | | 1,004,369 | | | | 17,767,288 | | | | - | | | | - | | |
| X-Rite, Inc.(a) | | | 684,832 | | | | 611,528 | | | | - | | | | 1,296,360 | | | | - | (a) | | | - | | | | 31,592 | | |
| Total | | | | | | | | | | | | | | | | | | $ | 272,780,434 | | | $ | 2,734,334 | | | $ | 294,630 | | |
(a) No longer an affiliated issuer as of July 31, 2006.
(b) 935,980 shares acquired in a 3-for-2 stock split; ex-date June 9, 2006.
(c) Represents realized gains (losses) and dividend income earned only when the issuer was an affiliate of the Fund.
23
Notes to Financial Statements (continued)
11. INVESTMENT RISKS
The Fund is subject to the general risks and considerations associated with equity investing as well as the particular risks associated with growth and value stocks. The value of an investment will fluctuate in response to movements in the stock market in general and to the changing prospects of individual companies in which the Fund invests. Different types of stocks shift in and out of favor depending on market and economic conditions. Growth stocks tend to be more volatile than other stocks. The market may fail to recognize the intrinsic value of particular value stocks for a long time. In addition, if the Fund's assessment of a company's potential for growth or market conditions is wrong, it could suffer losses or produce poor performance relative to other funds, even in a rising market. The Fund invests primarily in small company stocks, which tend to be more volatile and can be less liquid than large company stocks. Small companies may also have more limited product lines, markets or financial resources, and typically experience a higher risk of failure than large companies.
These factors can affect the Fund's performance.
12. SUMMARY OF CAPITAL TRANSACTIONS
Transactions in shares of beneficial interest are as follows:
| | | Year Ended
July 31, 2006 | | Year Ended
July 31, 2005 | |
| Class A Shares | | Shares | | Amount | | Shares | | Amount | |
| Shares sold | | | 28,333,877 | | | $ | 487,451,536 | | | | 18,253,096 | | | $ | 281,039,330 | | |
| Reinvestment of distributions | | | 888,249 | | | | 14,860,535 | | | | 1,200,214 | | | | 17,475,539 | | |
| Shares reacquired | | | (9,336,966 | ) | | | (158,820,032 | ) | | | (2,942,691 | ) | | | (44,852,942 | ) | |
| Increase | | | 19,885,160 | | | $ | 343,492,039 | | | | 16,510,619 | | | $ | 253,661,927 | | |
| Class B Shares | |
| Shares sold | | | 1,604,893 | | | $ | 26,461,264 | | | | 1,975,663 | | | $ | 29,598,985 | | |
| Reinvestment of distributions | | | 137,504 | | | | 2,242,684 | | | | 285,365 | | | | 4,077,898 | | |
| Shares reacquired | | | (943,816 | ) | | | (15,752,364 | ) | | | (501,708 | ) | | | (7,467,921 | ) | |
| Increase | | | 798,581 | | | $ | 12,951,584 | | | | 1,759,320 | | | $ | 26,208,962 | | |
| Class C Shares | |
| Shares sold | | | 9,006,248 | | | $ | 148,198,140 | | | | 9,636,857 | | | $ | 145,030,429 | | |
| Reinvestment of distributions | | | 346,405 | | | | 5,643,031 | | | | 386,657 | | | | 5,521,470 | | |
| Shares reacquired | | | (2,591,892 | ) | | | (43,028,434 | ) | | | (1,004,023 | ) | | | (15,079,178 | ) | |
| Increase | | | 6,760,761 | | | $ | 110,812,737 | | | | 9,019,491 | | | $ | 135,472,721 | | |
| Class P Shares | |
| Shares sold | | | 5,038,099 | | | $ | 87,319,105 | | | | 863,783 | | | $ | 13,771,499 | | |
| Reinvestment of distributions | | | 44,887 | | | | 753,644 | | | | 2,473 | | | | 36,160 | | |
| Shares reacquired | | | (934,488 | ) | | | (16,031,475 | ) | | | (49,324 | ) | | | (794,363 | ) | |
| Increase | | | 4,148,498 | | | $ | 72,041,274 | | | | 816,932 | | | $ | 13,013,296 | | |
| Class Y Shares | |
| Shares sold | | | 12,168,212 | | | $ | 211,588,096 | | | | 5,447,857 | | | $ | 86,200,689 | | |
| Reinvestment of distributions | | | 210,220 | | | | 3,556,929 | | | | 40,337 | | | | 591,735 | | |
| Shares reacquired | | | (2,201,768 | ) | | | (37,998,618 | ) | | | (180,841 | ) | | | (2,873,002 | ) | |
| Increase | | | 10,176,664 | | | $ | 177,146,407 | | | | 5,307,353 | | | $ | 83,919,422 | | |
24
Notes to Financial Statements (concluded)
13. RECENT ACCOUNTING PRONOUNCEMENT
In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position must meet before being recognized in the financial statements. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Fund will adopt FIN 48 during 2007 and the impact to the Fund's financial statements, if any, is currently being assessed.
25
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders,
Lord Abbett Blend Trust – Lord Abbett Small-Cap Blend Fund:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Lord Abbett Blend Trust – Lord Abbett Small-Cap Blend Fund (the "Fund") as of July 31, 2006, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estim ates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2006 by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Lord Abbett Blend Trust – Lord Abbett Small-Cap Blend Fund as of July 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
New York, New York
September 21, 2006
26
Basic Information About Management
The Board of Trustees (the "Board") is responsible for the management of the business and affairs of the Trust in accordance with the laws of the State of Delaware. The Board appoints officers who are responsible for the day-to-day operations of the Trust and who execute policies authorized by the Board. The Board also approves an investment adviser to the Trust and continues to monitor the cost and quality of the services provided by the investment adviser, and annually considers whether to renew the contract with the adviser. Generally, each Trustee holds office until his/her successor is elected and qualified or until his/her earlier resignation or removal, as provided in the Trust's organizational documents.
Lord, Abbett & Co. LLC ("Lord Abbett"), a Delaware limited liability company, is the Trust's investment adviser.
Interested Trustee
The following Trustee is the Managing Partner of Lord Abbett and is an "interested person" as defined in the Act. Mr. Dow is also an officer, director, or trustee of each of the fourteen Lord Abbett-sponsored funds, which consist of 55 portfolios or series.
Name, Address and
Year of Birth | | Current Position
Length of Service
with Trust | | Principal Occupation
During Past Five Years | | Other
Directorships | |
Robert S. Dow
Lord, Abbett & Co. LLC 90 Hudson Street
Jersey City, NJ 07302 (1945) | | Trustee and Chairman since 2001 | | Managing Partner and Chief Executive Officer of Lord Abbett since 1996. | | N/A | |
|
Independent Trustees
Unless indicated otherwise, the following independent or outside Trustees are also directors or trustees of each of the fourteen Lord Abbett-sponsored funds, which consist of 55 portfolios or series.
Name, Address and
Year of Birth | | Current Position
Length of Service
with Trust | | Principal Occupation
During Past Five Years | | Other
Directorships | |
E. Thayer Bigelow
Lord, Abbett & Co. LLC c/o Legal Dept.
90 Hudson Street
Jersey City, NJ 07302 (1941) | | Trustee since 2001 | | Managing General Partner, Bigelow Media, LLC (since 2000); Senior Adviser, Time Warner Inc. (1998 - 2000); Acting Chief Executive Officer of Courtroom Television Network (1997 – 1998); President and Chief Executive Officer of Time Warner Cable Programming, Inc. (1991 – 1997). | | Currently serves as director of Adelphia Communications, Inc., Crane Co., and Huttig Building Products Inc. | |
|
William H.T. Bush
Lord, Abbett & Co. LLC c/o Legal Dept.
90 Hudson Street
Jersey City, NJ 07302 (1938) | | Trustee since 2001 | | Co-founder and Chairman of the Board of the financial advisory firm of Bush-O'Donnell & Company (since 1986). | | Currently serves as director of WellPoint, Inc. (since 2002). | |
|
27
Basic Information About Management (continued)
Name, Address and
Year of Birth | | Current Position
Length of Service
with Trust | | Principal Occupation
During Past Five Years | | Other
Directorships | |
Robert B. Calhoun, Jr. Lord, Abbett & Co. LLC c/o Legal Dept.
90 Hudson Street
Jersey City, NJ 07302 (1942) | | Trustee since 2001 | | Managing Director of Monitor Clipper Partners (since 1997) and President of Clipper Asset Management Corp. (since 1991), both private equity investment funds. | | Currently serves as director of Avondale, Inc. and Interstate Bakeries Corp. | |
|
Julie A. Hill
Lord, Abbett & Co. LLC c/o Legal Dept.
90 Hudson Street
Jersey City, NJ 07302 (1946) | | Trustee since 2004 | | Owner and CEO of the Hillsdale Companies, a business consulting firm (since 1998); Founder, President and Owner of the Hiram-Hill and Hillsdale Development Companies (1998 - 2000). | | Currently serves as director of WellPoint, Inc.; Resources Connection Inc.; Holcim (US) Inc. (a subsidiary of Holcim Ltd.); and Lend Lease Corporation Limited. | |
|
Franklin W. Hobbs
Lord, Abbett & Co. LLC c/o Legal Dept.
90 Hudson Street
Jersey City, NJ 07302 (1947) | | Trustee since 2001 | | Former Chief Executive Officer of Houlihan Lokey Howard & Zukin, an investment bank (January 2002 - April 2003); Chairman of Warburg Dillon Read (1999 - 2001); Global Head of Corporate Finance of SBC Warburg Dillon Read (1997 - 1999); Chief Executive Officer of Dillon, Read & Co. (1994 - 1997). | | Currently serves as director of Adolph Coors Company. | |
|
Thomas J. Neff
Lord, Abbett & Co. LLC c/o Legal Dept.
90 Hudson Street
Jersey City, NJ 07302 (1937) | | Trustee since 2001 | | Chairman of Spencer Stuart (U.S.), an executive search consulting firm (since 1996); President of Spencer Stuart (1979-1996). | | Currently serves as director of Ace, Ltd. (since 1997) and Hewitt Associates, Inc. | |
|
James L.L. Tullis*
Lord, Abbett & Co. LLC
c/o Legal Dept.
90 Hudson Street
Jersey City, NJ 07302 (1947) | | Trustee since 2006 | | CEO of Tullis-Dickerson and Co. Inc, a venture capital management firm (since 1990). | | Currently serves as Director of Crane Co. (since 1998), and Viacell Inc. (since 2002). | |
|
* Mr. Tullis is a director or trustee of thirteen of the fourteen Lord Abbett-sponsored funds, consisting of 54 portfolios or series.
28
Basic Information About Management (concluded)
Officers
None of the officers listed below have received compensation from the Trust. All the officers of the Trust may also be officers of the other Lord Abbett-sponsored funds and maintain offices at 90 Hudson Street, Jersey City, NJ 07302.
Name and
Year of Birth | | Current Position
with Trust | | Length of Service
of Current Position | | Principal Occupation
During Past Five Years | |
Robert S. Dow
(1945) | | Chief Executive Officer and President | | Elected in 2001 | | Managing Partner and Chief Executive Officer of Lord Abbett (since 1996). | |
|
Michael T. Smith
(1963) | | Executive Vice President | | Elected in 2001 | | Partner and Investment Manager, joined Lord Abbett in 1997. | |
|
James Bernaiche
(1956) | | Chief Compliance Officer | | Elected in 2004 | | Chief Compliance Officer, joined Lord Abbett in 2001; formerly Vice President and Chief Compliance Officer with Credit Suisse Asset Management. | |
|
Joan A. Binstock
(1954) | | Chief Financial Officer and Vice President | | Elected in 2001 | | Partner and Chief Operations Officer, joined Lord Abbett in 1999. | |
|
John K. Forst
(1960) | | Vice President and Assistant Secretary | | Elected in 2005 | | Deputy General Counsel, joined Lord Abbett in 2004; prior thereto Managing Director and Associate General Counsel at New York Life Investment Management LLC (2002-2003); formerly Attorney at Dechert LLP (2000-2002). | |
|
| Lawrence H. Kaplan (1957) | | Vice President and Secretary | | Elected in 2001 | | Partner and General Counsel, joined Lord Abbett in 1997. | |
|
Robert G. Morris
(1944) | | Vice President | | Elected in 2001 | | Partner and Chief Investment Officer, joined Lord Abbett in 1991. | |
|
| A. Edward Oberhaus, III (1959) | | Vice President | | Elected in 2001 | | Partner and Manager of Equity Trading, joined Lord Abbett in 1983. | |
|
| Christina T. Simmons (1957) | | Vice President and Assistant Secretary | | Elected in 2001 | | Assistant General Counsel, joined Lord Abbett in 1999. | |
|
Bernard J. Grzelak
(1971) | | Treasurer | | Elected in 2003 | | Director of Fund Administration, joined Lord Abbett in 2003; formerly Vice President, Lazard Asset Management LLC. | |
|
Please call 888-522-2388 for a copy of the Statement of Additional Information (SAI), which contains further information about the Trust's Trustees. It is available free upon request.
29
Householding
The Trust has adopted a policy that allows it to send only one copy of the Fund's Prospectus, proxy material, annual report and semiannual report to certain shareholders residing at the same "household." This reduces Fund expenses, which benefits you and other shareholders. If you need additional copies or do not want your mailings to be "householded," please call Lord Abbett at 800-821-5129 or send a written request with your name, the name of your fund or funds and your account number or numbers to Lord Abbett Family of Funds, P.O. Box 219336, Kansas City, MO 64121.
Proxy Voting Policies, Procedures and Record
A description of the policies and procedures that Lord Abbett uses to vote proxies related to the Fund's portfolio securities, and information on how Lord Abbett voted the Fund's proxies during the 12-month period ended June 30, 2006, are available without charge, upon request, (i) by calling 888-522-2388; (ii) on Lord Abbett's website at www.LordAbbett.com; and (iii) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov.
Shareholder Reports and Quarterly Portfolio Disclosure
The Trust is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q. Copies of the filings are available without charge, upon request on the SEC's website at www.sec.gov and may be available by calling Lord Abbett at 800-821-5129. You can also obtain copies of Form N-Q by (i) visiting the SEC's Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330); (ii) sending your request and a duplicating fee to the SEC's Public Reference Room, Washington, DC 20549-0102; or (iii) sending your request electronically to publicinfo@sec.gov.
Tax Information
11.91% of the ordinary income distribution paid by the Fund during fiscal 2006 is qualified dividend income for individual shareholders and also eligible for the dividends received deduction for corporate shareholders.
Additionally, of the distributions paid to shareholders during the fiscal year ended July 31, 2006, $15,526,741 represents long-term capital gains.
30
Lord Abbett Blend Trust
Lord Abbett Small-Cap Blend Fund
LASCB-2-0706
(09/06)
This report when not used for the general
information of shareholders of the Fund, is to
be distributed only if preceded or accompanied
by a current Fund Prospectus.
Lord Abbett Mutual Fund shares are distributed by
LORD ABBETT DISTRIBUTOR LLC
Item 2: Code of Ethics.
(a) In accordance with applicable requirements, the Registrant adopted a Sarbanes-Oxley Code of Ethics on June 19, 2003 that applies to the principal executive officer and senior financial officers of the Registrant (“Code of Ethics”). The Code of Ethics was in effect during the fiscal year ended July 31, 2006 (the “Period”).
(b) Not applicable.
(c) The Registrant has not amended the Code of Ethics as described in Form N-CSR during the Period.
(d) The Registrant has not granted any waiver, including an implicit waiver, from a provision of the Code of Ethics as described in Form N-CSR during the Period.
(e) Not applicable.
(f) See Item 12(a)(1) concerning the filing of the Code of Ethics. The Registrant will provide a copy of the Code of Ethics to any person without charge, upon request. To obtain a copy, please call Lord Abbett at 800-821-5129.
Item 3: Audit Committee Financial Expert.
The Registrant’s Board of Trustees has determined that each of the following independent Trustees who are members of the audit committee are audit committee financial experts: E. Thayer Bigelow, Robert B. Calhoun, and Franklin W. Hobbs. Each of these persons is independent within the meaning of the Form N-CSR.
Item 4: Principal Accountant Fees and Services.
In response to sections (a), (b), and (c) of Item 4, the aggregate fees billed to the Registrant for the fiscal years ended July 31, 2006 and 2005 by the Registrant’s principal accounting firm, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu and their respective affiliates (collectively, “Deloitte”) were as follows:
| | Fiscal year ended: | |
| | 2006 | | 2005 | |
Audit Fees (a) | | $ | 36,000 | | $ | 36,000 | |
Audit-Related Fees (b) | | 236 | | 82 | |
Total audit and audit-related fees | | 36,236 | | 36,082 | |
| | | | | |
Tax Fees (c) | | 6,996 | | 6,865 | |
All Other Fees (d) | | -0- | | -0- | |
| | | | | |
Total Fees | | $ | 43,232 | | $ | 42,947 | |
(a) Consists of fees for audits of the Registrant’s annual financial statements.
(b) Consists of the Registrant’s proportionate share of fees for performing certain agreed-upon procedures regarding compliance with the provisions of Rule 17a-7 of the Investment Company Act of 1940 and related Board approved procedures.
(c) Fees for the fiscal year ended July 31, 2006 and 2005 consist of fees for preparing the U.S. Income Tax Return for Regulated Investment Companies, New Jersey Corporation Business Tax Return, New Jersey Annual Report Form, U.S. Return of Excise Tax on Undistributed Income of Investment Companies, IRS Forms 1099-MISC and 1096 Annual Summary and Transmittal of U.S. Information Returns.
(d) There were no other fees in the years ended July 31, 2006 and 2005.
(e) (1) Pursuant to Rule 2-01(c) (7) of Regulation S-X, the Registrant’s Audit Committee has adopted pre-approval policies and procedures. Such policies and procedures generally provide that the Audit Committee must pre-approve:
· any audit, audit-related, tax, and other services to be provided to the Lord Abbett Funds, including the Registrant, and
· any audit-related, tax, and other services to be provided to the Registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to one or more Funds comprising the Registrant if the engagement relates directly to operations and financial reporting of a Fund, by the independent auditor to assure that the provision of such services does not impair the auditor’s independence.
The Audit Committee has delegated pre-approval authority to its Chairman, subject to a fee limit of $10,000 per event, and not to exceed $25,000 annually. The Chairman will report any pre-approval decisions to the Audit Committee at its next scheduled meeting. Unless a type of service to be provided by the independent auditor has received general pre-approval, it
must be pre-approved by the Audit Committee. Any proposed services exceeding pre-approved cost levels will require specific pre-approval by the Audit Committee.
(e) (2) The Registrant’s Audit Committee has approved 100% of the services described in this Item 4 (b) through (d).
(f) Not applicable.
(g) The aggregate non-audit fees billed by Deloitte for services rendered to the Registrant are shown above in the response to Item 4 (a), (b), (c) and (d) as “All Other Fees”.
The aggregate non-audit fees billed by Deloitte for services rendered to the Registrant’s investment adviser, Lord, Abbett & Co. LLC (“Lord Abbett”), for the fiscal years ended July 31, 2006 and 2005 were:
| | Fiscal year ended: | |
| | 2006 | | 2005 | |
All Other Fees (a) | | $ | 5,500 | | $ | 165,650 | |
| | | | | | | |
(a) Consist of fees for Independent Services Auditors’ Report on Controls Placed in Operation and Tests of Operating Effectiveness related to Lord Abbett’s Asset Management Services (“SAS 70 Report”).
The aggregate non-audit fees billed by Deloitte for services rendered to entities under the common control of Lord Abbett (i.e., Lord Abbett Distributor LLC, the Registrant’s principal underwriter) for the fiscal years ended July 31, 2006 and 2005 were:
| | Fiscal year ended: | |
| | 2006 | | 2005 | |
All Other Fees (b) | | $ | - 0 - | | $ | - 0 - | |
| | | | | | | |
(b) The were no other fees in the years ended July 31, 2006 and 2005.
(h) The Registrant’s Audit Committee has considered the provision of non-audit services that were rendered to the Registrant’s investment adviser, and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant, that were not pre-approved pursuant to Rule 2-01 (c)(7)(ii) of Regulation S-X and has determined that the provision of such services is compatible with maintaining Deloitte’s independence.
Item 5: Audit Committee of Listed Registrants.
Not applicable.
Item 6: Schedule of Investments.
Not applicable.
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8: Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9: Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10: Submission of Matters to a Vote of Security Holders.
At the June 22, 2006 meetings of the Nominating and Governance Committees (the “Committee”) of the Boards of each of the Lord Abbett Funds, the Committee adopted policies and procedures for the nomination of independent directors/trustees (“Procedures”). The Procedures provide criteria for the nomination of independent directors/trustees, as well as a process for identifying and evaluating candidates. With respect to shareholder recommendations, it is the Committee’s policy to consider director/trustee nominations recommended by shareholders using the same criteria the Committee uses in considering potential director/trustee nominations from other sources. The Committee believes that directors/trustees must represent all shareholders and not just a limited set of shareholders. A copy of the Procedures may be found at www.LordAbbett.com.
Item 11: Controls and Procedures.
(a) Based on their evaluation of the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) as of a date within 90 days prior to the filing date of this report, the Chief Executive Officer and Chief Financial Officer of the Registrant have concluded that such disclosure controls and procedures are reasonably designed and effective to
ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to them by others within those entities.
(b) There were no significant changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Item 12: Exhibits.
(a)(1) Amendments to Code of Ethics – Not applicable.
(a)(2) Certification of each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2) is attached hereto as a part of EX-99.CERT.
(a)(3) Not applicable.
(b) Certification of each principal executive officer and principal financial officer of the Registrant as required by Section 906 of the Sarbanes-Oxley Act of 2002 is attached hereto as a part of EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| LORD ABBETT BLEND TRUST |
| |
| |
| /s/ Robert S. Dow | |
| Robert S. Dow |
| Chief Executive Officer, |
| Chairman and President |
| |
| |
| /s/ Joan A. Binstock | |
| Joan A. Binstock |
| Chief Financial Officer and Vice President |
Date: September 26, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| LORD ABBET BLEND TRUST |
| |
| |
| /s/ Robert S. Dow | |
| Robert S. Dow |
| Chief Executive Officer, |
| Chairman and President |
| |
| |
| /s/ Joan A. Binstock | |
| Joan A. Binstock |
| Chief Financial Officer and Vice President |
Date: September 26, 2006
